Circuit City 2004 Annual Report Download - page 6

Company filed an amended Form 10-K for the year ended December 31, 2003 with the Securities and Exchange
Commission on April 15, 2005. The consolidated financial statements included herein and all related information for
the periods affected have been restated to reflect the corrections.
Employment and Restricted Stock Unit Agreements
On October 12, 2004, we entered into an employment agreement with Gilbert Fiorentino, the Chief Executive
Officer of our subsidiary, Tiger Direct, Inc., and a director of the Company. The agreement became effective as of June
1, 2004 and expires on December 31, 2013 unless terminated sooner under the terms of the agreement.
The agreement provides for annual compensation and bonus payments. The agreement also accelerates the
vesting schedule of certain options previously granted to Mr. Fiorentino. In addition, new options were granted under
the Company's 1999 Long-
term Stock Incentive Plan (the "1999 Plan") for 166,667 shares, and the agreement obligates
the Company to issue additional options of 166,667 shares in each of August 2005 and 2006, at the then fair market
value. Options will vest in five annual cumulative installments of 20% each.
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Mr. Fiorentino also was granted, pursuant to a restricted stock unit agreement, restricted stock units under the
1999 Plan representing the right to receive a total of 1,000,000 shares of restricted stock of the Company. The grant is
conditioned upon shareholder approval at the 2005 annual meeting (which approval has been assured as a result of a
concurrent signed agreement whereby the Company's three controlling shareholders agreed to vote for approval) and
satisfaction of certain performance conditions based on earnings before interest, taxes and depreciation and
amortization expense in fiscal 2004, which have been met. Such restricted stock units generally vest at the rate of 20%
on May 31, 2005 and 10% per year on April 1, 2006 and each year thereafter.
Restructuring Activities
We continue to address the pressures of a competitive market with the identification of opportunities for cost
savings.
In February 2004 we announced a plan to streamline the back office and warehouse operations of our computer
businesses in the United States. The streamlining, which resulted in the elimination of approximately 200 jobs resulted
in approximately $3.7 million (pre-tax) of severance and other restructuring costs which were reflected in our first
quarter 2004 results. We expect that this streamlining plan will result in annual savings of approximately $8 million,
excluding the severance and other restructuring costs recognized in fiscal 2004.
During 2004 we implemented several cost reduction plans in Europe, including a consolidation of our United
Kingdom sales offices in the first quarter of 2004, resulting in the elimination of 50 jobs.
In early 2005, we announced that we are taking steps to increase the efficiency and profitability of our European
operations, including combining certain back office operations in the United Kingdom to provide better customer
service and reduce costs. These actions will result in the elimination of approximately 185 positions, which is expected
to result in approximately $8.0 million in annual savings.
Rebate Program Use Investigated
On August 10, 2004 we announced that we were cooperating in an investigation by the United States Attorney's
Office for the Southern District of Florida of one or more government employees and certain former employees of the
Company of possible misuse of certain previously terminated rebate programs offered by the Company's Dartek
subsidiary. The Government has informed the Company that it is not a subject of the investigation at this time. The
Audit Committee conducted a review of the aforementioned terminated rebate programs, including their potential
violations of Company policies, and has reviewed other similar programs offered by the Company.