SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CIRCUIT CITY STORES, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
<PAGE>
Circuit City Stores, Inc.
9950 Mayland Drive
Richmond, Virginia 23233
Notice of Annual Meeting of Shareholders
June 16, 1998
TO THE HOLDERS OF CIRCUIT CITY STORES, INC. -- CIRCUIT CITY GROUP COMMON STOCK
AND CIRCUIT CITY STORES, INC. -- CARMAX GROUP COMMON STOCK:
The annual meeting of shareholders of Circuit City Stores, Inc. (the
"Company") will be held at The Jefferson Hotel, Franklin and Adams Streets,
Richmond, Virginia, on Tuesday, June 16, 1998, at 10:00 a.m., Eastern Daylight
Time, for the following purposes:
1. To elect four directors to three-year terms;
2. To consider a shareholder proposal; and
3. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Only holders of record of shares of Circuit City Group Common Stock or
CarMax Group Common Stock at the close of business on May 1, 1998, will be
entitled to vote at the meeting and any adjournments thereof.
Whether or not you plan to attend the meeting, please fill in, date, sign
and return the enclosed proxy promptly in the return envelope provided.
You are cordially invited to attend the meeting.
By Order of the Board of Directors
/s/ MICHAEL T. CHALIFOUX
----------------------------------
MICHAEL T. CHALIFOUX, Secretary
May 12, 1998
<PAGE>
PROXY STATEMENT
This Proxy Statement, mailed to holders of Circuit City Group Common Stock
and CarMax Group Common Stock on or about May 12, 1998, is furnished in
connection with the solicitation by Circuit City Stores, Inc. of proxies in the
accompanying form for use at the annual meeting of shareholders to be held on
June 16, 1998, and at any adjournments thereof. A copy of the annual report of
the Company for the fiscal year ended February 28, 1998, is being mailed to you
with this Proxy Statement.
In addition to the solicitation of proxies by mail, the Company's officers
and regular employees, without compensation other than regular compensation,
may solicit proxies by telephone, telegraph, electronic means and personal
interview. The Company also has retained Morrow & Co., Inc. of New York, New
York, to assist in the solicitation of proxies of shareholders whose shares are
held in street name by brokers, banks and other institutions at an approximate
cost of $6,000 plus out-of-pocket expenses. The Company will bear the cost of
all solicitation.
Participants in the 1984 Circuit City Stores, Inc. Employee Stock Purchase
Plan (the "Circuit City Stock Purchase Plan") will receive proxy soliciting
material for the shares of Circuit City Group Common Stock held on each
participant's behalf by First Union National Bank of North Carolina, as
Custodian. Participants in the 1997 Employee Stock Purchase Plan for CarMax
Group Employees (the "CarMax Stock Purchase Plan") also will receive proxy
soliciting material for the shares of CarMax Group Common Stock held on each
participant's behalf by First Union, as Custodian. Those proxies should be
returned, properly executed, in the envelope provided. The Custodian will vote
returned proxies in accordance with the participants' instructions. If a
participant does not vote his or her Circuit City Stock Purchase Plan shares or
CarMax Stock Purchase Plan shares, the Custodian will vote such shares in
accordance with the recommendations of the Company's management.
On May 1, 1998, the date for determining shareholders entitled to vote at
the meeting, 99,536,965 shares of Circuit City Group Common Stock and
22,386,010 shares of CarMax Group Common Stock were outstanding and entitled to
vote. References to "Common Stock" in this Proxy Statement refer to the Circuit
City Group Common Stock and the CarMax Group Common Stock, collectively. The
holders of both series of Common Stock will vote together as a single group at
the meeting. Each outstanding share of Circuit City Group Common Stock entitles
the holder thereof to one vote; each outstanding share of CarMax Group Common
Stock entitles the holder thereof to 0.284 votes; the total number of votes
which shareholders may cast at the meeting, based on shares outstanding on the
record date, is 105,894,592. The voting rights of the CarMax Group Common Stock
have been determined from the recent market values of each series of the
Company's Common Stock in accordance with the formula set forth in the
Company's Articles of Incorporation.
Any shareholder giving a proxy may revoke it at any time before it is
voted by delivering another proxy or written notice of revocation to the
Company's Secretary. A proxy, if executed and not revoked, will be voted for
the election of the nominees for director named herein and against the
shareholder proposal set forth herein, unless it contains specific instructions
to the contrary, in which event it will be voted in accordance with such
instructions.
A majority of the total votes entitled to be cast on matters to be
considered at the meeting constitutes a quorum. If a share is represented for
any purpose at the meeting, it is deemed to be present for quorum purposes and
for all other matters as well. Abstentions and shares held of record by a
broker or its nominee ("Broker Shares") that are voted on any matter are
included in determining the number of votes present or represented at the
meeting. Broker Shares that are not voted on any matter at the meeting will not
be included in determining whether a quorum is present at such meeting.
The election of each nominee for director requires the affirmative vote of
the holders of the shares representing a plurality of the votes cast in the
election of directors. Votes that are withheld and Broker Shares that are not
voted in the election of directors will not be included in determining the
number of votes cast and, therefore, will have no effect on the election of
directors. Actions on all other matters to come before the meeting, including
the shareholder proposal, require that the votes cast in favor of the action
exceed votes cast against it. Abstentions and Broker shares that are not voted
are not considered cast either for or against a matter and, therefore, will
have no effect on the outcome.
1
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ITEM ONE -- ELECTION OF DIRECTORS
The Company's Board of Directors presently consists of 11 directors, who
are divided into three classes with staggered terms. The terms of Richard N.
Cooper, Richard L. Sharp and Alan L. Wurtzel as directors of the Company will
expire at the time of the annual meeting of shareholders. Robert S. Jepson, Jr.
was appointed by the Board to serve as a director effective August 1997 until
the next annual meeting of shareholders. The Company recommends the reelection
of Messrs. Cooper, Jepson, Sharp and Wurtzel to three-year terms.
Although all the nominees have indicated their willingness to serve if
elected, if at the time of the meeting any nominee is unable to or unwilling to
serve, shares represented by properly executed proxies will be voted at the
discretion of the persons named therein for such other person as the Board may
designate.
Information, including their business experience for the past five years,
about the nominees for election as directors and about other directors of the
Company whose terms of office do not expire this year appears below.
Nominees for Election to Three-Year Terms
<TABLE>
<S> <C>
RICHARD N. COOPER, 63, Professor of Economics at Harvard University since
1981. He is a director of the Phoenix Home Mutual Life Insurance Co., the
Warburg-Pincus Funds and the CNA Corporation. He has been a director of the
Company since 1983.
ROBERT S. JEPSON, JR., 55, Chairman of the Board and Chief Executive Officer
of Kuhlman Corporation, the principal business of which is the manufacture of
electrical and industrial products. He has been a director of the Company since August
1997.
RICHARD L. SHARP, 51, Chairman of the Board and Chief Executive Officer of
the Company. Mr. Sharp joined the Company as an Executive Vice President in 1982.
He was President of the Company from June 1984 to March 1997 and became Chief
Executive Officer in 1986 and Chairman of the Board in 1994. He is a director of Fort
James Corporation and Flextronics International, Ltd. He has been a director of the
Company since 1983.
ALAN L. WURTZEL, 64, Vice Chairman of the Board of the Company. Mr. Wurtzel
joined the Company in 1966, was elected President in 1970 and served as Chief
Executive Officer from 1972 to 1986. He also served as Chairman of the Board from
1984 until 1994, when he became Vice Chairman. He is a director of Dollar Tree
Stores, Inc. He has been a director of the Company since 1966.
</TABLE>
2
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Directors Whose Terms Do Not Expire This Year
<TABLE>
<S> <C>
MICHAEL T. CHALIFOUX, 51, Senior Vice President, Chief Financial Officer and
Secretary of the Company. Mr. Chalifoux joined the Company in 1983 as Corporate
Controller and was elected Vice President and Chief Financial Officer in 1988. He
became Senior Vice President and Chief Financial Officer in 1990 and became
Secretary in 1993. He has been a director of the Company since 1991. His present
term will expire in 2000.
BARBARA S. FEIGIN, 60, Executive Vice President and Worldwide Director of
Strategic Services of Grey Advertising, Inc., the principal business of which is
advertising and marketing communications. Ms. Feigin has held her current position
for the past 14 years. She is a director of VF Corporation. She has been a director of
the Company since 1994. Her present term will expire in 2000.
HUGH G. ROBINSON, 65, Chairman and Chief Executive Officer, The Tetra Group,
a consulting firm that provides construction management and business development
services, since 1989. Mr. Robinson is a retired Major General from the United States
Army. He is a director of A.H. Belo Corporation, TU Electric, Guaranty Federal
Savings Bank and Smith Environmental Technologies. He has been a director of the
Company since 1995. His present term will expire in 1999.
WALTER J. SALMON, 67, Stanley Roth Senior Professor of Retailing, Emeritus,
Harvard Business School, since 1980. Mr. Salmon is a director of Hannaford Bros.
Company; Luby's Cafeterias, Inc.; The Neiman Marcus Group; Harrah's
Entertainment, Inc.; The Quaker Oats Company; Cole National Corporation and
PetsMart, Inc. He has been a director of the Company since 1992. His present term
will expire in 1999.
MIKAEL SALOVAARA, 44, Partner, Greycliff Partners, since 1991. Mr. Salovaara
was a Limited Partner of The Blackstone Group L.P. from 1994 to 1996. The principal
business of The Blackstone Group L.P. and Greycliff Partners is merchant banking. He
is a director of Granite Broadcasting Corporation. He has been a director of the
Company since 1995. His present term will expire in 1999.
</TABLE>
3
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<TABLE>
<S> <C>
JOHN W. SNOW, 58, Chairman, President and Chief Executive Officer, CSX
Corporation, a transportation company. Mr. Snow was elected President and Chief
Executive Officer in 1989 and added the title of Chairman in 1991. He is a director of
Textron Inc. and USX Corporation. He has been a director of the Company since
1996. His present term will expire in 1999.
EDWARD VILLANUEVA, 63, financial consultant since 1987. In addition, Mr.
Villanueva served as acting President and Chief Financial Officer of Richfood
Holdings, Inc., a wholesale food distributor, from January 1990 to May 1990 and
August 1990, respectively. He is a director of Richfood Holdings, Inc. Mr. Villanueva
was employed by the Company from 1967 to 1987. He has been a director of the
Company since 1978. His present term will expire in 2000.
</TABLE>
4
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BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth information about the equity securities of
the Company beneficially owned as of February 28, 1998, by (i) each executive
officer named in the Summary Compensation Table; (ii) each director or nominee
for director of the Company; (iii) directors and executive officers as a group;
and (iv) each person who is known by the Company to own beneficially more than
5 percent of the outstanding shares of Circuit City Group Common Stock or
CarMax Group Common Stock. Unless otherwise noted, each shareholder has sole
voting power and sole investment power with respect to securities beneficially
owned.
<TABLE>
<CAPTION>
Shares of Shares of
Circuit City Group Circuit City Group CarMax Group
Option Shares Which Common Stock Common Stock
May Be Acquired Beneficially Owned Percent Beneficially Owned Percent
Within 60 Days After as of of as of of
Name February 28, 1998 February 28, 1998 (1) Series February 28, 1998 Series
- ----------------------------------- ---------------------- -------------------------- --------- ---------------------- --------
<S> <C> <C> <C> <C> <C>
Named Executive Officers
Richard L. Sharp** 570,110 1,547,705 1.6% 0 *
W. Alan McCollough 124,353 222,278 (3)(4) * 0 *
Richard S. Birnbaum 178,956 297,217 (3) * 0 *
John A. Fitzsimmons 83,250 160,801 (3) * 0 *
Michael T. Chalifoux** 139,783 261,106 (3) * 0 *
Directors/Director Nominees
Richard N. Cooper 7,094 38,668 * 0 *
Barbara S. Feigin 1,215 3,015 * 0 *
Robert S. Jepson, Jr. 0 10,000 * 0 *
Hugh G. Robinson 0 0 * 0 *
Walter J. Salmon 6,678 15,278 * 0 *
Mikael Salovaara 0 7,000 (5) * 0 *
John W. Snow 0 2,800 * 0 *
Edward Villanueva 4,030 237,886 (6) * 0 *
Alan L. Wurtzel 12,498 443,568 (7) * 0 *
All directors, director nominees
and executive officers as a group
(20 persons) 1,319,954 3,639,614 (3)(8) 3.7% 266,666 (2) 1.2%
Beneficial Owners of More than 5%
FMR Corp. N/A 14,121,120 (9) 14.2% N/A
82 Devonshire Street
Boston, MA 02109
The Capital Group Companies, Inc. N/A 6,477,050 (10) 6.5% 3,506,000 (11) 15.7%
333 South Hope Street
Los Angeles, CA 90071
The Equitable Companies
Incorporated N/A N/A 10,097,282 (12) 45.1%
1290 Avenue of the Americas
New York, NY 10104
SBC Holding (USA) Inc. N/A 8,890,811 (13) 8.9% N/A
222 Broadway
New York, NY 10038
J.P. Morgan & Co., Incorporated N/A 7,494,902 (14) 7.5% N/A
60 Wall Street
New York, NY 10260
</TABLE>
- ----------
* Less than 1 percent of Class, based on the total number of shares of
Circuit City Group Common Stock and CarMax Group Common Stock outstanding
on May 1, 1998.
5
<PAGE>
** Messrs. Sharp and Chalifoux are also directors of the Company.
(1) Includes the shares of Circuit City Group Common Stock that could be
acquired through exercise of stock options within 60 days after February
28, 1998.
(2) Represents the shares of CarMax Group Common Stock that could be acquired
through the exercise of a stock option within 60 days after February 28,
1998.
(3) Includes restricted shares of Circuit City Group Common Stock as follows:
Mr. McCollough 75,500; Mr. Birnbaum 40,500; Mr. Fitzsimmons 40,500; Mr.
Chalifoux 40,500; and 101,919 awarded to other executive officers. See the
Summary Compensation Table on page 8.
(4) Includes 100 shares held by Mr. McCollough's daughter. Mr. McCollough
disclaims beneficial ownership of such 100 shares.
(5) Includes 1,000 shares held by Mikael Salovaara and B.A.S. Salovaara
Foundation Trust. Mr. Salovaara disclaims beneficial ownership of such
1,000 shares.
(6) Includes 16,600 shares held by Mr. Villanueva as trustee of trusts for the
benefit of his children. Mr. Villanueva disclaims beneficial ownership of
such 16,600 shares.
(7) Includes 138,000 shares held by Mr. Wurtzel as trustee of trusts for the
benefit of his children, 233,070 shares held by Alan Wurtzel Revocable
Trust and 60,000 shares held by Alan Wurtzel Charitable Remainder
Unitrust. Mr. Wurtzel disclaims beneficial ownership of all the
aforementioned shares.
(8) Beneficial ownership is disclaimed for a total of 481,509 shares.
(9) Information concerning the Circuit City Group Common Stock beneficially
owned by FMR Corp. as of December 31, 1997, was obtained from a Schedule
13G dated February 14, 1998. FMR is a parent holding company, and Edward
C. Johnson 3d and Abigail P. Johnson may be deemed members of a group that
controls FMR. The Schedule 13G indicates that the 14,121,120 shares
beneficially owned include: (i) 13,073,840 shares or 13.1 percent of the
oustanding shares of Circuit City Group Common Stock beneficially owned by
Fidelity Management & Research Company ("Fidelity"), a registered
investment advisor and a wholly-owned subsidiary of FMR Corp., as a result
of acting as investment adviser to various registered investment companies
(the "Fidelity Funds"); and (ii) 1,047,280 shares or 1.1 percent of the
outstanding shares of Circuit City Group Common Stock beneficially owned
by Fidelity Management Trust Company, a bank and a wholly-owned subsidiary
of FMR Corp. (the "Fidelity Trust") as a result of its serving as
investment manager of institutional accounts (the "Institutional
Accounts"). According to the Schedule 13G, each of FMR, Mr. Johnson, and
Fidelity Funds has sole dispositive power over the Fidelity Funds' shares,
but neither FMR nor Mr. Johnson has sole power to vote these shares, a
power which resides with the Fidelity Funds' Board of Trustees. Each of
FMR and Mr. Johnson has sole dispositive power over the 1,047,280 shares
beneficially owned by Fidelity Trust and sole power to vote 442,880 of
those shares, but no power to vote 604,400 of those shares.
(10) Information concerning the Circuit City Group Common Stock beneficially
owned by The Capital Group Companies, Inc. as of December 31, 1997, was
obtained from a Schedule 13G dated February 10, 1998. The Company was
informed that no account managed by The Capital Group Companies, Inc. or
its affiliates owns 5 percent or more of Circuit City Group Common Stock.
The filing indicates that of the 6,477,050 shares beneficially owned, The
Capital Group Companies, Inc. has sole voting power for 1,828,150 shares
and sole dispositive power for 6,477,050 shares, but disclaims beneficial
ownership of any shares.
(11) Information concerning the CarMax Group Common Stock beneficially owned by
The Capital Group Companies, Inc. as of December 31, 1997, was obtained
from a Schedule 13G dated February 10, 1998. According to this filing, one
entity, Capital Research and Management Company, an investment adviser
registered under the Investment Adviser Act of 1940, has sole dispositive
power for 2,200,000 shares or 9.8 percent of the outstanding shares of
CarMax Group Common Stock. American Variable Insurance Series-Growth-Income
Fund, an investment company registered under the Investment Company Act of
1940, which is advised by Capital Research and Management Company, has sole
voting power for 1,300,000 of the 2,200,000 shares or 5.8 percent of the
outstanding shares of CarMax Group Common Stock. With respect to 1,306,000
shares beneficially owned by Capital Guardian Trust Company, a wholly owned
subsidiary of The Capital Group Companies, Inc., the filing reflects sole
voting power for 1,212,000 shares and sole dispositive power
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for 1,306,000 shares or 5.8 percent of the outstanding shares of CarMax
Group Common Stock. The filing indicates that of the 3,506,000 shares
beneficially owned, The Capital Group Companies, Inc. has sole voting power
for 1,212,000 shares and sole dispositive power for 3,506,000 shares, but
disclaims beneficial ownership of any shares.
(12) Information concerning the CarMax Group Common Stock beneficially owned by
The Equitable Companies Incorporated as of March 31, 1998, was obtained
from a Schedule 13G dated April 10, 1998, filed by Equitable Companies;
AXA-UAP, which beneficially owns a majority interest in Equitable
Companies; and the Mutuelles AXA, as a group which beneficially owns a
majority interest in AXA-UAP. According to this filing, the interest of
one entity, Alliance Capital Management L.P., an investment adviser
registered under the Investment Adviser Act of 1940, amounted to 9,587,282
shares or 42.8 percent of the outstanding shares of CarMax Group Common
Stock. The filing indicates that of the 10,097,282 shares beneficially
owned, The Equitable Companies Incorporated has sole voting power for
732,177 shares, shared voting power for 9,351,800 shares, sole dispositive
power for 10,087,282 shares and shared dispositive power for 10,000
shares.
(13) Information concerning the Circuit City Group Common Stock beneficially
owned by SBC Holding (USA) Inc. as of December 31, 1997, was obtained from
a Schedule 13G dated February 11, 1998. According to this filing, SBC
Holding (USA) Inc. has shared voting power and shared dispositive power
for the 8,890,811 shares. The filing indicates that Swiss Bank Corporation
also has shared voting power and shared dispositive power for the
8,890,811 shares. In addition, Brinson Partners, Inc., an investment
advisor registered under the Investment Advisor Act of 1940, and Brinson
Holdings, Inc., both have shared voting power and shared dispositive power
for 8,879,400 of the shares or 8.9 percent of the outstanding shares of
Circuit City Group Common Stock. The Company is informed that no account
managed by Brinson Partners, Inc. holds more than 5 percent of Circuit
City Group Common Stock.
(14) Information concerning the Circuit City Group Common Stock beneficially
owned by J.P. Morgan & Co., Inc. as of December 31, 1997, was obtained
from a Schedule 13G dated February 13, 1998. The Company is informed that
no account managed by J.P. Morgan & Co., Inc. or its affiliates owns 5
percent or more of Circuit City Group Common Stock. The filing indicates
that of the 7,494,902 shares beneficially owned, J.P. Morgan & Co., Inc.
has sole voting power for 5,129,106 shares, shared voting power for 6,945
shares, sole dispositive power for 7,452,277 shares and shared dispositive
power for 42,625 shares.
CERTAIN INFORMATION CONCERNING THE
BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors held seven meetings during the fiscal year ended
February 28, 1998. No director attended less than 75 percent of the aggregate
number of meetings of the Board and of the committees on which he or she served
except Richard N. Cooper who attended 69 percent.
The Audit Committee is composed of Edward Villanueva, Chairman, Richard N.
Cooper, Barbara S. Feigin and Hugh G. Robinson. Three meetings were held during
the fiscal year ended February 28, 1998. The functions of this Committee
include making recommendations to the Board regarding the selection of
independent auditors, conferring with the independent auditors and reviewing
the scope and results of their work as well as the fees therefor, reviewing the
Company's internal audit procedures and approving the nature and scope of non-
audit services performed by the Company's independent auditors as well as the
fees therefor.
The Compensation and Personnel Committee is composed of John W. Snow,
Chairman, Robert S. Jepson, Jr., Walter J. Salmon and Mikael Salovaara. Five
meetings were held during the fiscal year ended February 28, 1998. The
functions of this Committee include reviewing, evaluating and approving the
amount, design, and implementation of compensation programs for officers and
key personnel, making awards under and administering the Company's stock
incentive programs, reviewing and making recommendations with respect to senior
management organization and reviewing the Company's programs for attracting and
compensating management personnel at lower and middle levels.
The Pension Investment Committee is composed of Mikael Salovaara,
Chairman, Richard N. Cooper, Hugh G. Robinson, Edward Villanueva and Alan L.
Wurtzel. Three meetings were held during the fiscal year ended February 28,
1998. The functions of this Committee include establishing the funding policy
of the Employees' Retirement Plan of Circuit City Stores, Inc. (the "Pension
Plan"), appointing Pension Plan investment managers
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and allocating Pension Plan assets among managers for investment, employing
accountants and actuaries for the Pension Plan, making recommendations to the
Board concerning the appointment or removal of the Trustee for the Pension
Plan, establishing investment objectives to be followed by the Trustee and
investment managers and monitoring the performance of the Trustee and Pension
Plan investment managers. This Committee also may make recommendations
concerning investments to the Trustee and the investment managers.
The Nominating and Structure Committee is composed of Alan L. Wurtzel,
Chairman, Barbara S. Feigin, Robert S. Jepson, Jr., Walter J. Salmon and John
W. Snow. Five meetings were held during the fiscal year ended February 28,
1998. The functions of this Committee include recommending candidates for
election as directors and reviewing and recommending policies with regard to
the size and composition of the Board. The Committee considers nominees for the
Board recommended by the Company's shareholders.
In accordance with the Company's Bylaws, a shareholder who is interested
in nominating a person to the Board should submit to the Secretary of the
Company written notice of his or her intent to make such nomination. Such
notice must be given either by personal delivery or by United States mail,
postage prepaid, not later than 120 days in advance of the annual meeting, or
with respect to a special meeting of shareholders for the election of
directors, the close of business on the seventh day following the date on which
notice of such meeting is first given to shareholders. The contents of such
notice must be as specified in the Company's Bylaws, a copy of which may be
obtained by any shareholder who directs a written request for the same to the
Secretary of the Company.
COMPENSATION OF EXECUTIVE OFFICERS
Executive Compensation
Summary Compensation Table. The table below sets forth for the years ended
February 28, 1998, February 28, 1997, and February 29, 1996, the annual and
long-term compensation for services in all capacities to the Company and its
subsidiaries of those persons who at February 28, 1998, were the Company's
Chief Executive Officer ("CEO") and the other four most highly compensated
executive officers of the Company other than the CEO. The only stock
appreciation rights ("SARs") granted were Change of Control SARs (described on
page 15), which were granted in connection with each of the options. No
free-standing SARs have been granted. All of the following long-term
compensation awards are Circuit City Group Common Stock awards. No CarMax Group
Common Stock awards were granted to the Company's CEO and other four most
highly compensated executive officers through fiscal year 1998.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
--------------------- -------------------------------------------
Restricted Securities
Stock Underlying
Name and Fiscal Salary Bonus Awards(3) Options/SARs
Principal Position Year $ $ $ #
- ---------------------------- ------- --------- --------- -------------------- --------------------
<S> <C> <C> <C> <C> <C>
Richard L. Sharp 1998 854,757 630,000 0 83,000
Chairman of the Board and 1997 712,988 177,500 0 1,100,000 (4)
Chief Executive Officer 1996 685,509 376,750 0 127,000
W. Alan McCollough 1998 600,809 252,000 1,612,844 (2) 0
President and 1997 428,967 37,188 796,875 (1) 170,000
Chief Operating Officer 1996 383,494 73,150 0 40,000
Richard S. Birnbaum 1998 551,527 192,500 1,293,469 (2) 20,000
Executive Vice President 1997 524,450 65,000 0 160,000
Operations 1996 503,355 137,500 0 45,000
John A. Fitzsimmons 1998 505,911 175,000 1,293,469 (2) 84,000
Senior Vice President 1997 489,450 42,438 0 120,000
Administration 1996 468,356 89,513 0 30,000
Michael T. Chalifoux 1998 492,154 175,000 1,293,469 (2) 84,000
Senior Vice President, 1997 437,130 38,063 0 120,000
Chief Financial Officer 1996 413,355 78,925 0 30,000
and Secretary
</TABLE>
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(1) Mr. McCollough was awarded 25,000 shares of restricted stock on February
20, 1997, in connection with his promotion to President and Chief
Operating Officer. The amount in the above table is based on the closing
price for Circuit City Group Common Stock on the date of the award which
was $31.875. The stock will vest in even increments on April 20, 2000;
April 20, 2001; and April 20, 2002. Dividends are paid on restricted stock
during the restricted period.
(2) On December 9, 1997, Mr. McCollough was awarded 50,500 shares of restricted
stock, and Mr. Birnbaum, Mr. Fitzsimmons, and Mr. Chalifoux were each
awarded 40,500 shares of restricted stock. The amount in the above table
is based on the closing price for Circuit City Group Common Stock on the
date of the award which was $31.9375. The stock will vest at the end of
seven years with provisions for accelerated vesting based upon
performance. Performance criteria are based on a total return on Circuit
City Group Common Stock compared against a peer group consisting of large,
publicly traded consumer electronics companies. Based on the Company's
comparative performance, the awards may vest at 40 percent after the first
year, 40 percent after the second year, and 20 percent after the third
year. Dividends are paid on restricted stock during the restricted period.
(3) The number and value of each executive officer's restricted stock holdings
at the end of the fiscal year ended February 28, 1998, based on a February
27, 1998, closing price for the Circuit City Group Common Stock of $38.625
were as follows: Mr. McCollough: 75,500 shares with a total value of
$2,916,188; and Mr. Birnbaum, Mr. Fitzsimmons and Mr. Chalifoux: 40,500
shares each with a value of $1,564,313 each.
(4) In fiscal 1997, Mr. Sharp was granted a special long-term option of
1,000,000 shares of Circuit City Group Common Stock which was designed to
promote and reward extraordinary long-term performance by the Company
through Mr. Sharp's leadership. Mr. Sharp must stay with the Company for
at least five years to obtain the benefit of the option, which will expire
six years from the date of grant. The exercise price for the option was
$59 which was twice the trading price range of the Circuit City Group
Common Stock when the option was granted. Therefore, the option will only
have value if the Circuit City Group Common Stock more than doubles in
price within six years.
Options/SAR Grants in Last Fiscal Year. The table below sets forth for the
fiscal year ended February 28, 1998, the grants of Circuit City Group Common
Stock options and SARs to the executive officers named in the Summary
Compensation Table. The only SARs granted were Change of Control SARs
(described on page 15), which were granted in connection with each of the
options. No free-standing SARs have been granted.
<TABLE>
<CAPTION>
Potential Realization Value
Number of at Assumed Annual Rates of
Securities % of Total Stock Price Appreciation
Underlying Options/SARs for Option Term
Options/SARs Granted to Exercise Expiration -------------------------------
Granted Employees Price (1) Date 5% 10%
-------------- ------------- ------------- ----------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Richard L. Sharp 83,000 8.86% $ 36.000 06/17/04 $ 1,201,817 $ 2,814,549
W. Alan McCollough 0 0 - - 0 0
Richard S. Birnbaum 20,000 2.13 33.375 08/18/04 276,138 639,360
John A. Fitzsimmons 84,000 8.96 33.375 08/18/04 1,159,780 2,685,313
Michael T. Chalifoux 84,000 8.96 33.375 08/18/04 1,159,780 2,685,313
</TABLE>
- ----------
(1) The exercise price for all of the options is the fair market value of the
Circuit City Group Common Stock on the date of grant.
9
<PAGE>
Aggregated Options/SAR Exercises and Fiscal Year-End Option/SAR Value
Table. The following table sets forth information concerning Circuit City Group
Common Stock option exercises and fiscal year-end option/SAR values as of
February 28, 1998, for the executive officers named in the Summary Compensation
Table. The only SARs outstanding were Change of Control SARs (described on page
15).
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs at Options/SARs at
Number of February 28, 1998 February 28, 1998
Shares Acquired Value ------------------------------- --------------------------------
on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
----------------- ---------- ------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Richard L. Sharp 0 $ 0 513,360 919,417 $ 10,160,418 $ 2,588,567
W. Alan McCollough 20,000 470,000 89,853 182,125 1,684,706 1,753,138
Richard S. Birnbaum 0 0 117,956 221,500 2,284,096 2,420,870
John A. Fitzsimmons 0 0 63,750 214,500 1,056,636 1,841,776
Michael T. Chalifoux 0 0 120,283 213,875 2,312,899 1,828,944
</TABLE>
Pension Plan Table. The following table illustrates estimated annual
retirement benefits payable under the Company's defined benefit pension plan
(the "Pension Plan") to persons in specified compensation and years of service
classifications.
<TABLE>
<CAPTION>
Estimated* Annual Pension for Representative Years
of Credited Service
Highest Consecutive ------------------------------------------------------------
Five-Year Average
Compensation 15 20 25 30 35
- --------------------- --------- --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
$ 400,000 .......... 86,965 115,953 144,942 173,930 202,918
$ 600,000 .......... 131,965 175,953 219,942 263,930 307,918
$ 800,000 .......... 176,965 235,953 294,942 353,930 412,918
$1,000,000 .......... 221,965 295,953 369,942 443,930 517,918
$1,200,000 .......... 266,965 355,953 444,942 533,930 622,918
$1,400,000 .......... 311,965 415,953 519,942 623,930 727,918
$1,600,000 .......... 356,965 475,953 594,942 713,930 832,918
$1,800,000 .......... 401,965 535,953 669,942 803,930 937,918
$2,000,000 .......... 446,965 595,953 744,942 893,930 1,042,918
</TABLE>
- ----------
* The Internal Revenue Code limits the annual retirement benefits that may be
paid from, and the amount of compensation that may be recognized by, the
Pension Plan. For 1998, these limits are $130,000 and $160,000,
respectively.
The Pension Plan covers employees who satisfy certain age and service
requirements. Benefits are based on a designated percentage of the average of
compensation for the five highest of the last 10 consecutive years of
employment, weighted according to years of credited service, and integrated
with Social Security covered compensation. For Pension Plan purposes,
compensation of participants includes base pay, bonuses, overtime and
commissions and excludes amounts realized under any employee stock purchase
plan or stock incentive plan. For Pension Plan purposes, compensation for those
individuals listed in the Summary Compensation Table is substantially the same
as the amounts listed under the Salary and Bonus headings.
For purposes of the Pension Plan, credited years of past and future
service for Messrs. Sharp, McCollough, Birnbaum, Fitzsimmons and Chalifoux will
be 29, 28, 45, 21 and 29 years, respectively, at age 65.
Report of Compensation and Personnel Committee
Compensation Philosophy
The Compensation and Personnel Committee (the "Committee"), which is
composed entirely of outside independent directors, reviews, evaluates and
approves the amount, design and implementation of the Company's compensation
system for executive officers. The Committee believes that corporate
performance and, in
10
<PAGE>
turn, shareholder value will be best enhanced by a compensation system that
supports and reinforces the Company's key operating and strategic goals while
aligning the financial interests of the Company's executive officers with those
of the shareholders. The Company utilizes both short-term and long-term
incentive compensation programs to achieve these objectives. Executive officer
incentive compensation programs are tied to Company-wide achievement of annual
financial goals and the market value of the Company's stock. The Committee
believes that the use of Company-wide performance in setting goals promotes a
unified vision for senior management and creates common motivation among the
executives. For other salaried employees, the incentive compensation program is
also tied to divisional, departmental or store business goals and, in some
cases, individual performance.
For the Company's 1998 fiscal year, the Committee made its compensation
decisions based on a review of the Company's 1997 fiscal year performance, on
the Company's budget and other projections for the 1998 fiscal year, and on the
Company's performance in comparison to certain of its competitors. During the
1998 fiscal year, the Committee engaged a nationally known independent
compensation consultant to make an evaluation of the structure of the Company's
compensation practices in comparison to industry standards. The compensation
consultant determined that the Company's programs were generally consistent
with prevailing practices but also recommended some adjustments. As a result of
these recommendations, the Committee has adjusted some aspects of the Company's
compensation practices as noted below. The Company is subject to Internal
Revenue Code provisions that may limit the income tax deductibility of certain
forms of compensation paid to the executive officers named in the Summary
Compensation Table which precedes this report. These provisions allow full
deductibility of certain types of performance-based compensation. The Company's
compensation practices, to the extent practicable, provide the maximum
deductibility for compensation payments. Payments under the Annual
Performance-Based Bonus Plan ("Bonus Plan") and awards under the Stock
Incentive Plans qualify for deductibility under these provisions of the
Internal Revenue Code.
Components of the Executive Compensation Program
The Company's compensation program for executive officers consists
generally of three components: base salary, an annual performance-based cash
bonus and long-term stock incentives. In making compensation decisions, the
Committee generally compares the compensation of the Company's executive
officers with compensation of officers at certain other retail companies and
has utilized a nationally known compensation consultant as it deemed necessary.
The Committee generally compares various short- and long-term performance
measures, including total shareholder return, return on average shareholders'
equity, sales, net income and earnings per share for the Company and other
companies with which it competes with for executive talent. The Committee has
not established any particular level at which overall compensation will be set
in respect to the compensation peer group. The Committee believes that the
total compensation of the named executive officers is supported by the
Company's competitive comparisons on the short- and long-term performance
factors and is appropriate given the Company's overall performance. The
individual elements of the executive compensation program are addressed below.
Annual Salary
Each year, the Committee establishes salaries for executive officers. Such
salaries are based on proposals submitted by the Company's Chief Executive
Officer ("CEO") for annual salary for the executive officers other than
himself. Based on an analysis by the compensation consultant, the Committee set
the executive officer salaries for the 1998 fiscal year. The Committee believes
that the current level of annual salaries for executive officers is appropriate
and that it also provides for a large percentage of total compensation to be at
risk under the incentive programs. In evaluating individual executive officers,
the Committee may also consider, among other factors, (1) a qualitative
evaluation of the individual executive officer's performance provided by the
CEO, (2) the job responsibilities of the individual executive, including
changes in those responsibilities, and (3) the Company's performance in
relation to its target financial goals for the prior fiscal year.
Annual Performance-Based Bonus
All salaried employees, except the Company's executive officers, are
eligible to receive cash bonuses under an annual performance-based incentive
program ("Incentive Program") established each year by the Committee
11
<PAGE>
and approved by the Board of Directors. The Incentive Program is designed to
motivate the Company's employees to achieve the Company's annual operating and
financial goals. The executive officers participate in the Bonus Plan. The Bonus
Plan allows the Committee to establish performance goals based on pre-tax
earnings ("PTE"), earnings per share ("EPS") or both. The goals for both are
established with the purpose of continuing the Company's record of superior
performance in comparison with its competitors.
For the 1998 fiscal year, the Bonus Plan and the Incentive Program
measured the Company's achievement of its target financial goals for EPS. The
target EPS goal was established early in the fiscal year as part of the
Company's budgeting process and was approved by the Committee. Consistent with
the Committee's compensation philosophy of tying a large percentage of total
compensation to performance, the potential maximum bonus of each executive
officer was a significant percentage of that individual's salary for the year.
For the 1998 fiscal year, the target bonus amounts ranged from 50 percent of
base salary, in the case of less senior executive officers, to 100 percent of
base salary, in the case of the CEO. The target bonus percentages were based
upon the results of the current year's compensation study and the recommendation
of the compensation consultant.
The amount of bonus payments depends upon the extent to which the Company
achieves its target financial goals for the year. For the 1998 fiscal year, if
the Company did not achieve 85 percent of the goal, no bonuses would be paid.
For performance above the target, an additional bonus would be paid with a
maximum bonus of 150 percent of the target bonus.
The Company's performance for the 1998 fiscal year was above the minimum
requirement for payment of a bonus but less than the target financial goal. As
a result, bonuses were paid at the 70 percent level for the 1998 fiscal year.
Long-Term Incentive Compensation
Grants under the Company's Stock Incentive Plans provide long-term
incentive compensation and are a significant component of total compensation.
These programs are a part of the Company's performance-based incentive
compensation rewarding officers as total shareholder value increases. For
executive officers and other officers, grants under the Stock Incentive Plans
are made in the form of nonqualified stock options and restricted stock. Grants
based on Circuit City Group stock are used for officers whose duties are
principally for the Circuit City Group.
The Committee considers stock-based grants to be an important means of
ensuring that executive officers have a continuing incentive to increase the
long-term return to shareholders and the value of the Company's stock.
Stock-based grants also aid in retention of executives.
Stock options generally vest and become exercisable ratably over a period
of four years from the date of grant. The number of stock options to be granted
to a particular executive officer is determined by the Committee. The Committee
primarily uses a formula based on an individual's target bonus for the fiscal
year and the market price of the Company's stock, as well as the results of
compensation surveys to determine the appropriate grant size. Because the value
of stock options is entirely a function of increases in the value of the
Company's stock, the Committee believes that this component of the Company's
compensation arrangement closely aligns the interests of the executive officers
with those of the Company's shareholders.
After receiving the recommendations of the compensation consultant about
current industry practices, the Committee approved several changes to be
implemented in the standard grant terms under the Stock Incentive Plan. The
primary changes were extending the standard exercise period by one year to
eight years; providing longer exercise periods after a death or disability; and
accelerating vesting in the event of certain changes in control. The Committee
concluded that these changes were consistent with the Company's compensation
philosophy.
The Committee, on advice of the compensation consultant, also determined
that the Company should institute an additional long-term incentive program for
senior management using restricted stock under the Stock Incentive Plan. The
program provides for vesting at the end of a seven-year period. Accelerated
vesting of the stock would be based on the Company's total shareholder return
on Circuit City Group Stock measured against the performance of a peer group.
The structure of the program and the amounts of the initial awards made during
the 1998 fiscal year were based upon an analysis of industry practices and the
compensation consultant's recommendation.
12
<PAGE>
Other Matters
To maintain compensation competitiveness and to create a retirement
program that restores benefits for the Company's more senior executives who are
affected by Internal Revenue Code limits on benefits provided under the
Company's Pension Plan, the Company approved a retirement benefit restoration
plan to be implemented in fiscal year 1999. Subject to an annual limit, the
benefit restoration plan and the Pension Plan together will provide benefits to
all employees affected by the Internal Revenue Code limits at approximately the
same percentage of compensation as for other employees. The named executive
officers will participate in this plan.
Chief Executive Officer's Compensation
The Committee determined the compensation of Richard L. Sharp, the
Company's Chairman and CEO, for the 1998 fiscal year in a manner consistent
with the guidelines and policies described above. The Committee approved an
increase in Mr. Sharp's salary based upon a review of comparable officers in
the compensation peer group on a size-adjusted basis. The Committee kept Mr.
Sharp's performance bonus target at 100 percent of salary. Mr. Sharp received a
stock option grant for the 1998 fiscal year under the same formula as described
above. Mr. Sharp did not receive a restricted stock grant under the new
long-term incentive program.
In establishing Mr. Sharp's compensation, the Committee has compared his
compensation with the compensation of the CEOs of the compensation peer group
in relation to the relative performance of the Company with respect to the
compensation peer group. For setting Mr. Sharp's fiscal 1998 compensation, the
Committee also considered the Company's performance during the 1997 fiscal
year. The Committee recognized Mr. Sharp's leadership skills in assembling and
developing a strong management team and guiding the Company through its
significant growth during the last decade. The Committee also considered Mr.
Sharp's strong technology background as well as his unique abilities to
identify and develop additional high growth businesses, such as CarMax and
Divx, for the benefit of the Circuit City Group shareholders. The Committee
also is currently in the process of utilizing a compensation consultant to
ensure that Mr. Sharp's entrepreneurial contributions to the Company are
properly recognized.
The Committee believes that the structure of incentives to Mr. Sharp is
currently appropriate for Mr. Sharp's continuing role as Chairman and CEO in
the overall operations of the Company, his role in the continuing development
of the Circuit City and CarMax Presidents and his unique contributions to the
Company's diverse businesses.
The Committee believes that Mr. Sharp's actual compensation for the 1998
fiscal year was appropriate in light of all of the above considerations.
COMPENSATION AND PERSONNEL COMMITTEE
John W. Snow, Chairman
Robert S. Jepson, Jr.
Walter J. Salmon
Mikael Salovaara
13
<PAGE>
Performance Graphs
[GRAPH]
TOTAL RETURN TO SHAREHOLDERS
<TABLE>
<CAPTION>
Fiscal Year 1993 1994 1995 1996 1997 1998
<S> <C>
CIRCUIT CITY GROUP
COMMON STOCK 100.00 80.24 91.72 126.15 133.62 165.79
S&P 500 INDEX 100.00 108.34 116.31 156.68 197.67 266.86
S&P RETAIL STORES
COMPOSITE 100.00 100.22 91.77 101.29 124.66 190.70
</TABLE>
[GRAPH]
TOTAL RETURN TO SHAREHOLDERS
<TABLE>
<CAPTION>
2/4/97 2/28/97 2/28/98
<S> <C>
CARMAX GROUP
COMMON STOCK 100.00 91.48 42.05
S&P 500 INDEX 100.00 100.20 135.27
S&P RETAIL STORES
COMPOSITE 100.00 107.21 164.01
</TABLE>
Employment Agreements and Change-in-Control Arrangements
The Company has employment agreements with each of the executive officers
named in the Summary Compensation Table. Generally, these agreements provide
for annual salary review and participation in the Company's bonus, stock
incentive and other employee benefit programs. They also provide for
continuation of base salary for specified periods following termination by the
Company without cause (two years in the case of Mr. Sharp, one year for the
other named executive officers). In such circumstances, the agreements also
generally provide that the employee will be paid any bonus to which he would
otherwise be entitled for that year, such bonus to be prorated if termination
occurs in the first six months of the year. The salary continuation generally
14
<PAGE>
extends for another year if the termination without cause follows a change of
control. The Company's salary continuation obligation will decrease by up to 50
percent if the individual secures alternative employment; however, no decrease
will occur if the termination is related to a change of control. In addition,
if the employee voluntarily terminates the employment relationship within one
year following a change of control, the employee will be entitled to
continuation of base salary for a specified period of time (two years in the
case of Mr. Sharp, one year for the other named executive officers) and
potential payment of a bonus as indicated above. Each agreement contains
provisions confirming the employee's obligation to maintain the confidentiality
of proprietary information and not to compete with the Company for a specified
period of time after the termination of his employment. The agreement with Mr.
Birnbaum became effective in 1983. The agreement with Mr. Fitzsimmons became
effective in 1988. The agreements with Messrs. Sharp and Chalifoux became
effective in 1986 and 1989, respectively. The agreement with Mr. McCollough
became effective in 1995. The current base salaries of Messrs. Sharp,
McCollough, Birnbaum, Fitzsimmons, and Chalifoux under their employment
agreements are $900,000, $600,000, $550,000, $500,000, and $500,000,
respectively.
The named executive officers have been granted SARs in connection with the
stock options granted to them under the Company's stock incentive plans. The
options also provide for accelerated vesting in the event of a change of
control. The SARs are Change of Control SARs that may only be exercised in the
event of a change of control. Upon exercise of the SAR and the surrender of the
related option, the holder is entitled to receive cash from the Company in the
amount of the spread between the option exercise price and the market value of
the Common Stock at the time of exercise, which value is determined by a
formula designed to take into account the effect of the change of control. As
of February 28, 1998, all outstanding Common Stock options and SARs relate to
Circuit City Group Common Stock.
COMPENSATION OF DIRECTORS
Directors who are not employees receive compensation of $6,250 per
calendar quarter (this amount was increased in June 1997 from $5,500), plus
$1,000 for attendance at each Board meeting and $500 for attendance at each
committee meeting. Directors who serve as committee chairmen receive additional
annual compensation of $2,000. Mr. Wurtzel and employees who are also directors
do not receive directors' fees.
Directors who are not full-time employees of the Company also receive
awards under the 1989 Non-Employee Directors Stock Option Plan (the "1989
Plan"). Stock option grants under the 1989 Plan are automatic and relate to
both Circuit City Group Common Stock and CarMax Group Common Stock. Every year
on the date of the annual meeting of the Company's shareholders, stock options
are automatically granted to each eligible director. If elected on a date other
than the annual meeting date, a director also may be entitled to a grant at
that time depending on the amount of time between the election and the next
annual meeting. The options generally become exercisable three years after the
date of the grant. The 1989 Plan provides that the number of shares of Circuit
City Group Common Stock and CarMax Group Common Stock subject to the options is
determined by dividing (i) the product of the Applicable Series Percentage (as
defined below) and $75,000 by (ii) the Share Value Price (as defined below) of
the relevant series of Common Stock. The "Applicable Series Percentage" is
determined by dividing the Market Capitalization of the relevant series of
Common Stock as of the grant date by the aggregate Market Capitalization of all
outstanding series of Common Stock on such date. The "Market Capitalization" of
a series of Common Stock as of any date is the product of (i) the Share Value
Price of the series on such date and (ii) the number of Shares of the series
outstanding on such date. The "Share Value Price" means the last reported sale
price per share for the series on the New York Stock Exchange (or the exchange
on which such shares are then traded) on the date of grant, or, if the shares
did not trade on the date of grant, on the last day before the date of grant on
which such shares traded. A like number of Change of Control SARs are
automatically granted in connection with each stock option grant.
On June 17, 1997, eight directors who are not full-time employees were
each granted 428 CarMax Group Common Stock options at an option price of $14.00
per share and 1,923 Circuit City Group Common Stock options at an option price
of $35.875 per share. Robert S. Jepson, Jr. joined the Board of Directors in
August 1997 and was granted 452 CarMax Group Common Stock options at an option
price of $12.94 per share and 2,022 Circuit City Group Common Stock options at
an option price of $34.19 per share. These grants were under the 1989 Plan.
15
<PAGE>
Mr. Wurtzel, who formerly was employed by the Company as Chief Executive
Officer, has an agreement with the Company relating to the cessation of his
employment by the Company. Under the agreement, the Company agreed to pay Mr.
Wurtzel the lump sum of $56,565 plus $11,275 in monthly installments from
February 1996 to September 1998. He also receives annual perquisites valued at
approximately $65,000. The installment payments will be adjusted to reflect
changes over the term of the agreement in the value of certain employee
benefits, which they were designed to replace. If Mr. Wurtzel dies while the
agreement is still in effect, his beneficiary will continue to receive half the
remaining payments that would have been made to him under the agreement. Mr.
Wurtzel also executed a noncompete and confidentiality agreement that will be
effective during the term of the agreement.
SECTION 16(A) COMPLIANCE
Section 16(a) of the Securities Exchange Act requires the Company's
officers, directors and persons who own more than 10 percent of a registered
class of the Company's equity securities, to file reports of ownership and
changes in ownership on Forms 3, 4 and 5 with the Securities and Exchange
Commission (the "Commission"). Officers, directors and greater than 10 percent
shareholders are required by regulation to furnish the Company with copies of
all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received and written representations from certain reporting persons that they
were not required to file Form 5 for specified fiscal years, the Company
believes that all its officers, directors and any greater than 10 percent
beneficial owners complied with all of the filing requirements applicable to
them with respect to transactions during the fiscal year ended February 28,
1998, with the exception of one Form 4 which was filed late for W. Austin
Ligon, Senior Vice President, covering the exercise of an option to buy shares
in the month of December 1997.
ITEM 2 -- SHAREHOLDER PROPOSAL
The Company's Board of Directors recommends that shareholders vote AGAINST
the following shareholder proposal. Two institutional shareholders, The General
Board of Pension and Health Benefits of the United Methodist Church and The
Domini Social Equity Fund, have submitted the following supporting statement
and shareholder proposal:
Shareholder Proposal
We believe that companies preparing to be competitive in the twenty-first
century must learn to compete in an increasingly diverse global marketplace.
One of the ways this can be accomplished is by employing qualified people
regardless of race, gender or physical challenge. We also believe the judgments
and perspectives of a diverse board would improve the quality of corporate
decision-making. Corporate boards are responsible for representing shareholder
interests, and increasing numbers of shareholders are attaching equity value to
board inclusiveness.
The Teachers Insurance and Annuity Association and College Retirement
Equities Fund, the largest institutional investor in the United States, issued
a set of corporate governance guidelines which included a call for "diversity
of directors by experience, sex, age and race."
Robert Campbell, CEO of Sun Oil, stated in a Wall Street Journal article
dated August 12, 1996: "Often what a woman or minority person can bring to the
board is some perspective a company has not had before -- adding some
modern-day reality to the deliberation process. Those perspectives are of great
value, and often missing from an all white male gathering. They can also be
inspirational to the company's diverse workforce."
In November 1996, a Blue Ribbon commission of the National Association of
Corporate Directors released New Standards for Board Professionalism -- a
sweeping set of recommendations for a professional boardroom culture, which
urged corporate boards to "seriously consider . . . the distinctive skills,
perspectives and experiences that candidates diverse in gender, ethnic
background, geographic origin and professional experience . . . can bring to
the boardroom."
16
<PAGE>
W.R. Grace's 1996 proxy book states their Board ". . . recognizes that its
composition should reflect the global nature of the Company's operations and
the diversity of its workforce. The Board also recognizes that it is in a
unique position to "set the tone at the top" and to demonstrate its belief that
diversity makes good business sense."
Therefore, be it resolved the shareholders request:
1. The Nominating Committee of the Board make a greater effort to search
for qualified women and minority candidates for nomination to the Board
of Directors;
2. The Board issue a policy committing the Company to a more diverse Board,
a program of steps, and the time line expected to move in this direction;
3. The Company issue a report by September 1998 summarizing:
a. efforts to encourage diversified representation on our Board
b. criteria for Board qualification
c. the process for selecting Board candidates
d. the process for selecting Board committee members, including the
Nominating Committee.
Board of Directors' Statement in Opposition
The Company's Board of Directors embraces and concurs with the principle
that diversity in all respects both strengthens its membership and increases
its effectiveness. The goals advanced by the proposal have been and will
continue to be achieved by the current selection process and criteria for Board
membership. Thus, the Board believes the proposal is unnecessary.
The Board strives to select for its membership highly qualified
individuals who are dedicated to advancing the interests of the Company's
shareholders. When vacancies on the Board occur, the Nominating and Structure
Committee seeks individuals who, based on their background and other
qualifications, can promote this goal in conjunction with the other members of
the Board. The Committee actively seeks nominees who will bring diverse
talents, experiences and perspectives to the Board's deliberations. The Board
believes that, over the years, this approach has brought together a broad
spectrum of Board members whose collective input has served shareholders well.
The current members of the Board include chief executives, senior officers and
board members of major public companies, representing retail and other
industries; academic standouts in macroeconomics and retailing; individuals
known for their leadership qualities; and individuals with significant
experience in advertising, corporate finance and other major aspects of the
Company's business.
Approximately twenty percent of the current board members are members of
racial or gender minorities. Today's Board of 11 members includes a woman and
an African-American. The Board both desires and appreciates this specific
diversity. However, it has set neither requirements nor limits on diversity. It
believes that the Company and its shareholders are best served by a focus on
the overall qualifications of Board members and their individual contributions
to the Board as a whole, rather than by specific numeric goals for race, gender
or any other category.
The proposal seeks information on how Board and committee members are
chosen. The Nominating and Structure Committee looks to the Board as a whole,
as well as outside consultants, to suggest prospective Board members. It will
also consider suggestions from shareholders who may submit suggestions by
letter or under the formal procedures outlined at page 8 of the Proxy
Statement. Once elected to the Board, directors serve on committees based on
their particular expertise and experience as well as their own expressed
preferences.
The shareholder proposal seeks to require the Board to select candidates
for the Board on the basis of race and gender. The proposal requests a
step-by-step, timeline approach to a selection process that does not lend
itself to a strict procedure. The proponents have no basis to believe the
current diverse Board will not continue to draw prospective members from the
broadest possible pool of candidates. Shareholders will not be benefited by
abandoning the talents and experience of existing Board members in pursuit of
arbitrary numeric goals.
17
<PAGE>
In the Board's view, the shareholder proposal is unnecessary because it's
purpose has been and will continue to be accomplished without restricting or
limiting the selection of directors. The best interests of the Company and its
shareholders are served by the existing selection process and criteria.
The Board recommends a vote AGAINST the shareholder proposal.
RELATIONSHIP WITH INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
KPMG Peat Marwick LLP served during the Company's fiscal year ended
February 28, 1998, as the Company's independent certified public accountants
and has been selected as the Company's independent certified public accountants
for the current fiscal year. Representatives of KPMG Peat Marwick LLP will be
present at the meeting of the Company's shareholders. Such representatives will
have the opportunity to make a statement if they so desire and will be
available to respond to appropriate questions.
OTHER BUSINESS
If any other business, other than Items One and Two described in this
proxy statement, properly comes before the meeting, your proxy may be voted by
the persons named in it in such manner as they deem proper.
At this time the Company does not know of any other business that will be
presented to the meeting.
PROPOSALS BY SHAREHOLDERS FOR PRESENTATION
AT THE 1999 ANNUAL MEETING
Section 1.3 of the Company's Bylaws provides that, in addition to other
applicable requirements, for business to be properly brought before an annual
meeting by a shareholder, the shareholder must give timely written notice to
the Secretary or an Assistant Secretary at the principal office of the Company.
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 shall set forth (i) the name and address, as
they appear on the Company's stock transfer books, of the shareholder, (ii) the
class and number of shares of stock of the Company beneficially owned by the
shareholder, (iii) 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,
(iv) a brief description of the business desired to be brought before the
meeting, including the complete text of any resolutions to be presented and the
reasons for wanting to conduct such business and (v) any interest which the
shareholder may have in such business.
Proposals that any shareholder desires to have included in the proxy
statement for the 1999 annual meeting of shareholders must be received by the
Company no later than January 12, 1999.
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended February 28, 1998, as filed with the Securities and Exchange Commission
may be obtained by any shareholder after May 31, 1998, free of charge, upon
written request to Office of the Corporate Secretary, Circuit City Stores,
Inc., 9950 Mayland Drive, Richmond, Virginia 23233, or by calling (804)
527-4022.
By Order of the Board of Directors
/s/ Michael T. Chalifoux
Michael T. Chalifoux, Secretary
May 12, 1998
18
<PAGE>
CIRCUIT CITY STORES, INC.
Proxy Solicited on Behalf of the Board of Directors
for the Annual Meeting of Shareholders to be Held
June 16, 1998
The undersigned, having received the Annual Report to the Shareholders and
the accompanying Notice of Annual Meeting of Shareholders and Proxy Statement
dated May 12, 1998, hereby appoints Richard L. Sharp and Robert L. Burrus, Jr.,
and each of them, proxies, with full power of substitution, and hereby
authorizes them to represent and vote the shares of Circuit City Group Common
Stock and CarMax Group Common Stock of Circuit City Stores, Inc. (the
"Company"), which the undersigned would be entitled to vote if personally
present at the Annual Meeting of Shareholders of the Company to be held on
Tuesday, June 16, 1998, at 10:00 a.m., Eastern Daylight Time, and any
adjournment thereof, and especially to vote as set forth below.
<TABLE>
<S> <C>
1. ELECTION OF DIRECTORS
DIRECTORS
RECOMMEND [ ] FOR all nominees listed for the terms set [ ] WITHHOLD AUTHORITY to vote
A VOTE FOR forth in the Proxy Statement for all nominees listed
ITEM 1
Nominees: Richard N. Cooper, Robert S. Jepson, Jr., Richard L.
Sharp, Alan L. Wurtzel
To withhold authority to vote for any individual nominee, write that
nominee's name on the space provided below.
</TABLE>
2. SHAREHOLDER PROPOSAL (Described in the proxy statement)
DIRECTORS
RECOMMEND
A VOTE [ ] FOR [ ] AGAINST [ ] ABSTAIN
AGAINST
ITEM 2
(continued on reverse)
<PAGE>
3. In their discretion the proxies are authorized to vote upon such other
business as may properly come before the meeting and any adjournments
thereof.
If you specify a choice as to the action to be taken on an item, this proxy
will be voted in accordance with such choice. If you do not specify a choice,
it will be voted FOR the named nominees in the proxy statement and AGAINST the
shareholder proposal listed in the proxy statement. Any proxy or proxies
previously given for the meeting are revoked.
Dated: , 1998
---------------------
----------------------------------
(Signature)
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(Signature if held jointly)
Please sign exactly as the name
appears hereon.
[ ] I plan to attend the meeting
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE.
