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EXHIBIT 4.3    
    
    EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
  2002 EMPLOYEE STOCK PURCHASE PLAN    
  

	1.
	Purpose.

        The
purpose of this 2002 Employee Stock Purchase Plan (the "2002 Plan") is to provide employees of Expeditors International of Washington, Inc. (the "Company"), its Subsidiaries
and Consolidated Affiliates with an opportunity to purchase Stock of the Company through accumulated payroll deductions, enabling such persons to acquire or increase a proprietary interest in the
Company in order to strengthen the mutuality of interests between such persons and the Company's shareholders, and to provide a benefit that will assist the employer in competing to attract and retain
employees of high quality. This 2002 Plan consists of two separate plans, one plan under which options ("Qualified Options") intended to qualify under Section 423 of the Internal Revenue Code
of 1986 (the "Code") are granted to employees of the Company or its Subsidiaries and another plan under which options ("Nonqualified Options") that do not so qualify are granted to employees of
Consolidated Affiliates. Qualified and Nonqualified Options are referred to in the aggregate as "Options." It is the intention of the Company that the 2002 Plan qualify as an "employee stock purchase
plan" under Section 423 of the Code. Accordingly, the provisions of the 2002 Plan shall be construed in a manner consistent with the requirements of the Code. 

	2.
	Definitions.

        For
purposes of the 2002 Plan, the following terms shall be defined as set forth below, in addition to such terms as defined in Section 1 hereof: 

        "Account"
means the account maintained on behalf of the participant by the Custodian for the purpose of investing in Stock and engaging in other transactions permitted under the 2002
Plan. 

        "Administrator"
means the person or persons designated to administer the 2002 Plan under Section 13(a). 

        "Base
Pay" means regular straight time earnings, plus bonuses and overtime payments, payments for incentive compensation and other special payments except to the extent that any such
item is specifically excluded from the definition of Base Pay by the Committee. 

        "Board"
means the Company's Board of Directors. 

        "Change
in Control" means either one of the following: (i) when any 'person,' as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than the Company, a
subsidiary thereof or a Company employee benefit plan, including any trustee of such plan acting as trustee) becomes the 'beneficial owner' (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company's then outstanding securities; or
(ii) the occurrence of a transaction requiring shareholder approval, and involving the sale of all or substantially all of the assets of the Company or the merger of the Company with or into
another corporation. 

        "Committee"
means the Compensation Committee of the Board or such other committee of two or more non-employee directors that may be designated by the Board to administer the
2002 Plan. 

        "Consolidated
Affiliates" means entities where the Company maintains unilateral control over assets and operations and where the existence of the parent subsidiary relationship is
maintained by means other than record ownership of voting stock. 

        "Custodian"
means a custodian or any successor thereto as appointed by the Committee from time to time. 

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        "Employee"
means any individual employed continuously for at least sixty (60) days prior to the Enrollment Date by the Company, Subsidiary or a Consolidated Affiliate as a Full
Time Employee. 

        "Enrollment
Date" means the first day of the next Offering Period. 

        "Exchange
Act" means the Securities Exchange Act of 1934 as amended. 

        "Exercise
Date" means the last day of each Offering Period. 

        "Fair
Market Value" means the last sale price for the Common Stock of the Company as reported on the National Association of Securities Dealers Automated Quotation System, or if the
stock is traded on a stock exchange, the closing price for the stock on the principal such exchange or, if that day is not a Trading Day, then on the latest previous Trading Day. 

        "Full
Time Employee" means an employee whose customary employment with the Company, Subsidiary or Consolidated Affiliate is more than 20 hours per week and more than five months
per year. 

        "Offering
Period" means the approximately one-year period commencing on the first Trading Day of August and terminating on the last Trading Day of the following July. The
beginning and ending dates and duration of Offering Periods may be changed pursuant to Section 4 of the 2002 Plan. 

        "Purchase
Price" means an amount equal to 85 percent of the Fair Market Value of a share of Stock on the Enrollment Date or 85 percent of the Fair Market Value of a share
of Stock on the Exercise Date, whichever is lower. 

        "Reserves"
means the number of shares of Stock covered by all options under the 2002 Plan which have not yet been exercised and the number of shares of Stock which have been authorized
for issuance under the 2002 Plan but which have not yet become subject to options. 

        "Stock"
means the Company's Common Stock, and such other securities as may be substituted for Stock pursuant to Section 18 hereof. 

        "Subsidiary"
means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations (other than the last corporation
in the unbroken chain) owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in the chain. 

        "Trading
Day" means a day on which the New York Stock Exchange is open for trading. 

	3.
	Eligibility.

        (a)  All
Employees (as determined in accordance with Section 2(i) hereof) of the Company, Subsidiary or Consolidated Affiliate on a given Enrollment Date shall
be eligible to participate in the 2002 Plan, subject to Section 5(a). 

        (b)  Any
provisions of the 2002 Plan to the contrary notwithstanding, no Employee shall be granted an option under the 2002 Plan (i) to the extent that, immediately
after the grant, such Employee (or any other person whose Stock would be attributed to such Employee pursuant to Section 424(d) of the Code) would own capital stock and/or hold outstanding
options to purchase such stock possessing five percent or more of the total combined voting power or value of all classes of the capital stock of the Company or of any Subsidiary, (ii) to the
extent that his or her rights to purchase stock under all employee stock purchase plans of the Company and its Subsidiaries accrue at a rate which exceeds $25,000 worth of stock (determined at the
fair market value of the shares at the time such option is granted) for each calendar year in which such option is outstanding at any time, or (iii) in excess of 3,000 shares of stock for each
calendar year in which such option is outstanding at any time. 

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        (c)  All
participants in the 2002 Plan shall have equal rights and privileges (subject to the terms of the 2002 Plan) with respect to options outstanding during any given
Offering Period. 

	4.
	Offering
Periods. 

        The
2002 Plan shall have consecutive Offering Periods with an initial Offering Period commencing on the first Trading Day in August, 2002 and terminating in the last Trading Day of July,
2003. The Committee shall have the power to change the beginning date, ending date and duration of Offering Periods with respect to future offerings without shareholder approval if such change is
announced at least five days prior to the scheduled beginning of the first Offering Period to be affected thereafter, provided that Offering Periods will in all cases comply with applicable
limitations under Section 423(b)(7) of the Code. 

	5.
	Participation.

        (a)  Any
person who will be an eligible Employee on a given Enrollment Date may become a participant in the 2002 Plan by completing a subscription agreement authorizing
payroll deductions and filing it with the Administrator before such Enrollment Date. 

        (b)  Payroll
deductions for a participant shall commence on the first payroll following the Enrollment Date and shall end on the last payroll in the Offering Period to which
such authorization is applicable, unless sooner terminated by the participant as provided in Section 10 hereof. 

	6.
	Payroll
Deductions. 

        (a)  At
the time a participant files his or her subscription agreement, he or she shall elect to have payroll deductions made on each pay day during the Offering Period in a
regular amount, expressed as a percentage, not to exceed 10% of Base Pay. 

        (b)  All
payroll deductions made for a participant shall be credited to his or her Account under the 2002 Plan. A participant may not make any additional payments into such
Account. 

        (c)  A
participant may discontinue his or her participation in the 2002 Plan as provided in Section 10 hereof. Unless otherwise authorized by the Committee, a
participant may not change his or her payroll deduction rate during any Offering Period. Absent Committee authorization, any change in the rate shall be effective as of the next Offering Period. A
participant's subscription agreement shall remain in effect for successive Offering Periods unless terminated as provided in Section 10 hereof. 

        (d)  The
foregoing notwithstanding, to the extent necessary to comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's payroll
deductions may be terminated at such time during any Offering Period which is scheduled to end during the current calendar year (the "Current Offering Period") that the aggregate of all payroll
deductions accumulated with respect to the Current Offering Period equals $21,250 (or such other limit as may apply under Code Section 423(b)(8)). Payroll deductions shall recommence at the
rate provided in such participant's subscription agreement (as previously on file or as changed in accordance with Section 6(c)) at the beginning of the next Offering Period which is scheduled
to end in the following calendar year, unless terminated by the participant as provided in Section 10 hereof. 

        (e)  The
Company, Subsidiary or Consolidated Affiliate is authorized to withhold from any payment to be made to a participant, including any payroll and other payments not
related to the 2002 Plan, amounts of withholding and other taxes due in connection with any transaction under the 2002 Plan, including any disposition of shares acquired under the 2002 Plan, and a
participant's enrollment in the 2002 Plan will be deemed to constitute his or her consent to such withholding. At the time of a participant's exercise of an option or disposition of shares acquired
under the 2002 Plan, the Company
may require the participant to make other arrangements to meet tax withholding obligations as a condition to exercise of rights or distribution of shares or cash from the participant's Account. In 

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addition, a Participant may be required to advise the Company of sales and other dispositions of Stock acquired under the 2002 Plan in order to permit the Company to comply with tax laws and to claim
any tax deductions to which the Company may be entitled with respect to the 2002 Plan. 

	7.
	Grant
of Option. 

        On
the Enrollment Date of each Offering Period, each eligible Employee participating in such Offering Period shall be granted an option to purchase on the Exercise Date of such Offering
Period, at the applicable Purchase Price, up to a number of shares of Stock determined by dividing such Employee's payroll deductions accumulated prior to such Exercise Date and retained in the
Participant's Account as of the Exercise Date by the applicable Purchase Price; provided that such purchase shall be subject to the limitations set forth in Sections 3(b) and 12 hereof. Exercise of
the option shall occur as provided in Section 8 hereof, unless the participant has withdrawn pursuant to Section 10 hereof. 

	8.
	Exercise
of Option. 

        Participant's
option for the purchase of shares shall be exercised automatically on the Exercise Date, and the maximum number of shares subject to option shall be purchased for such
participant at the applicable Purchase Price with the accumulated payroll deductions in his or her Account. Shares purchased shall include fractional shares calculated to at least three decimal
places, unless otherwise determined by the Committee. If fractional shares are not to be purchased for a participant's Account, any payroll deductions accumulated in a participant's Account not
sufficient to purchase a full share shall be retained in the participant's Account for the subsequent Offering Period, subject to earlier withdrawal by the participant as provided in Section 10
hereof. During a participant's lifetime, a participant's option to purchase shares hereunder is exercisable only by him or her. 

	9.
	Delivery
of Shares; Participant Accounts. 

        (a)  At
or as promptly as practicable after the Exercise Date for an Offering Period, the Company will deliver the shares of Stock purchased to the Custodian for deposit into
the participant's Account. 

        (b)  Cash
dividends on any Stock credited to a participant's Account will be automatically reinvested in additional shares of Stock; such amounts will not be available in the
form of cash to participants. All cash dividends paid on Stock credited to participants' Accounts will be paid over by the Company to the Custodian at the dividend payment date. The Custodian will
aggregate all purchases of Stock in
connection with the 2002 Plan for a given dividend payment date. Purchases of Stock for purposes of dividend reinvestment will be made as promptly as practicable (but not more than 30 days)
after a dividend payment date. The Custodian will make such purchases, as directed by the Committee, in transactions on any securities exchange upon which Stock is traded, otherwise in the
over-the-counter market, or in negotiated transactions. Any shares of Stock distributed as a dividend or distribution in respect of shares of Stock or in connection with a
split of the Stock credited to a participant's Account will be credited to such Account. In the event of any other non-cash dividend or distribution in respect of Stock credited to a
participant's Account, the Custodian will, if reasonably practicable and at the direction of the Committee, sell any property received in such dividend or distribution as promptly as practicable and
use the proceeds to purchase additional shares of Common Stock in the same manner as cash paid over to the Custodian for purposes of dividend reinvestment. 

        (c)  Each
participant will be entitled to vote the number of shares of Stock credited to his or her Account (including any fractional shares credited to such Account) on any
matter as to which the approval of the Company's shareholders is sought. If a participant does not vote or grant a valid proxy with respect to shares credited to his or her Account, such shares will
be voted by the Custodian in accordance with any stock exchange or other rules governing the Custodian in the voting of shares held for customer accounts. Similar procedures will apply in the case of
any consent solicitation of Company shareholders. 

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	10.
	Withdrawal
of Payroll Deductions or Shares; Termination of Employment. 

        (a)  If
a participant terminates his or her payroll deduction rate during an Offering Period, the cash balance contributed for the year shall be refunded as soon as
practicable. Payroll deductions shall not automatically resume at the beginning of the succeeding Offering Period unless such individual delivers to the Administrator a new subscription agreement. 

        (b)  Upon
a participant's ceasing to be an Employee for any reason (including upon the participant's death), he or she shall be deemed to have elected to withdraw from the
2002 Plan and the payroll deductions credited to such participant's Account during the Offering Period but not yet used to exercise the option shall be returned to such participant as soon as
practicable or, in the case of his or her death, to the person or persons entitled thereto under Section 14 hereof, and such participant's option shall be automatically terminated. 

        (c)  If
a participant elects to withdraw shares from his or her Account, one or more certificates for whole shares shall be issued in the name of, and delivered to, the
participant, with such participant receiving cash in lieu of fractional shares based on the Fair Market Value of a share of Stock on the date of withdrawal. If shares of Stock are transferred from a
participant's Account to a broker-dealer or financial institution that maintains an account for the participant, only whole shares shall be transferred and cash in lieu of any fractional share shall
be paid to such participant based on the Fair Market
Value of a share of Stock on the date of transfer. A Participant seeking to withdraw or transfer shares of Stock must give instructions to the Custodian in such manner and form as may be prescribed by
the Committee and the Custodian, which instructions will be acted upon as promptly as practicable. Withdrawals and transfers will be subject to any fees imposed in accordance with Section 10(e)
hereof. 

        (d)  Upon
a participant's ceasing to be an Employee for any reason, the Custodian will continue to maintain the participant's Account until the earlier of such time as the
participant withdraws or transfers all Stock in the Account or one year after the participant ceases to be employed by the Company, its Subsidiaries or Consolidated Affiliates. At the expiration of
such one-year period, the assets in participant's Account shall be withdrawn or transferred as elected by the participant or, in the absence of such election, as determined by the
Committee. 

        (e)  Costs
and expenses incurred in the administration of the 2002 Plan and maintenance of Accounts will be paid by the Company, including annual fees of the Custodian and
any brokerage fees and commissions for the purchase of Stock upon reinvestment of dividends and distributions. The foregoing notwithstanding, the Custodian may impose or pass through a reasonable fee
for the withdrawal of Stock in the form of stock certificates (as permitted under Section 10(c)), and reasonable fees for other services unrelated to the purchase of Stock under the 2002 Plan,
to the extent approved in writing by the Company and communicated to participants. In no circumstance shall the Company pay any brokerage fees and commissions for the sale of Stock acquired under the
2002 Plan by a participant. 

	11.
	Interest. 

        No
interest shall accrue on the payroll deductions of a participant in the 2002 Plan. 

	12.
	Stock. 

        (a)  The
maximum number of shares of Stock which shall be made available for sale under the 2002 Plan shall be one million (1,000,000) shares plus any shares transferred to
Reserves from the 1988 Employee Stock Purchase Plan ("1988 Plan") pursuant to Section 24, subject to further adjustment as provided in Section 18 hereof. If, on a given Exercise Date,
the number of shares with respect to which options are to be exercised exceeds the number of shares then available under the 2002 Plan, the Company shall make a pro rata allocation of the shares
remaining available for purchase in as uniform a manner as shall be practicable and as it shall determine to be equitable. 

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        (b)  The
participant shall have no interest or voting right in shares purchasable upon exercise of his or her option until such option has been exercised. 

        (c)  Shares
acquired through dividend reinvestment shall be purchased on the open market unless otherwise determined by the Committee. 

	13.
	Administration.

        (a)  The
2002 Plan shall be administered by the Committee. The Committee shall have full and final authority to construe, interpret and apply the terms of the 2002 Plan, to
determine eligibility and to adjudicate all disputed claims filed under the 2002 Plan. The Committee may, in its discretion, delegate authority to the Administrator. Every finding, decision and
determination made by the Committee or Administrator shall, to the full extent permitted by law, be final and binding upon all parties (except for any reserved right of the Committee to review a
finding, decision or determination of the Administrator). The Committee, Administrator, and each member thereof shall be entitled to, in good faith, rely or act upon any report or other information
furnished to him or her by any executive officer, other officer or employee of the Company, Subsidiary, Consolidated Affiliate, the Company's independent auditors, consultants or any other agents
assisting in the administration of the 2002 Plan. Members of the Committee or Administrator and any officer or employee of the Company, Subsidiary or Consolidated Affiliate acting at the direction or
on behalf of the Committee shall not be personally liable for any action or determination taken or made in good faith with respect to the 2002 Plan, and shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action or determination. 

        (b)  The
Custodian will act as custodian under the 2002 Plan, and will perform such duties as are set forth in the 2002 Plan and in any agreement between the Company and the
Custodian. The Custodian will establish and maintain, as agent for each Participant, an Account and any sub-accounts as may be necessary or desirable for the administration of the 2002
Plan. 

	14.
	Designation
of Beneficiary. 

        (a)  A
participant may file a written designation of a beneficiary who is to receive shares and cash, if any, from the participant's Account under the 2002 Plan in the
event of (i) such participant's death subsequent to an Exercise Date on which the option is exercised but prior to a distribution to such participant of shares or cash then held in the
participant's Account or (ii) such participant's death prior to exercise of the option. If a participant is married and the designated beneficiary is not the spouse, spousal consent shall be
required for such designation to be effective. 

        (b)  Subject
to spousal consent, if applicable, such designation of beneficiary may be changed by the participant at any time by written notice. In the event of the death of
a participant and in the absence
of a beneficiary validly designated under the 2002 Plan who is living at the time of such participant's death, any shares or cash otherwise deliverable under Section 14(a) shall be delivered to
the participant's estate. 

	15.
	Transferability.

        Neither
payroll deductions credited to a participant's Account nor any rights with regard to the exercise of an option or to receive shares under the 2002 Plan may be assigned,
transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided in Section 14 hereof) by the participant. Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect. 

	16.
	Use
of Funds. 

        All
payroll deductions received or held by the Company under the 2002 Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such
payroll deductions. 

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	17.
	Reports. 

        An
individual Account shall be maintained by the Custodian for each participant in the 2002 Plan. Statements of Account shall be given to each participant at least annually, which
statements shall set forth the amounts of payroll deductions, the Purchase Price, the number of shares purchased, any remaining cash balance, and other information deemed relevant by the Committee. 

	18.
	Adjustments
Upon Changes in Capitalization, Dissolution, Liquidation, or Change in Control. 

        (a)  Changes
in Capitalization. The Committee shall proportionately adjust the Reserves and the price per share and the number of shares of Stock covered by each option under
the 2002 Plan which has not yet been exercised for any increase or decrease in the number of issued shares of Stock resulting from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Stock, or other extraordinary corporate event which affects the Stock in order to prevent dilution or enlargement of the rights of participants. The determination of the
Committee with respect to any such adjustment shall be final, binding and conclusive. 

        (b)  Dissolution
or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Offering Period shall terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the Committee. 

        (c)  Change
in Control. In the event of a Change in Control, the Committee shall shorten the Offering Period then in progress by setting a new Exercise Date (the "New
Exercise Date"). The New Exercise Date shall be before the date that will constitute the Change in Control. The Committee shall notify each participant in writing, at least ten business days prior to
the New Exercise Date, that the Exercise Date for the participant's option has been changed to the New Exercise Date and that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the Offering Period as provided in Section 10 hereof. 

	19.
	Amendment
or Termination. 

        (a)  The
Board may at any time and for any reason terminate or amend the 2002 Plan. Except as provided in Section 18 hereof, no such termination can affect options
previously granted, provided that an Offering Period may be terminated by the Board of Directors by shortening the Offering Period and accelerating the Exercise Date to a date not prior to the date of
such Board action if the Board determines that termination of the 2002 Plan is in the best interests of the Company and its shareholders. Except as provided in Section 18 and this
Section 19, no amendment may make any change in any option theretofore granted which materially adversely affects the rights of any participant, and any amendment will be subject to the
approval of the Company's shareholders not later than one year after Board approval of such amendment if such shareholder approval is required by any federal or state law or regulation or the rules of
any stock exchange or automated quotation system on which the Stock may then be listed or quoted, or if such shareholder approval is necessary in order for the 2002 Plan to continue to meet the
requirements of Section 423 of the Code, and the Board may otherwise, in its discretion, determine to submit any amendment to shareholders for approval. For the avoidance of doubt, any action
to increase the number of shares to be made available for sale under the 2002 Plan shall always be subject to shareholder approval unless such increase is an adjustment as provided for in
Section 18. 

        (b)  Without
shareholder consent and without regard to whether any participant rights may be considered to have been "adversely affected," the Committee shall be entitled to
change the Offering Periods, limit the frequency and/or number of changes in the amount withheld during an Offering Period, establish the exchange ratio applicable to amounts withheld in a currency
other than U.S. Dollars, permit payroll withholding in excess of the amount designated by a participant in order to adjust for delays or mistakes in the Company's processing of properly completed
withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to 

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ensure that amounts applied toward the purchase of Stock for each participant properly correspond with amounts withheld from the participant's compensation, and establish such other limitations or
procedures as the Committee determines in its sole discretion are advisable and consistent with the
2002 Plan. Without limiting the generality of the foregoing, the Committee may, but shall not be required to, modify or eliminate grants to persons who are otherwise eligible to receive options under
this 2002 Plan who are foreign nationals or employed outside the United States to recognize differences in local law, tax policy or custom. 

	20.
	Notices. 

        All
notices or other communications by a participant to the Company under or in connection with the 2002 Plan shall be deemed to have been duly given when received in the form specified
by the Company at the location, or by the person, designated by the Company for the receipt thereof. 

	21.
	Conditions
Upon Issuance of Shares. 

        The
Company shall not be obligated to issue shares with respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto shall comply
with all applicable provisions of law, domestic or foreign, including, without limitation, the Exchange Act, the Securities Act of 1933, as amended, all regulations promulgated there under, and the
requirements of any stock exchange or automated quotation system upon which the shares may then be listed or quoted, and shall be further subject to the approval of counsel for the Company with
respect to such compliance. 

	22.
	No
Right to Options or to Employment. 

        This
contract is between the Company and the individual participant and does not in any way alter or amend the existing employment relationship with the Company, its Subsidiary or
Consolidated Affiliate. Participation in the 2002 Plan shall in no way constitute any form of agreement or understanding binding on the Company, Subsidiary or Consolidated Affiliate, express or
implied, of continued employment for any length of time, nor shall participation in the 2002 Plan interfere in any way with the lawful rights of the actual employer to terminate the employment
relationship, which rights are hereby reserved for that particular legal entity. 

	23.
	Limitations
on Sales of Stock Purchased Under the 2002 Plan. 

        The
2002 Plan is intended to provide common stock for investment and not for resale. The Company does not, however, intend to restrict or influence any participant in the conduct of his
or her own affairs. A participant, therefore, may sell stock purchased under the 2002 Plan at any time, subject to compliance with any applicable Federal or state securities laws; provided, however,
that because of certain Federal tax requirements, each participant will agree by entering the 2002 Plan, promptly to
give the company notice of any such stock disposed of within two years after the date of the grant of the applicable option, showing the number of such shares disposed of. THE INDIVIDUAL EMPLOYEE
ASSUMES THE RISK OF ANY MARKET FLUCTUATIONS IN THE PRICE OF THE STOCK. 

	24.
	2002
Plan Effective Date and Shareholder Approval. 

        The
2002 Plan shall become effective upon approval by the Company's shareholders by a vote sufficient to meet the requirements of Section 423(b)(2) of the Code at the next annual
meeting of the shareholders to be held May 8, 2002, which is prior to the first Exercise Date. In the event that the 2002 Plan is approved by the Company's shareholders, the final plan year for
the existing 1988 Plan shall close on July 31, 2002 and the 1988 Plan shall be terminated upon distribution of shares purchased in such final plan year with any remaining shares registered for
issuance under the 1988 Plan being transferred to Reserves under this 2002 Plan. 

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EXHIBIT 4.3 EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. 2002 EMPLOYEE STOCK PURCHASE PLANQuickLinks
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Exhibit 10.1    
  

        8,250,000 Shares of Common Stock 

MOVIE
GALLERY, INC. 

UNDERWRITING
AGREEMENT 

May 15,
2002 

BEAR,
STEARNS & CO. INC.

THOMAS WEISEL PARTNERS LLC

    as Representatives of the

several Underwriters named in

Schedule I attached hereto

c/o Bear, Stearns & Co. Inc.

383 Madison Avenue

New York, New York 10179

and

Thomas Weisel Partners LLC

One Montgomery Street, Suite 3700

San Francisco, California 94104 

Ladies/Gentlemen: 

        Movie
Gallery, Inc., a corporation organized and existing under the laws of Delaware (the "Company"), proposes, subject to the
terms and conditions stated herein, to issue and sell an aggregate of 3,900,000 shares of its common stock, par value $0.001 per share (the "Common
Stock"), and certain stockholders of the Company named in Schedule II hereto (collectively, the "Selling Stockholders")
severally propose, subject to the terms and conditions stated herein, to sell an aggregate of 4,350,000 outstanding shares of Common Stock, with each Selling Stockholder selling the number of shares
set forth opposite such Selling Stockholder's name in Schedule II hereto in the column entitled "Number of
Firm Shares to Be Sold" (such 8,250,000 shares of Common Stock being hereinafter referred to as the "Firm Shares") to the several underwriters named in
Schedule I hereto (the "Underwriters") and, for the sole purpose of covering over-allotments in connection with the sale of the Firm
Shares, at the option of the Underwriters, H. Harrison Parrish ("Parrish") and Joe Thomas Malugen
("Malugen" and, together with Parrish, the "Over-Allotment Selling Stockholders") severally
propose, subject to the terms and conditions stated herein, to sell up to an additional 1,237,500 shares of Common Stock in the aggregate (the "Additional
Shares") with each Over-Allotment Selling Stockholder proposing to sell up to the number of shares of Common Stock set forth opposite his name in Schedule II
in the column entitled "Number of Additional Shares to Be Sold if Maximum Option Exercised". The Firm Shares and any Additional Shares purchased by the
Underwriters are referred to herein as the "Shares". The Shares are more fully described in the Registration Statement referred to below. Bear,
Stearns & Co. Inc. ("Bear Stearns") and Thomas Weisel Partners LLC ("Thomas Weisel" and,
together with Bear Stearns, the "Representatives") are acting as co-lead managers in connection with the offering and sale of the Shares
(the "Offering"). 

        1.    Representations and Warranties of the Company.    The Company represents and warrants to, and agrees with, each
of the Underwriters as of the date hereof and as of the Closing Date and each Additional Closing Date (each as defined in Section 2 below) that: 

                (a)
The Company has filed with the Securities and Exchange Commission (the "Commission") a registration statement on
Form S-1 (No. 333-86016), and amendments thereto, and related preliminary prospectuses for the registration under the Securities Act of 1933, as amended (the
"Securities Act"), of the Shares which registration statement, as so amended, has been declared effective by the Commission and copies of which have
heretofore been delivered to the Underwriters. The registration statement, as amended at the time it became effective, including the exhibits and information (if any) deemed to be part of the
registration statement at the time of effectiveness 

 

pursuant to Rule 430A or 434(d) under the Securities Act, is hereinafter referred to as the "Registration Statement." If the Company has filed
or is required pursuant to the terms hereof to file a registration statement pursuant to Rule 462(b) under the Securities Act registering additional shares of Common Stock (a
"Rule 462(b) Registration Statement"), then, unless otherwise specified, any reference herein to the term "Registration
Statement" shall be deemed to include such Rule 462(b) Registration Statement. Other than a Rule 462(b) Registration Statement, which became effective upon
filing, no other document with respect to the Registration Statement has heretofore been filed with the Commission. No stop order suspending the effectiveness of either the Registration Statement or
the Rule 462(b) Registration Statement, if any, has been issued and no proceeding for that purpose has been initiated or threatened by the Commission. The Company, if required by the rules and
regulations of the Commission (together, the "Rules and Regulations") or by the Securities Act, proposes to file the Prospectus with the Commission
pursuant to Rule 424(b) under the Securities Act ("Rule 424(b)"). The prospectus, in the form in which it is to be filed with the
Commission pursuant to Rule 424(b) of the Rules and Regulations, or, if the prospectus is not to be filed with the Commission pursuant to Rule 424(b), the prospectus in the form included
as part of the Registration Statement at the time the
Registration Statement became effective, is hereinafter referred to as the "Prospectus," except that if any revised prospectus or prospectus supplement
shall be provided to the Underwriters by the Company for use in connection with the Offering which differs from the Prospectus (whether or not such revised prospectus or prospectus supplement is
required to be filed by the Company pursuant to Rule 424(b)), the term "Prospectus" shall refer to such revised prospectus or prospectus
supplement, as the case may be, from and after the time it is first provided to the Underwriters for such use. Any preliminary prospectus or prospectus subject to completion included in the
Registration Statement or filed with the Commission pursuant to Rule 424 under the Securities Act is hereafter called a "Preliminary Prospectus."
All references in this Agreement to the Registration Statement, the Rule 462(b) Registration Statement, a Preliminary Prospectus and the Prospectus, or any amendments or supplements to any of
the foregoing shall be deemed to include any copy thereof filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval System
("EDGAR"). 

                (b)
At the time of the effectiveness of the Registration Statement or the effectiveness of any post-effective amendment to the Registration Statement, when the Prospectus is
first filed with the Commission pursuant to Rule 424(b) or Rule 434 under the Securities Act ("Rule 434"), when any supplement to
or amendment of the Prospectus is filed with the Commission and at the Closing Date and the Additional Closing Date, if any (as hereinafter respectively defined), the Registration Statement and the
Prospectus and any amendments thereof and supplements thereto complied or will comply in all material respects with the applicable provisions of the Securities Act, the Exchange Act and the Rules and
Regulations and did not and will not contain an untrue statement of a material fact and did not and will not omit to state any material fact required to be stated therein or necessary in order to make
the statements therein (i) in the case of the Registration Statement, not misleading and (ii) in the case of the Prospectus or any related Preliminary Prospectus in the light of the
circumstances under which they were made, not misleading. When any related Preliminary Prospectus was first filed with the Commission (whether filed as part of the Registration Statement for the
registration of the Shares or any amendment thereto or pursuant to Rule 424(a) under the Securities Act) and when any amendment thereof or supplement thereto was first filed with the
Commission, such Preliminary Prospectus and any amendments thereof and supplements thereto complied in all material respects with the applicable provisions of the Securities Act and the Rules and
Regulations and did not contain an untrue statement of a material fact and did not omit to state any material fact required to be stated therein or necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading. No representation and warranty is made in this subsection (b), however, with respect to any information contained in or
omitted from the Registration Statement or the Prospectus or any related Preliminary Prospectus or any amendment thereof or supplement thereto in reliance upon and in conformity with information
furnished in writing to the Company by or on 

2

 

behalf of any Underwriter through the Representatives specifically for use therein ("Underwriters' Information"). The parties acknowledge and agree
that the Underwriters' Information consists solely of (i) the number of shares the Underwriters severally have agreed to purchase from the Company and the Selling Stockholders as set forth in
the table under the first paragraph under the caption "UNDERWRITING" in the Prospectus and (ii) the material included in the first paragraph under the caption
"UNDERWRITING—Commissions and Discounts". If Rule 434 is used, the Company will comply with the requirements of Rule 434 and the Prospectus shall not be "materially
different," as such term is used in Rule 434, from the Prospectus included in the Registration Statement at the time it became effective. 

                (c)
Ernst & Young LLP, who have certified the financial statements and supporting schedules and information included in the Registration Statement, and Singer Lewak
Greenbaum & Goldstein, LLP, who have certified certain financial statements and other information of Video Update, Inc. ("Video Update")
that are included in the Registration Statement, each are independent public accountants as required by the Securities Act and the Rules and Regulations. 

                (d)
Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, except as set forth in the Registration Statement and the
Prospectus, the Company has not paid any dividends on its capital stock, and there has been no material adverse change or any development involving a prospective material adverse change, whether or
not arising from transactions in the ordinary course of business, in (i) the business, affairs, properties, condition (financial or otherwise), results of operations, stockholders' equity or
prospects of the Company and each subsidiary of the Company listed on Exhibit 21 of the Registration Statement (the "Subsidiaries"), taken as a
whole; (ii) the long-term debt of the Company and its Subsidiaries; (iii) the capital stock of the Company; (iv) the consummation of the transactions contemplated by
this Agreement and the Prospectus; or (v) the validity or enforceability of the Company's obligations hereunder or thereunder (a "Material Adverse
Change" or "Material Adverse Effect"). Since the date of the latest balance sheet presented in the Registration Statement and
the Prospectus, neither the Company nor any of the Subsidiaries has incurred or undertaken any liabilities or obligations, direct or contingent, or entered into any transactions which are material to
the Company and the Subsidiaries, taken as a whole, except for liabilities or obligations which are reflected in the Registration Statement and the Prospectus. 

                (e)
This Agreement and the transactions contemplated hereby have been duly and validly authorized by the Company and this Agreement has been duly and validly executed and delivered by
the Company. 

                (f)
The execution, delivery, and performance of this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) conflict with, require consent
under or result in a breach of any of the terms and provisions of, or constitute a default (or an event which with notice or lapse of time, or both, would constitute a default) under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of the Subsidiaries pursuant to, any indenture, mortgage, deed of trust, loan agreement or
other agreement, instrument, franchise, license or permit to which the Company or any of the Subsidiaries is a party or by which the Company or any of the Subsidiaries or their respective properties,
operations or assets may be bound, except for such conflicts, breaches or defaults or liens, charges or encumbrances as would not result in a Material Adverse Effect or (ii) violate or conflict
with any provision of the certificate or articles of incorporation, by-laws, certificate of formation, limited liability company agreement, partnership agreement or other organizational
documents of the Company or any of the Subsidiaries or (iii) except as would not have a Material Adverse Effect, violate or conflict with any judgment, decree, order, statute, rule or
regulation of any court or any public, governmental or regulatory agency or body, domestic or foreign, having jurisdiction over the Company or any of the Subsidiaries or any of their respective
properties, operations or assets. No consent, approval, authorization, order, registration, filing, qualification, license or permit of or with any court or any 

3

 

public, governmental or regulatory agency or body, domestic or foreign, having jurisdiction over the Company or any of the Subsidiaries or any of their respective properties, operations or assets, or
any third party, is required for the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby or by the Registration Statement and by the Prospectus, including the issuance, sale and delivery of the Shares to be issued, sold and delivered
hereunder, except the registration under the Securities Act of the Shares and such consents, approvals, authorizations, orders, registrations, filings, qualifications, licenses and permits as may be
required under state securities or Blue Sky laws or the by-laws and rules of the National Association of Securities Dealers, Inc. (the
"NASD") in connection with the purchase and distribution of the Shares by the Underwriters, each of which has been obtained. 

                (g)
The authorized, issued and outstanding capital stock of the Company is as set forth in the Prospectus in the column entitled "Actual" under the caption "Capitalization" and, after
giving effect to the Offering and the other transactions contemplated by the Registration Statement and the Prospectus, will be as set forth in the column entitled "As Adjusted" under the caption
"Capitalization". All of the issued shares of capital stock of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and were not issued in
violation of or subject to any preemptive or similar rights that entitle or will entitle any person to acquire from the Company or any Subsidiary upon the issuance or sale thereof any shares of Common
Stock, any other equity security of the Company or any Subsidiaries and any security convertible into, or exercisable or exchangeable for, any shares of Common Stock or other such equity security (any
"Relevant Security"), except for such rights as may have been fully satisfied or waived prior to the effectiveness of the Registration Statement. The
Shares to be delivered on the Closing Date and the Additional Closing Date, if any (as hereinafter respectively defined), have been duly and validly authorized and, when delivered in accordance with
this Agreement, will be duly and validly issued, fully paid and non-assessable and will not have been issued in violation of or subject to any preemptive or similar rights that entitle or
will entitle any person to acquire any Relevant Security from the Company or any Subsidiary upon issuance or sale of Shares in the Offering. The Common Stock, the Firm Shares and the Additional Shares
conform to the descriptions thereof contained in the Registration Statement and the Prospectus. Except as disclosed in or specifically contemplated by the Prospectus, neither the Company nor any
Subsidiary has outstanding options to purchase, or any preemptive rights or other rights to subscribe for or to purchase, or any contracts or commitments to issue or sell, any Relevant Security. 

                (h)
The Subsidiaries are the only subsidiaries of the Company within the meaning of Rule 405 under the Securities Act. Except for the Subsidiaries, the Company owns no ownership
or other beneficial interest, directly or indirectly, in any corporation, partnership, joint venture or other business entity. All of the issued shares of capital stock of or other ownership interest
in each of the Subsidiaries have been duly and validly authorized and issued and are fully paid and non-assessable and are owned directly or indirectly by the Company free and clear of all
liens, encumbrances, equities or claims. 

                (i)
Each of the Company and the Subsidiaries has been duly organized and validly exists as a corporation, partnership or limited liability company in good standing under the laws of its
jurisdiction of organization. Each of the Company and the Subsidiaries is duly qualified to do business and is in good standing as a foreign corporation, partnership or limited liability company in
each jurisdiction in which the character or location of its properties (owned, leased or licensed) or the nature or conduct of its business makes such qualification necessary, except for those
failures to be so qualified or in good standing which will not in the aggregate have a Material Adverse Effect. Each of the Company and the Subsidiaries has all requisite power and authority, and all
necessary consents, approvals, authorizations, orders, registrations, qualifications, licenses and permits (collectively, the "Consents") of and from
all public, regulatory or governmental agencies and bodies and third parties, foreign and domestic, to own, 

4

 

lease and operate its properties and conduct its business as it is now being conducted and as described in the Registration Statement and the Prospectus. No Consent contains a materially burdensome
restriction not adequately disclosed in the Registration Statement and the Prospectus. 

                (j)
Except as described in the Prospectus, there is no legal, governmental or regulatory proceeding or other litigation to which the Company or any of the Subsidiaries is a party or of
which any property or operations of the Company or any of the Subsidiaries is the subject which, singularly or in the aggregate, if determined adversely to the Company or any of the Subsidiaries, is
reasonably likely to have a Material Adverse Effect and, to the best of the Company's knowledge, no such proceeding or litigation is threatened or contemplated by any judicial, governmental or
regulatory authority or other third party, foreign or domestic; and the defense of all such proceedings and litigation against or involving the Company or any of the Subsidiaries will not have a
Material Adverse Effect. 

                (k)
Neither the Company nor any of its affiliates have taken, nor will any of them take, directly or indirectly, any action designed to cause or result in, or which constitutes or which
might reasonably be expected to constitute, the stabilization or manipulation of the price of the shares of Common Stock to facilitate the sale or resale of the Shares. 

                (l)
The financial statements of the Company, including the notes thereto, and the supporting schedules included in the Registration Statement and the Prospectus present fairly in all
material respects the financial position as of the dates indicated and the cash flows and results of operations for the periods specified of the Company and its consolidated subsidiaries, and the
financial statements of Video Update, including the notes thereto, and the supporting schedules included in the Registration Statement and the Prospectus present fairly in all material respects the
financial position as of the dates indicated and the cash flows and results of operations for the periods specified of Video Update and its consolidated subsidiaries; except as otherwise stated in the
Registration Statement, the financial statements of the Company and the financial statements of Video Update have been prepared on a basis consistent with that of the books and records of the Company
and Video Update, as the case may be, and have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved and the
supporting schedules included in the Registration Statement present fairly the information required to be stated therein. The other financial and statistical information and data included in the
Registration Statement and the Prospectus present fairly the information included therein and have been prepared on a basis consistent with that of the financial statements that are included in the
Registration Statement and the Prospectus and the books and records of the respective entities presented therein. 

                (m)
The pro forma and as adjusted financial information included in the Prospectus has been properly compiled, and prepared in accordance with the applicable requirements of the
Securities Act, the Exchange Act and the Rules and Regulations and includes all adjustments necessary to present fairly in all material respects the pro forma financial position of the respective
entity or entities presented therein at the respective dates indicated and the results of their operations for the respective periods specified. There are no historical or pro forma financial
statements which are required to be included
in the Registration Statement and Prospectus in accordance with Regulation S-X which have not been included as so required. 

                (n)
The assumptions used in preparing the pro forma and as adjusted financial information included in each of the Registration Statement and the Prospectus provide a reasonable basis
for presenting the significant effects directly attributable to the transactions or events described therein, the related pro forma and as adjusted adjustments give appropriate effect to those
assumptions, and the pro forma and as adjusted columns therein reflect the proper application of those adjustments to the corresponding historical financial statement amounts. 

                (o)
The Common Stock is registered pursuant to Section 12(b) of the Exchange Act and the outstanding shares of Common Stock (including the Shares) are listed for quotation on the
NASDAQ 

5

 

(as defined in Section 11(b) below), and the Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act
or de-listing the Common Stock from the NASDAQ, nor has the Company received any notification that the SEC or the NASDAQ is contemplating terminating such registration or listing. 

                (p)
There are no contracts or other documents (including, without limitation, any voting agreement), which are required to be described in the Prospectus or filed as exhibits to the
Registration Statement or the Prospectus by the Securities Act, the Exchange Act or the Rules and Regulations and which have not been so described or filed. 

                (q)
Except as disclosed in the Prospectus, no holder of securities of the Company has any rights to the registration of securities of the Company because of the filing of the
Registration Statement or otherwise in connection with the sale of the Shares contemplated hereby, and any such rights so disclosed have either been fully complied with by the Company or effectively
waived by the holders thereof. 

                (r)
The Company has not prior to the date hereof offered or sold any securities which would be "integrated" with the offer and sale of the Shares pursuant to the Registration Statement. 

                (s)
The statistical, industry-related and market-related data included in the Prospectus are based on or derived from sources which the Company reasonably believes to be reliable and
accurate. 

                (t)
No relationship, direct or indirect, exists between or among any of the Company or any affiliate of the Company, on the one hand, and any director, officer, stockholder, customer or
supplier of any of them, on the other hand, which is required by the Securities Act or by the Rules and Regulations to be
described in the Registration Statement or the Prospectus which is not so described or is not described as required. 

                (u)
The Company and its Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in
accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets, (iii) access to assets is permitted only in accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. 

                (v)
The Company is not and, upon consummation of the transactions contemplated hereby and after giving effect to the application of net proceeds of the Offering and the other
transactions contemplated by the Registration Statement and the Prospectus, will not be, subject to registration as an "investment company" under the Investment Company Act of 1940, as amended. 

                (w)
Each of the Company and the Subsidiaries owns or leases all such properties as are necessary to the conduct of its business as presently operated and proposed to be operated as
described in the Registration Statement and Prospectus. The Company and the Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal
property owned by them, in each case free and clear of all liens, encumbrances and defects except such as are described in the Registration Statement and the Prospectus or such as do not materially
affect the value of such property by the Company and the Subsidiaries; and any real property and buildings held under lease or sublease by the Company and the Subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and the
Subsidiaries. Neither the Company nor any of the Subsidiaries has received any notice of any claim adverse to its ownership of any material real or personal property or of any claim against the
continued 

6

 

possession of any material real property, whether owned or held under lease or sublease by the Company or any of the Subsidiaries. 

                (x)
Each of the Company and the Subsidiaries has accurately prepared and timely filed all federal, state and other tax returns that are required to be filed by it and has paid or made
provision for the payment of all taxes, assessments, governmental or other similar charges, including without limitation, all sales and use taxes and all taxes which the Company and each of the
Subsidiaries is obligated to withhold from amounts owing to employees, creditors and third parties, with respect to the periods covered by such tax returns (whether or not such amounts are shown as
due on any tax return), other than taxes being contested in good faith or for which adequate reserves have been provided, or those currently payable without penalty or interest. No deficiency
assessment with respect to a proposed adjustment of the Company's or any of the Subsidiaries' Federal, state, or other taxes is pending or, to the best of the Company's knowledge, threatened. There is
no tax lien, whether imposed by any federal, state or other taxing authority, outstanding against any material asset, property or business of the Company or any of the Subsidiaries. 

                (y)
Neither the Company, any of the Subsidiaries nor, to the Company's knowledge, any of its employees or agents 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. 

                (z)
Neither the Company nor any of the Subsidiaries (i) is in violation of its charter or by-laws, (ii) is in default (and no event has occurred which, with
notice or lapse of time or both, would constitute such a default) under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or by which it
is bound or to which any of its property or assets is subject or (iii) is in violation in any respect of any statute or any judgment, decree, order, rule or regulation of any court or
governmental or regulatory agency or body having jurisdiction over the Company or any of the Subsidiaries or any of their properties or assets, except any violation or default that would not have a
Material Adverse Effect. 

                (aa)
To the best of the Company's knowledge, the Company and each of the Subsidiaries owns or possesses adequate right to use all patents, patent applications, trademarks, service
marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, formulae, customer lists, and know-how and other intellectual property (including trade
secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) (collectively, the "Intellectual
Property") necessary for the conduct of their respective businesses as being conducted and as described in the Registration Statement and Prospectus and have no reason to
believe that the conduct of their respective businesses will conflict with, and have not received any notice of any claim of conflict with, any such right of others. To the best of the Company's
knowledge, there is no infringement by third parties of any such Intellectual Property; there is no pending or, to the Company's knowledge, threatened action, suit, proceeding or claim by others
challenging the Company's or any Subsidiary's rights in or to any such Intellectual Property, and the Company is unaware of any facts which would form a reasonable basis for any such claim; and
there is no pending or, to the Company's knowledge, threatened action, suit, proceeding or claim by others that the Company infringes or otherwise violates any patent, trademark, copyright, trade
secret or other proprietary rights of others, and the Company is unaware of any other fact which would form a reasonable basis for any such claim. 

                (bb)
No labor disturbance by the employees of the Company or any of the Subsidiaries exists or, to the best of the Company's knowledge, is imminent and the Company is not aware of any
existing or imminent labor disturbance by the employees of any of its or any Subsidiary's principal suppliers, 

7

 

manufacturers', customers or contractors, which, in either case, would reasonably be expected to have a Material Adverse Effect. 

                (cc)
No "prohibited transaction" (as defined in Section 406 of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as amended from time to time (the
"Code"), or "accumulated funding deficiency" (as defined in Section 302 of ERISA) or any of the events set forth in Section 4043(b) of
ERISA (other than events with respect to which the 30-day notice requirement under Section 4043 of ERISA has been waived) has occurred with respect to any employee benefit plan
which could reasonably be expected to have a Material Adverse Effect; each employee benefit plan is in compliance in all material respects with applicable law; including ERISA and the Code; the
Company has not incurred and does not expect to incur liability under Title IV of ERISA with respect to the termination of, or withdrawal from any "pension plan;" and each "pension plan" (as defined
in ERISA) for which the Company would have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred,
whether by action or by failure to act, which could cause the loss of such qualification. 

                (dd)
There has been no storage, generation, transportation, handling, treatment, disposal, discharge, emission, or other release of any kind of toxic or other wastes or other hazardous
substances by, due to, or caused by the Company (or, to the Company's knowledge, any other entity for whose acts or omissions the Company is or may be liable) upon any property of any person or
entity, including without limitation, any property now or previously owned or leased by the Company or any of the Subsidiaries, which would be a violation of any statute or any ordinance, rule,
regulation, order, judgment, decree or permit or which would, under any statute or any ordinance, rule (including rule of common law), regulation, order, judgment, decree or permit, or which would
give rise to any liability, except for any violation or liability which would not reasonably be expected to have, singularly or in the aggregate with all such violations and liabilities, a Material
Adverse Effect. There has been no disposal discharge, emission or other release of any kind onto such property or into the environment surrounding such property of any toxic or other wastes or other
hazardous substances with respect to which the Company or any of the Subsidiaries has knowledge. The Company has not agreed to assume, undertake or provide indemnification for any liability of any
other person under any Environmental Law, including any obligation for cleanup or remedial action, except as would not reasonably be expected to have a Material Adverse Effect. 

                (ee)
The Company and the Subsidiaries possess such permits, franchises, licenses, approvals, consents and other authorizations (collectively, "Governmental
Licenses") issued by the appropriate federal, state, local or foreign regulatory agencies or bodies necessary to conduct the business now operated or proposed to be operated by
them as described in the Registration Statement and the Prospectus, except where the failure to possess any such Governmental License would not individually or in the aggregate have a Material Adverse
Effect. The Company and the Subsidiaries are in compliance with the terms and conditions of all such Governmental Licenses, except where the failure to so comply would not individually or in the
aggregate have a Material Adverse Effect. All of the Governmental Licenses are valid and in full force and effect, except where the invalidity of any such Government License or failure of such
Governmental License to be in full force and effect would not individually or in the aggregate have a Material Adverse Effect, and neither the Company nor any of the Subsidiaries has received any
notice of proceedings relating to the revocation or modification of any such Governmental Licenses which if revoked or modified would individually or in the aggregate have a Material Adverse Effect. 

                (ff)
The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in
the businesses in
which they are engaged. All policies of insurance insuring the Company and the Subsidiaries or their businesses, assets, employees, officers and directors and managers are in full force 

8

 

and effect. The Company and the Subsidiaries are in compliance with such terms of such policies and instruments in all material respects. There are no claims by the Company or any of the Subsidiaries
under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause where such denial of liability would have a Material
Adverse Effect, whether or not arising from transactions in the ordinary course of business, except as described in the Registration Statement and the Prospectus. Neither the Company nor any of the
Subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not have a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business, except as described in the
Registration Statement and the Prospectus. 

                (gg)
By order entered December 20, 2001 (the "Confirmation Order"), the Bankruptcy Court for the District of Delaware confirmed
that certain plan of reorganization of Video Update, dated July 31, 2001, as modified prior to such entry (the "Plan"). The Plan became effective
and was fully consummated on December 21, 2001. Pursuant to the Plan, the Company acquired 100% of the capital stock of reorganized Video Update. All creditors of Video Update received notice
of (i) Video Update's bankruptcy, (ii) any bar date established in Video Update's bankruptcy case, and (iii) the Plan. No party in interest has filed any appeal or motion, or to
the knowledge of the Company, has threatened to file or is contemplating filing, any appeal or motion, in each case, with respect to the entry of the Confirmation Order (including without limitation a
motion to stay or modify the Confirmation Order). No stay of the Confirmation Order is or has been in effect. The Confirmation Order has not been modified. 

        Any
certificate signed by or on behalf of the Company and delivered to the Representatives or to counsel for the Underwriters' shall be deemed to be a representation and warranty by the
Company to each Underwriter as to the matters covered thereby. 

        2.    Representations and Warranties of the Selling Stockholders.    Each Selling Stockholder represents and warrants
to, and agrees with, the several Underwriters that: 

                (a)
This Agreement has been duly authorized, executed and delivered by or on behalf of such Selling Stockholder and is a valid and binding agreement of such Selling Stockholder,
enforceable in accordance with its terms, except as rights to indemnification hereunder may be limited by applicable law and except as the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles. 

                (b)
The Custody Agreement (as defined below) and the Power of Attorney (as defined below) have been duly authorized, executed and delivered by such Selling Stockholder and are valid and
binding agreements of such Selling Stockholder enforceable in accordance with their respective terms, except as rights to indemnification thereunder may be limited by applicable law and except as the
enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable
principles. 

                (c)
The execution and delivery by such Selling Stockholder of, and the performance by such Selling Stockholder of its obligations under, this Agreement, the Custody Agreement signed by
such Selling Stockholder and the Company, as Custodian, relating to the deposit of the Shares to be sold by such Selling Stockholder (the "Custody
Agreement") and the Power of Attorney appointing certain individuals as such Selling Stockholder's attorneys-in-fact to the extent set forth therein,
relating to the transactions contemplated hereby and by the Registration Statement (the "Power of Attorney"), and the consummation of the transactions
contemplated hereby and thereby, will not contravene any provision of applicable law, any agreement or other instrument binding upon such Selling Stockholder or any 

9

 

judgment, order or decree of any governmental body, agency or court having jurisdiction over such Selling Stockholder, and no consent, approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by such Selling Stockholder of its obligations under this Agreement or the Custody Agreement or the Power of Attorney of such Selling
Stockholder, except such as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Shares. 

                (d)
Certificates in negotiable form for such Selling Stockholder's Shares have been placed in custody, for delivery pursuant to the terms of this Agreement, under the Custody Agreement
and the Power of Attorney, and the shares of Common Stock represented by the certificates so held in custody for such Selling Stockholder are subject to the interests hereunder of the Underwriters and
the Company. The arrangements for custody and delivery of such certificates, made by such Selling Stockholder hereunder and under the Custody Agreement and the Power of Attorney are not subject to
termination by any acts of the Selling Stockholder, or by operation of law, whether by death or incapacity of any person acting on behalf of the Selling Stockholder or the occurrence of any other
event, and if such death, incapacity or any other such event shall occur before the delivery of the Selling Stockholder's Shares hereunder, certificates for such Shares will be delivered by the
Custodian in accordance with the terms and conditions of this Agreement, the Custody Agreement and the Power of Attorney as if such death, incapacity or other event had not occurred, regardless of
whether the Custodian shall have received notice of such death, incapacity or other event. 

                (e)
Each Selling Stockholder has valid title to, and is the owner of record in the stock records of the Company of, the Shares to be sold by such Selling Stockholder pursuant to this
Agreement. The Shares to be sold by such Selling Stockholder pursuant to this Agreement are certificated securities in registered form and are not held by or through any securities intermediary within
the meaning of the Uniform Commercial Code as in effect in the State of New York (the "NYUCC"). Such Selling Stockholder has, and, at the Closing Date
and the Additional Closing Date, if applicable, will have, full right, power and authority to hold, sell, transfer and deliver the Shares to be sold by such Selling Stockholder hereunder. Upon the
delivery to the Depository Trust Company ("DTC") or its agent of the Shares registered in the name of Cede & Co., as nominee for DTC against
payment by the several
Underwriters therefor, and the crediting by DTC of the Shares to the securities accounts of the several Underwriters with DTC, DTC will be a "protected purchaser" of the Shares (as defined in
Section 8-303 of the NYUCC) and will acquire its interest in the Shares (including, without limitation, all rights that such Selling Stockholders had or has the power to transfer in
such Shares) free of any adverse claim (as defined in Section 8-102(a)(1) of the NYUCC) assuming neither DTC nor any Underwriter has notice of any adverse claim. The Underwriters
will acquire valid security entitlements (within the meaning of Section 8-501 of the NYUCC) in respect of the Shares to be purchased by them, and no action (whether framed in
conversion, replevin, constructive trust, equitable lien, or other theory) based on an adverse claim to such Shares may be asserted against the Underwriters assuming they have no notice of any adverse
claim. 

                (f)
Such Selling Stockholder does not directly or indirectly have any registration or other similar rights to have any equity or debt securities registered for sale by the Company under
the Registration Statement or included in the offering contemplated by this Agreement, other than as described in the Registration Statement and as have been waived in writing in connection with the
offering contemplated hereby. 

                (g)
The Selling Stockholder (i) does not directly or indirectly have any preemptive right, co-sale right or right of first refusal or other similar right to purchase
any of the Shares that are to be sold by the Underwriters pursuant to this Agreement, and (ii) does not directly or indirectly own any warrants, options or similar rights to acquire, and does
not directly or indirectly have any right or arrangement to acquire, any capital stock, rights, warrants, options or other securities from the Company, other than as described in the Registration
Statement. 

10

 

                (h)
Such Selling Stockholder has not taken, and will not take, directly or indirectly, any action designed to cause or result in, or which constitutes or which might reasonably be
expected to constitute, the stabilization or manipulation of the price of the shares of Common Stock to facilitate the sale or resale of the Shares. 

                (i)
At the time of the effectiveness of the Registration Statement or the effectiveness of any post-effective amendment to the Registration Statement, when the Prospectus is
first filed with the Commission pursuant to Rule 424(b) or Rule 434, when any supplement to or amendment of the Prospectus is filed with the Commission and at the Closing Date and the
Additional Closing Date, if any, the Registration Statement and the Prospectus and any amendments thereof and supplements thereto did not and will not contain an untrue statement of a material fact
and did not and will not omit to state any material fact required to be stated therein or necessary in order to make the statements therein (i) in the case of the Registration Statement, not
misleading and (ii) in the case of the Prospectus or any related Preliminary Prospectus in light of the circumstances under which they were made, not misleading. When any related Preliminary
Prospectus was first filed with the Commission (whether filed as part of the Registration Statement for the registration of the Shares or any amendment thereto or pursuant to Rule 424(a) under
the Securities Act) and when any amendment thereof or supplement thereto was first filed with the Commission, such Preliminary Prospectus and any
amendments thereof and supplements thereto did not contain an untrue statement of a material fact and did not omit to state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were made, not misleading. No representation and warranty is made in this subsection (i), however, with respect to any
information contained in or omitted from the Registration Statement or the Prospectus or any related Preliminary Prospectus or any amendment thereof or supplement thereto in reliance upon and in
conformity with the Underwriters' Information, it being understood and agreed that the only such information is that described as such in the penultimate sentence of Section 1(b). 

                (j)
Except as disclosed in the Prospectus, there are no contracts, agreements or understandings between such Selling Stockholder and any person that would give rise to a valid claim
against such Selling Stockholder or any Underwriter for a brokerage commission, finder's fee or other like payment in connection with this offering. 

                (k)
Such Selling Stockholder, without independent verification, has no reason to believe that the representations and warranties of the Company contained in Section 1 hereof are
not true and correct, is familiar with the Registration Statement and the Prospectus and has no knowledge of any material fact, condition or information not disclosed in the Registration Statement or
the Prospectus which has had or may reasonably be expected to have a Material Adverse Effect on the Company and the Subsidiaries, individually or taken as a whole, and is not prompted to sell any of
the Shares by any information concerning the Company which is not set forth in the Registration Statement and the Prospectus. 

                (l)
Each certificate signed by any officer or other representative of such Selling Stockholder and delivered to the Underwriters or Underwriters' Counsel pursuant to this Agreement
shall be deemed to be a representation and warranty by such Selling Stockholder to the Underwriters as to the matters covered thereby. 

        3.    Purchase, Sale and Delivery of the Shares.    

                (a)
On the basis of the representations, warranties, covenants and agreements herein contained, but subject to the terms and conditions herein set forth, (i) the Company agrees
to sell 3,900,000 of the Firm Shares to the Underwriters, (ii) the Selling Stockholders agree to sell 4,250,000 of the Firm Shares to the Underwriters and (iii) the Underwriters,
severally and not jointly, agree to purchase from the Company and the Selling Stockholders, at a purchase price per share of $17.3146875, the number of Firm Shares set forth opposite the respective
names of the Underwriters in 

11

 

Schedule I hereto plus any additional number of Shares which the Underwriters may become obligated to purchase pursuant to the provisions of Section 10 hereof. 

                (b)
Payment of the purchase price for, and delivery of certificates for, the Shares shall be made at the office of Latham & Watkins, 633 West Fifth Street, Los Angeles,
California 90071 ("Underwriters' Counsel"), or at such other place as shall be agreed upon by the Representatives and the Company, at 10:00 A.M.,
New York City time, on the third or fourth business day (as permitted under Rule 15c6-1 under the Exchange Act) (unless postponed in accordance with the provisions of
Section 9 hereof) following the date of the effectiveness of the Registration Statement (or, if the Company has elected to rely upon Rule 430A of the Rules and Regulations, the third or
fourth business day (as permitted under Rule 15c6-1 under the Exchange Act) after the determination of the initial public offering price of the Shares), or such other time not later
than ten business days after such date as shall be agreed upon by the Representatives and the Company (such time and date of payment and delivery being herein called the
"Closing Date"). 

        Payment
for the Shares shall be made to or upon the order of the Company of the purchase price by wire transfer in Federal (same day) funds to the Company and the Selling Stockholders
upon delivery of certificates for the Shares to the Representatives through the facilities of The Depository Trust Company for the respective accounts of the several Underwriters against receipt
therefor signed by the Representatives. Certificates for the Shares to be delivered to the Representatives shall be registered in such name or names and shall be in such denominations as the
Representatives may request at least one business day before the Closing Date. The Company and the Selling Stockholders will permit the Representatives to examine and package such certificates for
delivery at least one full business day prior to the Closing Date. 

                (c)
In addition, the Over-Allotment Selling Stockholders hereby grant to the Underwriters, acting severally and not jointly, the option to purchase up to 1,237,500
Additional Shares in the aggregate at the same purchase price per share to be paid by the Underwriters to the Company and the Selling Stockholders for the Firm Shares as set forth in this
Section 3, for the sole purpose of covering over-allotments in the sale of Firm Shares by the Underwriters. This option may be exercised at any time and from time to time, in whole
or in part on one or more occasions, on or before the thirtieth day following the date of the Prospectus, by written notice by the Representatives to the Over-Allotment Selling
Stockholders. Such notice shall set forth the aggregate number of Additional Shares as to which the option is being exercised, each Over-Allotment Selling Stockholder's pro rata proportion
of such Additional Shares, and the date and time, as reasonably determined by the Representatives, when the Additional Shares are to be delivered (any such date and time being herein sometimes
referred to as the "Additional Closing Date"); provided, however, that the Additional Closing Date shall
not be earlier than the Closing Date or earlier than the second full business day after the date on which the option shall have been exercised nor later than the eighth full business day after the
date on which the option shall have been exercised (unless such time and date are postponed in accordance with the provisions of Section 10 hereof). Certificates for the Additional Shares shall
be registered in such name or names and in such authorized denominations as the Representatives may request in writing at least one full business day prior to the Additional Closing Date. The Company
will permit the Representatives to examine and package such certificates for delivery at least one full business day prior to the Additional Closing Date. 

        If
the option is exercised as to all or any portion of the Additional Shares, each Underwriter, acting severally and not jointly, will purchase that proportion of the total number of
Additional Shares then being purchased which the number of Firm Shares set forth opposite the name of such Underwriter in Schedule I hereto (or such number increased as set forth in
Section 10 hereof) bears to the total number of Firm Shares being purchased from the Company and the Selling Stockholders, subject, however, to
such adjustments to eliminate any fractional shares as the Representatives in their sole discretion shall make. 

12

 

        Payment
for the Additional Shares shall be made to or upon the order of the Company of the purchase price by wire transfer in Federal (same day) funds to the Over-Allotment
Selling Stockholders at the offices of Underwriters' Counsel, or such other location as may be mutually acceptable, upon delivery of the certificates for the Additional Shares to the Representatives
for the respective accounts of the Underwriters. 

        4.    Offering.    Upon authorization of the release of the Firm Shares by the Representatives, the Underwriters
propose to offer the Shares for sale to the public upon the terms and conditions set forth in the Prospectus. 

        5.    Covenants of the Company and the Selling Stockholders.    The Company covenants and agrees with the Underwriters
and the Selling Stockholders that: 

                (a)
If the Registration Statement has not yet been declared effective the Company will use its best efforts to cause the Registration Statement and any amendments thereto to become
effective as promptly as possible, and if Rule 430A is used or the filing of the Prospectus is otherwise required under Rule 424(b) or Rule 434, the Company will file the
Prospectus (properly completed if Rule 430A has been used) pursuant to Rule 424(b) within the prescribed time period and will provide evidence satisfactory to the Representatives of such
timely filing. If the Company elects to rely on Rule 434, the Company will prepare and file a term sheet that complies with the requirements of Rule 434. 

        The
Company will notify the Representatives immediately (and, if requested by the Representatives, will confirm such notice in writing) (i) when the Registration Statement and any
amendments thereto become effective, (ii) of any request by the Commission for any amendment of or supplement to the Registration Statement or the Prospectus or for any additional information,
(iii) of the Company's intention to file or prepare any supplement, revision or amendment to the Registration Statement or the Prospectus, (iv) of the mailing or the delivery to the
Commission for filing of any amendment of or supplement to the Registration Statement or the Prospectus, (v) of the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or any post-effective amendment thereto or of the initiation, or the threatening, of any proceedings therefor, it being understood that the Company shall make
every effort to avoid the issuance of any such stop order, (v) of the receipt of any comments from the Commission, and (vi) of the receipt by the Company of any notification with respect
to the suspension of the qualification of the Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for that purpose. If the Commission shall propose or enter a stop
order at any time, the Company will make every reasonable effort to prevent the issuance of any such stop order and, if issued, to obtain the lifting of such order as soon as possible. The Company
will not file any amendment to the Registration Statement or any amendment of or
supplement to the Prospectus (including the prospectus required to be filed pursuant to Rule 424(b) or Rule 434) that differs from the prospectus on file at the time of the effectiveness
of the Registration Statement before or after the effective date of the Registration Statement to which the Representatives shall reasonably object in writing after being timely furnished in advance a
copy thereof. 

                (b)
The Company shall comply with the Securities Act and the Exchange Act to permit completion of the distribution as contemplated in this Agreement, the Registration Statement and the
Prospectus. If at any time when a prospectus relating to the Shares is required to be delivered under the Securities Act or the Exchange Act in connection with the sales of Shares, any event shall
have occurred as a result of which the Prospectus as then amended or supplemented would, in the judgment of the Underwriters (based on advice from Underwriters' Counsel) or the Company, 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, in the light of the circumstances existing at the time
of delivery to the purchaser, not misleading, or if it shall be necessary at any time to amend or supplement the Prospectus or Registration Statement to comply with the Securities Act or the Rules 

13

 

and Regulations, the Company will notify the Representatives promptly and prepare and file with the Commission, subject to the second paragraph of Section 5(a) hereof, an appropriate amendment
or supplement (in form and substance reasonably satisfactory to the Representatives) which will correct such statement or omission and will use its best efforts to have any amendment to the
Registration Statement declared effective as soon as possible. 

                (c)
The Company will promptly deliver to each of the Underwriters and Underwriters' Counsel a signed copy of the Registration Statement, including all consents and exhibits filed
therewith and all amendments thereto, and the Company will promptly deliver to each of the Underwriters such number of copies of any Preliminary Prospectus, the Prospectus, the Registration Statement,
and all amendments of and supplements to such documents, if any, as the Representatives may reasonably request. Prior to 10:00 A.M., New York time, on the business day next succeeding the date
of this Agreement and from time to time thereafter, the Company will furnish the Underwriters with copies of the Prospectus in New York City in such quantities as the Representatives may reasonably
request. 

                (d)
The Company shall promptly deliver to each of the Underwriters and to Underwriters' Counsel copies of the Preliminary Prospectus, and the Company consents to the use and delivery of
the Preliminary Prospectus by the Underwriters in accordance with Rule 430 and Section 5(b) of the Securities Act. The Company shall also furnish to each of the Underwriters copies of
the Final Prospectus in such quantities as reasonably requested by any of the Underwriters. 

                (e)
The Company will use its best efforts, in cooperation with the Representatives, at or prior to the time of effectiveness of the Registration Statement, to qualify the Shares for
offering and sale under the securities laws relating to the offering or sale of the Shares of such jurisdictions as the Representatives may designate and to maintain such qualification in effect for
so long as required for the distribution thereof; except that in no event shall the Company be obligated in connection therewith to qualify as a foreign corporation or to execute a general consent to
service of process. 

                (f)
The Company will make generally available to its security holders and to the Underwriters as soon as practicable, but in any event not later than eighteen months after the effective
date of the Registration Statement (as defined in Rule 158(c) under the Securities Act), an earnings statement of the Company and the Subsidiaries (which need not be audited) complying with
Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder (including, at the option of the Company, Rule 158). 

                (g)
During the period of 90 days from the date of the Prospectus, the Company will not, directly or indirectly, without the prior written consent of the Representatives, issue,
sell, offer or agree to sell, grant any option for the sale of, pledge, make any short sale or maintain any short position, establish or maintain a "put equivalent position" (within the meaning of
Rule 16-a-1(h) under the Exchange Act), enter into any swap, derivative transaction or other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Common Stock (whether any such transaction is to be settled by delivery of Common Stock, other securities, cash or other consideration) or otherwise dispose
of, any Common Stock (or any securities convertible into, exercisable for or exchangeable for Common Stock) or interest therein of the Company or of any of the Subsidiaries, and the Company will
obtain the undertaking of each of its directors and such of its stockholders as have been heretofore designated by the Representatives and listed on Schedule III hereto, not to engage in any of
the aforementioned transactions on their own behalf during the period of 90 days from the date of the Prospectus, other than the sale of Shares hereunder by the Company and the Selling
Stockholders, and the Company's issuance of Common Stock upon (i) the conversion or exchange of convertible or exchangeable securities outstanding on the date hereof; (ii) the exercise
of currently outstanding options; and (iii) the grant and exercise of options under, or the issuance and sale of shares pursuant to, employee stock option plans in effect on the date hereof. In
addition, each Selling Stockholder agrees that, without the prior written consent of the Representatives, it will not, 

14

 

during the period ending 90 days after the date of the Prospectus, make any demand for, or exercise any right with respect to, the registration of any shares of Common Stock or any security
convertible into or exercisable or exchangeable for Common Stock. 

                (h)
During the period of five years from the effective date of the Registration Statement, the Company will furnish to the Representatives copies of all reports or other communications
(financial or other) furnished to security holders, and will deliver to the Representatives (i) as soon as they are available, copies of any reports and financial statements furnished to or
filed with the Commission or any national securities exchange on which any class of securities of the Company is listed; and (ii) such additional information concerning the business and
financial condition of the Company as the Representatives may from time to time reasonably request (such financial statements to be on a consolidated basis to the extent the accounts of the Company
and the Subsidiaries are consolidated in reports furnished to its security holders generally or to the Commission). 

                (i)
The Company will apply the net proceeds from the sale of the Shares as set forth under the caption "Use of Proceeds" in the Prospectus. 

                (j)
The Company will use its best efforts to maintain the listing of the Shares on the NASDAQ. 

                (k)
The Company, during the period when the Prospectus is required to be delivered under the Securities Act or the Exchange Act, will file all documents required to be filed with the
Commission pursuant to Section 13, 14 or 15 of the Exchange Act within the time periods required by the Exchange Act and the rules and regulations thereunder. 

        6.    Payment of Expenses.    Whether or not the transactions contemplated in this Agreement are consummated or this
Agreement is terminated, the Company hereby agrees to pay all costs and expenses incident to the performance of the obligations of the Company and the Selling Stockholders hereunder, including the
following: (i) the fees, disbursements and expenses of the Company's and the Selling Stockholders' counsel and accountants in connection with the registration of the Shares under the Securities
Act and all other expenses in connection with the preparation, printing and filing of the Registration Statement, any Preliminary Prospectus and the Prospectus and amendments and supplements thereto
and the mailing and delivering of copies thereof to the Underwriters and dealers; (ii) the cost of producing any agreement among Underwriters, this Agreement, the blue sky memoranda, closing
documents (including any compilations thereof) and any other documents in connection with the offering, purchase, sale and delivery of the Shares; (iii) all expenses in connection with the
qualification of the Shares for offering and sale under state securities laws as provided in Section 5(e) hereof, including the reasonable fees and disbursements of counsel for the Underwriters
in connection with such qualification and in connection with the blue sky survey; (iv) all fees and expenses in connection with listing the Shares on the NASDAQ; (v) all travel expenses
of the Company's officers and employees and any other expense of the Company incurred in connection with attending or hosting meetings with prospective purchasers of the Shares; (vi) any stock
transfer taxes incurred in connection with this Agreement or the Offering; and (vii) the filing fees incident to, and the reasonable fees and disbursements of counsel for the Underwriters in
connection with, securing any required review by the NASD of the terms of the sale of the Shares. The Company also will pay or cause to be paid: (i) the cost of preparing stock certificates;
(ii) the cost and charges of any transfer agent or registrar; and (iii) all other costs and expenses incident to the performance of its and the Selling Stockholders' respective
obligations hereunder which are not otherwise specifically provided for in this Section 6. It is understood, however, that except as provided in this Section, and Sections 8 and 12 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees of their counsel and stock transfer taxes on resale of any of the Shares by them. Notwithstanding anything to the contrary
in this Section 6, in the event that this Agreement is terminated pursuant to Section 7 or 12(b) hereof, or 

15

 

subsequent to a Material Adverse Change, the Company will pay all reasonable out-of pocket expenses of the Underwriters incurred in connection herewith. 

        7.    Conditions of Underwriters' Obligations.    The obligations of the Underwriters to purchase and pay for the Firm
Shares and the Additional Shares, as provided herein, shall be subject to the accuracy of the representations and warranties of the Company herein contained, as of the date hereof and as of the
Closing Date (for purposes of this Section 7 "Closing Date" shall refer to the Closing Date for the Firm Shares and any Additional Closing Date,
if different, for the Additional Shares), to the absence from any certificates, opinions, written statements or letters furnished to the Representatives or to Underwriters' Counsel pursuant to this
Section 7 of any misstatement or omission, to the performance
by the Company and the Selling Stockholders of their respective obligations hereunder, and to each of the following additional terms and conditions: 

                (a)
The Registration Statement shall have become effective not later than 5:30 P.M., New York time, on the date of this Agreement, or at such later time and date as shall have
been consented to in writing by the Representatives; if the Company shall have elected to rely upon Rule 430A or Rule 434 of the Regulations, the Prospectus shall have been filed with
the Commission in a timely fashion in accordance with Section 5(a) hereof and a form of the Prospectus containing information relating to the description of the Shares and the method of
distribution and similar matters shall have been filed with the Commission pursuant to Rule 424(b) within the applicable time period; and, at or prior to the Closing Date no stop order
suspending the effectiveness of the Registration Statement or any post-effective amendment thereof shall have been issued and no proceedings therefor shall have been initiated or
threatened by the Commission. 

                (b)
At the Closing Date, the Representatives shall have received (i) the written opinion of Troy & Gould Professional Corporation, counsel for the Company and the Selling
Stockholders, dated the Closing Date addressed to the Underwriters in the form attached hereto as Annex I and (ii) the written opinion of S. Page
Todd, in house counsel for the Company, dated the Closing Date addressed to the Underwriters in the form attached hereto as Annex II. 

                (c)
At the Closing Date, the Representatives shall have received (i) the written opinion of Goodmans LLP, Canadian counsel for the Company and its Subsidiaries, dated the Closing
Date addressed to the Underwriters in the form attached hereto as Annex III and (ii) the written opinion of Stewart McKelvey Stirling
Scales, Canadian counsel for the Company and its Subsidiaries, dated the Closing Date addressed to the Underwriters in the form attached hereto as  Annex IV. 

                (d)
All proceedings taken in connection with the sale of the Firm Shares and the Additional Shares as herein contemplated shall be satisfactory in form and substance to the
Representatives and to Underwriters' Counsel, and the Underwriters shall have received from Underwriters' Counsel a favorable opinion, dated as of the Closing Date, with respect to the issuance and
sale of the Shares, the Registration Statement and the Prospectus and such other related matters as the Representatives may require, and the Company shall have furnished to Underwriters' Counsel such
documents as they may reasonably request for the purpose of enabling them to pass upon such matters. 

                (e)
At the Closing Date, the Representatives shall have received a certificate of the Chief Executive Officer and Chief Financial Officer of the Company, dated the Closing Date to the
effect that (i) the condition set forth in subsection (a) of this Section 7 has been satisfied, (ii) as of the date hereof and as of the Closing Date, the representations
and warranties of the Company set forth in Section 1 hereof are accurate, (iii) as of the Closing Date all agreements, conditions and obligations of the Company to be performed or
complied with hereunder on or prior thereto have been duly performed or complied with, (iv) the Company and the Subsidiaries have not sustained any material loss or interference with their
respective businesses or properties from fire, flood, hurricane, accident or other calamity, whether or not covered by insurance, or from any labor dispute or any legal or governmental proceeding,
(v) subsequent to the respective dates as of which information is given in the 

16

 

Registration Statement and the Prospectus there has not been any Material Adverse Change, except in each case as described in or contemplated by the Prospectus, and (vi) there are no
historical or pro forma financial statements which are required to be included in the Registration Statement and Prospectus in accordance with Regulation S-X which have not been
included as so required. 

                (f)
The Representatives shall have received a comfort letter from each of (i) Ernst & Young LLP, independent public accountants for the Company, and (ii) Singer
Lewak Greenbaum and Goldstein, LLP, independent public accountants for Video Update, at the time this Agreement is executed and at the Closing Date, dated as of the date of this Agreement and as of
the Closing Date, respectively, addressed to the Underwriters and in form and substance satisfactory to the Underwriters and Underwriters' counsel; provided,
however, that the comfort letters delivered on the Closing Date shall use a "cut-off date" not earlier than the date hereof. 

                (g)
Subsequent to the execution and delivery of this Agreement or, if earlier, the dates as of which information is given in the Registration Statement (exclusive of any amendment
thereof) and the Prospectus (exclusive of any supplement thereto), there shall not have been any change in the capital stock or long-term debt of the Company or any of the Subsidiaries or
any change, or any development involving a prospective change, in or affecting the condition (financial or otherwise), results of operations, business, properties or prospects of the Company and the
Subsidiaries individually or taken as a whole, including, without limitation, the occurrence of a fire, flood, explosion or other calamity at any of the properties owned or leased by the Company or
any of its Subsidiaries, the effect of which, in any such case described above, is, in the judgment of the Underwriters, so material and adverse as to make it impracticable or inadvisable to proceed
with the public offering or the delivery of the Shares on the terms and in the manner contemplated in the Prospectus (exclusive of any supplement). 

                (h)
The Representatives shall have also received a lock-up agreement from each person who is a director of the Company and each stockholder as shall have been heretofore
designated by the Representatives and listed on Schedule III hereto, substantially in the form attached hereto as  Annex V, and each such lock-up
agreement shall be in full force and effect on the Closing Date. 

                (i)
At the Closing Date, the Shares shall have been approved for quotation on the NASDAQ. 

                (j)
At the Closing Date, the NASD shall have confirmed that it has not raised any objection with respect to the fairness and reasonableness of the underwriting terms and arrangements. 

                (k)
The Company shall have complied with the provisions of Section 5(c) hereof with respect to the furnishing of prospectuses on the next business day succeeding the date of this
Agreement. 

                (l)
The Company shall have furnished the Underwriters and Underwriters' Counsel with such other certificates, opinions or other documents as they may have reasonably requested. 

                (m)
The Representatives shall have received on the Closing Date and the Additional Closing Date, if applicable, a certificate, dated the Closing Date or the Additional Closing Date, as
applicable, and signed by the Attorney-in-Fact of each Selling Stockholder, to the effect that the representations and warranties of the Selling Stockholders contained in this
Agreement are true and correct as of the Closing Date or the Additional Closing Date, as applicable, and that the Selling Stockholders have complied with all of the agreements and satisfied all of the
conditions on their part to be performed or satisfied hereunder on or before the Closing Date or the Additional Closing Date, as applicable. 

                (n)
On the date hereof, the Company and the Selling Stockholders shall have furnished for review by the Representatives copies of the Powers of Attorney and Custody Agreements executed
by each of the Selling Stockholders and such further information, certificates and documents as the Representatives may reasonably request. 

17

 

                (o)
In the event the Underwriters exercise their option to purchase the Additional Shares, all of the conditions in this Section 7 must be satisfied in connection with such
Additional Shares on or prior to the Additional Closing Date. 

        If
any of the conditions specified in this Section 7 shall not have been fulfilled when and as required by this Agreement, or if any of the certificates, opinions, written
statements or letters furnished to the Representatives or to Underwriters' Counsel pursuant to this Section 7 shall not be satisfactory in form and substance to the Representatives and to
Underwriters' Counsel, all obligations of the Underwriters hereunder may be cancelled by the Representatives at, or at any time prior to, the Closing Date and the obligations of the Underwriters to
purchase the Additional Shares may be cancelled by the Representatives at, or at any time prior to, the Additional Closing Date. Notice of such cancellation shall be given to the Company in writing,
or by telephone. Any such telephone notice shall be confirmed promptly thereafter in writing. 

        8.    Indemnification.    

                (a)
The Company shall indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, against any and all losses, liabilities, claims, damages and expenses whatsoever as incurred (including but not limited to reasonable attorneys' fees and any and
all expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or
any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or any of them may become subject under the Securities Act, the Exchange
Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the registration statement for the registration of the Shares, as originally filed or any amendment thereof, or any related preliminary prospectus or the Prospectus, or in
any supplement thereto or amendment thereof, 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; provided, however, that the Company will not be liable in any such case to the extent but only to the extent that any
such loss, liability, claim, damage or expense arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in
conformity with the written information furnished to the Company by an Underwriter through the Representatives specifically for use therein, it being understood and agreed that the only such
information furnished to the Company by any Underwriter consists of the Underwriters' Information. This indemnity agreement will be in addition to any liability which the Company may otherwise have
including under this Agreement. The foregoing indemnity agreement with respect to any preliminary prospectus shall not inure to the benefit of any Underwriter who failed to deliver a Prospectus (as
then amended or supplemented, provided by the Company to the several Underwriters in the requisite quantity and on a timely basis to permit proper delivery on or prior to the Closing Date) to the
person asserting any losses, claims, damages and liabilities and judgments caused by any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus, or
caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, if such material misstatement or
omission or alleged material misstatement or omission was cured, as determined by a court of competent jurisdiction in a decision not subject to further appeal, in such Prospectus and such Prospectus
was required by law to be delivered at or prior to the written confirmation of sale to such person. 

                (b)
Each Selling Stockholder, severally and not jointly, will indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, against any and all losses, claims, damages, liabilities and expenses whatsoever as incurred (including but not
limited to reasonable attorneys' fees 

18

 

and any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid
in settlement of any claim or litigation), joint or several, to which they or any of them may become subject, under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration
statement for the registration of the Shares, as originally filed or any amendment thereof, or any related preliminary prospectus or the Prospectus, or in any supplement thereto or amendment thereof,
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;  provided, however, that with respect to the Selling Stockholders that are not the Over-Allotment Selling Stockholders (such Selling
Stockholders referred to herein as the "Other Selling Stockholders"), such Other Selling Stockholders will only be liable under this Section 8(b)
to the extent that any such loss, liability, claim, damage or expense (or actions in respect thereof) arises out of or is based upon any such untrue statement or alleged untrue statement or omission
or alleged omission made in the registration statement for the registration of the Shares, as originally filed or any amendment thereof, or any related preliminary prospectus or the Prospectus, or in
any supplement thereto or amendment thereof,
in reliance upon and in conformity with the written information furnished by or on behalf of such Other Selling Stockholders to the Company specifically for use therein;  provided, further that the
Selling Stockholders will not be liable in any such case to the extent but only to the extent that any such loss, liability,
claim, damage or expense arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with the
written information furnished to the Company by an Underwriter through the Representatives specifically for use therein, it being understood and agreed that the only such information furnished to the
Company by any Underwriter consists of the Underwriters' Information. This indemnity agreement will be in addition to any liability which the Selling Stockholders may otherwise have including under
this Agreement. The foregoing indemnity agreement with respect to any preliminary prospectus shall not inure to the benefit of any Underwriter who failed to deliver a Prospectus (as then amended or
supplemented, provided by the Company to the several Underwriters in the requisite quantity and on a timely basis to permit proper delivery on or prior to the Closing Date) to the person asserting any
losses, claims, damages and liabilities and judgments caused by any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus, or caused by any omission
or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, if such material misstatement or omission or alleged
material misstatement or omission was cured, as determined by a court of competent jurisdiction in a decision not subject to further appeal, in such Prospectus and such Prospectus was required by law
to be delivered at or prior to the written confirmation of sale to such person. 

                (c)
Each Underwriter, severally and not jointly, shall indemnify and hold harmless the Company, each of the directors of the Company, each of the officers of the Company who shall have
signed the Registration Statement, each other person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and each
of the Selling Stockholders, against any losses, liabilities, claims, damages and expenses whatsoever as incurred (including but not limited to attorneys' fees and any and all expenses whatsoever
incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation),
joint or several, to which they or any of them may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions
in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement for the registration of the Shares, as
originally filed or any amendment thereof, or any related preliminary prospectus or the Prospectus, or in any amendment 

19

 

thereof 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 each case to the extent, but only to the extent, that any such loss, liability, claim, damage or expense arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon and in conformity with the written information furnished to the Company by an Underwriter through the Representatives
specifically for use therein, it being understood and agreed that the only such information furnished to the Company by any Underwriter consists of the Underwriters' Information. This indemnity will
be in addition to any liability which any Underwriter may otherwise have including under this Agreement. 

                (d)
Promptly after receipt by an indemnified party under subsection (a), (b) or (c) above of notice of any claims or the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the claim or the commencement thereof (but the failure so to notify an indemnifying party shall not relieve the indemnifying party from any liability
which it may have under this Section 8 to the extent that it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability that such indemnifying
party may have otherwise than on account of the indemnity agreement hereunder). In case any such claim or action is brought against any indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party may participate, at its own expense in the defense of such action, and to the extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel satisfactory to such indemnified party; provided
however, that counsel to the indemnifying party shall not (except with the written consent of the indemnified party) also be counsel to the indemnified party. Notwithstanding
the foregoing, the indemnified party or parties shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall have been authorized in writing by one of the indemnifying parties in connection with the defense of such action,
(ii) the indemnifying parties shall not have employed counsel to have charge of the defense of such action within a reasonable time after notice of commencement of the action, (iii) the
indemnifying party does not diligently defend the action after assumption of the defense, or (iv) such indemnified party or parties shall have reasonably concluded that there may be defenses
available to it or them which are different from or additional to those available to one or all of the indemnifying parties (in which case the indemnifying parties shall not have the right to direct
the defense of such action on behalf of the indemnified party or parties), in any of which events such fees and expenses shall be borne by the indemnifying parties. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any settlement or compromise of, or consent to the entry of judgment with respect to, any pending or threatened investigation, action
or proceeding in respect of which indemnity or contribution may be or could have been sought hereunder by the indemnified party, unless (x) such settlement, compromise or judgment
(i) includes an unconditional release of the indemnified party from all liability and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act,
by or on behalf of the indemnified party, and (y) the indemnifying party confirms in writing its indemnification obligations hereunder with respect to such settlement, compromise or judgment. 

                (e)
Notwithstanding any provision in this Agreement to the contrary, the aggregate liability of each Selling Stockholder under the indemnity provisions of this Section 8, under
the contribution provisions of this Section 9 or for losses, liabilities, claims, damages or expenses (or actions in respect thereof) arising out of or based upon a breach by such Selling
Stockholder of the representations and warranties contained in Section 2(i), shall be limited to an amount equal to the aggregate gross proceeds, net of underwriting discounts, received by such
Selling Stockholder from the Shares sold by such Selling Stockholder to the Underwriters hereunder. 

20

 

        9.    Contribution.    In order to provide for contribution in circumstances in which the indemnification provided for
in Section 8 hereof is for any reason held to be unavailable from any indemnifying party or is insufficient to hold harmless a party indemnified thereunder, the Company, the Selling
Stockholders and the Underwriters shall contribute to the aggregate losses, claims, damages, liabilities and expenses of the nature contemplated by such indemnification provision (including any
investigation, legal and other expenses incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claims asserted, but after deducting, in the case of
losses, claims, damages, liabilities
and expenses suffered by the Company, any contribution received by the Company from persons, other than the Underwriters, who may also be liable for contribution, including persons who control the
Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, officers of the Company who signed the Registration Statement and directors of the
Company) as incurred to which the Company, the Selling Stockholders and one or more of the Underwriters may be subject, in such proportions as is appropriate to reflect the relative benefits received
by the Company and the Selling Stockholders on the one hand and the Underwriters on the other hand from the offering of the Shares or, if such allocation is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred to above but also the relative fault of the Company and the Selling Stockholders on the one hand and the Underwriters on
the other hand in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Selling Stockholders on the one hand and the Underwriters on the other hand shall be deemed to be in the same proportion as (x) the total
proceeds from the offering (net of underwriting discounts and commissions but before deducting expenses) received by the Company and the Selling Stockholders on the one hand bears to (y) the
underwriting discount received by the Underwriters on the other hand, respectively, in each case as set forth in the table on the cover page of the Prospectus. The relative fault of the Company and
the Selling Stockholders on the one hand and of the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Selling Stockholders on the one hand or the Underwriters on the other hand and
the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Selling Stockholders and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by
any other method of allocation which does not take account of the equitable considerations referred to above in this Section. The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 9 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating,
preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or
alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 9, (i) no Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Shares are 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 and (ii) no person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 9, each
person, if any, who controls an Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as such
Underwriter, and each person, if any, who controls the Company and the Selling Stockholders within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, each
officer of the Company who shall have signed the Registration Statement and each director of the Company shall 

21

 

have the same rights to contribution as the Company and the Selling Stockholders, subject in each case to clauses (i) and (ii) of this Section 9. Any party entitled to
contribution will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made against another party
or parties, notify each party or parties from whom contribution may be sought, but the omission to so notify such party or parties shall not relieve the party or parties from whom contribution may be
sought from any obligation it or they may have under this Section 9 or otherwise. The obligations of the Underwriters to contribute pursuant to this
Section 9 are several in proportion to the respective number of Shares purchased by each of the Underwriters hereunder and not joint. The obligations of the Selling Stockholders to contribute
pursuant to this Section 9 are several in proportion to the respective number of Shares sold by each of the Selling Stockholders hereunder and not joint. 

        10.    Default by an Underwriter.    

                (a)
If any Underwriter or Underwriters shall default in its or their obligation to purchase Firm Shares or Additional Shares hereunder, and if the Firm Shares or Additional Shares with
respect to which such default relates do not (after giving effect to arrangements, if any, made by the Representatives pursuant to subsection (b) below) exceed in the aggregate 10% of the
number of Firm Shares or Additional Shares, the Firm Shares or Additional Shares to which the default relates shall be purchased by the non-defaulting Underwriters in proportion to the
respective proportions which the numbers of Firm Shares set forth opposite their respective names in Schedule I hereto bear to the aggregate number of Firm Shares set forth opposite the names
of the non-defaulting Underwriters. 

                (b)
In the event that such default relates to more than 10% of the Firm Shares or Additional Shares, as the case may be, the Representatives may in their discretion arrange for them or
for another party or parties (including any non-defaulting Underwriter or Underwriters who so agree) to purchase such Firm Shares or Additional Shares, as the case may be, to which such
default relates on the terms contained herein. In the event that within five calendar days after such a default the Representatives do not arrange for the purchase of the Firm Shares or Additional
Shares, as the case may be, to which such default relates as provided in this Section 10, this Agreement or, in the case of a default with respect to the Additional Shares, the obligations of
the Underwriters to purchase and of the Over-Allotment Selling Stockholders to sell the Additional Shares shall thereupon terminate, without liability on the part of the Company with
respect thereto (except in each case as provided in Sections 6, 8(a) and 9 hereof) or the Underwriters (except in the case as provided in Sections 8(c) and 9 hereof), or the Selling Stockholders
(except in the case as provided in Sections 8(b), 8(e) and 9 hereof), but nothing in this Agreement shall relieve a defaulting Underwriter or Underwriters of its or their liability, if any, to the
other Underwriters, the Company and the Selling Stockholders for damages occasioned by its or their default hereunder. 

                (c)
In the event that the Firm Shares or Additional Shares to which the default relates are to be purchased by the non-defaulting Underwriters, or are to be purchased by
another party or parties as aforesaid, the Representatives or the Company shall have the right to postpone the Closing Date or Additional Closing Date, as the case may be for a period, not exceeding
five business days, in order to effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus or in any other documents and arrangements, and the Company agrees
to file promptly any amendment or supplement to the Registration Statement or the Prospectus which, in the opinion of Underwriters' Counsel, may thereby be made necessary or advisable. The term
"Underwriter" as used in this Agreement shall include any party substituted under this Section 10 with like effect as if it had originally been a
party to this Agreement with respect to such Firm Shares and Additional Shares. 

        11.    Survival of Representations and Agreements.    All representations and warranties, covenants and agreements of
the Underwriters, the Company and the Selling Stockholders contained in this Agreement or in certificates of officers of the Company or any Subsidiary submitted pursuant hereto, 

22

 

including the agreements contained in Section 6, the indemnity agreements contained in Section 8 and the contribution agreements contained in Section 9, shall remain operative
and in full force and effect regardless of any investigation made by or on behalf of any Underwriter or any controlling person thereof or by or on behalf of the Company, any of its officers and
directors or any controlling person thereof or by the Selling Stockholders, and shall survive delivery of and payment for the Shares to and by the Underwriters. The representations contained in
Section 1 and the agreements contained in Sections 6, 8, 9 and 12(e) hereof shall survive the termination of this Agreement, including termination pursuant to Section 10 or 12 hereof. 

        12.    Effective Date of Agreement; Termination.    

                (a)
This Agreement shall become effective, upon the later of (i) receipt by the Representatives, the Company and the Selling Stockholders of notification of the effectiveness of
the Registration Statement or (ii) the execution of this Agreement. If either the initial public offering price or the purchase price per Share has not been agreed upon prior to
5:00 P.M., New York City time, on the fifth full business day after the Registration Statement shall have become effective, this Agreement shall thereupon terminate without liability to the
Company, the Selling Stockholders or the Underwriters except as herein expressly provided. Until this Agreement becomes effective as aforesaid, it may be terminated by the Company or any Selling
Stockholder by notifying the Representatives or by the Representatives by notifying the Company and the Selling Stockholders. Notwithstanding the foregoing, the provisions of this Section 12
and of Sections 1, 6, 8 and 9 hereof shall at all times be in full force and effect. 

                (b)
The Representatives shall have the right to terminate this Agreement at any time prior to the Closing Date or the obligations of the Underwriters to purchase the Additional Shares
at any time prior to the Additional Closing Date, as the case may be, (A) if any domestic or international event or act or occurrence has materially disrupted, or in the opinion of the
Representatives will in the immediate future materially disrupt, the market for the Company's securities or securities in general; or (B) if trading on The New York Stock Exchange (the
"Exchange") or The NASDAQ National Market (the "NASDAQ") shall have been suspended or been made subject
to material limitations, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been required, on the Exchange, the NASDAQ or by order
of the Commission or any other governmental authority having jurisdiction; or (C) if a banking moratorium has been declared by any state or federal authority or if any material disruption in
commercial banking or securities settlement or clearance services shall have occurred; or (D) any downgrading shall have occurred in the Company's corporate credit rating or the rating accorded
the Company's debt securities or preferred stock by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Securities Act) or if any such
organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Company's debt securities; or (E) (i) if there
shall have occurred any outbreak or escalation of hostilities or acts of terrorism involving the United States or there is a declaration of a national emergency or war by the United States or
(ii) if there shall have been any other calamity or crisis or any change in political, financial or economic conditions if the effect of any such event in (i) or (ii), in the judgment of
the Representatives, makes it
impracticable or inadvisable to proceed with the offering, sale and delivery of the Firm Shares or the Additional Shares, as the case may be, on the terms and in the manner contemplated by the
Prospectus. 

                (c)
If one or more of the Selling Stockholders shall fail to sell and deliver to the Underwriters the Shares to be sold and delivered by such Selling Stockholders at the Closing Date
pursuant to this Agreement, then the Underwriters may at their option, by written notice from the Representatives to the Company and the Selling Stockholders, either (i) terminate this
Agreement without any liability on the part of any Underwriter or, except as provided in Sections 6 and 8 hereof, the Company or the Selling Stockholders, or (ii) purchase the Shares which the
Company and other Selling Stockholders 

23

 

have agreed to sell and deliver in accordance with the terms hereof. If one or more of the Selling Stockholders shall fail to sell and deliver to the Underwriters the Shares to be sold and delivered
by such Selling Stockholders pursuant to this Agreement at the Closing Date or the Additional Closing Date, then the Underwriters shall have the right, by written notice from the Representatives to
the Company and the Selling Stockholders, to postpone the Closing Date or the Additional Closing Date, as the case may be, but in no event for longer than seven days in order that the required
changes, if any, to the Registration Statement and the Prospectus or any other documents or arrangements may be effected. 

                (d)
Any notice of termination pursuant to this Section 12 shall be in writing. 

                (e)
If this Agreement shall be terminated pursuant to any of the provisions hereof (otherwise than pursuant to (i) notification by the Representatives as provided in
Section 12(a) hereof or (ii) Section 10(b) hereof), or if the sale of the Shares provided for herein is not consummated because any condition to the obligations of the
Underwriters set forth herein is not satisfied or because of any refusal, inability or failure on the part of the Company or any Selling Stockholder to perform any agreement herein or comply with any
provision hereof, the Company will, subject to demand by the Representatives, reimburse the Underwriters for all out-of-pocket expenses (including the fees and expenses of
their counsel), incurred by the Underwriters in connection herewith. 

        13.    Notices.    All communications hereunder, except as may be otherwise specifically provided herein, shall be in
writing, and: 

                (a)
if sent to any Underwriter, shall be mailed, delivered, or faxed and confirmed in writing, to such Underwriter c/o Bear, Stearns & Co. Inc., 383 Madison Avenue, New
York, New York 10179, Attention: Equity Capital Markets, and Thomas Weisel Partners LLC, One Montgomery Street, Suite 3700, San Francisco, California 94104, Attention: David A. Baylor, Esq., with a
copy to Underwriter's Counsel at Latham & Watkins, 633 West Fifth Street, Los Angeles, California 90071, Attention: Mary Ellen Kanoff, Esq.; 

                (b)
if sent to the Company, shall be mailed, delivered, or faxed and confirmed in writing to the Company and its counsel at the addresses set forth in the Registration Statement,
Attention: S. Page Todd, Esq.;

provided, however, that any notice to an Underwriter pursuant to Section 8 shall be delivered or sent by mail or facsimile transmission to such
Underwriter at its address set forth in its acceptance facsimile to the Representatives, which address will be supplied to any other party hereto by the Representatives upon request. Any such
statements, requests, notices or agreements shall take effect at the time of receipt thereof. 

        14.    Parties.    This Agreement shall inure solely to the benefit of, and shall be binding upon, the Underwriters
and the Company and the controlling persons, directors, officers, employees and agents referred to in Section 8 and 9, and their respective successors and assigns, and no other person shall
have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or any provision herein contained. This Agreement and all conditions
and provisions hereof are intended to be for the sole and exclusive benefit of the parties hereto and their respective successors, and said controlling persons, and officers and directors and their
heirs and legal representatives, and it is not for the benefit of any other person, firm or corporation. The term "successors and assigns" shall not include a purchaser, in its capacity as such, of
Shares from any of the Underwriters. 

        15.    Governing Law.    This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.

24

 

        16.    Counterparts.    This Agreement may be executed in any number of counterparts, each of which shall be deemed to
be an original, but all such counterparts shall together constitute one and the same instrument. 

        17.    Headings.    The headings herein are inserted for convenience of reference only and are not intended to be part
of, or to affect the meaning or interpretation of, this Agreement. 

        18.    Time is of the Essence.    Time shall be of the essence of this Agreement. As used herein, the term "business
day" shall mean any day when the Commission's office in Washington, D.C. is open for business. 

[signature
page follows] 

25

   
        If the foregoing correctly sets forth your understanding, please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement
among us. 

	 	 	Very truly yours,
	

 	
 	

MOVIE GALLERY, INC.
	

 	
 	

By:	
 	

/s/  S. PAGE TODD      
 Name: S. Page Todd

Title: Senior Vice President
	

 	
 	

The Selling Stockholders named on Schedule II hereto, acting severally
	

 	
 	

By:	
 	

/s/  S. PAGE TODD      
 Name: S. Page Todd

Title: Attorney-in-Fact

Accepted
as of the date first above written 

	BEAR, STEARNS & CO. INC.	 	 
	

By:	
 	

/s/  STEPHEN PARISH      
 Name: Stephen Parish

Title: Senior Managing Director	
 	

 
	

THOMAS WEISEL PARTNERS LLC	
 	

 
	

By:	
 	

/s/  ALEXANDER CHEFETZ      
 Name: Alexander Chefetz

Title: Partner

	
 	

 

On
behalf of themselves and the other

Underwriters named in Schedule I hereto. 

S-1

SCHEDULE I 

	Name of Underwriter
	 	Total Number of Firm Shares to be Purchased
	 	Number of Additional Shares to be Purchased if Maximum Option Exercised

	Bear, Stearns & Co. Inc.	 	2,887,500	 	 
	

Thomas Weisel Partners LLC	
 	

2,887,500	
 	

 
	

Morgan Keegan & Company, Inc.	
 	

1,815,000	
 	

 
	

BB&T Capital Markets	
 	

330,000	
 	

 
	

SWS Securities, Inc.	
 	

330,000	
 	

 
	 	

Total	
 	

8,250,000	
 	

1,237,500
	 	 	
	 	

SCHEDULE II 

	Name of Selling Stockholder

(or Over-Allotment Selling

Stockholder, as applicable):
	 	Number of Firm

Shares to Be Sold:
	 	Number of Additional Shares to Be Sold if Maximum Option Exercised:

	Joe Thomas Malugen	 	1,000,000	 	309,375
	

H. Harrison Parrish	
 	

3,000,000	
 	

928,125
	

William B. Snow	
 	

60,000	
 	

—
	

Sanford C. Sigoloff	
 	

60,000	
 	

—
	

Philip B. Smith	
 	

10,000	
 	

—
	

S. Page Todd	
 	

80,000	
 	

—
	

J. Steven Roy	
 	

100,000	
 	

—
	

Jeffrey S. Stubbs	
 	

40,000	
 	

—
	 	

Total	
 	

4,350,000	
 	

1,237,500

SCHEDULE III 

	Name of Director or Stockholder Subject to the Lock-Up Provision:
	 	 
	 	 

	Joe Thomas Malugen	 	 	 	 
	

William B. Snow	
 	

 	
 	

 
	

J. Steven Roy	
 	

 	
 	

 
	

Jeffrey S. Stubbs	
 	

 	
 	

 
	

S. Page Todd	
 	

 	
 	

 
	

H. Harrison Parrish	
 	

 	
 	

 
	

Sanford C. Sigoloff	
 	

 	
 	

 
	

Philip B. Smith	
 	

 	
 	

 

QuickLinks

Exhibit 10.1

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