FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended May 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
Commission File Number 1-5767
CIRCUIT CITY STORES, INC.
(Exact Name of Registrant as Specified in its Charter)
VIRGINIA 54-0493875
(State of Incorporation) (I.R.S. Employer
Identification No.)
9950 MAYLAND DRIVE, RICHMOND, VIRGINIA 23233
(Address of Principal Executive Offices and Zip Code)
(804) 527-4000
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date.
Class Outstanding at June 30, 1994
Common Stock, par value $0.50 96,291,832 Shares
An Index is included on Page 2 and a separate Index to Exhibits is included
on Page 12.
Page 1 of 13
<PAGE>
CIRCUIT CITY STORES, INC. AND SUBSIDIARIES
INDEX
Page
No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
May 31, 1994 and February 28, 1994 3
Consolidated Statements of Earnings -
Three Months Ended May 31, 1994 and 1993 4
Consolidated Statements of Cash Flows -
Three Months Ended May 31, 1994 and 1993 5
Note to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7-10
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders 11
Item 6. Exhibits and Reports on Form 8-K 12
Page 2 of 13
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CIRCUIT CITY STORES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in thousands)
May 31, 1994 Feb. 28, 1994
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 64,316 $ 75,194
Net accounts and notes receivable 173,669 188,990
Merchandise inventory 826,468 721,348
Prepaid expenses and other current assets 16,849 11,476
Total current assets 1,081,302 997,008
Property and equipment, net 460,352 438,096
Deferred income taxes 108,534 105,388
Other assets 13,183 14,172
TOTAL ASSETS $1,663,371 $1,554,664
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 1,781 $ 1,819
Accounts payable 412,773 419,037
Short-term debt 128,000 -
Accrued expenses and other current
liabilities 83,713 86,826
Accrued income taxes 19,606 38,582
Total current liabilities 645,873 546,264
Long-term debt, excluding current
installments 28,865 29,648
Deferred revenue and other liabilities 259,180 268,360
TOTAL LIABILITIES 933,918 844,272
Stockholders' equity:
Common stock, $0.50 par value 48,160 48,040
Capital in excess of par value 65,662 64,485
Retained earnings 615,631 597,867
TOTAL STOCKHOLDERS' EQUITY 729,453 710,392
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $1,663,371 $1,554,664
See accompanying note to consolidated financial statements.
</TABLE>
Page 3 of 13
<PAGE>
<TABLE>
CIRCUIT CITY STORES, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings (Unaudited)
(Amounts in thousands except per share data)
Three Months Ended
May 31,
1994 1993
<S> <C> <C>
Net sales and operating revenues $1,048,695 $ 798,950
Cost of sales, buying and warehousing 785,018 583,884
Gross profit 263,677 215,066
Selling, general and administrative
expenses 231,826 186,926
Interest expense 353 791
Total expenses 232,179 187,717
Earnings before income taxes 31,498 27,349
Provision for income taxes 11,810 10,119
Net earnings $ 19,688 $ 17,230
Weighted average common shares
and common share equivalents 96,994 97,761
Net earnings per share $ 0.20 $ 0.18
Dividends paid per common share $ 0.02 $ 0.02
See accompanying note to consolidated financial statements.
</TABLE>
Page 4 of 13
<PAGE>
<TABLE>
CIRCUIT CITY STORES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(Amounts in thousands)
Three Months Ended
May 31,
1994 1993
<S> <C> <C>
Operating Activities:
Net earnings $ 19,688 $ 17,230
Adjustments to reconcile net earnings to net
cash used in operating activities:
Depreciation and amortization 15,975 12,368
Loss on sales of property and equipment 797 24
Provision for deferred income taxes (3,146) (3,716)
(Decrease) increase in deferred revenue and
other liabilities (9,180) 3,833
Decrease in accounts and notes receivable 15,321 3,439
Increase in merchandise inventory, prepaid expenses
and other current assets (110,493) (89,635)
Decrease (increase) in other assets 989 (1,444)
(Decrease) increase in accounts payable, accrued expenses
and other current liabilities (28,353) 42,934
Net cash used in operating activities (98,402) (14,967)
Investing Activities:
Purchases of property and equipment (53,019) (40,658)
Proceeds from sales of property and equipment 13,991 8,001
Net cash used in investing activities (39,028) (32,657)
Financing Activities:
Proceeds from issuance of short-term debt 128,000 -
Principal payments on long-term debt (821) (803)
Proceeds from issuance of common stock, net 1,297 2,664
Dividends paid (1,924) (1,914)
Net cash provided by (used in) financing activities 126,552 (53)
Decrease in cash and cash equivalents (10,878) (47,677)
Cash and cash equivalents at beginning of year 75,194 141,412
Cash and cash equivalents at end of period $ 64,316 $ 93,735
See accompanying note to consolidated financial statements.
</TABLE>
Page 5 of 13
<PAGE>
CIRCUIT CITY STORES, INC. AND SUBSIDIARIES
Note to Consolidated Financial Statements
1. The consolidated financial statements conform to generally accepted
accounting principles. The interim period financial statements are
unaudited; however, in the opinion of management, all adjustments
(consisting of normal recurring adjustments) necessary for a fair
presentation of the consolidated financial statements have been
included. The consolidated financial statements included herein should
be read in conjunction with the notes to consolidated financial
statements included in the Company's 1994 annual report to stockholders.
Page 6 of 13
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net Sales and Operating Revenues and General Comments
Sales for the first quarter of fiscal 1995 were $1.05 billion, an increase of
31 percent over the same period last year. The total sales growth primarily
reflects the sales from 39 Superstores opened during the past year and a
comparable store sales increase of 12 percent. The first quarter sales
results exceeded management's expectations and reflect a generally healthy
environment for hard goods retailers and the Company's successful promotional
programs in markets throughout the country. These marketing programs
reinforce the Company's low-price image and its commitment to customer
service.
Comparable store sales increases for the first quarter ended May 31, 1994,
were as follows:
FY'95 1st Quarter
MAR APR MAY FY'95 FY'94
14% 13% 10% 12% 9%
The Company expects that during the last nine months of fiscal 1995
comparable store and total sales growth could moderate.
During the first quarter of fiscal 1995, the Company opened eight
Superstores, including a four-store entry into Minneapolis, Minn., and
Superstore additions in the Naples, Fla.; Brownsville/McAllen, Texas; and
Chicago, Ill.; markets. A Superstore replaced a consumer electronics-only
store in the Washington, D.C., market. Under its accelerated expansion plan,
the Company plans to open in new and existing markets approximately 60
Superstores in fiscal 1995 and 180 across the three-year period of fiscal
1995 to fiscal 1997.
The table below details store openings in the first quarter of fiscal 1995:
Stores Open at End of
Quarter Estimate
May 31, 1994 May 31, 1993 Feb. 28, 1995 Feb. 28, 1994
Superstore 259 220 311 251
Circuit City 2 0 5 2
Electronics-Only 6 7 6 7
Mall Store 32 39 32 34
TOTAL 299 266 354 294
Page 7 of 13
<PAGE>
Gross dollar sales from all extended warranty programs for the Company's
electronics and appliance business were essentially flat at 5.9 percent of
sales in the first quarter of both fiscal year 1995 and 1994. Total extended
warranty revenue included in net sales was 6.1 percent of sales in this
year's first quarter versus 5.5 percent in the first quarter of last year.
Third party warranty revenue included in net sales was 1.9 percent in this
year's first quarter versus 0.5 percent in the same period last year.
Total sales by merchandise categories are listed below:
1st Quarter
Fiscal 1995 Fiscal 1994
TV 19% 21%
VCR/Camcorders 16 18
Audio 21 22
Home Office 15 9
Appliances 18 20
Other * 11 10
TOTAL 100% 100%
* Includes such products as telephones, portable radios, portable tape
players and entertainment software.
Home office continues to be the most rapidly growing product category,
reflecting the Company's increased emphasis and the industry growth in this
area.
The Company's operations, in common with other retailers in general, are
subject to seasonal influences. Historically, the Company has realized more
of its net sales and net earnings in the final fiscal quarter, which includes
the Christmas season, than in any other fiscal quarter. The net earnings of
any interim quarter are seasonally disproportionate to net sales since
administrative and certain operating expenses remain relatively constant
during the year. Therefore, interim results should not be relied upon as
necessarily indicative of results for the entire fiscal year.
Cost of Sales, Buying and Warehousing
As anticipated, the gross profit margin decreased from 26.9 percent in the
first quarter of last year to 25.1 percent in the first quarter of fiscal
1995. The lower margin reflects the highly competitive climate and a higher
level of personal computers and music software, which carry lower gross
profit margins, in the Company's sales mix. Management expects that for the
remainder of fiscal 1995 these factors will continue to lower margins on a
year-over-year basis.
Page 8 of 13
<PAGE>
Selling, General and Administrative Expenses
The Company's selling, general and administrative expense ratio improved from
23.4 percent in the first quarter of last year to 22.1 percent for the same
period this year. Continued improvement in the ratio reflects a stronger-
than-anticipated comparable store sales pace; productivity gains, especially
in store operating efficiency; and a contribution from the Company's
private-label credit card program.
Although the Company expects continued improvements in the SG&A ratio, the
rates of improvement will moderate during the remainder of the fiscal year.
Interest Expense
Interest expense for the first quarter of fiscal 1995 was $353,000 (0.03
percent of sales) compared to $791,000 (0.1 percent of sales) for the first
quarter of last year. The decline in interest expense primarily reflects a
lower average interest rate and a lower average debt balance. In the first
quarter of fiscal 1994, the Company had $60 million in unsecured subordinated
notes with an average annual fixed interest rate of 9.6 percent. This
subordinated debt was repaid during the second quarter of last year.
Income Taxes
The effective income tax rate increased from 37.0 percent in the first
quarter of last year to 37.5 percent in the first quarter of fiscal 1995.
The change was due to the August 1993 increase in the statutory federal
income tax rate for corporations.
Net Earnings
Net earnings for the quarter ended May 31, 1994, were $19.7 million, an
increase of 14 percent over the same period last year. Net earnings per
share rose 11 percent to 20 cents from 18 cents.
The Company expects that costs associated with its previously discussed
marketing and accelerated expansion programs may limit earnings growth in
fiscal 1995.
Liquidity and Capital Resources
Total assets at May 31, 1994, were $1,663.4 million, up $108.7 million or 7
percent since February 28, 1994. The largest contributor to the asset
increase was a $105.1 million inventory increase to support expected higher
sales volume and new store openings.
Short-term debt increased $128.0 million since the end of fiscal 1994 and has
supported new store expansion and the purchase of inventory.
Page 9 of 13
<PAGE>
The Company expects to continue its long-term capitalization strategy during
fiscal 1995. Management anticipates that capital expenditures will be funded
through a combination of internally generated funds, sale-leaseback
transactions and operating leases. Management has available alternatives and
expects during fiscal 1995 to replace on a long-term basis and at a
moderately higher level the subordinated debt repaid in fiscal 1994. At May
31, 1994, the Company maintained a multi-year $100 million unsecured
revolving credit facility and $155 million in committed seasonal lines that
are renewed annually with various banks.
Page 10 of 13
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The annual meeting of the Company's shareholders was held on
June 14, 1994.
(c) (i) At such annual meeting, the shareholders of the Company
elected Michael Chalifoux, Barbara Feigin, and Edward
Villanueva as directors for three-year terms. The
elections were approved by the following votes:
Directors For Withheld
Michael Chalifoux 78,076,596 1,923,791
Barbara Feigin 78,336,888 1,663,499
Edward Villanueva 78,249,073 1,751,314
(ii) At such annual meeting, the shareholders of the Company
approved the 1994 Stock Incentive Plan (the "1994
Plan"), which authorizes the reservation of 2,500,000
shares of the Company's common stock for issuance
pursuant to incentive awards made under the 1994 Plan.
The 1994 Plan was approved by the following vote:
1994 Plan For Against Abstain Broker
Non-Votes
67,077,209 12,638,279 284,798 101
(iii) At such annual meeting, the shareholders of the Company
approved the Annual Performance-Based Bonus Plan (the
"Bonus Plan") to provide an annual performance-based
cash incentive for executive officers of the Company.
The Bonus Plan was approved by the following vote:
Bonus Plan For Against Abstain Broker
Non-Votes
68,801,978 10,885,060 313,349 0
Page 11 of 13
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Index to Exhibits:
(3) Bylaws of the Company, amended and restated as of
June 14, 1994.
(10) Employment agreement dated April 6, 1994, between the
Company and W. Stephen Cannon.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
quarter ended May 31, 1994.
Page 12 of 13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
CIRCUIT CITY STORES, INC.
(Company)
By: s/Richard L. Sharp
Richard L. Sharp
Chairman, President and
Chief Executive Officer
By: s/Michael T. Chalifoux
Michael T. Chalifoux
Senior Vice President and
Chief Financial Officer
By: s/Keith D. Browning
Keith D. Browning
Corporate Controller and
Chief Accounting Officer
July 13, 1994
Page 13 of 13
Exhibit (3)
CIRCUIT CITY STORES, INC.
B Y - L A W S
As Amended and Restated as of June 14, 1994
OFFICES RECORDS
1. Place 32. Form of Stock Certificate
33. Lost Certificates
STOCKHOLDERS MEETINGS 34. Transfer of Stock
35. Registered Stockholders
2. Place of Meeting
3. Annual Meetings OTHER MATTERS
4. Special Meetings
5. Notices 36. Notices
6. Adjourned Meetings 37. Registered Office and
7. Voting Agent
8. Stockholders Entitled 38. Corporate Records
to Vote 39. Request for Financial
9. Quorum Statement
40. Voting Stock in Other
DIRECTORS Corporations
41. Seal
10. Responsibility of Directors 42. Amendment of By-Laws
11. Number of Directors 43. Fiscal Year
12. (a) Directors' Nominations 44. General
(b) Directors' Terms
13. Directors' Meetings
14. Notice of Meetings
15. Compensation
16. Director Emeritus
17. Executive Committee
18. Audit Committee
19. Compensation and Personnel Committee
20. Nominating and Structure Committee
21. Other Committees
OFFICERS
22. Officers
23. Election of Officers
24. Chairman of the Board
(a) Vice Chairman of the Board
25. President
26. Vice Presidents
27. Secretary
28. Assistant Secretary
29. Treasurer
30. Other Officers
31. Compensation
<PAGE>
CIRCUIT CITY STORES, INC.
B Y - L A W S
OFFICES
1. PLACE: The principal office of the Corporation shall be in the
County of Henrico, State of Virginia.
STOCKHOLDERS
2. PLACE OF MEETING: Meetings of the stockholders shall be held
at the principal office of the Corporation or at such other place
which shall be approved by the Board of Directors and designated in
the notice of the meeting. Meetings may be held either within or
without the State of Virginia.
3. ANNUAL MEETING: Commencing with the year 1979, the annual
meeting of the stockholders of the Corporation shall be held on the
third Wednesday in June of each year, or at such other time and
place which shall be approved by the Board of Directors and
designated in the notice of meeting. Such meetings may be held
either within or without the State of Virginia. At the annual
meeting the stockholders shall elect a Board of Directors and
transact such other business as may properly be brought before
them.
4. SPECIAL MEETINGS: Special meetings of the stockholders may be
called by the Board of Directors, the Chairman of the Board and the
President of the Corporation.
5. NOTICES: Written notice by mail shall be given in accordance
with Section 36, stating the place, date and hour of a meeting of
stockholders and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall be given to each
stockholder of record entitled to vote at the meeting not less than
ten (10) nor more than fifty (50) days before the date of the
meeting, by or at the direction of the President, the Secretary, or
the officer or persons calling the meeting. The notice shall be
deemed to be given when it is deposited with postage prepaid in the
United States mail addressed to the stockholder at the address as
it appears on the stock transfer books of the Corporation. Notice
of a meeting to act on an amendment of the Articles of
Incorporation or on reduction of stated capital or on a plan of
merger, consolidation or exchange shall be given in the manner
provided above not less than twenty-five (25) nor more than fifty
(50) days before the date of the meeting. Such notice shall be
accompanied by a copy of the proposed amendment or plan of
reduction or merger, consolidation or exchange.
6. ADJOURNED MEETINGS: If a meeting is adjourned for lack of a
quorum, any matter which might have properly come before the
original meeting may came before the adjourned meeting when
reconvened.
7. VOTING: Each share of stock shall have one vote on all matters
on which stockholders are entitled to vote. A stockholder may vote
either in person or by proxy executed in writing by the stockholder
or a duly authorized attorney-in-fact.
8. STOCKHOLDERS ENTITLED TO VOTE: In lieu of closing the stock
transfer books, the Board of Directors shall fix a date which is
not more than fifty (50) days in advance of the date on which the
particular action is to be taken as the record date for any such
determination of stockholders.
9. QUORUM: A majority of the shares entitled to vote, represented
in person or by proxy, shall constitute a quorum at a meeting of
stockholders. Treasury shares and shares held by a corporation of
which the Corporation owns a majority of the shares entitled to
vote for the directors thereof shall not be entitled to vote or to
be counted in determining the total number of outstanding shares
entitled to vote. If a quorum is present, action on a matter,
other than the election of directors, is approved if the votes cast
favoring the action exceed the votes cast opposing the action. In
the election of directors, those receiving the greatest number of
votes shall be deemed elected even though not receiving a majority.
At each election for directors, every stockholder entitled to vote
shall have the right to vote the number of shares owned by him for
as many persons as there are directors to be elected at that time
and for whose election he has a right to vote.
DIRECTORS
10. RESPONSIBILITY OF DIRECTORS: The affairs and business of the
Corporation shall be under the management of its Board of Directors
and such officers and agents as the Board of Directors may elect
and employ.
11. NUMBER OF DIRECTORS: The number of directors shall be nine
(9) and they shall be elected at the annual meeting of the
stockholders or at a special meeting of the stockholders called for
such a purpose. This number may be increased or decreased from
time to time by amendment to these by-laws to the extent permitted
by law and by the Corporation's Articles of Incorporation. They
shall be elected by the stockholders for terms of three (3) years
in the manner set forth in the Articles of Incorporation and shall
serve until the election of their successors.
12. (a) DIRECTORS' NOMINATIONS: Nominations for the election of
directors may be made by the Board of Directors or by any
stockholder entitled to vote in the election of directors
generally. However, any stockholder entitled to vote in the
election of directors generally may nominate one or more persons
for election as directors at a meeting only if written notice of
such stockholder's intent to make such nomination or nominations
has been given, either by personal delivery or by United States
mail, postage prepaid, to the Secretary of the Corporation not
later than (i) with respect to an election to be held at an annual
meeting of stockholders (other than the 1986 annual meeting), 120
days in advance of such meeting, (ii) with respect to an election
to be held at the 1986 annual meeting, March 1, 1986 and (iii) with
respect to a special meeting of stockholders for the election of
directors, the close of business on the seventh day following the
date on which notice of such meeting is first given to
stockholders.
Each such notice shall set forth: (a) the name and address
of the stockholder who intends to make the nomination and of the
person or persons to be nominated; (b) a representation that the
stockholder is a holder of record of stock of the Corporation
entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons specified
in the notice; (c) a description of all arrangements or
understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to
which the nomination or nominations are to be made by the
stockholder; (d) such other information regarding each nominee
proposed by such stockholder as would be required to be included in
a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission, had the nominee been nominated,
or intended to be nominated, by the Board of Directors; and (e) the
consent of each nominee to serve as a director of the Corporation
if so elected. The Chairman may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing
procedure.
12. (b) DIRECTORS' TERM: No decrease in the number of directors
shall have the effect of changing the term of any incumbent
director. Unless a director resigns or is removed by the majority
vote of the stockholders, every director shall hold office for the
term elected or until a successor shall have been elected. Any
vacancy occurring in the Board of Directors may be filled by the
affirmative vote of a majority of the remaining directors though
less than a quorum of the Board of Directors; provided, however,
that the aggregate number of vacancies resulting from increases in
the number of directors which may be created and filled by action
of the Board of Directors between annual meetings of stockholders
shall be limited to two. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act
of the Board of Directors.
13. DIRECTORS' MEETING: The annual meeting of the directors shall
be held immediately after the annual meeting of the stockholders.
The Board of Directors, as soon as may be convenient after the
annual meeting of the stockholders at which such directors are
elected, shall elect from their number a Chief Executive Officer
(CEO) who shall be the Chairman of the Board or the President, as
the Board shall designate. Special meetings may be called by the
CEO, the Board of Directors or any two directors by giving notice
of the time and place in accordance with Section 14. Special
meetings of the Board of Directors (or any committee of the Board)
may be held by telephone or similar communication equipment whereby
all persons participating in the meeting can hear each other, at
such time as my be prescribed, upon call of the CEO or any two
members of the Board. A quorum shall be a majority of the
directors. Action may be taken by the directors or a committee of
the Board of Directors without a meeting if a written consent,
setting forth the action, shall be signed by all of the directors
or committee members either before or after such action. Such
consent shall have the same force and effect as a unanimous vote.
14. NOTICE OF MEETING: At the annual meeting of the Board of
Directors each year and at any meeting thereafter, the Board shall
designate the dates, times and places of regular meetings of the
Board for the ensuing calendar year, and no notice of any kind need
be given thereafter with respect to such regular meetings. Notice
of any special meeting of the Board shall be by oral, telegraphic
or written notice duly given to each director not less than five
(5) days before the date of the proposed meeting, but a waiver of
notice of such meeting in writing, signed by a director of the
Corporation before or after the time stated in such notice, shall
be equivalent to the giving of such notice. Attendance at a
meeting shall be deemed a waiver of notice of such meeting, unless
the sole purpose of attending the meeting shall be to object to the
transaction of any business.
15. COMPENSATION: Directors shall not receive a stated salary for
their services, but directors may be paid a fixed sum and expenses
for attendance at any regular or special meeting of the Board of
Directors or any meeting of any Committee and such other
compensation as the Board of Directors shall determine. A director
may serve or be employed by the Corporation in any other capacity
and receive compensation thereafter.
16. DIRECTOR EMERITUS: The Board may appoint to the position of
Director Emeritus any retiring director who has served not less
than three years as a director of the Corporation. Such person so
appointed shall have the title of "Director Emeritus" and shall be
entitled to receive notice of, and to attend all meetings of the
Board, but shall not in fact be a director, shall not be entitled
to vote, shall not be counted in determining a quorum of the Board
and shall not have any of the duties or liabilities of a director
under law.
17. EXECUTIVE COMMITTEE: With the approval of a majority of the
whole Board of Directors, two or more directors may be designated
to constitute an Executive Committee. The Executive Committee may
exercise all corporate powers of the Corporation and manage its
business and affairs to the same extent as the Board of Directors,
subject to the limitations set forth in Section 13.1-689 of the
Virginia Stock Corporation Act and any successor legislation
thereto. The Board of Directors may at any time, by resolution,
limit the powers of the Executive Committee. The Executive
Committee may meet at scheduled times or, upon notice to each
member, hold a special meeting. The Executive Committee shall keep
minutes of its meetings. Vacancies in the membership of the
Executive Committee shall be filled by the Board of Directors.
18. AUDIT COMMITTEE: The Board of Directors shall appoint each
year an Audit Committee, composed exclusively of outside directors,
which shall perform such duties as they consider necessary and
desirable to properly evaluate and generally supervise the
Corporation's accounting procedures including but not limited to
the following:
1. Recommend outside auditors to the Board.
2. Determine that the scope of the audit is adequate and
approve the audit fee.
3. Review audit results with the outside auditors.
4. Review and approve the retention of the outside auditors
to perform non-audit services and approve the fee
therefor.
5. Recommend policy for the scope, frequency, and method of
internal audit reports and review the results thereof.
Develop a direct line of communication with internal
auditors, if and when such are employed.
6. Review all filings with the Securities and Exchange
Commission.
7. Review pending lawsuits.
8. Review insurance coverage.
The Audit Committee should develop and follow a comprehensive
checklist so as to ensure that the Committee's inquiries of the
outside auditors and management are systematic in scope. This
Committee shall have free access to the outside auditors and to the
Corporation's general counsel. Meetings of the Committee should be
scheduled not less than three times each year, with a portion of
each meeting being held without management representatives present.
Minutes of such meetings should be kept and reports made to the
entire Board of Directors.
19. COMPENSATION AND PERSONNEL COMMITTEE: The Board of Directors
shall appoint each year a Compensation and Personnel Committee,
which shall be composed of three outside directors, and shall have
the following duties:
1. Review and recommend to the Board current management
compensation programs including salaries, bonuses and
fringe benefits and the creation of new officerships.
2. Review and report to the Board on the funding and
adequacy of existing retirement programs, and recommend
new programs, if appropriate. (This responsibility does
not include investment policy and other responsibilities
of the Trustees of the Profit Sharing Fund.)
3. Award and administer pursuant to existing authority, the
Corporation's Stock Option and Performance Share Programs
and review and recommend similar future programs, if any.
4. Review top management organization, assist the CEO in
determining that the Corporation has adequate depth and
breadth of management to carry out its expansion programs
and to provide for succession in the event of retirement
or the unanticipated departure of a key executive.
5. Review the Corporation's programs for attracting,
developing and compensating management personnel at lower
and middle levels.
20. NOMINATING AND STRUCTURE COMMITTEE: The Board of Directors
shall appoint each year a Nominating and Structure Committee, which
shall be composed of the Chairman of the Board and two outside
directors. The functions of this Committee shall include the
following:
1. Review the performance and contribution of existing
directors for the purpose of recommending whether they be
nominated for a successive term.
2. Recommend policies with regard to the size, composition
and function of the Board.
3. Suggest persons to fill vacancies on the Board and
maintain files on names submitted.
4. Assist the Chairman of the Board in carrying out an
orientation program for new directors.
5. Review and recommend to the Board changes and
improvements in the functioning of the Board.
6. Review and recommend compensation levels for outside
directors.
21. OTHER COMMITTEES: The Board of Directors may designate such
other committees as it deems advisable. Each committee shall
consist of at least two (2) directors and, to the extent provided
by the resolution of the Board of Directors, shall have and
exercise such powers of the Board of Directors in the management of
the business and affairs of the Corporation as may be lawfully
delegated.
OFFICERS
22. OFFICERS: The officers of the Corporation shall be a
President, a Secretary and a Treasure, each of whom shall be
elected by the Board of Directors. In addition, the Board of
Directors may elect or the President, if so authorized by the Board
of Directors, may appoint one or more Vice Presidents and other
officers or assistant officers as may be deemed necessary or
advisable to carry on the business of the Corporation. The
President shall be a member of the Board of Directors. Any two
offices may be combined in the same person except the offices of
President and Secretary.
23. ELECTION AND REMOVAL OF OFFICERS, TERM: Officers shall be
elected at the annual meeting of the Board of Directors immediately
following the annual meeting of stockholders or appointed at the
time thereof, and may be elected or appointed at such other time or
times as the Board of Directors or the persons authorized to make
appointments shall determine. All officers shall hold office,
unless removed, until the time of the next annual meeting of the
Board of Directors or until their successors are elected. Any
officer may resign at any time upon written notice to the President
or the Board of Directors, and such resignation shall be effective
when notice is delivered unless the notice specifies a later
effective date. Elected officers may be removed, with or without
cause, at any time by the Board of Directors. Appointed officers
may be similarly removed by the persons having the authority to
appoint them or by the Board of Directors.
24. CHAIRMAN OF THE BOARD: The Chairman of the Board, if one is
designated by the Board of Directors, shall preside at all meetings
of the Board and of stockholders and perform such other duties as
the Board shall assign from time to time.
(a) VICE CHAIRMAN OF THE BOARD: The Vice Chairman of the
Board, if one is designated by the Board of Directors, shall at the
request of or in the absence of the Chairman of the Board, preside
at meetings of the Board and of stockholders and, when requested to
do so, by the Board, shall perform all of the functions of the
Chairman of the Board during the absence or incapacity of the
latter.
25. PRESIDENT: The President, in the absence of the Chairman of
the Board and the Vice Chairman of the Board, shall preside at all
meetings of the Board of Directors and stockholders, shall have
power to call special meetings of the stockholders and directors
for any purpose; may hire, appoint and discharge, subject to the
approval of the Board of Directors, employees and agents of the
Corporation and fix their compensation; may make and sign deeds,
mortgages, deeds of trust, notes, leases, contracts and agreements
in the name and on behalf of the Corporation; shall have power to
carry into effect all directions of the Board of Directors; and
shall have general supervision of the business of the Corporation;
and shall have general supervision of the business of the
Corporation, except as may be limited by the Board of Directors,
the Articles of Incorporation, or these bylaws.
26. VICE PRESIDENT: Such Vice Presidents, in the order designated
by the Board of Directors from time to time, shall exercise all of
the functions of the President during the absence or incapacity of
the latter.
27. SECRETARY: The Secretary shall be the ex-officio clerk of the
Board of Directors and shall give, or cause to be given, notices of
all meetings of stockholders and directors, and all other notices
required by law or by these by-laws. The Secretary shall record
the proceedings of the meetings of the stockholders and directors
in a book kept for that purpose and shall keep the seal of the
Corporation and attach it to all documents requiring such
impression unless some other officer is designated to do so by the
Board of Directors. The Secretary shall also perform such other
duties as may be assigned by the Board of Directors.
28. ASSISTANT SECRETARY: There may be one or more Assistant
Secretaries who shall exercise all of the functions of the
Secretary during the absence or incapacity of the latter and such
other duties as may be assigned from time to time by the Board of
Directors.
29. TREASURER: The Treasurer shall keep or cause to be kept full
and accurate books of account, and may make and sign deeds,
mortgages, deeds of trust, notes, leases, contracts and agreements
in the name and on behalf of the Corporation. Whenever required by
the Board of Directors or the President, the Treasurer shall render
a financial statement showing all transactions of the Treasurer and
the financial condition of the Corporation.
30. OTHER OFFICERS: There may be one or more Assistant Vice
Presidents, Assistant Treasurers, Controller or Assistant
Controllers, who shall perform such duties as may be assigned from
time to time by the Board of Directors.
31. COMPENSATION: The compensation of all officers of the
Corporation shall be fixed by the Board of Directors.
RECORDS
32. FORM OF STOCK CERTIFICATE: The certificates of stock of the
Corporation shall be numbered and entered in the books of the
Corporation as they are issued. They shall be signed manually or
by the use of a facsimile signature, by the Chairman of the Board,
by the President or a Vice President designated by the Board of
Directors and countersigned by the Secretary or an Assistant
Secretary. They shall bear the corporate seal or a facsimile
thereof. The Board of Directors of the Corporation may issue scrip
in registered or bearer form, which shall entitle the holder to
receive a certificate for a full share. Scrip shall not entitle
the holder to exercise voting rights or to receive dividends
thereon or to participate in any of the assets of the Corporation
in the event of liquidation. The Board may cause scrip to be
issued subject to the condition that it shall become void if not
exchanged for certificates representing full shares before a
specified date or subject to any other conditions that it may deem
advisable. No fractional shares shall be issued.
33. LOST CERTIFICATES: The President or Secretary may direct a
new certificate or certificates to be issued in place of any lost
or destroyed certificate or certificates previously issued by the
Corporation if the person or persons who claim the certificate or
certificates make an affidavit stating the certificates of stock
have been lost or destroyed. When authorizing the issuance of a
new certificate or certificates, the Corporation may, in its
discretion and as a condition precedent to the issuance thereof,
require the owner of such lost or destroyed certificate or
certificates, or the legal representative, to advertise the same in
such manner as the Corporation shall require and/or to give the
Corporation a bond, in such sum as the Corporation may direct, to
indemnify the Corporation with respect to the certificate or
certificates alleged to have been lost or destroyed.
34. TRANSFER OF STOCK: Upon surrender to the Corporation, or to
the Transfer Agent of the Corporation, if any, of a certificate for
shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, the Corporation
shall issue a new certificate to the person entitled thereto,
cancel the old certificate, and record the transaction upon its
books.
35. REGISTERED STOCKHOLDERS: The Corporation shall be entitled to
treat the holder of record of any share or shares of stock as the
owner thereof and, accordingly, shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on
the part of any other person. The Corporation shall not be liable
for registering any transfer of shares which are registered in the
name of a fiduciary unless done with actual knowledge of facts
which would cause the Corporation's action in registering the
transfer to amount to bad faith.
OTHER MATTERS
36. NOTICES: Each stockholder, director and officer shall furnish
in writing to the Secretary of the Corporation the address to which
notices of every kind may be delivered or mailed. If such person
fails to furnish an address, and the Post Office advises the
Corporation that the address furnished is no longer the correct
address, the Corporation shall not be required to deliver or mail
any notice to such person. Whenever notice is required by
applicable law, the Articles of Incorporation or these by-laws, a
written waiver of such notice signed before or after the time
stated in the waiver or, in the case of a meeting, the attendance
of a stockholder or director (except for the sole purpose of
objecting) or, in the case of a unanimous consent, the signing of
the consent, shall be deemed a waiver of notice.
37. REGISTERED OFFICE AND AGENT: The Corporation shall at all
times have a registered office and a registered agent.
38. CORPORATE RECORDS: The Corporation shall keep correct and
complete books and records of accounts and minutes of the
stockholders' and directors' meetings, and shall keep at its
registered office or principal place of business, or at the office
of its transfer agent, if any, a record of its stockholders,
including the names and addresses of all stockholders and the
number, class, and series of the shares held by each. Any person
who shall have been a stockholder of record for at least six months
immediately preceding demand, or who shall be the holder of record
of at least five percent (5%) of all the outstanding shares of the
Corporation, upon written request stating the purpose therefor,
shall have the right to examine, in person or by agent or attorney,
at any reasonable time or times, for any proper purpose, the books
and records of account of the Corporation, minutes and record of
stockholders, and to make copies or extracts therefrom.
39. REQUEST FOR FINANCIAL STATEMENT: Upon the written request of
any stockholder, the Corporation shall mail to the stockholder its
most recent published financial statement.
40. VOTING STOCK IN OTHER CORPORATIONS: Unless otherwise provided
by the Board of Directors, the President, in the name and on behalf
of the Corporation, may appoint from time to time himself or any
other person (or persons) proxy, attorney or agent for the
Corporation to cast the votes which the Corporation may be entitled
to cast as a stockholder or otherwise in any other corporation,
domestic or foreign, whose stock or securities are held by the
Corporation, or to consent in writing to any action by such other
corporation, or to exercise any or all other powers of this
Corporation as the holder of the stock or other securities of such
other corporation. The President may instruct the person or
persons so appointed as to the manner of casting such votes or
giving such consent and may execute or cause to be executed on
behalf of the Corporation and under its corporate seal such written
proxies, consents, waivers, or other instruments as may be deemed
necessary or proper. The President may attend any meeting of the
holders of stock or other securities of any such other corporation
and vote or exercise any or all other powers of this corporation as
the holder of the stock or other securities of such other
corporation.
41. SEAL: The seal of the Corporation shall be a flat faced
circular die containing the word "SEAL" in the center and the name
of the Corporation around the circumference.
42. AMENDMENT OF BY-LAWS: The power to alter, amend or repeal the
by-laws or adopt new by-laws shall be vested in the Board of
Directors unless otherwise provided in the Articles of
Incorporation. By-laws adopted by the Board of Directors may be
repealed or changed or new by-laws adopted by the stockholders, and
the stockholders may prescribe that any by-law adopted by them may
not be altered, amended or repealed by the Board of Directors.
43. FISCAL YEAR: The fiscal year of the Corporation shall end on
the last day of February in each year.
44. GENERAL: Any matters not specifically covered by these by-
laws shall be governed by the applicable provisions of the Code of
Virginia in force at the time.
Exhibit (10)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of April 6, 1994, by and between CIRCUIT CITY
STORES, INC. (the "Company"), a Virginia Corporation, and W. Stephen Cannon,
Esq. (the "Employee").
The parties agree as follows:
ARTICLE I
Services
The Company agrees to employ the Employee as Senior Vice President and
General Counsel during the term of this Agreement. The Employee agrees to
devote his full time and attention to the business of the Company and to the
faithful performance of his duties as Senior Vice President and to the
performance of such additional duties as may be assigned to him from time to
time by the Company's Board of Directors (the "Board") or Chief Executive
Officer.
At any time and from time to time while this agreement is in force, the
Employee may be appointed to such other executive positions and be given such
other titles and executive responsibilities as the Board may determine.
ARTICLE II
Term
The Company agrees to employ the Employee and the Employee agrees to
serve the Company for a term beginning as of April 6, 1994 and continuing
through April 5, 1995. The term of this Agreement shall be automatically
extended for additional one-year periods unless either party notifies the other
in writing at least one year before the end of the then-current term that it
does wish to extend the term. For example, if such a notice is not given by
April 6, 1995, the term of this Agreement shall extend through April 5, 1996.
However, in order for the contract to expire on that date, notice must be given
by April 6, 1995. If no such notice is given, the term shall extend through
April 5, 1996. This Agreement may be terminated prior to its expiration by
either the Company or the employee. The consequences of such a termination are
described in other provisions of this Agreement.
ARTICLE III
Compensation
The Employee's compensation shall include:
(1) Base salary, as determined by the Board or the
Compensation and Personnel Committee of the Board (the "Committee")
following an annual review of the Employee's Compensation. Until June
1, 1994, such base salary will be $300,000.00/annually.
(2) Cash bonuses in accordance with the Company's annual
bonus program established by the Board or the Committee and on a basis
no less favorable than that applicable to other senior management
employees and such other cash bonuses as the Board or the Committee, in
their discretion, may determine from time to time.
(3) Participation in the Company's stock incentive programs
to the extent the Board or the Committee, in their discretion determines
is appropriate for senior management employees.
(4) Participation in the Company's pension and insurance
plans and all of the Company's fringe benefit and executive compensation
programs for senior management employees not otherwise provided for in
this Agreement in accordance with the terms and provisions of those
plans and programs, as they may be in effect from time to time.
In addition, the Company shall reimburse the Employee for all reasonable
and necessary expenses incurred by the Employee in connection with the
performance of his duties hereunder in accordance with corporate policies and
procedures covering travel and business expense reimbursement, as they may be in
effect from time to time.
The Employee may elect to defer all or any part of his salary or bonus
by filing a written election (the "Election") to that effect with the Secretary
of the Company. As to salary, the Election shall be effective only with respect
to compensation for services performed after the Employee files the Election.
As to bonuses, the Election shall be effective only with respect to bonuses
determined and awarded to the Employee after the Employee files the Election.
Any amounts deferred by the Employee will be credited to an account established
for him on the books of the Company. This account will also be credited as of
the end of each fiscal year, until such time as no balance remains in the
account, with an additional amount equal to the product of (a) the average
balance credited to the account during that fiscal year and (b) a percentage
which shall be the time weighted average of the prime rate announced by Signet
Bank from time to time during such fiscal year. The total amount credited to
this account will become payable to the Employee after his termination of
employment upon such payment schedule as he may specify in the Election. If
termination of employment occurs by reason of death, or if the Employee dies
after payments have commenced, any remaining payments will be made to one or
more beneficiaries designated by the Employee in a writing filed with the
Secretary of the Company. If the Employee fails to designate a beneficiary, or
if all the designated beneficiaries predecease him, payment of the remaining
unpaid balance in the account will be made to the Employee's estate. The
Company reserves the right to accelerate payments or to make payment of the
amounts remaining unpaid in a lump sum. All determinations made and actions
taken by the Company under this Article shall be binding upon the beneficiaries
and the Employee's estate. The Employee's rights, or the rights of any
beneficiary, are those of a general creditor of the Company.
ARTICLE IV
Confidential Information
The Employee recognizes that by virtue of his present position and his
tenure with the Company in an executive capacity, he has and will continue to
have access to Company trade secrets and other confidential information
concerning the Company's business methods, expansion plans, merchandising and
marketing techniques, training techniques, internal operations and other
matters. The Employee recognizes and acknowledges that such methods, plans,
techniques, operations and other information, as they may exist from time to
time, are valuable, special and unique assets of the Company, and that this
information and its use have been responsible for the rapid growth and
nationwide expansion of the Company, and if known by an entity engaged in the
"Business of the Company", would cause irreparable harm to the Company. The
"Business of the Company", shall be defined as: (a) retail sales and service of
consumer electronics or appliances and (b) any other line of business in which
the Company becomes engaged before the date the Employee's employment
terminates.
Therefore, except in performing his duties as an employee of the
Company, the Employee shall not:
(1) Make or cause to be made any reproductions of any
document or recorded information belonging to or in the
possession of the Company;
(2) Remove any documents or recorded information from the
premises of the Company or fail or refuse to surrender the same
to the Company immediately upon the termination of his
employment or at any prior time upon the Company's request; or
(3) Use for his own benefit or purposes or disclosure to or
use for the benefit or purposes of anyone other than the
Company, both during his employment and after the termination of
his employment, any trade secrets or other confidential
information, confidential data, or confidential knowledge of the
Company (including but not limited to unique business methods,
merchandising and marketing techniques, supplier information,
pricing information, internal corporate planning methods,
systems and operating procedures, and training techniques not
generally known in the Company's industry) that may become known
to him as a result of or during his employment with the Company,
either before or after the signing of this Agreement.
As used in this Article, the term "Company" shall include the Company
and all of its subsidiaries.
ARTICLE V
Noncompetition and Nonsolicitation
(1) Noncompetition. Except as hereinafter provided, the Employee
agrees that he will not, without the prior written consent of the Company,
engage in competition with the Company by being associated with any Competing
Business (as hereinafter defined) during the term of this Agreement and for a
period of one year following its termination or expiration. For purposes of
this Article, the Employee will be deemed to have associated with a Competing
Business if he: (1) directly or indirectly, alone or as a member of a
partnership, owns greater that a 5% interest in; or (2) manages, operates,
controls, or acts as a consultant to; or (3) serves as an officer or director or
in any managerial or executive position; with any Competing Business.
A "Competing Business" is any business entity which engages in the
Business of the Company and engages in Substantial Competition with the Company
in one or more Metropolitan Statistical Areas ("MSA"), in which the Company has
its operation, or in which, at the date the Employee's employment terminates,
the Company is engaged in real estate site selection or has taken further steps
toward the commencement of operation in the future, either alone or in
association with another entity ("Future Statistical Areas"), and in which the
Company collectively produced, or, in the case of Future Statistical Areas, is
projected to produce in the first year of operations, more than $5 million of
gross sales. A business will not be considered to be in "Substantial
Competition" with the Company if: (1) the business or the operating unit of the
business in which the Employee is employed or with which the Employee is
associated (the "Business Unit") is not engaged in the Business of the Company;
or (2) if sales of the Business Unit's products or services in the Business of
the Company constitute less than 10% of such Business Unit's sales; or (3) if
the sales of the Business Unit in the Business of the Company do not constitute
more than 10% of the sales of the Business Unit, but there is not significant
geographic overlap between such Business Unit and the Company's business
locations. For the purposes of this provision, there will not be a significant
geographic overlap if less than 10% of the sales of such Business Unit and less
than 10% of the Company's sales (i) are in the same MSA or (ii) are projected to
be in the same MSA within the first year of operations in the case of Future
Statistical Areas. The term "Business of the Company" is defined in Article IV.
In every case, the good faith judgement of the Committee shall be conclusive as
to whether the Employee is associated with a Competing Business.
(2) Nonsolicitation. The Employee agrees that during the term of this
Agreement and for a period of one year following its termination, he will not,
without the prior written consent of the Company, directly or indirectly engage
in efforts to induce the Company's employees to terminate their employment for
the purpose of being employed by another business entity.
(3) Change in Control. In the event that the Employee's employment is
terminated within two years following a Change in Control (Change in Control
being defined in Article VII) under circumstances described in Article VI(2),
the Employee shall not be bound by the provisions of this Article.
ARTICLE VI
Termination by the Company
(1) For Cause. The Company may immediately terminate the Employee's
employment at any time prior to the expiration of this Agreement for "cause".
For purposes of this Agreement, the following shall be "cause" for termination.
(a) continued and deliberate neglect by the Employee of his
employment duties; or
(b) criminal misconduct of the Employee in connection with
the performance of any of his duties, including, by way
of example but not limitation, misappropriation of funds
or property of the Company or accepting bribes or
kickbacks in connection with any transaction entered
into on behalf of the Company; or
(c) failure of the Employee to disclose to the Board a
conflict of interest, of which he knew or, with
reasonable diligence, would have known, in connection
with any transaction entered into on behalf of the
Company; or
(d) conduct by the Employee that would result in material
injury to the reputation of the Company if he were
retained in his position with the Company; or
(e) a preliminary or permanent injunction or similar remedy
is entered against the Employee, the Company or both
preventing the Employee or the Company from performing
all or part of this Agreement; or
(f) breach by the Employee of the provisions of Articles IV
or V of this Agreement.
In every case, the good faith judgement of the Committee shall be
conclusive as to whether cause for termination exists. In the event of a
termination for cause, which shall include resignation by the Employee at the
Company's request at a time when cause for termination exists, the Employee
shall forfeit the right to any compensation (other than deferred compensation)
under this Agreement after the date of termination, except to the extent that
the terms of any plans or programs referred to in Article III (4) or any
applicable law require otherwise.
(2) Without Cause. The Company may terminate the Employee's employment
agreement at any time prior to the expiration of this Agreement without cause
("cause" being defined in Article VI(1)). In the event: (a) the Employee's
employment is terminated by the Company without cause; (b) the Employee resigns
at the Company's request at a time when no cause for termination exists; or (c)
the Employee voluntarily terminates his employment as a result of a reduction in
compensation or benefits (which is not part of a prorata reduction in executive
compensation or benefits for the Company's senior executives) or as a result of
a significant reduction in the Employee's responsibilities, and the voluntary
termination occurs within 60 days after such reduction, the Employee shall
forfeit the right to any compensation (other than deferred compensation) under
this Agreement after the date of termination except:
(i) An amount equal to one year's base salary, payable in biweekly
installments over the following 12 months; and, in the event
that the termination of employment occurs within two years
following a Change in Control (Change in Control being defined
in Article VII), an additional amount equal to one year's base
salary, payable in biweekly installments over the second
12-month period immediately following such termination;
(ii) Any bonus for the fiscal year in which the Employee's employment
is terminated in accordance with the bonus program for such
fiscal year, if the termination occurs more than six months
after the start of the fiscal year. If the termination occurs
after the first six months of the fiscal year, any bonus to
which the Employee might have otherwise been entitled to receive
will be prorated based upon the number of weeks of employment in
the fiscal year; and
(iii) Participation in the Company's medical, dental and life
insurance plans for 12 months after employment terminates to the
extent permitted by the provisions of such plans; provided,
however, the Employee's rights under this subparagraph (iii)
shall terminate if he secures alternative employment.
Notwithstanding the foregoing, the Employee shall have the obligation to
seek alternative employment following a termination of employment under Article
VI(2). Any remuneration the Employee receives for the performance of personal
services during the year following termination of his employment pursuant to
this Article VI(2) will be an offset to the Company's obligations to pay any
remaining payments referred to in subparagraph (i) above; provided, however,
that such an offset will not reduce below one-half the biweekly payments the
Company is obligated to pay under subparagraph (i) above; and provided, further,
that the Employee shall not have any obligation to seek other employment and no
such offset will be allowed the Company if such a termination of employment
occurs within two years following a Change in Control (Change in Control being
defined in Article VII).
(3) Death or Disability. If the Employee dies or becomes disabled
during the term of this Agreement, the Employee's employment will terminate as
of the date of the Employee's death or the determination of the Employee's
disability. In such event, neither of Article VI (1) or (2) shall be
applicable. The determination as to whether the employee has suffered a
disability and the date on which the disability commenced shall be made by the
Committee, in its sole discretion, on the basis of competent evidence; provided,
however, that the inability of the Employee to perform each of the material
duties of his employment for 6 consecutive months because of a medically
determined physical or mental condition shall be conclusive evidence of
disability unless the Company is provided with competent medical evidence that
the condition will not continue to prevent the Employee from performing his
duties for more than six additional months. Two consecutive weeks of full
performance shall be required to interrupt the running of the six-month period.
In the event of termination because of disability, the Employee shall receive
his base salary (pursuant to Article III (1)) for the first 12 months after the
first date on which the Employee was unable to perform, after which he shall be
entitled only to such amounts, if any, as may be available under insurance or
other programs provided by the Company in which the Employee may be a
participant. Any amounts the Employee receives under such insurance or programs
during the 12 months referred to above shall be an offset to amounts which he
would otherwise receive under Article VI (3).
In the event of the Employee's death, the designated beneficiary of the
Employee shall continue to receive the Employee's base salary for a period of
three months following the date of death.
ARTICLE VII
Termination by Employee
(1) General Rule. The Employee may voluntarily terminate his
employment prior to the expiration of this Agreement upon 60 days written notice
to the Company. If the Employee does so for reasons other than those set forth
in provision (c) of Article VI (2) or for such reasons, but after the time
period set forth in such provision has expired, he shall forfeit the right to
any compensation (other than deferred compensation) under this Agreement after
the date of termination except that he shall be entitled to participate in the
Company's medical, dental and life insurance plans for up to 90 days after
termination to the extent permitted by the provisions of such plans; provided,
however, that the Employee's right to participate in such plans shall terminate
if he secures alternative employment.
(2) Voluntary Termination Following a Change in Control. The provision
of Article VII (1) notwithstanding, in the event that a Change of Control (as
hereinafter defined) occurs and within one year thereafter the Employee
voluntarily terminates his employment (other than pursuant to provision (c) of
Article VI (2)), the Employee shall be entitled to receive, in addition to any
other amounts he may be entitled to receive under this Agreement and subject to
any applicable payroll or other taxes required to be withheld, an amount equal
to one year's base salary. This amount shall be payable in biweekly
installments over the 12 months immediately following termination. In such
event, the Employee shall also be entitled to a bonus for the fiscal year in
which termination occurs in accordance with the bonus program for such fiscal
year, if the termination occurs more than six months after the start of the
fiscal year. If the termination occurs in the first six months of the fiscal
year, any bonus which the Employee might have otherwise been entitled to receive
will be prorated based upon the number of weeks of employment in such fiscal
year.
(3) Change in Control Definition. In this Agreement the term Change in
Control shall mean:
(i) a third person, including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934,
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 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 of Directors
of the Company or any successor to the Company.
ARTICLE VIII
Notices
Any notice or other communication ("Notice") required under this
Agreement shall be in writing and shall be deemed to have been given or made
when personally delivered, or when mailed by registered or certified mail,
postage prepaid, return receipt requested, to the other party. In the case of
the Company, any Notice shall be delivered or mailed to its principal office to
the attention of the Secretary. In the case of the Employee, any Notice shall
be delivered or mailed to his last known address as reflected in the records of
the Company.
ARTICLE IX
Binding Effect
This Agreement shall insure to the benefit of and be binding upon the
parties, their successors, assigns, or personal representatives, including a
successor corporation in the event of a merger, consolidation or transfer or
sale of all or substantially all of the assets of the Company, however, the
Employee may not transfer or assign his obligations under this Agreement.
ARTICLE X
Survival of Covenants
Except to the extent expressly provided otherwise in this Agreement, the
covenants and agreements of the Employee and the Company, including but not
limited to those set forth in Articles IV and V, shall survive the termination
or expiration of this Agreement.
ARTICLE XI
Entire Agreement; Amendments
This Agreement constitutes the entire agreement and supersedes all other
prior agreements and understandings, both written and oral, express or implied,
with respect to the subject matter of this Agreement. This Agreement may be
amended only by a writing executed by the parties.
ARTICLE XII
Governing Law
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the Commonwealth of Virginia.
ARTICLE XIII
Waiver
Failure to insist upon strict compliance with any term or condition of
this Agreement shall not constitute a waiver of the term or condition, nor shall
any waiver or relinquishment of any right or power under this Agreement at any
one or more times be deemed a waiver or relinquishment of such right or power at
any other time.
ARTICLE XIV
Severability
If any Article, paragraph, sentence, or clause hereof, including,
without limitation, Article IV and V ("Provision"), is deemed invalid or
unenforceable in whole or in part in any jurisdiction, all the other Provisions
in this Agreement including the affected Provision, to the extent it is not
deemed invalid or unenforceable, shall remain in full force and effect in that,
and any other, jurisdiction and shall be liberally construed in order to
effectuate the purpose and intent of the Agreement. The invalidity or
unenforceability of any Provision of this agreement in any jurisdiction shall
not affect the validity or enforceability of that Provision in any other
jurisdiction.
ARTICLE XV
Arbitration
(1) Any disagreement or controversy between the parties concerning this
Agreement (other than disagreements or controversies concerning Articles IV and
V of this Agreement) shall be settled by arbitration in accordance with
Commercial Arbitration Rules of the American Arbitration Association ("AAA") and
this Article. In the event of any inconsistency between such Rules and this
Agreement, this Agreement shall control. The decision in writing of the sole
arbitrator or of a majority of the arbitrators, as the case may be, designated
or selected in accordance with this Article shall be final and binding on both
parties and may be enforced in a court of law or equity. The parties recognize
that they wish to use arbitration to settle disagreements or controversies
concerning this Agreement other than those excluded above and both parties waive
their right to appeal the arbitrators' decision to any court. The cost of
arbitration, including arbitrators' fees and expenses of hearings and
conferences, shall be shared equally by the parties. Each party shall pay its
own attorney's and experts' fees and related expenses.
(2) Notice of intent to arbitrate must be given within six months after
the aggrieved party knows or, with reasonable diligence, would have known of the
existence of the disagreement or controversy, unless the parties agree in
writing to extend the six month period.
(3) Disagreements and controversies submitted to arbitration hereunder
shall be decided by a sole arbitrator appointed by the AAA; provided, however,
that each party shall have the right, but not the obligation, to designate one
additional arbitrator. If a party wishes to avail himself of such right, such
party shall give written notice naming such additional arbitrator to the other
party within 30 days after the notice of intent to arbitrate is given.
(4) If the Employee breaches the provisions of Articles IV or V, he
shall not be entitled to receive any amounts due under this Agreement that have
not been previously paid to him.
(5) The Employee recognizes and acknowledges that in the event of any
default in or breach of any of the terms, conditions, and provisions of Articles
IV or V of this Agreement (either actual or threatened) by the Employee, the
Company will suffer irreparable harm and its remedies at law will be inadequate.
Accordingly, the Employee agrees that, in such event, the Company shall have the
right to specify performance and injunctive relief in addition to any and all
other remedies and rights available to the Company under this Agreement, or at
law or in equity, and all rights and remedies shall be cumulative.
(6) Disagreements or controversies concerning Articles IV or V may be
settled by arbitration in accordance with this Article if both parties so agree
in writing.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and the year first written below.
CIRCUIT CITY STORES, INC.
By: s/Richard L. Sharp 6/10/94
Richard L. Sharp, Date
President and Chief Executive Officer
AGREED: s/W. Stephen Cannon 6/13/94
W. Stephen Cannon, Esq. Date
