CarMax 2002 Annual Report Download - page 72

CIRCUIT CITY STORES, INC. ANNUAL REPORT 2002 70
6. COMMON STOCK AND STOCK-BASED INCENTIVE PLANS
(A) 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.
(B) SHAREHOLDER RIGHTS PLAN: In conjunction with the
Company’s Shareholder 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. 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 Group right would
entitle the holder 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. A total of 500,000 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 per-
centage 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 cur-
rent 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 and an additional 500,000
shares of preferred stock designated as Series F, which are related
to similar rights held by CarMax Group shareholders.
(C) 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. 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
1,063,366 shares of Circuit City Group Common Stock were
granted to eligible employees in fiscal 2002. In fiscal 2001,
1,483,358 restricted shares of Circuit City Group Common
Stock were granted, including approximately 1,047,000 shares
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 the replacement grant shares vest
two-and-one-half years from the date of grant, and the remain-
ing 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 Group equity. Unearned compensation is expensed over the
restriction periods. In fiscal 2002, a total of $15,578,400 was
charged to operations ($11,211,200 in fiscal 2001 and
$11,648,700 in fiscal 2000). As of February 28, 2002,
2,317,348 restricted shares of Circuit City Group Common
Stock were outstanding.
(D) STOCK INCENTIVE PLANS: Under the Company’s stock incen-
tive plans, nonqualified stock options may be granted to man-
agement, key employees and outside directors to purchase
shares of Circuit City Group Common Stock. The exercise
price for nonqualified options is equal to, or greater than, the
market value at the date of grant. Options generally are exercis-
able over a period from one to 10 years from the date of grant.
The Company has authorized 29,765,050 shares of Circuit
City Group Common Stock to be issued as either options or
restricted stock grants. At February 28, 2002, 7,736,657 shares
of Circuit City Group Common Stock were available for
issuance of options or restricted stock grants and 12,053,254
shares were available at February 28, 2001.
(E) EMPLOYEE STOCK PURCHASE PLAN: The Company has
employee stock purchase plans for all employees meeting cer-
tain eligibility criteria. Under the Circuit City Group plan, eli-
gible employees may, subject to certain limitations, purchase
shares of Circuit City Group Common Stock. For each $1.00
contributed by employees under the plan, 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. The Company has authorized 15,500,000 shares of
Circuit City Group Common Stock for purchase under the
plan. At February 28, 2002, a total of 1,635,207 shares
remained available under the Circuit City Group plan. During
fiscal 2002, 866,524 shares were issued to or purchased on the
open market on behalf of employees (862,315 shares in fiscal
2001 and 501,984 shares in fiscal 2000). The average price per
share purchased under the plan was $17.59 in fiscal 2002,
$29.93 in fiscal 2001 and $41.70 in fiscal 2000. The Company
match for the Circuit City Group totaled $1,866,700 in fiscal
2002, $2,519,500 in fiscal 2001 and $2,682,300 in fiscal 2000.