On Circuit City’s bankruptcy filing…

November 10, 2008

This morning’s news that Circuit City (CC) was filing for bankruptcy protection prompted us to go back to something we had footnoted in late August: the employment contract with newly hired Vice Chairman James Marcum. A month later, on Sept. 22, Philip J. Schoonover stepped down immediately and was replaced by Marcum.

While there were a few things that caught our attention back then, such as the generous handouts given the state of the company including a $250K signing bonus to cover travel and other expenses between Marcum’s home in New Hampshire and the company’s headquarters in Richmond, Va., it was the language in Marcum’s contract — specifically the language that spelled out a liquidation scenario — as one of the change in control provisions that really made us pay attention. I’ll leave it up to the lawyers to figure out whether the language in Marcum’s contract means he’ll collect due to today’s filing. But to me, it seems like the “consummation of a reorganization” seems to apply here.

There was one other thing that didn’t catch our attention at the time: this 8K that Circuit City filed when it announced Schoonover’s departure as well as better-than-expected results for the second quarter. Though the filing didn’t include a separation agreement, it did note that Schoonover would get a year’s salary and another $900K for his targeted bonus as well as two years of continued health benefits. No word on whether he gets to keep the equipment that we’ve footnoted about before.

Over at FootnotedPro we have a new post up about the impact of margin calls that includes a spreadsheet of October margin calls that is only available to FootnotedPro subscribers.

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