CarMax 2001 Annual Report Download - page 43

(B) PREFERRED STOCK: In conjunction with the Company’s
Shareholders Rights Plan as amended and restated, preferred
stock purchase rights were distributed as a dividend at the rate
of one right for each share of Circuit City Group Common Stock
and CarMax Group Common Stock. The rights are exercisable
only upon the attainment of, or the commencement of a tender
offer to attain, a specified ownership interest in the Company by
a person or group. When exercisable, each Circuit City right
would entitle shareholders to buy one eight-hundredth of a share
of Cumulative Participating Preferred Stock, Series E, $20 par
value, at an exercise price of $125 per share subject to adjust-
ment. Each CarMax right, when exercisable, would entitle share-
holders to buy one four-hundredth of a share of Cumulative
Participating Preferred Stock, Series F, $20 par value, at an exer-
cise price of $100 per share subject to adjustment. A total of
1,000,000 shares of such preferred stock, which have preferential
dividend and liquidation rights, have been designated. No such
shares are outstanding. In the event that an acquiring person or
group acquires the specified ownership percentage of the
Company’s common stock (except pursuant to a cash tender
offer for all outstanding shares determined to be fair by the
board of directors) or engages in certain transactions with the
Company after the rights become exercisable, each right will be
converted into a right to purchase, for half the current market
price at that time, shares of the related Group stock valued at
two times the exercise price. The Company also has 1,000,000
shares of undesignated preferred stock authorized of which no
shares are outstanding.
(C) 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 will vote
together as a single voting group on all matters on which com-
mon shareholders generally are entitled to vote other than a
matter on which the common stock or either series thereof or
any series of preferred stock would be entitled to vote as a sepa-
rate voting group. On all matters on which both series of com-
mon stock would vote together as a single voting group, (i) each
outstanding share of Circuit City Group Common Stock shall
have one vote and (ii) each outstanding share of CarMax Group
Common Stock shall have a number of votes based on the
weighted average ratio of the market value of a share of
CarMax Group Common Stock to a share of Circuit City Group
Common Stock. 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.
(D) RESTRICTED STOCK: The Company has issued restricted
stock under the provisions of the 1994 Stock Incentive Plan
whereby management and key employees are granted restricted
shares of Circuit City Group Common Stock or CarMax Group
Common Stock. Shares are awarded in the name of the
employee, who has all the rights of a shareholder, subject to
certain restrictions or forfeitures. Restrictions on the awards
generally expire three to seven years from the date of grant.
Total restricted stock awards of 1,483,358 shares of Circuit City
Group Common Stock were granted to eligible employees in fis-
cal 2001. Approximately 1,047,000 of those shares were granted
as a one-for-one replacement for cancelled options that were
originally granted on June 13, 2000. Options held by senior
management were excluded from this replacement grant.
Approximately 782,000 of those shares vest two-and-one-half
years from the date of grant and approximately 265,000 shares
vest four to five years from the grant date with accelerated
vesting if certain performance factors are met. The market value
at the date of grant of all shares granted has been recorded as
unearned compensation and is a component of stockholders’
equity. Unearned compensation is expensed over the restriction
periods. In fiscal 2001, a total of $11,364,700 was charged to
operations ($12,095,900 in fiscal 2000 and $9,167,700 in fiscal
1999). As of February 28, 2001, 2,364,051 restricted shares of
Circuit City Group Common Stock and 56,667 restricted shares
of CarMax Group Common Stock were outstanding.
(E) EMPLOYEE STOCK PURCHASE PLANS: The Company has
Employee Stock Purchase Plans for all employees meeting cer-
tain eligibility criteria. Under the Circuit City Group Plan and
the CarMax Group Plan, eligible employees may purchase
shares of Circuit City Group Common Stock or CarMax Group
Common Stock, subject to certain limitations. For each $1.00
contributed by employees under the Plans, the Company
matches $0.15. Purchases are limited to 10 percent of an
employee’s eligible compensation, up to a maximum of $7,500
per year. At February 28, 2001, a total of 2,501,731 shares
remained available under the Circuit City Group Plan and
581,599 shares remained available under the CarMax Group
Plan. During fiscal 2001, 862,315 shares of Circuit City Group
Common Stock were issued to or purchased on the open market
for employees (501,984 shares in fiscal 2000 and 858,710 shares
in fiscal 1999), and 477,094 shares of CarMax Group Common
Stock were issued to or purchased on the open market on behalf
of employees (580,000 in fiscal 2000 and 268,532 in fiscal
1999). The average price per share of Circuit City Group
Common Stock purchased under the Plan was $29.93 in fiscal
2001, $41.70 in fiscal 2000 and $21.69 in fiscal 1999. The aver-
age price per share of CarMax Group Common Stock purchased
under the Plan was $4.18 in fiscal 2001, $3.68 in fiscal 2000
and $7.56 in fiscal 1999. The Company match or purchase price
discount totaled $2,766,500 in fiscal 2001, $2,903,800 in fiscal
2000 and $2,984,500 in fiscal 1999.
(F) STOCK INCENTIVE PLANS: Under the Company’s stock incen-
tive plans, nonqualified stock options may be granted to manage-
ment, key employees and outside directors to purchase shares of
Circuit City Group Common Stock or CarMax Group Common
Stock. The exercise price for nonqualified options is equal to, or
greater than, the market value at the date of grant. Options gener-
ally are exercisable over a period of from one to 10 years from the
date of grant.
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CIRCUIT CITY STORES, INC. 2001 ANNUAL REPORT