FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended May 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
Commission File Number 1-5767
CIRCUIT CITY STORES, INC.
(Exact Name of Registrant as Specified in its Charter)
VIRGINIA 54-0493875
(State of Incorporation) (I.R.S. Employer
Identification No.)
9950 MAYLAND DRIVE, RICHMOND, VIRGINIA 23233
(Address of Principal Executive Offices and Zip Code)
(804) 527-4000
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding at June 30, 1996
Common Stock, par value $0.50 97,889,694 Shares
An Index is included on Page 2 and a separate Index for Exhibits is included on
Page 12.
Page 1 of 14
CIRCUIT CITY STORES, INC. AND SUBSIDIARIES
INDEX
Page
No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
May 31, 1996 and February 29, 1996 3
Consolidated Statements of Earnings -
Three Months Ended May 31, 1996 and 1995 4
Consolidated Statements of Cash Flows -
Three Months Ended May 31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7
PART II.OTHER INFORMATION
Item 2. Changes in Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 12
Page 2 of 14
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CIRCUIT CITY STORES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in thousands except share data)
<TABLE>
<CAPTION>
May 31, 1996 Feb. 29, 1996
------------ --------------
(Unaudited)
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 51,969 $ 43,704
Net accounts and notes receivable 355,169 324,395
Merchandise inventory 1,355,225 1,323,183
Deferred income taxes 17,497 26,996
Prepaid expenses and other current assets 26,211 17,399
------------ -------------
Total current assets 1,806,071 1,735,677
Property and equipment, net 793,501 774,265
Other assets 16,620 16,080
------------ -------------
TOTAL ASSETS $2,616,192 $2,526,022
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 1,449 $ 1,436
Accounts payable 687,359 604,488
Short-term debt 111,428 92,087
Accrued expenses and other current liabilities 89,871 133,164
------------ -------------
Total current liabilities 890,107 831,175
Long-term debt, excluding current installments 429,339 399,161
Deferred revenue and other liabilities 197,867 214,001
Deferred income taxes 15,345 17,764
------------ -------------
TOTAL LIABILITIES 1,532,658 1,462,101
------------ -------------
Stockholders' equity:
Common stock, $0.50 par value 48,895 48,690
Capital in excess of par value 95,978 90,432
Retained earnings 938,661 924,799
------------ -------------
TOTAL STOCKHOLDERS' EQUITY 1,083,534 1,063,921
------------ -------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $2,616,192 $2,526,022
============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 3 of 14
CIRCUIT CITY STORES, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings (Unaudited)
(Amounts in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended
May 31,
1996 1995
------------ ------------
<S> <C>
Net sales and operating revenues $1,615,266 $1,391,658
Cost of sales, buying and warehousing 1,252,996 1,071,772
------------ ------------
Gross profit 362,270 319,886
------------ ------------
Selling, general and administrative expenses 328,515 276,650
Interest expense 6,669 3,843
------------ ------------
Total expenses 335,184 280,493
------------ ------------
Earnings before income taxes 27,086 39,393
Provision for income taxes 10,303 14,775
------------ ------------
Net earnings $ 16,783 $ 24,618
============ ============
Weighted average common shares and common
share equivalents 99,089 98,216
============ ============
Net earnings per share $ 0.17 $ 0.25
============ ============
Dividends paid per common share $ 0.03 $ 0.025
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4 of 14
CIRCUIT CITY STORES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(Amounts in thousands)
<TABLE>
<CAPTION>
Three Months Ended
May 31,
1996 1995
----------- ------------
<S> <C>
Operating Activities:
Net earnings $ 16,783 $ 24,618
Adjustments to reconcile net earnings to net
cash used in operating activities:
Depreciation and amortization 24,252 18,845
(Gain) loss on sales of property and equipment (716) 1,830
Provision for deferred income taxes 7,080 6,187
Decrease in deferred revenue and other liabilities (16,134) (18,993)
Increase in net accounts and notes receivable (30,774) (50,975)
Increase in merchandise inventory, prepaid expenses
and other current assets (40,854) (116,756)
Increase in other assets (540) (2,282)
Increase in accounts payable and accrued expenses
and other current liabilities 39,578 40,448
----------- -----------
Net cash used in operating activities (1,325) (97,078)
----------- -----------
Investing Activities:
Purchases of property and equipment (106,655) (110,514)
Proceeds from sales of property and equipment 63,883 20,604
----------- -----------
Net cash used in investing activities (42,772) (89,910)
----------- -----------
Financing Activities:
Proceeds from issuance of short-term debt 19,341 85,000
Proceeds from issuance of long-term debt 30,895 122,000
Principal payments on long-term debt (704) (721)
Proceeds from issuance of common stock, net 5,751 2,778
Dividends paid (2,921) (2,417)
----------- -----------
Net cash provided by financing activities 52,362 206,640
----------- -----------
Increase in cash and cash equivalents 8,265 19,652
Cash and cash equivalents at beginning of year 43,704 46,962
----------- -----------
Cash and cash equivalents at end of period $ 51,969 $ 66,614
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 5 of 14
CIRCUIT CITY STORES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Consolidated Financial Statements
The consolidated financial statements conform to generally accepted
accounting principles. The interim period financial statements are
unaudited; however, in the opinion of management, all adjustments
(consisting of normal recurring adjustments) necessary for a fair
presentation of the consolidated financial statements have been
included. The consolidated financial statements included herein
should be read in conjunction with the notes to consolidated
financial statements included in the Company's 1996 annual report to
stockholders.
2. Debt
At May 31, 1996, the Company classified $130 million of short-term
unsecured bank borrowings as long-term for financial reporting
purposes in anticipation of completion of a term loan agreement. On
June 14, 1996, the Company completed a five-year $130 million senior
unsecured term loan agreement with a group of banks. Principal is due
in full at maturity with interest payable periodically at LIBOR plus
0.35 percent.
3. Capital Stock and Stock Incentive Plans
At the annual meeting of the Company's shareholders held June 18,
1996, the Articles of Incorporation were amended to increase the
number of authorized shares of common stock to 250,000,000 shares
from 150,000,000. Additionally, the 1994 Stock Incentive Plan was
amended to increase the number of shares of common stock reserved for
issuance thereunder from 2,500,000 shares to 5,500,000 shares and to
increase the annual per participant grant limit from 1,000,000 shares
to 1,500,000 shares.
Page 6 of 14
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net Sales and Operating Revenues and General Comments
Sales for the first quarter of fiscal 1997 were $1.62 billion, an increase
of 16 percent from $1.39 billion in the same period last year. The total
sales growth includes the sales from the net increase of 66 Circuit City
Superstores and two CarMax Superstores opened during the past year and a
Circuit City comparable store sales decrease of 4 percent.
Circuit City comparable store sales increases (decreases) for the first
quarter of fiscal years 1997 and 1996 were as follows:
FY'97 1st Quarter
-------------------------------------------------------------------------
MAR APR MAY FY'97 FY'96
-------------------------------------------------------------------------
3% (10)% (6)% (4)% 10%
-------------------------------------------------------------------------
The first quarter comparable store sales results were below management's
expectations and reflect the slowing in industry sales that began in last
year's second half, the resulting intensity in the competitive climate and
the more difficult comparisons versus the prior year. Management expects
that comparable store sales for the first half of fiscal 1997 will be
lower than fiscal 1996 results during the same period; however, management
expects comparable store sales improvement during the second half of
fiscal 1997.
During the quarter, the Company opened eight new Circuit City Superstores,
replaced four stores with larger locations and expanded one store. The
Company entered the Detroit, Mich., market with five Superstores; Madison,
Wisc., with two Superstores; and High Point, N.C., with one Superstore.
The Company replaced two stores in Dallas, Texas, and one each in Orlando,
Fla., and Greensboro, N.C. A store was expanded in Durham, N.C. By the end
of the current fiscal year, the Company plans to have opened 60 to 65
Superstores and replaced 15 to 20 existing stores.
The table below details Circuit City retail units:
<TABLE>
<CAPTION>
Stores Open At End of Quarter Estimate
------------------------------------------
May 31, 1996 May 31, 1995 Feb. 28, 1997 Feb. 29, 1996
<S> <C>
- -----------------------------------------------------------------------------------------------------
Superstore
- -----------------------------------------------------------------------------------------------------
"D" Superstore 70 20 93 61
- -----------------------------------------------------------------------------------------------------
"C" Superstore 258 260 274 259
- -----------------------------------------------------------------------------------------------------
"B" Superstore 46 35 54 46
- -----------------------------------------------------------------------------------------------------
"A" Superstore 12 5 17 12
- -----------------------------------------------------------------------------------------------------
Electronics-Only 5 5 5 5
- -----------------------------------------------------------------------------------------------------
Circuit City Express 38 32 49 36
- -----------------------------------------------------------------------------------------------------
TOTAL 429 357 492 419
=====================================================================================================
</TABLE>
Page 7 of 14
In early March, the Company opened its fifth CarMax location in Charlotte, N.C.,
and, in early April, began selling new cars in addition to used cars at one of
its locations in Atlanta, Ga., under a franchise agreement with Chrysler
Corporation.
In mid-June, the Company announced a five-year expansion plan for CarMax, the
Company's automotive Superstore concept. By calendar year 2001, the Company
expects to be operating 80 to 90 CarMax Superstores. In the current fiscal year,
the Company expects to enter the Tampa and Orlando, Fla., markets. In fiscal
1998, the Company plans to open another eight to 10 CarMax Superstores and,
thereafter, to accelerate the opening program by adding 15 to 20 Superstores per
year.
For the Company's Circuit City business, gross dollar sales from all extended
warranty programs rose to 6.3 percent of sales in the first quarter of fiscal
year 1997 from 6.0 percent in the same period last year. Third-party warranty
revenue rose to 3.5 percent of sales in this year's first quarter from 3.1
percent in the same period last year. The total extended warranty revenue that
is reported in total sales was 5.6 percent of sales in this year's first quarter
versus 6.0 percent in the first quarter of last year.
Total sales by merchandise categories are listed below:
1st Quarter
------------------------------------------
Fiscal 1997 Fiscal 1996
------------------------------------------------------------------
TV 17 % 17 %
------------------------------------------------------------------
VCR/Camcorders 14 15
------------------------------------------------------------------
Audio* 19 20
------------------------------------------------------------------
Home Office 23 23
------------------------------------------------------------------
Appliances 17 15
------------------------------------------------------------------
Other * 10 10
------------------------------------------------------------------
TOTAL 100 % 100 %
==================================================================
*In the fourth quarter of fiscal 1996, the Company moved cellular
phones from the "Audio" category to the "Other" category and moved
certain audio products from the "Other" category to the "Audio"
category. Sales of these products have been reclassified for the
prior year quarter.
The Company's operations, in common with other retailers in general, are subject
to seasonal influences. Historically, the Company has realized more of its net
sales and net earnings in the final fiscal quarter, which includes the Christmas
season, than in any other fiscal quarter. The net earnings of any interim
quarter are seasonally disproportionate to net sales since administrative and
certain operating expenses remain relatively constant during the year.
Therefore, interim results should not be relied upon as necessarily indicative
of results for the entire fiscal year.
Cost of Sales, Buying and Warehousing
As anticipated, the gross profit margin decreased from 23.0 percent in the first
quarter of last year to 22.4 percent in the first quarter of fiscal 1997.
Page 8 of 14
The lower margin reflects the highly competitive climate and increased CarMax
sales. Management expects that these factors will continue to lower margins on a
year-over-year basis. An improved product mix and targeted promotional strategy
limited the first quarter reduction.
Selling, General and Administrative Expenses
The Company's selling, general and administrative expense ratio increased from
19.9 percent in the first quarter of last year to 20.3 percent for the same
period this year. The increase primarily reflects the lower comparable store
sales.
Interest Expense
Interest expense for the first quarter of fiscal 1997 increased to 0.4 percent
of sales from 0.3 percent for the first quarter of last year. The increase
reflects higher borrowing levels resulting from the Company's growth.
Income Taxes
The effective income tax rate was 38.0 percent in the first quarter of fiscal
1997 versus 37.5 percent in the same period last year. Management expects the
effective rate to remain at 38.0 percent for the remainder of fiscal 1997.
Net Earnings
Net earnings for the quarter ended May 31, 1996, decreased 32 percent to $16.8
million from $24.6 million in the same period last year. Net earnings per share
declined 32 percent to 17 cents from 25 cents.
Management expects moderate year-over-year earnings growth in fiscal 1997.
Liquidity and Capital Resources
Total assets at May 31, 1996, were $2,616.2 million, up $90.2 million or 4
percent since February 29, 1996. The largest contributor to the asset increase
was a $32.0 million inventory increase to support new store openings. Property
and equipment has increased $19.2 million since the end of fiscal 1996. This net
increase is due largely to planned and completed store openings. Net accounts
and notes receivable have increased $30.8 million since February 29, 1996,
primarily due to an increase in credit card accounts generated by the Company's
credit card bank subsidiary.
Accounts payable has increased $82.9 million and short-term debt has increased
$19.3 million since the end of fiscal 1996 to support new store expansion and
the purchase of inventory.
Page 9 of 14
On June 14, 1996, the Company completed a five-year $130 million senior
unsecured term loan agreement with a group of banks. Principal is due in full at
maturity with interest payable periodically at LIBOR plus 0.35 percent. Royal
Bank of Canada is agent for the banks in the agreement, with Deutsche Morgan
Grenfell as co-agent. The proceeds will be used for general corporate purposes.
At May 31, 1996, the Company classified $130 million in short-term debt as long
term in anticipation of this transaction.
The Company's credit card bank subsidiary has a master trust securitization
facility for its private-label credit card that allows the transfer of up to
$1,060 million in receivables through private placement and the public market.
The master trust vehicle permits further expansion of the securitization program
to meet future needs. In addition, the Company's credit card bank subsidiary has
an asset securitization program that allows the transfer of up to $950 million
in receivables related to its other bank card programs. The Company also has an
asset securitization program that allows the transfer of up to $125 million in
auto loan receivables. The Company anticipates that it will be able to expand
its securitization programs to meet future needs.
The Company expects to continue its existing long-term capitalization strategy
during fiscal 1997. Management anticipates that capital expenditures will be
funded through a combination of internally generated funds, sale-leaseback
transactions, operating leases and proceeds of the recent long-term debt
agreement and that securitization transactions will be used to finance the
growth in credit card and auto loan receivables. At May 31, 1996, the Company
maintained a multi-year, $100 million unsecured revolving bank credit facility
and $255 million in seasonal lines that are renewed annually with various banks.
Forward-Looking Statements
This report contains forward-looking statements, which are subject to risks and
uncertainties, including, but not limited to, risks associated with the
development of a new retail concept. Additional discussion of factors that could
cause actual results to differ materially from management's projections,
forecasts, estimates and expectations is contained in the Company's 1996 Annual
Report on Form 10-K.
Page 10 of 14
PART II. OTHER INFORMATION
Item 2. Changes in Securities
Effective March 5, 1996, the Board of Directors of the Company
amended the Company's Shareholders Rights Plan. The principal
revisions lower to 15% the threshold of ownership at which the
rights become exercisable and add a new "flip-in" provision
triggered after a person or group acquires 15% or more of the
Company's outstanding common stock (otherwise than pursuant to a
cash tender offer for all outstanding shares that the continuing
directors of the Company have found to be fair). The details of the
amendments are set forth in the Company's Current Report on Form
8-K dated March 5, 1996.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The annual meeting of the Company's shareholders was held
on June 18, 1996.
(c) (i) At such annual meeting, the shareholders of the
Company elected Hugh G. Robinson, Walter J.
Salmon, Mikael Salovaara and John W. Snow as
directors for three-year terms and Theodore D.
Nierenberg for a one-year term. The elections
were approved by the following votes:
Directors For Withheld
- ---------------------------------------------------------------------------
Hugh G. Robinson 84,173,226 741,816
- ---------------------------------------------------------------------------
Walter J. Salmon 84,284,871 630,171
- ---------------------------------------------------------------------------
Mikael Salovaara 84,257,445 657,597
- ---------------------------------------------------------------------------
John W. Snow 84,196,110 718,932
- ---------------------------------------------------------------------------
Theodore D. Nierenberg 84,249,326 665,716
- ---------------------------------------------------------------------------
(ii) At such annual meeting, the shareholders of the
Company approved the amendment of the Articles of
Incorporation (the "Articles") to increase the
number of authorized shares of common stock to
250,000,000 shares from 150,000,000 shares. The
amendment of the Articles was approved by the
following vote:
Broker
For Against Abstain Non-Votes
---------------------------------------------------------
Articles 76,681,039 7,980,509 253,494 0
---------------------------------------------------------
Page 11 of 14
(iii) At such annual meeting, the shareholders of the
Company approved the amendment of the 1994 Stock
Incentive Plan (the "1994 Plan"). The amendments
increased the number of shares of common stock
reserved for issuance thereunder from 2,500,000
shares to 5,500,000, increased the annual per
participant grant limit from 1,000,000 shares to
1,500,000 shares and allowed the grant of
transferable options under certain circumstances.
The amendment of the 1994 Plan was approved by
the following vote:
Broker
For Against Abstain Non-Votes
---------------------------------------------------------
1994 Plan 79,341,279 5,063,111 510,652 0
---------------------------------------------------------
(iv) At such annual meeting, the shareholders of the
Company approved the amendment of the 1989
Non-Employee Directors' Stock Option Plan (the
"1989 Plan"). The amendment extended the period
of time during which options granted
to a director under the 1989 Plan may be
exercised following the director's retirement
from the Board of Directors. The amendment to the
1989 Plan was approved by the following vote:
Broker
For Against Abstain Non-Votes
---------------------------------------------------------
1989 Plan 80,442,569 3,938,679 533,794 0
---------------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Index to Exhibits:
(3) Articles of Incorporation and Bylaws
(i) Amended and Restated Articles of
Incorporation of the Company, effective July
10, 1996, are filed herewith.
(ii) Bylaws of the Company, as amended and
restated June 18, 1996, are filed herewith.
(4) $130,000,000 term loan agreement dated as of June
14, 1996, between the Company and Royal Bank of
Canada, as agent. Pursuant to Item 601(b)(4)(iii)
of Regulation S-K, in lieu of filing a copy of
such agreement, the Company agrees to furnish a
copy of such agreement to the Commission upon
request.
Page 12 of 14
(10) Material Contracts
(i) Amendment adopted April 9, 1996, to the
Company's 1994 Stock Incentive Plan is filed
herewith.
(ii) Amendment adopted April 9, 1996, to the
Company's Amended and Restated 1989
Non-Employee Directors' Stock Option Plan is
filed herewith.
(27) Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K, dated
March 5, 1996, in which it reported, under Item 5, the
amendment of the Company's Shareholder Rights Plan.
Page 13 of 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
CIRCUIT CITY STORES, INC.
(Company)
By: s/Richard L. Sharp
----------------------------
Richard L. Sharp
Chairman of the Board,
President and
Chief Executive Officer
By: s/Michael T. Chalifoux
----------------------------
Michael T. Chalifoux
Senior Vice President,
Chief Financial Officer and
Corporate Secretary
By: s/Philip J. Dunn
----------------------------
Philip J. Dunn
Vice President, Treasurer
and Chief Accounting Officer
July 15, 1996
Page 14 of 14
CIRCUIT CITY STORES, INC.
AMENDED AND RESTATED ARTICLES OF INCORPORATION
ARTICLE I
NAME
The name of the Corporation is Circuit City Stores, Inc.
ARTICLE II
PURPOSES
The purpose for which the Corporation is organized is to engage in any
lawful business not required by the Virginia Stock Corporation Act to be stated
in the Articles of Incorporation.
The Corporation shall have all of the corporate powers of any character
which are not prohibited by law or required to be stated in the Articles of
Incorporation.
ARTICLE III
CAPITAL STOCK
A. Authorized Stock. The aggregate number of shares that the
Corporation shall have authority to issue and the par value per share are
as follows:
Class Number of Shares Par Value
Preferred 2,000,000 $20.00
Common 250,000,000 $ .50
B. Preemptive Rights. No holder of outstanding shares of any class of stock
shall have any preemptive right with respect to (i) any shares of any class of
stock of the Corporation or other security that the Corporation may determine to
issue, whether the shares of stock or other security to be issued is now or
hereafter authorized, (ii) any warrants, rights or options to purchase any such
stock or other security, or (iii) any obligations convertible into any such
stock or other security or into warrants, rights or options to purchase any such
stock or other security.
ARTICLE IV
PREFERRED STOCK
A. General. Certain provisions relating to the Preferred Stock and
the relative rights of the Preferred Stock and the holders of the
outstanding shares thereof, regardless of series, are set forth below.
(1) Issuance in Series. The Board of Directors is authorized to issue
the Preferred Stock from time to time in one or more series and to provide for
the relative rights and preferences of each series by the adoption of a
resolution or resolutions fixing:
(a) The maximum number of shares in a series and the designation of
the series, which designation shall distinguish the shares thereof from the
shares of any other series or class;
(b) The rate of dividend, the time of payment, whether dividends shall
be cumulative and if so, the dates from which they shall be cumulative, and
the extent of participation rights, if any;
(c) Any right to vote with holders of shares of any other series or
class and any right to vote as a class, either generally or as a condition
to specified corporate action; provided, however, that no holder of shares
of Preferred Stock shall ever be entitled to more than one vote for each
share held by him;
(d) The price at and the terms and conditions on which shares
may be redeemed;
(e) The amount payable upon shares in the event of involuntary
liquidation;
(f) The amount payable upon shares in the event of voluntary
liquidation;
(g) Sinking fund provisions for the redemption or purchase of
shares; and
(h) The terms and conditions on which shares may be converted,
if the shares of any series are issued with the privilege of
conversion; and
(i) Any other designations, rights, preferences or limitations that
are now or hereafter permitted by the laws of the Commonwealth of Virginia
and are not inconsistent with the provisions of paragraph (A)(1) of this
Article.
(2) Articles of Serial Designation. Before the issuance of any shares
of a series of the Preferred Stock (other than shares for which provision is
hereinafter made) the resolution for the series adopted pursuant to paragraph
(A)(1) of this Article shall be set forth in Articles of Serial Designation
filed with and made effective by the State Corporation Commission of Virginia as
required by law.
(3) Parity of All Shares. All shares of the Preferred Stock,
regardless of series, shall be identical with each other in all respects except
as is permitted in paragraph (A)(1) of this Article.
(4) Definitions. As used herein the following terms shall have
the following meanings:
(a) "Capital Stock" means any capital stock of any class or series
(however designated) of the Corporation.
(b) "Common Stock" means the Common Stock of the Corporation.
(c) "Dividends Accrued" means, with respect to the shares of each
series of the Preferred Stock an amount equal to the dividends thereon at
the annual dividend rate for such series computed from the date of issue to
the date to which reference is made, plus any additional amounts provided
by participation rights, whether or not such amounts or any part thereof
shall have been declared or set aside to be paid and whether there shall be
or have been any funds out of which such amounts might legally be paid,
less the amount of dividends or participation rights declared and paid
thereon.
(d) "Junior Stock" means any Capital Stock ranking, as to dividends
and as to rights in liquidation, dissolution or winding up of the affairs
of the Corporation, subordinate to the Preferred Stock.
(e) "Parity Stock" means any Capital Stock ranking, as to dividends
and as to rights in liquidation, dissolution or winding up of the affairs
of the Corporation, equally with the Preferred Stock.
(f) "Preferred Stock" means the Preferred Stock of the
Corporation.
(g) "Redemption" means any purchase or acquisition by the Corporation,
for a consideration, of shares of the Preferred Stock, whether pursuant to
an option of the Corporation or a sinking fund or otherwise, if the holder
of the Preferred Stock being acquired by the Corporation is required to
sell the shares the Corporation is acquiring or if, as a result of any such
purchase or acquisition, the Corporation takes a credit against a sinking
fund obligation.
(h) "Redemption Date" means the date fixed for the Redemption of any
shares of the Preferred Stock in a notice of Redemption given pursuant to
paragraph (A)(7) of this Article.
(i) "Redemption Price" means, with respect to the shares of each
series of the Preferred Stock, the price at which the Corporation shall or
may redeem such shares pursuant to the terms of the Articles of Serial
Designation for such series.
(j) "Subsidiary" means any corporation a majority of the outstanding
Voting Stock of which is owned, directly or indirectly, by the Corporation
or by the Corporation and one or more Subsidiaries.
(k) "Voting Stock" means stock of any class (however designated)
having voting power for the election of a majority of the board of
directors (or other governing body) of a corporation, other than stock
having such powers only by reason of the happening of a contingency.
(5) Dividends.
(a) The holders of outstanding shares of each series of the Preferred
Stock shall be entitled to receive, if, when and as declared by the Board
of Directors, out of funds legally available therefor, cash dividends in
accordance with the terms set forth in the Articles of Serial Designation
for such series.
(b) No dividends whatsoever shall be declared or paid upon, or any
sums set apart for the payment of dividends upon, any shares of Preferred
Stock or Parity Stock for any dividend period unless a like proportionate
dividend for the same dividend period (ratable in proportion to the
respective annual dividend rates) shall have been declared and paid upon,
or declared and a sufficient sum set apart for the payment of such dividend
upon, all outstanding shares of Preferred Stock.
(c) Unless Dividends Accrued (to the extent that the amount thereof
shall have been determinable) on all outstanding shares of each series of
the Preferred Stock for all past dividend periods and the then current
period shall have been declared and paid, or declared and a sum sufficient
for the payment thereof set apart, and all mandatory sinking fund payments
required to be made pursuant to the terms of any series of the Preferred
Stock shall have been made in full, then (i) no dividend whatsoever (other
than a dividend payable solely in Junior Stock) shall be declared or paid
upon, or any sum set apart for the payment of dividends upon, any shares of
Junior Stock; (ii) no other distribution shall be made upon any shares of
Junior Stock; (iii) no shares of Junior Stock shall be purchased, redeemed
or otherwise acquired for value by the Corporation or by any Subsidiary;
and (iv) no monies shall be paid into or set apart or made available for a
sinking or other like fund for the purchase, Redemption or other
acquisition for value of any shares of Junior Stock by the Corporation or
any Subsidiary.
(6) Voting Rights. No holder of outstanding shares of any series of
the Preferred Stock shall be entitled to vote for the election of directors or
upon any other matter, or to receive notice of or to participate in any meeting
of the stockholders of the Corporation, except (i) as hereinafter provided or as
provided in the Articles of Serial Designation for such series and (ii) as may
be required by law.
(7) Redemption.
(a) Redemptions of outstanding shares of any series of the Preferred
Stock shall be made pursuant to the terms and conditions set forth in these
Amended and Restated Articles of Incorporation or in the Articles of Serial
Designation for such series and, unless they provide otherwise, shall be
made in the manner hereinbelow set forth.
(b) No less than thirty (30) nor more than sixty (60) days prior to
the Redemption Date notice of Redemption shall be given by first class
mail, postage prepaid, to the holders of record of the outstanding shares
of the Preferred Stock being redeemed at their last known post office
addresses shown in the Corporation's stock transfer records. The notice of
Redemption shall set forth the paragraph or paragraphs of these Amended and
Restated Articles of Incorporation or the appropriate Articles of Serial
Designation pursuant to which the shares are being redeemed, the number of
shares to be redeemed, the date fixed for Redemption, the Redemption Price,
and the place or places where certificates representing shares to be
redeemed may be surrendered. In case less than all of the outstanding
shares of a series are to be redeemed (i) the shares to be redeemed shall
be selected by lot or redeemed ratably or in such other equitable manner as
the Board of Directors may determine, and (ii) the notice of Redemption
shall set forth the numbers of the certificates representing shares to be
redeemed and, if less than all of the shares represented by any such
certificate are to be redeemed, the number of shares to be redeemed which
are represented by such certificate.
(c) If notice of Redemption of any outstanding shares of any series of
the Preferred Stock shall have been duly mailed as hereinabove provided,
then on or before the Redemption Date the Corporation shall deposit cash
sufficient to pay the Redemption Price of such shares in trust for the
Benefit of the holders of the shares to be redeemed in any bank or trust
company in the City of Richmond, Virginia, having capital and surplus
aggregating at least $50,000,000 as of the date of its most recent report
of financial condition and named in such notice, with irrevocable
instructions and authority to apply such amount to the Redemption of the
shares so called for Redemption against surrender for cancellation of the
certificates representing such shares. From and after the time of such
deposit all shares for the Redemption of which such deposit shall have been
so made shall, whether or not the certificates therefor shall have been
surrendered for cancellation, be no longer deemed to be outstanding for any
purpose and all rights with respect to such shares shall thereupon cease
and terminate except the right to receive payment of the Redemption Price,
but without interest. Any interest accrued on such funds shall be paid to
the Corporation from time to time. Any fund so deposited and unclaimed at
the end of five years from the Redemption Date shall be repaid to the
Corporation, free of trust, and the holders of the shares called for
Redemption who shall not have surrendered their certificates representing
such shares prior to such repayment shall be deemed to be unsecured
creditors of the Corporation for the amount of the Redemption Price and
shall look only to the Corporation for payment thereof, without interest,
subject to the laws of the Commonwealth of Virginia.
(d) The Corporation shall also have the right to acquire outstanding
shares of any series of the Preferred Stock otherwise than by Redemption,
from time to time, for such consideration as may be acceptable to the
holders thereof; provided, however, that if all Dividends Accrued on all
outstanding shares of such series shall not have been declared and paid or
declared and a sum sufficient for the payment thereof set apart, neither
the Corporation nor any Subsidiary shall so acquire any shares of such
series except in accordance with a purchase offer made on the same terms to
all the holders of the outstanding shares of such series.
(e) Unless otherwise provided herein or in the Articles of Serial
Designation relating thereto (i) shares of any series of the Preferred
Stock purchased, redeemed or otherwise acquired by the Corporation may
thereafter be disposed of as shares of such series, or, (ii) upon issuance
by the State Corporation Commission of Virginia or any successor thereof of
a Certificate of Reduction, such shares shall become authorized and
unissued shares of the Preferred Stock which may be designated as shares of
any other series, but (iii) no additional shares of the Preferred Stock of
any series may be classified as additional shares of such series.
(8) Liquidation. In the event of the voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation, the
holders of shares of each series of the Preferred Stock then outstanding shall
be entitled to be paid in cash out of the net assets of the Corporation,
including its capital, an amount equal to the Redemption Price and no more,
before any distribution or payment shall be made to the holders of shares of
Junior Stock and, after payment to the holders of the outstanding shares of each
series of the Preferred Stock of the amounts to which they are respectively
entitled, the balance of such assets, if any, shall be paid to the holders of
Junior Stock according to their respective rights. For the purposes of the
preceding sentence, neither the consolidation of the Corporation with nor the
merger of the Corporation into any other corporation, nor the sale, lease or
other disposition of all or substantially all of the Corporation's properties
and assets shall, without further corporate action, be deemed a liquidation,
dissolution or winding up of the affairs of the Corporation. If the net assets
of the Corporation are insufficient to pay the holders of the outstanding shares
of each series of the Preferred Stock the full amounts to which they are
respectively entitled, the entire net assets of the Corporation remaining shall
be distributed ratably to the holders of the outstanding shares of the Preferred
Stock in proportion to the full amounts to which they are respectively entitled.
(9) Conflicting Provisions. Subsequent to the date these Amended and
Restated Articles of Incorporation become effective the Corporation may issue
one or more series of Preferred Stock. In the event that any of the foregoing
provisions of these Amended and Restated Articles of Incorporation conflict with
the provisions of the Articles of Serial Designation for any such series, or
with provisions set forth below for the Series D Preferred Stock, then, as to
such series, the specific provisions which relate to it, and not the general
provisions hereinabove set forth, shall control.
B. Series D Preferred Stock.
The Board of Directors of the Corporation has prior to the effective date
of these Amended and Restated Articles of Incorporation designated 45,646 shares
of the Preferred Stock as the Series D Preferred Stock ("Series D Stock"). Such
number may from time to time be decreased (but not below the number of shares of
Series D Stock then outstanding) by the Board of Directors of the Corporation.
In addition to any relative rights and preferences hereinabove granted, the
relative rights and preferences of such series and the holders of the
outstanding shares thereof are as set forth in paragraphs (B)(1) through (B)(6)
of this Article.
(1) Dividends.
(a) The holders of the Series D Stock shall be entitled to receive,
when and as declared by the Board of Directors, but only out of surplus
legally available for the payment of dividends, cash dividends at the rate
of 16.25 percent per annum calculated by multiplying such percentage by the
par value ($20) and no more. Dividends shall be payable in equal
installments for each quarterly dividend period ending on February 28 (or
29), May 30, August 31 and November 30 of each year. Such dividends shall
accrue and be cumulative from the date of original issue of Series D Stock
("Issue Date").
(b) Dividends on the Series D Stock shall be paid in full for all
prior dividend periods and shall be paid or declared and set apart for
payment in full for the current dividend period before the payment of any
dividends, other than dividends payable in shares of the Common Stock, on
the Common Stock or any other class of stock ranking junior to the Series D
Stock as to dividends. If dividends on Series D Stock are not paid in full
for all prior dividend periods and paid or declared and set apart for
payment in full for the current period, the Series D Stock shall share
ratably in the payment of dividends, including accumulations, if any, on
Preferred Stock (including Series D Stock), in accordance with sums which
would be payable if all such dividends were declared and paid in full.
(2) Redemption.
(a) At the option of the Board of Directors, the Corporation may
redeem all or part of the shares of the Series D Stock then outstanding at
any time and from time to time after the day on which the fifth anniversary
of the Issue Date occurs. The redemption price shall be the par value per
share, together with the amount of all dividends accrued and unpaid thereon
to the date fixed for redemption.
(b) For any redemption of less than all of the shares outstanding, the
Corporation either shall effect such redemption pro rata or shall designate
by lot, in such manner as the Board of Directors shall determine, the
shares to be redeemed.
(c) Notice of any redemption shall be given by the Corporation by
causing a notice thereof to be mailed not less than thirty (30) nor more
than ninety (90) days before the date fixed for redemption to each holder
of record of the shares to be redeemed as of a record date fixed by the
Board of Directors for the determination of the holders entitled to such
notice, addressed to such holder at his address appearing on the books of
the Corporation or given by him to the Corporation for the purpose of
notice, or, if no such address appears or is given, at the place where the
principal office of the Corporation is located. Each such notice of
redemption shall set forth the date fixed for redemption, the redemption
price, the shares, and the total number thereof to be redeemed and the
places in Richmond, Virginia or in such other place as the Corporation may
designate, at which the stockholders may obtain payment of the redemption
price upon the surrender of the certificates representing their shares. No
defect in any such notice or in the mailing thereof shall affect the
validity of the redemption.
(d) On or after the date fixed for redemption and stated in such
notice, each holder of shares called for redemption, on surrender of his
certificates representing such shares to the Corporation at the place
designated in such notice, shall be entitled to receive payment of the
redemption price thereof. If less than all of the shares represented by any
such surrendered certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
(e) Anything herein contained to the contrary notwithstanding, if, on
or prior to the date fixed for redemption of any shares of Series D Stock,
the Corporation deposits not earlier than sixty (60) days prior to the date
fixed for redemption a sum sufficient to redeem on the date fixed for
redemption, the shares called for redemption, in trust for the benefit of
the holders of such shares with any bank or trust company organized under
the laws of the United States or the Commonwealth of Virginia or such other
jurisdiction as the Corporation may designate, which has an office therein
and has capital, surplus and undivided profits aggregating at least
$50,000,000 according to its last published statement of condition, with
irrevocable instructions and authority to the bank or trust company to give
the notice of redemption thereof, if such notice has not been previously
given by the Corporation, or to complete the giving of such notice if
theretofore commenced, and to pay, on and after the date fixed for
redemption (or, at the election of the Corporation, prior thereto) the
redemption price of such shares of the shareholders upon the surrender of
their certificates representing such shares, then, from and after the date
of such deposit (although not prior to the date fixed for redemption if the
date fixed for redemption is after the day on which the sixth anniversary
of the Issue Date occurs), (i) such shares shall be deemed to be redeemed,
and (ii) dividends thereon shall cease to accrue, and (iii) such shares
shall be deemed to be no longer outstanding and the holders thereof shall
cease to be stockholders with respect to such shares, and shall have no
rights with respect thereto except the right to receive from the bank or
trust company payment of the redemption price of such shares, without
interest, upon the surrender of the certificates representing such shares.
(f) Any moneys so deposited by the Corporation and unclaimed at the
end of six (6) years from the date fixed for redemption shall, on the
request of the Corporation, be repaid to it, in which event the persons
entitled thereto shall look only to the Corporation for payment thereof and
may apply for and receive such moneys, without interest, from the
Corporation. If the Corporation, as required or permitted by law, pays to
any government any unclaimed moneys so repaid to the Corporation, such
persons shall look only to such government for the payment thereof. Any
interest accrued on funds so deposited or set aside shall be paid to the
Corporation from time to time and the holders of the shares to be redeemed
shall have no claim to any such interest.
(g) Shares of the Series D Stock so redeemed shall resume the status
of authorized and unissued shares of Preferred Stock without serial
designation.
(3) Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the holders of shares
of the Series D Stock shall be entitled to receive from the assets of the
Corporation the sum of Twenty Dollars ($20) per share, together with the amount
of all dividends accrued and unpaid thereon to the date that payment is made
available to such holders, and no more, before the payment or declaration and
setting apart for payment of any amount for, or the distribution of any assets
of the Corporation to, the holders of shares of the Common Stock or the holders
of shares of any other class of stock ranking junior to the Series D Stock in
connection with such liquidation, dissolution or winding up. If the amounts
payable on liquidation are not paid in full, the shares of Series D Stock shall
share ratably on a share for share basis with the shares of all other series of
Preferred Stock in any distribution of assets other than by way of dividends in
accordance with the sums which would be payable in such distribution if all sums
payable were discharged in full. A liquidation, dissolution or winding up of the
Corporation, as such terms are used in this paragraph (B)(3) of this Article,
shall not be deemed to be occasioned by or to include any consolidation or
merger of the Corporation with or into any other corporation or corporations or
a sale, lease, or conveyance of all or part of its assets.
(4) Conversion Rights.
(a) Subject to and upon compliance with the provisions of paragraph
(B)(4) of this Article, each share of Series D Stock may at the option of
the holder at any time and from time to time after the date on which the
sixth anniversary of the Issue Date occurs, be converted into the number of
shares of Common Stock (as such shares shall be constituted on the
conversion date) which is calculated by dividing $20 plus any accrued and
past due dividends at the time of conversion by the Market Price. The right
to convert such shares of Series D Stock will be lost unless the right is
exercised before those shares are called for redemption in accordance with
paragraph (B)(2) of this Article. The Market Price shall be the number that
represents ninety percent (90%) of the closing price per share of Common
Stock as quoted on the national exchange on which it is listed, or if not
so listed, the mean of the closing bid and asked quotations in the
over-the-counter market on the last business day which is not less than
sixty (60) days prior to the end of the sixth (6th) year after the Issue
Date subject to the adjustments hereinafter provided.
(b) The holder of each share of Series D Stock may exercise the
conversion privilege by surrendering at the executive offices of the
Corporation (unless a different place for surrender is designated by the
Board of Directors, and, if so, at such other place) the certificate
representing the share to be converted, accompanied by written notice, with
guaranty of signature acceptable to the Corporation, that the holder elects
to convert such share and payment of the amount of any unpaid tax with
respect thereto or proof of such payment, as required under paragraph
(B)(4)(g) of this Article. However, if the holder is unable to surrender
the certificate representing the share to be converted due to destruction,
loss or theft of such certificate, then such holder may effect a proper
surrender by furnishing the Corporation evidence satisfactory to the
Corporation, in its discretion, of the ownership, loss, theft or
destruction of such certificate, and if required by the Corporation, in its
discretion, security or indemnity satisfactory to the Corporation, and
reimbursement to the Corporation for all expenses in connection therewith,
and such other reasonable requirements which the Corporation may prescribe.
Conversion shall be deemed to have been effected immediately prior to the
close of business on the date such surrender is made ("Conversion Date").
On the Conversion Date or as promptly thereafter as practicable, the
Corporation shall issue and deliver to the holder of the shares of Series D
Stock surrendered for conversion, or on his written order, a certificate
for the number of full shares of Common Stock issuable on the conversion of
such shares of Series D Stock and a check or cash or a scrip certificate in
respect of any fraction of a share as provided in paragraph (B)(4)(c) of
this Article. The person in whose name the stock certificate is to be
issued shall be deemed to have become a holder of Common Stock of record on
the Conversion Date. No adjustment shall be made for any dividends not yet
due on such shares of Series D Stock or for dividends on the shares of
Common Stock issued on conversion.
(c) The Corporation shall not be required to issue fractional shares
of Common Stock on conversion of shares of Series D Stock. If one or more
shares of Series D Stock is surrendered for conversion at one time by the
same holder, the number of full shares of Common Stock issuable on
conversion thereof shall be computed on the basis of the aggregate number
of shares so surrendered. If any fractional interest in a share of Common
Stock would be deliverable on the conversion of any shares of Series D
Stock, the Corporation, in lieu of issuing the fractional share therefor
shall, as determined from time to time by the Board of Directors, either
(i) make an adjustment therefor in cash based on the Market Price, as
adjusted, or (ii) issue a scrip certificate therefor, with such terms and
conditions as the Board of Directors prescribe.
(d) If, at any time after the date on which the Market Price is
determined, the Corporation issues a dividend on its Common Stock payable
in its Common Stock or splits or combines the outstanding shares of Common
Stock, then as of the close of business on the record date for such stock
dividend, split or combination, the Market Price shall be proportionately
decreased in the case of a stock dividend or split or increased in the case
of a combination.
(e) Whenever the Market Price is adjusted as herein provided, the
Corporation shall forthwith place on file with the Treasurer of the
Corporation, and with any transfer agent for Series D Stock, a statement
showing in detail the facts requiring such adjustment and the Market Price
after such adjustment and shall exhibit it from time to time to any holder
of shares of Series D Stock desiring to inspect it.
(f) In the event of any reclassification or change of outstanding
shares of Common Stock (except a stock dividend, split or combination, or a
change in par value, or a change from par value to no par value, or a
change from no par value to par value), or of any consolidation or merger
to which the Corporation is a party (other than a merger in which the
Corporation is the surviving corporation and which does not result in any
reclassification or change of the outstanding Common Stock of the
Corporation except as stated above), or of any sale or conveyance to
another corporation of the property of the Corporation as an entirety or
substantially as an entirety, provision shall be made as part of the terms
of such reclassification, change, consolidation, merger, sale or conveyance
that the holder of each share of Series D Stock then outstanding shall have
the right, after the date which is the sixth anniversary of the Issue Date,
to convert such share into the same kind and amount of stock and other
securities and property as would be receivable upon such reclassification,
change, consolidation, merger, sale or conveyance by a holder of the number
of shares of Common Stock into which such could have been converted
immediately prior thereto as if the Series D Stock were then immediately so
convertible. As evidence of the kind and amount of stock or other
securities or property into which shares of Series D Stock are convertible
after any such reclassification, change, consolidation, merger, sale or
conveyance, or as to the appropriate adjustments of the conversion price
applicable with respect thereto, the holders of shares of Series D Stock
shall accept the certificate of any firm of independent public accountants
(who may be the regular auditors retained by the Corporation) with respect
thereto, who as to questions of law may request and rely on an opinion of
counsel of its choice (who may be counsel for the Corporation).
(g) The issue of stock certificates on conversions of shares of Series
D Stock shall be without charge to the converting stockholder for any tax
in respect of the issue thereof. The Corporation shall not, however, be
required to pay any tax which may be payable in respect of any transfer
involved in the issue of shares in any name other than that of the holder
of the shares of Series D Stock converted, and the Corporation shall not be
required to issue any such shares until the person or persons requesting
the issue thereof pay to the Corporation the amount of such tax or
establish to the satisfaction of the Corporation that such tax has been
paid.
(h) The Corporation shall at all times reserve and keep available,
free from preemptive rights, out of its authorized and unissued stock or
out of shares held in its treasury, for the purpose of effecting the
conversion of shares of Series D Stock such number of shares and its Common
Stock as shall from time to time be sufficient to effect the conversion of
all outstanding shares of Series D Stock.
(i) Shares of the Series D Stock converted into Common Stock shall
resume the status of authorized and unissued shares of Preferred Stock
without serial designation.
(5) Voting. The holders of shares of the Series D Stock shall be
entitled to vote on all matters at all meetings of the stockholders of the
Corporation, shall be entitled to one vote for each share of the Series D Stock
entitled to vote at such meeting, and, except as required by law, these Amended
and Restated Articles of Incorporation or resolution adopted by the Board of
Directors fixing terms applicable to any other series of Preferred Stock, shall
vote together with the holders of shares of the Common Stock and together with
the holders of shares of any other series of Preferred Stock who are entitled to
vote on such matters and the holders of shares of any other class of stock who
are entitled to vote in such manner, and not as a separate class.
(6) No Senior Preferred Stock. The Corporation shall not hereafter
designate a series of Preferred Stock ranking senior to the Series D Stock in
respect of payment of dividends or distribution of assets in liquidation, unless
approved by a vote of the holders of the outstanding shares of the Series D
Stock holding a majority of said shares voted at a meeting called and held for
the purpose of authorizing such senior series.
C. Series E Preferred Stock.
The Board of Directors of the Corporation has prior to the effective date
of these Amended and Restated Articles of Incorporation designated 500,000
shares of the Preferred Stock as the Cumulative Participating Preferred Stock,
Series E ("Series E Stock"). Such number may from time to time be decreased (but
not below the number of shares of Series E Stock then outstanding) by the Board
of Directors of the Corporation. In addition to any relative rights and
preferences hereinabove granted, the relative rights and preferences of such
series and the holders of the outstanding shares thereof of the outstanding
shares thereof are as set forth in paragraphs (C)(1) through (C)(5) of this
Article.
(1) Dividends and Distributions.
(a) The holders of shares of the Series E Stock, in preference to the
holders of Common Stock, par value $1.00 per share, of the Corporation (the
"Common Stock") and of any other junior stock, shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds
legally available for the purpose, quarterly dividends payable in cash on
the fifteenth day (or, if not a business day, the preceding business day)
of January, April, July and October in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing on
the first Quarterly Dividend Payment Date after the first issuance of a
share or fraction of a share of the Series E Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a) $1.00 or (b)
subject to the provision for adjustment hereinafter set forth, 100 times
the aggregate per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash dividends or
other distributions, other than a dividend payable in shares of Common
Stock, or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect to
the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of the Series E Stock. In the event the
Corporation shall at any time after the first issuance of any share or
fraction of a share of the Series E Stock declare or pay any dividend on
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of
Common Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the amount per share to which holders of shares of
the Series E Stock shall be entitled under clause (b) of the preceding
sentence shall be adjusted by multiplying the amount per share to which
holders of shares of the Series E Stock were entitled immediately prior to
such event under clause (b) of the preceding sentence by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such
event.
(b) The Corporation shall declare a dividend or distribution on the
Series E Stock as provided in paragraph (C)(1)(a) of this Article
immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock); provided
that, in the event no dividend or distribution shall have been declared on
the Common Stock during the period between any Quarterly Dividend Payment
Date and the next subsequent Quarterly Dividend Payment Date, a dividend of
$1.00 per share on the Series E Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on outstanding
shares of the Series E Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of the Series E Stock, unless
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares
shall begin to accrue from the date of issue of such shares, or unless the
date of issue is a Quarterly Dividend Payment Date or is a date after the
record date for the determination of holders of shares of the Series E
Stock entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends shall begin
to accrue and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
shares of the Series E Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the
time outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of the Series E Stock entitled to
receive payment of a dividend or distribution declared thereon, which
record date shall be not more than 60 days prior to the date fixed for the
payment thereof.
(2) Voting Rights. Except to the extent provided by law, the holders
of shares of the Series E Stock shall not be entitled (i) to vote on any matter
or (ii) to receive notice of, or to participate in, any meeting of shareholders
of the Corporation at which they are not entitled to vote.
(3) Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or distributions
payable on the Series E Stock as provided in paragraph (C)(1) of this
Article are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of the
Series E Stock outstanding shall have been paid in full, the Corporation
shall not:
(i) declare, set apart or pay dividends on or make any other
distributions on the Common Stock or any shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series E Stock;
(ii) declare or pay dividends on or make any other distributions
on any shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series E Stock,
except dividends paid ratably on the Series E Stock and all such
parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such
shares are then entitled; or
(iii) redeem or purchase or otherwise acquire for consideration
shares of the Series E Stock, any such parity stock or any stock
ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) with the Series E Stock, or set aside for
or pay to any sinking fund therefor.
(b) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of
the Corporation unless the Corporation could, under paragraph (C)(3)(a) of
this Article, purchase or otherwise acquire such shares at such time and in
such manner.
(4) Reacquired Shares. Any shares of the Series E Stock redeemed,
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock, par value $20.00 per share, and may be reissued as a new series
or a part of a new series of Preferred Stock, par value $20.00 per share, to be
created by resolution or resolutions of the Board of Directors.
(5) Redemption.
(a) The Corporation may, at its option and at any time and from time
to time after April 29, 2048, redeem all or any portion of the outstanding
shares of Series E Stock.
(b) The redemption price shall be an amount per share equal to the
greater of (i) $14,000 or (ii) subject to the provision for adjustment
hereinafter set forth, 100 times the current market price per share of
Common Stock on the date fixed for redemption, plus in each such case an
amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date fixed for redemption. The current
market price per share of the Common Stock on any date shall be deemed to
be the average of the daily closing prices per share of such Common Stock
for the 30 consecutive trading days immediately prior to such date. The
closing price for each day shall be the last sale price, regular way, or,
in case no such sale takes place on such day, the average of the closing
bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock Exchange
("NYSE") or, if the Common Stock is not listed or admitted to trading on
the NYSE, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national
securities exchange on which the Common Stock is listed or admitted to
trading or, if the Common Stock is not listed or admitted to trading on any
national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the overthe counter
market, as reported by the National Association of Securities Dealers, Inc.
Automated Quotations Systems ("NASDAQ") or such other system then in use,
or, if on any such date the Common Stock is not quoted by any such
organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Common Stock. If no
professional market maker is then making a market in the Common Stock, the
current market price per share of the Common Stock shall be deemed to be
$1.00. As used herein, the term trading day shall mean a day on which the
principal national securities exchange on which the Common Stock is listed
or admitted to trading is open for the transaction of business or, if the
Common Stock is not listed or admitted to trading on any national
securities exchange, a business day. In the event the Corporation shall at
any time after the first issuance of any share or fraction of a share of
the Series E Stock declare or pay any dividend on Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of
Common Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the aggregate amount per share to which holders of
shares of the Series E Stock shall be entitled under the provisions of the
first sentence of this paragraph shall be adjusted by multiplying the
amount per share to which holders of shares of the Series E Stock should
have been entitled immediately prior to such event under the provisions of
the first sentence of this paragraph by a fraction the numerator of which
is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
(c) In case less than all of the outstanding shares of Series E Stock
are to be redeemed, not more than 60 days prior to the date fixed for
redemption the Corporation shall select the shares to be redeemed. Such
shares shall be selected by lot or designated ratably or in such other
equitable manner as the Corporation may determine. The Corporation in its
discretion may select the particular certificates (if there are more than
one) representing shares registered in the name of a holder that are to be
redeemed.
(d) Not less than 30 nor more than 60 days prior to the date fixed for
redemption, notice of redemption shall be given by first class mail,
postage prepaid, to the holders of record of the outstanding shares of the
Series E Stock to be redeemed at their last known addresses shown in the
Corporation's share transfer records. The notice of redemption shall set
forth the paragraph of this Article pursuant to which the shares are being
redeemed, the number of shares to be redeemed, the date fixed for
redemption, the applicable redemption price, and the place or places where
certificates representing shares to be redeemed may be surrendered. In case
less than all of the outstanding shares of the Series E Stock are to be
redeemed the notice of redemption shall also set forth the numbers of the
certificates representing shares to be redeemed and, in case less than all
shares represented by any such certificate are to be redeemed, the number
of shares represented by such certificate to be redeemed.
(e) If notice of redemption of any outstanding shares of Series E
Stock shall have been duly mailed as herein provided, then on or before the
date fixed for redemption the Corporation shall deposit cash sufficient to
pay the redemption price of such shares in trust for the benefit of the
holders of the shares to be redeemed with any bank or trust company in the
City of Richmond, Commonwealth of Virginia, having capital and surplus
aggregating at least $50,000,000 as of the date of its most recent report
of financial condition and named in such notice, to be applied to the
redemption of the shares so called for redemption against surrender for
cancellation of the certificates representing such shares. From and after
the time of such deposit all shares for the redemption of which such
deposit shall have been made shall, whether or not the certificates
therefor shall have been surrendered for cancellation, no longer be deemed
to be outstanding for any purpose, and all rights with respect to such
shares shall thereupon cease and terminate except the right to receive
payment of redemption price but without interest. Any interest earned on
funds so deposited shall be paid to the Corporation from time to time. Any
funds so deposited and unclaimed at the end of five years from the date
fixed for redemption shall be repaid to the Corporation, free of trust, and
the holders of the shares called for redemption who shall not have
surrendered their certificates representing such shares prior to such
repayment shall be deemed to be unsecured creditors of the Corporation for
the amount of the redemption price and shall look only to the Corporation
for payment thereof, without interest, subject to the laws of the
Commonwealth of Virginia.
(f) The Corporation shall also have the right to acquire outstanding
shares of Series E Stock otherwise than by redemption pursuant to paragraph
(C)(5)(a) of this Article, from time to time for such consideration as may
be acceptable to the holders thereof; provided, however, that if all
dividends accrued on all outstanding shares of Series E Stock shall not
have been declared and paid or declared and a sum sufficient for the
payment thereof set apart, neither the Corporation nor any subsidiary shall
so acquire any shares of Series E Stock except in accordance with a
purchase offer made on the same terms to all the holders of the outstanding
shares of Series E Stock.
ARTICLE V
COMMON STOCK
Certain relative rights of the Common Stock and the holders of the
outstanding shares thereof are set forth below.
(1) Dividends. Subject to the provisions hereinabove set forth with
respect to the Preferred Stock and to the provisions contained in the Articles
of Serial Designation for any series of the Preferred Stock, the holders of
outstanding shares of the Common Stock shall be entitled to receive dividends
if, when and as declared by the Board of Directors out of funds legally
available therefor.
(2) Voting Rights. The holders of outstanding shares of the Common
Stock shall, to the exclusion of the holders of any other class of stock of the
Corporation, have the sole and full power to vote for the election of directors
and for all other purposes without limitation, except (i) as otherwise provided
herein or in the Articles of Serial Designation as applicable to any series of
the Preferred Stock, and (ii) as may be required by law. The holders of
outstanding shares of the Common Stock shall be entitled to one vote on each
matter to be voted upon by the stockholders for each share of the Common Stock
which they hold.
ARTICLE VI
DIRECTORS
The number of directors shall be fixed by the bylaws. In the absence of
such a provision in the bylaws, the number of directors shall be ten. In no
event, however, shall the number of directors exceed seventeen. The directors of
the corporation shall be divided into three classes as nearly equal in number as
possible. The term of office of the first class of directors shall expire at the
first annual meeting of stockholders after the initial election dividing
directors into such classes, that of the second class shall expire at the second
annual meeting after such election and that of the third class at the third
annual meeting after such election. At each annual meeting of stockholders,
successors to the class of directors whose terms shall then expire and any other
nominees for election as a director of such class shall be elected to hold
office until the third succeeding annual meeting. If the number of directors is
changed, any newly created directorships or decrease in directorships shall be
so apportioned among the classes as to make all classes as nearly equal in
number as possible. Notwithstanding the foregoing, if the holders of one or more
series of Preferred Stock voting as a separate class shall become entitled to
elect members of the Board pursuant to the provisions of the Articles of Serial
Designation for such series, the terms of all members of the Board of Directors
previously elected shall expire at the time of such election and each director
shall then serve until the next meeting of stockholders at which directors are
elected; and whenever the holders of any series of Preferred Stock are no longer
entitled to so elect directors voting as a separate class, all of the directors
shall be elected by classes at the next annual meeting of stockholders held for
such purpose in the manner provided hereinabove in this paragraph with respect
to the initial election dividing directors into such classes. Subject to the
foregoing, at each annual meeting of stockholders the successors to the class of
directors whose terms shall then expire and any other nominees for election as a
director of such class shall be elected to hold office until the third
succeeding annual meeting. The aggregate number of vacancies resulting from an
increase in the number of directors which may be created and filled by action of
the Board of Directors between annual meetings of stockholders shall be limited
to two.
ARTICLE VII
CERTAIN BUSINESS COMBINATIONS
A. Vote Required for Certain Business Combinations. In addition to
any affirmative vote required by law or these Amended and Restated Articles
of Incorporation, and except as otherwise expressly provided in paragraph B
of this Article:
(1) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with (a) any Interested Stockholder (as hereinafter
defined) or (b) any other corporation which immediately before such merger or
consolidation is an Affiliate or Associate (as hereinafter defined) of an
Interested Stockholder; or
(2) any statutory exchange of stock in which any Interested
Stockholder or any Affiliate or Associate of an Interested Stockholder acquires
the issued and outstanding shares of any class of capital stock of the
Corporation or any Subsidiary in exchange for cash or property or shares or
other securities or obligations of any other corporation; or
(3) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with any
Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder of all or any Substantial Part (as hereinafter defined) of the
assets of the Corporation or any Subsidiary; or
(4) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of transactions) of any securities of the
Corporation or any Subsidiary having an aggregate Fair Market Value equal to or
greater than 10% of the aggregate Fair Market Value of all of the issued and
outstanding shares of the Voting Stock of the Corporation on the Determination
Date (as hereinafter defined) to any Interested Stockholder or any Affiliate or
Associate of any Interested Stockholder; or
(5) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an Interested
Stockholder or any Affiliate or Associate of any Interested Stockholder; or
(6) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or consolidation
of the Corporation with any of its Subsidiaries or any other transaction
(whether or not with or into or otherwise involving an Interested Stockholder)
which has the effect, directly or indirectly, of increasing the proportion of
any class of securities of the Corporation or any Subsidiary directly or
indirectly owned by an Interested Stockholder or any Affiliate or Associate of
any Interested Stockholder; shall require the affirmative vote of the holders of
at least 75% of the then outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (the "Voting Stock"),
voting together as a single class (it being understood that for purposes of this
Article, each share of the Voting Stock shall have the number of votes granted
to it pursuant to these Amended and Restated Articles of Incorporation). Such
affirmative vote shall be required notwithstanding the fact that no vote may be
required, or that a lesser percentage may be specified, by law or in any
agreement with any national securities exchange or otherwise.
B. When Higher Vote is Not Required. The provisions of paragraph (A) of
this Article shall not be applicable to any particular Business Combination (as
hereinafter defined), and such Business Combination shall require only such
affirmative vote as is required by law and any other provision of these Amended
and Restated Articles of Incorporation, if all of the conditions specified in
either of the following paragraphs (1) or (2) are met:
(1) Approval by Continuing Directors. The Business Combination shall have
been approved by a majority of the Continuing Directors (as hereinafter
defined), it being understood that this condition shall not be capable of
satisfaction unless there is at least one Continuing Director.
(2) Price and Procedure Requirements. Consideration shall be paid to
the holders of the Common Stock in such Business Combination and all of the
following conditions shall have been met:
(a) the aggregate amount of the cash and the Fair Market Value (as
hereinafter defined) as of the date of the consummation of the Business
Combination of consideration other than cash to be received per share by
holders of Common Stock in such Business Combination shall be at least
equal to the highest of the following:
(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees)
paid by the Interested Stockholder for any shares of Common Stock
acquired by it (AA) within the two-year period immediately prior to
the first public announcement of the proposal of the Business
Combination (the "Announcement Date") or (BB) in the transaction in
which it became an Interested Stockholder, whichever is higher;
(ii) the Fair Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested Stockholder
became an Interested Stockholder (such letter date is referred to in
this Article as the "Determination Date"), whichever is higher; and
(iii) (if applicable) the price per share equal to the Fair
Market Value per share of Common Stock determined pursuant to
paragraph (2)(a)(ii) above, multiplied by the ration of (AA) the
highest per share price (including any brokerage commissions, transfer
taxes and soliciting dealers' fees) paid by the Interested Stockholder
for any shares of Common Stock acquired by it within the two-year
period immediately prior to the Announcement Date to (BB) the Fair
Market Value per share of Common Stock on the first day in such
two-year period upon which the Interested Stockholder acquired any
shares of Common Stock.
(b) the consideration to be received by holders of Common Stock shall
be in cash or in the same form as the Interested Stockholder has previously
paid for shares of such class. If the Interested Stockholder has paid for
shares of Common Stock with varying forms of consideration, the form of
consideration for Common Stock shall be either cash or the form used to
acquire the largest number of shares of such class previously acquired by
the Interested Stockholder.
(c) after such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business Combination,
except as approved by a majority of the Continuing Directors: (i) there
shall have been no failure to declare and pay at the regular date therefor
any full quarterly dividends (whether or not cumulative) on the outstanding
Preferred Stock; (ii) there shall have been (AA) no reduction in the annual
rate of dividends paid on the Common Stock (except as necessary to reflect
any subdivision of the Common Stock), and (BB) an increase in such annual
rat of dividends as necessary to reflect any reclassification (including
any reverse stock split), recapitalization, reorganization or any similar
transaction which has the affect of reducing the number of outstanding
shares of the Common Stock; and (iii) such Interested Stockholder shall
have not become the beneficial owner of any additional shares of Voting
Stock except as part of the transaction which results in such Interested
Stockholder becoming an Interested Stockholder.
(d) after such Interested Stockholder has become an Interested
Stockholder, except as approved by a majority of the Continuing Directors,
such Interested Stockholder shall not have received the benefit, directly
or indirectly (except proportionately as a shareholder), of any loans,
advances, guarantees, pledges or other financial assistance or any tax
credits or other tax advantages provided by the Corporation, whether in
anticipation of or in connection with such Business Combination or
otherwise.
(e) except as otherwise approved by a majority of the Continuing
Directors, a proxy or information statement describing the proposed
Business Combination and complying with the requirements of the Securities
Exchange Act of 1934 and the rules and regulations thereunder (or any
subsequent provisions replacing such Act, rules or regulations) shall be
mailed to stockholders of the Corporation at least 30 days prior to the
consummation of such Business Combination (whether or not such proxy or
information statement is required to be mailed pursuant to such Act or
subsequent provisions).
C. Certain Definitions. For the purposes of this Article:
(1) A "Business Combination" as used in this Article shall mean any
transaction which is referred to in any one or more of clauses (i) through (vi)
of paragraph (A) of this Article.
(2) A "person" shall mean any individual, firm, corporation,
partnership, joint venture or other entity.
(3) "Interested Stockholder" shall mean any person who or which is the
beneficial owner, directly or indirectly, of more than 10% of the outstanding
Voting Stock; provided, however, the term Interested Stockholder shall not
include the Corporation, any Subsidiary, or any savings, employee stock
ownership or other employee benefit plan of the Corporation or any Subsidiary,
or any fiduciary with respect to any such plan when acting in such capacity.
(4) A person shall be a "beneficial owner" of any Voting Stock as to
which such person and any such person's Affiliates or Associates, individually
or in the aggregate, have or share directly, or indirectly through any contract,
arrangement, understanding, relationship, or otherwise:
(a) voting power, which includes the power to vote, or to direct
the voting of Voting Stock; or
(b) investment power, which includes the power to dispose or to
direct the disposition or, Voting Stock; or
(c) economic benefit, which includes the right to receive or control
the disposition of income or liquidation proceeds from Voting Stock; or
(d) the right to acquire voting power, investment power or economic
benefit (whether such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights, warrants or
options or otherwise:
provided, that in no case shall a director of the Corporation be
deemed to be the beneficial owner of Voting Stock beneficially owned by another
director of the Corporation solely by reason of actions undertaken by such
persons in their capacity as directors of the Corporation.
(5) For the purpose of determining whether a person is an Interested
Stockholder pursuant to paragraph (C)(3) of this Article, the number of shares
of Voting Stock deemed to be outstanding shall include shares deemed owned
through application of paragraph (C)(4) of this Article but shall not include
any other shares of Voting Stock which may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion rights,
warrants or options or otherwise.
(6) "Affiliate" means a person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with the person specified.
(7) "Associate" means as to any specific person:
(a) any corporation or organization (other than the Corporation and
its Subsidiaries) of which such person is an officer or partner or is,
directly or indirectly, the beneficial owner of 10% or more of any class of
equity securities;
(b) any trust or other estate in which such person has a substantial
beneficial interest or as to which such person serves as trustee or in a
similar fiduciary capacity; and
(c) any relative or spouse of such person or any relative of such
spouse, who has the same home as such person.
(8) "Subsidiary" means any corporation of which a majority of any
class of equity security is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Interested
Stockholder set forth in paragraph (C)(3) of this Article, the term "Subsidiary"
shall mean only a corporation of which a majority of each class of equity
securities is owned, directly or indirectly, by the Corporation.
(9) "Continuing Director" means any member of the Board of Directors
of the Corporation (the "Board") who is unaffiliated with the Interested
Stockholder and was a member of the Board prior to the time that the Interested
Stockholder became an Interested Stockholder, and any successor of a Continuing
Director who is unaffiliated with the Interested Stockholder and is recommended
to succeed a Continuing Director by a majority of Continuing Directors then on
the Board.
(10) "Fair Market Value" means:
(a) in the case of stock, the highest closing sale price during the
30-day period immediately preceding the date in question of a share of such
stock on the Composite Tape for New York Stock ExchangeListed Stocks, or,
if such stock is not quoted on the Composite Tape, on the New York Stock
Exchange, or, if such stock is not listed on any such Exchange, on the
principal United States securities exchange registered under the Securities
Exchange Act of 1934 on which such stock is listed, or, if such stock is
not listed on any such exchange, the highest closing bid quotation with
respect to a share of such stock during the 30-day period preceding the
date in question on the National Association of Securities Dealers, Inc.
Automated Quotations System or any system then in use, or if no such
quotations are available, the fair market value on the date in question of
a share of such stock as determined by the Board in good faith; and
(b) in the case of property other than cash or stock, the fair market
value of such property on the date in question as determined by the Board
in good faith.
(11) "Substantial Part" means more than 10% of the book value of the
total assets of the entity in question, as reflected on the most recent fiscal
year end consolidated balance sheet of such entity existing at the time the
stockholders of the Corporation would be required to approve or authorize the
Business Combination involving the assets constituting any such Substantial
Part.
D. Powers of the Board of Directors. The Board of Directors of the
Corporation shall have the power and duty to determine for the purposes of this
Article, on the basis of information known to it after reasonable inquiry, (i)
whether a person is an Interested Stockholder, (ii) the number of shares of
Voting Stock beneficially owned by any person, (iii) whether a person is an
Affiliate or Associate of another, (iv) whether the securities to be issued or
transferred by the Corporation or any Subsidiary in any Business Combination
involving such person have, an aggregate Fair Market Value equal to or greater
than 10% of the aggregate Fair Market Value of all of the issued and outstanding
shares of the Voting Stock of the Corporation on the Determination Date, and (v)
whether the assets which are the subject of any Business Combination involving
such person constitute a Substantial Part of the assets of the Corporation or
any Subsidiary.
E. No Effect on Fiduciary Obligations of Interested Stockholders.
Nothing contained in this Article shall be construed to relieve any
Interested Stockholder or any director of the Corporation from any
obligation imposed by law.
F. Expiration Date. This Article shall expire and be of no further
force or effect after 11:59 p.m. on February 28, 1990 (the "Expiration
Date").
G. Amendment or Repeal.
(1) The affirmative vote of the holders of the capital stock of the
Corporation which is required by law or by the provisions of these Amended and
Restated Articles of Incorporation other than those in this Article or by the
bylaws of the Corporation in order to amend these Amended and Restated Articles
of Incorporation shall be required to amend this Article where the sole purpose
of the amendment is to change the Expiration Date to a later date.
(2) Notwithstanding any other provision of law, these Amended and
Restated Articles of Incorporation or the bylaws of the Corporation (and
notwithstanding the fact that a lesser percentage may be specified by law, these
Amended and Restated Articles of Incorporation or the bylaws of the
Corporation), and in addition to any affirmative vote of the holders of
Preferred Stock or any other class of capital stock of the Corporation or any
series of any of the foregoing then outstanding which is required by law or by
these Amended and Restated Articles of Incorporation or the bylaws of the
Corporation, the affirmative vote of the holders of 75% or more of the voting
power of the shares of the then outstanding Voting Stock, voting together as a
single class, shall be required to amend or repeal this Article of these Amended
and Restated Articles of Incorporation prior to the Expiration Date unless the
matter to be voted upon is an amendment to this Article where the sole purpose
of the amendment is to change the Expiration Date to a later date.
ARTICLE VIII
INDEMNIFICATION
A. Definitions. For purposes of this Article the following
definitions shall apply:
"Corporation" means this Corporation only and no predecessor entity or
other legal entity.
"Expenses" include counsel fees, expert witness fees, and costs of
investigation, litigation and appeal, as well as any amounts expended in
asserting a claim for indemnification.
"Liability" means the obligation to pay a judgment, settlement, penalty,
fine, or other such obligation, including, without limitation, any excise tax
assessed with respect to an employee benefit plan.
"Legal Entity" means a corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise.
"Predecessor Entity" means a legal entity the existence of which ceased
upon its acquisition by the Corporation in a merger or otherwise.
"Proceeding" means any threatened, pending, or completed action, suit,
proceeding or appeal whether civil, criminal, administrative or investigative
and whether formal or informal.
B. Indemnification of Directors and Officers. The Corporation shall
indemnify and may contract in advance to indemnify an individual who is, was or
is threatened to be made a party to a proceeding because he is or was a director
or officer of the Corporation or, while a director or officer of the
Corporation, is or was serving the Corporation or any other legal entity in any
capacity at the request of the Corporation against all liabilities and
reasonable expenses incurred in the proceeding except such liabilities and
expenses as are incurred because of his willful misconduct or knowing violation
of the criminal law (regardless of whether the proceeding is by or in the right
of the Corporation). The determination that indemnification under this Paragraph
B is permissible and the evaluation as to the reasonableness of expenses in a
specific case shall be made, in the case of a director, as provided by law, and
in the case of an officer, as provided in Paragraph C of this Article; provided,
however, that if a majority of the directors of the Corporation has changed
after the date of the alleged conduct giving rise to a claim for
indemnification, such determination and evaluation shall, at the option of the
person claiming indemnification, be made by special legal counsel agreed upon by
the Board of Directors and such person. Unless a determination has been made
that indemnification is not permissible, the Corporation shall make advances and
reimbursements for expenses incurred by a director or officer in a proceeding
upon receipt of an undertaking from him to repay the same if it is ultimately
determined that he is not entitled to indemnification. Such undertaking shall be
an unlimited, unsecured general obligation of the director or officer and shall
be accepted without reference to his ability to make repayment. The termination
of a proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent shall not of itself create a presumption that
a director or officer acted in such a manner as to make him ineligible for
indemnification.
C. Indemnification of Others. The Corporation may, to a lesser extent or to
the same extent that the Corporation is required to provide indemnification and
make advances and reimbursements for expenses to its directors and officers,
provide indemnification and make advances and reimbursements for expenses to its
employees and agents, the directors, officers, employees and agents of its
subsidiaries and predecessor entities, and any person serving any other legal
entity in any capacity at the request of the Corporation, and, if authorized by
general or specific action of the Board of Directors, may contract in advance to
do so. The determination that indemnification under this Paragraph C is
permissible, the authorization of such indemnification and the evaluation as to
the reasonableness of expenses in a specific case shall be made as authorized
from time to time by general or specific action of the Board of Directors, which
action may be taken before or after a claim for indemnification is made, or as
otherwise provided by law. No person's rights under Paragraph B of this Article
shall be limited by the provisions of this Paragraph C.
D. Miscellaneous. Every reference in this Article to persons who are or may
be entitled to indemnification shall include all persons who formerly occupied
any of the positions referred to and their respective heirs, executors and
administrators. Special legal counsel selected to make determinations under this
Article may be counsel for the Corporation. Indemnification pursuant to this
Article shall not be exclusive of any other right of indemnification to which
any person may be entitled including indemnification pursuant to a valid
contract, indemnification by legal entities other than the Corporation and
indemnification under policies of insurance purchased and maintained by the
Corporation or others. However, no person shall be entitled to indemnification
by the Corporation to the extent he is indemnified by another, including an
insurer. The Corporation is authorized to purchase and maintain insurance
against any liability it may have under this Article or to protect any of the
persons named above against any liability arising from their service to the
Corporation or any other legal entity at the request of the Corporation
regardless of the Corporation's power to indemnify against such liability. The
provisions of this Article shall not be deemed to prohibit the Corporation from
entering into contracts otherwise permitted by law with any individuals or legal
entities, including those named above, for the purposes of conducting the
business of the Corporation. If any provision of this Article or its application
to any person or circumstance is held invalid by a court of competent
jurisdiction, the invalidity shall not affect other provisions or applications
of this Article, and to this and the provisions of this Article are severable.
ARTICLE IX
LIMITATION OF LIABILITY
To the full extent that the Virginia Stock Corporation Act, as it now
exists or is hereafter amended, permits the limitation or elimination of the
liability of directors or officers, a director or officer of the Corporation
shall not be liable to the Corporation or its stockholders for monetary damages.
ARTICLE X
VOTE TO AMEND OR RESTATE
As to each voting group entitled to vote on an amendment or restatement of
these Amended and Restated Articles of Incorporation the vote required for
approval shall be (i) the vote required by the Virginia Stock Corporation Act
(as applied without regard to the effect of clause (iii) of this Article) if the
effect of the amendment or restatement is (a) to reduce the shareholder vote
required to approve a merger, a statutory share exchange, a sale of all or
substantially all of the assets of the Corporation or the dissolution of the
Corporation, (b) to modify any provision of Article VI of these Amended and
Restated Articles of Incorporation, or (c) to delete all or any part of this
clause (i) of this Article; (ii) the vote required by the terms of these Amended
and Restated Articles of Incorporation, as amended or as restated from time to
time, if such terms require the approval of more than a majority of the votes
entitled to be cast thereon by such voting group; or (iii) a majority of the
votes entitled to be cast thereon if neither clause (i) nor clause (ii) of this
Article is applicable.
CIRCUIT CITY STORES, INC.
BYLAWS
AS AMENDED AND RESTATED
JUNE 18, 1996
TABLE OF CONTENTS
ARTICLE I
MEETINGS OF SHAREHOLDERS
1.1 Place and Time of Meetings. . . . . . . . . . . . . . . . . . . 1
1.2 Organization and Order of Business. . . . . . . . . . . . . . . 1
1.3 Annual Meeting. . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Special Meetings. . . . . . . . . . . . . . . . . . . . . . . . 3
1.5 Record Dates. . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.6 Notice of Meetings. . . . . . . . . . . . . . . . . . . . . . . 3
1.7 Waiver of Notice; Attendance at Meeting . . . . . . . . . . . . 4
1.8 Quorum and Voting Requirements. . . . . . . . . . . . . . . . . 4
1.9 Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.10 Voting List. . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE II
DIRECTORS
2.1 General Powers. . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 Number and Term . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3 Nomination of Directors . . . . . . . . . . . . . . . . . . . . 6
2.4 Election. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.5 Removal; Vacancies. . . . . . . . . . . . . . . . . . . . . . . 7
2.6 Annual and Regular Meetings . . . . . . . . . . . . . . . . . . 8
2.7 Special Meetings. . . . . . . . . . . . . . . . . . . . . . . . 8
2.8 Notice of Meetings. . . . . . . . . . . . . . . . . . . . . . . 8
2.9 Waiver of Notice; Attendance at Meeting . . . . . . . . . . . . 9
2.10 Quorum; Voting . . . . . . . . . . . . . . . . . . . . . . . . 9
2.11 Telephonic Meetings. . . . . . . . . . . . . . . . . . . . . . 9
2.12 Action Without Meeting . . . . . . . . . . . . . . . . . . . . 9
2.13 Compensation.. . . . . . . . . . . . . . . . . . . . . . . . .10
2.14 Director Emeritus. . . . . . . . . . . . . . . . . . . . . . .10
2.15 Chairman and Vice Chairman.. . . . . . . . . . . . . . . . . .10
ARTICLE III
COMMITTEES OF DIRECTORS
3.1 Committees. . . . . . . . . . . . . . . . . . . . . . . . . . .10
3.2 Authority of Committees . . . . . . . . . . . . . . . . . . . .10
3.3 Executive Committee.. . . . . . . . . . . . . . . . . . . . . .11
3.4 Audit Committee.. . . . . . . . . . . . . . . . . . . . . . . .11
3.5 Nominating and Structure Committee. . . . . . . . . . . . . . .11
3.6 Compensation and Personnel Committee. . . . . . . . . . . . . .12
3.7 Committee Meetings; Miscellaneous.. . . . . . . . . . . . . . .13
ARTICLE IV
OFFICERS
4.1 Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . .13
4.2 Election; Term. . . . . . . . . . . . . . . . . . . . . . . . .13
4.3 Removal of Officers.. . . . . . . . . . . . . . . . . . . . . .13
4.4 Duties of the President.. . . . . . . . . . . . . . . . . . . .13
4.5 Duties of the Vice President. . . . . . . . . . . . . . . . . .14
4.6 Duties of the Secretary.. . . . . . . . . . . . . . . . . . . .14
4.7 Duties of the Chief Financial Officer.. . . . . . . . . . . . .14
4.8 Duties of the Assistant Secretary.. . . . . . . . . . . . . . .14
4.9 Duties of Other Officers. . . . . . . . . . . . . . . . . . . .14
4.10 Voting Securities of Other Corporations. . . . . . . . . . . .15
4.11 Compensation.. . . . . . . . . . . . . . . . . . . . . . . . .15
4.12 Bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
ARTICLE V
EVIDENCE OF SHARES
5.1 Form. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
5.2 Transfer. . . . . . . . . . . . . . . . . . . . . . . . . . . .16
5.3 Restrictions on Transfer. . . . . . . . . . . . . . . . . . . .16
5.4 Lost or Destroyed Share Certificates. . . . . . . . . . . . . .16
5.5 Registered Shareholders.. . . . . . . . . . . . . . . . . . . .16
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.1 Certain Definitions.. . . . . . . . . . . . . . . . . . . . . .17
6.2 Corporate Seal. . . . . . . . . . . . . . . . . . . . . . . . .17
6.3 Fiscal Year.. . . . . . . . . . . . . . . . . . . . . . . . . .17
6.4 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . .17
6.5 General.. . . . . . . . . . . . . . . . . . . . . . . . . . . .17
<PAGE>
CIRCUIT CITY STORES, INC.
BYLAWS
ARTICLE I
MEETINGS OF SHAREHOLDERS
1.1 Place and Time of Meetings. Meetings of shareholders shall be held
at the principal office of the Corporation or at such place, either within or
without the Commonwealth of Virginia, and at such time as may be provided in the
notice of the meeting and approved by the Board of Directors.
1.2 Organization and Order of Business. The Chairman or, in the Chairman's
absence, the President shall serve as chairman at all meetings of the
shareholders. In the absence of both of the foregoing persons or if both of them
decline to serve, a majority of the shares entitled to vote at a meeting may
appoint any person entitled to vote at the meeting to act as chairman. The
Secretary or, in the Secretary's absence, an Assistant Secretary shall act as
secretary at all meetings of the shareholders. In the event that neither the
Secretary nor an Assistant Secretary is present, the chairman of the meeting may
appoint any person to act as secretary of the meeting.
The Chairman shall have the authority to make such rules and regulations,
to establish such procedures and to take such steps as he or she may deem
necessary or desirable for the proper conduct of each meeting of the
shareholders, including, without limitation, the authority to make the agenda
and to establish procedures for (i) dismissing of business not properly
presented, (ii) maintaining of order and safety, (iii) placing limitations on
the time allotted to questions or comments on the affairs of the Corporation,
(iv) placing restrictions on attendance at a meeting by persons or classes of
persons who are not shareholders or their proxies, (v) restricting entry to a
meeting after the time prescribed for the commencement thereof and (vi)
commencing, conducting and closing voting on any matter.
Any business which might properly have been conducted on an original
meeting date may come before an adjourned meeting when reconvened.
1.3 Annual Meeting. The annual meeting of shareholders shall be held on the
Tuesday in June of each year which is closest to June 16. If such day is a legal
holiday, then the annual meeting of shareholders shall be held on the next
succeeding business day. Alternatively, the annual meeting may be held at such
other time as may be provided in the notice of the meeting and approved by the
Board of Directors.
At each annual meeting of shareholders, only such business shall be
conducted as is proper to consider and has been brought before the meeting (i)
pursuant to the Corporation's notice of the meeting, (ii) by or at the direction
of the Board of Directors or (iii) by a shareholder who is a shareholder of
record of a class of shares entitled to vote on the business such shareholder is
proposing and who is such a shareholder of record, both at the time of the
giving of the shareholder's notice hereinafter described in this Section 1.3 and
on the record date for such annual meeting, and who complies with the notice
procedures set forth in this Section 1.3.
In order to bring before an annual meeting of shareholders any business
which may properly be considered and which a shareholder has not sought to have
included in the Corporation's proxy statement for the meeting, a shareholder who
meets the requirements set forth in the preceding paragraph must give the
Corporation timely written notice. To be timely, a shareholder's notice must be
given, either by personal delivery to the Secretary or an Assistant Secretary at
the principal office of the Corporation or by first class United States mail,
with postage thereon prepaid, addressed to the Secretary at the principal office
of the Corporation. Any such notice must be received (i) on or after March 1st
and before April 1st of the year in which the meeting will be held, if clause
(ii) is not applicable, or (ii) not less than 60 days before the date of the
meeting if the date of such meeting, as prescribed in these bylaws, has been
changed by more than 30 days.
Each such shareholder's notice shall set forth as to each matter the
shareholder proposes to bring before the annual meeting (i) the name and
address, as they appear on the Corporation's stock transfer books, of the
shareholder proposing business, (ii) the class and number of shares of stock of
the Corporation beneficially owned by such shareholder, (iii) a representation
that such shareholder is a shareholder of record at the time of the giving of
the notice and intends to appear in person or by proxy at the meeting to present
the business specified in the notice, (iv) a brief description of the business
desired to be brought before the meeting, including the complete text of any
resolutions to be presented and the reasons for wanting to conduct such business
and (v) any interest which the shareholder may have in such business.
The Secretary or Assistant Secretary shall deliver each shareholder's
notice that has been timely received to the Chairman for review.
Notwithstanding the foregoing provisions of this Section 1.3, a shareholder
seeking to have a proposal included in the Corporation's proxy statement for an
annual meeting of shareholders shall comply with the requirements of Regulation
14A under the Securities Exchange Act of 1934, as amended from time to time, or
with any successor regulation.
1.4 Special Meetings. Special meetings of the shareholders may be
called only by the Chairman, the President or the Board of Directors. Only
business within the purpose or purposes described in the notice for a
special meeting of shareholders may be conducted at the meeting.
1.5 Record Dates. The Board of Directors shall fix, in advance, a record
date to make a determination of shareholders entitled to notice of or to vote at
any meeting of shareholders or to receive any dividend or for any purpose, such
date to be not more than 70 days before the meeting or action requiring a
determination of shareholders.
When a determination of shareholders entitled to notice of or to vote at
any meeting of shareholders has been made, such determination shall be effective
for any adjournment of the meeting unless the Board of Directors fixes a new
record date, which it shall do if the meeting is adjourned to a date more than
120 days after the date fixed for the original meeting.
1.6 Notice of Meetings. Written notice stating the place, day and hour of
each meeting of shareholders and, in the case of a special meeting, the purpose
or purposes for which the meeting is called, shall be given by mail not less
than 10 nor more than 60 days before the date of the meeting (except when a
different time is required in these Bylaws or by law) to each shareholder of
record entitled to vote at such meeting. Such notice shall be deemed to be
effective when deposited in first class United States mail with postage thereon
prepaid and addressed to the shareholder at his or her address as it appears on
the share transfer books of the Corporation.
Notice of a shareholder's meeting to act on (i) an amendment of the
Articles of Incorporation, (ii) a plan of merger or share exchange, (iii) the
sale, lease, exchange or other disposition of all or substantially all the
property of the Corporation otherwise than in the usual and regular course of
business or (iv) the dissolution of the Corporation, shall be given, in the
manner provided above, not less than 25 nor more than 60 days before the date of
the meeting. Any notice given pursuant to this section shall state that the
purpose, or one of the purposes, of the meeting is to consider such action and
shall be accompanied by (x) a copy of the proposed amendment, (y) a copy of the
proposed plan of merger or share exchange or (z) a summary of the agreement
pursuant to which the proposed transaction will be effected. If only a summary
of the agreement is sent to the shareholders, the Corporation shall also send a
copy of the agreement to any shareholder who requests it.
If a meeting is adjourned to a different date, time or place, notice need
not be given if the new date, time or place is announced at the meeting before
adjournment. However, if a new record date for an adjourned meeting is fixed,
notice of the adjourned meeting shall be given to shareholders as of the new
record date unless a court provides otherwise.
Notwithstanding the foregoing, no notice of a meeting of shareholders need
be given to a shareholder if (i) an annual report and proxy statements for two
consecutive annual meetings of shareholders or (ii) all, and at least two,
checks in payment of dividends or interest on securities during a 12-month
period, have been sent by first-class United States mail, with postage thereon
prepaid, addressed to the shareholder at his or her address as it appears on the
share transfer books of the Corporation, and returned undeliverable. The
obligation of the Corporation to give notice of meetings of shareholders to any
such shareholder shall be reinstated once the Corporation has received a new
address for such shareholder for entry on its share transfer books.
1.7 Waiver of Notice; Attendance at Meeting. A shareholder may waive any
notice required by law, the Articles of Incorporation or these Bylaws before or
after the date and time of the meeting that is the subject of such notice. The
waiver shall be in writing, be signed by the shareholder entitled to the notice
and be delivered to the Secretary for inclusion in the minutes or filing with
the corporate records.
A shareholder's attendance at a meeting (i) waives objection to lack of
notice or defective notice of the meeting unless the shareholder, at the
beginning of the meeting, objects to holding the meeting or transacting business
at the meeting and (ii) waives objection to consideration of a particular matter
at the meeting that is not within the purpose or purposes described in the
meeting notice unless the shareholder objects to considering the matter when it
is presented.
1.8 Quorum and Voting Requirements. Unless otherwise required by law, a
majority of the votes entitled to be cast on a matter constitutes a quorum for
action on that matter. Once a share is represented for any purpose at a meeting,
it is deemed present for quorum purposes for the remainder of the meeting and
for any adjournment of that meeting unless a new record date is or shall be set
for that adjourned meeting. If a quorum exists, action on a matter, other than
the election of directors, is approved if the votes cast favoring the action
exceed the votes cast opposing the action unless a greater number of affirmative
votes is required by law. Directors shall be elected by a plurality of the votes
cast by the shares entitled to vote in the election at a meeting at which a
quorum is present. Less than a quorum may adjourn a meeting.
1.9 Proxies. A shareholder may vote his or her shares in person or by
proxy. A shareholder may appoint a proxy to vote or otherwise act for such
shareholder by signing an appointment form, either personally or by his or her
attorney-in-fact. An appointment of a proxy is effective when received by the
Secretary or other officer or agent authorized to tabulate votes and is valid
for eleven (11) months unless a longer period is expressly provided in the
appointment form. An appointment of a proxy is revocable by the shareholder
unless the appointment form conspicuously states that it is irrevocable and the
appointment is coupled with an interest.
The death or incapacity of the shareholder appointing a proxy does not
affect the right of the Corporation to accept the proxy's authority unless
notice of the death or incapacity is received by the Secretary or other officer
or agent authorized to tabulate votes before the proxy exercises his or her
authority under the appointment. An irrevocable appointment is revoked when the
interest with which it is coupled is extinguished. A transferee for value of
shares subject to an irrevocable appointment may revoke the appointment if the
transferee did not know of its existence when the shares were acquired and the
existence of the irrevocable appointment was not noted conspicuously on the
certificate representing the shares or on the information statement for shares
without certificates. Subject to any legal limitations on the right of the
Corporation to accept the vote or other action of a proxy and to any express
limitation on the proxy's authority appearing on the face of the appointment
form, the Corporation is entitled to accept the proxy's vote or other action as
that of the shareholder making the appointment. Any fiduciary who is entitled to
vote any shares may vote such shares by proxy.
1.10 Voting List. The officer or agent having charge of the share transfer
books of the Corporation shall make, at least ten days before each meeting of
shareholders, a complete list of the shareholders entitled to vote at such
meeting or any adjournment thereof, with the address of and the number of shares
held by each. For a period of ten days prior to the meeting, such list shall be
kept on file at the registered office of the Corporation or at its principal
office or at the office of its transfer agent or registrar and shall be subject
to inspection by any shareholder at any time during usual business hours. Such
list shall also be produced and kept open at the time and place of the meeting
and shall be subject to the inspection of any shareholder during the whole time
of the meeting for the purpose thereof. The original share transfer books shall
be prima facie evidence as to which shareholders are entitled to examine such
list or transfer books or to vote at any meeting of the shareholders. The right
of a shareholder to inspect such list prior to the meeting shall be subject to
the conditions and limitations set forth by law. If the requirements of this
section have not been substantially complied with, the meeting shall, on the
demand of any shareholder in person or by proxy, be adjourned until such
requirements are met. Refusal or failure to prepare or make available the
shareholders' list does not affect the validity of action taken at the meeting
prior to the making of any such demand, but any action taken by the shareholders
after the making of any such demand shall be invalid and of no effect.
ARTICLE II
DIRECTORS
2.1 General Powers. The Corporation shall have a Board of Directors. All
corporate powers shall be exercised by or under the authority of, and the
business and affairs of the Corporation managed under the direction of, its
Board of Directors, and such officers and agents as the Board of Directors may
elect to employ, subject to any limitation set forth in the Articles of
Incorporation.
2.2 Number and Term. The number of directors shall be eleven (11). This
number may be increased or decreased from time to time by amendment to these
Bylaws to the extent permitted by law and by the Corporation's Articles of
Incorporation. Except as provided in Section 2.5, directors shall be elected for
terms of three (3) years in the manner set forth in the Articles of
Incorporation and shall serve until the election of their successors. No
decrease in the number of directors shall have the effect of changing the term
of any incumbent director. Unless a director resigns or is removed by the
majority vote of the shareholders, every director shall hold office for the term
elected or until a successor to such director shall have been elected.
2.3 Nomination of Directors. Nominations for the election of directors may
be made by the Board of Directors or by any shareholder entitled to vote in the
election of directors generally. However, any shareholder entitled to vote in
the election of directors generally may nominate one or more persons for
election as directors at a meeting only if written notice of such shareholder's
intent to make such nomination or nominations has been given, either by personal
delivery or by United States mail, postage prepaid, to the Secretary of the
Corporation not later than (i) with respect to an election to be held at an
annual meeting of shareholders 120 days in advance of such meeting or (ii) 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.
Each such notice shall set forth: (a) the name and address of the
shareholder who intends to make the nomination and of the person or persons to
be nominated; (b) a representation that the shareholder is a holder of record of
stock of the Corporation entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to nominate the person or persons specified
in the notice; (c) a description of all arrangements or understandings between
the shareholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to be
made by the shareholder; (d) such other information regarding each nominee
proposed by such shareholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission, had the nominee been nominated, or intended to be nominated, by the
Board of Directors; and (e) the consent of each nominee to serve as a director
of the Corporation if so elected. The Chairman may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing procedure.
2.4 Election. Except as provided in Section 2.5, the directors shall be
elected by the holders of the common shares at each annual meeting of
shareholders or at a special meeting called for such purpose. Those persons who
receive the greatest number of votes shall be deemed elected even though they do
not receive a majority of the votes cast. No individual shall be named or
elected as a director without such individual's prior consent.
2.5 Removal; Vacancies. The shareholders may remove one or more directors
with or without cause. If a director is elected by a voting group, only the
shareholders of that voting group may elect to remove the director. Unless the
Articles of Incorporation require a greater vote, a director may be removed if
the number of votes cast to remove the director constitutes a majority of the
votes entitled to be cast at an election of directors of the voting group or
voting groups by which such director was elected. A director may be removed by
the shareholders only at a meeting called for the purpose of removing such
director and the meeting notice must state that the purpose, or one of the
purposes of the meeting, is removal of the director.
A vacancy on the Board of Directors, including a vacancy resulting from the
removal of a director or an increase in the number of directors, may be filled
by (i) the shareholders, (ii) the Board of Directors or (iii) the affirmative
vote of a majority of the remaining directors though less than a quorum of the
Board of Directors and may, in the case of a resignation that will become
effective at a specified later date, be filled before the vacancy occurs but the
new director may not take office until the vacancy occurs. The foregoing
notwithstanding, the aggregate number of vacancies resulting from increases in
the number of directors which may be created and filled by action of the Board
of Directors between annual meetings of shareholders shall be limited to two.
Any director elected by the Board of Directors shall serve until the next annual
meeting of shareholders or until the election of a successor to such director.
2.6 Annual and Regular Meetings. An annual meeting of the Board of
Directors, which shall be considered a regular meeting, shall be held
immediately following each annual meeting of shareholders for the purpose of
electing officers and carrying on such other business as may properly come
before the meeting. The Board of Directors may also adopt a schedule of
additional meetings which shall be considered regular meetings. Regular meetings
shall be held at such times and at such places, within or without the
Commonwealth of Virginia, as the Chairman, the President or the Board of
Directors shall designate from time to time. If no place is designated, regular
meetings shall be held at the principal office of the Corporation.
2.7 Special Meetings. Special meetings of the Board of Directors may be
called by the President, the Board of Directors or any two Directors of the
Corporation and shall be held at such times and at such places, within or
without the Commonwealth of Virginia, as the person or persons calling the
meetings shall designate. If no such place is designated in the notice of a
meeting, it shall be held at the principal office of the Corporation.
2.8 Notice of Meetings. No notice need be given of regular meetings
of the Board of Directors.
Notices of special meetings of the Board of Directors shall be given to
each director in person or delivered to his or her residence or business address
(or such other place as the director may have directed in writing) not less than
twenty-four (24) hours before the meeting by mail, messenger, telecopy,
telegraph or other means of written communication or by telephoning such notice
to the director. Any such notice shall set forth the time and place of the
meeting.
2.9 Waiver of Notice; Attendance at Meeting. A director may waive any
notice required by law, the Articles of Incorporation or these Bylaws before or
after the date and time stated in the notice and such waiver shall be equivalent
to the giving of such notice. Except as provided in the next paragraph of this
section, the waiver shall be in writing, signed by the director entitled to the
notice and filed with the minutes or corporate records.
A director's attendance at or participation in a meeting waives any
required notice to such director of the meeting unless the director, at the
beginning of the meeting or promptly upon arrival, objects to holding the
meeting or transacting business at the meeting and does not thereafter vote for
or assent to action taken at the meeting.
2.10 Quorum; Voting. A majority of the number of directors fixed in these
Bylaws shall constitute a quorum for the transaction of business at a meeting of
the Board of Directors. If a quorum is present when a vote is taken, the
affirmative vote of a majority of the directors present is the act of the Board
of Directors. A director who is present at a meeting of the Board of Directors
or a committee of the Board of Directors when corporate action is taken is
deemed to have assented to the action taken unless (i) the director objects, at
the beginning of the meeting or promptly upon arrival, to holding it or
transacting specified business at the meeting or (ii) the director votes against
or abstains from the action taken.
2.11 Telephonic Meetings. The Board of Directors may permit any or all
directors to participate in a regular or special meeting by, or conduct the
meeting through the use of, any means of communication by which all directors
participating may simultaneously hear each other during the meeting. A director
participating in a meeting by this means is deemed to be present in person at
the meeting.
2.12 Action Without Meeting. Action required or permitted to be taken at a
meeting of the Board of Directors may be taken without a meeting if the action
is taken by all members of the Board. The action shall be evidenced by one or
more written consents stating the action taken, signed by each director either
before or after the action is taken and included in the minutes or filed with
the corporate records. Action taken under this section shall be effective when
the last director signs the consent unless the consent specifies a different
effective date in which event the action taken is effective as of the date
specified therein provided the consent states the date of execution by each
director.
2.13 Compensation. Directors shall not receive a stated salary for their
services, but directors may be paid a fixed sum and expenses for attendance at
any regular or special meeting of the Board of Directors or any meeting of any
Committee and such other compensation as the Board of Directors shall determine.
A director may serve or be employed by the Corporation in any other capacity and
receive compensation thereafter.
2.14 Director Emeritus. The Board may appoint to the position of Director
Emeritus any retiring director who has served not less than three years as a
director of the Corporation. Such person so appointed shall have the title of
"Director Emeritus" and shall be entitled to receive notice of, and to attend
all meetings of the Board, but shall not in fact be a director, shall not be
entitled to vote, shall not be counted in determining a quorum of the Board and
shall not have any of the duties or liabilities of a director under law.
2.15 Chairman and Vice Chairman. The Chairman of the Board, if one is
designated by the Board of Directors, shall preside at all meetings of the Board
and of shareholders and perform such other duties as the Board shall assign from
time to time. The Vice Chairman of the Board, if one is designated by the Board
of Directors, shall at the request of or in the absence of the Chairman of the
Board, preside at meetings of the Board and of shareholders and, when requested
to do so by the Board, shall perform all of the functions of the Chairman of the
Board during the absence or incapacity of the latter.
ARTICLE III
COMMITTEES OF DIRECTORS
3.1 Committees. The Board of Directors may create one or more committees
and appoint members of the Board of Directors to serve on them. Unless otherwise
provided in these Bylaws, each committee shall have two or more members who
serve at the pleasure of the Board of Directors. The creation of a committee and
appointment of members to it shall be approved by a majority of all of the
directors in office when the action is taken.
3.2 Authority of Committees. To the extent specified by the Board of
Directors, each committee may exercise the authority of the Board of Directors,
except that a committee may not (i) approve or recommend to shareholders action
that is required by law to be approved by shareholders, (ii) fill vacancies on
the Board of Directors or on any of its committees, (iii) amend the Articles of
Incorporation, (iv) adopt, amend, or repeal these Bylaws, (v) approve a plan of
merger not requiring shareholder approval, (vi) authorize or approve a
distribution, except according to a general formula or method prescribed by the
Board of Directors or (vii) authorize or approve the issuance or sale or
contract for sale of shares, or determine the designation and relative rights,
preferences, and limitations of a class or series of shares; provided, however,
that the Board of Directors may authorize a committee, or a senior executive
officer of the Corporation, to do so within limits specifically prescribed by
the Board of Directors.
3.3 Executive Committee. The Board of Directors may appoint an Executive
Committee consisting of not less than two directors which committee shall have
all of the authority of the Board of Directors except to the extent such
authority is limited by the provisions of Section 3.2.
3.4 Audit Committee. The Board of Directors shall appoint each year an
Audit Committee, all of whose members shall be independent directors (as defined
in Section 6.1) and which shall perform such duties as its members consider
necessary and desirable properly to evaluate and generally to supervise the
Corporation's accounting procedures including but not limited to the following:
1. Recommend independent public accountants for the Corporation to
the Board.
2. Determine that the scope of the audit is adequate and approve the
audit fee.
3. Review audit results with the Corporation's independent public
accountants.
4. Review and approve the retention of the outside auditors to
perform non-audit services and approve the fee therefor.
5. Recommend policy for the scope, frequency, and method of internal
audit reports and review the results thereof. Develop a direct line of
communication with internal auditors, if and when such are employed.
6. Review pending lawsuits.
7. Review insurance coverage.
The Audit Committee shall have complete access to the Corporation's
independent public accountants, internal auditors, if any, and inside and
outside general counsel.
3.5 Nominating and Structure Committee. The Board of Directors shall
appoint each year a Nominating and Structure Committee, which shall be composed
of at least three members of the Board, a majority of whom shall be independent
directors (as defined in Section 6.1). The functions of this Committee shall
include the following:
1. Review the performance and contributions of existing directors
for the purpose of recommending whether they be nominated for a
successive term.
2. Recommend policies with regard to the size, composition and
function of the Board.
3. Suggest persons to fill vacancies on the Board and maintain files
on names submitted.
4. Assist the Chairman of the Board in carrying out an orientation
program for new directors.
5. Review and recommend to the Board changes and improvements in the
functioning of the Board.
6. Review and recommend compensation levels for non-management
directors.
3.6 Compensation and Personnel Committee. The Board of Directors shall
appoint each year a Compensation and Personnel Committee, which shall be
composed of at least three members of the Board, all of whom shall be
independent directors (as defined in Section 6.1), and which shall have the
following duties:
1. Review and recommend to the Board current management compensation
programs including salaries, bonuses and fringe benefits and the
creation of new officerships.
2. Review and report to the Board on the funding and adequacy of existing
retirement programs, and recommend new programs, if appropriate. (This
responsibility does not include investment policy and other
responsibilities of the Trustees of the Retirement Plan.)
3. Award and administer pursuant to existing authority, the Corporation's
stock incentive programs and review and recommend similar future
programs, if any.
4. Review top management organization, assist the CEO in determining that
the Corporation has adequate depth and breadth of management to carry
out its expansion programs and to provide for succession in the event
of retirement or the unanticipated departure of a key executive.
5. Review the Corporation's programs for attracting, developing and
compensating management personnel at lower and middle levels.
3.7 Committee Meetings; Miscellaneous. The provisions of these Bylaws which
govern meetings, action without meetings, notice and waiver of notice, and
quorum and voting requirements of the Board of Directors shall apply to
committees of directors and their members as well.
ARTICLE IV
OFFICERS
4.1 Officers. The officers of the Corporation shall be a President, a
Secretary, a Chief Financial Officer, and, in the discretion of the Board of
Directors or the President, one or more Vice-Presidents and such other officers
as may be deemed necessary or advisable to carry on the business of the
Corporation. Any two or more offices may be held by the same person.
4.2 Election; Term. Officers shall be elected by the Board of Directors.
The President may, from time to time, appoint other officers. Officers elected
by the Board of Directors shall hold office, unless sooner removed, until the
next annual meeting of the Board of Directors or until their successors are
elected. Officers appointed by the President shall hold office, unless sooner
removed, until their successors are appointed. The action of the President in
appointing officers shall be reported to the next regular meeting of the Board
of Directors after it is taken. Any officer may resign at any time upon written
notice to the Board of Directors or the President and such resignation shall be
effective when notice is delivered unless the notice specifies a later effective
date.
4.3 Removal of Officers. The Board of Directors may remove any officer at
any time, with or without cause. The President may remove any officer he
appointed by the President at any time, with or without cause. Such action shall
be reported to the next regular meeting of the Board of Directors after it is
taken.
4.4 Duties of the President. The President shall be the Chief Executive
Officer of the Corporation and a member of the Board of Directors. The
President, in the absence of the Chairman of the Board and the Vice Chairman of
the Board, shall preside at all meetings of the Board of Directors and
shareholders, shall have power to call special meetings of the shareholders and
directors for any purpose; may hire, appoint and discharge employees and agents
of the Corporation and fix their compensation; may make and sign deeds,
mortgages, deeds of trust, notes, leases, powers of attorney, contracts and
agreements in the name and on behalf of the Corporation; shall have power to
carry into effect all directions of the Board of Directors; and shall have
general supervision of the business of the Corporation, except as may be limited
by the Board of Directors, the Articles of Incorporation, or these bylaws.
4.5 Duties of the Vice President. Such Vice Presidents, in the order
designated by the Board of Directors from time to time, shall exercise all of
the functions of the President during the absence or incapacity of the latter
and shall perform such other duties as may be assigned to them by the Board of
Directors or the President.
4.6 Duties of the Secretary. The Secretary shall be the ex-officio clerk of
the Board of Directors and shall give, or cause to be given, notices of all
meetings of shareholders and directors, and all other notices required by law or
by these Bylaws. The Secretary shall record the proceedings of the meetings of
the shareholders, Board of Directors and committees of the Board of Directors,
in books kept for that purpose and shall keep the seal of the Corporation and
attach it to all documents requiring such impression unless some other officer
is designated to do so by the Board of Directors. The Secretary shall also
perform such other duties as may be assigned by the Board of Directors or the
President.
4.7 Duties of the Chief Financial Officer. The Chief Financial Officer
shall keep or cause to be kept full and accurate books of account, and may make
and sign deeds, mortgages, deeds of trust, notes, leases, contracts and
agreements in the name and on behalf of the Corporation. Whenever required by
the Board of Directors or the President, the Chief Financial Officer shall
render a financial statement showing all transactions of the Corporation and the
financial condition of the Corporation.
4.8 Duties of the Assistant Secretary. There may be one or more Assistant
Secretaries who shall exercise all of the functions of the Secretary during the
absence or incapacity of the latter and such other duties as may be assigned
from time to time by the Board of Directors or the President.
4.9 Duties of Other Officers. The other officers of the Corporation, which
may include Assistant Vice Presidents, a Treasurer, Assistant Treasurers, a
Controller or Assistant Controllers, shall have such authority and perform such
duties as shall be prescribed by the Board of Directors or by officers
authorized by the Board of Directors to appoint them to their respective
offices. To the extent that such duties are not so stated, such officers shall
have such authority and perform the duties which generally pertain to their
respective offices, subject to the control of the President or the Board of
Directors.
4.10 Voting Securities of Other Corporations. Unless otherwise provided by
the Board of Directors, each of the President or the Chief Financial Officer, in
the name and on behalf of the Corporation, may appoint from time to time himself
or herself or any other person (or persons) proxy, attorney or agent for the
Corporation to cast the votes which the Corporation may be entitled to cast as a
shareholder, member or otherwise in any other corporation, partnership or other
legal entity, domestic or foreign, whose stock, interests or other securities
are held by the Corporation, or to consent in writing to any action by such
other entity, or to exercise any or all other powers of this Corporation as the
holder of the stock, interests or other securities of such other entity. Each of
the President or the Chief Financial Officer may instruct the person or persons
so appointed as to the manner of casting such votes or giving such consent and
may execute or cause to be executed on behalf of the Corporation and under its
corporate seal such written proxies, consents, waivers, or other instruments as
may be deemed necessary or proper. Each of the President or the Chief Financial
Officer may attend any meeting of the holders of stock, interests or other
securities of any such other entity and vote or exercise any or all other powers
of this Corporation as the holder of the stock, interest or other securities of
such other entity.
4.11 Compensation. The compensation of all officers of the
Corporation shall be fixed by the Board of Directors or the Compensation
and Personnel Committee.
4.12 Bonds. The Board of Directors may require that any or all officers,
employees and agents of the Corporation give bond to the Corporation, with
sufficient sureties, conditioned upon the faithful performance of the duties of
their respective offices or positions.
ARTICLE V
EVIDENCE OF SHARES
5.1 Form. Shares of the Corporation shall, when fully paid, be evidenced by
certificates containing such information as is required by law and approved by
the Board of Directors. Alternatively, the Board of Directors may authorize the
issuance of some or all shares without certificates. In such event, within a
reasonable time after issuance, the Corporation shall mail to the shareholder a
written confirmation of its records with respect to such shares containing the
information required by law. When issued, certificates shall be signed by the
Chairman of the Board, the President or a Vice President designated by the Board
and the Secretary or an Assistant Secretary and may (but need not) be sealed
with the seal of the Corporation. The seal of the Corporation and any or all of
the signatures on a share certificate may be facsimile. If any officer, transfer
agent or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the Corporation
with the same effect as if such individual were such officer, transfer agent or
registrar on the date of issue.
5.2 Transfer. The Board of Directors may make rules and regulations
concerning the issue, registration and transfer of shares and/or certificates
representing the shares of the Corporation. Transfers of shares and/or of the
certificates representing such shares shall be made upon the books of the
Corporation by surrender of the certificates representing such shares, if any,
accompanied by written assignments given by the record owners thereof or their
attorneys-in-fact.
5.3 Restrictions on Transfer. A lawful restriction on the transfer or
registration of transfer of shares is valid and enforceable against the holder
or a transferee of the holder if the restriction complies with the requirements
of law and its existence is noted conspicuously on the front or back of any
certificate representing the shares or has been otherwise communicated in
accordance with the requirements of law. Unless so noted or communicated, a
restriction is not enforceable against a person without knowledge of the
restriction.
5.4 Lost or Destroyed Share Certificates. The Corporation may issue a new
share certificate or a written confirmation of its records with respect to
shares in the place of any certificate theretofore issued which is alleged to
have been lost or destroyed and may require the owner of such certificate, or
such owner's legal representative, to give the Corporation a bond, with or
without surety, or such other agreement, undertaking or security as the Board of
Directors shall determine is appropriate, to indemnify the Corporation against
any claim that may be made against it on account of the alleged loss or
destruction or the issuance of any such new certificate.
5.5 Registered Shareholders. The Corporation shall be entitled to treat the
holder of record of any share or shares of stock as the owner thereof and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person. The
Corporation shall not be liable for registering any transfer of shares which are
registered in the name of a fiduciary unless done with actual knowledge of facts
which would cause the Corporation's action in registering the transfer to amount
to bad faith.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.1 Certain Definitions. As used in these Bylaws, the term "independent"
has the following meaning: A director is considered to be independent if the
individual (i) is not currently a member of management, (ii) has not been a
member of management for at least five years, (iii) is not employed on a part
time or consulting basis by the Company, (iv) has no direct, personal
transaction in excess of $60,000 with the Company and (v) is not an owner of
more than 10% of an entity engaged in transactions with the Company exceeding 5%
of the lesser of the entity's or the Company's revenues.
6.2 Corporate Seal. The corporate seal of the Corporation shall be
circular and shall have inscribed thereon, within and around the
circumference, the name of the Corporation. In the center shall be the
word "SEAL".
6.3 Fiscal Year. The fiscal year of the Corporation shall begin on
the first day of March of each year and end on the last day of February in
the next succeeding year.
6.4 Amendments. The power to alter, amend or repeal the Bylaws or adopt new
bylaws shall be vested in the Board of Directors unless otherwise provided in
the Articles of Incorporation. Bylaws adopted by the Board of Directors may be
repealed or changed or new bylaws adopted by the shareholders, and the
shareholders may prescribe that any bylaw adopted by them may not be altered,
amended or repealed by the Board of Directors.
6.5 General. Any matters not specifically covered by these Bylaws shall be
governed by the applicable provisions of the Code of Virginia in force at the
time.
Amendment #2 to 1994 Stock Incentive Plan
(adopted April 9, 1996)
RESOLVED, that pursuant to the recommendation of the Compensation and
Personnel Committee and subject to shareholder approval, Section 4 of
the Company's 1994 Stock Incentive Plan at the 1996 annual meeting, as
adopted February 15, 1994 and amended February 10, 1995 (the "Plan"),
shall be amended to increase the number of shares issuable under the
Plan by 3,000,000 shares and to increase the per employee limit on
annual grants under the Plan, such amendments to be accomplished by
deleting the first two sentences of Section 4 and replacing them with
the following:
"Subject to Section 13 of the Plan, there shall be reserved
for issuance under the Plan an aggregate of five million five
hundred thousand (5,500,000) shares of Company Stock, which
shall be authorized, but unissued shares. No more than one
million five hundred thousand (1,500,000) shares may be
allocated to the Incentive Awards that are granted to any one
employee during any single calendar year."
RESOLVED, that the Plan shall be amended to correct the definition of
"Fair Market Value" appearing in Section 2(k) of the Plan to read as
follows:
"Fair Market Value" means, for any given date, the fair market
value of the Company Stock as of such date, as determined by
the Committee based on the then prevailing prices of the
Company Stock on the exchange on which it generally has the
greatest trading volume.
RESOLVED, that pursuant to the recommendation of the Compensation and
Personnel Committee and subject to shareholder approval at the 1996
annual meeting, Section 10 of the Plan shall be amended to provide for
the transferability of options under certain circumstances, such
amendment to be accomplished by deleting Section 10 and replacing it
with the following:
"10. Nontransferability of Incentive Awards. Incentive Awards
shall not be transferrable unless so provided in the award
agreement or an amendment to the award agreement. Options and
Stock Appreciation Rights which are intended to be exempt
under Rule 16b-3 (to the extent required by Rule 16b-3 at the
time of grant or amendment of the award agreement), by their
terms, shall not be transferable by the Participant except by
will or by the laws of descent and distribution and shall be
exercisable, during the Participant's lifetime, only by the
Participant or by his guardian or legal representative.
Notwithstanding the foregoing, the Committee, in its sole
discretion, may provide for transferability of particular
Incentive Awards so long as such transferability will not
disqualify the exemption under Rule 16b-3 for other Incentive
Awards."
Amendment to 1989 Directors' Stock Option Plan
(Adopted April 9, 1996)
RESOLVED, that Section 7(c)(v) of the 1989 Circuit City Stores, Inc.
Non-Employee Directors Stock Option Plan (the "Plan") shall be amended,
subject to stockholder approval, to allow a director to exercise a
vested option after the option holder ceases to be a director for a
period of one additional year for each five years of service by the
option holder as a director of the Company, but not past the expiration
date of the option, such amendment to be accomplished by deleting said
Section 7(c)(v) and replacing it with the following:
"(v) except at such time as an optionee is a director of the
Company; provided, however, that once an Option has become
exercisable, if the optionee later ceases to be a director of
the Company, the Option may be exercised after the date the
optionee ceased to be a director at any time that is within a
period equal to the number of years of a director's service on
the Board divided by five (5) (rounded down to the next full
integer) plus one (1) year, provided that the Option must be
exercised before its date of expiration pursuant to (iii)
above."
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