SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-A
For Registration of Certain Classes of Securities
Pursuant to Section 12(b) or (g) of the
Securities and Exchange Act of 1934
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CIRCUIT CITY STORES, INC.
(Exact name of registrant as specified in its charter)
Virginia 54-0493875
(State of incorporation (I.R.S. employer
or organization) identification no.)
9950 Mayland Drive 23230
Richmond, Virginia (Zip code)
(Address of principal executive offices)
If this Form relates to the registration of a class of debt securities and is
effective upon filing pursuant to General Instruction A.(c)(1), please check the
following box. |_|
If this Form relates to the registration of a class of debt securities and is to
become effective simultaneously with the effectiveness of a concurrent
registration statement under the Securities Act of 1933 pursuant to General
Instruction A.(c)(2), please check the following box. |_|
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Securities to be registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Title of each class on which each class
to be registered is to be registered
<S> <C>
Circuit City Stores, Inc. -- New York Stock Exchange
Circuit City Group Common Stock, (when issued and regular way)
par value $.50 per share
Circuit City Stores, Inc. -- New York Stock Exchange
CarMax Group Common Stock, (when issued and regular way)
par value $.50 per share
</TABLE>
Securities to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
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Item 1. Description of Registrant's Securities to be Registered.
Reference is made to the information set forth under "Proposal 1 -- The
CarMax Stock Proposal -- Description of Circuit City Stock and CarMax Stock,"
"-- Inter-Group Interest," "-- Restated Rights Agreement" and "-- Anti-takeover
Considerations" in the Registrant's definitive proxy statement filed with the
Securities and Exchange Commission on December 23, 1996 (the "Proxy Statement").
A copy of such information is attached hereto as Exhibit 1 and is incorporated
herein by reference.
Item 2. Exhibits.
1. Information set forth under "Proposal 1 -- The CarMax Stock
Proposal -- Description of Circuit City Stock and CarMax Stock,"
"-- Inter-Group Interest," "-- Restated Rights Agreement" and "--
Anti-takeover Considerations" in the Proxy Statement.
2. Registrant's Amended and Restated Articles of Incorporation,
effective July 10, 1996.
3. Form of Registrant's Amendments to Amended and Restated Articles of
Incorporation, to be filed with the Virginia State Corporation
Commission prior to the issuance of the Securities.
4. Form of Certificate of Circuit City Stores, Inc. -- Circuit City
Group Common Stock, par value $.50 per share.
5. Form of Certificate of Circuit City Stores, Inc. -- CarMax Group
Common Stock, par value $.50 per share.
6. Registrant's Bylaws, as Amended and Restated June 18, 1996.
7. Form of Amended and Restated Rights Agreement between Registrant
and Norwest Bank Minnesota, N.A., as Rights Agent, with forms of
Rights Certificates attached, as proposed to be amended and
restated prior to the issuance of the Securities.
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this amendment to the registration
statement to be signed on its behalf by the undersigned, thereto duly
authorized.
January 2, 1997
CIRCUIT CITY STORES, INC.
By: /s/ Philip J. Dunn
---------------------------------
Philip J. Dunn, Vice President
and Treasurer
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INDEX TO EXHIBITS
Exhibit No.
* 1. Information set forth under "Proposal 1 -- The CarMax Stock
Proposal -- Description of Circuit City Stock and CarMax Stock,"
"-- Inter-Group Interest," "-- Restated Rights Agreement" and "--
Anti-takeover Considerations" in the Proxy Statement.
2. Registrant's Amended and Restated Articles of Incorporation,
effective July 10, 1996, filed as Exhibit 3(i) to Registrant's
Quarterly Report on Form 10-Q for the quarter ended May 31, 1996
(File No. 1-5767), are incorporated herein by reference.
3. Form of Amendments to Registrant's Amended and Restated Articles of
Incorporation, to be filed with the Virginia State Corporation
Commission prior to the issuance of the Securities and filed as
Annex II to the Proxy Statement, is incorporated herein by
reference.
* 4. Form of Certificate of Circuit City Stores, Inc. -- Circuit City
Group Common Stock, par value $.50 per share.
* 5. Form of Certificate of Circuit City Stores, Inc. -- CarMax Group
Common Stock, par value $.50 per share.
6. Registrant's Bylaws, as Amended and Restated June 18, 1996, filed
as Exhibit 3(ii) to Registrant's Quarterly Report on Form 10-Q for
the quarter ended May 31, 1996 (File No. 1-5767), are incorporated
herein by reference.
* 7. Form of Amended and Restated Rights Agreement between Registrant
and Norwest Bank Minnesota, N.A., as Rights Agent, with forms of
Rights Certificates attached, as proposed to be amended and
restated prior to the issuance of the Securities.
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* Filed herewith.
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DESCRIPTION OF CIRCUIT CITY STOCK AND CARMAX STOCK
THE FOLLOWING DESCRIPTION IS QUALIFIED BY REFERENCE TO THE GLOSSARY OF
DEFINED TERMS AND TO ANNEX II-A TO THIS PROXY STATEMENT, WHICH CONTAINS THE FULL
TEXT OF THE PROPOSED AMENDMENTS TO THE ARTICLES.
GENERAL
The Company's Articles currently provide that the Company is authorized to
issue 252,000,000 shares of stock, consisting of 250,000,000 shares of Common
Stock, par value $.50 per share, and 2,000,000 shares of Preferred Stock, par
value $20.00 per share, issuable in series by the Board of Directors, of which,
as of December 11, 1996, 500,000 shares were designated as Cumulative
Participating Preferred Stock, Series E (the "Series E Preferred Stock"). As of
December 11, 1996, the Company had issued and outstanding 97,953,294 shares of
Existing Common Stock and no shares of Preferred Stock.
If the CarMax Stock Proposal is adopted and implemented by the Board of
Directors, the Articles will be amended prior to the delivery of CarMax Stock in
the CarMax Stock Offering to provide for the issuance of Common Stock in series
by action of the Board of Directors, of which 125,000,000 shares initially will
be designated as Circuit City Stock and 125,000,000 shares initially will be
designated as CarMax Stock, and to redesignate the Existing Common Stock as
Circuit City Stock. The Circuit City Stock and the CarMax Stock are referred to
herein as the "Common Stock." The Board of Directors will have the authority to
increase or decrease from time to time the total number of authorized shares
comprising each series of Common Stock but not above a number which, when added
to the aggregate number of authorized shares of all other series of Common
Stock, would exceed the total authorized number of shares of Common Stock, and
not below the number of shares of such series then outstanding.
The Board of Directors is seeking shareholder approval of an amendment to
the Articles that would increase the number of shares of Common Stock authorized
for issuance from 250,000,000 to 350,000,000 in order to provide greater
assurance that a sufficient number of shares would be available in the event of
a conversion of one series of Common Stock into the other series. See "Proposal
2 -- Amendment to Articles of Incorporation Relating to Increased Authorization
of Common Stock" and " -- Conversion and Redemption."
The authorized but unissued shares of Circuit City Stock and CarMax Stock
would be available for issuance by the Company from time to time, as determined
by the Board of Directors, for any proper corporate purpose, which could include
raising capital, paying stock dividends, providing compensation or benefits to
employees or acquiring other companies or businesses. The approval of the
shareholders of the Company will not be solicited by the Company for the
issuance from the
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authorized but unissued shares of Common Stock of additional shares of Circuit
City Stock or CarMax Stock (including from shares that were previously
designated as part of the other series but are unissued) unless such approval is
deemed advisable by the Board of Directors or required by stock exchange
regulations or under the VSCA.
DIVIDENDS
Dividends on the Circuit City Stock and the CarMax Stock will be subject to
substantially the same limitations as dividends on the Existing Common Stock,
which are limited to legally available assets of the Company under the VSCA and
subject to the prior payment of dividends on any outstanding shares of Preferred
Stock. Under the VSCA, no distribution may be made to shareholders if, after
giving effect to such distribution, the Company would not be able to pay its
debts as they become due in the usual course of business or the Company's total
assets would be less than its total liabilities plus, subject to certain
exceptions, any amounts necessary to satisfy the preferential rights upon
dissolution of shareholders whose preferential rights are superior to those of
the shareholders receiving the distribution.
Dividends on the Circuit City Stock and the CarMax Stock will be further
limited to an amount not in excess of the Circuit City Group Available Dividend
Amount and the CarMax Group Available Dividend Amount, respectively. The
Available Dividend Amount with respect to a Group is intended to be similar to
the amount that would be legally available for the payment of dividends on the
stock of such Group under the VSCA if such Group were a separate company. There
can be no assurance that there will be an Available Dividend Amount with respect
to either Group.
The "Circuit City Group Available Dividend Amount," on any date, means the
excess, if any, of:
(i) an amount equal to the total assets of the Circuit City Group less
its total liabilities as of such date determined in accordance with
generally accepted accounting principles as in effect at such time applied
on a basis consistent with that applied in determining the Circuit City
Group Net Earnings (Loss), over
(ii) except to the extent that the Articles permit otherwise, the
amount that would be needed to satisfy the preferential rights to which
holders of Preferred Stock attributed to the Circuit City Group are
entitled upon dissolution of the Company;
provided that such excess must be reduced by an amount sufficient to ensure that
the Circuit City Group would be able to pay its debts as they become due in the
usual course of business.
The "CarMax Group Available Dividend Amount," on any date, means the
excess, if any, of:
(i) the product of (x) the Outstanding CarMax Fraction and (y) an
amount equal to the total assets of the CarMax Group less its total
liabilities as of such date determined in accordance with generally
accepted accounting principles as in effect at such time applied on a basis
consistent with that applied in determining the CarMax Group Net Earnings
(Loss), over
(ii) except to the extent that the Articles permit otherwise, the
amount that would be needed to satisfy the preferential rights to which
holders of any Preferred Stock attributed to the CarMax Group are entitled
upon dissolution of the Company;
provided that such excess must be reduced by an amount sufficient to ensure that
the CarMax Group would be able to pay its debts as they become due in the usual
course of business.
"Circuit City Group Net Earnings (Loss)," for any period through any date,
means the net earnings or loss of the Circuit City Group for such period (or in
respect of fiscal periods of the Company commencing prior to the date of the
initial issuance of CarMax Stock, the pro forma net earnings or loss of the
Circuit City Group for such period as if such date had been the first day of
such period) determined in accordance with generally accepted accounting
principles as in effect at such time, reflecting income and expense of the
Company attributed to the Circuit City Group on a basis substantially consistent
with attributions of income and expense made in the calculation of CarMax Group
Net Earnings (Loss), including, without limitation, corporate administrative
costs, net interest and other financial costs and income taxes.
"CarMax Group Net Earnings (Loss)," for any period through any date, means
the net earnings or loss of the CarMax Group for such period (or in respect of
the fiscal periods of the Company commencing prior to the date of the first
issuance of the CarMax Stock, the pro forma net earnings or loss of the CarMax
Group for such period as if such date had been the first day of such period)
determined in accordance with generally accepted accounting principles as in
effect at such time, reflecting income and expense of the Company attributed to
the CarMax Group on a basis substantially consistent with
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attributions of income and expense made in the calculation of the Circuit City
Group Net Earnings (Loss), including, without limitation, corporate
administrative costs, net interest and other financial costs and income taxes.
The VSCA limits the amount of distributions on capital stock to the legally
available assets of the Company, which are determined on the basis of the entire
Company, and not just the respective Groups. Consequently, the amount of legally
available assets would reflect the amount of any net losses of any Group, any
distributions on Circuit City Stock, CarMax Stock or any Preferred Stock and any
repurchases of Circuit City Stock, CarMax Stock or certain Preferred Stock.
Dividend payments on the Circuit City Stock and on the CarMax Stock could be
precluded because of the unavailability of legally available assets under the
VSCA, even though the Available Dividend Amount test with respect to the
relevant Group was met.
Subject to the prior payment of dividends on any outstanding shares of
Preferred Stock and the foregoing limitations, the Board of Directors would be
able, in its sole discretion, to declare and pay dividends exclusively on the
Circuit City Stock, exclusively on the CarMax Stock or on both, in equal or
unequal amounts, notwithstanding the relative amounts of the Circuit City Group
Available Dividend Amount and the CarMax Group Available Dividend Amount, the
amount of prior dividends declared on each series, the respective voting or
liquidation rights of each series or any other factor.
At the time of any dividend, redemption or other distribution on the
outstanding shares of CarMax Stock (but excluding a dividend payable in shares
of CarMax Stock), the Circuit City Group's financial statements will be credited
with, and the CarMax Group's financial statements will be charged with, an
amount equal to the product of (i) the Fair Value of such dividend, redemption
payment or distribution paid or distributed in respect of the outstanding shares
of CarMax Stock multiplied by (ii) a fraction, the numerator of which is the
Inter-Group Interest Fraction on the record date for such dividend, redemption
or distribution and the denominator of which is the Outstanding CarMax Fraction
on the record date for such dividend, redemption or distribution.
For information concerning the definition of "Fair Value," see "Glossary of
Defined Terms." See Annex I for illustrations of the calculation of the
Inter-Group Interest and the related effects of dividends on shares of CarMax
Stock.
CONVERSION AND REDEMPTION
The Articles currently do not provide for either mandatory or optional
conversion or redemption of the Existing Common Stock. The CarMax Stock Proposal
will permit the conversion and redemption of the CarMax Stock and the Circuit
City Stock upon the terms described below.
For information concerning the definitions of "Convertible Securities,"
"Market Capitalization," "Market Value," "Market Value Ratio of the CarMax Stock
to the Circuit City Stock," "Market Value Ratio of the Circuit City Stock to the
CarMax Stock" and "Publicly Traded," as used below, see "Glossary of Defined
Terms."
MANDATORY DIVIDEND, REDEMPTION OR CONVERSION OF COMMON STOCK
Upon the sale, transfer, assignment or other disposition (whether by
merger, consolidation, sale or contribution of assets or stock or otherwise), in
one transaction or a series of related transactions (a "Disposition"), by the
Company of all or substantially all of the properties and assets attributed to
either Group to one or more persons or entities (other than (w) the Disposition
by the Company of all or substantially all of the Company's properties and
assets in one transaction or a series of related transactions in connection with
the liquidation, dissolution or termination of the Company and the distribution
of assets to shareholders, (x) on a pro rata basis to the holders of all
outstanding shares of the series of Common Stock relating to such Group and, in
the case of a Disposition of the properties and assets attributed to the CarMax
Group, to the Company for the benefit of the Circuit City Group with respect to
the Number of Shares Issuable with Respect to the Inter-Group Interest, if any,
(y) to any person or entity controlled by the Company (as determined by the
Board of Directors) or (z) in connection with a Related Business Transaction),
the Company is required, on or prior to the 85th Trading Day following the
consummation of such Disposition, to either:
(1) provided that there are assets of the Company legally available
therefor:
(i) subject to the limitations described above in the second paragraph
under " -- Dividends," declare and pay a dividend in cash and/or securities
(other than Common Stock) or other property to the holders of outstanding
shares of the series of Common Stock relating to the Group subject to such
Disposition having a Fair Value as of the date of such consummation equal
in the aggregate to (I) in the case of a Disposition of the properties and
assets attributed to the Circuit City Group, the Fair Value of the Net
Proceeds of such Disposition and (II) in the case of a Disposition of the
properties and assets attributed to the CarMax Group, the product of the
Outstanding CarMax Fraction as of the record
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date for determining holders entitled to receive such dividend multiplied
by the Fair Value of the Net Proceeds of such Disposition; or
(ii) (A) if such Disposition involves all (not merely substantially
all) of the properties and assets attributed to such Group, redeem all
outstanding shares of Common Stock relating to the Group subject to such
Disposition in exchange for cash and/or securities (other than Common
Stock) or other property having a Fair Value as of the date of such
consummation in the aggregate equal to (I) in the case of a Disposition of
the properties and assets attributed to the Circuit City Group, the Fair
Value of the Net Proceeds of such Disposition and (II) in the case of a
Disposition of the properties and assets attributed to the CarMax Group,
the product of the Outstanding CarMax Fraction as of such redemption date
multiplied by the Fair Value of the Net Proceeds of such Disposition; or
(B) if such Disposition involves substantially all (but not all) of
the properties and assets attributed to such Group, redeem such number of
whole shares of the series of Common Stock relating to the Group subject to
such Disposition (but in any event not more than the number of shares of
such series of Common Stock outstanding) as have in the aggregate an
average Market Value, during the 10-Trading Day period beginning on the
16th Trading Day immediately succeeding such consummation, closest to (I)
in the case of a Disposition of the properties and assets attributed to the
Circuit City Group, the Fair Value of the Net Proceeds of such Disposition
as of the date of such consummation or (II) in the case of a Disposition of
the properties and assets attributed to the CarMax Group, the product of
the Outstanding CarMax Fraction as of the date such shares are selected for
redemption multiplied by the Fair Value of the Net Proceeds of such
Disposition as of the date of such consummation, in either case in
consideration for cash and/or securities (other than Common Stock) or other
property having a Fair Value in the aggregate equal to such Fair Value of
the Net Proceeds or such product, as applicable;
provided, however, that the Company may only redeem shares of a series of
Common Stock pursuant to this paragraph (ii) if the Fair Value of the Net
Proceeds to be paid in redemption of such series is less than or equal to
the Available Dividend Amount with respect to the Group subject to such
Disposition; or
(2) convert each outstanding share of the series of Common Stock relating
to the Group subject to such Disposition into a number of fully paid and
nonassessable shares of the series of Common Stock relating to the other
Group (or, if the Common Stock relating to the other Group is not Publicly
Traded at such time and shares of another class or series of common stock
of the Company (other than the series of Common Stock relating to the Group
subject to such Disposition) are then Publicly Traded, of such other class
or series of common stock as has the largest Market Capitalization as of
the close of business on the Trading Day immediately preceding the date of
the notice of such conversion mailed to holders), equal to 110% of the
ratio (rounded to the nearest five decimal places) of the average Market
Value of one share of Common Stock relating to the Group subject to such
Disposition to the average Market Value of one share of Common Stock
relating to the other Group (or such other class or series of common stock,
as the case may be), during the 10-Trading Day period beginning on the 16th
Trading Day following such consummation.
The Board of Directors may, within one year after a dividend or redemption
described above in this section, convert each outstanding share of the series of
Common Stock relating to the Group subject to such Disposition into a number of
fully paid and nonassessable shares of the series of Common Stock relating to
the other Group (or, if the series of Common Stock relating to the other Group
is not Publicly Traded at such time and shares of another class or series of
common stock of the Company (other than the series of Common Stock relating to
the Group subject to such Disposition) are then Publicly Traded, of such other
class or series of common stock as has the largest Market Capitalization as of
the close of business on the Trading Day immediately preceding the date of the
notice of such conversion mailed to holders) equal to 110% of the Market Value
Ratio of the Circuit City Stock to the CarMax Stock, if the Circuit City Stock
is to be converted into CarMax Stock, or the Market Value Ratio of the CarMax
Stock to the Circuit City Stock, if the CarMax Stock is to be converted into
Circuit City Stock, as of the fifth Trading Day prior to the date of the notice
of such conversion mailed to such holders. Any such exchange would dilute the
interest in the Company of holders of the series of Common Stock relating to the
Group not subject to the Disposition and would preclude holders of both series
of Common Stock from retaining their investment in a security reflecting
separately the business of their respective Group. In determining whether to
effect any such conversion following such a dividend or partial redemption, the
Board of Directors, in its sole discretion and consistent with its fiduciary
duties, in addition to other matters, would likely consider whether the
remaining properties and assets attributed to the Group subject to the
Disposition continue to constitute a viable business. Other considerations could
include the number of shares of Common Stock relating to such Group remaining
issued and outstanding, the per share market price of such Common Stock and the
cost of maintaining shareholder accounts.
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For these purposes, "substantially all of the properties and assets"
attributed to either Group means a portion of such properties and assets (i)
that represents at least 80% of the then Fair Value of the properties and assets
attributed to such Group or (ii) from which were derived at least 80% of the
aggregate revenues for the immediately preceding 12 fiscal quarterly periods of
the Company derived from the properties and assets of such Group as of such
date.
A "Related Business Transaction" means any Disposition of all or
substantially all of the properties and assets attributed to either Group in a
transaction or series of related transactions that result in the Company
receiving in consideration of such properties and assets primarily equity
securities (including, without limitation, capital stock, debt securities
convertible into or exchangeable for equity securities or interests in a general
or limited partnership or limited liability company, without regard to the
voting power or other management or governance rights associated therewith) of
any entity which (i) acquires such properties or assets or succeeds (by merger,
formation of a joint venture or otherwise) to the business conducted with such
properties or assets or controls such acquiror or successor and (ii) is
primarily engaged or proposes to engage primarily in one or more businesses
similar or complementary to the businesses conducted by such Group prior to such
Disposition, as determined by the Board of Directors. The purpose of the Related
Business Transaction exception is to enable the Company technically to "dispose"
of properties or assets of a Group to other entities engaged or proposing to
engage in businesses similar or complementary to those of the series of Common
Stock of such Group without resulting in a dividend on, or a conversion or
redemption of, the series of Common Stock of such Group.
The "Net Proceeds" of a Disposition of any of the properties and assets
attributed to either Group means, as of any date, an amount, if any, equal to
what remains of the gross proceeds of such Disposition after any payment of, or
reasonable provision is made as determined by the Board of Directors for, (a)
any taxes payable by the Company (or which would have been payable but for the
utilization of tax benefits attributable to the other Group) in respect of such
Disposition or in respect of any resulting dividend or redemption, (b) any
transaction costs, including, without limitation, any legal, investment banking
and accounting fees and expenses and (c) any liabilities (contingent or
otherwise) of or attributed to such Group, including, without limitation, any
liabilities for deferred taxes or any indemnity or guarantee obligations of the
Company incurred in connection with the Disposition or otherwise and any
liabilities for future purchase price adjustments and any preferential amounts
plus any accumulated and unpaid dividends in respect of the Preferred Stock
attributed to such Group.
The Company may elect to pay the dividend or redemption price referred to
in clause (1)(i) or (1)(ii) of the fifth preceding paragraph above either in the
same form as the proceeds of the Disposition were received or in any other
combination of cash, securities (other than Common Stock) or other property that
the Board of Directors or, in the case of equity securities or debt securities
that have not been Publicly Traded for a period of at least 15 months, an
independent investment banking firm, determines will have an aggregate market
value of not less than the amount of the Fair Value of the Net Proceeds.
At the time of any dividend or redemption made as a result of a Disposition
of the properties and assets attributed to the CarMax Group, the financial
statements of the Circuit City Group will be credited, and the financial
statements of the CarMax Group will be charged, with an amount equal to the
product of (i) the Fair Value of such dividend or redemption multiplied by (ii)
a fraction, the numerator of which is the Inter-Group Interest Fraction on the
record date for such dividend or redemption and the denominator of which is the
Outstanding CarMax Fraction on the record date for such dividend or redemption.
CONVERSION OF COMMON STOCK AT OPTION OF THE COMPANY
The Board of Directors may at any time convert each outstanding share of
Circuit City Stock into a number of fully paid and nonassessable shares of
CarMax Stock (or, if CarMax Stock is not Publicly Traded at such time and shares
of another class or series of common stock of the Company (other than Circuit
City Stock) are then Publicly Traded, of such other class or series of common
stock of the Company as has the largest Market Capitalization as of the close of
business on the Trading Day immediately preceding the date of the notice of such
conversion mailed to holders), equal to 115% of the Market Value Ratio of the
Circuit City Stock to the CarMax Stock as of the fifth Trading Day prior to the
date of the notice of such conversion mailed to such holders.
The Board of Directors may at any time convert each outstanding share of
CarMax Stock into a number of fully paid and nonassessable shares of Circuit
City Stock (or, if Circuit City Stock is not Publicly Traded at such time and
shares of another class or series of common stock of the Company (other than
CarMax Stock) are then Publicly Traded, of such other class or series of common
stock of the Company as has the largest Market Capitalization as of the close of
business on the Trading Day immediately preceding the date of the notice of such
conversion mailed to holders), equal to 115% of the Market Value Ratio of the
CarMax Stock to the Circuit City Stock as of the fifth Trading Day prior to the
date of the notice of such conversion mailed to such holders.
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The foregoing provisions allow the Company the flexibility to recapitalize
the Common Stock into one series of common stock that would, after such
recapitalization, represent an equity interest in all of the Company's
businesses. The optional exchange could be exercised at any future time if the
Board of Directors determined that, under the facts and circumstances then
existing, an equity structure consisting of two series of common stock was no
longer in the best interests of all of the Company's shareholders. Such exchange
may be exercised, however, at a time that is disadvantageous to the holders of
one of the series of Common Stock. See "Risk Factors -- Fiduciary Duties of the
Board of Directors; No Definitive Precedent under Virginia Law" and
" -- Potential Diverging Interests."
REDEMPTION IN EXCHANGE FOR STOCK OF SUBSIDIARY
At any time at which all of the assets and liabilities attributed to the
Circuit City Group (and no other assets or liabilities of the Company or any
subsidiary thereof) are held directly or indirectly by one or more wholly owned
subsidiaries of the Company (the "Circuit City Group Subsidiaries"), the Board
of Directors may, provided that there are assets of the Company legally
available therefor, redeem all of the outstanding shares of Circuit City Stock
for all of the outstanding shares of the common stock of the Circuit City Group
Subsidiaries, on a pro rata basis. If at the time of any such redemption, the
Circuit City Group holds an Inter-Group Interest in the CarMax Group, the
Company will also issue a number of shares of CarMax Stock equal to the Number
of Shares Issuable with Respect to the Inter-Group Interest either to (i) the
holders of the Circuit City Stock or (ii) one or more of the Circuit City Group
Subsidiaries.
At any time at which all of the assets and liabilities attributed to the
CarMax Group (and no other assets or liabilities of the Company or any
subsidiary thereof) are held directly or indirectly by one or more wholly-owned
subsidiaries of the Company (the "CarMax Group Subsidiaries"), the Board of
Directors may, provided that there are assets of the Company legally available
therefor, redeem all of the outstanding shares of CarMax Stock for a number of
shares of common stock of the CarMax Group Subsidiaries equal to the product of
the Outstanding CarMax Fraction multiplied by the number of shares of the CarMax
Group Subsidiaries to be outstanding immediately following such redemption, on a
pro rata basis. The Company will retain or distribute the balance of the
outstanding shares of the common stock of the CarMax Group Subsidiaries in
respect of the Inter-Group Interest of the Circuit City Group in the CarMax
Group, if any.
GENERAL CONVERSION AND REDEMPTION PROVISIONS
Not later than the 10th Trading Day following the consummation of a
Disposition referred to above under
" -- Mandatory Dividend, Redemption or Conversion of Common Stock," the Company
will announce publicly by press release (i) the Net Proceeds of such
Disposition, (ii) the number of shares outstanding of the series of Common Stock
relating to the Group subject to such Disposition, (iii) the number of shares of
such Common Stock into or for which Convertible Securities are then convertible,
exchangeable or exercisable and the conversion, exchange or exercise price
thereof and (iv) in the case of a Disposition of the properties and assets
attributable to the CarMax Group, the Outstanding CarMax Fraction on the date of
such notice. Not earlier than the 26th Trading Day and not later than the 30th
Trading Day following the consummation of such Disposition, the Company will
announce publicly by press release which of the actions specified in clause
(1)(i), (1)(ii)(A), (1)(ii)(B) or (2) of the first paragraph under
" -- Mandatory Dividend, Redemption or Conversion of Common Stock" it has
irrevocably determined to take.
If the Company determines to pay a dividend as described in clause (1)(i)
of such paragraph, the Company is required, not later than the 30th Trading Day
following the consummation of such Disposition, to cause to be given to each
holder of shares of the series of Common Stock relating to the Group subject to
such Disposition and to each holder of Convertible Securities convertible into
or exchangeable or exercisable for shares of such Common Stock (unless alternate
provision for notice to the holders of such Convertible Securities is made
pursuant to the terms of such Convertible Securities), a notice setting forth
(i) the record date for determining holders entitled to receive such dividend,
which shall be not earlier than the 40th Trading Day and not later than the 50th
Trading Day following the consummation of such Disposition, (ii) the anticipated
payment date of such dividend (which will not be more than 85 Trading Days
following the consummation of such Disposition), (iii) the type of property to
be paid as such dividend in respect of outstanding shares of such Common Stock,
(iv) the Net Proceeds of such Disposition, (v) in the case of a Disposition of
the properties and assets attributed to the CarMax Group, the Outstanding CarMax
Fraction on the date of such notice, (vi) the number of outstanding shares of
such Common Stock and the number of shares of such Common Stock into or for
which outstanding Convertible Securities are then convertible, exchangeable or
exercisable and the conversion, exchange or exercise price thereof and (vii) in
the case of notice to be given to holders of Convertible Securities, a statement
to the effect that a holder of such Convertible Securities will be entitled to
receive such dividend only if such holder properly converts, exchanges or
exercises them on or prior to the
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record date referred to in clause (i) of this sentence. Such notice will be sent
by first-class mail, postage prepaid, to each such holder at such holder's
address as the same appears on the transfer books of the Company.
If the Company determines to undertake a redemption pursuant to clause
(1)(ii)(A) of the first paragraph under " -- Mandatory Dividend, Redemption or
Conversion of Common Stock," the Company is required, not earlier than the 35th
Trading Day and not later than the 45th Trading Day prior to the redemption
date, to cause to be given to each holder of shares of the series of Common
Stock subject to the Disposition referred to in such paragraph, and to each
holder of Convertible Securities convertible into or exchangeable or exercisable
for shares of such Common Stock (unless alternate provision for such notice to
the holders of such Convertible Securities is made pursuant to the terms of such
Convertible Securities) a notice setting forth (1) a statement that all shares
of such Common Stock outstanding on the redemption date will be redeemed, (2)
the redemption date (which will not be more than 85 Trading Days following the
consummation of such Disposition), (3) the type of property in which the
redemption price for the shares to be redeemed is to be paid, (4) the Net
Proceeds of such Disposition, (5) in the case of a Disposition of the properties
and assets attributed to the CarMax Group, the Outstanding CarMax Fraction on
the date of such notice, (6) the place or places where certificates for shares
of such Common Stock, properly endorsed or assigned for transfer (unless the
Company waives such requirement) are to be surrendered for delivery of cash
and/or securities or other property, (7) the number of outstanding shares of
such Common Stock and the number of shares of such series of Common Stock into
or for which outstanding Convertible Securities are then convertible,
exchangeable or exercisable and the conversion, exchange or exercise price
thereof, (8) in the case of notice to be given to holders of Convertible
Securities, a statement to the effect that a holder of such Convertible
Securities will be entitled to participate in such redemption only if such
holder properly converts, exchanges or exercises such Convertible Securities on
or prior to the redemption date referred to in clause (2) of this sentence and a
statement as to what, if anything, such holder will be entitled to receive
pursuant to the terms of such Convertible Securities or the Articles as then
amended if such holder thereafter converts, exchanges or exercises such
Convertible Securities and (9) a statement to the effect that, except as
otherwise provided below, dividends on such shares of such Common Stock shall
cease to be paid as of such redemption date. Such notice will be sent by
first-class mail, postage prepaid to each such holder at such holder's address
as the same appears on the transfer books of the Company.
If the Company determines to undertake a redemption pursuant to clause
(1)(ii)(B) of the first paragraph under " -- Mandatory Dividend, Redemption or
Conversion of Common Stock," the Company is required, not later than the 30th
Trading Day following consummation of the Disposition referred to in such
paragraph, to cause to be given to each holder of shares of the series of Common
Stock relating to the Group subject to such Disposition and to each holder of
Convertible Securities that are convertible into or exchangeable or exercisable
for shares of such Common Stock (unless alternate provision for such notice to
the holders of such Convertible Securities is made pursuant to the terms of such
Convertible Securities), a notice setting forth (i) a date, not earlier than the
40th Trading Day and not later than the 50th Trading Day following the
consummation of such Disposition in respect of which such redemption is to be
made, on which shares of such series of Common Stock will be selected for
redemption, (ii) the anticipated redemption date which will not be more than 85
Trading Days following the consummation of such Disposition, (iii) the type of
property in which the redemption price for the shares to be redeemed is to be
paid, (iv) the Net Proceeds of such Disposition, (v) in the case of a
Disposition of the properties and assets attributed to the CarMax Group, the
Outstanding CarMax Fraction, (vi) the number of outstanding shares of such
Common Stock and the number of shares of such Common Stock into or for which
outstanding Convertible Securities are then convertible, exchangeable or
exercisable and the conversion, exchange or exercise price thereof, (vii) in the
case of notice to be given to holders of Convertible Securities, a statement to
the effect that a holder of such Convertible Securities will be entitled to
participate in such selection for redemption only if such holder properly
converts, exchanges or exercises them on or prior to the date referred to in
clause (i) of this sentence and a statement as to what, if anything, such holder
will be entitled to receive pursuant to the terms of such Convertible Securities
or the Articles as then amended if such holder thereafter converts, exchanges or
exercises such Convertible Securities and (viii) a statement that the Company
will not be required to register a transfer of any shares of such series of
Common Stock for a period of 15 Trading Days next preceding the date referred to
in clause (i) of this sentence. Promptly, but not earlier than 40 Trading Days
nor more than 50 Trading Days following the consummation of such Disposition,
the Company is required to cause to be given to each holder of shares of such
Common Stock to be so redeemed a notice setting forth (1) the number of shares
of such Common Stock held by such holder to be redeemed, (2) a statement that
such shares of such Common Stock will be redeemed, (3) the redemption date, (4)
the kind and per share amount of cash and/or securities or other property to be
received by such holder with respect to each share of such Common Stock to be
redeemed, including details as to the calculation thereof, (5) the place or
places where certificates for shares of such Common Stock, properly endorsed or
assigned for transfer (unless the Company waives such requirement) are to be
surrendered for delivery of such cash and/or securities or other property, (6)
if applicable, a statement to the effect that the shares being redeemed may no
longer be transferred on the transfer books of the
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Company after the redemption date and (7) a statement to the effect that, except
as otherwise provided below, dividends on such shares of such Common Stock will
cease to be paid as of such redemption date. Such notices will be sent by
first-class mail, postage prepaid to each such holder, at such holder's address
as the same appears on the transfer books of the Company.
If less than all of the outstanding shares of such Common Stock are to be
redeemed as described above under " -- Mandatory Dividend, Redemption or
Conversion of Common Stock," such shares will be redeemed by the Company pro
rata among the holders of outstanding shares of such Common Stock or by such
other method as may be determined by the Board of Directors to be equitable.
In the event of any conversion as described above under " -- Conversion of
Common Stock at Option of the Company" or " -- Mandatory Dividend, Redemption or
Conversion of Common Stock," the Company will cause to be given, not earlier
than the 35th Trading Day and not later than the 45th Trading Day prior to the
consummation date, to each holder of shares of the series of Common Stock to be
so converted and to each holder of Convertible Securities that are convertible
into or exchangeable or exercisable for shares of such Common Stock (unless
alternate provision for such notice to the holders of such Convertible
Securities is made pursuant to the terms of such Convertible Securities), a
notice setting forth (i) a statement that all outstanding shares of such Common
Stock will be converted, (ii) the conversion date (which, in the case of a
conversion after a Disposition, will not be more than 85 Trading Days following
the consummation of such Disposition), (iii) the per share number of shares of
Circuit City Stock or CarMax Stock or other class or series of common stock of
the Company, as the case may be, to be received with respect to each share of
such Common Stock, including details as to the calculation thereof, (iv) the
place or places where certificates for shares of such Common Stock, properly
endorsed or assigned for transfer (unless the Company waives such requirement)
are to be surrendered for delivery of certificates for shares of such Common
Stock, (v) the number of outstanding shares of such Common Stock and the number
of shares of such Common Stock into or for which outstanding Convertible
Securities are then convertible, exchangeable or exercisable and the conversion,
exchange or exercise price thereof, (vi) a statement to the effect that, except
as otherwise provided below, dividends on such shares of such Common Stock will
cease to be paid as of such conversion date and (vii) in the case of notice to
be given to holders of Convertible Securities, a statement to the effect that a
holder of such Convertible Securities will be entitled to receive shares of such
Common Stock upon such conversion only if such holder properly converts,
exchanges or exercises such Convertible Securities on or prior to the conversion
date referred to in clause (ii) of this sentence and a statement as to what, if
anything, such holder will be entitled to receive pursuant to the terms of such
Convertible Securities or the Articles as then amended if such holder thereafter
converts, exchanges or exercises such Convertible Securities. Such notice will
be sent by first-class mail, postage prepaid, to such holder at such holder's
address as the same appears on the transfer books of the Company.
If the Company determines to redeem shares of a series of Common Stock as
described above under " -- Redemption in Exchange for Stock of Subsidiary," the
Company will cause to be given to each holder of shares of such Common Stock and
to each holder of Convertible Securities convertible into or exchangeable or
exercisable for shares of such Common Stock (unless alternate provision for such
notice to the holders of such Convertible Securities is made pursuant to the
terms of such Convertible Securities), a notice setting forth (i) a statement
that all shares of such Common Stock outstanding on the redemption date will be
redeemed in exchange for shares of common stock of the Circuit City Group
Subsidiaries (and, in the case of a redemption to which clause (i) of the second
sentence of the first paragraph under " -- Redemption in Exchange for Stock of a
Subsidiary" applies, CarMax Stock) or shares of common stock of the CarMax Group
Subsidiaries, as the case may be, (ii) the redemption date, (iii) if CarMax
Stock is being redeemed, the Outstanding CarMax Fraction on the date of such
notice, (iv) the place or places where certificates for shares of such Common
Stock properly endorsed or assigned for transfer (unless the Company waives such
requirement) are to be surrendered for delivery of certificates for shares of
common stock of the Circuit City Group Subsidiaries (and, in the case of a
redemption to which clause (i) of the second sentence of the first paragraph
under " -- Redemption in Exchange for Stock of a Subsidiary" applies, CarMax
Stock) or shares of common stock of the CarMax Group Subsidiaries, as the case
may be, (v) a statement to the effect that, except as otherwise provided below,
dividends on such shares of such Common Stock will cease to be paid as of such
redemption date, (vi) the outstanding number of shares of such Common Stock and
the number of shares of such Common Stock into or for which outstanding
Convertible Securities are then convertible, exchangeable or exercisable and the
conversion, exchange or exercise price thereof and (vii) in the case of notice
to be given to holders of Convertible Securities, a statement to the effect that
a holder of such Convertible Securities will be entitled to receive shares of
common stock of the Circuit City Group Subsidiaries (and, in the case of a
redemption to which clause (i) of the second sentence of the first paragraph
under " -- Redemption in Exchange for Stock of a Subsidiary" applies, CarMax
Stock) or shares of common stock of the CarMax Group Subsidiaries, as the case
may be, only if such holder properly converts, exchanges or exercises such
Convertible Securities on
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or prior to the date referred to in clause (ii) of this sentence and a statement
as to what, if anything, such holder will be entitled to receive pursuant to the
terms of such Convertible Securities or the Articles of Amendment if such holder
thereafter converts, exchanges or exercises such Convertible Securities. Such
notice will be sent by first-class mail, postage prepaid, not less than 30
Trading Days nor more than 45 Trading Days prior to the redemption date, to each
such holder at such holder's address as the same appears on the transfer books
of the Company.
Neither the failure to mail any notice described above to any particular
holder of shares of any series of Common Stock or of any Convertible Securities
nor any defect therein will affect the sufficiency thereof with respect to any
other holder of outstanding shares of such Common Stock or of outstanding
Convertible Securities, or the validity of any such conversion or redemption.
The Company will not be required to issue or deliver fractional shares of
any class or series of capital stock or any fractional securities to any holder
of either series of Common Stock upon any conversion, redemption, dividend or
other distribution described above. If more than one share of Common Stock is
held at the same time by the same holder, the Company may aggregate the number
of shares of any class or series of capital stock that is issuable or the amount
of securities or property that is distributable to such holder upon any such
conversion, redemption, dividend or other distribution (including any fractions
of shares or securities). If the number of shares of any class or series of
capital stock or the amount of securities remaining to be issued or distributed
to any holder of such Common Stock is a fraction, the Company will, if such
fraction is not issued or distributed to such holder, pay a cash adjustment in
respect of such fraction in an amount equal to the Fair Value of such fraction
on the fifth Trading Day prior to the date such payment is to be made (without
interest).
No adjustments in respect of dividends will be made upon the conversion or
redemption of any shares of Common Stock; provided, however, that if such shares
are converted or redeemed by the Company after the record date for determining
holders of such Common Stock entitled to any dividend or distribution thereon,
such dividend or distribution will be payable to the holders of such shares at
the close of business on such record date notwithstanding such conversion or
redemption, in each case without interest.
Before any holder of Common Stock will be entitled to receive certificates
representing shares of any capital stock, cash and/or other securities or
property to be distributed to such holder with respect to any conversion or
redemption of shares of such Common Stock, such holder is required to surrender
at such place as the Company specified certificates for shares of such Common
Stock, properly endorsed or assigned for transfer (unless the Company waives
such requirement). As soon as practicable after the Company's receipt of
certificates for such shares of such Common Stock, the Company will deliver to
the person for whose account such shares were so surrendered, or to the nominee
or nominees of such person, certificates representing the number of whole shares
of the kind of capital stock, cash and/or other securities or property to which
such person was entitled, together with any fractional payment referred to
above, in each case without interest. If less than all of the shares of Common
Stock represented by any one certificate are to be redeemed, the Company will
issue and deliver a new certificate for the shares of such Common Stock not
redeemed.
From and after any conversion or redemption of shares of either series of
Common Stock, all rights of a holder of shares of such Common Stock that were
converted or redeemed will cease, except for the right, upon surrender of the
certificates representing such shares of such Common Stock, to receive the cash
and/or the certificates representing shares of the kind and amount of capital
stock and/or other securities or property for which such shares were converted
or redeemed, together with any fractional payment or rights to dividends as
provided above, in each case without interest. No holder of a certificate that
immediately prior to the conversion or redemption of Common Stock represented
shares of such Common Stock will be entitled to receive any dividend or other
distribution or interest payment with respect to shares of any kind of capital
stock into or in exchange for which shares of such Common Stock were converted
or redeemed until surrender of such holder's certificate in exchange for a
certificate or certificates representing shares of such kind of capital stock.
Upon such surrender, there will be paid to the holder the amount of any
dividends or other distributions (without interest) which theretofore became
payable with respect to a record date occurring after the conversion, but which
were not paid by reason of the foregoing, with respect to the number of whole
shares of the kind of capital stock represented by the certificate or
certificates issued upon such surrender. From and after a conversion, the
Company will, however, be entitled to treat the certificates for such Common
Stock that have not yet been surrendered for conversion as evidencing the
ownership of the number of whole shares of the kind of capital stock for which
the shares of such Common Stock represented by such certificates should have
been converted, notwithstanding the failure to surrender such certificates.
The Company will pay any and all documentary, stamp or similar issue or
transfer taxes that may be payable in respect of the issue or delivery of any
shares of capital stock and/or other securities on conversion or redemption of
shares of either series of Common Stock pursuant hereto. The Company will not,
however, be required to pay any tax that may be payable in
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respect of any transfer involved in the issue or delivery of any shares of
capital stock and/or other securities in a name other than that in which the
shares of such Common Stock so converted or redeemed were registered, and no
such issue or delivery will be made unless and until the person requesting such
issue has paid to the Company the amount of any such tax, or has established to
the satisfaction of the Company that such tax had been paid.
VOTING RIGHTS
Currently, holders of Existing Common Stock have one vote per share on all
matters submitted to shareholders. The CarMax Stock Proposal Amendments will
provide that the holders of both series of Common Stock and any series of
Preferred Stock outstanding at the time of such vote and entitled to vote
together with the holders of Common Stock will vote together as a single voting
group on all matters as to which common shareholders generally are entitled to
vote other than a matter with respect to which the Common Stock or either series
thereof or any series of Preferred Stock would be entitled to vote as a separate
voting group. On all matters as to which both series of Common Stock would vote
together as a single voting group, (i) each outstanding share of Circuit City
Stock shall have one vote, and (ii) each outstanding share of CarMax Stock shall
have a number of votes (including a fraction of one vote) equal to the quotient
(rounded to the nearest three decimal places) of (A) the sum of (1) four times
the average Market Value of the CarMax Stock over the five-Trading Day period
ending on the 10th Trading Day prior to the record date for determining the
holders of Common Stock entitled to vote, (2) three times the average Market
Value of the CarMax Stock over the next preceding five-Trading Day period, (3)
two times the average Market Value of the CarMax Stock over the next preceding
five-Trading Day period and (4) the average Market Value of the CarMax Stock
over the next preceding five-Trading Day period, divided by (B) the sum of (1)
four times the average Market Value of the Circuit City Stock over the
five-Trading Day period ending on such 10th Trading Day, (2) three times the
average Market Value of the Circuit City Stock over the next preceding
five-Trading Day period, (3) two times the average Market Value of the Circuit
City Stock over the next preceding five-Trading Day period and (4) the average
Market Value of the Circuit City Stock over the next preceding five-Trading Day
period. If shares of only one series of Common Stock are outstanding, each share
of that series shall be entitled to one vote. If either series of Common Stock
is entitled to vote as a separate voting group with respect to any matter, each
share of that series shall, for purposes of such vote, be entitled to one vote
on such matter.
To illustrate the foregoing, if the average Market Value of the CarMax
Stock for the periods specified in clause (A) above were $10, $20, $30 and $40,
respectively, and the average Market Value of the Circuit City Stock for the
periods specified in clause (B) above were $30, $40, $50 and $60, respectively,
each share of Circuit City Stock would have one vote and each share of CarMax
Stock would have 0.50 votes based on the following calculation:
_(4x$10)+(3x$20)+(2x$30)+(1x$40)_
(4x$30)+(3x$40)+(2x$50)+(1x$60)
Based on such number of votes, on any proposal where both series of Common Stock
vote together as a single voting group (with no classes or series of Preferred
Stock, if any, entitled to vote together with the holders of Common Stock) and
assuming four times as many shares of Circuit City Stock as CarMax Stock are
issued and outstanding, the shares of Circuit City Stock and CarMax Stock would
represent approximately 89% and 11%, respectively, of the total voting power.
The Company anticipates that upon completion of the CarMax Stock Offering,
the Circuit City Stock will initially represent a substantial majority of the
voting power of all shares of Common Stock entitled to vote in the election of
directors.
If the CarMax Stock Proposal is approved by the shareholders and
implemented by the Board of Directors, the Company will set forth the number of
outstanding shares of Circuit City Stock and CarMax Stock in its Annual and
Quarterly Reports filed pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and will disclose in any proxy statement for a
shareholder meeting the number of outstanding shares and per share voting rights
of the Circuit City Stock and the CarMax Stock.
The relative voting rights of the Circuit City Stock and the CarMax Stock
could fluctuate as described above so that a holder's voting rights will more
closely reflect the Market Value of such holder's equity investment in the
Company. Fluctuations in the relative voting rights of the Circuit City Stock
and the CarMax Stock could influence an investor interested in acquiring and
maintaining a fixed percentage of the voting power of the Company to acquire
such percentage of both series of Common Stock, and would limit the ability of
investors in one series to acquire for the same consideration relatively more or
less votes per share than investors in the other series.
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Following implementation of the CarMax Stock Proposal, the holders of
Circuit City Stock and CarMax Stock would vote together as a single voting
group, except as to certain mergers and statutory share exchanges and certain
amendments to the Articles affecting, among other things, the designation,
rights, preferences or limitations of either series of Common Stock, in which
case a separate vote by the holders of the particular series affected would also
be required. Accordingly, if a separate vote on a matter by the holders of
either the Circuit City Stock or CarMax Stock is not required under the VSCA and
if the Board of Directors does not require a separate vote, the series that is
entitled to more than the number of votes required to approve such matter will
be in a position to control the outcome of the vote on such matter even if the
matter involved a divergence or the appearance of a divergence of the interests
between the holders of the Circuit City Stock and the CarMax Stock. Conversely,
if a separate vote of the holders of either Circuit City Stock or CarMax Stock
is required to approve, for example, a merger of the type described above, the
favorable vote of the holders of more than two-thirds of the total number of
votes entitled to be cast with respect to each of the Circuit City Stock and
CarMax Stock may be required for approval. In such instance, the holders of
either the Circuit City Stock or CarMax Stock could prevent approval of such
merger notwithstanding the fact that the holders of more than two-thirds of the
total number of votes entitled to be cast with respect to both the Circuit City
Stock and CarMax Stock had voted in favor of it. Under the VSCA and the
Articles, (i) approval of certain matters, such as a merger, statutory share
exchange, and certain amendments to the Articles, requires the approval of the
holders of more than two-thirds of the total number of votes entitled to be cast
thereon by each voting group; (ii) approval of any other amendments to the
Articles requires the approval of the holders of a majority of the votes
entitled to be cast thereon by each voting group; and (iii) approval of most
other matters (other than the election of directors who are elected by a
plurality of the votes cast) requires the votes cast in favor of the matter to
exceed the votes cast opposing the matter. See "Risk Factors -- Limited Separate
Shareholder Voting Rights; Effects on Voting Power."
The CarMax Stock Proposal Amendments will reserve to the Board of Directors
the right to condition the submission of a particular matter on receipt of a
separate vote of the holders of outstanding shares of Circuit City Stock or
CarMax Stock. The Board of Directors has no present intention of imposing such a
separate vote requirement on any matter which it can now foresee. However,
should the Board of Directors, in the exercise of its fiduciary duties and its
good faith judgment of the best interests of the Company, conclude that such a
separate vote is necessary or desirable, it has reserved the right to so
require.
LIQUIDATION
Currently, in the event of a liquidation, dissolution or termination of the
Company, after payment, or provision for payment, of the debts and other
liabilities of the Company and the payment of full preferential amounts
(including any accumulated and unpaid dividends) to which the holders of any
Preferred Stock are entitled, holders of Existing Common Stock are entitled to
share ratably in the remaining net assets of the Company. Under the CarMax Stock
Proposal, in the event of a liquidation, dissolution or termination of the
Company, whether voluntary or involuntary, after payment or provision for
payment of the debts and other liabilities of the Company and full preferential
amounts (including any accumulated and unpaid dividends) to which holders of any
series of Preferred Stock are entitled (regardless of the Group to which such
shares of Preferred Stock were attributed), the holders of Circuit City Stock
and CarMax Stock will be entitled to receive the net assets, if any, of the
Company remaining for distribution to holders of Common Stock on a per share
basis in proportion to the Liquidation Units per share of each series. Each
share of Circuit City Stock will have one Liquidation Unit and each share of
CarMax Stock will have .5 of a Liquidation Unit. Thus, the liquidation rights of
the holders of the respective series may not bear any relationship to the
relative market values or the relative voting rights of the two series.
The Liquidation Units of the Circuit City Stock and the CarMax Stock were
determined by the Company in consultation with its financial advisors and are
based upon, among other factors, each Group's initial level of debt and equity
capitalization, each Group's recent historical financial performance, the market
prices of shares of comparable companies that are publicly traded and the
current state of the markets for public offerings and other stock transactions.
See "Risk Factors -- No Assurance as to Market Price." The Company considers
that its complete liquidation is a remote contingency, and its financial
advisors believe that, in general, these liquidation provisions are immaterial
to trading in Circuit City Stock and CarMax Stock. No holders of Circuit City
Stock will have any special right to receive specific assets attributable to the
Circuit City Group and no holder of CarMax Stock will have any special right to
receive specific assets attributable to the CarMax Group in the case of a
liquidation, dissolution or termination of the Company.
If the Company subdivides (by stock split, reclassification or otherwise)
or combines (by reverse stock split or otherwise) the outstanding shares of
either Circuit City Stock or CarMax Stock or declares a dividend or other
distribution of shares of Circuit City Stock or CarMax Stock to holders of such
series of Common Stock, the number of Liquidation Units of the Circuit City
Stock or the number of Liquidation Units of the CarMax Stock, will be
appropriately adjusted as determined by the Board of Directors so as to avoid
any dilution in aggregate liquidation rights of any series of Common Stock. For
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example, in case the Company were to effect a two-for-one split of the Circuit
City Stock, an adjustment would be made so that either the Circuit City Stock
would be entitled to 0.5 of a Liquidation Unit per share or the CarMax Stock
would be entitled to one Liquidation Unit per share, as determined by the Board
of Directors, in order to avoid dilution in the aggregate liquidation rights of
holders of CarMax Stock.
Neither a merger nor share exchange of the Company into or with any other
corporation, nor a merger or share exchange of any other corporation into or
with the Company, nor any sale, lease, exchange or other disposition of all or
any part of the assets of the Company, will, alone, be deemed to be a
liquidation of the Company, or cause the dissolution of the Company, for
purposes of the liquidation provisions set forth above.
DETERMINATIONS BY THE BOARD OF DIRECTORS
If the CarMax Stock Proposal is approved by the shareholders and
implemented by the Board of Directors, any determinations made in good faith by
the Board of Directors under any provision described under "Description of
Circuit City Stock and CarMax Stock," and any determinations with respect to any
Group or the rights of holders of shares of either series of Common Stock, would
be final and binding on all shareholders of the Company, subject to the rights
of shareholders under applicable Virginia law and under the federal securities
laws.
PREEMPTIVE RIGHTS
Neither the holders of the Circuit City Stock nor the holders of the CarMax
Stock will have any preemptive rights or any rights to convert their shares into
any other securities of the Company.
INTER-GROUP INTEREST
The "Outstanding CarMax Fraction" means the percentage interest in the
CarMax Group represented at any time by the outstanding shares of CarMax Stock,
and the "Inter-Group Interest Fraction" means the remaining percentage interest
in the CarMax Group that is attributed to the Circuit City Group. The sum of the
Inter-Group Interest Fraction and the Outstanding CarMax Fraction will always
equal 100%. The "Number of Shares Issuable with Respect to the Inter-Group
Interest" means the number of shares of CarMax Stock that could be sold or
otherwise issued by the Company for the account of the Circuit City Group in
respect of the Inter-Group Interest. The Inter-Group Interest would not be
represented by actual shares of CarMax Stock and could not be voted by the
Circuit City Group.
The shares of CarMax Stock that the Company expects to issue in the CarMax
Stock Offering will be issued for the account of the CarMax Group. As a result,
immediately after the CarMax Stock Offering, the Outstanding CarMax Fraction is
expected to equal 15% to 20% and the Inter-Group Interest Fraction is expected
to equal 80% to 85%. If shares representing a greater percentage of the equity
value of the CarMax Group are sold in the CarMax Stock Offering, the Company
will identify the number of such additional shares that is issued for the
account of the Circuit City Group and the number of such additional shares that
is issued for the account of the CarMax Group. In each case, the Outstanding
CarMax Fraction would increase and the Inter-Group Interest Fraction would
decrease accordingly. The Number of Shares Issuable with Respect to the
Inter-Group Interest would be reduced as a result of the issuance of any such
additional shares for the account of the Circuit City Group and would be
unchanged as a result of the issuance of any such additional shares for the
account of the CarMax Group.
The Board of Directors has determined that 75,440,000 is the number of
shares of CarMax Stock that, if issued, would initially represent 100% of the
equity value of the CarMax Group. Such number was determined based on the
historical and projected financial and operating information of the CarMax
Group, the market prices of securities and certain financial and operating
information of companies engaged in activities similar to those of the CarMax
Group, prevailing equity market conditions and the desired range of the initial
public offering price of the CarMax Stock. The number of shares of CarMax Stock
representing 100% of the equity value of the CarMax Group would increase as a
result of the CarMax Stock Offering to the extent of the shares issued for the
account of the CarMax Group. For example, if 20% of the equity value of the
CarMax Group were issued in the CarMax Stock Offering, the 18,860,000 shares
representing such percentage and issued to the public would cause the number of
shares representing 100% of the equity value of the CarMax Group to increase to
94,300,000.
At the time of any additional sale of CarMax Stock, the Board of Directors
would, in its sole discretion, determine the allocation of the net proceeds of
such sale between the Circuit City Group and the CarMax Group. The Board of
Directors could allocate 100% of the net proceeds of a sale of CarMax Stock to
the Circuit City Group or to the CarMax Group, in which event the net proceeds
would be reflected entirely in the financial statements of the Group to which
such proceeds
42
<PAGE>
would be allocated. If the net proceeds of any sale of CarMax Stock were
allocated to the Circuit City Group in respect of its Inter-Group Interest, the
Number of Shares Issuable with Respect to the Inter-Group Interest would be
reduced, the Inter-Group Interest Fraction would accordingly also be reduced and
the Outstanding Interest Fraction would be proportionately increased. If the net
proceeds of any sale of CarMax Stock were allocated to the CarMax Group, the
Number of Shares Issuable with Respect to the Inter-Group Interest would not be
reduced, but the Inter-Group Interest Fraction would nonetheless be reduced, and
the Outstanding Interest Fraction would increase accordingly.
The Board of Directors reserves the right to issue shares of CarMax Stock
as a distribution on the Circuit City Stock, although it has no current
intention to do so. Such a distribution would be treated as a distribution of
shares issuable with respect to the Inter-Group Interest and, as a result, the
Number of Shares Issuable with Respect to the Inter-Group Interest would
decrease by the number of shares distributed to the holders of Circuit City
Stock, resulting in a reduction in the Inter-Group Interest Fraction and a
proportionate increase in the Outstanding CarMax Fraction.
If the Company repurchases shares of CarMax Stock with cash or property of
the Circuit City Group, the Number of Shares Issuable with Respect to the
Inter-Group Interest and the Inter-Group Interest Fraction would increase and
the Outstanding CarMax Fraction would decrease accordingly. If the repurchase of
shares of CarMax Stock were attributed to the CarMax Group, the Number of Shares
Issuable with Respect to the Inter-Group Interest would not change but the
Inter-Group Interest Fraction would nonetheless increase and the Outstanding
CarMax Fraction would decrease accordingly.
The foregoing determinations with respect to the allocation of issuances of
shares of CarMax Stock between the Groups and the choice of which Group's funds
are to be used to repurchase shares of CarMax Stock will be made by the Board of
Directors, in its discretion, after consideration of a number of factors,
including, among others, the relative levels of internally generated cash flow
of each Group, the long-term business prospects for each Group and the
availability and cost of alternative financing sources.
Cash or other property allocated to the Circuit City Group that is
contributed as additional equity to the CarMax Group would increase the Number
of Shares Issuable with Respect to the Inter-Group Interest (based on the then
current Market Value of shares of CarMax Stock), and, accordingly, would
increase the Inter-Group Interest Fraction and decrease the Outstanding CarMax
Fraction. Cash or other property allocated to the CarMax Group that is
transferred to the Circuit City Group would, if so determined by the Board of
Directors, decrease the Number of Shares Issuable with Respect to the
Inter-Group Interest (based on the then current Market Value of shares of CarMax
Stock) and, accordingly, would decrease the Inter-Group Interest Fraction and
increase the Outstanding CarMax Fraction. The Board of Directors could
determine, in its sole discretion, to make such contribution or transfer after
consideration of a number of factors, including, among others, the financing
needs and objectives of the recipient Group, the investment objectives of the
transferring Group, the availability, cost and time associated with alternative
financing sources, prevailing interest rates and general economic conditions.
The financial statements of the Circuit City Group will be credited, and
the financial statements of the CarMax Group will be charged with, an amount
equal to the product of (i) the Fair Value of any dividend, redemption payment
or other distribution paid or distributed in respect of the outstanding shares
of CarMax Stock (including any dividend of, or redemption payment made with, Net
Proceeds from a Disposition), times (ii) a fraction, the numerator of which is
the Inter-Group Interest Fraction on the record date for such dividend,
redemption payment or distribution and the denominator of which is the
Outstanding CarMax Fraction on the record date for such dividend, redemption
payment or distribution.
For further discussion and illustrations of the calculation of the
Inter-Group Interest Fraction, the Outstanding CarMax Fraction and the Number of
Shares Issuable with Respect to the Inter-Group Interest and the effects thereon
of dividends on, and issuances and repurchase of, shares of CarMax Stock, and
transfers of cash or other property between Groups, see Annex I hereto.
RESTATED RIGHTS AGREEMENT
The Company has issued preferred stock purchase rights (the "Original
Rights") to all holders of the Existing Common Stock pursuant to a Rights
Agreement dated April 29, 1988 between the Company and Crestar Bank, as Rights
Agent, as amended and restated as of March 5, 1996 (the "Rights Agreement"). If
the CarMax Stock Proposal is approved by the shareholders and implemented by the
Board of Directors, (i) the Rights Agreement will be amended and restated (the
"Restated Rights Agreement") to reflect the change in the capital structure of
the Company, (ii) the Articles will be amended by action of the Board of
Directors to establish a new series of Preferred Stock (the "Series F Preferred
Stock"), (iii) the Board of Directors will authorize the issuance of one
preferred stock purchase right (a "CarMax Right") with respect to each share of
CarMax Stock that might be issued from time to time, including each such share
issued pursuant to the CarMax Stock Offering, and (iv) each Original Right will
be redesignated as a "Circuit City Right." The Circuit City Rights and the
CarMax Rights are collectively referred to herein as the "Rights."
The Restated Rights Agreement will provide that, prior to the earlier of
(i) the 10th day (the "Ownership Trigger Date") after a public announcement that
a person or group (including any affiliate or associate of such person or group)
(an "Acquiring Person") has acquired, or obtained the right to acquire,
beneficial ownership of shares of Common Stock representing 15% or more of the
total number of votes entitled to be cast generally in the election of directors
of all outstanding shares of Common Stock or (ii) the 10th business day after
the date of the commencement of or first public announcement of the intent of
any person or group to commence a tender or exchange offer the consummation of
which would result in such person or group becoming an Acquiring Person (the
earlier of such dates being called the "Distribution Date"), the Circuit City
Rights and the CarMax Rights will be evidenced by the certificates representing
shares of Circuit City Stock and CarMax Stock, respectively, then outstanding,
and no separate Rights certificates will be distributed. Therefore, until the
Distribution Date, the Circuit City Rights will be transferred with and only
with the Circuit City Stock, and the CarMax Rights will be transferred with and
only with the CarMax Stock. For purposes of the Restated Rights Agreement, the
total voting rights of the Common Stock will be determined based upon the fixed
voting rights of holders of outstanding shares of Circuit City Stock and CarMax
Stock in effect at the time of any such determination. See " -- Description of
Circuit City Stock and CarMax Stock -- Voting."
Upon the close of business on the Distribution Date, the Rights will
separate from the Common Stock and become exercisable as described below. The
Rights will expire on April 29, 1998 (the "Expiration Date"), unless earlier
redeemed by the Company as described below.
Following the Distribution Date, registered holders of Rights will be
entitled to purchase from the Company (i) in the case of a Circuit City Right,
one four-hundredth (1/400th) of a share of Series E Preferred Stock at a
purchase price of $35, subject to adjustment (the "Series E Purchase Price"),
and (ii) in the case of a CarMax Right, one four-hundredth (1/400th) of a share
of Series F Preferred Stock at a purchase price of $22, subject to adjustment
(the "Series F Purchase Price").
In the event (i) any person or group becomes an Acquiring Person other than
pursuant to a cash tender offer for all outstanding shares of Common Stock which
is determined to be fair by the Continuing Directors (i.e., those directors who
are such on the Distribution Date or are elected or nominated by a majority of
the Continuing Directors in office on the date of such election or nomination),
(ii) an Acquiring Person engages in one or more "self-dealing" transactions with
the Company as set forth in the Restated Rights Agreement, (iii) the Company is
the surviving or continuing corporation in a merger or other combination with an
Acquiring Person and all the Common Stock remains outstanding and is not changed
or exchanged or (iv) while there is an Acquiring Person, there shall be any
reclassification of securities, recapitalization of the Company or other
transaction or series of transactions that has the effect of increasing by more
than 1% the proportionate share of the outstanding shares of any class or series
of equity securities of the Company beneficially owned by the Acquiring Person,
then the Rights would "flip-in," and proper provision would be made so that each
holder of a Right, other than Rights which are, or under certain circumstances
specified in the Restated Rights Agreement, were beneficially owned by any
Acquiring
46
<PAGE>
Person (which will thereafter be void), will thereafter (a) in the case of a
Circuit City Right, entitle its holder to purchase, at the Series E Purchase
Price, a number of shares of Circuit City Stock with a market value equal to
twice the Series E Purchase Price and (b) in the case of a CarMax Right, entitle
its holder to purchase, at the Series F Purchase Price, a number of shares of
CarMax Stock with a market value equal to twice the Series F Purchase Price.
In the event, following the announcement that a person or group has become
an Acquiring Person, (i) the Company engages in a merger or consolidation with
another entity in which the Company is not the surviving corporation or in which
any shares of the outstanding Common Stock are changed into or exchanged for
stock or other securities of another person (or the Company) or cash or other
property or (ii) 50% or more of the Company's consolidated assets or earning
power are sold, the Rights would "flip-over," and each Circuit City Right and
each CarMax Right will entitle its holder to purchase, for the Series E Purchase
Price and Series F Purchase Price, respectively, a number of shares of common
stock of such entity or purchaser with a market value equal to twice the
applicable Purchase Price.
After any person or group becomes an Acquiring Person and before any
Acquiring Person becomes the beneficial owner of shares of Common Stock
representing 50% or more of the total number of votes entitled to be cast
generally in the election of directors of all outstanding shares of Common
Stock, the Company may, with the approval of a majority of the Continuing
Directors, exchange all or part of the Circuit City Rights and CarMax Rights for
shares of Circuit City Stock or CarMax Stock, respectively, or for shares of
Series E Preferred Stock or Series F Preferred Stock (or other preferred shares
having the same rights, privileges and preferences), respectively. In such
event, the exchange ratio would be one share of the applicable Common Stock, or
one four-hundredth (1/400th) of a share of the applicable series of Preferred
Stock, per Right.
At any time prior to the earlier of the Ownership Trigger Date or the
Expiration Date, the Company may, at its option, redeem all but not less than
all of the then outstanding Rights at a redemption price of $.0025 per Right
(the "Redemption Price"), provided, however, that any authorization of
redemption will require the concurrence of a majority of the Continuing
Directors if (i) any person or group has become an Acquiring Person or (ii)
there has been a change in a majority of the directors resulting from a proxy or
consent solicitation if any person participating in such solicitation has stated
(or the Board of Directors has determined in good faith) that such person
intends to take, or may consider taking, any action that would result in such
person becoming an Acquiring Person or that would cause the Rights to "flip-in"
or "flip-over." Immediately upon the action of the Board of Directors ordering
the redemption of the Rights, the Rights will terminate and the only right
thereafter of the holders of the Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends.
At any time prior to the Distribution Date, the Company may, without the
approval of any holders of Rights, supplement or amend any provision of the
Restated Rights Agreement, except that no supplement or amendment may be made
that changes the Redemption Price, the Expiration Date, the Purchase Prices or
the number of one four-hundredths of a share of Preferred Stock for which a
Right is exercisable (such provisions being referred to herein collectively as
the "Principal Economic Terms"). From and after the Distribution Date, the
Company may, without the approval of any holders of Rights, supplement or amend
the Restated Rights Agreement (i) to cure any ambiguity, (ii) to correct or
supplement any provision that may be defective or inconsistent, (iii) subject to
certain limitations and, in certain circumstances, only with the concurrence of
a majority of the Continuing Directors, to shorten or lengthen any time period
under the Restated Rights Agreement (other than a time period relating to when
the Rights may be redeemed if at the time of such supplement or amendment the
Rights are not then redeemable), or (iii) in any manner that the Company may
deem necessary or desirable and which does not adversely affect the interests of
the holders of Rights (other than an Acquiring Person) and which does not change
the Principal Economic Terms.
A copy of the form of the Restated Rights Agreement (which includes as
Exhibit B-1 the Form of Rights Certificate for Circuit City Rights and as
Exhibit B-2 the Form of Rights Certificate for CarMax Rights) will be filed with
the Commission as an Exhibit to the Registration Statement relating to the
CarMax Stock Proposal. A copy of the Rights Agreement previously has been filed
with the Commission as an Exhibit to a Registration Statement on Form 8-A, and
is incorporated herein by reference. A copy of the form of the Restated Rights
Agreement is available free of charge from the Company. This summary description
of the Rights does not purport to be complete and is qualified in its entirety
by reference to the form of the Restated Rights Agreement.
47
<PAGE>
ANTI-TAKEOVER CONSIDERATIONS
The following information is provided with respect to certain matters that
could be viewed as having the effect of discouraging an attempt to obtain
control of the Company.
The Articles currently provide for the issuance of Preferred Stock in
series at the discretion of the Board of Directors without further action by the
Company's shareholders (except as may be required by Virginia law or the rules
or regulations of any securities exchange on which the Company's securities may
then be listed). The Board of Directors may designate any of such series of
Preferred Stock and may establish the relative rights and preferences of each
series; however, no series of Preferred Stock may entitle the holder thereof to
more than one vote per share. The Articles authorize 2,000,000 shares of
Preferred Stock of which 1,000,000 shares have been or will be designated as
Series E or Series F Preferred Stock and 800,000 of those are or will be
reserved for issuance in connection with the Company's Restated Rights
Agreement. One of the effects of the existence of authorized, unissued and
unreserved Preferred Stock could be to enable the Board of Directors to issue
shares to persons friendly to current management which could render more
difficult or discourage an attempt to obtain control of the Company by means of
a merger, tender offer, proxy contest or otherwise, and thereby protect the
continuity of the Company's management. Such additional shares also could be
used to dilute the stock ownership of persons seeking to obtain control of the
Company. The Articles also provide for a classified Board of Directors under
which approximately one-third of the total number of directors are elected each
year. In addition, pursuant to the Bylaws, only the Chairman, the President or
the Board of Directors, and not the shareholders of the Company, are permitted
to call a special meeting of shareholders.
Certain of the Company's financing arrangements include provisions allowing
for the termination of such arrangements and the acceleration of the borrowings
and other obligations thereunder in the event (i) any person or group becomes,
or acquires the right to become, the beneficial owner of securities of the
Company representing 50% or more of the combined voting power of the Company's
outstanding voting securities or (ii) a transaction or series of transactions
occurs as a result of which the directors immediately prior to such
transaction(s) (together with persons elected or nominated by not less than two-
thirds of such directors) cease to constitute a majority of the Board of
Directors.
The Restated Rights Agreement will permit disinterested shareholders to
acquire additional shares of the Company or of an acquiring company at a
substantial discount in the event of certain described changes in control. See
" -- Restated Rights Agreement."
The Company is currently, and following the consummation of the CarMax
Stock Proposal will be, subject to the "affiliated transactions" and "control
share acquisitions" statutes of the VSCA, which are summarized below.
The "affiliated transactions" statute restricts certain transactions
("Affiliated Transactions") between a Virginia corporation having more than 300
shareholders of record and any person (an "Interested Shareholder") who
beneficially owns more than 10% of any class of the corporation's voting
securities. These restrictions, which are described below, do not apply to an
Affiliated Transaction with an Interested Shareholder who has been such
continuously since the date the corporation first had 300 shareholders of record
or whose acquisition of shares making such person an Interested Shareholder was
previously approved by a majority of the corporation's Disinterested Directors.
"Disinterested Director" means, with respect to a particular Interested
Shareholder, a member of the corporation's board of directors who was (i) a
member on the date on which an Interested Shareholder became an Interested
Shareholder or (ii) recommended for election by, or was elected to fill a
vacancy and received the affirmative vote of, a majority of the Disinterested
Directors then on the Board of Directors. Affiliated Transactions include
mergers, share exchanges, material dispositions of corporate assets not in the
ordinary course of business, any dissolution of the corporation proposed by or
on behalf of an Interested Shareholder, or any reclassification, including
reverse stock splits, recapitalization or merger of the corporation with its
subsidiaries, which increases the percentage of voting shares owned beneficially
by an Interested Shareholder by more than 5%. The "affiliated transactions"
statute prohibits a corporation from engaging in an Affiliated Transaction with
an Interested Shareholder for a period of three years after the Interested
Shareholder became such unless the transaction is approved by the affirmative
vote of a majority of the Disinterested Directors and by the affirmative vote of
the holders of two-thirds of the voting shares other than those shares
beneficially owned by the Interested Shareholder. Following the three-year
period, in addition to any other vote required by law or by the corporation's
articles of incorporation, an Affiliated Transaction must be approved either by
a majority of the Disinterested Directors or by the shareholder vote described
in the preceding sentence unless the transaction satisfies the fair-price or
certain other provisions of the statute. These fair price provisions require, in
general, that the consideration to be received by shareholders in the Affiliated
Transaction (a) be in cash or in the form of consideration used by the
Interested Shareholder to acquire the largest number of its shares and (b) not
be less, on a per share basis, than an amount determined in the manner
48
<PAGE>
specified in the statute by reference to the highest price paid by the
Interested Shareholder for shares it acquired and the fair market value of the
shares on specified dates.
The "control share acquisitions" statute provides that shares of a Virginia
corporation having 300 or more shareholders of record which are acquired in a
"Control Share Acquisition" have no voting rights unless such rights are granted
by a shareholders' resolution approved by the holders of a majority of the votes
entitled to be cast on the election of directors by persons other than the
acquiring person or any officer or employee-director of the corporation. A
"Control Share Acquisition" is an acquisition of voting shares which, when added
to all other voting shares beneficially owned by the acquiring person, would
cause such person's voting strength with respect to the election of directors to
meet or exceed any of the following thresholds: (i) one-fifth, (ii) one-third or
(iii) a majority. An acquiring person is entitled, before or after a Control
Share Acquisition, to file a disclosure statement with the corporation and
demand a special meeting of shareholders to be called for the purpose of
considering whether to grant voting rights for the shares acquired or proposed
to be acquired. If authorized in the corporation's articles of incorporation or
bylaws before a Control Share Acquisition has occurred, the corporation may,
during specified periods, redeem the shares so acquired if no disclosure
statement is filed or if the shareholders have failed to grant voting rights to
such shares. In the event full voting rights are granted to an acquiring person
who then has majority voting power, those shareholders who did not vote in favor
of such grant are entitled to dissent and demand payment of the fair value of
their shares from the corporation. The control share acquisitions statute does
not apply to an actual or proposed Control Share Acquisition if the
corporation's articles of incorporation or bylaws are amended, within the time
limits specified in the statute, to so provide.
The Company's Bylaws establish advance notice procedures, as described
below, for shareholders to make nominations of candidates for election as
directors or to bring other business before an annual meeting of shareholders of
the Company.
The Bylaws provide that nominations for the election of directors may be
made only by the Board of Directors or by a shareholder entitled to vote in the
election of directors who gives timely written notice to the Secretary of the
Company. Any such notice must be given 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. The
shareholder's notice must set forth (a) the name and address of the shareholder
who intends to make the nomination and of the person(s) to be nominated; (b) a
representation that the shareholder is a holder of record of stock of the
Company entitled to vote at such meeting and intends to appear in person or by
proxy at the meeting to nominate the person(s) specified in the notice; (c) a
description of all arrangements or understandings between the shareholder and
each nominee and any other person(s) (naming such person(s)) pursuant to which
the nomination(s) 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
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 Company if so elected.
The Bylaws also provide that in order to bring before an annual meeting of
shareholders any proper business that a shareholder has not sought to have
included in the Company's proxy statement for the meeting, a shareholder must
give timely written notice to the Secretary or Assistant Secretary of the
Company at the Company's principal office. 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 for such meeting prescribed in the Bylaws
has been changed by more than 30 days. The shareholder's notice must set forth
(a) the name and address, as they appear on the Company's stock transfer books,
of the shareholder, (b) the class and number of shares of stock of the Company
beneficially owned by the shareholder, (c) a representation that the 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, (d) 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 (e) any
interest that the shareholder may have in such business.
Certain provisions described above may have the effect of delaying
shareholder actions with respect to certain business combinations and the
election of new members of the Board of Directors. As such, the provisions could
have the effect of discouraging open market purchases of Common Stock because
they may be considered disadvantageous by a shareholder who desires to
participate in a business combination or elect a new director.
49
TEMPORARY CERTIFICATE - EXCHANGEABLE FOR DEFINITIVE
ENGRAVED CERTIFICATE WHEN READY FOR DELIVERY
CIRCUIT CITY STORES, INC. -- CIRCUIT CITY STORES, INC.--
CIRCUIT CITY GROUP CIRCUIT CITY GROUP
COMMON STOCK COMMON STOCK
INCORPORATED UNDER THE LAWS SEE REVERSE FOR CERTAIN
OF THE DEFINITIONS
COMMONWEALTH OF VIRGINIA
THIS CERTIFICATE IS TRANSFERABLE CUSIP ______________
IN MINNEAPOLIS, MINNESOTA
OR NEW YORK, NEW YORK
CIRCUIT CITY STORES, INC.
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF CIRCUIT CITY STORES, INC. -- CIRCUIT
CITY GROUP COMMON STOCK, PAR VALUE $.50 PER SHARE, OF
CIRCUIT CITY STORES, INC., transferable upon the books of the Corporation by the
holder hereof or duly authorized attorney upon surrender of this Certificate
properly endorsed. This Certificate and the shares represented hereby are issued
and shall be held subject to the provisions of the Amended and Restated Articles
of Incorporation and amendments thereto of the Corporation, to all of which the
holder by the acceptance hereof assents. This Certificate is not valid until
countersigned and registered by the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
COUNTERSIGNED AND REGISTERED:
NORWEST BANK MINNESOTA, N.A.
Transfer Agent and Registrar
By
Authorized Signature
Michael J. Chalifoux Richard L. Sharp
Secretary Chairman, President and
[SEAL] Chief Executive Officer
-5-
<PAGE>
CIRCUIT CITY STORES, INC.
A full statement of the designations, relative rights, preferences and
limitations applicable to each class of stock that the Corporation is authorized
to issue and the variations in rights, preferences and limitations determined
for the shares of each series of Common Stock and Preferred Stock that the
Corporation is authorized to issue so far as the same have been fixed and
determined (and the authority of the board of directors to determine variations
in the rights, preferences and limitations of subsequent series) will be
furnished to the holder hereof without charge upon request in writing to the
Secretary of the Corporation or to the Transfer Agent named on the face hereof.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM--as tenants in common UNIF GIFT MIN ACT - Custodian.........
TEN ENT--as tenants by the entireties (Cust) (Minor)
with right of survivorship under Uniform Gifts to Minors
JT TEN --as joint tenants with right of Act...........
survivorship and not as tenants (State)
in common
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received________hereby sell, assign and transfer
unto Please insert social security or other
identifying number of assignee
- -------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, including zip code, of assignee)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
_____________________________________________________________________ shares
of the capital stock represented by the within Certificate and
do hereby irrevocably constitute and appoint
____________________________________________________________________Attorney
to transfer the said stock on the books of the within named
Corporation with full power of substitution in the premises.
Dated______________________
-----------------------------------------------------------
NOTICE: THIS SIGNATURE TO THE ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed: ____________________________________________
THIS SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
The holder of this Certificate is also entitled to certain Rights as set forth
in an Amended and Restated Rights Agreement dated as of January ____, 1997, as
amended (the "Rights Agreement"), between Circuit City Stores, Inc. and Norwest
Bank Minnesota, N.A., as Rights Agent (the "Rights Agent"), the terms of which
are hereby incorporated herein by reference and a copy of which is on file at
the principal executive offices of Circuit City Stores, Inc. One or more
certificates evidencing such Rights have been delivered to and registered in the
name of the Rights Agent. Circuit City Stores, Inc. will mail to the holder of
this Certificate a copy of the Rights Agreement
-6-
<PAGE>
without charge after receipt of a written request therefor. The Rights may not
be transferred, directly or indirectly, to any Person who is or as a result of
the transfer of any Common Stock related to the Rights becomes, directly or
indirectly, an Acquiring Person or an Associate or Affiliate of an Acquiring
Person (as such terms are defined in the Rights Agreement). Any such purported
transfer of any Right shall be without effect, and the holder of such Right
prior to the purported transfer shall continue to have all rights with respect
to such Right, whether under any provision of the Rights Agreement or otherwise.
-7-
TEMPORARY CERTIFICATE - EXCHANGEABLE FOR DEFINITIVE
ENGRAVED CERTIFICATE WHEN READY FOR DELIVERY
CIRCUIT CITY STORES, INC. -- CIRCUIT CITY STORES, INC. --
CIRCUIT CITY GROUP CIRCUIT CITY GROUP
COMMON STOCK COMMON STOCK
INCORPORATED UNDER THE LAWS SEE REVERSE FOR CERTAIN
OF THE DEFINITIONS
COMMONWEALTH OF VIRGINIA
THIS CERTIFICATE IS TRANSFERABLE CUSIP ______________
IN MINNEAPOLIS, MINNESOTA
OR NEW YORK, NEW YORK
CIRCUIT CITY STORES, INC.
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF CIRCUIT CITY STORES, INC. -- CIRCUIT
CITY GROUP COMMON STOCK, PAR VALUE $.50 PER SHARE, OF
CIRCUIT CITY STORES, INC., transferable upon the books of the Corporation by the
holder hereof or duly authorized attorney upon surrender of this Certificate
properly endorsed. This Certificate and the shares represented hereby are issued
and shall be held subject to the provisions of the Amended and Restated Articles
of Incorporation and amendments thereto of the Corporation, to all of which the
holder by the acceptance hereof assents. This Certificate is not valid until
countersigned and registered by the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
COUNTERSIGNED AND REGISTERED:
NORWEST BANK MINNESOTA, N.A.
Transfer Agent and Registrar
By
Authorized Signature
Michael J. Chalifoux Richard L. Sharp
Secretary Chairman, President and
[SEAL] Chief Executive Officer
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<PAGE>
CIRCUIT CITY STORES, INC.
A full statement of the designations, relative rights, preferences and
limitations applicable to each class of stock that the Corporation is authorized
to issue and the variations in rights, preferences and limitations determined
for the shares of each series of Common Stock and Preferred Stock that the
Corporation is authorized to issue so far as the same have been fixed and
determined (and the authority of the board of directors to determine variations
in the rights, preferences and limitations of subsequent series) will be
furnished to the holder hereof without charge upon request in writing to the
Secretary of the Corporation or to the Transfer Agent named on the face hereof.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM--as tenants in common UNIF GIFT MIN ACT - Custodian.........
TEN ENT--as tenants by the entireties (Cust) (Minor)
with right of survivorship under Uniform Gifts to Minors
JT TEN --as joint tenants with right of Act...........
survivorship and not as tenants (State)
in common
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received________hereby sell, assign and transfer
unto Please insert social security or other
identifying number of assignee
- -------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, including zip code, of assignee)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
_____________________________________________________________________ shares
of the capital stock represented by the within Certificate and
do hereby irrevocably constitute and appoint
____________________________________________________________________Attorney
to transfer the said stock on the books of the within named
Corporation with full power of substitution in the premises.
Dated______________________
-----------------------------------------------------------
NOTICE: THIS SIGNATURE TO THE ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed: ___________________________________________
THIS SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
The holder of this Certificate is also entitled to certain Rights as set forth
in an Amended and Restated Rights Agreement dated as of January ____, 1997, as
amended (the "Rights Agreement"), between Circuit City Stores, Inc. and Norwest
Bank Minnesota, N.A., as Rights Agent (the "Rights Agent"), the terms of which
are hereby incorporated herein by reference and a copy of which is on file at
the principal executive offices of Circuit City Stores, Inc. One or more
certificates evidencing such Rights have been delivered to and registered in the
name of the Rights Agent. Circuit City Stores, Inc. will mail to the holder of
this Certificate a copy of the Rights Agreement
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<PAGE>
without charge after receipt of a written request therefor. The Rights may not
be transferred, directly or indirectly, to any Person who is or as a result of
the transfer of any Common Stock related to the Rights becomes, directly or
indirectly, an Acquiring Person or an Associate or Affiliate of an Acquiring
Person (as such terms are defined in the Rights Agreement). Any such purported
transfer of any Right shall be without effect, and the holder of such Right
prior to the purported transfer shall continue to have all rights with respect
to such Right, whether under any provision of the Rights Agreement or otherwise.
-10-
AMENDED AND RESTATED
RIGHTS AGREEMENT
between
CIRCUIT CITY STORES, INC.
and
NORWEST BANK MINNESOTA, N.A.
Dated as of January ___, 1997
<PAGE>
Rights Agreement
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
Section 1. Certain Definitions...................................................................................2
Section 2. Appointment of Rights Agent...........................................................................5
Section 3. Issuance of Rights Certificates.......................................................................5
Section 4. Form of Rights Certificates...........................................................................7
Section 5. Countersignature and Registration.....................................................................8
Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated,
Destroyed, Lost or Stolen Rights Certificates....................................................8
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.........................................9
Section 8. Cancellation and Destruction of Rights Certificates..................................................11
Section 9. Reservation and Availability of Preferred Shares and Common Shares...................................12
Section 10. Preferred Shares Record Date........................................................................14
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights.........................14
Section 12. Certificate of Adjusted Purchase Price or Number of Shares..........................................24
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power................................24
Section 14. Fractional Rights and Fractional Shares.............................................................26
Section 15. Rights of Action....................................................................................27
Section 16. Agreement of Right Holders..........................................................................27
Section 17. Rights Certificate Holder Not Deemed a Shareholder..................................................28
Section 18. Concerning the Rights Agent.........................................................................28
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Section 19. Merger or Consolidation or Change of Name of Rights Agent...........................................29
Section 20. Duties of Rights Agent..............................................................................29
Section 21. Change of Rights Agent..............................................................................32
Section 22. Issuance of New Rights Certificates.................................................................32
Section 23. Redemption and Termination..........................................................................33
Section 24. Exchange............................................................................................34
Section 25. Notice of Certain Events............................................................................35
Section 26. Notices.............................................................................................36
Section 27. Supplements and Amendments..........................................................................36
Section 28. Successors..........................................................................................37
Section 29. Determinations and Actions by the Board of Directors, etc...........................................37
Section 30. Benefits of this Agreement..........................................................................38
Section 31. Severability........................................................................................38
Section 32. Governing Law.......................................................................................38
Section 33. Counterparts........................................................................................38
Section 34. Descriptive Headings................................................................................38
</TABLE>
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<PAGE>
RIGHTS AGREEMENT
This Amended and Restated Rights Agreement, is entered into as of
January ___, 1997, between Circuit City Stores, Inc. a Virginia corporation (the
"Company"), and Norwest Bank Minnesota, N.A., a national banking association
(the "Rights Agent") and successor rights agent to Crestar Bank, a Virginia
banking corporation, and shall become effective as of the Redesignation (as
defined herein).
On April 29, 1988, the Board of Directors of the Company adopted a
shareholder rights plan governed by the terms of a Rights Agreement (as amended
and restated as of March 5, 1996, the "Original Agreement") and authorized and
declared a dividend of one preferred share purchase right (an "Original Right")
for each share of Common Stock, par value $.50 per share, of the Company (the
"Common Stock") outstanding on May 9, 1988. Each Original Right represented the
right to purchase one one-hundredth (subsequently one four-hundredths as a
result of adjustments pursuant to Section 11(p) hereof) of a share of Cumulative
Participating Preferred Stock, Series E, par value $20.00 per share (the "Series
E Preferred Shares"), of the Company having the rights and preferences set forth
in the form of Articles of Amendment attached as Exhibit A to the Original
Agreement (before it was amended and restated as of March 5, 1996) and
authorized the issuance of one Original Right with respect to each share of
Common Stock that became outstanding between the Record Date and the date
hereof.
On January ___, 1997, the shareholders of the Company approved certain
amendments to the Company's Amended and Restated Articles of Incorporation (as
so amended, the "Articles of Restatement") authorizing the issuance of Circuit
City Stores, Inc. -- CarMax Group Common Stock (the "CarMax Stock") as a new
series of Common Stock and redesignating (the "Redesignation") each existing
share of Common Stock as one share of Circuit City Stores, Inc. -- Circuit City
Group Common Stock (the "Circuit City Stock").
On December 9, 1996 the Board of Directors adopted this amendment and
restatement of the Original Agreement effective upon the Redesignation (as so
amended and restated, the "Agreement") and, conditioned upon and simultaneously
with the Redesignation, redesignated each Original Right as a Circuit City Right
and authorized the issuance of one Circuit City Right and one CarMax Right with
respect to each share of Circuit City Stock and CarMax Stock, respectively, that
shall become outstanding (i) after the Redesignation and before the earliest of
the Distribution Date, the Redemption Date and the Final Expiration Date (as
such terms are defined in Sections 3 and 7 hereof) or (ii) after the
Distribution Date but before the earlier of the Redemption Date or the Final
Expiration Date, if such Common Share became outstanding (A) upon the exercise
of a stock option, (B) pursuant to any employee plan or arrangement, or (C) upon
the conversion or exchange of a security which option, plan, arrangement or
security was granted, established or issued, as the case may be, by the Company
before the Distribution Date.
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<PAGE>
Each Circuit City Right, as so redesignated, will continue to represent
the right to purchase one four-hundredths of a Series E Preferred Share having
the rights and preferences set forth in Exhibit A-1 hereto, and each CarMax
Right will represent the right to purchase one four-hundredths of a share of
Cumulative Participating Preferred Stock, Series F, par value $20.00 per share
(the "Series F Preferred Shares"), of the Company having the rights and
preferences set forth in Exhibit A-2 hereto, in each such case upon the terms
and subject to the conditions herein set forth.
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this
Agreement, the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and Associates
(as such terms are hereinafter defined) of such Person, shall be the Beneficial
Owner (as such term is hereinafter defined) of Common Shares representing 15% or
more of the total Voting Rights of all the Common Shares then outstanding, but
shall not include the Company, any wholly-owned Subsidiary (as such term is
hereinafter defined) of the Company or any employee benefit plan of the Company
or any Subsidiary of the Company, or any Person or entity holding Common Shares
for or pursuant to the terms of any such plan.
(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as in effect on the date of this Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of and
shall be deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's
Affiliates or Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has (A) the right to
acquire (whether such right is exercisable immediately or only after
the passage of time) pursuant to any agreement, arrangement or
understanding (whether or not in writing), or upon the exercise of
conversion rights, exchange rights, rights (other than these Rights),
warrants or options, or otherwise; provided, however, that a Person
shall not be deemed the Beneficial Owner of, or to beneficially own,
(1) securities tendered pursuant to a tender or exchange offer made by
or on behalf of such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for purchase or
exchange, (2) securities issuable upon exercise of Rights at any time
prior to the occurrence of a Triggering Event (as hereinafter defined),
or (3) securities issuable upon exercise of Rights from and after the
occurrence of a Triggering Event
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<PAGE>
which Rights were acquired by such Person or any of such Person's
Affiliates or Associates prior to the Distribution Date or pursuant to
Section 3(a) or Section 22 hereof (the "Original Rights") or pursuant
to Section 11(i) hereof in connection with an adjustment made with
respect to any Original Rights; or (B) the right to vote or dispose of
or has "beneficial ownership" of (as determined pursuant to Rule 13d-3
of the General Rules and Regulations under the Exchange Act), including
pursuant to any agreement, arrangement or understanding (whether or not
in writing); provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, any security if the
agreement, arrangement or understanding to vote such security (1)
arises solely from a revocable proxy or consent given to such Person in
response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable rules and regulations of the
Exchange Act and (2) is not also then reportable on Schedule 13D under
the Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate thereof)
with which such Person (or any of such Person's Affiliates or
Associates) has any agreement, arrangement or understanding (whether or
not in writing) for the purpose of acquiring, holding, voting (except
to the extent contemplated by the proviso to Section 1(c)(ii)(B)), or
disposing of any securities of the Company; provided, however, that
nothing in this paragraph (iii) shall cause a person engaged in
business as an underwriter of securities to be the "Beneficial Owner"
of, or to "beneficially own," any securities acquired through such
person's participation in good faith in a firm commitment underwriting
until the expiration of forty days after the date of such acquisition.
(d) "Business Day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in the Commonwealth of Virginia
or the State of New York are authorized or obligated by law or executive order
to close.
(e) "CarMax Right" shall have the meaning set forth in the
fifth introductory paragraph of this Agreement.
(f) "CarMax Stock" shall have the meaning set forth in the
third introductory paragraph of this Agreement.
(g) "Circuit City Right" shall have the meaning set forth in
the fifth introductory paragraph of this Agreement.
(h) "Circuit City Stock" shall have the meaning set forth in
the third introductory paragraph of this Agreement.
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<PAGE>
(i) "Close of Business" on any given date shall mean 5:00
P.M., Richmond, Virginia time, on such date; provided, however, that if such
date is not a Business Day it shall mean 5:00 P.M., Richmond, Virginia time, on
the next succeeding Business Day.
(j) "Common Shares" when used with reference to the Company
shall mean shares of Circuit City Stock and/or CarMax Stock, as the context
requires, or any other shares of capital stock of the Company into which Circuit
City Stock or CarMax Stock shall be reclassified or changed. "Common Shares"
when used with reference to any Person other than the Company shall mean the
capital stock (or equity interest) with the greatest voting power, or having
power to control or direct the management, of such other Person or, if such
other Person is a Subsidiary of another Person, of the Person or Persons which
ultimately control such first mentioned Person.
(k) "Continuing Director" shall mean a director who was a
member of the Board of Directors of the Company on the Distribution Date or who
subsequently became a director and whose election, or nomination for election by
the Company's shareholders, was approved by a vote of a majority of Continuing
Directors on the Board of Directors of the Company on the date of such election
or nomination.
(l) "Person" shall mean any individual, firm, corporation,
partnership or other entity, and shall include any successor (by merger or
otherwise) of such entity.
(m) "Preferred Shares" shall mean the Series E Preferred
Shares and/or the Series F Preferred Shares, as the context requires, and, to
the extent there are not sufficient Series E Preferred Shares or Series F
Preferred Shares authorized to permit full exercise of the Rights, any other
series of Preferred Stock, par value $20.00 per share, of the Company designated
for such purpose containing terms substantially similar to the terms of Series E
Preferred Shares or Series F Preferred Shares, respectively.
(n) "Rights" shall mean Circuit City Rights and/or CarMax
Rights, as the context requires.
(o) "Section 11(a)(ii) Event" shall mean any event described
in Section 11(a)(ii)(A) or (B) hereof.
(p) "Section 13 Event" shall mean any event described in
clauses (i), (ii) or (iii) of Section 13(a) hereof.
(q) "Series E Preferred Shares" shall have the meaning set
forth in the fifth introductory paragraph of this Agreement.
-4-
<PAGE>
(r) "Series F Preferred Shares" shall have the meaning set
forth in the fifth introductory paragraph of this Agreement.
(s) "Share Acquisition Date" shall mean the first date of
public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) under the Exchange
Act) by the Company or an Acquiring Person that an Acquiring Person has become
such.
(t) "Subsidiary" of any Person shall mean any corporation or
other entity of which a majority of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by such Person.
(u) "Triggering Event" shall mean any Section 11(a)(ii) Event
or any Section 13 Event.
(v) "Voting Rights" when used with reference to the capital
stock of, or units of equity interest in, any Person shall mean the number of
votes entitled to be cast generally in the election of directors of such Person
(if such Person is a corporation) or to participate in the management and
control of such Person (if such Person is not a corporation).
Section 2. Appointment of Rights Agent. The Company hereby
confirms the appointment of the Rights Agent to act as agent for the Company and
the holders of the Rights (who, in accordance with Section 3 hereof, shall prior
to the Distribution Date also be the holders of the Common Shares) in accordance
with the terms and conditions hereof, and the Rights Agent hereby confirms the
acceptance of such appointment. The Company may from time to time appoint such
co-Rights Agents as it may deem necessary or desirable.
Section 3. Issuance of Rights Certificates. (a) The Rights in
respect of the issued and outstanding Common Shares will be issued and become
effective on the Record Date. A Common Share and the Right or Rights issued or
to be issued hereunder in respect thereof will not be separately transferable
until the date (the "Distribution Date") which is the earlier of (i) the close
of business on the tenth day after the Share Acquisition Date (or, if the tenth
day after the Share Acquisition Date occurs before the Record Date, the close of
business on the Record Date) or (ii) the close of business on the tenth Business
Day after the date of the commencement of, or first public announcement of the
intent of any Person (other than the Company, any wholly-owned Subsidiary of the
Company or any employee benefit plan of the Company or of any Subsidiary of the
Company or any entity holding Common Shares for or pursuant to the terms of any
such plan) to commence, a tender or exchange offer the consummation of which
would result in beneficial ownership by a Person of Common Shares representing
15% or more of the total Voting Rights of all the outstanding Common Shares
(including any such date which is after the date of this Agreement and prior to
the issuance of the Rights). Prior to the Distribution Date, each holder of
Common Shares will be the holder of the Rights associated with each such share
so held, except as otherwise provided in Section 7(e). (A Common Share and its
associated Right or Rights before the Distribution Date shall be collectively
referred to as the "Unit".) Until the Distribution Date, the Rights issued from
time to time hereunder shall be evidenced
-5-
<PAGE>
collectively by one or more certificates (the "Rights Certificates") delivered
to and registered in the name of the Rights Agent, as Rights Agent under this
Agreement; but the issuance of the Rights hereunder shall not be affected by any
failure to deliver a new or replacement Rights Certificate to the Rights Agent
in respect thereof. The initial Rights Certificate and any additional or
replacement Rights Certificates delivered to the Rights Agent shall, prior to
the Distribution Date, have a legend set forth on the face thereof to the effect
that the Rights represented thereby shall not be exercisable until the
Distribution Date. As soon as practicable after the Company has notified the
Rights Agent of the occurrence of the Distribution Date, the Rights Agent will
send, by first-class, insured, postage prepaid mail, to each record holder of
Common Shares as of the close of business on the Distribution Date, at the
address of such holder shown on the records of the Company, a Rights
Certificate, in substantially the form of Exhibit B-1 hereto (in the case of a
Circuit City Right) or Exhibit B-2 hereto (in the case of a CarMax Right),
evidencing one Right for each Common Share so held. As of the Distribution Date,
the Rights will be evidenced solely by such Rights Certificates. The failure to
mail any such Rights Certificate shall not affect the legality or validity of
the Rights.
(b) On the Record Date or as soon as practicable thereafter,
the Company sent a copy of a Summary of Rights to Purchase Preferred Shares in
substantially the form which was attached as Exhibit C to the Original Agreement
prior to the March 5, 1996 amendment and restatement (the "Summary of Rights"),
by first-class, postage prepaid mail, to each record holder of the Company's
then-existing Common Stock as of the close of business on the Record Date, at
the address of such holder shown on the records of the Company. The failure to
send a copy of a Summary of Rights shall not affect the legality or validity of
the Rights.
(c) Certificates for Common Shares issued after the date
hereof but prior to the earliest of the Distribution Date or the Redemption Date
or the Final Expiration Date shall have impressed on, printed on, written on or
otherwise affixed to them the following legend:
The holder of this certificate is entitled to certain Rights
as set forth in an Amended and Restated Rights Agreement
between Circuit City Stores, Inc. and Norwest Bank Minnesota,
N.A. (the "Rights Agent"), dated as of January ___, 1997 as
the same may be amended or supplemented from time to time
hereafter (the "Rights Agreement"), the terms of which are
hereby incorporated herein by reference and a copy of which is
on file at the principal executive offices of Circuit City
Stores, Inc. One or more certificates evidencing such Rights
have been delivered to and registered in the name of [INSERT
NAME OF RIGHTS AGENT], as Rights Agent under the Rights
Agreement. Circuit City Stores, Inc., will mail to the holder
of this certificate a copy of the Rights Agreement without
charge after receipt of a written request therefor. As
described in the Rights Agreement, Rights issued to any
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<PAGE>
Person who becomes an Acquiring Person (as defined in the
Rights Agreement) shall become null and void.
Section 4. Form of Rights Certificates. (a) The Rights
Certificates (and the forms of election to purchase Preferred Shares and of
assignment to be printed on the reverse thereof) shall be substantially the same
as Exhibit B-1 hereto (in the case of a Circuit City Right) or Exhibit B-2
hereto (in the case of a CarMax Right) and may have such marks of identification
or designation and such legends, summaries or endorsements printed thereon as
the Company may deem appropriate and as are not inconsistent with the provisions
of this Agreement, or as may be required to comply with any applicable law or
with any rule or regulation made pursuant thereto or with any rule or regulation
of any stock exchange on which the Rights may from time to time be listed, or to
conform to usage. Subject to the provisions of Section 11 and Section 22 hereof,
the Rights Certificates, whenever issued, that are issued in respect of Common
Shares which were issued and outstanding as of the Distribution Date, shall be
dated as of the Distribution Date, and all Rights Certificates that are issued
in respect of other Common Shares shall be dated as of the respective dates of
issuance of such Common Shares, and in each such case on their face shall
entitle the holders thereof to purchase such number of one four-hundredths of a
share of Preferred Shares as shall be set forth therein at the price per one
four-hundredths of a Preferred Share set forth therein (the "Purchase Price"),
but the amount and type of securities purchasable upon the exercise of each
Right and the Purchase Price thereof shall be subject to adjustment as provided
herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 that represents Rights beneficially owned by: (i) an Acquiring Person
or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such, or (iii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee before or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interest in such
Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of Section 7(e), and any Rights
Certificate issued pursuant to Section 6 or Section 11 upon transfer, exchange,
replacement or adjustment of any other Rights Certificate referred to in this
sentence, shall contain (to the extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as
such terms are defined in the Rights Agreement). Accordingly,
this Rights Certificate and the Rights represented
hereby may become null and void in the circumstance specified
in Section 7(e) of such Agreement.
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<PAGE>
Section 5. Countersignature and Registration. The Rights
Certificates shall be executed on behalf of the Company by its Chairman of the
Board, its President, any Executive Vice President, or any Senior Vice
President, and by the Secretary, an Assistant Secretary, Treasurer or an
Assistant Treasurer of the Company, either manually or by facsimile signature,
and have affixed thereto the Company's seal or a facsimile thereof. The Rights
Certificates shall not be valid for any purpose unless manually countersigned by
an authorized signatory of the Rights Agent. In case any officer of the Company
who shall have signed any of the Rights Certificates shall cease to be such
officer of the Company before countersignature by the Rights Agent and issuance
and delivery by the Company, such Rights Certificates, nevertheless, may be
countersigned by the Rights Agent, and issued and delivered by the Company with
the same force and effect as though the person who signed such Rights
Certificates had not ceased to be such officer of the Company; and any Rights
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Rights Certificate, shall be a proper
officer of the Company to sign such Rights Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.
The Rights Agent will keep or cause to be kept, at its
principal offices, books for registration and transfer of the Rights
Certificates issued hereunder. Such books shall show the names and addresses of
the respective holders of the Rights Certificates, the number of Rights
evidenced on its face by each of the Rights Certificates and the date of each of
the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
Subject to the provisions of Section 4(b), Section 7(e) and Section 14 hereof,
at or prior to the close of business on the earlier of the Redemption Date or
the Final Expiration Date (as such terms are defined in Section 7 hereof), any
Rights Certificate or Rights Certificates (other than Rights Certificates
representing Rights that have become void pursuant to Section 7(e)) may be
transferred, split up, combined or exchanged for another Rights Certificate or
Rights Certificates, entitling the registered holder to purchase a like number
of one four-hundredths of a share of Preferred Shares (or, following a
Triggering Event, Common Shares, other securities, cash or other assets, as the
case may be) as the Rights Certificate or Rights Certificates surrendered then
entitled such holder (or former holder in the case of a transfer) to purchase.
Any registered holder desiring to transfer, split up, combine or exchange any
Rights Certificate shall make such request in writing delivered to the Rights
Agent, and shall surrender the Rights Certificate or Rights Certificates to be
transferred, split up, combined or exchanged at the principal office or offices
of the Rights Agent designated for such purpose. Neither the Rights Agent nor
the Company shall be obligated to take any action whatsoever with respect to the
transfer of any such surrendered Rights Certificate until the registered holder
shall have completed and signed the certificate contained in the form of
assignment on
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<PAGE>
the reverse side of such Rights Certificate and shall have provided such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company shall
request. Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e)
and Section 14 hereof, countersign and deliver to the Person entitled thereto a
Rights Certificate or Rights Certificates, as the case may be, as so requested.
The Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Rights Certificates.
Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Rights Certificate if mutilated, the Company will execute and deliver a new
Rights Certificate of like tenor to the Rights Agent for counter-signature and
delivery to the registered owner in lieu of the Rights Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date
of Rights. (a) Subject to Section 7(e) hereof, the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c) and Section 11(a)(iii) hereof) in whole
or in part at any time after the Distribution Date upon surrender of the Rights
Certificate, with the form of election to purchase and the certificate on the
reverse side thereof duly executed, to the Rights Agent at the principal office
or offices of the Rights Agent designated for such purpose, together with
payment of the aggregate Purchase Price with respect to the total number of one
four-hundredths of a Preferred Share (or other securities, cash or other assets,
as the case may be) as to which such surrendered Rights are then exercisable, at
or prior to the earlier of (i) the close of business on April 29, 1998 (the
"Final Expiration Date"), or (ii) the time at which the Rights are redeemed as
provided in Section 23 hereof (the "Redemption Date").
(b) The purchase price for each one one-hundredths of a Series
E Preferred Share pursuant to the exercise of a Circuit City Right shall
initially be $140.00 (as adjusted, the "Series E Purchase Price"). The purchase
price for each one one-hundredths of a Series F Preferred Share pursuant to the
exercise of a CarMax Right shall initially be $________ (as adjusted, the
"Series F Purchase Price"). The Series E Purchase Price and the Series F
Purchase Price shall be subject to adjustment from time to time as provided in
Sections 11 and 13 hereof and shall be payable in accordance with paragraph (c)
below. References in this Agreement to the "Purchase Price" shall mean the
Series E Purchase Price and/or the Series F Purchase Price, as the context
requires.
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase and the certificate
duly executed, accompanied by
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payment, with respect to each Right so exercised, of the Purchase Price per one
fourhundredths of a Preferred Share (or other shares, securities, cash or other
assets, as the case may be) to be purchased as set forth below and an amount
equal to any applicable transfer tax required to be paid by the holder of such
Rights Certificate in accordance with Section 9, the Rights Agent shall, subject
to Section 20(k) hereof, thereupon promptly (i) (A) requisition from any
transfer agent of the Preferred Shares (or make available, if the Rights Agent
is the transfer agent for such shares) certificates for the total number of one
four-hundredths of a Preferred Share to be purchased and the Company hereby
irrevocably authorizes its transfer agent to comply with all such requests, or
(B) if the Company shall have elected to deposit the total number of Preferred
Shares issuable upon exercise of the Rights hereunder with a depositary agent,
requisition from the depositary agent depositary receipts representing such
number of one four-hundredths of a Preferred Share as are to be purchased (in
which case certificates for the Preferred Shares represented by such receipts
shall be deposited by the transfer agent with the depositary agent) and the
Company hereby directs the depositary agent to comply with such request, (ii)
when appropriate, requisition from the Company the amount of cash, if any, to be
paid in lieu of issuance of fractional shares in accordance with Section 14,
(iii) promptly after receipt of such certificates or depositary receipts, cause
the same to be delivered to or upon the order of the registered holder of such
Rights Certificate, registered in such name or names as may be designated by
such holder and (iv) when appropriate, after receipt, promptly deliver such
cash, if any, to or upon the order of the registered holder of such Rights
Certificate. The payment of the Purchase Price (as such amount may be reduced
pursuant to Section 11(a)(iii) hereof) shall be made (x) in cash or by certified
bank check or bank draft payable to the order of the Company, or (y) at the
election of the Company with respect to all exercisable Rights by delivery of a
certificate or certificates (with appropriate stock powers executed in blank
attached thereto) evidencing a number of Common Shares equal to the then
Purchase Price divided by the closing price (as determined pursuant to Section
11(d) hereof) per Common Share on the Trading Day (as hereinafter defined)
immediately preceding the date of such exercise or (z) in the event the Company
permits payment with Common Shares, a combination thereof. In the event the
Company elects to accept Common Shares in payment of the Purchase Price, it
shall notify the Rights Agent of such election and of the closing price per
Common Share on the Trading Date immediately preceding the date of exercise to
which such election relates. In the event that the Company is obligated to issue
other securities (including Common Shares) of the Company, pay cash and/or
distribute other property pursuant to Section 11(a) hereof, the Company will
make all arrangements necessary so that such other securities, cash and/or other
property are available for distribution by the Rights Agent, if and when
appropriate.
(d) In case the registered holder of any Rights Certificate
shall exercise fewer than all the Rights evidenced thereby, a new Rights
Certificate evidencing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent to the registered holder of such Rights
Certificate or to his duly authorized assigns, subject to the provisions of
Section 14 hereof.
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(e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any
Rights beneficially owned by (i) an Acquiring Person or an Associate or
Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee after the Acquiring
Person becomes such, or (iii) a transferee of an Acquiring Person (or of any
such Associate or Affiliate) who becomes a transferee before or concurrently
with the Acquiring Person becoming such and receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from the Acquiring
Person to holders of equity interests in such Acquiring Person or to any Person
with whom the Acquiring Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer that the Board
of Directors of the Company has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of this
Section 7(e), shall be void without any further action and any holder of such
Rights shall thereafter have no right whatsoever with respect to such Rights
(including, without limitation, the right to exercise such Rights) under any
provision of this Agreement or otherwise. No Rights Certificate shall be issued
pursuant to Section 3 that represents Rights beneficially owned by an Acquiring
Person whose Rights would be void pursuant to the preceding sentence or any
Associate or Affiliate thereof; no Rights Certificate shall be issued at any
time upon the transfer of any Rights to an Acquiring Person whose Rights would
be void pursuant to the preceding sentence or any Associate or Affiliate thereof
or to any nominee of such Acquiring Person, Associate or Affiliate; and any
Rights Certificate delivered to the Rights Agent for transfer to an Acquiring
Person whose Rights would be void pursuant to the preceding sentence shall be
cancelled. The Company shall use all reasonable efforts to insure that the
provisions of this Section 7(e) and Section 4(b) are complied with, but shall
have no liability to any holder of Rights Certificates or any other Person as a
result of its failure to make any determinations with respect to an Acquiring
Person or its Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) completed and signed the certificate contained in the form
of election to purchase set forth on the reverse side of the Rights Certificate
surrendered for such exercise, and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights
Certificates. All Rights Certificates surrendered for the purpose of exercise,
transfer, split up, combination or exchange shall, if surrendered to the Company
or to any of its agents, be delivered to the Rights Agent for cancellation or in
cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by
it, and no Rights Certificates shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Rights Agreement. The
Company shall deliver to the Rights Agent for cancellation and retirement, and
the Rights Agent shall so
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cancel and retire, any other Rights Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all cancelled Rights Certificates to the Company.
Section 9. Reservation and Availability of Preferred Shares
and Common Shares. (a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued Preferred Shares
(and, following the occurrence of a Triggering Event, out of its authorized and
unissued Common Shares and/or other securities) the number of Preferred Shares
(and, following the occurrence of a Triggering Event, Common Shares and/or other
securities) that, as provided in this Agreement, will be sufficient to permit
the exercise in full of all outstanding Rights.
(b) So long as the Preferred Shares (and, following the
occurrence of a Triggering Event, Common Shares and/or other securities)
issuable and deliverable upon the exercise of Rights may be listed on any
national securities exchange, the Company shall use its best efforts to cause,
from and after such time as the Rights become exercisable (but only to the
extent that it is reasonably likely that the Rights will be exercised), all
shares reserved for such issuance to be listed on such exchange upon official
notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as
soon as practicable following the earliest date after the first occurrence of a
Section 11(a)(ii) Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined pursuant to this
Agreement (including in accordance with Section 11(a)(iii) hereof), a
registration statement under the Securities Act of 1933 (the "Act"), with
respect to the securities purchasable upon exercise of the Rights on an
appropriate form, (ii) cause such registration statement to become effective as
soon as practicable after such filing, (iii) cause such registration statement
to remain effective (with a prospectus at all times meeting the requirements of
the Act) until the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities, and (B) the Final Expiration Date, and (iv)
obtain such regulatory approvals as may be necessary for it to issue securities
purchasable upon the exercise of the Rights. The Company will also take such
action as may be appropriate under, or to ensure compliance with, the securities
or "blue sky" laws of the various states in connection with the exercisability
of the Rights. The Company may temporarily suspend, for a period of time not to
exceed 90 days after the date set forth in clause (i) of the first sentence of
this Section 9(c), the exercisability of the Rights in order to prepare and file
such registration statement and permit it to become effective or to obtain any
other required regulatory approval in connection with the exercisability of the
Rights. Upon any such suspension, the Company shall issue a public announcement
stating, and notify the Rights Agent, that the exercisability of the Rights has
been temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. In addition, if the Company shall determine
that a registration statement is required following the Distribution Date, the
Company may temporarily suspend the exercisability of the Rights until such time
as a registration statement has been declared effective. In the event any Right
is exercised
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prior to the occurrence of a Section 11(a)(ii) Event or a Section 13 Event, the
Company may defer for up to 90 days the issuance of Preferred Shares upon such
exercise in order to obtain any necessary regulatory approval. If, within 90
days after such exercise of any Right, the Company is unable to obtain any
required regulatory approval for the issuance of the Preferred Shares, or if the
Company is otherwise unable to issue the Preferred Shares under the terms of its
Articles of Restatement or for any other reason, then the Company shall
substitute for the Preferred Shares otherwise issuable upon exercise of the
Right (1) cash, (2) a reduction in the Purchase Price, (3) Common Shares or
other equity securities of the Company, except to the extent that the Company
has not obtained any necessary regulatory approval for such issuance, (4) debt
securities of the Company, except to the extent that the Company has not
obtained any necessary regulatory approval for such issuance, (5) other assets,
or (6) any combination of the foregoing, having an aggregate value equal to the
Current Market Price (as defined in Section 11(d)(ii)) of the Preferred Shares
for which such Right is exercisable, where such aggregate value has been
determined by the Board of Directors of the Company based upon the advice of a
nationally recognized investment banking firm selected by the Board of Directors
of the Company. Notwithstanding any provision of this Agreement to the contrary,
the Rights shall not be exercisable in any jurisdiction if the requisite
qualification in such jurisdiction shall not have been obtained or the exercise
thereof shall not be permitted under applicable law.
(d) The Company covenants and agrees that it will take all
such action as may be necessary to ensure that all one four-hundredths of a
Preferred Share (and, following the occurrence of a Triggering Event, Common
Shares and/or other securities) delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such shares (subject to payment of the
Purchase Price), be duly and validly authorized and issued and fully paid and
nonassessable shares.
(e) The Company further covenants and agrees that it will pay
when due and payable any and all federal and state transfer taxes and charges
which may be payable in respect of the issuance or delivery of the Rights
Certificates and of any certificate for a number of one four-hundredths of a
Preferred Share (or Common Shares and/or other securities, as the case may be)
upon the exercise of Rights. The Company shall not, however, be required to pay
any transfer tax which may be payable in respect of any transfer or delivery of
Rights Certificates to a person other than, or the issuance or delivery of a
number of one four-hundredths of a Preferred Share (or Common Shares and/or
other securities, as the case may be) in respect of a name other than that of,
the registered holder of the Rights Certificate evidencing Rights surrendered
for exercise or to issue or deliver any certificates for a number of one
four-hundredths of a Preferred Share (or Common Shares and/or other securities,
as the case may be) upon the exercise of any Rights until any such tax shall
have been paid (any such tax being payable by the holder of such Rights
Certificate at the time of surrender) or until it has been established to the
Company's satisfaction that no such tax is due.
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Section 10. Preferred Shares Record Date. Each person in whose
name any certificate for a number of one four-hundredths of a Preferred Share is
issued upon the exercise of Rights shall for all purposes be deemed to have
become the holder of record of the Preferred Shares (or Common Shares and/or
other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and any applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Preferred Shares (or
Common Shares and/or other securities, as the case may be) transfer books of the
Company are closed, such person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Shares (or Common
Shares and/or other securities, as the case may be) transfer books of the
Company are open. Prior to the exercise of the Rights evidenced thereby, the
holder of a Rights Certificate shall not be entitled to any rights of a
shareholder of the Company with respect to shares for which the Rights shall be
exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of
Shares or Number of Rights. The Purchase Price, the number and kind of shares
covered by each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on any series of the Preferred
Shares payable in Preferred Shares, (B) subdivide any series of the outstanding
Preferred Shares, (C) combine any series of the outstanding Preferred Shares
into a smaller number of Preferred Shares or (D) issue any shares of its capital
stock in a reclassification of any series of the Preferred Shares (including any
such reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise
provided in this Section 11(a) and Section 7(e) hereof, the Purchase Price in
effect at the time of the record date for such dividend or of the effective date
of such subdivision, combination or reclassification, and the number and kind of
shares of capital stock issuable on such date, shall be proportionately adjusted
so that the holder of any Right exercised after such time shall be entitled to
receive, upon payment of the Purchase Price then in effect, the aggregate number
and kind of shares of capital stock which, if such Right had been exercised
immediately prior to such date and at a time when the Preferred Shares transfer
books of the Company were open, he would have owned upon such exercise and been
entitled to receive by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs which would require an adjustment under
both Section 11(a)(i) and Section 11(a)(ii), the adjustment provided for in this
Section 11(a)(i) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii).
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(ii) In the event
(A) any Acquiring Person or any Associate or
Affiliate of any Acquiring Person, at any time after the date
of this Agreement, directly or indirectly, (1) shall merge
into the Company or otherwise combine with the Company and the
Company shall be the continuing or surviving corporation of
such merger or combination and all the Common Shares of the
Company shall remain outstanding and not changed into or
exchanged for stock or other securities of any other Person or
the Company or cash or any other property, (2) shall, in one
or more transactions, transfer any assets to the Company or
any of its Subsidiaries in exchange (in whole or in part) for
shares of any class or series of capital stock of the Company
or any of its Subsidiaries or for securities exercisable for
or convertible into shares of any class or series of capital
stock of the Company or any of its Subsidiaries or otherwise
obtain from the Company or any of its Subsidiaries, with or
without consideration, any additional shares of any class or
series of capital stock of the Company or any of its
Subsidiaries or securities exercisable for or convertible into
shares of any class or series of capital stock of the Company
or any of its Subsidiaries (other than as part of a pro rata
distribution to all holders of such shares of any class or
series of capital stock of the Company or any of its
Subsidiaries), (3) shall sell, purchase, lease, exchange,
mortgage, pledge, transfer or otherwise acquire or dispose (in
one or more transactions), to, from, with or of, as the case
may be, the Company or any of its Subsidiaries, assets
(including securities) on terms and conditions less favorable
to the Company than the Company would be able to obtain in
arm's-length negotiation with an unaffiliated third party
(other than pursuant to a transaction set forth in Section
13(a) hereof), (4) shall sell, purchase, lease, exchange,
mortgage, pledge, transfer or otherwise acquire or dispose (in
one or more transactions), to, from, with or of, as the case
may be, the Company or any of the Company's Subsidiaries
(other than incidental to the lines of business, if any,
engaged in as of the date hereof between the Company and such
Acquiring Person or Associate or Affiliate) assets having an
aggregate fair market value of more than $2 million (other
than pursuant to a transaction set forth in Section 13(a)
hereof), (5) shall receive any compensation from the Company
or any of the Company's Subsidiaries other than compensation
for full-time employment as a regular employee at rates in
accordance with the Company's (or its Subsidiaries') past
practices, or (6) shall receive the benefit, directly or
indirectly (except proportionately as a shareholder and except
if resulting from a requirement of law or governmental
regulation), of any loans, advances, guarantees, pledges or
other financial assistance or any tax credits or other tax
advantage provided by the Company or any of its Subsidiaries,
or (B) any Person shall become the Beneficial Owner of Common
Shares representing 15% or more of the total Voting Rights of
all the Common Shares of the Company then outstanding except
pursuant to a tender offer made in the
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manner prescribed by Section 14(d) of the Exchange Act and the
rules and regulations promulgated thereunder; provided,
however, that (a) such tender offer shall provide for the
acquisition of all of the outstanding shares of Circuit City
Stock and CarMax Stock held by any Person other than such
Acquiring Person and its Associates or Affiliates for cash and
(b) a majority of the Continuing Directors shall have
determined that such tender offer is fair, or (C) during such
time as there is an Acquiring Person, there shall be any
reclassification of securities (including any reverse stock
split), or recapitalization of the Company, or any merger or
consolidation of the Company with any of its Subsidiaries or
any other transaction or series of transactions involving the
Company or any of its Subsidiaries (whether or not with or
into or otherwise involving an Acquiring Person), other than a
transaction or transactions to which the provisions of Section
13(a) apply, which has the effect, directly or indirectly, of
increasing by more than 1% the proportionate share of the
outstanding shares of any class or series of equity securities
or of securities exercisable for or convertible into
securities of the Company or any of its Subsidiaries which is
directly or indirectly owned by any Acquiring Person or any
Associate or Affiliate of any Acquiring Person,
then, promptly following the occurrence of any event described in Section
11(a)(ii)(A), (B) or (C) hereof, proper provision shall be made so that each
holder of a Right, except as provided below and in Section 7(e), shall
thereafter have the right to receive, upon exercise thereof at the then current
Purchase Price, in accordance with the terms of this Agreement, in lieu of a
number of one four-hundredths of a Preferred Share, such number of shares of
Circuit City Stock (in the case of a Circuit City Right) or CarMax Stock (in the
case of a CarMax Right) as shall equal the result obtained by (x) multiplying
the then current Purchase Price by the then number of one four-hundredths of a
Preferred Share for which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event, and dividing that product (which
product, following such first occurrence, shall thereafter be referred to as the
"Purchase Price" for each Right and for all purposes of this Agreement) by (y)
50% of the Current Market Price per share of the applicable series of Common
Shares (determined pursuant to Section 11(d)) on the date of such first
occurrence (such number of shares, the "Adjustment Shares"); provided, that the
Purchase Price and the number of Adjustment Shares shall be further adjusted as
provided in this Agreement to reflect any events occurring after the date of
such first occurrence.
(iii) In the event that the aggregate number of shares of
Circuit City Stock or CarMax Stock authorized by the Company's Articles of
Restatement but not outstanding or reserved for issuance for purposes other than
upon exercise of the Rights is not sufficient to permit the exercise in full of
the Circuit City Rights or CarMax Rights, as the case may be, in accordance with
the foregoing subparagraph (ii) of this Section 11(a), or if any necessary
regulatory approval for such issuance has not been obtained by the Company, the
Company shall: (A) determine the excess of (1) the value of the Adjustment
Shares issuable upon the exercise of each such Right (the "Current Value") over
(2) the Purchase Price (such excess,
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the "Spread"), and (B) with respect to each such Right, make adequate provision
to substitute for the Adjustment Shares, upon exercise of such Rights, (1) cash,
(2) a reduction in the Purchase Price, (3) Common Shares or other equity
securities of the Company (including, without limitation, shares or units of
shares of preferred stock which the Board of Directors of the Company has deemed
to have the same value as shares of Circuit City Stock or CarMax Stock, as
applicable (such shares or units of shares of preferred stock are herein called
"common stock equivalents"), except to the extent that the Company has not
obtained any necessary regulatory approval for such issuance, (4) debt
securities of the Company, except to the extent that the Company has not
obtained any necessary regulatory approval for such issuance, (5) other assets,
or (6) any combination of the foregoing, having an aggregate value equal to the
Current Value, where such aggregate value has been determined by the Board of
Directors of the Company based upon the advice of a nationally recognized
investment banking firm selected by the Board of Directors of the Company;
provided, however, if the Company shall not have made adequate provision to
deliver value pursuant to clause (B) above within 30 days following the later of
(x) the first occurrence of a Section 11(a)(ii) Event and (y) the date on which
the Company's right of redemption pursuant to Section 23(a) expires (the later
of (x) and (y) being referred to herein as the "Section 11(a)(ii) Trigger
Date"), then the Company shall be obligated, subject to Section 7(e), to
deliver, upon the surrender for exercise of each such Right and without
requiring payment of the Purchase Price, Common Shares (to the extent
available), except to the extent that the Company has not obtained any necessary
regulatory approval for such issuance, and then, if necessary, cash, which
shares and/or cash have an aggregate value equal to the Spread. If the Board of
Directors of the Company shall determine in good faith that it is likely that
sufficient additional Common Shares could be authorized for issuance upon
exercise in full of such Rights or that any necessary regulatory approval for
such issuance will be obtained, the 30-day period set forth above may be
extended to the extent necessary, but not more than 90 days after the Section
11(a)(ii) Trigger Date, in order that the Company may seek shareholder approval
for the authorization of such additional shares or take action to obtain such
regulatory approval (such period, as it may be extended, the "Substitution
Period"). To the extent that the Company determines that some action need be
taken pursuant to the first and/or second sentences of this Section 11(a)(iii),
the Company (x) shall provide, subject to Section 7(e) hereof, that such action
shall apply uniformly to all outstanding Circuit City Rights or CarMax Rights,
as the case may be, and (y) may suspend the exercisability of such Rights until
the expiration of the Substitution Period in order to seek any authorization of
additional shares, to take any action to obtain any required regulatory approval
and/or to decide the appropriate form of distribution to be made pursuant to
such first sentence and to determine the value thereof. In the event of any such
suspension, the Company shall issue a public announcement stating that the
exercisability of such Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect. For
purposes of this Section 11(a)(iii), the value of the Common Shares shall be the
Current Market Price (as determined pursuant to Section 11(d) hereof) per share
of the Common Shares on the Section 11(a)(ii) Trigger Date and the value of any
"common stock equivalent" shall be deemed to have the same value as the Common
Shares on such date.
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(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of any series of
Preferred Shares entitling them (for a period expiring within 45 calendar days
after such record date) to subscribe for or purchase such Preferred Shares (or
shares having the same rights, privileges and preferences as such Preferred
Shares ("equivalent preferred shares") or securities convertible into such
Preferred Shares or equivalent preferred shares at a price per Common Share or
equivalent preferred share (or having a conversion price per share, if a
security convertible into such Preferred Shares or equivalent preferred shares)
less than the Current Market Price per share of such Preferred Shares (as
defined in Section 11(d)) on such record date, the Purchase Price to be in
effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of such Preferred Shares outstanding on
such record date plus the number of such Preferred Shares which the aggregate
offering price of the total number of such Preferred Shares or equivalent
preferred shares or both so to be offered (or the aggregate initial conversion
price of the convertible securities so to be offered) would purchase at such
Current Market Price and the denominator of which shall be the number of such
Preferred Shares outstanding on such record date plus the number of additional
such Preferred Shares or equivalent preferred shares or both to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible). In case such subscription price may be paid
in a consideration part or all of which may be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent and the
holders of the Rights. Preferred Shares of such series owned by or held for the
account of the Company shall not be deemed outstanding for the purpose of any
such computation. Such adjustment shall be made successively whenever such a
record date is fixed; and in the event that such rights or warrants are not so
issued, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making
of a distribution to all holders of any series of Preferred Shares (including
any such distribution made in connection with a consolidation or merger in which
the Company is the continuing corporation) of evidences of indebtedness or
assets (other than a regular quarterly cash dividend or a dividend payable in
such Preferred Shares) or subscription rights or warrants (excluding those
referred to in Section 11(b)), the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the Current Market Price per share of such Preferred Shares (as defined
in Section 11(d)) on such record date, less the fair market value (as determined
in good faith by the Board of Directors of the Company, whose determination
shall be described in a statement filed with the Rights Agent) of the portion of
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the cash, assets or evidences of indebtedness so to be distributed or of such
subscription rights or warrants applicable to one such Preferred Share and the
denominator of which shall be such Current Market Price per share of such
Preferred Shares. Such adjustments shall be made successively whenever such a
record date is fixed; and in the event that such distribution is not so made,
the Purchase Price shall again be adjusted to be the Purchase Price which would
then be in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder (other
than computations made pursuant to Section 11(a)(iii) hereof), the "Current
Market Price" per share of the Common Shares on any date shall be deemed to be
the average of the daily closing prices per share of such Common Shares for the
30 consecutive Trading Days (as such term is hereinafter defined) immediately
prior to such date, and for purposes of computations made pursuant to Section
11(a)(iii) hereof, the "Current Market Price" per share of the Common Shares on
any date shall be deemed to be the average of the daily closing prices per share
of such Common Shares for the ten consecutive Trading Days immediately following
such date; provided, however, that in the event that the Current Market Price
per share of the Common Shares is determined during a period following the
announcement by the issuer of such Common Shares of (A) a dividend or
distribution on such Common Shares payable in such Common Shares or securities
convertible into such Common Shares (other than the Rights), or (B) any
subdivision, combination or reclassification of such Common Shares, and prior to
the expiration of the requisite 30 Trading Days or ten Trading Days, as set
forth above, after the ex-dividend date for such dividend or distribution or the
record date for such subdivision, combination or reclassification, then, and in
each such case, the Current Market Price shall be appropriately adjusted to
reflect the Current Market Price per Common Share equivalent. 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 or, if the Common Shares are not listed
or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Common Shares
are listed or admitted to trading or, if the Common Shares are 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
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then
in use, or, if on any such date the Common Shares are 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 Shares selected by the
Board of Directors of the Company. If on any such date no market maker is making
a market in the Common Shares, the fair value of such shares on such date as
determined in good faith by the Board of Directors of the Company shall be used.
The term "Trading Day" shall mean a day on which the principal national
securities exchange on which the Common Shares are listed or admitted to trading
is open for the transaction of business or, if the Common Shares are not listed
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or admitted to trading on any national securities exchange, a Business Day. If
the Common Shares are not publicly held or not so listed or traded, "Current
Market Price" per share shall mean the fair value per share as determined in
good faith by the Board of Directors of the Company, whose determination shall
be described in a statement filed with the Rights Agent and shall be conclusive
for all purposes.
(ii) For the purpose of any computation hereunder, the
"Current Market Price" per share of the Preferred Shares shall be determined in
the same manner as set forth above for Common Shares in clause (i) of this
Section 11(d) (other than the last sentence thereof). If the Current Market
Price per share of either series of Preferred Shares cannot be determined in the
manner provided above or if either series of Preferred Shares is not publicly
held or listed or traded in a manner described in clause (i) of this Section
11(d), the "Current Market Price" per share of such series of Preferred Shares
shall be conclusively deemed to be (A) in the case of the Series E Preferred
Stock, the Current Market Price per share of the Circuit City Stock
(appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof), multiplied by 400 and (B) in the
case of the Series F Preferred Stock, the Current Market Price per share of the
CarMax (appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof), multiplied by 400. If
neither the applicable series of Common Shares nor the applicable series of
Preferred Shares are publicly held or so listed or traded, "Current Market
Price" per share shall mean the fair value per share as determined in good faith
by the Board of Directors of the Company, whose determination shall be described
in a statement filed with the Rights Agent and shall be conclusive for all
purposes. For all purposes of this Agreement, the "Current Market Price" of one
four-hundredths of a Preferred Share shall be equal to the "Current Market
Price" of one Preferred Share divided by 400.
(e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least l% in the Purchase Price; provided,
however, that any adjustments which by reason of this Section 11(e) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 11 shall be made to
the nearest cent or to the nearest ten-thousandth of a Common Share or other
share or one-millionth of a Preferred Share, as the case may be. Notwithstanding
the first sentence of this Section 11(e), any adjustment required by this
Section 11 shall be made no later than the earlier of (i) three years from the
date of the transaction which requires such adjustment or (ii) the date of the
expiration of the right to exercise any Rights.
(f) If, as a result of an adjustment made pursuant to Section
11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock of the Company
other than Preferred Shares, thereafter the number of such other shares so
receivable upon exercise of any Right and the Purchase Price thereof shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Preferred Shares
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contained in Section 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and
the provisions of Sections 7, 9, 10, 13 and 14 with respect to the Preferred
Shares shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to
any adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one four-hundredths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Section 11(b) and (c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Purchase Price per one four-hundredths of a
Preferred Share, that number of one four-hundredths of a Preferred Share
(calculated to the nearest one one-millionth of a Preferred Share) obtained by
(i) multiplying (x) the number of one four-hundredths of a share covered by a
Right immediately prior to this adjustment by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price and (ii) dividing the
product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in substitution
for any adjustment in the number of one four-hundredths of a Preferred Share
purchasable upon the exercise of a Right. Each of the Rights outstanding after
such adjustment in the number of Rights shall be exercisable for the number of
one four-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement, and notify the Rights Agent, of its
election to adjust the number of Rights, indicating the record date for the
adjustment, and, if known at the time, the amount of the adjustment to be made.
This record date may be the date on which the Purchase Price is adjusted or any
day thereafter, but, if the Rights Certificates have been issued, shall be at
least ten days later than the date of the public announcement. If Rights
Certificates have been issued, upon each adjustment of the number of Rights
pursuant to this Section 11(i), the Company shall, as promptly as practicable,
cause to be distributed to holders of record of Rights Certificates on such
record date Rights Certificates evidencing, subject to Section 14 hereof, the
additional Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall cause to be distributed to
such holders of record in substitution and replacement for the Rights
Certificates held by such holders prior to the date of adjustment, and upon
surrender thereof, if required by the Company, new Rights Certificates
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evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein (and may bear, at the option
of the Company, the adjusted Purchase Price) and shall be registered in the
names of the holders of record of Rights Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of one four-hundredths of a Preferred Share issuable upon
the exercise of a Right, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per one four-hundredths of a
share and the number of four-hundredths of a share which were expressed in the
initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below one four-hundredths of the then par value, if
any, of the number of one four-hundredths of a Preferred Share issuable upon
exercise of the Rights, the Company shall take any corporate action which may,
in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable Preferred Shares at such
adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
of the number of one four-hundredths of a Preferred Share and other capital
stock or securities of the Company, if any, issuable upon such exercise over and
above the number of one four-hundredths of a Preferred Share and other capital
stock or securities of the Company, if any, issuable upon such exercise on the
basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares (fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that in their good faith judgment the Board of
Directors of the Company shall determine to be advisable in order that any
consolidation or subdivision of the Preferred Shares, issuance wholly for cash
of any of the Preferred Shares at less than the Current Market Price, issuance
wholly for cash of Preferred Shares or securities which by their terms are
convertible into or exchangeable for Preferred Shares, dividends on Preferred
Shares payable in Preferred Shares or issuance of rights, options or warrants
referred to in this Section 11, hereafter made by the Company to holders of its
Preferred Shares shall not be taxable to such shareholders.
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(n) The Company covenants and agrees that it shall not, at any
time after the Distribution Date, (i) consolidate with any other Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof), (ii) merge with or into any other Person (other than a Subsidiary
of the Company in a transaction which complies with Section 11(o) hereof), or
(iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), if (x) at the time of or immediately after
such consolidation, merger or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately after
such consolidation, merger or sale, the stockholders of the Person who
constitutes, or would constitute, the "Principal Party" for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23 or Section 27
hereof, take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by the
Rights.
(p) In the event that at any time after the date of this
Agreement and prior to the Distribution Date, the Company shall (i) declare or
pay any dividend on any series of the outstanding Common Shares payable in
Common Shares (other than a dividend payable in shares of CarMax Stock to the
extent such dividend reduces the Number of Shares Issuable with Respect to the
Inter-Group Interest, as such term is defined in the Articles of Restatement) or
(ii) effect a subdivision, combination or consolidation of any series of the
Common Shares (by reclassification or otherwise than by payment of dividends in
Common Shares) into a greater or lesser number of Common Shares, then in any
such case (i) the number of one four-hundredths of a Series E Preferred Share
(in the case of an event affecting the Circuit City Stock) or a Series F
Preferred Share (in the case of an event affecting the CarMax Stock) purchasable
after such event upon proper exercise of each Right shall be determined by
multiplying the number of one four-hundredths of a Preferred Share so
purchasable immediately prior to such event by a fraction, the numerator of
which is the number of such Common Shares outstanding immediately before such
event and the denominator of which is the number of such Common Shares
outstanding immediately after such event and (ii) each such Common Share
outstanding immediately after such event shall have issued with respect to it
that number of Rights which each such Common Share outstanding immediately prior
to such event had issued with respect to it. The adjustments provided for in
this Section 11(p) shall be made successively whenever such a dividend is
declared or paid or such a subdivision, combination or consolidation is
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effected. If an event occurs which would require an adjustment under Section
11(a)(ii) and this Section 11(p), the adjustments provided for in this Section
11(p) shall be in addition and prior to any adjustment required pursuant to
Section 11(a)(ii).
(q) In the event that at any time after the date of this Agreement and
prior to the Distribution Date, the Company shall redeem the shares of Circuit
City Stock or CarMax Stock in exchange for shares of common stock of one or more
subsidiaries of the Company pursuant to paragraph (B)(5)(b) of Article V, then
there shall be issued with respect to each such share of common stock of a
subsidiary delivered directly to the holders of Circuit City Stock or CarMax
Stock, as applicable, a share purchase right under a shareholder rights plan to
be established by such subsidiary.
Section 12. Certificate of Adjusted Purchase Price or Number
of Shares. Whenever an adjustment is made as provided in Sections 11 and 13
hereof, the Company shall (a) promptly prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent and with the transfer agent for the
Common Shares and Preferred Shares a copy of such certificate and (c) mail a
brief summary thereof to each holder of a Rights Certificate in accordance with
Section 25 hereof.
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power. (a) In the event that, following the Share Acquisition
Date, directly or indirectly, (i) the Company shall consolidate with, or merge
with and into, any other Person (other than a subsidiary of the Company in a
transaction which complies with Section 11(o) hereof or any employee benefit
plan of the Company, or any entity holding Common Shares for or pursuant to the
terms of any such plan) and the Company shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) any Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof or any employee benefit plan of the Company, or any entity holding Common
Shares for or pursuant to the terms of any such plan) shall consolidate with the
Company, or merge with and into the Company, and the Company shall be the
continuing or surviving corporation of such consolidation or merger and, in
connection with such merger, all or part of the outstanding Common Shares shall
be changed into or exchanged for stock or other securities of any other Person
(or the Company) or cash or any other property, or (iii) the Company shall sell
or otherwise transfer (or one or more of its Subsidiaries shall sell or
otherwise transfer), in one or more transactions, assets or earning power
aggregating 50% or more of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons (other than the Company
or any of its Subsidiaries in one or more transactions each of which complies
with Section 11(o) hereof), then, and in each such case, proper provision shall
be made so that (A) each holder of a Right (except as otherwise provided in
Section 7(e) hereof) shall thereafter have the right to receive, upon the
exercise thereof at the then current Series E Purchase Price (in the case of a
Circuit City Right) or the then current Series F Purchase Price (in the case of
a CarMax Right), in accordance with the terms of this Agreement, such number of
validly authorized and issued, fully paid, nonassessable and freely tradeable
shares of Common Shares of the Principal Party (as such term is hereinafter
defined), not subject to any liens, encumbrances, rights of first refusal or
other adverse claims, as shall be equal to the result obtained by (1)
multiplying such then current Purchase Price by the number of one
four-hundredths of a Preferred Share for which such Right is then exercisable
(without taking into account any adjustment previously made pursuant to Section
11(a)(ii)) and (2) dividing that product (which, following the first occurrence
of a Section 13 Event, shall be referred to as the "Purchase Price" for each
such Right and for all purposes of this Agreement) by 50% of the Current Market
Price per share
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of the Common Shares of such Principal Party on the date of consummation of such
Section 13 Event; (B) such Principal Party shall thereafter be liable for, and
shall assume, by virtue of such Section 13 Event, all the obligations and duties
of the Company pursuant to this Agreement; (C) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof shall apply only to such
Principal Party following the first occurrence of a Section 13 Event; (D) such
Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of shares of its Common Shares in accordance
with Section 9) in connection with the consummation of any such transaction as
may be necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to its Common Shares
thereafter deliverable upon the exercise of the Rights; and (E) the provisions
of Section 11(a)(ii) hereof shall be of no effect following the first occurrence
of any Section 13 Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in
clause (i) or (ii) of the first sentence of Section 13(a), the Person
that is the issuer of any securities into which Common Shares of the
Company are converted in such merger or consolidation, and if no
securities are so issued, the Person that is the other party to such
merger or consolidation; and
(ii) in the case of any transaction described in
clause (iii) of the first sentence of Section 13(a), the Person that is
the party receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions; provided,
however, that in any such case, (1) if the Common Shares of such Person
are not at such time and have not been continuously over the preceding
12-month period registered under Section 12 of the Exchange Act, and
such Person is a direct or indirect Subsidiary of another Person the
Common Shares of which is and has been so registered, "Principal Party"
shall refer to such other Person; and (2) in case such Person is a
Subsidiary, directly or indirectly, of more than one Person, the Common
Shares of two or more of which are and have been so registered,
"Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Shares having the greatest aggregate market value.
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<PAGE>
(c) The Company shall not consummate any Section 13 Event
unless the Principal Party shall have a sufficient number of authorized shares
of its Common Shares which have not been issued or reserved for issuance to
permit the exercise in full of the Rights in accordance with this Section 13 and
unless prior thereto the Company and such Principal Party shall have executed
and delivered to the Rights Agent a supplemental agreement providing for the
terms set forth in paragraphs (a) and (b) of this Section 13 and further
providing that, as soon as practicable after the date of any Section 13 Event,
the Principal Party will
(i) prepare and file a registration statement under
the Act, with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, and will use its best
efforts to cause such registration statement to (A) become effective as
soon as practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Act) until the
Final Expiration Date; and
(ii) will deliver to holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates
which comply in all respects with the requirements for registration on
Form 10 under the Exchange Act.
The foregoing provisions set forth in this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers. In the event
that a Section 13 Event shall occur at any time after the occurrence of a
Section 11(a)(ii) Event, the Rights which have not theretofore been exercised
shall thereafter become exercisable in the manner described in Section 13(a).
Section 14. Fractional Rights and Fractional Shares. (a) The
Company shall not be required to issue fractions of Rights or to distribute
Rights Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Rights Certificates
with regard to which such fractional Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
Right. For the purposes of this Section 14(a), the current market value of a
whole Right shall be the closing price of the Rights for the Trading Day
immediately prior to the date on which such fractional Rights would have been
otherwise issuable. The closing price for any 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 or, if the Rights
are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
Rights are listed or admitted to trading or, if the Rights are 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
over-the-counter market, as reported by NASDAQ or such other system then in use
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<PAGE>
or, if on any such date the Rights are 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 Rights selected by the Board of Directors of
the Company. If on any such date no such market maker is making a market in the
Rights the fair value of the Rights on such date as determined in good faith by
the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of
Preferred Shares (other than fractions which are integral multiples of one
four-hundredths of a Preferred Share) upon exercise of the Rights or to
distribute certificates which evidence fractional Preferred Shares (other than
fractions which are integral multiples of one fourhundredths of a Preferred
Share). Fractions of Preferred Shares in integral multiples of one
four-hundredths of a Preferred Share may, at the election of the Company, be
evidenced by depositary receipts, pursuant to an appropriate agreement between
the Company and a depositary selected by it, provided that such agreement shall
provide that the holders of such depositary receipts shall have all the rights,
privileges and preferences to which they are entitled as Beneficial Owners of
the Preferred Shares. In lieu of fractional Preferred Shares the Company shall
pay to the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one Preferred Share. For purposes of this Section 14(b),
the current market value of a Preferred Share shall be the closing price of a
Preferred Share (as determined pursuant to the second sentence of Section 11(d))
for the Trading Day immediately prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the Rights
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right.
Section 15. Rights of Action. All rights of action in respect
to this Agreement, excepting the rights of action given to the Rights Agent
under Section 18 hereof, are vested in the respective registered holders of the
Rights Certificates (and, prior to the Distribution Date, the registered holders
of the Common Shares); and any registered holder of any Rights Certificate (or,
prior to the Distribution Date, of the Common Shares), without the consent of
the Rights Agent or of the holder of any other Rights Certificate (or, prior to
the Distribution Date, of the Common Shares), may, on his own behalf and for his
own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his
right to exercise the Rights evidenced by such Rights Certificate in the manner
provided in such Rights Certificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened
violations of, the obligations of any Person subject to this Agreement.
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Section 16. Agreement of Right Holders. Every holder of a
Right, by accepting the same, consents and agrees with the Company and the
Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed;
(c) subject to Section 6 and Section 7(f) hereof, the Company
and the Rights Agent may deem and treat the person in whose name the Rights
Certificate (or, prior to the Distribution Date, the associated Common Shares
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Shares certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be required to be affected by any notice to the
contrary; and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative agency
or commission, or any statute, rule, regulation or executive order promulgated
or enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a
Shareholder. No holder, as such, of any Rights Certificate shall be entitled to
vote, receive dividends or be deemed for any purpose the holder of the Preferred
Shares or any other securities of the Company which may at any time be issuable
upon the exercise of the Rights represented thereby, nor shall anything
contained herein or in any Rights Certificate be construed to confer upon the
holder of any Rights Certificate, as such, any of the rights of a shareholder of
the Company or any right to vote for the election of directors or upon any
matter submitted to shareholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting shareholders (except as provided in Section 25), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by such Rights Certificate shall have been exercised in accordance
with the provisions hereof.
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Section 18. Concerning the Rights Agent. The Company agrees to
pay to the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the acceptance, exercise and performance of
its duties hereunder. The Company also agrees to indemnify the Rights Agent for,
and to hold it harmless against, any loss, liability, or expense, incurred
without gross negligence, bad faith or willful misconduct on the part of the
Rights Agent, for anything done, suffered or omitted by the Rights Agent in
connection with the acceptance and administration of this Agreement, including
the costs and expenses of defending against any claim of liability in the
premises (including reasonable counsel fees and expenses).
The Rights Agent shall be protected and shall incur no
liability for, or in respect of any action taken, suffered or omitted by it in
connection with, its administration of this Agreement in reliance upon any
Rights Certificate or certificate for the Preferred Shares or Common Shares or
for other securities of the Company, instrument of assignment or transfer, power
of attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper person or persons, or otherwise upon the advice of its counsel as set
forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of
Rights Agent. Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, provided that such corporation would be eligible for appointment
as a successor Rights Agent under the provisions of Section 21. In case at the
time such successor Rights Agent shall succeed to the agency created by this
Agreement, any of the Rights Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Rights Certificates so countersigned;
and in case at that time any of the Rights Certificates shall not have been
countersigned, a successor Rights Agent may countersign such Rights Certificates
either in the name of the predecessor Rights Agent or in the name of the
successor Rights Agent; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
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countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Rights Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken, suffered or omitted in good faith by it under the provisions of this
Agreement in reliance upon such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring Person and
the determination of "Current Market Price") be proved or established by the
Company prior to taking, suffering or omitting any action hereunder, such fact
or matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by any one of the Chairman of the Board, the President, any
Executive Vice President, any Senior Vice President, the Treasurer or the
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full and complete authorization to the Rights Agent for any action
taken, suffered or omitted in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company
and any other Person only for its own gross negligence, bad faith or willful
misconduct.
(d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement, the
Summary of Rights or in the Rights Certificates (except its countersignature
thereof) or be required to verify the same, but all such statements and recitals
are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any change in the exercisability of the Rights
or any adjustment in the terms of the Rights (including the manner, method or
amount thereof) provided for in Section 3, 11, 13 or 23, or the ascertaining of
the existence of facts that would require any such change or adjustment (except
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with respect to the exercise of Rights evidenced by Rights Certificates after
actual notice that such change or adjustment is required); nor shall it by any
act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Preferred Shares or other securities to be
issued pursuant to this Agreement or any Rights Certificate or as to whether any
Preferred Shares or other securities will, when issued, be validly authorized
and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder from
any one of the Chairman of the Board, the President, any Executive Vice
President, any Senior Vice President, the Secretary or the Treasurer of the
Company, and to apply to such officers for advice or instructions in connection
with its duties, and it shall not be liable for any action taken, suffered or
omitted to be taken in good faith by it under the provisions of this Agreement
in reliance upon instructions of any such officer. At any time the Rights Agent
may apply to the Company for written instructions with respect to any matter
arising in connection with the Rights Agent's duties and obligations arising
under this Agreement. Such application by the Rights Agent for written
instructions from the Company may, at the option of the Rights Agent, set forth
in writing any action proposed to be taken or omitted by the Rights Agent with
respect to its duties or obligations under this Agreement and the date on and/or
after which such action shall be taken and the Rights Agent shall not be liable
for any action taken or omitted in accordance with a proposal included in any
such application on or after the date specified therein (which date shall not be
less than three Business Days after the Company receives such application,
without the Company's consent) unless, prior to taking or initiating such
action, the Rights Agent has received written instructions in response to such
application specifying the action to be taken or omitted.
(h) The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any such
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act, default, neglect or misconduct, provided reasonable care was exercised in
the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment of such
funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to
the Rights Agent for exercise or transfer, the certificate attached to the form
of assignment or form of election to purchase, as the case may be, has either
not been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days notice in writing mailed to the Company and to the
transfer agent of the Common Shares and Preferred Shares by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
30 days notice in writing, mailed to the Rights Agent or successor Rights Agent,
as the case may be, and to the transfer agent of the Common Shares and Preferred
Shares by registered or certified mail, and to the holders of the Rights
Certificates by first-class mail. If the Rights Agent shall resign or be removed
or shall otherwise become incapable of acting, the Company shall appoint a
successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Rights Certificate
(who shall, with such notice, submit his Rights Certificate for inspection by
the Company), then the registered holder of any Rights Certificate may apply to
any court of competent jurisdiction for the appointment of a new Rights Agent.
Any successor Rights Agent, whether appointed by the Company or by such a court,
shall be a corporation organized and doing business under the laws of the United
States or of the States of New York or Virginia (or of any other state of the
United States so long as such corporation is authorized to do business as a
banking institution in the States of New York or Virginia), in good standing,
having a principal office in the States of New York or Virginia, which is
authorized under such laws to exercise corporate trust powers and is subject to
supervision or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $50 million. After appointment, the successor Rights Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
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than the effective date of any such appointment the Company shall file notice
thereof in writing with the predecessor Rights Agent and the transfer agent of
the Common Shares and Preferred Shares, and mail a notice thereof in writing to
the registered holders of the Rights Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates.
Notwithstanding any of the provisions of this Agreement or of the Rights to the
contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change in the Purchase Price and the number or kind or
class of shares or other securities or property purchasable under the Rights
Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale of Common Shares following the
Distribution Date and prior to the redemption or expiration of the Rights, the
Company (a) shall, with respect to Common Shares so issued or sold pursuant to
the exercise of stock options or under any employee plan or arrangement (so long
as such options, plan or arrangement were granted or established, as the case
may be, prior to the Distribution Date), or upon the exercise, conversion or
exchange of securities issued by the Company after the date hereof and prior to
the Distribution Date, and (b) may, in any other case, if deemed necessary or
appropriate by the Board of Directors of the Company, issue Rights Certificates
representing the appropriate number of Rights in connection with such issuance
or sale; provided, however, that (i) no such Rights Certificate shall be issued
if, and to the extent that, the Company shall be advised by counsel that such
issuance would create a significant risk of material adverse tax consequences to
the Company or the Persons to whom such Rights Certificate would be issued, and
(ii) no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
Section 23. Redemption and Termination. (a) The Board of
Directors of the Company may, at its option, at any time prior to the earlier of
(i) the close of business on the tenth day following the Share Acquisition Date
(or, if the Share Acquisition Date shall have occurred prior to the Record Date,
the close of business on the fifteenth day following the Record Date), or (ii)
the Final Expiration Date, redeem all but not less than all the then outstanding
Rights at a redemption price of $.0025 per Right, as such amount may be
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price") and the Company may, at its
option, pay the Redemption Price either in Common Shares (based on the "Current
Market Price," as defined in Section 11(d)(i) hereof, of the Common Shares at
the time of redemption) or cash; provided, however, if the Board of Directors of
the Company authorizes redemption of the Rights in either of the circumstances
set forth in clauses (i) and (ii) below, then there must be Continuing Directors
then in office and such authorization shall require the concurrence of a
majority of such Continuing Directors: (i) such authorization occurs on or after
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the time a Person becomes an Acquiring Person, or (ii) such authorization occurs
on or after the date of a change (resulting from a proxy or consent
solicitation) in a majority of the directors in office at the commencement of
such solicitation if any Person who is a participant in such solicitation has
stated (or, if upon the commencement of such solicitation, a majority of the
Board of Directors of the Company has determined in good faith) that such Person
(or any of its Affiliates or Associates) intends to take, or may consider
taking, any action which would result in such Person becoming an Acquiring
Person or which would cause the occurrence of a Triggering Event.
(b) Immediately upon the action of the Board of Directors of
the Company ordering the redemption of the Rights (such action being adopted in
the manner required by paragraph (a) above), evidence of which shall have been
filed with the Rights Agent and without any further action and without any
notice, the Rights will terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price for each Right so held.
Promptly after the action of the Board of Directors ordering the redemption of
the Rights, the Company shall give notice of such redemption to the Rights Agent
and the holders of the then outstanding Rights by mailing such notice to all
such holders at each holder's last address as it appears upon the registry books
of the Rights Agent or, prior to the Distribution Date, on the registry books of
the transfer agent for the Common Shares. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder receives
the notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made.
Section 24. Exchange. (a) With the affirmative vote of a
majority of the Continuing Directors, the Company may at any time after any
Person becomes an Acquiring Person, exchange all or part of the then outstanding
and exercisable Rights for Common Shares at an exchange ratio of one share of
Circuit City Stock per Circuit City Right and one share of CarMax Stock per
CarMax Right, each such ratio being appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(each such exchange ratio being hereinafter referred to as an "Exchange Ratio").
Notwithstanding the foregoing, the Company shall not be empowered to effect such
exchange at any time after any Person (other than the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or any such Subsidiary, or
any entity holding Common Shares for or pursuant to the terms of any such plan),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of Common Shares representing 50% or more of the total Voting
Rights of all the Common Shares of the Company then outstanding.
(b) Immediately upon the action of the Board of Directors of
the Company ordering the exchange of any Rights pursuant to subsection (a) of
this Section 24 and without any further action and without any notice, the right
to exercise such Rights shall terminate and the only right thereafter of a
holder of such Rights shall be to receive that number of shares of Circuit City
Stock or CarMax Stock, as the case may be, equal to the number of such Rights
held by such holder multiplied by the applicable Exchange Ratio. The Company
shall promptly give public notice of any such exchange; provided, however, that
the failure to give, or any defect in, such notice shall not affect the validity
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of such exchange. The Company promptly shall mail a notice of any such exchange
to all of the holders of such Rights at their last addresses as they appear upon
the registry books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which the exchange
of the Common Shares for Rights will be effected and, in the event of any
partial exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights held by each
holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company,
at its option, may substitute (i) Series E Preferred Shares (or equivalent
preferred shares, as such term is defined in Section 11(b) hereof) for shares of
Circuit City Stock exchangeable for Circuit City Rights, at the initial rate of
one four-hundredths of a Series E Preferred Share (or equivalent preferred
share) for each share of Circuit City Stock and (ii) Series F Preferred Shares
(or equivalent preferred shares, as such term is defined in Section 11(b)
hereof) for shares of CarMax Stock exchangeable for CarMax Rights, at the
initial rate of one four-hundredths of a Series F Preferred Share (or equivalent
preferred share) for each share of CarMax Stock, such rates, in the case of
clause (i) or (ii) of this Section 24(c), to be appropriately adjusted to
reflect adjustments in the voting rights of the Preferred Shares pursuant to the
terms thereof, so that the fraction of a Preferred Share delivered in lieu of a
Common Share shall have the same voting rights as such Common Share.
(d) In the event that there shall not be sufficient Common
Shares or Preferred Shares authorized but unissued to permit any exchange of
Rights as contemplated in accordance with this Section 24, the Company shall
take all such action as may be necessary to authorize additional Common Shares
or Preferred Shares for issuance upon exchange of the Rights.
(e) The Company shall not be required to issue fractions of
Common Shares or to distribute certificates which evidence fractional Common
Shares. In lieu of such fractional Common Shares, the Company shall pay to the
registered holders of the Rights Certificates with regard to which such
fractional Common Shares would otherwise be issuable an amount in cash equal to
the same fraction of the current market value of a whole Common Share. For the
purposes of this subsection (e), the current market value of a whole Common
Share shall be the closing price of such Common Share (as determined pursuant to
the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately
after the public announcement by the Company that an exchange is to be effected
pursuant to this Section 24.
Section 25. Notice of Certain Events. In case the Company
shall propose (a) to pay any dividend payable in stock of any class or series to
the holders of either series of Preferred Shares or to make any other
distribution to the holders of either series of Preferred Shares (other than a
regular quarterly cash dividend) or (b) to offer to the holders of either series
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of Preferred Shares rights or warrants to subscribe for or to purchase any
additional such Preferred Shares or shares of stock of any class or series or
any other securities, rights or options, or (c) to effect any reclassification
of either series of Preferred Shares (other than a reclassification involving
only the subdivision of outstanding Preferred Shares of such series), or (d) to
effect any consolidation or merger into or with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), or to effect any sale or other transfer (or to permit one or more of
its Subsidiaries to effect any sale or other transfer), in one or more
transactions, of 50% or more of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to, any other Person (other than the Company
and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), or (e) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of a Rights Certificate, in accordance with Section 26
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such stock dividend, or distribution of rights or warrants,
or the date on which such reclassification, consolidation, merger, sale,
transfer, liquidation, dissolution, or winding up is to take place and the date
of participation therein by the holders of the Common Shares and/or Preferred
Shares, if any such date is to be fixed, and such notice shall be so given in
the case of any action covered by clause (a) or (b) above at least 20 days prior
to the record date for determining holders of the Preferred Shares for purposes
of such action, and in the case of any such other action, at least 20 days prior
to the date of the taking of such proposed action or the date of participation
therein by the holders of the Common Shares and/or Preferred Shares, whichever
shall be the earlier.
In case any Section 11(a)(ii) Event shall occur, then, in any
such case, the Company shall as soon as practicable thereafter give to each
holder of a Rights Certificate, in accordance with Section 26 hereof, a notice
of the occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Section 11(a)(ii) hereof,
and all references in the preceding paragraph to Preferred Shares shall be
deemed thereafter references to Common Shares and/or, if appropriate, other
securities.
Section 26. Notices. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
Circuit City Stores, Inc.
9950 Mayland Drive
Richmond, VA 23233
Attention: Secretary
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
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Rights Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
Norwest Bank Minnesota, N.A.
161 North Concord Exchange
South St. Paul, Minnesota 55075
Attention: Shareowner Services
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments. Prior to the Distribution Date
and subject to the penultimate sentence of this Section 27, the Company may and
the Rights Agent shall, if the Company so directs, supplement or amend any
provision of this Agreement without the approval of any holders of certificates
representing Common Shares. From and after the Distribution Date and subject to
the penultimate sentence of this Section 27, the Company may and the Rights
Agent shall, if the Company so directs, supplement or amend this Agreement
without the approval of any holders of Rights Certificates in order (i) to cure
any ambiguity, (ii) to correct or supplement any provision contained herein
which may be defective or inconsistent with any other provisions herein, (iii)
shorten or lengthen any time period hereunder (which lengthening or shortening,
following the first occurrence of an event set forth in clauses (i) and (ii) of
the proviso to Section 23(a) hereof, shall be effective only if there are
Continuing Directors and shall require the concurrence of a majority of such
Continuing Directors), or (iv) to change or supplement the provisions hereunder
in any manner which the Company may deem necessary or desirable and which shall
not adversely affect the interests of the holders of Rights Certificates (other
than an Acquiring Person or an Affiliate or Associate of an Acquiring Person);
provided, this Agreement may not be supplemented or amended to lengthen,
pursuant to clause (iii) of this sentence, (A) a time period relating to when
the Rights may be redeemed at such time as the Rights are not then redeemable,
or (B) any other time period unless such lengthening is for the purpose of
protecting, enhancing or clarifying the rights of, and/or the benefits to, the
holders of Rights (other than any Acquiring Person and its Affiliates and
Associates). Upon the delivery of a certificate from an appropriate officer of
the Company which states that the proposed supplement or amendment is in
compliance with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment. Notwithstanding anything contained in this
Agreement to the contrary, no supplement or amendment shall be made which
changes the Redemption Price, the Final Expiration Date, the Purchase Price or
the number of one four-hundredths of a Preferred Share for which a Right is
exercisable. Prior to the Distribution Date, the interests of the holders of
Rights shall be deemed coincident with the interests of the holders of Common
Shares (other than an Acquiring Person).
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Section 28. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 29. Determinations and Actions by the Board of
Directors, etc. For all purposes of this Agreement, any calculation of the
number of Common Shares outstanding at any particular time, including for
purposes of determining the number of such outstanding Common Shares of which
any Person is the Beneficial Owner, shall be made in accordance with the last
sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the
Exchange Act. The Board of Directors of the Company (with, where specifically
provided for herein, the consent of a majority of the Continuing Directors)
shall have the exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board (with, where
specifically provided for herein, the consent of a majority of the Continuing
Directors) or to the Company, or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power to (i) interpret the provisions of this Agreement, (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement) and (iii) make all factual determinations deemed necessary
or advisable for the administration of this Agreement. All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) which are done or
made by the Board in good faith, shall (x) be final, conclusive and binding on
the Company, the Rights Agent, the holders of the Rights and all other parties,
and (y) not subject the Board to any liability to the holders of the Rights.
Section 30. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any person or corporation other than the
Company, the Rights Agent and the registered holders of the Rights Certificates
(and, prior to the Distribution Date, the Common Shares) any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Rights Certificates (and, prior to the Distribution Date, the
Common Shares).
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement, or any portion thereof, is held by a court of
competent jurisdiction or other authority to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement, including any portions of any thereof which are not held to be
invalid, void or unenforceable, shall remain in full force and effect and shall
in no way be affected, impaired or invalidated; provided, however, that
notwithstanding anything in this Agreement to the contrary, if any such term,
provision, covenant or restriction is held by such court or authority to be
invalid, void or unenforceable and the Board of Directors of the Company, with
the consent of a majority of the Continuing Directors after the Distribution
Date, determines in its good faith business judgment that severing the invalid
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language from this Agreement would adversely affect the purpose or effect of
this Agreement, the right of redemption set forth in Section 23 hereof shall be
reinstated and shall not expire until the close of business on the tenth day
following the date of such determination by the Board of Directors.
Section 32. Governing Law. This Agreement, each Right, and
each Rights Certificate issued hereunder shall be deemed to be a contract made
under the laws of the Commonwealth of Virginia and for all purposes shall be
governed by and construed in accordance with the laws of such Commonwealth
applicable to contracts to be made and performed entirely within such
Commonwealth.
Section 33. Counterparts. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
CIRCUIT CITY STORES, INC.
Attest:
By_________________________ By__________________________
Title______________________ Title_______________________
NORWEST BANK MINNESOTA, N.A.
Attest:
By________________________ By__________________________
Title_____________________ Title_______________________
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EXHIBIT A-1
The Board of Directors of the Corporation has approved the following
provisions to be set forth as Section C of Article IV of the Corporation's
Articles of Restatement setting forth certain relative rights and preferences of
the Series E Preferred Shares:
C. Series E Preferred Stock.
The Board of Directors of the Corporation has heretofore 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 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 shares of the Circuit City Stock and the CarMax 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, 400 times the aggregate per share amount of all cash dividends,
and 400 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 Circuit City Stock, or a subdivision of the
outstanding shares of Circuit City Stock (by reclassification or
otherwise), declared on the Circuit City 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 January 1, 1997 declare or pay any
dividend on Circuit City Stock payable in shares of Circuit City Stock,
or effect a subdivision or combination or consolidation of the
outstanding shares of Circuit City Stock (by reclassification or
otherwise than by payment of a dividend in shares of Circuit City
Stock) into a greater or lesser number of shares of Circuit City 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
A-1-1
<PAGE>
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 Circuit City Stock outstanding immediately after such event and the
denominator of which is the number of shares of Circuit City 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
Circuit City Stock (other than a dividend payable in shares of Circuit
City Stock); provided that, in the event no dividend or distribution
shall have been declared on the Circuit City 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-byshare 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,
A-1-2
<PAGE>
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 to be
created by resolution or resolutions of the Board of Directors or as part of an
existing series of Preferred Stock.
(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, 400 times the current market price
per share of Circuit City 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.
A-1-3
<PAGE>
The current market price per share of Circuit City Stock on any date
shall be deemed to be the average of the daily closing prices per share
of such Circuit City 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 Circuit City Stock is listed or admitted to
trading or, if the Circuit City 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 over-the 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 Circuit City
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 Circuit City Stock. If no professional
market maker is then making a market in the Circuit City Stock, the
current market price per share of the Circuit City 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
Circuit City Stock is listed or admitted to trading is open for the
transaction of business or, if the Circuit City 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 January 1,
1997 declare or pay any dividend on Common Stock payable in shares of
Circuit City 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 Circuit City Stock) into a greater or lesser number of shares of
Circuit City 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 Circuit City Stock outstanding immediately after such event and the
denominator of which is the number of shares of Circuit City 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
A-1-4
<PAGE>
(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
A-1-5
<PAGE>
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.
A-1-6
<PAGE>
EXHIBIT A-2
The Board of Directors of the Corporation has approved the following
provisions to be set forth as Section D of Article IV of the Corporation's
Articles of Restatement setting forth certain relative rights and preferences of
the Series F Preferred Shares:
D. Series F Preferred Stock.
The Board of Directors of the Corporation has heretofore designated
500,000 shares of the Preferred Stock as the Cumulative Participating Preferred
Stock, Series F ("Series F Stock"). Such number may from time to time be
decreased (but not below the number of shares of Series F 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 (D)(1) through (D)(5) of this Article.
(1) Dividends and Distributions.
(a) The holders of shares of the Series F Stock, in preference
to the holders of shares of the Circuit City Stock and the CarMax 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 F 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, 400 times the aggregate per share amount of all cash dividends,
and 400 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 CarMax Stock, or a subdivision of the outstanding
shares of CarMax Stock (by reclassification or otherwise), declared on
the CarMax 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 F Stock. In the event the Corporation shall at any time
after January 1, 1997 declare or pay any dividend on CarMax Stock
payable in shares of CarMax Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of CarMax Stock
(by reclassification or otherwise than by payment of a dividend in
shares of CarMax Stock) into a greater or lesser number of shares of
CarMax Stock, then in each such case the amount per share to which
holders of shares of the Series F 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 F Stock
A-2-1
<PAGE>
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 CarMax Stock outstanding immediately after such event and
the denominator of which is the number of shares of CarMax Stock that
were outstanding immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution
on the Series F Stock as provided in paragraph (D)(1)(a) of this
Article immediately after it declares a dividend or distribution on the
CarMax Stock (other than a dividend payable in shares of CarMax Stock);
provided that, in the event no dividend or distribution shall have been
declared on the CarMax 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 F 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 F Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of the
Series F 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 F 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 F 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-byshare 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 F 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 F 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 F Stock as provided in paragraph
(C)(1) of this Article are in arrears, thereafter and until all accrued
and unpaid dividends and distributions,
A-2-2
<PAGE>
whether or not declared, on shares of the Series F 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 F 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 F Stock, except dividends paid
ratably on the Series F 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 F Stock, any such parity
stock or any stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) with the Series F
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 (D)(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 F 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 to be
created by resolution or resolutions of the Board of Directors or as part of an
existing series of Preferred Stock.
(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 F Stock.
(b) The redemption price shall be an amount per share equal to
the greater of (i) $________ or (ii) subject to the provision for
adjustment hereinafter set forth, 400 times the current market price
per share of CarMax 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.
A-2-3
<PAGE>
The current market price per share of CarMax Stock on any date shall be
deemed to be the average of the daily closing prices per share of such
CarMax 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
CarMax Stock is listed or admitted to trading or, if the CarMax 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 over-the 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 CarMax 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 CarMax
Stock. If no professional market maker is then making a market in the
CarMax Stock, the current market price per share of the CarMax 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 CarMax Stock is listed or admitted to trading is open for the
transaction of business or, if the CarMax 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 January 1,
1997 declare or pay any dividend on Common Stock payable in shares of
CarMax 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 CarMax Stock) into
a greater or lesser number of shares of CarMax Stock, then in each such
case the aggregate amount per share to which holders of shares of the
Series F 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 F 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 CarMax Stock outstanding immediately
after such event and the denominator of which is the number of shares
of CarMax Stock that were outstanding immediately prior to such event.
(c) In case less than all of the outstanding shares of Series
F 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.
A-2-4
<PAGE>
(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 F 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 F 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 F 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 F Stock otherwise than by redemption
pursuant to paragraph (D)(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 F 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
A-2-5
<PAGE>
of Series F Stock except in accordance with a purchase offer made on
the same terms to all the holders of the outstanding shares of Series F
Stock.
A-2-6
<PAGE>
Exhibit B-1
[Form of Rights Certificate]
Certificate No. CCR-__________ Rights
NOT EXERCISABLE [BEFORE THE DISTRIBUTION DATE (AS SUCH TERM IS DEFINED
IN THE RIGHTS AGREEMENT) OR]* AFTER April 29, 1998 OR EARLIER IF NOTICE OF
REDEMPTION IS GIVEN. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT ON
THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS
BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS
REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A
PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).
ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH
AGREEMENT.]**
Circuit City Group Rights Certificate
Circuit City Stores, Inc.
- --------
*This portion of the legend in brackets shall be inserted only upon the
Rights Certificates delivered to the Rights Agent prior to the Distribution
Date.
**This portion of the legend in brackets shall be inserted only if
applicable and shall replace the immediately preceding sentence.
B-1-1
<PAGE>
This certifies that _______________ , or registered assigns,
is the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Amended and Restated Rights Agreement dated as of January ___, 1997 (the
"Rights Agreement") between Circuit City Stores, Inc., a Virginia corporation
(the "Company"), and Norwest Bank Minnesota, N.A., a national banking
association (Norwest Bank Minnesota, N.A. or its successor as rights agent under
the Rights Agreement, the "Rights Agent"), to purchase from the Company at any
time after the Distribution Date (as such term is defined in the Rights
Agreement) and prior to 5:00 P.M. (Richmond, Virginia time) on April 29, 1998
(the "Final Expiration Date") at the principal office or offices of the Rights
Agent designated for such purpose, or at its successor as Rights Agent, one
four-hundredths of a fully paid nonassessable share of Cumulative Participating
Preferred Stock, Series E, par value $20.00 per share (the "Preferred Shares"),
of the Company, at a purchase price of $140.00 per one four-hundredths of a
Preferred Share (the "Purchase Price"), upon presentation and surrender of this
Rights Certificate with the Form of Election to Purchase duly executed. The
Purchase Price shall be paid in cash or, if the Company so permits, Common
Shares having an equivalent value or, if the Company has permitted payment with
Common Shares, a combination of cash and Common Shares. The number of Rights
evidenced by this Rights Certificate (and the number of shares which may be
purchased upon exercise thereof) set forth above, and the Purchase Price per
share set forth above, are the number and Purchase Price as of January ___,
1997, based on the Preferred Shares as constituted at such date.
Upon the occurrence of a Section 11(a)(ii) Event (as such term
is defined in the Rights Agreement), if the Rights evidenced by this Right
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Associate or
Affiliate, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of a person who, concurrently with or after such
transfer, became an Acquiring Person or an Affiliate or Associate of an
Acquiring Person, such Rights shall become null and void and no holder hereof
shall have any right with respect to such Rights from and after the occurrence
of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and
the number and kind of Preferred Shares or other securities which may be
purchased upon the exercise of the Rights evidenced by this Rights Certificate
are subject to modification and adjustment upon the happening of certain events,
including Triggering Events (as such term is defined in the Rights Agreement).
This Rights Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities hereunder
of the Rights Agent, the Company and the holders of the Rights Certificates
which limitations of rights include the temporary suspension of the
exercisability of such Rights under the specific circumstances set forth in the
Rights Agreement. Copies of the Rights Agreement are on file at the principal
offices of the Company and are also available upon written request to the
Company.
B-1-2
<PAGE>
This Rights Certificate, with or without other Rights
Certificates, upon surrender at the office or offices of the Rights Agent
designated for such purpose, may be exchanged for another Rights Certificate or
Rights Certificates of like tenor and date evidencing Rights entitling the
holder to purchase a like aggregate number of one fourhundredths of a Preferred
Share as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option, with
the approval of a majority of the Continuing Directors (as such term is defined
in the Rights Agreement), at a redemption price of $.0025 per Right, payable, at
the option of the Company, in cash or Common Shares, at any time prior to the
earlier of the close of business on (i) the tenth day (as such time period may
be extended or shortened pursuant to the Rights Agreement) following the Share
Acquisition Date (as such term is defined in the Rights Agreement) and (ii) the
Final Expiration Date.
No fractional Preferred Shares will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one fourhundredths of a Preferred Share, which may, at the
election of the Company, be evidenced by depositary receipts), but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or, to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights Agent.
B-1-3
<PAGE>
WITNESS the facsimile signatures of the proper officers of the
Company and its corporate seal. Dated as of:
ATTEST: CIRCUIT CITY STORES, INC.
______________________________ By: _________________________
Title: Title:
Countersigned:
[INSERT NAME OF RIGHTS AGENT]
By__________________________________
Authorized Signature
B-1-4
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the Rights Certificates.)
FOR VALUE RECEIVED _____________________________ hereby sells,
assigns and transfers unto
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ___________________ Attorney,
to transfer the withinnamed Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated:___________ 19 ______________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor
institution (banks, stockbrokers, savings and loan associations and credit
unions with membership in an approved signature guarantee Medallion program),
pursuant to SEC Rule 17Ad-15.
Certificate
The undersigned hereby certifies by checking the appropriate boxes that: (i)
this Rights Certificate [ ] is [ ] is not being sold, assigned or transferred by
or on behalf of a Person who is or was an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined pursuant to
the Rights Agreement); and (ii) after due inquiry and to the best knowledge of
the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this
Rights Certificate from any Person who is, was or subsequently became an
Acquiring Person or an Affiliate or Associate of an Acquiring Person.
B-1-5
<PAGE>
Dated: ______________, 19 _____________________________
Signature
B-1-6
<PAGE>
Notices
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
B-1-7
<PAGE>
[Form of Reverse Side of Rights Certificate -- continued]
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise the Rights
Certificate.)
To: Circuit City Stores, Inc.
The undersigned hereby irrevocably elects to exercise
__________________________ Rights represented by this Rights Certificate to
purchase the Preferred Shares issuable upon the exercise of the Rights (or such
other securities of the Company or of any other person which may be issuable
upon the exercise of the Rights) and requests that certificates for such shares
be issued in the name of and delivered to:
Please insert social security
or other identifying number
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security or other identifying number
(Please print name and address)
Dated:_______________, 19 ______________________________
Signature
(Signature must conform in all respects to
name of holder as specified on the face of
this Rights Certificate in every
particular, without alteration or
enlargement or any change whatsoever)
B-1-8
<PAGE>
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor
institution (banks, stockbrokers, savings and loan associations and credit
unions with membership in an approved signature guarantee Medallion program),
pursuant to SEC Rule 17Ad-15.
Dated: ____________ , 19 _____________________________
Signature
Certificate
The undersigned hereby certifies by checking the appropriate boxes
that:
1. the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);
2. after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: _____________, 19 _____________________________
Signature
B-1-9
<PAGE>
Notice
The signature to the foregoing Election must correspond to the name as
written upon the face of this Rights Certificate in every particular, without
alteration or enlargement or any change whatsoever.
B-1-10
<PAGE>
Exhibit B-2
[Form of Rights Certificate]
Certificate No. CMR-__________ Rights
NOT EXERCISABLE [BEFORE THE DISTRIBUTION DATE (AS SUCH TERM IS DEFINED
IN THE RIGHTS AGREEMENT) OR]*** AFTER April 29, 1998 OR EARLIER IF NOTICE OF
REDEMPTION IS GIVEN. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT ON
THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS
BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS
REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A
PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).
ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH
AGREEMENT.]****
CarMax Group Rights Certificate
Circuit City Stores, Inc.
This certifies that _______________ , or registered assigns,
is the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Amended and Restated Rights Agreement dated as of January ___, 1997 (the
"Rights Agreement") between Circuit City
- --------
***This portion of the legend in brackets shall be inserted only upon the
Rights Certificates delivered to the Rights Agent prior to the Distribution
Date.
****This portion of the legend in brackets shall be inserted only if
applicable and shall replace the immediately preceding sentence.
B-2-1
<PAGE>
Stores, Inc., a Virginia corporation (the "Company"), and Norwest Bank
Minnesota, N.A., a national banking association (Norwest Bank Minnesota, N.A. or
its successor as rights agent under the Rights Agreement, the "Rights Agent"),
to purchase from the Company at any time after the Distribution Date (as such
term is defined in the Rights Agreement) and prior to 5:00 P.M. (Richmond,
Virginia time) on April 29, 1998 (the "Final Expiration Date") at the principal
office or offices of the Rights Agent designated for such purpose, or at its
successor as Rights Agent, one four-hundredths of a fully paid nonassessable
share of Cumulative Participating Preferred Stock, Series F, par value $20.00
per share (the "Preferred Shares"), of the Company, at a purchase price of
$______ per one four-hundredths of a Preferred Share (the "Purchase Price"),
upon presentation and surrender of this Rights Certificate with the Form of
Election to Purchase duly executed. The Purchase Price shall be paid in cash or,
if the Company so permits, Common Shares having an equivalent value or, if the
Company has permitted payment with Common Shares, a combination of cash and
Common Shares. The number of Rights evidenced by this Rights Certificate (and
the number of shares which may be purchased upon exercise thereof) set forth
above, and the Purchase Price per share set forth above, are the number and
Purchase Price as of January ___, 1997, based on the Preferred Shares as
constituted at such date.
Upon the occurrence of a Section 11(a)(ii) Event (as such term
is defined in the Rights Agreement), if the Rights evidenced by this Right
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Associate or
Affiliate, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of a person who, concurrently with or after such
transfer, became an Acquiring Person or an Affiliate or Associate of an
Acquiring Person, such Rights shall become null and void and no holder hereof
shall have any right with respect to such Rights from and after the occurrence
of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and
the number and kind of Preferred Shares or other securities which may be
purchased upon the exercise of the Rights evidenced by this Rights Certificate
are subject to modification and adjustment upon the happening of certain events,
including Triggering Events (as such term is defined in the Rights Agreement).
This Rights Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities hereunder
of the Rights Agent, the Company and the holders of the Rights Certificates
which limitations of rights include the temporary suspension of the
exercisability of such Rights under the specific circumstances set forth in the
Rights Agreement. Copies of the Rights Agreement are on file at the principal
offices of the Company and are also available upon written request to the
Company.
B-2-2
<PAGE>
This Rights Certificate, with or without other Rights
Certificates, upon surrender at the office or offices of the Rights Agent
designated for such purpose, may be exchanged for another Rights Certificate or
Rights Certificates of like tenor and date evidencing Rights entitling the
holder to purchase a like aggregate number of one fourhundredths of a Preferred
Share as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option, with
the approval of a majority of the Continuing Directors (as such term is defined
in the Rights Agreement), at a redemption price of $.0025 per Right, payable, at
the option of the Company, in cash or Common Shares, at any time prior to the
earlier of the close of business on (i) the tenth day (as such time period may
be extended or shortened pursuant to the Rights Agreement) following the Share
Acquisition Date (as such term is defined in the Rights Agreement) and (ii) the
Final Expiration Date.
No fractional Preferred Shares will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one fourhundredths of a Preferred Share, which may, at the
election of the Company, be evidenced by depositary receipts), but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or, to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights Agent.
B-2-3
<PAGE>
WITNESS the facsimile signatures of the proper officers of the
Company and its corporate seal. Dated as of:
ATTEST: CIRCUIT CITY STORES, INC.
______________________________ By: _________________________
Title: Title:
Countersigned:
[INSERT NAME OF RIGHTS AGENT]
By__________________________________
Authorized Signature
B-2-4
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the Rights Certificates.)
FOR VALUE RECEIVED _____________________________ hereby sells,
assigns and transfers unto
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ___________________ Attorney,
to transfer the withinnamed Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated:___________ 19 ______________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor
institution (banks, stockbrokers, savings and loan associations and credit
unions with membership in an approved signature guarantee Medallion program),
pursuant to SEC Rule 17Ad-15.
Certificate
The undersigned hereby certifies by checking the appropriate boxes that: (i)
this Rights Certificate [ ] is [ ] is not being sold, assigned or transferred by
or on behalf of a Person who is or was an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined pursuant to
the Rights Agreement); and (ii) after due inquiry and to the best knowledge of
the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this
Rights Certificate from any Person who is, was or subsequently became an
Acquiring Person or an Affiliate or Associate of an Acquiring Person.
B-2-5
<PAGE>
Dated: ______________, 19 _____________________________
Signature
B-2-6
<PAGE>
Notices
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
B-2-7
<PAGE>
[Form of Reverse Side of Rights Certificate -- continued]
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise the Rights
Certificate.)
To: Circuit City Stores, Inc.
The undersigned hereby irrevocably elects to exercise
__________________________ Rights represented by this Rights Certificate to
purchase the Preferred Shares issuable upon the exercise of the Rights (or such
other securities of the Company or of any other person which may be issuable
upon the exercise of the Rights) and requests that certificates for such shares
be issued in the name of and delivered to:
Please insert social security
or other identifying number
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security or other identifying number
(Please print name and address)
Dated:_______________, 19 ______________________________
Signature
(Signature must conform in all respects to
name of holder as specified on the face of
this Rights Certificate in every particular,
without alteration or enlargement or any
change whatsoever)
B-2-8
<PAGE>
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor
institution (banks, stockbrokers, savings and loan associations and credit
unions with membership in an approved signature guarantee Medallion program),
pursuant to SEC Rule 17Ad-15.
Dated: ____________ , 19 _____________________________
Signature
Certificate
The undersigned hereby certifies by checking the appropriate boxes
that:
1. the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);
2. after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: _____________, 19 _____________________________
Signature
B-2-9
<PAGE>
Notice
The signature to the foregoing Election must correspond to the name as
written upon the face of this Rights Certificate in every particular, without
alteration or enlargement or any change whatsoever.
B-2-10
