FORM 8-A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
CIRCUIT CITY STORES, INC.
(Exact name of registrant as specified in its charter)
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Virginia 54-0493875
(State of incorporation or organization) (I.R.S. Employer Identification No.)
9950 Mayland Drive
Richmond, Virginia 23233
(Address of principal executive offices) (Zip Code)
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If this Form relates to the registration of a class of securities
pursuant to Section 12(b) of the Exchange Act and is effective pursuant to
General Instruction A.(c), please check the following box. [ X ]
If this Form relates to the registration of a class of securities
pursuant to Section 12(g) of the Exchange Act and is effective pursuant to
General Instruction A.(d), please check the following box. [ ]
Securities to be registered pursuant to Section 12(b) of the Act:
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Title of each class Name of each exchange on which each class is to be
to be so registered registered
Rights to Purchase New York Stock Exchange
Cumulative Participating Preferred Stock, Series E,
par value $20.00 per share
Rights to Purchase New York Stock Exchange
Cumulative Participating Preferred Stock, Series F,
par value $20.00 per share
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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," 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 filed as Exhibit 2 to this Registration Statement and is
incorporated herein by reference.
On April 14, 1998, the Board of Directors of Circuit City Stores, Inc.,
a Virginia corporation (the "Company"), declared a dividend distribution of (1)
one Preferred Stock Purchase Right (a "Circuit City Right") for each outstanding
share of the Circuit City Stores, Inc. - Circuit City Group Common Stock, par
value $.50 per share (the "Circuit City Stock"), and (2) one Preferred Stock
Purchase Right (a "CarMax Right") for each outstanding share of the Circuit City
Stores, Inc. - CarMax Group Common Stock, par value $.50 per share (the "CarMax
Stock"), in each case payable to stockholders of record at the close of business
on April 29, 1998 (the "Record Date"). From and after the Distribution Date (as
defined below), each Circuit City Right entitles the record holder to purchase
from the Company one four-hundredth of a share of the Company's Series E
Cumulative Participating Preferred Stock, par value $20 per share (the "Series E
Preferred Stock"), at a price of $250.00 (the "Series E Purchase Price"), and
each CarMax Right entitles the record holder to purchase from the Company one
four-hundredth of a share of the Company's Series F Cumulative Participating
Preferred Stock, par value $20 per share (the "Series F Preferred Stock"), at a
price of $100.00 (the "Series F Purchase Price"), in each case subject to
adjustment in certain circumstances. The description and terms of the Rights are
set forth in a Rights Agreement, dated as of April 14, 1998 (the "Rights
Agreement"), between the Company and Norwest Bank Minnesota, N.A., as rights
agent (the "Rights Agent").
Initially, the Circuit City Rights and the CarMax Rights (collectively
the "Rights") will be attached to and represented by the certificates
representing outstanding shares of Circuit City Stock and CarMax Stock,
respectively (collectively, the "Common Stock"). The Rights will separate from
the Common Stock and a Distribution Date will occur upon the earlier of (i) ten
days following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the right
to acquire, beneficial ownership of 20% or more in voting power of the
outstanding shares of Common Stock (the "Stock Acquisition Date"), or (ii) ten
business days following the commencement of, or first public announcement of the
intent of any person to commence, a tender offer or exchange offer if, upon
consummation thereof, the person or group making such offer would be the
beneficial owner of 20% or more in voting power of the outstanding shares of
Common Stock.
Until the Distribution Date, (i) no Rights certificates will be
distributed, (ii) the Rights will be transferable with and only with the Common
Stock certificates, and (iii) the surrender for transfer of any Common Stock
certificates will also constitute the transfer of the Rights associated with the
Common Stock represented by such certificates. Following the Distribution Date,
Rights certificates will be mailed to holders of record of the Common Stock as
of the close of business on the Distribution Date and, thereafter, such separate
Rights certificates alone will evidence the Rights. Except in certain limited
circumstances, only shares of Common Stock issued prior to the Distribution Date
will be issued with Rights.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on April 14, 2008, unless earlier exercised or
redeemed by the Company as described below.
At any time following the Distribution Date, if (i) the Company is the
surviving corporation in a merger with an Acquiring Person and its Common Stock
is not changed or exchanged, (ii) a Person becomes the beneficial owner of 20%
or more in voting power of the then outstanding shares of Common Stock (other
than pursuant to an offer for all outstanding shares of Common Stock at a price
and on terms which a majority of the Continuing Directors (as hereinafter
defined) determine to be fair to, and otherwise in the best interests of,
stockholders), or (iii) an Acquiring Person receives equity securities (other
than pursuant to a pro rata distribution) from the Company, acquires from or
transfers to the Company assets with a fair market value exceeding $2,000,000 or
engages in certain other "self-dealing" transactions specified in the Rights
Agreement, the Rights Agreement requires that proper provision be made so that
each holder of a Right will thereafter have the right to receive, upon the
exercise thereof, shares of the associated series of Common Stock (or, in
certain circumstances, cash, property or other securities of the Company) having
a value equal to two times the exercise price of the Right. However, Rights are
not exercisable following the occurrence of the events set forth above until
such time as the Rights are no longer redeemable by the Company as set forth
below. Notwithstanding any of the foregoing, following the occurrence of any of
the events set forth in this paragraph, any Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by an
Acquiring Person will immediately become null and void.
For example, at an exercise price of $250 per Right, each Circuit City
Right not owned by an Acquiring Person (or by certain related parties) following
an event set forth in the preceding paragraph would entitle its holder to
purchase $500 worth of Circuit City Stock (or other securities or assets, as
noted above) for $250. Assuming that the Circuit City Stock had a per share
value of $50 at such time, the holder of each valid Circuit City Right would be
entitled to purchase ten shares of Circuit City Stock for $250. The holder of
each valid CarMax Right would have a similar right under such circumstances to
purchase $200 worth of CarMax Stock (or such other securities or assets) for
$100 (the exercise price of a CarMax Right).
At any time following the Stock Acquisition Date, if (i) the Company
engages in a merger or consolidation in which the Company is not the surviving
corporation, (ii) the Company engages in a merger or consolidation with another
person in which the Company is the surviving corporation, but in which all or
part of the Common Stock is changed or exchanged, (iii) the Company engages in a
statutory share exchange or (iv) 50% or more of the Company's assets or earning
power is sold or transferred, the Rights Agreement requires that proper
provision be made so that each holder of a Right shall thereafter have the right
to receive, upon the exercise thereof, common stock of the acquiring company
having a value equal to two times the exercise price of the Right.
Notwithstanding any of the foregoing, following the occurrence of any of the
events set forth in this paragraph, any Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by an
Acquiring Person will immediately become null and void.
The Rights Agreement provides that, after the Distribution Date, the
Company generally may not take any action which would diminish substantially the
benefits of the Rights, including any consolidation or merger with, or sale of
50% of the Company's assets or earning power to, any person which has securities
or is bound by agreements which would have such effect.
The Purchase Price payable, and the number of one four-hundredths of a
share of Preferred Stock or other securities or property issuable, upon exercise
of the Rights are subject to adjustment from time to time to prevent dilution
(i) in the event of a stock dividend on the Preferred Stock or other capital
stock, or a subdivision, combination or reclassification of the Preferred Stock,
(ii) upon the grant to holders of the Preferred Stock of certain rights or
warrants to subscribe for Preferred Stock or securities convertible into
Preferred Stock at less than the current market price of the Preferred Stock, or
(iii) upon the distribution to holders of the Preferred Stock of evidences of
indebtedness or assets (excluding regular quarterly cash dividends) or of
subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. The Company may, in lieu of issuing fractional shares of
Preferred Stock (other than fractions which are integral multiples of one
four-hundredth of a share) upon exercise of the Rights, make a cash payment
based on the market price of the Preferred Stock on the last trading date prior
to the date of exercise.
If the Company is not able to issue shares of the applicable series of
Preferred Stock or Common Stock because of the absence of necessary regulatory
approval, restrictions contained in the Company's Amended and Restated Articles
of Incorporation or for any other reason, a person exercising Rights will be
entitled to receive a combination of cash or property or other securities having
a value equal to the value of the shares of Preferred Stock or Common Stock
which would otherwise have been issued upon exercise of the Rights.
At any time until ten days following the Stock Acquisition Date, the
Board of Directors of the Company may redeem the Circuit City Rights and the
CarMax Rights in whole, but not in part, at a price of $.01 per Right, payable
in cash or securities or both (the "Redemption Price"). Upon certain
circumstances set forth in the Rights Agreement, the decision to redeem shall
require the concurrence of a majority of the Continuing Directors. Immediately
upon the action of the Board of Directors of the Company ordering redemption of
the Rights (with, where required, the concurrence of a majority of the
Continuing Directors), the Rights will terminate and the only right of the
holders of Rights will be to receive the Redemption Price.
After a Person becomes an Acquiring Person and before any Acquiring
Person acquires 50% or more of the outstanding shares of Common Stock, the
Company, with the approval of a majority of Continuing Directors, may require a
holder to exchange all or any portion of the holder's Rights at an exchange
ratio of (1) one share of Circuit City Stock or one four-hundredths of a share
of Series E Preferred Stock (or in certain circumstances, other securities of
the Company) per Circuit City Right and (2) one share of CarMax Stock or one
four-hundredths of a share of Series F Preferred Stock (or in certain
circumstances, other securities of the Company) per CarMax Right.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income at such time as the Rights become
exercisable or are exercised for Common Stock (or other consideration) of the
Company or for common stock of the acquiring company as set forth above.
Certain provisions of the Rights Agreement relating to the principal
economic terms of the Rights generally may not be amended at any time. Other
provisions may be amended by the Board of Directors of the Company prior to the
Distribution Date. Thereafter, these other provisions of the Rights Agreement
may be amended by the Board (in certain circumstances only with the concurrence
of the Continuing Directors) in order: to cure any ambiguity, defect or
inconsistency; to shorten or lengthen any time period under the Rights
Agreement; or in any other respect that will not adversely affect the interests
of holders of Rights (excluding the interests of any Acquiring Person);
provided, that no amendment to adjust the time period governing redemption may
be made if the Rights are not redeemable at the time of such amendment.
Each one four-hundredth of a share of Series E Preferred Stock will be
entitled to (i) a quarterly dividend equal to the greater of (a) the quarterly
dividend declared per share of Circuit City Stock or (b) $.01, (ii) upon
liquidation, a minimum preferential liquidation payment equal to the greater of
(a) $250.00 or (b) the market price of a share of Circuit City stock at the time
of liquidation, plus accrued and unpaid dividends, and (iii) in the event of any
merger, consolidation or other transaction in which shares of Circuit City Stock
are exchanged, the same amount received per share of Circuit City Stock. Each
one four-hundredths of a share of Series F Preferred Stock will be entitled to
(i) a quarterly dividend equal to the greater of (a) the quarterly dividend
declared per share of CarMax Stock or (b) $.01, (ii) upon liquidation, a minimum
preferential liquidation payment equal to the greater of (a) $100.00 or (b) the
market price of a share of CarMax Stock at the time of liquidation, plus accrued
and unpaid dividends, and (iii) in the event of any merger, consolidation or
other transaction in which shares of CarMax Stock are exchanged, the same amount
received per share of CarMax Stock. After April 14, 2058, the Company may redeem
all or any portion of the Series E or Series F Preferred Stock at a price equal
to the respective liquidation payments described above. The foregoing rights are
protected by customary anti-dilution provisions. The holders of shares of
Preferred Stock are not entitled to vote on any matter except to the extent
provided by law. Because of the nature of the Preferred Stock's dividend,
liquidation and redemption rights, the value of each one four-hundredths of a
share of Preferred Stock purchasable upon exercise of each Right should
approximate the value of one share of the associated series of Common Stock
subject to the effect on such value of the fact that holders of Preferred Stock
have no voting rights other than those provided by law.
The term "Continuing Director" means any member of the Company's Board
of Directors who was a member of the Board on the Distribution Date, and any
person who is subsequently elected to the Board if such person is recommended or
approved by a majority of the Continuing Directors.
This summary description of the Rights does not purport to be complete
and is qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference to Exhibit 1 filed with this Registration
Statement.
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Item 2. Exhibits.
1. Rights Agreement dated as of April 14, 1998 between Registrant
and Norwest Bank Minnesota, N.A., as Rights Agent, including
Exhibits A-1, A-2, B-1, B-2 and C thereto.
2. Information set forth under "Proposal 1 -- The CarMax Stock
Proposal -- Description of Circuit City Stock and CarMax
Stock," "-- Inter-Group Interest," and "-- Anti-Takeover
Considerations" in the Registrant's definitive proxy statement
filed with the Securities and Exchange Commission (the
"Commission") on December 23, 1996.
3. Registrant's Amended and Restated Articles of Incorporation,
effective February 3, 1997.
4. Articles of Amendment to Registrant's Restated Articles of
Incorporation, dated April 14, 1998.
5. Form of Rights Certificate for rights attached to Circuit City
Stores, Inc. -- Circuit City Group Common Stock, filed as
Exhibit B-1 to the Rights Agreement filed as Exhibit 1 to this
Registration Statement.
6. Form of Rights Certificate for rights attached to Circuit City
Stores, Inc. -- CarMax Group Common Stock, filed as Exhibit
B-2 to the Rights Agreement filed as Exhibit 1 to this
Registration Statement.
7. 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).
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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 registration statement to be
signed on its behalf by the undersigned, thereto duly authorized.
Date: April 28, 1998
CIRCUIT CITY STORES, INC.
By: /s/Richard L. Sharp
Richard L. Sharp,
Chairman of the Board
and Chief Executive Officer
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INDEX TO EXHIBITS
*1. Rights Agreement dated as of April 14, 1998 between Registrant and
Norwest Bank Minnesota, N.A., as Rights Agent, including Exhibits A-1,
A-2, B-1, B-2 and C thereto.
*2. Information set forth under "Proposal 1 -- The CarMax Stock Proposal
-- Description of Circuit City Stock and CarMax Stock," "--
Inter-Group Interest," and "-- Anti-Takeover Considerations" in the
Registrant's definitive proxy statement filed with the Securities and
Exchange Commission (the "Commission") on December 23, 1996.
*3. Registrant's Amended and Restated Articles of Incorporation, effective
February 3, 1997.
*4. Articles of Amendment to Registrant's Restated Articles of
Incorporation, dated April 14, 1998.
5. Form of Rights Certificate for rights attached to Circuit City Stores,
Inc. -- Circuit City Group Common Stock, filed as Exhibit B-1 to the
Rights Agreement filed as Exhibit 1 to this Registration Statement, is
incorporated herein by reference.
6. Form of Rights Certificate for rights attached to Circuit City Stores,
Inc. -- CarMax Group Common Stock, filed as Exhibit B-2 to the Rights
Agreement filed as Exhibit 1 to this Registration Statement, is
incorporated herein by reference.
7. 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.
* Filed herewith.
EXHIBIT 1
RIGHTS AGREEMENT
between
CIRCUIT CITY STORES, INC.
and
NORWEST BANK MINNESOTA, N.A.
Dated as of April 14, 1998
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-ii-
Rights Agreement
Table of Contents
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Page
Section 1. Certain Definitions...................................................................................1
Section 2. Appointment of Rights Agent...........................................................................5
Section 3. Issuance of Rights Certificates.......................................................................5
Section 4. Form of Rights Certificates...........................................................................6
Section 5. Countersignature and Registration.....................................................................7
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...................................11
Section 10. Preferred Shares Record Date........................................................................13
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, Statutory Share Exchange 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..........................................................................28
Section 17. Rights Certificate Holder Not Deemed a Shareholder..................................................28
Section 18. Concerning the Rights Agent.........................................................................29
Section 19. Merger or Consolidation or Change of Name of Rights Agent...........................................29
Section 20. Duties of Rights Agent..............................................................................30
Section 21. Change of Rights Agent..............................................................................32
Section 22. Issuance of New Rights Certificates.................................................................33
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..........................................................................37
Section 28. Successors..........................................................................................38
Section 29. Determinations and Actions by the Board of Directors, etc...........................................38
Section 30. Benefits of this Agreement..........................................................................38
Section 31. Severability........................................................................................38
Section 32. Governing Law.......................................................................................39
Section 33. Counterparts........................................................................................39
Section 34. Descriptive Headings................................................................................39
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RIGHTS AGREEMENT
This Rights Agreement (the "Agreement") is entered into as of April 14,
1998, between Circuit City Stores, Inc., a Virginia corporation (the "Company"),
and Norwest Bank Minnesota, N.A., a national banking association (the "Rights
Agent").
On April 14, 1998, the Board of Directors of the Company authorized and
declared a dividend of (i) one preferred share purchase right (a "Circuit City
Right") for each share of Circuit City Stores, Inc. -- Circuit City Group Common
Stock (the "Circuit City Stock") outstanding on April 29, 1998 (the "Record
Date") and (ii) one preferred share purchase right (a "CarMax Right") for each
share of Circuit City Stores, Inc. -- CarMax Group Common Stock (the "CarMax
Stock") outstanding on the Record Date and further 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
(x) between the Record Date and 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 (y) 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.
Each Circuit City Right will represent the right to purchase one
four-hundredth of a share of Cumulative Participating Preferred Stock, Series E,
par value $20.00 per share, of the Company (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-hundredth of a share of
Cumulative Participating Preferred Stock, Series F, par value $20.00 per share
of the Company (a "Series F Preferred Share") 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:
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(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 20% 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. Notwithstanding the foregoing,
the term "Acquiring Person" shall not include any person who becomes the
Beneficial Owner of Common Shares representing 20% or more of the total Voting
Rights of all the Common Shares then outstanding solely as a result of a
recalculation of the voting power of any series of Common Shares in accordance
with the Articles of Restatement; provided, however, that the term "Acquiring
Person" shall include such Person from and after the first date upon which (i)
such Person, or any Affiliates or Associates of such Person, since the date of
such recalculation of voting power, shall have acquired Beneficial Ownership of
any Common Shares and (ii) such Person, together with all Affiliates and
Associates of such Person, shall be the Beneficial Owner of Common Shares
representing 20% or more of the total Voting Rights of all the Common Shares
then outstanding.
(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 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
second introductory paragraph of this Agreement.
(f) "CarMax Stock" shall have the meaning set forth in the
second introductory paragraph of this Agreement.
(g) "Circuit City Right" shall have the meaning set forth in
the second introductory paragraph of this Agreement.
(h) "Circuit City Stock" shall have the meaning set forth in
the second introductory paragraph of this Agreement.
(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), (B) or (C) hereof.
(p) "Section 13 Event" shall mean any event described in
clauses (i), (ii), (iii) or (iv) of Section 13(a) hereof.
(q) "Series E Preferred Shares" shall have the meaning set
forth in the third introductory paragraph of this Agreement.
(r) "Series F Preferred Shares" shall have the meaning set
forth in the third 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). For purposes of
calculating the number of votes entitled to be cast generally in the election of
directors of the Company, the voting power of each outstanding share of each
series of Common Shares, as determined in accordance with the Amended and
Restated Articles of Incorporation of the Company (the "Articles of
Restatement") for purposes of a vote by the shareholders of the Company on any
matter, shall continue to be the voting power of such shares until a new
determination is made with respect to a subsequent vote by the shareholders of
the Company on any matter.
Section 2. Appointment of Rights Agent. The Company hereby
appoints the Rights Agent to act as agent for the Company in accordance with the
terms and conditions hereof, and the Rights Agent hereby accepts 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
20% 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 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 will send a copy of a Summary of Rights to Purchase Preferred Shares
in substantially the form attached hereto as Exhibit C (the "Summary of
Rights"), by first-class, postage prepaid mail, to each record holder of Common
Shares 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:
This certificate also evidences and entitles the holder hereof
to certain Rights as set forth in a Rights Agreement between
Circuit City Stores, Inc. and Norwest Bank Minnesota, N.A.
(the "Rights Agent"), dated as of April 14, 1998, 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. Under certain circumstances, as set forth in the
Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this
certificate. The Rights will expire at the close of business
on April 14, 2008 unless exercised or redeemed prior thereto.
Circuit City Stores, Inc. will mail to the holder of this
certificate a copy of the Rights Agreement, as in effect on
the date of mailing, without charge promptly after receipt of
a written request therefor. Under certain circumstances set
forth in the Rights Agreement, Rights issued to, or held by,
any Person who is, was or becomes an Acquiring Person or any
Affiliate or Associate thereof (as such terms are defined in
the Rights Agreement), whether currently held by or on behalf
of such Person or by any subsequent holder, may become null
and void.
Until the earlier of the Distribution Date or the Final Expiration Date, the
Rights associated with the Common Shares represented by certificates for Common
Shares whether or not containing the foregoing legend shall be evidenced by such
certificates alone and registered holders of Common Shares shall also be the
registered holders of the associated Rights, and the transfer of any of such
certificates shall also constitute the transfer of the Rights associated with
the Common Shares represented by such certificates.
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
be or become null and void in the circumstance specified in
Section 7(e) of such Agreement.
The provisions of Section 7(e) of this Agreement shall be operative whether or
not the foregoing legend is contained on any such Rights Certificates.
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 any time after the close of business on the Distribution Date, and 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 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), Section 11(a)(iii) and Section 23(a)
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 14, 2008 (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 four-hundredth of a Series
E Preferred Share pursuant to the exercise of a Circuit City Right shall
initially be $250.00 (as adjusted, the "Series E Purchase Price"). The purchase
price for each one four-hundredth of a Series F Preferred Share pursuant to the
exercise of a CarMax Right shall initially be $100.00 (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 payment, with respect to each Right so exercised,
of the Purchase Price per one four-hundredth 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.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Triggering 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 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
or shall, at the written request of the Company and after any retention period
required by the Securities and Exchange Commission, destroy such canceled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof 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 including Section 11(a)(iii)
hereof, 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), or as soon
as is required by law or regulation following the Distribution date, as the case
may be, 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 and, in the event the Preferred Shares or other securities are
not then registered under the Exchange Act, file an appropriate form to so
register such Preferred Shares or other securities, (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 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.
Section 10. Preferred Shares Record Date. Each person in whose
name 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) 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 or other capital stock, (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).
(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 as
determined in good faith by the Board of Directors of the
Company (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 (other than the Company, any
wholly-owned Subsidiary of the Company or any employee benefit
plan of the Company or any Subsidiary of the Company, or any
Person holding Common Shares for or pursuant to the terms of
any such plan) shall become the Beneficial Owner of Common
Shares representing 20% or more of the total Voting Rights of
all the Common Shares of the Company then outstanding unless
the event causing the 20% threshold to be crossed (1) is a
recalculation of the voting power of any series of Common
Shares made in accordance with the Articles of Restatement;
provided, however, that the exception provided by this clause
(1) shall no longer apply from and after the first date upon
which (i) such Person, or any Affiliate or Associate of such
Person, since the date of such recalculation of voting power,
shall have acquired Beneficial Ownership of any Common Shares
and (ii) such Person, together with all Affiliates and
Associates of such Person, shall be the Beneficial Owner of
Common Shares representing 20% or more of the total Voting
Rights of all the Common Shares then outstanding, (2) is a
transaction set forth in Section 13(a) hereof, or (3) is an
acquisition of Common Shares pursuant to a tender offer made
in the 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) the price and other terms of such tender
offer are determined by at least a majority of the Continuing
Directors, after receiving advice from one or more investment
banking firms, to be (x) fair to shareholders (taking into
account all factors which such members of the Board deem
relevant including, without limitation, values indicated in
the light of long-term prospects or business plans or
aggregate prices or values which could reasonably be achieved
if part or all of the Company or its assets were distributed
or sold on an orderly basis designed to realize maximum
long-term value) and (y) otherwise in the best interests of
the Company and its shareholders, 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, 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.
(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 Preferred 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 (and/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 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, cash
(other than a regular quarterly cash dividend), assets (other than 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
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 take
into account ex-dividend trading or trading after any subdivision, combination
or reclassification. 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 and shall be conclusive for all purposes.
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
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 Stock (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
contained in Section 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and
the provisions of Sections 7, 9, 10, 12, 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 (or other consideration, as the case may be) 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
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 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
such number of fully paid and nonassessable one-four hundredths of a Preferred
Share 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.
(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), (iii)
effect a statutory share exchange with any Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof, or (iv)
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, statutory share exchange 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, statutory share exchange 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 (including, without
limitation, any conversion or redemption of any series of Common Shares
otherwise permitted under the Articles of Restatement) 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
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 declare or pay a dividend on
the outstanding shares of Circuit City Stock payable in shares of CarMax Stock,
then 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, the Series E Purchase Price shall be adjusted so that the result
obtained by multiplying (x) the Series E Purchase Price in effect immediately
prior to such event by (y) the number of one-four hundredths of a Series E
Preferred Share purchasable at the time of such event upon proper exercise of
all Circuit City Rights associated with one share of Circuit City Stock is equal
to the sum of (A) the result obtained by multiplying (i) the Series E Purchase
Price in effect immediately after such event by (ii) the number of one-four
hundredths of a Series E Preferred Share purchasable at the time of such event
upon proper exercise of all Circuit City Rights associated with one share of
Circuit City Stock plus (B) the result obtained by multiplying (i) the Series F
Purchase Price at the time of such event by (ii) the number of one-four
hundredths of a Series F Preferred Share purchasable at the time of such event
upon proper exercise of all CarMax Rights associated with the shares of CarMax
Stock paid in such dividend with respect to one share of Circuit City Stock.
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, Statutory Share Exchange 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,
(iii) the Company shall be a party to a statutory share exchange with 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)
after which the Company is a Subsidiary of any other Person, or (iv) 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 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), (ii) or (iii) 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 or exchanged in such merger, consolidation or
statutory share exchange, and if no securities are so issued, the
Person that is the other party to such merger, consolidation or
statutory share exchange; and
(ii) in the case of any transaction described in
clause (iv) 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; (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; and (3)
in case such Person is owned, directly or indirectly, by a joint venture formed
by two or more persons that are not owned, directly or indirectly, by the same
Person, the rules set forth in (1) and (2) above shall apply to each of the
chains of ownership having an interest in such joint venture as if such party
were a "Subsidiary" of both or all of such joint ventures and the Principal
Parties in each such chain shall bear the obligations set forth in this Section
13 in the same ratio as their direct or indirect interests in such Person bear
to the total of such interests.
(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;
(ii) use its best efforts to qualify or register the
Rights and the securities purchasable upon exercise of the Rights under
the Blue Sky laws of such jurisdictions as may be necessary or
appropriate; and
(iii) 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 statutory share exchange 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 of the Rights 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 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 and shall be conclusive for all purposes.
(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 four-hundredths 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 Section 11(d)(ii) hereof) 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. Holders
of Rights shall be entitled to recover the reasonable costs and expenses,
including attorneys' fees, incurred by them in any action to enforce the
provisions of this Agreement.
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.
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
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
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
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
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
Circuit City Rights and CarMax Rights at a redemption price of $.01 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 as of a date determined by the Board) 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 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.
Notwithstanding anything contained in this Agreement to the contrary, the Rights
shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event
until such time as the Company's right of redemption hereunder has expired.
(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
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-hundredth 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-hundredth of a Series F Preferred Share (or equivalent preferred
share) for each share of CarMax Stock.
(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
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, at any time after the Distribution Date, (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 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 a statutory share
exchange with any 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, statutory share exchange, 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
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: Circuit City Account Manager
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) to 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, provided that this Agreement may be amended to
change the type and number of securities into which a right is exercisable
before the occurrence of any Triggering Event if, after giving effect to such
amendment, the new securities into which each Right is so exercisable have a
value equal to the value of, and have voting rights at least equal to the voting
rights of, the securities into which such Right was exercisable prior to such
amendment (excluding any value attributable to any minimum dividend payments and
excluding any voting rights operable in case of non-payment of dividends) and
provided further that upon the creation of a new series of Common Shares of the
Company, this Agreement may be amended before the occurrence of any Triggering
Event (x) to reflect the Redemption Price, the Purchase Price, the number and
type of securities purchasable upon exercise and any other terms of any share
purchase rights to be associated with the shares of such new series and (y) if
any shares of such new series are to be paid as a dividend on the outstanding
shares of any other series of Common Shares, then to the extent such dividend
reduces the Number of Shares Issuable with Respect to the Inter-Group Interest,
as such term is now or hereafter defined in the Articles of Restatement, to
adjust (in a manner similar to the adjustments required under Section 11(q)
hereof) the Purchase Price payable upon proper exercise of the Rights associated
with the Common Shares on which such dividend is to be paid. 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).
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
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.
<PAGE>
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: /s/Lisa Baldyga By: /s/Michael T. Chalifoux
Title: Assistant Secretary Title: Senior Vice President,
Chief Financial Officer
and Secretary
NORWEST BANK MINNESOTA, N.A.
Attest:
By: /s/Susan J. Roeder By: /s/Barbara M. Novak
Title: Assistant Secretary Title: Vice President
<PAGE>
EXHIBIT A-1
The following provisions are or will be set forth as Section C of Article IV of
the Articles of Restatement:
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)
$4.00 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
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 $4.00 per share on the
Series E Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on
outstanding shares of the Series E Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of the
Series E Stock, unless the date of issue of such shares is prior to the
record date for the first Quarterly Dividend Payment Date, in which
case dividends on such shares shall begin to accrue from the date of
issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the
determination of holders of shares of the Series E Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment
Date, in either of which events such dividends shall begin to accrue
and be cumulative from such Quarterly Dividend Payment Date. Accrued
but unpaid dividends shall not bear interest. Dividends paid on the
shares of the Series E Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of the Series E Stock entitled
to receive payment of a dividend or distribution declared thereon,
which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.
(2) Voting Rights. Except to the extent provided by law, the
holders of shares of the Series E Stock shall not be entitled (i) to vote on any
matter or (ii) to receive notice of, or to participate in, any meeting of
shareholders of the Corporation at which they are not entitled to vote.
(3) Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or
distributions payable on the Series E Stock as provided in paragraph
(C)(1) of this Article are in arrears, thereafter and until all accrued
and unpaid dividends and distributions, whether or not declared, on
shares of the Series E Stock outstanding shall have been paid in full,
the Corporation shall not:
(i) declare, set apart or pay dividends on or make any
other distributions on the Common Stock or any shares of stock
ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series E Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Series E Stock, except dividends paid
ratably on the Series E Stock and all such parity stock on
which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then
entitled; or
(iii) redeem or purchase or otherwise acquire for
consideration shares of the Series E Stock, any such parity
stock or any stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) with the Series E
Stock, or set aside for or pay to any sinking fund therefor.
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (C)(3)(a) of this Article, purchase or otherwise acquire such
shares at such time and in such manner.
(4) Reacquired Shares. Any shares of the Series E Stock
redeemed, purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled 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 14, 2058, 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) $100,000.00 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. 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 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 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
(if there are more than one) representing shares registered in the name
of a holder that are to be redeemed.
(d) Not less than 30 nor more than 60 days prior to the date
fixed for redemption, notice of redemption shall be given by first
class mail, postage prepaid, to the holders of record of the
outstanding shares of the Series E Stock to be redeemed at their last
known addresses shown in the Corporation's share transfer records. The
notice of redemption shall set forth the paragraph of this Article
pursuant to which the shares are being redeemed, the number of shares
to be redeemed, the date fixed for redemption, the applicable
redemption price, and the place or places where certificates
representing shares to be redeemed may be surrendered. In case less
than all of the outstanding shares of the Series E Stock are to be
redeemed the notice of redemption shall also set forth the numbers of
the certificates representing shares to be redeemed and, in case less
than all shares represented by any such certificate are to be redeemed,
the number of shares represented by such certificate to be redeemed.
(e) If notice of redemption of any outstanding shares of
Series E Stock shall have been duly mailed as herein provided, then on
or before the date fixed for redemption the Corporation shall deposit
cash sufficient to pay the redemption price of such shares in trust for
the benefit of the holders of the shares to be redeemed with any bank
or trust company in the City of Richmond, Commonwealth of Virginia,
having capital and surplus aggregating at least $50,000,000 as of the
date of its most recent report of financial condition and named in such
notice, to be applied to the redemption of the shares so called for
redemption against surrender for cancellation of the certificates
representing such shares. From and after the time of such deposit all
shares for the redemption of which such deposit shall have been made
shall, whether or not the certificates therefor shall have been
surrendered for cancellation, no longer be deemed to be outstanding for
any purpose, and all rights with respect to such shares shall thereupon
cease and terminate except the right to receive payment of redemption
price but without interest. Any interest earned on funds so deposited
shall be paid to the Corporation from time to time. Any funds so
deposited and unclaimed at the end of five years from the date fixed
for redemption shall be repaid to the Corporation, free of trust, and
the holders of the shares called for redemption who shall not have
surrendered their certificates representing such shares prior to such
repayment shall be deemed to be unsecured creditors of the Corporation
for the amount of the redemption price and shall look only to the
Corporation for payment thereof, without interest, subject to the laws
of the Commonwealth of Virginia.
(f) The Corporation shall also have the right to acquire
outstanding shares of Series E Stock otherwise than by redemption
pursuant to paragraph (C)(5)(a) of this Article, from time to time for
such consideration as may be acceptable to the holders thereof;
provided, however, that if all dividends accrued on all outstanding
shares of Series E Stock shall not have been declared and paid or
declared and a sum sufficient for the payment thereof set apart,
neither the Corporation nor any subsidiary shall so acquire any shares
of Series E Stock except in accordance with a purchase offer made on
the same terms to all the holders of the outstanding shares of Series E
Stock.
(6) Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination, statutory share exchange or
other transaction in which the shares of Circuit City Stock are exchanged for or
changed into other stock or securities, cash and/or any other property, then in
any such case the shares of the Series E Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 400 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Circuit City Stock is changed or
exchanged. If 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 set forth in
the preceding sentence with respect to the exchange or change of shares of the
Series E Stock shall be adjusted by multiplying such amount 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.
<PAGE>
EXHIBIT A-2
The following provisions are or will be set forth as Section D of Article IV of
the Articles of Restatement:
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)
$4.00 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 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 $4.00 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-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of the Series 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, 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 canceled 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 14, 2058, 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) $40,000.00 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. 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 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 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.
(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
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.
(6) Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination, statutory share exchange or
other transaction in which the shares of CarMax Stock are exchanged for or
changed into other stock or securities, cash and/or any other property, then in
any such case the shares of Series F Stock shall at the same time be similarly
exchanged or changed in an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to 400 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of CarMax Stock is changed or
exchanged. If 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 set forth in the preceding sentence with respect to
the exchange or change of shares of Series F Stock shall be adjusted by
multiplying such amount 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.
<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 14, 2008 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.]**
*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.
Circuit City 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 Rights Agreement dated as of April 14, 1998 (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 14, 2008 (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-hundredth 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 $250.00 per one four-hundredth 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 April 14, 1998, based on the Preferred Shares as
constituted at such date.
Upon the occurrence of a Triggering 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.
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 four-hundredths 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 $.01 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 four-hundredths 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.
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
<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 within-named Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated:___________ _____ ______________________________
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.
Dated: ______________, _____ _____________________________
Signature
<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.
<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:_______________, ____ ______________________________
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)
<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: ____________ , ____ _____________________________
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: _____________, ____ _____________________________
Signature
<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.
<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 14, 2008 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.]****
***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.
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 Rights Agreement dated as of April 14, 1998 (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 14, 2008 (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-hundredth 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 $100.00 per one four-hundredth 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 April 14, 1998, based on the Preferred Shares as
constituted at such date.
Upon the occurrence of a Triggering 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.
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 four-hundredths 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 $.01 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 four-hundredths 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.
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
<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 within-named Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated:___________, ____ ______________________________
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.
Dated: ______________, ____ _____________________________
Signature
Notices
<PAGE>
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.
<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:_______________, ____ ______________________________
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)
<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: ____________ , ____ _____________________________
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: _____________, ____ _____________________________
Signature
<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.
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On April 14, 1998, the Board of Directors of Circuit City Stores, Inc.,
a Virginia corporation (the "Company"), declared a dividend distribution of (1)
one Preferred Stock Purchase Right (a "Circuit City Right") for each outstanding
share of the Circuit City Stores, Inc. - Circuit City Group Common Stock, par
value $.50 per share (the "Circuit City Stock"), and (2) one Preferred Stock
Purchase Right (a "CarMax Right") for each outstanding share of the Circuit City
Stores, Inc. - CarMax Group Common Stock, par value $.50 per share (the "CarMax
Stock"), in each case payable to stockholders of record at the close of business
on April 29, 1998 (the "Record Date"). From and after the Distribution Date (as
defined below), each Circuit City Right entitles the record holder to purchase
from the Company one four-hundredth of a share of the Company's Series E
Cumulative Participating Preferred Stock, par value $20 per share (the "Series E
Preferred Stock"), at a price of $250.00 (the "Series E Purchase Price"), and
each CarMax Right entitles the record holder to purchase from the Company one
four-hundredth of a share of the Company's Series F Cumulative Participating
Preferred Stock, par value $20 per share (the "Series F Preferred Stock"), at a
price of $100.00 (the "Series F Purchase Price"), in each case subject to
adjustment in certain circumstances. The description and terms of the Rights are
set forth in a Rights Agreement, dated as of April 14, 1998 (the "Rights
Agreement"), between the Company and Norwest Bank Minnesota, N.A., as rights
agent (the "Rights Agent").
Initially, the Circuit City Rights and the CarMax Rights (collectively
the "Rights") will be attached to and represented by the certificates
representing outstanding shares of Circuit City Stock and CarMax Stock,
respectively (collectively, the "Common Stock"). The Rights will separate from
the Common Stock and a Distribution Date will occur upon the earlier of (i) ten
days following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the right
to acquire, beneficial ownership of 20% or more in voting power of the
outstanding shares of Common Stock (the "Stock Acquisition Date"), or (ii) ten
business days following the commencement of, or first public announcement of the
intent of any person to commence, a tender offer or exchange offer if, upon
consummation thereof, the person or group making such offer would be the
beneficial owner of 20% or more in voting power of the outstanding shares of
Common Stock.
Until the Distribution Date, (i) no Rights certificates will be
distributed, (ii) the Rights will be transferable with and only with the Common
Stock certificates, and (iii) the surrender for transfer of any Common Stock
certificates will also constitute the transfer of the Rights associated with the
Common Stock represented by such certificates. Following the Distribution Date,
Rights certificates will be mailed to holders of record of the Common Stock as
of the close of business on the Distribution Date and, thereafter, such separate
Rights certificates alone will evidence the Rights. Except in certain limited
circumstances, only shares of Common Stock issued prior to the Distribution Date
will be issued with Rights.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on April 14, 2008, unless earlier exercised or
redeemed by the Company as described below.
At any time following the Distribution Date, if (i) the Company is the
surviving corporation in a merger with an Acquiring Person and its Common Stock
is not changed or exchanged, (ii) a Person becomes the beneficial owner of 20%
or more in voting power of the then outstanding shares of Common Stock (other
than pursuant to an offer for all outstanding shares of Common Stock at a price
and on terms which a majority of the Continuing Directors (as hereinafter
defined) determine to be fair to, and otherwise in the best interests of,
stockholders), or (iii) an Acquiring Person receives equity securities (other
than pursuant to a pro rata distribution) from the Company, acquires from or
transfers to the Company assets with a fair market value exceeding $2,000,000 or
engages in certain other "self-dealing" transactions specified in the Rights
Agreement, the Rights Agreement requires that proper provision be made so that
each holder of a Right will thereafter have the right to receive, upon the
exercise thereof, shares of the associated series of Common Stock (or, in
certain circumstances, cash, property or other securities of the Company) having
a value equal to two times the exercise price of the Right. However, Rights are
not exercisable following the occurrence of the events set forth above until
such time as the Rights are no longer redeemable by the Company as set forth
below. Notwithstanding any of the foregoing, following the occurrence of any of
the events set forth in this paragraph, any Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by an
Acquiring Person will immediately become null and void.
For example, at an exercise price of $250 per Right, each Circuit City
Right not owned by an Acquiring Person (or by certain related parties) following
an event set forth in the preceding paragraph would entitle its holder to
purchase $500 worth of Circuit City Stock (or other securities or assets, as
noted above) for $250. Assuming that the Circuit City Stock had a per share
value of $50 at such time, the holder of each valid Circuit City Right would be
entitled to purchase ten shares of Circuit City Stock for $250. The holder of
each valid CarMax Right would have a similar right under such circumstances to
purchase $200 worth of CarMax Stock (or such other securities or assets) for
$100 (the exercise price of a CarMax Right).
At any time following the Stock Acquisition Date, if (i) the Company
engages in a merger or consolidation in which the Company is not the surviving
corporation, (ii) the Company engages in a merger or consolidation with another
person in which the Company is the surviving corporation, but in which all or
part of the Common Stock is changed or exchanged, (iii) the Company engages in a
statutory share exchange or (iv) 50% or more of the Company's assets or earning
power is sold or transferred, the Rights Agreement requires that proper
provision be made so that each holder of a Right shall thereafter have the right
to receive, upon the exercise thereof, common stock of the acquiring company
having a value equal to two times the exercise price of the Right.
Notwithstanding any of the foregoing, following the occurrence of any of the
events set forth in this paragraph, any Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by an
Acquiring Person will immediately become null and void.
The Rights Agreement provides that, after the Distribution Date, the
Company generally may not take any action which would diminish substantially the
benefits of the Rights, including any consolidation or merger with, or sale of
50% of the Company's assets or earning power to, any person which has securities
or is bound by agreements which would have such effect.
The Purchase Price payable, and the number of one four-hundredths of a
share of Preferred Stock or other securities or property issuable, upon exercise
of the Rights are subject to adjustment from time to time to prevent dilution
(i) in the event of a stock dividend on the Preferred Stock or other capital
stock, or a subdivision, combination or reclassification of the Preferred Stock,
(ii) upon the grant to holders of the Preferred Stock of certain rights or
warrants to subscribe for Preferred Stock or securities convertible into
Preferred Stock at less than the current market price of the Preferred Stock, or
(iii) upon the distribution to holders of the Preferred Stock of evidences of
indebtedness or assets (excluding regular quarterly cash dividends) or of
subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. The Company may, in lieu of issuing fractional shares of
Preferred Stock (other than fractions which are integral multiples of one
four-hundredth of a share) upon exercise of the Rights, make a cash payment
based on the market price of the Preferred Stock on the last trading date prior
to the date of exercise.
If the Company is not able to issue shares of the applicable series of
Preferred Stock or Common Stock because of the absence of necessary regulatory
approval, restrictions contained in the Company's Amended and Restated Articles
of Incorporation or for any other reason, a person exercising Rights will be
entitled to receive a combination of cash or property or other securities having
a value equal to the value of the shares of Preferred Stock or Common Stock
which would otherwise have been issued upon exercise of the Rights.
At any time until ten days following the Stock Acquisition Date, the
Board of Directors of the Company may redeem the Circuit City Rights and the
CarMax Rights in whole, but not in part, at a price of $.01 per Right, payable
in cash or securities or both (the "Redemption Price"). Upon certain
circumstances set forth in the Rights Agreement, the decision to redeem shall
require the concurrence of a majority of the Continuing Directors. Immediately
upon the action of the Board of Directors of the Company ordering redemption of
the Rights (with, where required, the concurrence of a majority of the
Continuing Directors), the Rights will terminate and the only right of the
holders of Rights will be to receive the Redemption Price.
After a Person becomes an Acquiring Person and before any Acquiring
Person acquires 50% or more in voting power of the outstanding shares of Common
Stock, the Company, with the approval of a majority of Continuing Directors, may
require a holder to exchange all or any portion of the holder's Rights at an
exchange ratio of (1) one share of Circuit City Stock or one four-hundredth of a
share of Series E Preferred Stock (or in certain circumstances, other securities
of the Company) per Circuit City Right and (2) one share of CarMax Stock or one
four-hundredth of a share of Series F Preferred Stock (or in certain
circumstances, other securities of the Company) per CarMax Right.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income at such time as the Rights become
exercisable or are exercised for Common Stock (or other consideration) of the
Company or for common stock of the acquiring company as set forth above.
Certain provisions of the Rights Agreement relating to the principal
economic terms of the Rights generally may not be amended at any time. Other
provisions may be amended by the Board of Directors of the Company prior to the
Distribution Date. Thereafter, these other provisions of the Rights Agreement
may be amended by the Board (in certain circumstances only with the concurrence
of the Continuing Directors) in order: to cure any ambiguity, defect or
inconsistency; to shorten or lengthen any time period under the Rights
Agreement; or in any other respect that will not adversely affect the interests
of holders of Rights (excluding the interests of any Acquiring Person);
provided, that no amendment to adjust the time period governing redemption may
be made if the Rights are not redeemable at the time of such amendment.
Each one four-hundredth of a share of Series E Preferred Stock will be
entitled to (i) a quarterly dividend equal to the greater of (a) the quarterly
dividend declared per share of Circuit City Stock or (b) $.01, (ii) upon
liquidation, a minimum preferential liquidation payment equal to the greater of
(a) $250.00 or (b) the market price of a share of Circuit City stock at the time
of liquidation, plus accrued and unpaid dividends, and (iii) in the event of any
merger, consolidation or other transaction in which shares of Circuit City Stock
are exchanged, the same amount received per share of Circuit City Stock. Each
one four-hundredth of a share of Series F Preferred Stock will be entitled to
(i) a quarterly dividend equal to the greater of (a) the quarterly dividend
declared per share of CarMax Stock or (b) $.01, (ii) upon liquidation, a minimum
preferential liquidation payment equal to the greater of (a) $100.00 or (b) the
market price of a share of CarMax Stock at the time of liquidation, plus accrued
and unpaid dividends, and (iii) in the event of any merger, consolidation or
other transaction in which shares of CarMax Stock are exchanged, the same amount
received per share of CarMax Stock. After April 14, 2058, the Company may redeem
all or any portion of the Series E or Series F Preferred Stock at a price equal
to the respective liquidation payments described above. The foregoing rights are
protected by customary anti-dilution provisions. The holders of shares of
Preferred Stock are not entitled to vote on any matter except to the extent
provided by law. Because of the nature of the Preferred Stock's dividend,
liquidation and redemption rights, the value of each one four-hundredth of a
share of Preferred Stock purchasable upon exercise of each Right should
approximate the value of one share of the associated series of Common Stock
subject to the effect on such value of the fact that holders of Preferred Stock
have no voting rights other than those provided by law.
The term "Continuing Director" means any member of the Company's Board
of Directors who was a member of the Board on the Distribution Date, and any
person who is subsequently elected to the Board if such person is recommended or
approved by a majority of the Continuing Directors.
A copy of the Rights Agreement is filed with the Securities and
Exchange Commission as an exhibit to a Registration Statement of the Company on
Form 8-A. A copy of the Rights Agreement is available free of charge from the
Company upon written request. This summary description of the Rights does not
purport to be complete and is qualified in its entirety by reference to the
Rights Agreement, which is incorporated herein by reference.
EXHIBIT 2
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 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 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 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.
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.
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 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 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 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 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.
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
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 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.
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 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.
EXHIBIT 3
CIRCUIT CITY STORES, INC.
AMENDED AND RESTATED ARTICLES OF INCORPORATION
ARTICLE I
NAME
The name of the Corporation is Circuit City Stores, Inc.
ARTICLE II
PURPOSES
The purpose for which the Corporation is organized is to engage in any
lawful business not required by the Virginia Stock Corporation Act to be stated
in the Articles of Incorporation.
The Corporation shall have all of the corporate powers of any character
which are not prohibited by law or required to be stated in the Articles of
Incorporation.
ARTICLE III
CAPITAL STOCK
A. Authorized Stock. The aggregate number of shares that the
Corporation shall have authority to issue and the par value per share are as
follows:
Class Number of Shares Par Value
Preferred 2,000,000 $20.00
Common 350,000,000 $ .50
B. Preemptive Rights. No holder of outstanding shares of any class of
stock shall have any preemptive right with respect to (i) any shares of any
class of stock of the Corporation or other security that the Corporation may
determine to issue, whether the shares of stock or other security to be issued
is now or hereafter authorized, (ii) any warrants, rights or options to purchase
any such stock or other security, or (iii) any obligations convertible into any
such stock or other security or into warrants, rights or options to purchase any
such stock or other security.
ARTICLE IV
PREFERRED STOCK
A. General. Certain provisions relating to the Preferred Stock and the
relative rights of the Preferred Stock and the holders of the outstanding shares
thereof, regardless of series, are set forth below.
(1) Issuance in Series. The Board of Directors is authorized to
issue the Preferred Stock from time to time in one or more series and to provide
for the relative rights and preferences of each series by the adoption of a
resolution or resolutions fixing:
(a) The maximum number of shares in a series and the designation of
the series, which designation shall distinguish the shares thereof from
the shares of any other series or class;
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(b) The rate of dividend, the time of payment, whether dividends
shall be cumulative and if so, the dates from which they shall be
cumulative, and the extent of participation rights, if any;
(c) Any right to vote with holders of shares of any other series or
class and any right to vote as a class, either generally or as a
condition to specified corporate action; provided, however, that no
holder of shares of Preferred Stock shall ever be entitled to more than
one vote for each share held by him;
(d) The price at and the terms and conditions on which shares may be
redeemed;
(e) The amount payable upon shares in the event of involuntary
liquidation;
(f) The amount payable upon shares in the event of voluntary
liquidation;
(g) Sinking fund provisions for the redemption or purchase of
shares; and
(h) The terms and conditions on which shares may be converted, if
the shares of any series are issued with the privilege of conversion;
and
(i) Any other designations, rights, preferences or limitations that
are now or hereafter permitted by the laws of the Commonwealth of
Virginia and are not inconsistent with the provisions of paragraph
(A)(1) of this Article.
(2) Articles of Amendment. Before the issuance of any shares of a
series of the Preferred Stock (other than shares for which provision is already
made in these Amended and Restated Articles of Incorporation), Articles of
Amendment establishing such series shall be filed with and made effective by the
State Corporation Commission of Virginia, as required by law.
(3) Parity of All Shares. All shares of the Preferred Stock,
regardless of series, shall be identical with each other in all respects except
as is permitted in paragraph (A)(1) of this Article.
(4) Definitions. As used herein the following terms shall have the
following meanings:
(a) "Capital Stock" means any capital stock of any class or series
(however designated) of the Corporation.
(b) "Common Stock" means the Common Stock of the Corporation.
(c) "Dividends Accrued" means, with respect to the shares of each
series of the Preferred Stock an amount equal to the dividends thereon
at the annual dividend rate for such series computed from the date of
issue to the date to which reference is made, plus any additional
amounts provided by participation rights, whether or not such amounts
or any part thereof shall have been declared or set aside to be paid
and whether there shall be or have been any funds out of which such
amounts might legally be paid, less the amount of dividends or
participation rights declared and paid thereon.
(d) "Junior Stock" means any Capital Stock ranking, as to dividends
and as to rights in liquidation, dissolution or winding up of the
affairs of the Corporation, subordinate to the Preferred Stock.
(e) "Parity Stock" means any Capital Stock ranking, as to dividends
and as to rights in liquidation, dissolution or winding up of the
affairs of the Corporation, equally with the Preferred Stock.
(f) "Preferred Stock" means the Preferred Stock of the Corporation.
(g) "Redemption" means any purchase or acquisition by the
Corporation, for a consideration, of shares of the Preferred Stock,
whether pursuant to an option of the Corporation or a sinking fund or
otherwise, if the holder of the Preferred Stock being acquired by the
Corporation is required to sell the shares the Corporation is acquiring
or if, as a result of any such purchase or acquisition, the Corporation
takes a credit against a sinking fund obligation.
(h) "Redemption Date" means the date fixed for the Redemption of any
shares of the Preferred Stock in a notice of Redemption given pursuant
to paragraph (A)(7) of this Article.
(i) "Redemption Price" means, with respect to the shares of each
series of the Preferred Stock, the price at which the Corporation shall
or may redeem such shares pursuant to the terms of the Articles of
Serial Designation for such series.
(j) "Subsidiary" means any corporation a majority of the outstanding
Voting Stock of which is owned, directly or indirectly, by the
Corporation or by the Corporation and one or more Subsidiaries.
(k) "Voting Stock" means stock of any class (however designated)
having voting power for the election of a majority of the board of
directors (or other governing body) of a corporation, other than stock
having such powers only by reason of the happening of a contingency.
(5) Dividends.
(a) The holders of outstanding shares of each series of the
Preferred Stock shall be entitled to receive, if, when and as declared
by the Board of Directors, out of funds legally available therefor,
cash dividends in accordance with the terms set forth in the amendment
to these Amended and Restated Articles of Incorporation establishing
such series.
(b) No dividends whatsoever shall be declared or paid upon, or any
sums set apart for the payment of dividends upon, any shares of
Preferred Stock or Parity Stock for any dividend period unless a like
proportionate dividend for the same dividend period (ratable in
proportion to the respective annual dividend rates) shall have been
declared and paid upon, or declared and a sufficient sum set apart for
the payment of such dividend upon, all outstanding shares of Preferred
Stock.
(c) Unless Dividends Accrued (to the extent that the amount thereof
shall have been determinable) on all outstanding shares of each series
of the Preferred Stock for all past dividend periods and the then
current period shall have been declared and paid, or declared and a sum
sufficient for the payment thereof set apart, and all mandatory sinking
fund payments required to be made pursuant to the terms of any series
of the Preferred Stock shall have been made in full, then (i) no
dividend whatsoever (other than a dividend payable solely in Junior
Stock) shall be declared or paid upon, or any sum set apart for the
payment of dividends upon, any shares of Junior Stock; (ii) no other
distribution shall be made upon any shares of Junior Stock; (iii) no
shares of Junior Stock shall be purchased, redeemed or otherwise
acquired for value by the Corporation or by any Subsidiary; and (iv) no
monies shall be paid into or set apart or made available for a sinking
or other like fund for the purchase, Redemption or other acquisition
for value of any shares of Junior Stock by the Corporation or any
Subsidiary.
(6) Voting Rights. No holder of outstanding shares of any
series of the Preferred Stock shall be entitled to vote for the election of
directors or upon any other matter, or to receive notice of or to participate in
any meeting of the stockholders of the Corporation, except (i) as hereinafter
provided or as provided in the amendment to these Amended and Restated Articles
of Incorporation establishing such series and (ii) as may be required by law.
(7) Redemption.
(a) Redemptions of outstanding shares of any series of the
Preferred Stock shall be made pursuant to the terms and conditions set
forth in these Amended and Restated Articles of Incorporation or in the
amendment thereto establishing such series and, unless they provide
otherwise, shall be made in the manner hereinbelow set forth.
(b) No less than thirty (30) nor more than sixty (60) days
prior to the Redemption Date notice of Redemption shall be given by
first class mail, postage prepaid, to the holders of record of the
outstanding shares of the Preferred Stock being redeemed at their last
known post office addresses shown in the Corporation's stock transfer
records. The notice of Redemption shall set forth the paragraph or
paragraphs of these Amended and Restated Articles of Incorporation (or
the amendment thereto establishing the series of which such shares are
a part) pursuant to which the shares are being redeemed, the number of
shares to be redeemed, the date fixed for Redemption, the Redemption
Price, and the place or places where certificates representing shares
to be redeemed may be surrendered. In case less than all of the
outstanding shares of a series are to be redeemed (i) the shares to be
redeemed shall be selected by lot or redeemed ratably or in such other
equitable manner as the Board of Directors may determine, and (ii) the
notice of Redemption shall set forth the numbers of the certificates
representing shares to be redeemed and, if less than all of the shares
represented by any such certificate are to be redeemed, the number of
shares to be redeemed which are represented by such certificate.
(c) If notice of Redemption of any outstanding shares of any
series of the Preferred Stock shall have been duly mailed as
hereinabove provided, then on or before the Redemption Date the
Corporation shall deposit cash sufficient to pay the Redemption Price
of such shares in trust for the Benefit of the holders of the shares to
be redeemed in any bank or trust company in the City of Richmond,
Virginia, having capital and surplus aggregating at least $50,000,000
as of the date of its most recent report of financial condition and
named in such notice, with irrevocable instructions and authority to
apply such amount to the Redemption of the shares so called for
Redemption against surrender for cancellation of the certificates
representing such shares. From and after the time of such deposit all
shares for the Redemption of which such deposit shall have been so made
shall, whether or not the certificates therefor shall have been
surrendered for cancellation, be no longer deemed to be outstanding for
any purpose and all rights with respect to such shares shall thereupon
cease and terminate except the right to receive payment of the
Redemption Price, but without interest. Any interest accrued on such
funds shall be paid to the Corporation from time to time. Any fund so
deposited and unclaimed at the end of five years from the Redemption
Date shall be repaid to the Corporation, free of trust, and the holders
of the shares called for Redemption who shall not have surrendered
their certificates representing such shares prior to such repayment
shall be deemed to be unsecured creditors of the Corporation for the
amount of the Redemption Price and shall look only to the Corporation
for payment thereof, without interest, subject to the laws of the
Commonwealth of Virginia.
(d) The Corporation shall also have the right to acquire
outstanding shares of any series of the Preferred Stock otherwise than
by Redemption, from time to time, for such consideration as may be
acceptable to the holders thereof; provided, however, that if all
Dividends Accrued on all outstanding shares of such series shall not
have been declared and paid or declared and a sum sufficient for the
payment thereof set apart, neither the Corporation nor any Subsidiary
shall so acquire any shares of such series except in accordance with a
purchase offer made on the same terms to all the holders of the
outstanding shares of such series.
(e) Shares of any series of the Preferred Stock purchased,
redeemed or otherwise acquired by the Corporation shall constitute
authorized but unissued shares of Preferred Stock but undesignated as
to series, as provided by law, and, unless otherwise provided in these
Amended and Restated Articles of Incorporation or in the amendment
thereto establishing such series of the Preferred Stock, may be
reissued by the Corporation.
(8) Liquidation. In the event of the voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation, the
holders of shares of each series of the Preferred Stock then outstanding shall
be entitled to be paid in cash out of the net assets of the Corporation,
including its capital, an amount equal to the Redemption Price and no more,
before any distribution or payment shall be made to the holders of shares of
Junior Stock and, after payment to the holders of the outstanding shares of each
series of the Preferred Stock of the amounts to which they are respectively
entitled, the balance of such assets, if any, shall be paid to the holders of
Junior Stock according to their respective rights. For the purposes of the
preceding sentence, neither the consolidation of the Corporation with nor the
merger of the Corporation into any other corporation, nor the sale, lease or
other disposition of all or substantially all of the Corporation's properties
and assets shall, without further corporate action, be deemed a liquidation,
dissolution or winding up of the affairs of the Corporation. If the net assets
of the Corporation are insufficient to pay the holders of the outstanding shares
of each series of the Preferred Stock the full amounts to which they are
respectively entitled, the entire net assets of the Corporation remaining shall
be distributed ratably to the holders of the outstanding shares of the Preferred
Stock in proportion to the full amounts to which they are respectively entitled.
(9) Conflicting Provisions. Subsequent to the date these
Amended and Restated Articles of Incorporation become effective the Corporation
may issue one or more series of Preferred Stock. In the event that any of the
foregoing provisions of these Amended and Restated Articles of Incorporation
conflict with the provisions of the amendment thereto establishing a series of
the Preferred Stock, then, as to such series, the specific provisions which
relate to it, and not the general provisions hereinabove set forth, shall
control.
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
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-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of the Series E Stock entitled
to receive payment of a dividend or distribution declared thereon,
which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.
(2) Voting Rights. Except to the extent provided by law, the
holders of shares of the Series E Stock shall not be entitled (i) to vote on any
matter or (ii) to receive notice of, or to participate in, any meeting of
shareholders of the Corporation at which they are not entitled to vote.
(3) Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or
distributions payable on the Series E Stock as provided in paragraph
(C)(1) of this Article are in arrears, thereafter and until all accrued
and unpaid dividends and distributions, whether or not declared, on
shares of the Series E Stock outstanding shall have been paid in full,
the Corporation shall not:
(i) declare, set apart or pay dividends on or make
any other distributions on the Common Stock or any shares of
stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series E Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Series E Stock, except dividends paid
ratably on the Series E Stock and all such parity stock on
which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then
entitled; or
(iii) redeem or purchase or otherwise acquire for
consideration shares of the Series E Stock, any such parity
stock or any stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) with the Series E
Stock, or set aside for or pay to any sinking fund therefor.
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (C)(3)(a) of this Article, purchase or otherwise acquire such
shares at such time and in such manner.
(4) Reacquired Shares. Any shares of the Series E Stock
redeemed, purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock, par value $20.00 per share, and may be
reissued as a new series or a part of a new series of Preferred Stock 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. 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
(if there are more than one) representing shares registered in the name
of a holder that are to be redeemed.
(d) Not less than 30 nor more than 60 days prior to the date
fixed for redemption, notice of redemption shall be given by first
class mail, postage prepaid, to the holders of record of the
outstanding shares of the Series E Stock to be redeemed at their last
known addresses shown in the Corporation's share transfer records. The
notice of redemption shall set forth the paragraph of this Article
pursuant to which the shares are being redeemed, the number of shares
to be redeemed, the date fixed for redemption, the applicable
redemption price, and the place or places where certificates
representing shares to be redeemed may be surrendered. In case less
than all of the outstanding shares of the Series E Stock are to be
redeemed the notice of redemption shall also set forth the numbers of
the certificates representing shares to be redeemed and, in case less
than all shares represented by any such certificate are to be redeemed,
the number of shares represented by such certificate to be redeemed.
(e) If notice of redemption of any outstanding shares of
Series E Stock shall have been duly mailed as herein provided, then on
or before the date fixed for redemption the Corporation shall deposit
cash sufficient to pay the redemption price of such shares in trust for
the benefit of the holders of the shares to be redeemed with any bank
or trust company in the City of Richmond, Commonwealth of Virginia,
having capital and surplus aggregating at least $50,000,000 as of the
date of its most recent report of financial condition and named in such
notice, to be applied to the redemption of the shares so called for
redemption against surrender for cancellation of the certificates
representing such shares. From and after the time of such deposit all
shares for the redemption of which such deposit shall have been made
shall, whether or not the certificates therefor shall have been
surrendered for cancellation, no longer be deemed to be outstanding for
any purpose, and all rights with respect to such shares shall thereupon
cease and terminate except the right to receive payment of redemption
price but without interest. Any interest earned on funds so deposited
shall be paid to the Corporation from time to time. Any funds so
deposited and unclaimed at the end of five years from the date fixed
for redemption shall be repaid to the Corporation, free of trust, and
the holders of the shares called for redemption who shall not have
surrendered their certificates representing such shares prior to such
repayment shall be deemed to be unsecured creditors of the Corporation
for the amount of the redemption price and shall look only to the
Corporation for payment thereof, without interest, subject to the laws
of the Commonwealth of Virginia.
(f) The Corporation shall also have the right to acquire
outstanding shares of Series E Stock otherwise than by redemption
pursuant to paragraph (C)(5)(a) of this Article, from time to time for
such consideration as may be acceptable to the holders thereof;
provided, however, that if all dividends accrued on all outstanding
shares of Series E Stock shall not have been declared and paid or
declared and a sum sufficient for the payment thereof set apart,
neither the Corporation nor any subsidiary shall so acquire any shares
of Series E Stock except in accordance with a purchase offer made on
the same terms to all the holders of the outstanding shares of Series E
Stock.
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 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-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of the Series 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, 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) $8,800 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. 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.
(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
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.
ARTICLE V
COMMON STOCK
A. General. Certain provisions relating to the Common Stock and the
relative rights of the Common Stock and the holders of the outstanding shares
thereof, regardless of series, are set forth below.
(1) Issuance in Series. The Board of Directors, by an adoption of an
amendment of these Amended and Restated Articles of Incorporation, may fix, in
whole or part, the preferences, limitations and relative rights, within the
limits set forth in applicable law, of one or more series of Common Stock of the
Corporation before the issuance of any shares of that series.
(2) Parity of All Shares. All shares of Common Stock, regardless of
series, shall be identical with each other in all respects except as is
permitted in paragraph (A)(1) of this Article.
B. Circuit City Stock and Carmax Stock.
(1) Designation of Series; Number of Shares of Each Series. One series
of Common Stock is hereby designated as "Circuit City Stores, Inc. -- Circuit
City Group Common Stock" ("Circuit City Stock") consisting of 175,000,000 shares
and a second series of Common Stock is hereby designated as "Circuit City
Stores, Inc. -- CarMax Group Common Stock" ("CarMax Stock") consisting of
175,000,000 shares. The number of shares of each such series may from time to
time be increased (but not above the total number of authorized shares of the
class of Common Stock) or decreased (but not below the number of shares of such
series then outstanding) by the Board of Directors of the Corporation.
(2) Dividends. Subject to any preferences, limitations and relative
rights of any outstanding series of the Preferred Stock and any qualifications
or restrictions on the Common Stock created thereby, dividends may be declared
and paid upon the Circuit City Stock and the CarMax Stock, upon the terms with
respect to each such series, and subject to the limitations provided for below
in this paragraph B(2) of this Article, as the Board of Directors may determine.
(a) Dividends on Circuit City Stock. Dividends on Circuit City
Stock may be declared and paid only out of the lesser of (i) the assets
legally available therefor and (ii) the Circuit City Group Available
Dividend Amount.
(b) Dividends on Carmax Stock. Dividends on CarMax Stock may
be declared and paid only out of the lesser of (i) the assets legally
available therefor and (ii) the CarMax Group Available Dividend Amount.
(c) Discrimination in Dividends Between Series of Common
Stock. The Board of Directors, subject to the provisions of paragraphs
B(2)(a) and B(2)(b) of this Article, may at any time declare and pay
dividends exclusively on Circuit City Stock, exclusively on CarMax
Stock or on both such series, 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 dividends previously declared on each series, the
respective voting or liquidation rights of each series or any other
factor.
(d) Share Distributions. Subject to paragraphs B(2)(a) and
B(2)(b) of this Article, as the case may be, and except as permitted by
paragraphs B(5)(a) and B(5)(b)(ii)(2) of this Article, the Board of
Directors may declare and pay dividends or distributions of shares of
the Common Stock (or Convertible Securities convertible into or exchangeable or
exercisable for shares of the Common Stock) on shares of the Common Stock or
shares of the Preferred Stock only as follows:
(i) dividends or distributions of shares of Circuit
City Stock (or Convertible Securities convertible into or
exchangeable or exercisable for shares of Circuit City Stock)
on shares of Circuit City Stock or shares of the Preferred
Stock attributed to the Circuit City Group;
(ii) dividends or distributions of shares of CarMax
Stock (or Convertible Securities convertible into or
exchangeable or exercisable for shares of CarMax Stock) on
shares of CarMax Stock or shares of the Preferred Stock
attributed to the CarMax Group; and
(iii) dividends or distributions of shares of CarMax
Stock (or Convertible Securities convertible into or
exchangeable or exercisable for shares of CarMax Stock) on
shares of Circuit City Stock or shares of the Preferred Stock
attributed to the Circuit City Group, but only if the sum of
(1) the number of shares of CarMax Stock to be so issued (or
the number of such shares which would be issuable upon
conversion, exchange or exercise of any Convertible Securities
to be so issued) and (2) the number of shares of CarMax Stock
which are issuable upon conversion, exchange or exercise of
any Convertible Securities then outstanding that are
attributed in accordance with this Article to the Circuit City
Group is less than or equal to the Number of Shares Issuable
with Respect to the Inter-Group Interest.
For purposes of this paragraph B(2)(d) of this Article, any
outstanding Convertible Securities that are convertible into or
exchangeable or exercisable for any other Convertible Securities which
are themselves convertible into or exchangeable or exercisable for
Circuit City Stock or CarMax Stock (or other Convertible Securities
that are so convertible, exchangeable or exercisable) shall be deemed
to have been converted, exchanged or exercised in full for such
Convertible Securities.
(3) Voting Rights. Except as otherwise provided by law or by the terms
of any outstanding series of Preferred Stock or any provision of these Amended
and Restated Articles of Incorporation restricting the power to vote on a
specified matter to other shareholders, the entire voting power of the
shareholders of the Corporation shall be vested in the holders of the Common
Stock, who shall be entitled to vote on any matter on which the holders of stock
of the Corporation shall, by law or by the provisions of these Amended and
Restated Articles of Incorporation or Bylaws of the Corporation, be entitled to
vote, and both series of the Common Stock shall vote thereon together as a
single voting group. On each matter to be voted on by the holders of both series
of the Common Stock voting 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 number of votes determined by the ratio of
the weighted average during the 20 Trading Days ending on the tenth Trading Day
prior to the record date for determining the shareholders entitled to vote of
the Market Value of the CarMax Stock to the weighted average over the same 20
Trading Days of the Market Value of the Circuit City Stock, expressed as a
decimal fraction rounded to the nearest three decimal places, determined as
follows: (A) the numerator of such fraction shall be the sum of (1) four times
the average Market Value of the CarMax Stock over the period of five Trading
Days ending on such tenth Trading Day prior to such record date, (2) three times
the average Market Value of the CarMax Stock over the period of five Trading
Days ending on the 15th Trading Day prior to such record date, (3) two times the
average Market Value of the CarMax Stock over the period of five Trading Days
ending on the 20th Trading Day prior to such record date and (4) the average
Market Value of the CarMax Stock over the period of five Trading Days ending on
the 25th Trading Day prior to such record date and (B) the denominator of such
fraction shall be the sum of (1) four times the average Market Value of the
Circuit City Stock over the period of five Trading Days ending on such tenth
Trading Day prior to such record date, (2) three times the average Market Value
of the Circuit City Stock over the period of five Trading Days ending on the
15th Trading Day prior to such record date, (3) two times the average Market
Value of the Circuit City Stock over the period of five Trading Days ending on
the 20th Trading Day prior to such record date and (4) the average Market Value
of the Circuit City Stock over the period of five Trading Days ending on the
25th Trading Day prior to such record date.
Notwithstanding the foregoing provisions of this paragraph B(3) of this
Article, if shares of only one series of the Common Stock are outstanding on the
record date for determining the common shareholders entitled to vote on any
matter, then each share of that series shall be entitled to one vote and, if
either series of the Common Stock is entitled to vote as a separate voting group
with respect to any matter, each share of that series shall, for purpose of such
vote, be entitled to one vote on such matter.
In addition to any provision of law or any provision of these Amended
and Restated Articles of Incorporation entitling the holders of outstanding
shares of Circuit City Stock or CarMax Stock to vote as a separate voting group,
the Board of Directors may condition the approval of any matter submitted to
shareholders on receipt of a separate vote of the holders of outstanding shares
of Circuit City Stock or CarMax Stock.
(4) Liquidation Rights. In the event of any voluntary or involuntary
liquidation, dissolution or termination of the Corporation, after payment or
provision for payment of the debts and other liabilities of the Corporation and
the full preferential amounts (including any accumulated and unpaid dividends)
to which the holders of any outstanding shares of the Preferred Stock are
entitled (regardless of the Group to which such shares of the Preferred Stock
were attributed), the holders of the Circuit City Stock and CarMax Stock shall
be entitled to receive the assets, if any, of the Corporation remaining for
distribution to holders of the Common Stock on a per share basis in proportion
to the respective liquidation units per share of such series. Each share of
Circuit City Stock shall have one liquidation unit and each share of CarMax
Stock shall have .5 of a liquidation unit. Neither a merger nor share exchange
of the Corporation into or with any other company, nor a merger or share
exchange of any other company into or with the Corporation, nor a sale, lease,
exchange or other disposition of all or any part of the assets of the
Corporation, shall, alone, be deemed a liquidation of the Corporation, or cause
the dissolution of the Corporation, for purposes of this paragraph (B)(4) of
this Article.
If the Corporation shall in any manner subdivide (by stock split,
reclassification or otherwise) or combine (by reverse stock split,
reclassification or otherwise) the outstanding shares of Circuit City Stock or
CarMax Stock, or declare a dividend or other distribution in shares of either
series to holders of such series, the per share liquidation units of either
series of the Common Stock specified in the preceding paragraph of this
paragraph B(4) of this Article, as adjusted from time to time, shall be
appropriately adjusted, as determined by the Board of Directors, so as to avoid
dilution in the aggregate, relative liquidation rights of the shares of any
series of the Common Stock.
(5) Conversion or Redemption of the Common Stock. The Circuit City
Stock is subject to conversion or redemption and the CarMax Stock is subject to
conversion or redemption upon the terms provided below in this paragraph B(5) of
this Article; provided, however, that neither series of the Common Stock may be
converted or redeemed if the other series has been converted or redeemed in its
entirety or notice thereof shall have been given as required by this paragraph
B(5) of this Article.
(a) Mandatory and Optional Conversion and Redemption of Common
Stock Other than for Subsidiary Stock. (i) In the event of the
Disposition, in one transaction or a series of related transactions, by
the Corporation and/or its subsidiaries of all or substantially all of
the properties and assets attributed to either Group to one or more
persons or entities (other than (1) the Disposition by the Corporation
of all or substantially all its properties and assets in one
transaction or a series of related transactions in connection with the
liquidation, dissolution or termination of the Corporation and the
distribution of assets to shareholders as referred to in paragraph B(4)
of this Article, (2) the Disposition of the properties and assets of
either Group as contemplated by paragraph B(5)(b) of this Article or
otherwise to all holders of shares of such Group divided among such
holders on a pro rata basis in accordance with the number of shares of
stock issued in respect of such Group outstanding and, in the case of a
Disposition of the properties and assets attributed to the CarMax
Group, to the Corporation or subsidiaries thereof, divided among such
holders and the Corporation or subsidiaries thereof on a pro rata basis
in accordance with the number of shares of stock issued in respect of
such Group outstanding and the Number of Shares Issuable with Respect
to the Inter-Group Interest, (3) to any person or entity controlled (as
determined by the Board of Directors) by the Corporation or (4) in
connection with a Related Business Transaction), the Corporation shall,
on or prior to the 85th Trading Day after the date of consummation of
such Disposition (the "Disposition Date"), pay a dividend on the series
of the Common Stock relating to the Group subject to such Disposition
or redeem some or all of such Common Stock or convert such Common Stock
into Common Stock relating to the other Group (or another class or
series of common stock of the Corporation), all as provided by the
following paragraphs B(5)(a)(i)(1) and B(5)(a)(i)(2) of this Article
and, to the extent applicable, by paragraph B(5)(d) of this Article, as
the Board of Directors shall have selected among such alternatives:
(1) provided that there are assets legally available therefor:
(a) pay to the holders of the shares of the series of
the Common Stock relating to the Group subject to such
disposition a dividend, as the Board of Directors shall have
declared subject to compliance with paragraph B(2) of this
Article, in cash and/or in securities (other than a dividend
of the Common Stock) or other property having a Fair Value as
of the Disposition Date 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 the record
date for determining holders entitled to receive such dividend
multiplied by the Fair Value of the Net Proceeds of such
Disposition; or
(b)(I) subject to the last sentence of this paragraph
B(5)(a)(i) of this Article, if such Disposition involves all
(not merely substantially all) of the properties and assets
attributed to such Group, redeem as of the Redemption Date
provided by paragraph B(5)(d)(iii), all outstanding shares of
the Common Stock relating to the Group subject to such
Disposition in exchange for cash and/or for securities (other
than the Common Stock) or other property having a Fair Value
as of the Disposition Date in the aggregate equal to (A) 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 (B) 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
(II) subject to the last sentence of this paragraph
B(5)(a)(i) of this Article, if such Disposition involves
substantially all (but not all) of the properties and assets
attributed to such Group, redeem as of the Redemption Date
provided by paragraph B(5)(d)(iv) of this Article such number
of whole shares of the series of the Common Stock relating to
the Group subject to such Disposition (which may be all of,
but not more than, such shares outstanding) as have in the
aggregate an average Market Value during the period of ten
consecutive Trading Days beginning on the 16th Trading Day
immediately succeeding the Disposition Date closest to (A) in
the case of a Disposition of the properties and assets
attributed to the Circuit City Group, the Fair Value as of the
Disposition Date of the Net Proceeds of such Disposition, in
consideration for cash and/or securities (other than the
Common Stock) or other property having a Fair Value in the
aggregate equal to such Fair Value of the Net Proceeds or (B)
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 as of the Disposition
Date of the Net Proceeds of such Disposition in consideration
for cash and/or securities (other than the Common Stock) or
other property having a Fair Value in the aggregate equal to
such product; or
(2) declare that each outstanding share of the series of the
Common Stock relating to the Group subject to such Disposition shall be
converted as of the Conversion Date provided by paragraph B(5)(d)(v) of
this Article into a number of fully paid and nonassessable shares of
the series of the Common Stock relating to the other Group (or, if the
series of the Common Stock relating to the other Group is not Publicly
Traded at such time and shares of another class or series of the Common
Stock of the Corporation (other than the series of the Common Stock
relating to the Group subject to such Disposition) are then Publicly
Traded, of such other class or series of the 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 required by paragraph B(5)(d)(v) of this Article), equal to
110% of the ratio, expressed as a decimal fraction rounded to the
nearest five decimal places, of the average Market Value of one share
of the Common Stock relating to the Group subject to such Disposition
over the period of 10 consecutive Trading Days beginning on the 16th
Trading Day following the Disposition Date to the average Market Value
of one share of the Common Stock relating to the other Group (or such
other class or series of common stock) over the same 10 Trading Day
period.
Notwithstanding the foregoing provisions of this paragraph B(5)(a)(i)
of this Article, the Corporation shall redeem shares of a series of the
Common Stock as provided by paragraphs B(5)(a)(i)(1)(b)(I) or (II) of
this Article only if the amount to be paid in redemption of such stock
is less than or equal to the Available Dividend Amount with respect to
the Group subject to such Disposition as of the Redemption Date.
(ii) For purposes of this paragraph B(5)(a) of this Article:
(1) as of any date, "substantially all of the
properties and assets" attributed to either Group shall mean a
portion of such properties and assets (x) that represents at
least 80% of the Fair Value of the properties and assets
attributed to such Group as of such date or (y) from which
were derived at least 80% of the aggregate revenues for the
immediately preceding twelve fiscal quarterly periods of the
Company (calculated on a pro forma basis to include revenues
derived from any of such properties and assets acquired during
such period) derived from the properties and assets of such
Group as of such date;
(2) in the case of a Disposition of the properties
and assets attributed to either Group in a series of related
transactions, such Disposition shall not be deemed to have
been consummated until the consummation of the last of such
transactions; and
(3) the Board of Directors may pay any dividend or
redemption price referred to in paragraph B(5)(a) (i) of this
Article in cash, securities (other than the Common Stock) or
other property, regardless of the form or nature of the
proceeds of the Disposition.
(iii) After the payment of the dividend or the redemption
price with respect to the series of the Common Stock relating to the
Group subject to a Disposition as provided for by paragraph
B(5)(a)(i)(1) of this Article, the Board of Directors may declare that
each share of such series of the Common Stock remaining outstanding
shall be converted, but only as of a Conversion Date (determined as
provided by paragraph B(5)(d)(v) of this Article) prior to the first
anniversary of the payment of such dividend or redemption price, into a
number of fully paid and nonassessable shares of the series of the
Common Stock relating to the other Group (or, if the series of the
Common Stock relating to the other Group is not Publicly Traded at such
time and shares of any other class or series of common stock of the
Corporation (other than the series of the Common Stock relating to the
Group subject to such Disposition) are then Publicly Traded, of such
other class or series of common stock of the Corporation 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 required by paragraph B(5)(d)(v) of this Article) equal to
110% of (i) in the case of conversion of the Circuit City Stock, the
Market Value Ratio of the Circuit City Stock to the CarMax Stock or
(ii) in the case of conversion of the CarMax Stock, the Market Value
Ratio of the CarMax Stock to the Circuit City Stock, in each case, as
of the fifth Trading Day prior to the date of the notice of such
conversion required by paragraph B(5)(d)(v) of this Article.
(iv) The Board of Directors may at any time declare that each
outstanding share of either Circuit City Stock or CarMax Stock shall be
converted, as of the Conversion Date provided by paragraph B(5)(d)(v)
of this Article, into the number of fully paid and nonassessable shares
of CarMax Stock or Circuit City Stock, respectively (or, if such latter
series of Common Stock of the Corporation is not Publicly Traded at
such time and shares of any other class or series of common stock of
the Corporation (other than the series of the Common Stock subject to
such conversion) are then Publicly Traded, of such other class or
series of common stock of the Corporation as has the largest Market
Capitalization as of the close of business on the Trading Day
immediately preceding the date of the notice of conversion required by
paragraph B(5)(d)(v) of this Article) equal to 115% of (i) in the case
of conversion of the Circuit City Stock, the Market Value Ratio of the
Circuit City Stock to the CarMax Stock or (ii) in the case of
conversion of the CarMax Stock, the Market Value Ratio of the CarMax
Stock to the Circuit City Stock, in each case, as of the fifth Trading
Day prior to the date of the notice of such conversion required by
paragraph B(5)(d)(v) of this Article.
(b) Redemption of Common Stock for Subsidiary Stock. (i) At
any time at which all of the assets and liabilities attributed to the
CarMax Group (and no other assets or liabilities of the Corporation or
any subsidiary thereof) are held directly or indirectly by one or more
wholly-owned subsidiaries of the Corporation (each, a "CarMax Group
Subsidiary"), the Board of Directors may, provided that there are
assets legally available therefor, redeem all of the outstanding shares
of CarMax Stock, on a Redemption Date of which notice is delivered in
accordance with paragraph B(5)(d)(vi) of this Article, in exchange for
the number of shares of common stock of each CarMax Group Subsidiary
equal to the product of the Outstanding CarMax Fraction multiplied by
the number of shares of common stock of such CarMax Group Subsidiary to
be outstanding immediately following such exchange of shares, such
CarMax Group Subsidiary shares to be delivered to the holders of shares
of CarMax Stock on the Redemption Date either directly or indirectly
through another CarMax Group Subsidiary (as a wholly-owned subsidiary
thereof) and to be divided among the holders of CarMax Stock pro rata
in accordance with the number of shares of CarMax Stock held by each on
such Redemption Date, each of which shares of common stock of such
CarMax Group Subsidiary shall be, upon such delivery, fully paid and
nonassessable.
(ii) 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 Corporation or any subsidiary thereof) are held
directly or indirectly by one or more wholly-owned subsidiaries of the
Corporation (each, a "Circuit City Group Subsidiary"), the Board of
Directors may, provided that there are assets legally available
therefor,
(1) if the Number of Shares Issuable with Respect to
the Inter-Group Interest is zero, redeem all of the
outstanding shares of Circuit City Stock, on a Redemption Date
of which notice is delivered in accordance with paragraph
B(5)(d)(vi) of this Article, in exchange for all of the shares
of common stock of each Circuit City Group Subsidiary as will
be outstanding immediately following such exchange of shares,
such shares of common stock of each Circuit City Group
Subsidiary to be delivered to the holders of shares of Circuit
City Stock on the Redemption Date either directly or
indirectly through another Circuit City Group Subsidiary (as a
wholly-owned subsidiary thereof) and to be divided among the
holders of Circuit City Stock pro rata in accordance with the
number of shares of Circuit City Stock held by each on such
Redemption Date, each of which shares of common stock of such
Circuit City Group Subsidiary shall be, upon such delivery,
fully paid and nonassessable; or
(2) if the Number of Shares Issuable with Respect to
the Inter-Group Interest is greater than zero, either
(x) redeem all of the outstanding shares of
Circuit City Stock, on such a Redemption Date, in
exchange for (1) all of the shares of common stock of
each Circuit City Group Subsidiary as will be
outstanding immediately following such exchange of
shares and (2) a number of shares of CarMax Stock
equal to the Number of Shares Issuable with Respect
to the Inter-Group Interest, such shares of common
stock of each Circuit City Group Subsidiary to be
delivered to the holders of shares of Circuit City
Stock on the Redemption Date either directly or
indirectly through another Circuit City Group
Subsidiary (as a wholly-owned subsidiary thereof) and
the shares of common stock of each Circuit City Group
Subsidiary and the shares of CarMax Stock to be
divided among the holders of Circuit City Stock pro
rata in accordance with the number of shares of
Circuit City Stock held by each on such Redemption
Date, each of which shares of common stock of each
Circuit City Group Subsidiary and shares of CarMax
Stock shall be, upon such delivery, fully paid and
nonassessable; or
(y) (1) redeem all of the outstanding shares
of Circuit City Stock as contemplated by clause (x)
(1) above and (2) issue to one or more of the Circuit
City Group Subsidiaries a number of shares of CarMax
Stock equal to the Number of Shares Issuable with
Respect to the Inter-Group Interest.
(c) Treatment of Convertible Securities. After any Conversion
Date or Redemption Date on which all outstanding shares of either
series of the Common Stock are converted or redeemed, any share of such
series of the Common Stock that is to be issued on conversion, exchange
or exercise of any Convertible Securities shall, immediately upon such
conversion, exchange or exercise and without any notice from or to, or
any other action on the part of, the Corporation or its Board of
Directors or the holder of such Convertible Security:
(i) in the event the shares of such series of the
Common Stock outstanding on such Conversion Date were
converted into shares of the other series of the Common Stock
(or another class or series of common stock of the
Corporation) pursuant to paragraph B(5)(a)(i)(2) or paragraph
B(5)(a)(iii) or (iv) of this Article, be converted into the
amount of cash and/or the number of shares of the kind of
capital stock and/or other securities or property of the
Corporation that the number of shares of such series of the
Common Stock that were to be issued upon such conversion,
exchange or exercise would have received had such shares been
outstanding on such Conversion Date; or
(ii) in the event the shares of such series of the
Common Stock outstanding on such Redemption Date were redeemed
pursuant to paragraph B(5)(a)(i)(1)(b) or paragraph B(5)(b) of
this Article, be redeemed, to the extent of funds of the
Corporation legally available therefor, for $.01 per share in
cash for each share of such series of the Common Stock that
otherwise would be issued upon such conversion, exchange or
exercise.
The provisions of the immediately preceding sentence shall not apply to
the extent that other adjustments in respect of such conversion,
exchange or redemption of a series of the Common Stock are otherwise
made pursuant to the provisions of such Convertible Securities.
(d) Notice and Other Provisions. (i) Not later than the tenth
Trading Day following the consummation of a Disposition referred to in
paragraph B(5)(a)(i) of this Article, the Corporation shall announce
publicly by press release (1) the Net Proceeds of such Disposition, (2)
the number of shares outstanding of the series of the Common Stock
relating to the Group subject to such Disposition, (3) the number of
shares of such series of Common Stock into or for which Convertible
Securities are then convertible, exchangeable or exercisable and the
conversion, exchange or exercise price thereof and (4) 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 Corporation
shall announce publicly by press release which of the actions specified
in paragraph B(5)(a)(i) of this Article, it has irrevocably determined
to take in respect of such Disposition.
(ii) If the Corporation determines to pay a dividend pursuant
to paragraph B(5)(a)(i)(1)(a) of this Article, the Corporation shall,
not later than the 30th Trading Day following the consummation of the
Disposition referred to in such paragraph, cause notice to be given to
each holder of shares of the series of the 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 series of 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), setting forth
(1) 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, (2) the anticipated payment date of such dividend (which
shall not be more than 85 Trading Days following the consummation of
such Disposition), (3) the type of property to be paid as such dividend
in respect of the outstanding shares of such series of Common Stock,
(4) the Net Proceeds of such Disposition, (5) 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, (6)
the number of outstanding shares of such series of 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
and (7) 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 shall be entitled to receive such dividend only if such
holder properly converts, exchanges or exercises such Convertible
Securities on or prior to the record date referred to in clause (1) of
this sentence. Such notice shall 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 Corporation.
(iii) If the Corporation determines to undertake a redemption
pursuant to paragraph B(5)(a)(i)(1)(b)(I) of this Article, the
Corporation shall, not less than 35 Trading Days and not more than 45
Trading Days prior to the Redemption Date, cause notice to be given to
each holder of shares of the series of the Common Stock relating to the
Group 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 series of 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), setting forth (1) a statement that all shares of such
series of Common Stock outstanding on the Redemption Date shall be
redeemed, (2) the Redemption Date (which shall 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 of such
series of Common Stock 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 series of Common Stock, properly
endorsed or assigned for transfer (unless the Corporation 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 series of Common Stock and the number of shares of such series of
the Common Stock into or for which such 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 shall 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, if
applicable, this paragraph B(5) of this Article if such holder
thereafter converts, exchanges or exercises such Convertible Securities
and (9) a statement to the effect that, except as otherwise provided by
paragraph B(5)(d)(ix) of this Article, dividends on such shares of the
Common Stock shall cease to be paid as of such Redemption Date. Such
notice shall 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 Corporation.
(iv) If the Corporation determines to undertake a redemption
pursuant to paragraph B(5)(a)(i)(1)(b)(II) of this Article, the
Corporation shall, not later than the 30th Trading Day following the
consummation of the Disposition referred to in such paragraph, cause
notice to be given to each holder of shares of the series of the 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 series of 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) setting forth (1) a date not earlier than the
40th Trading Day and not later than the 50th Trading Day following the
consummation of the Disposition in respect of which such redemption is
to be made on which shares of such series of the Common Stock shall be
selected for redemption, (2) the anticipated Redemption Date (which
shall 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, (6) the number of shares of such series of Common Stock
outstanding 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, (7) 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 shall be eligible to participate
in such selection for redemption only if such holder properly converts,
exchanges or exercises such Convertible Securities on or prior to the
record date referred to in clause (1) 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, if applicable,
this paragraph B(5) of this Article if such holder thereafter converts,
exchanges or exercises such Convertible Securities and (8) a statement
that the Corporation will not be required to register a transfer of any
shares of such series of the Common Stock for a period of 15 Trading
Days next preceding the date referred to in clause (1) of this
sentence. Promptly following the date referred to in clause (1) of the
preceding sentence, but not earlier than 40 Trading Days nor later than
50 Trading Days following the consummation of such Disposition, the
Corporation shall cause a notice to be given to each holder of record
of shares of such series of Common Stock to be redeemed setting forth
(1) the number of shares of such series of Common Stock held by such
holder to be redeemed, (2) a statement that such shares of such series
of Common Stock shall 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 series
of Common Stock to be redeemed, including details as to the calculation
thereof, (5) the place or places where certificates for shares of such
series of Common Stock, properly endorsed or assigned for transfer
(unless the Corporation shall waive 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 Corporation after the Redemption Date and (7) a statement to the
effect that, subject to paragraph B(5)(d)(ix) of this Article,
dividends on such shares of such series of Common Stock shall cease to
be paid as of the Redemption Date. Such notices shall 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 Corporation.
(v) If the Corporation determines to convert either series of
the Common Stock into the other series (or another class or series of
common stock of the Corporation) pursuant to paragraph B(5)(a)(i)(2) or
paragraph B(5)(a)(iii) or (iv) of this Article, the Corporation shall,
not less than 35 Trading Days and not more than 45 Trading Days prior
to the Conversion Date, cause notice to be given to each holder of
shares of the series of the 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 series of 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) setting forth (1) a statement that all
outstanding shares of such series of Common Stock shall be converted,
(2) the Conversion Date (which, in the case of a conversion after a
Disposition, shall not be more than 85 Trading Days following the
consummation of such Disposition), (3) the per share number of shares
of Circuit City Stock or CarMax Stock or another class or series of
common stock of the Corporation, as the case may be, to be received
with respect to each share of such series of Common Stock, including
details as to the calculation thereof, (4) the place or places where
certificates for shares of such series of Common Stock, properly
endorsed or assigned for transfer (unless the Corporation shall waive
such requirement), are to be surrendered for delivery of certificates
for shares of such series of Common Stock, (5) the number of
outstanding shares of such series of 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, (6)
a statement to the effect that, subject to paragraph B(5)(d)(ix) of
this Article, dividends on such shares of CarMax Stock shall cease to
be paid as of such Conversion Date and (7) in the case of notice to
holders of such Convertible Securities, a statement to the effect that
a holder of such Convertible Securities shall be entitled to receive
shares of such series of Common Stock upon such conversion only if such
holder properly converts, exchanges or exercises such Convertible
Securities on or prior to such Conversion Date and a statement as to
what, if anything, such holder will be entitled to receive pursuant to
the terms of such Convertible Securities or, if applicable, this
paragraph B(5) of this Article if such holder thereafter converts,
exchanges or exercises such Convertible Securities. Such notice shall
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
Corporation.
(vi) If the Corporation determines to redeem shares of either
series of the Common Stock pursuant to paragraph B(5)(b) of this
Article, the Corporation shall cause notice to be given to each holder
of shares of such series of the Common Stock to be redeemed and to each
holder of Convertible Securities that are convertible into or
exchangeable or exercisable for shares of such series of the 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), setting forth (1) a statement that all shares
of such series of the Common Stock outstanding on the Redemption Date
shall be redeemed in exchange for shares of common stock of each
Circuit City Group Subsidiary (and, if such redemption is pursuant to
paragraph B(5)(b)(ii)(2)(x) of this Article, CarMax Stock) or common
stock of each CarMax Group Subsidiary, as the case may be, (2) the
Redemption Date, (3) in the case of a redemption of the CarMax Stock,
the Outstanding CarMax Fraction on the date of such notice, (4) the
place or places where certificates for shares of the series of the
Common Stock to be redeemed, properly endorsed or assigned for transfer
(unless the Corporation shall waive such requirement), are to be
surrendered for delivery of certificates for shares of the common stock
of each Circuit City Group Subsidiary (and, if such redemption is
pursuant to paragraph B(5)(b)(ii)(2)(x) of this Article, CarMax Stock)
or common stock of each CarMax Group Subsidiary, as the case may be,
(5) a statement to the effect that, subject to paragraph B(5)(d)(ix) of
this Article, dividends on such shares of the Common Stock shall cease
to be paid as of such Redemption Date, (6) the number of shares of such
series of the Common Stock outstanding 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 and (7) in the case of
notice to holders of Convertible Securities, a statement to the effect
that a holder of Convertible Securities shall be entitled to receive
shares of common stock of each Circuit City Group Subsidiary (and, if
such redemption is pursuant to paragraph B(5)(b)(ii)(2)(x) of this
Article, CarMax Stock) or common stock of each CarMax Group Subsidiary,
as the case may be, upon redemption only if such holder properly
converts, exchanges or exercises such Convertible Securities on or
prior to the Redemption Date and a statement as to what, if anything,
such holder will be entitled to receive pursuant to the terms of such
Convertible Securities or, if applicable, this paragraph B(5) of this
Article, if such holder thereafter converts, exchanges or exercises
such Convertible Securities. Such notice shall 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
Corporation.
(vii) If less than all of the outstanding shares of the Common
Stock of a series are to be redeemed pursuant to paragraph
B(5)(a)(i)(1) of this Article, the shares to be redeemed by the
Corporation shall be selected from among the holders of shares of such
series of the Common Stock outstanding at the close of business on the
record date for such redemption on a pro rata basis among all such
holders or by lot or by such other method as may be determined by the
Board of Directors of the Corporation to be equitable.
(viii) The Corporation shall not be required to issue or
deliver fractional shares of any capital stock or of any other
securities to any holder of either series of the Common Stock upon any
conversion, redemption, dividend or other distribution pursuant to this
paragraph B(5) of this Article. If more than one share of either series
of the Common Stock shall be held at the same time by the same holder,
the Corporation may aggregate the number of shares of any capital stock
that shall be issuable or any other securities or property that shall
be distributable to such holder upon any conversion, redemption,
dividend or other distribution (including any fractional shares). If
there are fractional shares of any capital stock or of any other
securities remaining to be issued or distributed to the holders of
either series of the Common Stock, the Corporation shall, if such
fractional shares are not issued or distributed to the holder, pay cash
in respect of such fractional shares in an amount equal to the Fair
Value thereof on the fifth Trading Day prior to the date such payment
is to be made (without interest).
(ix) No adjustments in respect of dividends shall be made upon
the conversion or redemption of any shares of either series of the
Common Stock; provided, however, that if the Conversion Date or
Redemption Date, as the case may be, with respect to any shares of
either series of the Common Stock shall be subsequent to the record
date for the payment of a dividend or other distribution thereon or
with respect thereto, the holders of such series of the Common Stock at
the close of business on such record date shall be entitled to receive
the dividend or other distribution payable on or with respect to such
shares on the date set for payment of such dividend or other
distribution, in each case without interest, notwithstanding the
subsequent conversion or redemption of such shares.
(x) Before any holder of either series of the Common Stock
shall be entitled to receive any cash payment and/or certificates or
instruments representing shares of any capital stock and/or other
securities or property to be distributed to such holder with respect to
such series of the Common Stock pursuant to this paragraph B(5) of this
Article, such holder shall surrender at such place as the Corporation
shall specify certificates for such shares of the Common Stock,
properly endorsed or assigned for transfer (unless the Corporation
shall waive such requirement). The Corporation shall as soon as
practicable after receipt of certificates representing such shares of
the Common Stock deliver to the person for whose account such shares of
the Common Stock were so surrendered, or to such person's nominee or
nominees, the cash and/or the certificates or instruments representing
the number of whole shares of the kind of capital stock and/or other
securities or property to which such person shall be entitled as
aforesaid, together with any payment in respect of fractional shares
contemplated by paragraph B(5)(d)(viii) of this Article, in each case
without interest. If less than all of the shares of either series of
the Common Stock represented by any one certificate are to be redeemed,
the Corporation shall issue and deliver a new certificate for the
shares of such series of Common Stock not redeemed.
(xi) From and after any applicable Conversion Date or
Redemption Date, as the case may be, all rights of a holder of shares
of either series of the Common Stock that were converted or redeemed
shall cease except for the right, upon surrender of the certificates
representing such shares of the Common Stock as required by paragraph
B(5)(d)(x) of this Article, to receive the cash and/or the certificates
or instruments 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 payment in respect of
fractional shares contemplated by paragraph B(5)(d)(viii) of this
Article and rights to dividends as provided in paragraph B(5)(d)(ix) of
this Article, in each case without interest. No holder of a certificate
that immediately prior to the applicable Conversion Date represented
shares of a series of the Common Stock shall be entitled to receive any
dividend or other distribution or interest payment with respect to
shares of any kind of capital stock or other security or instrument for
which such series of the Common Stock was converted until the surrender
as required by this paragraph B(5) of this Article of such certificate
in exchange for a certificate or certificates or instrument or
instruments representing such capital stock or other security. Subject
to applicable escheat and similar laws, upon such surrender, there
shall be paid to the holder the amount of any dividends or other
distributions (without interest) which theretofore became payable on
any class or series of capital stock of the Corporation as of a record
date after the Conversion Date, but that 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 Date, the Corporation
shall, however, be entitled to treat the certificates for a series of
the Common Stock that have not yet been surrendered for conversion as
evidencing the ownership of the number of whole shares of the kind or
kinds of capital stock of the Corporation for which the shares of such
series of the Common Stock represented by such certificates shall have
been converted, notwithstanding the failure to surrender such
certificates.
(xii) The Corporation shall pay any and all documentary, stamp
or similar issue or transfer taxes that may be payable in respect of
the issuance or delivery of any shares of capital stock and/or other
securities upon conversion or redemption of shares of either series of
the Common Stock pursuant to this paragraph B(5) of this Article. The
Corporation shall not, however, be required to pay any tax that may be
payable in respect of any transfer involved in the issuance or delivery
of any shares of capital stock and/or other securities in a name other
than that in which the shares of such series of the Common Stock so
converted or redeemed were registered, and no such issuance or delivery
shall be made unless and until the person requesting such issuance or
delivery has paid to the Corporation the amount of any such tax or has
established to the satisfaction of the Corporation that such tax has
been paid.
(xiii) Neither the failure to mail any notice required by this
paragraph B(5)(d) of this Article to any particular holder of the
Common Stock or of Convertible Securities nor any defect therein shall
affect the sufficiency thereof with respect to any other holder of
outstanding shares of the Common Stock or of Convertible Securities or
the validity of any such conversion or redemption.
(xiv) The Board of Directors may establish such rules and
requirements to facilitate the effectuation of the transactions
contemplated by this paragraph B(5) of this Article as the Board of
Directors shall determine to be appropriate.
(6) Application of the Provisions of this Certificate of Designations.
(a) Certain Determinations by the Board of Directors. The
Board of Directors shall make such determinations with respect to the
assets and liabilities to be attributed to the Groups, the application
of the provisions of this paragraph B of this Article to transactions
to be engaged in by the Corporation and the preferences, limitations
and relative rights of the holders of either series of the Common
Stock, and the qualifications and restrictions thereon, provided by
these Amended and Restated Articles of Incorporation as may be or
become necessary or appropriate to the exercise of such preferences,
limitations and relative rights, including, without limiting the
foregoing, the determinations referred to in the following paragraphs
B(6)(a)(i), (ii), (iii), (iv) and (v) of this Article. A record of any
such determination shall be filed with the records of the actions of
the Board of Directors.
(i) Upon any acquisition by the Corporation or its
subsidiaries of any assets or business, or any assumption of
liabilities, outside of the ordinary course of business of the
Circuit City Group or the CarMax Group, as the case may be,
the Board of Directors shall determine whether such assets,
business and liabilities (or an interest therein) shall be for
the benefit of the Circuit City Group or the CarMax Group or
that an interest therein shall be partly for the benefit of
the Circuit City Group and partly for the benefit of the
CarMax Group and, accordingly, shall be attributed to the
Circuit City Group or the CarMax Group, or partly to each, in
accordance with paragraph B(7)(a) or (d) of this Article, as
the case may be.
(ii) Upon any issuance of any shares of CarMax Stock
at a time when the Number of Shares Issuable with Respect to
the Inter-Group Interest is greater than zero, the Board of
Directors shall determine, based on the use of the proceeds of
such issuance and any other relevant factors, whether all or
any part of the shares of CarMax Stock so issued shall reduce
the Number of Shares Issuable with Respect to the Inter-Group
Interest, and the Number of Shares Issuable with Respect to
the Inter-Group Interest shall be adjusted accordingly.
(iii) Upon any issuance by the Corporation or any
subsidiary thereof of any Convertible Securities that are
convertible into or exchangeable or exercisable for shares of
CarMax Stock, if at the time such Convertible Securities are
issued the Number of Shares Issuable with Respect to the
Inter-Group Interest is greater than zero, the Board of
Directors shall determine, based on the use of the proceeds of
such issuance of Convertible Securities in the business of the
Circuit City Group or the CarMax Group and any other relevant
factors, whether, upon conversion, exchange or exercise
thereof, the issuance of shares of CarMax Stock pursuant
thereto shall, in whole or in part, reduce the Number of
Shares Issuable with Respect to the Inter-Group Interest.
(iv) Upon any issuance of any shares of the Preferred
Stock of any series, the Board of Directors shall attribute,
based on the use of proceeds of such issuance of shares of the
Preferred Stock in the business of the Circuit City Group or
the CarMax Group and any other relevant factors, the shares so
issued entirely to the Circuit City Group or entirely to the
CarMax Group or partly to the Circuit City Group and partly to
the CarMax Group in such proportion as the Board of Directors
shall determine.
(v) Upon any redemption or repurchase by the
Corporation or any subsidiary thereof of shares of the
Preferred Stock of any class or series or of other securities
or debt obligations of the Corporation, the Board of Directors
shall determine, based on the property used to redeem or
purchase such shares, other securities or debt obligations,
which, if any, of such shares, other securities or debt
obligations redeemed or repurchased shall be attributed to the
Circuit City Group and which, if any, of such shares, other
securities or debt obligations shall be attributed to the
CarMax Group and, accordingly, how many of the shares of such
series of the Preferred Stock or of such other securities, or
how much of such debt obligations, that remain outstanding, if
any, are thereafter attributed to the Circuit City Group or to
the CarMax Group.
(b) Certain Determinations Not Required. Notwithstanding the
foregoing provisions of this paragraph B(6) of this Article, the
provisions of paragraphs B(7)(a), (c), (d) or (f) of this Article or
any other provision of this Article, at any time when there are not
outstanding both (i) one or more shares of Circuit City Stock or
Convertible Securities convertible into or exchangeable or exercisable
for Circuit City Stock and (ii) one or more shares of CarMax Stock or
Convertible Securities convertible into or exchangeable or exercisable
for CarMax Stock, the Corporation need not (A) attribute any of the
assets or liabilities of the Corporation or any of its subsidiaries to
the Circuit City Group or the CarMax Group or (B) make any
determination required in connection therewith, nor shall the Board of
Directors be required to make any of the determinations otherwise
required by this Article, and in such circumstances the holders of the
shares of Circuit City Stock or CarMax Stock outstanding, as the case
may be, shall (unless otherwise specifically provided by these Amended
and Restated Articles of Incorporation) be entitled to all the
preferences or other relative rights of both series of the Common Stock
without differentiation between the Circuit City Stock and the CarMax
Stock.
(c) Board Determinations Binding. Subject to applicable law,
any determinations made in good faith by the Board of Directors of the
Corporation under any provision of this paragraph B(6) of this Article
or otherwise in furtherance of the application of this Article shall be
final and binding on all shareholders.
(7) Certain Definitions. As used in this Article, the following terms
shall have the following meanings (with terms defined in the singular having
comparable meaning when used in the plural and vice versa), unless the context
otherwise requires. As used in this paragraph B(7) of this Article, a
"contribution" or "transfer" of assets or properties from one Group to another
shall refer to the reattribution of such assets or properties from the
contributing or transferring Group to the other Group and correlative phrases
shall have correlative meanings.
(a) "Carmax Group" shall mean, as of any date:
(i) all businesses, assets and liabilities of each of
CarMax Auto Superstores, Inc., a Virginia corporation, CarMax,
Inc., a Virginia corporation, and C-Max Auto Superstores,
Inc., a California corporation (the "CarMax Group Companies"),
as of the date of the first issuance of CarMax Stock;
(ii) all assets and liabilities of the Corporation
and its subsidiaries attributed by the Board of Directors to
the CarMax Group, whether or not such assets or liabilities
are or were also assets and liabilities of any of the CarMax
Group Companies;
(iii) all properties and assets transferred to the
CarMax Group from the Circuit City Group (other than a
transaction pursuant to paragraph B(7)(a)(iv) of this Article)
pursuant to transactions in the ordinary course of business of
both the Circuit City Group and the CarMax Group or otherwise
as the Board of Directors may have directed as permitted by
this Article;
(iv) all properties and assets transferred to the
CarMax Group from the Circuit City Group in connection with an
increase in the Number of Shares Issuable with respect to the
Inter-Group Interest; and
(v) the interest of the Corporation or any of its
subsidiaries in any business or asset acquired and any
liabilities assumed by the Corporation or any of its
subsidiaries outside of the ordinary course of business and
attributed to the CarMax Group, as determined by the Board of
Directors as contemplated by paragraph B(6)(a)(i) of this
Article;
provided that (1) from and after the payment date of any dividend or
other distribution with respect to shares of CarMax Stock (other than a
dividend or other distribution payable in shares of CarMax Stock, with
respect to which adjustment shall be made as provided in paragraph
B(7)(s)(i) of this Article, or in securities of the Corporation
attributed to the CarMax Group, for which provision shall be made as
set forth in clause (2) of this proviso), the CarMax Group shall no
longer include an amount of assets or properties previously attributed
to the CarMax Group of the same kind as so paid in such dividend or
other distribution with respect of shares of CarMax Stock as have a
Fair Value on the record date for such dividend or distribution equal
to the product of (a) the Fair Value on such record date of the
aggregate of such dividend or distribution to holders of shares of
CarMax Stock declared multiplied by (b) a fraction the numerator of
which is equal to the Inter-Group Interest Fraction in effect on the
record date for such dividend or distribution and the denominator of
which is equal to the Outstanding CarMax Fraction in effect on the
record date for such dividend or distribution, (2) if the Corporation
shall pay a dividend or make some other distribution with respect to
shares of CarMax Stock payable in securities of the Corporation that
are attributed to the CarMax Group for purposes of this Article (other
than CarMax Stock), there shall be excluded from the CarMax Group an
interest in the CarMax Group equivalent to the number or amount of such
securities that is equal to the product of the number or amount of
securities so distributed to holders of CarMax Stock multiplied by the
fraction specified in clause 1(b) of this proviso (determined as of the
record date for such distribution) (and such interest in the CarMax
Group shall be attributed to the Circuit City Group) and, to the extent
interest is or dividends are paid on the securities so distributed, the
CarMax Group shall no longer include a corresponding ratable amount of
the kind of assets paid as such interest or dividends as would have
been paid in respect of the securities equivalent to such interest in
the CarMax Group deemed held by the Circuit City Group if the
securities equivalent to such interest were outstanding (and in such
eventuality such assets as are no longer included in the CarMax Group
shall be attributed to the Circuit City Group) and (3) from and after
any transfer of any assets or properties from the CarMax Group to the
Circuit City Group, the CarMax Group shall no longer include such
assets or properties so contributed or transferred. The Corporation may
also, to the extent a dividend or distribution on the CarMax Stock has
been paid in Convertible Securities that are convertible into or
exchangeable or exercisable for CarMax Stock, cause such Convertible
Securities as are deemed to be held by the Circuit City Group in
accordance with the third to last sentence of paragraph B(7)(d) of this
Article and clause (2) of the proviso to the immediately preceding
sentence to be deemed to be converted, exchanged or exercised as
provided in the penultimate sentence of paragraph B(7)(d) of this
Article, in which case such Convertible Securities shall no longer be
deemed to be held by the Circuit City Group.
(b) "Carmax Group Available Dividend Amount", on any date,
shall mean 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 these Amended and
Restated Articles of Incorporation 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 Corporation;
provided, that such excess shall 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.
(c) "Carmax Group Net Earnings (Loss)", for any period through
any date, shall mean the net earnings or loss of the CarMax Group for
such period (or in respect of fiscal periods of the Corporation
commencing prior to the date of the first issuance of 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 in effect at
such time, reflecting income and expense of the Corporation attributed
to the CarMax Group on a basis substantially consistent with
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.
(d) "Circuit City Group" shall mean, as of any date:
(i) the interest of the Corporation or any of its
subsidiaries on such date in all of the assets, liabilities
and businesses of the Corporation or any of its subsidiaries
(and any successor companies), other than any assets,
liabilities and businesses attributed in accordance with this
Article to the CarMax Group;
(ii) a proportionate undivided interest in each and
every business, asset and liability attributed to the CarMax
Group equal to the Inter-Group Interest Fraction as of such
date;
(iii) all properties and assets transferred to the
Circuit City Group from the CarMax Group (other than pursuant
to paragraph B(7)(d)(iv) or (vi) of this Article) pursuant to
transactions in the ordinary course of business of both the
Circuit City Group and the CarMax Group or otherwise as the
Board of Directors may have directed as permitted by this
Article;
(iv) all properties and assets transferred to the
Circuit City Group from the CarMax Group in connection with a
reduction of the Number of Shares Issuable with Respect to the
Inter-Group Interest;
(v) the interest of the Corporation or any of its
subsidiaries in any business or asset acquired and any
liabilities assumed by the Corporation or any of its
subsidiaries outside the ordinary course of business and
attributed to the Circuit City Group, as determined by the
Board of Directors as contemplated by paragraph B(6)(a)(i) of
this Article; and
(vi) from and after the payment date of any dividend,
redemption or other distribution with respect to shares of
CarMax Stock (other than a dividend or other distribution
payable in shares of CarMax Stock, with respect to which
adjustment shall be made as provided in paragraph B(7)(s)(i)
of this Article, or in securities of the Corporation
attributed to the CarMax Group, for which provision shall be
made as set forth in the third to last sentence of this
definition), an amount of assets or properties previously
attributed to the CarMax Group of the same kind as were paid
in such dividend or other distribution with respect to shares
of CarMax Stock as have a Fair Value on the record date for
such dividend or distribution equal to the product of (1) the
Fair Value on such record date of the aggregate of such
dividend or distribution to holders of shares of CarMax Stock
declared multiplied by (2) a fraction the numerator of which
is equal to the Inter-Group Interest Fraction in effect on the
record date for such dividend or distribution and the
denominator of which is equal to the Outstanding CarMax
Fraction in effect on the record date for such dividend or
distribution;
provided that from and after any transfer of any assets or properties
from the Circuit City Group to the CarMax Group, the Circuit City Group
shall no longer include such assets or properties so transferred (other
than as reflected in respect of such a transfer by the Inter-Group
Interest Fraction, as provided by paragraph B(7)(d)(ii) of this
Article).
If the Corporation shall pay a dividend or make some other
distribution with respect to shares of CarMax Stock payable in
securities of the Corporation that are attributed to the CarMax Group
for purposes of this Article (other than CarMax Stock), the Circuit
City Group shall be deemed to hold an interest in the CarMax Group
equivalent to the number or amount of such securities that is equal to
the product of the number or amount of securities so distributed to
holders of CarMax Stock multiplied by the fraction specified in clause
(2) of paragraph B(7)(d)(vi) of this Article (determined as of the
record date for such distribution) and, to the extent interest is or
dividends are paid on the securities so distributed, the Circuit City
Group shall include, and there shall be transferred thereto from the
CarMax Group, a corresponding ratable amount of the kind of assets paid
as such interest or dividends as would have been paid in respect of
such securities so deemed to be held by the Circuit City Group if such
securities were outstanding. The Corporation may also, to the extent
the securities so paid as a dividend or other distribution to the
holders of CarMax Stock are Convertible Securities and at the time are
convertible into or exchangeable or exercisable for shares of CarMax
Stock, treat such Convertible Securities as are so deemed to be held by
the Circuit City Group to be deemed to be converted, exchanged or
exercised, and shall do so to the extent such Convertible Securities
are mandatorily converted, exchanged or exercised (and to the extent
the terms of such Convertible Securities require payment of
consideration for such conversion, exchange or exercise, the Circuit
City Group shall then no longer include an amount of the kind of
properties or assets required to be paid as such consideration for the
amount of Convertible Securities deemed converted, exchanged or
exercised (and the CarMax Group shall be attributed such properties or
assets), in which case, from and after such time, the securities into
or for which such Convertible Securities so deemed to be held by the
Circuit City Group were so considered converted, exchanged or exercised
shall be deemed held by the Circuit City Group (as provided in clause
(3) of paragraph B(7)(s)(iii) of this Article) and such Convertible
Securities shall no longer be deemed to be held by the Circuit City
Group. A statement setting forth the election to effectuate any such
deemed conversion, exchange or exercise of Convertible Securities so
deemed to be held by the Circuit City Group and the properties or
assets, if any, to be attributed to the CarMax Group in consideration
of such conversion, exchange or exercise (if any) shall be filed in the
records of the actions of the Board of Directors and, upon such filing,
such deemed conversion, exchange or exercise shall be effectuated.
(e) "Circuit City Group Available Dividend Amount", on any
date, shall mean 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 these Amended and
Restated Articles of Incorporation permit otherwise, the
amount that would be needed to satisfy the preferential rights
to which holders of any Preferred Stock attributed to the
Circuit City Group are entitled upon dissolution of the
Corporation;
provided, that such excess shall 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.
(f) "Circuit City Group Net Earnings (Loss)", for any period
through any date, shall mean the net earnings or loss of the Circuit
City Group for such period (or in respect of fiscal periods of the
Corporation commencing prior to the date of the first 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 in effect at such time, reflecting income and expense of the
Corporation 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.
(g) "Common Stock" shall mean the collective reference to the
Circuit City Stock and the CarMax Stock, and either may sometimes be
called a series of Common Stock.
(h) "Conversion Date" shall mean the date fixed by the Board
of Directors as the effective date for the conversion of shares of
Circuit City Stock or CarMax Stock, as the case may be, into shares of
CarMax Stock or Circuit City Stock, respectively (or another class or
series of common stock of the Corporation, as the case may be) as shall
be set forth in the notice to holders of shares of the series of Common
Stock subject to such conversion and to holders of any Convertible
Securities that are convertible into or exchangeable or exercisable for
shares of the series of Common Stock subject to such conversion
required pursuant to paragraph B(5)(d)(v) of this Article.
(i) "Convertible Securities" at any time shall mean any
securities of the Corporation or of any subsidiary thereof (other than
shares of the Common Stock), including warrants and options,
outstanding at such time that by their terms are convertible into or
exchangeable or exercisable for or evidence the right to acquire any
shares of either series of the Common Stock, whether convertible,
exchangeable or exercisable at such time or a later time or only upon
the occurrence of certain events, but in respect of antidilution
provisions of such securities only upon the effectiveness thereof.
(j) "Disposition" shall mean a sale, transfer, assignment or
other disposition (whether by merger, consolidation, sale or
contribution of assets or stock or otherwise) of properties or assets
(including stock, other securities and goodwill).
(k) "Fair Value" shall mean, (i) in the case of equity
securities or debt securities of a class or series that has previously
been Publicly Traded for a period of at least 15 months, the Market
Value thereof (if such Market Value, as so defined, can be determined);
(ii) in the case of an equity security or debt security that has not
been Publicly Traded for at least 15 months or the Market Value of
which cannot be determined, the fair value per share of stock or per
other unit of such security, on a fully distributed basis, as
determined by an independent investment banking firm experienced in the
valuation of securities selected in good faith by the Board of
Directors, or, if no such investment banking firm is, as determined in
the good faith judgment of the Board of Directors, available to make
such determination, in good faith by the Board of Directors; (iii) in
the case of cash denominated in U.S. dollars, the face amount thereof
and in the case of cash denominated in other than U.S. dollars, the
face amount thereof converted into U.S. dollars at the rate published
in The Wall Street Journal on the date for the determination of Fair
Value or, if not so published, at such rate as shall be determined in
good faith by the Board of Directors based upon such information as the
Board of Directors shall in good faith determine to be appropriate in
accordance with good business practice; and (iv) in the case of
property other than securities or cash, the "Fair Value" thereof shall
be determined in good faith by the Board of Directors based upon such
appraisals or valuation reports of such independent experts as the
Board of Directors shall in good faith determine to be appropriate in
accordance with good business practice. Any such determination of Fair
Value shall be described in a statement filed with the records of the
actions of the Board of Directors.
(l) "Group" shall mean, as of any date, the Circuit City Group
or the CarMax Group, as the case may be.
(m) "Inter-Group Interest Fraction" as of any date shall mean
a fraction the numerator of which shall be the Number of Shares
Issuable with Respect to the Inter-Group Interest on such date and the
denominator of which shall be the sum of (A) such Number of Shares
Issuable with Respect to the Inter-Group Interest and (B) the aggregate
number of shares of CarMax Stock outstanding on such date. A statement
setting forth the Inter-Group Interest Fraction as of the record date
for any dividend or distribution on either series of the Common Stock,
as of the effective date of any conversion, exchange or exercise of
Convertible Securities into or for shares of CarMax Stock and as of the
end of each fiscal quarter of the Corporation shall be filed by the
Secretary of the Corporation in the records of the Board of Directors
of the Corporation not later than ten days after such date.
(n) "Market Capitalization" of any class or series of common
stock on any date shall mean the product of (i) the Market Value of one
share of such class or series of common stock on such date and (ii) the
number of shares of such class or series of common stock outstanding on
such date.
(o) "Market Value" of a share of any class or series of
capital stock of the Corporation on any day shall mean the average of
the high and low reported sales prices regular way of a share of such
class or series on such Trading Day or, in case no such reported sale
takes place on such Trading Day, the average of the reported closing
bid and asked prices regular way of a share of such class or series on
such Trading Day, in either case as reported on the New York Stock
Exchange Composite Tape or, if the shares of such class or series are
not listed or admitted to trading on such Exchange on such Trading Day,
on the principal national securities exchange in the United States on
which the shares of such class or series are listed or admitted to
trading or, if not listed or admitted to trading on any national
securities exchange on such Trading Day, on The Nasdaq National Market
or, if the shares of such class or series are not listed or admitted to
trading on any national securities exchange or quoted on The Nasdaq
National Market on such Trading Day, the average of the closing bid and
asked prices of a share of such class or series in the over-the-counter
market on such Trading Day as furnished by any New York Stock Exchange
member firm selected from time to time by the Corporation or, if such
closing bid and asked prices are not made available by any such New
York Stock Exchange member firm on such Trading Day, the Fair Value of
a share of such class or series as set forth in clause (ii) of the
definition of Fair Value; provided that, for purposes of determining
the market value of a share of any class or series of capital stock for
any period, (i) the "Market Value" of a share of capital stock on any
day prior to any "ex-dividend" date or any similar date occurring
during such period for any dividend or distribution (other than any
dividend or distribution contemplated by clause (ii)(B) of this
sentence) paid or to be paid with respect to such capital stock shall
be reduced by the Fair Value of the per share amount of such dividend
or distribution and (ii) the "Market Value" of any share of capital
stock on any day prior to (A) the effective date of any subdivision (by
stock split or otherwise) or combination (by reverse stock split or
otherwise) of outstanding shares of such class or series of capital
stock occurring during such period or (B) any "ex-dividend" date or any
similar date occurring during such period for any dividend or
distribution with respect to such capital stock to be made in shares of
such class or series of capital stock or Convertible Securities that
are convertible, exchangeable or exercisable for such class or series
of capital stock shall be appropriately adjusted, as determined by the
Board of Directors, to reflect such subdivision, combination, dividend
or distribution.
(p) "Market Value Ratio of the Carmax Stock to the Circuit
City Stock" as of any date shall mean the fraction (which may be
greater or less than 1/1), expressed as a decimal (rounded to the
nearest five decimal places), of a share of Circuit City Stock (or
another class or series of common stock of the Corporation, if so
provided by paragraph B(5)(a) of this Article because Circuit City
Stock is not then Publicly Traded) to be issued in respect of a share
of CarMax Stock upon a conversion of CarMax Stock into Circuit City
Stock (or another class or series of common stock of the Corporation)
in accordance with paragraph B(5)(a) of this Article, based on the
ratio of the Market Value of a share of CarMax Stock to the Market
Value of a share of Circuit City Stock (or such other common stock) as
of such date, determined by the fraction the numerator of which shall
be the sum of (A) four times the average Market Value of one share of
CarMax Stock over the period of five consecutive Trading Days ending on
such date, (B) three times the average Market Value of one share of
CarMax Stock over the period of five consecutive Trading Days ending on
the fifth Trading Day prior to such date, (C) two times the average
Market Value of one share of CarMax Stock over the period of five
consecutive Trading Days ending on the 10th Trading Day prior to such
date and (D) the average Market Value of one share of CarMax Stock over
the period of five consecutive Trading Days ending on the 15th Trading
Day prior to such date and the denominator of which shall be the sum of
(A) four times the average Market Value of one share of Circuit City
Stock (or such other common stock) over the period of five consecutive
Trading Days ending on such date, (B) three times the average Market
Value of one share of Circuit City Stock (or such other common stock)
over the period of five consecutive Trading Days ending on the fifth
Trading Day prior to such date, (C) two times the average Market Value
of one share of Circuit City Stock (or such other common stock) over
the period of five consecutive Trading Days ending on the 10th Trading
Day prior to such date and (D) the average Market Value of one share of
Circuit City Stock (or such other common stock) over the period of five
consecutive Trading Days ending on the 15th Trading Day prior to such
date.
(q) "Market Value Ratio of the Circuit City Stock to the
Carmax Stock" as of any date shall mean the fraction (which may be
greater or less than 1/1), expressed as a decimal (rounded to the
nearest five decimal places), of a share of CarMax Stock (or another
class or series of common stock of the Corporation, if so provided by
paragraph B(5)(a) of this Article because CarMax Stock is not then
Publicly Traded) to be issued in respect of a share of Circuit City
Stock upon a conversion of Circuit City Stock into CarMax Stock (or
another class or series of common stock of the Corporation) in
accordance with paragraph B(5)(a) of this Article, based on the ratio
of the Market Value of a share of Circuit City Stock to the Market
Value of a share of CarMax Stock (or such other common stock) as of
such date, determined by the fraction the numerator of which shall be
the sum of (A) four times the average Market Value of one share of
Circuit City Stock over the period of five consecutive Trading Days
ending on such date, (B) three times the average Market Value of one
share of Circuit City Stock over the period of five consecutive Trading
Days ending on the fifth Trading Day prior to such date, (C) two times
the average Market Value of one share of Circuit City Stock over the
period of five consecutive Trading Days ending on the 10th Trading Day
prior to such date and (D) the average Market Value of one share of
Circuit City Stock over the period of five consecutive Trading Days
ending on the 15th Trading Day prior to such date and the denominator
of which shall be the sum of (A) four times the average Market Value of
one share of CarMax Stock (or such other common stock) over the period
of five consecutive Trading Days ending on such date, (B) three times
the average Market Value of one share of CarMax Stock (or such other
common stock) over the period of five consecutive Trading Days ending
on the fifth Trading Day prior to such date, (C) two times the average
Market Value of one share of CarMax Stock (or such other common stock)
over the period of five consecutive Trading Days ending on the 10th
Trading Day prior to such date and (D) the average Market Value of one
share of CarMax Stock (or such other common stock) over the period of
five consecutive Trading Days ending on the 15th Trading Day prior to
such date.
(r) "Net Proceeds" shall mean, as of any date with respect to
any Disposition of any of the properties and assets attributed to the
Circuit City Group or the CarMax Group, as the case may be, an amount,
if any, equal to what remains of the gross proceeds of such Disposition
after payment of, or reasonable provision is made as determined by the
Board of Directors for, (A) any taxes payable by the Corporation (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 pursuant to paragraphs
B(5)(a)(i)(1)(a) or (b) of this Article, (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 Corporation 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. For purposes of this definition, any properties and assets
attributed to the Group, the properties and assets of which are subject
to such Disposition, remaining after such Disposition shall constitute
"reasonable provision" for such amount of taxes, costs and liabilities
(contingent or otherwise) as the Board of Directors determines can be
expected to be supported by such properties and assets.
(s) "Number of Shares Issuable with Respect to the Inter-Group
Interest" shall be determined by the Board of Directors prior to the
first issuance of shares of CarMax Stock to be the number of shares of
CarMax Stock that initially represents 100% of the common shareholders'
equity of the Corporation attributable to the CarMax Group, which
determination shall be set forth in a statement filed with the records
of the actions of the Board of Directors; provided, however, that such
number shall from time to time thereafter be:
(i) adjusted, if before such adjustment such number
is greater than zero, as determined by the Board of Directors
to be appropriate to reflect equitably any subdivision (by
stock split or otherwise) or combination (by reverse stock
split or otherwise) of the CarMax Stock or any dividend or
other distribution of shares of CarMax Stock to holders of
shares of CarMax Stock or any reclassification of CarMax
Stock;
(ii) decreased (but to not less than zero), if before
such adjustment such number is greater than zero, by action of
the Board of Directors by (1) the number of shares of CarMax
Stock issued or sold by the Corporation that, immediately
prior to such issuance or sale, were included in the Number of
Shares Issuable with Respect to the Inter-Group Interest, (2)
the number of shares of CarMax Stock issued upon conversion,
exchange or exercise of Convertible Securities that,
immediately prior to the issuance or sale of such Convertible
Securities, were included in the Number of Shares Issuable
with Respect to the Inter-Group Interest, (3) the number of
shares of CarMax Stock issued by the Corporation as a dividend
or other distribution (including in connection with any
reclassification or exchange of shares) to holders of Circuit
City Stock, (4) the number of shares of CarMax Stock issued
upon the conversion, exchange or exercise of any Convertible
Securities issued by the Corporation as a dividend or other
distribution (including in connection with any
reclassification or exchange of shares) to holders of Circuit
City Stock, or (5) the number (rounded, if necessary, to the
nearest whole number) equal to the quotient of (a) the
aggregate Fair Value as of the date of contribution of
properties or assets (including cash) transferred from the
CarMax Group to the Circuit City Group in consideration for a
reduction in the Number of Shares Issuable with Respect to the
Inter-Group Interest divided by (b) the Market Value of one
share of CarMax Stock as of the date of such transfer; and
(iii) increased by (1) the number of outstanding
shares of CarMax Stock repurchased by the Corporation for
consideration that is attributed as provided by paragraph
B(7)(d) of this Article to the Circuit City Group and (2) the
number (rounded, if necessary, to the nearest whole number)
equal to the quotient of (a) the Fair Value of properties or
assets (including cash) theretofore attributed as provided by
paragraph B(7)(d) of this Article to the Circuit City Group
that are contributed to the CarMax Group in consideration of
an increase in the Number of Shares Issuable with Respect to
the Inter-Group Interest, divided by (b) the Market Value of
one share of CarMax Stock as of the date of such contribution
and (3) the number of shares of CarMax Stock into or for which
Convertible Securities are deemed converted, exchanged or
exercised pursuant to the penultimate sentence of the
definition of "Circuit City Group" in paragraph B(7)(d) of
this Article.
(t) "Outstanding Carmax Fraction", as of any date, means the
fraction (which may simplify to 1/1) the numerator of which shall be
the number of shares of CarMax Stock outstanding on such date and the
denominator of which shall be the sum of the number of shares of CarMax
Stock outstanding on such date and the Number of Shares Issuable with
Respect to the Inter-Group Interest on such date. A statement setting
forth the Outstanding CarMax Fraction as of the record date for the
payment of any dividend or distribution on either series of the Common
Stock and as of the end of each fiscal quarter of the Corporation shall
be filed by the Secretary of the Corporation in the records of the
actions of the Board of Directors not later than ten days after such
date.
(u) "Publicly Traded" with respect to any security shall mean
(i) registered under Section 12 of the Securities Exchange Act of 1934,
as amended (or any successor provision of law), and (ii) listed for
trading on the New York Stock Exchange or the American Stock Exchange
(or any national securities exchange registered under Section 7 of the
Securities Exchange Act of 1934, as amended (or any successor provision
of law), that is the successor to either such exchange) or listed on
The Nasdaq Stock Market (or any successor market system).
(v) "Redemption Date" shall mean the date fixed by the Board
of Directors as the effective date for a redemption of shares of either
series of the Common Stock, as set forth in a notice to holders thereof
required pursuant to paragraphs B(5)(d)(iii), (iv) or (vi) of this
Article.
(w) "Related Business Transaction" means any Disposition of
all or substantially all the properties and assets attributed to the
Circuit City Group or the CarMax Group, as the case may be, in a
transaction or series of related transactions that result in the
Corporation 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.
(x) "Trading Day" shall mean each weekday other than any day
on which the relevant series of common stock of the Corporation is not
traded on any national securities exchange or quoted on The Nasdaq
National Market or in the over-the-counter market."
C. Redesignation of Existing Common Stock. As of the effective date of
the Articles of Amendment pursuant to which this Section C is added to these
Amended and Restated Articles of Incorporation, and without any further action
on the part of the Corporation or its shareholders, each share of the Common
Stock then issued shall automatically be redesignated, changed and converted
into one fully paid and nonassessable share of Circuit City Stock.
ARTICLE VI
DIRECTORS
The number of directors shall be fixed by the bylaws. In the absence of
such a provision in the bylaws, the number of directors shall be ten. In no
event, however, shall the number of directors exceed seventeen. The directors of
the corporation shall be divided into three classes as nearly equal in number as
possible. The term of office of the first class of directors shall expire at the
first annual meeting of stockholders after the initial election dividing
directors into such classes, that of the second class shall expire at the second
annual meeting after such election and that of the third class at the third
annual meeting after such election. At each annual meeting of stockholders,
successors to the class of directors whose terms shall then expire and any other
nominees for election as a director of such class shall be elected to hold
office until the third succeeding annual meeting. If the number of directors is
changed, any newly created directorships or decrease in directorships shall be
so apportioned among the classes as to make all classes as nearly equal in
number as possible. Notwithstanding the foregoing, if the holders of one or more
series of Preferred Stock voting as a separate class shall become entitled to
elect members of the Board pursuant to the provisions of the Articles of Serial
Designation for such series, the terms of all members of the Board of Directors
previously elected shall expire at the time of such election and each director
shall then serve until the next meeting of stockholders at which directors are
elected; and whenever the holders of any series of Preferred Stock are no longer
entitled to so elect directors voting as a separate class, all of the directors
shall be elected by classes at the next annual meeting of stockholders held for
such purpose in the manner provided hereinabove in this paragraph with respect
to the initial election dividing directors into such classes. Subject to the
foregoing, at each annual meeting of stockholders the successors to the class of
directors whose terms shall then expire and any other nominees for election as a
director of such class shall be elected to hold office until the third
succeeding annual meeting. The aggregate number of vacancies resulting from an
increase in the number of directors which may be created and filled by action of
the Board of Directors between annual meetings of stockholders shall be limited
to two.
ARTICLE VIII
INDEMNIFICATION
A. Definitions. For purposes of this Article the following definitions
shall apply:
"Corporation" means this Corporation only and no predecessor entity or
other legal entity.
"Expenses" include counsel fees, expert witness fees, and costs of
investigation, litigation and appeal, as well as any amounts expended in
asserting a claim for indemnification.
"Liability" means the obligation to pay a judgment, settlement,
penalty, fine, or other such obligation, including, without limitation, any
excise tax assessed with respect to an employee benefit plan.
"Legal Entity" means a corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise.
"Predecessor Entity" means a legal entity the existence of which ceased
upon its acquisition by the Corporation in a merger or otherwise.
"Proceeding" means any threatened, pending, or completed action, suit,
proceeding or appeal whether civil, criminal, administrative or investigative
and whether formal or informal.
B. Indemnification of Directors and Officers. The Corporation shall
indemnify and may contract in advance to indemnify an individual who is, was or
is threatened to be made a party to a proceeding because he is or was a director
or officer of the Corporation or, while a director or officer of the
Corporation, is or was serving the Corporation or any other legal entity in any
capacity at the request of the Corporation against all liabilities and
reasonable expenses incurred in the proceeding except such liabilities and
expenses as are incurred because of his willful misconduct or knowing violation
of the criminal law (regardless of whether the proceeding is by or in the right
of the Corporation). The determination that indemnification under this Paragraph
B is permissible and the evaluation as to the reasonableness of expenses in a
specific case shall be made, in the case of a director, as provided by law, and
in the case of an officer, as provided in Paragraph C of this Article; provided,
however, that if a majority of the directors of the Corporation has changed
after the date of the alleged conduct giving rise to a claim for
indemnification, such determination and evaluation shall, at the option of the
person claiming indemnification, be made by special legal counsel agreed upon by
the Board of Directors and such person. Unless a determination has been made
that indemnification is not permissible, the Corporation shall make advances and
reimbursements for expenses incurred by a director or officer in a proceeding
upon receipt of an undertaking from him to repay the same if it is ultimately
determined that he is not entitled to indemnification. Such undertaking shall be
an unlimited, unsecured general obligation of the director or officer and shall
be accepted without reference to his ability to make repayment. The termination
of a proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent shall not of itself create a presumption that
a director or officer acted in such a manner as to make him ineligible for
indemnification.
C. Indemnification of Others. The Corporation may, to a lesser extent
or to the same extent that the Corporation is required to provide
indemnification and make advances and reimbursements for expenses to its
directors and officers, provide indemnification and make advances and
reimbursements for expenses to its employees and agents, the directors,
officers, employees and agents of its subsidiaries and predecessor entities, and
any person serving any other legal entity in any capacity at the request of the
Corporation, and, if authorized by general or specific action of the Board of
Directors, may contract in advance to do so. The determination that
indemnification under this Paragraph C is permissible, the authorization of such
indemnification and the evaluation as to the reasonableness of expenses in a
specific case shall be made as authorized from time to time by general or
specific action of the Board of Directors, which action may be taken before or
after a claim for indemnification is made, or as otherwise provided by law. No
person's rights under Paragraph B of this Article shall be limited by the
provisions of this Paragraph C.
D. Miscellaneous. Every reference in this Article to persons who are or
may be entitled to indemnification shall include all persons who formerly
occupied any of the positions referred to and their respective heirs, executors
and administrators. Special legal counsel selected to make determinations under
this Article may be counsel for the Corporation. Indemnification pursuant to
this Article shall not be exclusive of any other right of indemnification to
which any person may be entitled including indemnification pursuant to a valid
contract, indemnification by legal entities other than the Corporation and
indemnification under policies of insurance purchased and maintained by the
Corporation or others. However, no person shall be entitled to indemnification
by the Corporation to the extent he is indemnified by another, including an
insurer. The Corporation is authorized to purchase and maintain insurance
against any liability it may have under this Article or to protect any of the
persons named above against any liability arising from their service to the
Corporation or any other legal entity at the request of the Corporation
regardless of the Corporation's power to indemnify against such liability. The
provisions of this Article shall not be deemed to prohibit the Corporation from
entering into contracts otherwise permitted by law with any individuals or legal
entities, including those named above, for the purposes of conducting the
business of the Corporation. If any provision of this Article or its application
to any person or circumstance is held invalid by a court of competent
jurisdiction, the invalidity shall not affect other provisions or applications
of this Article, and to this and the provisions of this Article are severable.
ARTICLE IX
LIMITATION OF LIABILITY
To the full extent that the Virginia Stock Corporation Act, as it now
exists or is hereafter amended, permits the limitation or elimination of the
liability of directors or officers, a director or officer of the Corporation
shall not be liable to the Corporation or its stockholders for monetary damages.
ARTICLE X
VOTE TO AMEND OR RESTATE
As to each voting group entitled to vote on an amendment or restatement
of these Amended and Restated Articles of Incorporation the vote required for
approval shall be (i) the vote required by the Virginia Stock Corporation Act
(as applied without regard to the effect of clause (iii) of this Article) if the
effect of the amendment or restatement is (a) to reduce the shareholder vote
required to approve a merger, a statutory share exchange, a sale of all or
substantially all of the assets of the Corporation or the dissolution of the
Corporation, (b) to modify any provision of Article VI of these Amended and
Restated Articles of Incorporation, or (c) to delete all or any part of this
clause (i) of this Article; (ii) the vote required by the terms of these Amended
and Restated Articles of Incorporation, as amended or as restated from time to
time, if such terms require the approval of more than a majority of the votes
entitled to be cast thereon by such voting group; or (iii) a majority of the
votes entitled to be cast thereon if neither clause (i) nor clause (ii) of this
Article is applicable.
EXHIBIT 4
CIRCUIT CITY STORES, INC.
ARTICLES OF AMENDMENT
1. Name. The name of the corporation is Circuit City Stores, Inc.
2. The Amendment. The Amendment amends and restates Sections C and D of
Article IV of the corporation's Amended and Restated Articles of Incorporation
in the form attached hereto. The Amendment did not require shareholder approval.
3. Board Action. The Board of Directors adopted the Amendment at a
meeting held on April 14, 1998.
4. Certificate Required by Law. These Articles of Amendment contain all
of the information required by Section 13.1-710 of the Code of Virginia and this
paragraph constitutes the Certificate required by that Section.
Dated: April 21, 1998 CIRCUIT CITY STORES, INC.
By: Michael T. Chalifoux
Senior Vice President,
Chief Financial Officer and
Secretary
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)
$4.00 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
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 $4.00 per share on the
Series E Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on
outstanding shares of the Series E Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of the
Series E Stock, unless the date of issue of such shares is prior to the
record date for the first Quarterly Dividend Payment Date, in which
case dividends on such shares shall begin to accrue from the date of
issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the
determination of holders of shares of the Series E Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment
Date, in either of which events such dividends shall begin to accrue
and be cumulative from such Quarterly Dividend Payment Date. Accrued
but unpaid dividends shall not bear interest. Dividends paid on the
shares of the Series E Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of the Series E Stock entitled
to receive payment of a dividend or distribution declared thereon,
which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.
(2) Voting Rights. Except to the extent provided by law, the
holders of shares of the Series E Stock shall not be entitled (i) to vote on any
matter or (ii) to receive notice of, or to participate in, any meeting of
shareholders of the Corporation at which they are not entitled to vote.
(3) Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or
distributions payable on the Series E Stock as provided in paragraph
(C)(1) of this Article are in arrears, thereafter and until all accrued
and unpaid dividends and distributions, whether or not declared, on
shares of the Series E Stock outstanding shall have been paid in full,
the Corporation shall not:
(i) declare, set apart or pay dividends on or make any
other distributions on the Common Stock or any shares of stock
ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series E Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Series E Stock, except dividends paid
ratably on the Series E Stock and all such parity stock on
which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then
entitled; or
(iii) redeem or purchase or otherwise acquire for
consideration shares of the Series E Stock, any such parity
stock or any stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) with the Series E
Stock, or set aside for or pay to any sinking fund therefor.
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (C)(3)(a) of this Article, purchase or otherwise acquire such
shares at such time and in such manner.
(4) Reacquired Shares. Any shares of the Series E Stock
redeemed, purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled 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 14, 2058, 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) $100,000.00 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. 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 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 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
(if there are more than one) representing shares registered in the name
of a holder that are to be redeemed.
(d) Not less than 30 nor more than 60 days prior to the date
fixed for redemption, notice of redemption shall be given by first
class mail, postage prepaid, to the holders of record of the
outstanding shares of the Series E Stock to be redeemed at their last
known addresses shown in the Corporation's share transfer records. The
notice of redemption shall set forth the paragraph of this Article
pursuant to which the shares are being redeemed, the number of shares
to be redeemed, the date fixed for redemption, the applicable
redemption price, and the place or places where certificates
representing shares to be redeemed may be surrendered. In case less
than all of the outstanding shares of the Series E Stock are to be
redeemed the notice of redemption shall also set forth the numbers of
the certificates representing shares to be redeemed and, in case less
than all shares represented by any such certificate are to be redeemed,
the number of shares represented by such certificate to be redeemed.
(e) If notice of redemption of any outstanding shares of
Series E Stock shall have been duly mailed as herein provided, then on
or before the date fixed for redemption the Corporation shall deposit
cash sufficient to pay the redemption price of such shares in trust for
the benefit of the holders of the shares to be redeemed with any bank
or trust company in the City of Richmond, Commonwealth of Virginia,
having capital and surplus aggregating at least $50,000,000 as of the
date of its most recent report of financial condition and named in such
notice, to be applied to the redemption of the shares so called for
redemption against surrender for cancellation of the certificates
representing such shares. From and after the time of such deposit all
shares for the redemption of which such deposit shall have been made
shall, whether or not the certificates therefor shall have been
surrendered for cancellation, no longer be deemed to be outstanding for
any purpose, and all rights with respect to such shares shall thereupon
cease and terminate except the right to receive payment of redemption
price but without interest. Any interest earned on funds so deposited
shall be paid to the Corporation from time to time. Any funds so
deposited and unclaimed at the end of five years from the date fixed
for redemption shall be repaid to the Corporation, free of trust, and
the holders of the shares called for redemption who shall not have
surrendered their certificates representing such shares prior to such
repayment shall be deemed to be unsecured creditors of the Corporation
for the amount of the redemption price and shall look only to the
Corporation for payment thereof, without interest, subject to the laws
of the Commonwealth of Virginia.
(f) The Corporation shall also have the right to acquire
outstanding shares of Series E Stock otherwise than by redemption
pursuant to paragraph (C)(5)(a) of this Article, from time to time for
such consideration as may be acceptable to the holders thereof;
provided, however, that if all dividends accrued on all outstanding
shares of Series E Stock shall not have been declared and paid or
declared and a sum sufficient for the payment thereof set apart,
neither the Corporation nor any subsidiary shall so acquire any shares
of Series E Stock except in accordance with a purchase offer made on
the same terms to all the holders of the outstanding shares of Series E
Stock.
(6) Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination, statutory share exchange or
other transaction in which the shares of Circuit City Stock are exchanged for or
changed into other stock or securities, cash and/or any other property, then in
any such case the shares of the Series E Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 400 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Circuit City Stock is changed or
exchanged. If 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 set forth in
the preceding sentence with respect to the exchange or change of shares of the
Series E Stock shall be adjusted by multiplying such amount 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.
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)
$4.00 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 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 $4.00 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-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of the Series 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, 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 canceled 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 14, 2058, 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) $40,000.00 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. 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 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 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.
(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
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.
(6) Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination, statutory share exchange or
other transaction in which the shares of CarMax Stock are exchanged for or
changed into other stock or securities, cash and/or any other property, then in
any such case the shares of Series F Stock shall at the same time be similarly
exchanged or changed in an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to 400 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of CarMax Stock is changed or
exchanged. If 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 set forth in the preceding sentence with respect to
the exchange or change of shares of Series F Stock shall be adjusted by
multiplying such amount 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.
