<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
CompUSA Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
CompUSA Inc.
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
CompUSA Inc.
14951 North Dallas Parkway
Dallas, Texas 75240
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held November 6, 1996
To the Stockholders of
CompUSA Inc.
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of CompUSA Inc., a Delaware corporation (the "Company"), will be
held at The Grand Kempinski Hotel, 15201 North Dallas Parkway, Dallas, Texas, on
November 6, 1996, at 10:00 a.m., local time, for the following purposes:
(1) To elect two members of the Board of Directors, which will
consist of seven directors, for the term of office stated in
the Proxy Statement.
(2) To amend the Company's Restated and Amended Certificate of
Incorporation to increase the number of authorized shares of
Common Stock from 100,000,000 to 200,000,000.
(3) To amend the CompUSA Inc. Long-Term Incentive Plan to increase
the number of shares of Common Stock authorized for issuance
thereunder by 2,000,000, from 6,394,368 to 8,394,368.
(4) To consider and ratify the selection of the Company's
independent auditors.
(5) To transact any other business that may properly come before
the Meeting and any adjournments thereof.
The close of business on September 9, 1996, has been fixed as the
record date for determining stockholders entitled to notice of and to vote at
the Meeting and any adjournments thereof. For a period of at least 10 days
prior to the Meeting, a complete list of stockholders entitled to vote at the
Meeting will be open to the examination of any stockholder during ordinary
business hours at CompUSA Inc., 14951 North Dallas Parkway, Dallas, Texas.
Information concerning the matters to be acted upon at the Meeting is
set forth in the accompanying Proxy Statement.
STOCKHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING IN PERSON
ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE
ACCOMPANYING ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors
Mark R. Walker
Senior Vice President-General
Counsel and Secretary
Dallas, Texas
September 27, 1996
<PAGE>
CompUSA Inc.
14951 North Dallas Parkway
Dallas, Texas 75240
PROXY STATEMENT
for
ANNUAL MEETING OF STOCKHOLDERS
To Be Held November 6, 1996
This Proxy Statement is being first mailed on September 27, 1996, to
stockholders of CompUSA Inc. (the "Company") by the board of directors of the
Company (the "Board of Directors" or the "Board") to solicit proxies (the
"Proxies") for use at the Annual Meeting of Stockholders (the "Meeting") to be
held at The Grand Kempinski Hotel, 15201 North Dallas Parkway, Dallas, Texas, on
Wednesday, November 6, 1996, at 10:00 a.m., local time, and at such other time
and place to which the Meeting may be adjourned.
All shares represented by valid Proxies, unless the stockholder
otherwise specifies, will be voted (i) FOR the election of the persons named
herein under "Election of Directors" as nominees for election as a director of
the Company for the term described therein; (ii) FOR the amendment of the
Company's Restated and Amended Certificate of Incorporation (the "Charter") to
increase the number of authorized shares of Common Stock, par value $.01 per
share, of the Company (the "Common Stock") from 100,000,000 to 200,000,000;
(iii) FOR the proposal to amend the CompUSA Inc. Long-Term Incentive Plan (the
"Long-Term Incentive Plan") to increase the number of shares of Common Stock
authorized for issuance thereunder by 2,000,000, from 6,394,368 to
8,394,368; (iv) FOR the ratification of the selection of Ernst & Young LLP as
the Company's independent auditors for the fiscal year ending June 28, 1997
("fiscal 1997"); and (v) at the discretion of the Proxyholders with regard to
any other matters that may properly come before the Meeting and any adjournments
thereof.
Any stockholder executing a Proxy retains the right to revoke it at
any time prior to exercise at the Meeting. A Proxy may be revoked by delivery
of written notice of revocation to the Secretary of the Company, by execution
and delivery of a later Proxy or by voting the shares in person at the Meeting.
If not revoked, all shares represented by properly executed Proxies will be
voted as specified therein or as noted above, as applicable.
RECORD DATE AND VOTING SECURITIES
The record date for determining the stockholders entitled to notice of
and to vote at the Meeting and any adjournments thereof is the close of business
on September 9, 1996 (the "Record Date"). On April 22, 1996, the Company issued
21,047,172 shares of Common Stock as the result of a 2-for-1 stock split in the
form of a stock dividend on the Common Stock outstanding at the close of
business on April 8, 1996. All share numbers stated in this Proxy Statement,
except for authorized shares, reflect the stock split. In addition, on May 30,
1996, the Company issued 2,632,717 shares of Common Stock pursuant to an
Agreement and Plan of Merger by which the Company acquired PCs Compleat, Inc., a
direct reseller of brand-name personal microcomputers and peripherals ("PCs
Compleat"). As a result of these and other issuances of Common Stock, 45,320,525
shares of Common Stock were issued and outstanding as of the close of business
on the Record Date. Common Stock is the only class of outstanding voting
securities of the Company.
QUORUM AND VOTING
The presence at the Meeting, in person or by proxy, of the holders of
a majority of the Common Stock issued and outstanding and entitled to vote
thereat is necessary to constitute a quorum to transact business. Each share
represented at the Meeting in person or by proxy will be counted toward a
quorum. In deciding all questions and other matters, a holder of Common Stock on
the Record Date shall be entitled to cast one vote for each share of Common
Stock registered in such holder's name.
<PAGE>
Election of the director nominees named in Proposal No. 1, or either
of them, requires the affirmative vote of a plurality of the shares of Common
Stock present or represented at the Meeting and entitled to vote thereon. Votes
may be cast in favor or withheld with respect to both of the director nominees,
or either of them. Votes that are withheld will be counted toward a quorum, but
will be excluded entirely from the tabulation for the proposal and, therefore,
will not otherwise affect the outcome of the vote on the proposal.
Approval of Proposal No. 2 requires the affirmative vote of a majority
of the shares of Common Stock outstanding and entitled to vote. Abstentions on
the proposal may be specified and will have the same effect as a vote against
the proposal.
In order for certain stock options granted under the Long-Term
Incentive Plan to qualify as "incentive stock options" under Section 422 of the
Internal Revenue Code, approval of Proposal No. 3 requires the affirmative vote
of a majority of the shares of Common Stock present or represented at the
Meeting and entitled to vote thereon. Abstentions on the proposal may be
specified and will have the same effect as a vote against the proposal.
Approval of Proposal No. 4 requires the affirmative vote of a majority
of the shares of Common Stock present or represented at the Meeting and entitled
to vote thereon. Abstentions on the proposal may be specified and will have the
same effect as a vote against the proposal.
Brokers or nominees have discretionary power to vote on each of the
Proposals.
2
<PAGE>
PRINCIPAL STOCKHOLDERS AND MANAGEMENT OWNERSHIP
The following table sets forth information as of the Record Date
regarding the beneficial ownership of Common Stock by (i) each person or group
known by the Company to own beneficially more than 5% of the outstanding shares
of Common Stock, (ii) each director and nominee for director of the Company,
(iii) the Company's Named Officers (as defined under "EXECUTIVE COMPENSATION--
Summary Compensation Table") and (iv) all directors and executive officers of
the Company as a group.
<TABLE>
<CAPTION>
Beneficial Ownership
of Common Stock (1)
--------------------------------------------------
Amount and
Nature of
Beneficial Percent of
Name and Address of Beneficial Owner Ownership (2) Common Stock
- ------------------------------------ ------------------- ------------------
<S> <C> <C>
FMR Corp. (3)
82 Devonshire Street
Boston, Massachusetts 02109 6,219,500 13.4%
Forstmann-Leff Associates Inc. (4)
55 East 52nd Street
New York, New York 10055 3,588,600 7.7%
Giles H. Bateman 153,587 *
Leonard L. Berry, Ph.D. 22,397 *
Warren D. Feldberg 33,109 *
James F. Halpin (5) 494,099 1.1%
Lawrence Mittman 1,982 *
Kevin J. Roche 113,775 *
Edith Weiner 3,426 *
Harold F. Compton (5) 206,655 *
Lawrence N. Mondry (5) 262,347 *
James E. Skinner (5) 196,589 *
J. Samuel Crowley (5) 51,415 *
All directors and executive officers as a
group (30 persons) (5) 2,086,634 4.5%
</TABLE>
- ------------------------
*Less than 1.0%
(1) "Beneficial owner" means generally any person who, directly or
indirectly, has or shares voting power or investment power with
respect to a security. All information with respect to the beneficial
ownership of any stockholder has been furnished by such stockholder
and the Company believes that, except as otherwise indicated, each
stockholder has sole voting and investment power with respect to
shares listed as beneficially owned by such stockholder.
(2) Includes shares of Common Stock issuable upon exercise of options that
were exercisable on the Record Date or within 60 days thereafter by
Messrs. Bateman, Berry, Feldberg, Halpin, Mittman, Roche, Compton,
Mondry, Skinner, Crowley and Ms. Weiner and all directors and
executive officers as a group: with such shares numbering 56,287;
9,897; 13,109; 309,081; 950; 9,897; 66,810; 15,986; 181,284; 29,448;
1,826 and 1,079,838, respectively. These numbers do not reflect the
options granted by the Compensation Committee on August 16, 1996,
subject to stockholder approval of Proposal No. 3. See footnote 1 to
the table set forth under "Proposal No. 3 - AMENDMENT TO LONG-TERM
INCENTIVE PLAN - Grant of Awards Under the Long-Term Incentive Plan."
(3) Based on a Report on Schedule 13G dated February 14, 1996, which was
filed with the Securities and Exchange Commission (the "Commission")
by FMR Corp. ("FMR"). FMR reported sole voting power with respect to
111,400 shares and sole dispositive power with respect to 6,219,500
shares.
(notes continued on following page)
4
<PAGE>
(notes continued from previous page)
(4) Based on a Report on Schedule 13G dated February 15, 1996, which was
filed with the Commission by Forstmann-Leff Associates Inc.
("Forstmann-Leff"). Forstmann-Leff reported sole voting power with
respect to 2,424,200 shares and sole dispositive power with respect to
2,556,600 shares.
(5) Includes shares of Common Stock restricted by the Company as to their
sale, assignment, transfer, pledge or other encumbrance by Messrs.
Halpin, Compton, Mondry, Skinner, Crowley and all directors and
executive officers as a group; with such shares numbering 26,131;
22,456; 8,147; 8,147; 8,147 and 119,553, respectively. The vesting
period of these restricted stock awards may be accelerated if
specified performance goals are met. See "EXECUTIVE COMPENSATION -
Summary Compensation Table."
Proposal No. 1
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes of directors
serving staggered three-year terms. All directors of one class hold their
positions until the annual meeting of stockholders at which the terms of the
directors in such class expire and their respective successors are elected and
qualified. The Charter provides that the number of directors will not be less
than three nor greater than thirteen and will be divided into three classes as
nearly equal in number as the then authorized number of directors permits. The
Bylaws of the Company provide that the number of directors will be established
by resolution of the Board of Directors within the limitations set forth in the
Charter. The Board of Directors has set the number of directors at seven.
The Board of Directors has approved the recommendation of the
Nominating Committee that Warren D. Feldberg and Kevin J. Roche be submitted as
nominees to the stockholders to serve three-year terms as directors expiring at
the 1999 annual meeting of stockholders and until their successors are elected
and have qualified. Both have served as members of the Board of Directors since
prior to the last annual meeting of stockholders.
Proxies may not be voted for a greater number of persons than the
number of nominees named in this Proxy Statement. It is the intention of the
persons named in the enclosed form of Proxy to vote such Proxy FOR the election
of the nominees named above, unless authorization is withheld on the Proxy.
Directors will be elected by the affirmative vote of a plurality of the shares
of Common Stock present or represented at the Meeting and entitled to vote
thereon, provided a quorum is present.
The nominees named above have consented to serve as members of the
Board of Directors if elected. If any of the above nominees for any reason is
unable or unwilling to serve at the time of the Meeting, the Proxyholders will
have discretionary authority to vote the Proxies for a substitute nominee or
nominees. The following sets forth information as to the nominees for election
at the Meeting and each of the directors whose term of office will continue
after the Meeting, including their ages, present principal occupations, other
business experience during the last five years, memberships on committees of the
Board of Directors and directorships in other publicly-held companies.
5
<PAGE>
<TABLE>
<CAPTION>
Served as Year
Director Term
Name Age Position Since Expires
- ---------------------------- --- ------------------- ---------- ---------
<S> <C> <C> <C> <C>
Nominees for three-year
terms ending in 1999:
Warren D. Feldberg (4) 46 Director 1992 1996
Kevin J. Roche (2)(3)(4) 38 Director 1989 1996
Continuing directors:
James F. Halpin (1)(2) 45 President, Chief 1993 1997
Executive Officer
and Director
Lawrence Mittman (3) 45 Director 1995 1997
Edith Weiner 47 Director 1995 1997
Giles H. Bateman (1)(2) 51 Chairman of the 1991 1998
Board of Directors
Leonard L. Berry, 53 Director 1993 1998
Ph.D. (4)
- ----------------
</TABLE>
(1) Member of the Nominating Committee
(2) Member of the Finance Committee
(3) Member of the Audit Committee
(4) Member of Compensation Committee
Warren D. Feldberg has served as a director of the Company since
October 1992. Since May 1996, Mr. Feldberg has been the Chief Executive Officer
of Caldor Corp., a department store retail chain. Mr. Feldberg served as
Chairman and Chief Executive Officer of Marshalls, Inc., a retail organization
and a subsidiary of Melville Corporation, from October 1991 to June 1995. Mr.
Feldberg also served as Vice President of Melville Corporation during the same
period. From 1988 to October 1991, Mr. Feldberg was employed by Dayton Hudson
Corporation, where he served in a variety of positions for its Target division,
most recently as President during 1991.
Kevin J. Roche has served as a director of the Company since 1989. Mr.
Roche has served as Senior Vice President of First Union Capital Partners, Inc.
since 1993, Senior Vice President of First Union Corporation since 1991 and
Senior Vice President of First Union National Bank of North Carolina since 1988.
James F. Halpin has served as President and a director of the Company since
May 1993 and as Chief Executive Officer since December 1993. Mr. Halpin also
served as Chief Operating Officer from May 1993 to January 1995. From 1990 to
November 1992, Mr. Halpin was President of HomeBase, a home center warehouse
retailer. From 1988 to 1990, Mr. Halpin was President of BJ's Wholesale Club, a
chain of warehouse club retail stores. He also served as Executive Vice
President of Waban Inc., the parent corporation of HomeBase and BJ's Wholesale
Club, from 1988 to May 1993. He is also a director of Toy Biz, Inc.
Lawrence Mittman has served as a director of the Company since January
1995. Mr. Mittman is a partner of the New York City law firm Battle Fowler,
where he has been employed since 1979.
Edith Weiner has served as a director of the Company since March 1995. Ms.
Weiner is President of Weiner, Edrich, Brown, Inc., a management consulting
firm, where she has been employed since 1977. She also serves as a director of
First Unum Life Insurance Company.
Giles H. Bateman has served as a director of the Company since November
1991 and as Chairman of the Board of Directors since December 1993. Since
January 1992, Mr. Bateman has been an investor in and director of several
private companies, primarily engaged in retailing. In 1991, Mr. Bateman served
as a Visiting Professor at the University of San Diego Olin Hall School of
Business Administration. Mr. Bateman was a co-founder of The Price Company, the
operator of The Price Club chain of warehouse club retail superstores. Mr.
Bateman served as a director and Chief Financial Officer of The Price Company
from 1976 to 1991 and as Vice Chairman from 1986 to 1991. He is also a director
of Boatracs, Inc.
6
<PAGE>
Leonard L. Berry, Ph.D. has served as a director of the Company since
November 1993. Mr. Berry has served as a Professor of Marketing and as Director
of the Center for Retailing Studies at Texas A&M University since 1982. He has
also held the J.C. Penney Chair of Retailing Studies since January 1991.
Meetings and Committees of the Board of Directors
The business of the Company is managed under the direction of the Board of
Directors. The Board meets on a regularly scheduled basis to review significant
developments affecting the Company and to act on matters requiring Board
approval. It also holds special meetings and acts by written consent when
important matters require Board action between scheduled meetings. The Board of
Directors met six times and acted by unanimous written consent four times during
fiscal 1996. During such period, all members of the Board of Directors
participated in at least 75% of all Board and applicable Committee meetings.
The Board of Directors has four standing committees (each a "Committee"):
The Nominating Committee, the Finance Committee, the Audit Committee and the
Compensation Committee. The functions of these committees, their current
members, the number of meetings held and the number of times action was taken by
written consent during fiscal 1996 are described below.
The Nominating Committee is empowered to recommend nominees for election to
the Board; review the role, composition and structure of the Board and its
committees; and review planning for the succession to senior executive
positions. The Nominating Committee is comprised of James F. Halpin (Chairman)
and Giles H. Bateman. The Nominating Committee met informally once during
fiscal 1996.
The Finance Committee has the responsibility of making recommendations to
the Board with respect to the Company's credit arrangements, the issuance of
equity and long-term debt securities and other matters. The Finance Committee
is comprised of Giles H. Bateman (Chairman), James F. Halpin and Kevin J. Roche.
The Finance Committee met once and acted by written consent once during fiscal
1996.
The Audit Committee was established to review the professional services and
independence of the Company's independent auditors and to review the Company's
financial statements, procedures and internal controls. The Audit Committee is
comprised of Kevin J. Roche (Chairman) and Lawrence Mittman. The Audit
Committee met seven times during fiscal 1996.
The Compensation Committee has the responsibility of fixing annual salaries
and bonuses for the officers and key employees of the Company and administering
the Long-Term Incentive Plan. The Compensation Committee is comprised of Warren
D. Feldberg (Chairman), Kevin J. Roche and Leonard L. Berry, Ph.D. The
Compensation Committee met six times during fiscal 1996.
Director Compensation
Directors who are also employees of the Company or its subsidiaries receive
no compensation in their capacities as directors. Nonemployee directors receive
an annual retainer of $25,000, plus a fee of $1,000 for each Board meeting and
$500 for each Committee meeting in which the director participates. All
directors are reimbursed for expenses connected with attendance at Board or
Committee meetings. In addition, nonemployee directors receive annual automatic
grants of stock options to purchase $50,000 of Common Stock (based on market
value).
For fiscal 1996, the Company (i) paid Messrs. Bateman, Berry, Feldberg,
Mittman and Roche $30,000, $33,000, $32,500, $30,500 and $35,000, respectively,
and paid the firm of Weiner, Edrich, Brown, Inc., $29,000 in respect of Ms.
Weiner's services and (ii) granted each of Messrs. Bateman, Berry, Feldberg,
Mittman and Roche and Ms. Weiner options to purchase 2,846 shares of Common
Stock at an exercise price of $17.52 per share. For his services as Chairman of
the Board of Directors during fiscal 1996, Mr. Bateman received an additional
$69,000 as an annual salary. In addition, Mr. Dean Groussman, who resigned as a
director in August 1995, was paid $13,917 for services rendered in fiscal 1996.
7
<PAGE>
Proposal No. 2
INCREASE IN THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has unanimously approved, subject to approval by the
stockholders of the Company, a proposal to amend the Fourth Article of the
Charter to increase the number of shares of Common Stock authorized and
available for issuance from 100,000,000 to 200,000,000.
Management believes that this amendment would benefit the Company by
providing greater flexibility to the Board of Directors to issue additional
equity securities, for example, to raise additional capital, to facilitate
possible future acquisitions, to provide stock-related employee benefits and to
effect stock splits of the outstanding Common Stock. If the increase is
approved at the Meeting, generally, no stockholder approval would be necessary
for the issuance of all or any portion of the additional shares of Common Stock
unless required by law or any rules or regulations to which the Company is
subject. However, as long as the Common Stock is quoted for trading through the
New York Stock Exchange (the "NYSE"), the flexibility that this amendment would
provide the Board of Directors will be limited by the rules of such exchange
which, as presently in effect, would generally require stockholder approval for
the issuance of shares when: (i) a stock option or purchase plan is to be
established or other arrangements made pursuant to which stock may be acquired
by directors or officers, except for warrants or rights issued generally to
securityholders of the Company or broadly-based plans or arrangements including
other employees; (ii) a business, a company, tangible or intangible assets or
property or securities representing any such interest are to be acquired,
directly or indirectly, from a director, officer or substantial securityholder
of the Company (including its subsidiaries, affiliates or other closely related
persons) or from any company or party in which one of such persons has a
substantial direct or indirect interest if the number of shares of Common Stock
to be issued or the number of shares of Common Stock into which the securities
may be convertible exceeds one percent of the number of shares of Common Stock,
or one percent of the voting power, outstanding before the issuance; (iii)
Common Stock or securities convertible into or exercisable for Common Stock are
to be issued in any transaction or series of related transactions, other than a
public offering for cash, if (a) the Common Stock to be issued has, or will have
upon issuance, voting power equal to or in excess of 20% of the voting power
outstanding before the issuance of such Common Stock or securities convertible
into or exercisable for Common Stock, or (b) the number of shares of Common
Stock to be issued is, or will be, equal to or in excess of 20% of the number of
shares of Common Stock outstanding before the issuance of the Common Stock; or
(iv) the issuance would result in a change in control of the Company.
Although the Company considers from time to time mergers, acquisitions and
other transactions that may involve the issuance of additional shares of Common
Stock (any one or more of which may be under consideration or acted upon at any
time), the Company is not a party to any agreements with respect to any such
transactions, nor does it have any agreements, commitments or understandings
with respect to such transactions or that would involve the issuance of
additional shares of Common Stock in amounts that would exceed the number of
currently authorized and unissued shares.
Depending upon the consideration per share received by the Company for any
subsequent issuance of Common Stock, such issuance could have a dilutive effect
on those stockholders who paid a higher consideration per share for their stock.
Also, future issuances will increase the number of outstanding shares of Common
Stock, thereby decreasing the percentage ownership in the Company (for voting,
distributions and all other purposes) represented by existing shares of Common
Stock. The availability for issuance of the additional shares of Common Stock
and any issuance thereof, or both, may be viewed as having the effect of
discouraging an unsolicited attempt by another person or entity to acquire
control of the Company. Although the Board of Directors has no present
intention of doing so, the Company's authorized but unissued Common Stock could
be issued in one or more transactions that would make a takeover of the Company
more difficult or costly, and therefore less likely. The Company is not aware
of any person or entity who is seeking to acquire control of the Company.
Holders of Common Stock do not have any preemptive rights to acquire any
additional securities issued by the Company.
As of the Record Date, 45,320,525 shares of Common Stock were issued and
outstanding and 5,147,888 shares of Common Stock were reserved for issuance
pursuant to the Company's employee benefit plans. Accordingly, only an
additional 49,531,587 unreserved shares of Common Stock are available for
issuance under the Charter. If the proposed amendment to the Charter is not
adopted, it would be necessary to convene a special meeting of
8
<PAGE>
stockholders before the Company could consummate any transaction in which the
number of shares of Common Stock that would be issued, together with all other
new issuances of Common Stock after the Record Date, would exceed 49,531,587
shares. This could potentially add to the costs of a proposed transaction and
the added time necessary to prepare for and hold a stockholders meeting could
serve as a disincentive for third parties otherwise interested in making an
investment in, or entering into other transactions with, the Company. It is for
these and similar reasons that companies have authorized and unissued shares
available for issuance.
Vote Required
Adoption of the proposal to increase the number of authorized shares of
Common Stock requires the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock on the Record Date. If approved by the
stockholders, such increase in the number of authorized shares will become
effective upon the filing with the Secretary of State of the State of Delaware
of an amendment to the Charter setting forth such increase. Unless otherwise
instructed, it is the intent of the persons named in the Proxy to vote all
Proxies "FOR" the adoption of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE INCREASE IN THE
NUMBER OF AUTHORIZED SHARES OF THE COMPANY'S COMMON STOCK TO 200,000,000
Proposal No. 3
AMENDMENT TO LONG-TERM INCENTIVE PLAN
The Board of Directors and the Compensation Committee (referred to
collectively as the "Board of Directors" with respect to this Proposal)
unanimously approved an amendment to the Company's Long-Term Incentive Plan,
subject to approval by the stockholders, to increase the number of shares of
Common Stock issuable pursuant to the Long-Term Incentive Plan by 2,000,000,
from 6,394,368 to 8,394,368. The Board of Directors has unanimously approved
certain additional amendments to the Long-Term Incentive Plan, as set forth
herein, that do not require stockholder approval. See "--Amendments Not
Requiring Stockholder Approval."
Description of Long-Term Incentive Plan
The Long-Term Incentive Plan provides that the Compensation Committee may,
from time to time and in its sole discretion, grant options to acquire shares of
Common Stock, restricted stock awards, stock appreciation rights, performance
share awards and stock unit awards to full-time and part-time employees,
nonemployee directors, consultants and advisors ("Participants") of or to the
Company or a subsidiary thereof (referred to collectively as the "Company" with
respect to this Proposal). The Company has six nonemployee directors and
approximately 11,000 employees. The Compensation Committee, composed of two or
more nonemployee directors of the Company, has the authority to fix the number
and terms of awards to be granted under the Long-Term Incentive Plan, the
persons to receive awards and any conditions for the receipt of awards. The
Board of Directors has all the powers of the Compensation Committee under the
Long-Term Incentive Plan and may take any action under or with respect to the
Long-Term Incentive Plan that the Compensation Committee is entitled to take.
The Long-Term Incentive Plan currently provides for the issuance of up to
6,394,368 shares of Common Stock pursuant thereto, upon the exercise of stock
options or in the form of restricted stock awards, performance stock awards or
stock unit awards granted thereunder. The maximum aggregate number of shares of
Common Stock with respect to which awards may be granted to any Participant
during the term of the Long-Term Incentive Plan is one-half of the total number
of shares of Common Stock that may be issued from time to time thereunder.
Awards may be granted under the Long-Term Incentive Plan through May 8, 2005.
Stock Options. Under the Long-Term Incentive Plan, options may be granted
in the form of "incentive stock options" as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or nonstatutory stock
options. The options generally become exercisable with respect to one-third or
one-fourth of the shares purchasable thereunder on each anniversary of the date
of the option grant. The options generally expire
9
<PAGE>
within 10 years after the date of grant (five years in the case of incentive
stock options granted to employees owning more than 10% of the Common Stock),
except as follows. If a Participant ceases to be employed by the Company because
the participant is terminated for Cause (as defined in the Long-Term Incentive
Plan), any options held by the Participant will automatically expire. If a
Participant's employment by the Company is terminated for any reason other than
for Cause or due to death, such Participant's option will be exercisable (to the
extent exercisable on the date of termination of the Participant's employment by
the Company or, if the Compensation Committee, in its sole discretion, has
accelerated the vesting of such option, to the extent exercisable following such
acceleration) at any time within 30 days after the Participant ceases to be an
employee (or within (i) three months after termination on account of retirement
or (ii) 12 months after termination on account of disability), unless by its
terms the option expires earlier or unless, with respect to a nonstatutory stock
option, the Compensation Committee agrees, in its sole discretion, to extend the
term of such option. If a Participant dies while employed by the Company, or
within three months after ceasing to be an employee, such Participant's option
will be exercisable (to the extent exercisable on the date of death, or, if the
Compensation Committee, in its sole discretion, has accelerated the vesting of
such option, to the extent exercisable following such acceleration) at any time
within 12 months after the date of death, unless by its terms the option expires
earlier or unless, with respect to any nonstatutory stock option, the
Compensation Committee agrees, in its sole discretion, to extend the term of
such option. If a nonemployee Participant's association with the Company is
terminated for Cause, any options held by such Participant will automatically
expire. In all other cases, any options held by such a Participant, to the
extent exercisable on the date of termination of the Participant's association
with the Company, will remain exercisable and will expire in accordance with the
terms of the applicable option agreement. The Compensation Committee does not
have the authority to extend the term of any option beyond its original term. In
the event of certain mergers and reorganizations involving the Company or upon
the occurrence of a change in control (as defined in the Long-Term Incentive
Plan) or threatened change in control of the Company, all outstanding options
will become immediately exercisable with respect to the full number of shares
purchasable under such options.
Incentive stock options may not be transferred or assigned other than by
will or the laws of descent and distribution and may be exercised during the
lifetime of the Participant only by the Participant or by the Participant's
legally authorized representative. With respect to nonstatutory stock options,
the Compensation Committee may, in its sole discretion, provide for the
transferability of such options as it deems appropriate.
The exercise price of each incentive stock option granted under the Long-
Term Incentive Plan may not be less than 100% of the fair market value of the
Common Stock on the date of grant (or 110% in the case of incentive stock
options granted to employees owning more than 10% of the Common Stock), while
the exercise price for nonstatutory stock options may be less than the fair
market value on the date of grant. The closing price of the Common Stock on the
NYSE on the Record Date was $45.50 per share.
The exercise price of an option may be paid in cash, by certified or
cashier's check, by shares of Common Stock, if permitted by the Compensation
Committee, by a promissory note for the total purchase price of the shares of
Common Stock being purchased, which note shall contain such terms and provisions
as the Compensation Committee may approve, including without limitation the
right to repay the note partially or wholly with Common Stock, or by delivery of
a copy of irrevocable instructions from the Participant to a broker or dealer,
reasonably acceptable to the Company, to sell certain of the shares of Common
Stock purchased upon exercise of the option or to pledge them as collateral for
a loan and promptly deliver to the Company the amount of sale or loan proceeds
necessary to pay such purchase price.
As of the Record Date, options to purchase an aggregate of [6,773,141]
shares of Common Stock had been granted under the Long-Term Incentive Plan, of
which options to purchase [2,211,617] shares of Common Stock had been exercised,
options to purchase [1,907,304] shares of Common Stock had been cancelled, and
options to purchase [2,654,220] shares of Common Stock remain outstanding. These
numbers do not reflect the options granted by the Compensation Committee on
August 16, 1996, subject to stockholder approval of Proposal No. 3. See footnote
1 to the table set forth below under the caption "--Grant of Awards Under the
Long-Term Incentive Plan."
Restricted Stock Awards. Under the Long-Term Incentive Plan, the
Compensation Committee may, in its sole discretion, award shares of Common
Stock, subject to certain restrictions, as determined by the Compensation
Committee. The general terms and conditions of restricted stock awards are as
follows: (i) any shares of Common Stock awarded to a Participant will be
restricted for a period of time to be determined by the Compensation
10
<PAGE>
Committee, but not more than ten years; (ii) the restrictions will prohibit the
sale, assignment, transfer, pledge or other encumbrance of such shares, and will
provide for possible reversion thereof to the Company during the period of
restriction; (iii) all restricted stock awarded to a Participant will be
forfeited and returned to the Company in the event the Participant's employment
by or other association with the Company is terminated prior to the expiration
of the period of restriction, unless the Participant's termination of employment
by or other association with the Company is due to his death, disability or
retirement or unless the Compensation Committee, in its sole discretion, waives
the restrictions established with respect to any or all of the shares of
restricted stock; (iv) in the event of a Participant's death or disability, the
restrictions established will lapse with respect to all restricted stock awarded
to the Participant prior to any such event and the shares of Common Stock
involved will cease to be restricted stock and will no longer be subject to
forfeiture to the Company; (v) in the event of a Participant's retirement, the
restrictions established will continue to apply unless the Compensation
Committee, in its sole discretion, shortens the restriction period; (vi) from
the time of grant of the restricted stock award, the Participant will be
entitled to all rights (including dividend and voting rights) with respect to
the shares of Common Stock covered by the award, subject to forfeiture of such
Common Stock; and (vii) upon the expiration of a restriction period, the Company
will issue a certificate for such shares that does not bear a restrictive
legend.
The vesting of certain restricted stock awards may be accelerated if
specified performance goals are met (such restricted stock is referred to herein
as "performance accelerated restricted stock" or "PARS"). As of the Record Date,
the Company has awarded a total of 121,783 shares of restricted stock, all of
which shares were PARS, with James F. Halpin, Harold F. Compton, J. Samuel
Crowley, Lawrence N. Mondry and James E. Skinner receiving PARS in the following
amounts, respectively: 26,131; 22,456; 8,147; 8,147 and 8,147 shares.
Stock Appreciation Rights. Under the Long-Term Incentive Plan, the
Compensation Committee may, in its sole discretion, grant stock appreciation
rights. A stock appreciation right entitles a Participant to receive an amount
equal to (or if the Compensation Committee shall so determine at the time of
grant, less than) the excess of the market value on the date of exercise over
the market value on the date of grant of such right (or such other price as is
set by the Compensation Committee), multiplied by the number of shares of Common
Stock with respect to which the stock appreciation right shall have been
exercised. A stock appreciation right may be granted in combination with, in
addition to, or completely independent of, an option or any other award.
Settlement of a stock appreciation right may be made in cash, by certified or
cashier's check, in shares of Common Stock, if permitted by the Compensation
Committee, or in any other form of valid consideration, as determined by the
Compensation Committee in its sole discretion. However, any stock appreciation
right exercised upon or subsequent to the occurrence of certain mergers,
reorganizations or a change in control must be paid in cash. The Compensation
Committee may, in its sole discretion, determine the transferability of the
stock appreciation rights granted to any Participant. Whenever a stock
appreciation right is granted in relation to an option and the exercise of one
affects the right to exercise the other, the number of shares of Common Stock
available under the option to which the stock appreciation right relates will
decrease by a number equal to the number of shares of Common Stock for which the
stock appreciation right is exercised. Upon the exercise of an option, any
related stock appreciation right will terminate as to any number of shares of
Common Stock subject to such stock appreciation right that exceeds the total
number of shares of Common Stock for which the option remains unexercised.
Whenever a stock appreciation right is granted in relation to an option and
the exercise of one affects the right to exercise the other, in the event of the
termination of the Participant's employment by or other association with the
Company, the stock appreciation right may be exercised only during the period,
if any, within which the option to which it relates may be exercised. If a
Participant who is a Company employee is granted a stock appreciation right
independently of an option, the following provisions will apply: (i) if a
Participant ceases to be employed by the Company because the Participant is
terminated for Cause (as defined in the Long-Term Incentive Plan), any stock
appreciation rights held by that Participant will automatically expire; (ii) if
a Participant's employment by the Company is terminated for any reason other
than Cause or due to death, such Participant's stock appreciation right will be
exercisable (to the extent exercisable on the date of termination of the
Participant's employment by the Company or, if the Compensation Committee, in
its sole discretion, has accelerated the vesting of such stock appreciation
right, to the extent exercisable following such acceleration) at any time within
30 days after the Participant ceases to be an employee (or within (a) three
months after termination if on account of retirement or (b) 12 months after
termination if on account of disability), unless by its terms it expires earlier
or unless the Compensation Committee agrees, in its sole discretion, to extend
the term of such stock appreciation right; provided that the term of any such
stock appreciation right will not be extended beyond its original term, and
(iii) if a Participant dies while employed by the Company or within three months
after ceasing to be an employee, such
11
<PAGE>
Participant's stock appreciation right will be exercisable (to the extent
exercisable on the date of death, or, if the Compensation Committee, in its sole
discretion, has accelerated the vesting of such stock appreciation right, to the
extent exercisable following such acceleration) at any time within 12 months
after the date of death, unless by its terms it expires earlier or unless the
Compensation Committee agrees, in its sole discretion, to extend the term of
such stock appreciation right; provided that the term of any such stock
appreciation right will not be extended beyond its original term. Military or
sick leave will not be deemed a termination of employment by the Company;
provided that it does not exceed the longer of three-months or the period during
which the absent Participant's reemployment rights, if any, are guaranteed by
statute or by contract. If a nonemployee Participant is granted a stock
appreciation right independently of an option under the Long-Term Incentive
Plan, the following provisions will apply: (i) if the Participant's association
with the Company is terminated for Cause, any stock appreciation right held by
the Participant will automatically expire and (ii) in all other cases, any stock
appreciation right held by a Participant will remain exercisable to the extent
exercisable on the date of termination of the Participant's association with the
Company and will remain exercisable in accordance with the terms of the
applicable stock appreciation right agreement. As of the Record Date, no stock
appreciation rights have been granted.
Whenever an incentive stock option and a stock appreciation right are
granted together and the exercise of one affects the right to exercise the
other, the following requirements apply: (i) the stock appreciation right will
expire no later than the expiration of the underlying incentive stock option;
(ii) the stock appreciation right may be for no more than the difference between
the exercise price of the underlying incentive stock option and the market value
of the Common Stock subject to the underlying incentive stock option at the time
the stock appreciation right is exercised; (iii) the stock appreciation right is
transferable only when the underlying incentive stock option is transferable and
under the same conditions; (iv) the stock appreciation right may be exercised
only when the underlying incentive stock option is eligible to be exercised; and
(v) the stock appreciation right may be exercised only when the market value of
the Common Stock subject to the underlying incentive stock option exceeds the
exercise price of the underlying incentive stock option.
Performance Shares. Under the Long-Term Incentive Plan, the Compensation
Committee may, in its sole discretion, grant performance shares. Performance
shares may be earned based on the attainment of performance goals established by
the Compensation Committee for a particular performance cycle. The Compensation
Committee may establish performance goals with such criteria and objectives as
the Compensation Committee may from time to time select. After the end of each
performance cycle, the Compensation Committee will determine the number of
performance shares, if any, earned by each Participant with respect to the
performance cycle in accordance with the following: (i) if the performance goal
is attained or exceeded, a Participant will be deemed to have earned the full
number of performance shares granted to the Participant; (ii) if the minimum
performance goal is not attained, a Participant will be deemed to have earned no
performance shares; (iii) if the performance goal is not attained, but the
minimum performance goal is attained or exceeded, the number of performance
shares deemed to have been earned by a Participant will be a portion of the
performance shares, as determined based on a formula established by the
Compensation Committee at the time of grant; (iv) if a Participant's employment
by or other association with the Company has terminated because of death,
disability or retirement prior to the end of a performance cycle, the number of
performance shares such Participant will be deemed to have earned shall be the
number of performance shares determined as though such Participant's employment
by or other association with the Company had not terminated, multiplied by a
fraction, the numerator of which is the number of months such Participant was
employed by or was otherwise associated with the Company during the performance
cycle (including the month during which employment by or other association with
the Company terminated) and the denominator of which is the total number of
months in the performance cycle; (v) if the Participant's employment by or other
association with the Company has terminated for any reason other than death,
disability or retirement, such Participant will be deemed to have earned no
performance shares except as and to the extent the Compensation Committee may
determine; provided that the number of performance shares that may be so
determined by the Compensation Committee to have been earned may not exceed the
number that would have been earned had the provisions of subparagraph (i) been
applicable; and (vi) at any time prior to the end of a performance cycle, the
Compensation Committee may adjust downward (but not upward) the performance goal
and/or the minimum performance goal as a result of major events unforeseen at
the time the performance shares were awarded, such as changes in the economy,
the industry, laws affecting the operation of the Company, changes in applicable
tax laws or accounting principles or any other event the Compensation Committee
determines would have a significant impact upon the probability of attaining the
previously established performance goal and/or minimum performance goal.
Payment in respect of earned performance shares will be made to the Participant
or, if the Participant has died, to the Participant's designated beneficiary, as
soon as practicable after the expiration of the performance cycle and the
12
<PAGE>
Compensation Committee's determination. Payment in respect of earned
performance shares may be made in cash, in shares of Common Stock or a
combination thereof, as determined by the Compensation Committee, in its sole
discretion, at the time of payment. In the sole discretion of the Compensation
Committee, a performance share award may provide the Participant with dividends
or dividend equivalents (payable on a current or deferred basis) and cash
payments in lieu of or in addition to such award. As of the Record Date, no
performance shares have been granted.
Stock Unit Awards. Under the Long-Term Incentive Plan, the Compensation
Committee may, in its sole discretion, grant stock unit awards. Stock unit
awards may be in the form of Common Stock or units, the value of which is based,
in whole or in part, on the market value of the Common Stock. Stock unit awards
will be subject to such terms, restrictions, conditions, vesting requirements,
payment requirements and rights upon termination of employment by or other
association with the Company as the Compensation Committee may determine, in its
sole discretion, at the time of grant, including without limitation the
following: (i) any shares of Common Stock that are part of a stock unit award
may be subject to restrictions on sale, assignment, transfer, pledge or other
encumbrance; (ii) stock unit awards may provide for the payment of cash
consideration by the Participant or provide that the award, and any Common Stock
to be issued in connection therewith, if applicable, shall be delivered without
the payment of cash consideration; (iii) stock unit awards may relate in whole
or in part to certain performance criteria established by the Compensation
Committee; and (iv) stock unit awards may provide for deferred payment schedules
and/or vesting over a specified period of employment by or other association
with the Company. In the sole discretion of the Compensation Committee, a stock
unit award may provide the Participant with dividends or dividend equivalents
(payable on a current or deferred basis) and cash payments in lieu of or in
addition to such award. As of the Record Date, no stock unit awards have been
granted.
Description of Proposed Amendment
The Board of Directors has unanimously approved an amendment to the Long-
Term Incentive Plan, subject to approval by the stockholders, to increase the
number of shares of Common Stock issuable pursuant to the Long-Term Incentive
Plan by 2,000,000, from 6,394,368 to 8,394,368, which amendment, if
approved by the stockholders, will be effective as of August 16, 1996.
Amendments Not Requiring Stockholder Approval
The Board of Directors has unanimously approved certain amendments to the
Long-Term Incentive Plan that did not require stockholder approval and became
effective August 16, 1996, including the elimination of: (i) certain
restrictions on the transferability of nonstatutory stock options, restricted
stock awards and stock appreciation rights; and (ii) certain minimum vesting or
holding periods applicable to awards.
Summary of Federal Income Tax Consequences
Summary of Certain Federal Income Tax Consequences Relating to Incentive
Stock Options. No taxable income is realized by a Participant and no tax
deduction is available to the Company upon either the grant or exercise of an
incentive stock option. If a Participant holds the shares acquired upon the
exercise of an incentive stock option for more than one year after the issuance
of the shares upon exercise of the incentive stock option and more than two
years after the date of the grant of the incentive stock option (the "holding
period"), the difference between the exercise price and the amount realized upon
the sale of the shares will be treated as a long-term capital gain or loss and
no deduction will be available to the Company. If the shares are transferred
before the expiration of the holding period, the Participant will realize
ordinary income, and the Company will be entitled to a deduction, on the portion
of the gain, if any, equal to the difference between the incentive stock option
exercise price and the fair market value of the shares on the date of exercise
or, if less, the difference between the amount realized on the disposition and
the adjusted basis of the stock; provided that the deduction will not be allowed
if such amount exceeds the annual $1,000,000 limitation on the deduction that an
employer may claim for compensation of certain executives pursuant to Section
162(m) of the Code (the "Deduction Limitation") and no exception to the
Deduction Limitation is applicable. Any further gain or loss from the arm's
length sale or exchange will be taxable as a long-term or short-term capital
gain or loss depending upon the holding period before disposition. Certain
special rules apply if an incentive stock option is exercised by tendering
stock. The difference between the incentive stock option exercise price and the
fair market value, at the time of exercise, of the Common Stock acquired upon
the exercise of
13
<PAGE>
an incentive stock option may give rise to alternative minimum taxable income
subject to an alternative minimum tax.
Summary of Certain Federal Income Tax Consequences Relating to Nonqualified
Stock Options. No taxable income generally is realized by the Participant upon
the grant of a nonqualified stock option, and no deduction generally is then
available to the Company. Upon exercise of a nonqualified stock option, the
excess of the fair market value of the shares on the date of exercise over the
exercise price will be taxable to the Participant as ordinary income. This
amount will also be deductible by the Company unless the amount exceeds the
Deduction Limitation and no exception to the Deduction Limitation is applicable.
The tax basis of shares acquired by the Participant will be the fair market
value on the date of exercise. When a Participant disposes of shares acquired
upon exercise of a nonqualified stock option, any amount realized in excess of
the fair market value of the shares on the date of exercise generally will be
treated as a long-term or short-term capital gain, depending on the holding
period of the shares. The holding period commences upon exercise of the
nonqualified stock option. If the amount received is less than such fair market
value, the loss will be treated as a long-term or short-term capital loss,
depending on the holding period of the shares. The exercise of a nonqualified
stock option will not trigger the alternative minimum tax consequences
applicable to incentive stock options.
Summary of Certain Federal Income Tax Consequences Relating to Restricted
Stock. Unless a Participant otherwise elects to be taxed upon receipt of shares
of restricted stock under the Long-Term Incentive Plan, the Participant must
include in the Participant's taxable income the difference between the fair
market value of the shares and the amount paid, if any, for the shares, as of
the first date the Participant's interest in the shares is no longer subject to
a substantial risk of forfeiture or such shares become transferable. A
Participant's rights in restricted stock awarded under the Long-Term Incentive
Plan are subject to a substantial risk of forfeiture if the rights to full
enjoyment of the shares are conditioned, directly or indirectly, upon the future
performance of substantial services by the Participant. Where shares of
restricted stock received under the Long-Term Incentive Plan are subject to a
substantial risk of forfeiture, the Participant can elect to report the
difference between the fair market value of the shares on the date of receipt
and the amount paid, if any, for the stock as ordinary income in the year of
receipt (an "Election"). To be effective, an Election must be filed with the
Internal Revenue Service within 30 days after the date the shares are
transferred to the Participant. The Company is entitled to a tax deduction equal
in amount to the amount includable as compensation in the gross income of the
Participant unless such amount exceeds the Deduction Limitation and no exception
to the Deduction Limitation is applicable. The amount of taxable gain arising
from a Participant's sale of shares of restricted stock acquired pursuant to the
Long-Term Incentive Plan is equal to the excess of the amount realized on such
sale over the sum of the amount paid, if any, for the stock and the compensation
element included by the Participant in taxable income. The Participant will
realize long-term capital gain or loss upon disposition of stock held for more
than one year after (i) it is no longer subject to a substantial risk of
forfeiture or (ii) the date of receipt if an Election has been timely made.
Summary of Certain Federal Income Tax Consequences Relating to Stock
Appreciation Rights. No taxable income will be realized by a Participant upon
the grant of a stock appreciation right and no deduction is then available to
the Company. Upon the exercise of a stock appreciation right, the Participant
will realize taxable income equal to the cash or the fair market value (on the
date of exercise) of the shares, or both, received, and the Company will be
entitled to a deduction of the same amount unless such amount exceeds the
Deduction Limitation and no exception to the Deduction Limitation is applicable.
The tax basis of any shares received will be the fair market value on the date
of exercise, and, if the shares received are held for more than one year, the
Participant will realize long-term capital gain or loss upon disposition.
Summary of Certain Federal Income Tax Consequences Relating to Performance
Shares. No taxable income will be realized by a Participant upon the grant of a
performance share award and no deduction is then available to the Company. A
Participant will realize ordinary income at the time the award is paid in an
amount equal to the amount of cash paid or the value of the shares delivered to
the Participant and the Company will have a corresponding deduction unless such
amounts exceed the Deduction Limitation and no exception to the
Deduction Limitation is applicable.
Summary of Certain Federal Income Tax Consequences Relating to Stock Units.
No taxable income will be realized by a Participant upon the grant of a stock
unit award and no deduction is then available to the Company. A Participant
will realize ordinary income at the time the award is paid in an amount equal to
the amount of cash
14
<PAGE>
paid or the value of the shares delivered to the Participant and the Company
will have a corresponding deduction unless such amounts exceed the Deduction
Limitation and no exception to the Deduction Limitation is applicable.
Grant of Awards Under the Long-Term Incentive Plan
The following table sets forth certain information regarding options
received under the Long-Term Incentive Plan from its inception through the
Record Date by (i) the Company's Chief Executive Officer, (ii) each of the
Company's four other most highly compensated executive officers for fiscal 1996
individually, (iii) all current executive officers as a group, (iv) all current
directors who are not executive officers as a group, (v) each nominee for
election as a director, and (vi) all employees, excluding executive officers, as
a group and excluding all canceled options.
<TABLE>
<CAPTION>
Name of Individual Aggregate Shares of Common
or Group Stock Subject to Options
-------------------------------------------- --------------------------
<S> <C>
James F. Halpin............................. 602,384
Harold F. Compton........................... 160,756
J. Samuel Crowley........................... 60,132
Lawrence N. Mondry.......................... 343,792
James E. Skinner............................ 223,058
Warren D. Fledberg.......................... 17,622
Kevin J . Roche............................. 14,410
All current executive
officers as a group....................... 2,259,372
All current directors who
are not executive......................... 141,884
All employees, excluding executive
officers, as a group and excluding
all canceled options...................... 2,789,570
</TABLE>
- -------------------------------------------
(1) On August 16, 1996, the Compensation Committee, subject to stockholder
approval of Proposal No. 3, granted options under the Long-Term Incentive
Plan to purchase shares of Common Stock (the "Executive Options") to the
Company's senior management in order to maintain long-term incentives and
to help enable the Company to retain its executive team. Share amounts in
the foregoing table do not include shares of Common Stock issuable upon
exercise of the Executive Options. Executive Options granted Messrs.
Halpin, Compton, Crowley, Mondry, Skinner, and all current executive
officers as a group, numbered: 500,000; 340,000; 170,000; 170,000; 170,000;
and 1,920,000 shares respectively. If Proposal No. 3 is approved by the
stockholders, the Executive Options will have a term of ten years from the
date of grant, and will vest with respect to one-fourth of the shares
covered thereby annually, beginning May 6, 1997. With respect to each grant
of Executive Options, approximately one-third of such options will have an
exercise price of $45, one-third will have an exercise price of $55, and
one-third will have an exercise price of $65. The exercise prices of all
Executive Options were above $41.38, the closing price per share of the
Common Stock on the NYSE on August 16, 1996, the date of grant. In the
event of a change in control of the Company (as defined in Long-Term
Incentive Plan), however, any unexerciseable portion of the Executive
Options would become immediately exerciseable.
The amounts that would be receivable in the future by the individuals or
groups named in the table above under the Long-Term Incentive Plan as
proposed to be amended are not determinable at this time.
Vote Required
Approval of the amendment to the Long-Term Incentive Plan to increase the
number of shares issuable thereunder requires the approval of the affirmative
vote of a majority of the shares of Common Stock present or represented at the
meeting and entitled to vote thereon. If approved by the stockholders, such
amendment will be effective as of August 16, 1996. Unless otherwise instructed
or restricted, it is the intent of the persons named in the Proxy to vote all
Proxies "FOR" the adoption of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT TO THE
COMPANY'S LONG-TERM INCENTIVE PLAN.
15
<PAGE>
MANAGEMENT
Executive Officers
The following table sets forth certain information regarding the
Company's executive officers. Officers are elected annually by the Board of
Directors and serve at its discretion.
<TABLE>
<CAPTION>
Name Age Position
- -------------------------- ------- ---------------------------------------------------
<S> <C> <C>
James F. Halpin............ 45 President, Chief Executive Officer and Director
Harold F. Compton.......... 49 Executive Vice President, Chief Operating
Officer and President--CompUSA Stores
J. Samuel Crowley.......... 46 Executive Vice President--Operations
Gordon B. Hoffstein........ 44 Executive Vice President--Mail Order
Lawrence N. Mondry......... 36 Executive Vice President--Merchandising
James E. Skinner........... 43 Executive Vice President, Chief Financial
Officer, Treasurer and Assistant Secretary
Ronald J. Gilmore.......... 41 Senior Vice President--Marketing & Advertising
Jack Littman-Quinn......... 41 Senior Vice President--Mail Order
Melvin D. McCall........... 51 Senior Vice President--Human Resources
Paul B. Poyfair............ 44 Senior Vice President--Services & Administration
Mark R. Walker............. 39 Senior Vice President--General Counsel and Secretary
Anthony J. Cincotta........ 55 Vice President--Merchandising & General Merchandise Manager
Aka A. DeMesa.............. 45 Vice President--Commercial Products
Paul F. Ewert.............. 48 Vice President--Merchandising & General Merchandise Manager
Rick L. Fountain........... 43 Vice President--Technical Services
J. Robert Gary............. 41 Vice President--Finance
Robyn Gatch-Priest......... 46 Vice President, Controller and Assistant Treasurer
Harold D. Greenberg........ 49 Vice President--Inventory Management
James L. Infinger.......... 39 Vice President--Information Systems and Chief
Information Officer
Leslie C. Marshall......... 51 Vice President--Loss Prevention
Barry C. McCook............ 49 Vice President--Operations, East
Jack A. Phelps............. 47 Vice President--Operations, West
Ronald D. Strongwater...... 53 Vice President--Real Estate
Anthony A. Weiss........... 29 Vice President--Direct Sales
</TABLE>
See "Proposal No. 1 - Election of Directors" for biographical
information regarding Mr. Halpin.
Harold F. Compton has served as Executive Vice President and Chief
Operating Officer since January 1995. In July 1996, Mr. Compton was promoted to
the additional position of President--CompUSA Stores. He served as Executive
Vice President--Operations from August 1994 to January 1995. Prior to joining
the Company, Mr. Compton served as President and Chief Operating Officer of
Central Electric Inc. from December 1993 to August 1994. Previously, Mr.
Compton had served as Executive Vice President--Operations & Human Resources of
HomeBase from 1989 to 1993.
J. Samuel Crowley has served as Executive Vice President--Operations
since March 1995. He served as Vice President--Operations, East from April 1994
to March 1995, as Vice President--Retail Sales from July 1993 to April 1994 and
as a Regional Manager from 1989 to July 1993. Prior to joining the Company, Mr.
Crowley was employed by The Federated Group, a chain of consumer electronics
stores, for eight years, serving as Vice President/General Manager from 1987 to
1988 and as Regional Vice President from 1984 to 1987.
Gordon B. Hoffstein has served as Executive Vice President--Mail Order
since May 1996. Mr. Hoffstein also serves as Chairman of the Board and Chief
Executive Officer of PCs Compleat, Inc., which positions he has held since 1991.
16
<PAGE>
Lawrence N. Mondry has served as Executive Vice President--
Merchandising since December 1993. He served as Senior Vice President and
General Merchandise Manager from 1990 to December 1993. Prior to joining the
Company, Mr. Mondry was employed by Highland Superstores, Inc., a chain of
retail appliance and consumer electronics stores, from 1983 to 1990, serving as
Vice President and National Merchandise Manager from 1988 to 1990.
James E. Skinner has served as Executive Vice President, Chief
Financial Officer and Treasurer since September 1994. He served as Senior Vice
President--Finance and Planning and Chief Accounting Officer from December 1993
to September 1994, as Vice President--Finance and Planning and Chief Accounting
Officer from June 1992 to December 1993, and as Vice President and Chief
Accounting Officer from September 1991 to June 1992. Mr. Skinner served as
Assistant Treasurer from October 1992 to September 1994 and has also served as
Assistant Secretary since October 1992. Prior to joining the Company, Mr.
Skinner was a partner of Ernst & Young, an international public accounting firm,
where he had been employed since 1975. Mr. Skinner is a Certified Public
Accountant.
Ronald J. Gilmore has served as Senior Vice President--Marketing &
Advertising since May 1994. He served as Vice President--Advertising & Sales
Promotion from July 1993 to April 1994. Prior to joining the Company, Mr.
Gilmore served as Vice President--Marketing of the Good Guys!, Inc., a consumer
electronics retailer, from April 1993 to July 1993. Mr. Gilmore was employed by
HomeBase from April 1991 to April 1993, serving as Vice President--Marketing &
Advertising. From April 1990 to April 1991, Mr. Gilmore was employed by
Montgomery Ward, Inc. as Media Director, and from 1989 to 1990, he was employed
by Harte Hanks Communications, Inc., serving as Director of Advertising Sales of
the Boston Newspaper Group.
Jack Littman-Quinn has served as Senior Vice President--Mail Order
since May 1996. Mr. Littman-Quinn also serves as President and Chief Operating
Officer of PCs Compleat, Inc., which positions he has held since 1991.
Melvin D. McCall has served as Senior Vice President--Human Resources
since October 1995. He served as Vice President--Human Resources from May 1995
to October 1995. Prior to joining the Company, he was a principal of HR Partners
from 1991 to May 1995. From 1987 to 1991, Mr. McCall served as Senior Vice
President of Human Resources and Administration of Dominick's Finer Foods, a
regional supermarket chain.
Paul B. Poyfair has served as Senior Vice President--Services &
Administration since October 1995. He served as Senior Vice President--Human
Resources, Training and Administration from December 1993 to October 1995 and as
Vice President--Human Resources from September 1993 to December 1993. Prior to
joining the Company, Mr. Poyfair was employed by HomeBase from October 1990 to
September 1993, serving as Vice President--Human Resources and by Kenworth Truck
Company from 1986 to 1990, serving as Director of Human Resources.
Mark R. Walker has served as Senior Vice President--General Counsel
and Secretary since November 1995. He served as Vice President--General Counsel
and Secretary from August 1993 to November 1995. Prior to joining the Company,
he was employed as Vice President, Secretary and General Counsel from May 1990
to February 1993 by AmeriCredit Corp., an indirect consumer finance company.
Mr. Walker practiced general corporate and securities law from 1986 to 1990 with
Mayer, Brown & Platt in Chicago, Illinois.
Anthony Cincotta has served as Vice President--Merchandising & General
Merchandise Manager since February 1996. Prior to joining the Company, Mr.
Cincotta served as President and Chief Executive Officer of Aaron Brothers,
Inc. a [line of business] based in City of Industry, California from __________
1993 to __________ 1995, and prior to that as Senior Vice President--
Merchandising of Handy-Andy Home Improvement, Inc., based in Schaumberg,
Illinois from _________ to ____________ 1993. From 1990 to ___________ 1993, Mr.
Cincotta served as Senior Vice President--Merchandising & Marketing of
Grossman's, Inc.
Aka A. DeMesa has served as Vice President--Commercial Products since
April 1996. From ____________ 1995 to April 1996, he served as Senior
Director--Commercial Products for the Company. Prior to joining the Company,
Mr. DeMesa served as Vice President of Product Line Management & Purchasing of
CompuCom Systems, Inc. a [line of business] from 1992 to 1994. From 1990 to
1992, he was Vice President of Product Management for Computer Factory, Inc., a
CompuCom Systems, Inc. subsidiary.
Paul F. Ewert has served as Vice President--Merchandising & General
Merchandise Manager since February 1996. From January 1994 to February 1996, he
served as Vice President--Merchandising and from 1991 to January 1994, he served
as Senior Director of Hardware Merchandising. Prior to joining the Company, Mr.
Ewert served as Vice President--Fashion Accessories of Broadway Department
Stores, from 1990 to 1991. Mr. Ewert served as General Manager and Regional
Merchandiser of Target, a division of Dayton Hudson Corporation, from 1983 to
1990.
Rick L. Fountain has served as Vice President--Technical Services
since July 1996. From September 1994 to July 1996, he served as Senior Director
- --Technical Services and from February 1990 to September 1994, he served as the
East Coast Regional Manager of the Company. Prior to joining the Company, he was
employed by Federated Electronics Superstores from 1985 to 1990, where he last
held the position of Vice President--Operations.
17
<PAGE>
J. Robert Gary has served as Vice President--Finance since May 1996.
Prior to joinig the Company, Mr. Gary served as Senior Vice President and Chief
Financial Officer for Wireless One, Inc. from September 1995 to May 1996, and
from 1992 to September 1995, he was Executive Vice President, Chief Operating
Officer and Chief Financial Officer for Greentee Software, Inc. From 1990 to
1992, Mr. Gary was employed as Vice President--Business Manager for the Trade
Division of Simon & Schuster.
Robyn Gatch-Priest has served as Vice President since January 1994 and
as Controller since 1991. Prior to joining the Company, she served as Chief
Financial Officer of Hofbauer, Inc., a software development firm, from 1989 to
1991. Ms. Gatch-Priest is a Certified Public Accountant.
Harold D. Greenberg has served as Vice President--Inventory Management
since April 1994. Prior to joining the Company, he was employed by Ames
Department Stores, Inc., a regional chain of discount department stores, where
he served in several positions from 1989 to December 1993, most recently as
Director of Planning and Analysis during 1993.
James L. Infinger has served as Vice President--Information Systems
and Chief Information Officer since June 1994. Prior to joining the Company, he
was employed by Old American Insurance Services, a personal lines insurance
company, as Vice President--Data Processing from February 1992 to June 1994.
From 1989 to February 1992, Mr. Infinger was employed by Siemens Information
Systems, an international software and hardware vendor for the retail industry,
serving as Director of Systems Development for Retail.
Leslie C. Marshall has served as Vice President--Loss Prevention since
July 1996. From 1992 to July 1996, he served as Senior Director--Loss
Prevention of the Company. Prior to joining the Company, Mr. Marshall served as
Director of Risk Management and Loss Prevention for Pic "N" Save Corporation, a
[line of business] from 1986 to 1991.
Barry C. McCook has served as Vice President--Operations, East since
March 1995. He served as Regional Manager of the Southeast from February 1994
to March 1995, as Vice President--Retail Sales from July 1993 to February 1994,
and as Regional Manager from 1990 to July 1993.
Jack A. Phelps has served as Vice President--Operations, West since
February 1994. He served as Senior Vice President of the Company and as
President of the CompUSA West Division from May 1993 to February 1994, as Vice
President--Human Resources from 1990 to May 1993, as Vice President--Operations
from 1989 to 1990 and as a Director of Operations during 1989.
Ronald D. Strongwater has served as Vice President--Real Estate since
April 1994. Prior to joining the Company, he served as President of The RDS
GROUP, a nationwide real estate/management services consulting firm, from 1990
to April 1994. Mr. Strongwater also served as Senior Vice President--Real
Estate of Wickes Companies, Inc. from 1982 to 1990.
Anthony A. Weiss has served as Vice President--Direct Sales since
September 1995. He joined the Company in 1988 and has served in various
positions, most recently as Senior Director, Direct Sales.
18
<PAGE>
EXECUTIVE COMPENSATION
Report of the Compensation Committee on Executive Compensation
OVERVIEW AND PHILOSOPHY
Recommendations regarding base salary and annual incentive
compensation for executive officers are prepared by the Compensation Committee
and presented to the Board of Directors for final approval. The Compensation
Committee, which is composed entirely of nonemployee directors, has access to
independent compensation data and has available to it advice and reports from
outside compensation consultants.
The objectives of the Company's executive compensation program are to:
. Support the achievement of desired Company performance.
. Provide competitive compensation that will attract and retain superior
talent and reward performance.
. Align the executive officers' interests with those of the stockholders
by placing a portion of their pay at risk because it is dependent upon
corporate performance.
To achieve the above objectives, the Company's executive compensation
policies integrate annual base compensation with bonuses based on overall
corporate performance and individual initiatives and performance. The
measurement of corporate performance and the award of bonuses are based
primarily upon the achievement of Company performance goals that are reviewed
and approved annually by the Compensation Committee. Accordingly, in years in
which these performance goals are achieved or exceeded, executive compensation
tends to be higher than in years in which the Company's performance is below
expectations. Annual cash compensation, together with the payment of long-term
equity-based incentive compensation through stock options, restricted stock and
other equity-based awards, is designed to attract and retain qualified
executives and to ensure that such executives have a continuing stake in the
long-term success of the Company.
The executive compensation program is designed to provide an overall level
of compensation that is competitive within the retail industry, as well as with
a broader group of companies of comparable size and complexity. The actual
compensation levels of the Company's executive officers may be greater or less
than average compensation levels in other companies based upon annual and long-
term overall Company performance as well as individual performance. The
Compensation Committee uses its discretion to set executive compensation at
levels warranted in its judgment by external, internal and individual
circumstances.
EXECUTIVE OFFICER COMPENSATION PROGRAM
The Company's executive officer compensation program is comprised of base
salary, annual cash incentive compensation, long-term incentive compensation in
the form of stock options, restricted stock and other equity-based awards, and
various benefits, including a 401(k) plan, deferred compensation plan and an
executive medical plan.
Base Salary
Subject to the provisions of any applicable employment agreements, in
fiscal 1996 base salary levels for the Company's executive officers, including
the Chief Executive Officer, were competitively set relative to companies in the
retail industry and other comparable companies. See "--Employment Agreements."
In determining salaries, the Compensation Committee took into account individual
experience and performance and specific issues particular to the Company,
counseled with an outside compensation consultant, and reviewed independent
compensation data to establish base salary levels that were within the range of
persons holding positions of comparable responsibility at other similarly
situated companies, both regionally and nationally.
Annual Cash Incentive Compensation
The Company maintains annual incentive compensation plans for its executive
officers. For fiscal 1996, incentive bonuses for senior executives were based
on the Company achieving its targeted earnings per share (the "EPS Target").
For example, if the EPS target is achieved, senior executives will receive
awards ranging from 30% to 40% of their respective base salaries (each an
"Award"). If the EPS Target is surpassed, an individual's Award will increase
2% to 5% for each percentage point by which reported earnings per share exceeds
the EPS Target, with no limit. If the EPS Target is not achieved, an
individual's Award will decrease by 6.67% for each percentage point by which
reported earnings per share falls below the EPS Target. Thus, if reported
earnings per share were to fall 15% or more below the EPS Target, all Awards
would be eliminated. Officers other than senior executives also participate in
this plan and are eligible for Awards based on achievement of the EPS Target or
other performance
19
<PAGE>
goals. The Company is obligated to maintain incentive compensation plans during
the terms of the employment agreements described below. These incentive bonuses
are reflected in the Summary Compensation Table below.
Long-Term Incentive Plan
The Long-Term Incentive Plan (formerly the 1990 Stock Option Plan) has been
the Company's long-term incentive plan for executive officers since 1990. The
objectives of the Long-Term Incentive Plan are to align executive and
stockholder long-term interests by creating a strong and direct link between
executive compensation and stockholder return and to enable executives to
develop and maintain a significant long-term ownership position in the Common
Stock. The Company proposes to amend the Long-Term Incentive Plan as discussed
under "Proposal No. 3 - AMENDMENT TO LONG-TERM INCENTIVE PLAN."
CompSavings Plan for Employees of CompUSA Inc.
The CompSavings Plan for Employees of CompUSA Inc. (the "401(k) Plan") is
intended to enable eligible employees of the Company to accumulate capital for
their future economic security, encourage eligible employees to remain in the
service of the Company and provide incentives for employee performance on behalf
of the Company. All employees of the Company are eligible to participate in the
401(k) Plan if they have attained age 21 and completed six months of service
with a minimum of 500 hours worked during that period. An eligible employee may
elect to make pre-tax contributions to the 401(k) Plan through payroll
deductions in an amount up to 15% of such employee's compensation. The 401(k)
Plan provides for Company matching contributions of 25% on the first 5% of an
eligible employee's pre-tax contributions. Company matching contributions are
made one-fourth in cash and the remaining three-fourths in Common Stock. In
addition, the Company may elect to make supplemental matching contributions in
an amount based on the Company's profitability for the fiscal year that ends
within the 401(k) Plan's fiscal year. The 401(k) Plan is a defined contribution
retirement plan within the meaning of Section 401(a) of the Code. Participants
in the 401(k) Plan may direct the investment of their 401(k) Plan accounts among
specified investment funds, including a fund that invests primarily in Common
Stock. The 401(k) Plan is administered by the CompSavings Plan Committee, which
is comprised of James F. Halpin, James E. Skinner and Melvin D. McCall.
CompUSA Inc. Deferred Compensation Plan
The CompUSA Inc. Deferred Compensation Plan (the "SERP") is a supplemental
executive retirement plan maintained in conjunction with the 401(k) Plan that is
intended to provide certain benefits to a select group of the Company's
management and highly compensated employees. The SERP is a nonqualified plan
for federal income tax purposes that allows eligible employees to make pre-tax
contributions through payroll deductions in excess of certain limitations
imposed on pre-tax contributions by these employees to the 401(k) Plan. Eligible
employees who make pre-tax contributions to the SERP are eligible to receive an
allocation of Company matching contributions on the same basis as Company
matching contributions to the 401(k) Plan. The SERP is administered by the
CompSavings Plan Committee.
PCs Compleat Plans
In connection with its acquisition of PCs Compleat, the Company assumed all
outstanding obligations under PCs Compleat's stock option and 401(k) plans. The
Company has reserved 325,413 shares of Common Stock for issuance upon exercise
of options granted under the PCs Compleat stock option plan. Neither the Company
nor PCs Compleat intends to issue any additional stock options or make any
additional contributions under these PCs Compleat plans.
Benefits
The Company provides medical benefits to its executive officers pursuant to
an executive medical plan.
This report of the Compensation Committee on executive compensation is
submitted by the current members of the committee as noted below:
Warren D. Feldberg
Kevin J. Roche
Leonard L. Berry, Ph.D.
20
<PAGE>
Summary Compensation Table
The following contains information concerning the compensation earned by,
awarded to or paid to the Company's Chief Executive Officer and each of the
other four most highly compensated executive officers of the Company
(collectively, the "Named Officers") for services rendered to the Company during
fiscal years 1994 through 1996.
<TABLE>
<CAPTION>
Long-Term Compensation
------------------------------------
Annual Compensation Awards Payouts
-------------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Securities
Restricted Underlying
Other Annual Stock Options/ LTIP All Other
Fiscal Salary Bonus Compensation Award(s) SARS Payouts Compensation
Name and Principal Position Year ($) ($) (1) ($) (2) ($) (3) (#) (4) ($) ($) (2)
- ------------------------------------------------------------------------------- ---------------------------------------------------
James F. Halpin 1996 653,078 1,496,003 -- -- 71,138 -- --
President and Chief 1995 550,000 440,000 -- 232,502 131,246 -- --
Executive Officer 1994 441,667 -- -- -- 80,000 -- --
Harold F. Compton (5) 1996 420,193 842,189 203,195 (6) -- 20,326 -- --
Executive Vice President and 1995 332,292 217,708 327,944 (7) 200,005 140,430 -- --
Chief Operating Officer 1994 -- -- -- -- -- -- --
J. Samuel Crowley 1996 204,404 351,038 -- -- 7,602 -- --
Executive Vice President-- 1995 160,067 85,866 -- 71,033 17,256 -- --
Operations 1994 131,252 -- -- -- 14,584 -- --
Lawrence N. Mondry 1996 273,264 469,924 -- -- 7,602 -- --
Executive Vice President-- 1995 236,905 142,143 -- 71,033 19,256 -- --
Merchandising 1994 214,268 -- -- -- 16,000 -- --
James E. Skinner 1996 220,769 379,500 -- -- 7,602 -- --
Executive Vice President, 1995 189,250 113,550 -- 71,033 23,256 -- --
Chief Financial Officer, 1994 156,083 -- -- -- 12,000 -- --
Treasurer and Assistant
Secretary
</TABLE>
- -----------------------------------
(1) Includes bonuses earned in fiscal 1995 and 1996, respectively, under the
incentive compensation plans of the Named Officers that were or are to be
paid in fiscal 1996 and 1997, respectively.
(2) Except for the compensation for Mr. Compton noted below, no compensation
was paid to any of the Named Officers during fiscal 1994, 1995 or 1996 that
constituted Other Annual Compensation. In fiscal 1994, 1995 and 1996, the
value of perquisites and other personal benefits, if any, did not equal or
exceed the lesser of $50,000 or 10% of the total amount of annual salary
and bonus for any Named Officer.
(3) The value of the restricted stock awards at the end of the last fiscal is
year $641,141, $551,528, $195,878, $195,878 and $195,878 for Messrs.
Halpin, Compton, Crowley, Mondry and Skinner, respectively. The number of
the restricted stock awards held by Messrs. Halpin, Compton, Crowley,
Mondry and Skinner at the end of the last fiscal year is 18,788; 16,162;
5,740; 5,740 and 5,740 shares, respectively. Restrictions lapse after five
years, subject to accelerated vesting if specific performance goals are
met; however, such vesting period will not be less than three years.
(4) Options to acquire shares of Common Stock under the Long-Term Incentive
Plan. Does not include options granted by the Compensation Committee on
August 16, 1996, subject to stockholder approval of Proposal No. 3. See
"Proposal No. 3 -- AMENDMENT TO LONG-TERM INCENTIVE PLAN -- Grant of Awards
Under the Long-Term Incentive Plan."
(5) Mr. Compton joined the Company in August 1994.
(6) Of this amount, $86,628 represents additional reimbursement of relocation
expenses and $98,073 constitutes additional reimbursement of federal income
taxes incurred by Mr. Compton due to his receipt of certain payments in
respect of his relocation in fiscal 1995.
(7) Of this amount, $187,631 constitutes reimbursement of relocation expenses
and $129,313 constitutes reimbursement of federal income taxes incurred by
Mr. Compton due to his receipt of certain payments in respect of his
relocation.
21
<PAGE>
Option Grants During Fiscal 1996
The following table sets forth information regarding stock options granted
to Named Officers during fiscal 1996 pursuant to the Long-Term Incentive Plan.
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------------------------------
Securities % of Total Potential Realized Value at
Underlying Options/SARs Assumed Annual Rates of Stock
Options/SARs Granted to Exercise or Price Appreciation For Option
Granted Employees in Base Price Expiration Term (1)
------------------------------
Name (#)(2)(3)(5) Fiscal Year (2) ($/Share) (4) Date 5% ($) 10% ($)
- ------------------------ ---------------------------------------------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
James F. Halpin 71,138 15.5% $17.69 1/25/06 791,441 2,005,656
Harold F. Compton 20,326 4.4% $17.69 1/25/06 226,136 573,069
J. Samuel Crowley 7,602 1.7% $17.69 1/25/06 84,576 214,330
Lawrence N. Mondry 7,602 1.7% $17.69 1/25/06 84,576 214,330
James E. Skinner 7,602 1.7% $17.69 1/25/06 84,576 214,330
</TABLE>
- -----------------------
(1) The potential realized value portion of the foregoing table illustrates the
value that might be realized upon exercise of the options immediately prior
to the expiration of their term, assuming the specified compounded rates of
appreciation on the Common Stock over the exercise price of the options
(which is equal to the fair market value at the date of grant) over the
term of the options. These amounts do not take into account provisions
providing for termination of options following termination of employment,
nontransferability or vesting over periods of up to three years.
(2) The Company has not granted any stock appreciation rights (SARs).
(3) Options vest with respect to one-third or one-fourth of the shares covered
thereby annually, beginning on the first anniversary of the date of grant.
In the event of a change in control of the Company (as defined in the Long-
Term Incentive Plan), however, any unexercisable portion of the options
will become immediately exercisable.
(4) The exercise price was equal to the fair market value of the Common Stock
on the date of grant.
(5) Does not include options granted by the Compensation Committee on August
16, 1996, subject to stockholder approval of Proposal No. 3. See "Proposal
No. 3 -- AMENDMENT TO LONG-TERM INCENTIVE PLAN -- Grant of Awards Under the
Long-Term
22
<PAGE>
Option Exercises During Fiscal 1996 and Fiscal Year End Option Values
The following table provides information regarding options exercised by the
Named Officers during fiscal 1996 and the number and value of options held at
fiscal year end. The Company does not have any outstanding stock appreciation
rights.
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options/SARs at In-the-Money
Fiscal Year End (#) Options/SARs at Fiscal Year End
Shares Value ($) (2) (3)
Acquired on Realized -------------------------------- --------------------------------
Name Exercise (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James F. Halpin -- -- 289,081 313,303 6,386,387 6,639,560
Harold F. Compton -- -- 46,810 113,946 1,265,618 2,865,344
J. Samuel Crowley -- -- 26,132 34,000 560,252 701,250
Lawrence N. Mondry 65,286 1,063,550 11,986 25,774 305,160 581,867
James E. Skinner -- -- 139,910 63,148 4,284,411 1,752,393
</TABLE>
- -------------------
(1) Value is calculated based on the difference between the option exercise
price and the closing price of the Common Stock on the date of exercise
multiplied by the number of shares to which the exercise relates.
(2) The closing price of the Common Stock on the NYSE on June 29, 1996, was
$34.125 per share. In-the-money option values are calculated on the basis
of the difference between the per share option exercise price and $34.125
multiplied by the number of shares of Common Stock purchasable under the
option.
(3) Does not include options granted by the Compensation Committee on August
16, 1996, subject to stockholder approval of Proposal No. 3. See "Proposal
No. 3 -- AMENDMENT TO LONG-TERM INCENTIVE PLAN -- Grant of Awards Under the
Long-Term Incentive Plan."
Employment Agreements
Halpin Agreement. The Company is a party to an employment agreement with
James F. Halpin (the "Halpin Agreement") dated August 16, 1996, pursuant to
which Mr. Halpin currently serves as President and Chief Executive Officer. The
Halpin Agreement provides for annual salary increases at the sole discretion of
the Compensation Committee of the Board of Directors. Mr. Halpin's current
annual base salary is $700,000. In addition, Mr. Halpin is eligible to receive
in respect of each fiscal year an incentive bonus determined by the management
incentive bonus plan. See "Report of the Compensation Committee on Executive
Compensation -- EXECUTIVE OFFICER COMPENSATION PROGRAM --Annual Cash Incentive
Compensation." The term of employment under the Halpin Agreement will expire on
August 15, 2000. Mr. Halpin has agreed to certain noncompetition restrictions
with the Company during the term of his agreement and for two years thereafter.
The Halpin Agreement provides for certain severance arrangements. See "--
Severance Arrangements."
Compton Agreement. The Company is a party to an employment agreement with
Harold F. Compton (the "Compton Agreement") dated August 16, 1996, pursuant to
which Mr. Compton currently serves as Executive Vice President and Chief
Operating Officer. The Compton Agreement provides for annual salary increases at
the sole discretion of the Compensation Committee of the Board of Directors. Mr.
Compton's current annual base salary is $450,000. In addition, Mr. Compton is
eligible to receive in respect of each fiscal year an incentive bonus determined
by the management incentive bonus plan. See "Report of the Compensation
Committee on Executive Compensation -- EXECUTIVE OFFICER COMPENSATION PROGRAM --
Annual Cash Incentive Compensation." The term of employment under the Compton
Agreement will expire on August 15, 2000. Mr. Compton has agreed to certain
noncompetition restrictions with the Company during the term of his agreement
and for two years thereafter. The Compton Agreement provides for certain
severance arrangements. See "--Severance Arrangements."
Crowley Agreement. The Company is a party to an employment agreement with
J. Samuel Crowley (the "Crowley Agreement") dated May 1, 1996, pursuant to which
Mr. Crowley currently serves as Executive Vice President - Operations. The
Crowley Agreement provides for annual salary increases at the sole discretion of
the Compensation Committee of the Board of Directors. Mr. Crowley's current
annual base salary is $217,000. In addition, Mr. Crowley is eligible to receive
in respect of each fiscal year an incentive bonus determined by the
23
<PAGE>
management incentive bonus plan. See "Report of the Compensation Committee on
Executive Compensation -- EXECUTIVE OFFICER COMPENSATION PROGRAM -- Annual Cash
Incentive Compensation." The term of employment under the Crowley Agreement will
expire on May 1, 1998. Mr. Crowley has agreed to certain noncompetition
restrictions with the Company during the term of his agreement and for two years
thereafter. The Crowley Agreement provides for certain severance arrangements.
See "--Severance Arrangements."
Mondry Agreement. The Company is a party to an employment agreement with
Lawrence N. Mondry (the "Mondry Agreement") dated May 1, 1996, pursuant to which
Mr. Mondry currently serves as Executive Vice President--Merchandising. The
Mondry Agreement provides for annual salary increases at the sole discretion of
the Compensation Committee of the Board of Directors. Mr. Mondry's current
annual base salary is $300,000. In addition, Mr. Mondry is eligible to receive
in respect of each fiscal year an incentive bonus determined by the management
incentive bonus plan. See "Report of the Compensation Committee on Executive
Compensation -- EXECUTIVE OFFICER COMPENSATION PROGRAM -- Annual Cash Incentive
Compensation." The term of employment under the Mondry Agreement will expire on
May 1, 1998. Mr. Mondry has agreed to certain noncompetition restrictions with
the Company during the term of his agreement and for two years thereafter. The
Mondry Agreement provides for certain severance arrangements. See "--Severance
Arrangements."
Skinner Agreement. The Company is a party to an employment agreement with
James E. Skinner (the "Skinner Agreement") dated May 1, 1996, pursuant to which
Mr. Skinner currently serves as Executive Vice President and Chief Financial
Officer. The Skinner Agreement provides for annual salary increases at the sole
discretion of the Compensation Committee of the Board of Directors. Mr.
Skinner's current annual base salary is $240,000. In addition, Mr. Skinner is
eligible to receive in respect of each fiscal year an incentive bonus determined
by the management incentive bonus plan. See "Report of the Compensation
Committee on Executive Compensation -- EXECUTIVE OFFICER COMPENSATION PROGRAM --
Annual Cash Incentive Compensation." The term of employment under the Skinner
Agreement will expire on May 1, 1998. Mr. Skinner has agreed to certain
noncompetition restrictions with the Company during the term of his agreement
and for two years thereafter. The Skinner Agreement provides for certain
severance arrangements. See "--Severance Arrangements."
Severance Arrangements
The Halpin, Compton, Crowley, Mondry and Skinner Agreements provide for
severance payments to such officers upon termination by the Company of
employment other than for "cause," as defined in the agreements. Under the
Halpin Agreement, Mr. Halpin is entitled to receive the amount of his monthly
base salary (at the rate in effect immediately prior to termination of
employment) as severance pay for a period of 48 months following termination of
employment. Under the Compton Agreement, Mr. Compton is entitled to receive the
amount of his monthly base salary (at the rate in effect immediately prior to
termination of employment) as severance pay for a period of 36 months following
termination of employment. Under the Crowley, Mondry and Skinner Agreements,
each is entitled to receive the amount of his monthly base salary (at the rate
in effect immediately prior to termination of employment) as severance pay for a
period of 18 months following termination of employment.
The agreements provide for lump sum severance payments in lieu of the
foregoing payments upon termination of employment in connection with a "change
in control" (as defined in the agreements) of the Company. The Company's
obligation under the agreements applies to specified employment terminations
during the 90 day period preceding a change in control and to any employment
termination (other than one due to death) during the 12 month period following a
change in control. The amount of the lump sum severance payment is equal to 2.99
times the sum of the following: (i) the terminated executive's base pay, (ii)
two times the terminated executive's target bonus for the bonus period in which
the change in control occurs and (iii) the terminated executive's annualized
automobile allowance, all determined at the time of employment termination. The
lump sum payment also includes a payment in lieu of continued group insurance
coverage and an amount necessary to reimburse the terminated executive for
excise taxes, if any, that the executive may be expected to incur as a result of
the severance payments. Under the agreements, the Company is obligated to
reimburse the executive for outplacement consulting service costs incurred
during the two year period following employment termination in connection with a
change in control. The agreements provide that Messrs. Halpin, Compton, Crowley,
Mondry and Skinner, if requested by the Company, will enter into consulting
agreements with the Company for a period of six months following termination of
employment in connection with a change in control. Modified noncompetition
restrictions apply for a period of two years under the agreements in the event
of employment termination in connection with a change in control.
24
<PAGE>
Officers of the Company who are not Named Officers have employment
agreements that provide for severance payments upon termination by the Company
of employment other than for "cause" as defined in the agreements. The
agreements provide for severance payments for periods of 18 months following
termination of employment of Mr. Hoffstein and 12 and 6 months following
termination of employment of Senior Vice Presidents and Vice Presidents,
respectively. The agreements also provide for lump sum severance payments in
lieu of the foregoing payments upon termination of employment in connection with
a change in control of the Company. The change in control severance provisions
of the agreements with officers of the Company who are not Named Officers are
substantially similar to the change in control severance provisions of the Named
Officers; provided that for Vice Presidents, (i) the amount of the lump sum
severance payments will be equal to 1.00 times the sum of the items enumerated
in the preceding paragraph, (ii) consulting agreements are not required and
(iii) modified noncompetition restrictions apply for a period of one year. Key
employees not covered by employment agreements are covered by a plan containing
severance provisions substantially similar to the change in control severance
provisions contained in the agreements of the Named Officers; provided that the
amount of the lump sum severance payments will be equal to .50 times the sum of
the terminated employee's base pay, target bonus and annualized automobile
allowance. Key employees not covered by employment agreements are not required
to enter into consulting agreements following termination of employment in
connection with a change in control and are not subject to noncompetition
restrictions at any time. The plan covers 52 key employees and continues to May
1, 1998; provided that if a change in control of the Company occurs prior to May
1, 1998, the plan will continue for a period of 12 months following the change
in control.
SECTION 16 REQUIREMENTS
Section 16(a) of the Exchange Act requires the Company's directors and
officers, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes of
ownership with the Commission. Based solely on its review of the copies of such
forms received by it, and written representations from certain reporting
persons, the Company believes that during fiscal 1996 all filing requirements
applicable to its directors, officers and greater than 10% beneficial owners
were complied with.
25
<PAGE>
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total stockholder return on Common
Stock with the cumulative total return on the stocks comprising the NYSE
Composite Index (the "NYSE Index") and the stocks comprising the Standard &
Poor's Retail-Specialty Index over the period commencing December 17, 1991 (the
date of the first public trading of the Common Stock) and ending June 29, 1996
(assuming the investment of $100 on December 17, 1991, in Common Stock, the
stocks comprising the NYSE Index and the stocks comprising the Standard & Poor's
Retail-Specialty Index, and reinvestment of all dividends).
The companies whose stocks comprise the Standard & Poor's Retail-Specialty
Index are Circuit City Stores, Inc., Home Depot, Inc., Lowe's Companies, Inc.,
Melville Corporation, Pep Boys--Manny, Moe & Jack, Price/Costco Inc., Tandy
Corporation, Toys R Us, Inc. and Woolworth Corporation.
Comparison Of Cumulative Total Return On Common Stock, Standard & Poor's Retail-
Specialty Index And NYSE Index
<TABLE>
<CAPTION>
- -----------------------------FISCAL YEAR ENDING--------------------------------
COMPANY 1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
COMPUSA INC 100 155.74 212.30 56.56 196.72 447.54
INDUSTRY INDEX 100 101.74 127.05 123.28 121.88 148.91
BROAD MARKET 100 98.25 111.42 115.30 137.64 172.20
</TABLE>
- --------------
(1) Common Stock
(2) Standard & Poor's Retail-Specialty Index
(3) NYSE Index
Proposal No. 4
INDEPENDENT AUDITORS
Upon the recommendation of the Audit Committee and subject to ratification
by the stockholders at the Meeting, the Board of Directors has selected Ernst &
Young LLP to audit the consolidated financial statements of the Company for
fiscal 1997. Ernst & Young LLP has served the Company in this capacity since
1988. Representatives of Ernst & Young LLP are expected to be present at the
Meeting, will have the opportunity to make a statement if they desire to do so,
and will be available to respond to appropriate questions.
26
<PAGE>
STOCKHOLDERS' PROPOSALS
Stockholders may submit proposals on matters appropriate for stockholder
action at subsequent annual meetings of the Company consistent with Rule 14a-8
promulgated under the Exchange Act. For such proposals to be considered in the
Proxy Statement and Proxy relating to the 1997 annual meeting of stockholders,
such proposals must be received by the Company not later than May 30, 1997. Such
proposals should be directed to CompUSA Inc., 14951 North Dallas Parkway,
Dallas, Texas 75240, Attention: Secretary.
OTHER BUSINESS
The Board of Directors knows of no matters other than those described
herein that will be presented for consideration at the Meeting. However, should
any other matters properly come before the Meeting or any adjournments thereof,
it is the intention of the persons named in the Proxy to vote on such matters in
accordance with their best judgment in the interest of the Company.
MISCELLANEOUS
All costs incurred in the solicitation of Proxies will be borne by the
Company. In addition to solicitation by mail, employees of the Company may
solicit Proxies by telephone, or personally, without additional compensation.
The Company may also make arrangements with brokerage houses and other
custodians, nominees and fiduciaries for the forwarding of solicitation
materials to the beneficial owners of shares of Common Stock held of record by
such persons, and the Company may reimburse such brokerage houses and other
custodians, nominees and fiduciaries for their out-of-pocket expenses incurred
in connection with these activities. In addition, Corporate Investor
Communications, Inc. ("CIC") may be retained by the Company to aid in the
solicitation of Proxies. If CIC is so retained, it would solicit Proxies by
mail, telephone, telegraph and personal interview and may request brokerage
houses and other custodians, nominees and fiduciaries to forward soliciting
material to beneficial owners of shares of Common Stock held of record by such
persons. For these services, CIC would be paid fees not to exceed $5,000 and
would be reimbursed for its expenses.
ANNUAL REPORT
Incorporated by Reference
Accompanying this Proxy Statement is a copy of the Company's Annual Report
for the fiscal year ended June 29, 1996. Reference is made to the Consolidated
Financial Statements and Selected Financial Data and Management's Discussion and
Analysis of Financial Condition and Results of Operations included in the Annual
Report, all of which are incorporated by reference into this Proxy Statement.
By Order of the Board of Directors
Mark R. Walker
Senior Vice President--General
Counsel and Secretary
Dallas, Texas
September 27, 1996
27
<PAGE>
AS RESTATED AND AMENDED
August 16, 1996
COMPUSA INC.
LONG-TERM INCENTIVE PLAN
ARTICLE I
DEFINITIONS
As used in this Plan, the following terms will have the following
meanings:
1.1. Annual Stockholders Meeting has the meaning ascribed to it in
Section 4.2.
1.2. Automatic Grant Date has the meanings ascribed to it in
Sections 4.2(a) and 4.2(b), as applicable.
1.3. Award means a grant of Options under Article IV of the Plan, a
Restricted Stock Award under Article V of the Plan, a Stock Appreciation Rights
Award under Article VI of the Plan, a Performance Share Award under Article VII
of the Plan or a Stock Unit Award under Article VIII of the Plan.
1.4. Award Agreement means an Option Agreement, Restricted Stock
Agreement, Stock Appreciation Rights Agreement, Performance Share Agreement or
Stock Unit Agreement.
1.5. Board means the Company's Board of Directors.
1.6. Cause means an act or acts engaged in by a Participant
involving (i) a felony, (ii) fraud, (iii) embezzlement, (iv) gross or willful
neglect of duty or misconduct, (v) the commission of any act that causes or
reasonably may be expected to cause substantial injury to the Company.
1.7. Code means the federal Internal Revenue Code of 1986, as
amended.
1.8. Committee means a committee comprised of two or more Directors
of the Company, appointed by the Board, the members of which satisfy the
requirements for eligibility set forth in Section 3.1 and which is responsible
for the administration of the Plan; provided that the full Board may at any
time, in its sole discretion, exercise any or all functions and authority of the
Committee.
1.9. Commission means the United States Securities and Exchange
Commission.
1.10 Company means CompUSA Inc., a Delaware corporation.
1.11. Director means a member of the Board of Directors of the
Company or of a subsidiary thereof.
1.12. Disability of a Participant will be deemed to occur whenever a
Participant is rendered unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment that can be
expected to result in death or that has lasted or can be expected to last for a
continuing period of not less than 12 months. In the case of any dispute as to
whether or not a Participant is disabled within the meaning of this Section, the
determination of disability will
<PAGE>
be made by a licensed physician selected by the Board and acceptable to the
Participant, which physician's decision will be final and binding.
1.13. Employee means any employee of the Company or of any of its
subsidiaries, as defined under Section 3401(c) of the Code and the regulations
promulgated thereunder.
1.14. Employment Agreement means an agreement, if any, between the
Company or any subsidiary thereof and a Participant, setting forth the terms and
conditions of the Participant's employment by the Company or such subsidiary.
1.15. ERISA means the Employee Retirement Income Security Act of
1974, as amended.
1.16. Exchange Act means the Securities Exchange Act of 1934, as
amended.
1.17. Grant Date means, with respect to an Option, the date on which
an Option is granted, as specified in Section 4.2 or, as applicable, in Section
4.3.
1.18. Incentive Option means an Option that by its terms is intended
to be treated as an "incentive stock option" within the meaning of Section 422
of the Code.
1.19. Market Value means, on any date, the closing price per share of
the Stock on the New York Stock Exchange on such date.
1.20. Minimum Performance Goal means the minimum objective(s)
established by the Committee that must be satisfied before any portion of a
Performance Share Award is earned. The Minimum Performance Goal may, in the sole
discretion of the Committee, be the same as or less than the Performance Goal.
1.21. Nondiscretionary Option means a Nonstatutory Option granted to
a Nonemployee Director under Section 4.2.
1.22. Nonemployee Director means a member of the Board who is not an
Employee.
1.23. Nonstatutory Option means any Option that is not an Incentive
Option.
1.24. Option means an option to purchase Stock granted under the
Plan.
1.25. Option Agreement means a written agreement between the Company
and a Participant setting forth the terms and conditions of an Option.
1.26. Option Price means the price to be paid by a Participant for a
share of Stock upon exercise of an Option.
1.27. Participant means a person to whom an Award has been granted.
-2-
<PAGE>
1.28. Performance Cycle or Cycle means a period of years selected by
the Committee during which the performance of the Company and/or the Participant
is measured for the purpose of determining the extent to which Performance
Shares that have been contingently awarded with respect to such Cycle are
earned.
1.29. Performance Goal means the objective(s) established by the
Committee at the time each Performance Share Award is granted with respect to
the related Performance Cycle for the purpose of determining the extent to which
Performance Shares that have been contingently awarded for such Cycle are
earned.
1.30. Performance Share or Performance Share Award means an Award
granted pursuant to Article VII expressed as a share of Stock.
1.31. Performance Share Agreement means a written agreement between
the Company and a Participant setting forth the terms and conditions of a
Performance Share Award.
1.32. Plan means this Long-Term Incentive Plan of the Company, as
amended from time to time.
1.33. Restricted Stock or Restricted Stock Award means an award of
Stock granted under Article V.
1.34. Restricted Stock Agreement means a written agreement between
the Company and a Participant with respect to a Restricted Stock Award.
1.35. Retirement means resignation by the Participant on or after the
date on which the Participant has served the Company or one or more subsidiaries
thereof for at least five (5) years in the aggregate.
1.36. Rule 16b-3 means Rule 16b-3 or its successors promulgated under
the Exchange Act.
1.37. Securities Act means the Securities Act of 1933, as amended.
1.38. Section 162(m) means Section 162(m) of the Code and the
regulations promulgated thereunder.
1.39. Stock means Common Stock, no par value, of the Company or, in
the event the outstanding shares of such stock are hereafter changed into or
exchanged for shares of a different security of the Company or some other
corporation, such other security.
1.40. Stock Appreciation Right or Stock Appreciation Rights Award
means an Award granted under Article VI.
-3-
<PAGE>
1.41. Stock Appreciation Rights Agreement means an agreement between
the Company and a Participant setting forth the terms and conditions of a Stock
Appreciation Rights Award.
1.42. Stock Unit or Stock Unit Award means an award of Stock or units
granted under Article VIII.
1.43. Stock Unit Agreement means a written agreement between the
Company and a Participant setting forth the terms and conditions of a Stock Unit
Award.
1.44. Ten Percent Owner means a person who owns, or is deemed within
the meaning of Section 422(b)(6) of the Code to own, stock possessing more than
10% of the total combined voting power of all classes of stock of the Company
(or its parent or subsidiary corporations, within the meaning of Sections 424(e)
and 424(f) of the Code). Whether a person is a Ten Percent Owner will be
determined with respect to each Option based on the facts existing immediately
prior to the Grant Date of such Option.
1.45. Vesting Year for any portion of any Incentive Option means the
calendar year in which that portion of the Option first becomes exercisable.
ARTICLE II
GENERAL
2.1. Purpose. This Plan is intended to encourage ownership of Stock
by Participants and to provide additional incentives for them to promote the
success of the Company's business. The Company intends that Incentive Options
granted under Article IV will qualify as "incentive stock options" within the
meaning of Section 422 of the Code.
2.2. Term of the Plan. Awards may be granted not later than May 8,
2005.
2.3. Stock Subject to the Plan. Subject to the provisions of Section
9.2 and subject to any additional restrictions elsewhere in the Plan, the
maximum aggregate number of shares of Stock that may be issued from time to time
pursuant to the Plan may not exceed 8,394,368 shares. The maximum aggregate
number of shares of Stock with respect to which Awards may be granted to any
Participant during the term of the Plan may not exceed 50% of the total number
of shares of Stock that may be issued from time to time under the Plan. Shares
to be issued pursuant to Awards may be either authorized but unissued shares or
shares held by the Company in its treasury. If shares of Stock are reacquired by
the Company pursuant to the provisions of the Plan or if Options expire or
terminate for any reason without having been exercised in full, the reacquired
shares and/or the shares not purchased will again be available for issuance
under the Plan to the extent permitted by law.
-4-
<PAGE>
2.4. Eligibility. Any full-time or part-time Employee, Director,
consultant or advisor of one or more of the Company or any subsidiary thereof
will be eligible to be a Participant; provided that Incentive Options may be
granted only to Employees.
2.5. Acceleration in Certain Events. The Committee may accelerate
the exercisability of any Option or Stock Appreciation Right or waive any
restrictions and/or Performance Goals with respect to shares of Restricted
Stock, Performance Shares or Stock Units in whole or in part at any time. In
addition, notwithstanding the provisions of any Award Agreement, the following
provisions will apply:
(i) Mergers and Reorganizations. In the event the Company or
its stockholders enter into an agreement to dispose of all or
substantially all of the assets of the Company by means of a sale,
merger or other reorganization, liquidation or otherwise in a
transaction in which the Company is not the surviving corporation, any
Option or Stock Appreciation Right will become immediately exercisable
with respect to the full number of shares subject to that Option or
Stock Appreciation Right and all restrictions and/or Performance Goals
will be deemed lapsed, waived and/or satisfied (as applicable) with
respect to any Restricted Stock Award, Performance Share Award or
Stock Unit Award; provided that no Option or Stock Appreciation Right
will be immediately exercisable and no restrictions or Performance
Goals will be deemed lapsed, waived and/or satisfied with respect to a
Restricted Stock Award, Performance Share Award or Stock Unit Award
under this Section 2.5 on account of any agreement of merger or other
reorganization when the stockholders of the Company immediately before
the consummation of the transaction will own at least 50% of the total
combined voting power of all classes of stock entitled to vote of the
surviving entity immediately after the consummation of the
transaction.
(ii) Change in Control. All Options and Stock Appreciation
Rights will become immediately exercisable and all restrictions and/or
Performance Goals related to any Restricted Stock Award, Performance
Share Award or Stock Unit Award will be deemed lapsed, waived and/or
satisfied (as applicable) in the event any Person (other than a Person
meeting the requirements of clauses (i) and (ii) of Rule 13d-1(b)(1)
or its successors promulgated under the Exchange Act) meets the
requirements for becoming an Acquiring Person, whether or not a
Distribution Date occurs or the Rights are redeemed by the Company, as
those terms are defined in the Rights Agreement dated as of April 29,
1994 between the Company and Bank One, Texas, N.A., as Rights Agent
(American Stock Transfer & Trust Company became successor Rights Agent
August 19, 1996).
2.6. Restrictions on Issuance of Shares. Notwithstanding any other
provision of the Plan, if at any time in the reasonable opinion of the Company
the issuance of shares of Stock pursuant to an Award may constitute a violation
of law, then the Company may delay such issuance and the delivery of a
certificate for such shares of Stock until (i) approval has been obtained from
such governmental agencies, other than the Commission, as may be required under
any applicable law, rule or regulation and (ii) in the case where such issuance
would constitute a violation of a law
-5-
<PAGE>
administered by or a regulation of the Commission, one of the following
conditions has been satisfied:
(1) the issuance of shares of Stock is effectively registered
under the Securities Act; or
(2) a no-action letter in form and substance reasonably
satisfactory to the Company with respect to the issuance of such
shares has been obtained by the Company from the staff of the
Commission.
The Company will make all reasonable efforts to bring about the occurrence of
such events.
2.7. Purchase for Investment; Subsequent Registration.
(a) Unless the issuance of shares of Stock to be issued
pursuant to an Award has been effectively registered under the
Securities Act, the Company will be under no obligation to issue any
shares of Stock pursuant to an Award unless the Participant gives a
written representation to the Company that is satisfactory in form and
substance to its counsel and upon which the Company may reasonably
rely, that he is acquiring the shares of Stock issued pursuant to such
Award as an investment and not with a view to, or for sale in
connection with, the distribution of any such shares of Stock.
(b) If required in the opinion of counsel, each certificate
representing shares of Stock issued pursuant to an Award will bear a
reference to the investment representation made in accordance with
this Section 2.7 and to the fact that no registration statement has
been filed with the Commission in respect of the issuance of such
shares of Stock.
(c) If the Company deems it necessary or desirable to
register under the Securities Act or other applicable statutes the
issuance of any shares of Stock with respect to which an Award has
been granted, or to qualify the issuance of any such shares for
exemption from the Securities Act or other applicable statutes, then
the Company will take such action at its own expense. The Company may
require from each Participant such information in writing for use in
any registration statement, prospectus, preliminary prospectus or
offering circular as is reasonably necessary for such purpose and may
require reasonable indemnity to the Company and its Directors and
officers from such holder against all losses, claims, damages and
liabilities arising from such use of the information so furnished and
caused by any untrue statement of any material fact therein or caused
by the omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made.
2.8. Withholding; Notice of Disposition of Stock Prior to Expiration
of Specified Holding Period.
-6-
<PAGE>
(a) Whenever shares of Stock are to be issued pursuant to an
Award, the Company will have the right to require the Participant to
remit to the Company an amount sufficient to satisfy federal, state,
local or other withholding tax requirements (whether so required to
secure for the Company an otherwise available tax deduction or
otherwise) prior to the delivery of any certificate or certificates
for such shares of Stock.
(b) When a Participant is required to pay to the Company an
amount required to be withheld under applicable income tax laws in
connection with an Award, such payment may be made, in whole or in
part, (i) in cash, (ii) by check, (iii) if permitted by the Committee,
by delivery to the Company of shares of Stock already owned by the
Participant having a Market Value on the date on which the amount of
tax to be withheld is determined (the "Tax Date") equal to the amount
required to be withheld, (iv) with respect to Options, through the
withholding by the Company ("Company Withholding") of a portion of the
shares of Stock acquired upon the exercise of the Options, or (v) in
any other form of valid consideration, as permitted by the Committee
in its sole discretion.
(c) The Company may require as a condition to the issuance
of shares of Stock upon exercise of an Incentive Option that the party
exercising such Option give a written representation to the Company,
which is satisfactory in form and substance to its counsel and upon
which the Company may reasonably rely, that he will report to the
Company any disposition of such shares prior to the expiration of the
holding periods specified by Section 422(a)(1) of the Code. If and to
the extent that the realization of income in such a disposition
imposes upon the Company federal, state, local or other withholding
tax requirements, or any such withholding is required to secure for
the Company an otherwise available tax deduction, the Company will
have the right to require that the recipient remit to the Company an
amount sufficient to satisfy those requirements; and the Company may
require as a condition to the issuance of shares of Stock upon
exercise of an Incentive Option that the party exercising such option
agree, in writing in a form satisfactory to the Company, to make such
a remittance.
2.9. Reservation of Stock. The Company must at all times during the
term of the Plan reserve or otherwise keep available such number of shares of
Stock as will be sufficient to satisfy the requirements of the Plan and will pay
all fees and expenses necessarily incurred by the Company in connection
therewith.
2.10. No Special Employment or Other Rights. Nothing contained in the
Plan or in any Award will confer upon any Participant any right with respect to
the continuation of his employment or service with the Company (or any
subsidiary), or interfere in any way with the right of the Company (or any
subsidiary), subject to the terms of any separate employment or consulting
agreement or provision of law or certificate of incorporation or bylaws to the
contrary, at any time to terminate such employment or consulting agreement or to
increase or decrease the compensation of the Participant from the rate in
existence at the time of the grant of an Award.
-7-
<PAGE>
ARTICLE III
ADMINISTRATION
3.1. Administration. Subject to the provisions of the Plan, the
Plan will be administered by the Committee. Each member of the Committee must
qualify as a "Non-Employee Director" within the meaning of Rule 16b-3. In
addition, with respect to any Award that the Company intends to qualify for the
exception for qualified performance-based compensation set forth in Section
162(m), such Award must be granted solely by "outside directors" within the
meaning of such section. The Committee will have sole discretion and authority
to determine from time to time the Participants to whom Awards will be granted
and the number of shares of Stock subject to each Award, to interpret the Plan,
to prescribe, amend and rescind rules and regulations relating to it, to
determine and interpret the terms and provisions of each Award Agreement or
waive any conditions, restrictions and/ or Performance Goals applicable to any
Option or Stock Appreciation Right (or the exercise thereof) or to any shares of
Restricted Stock, Performance Shares or Stock Units, and to make all other
determinations necessary or advisable for the administration of the Plan. In
making such determinations, the Committee may take into account the nature of
the services rendered by the respective Participants, their present and
potential contributions to the success of the Company and its subsidiaries, and
such other factors as the Committee in its sole discretion deems relevant. The
Committee's determinations on the matters referred to in this Section 3.1 will
be conclusive.
ARTICLE IV
OPTIONS
4.1 Grant of Options. The Committee may, in its sole discretion,
grant Options in accordance with the terms and conditions set forth in the Plan.
Each Option Agreement may contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as are determined by the Committee in
its sole discretion.
4.2. Automatic Grants of Options to Nonemployee Directors.
(a) Directors Elected or Re-Elected at Annual Stockholders
Meeting. Each Nonemployee Director who is elected or re-elected to the
Board at an annual stockholders meeting or special meeting in lieu of
an annual meeting (an "Annual Stockholders Meeting"), or continues to
serve as a Nonemployee Director after such Annual Stockholders
Meeting, is hereby granted, on the date of such meeting (as used in or
with reference to this Section 4.2(a), an "Automatic Grant Date"), a
Nonstatutory Option to purchase that whole number of shares (without
any fraction) of Stock calculated by dividing $50,000 by the Market
Value on the Automatic Grant Date. Each Option granted to a
Participant under this Section 4.2(a) will (i) have an Option Price
equal to 100% of the Market Value of the Stock on the Automatic Grant
Date, (ii) terminate on the tenth anniversary of the Automatic Grant
Date (subject to the provisions of Section 16(b) of the Exchange Act)
and (iii) become exercisable in three equal installments as follows:
33 1/3% on the first anniversary of the Automatic Grant Date, an
additional 33 1/3% on the second anniversary of the Automatic Grant
Date, and an additional 33 1/3% on the third anniversary of the
Automatic Grant Date.
(b) Directors Elected at Other Times. Each Nonemployee Director
who is elected to the Board on a date other than the day of an Annual
Stockholders Meeting (as used in or with reference to this Section
4.2(b), an "Automatic Grant Date") is hereby granted, on the Automatic
Grant Date, an Option to purchase the number of shares of Stock set
forth below, which Option will become exercisable if the Participant
remains a Nonemployee Director as set forth below:
(1) If such individual is elected after the day of an Annual
Stockholders Meeting but on or before December 31, he is hereby
granted an Option to purchase that whole number of shares (without any
fraction) of Stock calculated by dividing $37,500 by the Market Value
on the Automatic Grant Date, which Option will become exercisable in
three equal installments as follows: 33 1/3% on the first anniversary
of the Automatic Grant Date, an additional 33 1/3% on the second
anniversary of the Automatic Grant Date, and an additional 33 1/3% on
the third anniversary of the Automatic Grant Date.
(2) If such individual is elected on or after January 1 but on
or before March 31, he is hereby granted an Option to purchase that
whole number of shares (without any fraction) of Stock calculated by
dividing $25,000 by the Market Value on the Automatic Grant Date,
which Option will become exercisable in three equal installments as
follows: 33 1/3% on the first anniversary of the Automatic Grant Date,
an additional 33 1/3% on the second anniversary of the Automatic Grant
Date, and an additional 33 1/3% on the third anniversary of the
Automatic Grant Date.
(3) If such individual is elected on or after April 1 but on or
before June 30, he is hereby granted an Option to purchase that whole
number of shares (without any fraction) of Stock calculated by
dividing $12,500 by the Market Value on the Automatic Grant Date,
which Option will become exercisable in three equal installments as
follows: 33 1/3% on the first anniversary of the Automatic Grant Date,
an additional 33 1/3% on the second anniversary of the Automatic Grant
Date, and an additional 33 1/3% on the third anniversary of the
Automatic Grant Date.
Each Option granted to a Nonemployee Director under Section 4.2(b) will have an
Option Price equal to 100% of the Market Value on the Automatic Grant Date and
will terminate on the tenth anniversary of the Automatic Grant Date.
4.3. Time of Granting Options. Except as provided in Sections 4.2(a)
and 4.2(b), the granting of an Option will take place at the time specified in
the Option Agreement.
4.4. Option Price. The Option Price under each Incentive Option may
not be less than 100% of the Market Value on the Grant Date, or less than 110%
of the Market Value on the Grant Date if the Participant is a Ten Percent Owner.
The Option Price under each Nonstatutory Option will not be so limited solely by
reason of this Section 4.4.
4.5. Option Period. No Incentive Option may be exercised later than
the tenth anniversary of the Grant Date, or, if the Participant is a Ten Percent
Owner, not later than the fifth anniversary of the Grant Date. The option period
under each Nonstatutory Option will not be so limited solely by reason of this
Section 4.5. Options may become exercisable in such installments, cumulative or
noncumulative, as the Committee may determine.
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4.6. Limit on Incentive Option Characterization. To the extent any
Option fails to qualify as an Incentive Option, such Option will be considered a
Nonstatutory Option.
4.7. Exercise of Options.
(a) Method of Exercise. Each Option will be exercisable in
accordance with the terms of the Option Agreement pursuant to which
the Option was granted. No Option may be exercised for a fraction of a
share of Stock.
(b) Payment of Purchase Price. The purchase price of any
shares of Stock purchased must be paid at the time of exercise of the
Option either (i) in cash, (ii) by certified or cashier's check, (iii)
by shares of Stock, if permitted by the Committee, (iv) if then
permitted under the laws of the State of Delaware and approved by the
Committee, by a promissory note for the total purchase price of the
shares of Stock being purchased, which note will contain such terms
and provisions as the Committee may approve, including without
limitation the right to repay the note partially or wholly with Stock,
(v) by delivery of a copy of irrevocable instructions from the
Participant to a broker or dealer, reasonably acceptable to the
Company, to sell certain of the shares of Stock purchased upon
exercise of the Option or to pledge them as collateral for a loan and
promptly deliver to the Company the amount of sale or loan proceeds
necessary to pay such purchase price or (vi) in any other form of
valid consideration, as permitted by the Committee in its sole
discretion. If any portion of the purchase price or a note given at
the time of exercise is paid in shares of Stock, those shares will be
valued at the then Market Value.
4.8. Termination of Employment or Association with the Company.
(a) Termination of Employment with the Company. If a
Participant ceases to be employed by the Company or any subsidiary
thereof because the Participant is terminated for Cause, any Options
held by that Participant will automatically expire. If a Participant's
employment is terminated for any reason other than for Cause or due to
death, such Participant's Option will be exercisable (to the extent
exercisable on the date of termination of the Participant's employment
or, if the Committee, in its sole discretion, has accelerated the
vesting of such Option, to the extent exercisable following such
acceleration) at any time within 30 days after he ceases to be an
Employee (or within (i) three months after termination if on account
of Retirement or (ii) 12 months after termination if on account of
Disability), unless by its terms it expires earlier or unless, with
respect to any Nonstatutory Option, the Committee agrees, in its sole
discretion, to extend the term of such Option; provided that the term
of any such Option will not be extended beyond its original term. If a
Participant dies while employed by the Company or any subsidiary
thereof, or within three months after ceasing to be an Employee, such
Participant's Option will be exercisable (to the extent exercisable on
the date of death, or, if the Committee, in its sole discretion, has
accelerated the vesting of such Option, to the extent exercisable
following such acceleration) at any time within 12 months after the
date of death, unless by its terms it expires earlier or unless, with
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respect to any Nonstatutory Option, the Committee agrees, in its sole
discretion, to extend the term of such Option; provided that the term
of any such Option will not be extended beyond its original term.
Military or sick leave will not be deemed a termination of employment,
provided that it does not exceed the longer of three months or the
period during which the absent Participant's reemployment rights, if
any, are guaranteed by statute or by contract. The foregoing is
qualified by the following: (i) if any facts that would constitute
Cause for termination of employment of a Participant are brought to
the attention of the Committee after the Participant's employment with
the Company or any subsidiary thereof has ended, any Options then held
by the Participant may be immediately terminated by the Committee and
(ii) if a Participant is an Employee employed pursuant to a written
Employment Agreement, the Participant's employment with the Company
will be deemed terminated for "cause" for purposes of the Plan only if
the Participant's employment is considered under the circumstances to
have been terminated for cause for purposes of such agreement.
(b) Termination of Association with the Company. If (i) a
Nonemployee Director is removed for Cause or (ii) a consultant or
advisor or other Participant who is not an Employee has his
relationship with the Company terminated for Cause, any Options held
by any such Participant will automatically expire. In all other cases,
any Options held by such a Participant, to the extent exercisable on
the date of termination of the Participant's association with the
Company, will remain exercisable and will expire in accordance with
the terms of the applicable Option Agreement; provided that (i) if any
facts that would constitute cause for removal or termination of a
Participant who is a Nonemployee Director, consultant or advisor or
other person who is not an Employee are brought to the attention of
the Committee after such Participant's association with the Company
has ended, any Options held by such Participant may be immediately
terminated by the Committee, and (ii) if such Participant has been
retained pursuant to a written agreement, the Participant's
relationship with the Company will be deemed terminated for "cause"
for purposes of the Plan only if the Participant's association with
the Company is considered under the circumstances to have been
terminated for cause for purposes of such written agreement.
4.9. Transferability of Options.
(a) Incentive Options. Incentive Options may not be
transferred or assigned other than by will or the laws of descent and
distribution and may be exercised during the lifetime of the
Participant only by the Participant or by the Participant's legally
authorized representative, and each Option Agreement in respect of an
Incentive Option will so provide. The designation by a Participant of
a beneficiary will not constitute a transfer of the Option.
(b) Nonstatutory Options. With respect to Nonstatutory
Options, the Committee may, in its sole discretion, provide in any
Option Agreement (or in an amendment to any existing Option Agreement)
such provisions regarding transferability of the Nonstatutory Options
as the Committee, in its sole discretion, deems appropriate.
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4.10. Limitation of Rights in Stock. A Participant will not be
deemed for any purpose to be a stockholder of the Company with respect to any of
the shares of Stock covered by an Option, except to the extent the Option has
been exercised with respect thereto and, in addition, a certificate has been
issued therefor and delivered to the Participant or his agent. Any Stock issued
pursuant to the Option will be subject to all restrictions upon the transfer
thereof that may be now or hereafter imposed by the Certificate of Incorporation
of the Company (as amended or restated from time to time), the Bylaws of the
Company (as amended or restated from time to time) and any applicable Employment
Agreement.
ARTICLE V
RESTRICTED STOCK
5.1 Grant of Restricted Stock Awards. The Committee may, in its
sole discretion, grant Restricted Stock Awards in accordance with the terms and
conditions set forth in the Plan. Each Restricted Stock Agreement may contain
such additional terms and conditions, not inconsistent with the terms of the
Plan, as are determined by the Committee in its sole discretion.
5.2. Terms and Conditions. Each Restricted Stock Award confers upon
the recipient thereof the right to receive a specified number of shares of Stock
in accordance with the terms and conditions of each Participant's Restricted
Stock Agreement. The general terms and conditions of a Restricted Stock Award
will be as follows:
(a) Any shares of Stock awarded hereunder to a Participant
will be restricted for a period of time to be determined by the
Committee for each Participant at the time of the Award, which period
shall be not more than ten years. The restrictions will prohibit the
sale, assignment, transfer, pledge or other encumbrance of such
shares, and will provide for possible reversion thereof to the Company
in accordance with subparagraph (b) during the period of restriction.
(b) All Restricted Stock awarded under this Plan to a
Participant will be forfeited and returned to the Company in the event
the Participant's employment or service with the Company or a
subsidiary thereof is terminated prior to the expiration of the period
of restriction, unless the Participant's termination of employment or
service is due to his death, Disability or Retirement or unless the
Committee, in its sole discretion, waives the restrictions established
in accordance with subparagraph (a) with respect to any or all of the
shares of Restricted Stock.
(c) In the event of a Participant's death or Disability, the
restrictions established in accordance with subparagraph (a) will
lapse with respect to all Restricted Stock awarded to the Participant
prior to any such event, and the shares of Stock involved will cease
to be Restricted Stock and will no longer be subject to forfeiture to
the Company pursuant to subparagraph (b).
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(d) In the event of a Participant's Retirement, the
restrictions established in accordance with subparagraph (a) will
continue to apply unless the Committee in its sole discretion shortens
the restriction period.
(e) Stock certificates issued with respect to Restricted
Stock Awards will be registered in the name of the Participant, but
will be delivered by him to the Company together with a stock power
endorsed in blank. Each such certificate will bear the following
legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
FORFEITURE, RESTRICTIONS ON TRANSFER AND CERTAIN OTHER TERMS
AND CONDITIONS SET FORTH IN THE COMPUSA INC. LONG-TERM
INCENTIVE PLAN AND THE AGREEMENT BETWEEN THE REGISTERED OWNER
OF THE SHARES REPRESENTED BY THIS CERTIFICATE AND COMPUSA INC.
ENTERED INTO PURSUANT TO SUCH PLAN."
From the time of grant of the Restricted Stock Award, the
Participant will be entitled to exercise all rights (including
dividend and voting rights) with respect to the shares represented by
such certificate, subject to forfeiture of such voting rights and the
Stock as provided in subparagraph (b).
(f) Upon the lapse of a restriction period as determined
pursuant to subparagraph (a), the Company will return the stock
certificates representing the shares with respect to which the
restriction has lapsed to the Participant or his legal representative,
and pursuant to the instruction of the Participant or his legal
representative will issue a certificate for such shares that does not
bear the legend set forth in subparagraph (e).
(g) Any other securities or assets (other than ordinary cash
dividends) that are received by a Participant with respect to
Restricted Stock awarded to him, which is still subject to
restrictions established in accordance with subparagraph (a), will be
subject to the same restrictions and will be delivered by the
Participant to the Company as provided in subparagraph (e).
5.3. Notice to Company of Section 83(b) Election. Any Participant
who exercises an election under Section 83(b) of the Code to have his receipt of
Shares of Restricted Stock taxed currently, without regard to restrictions, must
give notice to the Company of such election immediately upon making such
election. Such an election must be made within 30 days after the effective date
of issuance and cannot be revoked except with the consent of the Internal
Revenue Service.
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ARTICLE VI
STOCK APPRECIATION RIGHTS
6.1. Grant of Stock Appreciation Rights. The Committee may, in its
sole discretion, grant Stock Appreciation Rights in accordance with the terms
and conditions set forth in the Plan. Each Stock Appreciation Rights Agreement
may contain such additional terms and conditions, not inconsistent with the
terms of the Plan, as are determined by the Committee in its sole discretion.
6.2. Terms and Conditions. A Stock Appreciation Right will entitle
a Participant to receive an amount equal to (or if the Committee shall so
determine at the time of grant, less than) the excess of the Market Value on the
date of exercise over the Market Value on the date of grant of such right (or
such other price as is set by the Committee), multiplied by the number of shares
of Stock with respect to which the Stock Appreciation Right shall have been
exercised.
6.3. Form of Grant. A Stock Appreciation Right may be granted in
combination with, in addition to, or completely independent of, an Option or any
other Award.
6.4. Form of Payment. Settlement of a Stock Appreciation Right may
be made (i) in cash, (ii) by certified or cashier's check, (iii) if permitted by
the Committee, in shares of Stock or (iv) in any other form of valid
consideration, as determined by the Committee in its sole discretion. However,
any Stock Appreciation Right exercised upon or subsequent to the occurrence of
an event described in Sections 2.5(i) or 2.5(ii) must be paid in cash.
6.5. Exercise of Stock Appreciation Rights; Effects on Options and
Vice-Versa. Each Stock Appreciation Right will be exercisable in accordance
with the terms of the Stock Appreciation Rights Agreement pursuant to which the
Stock Appreciation Right is granted. Whenever a Stock Appreciation Right is
granted in relation to an Option and the exercise of one affects the right to
exercise the other, the number of shares of Stock available under the Option to
which the Stock Appreciation Right relates will decrease by a number equal to
the number of shares of Stock for which the Stock Appreciation Right is
exercised. Upon the exercise of an Option, any related Stock Appreciation Right
will terminate as to any number of shares of Stock subject to such Stock
Appreciation Right that exceeds the total number of shares of Stock for which
the Option remains unexercised.
6.6. Transferability of Stock Appreciation Rights. Subject to
Section 6.8, the Committee may, in its sole discretion, provide in any Stock
Appreciation Rights Agreement (or in an amendment to any existing Stock
Appreciation Rights Agreement) such provisions regarding transferability of the
Stock Appreciation Rights as the Committee, in its sole discretion, deems
appropriate.
6.7. Termination of Employment or Service. Whenever a Stock
Appreciation Right is granted in relation to an Option and the exercise of one
affects the right to exercise the other, in the event of the termination of the
Participant's employment or service with the Company, the Stock
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Appreciation Right may be exercised only during the period, if any, within which
the Option to which it relates may be exercised. If a Stock Appreciation Right
is granted independently of an Option under the Plan, the following provisions
will apply:
(a) Termination of Employment with the Company. If a
Participant ceases to be employed by the Company or any subsidiary
thereof because the Participant is terminated for Cause, any Stock
Appreciation Rights held by that Participant will automatically
expire. If a Participant's employment is terminated for any reason
other than Cause or due to death, such Participant's Stock
Appreciation Right will be exercisable (to the extent exercisable on
the date of termination of the Participant's employment or, if the
Committee, in its sole discretion, has accelerated the vesting of such
Stock Appreciation Right, to the extent exercisable following such
acceleration) at any time within 30 days after he ceases to be an
Employee (or within (i) three months after termination if on account
of Retirement or (ii) 12 months after termination if on account of
Disability), unless by its terms it expires earlier or unless the
Committee agrees, in its sole discretion, to extend the term of such
Stock Appreciation Right; provided that the term of any such Stock
Appreciation Right will not be extended beyond its original term. If a
Participant dies while employed by the Company or any subsidiary
thereof, or within three months after ceasing to be an Employee, such
Participant's Stock Appreciation Right will be exercisable (to the
extent exercisable on the date of death, or, if the Committee, in its
sole discretion, has accelerated the vesting of such Stock
Appreciation Right, to the extent exercisable following such
acceleration) at any time within 12 months after the date of death,
unless by its terms it expires earlier or unless the Committee agrees,
in its sole discretion, to extend the term of such Stock Appreciation
Right; provided that the term of any such Stock Appreciation Right
will not be extended beyond its original term. Military or sick leave
will not be deemed a termination of employment, provided that it does
not exceed the longer of three months or the period during which the
absent Participant's reemployment rights, if any, are guaranteed by
statute or by contract. The foregoing is qualified by the following:
(i) if any facts that would constitute Cause for termination of
employment of a Participant are brought to the attention of the
Committee after the Participant's employment with the Company or any
subsidiary thereof has ended, any Stock Appreciation Rights then held
by the Participant may be immediately terminated by the Committee and
(ii) if a Participant is an Employee employed pursuant to a written
Employment Agreement, the Participant's employment with the Company
will be deemed terminated for "cause" for purposes of the Plan only if
the Participant's employment is considered under the circumstances to
have been terminated for cause for purposes of such agreement.
(b) Termination of Association with the Company. If a
consultant or advisor or other Participant who is not an Employee has
his relationship with the Company terminated for Cause, any Stock
Appreciation Rights held by any such Participant will automatically
expire. In all other cases, any Stock Appreciation Rights held by such
a Participant, to the extent exercisable on the date of termination of
the Participant's association with the Company, will remain
exercisable and will expire in accordance with the terms of the
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applicable Stock Appreciation Rights Agreement; provided that (i) if
any facts that would constitute cause for removal or termination of a
Participant who is a consultant or advisor or other person who is not
an Employee are brought to the attention of the Committee after such
Participant's association with the Company has ended, any Stock
Appreciation Rights held by such Participant may be immediately
terminated by the Committee and (ii) if such Participant has been
retained pursuant to a written agreement, the Participant's
relationship with the Company will be deemed terminated for "cause"
for purposes of the Plan only if the Participant's association with
the Company is considered under the circumstances to have been
terminated for cause for purposes of such written agreement.
6.8. Tandem Incentive Option - Stock Appreciation Right. Whenever
an Incentive Option and a Stock Appreciation Right are granted together and the
exercise of one affects the right to exercise the other, the following
requirements shall apply:
(a) The Stock Appreciation Right will expire no later than
the expiration of the underlying Incentive Option.
(b) The Stock Appreciation Right may be for no more than the
difference between the Option Price of the underlying Incentive Option
and the Market Value of the Stock subject to the underlying Incentive
Option at the time the Stock Appreciation Right is exercised.
(c) The Stock Appreciation Right is transferable only when
the underlying Incentive Option is transferable, and under the same
conditions.
(d) The Stock Appreciation Right may be exercised only when
the underlying Incentive Option is eligible to be exercised.
(e) The Stock Appreciation Right may be exercised only when
the Market Value of the Stock subject to the underlying Incentive
Option exceeds the Option Price of the underlying Incentive Option.
6.9. Written Notice Required. Any Stock Appreciation Right will be
deemed to be exercised when written notice of exercise has been received by the
Company at its principal office from the person entitled to exercise the Stock
Appreciation Right.
ARTICLE VII
PERFORMANCE SHARES
7.1. Grant of Performance Shares. The Committee may, in its sole
discretion, grant Performance Shares in accordance with the terms and conditions
set forth in the Plan. Each Performance Share Agreement may contain such
additional terms and conditions, not inconsistent with the terms of the Plan, as
are determined by the Committee in its sole discretion.
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7.2. Terms and Conditions. Performance Shares may be earned based
on the attainment of Performance Goals established by the Committee for a
particular Performance Cycle. The Committee may establish Performance Goals on
the basis of such criteria and to accomplish such objectives as the Committee
may from time to time select.
7.3. Amount of Payment. After the end of each Performance Cycle,
the Committee will determine the number of Performance Shares earned by each
Participant with respect to the Performance Cycle in accordance with the
following:
(a) If the Performance Goal is attained or exceeded, a
Participant will be deemed to have earned the full number of
Performance Shares granted to the Participant.
(b) If the Minimum Performance Goal is not attained, a
Participant will be deemed to have earned no Performance Shares.
(c) If the Performance Goal is not attained, but the Minimum
Performance Goal is attained or exceeded, the number of Performance
Shares deemed to have been earned by a Participant will be a portion
of the Performance Shares, as determined based on a formula
established by the Committee at the time of grant.
(d) If a Participant's employment or service with the
Company or any subsidiary thereof has terminated because of death,
Disability or Retirement prior to the end of a Performance Cycle, the
number of Performance Shares such Participant will be deemed to have
earned shall be the number of Performance Shares determined as though
such Participant's employment or service had not terminated,
multiplied by a fraction, the numerator of which is the number of
months such Participant was employed or served the Company or a
subsidiary thereof during the Performance Cycle (including the month
during which employment or service terminated) and the denominator of
which is the total number of months in the Performance Cycle.
(e) If the Participant's employment or service has
terminated for any reason other than death, Disability or Retirement,
such Participant will be deemed to have earned no Performance Shares
except as and to the extent the Committee may determine; provided that
the number of Performance Shares that may be so determined by the
Committee to have been earned may not exceed the number that would
have been earned had the provisions of Section 7.3(a) been applicable.
(f) At any time prior to the end of a Performance Cycle, the
Committee may adjust downward (but not upward) the Performance Goal
and/or the Minimum Performance Goal as a result of major events
unforeseen at the time the Performance Shares were awarded, such as
changes in the economy, the industry, laws affecting the operation of
the Company or any subsidiary thereof, changes in applicable tax laws
or accounting principles or any other event the Committee determines
would have a significant impact upon the
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probability of attaining the previously established Performance Goal
and/or Minimum Performance Goal.
7.4. Form of Payment. Payment in respect of earned Performance
Shares will be made to the Participant or, if the Participant has died, to the
Participant's designated beneficiary, as soon as practicable after the
expiration of the Performance Cycle and the Committee's determination under
Section 7.3. Payment in respect of earned Performance Shares may be made in
cash, in shares of Stock or a combination thereof, as determined by the
Committee in its sole discretion at the time of payment.
7.5. Additional Awards. In the sole discretion of the Committee, a
Performance Share Award may provide the Participant with (i) dividends or
dividend equivalents (payable on a current or deferred basis) and (ii) cash
payments in lieu of or in addition to such Award.
ARTICLE VIII
STOCK UNIT AWARDS
8.1. Grant of Stock Unit Awards. The Committee may, in its sole
discretion, grant Stock Unit Awards in accordance with the terms and conditions
set forth in the Plan. Each Stock Unit Agreement may contain such additional
terms and conditions, not inconsistent with the terms of the Plan, as are
determined by the Committee in its sole discretion.
8.2 Terms and Conditions. Stock Unit Awards may be in the form of
Stock or units, the value of which is based, in whole or in part, on the Market
Value of Stock. Stock Unit Awards will be subject to such terms, restrictions,
conditions, vesting requirements and payment requirements as the Committee may
determine in its sole discretion at the time of grant, including without
limitation the following:
(a) Any shares of Stock that are part of a Stock Unit Award
may be subject to restrictions on sale, assignment, transfer, pledge
or other encumbrance.
(b) Stock Unit Awards may provide for the payment of cash
consideration by the Participant or provide that the Award, and any
Stock to be issued in connection therewith, if applicable, shall be
delivered without the payment of cash consideration.
(c) Stock Unit Awards may relate in whole or in part to
certain performance criteria established by the Committee.
(d) Stock Unit Awards may provide for deferred payment
schedules and/or vesting over a specified period of employment or
service with the Company or any subsidiary thereof.
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8.3. Additional Awards. In the sole discretion of the Committee, a
Stock Unit Award may provide the Participant with (i) dividends or dividend
equivalents (payable on a current or deferred basis) and (ii) cash payments in
lieu of or in addition to such Award.
ARTICLE IX
TERMINATION, AMENDMENT AND ADJUSTMENT
9.1. Termination and Amendment of the Plan. The Board (or, if the
Board has specifically delegated this authority to the Committee, the Committee)
may at any time terminate the Plan or make such modifications of the Plan as it
deems advisable; provided that no amendment may be made without approval of the
stockholders of the Company if such approval is required under the Code or any
requirement under applicable state law. No termination or amendment of the Plan
may, without the consent of the Participant to whom any Award has theretofore
been granted, adversely affect the rights of such Participant under such Award.
9.2. Adjustment. In the event of any stock dividend payable in
Stock or any split-up or contraction of the number of shares of Stock after the
date an Award is granted and prior to the exercise in full of an Option or Stock
Appreciation Right or the lapse, waiver and/or satisfaction of any restrictions
or Performance Goals related to a Restricted Stock Award, Performance Share
Award or Stock Unit Award, the number of shares subject to such Award and, if
applicable, the Option Price, will be proportionately adjusted. In the event of
any reclassification or change of outstanding shares of Stock or in case of any
consolidation or merger of the Company with or into another company or in case
of any sale or conveyance to another company or entity of the property of the
Company as a whole or substantially as a whole, shares of stock or other
securities equivalent in kind and value to those shares a Participant would have
received if he had held the full number of shares of Stock subject to the Award
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance (together with all other shares, stock and securities thereafter
issued in respect thereof) will thereupon be subject to the Award. Upon
dissolution or liquidation of the Company, all Awards will terminate, but the
Participant will have the right, immediately prior to such dissolution or
liquidation, to exercise any Option or Stock Appreciation Right to the extent
exercisable on the date of such dissolution or liquidation. No fraction of a
share of Stock will be purchasable or deliverable upon exercise, but in the
event any adjustment hereunder of the number of shares covered by the Award will
cause such number to include a fraction of a share, such number of shares will
be adjusted to the nearest smaller whole number of shares. In the event of
changes in the outstanding Stock by reason of any stock dividend, split-up,
contraction, reclassification, or change of outstanding shares of Stock of the
nature contemplated by this Section 9.2, the number of shares of Stock available
for the purpose of the Plan as stated in Section 2.3 will be correspondingly
adjusted.
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ARTICLE X
MISCELLANEOUS
10.1. Notices and Other Communications. All notices and other
communications required or permitted under the Plan will be effective if in
writing and if delivered or sent by certified or registered mail, return receipt
requested (a) if to the Participant, at his residence address last filed with
the Company and (b) if to the Company, at 14951 North Dallas Parkway, Dallas,
Texas 75240 Attention: President, with a copy to the Chairman of the Board of
Directors of the Company, presently at 14951 North Dallas Parkway, Dallas, Texas
75240, or to such other persons or addresses as the Participant or the Company
may specify by a written notice to the other from time to time.
10.2. Plan Binding on Successors. The Plan will be binding upon the
successors and assigns of the Company.
10.3. Number and Gender. Whenever used herein, nouns in the singular
will include the plural where appropriate, and the masculine pronoun will
include the female gender.
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CompUSA Inc.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD NOVEMBER 6, 1996
The undersigned hereby appoints James F. Halpin and Harold F. Compton,
each with the power to act without the other and with full power of
substitution, as Proxies to vote, as designated below, all stock of CompUSA Inc.
owned by the undersigned at the Annual Meeting of Stockholders to be held at The
Grand Kempinski Hotel, 1501 North Dallas Parkway, Dallas, Texas on Wednesday,
November 6, 1996, at 10:00 a.m., local time, upon such business as may properly
come before the meeting, including the following:
1. Election as directors of the two nominees listed below (except as indicated
to the contrary below).
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY
to vote on one or more nominees as listed
below
Warren D. Feldberg Kevin J. Roche
INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided below.
- ----------------------------------------------------------------------------
2. Approval of the amendment to the Restated and Amended Certificate of
Incorporation to increase the number of authorized shares of Common Stock
from 100,000,000 to 200,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of the amendment to the CompUSA Inc. Long-Term Incentive Plan to
increase the number of shares of Common Stock available for issuance upon
exercise of options under such plan by 2,000,000, from 6,394,368 to
8,394,368.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued, and to be signed and dated, on the reverse side)
<PAGE>
(Continued from other side)
4. Approval of the selection of Earnst & Young LLP as the Company's independent
auditors for the fiscal year ending June 28, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion on any matter that may properly come before the meeting
and any adjournments thereof.
The shares represented by this proxy will be voted as directed. WHERE NO
DIRECTION IS GIVEN, THE SHARES WILL BE VOTED FOR MATTERS 1, 2, 3 AND 4.
Please sign below, date and return promptly.
Dated:----------------1996
-------------------------------
Signature
-------------------------------
(Signature if held jointly)
IMPORTANT: Please sign exactly as name
appears to the left. When signing on
behalf of a corporation, partnership,
estate, trust or in other representative
capacity, please sign name and title.
If executed by a corporation, the proxy
should be signed by a duly authorized
officer. If executed by a partnership,
please sign in the partnership name by
an authorized person. For joint
accounts, each joint owner must sign.
This proxy may be revoked prior to the exercise of the powers conferred by the
proxy.
