Registration No. _____________
As Filed with the Securities and Exchange Commission on December 1, 1994.
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___________________________________________________________________________
___________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
_______________________
CIRCUIT CITY STORES, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 54-0493875
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9950 MAYLAND DRIVE
RICHMOND, VIRGINIA 23233
(Address of Principal Executive Offices) (Zip Code)
CIRCUIT CITY STORES, INC. 1994 STOCK INCENTIVE PLAN
(Full title of the plan)
RICHARD L. SHARP, PRESIDENT, CHIEF EXECUTIVE OFFICER
AND CHAIRMAN OF THE BOARD
CIRCUIT CITY STORES, INC.
9950 MAYLAND DRIVE, RICHMOND, VIRGINIA, 23233
(Name and address of agent for service)
(804) 527-4000
(Telephone number, including area code, of agent for service)
_______________________
<PAGE>
CALCULATION OF REGISTRATION FEE
_______________________________________________________________________________
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Per Offering Registration
Registered Registered Share Price Fee
_______________________________________________________________________________
Common Stock, par 2,500,000 shares $25.00(1) $62,500,000(1) $21,551.88
value $.50
Rights to Purchase 2,500,000 rights (2) (2) $ 100(2)
Preferred Stock,
Series E, par value
$20.00
_______________________________________________________________________________
(1) Estimated solely for the purpose of calculating the registration
fee. Based on the average of the high and low prices of the Common Stock
on the New York Stock Exchange on November 30, 1994.
(2) The Rights to Purchase Preferred Stock will be attached to and
trade with shares of the Common Stock. Value attributable to such rights,
if any, will be reflected in the market price of the shares of Common
Stock. The fee paid represents the minimum statutory fee pursuant to
Section 6(b) of the Securities Act of 1933.
<PAGE>
PART II. INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
Circuit City Stores, Inc. (the "Company") hereby incorporates by
reference into this registration statement the documents listed below which
have been filed with the Securities and Exchange Commission.
(a) The Company's Annual Report on Form 10-K (File No. 1-5767) for
the year ended February 28, 1994.
(b) All other reports filed pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 since the end of the fiscal year
covered by the Annual Report referred to in (a) above.
(c) The description of the Company's Common Stock appearing in
Amendment No. 4, dated June 12, 1990, to the Company's Form 8-A
and filed with the Commission (File No. 1-5767) and all
amendments and reports filed for the purpose of updating such
description.
(d) The description of the Company's Rights appearing in a
registration statement on Form 8-A dated May 16, 1988 and filed
with the Commission (File No. 1-5767) and all amendments and
reports filed for the purpose of updating such description.
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, prior to
the filing of a post-effective amendment which indicates that all
securities offered have been sold or which deregisters all securities then
remaining unsold, shall be deemed to be incorporated by reference into this
registration statement and shall be deemed to be part of this registration
statement from the date of filing of such documents.
Item 6. Indemnification of Directors and Officers
The laws of the Commonwealth of Virginia pursuant to which the Company
is incorporated permit it to indemnify its officers and directors against
certain liabilities with the approval of its shareholders. The articles of
incorporation of the Company, which have been approved by its shareholders,
provide for the indemnification of each director and officer (including
former directors and officers and each person who may have served at the
request of the Company as a director or officer of any other legal entity
and, in all such cases, his heirs, executors and administrators) against
liabilities (including expenses) reasonably incurred by him in connection
with any actual or threatened action, suit or proceeding to which he may be
made a party by reason of his being or having been a director or officer of
<PAGE>
the Company, except in relation to any action, suit or proceeding in which
he has been adjudged liable because of willful misconduct or a knowing
violation of the criminal law.
The Company has purchased directors' and officers' liability insurance
policies. Within the limits of their coverage, the policies insure (1) the
directors and officers of the Company against certain losses resulting from
claims against them in their capacities as directors and officers to the
extent that such losses are not indemnified by the Company and (2) the
Company to the extent that it indemnifies such directors and officers for
losses as permitted under the laws of Virginia.
Item 8. Exhibits
See Exhibit Index.
Item 9. Undertakings
The undersigned registrant hereby undertakes:
(a)(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3 or Form S-8 and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant
pursuant to section 13 or section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof.
<PAGE>
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to section 13(a) or section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-8 and has duly caused
this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Richmond, Commonwealth of
Virginia, on November 30, 1994.
CIRCUIT CITY STORES, INC.
By: /s/ RICHARD L. SHARP
------------------------
Richard L. Sharp
President, Chief Executive Officer
and Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in
the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
Alan L. Wurtzel* Vice Chairman of the November 30, 1994
- ------------------------ Board
Alan L. Wurtzel
/s/ MICHAEL T. CHALIFOUX Senior Vice President, November 30, 1994
- ------------------------ Chief Financial Officer,
Michael T. Chalifoux Secretary and Director
Richard N. Cooper* Director November 30, 1994
- ------------------------
Richard N. Cooper
Douglas D. Drysdale* Director November 30, 1994
- ------------------------
Douglas D. Drysdale
Barbara S. Feigin* Director November 30, 1994
- ------------------------
Barbara S. Feigin
Theodore D. Nierenberg* Director November 30, 1994
- ------------------------
Theodore D. Nierenberg
Walter J. Salmon* Director November 30, 1994
- ------------------------
Walter J. Salmon
<PAGE>
/s/ RICHARD L. SHARP President, Chief November 30, 1994
- ------------------------ Executive Officer
Richard L. Sharp and Chairman of the
Board
Edward Villanueva* Director November 30, 1994
- ---------------------
Edward Villanueva
/s/KEITH D. BROWNING Corporate Controller, November 30, 1994
- --------------------- Principal Accounting
Keith D. Browning Officer
*By: /s/ RICHARD L. SHARP
---------------------
Attorney-In-Fact
<PAGE>
EXHIBIT INDEX
Exhibit
No. Document
- -------- --------
3.1 The Company's Amended and Restated
Articles of Incorporation filed as Exhibit
3(a) to the Company's Annual Report on Form
10-K for the fiscal year ended February 28,
1993, (File No. 1-5767) are expressly
incorporated herein by this reference.
3.2 The Company's Articles of Amendment to the
Amended and Restated Articles of Incorporation
filed as Exhibit 3(b) to the Company's Annual
Report on Form 10-K for the fiscal year ended
February 28, 1993, (File No. 1-5767) are
expressly incorporated herein by this
reference.
3.3 The Company's Bylaws filed as Exhibit 3 to the
Company's Quarterly Report on Form 10-Q for
the quarter ended August 31, 1994, (File No.
1- 5767) are expressly incorporated herein by
this reference.
4 Rights Agreement dated April 29, 1988, between
the Company and Crestar Bank, as Rights Agent,
filed as Exhibit (2) to the Company's
registration statement on Form S-8 (File No.
1-5767) filed on May 23, 1988, is expressly
incorporated herein by this reference.
5 Opinion and Consent of McGuire, Woods, Battle
& Boothe as to the legality of the shares
offered hereunder.
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of McGuire, Woods, Battle & Boothe
(included in Exhibit 5)
24 Powers of attorney
99 Circuit City Stores, Inc. 1994 Stock Incentive Plan
<PAGE>
EXHIBIT 5
McGuire Woods
Battle & Boothe
One James Center
Richmond, Virginia 23219
October 7, 1994
Circuit City Stores, Inc.
9950 Mayland Drive
Richmond, Virginia 23233-1464
Circuit City Stores, Inc. (the "Company")
Ladies and Gentlemen:
You propose to file as soon as possible with the Securities and
Exchange Commission a registration statement on Form S-8 (the "Registration
Statement") relating to the Circuit City Stores, Inc. 1994 Stock Incentive
Plan (the "Plan"). The Registration Statement covers 2,500,000 shares of
Common Stock, par value $.50, of the Company (the "Common Stock") which
have been reserved for issuance under the 1994 Plan and 2,500,000 Rights to
Purchase Preferred Stock, Series E, $20.00 par value, of the Company (the
"Rights"), attached in equal number to the shares of Common Stock which may
be issued under the Plan.
We are of the opinion that the 2,500,000 shares of Common Stock
which are authorized for issuance under the Plan, when issued or sold in
accordance with the terms and provisions of the Plan, will be duly
authorized, legally issued, fully paid and nonassessable.
We are also of the opinion that the 2,500,000 Rights attached in
equal number to the shares referred to above, when issued in accordance
with the terms and provisions of the Rights Agreement dated as of April 29,
1988 between the Company and Mellon Securities Trust Company, as successor
to Crestar Bank, will be duly authorized, legally issued, fully paid and
nonassessable. Our opinion with respect to the Rights is subject to all
the assumptions and qualifications with respect to such matters set forth
in our opinion, dated June 16, 1988, to the Board of Directors of the
Company. We hereby reaffirm our opinion of June 16, 1988, a copy of which
is attached to this opinion. In our opinion regarding the Rights, we
discussed whether certain provisions of Section 13.1-638 of the Virginia
Code might prohibit the restrictions on transfer imposed under the
agreement governing the Rights. The Virginia Code was amended in 1990 to
provide that, notwithstanding such provisions
<PAGE>
Circuit City Stores, Inc.
October 7, 1994
Page 2
of Section 13.1-638, the terms of rights issued by a corporation may
include restrictions on transfer by designated persons or classes of
persons.
We consent to the use of this opinion as Exhibit 5 to the Registration
Statement.
Very truly yours,
/s/ McGUIRE, WOODS, BATTLE & BOOTHE
<PAGE>
June 16, 1988
Board of Directors
Circuit City Stores, Inc.
2040 Thalbro Street
Richmond, Virginia 23230
Gentlemen:
This will confirm our opinion, given orally to the Board of Directors
of Circuit City Stores, Inc., a Virginia corporation (the "Company"), with
respect to the Board's adoption of a Shareholder Rights Plan (the "Plan")
on the terms set forth in the Rights Agreement (the "Rights Agreement")
which was submitted to the Board prior to adoption. Under the Plan, the
Board of Directors has authorized the issuance by the Company of rights
(the "Rights") to purchase 1/100th of a share of the Company's Cumulative
Participating Preferred Stock, Series E, par value $20.00 per share
("Series E Preferred Stock"), as a dividend distribution to holders of the
Common Stock, par value $1.00 per share (the "Common Stock"), of the
Company.
In connection with this opinion, we have reviewed the Articles of
Restatement and Bylaws of the Company as amended; the Rights Agreement; the
resolutions adopted by the Board of Directors on April 29, 1988, providing
among other things for the distribution of the Rights and approving the
Rights Agreement; the Company's letter to shareholders concerning the
Rights distribution; and such other matters as we consider necessary. We
have examined those Virginia statutes and judicial decisions as we have
deemed relevant. Although we have also examined certain statutes and
judicial decisions from other jurisdictions, we express no opinion herein
concerning the laws of any state other than Virginia.
Summary of the Plan
Each Right issued under the Plan will entitle the holder to purchase
1/100th of a share of Series E Preferred Stock for $140.00, subject to
certain anti-dilution adjustments. However, the Rights are not exercisable
(and cannot be transferred separately from the Common Stock) until the
close of business on the tenth day after the first date of public
announcement that a person or group has acquired beneficial ownership of
20% or more of the Common Stock (an "Acquiring Person") or after the close
of business on the tenth business day after the date a person or group
commences or first publicly announces its intention to commence a tender or
exchange offer the consummation of which would result in beneficial
ownership by such person or group of 30% or more of the Common Stock. In
the event that any other entity should merge or otherwise combine with the
Company or enter into certain specified transactions with it, each Right
<PAGE>
Board of Directors
Circuit City Stores, Inc.
June 16, 1988
Page 2
would then entitle the holder to purchase that number of shares of common
stock of such other entity or, in the case of certain transactions where
the other entity is an Acquiring Person, that number of shares of Common
Stock, which at the time of the transaction would have a market value of
two times the then exercise price of the Right. The Board of Directors of
the Company may redeem all of the Rights at a price of $.01 per Right at
any time until ten days after any person or group acquires beneficial
ownership of 20% or more of the Common Stock.
Reasons for the Plan
We understand that the Board of Directors believes that the current
market price of the Common Stock does not reflect the long-term potential
of the Company. Given the present popularity and ease of consummating an
unsolicited takeover of a major corporation, the Board believes that
adoption of the Plan will make the Company less vulnerable to abusive and
unfair takeover tactics by giving the Board the time and flexibility to
ensure that all shareholders are protected in their right to retain their
investment, or to secure full value for it, while not precluding a fair
acquisition of the Company. Although we understand that the Company has no
knowledge that any person or group is presently engaged in such tactics
with respect to the Company, the Board is concerned that present law and
existing provisions of the Company's Articles of Restatement and Bylaws do
not provide adequate protection against such tactics.
We understand that the Board's principal purpose in adopting the Plan
is to encourage any potential acquiror to negotiate in advance with the
Company, thereby enabling the Board to act in the best interests of all the
shareholders. The Board has acknowledged that the Plan is not intended to
deter or prevent an offer which would be in the best interests of all
shareholders or to affect adversely any person or group's ability to obtain
representation on or control of the Company's Board of Directors through
proxy contests.
Matters Considered by the Board
The Board of Directors considered proposals similar to the Plan at
meetings held on February 16, 1988 and April 19, 1988. On April 22, 1988 a
Special Committee of the Board of Directors met to review a subsequent
proposal and to discuss various issues in connection with the Plan. On
April 29, 1988 the entire Board of Directors met to consider and vote on
the recommendations of the Special Committee. The directors were assisted
in their deliberations not only by officers of the Company but also by
<PAGE>
Board of Directors
Circuit City Stores, Inc.
June 16, 1988
Page 3
independent financial advisors and legal counsel. Factors discussed during
these meetings included (i) the takeover environment generally and as it
relates to retailers of consumer electronics and appliances; (ii) the
vulnerability of the Company to a takeover generally and to particular
takeover tactics, in light of present law and existing provisions of the
Company's Articles of Restatement and Bylaws; (iii) the financial and other
characteristics of the Company which could make the Company an attractive
target; (iv) the provisions, purposes and potential effects of the Plan;
(v) whether the Plan is reasonably related to and effective in
accomplishing its intended purposes; (vi) the effect of the Plan, if any,
on potential offers for all of the Common Stock; (vii) the redemption
features of the Plan, including the possibility that the Rights might
become non-redeemable and the consequences thereof in obtaining a fair
price for all shareholders in a subsequent negotiated transaction; (viii)
the potential effect of the Plan on the market price of the Common Stock
and on the ability of the Company to secure financing to meet future needs;
and (ix) whether the exercise price under the Rights is reasonably related
to the value of the Company.
The Board also considered that Virginia has recently adopted a new
statute barring for a three year period certain significant transactions
between a corporation and any person who, without the prior approval of the
Board, becomes a holder of more than 10% of its voting shares (an
"Interested Shareholder") unless the transaction has been approved by a
majority of the independent directors and by the affirmative vote of the
holders of two-thirds of the voting shares other than the shares
beneficially owned by the Interested Shareholder. After the three year
period ends, these transactions with the Interested Shareholders are
prohibited unless they are approved by the independent directors or two-
thirds of the other shareholders or all shareholders are paid a "fair
price" for their shares. In general, the statute bases "fair price" on
prices paid by the Interested Shareholder in acquiring his position. We
understand that the Board believes the Plan supplements the protection
provided by the statute by helping to ensure that shareholders realize the
full long-term potential value for their Common Stock.
It is our understanding that the Board has concluded that the Rights
(i) serve a legitimate corporate purpose and are reasonably related to
accomplishing that purpose, (ii) have an exercise price which is reasonably
related to the value of the Company, (iii) are in the best interests of the
Company and its shareholders, and (iv) have not been proposed for the
purpose of perpetuating the directors' or management's control over the
Company.
<PAGE>
Board of Directors
Circuit City Stores, Inc.
June 16, 1988
Page 4
Legal Authorization of the Rights
The Virginia Stock Corporation Act authorizes the board of directors
of a corporation to issue rights, options and warrants for the purchase of
shares of the corporation on such terms as it may approve, except in
limited circumstances not applicable here. Section 13.1-646 of the
Virginia Code provides that:
A corporation may create or issue rights, options or warrants for
the purchase of shares of the corporation upon such terms and
conditions and for such consideration, if any, and such persons
as may be approved by the board of directors. If such rights,
options or warrants are to be issued to directors, officers or
employees as such of the corporation or any subsidiary thereof,
and not to the shareholders generally, their issuance shall be
authorized by the shareholders of the corporation who are
entitled to vote generally in the election of directors, or shall
be authorized by and consistent with a plan approved or ratified
by such shareholders, unless the articles of incorporation
provide that shareholder approval is not required. (emphasis
supplied)
The terms of Section 13.1-646 are broad, and we have not found any
legislative history or judicial decision indicating that the language of
the statute should be narrowly construed so as to deprive boards of
directors of the authority to issue rights similar to those contemplated
under the Plan. We note that similarly broadly-worded provisions of the
Delaware General Corporation Law have been held by the Delaware Supreme
Court to authorize a Board of Directors to issue rights with features
similar to those of the Plan. Moran v. Household International, Inc., 500
A.2d 1346 (Del. 1985) ("Household"); Revlon, Inc. v. MacAndrew & Forbes
Holdings, Inc. 506 A.2d 173 (Del. 1986) ("Revlon").
Based on the language of the Virginia statues, the Household and
Revlon cases and the absence of contrary Virginia precedent, we believe
that a Virginia court should hold that the Plan and the issuance of the
Rights are authorized by Section 13.1-646.
Restriction on Transfer to an Acquiring Person
The Plan provides that Rights cannot be transferred to any person who
is or, as a result of the transfer of Common Stock related to the Rights,
becomes, directly or indirectly, an Acquiring Person or an associate or
affiliate of an Acquiring Person. Any such purported transfer shall be
without effect and
<PAGE>
Board of Directors
Circuit City Stores, Inc.
June 16, 1988
Page 5
the holder of such Right prior to the purported transfer shall continue to
have all rights with respect to such Right, whether under any provision of
the Rights Agreement or otherwise. However, any transfer of Rights to such
person before he becomes such an Acquiring Person (or an associate or
affiliate) would be valid.
Section 13.1-649 of the Virginia code permits, among other things, a
restriction on transfer to any person or class of persons, if the
restriction is not "manifestly unreasonable." Since the purpose of the
Rights is to make the Company less vulnerable to abusive and unfair
takeover tactics by giving the Board the time and flexibility to ensure
that all shareholders are protected in their right to retain their
investment, or to secure full value for it, while not precluding a fair
acquisition of the Company, we believe that a court applying Virginia law
should hold that (i) the restrictions on transfer set forth in the Plan are
for a reasonable purpose and (ii) not permitting Rights to be transferred
to an Acquiring Person and its affiliates and associates is not manifestly
unreasonable. Without these restrictions on transfer, certain types of
unfair or coercive transactions could be pursued by a potential acquiror
without regard to the Rights, thereby undermining the function of the
Rights in encouraging a potential acquiror to negotiate with the Board and
to pay fair value to the Company's shareholders.
Someone seeking to attack the Plan might argue that the provisions of
Section 13.1-638 of the Virginia Code (which provides that all shares of a
class must have preferences, limitations and relative rights identical to
those of other shares) prohibit the discriminatory effect of the
restrictions on transfer imposed under the Plan.
Courts in some jurisdictions have held that rights plans violate
statutes similar to Section 13.1-638 because of provisions which, in
certain circumstances, invalidate rights held by the potential acquiror.
These courts have held that the statutory provisions in question prohibit
discrimination among shareholders. See, e.g., Amalgamated Sugar Co. v. NL
Industries, inc., 644 F. Supp. 1229 (S.D.N.Y. 1986), R. D. Smith & Co.,
Inc. v. Preway, Inc., 644 F. Supp. 868 (W.D. Wis. 1986). On the other
hand, courts in other jurisdictions dealing with similar plans and
statutory provisions, have held that the prohibition against discrimination
only extends to the shares and does not prohibit discrimination among
shareholders. Using this reasoning, these courts upheld the provisions in
the plans which restricted the exercisability of the rights by certain
holders. See, e.g., Dynamics Corp. of America v. CTS Corp., 805 F. 2d 705
(7th Cir. 1986), Gelco Corp. v. Coniston Partners, 652 F. Supp. 829
<PAGE>
Board of Directors
Circuit City Stores, Inc.
June 16, 1988
Page 6
(D.Minn. 1986), aff'd in part and vacated in part, 811 F.2d 414 (8th Cir.
1987).
Whether or not Section 13.1-638 would prohibit attempts to invalidate
rights already held by a person because of discrimination among existing
security holders, we believe that a court applying Virginia law should hold
that any such principles would be inapplicable to the transfer restrictions
contained in the Plan. These transfer restrictions may prevent a person
from acquiring more Rights but do not affect his ability to exercise Rights
previously acquired.
Standard of Conduct of the Board of Directors
Directors of a corporation stand in a fiduciary relationship to their
corporation, and therefore impliedly to their shareholders, and have a duty
to exercise due care in making decisions. To fulfill their obligations,
directors must have access to and consider reasonably available information
relevant to their decisions. Directors are generally protected against
liability for actions taken in exercise of their duties as directors by the
business judgment rule. This rule accords a presumption of validity to
directors' actions unless it is shown that the directors acted in bad
faith, fraudulently or in their own self interest. Courts applying
Virginia law have recognized the business judgment rule. Penn v. Pemberton
& Penn, 189 Va. 649, 53 S.E. 2d 823 (1949); Abella v. Universal Leaf
Tobacco Co., Inc., 495 F. Supp. 713 (E.D. Va. 1980), reconsidered at 546 F.
Supp. 795 (E.D. Va. 1980).
In the 1986 revision of the Virginia Stock Corporation Act, the
General Assembly adopted a statutory standard of conduct for directors. If
a director performs his duties in accordance with this standard of conduct,
he is not liable for any action taken as a director. Thus, the General
Assembly has codified the business judgment rule for directors of Virginia
corporations. To date there have been no judicial interpretations of the
new statute.
Section 13.1-690 of the Virginia Code sets forth the general standard
of conduct for directors and provides as follows:
A. A director shall discharge his duties as a
director, including his duties as a member of a
committee, in accordance with his good faith business
judgment of the best interests of the corporation.
<PAGE>
Board of Directors
Circuit City Stores, Inc.
June 16, 1988
Page 7
B. Unless he has knowledge or information concerning
the matter in question that makes reliance unwarranted,
a director is entitled to rely on information,
opinions, reports or statements, including financial
statements and other financial data, if prepared or
presented by:
1. One or more officers or employees of the
corporation whom the director believes, in good
faith, to be reliable and competent in the matters
presented;
2. Legal counsel, public accountants, or
other persons as to matters the director
believes, in good faith, are within the
person's professional or expert competence;
or
3. A committee of the board of directors of
which he is not a member if the director
believes, in good faith, that the committee
merits confidence.
C. A director is not liable for any action taken as a
director, or any failure to take any action, if he
performed the duties of his office in compliance with
this section.
D. A person alleging a violation of this section has
the burden of proving the violation. (emphasis
supplied)
Commentary from the drafters of this section reflects an intention to
simplify the standard of conduct and to avoid measuring the conduct against
a reasonable man standard. Instead courts should look to the director's
good faith decision of what is in the best interests of the corporation.
The drafters believed that under this standard, a director could be more
certain that he is acting properly than under previous judicial decisions.
While there have been no Virginia cases applying Section 13.1-690 of
the Virginia Code or the business judgment rule to actions of boards of
directors in issuing rights similar to those contemplated by the Plan,
several recent cases from other
<PAGE>
Board of Directors
Circuit City Stores, Inc.
June 16, 1988
Page 8
jurisdictions have examined director conduct in just such a context. The
most notable of these cases is the Household case, in which the Delaware
Supreme Court held that the business judgment rule as construed in that
state applies to the adoption of a shareholder rights plan. The Household
court also recognized the propriety of adopting such a plan in preparation
for the possibility of an unfriendly takeover attempt:
. . . pre-planning for the contingency of a hostile
takeover might reduce the risk that, under the pressure
of a takeover bid, management will fail to exercise
reasonable judgment. Therefore, in reviewing a pre-
planned defensive mechanism it seems even more
appropriate to apply the business judgment rule.
Moran v. Household International, Inc., supra, 500 A.2d
at 1350 (1985) (emphasis supplied).
More recently, the Delaware Supreme Court in the Revlon case has
determined that the adoption of a rights plan similar to the Plan was
within the power of the board of directors and was valid under the
circumstances existing at the time of its adoption. In an Illinois federal
case applying Indiana law (which was assumed to follow Delaware law), the
court dismissed arguments relating to the power of a board of directors to
adopt the rights plan under review, although it issued a preliminary
injunction against the plan on the grounds that under the circumstances the
particular plan was unreasonable in relationship to the particular threat
to the corporation. Dynamics Corp. of America v. CTS Corp., 637 F. Supp.
406 (N.D. Ill. 1986), aff'd, 794 F. 2d 250 (7th Cir. 1986).
The basic principles of the business judgment rule and of Section
13.1-690 of the Virginia Code are, we believe, quite similar under Virginia
and Delaware law. Accordingly, we believe that the analysis and
conclusions of the Delaware Supreme Court on such issues arising under
Delaware law would be favorably considered by a Virginia court in
considering whether the adoption of the Plan was a proper exercise of
business judgment under Section 13.1-690.
Given the broad authorization contained in Section 13.1-646 with
respect to the power of boards of directors to create and issue rights on
such terms as it determines and the provisions of Section 13.1-690 which
protect directors from liability for actions taken in exercise of their
good faith business judgment
<PAGE>
Board of Directors
Circuit City Stores, Inc.
June 16, 1988
Page 9
of the best interests of the corporation, we believe a Virginia court
should apply the Household and Revlon decisions and their reasoning to the
decision of the Board of Directors to adopt the Plan and to issue the
Rights.
Opinion
Based upon the foregoing, we are of the opinion that a court applying
Virginia law should hold that:
1. The adoption of the Plan and declaration of the Rights dividend
distribution was a matter properly within the business judgment of the
Board of Directors of the Company.
2. All corporate action required under the laws of Virginia has been
taken (i) for the authorization of issuance of the Rights in accordance
with the terms of the Rights Agreement, (ii) for the authorization of
issuance of the Series E Preferred Stock in accordance with the Articles of
Restatement of the Company, and (iii) for the Rights, when issued, to be
validly issued.
This opinion is limited to the adoption of the Plan by the Board of
Directors. Any further action or inaction by the Board of Directors with
respect to the Plan, including a decision relating to the redemption of the
Rights, will be judged in light of all the relevant facts and circumstances
applicable at the time. This opinion is furnished solely for your benefit
and may not be relied on by any other person.
Very truly yours,
/s/ McGUIRE, WOODS, BATTLE & BOOTHE
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Circuit City Stores, Inc.:
We consent to incorporation by reference in this Registration Statement on
Form S-8 of Circuit City Stores, Inc. of our report dated April 4, 1994,
relating to the consolidated balance sheets of Circuit City Stores, Inc.
and subsidiaries as of February 28, 1994 and 1993 and the related
consolidated statements of earnings, stockholders' equity, and cash flows
for each of the fiscal years in the three-year period ended February 28,
1994, which report is incorporated by reference in the February 28, 1994
annual report on Form 10-K of Circuit City Stores, Inc. We also consent to
the incorporation by reference in this Registration Statement of our report
dated April 4, 1994, relating to the financial statement schedules of
Circuit City Stores, Inc. which report is included in such annual report on
Form 10-K.
As discussed in Note 1(G) to the consolidated financial statements, the
Company changed its method of accounting for income taxes in fiscal 1993.
/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
Richmond, Virginia
November 29, 1994
EXHIBIT 24(a)
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Richard L. Sharp and
Michael T. Chalifoux, each acting singly, his attorney-in-fact, with full
power to act without the other, to execute on his behalf, individually and
in his capacity as an officer and/or director of Circuit City Stores, Inc.
(the "Company"), and to file any documents referred to below relating to
the registration of (i) 2,500,000 shares of Common Stock of the Company and
(ii) an equal number of rights to purchase preferred shares, Series E
("Rights") to be offered by the Company pursuant to the Circuit City
Stores, Inc. 1994 Stock Incentive Plan (the "1994 Plan"); such documents
being: registration statements on Form S-8 to be filed with the Securities
and Exchange Commission; such statements with, and or applications to, the
regulatory authorities of any state in the United States as may be
necessary to permit such shares to be offered in such states; any and all
other documents required to be filed with respect thereto with any
regulatory authority; and any and all amendments (post-effective and pre-
effective) to any of the foregoing, with all exhibits and documents
required to be filed in connection therewith.
The undersigned further grants unto said attorneys and each of them
full power and authority to perform each and every act necessary to be done
in order to accomplish the foregoing as fully as he himself might do.
IN WITNESS WHEREOF, the undersigned has executed this power of
attorney as of this 12th day of September, 1994.
/s/ ALAN L. WURTZEL
---------------------------
Alan L. Wurtzel
<PAGE>
EXHIBIT 24(b)
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Richard L. Sharp and
Michael T. Chalifoux, each acting singly, his attorney-in-fact, with full
power to act without the other, to execute on his behalf, individually and
in his capacity as an officer and/or director of Circuit City Stores, Inc.
(the "Company"), and to file any documents referred to below relating to
the registration of (i) 2,500,000 shares of Common Stock of the Company and
(ii) an equal number of rights to purchase preferred shares, Series E
("Rights") to be offered by the Company pursuant to the Circuit City
Stores, Inc. 1994 Stock Incentive Plan (the "1994 Plan"); such documents
being: registration statements on Form S-8 to be filed with the Securities
and Exchange Commission; such statements with, and or applications to, the
regulatory authorities of any state in the United States as may be
necessary to permit such shares to be offered in such states; any and all
other documents required to be filed with respect thereto with any
regulatory authority; and any and all amendments (post-effective and pre-
effective) to any of the foregoing, with all exhibits and documents
required to be filed in connection therewith.
The undersigned further grants unto said attorneys and each of them
full power and authority to perform each and every act necessary to be done
in order to accomplish the foregoing as fully as he himself might do.
IN WITNESS WHEREOF, the undersigned has executed this power of
attorney as of this 6th day of September, 1994.
/s/ RICHARD N. COOPER
----------------------------
Richard N. Cooper
<PAGE>
EXHIBIT 24(c)
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Richard L. Sharp and
Michael T. Chalifoux, each acting singly, his attorney-in-fact, with full
power to act without the other, to execute on his behalf, individually and
in his capacity as an officer and/or director of Circuit City Stores, Inc.
(the "Company"), and to file any documents referred to below relating to
the registration of (i) 2,500,000 shares of Common Stock of the Company and
(ii) an equal number of rights to purchase preferred shares, Series E
("Rights") to be offered by the Company pursuant to the Circuit City
Stores, Inc. 1994 Stock Incentive Plan (the "1994 Plan"); such documents
being: registration statements on Form S-8 to be filed with the Securities
and Exchange Commission; such statements with, and or applications to, the
regulatory authorities of any state in the United States as may be
necessary to permit such shares to be offered in such states; any and all
other documents required to be filed with respect thereto with any
regulatory authority; and any and all amendments (post-effective and pre-
effective) to any of the foregoing, with all exhibits and documents
required to be filed in connection therewith.
The undersigned further grants unto said attorneys and each of them
full power and authority to perform each and every act necessary to be done
in order to accomplish the foregoing as fully as he himself might do.
IN WITNESS WHEREOF, the undersigned has executed this power of
attorney as of this 6th day of September, 1994.
/s/ DOUGLAS D. DRYSDALE
----------------------------
Douglas D. Drysdale
<PAGE>
EXHIBIT 24(d)
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Richard L. Sharp and
Michael T. Chalifoux, each acting singly, his attorney-in-fact, with full
power to act without the other, to execute on his behalf, individually and
in his capacity as an officer and/or director of Circuit City Stores, Inc.
(the "Company"), and to file any documents referred to below relating to
the registration of (i) 2,500,000 shares of Common Stock of the Company and
(ii) an equal number of rights to purchase preferred shares, Series E
("Rights") to be offered by the Company pursuant to the Circuit City
Stores, Inc. 1994 Stock Incentive Plan (the "1994 Plan"); such documents
being: registration statements on Form S-8 to be filed with the Securities
and Exchange Commission; such statements with, and or applications to, the
regulatory authorities of any state in the United States as may be
necessary to permit such shares to be offered in such states; any and all
other documents required to be filed with respect thereto with any
regulatory authority; and any and all amendments (post-effective and pre-
effective) to any of the foregoing, with all exhibits and documents
required to be filed in connection therewith.
The undersigned further grants unto said attorneys and each of them
full power and authority to perform each and every act necessary to be done
in order to accomplish the foregoing as fully as he himself might do.
IN WITNESS WHEREOF, the undersigned has executed this power of
attorney as of this 8th day of September, 1994.
/s/ BARBARA S. FEIGIN
----------------------------
Barbara S. Feigin
<PAGE>
EXHIBIT 24(e)
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Richard L. Sharp and
Michael T. Chalifoux, each acting singly, his attorney-in-fact, with full
power to act without the other, to execute on his behalf, individually and
in his capacity as an officer and/or director of Circuit City Stores, Inc.
(the "Company"), and to file any documents referred to below relating to
the registration of (i) 2,500,000 shares of Common Stock of the Company and
(ii) an equal number of rights to purchase preferred shares, Series E
("Rights") to be offered by the Company pursuant to the Circuit City
Stores, Inc. 1994 Stock Incentive Plan (the "1994 Plan"); such documents
being: registration statements on Form S-8 to be filed with the Securities
and Exchange Commission; such statements with, and or applications to, the
regulatory authorities of any state in the United States as may be
necessary to permit such shares to be offered in such states; any and all
other documents required to be filed with respect thereto with any
regulatory authority; and any and all amendments (post-effective and pre-
effective) to any of the foregoing, with all exhibits and documents
required to be filed in connection therewith.
The undersigned further grants unto said attorneys and each of them
full power and authority to perform each and every act necessary to be done
in order to accomplish the foregoing as fully as he himself might do.
IN WITNESS WHEREOF, the undersigned has executed this power of
attorney as of this 6th day of September, 1994.
/s/ THEODORE D. NIERENBERG
------------------------------
Theodore D. Nierenberg
<PAGE>
EXHIBIT 24(f)
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Richard L. Sharp and
Michael T. Chalifoux, each acting singly, his attorney-in-fact, with full
power to act without the other, to execute on his behalf, individually and
in his capacity as an officer and/or director of Circuit City Stores, Inc.
(the "Company"), and to file any documents referred to below relating to
the registration of (i) 2,500,000 shares of Common Stock of the Company and
(ii) an equal number of rights to purchase preferred shares, Series E
("Rights") to be offered by the Company pursuant to the Circuit City
Stores, Inc. 1994 Stock Incentive Plan (the "1994 Plan"); such documents
being: registration statements on Form S-8 to be filed with the Securities
and Exchange Commission; such statements with, and or applications to, the
regulatory authorities of any state in the United States as may be
necessary to permit such shares to be offered in such states; any and all
other documents required to be filed with respect thereto with any
regulatory authority; and any and all amendments (post-effective and pre-
effective) to any of the foregoing, with all exhibits and documents
required to be filed in connection therewith.
The undersigned further grants unto said attorneys and each of them
full power and authority to perform each and every act necessary to be done
in order to accomplish the foregoing as fully as he himself might do.
IN WITNESS WHEREOF, the undersigned has executed this power of
attorney as of this 7th day of September, 1994.
/s/ WALTER J. SALMON
---------------------------
Walter J. Salmon
<PAGE>
EXHIBIT 24(g)
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Richard L. Sharp and
Michael T. Chalifoux, each acting singly, his attorney-in-fact, with full
power to act without the other, to execute on his behalf, individually and
in his capacity as an officer and/or director of Circuit City Stores, Inc.
(the "Company"), and to file any documents referred to below relating to
the registration of (i) 2,500,000 shares of Common Stock of the Company and
(ii) an equal number of rights to purchase preferred shares, Series E
("Rights") to be offered by the Company pursuant to the Circuit City
Stores, Inc. 1994 Stock Incentive Plan (the "1994 Plan"); such documents
being: registration statements on Form S-8 to be filed with the Securities
and Exchange Commission; such statements with, and or applications to, the
regulatory authorities of any state in the United States as may be
necessary to permit such shares to be offered in such states; any and all
other documents required to be filed with respect thereto with any
regulatory authority; and any and all amendments (post-effective and pre-
effective) to any of the foregoing, with all exhibits and documents
required to be filed in connection therewith.
The undersigned further grants unto said attorneys and each of them
full power and authority to perform each and every act necessary to be done
in order to accomplish the foregoing as fully as he himself might do.
IN WITNESS WHEREOF, the undersigned has executed this power of
attorney as of this 6th day of September, 1994.
/s/ EDWARD VILLANUEVA
---------------------------
Edward Villanueva
EXHIBIT 99
CIRCUIT CITY STORES, INC.
1994 STOCK INCENTIVE PLAN
1. Purpose. The purpose of this Circuit City Stores, Inc. 1994
Stock Incentive Plan (the "Plan") is to further the long term stability and
financial success of Circuit City Stores, Inc. (the "Company") by
attracting and retaining key employees of the Company through the use of
stock incentives. It is believed that ownership of Company Stock will
stimulate the efforts of those employees upon whose judgment and interest
the Company is and will be largely dependent for the successful conduct of
its business. It is also believed that Incentive Awards granted to
employees under this Plan will strengthen their desire to remain with the
Company and will further the identification of those employees' interests
with those of the Company's shareholders.
2. Definitions. As used in the Plan, the following terms have the
meanings indicated:
(a) "Act" means the Securities Exchange Act of 1934, as amended.
(b) "Applicable Withholding Taxes" means the aggregate amount of
federal, state and local income and payroll taxes that the Company is
required to withhold in connection with any exercise of a Nonstatutory
Stock Option or Stock Appreciation Right, or the award of Restricted Stock.
(c) "Board" means the Board of Directors of the Company.
(d) "Change of Control" means the occurrence of either of the
following events: (i) a third person, including a "group" as defined in
Section 13(d)(3) of the Act, becomes, or obtains the right to become, the
beneficial owner of Company securities having 20% or more of the combined
voting power of the then outstanding securities of the Company that may be
cast for the election of directors to the Board of the Company (other than
as a result of an issuance of securities initiated by the Company in the
ordinary course of business); or (ii) as the result of, or in connection
with, any cash tender or exchange offer, merger or other business
combination, sale of assets or contested election, or any combination of
the foregoing transactions, the persons who were directors of the Company
before such transactions shall cease to constitute a majority of the Board
or of the board of directors of any successor to the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
<PAGE>
(f) "Committee" means the committee appointed by the Board as
described under Section 14.
(g) "Company" means Circuit City Stores, Inc., a Virginia
corporation.
(h) "Company Stock" means shares of voting common stock of the
Company, subject to adjustment as provided in Section 13.
(i) "Date of Grant" means the date on which an Incentive Award is
granted by the Committee.
(j) "Disability" or "Disabled" means, as to an Incentive Stock
Option, a Disability within the meaning of Code section 22(e)(3). As to
all other forms of Incentive Awards, the Committee shall determine whether
a Disability exists and such determination shall be conclusive.
(k) "Fair Market Value" means, on any given date, the average of the
highest and lowest registered sales prices of the Company Stock on such day
on the exchange on which it generally has the greatest trading volume.
(l) "Incentive Award" means, collectively, the award of an Option,
Stock Appreciation Right, or Restricted Stock under the Plan.
(m) "Incentive Stock Option" means an Option intended to meet the
requirements of, and qualify for favorable federal income tax treatment
under, Code section 422.
(n) "Insider" means a person subject to Section 16(b) of the Act.
(o) "Nonstatutory Stock Option" means an Option that does not meet
the requirements of Code section 422 or, even if meeting the requirements
of Code section 422, is not intended to be an Incentive Stock Option and is
so designated.
(p) "Option" means a right to purchase Company Stock granted under
the Plan, at a price determined in accordance with the Plan.
(q) "Parent" means, with respect to any corporation, a parent of that
corporation within the meaning of Code section 424(e).
(r) "Participant" means any employee who receives an Incentive Award
under the Plan.
(s) "Reload Feature" means a feature of an Option described in a
Participant's stock option agreement that authorizes the automatic grant of
a Reload Option in accordance with the provisions of Section 9(e).
<PAGE>
(t) "Reload Option" means an Option automatically granted to a
Participant equal to the number of shares of already owned Company Stock
delivered by the Participant in payment of the exercise price of an Option
having a Reload Feature.
(u) "Restricted Stock" means Company Stock awarded upon the terms and
subject to the restrictions set forth in Section 6.
(v) "Restricted Stock Award" means an award of Restricted Stock
granted under the Plan.
(w) "Retirement Date" means, with respect to a Participant, the
earliest date on which the Participant is eligible to retire under a
qualified Code section 401(a) plan of the Company, or, if there is no such
plan, age 65.
(x) "Rule 16b-3" means Rule 16b-3 adopted pursuant to section 16(b)
of the Act. A reference in the Plan to Rule 16b-3 shall include a
reference to any corresponding rule (or number redesignation) of any
amendments to Rule 16b-3 adopted after the effective date of the Plan's
adoption.
(y) "Stock Appreciation Right" means a right to receive amounts from
the Company awarded upon the terms and subject to the restrictions set
forth in Section 8.
(z) "Subsidiary" means, with respect to any corporation, a subsidiary
of that corporation within the meaning of Code section 424(f).
(aa) "10% Shareholder" means a person who owns, directly or
indirectly, stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any Parent or Subsidiary of
the Company. Indirect ownership of stock shall be determined in accordance
with Code section 424(d).
3. General. Incentive Awards may be granted under the Plan in the
form of Options, Stock Appreciation Rights, and Restricted Stock. Options
granted under the Plan may be Incentive Stock Options or Nonstatutory Stock
Options. The provisions of the Plan referring to Insiders or Rule 16b-3
shall apply only to Participants who are subject to section 16 of the Act.
4. Stock. Subject to Section 13 of the Plan, there shall be
reserved for issuance under the Plan an aggregate of two million five
hundred thousand (2,500,000) shares of Company Stock, which shall be
authorized but unissued shares. No more than one million (1,000,000)
shares may be allocated to the Incentive Awards that are granted to any
employee during any single calendar year. Shares that have not been issued
and shares allocable to options or portions thereof that expire or
otherwise terminate unexercised after the effective date of the Plan under
the Circuit City Stores, Inc. 1986 Stock Incentive Plan (the "1986 Plan")
and the Circuit City Stores, Inc. 1988 Stock Incentive Plan (the "1988
<PAGE>
Plan") may be subjected to an Incentive Award under the Plan. Shares that
have not been issued under the Plan and that are allocable to Incentive
Awards or portions thereof that expire or otherwise terminate unexercised
may again be subjected to an Incentive Award under the Plan. Similarly, if
any shares of Restricted Stock issued pursuant to the Plan are reacquired
by the Company as a result of a forfeiture of such shares pursuant to the
Plan, such shares may, to the extent permitted by Rule 16b-3 again be
subjected to an Incentive Award under the Plan. An Incentive Award to a
Participant may be conditioned upon the surrender for cancellation of an
option granted under the 1986 Plan, the 1988 Plan or an existing Incentive
Award. For purposes of determining the number of shares that are available
for Incentive Awards under the Plan, such number shall, to the extent
permissible under Rule 16b-3, include the number of shares surrendered by
an optionee or retained by the Company in payment of federal and state
income tax withholding liabilities upon exercise of an Option.
5. Eligibility.
(a) All present and future employees of the Company (or any Parent or
Subsidiary of the Company, whether now existing or hereafter created or
acquired) shall be eligible to receive Incentive Awards under the Plan.
The Committee shall have the power and complete discretion, as provided in
Section 14, to select which employees shall receive Incentive Awards and to
determine for each such Participant the terms and conditions, the nature of
the award and the number of shares to be allocated to each Participant as
part of each Incentive Award.
(b) The grant of an Incentive Award shall not obligate the Company or
any Parent or Subsidiary of the Company to pay a Participant any particular
amount of remuneration, to continue the employment of the Participant after
the grant or to make further grants to the Participant at any time
thereafter.
6. Restricted Stock Awards.
(a) Whenever the Committee deems it appropriate to grant a Restricted
Stock Award, notice shall be given to the Participant stating the number of
shares of Restricted Stock for which the Restricted Stock Award is granted
and the terms and conditions to which the Restricted Stock Award is
subject. This notice, when accepted in writing by the Participant, shall
become an award agreement between the Company and the Participant. A
Restricted Stock Award may be made by the Committee in its discretion
without cash consideration.
(b) Restricted Stock issued pursuant to the Plan shall be subject to
the following restrictions:
(i) None of such shares may be sold, assigned, transferred,
pledged, hypothecated, or otherwise encumbered or disposed of until
<PAGE>
the restrictions on such shares shall have lapsed or shall have been
removed pursuant to paragraph (d) or (e) below.
(ii) The restrictions on such shares must remain in effect and
may not lapse for a period of three years beginning on the date of
grant, except as provided under paragraph (d) or (e) in the case of
Disability, retirement, death or a Change in Control.
(iii) If a Participant ceases to be employed by the Company or a
Parent or Subsidiary of the Company, the Participant shall forfeit to
the Company any shares of Restricted Stock, the restrictions on which
shall not have lapsed or shall not have been removed pursuant to
paragraph (d) or (e) below, on the date such Participant shall cease
to be so employed.
(iv) The Committee may establish such other restrictions on such
shares that the Committee deems appropriate, including, without
limitation, events of forfeiture.
(c) Upon the acceptance by a Participant of a Restricted Stock Award,
such Participant shall, subject to the restrictions set forth in paragraph
(b) above, have all the rights of a shareholder with respect to the shares
of Restricted Stock subject to such Restricted Stock Award, including, but
not limited to, the right to vote such shares of Restricted Stock and the
right to receive all dividends and other distributions paid thereon.
Certificates representing Restricted Stock shall bear a legend referring to
the restrictions set forth in the Plan and the Participant's award
agreement.
(d) The Committee shall establish as to each Restricted Stock Award
the terms and conditions upon which the restrictions set forth in paragraph
(b) above shall lapse. Such terms and conditions may include, without
limitation, the lapsing of such restrictions as a result of the Disability,
death or retirement of the Participant or the occurrence of a Change of
Control.
(e) Notwithstanding the forfeiture provisions of paragraph (b)(iii)
above, the Committee may at any time, in its sole discretion, accelerate
the time at which any or all restrictions will lapse or remove any and all
such restrictions.
(f) Each Participant shall agree at the time his Restricted Stock
Award is granted, and as a condition thereof, that the Company shall deduct
from any payments of any kind otherwise due from the Company to such
Participant the aggregate amount of any Federal, state or local taxes of
any kind required by law to be withheld with respect to the shares of
Restricted Stock subject to the Restricted Stock Award or that such
Participant will pay to the Company, or make arrangements satisfactory to
the Company regarding the payment to the Company of, the aggregate amount
<PAGE>
of any such taxes. Until such amount has been paid or arrangements
satisfactory to the Company have been made, no stock certificates free of a
legend reflecting the restrictions set forth in paragraph (b) above shall
be issued to such Participant. As an alternative to making a cash payment
to the Company to satisfy Applicable Withholding Taxes, the Committee may
establish procedures permitting the Participant to elect to (a) deliver
shares of already owned Company Stock or (b) have the Company retain that
number of shares of Company Stock that would satisfy all or a specified
portion of the Federal, state and local tax liabilities of the Participant
arising in the year the Incentive Award becomes subject to tax. Any such
election shall be made only in accordance with procedures established by
the Committee.
7. Stock Options.
(a) Whenever the Committee deems it appropriate to grant Options,
notice shall be given to the eligible employee stating the number of shares
for which Options are granted, the Option price per share, whether the
Options are Incentive Stock Options or Nonstatutory Stock Options, the
extent, if any, to which Stock Appreciation Rights are granted, and the
conditions to which the grant and exercise of the Options are subject.
This notice, when duly accepted in writing by the eligible employee, shall
become a stock option agreement between the Company and the eligible
employee.
(b) The exercise price of shares of Company Stock covered by an
Incentive Stock Option shall be not less than 100% of the Fair Market Value
of such shares on the Date of Grant; provided that if an Incentive Stock
Option is granted to an employee who, at the time of the grant, is a 10%
Shareholder, then the exercise price of the shares covered by the Incentive
Stock Option shall be not less than 110% of the Fair Market Value of such
shares on the Date of Grant.
(c) The exercise price of shares of Company Stock covered by a
Nonstatutory Stock Option shall be not less than 100% of the Fair Market
Value of such shares on the Date of Grant.
(d) Options may be exercised in whole or in part at such times as may
be specified by the Committee in the Participant's stock option agreement;
provided that the exercise provisions for Incentive Stock Options shall in
all events not be more liberal than the following provisions:
(i) No Incentive Stock Option may be exercised after the first
to occur of:
(x) Ten years (or, in the case of an Incentive Stock Option
granted to a 10% Shareholder, five years) from the Date of Grant,
(y) Three months following the date of the Participant's
termination of employment with the Company and any Parent or
<PAGE>
Subsidiary of the Company for reasons other than death or
Disability; or
(z) One year following the date of the Participant's
termination of employment by reason of death or Disability.
(ii) Except as otherwise provided in this paragraph, no
Incentive Stock Option may be exercised unless the Participant is
employed by the Company or a Parent or Subsidiary of the Company at
the time of the exercise and has been so employed at all times since
the Date of Grant. If a Participant's employment is terminated other
than by reason of death or Disability at a time when the Participant
holds an Incentive Stock Option that is exercisable (in whole or in
part), the Participant may exercise any or all of the exercisable
portion of the Incentive Stock Option (to the extent exercisable on
the date of termination) within three months after the Participant's
termination of employment. If a Participant's employment is
terminated by reason of his Disability at a time when the Participant
holds an Incentive Stock Option that is exercisable (in whole or in
part), the Participant may exercise any or all of the exercisable
portion of the Incentive Stock Option (to the extent exercisable on
the date of Disability) within one year after the Participant's
termination of employment. If a Participant's employment is
terminated by reason of his death at a time when the Participant holds
an Incentive Stock Option that is exercisable (in whole or in part),
the Incentive Stock Option may be exercised (to the extent exercisable
on the date of death) within one year after the Participant's death by
the person to whom the Participant's rights under the Incentive Stock
Option shall have passed by will or by the laws of descent and
distribution.
(iii) An Incentive Stock Option, by its terms, shall be
exercisable in any calendar year only to the extent that the aggregate
Fair Market Value (determined at the Date of Grant) of the Company
Stock with respect to which Incentive Stock Options are exercisable
for the first time during the calendar year does not exceed $100,000
(the "Limitation Amount"). Incentive Stock Options granted after
December 31, 1986 under the Plan and all other plans of the Company
and any Parent or Subsidiary of the Company shall be aggregated for
purposes of determining whether the Limitation Amount has been
exceeded. The Committee may impose such conditions as it deems
appropriate on an Incentive Stock Option to ensure that the foregoing
requirement is met. If Incentive Stock Options exceed the Limitation
Amount, the excess Options will be treated as Nonstatutory Stock
Options to the extent permitted by law.
(e) Notwithstanding the foregoing, no Option shall be exercisable by
an Insider within the first six months after it is granted; provided that
this restriction shall not apply if the Participant becomes Disabled or
<PAGE>
dies during the six-month period.
(f) The Committee may, in its discretion, grant Options that by their
terms become fully exercisable upon a Change of Control notwithstanding
other conditions on exercisability in the stock option agreement, and, in
such event, paragraph (e) shall not apply.
8. Stock Appreciation Rights.
(a) Whenever the Committee deems it appropriate, Stock Appreciation
Rights may be granted in connection with all or any part of an Option,
either concurrently with the grant of the Option or, if the Option is a
Nonstatutory Stock Option, by an amendment to the Option at any time
thereafter during the term of the Option. Stock Appreciation Rights may be
exercised in whole or in part at such times and under such conditions as
may be specified by the Committee in the Participant's stock option
agreement. The following provisions apply to all Stock Appreciation Rights
that are granted in connection with Options:
(i) Stock Appreciation Rights shall entitle the Participant,
upon exercise of all or any part of the Stock Appreciation Rights, to
surrender to the Company unexercised that portion of the underlying
Option relating to the same number of shares of Company Stock as is
covered by the Stock Appreciation Rights (or the portion of the Stock
Appreciation Rights so exercised) and to receive in exchange from the
Company an amount equal to the excess of (x) the fair market value on
the date of exercise of the Company Stock covered by the surrendered
portion of the underlying Option over (y) the exercise price of the
Company Stock covered by the surrendered portion of the underlying
Option. The Committee may limit the amount that the Participant will
be entitled to receive upon exercise of the Stock Appreciation Right.
(ii) Upon the exercise of a Stock Appreciation Right and
surrender of the related portion of the underlying Option, the Option,
to the extent surrendered, shall not thereafter be exercisable.
(iii) The Committee may, in its discretion, grant Stock
Appreciation Rights in connection with Options which by their terms
become fully exercisable upon a Change of Control, which Stock
Appreciation Rights shall only be exercisable following a Change of
Control. The underlying Option may provide that such Stock
Appreciation Rights shall be payable solely in cash. The terms of the
underlying Option shall provide the method by which fair market value
of the Company Stock on the date of exercise shall be calculated based
on one of the following alternatives:
(x) the closing price of the Company Stock on the exchange
on which it is then traded on the business day immediately
<PAGE>
preceding the day of exercise;
(y) the highest closing price of the Company Stock on the
exchange on which it is then traded, during the 90 days
immediately preceding the Change of Control; or
(z) the greater of (x) or (y).
(iv) Subject to any further conditions upon exercise imposed by
the Committee, a Stock Appreciation Right shall be exercisable only to
the extent that the related Option is exercisable, except that in no
event shall a Stock Appreciation Right held by an Insider be
exercisable within the first six months after it is awarded even
though the related Option is or becomes exercisable, and shall expire
no later than the date on which the related Option expires.
(v) A Stock Appreciation Right may only be exercised at a time
when the fair market value of the Company Stock covered by the Stock
Appreciation Right exceeds the exercise price of the Company Stock
covered by the underlying Option.
(b) Whenever the Committee deems it appropriate, Stock Appreciation
Rights may be granted without related Options. The terms and conditions of
the award shall be set forth in a stock appreciation rights agreement
between the Company and the Participant. The following provisions apply to
all Stock Appreciation Rights that are granted without related Options:
(i) Stock Appreciation Rights shall entitle the Participant,
upon the exercise of all or any part of the Stock Appreciation Rights,
to receive from the Company an amount equal to the excess of (x) the
fair market value on the date of exercise of the Company Stock covered
by the Stock Appreciation Rights over (y) the fair market value on the
Date of Grant of the Company Stock covered by the Stock Appreciation
Rights. The Committee may limit the amount that the Participant may
be entitled to receive upon exercise of the Stock Appreciation Right.
(ii) Stock Appreciation Rights shall be exercisable, in whole or
in part, at such times as the Committee shall specify in the
Participant's stock appreciation rights agreement except that in no
event shall a Stock Appreciation Right held by an Insider be
exercisable within the first six months after it is awarded.
(c) The manner in which the Company's obligation arising upon the
exercise of a Stock Appreciation Right shall be paid shall be determined by
the Committee and shall be set forth in the Participant's stock option
agreement (if the Stock Appreciation Rights are related to an Option) or
stock appreciation rights agreement. The Committee may provide for payment
in Company Stock or cash, or a fixed combination of Company Stock or cash,
<PAGE>
or the Committee may reserve the right to determine the manner of payment
at the time the Stock Appreciation Right is exercised. Shares of Company
Stock issued upon the exercise of a Stock Appreciation Right shall be
valued at their fair market value on the date of exercise.
(d) Except in the case of Stock Appreciation Rights which by their
terms are exercisable only during a specified period following a Change of
Control, which period does not exceed 90 days, an Insider may only exercise
a Stock Appreciation Right during the period beginning on the third
business day and ending on the twelfth business day following the release
for publication of quarterly or annual summary statements of the Company's
sales and earnings. The release for publication shall be deemed to have
occurred if the specified financial data (i) appears on a wire service,
(ii) appears in a financial news service, (iii) appears in a newspaper of
general circulation, or (iv) is otherwise made publicly available.
An Insider may exercise a Stock Appreciation Right which is by its
terms exercisable only during a specified period following a Change of
Control, which period does not exceed 90 days, during the period specified
therein, provided that no Stock Appreciation Right held by an Insider shall
be exercisable by its terms within the first six months after it is
granted.
9. Method of Exercise of Options and Stock Appreciation Rights.
(a) Options and Stock Appreciation Rights may be exercised by the
employee giving written notice of the exercise to the Company, stating the
number of shares the employee has elected to purchase under the Option or
the number of Stock Appreciation Rights he has elected to exercise. In the
case of a purchase of shares under an Option, such notice shall be
effective only if accompanied by the exercise price in full paid in cash;
provided that, if the terms of an Option so permit, the employee may (i)
deliver shares of Company Stock (valued at their Fair Market Value on the
date of exercise) in satisfaction of all or any part of the exercise price,
(ii) deliver a properly executed exercise notice together with irrevocable
instructions to a broker to deliver promptly to the Company, from the sale
or loan proceeds with respect to the sale of Company Stock or a loan
secured by Company Stock, the amount necessary to pay the exercise price
and, if required by the Committee, applicable withholding taxes, or (iii)
deliver an interest bearing promissory note, payable to the Company, in
payment of all or part of the exercise price together with such collateral
as may be required by the Committee at the time of exercise. The interest
rate under any such promissory note shall be equal to the minimum interest
rate required at the time to avoid imputed interest under the Code.
(b) The Company may place on any certificate representing Company
Stock issued upon the exercise of an Option or a Stock Appreciation Right
any legend deemed desirable by the Company's counsel to comply with federal
<PAGE>
or state securities laws, and the Company may require of the employee a
customary written indication of his investment intent. Until the employee
has made any required payment, including any applicable withholding taxes,
and has had issued to him a certificate for the shares of Company Stock
acquired, he shall possess no shareholder rights with respect to the
shares.
(c) As an alternative to making a cash payment to the Company to
satisfy Applicable Withholding Taxes, the Committee may establish
procedures permitting the Participant to elect to (a) deliver shares of
already owned Company Stock or (b) have the Company retain that number of
shares of Company Stock that would satisfy all or a specified portion of
the Federal, state and local tax liabilities of the Participant arising in
the year the Incentive Award becomes subject to tax. Any such election
shall be made only in accordance with procedures established by the
Committee.
(d) Notwithstanding anything herein to the contrary, if the Company
is subject to section 16 of the Act, Options and Stock Appreciation Rights
shall always be granted and exercised in such a manner as to conform to the
provisions of Rule 16b-3.
(e) If a Participant exercises an Option that has a Reload Feature by
delivering already owned shares of Company Stock in payment of the exercise
price, the Participant shall automatically be granted a Reload Option. At
the time the Option with a Reload Feature is awarded, the Committee may
impose such restrictions on the Reload Option as it deems appropriate, but
in any event the Reload Option shall be subject to the following
restrictions:
(i) The exercise price of shares of Company Stock covered by a
Reload Option shall be not less than 100% of the Fair Market Value of
such shares on the Date of Grant of the Reload Option;
(ii) If and to the extent required by Rule 16b-3, or if so
provided in the option agreement, a Reload Option shall not be
exercisable within the first six months after it is granted; provided
that, subject to the terms of the Participant's stock option
agreement, this restriction shall not apply if the Participant becomes
Disabled or dies during the six-month period;
(iii) The Reload Option shall be subject to the same
restrictions on exercisability imposed on the underlying Option
(possessing the Reload Feature) that was exercised unless the
Committee specifies different limitations;
(iv) The Reload Option shall not be exercisable until the
expiration of any retention holding period imposed on the disposition
of any shares of Company Stock covered by the underlying Option
(possessing the Reload Feature) that was exercised;
<PAGE>
(v) The Reload Option shall not have a Reload Feature.
10. Nontransferability of Incentive Awards. Incentive Awards shall
not be transferrable unless so provided in the award agreement. Options
and Stock Appreciation Rights, by their terms, shall not be transferable by
the Participant except by will or by the laws of descent and distribution
and shall be exercisable, during the Participant's lifetime, only by the
Participant or by his guardian or legal representative.
11. Effective Date of the Plan. This Plan shall be effective as of
February 15, 1994 and shall be submitted to the shareholders of the Company
for approval. No Option or Stock Appreciation Right shall be exercisable
and no Company Stock shall be issued under the Plan until (i) the Plan has
been approved by the Company's shareholders, (ii) shares issuable under the
Plan have been registered with the Securities and Exchange Commission and
accepted for listing on the New York Stock Exchange upon notice of
issuance, and (iii) the requirements of any applicable state securities
laws have been met.
12. Termination, Modification, Change. If not sooner terminated by
the Board, this Plan shall terminate at the close of business on February
14, 2004. No Incentive Awards shall be granted under the Plan after its
termination. The Board may terminate the Plan or may amend the Plan in
such respects as it shall deem advisable; provided that, if and to the
extent required by the Code or Rule 16b-3, no change shall be made that
increases the total number of shares of Company Stock reserved for issuance
pursuant to Incentive Awards granted under the Plan (except pursuant to
Section 13), expands the class of persons eligible to receive Incentive
Awards, or materially increases the benefits accruing to Participants under
the Plan, unless such change is authorized by the shareholders of the
Company. Notwithstanding the foregoing, the Board may unilaterally amend
the Plan and Incentive Awards as it deems appropriate to ensure compliance
with Rule 16b-3 and to cause Incentive Awards to meet the requirements of
the Code, including Code sections 162(m) and 422, and regulations
thereunder. Except as provided in the preceding sentence, a termination or
amendment of the Plan shall not, without the consent of the Participant,
adversely affect a Participant's rights under an Incentive Award previously
granted to him.
13. Change in Capital Structure.
(a) The number of shares reserved for issuance under the Plan, the
terms of Incentive Awards, and all computations under the Plan shall be
appropriately adjusted by the Committee should the Company effect one or
more stock dividends, stock splits, subdivisions or consolidations of
shares, or other similar changes in capitalization, or if the par value of
Company Stock is altered. If the adjustment would produce fractional
<PAGE>
shares with respect to any unexercised Option, the Committee may adjust
appropriately the number of shares covered by the Option so as to eliminate
the fractional shares.
(b) If the Company is a party to a consolidation or merger in which
the Company is not the surviving corporation, a transaction that results in
the acquisition of substantially all of the Company's outstanding stock by
a single person or entity, or a sale or transfer of substantially all of
the Company's assets, the Committee may take such actions with respect to
outstanding Incentive Awards as the Committee deems appropriate.
(c) Any determination made or action taken under this Section 13 by
the Committee shall be final and conclusive and may be made or taken
without the consent of any Participant.
14. Administration of the Plan. The Plan shall be administered by a
Committee, which shall be appointed by the Board, consisting of not less
than three members of the Board. Subject to paragraph (e) below, the
Committee shall be the Compensation and Personnel Committee unless the
Board shall appoint another Committee to administer the Plan. The
Committee shall have general authority to impose any limitation or
condition upon an Incentive Award that the Committee deems appropriate to
achieve the objectives of the Incentive Award and the Plan and, without
limitation and in addition to powers set forth elsewhere in the Plan, shall
have the following specific authority:
(a) The Committee shall have the power and complete discretion to
determine (i) which eligible employees shall receive an Incentive Award and
the nature of the Incentive Award, (ii) the number of shares of Company
Stock to be covered by each Incentive Award, (iii) whether Options shall be
Incentive Stock Options or Nonstatutory Stock Options, (iv) when, whether
and to what extent Stock Appreciation Rights shall be granted in connection
with Options, (v) the fair market value of Company Stock, (vi) the time or
times when an Incentive Award shall be granted, (vii) whether an Incentive
Award shall become vested over a period of time and when it shall be fully
vested, (viii) when Options and Stock Appreciation Rights may be exercised,
(ix) whether a Disability exists, (x) the manner in which payment will be
made upon the exercise of Options or Stock Appreciation Rights, (xi)
conditions relating to the length of time before disposition of Company
Stock received upon the exercise of Options or Stock Appreciation Rights is
permitted, (xii) procedures for the withholding or delivery of Company
Stock to satisfy Applicable Withholding Taxes, (xiii) the terms and
conditions applicable to Restricted Stock Awards, (xiv) the terms and
conditions on which restrictions upon Restricted Stock shall lapse, (xv)
whether to accelerate the time at which any or all restrictions with
respect to Restricted Stock will lapse or be removed, (xvi) notice
provisions relating to the sale of Company Stock acquired under the Plan,
<PAGE>
and (xvii) any additional requirements relating to Incentive Awards that
the Committee deems appropriate. Notwithstanding the foregoing, no "tandem
stock options" (where two stock options are issued together and the
exercise of one option affects the right to exercise the other option) may
be issued in connection with Incentive Stock Options. The Committee shall
have the power to amend the terms of previously granted Incentive Awards so
long as the terms as amended are consistent with the terms of the Plan and
provided that the consent of the Participant is obtained with respect to
any amendment that would be detrimental to the Participant, except that
such consent will not be required if such amendment is for the purpose of
complying with Rule 16b-3 or any requirement of the Code applicable to the
Incentive Award.
(b) The Committee may adopt rules and regulations for carrying out
the Plan. The interpretation and construction of any provision of the Plan
by the Committee shall be final and conclusive. The Committee may consult
with counsel, who may be counsel to the Company, and shall not incur any
liability for any action taken in good faith in reliance upon the advice of
counsel.
(c) A majority of the members of the Committee shall constitute a
quorum, and all actions of the Committee shall be taken by a majority of
the members present. Any action may be taken by a written instrument
signed by all of the members, and any action so taken shall be fully
effective as if it had been taken at a meeting.
(d) The Board from time to time may appoint members previously
appointed and may fill vacancies, however caused, in the Committee.
(e) All members of the Committee must be "outside directors" as
described in Code section 162(m). In addition, no member of the Committee
shall be eligible to receive any Incentive Award under the Plan or to
participate in any other plan of the Company or any Parent or Subsidiary of
the Company that entitles participants to acquire stock, stock options or
stock appreciation rights or other equity securities of the Company or any
Parent or Subsidiary of the Company except for the 1989 Non-Employee
Directors Stock Option Plan (the "Directors Plan"), and no person shall
become a member of the Committee if, within the preceding one-year period,
and, if and to the extent required by Rule 16b-3, within the following one-
year period, the person shall have been, or will become, eligible to
participate in the Plan or any other such plan of the Company or any Parent
or Subsidiary of the Company except for the Directors Plan.
15. Notice. All notices and other communications required or
permitted to be given under this Plan shall be in writing and shall be
deemed to have been duly given if delivered personally or mailed first
class, postage prepaid, as follows:
(a) if to the Company - at its principal business address to the
attention of the Secretary;
<PAGE>
(b) if to any Participant - at the last address of the Participant
known to the sender at the time the notice or other communication is sent.
16. Interpretation. The terms of this Plan are subject to all
present and future regulations and rulings of the Secretary of the Treasury
or his delegate relating to the qualification of Incentive Stock Options
under the Code. If any provision of the Plan conflicts with any such
regulation or ruling, then that provision of the Plan shall be void and of
no effect. As to all Incentive Stock Options and all Nonstatutory Stock
Options with an exercise price of at least 100% of Fair Market Value of the
Company Stock on the Date of Grant, this Plan shall be interpreted for such
Options to be excluded from applicable employee remuneration for purposes
of Code section 162(m).
