EXHIBIT 1.1
EXECUTION COPY
COSTCO WHOLESALE CORPORATION
("Company")
Debt Securities
TERMS AGREEMENT
March 20, 2002
To: The Representatives of the Underwriters identified herein
Ladies and Gentlemen:
The undersigned agrees to sell to the several Underwriters named in
Schedule A hereto for their respective accounts, on and subject to the terms and
conditions of the Underwriting Agreement attached hereto as Exhibit A
("Underwriting Agreement"), the following securities ("Offered Securities") on
the following terms:
Title: 5 1/2% Notes due 2007.
Principal Amount: $300,000,000.
Interest: 5 1/2% per annum, from March 25, 2002, payable semiannually on
March 15 and September 15 of each year, commencing September 15, 2002, to
holders of record on the preceding March 1 and September 1, respectively.
Maturity: March 15, 2007
Optional Redemption: The Notes are to be redeemable at the option of the
Company at any time and from time to time by paying the redemption price as set
forth in the indenture.
Sinking Fund: None.
Listing: None.
Purchase Price: 99.196% of principal amount, plus accrued interest, if any,
from March 25 2002.
Expected Reoffering Price: 99.796% of principal amount, plus accrued
interest, if any, from March 25, 2002, subject to change by the Representatives.
Closing: 10:00 A.M. (New York City Time) on March 25, 2002, at Sidley
Xxxxxx Xxxxx & Xxxx, LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, in Federal
(same day) funds.
Settlement and Trading: Book-Entry Only via The Depository Trust Company.
Names of the Representatives: Banc of America Securities LLC and Credit
Suisse First Boston Corporation.
The respective principal amounts of the Offered Securities to be purchased
by each of the Underwriters are set forth opposite their names in Schedule A
hereto.
The provisions of the Underwriting Agreement are incorporated herein by
reference.
The Offered Securities will be made available for checking and packaging at
the office of Credit Suisse First Boston Corporation at least 24 hours prior to
the Closing Date.
For purposes of Section 6 of the Underwriting Agreement, the only
information furnished to the Company by any Underwriter for use in the
Prospectus consists of (i) the seventh paragraph and the concession and
reallowance figures appearing in the third paragraph under the caption
"Underwriting" in the prospectus supplement, and (ii) the information in the
ninth paragraph furnished on behalf of First Union Securities, Inc. under the
caption "Underwriting" in the prospectus supplement.
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If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to the Company one of the counterparts hereof,
whereupon it will become a binding agreement between the Company and the several
Underwriters in accordance with its terms.
Very truly yours,
COSTCO WHOLESALE CORPORATION
By:
Name:
Title:
The foregoing Terms Agreement
is hereby confirmed and accepted as
of the date first above written
BANC OF AMERICA SECURITIES LLC
CREDIT SUISSE FIRST BOSTON CORPORATION
Acting on behalf of themselves and as the
Representatives of the several Underwriters.
By: BANC OF AMERICA SECURITIES LLC
By: ________________________________
Title:
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SCHEDULE A
Principal
Underwriter Amount
Banc of America Securities LLC............................... $105,000,000
Credit Suisse First Boston Corporation....................... $105,000,000
ABN AMRO Incorporated........................................ $ 12,000,000
Banc One Capital Markets, Inc............................... $ 12,000,000
First Union Securities, Inc................................. $ 12,000,000
Fleet Securities, Inc....................................... $ 12,000,000
Tokyo-Mitsubishi International plc.......................... $ 12,000,000
U.S. Bancorp Xxxxx Xxxxxxx Inc.............................. $ 12,000,000
Xxxxx Fargo Brokerage Services, LLC......................... $ 12,000,000
X. X. Xxxx & Company........................................ $ 6,000,000
------------
Total.............................................. $300,000,000
============
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EXHIBIT A
COSTCO WHOLESALE CORPORATION
Debt Securities
UNDERWRITING AGREEMENT
1. Introductory. COSTCO WHOLESALE CORPORATION, a Washington corporation
("Company"), proposes to issue and sell from time to time certain of its
unsecured debt securities registered under the registration statement referred
to in Section 2(a) ("Registered Securities"). The Registered Securities will be
issued under a first supplemental indenture, dated as of March 20, 2002, ("First
Supplemental Indenture") to an indenture between the Company and U.S. Bank, as
Trustee, (collectively with the First Supplemental Indenture, "Indenture") in
one or more series, which series may vary as to interest rates or formulas,
maturities, redemption provisions, selling prices and other terms, with all such
terms for any particular series of the Registered Securities being determined at
the time of sale. Particular series of the Registered Securities will be sold
pursuant to a terms agreement referred to in Section 3 ("Terms Agreement") for
resale in accordance with terms of offering determined at the time of sale.
The Registered Securities involved in any such offering are hereinafter
referred to as the "Offered Securities". The firm or firms which agree to
purchase the Offered Securities are hereinafter referred to as the
"Underwriters" of such securities, and the representative or representatives of
the Underwriters, if any, specified in the Terms Agreement are hereinafter
referred to as the "Representatives"; provided, however, that if the Terms
Agreement does not specify any representative of the Underwriters, the term
"Representatives", as used in this Agreement (other than in Sections 2(b), 5(c)
and 6 and the second sentence of Section 3), shall mean the Underwriters.
2. Representations and Warranties of the Company. The Company, as of the
date of the Terms Agreement, represents and warrants to, and agrees with, each
Underwriter that:
(a) Two registration statements (Nos. 333-01127 and 333-72122), including
a combined prospectus pursuant to Rule 429(b) under the Securities Act
of 1933, as amended ("Act"), relating to the Registered Securities
have been filed with the Securities and Exchange Commission
("Commission") and each has become effective. Such registration
statements, including all material incorporated by reference therein,
as amended prior to the time the applicable Terms Agreement is
executed and delivered, are hereinafter referred to as collectively as
the "Registration Statement", and the final prospectus, dated March
20, 2002, included in the Registration Statement, as supplemented as
contemplated by Section 3 to reflect the terms of the Offered
Securities and the terms of offering thereof, including all material
incorporated by reference therein, is hereinafter referred to as the
"Prospectus". No document has been or will be prepared or distributed
in reliance on Rule 434 under the Act.
(b) On the initial effective date of the registration statement relating
to the Registered Securities and on each date on which any
post-effective amendment thereto became effective, such registration
statement and any amendment thereto conformed in all respects to the
requirements of the Act, the Trust Indenture Act of 1939, as amended
("Trust Indenture Act"), and the rules and regulations of the
Commission ("Rules and Regulations") and did not include any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading. On the date of the Terms Agreement and on the
Closing Date (as defined in Section 3), the Registration Statement and
the Prospectus and any amendment or supplement thereto will conform in
all respects to the requirements of the Act, the Trust Indenture Act
and the Rules and Regulations. The material incorporated into the
Registration Statement and the Prospectus by reference conformed, when
filed with the Commission, in all respects to the requirements of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), and the
Rules and Regulations. On the date of the Terms Agreement and on the
Closing Date, none of the Registration Statement or the Prospectus, or
any amendment or supplement thereto, or any related preliminary
prospectus or preliminary prospectus supplement, will include any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
statements in or omissions from any of the foregoing documents based
upon written information furnished to the Company by any Underwriter
through the Representatives, if any, specifically for use therein.
(c) The Company has been duly incorporated and is an existing corporation
under the laws of the State of Washington, with power and authority
(corporate and other) to own its properties and conduct its business
as described in the Prospectus. The Company is duly qualified to do
business as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification except for such
failure to qualify which would not, individually or in the aggregate,
have a material adverse effect on the condition (financial or other),
business, properties or results of operations of the Company and its
subsidiaries taken as a whole ("Material Adverse Effect")
(d) Each subsidiary of the Company has been duly incorporated and is a
validly existing corporation in good standing under the laws of the
jurisdiction of its incorporation, with power and authority (corporate
and other) to own its properties and conduct its business as described
in the Prospectus. Each subsidiary of the Company is duly qualified to
do business as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification except for such
failure to qualify which would not individually or in the aggregate
have a Material Adverse Effect. All of the issued and outstanding
capital stock of each subsidiary of the Company has been duly
authorized and validly issued and is fully paid and nonassessable and
is owned by the Company, directly or through subsidiaries, free from
liens, encumbrances and defects. The Company does not have any
subsidiary other than Costco Wholesale Canada Ltd., Costco Wholesale
Membership, Inc. and Price Costco Canada Holdings Inc. that,
individually or in the aggregate, is a "significant subsidiary" within
the meaning of Regulation S-X under the Act.
(e) The Indenture has been duly authorized and has been duly qualified
under the Trust Indenture Act. The Offered Securities have been duly
authorized. When the Offered Securities are delivered and paid for
pursuant to the Terms Agreement on the Closing Date, the Indenture
will have been duly executed and delivered, such Offered Securities
will have been duly executed, authenticated, issued and delivered and
the Indenture and such Offered Securities will constitute valid and
legally binding obligations of the Company, enforceable in accordance
with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to
general equity principles and will conform to the descriptions thereof
contained in the Prospectus.
(f) No consent, approval, authorization, or order of, or filing with, any
governmental agency or body or any court, domestic or foreign, is
required for the consummation of the transactions contemplated by the
Terms Agreement (including the provisions of this Agreement) in
connection with the issuance and sale of the Offered Securities by the
Company, except such as have been obtained and made under the Act and
the Trust Indenture Act and such as may be required under state
securities laws.
(g) The execution, delivery and performance of the Indenture and the Terms
Agreement (including the provisions of this Agreement) and the
issuance and sale of the Offered Securities and compliance with the
terms and provisions thereof will not result in any breach or
violation of any of the terms and provisions of any agreement or
instrument to which the Company or any such subsidiary is a party or
by which the Company or any such subsidiary is bound or to which any
of the properties of the Company or any such subsidiary is subject, or
in the creation or imposition of any lien, charge or encumbrance upon
any property or assets of the Company or any subsidiary of the Company
pursuant to any agreement or instrument to which the Company or any
such subsidiary is a party or by which the Company or any such
subsidiary is bound or to which any of the properties of the Company
or any such subsidiary is subject, except for such breach, violation
or default which would not individually or in the aggregate have a
Material Adverse Effect, nor will such action result in a breach or
violation of any of the terms and provisions of, or constitute a
default under, any statute, any rule, regulation or order of any
governmental agency or body or any court, domestic or foreign, having
jurisdiction over the Company or
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any subsidiary of the Company or any of their respective properties,
or the charter or by-laws of the Company or any such subsidiary, and
the Company has full power and authority to authorize, issue and sell
the Offered Securities as contemplated by the Terms Agreement
(including the provisions of this Agreement).
(h) The Terms Agreement (including the provisions of this Agreement) has
been duly authorized, executed and delivered by the Company.
(i) Except as disclosed in the Prospectus, the Company and its
subsidiaries have good and marketable title to all real properties and
all other properties and assets owned by them, in each case free from
liens, encumbrances and defects that would materially affect the value
thereof or materially interfere with the use made or to be made
thereof by them. Except as disclosed in the Prospectus, the Company
and its subsidiaries hold any leased real or personal property under
valid and enforceable leases with no exceptions that would materially
interfere with the use made or to be made thereof by them.
(j) The Company and its subsidiaries possess adequate certificates,
authorities or permits issued by appropriate governmental agencies or
bodies necessary to conduct the business now operated by them and have
not received any notice of proceedings relating to the revocation or
modification of any such certificate, authority or permit that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect.
(k) No labor dispute with the employees of the Company, Costco Wholesale
Canada Ltd., Costco Wholesale Membership, Inc. or Price Costco Canada
Holdings Inc. exists or, to the knowledge of the Company, is imminent
that might have a Material Adverse Effect.
(l) The Company and its subsidiaries own, possess or can acquire on
reasonable terms, adequate trademarks, trade names and other rights to
inventions, know-how, patents, copyrights, confidential information
and other intellectual property (collectively, "intellectual property
rights") necessary to conduct the business now operated by them, or
presently employed by them, and have not received any notice of
infringement of or conflict with asserted rights of others with
respect to any intellectual property rights that, if determined
adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect.
(m) Except as disclosed in the Prospectus, neither the Company nor any of
its subsidiaries is in violation of any statute, any rule, regulation,
decision or order of any governmental agency or body or any court,
domestic or foreign, relating to the use, disposal or release of
hazardous or toxic substances or relating to the protection or
restoration of the environment or human exposure to hazardous or toxic
substances (collectively, "environmental laws"), owns or operates any
real property contaminated with any substance that is subject to any
environmental laws, is liable for any off-site disposal or
contamination pursuant to any environmental laws, or is subject to any
claim relating to any environmental laws, which violation,
contamination, liability or claim would individually or in the
aggregate have a Material Adverse Effect. The Company is not aware of
any pending investigation which might lead to such a claim.
(n) Except as disclosed in the Prospectus, there are no pending actions,
suits or proceedings against or affecting the Company, any of its
subsidiaries or any of their respective properties which, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect or
would materially and adversely affect the ability of the Company to
perform its obligations under the Indenture or the Terms Agreement
(including the provisions of this Agreement) or which are otherwise
material in the context of the sale of the Offered Securities. No such
actions, suits or proceedings are threatened or, to the Company's
knowledge, contemplated.
(o) The financial statements (including the notes and supporting
schedules) included or incorporated by reference in the Registration
Statement and Prospectus present fairly the financial position of the
Company and its consolidated subsidiaries as of the dates shown and
their results of operations and cash flows for the periods shown, and,
except as otherwise disclosed in the Prospectus, such financial
statements have been prepared in conformity with the generally
accepted accounting principles
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in the United States applied on a consistent basis. Any schedules
included in the Registration Statement and Prospectus present fairly
the information required to be stated therein. If pro forma financial
statements are included in the Registration Statement and Prospectus:
the assumptions used in preparing the pro forma financial statements
included in the Registration Statement and Prospectus provide a
reasonable basis for presenting the significant effects directly
attributable to the transactions or events described therein, the
related pro forma adjustments give appropriate effect to those
assumptions, and the pro forma columns therein reflect the proper
application of those adjustments to the corresponding historical
financial statement amounts.
(p) Except as disclosed in the Prospectus, since the date of the latest
audited financial statements included in the Prospectus there has been
no material adverse change, nor any development or event involving a
prospective material adverse change, in the condition (financial or
other), business, properties or results of operations of the Company
and its subsidiaries taken as a whole and, except as otherwise
disclosed in the Prospectus, there has been no dividend or
distribution of any kind declared, paid or made by the Company on any
class of its capital stock.
(q) The Company is subject to the reporting requirements of either Section
13 or Section 15(d) of the Exchange Act and files reports with the
Commission on the Electronic Data Gathering, Analysis, and Retrieval
(XXXXX) system.
(r) The Company is not and, after giving effect to the offering and sale
of the Offered Securities and the application of the proceeds thereof
as described in the Prospectus, will not be an "investment company" as
defined in the Investment Company Act of 1940, as amended ("Investment
Company Act").
3. Purchase and Offering of Offered Securities. The obligation of the
Underwriters to purchase the Offered Securities will be evidenced by the Terms
Agreement at the time the Company determines to sell the Offered Securities. The
Terms Agreement will incorporate by reference the provisions of this Agreement,
except as otherwise provided therein, and will specify the firm or firms which
will be Underwriters, the name of any Representative, the principal amount to be
purchased by each Underwriter, the purchase price to be paid by the Underwriters
and the terms of the Offered Securities not already specified in the Indenture,
including, but not limited to, interest rate or formula, maturity, any
redemption provisions and any sinking fund requirements. The Terms Agreement
will also specify the time and date of delivery and payment (such time and date,
or such other time not later than seven full business days thereafter as the
Underwriter first named in the Terms Agreement ("Lead Underwriter") and the
Company agree as the time for payment and delivery, being herein and in the
Terms Agreement referred to as the "Closing Date"), the place of delivery and
payment and any details of the terms of offering that should be reflected in the
prospectus supplement relating to the offering of the Offered Securities. For
purposes of Rule 15c6-1 under the Exchange Act, the Closing Date (if later than
the otherwise applicable settlement date) shall be the date for payment of funds
and delivery of securities for all the Offered Securities sold pursuant to the
offering. The obligations of Underwriters to purchase the Offered Securities
will be several and not joint. It is understood that the Underwriters propose to
offer the Offered Securities for sale as set forth in the Prospectus.
If the Terms Agreement specifies "Book-Entry Only" settlement or otherwise
states that the provisions of this paragraph shall apply, the Company will
deliver against payment of the purchase price the Offered Securities in the form
of one or more permanent global securities in definitive form ("Global
Securities") deposited with the Trustee as custodian for The Depository Trust
Company ("DTC") and registered in the name of Cede & Co., as nominee for DTC.
Interests in any permanent global securities will be held only in book-entry
form through DTC, except in the limited circumstances described in the
Prospectus. Payment for the Offered Securities shall be made by the Underwriters
in Federal (same day) funds by official check or checks or wire transfer to an
account previously designated by the Company at a bank acceptable to the Lead
Underwriter, in each case drawn to the order of the Company at the place of
payment specified in the Terms Agreement on the Closing Date, against delivery
to the Trustee as custodian for DTC of the Global Securities representing all of
the Offered Securities.
4. Certain Agreements of the Company. The Company agrees with the several
Underwriters that it will furnish to counsel for the Underwriters, one signed
copy of the registration statement relating to the Registered
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Securities, including all exhibits, in the form it became effective,
and of all amendments thereto, and that, in connection with each
offering of Offered Securities:
(a) The Company will file the Prospectus with the Commission pursuant to
and in accordance with Rule 424(b)(2) (or, if applicable and if
consented to by the Lead Underwriter, which consent shall not be
unreasonably withheld, subparagraph (5)) not later than the second
business day following the execution and delivery of the Terms
Agreement.
(b) The Company will advise the Lead Underwriter promptly of any proposal
to amend or supplement the Registration Statement or the Prospectus
and will afford the Lead Underwriter a reasonable opportunity to
comment on any such proposed amendment or supplement. The Company will
also advise the Lead Underwriter promptly of the filing of any such
amendment or supplement and of the institution by the Commission of
any stop order proceedings in respect of the Registration Statement or
of any part thereof and will use its best efforts to prevent the
issuance of any such stop order and to obtain as soon as possible its
lifting, if issued.
(c) If, at any time when a prospectus relating to the Offered Securities
is required to be delivered under the Act in connection with sales by
any Underwriter or dealer, any event occurs as a result of which the
Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with the Act,
the Company promptly will notify the Lead Underwriter of such event
and will promptly prepare and file with the Commission, at its own
expense, an amendment or supplement which will correct such statement
or omission or an amendment which will effect such compliance. Neither
the Lead Underwriter's consent to, nor the Underwriters' delivery of,
any such amendment or supplement shall constitute a waiver of any of
the conditions set forth in Section 5 hereof.
(d) As soon as practicable, but not later than 16 months, after the date
of each Terms Agreement, the Company will make generally available to
its securityholders an earnings statement covering a period of at
least 12 months beginning after the later of (i) the effective date of
the registration statement relating to the Registered Securities, (ii)
the effective date of the most recent post-effective amendment to the
Registration Statement to become effective prior to the date of such
Terms Agreement and (iii) the date of the Company's most recent Annual
Report on Form 10-K filed with the Commission prior to the date of
such Terms Agreement, which will satisfy the provisions of Section
11(a) of the Act.
(e) The Company will furnish to the Representatives copies of the
Registration Statement, including all exhibits, any related
preliminary prospectus, any related preliminary prospectus supplement
and the Prospectus, and all amendments and supplements to any of such
documents, in each case as soon as available and in such quantities as
the Lead Underwriter reasonably requests. The Company will pay the
expenses of printing and distributing to the Underwriters all such
documents.
(f) The Company will arrange for the qualification of the Offered
Securities for sale and the determination of their eligibility for
investment under the laws of such jurisdictions as the Lead
Underwriter designates and will continue such qualifications in effect
so long as required for the distribution, provided that the Company
and its subsidiaries shall not be obligated to qualify as foreign
corporations in any jurisdiction in which they are not so qualified or
to file a general consent to service of process in any jurisdiction.
(g) The Company will pay all expenses incident to the performance of its
obligations under the Terms Agreement (including the provisions of
this Agreement), for any filing fees or other expenses (including fees
and disbursements of counsel) in connection with qualification of the
Registered Securities for sale and any determination of their
eligibility for investment under the laws of such jurisdictions as the
Lead Underwriter may designate and the printing of memoranda relating
thereto, for any fees charged by investment rating agencies for the
rating of the Offered Securities, for any travel expenses of the
Company's officers and employees and any other expenses of the Company
in connection with attending or hosting meetings with prospective
purchasers of Registered Securities and for expenses incurred in
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distributing the Prospectus, any preliminary prospectuses, any
preliminary prospectus supplements or any other amendments or
supplements to the Prospectus to the Underwriters.
(h) The Company will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the
Commission a registration statement under the Act relating to United
States dollar-denominated debt securities issued or guaranteed by the
Company and having a maturity of more than one year from the date of
issue or publicly disclose the intention to make any such offer, sale,
pledge, disposition or filing, without the prior written consent of
the Lead Underwriter for a period beginning at the time of execution
of the Terms Agreement and ending at the later of the Closing Date or
the date specified under "Blackout" in the Terms Agreement.
5. Conditions of the Obligations of the Underwriters. The obligations of
the several Underwriters to purchase and pay for the Offered Securities will be
subject to the accuracy of the representations and warranties on the part of the
Company contained herein or in the Terms Agreement, to the accuracy of the
statements of Company officers made pursuant to the provisions hereof or
thereof, to the performance by the Company of its obligations contained herein
or therein and to the following additional conditions precedent:
(a) On or prior to the date of the Terms Agreement, the Representatives
shall have received a letter, dated the date of delivery thereof, of
Xxxxxx Xxxxxxxx LLP confirming that they are independent public
accountants within the meaning of the Act and the applicable published
Rules and Regulations thereunder and stating to the effect that:
(i) their opinion the financial statements and any schedules and any
summary of earnings examined by them and included in the Prospectus
comply as to form in all material respects with the applicable
accounting requirements of the Act, the Exchange Act and the related
published Rules and Regulations;
(ii) they have performed the procedures specified by the American Institute
of Certified Public Accountants for a review of interim financial
information as described in Statement of Auditing Standards No. 71,
Interim Financial Information, on any unaudited financial statements
included in the Prospectus;
(iii)on the basis of the review referred to in clause (ii) above, a
reading of the latest available interim financial statements of the
Company, inquiries of officials of the Company who have responsibility
for financial and accounting matters and other specified procedures,
nothing came to their attention that caused them to believe that:
(A) the unaudited financial statements, if any, and any summary of
earnings included in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the
Act, the Exchange Act and the related published Rules and Regulations
or any material modifications should be made to such unaudited
financial statements and summary of earnings for them to be in
conformity with generally accepted accounting principles applied on a
basis substantially consistent with the audited financial statements
included in the Prospectus;
(B) if any unaudited "capsule" information is contained in the Prospectus,
the unaudited consolidated net sales, net operating income, net income
and net income per share amounts or other amounts constituting such
"capsule" information and described in such letter do not agree with
the corresponding amounts set forth in the unaudited consolidated
financial statements or were not determined on a basis substantially
consistent with that of the corresponding amounts in the audited
statements of income;
(C) at the date of the latest available balance sheet read by such
accountants, or at a subsequent specified date not more than three
business days prior to the date
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of the such letter, there was any change in the capital stock or any
increase in short-term indebtedness or long-term debt of the Company
and its consolidated subsidiaries or, at the date of the latest
available balance sheet read by such accountants, there was any
decrease in consolidated net current assets or net assets as compared
with amounts shown on the latest balance sheet included in the
Prospectus; or
(D) for the period from the closing date of the latest income statement
included in the Prospectus to the closing date of the latest available
income statement read by such accountants, there were any decreases,
as compared with the corresponding period of the previous year and
with the period of corresponding length ended the date of the latest
income statement included in the Prospectus, in consolidated net
sales, net operating income, consolidated income before extraordinary
items or net income or in the ratio of earnings to fixed charges;
except in all cases set forth in clauses (C) and (D) above for
changes, increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter; and
(iv) they have compared specified dollar amounts (or percentages derived
from such dollar amounts) and other financial information contained in
the Prospectus (in each case to the extent that such dollar amounts,
percentages and other financial information are derived from the
general accounting records of the Company and its subsidiaries subject
to the internal controls of the Company's accounting system or are
derived directly from such records by analysis or computation) with
the results obtained from inquiries, a reading of such general
accounting records and other procedures specified in such letter and
have found such dollar amounts, percentages and other financial
information to be in agreement with such results, except as otherwise
specified in such letter.
(b) The Prospectus shall have been filed with the Commission in accordance
with the Rules and Regulations and Section 4(a) of this Agreement. No
stop order suspending the effectiveness of the Registration Statement
or of any part thereof shall have been issued and no proceedings for
that purpose shall have been instituted or, to the knowledge of the
Company or any Underwriter, shall be contemplated by the Commission.
(c) Subsequent to the execution of the Terms Agreement, there shall not
have occurred (i) any change, or any development or event involving a
prospective change, in the condition (financial or other), business,
properties or results of operations of the Company and its
subsidiaries taken as one enterprise which, in the judgment of a
majority in interest of the Underwriters (including any
Representatives), is material and adverse and makes it impractical or
inadvisable to proceed with completion of the public offering or the
sale of and payment for the Offered Securities; (ii) any downgrading
in the rating of any debt securities or preferred stock of the Company
by any "nationally recognized statistical rating organization" (as
defined for purposes of Rule 436(g) under the Act), or any public
announcement that any such organization has under surveillance or
review its rating of any debt securities or preferred stock of the
Company (other than an announcement with positive implications of a
possible upgrading, and no implication of a possible downgrading, of
such rating); (iii) any change in U.S. or international financial,
political or economic conditions or currency exchange rates or
exchange controls as would, in the judgment of a majority in interest
of the Underwriters (including any Representatives), be likely to
prejudice materially the success of the proposed issue, sale or
disposition of the Offered Securities, whether in the primary market
or in respect of dealings in the secondary market; (iv) any material
suspension or material limitation of trading in securities generally
on the New York Stock Exchange or the NASDAQ National Market, or any
setting of minimum prices for trading on any such exchange or market,
or any suspension of trading of any securities of the Company on any
exchange or in the over-the-counter market; (v) any banking moratorium
declared by U.S. Federal or New York authorities; (vi) any major
disruption of settlements of securities or clearance services in the
United States or (vii) any attack on, outbreak or escalation of
hostilities or act of terrorism involving the United States, any
declaration of war by Congress or any other national or international
calamity or emergency if, in the judgment of a majority in interest of
the Underwriters (including any Representatives), the effect of any
such attack, outbreak,
7
escalation, act, declaration, calamity or emergency makes it
impractical or inadvisable to proceed with completion of the public
offering or the sale of and payment for the Offered Securities.
(d) The Representatives shall have received an opinion, dated the Closing
Date, of Xxxxxx Xxxxxx White & XxXxxxxxx LLP, counsel for the Company,
to the effect that:
(i) The Company has been duly incorporated and is an existing corporation
under the laws of the State of Washington, with corporate power and
authority to own its properties and conduct its business as described
in the Prospectus;
(ii) Costco Wholesale Membership, Inc. has been duly incorporated and is a
validly existing corporation in good standing under the laws of the
jurisdiction of its incorporation, with power and authority (corporate
and other) to own its properties and conduct its business as described
in the Prospectus; and all of the issued and outstanding capital stock
of Costco Wholesale Membership, Inc. has been duly authorized and
validly issued and is fully paid and nonassessable and is owned by the
Company, directly or through subsidiaries;
(iii)The Indenture has been duly authorized, executed and delivered by the
Company and has been duly qualified under the Trust Indenture Act; the
Offered Securities have been duly authorized, and issued by the
Company, and assuming due authentication thereof by the trustee under
the Indenture and upon payment and delivery in accordance with this
Agreement, will be duly and validly issued and outstanding; the
Indenture and the Offered Securities constitute valid and legally
binding obligations of the Company enforceable in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles, whether such enforceability is considered in a proceeding
in equity or at law; and the Indenture and the Offered Securities
conform to the descriptions thereof contained in the Prospectus in all
material respects;
(iv) The Company is not and, after giving effect to the offering and sale
of the Offered Securities and the application of the proceeds thereof
as described in the Prospectus, will not be an "investment company" as
defined in the Investment Company Act;
(v) No consent, approval, authorization or order of, or filing with, any
governmental agency or body or any court is required for the
consummation of the transactions contemplated by the Terms Agreement
(including the provisions of this Agreement) in connection with the
issuance or sale of the Offered Securities by the Company, except such
as have been obtained and made under the Act and the Trust Indenture
Act and such as may be required under state securities laws;
(vi) The execution, delivery and performance of the Indenture and the Terms
Agreement (including the provisions of this Agreement) and the
issuance and sale of the Offered Securities and compliance with the
terms and provisions thereof will not result in a breach or violation
of any of the terms and provisions of, or constitute a default under,
(i) any statute, any rule or regulation of any governmental agency or
body or, to such counsel's knowledge, any order or judgment of any
court having jurisdiction over the Company or any of its properties,
(ii) pursuant to any agreement listed as an exhibit to the Company's
reports filed by the company pursuant to the Exchange Act, or (iii)
the charter or by-laws of the Company and the Company has full
corporate power and authority to authorize, issue and sell the Offered
Securities as contemplated by the Terms Agreement (including the
provisions of this Agreement);
(vii)The Registration Statement has become effective under the Act, the
Prospectus was properly filed with the Commission pursuant to the
subparagraph of Rule 424(b) specified in such opinion on the date
specified therein, and, to the best of the knowledge of such counsel,
no stop order suspending the effectiveness of the Registration
Statement or any part thereof has been issued and no proceedings for
that purpose have been instituted or are pending or contemplated under
the Act, and the registration statement relating to the Registered
Securities, as of its effective date,
8
the Registration Statement and the Prospectus, as of the date of the
Terms Agreement, and any amendment or supplement thereto, as of its
date, each complied as to form in all material respects with the
requirements of the Act, the Trust Indenture and, with respect to
material incorporated by reference therein, the Exchange Act and, in
each case, the Rules and Regulations; such counsel have no reason to
believe that such registration statement, as of its effective date,
the Registration Statement, as of the date of the Terms Agreement or
as of the Closing Date, or any amendment thereto, as of its date or as
of the Closing Date, contained any untrue statement of a material fact
or omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Prospectus, as of the date of the Terms Agreement or as of the Closing
Date, or any amendment or supplement thereto, as of its date or as of
the Closing Date, included any untrue statement of a material fact or
omitted to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; the descriptions in the Registration
Statement and Prospectus of statutes, legal and governmental
proceedings and contracts and other documents are accurate and fairly
present the information required to be shown; and such counsel do not
know of any legal or governmental proceedings required to be described
in the Prospectus which are not described as required or of any
contracts or documents of a character required to be described in the
Registration Statement or Prospectus or to be filed as exhibits to the
Registration Statement which are not described and filed as required;
it being understood that such counsel need express no opinion as to
the financial statements or other financial data contained in the
Registration Statement or the Prospectus or any amendment or
supplement thereto and the portion of the Registration Statement
constituting Form T-1 of the Trustee; and
(viii) The Terms Agreement (including the provisions of this Agreement) has
been duly authorized, executed and delivered by the Company.
(e) The Representatives shall have received an opinion, dated the Closing
Date, of Xxxxxxxx Xxxxxxxxxx, a general partnership, special counsel
for the Company, to the effect that:
(i) Costco Wholesale Canada Ltd. has been duly incorporated and is a
validly existing corporation in good standing under the laws of
Canada, with corporate power and authority to own its properties and
conduct its business as described in the Prospectus; and all of the
issued and outstanding capital stock of Costco Wholesale Canada Ltd.
has been duly authorized and validly issued and is fully paid and
nonassessable and is owned by the Company, directly or through
subsidiaries; and
(ii) Price Costco Canada Holdings Inc. has been duly incorporated and is a
validly existing corporation in good standing under the laws of
Canada, with corporate power and authority to own its properties and
conduct its business as described in the Prospectus; and all of the
issued and outstanding capital stock of Price Costco Canada Holdings
Inc. has been duly authorized and validly issued and is fully paid and
nonassessable and is owned by the Company, directly or through
subsidiaries.
(f) The Representatives shall have received from Sidley Xxxxxx Xxxxx &
Wood LLP, counsel for the Underwriters, such opinion or opinions,
dated the Closing Date, with respect to the incorporation of the
Company, the validity of the Offered Securities, the Registration
Statement and the Prospectus and any amendment or supplement thereto
and other related matters as the Representatives may require, and the
Company shall have furnished to such counsel such documents as they
request for the purpose of enabling them to pass upon such matters. In
rendering such opinion, Sidley Xxxxxx Xxxxx & Xxxx LLP may rely as to
the incorporation of the Company and all other matters governed by
Washington law upon the opinion of Xxxxxx Xxxxxx White & XxXxxxxxx LLP
referred to above.
(g) The Representatives shall have received a certificate, dated the
Closing Date, of the President or any Vice President and a principal
financial or accounting officer of the Company in which such officers,
to the best of their knowledge after reasonable investigation, shall
state that the representations and warranties of the Company in this
Agreement are true and correct, that the Company
9
has complied with all agreements and satisfied all conditions on its
part to be performed or satisfied hereunder at or prior to the Closing
Date, that no stop order suspending the effectiveness of the
Registration Statement or of any part thereof has been issued and no
proceedings for that purpose have been instituted or are contemplated
by the Commission and that, subsequent to the date of the most recent
financial statements in the Prospectus, there has been no material
adverse change, nor any development or event involving a prospective
material adverse change, in the condition (financial or other),
business, properties or results of operations of the Company and its
subsidiaries taken as a whole except as set forth in the Prospectus.
(h) The Representatives shall have received a letter, dated the Closing
Date, of Xxxxxx Xxxxxxxx LLP which meets the requirements of
subsection (a) of this Section, except that the specified date
referred to in such subsection will be a date not more than three days
prior to the Closing Date for the purposes of this subsection.
The Company will furnish the Representatives with such conformed copies of such
opinions, certificates, letters and documents as the Representatives reasonably
request. The Lead Underwriter may in its sole discretion waive on behalf of the
Underwriters compliance with any conditions to the obligations of the
Underwriters under this Agreement and the Terms Agreement.
6. Indemnification and Contribution. The Company will indemnify and hold
harmless each Underwriter, its partners, directors and officers and each person,
if any, who controls such Underwriter within the meaning of Section 15 of the
Act against any losses, claims, damages or liabilities, joint or several, to
which such Underwriter may become subject, under the Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement or the Prospectus,
or any amendment or supplement thereto, or any related preliminary prospectus or
preliminary prospectus supplement, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating or defending any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement in or omission or alleged
omission from any of such documents in reliance upon and in conformity with
written information furnished to the Company by any Underwriter through the
Representatives, if any, specifically for use therein, it being understood and
agreed that the only such information furnished by any Underwriter consists of
the information described as such in the Terms Agreement.
(a) Each Underwriter will severally and not jointly indemnify and hold
harmless the Company, its directors, each of its officers who signed
the Registration Statement and each person, if any, who controls the
Company within the meaning of Section 15 of the Act against any
losses, claims, damages or liabilities to which the Company may become
subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or any related
preliminary prospectus or preliminary prospectus supplement, or arise
out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the
Company by such Underwriter through the Representatives, if any,
specifically for use therein, and will reimburse any legal or other
expenses reasonably incurred by the Company in connection with
investigating or defending any such loss, claim, damage, liability or
action as such expenses are incurred, it being understood and agreed
that the only such information furnished by any Underwriter consists
of the information described as such in the Terms Agreement.
(b) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying
party under subsection (a) or (b) above, notify the indemnifying party
of the
10
commencement thereof, but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party otherwise than under subsection (a) or (b) above. In
case any such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the
extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying
party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof,
the indemnifying party will not be liable to such indemnified party
under this Section for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. It is understood
that the indemnifying party or parties shall not, in connection with
any proceeding or related proceedings in the same jurisdiction, be
liable for the reasonable fees, disbursements and other charges of
more than one separate firm of attorneys (in addition to local
counsel, if applicable) at any one time for all such indemnified party
or parties. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending
or threatened action in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder
by such indemnified party unless such settlement (i) includes an
unconditional release of such indemnified party from all liability on
any claims that are the subject matter of such action and (ii) does
not include a statement as to, or an admission of, fault, culpability
or a failure to act by or behalf of an indemnified party.
(c) If the indemnification provided for in this Section is unavailable or
insufficient to hold harmless an indemnified party under subsection
(a) or (b) above, then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of the
losses, claims, damages or liabilities referred to in subsection (a)
or (b) above (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the
Underwriters on the other from the offering of the Offered Securities
or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above
but also the relative fault of the Company on the one hand and the
Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or
liabilities as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters. The relative
fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by the Company or the Underwriters and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission.
The amount paid by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the first sentence of
this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection
with investigating or defending any action or claim which is the
subject of this subsection (d). Notwithstanding the provisions of this
subsection (d), no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the
Offered Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which
such Underwriter has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this subsection (d) to contribute are
several in proportion to their respective underwriting obligations and
not joint.
(d) The obligations of the Company under this Section shall be in addition
to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any,
who controls any Underwriter within the meaning of the Act; and the
obligations of the Underwriters under this Section shall be in
addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions,
to each director of the Company, to each officer of the Company who
has signed the Registration Statement and to each person, if any, who
controls the Company within the meaning of the Act.
11
7. Default of Underwriters. If any Underwriter or Underwriters default in
its obligation or their obligations, as the case may be, to purchase Offered
Securities under the Terms Agreement and the aggregate principal amount of
Offered Securities that such defaulting Underwriter or Underwriters agreed but
failed to purchase does not exceed 10% of the total principal amount of Offered
Securities, the Lead Underwriter may make arrangements satisfactory to the
Company for the purchase of such Offered Securities by other persons, including
any of the Underwriters, but if no such arrangements are made by the Closing
Date, the non-defaulting Underwriters shall be obligated severally, in
proportion to their respective commitments under the Terms Agreement (including
the provisions of this Agreement), to purchase the Offered Securities that such
defaulting Underwriters agreed but failed to purchase. If any Underwriter or
Underwriters so default and the aggregate principal amount of Offered Securities
with respect to which such default or defaults occur exceeds 10% of the total
principal amount of Offered Securities and arrangements satisfactory to the Lead
Underwriter and the Company for the purchase of such Offered Securities by other
persons are not made within 36 hours after such default, the Terms Agreement
will terminate without liability on the part of any non-defaulting Underwriter
or the Company, except as provided in Section 8. 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.
8. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Company or its officers and of the several Underwriters set forth in or made
pursuant to the Terms Agreement (including the provisions of this Agreement)
will remain in full force and effect, regardless of any investigation, or
statement as to the results thereof, made by or on behalf of any Underwriter,
the Company or any of their respective representatives, officers or directors or
any controlling person, and will survive delivery of and payment for the Offered
Securities. If the Terms Agreement is terminated pursuant to Section 7 or if for
any reason the purchase of the Offered Securities by the Underwriters is not
consummated, the Company shall remain responsible for the expenses to be paid or
reimbursed by it pursuant to Section 4 and the respective obligations of the
Company and the Underwriters pursuant to Section 6 shall remain in effect. If
the purchase of the Offered Securities by the Underwriters is not consummated
for any reason other than solely because of the termination of the Terms
Agreement pursuant to Section 7 or the occurrence of any event specified in
clause (iii), (iv), (v), (vi) or (vii) of Section 5(c), the Company will
reimburse the Underwriters for all out-of-pocket expenses (including fees and
disbursements of counsel) reasonably incurred by them in connection with the
offering of the Offered Securities.
9. Notices. All communications hereunder will be in writing and, if sent to
the Underwriters, will be mailed, delivered or telegraphed and confirmed to them
at their address furnished to the Company in writing for the purpose of
communications hereunder or, if sent to the Company, will be mailed, delivered
or telegraphed and confirmed to it at 000 Xxxx Xxxxx, Xxxxxxxx, Xxxxxxxxxx
00000, Attention: General Counsel.
10. Successors. The Terms Agreement (including the provisions of this
Agreement) will inure to the benefit of and be binding upon the Company and such
Underwriters as are identified in the Terms Agreement and their respective
successors and the officers and directors and controlling persons referred to in
Section 6, and no other person will have any right or obligation hereunder.
11. Representation of Underwriters. Any Representatives will act for the
several Underwriters in connection with the financing described in the Terms
Agreement, and any action under such Terms Agreement (including the provisions
of this Agreement) taken by the Representatives jointly or by the Lead
Underwriter will be binding upon all the Underwriters.
12. Counterparts. The Terms Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
13. Applicable Law. This Agreement and the Terms Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York.
The Company hereby submits to the non-exclusive jurisdiction of the Federal
and state courts in the Borough of Manhattan in The City of New York in any suit
or proceeding arising out of or relating to the Terms Agreement (including the
provisions of this Agreement) or the transactions contemplated thereby.
12
