2,000,000 Shares
HOLLYWOOD ENTERTAINMENT CORPORATION
Common Stock
UNDERWRITING AGREEMENT
December __, 1996
XXXXXXXXXX SECURITIES
XXXXXXXXX, LUFKIN & XXXXXXXX
SECURITIES CORPORATION
As Representatives of the several Underwriters
c/x XXXXXXXXXX SECURITIES
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
SECTION 1. Introductory. Hollywood Entertainment Corporation, an
Oregon corporation (the "Company"), proposes to issue and sell 2,000,000
shares of its authorized but unissued Common Stock (the "Common Stock") to
the several underwriters named in Schedule A annexed hereto (the
"Underwriters"), for whom you are acting as Representatives. Said aggregate
of 2,000,000 shares are herein called the "Firm Common Shares." In
addition, the Company proposes to grant to the Underwriters an option to
purchase up to 300,000 additional shares of Common Stock (the "Optional
Common Shares"), as provided in Section 4 hereof. The Firm Common Shares
and, to the extent such option is exercised, the Optional Common Shares are
hereinafter collectively referred to as the Common Shares.
You have advised the Company that the Underwriters propose to
make a public offering of their respective portions of the Common Shares on
the effective date of the registration statement hereinafter referred to,
or as soon thereafter as in your judgment is advisable.
The Company hereby confirms its agreements with respect to the
purchase of the Common Shares by the Underwriters as follows:
SECTION 2. Representations and Warranties of the Company. The
Company represents and warrants to the several Underwriters that:
(a) A registration statement on Form S-3 (File No.
333-_______) with respect to the Common Shares has been prepared by
the Company in conformity with the requirements of the Securities Act
of 1933, as amended (the "Act"), and the rules and regulations (the
"Rules and Regulations") of the Securities and Exchange Commission
(the "Commission") thereunder, and has been filed with the Commission.
[The Company has prepared and has filed or proposes to file prior to
the effective date of such registration statement an amendment or
amendments to such registration statement, which amendment or
amendments have been or will be similarly prepared.] There have been
delivered to you two signed copies of such registration statement [and
amendments,] together with
1.
two copies of each exhibit filed therewith. Conformed copies of such
registration statement [and amendments] (but without exhibits) and of
the related preliminary prospectus have been delivered to you in such
reasonable quantities as you have requested for each of the
Underwriters. The Company will next file with the Commission one of
the following: (i) prior to effectiveness of such registration
statement, a further amendment thereto, including the form of final
prospectus, (ii) a final prospectus in accordance with Rules 430A and
424(b) of the Rules and Regulations, or (iii) a term sheet (the "Term
Sheet") as described in and in accordance with Rules 434 and 424(b) of
the Rules and Regulations. As filed, the final prospectus, if one is
used, or the Term Sheet and Preliminary Prospectus (as hereinafter
defined), if a final prospectus is not used, shall include all Rule
430A Information (as hereinafter defined) and, except to the extent
that you shall agree in writing to a modification, shall be in all
substantive respects in the form furnished to you prior to the date
and time that this Agreement was executed and delivered by the parties
hereto, or, to the extent not completed at such date and time, shall
contain only such specific additional information and other changes
(beyond that contained in the latest Preliminary Prospectus (as
hereinafter defined)) as the Company shall have previously advised you
in writing would be included or made therein.
The term "Registration Statement" as used in this Agreement
shall mean such registration statement at the time such registration
statement becomes effective and, in the event any post-effective
amendment thereto becomes effective prior to the First Closing Date
(as hereinafter defined), shall also mean such registration statement
as so amended; provided, however, that such term shall also include
(i) all Rule 430A Information deemed to be included in such
registration statement at the time such registration statement becomes
effective as provided by Rule 430A of the Rules and Regulations and
(ii) a registration statement, if any, filed pursuant to Rule 462(b)
of the Rules and Regulations relating to the Common Shares. The term
"Preliminary Prospectus" shall mean any preliminary prospectus
referred to in the preceding paragraph and any preliminary prospectus
included in the Registration Statement at the time it becomes
effective that omits Rule 430A Information. The term "Prospectus" as
used in this Agreement shall mean either (i) the prospectus relating
to the Common Shares in the form in which it is first filed with the
Commission pursuant to Rule 424(b) of the Rules and Regulations, or
(ii) if a Term Sheet is not used and no filing pursuant to Rule 424(b)
of the Rules and Regulations is required, the form of final prospectus
included in the Registration Statement at the time such registration
statement becomes effective, or (iii) if a Term Sheet is used, the
Term Sheet in the form in which it is first filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations, together with
the Preliminary Prospectus included in the Registration Statement at
the time it becomes effective. The term "Rule 430A Information" means
information with respect to the Common Shares and the offering thereof
permitted to be omitted from the Registration Statement when it
becomes effective pursuant to Rule 430A of the Rules and Regulations.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus, and each Preliminary
Prospectus has conformed in all material respects to the requirements
of the Act and the Rules and Regulations and, as of its date, has not
included any untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; and
at the time the Registration Statement becomes effective, and at all
times subsequent thereto up to and including each Closing Date
hereinafter mentioned, the Registration Statement and the Prospectus,
and any amendments or supplements thereto, will contain all material
statements and information required to be included therein by the Act
and the Rules and Regulations and will in all material respects
conform to the requirements of the Act and the Rules and Regulations,
and neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, will include any untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, no representation or warranty contained in this
subsection 2(b) shall be applicable to information contained in or
omitted from any Preliminary
2.
Prospectus, the Registration Statement, the Prospectus or any such
amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by or on behalf of any
Underwriter, directly or through the Representatives, specifically for
use in the preparation thereof. The documents incorporated by
reference in the Registration Statement, any Preliminary Prospectus
and the Prospectus, when they were filed with the Commission or as
subsequently amended prior to the date hereof, conformed in all
material respects to the requirements of the Exchange Act and the
rules and regulations of the Commission thereunder, and none of such
documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading.
(c) The Company does not own or control, directly or
indirectly, any corporation, association or other entity other than
the subsidiaries listed in Exhibit 21.1 to the Registration Statement.
The Company and each of its subsidiaries have been duly incorporated
and are validly existing as corporations in good standing under the
laws of their respective jurisdictions of incorporation, with full
power and authority (corporate and other) to own and lease their
properties and conduct their respective businesses as described in the
Prospectus; the Company owns all of the outstanding capital stock of
its subsidiaries free and clear of all claims, liens, charges and
encumbrances; the Company and each of its subsidiaries are in
possession of and operating in compliance with all authorizations,
licenses, permits, consents, certificates and orders material to the
conduct of their respective businesses taken as a whole, all of which
are valid and in full force and effect; the Company and each of its
subsidiaries are duly qualified to do business and in good standing as
foreign corporations in each jurisdiction in which the ownership or
leasing of properties or the conduct of their respective businesses
requires such qualification, except for jurisdictions in which the
failure to so qualify would not have a material adverse effect upon
the Company or the subsidiary; and, to the best of the Company's
knowledge, no proceeding has been instituted in any such jurisdiction,
revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, such power and authority or qualification.
(d) The Company has an authorized and outstanding capital
stock as set forth under the heading Capitalization in the Prospectus;
the issued and outstanding shares of Common Stock have been duly
authorized and validly issued, are fully paid and nonassessable, are
duly listed on the Nasdaq National Market, have been issued in
compliance with all federal and state securities laws, were not issued
in violation of or subject to any preemptive rights or other rights to
subscribe for or purchase securities, and conform to the description
thereof contained or incorporated in the Prospectus. All issued and
outstanding shares of capital stock of each subsidiary of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable. Except as disclosed in or contemplated by the
Prospectus and the financial statements of the Company, and the
related notes thereto, included in the Prospectus, neither the Company
nor any subsidiary has outstanding any options to purchase, or any
preemptive rights or other rights to subscribe for or to purchase, any
securities or obligations convertible into, 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 Company's stock option, stock bonus and other stock
plans or arrangements, and the options or other rights granted and
exercised thereunder, set forth in the Prospectus accurately and
fairly presents the information required to be shown with respect to
such plans, arrangements, options and rights.
(e) The Common Shares to be sold by the Company have been
duly authorized and, when issued, delivered and paid for in the manner
set forth in this Agreement, will be duly authorized, validly issued,
fully paid and nonassessable, and will conform to the description
thereof contained in the Prospectus. No preemptive rights or other
rights to subscribe for or purchase exist with respect to the issuance
and sale of the Common Shares by the Company pursuant to this
Agreement. No shareholder of the Company has any right which has not
been waived to require the
3.
Company to register the sale of any shares owned by such shareholder
under the Act in the public offering contemplated by this Agreement.
No further approval or authority of the shareholders or the Board of
Directors of the Company will be required for the transfer and sale of
the Common Shares to be sold by the Company as contemplated herein.
(f) The Company has full legal right, power and authority to
enter into this Agreement and perform the transactions contemplated
hereby. This Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding
obligation of the Company in accordance with its terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting creditors' rights generally or
by general equitable principles. The making and performance of this
Agreement by the Company and the consummation of the transactions
herein contemplated will not violate any provisions of the articles of
incorporation or bylaws, or other organizational documents, of the
Company or any of its subsidiaries, and will not conflict with, result
in the breach or violation of, or constitute, either by itself or upon
notice or the passage of time or both, a default under any agreement,
mortgage, deed of trust, lease, franchise, license, indenture, permit
or other instrument to which the Company or any of its subsidiaries is
a party or by which the Company or any of its subsidiaries or any of
its respective properties may be bound or affected, any statute or any
authorization, judgment, decree, order, rule or regulation of any
court or any regulatory body, administrative agency or other
governmental body applicable to the Company or any of its subsidiaries
or any of their respective properties. No consent, approval,
authorization or other order of any court, regulatory body,
administrative agency or other governmental body is required for the
execution and delivery of this Agreement or the consummation of the
transactions contemplated by this Agreement, except for compliance
with the Act, the Blue Sky laws applicable to the public offering of
the Common Shares by the several Underwriters and the clearance of
such offering with the National Association of Securities Dealers,
Inc. (the "NASD").
(g) Each of Coopers & Xxxxxxx, L.L.P. and Price Waterhouse
LLP, who have expressed their opinions with respect to the financial
statements and schedules filed with the Commission as a part of the
Registration Statement and included in the Prospectus and in the
Registration Statement, are independent accountants as required by the
Act and the Rules and Regulations.
(h) The financial statements and schedules of the Company
and its subsidiaries and the related notes thereto, included or
incorporated in the Registration Statement and the Prospectus present
fairly the financial position of Hollywood Entertainment Corporation
and its subsidiaries as of the respective dates of such financial
statements and schedules, and present fairly the results of operations
and changes in financial position of Hollywood Entertainment
Corporation for the respective periods covered thereby. Such
statements, schedules and related notes have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis as certified by the independent accountants named in
subsection 2(g). No other financial statements or schedules are
required to be included or incorporated in the Registration Statement.
The selected financial data set forth in the Prospectus under the
captions "Capitalization" and "Selected Financial and Operating Data"
fairly present the information set forth therein on the basis stated
in the Registration Statement. [The pro forma financial information
included in the Registration Statement and the Prospectus present
fairly the information shown therein, have been prepared in accordance
with the Commission's rules and guidelines with respect to pro forma
financial statements, have been properly compiled on the pro forma
bases described therein, and, in the opinion of the Company, the
assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the
transactions or circumstances referred to therein.] No other financial
statements or schedules of the Company or any other entity are
required to be included in, or incorporated into, the Registration
4.
Statement pursuant to any requirement of the Act or any Rules and
Regulations, including Rule 3-05 of Regulation S-X.
(i) Except as disclosed in the Prospectus, and except as to
violations, breaches and defaults which individually or in the
aggregate would not be material to the Company, neither the Company
nor any of its subsidiaries is in violation or default of any
provision of its articles of incorporation or bylaws, or other
organizational documents, or is in breach of or default with respect
to any provision of any agreement, judgment, decree, order, mortgage,
deed of trust, lease, franchise, license, indenture, permit or other
instrument to which it is a party or by which it or any of its
properties are bound; and there does not exist any state of facts
which constitutes an event of default on the part of the Company or
any such subsidiary as defined in such documents or which, with notice
or lapse of time or both, would constitute such an event of default.
(j) There are no contracts or other documents required to be
described in the Registration Statement or to be filed as exhibits to
the Registration Statement by the Act or by the Rules and Regulations
which have not been described or filed as required. The contracts so
described in the Prospectus are in full force and effect on the date
hereof; and neither the Company nor any of its subsidiaries, nor to
the best of the Company's knowledge, any other party is in breach of
or default under any of such contracts.
(k) Except as disclosed in the Prospectus, there are no
legal or governmental actions, suits or proceedings pending or, to the
best of the Company's knowledge, threatened to which the Company or
any of its subsidiaries is or may be a party or of which property
owned or leased by the Company or any of its subsidiaries is or may be
the subject, or related to environmental or discrimination matters,
which actions, suits or proceedings might, individually or in the
aggregate, prevent or adversely affect the transactions contemplated
by this Agreement or result in a material adverse change in the
condition (financial or otherwise), properties, business, results of
operations or prospects of the Company and its subsidiaries; and no
labor disturbance by the employees of the Company or any of its
subsidiaries exists or is imminent which might be expected to affect
adversely such condition, properties, business, results of operations
or prospects. 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,
administrative agency or other governmental body.
(l) The Company or the applicable subsidiary has good and
marketable title to all the properties and assets reflected as owned
in the financial statements hereinabove described (or elsewhere in the
Prospectus), subject to no lien, mortgage, pledge, charge or
encumbrance of any kind except (i) those, if any, reflected in such
financial statements (or elsewhere in the Prospectus), or (ii) those
which are not material in amount and do not adversely affect the use
made and proposed to be made of such property by the Company and its
subsidiaries. The Company or the applicable subsidiary holds its
leased properties under valid and binding leases, with such exceptions
as are not materially significant in relation to the business of the
Company and its subsidiaries taken as a whole. Except as disclosed in
the Prospectus, the Company owns or leases all such properties as are
necessary to its operations as now conducted.
(m) Since the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as
described in or specifically contemplated by the Prospectus: (i) the
Company and its subsidiaries have not incurred any material
liabilities or obligations, indirect, direct or contingent, or entered
into any material verbal or written agreement or other transaction
which is not in the ordinary course of business or which could result
in a material reduction in the future earnings of the Company and its
subsidiaries; (ii) the Company and its subsidiaries have not sustained
any material loss or interference with their respective businesses or
properties from fire, flood,
5.
windstorm, accident or other calamity, whether or not covered by
insurance; (iii) the Company has not paid or declared any dividends or
other distributions with respect to its capital stock and the Company
and its subsidiaries are not in default in the payment of principal or
interest on any outstanding debt obligations; (iv) there has not been
any change in the capital stock (other than upon the sale of the
Common Shares hereunder and upon the exercise of options or warrants
described in the Registration Statement) or indebtedness material to
the Company and its subsidiaries taken as a whole (other than in the
ordinary course of business); and (v) there has not been any material
adverse change in the condition (financial or otherwise), business,
properties, results of operations or prospects of the Company and its
subsidiaries taken as a whole.
(n) Except as disclosed in or specifically contemplated by
the Prospectus, the Company and its subsidiaries have sufficient
trademarks, trade names, patent rights, mask works, copyrights,
licenses, approvals and governmental authorizations to conduct their
businesses as now conducted; the expiration of any trademarks, trade
names, patent rights, mask works, copyrights, licenses, approvals or
governmental authorizations would not have a material adverse effect
on the condition (financial or otherwise), business, results of
operations or prospects of the Company or its subsidiaries; and the
Company has no knowledge of any material infringement by it or its
subsidiaries of trademark, trade name rights, patent rights, mask
works, copyrights, licenses, trade secret or other similar rights of
others, and there is no claim being made against the Company or its
subsidiaries regarding trademark, trade name, patent, mask work,
copyright, license, trade secret or other infringement which could
have a material adverse effect on the condition (financial or
otherwise), business, results of operations or prospects of the
Company and its subsidiaries taken as a whole.
(o) Neither the Company nor any of its subsidiaries have
been advised or have any reason to believe that either it or any of
its subsidiaries is not conducting business in compliance with all
applicable laws, rules and regulations of the jurisdictions in which
it is conducting business, including, without limitation, all
applicable local, state and federal environmental laws and
regulations; except where failure to be so in compliance would not
materially adversely affect the condition (financial or otherwise),
business, results of operations or prospects of the Company and its
subsidiaries taken as a whole.
(p) The Company and its subsidiaries have filed all
necessary federal, state and foreign income and franchise tax returns
and have paid all taxes shown as due thereon; and the Company has no
knowledge of any tax deficiency which has been or might be asserted or
threatened against the Company or its subsidiaries which could
materially and adversely affect the business, operations or properties
of the Company and its subsidiaries taken as a whole.
(q) The Company is not an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(r) The Company has not distributed and will not distribute
prior to the First Closing Date any offering material in connection
with the offering and sale of the Common Shares other than the
Prospectus, the Registration Statement and the other materials
permitted by the Act.
(s) Each of the Company and its subsidiaries maintains
insurance of the types and in the amounts generally deemed adequate
for its business, including, but not limited to, insurance covering
real and personal property owned or leased by the Company and its
subsidiaries against theft, damage, destruction, acts of vandalism and
all other risks customarily insured against, all of which insurance is
in full force and effect.
6.
(t) Neither the Company nor any of its subsidiaries has at
any time during the last five years (i) made any unlawful contribution
to any candidate for foreign office, or failed to disclose fully any
contribution in violation of law, or (ii) made any payment to any
federal or state governmental officer or official, or other person
charged with similar public or quasi-public duties, other than
payments required or permitted by the laws of the United States of any
jurisdiction thereof.
(u) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might be reasonably
expected to cause or result in stabilization or manipulation of the
price of the Common Stock to facilitate the sale or resale of the
Common Shares.
(v) Neither the Company nor any of its affiliates does
business with the government of Cuba or with any person or affiliate
located in Cuba in violation of Section 517.075 of the Florida
Statutes.
SECTION 3. Representations and Warranties of the Underwriters.
The Representatives, on behalf of the several Underwriters, represent and
warrant to the Company that the information set forth (i) on the cover page
of the Prospectus with respect to price, underwriting discounts and
commissions and terms of offering and (ii) under "Underwriting" in the
Prospectus was furnished to the Company by and on behalf of the
Underwriters for use in connection with the preparation of the Registration
Statement and the Prospectus and is correct in all material respects. The
Representatives represent and warrant that they have been authorized by
each of the other Underwriters as the Representatives to enter into this
Agreement on its behalf and to act for it in the manner herein provided.
SECTION 4. Purchase, Sale and Delivery of Common Shares. 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 issue and sell to the Underwriters the [2,000,000] Firm Common
Shares. The Underwriters agree, severally and not jointly, to purchase from
the Company the number of Firm Common Shares described below. The purchase
price per share to be paid by the several Underwriters to the Company shall
be $_________ per share.
The obligation of each Underwriter to the Company shall be to
purchase from the Company that number of full shares which (as nearly as
practicable, as determined by you) bears to [2,000,000] the same proportion
as the number of shares set forth opposite the name of such Underwriter in
Schedule A hereto bears to the total number of Firm Common Shares.
Delivery of certificates for the Firm Common Shares to be
purchased by the Underwriters and payment therefor shall be made at the
offices of Xxxxxxxxxx Securities, 000 Xxxxxxxxxx Xxxxxx, Xxx Xxxxxxxxx,
Xxxxxxxxxx (or such other place as may be agreed upon by the Company and
the Representatives) at such time and date, not later than the third (or,
if the Firm Common Shares are priced, as contemplated by Rule 15c6-1(c) of
the Securities Exchange Act of 1934, as amended (the Exchange Act), after
4:30 P.M. Washington D.C. Time, the fourth) full business day following the
first date that any of the Common Shares are released by you for sale to
the public, as you shall designate by at least 48 hours' prior notice to
the Company (or at such other time and date, not later than one week after
such third or fourth, as the case may be, full business day as may be
agreed upon by the Company and the Representatives) (the First Closing
Date); provided, however, that if the Prospectus is at any time prior to
the First Closing Date recirculated to the public, the First Closing Date
shall occur upon the later of the third or fourth, as the case may be, full
business day following the first date that any of the Common Shares are
released by you for sale to the public (as set forth above) or the date
that is 48 hours after the date that the Prospectus has been so
recirculated.
Delivery of certificates for the Firm Common Shares shall be made
by or on behalf of the Company to you, for the respective accounts of the
Underwriters against payment by you, for the accounts of
7.
the several Underwriters, of the purchase price therefor by certified or
official bank check payable in next day funds to the order of the Company.
The certificates for the Firm Common Shares shall be registered in such
names and denominations as you shall have requested at least two full
business days prior to the First Closing Date, and shall be made available
for checking and packaging on the business day preceding the First Closing
Date at a location in New York, New York, as may be designated by you. Time
shall be of the essence, and delivery at the time and place specified in
this Agreement is a further condition to the obligations of the
Underwriters.
In addition, on the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein
set forth, the Company hereby grants an option to the several Underwriters
to purchase, severally and not jointly, up to an aggregate of 300,000
Optional Common Shares at the purchase price per share to be paid for the
Firm Common Shares, for use solely in covering any over-allotments made by
you for the account of the Underwriters in the sale and distribution of the
Firm Common Shares. The option granted hereunder may be exercised at any
time (but not more than once) within 30 days after the first date that any
of the Common Shares are released by you for sale to the public, upon
notice by you to the Company setting forth the aggregate number of Optional
Common Shares as to which the Underwriters are exercising the option, the
names and denominations in which the certificates for such shares are to be
registered and the time and place at which such certificates will be
delivered. Such time of delivery (which may not be earlier than the First
Closing Date), being herein referred to as the Second Closing Date, shall
be determined by you, but if at any time other than the First Closing Date
shall not be earlier than three nor later than five full business days
after delivery of such notice of exercise. The number of Optional Common
Shares to be purchased by each Underwriter shall be determined by
multiplying the number of Optional Common Shares to be sold by the Company
pursuant to such notice of exercise by a fraction, the numerator of which
is the number of Firm Common Shares to be purchased by such Underwriter as
set forth opposite its name in Schedule A and the denominator of which is
300,000 (subject to such adjustments to eliminate any fractional share
purchases as you in your discretion may make). Certificates for the
Optional Common Shares will be made available for checking and packaging on
the business day preceding the Second Closing Date at a location in New
York, New York, as may be designated by you. The manner of payment for and
delivery of the Optional Common Shares shall be the same as for the Firm
Common Shares purchased from the Company as specified in the two preceding
paragraphs. At any time before lapse of the option, you may cancel such
option by giving written notice of such cancellation to the Company. If the
option is cancelled or expires unexercised in whole or in part, the Company
will deregister under the Act the number of Option Shares as to which the
option has not been exercised.
You have advised the Company that each Underwriter has authorized
you to accept delivery of its Common Shares, to make payment and to receipt
therefor. You, individually and not as the Representatives of the
Underwriters, may (but shall not be obligated to) make payment for any
Common Shares to be purchased by any Underwriter whose funds shall not have
been received by you by the First Closing Date or the Second Closing Date,
as the case may be, for the account of such Underwriter, but any such
payment shall not relieve such Underwriter from any of its obligations
under this Agreement.
Subject to the terms and conditions hereof, the Underwriters
propose to make a public offering of their respective portions of the
Common Shares as soon after the effective date of the Registration
Statement as in the judgment of the Representatives is advisable and at the
public offering price set forth on the cover page of and on the terms set
forth in the Prospectus, if one is used, or on the first page of the Term
Sheet, if one is used.
SECTION 5. Covenants of the Company. The Company covenants and
agrees that:
(a) The Company will use its best efforts to cause the
Registration Statement and any amendment thereof, if not effective at
the time and date that this Agreement is executed and
8.
delivered by the parties hereto, to become effective. If the
Registration Statement has become or becomes effective pursuant to
Rule 430A of the Rules and Regulations, or the filing of the
Prospectus is otherwise required under Rule 424(b) of the Rules and
Regulations, the Company will file the Prospectus, properly completed,
pursuant to the applicable paragraph of Rule 424(b) of the Rules and
Regulations within the time period prescribed and will provide
evidence satisfactory to you of such timely filing. The Company will
promptly advise you in writing (i) of the receipt of any comments of
the Commission, (ii) of any request of the Commission for amendment of
or supplement to the Registration Statement (either before or after it
becomes effective), any Preliminary Prospectus or the Prospectus or
for additional information, (iii) when the Registration Statement
shall have become effective and (iv) 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.
If the Commission shall enter any such stop order at any time, the
Company will use its best efforts to obtain the lifting of such order
at the earliest possible moment. The Company will not file any
amendment or supplement to the Registration Statement (either before
or after it becomes effective), any Preliminary Prospectus or the
Prospectus of which you have not been furnished with a copy a
reasonable time prior to such filing or to which you reasonably object
or which is not in compliance with the Act and the Rules and
Regulations.
(b) The Company will prepare and file with the Commission,
promptly upon your request, any amendments or supplements to the
Registration Statement or the Prospectus which in your judgment may be
necessary or advisable to enable the several Underwriters to continue
the distribution of the Common Shares and will use its best efforts to
cause the same to become effective as promptly as possible. The
Company will fully and completely comply with the provisions of Rule
430A of the Rules and Regulations with respect to information omitted
from the Registration Statement in reliance upon such Rule.
(c) If at any time within the nine-month period referred to
in Section 10(a)(3) of the Act during which a prospectus relating to
the Common Shares is required to be delivered under the Act any event
occurs, as a result of which the Prospectus, including any amendments
or supplements, would include an 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, or if it is
necessary at any time to amend the Prospectus, including any
amendments or supplements, to comply with the Act or the Rules and
Regulations, the Company will promptly advise you thereof 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 or supplement which will effect such compliance and
will use its best efforts to cause the same to become effective as
soon as possible; and, in case any Underwriter is required to deliver
a prospectus after such nine-month period, the Company upon request,
but at the expense of such Underwriter, will promptly prepare such
amendment or amendments to the Registration Statement and such
Prospectus or Prospectuses as may be necessary to permit compliance
with the requirements of Section 10(a)(3) of the Act.
(d) As soon as practicable, but not later than 45 days after
the end of the first quarter ending after one year following the
effective date of the Registration Statement (as defined in Rule
158(c) of the Rules and Regulations, the "Effective Date"), the
Company will make generally available to its security holders an
earnings statement (which need not be audited) covering a period of 12
consecutive months beginning after the effective date of the
Registration Statement which will satisfy the provisions of the last
paragraph of Section 11(a) of the Act.
(e) During such period as a prospectus is required by law to
be delivered in connection with sales by an Underwriter or dealer, the
Company, at its expense, but only for the nine-month period referred
to in Section 10(a)(3) of the Act, will furnish to you or mail to your
order copies
9.
of the Registration Statement, the Prospectus, the Preliminary
Prospectus and all amendments and supplements to any such documents in
each case as soon as available and in such quantities as you may
request, for the purposes contemplated by the Act.
(f) The Company shall cooperate with you and your counsel in
order to qualify or register the Common Shares for sale under (or
obtain exemptions from the application of) the Blue Sky laws of such
jurisdictions as you designate, will comply with such laws and will
continue such qualifications, registrations and exemptions in effect
so long as required for the distribution of the Common Shares. The
Company shall not be required to qualify as a foreign corporation or
to file a general consent to service of process in any such
jurisdiction where it is not presently qualified or where it would be
subject to taxation as a foreign corporation. The Company will advise
you promptly of the suspension of the qualification or registration of
(or any such exemption relating to) the Common Shares for offering,
sale or trading in any jurisdiction or any initiation or threat of any
proceeding for any such purpose, and in the event of the issuance of
any order suspending such qualification, registration or exemption,
the Company, with your cooperation, will use its best efforts to
obtain the withdrawal thereof.
(g) During the period of five years hereafter, the Company
will furnish to the Representatives and, upon request of any
Representative, to each of the other Underwriters: (i) as soon as
practicable after the end of each fiscal year, copies of the Annual
Report of the Company containing the balance sheet of the Company as
of the close of such fiscal year and statements of income,
shareholders' equity and cash flows for the year then ended and the
opinion thereon of the Company's independent public accountants; (ii)
as soon as practicable after the filing thereof, copies of each proxy
statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q,
Current Report on Form 8-K or other report filed by the Company with
the Commission, the NASD or any securities exchange; and (iii) as soon
as available, copies of any report or communication of the Company
mailed generally to holders of its Common Stock.
(h) During the period of 90 days after the first date that
any of the Common Shares are released by you for sale to the public,
without the prior written consent of Xxxxxxxxxx Securities (which
consent may be withheld at the sole discretion of Xxxxxxxxxx
Securities), the Company will not issue, offer, pledge, sell, grant
options to purchase or otherwise dispose of, directly or indirectly,
any of the Company's equity securities or any other securities
convertible into or exchangeable with its Common Stock or other equity
security, other than grants pursuant to the Company's 1993 Stock
Incentive Plan and the sale of shares pursuant to the exercise of
options described in the Prospectus.
(i) The Company will apply the net proceeds of the sale of
the Common Shares sold by it in accordance with its statements under
the caption Use of Proceeds in the Prospectus.
(j) The Company will use its best efforts to qualify or
register its Common Stock for sale in non-issuer transactions under
(or obtain exemptions from the application of) the Blue Sky laws of
the State of California (and thereby permit market making transactions
and secondary trading in the Company's Common Stock in California),
will comply with such Blue Sky laws and will continue such
qualifications, registrations and exemptions in effect for a period of
five years after the date hereof.
You, on behalf of the Underwriters, may, in your sole discretion,
waive in writing the performance by the Company of any one or more of the
foregoing covenants or extend the time for their performance.
10.
SECTION 6. Payment of Expenses. Whether or not the transactions
contemplated hereunder are consummated or this Agreement becomes effective
or is terminated, the Company agrees to pay all costs, fees and expenses
incurred in connection with the performance of their obligations hereunder
and in connection with the transactions contemplated hereby, including
without limiting the generality of the foregoing, (i) all expenses incident
to the issuance and delivery of the Common Shares (including all printing
and engraving costs), (ii) all fees and expenses of the registrar and
transfer agent of the Common Stock, (iii) all necessary issue, transfer and
other stamp taxes in connection with the issuance and sale of the Common
Shares to the Underwriters, (iv) all fees and expenses of the Company's
counsel and the Company's independent accountants, (v) all costs and
expenses incurred in connection with the preparation, printing, filing,
shipping and distribution of the Registration Statement, each Preliminary
Prospectus and the Prospectus (including all exhibits and financial
statements) and all amendments and supplements provided for herein, this
Agreement, the Agreement Among Underwriters, the Selected Dealers
Agreement, the Underwriters' Questionnaire, the Underwriters' Power of
Attorney and the Blue Sky memorandum, (vi) all filing fees, attorneys' fees
and expenses incurred by the Company or the Underwriters in connection with
qualifying or registering (or obtaining exemptions from the qualification
or registration of) all or any part of the Common Shares for offer and sale
under the Blue Sky laws or the laws of the Canadian provinces or of any
other foreign jurisdiction, (vii) the filing fee of the NASD, and (viii)
all other fees, costs and expenses referred to in Item 13 of the
Registration Statement. Except as provided in this Section 6, Section 8 and
Section 10 hereof, the Underwriters shall pay all of their own expenses,
including the fees and disbursements of their counsel (excluding those
relating to qualification, registration or exemption under the Blue Sky
laws and the Blue Sky memorandum referred to above).
SECTION 7. Conditions of the Obligations of the Underwriters. The
obligations of the several Underwriters to purchase and pay for the Firm
Common Shares on the First Closing Date and the Optional Common Shares on
the Second Closing Date shall be subject to the accuracy of the
representations and warranties on the part of the Company herein set forth
as of the date hereof and as of the First Closing Date or the Second
Closing Date, as the case may be, to the accuracy of the statements of
Company's officers made pursuant to the provisions hereof, to the
performance by the Company of its obligations hereunder, and to the
following additional conditions:
(a) The Registration Statement shall have become effective
not later than 5:00 P.M. (or, in the case of a registration statement
filed pursuant to Rule 462(b) of the Rules and Regulations relating to
the Common Shares, not later than 10:00 P.M.), Washington, D.C. Time,
on the date of this Agreement, or at such later time as shall have
been consented to by you; if the filing of the Prospectus, or any
supplement thereto, is required pursuant to Rule 424(b) of the Rules
and Regulations, the Prospectus shall have been filed in the manner
and within the time period required by Rule 424(b) of the Rules and
Regulations; and prior to such Closing Date, no stop order suspending
the effectiveness of the Registration Statement shall have been issued
and no proceedings for that purpose shall have been instituted or
shall be pending or, to the knowledge of the Company or you, shall be
contemplated by the Commission; and any request of the Commission for
inclusion of additional information in the Registration Statement, or
otherwise, shall have been complied with to your satisfaction.
(b) You shall be satisfied that since the respective dates
as of which information is given in the Registration Statement and
Prospectus, (i) there shall not have been any change in the capital
stock of the Company or any of its subsidiaries or any material
increase in the indebtedness (other than in the ordinary course of
business) of the Company or any of its subsidiaries, (ii) except as
set forth in or contemplated by the Registration Statement or the
Prospectus, no material verbal or written agreement or other
transaction shall have been entered into by the Company or any of its
subsidiaries, which is not in the ordinary course of business or which
could result in a material reduction in the future earnings of the
Company and its subsidiaries taken as a whole, (iii) no loss or damage
(whether or not insured) to the property of the Company or any of its
subsidiaries shall have
11.
been sustained which materially and adversely affects the condition
(financial or otherwise), business, results of operations or prospects
of the Company and its subsidiaries taken as a whole, (iv) no legal or
governmental action, suit or proceeding affecting the Company or any
of its subsidiaries which is material to the Company or any of its
subsidiaries or which affects or may affect the transactions
contemplated by this Agreement shall have been instituted or
threatened except as disclosed in the Prospectus and (v) there shall
not have been any material change in the condition (financial or
otherwise), business, management, results of operations or prospects
of the Company or any of its subsidiaries which makes it impractical
or inadvisable in the reasonable judgment of the Representatives to
proceed with the public offering or purchase the Common Shares as
contemplated hereby.
(c) There shall have been furnished to you, as
Representatives of the Underwriters, on each Closing Date, in form and
substance satisfactory to you, except as otherwise expressly provided
below:
(i) An opinion of Stoel Rives LLP counsel for the
Company, addressed to the Underwriters and dated the First
Closing Date, or the Second Closing Date, as the case may be, to
the effect that:
(1) Each of the Company and its subsidiaries has
been duly incorporated and is validly existing as a
corporation in good standing under the laws of its
jurisdiction of incorporation, is duly qualified to do
business as a foreign corporation and is in good standing in
all other jurisdictions where the ownership or leasing of
properties or the conduct of its business requires such
qualification, except for jurisdictions in which the failure
to so qualify would not have a material adverse effect on
the Company and its subsidiaries taken as a whole, and has
full corporate power and authority to own its properties and
conduct its business as described in the Registration
Statement;
(2) The authorized, issued and outstanding capital
stock of the Company conforms as to legal matters in all
material respects to the description thereof contained in
the Registration Statement and is as set forth in the
Prospectus; all necessary corporate proceedings have been
taken in order to authorize validly such authorized Common
Stock; all outstanding shares of Common Stock (including the
Firm Common Shares and any Optional Common Shares when
certificates therefor have been delivered to you or upon
your order against payment of the agreed consideration
therefor in accordance with the provisions of this
Agreement) have been duly and validly issued, are fully paid
and nonassessable, have been issued in compliance with
registration and qualification provisions of federal and
state securities laws, were not issued in violation of or
subject to any preemptive rights or, to the actual knowledge
of such counsel, other rights to subscribe for or purchase
any securities and conform to the description thereof
contained in the Prospectus; without limiting the foregoing,
there are no preemptive or to the actual knowledge of such
counsel other rights to subscribe for or purchase any of the
Common Shares to be sold by the Company hereunder;
(3) The certificates evidencing the Common Shares
to be delivered hereunder comply as to form with Oregon law,
and, when duly countersigned by the Company's transfer agent
and registrar and delivered to you or upon your order
against payment of the agreed consideration therefor in
accordance with the provisions of this Agreement, the Common
Shares represented thereby will be duly authorized and
validly issued, fully paid and nonassessable, will not have
been
12.
issued in violation of or subject to any preemptive rights
or, to the actual knowledge of such counsel, other rights to
subscribe for or purchase securities and will conform in all
respects to the description thereof contained in the
Prospectus;
(4) Except as disclosed in or specifically
contemplated by the Prospectus, to the actual knowledge of
such counsel, there are no outstanding options, warrants or
other rights calling for the issuance of, and no
commitments, plans or arrangements to issue, any shares of
capital stock of the Company or any security convertible
into or exchangeable for capital stock of the Company;
(5) (a) The Registration Statement has become
effective under the Act, and, to the actual knowledge of
such counsel, no stop order suspending the effectiveness of
the Registration Statement or preventing the use of the
Prospectus has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated
by the Commission; any required filing of the Prospectus and
any supplement thereto pursuant to Rule 424(b) of the Rules
and Regulations has been made in the manner and within the
time period required by such Rule 424(b);
(b) The Registration Statement, the
Prospectus and each amendment or supplement thereto (except
for the financial statements and schedules included therein
as to which such counsel need express no opinion) comply as
to form in all material respects with the requirements of
the Act and the Rules and Regulations;
(c) The documents incorporated by reference
in the Prospectus (except for any financial statements and
schedules and financial and statistical information included
in such documents as to which such counsel need express no
opinion), when they were filed with the Commission or as
subsequently amended prior to the date hereof, complied as
to form in all material respects with the requirements of
the Exchange Act and the rules and regulations of the
Commission thereunder;
(d) To the actual knowledge of such counsel,
there are no franchises, leases, contracts, agreements or
documents of a character required to be disclosed in the
Registration Statement or Prospectus or to be filed as
exhibits to the Registration Statement which are not
disclosed or filed, as required; and
(e) To the actual knowledge of such counsel,
there are no pending or threatened legal or governmental
actions, suits or proceedings against the Company
(including, without limitation, those having jurisdiction
over environmental or similar matters) required to be
disclosed in the Registration Statement or Prospectus which
are not disclosed as required;
(6) The Company has full corporate power and
corporate authority to enter into this Agreement and to sell
and deliver the Common Shares to be sold by it to the
several Underwriters; this Agreement has been duly and
validly authorized by all necessary corporate action by the
Company, has been duly and validly executed and delivered by
and on behalf of the Company, and is a valid and binding
agreement of the Company enforceable in accordance with its
terms, except as to those provisions relating to indemnity
or contribution for liabilities arising under the Act as to
which no opinion need be expressed; and no approval,
authorization, order,
13.
consent, registration, filing, qualification, license or
permit of or with any court, regulatory, administrative or
other governmental body is required for the execution and
delivery of this Agreement by the Company or the
consummation of the transactions contemplated by this
Agreement, except such as have been obtained and are in full
force and effect under the Act and such as may be required
under applicable Blue Sky laws in connection with the
purchase and distribution of the Common Shares by the
Underwriters and the clearance of such offering with the
NASD;
(7) The execution and performance of this
Agreement and the consummation of the transactions herein
contemplated will not conflict with, result in the breach
of, or constitute, either by itself or upon notice or the
passage of time or both, a default under, any agreement,
mortgage, deed of trust, lease, franchise, license,
indenture, permit or other instrument actually known to such
counsel to which the Company or is a party or by which the
Company or any of its property may be bound or affected
which is material to the Company, or violate any of the
provisions of the articles of incorporation or bylaws of the
Company, or, to the actual knowledge of such counsel,
violate any statute, judgment, decree, order, rule or
regulation of any court or governmental body having
jurisdiction over the Company or any of its property;
(8) To the actual knowledge of such counsel, the
Company is not in violation of its articles of incorporation
or bylaws, or in breach of or default with respect to any
provision of any agreement, mortgage, deed of trust, lease,
franchise, license, indenture, permit or other instrument
actually known to such counsel to which the Company is a
party or by it or any of its properties or assets (tangible
or intangible) may be bound or affected, except where such
default would not materially adversely affect the Company;
and, to the actual knowledge of such counsel, the Company is
in compliance with all laws, rules, regulations, judgments,
decrees, orders and statutes of any court or jurisdiction to
which it is subject, except where noncompliance would not
materially adversely affect the Company;
(9) To the actual knowledge of such counsel, no
holders of securities of the Company have rights which have
not been waived to the registration of shares of Common
Stock or other securities because of the filing of the
Registration Statement by the Company or the offering
contemplated hereby;
(10) No transfer taxes are required to be paid in
connection with the sale and delivery of the Common Shares
to the Underwriters hereunder; and
(11) Assuming due execution by the party thereto,
the Lock-up Agreement of Xx. Xxxx X. Xxxxxxx is a legal,
valid and binding obligation of the party thereto,
enforceable against the party and, assuming timely notice of
the terms of the Lock-up Agreement, any subsequent holder of
the securities subject thereto in accordance with its terms.
In rendering such opinion, such counsel may rely as to matters of
local law, on opinions of local counsel, and as to matters of fact, on
certificates of officers of the Company and of governmental officials, in
which case their opinion is to state that they are so doing. In addition,
such counsel shall state that such counsel has participated in conferences
with officials and other representatives of the Company, you, your counsel
and the independent public accountants of the
14.
Company, at which conferences the contents of the Registration Statement
and the Prospectus and related matters were discussed, and although they
have not verified the accuracy or completeness of the statements contained
in the Registration Statement or the Prospectus, nothing has come to the
attention of such counsel which caused them to believe that, at the time
the Registration Statement became effective, the Registration Statement
(except as to financial statements, financial data and supporting schedules
contained therein, as to which such counsel need make no statement),
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or on the Closing Date the Registration
Statement or the Prospectus (except as aforesaid), contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light
of the circumstances in which made, not misleading.
(i) Such opinion or opinions of Xxxxxxx, Phleger & Xxxxxxxx
LLP, counsel for the Underwriters dated the First Closing Date or
the Second Closing Date, as the case may be, with respect to the
incorporation of the Company, the sufficiency of all corporate
proceedings and other legal matters relating to this Agreement,
the validity of the Common Shares, the Registration Statement and
the Prospectus and other related matters as you may reasonably
require, and the Company shall have furnished to such counsel
such documents and shall have exhibited to them such papers and
records as they may reasonably request for the purpose of
enabling them to pass upon such matters. In connection with such
opinions, such counsel may rely on representations or
certificates of officers of the Company and governmental
officials.
(ii) A certificate of the Company executed by the Chairman
of the Board or President and the chief financial or accounting
officer of the Company, dated the First Closing Date or the
Second Closing Date, as the case may be, to the effect that:
(1) The representations and warranties of the Company
set forth in Section 2 of this Agreement are true and
correct as of the date of this Agreement and as of the First
Closing Date or the Second Closing Date, as the case may be,
and the Company has complied with all the agreements and
satisfied all the conditions specified herein on its part to
be performed or satisfied on or prior to such Closing Date;
(2) The Commission has not issued any order preventing
or suspending the use of the Prospectus or any Preliminary
Prospectus filed as a part of the Registration Statement or
any amendment thereto; no stop order suspending the
effectiveness of the Registration Statement has been issued;
and to the best of the knowledge of the respective signers,
no proceedings for that purpose have been instituted or are
pending or contemplated under the Act;
(3) Each of the respective signers of the certificate
has carefully examined the Registration Statement and the
Prospectus; in his opinion and to the best of his knowledge,
the Registration Statement and the Prospectus and any
amendments or supplements thereto contain all statements
required to be stated therein regarding the Company and its
subsidiaries; and neither the Registration Statement nor the
Prospectus nor any amendment or supplement thereto includes
any untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary
to make the statements therein not misleading;
15.
(4) Since the initial date on which the Registration
Statement was filed, no agreement, written or oral,
transaction or event has occurred which should have been set
forth in an amendment to the Registration Statement or in a
supplement to or amendment of any prospectus which has not
been disclosed in such a supplement or amendment;
(5) Since the respective dates as of which information
is given in the Registration Statement and the Prospectus,
and except as disclosed in or contemplated by the
Prospectus, there has not been any material adverse change
or a development involving a material adverse change in the
condition (financial or other), business, properties,
results of operations, management or prospects of the
Company and its subsidiaries; and except as disclosed in the
Prospectus, no legal or governmental action, suit or
proceeding is pending or threatened against the Company or
any of its subsidiaries which is material to the Company and
its subsidiaries, whether or not arising from transactions
in the ordinary course of business, or which in the
reasonable judgment of the Representatives may adversely
affect the transactions contemplated by this Agreement;
since such dates and except as so disclosed, neither the
Company nor any of its subsidiaries has entered into any
verbal or written agreement or other transaction which is
not in the ordinary course of business or which could result
in a material reduction in the future earnings of the
Company or incurred any material liability or obligation,
direct, contingent or indirect, made any change in its
capital stock, made any material increase in its short-term
debt, other than as the result of purchases of
videocassettes in the ordinary course of business in amounts
consistent with past practices, or funded debt or
repurchased or otherwise acquired any of the Company's
capital stock; and the Company has not declared or paid any
dividend, or made any other distribution, upon its
outstanding capital stock payable to shareholders of record
on a date prior to the First Closing Date or Second Closing
Date; and
(6) Since the respective dates as of which information
is given in the Registration Statement and the Prospectus
and except as disclosed in or contemplated by the
Prospectus, the Company has not sustained a material loss or
damage by strike, fire, flood, windstorm, accident or other
calamity (whether or not insured).
(iv) On the date before this Agreement is executed and also
on the First Closing Date and the Second Closing Date a letter
addressed to you, as Representatives of the Underwriters, from
Coopers & Xxxxxxx, L.L.P., independent accountants, the first one
to be dated the day before the date of this Agreement, the second
one to be dated the First Closing Date and the third one (in the
event of a Second Closing) to be dated the Second Closing Date,
in form and substance satisfactory to you.
(v) On the date before this Agreement is executed and also
on the First Closing Date and the Second Closing Date a letter
addressed to you, as Representatives of the Underwriters, from
Price Waterhouse LLP, independent accountants, the first one to
be dated the day before the date of this Agreement, the second
one to be dated the First Closing Date and the third one (in the
event of a Second Closing) to be dated the Second Closing Date,
in form and substance satisfactory to you.
(vi) On or before the First Closing Date, a letter from Xx.
Xxxx X. Xxxxxxx, in form and substance satisfactory to you,
confirming that for a period of 90 days
16.
after the first date that any of the Common Shares are released
by you for sale to the public, he will not directly or indirectly
sell or offer to sell or otherwise dispose of any shares of
Common Stock or any right to acquire such shares without the
prior written consent of Xxxxxxxxxx Securities, which consent may
be withheld at the sole discretion of Xxxxxxxxxx Securities,
other than bona fide gifts of Common Stock where the recipient
agrees in writing to be bound by the terms of such letter
agreement.
SECTION 8. Reimbursement of Underwriters' Expenses.
Notwithstanding any other provisions hereof, if this Agreement shall be
terminated by you pursuant to Section 7, or if the sale to the Underwriters
of the Common Shares at the First Closing is not consummated because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein or to comply with any provision hereof, the Company agrees
to reimburse you and the other Underwriters upon demand for all
out-of-pocket expenses that shall have been incurred by you and them in
connection with the proposed purchase and the sale of the Common Shares,
including but not limited to fees and disbursements of counsel, printing
expenses, travel expenses, postage, telegraph charges and telephone charges
relating directly to the offering contemplated by the Prospectus. Any such
termination shall be without liability of any party to any other party
except that the provisions of this Section, Section 6 and Section 10 shall
at all times be effective and shall apply.
SECTION 9. Effectiveness of Registration Statement. You and the
Company will use your and its best efforts to cause the Registration
Statement to become effective, to prevent the issuance of any stop order
suspending the effectiveness of the Registration Statement and, if such
stop order be issued, to obtain as soon as possible the lifting thereof.
SECTION 10. Indemnification.
a. The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter
within the meaning of the Act against any losses, claims, damages,
liabilities or expenses, joint or several, to which such Underwriter
or such controlling person may become subject, under the Act, the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
other federal or state statutory law or regulation, or at common law
or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of the Company),
insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof as contemplated below) arise out of or are
based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus, any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to
state in any of them a material fact required to be stated therein or
necessary to make the statements in any of them not misleading, or
arise out of or are based in whole or in part on any inaccuracy in the
representations and warranties of the Company contained herein or any
failure of the Company to perform its obligations hereunder or under
law; and will reimburse each Underwriter and each such controlling
person for any reasonable legal and other expenses incurred by such
Underwriter or such controlling person in connection with
investigating, defending, settling, compromising or paying any such
loss, claim, damage, liability, expense or action; provided, however,
that the Company will not be liable in any such case to the extent
that any such loss, claim, damage, liability or expense arises out of
or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in the Registration Statement, any
Preliminary Prospectus, the Prospectus, any amendment or supplement
thereto in reliance upon and in conformity with the information
furnished to the Company pursuant to Section 4 hereof; and further
provided, however, such indemnity with respect to any Preliminary
Prospectus shall not inure to the benefit of any Underwriter from whom
the person asserting any such loss, claim, damage or liability
purchased the Common Shares which are the subject thereof if such
person did not receive a copy of the Prospectus (or the Prospectus as
amended or supplemented) at or prior to the confirmation of the sale
of such
17.
Common Shares to such person in any case where such delivery is
required by the Act and the untrue statement or omission of a material
fact contained in such preliminary prospectus was corrected in the
Prospectus (or the Prospectus as amended or supplemented). In addition
to its other obligations under this Section 10(a), the Company agrees
that, as an interim measure during the pendency of any claim, action,
investigation, inquiry or other proceeding arising out of or based
upon any statement or omission, or any alleged statement or omission,
or any inaccuracy in the representations and warranties of the Company
herein or failure to perform its obligations hereunder, all as
described in this Section 10(a), it will reimburse each Underwriter on
a quarterly basis for all legal or other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the
absence of a judicial determination as to the propriety and
enforceability of the Company's obligation to reimburse each
Underwriter for such expenses and the possibility that such payments
might later be held to have been improper by a court of competent
jurisdiction. To the extent that any such interim reimbursement
payment is so held to have been improper, each Underwriter shall
promptly return it to the Company together with interest, compounded
daily, determined on the basis of the prime rate (or other commercial
lending rate for borrowers of the highest credit standing) announced
from time to time by Bank of America NT&SA, San Francisco, California
(the "Prime Rate"). Any such interim reimbursement payments which are
not made to an Underwriter within 30 days of a request for
reimbursement, shall bear interest at the Prime Rate from the date of
such request. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.
b. Each Underwriter will severally indemnify and hold
harmless the Company, each of its directors and officers who signed
the Registration Statement and each person, if any, who controls the
Company within the meaning of the Act, against any losses, claims,
damages, liabilities or expenses to which the Company, or any such
director, officer or controlling person may become subject, under the
Act, the Exchange Act, or other federal or state statutory law or
regulation, or at common law or otherwise (including in settlement of
any litigation, if such settlement is effected with the written
consent of such Underwriter), insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof as contemplated
below) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, 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, in light of the circumstances in which made and, 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 the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, in reliance upon
and in conformity with the information furnished to the Company
pursuant to Section 3 hereof; and will reimburse the Company, or any
such director, officer or controlling person for any reasonable legal
and other expense incurred by the Company, or any such director,
officer or controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action. In addition to its other
obligations under this Section 10(b), each Underwriter severally
agrees that, as an interim measure during the pendency of any claim,
action, investigation, inquiry or other proceeding arising out of or
based upon any statement or omission, or any alleged statement or
omission, described in this Section 10(b) which relates to information
furnished to the Company pursuant to Section 3 hereof, it will
reimburse the Company (and, to the extent applicable, each officer,
director and controlling person) on a quarterly basis for all
reasonable legal or other expenses incurred in connection with
investigating or defending any such claim, action, investigation,
inquiry or other proceeding, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the
Underwriters' obligation to reimburse the Company (and, to the extent
applicable, each officer, director and controlling person) for such
expenses and the possibility that such payments might later be held to
have been improper by a court of
18.
competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Company
(and, to the extent applicable, each officer, director and controlling
person) shall promptly return it to the Underwriters together with
interest, compounded daily, determined on the basis of the Prime Rate.
Any such interim reimbursement payments which are not made to the
Company within 30 days of a request for reimbursement, shall bear
interest at the Prime Rate from the date of such request. This
indemnity agreement will be in addition to any liability which such
Underwriter may otherwise have.
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 an
indemnifying party under this Section, notify the indemnifying party
in writing 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 for contribution or otherwise than
under the indemnity agreement contained in this Section or to the
extent it is not prejudiced as a proximate result of such failure. In
case any such action is brought against any indemnified party and such
indemnified party seeks or intends to seek indemnity from an
indemnifying party, the indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with all
other indemnifying parties similarly notified, to assume the defense
thereof with counsel reasonably satisfactory to such indemnified
party; provided, however, if the defendants in any such action include
both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be a
conflict between the positions of the indemnifying party and the
indemnified party in conducting the defense of any such action or that
there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have
the right to select separate counsel to assume such legal defenses and
to otherwise participate in the defense of such action on behalf of
such indemnified party or parties. Upon receipt of notice from the
indemnifying party to such indemnified party of its election so to
assume the defense of such action and approval by the indemnified
party of counsel, 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 unless (i) the indemnified party shall have employed
such counsel in connection with the assumption of legal defenses in
accordance with the proviso to the next preceding sentence (it being
understood, however, that the indemnifying party shall not be liable
for the expenses or more than one separate counsel, approved by the
Representatives in the case of paragraph (a), representing the
indemnified parties who are parties to such action) or (ii) the
indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of commencement of the
action, in each of which cases the fees and expenses of counsel shall
be at the expense of the indemnifying party.
d. If the indemnification provided for in this Section 10 is
required by its terms but is for any reason held to be unavailable to
or otherwise insufficient to hold harmless an indemnified party under
subparagraphs (a), (b) or (c) in respect of any losses, claims,
damages, liabilities or expenses referred to herein, then each
applicable indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of any losses, claims,
damages, liabilities or expenses referred to herein (i) in such
proportion as is appropriate to reflect the relative benefits received
by the Company and the Underwriters from the offering of the Common
Shares 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 relative fault of the Company and the Underwriters in
connection with the statements or omissions or inaccuracies in the
representations and warranties herein which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The respective relative benefits
received by the Company and the Underwriters shall be deemed to be in
the same proportion, in the
19.
case of the Company, as the total price paid to the Company for the
Common Shares sold by it to the Underwriters (net of underwriting
commissions but before deducting expenses) and, in the case of the
Underwriters, as the underwriting commissions received by them bears
to the total of such amounts paid to the Company and received by the
Underwriters as underwriting commissions. The relative fault of the
Company and the Underwriters 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 or the inaccurate or the alleged inaccurate
representation or warranty 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 statement or omission. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the
limitations set forth in subparagraph (c) of this Section 10, any
legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any action or claim. The
provisions set forth in subparagraph (c) of this Section 10 with
respect to notice of commencement of any action shall apply if a claim
for contribution is to be made under this subparagraph (d); provided,
however, that no additional notice shall be required with respect to
any action for which notice has been given under subparagraph (c) for
purposes of indemnification. The Company and the Underwriters agree
that it would not be just and equitable if contribution pursuant to
this Section 10 were determined solely by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by
any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 10, no
Underwriter shall be required to contribute any amount in excess of
the amount of the total underwriting commissions received by such
Underwriter in connection with the Common Shares underwritten by it
and distributed to the public. 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 to
contribute pursuant to this Section 10 are several in proportion to
their respective underwriting commitments and not joint.
e. It is agreed that any controversy arising out of the
operation of the interim reimbursement arrangements set forth in
Sections 10(a) and 10(b) hereof, including the amounts of any
requested reimbursement payments and the method of determining such
amounts, shall be settled by arbitration conducted under the
provisions of the Constitution and Rules of the Board of Governors of
the New York Stock Exchange, Inc. or pursuant to the Code of
Arbitration Procedure of the NASD. Any such arbitration must be
commenced by service of a written demand for arbitration or written
notice of intention to arbitrate, therein electing the arbitration
tribunal. In the event the party demanding arbitration does not make
such designation of an arbitration tribunal in such demand or notice,
then the party responding to said demand or notice is authorized to do
so. Such an arbitration would be limited to the operation of the
interim reimbursement provisions contained in Sections 10(a) and 10(b)
hereof and would not resolve the ultimate propriety or enforceability
of the obligation to reimburse expenses which is created by the
provisions of such Sections 10(a) and 10(b) hereof.
SECTION 11. Default of Underwriters. It shall be a condition to
this Agreement and the obligation of the Company to sell and deliver the
Common Shares hereunder, and of each Underwriter to purchase the Common
Shares in the manner as described herein, that, except as hereinafter in
this paragraph provided, each of the Underwriters shall purchase and pay
for all the Common Shares agreed to be purchased by such Underwriter
hereunder upon tender to the Representatives of all such shares in
accordance with the terms hereof. If any Underwriter or Underwriters
default in their obligations to purchase Common Shares hereunder on either
the First or Second Closing Date and the aggregate number of Common Shares
which such defaulting Underwriter or Underwriters agreed but failed to
purchase on such Closing Date does not exceed 10% of the total number of
Common Shares which the Underwriters are obligated to purchase on such
Closing Date, the non-defaulting Underwriters shall be obligated severally,
in proportion to their respective
20.
commitments hereunder, to purchase the Common Shares which such defaulting
Underwriters agreed but failed to purchase on such Closing Date. If any
Underwriter or Underwriters so default and the aggregate number of Common
Shares with respect to which such default occurs is more than the above
percentage and arrangements satisfactory to the Representatives and the
Company for the purchase of such Common Shares by other persons are not
made within 48 hours after such default, this Agreement will terminate
without liability on the part of any non-defaulting Underwriter or the
Company except for the expenses to be paid by the Company pursuant to
Section 6 hereof and except to the extent provided in Section 10 hereof.
In the event that Common Shares to which a default relates are to
be purchased by the non-defaulting Underwriters or by another party or
parties, the Representatives or the Company shall have the right to
postpone the First or Second Closing Date, as the case may be, for not more
than five business days in order that the necessary changes in the
Registration Statement, Prospectus and any other documents, as well as any
other arrangements, may be effected. 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.
SECTION 12. Effective Date. This Agreement shall become effective
immediately as to Sections 6, 8, 10, 13 and 14 and, as to all other
provisions, (i) if at the time of execution of this Agreement the
Registration Statement has not become effective, at 2:00 P.M., California
Time, on the first full business day following the effectiveness of the
Registration Statement, or (ii) if at the time of execution of this
Agreement the Registration Statement has been declared effective, at 2:00
P.M., California Time, on the first full business day following the date of
execution of this Agreement; but this Agreement shall nevertheless become
effective at such earlier time after the Registration Statement becomes
effective as you may determine on and by notice to the Company or by
release of any of the Common Shares for sale to the public. For the
purposes of this Section 12, the Common Shares shall be deemed to have been
so released upon the release for publication of any newspaper advertisement
relating to the Common Shares or upon the release by you of telegrams (i)
advising Underwriters that the Common Shares are released for public
offering, or (ii) offering the Common Shares for sale to securities
dealers, whichever may occur first.
SECTION 13. Termination. Without limiting the right to terminate
this Agreement pursuant to any other provision hereof:
(a) This Agreement may be terminated by the Company by
notice to you or by you by notice to the Company at any time prior to
the time this Agreement shall become effective as to all its
provisions, and any such termination shall be without liability on the
part of the Company to any Underwriter (except for the expenses to be
paid or reimbursed by the Company and the Selling Stockholders
pursuant to Sections 6 and 8 hereof and except to the extent provided
in Section 10 hereof) or of any Underwriter to the Company (except to
the extent provided in Section 10 hereof).
(b) This Agreement may also be terminated by you prior to
the First Closing Date by notice to the Company (i) if additional
material governmental restrictions, not in force and effect on the
date hereof, shall have been imposed upon trading in securities
generally or minimum or maximum prices shall have been generally
established on the New York Stock Exchange or on the American Stock
Exchange or in the over the counter market by the NASD, or trading in
securities generally shall have been suspended on either such Exchange
or in the over the counter market by the NASD, or a general banking
moratorium shall have been established by federal, New York or
California authorities, (ii) if an outbreak of major hostilities or
other national or international calamity or any substantial change in
political, financial or economic conditions shall have occurred or
shall have accelerated or escalated to such an extent, as, in the
reasonable judgment of the Representatives, to affect materially and
adversely the marketability of the Common Shares, (iii) if any adverse
event shall have occurred or shall exist which makes untrue or
incorrect in any material respect any statement or
21.
information contained in the Registration Statement or Prospectus or
which is not reflected in the Registration Statement or Prospectus but
should be reflected therein in order to make the statements or
information contained therein not misleading in any material respect,
or (iv) if there shall be any action, suit or proceeding pending or
threatened, or 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, in the reasonable
judgment of the Representatives, may materially and adversely affect
the Company's business or earnings and makes it impracticable or
inadvisable to offer or sell the Common Shares. Any termination
pursuant to this subsection (b) shall be without liability on the part
of any Underwriter to the Company or on the part of the Company to any
Underwriter (except for expenses to be paid or reimbursed by the
Company pursuant to Sections 6 and 8 hereof and except to the extent
provided in Section 10 hereof).
SECTION 14. Representations and Indemnities to Survive Delivery.
The respective indemnities, agreements, representations, warranties and
other statements of the Company, of 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 made by or on behalf
of any Underwriter or the Company or any of its or their partners, officers
or directors or any controlling person, as the case may be, and will
survive delivery of and payment for the Common Shares sold hereunder and
any termination of this Agreement.
SECTION 15. Notices. All communications hereunder shall be in
writing and, if sent to the Representatives shall be mailed, delivered or
telegraphed and confirmed to you at 000 Xxxxxxxxxx Xxxxxx, Xxx Xxxxxxxxx,
Xxxxxxxxxx 00000, Attention: Xxxxx Xxxxxxxx, with a copy to Xxxxxxx,
Xxxxxxx & Xxxxxxxx LLP, One Market, Xxxxx Xxxxxx Xxxxx, Xxx Xxxxxxxxx,
Xxxxxxxxxx 00000: Xxxxxxx X. Xxxxxx, Esq.; and if sent to the Company shall
be mailed, delivered or telecopied and confirmed to the Company at
Hollywood Entertainment Corporation, 00000 X.X. Xxxxx Xxxx., Xxxxxxxxx,
Xxxxxx 00000, Attention: Xxxxxx X. Xxxxx, Esq., with a copy to Esq., Stoel
Xxxxx Xxxxx Xxxxx & Grey, 000 X.X. Xxxxx Xxx., Xxxxx 0000, Xxxxxxxx, XX
00000. The Company or the Representatives may change the address for
receipt of communications hereunder by giving notice to the others.
SECTION 16. Successors. This Agreement will inure to the benefit
of and be binding upon the parties hereto, including any substitute
Underwriters pursuant to Section 11 hereof, and to the benefit of the
officers and directors and controlling persons referred to in Section 10,
and in each case their respective successors, personal representatives and
assigns, and no other person will have any right or obligation hereunder.
No such assignment shall relieve any party of its obligations hereunder.
The term "successors" shall not include any purchaser of the Common Shares
as such from any of the Underwriters merely by reason of such purchase.
SECTION 17. Representation of Underwriters. You will act as
Representatives for the several Underwriters in connection with all
dealings hereunder, and any action under or in respect of this Agreement
taken jointly or by Xxxxxxxxxx Securities, as Representatives, will be
binding upon all the Underwriters.
SECTION 18. 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) as are necessary to make it valid and enforceable.
SECTION 19. Applicable Law. This Agreement shall be governed by
and construed in accordance with the internal laws (and not the laws
pertaining to conflicts of laws) of the State of California.
22.
SECTION 20. 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. This Agreement may
be executed in several counterparts, each one of which shall be an
original, and all of which shall constitute one and the same document.
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 you.
23.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed copies hereof,
whereupon it will become a binding agreement between among the Company and
the several Underwriters including you, all in accordance with its terms.
Very truly yours,
HOLLYWOOD ENTERTAINMENT CORPORATION
By: _______________________________
President
The foregoing Underwriting Agreement
is hereby confirmed and accepted by
us in San Francisco, California as
of the date first above written.
XXXXXXXXXX SECURITIES
XXXXXXXXX, LUFKIN & XXXXXXXX SECURITIES CORPORATION
Acting as Representatives of the
several Underwriters named in
the attached Schedule A.
By XXXXXXXXXX SECURITIES
By: ___________________________________
Managing Director
24.
SCHEDULE A
Number of Firm
Common Shares
Name of Underwriter to be Purchased
------------------- ---------------
Xxxxxxxxxx Securities.......................................
Xxxxxxxxx, Lufkin & Xxxxxxxx Securities Corporation. .......
TOTAL ................................... 2,000,000
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