SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant ( )
Filed by a Party other than the Registrant (X)
Check the appropriate box:
( ) Preliminary Proxy Statement
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Circuit City Stores, Inc.
(Name of Registrant as Specified in its Charter)
Circuit City Stores, Inc.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
(X) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
( ) $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
CIRCUIT CITY STORES, INC.
9950 MAYLAND DRIVE
RICHMOND, VIRGINIA 23233
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 14, 1994
TO THE HOLDERS OF CIRCUIT CITY STORES, INC. COMMON STOCK:
The annual meeting of shareholders of Circuit City Stores, Inc. (the
"Company") will be held at The Jefferson Hotel, Franklin and Adams Streets,
Richmond, Virginia, on Tuesday, June 14, 1994, at 10:00 a.m., Eastern Daylight
Time, for the following purposes:
1. To elect three directors for three-year terms;
2. To consider and vote upon a proposal to approve a 1994 Stock Incentive
Plan;
3. To consider and vote upon a proposal to approve an Annual Performance
Based Bonus Plan; and
4. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Only holders of record of shares of Common Stock at the close of business
on May 6, 1994, will be entitled to vote at the meeting and any adjournments
thereof.
Whether or not you plan to attend the meeting, please fill in, date, sign
and return the enclosed proxy promptly in the enclosed envelope.
You are cordially invited to attend the meeting.
By Order of the Board of Directors
(Sig)
MICHAEL T. CHALIFOUX, SECRETARY
May 13, 1994
<PAGE>
PROXY STATEMENT
This Proxy Statement, mailed to shareholders on or about May 13, 1994, is
furnished in connection with the solicitation by Circuit City Stores, Inc. (the
"Company") of proxies in the accompanying form for use at the annual meeting of
shareholders to be held on June 14, 1994, and at any adjournments thereof. A
copy of the annual report of the Company for the fiscal year ended February 28,
1994, is being mailed to you with this Proxy Statement.
In addition to the solicitation of proxies by mail, the Company's officers
and regular employees, without compensation other than regular compensation, may
solicit proxies by telephone, telegraph and personal interview. The Company has
also retained Shareholder Communications Corporation of New York, New York, to
assist in the solicitation of proxies of shareholders whose shares are held in
street name by brokers, banks and other institutions at an approximate cost of
$6,000 plus out-of-pocket expenses. The Company will bear the cost of all
solicitation.
On May 6, 1994, the date for determining shareholders entitled to vote at
the meeting, there were 96,068,810 shares of common stock of the Company
("Common Stock") outstanding and entitled to vote. Each such share of Common
Stock entitles the holder thereof to one vote.
Any shareholder giving a proxy may revoke it at any time before it is voted
by delivering another proxy or written notice of revocation to the Company's
Secretary. A proxy, if executed and not revoked, will be voted for the election
of the nominees for director named herein and for the proposed 1994 Stock
Incentive Plan and the proposed Annual Performance Based Bonus Plan unless it
contains specific instructions to the contrary, in which event it will be voted
in accordance with such instructions.
A majority of the votes entitled to be cast on matters to be considered at
the meeting constitutes a quorum. If a share is represented for any purpose at
the meeting, it is deemed to be present for quorum purposes and for all other
matters as well. Abstentions and shares held of record by a broker or its
nominee ("Broker Shares") that are voted on any matter are included in
determining the number of votes present or represented at the meeting. Broker
Shares that are not voted on any matter at the meeting will not be included in
determining whether a quorum is present at such meeting.
The election of each nominee for director requires the affirmative vote of
the holders of a plurality of the shares of Common Stock cast in the election of
directors. Votes that are withheld and Broker Shares that are not voted in the
election of directors will not be included in determining the number of votes
cast and, therefore, will have no effect on the election of directors. The
affirmative vote of the holders of a majority of the votes cast will be required
to act on all other matters to come before the Annual Meeting, including (i) the
approval of the 1994 Stock Incentive Plan and (ii) the approval of the Annual
Performance Based Bonus Plan.
ITEM ONE -- ELECTION OF DIRECTORS
The Company's Board of Directors presently consists of ten directors, who
are divided into three classes with staggered terms. The terms of Ms. Barbara S.
Feigin and Messrs. Michael T. Chalifoux, Edward Villanueva and Norman Ricken as
directors of the Company will expire at the time of the annual meeting of
shareholders.
Mr. Ricken has declined to stand for reelection due to other business and
personal commitments. The Company proposes the reelection of Ms. Feigin and
Messrs. Chalifoux and Villanueva for three-year terms expiring at the time of
the 1997 Annual Meeting.
Although all the nominees have indicated their willingness to serve if
elected, if at the time of the meeting any nominee is unable or unwilling to
serve, shares represented by properly executed proxies will be voted at the
discretion of the persons named therein for such other person as the Board may
designate.
Information, including their business experience for the past five years,
about the nominees and the directors of the Company whose terms of office do not
expire this year appears below.
1
<PAGE>
NOMINEES FOR ELECTION FOR THREE-YEAR TERMS
<TABLE>
<C> <S>
(photo) MICHAEL T. CHALIFOUX, 47, Senior Vice President, Chief Financial Officer and Secretary of
the Company. Mr. Chalifoux joined the Company in 1983 as Corporate Controller and was
elected Vice President and Chief Financial Officer in 1988. He became Senior Vice
President and Chief Financial Officer in 1990 and became Secretary in 1993. He has been a
director of the Company since 1991.
BARBARA S. FEIGIN, 56, Executive Vice President and Director of Strategic Services of Grey
Advertising, Inc., the principal business of which is advertising and marketing
communications. Ms. Feigin has held her current position for the past 11 years. She is a
director of PHH Corporation and VF Corporation. She has been a director of the Company
since February 1994.
(photo) EDWARD VILLANUEVA, 59, financial consultant since 1987. Mr. Villanueva was employed by the
Company from 1967 to 1987. Mr. Villanueva served as acting President and Chief Financial
Officer of Richfood Holdings, Inc. from January 1990 to May 1990 and August 1990,
respectively. He is a director of Richfood Holdings, Inc. He has been a director of the
Company since 1978.
</TABLE>
DIRECTORS WHOSE TERMS DO NOT EXPIRE THIS YEAR
<TABLE>
<C> <S>
(photo) RICHARD N. COOPER, 59, Professor of Economics, Harvard University, since 1981. Mr. Cooper
served as Undersecretary of State for Economic Affairs, U.S. State Department, from 1977
to 1981. He is a director of the Phoenix Home Mutual Life Insurance Co., the
Warburg-Pincus Counsellors family of mutual funds and the Center for Naval Analysis. He
has been a director of the Company since 1983. His present term will expire in 1995.
DOUGLAS D. DRYSDALE, 69, Member, Caplin & Drysdale, Chartered, attorneys-at-law,
Washington, D.C. The Company has retained Caplin & Drysdale, Chartered, in prior fiscal
years and may retain it in the current fiscal year in connection with certain legal
matters. He has been a director of the Company since 1976. His present term will expire in
1995.
</TABLE>
2
<PAGE>
<TABLE>
<C> <S>
(photo) THEODORE D. NIERENBERG, 71, retired. Mr. Nierenberg founded and until 1984 served as the
President of Dansk International Designs, Ltd., a designer, importer, wholesaler and
retailer of fine tableware and giftware with headquarters in Mount Kisco, New York. He is
a director of the Growth Fund of America, the Income Fund of America and the Balanced Fund
of America. He has been a director of the Company since 1981. His present term will expire
in 1996.
(photo) WALTER J. SALMON, 63, Stanley Roth Senior Professor of Retailing, Harvard Business School,
since 1980 and Senior Associate Dean and Director of External Relations since 1989. He is
a director of Hannaford Bros. Company, Luby's Cafeterias, Inc., The Neiman Marcus Group,
Promus Companies, Inc., The Quaker Oats Company and Telxon Corporation. He has been a
director of the Company since 1992. His present term will expire in 1996.
(photo) RICHARD L. SHARP, 47, President and Chief Executive Officer of the Company. Mr. Sharp
joined the Company as Executive Vice President in 1982. He became President of the Company
in June 1984, and Chief Executive Officer in June 1986. He is a director of S&K Famous
Brands, Inc. and Flextronics International, Ltd. He has been a director of the Company
since 1983. His present term will expire in 1995.
(photo) ALAN L. WURTZEL, 60, Chairman of the Board of the Company. Mr. Wurtzel joined the Company
in 1966, was elected President in 1970 and served as Chief Executive Officer from 1972 to
1986. He is a director of Office Depot, Inc. He has been a director of the Company since
1966. His present term will expire in 1995.
</TABLE>
3
<PAGE>
BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth information about the equity securities of
the Company beneficially owned as of February 28, 1994, by (i) each executive
officer named in the tables appearing in the Summary Compensation Table; (ii)
each director or nominee for director of the Company; (iii) directors and
executive officers as a group; and (iv) each person who is believed by the
Company to own beneficially more than 5 percent of the outstanding shares of
Common Stock. Unless otherwise noted, each individual has sole voting power and
sole investment power with respect to securities beneficially owned.
<TABLE>
<CAPTION>
OPTION SHARES WHICH
MAY BE ACQUIRED WITHIN NUMBER OF SHARES PERCENT
60 DAYS AFTER BENEFICIALLY OWNED AS OF OF
NAME FEBRUARY 28, 1994 FEBRUARY 28, 1994(1) CLASS
<S> <C> <C> <C>
NAMED EXECUTIVE OFFICERS
Richard L. Sharp** 589,453 1,536,239 1.6%
Walter E. Bruckart 156,772 235,880 *
John A. Fitzsimmons 129,649 226,808 *
William E. Zierden 57,000 78,800(2) *
Michael T. Chalifoux** 85,297 156,437 *
Bernard W. Andrews*** 0 172,528(3) *
DIRECTORS
Richard N. Cooper 8,136 36,136 *
Douglas D. Drysdale 8,136 116,136(4) *
Barbara S. Feigin 0 0 *
Theodore D. Nierenberg 8,136 39,136(5) *
Norman Ricken 7,750 15,750 *
Walter J. Salmon 0 8,600 *
Edward Villanueva 8,136 357,080(6) *
Alan L. Wurtzel 34,176 417,676(7) *
All directors and executive
officers as a group (15 persons) 1,238,119 3,692,922 3.8%
BENEFICIAL OWNERS OF MORE THAN
5%
The Equitable Companies,
Incorporated N/A 8,370,550(8) 8.7%
787 Seventh Avenue
New York, NY 10019
Wellington Management
Company N/A 6,000,000(9) 6.2%
100 Vanguard Boulevard
Malvern, PA 19355
Lazard Freres & Co. N/A 5,000,000(10) 5.2%
One Rockefeller Plaza
New York, NY 10020
</TABLE>
* Less than 1% of Class, based on the number of shares of Common Stock
outstanding on May 6, 1994.
** Messrs. Sharp and Chalifoux are also directors of the Company.
*** Mr. Andrews served as an executive officer and as a director of the Company
until January 1994.
4
<PAGE>
(1) Includes the shares of Common Stock which could be acquired through
exercise of stock options within 60 days after February 28, 1994. Includes,
as to Messrs. Sharp, Bruckart, Fitzsimmons, Zierden, Chalifoux and all
directors and executive officers as a group, 25,000, 15,000, 9,000, 6,000,
6,000 and 74,100 shares, respectively, of restricted stock which become
free of restrictions on sale three years from the grant date. Also
includes, as to Messrs. Sharp, Bruckart, Fitzsimmons, Zierden, Chalifoux
and all directors and executive officers as a group, 40,000, 30,000,
20,000, 15,000, 10,000 and 125,000 shares, respectively, of restricted
stock which become free of restrictions on sale four years from the grant
date.
(2) Includes 800 shares held by Mr. Zierden as trustee for the benefit of his
retirement plan.
(3) Includes 4,000 shares owned by Mr. Andrews' wife in trust. Mr. Andrews
disclaims beneficial ownership of such 4,000 shares.
(4) Mr. Drysdale shares voting and investment power with respect to 64,800
shares.
(5) Includes 31,000 shares owned by Mr. Nierenberg's wife. Mr. Nierenberg
disclaims beneficial ownership of such 31,000 shares.
(6) Excludes 4,100 shares held by Mr. Villanueva as trustee of trusts for the
benefit of his children. Mr. Villanueva disclaims beneficial ownership of
all the excluded shares.
(7) Excludes 160,600 shares held by Mr. Wurtzel as trustee of trusts for the
benefit of his children. Mr. Wurtzel disclaims beneficial ownership of all
the excluded shares.
(8) Information concerning the shares owned by The Equitable Companies,
Incorporated ("Equitable") was obtained from a Schedule 13G dated February
9, 1994. According to this filing, Equitable filed on behalf of five French
mutual insurance companies, AXA Assurances I.A.R.D. Mutuelle, AXA
Assurances Vie Mutuelle, Alpha Assurances I.A.R.D. Mutuelle, Alpha
Assurances Vie Mutuelle and Uni Europe Assurance Mutuelle (collectively
"Mutuelles AXA"), as a group, AXA and Equitable. The filing indicates that
of the 8,370,550 shares beneficially owned, the group has sole voting power
of 6,044,950 shares, shared voting power of 243,000 shares, sole
dispositive power of 8,369,150 shares and shared dispositive power of 1,400
shares.
(9) Information concerning the shares believed by the Company to be
beneficially owned by Wellington Management Company was obtained from a
report on settlement activity for the Common Stock during February 1994.
The report was prepared by a consultant to the Company. The Company has no
information concerning the extent to which voting power and investment
power may be shared with respect to such Common Stock.
(10) Information concerning the shares believed by the Company to be
beneficially owned by Lazard Freres & Co. was obtained from a report on
settlement activity for the Common Stock during February 1994. The report
was prepared by a consultant to the Company. The Company has no information
concerning the extent to which voting power and investment power may be
shared with respect to such Common Stock.
CERTAIN INFORMATION CONCERNING THE
BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors held seven meetings during the fiscal year ended
February 28, 1994. No director attended less than 75 percent of the aggregate
number of meetings of the Board and of the committees on which he served, except
Mr. Ricken.
The Audit Committee is composed of Edward Villanueva, Chairman, Richard N.
Cooper and Norman Ricken. Barbara S. Feigin was appointed to the Audit Committee
in April 1994. Three meetings were held during the fiscal year ended February
28, 1994. The functions of this Committee include making recommendations to the
Board regarding the selection of independent auditors, conferring with the
independent auditors and reviewing the scope and results of their work as well
as the fees therefor, reviewing the Company's internal audit procedures and
approving the nature and scope of non-audit services performed by the Company's
independent auditors as well as the fees therefor.
5
<PAGE>
The Compensation and Personnel Committee is composed of Douglas D.
Drysdale, Chairman, Walter J. Salmon and Norman Ricken. Six meetings were held
during the fiscal year ended February 28, 1994. The functions of this Committee
include reviewing and recommending compensation programs for officers and key
personnel, making awards under and administering the Company's stock incentive
programs, reviewing and making recommendations with respect to senior management
organization and reviewing the Company's programs for attracting and
compensating management personnel at lower and middle levels.
The Pension Investment Committee is composed of Theodore D. Nierenberg,
Chairman, Richard N. Cooper, and Edward Villanueva. One meeting was held during
the fiscal year ended February 28, 1994. The functions of this Committee include
establishing the funding policy of the Employees' Retirement Plan of Circuit
City Stores, Inc. (the "Pension Plan"), appointing Pension Plan investment
managers and allocating Pension Plan assets among managers for investment,
employing accountants and actuaries for the Pension Plan, making recommendations
to the Board concerning the appointment or removal of the Trustee for the
Pension Plan, establishing investment objectives to be followed by the Trustee
and investment managers and monitoring the performance of the Trustee and
Pension Plan investment managers. This Committee also may make recommendations
concerning investments to the Trustee and the investment managers.
The Nominating and Structure Committee is composed of Alan L. Wurtzel,
Chairman, Theodore D. Nierenberg and Walter J. Salmon. Barbara S. Feigin was
appointed to the Nominating and Structure Committee in April 1994. Two meetings
were held during the fiscal year ended February 28, 1994. The functions of this
Committee include recommending candidates for election as directors and
reviewing and recommending policies with regard to the size and composition of
the Board. The Committee considers nominees for the Board recommended by the
Company's shareholders.
In accordance with the Company's Bylaws, a shareholder who is interested in
nominating a person to the Board should submit to the Secretary of the Company
written notice of his intent to make such nomination. Such notice must be given
either by personal delivery or by United States mail, postage prepaid, not later
than 120 days in advance of the annual meeting, or with respect to a special
meeting of shareholders 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 shareholders. The contents of such notice must be as specified in the
Company's Bylaws, a copy of which may be obtained by any shareholder who directs
a written request for the same to the Secretary of the Company.
6
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The table below sets forth for the years ended
February 28, 1994, February 28, 1993 and February 29, 1992, the annual and
long-term compensation for services in all capacities to the Company and its
subsidiaries of those persons who at February 28, 1994, were the Company's Chief
Executive Officer ("CEO") and the other four most highly compensated executive
officers of the Company other than the CEO and for Mr. Andrews, who was not
serving as an executive officer at the end of the last completed fiscal year,
but for whom disclosure would have otherwise been provided. The only SARs
granted were Change of Control SARs (described at page 13), which were granted
in connection with each of the options. No free-standing SARs have been granted.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
RESTRICTED SECURITIES
ANNUAL COMPENSATION STOCK UNDERLYING
SALARY BONUS AWARD(S)(1) OPTIONS/SARS
NAME AND FISCAL
PRINCIPAL POSITION YEAR $ $ $ (#)
<S> <C> <C> <C> <C> <C>
Richard L. Sharp 1994 618,286 549,575 0 97,500
President and 1993 583,012 870,000 0 538,578
Chief Executive Officer 1992 561,171 660,000 226,563 76,000
Walter E. Bruckart 1994 492,863 218,050 0 40,000
Executive Vice President 1993 461,647 345,000 0 125,522
Merchandising 1992 436,171 318,750 135,938 45,000
John A. Fitzsimmons 1994 407,863 126,157 0 22,500
Senior Vice President 1993 379,378 196,875 0 131,152
Administration 1992 361,171 183,750 81,563 28,000
William E. Zierden 1994 335,632 102,795 0 18,000
Senior Vice President 1993 317,108 162,750 0 31,000
Human Resources 1992 306,171 154,875 54,375 21,000
Michael T. Chalifoux 1994 350,094 109,025 0 22,500
Senior Vice President, 1993 307,551 162,750 0 70,912
Chief Financial Officer 1992 271,171 136,500 54,375 21,000
and Secretary
Bernard W. Andrews 1994 448,659 0 0 40,000(2)
Executive Vice President -- 1993 454,820 345,000 0 96,664
Operations until 1992 397,709 300,000 135,938 45,000
January 1994
</TABLE>
(1) On February 28, 1994, the persons named in the table held the following
number of shares of restricted stock with the dollar value at such date
stated in parenthesis: Mr. Sharp -- 65,000 shares ($1,235,000); Mr.
Bruckart -- 45,000 ($855,000); Mr. Fitzsimmons -- 29,000 shares ($551,000);
Mr. Zierden -- 21,000 shares ($399,000); Mr. Chalifoux -- 16,000 shares
($304,000). Mr. Andrews forfeited all of his shares of restricted stock upon
the termination of his employment. None of the restricted stock awards will
vest, in whole or in part, in under three years from the date of grant.
Dividends are paid to the employee on the restricted stock during the
restricted period.
(2) Although the described options were granted to Mr. Andrews, all expired upon
his termination of employment.
7
<PAGE>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR. The table below sets forth for the
fiscal year ended February 28, 1994, the grants of stock options and stock
appreciation rights ("SARs") to the executive officers named in the Summary
Compensation Table. The only SARs granted were Change of Control SARs (described
at page 13) which were granted in connection with each of the options. No
free-standing SARs have been granted.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
NUMBER OF VALUE
SECURITIES AT ASSUMED ANNUAL RATES
UNDERLYING % OF TOTAL OF
OPTIONS/ OPTIONS/SARS STOCK PRICE APPRECIATION
SARS GRANTED TO EXERCISE EXPIRATION FOR OPTION TERM(1)
NAME GRANTED EMPLOYEES PRICE(2) DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Richard L. Sharp 97,500 17.34% $25.125 03/24/00 $1,040,141 $2,383,435
Walter E. Bruckart 40,000 7.11 25.125 03/24/00 426,725 977,820
John A. Fitzsimmons 22,500 4.00 25.125 03/24/00 240,033 550,024
William E. Zierden 18,000 3.20 25.125 03/24/00 192,026 440,019
Michael T. Chalifoux 22,500 4.00 25.125 03/24/00 240,033 550,024
Bernard W. Andrews(3) 40,000 7.11 25.125 03/24/00 426,725 977,820
</TABLE>
(1) Any such appreciation will inure to the benefit of all shareholders. The
value of the Company's outstanding Common Stock would increase by
approximately $983,672,000 and $2,292,336,000, based on assumed stock price
appreciation rates of 5% and 10%, respectively, from the grant date of the
options expiring in 2000 until the end of such options' term.
(2) The exercise price for all of the options is the fair market value of the
Common Stock on the date of grant.
(3) Although the described options were granted to Mr. Andrews, all expired upon
his termination of employment.
AGGREGATED OPTIONS/SAR EXERCISES AND FISCAL YEAR END OPTION/SAR VALUE
TABLE. The table below sets forth information concerning option exercises and
fiscal year end option/SAR values as of February 28, 1994, for the executive
officers named in the Summary Compensation Table. The only SARs outstanding were
Change of Control SARs (described at page 13).
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
NUMBER OF OPTIONS/SARS AT OPTIONS/SARS AT
SHARES ACQUIRED FEBRUARY 28, 1994 FEBRUARY 28, 1994
ON EXERCISE VALUE REALIZED* EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Richard L. Sharp 0 $ 0 523,828 259,250 $1,073,563 $ 777,438
Walter E. Bruckart 0 0 129,272 155,000 $ 543,906 $ 392,812
John A. Fitzsimmons 15,000 183,750 113,524 68,000 $ 378,938 $ 240,625
William E. Zierden 0 0 44,750 51,750 $ 350,281 $ 179,250
Michael T. Chalifoux 0 0 71,872 36,400 $ 265,163 $ 179,738
Bernard W. Andrews 46,250 359,141 0 0 0 0
</TABLE>
* The oldest outstanding options exercised by the named executive officers were
granted in January 1987. For point of reference, the value of the Company's
outstanding stock as of that date had increased by approximately
$1,152,034,000 in January 1994 when most of the options were exercised.
8
<PAGE>
PENSION PLAN TABLE. The following table illustrates estimated annual
retirement benefits payable under the Company's defined benefit pension plan
(the "Pension Plan") to persons in specified compensation and years of service
classifications.
<TABLE>
<CAPTION>
HIGHEST
CONSECUTIVE
FIVE-YEAR ESTIMATED* ANNUAL PENSION** FOR REPRESENTATIVE YEARS
AVERAGE OF CREDITED SERVICE
COMPENSATION 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$ 400,000............ 87,660 116,880 146,100 175,320 204,540
$ 500,000............ 110,160 146,880 183,600 220,320 257,040
$ 600,000............ 132,660 176,880 221,100 265,320 309,540
$ 700,000............ 155,160 206,880 258,600 310,320 362,040
$ 800,000............ 177,660 236,880 296,100 355,320 414,540
$ 900,000............ 200,160 266,880 333,600 400,320 467,040
$1,000,000........... 222,660 296,880 371,100 445,320 519,540
$1,100,000........... 245,160 326,880 408,600 490,320 572,040
</TABLE>
* Notwithstanding the estimates set forth in the table, the annual pension
payable from the Pension Plan is limited to $118,800, effective January 1,
1994, for a participant who retires at age 65. This limit, which is subject
to annual cost of living adjustments, is imposed on defined benefit plans
under the Internal Revenue Code and may also vary in individual cases if
retirement occurs early or late.
** The Pension Plan is integrated with Social Security benefits and the annual
pension amounts before any offset for such Social Security benefits.
The Pension Plan covers employees who satisfy certain age and service
requirements. Benefits are based on a designated percentage of the average of
compensation for the five highest consecutive years of employment, weighted
according to years of credited service, with an offset for Social Security
benefits. For Pension Plan purposes, compensation of participants includes base
compensation, bonuses, overtime and commissions, and excludes amounts realized
under any employee stock purchase plan or stock incentive plan. For Pension Plan
purposes, compensation for those individuals listed in the Summary Compensation
Table is substantially the same as the amounts listed under the Salary and Bonus
headings.
For purposes of the Pension Plan, credited years of past and future service
for Messrs. Sharp, Bruckart, Fitzsimmons, Zierden, Chalifoux and Andrews will be
29, 34, 21, 20, 29 and 0 years, respectively, at age 65.
REPORT OF COMPENSATION AND PERSONNEL COMMITTEE
COMPENSATION PHILOSOPHY
The Compensation and Personnel Committee (the "Committee") believes that
corporate performance and, in turn, shareholder value will be enhanced by a
compensation system which supports and reinforces the Company's key operating
and strategic goals while aligning the financial interests of the Company's
executive officers with those of the shareholders. The Company utilizes both
short-term and long-term incentive compensation programs to achieve these
objectives. Executive officer incentive compensation programs are tied to
Company-wide achievement of annual financial goals and the market value of the
Company's stock. For other salaried employees, the incentive compensation
program is also tied to divisional, departmental or store business goals and, in
some cases, individual performance.
The Committee meets early in each fiscal year to establish executive
compensation for that year. For the Company's 1994 fiscal year, the Committee
made its compensation decisions based on a review of the Company's 1993 fiscal
year performance and on the Company's budget and other projections for the 1994
fiscal year. The Committee is composed solely of independent directors.
Beginning in the 1995 fiscal year, the Company will be subject to new
Internal Revenue Code provisions that may limit the income tax deductibility of
certain forms of compensation paid to its named executive officers. These
provisions allow full deductibility of certain types of performance based
compensation. The Committee
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has determined that the Company should modify its compensation practices, to the
extent practicable, to provide the maximum deductibility for compensation
payments. The major modifications to these practices are reflected in the Annual
Performance Based Bonus Plan and the 1994 Stock Incentive Plan which are being
submitted for shareholder approval.
COMPONENTS OF THE EXECUTIVE COMPENSATION PROGRAM
The Company's compensation program for executive officers consists of three
components: base salary, an annual performance based cash bonus and stock
incentives, principally in the form of stock options. In making compensation
decisions for the 1994 fiscal year, the Committee compared the compensation of
the Company's executive officers with compensation of officers at certain other
retail companies by utilizing a nationally-known compensation consultant. A peer
group of fourteen national retail organizations was selected by the outside
consultant. The companies in the compensation peer group are among the companies
included in the Retail Stores - Composite and the S&P 500 used for the
Performance Graph that follows this report.
The Committee compared the Company and the compensation peer group based on
one-year and five-year performance measures of return on average shareholders'
equity and total shareholders' return. The Company ranked above the 75th
percentile on all these performance measures. For the five-year period, the
Company also ranked above the 75th percentile on cumulative average sales growth
rate and above the 65th percentile on cumulative average net income growth rate.
The total compensation (salary, target bonuses and stock options) of the
Company's named executive officers was in the 75th percentile for the
compensation peer group. Although the Committee did not establish any particular
level for the Company's compensation to be set at in respect to the compensation
peer group, the Committee believes that the total compensation is appropriate
given the Company's overall performance and competitive comparisons. The
individual elements of the executive compensation program are addressed below.
ANNUAL SALARY
Each year, the Committee reviews proposals submitted by the Company's Chief
Executive Officer ("CEO") for annual salary for the executive officers other
than the CEO. In evaluating the CEO's proposals, the Committee considers (1) a
qualitative evaluation of the individual executive officer's performance,
including evaluations thereof provided by the CEO and (2) the Company's
performance in relation to its target financial goals for the prior fiscal year.
Those target financial goals include goals for pre-tax earnings, earnings per
share and return on equity. The target financial goals are initially established
as part of the Company's budget process at the beginning of each fiscal year.
The Committee looks at the Company's overall performance and does not apply a
specific weight to any of the various measures of financial performance. The
Committee believes that the annual salaries for executive officers should be set
so that a large percentage of total cash compensation is at risk under the
incentive programs.
ANNUAL PERFORMANCE BASED BONUS
All salaried employees, including the Company's named executive officers,
are eligible to receive cash bonuses under a performance based bonus program
established each year by the Committee and approved by the Board of Directors.
The bonus program is designed to motivate the Company's employees to achieve the
Company's short-term operating and financial goals. For the 1994 fiscal year,
the bonus awards for executive officers were based exclusively upon the
Company's achievement of its target financial goals for pre-tax earnings
("PTE"). The target PTE goals were established early in the fiscal year as part
of the Company's budgeting process and were subject to approval and modification
by the Committee. Consistent with the Committee's compensation philosophy of
tying a large percentage of total compensation to performance, the potential
maximum bonus of each executive officer was a significant percentage of that
individual's salary for the year. For the 1994 fiscal year, the target bonus
amounts ranged from 35% of base salary, in the case of certain less senior
executive officers, to 100% of base salary, in the case of the CEO, which were
the same levels as for the 1993 fiscal year for all executive officers.
The amount of bonus payments depends upon the extent to which the Company
achieves its target financial goals for the year. For the 1994 fiscal year, if
the Company did not achieve 85% of the goal, no bonuses would
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have been paid. At 85% of the goal, 25% of the bonus would be paid with an
additional five percent paid for each one-percent increase in performance up to
the goal. For performance above the target, an additional bonus would be paid
with a maximum of 150% of the target bonus. The Committee retained the
discretion to adjust the PTE and EPS goals during the fiscal year to account for
unforeseen factors.
In establishing the annual salary and bonuses for named executive officers
for the 1994 fiscal year, the Committee compared the projected amounts payable
with the compensation paid by the compensation peer group. The annual cash
compensation (salary and target bonus) for the named executive officers as a
group was at the 50th percentile. The Committee believes that this level is
reasonable in light of the greater importance of the long-term incentives in the
Company's executive compensation package.
LONG-TERM INCENTIVE COMPENSATION
Long-term incentive compensation is provided by grants under the Company's
stock incentive plans, which are offered broadly to salaried employees. For
executive officers, these grants are made principally in the form of stock
options. All grants of restricted stock awards were limited to salaried
employees below the level of executive officers during the 1994 fiscal year.
The Committee considers stock options to be an important means of ensuring
that executive officers maintain their incentive to increase the long-term
profitability of the Company and the value of the Company's stock. Such options
generally become vested and exercisable ratably over a period of four years from
the date of grant. The number of options to be granted to a particular executive
officer is determined by the Committee primarily under a formula based on that
individual's target bonus for the fiscal year and the market price of the
Company's stock. Compared to the compensation peer group, the compensation of
executive officers of the Company is more heavily weighted toward long-term
incentives in the form of stock options. The Committee and the compensation
consultant believe that the formula results in awards of appropriate size for
its executive officers in relation to grants made to officers of companies of
comparable size and financial performance. Because the value of stock options is
entirely a function of increases in the value of the Company's stock, the
Committee believes that this component of the Company's compensation arrangement
closely aligns the interests of the executive officers with those of the
Company's shareholders.
CHIEF EXECUTIVE OFFICER'S COMPENSATION
The Committee determined the compensation of Richard L. Sharp, the
Company's President and CEO, for the 1994 fiscal year in a manner consistent
with the guidelines and policies described above. The Committee approved a
six-percent increase in Mr. Sharp's salary, and kept his performance bonus
target at 100% of salary. Stock option grants to Mr. Sharp for the 1994 fiscal
year were made under the same formula as for the 1993 fiscal year.
In comparison to the compensation peer group, Mr. Sharp's cash compensation
ranked below the 50th percentile. The options granted to Mr. Sharp for the 1993
fiscal year ranked above the 80th percentile of those companies in the
compensation peer group that used long-term incentives for their CEO. On an
aggregate basis, Mr. Sharp's compensation was slightly above the 75th percentile
for the compensation peer group. In evaluating Mr. Sharp's compensation, the
Committee considered the Company's performance during the 1993 fiscal year which
had exceeded all financial goals, the compensation of chief executive officers
of the compensation peer group, and Mr. Sharp's important personal contributions
to the continued growth of the Company. The Committee also considered that Mr.
Sharp's compensation changes for the last five fiscal years had been consistent
with the Company's net income and sales increases for that period, and had been
slower than increases in total shareholder return. The Committee believes that
Mr. Sharp's potential compensation for the 1994 fiscal year was appropriate in
light of all of the above factors.
COMPENSATION AND PERSONNEL COMMITTEE
Douglas D. Drysdale, Chairman
Walter J. Salmon
Norman Ricken
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Drysdale, a member of the Committee, is a member of the law firm of
Caplin & Drysdale, Chartered. Mr. Drysdale's firm has been retained by the
Company in the past, most recently in 1991, and may possibly be retained by the
Company during the current fiscal year.
PERFORMANCE GRAPH
TOTAL RETURN TO SHAREHOLDERS
(graph as defined by the
following data points)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
FY1989 1990 1991 1992 1993 1994
CIRCUIT CITY STORES INC 100.00 113.92 83.23 167.31 255.12 204.72
S&P 500 INDEX 100.00 118.90 136.34 158.14 174.98 189.57
RETAIL STORES-COMPOSITE 100.00 119.43 147.09 198.25 227.52 228.02
</TABLE>
EMPLOYMENT AGREEMENTS AND CHANGE-IN-CONTROL ARRANGEMENTS
The Company has employment agreements with each of the executive officers
named in the Summary Compensation Table. Generally, these agreements provide for
annual salary review and participation in the Company's bonus, stock incentive
and other employee benefit programs. They also provide for continuation of base
salary for specified periods following termination by the Company without cause
(two years in the case of Mr. Sharp, one year for the other named executive
officers). In such circumstances, the agreements also generally provide that the
employee will be paid any bonus to which he would otherwise be entitled for that
year, such bonus to be prorated if termination occurs in the first six months of
the year. The salary continuation generally extends for another year if the
termination without cause follows a change of control. The Company's salary
continuation obligation will decrease by up to 50 percent if the individual
secures alternative employment; provided, however, that there is no decrease if
the termination related to a change of control. In addition, if the employee
voluntarily terminates the employment relationship within one year following a
change of control, the employee will be entitled to continuation of base salary
for a specified period of time (two years in the case of Mr. Sharp, one year for
the other named executive officers) and potential payment of a bonus as
indicated above.
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Each agreement contains provisions confirming the employee's obligation to
maintain the confidentiality of proprietary information and not to compete with
the Company for a specified period of time after the termination of his
employment. The agreements with Messrs. Bruckart, Fitzsimmons and Zierden became
effective in 1988. The agreements with Messrs. Sharp and Chalifoux became
effective in 1986 and 1989, respectively. The current base salaries of Messrs.
Sharp, Bruckart, Fitzsimmons, Zierden and Chalifoux under their employment
agreements are $617,500, $490,000, $405,000, $330,000 and $350,000 respectively.
Mr. Andrews had a similar employment agreement, which became effective in
1991; however, since he voluntarily terminated his employment and no change in
control has occurred, the Company is not obligated to make any post-employment
payments to Mr. Andrews under his employment agreement. The Company executed a
limited waiver of Mr. Andrews' non-compete obligations upon his termination of
employment.
The named executive officers have been granted SARs in connection with the
stock options granted to them under the Company's stock incentive plans. These
Change of Control SARs may only be exercised in the event that a change of
control of the Company takes place and, upon exercise of the SAR and the
surrender of the related option, entitle the holder to receive cash from the
Company in the amount of the spread between the option exercise price and the
market value of the Common Stock at the time of exercise, which value is
determined by a formula designed to take into account the effect of the change
of control.
COMPENSATION OF DIRECTORS
Directors who are not employees receive annual compensation of $21,000,
plus $1,000 for attendance at each Board meeting and $500 for attendance at each
committee meeting. Employees who are also directors do not receive directors'
fees.
The Company has an employment agreement with Alan L. Wurtzel, Chairman of
the Board of Directors, pursuant to which Mr. Wurtzel receives a salary and
certain benefits for services as a part-time employee of the Company. The
agreement is effective through 1998 when Mr. Wurtzel reaches age 65. His base
salary under the agreement is currently $80,000 with annual increases of $5,000.
The value of perquisites provided to Mr. Wurtzel under the agreement was $59,626
for the fiscal year ended February 28, 1994. Mr. Wurtzel has agreed to
confidentiality and non-compete provisions similar to those in the named
executive officers' agreements. If Mr. Wurtzel's employment is terminated
without cause, he will be entitled to receive the same salary payments from the
Company that he would have received if his employment had not been terminated
until he reached age 65.
Directors who are not full-time employees of the Company also receive
awards under the 1989 Non-Employee Directors Stock Option Plan (the "1989
Plan"). Stock option grants under the 1989 Plan are automatic. Every year on the
date of the annual meeting of the Company's shareholders, stock options are
automatically granted to each eligible director. If elected on a date other than
the annual meeting date, a director may also be entitled to a grant at that time
depending on how soon the election occurs before the next annual meeting. The
number of shares of Common Stock subject to the options will be such that the
exercise price of the options multiplied by such number of shares is as near as
possible to, but does not exceed, $50,000. The exercise price of options granted
under the 1989 Plan is the fair market value of the Common Stock on the date of
the option grant. A like number of Change of Control SARs are automatically
granted in connection with each stock option grant.
On June 15, 1993, seven non-full time employee members of the Board of
Directors were granted an aggregate of 10,605 stock options under the 1989 Plan
at an option price of $33.00 per share.
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SECTION 16(A) COMPLIANCE
Section 16(a) of the Securities Exchange Act requires the Company's
officers and directors, and persons who own more than 10 percent of a registered
class of the Company's equity securities, to file reports of ownership and
changes in ownership on Forms 3, 4 and 5 with the Securities and Exchange
Commission. Officers, directors and greater than 10 percent shareholders are
required by regulation to furnish the Company with copies of all Forms 3, 4 and
5 they file.
Based solely on the Company's review of the copies of such forms it has
received and written representations from certain reporting persons that they
were not required to file Forms 5 for specified fiscal years, the Company
believes that all of its officers, directors and greater than 10 percent
beneficial owners complied with all filing requirements applicable to them with
respect to transactions during fiscal 1994.
ITEM TWO -- PROPOSAL TO ADOPT 1994 STOCK
INCENTIVE PLAN
INTRODUCTION
The Board of Directors of the Company has adopted, and recommends that the
shareholders approve, the Company's 1994 Stock Incentive Plan (the "1994 Plan"
or "Plan"). The 1994 Plan is intended to provide a means for selected employees
of the Company to increase their personal financial interest in the Company,
thereby stimulating the efforts of these employees and strengthening their
desire to remain with the Company (references to the "Company" in this section
will include any parent and subsidiary corporations).
The 1994 Plan became effective February 15, 1994, subject to shareholder
approval. Unless sooner terminated by the Board of Directors, the Plan will
terminate on February 14, 2004. No incentive awards may be made under the 1994
Plan after termination.
The principal features of the 1994 Plan are summarized below. The summary
is qualified by reference to the complete text of the Plan, which is attached as
Exhibit A.
GENERAL
The 1994 Plan authorizes the reservation of 2,500,000 shares of Common
Stock for issuance pursuant to incentive awards made under the 1994 Plan. Such
incentive awards may be in the form of stock options, stock appreciation rights
or restricted stock. No more than 1,000,000 shares may be subjected to awards
for any single employee in any year while the 1994 Plan is in effect.
If an incentive award is cancelled, terminates or lapses unexercised, any
unissued shares allocated to such incentive award may be subjected again to an
incentive award. If shares of restricted stock are reacquired by the Company,
such shares may again be subjected to an incentive award under the Plan. In
addition, shares subject to options granted under the Company's 1986 Stock
Incentive Plan and 1988 Stock Incentive Plan that are not issued under one of
those plans because such options are cancelled, expire or otherwise terminate
unexercised after February 15, 1994, may be subjected to an incentive award and
issued under the 1994 Plan.
Adjustments will be made in the number of shares that may be issued under
the 1994 Plan in the event of a future stock dividend, stock split or similar
pro rata change in the number of outstanding shares of Common Stock or the
future creation or issuance to shareholders generally of rights, options or
warrants for the purchase of Common Stock or Preferred Stock.
The Common Stock is traded on the New York Stock Exchange, and on May 6,
1994, the closing price was $18.625. The Company presently intends to register
the shares issuable under the 1994 Plan under the Securities Act of 1933 after
shareholder approval is received. No awards had been granted under the 1994 Plan
as of May 6, 1994.
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ELIGIBILITY
All present and future employees of the Company are eligible to receive
incentive awards under the 1994 Plan. The Company has approximately 23,600
employees (nine of whom are executive officers).
ADMINISTRATION
An independent committee (the "Committee") will administer the 1994 Plan.
This Committee will be comprised of at least three directors of the Company who
are not eligible to participate in the Plan or any similar plan of the Company.
It is anticipated that the Committee will be the Compensation and Personnel
Committee of the Board of Directors. The Committee has the power and complete
discretion to determine when to grant incentive awards, which eligible employees
will receive incentive awards, whether the award will be an option, stock
appreciation right or restricted stock, whether stock appreciation rights will
be attached to options, and the number of shares to be allocated to each
incentive award. The Committee may impose conditions on the exercise of options
and stock appreciation rights and upon the transfer of restricted stock received
under the Plan, and may impose such other restrictions and requirements as it
may deem appropriate, including reserving the right for the Company to reacquire
shares issued pursuant to an incentive award. The Committee is also expressly
authorized to make an award under the Plan conditioned upon the surrender for
cancellation of an existing incentive award.
STOCK OPTIONS
Options to purchase shares of Common Stock granted under the 1994 Plan may
be "incentive stock options" or nonstatutory stock options. Incentive stock
options qualify for favorable income tax treatment under Section 422A of the
Internal Revenue Code, while nonstatutory stock options do not. The option price
of Common Stock covered by an incentive stock option may not be less than 100
percent (or, in the case of an incentive stock option granted to a 10 percent
shareholder, 110 percent) of the fair market value of the Common Stock on the
date of the option grant. The option price of Common Stock covered by a
nonstatutory option may not be less than 100 percent of the fair market value of
the Common Stock on the date of grant.
The value of incentive stock options, based on the exercise price, that can
be exercisable for the first time in any calendar year under the 1994 Plan or
any other similar plan maintained by the Company is limited to $100,000.
Options may only be exercised at such times as may be specified by the
Committee, provided, however, that incentive stock options may not be exercised
after the first to occur of (i) ten years (or, in the case of an incentive stock
option granted to a 10 percent shareholder, five years) from the date on which
the incentive stock option was granted, (ii) three months from the optionee's
termination of employment with the Company for reasons other than death or
disability, or (iii) one year from the optionee's termination of employment
because of death or disability. No option granted under the 1994 Plan may be
exercised within the first six months from the date it is granted (except in the
case of an optionee who becomes disabled or dies or in the case of an option
which becomes exercisable as a result of a Change of Control).
If the option so provides, an optionee exercising an option may pay the
purchase price in cash; by delivering or causing to be withheld from the option
shares, shares of Common Stock; by delivering a promissory note; or by
delivering an exercise notice together with irrevocable instructions to a broker
to promptly deliver to the Company the amount of sale or loan proceeds from the
option shares to pay the exercise price. The 1994 Plan authorizes the Committee
also to include a "reload" feature in options granted under the Plan. If an
option with a reload feature is exercised by delivering already owned shares to
pay the exercise price, the optionee is automatically granted a new option to
purchase the number of already owned shares delivered (a "Reload Option"). The
Reload Option will have the same restrictions on exercisability as existed in
the underlying option and the exercise price will be the market value of the
Common Stock on the date of grant of the Reload Option. The Reload Option may
not have a reload feature.
CHANGE OF CONTROL
The Committee may, in its discretion, include provisions in stock options
granted under the 1994 Plan that will make the options become fully exercisable
upon a Change of Control, or upon the occurrence of one or more
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events subsequent to a Change of Control, notwithstanding other conditions on
exercisability in the option. A "Change of Control" shall be deemed to have
taken place if: (i) a third person, including a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934 becomes, or acquires the right
to become, the beneficial owner of the Company's securities having 20 percent 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 a 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.
STOCK APPRECIATION RIGHTS
The Committee may award stock appreciation rights under the 1994 Plan
either with or without related options, or the Committee may subsequently award
and attach stock appreciation rights to a previously awarded nonstatutory
option, and impose such conditions upon their exercise as it deems appropriate.
When the stock appreciation right is exercisable, the holder may surrender to
the Company all or a portion of his unexercised stock appreciation right and
receive in exchange an amount equal to the difference between (i) the fair
market value on the date of exercise of the Common Stock covered by the
surrendered portion of the stock appreciation right and (ii) the exercise price
of the Common Stock under the related option or, if not related to an option,
the fair market value of Common Stock on the date the stock appreciation right
was awarded. The Committee may limit the amount which can be received when a
stock appreciation right is exercised. When a stock appreciation right related
to an option is exercised, the underlying option, to the extent surrendered,
will no longer be exercisable. Similarly, when an option is exercised, any stock
appreciation rights attached to the option will no longer be exercisable. The
Company's obligation arising upon exercise of a stock appreciation right may be
paid in Common Stock or in cash, or in any combination of the two, as the
Committee may determine.
Stock appreciation rights may only be exercised when the underlying option
is exercisable or, if there is no underlying option, at such times as may be
specified by the Committee. In addition, it is possible under the Plan for stock
appreciation rights to be awarded which are exercisable only during a specified
period of time following a Change of Control. There are further limitations on
when an officer, director or 10 percent shareholder of the Company (an
"Insider"), may exercise a stock appreciation right. In particular, Insiders may
not exercise stock appreciation rights within the first six months after they
are granted and must generally exercise the rights in brief window periods
following quarterly earnings releases. Insiders may exercise Change of Control
stock appreciation rights in accordance with their terms.
RESTRICTED STOCK
Restricted stock issued pursuant to the Plan is subject to the following
general restrictions: (i) none of such shares may be sold, transferred, pledged,
or otherwise encumbered or disposed of until the restrictions on such shares
shall have lapsed or been removed under the provisions of the Plan, and (ii) if
a holder of restricted stock ceases to be employed by the Company, he will
forfeit any shares of restricted stock on which the restrictions have not lapsed
or been otherwise removed. The Committee is also authorized to impose further
restrictions on restricted stock awards, including additional events of
forfeiture.
The Committee will establish as to each share of restricted stock issued
under the 1994 Plan the terms and conditions upon which the restrictions on such
shares shall lapse provided that except in limited circumstances, the period of
restriction must be at least three years from the date of grant. Such terms and
conditions may include, without limitation, the lapsing of such restrictions at
the end of a specified period of time, as a result of the disability, death or
retirement of the participant, or as a result of the occurrence of a Change of
Control. In addition, 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.
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During the period of restriction, participants holding shares of restricted
stock may exercise full voting rights with respect to those shares and are
entitled to receive all dividends and other distributions paid with respect to
those shares.
TRANSFERABILITY OF INCENTIVE AWARDS
No options or stock appreciation rights granted under the Plan, and during
the applicable period of restriction no shares of restricted stock, may be sold,
transferred, pledged, or otherwise disposed of, other than by will or by the
laws of descent and distribution. All rights granted to a participant under the
Plan shall be exercisable during his lifetime only by such participant, or his
guardians or legal representatives. Upon the death of a participant, his
personal representative or beneficiary may exercise his rights under the Plan.
AMENDMENT OF THE 1994 PLAN AND INCENTIVE AWARDS
The Board of Directors may amend the 1994 Plan in such respects as it deems
advisable; provided that the shareholders of the Company must approve any
amendment that would (i) materially increase the benefits accruing to
participants under the 1994 Plan, (ii) materially increase the number of shares
of Common Stock that may be issued under the 1994 Plan, or (iii) materially
modify the requirements of eligibility for participation in the 1994 Plan.
Incentive awards granted under the 1994 Plan may be amended with the consent of
the participant so long as the amended award is consistent with the terms of the
Plan.
FEDERAL INCOME TAX CONSEQUENCES
An employee will not incur federal income tax when he is granted a
nonstatutory stock option, an incentive stock option, a stock appreciation right
or restricted stock.
Upon exercise of a nonstatutory option or a stock appreciation right, an
employee generally will recognize ordinary compensation income, which is subject
to income tax withholding by the Company, equal to the difference between the
fair market value of the Common Stock on the date of the exercise and the option
price. When an employee exercises an incentive stock option, he generally will
not recognize income, unless he is subject to the alternative minimum tax.
An employee may deliver shares of Common Stock instead of cash to acquire
shares under an incentive stock option or nonstatutory stock option, without
having to recognize taxable gain (except in some cases with respect to
"statutory option stock") on any appreciation in value of the shares delivered.
However, if an employee delivers shares of "statutory option stock" in
satisfaction of all, or any part, of the exercise price under an incentive stock
option, and if the applicable holding periods of the "statutory option stock"
have not been met, he will be considered to have made a taxable disposition of
the "statutory option stock." "Statutory option stock" is stock acquired upon
the exercise of incentive stock options.
In general, an employee who has received shares of restricted stock will
include in his gross income as compensation income an amount equal to the fair
market value of the shares of restricted stock at the time the restrictions
lapse or are removed. Such amount will be included in income in the tax year in
which such event occurs. The income recognized will be subject to income tax
withholding by the Company.
The Committee has authority under the 1994 Plan to adopt procedures to give
a participant the right to deliver already owned Common Stock or to have a
portion of the shares he would otherwise acquire under an incentive award
withheld to cover his tax liabilities. The election will be effective only if
made in compliance with the procedures established by the Committee.
The Company usually will be entitled to a business expense deduction at the
time and in the amount that the recipient of an incentive award recognizes
ordinary compensation income in connection therewith. As stated above, this
usually occurs upon exercise of nonstatutory options and stock appreciation
rights and, with respect to restricted stock, when the restrictions lapse or are
removed. In some cases, such as the exercise of a nonstatutory option, the
Company's deduction is contingent upon the Company's meeting withholding tax
requirements. No deduction is allowed in connection with an incentive stock
option, unless the employee disposes of Common
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Stock received upon exercise in violation of the holding period requirements.
Moreover, there can be circumstances when the Company may not be entitled to a
deduction for certain transfers of Common Stock or payments to an employee upon
the exercise of an incentive award that has been accelerated as a result of a
Change of Control.
In addition to the limitations described above on the Company's right to a
corresponding business expenses deduction, recent tax legislation, enacted
August 10, 1993, generally imposes a $1 million limitation on the amount of
annual compensation deduction allowable to a publicly held company in respect of
its chief executive officer and its other four most highly paid executive
officers. An exception is provided for certain performance based compensation if
certain shareholder approval and outside director administration requirements
are satisfied. Because of certain interpretational issues under the new statute,
and in the absence of final Internal Revenue Service regulations, there can be
no assurance that incentive awards under the 1994 Plan will qualify for this
exception. Proposed regulations would include stock options and stock
appreciation rights, but exclude restricted stock from the exception.
VOTE REQUIRED
The 1994 Stock Incentive Plan will be approved if the votes cast in favor
of approval of the Plan at the annual meeting exceed the votes cast against
approval.
THE BOARD OF DIRECTORS BELIEVES THAT APPROVAL OF THE 1994 STOCK INCENTIVE
PLAN IS IN THE BEST INTEREST OF ALL SHAREHOLDERS AND, ACCORDINGLY, RECOMMENDS A
VOTE "FOR" THE PROPOSED 1994 STOCK INCENTIVE PLAN.
ITEM THREE -- PROPOSAL TO ADOPT AN
ANNUAL PERFORMANCE BASED BONUS PLAN
INTRODUCTION
The Board of Directors of the Company adopted the Circuit City Stores, Inc.
Annual Performance Based Bonus Plan (the "Bonus Plan") on February 15, 1994. The
purpose of the Bonus Plan is to provide an annual performance based cash
incentive for executive officers who are in a position to contribute materially
to the success of the Company and its subsidiaries. The Board of Directors
recommended that the Bonus Plan be submitted for approval by the shareholders of
the Company to meet the requirements of Section 162(m) of the Internal Revenue
Code ("Section 162(m)") so that the Company's ability to deduct payments under
the Bonus Plan for federal income tax purposes would not be limited by the
provisions of Section 162(m). This recommendation is consistent with the Board's
policy concerning Section 162(m) as explained under "Report of Compensation and
Personnel Committee" above. The Bonus Plan will apply to each fiscal year of the
Company (the "Plan Year") while the Bonus Plan is in effect, beginning with the
fiscal year ending on February 28, 1995. The Plan is intended to operate
substantially the same as the Company's historical performance based bonus
program applied to executive officers.
The principal features of the Bonus Plan are summarized below. The summary
is qualified by reference to the complete text of the Plan, which is attached as
Exhibit B.
ADMINISTRATION
The Bonus Plan will be administered by an independent committee (the
"Committee"), which is expected to be the Compensation and Personnel Committee
of the Board of Directors.
ELIGIBILITY
All executive officers of the Company are eligible under the Bonus Plan.
The Committee will select which executive officers will be participants each
Plan Year and the terms and conditions of annual awards to participants.
Approximately nine employees are currently eligible to participate in the Bonus
Plan.
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OPERATION OF THE BONUS PLAN
For each Plan Year, the Committee will select the Performance Criteria to
be used for that Plan Year. The permissible Performance Criteria under the Bonus
Plan are the Company's pre-tax earnings and the Company's earnings per share.
For purposes of the Performance Criteria, the "Company" refers to the Company
and its subsidiaries on a consolidated basis. Either or both of the Performance
Criteria may be used for a Plan Year. The Committee will also determine the
appropriate weight to be given to any applicable Performance Criteria for a Plan
Year. For each Performance Criteria, the Committee will establish one or more
Performance Goals. During a Plan Year, the Committee may increase, but not
decrease, a Performance Goal. For attainment of each level of Performance Goal,
the Committee will establish a Performance Adjustment percentage to be applied
to the Target Bonuses of the Plan participants for that Plan Year. The
Performance Adjustment percentage may be between zero (0) percent and two
hundred (200) percent. The Committee may limit the maximum Performance
Adjustment for a Plan Year to less than two hundred (200) percent. The
Performance Criteria, Performance Goals and Performance Adjustments may vary
among participants for a Plan Year.
The Committee will also establish a Target Bonus for each participant for
each Plan Year. After the end of a Plan Year, the Committee will certify in
writing the level of Performance Goal that was attained for the prior Plan Year.
A participant's bonus under the Plan will be obtained by multiplying the
Performance Adjustment for the attained Performance Goal times the participant's
Target Bonus. The maximum bonus award for a participant for a Plan Year will be
the lesser of two hundred (200) percent of the participant's base salary for the
Plan Year or $2 million. Bonuses for participants are payable in cash after the
Committee certifies the achievement of the Performance Goal.
TERMINATION; AMENDMENTS
The Plan will terminate on February 29, 2004, unless it is terminated
earlier by the Board of Directors. The Board may amend the Plan, provided that
any amendment to change the Performance Criteria or materially increase the
maximum potential benefits for participants must be approved by the shareholders
of the Company (except for amendments necessary to meet the requirements of
Section 162(m) of the Internal Revenue Code).
VOTE REQUIRED
The Bonus Plan will be approved if the votes cast in favor of approval of
the Plan at the annual meeting exceed the votes cast against approval.
THE BOARD OF DIRECTORS BELIEVES THAT APPROVAL OF THE BONUS PLAN IS IN THE
BEST INTEREST OF ALL SHAREHOLDERS AND, ACCORDINGLY, RECOMMENDS A VOTE "FOR" THE
PROPOSED BONUS PLAN.
RELATIONSHIP WITH INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
KPMG Peat Marwick served during the Company's fiscal year ended February
28, 1994, as the Company's independent certified public accountants and has been
selected as its independent certified public accountants for the current fiscal
year. Representatives of KPMG Peat Marwick will be present at the meeting of the
Company's shareholders. Such representatives will have the opportunity to make a
statement if they so desire and will be available to respond to appropriate
questions.
OTHER BUSINESS
If any other business properly comes before the meeting, your proxy may be
voted by the persons named in it in such manner as they deem proper.
At this time the Company does not know of any other business that will be
presented to the meeting.
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PROPOSALS BY SHAREHOLDERS FOR PRESENTATION
AT 1995 ANNUAL MEETING
Proposals that any shareholder intends to present to the 1995 annual
meeting of shareholders must be received by the Company no later than January
13, 1995.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED FEBRUARY 28, 1994 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION MAY
BE OBTAINED BY ANY SHAREHOLDER AFTER MAY 31, 1994, FREE OF CHARGE, UPON WRITTEN
REQUEST TO CIRCUIT CITY STORES, INC., 9950 MAYLAND DRIVE, RICHMOND, VIRGINIA
23233, OR BY CALLING (804) 527-4000.
By Order of the Board of Directors
(SIG)
Michael T. Chalifoux, Secretary
May 13, 1994
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EXHIBIT A
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.
(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.
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(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).
(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 allocated 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 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
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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 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.
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(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 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 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
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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 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 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).
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(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, 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,
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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 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;
(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
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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 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, and (xvii) any additional
requirements relating to Incentive Awards that the Committee deems appropriate.
Notwithstanding the foregoing,
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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;
(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).
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EXHIBIT B
CIRCUIT CITY STORES, INC.
ANNUAL PERFORMANCE BASED BONUS PLAN
1. PURPOSE. The purpose of the Circuit City Stores, Inc. Annual Performance
Based Bonus Plan (the "Plan") is to provide an annual performance based
incentive for executive officers who are in a position to contribute materially
to the success of the Company and its Subsidiaries.
2. DEFINITIONS. As used in the Plan, the following terms will have the
meaning indicated:
(a) "Award" means an award made pursuant to the Plan.
(b) "Award Agreement" means the agreement entered into between the Company
and a Participant, setting forth the terms and conditions applicable to an Award
granted to the Participant.
(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.
(f) "Code Section 162(m) Award" means an Award intended to satisfy the
requirements of Code Section 162(m) and designated as such in an Award
Agreement.
(g) "Committee" means the committee appointed by the Board as described
under Section 4.
(h) "Company" means Circuit City Stores, Inc., a Virginia corporation.
(i) "Covered Employee" means a covered employee within the meaning of Code
Section 162(m)(3).
(j) "Executive Employee" means all executive officers (as defined in Rule
3b-7 under the Securities Exchange Act of 1934, as amended) of the Company (or
any Parent or Subsidiary of the Company, whether now existing or hereafter
created or acquired).
(k) "Parent" means, with respect to any corporation, a parent of that
corporation within the meaning of Code Section 424(e).
(l) "Participant" means an Executive Employee selected from time to time by
the Committee to participate in the Plan.
(m) "Performance Adjustment" means the percentage(s), as set forth in an
award schedule, that will, when multiplied by a Participant's Target Bonus,
determine the amount of a Participant's Award.
(n) "Performance Criteria" means the criteria selected by the Committee to
measure performance for a Plan Year from among one or more of the following:
(i) Pre-tax earnings, as shown in the Company's annual report to
shareholders, calculated in accordance with generally accepted accounting
principles consistently applied by the Company; and
(ii) Earnings per share, as shown in the Company's annual report to
shareholders, calculated in accordance with generally accepted accounting
principles consistently applied by the Company.
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(o) "Performance Goal" means one or more levels of performance as to each
Performance Criteria, as established by the Committee, that will result in the
Performance Adjustment that is established by the Committee for each such level
of performance.
(p) "Plan Year" means the fiscal year of the Company from March 1 to the
last day of February of each year.
(q) "Retirement" means, with respect to a Participant, the earliest date on
which the Participant is eligible to retire under any qualified Code Section
401(a) plan of the Company, or, if there is no such plan, age 65.
(r) "Subsidiary" means, with respect to any corporation, a subsidiary of
that corporation within the meaning of Code Section 424(f).
(s) "Target Bonus" means the bonus payable to a Participant if there is a
100-percent Performance Adjustment for each Performance Criteria.
3. ELIGIBILITY. All present and future Executive Employees shall be
eligible to receive Awards under the Plan. The Committee shall have the power
and complete discretion to select eligible Executive Employees to receive Awards
and to determine for each Participant the terms and conditions and the amount of
each Award.
4. AWARDS.
(a) Each Award shall be evidenced by an Award Agreement setting forth the
Performance Goals for each Performance Criteria, the Target Bonus, the maximum
bonus payable and such other terms and conditions applicable to the Award, as
determined by the Committee, not inconsistent with the terms of the Plan.
Anything else in this Plan to the contrary notwithstanding, the aggregate
maximum amount payable under the Plan to any Participant in any Plan Year shall
be the lesser of 200 percent of the Participant's base salary or $2,000,000. In
the event of any conflict between an Award Agreement and the Plan, the terms of
the Plan shall govern.
(b) The Committee shall establish the Performance Goals for the Company
and/or its Subsidiaries each Plan Year. The Committee shall also determine the
extent to which each Performance Criteria shall be weighted in determining
Awards. The Committee may vary the Performance Criteria, Performance Goals and
weightings from Participant to Participant, Award to Award and Plan Year to Plan
Year. The Committee may increase, but not decrease, any Performance Goal during
a Plan Year.
(c) The Committee shall establish for each Award the percentage of the
Target Bonus for such Participant payable at specified levels of performance,
based on the Performance Goal for each Performance Criteria and the weighting
established for such criteria. The Award payable to any Participant may range
from zero (0) to two hundred percent of the Participant's Target Bonus,
depending upon whether, or the extent to which, the Performance Goals have been
achieved. All such determinations regarding the achievement of any Performance
Goals will be made by the Committee; provided, however, that the Committee may
not increase during a Plan Year the amount of the Award that would otherwise be
payable upon achievement of the Performance Goal or Goals.
(d) The actual Award for a Participant will be calculated by multiplying
the Participant's Target Bonus by the Performance Adjustments in accordance with
the Award. All calculations of actual Awards shall be made by the Committee.
(e) Awards will be paid, in a lump sum cash payment, as soon as practicable
after the close of the Plan Year for which they are earned; provided, however,
that no Awards shall be paid except to the extent that the Committee has
certified in writing that the Performance Goals have been met. Notwithstanding
the foregoing provisions of this Section 4(e), the Committee shall have the
right to allow Participants to elect to defer the payment of Awards subject to
such terms and conditions as the Committee may determine.
(f) Whenever payments under the Plan are to be made, the Company and/or the
Subsidiary will withhold therefrom an amount sufficient to satisfy any
applicable governmental withholding tax requirements related thereto.
(g) Nothing contained in the Plan will be deemed in any way to limit or
restrict the Company, its Subsidiaries, or the Committee from making any award
or payment to any person under any other plan, arrangement or understanding,
whether now existing or hereafter in effect.
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<PAGE>
5. ADMINISTRATION. 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 (d) 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 Award the Committee deems appropriate
to achieve the objectives of the Award and the Plan and, in addition, 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 Executive Employees shall receive an Award and the nature of the
Award, (ii) the amount of each Award, (iii) the time or times when an Award
shall be granted, (iv) whether a disability exists, (v) the terms and conditions
applicable to Awards, and (vi) any additional requirements relating to Awards
that the Committee deems appropriate.
(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) All members of the Committee must be "outside directors" as described
in Code Section 162(m).
(e) The Board from time to time may appoint members previously appointed
and may fill vacancies, however caused, in the Committee.
(f) As to any Code Section 162(m) Awards, it is the intent of the Company
that this Plan and any Code Section 162(m) Awards hereunder satisfy, and be
interpreted in a manner that satisfy, the applicable requirements of Code
Section 162(m). If any provision of this Plan or if any Code Section 162(m)
Award would otherwise conflict with the intent expressed in this Section 4(f),
that provision to the extent possible shall be interpreted so as to avoid such
conflict. To the extent of any remaining irreconcilable conflict with such
intent, such provision shall be deemed void as applicable to Covered Employees.
Nothing herein shall be interpreted to preclude a Participant who is or may be a
Covered Employee from receiving an Award that is not a Code Section 162(m)
Award.
(g) The Committee's determinations under the Plan need not be uniform and
may be made by it selectively among persons who receive, or are eligible to
receive, Awards under the Plan, whether or not such persons are similarly
situated. Without limiting the generality of the foregoing, the Committee will
be entitled, among other things, to make non-uniform and selective
determinations and to establish non-uniform and selective Performance Criteria,
Performance Goals, the weightings thereof, and Target Bonuses.
6. CHANGE OF CONTROL. In the event of a Change of Control of the Company,
in addition to any action required or authorized by the terms of an Award
Agreement, the Committee may, in its sole discretion, take any of the following
actions as a result, or in anticipation, of any such event to assure fair and
equitable treatment of Participants:
(a) accelerate time periods for purposes of vesting in, or receiving any
payment with regard to, any outstanding Award, or
(b) make adjustments or modifications to outstanding Awards as the
Committee deems appropriate to maintain and protect the rights and interests of
Participants following such Change of Control. Any such action approved by the
Committee shall be conclusive and binding on the Company and all Participants.
7. NONTRANSFERABILITY OF AWARDS. An Award shall not be assignable or
transferable by the Participant except by will or by the laws of descent and
distribution.
8. TERMINATION, MODIFICATION, CHANGE. If not sooner terminated by the
Board, this Plan shall terminate at the close of business on February 29, 2004.
No 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
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<PAGE>
and to the extent required by the Code, no change shall be made that changes the
Performance Criteria, or materially increases the maximum potential benefits for
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 Awards as it deems appropriate to cause Awards
to meet the requirements of Code Section 162(m), 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 Award previously granted to him.
9. UNFUNDED PLAN. The Plan shall be unfunded. No provision of the Plan or
any Award Agreement will require the Company or its Subsidiaries, for the
purpose of satisfying any obligations under the Plan, to purchase assets or
place any assets in a trust or other entity to which contributions are made or
otherwise to segregate any assets, nor will the Company or its Subsidiaries
maintain separate bank accounts, books, records or other evidence of the
existence of a segregated or separately maintained or administered fund for such
purposes. Participants will have no rights under the Plan other than as
unsecured general creditors of the Company and its Subsidiaries, except that
insofar as they may have become entitled to payment of additional compensation
by performance of services, they will have the same rights as other employees
under generally applicable law.
10. LIABILITY OF COMPANY. Any liability of the Company or a Subsidiary to
any Participant with respect to an Award shall be based solely upon contractual
obligations created by the Plan and the Award Agreement. Neither the Company nor
a Subsidiary, nor any member of the Board or of the Committee, nor any other
person participating in any determination of any question under the Plan, or in
the interpretation, administration or application of the Plan, shall have any
liability to any party for any action taken or not taken in good faith under the
Plan. Status as an eligible Executive Employee shall not be construed as a
commitment that any Award will be made under this Plan to such eligible
Executive Employee or to eligible Executive Employees generally. Nothing
contained in this Plan or in any Award Agreement (or in any other documents
related to this Plan or to any Award or Award Agreement) shall confer upon any
Executive Employee or Participant any right to continue in the employ or other
service of the Company or a Subsidiary or constitute any contract or limit in
any way the right of the Company or a Subsidiary to change such person's
compensation or other benefits.
11. INTERPRETATION. If any term or provision contained herein will to any
extent be invalid or unenforceable, such term or provision will be reformed so
that it is valid, and such invalidity or unenforceability will not affect any
other provision or part hereof. The Plan, the Award Agreements and all actions
taken hereunder or thereunder shall be governed by, and construed in accordance
with, the laws of the Commonwealth of Virginia without regard to the conflict of
law principles thereof.
12. EFFECTIVE DATE OF THE PLAN. The Plan shall be effective as of March 1,
1994 and shall be submitted to the shareholders of the Company for approval. No
Award shall be payable to a Covered Employee until the Plan has been approved by
the Company's shareholders.
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<PAGE>
CIRCUIT CITY STORES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
JUNE 14, 1994
The undersigned, having received the Annual Report to the Shareholders
and the accompanying Notice of Annual Meeting of Shareholders and Proxy
Statement dated May 13, 1994, hereby appoints Richard L. Sharp and Robert L.
Burrus, Jr., and each of them, proxies, with full power of substitution, and
hereby authorizes them to represent and vote the shares of Common Stock of
Circuit City Stores, Inc. (the "Company") which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Shareholders
of the Company to be held on Tuesday, June 14, 1994, at 10:00 a.m., Eastern
Daylight Time, and any adjournment thereof, and especially to vote as set
forth on the reverse hereof.
1. ELECTION OF DIRECTORS
( ) FOR all nominees listed for the ( ) WITHHOLD AUTHORITY
terms set forth in the Proxy Statement to vote for all nominees
listed
NOMINEES: Michael T. Chalifoux, Barbara S. Feigin, Edward Villanueva
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW
2. Approval of the 1994 Stock Incentive Plan.
( ) FOR ( ) AGAINST ( ) ABSTAIN
3. Approval of the Annual Performance Based Bonus Plan.
( ) FOR ( ) AGAINST ( ) ABSTAIN
IN THEIR DISCRETION the proxies are authorized to vote upon such
other business as may properly come before the meeting and any adjournments
thereof.
If you specify a choice as to the action to be taken on any Item, this
proxy will be voted in accordance with such choice. If you do not specify a
choice, it will be voted FOR the named nominees in the Proxy Statement and
FOR Items 2 and 3.
Any proxy or proxies previously given for the meeting are revoked.
Please sign exactly as the name appears hereon.
Dated:_______________________________________, 1994
___________________________________________________
(signature)
___________________________________________________
(signature if held jointly)
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE.
I plan to attend the meeting. ( )
