UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Circuit City Stores, Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
Circuit City Stores, Inc.
9950 Mayland Drive
Richmond, Virginia 23233
----------------
Notice of Annual Meeting of Shareholders
June 15, 2001
To The Holders of Circuit City Stores, Inc.--Circuit City Group Common Stock
and Circuit City Stores, Inc.--Carmax Group Common Stock:
The annual meeting of shareholders of Circuit City Stores, Inc. will be held
at The Jefferson Hotel, Franklin and Adams Streets, Richmond, Virginia, on
Friday, June 15, 2001, at 10:00 a.m., Eastern Daylight Time, for the following
purposes:
1. To elect four directors to three-year terms, two directors to two-year
terms and one director to a one-year term;
2. To consider and vote upon a shareholder proposal, if properly
presented; and
3. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only holders of record of shares of Circuit City Group Common Stock or
CarMax Group Common Stock at the close of business on April 25, 2001, will be
entitled to vote at the meeting and any adjournments thereof.
Whether or not you plan to attend the meeting, please fill in, date, sign
and return the enclosed proxy promptly in the return envelope provided. You are
cordially invited to attend the meeting.
By Order of the Board of Directors
/s/ Michael T. Chalifoux
Michael T. Chalifoux, Secretary
May 11, 2001
PROXY STATEMENT
This Proxy Statement, mailed to holders of Circuit City Group Common Stock
and CarMax Group Common Stock on or about May 11, 2001, is furnished in
connection with the solicitation by Circuit City Stores, Inc. of proxies in
the accompanying form for use at the annual meeting of shareholders to be held
on June 15, 2001, and at any adjournments thereof. A copy of the annual report
of the Company for the fiscal year ended February 28, 2001, is being mailed to
you with this Proxy Statement.
In addition to the solicitation of proxies by mail, the Company's officers
and regular employees, without compensation other than regular compensation,
may solicit proxies by telephone, electronic means and personal interview. The
Company also has retained Morrow & Co., Inc. of New York, New York, to assist
in the solicitation of proxies of shareholders whose shares are held in street
name by brokers, banks and other institutions at an approximate cost of $6,000
plus out-of-pocket expenses. The Company will bear the cost of all
solicitation.
Participants in the 1984 Circuit City Stores, Inc. Employee Stock Purchase
Plan will receive a request for voting instructions for the shares of Circuit
City Group Common Stock held on each participant's behalf by Merrill Lynch,
Fenner & Smith Incorporated, as service provider for the Plan. Participants in
the 1997 Employee Stock Purchase Plan for CarMax Group Employees also will
receive a request for voting instructions for the shares of CarMax Group
Common Stock held on each participant's behalf by Merrill Lynch, as service
provider for the Plan. Voting instructions should be returned, properly
executed, in the envelope provided. Merrill Lynch will vote in accordance with
the participants' instructions. If a participant does not return his or her
voting instructions, Merrill Lynch will have discretionary power to vote such
shares in accordance with New York Stock Exchange rules.
On April 25, 2001, the date for determining shareholders entitled to vote
at the meeting, 206,945,947 shares of Circuit City Group Common Stock and
26,054,453 shares of CarMax Group Common Stock were outstanding and entitled
to vote. References to "Common Stock" in this Proxy Statement refer to the
Circuit City Group Common Stock and the CarMax Group Common Stock
collectively. The holders of both series of Common Stock will vote together as
a single group at the meeting. Each outstanding share of Circuit City Group
Common Stock entitles the holder thereof to one vote; each outstanding share
of CarMax Group Common Stock entitles the holder thereof to 0.616 votes; the
total number of votes that shareholders may cast at the meeting, based on
shares outstanding on the record date, is 222,995,490. The voting rights of
the CarMax Group Common Stock have been determined from the recent market
values of each series of the Company's Common Stock in accordance with the
formula set forth in the Company's Articles of Incorporation.
Any shareholder giving a proxy may revoke it at any time before it is voted
by delivering another proxy or written notice of revocation to the Company's
Secretary. A proxy, if executed and not revoked, will be voted for the
election of the nominees for director named herein and against the shareholder
proposal set forth herein, unless it contains specific instructions to the
contrary, in which event it will be voted in accordance with such
instructions.
A majority of the total votes entitled to be cast on matters to be
considered at the meeting constitutes a quorum. If a share is represented for
any purpose at the meeting, it is deemed to be present for quorum purposes and
for all other matters as well. Abstentions and shares held of record by a
broker or its nominee ("Broker Shares") that are voted on any matter are
included in determining the number of votes present or represented at the
meeting. Broker Shares that are not voted on any matter at the meeting will
not be included in determining whether a quorum is present at such meeting.
Directors will be elected by a plurality of the votes cast. Votes that are
withheld and Broker Shares that are not voted in the election of directors
will not be included in determining the number of votes cast and, therefore,
will have no effect on the election of directors. Actions on all other matters
to come before the meeting, including the shareholder proposal, require that
the votes cast in favor of the action exceed the votes cast against it.
Abstentions and Broker Shares that are not voted are not considered cast
either for or against a matter and, therefore, will have no effect on the
outcome.
1
ITEM ONE--ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes with
staggered three-year terms. The terms of Richard N. Cooper, Robert S. Jepson,
Jr., Walter J. Salmon, Richard L. Sharp and Alan L. Wurtzel as directors of the
Company will expire at the time of the Annual Meeting of Shareholders. After 35
years of dedicated service on the Board, Mr. Wurtzel has declined to stand for
re-election. Mr. Salmon, who is retiring after nine years of dedicated service,
also has declined to stand for re-election. Carolyn Y. Woo has been nominated
to be a director of the Company. In addition, James F. Hardymon, Hugh G.
Robinson and Mikael Salovaara, whose terms would not otherwise expire until
2002, have agreed to stand for re-election this year in order to satisfy the
requirement in the Company's Articles of Incorporation that each class of
directors generally be of equal size.
Although all the nominees have indicated their willingness to serve if
elected, if at the time of the meeting any nominee is unable to or unwilling to
serve, shares represented by properly executed proxies will be voted at the
discretion of the persons named therein for such other person as the Board may
designate.
Information about the nominees for election as directors and the other
directors of the Company whose terms of office do not expire this year appears
below.
Nominees for Election to Three-Year Terms
RICHARD N. COOPER, 66, Professor of Economics at Harvard
University since 1981. He is a director of Phoenix Home Mutual
Life Insurance Co. and CNA Corporation. He has been a director
of the Company since 1983.
[PHOTO]
JAMES F. HARDYMON, 66, retired as Chairman of Textron, Inc. in
January 1999. Mr. Hardymon joined Textron, Inc., a global,
multi-industry company with core businesses of aircraft,
automotive, industrial and finance, in 1989 as President and
Chief Operating Officer. He became Chief Executive Officer in
1992 and assumed the title of Chairman in 1993. He is a director
of Air Products and Chemicals, Inc.; Fleet Boston Financial
Corporation; Championship Auto Racing Teams, Inc.; Lexmark
International, Inc.; American Standard Companies, Inc.; and
Schneider Electric, S.A. He has been a director of the Company
since 1998.
[PHOTO]
HUGH G. ROBINSON, 68, Chairman and Chief Executive Officer, The
Tetra Group, a consulting firm that provides construction
management and business development services, since 1989. Mr.
Robinson is a retired Major General from the United States Army.
He is a director of A.H. Belo Corporation, TXU Electric Company,
Imco Recycling, Inc. and Guaranty Federal Savings Bank. He has
been a director of the Company since 1995.
[PHOTO]
CAROLYN Y. WOO, 47, Dean of the Mendoza College of Business,
University of Notre Dame, since 1997. From 1995 to 1997, Ms. Woo
served as Associate Executive Vice President of Academic Affairs
at Purdue University. She is a director of AON Corporation and
NISource, Inc.
[PHOTO]
2
Nominees for Election to Two-Year Terms
ROBERT S. JEPSON, JR., 58, Chairman and Chief Executive Officer
of Jepson Associates, Inc., a private investment company, and
Chairman of the Board and Chief Executive Officer of Jepson
Vineyards, Ltd. Until 1999, Mr. Jepson also served as Chairman
of the Board and Chief Executive Officer of Kuhlman Corporation.
He is a director of AGL Resources, Inc. and Critz, Inc. He has
been a director of the Company since 1997.
[PHOTO]
MIKAEL SALOVAARA, 46, Partner, Greycliff Partners, since 1991.
Mr. Salovaara was a Limited Partner of The Blackstone Group L.P.
from 1994 to 1996. The principal business of Greycliff Partners
and The Blackstone Group L.P. is merchant banking. He has been a
director of the Company since 1995.
[PHOTO]
Nominee for Election to a One-Year Term
RICHARD L. SHARP, 54, Chairman of the Board of the Company. Mr.
Sharp joined the Company as an Executive Vice President in 1982.
He was President of the Company from 1984 to 1997, Chief
Executive Officer from 1986 to 2000 and became Chairman of the
Board in 1994. He is a director of Flextronics International,
Ltd. He has been a director of the Company since 1983.
[PHOTO]
Directors Whose Terms Do Not Expire This Year
MICHAEL T. CHALIFOUX, 54, Executive Vice President, Chief
Financial Officer and Secretary of the Company. Mr. Chalifoux
joined the Company in 1983 as Corporate Controller and was
elected Vice President and Chief Financial Officer in 1988. He
became Senior Vice President and Chief Financial Officer in
1990, Secretary in 1993 and an Executive Vice President in 1998.
He has been a director of the Company since 1991. His present
term will expire in 2002.
[PHOTO]
BARBARA S. FEIGIN, 63, a consultant specializing in strategic
marketing and branding. She served as Executive Vice President,
Worldwide Director of Strategic Services and member of the
Agency Policy Council of Grey Advertising, Inc., the principal
business of which is advertising and marketing communications,
from 1983 until February 1999. She is a director of VF
Corporation and VitaminShoppe.com, Inc. She has been a director
of the Company since 1994. Her present term will expire in 2003.
[PHOTO]
3
W. ALAN MCCOLLOUGH, 51, President and Chief Executive Officer of
the Company. Mr. McCollough joined the Company in 1987 as
General Manager of Corporate Operations. He was elected
Assistant Vice President in 1989, Vice President and Central
Division President in 1991, Senior Vice President--Merchandising
in 1994, President and Chief Operating Officer in 1997 and Chief
Executive Officer, effective June 2000. He has been a director
of the Company since December 1999. His present term will expire
in 2003.
[PHOTO]
JOHN W. SNOW, 61, Chairman, President and Chief Executive
Officer, CSX Corporation, a transportation company. Mr. Snow was
elected President and Chief Executive Officer in 1989 and added
the title of Chairman in 1991. He is a director of Johnson &
Johnson, Verizon and USX Corporation. He has been a director of
the Company since 1996. His present term will expire in 2002.
[PHOTO]
4
BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth information as of February 28, 2001, about
the equity securities of the Company which are or may be beneficially owned by
(i) each executive officer named in the Summary Compensation Table; (ii) each
director or nominee for director of the Company; (iii) directors and executive
officers as a group; and (iv) each person who is known by the Company who may
own beneficially more than 5 percent of the outstanding shares of Circuit City
Group Common Stock or CarMax Group Common Stock. Unless otherwise noted, each
shareholder has sole voting power and sole investment power with respect to
securities shown in the table below.
Circuit City Group
Option Shares Shares of CarMax Group
Which May be Circuit City Group Option Shares Which Shares of CarMax Group
Acquired Within 60 Common Stock May Be Acquired Common Stock
Days After Beneficially Owned as Percent Within 60 Days After Beneficially Owned as Percent
Name February 28, 2001 of February 28, 2001 (1) of Series February 28, 2001 of February 28, 2001 (2) of Series
---- ------------------ ------------------------ --------- -------------------- ------------------------ ---------
Named Executive
Officers
W. Alan
McCollough**... 196,000 369,013 (3) * 0 0 *
Richard L.
Sharp**........ 1,236,500 1,539,737 * 0 0 *
Richard S.
Birnbaum....... 180,000 367,977 (3) * 0 0 *
Michael T.
Chalifoux**.... 354,000 560,793 (3) * 0 0 *
John W. Froman.. 43,000 167,359 (3) * 0 0 *
W. Austin
Ligon.......... 0 32,388 (4) * 42,500 1,277,000 (5) 4.9%
Directors/Director
Nominees
Richard N.
Cooper......... 12,850 65,822 * 428 453 *
Barbara S.
Feigin......... 8,784 16,267 * 428 428 *
James F.
Hardymon....... 0 1,000 * 0 0 *
Robert S.
Jepson, Jr..... 4,044 24,458 * 452 477 *
Hugh G.
Robinson....... 8,046 9,140 * 428 453 *
Walter J.
Salmon......... 17,880 40,291 * 428 453 *
Mikael
Salovaara...... 3,846 14,260 (6) * 428 18,553 (7) *
John W. Snow.... 7,912 13,926 * 428 453 *
Carolyn Y. Woo.. 0 0 * 0 0 *
Alan L.
Wurtzel........ 7,912 397,282 (8) * 428 25,453 (9) *
All directors,
director
nominees and
executive
officers as a
group
(23 persons)... 2,409,149 4,122,086 (3)(10) 2.0% 45,948 1,323,723 (11) 5.1%
Beneficial Owners of More Than 5%
(12)
Capital Group
International,
Inc. .......... N/A 13,164,400 (13) 6.4% N/A N/A N/A
11100 Santa Monica Boulevard
Los Angeles, CA 90025
Capital Research
and Management
Company........ N/A 27,185,000 (14) 13.1% N/A N/A N/A
333 South Hope Street
Los Angeles, CA 90071
Mellon Financial
Corporation.... N/A 12,187,391 (15) 5.9% N/A N/A N/A
One Mellon Center
Pittsburgh, Pennsylvania 15258
OppenheimerFunds,
Inc. .......... N/A 12,194,185 (16) 5.9% N/A N/A N/A
Two World Trade Center, 34th Floor
New York, NY 10048-0203
Orient Star
Holdings
LLC. .......... N/A 12,160,000 (17) 5.9% N/A N/A N/A
1000 Louisiana Street, Suite 565
Houston, TX 77002
Dimensional Fund
Advisors
Inc. .......... N/A N/A N/A N/A 2,071,200 (18) 7.9%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Ronald Juvonen.. N/A N/A N/A N/A 3,681,600 (19) 14.1%
c/o Downtown Associates, L.L.C.
312 West State Street, Suite B
Kennett Square, PA 19348
Orbis Holdings
Limited........ N/A N/A N/A N/A 3,129,000 (20) 12.0%
34 Bermudiana Road
Hamilton HM11 Bermuda
5
--------
* Less than 1 percent of class, based on the total number of shares of
Circuit City Group Common Stock and CarMax Group Common Stock
outstanding on April 25, 2001.
** Messrs. McCollough, Sharp and Chalifoux are also directors of the
Company.
(1) Includes shares of Circuit City Group Common Stock that could be
acquired through the exercise of stock options within 60 days after
February 28, 2001.
(2) Includes shares of CarMax Group Common Stock that could be acquired
through the exercise of stock options within 60 days after February 28,
2001.
(3) Includes restricted shares of Circuit City Group Common Stock as
follows: Mr. McCollough 50,500; Mr. Birnbaum 40,500; Mr. Chalifoux
40,500; Mr. Froman 75,940; and 104,146 awarded to other executive
officers. See the Summary Compensation Table on page 10.
(4) Includes 15,000 shares held by Mr. Ligon's wife. Mr. Ligon disclaims
beneficial ownership of these shares.
(5) Includes 50,700 shares held by Mr. Ligon's children. Mr. Ligon
disclaims beneficial ownership of these shares.
(6) Includes 10,000 shares held by Trewstar LLC, a limited liability
company in which Mr. Salovaara, his wife and his children own 100
percent of the membership interests. Mr. Salovaara disclaims beneficial
ownership of these shares.
(7) Includes 18,100 shares held by Trewstar LLC, a limited liability
company in which Mr. Salovaara, his wife and his children own 100
percent of the membership interests. Mr. Salovaara disclaims beneficial
ownership of these shares.
(8) Includes 126,000 shares held by Mr. Wurtzel as trustee of trusts for
the benefit of his children, 196,370 shares held by Alan Wurtzel
Revocable Trust, 57,000 shares held by Alan Wurtzel Charitable
Remainder Unitrust and 10,000 shares held by Alan Wurtzel Charitable
Remainder Unitrust #3. Mr. Wurtzel disclaims beneficial ownership of
all the aforementioned shares.
(9) Includes 10,000 shares held by Grass Roots Investment Fund L.P., in
which Mr. Wurtzel owns 1.4 percent, and 15,025 shares held by Alan
Wurtzel Revocable Trust. Mr. Wurtzel disclaims beneficial ownership of
all the aforementioned shares.
(10) Beneficial ownership is disclaimed for a total of 414,770 shares.
(11) Beneficial ownership is disclaimed for a total of 93,825 shares.
(12) Alfred Loomis, III and Philip Timon each have reported that he is the
beneficial owner of more than five percent of the outstanding shares of
CarMax Group Common Stock. However, the Company has not received
information concerning the number of shares beneficially owned by these
individuals as of February 28, 2001, or the nature of the beneficial
ownership. See "Section 16(a) Compliance" for additional information.
(13) Information concerning the Circuit City Group Common Stock beneficially
owned by Capital Group International, Inc. as of December 29, 2000, was
obtained from a Schedule 13G dated February 12, 2001. The filing
indicates that of the 13,164,400 shares beneficially owned, Capital
Group International, Inc. has sole voting power for 11,529,250 shares
and sole dispositive power for 13,164,400 shares. Capital Group
International, Inc. is the parent holding company of a group of
investment management companies that hold investment power and, in some
cases, voting power over securities. The investment management
companies, which include a "bank" as defined in Section 3(a)6 of the
Securities Exchange Act of 1934 and several investment advisers
registered under Section 203 of the Investment Advisers Act of 1940,
provide investment advisory and management services for their
respective clients, which include registered investment companies and
institutional accounts. Capital Group International, Inc. does not have
investment power or voting power over any of the securities reported
herein; however, it may be deemed to "beneficially own" such securities
by virtue of Rule 13d-3 under the Act.
(14) Information concerning the Circuit City Group Common Stock beneficially
owned as of December 29, 2000, by Capital Research and Management
Company was obtained from a Schedule 13G dated February 12, 2001.
According to this filing, Capital Research and Management Company, an
investment adviser
6
registered under the Investment Advisers Act of 1940, has sole
dispositive power for 27,185,000 shares, but disclaims beneficial
ownership of any shares.
(15) Information concerning the Circuit City Group Common Stock beneficially
owned by Mellon Financial Corporation as of December 31, 2000, was
obtained from a Schedule 13G dated January 26, 2001. The filing
indicates that of the 12,187,391 shares beneficially owned, Mellon
Financial Corporation has sole voting power for 9,101,401 shares,
shared voting power for 522,100 shares, sole dispositive power for
11,619,313 shares and shared dispositive power for 337,260 shares.
According to the filing, Mellon Financial Corporation is a parent
holding company in accordance with Section 240.13 and all of the
securities are beneficially owned by Mellon and direct and indirect
subsidiaries in their various fiduciary capacities. No individual
account holds more than 5 percent of the Circuit City Group Common
Stock.
(16) Information concerning the Circuit City Group Common Stock beneficially
owned by OppenheimerFunds, Inc. as of December 29, 2000, was obtained
from a Schedule 13G dated February 13, 2001. The filing indicates that
OppenheimerFunds, Inc., an investment adviser registered under the
Investment Act of 1940, has shared dispositive power for 12,194,185
shares, but disclaims beneficial ownership of any shares.
(17) Information concerning the Circuit City Group Common Stock beneficially
owned by Orient Star Holdings LLC as of March 1, 2001, was obtained
from a Schedule 13G dated March 12, 2001. According to the filing,
Orient Star, a holding company with portfolio investments in various
companies, directly owns the 12,160,000 shares and has shared voting
and dispositive powers for all of the shares. Inmobiliara, a holding
company and the sole member of Orient Star, is deemed to beneficially
own indirectly the shares owned directly by Orient Star. In addition,
the Slim Family, which indirectly owns all of the issued and
outstanding voting securities of Inmobiliara, is deemed to beneficially
own indirectly the shares deemed beneficially owned indirectly by
Inmobiliara and owned directly by Orient Star.
(18) Information concerning the CarMax Group Common Stock beneficially owned
by Dimensional Fund Advisors Inc. as of December 31, 2000, was obtained
from a Schedule 13G dated February 2, 2001. According to this filing,
Dimensional Fund Advisors Inc., an investment adviser registered under
the Investment Advisers Act of 1940, has sole voting power and sole
dispositive power for the 2,071,200 shares, but disclaims beneficial
ownership of any shares. The Company has been informed that no account
managed by Dimensional Fund Advisors Inc. holds more than 5 percent of
the CarMax Group Common Stock.
(19) Information concerning the CarMax Group Common Stock beneficially owned
by Ronald Juvonen as of December 31, 2000, was obtained from a Schedule
13G dated March 26, 2001. According to this filing, the shares are held
by Downtown Associates, L.P.; Downtown Associates II, L.P.; Downtown
Associates III, L.P. and Downtown Foundations, L.P. (collectively
referred to as the Downtown Funds) and Ronald Juvonen individually. The
general partner of the Downtown Funds is Downtown Associates, L.L.C.
Ronald Juvonen, as the Managing Member of the general partner, has sole
voting power and sole dispositive power with respect to the shares of
the CarMax Group Common Stock held by the Downtown Funds.
(20) Information concerning the CarMax Group Common Stock beneficially owned
by Orbis Holdings Limited as of December 31, 2000, was obtained from a
Schedule 13G dated February 13, 2001, filed by Orbis Holdings Limited;
Orbis Asset Management Limited, which serves as a general partner to
Orbis Optimal Global Fund, LP; and Orbis Investment Management Limited,
which serves as an investment manager to Orbis Global Equity Fund
Limited. According to this filing, Orbis Holdings Limited has shared
voting power and shared dispositive power of 3,129,000 shares, but
disclaims beneficial ownership of any shares. Orbis Investment
Management Limited has shared voting power and shared dispositive power
of 2,929,000 of the 3,129,000 shares of CarMax Group Common Stock, but
disclaims beneficial ownership of any shares.
7
CERTAIN INFORMATION CONCERNING THE
BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors held seven meetings during the fiscal year ended
February 28, 2001. No director attended less than 75 percent of the aggregate
number of meetings of the Board and the committees on which he or she served.
The Audit Committee is composed of Mikael Salovaara, Chairman; Richard N.
Cooper; Barbara S. Feigin; and Hugh G. Robinson. Three meetings were held
during the fiscal year ended February 28, 2001. The Audit Committee reviews
and recommends to the Board the independent auditors to be selected to audit
the Company's financial statements. It also reviews the scope of the proposed
audits and audit procedures to be employed, the independence of the auditors
and the effectiveness of the Company's system of internal controls, as well as
the Company's internal audit function. When the audit is complete, the Audit
Committee reviews it with management and separately with the auditors.
The Compensation and Personnel Committee is composed of Robert S. Jepson,
Jr., Chairman; James F. Hardymon; Walter J. Salmon; and John W. Snow. Five
meetings were held during the fiscal year ended February 28, 2001. The
functions of this Committee include reviewing, evaluating and approving the
amount, design and implementation of compensation programs for officers and
key personnel, making awards under and administering the Company's stock
incentive programs, reviewing and making recommendations with respect to
senior management organization and reviewing the Company's programs for
attracting and compensating management personnel at lower and middle levels.
The Pension Committee is composed of Alan L. Wurtzel, Chairman, Richard N.
Cooper, Barbara S. Feigin and Mikael Salovaara. Two meetings were held during
the fiscal year ended February 28, 2001. The functions of this Committee are
to provide oversight of investment allocations and fund managers for the
Employees Retirement Plan of Circuit City Stores, Inc. and to receive and
review on behalf of Board periodic reports concerning the funding status and
investment performance of the Retirement Plan from the management employees of
the Company with responsibility for such matters.
The Nominating and Governance Committee is composed of John W. Snow,
Chairman; James F. Hardymon; Robert S. Jepson, Jr.; Hugh G. Robinson; and
Walter J. Salmon. Two meetings were held during the fiscal year ended February
28, 2001. The functions of this Committee include reviewing significant
corporate governance issues and recommending changes to the Board as
appropriate, recommending candidates for election as directors and reviewing
and recommending policies with regard to the size and composition of the
Board. The Committee considers nominees for the Board recommended by the
Company's shareholders.
The Company's Board of Directors embraces the principle that diversity in
all respects both strengthens its membership and increases its effectiveness.
The Board strives to select for its membership highly qualified individuals
who are dedicated to advancing the interest of the Company's shareholders.
When vacancies on the Board occur, the Nominating and Governance Committee
seeks individuals who, based on their background and qualifications, can
promote this goal in conjunction with the other members of the Board. The
Committee actively seeks nominees who will bring diverse talents, experiences
and perspectives to the Board's deliberations.
In accordance with the Company's Bylaws, a shareholder who is interested in
nominating a person to the Board should submit to the Secretary of the Company
written notice of his or her intent to make such nomination. Such notice must
be given either by personal delivery or by United States mail, postage
prepaid, not later than 120 days in advance of the annual meeting, or with
respect to a special meeting of shareholders for the election of directors,
the close of business on the seventh day following the date on which notice of
such meeting is first given to shareholders. The contents of such notice must
be as specified in the Company's Bylaws, a copy of which may be obtained by
any shareholder who directs a written request for the same to the Secretary of
the Company.
8
Report of the Audit Committee
The Audit Committee, which is composed entirely of outside, independent
directors, provides assistance to the Board of Directors in fulfilling its
responsibility relating to the corporate accounting and reporting practices of
the Company. In so doing, it is the responsibility of the Audit Committee to
foster open communication among the directors, the independent auditors, the
internal auditors and the financial management of the Company. The Audit
Committee has adopted a written charter, and it is included in this proxy
statement as Appendix A.
The Audit Committee has reviewed and discussed with management the
Company's audited consolidated financial statements as of and for the year
ended February 28, 2001. Management is responsible for the financial
statements, including the system of internal controls. The Audit Committee has
discussed with the independent auditors matters required by Statement on
Auditing Standards No. 61, "Communications with Audit Committees." We have
also received the written disclosures and a letter from the auditors regarding
their independence as required by Independence Standards Board Standard No. 1,
"Independence Discussion with Audit Committees," and have discussed with the
auditors their independence. Based on the aforementioned reviews and
discussions, the Audit Committee recommended to the Board of Directors that
the audited financial statements be included in the Company's Annual Report on
Form 10-K for the year ended February 28, 2001.
AUDIT COMMITTEE
Mikael Salovaara, Chairman
Richard N. Cooper
Barbara S. Feigin
Hugh G. Robinson
9
COMPENSATION OF EXECUTIVE OFFICERS
Executive Compensation
Summary Compensation Table. The table below sets forth for the three years
ended February 28, 2001, the annual and long-term compensation for services in
all capacities to the Company and its subsidiaries of those persons who served
as the Company's Chief Executive Officer during fiscal 2001 and the other four
most highly compensated executive officers of the Company other than the CEO
(the "Named Executive Officers") at February 28, 2001. The only stock
appreciation rights (SARs) granted were Change of Control SARs (described on
page 17), which were granted in connection with each of the options. No free-
standing SARs have been granted. On June 15, 1999, the Board of Directors
declared a two-for-one stock split of the outstanding Circuit City Group
Common Stock. All shares and price per share information reflect this split.
Long-Term
Annual Compensation Compensation Awards
-------------------- ----------------------------------
Restricted Securities
Fiscal Stock Underlying
Name and Principal Position Year Salary $ Bonus $ Awards $ (1) Options/SARs # (2)
--------------------------- ------ -------------------- ------------ ------------------
W. Alan McCollough.................... 2001 928,469 285,000 0 2,000,000
President and 2000 712,219 815,625 0 0
Chief Executive Officer 1999 644,911 633,750 0 0
Richard L. Sharp (3).................. 2001 700,296 0 0 200,000
Chairman of the Board 2000 991,450 1,492,500 0 200,000
1999 944,911 1,235,000 0 190,000
Richard S. Birnbaum................... 2001 654,142 0 0 100,000
Executive Vice President 2000 621,065 558,000 0 0
Operations 1999 587,988 442,500 0 0
Michael T. Chalifoux.................. 2001 636,358 0 0 100,000
Executive Vice President, 2000 608,273 544,500 0 0
Chief Financial Officer and Secretary 1999 562,219 431,250 0 0
John W. Froman........................ 2001 635,296 0 1,761,000 (4) 100,000
Executive Vice President 2000 445,380 515,000 0 0
Merchandising 1999 385,384 210,000 0 0
W. Austin Ligon....................... 2001 545,488 412,500 0 70,000
Senior Vice President 2000 489,615 371,250 0 100,000
Automotive 1999 469,231 118,750 0 0
--------
(1) In fiscal 1998, Mr. McCollough was awarded 101,000 shares of restricted
stock, Messrs. Birnbaum and Chalifoux were each awarded 81,000 shares of
restricted stock and Mr. Froman was awarded 51,880 shares of restricted
stock. The stock will vest at the end of seven years with provisions for
accelerated vesting based upon performance. Performance criteria are
based on a total return on Circuit City Group Common Stock compared
against a peer group consisting of publicly traded consumer electronics
companies. Based on the Company's comparative performance, 25 percent of
the awards vested in each of the fiscal years 1999 and 2000. Based on
the Company's comparative performance, the maximum the awards may vest
in any one year is 40 percent of the original grant. Dividends are paid
on restricted stock during the restricted period. The number and value
of each executive officer's restricted stock holdings at the end of the
fiscal year ended February 28, 2001, based on a closing price on that
day for the Circuit City Group Common Stock of $15.17 were as follows:
Mr. McCollough: 50,500 shares with a total value of $766,085; Messrs.
Birnbaum and Chalifoux: 40,500 shares each with a value of $614,385
each; and Mr. Froman: 75,940 shares with a total value of $1,152,010.
(2) All of the long-term compensation awards are Circuit City Group Common
Stock awards, except for those granted to Mr. Ligon, which are CarMax
Group Common Stock awards.
(3) Mr. Sharp also served as Chief Executive Officer through June 2000.
(4) Mr. Froman was awarded 50,000 shares of restricted stock when he was
promoted to Executive Vice President--Merchandising. The amount in the
above table is based on the closing price for the Circuit City Group
Common Stock, which was $35.22, on the date of the award.
10
Options Grants in Last Fiscal Year. The table below sets forth for the
fiscal year ended February 28, 2001, the grants of Circuit City Group Common
Stock options and CarMax Group Common Stock options to the Named Executive
Officers. No SARs were granted in connection with these options.
Potential Realization
Value
at Assumed Annual Rates
of
Stock Price
Number of % of Total Appreciation
Underlying Options/SARs Exercise for Option Term
Options/SARs Granted to Price Expiration -----------------------
Granted Employees (1) Date 5% 10%
------------ ------------ -------- ---------- ----------- -----------
W. Alan McCollough...... 2,000,000 46.73% $35.2187 6/13/08 $33,630,868 $80,551,637
Richard L. Sharp........ 200,000 4.67% $35.2187 6/13/08 $ 3,363,087 $ 8,055,164
Richard S. Birnbaum..... 100,000 2.34% $35.2187 6/13/08 $ 1,681,543 $ 4,027,582
Michael T. Chalifoux.... 100,000 2.34% $35.2187 6/13/08 $ 1,681,543 $ 4,027,582
John W. Froman.......... 100,000 2.34% $35.2187 6/13/08 $ 1,681,543 $ 4,027,582
W. Austin Ligon (2)..... 70,000 5.47% $ 1.6250 3/01/07 $ 46,308 $ 107,917
--------
(1) The exercise price for all of the options is the fair market value of
the Circuit City Group Common Stock or CarMax Group Common Stock on the
date of grant.
(2) The shares underlying Mr. Ligon's options consist of CarMax Group Common
Stock.
Aggregated Options/SAR Exercises and Fiscal Year-End Option/SAR Value
Table. The following table sets forth information concerning Circuit City
Group Common Stock and CarMax Group Common Stock option exercises and fiscal
year-end option/SAR values as of February 28, 2001, for the executive officers
named in the Summary Compensation Table. The only SARs outstanding were Change
of Control SARs (described on page 17).
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs at Options/SARs at
Number of February 28, 2001 February 28, 2001
Shares Acquired Value ------------------------- -------------------------
on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
--------------- ----------- ----------- ------------- ----------- -------------
W. Alan McCollough...... 0 $ 0 123,000 2,145,000 $ 32,640 $ 81,600
Richard L. Sharp (1).... 1,000,000 $29,125,000 1,189,000 486,500 $ 34,000 $ 0
Richard S. Birnbaum..... 0 $ 0 116,000 270,000 $ 65,280 $108,800
Michael T. Chalifoux.... 0 $ 0 306,000 262,000 $332,400 $ 81,600
John W. Froman.......... 26,500 $ 888,375 35,500 150,000 $ 3,740 $ 0
W. Austin Ligon (2)..... 0 $ 0 25,000 145,000 $ 0 $244,650
--------
(1) In fiscal 1997, Mr. Sharp was granted a special long-term option to
purchase 2,000,000 shares of Circuit City Group Common Stock, which was
designed to promote and reward extraordinary long-term performance by
the Company through Mr. Sharp's leadership. The option is exercisable
four years from the date of grant and expires six years from the date of
grant. However, Mr. Sharp must stay with the Company for at least five
years from the date of grant to obtain the benefit of the option. The
exercise price for the option was $29.50, which was twice the trading
price range of the Circuit City Group Common Stock when the option was
granted. Therefore, the option only has value if the Circuit City Group
Common Stock more than doubles in price within six years of the grant.
(2) The shares underlying Mr. Ligon's options consist of CarMax Group Common
Stock.
11
Pension Plan/Benefit Restoration Plan. The following table illustrates
estimated annual retirement benefits payable under the Company's defined
benefit pension plan (the "Pension Plan") to persons in specified compensation
and years of service classifications.
Estimated* Annual Pension for Representative
Years of Credited Service
Highest Consecutive Five-Year ---------------------------------------------
Average Compensation 15 20 25 30 35
----------------------------- ------- ------- --------- --------- ---------
$ 500,000....................... 108,872 145,162 181,453 217,743 254,034
$1,000,000....................... 221,372 295,162 368,953 442,743 516,534
$1,500,000....................... 333,872 445,162 556,453 667,743 779,034
$2,000,000....................... 446,372 595,162 743,953 892,743 1,041,534
$2,500,000....................... 558,872 745,162 931,453 1,117,743 1,304,034
$3,000,000....................... 671,372 895,162 1,118,953 1,342,743 1,566,534
--------
* For 2001, the Internal Revenue Code limit on the annual retirement
benefits that may be paid from the Pension Plan was $140,000 and the limit
on the amount of compensation that may be recognized by the Pension Plan
was $170,000. The maximum benefit payable under the Benefit Restoration
Plan is $339,717 in 2001. The benefits shown on this table have not been
limited by these caps.
The Pension Plan covers employees who satisfy certain age and service
requirements. Benefits are based on a designated percentage of the average of
compensation for the five highest of the last 10 consecutive years of
employment, weighted according to years of credited service, and integrated
with Social Security covered compensation. For Pension Plan purposes,
compensation of participants includes base pay, bonuses, overtime and
commissions and excludes amounts realized under any employee stock purchase
plan or stock incentive plan. For Pension Plan purposes, compensation for
those individuals listed in the Summary Compensation Table is substantially
the same as the amounts listed under the Salary and Bonus headings.
For purposes of the Pension Plan, credited years of past and future service
for Messrs. McCollough, Sharp, Birnbaum, Chalifoux, Froman and Ligon will be
28, 29, 45, 29, 33 and 25 years, respectively, at age 65.
To maintain compensation competitiveness and to create a retirement program
that restores benefits for the Company's more senior executives who are
affected by Internal Revenue Code limits on benefits provided under the
Company's Pension Plan, the Company implemented a retirement benefit
restoration plan in fiscal year 1999. Subject to an annual limit, the benefit
restoration plan and the Pension Plan together provide benefits to all
employees affected by the Internal Revenue Code limits at approximately the
same percentage of compensation as for other employees. The Named Executive
Officers participate in this plan.
Report of Compensation and Personnel Committee
Compensation Philosophy
The Compensation and Personnel Committee, which is composed entirely of
outside independent directors, reviews, evaluates and approves the amount,
design and implementation of the Company's compensation system for executive
officers. The Committee believes that corporate performance and, in turn,
shareholder value will be best enhanced by a compensation system that supports
and reinforces the Company's key operating and strategic goals while aligning
the financial interests of the Company's executive officers with those of the
shareholders. The Company utilizes both short-term and long-term incentive
compensation programs to achieve these objectives. Executive officer incentive
compensation programs generally are tied to Company-wide achievement of annual
financial goals and the market value of the Company's stock. The Committee
believes that the use of Company-wide performance in setting goals promotes a
unified vision for senior management and creates common motivation among the
executives. Incentives may relate to performance of the Circuit City Group,
the CarMax Group or both, depending on the responsibilities of the executives.
For other salaried employees, the incentive compensation program is tied also
to division, department or store business goals and, in some cases, individual
performance.
12
For the Company's 2001 fiscal year, the Committee made its compensation
decisions based on a review of the Company's 2000 fiscal year performance and
on the Company's budget and other projections for the 2001 fiscal year. The
Company is subject to Internal Revenue Code provisions that may limit the
income tax deductibility of certain forms of compensation paid to the
executive officers named in the Summary Compensation Table that precedes this
report. These provisions allow full deductibility of certain types of
performance-based compensation. The Company's compensation practices, to the
extent practicable, provide the maximum deductibility for compensation
payments. Payments under the Annual Performance-Based Bonus Plan and awards
under the Stock Incentive Plans qualify for deductibility under these
provisions of the Internal Revenue Code.
Components of the Executive Compensation Program
The Company's compensation program for executive officers consists
generally of three components: base salary, an annual performance-based cash
bonus and long-term stock incentives. In making compensation decisions for
officers other than the Chief Executive Officer, the Committee considers the
recommendations of the Chief Executive Officer, which may include a comparison
of the compensation of the Company's executive officers with compensation of
officers at certain other retail companies as well as other companies with
which it competes for executive talent. During the 2001 fiscal year, the
Committee also utilized the services of a compensation consultant to assist
with certain aspects of its evaluation. The Committee used the same consultant
as periodically used in the past.
As it deems necessary, the Committee compares various short- and long-term
performance measures, including total shareholder return, return on average
shareholders' equity, sales, net income and earnings per share for the Company
and other companies with which it competes for executive talent. The Committee
has not established any particular level at which overall compensation will be
set in respect to the compensation peer group. The Committee believes that the
total compensation of the Named Executive Officers is supported by the
Company's competitive comparisons on the short- and long-term performance
factors and is appropriate given the Company's overall performance. The
individual elements of the executive compensation program are addressed below.
Annual Salary
Each year, the Committee establishes salaries for executive officers. Such
salaries are based on proposals submitted by the Company's Chief Executive
Officer for the annual salaries of the executive officers other than himself.
The Committee believes that the 2001 fiscal year salaries for executive
officers are appropriate and this belief was supported by the work of the
compensation consultant. The Committee intends that the salary levels also
provide for a large percentage of total compensation to be at risk under the
incentive programs. In evaluating individual executive officers, the Committee
also may consider, among other factors, (1) a qualitative evaluation of the
individual executive officer's performance provided by the Chief Executive
Officer, (2) the job responsibilities of the individual executive, including
changes in those responsibilities, and (3) the Company's performance in
relation to its target financial goals for the prior fiscal year.
Annual Performance-Based Bonus
All salaried employees are eligible to receive cash bonuses under the
Annual Performance-Based Bonus Plan based on targets established each year by
the Committee and approved by the Board of Directors. The Bonus Plan is
designed to motivate the Company's employees to achieve the Company's annual
operating and financial goals. The Bonus Plan allows the Committee to
establish performance goals based on pretax earnings, earnings per share or
both. The goals for the Bonus Plan are established with the purpose of
continuing the Company's record of superior performance in comparison with its
competitors.
For the 2001 fiscal year, the Bonus Plan primarily measured the Company's
achievement of its target financial goals for earnings per share and pretax
earnings for Circuit City operations. The target EPS and pretax
13
earnings goals were established early in the fiscal year as part of the
Company's budgeting process and were approved by the Committee. Consistent
with the Committee's compensation philosophy of tying a large percentage of
total compensation to performance, the potential maximum bonus for each
executive officer was a significant percentage of that individual's salary for
the year. For the 2001 fiscal year, the target bonus amounts were targeted at
100 percent for senior executives and the Chief Executive Officer. This bonus
percentage represents an increase for senior executives other than the Chief
Executive Officer and reflects competitive practices as determined by the
compensation consultant.
The amount of bonus payments depends upon the extent to which the Company
achieves its target financial goals for the year. For the 2001 fiscal year,
the Company did not achieve the threshold financial performance for the
payment of bonuses and no bonuses were paid under the Bonus Plan to the
Circuit City officers. The CarMax officers, however, earned a maximum 150
percent bonus.
Long-Term Incentive Compensation
Grants under the Company's Stock Incentive Plans provide long-term
incentive compensation and are a significant component of total compensation.
These programs are a part of the Company's performance-based incentive
compensation, rewarding officers as total shareholder value increases. For
executive officers and other officers, grants under the Stock Incentive Plans
are made in the form of nonqualified stock options and restricted stock.
Grants based on Circuit City Group Common Stock are used for officers whose
duties are principally for the Circuit City Group and grants based on CarMax
Group Common Stock, for officers whose duties are principally for the CarMax
Group.
The Committee considers stock-based grants to be an important means of
ensuring that executive officers have a continuing incentive to increase the
long-term return to shareholders and the value of the Company's stock. Stock-
based grants also aid in retention of executives.
Stock options generally vest and become exercisable ratably over a period
of four years from the date of grant and may be exercised within eight years
of the date of grant. The number of stock options to be granted to a
particular executive officer is determined by the Committee. The Committee
primarily uses a formula based on an individual's target bonus for the fiscal
year, the market price of the Company's stock, and the results of periodic
compensation surveys to determine the appropriate grant size. A survey was
done for the 2001 fiscal year. The value of stock options is entirely a
function of increases in the value of the Company's stock, thus the Committee
believes that this component of the Company's compensation arrangement closely
aligns the interests of the executive officers with those of the Company's
shareholders.
During the 1998 fiscal year, an additional long-term incentive program was
instituted for senior management using restricted stock under the Stock
Incentive Plan. The program provides for vesting at the end of a seven-year
period if the executive's employment continues. Accelerated vesting of the
stock may occur based on the Company's total shareholder return on Circuit
City Group Common Stock measured against the performance of a peer group.
Based on the Company's comparative performance, no portion of the awards
vested in the 2001 fiscal year.
Chairman's Compensation
In June 2000, Mr. McCollough replaced Mr. Sharp as Chief Executive Officer
of the Company. Mr. Sharp continued as the Company's Chairman to assist with
his transition among senior management. For his continued services with the
Company, the Committee determined that Mr. Sharp should receive a two-year
employment arrangement which provides (1) an annual salary of $300,000, (2) an
option for 200,000 shares of Circuit City Group Common Stock with vesting at
the end of the two-year period, (3) continued participation in the Company
benefit programs available to current executives, and (4) a secretary and an
office. Mr. Sharp also received a retirement benefit of $300,000 per year for
a ten-year period commencing when he leaves the Company until he reaches age
65.
14
Other Matters
To maintain compensation competitiveness and to create a retirement program
that restores benefits for the Company's more senior executives who are
affected by Internal Revenue Code limits on benefits provided under the
Company's Pension Plan, the Company maintains a retirement benefit restoration
plan. Subject to an annual limit, the benefit restoration plan and the Pension
Plan together provide benefits to all employees affected by the Internal
Revenue Code limits at approximately the same percentage of compensation as
for other employees. The Named Executive Officers participate in this plan.
Chief Executive Officer's Compensation
The Committee determined the compensation of W. Alan McCollough, the
Company's new Chief Executive Officer, for the 2001 fiscal year in a manner
consistent with the guidelines and policies described above. The Committee set
Mr. McCollough's salary at $950,000 with a performance-bonus target at 100
percent of salary. Mr. McCollough's bonus is based upon the performance of the
Circuit City Group and the CarMax Group according to the relative time that
Mr. McCollough devotes to each group. Upon the election of Mr. McCollough to
the position of Chief Executive Officer, the Committee granted Mr. McCollough
a stock option for 2 million shares of Circuit City Group Common Stock.
In establishing the Chief Executive Officer's compensation in prior years,
the Committee has compared the compensation of the Company's Chief Executive
Officer to the relative performance of the Company with respect to the
compensation peer group. The Company did not make a comparison for the 2001
fiscal year, but did examine general information about the competitive market
for senior executives. In setting Mr. McCollough's 2001 fiscal year
compensation, the Committee also considered the compensation paid to his
predecessor.
The Committee believes that the structure of incentives to Mr. McCollough
is appropriate for Mr. McCollough's role as Chief Executive Officer in the
overall operations of the Company. The Committee believes that Mr.
McCollough's actual compensation for the 2001 fiscal year was appropriate in
light of his promotion and all of the other above considerations.
COMPENSATION AND PERSONNEL COMMITTEE
Robert S. Jepson, Jr., Chairman
James F. Hardymon
Walter J. Salmon
John W. Snow
15
Performance Graphs
[GRAPH]
TOTAL RETURN TO SHAREHOLDERS
Fiscal Year 1996 1997 1998 1999 2000 2001
Circuit City Group
Common Stock $100 $105.92 $131.43 $185.21 $276.56 $104.07
S&P 500 Index $100 $126.16 $170.32 $203.94 $227.86 $209.18
Retail Stores Composite $100 $123.07 $188.27 $276.62 $265.83 $277.77
[GRAPH]
TOTAL RETURN TO SHAREHOLDERS
Fiscal Year 2/4/97 2/28/97 2/28/98 2/28/99 2/29/00 2/28/01
Carmax Group
Common Stcok $100 $ 91.48 $ 42.05 $ 20.46 $ 7.39 $ 23.41
S&P 500 Index $100 $100.20 $135.27 $161.97 $180.97 $166.13
Retail Stores
Composite $100 $107.21 $164.01 $240.97 $231.57 $241.97
16
Employment Agreements and Change-In-Control Arrangements
The Company has employment agreements with each of the Named Executive
Officers. Generally, these agreements provide for annual salary review and
participation in the Company's bonus, stock incentive and other employee
benefit programs. They also provide for continuation of base salary for
specified periods following termination by the Company without cause (two
years in the case of Mr. Sharp, one year for the other Named Executive
Officers). In such circumstances, the agreements also generally provide that
the employee will be paid any bonus to which he would otherwise be entitled
for that year, such bonus to be prorated if termination occurs in the first
six months of the year. The salary continuation generally extends for another
year under the agreements if the termination without cause follows a change of
control. The Company's salary continuation obligation will decrease by up to
50 percent if the individual secures alternative employment; however, no
decrease will occur if the termination is related to a change of control. In
addition, if the employee voluntarily terminates the employment relationship
within one year following a change of control, the employee will be entitled
to continuation of base salary for a specified period of time (two years in
the case of Mr. Sharp, one year for the other Named Executive Officers) and
potential payment of a bonus as indicated above. Each agreement contains
provisions confirming the employee's obligation to maintain the
confidentiality of proprietary information and not to compete with the Company
for a specified period of time after the termination of his employment. Mr.
Froman's employment agreement contains benefit terms that are less than those
of others at his level and is presently under revision to make it consistent
with those of other senior officers. The employment agreements with the Named
Executive Officers became effective as follows: Mr. Birnbaum--1983, Mr.
Sharp--1986, Mr. Chalifoux--1989, Mr. Froman--1990, Mr. McCollough--1995, and
Mr. Ligon--1995. The current base salaries of Messrs. McCollough, Sharp,
Birnbaum, Chalifoux, Froman and Ligon under their employment agreements are
$950,000, $300,000, $620,000, $605,000, $600,000 and $550,000, respectively.
The Named Executive Officers have been granted SARs in connection with some
of the stock options granted to them under the Company's stock incentive
plans. The options also provide for accelerated vesting in the event of a
change of control. The SARs are Change of Control SARs that may only be
exercised in the event of a change of control. Upon exercise of the SAR and
the surrender of the related option, the holder is entitled to receive cash
from the Company in the amount of the spread between the option exercise price
and the market value of the Common Stock at the time of exercise, which value
is determined by a formula designed to take into account the effect of the
change of control.
COMPENSATION OF DIRECTORS
During fiscal 2001, directors who are not employees of the Company received
a combination of equity-based and cash compensation. The cash portion of the
annual retainer was $28,500, with committee chairmen receiving an additional
$2,500. Committee and Board meeting attendance fees of $1,500 per meeting also
were paid. The non-employee directors' equity-based compensation was comprised
of a stock grant with a fair market value at the date of grant of $10,000 and
a stock option grant with a value as of the date of grant (based on the Black-
Scholes method) of $43,300. The equity-based components of director
compensation were divided between Circuit City Group Common Stock and CarMax
Group Common Stock based on the relative market values of each Group's Common
Stock at the time of grant. The fiscal 2001 stock grant consisted of 414
shares of Circuit City Group Common Stock and 25 shares of CarMax Group Common
Stock. The fiscal 2001 stock option grants were made under the Company's 2000
Non-Employee Directors Stock Incentive Plan and consisted of options to
purchase 2,530 shares of Circuit City Group Common Stock and options to
purchase 264 shares of CarMax Group Common Stock. The exercise price for each
option is 100 percent of the fair market value of the relevant Common Stock on
the date of grant. The options vest evenly over three years from the date of
grant and expire in eight years. Non-employee directors have the right to
defer the receipt of compensation under the Company's deferred compensation
plan.
Directors who are employees of the Company receive no compensation for
service as members of the Board or Board committees.
17
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 2001, the Board of Directors approved the sale of a
corporate-owned aircraft to Mr. Sharp, Chairman of the Board of Directors, for
$13.1 million. The sale price was based on the fair market value of the
aircraft as determined by an independent appraisal.
SECTION 16(a) COMPLIANCE
Section 16(a) of the Securities Exchange Act requires the Company's
officers, directors and persons who own more than ten percent of a registered
class of the Company's equity securities, to file reports of ownership and
changes in ownership on Forms 3, 4 and 5 with the Securities and Exchange
Commission. Officers, directors and greater than ten percent shareholders are
required by regulation to furnish the Company with copies of all Forms 3, 4
and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received and written representations from certain reporting persons that they
were not required to file Form 5 for specified fiscal years, the Company
believes that all its officers and directors complied with all of the filing
requirements applicable to them with respect to transactions during the fiscal
year ended February 28, 2001.
Each of the following individuals has reported that he is the beneficial
owner of more than ten percent of the outstanding shares of CarMax Group
Common Stock: Ronald Juvonen, Alfred Loomis, III and Philip Timon. Messrs
Juvonen, Loomis and Timon each filed a Form 3 indicating his respective
ownership of the CarMax Group Common Stock more than ten days after the date
that the Form 3 states that he became the beneficial owner of such shares. In
addition, Mr. Juvonen filed 20 Forms 4 reporting 175 transactions, and Mr.
Timon filed five Forms 4 reporting 18 transactions, in the Company's Common
Stock. Mr. Loomis filed four Forms 4 reporting 12 transactions in the
Company's Common Stock. Each of the Forms 4 filed by Messrs Juvonen, Loomis
and Timon was filed more than ten days after the end of the month in which the
transactions reported on the relevent Form 4 occurred.
18
ITEM TWO--SHAREHOLDER PROPOSAL REGARDING A REPORT ON EMPLOYMENT PRACTICES
The Company's Board of Directors recommends that, if it is properly
presented at the 2001 annual meeting, shareholders vote AGAINST the following
shareholder proposal submitted by the Congregation of the Passion and the
General Board of Pension and Health Benefits of the United Methodist Church,
both institutional shareholders. Upon receiving an oral or written request,
the Company will furnish the address and number of shares of Common Stock held
by these shareholders.
Shareholder Proposal
WHEREAS: Equal employment is a key issue for shareholders. The bipartisan
Glass Ceiling Commission Study released in 1995 explains that a positive
diversity record has a positive impact on the bottom line. This study is
important for shareholders because it shows how many corporations in the
United States select for advancement from less than 50 percent of the total
talent available in our work force.
. Women and minorities comprise 57 percent of the work force, yet
represent only 3 percent of executive management positions.
. Women who were awarded more than half of all master degrees represent
less than 5 percent of senior-level management positions.
These statistics show the limits placed on selecting the most talented people
for top management positions.
Not attending to diversity impacts the bottom line because of the real costs
of discrimination cases, the potential loss of government contracts and the
financial ramifications of a damaged corporate image.
a) In 1996 Texaco settled the largest racial discrimination lawsuit in
U.S. history, costing a reported $170 million to the company and
stockholders. Texaco's public image was tarnished and the company
faced a consumer boycott.
b) In 1996 the Wall Street Journal reported that Shoney's earnings for
fiscal year 1992 posted a direct loss of $16.6 million as a result of
settling a racial discrimination suit for $134.5 million.
c) In 1997 Denny's reported it was still trying to win back its minority
customers, dating back to the 1992 discrimination complaints against
Denny's.
d) In 1998 Smith Barney agreed to spend $15 million on diversity programs
to settle a case brought by plaintiffs charging sexual harassment.
More than 150 major employers publicly report on work force diversity to their
shareholders. Primary examples are Disney/ABC Commitment Report, USAir
Affirming Workplace Diversity Report, Intel Diversity Report, Monsanto
Diversity Report, and Texaco Diversity Report. These companies and many others
regularly provide reports describing diversity progress and challenges. Often
companies will also include this information in their annual reports.
RESOLVED: The shareholders request our company prepare a report at reasonable
cost that may omit confidential information on the issues described below.
1) An updated Diversity Report to be available to shareholders four months
from the date of the annual meeting, that includes:
a) the EEO-1 Report in standard federal government categories according
to gender and race in each of the nine major EEOC-defined categories
for the previous three years;
b) a description of any policies and programs oriented specifically
toward increasing number of managers who are qualified females and/or
ethnic minorities;
19
c) a description of the company's efforts to increase its business with
female and minority suppliers and service-providers;
d) any federal audit, corporate management review, and letter of
compliance with corrective measures enacted to protect any government
contracts.
2) A report on any material litigation in which the company is involved
concerning race, gender and the physically challenged.
Board of Directors' Statement in Opposition
This proposal is substantially the same as one that has been presented at
our last two annual meetings and received 14 percent of the shareholder votes
in 1999 and 20 percent of the votes at last year's annual meeting. The Board
continues to oppose the proposal and its view, set forth below, is essentially
unchanged from prior years.
The Company's Board of Directors and management strongly endorse and
enforce equal opportunity in all phases of the Company's relationships with
shareholders, employees, customers and vendors. The Company's Code of Business
Conduct stresses its longstanding "commitment to the highest ethical and moral
ideals." It communicates the expectation that every employee "act at every
opportunity, according to the highest standards of ethical business conduct"
and "maintain the highest level of personal integrity in performing their
daily responsibilities and in working with other Associates, Customers,
Vendors and Competitors."
The Board believes that this commitment requires the Company's business
decisions to be untainted by consideration of any impermissible factors not
directly related to individual merit, mutual respect and value to the
shareholders. The future of the Company depends on the success of all of its
business relationships, especially those with its employees.
The Company's Code of Business Conduct also mandates compliance with all
Equal Employment Opportunity laws, which is "central to and embodied in our
personnel philosophy of Treating Associates with Respect." This guiding
principle of the Company's human resources philosophy directs the Company's
relationships with all applicants and employees. The Company clearly states
its equal employment opportunity policy in its recruitment advertisements and
its application material and widely publicizes the policy and practice among
its employees. The associate handbook, as well as prominent postings in all
Company locations, describes in detail the requirement of "Treating Each Other
with Respect." Circuit City firmly believes that the workplace must be free
from disrespect and discrimination. It will not tolerate offensive behavior.
This commitment goes far beyond the legal standards prohibiting workplace
discrimination and sets a much higher standard for workplace behavior at the
Company.
In the execution of this philosophy, the Company maintains extensive
avenues of internal communication to encourage open and honest dialog with its
employees and to provide them with effective mechanisms to bring any concerns
to the attention of their immediate managers, human resources personnel or
senior management. Further, the Company requires all of its managers to
participate in and successfully complete training on both the applicable legal
requirements and the Company's higher "respect" standard for fairly and
consistently selecting and managing our workforce. Also, the Company makes
every effort to stimulate interest among the broadest base of qualified
internal and external applicants to fuel our continuing growth while
maintaining our high performance standards. Those efforts include the
Company's Management Development program in the store organization that allows
every employee who meets minimum qualifications to self-nominate for
advancement by expressing his or her interest in promotion. By successful
completion of self-paced modules designed to encourage professional
development and provide management assistance for acquiring and improving
necessary skills, every employee has the ability to be the architect of his or
her own growth within the organization. The Company's commitment is that every
employee who wishes to participate in this process will have the opportunity
to do so.
20
Based on the concerns stated in support of the proposal about settlement
and other costs associated with major discrimination lawsuits, the Board
believes the proposal may have been motivated to some degree by publicity
surrounding employment discrimination litigation in 1996 involving the
promotion practices at the Company's headquarters. The trial level proceedings
were widely reported, notwithstanding the plaintiffs' success on only three
out of 50 claims. However, less publicity surrounded the later appellate
decisions, which vacated sweeping injunctive relief and the pattern and
practice finding made at the trial level. The Board believes the appellate
decisions clear the Company of accusations of widespread disparate treatment
and more than justify its support of management's decision to vigorously
defend the case. The Board is adamant that any, even isolated, incidence of
discrimination is deplorable and unacceptable in our Company. It also is proud
of the Company's equal employment record and continues to believe that the
shareholders' interests are served by vigorous defense of meritless claims.
Clearly, any suggested comparison between the Company's experience and the
multi-million dollar settlements by other major corporations is grossly
inaccurate and unwarranted.
Considered against this factual background, the Board believes the proposal
is unnecessary and inappropriate. In the Board's view, the proposal also fails
to take into account the nature of the Company's business and misapprehends
both required and legally permissible practices by the Company. The Board is
informed that private employers, which are not government contractors and are
not subject to court-ordered remedial action for past discrimination, may not
legally make employment or contracting decisions based upon consideration of
race and gender regardless of whether the decision impermissibly favors or
disfavors a protected group.
Circuit City is not a government contractor and is not subject to court-
ordered remedial action for past discrimination. Many of the employers
referenced in the proposal do fall into at least one of these categories,
requiring them to make certain business decisions on the basis of race and/or
gender. As such, no valid comparison can be made between Circuit City and
these other companies. Thus, Circuit City does not have, and cannot legally
maintain, policies and programs of the type the proposal asks us to describe.
The Board reiterates its commitment and direction that management continue to
make employment and contracting decisions based on qualification and merit,
without regard to race, gender or other protected characteristics.
The proposal also seeks publication of a report that the Company prepares
and files on a confidential basis with governmental authorities. While these
reports in fact illustrate the Company's commitment to equal opportunity, the
Board does not believe that public dissemination of these reports will promote
the goal of equal employment opportunity in any meaningful way. Furthermore,
in order to obtain consistent statistical information across all categories of
employers, the government requires the Company to report the information in
artificial categories that do not accurately reflect either the business or
the practices of the Company. As a result, the information in the reports is
potentially susceptible to misinterpretation. For example, it does not reflect
either workforce availability or interest in advancement. Accordingly,
disclosure of this sensitive information, which is protected by federal law,
would not be in the interests of shareholders.
Finally, the proposal requests disclosure of material employment-related
litigation. The Company already is obligated under SEC rules to make
disclosure of material litigation of all kinds. Employment-related litigation
is not excluded from this disclosure and already is reported as required. For
this reason, the Board believes that the proposal is duplicative and
unnecessary.
In summary, the Board believes that the proposal is unnecessary in most
respects and, in other respects, is potentially harmful to the Company and not
in the best interests of the shareholders.
Vote Required
The shareholder proposal will be approved if the votes cast in favor of
approval of the proposal exceed the votes cast against approval.
THE BOARD RECOMMENDS A VOTE AGAINST THIS SHAREHOLDER PROPOSAL.
21
RELATIONSHIP WITH INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
KPMG LLP served during the Company's fiscal year ended February 28, 2001,
as the Company's independent certified public accountants and has been
selected as the Company's independent certified public accountants for the
current fiscal year. Representatives of KPMG LLP will be present at the
meeting of the Company's shareholders. Such representatives will have the
opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
OTHER BUSINESS
Audit Fees
During fiscal 2001, KPMG LLP, our principal audit firm, billed the Company
$428,000 for audit fees. The audit fees category includes the amounts billed
for the year-end audit and the quarterly reviews.
All Other Fees
KPMG LLP billed the Company $1,148,000 for all non-audit services in fiscal
2001. There were no financial information systems design and implentation fees
for reviews. The Audit Committee has reviewed the non-audit services performed
by KPMG LLP and believes they are compatible with maintaining the auditors'
independence.
If any other business properly comes before the meeting, your proxy may be
voted by the persons named in it in such manner as they deem proper.
At this time, the Company does not know of any other business that will be
presented to the meeting.
22
PROPOSALS BY SHAREHOLDERS FOR PRESENTATION
AT THE 2002 ANNUAL MEETING
Section 1.3 of the Company's Bylaws provides that, in addition to other
applicable requirements, for business to be properly brought before an annual
meeting by a shareholder, the shareholder must give timely written notice to
the Secretary or an Assistant Secretary at the principal office of the
Company. Any such notice must be received (i) on or after February 1st and
before March 1st of the year in which the meeting will be held, if clause (ii)
is not applicable, or (ii) not less than 90 days before the date of the
meeting if the date for such meeting prescribed in the Bylaws has been changed
by more than 30 days. The shareholder's notice shall set forth (i) the name
and address, as they appear on the Company's stock transfer books, of the
shareholder, (ii) the class and number of shares of stock of the Company
beneficially owned by the shareholder, (iii) a representation that the
shareholder is a shareholder of record at the time of the giving of the notice
and intends to appear in person or by proxy at the meeting to present the
business specified in the notice, (iv) a brief description of the business
desired to be brought before the meeting, including the complete text of any
resolutions to be presented and the reasons for wanting to conduct such
business and (v) any interest that the shareholder may have in such business.
The proxies will have discretionary authority to vote on any matter that
properly comes before the meeting if the shareholder has not provided timely
written notice as required by the Bylaws.
Proposals that any shareholder desires to have included in the proxy
statement for the 2002 annual meeting of shareholders must be received by the
Company no later than January 11, 2002.
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended February 28, 2001, as filed with the Securities and Exchange Commission,
may be obtained by any shareholder after May 31, 2001, free of charge, upon
written request to Office of the Corporate Secretary, Circuit City Stores,
Inc., 9950 Mayland Drive, Richmond, Virginia 23233, or by calling (804) 527-
4022.
By Order of the Board of Directors
/s/ Michael T. Chalifoux
Michael T. Chalifoux, Secretary
May 11, 2001
23
APPENDIX A
CIRCUIT CITY STORES, INC.
AUDIT COMMITTEE CHARTER
Organization and Composition
There shall be a committee of the Board of Directors to be known as the
Audit Committee. The Audit Committee shall consist of at least three
directors, all of whom have no relationship to the corporation that may, in
the opinion of the Board of Directors, interfere with the exercise of their
independence from management and the corporation. In addition, the members of
the committee shall satisfy the requirements for audit committee membership
imposed by the New York Stock Exchange on audit committees of listed public
companies and any eligibility requirements of the Securities and Exchange
Commission with regard to companies whose securities are registered under the
Securities Exchange Act of 1934, as amended.
The Board of Directors shall interpret the foregoing requirements and
determine the qualifications of committee members in its business judgment.
Subject to approval by the Board of Directors, the committee shall revise
this charter from time to time as needed to take into account the requirements
of the Securities and Exchange Commission and the New York Stock Exchange and
such other factors as the committee deems appropriate.
Statement of Policy
The Audit Committee shall provide assistance to the Board of Directors in
fulfilling its responsibility relating to the corporate accounting and
reporting practices of the corporation. In so doing, it is the responsibility
of the Audit Committee to foster open communication between the directors, the
independent auditors, the internal auditors, and the financial management of
the corporation.
Responsibilities
In carrying out its responsibilities, the Audit Committee believes its
procedures should remain flexible, in order to best react to changing
conditions and to foster compliance with applicable requirements and integrity
with respect to the corporate accounting and reporting practices of the
corporation. In carrying out these responsibilities, the Audit Committee will:
. Review and recommend to the directors, after consulting with
management, the independent auditors to be selected to audit the
financial statements of the corporation and its divisions and
subsidiaries. The independent auditors shall be responsible to the
Board of Directors and shall report directly to the Audit Committee, as
the Board of Director's representative, on matters pertaining to its
engagement. The Board of Directors and the Audit Committee shall have
the ultimate authority and responsibility to select, evaluate and,
where appropriate, replace the independent auditors.
. Require the independent auditors to submit a written statement to the
committee, consistent with Independence Standards Board Standard No. 1,
delineating all relationships between the corporation and the
independent auditors, engage in dialogue with respect to any such
disclosed relationships or services which may impact the objectivity
and independence of the auditors, and take, or recommend that the
directors take, appropriate action to ensure the independence of the
auditors.
. Meet with the independent auditors and financial management of the
corporation to review the scope of the proposed audit for the current
year and the audit procedures to be utilized. At the conclusion of the
audit, review such audit, including any comments or recommendations of
the independent auditors and the information required to be
communicated to the committee by the independent auditors by Statements
on Auditing Standard No. 61.
A-1
. Review the audited financial statements to be contained in the
corporation's Annual Report on Form 10-K with management and the
independent auditors to determine that the independent auditors are
satisfied with the disclosure and content of the financial statements.
Any changes in accounting principles should also be reviewed. Based on
such reviews and related discussions, make a recommendation to the
Board of Directors concerning whether the audited financial statements
should be included in the Form 10-K.
. Review with the independent auditors, the corporation's internal
auditor, and financial management of the corporation, the adequacy and
effectiveness of the accounting and financial controls of the
corporation, including the adequacy of such internal controls to expose
any payments, transactions, or procedures that might be deemed illegal
or otherwise improper, and review any plans for the improvement of such
internal control procedures. Further, the committee periodically should
review with the corporation's general counsel the corporation's Code of
Business Conduct.
. Review the internal audit function of the corporation, the proposed
audit plans for the coming year, and the coordination of such plans
with the independent auditors.
. Provide sufficient opportunity for the internal and independent
auditors to meet with the members of the Audit Committee without
members of management present. Among the items to be discussed in these
meetings are the independent auditors' evaluation of the corporation's
financial, accounting, and auditing personnel, and the cooperation that
the independent auditors received during the course of the audit.
. Submit the minutes of all meetings of the Audit Committee to, or
discuss the matters discussed at each committee meeting with, the Board
of Directors.
. Investigate any matter brought to its attention within the scope of its
duties, with the power to retain outside counsel for this purpose if,
in its judgment, that is appropriate.
A-2
CIRCUIT CITY STORES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 15, 2001.
The undersigned, having received the Annual Report to the Shareholders and the
accompanying Notice of Annual Meeting of Shareholders and Proxy Statement
dated May 11, 2001, hereby appoints W. Alan McCollough and Robert L. Burrus,
Jr., and each of them, proxies, with full power of substitution, and hereby
authorizes them to represent and vote the shares of Circuit City Group Common
Stock and CarMax Group Common Stock of Circuit City Stores, Inc. (the
"Company"), which the undersigned would be entitled to vote if personally
present at the Annual Meeting of Shareholders of the Company to be held on
Friday, June 15, 2001, at 10:00 a.m., Eastern Daylight Time, and any adjournment
thereof, and especially to vote as set forth below.
The Board of Directors Recommends a Vote FOR Item 1.
1. Election of directors: 01 Richard N. Cooper
02 James F. Hardymon
03 Robert S. Jepson, Jr.
04 Hugh G. Robinson
05 Mikael Salovaara
06 Richard L. Sharp
07 Carolyn Y. Woo
[ ] Vote FOR all nominees for the terms set forth [ ] Vote WITHHELD
in the Proxy Statement (except as marked) from all nominees
(Instructions: To withhold authority to vote for any indicated nominee, write
the number(s) of the nominee(s) in the box provided to the right.) [ ]
Please fold here
The Board of Directors Recommends a Vote AGAINST Item 2.
2. Shareholder proposal regarding a report on employment practices
(described in the Proxy Statement). [ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting and any adjournments
thereof.
IF YOU SPECIFY A CHOICE AS TO THE ACTION TO BE TAKEN ON AN ITEM, THIS PROXY WILL
BE VOTED IN ACCORDANCE WITH SUCH CHOICE. IF YOU DO NOT SPECIFY A CHOICE, IT WILL
BE VOTED FOR THE NOMINEES NAMED IN THE PROXY STATEMENT AND AGAINST ITEM 2.
Any proxy or proxies previously given for the meeting are revoked.
PLEASE MARK, SIGN, DATE AND RETURN PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE.
Address Change? Mark Box [ ] Indicate changes below:
Date ____________________________
---------------------------------
| |
---------------------------------
Signature(s) in Box
Please sign exactly as your name(s)
appear on the Proxy. If held in
joint tenancy, all persons must
sign. Trustees, administrators, etc.
should include title and authority.
Corporations should provide full
name of corporation and title of
authorized officer signing the
proxy.