SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(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)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
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(i)(2) or
Item 22(a)(2) of Schedule 14A.
( ) $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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) 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 13, 1995
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 13, 1995, at 10:00 a.m., Eastern Daylight
Time, for the following purposes:
1. To elect three directors for three-year terms and one director for a
one-year term;
2. To consider and vote upon a proposal to amend and restate the 1989
Non-Employee Directors Stock Option Plan; and
3. 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 5, 1995, 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
MICHAEL T. CHALIFOUX, SECRETARY
May 12, 1995
<PAGE>
PROXY STATEMENT
This Proxy Statement, mailed to shareholders on or about May 12, 1995, 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 13, 1995, and at any adjournments thereof. A
copy of the annual report of the Company for the fiscal year ended February 28,
1995, 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 Morrow & Co., Inc. 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.
Participants in the 1984 Circuit City Stores, Inc. Employee Stock Purchase
Plan (the "Stock Purchase Plan") will receive proxy soliciting material for the
shares held by First Union National Bank of North Carolina, the Stock Purchase
Plan Custodian, on a participant's behalf. That proxy should be returned,
properly executed, to the Custodian (not to the Company) in the envelope
provided. The Custodian will vote returned proxies in accordance with the Stock
Purchase Plan participants' instructions. If a Participant does not vote his or
her Stock Purchase Plan shares, the Custodian will vote such shares in
accordance with the recommendations of the Company's management.
On May 5, 1995, the date for determining shareholders entitled to vote at
the meeting, 96,607,304 shares of common stock of the Company ("Common Stock")
were 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 amendment and
restatement of the 1989 Non-Employee Directors Stock Option Plan unless it
contains specific instructions withholding authority to vote for any nominee or
directing an abstention on or vote against the amendment and restatement, 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 the
approval of the amendment and restatement of the 1989 Non-Employee Directors
Stock Option Plan.
ITEM ONE -- ELECTION OF DIRECTORS
The Company's Board of Directors presently consists of 10 directors, who
are divided into three classes with staggered terms. The terms of Messrs.
Richard N. Cooper, Douglas D. Drysdale, Mikael Salovaara, Richard L. Sharp and
Alan L. Wurtzel as directors of the Company will expire at the time of the
annual meeting of shareholders. Mr. Drysdale, who has served on the Board since
1976, has decided to retire from the Board at the
1
<PAGE>
time of the meeting. The Board has amended the bylaws to reduce the size of the
Board to nine members effective at the annual meeting. The Company recommends
the reelection of Messrs. Cooper, Sharp and Wurtzel for three-year terms
expiring at the time of the 1998 Annual Meeting. The Company also recommends the
reelection of Mr. Salovaara for a one-year term expiring at the time of the 1996
Annual Meeting. Mr. Salovaara is nominated for a one-year term to comply with
the requirements of the Company's Articles of Incorporation that the classes of
directors be as nearly equal in size as possible.
Although all of the nominees have indicated their willingness to serve if
elected, if at the time of the meeting any nominee is unable to 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 for election as directors and about other directors of the
Company whose terms of office do not expire this year, appears below.
NOMINEES FOR ELECTION FOR THREE-YEAR TERMS
<TABLE>
<S> <C>
(Box) RICHARD N. COOPER, 60, 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.
(Box) RICHARD L. SHARP, 48, Chairman of the Board, 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 1984; Chief Executive Officer in 1986; and Chairman of the
Board in 1994. He is a director of S&K Famous Brands, Inc., Dominion Resources, Inc.,
Virginia Power and Flextronics International, Ltd. He has been a director of the Company
since 1983.
(Box) ALAN L. WURTZEL, 61, Vice-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 also served as Chairman of the Board from 1984 until 1994, when he became
Vice-Chairman. He is a director of Office Depot, Inc. and Dollar Tree Stores, Inc. He has
been a director of the Company since 1966.
</TABLE>
NOMINEE FOR ELECTION FOR ONE-YEAR TERM
<TABLE>
<S> <C>
(Box) MIKAEL SALOVAARA, 41, Limited Partner and Member of the Investment Committee, The
Blackstone Group L.P., since 1994; and Partner, Greycliff Partners, since 1991. Mr.
Salovaara was a General Partner of Goldman, Sachs & Co., where he worked from 1980 to
1991. He is a director of Granite Broadcasting Corporation and Hadco Corporation. He has
been a director of the Company since April 1995.
</TABLE>
2
<PAGE>
DIRECTORS WHOSE TERMS DO NOT EXPIRE THIS YEAR
<TABLE>
<S> <C>
(Box) MICHAEL T. CHALIFOUX, 48, 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. His present term will expire in 1997.
(Box) BARBARA S. FEIGIN, 57, 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 VF Corporation. She has been a director of the Company since February 1994.
Her present term will expire in 1997.
(Box) THEODORE D. NIERENBERG, 72, 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.
(Box) WALTER J. SALMON, 64, 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.
(Box) EDWARD VILLANUEVA, 60, financial consultant since 1987. In addition, 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. Mr. Villanueva was employed by the Company from 1967 to 1987. He has been a director
of the Company since 1978. His present term will expire in 1997.
</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, 1995, 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 known 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, 1995 FEBRUARY 28, 1995 (1) CLASS
<S> <C> <C> <C>
NAMED EXECUTIVE OFFICERS
Richard L. Sharp** 638,836 1,562,742 1.6%
Walter E. Bruckart 195,522 258,790 *
Richard S. Birnbaum 105,134 175,686 *
John A. Fitzsimmons 129,698 212,649 *
Michael T. Chalifoux** 100,062 165,570 *
DIRECTORS
Richard N. Cooper 13,540 37,460 *
Douglas D. Drysdale 13,540 114,340(2) *
Barbara S. Feigin 0 500 *
Theodore D. Nierenberg 13,540 75,540(3) *
Walter J. Salmon 0 8,600 *
Mikael Salovaara 0 0(4) *
Edward Villanueva 3,790 286,753(5) *
Alan L. Wurtzel 39,580 421,680(6) *
All directors and executive
officers as a group (18 persons) 1,475,330 3,442,398 3.6%
BENEFICIAL OWNERS OF MORE THAN 5%
FMR Corp. N/A 10,091,376(7) 10.4%
82 Devonshire Street
Boston, MA 02109
Vanguard/Windsor Fund, Inc. N/A 5,296,100(8) 5.5%
Post Office Box 2600
Valley Forge, PA 19482
Wellington Management Company N/A 5,513,730(8) 5.7%
75 State Street
Boston, MA 02109
</TABLE>
* Less than 1 percent of Class, based on the number of shares of Common Stock
outstanding on May 5, 1995.
** Messrs. Sharp and Chalifoux are also directors of the Company.
(1) Includes the shares of Common Stock that could be acquired through exercise
of stock options within 60 days after February 28, 1995. For beneficial
owners of more than 5 percent, the number of beneficially owned shares is as
of December 31, 1994.
(2) Mr. Drysdale shares voting and investment power with respect to 57,600
shares.
4
<PAGE>
(3) Includes 31,000 shares owned by Mr. Nierenberg's wife. Mr. Nierenberg
disclaims beneficial ownership of such 31,000 shares.
(4) Mr. Salovaara was not a director at February 28, 1995. He was elected to the
Board in April 1995.
(5) Excludes 16,600 shares held by Mr. Villanueva as trustee of trusts for the
benefit of his children.
(6) Excludes 160,600 shares held by Mr. Wurtzel as trustee of trusts for the
benefit of his children. Includes 100,000 shares held by Alan Wurtzel
Charitable Remainder Unitrust. Mr. Wurtzel disclaims beneficial ownership of
all the aforementioned shares.
(7) Information concerning the shares owned by FMR Corp. as of December 31,
1994, was obtained from a Schedule 13G dated February 13, 1995. According to
this filing, the interest of one entity, Fidelity Magellan Fund, an
investment company registered under the Investment Company Act of 1940,
amounted to 5,633,200 shares or 5.8 percent of the outstanding shares of
Common Stock. The filing indicates that of the 10,091,376 shares
beneficially owned, FMR Corp. has sole voting power of 600,506 shares,
shared voting power of 9,000 shares, sole dispositive power of 10,082,376
shares and shared dispositive power of 9,000 shares.
(8) Information concerning the shares owned by Vanguard/Windsor Fund, Inc. (the
"Fund") as of December 31, 1994, was obtained from a Schedule 13G dated
February 10, 1995. The filing indicates that the Fund has sole voting power
and shared dispositive power of all 5,296,100 shares beneficially owned.
Information concerning the shares owned by Wellington Management Company
(WMC) as of December 31, 1994, was obtained from a Schedule 13G dated
February 3, 1995. The filing indicates that of the 5,513,730 shares
beneficially owned, WMC has shared voting power of 27,330 shares and shared
dispositive power of all 5,513,730 shares. The Company was informed by WMC
that the 5,296,100 shares beneficially owned by the Fund are included in the
5,513,730 shares beneficially owned by WMC.
CERTAIN INFORMATION CONCERNING THE
BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors held six meetings during the fiscal year ended
February 28, 1995. No director attended less than 75 percent of the aggregate
number of meetings of the Board and of the committees on which he or she served.
The Audit Committee is composed of Edward Villanueva, Chairman, Richard N.
Cooper and Barbara S. Feigin. Three meetings were held during the fiscal year
ended February 28, 1995. 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.
The Compensation and Personnel Committee is composed of Douglas D.
Drysdale, Chairman, Walter J. Salmon and Theodore D. Nierenberg. Mikael
Salovaara was appointed to this Committee in April 1995. Seven meetings were
held during the fiscal year ended February 28, 1995. 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 Alan L. Wurtzel, Chairman,
Richard N. Cooper, and Edward Villanueva. Mikael Salovaara was appointed to this
committee in April 1995. One meeting was held during the fiscal year ended
February 28, 1995. 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
5
<PAGE>
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, Walter J. Salmon and Barbara S. Feigin. Four
meetings were held during the fiscal year ended February 28, 1995. 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.
COMPENSATION OF EXECUTIVE OFFICERS
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The table below sets forth for the years ended
February 28, 1995, February 28, 1994, and February 28, 1993, the annual and
long-term compensation for services in all capacities to the Company and its
subsidiaries of those persons who at February 28, 1995, were the Company's Chief
Executive Officer ("CEO") and the other four most highly compensated executive
officers of the Company other than the CEO. The only stock appreciation rights
("SARs") granted were Change of Control SARs (described on page 12), which were
granted in connection with each of the options. No free-standing SARs have been
granted.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
SECURITIES
ANNUAL COMPENSATION UNDERLYING
NAME AND FISCAL SALARY BONUS OPTIONS/SARS
PRINCIPAL POSITION YEAR $ $ (#)
<S> <C> <C> <C> <C>
Richard L. Sharp 1995 651,747 975,000 125,000
Chairman of the Board, 1994 618,286 549,575 97,500
President and 1993 583,012 870,000 538,578
Chief Executive Officer
Walter E. Bruckart 1995 518,853 386,250 50,000
Executive Vice President 1994 492,863 218,050 40,000
Merchandising 1993 461,647 345,000 125,522
Richard S. Birnbaum 1995 482,322 356,250 50,000
Executive Vice President 1994 330,105 101,238 20,000
Operations 1993 296,153 26,200 87,592
John A. Fitzsimmons 1995 441,045 231,000 30,000
Senior Vice President 1994 407,863 126,157 22,500
Administration 1993 379,378 196,875 131,152
Michael T. Chalifoux 1995 386,045 202,125 27,500
Senior Vice President, 1994 350,094 109,025 22,500
Chief Financial Officer 1993 307,551 162,750 70,912
and Secretary
</TABLE>
6
<PAGE>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR. The table below sets forth for the
fiscal year ended February 28, 1995, the grants of stock options and SARs to the
executive officers named in the Summary Compensation Table. The only SARs
granted were Change of Control SARs (described on page 12), which were granted
in connection with each of the options. No free-standing SARs have been granted.
<TABLE>
<CAPTION>
POTENTIAL REALIZATION
VALUE
NUMBER OF AT ASSUMED ANNUAL RATES
SECURITIES % OF TOTAL OF STOCK PRICE
UNDERLYING OPTIONS/SARS EXERCISE APPRECIATION
OPTIONS/SARS GRANTED TO PRICE EXPIRATION FOR OPTION TERM (1)
GRANTED EMPLOYEES (2) DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Richard L. Sharp 125,000 16.66% $18.1875 5/18/01 $1,002,468 $2,263,420
Walter E. Bruckart 50,000 6.66 18.1875 5/18/01 400,987 905,368
Richard S. Birnbaum 50,000 6.66 18.1875 5/18/01 400,987 905,368
John A. Fitzsimmons 30,000 4.00 18.1875 5/18/01 240,592 543,221
Michael T. Chalifoux 27,500 3.66 18.1875 5/18/01 220,543 497,952
</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 $735,223,000 and $1,713,352,000, based on assumed stock price
appreciation rates of 5 percent and 10 percent, respectively, from the grant
date of the options expiring in 2001 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.
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, 1995, for the executive
officers named in the Summary Compensation Table. The only SARs outstanding were
Change of Control SARs (described on page 12).
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
NUMBER OF OPTIONS/SARS AT OPTIONS/SARS AT
SHARES ACQUIRED VALUE FEBRUARY 28, 1995 FEBRUARY 28, 1995
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Richard L. Sharp 0 $ 0 572,761 299,625 $ 1,960,969 $ 1,158,219
Walter E. Bruckart 0 0 168,022 126,250 987,344 521,016
Richard S. Birnbaum 0 0 93,534 83,200 419,313 313,063
John A. Fitzsimmons 10,852 12,887 113,573 74,875 664,938 315,750
Michael T. Chalifoux 0 0 86,637 65,225 472,969 253,109
</TABLE>
7
<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 ESTIMATED* ANNUAL PENSION FOR REPRESENTATIVE YEARS
FIVE-YEAR AVERAGE OF CREDITED SERVICE
COMPENSATION 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$ 400,000............ 87,368 116,490 145,613 174,735 203,858
$ 600,000............ 132,368 176,490 220,613 264,735 308,858
$ 800,000............ 177,368 236,490 295,613 354,735 413,858
$1,000,000........... 222,368 296,490 370,613 444,735 518,858
$1,200,000........... 267,368 356,490 445,613 534,735 623,858
$1,400,000........... 312,368 416,490 520,613 624,735 728,858
$1,600,000........... 357,368 476,490 595,613 714,735 833,858
$1,800,000........... 402,368 536,490 670,613 804,735 938,858
</TABLE>
* Notwithstanding the estimates set forth in the table, the annual pension
payable from the Pension Plan is limited to $120,000, effective January 1,
1995, for a participant who retires at age 65. This limit, which is subject to
annual cost of living adjustments, is imposed on tax-qualified defined benefit
plans under the Internal Revenue Code and also may vary in individual cases if
retirement occurs early or late. Additionally, the maximum amount of annual
compensation that may be taken into account with respect to a participant is
limited under the Internal Revenue Code. The compensation limit effective in
1995 is $150,000. The benefits shown above do not reflect these limits.
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 of the last 10 consecutive years of
employment, weighted according to years of credited service, and integrated with
Social Security covered compensation. For Pension Plan purposes, compensation of
participants includes base pay, 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, Birnbaum, Fitzsimmons and Chalifoux will be 29, 34,
45, 21 and 29 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 best 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. The Committee believes that the use of Company-wide performance
in setting goals promotes a unified vision for senior management and creates
common motivation among the executives. 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 review executive
compensation, including performance targets, for that year. For the Company's
1995 fiscal year, the Committee made its compensation decisions based on a
review of the Company's 1994 fiscal year performance and on the Company's budget
and other projections for the 1995 fiscal year. The Committee is composed solely
of independent directors.
8
<PAGE>
The Company is subject to 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 Company's compensation practices, to the
extent practicable, provide the maximum deductibility for compensation payments.
Payments under the Annual Performance-Based Bonus Plan ("Bonus Plan") qualify
for deductibility under these provisions of the Internal Revenue Code.
COMPONENTS OF THE EXECUTIVE COMPENSATION PROGRAM
The Company's compensation program for executive officers consists
generally 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 1995 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 14 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 indexes used
for the Performance Graph that follows this report. The compensation peer group
consists of the same companies that were used for comparison in the prior year.
The Committee compared the Company and the compensation peer group based on
various one-year and five-year performance measures including return on average
shareholders' equity, sales growth, net income growth and earnings per share
growth. Although the Committee has not established any particular level for the
Company's compensation in respect to the compensation peer group, the Committee
believes that the total compensation of the named executive officers is
supported by the Company's competitive comparisons on the short and long-term
performance factors and is appropriate given the Company's overall performance.
The individual elements of the executive compensation program are addressed
below.
ANNUAL SALARY
Each year, the Committee establishes salaries for executive officers. Such
salaries are based on proposals submitted by the Company's Chief Executive
Officer ("CEO") for annual salary for the executive officers other than himself.
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.
In evaluating the CEO's proposals, the Committee considers (1) a
qualitative evaluation of the individual executive officer's performance
provided by the CEO, (2) the Company's performance in relation to its target
financial goals for the prior fiscal year and (3) a comparison with salaries for
comparable positions paid by companies in the compensation peer group.
ANNUAL PERFORMANCE-BASED BONUS
All salaried employees, except the Company's executive officers, are
eligible to receive cash bonuses under an annual performance-based incentive
program ("Incentive Program") established each year by the Committee and
approved by the Board of Directors. The Incentive Program is designed to
motivate the Company's employees to achieve the Company's annual operating and
financial goals. The executive officers participate in the Bonus Plan, which
became effective for the 1995 fiscal year. The Bonus Plan allows the Committee
to establish performance goals based on pre-tax earnings, earnings per share or
both.
For the 1995 fiscal year, the bonus awards under the Bonus Plan and the
Incentive Program were based upon the Company's achievement of its target
financial goals for earnings per share ("EPS") and pre-tax earnings ("PTE"). The
target EPS and 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 1995 fiscal year, the target bonus
amounts ranged from 35 percent of base salary, in the case of certain less
senior executive officers, to 100 percent of base salary, in the case of the
CEO, which were the same levels as for the 1993 and 1994 fiscal years for all
levels of 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 1995 fiscal year, if
the Company did not achieve 85 percent of the goal, no bonuses
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would be paid. For performance above the target, an additional bonus would be
paid with a maximum bonus at a performance of 150 percent of the target bonus.
The Committee retains the discretion to adjust the PTE and EPS goals during
the fiscal year to account for unforeseen factors. For executive officers in the
Bonus Plan, the only permissible adjustment is to increase the goals. During the
1995 fiscal year, the Committee increased the goals for the Bonus Plan and the
Incentive Program. The PTE and EPS targets were raised and the performance level
for the maximum payout was increased.
In establishing the annual salary and bonuses for named executive officers
for the 1995 fiscal year, the Committee compared the projected amounts payable
with the compensation paid by the compensation peer group. The Committee
believes that this level is reasonable in light of the Company's overall
performance for both one-year and five-year periods.
LONG-TERM INCENTIVE COMPENSATION
Long-term incentive compensation is provided by grants under the Company's
Stock Incentive Plan, which is offered broadly to salaried employees. For
executive officers, grants under the Stock Incentive Plan are made principally
in the form of non-qualified stock options. Restricted stock awards were made
only to salaried employees below the level of vice president during the 1995
fiscal year.
The Committee considers stock options to be an important means of ensuring
that executive officers have a continuing incentive to increase the long-term
profitability of the Company and the value of the Company's stock. Such options
generally vest and become 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. The Committee primarily uses a formula
based on an 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 in the form of stock options
is more heavily weighted toward long-term incentives in the form of stock
options. 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 Chairman, President and CEO, for the 1995 fiscal year in a manner
consistent with the guidelines and policies described above. The Committee
approved a 5.3 percent increase in Mr. Sharp's salary and kept his performance
bonus target at 100 percent of salary. Stock option grants to Mr. Sharp for the
1995 fiscal year were made under the same formula as for the 1994 fiscal year.
In establishing Mr. Sharp's 1995 fiscal year compensation, the Committee
compared his 1994 fiscal year compensation with the compensation of the CEOs of
the compensation peer group in relationship to the relative performance of the
Company with respect to the compensation peer group. The Committee also
considered the Company's performance during the 1994 fiscal year.
The Committee also evaluated Mr. Sharp's important additional contributions
to the continued growth of the Company. In particular, the Committee appraised
Mr. Sharp's efforts to analyze strategies for the Company and to implement those
strategies. The Committee assessed his leadership in diversification of business
lines and his general management skills. In addition, the Committee compared Mr.
Sharp's compensation changes for the last five fiscal years with the Company's
performance for that period. The Committee believes that Mr. Sharp's actual and
potential compensation for the 1995 fiscal year were appropriate in light of all
the above factors.
COMPENSATION AND PERSONNEL COMMITTEE
Douglas D. Drysdale, Chairman
Theodore D. Nierenberg
Walter J. Salmon
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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
(graph)
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; however, 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. 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 agreement with Mr. Birnbaum became effective in 1983. The
agreements with Messrs. Bruckart and Fitzsimmons became effective in 1988. The
agreements with Messrs. Sharp and Chalifoux became effective in 1986 and 1989,
respectively. Mr. Bruckart's agreement was amended effective March 1, 1995, in
connection with his retirement as Executive Vice President-Merchandising. Mr.
Bruckart will remain employed as a consultant by the Company for a period of
five years, during which he will receive a salary of $200,000 per year. He is
not entitled to receive bonuses or stock incentive awards for the periods after
fiscal 1995. If his employment is terminated during that period other than for
cause, he will receive the payments he otherwise would have received had his
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employment continued for the entire five years. The current base salaries of
Messrs. Sharp, Bruckart, Birnbaum, Fitzsimmons and Chalifoux under their
employment agreements are $650,000, $200,000, $475,000, $440,000, and $385,000,
respectively.
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, Vice-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 $85,000 with annual increases of $5,000.
The value of perquisites provided to Mr. Wurtzel under the agreement was $52,610
for the fiscal year ended February 28, 1995. 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 long the election occurs before the next annual meeting. The
options generally become exercisable three years after they are granted. The
1989 Plan currently provides that 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, 1994, seven non full-time employee members of the Board of
Directors were each granted 2,515 stock options under the 1989 Plan at an option
price of $19.875 per share. Certain amendments to the 1989 Plan have been
approved by the Board and will be submitted to shareholders for approval at the
annual meeting. See "Item Two -- Proposal to Amend and Restate 1989 Non-Employee
Directors Stock Option Plan" below.
SECTION 16(a) COMPLIANCE
Section 16a 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 (the
"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 Form 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 1995, except that Mr. Fitzsimmons filed a
late report with respect to one sale transaction during such fiscal year and a
trust that was established by Mr. Wurtzel and that is required by the
Commission's rules to report its transactions on separate forms was
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late in filing its initial ownership report. All transactions between Mr.
Wurtzel and the trust and by the trust itself were reported on a timely basis.
ITEM TWO -- PROPOSAL TO AMEND AND RESTATE
1989 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
INTRODUCTION
On September 12, 1989, the Board of Directors of the Company, subject to
shareholder approval, adopted the 1989 Non-Employee Directors Stock Option Plan
(the "1989 Plan"). On June 19, 1990, the shareholders approved the 1989 Plan.
The 1989 Plan is intended to encourage ownership in the Company by members of
the Board of Directors who are not full-time employees of the Company, in order
to give them an identity of interests with shareholders of the Company and to
provide them with an incentive to continue as directors of the Company. The
basic operation of the 1989 Plan is described under "Compensation of Directors."
In 1995, the Board of Directors of the Company approved, subject to
shareholder approval, certain amendments to the 1989 Plan and the restatement of
the 1989 Plan, as amended. The amendments are summarized below. The summary is
qualified by reference to the complete text of the amended and restated 1989
Plan, which is attached as Exhibit A. In general, the purposes of the amendments
are to extend the life of the 1989 Plan, which would otherwise expire at the end
of 1995, to add sufficient shares to the 1989 Plan to cover the options which
will be granted in the next several years, to change the vesting schedule for
options granted under the 1989 Plan so as to ensure that any director who serves
at least one three-year term on the Board will have the opportunity to exercise
the grant made in the director's first year of service on the Board, to increase
the number of shares covered by each annual option grant to the level
recommended by the Nominating and Structure Committee as appropriate in light of
the entire compensation package provided to the Company's non-management
directors and to effect certain changes of a housekeeping nature.
AMENDMENTS
The amendments to the 1989 Plan are as follows:
(1) The expiration date of the 1989 Plan is extended from December 31, 1995
to December 31, 2001;
(2) The number of shares reserved for issuance under the 1989 Plan is
increased by 50,000 shares to a total of 250,000 (without the
amendment, 41,993 shares are available for grants);
(3) Options granted under the 1989 Plan will become exercisable on the
business day preceding the annual meeting three years after the annual
meeting at which the options are granted, rather than three years after
the date of grant (also, as is currently provided, options become
exercisable immediately (a) upon retirement after six years of service,
(b) upon a Change of Control as described in the 1989 Plan or (c) upon
termination of service as a director because of death). The change in
the vesting of the options is applicable to all unvested options
outstanding on February 10, 1995, as well as new options granted after
February 10, 1995, under the 1989 Plan;
(4) The number of shares subject to each option shall be such that the
option exercise price multiplied times such number of shares is as near
as possible to, but does not exceed, $75,000, rather than $50,000;
(5) The 1989 Plan will allow for the issuance of book entry Common Stock
upon exercise of an option as an alternative to stock certificates; and
(6) The grant formula in the 1989 Plan may not be amended more than once in
a six-month period (also, as is currently provided, (a) the
shareholders of the Company must approve any amendment to the 1989 Plan
that would (i) materially increase the benefits accruing to optionees
thereunder, (ii) increase the total number of Shares reserved for
issuance thereunder (except as specifically provided in the Plan), or
(iii) expand the class of persons eligible to receive options
thereunder and (b) options granted under the 1989 Plan may be amended,
provided that no such amendment may have the effect of changing the
exercise price or the number of shares subject to the options or
altering or impairing any rights or obligations of any person under any
option previously granted without the consent of the optionee).
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STOCK OPTIONS
See above for a discussion of when options granted under the 1989 Plan may
be exercised. Options granted under the 1989 Plan expire seven years from the
date of the option grant. Once an option becomes exercisable, if the option
holder ceases to be a director of the Company, the option may be exercised at
any time within one year after the date the option holder ceases to be a
director and before its expiration date. An optionee exercising an option
granted under the 1989 Plan may pay the purchase price in cash, in shares of
Common Stock or in any combination thereof.
STOCK APPRECIATION RIGHTS
Each director of the Company who is granted an option under the 1989 Plan
is automatically granted a like number of limited stock appreciation rights in
connection with the grant of such option. These limited stock appreciation
rights will become exercisable only upon the occurrence of a Change of Control
as defined in the 1989 Plan. When the stock appreciation right is exercisable,
the holder may surrender to the Company all or a portion of the holder's
unexercised stock option and receive in exchange an amount equal to the excess
of (i) the fair market value on the date of exercise of the Common Stock covered
by the surrendered portion of the underlying option over (ii) the exercise price
of the Common Stock covered by the surrendered portion of the underlying option.
When a stock appreciation right 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 the exercise of a stock
appreciation right will be paid in cash. Stock appreciation rights granted under
the 1989 Plan may only be exercised within the 90-day period immediately
following a Change of Control. In addition, such stock appreciation rights may
only be exercised when the underlying option is exercisable, and they may not be
exercised within the first six months after they are granted.
FEDERAL INCOME TAX CONSEQUENCES
A director generally will not incur federal income tax when he or she is
granted a stock option or a stock appreciation right under the 1989 Plan. Upon
exercise of a stock option or stock appreciation right, a director generally
will recognize ordinary income equal to the difference between the fair market
value of the Common Stock on the date of the exercise and the exercise price. A
director delivering shares of Common Stock instead of cash to pay the exercise
price under an option will not have to recognize a taxable gain on any
appreciation in value of the shares delivered.
The Company usually will be entitled to a business expense deduction at the
time of a grant and in the amount that the recipient of a grant under the 1989
Plan recognizes ordinary income in connection therewith. As stated above, this
occurs upon the exercise of nonstatutory stock options and stock appreciation
rights.
This summary of federal income tax consequences of stock options and stock
appreciation rights granted under the 1989 Plan does not purport to be complete.
State, local and foreign income taxes may also be applicable to the transactions
described above.
EFFECT OF AMENDMENTS ON DIRECTORS
The amendments will affect the vesting dates of outstanding, unvested
options held by the following directors and covering the stated number of
shares: Mr. Cooper: 7,094 shares; Mr. Drysdale: 7,094 shares; Ms. Feigin: 2,515
shares; Mr. Nierenberg: 7,094 shares; Mr. Salmon: 6,678 shares; Mr. Villanueva:
7,094 shares; and Mr. Wurtzel: 7,094 shares. The amendments may increase
benefits under the 1989 Plan for directors who serve less than six years by
causing one more annual option grant to become exercisable by the time they
leave the Board than would have been the case without the amendments. All of the
current directors other than Ms. Feigin and Messrs. Salmon and Salovaara have
served on the Board for more than six years.
There are no participants in the 1989 Plan other than directors who are not
full-time employees of the Company and only one participant, Mr. Wurtzel, is a
part-time employee of the Company. On the date of the 1995 annual meeting,
assuming the nominees named in this proxy statement are elected, the following
directors will receive option grants under the 1989 Plan: Mr. Cooper, Ms. Feigin
and Messrs. Nierenberg, Salmon, Salovaara, Villanueva and Wurtzel. The number of
shares of Common Stock subject to these options will be such
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that the exercise price of the options for each director multiplied by such
number of shares is as near as possible to, but does not exceed $75,000. The
exercise price of the options will be the fair market value of the Common Stock
on the date of the annual meeting. A like number of Change of Control stock
appreciation rights will be automatically granted in connection with each stock
option grant. Based upon the closing price of the Common Stock on the New York
Stock Exchange on May 5, 1995, each eligible director would receive on the 1995
annual meeting date options to purchase 2,816 shares of Common Stock at an
exercise price of $26.625 per share.
VOTE REQUIRED
The amendment and restatement of the 1989 Plan will be approved if the
votes cast in favor of approval at the annual meeting exceed the votes cast
against approval.
THE BOARD OF DIRECTORS BELIEVES THAT APPROVAL OF THE AMENDMENT AND
RESTATEMENT OF THE 1989 PLAN IS IN THE BEST INTEREST OF ALL SHAREHOLDERS AND,
ACCORDINGLY, RECOMMENDS A VOTE "FOR" THE PROPOSED AMENDMENT AND RESTATEMENT.
RELATIONSHIP WITH INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
KPMG Peat Marwick LLP served during the Company's fiscal year ended
February 28, 1995, as the Company's independent certified public accountants and
has been selected as the Company's independent certified public accountants for
the current fiscal year. Representatives of KPMG Peat Marwick LLP 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.
PROPOSALS BY SHAREHOLDERS FOR PRESENTATION
AT THE 1996 ANNUAL MEETING
Proposals that any shareholder desires to have included in the proxy
statement for the 1996 annual meeting of shareholders must be received by the
Company no later than January 12, 1996.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED FEBRUARY 28, 1995, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
MAY BE OBTAINED BY ANY SHAREHOLDER AFTER MAY 31, 1995, FREE OF CHARGE, UPON
WRITTEN REQUEST TO OFFICE OF THE CORPORATE SECRETARY, CIRCUIT CITY STORES, INC.,
9950 MAYLAND DRIVE, RICHMOND, VIRGINIA 23233, OR BY CALLING (804) 527-4022.
By Order of the Board of Directors
Michael T. Chalifoux, SECRETARY
May 12, 1995
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EXHIBIT A
CIRCUIT CITY STORES, INC.
AMENDED AND RESTATED
1989 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
1. PURPOSE. The Purpose of this Non-Employee Directors Stock Option Plan
(the "Plan") of Circuit City Stores, Inc. (the "Company") is to encourage
ownership in the Company by non-employee members of the Board of Directors (the
"Board") of the Company, in order to promote long-term shareholder value and to
provide non-employee members of the Board with an incentive to continue as
directors of the Company. The Plan conforms to the provisions of Securities and
Exchange Commission Rule 16b-3 ("Rule 16b-3") under the Securities Exchange Act
of 1934 (the "'34 Act"), as presently in effect.
2. ADMINISTRATION. The Plan shall be administered by the Board. Grants of
stock options ("Options") and stock appreciation rights ("SARs") under the Plan
shall be automatic as described in Sections 7 and 8, respectively. However, the
Board shall have all powers vested in it by the terms of the Plan, including,
without limitation, the authority (within the limitations described herein) to
prescribe the form of the agreement embodying awards of Options and SARs under
the Plan, to construe the Plan, to determine all questions arising under the
Plan, and to adopt and amend rules and regulations for the administration of the
Plan as it may deem desirable. Any decision of the Board in the administration
of the Plan, as described herein, shall be final and conclusive. The Board may
act only by a majority of its members in office, except that members thereof may
authorize any one or more of their number or any officer of the Company to
execute and deliver documents on behalf of the Board. No member of the Board
shall be liable for anything done or omitted to be done by him or any other
member of the Board in connection with the Plan, except for his own willful
misconduct or as expressly provided by statute.
3. PARTICIPATION IN THE PLAN. Each director of the Company who is not a
full-time employee of the Company or any parent or subsidiary corporation shall
be eligible to participate in the Plan.
The terms "parent corporation" and "subsidiary corporation," as used in
this Plan, shall have the meanings given them in Sections 424(e) and (f) of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code").
4. STOCK SUBJECT TO THE PLAN. The Company has reserved an aggregate of
250,000 shares of Common Stock ("Shares") for issuance pursuant to the exercise
of Options granted under the Plan. The aggregate number is subject to future
adjustments as hereinafter provided in Section 13. The aggregate number of
Shares reserved shall be reduced by the issuance of Shares upon the exercise of
Options, but it shall not be reduced if Options, for any reason, expire or
terminate unexercised.
5. NON-STATUTORY STOCK OPTIONS. All Options granted under the Plan shall be
non-statutory in nature and shall not be entitled to special tax treatment under
Section 422 of the Internal Revenue Code.
6. OPTION EXERCISE PRICE. The Option exercise price shall be fair market
value of the Shares subject to such Option on the date the Option is granted,
which shall be the last reported sale price per share of the Shares on the New
York Stock Exchange (or the exchange on which such shares are then traded) on
the date of grant, or, if the Shares did not trade on the date of grant, on the
last day before the date of grant on which the Shares traded.
7. TERMS, CONDITIONS AND FORM OF STOCK OPTIONS. Each Option shall be
evidenced by a written agreement in such form as the Board shall from time to
time approve, which agreement shall comply with and be subject to the following
terms and conditions:
(a) Each director of the Company who is currently serving as a director on
the date the Plan is adopted shall automatically be granted an Option to
purchase a number of Shares computed as follows: The number of Shares subject to
each Option shall be such that the Option exercise price multiplied times such
number of Shares is as near as possible to, but does not exceed, $75,000.00.
Thereafter, each director who is currently continuing to
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serve as a director or who has been elected to serve as a director for the next
following year shall automatically be granted an Option to purchase a number of
Shares computed as set forth above on the date of the Company's annual meeting
of shareholders. In addition, each director who is elected or appointed to serve
at a date other than the date of the Company's annual meeting of shareholders,
and whose date of appointment or election occurs more than six months before the
next regularly scheduled shareholders' meeting shall automatically be granted an
Option to purchase a number of Shares computed as set forth above on the date of
his election or appointment.
(b) An Option shall not be transferable by the optionee otherwise than by
will, or by the laws of descent and distribution, and shall be exercised during
the lifetime of the optionee only by the optionee or by his guardian or legal
representative. No Option or interest therein may be transferred, assigned,
pledged or hypothecated by the optionee during his lifetime, whether by
operation of law or otherwise, or be made subject to execution, attachment or
similar process.
(c) No Option may be exercised:
(i) before the Plan is approved by the shareholders of the Company;
(ii) in the case of all options outstanding on or granted after
February 10, 1995, until the business day immediately preceding the day of
the third annual meeting after the date the Option is granted unless the
Option is granted other than on an annual meeting date in which case the
Option may not be exercised until the business day immediately preceding
the day of the third annual meeting after the Company's last annual meeting
of shareholders occurring before the date the Option was granted; provided,
however, that if (A) an optionee ceases to be a director (x) after he has
completed six years of service with the Company as a director or (y) on
account of his death (whether or not he has completed six years of
service), the optionee may exercise any or all of his outstanding Options
at any time (subject to the limitations of subsections (i) and (iii) of
this Section) or (B) a Change in Control (defined in Section 8(j) occurs,
the optionee may exercise any or all of his outstanding Options at any time
(subject to the limitations of subsections (i) and (iii) of this Section);
(iii) after the expiration of seven (7) years from the date the Option
is granted; provided, however, that each Option shall be subject to
termination before its date of expiration as hereinafter provided;
(iv) except by written notice to the Company at its principal office,
stating the number of Shares the optionee has elected to purchase,
accompanied by payment in cash, by delivery to the Company of Shares
(valued at fair market value on the date of exercise) in the amount of the
full Option exercise price for the Shares being acquired thereunder or in
any combination thereof; and
(v) except at such time as an optionee is a director of the Company;
provided, however, that once an Option has been exercisable, if the
optionee later ceases to be a director of the Company, the Option may be
exercised at any time within one (1) year after the date the optionee
ceased to be a director and before its date of expiration pursuant to (iii)
above.
(d) The Company shall not be required to issue or deliver any Shares of its
Common Stock purchased upon the exercise of any part of an Option before (i) the
admission of such Shares to listing on the New York Stock Exchange; (ii)
completion of any registration or other qualification of such Shares under any
state or federal law or regulation that the Company's counsel shall determine is
necessary or advisable, and (iii) compliance by the Company with such other
legal requirements as the Company's counsel shall advise is necessary or
advisable.
(e) Notwithstanding anything herein to the contrary, Options shall always
be granted and exercised in such a manner as to conform to the provisions of
Rule 16b-3, or any replacement rule adopted pursuant to the provisions of the
'34 Act, as the same now exists or may, from time to time, be amended.
8. CHANGE OF CONTROL STOCK APPRECIATION RIGHTS. Each director of the
Company who is granted an Option under Section 7 shall automatically be granted
stock appreciation rights ("SARs") in connection with the grant of such Option.
SARs shall be evidenced by a written agreement in such form as the Board shall
from time to time approve, which shall comply with and be subject to the
following terms and conditions:
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(a) SARs shall entitle the optionee, upon exercise of all or any part of
the SARs, to surrender to the Company unexercised that portion of the underlying
Option relating to the same number of Shares covered by the SARs (or the portion
of the SARs 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
Shares covered by the surrendered portion of the underlying Option over (y) the
exercise price of the Shares covered by the surrendered portion of the
underlying Option.
(b) Upon the exercise of an SAR and surrender of the related portion of the
underlying Option, the Option, to the extent surrendered, shall not thereafter
be exercisable.
(c) SARs by their terms shall become fully and immediately exercisable only
following a Change of Control (defined in subsection (j) below). The terms of
the underlying Option shall provide that the fair market value of the Shares on
the date of exercise shall be the greater of (x) or (y) below:
(x) the closing price of the Shares on the New York Stock Exchange (or
the exchange on which the shares are then traded) on the business day
immediately preceding the day of exercise;
(y) the highest closing price of the Shares on the New York Stock
Exchange (or the exchange on which the shares are then traded) during the
90 days immediately preceding the Change of Control.
(d) An SAR shall be exercisable only to the extent that the related Option
is exercisable.
(e) An SAR may only be exercised at a time when the fair market value of
the Shares covered by the SAR exceeds the exercise price of the Shares covered
by the underlying Option.
(f) The Company's obligation arising upon the exercise of an SAR shall be
paid in cash.
(g) SARs by their terms may be exercised only within the 90-day period
immediately following the Change of Control; provided, however, that SARs may
not be exercised before the Plan is approved by the shareholders of the Company,
before six months elapse from the date they are awarded or after the date on
which the Options to which they relate expire.
(h) SARs by their terms shall not be transferable by the optionee otherwise
than by will, or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the optionee only by the optionee or by his
guardian or legal representative.
(i) SARs may be exercised by giving written notice to the Company at its
principal office, stating the numbers of SARs the optionee has elected to
exercise.
(j) For purposes of this Plan, the term "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 Securities Exchange Act of 1934,
becomes, or obtains the right to become, the beneficial owner of Company
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 the
result of, or in connection with, any cash tender or exchange offer, merger or
other business combination, sale of assets or contested election, or any
combination of the foregoing transactions, the persons who were directors of the
Company before such transactions shall cease to constitute a majority of the
Board of Directors of the Company or any successor to the Company.
9. DEATH OF OPTIONEE. In the event of the death of an optionee at a time
when Options granted to such optionee hereunder are outstanding and exercisable,
the personal representative of the estate of the optionee may exercise such
Options in the same manner as could the optionee before death; provided,
however, that no such Option may be exercised after the earlier of (i) the first
anniversary of the optionee's death and (ii) the expiration date of the Option
under Section 7(c)(iii).
10. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. The Board shall have
the power to modify, extend or renew any outstanding Option, provided that any
such action may not have the effect of changing the Option
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exercise price or the number of Shares subject to the Option or altering or
impairing any rights or obligations of any person under any Option previously
granted without the consent of the optionee.
11. TERMINATION. The plan shall terminate upon the earlier of:
(a) the adoption of a resolution of the Board terminating the Plan; or
(b) December 31, 2001.
No termination of the Plan shall without the optionee's consent materially
and adversely affect any of the rights or obligations of any optionee under any
Option previously granted under the Plan.
12. LIMITATION OF RIGHTS.
(a) Neither the Plan nor the granting of an Option nor any other action
taken pursuant to the Plan, shall constitute or be evidence of any agreement or
understanding, express or implied, that the Company will retain any person as a
director for any period of time.
(b) An optionee shall have no rights as a shareholder with respect to
Shares covered by his or her Options until the date of exercise of the Option,
and, except as provided in Section 13, no adjustment will be made for dividends
or other rights for which the record date is before the date of such exercise.
13. CHANGES IN CAPITAL STRUCTURE. Appropriate adjustments shall be made to
the price of the Shares and the number of Shares subject to outstanding Options
and the number of Shares issuable under the Plan if there are any changes in the
Company's Common Stock by reason of stock dividends, stock splits, reverse stock
splits, recapitalization, mergers, or consolidations.
14. EFFECTIVE DATE OF THE PLAN. Subject to the approval of the shareholders
of the Company, the Plan shall be effective on the date the Plan is adopted by
the Board.
15. AMENDMENT TO THE PLAN. The Board may suspend or discontinue the Plan or
revise or amend the Plan in any respect; provided that, if and to the extent
required by Rule 16b-3, no revision or amendment to Section 7(a) of this Plan
shall be made less than six months after the last such revision or amendment,
and no revision or amendment shall be made that increases the total number of
Shares reserved for issuance pursuant to Options under the Plan subject to the
Plan (except as provided in Section 13), expands the class of persons eligible
to receive Options, or materially increases the benefits accruing to optionees
under the Plan, unless such change is authorized by shareholders.
16. NOTICE. Any written notice to the Company required by any of the
provisions of the Plan shall be addressed to the Secretary of the Company and
delivered personally or mailed first class, postage prepaid to the Company at
its principal business address.
17. MISCELLANEOUS. By accepting any Option or other benefit under the Plan,
each optionee and each person claiming under or through such person shall be
conclusively deemed to have given his or her acceptance and ratification of, and
consent to, any action taken with respect thereto by the Company or the Board.
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CIRCUIT CITY STORES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 13, 1995
The undersigned, having received the Annual Report to the Shareholders and
the accompanying Notice of Annual Meeting of Shareholders and Proxy Statement
dated May 12, 1995, 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 13, 1995, at 10:00 a.m., Eastern Daylight Time, and any
adjournment thereof, and especially to vote as set forth below.
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed for the terms [ ] WITHHOLD AUTHORITY to vote for all
set forth in the Proxy Statement nominees listed
Nominees: Richard N. Cooper
Mikael Salovaara
Richard L. Sharp
Alan L. Wurtzel
To withhold authority to vote for any individual nominee, write that
nominee's name on the space provided below
2. Approval of the amendment and restatement of the 1989 Non-Employee Directors
Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
3. 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 AN 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 ITEM 2.
Any proxy or proxies previously given for the meeting are revoked.
[ ] I PLAN TO ATTEND THE MEETING
Please sign exactly as the name appears hereon.
Dated: , 1995
(Signature)
(Signature if held jointly)
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE.
