Registration No. _____________
As Filed with the Securities and Exchange Commission on December 5, 1995
------------------------------------------------------------------------
________________________________________________________________________
________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
_______________________
CIRCUIT CITY STORES, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 54-0493875
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9950 MAYLAND DRIVE
RICHMOND, VIRGINIA 23233
(Address of Principal Executive Offices) (Zip Code)
CIRCUIT CITY STORES, INC. 1994 STOCK INCENTIVE PLAN, AS
AMENDED FEBRUARY 10, 1995
(Formerly CIRCUIT CITY STORES, INC. 1994 STOCK INCENTIVE PLAN)
and
CIRCUIT CITY STORES, INC. AMENDED AND RESTATED 1989 NON-EMPLOYEE
DIRECTORS STOCK OPTION PLAN
(Formerly CIRCUIT CITY STORES, INC. 1989 NON-EMPLOYEE
DIRECTORS STOCK OPTION PLAN)
(Full title of the plans)
RICHARD L. SHARP, PRESIDENT, CHIEF EXECUTIVE OFFICER
AND CHAIRMAN OF THE BOARD
CIRCUIT CITY STORES, INC.
9950 MAYLAND DRIVE, RICHMOND, VIRGINIA, 23233
(Name and address of agent for service)
(804) 527-4000
(Telephone number, including area code, of agent for service)
<PAGE>
CALCULATION OF REGISTRATION FEE
______________________________________________________________________
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Per Offering Registration
Registered Registered Share Price Fee
______________________________________________________________________
Common Stock, 1,371,682 $27.25(1) $37,378,334.50(1) $12,889.08
par value $.50, shares
with attached
Rights to
Purchase Preferred
Stock, Series E,
par value $20.00(2)
______________________________________________________________________
(1) Estimated solely for the purpose of calculating the
registration fee. Based on the average of the high and low
prices of the Common Stock on the New York Stock Exchange on
December 4, 1995.
(2) The Rights to Purchase Preferred Stock will be attached
to and trade with shares of the Common Stock. Value attributable
to such rights, if any, will be reflected in the market price of
the shares of Common Stock.
The securities covered by this Registration Statement will
be (i) issued to employees of the Registrant from time to time
pursuant to incentive awards granted or to be granted under the
Circuit City Stores, Inc. 1994 Stock Incentive Plan, as amended
February 10, 1995, and (ii) issued to directors of the Registrant
who are not full-time employees from time to time pursuant to
stock options granted or to be granted under the Circuit City
Stores, Inc. Amended and Restated 1989 Non-Employee Directors
Stock Option Plan.
<PAGE>
PART II. INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
The purpose of this Registration Statement is to (i)
register 1,321,682 additional shares of Common Stock, $.50 par
value, of Circuit City Stores, Inc., issuable pursuant to
incentive awards granted or to be granted under the 1994 Circuit
City Stores, Inc. Stock Incentive Plan, as amended February 10,
1995 (formerly Circuit City Stores, Inc. 1994 Stock Incentive
Plan) and 1,321,682 associated Rights to Purchase Preferred
Stock, Series E, $20.00 par value and (ii) register 50,000
additional shares of Common Stock, $.50 par value, of Circuit
City Stores, Inc., issuable pursuant to the Circuit City Stores,
Inc. Amended and Restated 1989 Non-Employee Director Stock Option
Plan (formerly Circuit City Stores, Inc. 1989 Non-Employee
Director Stock Option Plan) and 50,000 associated Rights to
Purchase Preferred Stock, Series E, $20.00 par value. The
Registrant hereby incorporates by reference all information
included in its (i) Form S-8 Registration Statement No. 33-56697
(filed on December 1, 1994) and (ii) Form S-8 Registration
Statement No. 33-36650 (filed on August 31, 1990), except for
information included in such Registration Statement which relates
only to the Circuit City Stores, Inc. 1988 Stock Incentive Plan
and the 1984 Circuit City Stores, Inc. Employee Stock Purchase
Plan, as Amended and Restated April 19, 1988.
Item 8. Exhibits
See Exhibit Index following signatures.
1
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby appoints
Richard L. Sharp and Michael T. Chalifoux, or either of them, his
true and lawful attorney-in-fact to sign on his behalf, as an
individual and in the capacity stated below, any amendment or
post-effective amendment to this Registration Statement which
said attorney-in-fact may deem appropriate or necessary.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form
S-8 and has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized in
the County of Henrico, Commonwealth of Virginia, on October 12,
1995.
CIRCUIT CITY STORES, INC.
By:/s/RICHARD L. SHARP
Richard L. Sharp
President, Chief
Executive Officer and
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933,
this registration statement has been signed below by the
following persons in the capacities and on the date indicated.
Signature Title Date
/s/ALAN L. WURTZEL Vice Chairman of the 10/12/95
Alan L. Wurtzel Board
/s/MICHAEL T. CHALIFOUX Senior Vice President, 10/12/95
Michael T. Chalifoux Chief Financial Officer,
Secretary and Director
/s/RICHARD N. COOPER Director 10/12/95
Richard N. Cooper
/s/BARBARA S. FEIGIN Director 10/12/95
Barbara S. Feigin
/s/THEODORE D. NIERENBERG Director 10/12/95
Theodore D. Nierenberg
2
<PAGE>
/s/HUGH G. ROBINSON Director 10/12/95
Hugh G. Robinson
/s/WALTER J. SALMON Director 10/12/95
Walter J. Salmon
/s/MIKAEL SALOVAARA Director 10/12/95
Mikael Salovaara
/s/RICHARD L. SHARP President, Chief 10/12/95
Richard L. Sharp Executive Officer
and Chairman of the
Board
/s/EDWARD VILLANUEVA Director 10/12/95
Edward Villanueva
/s/KEITH D. BROWNING Corporate Controller, 10/12/95
Keith D. Browning Principal Accounting
Officer
3
<PAGE>
EXHIBIT INDEX
Exhibit
No. Document
------- --------
4.1 Registrant's Amended and Restated
Articles of Incorporation, effective
January 26, 1990, filed as Exhibit 3(a)
to Registrant's Annual Report on Form
10-K for the fiscal year ended February
28, 1993, (File No. 1-5767) are
expressly incorporated herein by this
reference.
4.2 Registrant's Articles of Amendment to
the Amended and Restated Articles of
Incorporation, effective February 26,
1993, filed as Exhibit 3(b) to
Registrant's Annual Report on Form 10-K
for the fiscal year ended February 28,
1993, (File No. 1-5767) are expressly
incorporated herein by this reference.
4.3 Registrant's Bylaws, as amended and
restated August 15, 1995, filed as
Exhibit 3 to Registrant's Quarterly
Report on Form 10-Q for the quarterly
period ended August 31, 1995, (File No.
1-5767) are expressly incorporated
herein by this reference.
4.4 Rights Agreement dated April 29, 1988,
between Registrant and Crestar Bank, as
Rights Agent, filed as Exhibit (2) to
Registrant's registration statement on
Form 8-A (File No. 1-5767) filed on May
23, 1988, is expressly incorporated
herein by this reference.
5 Opinion and Consent of McGuire, Woods,
Battle & Boothe, L.L.P. as to the
legality of the shares offered
hereunder, filed herewith.
23.1 Consent of KPMG Peat Marwick LLP, filed
herewith.
23.2 Consent of McGuire, Woods, Battle &
Boothe, L.L.P. (included in Exhibit 5)
25 Powers of attorney (See signature page)
99.1 Registrant's Amended and Restated 1989
4
<PAGE>
Non-Employee Directors Stock Option Plan
filed as Exhibit A to Registrant's
definitive Proxy Statement dated May 12,
1995, for the Annual Meeting of
Shareholders held on June 13, 1995, is
expressly incorporated herein by this
reference.
99.2 Registrant's 1994 Stock Incentive Plan
filed as Exhibit 99 to the Registrant's
Registration Statement on Form S-8
(Registration No. 033-56697) filed on
December 1, 1994, is expressly
incorporated herein by this reference.
99.3 Amendment adopted February 10, 1995, to
Registrant's 1994 Stock Incentive Plan
filed as Exhibit 10(f) to the
Registrant's Annual Report on Form 10-K
for the fiscal year ended February 28,
1995, (File No. 1-5767) is expressly
incorporated herein by this reference.
5
<PAGE>
EXHIBIT 5
McGuire Woods
Battle & Boothe, L.L.P.
One James Center
Richmond, Virginia 23219
November 21, 1995
Circuit City Stores, Inc.
9950 Mayland Drive
Richmond, Virginia 23233-1464
Circuit City Stores, Inc. (the "Company")
Ladies and Gentlemen:
You propose to file as soon as possible with the
Securities and Exchange Commission a registration statement on
Form S-8 (the "Registration Statement") relating to the Circuit
City Stores, Inc. 1994 Stock Incentive Plan, as amended February
10, 1995 (the "1994 Plan") and the Circuit City Stores, Inc.
Amended and Restated 1989 Non-Employee Directors Stock Option
Plan (the "1989 Plan"). The Registration Statement covers (i)
1,321,682 shares of Common Stock, par value $.50, of the Company
(the "Common Stock") which have been reserved for issuance under
the 1994 Plan and (ii) 50,000 shares of Common Stock which have
been reserved for issuance under the 1989 Plan. The Registration
Statement also covers 1,371,682 Rights to Purchase Preferred
Stock, Series E, $20.00 par value, of the Company (the "Rights"),
attached in equal number to the shares of Common Stock which may
be issued under the 1994 Plan and the 1989 Plan.
We are of the opinion that the 1,321,682 shares of
Common Stock which are authorized for issuance under the 1994
Plan and the 50,000 shares of Common Stock which are authorized
for issuance under the 1989 Plan, when issued or sold in
accordance with the terms and provisions of the 1994 Plan and
1989 Plan, respectively, will be duly authorized, legally issued,
fully paid and nonassessable.
<PAGE>
Circuit City Stores, Inc.
November 21, 1995
Page 2
We are also of the opinion that the 1,371,682 Rights,
when issued in accordance with the terms and provisions of the
Rights Agreement dated as of April 29, 1988 between the Company
and Norwest Bank Minnesota, N.A., as successor to Crestar Bank,
will be duly authorized, legally issued, fully paid and
nonassessable. Our opinion with respect to the Rights is subject
to all the assumptions and qualifications with respect to such
matters set forth in our opinion, dated June 16, 1988, to the
Board of Directors of the Company. We hereby reaffirm our
opinion of June 16, 1988, a copy of which is attached to this
opinion. In our opinion regarding the Rights, we discussed
whether certain provisions of Section 13.1-638 of the Virginia
Code might prohibit the restrictions on transfer imposed under
the agreement governing the Rights. The Virginia Code was
amended in 1990 to provide that, notwithstanding such provisions
of Section 13.1-638, the terms of rights issued by a corporation
may include restrictions on transfer by designated persons or
classes of persons.
We consent to the use of this opinion as Exhibit 5 to
the Registration Statement.
Very truly yours,
/s/ MCGUIRE, WOODS, BATTLE & BOOTHE, L.L.P.
MCGUIRE, WOODS, BATTLE & BOOTHE, L.L.P.
<PAGE>
June 16, 1988
Board of Directors
Circuit City Stores, Inc.
2040 Thalbro Street
Richmond, Virginia 23230
Gentlemen:
This will confirm our opinion, given orally to the Board of
Directors of Circuit City Stores, Inc., a Virginia corporation
(the "Company"), with respect to the Board's adoption of a
Shareholder Rights Plan (the "Plan") on the terms set forth in
the Rights Agreement (the "Rights Agreement") which was submitted
to the Board prior to adoption. Under the Plan, the Board of
Directors has authorized the issuance by the Company of rights
(the "Rights") to purchase 1/100th of a share of the Company's
Cumulative Participating Preferred Stock, Series E, par value
$20.00 per share ("Series E Preferred Stock"), as a dividend
distribution to holders of the Common Stock, par value $1.00 per
share (the "Common Stock"), of the Company.
In connection with this opinion, we have reviewed the
Articles of Restatement and Bylaws of the Company as amended; the
Rights Agreement; the resolutions adopted by the Board of
Directors on April 29, 1988, providing among other things for the
distribution of the Rights and approving the Rights Agreement;
the Company's letter to shareholders concerning the Rights
distribution; and such other matters as we consider necessary.
We have examined those Virginia statutes and judicial decisions
as we have deemed relevant. Although we have also examined
certain statutes and judicial decisions from other jurisdictions,
we express no opinion herein concerning the laws of any state
other than Virginia.
Summary of the Plan
Each Right issued under the Plan will entitle the holder to
purchase 1/100th of a share of Series E Preferred Stock for
$140.00, subject to certain anti-dilution adjustments. However,
the Rights are not exercisable (and cannot be transferred
separately from the Common Stock) until the close of business on
the tenth day after the first date of public announcement that a
person or group has acquired beneficial ownership of 20% or more
of the Common Stock (an "Acquiring Person") or after the close of
business on the tenth business day after the date a person or
group commences or first publicly announces its intention to
commence a tender or exchange offer the consummation of which
would result in beneficial ownership by such person or group of
30% or more of the Common Stock. In the event that any other
entity should merge or otherwise combine with the Company or
enter into certain specified transactions with it, each Right
<PAGE>
Board of Directors
Circuit City Stores, Inc.
June 16, 1988
Page 2
would then entitle the holder to purchase that number of shares
of common stock of such other entity or, in the case of certain
transactions where the other entity is an Acquiring Person, that
number of shares of Common Stock, which at the time of the
transaction would have a market value of two times the then
exercise price of the Right. The Board of Directors of the
Company may redeem all of the Rights at a price of $.01 per Right
at any time until ten days after any person or group acquires
beneficial ownership of 20% or more of the Common Stock.
Reasons for the Plan
We understand that the Board of Directors believes that the
current market price of the Common Stock does not reflect the
long-term potential of the Company. Given the present popularity
and ease of consummating an unsolicited takeover of a major
corporation, the Board believes that adoption of the Plan will
make the Company less vulnerable to abusive and unfair takeover
tactics by giving the Board the time and flexibility to ensure
that all shareholders are protected in their right to retain
their investment, or to secure full value for it, while not
precluding a fair acquisition of the Company. Although we
understand that the Company has no knowledge that any person or
group is presently engaged in such tactics with respect to the
Company, the Board is concerned that present law and existing
provisions of the Company's Articles of Restatement and Bylaws do
not provide adequate protection against such tactics.
We understand that the Board's principal purpose in adopting
the Plan is to encourage any potential acquiror to negotiate in
advance with the Company, thereby enabling the Board to act in
the best interests of all the shareholders. The Board has
acknowledged that the Plan is not intended to deter or prevent an
offer which would be in the best interests of all shareholders or
to affect adversely any person or group's ability to obtain
representation on or control of the Company's Board of Directors
through proxy contests.
Matters Considered by the Board
The Board of Directors considered proposals similar to the
Plan at meetings held on February 16, 1988 and April 19, 1988.
On April 22, 1988 a Special Committee of the Board of Directors
met to review a subsequent proposal and to discuss various issues
in connection with the Plan. On April 29, 1988 the entire Board
of Directors met to consider and vote on the recommendations of
the Special Committee. The directors were assisted in their
deliberations not only by officers of the Company but also by
<PAGE>
Board of Directors
Circuit City Stores, Inc.
June 16, 1988
Page 3
independent financial advisors and legal counsel. Factors
discussed during these meetings included (i) the takeover
environment generally and as it relates to retailers of consumer
electronics and appliances; (ii) the vulnerability of the Company
to a takeover generally and to particular takeover tactics, in
light of present law and existing provisions of the Company's
Articles of Restatement and Bylaws; (iii) the financial and other
characteristics of the Company which could make the Company an
attractive target; (iv) the provisions, purposes and potential
effects of the Plan; (v) whether the Plan is reasonably related
to and effective in accomplishing its intended purposes; (vi) the
effect of the Plan, if any, on potential offers for all of the
Common Stock; (vii) the redemption features of the Plan,
including the possibility that the Rights might become non-
redeemable and the consequences thereof in obtaining a fair price
for all shareholders in a subsequent negotiated transaction;
(viii) the potential effect of the Plan on the market price of
the Common Stock and on the ability of the Company to secure
financing to meet future needs; and (ix) whether the exercise
price under the Rights is reasonably related to the value of the
Company.
The Board also considered that Virginia has recently adopted
a new statute barring for a three year period certain significant
transactions between a corporation and any person who, without
the prior approval of the Board, becomes a holder of more than
10% of its voting shares (an "Interested Shareholder") unless the
transaction has been approved by a majority of the independent
directors and by the affirmative vote of the holders of two-
thirds of the voting shares other than the shares beneficially
owned by the Interested Shareholder. After the three year period
ends, these transactions with the Interested Shareholders are
prohibited unless they are approved by the independent directors
or two-thirds of the other shareholders or all shareholders are
paid a "fair price" for their shares. In general, the statute
bases "fair price" on prices paid by the Interested Shareholder
in acquiring his position. We understand that the Board believes
the Plan supplements the protection provided by the statute by
helping to ensure that shareholders realize the full long-term
potential value for their Common Stock.
It is our understanding that the Board has concluded that
the Rights (i) serve a legitimate corporate purpose and are
reasonably related to accomplishing that purpose, (ii) have an
exercise price which is reasonably related to the value of the
Company, (iii) are in the best interests of the Company and its
shareholders, and (iv) have not been proposed for the purpose of
perpetuating the directors' or management's control over the
Company.
<PAGE>
Board of Directors
Circuit City Stores, Inc.
June 16, 1988
Page 4
Legal Authorization of the Rights
The Virginia Stock Corporation Act authorizes the board of
directors of a corporation to issue rights, options and warrants
for the purchase of shares of the corporation on such terms as it
may approve, except in limited circumstances not applicable here.
Section 13.1-646 of the Virginia Code provides that:
A corporation may create or issue rights, options or
----------------------------------------------------
warrants for the purchase of shares of the corporation
------------------------------------------------------
upon such terms and conditions and for such
-------------------------------------------
consideration, if any, and such persons as may be
-------------------------------------------------
approved by the board of directors. If such rights,
-----------------------------------
options or warrants are to be issued to directors,
officers or employees as such of the corporation or any
subsidiary thereof, and not to the shareholders
generally, their issuance shall be authorized by the
shareholders of the corporation who are entitled to
vote generally in the election of directors, or shall
be authorized by and consistent with a plan approved or
ratified by such shareholders, unless the articles of
incorporation provide that shareholder approval is not
required. (emphasis supplied)
The terms of Section 13.1-646 are broad, and we have not
found any legislative history or judicial decision indicating
that the language of the statute should be narrowly construed so
as to deprive boards of directors of the authority to issue
rights similar to those contemplated under the Plan. We note
that similarly broadly-worded provisions of the Delaware General
Corporation Law have been held by the Delaware Supreme Court to
authorize a Board of Directors to issue rights with features
similar to those of the Plan. Moran v. Household International,
Inc., 500 A.2d 1346 (Del. 1985) ("Household"); Revlon, Inc. v.
MacAndrew & Forbes Holdings, Inc. 506 A.2d 173 (Del. 1986)
("Revlon").
Based on the language of the Virginia statues, the Household
and Revlon cases and the absence of contrary Virginia precedent,
we believe that a Virginia court should hold that the Plan and
the issuance of the Rights are authorized by Section 13.1-646.
Restriction on Transfer to an Acquiring Person
The Plan provides that Rights cannot be transferred to any
person who is or, as a result of the transfer of Common Stock
related to the Rights, becomes, directly or indirectly, an
Acquiring Person or an associate or affiliate of an Acquiring
Person. Any such purported transfer shall be without effect and
<PAGE>
Board of Directors
Circuit City Stores, Inc.
June 16, 1988
Page 5
the holder of such Right prior to the purported transfer shall
continue to have all rights with respect to such Right, whether
under any provision of the Rights Agreement or otherwise.
However, any transfer of Rights to such person before he becomes
such an Acquiring Person (or an associate or affiliate) would be
valid.
Section 13.1-649 of the Virginia code permits, among other
things, a restriction on transfer to any person or class of
persons, if the restriction is not "manifestly unreasonable."
Since the purpose of the Rights is to make the Company less
vulnerable to abusive and unfair takeover tactics by giving the
Board the time and flexibility to ensure that all shareholders
are protected in their right to retain their investment, or to
secure full value for it, while not precluding a fair acquisition
of the Company, we believe that a court applying Virginia law
should hold that (i) the restrictions on transfer set forth in
the Plan are for a reasonable purpose and (ii) not permitting
Rights to be transferred to an Acquiring Person and its
affiliates and associates is not manifestly unreasonable.
Without these restrictions on transfer, certain types of unfair
or coercive transactions could be pursued by a potential acquiror
without regard to the Rights, thereby undermining the function of
the Rights in encouraging a potential acquiror to negotiate with
the Board and to pay fair value to the Company's shareholders.
Someone seeking to attack the Plan might argue that the
provisions of Section 13.1-638 of the Virginia Code (which
provides that all shares of a class must have preferences,
limitations and relative rights identical to those of other
shares) prohibit the discriminatory effect of the restrictions on
transfer imposed under the Plan.
Courts in some jurisdictions have held that rights plans
violate statutes similar to Section 13.1-638 because of
provisions which, in certain circumstances, invalidate rights
held by the potential acquiror. These courts have held that the
statutory provisions in question prohibit discrimination among
shareholders. See, e.g., Amalgamated Sugar Co. v. NL Industries,
inc., 644 F. Supp. 1229 (S.D.N.Y. 1986), R. D. Smith & Co., Inc.
v. Preway, Inc., 644 F. Supp. 868 (W.D. Wis. 1986). On the other
hand, courts in other jurisdictions dealing with similar plans
and statutory provisions, have held that the prohibition against
discrimination only extends to the shares and does not prohibit
discrimination among shareholders. Using this reasoning, these
courts upheld the provisions in the plans which restricted the
exercisability of the rights by certain holders. See, e.g.,
Dynamics Corp. of America v. CTS Corp., 805 F. 2d 705 (7th Cir.
1986), Gelco Corp. v. Coniston Partners, 652 F. Supp. 829
<PAGE>
Board of Directors
Circuit City Stores, Inc.
June 16, 1988
Page 6
(D.Minn. 1986), aff'd in part and vacated in part, 811 F.2d 414
(8th Cir. 1987).
Whether or not Section 13.1-638 would prohibit attempts to
invalidate rights already held by a person because of
discrimination among existing security holders, we believe that a
court applying Virginia law should hold that any such principles
would be inapplicable to the transfer restrictions contained in
the Plan. These transfer restrictions may prevent a person from
acquiring more Rights but do not affect his ability to exercise
Rights previously acquired.
Standard of Conduct of the Board of Directors
Directors of a corporation stand in a fiduciary relationship
to their corporation, and therefore impliedly to their
shareholders, and have a duty to exercise due care in making
decisions. To fulfill their obligations, directors must have
access to and consider reasonably available information relevant
to their decisions. Directors are generally protected against
liability for actions taken in exercise of their duties as
directors by the business judgment rule. This rule accords a
presumption of validity to directors' actions unless it is shown
that the directors acted in bad faith, fraudulently or in their
own self interest. Courts applying Virginia law have recognized
the business judgment rule. Penn v. Pemberton & Penn, 189 Va.
649, 53 S.E. 2d 823 (1949); Abella v. Universal Leaf Tobacco Co.,
Inc., 495 F. Supp. 713 (E.D. Va. 1980), reconsidered at 546 F.
Supp. 795 (E.D. Va. 1980).
In the 1986 revision of the Virginia Stock Corporation Act,
the General Assembly adopted a statutory standard of conduct for
directors. If a director performs his duties in accordance with
this standard of conduct, he is not liable for any action taken
as a director. Thus, the General Assembly has codified the
business judgment rule for directors of Virginia corporations.
To date there have been no judicial interpretations of the new
statute.
Section 13.1-690 of the Virginia Code sets forth the general
standard of conduct for directors and provides as follows:
A. A director shall discharge his duties as
----------------------------------------
a director, including his duties as a member
--------------------------------------------
of a committee, in accordance with his good
-------------------------------------------
faith business judgment of the best interests
---------------------------------------------
of the corporation.
-------------------
<PAGE>
Board of Directors
Circuit City Stores, Inc.
June 16, 1988
Page 7
B. Unless he has knowledge or information
concerning the matter in question that makes
reliance unwarranted, a director is entitled
to rely on information, opinions, reports or
statements, including financial statements
and other financial data, if prepared or
presented by:
1. One or more officers or employees
of the corporation whom the director
believes, in good faith, to be reliable
and competent in the matters presented;
2. Legal counsel, public
accountants, or other persons as to
matters the director believes, in
good faith, are within the person's
professional or expert competence;
or
3. A committee of the board of
directors of which he is not a
member if the director believes, in
good faith, that the committee
merits confidence.
C. A director is not liable for any action
---------------------------------------
taken as a director, or any failure to take
-------------------------------------------
any action, if he performed the duties of his
---------------------------------------------
office in compliance with this section.
---------------------------------------
D. A person alleging a violation of this
section has the burden of proving the
violation. (emphasis supplied)
Commentary from the drafters of this section reflects an
intention to simplify the standard of conduct and to avoid
measuring the conduct against a reasonable man standard. Instead
courts should look to the director's good faith decision of what
is in the best interests of the corporation. The drafters
believed that under this standard, a director could be more
certain that he is acting properly than under previous judicial
decisions.
While there have been no Virginia cases applying Section
13.1-690 of the Virginia Code or the business judgment rule to
actions of boards of directors in issuing rights similar to those
contemplated by the Plan, several recent cases from other
<PAGE>
Board of Directors
Circuit City Stores, Inc.
June 16, 1988
Page 8
jurisdictions have examined director conduct in just such a
context. The most notable of these cases is the Household case,
in which the Delaware Supreme Court held that the business
judgment rule as construed in that state applies to the adoption
of a shareholder rights plan. The Household court also
recognized the propriety of adopting such a plan in preparation
for the possibility of an unfriendly takeover attempt:
. . . pre-planning for the contingency of a
hostile takeover might reduce the risk that,
under the pressure of a takeover bid,
management will fail to exercise reasonable
judgment. Therefore, in reviewing a pre-
-------------------
planned defensive mechanism it seems even
-----------------------------------------
more appropriate to apply the business
--------------------------------------
judgment rule.
--------------
Moran v. Household International, Inc.,
supra, 500 A.2d at 1350 (1985) (emphasis
supplied).
More recently, the Delaware Supreme Court in the Revlon case
has determined that the adoption of a rights plan similar to the
Plan was within the power of the board of directors and was valid
under the circumstances existing at the time of its adoption. In
an Illinois federal case applying Indiana law (which was assumed
to follow Delaware law), the court dismissed arguments relating
to the power of a board of directors to adopt the rights plan
under review, although it issued a preliminary injunction against
the plan on the grounds that under the circumstances the
particular plan was unreasonable in relationship to the
particular threat to the corporation. Dynamics Corp. of America
v. CTS Corp., 637 F. Supp. 406 (N.D. Ill. 1986), aff'd, 794 F. 2d
250 (7th Cir. 1986).
The basic principles of the business judgment rule and of
Section 13.1-690 of the Virginia Code are, we believe, quite
similar under Virginia and Delaware law. Accordingly, we believe
that the analysis and conclusions of the Delaware Supreme Court
on such issues arising under Delaware law would be favorably
considered by a Virginia court in considering whether the
adoption of the Plan was a proper exercise of business judgment
under Section 13.1-690.
Given the broad authorization contained in Section 13.1-646
with respect to the power of boards of directors to create and
issue rights on such terms as it determines and the provisions of
Section 13.1-690 which protect directors from liability for
actions taken in exercise of their good faith business judgment
<PAGE>
Board of Directors
Circuit City Stores, Inc.
June 16, 1988
Page 9
of the best interests of the corporation, we believe a Virginia
court should apply the Household and Revlon decisions and their
reasoning to the decision of the Board of Directors to adopt the
Plan and to issue the Rights.
Opinion
Based upon the foregoing, we are of the opinion that a court
applying Virginia law should hold that:
1. The adoption of the Plan and declaration of the Rights
dividend distribution was a matter properly within the business
judgment of the Board of Directors of the Company.
2. All corporate action required under the laws of
Virginia has been taken (i) for the authorization of issuance of
the Rights in accordance with the terms of the Rights Agreement,
(ii) for the authorization of issuance of the Series E Preferred
Stock in accordance with the Articles of Restatement of the
Company, and (iii) for the Rights, when issued, to be validly
issued.
This opinion is limited to the adoption of the Plan by the
Board of Directors. Any further action or inaction by the Board
of Directors with respect to the Plan, including a decision
relating to the redemption of the Rights, will be judged in light
of all the relevant facts and circumstances applicable at the
time. This opinion is furnished solely for your benefit and may
not be relied on by any other person.
Very truly yours,
/s/ MCGUIRE, WOODS, BATTLE & BOOTHE
MCGUIRE, WOODS, BATTLE & BOOTHE
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Circuit City Stores, Inc.:
We consent to incorporation by reference in this Registration
Statement on Form S-8 of Circuit City Stores, Inc. of our report
dated April 5, 1995, relating to the consolidated balance sheets
of Circuit City Stores, Inc. and subsidiaries as of February 28,
1995 and 1994 and the related consolidated statements of
earnings, stockholders' equity, and cash flows for each of the
fiscal years in the three-year period ended February 28, 1995,
which report is incorporated by reference in the February 28,
1995 annual report on Form 10-K of Circuit City Stores, Inc. We
also consent to the incorporation by reference in this
Registration Statement of our report dated April 5, 1995,
relating to the financial statement schedules of Circuit City
Stores, Inc., which report is included in such annual report on
Form 10-K.
/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
Richmond, Virginia
December 4, 1995
<PAGE>
