Exhibit 1.1
[FORM OF UNDERWRITING AGREEMENT]
_____________ Shares
CIRCUIT CITY STORES, INC.
CIRCUIT CITY STORES, INC. - CARMAX GROUP COMMON STOCK
(par value $.50 per share)
UNDERWRITING AGREEMENT
______ __, 2001
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_______ __, 2001
Xxxxxx Xxxxxxx & Co. Incorporated
Banc of America Securities LLC
UBS Warburg LLC
c/o Morgan Xxxxxxx & Co. Incorporated
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Dear Sirs and Mesdames:
Circuit City Stores, Inc., a Virginia corporation (the "Company"),
proposes to issue and sell to the several Underwriters named in Schedule I
hereto (the "Underwriters") __________ shares of its Circuit City Stores, Inc. -
CarMax Group Common Stock, par value $.50 per share (the "Firm Shares"). The
Company also proposes to issue and sell to the several Underwriters not more
than an additional __________ shares of its Circuit City Stores, Inc. - CarMax
Group Common Stock, par value $.50 per share (the "Additional Shares"), if and
to the extent that you, as Managers of the offering, shall have determined to
exercise, on behalf of the Underwriters, the right to purchase such shares of
common stock granted to the Underwriters in Section 2 hereof. The Firm Shares
and the Additional Shares are hereinafter collectively referred to as the
"Shares". The shares of Circuit City Stores, Inc. - CarMax Group Common Stock,
par value $.50 per share, of the Company outstanding after giving effect to the
sales contemplated hereby are hereinafter referred to as the "CarMax Stock."
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement, including a prospectus, relating to the
Shares. The registration statement as amended at the time it becomes effective,
including the information (if any) deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A under the
Securities Act of 1933, as amended (the "Securities Act"), and all documents
incorporated therein by reference is hereinafter referred to as the
"Registration Statement"; and the prospectus in the form first used to confirm
sales of Shares, including all documents incorporated therein by reference, is
hereinafter collectively referred to as the "Prospectus." If the Company has
filed an abbreviated registration statement to register additional shares of
CarMax Stock pursuant to Rule 462(b) under the Securities Act (the "Rule 462
Registration Statement"), then any reference herein to the term "Registration
Statement" shall be deemed to include such Rule 462 Registration Statement.
1. Representations and Warranties. The Company represents and
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warrants to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect,
and no
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proceedings for such purpose are pending before or, to the knowledge of the
Company, threatened by the Commission.
(b) (i) The Registration Statement, when it became effective, did not
contain and as amended or supplemented, if applicable, will not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading, (ii) the Registration Statement and the Prospectus comply
and, as amended or supplemented, if applicable, will comply in all material
respects with the Securities Act and the applicable rules and regulations
of the Commission thereunder and (iii) the Prospectus does not contain and,
as amended or supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that the representations and
warranties set forth in this paragraph do not apply to statements or
omissions in the Registration Statement or the Prospectus based upon
information furnished to the Company in writing by any Underwriter through
you expressly for use therein.
(c) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property
and to conduct its business as described in the Prospectus and is duly
qualified to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the failure
to be so qualified or be in good standing would not have a material adverse
effect either on the Company and its subsidiaries, taken as a whole, or the
CarMax group (as described in the Prospectus).
(d) Each subsidiary of the Company has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to
own its property and to conduct its business as described in the
Prospectus, and is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not
have a material adverse effect either on the Company and its subsidiaries,
taken as a whole, or the CarMax group; all of the issued shares of capital
stock of each subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and, except as
shown on Schedule II hereto, are owned, directly or indirectly, by the
Company, free and clear of all liens, encumbrances, equities or claims.
(e) This Agreement has been duly authorized, executed and delivered
by the Company.
(f) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
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(g) The shares of common stock of the Company outstanding prior to
the issuance of the Shares have been duly authorized and are validly
issued, fully paid and non-assessable.
(h) The Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable, and the issuance of such Shares will
not be subject to any preemptive or similar rights.
(i) The execution and delivery by the Company of, and the performance
by the Company of its obligations under, this Agreement will not contravene
any provision of applicable law or the Amended and Restated Articles of
Incorporation or bylaws of the Company or any agreement or other instrument
binding upon the Company or any of its subsidiaries that is material to
either the Company and its subsidiaries, taken as a whole, or the CarMax
group, or any judgment, order or decree of any governmental body, agency or
court having jurisdiction over the Company or any of its subsidiaries, and
no consent, approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by the Company
of its obligations under this Agreement, except such as have been obtained
and 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.
(j) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of either the Company and its subsidiaries, taken as a whole, or
the CarMax group, from that set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this
Agreement).
(k) There are no legal or governmental proceedings pending or, to the
knowledge of the Company, threatened to which the Company or any of its
subsidiaries is a party or to which any of the properties of the Company or
any of its subsidiaries is subject that are required to be described in the
Registration Statement or the Prospectus and are not so described or any
statutes, regulations, contracts or other documents that are required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not described or filed as
required.
(l) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Securities Act, complied when so filed in
all material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder.
(m) The Company is not, and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as described
in the Prospectus, will not be required to register as an "investment
company" as such term is defined in the Investment Company Act of 1940, as
amended.
(n) The Company and its subsidiaries (i) are in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes,
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pollutants or contaminants ("Environmental Laws"), (ii) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license or
approval, except where such noncompliance with Environmental Laws, failure
to receive required permits, licenses or other approvals or failure to
comply with the terms and conditions of such permits, licenses or approvals
would not, singly or in the aggregate, have a material adverse effect
either on the Company and its subsidiaries, taken as a whole, or the CarMax
group.
(o) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties) which would, singly or in the aggregate, have a material adverse
effect either on the Company and its subsidiaries, taken as a whole, or the
CarMax group.
(p) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the
Company to file a registration statement under the Securities Act with
respect to any securities of the Company or to require the Company to
include such securities with the Shares registered pursuant to the
Registration Statement.
(q) None of the Company's securities are accorded a rating by any
"nationally recognized statistical rating organization," as such term is
defined for purposes of Rule 436(g)(2) under the Securities Act.
(r) The Company has complied with all provisions of Section 517.075,
Florida Statutes relating to doing business with the Government of Cuba or
with any person or affiliate located in Cuba.
2. Agreements to Sell and Purchase. The Company hereby agrees to sell
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to the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Company the respective numbers of Firm Shares set forth in Schedule I hereto
opposite its name at $____ a share (the "Purchase Price").
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the Underwriters the Additional Shares, and the Underwriters shall have a
one-time right to purchase, severally and not jointly, up to __________
Additional Shares at the Purchase Price. If you, on behalf of the Underwriters,
elect to exercise such option, you shall so notify the Company in writing not
later than 30 days after the date of this Agreement, which notice shall specify
the number of Additional Shares to be purchased by the Underwriters and the date
on which such shares are to be purchased. Such date may be the same as the
Closing Date (as defined below) but not earlier than the Closing Date nor later
than ten business days after the date of such notice. Additional Shares may be
purchased as provided in Section 4 hereof solely for the purpose of covering
over-allotments made in connection with the offering of the Firm Shares. If any
Additional Shares are to be purchased, each Underwriter agrees, severally and
not jointly, to purchase the number of Additional Shares (subject to such
adjustments to eliminate fractional shares as you may
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determine) that bears the same proportion to the total number of Additional
Shares to be purchased as the number of Firm Shares set forth in Schedule I
hereto opposite the name of such Underwriter bears to the total number of Firm
Shares.
The Company hereby agrees that, without the prior written consent of
Xxxxxx Xxxxxxx & Co. Incorporated on behalf of the Underwriters, it will not,
during the period ending 90 days after the date of the Prospectus (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, lend or otherwise transfer or dispose of, directly or indirectly, any
shares of CarMax Stock or any securities (other than shares of Circuit City
Stores, Inc. - Circuit City Group Common Stock) convertible into or exercisable
or exchangeable for shares of CarMax Stock or (ii) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the economic
consequences of ownership of the CarMax Stock, whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of the CarMax
Stock or such other securities, in cash or otherwise; provided that the Company
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(a) may issue shares and grant stock options and similar rights under its
employee benefit plans existing on the date hereof, (b) may grant stock options
and similar rights to directors of the Company under benefit plans now existing
and (c) may sell the Shares as contemplated hereby during such 90-day period.
3. Terms of Public Offering. The Company is advised by you that the
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Underwriters propose to make a public offering of their respective portions of
the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable. The Company is further
advised by you that the Shares are to be offered to the public initially at
$____ a share (the "Public Offering Price") and to certain dealers selected by
you at a price that represents a concession not in excess of $____ a share under
the Public Offering Price, and that any Underwriter may allow, and such dealers
may reallow, a concession, not in excess of $____ a share, to any Underwriter or
to certain other dealers.
4. Payment and Delivery. Payment for the Firm Shares shall be made
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to the Company in Federal or other funds immediately available in New York City
against delivery of such Firm Shares for the respective accounts of the several
Underwriters at 10:00 a.m., New York City time, on ______ __, 2001, or at such
other time on the same or such other date, not later than ______ __, 2001, as
shall be designated in writing by you. The time and date of such payment are
hereinafter referred to as the "Closing Date."
Payment for any Additional Shares shall be made to the Company in
Federal or other funds immediately available in New York City against delivery
of such Additional Shares for the respective accounts of the several
Underwriters at 10:00 a.m., New York City time, on the date specified in the
notice described in Section 2 or at such other time on the same or on such other
date, in any event not later than ______ __, 2001, as shall be designated in
writing by you. The time and date of such payment are hereinafter referred to
as the "Option Closing Date."
Certificates for the Firm Shares and Additional Shares shall be in
such form and registered in such names and in such denominations as you shall
request in writing not later than two full business days prior to the Closing
Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of
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the several Underwriters, with any transfer taxes payable in connection with the
transfer of the Shares to the Underwriters duly paid, against payment of the
Purchase Price therefor.
5. Conditions to the Underwriters' Obligations. The obligations of
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the Company to sell the Shares to the Underwriters and the several obligations
of the Underwriters to purchase and pay for the Shares on the Closing Date are
subject to the condition that the Registration Statement shall have become
effective not later than 5:00 p.m. (New York City time) on the date hereof.
The several obligations of the Underwriters are subject to the
following further conditions:
(a) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date there shall not have occurred any change, or any
development involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations, of the Company and
its subsidiaries, taken as a whole, or the CarMax group from that set forth
in the Prospectus (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement), that, in your judgment, is
material and adverse and that makes it, in your judgment, impracticable to
market the Shares on the terms and in the manner contemplated in the
Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of
the Company, to the effect that the representations and warranties of the
Company contained in this Agreement are true and correct as of the Closing
Date and that the Company has complied with all of the agreements and
satisfied all of the conditions on its part to be performed or satisfied
hereunder on or before the Closing Date.
The officer signing and delivering such certificate may rely upon
the best of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date an
opinion of XxXxxxx Xxxxx LLP, outside counsel for the Company, dated the
Closing Date, to the effect that:
(i) the Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in the Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole, or the
CarMax group;
(ii) each significant subsidiary (as defined in Rule 1-02 of
Regulation S-X) of the Company (each, a "Significant Subsidiary") has
been duly incorporated, is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, has
the corporate power and authority to
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own its property and to conduct its business as described in the
Prospectus and is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or
its ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole, or the CarMax group;
(iii) the authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus;
(iv) the shares of common stock of the Company outstanding
prior to the issuance of the Shares have been duly authorized and are
validly issued, fully paid and non-assessable;
(v) all of the issued shares of capital stock of each
Significant Subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and, except
as shown on Schedule II hereto, are owned directly or indirectly by
the Company, free and clear of all liens, encumbrances, equities or
claims;
(vi) the Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be
validly issued, fully paid and non-assessable, and the issuance of
such Shares will not be subject to any preemptive or similar rights;
(vii) this Agreement has been duly authorized, executed and
delivered by the Company;
(viii) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement
will not contravene any provision of applicable law or the Amended and
Restated Articles of Incorporation or bylaws of the Company or, to the
best of such counsel's knowledge, any agreement or other instrument
binding upon the Company or any of its Significant Subsidiaries that
is material either to the Company and its subsidiaries, taken as a
whole, or the CarMax group, or, to the best of such counsel's
knowledge, any judgment, order or decree of any governmental body,
agency or court having jurisdiction over the Company or any of its
Significant Subsidiaries, and no consent, approval, authorization or
order of, or qualification with, any governmental body or agency is
required for the performance by the Company of its obligations under
this Agreement, except such as have been obtained and 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;
(ix) the statements (A) in the Prospectus under the captions
"Material United States Tax Consequences," "Description of Capital
Stock" and, to the extent such statements describe the terms of this
Agreement, "Underwriters" and (B) in the Registration Statement in
Item 15, in each case insofar as such statements constitute summaries
of the legal matters, documents or proceedings referred to therein,
fairly present the information called for with respect to such
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legal matters, documents and proceedings and fairly summarize the
matters referred to therein;
(x) after due inquiry, such counsel does not know of any legal
or governmental proceedings pending or threatened to which the Company
or any of its Significant Subsidiaries is a party or to which any of
the properties of the Company or any of its Significant Subsidiaries
is subject that are required to be described in the Registration
Statement or the Prospectus and are not so described or of any
statutes, regulations, contracts or other documents that are required
to be described in the Registration Statement or the Prospectus or to
be filed as exhibits to the Registration Statement that are not
described or filed as required;
(xi) the Company is not, and, after giving effect to the
offering and sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be required to
register as an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended; and
(xii) such counsel (A) is of the opinion that the Registration
Statement and Prospectus (except for financial statements and
schedules and other financial and statistical data included therein as
to which such counsel need not express any opinion) comply as to form
in all material respects with the Securities Act and the applicable
rules and regulations of the Commission thereunder, (B) has no reason
to believe that (except for financial statements and schedules and
other financial and statistical data as to which such counsel need not
express any belief) each part of the Registration Statement and the
prospectus included therein at the time such part became effective
contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading and (C) has no reason to believe
that (except for financial statements and schedules and other
financial and statistical data as to which such counsel need not
express any belief) the Prospectus contains any untrue statement of a
material fact or omits to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading.
In rendering any such opinion, such counsel may rely, as to matters of
fact, on certificates of officers of the Company and of public
officials and may state that it expresses no opinion as to the laws of
any jurisdiction other than the Commonwealth of Virginia and the
federal law of the United States. The Underwriters acknowledge and
counsel may note in its opinion that such counsel has represented the
Company and its subsidiaries only since July 1981.
(d) The Underwriters shall have received on the Closing Date an
opinion of Xxxxxxx Xxxxxxx & Xxxxxxxx, counsel for the Underwriters, dated
the Closing Date, covering the matters referred to in subparagraphs (vi)
(but only as to the due authorization, valid issuance, full payment for and
non-assessability of the Shares), (vii), (ix) (but only as to the
statements in the Prospectus under "Description of Capital Stock" and
"Underwriters"), and (xii) of paragraph (c) above.
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With respect to subparagraph (xii) of paragraph (c) above,
XxXxxxx Xxxxx LLP and Xxxxxxx Xxxxxxx & Xxxxxxxx may each state that its
opinion and belief are based upon its participation in the preparation of
the Registration Statement and Prospectus and any amendments or supplements
thereto and review and discussion of the contents thereof, but are without
independent check or verification except as specified.
The opinion of XxXxxxx Xxxxx LLP described in paragraph (c) above
shall be rendered to the Underwriters at the request of the Company and
shall so state therein.
(e) The Underwriters shall have received, on each of the date hereof
and the Closing Date, a letter dated the date hereof or the Closing Date,
as the case may be, in form and substance satisfactory to the Underwriters,
from KPMG LLP, independent public accountants, containing statements and
information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and
certain financial information contained in the Registration Statement and
the Prospectus, provided that the letter delivered on the Closing Date
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shall use a "cut-off date" not earlier than the date hereof.
(f) "Lock-up" agreements, each substantially in the form of Exhibit A
hereto, between you and the officers and employees of the Company and its
subsidiaries identified on Schedule III hereto relating to sales and
certain other dispositions of shares of CarMax Stock or certain other
securities, delivered to you on or before the date hereof, shall be in full
force and effect on the Closing Date.
(g) The several obligations of the Underwriters to purchase
Additional Shares hereunder are subject to the delivery to you on the
Option Closing Date of such documents as you may reasonably request with
respect to the good standing of the Company, the due authorization and
issuance of the Additional Shares and other matters related to the issuance
of the Additional Shares.
6. Covenants of the Company. In further consideration of the
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agreements of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish to you, without charge, ___ signed copies of the
Registration Statement (including exhibits thereto) and for delivery to
each other Underwriter a conformed copy of the Registration Statement
(without exhibits thereto) and to furnish to you in New York City, without
charge, prior to 10:00 a.m. New York City time on the business day next
succeeding the date of this Agreement and during the period mentioned in
paragraph (c) below, as many copies of the Prospectus and any supplements
and amendments thereto or to the Registration Statement as you may
reasonably request.
(b) Before amending or supplementing the Registration Statement or
the Prospectus, to furnish to you a copy of each such proposed amendment or
supplement and not to file any such proposed amendment or supplement to
which you reasonably object, and to file with the Commission within the
applicable period specified in Rule 424(b) under the Securities Act any
prospectus required to be filed pursuant to such Rule.
(c) If, during such period after the first date of the public
offering of the Shares as in the opinion of counsel for the Underwriters
the Prospectus is required by law
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to be delivered in connection with sales by an Underwriter or dealer, any
event shall occur or condition exist as a result of which it is necessary
to amend or supplement the Prospectus in order to make the statements
therein, in the light of the circumstances when the Prospectus is delivered
to a purchaser, not misleading, or if, in the opinion of counsel for the
Underwriters or counsel for the Company, it is necessary to amend or
supplement the Prospectus to comply with applicable law, forthwith to
prepare, file with the Commission and furnish, at its own expense, to the
Underwriters and to the dealers (whose names and addresses you will furnish
to the Company) to which Shares may have been sold by you on behalf of the
Underwriters and to any other dealers upon request, either amendments or
supplements to the Prospectus so that the statements in the Prospectus as
so amended or supplemented will not, in the light of the circumstances when
the Prospectus is delivered to a purchaser, be misleading or so that the
Prospectus, as amended or supplemented, will comply with law.
(d) To endeavor to qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as you shall reasonably
request, provided that the Company shall not be required to qualify as a
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foreign corporation or file a general consent to service of process in any
jurisdiction.
(e) To make generally available to the Company's security holders and
to you as soon as practicable an earning statement covering the twelve-
month period ending August 31, 2002 that satisfies the provisions of
Section 11(a) of the Securities Act and the rules and regulations of the
Commission thereunder.
(f) Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be paid
all expenses incident to the performance of its obligations under this
Agreement, including: (i) the fees, disbursements and expenses of the
Company's counsel and the Company's accountants in connection with the
registration and delivery of the Shares under the Securities Act and all
other fees or expenses in connection with the preparation and filing of the
Registration Statement, any preliminary prospectus, the Prospectus and
amendments and supplements to any of the foregoing, including all printing
costs associated therewith, and the mailing and delivering of copies
thereof to the Underwriters and dealers, in the quantities hereinabove
specified, (ii) all costs and expenses related to the transfer and delivery
of the Shares to the Underwriters, including any transfer or other taxes
payable thereon, (iii) the cost of printing or producing any Blue Sky or
Legal Investment memorandum in connection with the offer and sale of the
Shares under state securities laws and all expenses in connection with the
qualification of the Shares for offer and sale under state securities laws
as provided in Section 6(d) hereof, including filing fees and the
reasonable fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky or
Legal Investment memorandum, (iv) all filing fees and the reasonable fees
and disbursements of counsel to the Underwriters incurred in connection
with the review and qualification of the offering of the Shares by the
National Association of Securities Dealers, Inc., (v) all fees and expenses
in connection with the preparation and filing of a registration statement
on Form 8-A or any amendment thereto relating to the CarMax Stock and all
costs and expenses incident to listing the Shares on the NYSE, (vi) the
cost of printing certificates representing the Shares, (vii) the costs and
charges of any transfer agent, registrar or
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depositary, (viii) the costs and expenses of the Company relating to
investor presentations on any "road show" undertaken in connection with the
marketing of the offering of the Shares, including, without limitation,
expenses associated with the production of road show slides and graphics,
fees and expenses of any consultants engaged by the Company or with the
Company's prior approval in connection with the road show presentations,
travel and lodging expenses of the representatives and officers of the
Company and any such consultants, and the cost of any aircraft chartered
with the prior approval of the Company in connection with the road show and
(ix) all other costs and expenses incident to the performance of the
obligations of the Company hereunder for which provision is not otherwise
made in this Section. It is understood, however, that except as provided in
this Section, Section 7 entitled "Indemnity and Contribution," and the last
paragraph of Section 9 below, the Underwriters will pay all of their costs
and expenses, including fees and disbursements of their counsel, stock
transfer taxes payable on resale of any of the Shares by them and any
advertising expenses connected with any offers they may make.
7. Indemnity and Contribution. (a) The Company agrees to indemnify
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and hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), from and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably incurred
in connection with defending or investigating any such action or claim) caused
by any untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement or any amendment thereof, any preliminary
prospectus or the Prospectus (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto), 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, except
insofar as such losses, claims, damages or liabilities are caused by any such
untrue statement or omission or alleged untrue statement or omission based upon
information furnished to the Company in writing by any Underwriter through you
expressly for use therein; provided that the foregoing indemnity agreement with
--------
respect to any preliminary prospectus shall not inure to the benefit of any
Underwriter from whom the person asserting any such losses, claims, damages or
liabilities purchased Shares, or any person controlling such Underwriter, if a
copy of the Prospectus (as then amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) was not sent or given by
or on behalf of such Underwriter to such person, if required by law so to have
been delivered, at or prior to the written confirmation of the sale of the
Shares to such person, and if the Prospectus (as so amended or supplemented)
would have cured the defect giving rise to such losses, claims, damages or
liabilities, unless such failure is the result of noncompliance by the Company
with Section 6(a) hereof.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity from the Company to
such Underwriter, but only with reference to information furnished to the
Company in writing by any Underwriter through you expressly for use in the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendments or supplements thereto.
13
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to paragraph (a) or (b) of this Section 7, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any single firm serving as local counsel) for all such indemnified parties
and that all such fees and expenses shall be reimbursed as they are incurred. In
the case of any such separate firm for the Underwriters and such control persons
of the Underwriters, such firm shall be designated in writing by Xxxxxx Xxxxxxx
& Co. Incorporated. In the case of any such separate firm for the Company, and
such directors, officers and control persons of the Company, such firm shall be
designated in writing by the Company. The indemnifying party shall not be liable
for any settlement of any proceeding effected without its written consent, but
if settled with such consent or if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement made in good faith of any proceeding effected without
its written consent if (i) such settlement is entered into more than 30 days
after receipt by such indemnifying party of written notice from the indemnified
party of such indemnifying party's failure to reimburse the indemnified party as
required by this Agreement and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with this Agreement prior to the
date of such settlement. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such proceeding.
(d) To the extent the indemnification provided for in paragraph (a)
or (b) of this Section 7 is unavailable to an indemnified party or insufficient
in respect of any losses, claims, damages or liabilities referred to therein,
then each indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other hand from the offering of the
14
Shares or (ii) if the allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and of the Underwriters on the other hand in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriters on the other hand in connection with the offering of the
Shares shall be deemed to be in the same respective proportions as the net
proceeds from the offering of the Shares (before deducting expenses) received by
the Company and the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover of the
Prospectus, bear to the aggregate Public Offering Price of the Shares. The
relative fault of the Company on the one hand and 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
or by the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Underwriters' respective obligations to contribute pursuant to this Section
7 are several in proportion to the respective number of Shares they have
purchased hereunder, and not joint.
(e) The Company and the Underwriters agree that it would not be just
or equitable if contribution pursuant to this Section 7 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 that does not take account of the
equitable considerations referred to in paragraph (d) of this Section 7. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages that such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The remedies provided for in this Section 7 are
not exclusive and shall not limit any rights or remedies that may otherwise be
available to any indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained in this
Section 7 and the representations, warranties and other statements of the
Company contained in this Agreement shall remain operative and in full force and
effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter or by or on behalf of the Company, its officers or directors or
any person controlling the Company and (iii) acceptance of and payment for any
of the Shares.
8. Termination. This Agreement shall be subject to termination by
-----------
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange, the
15
National Association of Securities Dealers, Inc., the Chicago Board of Options
Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii)
trading of any securities of the Company shall have been suspended on any
exchange or in any over-the-counter market, (iii) a general moratorium on
commercial banking activities in New York shall have been declared by either
Federal or New York State authorities or (iv) there shall have occurred any
outbreak or escalation of hostilities or any change in financial markets or any
calamity or crisis that, in your judgment, is material and adverse and (b) in
the case of any of the events specified in clauses (a)(i) through (iv), such
event singly or together with any other such event makes it, in your judgment,
impracticable to market the Shares on the terms and in the manner contemplated
in the Prospectus.
9. Effectiveness, Defaulting Underwriters. This Agreement shall
--------------------------------------
become effective upon execution and delivery hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase Shares
that it has or they have agreed to purchase hereunder on such date, and the
aggregate number of Shares which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate number of the Shares to be purchased on such date, the other
Underwriters shall be obligated severally in the proportions that the number of
Firm Shares set forth opposite their respective names in Schedule I bears to the
aggregate number of Firm Shares set forth opposite the names of all such non-
defaulting Underwriters, or in such other proportions as you may specify, to
purchase the Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase on such date; provided that in no event shall the
--------
number of Shares that any Underwriter has agreed to purchase pursuant to this
Agreement be increased pursuant to this Section 9 by an amount in excess of one-
ninth of such number of Shares without the written consent of such Underwriter.
If, on the Closing Date, any Underwriter or Underwriters shall fail or refuse to
purchase Firm Shares and the aggregate number of Firm Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of Firm
Shares to be purchased, and arrangements satisfactory to you and the Company for
the purchase of such Firm Shares are not made within 36 hours after such
default, this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter or the Company. In any such case either you or the
Company shall have the right to postpone the Closing Date, but in no event for
longer than seven days, in order that the required changes, if any, in the
Registration Statement and in the Prospectus or in any other documents or
arrangements may be effected. If, on the Option Closing Date, any Underwriter
or Underwriters shall fail or refuse to purchase Additional Shares and the
aggregate number of Additional Shares with respect to which such default occurs
is more than one-tenth of the aggregate number of Additional Shares to be
purchased, the non-defaulting Underwriters shall have the option to (i)
terminate their obligation hereunder to purchase Additional Shares or (ii)
purchase not less than the number of Additional Shares that such non-defaulting
Underwriters would have been obligated to purchase in the absence of such
default. Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason (other than as a result of the termination of this Agreement solely
pursuant to the preceding paragraph or paragraph 8 hereof)
16
the Company shall be unable to perform its obligations under this Agreement, the
Company will reimburse the Underwriters or such Underwriters as have so
terminated this Agreement with respect to themselves, severally, for all out-of-
pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.
10. Counterparts. This Agreement may be signed in two or more
------------
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
11. Applicable Law. This Agreement shall be governed by and
--------------
construed in accordance with the internal laws of the State of New York.
12. Notices. All communication hereunder will be in writing, and, if
-------
sent to any Underwriter, will be sent to it by registered mail, overnight
courier or facsimile, c/o Morgan Xxxxxxx & Co. Incorporated, 0000 Xxxxxxxx, Xxx
Xxxx, Xxx Xxxx 00000 (facsimile no.: (000) 000-0000), Attention: Xxxx Xxxxx, and
if sent to the Company, will be sent to it by registered mail, overnight courier
or facsimile at 0000 Xxxxxxx Xxxxx, Xxxxxxxx, Xxxxxxxx 00000 (facsimile no.:
(000) 000-0000), Attention: Xxxxxxx X. Xxxxxxxxx.
17
13. Headings. The headings of the sections of this Agreement have
--------
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
Very truly yours,
CIRCUIT CITY STORES, INC.
By_____________________________
Accepted, ______ __, 2001
XXXXXX XXXXXXX & CO. INCORPORATED
BANC OF AMERICA SECURITIES LLC
UBS WARBURG LLC
Acting severally on behalf of themselves
and the several Underwriters named
in Schedule I hereto.
By Xxxxxx Xxxxxxx & Co. Incorporated
By______________________________________
Schedule I
Underwriters
------------
Number of
Firm Shares
Underwriters to be Purchased
------------ ---------------
Xxxxxx Xxxxxxx & Co. Incorporated
Banc of America Securities LLC
UBS Warburg LLC
[ ] _______________
Total Firm Shares........................................
Schedule II
Issued Shares of Capital Stock of the Company's Subsidiaries Not Owned
-----------------------------------------------------------------------
by the Company Free and Clear
-----------------------------
--------------------------------------------------------------------------------
Entity Percentage owned
------ by Circuit City Stores, Inc.
---------------------------
--------------------------------------------------------------------------------
CirCam Corporation 50%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Comfort Technology, L.L.C. 60%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Zoom Partners, L.P. 50%
--------------------------------------------------------------------------------
Schedule III
Officers and Employees to be Parties
------------------------------------
to "Lock-Up" Agreements
-----------------------
Xxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxx
Xxxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxx
W. Xxxxxx Xxxxx
Exhibit A
Form of Lock-Up Letter
----------------------
_______ __, 2001
Xxxxxx Xxxxxxx & Co. Incorporated
Banc of America Securities LLC
UBS Warburg LLC
c/o Morgan Xxxxxxx & Co. Incorporated
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Dear Sirs and Mesdames:
The undersigned understands that Xxxxxx Xxxxxxx & Co. Incorporated
("Xxxxxx Xxxxxxx"), Banc of America Securities LLC ("Banc of America") and
UBS Warburg LLC ("UBS") propose to enter into an Underwriting Agreement
(the "Underwriting Agreement") with Circuit City Stores, Inc., a Virginia
corporation (the "Company"), providing for the public offering (the "Public
Offering") by the several Underwriters, including Xxxxxx Xxxxxxx, Banc of
America and UBS (the "Underwriters"), of _________ shares (the "Shares") of
the Circuit City Stores, Inc. - CarMax Group Common Stock, par value $.50
per share, of the Company (the "CarMax Stock").
To induce the Underwriters that may participate in the Public Offering
to continue their efforts in connection with the Public Offering, the
undersigned hereby agrees that, without the prior written consent of Xxxxxx
Xxxxxxx on behalf of the Underwriters, the undersigned will not, during the
period commencing on the date hereof and ending 90 days after the date of
the final prospectus relating to the Public Offering (the "Prospectus"),
(1) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase, lend or otherwise transfer or dispose of, directly
or indirectly, any shares of the CarMax Stock or any securities (other than
shares of Circuit City Stores, Inc. - Circuit City Group Common Stock, par
value $.50 per share, of the Company) convertible into or exercisable or
exchangeable for CarMax Stock or (2) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the CarMax Stock, whether any such
transaction described in clause (1) or (2) above is to be settled by
delivery of CarMax Stock or such other securities, in cash or otherwise.
The foregoing sentence shall not apply to (a) the sale of any Shares to the
Underwriters pursuant to the Underwriting Agreement, (b) transactions
relating to shares of CarMax Stock or other securities acquired in open
market transactions after the completion of the Public Offering, (c)
transfers of shares of CarMax Stock or any security convertible into CarMax
Stock as a bona fide gift or gifts and (d) transfers or dispositions of
shares of CarMax Stock or any security convertible into CarMax Stock by
sale or delivery to the Company; provided that in the case of any transfer
--------
or distribution pursuant to clause (c), (i) each donee or distributee shall
execute and deliver to Xxxxxx Xxxxxxx a duplicate form of this Lock-Up
Letter and (ii) no filing by any party
(donor, donee, transferor or transferee) under Section 16(a) of the
Securities Exchange Act of 1934, as amended, shall be required or shall be
made voluntarily in connection with such transfer or distribution (other
than a filing on Form 5 made after the expiration of the 90-day period
referred to above). In addition, the undersigned agrees that, without the
prior written consent of Xxxxxx Xxxxxxx on behalf of the Underwriters, the
undersigned will not, during the period commencing on the date hereof and
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
CarMax Stock or any security convertible into or exercisable or
exchangeable for CarMax Stock. The undersigned understands that the Company
and the Underwriters are relying on this Lock-Up Letter in proceeding
toward consummation of the Public Offering. The undersigned further
understands that this Lock-Up Letter is irrevocable and shall be binding
upon the undersigned's heirs, legal representatives, successors and
assigns.
Whether or not the Public Offering actually occurs depends on a number
of factors, including market conditions. Any Public Offering will only be
made pursuant to an Underwriting Agreement, the terms of which are subject
to negotiation between the Company and the Underwriters.
Very truly yours,
______________________________
(Name)
______________________________
(Address)
