EXHIBIT 1.1
20,000,000
eMachines, Inc.
Common Stock
UNDERWRITING AGREEMENT
----------------------
March __, 2000
Credit Suisse First Boston Corporation
Chase Securities Inc.
FleetBoston Xxxxxxxxx Xxxxxxxx Inc.
Xxxxxxx Xxxxx Xxxxxx Inc.,
As Representatives of the Several Underwriters,
c/o Credit Suisse First Boston Corporation,
Eleven Madison Avenue,
New York, N.Y. 10010-3629
Dear Sirs:
1. Introductory. eMachines, Inc., a Delaware corporation ("Company"),
proposes to issue and sell 20,000 shares ("Firm Securities") of its Common
Stock, par value $0.0000125 per share, ("Securities") and also proposes to issue
and sell to the Underwriters, at the option of the Underwriters, an aggregate of
not more than 3,000,000 additional shares ("Optional Securities") of its
Securities as set forth below. The Firm Securities and the Optional Securities
are herein collectively called the "Offered Securities". As part of the offering
contemplated by this Agreement, Chase Securities Inc. (the "Designated
Underwriter") has agreed to reserve out of the Firm Securities purchased by it
under this Agreement, up to * shares, for sale to the Company's directors,
officers, employees and other parties associated with the Company (collectively,
"Participants"), as set forth in the Prospectus (as defined herein) under the
heading "Underwriting" (the "Directed Share Program"). The Firm Securities to be
sold by the Designated Underwriter pursuant to the Directed Share Program (the
"Directed Shares") will be sold by the Designated Underwriter pursuant to this
Agreement at the public offering price. Any Directed Shares not orally confirmed
for purchase by a Participant 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. The Company hereby agrees with the several Underwriters
named in Schedule A hereto ("Underwriters") as follows:
2. Representations and Warranties.
The Company represents and warrants to, and agrees with, the several
Underwriters that:
(a) A registration statement (No. 333-86219) relating to the Offered
Securities, including a form of prospectus, has been filed with the Securities
and Exchange Commission
1
("Commission") and either (i) has been declared effective under the Securities
Act of 1933 ("Act") and is not proposed to be amended or (ii) is proposed to be
amended by amendment or post-effective amendment. If such registration statement
("initial registration statement") has been declared effective, either (i) an
additional registration statement ("additional registration statement") relating
to the Offered Securities may have been filed with the Commission pursuant to
Rule 462(b) ("Rule 462(b)") under the Act and, if so filed, has become effective
upon filing pursuant to such Rule and the Offered Securities all have been duly
registered under the Act pursuant to the initial registration statement and, if
applicable, the additional registration statement or (ii) such an additional
registration statement is proposed to be filed with the Commission pursuant to
Rule 462(b) and will become effective upon filing pursuant to such Rule and upon
such filing the Offered Securities will all have been duly registered under the
Act pursuant to the initial registration statement and such additional
registration statement. If the Company does not propose to amend the initial
registration statement or if an additional registration statement has been filed
and the Company does not propose to amend it, and if any post-effective
amendment to either such registration statement has been filed with the
Commission prior to the execution and delivery of this Agreement, the most
recent amendment (if any) to each such registration statement has been declared
effective by the Commission or has become effective upon filing pursuant to Rule
462(c) ("Rule 462(c)") under the Act or, in the case of the additional
registration statement, Rule 462(b). For purposes of this Agreement, "Effective
Time" with respect to the initial registration statement or, if filed prior to
the execution and delivery of this Agreement, the additional registration
statement means (i) if the Company has advised the Representatives that it does
not propose to amend such registration statement, the date and time as of which
such registration statement, or the most recent post-effective amendment thereto
(if any) filed prior to the execution and delivery of this Agreement, was
declared effective by the Commission or has become effective upon filing
pursuant to Rule 462(c), or (ii) if the Company has advised the Representatives
that it proposes to file an amendment or post-effective amendment to such
registration statement, the date and time as of which such registration
statement, as amended by such amendment or post-effective amendment, as the case
may be, is declared effective by the Commission. If an additional registration
statement has not been filed prior to the execution and delivery of this
Agreement but the Company has advised the Representatives that it proposes to
file one, "Effective Time" with respect to such additional registration
statement means the date and time as of which such registration statement is
filed and becomes effective pursuant to Rule 462(b). "Effective Date" with
respect to the initial registration statement or the additional registration
statement (if any) means the date of the Effective Time thereof. The initial
registration statement, as amended at its Effective Time, including all
information contained in the additional registration statement (if any) and
deemed to be a part of the initial registration statement as of the Effective
Time of the additional registration statement pursuant to the General
Instructions of the Form on which it is filed and including all information (if
any) deemed to be a part of the initial registration statement as of its
Effective Time pursuant to Rule 430A(b) ("Rule 430A(b)") under the Act, is
hereinafter referred to as the "Initial Registration Statement". The additional
registration statement, as amended at its Effective Time, including the contents
of the initial registration statement incorporated by reference therein and
including all information (if any) deemed to be a part of the additional
registration statement as of its Effective Time pursuant to Rule 430A(b), is
hereinafter referred to as the "Additional Registration Statement". The Initial
Registration Statement and the Additional Registration Statement are herein
referred to collectively as the "Registration Statements" and individually as a
"Registration Statement". The form of prospectus relating to the Offered
Securities, as first filed with the Commission pursuant to and in accordance
with Rule 424(b) ("Rule 424(b)") under the Act or (if no such filing is
required) as included in a Registration Statement, is hereinafter referred to as
the
2
"Prospectus". No document has been or will be prepared or distributed in
reliance on Rule 434 under the Act.
(b) If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement: (i) on the Effective Date
of the Initial Registration Statement, the Initial Registration Statement
conformed in all respects to the requirements of the Act and the rules and
regulations of the Commission ("Rules and Regulations") 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,
(ii) on the Effective Date of the Additional Registration Statement (if any),
each Registration Statement conformed, or will conform, in all respects to the
requirements of the Act and the Rules and Regulations and did not include, or
will not include, any untrue statement of a material fact and did not omit, or
will not omit, to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) on the date of
this Agreement, the Initial Registration Statement and, if the Effective Time of
the Additional Registration Statement is prior to the execution and delivery of
this Agreement, the Additional Registration Statement each conforms, and at the
time of filing of the Prospectus pursuant to Rule 424(b) or (if no such filing
is required) at the Effective Date of the Additional Registration Statement in
which the Prospectus is included, each Registration Statement and the Prospectus
will conform, in all respects to the requirements of the Act and the Rules and
Regulations, and neither of such documents includes, or will include, any untrue
statement of a material fact or omits, or will omit, to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading. If the Effective Time of the Initial Registration Statement is
subsequent to the execution and delivery of this Agreement: on the Effective
Date of the Initial Registration Statement, the Initial Registration Statement
and the Prospectus will conform in all respects to the requirements of the Act
and the Rules and Regulations, neither of such documents 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,
and no Additional Registration Statement has been or will be filed. The two
preceding sentences do not apply to statements in or omissions from a
Registration Statement or the Prospectus based upon written information
furnished to the Company by any Underwriter through the Representatives
specifically for use therein, it being understood and agreed that the only such
information is that described as such in Section 7(b) hereof.
(c) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware, with power
and authority (corporate and other) to own its properties and conduct its
business as described in the Prospectus; the Company is duly qualified to do
business as a foreign corporation in good standing in all other jurisdictions in
which its ownership or lease of property or the conduct of its business requires
such qualification, except where the failure to be so qualified would not have a
material adverse effect on the condition (financial or other), business,
properties or results of operations of the Company and its subsidiaries taken as
a whole ("Material Adverse Effect"). Except for FreePC, Inc., a Delaware
corporation (the "Significant Subsidiary"), none of the Company's subsidiaries
constitutes a "significant subsidiary," as such term is defined in Rule 1-02(w)
of Regulation S-X promulgated by the Commission. The Significant Subsidiary has
been duly incorporated and is an existing corporation in good standing under the
laws of the State of Delaware, with power and authority (corporate and other) to
own its properties and conduct its business as described in the Prospectus; the
Significant Subsidiary is duly qualified to do business as a foreign corporation
in good standing in all other jurisdictions in which its ownership or lease of
property or the conduct of its
3
business requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect.
(d) The Offered Securities and all other outstanding shares of capital
stock of the Company have been duly authorized; all outstanding shares of
capital stock of the Company are, and, when the Offered Securities have been
delivered and paid for in accordance with this Agreement on each Closing Date
(as defined below), such Offered Securities will have been, validly issued,
fully paid and nonassessable and will conform to the description thereof
contained in the Prospectus; none of the outstanding shares of capital stock of
the Company was issued in violation of the preemptive or other similar rights of
any securityholder of the Company; except as described in the Prospectus, the
stockholders of the Company have no preemptive rights with respect to the
Securities; and the authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus in the column entitled "Actual" under
the caption "Capitalization" (except for subsequent issuances, if any, pursuant
to this Agreement, pursuant to reservations, agreements or employee benefit
plans referred to in the Prospectus).
(e) Except as disclosed in the Prospectus, there are no contracts,
agreements or understandings between the Company and any person that would give
rise to a valid claim against the Company or any Underwriter for a brokerage
commission, finder's fee or other like payment in connection with this offering.
(f) Except as disclosed in the Prospectus, 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 Act with respect to any securities of the Company owned or to be owned by
such person or to require the Company to include such securities in the
securities registered pursuant to a Registration Statement or in any securities
being registered pursuant to any other registration statement filed by the
Company under the Act.
(g) The Offered Securities have been approved for listing on the
Nasdaq Stock Market's National Market subject to notice of issuance.
(h) No consent, approval, authorization, or order of, or filing with,
any governmental agency or body or any court is required for the consummation of
the transactions contemplated by this Agreement in connection with the issuance
and sale of the Offered Securities by the Company, except such as have been
obtained and made under the Act and under the Securities Exchange Act of 1934,
as amended ("Exchange Act") and such as may be required under state securities
laws.
(i) The execution, delivery and performance of this Agreement, and the
issuance and sale of the Offered Securities will not result in a breach or
violation of any of the terms and provisions of, or constitute a default under,
(i) any statute, any rule, regulation or order of any governmental agency or
body or any court, domestic or foreign, having jurisdiction over the Company or
any of its properties, or (ii) any agreement or instrument to which the Company
is a party or by which the Company is bound or to which any of the properties of
the Company is subject, or (iii) the certificate of incorporation or bylaws of
the Company, except in the case of clause (ii), such breaches or violations as
would not, either individually or in the aggregate, have a Material Adverse
Effect, and the Company has full power and authority to authorize, issue and
sell the Offered Securities as contemplated by this Agreement.
4
(j) This Agreement has been duly authorized, executed and delivered by
the Company.
(k) Except as disclosed in the Prospectus, the Company and the
Significant Subsidiary have good and marketable title to all real properties and
all other properties and assets owned by them, in each case free from liens,
encumbrances and defects that would materially affect the value thereof or
materially interfere with the use made or to be made thereof by them; and except
as disclosed in the Prospectus, the Company holds any leased real or personal
property under valid and enforceable leases with no exceptions that would
materially interfere with the use made or to be made thereof by the Company.
(l) The Company and the Significant Subsidiary each possesses adequate
certificates, authorities or permits issued by appropriate governmental agencies
or bodies necessary to conduct the business now operated by it and has not
received any notice of proceedings relating to the revocation or modification of
any such certificate, authority or permit that, if determined adversely to the
Company, would individually or in the aggregate have a Material Adverse Effect.
(m) No labor dispute with the employees of the Company exists or, to
the knowledge of the Company, is imminent that might have a Material Adverse
Effect.
(n) The Company and the Significant Subsidiary each owns, possesses,
licenses from third parties or can acquire on reasonable terms, adequate
trademarks, trade names and other rights to inventions, know-how, patents,
copyrights, confidential information and other intellectual property
(collectively, "intellectual property rights") necessary to conduct the business
now operated by it, or presently employed by it, and has not received any notice
of infringement of or conflict with asserted rights of others with respect to
any intellectual property rights that, if determined adversely to the Company,
would individually or in the aggregate have a Material Adverse Effect.
(o) Except as disclosed in the Prospectus, neither the Company nor the
Significant Subsidiary (i) is in violation of any statute, any rule, regulation,
decision or order of any governmental agency or body or any court, domestic or
foreign, relating to the use, disposal or release of hazardous or toxic
substances or relating to the protection or restoration of the environment or
human exposure to hazardous or toxic substances (collectively, "environmental
laws"), (ii) owns or operates any real property contaminated with any substance
that is subject to any environmental laws, (iii) is liable for any off-site
disposal or contamination pursuant to any environmental laws, or (iv) is subject
to any claim relating to any environmental laws, which violation, contamination,
liability or claim would individually or in the aggregate have a Material
Adverse Effect; and neither the Company nor the Significant Subsidiary is aware
of any pending investigation which might lead to such a claim.
(p) Except as disclosed in the Prospectus, there are no pending
actions, suits or proceedings against or affecting the Company or the
Significant Subsidiary, or any of their properties that, if determined adversely
to the Company or the Significant Subsidiary, would reasonably be expected
individually or in the aggregate to have a Material Adverse Effect, or would
materially and adversely affect the ability of the Company to perform its
obligations under this Agreement, or which are otherwise material in the context
of the sale of the Offered
5
Securities; and no such actions, suits or proceedings are threatened or, to the
Company's knowledge, contemplated.
(q) Each of the Company and the Significant Subsidiary has filed all
foreign, federal, state and local tax returns that are required to be filed or
has requested extensions thereof (except in any case in which the failure so to
file would not have a Material Adverse Effect) and has paid all taxes required
to be paid by it and any other assessment, fine or penalty levied against it, to
the extent that any of the foregoing is due and payable, except for any such
assessment, fine or penalty that is currently being contested in good faith or
as described in or contemplated by the Prospectus and except where the failure
to file such return or pay such tax would not have a Material Adverse Effect.
(r) Each of the Company and the Significant Subsidiary is insured by
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 the Significant Subsidiary have been
refused any insurance coverage sought or applied for; and the Company has no
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, except as described in or contemplated
by the Prospectus.
(s) Each of the Company and the Significant Subsidiary is in
compliance in all material respects with all presently applicable provisions of
the Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"); no "reportable
event" (as defined in ERISA) has occurred with respect to any "pension plan" (as
defined in ERISA) for which the Company would have liability; the Company has
not incurred and does not expect to incur liability under (i) Title IV of ERISA
with respect to termination of, or withdrawal from, any "pension plan" or (ii)
Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including
the regulations and published interpretations thereunder (the "Code"); and each
"pension plan" for which the Company would have any liability is intended to be
qualified under Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by failure to act, which
would cause the loss of such qualification.
(t) The financial statements included in each Registration Statement
and the Prospectus present fairly the financial position of the Company and the
Significant Subsidiary as of the dates shown and their results of operations and
cash flows for the periods shown, and such financial statements have been
prepared in conformity with the generally accepted accounting principles in the
United States applied on a consistent basis and the schedules included in each
Registration Statement present fairly the information required to be stated
therein and the assumptions used in preparing the pro forma financial statements
included in each Registration Statement and the Prospectus provide a reasonable
basis for presenting the significant effects directly attributable to the
transactions or events described therein, the related pro forma adjustments give
appropriate effect to those assumptions, and the pro forma columns therein
reflect the proper application of those adjustments to the corresponding
historical financial statement amounts; and each of Deloitte & Touche LLP and
Ernst & Young LLP who certified the financial statements and supporting
schedules included in the Registration Statement are independent public
accountants as required by the 1933 Act and the 1933 Act Regulations.
6
(u) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv)
the recorded accountability for assets is compared with the existing assets
at reasonable intervals and appropriate action is taken with respect to any
differences.
(v) Except as disclosed in the Prospectus, since the date of the
latest audited financial statements included in the Prospectus there has
been no material adverse change, nor any development or event involving a
prospective material adverse change, in the condition (financial or other),
business, properties or results of operations of the Company and/or the
Significant Subsidiary, and, except as disclosed in or contemplated by the
Prospectus, there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital stock.
(w) The Company is not and, after giving effect to the offering and
sale of the Offered Securities and the application of the proceeds thereof
as described in the Prospectus, will not be an "investment company" as
defined in the Investment Company Act of 1940.
(x) Except to the extent otherwise disclosed in the Prospectus, the
Company has no reason to believe, and does not believe, that the Year 2000
Problem will have a Material Adverse Effect or result in any material loss
or interference with the Company's business or operations. The "Year 2000
Problem" as used herein means any significant risk that computer hardware
or software used in the receipt, transmission, processing, manipulation,
storage, retrieval, retransmission or other utilization of data or in the
operation of mechanical or electrical systems of any kind 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.
(y) Furthermore, the Company represents and warrants to the
Underwriters that (i) the Registration Statement, the Prospectus and any
preliminary prospectus comply, and any further 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, and that (ii) no authorization, approval,
consent, license, order, registration or qualification of or with any
government, governmental instrumentality or court, other than such as have
been obtained, is necessary under the securities law and regulations of
foreign jurisdictions in which the Directed Shares are offered outside the
United States.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and the Underwriters agree, severally and not jointly, to purchase
from the Company, at a purchase price of $ * per share, the respective Firm
Securities set forth opposite the names of the Underwriters in Schedule A
hereto.
(a) The Company will deliver the Firm Securities to the
Representatives for the accounts of the Underwriters, against payment of
the purchase price in Federal (same day) funds by official bank check or
checks or wire transfer to an account at a bank acceptable to Credit Suisse
First
7
Boston Corporation ("CSFBC") drawn to the order of the Company at the
office of Xxxxxxxx & Xxxxxxxx LLP, 000 Xxxx Xxxx Xxxx, Xxxx Xxxx,
Xxxxxxxxxx 00000 at 6:30 A.M., local time, on * , or at such other time not
later than seven full business days thereafter as CSFBC and the Company
determine, such time being herein referred to as the "First Closing Date".
For purposes of Rule 15c6-1 under the Securities Exchange Act of 1934, the
First Closing Date (if later than the otherwise applicable settlement date)
shall be the settlement date for payment of funds and delivery of
securities for all the Offered Securities sold pursuant to the offering.
The certificates for the Firm Securities so to be delivered will be in
definitive form, in such denominations and registered in such names as
CSFBC requests and will be made available for checking and packaging at the
above office of Xxxxxxxx & Xxxxxxxx LLP at least 24 hours prior to the
First Closing Date.
(b) In addition, upon written notice from CSFBC given to the Company
from time to time not more than 30 days subsequent to the date of the
Prospectus, the Underwriters may purchase all or less than all of the
Optional Securities at the purchase price per Security to be paid for the
Firm Securities. The Company agrees to sell to the Underwriters the
Optional Securities specified in such notice and the Underwriters agree,
severally and not jointly, to purchase such Optional Securities. Such
Optional Securities shall be purchased for the account of each Underwriter
in the same proportion as the Firm Securities set forth opposite such
Underwriter's name bears to the total number of shares of Firm Securities
(subject to adjustment by CSFBC to eliminate fractions) and may be
purchased by the Underwriters only for the purpose of covering over-
allotments made in connection with the sale of the Firm Securities. No
Optional Securities shall be sold or delivered unless the Firm Securities
previously have been, or simultaneously are, sold and delivered. The right
to purchase the Optional Securities or any portion thereof may be exercised
from time to time and to the extent not previously exercised may be
surrendered and terminated at any time upon notice by CSFBC to the Company.
(c) Each time for the delivery of and payment for the Optional
Securities, being herein referred to as an "Optional Closing Date", which
may be the First Closing Date (the First Closing Date and each Optional
Closing Date, if any, being sometimes referred to as a "Closing Date"),
shall be determined by CSFBC but shall be not later than five full business
days after written notice of election to purchase Optional Securities is
given. The Company will deliver the Optional Securities being purchased on
each Optional Closing Date to the Representatives for the accounts of the
several Underwriters against payment of the purchase price therefor in
Federal (same day) funds by official bank check or checks or wire transfer
to an account at a bank acceptable to CSFBC drawn to the order of the
Company, at the above office of Xxxxxxxx & Xxxxxxxx LLP. The certificates
for the Optional Securities being purchased on each Optional Closing Date
will be in definitive form, in such denominations and registered in such
names as CSFBC requests upon reasonable notice prior to such Optional
Closing Date and will be made available for checking and packaging at the
above office of Xxxxxxxx & Xxxxxxxx LLP at a reasonable time in advance of
such Optional Closing Date.
4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Offered Securities for sale to the public as
set forth in the Prospectus.
5. Certain Agreements.
The Company agrees with the several Underwriters that:
8
(a) If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement, the Company will
file the Prospectus with the Commission pursuant to and in accordance with
subparagraph (1) (or, if applicable and if consented to by CSFBC,
subparagraph (4)) of Rule 424(b) not later than the earlier of (A) the
second business day following the execution and delivery of this Agreement
or (B) the fifteenth business day after the Effective Date of the Initial
Registration Statement. The Company will advise CSFBC promptly of any such
filing pursuant to Rule 424(b). If the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this
Agreement and an additional registration statement is necessary to register
a portion of the Offered Securities under the Act but the Effective Time
thereof has not occurred as of such execution and delivery, the Company
will file the additional registration statement or, if filed, will file a
post-effective amendment thereto with the Commission pursuant to and in
accordance with Rule 462(b) on or prior to 10:00 P.M., New York time, on
the date of this Agreement or, if earlier, on or prior to the time the
Prospectus is printed and distributed to any Underwriter, or will make such
filing at such later date as shall have been consented to by CSFBC.
(b) The Company will advise CSFBC promptly of any proposal to amend
or supplement the initial or any additional registration statement as filed
or the related prospectus or the Initial Registration Statement, the
Additional Registration Statement (if any) or the Prospectus and will not
effect such amendment or supplementation without CSFBC's consent; and the
Company will also advise CSFBC promptly of the effectiveness of each
Registration Statement (if its Effective Time is subsequent to the
execution and delivery of this Agreement) and of any amendment or
supplementation of a Registration Statement or the Prospectus and of the
institution by the Commission of any stop order proceedings in respect of a
Registration Statement and will use its best efforts to prevent the
issuance of any such stop order and to obtain as soon as possible its
lifting, if issued.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Act in connection with
sales by any Underwriter or dealer, any event occurs as a result of which
the Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the 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 Act, the Company will promptly
notify CSFBC of such event and will promptly prepare and file with the
Commission, at its own expense, an amendment or supplement which will
correct such statement or omission or an amendment which will effect such
compliance. Neither CSFBC's consent to, nor the Underwriters' delivery of,
any such amendment or supplement shall constitute a waiver of any of the
conditions set forth in Section 6.
(d) As soon as practicable, but not later than the Availability Date
(as defined below), the Company will make generally available to its
securityholders an earnings statement covering a period of at least 12
months beginning after the Effective Date of the Initial Registration
Statement (or, if later, the Effective Date of the Additional Registration
Statement) which will satisfy the provisions of Section 11(a) of the Act.
For the purpose of the preceding sentence, "Availability Date" means the
45th day after the end of the fourth fiscal quarter following the fiscal
quarter that includes such Effective Date, except that, if such fourth
fiscal quarter is the last quarter of the Company's fiscal year,
"Availability Date" means the 90th day after the end of such fourth fiscal
quarter.
9
(e) The Company will furnish to the Representatives copies of each
Registration Statement (four of which will be signed and will include all
exhibits), each related preliminary prospectus, and, so long as a
prospectus relating to the Offered Securities is required to be delivered
under the Act in connection with sales by any Underwriter or dealer, the
Prospectus and all amendments and supplements to such documents, in each
case in such quantities as CSFBC requests. The Prospectus shall be so
furnished on or prior to 3:00 P.M., New York time, on the business day
following the later of the execution and delivery of this Agreement or the
Effective Time of the Initial Registration Statement. All other documents
shall be so furnished as soon as available. The Company will pay the
expenses of printing and distributing to the Underwriters all such
documents.
(f) The Company will arrange for the qualification of the Offered
Securities for sale under the laws of such jurisdictions as CSFBC
designates and will continue such qualifications in effect so long as
required for the distribution; provided, however, that the Company will not
be required to qualify in any jurisdiction where it would be required to
(i) give a general consent to service of process or submit to general
personal jurisdiction or (ii) assume any ongoing reporting obligations to
the authorities in such jurisdiction.
(g) During the period of five years hereafter, the Company will
furnish to the Representatives and, upon request, to each of the other
Underwriters, as soon as practicable after the end of each fiscal year, a
copy of its annual report to stockholders for such year; and the Company
will furnish to the Representatives (i) as soon as available, a copy of
each report and any definitive proxy statement of the Company filed with
the Commission under the Securities Exchange Act of 1934 or mailed to
stockholders, and (ii) from time to time, such other information concerning
the Company as CSFBC may reasonably request.
(h) The Company will pay all expenses incident to the performance of
its obligations under this Agreement, for any filing fees and other
expenses (including fees and disbursements of counsel) incurred in
connection with qualification of the Offered Securities for sale under the
laws of such jurisdictions as CSFBC designates and the printing of
memoranda relating thereto for the filing fee incident to, and the
reasonable fees and disbursements of counsel to the Underwriters in
connection with, the review by the National Association of Securities
Dealers, Inc. of the Offered Securities, for any travel expenses of the
Company's officers and employees and any other expenses of the Company in
connection with attending or hosting meetings with prospective purchasers
of the Offered Securities and for expenses incurred in distributing
preliminary prospectuses and the Prospectus (including any amendments and
supplements thereto) to the Underwriters.
(i) For a period of 180 days after the date of the initial public
offering of the Offered Securities, not to offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, or file with the
Commission a registration statement under the Act relating to, any
additional shares of its Securities or securities convertible into or
exchangeable or exercisable for any shares of its Securities, or publicly
disclose the intention to make any such offer, sale, pledge, disposition or
filing, without the prior written consent of CSFBC except issuances of
Securities pursuant to the conversion or exchange of convertible or
exchangeable securities or the exercise of warrants or options, in each
case outstanding on the date hereof, grants of employee stock options or
other Securities pursuant to the terms of a plan in effect on the date
hereof (including the 1998 Stock Plan and the 2000 Employee Stock Purchase
Plan), and issuances of Securities pursuant to the exercise of such
options.
10
(j) In connection with the Directed Share Program, the Company will
ensure that the Directed Shares will be restricted to the extent required
by the National Association of Securities Dealers, Inc. (the "NASD") or the
NASD rules from sale, transfer, assignment, pledge or hypothecation for a
period of three months following the date of the effectiveness of the
Registration Statement. The Designated Underwriter will notify the Company
as to which Participants will need to be so restricted. The Company will
direct the transfer agent to place stop transfer restrictions upon such
securities for such period of time.
(k) The Company will pay all fees and disbursements of counsel
incurred by the Underwriters in connection with the Directed Shares Program
and stamp duties, similar taxes or duties or other taxes, if any, incurred
by the Underwriters in connection with the Directed Share Program.
Furthermore, the Company covenants with the Underwriters that the
Company will comply with all applicable securities and other applicable laws,
rules and regulations in each foreign jurisdiction in which the Directed
Shares are offered in connection with the Directed Share Program.
6. Conditions of the Obligations of the Underwriters. The obligations of
the several Underwriters to purchase and pay for the Firm Securities on the
First Closing Date and the Optional Securities to be purchased on each Optional
Closing Date will be subject to the accuracy of the representations and
warranties on the part of the Company herein, to the accuracy of the statements
of Company officers made pursuant to the provisions hereof, to the performance
by the Company of its obligations hereunder and to the following additional
conditions precedent:
(a) The Representatives shall have received a letter in form and
substance satisfactory to the Representatives, containing statements and
information of the type ordinarily included in accountants' "comfort
letters" with respect to financial statements and certain information of
the Company and the Significant Subsidiary contained in the Registration
Statements, dated the date of delivery thereof (which, if the Effective
Time of the Initial Registration Statement is prior to the execution and
delivery of this Agreement, shall be on or prior to the date of this
Agreement or, if the Effective Time of the Initial Registration Statement
is subsequent to the execution and delivery of this Agreement, shall be
prior to the filing of the amendment or post-effective amendment to the
registration statement to be filed shortly prior to such Effective Time),
of Deloitte & Touche LLP that they are independent public accountants
within the meaning of the Act and the applicable published Rules and
Regulations thereunder and stating to the effect that:
(i) in their opinion the financial statements and schedules
examined by them and included in the Registration Statements comply as
to form in all material respects with the applicable accounting
requirements of the Act and the related published Rules and
Regulations;
(ii) they have performed the procedures specified by the
American Institute of Certified Public Accountants for a review of
interim financial information as described in Statement of Auditing
Standards No. 71, Interim Financial Information, on the unaudited
financial statements included in the Registration Statements;
(iii) on the basis of the review referred to in clause (ii)
above, a reading of the latest available interim financial statements
of the Company, inquiries of officials of
11
the Company who have responsibility for financial and accounting
matters and other specified procedures, nothing came to their
attention that caused them to believe that:
(A) the unaudited financial statements included in the
Registration Statements do not comply as to form in all material
respects with the applicable accounting requirements of the Act
and the related published Rules and Regulations or any material
modifications should be made to such unaudited financial
statements for them to be in conformity with generally accepted
accounting principles;
(B) at the date of the latest available balance sheet read
by such accountants, or at a subsequent specified date not more
than three business days prior to the date of such letter, there
was any change in the capital stock or any increase in short-term
indebtedness or long-term debt of the Company or, at the date of
the latest available balance sheet read by such accountants,
there was any decrease in net assets, as compared with amounts
shown on the latest balance sheet included in the Prospectus; or
(C) for the period from the closing date of the latest
income statement included in the Prospectus to the closing date
of the latest available income statement read by such accountants
there were any decreases, as compared with the corresponding
period of the previous year and with the period of corresponding
length ended the date of the latest income statement included in
the Prospectus, in net sales or net operating income (loss) or in
the total or per share amounts of net income, except in all cases
set forth in clauses (B) and (C) above for changes, increases or
decreases which the Prospectus discloses have occurred or may
occur or which are described in such letter; and
(iv) Deloitte & Touche LLP has compared specified dollar amounts
(or percentages derived from such dollar amounts) and other financial
information contained in the Registration Statements (in each case to the
extent that such dollar amounts, percentages and other financial
information are derived from the general accounting records of the Company
subject to the internal controls of the Company's accounting system or are
derived directly from such records by analysis or computation) with the
results obtained from inquiries, a reading of such general accounting
records and other procedures specified in such letter and have found such
dollar amounts, percentages and other financial information to be in
agreement with such results, except as otherwise specified in such letter.
(b) The Representatives shall have received a letter in form and substance
satisfactory to the Representatives, containing statements and information of
the type ordinarily included in accountants' "comfort letters" with respect to
financial statements and certain information of the Company and the Significant
Subsidiary contained in the Registration Statements, dated the date of delivery
thereof (which, if the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement, shall be on or prior to
the date of this Agreement or, if the Effective Time of the Initial Registration
Statement is subsequent to the execution and delivery of this Agreement, shall
be prior to the filing of the amendment or post-effective amendment to the
registration statement to be filed shortly prior to such Effective Time), of
Ernst & Young LLP that they are independent public accountants within the
meaning of the Act and
12
the applicable published Rules and Regulations thereunder and stating to the
effect that in their opinion the financial statements and schedules examined by
them and included in the Registration Statements comply as to form in all
material respects with the applicable accounting requirements of the Act and the
related published Rules and Regulations.
Ernst & Young LLP has compared specified dollar amounts (or percentages derived
from such dollar amounts) and other financial information contained in the
Registration Statements (in each case to the extent that such dollar amounts,
percentages and other financial information are derived from the general
accounting records of the Significant Subsidiary subject to the internal
controls of the Significant Subsidiary's accounting system or are derived
directly from such records by analysis or computation) with the results obtained
from inquiries, a reading of such general accounting records and other
procedures specified in such letter and have found such dollar amounts,
percentages and other financial information to be in agreement with such
results, except as otherwise specified in such letter.
For purposes of this subsection, (i) if the Effective Time of the Initial
Registration Statement is subsequent to the execution and delivery of this
Agreement, "Registration Statements" shall mean the initial registration
statement as proposed to be amended by the amendment or post-effective amendment
to be filed shortly prior to its Effective Time, (ii) if the Effective Time of
the Initial Registration Statement is prior to the execution and delivery of
this Agreement but the Effective Time of the Additional Registration is
subsequent to such execution and delivery, "Registration Statements" shall mean
the Initial Registration Statement and the additional registration statement as
proposed to be filed or as proposed to be amended by the post-effective
amendment to be filed shortly prior to its Effective Time, and (iii)
"Prospectus" shall mean the prospectus included in the Registration Statements.
(c) If the Effective Time of the Initial Registration Statement is not
prior to the execution and delivery of this Agreement, such Effective Time shall
have occurred not later than 10:00 P.M., New York time, on the date of this
Agreement or such later date as shall have been consented to by CSFBC. If the
Effective Time of the Additional Registration Statement (if any) is not prior to
the execution and delivery of this Agreement, such Effective Time shall have
occurred not later than 10:00 P.M., New York time, on the date of this Agreement
or, if earlier, the time the Prospectus is printed and distributed to any
Underwriter, or shall have occurred at such later date as shall have been
consented to by CSFBC. If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement, the
Prospectus shall have been filed with the Commission in accordance with the
Rules and Regulations and Section 5(a) of this Agreement. Prior to such Closing
Date, no stop order suspending the effectiveness of a Registration Statement
shall have been issued and no proceedings for that purpose shall have been
instituted or, to the knowledge of the Company or the Representatives, shall be
contemplated by the Commission.
(d) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) any change, or any development or event involving a
prospective change, in the condition (financial or other), business, properties
or results of operations of the Company which, in the judgment of a majority in
interest of the Underwriters including the Representatives, is material and
adverse and makes it impractical or inadvisable to proceed with completion of
the public offering or the sale of and payment for the Offered Securities; (ii)
any material suspension or material limitation of trading in securities
generally on the New York Stock Exchange, or any setting of minimum prices for
trading on such exchange, or any suspension of trading of any securities of the
Company on any exchange or in the over-the-counter market; (iii) any banking
13
moratorium declared by U.S. Federal or New York authorities; or (iv) any
outbreak or escalation of major hostilities in which the United States is
involved, any declaration of war by Congress or any other substantial national
or international calamity or emergency if, in the judgment of a majority in
interest of the Underwriters including the Representatives, the effect of any
such outbreak, escalation, declaration, calamity or emergency makes it
impractical or inadvisable to proceed with completion of the public offering or
the sale of and payment for the Offered Securities.
(e) The Representatives shall have received an opinion, dated such Closing
Date, of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, counsel for the Company, to the
effect that:
(i) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own its properties and conduct its
business as described in the Prospectus; the Company is duly qualified to
do business as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or the conduct of
its business requires such qualification. The Significant Subsidiary has
been duly incorporated and is an existing corporation in good standing
under the laws of the State of Delaware, with corporate power and authority
to own its properties and conduct its business as described in the
Prospectus; the Significant Subsidiary is duly qualified to do business as
a foreign corporation in good standing in all other jurisdictions of its
business requires such qualification;
(ii) The Offered Securities delivered on such Closing Date and all
other outstanding shares of capital stock of the Company have been duly
authorized and validly issued, are fully paid and nonassessable and conform
to the description thereof contained in the Prospectus, and the
stockholders of the Company have no preemptive rights with respect to the
Offered Securities;
(iii) Except as disclosed in the Prospectus, to such counsel's
knowledge, 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 Act with respect to any
securities of the Company owned or to be owned by such person or to require
the Company to include such securities in the securities registered
pursuant to the Registration Statement or in any securities being
registered pursuant to any other registration statement filed by the
Company under the Act;
(iv) The Company is not and, after giving effect to the offering and
sale of the Offered Securities and the application of the proceeds thereof
as described in the Prospectus, will not be an "investment company" as
defined in the Investment Company Act of 1940;
(v) No consent, approval, authorization or order of, or filing
with, any governmental agency or body or any court is required for the
consummation of the transactions contemplated by this Agreement in
connection with the issuance or sale of the Offered Securities by the
Company, except such as have been obtained and made under the Act and the
Exchange Act and such as may be required under state securities laws;
14
(vi) The execution, delivery and performance of this Agreement and
the issuance and sale of the Offered Securities will not result in a breach
or violation of any of the terms and provisions of, or constitute a default
under, any statute, any rule, regulation or order of any governmental
agency or body or any court having jurisdiction over the Company or the
Significant Subsidiary or any of their properties, or any agreement or
instrument to which the Company or the Significant Subsidiary is a party or
by which the Company or the Significant Subsidiary is bound or to which any
of the properties of the Company or the Significant Subsidiary is subject,
or the certificate of incorporation or bylaws of the Company or the
Significant Subsidiary, and the Company has full power and authority to
authorize, issue and sell the Offered Securities as contemplated by this
Agreement;
(vii) To the best of the knowledge of such counsel, there is not
pending or threatened any action, suit, proceeding, inquiry or
investigation, to which the Company is a party, or to which the property of
the Company is subject, before or brought by any court or governmental
agency or body, domestic or foreign, which might reasonably be expected to
result in a Material Adverse Effect, or which might reasonably be expected
to materially and adversely affect the properties or assets or the
consummation of the transactions contemplated in the Agreement or the
performance by the Company of its obligations thereunder;
(viii) The information in the Prospectus under "Description of Capital
Stock," "Shares Eligible For Future Sale", "Management -- Stock Plans",
"Related Party Transactions" and in the Registration Statement under 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 in all material respects;
(ix) To the best of the knowledge of such counsel, the Company is
not in violation of its certificate of incorporation or by-laws and no
default by the Company exists in the due performance or observance of any
material obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease or other
agreement or instrument that is described or referred to in the
Registration Statement or the Prospectus or filed as an exhibit to the
Registration Statement; to the best of the knowledge of such counsel, the
Significant Subsidiary is not in violation of its certificate of
incorporation or by-laws and no default by the Significant Subsidiary
exists in the due performance or observance of any material obligation,
agreement, covenant or condition contained in any contract, indenture,
mortgage, loan agreement, note, lease or other agreement or instrument that
is described or referred to in the Registration Statement or the Prospectus
or filed as an exhibit to the Registration Statement
(x) The offer and sale of the Company's Series A Preferred Stock,
par value $0.01 per share, and the Common Stock of the Company issuable
upon conversion thereof is exempt from the registration requirements of the
Act.
(xi) The Initial Registration Statement was declared effective
under the Act as of the date and time specified in such opinion, the
Additional Registration Statement
15
(if any) was filed and became effective under the Act as of the date and
time (if determinable) specified in such opinion, the Prospectus either was
filed with the Commission pursuant to the subparagraph of Rule 424(b)
specified in such opinion on the date specified therein or was included in
the Initial Registration Statement or the Additional Registration Statement
(as the case may be), and, to the best of the knowledge of such counsel, no
stop order suspending the effectiveness of a Registration Statement or any
part thereof has been issued and no proceedings for that purpose have been
instituted or are pending or contemplated under the Act, and each
Registration Statement and the Prospectus, and each amendment or supplement
thereto, as of their respective effective or issue dates, complied as to
form in all material respects with the requirements of the Act and the
Rules and Regulations; such counsel have no reason to believe that any part
of a Registration Statement or any amendment thereto, as of its effective
date or as of such Closing Date, contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or that
the Prospectus or any amendment or supplement thereto, as of its issue date
or as of such Closing Date, contained any untrue statement of a material
fact or omitted to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; the descriptions in the Registration Statements and
Prospectus of statutes, legal and governmental proceedings and contracts
and other documents are accurate and fairly present the information
required to be shown; and such counsel do not know of any legal or
governmental proceedings required to be described in a Registration
Statement or the Prospectus which are not described as required or of any
contracts or documents of a character required to be described in a
Registration Statement or the Prospectus or to be filed as exhibits to a
Registration Statement which are not described and filed as required; it
being understood that such counsel need express no opinion as to the
financial statements or other financial data contained in the Registration
Statements or the Prospectus; and
(xii) This Agreement has been duly authorized, executed and delivered
by the Company.
(f) The Representatives shall have received from Xxxxxxxx & Xxxxxxxx LLP,
counsel for the Underwriters, such opinion or opinions, dated such Closing Date,
with respect to the incorporation of the Company, the validity of the Offered
Securities delivered on such Closing Date, the Registration Statements, the
Prospectus and other related matters as the Representatives may require, and the
Company shall have furnished to such counsel such documents as they request for
the purpose of enabling them to pass upon such matters.
(g) The Representatives shall have received a certificate, dated such
Closing Date, of the President or any Vice President and a principal financial
or accounting officer of the Company in which such officers, to the best of
their knowledge after reasonable investigation, shall state that: the
representations and warranties of the Company in this Agreement are true and
correct; the Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or prior to
such Closing Date; no stop order suspending the effectiveness of any
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are contemplated by the Commission; the Additional
Registration Statement (if any) satisfying the requirements of subparagraphs (1)
and (3) of Rule 462(b) was filed pursuant to Rule 462(b), including payment of
the applicable filing fee in accordance with Rule 111(a) or (b)
16
under the Act, prior to the time the Prospectus was printed and distributed to
any Underwriter; and, subsequent to the date of the most recent financial
statements in the Prospectus, there has been no material adverse change, nor any
development or event involving a prospective material adverse change, in the
condition (financial or other), business, properties or results of operations of
the Company taken as a whole except as set forth in or contemplated by the
Prospectus or as described in such certificate.
(h) The Representatives shall have received a letter, dated such
Closing Date, of Deloitte & Touche LLP which meets the requirements of
subsection (a) of this Section, except that the specified date referred to
in such subsection will be a date not more than three days prior to such
Closing Date for the purposes of this subsection.
(i) The Representative shall have received a letter, dated such
Closing Date, of Ernst & Young LLP which meets the requirements of
subsection (b) of this Section, except that the specified date referred to
in such subsection will be a date not more than three days prior to such
Closing Date for the purposes of this subsection.
(j) On or prior to the date of this Agreement, the Representatives
shall have received lock-up letters from each of the executive officers and
directors of the Company, and all holders of 1% or more of the Company's
Securities.
The Company will furnish the Representatives with such conformed copies of such
opinions, certificates, letters and documents as the Representatives reasonably
request. CSFBC may in its sole discretion waive on behalf of the Underwriters
compliance with any conditions to the obligations of the Underwriters hereunder,
whether in respect of an Optional Closing Date or otherwise.
7. Indemnification and Contribution.
(a) The Company will indemnify and hold harmless each Underwriter, its
partners, directors and officers and each person, if any, who controls such
Underwriter within the meaning of Section 15 of the Act, against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any Registration Statement, the
Prospectus, or any amendment or supplement thereto, or any related
preliminary prospectus, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
will reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating or defending
any such loss, claim, damage, liability or action as such expenses are
incurred; provided, however, that the Company will not be liable in any
such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue
statement in or omission or alleged omission from any of such documents in
reliance upon and in conformity with written information furnished to the
Company by any Underwriter through the Representatives specifically for use
therein, it being understood and agreed that the only such information
furnished by any Underwriter consists of the information described as such
in subsection (b) below.
(b) Each Underwriter will severally and not jointly indemnify and hold
harmless the Company, its directors and officers and each person, if any
who controls the Company within the
17
meaning of Section 15 of the Act, against any losses, claims, damages or
liabilities to which the Company may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
Registration Statement, the Prospectus, or any amendment or supplement
thereto, or any related preliminary prospectus, or arise out of or are
based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through the
Representatives specifically for use therein, and will reimburse any legal
or other expenses reasonably incurred by the Company in connection with
investigating or defending any such loss, claim, damage, liability or
action as such expenses are incurred, it being understood and agreed that
the only such information furnished by any Underwriter consists of the
following information in the Prospectus furnished on behalf of each
Underwriter: the concession and reallowance figures appearing in the fourth
paragraph under the caption "Underwriting," the information in the sixth
paragraph under the caption "Underwriting" regarding discretionary sales
and the last paragraph under the caption "Underwriting" regarding
stabilizing.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party
under subsections (a) or (b) above, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party otherwise than under subsection (a) or (b) above. In case any such
action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate therein and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to
the indemnifying party), and after notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof,
the indemnifying party will not be liable to such indemnified party under
this Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of
any pending or threatened action 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 (i) includes an
unconditional release of such indemnified party from all liability on any
claims that are the subject matter of such action and (ii) does not include
a statement as to, or an admission of, fault, culpability or a failure to
act by or on behalf of an indemnified party.
(d) If the indemnification provided for in this Section is unavailable
or insufficient to hold harmless an indemnified party under subsection (a)
or (b) above, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above
(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
from the offering of the Securities or (ii) if the allocation provided by
clause (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 (i) above but also the
18
relative fault of the Company on the one hand and the Underwriters on the
other in connection with the statements or omissions which 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 shall be deemed to be in the
same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters. 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 or the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The amount paid by an indemnified party as a result
of the losses, claims, damages or liabilities referred to in the first
sentence of this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any action or claim which is the subject of
this subsection (d). Notwithstanding the provisions of this subsection (d),
no Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Securities underwritten by it
and distributed to the public were offered to the public exceeds the amount
of any damages which 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 Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this subsection (d) to contribute are several
in proportion to their respective underwriting obligations and not joint.
(e) The obligations of the Company under this Section shall be in
addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who
controls any Underwriter within the meaning of the Act; and the obligations
of the Underwriters under this Section shall be in addition to any
liability which the respective Underwriters may otherwise have and shall
extend, upon the same terms and conditions, to each director of the
Company, to each officer of the Company who has signed a Registration
Statement and to each person, if any, who controls the Company within the
meaning of the Act.
8. Default of Underwriters. If any Underwriter or Underwriters default in
their obligations to purchase Offered Securities hereunder on either the First
or any Optional Closing Date and the aggregate number of shares of Offered
Securities that such defaulting Underwriter or Underwriters agreed but failed to
purchase does not exceed 10% of the total number of shares of Offered Securities
that the Underwriters are obligated to purchase on such Closing Date, CSFBC may
make arrangements satisfactory to the Company for the purchase of such Offered
Securities by other persons, including any of the Underwriters, but if no such
arrangements are made by such Closing Date, the non-defaulting Underwriters
shall be obligated severally, in proportion to their respective commitments
hereunder, to purchase the Offered Securities that such defaulting Underwriters
agreed but failed to purchase on such Closing Date. If any Underwriter or
Underwriters so default and the aggregate number of shares of Offered Securities
with respect to which such default or defaults occur exceeds 10% of the total
number of shares of Offered Securities that the Underwriters are obligated to
purchase on such Closing Date and arrangements satisfactory to CSFBC and the
Company for the purchase of such Offered Securities by other persons are not
made within 36 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter or the Company, except
as provided in Section 9 (provided that if such default occurs with respect to
Optional Securities after the First Closing Date, this Agreement will not
19
terminate as to the Firm Securities or any Optional Securities purchased prior
to such termination). As used in this Agreement, the term "Underwriter" includes
any person substituted for an Underwriter under this Section. Nothing herein
will relieve a defaulting Underwriter from liability for its default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Company or its officers and of the several Underwriters set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation, or statement as to the results thereof, made by or on behalf
of any Underwriter, the Company or any of their respective representatives,
officers or directors or any controlling person, and will survive delivery of
and payment for the Offered Securities. If this Agreement is terminated pursuant
to Section 8 or if for any reason the purchase of the Offered Securities by the
Underwriters is not consummated, the Company shall remain responsible for the
expenses to be paid or reimbursed by it pursuant to Section 5 and the respective
obligations of the Company and the Underwriters pursuant to Section 7 shall
remain in effect, and if any Offered Securities have been purchased hereunder
the representations and warranties in Section 2 and all obligations under
Section 5 shall also remain in effect. If the purchase of the Offered Securities
by the Underwriters is not consummated for any reason other than solely because
of the termination of this Agreement pursuant to Section 8 or the occurrence of
any event specified in clause (ii), (iii), or (iv) of Section 6(d), the Company
will reimburse the Underwriters for all out-of-pocket expenses (including fees
and disbursements of counsel) reasonably incurred by them in connection with the
offering of the Offered Securities.
10. Notices. All communications hereunder will be in writing and, if sent
to the Underwriters, will be mailed, delivered or telegraphed and confirmed to
the Representatives, at c/o Credit Suisse First Boston Corporation, Eleven
Madison Avenue, New York, N.Y. 10010-3629, Attention: Investment Banking
Department--Transactions Advisory Group, or, if sent to the Company, will be
mailed, delivered or telegraphed and confirmed to it at eMachines, Inc., 00000
Xxxxxx Xxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxxxx Xxxxxx;
provided, however, that any notice to an Underwriter pursuant to Section 7 will
be mailed, delivered or telegraphed and confirmed to such Underwriter.
11. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the officers and
directors and controlling persons referred to in Section 7, and no other person
will have any right or obligation hereunder.
12. Representation of Underwriters. The Representatives will act for the
several Underwriters in connection with this financing, and any action under
this Agreement taken by the Representatives, jointly or by CSFBC will be binding
upon all the Underwriters.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to principles
of conflicts of laws.
15. The Company hereby submits to the non-exclusive jurisdiction of the
Federal and state courts in the Borough of Manhattan in The City of New York in
any suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.
20
If the foregoing is in accordance with the Representatives' understanding of our
agreement, kindly sign and return to the Company one of the counterparts hereof,
whereupon it will become a binding agreement between the Company and the several
Underwriters in accordance with its terms.
Very truly yours,
EMACHINES, INC.
By:
---------------------------------------
Xxxxxxx X. Xxxxxx
President and Chief Executive Officer
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
CHASE SECURITIES Inc.
FLEETBOSTON XXXXXXXXX XXXXXXXX Inc.
XXXXXXX XXXXX BARNEY Inc.
Acting on behalf of themselves and as
the Representatives of the
several Underwriters
By CREDIT SUISSE FIRST BOSTON CORPORATION
--------------------------------------
By
--------------------------------------
[Insert title]
21
SCHEDULE A
Number of
Underwriter Firm Securities
----------- ---------------
Credit Suisse First Boston Corporation..............
Chase Securities Inc................................
FleetBoston Xxxxxxxxx Xxxxxxxx Inc..................
Xxxxxxx Xxxxx Barney Inc............................
Total............................................ [$]
===============
22
