As filed with the Securities and Exchange Commission on June 10, 1998
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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CIRCUIT CITY STORES, INC.
(Exact name of registrant as specified in its charter)
Virginia
(State or other jurisdiction of incorporation or organization)
54-0493875
(I.R.S. employer identification number)
9950 Mayland Drive
Richmond, Virginia 23233
(804) 527-4022
(Address, including zip code, and telephone number,
including area code, of registrant's principal
executive offices)
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Richard L. Sharp
Chief Executive Officer and Chairman of the Board
Circuit City Stores, Inc.
9950 Mayland Drive
Richmond, Virginia 23233
(804) 527-4000
(Name, address, including zip code, and
telephone number, including area code, of
agent for service)
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Copies to:
Robert L. Burrus, Jr.
McGuire, Woods, Battle & Boothe LLP
One James Center
901 East Cary Street
Richmond, Virginia 23219
(804) 775-1000
Approximate date of commencement of proposed sale to the public: from
time to time after the effective date of this registration statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
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If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Maximum Maximum
Amount Offering Aggregate Amount of
Title of Each Class of to be Price Per Offering Registration
Securities to be Registered Registered Share (1) Price (1) Fee
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Circuit City Stores, Inc. - Circuit City 32,344 $44.438 $1,437,302 $424
Group Common Stock par value $.50
per share
Rights to Purchase Preferred N/A N/A N/A N/A
Stock, Series E, par value, $20.00 per
share (2)
Circuit City Stores, Inc. - CarMax (6) N/A N/A N/A
Group Common Stock, par value $.50
per share (3)(4)
Rights to Purchase Preferred N/A N/A N/A N/A
Stock, Series F, par value $20.00 per
share (5)
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(1) Estimated solely for the purpose of calculating the registration
fee pursuant to Rule 457(c) and based upon the average high and low prices of
the Circuit City Group Common Stock on the New York Stock Exchange on June 4,
1998.
(2) Prior to the occurrence of certain events, the Rights to Purchase
Preferred Stock, Series E, will be attached to and trade with shares of the
Circuit City Group Common Stock. Value attributable to such rights, if any, will
be reflected in the market price of the shares of Circuit City Group Common
Stock.
(3) Registered solely because the shares of Circuit City Group Common
Stock registered under this registration statement may be converted, at the
option of the Registrant, into shares of CarMax Group Common Stock in accordance
with the terms of the Circuit City Group Common Stock.
(4) No additional consideration would be paid by the holders of Circuit
City Group Common Stock upon a conversion of the Circuit City Group Common Stock
into CarMax Group Common Stock. Accordingly, no separate fee is paid.
(5) Prior to the occurrence of certain events, the Rights to Purchase
Preferred Stock, Series F, will be attached to and trade with shares of the
CarMax Group Common Stock. Value attributable to such rights, if any, will be
reflected in the market price of the shares of CarMax Group Common Stock.
(6) This Registration Statement registers an indeterminate number of
shares of CarMax Group Common Stock (including the associated Rights to Purchase
Preferred Stock, Series F) issuable upon any conversion of the shares of Circuit
City Group Common Stock registered hereunder.
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED JUNE 10, 1998
32,344 shares
CIRCUIT CITY STORES, INC.
CIRCUIT CITY STORES, INC. - CIRCUIT CITY GROUP
COMMON STOCK
This Prospectus relates to 32,344 shares (the "Shares") of Circuit City
Stores, Inc. - Circuit City Group Common Stock, $.50 par value per share (the
"Circuit City Group Stock"), of Circuit City Stores, Inc. (the "Company"), which
may be offered from time to time by the Selling Stockholder named herein. The
Circuit City Group Stock is listed on the New York Stock Exchange (the "NYSE")
under the trading symbol "CC." On June 8, 1998 the last reported sale price of
the Circuit City Group Stock on the NYSE was $45.50 per share.
The Selling Stockholder has advised the Company that the Shares may be
sold from time to time in transactions on the NYSE or in negotiated
transactions, in each case at prices satisfactory to the Selling Stockholder.
(See "Plan of Distribution.")
THE PURCHASE OF THE SECURITIES OFFERED HEREBY INVOLVES CERTAIN
RISKS. SEE "RISK FACTORS" ON PAGE 7 OF THE PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is __________, 1998.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER DESCRIBED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE SELLING SHAREHOLDERS. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE UNDER THIS PROSPECTUS SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR SINCE THE DATE OF ANY DOCUMENTS
INCORPORATED HEREIN BY REFERENCE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
SECURITIES TO WHICH IT RELATES, OR AN OFFER OR SOLICITATION IN ANY STATE TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
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TABLE OF CONTENTS
Page
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AVAILABLE INFORMATION.........................................................2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...............................3
SUMMARY.......................................................................4
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS.....................7
RISK FACTORS..................................................................7
RECENT DEVELOPMENTS..........................................................18
USE OF PROCEEDS..............................................................19
SELLING STOCKHOLDER..........................................................19
PLAN OF DISTRIBUTION.........................................................19
DESCRIPTION OF CAPITAL STOCK.................................................20
CERTAIN MANAGEMENT AND ALLOCATION POLICIES...................................41
STOCK TRANSFER AGENT AND REGISTRAR...........................................43
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES........................43
VALIDITY OF SECURITIES.......................................................44
EXPERTS......................................................................44
GLOSSARY OF DEFINED TERMS....................................................45
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549; and at the Commission's regional offices at
500 West Madison Street, Chicago, Illinois 60606; and 7 World Trade Center, 13th
Floor, New York, New York 10048. Copies of such material can be obtained by mail
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission also maintains a
World Wide Web site at http://www.sec.gov containing reports, proxy and
information statements and other information regarding registrants, such as the
Company, that file electronically with the Commission. The Circuit City Group
Stock is listed on the New York Exchange, and such material may also be
inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
The Company has filed with the Commission a Registration Statement on
Form S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), of which this Prospectus constitutes a part. This Prospectus
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does not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information, reference is made to the
Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 1-5767) by
the Company are hereby incorporated by reference into this Prospectus:
(a) the Company's Annual Report on Form 10-K for the fiscal year
ended February 28, 1998 filed with the Commission May 27, 1998;
(b) all other reports filed with the Commission pursuant to Section
13(a) or 15(d) of the Exchange Act since February 28, 1998;
(c) the description of the Circuit City Group Stock and the Circuit
City Stores, Inc.-CarMax Group Common Stock (the "CarMax Group
Stock") contained in the Registration Statement on Form 8-A filed
with the Commission on January 2, 1997, as amended on Forms
8-A/A, filed with the Commission on January 31, 1997, July 8,
1997 and April 28, 1998, respectively; and
(d) the description of the Rights to Purchase Preferred Stock, Series
E and the Rights to Purchase Preferred Stock, Series F contained
in the Registration Statement on Form 8-A filed with the
Commission on April 28, 1998.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Shares shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
respective dates of filing of such documents. Any statement contained herein or
in a document all or any portion of which is incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such earlier statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to any person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated herein by reference (other
than certain exhibits to such documents). Requests for such copies should be
directed to Corporate Secretary, Circuit City Stores, Inc., 9950 Mayland Drive,
Richmond, Virginia 23233, telephone (804) 527-4022.
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SUMMARY
The following is a summary of certain information contained elsewhere
in this Prospectus. Reference is made to, and this Summary is qualified in its
entirety by, the more detailed information contained in this Prospectus. As used
herein, (i) the "Company" means Circuit City Stores, Inc. and its consolidated
subsidiaries, (ii) "Common Stock" means collectively the Circuit City Group
Stock and the CarMax Group Stock, (iii) "Preferred Stock" means collectively the
Series E and the Series F Preferred Stock, and (iv) "CarMax" means the CarMax
Group. Unless otherwise defined herein, capitalized terms have the respective
meanings ascribed to them elsewhere in this Prospectus. See "Glossary of Defined
Terms."
The Company
Circuit City Stores, Inc. was incorporated under the laws of Virginia
in 1949. It is the nation's largest retailer of brand-name consumer electronics
and major appliances and a leading retailer of personal computers and music
software. Its retail operations consist of 505 Circuit City Superstores, four
Circuit City electronics-only stores and 52 mall-based Circuit City Express
stores. Certain of Circuit City Stores, Inc. subsidiaries operate CarMax Auto
Superstores, a used- and new-car retail business. The Company also has wholly
owned finance operations that provide consumer revolving credit and auto
installment loans. In addition, Circuit City Stores, Inc. holds approximately
two-thirds of the ownership interest in Digital Video Express, LP ("Divx") and
related operations, a limited partnership formed to develop and launch an
enhancement for DVD players that provides significant convenience, flexibility
and affordability for movies released on Divx digital discs.
Changes in Capital Structure
On January 24, 1997, shareholders of Circuit City Stores, Inc. and its
subsidiaries approved the creation of two common stock series. The Company's
existing common stock was subsequently redesignated as Circuit City Group Stock.
In an initial public offering, which was completed February 7, 1997, the Company
sold 21.86 million shares of CarMax Group Stock.
The Circuit City Group
The Circuit City Group Stock is intended to track the performance of
the Circuit City Group. The Group includes the Company's Circuit City
store-related operations; the Company's consumer revolving credit finance
operations; the Company's investment in Divx and related operations; a retained
interest in the CarMax Group; and all other businesses in which the Company may
be engaged (other than those comprising the CarMax Group).
The CarMax Group
The CarMax Group Stock is intended to track the performance of the
CarMax Group (also referred to herein as "CarMax"). The CarMax Group is a
leading retailer of used cars and light trucks in the United States with
twenty-one stores located in eleven markets. The Group purchases, reconditions
and sells used cars at each of its stores and sells new cars at two of its
Atlanta, Ga. locations under franchise agreements with Chrysler Corporation
("Chrysler"). Additionally, the CarMax Group provides its customers with a full
range of related services, including the financing of vehicle purchases through
its own financing unit and through third parties, the sale of service policies
and the sale of automotive electronic products.
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The Circuit City Group Stock
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Dividends........................................ The Company has recently paid dividends on the Circuit City Group
Stock at a quarterly rate of 3.5(cent) per share.
Dividends on the Circuit City Group Stock will be paid at the
discretion of the Board of Directors based primarily upon the
financial condition, results of operations and business
requirements of the Circuit City Group and the Company as a
whole. Dividends will be payable out of the lesser of (i) the
assets of the Company legally available for the payment of
dividends and (ii) the Circuit City Group Available Dividend
Amount.
Voting Rights.................................... Except as otherwise described herein, the holders of Circuit City
Group Stock and CarMax Group Stock will vote together as a single
voting group. Each share of Circuit City Group Stock will have
one vote per share. Each share of CarMax Group Stock will have a
variable vote equal to the ratio of the time- weighted average
Market Value of one share of CarMax Group Stock to the
time-weighted average Market Value of one share of Circuit City
Group Stock, calculated over the 20-Trading Day period ending 10
Trading Days prior to the applicable record date, and may have
more than, less than or exactly one vote per share.
Rights on Disposition............................ If the Company disposes of all or substantially all of the
properties and assets attributable to the Circuit City Group (i.e.,
80% or more on a current market value basis), other than in a
transaction in which the Company receives primarily equity
securities of an entity engaged or proposing to engage primarily
in a business similar or complementary to the business of the
Circuit City Group, the Company must either (i) distribute to
holders of Circuit City Group Stock an amount in cash and/or
securities or other property equal to the Fair Value of the Net
Proceeds of such disposition, either by special dividend or by
redemption of all or part of the outstanding shares of Circuit
City Group Stock, or (ii) convert each share of Circuit City
Group Stock into a number of shares of CarMax Group Stock
equal to 110% of the ratio of the average Market Value of one
share of Circuit City Group Stock to the average Market Value
of one share of CarMax Group Stock, calculated over the 10-
Trading Day period beginning on the 16th Trading Day after
consummation of the disposition transaction.
The Company may, at any time prior to the first anniversary of a
dividend on, or partial redemption of, shares of Circuit City
Group Stock following a disposition of all or substantially all
of the properties and assets attributed to the Circuit City
Group, convert each remaining outstanding share of Circuit City
Group Stock into a number of shares of CarMax Group Stock equal
to 110% of the ratio of the time-weighted average Market Value of
one share of CarMax Group Stock, calculated over the 20- Trading
Day period ending five Trading Days prior to the date of notice
to holders of such conversion.
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Conversion at Option of Company.................. The Company may, at any time, convert each share of Circuit
City Group Stock into a number of shares of CarMax Group
Stock equal to 115% of the ratio of the time-weighted average
Market Value of one share of Circuit City Group Stock to the
time-weighted average Market Value of one share of CarMax
Group Stock, calculated over the 20-Trading Day period ending
five Trading Days prior to the date of notice to holders of such
conversion.
Redemption in Exchange for
Stock of Subsidiary......................... The Company may redeem the Circuit City Group Stock for a
number of shares of one or more wholly owned subsidiaries of
the Company that hold all of the assets and liabilities attributed
to the Circuit City Group equal to the proportionate interest in
the Circuit City Group represented by the outstanding Circuit
City Group Stock. If, at such time, the Circuit City Group holds
an Inter-Group Interest, the Company also will issue shares of
CarMax Group Stock in respect of the Inter-Group Interest
either to the holders of Circuit City Group Stock or to one or
more of such subsidiaries.
Liquidation...................................... Holders of Circuit City Group Stock and CarMax Group Stock will
be entitled to a portion of the assets remaining for distribution
to holders of Common Stock on a per share basis in proportion to
the respective per share liquidation units of such series (each,
a "Liquidation Unit"). Each share of Circuit City Group Stock
will have one Liquidation Unit and each share of CarMax Group
Stock will have .5 of a Liquidation Unit, subject to adjustment
if shares of either series are subdivided, combined or
distributed as a dividend.
Certain Provisions of the
CarMax Group Stock.............................. If the Company disposes of all or substantially all of the
properties and assets attributed to the CarMax Group, the Company
must either distribute the product of the Outstanding CarMax
Fraction multiplied by the Fair Value of the Net Proceeds of such
disposition thereof to holders of CarMax Group Stock by special
dividend or redemption or convert the CarMax Group Stock into
Circuit City Group Stock, upon the terms and conditions described
under "Description of Capital Stock--Conversion and Redemption."
The Company may, at any time, convert the CarMax Group Stock into
Circuit City Group Stock upon the terms and conditions described
under "Description of Capital Stock -- Conversion and Redemption
-- Conversion at the Option of the Company." The Company may
redeem the CarMax Group Stock for a number of shares of one or
more wholly owned subsidiaries of the Company that hold all of
the assets and liabilities attributed to the CarMax Group equal
to the proportionate interest in the CarMax Group represented by
the outstanding CarMax Group Stock.
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Inter-Group Interest
The Circuit City Group holds a percentage interest in the equity of the
CarMax Group. The "Outstanding CarMax Fraction" means the percentage interest in
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the CarMax Group represented at any time by the outstanding shares of CarMax
Group 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 always equals 100%. The "Number of Shares Issuable with Respect to the
Inter-Group Interest" means the number of shares of CarMax Group Stock that
could be sold or otherwise issued by the Company for the account of the Circuit
Group in respect of the Inter-Group interest. The Inter-Group Interest is not
represented by actual shares of CarMax Group Stock and can not be voted by the
Circuit City Group. As of May 31, 1998, the Outstanding CarMax Fraction was
equal to 22.9%, the Inter-Group Interest Fraction was equal to 77.1%, and the
Number of Shares Issuable with Respect to the Inter-Group Interest was
75,440,000. For further information see "Description of Capital Stock --
Inter-Group Interest."
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Prospectus regarding matters that
are not historical facts, including statements incorporated by reference, are
forward-looking statements (as such term is defined in the Private Securities
Litigation Reform Act of 1995). Because such statements include risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. Factors that could cause actual
results to differ materially include, but are not limited to, those discussed
under "Risk Factors" and in the Company's 1998 Annual Report on Form 10-K,
incorporated by reference herein.
RISK FACTORS
INVESTMENT IN THE SHARES OFFERED HEREBY INVOLVES CERTAIN RISKS. IN
ADDITION TO THE OTHER INFORMATION INCLUDED ELSEWHERE IN THIS PROSPECTUS,
PROSPECTIVE INVESTORS SHOULD GIVE CAREFUL CONSIDERATION TO THE FOLLOWING FACTORS
IN CONNECTION WITH AN INVESTMENT IN THE SHARES OFFERED HEREBY.
Factors Relating to the Divx Business
Divx is entering the highly competitive home video industry with a
product that has a conditional access system for the viewing of motion pictures
in the DVD format. The new system combines a standard DVD with an exclusive
encryption and copyright protection system that requires an "enhanced" DVD
player with a modem for viewing the movie content. Divx will introduce players
and discs in June 1998 in Richmond, Va., and San Francisco, Calif., and plans to
begin a national roll out later this year. As described below, Divx's ability to
successfully implement a national roll out will depend on numerous factors.
Divx faces competition from the widely accepted video cassette industry
and competing open format DVD providers and also faces competition for
consumers' time from other segments of the home entertainment market such as
cable television, pay-per-view, direct broadcasting systems, and emerging
in-home movie-viewing technologies, as well as the Internet and computer and
video gaming. Management believes that Divx's high quality and new
standard for consumer convenience will appeal to the mass market. However,
because Divx is a new technology with no operational history, there can be no
assurance that Divx will gain the consumer acceptance needed to achieve
significant sales or profits.
Divx is currently in the early stages of implementing the new system.
Unforeseen expenses and delays associated with the further development and
implementation of the system on a large scale could have a material adverse
impact on Divx. In an industry in which technological change is a driving force,
Divx believes its video platform is the most advanced in the marketplace but
plans to aggressively pursue research and development to enhance its products
and pursue additional markets; however, there is no guarantee these efforts will
result in marketable products or prevent Divx technology from becoming either an
obsolete or niche product. Additionally, Divx will need (i) to adapt and enhance
its management systems and controls to support a new product and its expanded
operations, and (ii) to expand its operations so as to generate additional
revenues without proportionately increasing overhead.
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Because management does not expect Divx to generate profits until
substantial player penetration is achieved and transaction volumes reach
significant levels, Divx will require substantial additional capital in order to
fund its expansion plans and to support continuing operations. Although Divx
expects to obtain additional capital through public or private financings or
borrowings or through equity issuances, there is no assurance that Divx will be
able to do so.
Divx makes it products available through agreements with several third
parties for both software and hardware. Divx currently has multi-year license
agreements with six of the major motion picture studios (Disney, Paramount,
Universal, Twentieth Century Fox, Metro-Goldwyn-Mayer and Dreamworks SKG);
agreements with six consumer electronics hardware manufacturers (Thomson
Electronics, LG Electronics, Matsushita, JVC, Pioneer and Harmon Kardon) to
incorporate Divx technology into existing DVD player models; and a multi-year
disc replication agreement with Nimbus for the manufacture of Divx discs. There
can be no assurance that additional studios will grant Divx license agreements
or that existing agreements will be extended beyond their original terms. In
addition, unforeseen difficulties or delays may reduce the capacity of
production facilities, while limited customer acceptance of the Divx format
could result in difficulties obtaining the necessary portion of the limited
available replication capacity for DVD's. The Company has guaranteed Divx's
performance under the commitments made in the licensing agreements. Commencing
with the operational date of each agreement through the following three to five
years, the minimum compensation due the studios is $112 million.
Divx's success will depend in part on the widespread availability of
both its hardware and software in retail outlets. Currently, the products are
being made available in two markets through the Company's Circuit City stores
and through "the good guys!" retail outlets. Additional retail outlets will be
required and there is no assurance that Divx will be successful in obtaining
these additional outlets.
Divx's success will also depend to a significant degree upon the
continued services of its senior management team as well as attracting qualified
personnel in the film production and marketing industry, cryptographic analysts
and sales representatives and information systems programmers. The loss of key
personnel or the inability to attract qualified personnel could have a material
adverse impact upon Divx.
Divx may be exposed to potential liabilities relating to the production
or use of its products or from developments or assertions by or against Divx
relating to intellectual property rights. There can be no assurance that Divx
will not experience material legal claims or be adversely affected by any
resulting negative publicity.
Factors Relating to the CarMax Business
Limited Operating History; History of Net Losses; Store Maturity
CarMax opened its first store location in Richmond, Virginia in October
1993 and now operates 21 stores in 11 markets. All stores which have been open
for at least one year were profitable during fiscal 1998 on a store-level basis
including profits from vehicle financing but before the allocation of Group
overhead expenses. Net losses for the CarMax Group were $34.2 million (including
an $11.5 million expense related to owned and leased real estate), $9.3 million
and $5.2 million in fiscal 1998, 1997 and 1996, respectively. The losses reflect
the costs associated with an aggressive expansion program, overhead costs that
are spread over a small store base and the immaturity of the majority of CarMax
locations. In fiscal 1998, and during the first quarter of fiscal 1999, CarMax
sales and earnings were below the Company's expectations. The results reflect
lower than anticipated sales at some new stores and the effect on the used-car
industry of highly promotional pricing among new-car retailers. CarMax expects
to produce a lower loss in fiscal 1999 compared to fiscal 1998 due to a more
mature store base, increased advertising efficiencies resulting from completely
stored markets, refinements in various aspects of its consumer offer, the
elimination of centralized reconditioning facilities and more efficient store
staffing.
Risks Associated with Expansion
The CarMax growth strategy calls for aggressive expansion of its store
base. CarMax expects to open approximately ten stores in fiscal 1999, including
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its entry into the Chicago market, and another ten stores, including its entry
into the Los Angeles market, in fiscal 2000. CarMax's ability to implement this
growth strategy, and to do so profitably, will depend on many factors, including
those discussed under " -- Highly Competitive Industry; New Entrants;"
" -- Capital and Liquidity;" " -- Sourcing of Used Cars;" " -- Dependence Upon
and Availability of Key Personnel;" " -- Manufacturer Control Over Existing and
New Franchises; Franchise Agreements with Chrysler; Framework Agreement with
Nissan Motor Corporation" and " -- Cyclicality of Automobile Sales; Geographic
Concentration." Additional factors include CarMax's ability to (i) obtain
suitable sites for new stores at a reasonable cost, (ii) adapt and enhance its
management systems and controls to support the expanded operations and (iii)
expand its operations, including used- and new-vehicle sales, so as to generate
additional revenues without proportionately increasing Group overhead. In
addition, unforeseen expenses and delays associated with a rapid rollout of new
stores and retail services may be encountered that could have a material adverse
effect on the business, results of operations and the financial condition of
CarMax and its planned expansion. See "Recent Developments."
Highly Competitive Industry; New Entrants
Automotive retailing in the United States is highly competitive. In the
used-vehicle market, CarMax competes with existing franchised and independent
dealers, rental companies and private parties. The used-vehicle market has also
attracted attention recently from a number of companies, some with substantial
resources, that have entered this market through a national or regional network
of used-vehicle stores. Many franchised new-car dealerships have also increased
their focus on the used-vehicle market. CarMax believes that these companies and
dealerships are attracted by the potential for generating high sales volume per
location, the relatively high gross margins that currently exist in this market
and the industry's fragmentation and potential for consolidation. Part of
CarMax's business strategy is to position itself as the low-price, low-cost
operator in the industry. However, increased competition in this industry,
particularly from new entrants adopting non-traditional selling methods similar
to those used by CarMax, could result in, among other things, increased
wholesale costs for used cars and lower retail sales prices and margins than
expected, which could adversely affect the business, results of operations and
financial condition of CarMax.
In the new-vehicle market, CarMax competes with other franchised
dealers offering vehicles produced by the same or other manufacturers, auto
brokers and leasing companies. As is typical of such arrangements, CarMax's
existing Franchise Agreements with Chrysler do not guarantee exclusivity within
a specified territory. CarMax could therefore face even greater competition at
its existing and any future new-vehicle franchise locations if the manufacturers
awarding such franchises award additional dealership franchises to others in the
same market areas. In addition, Ford and General Motors have announced plans to
study consolidating dealers within markets. This could tend to increase retail
competition in those markets.
Aggressive discounting by manufacturers of new cars, which typically
occurs in the fall during the close-out of prior year models, may result in
lower retail sales prices and margins for used vehicles during such discounting.
CarMax's inventory includes a significant percentage of late model vehicles
which would be particularly affected by such discounting. Therefore, aggressive
or prolonged discounting by manufacturers may have a material adverse effect on
CarMax's results of operations for the periods in which such discounting occur.
Capital and Liquidity
Late in fiscal 1997, Circuit City Stores, Inc. raised a net of $412.3
million through the initial public offering of 21.86 million shares of newly
created CarMax Group Stock. In fiscal 1997, the Group used approximately $187
million of the net proceeds to repay its allocated portion of Circuit City
Stores, Inc. indebtedness. The Company has used the remainder of the net
proceeds to finance part of the CarMax expansion plan. Capital expenditures have
been funded through sale-leaseback transactions, proceeds from the CarMax Group
equity offering and allocated short- and long-term debt. The Group also sells
most of its installment loan receivables generated by First National American
Credit Corporation ("FNAC") through its auto loan securitization program.
Additionally, CarMax is working to establish a renewable inventory financing
program; however, there can be no assurance that it will be able to do so.
CarMax's ability to continue to undertake both sale-leaseback and securitization
transactions, and to do so on economically favorable terms, depends in large
part on the existence of available financing capacity of the Company. There can
be no assurance that the Company will continue to have capacity available or, if
it does, that it would be made available to the CarMax Group. Decisions relating
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to the allocation of available financing capacity between the CarMax Group and
the Circuit City Group are made by the Board of Directors in its good faith
business judgment or in accordance with procedures and policies adopted by the
Board of Directors from time to time. See " -- Factors Relating to the Capital
Stock -- Potential Diverging Interests -- Operational and Financial Decisions;"
" -- Factors Relating to Capital Stock -- Allocation of Financing Costs; --
Transfers of Funds Between Groups; Equity Contributions;" and "Certain
Management and Allocation Policies."
The terms of sale-leaseback and securitization transactions are
affected by a number of other factors which are beyond the control of CarMax and
the Company, including, among others, conditions in the securities and finance
markets generally, prevailing interest rates, conditions in the markets for
securitized instruments and lease financings and approval by all parties to the
terms of the transaction. Profits from the extension of credit for vehicle
financing contribute significantly to the profitability of CarMax. Any increase
in the cost of sale-leaseback or securitization financings would increase the
effective rental cost of real estate or reduce the profitability of CarMax's
vehicle financing activities and, if significant, could have a material adverse
effect on the business, results of operations and financial condition of CarMax.
If for any reason the Company were unable to undertake securitization
transactions or otherwise sell its installment loan receivables, the net profit
from such receivables would be recognized over the life thereof rather than at
the time of the sale, which could have a material adverse effect on the results
of operations in a particular financial period.
Capital may also be raised by the Company through additional public or
private financings or borrowings; however, there can be no assurance that the
Company will be able to do so or that, if it does, the funds raised would be
made available to the CarMax Group. If additional funds are raised by issuing
equity securities allocated to the CarMax Group, dilution to the holders of
outstanding shares of CarMax Group Stock may result. See " -- Factors Relating
to the Capital Stock -- Possible Volatility of Stock Price."
Sourcing of Used Cars
CarMax acquires a significant proportion of its used-vehicle inventory
through its appraisal process in which CarMax appraises and makes an offer to
purchase any properly documented vehicle from the public. CarMax also acquires a
significant proportion of its used vehicles through auctions and, to a lesser
extent, directly from other sources, including wholesalers, franchised and
independent dealers and fleet owners, such as leasing companies and rental
companies. Some of the auctions for vehicles are closed except to the franchised
dealers of specific manufacturers. Based on consumer acceptance of the appraisal
process at existing CarMax stores and the experience and success of CarMax to
date in acquiring vehicles from auctions and other sources, management believes
that its sources of used vehicles will continue to be sufficient to meet current
needs and to support planned expansion. However, there can be no assurance that
sufficient inventory from such sources will continue to be available, or will be
available at comparable costs, particularly if changes occur in the type or
proportion of used vehicles that are sold in auctions closed to CarMax or if
competitive pressures increase as a result of new entrants to this market. See "
- -- Highly Competitive Industry; New Entrants." Any reduction in inventory
availability, or increase in inventory wholesale costs that are not reflected in
retail market prices, for these or other reasons, could have a material adverse
effect on the business, results of operations and financial condition of CarMax
and its planned expansion.
Dependence upon and Availability of Key Personnel
CarMax's success will depend to a significant degree upon the continued
services of its senior management team as well as the Group's ability to attract
qualified personnel, including experienced location general managers, as the
business grows. In addition, the future performance of CarMax will depend upon
the Group's continued access to certain Circuit City Group personnel who are
experienced in rapid retail expansion, sale-leaseback and securitization
financing, consumer credit, site selection and facilities construction. The loss
of the services of key personnel, or the inability to attract and retain
additional personnel as needed, could have a material adverse effect upon CarMax
and its planned expansion.
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Manufacturer Control over Existing and New Franchises; Franchise
Agreements with Chrysler; Framework Agreement with Nissan Motor
Corporation
One component of the CarMax growth strategy is to acquire additional
new-vehicle franchises both through acquisitions of existing franchises and
through new grants. Given the relative unavailability of new franchises and the
limited availability of franchises within a suitable radius of its existing and
proposed stores, there is no assurance that CarMax will be able to achieve this
portion of its growth plan. In addition, manufacturers have historically
exercised significant control over their franchisees, restricting them to
specified locations and retaining approval rights over changes in management and
ownership. The ability of CarMax to acquire existing franchises, as well as new
franchises, will therefore depend on obtaining the approval of manufacturers,
and there can be no assurance that CarMax will be able to obtain the requisite
approvals from manufacturers on acceptable terms. Certain manufacturers may be
reluctant to approve acquisitions by CarMax of new or existing franchises
because of, among other things, their opposition to diffuse corporate ownership
of their dealerships, the potential adverse effects on their existing
franchisees or concerns with a single company owning a large number of
dealerships.
CarMax operates its new-car dealerships in the Atlanta, Ga. market
under sales and service agreements between Chrysler and a subsidiary of the
Company (the "Franchise Agreements"). The Franchise Agreements impose various
requirements on CarMax and compliance with these requirements is closely
monitored by Chrysler. The Franchise Agreements may be terminated by Chrysler on
generally not less than 60 days written notice for specified reasons, including
a breach by CarMax of any of its obligations thereunder, or if, without
Chrysler's prior approval, the Company ceases to control the subsidiary that
entered into the agreements.
In 1998, CarMax signed a framework agreement with Nissan Motor
Corporation that will allow CarMax to own and operate Nissan franchises
throughout the U.S. The agreement provides that CarMax may acquire existing
Nissan franchises and may obtain new franchise points and that Nissan franchises
may be integrated into CarMax stores or operated as stand-alone locations.
Cyclicality of Automobile Sales; Geographic Concentration
Unit sales of vehicles, particularly new vehicles, historically have
been cyclical, fluctuating with general economic cycles. During economic
downturns, the automotive retailing industry tends to experience similar periods
of decline and recession as the general economy. Although there has been a
general trend of increasing sales of used vehicles since 1991, there can be no
assurance that the industry will not experience sustained periods of decline in
vehicle sales in the future. CarMax believes that the industry is also
influenced by consumer confidence, the level of personal discretionary spending,
interest rates and credit availability. Any future adverse changes in economic
conditions could have a material adverse effect on the business, results of
operations and financial condition of CarMax and its planned expansion.
In addition to being affected by general economic trends, the success
of CarMax depends, in part, on regional auto-buying trends, local and regional
economic factors and other regional competitive pressures. Currently, CarMax
sells its vehicles in Virginia, North Carolina, Florida, Georgia, Illinois,
Texas and Maryland. Conditions and competitive pressures affecting these
markets, such as price-cutting by dealers in these areas or in new markets
CarMax enters, or a general economic downturn in the region, could adversely
affect CarMax, although the automotive retail industry as a whole might not be
affected.
Seasonality
The business of CarMax is seasonal, with a disproportionate amount of
sales currently occurring in the first half of the fiscal year. Seasonality
causes difficulties in planning for a variety of resources, including personnel
and inventory, and may also make it difficult to detect, and respond in a timely
and effective way, to downturns in retailing when they occur, thereby increasing
risks inherent in the business. CarMax anticipates that the seasonality of its
business may vary from region to region as the Group expands its operations
geographically.
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Credit Risk
Payments by customers on a number of the installment sales contracts
originated by FNAC become delinquent from time to time and some contracts end up
in default. There can be no assurance that the current credit performance of
FNAC's customers will be maintained or that general economic conditions will not
worsen and lead to higher rates of delinquency and default. While CarMax retains
limited liability with respect to such delinquencies or defaults under its
current securitization program, a general decline in the quality of its contract
portfolio could lead CarMax to reduce the availability of credit through FNAC,
with a corresponding decrease in sales and profitability.
Legal Proceedings
CarMax is currently involved in litigation with AutoNation, Inc.
("AutoNation") relating to CarMax's right to use the mark CARMAX. While CarMax
successfully defended its rights to its mark at the trial court level, the
matter is on appeal and an adverse outcome on appeal could have a material
adverse effect on the results of operations of CarMax.
CarMax may be exposed to potential liabilities for personal injury or
property damage claims relating to the use of vehicles and other products sold
by it. Although CarMax maintains third-party product liability insurance and
other types of insurance in amounts it considers adequate, and the manufacturers
are required to indemnify CarMax for most product liability claims, there can be
no assurance that CarMax will not experience material legal claims in excess of
its insurance coverage, or material claims (such as those relating to its use of
the mark CARMAX) that ultimately would not be covered by insurance or
indemnification from the manufacturers. Furthermore, if any significant claims
are made against CarMax, the business of CarMax may be adversely affected by
resulting negative publicity.
Environmental Matters; Government Regulation
The business of CarMax involves the use, handling and disposal of
hazardous or toxic substances as well as the past and current operation and/or
removal of aboveground and underground storage tanks containing such substances.
Accordingly, CarMax is subject to federal, state and local laws and regulations
governing air and water quality and the handling, storage and disposal of
hazardous or toxic substances. Although CarMax believes that it does not have
any material environmental liabilities, compliance with new or more stringent
laws or regulations, stricter interpretations of existing laws or regulations or
the future discovery of environmental conditions at current or future CarMax
locations could require additional expenditures by CarMax, some of which could
be material.
The CarMax operations are also subject to ongoing regulation,
supervision and licensing under various other federal, state and local statutes,
ordinances and regulations. Among other things, these laws require that CarMax
obtain and maintain certain licenses and regulate the manner in which CarMax
conducts its business, including its advertising and sales practices. In
addition, the financing activities of CarMax with its customers are subject to
federal truth in lending, consumer lending and equal credit opportunity
regulations as well as state and local motor vehicle finance laws, installment
finance laws, usury laws and other installment sales laws. CarMax believes that
it is currently in substantial compliance with all such laws affecting its
business. Any failure to comply with such laws or any adverse change in such
laws, whether by the adoption of new laws, changes in the interpretation of
existing laws or CarMax's entrance into jurisdictions with more stringent
regulatory requirements, could have a material adverse effect on the business,
results of operations and financial condition of CarMax.
Factors Relating to Capital Stock
Shareholders of One Group; Financial Effects on One Group Could Affect
the Other
Notwithstanding the allocation of assets and liabilities (including
contingent liabilities) and shareholders' equity between the Circuit City Group
and the CarMax Group for the purpose of preparing their respective financial
statements, holders of Circuit City Group Stock and CarMax Group Stock are
shareholders of the Company and are subject to all of the risks associated with
an investment in the Company and all of its businesses, assets and liabilities.
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The equity structure of the Company does not affect title to the assets or
responsibility for the liabilities of the Company or any of its subsidiaries or
the rights of holders of any debt of the Company or its subsidiaries. Financial
impacts arising from either Group that affect the Company's results of
operations or financial condition could affect the results of operations or
financial condition of the other Group and the market price of the series of
Common Stock relating to that Group. In addition, any net losses of the Circuit
City Group or the CarMax Group and dividends or distributions on, or repurchases
of, Circuit City Group Stock or CarMax Group Stock will reduce the legally
available funds of the Company available for payment of dividends on both the
Circuit City Group Stock and the CarMax Group Stock. Accordingly, the Company's
consolidated financial information should be read in conjunction with the
financial information of the Circuit City Group and the CarMax Group.
The Company provides to holders of Circuit City Group Stock and CarMax
Group Stock financial statements, management's discussion and analysis of
financial condition and results of operations, business descriptions and other
information for each Group and for the consolidated Company. The financial
statements of each Group reflect the financial position, results of operations
and cash flows of the businesses included therein. Consistent with the Amended
and Restated Articles of Incorporation, as amended, (the "Articles") and
relevant policies, such Group's financial statements also include allocated
portions of the Company's corporate assets and liabilities (including contingent
liabilities) that are not separately identified with the operations of a
specific Group. See "Certain Management and Allocation Policies."
Limited Separate Shareholder Voting Rights; Effects on Voting Power
Holders of Circuit City Group Stock and CarMax Group Stock have only
the rights customarily held by common shareholders of the Company and have no
rights related to their corresponding Group and no right to vote on matters as a
separate voting group other than in limited circumstances as provided under the
Virginia Stock Corporation Act (the "VSCA"). Under the VSCA, the holders of
Circuit City Group Stock and CarMax Group Stock vote together as a single voting
group, except as to certain mergers and statutory share exchanges and certain
amendments to the Articles. Accordingly, if a separate vote on a matter by the
holders of either the Circuit City Group Stock or CarMax Group Stock is not
required under the VSCA, and if the Board of Directors does not require a
separate vote, any 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 Group Stock and CarMax Group Stock. Conversely, if a separate vote on a
matter by the holders of either Circuit City Group Stock or CarMax Group Stock
is required under the VSCA or by the Board of Directors, the holders of either
the Circuit City Group Stock or CarMax Group Stock could prevent approval of
such matter, notwithstanding the fact that the holders of a majority or more
than two-thirds, as applicable, of the total number of votes cast or entitled to
be cast with respect to both the Circuit City Group Stock and CarMax Group Stock
had voted in favor of it. See "Description of Capital Stock -- Voting Rights"
and " -- Potential Diverging Interests -- Allocation of Proceeds of Mergers or
Statutory Share Exchanges."
The relative voting power of shares of Circuit City Group Stock and
CarMax Group Stock fluctuates from time to time, with each share of Circuit City
Group Stock having one vote and each share of CarMax Group Stock having a
variable number of votes, based upon the ratio, over a specified period, of the
time-weighted average Market Value of one share of CarMax Group Stock to the
time-weighted average Market Value of one share of Circuit City Group Stock.
This formula is intended to equate the proportionate voting rights of each
series of Common Stock to their respective Market Values at the time of any
vote. The Circuit City Group Stock represents a substantial majority of the
voting power of all the Company's stock entitled to vote in the election of
directors. Market Value could be influenced by many factors, including the
results of operations of the Company and each of the Groups, trading volume,
share issuances and repurchases and general economic and market conditions. See
"Description of Capital Stock -- Voting Rights." Changes in the aggregate votes
or relative voting power of the Circuit City Group Stock or the CarMax Group
Stock could result from the market's reaction to a decision by the Company's
management or Board of Directors that is perceived to disparately affect one
series of Common Stock in comparison to the other or the issuance or repurchase
of shares of Common Stock of either series. See " -- Limited Approval Rights of
Future Issuances."
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Fiduciary Duties of The Board of Directors; No Definitive Precedent
Under Virginia Law
Under Virginia law, each member of the Board of Directors must act in
accordance with his or her good faith business judgment of the best interests of
the Company, taking into consideration the interests of all common shareholders.
As further described below, the Company's equity structure may give rise to
occasions when the interests of the holders of Circuit City Group Stock and the
holders of CarMax Group Stock may diverge or appear to diverge. Although the
Company is not aware of any precedent concerning the manner in which principles
of Virginia law would be applied in the context of the Company's equity
structure, principles of Virginia law provide that directors must act in
accordance with their good faith business judgment of the corporation's best
interests, taking into consideration the interests of all common shareholders
regardless of class or series. Under these principles of Virginia law, a good
faith determination made by a disinterested and adequately informed Board of
Directors with respect to any matter having a disparate impact upon the holders
of Circuit City Group Stock and the holders of CarMax Group Stock would be a
defense to any challenge to such determination made by or on behalf of either
group of holders. Nevertheless, a Virginia court hearing a case involving such a
challenge may decide to apply principles of Virginia law other than those
discussed above, or may fashion new principles of Virginia law, in order to
decide such a case, which would be a case of first impression. There may arise
circumstances involving a divergence of interests in which the Board of
Directors is held to have properly discharged its duty to act in accordance with
its good faith business judgment of the best interests of the Company, but in
which holders of either the Circuit City Group Stock or the CarMax Group Stock
consider themselves to be disadvantaged relative to the other series. In such a
case, such holders would not have any other remedy under Virginia law with
respect to the circumstances giving rise to the divergence of interests.
Disproportionate ownership interests of members of the Board of
Directors in the Circuit City Group Stock and the CarMax Group Stock or
disparate values of the Circuit City Group Stock and the CarMax Group Stock
could create or appear to create potential conflicts of interest when directors
are faced with decisions that could have different implications for the
different series. See " -- Potential Diverging Interests."
Potential Diverging Interests
The existence of separate series of Common Stock could give rise to
occasions when the interests of the holders of Circuit City Group Stock and
holders of CarMax Group Stock diverge or appear to diverge. Examples include
determinations by the Board of Directors to (i) pay or omit the payment of
dividends on Circuit City Group Stock or CarMax Group Stock, (ii) allocate
consideration to be received by holders of each of the series of Common Stock in
connection with a merger or consolidation involving the Company, (iii) convert
one series of Common Stock into shares of the other series of Common Stock, (iv)
approve certain dispositions of assets attributed to any Group, (v) so long as
there is an Inter-Group Interest, allocate the proceeds of issuances of CarMax
Group Stock either to the Circuit City Group in respect of its Inter-Group
Interest or to the CarMax Group and (vi) make operational and financial
decisions with respect to one Group that could be considered to be detrimental
to the other Group, including whether to make transfers of funds between Groups,
as described below. When making decisions with regard to matters that create
potential diverging interests, the Board of Directors would act in accordance
with the terms of the Articles, the management and allocation policies described
in "Certain Management and Allocation Policies" to the extent applicable and its
fiduciary duties. See " -- Fiduciary Duties of the Board of Directors; No
Definitive Precedent Under Virginia Law." The Board of Directors could also from
time to time refer matters involving such conflict issues to an existing
committee or one or more new committees of the Board of Directors and have such
committee or committees report to the Board of Directors on such matters or
decide such matters to the extent permitted by the Bylaws and applicable law.
Each of the foregoing potential conflicts of interest is discussed below:
No Assurance of Payment of Dividends. The Company has recently paid
dividends on Circuit City Group Stock at a quarterly rate of 3.5(cent) per
share. The Company has not paid dividends on the CarMax Group Stock.
Determinations as to the future dividends on the Circuit City Group Stock and
the CarMax Group Stock will be based primarily upon the financial condition,
results of operations and business requirements of the relevant Group and the
Company as a whole. Dividends on the Circuit City Group Stock and the CarMax
Group Stock, if any, will be payable out of the lesser of (i) all assets of the
Company legally available for the payment of dividends and (ii) the Available
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Dividend Amount with respect to the relevant Group. Subject only to such
limitations, the Board of Directors reserves the right to declare and pay
dividends on the Circuit City Group Stock and the CarMax Group Stock in any
amount and could, in its sole discretion, declare and pay dividends exclusively
on the Circuit City Group Stock, exclusively on the CarMax Group 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. In
addition, net losses of any Group, dividends and distributions on Circuit City
Group Stock, CarMax Group Stock or any Preferred Stock and any repurchases of
Circuit City Group Stock, CarMax Group Stock or certain Preferred Stock would
reduce the assets of the Company legally available for future dividends on the
Circuit City Group Stock and the CarMax Group Stock. See "Description of Capital
Stock -- Dividends."
Allocation of Proceeds of Mergers or Statutory Share Exchanges. The
Articles do not contain any provisions governing how consideration to be
received by holders of Common Stock in connection with a merger or statutory
share exchange involving the entire Company is to be allocated among holders of
different series of Common Stock. In any such merger or statutory share
exchange, the percentage of the consideration to be allocated to holders of any
series of Common Stock will be determined by the Board of Directors and may be
materially more or less than that which might have been allocated to such
holders had the Board of Directors chosen a different method of allocation. See
" -- Limited Separate Shareholder Voting Rights; Effects on Voting Power."
Optional Conversion of Series of Common Stock. The Board of Directors
could, in its sole discretion, determine to convert shares of the series of
Common Stock of one Group into shares of the series of Common Stock of the other
Group at a 15% premium at any time or a 10% premium following any dividend or
partial redemption undertaken in connection with a disposition of all or
substantially all of the properties or assets attributed to the Group whose
stock is being converted. Any such determination could be made at a time when
either or both of the Circuit City Group Stock and the CarMax Group Stock may be
considered to be overvalued or undervalued. Any conversion at any premium would
dilute the interests in the Company of the holders of the series of Common Stock
not subject to conversion. In addition, any such conversion of either series of
Common Stock into the other would preclude holders of both series of Common
Stock from retaining their investment in a security that is intended to reflect
separately the performance of the relevant Group. Holders of shares of the
series of Common Stock converted may receive a greater or lesser premium than
any premium that might be paid by a third-party buyer of all or substantially
all of the assets attributed to the Group whose stock is converted. In
determining whether to convert one series of Common Stock into the other series
of Common Stock, the Board of Directors will act in accordance with its good
faith business judgment that any such conversion is in the best interests of the
Company, taking into consideration the interests of all common shareholders,
including both the holders of the series of Common Stock being converted and the
holders of the series of Common Stock into which it is to be converted. See
"Description of Capital Stock -- Conversion and Redemption."
Dispositions of Group Assets. Assuming the assets attributed to any
Group represent less than substantially all of the properties and assets of the
Company, the Board of Directors could, in its sole discretion and without
shareholder approval, approve sales and other dispositions of any amount of the
properties and assets attributed to such Group, because Virginia law and the
Articles require shareholder approval only for a sale or other disposition of
all or substantially all of the properties and assets of the entire Company. The
proceeds from any such disposition would be assets attributed to such Group and
used for its benefit, subject to the management and allocation policies
described under "Certain Management and Allocation Policies." The Articles
contain provisions that, in the event of a Disposition of all or substantially
all of the properties and assets attributed to any Group, other than in a
Related Business Transaction, require the Company to (i) distribute to holders
of the series of Common Stock relating to the Group subject to such Disposition
an amount in cash and/or securities or other property equal to their
proportionate interest in the Fair Value of the Net Proceeds of such Disposition
either by special dividend or redemption of all or part of the shares of such
series of Common Stock or (ii) convert the outstanding shares of such Common
Stock into a number of shares of the series of Common Stock relating to the
other Group equal to 110% of the ratio, calculated over a period of time, of the
average Market Value of one share of the 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. See "Description of Capital Stock --
Conversion and Redemption." The terms of the Common Stock do not require the
Board of Directors to select the option that would result in the distribution
with the highest value to the holders of the Common Stock relating to the Group
subject to such Disposition or with the smallest effect on the Common Stock
relating to the other Group. The Board of Directors would select an option based
upon its good faith business judgment that such option is in the best interests
of the Company, taking into consideration the interests of all common
shareholders. See " -- Fiduciary Duties of the Board of Directors; No
Definitive Precedent under Virginia Law."
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Allocation of Proceeds upon Issuance of CarMax Group Stock. If the
Circuit City Group, at the time the Company issues any shares of CarMax Group
Stock, holds an Inter-Group Interest representing an interest in the equity
value of the CarMax Group, the Board of Directors will, in its sole discretion,
determine whether to allocate all or any portion of the proceeds of such
issuance to the CarMax Group or to the Circuit City Group. To the extent the net
proceeds of such issuance of shares of CarMax Group Stock are allocated to the
CarMax Group, the financial statements of the CarMax Group would reflect the
receipt of such proceeds. To the extent such net proceeds are allocated to the
Circuit City Group, the financial statements of the Circuit City Group would
reflect a reduction in the Inter-Group Interest and the receipt of such
proceeds. Any such allocation may favor one Group at the expense of the other.
For example, the decision to allocate proceeds to one Group may adversely affect
the ability of the other Group to obtain funds. Any such allocation will be made
by the Board of Directors in its good faith business judgment that such
allocation is in the best interests of the Company, taking into consideration
the interests of all common shareholders. See " -- Fiduciary Duties of the Board
of Directors; No Definitive Precedent Under Virginia Law." In addition, if the
Company issues shares of CarMax Group Stock for the account of the Circuit City
Group in respect of the Circuit City Group's Inter-Group Interest in the CarMax
Group, the voting power of holders of shares of CarMax Group Stock immediately
prior to such issuance would be diluted even though no consideration received
for such shares would be allocated to the CarMax Group.
Operational and Financial Decisions. The Board of Directors could, in
its sole discretion, from time to time, make operational and financial decisions
or implement policies that affect disproportionately the businesses of the
Circuit City Group and the CarMax Group, such as transfers of services, funds or
assets between Groups and other inter-Group transactions, the allocation of
financing opportunities in the public markets and the allocation of business
opportunities, resources and personnel that may be suitable for both Groups. Any
such decision may favor one Group at the expense of the other. For example, the
decision to obtain funds for one Group may adversely affect the ability of the
other Group to obtain funds sufficient to implement its growth strategies. All
such decisions will be made by the Board of Directors in its good faith business
judgment or in accordance with procedures and policies adopted by the Board of
Directors from time to time, including the policies described under "Certain
Management and Allocation Policies," to ensure that such decisions will be made
in a manner consistent with the best interests of the Company, taking into
consideration the interests of all common shareholders. For further discussion
of potential divergence of interests, see " -- Fiduciary Duties of the Board of
Directors; No Definitive Precedent Under Virginia Law," " -- Allocation of
Financing Costs; Transfers of Funds Between Groups; Equity Contributions" and
"Certain Management and Allocation Policies."
Management and Allocation Policies Subject to Change
The Company's policies described herein with respect to dividends, the
allocation of corporate expenses, assets and liabilities, the allocation of
proceeds of sales of Circuit City Group Stock and CarMax Group Stock and other
matters may be modified or rescinded, or additional policies may be adopted, in
the sole discretion of the Board of Directors without approval of the
shareholders, although the Board of Directors has no present intention to do so.
Any determination of the Board of Directors to modify or rescind such policies,
or to adopt additional policies, including any such decision that would have
disparate impacts upon holders of Circuit City Group Stock and holders of CarMax
Group Stock, would be made in accordance with the Board of Director's good faith
business judgment of the best interests of the Company, taking into
consideration the interests of all common shareholders. See " -- Potential
Diverging Interests."
Allocation of Financing Costs; Transfers of Funds Between Groups;
Equity Contributions
As described under "Certain Management and Allocation Policies," most
financial activities are managed by the Company on a centralized basis. Such
financial activities include the investment of surplus cash and the issuance and
repayment of short-term and long-term debt and may include the issuance and
repurchase of any Preferred Stock. In the event that cash or other property
allocated to one Group is transferred to the other Group (other than transfers
made with respect to the Inter-Group Interest upon the payment of any dividend
or other distribution on CarMax Group Stock), such transfer will be accounted
for in one of the following ways, as determined by the Board of Directors: (i)
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as a reallocation of pooled debt, as described under the caption referred to
above, or any Preferred Stock, (ii) as an increase or decrease in the Number of
Shares Issuable with Respect to the Inter-Group Interest, (iii) as a sale of
assets between the two Groups, or (iv) as a short-term or long-term loan from
one Group to the other Group. There are no specific criteria to determine which
of the foregoing will be applied to a particular transfer of cash or property
from one Group to the other Group. Such determination will be made by the Board
of Directors in the exercise of its business judgment based upon all relevant
circumstances, including 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. Any such determination could affect the
amount of interest or dividend expense reflected in the financial statements of
the Circuit City Group and the CarMax Group. All transfers of material assets
from one Group to the other Group will be deemed to be made on a fair value
basis for the foregoing purposes, as determined by the Board of Directors.
A portion of the Company's debt and any Preferred Stock may be
allocated to each Group, and interest or dividend expense will be charged to
each Group, based on the weighted average interest or dividend rate of such
pooled debt or Preferred Stock. As a result, changes in the amount of pooled
debt or Preferred Stock would affect such weighted average interest or dividend
rate and, therefore, would affect the interest or dividend expense charged to
both Groups in respect of their allocated portions. In addition, in obtaining
its financing through increases of its allocated pooled debt or Preferred Stock
balance, the Group receiving the proceeds would receive a "benefit" or
"detriment" to the extent such weighted average rate is lower or higher,
respectively, than the market rate for a hypothetical borrowing of debt or
issuance of Preferred Stock by such Group if such Group were a stand-alone
corporation. Debt and Preferred Stock of the Company also may be allocated in
its entirety to one Group as determined by the Board of Directors.
The Board of Directors could, in its sole discretion, determine that a
transfer of cash or other property from one Group to the other Group should be
accounted for as a short-term or long-term loan. The Board of Directors would
establish the terms on which loans between the Groups would be made, including
interest rate, amortization schedule, maturity and redemption terms. In the
event that the Board of Directors determines that a transfer of funds between
the Circuit City Group and the CarMax Group should be accounted for as a loan,
the Group receiving the funds would receive a "benefit" or "detriment" to the
extent the rate determined by the Board of Directors is lower or higher,
respectively, than the market rate for a hypothetical borrowing of debt by such
Group if such Group were a stand-alone corporation.
The Board of Directors also could, in its sole discretion, determine
from time to time to contribute, as additional equity, cash or other property of
the Circuit City Group to the CarMax Group, thereby increasing the Inter-Group
Interest. Similarly, the Board of Directors could, in its sole discretion,
determine from time to time to transfer cash or other property from the CarMax
Group to the Circuit City Group as a reduction in such equity, thereby
decreasing the Inter-Group Interest. Although any increase in the Inter-Group
Interest resulting from an equity contribution by the Circuit City Group to the
CarMax Group or any decrease in the Inter-Group Interest resulting from a
transfer of funds from the CarMax Group to the Circuit City Group would be
determined by reference to the then current Market Value of CarMax Group Stock,
such changes could occur at a time when such shares could be considered
undervalued or overvalued. The holders of outstanding shares of CarMax Group
Stock would not have an opportunity to participate in a similar transaction.
Potential Effects of Possible Disposition of Assets Attributed to a
Group
The terms of the Common Stock provide that upon a Disposition of all or
substantially all of the properties and assets attributed to any Group, the
Company would be required, subject to certain exceptions, either to pay a
special dividend on, or redeem some or all of, the outstanding shares of the
series of Common Stock relating to such Group or convert such Common Stock into
shares of the series of Common Stock relating to the other Group. If the Group
subject to such Disposition were instead a separate, independent company and its
shares were acquired by another person, certain costs of such Disposition,
including corporate level taxes, might not be payable in connection with such an
acquisition. As a result, the consideration that would be received by
shareholders of such a separate independent company in connection with such an
acquisition might be greater than the Fair Value of the Net Proceeds that would
be received by holders of the series of Common Stock relating to such Group if
the assets attributed to such Group were sold. In addition, no assurance can be
given that the Net Proceeds per share of the series of Common Stock relating to
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such Group to be received in connection with a Disposition of all of the assets
attributed to such Group will be equal to or more than the market value per
share of such Common Stock prior to or after announcement of such Disposition.
See "Description of Capital Stock -- Conversion and Redemption -- Mandatory
Dividend, Redemption or Conversion of Common Stock."
Limited Approval Rights of Future Issuances
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
Circuit City Group Stock or CarMax Group 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 is required by stock
exchange regulations or under the VSCA.
Limitations on Potential Acquisitions of a Group
If the Circuit City Group and the CarMax Group were organized as
stand-alone corporations, any person interested in acquiring either of such
corporations without negotiation with management could seek control of the
outstanding stock of such corporation by means of a tender offer or proxy
contest. Although the Company has created two series of Common Stock that are
intended to reflect the separate performance of the Groups, a person interested
in acquiring only one Group without negotiation with the Company's management
will still be required to seek control of the voting power represented by all of
the outstanding capital stock of the Company, including the series of Common
Stock related to the other Group. See " -- Limited Separate Shareholder Rights;
Effects on Voting Power" and "Description of Capital Stock -- Voting Rights."
Possible Volatility of Stock Price
The market price of the Circuit City Group Stock is determined in the
trading markets and may be influenced by many factors, including the
consolidated results of the Company, as well as the performance of the Circuit
City Group, investors' expectations for the Company as a whole and the Circuit
City Group, trading volume, share issuances and repurchases and general economic
market conditions. There can be no assurance that investors will assign value to
the Circuit City Group Stock based on the reported financial results and
prospects of such Group or the dividend policies established by the Board of
Directors with respect to such Group. Accordingly, financial effects on either
Group that affect the Company's consolidated results of operations or financial
condition could affect the market price of shares of the Circuit City Group
Stock. In addition, the Company cannot predict the impact on the market price of
certain terms of the Circuit City Group Stock or CarMax Group Stock, including
the respective redemption and conversion rights applicable upon the disposition
of substantially all the assets attributed to either Group, the ability of the
Company to convert shares of one series of Common Stock into shares of the other
series of Common Stock, the discretion of the Board of Directors to make various
determinations relating to the separate series, or the availability of
additional shares of either series for future sale, including shares of CarMax
Group Stock attributable to the Circuit City Group's Inter-Group Interest in the
CarMax Group. There can also be no assurance that Circuit City Group Stock will
continue to be listed on the New York Stock Exchange.
RECENT DEVELOPMENTS
The Circuit City Group introduced the first Divx players in stores on
June 8, 1998. The Group recently reported plans to begin a two month launch
program for Divx with approximately 30 titles. The Group also reported plans to
add about 50 titles per month thereafter.
The Company recently announced that the CarMax Group expects to incur a
loss of approximately 3 cents per share for the first quarter of fiscal 1999.
The Group also announced that it is more cautious in its outlook for the
remainder of the year and that the Group is unlikely to produce a profit for the
full year. The Group's more cautious outlook is based on disappointing first
quarter results and uncertainty about the impact of intense promotional activity
in the new-car segment. The Group plans to open approximately ten stores in
fiscal 1999. Additionally, the Group reported that given the variability in
store performance, it plans to open a critical mass of six to seven stores in
Los Angeles and a limited number of additional stores, for a total of
approximately ten stores in fiscal 2000.
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USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares by the Selling Stockholder.
SELLING STOCKHOLDER
The following table sets forth certain information as of the date of
this Prospectus with respect to shares of Circuit City Group Stock owned by the
Selling Stockholder which are covered by this Prospectus. The number of shares
of Circuit City Group Stock offered pursuant to this Prospectus for the account
of the Selling Stockholder equals the total number of shares of Circuit City
Group Stock owned by the Selling Stockholder as of the date of this Prospectus.
Circuit City Group Stock Ownership
Prior to the Offering
Name of Selling Stockholder Number
- ---------------------------- ------
Goldberg Company, Inc. 32,344
PLAN OF DISTRIBUTION
The Selling Stockholder has advised the Company that it may offer
Shares from time to time depending on market conditions and other factors, in
one or more transactions on the NYSE, on which the Shares are traded, or in
negotiated transactions, at market prices prevailing at the time of sale, at
negotiated prices or at fixed prices. Sales of Shares may involve (i) block
transactions in which the broker or dealer so engaged will attempt to sell the
Shares as agent but may position and resell a portion of the block as principal
to facilitate the transaction, (ii) purchases by a broker-dealer as principal
and resale by such broker-dealer for its own account pursuant to this
Prospectus, (iii) ordinary brokerage transactions and transactions in which a
broker solicits purchasers and (iv) privately negotiated transactions. To the
extent required, this Prospectus may be amended and supplemented from time to
time to describe a specific plan of distribution. In connection with the
distribution of the Shares or otherwise, the Selling Stockholder may enter into
hedging transactions with broker-dealers. In connection with such transactions,
broker-dealers may engage in short sales of the Circuit City Group Stock in the
course of hedging the position they assume with the Selling Stockholder. The
Selling Stockholder may also sell the Circuit City Group Stock short and
redeliver the Shares to close out such short positions. The Selling Stockholder
may also enter into option or other transactions with broker-dealers which
require delivery to such broker-dealer of Shares offered hereby, which Shares
such broker-dealer may resell pursuant to this Prospectus (as supplemented or
amended to reflect such transaction). The Selling Stockholder may also pledge
shares to a broker-dealer and, upon a default, such broker-dealer may effect
sales of the pledged shares pursuant to this Prospectus (as supplemented or
amended to reflect such transaction). In addition, any shares that qualify for
sale pursuant to Rule 144 may be sold thereunder rather than pursuant to this
Prospectus.
Brokers and dealers may receive compensation in the form of concessions
or commissions from the Selling Stockholder and/or purchasers of Shares for whom
they may act as agent (which compensation may be in excess of customary
commissions). The Selling Stockholder and any broker or dealer that participates
in the distribution of Shares may be deemed to be underwriters and any
commissions received by them and any profit on the resale of Shares positioned
by a broker or dealer may be deemed to be underwriting discounts and commissions
under the Securities Act.
The Company has advised the Selling Stockholder that Regulation M under
the Exchange Act may apply to sales of Shares and to the activities of the
Selling Stockholder or broker-dealers in connection therewith.
Pursuant to the Asset Purchase Agreement, dated as of June 1, 1998, by
and among the Company and the Selling Stockholder, the Company will pay
registration expenses in connection with the registration of the Shares. The
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Selling Stockholder and the Company have agreed to indemnify each other against
certain civil liabilities, including certain liabilities under the Securities
Act.
DESCRIPTION OF CAPITAL STOCK
General
The Company is authorized to issue 352,000,000 shares of stock,
consisting of 350,000,000 shares of common stock, par value $.50 per share, and
2,000,000 shares of preferred stock, par value $20.00 per share. The common
stock and the preferred stock are issuable in series by the Board of Directors.
175,000,000 shares of the common stock have been designated as Circuit City
Group Stock and 175,000,000 shares have been designated as CarMax Group Stock.
500,000 shares of preferred stock have been designated as Cumulative
Participating Preferred Stock, Series E (the "Series E Preferred Stock") and
500,000 shares have been designated as Cumulative Participating Preferred Stock,
Series F (the "Series F Preferred Stock"). As of May 31, 1998, the Company had
issued and outstanding 99,840,108 shares of Circuit City Group Stock and
22,411,027 shares of CarMax Group Stock.
The Board of Directors has 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 authorized but unissued shares of Circuit City Group Stock and
CarMax Group Stock are 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 Group Stock or CarMax Group 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.
The following is a description of the terms of the capital stock of the
Company. This description does not purport to be complete and is qualified in
its entirety by reference to the Articles.
Dividends
Dividends on the Circuit City Group Stock and the CarMax Group Stock
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 Group Stock and the CarMax Group Stock
are 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.
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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 will be able to pay its debts as they become due in the
usual course of business.
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 will reflect the amount of any net losses of any
Group, any distributions on Circuit City Group Stock, CarMax Group Stock or any
Preferred Stock and any repurchases of Circuit City Group Stock, CarMax Group
Stock or certain Preferred Stock. Dividend payments on the Circuit City Group
Stock and on the CarMax Group Stock may 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 is met.
Subject to the prior payment of dividends on any outstanding shares of
Preferred Stock and the foregoing limitations, the Board of Directors may, in
its sole discretion, declare and pay dividends exclusively on the Circuit City
Group Stock, exclusively on the CarMax Group 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.
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 will be able to pay its debts as they become due in the usual
course of business. For the definition of "Outstanding CarMax Fraction,"
see"--Inter-Group Interest."
"Circuit City Group" means, as of any date, (i) the interest of the
Company or any of its subsidiaries on such date in all of the assets,
liabilities and businesses of the Company or any of its subsidiaries (and any
successor companies), other than any assets, liabilities and businesses
attributed 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
as contemplated by clause (iv) below) pursuant to transactions in the ordinary
course of business of both the CarMax Group and the Circuit City Group or
otherwise as the Board of Directors may have directed as permitted by the
Articles; (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
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Issuable with Respect to the Inter-Group Interest; (v) the interest of the
Company or any of its subsidiaries in any business or asset acquired and any
liabilities assumed by the Company 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; (vi) from and after the payment date of
any dividend, redemption or other distribution with respect to shares of CarMax
Group Stock (other than a dividend or other distribution payable in shares of
CarMax Group Stock or in securities of the Company attributed to the CarMax
Group), 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 Group 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 Group 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; and (vii) if the Company pays a dividend or makes a
distribution with respect to shares of the CarMax Group Stock payable in
securities of the Company (other than CarMax Group Stock), an interest in the
CarMax Group equal to the product of the number or amount of such securities so
distributed to holders of CarMax Group Stock multiplied by a fraction the
numerator of which is equal to the Inter- Group Interest Fraction and the
denominator of which is equal to the Outstanding CarMax Fraction (determined as
of the record date for such 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 contemplated by clause (ii) above).
"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 Group 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" means, 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 Superstore, Inc., a
California corporation (the "CarMax Group Companies") as of the date of the
first issuance of CarMax Group Stock; (ii) all assets and liabilities of the
Company 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 contemplated by clause (iv) below) pursuant to transactions in the
ordinary course of business of both the CarMax Group and the Circuit City Group
or otherwise as the Board of Directors may have directed as permitted by the
Articles; (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
Company or any of its subsidiaries in any business or asset acquired and any
liabilities assumed by the Company or any of its subsidiaries outside of the
ordinary course of business and attributed to the CarMax Group by the Board of
Directors as permitted by the Articles; provided, that 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. After the payment date of any dividend, redemption
or other distribution with respect to shares of CarMax Group Stock (other than a
dividend or other distribution payable in shares of CarMax Group Stock or in
securities of the Company attributed to the CarMax Group), 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 Group 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 Group 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. If the Company pays a
dividend or makes a distribution with respect to shares of CarMax Group Stock
payable in securities of the Company (other than CarMax Group Stock), there
shall be excluded from the CarMax Group an interest in the CarMax Group equal to
the product of the number or amount of securities so distributed to holders of
CarMax Group Stock multiplied by the fraction specified in clause (b) of the
preceding sentence (determined as of the record date for such distribution). To
the extent interest is or dividends are paid on securities so distributed, the
CarMax Group shall no longer include a corresponding ratable amount of the kind
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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.
"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 Group 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.
Conversion and Redemption
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
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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 Group Stock to the CarMax
Group Stock, if the Circuit City Group Stock is to be converted into CarMax
Group Stock, or the Market Value Ratio of the CarMax Group Stock to the Circuit
City Group Stock, if the CarMax Group Stock is to be converted into Circuit City
Group 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, will likely consider whether the remaining properties
and assets attributed to the Group subject to the Disposition continue to
constitute a viable business. Other considerations may 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.
The Company may elect to pay the dividend or redemption price referred
to in clause (1)(i) or (1)(ii) of the first paragraph under "--Mandatory
Dividend, Redemption or Conversion of Common Stock" 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.
As used herein:
"Convertible Securities" at any time means any securities of the
Company 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
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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.
"Fair Value" means (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 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.
"Market Capitalization" of any class or series of common stock on
any date means 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.
"Market Value" of a share of any class or series of capital stock
of the Company on any day means 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 NYSE Composite Tape, or, if the shares
of such class or series are not listed or admitted to trading on the
NYSE 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, the Nasdaq
National Market System of the Nasdaq Stock Market ("Nasdaq NMS") or, if
the shares of such class or series are not listed or admitted to
trading on any national securities exchange or quoted on Nasdaq NMS 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 NYSE member firm selected from time to
time by the Company or, if such closing bid and asked prices are not
made available to any such NYSE member firm on such Trading Day, the
Fair Value of a share of such class or series; 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.
"Market Value Ratio of the CarMax Group Stock to the Circuit City
Group Stock" as of any date means the fraction (which may be greater
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than 1/1), expressed as a decimal (rounded to the nearest five decimal
places), of a share of Circuit City Group Stock (or another class or
series of common stock of the Company, if Circuit City Group Stock is
not then Publicly Traded) to be issued in respect of a share of CarMax
Group Stock upon a conversion of CarMax Group Stock into Circuit City
Group Stock (or another class or series of common stock of the
Company), based on the ratio of the Market Value of a share of CarMax
Group Stock to the Market Value of a share of Circuit City Group 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 Group 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 Group 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 Group 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 Group 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 Group 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 Group 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 Group 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 Group Stock (or such other common stock) over the period
of five consecutive Trading Days ending on the 15th Trading Day prior
to such date.
"Market Value Ratio of the Circuit City Group Stock to the CarMax
Group Stock" as of any date means 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 Group Stock (or another class or
series of common stock of the Company, if CarMax Group Stock is not
then Publicly Traded) to be issued in respect of a share of Circuit
City Group Stock upon a conversion of Circuit City Group Stock into
CarMax Group Stock (or another class or series of common stock of the
Company), based on the ratio of the Market Value of a share of Circuit
City Group Stock to the Market Value of a share of CarMax Group 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 Group 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 Group 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 Group 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
Group 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 Group 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 Group 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 Group 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 Group Stock (or such other common
stock) over the period of five consecutive Trading Days ending on the
15th Trading Day prior to such date.
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
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<PAGE>
adjustments and any preferential amounts plus any accumulated and
unpaid dividends in respect of the Preferred Stock attributed to such
Group.
"Publicly Traded" with respect to any security means (i)
registered under the Exchange Act (or any successor provision of law),
and (ii) listed for trading on the NYSE or the American Stock Exchange
(or any national securities exchange registered under Section 7 of the
Exchange Act (or any successor provision of law), that is the successor
to either such exchange) or listed on Nasdaq NMS (or any successor
market system).
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.
"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.
"Trading Day" means each weekday other than any day on which the
relevant series of Common Stock is not traded on any national
securities exchange or quoted in Nasdaq NMS or in the over-the-counter
market.
Conversion of Common Stock at Option of the Company
The Board of Directors may at any time convert each outstanding share
of Circuit City Group Stock into a number of fully paid and nonassessable shares
of CarMax Group Stock (or, if CarMax Group 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 Group 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 Group Stock to the CarMax Group 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 Group Stock into a number of fully paid and nonassessable shares of
Circuit City Group Stock (or, if Circuit City Group Stock is not Publicly Traded
at such time and shares of another class or series of common stock of the
Company (other than CarMax Group 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 Group Stock to the Circuit City
Group Stock as of the fifth Trading Day prior to the date of the notice of such
conversion mailed to such holders.
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The foregoing provisions allow the Company the flexibility to
recapitalize the Common Stock into one series of common stock that would, after
such recapitalization, represent an equity interest in all of the Company's
businesses. The optional exchange could be exercised at any future time if the
Board of Directors determined that, under the facts and circumstances then
existing, an equity structure consisting of two series of common stock was no
longer in the best interests of all of the Company's shareholders. Such exchange
may be exercised, however, at a time that is disadvantageous to the holders of
one of the series of Common Stock. See "Risk Factors -- Factors Relating to
Capital Stock -- 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 Group
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 Group Stock equal to the
Number of Shares Issuable with Respect to the Inter-Group Interest either to (i)
the holders of the Circuit City Group 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 Group 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
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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 less than 35 Trading
Days and not more than 45 Trading Days 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 (i) a statement that all shares of such
Common Stock outstanding on the redemption date will be redeemed, (ii) the
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 on
the date of such notice, (vi) 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, (vii) 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, (viii) 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 (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 and (ix) 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
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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 less
than 35 Trading Days and not more than 45 Trading Days 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 Group
Stock or CarMax Group 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 Group Stock) or shares of common stock of the CarMax
Group Subsidiaries, as the case may be, (ii) the redemption date, (iii) if
CarMax Group 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
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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 Group 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 Group 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 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, 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
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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
The holders of both series of Common Stock and any series of Preferred
Stock outstanding and entitled to vote together with the holders of Common Stock
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
is entitled to vote as a separate voting group. On all matters as to which both
series of Common Stock vote together as a single voting group, (i) each
outstanding share of Circuit City Group Stock is entitled to one vote, and (ii)
each outstanding share of CarMax Group Stock is entitled to the 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 Group 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 Group
Stock over the next preceding five-Trading Day period, (3) two times the average
Market Value of the CarMax Group Stock over the next preceding five-Trading Day
period and (4) the average Market Value of the CarMax Group 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 Group Stock over the five-Trading Day
period ending on such 10th Trading Day, (2) three times the average Market Value
of the Circuit City Group Stock over the next preceding five-Trading Day period,
(3) two times the average Market Value of the Circuit City Group Stock over the
next preceding five-Trading Day period and (4) the average Market Value of the
Circuit City Group 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
Group 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 Group Stock
for the periods specified in clause (B) above were $30, $40, $50 and $60,
respectively, each share of Circuit City Group Stock would have one vote and
each share of CarMax Group Stock would have 0.50 votes based on the following
calculation:
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(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 Group Stock as CarMax Group
Stock are issued and outstanding, the shares of Circuit City Group Stock and
CarMax Group Stock would represent approximately 89% and 11%, respectively, of
the total voting power.
The Circuit City Group Stock represents a substantial majority of the
voting power of all shares of Common Stock entitled to vote in the election of
directors.
The Company sets forth the number of outstanding shares of Circuit City
Group Stock and CarMax Group Stock in its Annual and Quarterly Reports filed
pursuant to 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 Group Stock and the CarMax Group Stock.
The relative voting rights of the Circuit City Group Stock and the
CarMax Group Stock 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
Group Stock and the CarMax Group 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.
The holders of Circuit City Group Stock and CarMax Group Stock 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 is also required. Accordingly, if a separate vote on a matter by
the holders of either the Circuit City Group Stock or CarMax Group 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 Group Stock and the CarMax Group Stock. Conversely, if a separate vote of
the holders of either Circuit City Group Stock or CarMax Group 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 Group Stock and
CarMax Group Stock may be required for approval. In such instance, the holders
of either the Circuit City Group Stock or CarMax Group 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 Group Stock and CarMax Group 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 --
Factors Relating to Capital Stock -- Limited Separate Shareholder Voting Rights;
Effects on Voting Power."
The Board of Directors has 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 Group Stock or CarMax Group 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.
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Liquidation
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 Group
Stock and CarMax Group 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 Group Stock has one Liquidation Unit and each share
of CarMax Group Stock has .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. No
holders of Circuit City Group Stock will have any special right to receive
specific assets attributable to the Circuit City Group and no holder of CarMax
Group 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 Group Stock or CarMax Group Stock or declares a
dividend or other distribution of shares of Circuit City Group Stock or CarMax
Group Stock to holders of such series of Common Stock, the number of Liquidation
Units of the Circuit City Group Stock or the number of Liquidation Units of the
CarMax Group 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 Group Stock, an adjustment would be made
so that either the Circuit City Group Stock would be entitled to 0.5 of a
Liquidation Unit per share or the CarMax Group 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 Group
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
Any determinations made in good faith by the Board of Directors under
any provision described above and any determinations with respect to any Group
or the rights of holders of shares of either series of Common Stock, will 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 Group Stock nor the holders of
the CarMax Group Stock have any preemptive rights or any rights to convert their
shares into any other securities of the Company.
Inter-Group Interest
The Circuit City Group holds a percentage interest in the equity of the
CarMax Group. The "Outstanding CarMax Fraction" means the percentage interest in
the CarMax Group represented at any time by the outstanding shares of CarMax
Group 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 always equals 100%. The "Number of Shares Issuable with Respect to the
Inter-Group Interest" means the number of shares of CarMax Group 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 is
not represented by actual shares of CarMax Group Stock and can not be voted by
the Circuit City Group. As of May 31, 1998, the Outstanding CarMax Fraction was
equal to 22.9%, the Inter-Group Interest Fraction was equal to 77.1% and the
Number of Shares Issuable with Respect to the Inter-Group Interest was
75,440,000.
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At the time of any sale of CarMax Group Stock, the Board of Directors
will, 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 Group
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 Group 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 CarMax Fraction would be
proportionately increased. If the net proceeds of any sale of CarMax Group 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 CarMax Fraction would
increase accordingly.
The Board of Directors reserves the right to issue shares of CarMax
Group Stock as a distribution on the Circuit City Group Stock. 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 Group 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 Group 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 Group 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 Group Stock between the Groups and the choice of
which Group's funds are to be used to repurchase shares of CarMax Group 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 Group 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
Group 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 Group 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.
The Number of Shares Issuable with Respect to the Inter-Group Interest
shall from time to time 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 Group
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Stock or any dividend or other distribution of shares of CarMax Group
Stock to holders of shares of CarMax Group Stock or any
reclassification of CarMax Group 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 Group Stock issued or
sold by the Company 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 Group 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 Group
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 Group Stock, (4) the number of
shares of CarMax Group Stock issued upon the conversion, exchange or
exercise of any Convertible Securities issued by the Company as a
dividend or other distribution (including in connection with any
reclassification or exchange of shares) to holders of Circuit City
Group 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 Group Stock as of the date of such transfer; and
(iii) increased by (1) the number of outstanding shares of CarMax
Group Stock repurchased by the Company for consideration that is
attributed as contemplated by the definition of "Circuit City Group"
set forth above 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) therefore
attributed as contemplated by the definition of "Circuit City Group"
set forth above 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 Group Stock as of the date of such
contribution.
Rights Agreement
On April 14, 1998, the Board of Directors declared a dividend
distribution of (1) one Preferred Stock Purchase Right (a "Circuit City Right")
for each outstanding share of the Circuit City Group Stock and (2) one Preferred
Stock Purchase Right (a "CarMax Right") for each outstanding share of the CarMax
Group 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").
The Circuit City Rights and the CarMax Rights (collectively the
"Rights") are currently attached to and represented by the certificates
representing outstanding shares of Circuit City Group Stock and CarMax Group
Stock, respectively. However, the Rights will separate from the Common Stock and
a distribution date ("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.
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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 Group Stock (or other securities or assets,
as noted above) for $250. Assuming that the Circuit City Group 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 Group Stock for $250.
The holder of each valid CarMax Right would have a similar right under such
circumstances to purchase $200 worth of CarMax Group 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
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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 Articles 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 Group 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 Group 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 Group 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 Group 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 Group Stock are exchanged, the same amount received per share of
Circuit City Group 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 Group Stock
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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
Group 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 Group Stock are exchanged, the same amount received per share
of CarMax Group 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. A copy of
the Rights Agreement previously has been filed with the Commission as an Exhibit
to a Registration Statement on Form 8-A, and is incorporated herein by
reference.
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 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 designated as Series E or
Series F Preferred Stock and 800,000 of those are reserved for issuance in
connection with the Company's 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 Rights Agreement permits 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 " -- Rights
Agreement."
The Company is subject to the "affiliated transactions" and "control
share acquisitions" statutes of the VSCA, which are summarized below.
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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
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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.
CERTAIN MANAGEMENT AND ALLOCATION POLICIES
The Circuit City Group has accounted for its interest in the CarMax
Group in a manner similar to the equity method of accounting. Generally accepted
accounting principles require that the CarMax Group be consolidated with the
Circuit City Group. Except for the effects of not consolidating the Circuit City
Group and the CarMax Group, the Company prepares financial statements in
accordance with generally accepted accounting principles, consistently applied,
for both the Circuit City Group and the CarMax Group, and these financial
statements, taken together, comprise all of the accounts included in the
corresponding consolidated financial statements of the Company. The financial
statements of each of the Groups principally reflect the financial position,
results of operations and cash flows of the businesses included therein. The
Group financial statements also include allocated portions of the Company's
corporate general and administrative costs and other shared services.
Notwithstanding such allocations for the purpose of preparing each of the
Group's financial statements, holders of Circuit City Group Stock and CarMax
Group Stock are subject to all of the risks associated with an investment in the
Company and all of its businesses, assets and liabilities. See "Risk Factors --
Factors Relating to Capital Stock -- Shareholders of One Group; Financial
Effects on One Group Could Affect the Other."
Principal corporate activities are allocated to the Groups based on
methods that management of the Company believes to be reasonable and are
reflected in their respective financial statements as follows:
(i) Most financial activities are managed by the Company on a
centralized basis. Such financial activities include the investment of
surplus cash, and the issuance and repayment of short-term and
long-term debt and may include the issuance and repurchase of any
Preferred Stock. In the event that cash or other property allocated to
one Group is transferred to the other Group (other than transfers made
with respect to the Inter-Group Interest upon the payment of any
dividend or other distribution on CarMax Group Stock), such transfer
will be accounted for in one of the following ways, as determined by
the Board of Directors: (A) as a reallocation of pooled debt (as
defined below) or Preferred Stock, as described in paragraph (ii)
below, (B) as a short-term or long-term loan from one Group to the
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other Group, as described in paragraph (iii) below, (C) as an increase
or decrease in the Number of Shares Issuable with Respect to the
Inter-Group Interest, as described in paragraph (iv) below, or (D) as a
sale of assets between the two Groups. There are no specific criteria
to determine which of the foregoing would be applied to a particular
transfer of cash or property from one Group to the other Group. Such
determination will be made by the Board of Directors in the exercise of
its business judgment based upon all relevant circumstances, including
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. All transfers of
material assets from one Group to the other Group will be made on a
fair value basis for the foregoing purposes, as determined by the Board
of Directors.
(ii) Debt of the Company is either allocated between the
Groups ("pooled debt") or is allocated in its entirety to one Group.
Preferred Stock, if issued, will be allocated in a similar manner. Cash
allocated to one Group that is used to repay pooled debt or redeem
Preferred Stock will decrease such Group's allocated portion of the
pooled debt or Preferred Stock, respectively. Cash or other property
allocated to one Group that is transferred to the other Group will, if
so determined by the Board of Directors, decrease the transferring
Group's allocated portion of the pooled debt or Preferred Stock and,
correspondingly, increase the recipient Group's allocated portion of
the pooled debt or Preferred Stock. The pooled debt bears interest at a
rate based on the weighted average interest rate of such debt
calculated on a periodic basis and applied to the average pooled debt
balance during the period. Preferred Stock, if issued and if pooled in
a manner similar to the pooled debt, will bear dividends at a rate
based on the weighted average dividend rate of such Preferred Stock
similarly calculated and applied. Any expense related to debt or
Preferred Stock of the Company that is allocated in its entirety to
either Group will be allocated in whole to such Group, and any expense
related to increases in pooled debt or Preferred Stock will be
reflected in the weighted average interest or dividend rate of such
pooled debt or Preferred Stock as a whole.
(iii) Cash or other property allocated to one Group that is
transferred to the other Group, may, if so determined by the Board of
Directors, be accounted for either as a short-term loan or as a
long-term loan. The Board of Directors establishes the terms on which
loans between the Groups are made, including interest rate,
amortization schedule, maturity and redemption terms.
(iv) Cash or other property allocated to the Circuit City
Group that is contributed as additional equity to the CarMax Group will
increase the Number of Shares Issuable with Respect to the Inter-Group
Interest and, accordingly, will 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, if so determined by the Board of Directors, will
decrease the Number of Shares Issuable with Respect to the Inter-Group
Interest and, accordingly, will decrease the Inter-Group Interest
Fraction and increase the Outstanding CarMax Fraction.
(v) All financial impacts of issuances of shares of Circuit
City Group Stock or shares of CarMax Group Stock, the proceeds of which
are attributed to the Inter-Group Interest of the Circuit City Group,
will be reflected entirely in the financial statements of the Circuit
City Group. All financial impacts of issuances of shares of CarMax
Group Stock, the proceeds of which are allocated to the CarMax Group,
will be reflected entirely in the financial statements of the CarMax
Group. Financial impacts of dividends or other distributions on, and
purchases of, shares of Circuit City Group Stock or CarMax Group Stock
are reflected entirely in the respective financial statements of the
Circuit City Group and the CarMax Group, except that so long as the
Circuit City Group has an Inter-Group Interest, the Circuit City Group
financial statements are credited, and the CarMax Group financial
statements are charged, with an amount that is proportionate to the
aggregate amount paid in respect of any such dividend on, or other
distribution with respect to, the CarMax Group Stock.
(vi) Corporate general and administrative costs and other
shared services are generally allocated to the Groups based upon
utilization of such services by each Group. Where determinations based
on utilization alone are impracticable, other methods and criteria that
management believes to be equitable and to provide a reasonable
estimate of the cost attributable to each Group are used.
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(vii) Federal income taxes, which are determined on a
consolidated basis, are allocated to each Group in accordance with the
Company's tax allocation policy and reflected in the financial
statements for each Group. In general, the consolidated tax provision
and related tax payments or refunds are allocated between the Groups,
for Group financial statement purposes, based principally upon the
financial income, taxable income, credits and other amounts directly
related to the respective Group. Tax benefits that cannot be used by
the Group generating such attributes, but can be utilized on a
consolidated basis, are allocated to the Group that generated such
benefits. As a result, the allocated Group amounts of taxes payable or
refundable are not necessarily comparable to those that would have
resulted if the Groups had filed separate tax returns. State income
taxes generally are computed on a separate company basis.
The above policies may be modified or rescinded, or additional policies
may be adopted, in the sole discretion of the Board of Directors, without
approval of the shareholders, although the Board of Directors has no present
plans to do so. Any determination of the Board of Directors to modify or rescind
such policies, or to adopt additional policies, including any such decision that
would have disparate effects upon holders of the two series of Common Stock,
will be made by the Board of Directors in its good faith business judgment of
the Company's best interests, taking into consideration the interests of all
common shareholders. See "Risk Factors -- Factors Relating to Capital Stock --
Fiduciary Duties of the Board of Directors; No Definitive Precedent Under
Virginia Law."
STOCK TRANSFER AGENT AND REGISTRAR
Norwest Bank Minnesota, N.A. acts as the registrar and transfer agent
for both the Circuit City Group Stock and the CarMax Group Stock.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of certain of the material United States
federal income tax consequences of the ownership and disposition of the Circuit
City Group Stock. This discussion does not deal with all aspects of United
States federal income taxation, nor does it address the tax treatement of
holders subject to special tax treatment, such as foreign corporations and
nonresident alien individuals. Prospective investors are urged to consult their
tax advisors regarding the United States federal, state, local and non-United
States income and other tax consequences of owning and disposing of the Circuit
City Group Stock.
In the opinion of McGuire, Woods, Battle & Boothe LLP, tax counsel to
the Company, the Circuit City Group Stock will be treated for federal income tax
purposes as common stock of the Company. Accordingly, for federal income tax
purposes, (i) a holder of Circuit City Group Stock will not recognize any
income, gain or loss upon the exchange of Circuit City Group Stock for CarMax
Group Stock either pursuant to the Company's option or upon the Disposition of
all or substantially all of the assets of the Circuit City Group, except for
cash received in lieu of fractional shares; and (ii) the tax basis of the CarMax
Group Stock received in such exchange will be the tax basis of the Circuit City
Group Stock exchanged therefor, and, assuming that the exchanged Circuit City
Group Stock is held as a capital asset, the holding period of the CarMax Group
Stock exchanged therefor will include the holding period of such Circuit City
Group Stock.
The Internal Revenue Service (the "Service") has announced that it will
not issue advance rulings on the classification of an instrument that has
certain voting and liquidation rights in an issuing corporation but whose
dividend rights are determined by reference to the earnings of a segregated
portion of the issuing corporation's assets, including assets held by a
subsidiary. In addition, there are no court decisions or other authorities that
bear directly on transactions similar to the offering. It is possible,
therefore, that the Service could assert that the Circuit City Group Stock
represents property other than stock of the Company. If the Circuit City Group
Stock were treated as property other than stock of the Company, the Company or
its subsidiaries (i) could recognize a significant taxable gain on the issuance
of Circuit City Group Stock in an amount equal to the excess of the fair market
value of such stock over its federal income tax basis to the Company or such
subsidiaries and (ii) the Company could lose its ability to file consolidated
federal income tax returns (one consequence being that any dividends paid or
deemed to be paid by the Circuit City Group to the Company would be taxable to
the Company, subject to any applicable dividends received deduction). As
indicated above, however, it is the opinion of counsel that the Service would
not prevail in any such assertion.
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The foregoing discussion is for general information only. It is based
on the Internal Revenue Code of 1986, as amended (the "Code"), United States
Treasury Department regulations, published positions of the Service and court
decisions now in effect, all of which are subject to change. In particular,
Congress could enact legislation affecting the treatment of stock with
characteristics similar to the Common Stock or the United States Treasury
Department could change the current law in future regulations, including
regulations issued pursuant to its authority under Section 337(d) of the Code.
Any future legislation or regulations could apply retroactively.
VALIDITY OF SECURITIES
The validity of the Shares to which this Prospectus relates will be
passed upon for the Company by McGuire, Woods, Battle & Boothe LLP, Richmond,
Virginia, which serves as general counsel to the Company. Lawyers of McGuire,
Woods, Battle & Boothe LLP own approximately 11,000 shares of Common Stock.
EXPERTS
The (i) consolidated financial statements of the Company as of February
28, 1998 and 1997, and for each of the fiscal years in the three-year period
ended February 28, 1998 and the related financial statement schedule
incorporated by reference herein, (ii) financial statements of the Circuit City
Group as of February 28, 1998 and 1997, and for each of the fiscal years in the
three-year period ended February 28, 1998 and the related financial statement
schedule incorporated by reference herein, (iii) financial statements of the
CarMax Group as of February 28, 1998 and 1997, and for each of the fiscal years
in the three-year period ended February 28, 1998 and the related financial
statement schedule incorporated by reference herein, have been incorporated
herein in reliance upon the reports of KPMG Peat Marwick LLP, independent
auditors, incorporated by reference herein and upon the authority of said firm
as experts in accounting and auditing.
The reports of KPMG Peat Marwick LLP covering the Circuit City Group
financial statements and schedule, referred to above, include a qualification
related to the effects of not consolidating the CarMax Group with the Circuit
City Group as required by generally accepted accounting principles.
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GLOSSARY OF DEFINED TERMS
Set forth below is a list of certain defined terms used herein and the
page of this Prospectus on which each such term is defined.
<TABLE>
<CAPTION>
Page on which
Term is defined
Term in the Prospectus
- ----- ------------------
<S> <C>
Acquiring Person................................................................................. 36
Affiliated Transactions.......................................................................... 40
Articles ........................................................................................ 13
Asset Purchase Agreement......................................................................... 19
CarMax........................................................................................... 4
CarMax Group..................................................................................... 22
CarMax Group Available Dividend Amount........................................................... 21
CarMax Group Companies........................................................................... 22
CarMax Group Net Earnings (Loss)................................................................. 22
CarMax Group Stock............................................................................... 3
CarMax Group Subsidiaries........................................................................ 28
CarMax Right..................................................................................... 36
Chrysler......................................................................................... 4
Circuit City Group............................................................................... 21
Circuit City Group Available Dividend Amount..................................................... 21
Circuit City Group Net Earnings (Loss)........................................................... 22
Circuit City Group Stock......................................................................... 1
Circuit City Group Subsidiaries.................................................................. 28
Circuit City Right............................................................................... 36
Code ........................................................................................ 44
Commission....................................................................................... 2
Common Stock..................................................................................... 4
Company.......................................................................................... 4
Continuing Directors............................................................................. 39
Control Share Acquisition........................................................................ 40
Convertible Securities........................................................................... 24
Disinterested Director........................................................................... 40
Disposition...................................................................................... 23
Distribution Date................................................................................ 36
Divx ........................................................................................ 4
Exchange Act..................................................................................... 2
FNAC ........................................................................................ 9
Fair Value....................................................................................... 25
Franchise Agreements............................................................................. 11
Inter-Group Interest............................................................................. 34
Inter-Group Interest Fraction.................................................................... 34
Interested Shareholder........................................................................... 40
Liquidation Unit................................................................................. 6
Market Capitalization............................................................................ 25
Market Value..................................................................................... 25
Market Value Ratio of the CarMax Stock to the Circuit City Stock................................. 25
Market Value Ratio of the Circuit City Stock to the CarMax Stock................................. 26
Nasdaq NMS....................................................................................... 25
Net Proceeds..................................................................................... 26
Number of Shares Issuable with Respect to the Inter-Group Interest............................... 7
NYSE............................................................................................. 1
-45-
<PAGE>
Outstanding CarMax Fraction...................................................................... 6
Preferred Stock.................................................................................. 4
Publicly Traded.................................................................................. 27
Redemption Price................................................................................. 38
Related Business Transaction..................................................................... 27
Rights ........................................................................................ 36
Rights Agreement................................................................................. 36
Selling Stockholder.............................................................................. 19
Series E Preferred Stock......................................................................... 20
Series F Preferred Stock......................................................................... 20
Series E Purchase Price.......................................................................... 36
Series F Purchase Price.......................................................................... 36
Service ........................................................................................ 43
Shares ........................................................................................ 1
Stock Acquisition Date........................................................................... 36
Trading Day...................................................................................... 27
VSCA ........................................................................................ 13
</TABLE>
-46-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
SEC registration fee..................................... $ 424
NYSE listing fee......................................... 1,500
Accountants' fees and expenses........................... 10,000
Attorneys' fees and expenses............................. 50,000
Printing and engraving expenses.......................... 0
Miscellaneous............................................ 0
Total............................................... $ 61,924
- --------------
All fees and expenses other than the SEC registration fee and the NYSE
listing fee are estimated.
Item 15. Indemnification of Directors and Officers
The laws of the Commonwealth of Virginia pursuant to which the Company is
incorporated permit it to indemnify its officers and directors against certain
liabilities with the approval of its shareholders. The Amended and Restated
Articles of Incorporation of the Company, as amended, which have been approved
by its shareholders, provide for the indemnification of each director and
officer (including former directors and officers and each person who may have
served at the request of the Company as a director or officer of any other legal
entity and, in all such cases, his or her heirs, executors and administrators)
against liabilities (including expenses) reasonably incurred by him or her in
connection with any actual or threatened action, suit or proceeding to which he
or she may be made a party by reason of his or her being or having been a
director of officer of the Company, except in relation to any action, suit or
proceeding in which he or she has been adjudged liable because of willful
misconduct or a knowing violation of the criminal law.
The Company has purchased directors' and officers' liability insurance
policies. Within the limits of their coverage, the policies insure (1) the
directors and officers of the Company and its subsidiaries against certain
losses resulting from claims against them in their capacities as directors and
officers to the extent that such losses are not indemnified by the Company and
(2) the Company to the extent that it indemnifies such directors and officers
for losses as permitted under the laws of Virginia.
Item 16. Exhibits
Exhibit
No. Document
4.1 Amended and Restated Articles of Incorporation of the Company,
effective February 3, 1997, filed as Exhibit 4.1 to the Company's
Registration Statement on Form S-8 (Registration No. 333-22759),
filed March 4, 1997, are expressly incorporated herein by this
reference.
4.2 Articles of Amendment to the Company's Amended and Restated
Articles of Incorporation, effective April 28, 1998, filed as
Exhibit 4 to Form 8-A filed April 28, 1998 (File No. 1-5767) are
expressly incorporated herein by this reference.
4.3 (a) Form of Certificate of Circuit City Stores, Inc. - CarMax Group
Common Stock, filed as Exhibit 4.3(a) to the Company's
Registration Statement on Form S-3 (Registration No. 333-15995) is
expressly incorporated herein by this reference.
4.3 (b) Form of Certificate of Circuit City Stores, Inc. - Circuit City
Group Common Stock, filed as Exhibit 4.3(b) to the Company's
Registration Statement on Form S-3 (Registration No. 333-15995) is
expressly incorporated herein by this reference.
II-1
<PAGE>
4.4 Bylaws of the Company, as amended and restated August 19, 1997,
filed as Exhibit 3(i) to the Company's Quarterly Report on Form
10-Q for the quarter ended August 31, 1997, (File No. 1-5767) are
expressly incorporated herein by this reference.
4.5 Rights Agreement dated April 14, 1998, between the Company and
Norwest Bank Minnesota, N.A., as Rights Agent, filed as Exhibit 1
to the Company's 8-A filed on April 28, 1998, is expressly
incorporated herein by this reference.
5.1 Opinion and consent of McGuire, Woods, Battle & Boothe LLP,
regarding the legality of the Common Stock being registered.
8.1 Opinion and consent of McGuire, Woods, Battle & Boothe LLP as to
certain tax matters.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consents of McGuire, Woods, Battle & Boothe LLP (included in
Exhibits 5.1 and 8.1).
24 Powers of Attorney.
Item 17. Undertakings
1. The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) under the Securities
Act of 1933 if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or 15(d) of the Exchange Act that are incorporated by reference in
the registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
II-2
<PAGE>
2. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrants' annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
3. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Company certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form S-3 and has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Richmond and Commonwealth of Virginia, on June 10, 1998.
CIRCUIT CITY STORES, INC.
By: /s/ Michael T. Chalifoux
------------------------
Michael T. Chalifoux
Senior Vice President,
Chief Financial Officer,
Corporate Secretary and Director
Pursuant to the requirements of the Securities Act, this registration
statement has been signed below by the following persons in the capacities
listed on this the 10th of June, 1998.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C>
Richard L. Sharp* Chief Executive Officer June 10, 1998
- ---------------------------------- and Chairman of the Board
Richard L. Sharp
Alan L. Wurtzel* Vice Chairman of the Board June 10, 1998
- ---------------------------------- and Director
Alan L. Wurtzel
/s/ Michael T. Chalifoux Senior Vice President, Chief June 10, 1998
- ---------------------------------- Financial Officer, Corporate
Michael T. Chalifoux Secretary and Director
Richard N. Cooper* Director June 10, 1998
- ----------------------------------
Richard N. Cooper
Barbara S. Feigin* Director June 10, 1998
- ----------------------------------
Barbara S. Feigin
Robert S. Jepson, Jr.* Director June 10, 1998
- ----------------------------------
Robert S. Jepson, Jr.
Hugh G. Robinson* Director June 10, 1998
- ----------------------------------
Hugh G. Robinson
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Walter J. Salmon* Director June 10, 1998
- ----------------------------------
Walter J. Salmon
Mikael Salovaara* Director June 10, 1998
- ----------------------------------
Mikael Salovaara
- ---------------------------------- Director June 10, 1998
John W. Snow
Edward Villaneuva* Director June 10, 1998
- ----------------------------------
Edward Villaneuva
Philip J. Dunn* Vice President, Treasurer, June 10, 1998
- ---------------------------------- Corporate Controller and
Philip J. Dunn Chief Accounting Officer
*By: /s/ Michael T. Chalifoux
- ---------------------------------
Name: Michael T. Chalifoux
Title: Attorney-in-Fact
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
Exhibit
No. Document
- ------- --------
4.1 Amended and Restated Articles of Incorporation of the Company,
effective February 3, 1997, filed as Exhibit 4.1 to the Company's
Registration Statement on Form S-8 (Registration No. 333-22759),
filed March 4, 1997, are expressly incorporated herein by this
reference.
4.2 Articles of Amendment to the Company's Amended and Restated Articles
of Incorporation, effective April 28, 1998, filed as Exhibit 4 to
Form 8-A filed April 28, 1998 (File No. 1-5767) are expressly
incorporated herein by this reference.
4.3(a) Form of Certificate of Circuit City Stores, Inc. - CarMax Group
Common Stock, filed as Exhibit 4.3(a) to the Company's Registration
Statement on Form S-3 (Registration No. 333-15995) is expressly
incorporated herein by this reference.
4.3(b) Form of Certificate of Circuit City Stores, Inc. - Circuit City Group
Common Stock, filed as Exhibit 4.3(b) to the Company's Registration
Statement on Form S-3 (Registration No. 333-15995) is expressly
incorporated herein by this reference.
4.4 Bylaws of the Company, as amended and restated August 19, 1997, filed
as Exhibit 3(i) to the Company's Quarterly Report on Form 10-Q for
the quarter ended August 31, 1997, (File No. 1-5767) are expressly
incorporated herein by this reference.
4.5 Rights Agreement dated April 14, 1998, between the Company and
Norwest Bank Minnesota, N.A., as Rights Agent, filed as Exhibit 1 to
the Company's 8-A filed on April 28, 1998, is expressly incorporated
herein by this reference.
5.1 Opinion and consent of McGuire, Woods, Battle & Boothe LLP, regarding
the legality of the Common Stock being registered.
8.1 Opinion and consent of McGuire, Woods, Battle & Boothe LLP as to
certain tax matters.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consents of McGuire, Woods, Battle & Boothe LLP (included in Exhibits
5.1 and 8.1).
24 Powers of Attorney.
II-6
Exhibit 5.1
June 10, 1998
Circuit City Stores, Inc.
9950 Mayland Drive
Richmond, Virginia 23233-1464
Circuit City Stores, Inc. (the "Company")
Ladies and Gentlemen:
You propose to file as soon as possible with the Securities and Exchange
Commission a registration statement on Form S-3 (the "Registration Statement").
The Registration Statement covers (i) 32,344 shares of Circuit City Stores, Inc.
- -- Circuit City Group Common Stock, par value $.50 per share (the "Circuit City
Group Stock"), (ii) 32,344 Rights to Purchase Preferred Stock, Series E, par
value $20.00 per share, attached in equal number to the shares of Circuit City
Group Stock ("Circuit City Rights"), (iii) an indeterminate number of shares of
Circuit City Stores, Inc. -- CarMax Group Common Stock, par value $.50 per share
(the "CarMax Group Stock") issuable upon any conversion of the shares of Circuit
City Group Stock and (iv) an indeterminate number of Rights to Purchase
Preferred Stock, Series F, par value $20.00 per share, attached in equal number
of shares of CarMax Group Stock ("CarMax Rights").
In rendering this opinion, we have examined such certificates of public
officials, certificates of officers of the Company, documents and records of the
Company (or copies of such documents and records certified to our satisfaction)
and such other documents, certificates, records and papers as we have deemed
necessary as a basis for such opinion. We assume for purposes of this opinion
that prior to the issuance of the CarMax Group Stock upon a conversion of the
Circuit City Group Stock, the Company takes all actions necessary to authorize
such conversion (and the issuance of the CarMax Group Stock in connection
therewith) in accordance with the Amended and Restated Articles of Incorporation
of the Company, as amended. We also assume for the purposes of this opinion that
at the time of such conversion, the Company has a sufficient number of
authorized but unissued shares of CarMax Group Stock, and, if CarMax Rights are
issuable in connection therewith, Series F Preferred Stock, respectively, to
effect such conversion.
Based on the foregoing and on such legal considerations as we deem relevant,
we are of the opinion that:
1. The 32,344 shares of Circuit City Group Stock have been validly issued and
are fully paid and nonassessable.
<PAGE>
Circuit City Stores, Inc.
June 10, 1998
Page 2
2. The shares of CarMax Group Stock, when issued upon conversion of the
Circuit City Stock in accordance with the Amended and Restated Articles of
Incorporation of the Company, as amended, will be validly issued, fully paid and
nonassessable.
3. All corporate actions required under the laws of the Commonwealth of
Virginia have been taken for the 32,344 Circuit City Rights to be validly
issued.
4. All corporate actions required under the laws of the Commonwealth of
Virginia have been taken for the CarMax Rights, if and when issued upon
conversion of the Circuit City Group Stock in accordance with the terms and
provisions of the Rights Agreement dated April 14, 1998 between the Company and
Norwest Bank Minnesota, N.A., as rights agent, to be validly issued.
We consent to the use of this opinion as Exhibit 5.1 in the Registration
Statement.
Sincerely,
/s/ McGuire, Woods, Battle & Boothe LLP
Exhibit 8.1
June 10, 1998
Circuit City Stores, Inc.
9950 Mayland Drive
Richmond, VA 23233
Ladies and Gentlemen:
You have requested our opinion regarding the material federal income tax
consequences of the ownership and disposition of shares of a series of the
Common Stock, par value $.50 per share, of Circuit City Stores, Inc. (the
"Company") designated as the Circuit City Stores, Inc. Circuit City Group Common
Stock (the "Circuit City Group Stock"), as more fully described in the Company's
Registration Statement on Form S-3 filed with the Securities and Exchange
Commission (the "Registration Statement") and the Prospectus included in the
Registration Statement. Defined terms not otherwise defined herein have the
meaning ascribed to them in the Registration Statement.
Based upon our review of the Registration Statement and such other documents
as we have deemed necessary, we are of the opinion that, assuming the terms of
the Circuit City Group Stock and CarMax Group Stock are as described in the
Registration Statement and all events occur as contemplated in the Registration
Statement and subject to the same qualifications and limitations described
therein:
(i) the CarMax Group Stock and the Circuit City Group Stock each will
be treated as common stock of the Company for United States federal
income tax purposes;
(ii) a holder of Circuit City Group Stock will not recognize any
income, gain or loss upon the exchange of Circuit City Group Stock for
CarMax Group Stock, whether pursuant to the Company's option or upon
the disposition of all or substantially all of the assets of the
Circuit City Group, except for cash received in lieu of fractional
shares; and
(iii) the tax basis of CarMax Group Stock received in such an exchange
for Circuit City Group Stock will be the tax basis of the Circuit City
Group Stock exchanged therefor, and, assuming that the Circuit City
Group Stock is held as a capital asset, the holding period of such
CarMax Group Stock will include the holding period of such Circuit City
Group Stock.
The foregoing opinion is based on current provisions of the Internal
Revenue Code of 1986, as amended, the Treasury Regulations promulgated
thereunder (including proposed Treasury Regulations), and administrative rulings
of the Internal Revenue Service and judicial decisions thereunder, any of which
may be changed at any time with retroactive effect. We express no opinion either
as to any matters not specifically covered by the foregoing or as to the effect
on the matters covered by this opinion of the laws of any other jurisdiction.
Additionally, we undertake no obligation to update this opinion in the event
there is either a change in the legal authorities, the facts of the documents on
which this opinion is based, or an inaccuracy in any of the representations upon
which we have relied in rendering this opinion.
<PAGE>
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to all references to our firm included in the related
Prospectus and in any amendment or supplement to the Prospectus. We do not admit
by giving this consent that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ McGuire, Woods, Battle & Boothe LLP
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Circuit City Stores, Inc.:
We consent to the use of our reports dated April 3, 1998, relating to the
consolidated balance sheets of Circuit City Stores, Inc. and subsidiaries as of
February 28, 1998 and 1997 and the related consolidated statements of earnings,
stockholders' equity and cash flows for each of the fiscal years in the
three-year period ended February 28, 1998, and the related financial statement
schedule, which reports are included, or incorporated by reference from the
annual report to stockholders, in the February 28, 1998 annual report on Form
10-K of Circuit City Stores, Inc., which annual report is incorporated by
reference in this Registration Statement on Form S-3.
We also consent to the use of our reports dated April 3, 1998, relating to the
balance sheets of the Circuit City Group as of February 28, 1998 and 1997 and
the related statements of earnings, group equity and cash flows for each of the
fiscal years in the three-year period ended February 28, 1998, and the related
financial statement schedule, which reports are included, or incorporated by
reference from the annual report to stockholders, in the February 28, 1998
annual report on Form 10-K of Circuit City Stores, Inc., which annual report is
incorporated by reference in this Registration Statement on Form S-3. Our
reports on the Circuit City Group dated April 3, 1998, include a qualification
related to the effects of not consolidating the CarMax Group with the Circuit
City Group as required by generally accepted accounting principles.
We also consent to the use of our reports dated April 3, 1998, relating to the
balance sheets of the CarMax Group as of February 28, 1998 and 1997 and the
related statements of operations, group equity (deficit) and cash flows for each
of the fiscal years in the three-year period ended February 28, 1998, and the
related financial statement schedule, which reports are included, or
incorporated by reference from the annual report to stockholders, in the
February 28, 1998 annual report on Form 10-K of Circuit City Stores, Inc., which
annual report is incorporated by reference in this Registration Statement on
Form S-3.
We also consent to the reference to our firm under the heading "Experts" in the
prospectus.
/s/ KPMG Peat Marwick LLP
Richmond, Virginia
June 9, 1998
Exhibit 24
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Richard L. Sharp and
Michael T. Chalifoux, each acting singly, his or her attorneys-in-fact, with
full power to act without the other, to execute on his or her behalf,
individually and in his or her capacity as an officer and/or director of Circuit
City Stores, Inc. (the "Company"), and to file any documents referred to below
relating to the registration for resale of shares acquired by Goldberg Company,
Inc. ("Goldberg") in connection with the acquisition by the Company of certain
assets of Goldberg, such documents being: registration statements on Form S-3 to
be filed with the Securities and Exchange Commission; such statements with,
and/or applications to, the regulatory authorities of any state in the United
States as may be necessary to permit such shares to be offered in such states;
any and all other documents required to be filed with respect thereto with any
regulatory authority; and any and all amendments (post-effective and
pre-effective) to any of the foregoing, with all exhibits and documents required
to be filed in connection therewith.
The undersigned further grants unto said attorneys and each of them
full power and authority to perform each and every act necessary to be done in
order to accomplish the foregoing as fully as he himself or she herself might
do.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
as of this 14th day of April, 1998.
/s/ Robert S. Jepson, Jr.
-------------------------
Robert S. Jepson, Jr.
<PAGE>
Exhibit 24
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Richard L. Sharp and
Michael T. Chalifoux, each acting singly, his or her attorneys-in-fact, with
full power to act without the other, to execute on his or her behalf,
individually and in his or her capacity as an officer and/or director of Circuit
City Stores, Inc. (the "Company"), and to file any documents referred to below
relating to the registration for resale of shares acquired by Goldberg Company,
Inc. ("Goldberg") in connection with the acquisition by the Company of certain
assets of Goldberg, such documents being: registration statements on Form S-3 to
be filed with the Securities and Exchange Commission; such statements with,
and/or applications to, the regulatory authorities of any state in the United
States as may be necessary to permit such shares to be offered in such states;
any and all other documents required to be filed with respect thereto with any
regulatory authority; and any and all amendments (post-effective and
pre-effective) to any of the foregoing, with all exhibits and documents required
to be filed in connection therewith.
The undersigned further grants unto said attorneys and each of them
full power and authority to perform each and every act necessary to be done in
order to accomplish the foregoing as fully as he himself or she herself might
do.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
as of this 14th day of April, 1998.
/s/ Philip J. Dunn
-------------------
Philip J. Dunn
<PAGE>
Exhibit 24
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Richard L. Sharp and
Michael T. Chalifoux, each acting singly, his or her attorneys-in-fact, with
full power to act without the other, to execute on his or her behalf,
individually and in his or her capacity as an officer and/or director of Circuit
City Stores, Inc. (the "Company"), and to file any documents referred to below
relating to the registration for resale of shares acquired by Goldberg Company,
Inc. ("Goldberg") in connection with the acquisition by the Company of certain
assets of Goldberg, such documents being: registration statements on Form S-3 to
be filed with the Securities and Exchange Commission; such statements with,
and/or applications to, the regulatory authorities of any state in the United
States as may be necessary to permit such shares to be offered in such states;
any and all other documents required to be filed with respect thereto with any
regulatory authority; and any and all amendments (post-effective and
pre-effective) to any of the foregoing, with all exhibits and documents required
to be filed in connection therewith.
The undersigned further grants unto said attorneys and each of them
full power and authority to perform each and every act necessary to be done in
order to accomplish the foregoing as fully as he himself or she herself might
do.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
as of this 14th day of April, 1998.
/s/ Richard N. Cooper
---------------------
Richard N. Cooper
<PAGE>
Exhibit 24
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Richard L. Sharp and
Michael T. Chalifoux, each acting singly, his or her attorneys-in-fact, with
full power to act without the other, to execute on his or her behalf,
individually and in his or her capacity as an officer and/or director of Circuit
City Stores, Inc. (the "Company"), and to file any documents referred to below
relating to the registration for resale of shares acquired by Goldberg Company,
Inc. ("Goldberg") in connection with the acquisition by the Company of certain
assets of Goldberg, such documents being: registration statements on Form S-3 to
be filed with the Securities and Exchange Commission; such statements with,
and/or applications to, the regulatory authorities of any state in the United
States as may be necessary to permit such shares to be offered in such states;
any and all other documents required to be filed with respect thereto with any
regulatory authority; and any and all amendments (post-effective and
pre-effective) to any of the foregoing, with all exhibits and documents required
to be filed in connection therewith.
The undersigned further grants unto said attorneys and each of them
full power and authority to perform each and every act necessary to be done in
order to accomplish the foregoing as fully as he himself or she herself might
do.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
as of this 14th day of April, 1998.
/s/ Richard L. Sharp
--------------------
Richard L. Sharp
<PAGE>
Exhibit 24
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Richard L. Sharp and
Michael T. Chalifoux, each acting singly, his or her attorneys-in-fact, with
full power to act without the other, to execute on his or her behalf,
individually and in his or her capacity as an officer and/or director of Circuit
City Stores, Inc. (the "Company"), and to file any documents referred to below
relating to the registration for resale of shares acquired by Goldberg Company,
Inc. ("Goldberg") in connection with the acquisition by the Company of certain
assets of Goldberg, such documents being: registration statements on Form S-3 to
be filed with the Securities and Exchange Commission; such statements with,
and/or applications to, the regulatory authorities of any state in the United
States as may be necessary to permit such shares to be offered in such states;
any and all other documents required to be filed with respect thereto with any
regulatory authority; and any and all amendments (post-effective and
pre-effective) to any of the foregoing, with all exhibits and documents required
to be filed in connection therewith.
The undersigned further grants unto said attorneys and each of them
full power and authority to perform each and every act necessary to be done in
order to accomplish the foregoing as fully as he himself or she herself might
do.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
as of this 14th day of April, 1998.
/s/ Edward Villaneuva
----------------------
Edward Villanueva
<PAGE>
Exhibit 24
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Richard L. Sharp and
Michael T. Chalifoux, each acting singly, his or her attorneys-in-fact, with
full power to act without the other, to execute on his or her behalf,
individually and in his or her capacity as an officer and/or director of Circuit
City Stores, Inc. (the "Company"), and to file any documents referred to below
relating to the registration for resale of shares acquired by Goldberg Company,
Inc. ("Goldberg") in connection with the acquisition by the Company of certain
assets of Goldberg, such documents being: registration statements on Form S-3 to
be filed with the Securities and Exchange Commission; such statements with,
and/or applications to, the regulatory authorities of any state in the United
States as may be necessary to permit such shares to be offered in such states;
any and all other documents required to be filed with respect thereto with any
regulatory authority; and any and all amendments (post-effective and
pre-effective) to any of the foregoing, with all exhibits and documents required
to be filed in connection therewith.
The undersigned further grants unto said attorneys and each of them
full power and authority to perform each and every act necessary to be done in
order to accomplish the foregoing as fully as he himself or she herself might
do.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
as of this 14th day of April, 1998.
/s/ Mikael Salovaara
---------------------
Mikael Salovaara
<PAGE>
Exhibit 24
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Richard L. Sharp and
Michael T. Chalifoux, each acting singly, his or her attorneys-in-fact, with
full power to act without the other, to execute on his or her behalf,
individually and in his or her capacity as an officer and/or director of Circuit
City Stores, Inc. (the "Company"), and to file any documents referred to below
relating to the registration for resale of shares acquired by Goldberg Company,
Inc. ("Goldberg") in connection with the acquisition by the Company of certain
assets of Goldberg, such documents being: registration statements on Form S-3 to
be filed with the Securities and Exchange Commission; such statements with,
and/or applications to, the regulatory authorities of any state in the United
States as may be necessary to permit such shares to be offered in such states;
any and all other documents required to be filed with respect thereto with any
regulatory authority; and any and all amendments (post-effective and
pre-effective) to any of the foregoing, with all exhibits and documents required
to be filed in connection therewith.
The undersigned further grants unto said attorneys and each of them
full power and authority to perform each and every act necessary to be done in
order to accomplish the foregoing as fully as he himself or she herself might
do.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
as of this 14th day of April, 1998.
/s/ Walter J. Salmon
--------------------
Walter J. Salmon
<PAGE>
Exhibit 24
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Richard L. Sharp and
Michael T. Chalifoux, each acting singly, his or her attorneys-in-fact, with
full power to act without the other, to execute on his or her behalf,
individually and in his or her capacity as an officer and/or director of Circuit
City Stores, Inc. (the "Company"), and to file any documents referred to below
relating to the registration for resale of shares acquired by Goldberg Company,
Inc. ("Goldberg") in connection with the acquisition by the Company of certain
assets of Goldberg, such documents being: registration statements on Form S-3 to
be filed with the Securities and Exchange Commission; such statements with,
and/or applications to, the regulatory authorities of any state in the United
States as may be necessary to permit such shares to be offered in such states;
any and all other documents required to be filed with respect thereto with any
regulatory authority; and any and all amendments (post-effective and
pre-effective) to any of the foregoing, with all exhibits and documents required
to be filed in connection therewith.
The undersigned further grants unto said attorneys and each of them
full power and authority to perform each and every act necessary to be done in
order to accomplish the foregoing as fully as he himself or she herself might
do.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
as of this 14th day of April, 1998.
/s/ Hugh G. Robinson
--------------------
Hugh G. Robinson
<PAGE>
Exhibit 24
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Richard L. Sharp and
Michael T. Chalifoux, each acting singly, his or her attorneys-in-fact, with
full power to act without the other, to execute on his or her behalf,
individually and in his or her capacity as an officer and/or director of Circuit
City Stores, Inc. (the "Company"), and to file any documents referred to below
relating to the registration for resale of shares acquired by Goldberg Company,
Inc. ("Goldberg") in connection with the acquisition by the Company of certain
assets of Goldberg, such documents being: registration statements on Form S-3 to
be filed with the Securities and Exchange Commission; such statements with,
and/or applications to, the regulatory authorities of any state in the United
States as may be necessary to permit such shares to be offered in such states;
any and all other documents required to be filed with respect thereto with any
regulatory authority; and any and all amendments (post-effective and
pre-effective) to any of the foregoing, with all exhibits and documents required
to be filed in connection therewith.
The undersigned further grants unto said attorneys and each of them
full power and authority to perform each and every act necessary to be done in
order to accomplish the foregoing as fully as he himself or she herself might
do.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
as of this 14th day of April, 1998.
/s/ Barbara S. Feigin
---------------------
Barbara S. Feigin
<PAGE>
Exhibit 24
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Richard L. Sharp and
Michael T. Chalifoux, each acting singly, his or her attorneys-in-fact, with
full power to act without the other, to execute on his or her behalf,
individually and in his or her capacity as an officer and/or director of Circuit
City Stores, Inc. (the "Company"), and to file any documents referred to below
relating to the registration for resale of shares acquired by Goldberg Company,
Inc. ("Goldberg") in connection with the acquisition by the Company of certain
assets of Goldberg, such documents being: registration statements on Form S-3 to
be filed with the Securities and Exchange Commission; such statements with,
and/or applications to, the regulatory authorities of any state in the United
States as may be necessary to permit such shares to be offered in such states;
any and all other documents required to be filed with respect thereto with any
regulatory authority; and any and all amendments (post-effective and
pre-effective) to any of the foregoing, with all exhibits and documents required
to be filed in connection therewith.
The undersigned further grants unto said attorneys and each of them
full power and authority to perform each and every act necessary to be done in
order to accomplish the foregoing as fully as he himself or she herself might
do.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
as of this 14th day of April, 1998.
/s/ Alan L. Wurtzel
-------------------
Alan L. Wurtzel
