EXECUTION COPY
SECOND AMENDED AND RESTATED RIGHTS AGREEMENT
between
CIRCUIT CITY STORES, INC.
and
XXXXX FARGO BANK MINNESOTA, N.A.
(FORMERLY NAMED NORWEST BANK MINNESOTA, N.A.)
Dated as of July 10, 2001
CORP 62338.7
Rights Agreement
Table of Contents
Page
Section 1. Certain Definitions.............................................................................2
Section 2. Appointment of Rights Agent.....................................................................9
Section 3. Issuance of Rights Certificates.................................................................9
Section 4. Form of Rights Certificates....................................................................13
Section 5. Countersignature and Registration..............................................................15
Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed,
Lost or Stolen Rights Certificates.............................................................15
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights..................................17
Section 8. Cancellation and Destruction of Rights Certificates............................................21
Section 9. Reservation and Availability of Preferred Shares and Common Shares.............................22
Section 10. Preferred Shares Record Date...................................................................25
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights....................26
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.....................................41
Section 13. Consolidation, Merger, Statutory Share Exchange or Sale or Transfer of Assets or
Earning Power..................................................................................41
Section 14. Fractional Rights and Fractional Shares........................................................46
Section 15. Rights of Action...............................................................................47
Section 16. Agreement of Right Holders.....................................................................48
Section 17. Rights Certificate Holder Not Deemed a Shareholder.............................................49
Section 18. Concerning the Rights Agent....................................................................50
Section 19. Merger or Consolidation or Change of Name of Rights Agent......................................51
Section 20. Duties of Rights Agent.........................................................................52
Section 21. Change of Rights Agent.........................................................................55
Section 22. Issuance of New Rights Certificates............................................................57
Section 23. Redemption and Termination.....................................................................58
Section 24. Exchange.......................................................................................59
Section 25. Notice of Certain Events.......................................................................61
Section 26. Notices........................................................................................63
Section 27. Supplements and Amendments.....................................................................63
Section 28. Successors.....................................................................................65
Section 29. Determinations and Actions by the Board of Directors, etc......................................65
Section 30. Benefits of this Agreement.....................................................................66
Section 31. Severability...................................................................................66
Section 32. Governing Law..................................................................................66
Section 33. Counterparts...................................................................................67
Section 34. Descriptive Headings...........................................................................67
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CORP 62338.7
SECOND AMENDED AND RESTATED RIGHTS AGREEMENT
This Second Amended and Restated Rights Agreement (the "Agreement") is
entered into as of July 10, 2001, between Circuit City Stores, Inc., a Virginia
corporation (the "Company"), and Xxxxx Fargo Bank Minnesota, N.A., formerly
named Norwest Bank Minnesota, N.A., a national banking association (the "Rights
Agent"). This Agreement amends and restates the Rights Agreement dated as of
April 14, 1998 between the Company and the Rights Agent (the "Original Rights
Agreement"), as previously amended by the First Amended and Restated Rights
Agreement (the "First Restated Agreement").
On April 14, 1998, the Board of Directors of the Company authorized and
declared a dividend of (i) one preferred share purchase right (a "Circuit City
Right") for each share of Circuit City Stores, Inc. -- Circuit City Group Common
Stock (the "Circuit City Stock") outstanding on April 29, 1998 (the "Record
Date") and (ii) one preferred share purchase right (a "CarMax Right") for each
share of Circuit City Stores, Inc. -- CarMax Group Common Stock (the "CarMax
Stock") outstanding on the Record Date and further authorized the issuance of
one Circuit City Right and one CarMax Right with respect to each share of
Circuit City Stock and CarMax Stock, respectively, that shall become outstanding
(x) between the Record Date and the earliest of the Distribution Date, the
Redemption Date and the Final Expiration Date (as such terms are hereinafter
defined) or (y) after the Distribution Date but before the earlier of the
Redemption Date or the Final Expiration Date, if such share of Circuit City
Stock or CarMax Stock became outstanding (A) upon the exercise of a stock
option, (B) pursuant to any employee plan or arrangement, or (C) upon the
conversion or exchange of a security (other than a Circuit City Right or a
CarMax Right), which option, plan, arrangement or security was granted,
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CORP 62338.7
established or issued, as the case may be, by the Company before the
Distribution Date (collectively, "Post-Distribution Shares Bearing Rights").
At the time of the declaration of such dividend, each Circuit City
Right represented the right to purchase one four-hundredth of a share of
Cumulative Participating Preferred Stock, Series E, par value $20.00 per share,
of the Company (a "Series E Preferred Share") having the rights and preferences
set forth in Exhibit A-1 hereto, and each CarMax Right represented the right to
purchase one four-hundredth of a share of Cumulative Participating Preferred
Stock, Series F, par value $20.00 per share of the Company (a "Series F
Preferred Share") having the rights and preferences set forth in Exhibit A-2
hereto, in each such case upon the terms and subject to the conditions herein
set forth.
On February 16, 1999, the Board of Directors of the Company authorized
the amendment and restatement of the Original Rights Agreement in the manner set
forth in the First Restated Agreement.
On July 10, 2001, the Board of Directors of the Company authorized the
amendment and restatement of the First Restated Agreement as provided herein,
all of which is authorized by Section 27 of the First Restated Agreement.
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement,
--------------------
the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of Common Shares constituting an "Acquiring Block" (as such
term is hereinafter defined), but shall not include the
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Company, any wholly-owned Subsidiary of the Company or any employee benefit plan
of the Company or any Subsidiary of the Company, or any Person or entity holding
Common Shares for or pursuant to the terms of any such plan. For the purposes of
the next preceding sentence, an "Acquiring Block" shall mean either of the
following: (A) 15% or more of the shares of Circuit City Stock then outstanding;
or (B) Common Shares including in the aggregate both (x) 30% or more of the
shares of CarMax Stock then outstanding and (y) Common Shares representing 15%
or more of the Voting Rights of all the Common Shares then outstanding.
Notwithstanding the foregoing, the term "Acquiring Person" shall not include any
person who becomes the Beneficial Owner of an Acquiring Block solely as a result
of an acquisition by the Company of any Common Shares that has the effect of
increasing the proportion of the Common Shares (of any Series) beneficially
owned by such Person, or of Voting Rights of the Common Shares pertaining to the
Common Shares beneficially owned by such Person, or solely as a result of a
recalculation of the voting power of any series of Common Shares in accordance
with the Articles of Incorporation; provided, however, that the term "Acquiring
Person" shall include such Person from and after the first subsequent date upon
which (i) such Person, or any Affiliates or Associates of such Person, shall
have acquired Beneficial Ownership of any additional Common Shares and (ii) such
Person, together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of an Acquiring Block. Notwithstanding the foregoing, if the
Board of Directors of the Company determines in good faith that a Person who
would be an Acquiring Person but for the provisions of this sentence has become
such inadvertently, and if such Person divests as promptly as practicable a
sufficient number of Common Shares so that such Person would no longer be an
Acquiring Person without regard to such provisions, then such Person shall not
be deemed an "Acquiring Person" for any purpose of this Agreement.
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Notwithstanding the foregoing, a Person who or which, together with all
Affiliates and Associates of such Person, shall be the Beneficial Owner of an
Acquiring Block immediately upon the effectiveness of this Agreement but was not
immediately before such effectiveness an "Acquiring Person" as defined in the
First Restated Agreement shall not be deemed an "Acquiring Person" for any
purpose of this Agreement unless and until such Person, together with all
Affiliates and Associates of such Person, shall be the Beneficial Owner of
Common Shares representing 20% or more of the total Voting Rights of all Common
Shares then outstanding; provided, however, that if such Person, together with
all Affiliates and Associates of such Person, shall thereafter cease to be the
Beneficial Owner of an Acquiring Block, any subsequent determination whether
such person is an Acquiring Person shall be made without regard to this sentence
(other than the provisions of this proviso).
(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act, as in effect on the date of this Agreement.
(c) "Articles of Incorporation" shall mean the Amended and
Restated Articles of Incorporation of the Company in effect at February 16,
1999, as may be amended from time to time.
(d) A Person shall be deemed the "Beneficial Owner" of and
shall be deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates
or Associates beneficially owns, directly or indirectly;
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CORP 62338.7
(ii) which such Person or any of such Person's Affiliates
or Associates, directly or indirectly, has (A) the right to
acquire (whether such right is exercisable immediately or only
after the passage of time) pursuant to any agreement,
arrangement or understanding (whether or not in writing), or
upon the exercise of conversion rights, exchange rights, rights
(other than these Rights), warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, securities
tendered pursuant to a tender or exchange offer made by or on
behalf of such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for
purchase or exchange; or (B) the right to vote pursuant to any
agreement, arrangement or understanding (whether or not in
writing); provided, however, that a Person shall not be deemed
the Beneficial Owner of, or to beneficially own, any security
if the agreement, arrangement or understanding to vote such
security (1) arises solely from a revocable proxy or consent
given to such Person in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the
applicable rules and regulations of the Exchange Act and (2) is
not also then reportable on Schedule 13D under the Exchange Act
(or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly,
by any other Person (or any Affiliate or Associate thereof)
with which such Person (or any of such Person's Affiliates or
Associates) has any agreement, arrangement or understanding
(whether or not in writing) for the purpose of acquiring,
holding, voting (except to the extent contemplated by the
proviso to Section 1(d)(ii)(B)), or
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CORP 62338.7
disposing of any securities of the Company; provided, however,
that nothing in this paragraph (iii) shall cause a Person
engaged in business as an underwriter of securities to be the
"Beneficial Owner" of, or to "beneficially own," any securities
acquired through such Person's participation in good faith in a
firm commitment underwriting until the expiration of forty days
after the date of such acquisition.
(e) "Business Day" shall mean any day other than a
Saturday, Sunday, or a day on which banking institutions in the Commonwealth of
Virginia or the State of New York are authorized or obligated by law or
executive order to close.
(f) "CarMax Right" shall have the meaning set forth in the
second introductory paragraph of this Agreement.
(g) "CarMax Stock" shall have the meaning set forth in the
second introductory paragraph of this Agreement.
(h) "Circuit City Right" shall have the meaning set forth
in the second introductory paragraph of this Agreement.
(i) "Circuit City Stock" shall have the meaning set forth
in the second introductory paragraph of this Agreement.
(j) "Close of Business" on any given date shall mean 5:00
P.M., Richmond, Virginia time, on such date; provided, however, that if such
date is not a Business Day it shall mean 5:00 P.M., Richmond, Virginia time, on
the next succeeding Business Day.
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(k) "Common Shares" when used with reference to the Company
shall mean shares of Circuit City Stock and/or CarMax Stock, as the context
requires, or any other shares of capital stock of the Company into which Circuit
City Stock or CarMax Stock shall be reclassified or changed. "Common Shares"
when used with reference to any Person other than the Company shall mean the
capital stock (or equity interest) with the greatest voting power, or having
power to control or direct the management, of such other Person or, if such
other Person is a Subsidiary of another Person, of the Person or Persons which
ultimately control such first-mentioned Person.
(l) "Distribution Date" shall have the meaning set forth in
Section 3(a) hereof.
(m) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
(n) "Final Expiration Date" shall have the meaning set
forth in Section 7(a) hereof.
(o) "Person" shall mean any individual, firm, corporation,
partnership or other entity, and shall include any successor (by merger or
otherwise) of such entity.
(p) "Preferred Shares" shall mean the Series E Preferred
Shares and/or the Series F Preferred Shares, as the context requires, and, to
the extent there are not sufficient Series E Preferred Shares or Series F
Preferred Shares authorized to permit full exercise of the Rights, any other
series of Preferred Stock, par value $20.00 per share, of the Company designated
for such purpose containing terms substantially similar to the terms of Series E
Preferred Shares or Series F Preferred Shares, respectively.
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CORP 62338.7
(q) "Post-Distribution Shares Bearing Rights" shall have
the meaning set forth in the second introductory paragraph of this Agreement.
(r) "Redemption Date" shall have the meaning set forth in
Section 7(a) hereof.
(s) "Rights" shall mean Circuit City Rights and/or CarMax
Rights, as the context requires.
(t) "Section 11(a)(ii) Event" shall mean any event
described in Section 11(a)(ii) hereof.
(u) "Section 13 Event" shall mean any event described in
clauses (i), (ii), (iii) or (iv) of Section 13(a) hereof.
(v) "Series E Preferred Shares" shall have the meaning set
forth in the third introductory paragraph of this Agreement.
(w) "Series F Preferred Shares" shall have the meaning set
forth in the third introductory paragraph of this Agreement.
(x) "Share Acquisition Date" shall mean the first date of
public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) under the Exchange
Act) by the Company or an Acquiring Person that an Acquiring Person has become
such.
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CORP 62338.7
(y) "Subsidiary" of any Person shall mean any corporation
or other entity of which a majority of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by such Person.
(z) "Triggering Event" shall mean any Section 11(a)(ii)
Event or any Section 13 Event.
(aa) "Voting Rights" when used with reference to the capital
stock of, or units of equity interest in, any Person shall mean the number of
votes entitled to be cast generally in the election of directors of such Person
(if such Person is a corporation) or to participate in the management and
control of such Person (if such Person is not a corporation). For purposes of
calculating at any time the number of votes entitled to be cast generally in the
election of directors of the Company, the voting power of each outstanding share
of each series of Common Shares under the Articles of Incorporation shall be
conclusively established by the most recent definitive proxy statement of the
Company filed pursuant to Rule 14a-6 under the Exchange Act with respect to a
vote by the shareholders of the Company on any matter.
Section 2. Appointment of Rights Agent. The Company hereby
-------------------------------
appoints the Rights Agent to act as agent for the Company in accordance with the
terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such co-Rights Agents as
it may deem necessary or desirable.
Section 3. Issuance of Rights Certificates.
-------------------------------
(a) The Rights in respect of the issued and outstanding
Common Shares will be issued and become effective on the Record Date. A Common
Share and the Right or Rights
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CORP 62338.7
issued or to be issued hereunder in respect thereof will not be separately
transferable until the date (the "Distribution Date") which is the earlier of
(i) the close of business on the tenth day after the Share Acquisition Date (or,
if the tenth day after the Share Acquisition Date occurs before the Record Date,
the close of business on the Record Date) or (ii) the close of business on the
tenth Business Day (or such later time and day as may be determined by action of
the Board of Directors of the Company prior to such time as any Person becomes
an Acquiring Person) after the date of the commencement by any Person (other
than the Company, any wholly-owned Subsidiary of the Company or any employee
benefit plan of the Company or of any Subsidiary of the Company or any entity
holding Common Shares for or pursuant to the terms of any such plan) of, or
first public announcement of the intention of any such Person to commence, a
tender or exchange offer, the consummation of which would result in any Person
becoming the Beneficial Owner of an Acquiring Block (including any such date
which is after the date of this Agreement and prior to the issuance of the
Rights). Prior to the Distribution Date, each holder of Common Shares will be
the holder of the Rights associated with each such share so held, except as
otherwise provided in Section 7(e). Until the Distribution Date, the Rights
issued from time to time hereunder shall be evidenced collectively by one or
more certificates (the "Rights Certificates") delivered to and registered in the
name of the Rights Agent, as Rights Agent under this Agreement; but the issuance
of the Rights hereunder shall not be affected by any failure to deliver a new or
replacement Rights Certificate to the Rights Agent in respect thereof. The
initial Rights Certificate and any additional or replacement Rights Certificates
delivered to the Rights Agent shall, prior to the Distribution Date, have a
legend set forth on the face thereof to the effect that the Rights represented
thereby shall not be exercisable until the Distribution Date. As soon as
practicable after the Company has notified the Rights Agent of the occurrence of
the
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Distribution Date (and subsequently with respect to each issuance of
Post-Distribution Shares Bearing Rights), the Rights Agent will send, by
first-class, insured, postage prepaid mail, to each record holder of Common
Shares as of the close of business on the Distribution Date (or the date of
issuance in the case of Post-Distribution Shares Bearing Rights), at the address
of such holder shown on the records of the Company, a Rights Certificate, in
substantially the form of Exhibit B-1 hereto (in the case of a Circuit City
Right) or Exhibit B-2 hereto (in the case of a CarMax Right), evidencing one
Right for each Common Share so held. From and after the Distribution Date, the
Rights will be evidenced solely by such Rights Certificates. The failure to mail
any such Rights Certificate shall not affect the legality or validity of the
Rights.
(b) On the Record Date or as soon as practicable
thereafter, the Company will send a copy of a Summary of Rights to Purchase
Preferred Shares in substantially the form attached hereto as Exhibit C (the
"Summary of Rights"), by first-class, postage prepaid mail, to each record
holder of Common Shares as of the close of business on the Record Date, at the
address of such holder shown on the records of the Company. The failure to send
a copy of a Summary of Rights shall not affect the legality or validity of the
Rights.
(c) Certificates for Common Shares issued after the date of
the Original Rights Agreement but prior to the earliest of the Distribution Date
or the Redemption Date or the Final Expiration Date shall have impressed on,
printed on, written on or otherwise affixed to them the following legend (which
may, however, conform to the variations in wording appearing in either Section
3(c) of the Original Rights Agreement or in Section 3(c) of the First Restated
Agreement):
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This certificate also evidences and entitles the holder hereof
to certain Rights as set forth in a Rights Agreement between
Circuit City Stores, Inc. and Norwest Bank Minnesota, N.A. (the
"Rights Agent"), dated as of April 14, 1998, as the same may be
amended or supplemented from time to time hereafter (the "Rights
Agreement"), the terms of which are hereby incorporated herein
by reference and a copy of which is on file at the principal
executive offices of Circuit City Stores, Inc. Under certain
circumstances, as set forth in the Rights Agreement, such Rights
will be evidenced by separate certificates and will no longer be
evidenced by this certificate. The Rights will expire at the
close of business on April 14, 2008 unless exercised or redeemed
prior thereto. Circuit City Stores, Inc. will mail to the holder
of this certificate a copy of the Rights Agreement, as in effect
on the date of mailing, without charge promptly after receipt of
a written request therefor. Under certain circumstances set
forth in the Rights Agreement, Rights issued to, or held by, any
Person who is, was or becomes an Acquiring Person or any
Affiliate or Associate thereof (as such terms are defined in the
Rights Agreement), whether currently held by or on behalf of
such Person or by any subsequent holder, may become null and
void.
Until the earlier of the Distribution Date or the Final Expiration Date, the
Rights associated with the Common Shares represented by certificates for Common
Shares whether or not containing the foregoing legend shall be evidenced by such
certificates alone and registered holders of Common Shares shall also be the
registered holders of the associated Rights, and the transfer of any of such
certificates shall also constitute the transfer of the Rights associated with
the Common Shares represented by such certificates. In the event that the
Company purchases any
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CORP 62338.7
Common Shares after the Record Date but prior to the Distribution Date with the
effect that such Common Shares cease to be outstanding, any Rights associated
with such Common Shares shall be deemed cancelled and retired.
Section 4. Form of Rights Certificates.
---------------------------
(a) The Rights Certificates (and the forms of election to
purchase Preferred Shares and of assignment to be printed on the reverse
thereof) shall be substantially the same as Exhibit B-1 hereto (in the case of a
Circuit City Right) or Exhibit B-2 hereto (in the case of a CarMax Right) and
may have such marks of identification or designation and such legends, summaries
or endorsements printed thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the Rights
may from time to time be listed, or to conform to usage. Subject to the
provisions of Section 11 and Section 22 hereof, the Rights Certificates,
whenever issued, that are issued in respect of Common Shares which were issued
and outstanding as of the Distribution Date, shall be dated as of the
Distribution Date, and all Rights Certificates that are issued in respect of
other Common Shares shall be dated as of the respective dates of issuance of
such Common Shares, and in each such case on their face shall entitle the
holders thereof to purchase such number of one four-hundredths of a share of
Preferred Shares as shall be set forth therein at the price per one
four-hundredths of a Preferred Share set forth therein (the "Purchase Price"),
but the amount and type of securities purchasable upon the exercise of each
Right and the Purchase Price thereof shall be subject to adjustment as provided
herein.
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(b) Any Rights Certificate issued pursuant to Section 3(a)
or Section 22 that represents Rights beneficially owned by: (i) an Acquiring
Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee
of an Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such, or (iii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee before or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interest in such
Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of Section 7(e), and any Rights
Certificate issued pursuant to Section 6 or Section 11 upon transfer, exchange,
replacement or adjustment of any other Rights Certificate referred to in this
sentence, shall contain (to the extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as
such terms are defined in the Rights Agreement). Accordingly,
this Rights Certificate and the Rights represented hereby may
be or become null and void in the circumstance specified in
Section 7(e) of such Agreement.
The provisions of Section 7(e) of this Agreement shall be operative whether or
not the foregoing legend is contained on any such Rights Certificates.
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Section 5. Countersignature and Registration. The Rights
--------------------------------------
Certificates shall be executed on behalf of the Company by its Chairman of the
Board, its President, any Executive Vice President, or any Senior Vice
President, and by the Secretary, an Assistant Secretary, Treasurer or an
Assistant Treasurer of the Company, either manually or by facsimile signature,
and have affixed thereto the Company's seal or a facsimile thereof. The Rights
Certificates shall not be valid for any purpose unless manually countersigned by
an authorized signatory of the Rights Agent. In case any officer of the Company
who shall have signed any of the Rights Certificates shall cease to be such
officer of the Company before countersignature by the Rights Agent and issuance
and delivery by the Company, such Rights Certificates, nevertheless, may be
countersigned by the Rights Agent, and issued and delivered by the Company with
the same force and effect as though the person who signed such Rights
Certificates had not ceased to be such officer of the Company; and any Rights
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Rights Certificate, shall be a proper
officer of the Company to sign such Rights Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.
The Rights Agent will keep or cause to be kept, at its
principal offices, books for registration and transfer of the Rights
Certificates issued hereunder. Such books shall show the names and addresses of
the respective holders of the Rights Certificates, the number of Rights
evidenced on its face by each of the Rights Certificates and the date of each of
the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
-------------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates. Subject
----------------------------------------------------------------------
to the provisions of Section 4(b), Section 7(e) and Section 14 hereof, at any
time after the Close of Business on the
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Distribution Date, and at or prior to the Close of Business on the earlier of
the Redemption Date or the Final Expiration Date, any Rights Certificate or
Rights Certificates (other than Rights Certificates representing Rights that
have become void pursuant to Section 7(e)) may be transferred, split up,
combined or exchanged for another Rights Certificate or Rights Certificates,
entitling the registered holder to purchase a like number of one four-hundredths
of a share of Preferred Shares (or, following a Triggering Event, Common Shares,
other securities, cash or other assets, as the case may be) as the Rights
Certificate or Rights Certificates surrendered then entitled such holder (or
former holder in the case of a transfer) to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Rights Certificate shall
make such request in writing delivered to the Rights Agent, and shall surrender
the Rights Certificate or Rights Certificates to be transferred, split up,
combined or exchanged at the principal office or offices of the Rights Agent
designated for such purpose. Neither the Rights Agent nor the Company shall be
obligated to take any action whatsoever with respect to the transfer of any such
surrendered Rights Certificate until the registered holder shall have completed
and signed the certificate contained in the form of assignment on the reverse
side of such Rights Certificate and shall have provided such additional evidence
of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall request. Thereupon the
Rights Agent shall, subject to Section 4(b), Section 7(e) and Section 14 hereof,
countersign and deliver to the Person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. The Company may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer, split up, combination or
exchange of Rights Certificates.
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Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Rights Certificate if mutilated, the Company will execute and deliver a new
Rights Certificate of like tenor to the Rights Agent for counter-signature and
delivery to the registered owner in lieu of the Rights Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date
-------------------------------------------------------
of Rights.
---------
(a) Subject to Section 7(e) hereof, the registered holder
of any Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price with respect to
the total number of one four-hundredths of a Preferred Share (or other
securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable, at or prior to the earliest of (i) the
close of business on April 14, 2008 (the "Final Expiration Date"), (ii) the time
at which the Rights are redeemed as provided in Section 23 hereof (the
"Redemption Date"), or (iii) the time at which such Rights are exchanged as
provided in Section 24 hereof.
17
CORP 62338.7
(b) The purchase price for each one four-hundredth of a
Series E Preferred Share pursuant to the exercise of a Circuit City Right shall
initially be $250.00 (as adjusted, the "Series E Purchase Price"). The purchase
price for each one four-hundredth of a Series F Preferred Share pursuant to the
exercise of a CarMax Right shall initially be $100.00 (as adjusted, the "Series
F Purchase Price"). The Series E Purchase Price and the Series F Purchase Price
shall be subject to adjustment from time to time as provided in Sections 11 and
13 hereof and shall be payable in accordance with paragraph (c) below.
References in this Agreement to the "Purchase Price" shall mean the Series E
Purchase Price and/or the Series F Purchase Price, as the context requires.
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase and the certificate
duly executed, accompanied by payment, with respect to each Right so exercised,
of the Purchase Price per one four-hundredth of a Preferred Share (or other
shares, securities, cash or other assets, as the case may be) to be purchased as
set forth below and an amount equal to any applicable transfer tax required to
be paid by the holder of such Rights Certificate in accordance with Section 9,
the Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i)
(A) requisition from any transfer agent of the Preferred Shares (or make
available, if the Rights Agent is the transfer agent for such shares)
certificates for the total number of one four-hundredths of a Preferred Share to
be purchased and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, or (B) if the Company shall have elected to
deposit the total number of Preferred Shares issuable upon exercise of the
Rights hereunder with a depositary agent, requisition from the depositary agent
depositary receipts representing such number of one four-hundredths of a
Preferred Share as are to be purchased (in which case certificates for the
Preferred Shares represented by such
18
CORP 62338.7
receipts shall be deposited by the transfer agent with the depositary agent) and
the Company hereby directs the depositary agent to comply with such request,
(ii) when appropriate, requisition from the Company the amount of cash, if any,
to be paid in lieu of issuance of fractional shares in accordance with Section
14, (iii) promptly after receipt of such certificates or depositary receipts,
cause the same to be delivered to or upon the order of the registered holder of
such Rights Certificate, registered in such name or names as may be designated
by such holder and (iv) when appropriate, after receipt, promptly deliver such
cash, if any, to or upon the order of the registered holder of such Rights
Certificate. The payment of the Purchase Price (as such amount may be reduced
pursuant to Section 11(a)(iii) hereof) shall be made (x) in cash or by certified
bank check or bank draft payable to the order of the Company, or (y) at the
election of the Company with respect to all exercisable Rights by delivery of a
certificate or certificates (with appropriate stock powers executed in blank
attached thereto) evidencing a number of Common Shares equal to the then
Purchase Price divided by the closing price (as determined pursuant to Section
11(d) hereof) per Common Share on the Trading Day (as hereinafter defined)
immediately preceding the date of such exercise or (z) in the event the Company
permits payment with Common Shares, a combination thereof. In the event the
Company elects to accept Common Shares in payment of the Purchase Price, it
shall notify the Rights Agent of such election and of the closing price per
Common Share on the Trading Date immediately preceding the date of exercise to
which such election relates. In the event that the Company is obligated to issue
other securities (including Common Shares) of the Company, pay cash and/or
distribute other property pursuant to Section 11(a) hereof, the Company will
make all arrangements necessary so that such other securities, cash and/or other
property are available for distribution by the Rights Agent, if and when
appropriate.
19
CORP 62338.7
(d) In case the registered holder of any Rights Certificate
shall exercise fewer than all the Rights evidenced thereby, a new Rights
Certificate evidencing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent to the registered holder of such Rights
Certificate or to his duly authorized assigns, subject to the provisions of
Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Triggering Event, any Rights
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an
Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee before or concurrently with the
Acquiring Person becoming such and receives such Rights pursuant to either (A) a
transfer (whether or not for consideration) from the Acquiring Person to holders
of equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer that the Board of Directors
of the Company has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect the avoidance of this Section 7(e),
shall be void without any further action and any holder of such Rights shall
thereafter have no right whatsoever with respect to such Rights (including,
without limitation, the right to exercise such Rights) under any provision of
this Agreement or otherwise. No Rights Certificate shall be issued pursuant to
Section 3 that represents Rights beneficially owned by an Acquiring Person whose
Rights would be void pursuant to the preceding sentence or any Associate or
Affiliate thereof; no Rights Certificate shall be issued at any time upon the
transfer of any Rights to an Acquiring Person
20
CORP 62338.7
whose Rights would be void pursuant to the preceding sentence or any Associate
or Affiliate thereof or to any nominee of such Acquiring Person, Associate or
Affiliate; and any Rights Certificate delivered to the Rights Agent for transfer
to an Acquiring Person whose Rights would be void pursuant to the preceding
sentence shall be canceled. The Company shall use all reasonable efforts to
insure that the provisions of this Section 7(e) and Section 4(b) are complied
with, but shall have no liability to any holder of Rights Certificates or any
other Person as a result of its failure to make any determinations with respect
to an Acquiring Person or its Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) completed and signed the certificate contained in the form
of election to purchase set forth on the reverse side of the Rights Certificate
surrendered for such exercise, and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates.
-------------------------------------------------------
All Rights Certificates surrendered for the purpose of exercise, transfer, split
up, combination or exchange shall, if surrendered to the Company or to any of
its agents, be delivered to the Rights Agent for cancellation or in cancelled
form, or, if surrendered to the Rights Agent, shall be canceled by it, and no
Rights Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Rights Agreement. The Company shall
deliver to the Rights Agent for cancellation and retirement, and the Rights
Agent shall so cancel and retire, any other Rights
21
CORP 62338.7
Certificate purchased or acquired by the Company otherwise than upon the
exercise thereof. The Rights Agent shall deliver all canceled Rights
Certificates to the Company or shall, at the written request of the Company and
after any retention period required by the Securities and Exchange Commission,
destroy such canceled Rights Certificates, and in such case shall deliver a
certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Preferred Shares and
-------------------------------------------------------
Common Shares.
-------------
(a) The Company covenants and agrees that it will cause to
be reserved and kept available out of its authorized and unissued Preferred
Shares (and, following the occurrence of a Triggering Event, out of its
authorized and unissued Common Shares and/or other securities) the number of
Preferred Shares (and, following the occurrence of a Triggering Event, Common
Shares and/or other securities) that, as provided in this Agreement including
Section 11(a)(iii) hereof, will be sufficient to permit the exercise in full of
all outstanding Rights.
(b) So long as the Preferred Shares (and, following the
occurrence of a Triggering Event, Common Shares and/or other securities)
issuable and deliverable upon the exercise of Rights may be listed on any
national securities exchange, the Company shall use its best efforts to cause,
from and after such time as the Rights become exercisable (but only to the
extent that it is reasonably likely that the Rights will be exercised), all
shares reserved for such issuance to be listed on such exchange upon official
notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as
soon as practicable following the earliest date after the first occurrence of a
Section 11(a)(ii) Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined pursuant to this
Agreement (including in accordance with Section 11(a)(iii) hereof), or as soon
as
22
CORP 62338.7
is required by law or regulation following the Distribution date, as the case
may be, a registration statement under the Securities Act of 1933 (the "Act"),
with respect to the securities purchasable upon exercise of the Rights on an
appropriate form and, in the event the Preferred Shares or other securities are
not then registered under the Exchange Act, file an appropriate form to so
register such Preferred Shares or other securities, (ii) cause such registration
statement to become effective as soon as practicable after such filing, (iii)
cause such registration statement to remain effective (with a prospectus at all
times meeting the requirements of the Act) until the earlier of (A) the date as
of which the Rights are no longer exercisable for such securities, and (B) the
Final Expiration Date, and (iv) obtain such regulatory approvals as may be
necessary for it to issue securities purchasable upon the exercise of the
Rights. The Company will also take such action as may be appropriate under, or
to ensure compliance with, the securities or "blue sky" laws of the various
states in connection with the exercisability of the Rights. The Company may
temporarily suspend, for a period of time not to exceed 90 days after the date
set forth in clause (i) of the first sentence of this Section 9(c), the
exercisability of the Rights in order to prepare and file such registration
statement and permit it to become effective or to obtain any other required
regulatory approval in connection with the exercisability of the Rights. Upon
any such suspension, the Company shall issue a public announcement stating, and
notify the Rights Agent, that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. In addition, if the Company shall determine
that a registration statement is required following the Distribution Date, the
Company may temporarily suspend the exercisability of the Rights until such time
as a registration statement has been declared effective. In the event any Right
is exercised prior to the occurrence of a Section 11(a)(ii) Event or a Section
13 Event, the Company may defer for up
23
CORP 62338.7
to 90 days the issuance of Preferred Shares upon such exercise in order to
obtain any necessary regulatory approval. If, within 90 days after such exercise
of any Right, the Company is unable to obtain any required regulatory approval
for the issuance of the Preferred Shares, or if the Company is otherwise unable
to issue the Preferred Shares under the terms of its Articles of Incorporation
or for any other reason, then the Company shall substitute for the Preferred
Shares otherwise issuable upon exercise of the Right (1) cash, (2) a reduction
in the Purchase Price, (3) Common Shares or other equity securities of the
Company, except to the extent that the Company has not obtained any necessary
regulatory approval for such issuance, (4) debt securities of the Company,
except to the extent that the Company has not obtained any necessary regulatory
approval for such issuance, (5) other assets, or (6) any combination of the
foregoing, having an aggregate value equal to the Current Market Price (as
defined in Section 11(d)(ii)) of the Preferred Shares for which such Right is
exercisable, where such aggregate value has been determined by the Board of
Directors of the Company based upon the advice of a nationally recognized
investment banking firm selected by the Board of Directors of the Company.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction if the requisite qualification in
such jurisdiction shall not have been obtained or the exercise thereof shall not
be permitted under applicable law.
(d) The Company covenants and agrees that it will take all
such action as may be necessary to ensure that all one four-hundredths of a
Preferred Share (and, following the occurrence of a Triggering Event, Common
Shares and/or other securities) delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such shares (subject to payment of the
Purchase Price), be duly and validly authorized and issued and fully paid and
nonassessable shares.
24
CORP 62338.7
(e) The Company further covenants and agrees that it will
pay when due and payable any and all federal and state transfer taxes and
charges which may be payable in respect of the issuance or delivery of the
Rights Certificates and of any certificate for a number of one four-hundredths
of a Preferred Share (or Common Shares and/or other securities, as the case may
be) upon the exercise of Rights. The Company shall not, however, be required to
pay any transfer tax which may be payable in respect of any transfer or delivery
of Rights Certificates to a person other than, or the issuance or delivery of a
number of one four-hundredths of a Preferred Share (or Common Shares and/or
other securities, as the case may be) in respect of a name other than that of,
the registered holder of the Rights Certificate evidencing Rights surrendered
for exercise or to issue or deliver any certificates for a number of one
four-hundredths of a Preferred Share (or Common Shares and/or other securities,
as the case may be) upon the exercise of any Rights until any such tax shall
have been paid (any such tax being payable by the holder of such Rights
Certificate at the time of surrender) or until it has been established to the
Company's satisfaction that no such tax is due.
Section 10. Preferred Shares Record Date. Each person in whose name
----------------------------
any certificate for a number of one four-hundredths of a Preferred Share (or
Common Shares and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of the Preferred Shares (or Common Shares and/or other securities, as the
case may be) represented thereby on, and such certificate shall be dated, the
date upon which the Rights Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the Preferred Shares (or Common Shares and/or other
securities, as the case may be) transfer books of the Company are
25
CORP 62338.7
closed, such person shall be deemed to have become the record holder of such
shares (fractional or otherwise) on, and such certificate shall be dated, the
next succeeding Business Day on which the Preferred Shares (or Common Shares
and/or other securities, as the case may be) transfer books of the Company are
open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate shall not be entitled to any rights of a shareholder of the
Company with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares
-------------------------------------------------------
or Number of Rights. The Purchase Price, the number and kind of shares covered
-------------------
by each Right and the number of Rights outstanding are subject to adjustment
from time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after
the date of the Original Rights Agreement (A) declare a dividend on any series
of the Preferred Shares payable in Preferred Shares or other capital stock, (B)
subdivide any series of the outstanding Preferred Shares, (C) combine any series
of the outstanding Preferred Shares into a smaller number of Preferred Shares or
(D) issue any shares of its capital stock in a reclassification of any series of
the Preferred Shares (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation), except as otherwise provided in this Section 11(a) and Section
7(e) hereof, the Purchase Price in effect at the time of the record date for
such dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of capital stock issuable on
such date, shall be
26
CORP 62338.7
proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive, upon payment of the Purchase Price then in
effect, the aggregate number and kind of shares of capital stock which, if such
Right had been exercised immediately prior to such date and at a time when the
Preferred Shares transfer books of the Company were open, he would have owned
upon such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification. If an event occurs which would
require an adjustment under both Section 11(a)(i) and Section 11(a)(ii), the
adjustment provided for in this Section 11(a)(i) shall be in addition to, and
shall be made prior to, any adjustment required pursuant to Section 11(a)(ii).
(ii) In the event any Person shall become an Acquiring
Person then each holder of a Right, except as provided below and in Section
7(e), shall thereafter have the right to receive, upon exercise thereof at the
then current Purchase Price, in accordance with the terms of this Agreement, in
lieu of a number of one four-hundredths of a Preferred Share, such number of
shares of Circuit City Stock (in the case of a Circuit City Right) or CarMax
Stock (in the case of a CarMax Right) as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the then number of one
four-hundredths of a Preferred Share for which a Right was exercisable
immediately before such event, and dividing that product (which product,
following such first occurrence, shall thereafter be referred to as the
"Purchase Price" for each Right and for all purposes of this Agreement) by (y)
50% of the Current Market Price per share of the applicable series of Common
Shares (determined pursuant to Section 11(d)) on the date of the first
occurrence of such event (such number of shares, the "Adjustment Shares");
provided, that the Purchase Price and the number of Adjustment Shares shall be
further adjusted as provided in this Agreement to reflect any events occurring
after the date of such first occurrence.
27
CORP 62338.7
(iii) In the event that the aggregate number of shares
of Circuit City Stock or CarMax Stock authorized by the Company's Articles of
Incorporation but not outstanding or reserved for issuance for purposes other
than upon exercise of the Rights is not sufficient to permit the exercise in
full of the Circuit City Rights or CarMax Rights, as the case may be, in
accordance with the foregoing subparagraph (ii) of this Section 11(a), or if any
necessary regulatory approval for such issuance has not been obtained by the
Company, the Company shall: (A) determine the excess of (1) the value of the
Adjustment Shares issuable upon the exercise of each such Right (the "Current
Value") over (2) the Purchase Price (such excess, the "Spread"), and (B) with
respect to each such Right, make adequate provision to substitute for the
Adjustment Shares, upon exercise of such Rights, (1) cash, (2) a reduction in
the Purchase Price, (3) Common Shares or other equity securities of the Company
(including, without limitation, shares or units of shares of preferred stock
which the Board of Directors of the Company has deemed to have the same value as
shares of Circuit City Stock or CarMax Stock, as applicable (such shares or
units of shares of preferred stock are herein called "common stock
equivalents"), except to the extent that the Company has not obtained any
necessary regulatory approval for such issuance, (4) debt securities of the
Company, except to the extent that the Company has not obtained any necessary
regulatory approval for such issuance, (5) other assets, or (6) any combination
of the foregoing, having an aggregate value equal to the Current Value, where
such aggregate value has been determined by the Board of Directors of the
Company based upon the advice of a nationally recognized investment banking firm
selected by the Board of Directors of the Company; provided, however, if the
Company shall not have made adequate provision to deliver value pursuant to
clause (B) above within 30 days following the later of (x) the first occurrence
of a Section 11(a)(ii) Event and (y) the date on which the
28
CORP 62338.7
Company's right of redemption pursuant to Section 23(a) expires (the later of
(x) and (y) being referred to herein as the "Section 11(a)(ii) Trigger Date"),
then the Company shall be obligated, subject to Section 7(e), to deliver, upon
the surrender for exercise of each such Right and without requiring payment of
the Purchase Price, Common Shares (to the extent available), except to the
extent that the Company has not obtained any necessary regulatory approval for
such issuance, and then, if necessary, cash, which shares and/or cash have an
aggregate value equal to the Spread. If the Board of Directors of the Company
shall determine in good faith that it is likely that sufficient additional
Common Shares could be authorized for issuance upon exercise in full of such
Rights or that any necessary regulatory approval for such issuance will be
obtained, the 30-day period set forth above may be extended to the extent
necessary, but not more than 90 days after the Section 11(a)(ii) Trigger Date,
in order that the Company may seek shareholder approval for the authorization of
such additional shares or take action to obtain such regulatory approval (such
period, as it may be extended, the "Substitution Period"). To the extent that
the Company determines that some action need be taken pursuant to the first
and/or second sentences of this Section 11(a)(iii), the Company (x) shall
provide, subject to Section 7(e) hereof, that such action shall apply uniformly
to all outstanding Circuit City Rights or CarMax Rights, as the case may be, and
(y) may suspend the exercisability of such Rights until the expiration of the
Substitution Period in order to seek any authorization of additional shares, to
take any action to obtain any required regulatory approval and/or to decide the
appropriate form of distribution to be made pursuant to such first sentence and
to determine the value thereof. In the event of any such suspension, the Company
shall issue a public announcement stating that the exercisability of such Rights
has been temporarily suspended, as well as a public announcement at such time as
the suspension is no longer in effect. For purposes of this Section 11(a)(iii),
the value of the
29
CORP 62338.7
Common Shares shall be the Current Market Price (as determined pursuant to
Section 11(d) hereof) per share of the Common Shares on the Section 11(a)(ii)
Trigger Date and the value of any "common stock equivalent" shall be deemed to
have the same value as the Common Shares on such date.
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of any series of
Preferred Shares entitling them (for a period expiring within 45 calendar days
after such record date) to subscribe for or purchase such Preferred Shares (or
shares having the same rights, privileges and preferences as such Preferred
Shares ("equivalent preferred shares") or securities convertible into such
Preferred Shares or equivalent preferred shares at a price per Preferred Share
or equivalent preferred share (or having a conversion price per share, if a
security convertible into such Preferred Shares or equivalent preferred shares)
less than the Current Market Price per share of such Preferred Shares (as
defined in Section 11(d)) on such record date, the Purchase Price to be in
effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of such Preferred Shares outstanding on
such record date plus the number of such Preferred Shares which the aggregate
offering price of the total number of such Preferred Shares or equivalent
preferred shares or both so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such Current Market Price and the denominator of which shall be the number of
such Preferred Shares outstanding on such record date plus the number of
additional such Preferred Shares or equivalent preferred shares or both to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible). In case such subscription price may
be paid in a consideration part or all of which
30
CORP 62338.7
may be in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the Rights. Preferred
Shares owned by or held for the account of the Company shall not be deemed
outstanding for the purpose of any such computation. Such adjustment shall be
made successively whenever such a record date is fixed; and in the event that
such rights or warrants are not so issued, the Purchase Price shall be adjusted
to be the Purchase Price which would then be in effect if such record date had
not been fixed.
(c) In case the Company shall fix a record date for the
making of a distribution to all holders of any series of Preferred Shares
(including any such distribution made in connection with a consolidation or
merger in which the Company is the continuing corporation) of evidences of
indebtedness, cash (other than a regular quarterly cash dividend), assets (other
than a dividend payable in such Preferred Shares) or subscription rights or
warrants (excluding those referred to in Section 11(b)), the Purchase Price to
be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the Current Market Price per share of such
Preferred Shares (as defined in Section 11(d)) on such record date, less the
fair market value (as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with the
Rights Agent) of the portion of the cash, assets or evidences of indebtedness so
to be distributed or of such subscription rights or warrants applicable to one
such Preferred Share and the denominator of which shall be such Current Market
Price per share of such Preferred Shares. Such adjustments shall be made
successively whenever such a record date is fixed; and in the event that such
distribution is not
31
CORP 62338.7
so made, the Purchase Price shall again be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder (other
than computations made pursuant to Section 11(a)(iii) hereof), the "Current
Market Price" per share of the Common Shares on any date shall be deemed to be
the average of the daily closing prices per share of such Common Shares for the
30 consecutive Trading Days (as such term is hereinafter defined) immediately
prior to such date, and for purposes of computations made pursuant to Section
11(a)(iii) hereof, the "Current Market Price" per share of the Common Shares on
any date shall be deemed to be the average of the daily closing prices per share
of such Common Shares for the ten consecutive Trading Days immediately following
such date; provided, however, that in the event that the Current Market Price
per share of the Common Shares is determined during a period following the
announcement by the issuer of such Common Shares of (A) a dividend or
distribution on such Common Shares payable in such Common Shares or securities
convertible into such Common Shares (other than the Rights), or (B) any
subdivision, combination or reclassification of such Common Shares, and prior to
the expiration of the requisite 30 Trading Days or ten Trading Days, as set
forth above, after the ex-dividend date for such dividend or distribution or the
record date for such subdivision, combination or reclassification, then, and in
each such case, the Current Market Price shall be appropriately adjusted to take
into account ex-dividend trading or trading after any subdivision, combination
or reclassification. The closing price for each day shall be the last sale
price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the
32
CORP 62338.7
Common Shares are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Common Shares are listed or admitted to trading or, if the Common
Shares are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") or such other system then in use, or, if on any such date the Common
Shares are not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker making a market in
the Common Shares selected by the Board of Directors of the Company. If on any
such date no market maker is making a market in the Common Shares, the fair
value of such shares on such date as determined in good faith by the Board of
Directors of the Company shall be used and shall be conclusive for all purposes.
The term "Trading Day" shall mean a day on which the principal national
securities exchange on which the Common Shares are listed or admitted to trading
is open for the transaction of business or, if the Common Shares are not listed
or admitted to trading on any national securities exchange, a Business Day. If
the Common Shares are not publicly held or not so listed or traded, "Current
Market Price" per share shall mean the fair value per share as determined in
good faith by the Board of Directors of the Company, whose determination shall
be described in a statement filed with the Rights Agent and shall be conclusive
for all purposes.
(ii) For the purpose of any computation hereunder, the
"Current Market Price" per share of the Preferred Shares shall be determined in
the same manner as set forth above for Common Shares in clause (i) of this
Section 11(d) (other than the last sentence thereof). If the
33
CORP 62338.7
Current Market Price per share of either series of Preferred Shares cannot be
determined in the manner provided above or if either series of Preferred Shares
is not publicly held or listed or traded in a manner described in clause (i) of
this Section 11(d), the "Current Market Price" per share of such series of
Preferred Shares shall be conclusively deemed to be (A) in the case of the
Series E Preferred Stock, the Current Market Price per share of the Circuit City
Stock (appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof), multiplied by 400 and (B)
in the case of the Series F Preferred Stock, the Current Market Price per share
of the CarMax Stock (appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof), multiplied by
400. If neither the applicable series of Common Shares nor the applicable series
of Preferred Shares are publicly held or so listed or traded, "Current Market
Price" per share shall mean the fair value per share as determined in good faith
by the Board of Directors of the Company, whose determination shall be described
in a statement filed with the Rights Agent and shall be conclusive for all
purposes. For all purposes of this Agreement, the "Current Market Price" of one
four-hundredths of a Preferred Share shall be equal to the "Current Market
Price" of one Preferred Share divided by 400.
(e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least l% in the Purchase Price; provided,
however, that any adjustments which by reason of this Section 11(e) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 11 shall be made to
the nearest cent or to the nearest ten-thousandth of a Common Share or other
share or one-millionth of a Preferred Share, as the case may be. Notwithstanding
the first sentence of this Section 11(e), any
34
CORP 62338.7
adjustment required by this Section 11 shall be made no later than the earlier
of (i) three years from the date of the transaction which requires such
adjustment or (ii) the date of the expiration of the right to exercise any
Rights.
(f) If, as a result of an adjustment made pursuant to
Section 11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter
exercised shall become entitled to receive any shares of capital stock of the
Company other than Preferred Shares, thereafter the number of such other shares
so receivable upon exercise of any Right and the Purchase Price thereof shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Preferred Shares
contained in Section 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and
the provisions of Sections 7, 9, 10, 12, 13 and 14 with respect to the Preferred
Shares shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent
to any adjustment made to the Purchase Price hereunder shall evidence the right
to purchase, at the adjusted Purchase Price, the number of one four-hundredths
of a Preferred Share (or other consideration, as the case may be) purchasable
from time to time hereunder upon exercise of the Rights, all subject to further
adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Section 11(b) and (c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Purchase Price per one four-hundredths of a
Preferred Share, that number of one four-hundredths of a Preferred Share
(calculated to the nearest one one-millionth of a Preferred Share) obtained by
(i) multiplying (x)
35
CORP 62338.7
the number of one four-hundredths of a share covered by a Right immediately
prior to this adjustment by (y) the Purchase Price in effect immediately prior
to such adjustment of the Purchase Price and (ii) dividing the product so
obtained by the Purchase Price in effect immediately after such adjustment of
the Purchase Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in substitution
for any adjustment in the number of one four-hundredths of a Preferred Share
purchasable upon the exercise of a Right. Each of the Rights outstanding after
such adjustment in the number of Rights shall be exercisable for the number of
one four-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement, and notify the Rights Agent, of its
election to adjust the number of Rights, indicating the record date for the
adjustment, and, if known at the time, the amount of the adjustment to be made.
This record date may be the date on which the Purchase Price is adjusted or any
day thereafter, but, if the Rights Certificates have been issued, shall be at
least ten days later than the date of the public announcement. If Rights
Certificates have been issued, upon each adjustment of the number of Rights
pursuant to this Section 11(i), the Company shall, as promptly as practicable,
cause to be distributed to holders of record of Rights Certificates on such
record date Rights Certificates evidencing, subject to Section 14 hereof, the
additional Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall cause to be distributed to
such holders of
36
CORP 62338.7
record in substitution and replacement for the Rights Certificates held by such
holders prior to the date of adjustment, and upon surrender thereof, if required
by the Company, new Rights Certificates evidencing all the Rights to which such
holders shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the
Purchase Price or the number of one four-hundredths of a Preferred Share
issuable upon the exercise of a Right, the Rights Certificates theretofore and
thereafter issued may continue to express the Purchase Price per one
four-hundredths of a share and the number of four-hundredths of a share which
were expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then par value, if any, of the number of
one four-hundredths of a Preferred Share issuable upon exercise of the Rights,
the Company shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue
such number of fully paid and nonassessable one-four hundredths of a Preferred
Share at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that
an adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
of the number of one four-hundredths of a Preferred Share and other capital
stock or securities of the Company, if any, issuable upon such exercise over and
above the number of one four-hundredths of a Preferred Share and other
37
CORP 62338.7
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due xxxx or other
appropriate instrument evidencing such holder's right to receive such additional
shares (fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that in their good faith judgment the Board of
Directors of the Company shall determine to be advisable in order that any
consolidation or subdivision of the Preferred Shares, issuance wholly for cash
of any of the Preferred Shares at less than the Current Market Price, issuance
wholly for cash of Preferred Shares or securities which by their terms are
convertible into or exchangeable for Preferred Shares, dividends on Preferred
Shares payable in Preferred Shares or issuance of rights, options or warrants
referred to in this Section 11, hereafter made by the Company to holders of its
Preferred Shares shall not be taxable to such shareholders.
(n) The Company covenants and agrees that it shall not, at
any time after the Distribution Date, (i) consolidate with any other Person
(other than a Subsidiary of the Company in a transaction which complies with
Section 11(o) hereof), (ii) merge with or into any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), (iii) effect a statutory share exchange with any Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof, or (iv) sell or transfer
38
CORP 62338.7
(or permit any Subsidiary to sell or transfer), in one transaction, or a series
of related transactions, assets or earning power aggregating more than 50% of
the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any other Person or Persons (other than the Company and/or any of its
Subsidiaries in one or more transactions each of which complies with Section
11(o) hereof), if (x) at the time of or immediately after such consolidation,
merger, statutory share exchange or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately after
such consolidation, merger, statutory share exchange or sale, the stockholders
of the Person who constitutes, or would constitute, the "Principal Party" for
purposes of Section 13(a) hereof shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Sections 23, 24 or 27
hereof, take or permit any Subsidiary to take any action (including, without
limitation, any conversion or redemption of any series of Common Shares
otherwise permitted under the Articles of Incorporation) if at the time such
action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by the
Rights.
(p) In the event that at any time after the date of this
Agreement and prior to the Distribution Date, the Company shall (i) declare or
pay any dividend on any series of the outstanding Common Shares payable in
Common Shares (other than a dividend payable in shares of CarMax Stock to the
extent such dividend reduces the Number of Shares Issuable with Respect to the
Inter-Group Interest, as such term is defined in the Articles of Incorporation)
or
39
CORP 62338.7
(ii) effect a subdivision, combination or consolidation of any series of the
Common Shares (by reclassification or otherwise than by payment of dividends in
Common Shares) into a greater or lesser number of Common Shares, then in any
such case (i) the number of one four-hundredths of a Series E Preferred Share
(in the case of an event affecting the Circuit City Stock) or a Series F
Preferred Share (in the case of an event affecting the CarMax Stock) purchasable
after such event upon proper exercise of each Right shall be determined by
multiplying the number of one four-hundredths of a Preferred Share so
purchasable immediately prior to such event by a fraction, the numerator of
which is the number of such Common Shares outstanding immediately before such
event and the denominator of which is the number of such Common Shares
outstanding immediately after such event and (ii) each such Common Share
outstanding immediately after such event shall have issued with respect to it
that number of Rights which each such Common Share outstanding immediately prior
to such event had issued with respect to it. The adjustments provided for in
this Section 11(p) shall be made successively whenever such a dividend is
declared or paid or such a subdivision, combination or consolidation is
effected. If an event occurs which would require an adjustment under Section
11(a)(ii) and this Section 11(p), the adjustments provided for in this Section
11(p) shall be in addition and prior to any adjustment required pursuant to
Section 11(a)(ii).
(q) In the event that at any time after the date of this
Agreement and prior to the Distribution Date, the Company shall declare or pay a
dividend on the outstanding shares of Circuit City Stock payable in shares of
CarMax Stock, then to the extent such dividend reduces the Number of Shares
Issuable with Respect to the Inter-Group Interest, as such term is defined in
the Articles of Incorporation, the Series E Purchase Price shall be adjusted so
that the result obtained by multiplying (x) the Series E Purchase Price in
effect immediately prior to such event
40
CORP 62338.7
by (y) the number of one-four hundredths of a Series E Preferred Share
purchasable at the time of such event upon proper exercise of all Circuit City
Rights associated with one share of Circuit City Stock is equal to the sum of
(A) the result obtained by multiplying (i) the Series E Purchase Price in effect
immediately after such event by (ii) the number of one-four hundredths of a
Series E Preferred Share purchasable at the time of such event upon proper
exercise of all Circuit City Rights associated with one share of Circuit City
Stock plus (B) the result obtained by multiplying (i) the Series F Purchase
Price at the time of such event by (ii) the number of one-four hundredths of a
Series F Preferred Share purchasable at the time of such event upon proper
exercise of all CarMax Rights associated with the shares of CarMax Stock paid in
such dividend with respect to one share of Circuit City Stock.
Section 12. Certificate of Adjusted Purchase Price or Number of
-------------------------------------------------------
Shares. Whenever an adjustment is made as provided in Sections 11 and 13 hereof,
------
the Company shall (a) promptly prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent and with the transfer agent for the
Common Shares and Preferred Shares a copy of such certificate and (c) mail a
brief summary thereof to each holder of a Rights Certificate in accordance with
Section 25 hereof.
Section 13. Consolidation, Merger, Statutory Share Exchange or Sale
-------------------------------------------------------
or Transfer of Assets or Earning Power.
--------------------------------------
(a) In the event that, following the date any Person has
become an Acquiring Person, directly or indirectly, (i) the Company shall
consolidate with, or merge with and into, any other Person (other than a
subsidiary of the Company in a transaction which complies with Section 11(o)
hereof or any employee benefit plan of the Company, or any entity holding Common
Shares for or pursuant to the terms of any such plan) and the Company shall not
be the continuing or surviving corporation of such consolidation or merger, (ii)
any Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof or any employee benefit plan of the Company,
or any entity holding
41
CORP 62338.7
Common Shares for or pursuant to the terms of any such plan) shall consolidate
with the Company, or merge with and into the Company, and the Company shall be
the continuing or surviving corporation of such consolidation or merger and, in
connection with such merger, all or part of the outstanding Common Shares shall
be changed into or exchanged for stock or other securities of any other Person
(or the Company) or cash or any other property, (iii) the Company shall be a
party to a statutory share exchange with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof or any employee benefit plan of the Company, or any entity holding Common
Shares for or pursuant to the terms of any such plan) after which the Company is
a Subsidiary of any other Person, or (iv) the Company shall sell or otherwise
transfer (or one or more of its Subsidiaries shall sell or otherwise transfer),
in one or more transactions, assets or earning power aggregating 50% or more of
the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any Person or Persons (other than the Company or any of its
Subsidiaries in one or more transactions each of which complies with Section
11(o) hereof), then, and in each such case, proper provision shall be made so
that (A) each holder of a Right (except as otherwise provided in Section 7(e)
hereof) shall thereafter have the right to receive, upon the exercise thereof at
the then current Series E Purchase Price (in the case of a Circuit City Right)
or the then current Series F Purchase Price (in the case of a CarMax Right), in
accordance with the terms of this Agreement, such number of validly authorized
and issued, fully paid, nonassessable and freely tradeable shares of Common
Shares
42
CORP 62338.7
of the Principal Party (as such term is hereinafter defined), not subject to any
liens, encumbrances, rights of first refusal or other adverse claims, as shall
be equal to the result obtained by (1) multiplying such then current Purchase
Price by the number of one four-hundredths of a Preferred Share for which such
Right is then exercisable (without taking into account any adjustment previously
made pursuant to Section 11(a)(ii)) and (2) dividing that product (which,
following the first occurrence of a Section 13 Event, shall be referred to as
the "Purchase Price" for each such Right and for all purposes of this Agreement)
by 50% of the Current Market Price per share of the Common Shares of such
Principal Party on the date of consummation of such Section 13 Event; (B) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such Section 13 Event, all the obligations and duties of the Company pursuant to
this Agreement; (C) the term "Company" shall thereafter be deemed to refer to
such Principal Party, it being specifically intended that the provisions of
Section 11 hereof shall apply only to such Principal Party following the first
occurrence of a Section 13 Event; (D) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient number of shares
of its Common Shares in accordance with Section 9) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its Common Shares thereafter deliverable upon the exercise of
the Rights; and (E) the provisions of Section 11(a)(ii) hereof shall be of no
effect following the first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause
(i), (ii) or (iii) of the first sentence of Section 13(a), the
Person that is the issuer of any securities
43
CORP 62338.7
into which Common Shares of the Company are converted or
exchanged in such merger, consolidation or statutory share
exchange, and if no securities are so issued, the Person that
is the other party to such merger, consolidation or statutory
share exchange; and
(ii) in the case of any transaction described in clause
(iv) of the first sentence of Section 13(a), the Person that is
the party receiving the greatest portion of the assets or
earning power transferred pursuant to such transaction or
transactions;
provided, however, that in any such case, (1) if the Common Shares of such
Person are not at such time and have not been continuously over the preceding
12-month period registered under Section 12 of the Exchange Act, and such Person
is a direct or indirect Subsidiary of another Person the Common Shares of which
is and has been so registered, "Principal Party" shall refer to such other
Person; (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Shares of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Shares having the greatest aggregate market value; and (3)
in case such Person is owned, directly or indirectly, by a joint venture formed
by two or more persons that are not owned, directly or indirectly, by the same
Person, the rules set forth in (1) and (2) above shall apply to each of the
chains of ownership having an interest in such joint venture as if such party
were a "Subsidiary" of both or all of such joint ventures and the Principal
Parties in each such chain shall bear the obligations set forth in this Section
13 in the same ratio as their direct or indirect interests in such Person bear
to the total of such interests.
44
CORP 62338.7
(c) The Company shall not consummate any Section 13 Event
unless the Principal Party shall have a sufficient number of authorized shares
of its Common Shares which have not been issued or reserved for issuance to
permit the exercise in full of the Rights in accordance with this Section 13 and
unless prior thereto the Company and such Principal Party shall have executed
and delivered to the Rights Agent a supplemental agreement providing for the
terms set forth in paragraphs (a) and (b) of this Section 13 and further
providing that, as soon as practicable after the date of any Section 13 Event,
the Principal Party will:
(i) prepare and file a registration statement under the
Act, with respect to the Rights and the securities purchasable
upon exercise of the Rights on an appropriate form, and will
use its best efforts to cause such registration statement to
(A) become effective as soon as practicable after such filing
and (B) remain effective (with a prospectus at all times
meeting the requirements of the Act) until the Final Expiration
Date;
(ii) use its best efforts to qualify or register the
Rights and the securities purchasable upon exercise of the
Rights under the Blue Sky laws of such jurisdictions as may be
necessary or appropriate; and
(iii) deliver to holders of the Rights historical
financial statements for the Principal Party and each of its
Affiliates which comply in all respects with the requirements
for registration on Form 10 under the Exchange Act.
The foregoing provisions set forth in this Section 13 shall similarly apply to
successive mergers or consolidations or statutory share exchange or sales or
other transfers. In the event that a Section 13 Event shall occur at any time
after the occurrence of a Section 11(a)(ii) Event, the
45
CORP 62338.7
Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Company shall not be required to issue fractions of
Rights or to distribute Rights Certificates which evidence fractional Rights. In
lieu of such fractional Rights, there shall be paid to the registered holders of
the Rights Certificates with regard to which such fractional Rights would
otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole Right. For the purposes of this Section 14(a),
the current market value of a whole Right shall be the closing price of the
Rights for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable. The closing price of the
Rights for any day shall be the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading or, if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by NASDAQ or such other system then in use or, if on any such date
the Rights are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Rights selected by the Board of Directors of the Company. If on any such
date no such market maker is making a
46
CORP 62338.7
market in the Rights the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used and shall be
conclusive for all purposes.
(b) The Company shall not be required to issue fractions of
Preferred Shares (other than fractions which are integral multiples of one
four-hundredths of a Preferred Share) upon exercise of the Rights or to
distribute certificates which evidence fractional Preferred Shares (other than
fractions which are integral multiples of one four-hundredths of a Preferred
Share). Fractions of Preferred Shares in integral multiples of one
four-hundredths of a Preferred Share may, at the election of the Company, be
evidenced by depositary receipts, pursuant to an appropriate agreement between
the Company and a depositary selected by it, provided that such agreement shall
provide that the holders of such depositary receipts shall have all the rights,
privileges and preferences to which they are entitled as Beneficial Owners of
the Preferred Shares. In lieu of fractional Preferred Shares the Company shall
pay to the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one Preferred Share. For purposes of this Section 14(b),
the current market value of a Preferred Share shall be the closing price of a
Preferred Share (as determined pursuant to Section 11(d)(ii) hereof) for the
Trading Day immediately prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the Rights
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right.
Section 15. Rights of Action. All rights of action in respect to
-----------------
this Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date,
47
CORP 62338.7
the registered holders of the Common Shares); and any registered holder of any
Rights Certificate (or, prior to the Distribution Date, of the Common Shares),
without the consent of the Rights Agent or of the holder of any other Rights
Certificate (or, prior to the Distribution Date, of the Common Shares), may, on
his own behalf and for his own benefit, enforce, and may institute and maintain
any suit, action or proceeding against the Company to enforce, or otherwise act
in respect of, his right to exercise the Rights evidenced by such Rights
Certificate in the manner provided in such Rights Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of, the obligations of
any Person subject to this Agreement. Holders of Rights shall be entitled to
recover the reasonable costs and expenses, including attorneys' fees, incurred
by them in any action to enforce the provisions of this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
--------------------------
accepting the same, consents and agrees with the Company
and the Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Rights Certificates
are transferable only on the registry books of the Rights Agent if surrendered
at the principal office or offices of the
48
CORP 62338.7
Rights Agent designated for such purposes, duly endorsed or accompanied by a
proper instrument of transfer and with the appropriate forms and certificates
fully executed;
(c) subject to Section 6 and Section 7(f) hereof, the
Company and the Rights Agent may deem and treat the person in whose name the
Rights Certificate (or, prior to the Distribution Date, the associated Common
Shares certificate) is registered as the absolute owner thereof and of the
Rights evidenced thereby (notwithstanding any notations of ownership or writing
on the Rights Certificates or the associated Common Shares certificate made by
anyone other than the Company or the Rights Agent) for all purposes whatsoever,
and neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be required to be affected by any notice to the
contrary; and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative agency
or commission, prohibiting or otherwise restraining performance of such
obligation; provided, however, the Company must use its best efforts to have any
such order, decree or ruling lifted or otherwise overturned as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Shareholder. No
--------------------------------------------------
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Preferred Shares or any
other securities of the Company which may at any time be issuable upon the
exercise of the Rights represented thereby, nor shall anything
49
CORP 62338.7
contained herein or in any Rights Certificate be construed to confer upon the
holder of any Rights Certificate, as such, any of the rights of a shareholder of
the Company or any right to vote for the election of directors or upon any
matter submitted to shareholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting shareholders (except as provided in Section 25), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by such Rights Certificate shall have been exercised in accordance
with the provisions hereof.
Section 18. Concerning the Rights Agent. The Company agrees to pay
---------------------------
to the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the acceptance, exercise and performance of
its duties hereunder. The Company also agrees to indemnify the Rights Agent for,
and to hold it harmless against, any loss, liability, or expense, incurred
without gross negligence, bad faith or willful misconduct on the part of the
Rights Agent, for anything done, suffered or omitted by the Rights Agent in
connection with the acceptance and administration of this Agreement, including
the costs and expenses of defending against any claim of liability in the
premises (including reasonable counsel fees and expenses).
The Rights Agent shall be protected and shall incur no
liability for, or in respect of any action taken, suffered or omitted by it in
connection with, its administration of this Agreement in reliance upon any
Rights Certificate or certificate for the Preferred Shares or Common Shares or
for other securities of the Company, instrument of assignment or transfer, power
of attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where
50
CORP 62338.7
necessary, verified or acknowledged, by the proper person or persons, or
otherwise upon the advice of its counsel as set forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights
-------------------------------------------------------
Agent. Any corporation into which the Rights Agent or any successor Rights Agent
-----
may be merged or with which it may be consolidated, or any corporation resulting
from any merger or consolidation to which the Rights Agent or any successor
Rights Agent shall be a party, or any corporation succeeding to the corporate
trust business of the Rights Agent or any successor Rights Agent, shall be the
successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
provided that such corporation would be eligible for appointment as a successor
Rights Agent under the provisions of Section 21. In case at the time such
successor Rights Agent shall succeed to the agency created by this Agreement,
any of the Rights Certificates shall have been countersigned but not delivered,
any such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Rights Certificates so countersigned;
and in case at that time any of the Rights Certificates shall not have been
countersigned, a successor Rights Agent may countersign such Rights Certificates
either in the name of the predecessor Rights Agent or in the name of the
successor Rights Agent; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name
51
CORP 62338.7
or in its changed name; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
----------------------
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who
may be legal counsel for the Company), and the opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent as to any
action taken, suffered or omitted in good faith by it under the provisions of
this Agreement in reliance upon such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring Person and
the determination of "Current Market Price") be proved or established by the
Company prior to taking, suffering or omitting any action hereunder, such fact
or matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by any one of the Chairman of the Board, the President, any
Executive Vice President, any Senior Vice President, the Treasurer or the
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full and complete authorization to the Rights Agent for any action
taken, suffered or omitted in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the
Company and any other Person only for its own gross negligence, bad faith or
willful misconduct.
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CORP 62338.7
(d) The Rights Agent shall not be liable for or by reason
of any of the statements of fact or recitals contained in this Agreement, the
Summary of Rights or in the Rights Certificates (except its countersignature
thereof) or be required to verify the same, but all such statements and recitals
are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility
in respect of the validity of this Agreement or the execution and delivery
hereof (except the due execution hereof by the Rights Agent) or in respect of
the validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any change in the exercisability of the Rights
or any adjustment in the terms of the Rights (including the manner, method or
amount thereof) provided for in Section 3, 11, 13 or 23, or the ascertaining of
the existence of facts that would require any such change or adjustment (except
with respect to the exercise of Rights evidenced by Rights Certificates after
actual notice that such change or adjustment is required); nor shall it by any
act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Preferred Shares or other securities to be
issued pursuant to this Agreement or any Rights Certificate or as to whether any
Preferred Shares or other securities will, when issued, be validly authorized
and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Agreement.
53
CORP 62338.7
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder from
any one of the Chairman of the Board, the President, any Executive Vice
President, any Senior Vice President, the Secretary or the Treasurer of the
Company, and to apply to such officers for advice or instructions in connection
with its duties, and it shall not be liable for any action taken, suffered or
omitted to be taken in good faith by it under the provisions of this Agreement
in reliance upon instructions of any such officer. At any time the Rights Agent
may apply to the Company for written instructions with respect to any matter
arising in connection with the Rights Agent's duties and obligations arising
under this Agreement. Such application by the Rights Agent for written
instructions from the Company may, at the option of the Rights Agent, set forth
in writing any action proposed to be taken or omitted by the Rights Agent with
respect to its duties or obligations under this Agreement and the date on and/or
after which such action shall be taken and the Rights Agent shall not be liable
for any action taken or omitted in accordance with a proposal included in any
such application on or after the date specified therein (which date shall not be
less than three Business Days after the Company receives such application,
without the Company's consent) unless, prior to taking or initiating such
action, the Rights Agent has received written instructions in response to such
application specifying the action to be taken or omitted.
(h) The Rights Agent and any shareholder, director, officer
or employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it
54
CORP 62338.7
were not Rights Agent under this Agreement. Nothing herein shall preclude the
Rights Agent from acting in any other capacity for the Company or for any other
legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct, provided reasonable care was exercised in
the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment of such
funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered
to the Rights Agent for exercise or transfer, the certificate attached to the
form of assignment or form of election to purchase, as the case may be, has
either not been completed or indicates an affirmative response to clause 1
and/or 2 thereof, the Rights Agent shall not take any further action with
respect to such requested exercise or transfer without first consulting with the
Company.
Section 21. Change of Rights Agent. The Rights Agent or any
-------------------------
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days notice in writing mailed to the Company and to the
transfer agent of the Common Shares and Preferred Shares by registered or
certified mail, and to the holders of the Rights Certificates by first-class
55
CORP 62338.7
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
30 days notice in writing, mailed to the Rights Agent or successor Rights Agent,
as the case may be, and to the transfer agent of the Common Shares and Preferred
Shares by registered or certified mail, and to the holders of the Rights
Certificates by first-class mail. If the Rights Agent shall resign or be removed
or shall otherwise become incapable of acting, the Company shall appoint a
successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Rights Certificate
(who shall, with such notice, submit his Rights Certificate for inspection by
the Company), then the registered holder of any Rights Certificate may apply to
any court of competent jurisdiction for the appointment of a new Rights Agent.
Any successor Rights Agent, whether appointed by the Company or by such a court,
shall be a corporation organized and doing business under the laws of the United
States or of the States of New York or Virginia (or of any other state of the
United States so long as such corporation is authorized to do business as a
banking institution in the States of New York or Virginia), in good standing,
having a principal office in the States of New York or Virginia, which is
authorized under such laws to exercise corporate trust powers and is subject to
supervision or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $50 million. After appointment, the successor Rights Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the
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CORP 62338.7
effective date of any such appointment the Company shall file notice thereof in
writing with the predecessor Rights Agent and the transfer agent of the Common
Shares and Preferred Shares, and mail a notice thereof in writing to the
registered holders of the Rights Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding
-------------------------------------
any of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Rights Certificates evidencing Rights in
such form as may be approved by its Board of Directors to reflect any adjustment
or change in the Purchase Price and the number or kind or class of shares or
other securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of Common Shares following the Distribution Date and
prior to the redemption or expiration of the Rights, the Company (a) shall, with
respect to Common Shares so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement (so long as such options, plan
or arrangement were granted or established, as the case may be, prior to the
Distribution Date), or upon the exercise, conversion or exchange of securities
issued by the Company after the date hereof and prior to the Distribution Date,
and (b) may, in any other case, if deemed necessary or appropriate by the Board
of Directors of the Company, issue Rights Certificates representing the
appropriate number of Rights in connection with such issuance or sale; provided,
however, that (i) no such Rights Certificate shall be issued if, and to the
extent that, the Company shall be advised by counsel that such issuance would
create a significant risk of material adverse tax consequences to the Company or
the Persons to whom such Rights
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CORP 62338.7
Certificate would be issued, and (ii) no such Rights Certificate shall be issued
if, and to the extent that, appropriate adjustment shall otherwise have been
made in lieu of the issuance thereof.
Section 23. Redemption and Termination.
--------------------------
(a) The Board of Directors of the Company may, at its
option, at any time prior to such time as any Person becomes an Acquiring
Person, redeem all but not less than all the then outstanding Circuit City
Rights and CarMax Rights at a redemption price of $.01 per Right, as such amount
may be appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price") and the Company may, at its
option, pay the Redemption Price either in Common Shares (based on the "Current
Market Price," as defined in Section 11(d)(i) hereof, of the Common Shares as of
a date determined by the Board) or cash. The redemption of the Rights by the
Board of Directors of the Company may be made effective at such time, on such
basis and with such conditions as the Board of Directors of the Company, in its
sole discretion, may establish.
(b) Immediately upon the action of the Board of Directors
of the Company ordering the redemption of the Rights (such action being adopted
in the manner required by paragraph (a) above), evidence of which shall have
been filed with the Rights Agent and without any further action and without any
notice, the Rights will terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price for each Right so held.
Promptly after the action of the Board of Directors ordering the redemption of
the Rights, the Company shall give notice of such redemption to the Rights Agent
and the holders of the then
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CORP 62338.7
outstanding Rights by mailing such notice to all such holders at each holder's
last address as it appears upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Common Shares. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made. Neither the Company nor any of its Affiliates or Associates may
redeem, acquire or purchase for value any Rights at anytime in any manner other
than that specifically set forth in this Section 23 or in Section 24 hereof, and
other than in connection with the purchase of Common Shares before the
Distribution Date.
Section 24. Exchange.
--------
(a) The Company may at any time after any Person becomes an
Acquiring Person, exchange all or part of the then outstanding and exercisable
Rights for Common Shares at an exchange ratio of one share of Circuit City Stock
per Circuit City Right and one share of CarMax Stock per CarMax Right, each such
ratio being appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (each such exchange ratio
being hereinafter referred to as an "Exchange Ratio"). Notwithstanding the
foregoing, the Company shall not be empowered to effect such exchange at any
time after any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or any such Subsidiary, or any entity
holding Common Shares for or pursuant to the terms of any such plan), together
with all Affiliates and Associates of such Person, becomes the Beneficial Owner
of Common Shares representing 50% or more of the total Voting Rights of all the
Common Shares of the Company then outstanding.
59
CORP 62338.7
(b) Immediately upon the action of the Board of Directors
of the Company ordering the exchange of any Rights pursuant to subsection (a) of
this Section 24 and without any further action and without any notice, the right
to exercise such Rights shall terminate and the only right thereafter of a
holder of such Rights shall be to receive that number of shares of Circuit City
Stock or CarMax Stock, as the case may be, equal to the number of such Rights
held by such holder multiplied by the applicable Exchange Ratio. The Company
shall promptly give public notice of any such exchange; provided, however, that
the failure to give, or any defect in, such notice shall not affect the validity
of such exchange. The Company promptly shall mail a notice of any such exchange
to all of the holders of such Rights at their last addresses as they appear upon
the registry books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which the exchange
of the Common Shares for Rights will be effected and, in the event of any
partial exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights held by each
holder of Rights.
(c) In any exchange pursuant to this Section 24, the
Company, at its option, may substitute (i) Series E Preferred Shares (or
equivalent preferred shares, as such term is defined in Section 11(b) hereof)
for shares of Circuit City Stock exchangeable for Circuit City Rights, at the
initial rate of one four-hundredth of a Series E Preferred Share (or equivalent
preferred share) for each share of Circuit City Stock and (ii) Series F
Preferred Shares (or equivalent preferred shares, as such term is defined in
Section 11(b) hereof) for shares of CarMax Stock exchangeable for CarMax Rights,
at the initial rate of one four-hundredth of a Series F Preferred Share (or
equivalent preferred share) for each share of CarMax Stock.
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CORP 62338.7
(d) In the event that there shall not be sufficient Common
Shares or Preferred Shares authorized but unissued to permit any exchange of
Rights as contemplated in accordance with this Section 24, the Company shall
take all such action as may be necessary to authorize additional Common Shares
or Preferred Shares for issuance upon exchange of the Rights.
(e) The Company shall not be required to issue fractions of
Common Shares or to distribute certificates which evidence fractional Common
Shares. In lieu of such fractional Common Shares, the Company shall pay to the
registered holders of the Rights Certificates with regard to which such
fractional Common Shares would otherwise be issuable an amount in cash equal to
the same fraction of the current market value of a whole Common Share. For the
purposes of this subsection (e), the current market value of a whole Common
Share shall be the closing price of such Common Share (as determined pursuant to
Section 11(d)(i) hereof) for the Trading Day immediately after the public
announcement by the Company that an exchange is to be effected pursuant to this
Section 24.
Section 25. Notice of Certain Events. In case the Company shall
-------------------------
propose, at any time after the Distribution Date, (a) to pay any dividend
payable in stock of any class or series to the holders of either series of
Preferred Shares or to make any other distribution to the holders of either
series of Preferred Shares (other than a regular quarterly cash dividend) or (b)
to offer to the holders of either series of Preferred Shares rights or warrants
to subscribe for or to purchase any additional such Preferred Shares or shares
of stock of any class or series or any other securities, rights or options, or
(c) to effect any reclassification of either series of Preferred Shares (other
than a reclassification involving only the subdivision of outstanding Preferred
Shares of such series), or (d) to effect any consolidation or merger into or
with any other Person (other than a Subsidiary of the Company in a transaction
which complies with Section 11(o)
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CORP 62338.7
hereof), or to effect a statutory share exchange with any Person (other than a
Subsidiary of the Company in a transaction which complies with section 11(o)
hereof), or to effect any sale or other transfer (or to permit one or more of
its Subsidiaries to effect any sale or other transfer), in one or more
transactions, of 50% or more of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to, any other Person (other than the Company
and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), or (e) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of a Rights Certificate, in accordance with Section 26
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such stock dividend, or distribution of rights or warrants,
or the date on which such reclassification, consolidation, merger, statutory
share exchange, sale, transfer, liquidation, dissolution, or winding up is to
take place and the date of participation therein by the holders of the Common
Shares and/or Preferred Shares, if any such date is to be fixed, and such notice
shall be so given in the case of any action covered by clause (a) or (b) above
at least 20 days prior to the record date for determining holders of the
Preferred Shares for purposes of such action, and in the case of any such other
action, at least 20 days prior to the date of the taking of such proposed action
or the date of participation therein by the holders of the Common Shares and/or
Preferred Shares, whichever shall be the earlier.
In case any Section 11(a)(ii) Event shall occur, then, in any
such case, the Company shall as soon as practicable thereafter give to each
holder of a Rights Certificate, in accordance with Section 26 hereof, a notice
of the occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Section 11(a)(ii) hereof,
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CORP 62338.7
and all references in the preceding paragraph to Preferred Shares shall be
deemed thereafter references to Common Shares and/or, if appropriate, other
securities.
Section 26. Notices. Notices or demands authorized by this
-------
Agreement to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
Circuit City Stores, Inc.
0000 Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attention: Secretary
Subject to the provisions of Section 21 hereof, any notice or
demand authorized by this Agreement to be given or made by the Company or by the
holder of any Rights Certificate to or on the Rights Agent shall be sufficiently
given or made if sent by first-class mail, postage prepaid, addressed (until
another address is filed in writing with the Company) as follows:
Xxxxx Fargo Bank Minnesota, N.A.
000 Xxxxx Xxxxxxx Xxxxxxxx
Xxxxx Xx. Xxxx, Xxxxxxxxx 00000
Attention: Circuit City Account Manager
Notices or demands authorized by this Agreement to be given or
made by the Company or the Rights Agent to the holder of any Rights Certificate
shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed to such holder at the address of such holder as shown on the
registry books of the Company.
Section 27. Supplements and Amendments. Prior to the time any
----------------------------
Person shall become an Acquiring Person and subject to the penultimate sentence
of this Section 27, the Company may and the Rights Agent shall, if the Company
so directs, supplement or amend any provision
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CORP 62338.7
of this Agreement without the approval of any holders of Rights Certificates
(or, before the Distribution Date, the Common Shares). From and after such time
as any Person shall become an Acquiring Person and subject to the penultimate
sentence of this Section 27, the Company may and the Rights Agent shall, if the
Company so directs, supplement or amend this Agreement without the approval of
any holders of Rights Certificates in order (i) to cure any ambiguity, (ii) to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, or (iii) to change or supplement
the provisions hereunder in any manner which the Company may deem necessary or
desirable and which shall not adversely affect the interests of the holders of
Rights Certificates (other than an Acquiring Person or an Affiliate or Associate
of an Acquiring Person). Upon the delivery of a certificate from an appropriate
officer of the Company which states that the proposed supplement or amendment is
in compliance with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment. Notwithstanding anything contained in this
Agreement to the contrary, no supplement or amendment shall be made which
changes the Redemption Price, the Final Expiration Date, the Purchase Price or
the number of one four-hundredths of a Preferred Share for which a Right is
exercisable, provided that this Agreement may be amended to change the type and
number of securities into which a right is exercisable before the occurrence of
any Triggering Event if, after giving effect to such amendment, the new
securities into which each Right is so exercisable have a value equal to the
value of, and have voting rights at least equal to the voting rights of, the
securities into which such Right was exercisable prior to such amendment
(excluding any value attributable to any minimum dividend payments and excluding
any voting rights operable in case of non-payment of dividends) and provided
further that upon the creation of a new series of Common Shares of the Company,
this Agreement may be
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CORP 62338.7
amended before the occurrence of any Triggering Event (x) to reflect the
Redemption Price, the Purchase Price, the number and type of securities
purchasable upon exercise and any other terms of any share purchase rights to be
associated with the shares of such new series and (y) if any shares of such new
series are to be paid as a dividend on the outstanding shares of any other
series of Common Shares, then to the extent such dividend reduces the Number of
Shares Issuable with Respect to the Inter-Group Interest, as such term is now or
hereafter defined in the Articles of Incorporation, to adjust (in a manner
similar to the adjustments required under Section 11(q) hereof) the Purchase
Price payable upon proper exercise of the Rights associated with the Common
Shares on which such dividend is to be paid. Prior to the Distribution Date, the
interests of the holders of Rights shall be deemed coincident with the interests
of the holders of Common Shares (other than an Acquiring Person).
Section 28. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors,
-------------------------------------------------------
etc. For all purposes of this Agreement, any calculation of the number of Common
---
Shares outstanding at any particular time, including for purposes of determining
the number of such outstanding Common Shares of which any Person is the
Beneficial Owner, shall be made in accordance with the last sentence of Rule
13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act. The
Board of Directors of the Company shall have the exclusive power and authority
to administer this Agreement and to exercise all rights and powers specifically
granted to the Board or to the Company, or as may be necessary or advisable in
the administration of this Agreement, including, without limitation, the right
and power to (i) interpret the provisions of
65
CORP 62338.7
this Agreement, (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend the Agreement) and (iii) make all factual
determinations deemed necessary or advisable for the administration of this
Agreement. All such actions, calculations, interpretations and determinations
(including, for purposes of clause (y) below, all omissions with respect to the
foregoing) which are done or made by the Board in good faith, shall (x) be
final, conclusive and binding on the Company, the Rights Agent, the holders of
the Rights and all other parties, and (y) not subject the Board to any liability
to the holders of the Rights.
Section 30. Benefits of this Agreement. Nothing in this Agreement
---------------------------
shall be construed to give to any person or corporation other than the Company,
the Rights Agent and the registered holders of the Rights Certificates (and,
prior to the Distribution Date, the Common Shares) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Rights Certificates (and, prior to the Distribution Date, the
Common Shares).
Section 31. Severability. If any term, provision, covenant or
------------
restriction of this Agreement, or any portion thereof, is held by a court of
competent jurisdiction or other authority to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement, including any portions of any thereof which are not held to be
invalid, void or unenforceable, shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
Section 32. Governing Law. This Agreement, each Right, and each
--------------
Rights Certificate issued hereunder shall be deemed to be a contract made under
the laws of the Commonwealth of
66
CORP 62338.7
Virginia and for all purposes shall be governed by and construed in accordance
with the laws of such Commonwealth applicable to contracts to be made and
performed entirely within such Commonwealth.
Section 33. Counterparts. This Agreement may be executed in any
------------
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the
---------------------
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
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CORP 62338.7
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
CIRCUIT CITY STORES, INC.
Attest:
By_________________________ By__________________________
Title______________________ Title_______________________
XXXXX FARGO BANK MINNESOTA, N.A.
FORMERLY NAMED NORWEST BANK
MINNESOTA, N.A.
Attest:
By________________________ By__________________________
Title_____________________ Title_______________________
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CORP 62338.7
EXHIBIT A-1
The following provisions are or will be set forth as Section C of Article IV of
the Articles of Incorporation:
C. Series E Preferred Stock.
------------------------
The Board of Directors of the Corporation has heretofore
designated 500,000 shares of the Preferred Stock as the Cumulative Participating
Preferred Stock, Series E ("Series E Stock"). Such number may from time to time
be decreased (but not below the number of shares of Series E Stock then
outstanding) by the Board of Directors of the Corporation. In addition to any
relative rights and preferences hereinabove granted, the relative rights and
preferences of such series and the holders of the outstanding shares thereof are
as set forth in paragraphs (C)(1) through (C)(5) of this Article.
(1) Dividends and Distributions.
(a) The holders of shares of the Series E Stock, in preference
to the holders of shares of the Circuit City Stock and the CarMax Stock
and of any other junior stock, shall be entitled to receive, when, as
and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the
fifteenth day (or, if not a business day, the preceding business day)
of January, April, July and October in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing
on the first Quarterly Dividend Payment Date after the first issuance
of a share or fraction of a share of the Series E Stock, in an amount
per share (rounded to the nearest cent) equal to the greater of (a)
$4.00 or (b) subject to the provision for adjustment hereinafter set
forth, 400 times the aggregate per share amount of all cash dividends,
and 400 times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions, other than a dividend
payable in shares of Circuit City Stock, or a subdivision of the
outstanding shares of Circuit City Stock (by reclassification or
otherwise), declared on the Circuit City Stock since the immediately
preceding Quarterly Dividend Payment Date or, with respect to the first
Quarterly Dividend Payment Date, since the first issuance of any share
or fraction of a share of the Series E Stock. In the event the
Corporation shall at any time after January 1, 1997 declare or pay any
dividend on Circuit City Stock payable in shares of Circuit City Stock,
or effect a subdivision or combination or consolidation of the
outstanding shares of Circuit City Stock (by reclassification or
otherwise than by payment of a dividend in shares of Circuit City
Stock) into a greater or lesser number of shares of Circuit City Stock,
then in each such case the amount per share to which holders of shares
of the Series E Stock shall be entitled under clause (b) of the
preceding sentence shall be adjusted by multiplying the amount per
share to which holders of shares of the Series E Stock were entitled
immediately prior to such event under clause (b) of the preceding
sentence by a fraction the numerator of which is the number of shares
of Circuit City Stock outstanding immediately after such event and the
denominator of which is the number of shares of Circuit City Stock that
were outstanding immediately prior to such event.
A-1-1
CORP 62338.7
(b) The Corporation shall declare a dividend or distribution
on the Series E Stock as provided in paragraph (C)(1)(a) of this
Article immediately after it declares a dividend or distribution on the
Circuit City Stock (other than a dividend payable in shares of Circuit
City Stock); provided that, in the event no dividend or distribution
shall have been declared on the Circuit City Stock during the period
between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $4.00 per share on the
Series E Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on
outstanding shares of the Series E Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of the
Series E Stock, unless the date of issue of such shares is prior to the
record date for the first Quarterly Dividend Payment Date, in which
case dividends on such shares shall begin to accrue from the date of
issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the
determination of holders of shares of the Series E Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment
Date, in either of which events such dividends shall begin to accrue
and be cumulative from such Quarterly Dividend Payment Date. Accrued
but unpaid dividends shall not bear interest. Dividends paid on the
shares of the Series E Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of the Series E Stock entitled
to receive payment of a dividend or distribution declared thereon,
which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.
(2) Voting Rights. Except to the extent provided by law, the
-------------
holders of shares of the Series E Stock shall not be entitled (i) to vote on any
matter or (ii) to receive notice of, or to participate in, any meeting of
shareholders of the Corporation at which they are not entitled to vote.
(3) Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or
distributions payable on the Series E Stock as provided in paragraph
(C)(1) of this Article are in arrears, thereafter and until all accrued
and unpaid dividends and distributions, whether or not declared, on
shares of the Series E Stock outstanding shall have been paid in full,
the Corporation shall not:
(i) declare, set apart or pay dividends on or make any
other distributions on the Common Stock or any shares of stock
ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series E Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity
(either as to dividends or upon liquidation,
A-1-2
CORP 62338.7
dissolution or winding up) with the Series E Stock, except
dividends paid ratably on the Series E Stock and all such
parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all
such shares are then entitled; or
(b) redeem or purchase or otherwise acquire for consideration
shares of the Series E Stock, any such parity stock or any stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series E Stock, or set aside for or pay to any sinking fund therefor.
(c) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (C)(3)(a) of this Article, purchase or otherwise acquire such
shares at such time and in such manner.
(4) Reacquired Shares. Any shares of the Series E Stock
------------------
redeemed, purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock, par value $20.00 per share, and may be reissued as a
new series or a part of a new series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors or as part of an existing
series of Preferred Stock.
(5) Redemption.
(a) The Corporation may, at its option and at any time and
from time to time after April 14, 2058, redeem all or any portion of
the outstanding shares of Series E Stock.
(b) The redemption price shall be an amount per share equal to
the greater of (i) $100,000.00 or (ii) subject to the provision for
adjustment hereinafter set forth, 400 times the current market price
per share of Circuit City Stock on the date fixed for redemption, plus
in each such case an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date fixed for
redemption. The current market price per share of Circuit City Stock on
any date shall be deemed to be the average of the daily closing prices
per share of such Circuit City Stock for the 30 consecutive trading
days immediately prior to such date. The closing price for each day
shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange ("NYSE")
or, if the Common Stock is not listed or admitted to trading on the
NYSE, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national
securities exchange on which the Circuit City Stock is listed or
admitted to trading or, if the Circuit City Stock is not listed or
admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotations
Systems ("NASDAQ") or
A-1-3
CORP 62338.7
such other system then in use, or, if on any such date the Circuit City
Stock is not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market
maker making a market in the Circuit City Stock. If no professional
market maker is then making a market in the Circuit City Stock, the
current market price per share of the Circuit City Stock shall be
deemed to be $1.00. As used herein, the term trading day shall mean a
day on which the principal national securities exchange on which the
Circuit City Stock is listed or admitted to trading is open for the
transaction of business or, if the Circuit City Stock is not listed or
admitted to trading on any national securities exchange, a business
day. In the event the Corporation shall at any time after January 1,
1997 declare or pay any dividend on Circuit City Stock payable in
shares of Circuit City Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Circuit City Stock (by
reclassification or otherwise than by payment of a dividend in shares
of Circuit City Stock) into a greater or lesser number of shares of
Circuit City Stock, then in each such case the aggregate amount per
share to which holders of shares of the Series E Stock shall be
entitled under the provisions of the first sentence of this paragraph
shall be adjusted by multiplying the amount per share to which holders
of shares of the Series E Stock should have been entitled immediately
prior to such event under the provisions of the first sentence of this
paragraph by a fraction the numerator of which is the number of shares
of Circuit City Stock outstanding immediately after such event and the
denominator of which is the number of shares of Circuit City Stock that
were outstanding immediately prior to such event.
(c) In case less than all of the outstanding shares of Series
E Stock are to be redeemed, not more than 60 days prior to the date
fixed for redemption the Corporation shall select the shares to be
redeemed. Such shares shall be selected by lot or designated ratably or
in such other equitable manner as the Corporation may determine. The
Corporation in its discretion may select the particular certificates
(if there are more than one) representing shares registered in the name
of a holder that are to be redeemed.
(d) Not less than 30 nor more than 60 days prior to the date
fixed for redemption, notice of redemption shall be given by first
class mail, postage prepaid, to the holders of record of the
outstanding shares of the Series E Stock to be redeemed at their last
known addresses shown in the Corporation's share transfer records. The
notice of redemption shall set forth the paragraph of this Article
pursuant to which the shares are being redeemed, the number of shares
to be redeemed, the date fixed for redemption, the applicable
redemption price, and the place or places where certificates
representing shares to be redeemed may be surrendered. In case less
than all of the outstanding shares of the Series E Stock are to be
redeemed the notice of redemption shall also set forth the numbers of
the certificates representing shares to be redeemed and, in case less
than all shares represented by any such certificate are to be redeemed,
the number of shares represented by such certificate to be redeemed.
(e) If notice of redemption of any outstanding shares of
Series E Stock shall have been duly mailed as herein provided, then on
or before the date fixed for redemption the Corporation shall deposit
cash sufficient to pay the redemption price of such shares in trust for
the benefit of the holders of the shares to be redeemed with any bank
or trust
A-1-4
CORP 62338.7
company in the City of Richmond, Commonwealth of Virginia, having
capital and surplus aggregating at least $50,000,000 as of the date of
its most recent report of financial condition and named in such notice,
to be applied to the redemption of the shares so called for redemption
against surrender for cancellation of the certificates representing
such shares. From and after the time of such deposit all shares for the
redemption of which such deposit shall have been made shall, whether or
not the certificates therefor shall have been surrendered for
cancellation, no longer be deemed to be outstanding for any purpose,
and all rights with respect to such shares shall thereupon cease and
terminate except the right to receive payment of redemption price but
without interest. Any interest earned on funds so deposited shall be
paid to the Corporation from time to time. Any funds so deposited and
unclaimed at the end of five years from the date fixed for redemption
shall be repaid to the Corporation, free of trust, and the holders of
the shares called for redemption who shall not have surrendered their
certificates representing such shares prior to such repayment shall be
deemed to be unsecured creditors of the Corporation for the amount of
the redemption price and shall look only to the Corporation for payment
thereof, without interest, subject to the laws of the Commonwealth of
Virginia.
(f) The Corporation shall also have the right to acquire
outstanding shares of Series E Stock otherwise than by redemption
pursuant to paragraph (C)(5)(a) of this Article, from time to time for
such consideration as may be acceptable to the holders thereof;
provided, however, that if all dividends accrued on all outstanding
shares of Series E Stock shall not have been declared and paid or
declared and a sum sufficient for the payment thereof set apart,
neither the Corporation nor any subsidiary shall so acquire any shares
of Series E Stock except in accordance with a purchase offer made on
the same terms to all the holders of the outstanding shares of Series E
Stock.
(6) Consolidation, Merger, etc. In case the Corporation shall
---------------------------
enter into any consolidation, merger, combination, statutory share exchange or
other transaction in which the shares of Circuit City Stock are exchanged for or
changed into other stock or securities, cash and/or any other property, then in
any such case the shares of the Series E Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 400 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Circuit City Stock is changed or
exchanged. If the Corporation shall at any time after January 1, 1997 declare or
pay any dividend on Circuit City Stock payable in shares of Circuit City Stock,
or effect a subdivision or combination or consolidation of the outstanding
shares of Circuit City Stock (by reclassification or otherwise than by payment
of a dividend in shares of Circuit City Stock) into a greater or lesser number
of shares of Circuit City Stock, then in each such case the amount set forth in
the preceding sentence with respect to the exchange or change of shares of the
Series E Stock shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Circuit City Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Circuit City Stock that were outstanding immediately prior to such
event.
A-1-5
CORP 62338.7
EXHIBIT A-2
The following provisions are or will be set forth as Section D of Article IV of
the Articles of Incorporation:
D. Series F Preferred Stock.
------------------------
The Board of Directors of the Corporation has heretofore
designated 500,000 shares of the Preferred Stock as the Cumulative Participating
Preferred Stock, Series F ("Series F Stock"). Such number may from time to time
be decreased (but not below the number of shares of Series F Stock then
outstanding) by the Board of Directors of the Corporation. In addition to any
relative rights and preferences hereinabove granted, the relative rights and
preferences of such series and the holders of the outstanding shares thereof are
as set forth in paragraphs (D)(1) through (D)(5) of this Article.
(1) Dividends and Distributions.
---------------------------
(a) The holders of shares of the Series F Stock, in preference
to the holders of shares of the Circuit City Stock and the CarMax Stock
and of any other junior stock, shall be entitled to receive, when, as
and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the
fifteenth day (or, if not a business day, the preceding business day)
of January, April, July and October in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing
on the first Quarterly Dividend Payment Date after the first issuance
of a share or fraction of a share of the Series F Stock, in an amount
per share (rounded to the nearest cent) equal to the greater of (a)
$4.00 or (b) subject to the provision for adjustment hereinafter set
forth, 400 times the aggregate per share amount of all cash dividends,
and 400 times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions, other than a dividend
payable in shares of CarMax Stock, or a subdivision of the outstanding
shares of CarMax Stock (by reclassification or otherwise), declared on
the CarMax Stock since the immediately preceding Quarterly Dividend
Payment Date or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of
the Series F Stock. In the event the Corporation shall at any time
after January 1, 1997 declare or pay any dividend on CarMax Stock
payable in shares of CarMax Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of CarMax Stock
(by reclassification or otherwise than by payment of a dividend in
shares of CarMax Stock) into a greater or lesser number of shares of
CarMax Stock, then in each such case the amount per share to which
holders of shares of the Series F Stock shall be entitled under clause
(b) of the preceding sentence shall be adjusted by multiplying the
amount per share to which holders of shares of the Series F Stock were
entitled immediately prior to such event under clause (b) of the
preceding sentence by a fraction the numerator of which is the number
of shares of CarMax Stock outstanding immediately after such event and
the denominator of which is the number of shares of CarMax Stock that
were outstanding immediately prior to such event.
A-2-1
CORP 62338.7
(b) The Corporation shall declare a dividend or distribution
on the Series F Stock as provided in paragraph (D)(1)(a) of this
Article immediately after it declares a dividend or distribution on the
CarMax Stock (other than a dividend payable in shares of CarMax Stock);
provided that, in the event no dividend or distribution shall have been
declared on the CarMax Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $4.00 per share on the Series F Stock shall
nevertheless be payable on such subsequent Quarterly Dividend Payment
Date.
(c) Dividends shall begin to accrue and be cumulative on
outstanding shares of the Series F Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of the
Series F Stock, unless the date of issue of such shares is prior to the
record date for the first Quarterly Dividend Payment Date, in which
case dividends on such shares shall begin to accrue from the date of
issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the
determination of holders of shares of the Series F Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment
Date, in either of which events such dividends shall begin to accrue
and be cumulative from such Quarterly Dividend Payment Date. Accrued
but unpaid dividends shall not bear interest. Dividends paid on the
shares of the Series F Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of the Series F Stock entitled
to receive payment of a dividend or distribution declared thereon,
which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.
(2) Voting Rights. Except to the extent provided by law, the
-------------
holders of shares of the Series F Stock shall not be entitled (i) to vote on any
matter or (ii) to receive notice of, or to participate in, any meeting of
shareholders of the Corporation at which they are not entitled to vote.
(3) Certain Restrictions.
--------------------
(a) Whenever quarterly dividends or other dividends or
distributions payable on the Series F Stock as provided in paragraph
(C)(1) of this Article are in arrears, thereafter and until all accrued
and unpaid dividends and distributions, whether or not declared, on
shares of the Series F Stock outstanding shall have been paid in full,
the Corporation shall not:
(i) declare, set apart or pay dividends on or make any
other distributions on the Common Stock or any shares of stock
ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series F Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity
(either as to dividends or upon liquidation,
A-2-2
CORP 62338.7
dissolution or winding up) with the Series F Stock, except
dividends paid ratably on the Series F Stock and all such
parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all
such shares are then entitled; or
(iii) redeem or purchase or otherwise acquire for
consideration shares of the Series F Stock, any such parity
stock or any stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) with the Series F
Stock, or set aside for or pay to any sinking fund therefor.
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (D)(3)(a) of this Article, purchase or otherwise acquire such
shares at such time and in such manner.
(4) Reacquired Shares. Any shares of the Series F Stock
------------------
redeemed, purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock, par value $20.00 per share, and may be reissued as a
new series or a part of a new series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors or as part of an existing
series of Preferred Stock.
(5) Redemption.
----------
(a) The Corporation may, at its option and at any time and
from time to time after April 14, 2058, redeem all or any portion of
the outstanding shares of Series F Stock.
(b) The redemption price shall be an amount per share equal to
the greater of (i) $40,000.00 or (ii) subject to the provision for
adjustment hereinafter set forth, 400 times the current market price
per share of CarMax Stock on the date fixed for redemption, plus in
each such case an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date fixed for
redemption. The current market price per share of CarMax Stock on any
date shall be deemed to be the average of the daily closing prices per
share of such CarMax Stock for the 30 consecutive trading days
immediately prior to such date. The closing price for each day shall be
the last sale price, regular way, or, in case no such sale takes place
on such day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange ("NYSE") or, if the
Common Stock is not listed or admitted to trading on the NYSE, as
reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities
exchange on which the CarMax Stock is listed or admitted to trading or,
if the CarMax Stock is not listed or admitted to trading on any
national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the
over-the counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotations Systems ("NASDAQ") or
such other system then in
A-2-3
CORP 62338.7
use, or, if on any such date the CarMax Stock is not quoted by any such
organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the CarMax
Stock. If no professional market maker is then making a market in the
CarMax Stock, the current market price per share of the CarMax Stock
shall be deemed to be $1.00. As used herein, the term trading day shall
mean a day on which the principal national securities exchange on which
the CarMax Stock is listed or admitted to trading is open for the
transaction of business or, if the CarMax Stock is not listed or
admitted to trading on any national securities exchange, a business
day. In the event the Corporation shall at any time after January 1,
1997 declare or pay any dividend on CarMax Stock payable in shares of
CarMax Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of CarMax Stock (by reclassification or
otherwise than by payment of a dividend in shares of CarMax Stock) into
a greater or lesser number of shares of CarMax Stock, then in each such
case the aggregate amount per share to which holders of shares of the
Series F Stock shall be entitled under the provisions of the first
sentence of this paragraph shall be adjusted by multiplying the amount
per share to which holders of shares of the Series F Stock should have
been entitled immediately prior to such event under the provisions of
the first sentence of this paragraph by a fraction the numerator of
which is the number of shares of CarMax Stock outstanding immediately
after such event and the denominator of which is the number of shares
of CarMax Stock that were outstanding immediately prior to such event.
(c) In case less than all of the outstanding shares of Series
F Stock are to be redeemed, not more than 60 days prior to the date
fixed for redemption the Corporation shall select the shares to be
redeemed. Such shares shall be selected by lot or designated ratably or
in such other equitable manner as the Corporation may determine. The
Corporation in its discretion may select the particular certificates
(if there are more than one) representing shares registered in the name
of a holder that are to be redeemed.
(d) Not less than 30 nor more than 60 days prior to the date
fixed for redemption, notice of redemption shall be given by first
class mail, postage prepaid, to the holders of record of the
outstanding shares of the Series F Stock to be redeemed at their last
known addresses shown in the Corporation's share transfer records. The
notice of redemption shall set forth the paragraph of this Article
pursuant to which the shares are being redeemed, the number of shares
to be redeemed, the date fixed for redemption, the applicable
redemption price, and the place or places where certificates
representing shares to be redeemed may be surrendered. In case less
than all of the outstanding shares of the Series F Stock are to be
redeemed the notice of redemption shall also set forth the numbers of
the certificates representing shares to be redeemed and, in case less
than all shares represented by any such certificate are to be redeemed,
the number of shares represented by such certificate to be redeemed.
(e) If notice of redemption of any outstanding shares of
Series F Stock shall have been duly mailed as herein provided, then on
or before the date fixed for redemption the Corporation shall deposit
cash sufficient to pay the redemption price of such shares in trust for
the benefit of the holders of the shares to be redeemed with any bank
or trust
A-2-4
CORP 62338.7
company in the City of Richmond, Commonwealth of Virginia, having
capital and surplus aggregating at least $50,000,000 as of the date of
its most recent report of financial condition and named in such notice,
to be applied to the redemption of the shares so called for redemption
against surrender for cancellation of the certificates representing
such shares. From and after the time of such deposit all shares for the
redemption of which such deposit shall have been made shall, whether or
not the certificates therefor shall have been surrendered for
cancellation, no longer be deemed to be outstanding for any purpose,
and all rights with respect to such shares shall thereupon cease and
terminate except the right to receive payment of redemption price but
without interest. Any interest earned on funds so deposited shall be
paid to the Corporation from time to time. Any funds so deposited and
unclaimed at the end of five years from the date fixed for redemption
shall be repaid to the Corporation, free of trust, and the holders of
the shares called for redemption who shall not have surrendered their
certificates representing such shares prior to such repayment shall be
deemed to be unsecured creditors of the Corporation for the amount of
the redemption price and shall look only to the Corporation for payment
thereof, without interest, subject to the laws of the Commonwealth of
Virginia.
(f) The Corporation shall also have the right to acquire
outstanding shares of Series F Stock otherwise than by redemption
pursuant to paragraph (D)(5)(a) of this Article, from time to time for
such consideration as may be acceptable to the holders thereof;
provided, however, that if all dividends accrued on all outstanding
shares of Series F Stock shall not have been declared and paid or
declared and a sum sufficient for the payment thereof set apart,
neither the Corporation nor any subsidiary shall so acquire any shares
of Series F Stock except in accordance with a purchase offer made on
the same terms to all the holders of the outstanding shares of Series F
Stock.
(6) Consolidation, Merger, etc. In case the Corporation shall
---------------------------
enter into any consolidation, merger, combination, statutory share exchange or
other transaction in which the shares of CarMax Stock are exchanged for or
changed into other stock or securities, cash and/or any other property, then in
any such case the shares of Series F Stock shall at the same time be similarly
exchanged or changed in an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to 400 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of CarMax Stock is changed or
exchanged. If the Corporation shall at any time after January 1, 1997 declare or
pay any dividend on CarMax Stock payable in shares of CarMax Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of CarMax
Stock (by reclassification or otherwise than by payment of a dividend in shares
of CarMax Stock) into a greater or lesser number of shares of CarMax Stock, then
in each such case the amount set forth in the preceding sentence with respect to
the exchange or change of shares of Series F Stock shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of CarMax Stock outstanding immediately after such event and the
denominator of which is the number of shares of CarMax Stock that were
outstanding immediately prior to such event.
A-2-5
CORP 62338.7
EXHIBIT B-1
[Form of Rights Certificate]
Certificate No. CCR-__________ Rights
NOT EXERCISABLE [BEFORE THE DISTRIBUTION DATE (AS SUCH TERM IS DEFINED
IN THE RIGHTS AGREEMENT) OR]* AFTER APRIL 14, 2008 OR EARLIER IF NOTICE OF
REDEMPTION IS GIVEN. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT ON
THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS
BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS
REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A
PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).
ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH
AGREEMENT.]**
* This portion of the legend in brackets shall be inserted only upon the Rights
Certificates delivered to the Rights Agent prior to the Distribution Date.
** This portion of the legend in brackets shall be inserted only if applicable
and shall replace the immediately preceding sentence.
B-1-1
CORP 62338.7
Circuit City Group Rights Certificate
Circuit City Stores, Inc.
This certifies that _______________ , or registered assigns,
is the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement dated as of April 14, 1998 and as amended from time to time
(the "Rights Agreement") between Circuit City Stores, Inc., a Virginia
corporation (the "Company"), and Norwest Bank Minnesota, N.A., a national
banking association (Norwest Bank Minnesota, N.A. or its successor as rights
agent under the Rights Agreement, the "Rights Agent"), to purchase from the
Company at any time after the Distribution Date (as such term is defined in the
Rights Agreement) and prior to 5:00 P.M. (Richmond, Virginia time) on April 14,
2008 (the "Final Expiration Date") at the principal office or offices of the
Rights Agent designated for such purpose, or at its successor as Rights Agent,
one four-hundredth of a fully paid nonassessable share of Cumulative
Participating Preferred Stock, Series E, par value $20.00 per share (the
"Preferred Shares"), of the Company, at a purchase price of $250.00 per one
four-hundredth of a Preferred Share (the "Purchase Price"), upon presentation
and surrender of this Rights Certificate with the Form of Election to Purchase
duly executed. The Purchase Price shall be paid in cash or, if the Company so
permits, Common Shares having an equivalent value or, if the Company has
permitted payment with Common Shares, a combination of cash and Common Shares.
The number of Rights evidenced by this Rights Certificate (and the number of
shares which may be purchased upon exercise thereof) set forth above, and the
Purchase Price per share set forth above, are the number and Purchase Price as
of April 14, 1998, based on the Preferred Shares as constituted at such date.
Upon the occurrence of a Triggering Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Right
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Associate or
Affiliate, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of a person who, concurrently with or after such
transfer, became an Acquiring Person or an Affiliate or Associate of an
Acquiring Person, such Rights shall become null and void and no holder hereof
shall have any right with respect to such Rights from and after the occurrence
of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and
the number and kind of Preferred Shares or other securities which may be
purchased upon the exercise of the Rights evidenced by this Rights Certificate
are subject to modification and adjustment upon the happening of certain events,
including Triggering Events (as such term is defined in the Rights Agreement).
This Rights Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities hereunder
of the Rights Agent, the Company and the holders of the Rights Certificates
which limitations of
B-1-2
CORP 62338.7
rights include the temporary suspension of the exercisability of such Rights
under the specific circumstances set forth in the Rights Agreement. Copies of
the Rights Agreement are on file at the principal offices of the Company and are
also available upon written request to the Company.
This Rights Certificate, with or without other Rights
Certificates, upon surrender at the office or offices of the Rights Agent
designated for such purpose, may be exchanged for another Rights Certificate or
Rights Certificates of like tenor and date evidencing Rights entitling the
holder to purchase a like aggregate number of one four-hundredths of a Preferred
Share as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option at a
redemption price of $.01 per Right, payable, at the option of the Company, in
cash or Common Shares, at any time prior to the earlier of the close of business
on (i) the tenth day (as such time period may be extended or shortened pursuant
to the Rights Agreement) following the Share Acquisition Date (as such term is
defined in the Rights Agreement) and (ii) the Final Expiration Date.
No fractional Preferred Shares will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one four-hundredths of a Preferred Share, which may, at
the election of the Company, be evidenced by depositary receipts), but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or, to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights Agent.
B-1-3
CORP 62338.7
WITNESS the facsimile signatures of the proper officers of the
Company and its corporate seal. Dated as of:
ATTEST: CIRCUIT CITY STORES, INC.
______________________________ By: _________________________
Title: Title:
Countersigned:
[INSERT NAME OF RIGHTS AGENT]
By__________________________________
Authorized Signature
B-1-4
CORP 62338.7
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such holder desires to transfer the
Rights Certificates.)
FOR VALUE RECEIVED _____________________________ hereby sells,
assigns and transfers unto
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ___________________ Attorney,
to transfer the within-named Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated:________________ ______________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor
institution (banks, stockbrokers, savings and loan associations and credit
unions with membership in an approved signature guarantee Medallion program),
pursuant to SEC Rule 17Ad-15.
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes that: (i)
this Rights Certificate [ ] is [ ] is not being sold, assigned or transferred by
or on behalf of a Person who is or was an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined pursuant to
the Rights Agreement); and (ii) after due inquiry and to the best knowledge of
the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this
Rights Certificate from any Person who is, was or subsequently became an
Acquiring Person or an Affiliate or Associate of an Acquiring Person.
Dated: ______________, _____ _____________________________
Signature
B-1-5
CORP 62338.7
Notices
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
B-1-6
CORP 62338.7
[Form of Reverse Side of Rights Certificate -- continued]
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to exercise the Rights Certificate.)
To: Circuit City Stores, Inc.
The undersigned hereby irrevocably elects to exercise
_____________________ Rights represented by this Rights Certificate to purchase
the Preferred Shares issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be issued
in the name of and delivered to:
Please insert social security
or other identifying number
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security or other identifying number
(Please print name and address)
Dated: _______________, ____ ______________________________
Signature
(Signature must conform in all respects to
name of holder as specified on the face of
this Rights Certificate in every particular,
without alteration or enlargement or any
change whatsoever)
B-1-7
CORP 62338.7
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor
institution (banks, stockbrokers, savings and loan associations and credit
unions with membership in an approved signature guarantee Medallion program),
pursuant to SEC Rule 17Ad-15.
Dated: ____________ , ____ _____________________________
Signature
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
1. the Rights evidenced by this Rights Certificate [ ] are [ ] are not being
exercised by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
pursuant to the Rights Agreement);
2. after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or became an Acquiring Person or an Affiliate or Associate of
an Acquiring Person.
Dated: _____________, ____. _____________________________
Signature
B-1-8
CORP 62338.7
Notice
------
The signature to the foregoing Election must correspond to the name as
written upon the face of this Rights Certificate in every particular, without
alteration or enlargement or any change whatsoever.
B-1-9
CORP 62338.7
EXHIBIT B-2
[Form of Rights Certificate]
Certificate No. CMR-__________ Rights
NOT EXERCISABLE [BEFORE THE DISTRIBUTION DATE (AS SUCH TERM IS DEFINED
IN THE RIGHTS AGREEMENT) OR]*** AFTER APRIL 14, 2008 OR EARLIER IF NOTICE OF
REDEMPTION IS GIVEN. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT ON
THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS
BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS
REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A
PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).
ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH
AGREEMENT.]****
*** This portion of the legend in brackets shall be inserted only upon the
Rights Certificates delivered to the Rights Agent prior to the Distribution
Date.
**** This portion of the legend in brackets shall be inserted only if applicable
and shall replace the immediately preceding sentence.
B-2-1
CORP 62338.7
CarMax Group Rights Certificate
Circuit City Stores, Inc.
This certifies that _______________ , or registered assigns,
is the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement dated as of April 14, 1998 and as amended from time to time
(the "Rights Agreement") between Circuit City Stores, Inc., a Virginia
corporation (the "Company"), and Norwest Bank Minnesota, N.A., a national
banking association (Norwest Bank Minnesota, N.A. or its successor as rights
agent under the Rights Agreement, the "Rights Agent"), to purchase from the
Company at any time after the Distribution Date (as such term is defined in the
Rights Agreement) and prior to 5:00 P.M. (Richmond, Virginia time) on April 14,
2008 (the "Final Expiration Date") at the principal office or offices of the
Rights Agent designated for such purpose, or at its successor as Rights Agent,
one four-hundredth of a fully paid nonassessable share of Cumulative
Participating Preferred Stock, Series F, par value $20.00 per share (the
"Preferred Shares"), of the Company, at a purchase price of $100.00 per one
four-hundredth of a Preferred Share (the "Purchase Price"), upon presentation
and surrender of this Rights Certificate with the Form of Election to Purchase
duly executed. The Purchase Price shall be paid in cash or, if the Company so
permits, Common Shares having an equivalent value or, if the Company has
permitted payment with Common Shares, a combination of cash and Common Shares.
The number of Rights evidenced by this Rights Certificate (and the number of
shares which may be purchased upon exercise thereof) set forth above, and the
Purchase Price per share set forth above, are the number and Purchase Price as
of April 14, 1998, based on the Preferred Shares as constituted at such date.
Upon the occurrence of a Triggering Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Right
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Associate or
Affiliate, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of a person who, concurrently with or after such
transfer, became an Acquiring Person or an Affiliate or Associate of an
Acquiring Person, such Rights shall become null and void and no holder hereof
shall have any right with respect to such Rights from and after the occurrence
of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and
the number and kind of Preferred Shares or other securities which may be
purchased upon the exercise of the Rights evidenced by this Rights Certificate
are subject to modification and adjustment upon the happening of certain events,
including Triggering Events (as such term is defined in the Rights Agreement).
This Rights Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities hereunder
of the Rights Agent, the Company and the holders of the Rights Certificates
which limitations of
B-2-2
CORP 62338.7
rights include the temporary suspension of the exercisability of such Rights
under the specific circumstances set forth in the Rights Agreement. Copies of
the Rights Agreement are on file at the principal offices of the Company and are
also available upon written request to the Company.
This Rights Certificate, with or without other Rights
Certificates, upon surrender at the office or offices of the Rights Agent
designated for such purpose, may be exchanged for another Rights Certificate or
Rights Certificates of like tenor and date evidencing Rights entitling the
holder to purchase a like aggregate number of one four-hundredths of a Preferred
Share as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option at a
redemption price of $.01 per Right, payable, at the option of the Company, in
cash or Common Shares, at any time prior to the earlier of the close of business
on (i) the tenth day (as such time period may be extended or shortened pursuant
to the Rights Agreement) following the Share Acquisition Date (as such term is
defined in the Rights Agreement) and (ii) the Final Expiration Date.
No fractional Preferred Shares will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one four-hundredths of a Preferred Share, which may, at
the election of the Company, be evidenced by depositary receipts), but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or, to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights Agent.
B-2-3
CORP 62338.7
WITNESS the facsimile signatures of the proper officers of the
Company and its corporate seal. Dated as of:
ATTEST: CIRCUIT CITY STORES, INC.
______________________________ By: _________________________
Title: Title:
Countersigned:
[INSERT NAME OF RIGHTS AGENT]
By__________________________________
Authorized Signature
B-2-4
CORP 62338.7
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such holder desires to transfer the
Rights Certificates.)
FOR VALUE RECEIVED _____________________________ hereby sells,
assigns and transfers unto
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ___________________ Attorney,
to transfer the within-named Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated: ___________, ____ ______________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor
institution (banks, stockbrokers, savings and loan associations and credit
unions with membership in an approved signature guarantee Medallion program),
pursuant to SEC Rule 17Ad-15.
B-2-5
CORP 62338.7
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes that: (i)
this Rights Certificate [ ] is [ ] is not being sold, assigned or transferred by
or on behalf of a Person who is or was an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined pursuant to
the Rights Agreement); and (ii) after due inquiry and to the best knowledge of
the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this
Rights Certificate from any Person who is, was or subsequently became an
Acquiring Person or an Affiliate or Associate of an Acquiring Person.
Dated: ______________, ____ _____________________________
Signature
Notices
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
B-2-6
CORP 62338.7
[Form of Reverse Side of Rights Certificate -- continued]
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to exercise the Rights Certificate.)
To: Circuit City Stores, Inc.
The undersigned hereby irrevocably elects to exercise
__________________________ Rights represented by this Rights Certificate to
purchase the Preferred Shares issuable upon the exercise of the Rights (or such
other securities of the Company or of any other person which may be issuable
upon the exercise of the Rights) and requests that certificates for such shares
be issued in the name of and delivered to:
Please insert social security
or other identifying number
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security or other identifying number
(Please print name and address)
Dated: _______________, ____ ______________________________
Signature
(Signature must conform in all respects to
name of holder as specified on the face of
this Rights Certificate in every particular,
without alteration or enlargement or any
change whatsoever)
B-2-7
CORP 62338.7
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor
institution (banks, stockbrokers, savings and loan associations and credit
unions with membership in an approved signature guarantee Medallion program),
pursuant to SEC Rule 17Ad-15.
Dated: ____________ , ____ _____________________________
Signature
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
1. the Rights evidenced by this Rights Certificate [ ] are [ ] are not being
exercised by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
pursuant to the Rights Agreement);
2. after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or became an Acquiring Person or an Affiliate or Associate of
an Acquiring Person.
Dated:_____________, ____ _____________________________
Signature
B-2-8
CORP 62338.7
Notice
------
The signature to the foregoing Election must correspond to the name as written
upon the face of this Rights Certificate in every particular, without alteration
or enlargement or any change whatsoever.
B-2-9
CORP 62338.7
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On April 14, 1998, the Board of Directors of Circuit City Stores, Inc.,
a Virginia corporation (the "Company"), declared a dividend distribution of (1)
one Preferred Stock Purchase Right (a "Circuit City Right") for each share of
the Circuit City Stores, Inc. - Circuit City Group Common Stock, par value $.50
per share (the "Circuit City Stock") outstanding on April 29, 1998 (the "Record
Date"), and (2) one Preferred Stock Purchase Right (a "CarMax Right") for each
share of the Circuit City Stores, Inc. - CarMax Group Common Stock, par value
$.50 per share (the "CarMax Stock") outstanding on the Record Date, and further
authorized the issuance of one Circuit City Right and one CarMax Right with
respect to each share of Circuit City Stock and CarMax Stock, respectively, that
in certain cases shall become outstanding thereafter. At the time of the
declaration of such dividend, each Circuit City Right represented the right to
purchase from the Company one four-hundredth of a share of the Company's Series
E Cumulative Participating Preferred Stock, par value $20 per share (the "Series
E Preferred Stock"), at a price of $250.00 (the "Series E Purchase Price"), and
each CarMax Right represented the right to purchase from the Company one
four-hundredth of a share of the Company's Series F Cumulative Participating
Preferred Stock, par value $20 per share (the "Series F Preferred Stock"), at a
price of $100.00 (the "Series F Purchase Price"), in each case subject to
adjustment in certain circumstances. The description and terms of the Rights are
set forth in a Rights Agreement, dated as of April 14, 1998, between the Company
and Norwest Bank Minnesota, N.A., as rights agent (the "Rights Agent"), as
amended and restated as of February 16, 1999 and as of July 10, 2001 (such
agreement, as so amended and restated and as amended from time to time being
hereinafter called the "Rights Agreement").
Initially, the Circuit City Rights and the CarMax Rights (collectively
the "Rights") will be attached to and represented by the certificates
representing outstanding shares of Circuit City Stock and CarMax Stock,
respectively (collectively, the "Common Stock"). The Rights will separate from
the Common Stock on the date (the "Distribution Date") which is the earlier of
(i) ten days following a public announcement that a person or group of
affiliated or associated persons (an "Acquiring Person") has acquired beneficial
ownership of an Acquiring Block (as hereinafter defined), or (ii) ten business
days (or such later date as may be set by the Board of Directors prior to any
person becoming an Acquiring Person) following the commencement of, or first
public announcement of the intent of any person to commence, a tender offer or
exchange offer if, upon consummation thereof, the person or group making such
offer would be the beneficial owner of an Acquiring Block. For this purpose, an
Acquiring Block means either (x) 15% or more of the outstanding Circuit City
Stock or (y) shares of Common Stock which include both 30% or more of the
outstanding CarMax Stock and 15% or more of the voting power (determined as set
forth in the Rights Agreement) of the Common Stock. Notwithstanding the
foregoing, any person who was not an Acquiring Person immediately before the
Rights Agreement was restated on July 10, 2001, but who owns shares constituting
an Acquiring Block at the time of such restatement (and does not subsequently
cease to beneficially own shares
C-1
CORP 62338.7
constituting an Acquiring Block) shall not be deemed and Acquiring Person unless
such person acquires 20% or more of the voting power of the outstanding shares
of Common Stock.
Until the Distribution Date, (i) no Rights certificates will be
distributed, (ii) the Rights will be transferable with and only with the Common
Stock certificates, and (iii) the surrender for transfer of any Common Stock
certificates will also constitute the transfer of the Rights associated with the
Common Stock represented by such certificates. Following the Distribution Date,
Rights certificates will be mailed to holders of record of the Common Stock as
of the close of business on the Distribution Date and, thereafter, such separate
Rights certificates alone will evidence the Rights. Except in certain limited
circumstances, only shares of Common Stock issued prior to the Distribution Date
will be issued with Rights.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on April 14, 2008, unless earlier exercised or
redeemed by the Company as described below.
If any person becomes an Acquiring Person, each holder of a Right will
thereafter have the right to receive, upon the exercise thereof, in lieu of
shares of the associated series of Preferred Stock, shares of the associated
series of Common Stock (or, in certain circumstances, cash, property or other
securities of the Company) having a value equal to two times the exercise price
of the Right. Notwithstanding any of the foregoing, following such occurrence
any Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by an Acquiring Person will immediately
become null and void.
For example, at an exercise price of $250 per Right, each Circuit City
Right not owned by an Acquiring Person (or by certain related parties) following
an event set forth in the preceding paragraph would entitle its holder to
purchase $500 worth of Circuit City Stock (or other securities or assets, as
noted above) for $250. Assuming that the Circuit City Stock had a per share
value of $50 at such time, the holder of each valid Circuit City Right would be
entitled to purchase ten shares of Circuit City Stock for $250. The holder of
each valid CarMax Right would have a similar right under such circumstances to
purchase $200 worth of CarMax Stock (or such other securities or assets) for
$100 (the exercise price of a CarMax Right).
At any time following the date any person acquires an Acquiring Block,
if (i) the Company engages in a merger or consolidation in which the Company is
not the surviving corporation, (ii) the Company engages in a merger or
consolidation with another person in which the Company is the surviving
corporation, but in which all or part of the Common Stock is changed or
exchanged, (iii) the Company engages in a statutory share exchange or (iv) 50%
or more of the Company's assets or earning power is sold or transferred, the
Rights Agreement requires that proper provision be made so that each holder of a
Right will thereafter have the right to receive, upon the exercise thereof,
common stock of the acquiring company having a value equal to two times the
exercise price of the Right. Notwithstanding any of the foregoing, following the
occurrence of any of the events set forth in this paragraph, any Rights that
are, or (under certain circumstances specified in the Rights Agreement) were,
beneficially owned by an Acquiring Person will immediately become null and void.
C-2
CORP 62338.7
The Rights Agreement provides that, after the Distribution Date, the
Company generally may not take any action which would diminish substantially the
benefits of the Rights, including any consolidation or merger with, or sale of
50% of the Company's assets or earning power to, any person which has securities
or is bound by agreements which would have such effect.
The Series E Purchase Price or the Series F Purchase Price, as the case
may be (the "Purchase Price"), payable, and the number of one four-hundredths of
a share of Preferred Stock or other securities or property issuable, upon
exercise of the Rights are subject to adjustment from time to time to prevent
dilution (i) in the event of a stock dividend on the Preferred Stock or other
capital stock, or a subdivision, combination or reclassification of the
Preferred Stock, (ii) upon the grant to holders of the Preferred Stock of
certain rights or warrants to subscribe for Preferred Stock or securities
convertible into Preferred Stock at less than the current market price of the
Preferred Stock, or (iii) upon the distribution to holders of the Preferred
Stock of evidences of indebtedness or assets (excluding regular quarterly cash
dividends) or of subscription rights or warrants (other than those referred to
above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. The Company may, in lieu of issuing fractional shares of
Preferred Stock (other than fractions which are integral multiples of one
four-hundredth of a share) upon exercise of the Rights, make a cash payment
based on the market price of the Preferred Stock on the last trading date prior
to the date of exercise.
If the Company is not able to issue shares of the applicable series of
Preferred Stock or Common Stock because of the absence of necessary regulatory
approval, restrictions contained in the Company's Amended and Restated Articles
of Incorporation or for any other reason, a person exercising Rights will be
entitled to receive a combination of cash or property or other securities having
a value equal to the value of the shares of Preferred Stock or Common Stock
which would otherwise have been issued upon exercise of the Rights.
At any time until the date any person acquires an Acquiring Block, the
Board of Directors of the Company may redeem the Circuit City Rights and the
CarMax Rights in whole, but not in part, at a price of $.01 per Right, payable
in cash or securities or both (the "Redemption Price"). Immediately upon the
action of the Board of Directors of the Company ordering redemption of the
Rights, the Rights will terminate and the only right of the holders of Rights
will be to receive the Redemption Price. Any such redemption may be made
effective at such time, on such basis and with such conditions as may be
established by the Board of Directors.
After a person becomes an Acquiring Person and before any Acquiring
Person acquires 50% or more in voting power of the outstanding shares of Common
Stock, the Company may require a holder to exchange all or any portion of the
holder's Rights at an exchange ratio of (1) one share of Circuit City Stock or
one four-hundredth of a share of Series E Preferred Stock (or in certain
circumstances, other securities of the Company) per Circuit City Right and (2)
one share of CarMax Stock or one four-hundredth of a share of Series F Preferred
Stock (or in certain circumstances, other securities of the Company) per CarMax
Right.
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Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income at such time as the Rights become
exercisable or are exercised for Common Stock (or other consideration) of the
Company or for common stock of the acquiring company as set forth above.
Certain provisions of the Rights Agreement relating to the principal
economic terms of the Rights generally may not be amended at any time. Other
provisions may be amended by the Board of Directors of the Company prior to the
time any person acquires an Acquiring Block. Thereafter, these other provisions
of the Rights Agreement may be amended by the Board in order: to cure any
ambiguity, defect or inconsistency, or in any other respect that will not
adversely affect the interests of holders of Rights (excluding the interests of
any Acquiring Person).
Each one four-hundredth of a share of Series E Preferred Stock will be
entitled to (i) a quarterly dividend equal to the greater of (a) the quarterly
dividend declared per share of Circuit City Stock or (b) $.01, (ii) upon
liquidation, a minimum preferential liquidation payment equal to the greater of
(a) $250.00 or (b) the market price of a share of Circuit City stock at the time
of liquidation, plus accrued and unpaid dividends, and (iii) in the event of any
merger, consolidation or other transaction in which shares of Circuit City Stock
are exchanged, the same amount received per share of Circuit City Stock. Each
one four-hundredth of a share of Series F Preferred Stock will be entitled to
(i) a quarterly dividend equal to the greater of (a) the quarterly dividend
declared per share of CarMax Stock or (b) $.01, (ii) upon liquidation, a minimum
preferential liquidation payment equal to the greater of (a) $100.00 or (b) the
market price of a share of CarMax Stock at the time of liquidation, plus accrued
and unpaid dividends, and (iii) in the event of any merger, consolidation or
other transaction in which shares of CarMax Stock are exchanged, the same amount
received per share of CarMax Stock. After April 14, 2058, the Company may redeem
all or any portion of the Series E or Series F Preferred Stock at a price equal
to the respective liquidation payments described above. The foregoing rights are
protected by customary anti-dilution provisions. The holders of shares of
Preferred Stock are not entitled to vote on any matter except to the extent
provided by law. Because of the nature of the Preferred Stock's dividend,
liquidation and redemption rights, the value of each one four-hundredth of a
share of Preferred Stock purchasable upon exercise of each Right should
approximate the value of one share of the associated series of Common Stock
subject to the effect on such value of the fact that holders of Preferred Stock
have no voting rights other than those provided by law.
A copy of the Rights Agreement is filed with the Securities and
Exchange Commission as an exhibit to a Registration Statement of the Company on
Form 8-A (including any amendments thereto). A copy of the Rights Agreement is
available free of charge from the Company upon written request. This summary
description of the Rights does not purport to be complete and is qualified in
its entirety by reference to the Rights Agreement, which is incorporated herein
by reference.
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