EXHIBIT 1.1
18,860,000 Shares
CIRCUIT CITY STORES, INC.
CIRCUIT CITY STORES, INC.-CARMAX GROUP COMMON STOCK
(par value $.50 per share)
UNDERWRITING AGREEMENT
____________, 1997
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
▇▇▇▇▇▇▇, Sachs & Co.
Wheat, First Securities, Inc.
c/o Morgan ▇▇▇▇▇▇▇ & Co. Incorporated
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. International Limited
▇▇▇▇▇▇▇ Sachs International
Wheat, First Securities, Inc.
▇/▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇ Limited
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
England
Dear Sirs and Mesdames:
Circuit City Stores, Inc., a Virginia corporation (the
"Company"), proposes to issue and sell to the several Underwriters (as defined
below) 18,860,000 shares of its Circuit City Stores, Inc.-CarMax Group Common
Stock, par value $.50 per share (the "Firm Shares").
It is understood that, subject to the conditions hereinafter
stated, 15,088,000 Firm Shares (the "U.S. Firm Shares") will be sold to the
several U.S. Underwriters named in Schedule I hereto (the "U.S. Underwriters")
in connection with the offering and sale of such U.S. Firm Shares in the United
States and Canada to United States and Canadian Persons (as such terms are
defined in the Agreement Between U.S. and International Underwriters of even
date herewith), and 3,772,000 Firm Shares (the "International Shares") will be
sold to the several International Underwriters named in Schedule II hereto (the
"International Underwriters") in connection with the offering and sale of such
International Shares outside the United States and Canada to persons other than
United States and Canadian Persons. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated and
▇▇▇▇▇▇▇, Sachs & Co. and Wheat, First Securities, Inc. shall act as
representatives (the "U.S. Representatives") of the several U.S. Underwriters,
and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ International & Co. and ▇▇▇▇▇▇▇, Sachs & Co. shall act as
representatives (the "International Representatives") of the several
International Underwriters. The U.S. Underwriters and the International
Underwriters are hereinafter collectively referred to as the Underwriters.
The Company also proposes to issue and sell to the several
U.S. Underwriters not more than an additional 2,829,000
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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 the U.S.
Representatives shall have determined to exercise, on behalf of the U.S.
Underwriters, the right to purchase such shares of common stock granted to the
U.S. 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 to be 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 relating to the Shares.
The registration statement contains the U.S. prospectus, to be used in
connection with the offering and sale of Shares in the United States and Canada
to United States and Canadian Persons. An international prospectus is to be used
in connection with the offering and sale of Shares outside the United States and
Canada to persons other than United States and Canadian Persons. The
international prospectus is identical to the U.S. prospectus except for the
outside front and back cover pages. 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"; the U.S. prospectus and the international prospectus
in the respective forms first used to confirm sales of Shares, including all
documents incorporated therein by reference, are hereinafter collectively
referred to as the "Prospectus".
1. Representations and Warranties. The Company
represents and warrants to and agrees with each of the Underwriters, U.S. and
International that:
(a) The Registration Statement has become effective; no stop
order suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for such purpose are pending before or, to
the knowledge of the Company, threatened by the Commission.
(b) (i) Each part of the Registration Statement, when such
part 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
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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 1(b) 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 defined 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 currently
conducted 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 III 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.
(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
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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 by-laws 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, an "investment
company" as such term is defined in the Investment Company Act of 1940,
as amended.
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(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, 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 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 Schedules I and II
hereto opposite their names at U.S. $________ a share ("Purchase Price").
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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 U.S. Underwriters the Additional Shares, and the U.S.
Underwriters shall have a one-time right to purchase, severally and not jointly,
up to ________ Additional Shares at the Purchase Price. If the U.S.
Representatives, on behalf of the U.S. Underwriters, elect to exercise such
option, the U.S. Representatives 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 U.S. 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 U.S. Underwriter agrees, severally
and not jointly, to purchase the number of Additional Shares (subject to such
adjustments to eliminate fractional shares as the U.S. Representatives may
determine) that bears the same proportion to the total number of Additional
Shares to be purchased as the number of U.S. Firm Shares set forth in Schedule I
hereto opposite the name of such U.S. Underwriter bears to the total number of
U.S. Firm Shares.
The Company hereby agrees that, without the prior written
consent of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated on behalf of the Underwriters, it
will not during the period ending 180 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 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
(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
or hereafter adopted (provided, that options and similar rights granted under
benefit plans hereafter adopted shall not become exercisable prior to 180 days
after the date of the Prospectus) and (c) may sell the Shares as contemplated
hereby during such 180 day period.
3. Terms of Public Offering. The Company is advised
by you that the Underwriters propose to make a public offering of
their respective portions of the Shares as soon after the
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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 U.S.$________ a share (the "Public
Offering Price") and to certain dealers selected by you at a price that
represents a concession not in excess of U.S.$________ a share under the public
offering price, and that any Underwriter may allow, and such dealers may
reallow, a concession, not in excess of U.S.$_______ a share, to any Underwriter
or to certain other dealers.
4. Payment and Delivery. Payment for the Firm Shares shall be
made 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 ________, 1997, or at
such other time on the same or such other date, not later than ___________,
1997, 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 ___________, 1997, as shall be designated in
writing by the U.S. Representatives. 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 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 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 ___________ (New York City time) on
the date hereof.
The several obligations of the Underwriters hereunder are
subject to the following further conditions:
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(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
(x) the Company and its subsidiaries, taken as a whole, or (y) the
CarMax Group, from that set forth in the Prospectus, 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 set forth in clause (a) above and 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 ▇▇▇▇▇▇▇ ▇▇▇▇▇ Battle & ▇▇▇▇▇▇ 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 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 currently
conducted 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
9
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 (as defined in Rule 1-02 of Regulation
S-X) of the Company have been duly and validly authorized and
issued, are fully paid and non-assessable and, except as shown
on Scheduled III 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 by-laws 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 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 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 by the U.S.
Underwriters;
(ix) the statements (A) in the Prospectus under
the captions "Certain 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
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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 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 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 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, an "investment company" as such term
is defined in the Investment Company Act of 1940, as amended;
(xii) such counsel (A) is of the opinion that
the Registration Statement and Prospectus (except for
financial statements 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 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 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 they express no opinion as to the laws of
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any jurisdiction other than the Commonwealth of Virginia and the federal law of
the United States. The Underwriters acknowledge and counsel may so note in their
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 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, 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),
(x) (but only as to the statements in the Prospectus under "Description
of Capital Stock" and "Underwriters"), and (xiv) of paragraph (c) above.
With respect to subparagraph (xii) of paragraph (c) above,
▇▇▇▇▇▇▇ ▇▇▇▇▇ Battle & ▇▇▇▇▇▇, L.L.P. and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ may
state that their opinion and belief are based upon their 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 ▇▇▇▇▇▇▇ ▇▇▇▇▇ Battle & ▇▇▇▇▇▇, L.L.P. 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 Peat Marwick 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 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 IV 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 U.S. Underwriters
to purchase Additional Shares hereunder are subject to the
delivery to the U.S. Representatives on the Option Closing
Date of such documents as they may reasonably request with
respect to the good standing of the Company, the due
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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 agreements of the Underwriters herein
contained, the Company covenants with each Underwriter as
follows:
(a) To furnish to you, without charge, five 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 5:00 P.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 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 foreign
13
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 February 28, 1998 that satisfies the
provisions of Section 11(a) of the Securities Act and the rules and
regulations of the Commission thereunder.
(f) To pay all document production charges and expenses of
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, special counsel for the Underwriters (but
not including their fees for professional services), in connection with
the preparation of this Agreement.
(g) 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 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 Common 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 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
14
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 with the prior approval of the Company, 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 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.
(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
15
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
such Underwriter through you expressly for use in the Registration Statement,
any preliminary prospectus, the Prospectus or any amendments or supplements
thereto.
(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 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
& 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
16
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 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
17
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 which 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 and warranties 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 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.
18
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 or Schedule
II 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 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 the 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) 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
19
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
▇▇▇▇▇▇▇ & Co. Incorporated, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ (facsimile no.: (▇▇▇)▇▇▇-▇▇▇▇), Attention: ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, and if sent to the Company, will be sent to it by
registered mail, overnight courier or facsimile at ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (facsimile no.: (▇▇▇)▇▇▇-▇▇▇▇),
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇.
20
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, _______________, 1997
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & CO. INCORPORATED
▇▇▇▇▇▇▇, SACHS & CO.
WHEAT, FIRST SECURITIES, INC.
Acting severally on behalf of themselves and the several U.S. Underwriters named
in Schedule I hereto.
By ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
By______________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & CO. INTERNATIONAL LIMITED
▇▇▇▇▇▇▇ SACHS INTERNATIONAL
WHEAT, FIRST SECURITIES, INC.
Acting severally on behalf of themselves
and the several International Underwriters
named in Schedule II hereto.
By ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. International Limited
By______________________________________
Schedule I
U.S. Underwriters
Number of
Firm Shares
Underwriter To Be Purchased
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
▇▇▇▇▇▇▇, Sachs & Co.
Wheat, First Securities, Inc.
[NAMES OF OTHER U.S. UNDERWRITERS]
--------------------
Total U.S. Firm Shares...................
====================
Schedule II
International Underwriters
Number of
Firm Shares
Underwriter To Be Purchased
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. International Limited
▇▇▇▇▇▇▇, Sachs International
Wheat, First Securities, Inc.
[NAMES OF OTHER INTERNATIONAL
UNDERWRITERS]
------------------
Total International Firm Shares..................
==================
Schedule III
Issued Shares of Capital Stock
of the Company Not Owned
by the Company Free and Clear
Schedule IV
Officers and Employees to be Parties
to "Lock-Up" Agreements
Exhibit A
[Form of Lock-up Letter]
_______________, 1997
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
▇▇▇▇▇▇▇, Sachs & Co.
Wheat, First Securities, Inc.
c/o Morgan ▇▇▇▇▇▇▇ & Co. Incorporated
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. International Limited
▇▇▇▇▇▇▇ Sachs International
Wheat, First Securities, Inc.
▇/▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇ Limited
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
England
Dear Sirs and Mesdames:
The undersigned understands that ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co.
Incorporated ("▇▇▇▇▇▇ ▇▇▇▇▇▇▇") and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. International Limited
("MSIL") 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 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and MSIL (the "Underwriters") of
18,860,000 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 ▇▇▇▇▇▇
▇▇▇▇▇▇▇ on behalf of the Underwriters, the undersigned will not, during the
period commencing on [date of the Prospectus] and ending 180 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, 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
(whether such shares or any such securities are now owned by such person or are
hereafter acquired prior to or in connection with the Public Offering) 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, except for any transfer or disposition of any such securities by sale
or delivery to the Company or through bona fide gifts to persons who agree in
writing with you to be bound
2
by this restriction. The undersigned agrees that, without the prior written
consent of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ on behalf of the Underwriters, the undersigned will
not, during the period commencing on the [date of the Prospectus] and ending 180
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.
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)