_____________________________________________________________________________
_
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 23, 1996
OR
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________ to __________.
Commission File Number 1-11566
CompUSA Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2261497
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14951 North Dallas Parkway, Dallas, Texas 75240
(Address of principal executive offices)
Registrant's telephone number, including area code: 214-982-4000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes ___ No ___
The registrant had 42,150,352 shares of common stock, $.01 per share par
value, outstanding as of April 29, 1996.
_____________________________________________________________________________
<PAGE>
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at March 23, 1996 (unaudited)
and June 24, 1995 . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Income for the thirteen weeks
and thirty-nine weeks ended March 23, 1996 and
March 25, 1995 (unaudited). . . . . . . . . . . . . . . . . 3
Consolidated Statements of Cash Flows for the thirty-nine weeks
ended March 23, 1996 and March 25, 1995 (unaudited) . . . . 4
Notes to Consolidated Financial Statements (unaudited) . . . . . 5
Separate financial statements relating to CompTeam Inc., CompFinance
Inc.
and CompService Inc., the Company's wholly owned subsidiaries, are omitted
since they have guaranteed the Company's 9 1/2% Senior Subordinated Notes due
2000 on a full, unconditional and joint and several basis, and the Company
does not consider such separate financial statements to be material to
investors.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . 9
Part II - OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . .16
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . .17
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
<PAGE>
<PAGE>
CompUSA Inc.
CONSOLIDATED BALANCE SHEETS
(in thousands, except shares)
<TABLE>
<CAPTION>
March 23, June 24,
1996 1995
------------ ------------
<S> <C> <C>
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . $ 295,318 $ 95,270
Accounts receivable, net of allowance
for doubtful accounts of $1,219 and
$958 at March 23, 1996 and June 24,
1995, respectively . . . . . . . . . 118,138 91,727
Merchandise inventories . . . . . . 412,663 296,749
Prepaid expenses and other . . . . . 12,587 14,451
------------ ------------
Total current assets . . . . . . . 838,706 498,197
Property and equipment, net. . . . . . . . . 122,404 104,928
Other assets . . . . . . . . . . . . . . . . 6,983 7,386
------------ ------------
$ 968,093 $ 610,511
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . .$ 468,966 $ 268,380
Accrued liabilities . . . . . . . . . . 82,102 48,655
Current portion of capital lease
obligations . . . . . . . . . . . . . 4,651 4,965
------------ ------------
Total current liabilities . . . . . 555,719 322,000
Capital lease obligations . . . . . . . . . . 4,460 5,092
Senior Subordinated Notes . . . . . . . . . . 110,000 110,000
Deferred income taxes . . . . . . . . . . . . 6,235 2,464
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 per share par
value, 10,000 shares authorized,
none issued . . . . . . . . . . . . . -- --
Common stock, $.01 per share par value,
100,000,000 shares authorized, with
42,255,568 shares issued at March 23,
1996; no par value, $.01 per share
stated value, with 37,833,818 shares
issued and outstanding at June 24,
1995 . . . . . . . . . . . . . . . . 423 378
Paid-in capital . . . . . . . . . . . . 232,309 154,311
Retained earnings . . . . . . . . . . . 61,776 16,266
------------ ------------
294,508 170,955
Less: Treasury stock, at cost, 189,730
shares at March 23, 1996 . . . . . . (2,829) --
------------ ------------
Total stockholders' equity . . . . 291,679 170,955
------------ ------------
$ 968,093 $ 610,511
============ ============
</TABLE>
See accompanying notes.<PAGE>
<PAGE>
CompUSA Inc.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Thirteen weeks ended Thirty-nine weeks ended
----------------------------- -----------------------------
March 23, March 25, March 23, March
25,
1996 1995 1996 1995
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . .$ 1,000,128 $ 776,111 $ 2,669,985 $ 2,123,565
Cost of sales and occupancy costs . . . . . . 857,920 676,520 2,308,450 1,860,507
------------ ------------ ------------ ------------
Gross profit. . . . . . . . . . . . 142,208 99,591 361,535 63,058
Store operating expenses. . . . . . . . . . . 83,762 65,559 224,780 187,969
Pre-opening expenses. . . . . . . . . . . . . 223 717 3,148 1,902
General and administrative expenses . . . . . 21,213 14,412 52,636 41,203
------------ ------------ ------------ ------------
Operating income. . . . . . . . . . 37,010 18,903 80,971 31,984
Other expense (income):
Interest expense . . . . . . . . . . . . 2,984 2,941 9,164 8,913
Other income, net. . . . . . . . . . . . (2,226) (389) (4,327) (1,486)
------------ ------------ ------------ ------------
758 2,552 4,837 7,427
------------ ------------ ------------ ------------
Income before
income taxes. . . . . . . . . 36,252 16,351 76,134 24,557
Income tax expense. . . . . . . . . . . . . . 14,183 4,250 30,624 5,891
------------ ------------ ------------ ------------
Net income. . . . . . . . . . . . .$ 22,069 $ 12,101 $ 45,510 $ 18,666
============ ============ ============ ============
Income per common and
common equivalent share. . . . . . . . .$ 0.51 $ 0.31 $ 1.08 $ 0.49
============ ============ ============ ============
Weighted average common and
common equivalent shares . . . . . . . . 43,397 38,426 42,224 38,072
============ ============ ============ ============
</TABLE>
See accompanying notes.
<PAGE>
CompUSA Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Thirty-nine weeks ended
-----------------------------
March 23, March 25,
1996 1995
------------ ------------
<S> <C> <C>
Cash flows provided by operating activities:
Net income . . . . . . . . . . . . . . . .$ 45,510 $ 18,666
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization. 19,470 15,308
Changes in assets and
liabilities:
Decrease (increase) in:
Accounts receivable . . (26,462) 3,488
Merchandise inventories (115,914) (61,018)
Prepaid expenses and
other assets . . . . 643 (940)
Increase in accounts
payable and accrued
liabilities. . . . . . 238,448 155,556
------------ ------------
Net cash provided by operating activities . . 161,695 131,060
Cash flows used in investing activities:
Capital expenditures . . . . . . . . . . (33,258) (19,505)
Other . . . . . . . . . . . . . . . . . 629 431
------------ ------------
Net cash used in investing activities . . . . (32,629) (19,074)
Cash flows provided by (used in) financing
activities:
Proceeds from issuance of common stock . . 77,923 616
Purchase of treasury stock . . . . . . . . (3,521) --
Sale of treasury stock to benefit plan . . 812 --
Borrowings under Credit Agreement . . . . -- 23,600
Repayments of borrowings under Credit
Agreement . . . . . . . . . . . . . . . -- (58,100)
Payments under capital lease obligations . (4,232) (3,725)
------------ ------------
Net cash provided by (used in) financing
activities . . . . . . . . . . . . . . . . 70,982 (37,609)
------------ ------------
Net increase in cash and cash equivalents . . 200,048 74,377
Cash and cash equivalents at beginning
of period . . . . . . . . . . . . . . . . 95,270 22,505
------------ ------------
Cash and cash equivalents at end of period. .$ 295,318 96,882
============ ============
</TABLE>
See accompanying notes.
<PAGE>
CompUSA Inc.
Notes to Consolidated Financial Statements
(unaudited)
1. Basis of Presentation
The consolidated financial statements include the accounts of CompUSA
Inc. and its wholly owned subsidiaries (collectively, "CompUSA" or the
"Company"). All significant intercompany accounts and transactions have been
eliminated. In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the financial
position, results of operations and cash flows of the Company for the
applicable interim periods. The results of operations for these periods are
not necessarily comparable to, or indicative of, results of any other interim
period or for the fiscal year as a whole. Certain financial information that
is not normally required for interim reporting purposes has been omitted.
Therefore, these financial statements should be read in conjunction with the
Company's Annual Report on Form 10-K for the fiscal year ended June 24, 1995.
2. Stock Split and Income Per Common and Common Equivalent Share
Income per common and common equivalent share is computed using the
weighted average number of shares of common stock and common stock
equivalents
outstanding during each period. The dilutive effect of stock options, treated
as common stock equivalents, is calculated using the treasury stock method.
On March 27, 1996, the Company's Board of Directors declared a
two-for-one stock split effected in the form of a stock dividend to
stockholders of record on April 8, 1996, payable on April 22, 1996. Stock
options and all other agreements payable in the Company's common stock (the
"Common Stock") have been amended to reflect the split. An amount equal to
the par value of shares issued has been transferred from additional paid in
capital to the common stock account. All references to the number of shares,
except for shares authorized, and income per common and common equivalent
share amounts in the consolidated financial statements and the accompanying
notes have been adjusted to reflect the stock split on a retroactive basis.
3. Commitments and Contingencies
In June 1994, nine lawsuits were filed by certain securityholders of the
Company against the Company and certain of its present and former directors
and officers seeking class action status on behalf of the purchasers of the
Common Stock and 9 1/2% Senior Subordinated Notes due 2000
<PAGE>
CompUSA Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
3. Commitments and Contingencies (continued):
("Senior Subordinated Notes"). On November 28, 1994, the United States
District Court for the Northern District of Texas entered Pre-Trial Order No.
1 which, among other things, consolidated the nine separate cases into one
consolidated action styled "In re CompUSA Inc. Securities Litigation." A
consolidated, amended complaint was filed on February 10, 1995 that alleged
violations of the federal securities laws based upon purported misstatements
and/or omissions of material fact. Among other things, the plaintiffs
alleged that misstatements and omissions by Company personnel relating to
projected and historical operating results, sales and other matters involving
corporate operations resulted in an inflation of prices of the Common Stock and
the Senior Subordinated Notes. On October 30, 1995, the court issued a
Memorandum Opinion and Order and an accompanying Judgment in favor of the
Company that required the plaintiffs to pay all court costs. On January 12,
1996, the Company completed a settlement of the case in which the plaintiffs
agreed not to appeal the judgment against them in exchange for the Company's
agreement not to pursue its right to seek recovery of court costs.
In April 1994, SCI Systems, Inc. filed a lawsuit against the Company in
the Circuit Court of Madison County, Alabama alleging various causes of
action, including breach of contract, work and labor done, and money due on
account and seeking damages of $3 million plus interest, costs and attorneys'
fees. The complaint was later amended to add as plaintiffs SCI Technology,
Inc., SCI Systems (Alabama), Inc., SCIMEX, Inc., and Adelantos de Tecnologia,
S.A. de C.V. The amended complaint also sought damages under the Alabama
Commercial Code. The Company asserted a counterclaim for fraud, breach of
warranty, negligence and wantonness, seeking an aggregate of $10 million in
actual and $5 million in punitive damages. On January 15, 1996, the Company
and the plaintiffs reached a settlement resulting in the release and
dismissal
of all claims.
The Company is a defendant from time to time in lawsuits incidental to
its business. Based on currently available information, the Company believes
that resolution of all known contingencies would not have a material adverse
impact on the Company's financial statements. However, there can be no
assurances that future costs would not be material to results of operations
of the Company for a particular future period. In addition, the Company's
estimates of future costs are subject to change as events evolve and
additional information becomes available during the course of litigation.
<PAGE>
CompUSA Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
4. Subsidiary Guarantees
The Senior Subordinated Notes are guaranteed on a full, unconditional
and joint and several basis by CompTeam Inc., CompFinance Inc. and CompService
Inc. The combined summarized information of these subsidiaries is as
follows:
<TABLE>
<CAPTION>
As of and for the
Thirty-nine weeks ended
-----------------------------
March 23, March 25,
1996 1995
------------ ------------
(in thousands)
<S> <C> <C>
Intercompany receivables . . . . . . . . . .$ 86,958 $ 82,844
Other current assets . . . . . . . . . . . . 37,745 14,169
Non-current assets . . . . . . . . . . . . . 1 1
Intercompany payables . . . . . . . . . . . . 14,292 4,172
Other current liabilities . . . . . . . . . . 1 4
Intercompany revenues . . . . . . . . . . . . 26,572 20,743
Other revenues . . . . . . . . . . . . . . . 629 1,362
Cost and expenses . . . . . . . . . . . . . . 144 78
Net income . . . . . . . . . . . . . . . . . 13,177 9,838
</TABLE>
In the preparation of the Company's consolidated financial statements,
all intercompany accounts were eliminated.
5. Public Offering
On September 19, 1995, the Company completed a public offering, selling
4,025,000 newly-issued shares of Common Stock and receiving net proceeds of
approximately $77 million (net of offering costs of approximately $4
million).
<PAGE>
CompUSA Inc.
Notes to Consolidated Financial Statements (Continued)
(unaudited)
6. Treasury Stock
In December 1995, the Company's Board of Directors authorized the
purchase of up to $30.0 million of Common Stock. The shares acquired will
provide a source of Common Stock for the Company's stock-based compensation
and benefit plans. The funds for stock purchases are provided by internally
generated funds. On December 22, 1995, the Company repurchased 236,200
shares of Common Stock, to be held as treasury stock, at a weighted average of
$14.89 per share, excluding transaction costs. In February 1996, the Company
sold 46,470 treasury shares to the Company's 401(k) plan to fund the Company's
required contribution to the plan for 1995.
7. Supplemental Disclosures of Cash Flow Information
<TABLE>
<CAPTION>
Thirty-nine weeks ended
-----------------------------
March 23, March 25,
1996 1995
------------ ------------
(in thousands)
<S> <C> <C>
Cash paid during the periods for:
Interest . . . . . . . . . . . . . . . .$ 5,928 $ 6,474
Income taxes . . . . . . . . . . . . . .$ 20,104 $ 3,993
Investing activities not affecting cash
are as follows:
Additions to property and equipment
under capital leases . . . . . . . . .$ 3,286 $ 1,652
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Factors That May Affect Future Results
With the exception of historical information, the matters discussed in
this report are forward looking statements about the business, financial
condition and prospects of the Company. The actual results of the Company
could differ materially from those indicated by the forward looking
statements
because of various risks and uncertainties, including without limitation
changes in product demand, the availability of products, changes in
competition, the ability of the Company to open new stores in accordance with
its plans, economic conditions, real estate market fluctuations, interest
rate fluctuations, dependance on manufacturers' product development, various
inventory risks due to changes in market conditions and other risks indicated
in the Company's filings with the Securities and Exchange Commission. These
risks and uncertainties are beyond the ability of the Company to control, and
in many cases the Company cannot predict the risks and uncertainties that
could cause its actual results to differ materially from those indicated by
the forward looking statements.
General
Fiscal 1995 was a transition year for CompUSA, characterized by a
reduction in store growth that allowed the Company to apply its resources to
improving the Company's operations. The Company believes it has
substantially completed the transition phase of its fiscal 1995 business plan
and for fiscal 1996 it is focused on the execution and growth of its
businesses.
All references herein to "fiscal 1996" relate to the fifty-three weeks
ending June 29, 1996, and references to "fiscal 1995" relate to the fifty-two
weeks ended June 24, 1995. In addition, all references herein to "third
quarter of fiscal 1996" and "first nine months of fiscal 1996" relate to the
thirteen weeks and thirty-nine weeks, respectively, ended March 23, 1996, and
all references to "third quarter of fiscal 1995" and "first nine months of
fiscal 1995" relate to the thirteen weeks and thirty-nine weeks,
respectively, ended March 25, 1995.
<PAGE>
The following table sets forth certain operating data for the Company:
<TABLE>
<CAPTION>
Thirteen weeks ended Thirty-nine weeks ended
----------------------------- -----------------------------
March 23, March 25, March 23, March 25,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Stores open at end of period. . . . . . . . . 96 83 96 83
Stores opened during the period . . . . . . . 1 3 11 7
Stores relocated during the period. . . . . . -- -- 1 2
Average net sales per gross square
foot (1) . . . . . . . . . . . . . . . . $390 $362 $1,100 $1,026
Comparable store sales increase (2) . . . . . 14.1% 14.3% 13.6% 10.2%
</TABLE>
(1) Calculated using net sales divided by gross square footage of stores open
at the end of the period, weighted by the number of months open during
the period.
(2) Comparable store sales are net sales for stores open the same months in
both the indicated and previous period, including stores that were
relocated or expanded during the period.
Average net sales per gross square foot increased during the third
quarter of fiscal 1996 compared with the same period last year primarily due
to the maturation of the Company's existing store base and increased growth in
the Company's direct sales, mail order and service businesses. Service
businesses include customer training and technical services.
Average net sales per gross square foot increased during the first nine
months of fiscal 1996 compared with the same period last year primarily due to
the maturation of the Company's store base, increased customer demand that was
attributable to several factors, one of which was the introduction of
Microsoft's Windows(R) 95 operating system, and increased growth in the
Company's direct sales, mail order and service businesses.
In certain instances, the Company has opened additional Computer
Superstores(SM) in existing markets, which has resulted in the diversion of
sales from existing stores and thus some reductions in the rate of comparable
store sales growth. CompUSA has opened additional stores in existing
markets largely to increase market penetration and to provide customers with
more convenience and better service. The Company plans to continue its
strategy of opening additional Computer Superstores in existing markets. The
resulting diversion of sales from existing stores may adversely affect the
Company's comparable store sales. However, the Company believes that this
strategy should increase its awareness with local consumers, enhance its
competitive position in such markets and create efficiencies in advertising
and management, and therefore is in the Company's long-term best interest.
<PAGE>
Results of Operations
As a result of the expansion of the Company's store base,
period-to-period comparisons of financial results may not be meaningful, and
the results of operations for historical periods may not be indicative of the
results to be expected in future periods. In addition, the Company expects
that its quarterly results of operations will fluctuate depending on the
timing of the opening of, and the amount of net sales contributed by, new
stores and the timing of costs associated with the selection, leasing,
construction and opening of new stores, as well as seasonal factors, product
introductions and changes in product mix. See ''--Quarterly Data and
Seasonality.'' The following table sets forth certain items expressed as a
percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
Thirteen weeks ended Thirty-nine weeks ended
----------------------------- -----------------------------
March 23, March 25, March 23, March 25,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0% 100.0%
Cost of sales and occupancy costs . . . . . . 85.8 87.2 86.5 87.6
------------ ------------ ------------ ------------
Gross profit . . . . . . . . . . . . . . 14.2 12.8 13.5 12.4
Store operating expenses. . . . . . . . . . . 8.4 8.4 8.4 8.9
Pre-opening expenses. . . . . . . . . . . . . 0.0 0.1 0.1 0.1
General and administrative expenses . . . . . 2.1 1.9 2.0 1.9
------------ ------------ ------------ ------------
Operating income . . . . . . . . . . . . 3.7 2.4 3.0 1.5
Interest expense and other income,
net. . . . . . . . . . . . . . . . . . . 0.1 0.3 0.2 0.3
------------ ------------ ------------ ------------
Income before income taxes . . . . . . . 3.6 2.1 2.8 1.2
Income tax expense. . . . . . . . . . . . . . 1.4 0.5 1.1 0.3
------------ ------------ ------------ ------------
Net income . . . . . . . . . . . . . . . 2.2% 1.6% 1.7% 0.9%
============ ============ ============ ============
</TABLE>
Third quarter ended March 23, 1996, compared with the third quarter ended
March 25, 1995.
Net sales for the third quarter of fiscal 1996 increased 29% to $1.00
billion from $776 million for the third quarter of fiscal 1995. The increase
in net sales was due to the additional sales volumes attributable to the new
stores opened during and subsequent to the third quarter of fiscal 1995 and an
increase in comparable store sales of 14.1%. The increase in comparable store
sales was primarily due to maturation of the Company's store base and
increased growth in its direct sales, mail order and service businesses.
<PAGE>
Gross profit was $142 million, or 14.2% of net sales, in the third
quarter of fiscal 1996, compared with $99.6 million, or 12.8% of net sales,
in the third quarter of fiscal 1995. The increase in gross profit as a
percentage of net sales was primarily due to higher product margin,
leveraging of occupancy costs due to higher average sales per store and an
increase in the mix of service revenues to total revenues. Service revenues
typically have higher gross margins than merchandise sales.
Store operating expenses of $83.8 million, or 8.4% of net sales, for the
third quarter of fiscal 1996, remained constant as a percentage of net sales
compared with $65.6 mill ion, or 8.4% of net sales, for the third quarter of
fiscal 1995.
Pre-opening expenses consist primarily of personnel expenses incurred
prior to a store's opening and promotional costs associated with the opening.
The Company's policy is to expense all pre-opening expenses in the month of
the store's grand opening. In the third quarter of fiscal 1996, the Company
incurred $223,000 in pre-opening expenses in connection with the opening of
one new store, compared with $717,000, or $238,000 per store, in pre-opening
expenses incurred in the third quarter of fiscal 1995 in connection with the
opening of three new stores.
General and administrative expenses were $21.2 million, or 2.1% of net
sales, for the third quarter of fiscal 1996 compared with $14.4 million, or
1.9% of net sales, for the third quarter of fiscal 1995. The increase in
general and administrative expense as a percentage of net sales was primarily
due to a charge of approximately $2 million relating to discussions
undertaken during the quarter regarding the Company's possible purchase of
Tandy Corporation's Computer City division. Those discussions were terminated
in February 1996.
Interest expense and other income, net, was $0.8 million for the third
quarter of fiscal 1996, compared with $2.6 million for the third quarter of
fiscal 1995. The decrease was attributable to increased other income related
to higher investment levels during the third quarter of fiscal 1996.
See "--Liquidity and Capital Resources."
The Company's effective tax rate for the third quarter of fiscal 1996
was 39%, compared with an effective tax rate of 26% for the third quarter of
fiscal 1995. The effective tax rate differed in fiscal 1996 from the federal
statutory rate primarily due to state income taxes, offset in part by the
benefits from tax exempt interest earned by the Company. The fiscal 1995
effective tax rate differed from the federal statutory rate primarily due to
recognition of the previously unrecognized tax benefit associated with the
fiscal 1994 loss.
As a result of the above, net income for the third quarter of fiscal
1996 was $22.1 million, or $0.51 per share, compared with net income of $12.1
million, or $0.31 per share, for the third quarter of fiscal 1995.
<PAGE>
Nine months ended March 23, 1996, compared with the nine months ended March
25, 1995.
Net sales for the first nine months of fiscal 1996 increased 26% to
$2.67 billion from $2.12 billion for the first nine months of fiscal 1995.
The increase in net sales was due to the additional sales volumes attributable
to the new stores opened during and subsequent to the first nine months
of fiscal 1995 and an increase in comparable store sales of 13.6%. The
increase in comparable store sales was primarily due to the maturation of the
Company's store base, increased customer demand that was attributable to
several factors, one of which was the introduction of Microsoft's
Windows(R) 95 operating system, and increased growth in the Company's direct
sales, mail order and service businesses.
Gross profit was $362 million, or 13.5% of net sales, in the first nine
months of fiscal 1996, compared with $263 million, or 12.4% of net sales, in
the first nine months of fiscal 1995. The increase in gross profit as a
percentage of net sales was primarily due to higher product margin, an
improvement in controllable costs such as inventory shrinkage, leveraging of
occupancy costs due to higher average sales per store and an increase in the
mix of service revenues to total revenues.
Store operating expenses were $225 million, or 8.4% of net sales, in the
first nine months of fiscal 1996, compared with $188 million, or 8.9% of net
sales, in the first nine months of fiscal 1995. The decrease in store
operating expenses as a percentage of net sales was primarily due to the
leveraging of fixed store costs and lower net advertising expense resulting
from increased vendor participation, which factors were partially offset by
higher personnel expenses related to the increase in service revenues.
Although service revenues generally have higher gross margins than
merchandise sales, the related store operating expenses are higher than those
related to merchandise sales.
In the first nine months of fiscal 1996, the Company incurred $3.1
million in pre-opening expenses in connection with the opening of eleven new
stores, the relocation of one store and the opening of two Training
Supercenter Plus locations, compared with $1.9 million in pre-opening
expenses incurred in the first nine months of fiscal 1995 in connection with
the opening of seven new stores and the relocation of two stores. The Company
incurred average pre-opening expenses of $261,000 per store for the eleven
new stores opened during the first nine months of fiscal 1996 and $240,000 per
store for the seven new stores opened during the first nine months of fiscal
1995.
General and administrative expenses of $52.6 million, or 2.0% of net
sales, for the first nine months of fiscal 1996 increased as a percentage of
net sales compared with $41.2 million, or 1.9% of net sales, for the first
nine months of fiscal 1995. The increase in general and administrative
expense as a percentage of net sales was primarily due to a charge of
approximately $2 million relating to discussions undertaken during the third
quarter regarding the Company's possible purchase of Tandy Corporation's
Computer City division. Those discussions were terminated in February 1996.
<PAGE>
Interest expense and other income, net, was $4.8 million in the first
nine months of fiscal 1996, compared with $7.4 million in the first nine
months of fiscal 1995. The decrease is attributable to increased other
income related to higher investment levels during fiscal 1996.
See "--Liquidity and Capital Resources."
The Company's effective tax rate for the first nine months of fiscal
1996 was 40%, compared with an effective tax rate of 24% for the first nine
months of fiscal 1995. The effective tax rate differed in fiscal 1996 from
the federal statutory rate primarily due to state income taxes, offset in part
by the benefits from tax exempt interest earned by the Company. The fiscal
1995 effective tax rate differed from the federal statutory rate primarily due
to recognition of the previously unrecognized tax benefit associated with the
fiscal 1994 loss.
As a result of the above, net income for the first nine months of fiscal
1996 was $45.5 million, or $1.08 per share, compared with net income of
$18.7 million, or $0.49 per share, for the first nine months of fiscal 1995.
Quarterly Data and Seasonality
The Company expects that its quarterly results of operations will
fluctuate depending on the timing of the opening of, and the amount of net
sales contributed by, new stores and the timing of costs associated with the
selection, leasing, construction and opening of new stores, as well as
seasonal factors, product introductions and changes in product mix.
The Company believes that its business is seasonal. Excluding the
effects of new store openings, net sales and earnings are generally lower
during the first and fourth fiscal quarters than in the second and third
fiscal quarters.
Liquidity and Capital Resources
On September 19, 1995, the Company completed a public offering (the
"Offering"), selling 4,025,000 newly-issued shares of Common Stock and
receiving net proceeds of approximately $77 million (net of offering costs of
approximately $4 million).
In December 1995, the Company's Board of Directors authorized the
purchase of up to $30.0 million of Common Stock. The shares acquired will
provide a source of Common Stock for the Company's stock-based compensation
and benefit plans. The funds for stock purchases are provided by internally
generated funds. On December 22, 1995, the Company repurchased 236,200
shares of Common Stock, to be held as treasury stock, at a weighted average of
$14.89 per share, excluding transaction costs. In February 1996, the Company
sold 46,470 treasury shares to the Company's 401(k) plan to fund the Company's
required contribution to the plan for 1995.
<PAGE>
At March 23, 1996, total assets were $968 million, $839 million of which
were current assets, including $295 million of cash and cash equivalents.
Net cash provided by operating activities for the first nine months of fiscal
1996 was $162 million, compared with net cash provided by operating activities
of $131 million for the first nine months of fiscal 1995. The increase in cash
provided by operating activities for the first nine months of fiscal 1996
compared with the first nine months of fiscal 1995 was due to the unusually
high accounts payable to inventory ratio on March 23, 1996 of 114%, compared
with 87% at the same time last year, which percentage is consistent with the
Company's historical levels.
Approximately three-fourths of the Company's net sales during the first
nine months of both fiscal 1996 and fiscal 1995 were sales for which the
Company received payment at the time of sale either in cash, by check or by
third-party credit cards. The remaining net sales were primarily sales
for which the Company provided credit terms to corporate, government and
education customers.
Capital expenditures during the first nine months of fiscal 1996 were
$33.3 million, $12.2 million of which were for fiscal 1996 new stores,
compared with $19.5 million of capital expenditures during the first nine
months of fiscal 1995, $7.1 million of which were for fiscal 1995 new stores.
During the first nine months of fiscal 1996, the Company opened 11 new
Computer Superstores and it plans to open approximately nine new Computer
Superstores during the remainder of fiscal 1996. The Company anticipates
total capital expenditures of approximately $55 million for all of fiscal
1996. Excluding the effects of new store openings, the Company's greatest
short-term capital requirements occur during the second fiscal quarter to
support a higher level of sales in that quarter. Short-term capital
requirements are satisfied primarily by vendor, bank and floor plan
financing.
The Company has an unsecured $75 million credit agreement (the ''Credit
Agreement'') with a consortium of banks that expires in June 1998. At March
23, 1996, no amounts were outstanding under the Credit Agreement and the
Company had approximately $75 million available for future borrowings. The
Company also finances certain fixture and equipment acquisitions through
equipment lessors. Lease financing is available to the Company from numerous
sources and it evaluates equipment leasing as a supplemental source of
financing on a continuing basis.
The Company believes that its available cash and cash equivalents, funds
generated by operations, currently available vendor and floor plan financing,
lease financing, funds available under the Credit Agreement and the net
proceeds from the Offering should be sufficient to finance its continuing
operations and expansion plans through the end of fiscal 1996 and to make all
required payments of interest on the Senior Subordinated Notes. The level of
future expansion will be contingent upon the availability of additional
capital.
<PAGE>
Inflation
While inflation has not had, and the Company does not expect it to have,
a material impact upon operating results, there can be no assurances that the
Company's business will not be affected by inflation in the future.
PART II
Item 1. Legal Proceedings
For information on legal proceedings, see Note 3 of Notes to Consolidated
Financial Statements.
The last paragraph of Note 3 of Notes to Consolidated Financial
Statements in Item 1 is incorporated herein by reference as if fully restated
herein. This paragraph contains forward looking statements that are subject
to the risks and uncertainties discussed in Item 2 - Management's Discussion
and Analysis of Financial Condition and Results of Operations - Factors That
May Affect Future Results.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
3.1 Restated and Amended Certificate of Incorporation. (7)
3.2 Restated and Amended Bylaws. (5)
4.1 Specimen Common Stock Certificate (as amended). (7)
4.2 Specimen 9 1/2% Senior Subordinated Note Due 2000. (4)
4.3 Indenture dated June 17, 1993 among CompUSA Inc., as Issuer,
Compudyne Products, Inc., Compudyne Direct, Inc., CompFinance
Inc., CompService Inc., as Guarantors and U.S. Trust Company of
Texas, N.A. as Trustee relating to 9 1/2% Senior Subordinated
Notes Due 2000. (2)
4.4 First Supplemental Indenture dated as of December 1, 1995 among
the Company, CompTeam Inc., CompFinance Inc., CompService Inc.,
and U.S. Trust Company of Texas, N.A., as trustee. (8)
4.5 Subsidiary Guarantee executed by CompTeam Inc. (8)
4.6 Rights Agreement dated April 29, 1994, between the Company and
Bank One, Texas, N.A. as Rights Agent. (5)
4.7 Letter of the Company dated November 1, 1995, appointing First
Interstate Bank of Texas, N.A. as substitute Rights Agent under
the Rights Agreement. (7)
10.1 CompUSA Inc. Long-Term Incentive Plan (formerly CompUSA Inc.
1990 Stock Option Plan). (7)
10.2 $75,000,000 Credit Agreement dated June 16, 1995, among the
Company, certain lenders and NationsBank of Texas, N.A. as
Administrative Lender. (6)
10.3 First Amendment to the Credit Agreement dated as of December
21, 1995 among the Company, certain lenders and NationsBank of
Texas, N.A., as Administrative Lender. (8)
10.4 Promissory Note dated June 16, 1995, in the principal amount of
$20,000,000 issued in favor of NationsBank of Texas, N.A.. (6)
10.5 Promissory Note dated June 16, 1995, in the principal amount of
$15,000,000 issued in favor of First Interstate Bank of Texas,
N.A.. (6)
10.6 Promissory Note dated June 16, 1995, in the principal amount of
$15,000,000 issued in favor of United States Bank of Oregon. (6)
10.7 Promissory Note dated June 16, 1995, in the principal amount of
$12,500,000 issued in favor of Wells Fargo Bank. (6)
10.8 Promissory Note dated June 16, 1995, in the principal amount of
$12,500,000 issued in favor of Bank One, Texas, N.A. (6)
10.9 Subsidiary Guaranty dated June 16, 1995, made by CompFinance
Inc. and CompService Inc. (6)
10.10 Agreement and Adoption of Subsidiary Guaranty dated as of
December 1, 1995, executed by CompTeam Inc. (8)
10.11 Subordination Agreement dated June 16, 1995, among CompFinance
Inc., CompService Inc., NationsBank of Texas, N.A. and certain
lenders. (6)
<PAGE>
10.12 Agreement and Adoption of Subordination Agreement dated as of
December 1, 1995, executed by CompTeam Inc. (8)
10.13 The Addison Office Lease Agreement dated September 1, 1992,
between Carter-Crowley Properties, Inc. as Landlord and CompUSA
Inc. as Tenant. (3)
10.14 CompUSA Inc. 1996 Change in Control Termination Plan. (8)
10.15 Employment Agreement between the Company and Keith Costine. (1)
10.16 Form of Employment Agreement dated as of May 1, 1996, between
the Company and each of Harold F. Compton, J. Samuel Crowley,
Ronald J. Gilmore, James F. Halpin, Melvin D. McCall, Lawrence
N. Mondry, Paul Poyfair, James E. Skinner and Mark R. Walker.(8)
10.17 Form of Employment Agreement dated as of May 1, 1996, between
the Company and each of Anthony J. Cincotta, Aka DeMesa, Paul F.
Ewert, Robyn Gatch-Priest, Harold Greenberg, James L. Infinger,
Barry C. McCook, Jack A. Phelps, Ronald D. Strongwater and
Anthony A. Weiss. (8)
11 Computations of Income per Common and Common Equivalent Share.(8)
(b) Reports on Form 8-K.
None.
(1) Previously filed as an exhibit to Registration Statement No. 33-52236 on
Form S-1 and incorporated herein by reference.
(2) Previously filed as an exhibit to Registration Statement No. 33-62884 on
Form S-3 and incorporated herein by reference.
(3) Previously filed as an exhibit to the Company's Annual Report on Form
10-K, as amended, for the fiscal year ended June 27, 1992 and
incorporated herein by reference.
(4) Previously filed as an exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended June 26, 1993 and incorporated herein by
reference.
(5) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended March 26, 1994 and incorporated herein
by reference.
(6) Previously filed as an exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended June 24, 1995 and incorporated herein by
reference.
(7) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended December 23, 1995 and incorporated
herein by reference.
(8) Filed herewith.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CompUSA Inc.
Date: May 2, 1996 By: /S/ James E. Skinner
---------------------------
James E. Skinner
Executive Vice President, Chief Financial
Officer and Treasurer (Principal Financial
and Accounting Officer)
<PAGE>
Exhibit Index
Page
No.
3.1 Restated and Amended Certificate of Incorporation. (7)
3.2 Restated and Amended Bylaws. (5)
4.1 Specimen Common Stock Certificate (as amended). (7)
4.2 Specimen 91/2% Senior Subordinated Note Due 2000. (4)
4.3 Indenture dated June 17, 1993 among CompUSA Inc., as Issuer,
Compudyne Products, Inc., Compudyne Direct, Inc., CompFinance
Inc., CompService Inc., as Guarantors and U.S. Trust Company of
Texas, N.A. as Trustee relating to 91/2% Senior Subordinated
Notes Due 2000. (2)
4.4 First Supplemental Indenture dated as of December 1, 1995 among
the Company, CompTeam Inc., CompFinance Inc., CompService Inc.,
and U.S. Trust Company of Texas, N.A., as trustee. (8) 22
4.5 Subsidiary Guarantee executed by CompTeam Inc. (8) 27
4.6 Rights Agreement dated April 29, 1994, between the Company and
Bank One, Texas, N.A. as Rights Agent. (5)
4.7 Letter of the Company dated November 1, 1995, appointing First
Interstate Bank of Texas, N.A. as substitute Rights Agent under
the Rights Agreement. (7)
10.1 CompUSA Inc. Long-Term Incentive Plan (formerly CompUSA Inc.
1990 Stock Option Plan). (7)
10.2 $75,000,000 Credit Agreement dated June 16, 1995, among the
Company, certain lenders and NationsBank of Texas, N.A. as
Administrative Lender. (6)
10.3 First Amendment to the Credit Agreement dated as of December 21,
1995 among the Company, certain lenders and NationsBank of
Texas, N.A., as Administrative Lender. (8) 30
10.4 Promissory Note dated June 16, 1995, in the principal amount of
$20,000,000 issued in favor of NationsBank of Texas, N.A.. (6)
10.5 Promissory Note dated June 16, 1995, in the principal amount of
$15,000,000 issued in favor of First Interstate Bank of Texas,
N.A.. (6)
10.6 Promissory Note dated June 16, 1995, in the principal amount of
$15,000,000 issued in favor of United States Bank of Oregon. (6)
10.7 Promissory Note dated June 16, 1995, in the principal amount of
$12,500,000 issued in favor of Wells Fargo Bank. (6)
10.8 Promissory Note dated June 16, 1995, in the principal amount of
$12,500,000 issued in favor of Bank One, Texas, N.A. (6)
10.9 Subsidiary Guaranty dated June 16, 1995, made by CompFinance
Inc. and CompService Inc. (6) 35
10.10 Agreement and Adoption of Subsidiary Guaranty dated as of
December 1, 1995, executed by CompTeam Inc. (8)
10.11 Subordination Agreement dated June 16, 1995, among CompFinance
Inc., CompService Inc., NationsBank of Texas, N.A. and certain
lenders. (6)
<PAGE>
10.12 Agreement and Adoption of Subordination Agreement dated as of
December 1, 1995, executed by CompTeam Inc. (8) 39
10.13 The Addison Office Lease Agreement dated September 1, 1992,
between Carter-Crowley Properties, Inc. as Landlord and CompUSA
Inc. as Tenant. (3)
10.14 CompUSA Inc. 1996 Change in Control Termination Plan. (8) 43
10.15 Employment Agreement between the Company and Keith Costine. (1)
10.16 Form of Employment Agreement dated as of May 1, 1996, between
the Company and each of Harold F. Compton, J. Samuel Crowley,
Ronald J. Gilmore, James F. Halpin, Melvin D. McCall, Lawrence
N. Mondry, Paul Poyfair, James E. Skinner and Mark R. Walker.(8) 56
10.17 Form of Employment Agreement dated as of May 1, 1996, between
the Company and each of Anthony J. Cincotta, Aka DeMesa, Paul F.
Ewert, Robyn Gatch-Priest, Harold Greenberg, James L. Infinger,
Barry C. McCook, Jack A. Phelps, Ronald D. Strongwater and
Anthony A. Weiss. (8) 81
11 Computations of Income per Common and Common Equivalent
Share.(8) 99
(1) Previously filed as an exhibit to Registration Statement No. 33-52236 on
Form S-1 and incorporated herein by reference.
(2) Previously filed as an exhibit to Registration Statement No. 33-62884 on
Form S-3 and incorporated herein by reference.
(3) Previously filed as an exhibit to the Company's Annual Report on Form
10-K, as amended, for the fiscal year ended June 27, 1992 and
incorporated herein by reference.
(4) Previously filed as an exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended June 26, 1993 and incorporated herein by
reference.
(5) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended March 26, 1994 and incorporated herein
by reference.
(6) Previously filed as an exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended June 24, 1995 and incorporated herein by
reference.
(7) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended December 23, 1995 and incorporated
herein by reference.
(8) Filed herewith.
<PAGE>
Exhibit 4.4
- -----------------------------------------------------------------------------
- -
CompUSA Inc.,
as Issuer,
CompFinance Inc.,
CompService Inc.
and
CompTeam Inc.,
as Guarantors,
and
U.S. TRUST COMPANY OF TEXAS, N.A.,
as Trustee
---------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of December 1, 1995
---------------
Supplement to Indenture dated as of June 17, 1993, between CompUSA Inc.,
as Issuer, Compudyne Products, Inc., Compudyne Direct, Inc., CompFinance
Inc.,
and CompService Inc., as Guarantors and U.S. Trust Company of Texas, N.A., as
Trustee, relating to CompUSA Inc.'s $110,000,000 principal amount of 9 1/2%
Senior Subordinated Notes due 2000
<PAGE>
<PAGE>
FIRST SUPPLEMENTAL INDENTURE
FIRST SUPPLEMENTAL INDENTURE, dated as of December 1, 1995, among CompUSA
Inc., a corporation duly organized and existing under the laws of the State
of
Delaware (the "Issuer"), CompTeam Inc., a corporation duly organized and
existing under the laws of the State of Delaware ("CompTeam") and CompFinance
Inc. and CompService Inc. (collectively, with CompTeam, the "Guarantors"),
and
U.S. TRUST COMPANY OF TEXAS, N.A., a national banking association duly
organized and existing under the laws of the United States (the "Trustee"),
as
Trustee under the Indenture hereinafter mentioned.
WITNESSETH
WHEREAS, the Issuer, CompFinance Inc., CompService Inc., Compudyne
Products, Inc. and Compudyne Direct, Inc., heretofore executed and delivered
to the Trustee an Indenture dated as of June 17, 1993 (the "Original
Indenture"), providing for the issuance of $110,000,000 principal amount
of the Issuer's 9 1/2% Senior Subordinated Notes due 2000 (the "Securities");
WHEREAS, Compudyne Products, Inc. and Compudyne Direct, Inc. have been
merged with and into the Issuer and are therefore no longer in existence;
WHEREAS, CompTeam is a newly formed, wholly owned subsidiary of the
Issuer
and wishes to guarantee Issuer's obligations with respect to the repayment of
the Securities;
WHEREAS, Section 9.01 of the Indenture, "Amendments -- Without Consent of
Securityholders", provides that provisions of the Indenture may be amended or
supplemented without the consent of the Holders with respect to certain
matters therein identified;
WHEREAS, CompTeam desires in and by this First Supplemental Indenture to
guarantee the obligation of the Issuer to pay the principal and interest on
the Securities;
WHEREAS, all conditions necessary to authorize the execution and delivery
of this First Supplemental Indenture and to make this First Supplemental
Indenture valid and binding have been complied with or have been done or
performed;
NOW THEREFORE, in consideration of the above premises, and in order to
comply with the terms of the Indenture, the Issuer and the Guarantors
covenant
with the Trustee as follows:
ARTICLE ONE
DEFINITIONS
Section 1.01. For all purposes of the Indenture and this First
Supplemental Indenture, except as otherwise expressly provided or unless the
context otherwise requires:
(a) the words "herein", "hereof" and "hereunder" and other words of
<PAGE>
similar import refer to the Indenture and this First Supplemental Indenture
as
a whole and not to any particular Article, Section or subdivision; and
(b) capitalized terms used but not defined herein shall have the meaning
assigned to them in the Indenture.
ARTICLE TWO
AMENDMENT AND SUPPLEMENT
Section 2.01. The definition of "Guarantor," which follows the
definition
of "Guarantee" in Section 1.01 of the Indenture, is hereby deleted and
replaced with the following new definition:
"Guarantor" means each of CompFinance Inc., CompService Inc. and
CompTeam Inc. and any other direct or indirect Subsidiary of the Company that
executes a Subsidiary Guarantee after the date hereof, and their respective
successors or assigns.
Section 2.02. CompTeam hereby agrees to be bound by all of the terms and
conditions of the Indenture as a Guarantor and to execute such documents,
including without limitation a written Subsidiary Guarantee, as shall be
necessary to evidence CompTeam's status as a Guarantor.
ARTICLE THREE
MISCELLANEOUS
Section 3.01. All of the terms and conditions of the Indenture shall
remain in full force and effect.
Section 3.02. The Trustee accepts the modification of the Indenture
effected by this First Supplemental Indenture, but only upon the terms and
conditions set forth in the Indenture. Without limiting the generality of
the
foregoing, the Trustee assumes no responsibility for the correctness of the
recitals herein contained, which shall be taken as the statements of the
Issuer. The Trustee makes no representation and shall have no responsibility
as to the validity of this First Supplemental Indenture.
Section 3.03. In case any provision in this First Supplemental Indenture
shall be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions of this First Supplemental
Indenture or the Indenture shall not in any way be affected or impaired
thereby.
Section 3.04. This First Supplemental Indenture shall be deemed to be a
contract made under the laws of the State of New York and for all purposes
shall be governed by and construed in accordance with the laws of the State
of
New York without regard to principles of conflicts of laws.
Section 3.05. This First Supplemental Indenture may be executed in any
number of counterparts, each of which when so executed shall be deemed to be
an original, but such counterparts shall together constitute but one and the
same instrument.
<PAGE>
IN WITNESS WHEREOF, the Issuer, the Guarantors and the Trustee have
caused
their names to be signed hereto by their respective officers thereunder duly
authorized and their respective corporate seals, duly attested, to be
hereunto
duly affixed, all as of the day and the year first above
written.
CompUSA Inc.
[SEAL]
By: /s/ James E. Skinner
--------------------------------
Name: James E. Skinner
Attest: Title: Executive Vice President
/s/ Mark R. Walker
- ---------------------
CompFinance Inc.
[SEAL]
By: /s/ Joan Dobrzynski
-------------------------------
Name: Joan Dobrzynski
Attest: Title: President
/s/ Rick B. Mahaff
- ---------------------
CompService Inc.
[SEAL]
By: /s/ Joan Dubrzynski
---------------------------------
Name: Joan Dubrzynski
Attest: Title: President
/s/ Rick B. Mahaff
- ---------------------
CompTeam Inc.
[SEAL]
By: /s/ James E. Skinner
---------------------------------
Name: James E. Skinner
Attest: Title: Vice President & Treasurer
/s/ Mark R. Walker
- ---------------------
<PAGE>
U.S. Trust Company of Texas, N.A.
[SEAL]
By: /s/ Colette E. Neuner
-----------------------------------
Name: Colette E. Neuner
Attest: Title: Assistant Vice President
/s/ J. Stetih
- --------------
<PAGE>
Exhibit 4.5
SUBSIDIARY GUARANTEE
CompTeam Inc., a Delaware corporation ("Guarantor"), hereby executes this
Subsidiary Guarantee (this "Subsidiary Guarantee") on behalf of its sole
stockholder, CompUSA Inc., a Delaware corporation (the "Company") in
connection with that certain Indenture (the "Indenture") dated as of June 17,
1993, among the Company, certain of its subsidiaries (collectively, with the
Guarantor, the "Guarantors") and U.S. Trust Company of Texas, N.A. (the
"Trustee"). Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to them in the Indenture.
The Guarantor hereby unconditionally guarantees to each Holder of a
Security
authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, irrespective of the validity and enforceability of
the
Indenture, the Securities and the obligations of the Company thereunder,
that:
(a) the principal of and interest on the Securities will be promptly paid in
full when due, whether at maturity, by acceleration, redemption or otherwise,
and interest on the overdue principal of and interest on the Securities, if
any, if lawful, and all other obligations of the Company to the
Securityholders or the Trustee thereunder will be promptly paid in full or
performed, all in accordance with the terms thereof; and (b) in case of any
extension of time of payment or renewal of any Securities or any of such
other
obligations, that same will be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. Failing payment when due of any
amount so guaranteed or any performance so guaranteed for whatever reason,
the
Guarantor will be jointly and severally obligated (together with the other
Guarantors) to pay the same immediately. The Guarantor hereby agrees that
its obligations hereunder shall be unconditional, irrespective of the
validity, regularity or enforceability of the Securities or the Indenture,
the
absence of any action to enforce the same, any waiver or consent by any
Securityholder with respect to any provisions thereof, the recovery of any
judgment against the Company, any action to enforce the same or any other
circumstance that might otherwise constitute a legal or equitable discharge
or
defense of the Guarantor. The Guarantor hereby waives diligence,
presentment,
demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a proceeding
first against the Company, protest, notice and all demands whatsoever and
covenants that this Subsidiary Guarantee will not be discharged except by
complete performance of the obligations contained in the Securities and the
Indenture. If any Securityholder or the Trustee is required by any court or
otherwise to return to the Company or any Guarantor, or any Custodian,
Trustee, liquidator or other similar official acting in relation to either
the
Company or the Guarantors, any amount paid by either to the Trustee or such
Securityholder, this Subsidiary Guarantee, to the extent theretofore
discharged, shall be reinstated in full force and effect. The Guarantor
agrees that it shall not be entitled to any right of subrogation in relation
to the Securityholders in respect of any obligations guaranteed hereby until
<PAGE>
payment in full of all obligations guaranteed hereby. The Guarantor further
agrees that, as between the Guarantors, on the one hand, and the
Securityholders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6 of
the Indenture for the purposes of this Subsidiary Guarantee, notwithstanding
any stay, injunction or other prohibition preventing such acceleration in
respect of the obligations guaranteed thereunder, and (y) in the event of any
declaration of acceleration of such obligations as provided in Article 6 of
the Indenture, such obligations (whether or not due and payable) shall
forthwith become due and payable by the Guarantors for the purpose of this
Subsidiary Guarantee. The Guarantor shall have the right to seek
contribution
from any non-paying Guarantor so long as the exercise of such right does not
impair the rights of the Securityholders under this Subsidiary Guarantee.
The Guarantor agrees to pay any and all costs and expenses (including
reasonable attorneys' fees) incurred by the Trustee or any Holder in
enforcing
any rights under this Subsidiary Guarantee; provided, however, that the
maximum liability of the Guarantor pursuant to this Subsidiary Guarantee
shall be limited by the following paragraph.
The Guarantor hereby confirms that it is the intention of all parties that
the guarantee by the Guarantor pursuant to this Subsidiary Guarantee not
constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy
Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer
Act or any similar federal or state law. To effectuate the foregoing
intention, the Guarantor hereby irrevocably agrees that the obligations of
such Guarantor under this Subsidiary Guarantee shall be limited to the
maximum
amount as will, after giving effect to any collections from or payments made
by or on behalf of any other Guarantor in respect of the obligations of such
other Guarantor under its Subsidiary Guarantee, result in the obligations of
the Guarantor under this Subsidiary Guarantee not constituting such
fraudulent
transfer or conveyance.
No stockholder, officer, director or incorporator, as such, past, present
or
future, of the Guarantor shall have any personal liability under this
Subsidiary Guarantee by reason of his or its status as such stockholder,
officer, director or incorporator.
This Subsidiary Guarantee shall be binding upon the Guarantor and its
successors and assigns and shall inure to the benefit of the successors and
assigns of the Trustee and the Securityholders and, in the event of any
transfer or assignment of rights by any Securityholder or the Trustee, the
rights and privileges herein conferred upon that party shall automatically
extend to and be vested in such transferee or assignee, all subject to the
terms and conditions hereof.
The obligations of the Guarantor to the Securityholders and to the Trustee
pursuant to this Subsidiary Guarantee and the Indenture are expressly
subordinated to the extent set forth in Article 11 of the Indenture and
reference is hereby made to such Indenture for the precise terms of such
subordination.
<PAGE>
Concurrently with a sale or other disposition of assets or all of the
capital stock of the Guarantor in compliance with the terms and conditions
set
forth in the Indenture, including Sections 4.10 and 11.04 thereof, such
assets
shall automatically be released from any Liens in favor of the Trustee and,
if
the assets sold or otherwise disposed of include all or substantially all of
the assets of the Guarantor or all of the capital stock of the Guarantor,
then
the Guarantor (in the event of a sale or other disposition of all of the
capital stock of such Guarantor) or the purchaser of the property (in the
event of a sale or other disposition of all or substantially all of the
assets
of such Guarantor) shall automatically be released from and relieved of any
obligations under the Subsidiary Guarantee without any action required on the
part of the Trustee or any Securityholder.
CompTeam Inc.
By: /s/ Mark R. Walker
---------------------------
Its: Vice President & Secretary
<PAGE>
Exhibit 10.3
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "First Amendment"), dated as
of December 21, 1995, is entered into among CompUSA Inc., a Delaware
corporation ("Borrower"), the banks listed on the signature pages hereof
(collectively, the "Lenders"), and NationsBank of Texas, N.A., as
Administrative Lender (in said capacity, the "Administrative Lender").
BACKGROUND
A. Borrower, Lenders and Administrative Lender heretofore entered into that
certain Credit Agreement, dated as of June 16, 1995 (the "Credit Agreement";
the terms defined in the Credit Agreement and not otherwise defined herein
shall be used herein as defined in the Credit Agreement).
B. Borrower, Lenders and Administrative Lender desire to make an
amendment to the Credit Agreement.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements
hereafter set forth, and for other good and valuable consideration, the
receipt and adequacy of which are all hereby acknowledged, Borrower, Lenders
and Administrative Lender covenant and agree as follows:
1. AMENDMENT TO CREDIT AGREEMENT. Section 7.6 of the Credit Agreement
is hereby amended to read as follows:
"Section 7.6 Restricted Payments. The Borrower shall not, and shall
not
permit any Subsidiary to, directly or indirectly declare, pay or make any
Restricted Payments; provided, however, (a) any Subsidiary may declare and
pay
Dividends to the Borrower or another Subsidiary, (b) the Borrower may make
loans to directors, officers and employees of Borrower and its Subsidiaries
during any Fiscal Year (calculated net of loan repayments), together with the
Guaranty of Indebtedness of directors, officers and employees permitted
pursuant to Section
7.5 hereof during such Fiscal Year, in an aggregate amount not to exceed
$1,000,000, and
(c) the Borrower may make Treasury Stock Purchases of its shares of capital
stock for an aggregate consideration not to exceed $30,000,000; provided,
further, however, the Borrower shall not pay or make any such Restricted
Payment set forth in clause (b) or (c) above unless there shall exist no
Default prior to or after giving effect to any such proposed Restricted
Payment."
<PAGE>
2. REPRESENTATIONS AND WARRANTIES TRUE; NO EVENT OF DEFAULT. By its
execution and delivery hereof, Borrower represents and warrants that, as of
the date hereof and after giving effect to the amendment contemplated by the
foregoing Section 1:
(a) the representations and warranties contained in the Credit Agreement
are true and correct on and as of the date hereof as made on and as of such
date;
(b) no event has occurred and is continuing which constitutes a Default
or an Event of Default;
(c) Borrower has full power and authority to execute and deliver this
First Amendment and the Credit Agreement, as amended hereby, constitute the
legal, valid and binding obligations of Borrower, enforceable in accordance
with their respective terms, except as enforceability may be limited by
applicable debtor relief laws and by general principles of equity (regardless
of whether enforcement is sought in a proceeding in equity or at law) and
except as rights to indemnity may be limited by federal or state securities
laws; and
(d) no authorization, approval consent, or other action by, notice to,
or
filing with, any governmental authority or other Person, is required for the
execution, delivery or performance by Borrower of this First Amendment or the
acknowledgement of the First Amendment by any Guarantor.
3. CONDITIONS OF EFFECTIVENESS. This First Amendment shall be
effective
as of December 21, 1995, subject to the following:
(a) Administrative Lender shall have received counterparts of this First
Amendment executed by Determining Lenders;
(b) Administrative Lender shall have received counterparts of this First
Amendment executed by Borrower and acknowledged by each Guarantor; and
(c) Administrative Lender shall have received, in form and substance
satisfactory to Administrative Lender and its counsel, such other documents,
certificates and instruments as Administrative Lender shall require.
4. GUARANTOR'S ACKNOWLEDGMENT. By signing below, each of the
Guarantors
acknowledges this First Amendment and agrees that its obligations in respect
of its Subsidiary Guaranty are not released, modified, impaired or affected
in
any manner by this First Amendment or any of the provisions contemplated
herein.
5. REFERENCE TO THE CREDIT AGREEMENT.
(a) Upon the effectiveness of this First Amendment, each reference in
the
Credit Agreement to "this Agreement", "hereunder", or words of like import
shall mean and be a reference to the Credit Agreement, as affected and
amended
by this First Amendment.
<PAGE>
(b) The Credit Agreement, as amended by this First Amendment, and all
other Loan Documents shall remain in full force and effect and are hereby
ratified and confirmed.
6. COSTS, EXPENSES AND TAXES. Borrower agrees to pay on demand all
costs and expenses of each Lender in connection with the preparation,
reproduction, execution and delivery of this First Amendment and the other
instruments and documents to be delivered hereunder (including the reasonable
fees and out-of-pocket expenses of counsel for each Lender with respect
thereto and with respect to advising each Lender as to its rights and
responsibilities under the Credit Agreement, as amended by this First
Amendment).
7. EXECUTION IN COUNTERPARTS. This First Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same instrument.
8. GOVERNING LAW: BINDING EFFECT. This First Amendment shall be
governed by and construed in accordance with the laws of the State of Texas
and shall be binding upon Borrower and each Lender and their respective
successors and assigns.
9. HEADINGS. Section headings in this First Amendment are included
herein for convenience of reference only and shall not constitute a part of
this First Amendment for any other purpose.
10. ENTIRE AGREEMENT. THE CREDIT AGREEMENT, AS AMENDED BY THIS FIRST
AMENDMENT AND ALL PRIOR AMENDMENTS, AND THE OTHER LOAN DOCUMENTS REPRESENT
THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
as
the date first above written.
CompUSA Inc.
By: /s/ James E. Skinner
----------------------------------
James E. Skinner
Executive Vice President, CFO
NATIONSBANK OF TEXAS, N.A.
as Administrative Lender and as a Lender
By: /s/ Donald L. Harrison, Jr.
------------------------------------
Name: Donald L. Harrison, Jr.
Title: SVP
FIRST INTERSTATE BANK OF TEXAS,
N.A.
By: /s/ Connor J. Duffey
-------------------------------------
Name: Connor J. Duffey
Title: Vice President
UNITED STATES NATIONAL BANK OF
OREGON
By: /s/ Blake R. Howells
--------------------------------------
Name: Blake R. Howells
Title: Vice President
WELLS FARGO BANK, N.A.
<PAGE>
By: /s/ Kellie DeWhitt
-------------------------------------
Name: Kellie DeWhitt
Title: Vice President
BANK ONE, TEXAS, N.A.
By: /s/ Richard L. Rogers
--------------------------------------
Name: Richard L. Rogers
Title: FVP
ACKNOWLEDGED AND AGREED:
COMPFINANCE INC.
By: /s/ Joan L. Dobrzynski
---------------------------
Joan L. Dobrzynski
President
COMPSERVICE INC.
By: /s/ Joan L. Dobrzynski
---------------------------
Joan L. Dobrzynski
President
<PAGE>
Exhibit 10.10
AGREEMENT AND ADOPTION OF SUBSIDIARY GUARANTY
THIS AGREEMENT AND ADOPTION OF SUBSIDIARY GUARANTY (this "Agreement"),
dated
as of December 1, 1995, is executed by CompTeam Inc., a Delaware corporation
("CompTeam"), in favor of the Administrative Lender and the Lenders (each as
defined in the Credit Agreement referred to below).
BACKGROUND
11. CompUSA Inc., a Delaware corporation ("Company"), the Administrative
Lender and the Lenders have entered into a Credit Agreement, dated as of June
16, 1995 (said Credit Agreement, as amended or otherwise modified from time
to
time, being the "Credit Agreement"). The capitalized terms not otherwise
defined herein shall have the meanings specified in the Credit Agreement.
12. CompFinance Inc., a Delaware corporation ("CompFinance"), and
CompService Inc., a Delaware corporation ("CompService") (CompFinance and
CompService being collectively the "Existing Guarantors"), entered into that
certain Subsidiary Guaranty, dated as June 16, 1995 (the "Subsidiary
Guaranty").
13. On December 1, 1995, the Company formed CompTeam, a wholly-owned
Subsidiary of the Company.
14. Section 7.3(d) of the Credit Agreement requires that CompTeam
immediately become a party to the Subsidiary Guaranty.
15. The Board of Directors of CompTeam has determined that the Advances
made and to be made to the Company under the Credit Agreement may reasonably
be expected to benefit, directly or indirectly, CompTeam.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained hereinafter and contained in the Credit Agreement and the other
Loan
Documents, the parties hereto agree as follows:
16. Agreement. CompTeam hereby unconditionally agrees to be a Guarantor
under the Subsidiary Guaranty, and agrees to be bound by the Subsidiary
Guaranty and to undertake the duties, liabilities and obligations of a
Guarantor under the Subsidiary Guaranty to the same extent as if originally
named therein as a Guarantor.
17. Representations and Warranties. By its execution and delivery
hereof, CompTeam represents and warrants to the Lenders as follows:
(a) The execution, delivery and performance by CompTeam of this
Agreement
and each other document and instrument to be delivered hereunder:
<PAGE>
(i) are within CompTeam's corporate power;
(ii) have been duly authorized by all necessary corporate action,
including, without limitation, the consent of shareholders required;
(iii) will not (A) contravene its Certificate of Incorporation or
bylaws, or
(B) conflict with or result in a breach of, or constitute a default
under,
or result in or permit the termination or acceleration of, any agreement or
other contractual obligation of CompTeam;
(iv) do not require the consent, authorization by, or approval of,
or
notice to, or filing or registration with, any governmental authority or any
other Person, other than those which have been obtained and copies of which
have been delivered to the Administrative Lender, each of which is in full
force and effect.
(b) This Agreement has been duly executed and delivered by CompTeam.
(c) This Agreement is the legal, valid and binding obligation of
CompTeam, enforceable against CompTeam in accordance with its terms, except
as
enforceability may be limited by applicable Debtor Relief Laws and general
principles of equity.
18. Conditions of Effectiveness. This Agreement shall be effective as
of
the date first above written, subject to the following:
(a) The Administrative Lender shall have received counterparts of this
Agreement executed by CompTeam and acknowledged by the Existing Guarantors;
(b) The Administrative Lender shall have received an Officer's
Certificate of CompTeam, containing (i) the Certificate of Incorporation of
CompTeam, (ii) bylaws of CompTeam,
(iii) certified corporate resolutions of the Board of Directors of CompTeam
authorizing CompTeam to enter into this Agreement and the documents,
transactions and matters contemplated hereby, and (iv) the names and true
signatures of the officers of CompTeam authorized to execute and deliver this
Agreement on behalf of CompTeam.
(c) The Administrative Lender shall have received an executed copy of
the
Agreement and Adoption of Subordination Agreement executed by all parties
thereto.
19. Reference to the Subsidiary Guaranty.
(a) Upon the effectiveness of this Agreement, each reference in the
Subsidiary Guaranty to this "Guaranty", "hereunder", or words of like import
shall mean and be a reference to the Subsidiary Guaranty, as affected hereby.
(b) The Subsidiary Guaranty, as affected hereby, shall remain in full
fore and effect and is hereby ratified and confirmed.
<PAGE>
20. Costs, Expenses and Taxes. CompTeam agrees to pay on demand all
reasonable costs and expenses of Administrative Lender in connection with the
preparation, reproduction, execution and delivery of this Agreement and the
other instruments and documents to be delivered hereunder
(including the reasonable fees and out-of-pocket expenses of counsel for the
Administrative Lender with respect thereto).
21. Execution In Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which when taken together shall constitute but one
and the same instrument.
22. Governing Law; Binding Effect. This Agreement shall be governed by
and construed in accordance with the laws of the State of Texas and shall be
binding upon Borrower and each Lender and their respective successors and
assigns.
23. Headings. Section headings in this Agreement are included herein
for
convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
<PAGE>
<PAGE>
IN WITNESS WHEREOF, CompTeam has caused this Agreement to be duly executed
and delivered by its duly authorized officer on the date first above written.
COMPTEAM INC.
By: /s/ Mark R. Walker
------------------------------
Name: Mark R. Walker
Title: V.P. & Secretary
Address for CompTeam Inc.:
c/o CompUSA Inc.
14951 North Dallas Parkway
Dallas, Texas 75240
Attention: Robert L. Silmon
Vice President-Finance and Planning
The undersigned Existing Guarantors hereby
acknowledge this Agreement and confirm that
their obligations in respect of the Subsidiary
Guaranty remain in full force and effect:
COMPFINANCE INC.
By: /s/ Joan Dobrzynski
-----------------------
Name: Joan Dobrzynski
Title: President
COMPSERVICE INC.
By: /s/ Joan Dobrzynski
-----------------------
Name: Joan Dobrzynski
Title: President
<PAGE>
Exhibit 10.12
AGREEMENT AND ADOPTION OF SUBORDINATION AGREEMENT
THIS AGREEMENT AND ADOPTION OF SUBORDINATION AGREEMENT (this "Agreement"),
dated as of December 1, 1995, is executed by CompTeam Inc., a Delaware
corporation ("CompTeam"), in favor of the Administrative Lender and the
Lenders (each as defined in the Credit Agreement referred to below).
BACKGROUND
24. CompUSA Inc., a Delaware corporation ("Company"), the Administrative
Lender and the Lenders have entered into a Credit Agreement, dated as of June
16, 1995 (said Credit Agreement, as amended or otherwise modified from time
to
time, being the "Credit Agreement"). The capitalized terms not otherwise
defined herein shall have the meanings specified in the Credit Agreement.
25. CompFinance Inc., a Delaware corporation ("CompFinance"),
CompService
Inc., a Delaware corporation ("CompService") (CompFinance and CompService
being collectively the "Existing Subordinate Creditors"), and the
Administrative Lender for the Lenders entered into that certain Subordination
Agreement, dated as June 16, 1995 (the "Subordination Agreement").
26. On December 1, 1995, the Company formed CompTeam, a wholly-owned
Subsidiary of the Company.
27. Section 7.3(d) of the Credit Agreement requires that CompTeam
immediately become a party to the Subordination Agreement.
28. The Board of Directors of CompTeam has determined that the Advances
made and to be made to the Company under the Credit Agreement may reasonably
be expected to benefit, directly or indirectly, CompTeam.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained hereinafter and contained in the Credit Agreement and the other
Loan
Documents, the parties hereto agree as follows:
29. Agreement. CompTeam hereby unconditionally agrees to be a
Subordinate Creditor under the Subordination Agreement, and agrees to be
bound
by the Subordination Agreement and to undertake the duties, liabilities and
obligations of a Subordinate Creditor under the Subordination Agreement to
the
same extent as if originally named therein as a Subordinate Creditor.
30. Representations and Warranties. By its execution and delivery
hereof, CompTeam represents and warrants to the Lenders as follows:
(a) The execution, delivery and performance by CompTeam of this
Agreement and each other document and instrument to be delivered hereunder:
<PAGE>
(i) are within CompTeam's corporate power;
(ii) have been duly authorized by all necessary corporate
action, including, without limitation, the consent of shareholders
required;
(iii) will not (A) contravene its Certificate of Incorporation
or bylaws, or (B) conflict with or result in a breach of, or
constitute a default under, or result in or permit the termination or
acceleration of, any agreement or other contractual obligation of
CompTeam;
(iv) do not require the consent, authorization by, or approval
of, or notice to, or filing or registration with, any governmental
authority or any other Person, other than those which have been
obtained and copies of which have been delivered to the
Administrative Lender, each of which is in full force and effect.
(b) This Agreement has been duly executed and delivered by CompTeam.
(c) This Agreement is the legal, valid and binding obligation of
CompTeam, enforceable against CompTeam in accordance with its terms, except
as enforceability may be limited by applicable Debtor Relief Laws and
general principles of equity.
31. Conditions of Effectiveness. This Agreement shall be effective as
of
the date first above written, subject to the following:
(a) The Administrative Lender shall have received counterparts of
this Agreement executed by CompTeam and acknowledged by the Existing
Subordinate Creditors;
(b) The Administrative Lender shall have received an Officer's
Certificate of CompTeam, containing (i) the Certificate of Incorporation of
CompTeam, (ii) bylaws of CompTeam, (iii) certified corporate resolutions of
the Board of Directors of CompTeam authorizing CompTeam to enter into this
Agreement and the documents, transactions and matters contemplated hereby,
and (iv) the names and true signatures of the officers of CompTeam
authorized to execute and deliver this Agreement on behalf of CompTeam.
(c) The Administrative Lender shall have received an executed copy
of the Agreement and Adoption of Subsidiary Guaranty executed by all
parties
thereto.
32. Reference to the Subordination Agreement.
(a) Upon the effectiveness of this Agreement, each reference in the
Subordination Agreement to this "Subordination Agreement", "hereunder", or
words of like import shall mean and be a reference to the Subordination
Agreement, as affected hereby.
(b) The Subordination Agreement, as affected hereby, shall remain
in full fore and effect and is hereby ratified and confirmed.
<PAGE>
33. Costs, Expenses and Taxes. CompTeam agrees to pay on demand all
reasonable costs and expenses of Administrative Lender in connection with the
preparation, reproduction, execution and delivery of this Agreement and the
other instruments and documents to be delivered hereunder (including the
reasonable fees and out-of-pocket expenses of counsel for the Administrative
Lender with respect thereto).
34. Execution In Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which when taken together shall constitute but one
and the same instrument.
35. Governing Law; Binding Effect. This Agreement shall be governed by
and construed in accordance with the laws of the State of Texas and shall be
binding upon Borrower and each Lender and their respective successors and
assigns.
36. Headings. Section headings in this Agreement are included herein
for
convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
<PAGE>
<PAGE>
IN WITNESS WHEREOF, CompTeam has caused this Agreement to be duly executed
and delivered by its duly authorized officer on the date first above written.
COMPTEAM INC.
By: /s/ Mark R. Walker
----------------------------
Name: Mark R. Walker
Title: V.P. & Secretary
Address for CompTeam Inc.:
c/o CompUSA Inc.
14951 North Dallas Parkway
Dallas, Texas 75240
Attention: Robert L. Silmon
Vice President-Finance and Planning
The undersigned Existing Subordinate Creditors
hereby acknowledge this Agreement and confirm that
their obligations in respect of the Subordination
Agreement remain in full force and effect:
COMPFINANCE INC.
By: /s/ Joan Dobrzynski
----------------------------
Name: Joan Dobrzynski
Title: President
COMPSERVICE INC.
By: /s/ Joan Dobrzynski
----------------------------
Name: Joan Dobrzynski
Title: President
CONSENTED AND AGREED TO:
COMPUSA INC.
By: /s/ James E. Skinner
-------------------------------
Name: James E. Skinner
Title: Executive Vice President
<PAGE>
Exhibit 10.14
CompUSA Inc.
1996 CHANGE IN CONTROL TERMINATION PLAN
R E C I T A L S:
A. Employer considers the maintenance of a sound management team
essential to protecting and enhancing its best interests and those of its
stockholders.
B. Employer recognizes that the possibility of a change in control of
Employer may result in the departure or distraction of management to the
detriment of Employer and its stockholders.
C. Employer has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of selected
members of Employer's management team to their assigned duties without the
distraction arising from the possibility of a change in control of Employer.
D. Employer previously adopted the CompUSA Inc. Change In Control
Termination Plan, which will expire April 30, 1996.
E. Employer desires to adopt the CompUSA Inc. 1996 Change In Control
Termination Plan effective May 1, 1996.
NOW, THEREFORE, Employer hereby adopts the Plan upon the following terms
and conditions:
ARTICLE I
PARTICIPATION
1.1 Commencement of Participation. Each employee employed by Employer
in
an Eligible Category on the Effective Date is a Participant. Thereafter,
each
employee employed by Employer in an Eligible Category shall become a
Participant on the first date such employee is employed with Employer in an
Eligible Category.
1.2 Duration of Participation.
(a) General Provisions. Each Participant shall continue to participate
in the Plan until the earliest to occur of the following:
(i) termination of the Participant's employment with all Employers
other than in a Triggering Termination;
<PAGE>
(ii) transfer of the Participant's employment from an Eligible
Category other than during an Applicable Period;
(iii) the last Employer (other than the Company) by which the
Participant is employed ceases to be a subsidiary or other affiliate of
the Company other than during an Applicable Period;
(iv) a Triggering Termination of the Participant's employment with
all Employers, but only after payment of the entire amount of the
Termination Payment to the Participant and all other payments that the
Participant is, or may become, entitled to receive under the Plan;
(v) expiration of the term of the Plan as provided in Section 6.1;
(vi) expiration of the Applicable Period with respect to a Change In
Control; or
(vii) death of the Participant.
1.3 Eligible Category. The term "Eligible Category" refers to employees
employed by Employer in the capacity of Regional Manager, Senior Director or
Director, as those terms are defined in accordance with Employer's personnel
policies.
ARTICLE II
CHANGE IN CONTROL
2.1 Change In Control Defined. A Change In Control shall be deemed to
have occurred for purposes hereof when any Person 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 between the Company and Bank One, Texas, N.A. as Rights Agent
(First
Interstate Bank of Texas, N.A. became successor Rights Agent as of November
1,
1995), dated as of April 29, 1994 (the "Rights Agreement"); provided that a
Change In Control shall not be deemed to have occurred for purposes hereof
with respect to any Person meeting the requirements of clauses (i) and (ii)
of
Rule 13d-1(b)(1) promulgated under the Securities Exchange Act of 1934, as
amended.
ARTICLE III
CHANGE IN CONTROL TERMINATION PAYMENT
3.1 Termination Payment.
(a) Amount.
(i) In the event a Participant's employment with Employer
terminates
in a Triggering Termination, Employer shall pay the Participant a lump
sum
payment in cash (the "Termination Payment") equal to 50% of the sum of
the
following items:
<PAGE>
(1) Participant's annual base compensation determined by
reference to his highest annual base compensation in effect at any
time during the Participant's employment with Employer;
(2) the Target Bonus that would be payable to the Participant
by Employer for the bonus period in which the Change In Control
occurred; and
(3) the Participant's annualized car allowance determined by
reference to his highest car allowance rate in effect at any time
during the Participant's employment with Employer.
(ii) The Termination Payment shall include the amounts described in
Section 3.1(a)(i) plus the following amounts described in this Section
3.1(a)(ii):
(1) the amount of the Participant's compensation accrued but
unpaid as of the date of the Triggering Termination;
(2) reimbursements due to the Participant for unpaid expenses
incurred in the performance of his duties for Employer prior to the
Triggering Termination;
(3) any other benefit accrued but unpaid as of the date of
the Triggering Termination; and
(4) the estimated cost of obtaining accident, health, dental,
disability and life insurance coverage for the six month period
following the expiration of the Participant's continuation (COBRA)
rights; provided that such coverage is substantially similar to the
most comprehensive coverage provided to the Participant by Employer
at any time during the Applicable Period; and provided further that
this Section 3.1(a)(ii)(4) shall be applied without regard to, and
the amount payable under this Section 3.1(a)(ii)(4) is in addition
to, any continuation (COBRA) rights or conversion rights under any
plan provided by Employer, which rights are not affected by any
provision of the Plan.
(c) Applicable Period Defined. "Applicable Period" means the 15 month
period that begins three months before the Change In Control and ends 12
months after the Change In Control.
(d) Triggering Termination Defined. Each of the following events
constitutes a "Triggering Termination" when a Participant's employment with
all Employers is:
(i) actually terminated by an Employer during an Applicable Period
other than for Good Reason;
(ii) Constructively Terminated by an Employer during an Applicable
Period other than for Good Reason; or
<PAGE>
(iii) the last Employer (other than the Company) by which the
Participant is employed ceases to be a subsidiary or other affiliate of
the Company during an Applicable Period.
(e) Good Reason Defined. "Good Reason" means the termination of a
Participant's employment with Employer as a result of the Participant's
commission of a felony or failure to obey written directions delivered to the
Participant by the Company's Chairman of the Board, President, Chief
Executive
Officer or its Board of Directors or by any of the Company's Executive Vice
Presidents, Senior Vice Presidents or Vice Presidents.
(f) Constructively Terminated Defined. "Constructively Terminated" with
respect to a Participant's employment with Employer will be deemed to have
occurred if Employer:
(i) demotes the Participant to a lesser position, either in title
or responsibility, than the highest position held by the Participant with
Employer at any time during the Participant's employment with Employer;
(ii) decreases the Participant's compensation below the highest
level
in effect at any time during the Participant's employment with Employer
or
reduces the Participant's benefits and perquisites below the highest
levels in effect at any time during the Participant's employment with
Employer (other than as a result of any amendment or termination of any
employee or group or other executive benefit plan, which amendment or
termination is applicable to all executives of Employer); or
(iii) requires the Participant to relocate to a principal place
of business more than 25 miles from the principal place of business
occupied by Employer on the first day of an Applicable Period.
3.2 Outplacement Consulting Services. In addition to the Termination
Payment, Employer shall pay each Participant whose employment is terminated
in
a Triggering Termination a cash payment in the amount of $5,000 as an
allowance for the cost of outplacement consulting services. Such amount
shall
be paid at such time and in accordance with Section 3.3 as if the payment
under this Section 3.2 constituted part of the Termination Payment. The
Participant shall not be obligated to apply the amount of the payment under
this Section 3.2 to outplacement consulting services and shall not be
obligated to account to Employer for the expenditure of such amount.
3.3 Time for Payment; Interest. Employer shall pay the Termination
Payment to the Participant concurrent with the Triggering Termination or
concurrent with the Change In Control if the Participant's employment
terminated in a Triggering Termination during the portion of the Applicable
Period prior to the Change In Control. Employer's obligation to pay any
amounts under the Plan to a Participant, including without limitation the
Termination Payment and any Gross Up Payment due under Article IV, shall bear
interest at the maximum rate allowed by law until paid by Employer, and all
accrued and unpaid interest shall bear interest at the same rate, all of
which
interest shall be compounded daily. All Employers shall be and remain
jointly
and severally liable for all payments due under the Plan until such payments
are made in full.
<PAGE>
ARTICLE IV
GROSS UP PAYMENT
4.1 Excess Parachute Payment. If a Participant incurs the tax (the
"Excise Tax") imposed by Section 4999 of the Code on "excess parachute
payments" within the meaning of Section 280G(b)(1) of the Code as the result
of the receipt of any payments under the Plan, Employer shall pay to the
Participant an amount (the "Gross Up Payment") such that the net amount
retained by the Participant, after deduction of (i) any Excise Tax upon any
payments under the Plan (other than payments provided by this Section 4.1)
and
(ii) any federal, state and local income and employment taxes (together with
penalties and interest) and Excise Tax upon the payments provided by this
Section 4.1, shall be equal to the amount of the payments that the
Participant
is entitled to receive under the Plan (other than payments provided by this
Section 4.1).
4.2 Applicable Rates. For purposes of determining the Gross Up Payment
amount, the Participant shall be deemed:
(a) to pay federal income taxes at the highest marginal rate of federal
income taxation applicable to individual taxpayers in the calendar year in
which the Gross Up Payment is made (which rate shall be adjusted as necessary
to take into account the effect of any reduction in deductions, exemptions or
credits otherwise available to the Participant had the Gross Up Payment not
been received);
(b) to pay additional employment taxes as a result of the receipt of the
Gross Up Payment in an amount equal to the highest marginal rate of
employment
taxes applicable to wages; provided that if any employment tax is applied
only
up to a specified maximum amount of wages, such limit shall be taken into
account for purposes of such calculation; and
(c) to pay state and local income taxes at the highest marginal rates of
taxation in the state and locality of the Participant's residence on the date
of the Triggering Termination, net of the maximum reduction in federal income
taxes that could be obtained from deduction of such state and local taxes.
4.3 Determination of Gross Up Payment Amount. The determination of the
Gross Up Payment amount shall be made by Ernst & Young LLP or another
nationally recognized public accounting firm reasonably acceptable to the
Participant (in either case, the "Accountants"). If the Excise Tax amount
payable by the Participant, based upon a "Determination," is different from
the Excise Tax amount computed by the Accountants for purposes of determining
the Gross Up Payment amount, then appropriate adjustments to the Gross Up
Payment amount shall be made in the manner provided in Section 4.4. For
purposes of determining the Gross Up Payment amount prior to a Determination
of the Excise Tax amount, the following assumptions shall be utilized:
(a) that portion of the Termination Payment that is attributable to the
items described in Sections 3.1(a)(i)(1), (2) and (3), Section 3.1(a)(ii)(4)
and the Gross Up Payment amount shall be treated as a Parachute Payment
without regard to whether a Change In Control satisfies the requirements of
Section 280G(b)(2)(A)(i) of the Code;
<PAGE>
(b) no portion of any payment made pursuant to Sections 3.1(a)(ii)(1),
(2) or (3) or Section 8.3 shall be treated as a Parachute Payment;
(c) the "ascertainable fair market value" (as set forth in Prop. Treas.
Reg. Sec. 1.280G-1, Q&A 13) of the Options, the vesting of which was
accelerated by the Change In Control as provided in the Incentive Plan and as
further provided in Section 5.1, shall be equal to the product of (i) and
(ii)
as set forth below:
(i) the number of shares covered by such Options; and
(ii) the difference between:
(1) the fair market value per share as of the date of the
Change In Control; and
(2) the exercise price per share of stock subject to such
Options; and
(d) for purposes of applying the rules set forth in Prop. Treas. Reg.
Sec. 1.280G-1, Q&A 24(c) to a payment described in Prop. Treas. Reg. Sec.
1.280G-1, Q&A 24(b), the amount reflecting the lapse of the obligation to
continue performing services shall be equal to the minimum amount allowed for
such payment as set forth in Prop. Treas. Reg. Sec. 1.280G-1, Q&A 24(c)(2)
(or
if Prop. Treas. Reg. Sec. 1.280G-1 has been superseded by temporary or final
regulations, the minimum amount provided for in any temporary or final
regulations that supersede Prop. Treas. Reg. Sec. 1.280G-1 and that are
applicable to the Termination Payment, Gross Up Payment or both).
4.4 Time For Payment. Employer shall pay the estimated Gross Up Payment
amount in cash to the Participant concurrent with the payment of the
Termination Payment. The Participant shall cooperate with Employer in the
determination of the actual Gross Up Payment amount. Further, such
adjustments to the estimated Gross Up Payment amount as may be necessary to
equal the actual Gross Up Payment amount shall be made, which in the case of
the Participant refers to refunds of prior overpayments and in the case of
Employer refers to makeup of prior underpayments.
ARTICLE V
STOCK OPTIONS AND RESTRICTED STOCK
5.1 Treatment of Options and Restricted Stock. A Participant may hold
options ("Options") issued under the Incentive Plan that become immediately
exercisable upon a Change In Control. In addition, a Participant may hold
restricted stock ("Restricted Stock") issued under the Incentive Plan
pursuant
to which applicable restrictions will lapse upon a Change In Control.
Employer shall take no action to facilitate a transaction involving a Change
In Control, including without limitation redemption of the Rights issued
pursuant to the Rights Agreement, unless it has taken such action as may be
necessary to ensure that each Participant has the opportunity to exercise all
Options he may then hold, and obtain certificates containing no restrictive
legends in respect of any Restricted Stock he may then hold, at a time and in
<PAGE>
a manner that shall give each Participant the opportunity to sell or exchange
the securities of Employer acquired upon exercise of his Options and upon
receipt of unrestricted certificates for shares of Common Stock in respect of
his Restricted Stock, if any (collectively, the "Acquired Securities"), at
the
earliest time and in the most advantageous manner any holder of the same
class
of securities as the Acquired Securities is able to sell or exchange such
securities in connection with such Change In Control. Employer acknowledges
that its covenants in the preceding sentence (the "Covenants") are reasonable
and necessary in order to protect the legitimate interests of Employer in
maintaining the Participants as employees and that any violation of the
Covenants by Employer would result in irreparable injuries to the
Participants, and Employer therefore acknowledges that in the event of any
violation of the Covenants by Employer or its directors, officers or
employees, or any of their respective agents, each Participant shall be
entitled to obtain from any court of competent jurisdiction temporary,
preliminary and permanent injunctive relief in order to (i) obtain specific
performance of the Covenants, (ii) obtain specific performance of the
exercise
of his Options, delivery of certificates containing no restrictive legends in
respect of his Restricted Stock and the sale or exchange of the Acquired
Securities in the advantageous manner contemplated above or (iii) prevent
violation of the Covenants; provided that in the event a Participant fails to
obtain such injunctive relief, nothing in this Plan shall be deemed to
prejudice the Participant's rights to damages for violation of the Covenants.
ARTICLE VI
AMENDMENT AND TERMINATION
6.1 Term. The Plan shall commence on the Effective Date and shall
terminate on May 1, 1998, if a Change In Control has not occurred before such
date. If, however, a Change In Control occurs before May 1, 1998, the Plan
shall continue in effect with respect to each Participant throughout the
Applicable Period with respect to such Change In Control.
6.2 Amendment Procedures. The Plan may be modified, amended or
terminated at any time by a written instrument executed by an officer of the
Company; provided that execution of such instrument must be authorized by a
written resolution of the Board of Directors of the Company or a written
resolution of the Committee.
6.3 No Amendments During Applicable Period. Notwithstanding any
provision of the Plan to the contrary, the Plan shall not be modified,
amended
or terminated in any respect during an Applicable Period if the effect of any
such amendment would be to reduce any benefit payable to a Participant or
that
may become payable in the future to a Participant.
6.4 Adoption by Other Employers. Any subsidiary or other affiliate of
the Company may adopt the Plan for the benefit of its employees by written
resolution of its board of directors or similar governing body; provided that
such adoption must be authorized by the Board of Directors of the Company or
the Committee. No subsidiary or other affiliate that is an adopting employer
of the Plan pursuant to this Section 6.4 shall have any power at any time to
modify or amend the Plan in any respect.
<PAGE>
ARTICLE VII
ADMINISTRATION
7.1 Authority and Responsibility of the Committee. The Committee has
the
authority to control and manage the operation and administration of the Plan;
provided that if the Committee for any reason fails or refuses to take any
action required or permitted under the terms of the Plan, the Board of
Directors of the Company may take such action in lieu of the Committee. The
Committee shall be the "named fiduciary" of the Plan for purposes of ERISA.
7.2 Committee Actions. Each decision of a majority of the members of
the
Committee then in office shall constitute the final and binding act of the
Committee. The Committee may act (a) at meetings called or held in person or
by conference telephone call and (b) by unanimous written consent, and shall
keep minutes of all meetings held and a record of all actions taken by
unanimous written consent.
7.3 Committee Powers and Duties. The Committee shall enforce the Plan
in
accordance with its terms and, except as provided in Section 7.7, shall have
all powers and discretion necessary or appropriate to supervise the
administration of the Plan and to control its operation in accordance with
its
terms, including without limitation the following powers:
(a) to issue rules and regulations necessary for the conduct and
administration of the Plan and to change, alter or amend such rules and
regulations;
(b) to interpret and determine the meaning of the Plan and to determine
and resolve any questions arising under, or in connection with, the
administration of the Plan;
(c) to determine and resolve all questions relating to the eligibility
of
employees to become Participants and the rights of Participants to any
payments under the Plan;
(d) to compute the amount of Termination Payments, Gross Up Payments and
other payments under the Plan to Participants;
(e) to keep records relating to Participants and other matters
applicable
to the Plan;
(f) to appoint an agent for service of legal process with respect to the
Plan;
(g) to prescribe procedures to be followed and forms to be used in the
administration of the Plan, including adoption of a claims and appeal
procedure in compliance with ERISA;
(h) to make available for inspection and to provide upon request at such
charge as may be permitted and determined by the Committee, documents and
instruments required by ERISA to be disclosed to Participants; and
(i) to file, or cause to be filed, all reports required by law to be
<PAGE>
filed with governmental agencies.
7.4 Committee Delegations and Allocations of Responsibility.
(a) Delegation. The Committee shall have the authority to delegate by
instrument in writing filed with the minutes of the Committee's meetings, all
or any part of its responsibilities under the Plan to such person as it may
deem advisable (and may authorize such person to delegate such
responsibilities to such other person as the Committee shall authorize); and
in the same manner, the Committee shall have the authority to revoke any such
delegation of its responsibilities. Any action of the Committee delegate in
the exercise of such delegated responsibilities shall have the same force and
effect for all purposes under the Plan as if such action had been taken by
the
Committee. The Committee shall not be liable for any acts or omissions of
any
such delegate. The delegate shall report periodically to the Committee
concerning the discharge of the delegated responsibilities.
(b) Allocation. The Committee shall have the authority to allocate from
time to time, by instrument in writing filed with the minutes of the
Committee's meetings, all or any part of its responsibilities under the Plan
to one or more of its members as it may deem advisable and in the same manner
to revoke such allocation of responsibilities. Any action of the member to
whom responsibilities are allocated in the exercise of such allocated
responsibilities shall have the same force and effect for all purposes under
the Plan as if such action had been taken by the Committee. The Committee
shall not be liable for any acts or omissions of any such member. The member
to whom responsibilities have been allocated shall report periodically to the
Committee concerning the discharge of the allocated responsibilities.
7.5 Records. The regularly kept records of the Committee and Employer
shall be conclusive evidence in the determination of any amounts to be paid
to
any Participant in accordance with the Plan.
7.6 Fiduciary Capacity. Any person or group of persons may serve in
more
than one fiduciary capacity with respect to the Plan.
7.7 Review of Committee Determinations. Prior to a Change In Control,
the Committee shall exercise unlimited discretion in making and resolving all
determinations required or permitted under the Plan, and it is the intention
of the Company that all such determinations actually made and resolved by the
Committee shall be reviewed, if reviewed at all, in accordance with the
arbitrary and capricious standard of review, with maximum deference given to
the determination of the Committee. Following a Change In Control, the
Committee shall have no discretion in making or resolving any determinations
required under the Plan, and it is the intention of the Company that any such
determinations made and resolved by the Committee shall be given no deference
in any legal or equitable action. It is the further intention of the Company
that no Participant shall be required to exhaust any administrative remedies,
whether under the Plan or otherwise, as a condition to any legal or equitable
action to obtain benefits under the Plan following a Change In Control.
7.8 Claims; Arbitration. Any controversy or claim arising out of or
relating to the Plan shall be settled exclusively by arbitration in Dallas,
<PAGE>
Texas, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association then in effect. Judgment upon the award rendered by
the arbitrators may be entered in, and enforced by, any court having
jurisdiction of such claim or controversy.
ARTICLE VIII
MISCELLANEOUS
8.1 Notices. All notices and other communications hereunder shall be in
writing or by written telecommunication, and shall be deemed to have been
duly
given if delivered personally or if mailed by certified mail, return receipt
requested or by written telecommunication, to the relevant address set forth
below, or to such other address as the recipient of such notice or
communication shall have specified to the other party in accordance with this
Section 8.1:
If to Employer, to: with a copy to:
CompUSA Inc. Jackson & Walker, L.L.P.
14951 North Dallas Parkway 901 Main Street, Suite 6000
Dallas, Texas 75240 Dallas, Texas 75202
Attention: Chairman of the Board Attention: Fred W. Fulton
Facsimile Number: (214) 982-4276 Facsimile Number: (214) 953-6115
If to a Participant, to his last known address as reflected in Employer's
personnel records.
8.2 Withholding; No Offset. All payments required to be made by
Employer
under the Plan to a Participant shall be subject to the withholding of such
amounts, if any, relating to federal, state and local taxes as may be
required
by law. No payment under the Plan shall be subject to offset or reduction
attributable to any amount a Participant may owe any Employer or any other
person.
8.3 Legal and Accounting Costs. Employer shall pay all attorneys' and
accountants' fees and costs incurred by a Participant as a result of any
breach by Employer of its obligations under the Plan, including without
limitation all such costs incurred in contesting or disputing any
determination made by Employer under the Plan or in connection with any tax
audit or proceeding to the extent attributable to the application of Section
4999 of the Code to any payment under the Plan. Reimbursements of such costs
shall be made by Employer within 15 days after a Participant's presentation
to
Employer of any statements of such costs and thereafter shall bear interest
at
the maximum rate allowed by law until paid by Employer, and all accrued and
unpaid interest shall bear interest at the same rate, all of which interest
shall be compounded daily.
8.4 Severability. If any provision of the Plan is held to be illegal,
invalid or unenforceable, such provision shall be fully severable, and the
Plan shall be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof, and the remaining
provisions hereof shall remain in full force and effect and shall not be
<PAGE>
affected by the illegal, invalid or unenforceable provision or by its
severance herefrom. Furthermore, in lieu of such illegal, invalid or
unenforceable provision, there shall be added automatically as part of the
Plan a provision as similar in its terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and
enforceable.
8.5 Waivers. No delay or omission by either party in exercising any
right, power or privilege hereunder shall impair such right, power or
privilege, nor shall any single or partial exercise of any such right, power
or privilege preclude any further exercise thereof or the exercise of any
other right, power or privilege.
8.6 Captions. The captions in the Plan are for convenience of reference
only and shall not limit or otherwise affect any of the terms or provisions
hereof.
8.7 Reference to Plan. Use of the words "hereof," "hereunder" and the
like in the Plan refer to the Plan only as a whole and not to any particular
section or subsection of the Plan, unless otherwise noted.
8.8 Binding Effect. The Plan shall be binding upon and inure to the
benefit of all Employers and the Participants and shall be enforceable by the
personal representatives and heirs of each Participant and the successors and
assigns of Employer. The obligations of Employer under the Plan may be
assigned by the Company or any Employer to any Employer; provided that in the
event of any such assignment, the Company shall remain liable for all of its
obligations hereunder and shall be liable for all obligations of all such
assignees hereunder. If a Participant dies while any amounts are payable to
him hereunder, such amounts shall be paid to the Participant's estate. The
amounts payable under the Plan are not otherwise assignable by Participants.
8.9 Governing Law. Except to the extent provided by ERISA, the Plan and
its performance shall be construed and governed in accordance with the laws
of
the State of Texas, without regard to its choice of law principles.
8.10 Gender and Number. The masculine gender shall be deemed to denote
the feminine or neuter genders, the singular to denote the plural, and the
plural to denote the singular, where the context so permits.
ARTICLE IX
DEFINITIONS
9.1 Definitions. As used in the Plan, the following terms have
the meanings set forth below:
(a) Accountants has the meaning ascribed to it in Section 4.3.
(b) Acquired Securities has the meaning ascribed to it in Section 5.1.
(c) Applicable Period has the meaning ascribed to it in Section 3.1(c).
<PAGE>
(d) Change In Control has the meaning ascribed to it in Section 2.1.
(e) Code means the Internal Revenue Code of 1986, as amended.
(f) Committee means the Compensation Committee of the Board of Directors
of the Company.
(g) Company means CompUSA Inc., a Delaware corporation.
(h) Constructively Terminated has the meaning ascribed to it in Section
3.1(f).
(i) Covenants has the meaning ascribed to it in Section 5.1.
(j) Determination has the meaning ascribed to such term in Section
1313(a) of the Code.
(k) Effective Date means May 1, 1996.
(l) Eligible Category has the meaning ascribed to it in Section 1.3.
(m) Employer refers collectively to the Company and any of its
subsidiaries and other affiliates that adopt the Plan in accordance with
Section 6.4. Each Participant shall be deemed to be employed by the Company
and all compensation and benefits paid or provided to a Participant by any
Employer at any time shall be deemed to have been paid or provided to the
Participant by the Company regardless of whether a Participant's actual
Employer is the Company or is a subsidiary or other affiliate of the Company.
(n) ERISA means the Employee Retirement Income Security Act of 1974, as
amended.
(o) Excise Tax has the meaning ascribed to it in Section 4.1.
(p) Good Reason has the meaning ascribed to it in Section 3.1(e).
(q) Gross Up Payment has the meaning ascribed to it in Section 4.1.
(r) Incentive Plan means the CompUSA Inc. Long-Term Incentive Plan, as
amended from time to time.
(s) Options has the meaning ascribed to it in Section 5.1.
(t) Participant means an individual who satisfies the requirements of
Article I to participate in the Plan.
(u) Parachute Payments has the meaning ascribed to such term in Section
280G(b)(2) of the Code.
(v) Plan means the CompUSA Inc. 1996 Change In Control Termination Plan.
(w) Restricted Stock has the meaning ascribed to it in Section 5.1.
<PAGE>
(x) Rights Agreement has the meaning ascribed to it in Section 2.1.
(y) Target Bonus means, with respect to each Participant, the dollar
amount that is equal to the established percentage of such Participant's base
salary that would be paid to the Participant under the management incentive
bonus plan of Employer assuming the measurement criteria contained in such
plan with respect to the Participant were achieved for the bonus period in
which the Change In Control occurred.
(z) Termination Payment has the meaning ascribed to it in Section
3.1(a)(i).
(aa) Triggering Termination has the meaning ascribed to it in Section
3.1(d).
<PAGE>
Exhibit 10.16
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), dated as of May 1, 1996, is
between CompUSA Inc., a Delaware corporation, and _______________________
("Employee").
R E C I T A L S:
A. Employee has been employed by Employer, and Employer and Employee
desire to enter into a written agreement to specify the terms and conditions
of Employee's continued employment with Employer.
B. Employer considers the maintenance of a sound management team,
including Employee, essential to protecting and enhancing its best interests
and those of its stockholders.
C. Employer recognizes that the possibility of a change in control of
Employer may result in the departure or distraction of management to the
detriment of Employer and its stockholders.
D. Employee is a key executive of Employer and an integral member of
its
management team.
E. Employer has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of selected
members of Employer's management team to their assigned duties without the
distraction arising from the possibility of a change in control of Employer.
NOW, THEREFORE, in consideration of Employee's past and future employment
with Employer and other good and valuable consideration, the parties agree as
follows:
Section 1. Employment. Employer hereby employs Employee, and
Employee
hereby accepts employment, upon the terms and subject to the conditions
hereinafter set forth.
Section 2. Duties. Employee shall be employed as
_____________________ of Employer, or such other position to which he may be
appointed by the Board of Directors. Employee agrees to devote his full time
and best efforts to the performance of the duties attendant to his executive
position with Employer.
Section 3. Term. The term of employment of Employee hereunder shall
commence on the date of this Agreement (the "Commencement Date") and continue
until May 1, 1998, unless earlier terminated pursuant to Section 6 or Section
10.
<PAGE>
Section 4. Compensation and Benefits. In consideration for the
services of Employee hereunder, Employer shall compensate Employee as
follows:
(a) Base Salary. Until the termination of Employee's employment
hereunder, Employer shall pay Employee, semi-monthly in arrears, a base
salary
at an annual rate of $__________ (the "Base Salary"). The Base Salary may
not
be decreased at any time during the term of Employee's employment hereunder
and shall be reviewed by Employer each October. Any increase in the Base
Salary shall be in the sole discretion of the Compensation Committee of the
Board of Directors of the Company.
(b) Management Incentive Bonus. Employee shall be eligible to receive
from Employer such annual management incentive bonuses as may be provided in
management incentive bonus plans adopted from time to time by Employer.
(c) Vacation. Employee shall be entitled to _____ hours of paid
vacation
per year at the reasonable and mutual convenience of Employer and Employee.
Unless otherwise approved by the Compensation Committee of the Board of
Directors of the Company, accrued vacation not taken in any calendar year
shall not be carried forward or used in any subsequent calendar year.
(d) Insurance Benefits. Employer shall provide accident, health,
dental,
disability and life insurance for Employee under the group accident, health,
dental, disability and life insurance plans maintained by Employer for its
full-time, salaried employees.
(e) Car Allowance. As a condition of Employee's employment, Employee
shall from time to time be required to travel by automobile on Employer's
business. Accordingly, during the term of Employee's employment hereunder,
Employer shall provide Employee with a monthly car allowance of $1,000,
payable in equal semi-monthly installments, to cover Employee's costs of
obtaining, maintaining and insuring a suitable automobile.
(f) Health Club Membership. For the duration of Employee's employment
with Employer hereunder, Employer shall pay up to $250 per month for a health
club membership in a health club selected by Employee.
Section 5. Expenses. The parties anticipate that in connection with
the services to be performed by Employee pursuant to the terms of this
Agreement, Employee will be required to make payments for travel,
entertainment of business associates and similar expenses. Employer shall
reimburse Employee for all reasonable expenses of types authorized by
Employer
and incurred by Employee in the performance of his duties hereunder.
Employee
shall comply with such budget limitations and approval and reporting
requirements with respect to expenses as Employer may establish from time to
time.
Section 6. Termination.
(a) General. Employee's employment hereunder shall commence on the
Commencement Date and continue until the end of the term specified in Section
3, except that the employment of Employee hereunder shall terminate prior to
such time in accordance with the following:
<PAGE>
(i) Death or Disability. Upon the death of Employee during the
term
of his employment hereunder or, at the option of Employer, in the event
of
Employee's Disability, upon 30 days' notice to Employee.
(ii) For Cause. For "Cause" immediately upon written notice by
Employer to Employee. A termination shall be for Cause if:
(1) Employee commits a criminal act involving moral
turpitude; or
(2) Employee commits a material breach of any of the
covenants, terms and provisions hereof or fails to obey written
directions delivered to Employee by the Company's Chairman of the
Board, President, Chief Executive Officer or its Board of Directors.
(iii) Without Cause. Without Cause upon notice by Employer to
Employee.
(b) Severance Pay.
(i) Termination Upon Death or Disability or For Cause. Employee
shall not be entitled to any severance pay or other compensation upon
termination of his employment pursuant to Section 6(a)(i) or (ii) except
for his Base Salary accrued but unpaid as of the date of termination,
unpaid expense reimbursements under Section 5 for expenses incurred in
accordance with the terms hereof prior to termination, and compensation
for accrued, unused vacation as of the date of termination.
(ii) Termination Without Cause. In the event Employee's employment
hereunder is terminated pursuant to Section 6(a)(iii), Employer shall pay
Employee Separation Payments as Employee's sole remedy in connection with
such termination. "Separation Payments" are payments made at the semi-
monthly rate of Employee's Base Salary in effect immediately preceding
the
date of termination. Separation Payments shall be made for 12 months
after the date of termination (the "Separation Payment Period") and shall
be paid by Employer in equal semi-monthly payments in arrears.
Separation
Payments shall be reduced by the amount of any personal services income
earned by Employee during the Separation Payment Period. Employer shall
also pay Employee his Base Salary accrued but unpaid as of the date of
termination, unpaid expense reimbursements under Section 5 for expenses
incurred in accordance with the terms hereof prior to termination, and
compensation for accrued, unused vacation as of the date of termination.
Separation Payments shall be made for the number of months specified
above
without regard to the number of months remaining in the term of this
Agreement. This paragraph is subject to the provisions of Section 10(k)
dealing with the coordination of payments in the event of a Change In
Control.
(c) Transfers of Employment. Employee's employment hereunder shall
continue until the earlier of the following:
<PAGE>
(i) Employee's employment with all Employers terminates; or
(ii) the last Employer (other than the Company) by which Employee is
employed under this Agreement ceases to be a subsidiary or affiliate of
the Company. For purposes of Section 6(b)(ii), the termination of
Employee's employment hereunder pursuant to this Section 6(c)(ii) shall
be
treated as a termination by Employer without Cause pursuant to Section
6(a)(iii).
Section 7. Inventions; Assignment.
(a) Inventions Defined. All rights to discoveries, inventions,
improvements, designs and innovations (including all data and records
pertaining thereto) that relate to the business of Employer, whether or not
patentable, copyrightable or reduced to writing, that Employee may discover,
invent or originate during the term of his employment hereunder, and for a
period of six months thereafter, either alone or with others and whether or
not during working hours or by the use of the facilities of Employer
("Inventions"), shall be the exclusive property of Employer. Employee shall
promptly disclose all Inventions to Employer, shall execute at the request of
Employer any assignments or other documents Employer may deem necessary to
protect or perfect its rights therein, and shall assist Employer, at
Employer's expense, in obtaining, defending and enforcing Employer's rights
therein. Employee hereby appoints Employer as his attorney-in-fact to
execute
on his behalf any assignments or other documents deemed necessary by Employer
to protect or perfect its rights to any Inventions.
(b) Covenant to Assign and Cooperate. Without limiting the generality
of
the foregoing, Employee shall assign and transfer to Employer the world-wide
right, title and interest of Employee in the Inventions. Employee agrees
that
Employer may apply for and receive patent rights (including Letters Patent in
the United States) for the Inventions in Employer's name in such countries as
may be determined solely by Employer. Employee shall communicate to Employer
all facts known to Employee relating to the Inventions and shall cooperate
with Employer's reasonable requests in connection with vesting title to the
Inventions and related patents exclusively in Employer and in connection with
obtaining, maintaining and protecting Employer's exclusive patent rights in
the Inventions.
(c) Successors and Assigns. Employee's obligations under this Section 7
shall inure to the benefit of Employer and its successors and assigns and
shall survive the expiration of the term of this Agreement for such time as
may be necessary to protect the proprietary rights of Employer in the
Inventions.
Section 8. Confidential Information.
(a) Acknowledgment of Proprietary Interest. Employee acknowledges the
proprietary interest of Employer in all Confidential Information. Employee
agrees that all Confidential Information learned by Employee during his
employment with Employer or otherwise, whether developed by Employee alone or
in conjunction with others or otherwise, is and shall remain the exclusive
property of Employer. Employee further acknowledges and agrees that his
<PAGE>
disclosure of any Confidential Information will result in irreparable injury
and damage to Employer.
(b) Confidential Information Defined. "Confidential Information" means
all confidential and proprietary information of Employer, including without
limitation (i) information derived from reports, investigations, experiments,
research and work in progress, (ii) methods of operation, (iii) market data,
(iv) proprietary computer programs and codes, (v) drawings, designs, plans
and
proposals, (vi) marketing and sales programs, (vii) client lists, (viii)
historical financial information and financial projections, (ix) pricing
formulae and policies, (x) all other concepts, ideas, materials and
information prepared or performed for or by Employer and (xi) all information
related to the business, products, purchases or sales of Employer or any of
its suppliers and customers, other than information that is publicly
available.
(c) Covenant Not To Divulge Confidential Information. Employer is
entitled to prevent the disclosure of Confidential Information. As a portion
of the consideration for the employment of Employee and for the compensation
being paid to Employee by Employer, Employee agrees at all times during the
term of his employment hereunder and thereafter to hold in strict confidence
and not to disclose or allow to be disclosed to any person, firm or
corporation, other than to persons engaged by Employer to further the
business
of Employer, and not to use except in the pursuit of the business of
Employer,
the Confidential Information, without the prior written consent of Employer.
(d) Return of Materials at Termination. In the event of any termination
or cessation of his employment with Employer for any reason, Employee shall
promptly deliver to Employer all documents, data and other information
derived
from or otherwise pertaining to Confidential Information. Employee shall not
take or retain any documents or other information, or any reproduction or
excerpt thereof, containing or pertaining to any Confidential Information.
Section 9. Noncompetition.
(a) Until two years after termination of Employee's employment
hereunder,
Employee shall not do any of the following:
(i) engage directly or indirectly, alone or as a shareholder,
partner, director, officer, employee of or consultant to any other
business organization, in any business activities that:
(1) relate to the wholesale, direct or retail sale of
computer hardware, software, peripherals, training or other computer
related services (the "Designated Industry"); or
(2) were either conducted by Employer prior to the
termination of Employee's employment hereunder or proposed to be
conducted by Employer at the time of such termination;
(ii) divert to any competitor of Employer in the Designated Industry
any customer of Employer; or
<PAGE>
(iii) solicit or encourage any director, officer, employee of or
consultant to Employer to end his relationship with Employer or commence
any such relationship with any competitor of Employer in the aesignated
Industry.
(b) Employee's noncompetition obligations hereunder shall not preclude
Employee from owning less than five percent of the common stock of any
publicly traded corporation conducting business activities in the Designated
Industry. If at any time the provisions of this Section 9 are determined to
be invalid or unenforceable by reason of being vague or unreasonable as to
area, duration or scope of activity, this Section 9 shall be considered
divisible and shall be immediately amended to only such area, duration and
scope of activity as shall be determined to be reasonable and enforceable by
the court or other body having jurisdiction over the matter, and Employee
agrees that this Section 9 as so amended shall be valid and binding as though
any invalid or unenforceable provision had not been included herein.
Section 10. Termination of Employment in Connection With a Change In
Control.
(a) Applicability. The provisions of this Section 10 shall apply in
lieu
of all conflicting provisions in this Agreement in the event Employee's
employment hereunder is terminated in a Triggering Termination. Each of the
following events constitutes a "Triggering Termination" when Employee's
employment hereunder is:
(i) terminated for any reason (other than death) within the 12
month
period following a Change In Control;
(ii) terminated by Employer during an Applicable Period for any
reason other than the commission of a felony by Employee;
(iii) Constructively Terminated by Employer during an Applicable
Period;
(iv) terminated pursuant to Section 6(c)(ii) during an Applicable
Period or within 12 months following a Change In Control; or
(v) terminated in an Agreement Termination pursuant to this Section
10(a)(v).
(1) An "Agreement Termination" shall occur when Employee's
employment hereunder is terminated by Employee immediately prior to
a Change In Control to the extent that his continued employment with
Employer is not pursuant to the terms of this Agreement (other than
as provided herein with respect to an Agreement Termination) and
thereafter is only on an at-will basis. Employee's determination to
effect an Agreement Termination must be based on a good faith
judgment of Employee and any two or more Concurring Persons, in
light
of the circumstances as then known or understood by them, that a
Change In Control is going to occur within 24 hours, but it is not
required as a condition to such good faith judgment that:
<PAGE>
(I) Employee or any Concurring Person conduct any
investigation or consult with any other person or group (except
only for Employee's requirement to obtain the concurrence or
approval of Concurring Persons);
(II) no condition remains to be satisfied before
the Change In Control can occur; or
(III) the Board of Directors of Employer has taken
any action to approve or facilitate the Change In Control.
(2) The concurrence or approval of the Concurring Persons is
limited to the occurrence and timing of the Change In Control and is
not made regarding the propriety of Employee's effecting an
Agreement
Termination.
(3) In consideration of the right to effect an Agreement
Termination and receive a Termination Payment and Gross Up Payment
immediately prior to a Change In Control, Employee agrees that, upon
(and notwithstanding) his exercise of such right and the payment to
him of the Termination Payment and Gross Up Payment, he shall
continue, without interruption until such Change In Control occurs
(unless his at-will employment with Employer is sooner terminated or
Constructively Terminated by Employer, as described in Sections
10(a)(ii), (iii) and (iv), or Employee dies or terminates his
employment with Employer due to Disability), to devote his full time
and best efforts as an at-will employee of Employer to the
performance of the same duties that he performed for Employer,
holding the same office or position with Employer as he held before
the Agreement Termination, but without the right to any compensation
from Employer for such continued performance (except as provided
below in Section 10(a)(v)(4)(I)). Employee's obligation set forth
in
the preceding sentence is referred to herein as the "Continued
Performance Obligation."
(4) Employee shall have no obligation to comply with Section
8(d) until he has no further Continued Performance Obligation. If
the anticipated Change In Control does not occur within five
business
days after Employee's receipt of a Termination Payment and Gross Up
Payment following the exercise of his right to effect an Agreement
Termination, then:
(I) such Agreement Termination shall be void and
ineffective, and Employee's employment under all of the terms
of this Agreement (including without limitation his
compensation and benefits, duties, position and rights
regarding any other actual or expected Change In Control) shall
be deemed to have continued without interruption; and
(II) Employee shall, and Employee hereby agrees
to, repay to Employer within two business days the full
Termination Payment and Gross Up Payment received by Employee
(together with interest, if any, actually earned on the funds
<PAGE>
while in Employee's control).
(5) If Employee fails to satisfy his Continued Performance
Obligation, then:
(I) such Agreement Termination shall be void and
ineffective, and Employee shall be deemed to have voluntarily
terminated his employment hereunder before a Change In Control;
and
(II) Employee shall repay to Employer within one
business day the full Termination Payment and Gross Up Payment
received by Employee (together with interest, if any, actually
earned on the funds while in Employee's control).
(b) Termination Payment.
(i) Amount.
(1) Upon the occurrence of a Triggering Termination, Employer
shall pay Employee a lump sum payment in cash equal to 2.99 times
the
sum of the following items:
(I) Employee's annual base compensation
determined by reference to his highest annual base compensation
in effect at any time during Employee's employment with
Employer;
(II) two times the Target Bonus that would be
payable to Employee by Employer for the bonus period in which
the Change In Control occurred; provided that the amount
determined under this Section 10(b)(i)(1)(II) shall not be less
than ____% of the amount determined under Section
10(b)(i)(1)(I); and
(III) Employee's annualized car allowance
determined by reference to his highest car allowance rate in
effect at any time during Employee's employment with Employer.
(2) The term "Termination Payment" shall include the amounts
described above in Section 10(b)(i)(1) plus the following amounts
described in this Section 10(b)(i)(2):
(I) Employee's Base Salary accrued but unpaid as
of the date of the Triggering Termination;
(II) reimbursement under Section 5 for unpaid
expenses incurred in the performance of his duties hereunder
prior to the date of the Triggering Termination;
(III) any other benefit accrued but unpaid as of
the date of the Triggering Termination; and
<PAGE>
(IV) $18,000, which represents the estimated cost
to Employee of obtaining accident, health, dental, disability
and life insurance coverage for the 18 month period following
the expiration of his continuation (COBRA) rights; provided
that this Section 10(b)(i)(2)(IV) shall be applied without
regard to, and the amount payable under this Section
10(b)(i)(2)(IV) is in addition to, any continuation (COBRA)
rights or conversion rights under any plan provided by
Employer, which rights are not affected by any provision
hereof.
(ii) Time for Payment; Interest. Employer shall pay the Termination
Payment to Employee concurrent with the Triggering Termination.
Employer's obligation to pay to Employee any amounts under this Section
10, including without limitation the Termination Payment and any Gross Up
Payment due under Section 10(d), shall bear interest at the maximum rate
allowed by law until paid by Employer, and all accrued and unpaid
interest
shall bear interest at the same rate, all of which interest shall be
compounded daily.
(iii) Payment Authority. Any officer of Employer (other than
Employee) is authorized to issue and execute a check, initiate a wire
transfer or otherwise effect payment on behalf of Employer to satisfy
Employer's obligations to pay all amounts due to Employee under this
Section 10.
(iv) Termination. Employer's obligation to pay the Termination
Payment shall not be affected by the manner in which Employee's
employment
hereunder is terminated. Without limiting the generality of the
foregoing, Employer shall be obligated to pay the Termination Payment and
any Gross Up Payment regardless of whether Employee's termination of
employment is voluntary, involuntary, for cause, without cause, in
violation of any employment agreement or other agreement in effect at the
time of the Change In Control (except as provided in Section
10(a)(v)(5)(I) with respect to Employee's failure to satisfy his
Continued
Performance Obligation in the event of an Agreement Termination) or due
to
Employee's retirement or Disability. Employee's notice of his
termination
of employment hereunder in connection with a Change In Control may be
made
by any means.
(c) Change In Control. A Change In Control shall be deemed to have
occurred for purposes hereof when any Person meets the requirements for
becoming an Acquiring Person, whether or not a Distribution Date occurs or
the
Rights are redeemed by Employer, as those terms are defined in the Rights
Agreement between the Company and Bank One, Texas, N.A. as Rights Agent
(First
Interstate Bank of Texas, N.A. became successor Rights Agent as of November
1,
1995), dated as of April 29, 1994 (the "Rights Agreement"); provided that a
Change In Control shall not be deemed to have occurred for purposes hereof
with respect to any Person meeting the requirements of clauses (i) and (ii)
of
Rule 13d-1(b)(1) promulgated under the Securities Exchange Act of 1934, as
amended.
(d) Gross Up Payment.
<PAGE>
(i) Excess Parachute Payment. If Employee incurs the tax (the
"Excise Tax") imposed by Section 4999 of the Code on "excess parachute
payments" within the meaning of Section 280G(b)(1) of the Code as the
result of the receipt of any payments under this Agreement, Employer
shall
pay to Employee an amount (the "Gross Up Payment") such that the net
amount retained by Employee, after deduction of (1) any Excise Tax upon
any payments under this Agreement (other than payments provided by this
Section 10(d)(i)) and (2) any federal, state and local income and
employment taxes (together with penalties and interest) and Excise Tax
upon the payments provided by this Section 10(d)(i), shall be equal to
the
amount of the payments that Employee is entitled to receive under this
Agreement (other than payments provided by this Section 10(d)(i)).
(ii) Applicable Rates. For purposes of determining the Gross Up
Payment amount, Employee shall be deemed:
(1) to pay federal income taxes at the highest marginal rate
of federal income taxation applicable to individual taxpayers in the
calendar year in which the Gross Up Payment is made (which rate
shall
be adjusted as necessary to take into account the effect of any
reduction in deductions, exemptions or credits otherwise available
to
Employee had the Gross Up Payment not been received);
(2) to pay additional employment taxes as a result of the
receipt of the Gross Up Payment in an amount equal to the highest
marginal rate of employment taxes applicable to wages; provided that
if any employment tax is applied only up to a specified maximum
amount of wages, such limit shall be taken into account for purposes
of such calculation; and
(3) to pay state and local income taxes at the highest
marginal rates of taxation in the state and locality of Employee's
residence on the date of the Triggering Termination, net of the
maximum reduction in federal income taxes that could be obtained
from
deduction of such state and local taxes.
(iii) Determination of Gross Up Payment Amount. The
determination of the Gross Up Payment amount shall be made by Ernst &
Young LLP or another nationally recognized public accounting firm
selected
by Employee (in either case, the "Accountants"). If the Excise Tax
amount
payable by Employee, based upon a "Determination," is different from the
Excise Tax amount computed by the Accountants for purposes of determining
the Gross Up Payment amount, then appropriate adjustments to the Gross Up
Payment amount shall be made in the manner provided in Section 10(d)(iv).
For purposes of determining the Gross Up Payment amount prior to a
Determination of the Excise Tax amount, the following assumptions shall
be
utilized:
(1) that portion of the Termination Payment that is
attributable to the items described in Sections 10(b)(i)(1)(I), (II),
(III) and Section 10(b)(i)(2)(IV), and the Gross Up Payment, shall be
treated as Parachute Payments without regard to whether a Change In
Control satisfies the requirements of Section 280G(b)(2)(A)(i) of the
<PAGE>
Code;
(2) no portion of any payment made pursuant to Sections
10(b)(i)(2)(I), (II) or (III) or Section 11(c) shall be treated as a
Parachute Payment;
(3) the amount payable to Employee pursuant to Section 10(l)
shall be:
(I) deemed to be equal to 15% of the amount
determined under Section 10(b)(i)(1)(I);
(II) deemed to have been paid immediately
following the Change In Control;
(III) deemed to include the additional amount
payable under Section 10(l), if any, for additional taxes
payable by Employee as a result of the receipt of the payment
described in Section 10(l); and
(IV) treated 100% as a Parachute Payment;
(4) it shall be assumed that all of the payments that could
potentially be made to Employee pursuant to the Consulting Agreement
shall be made, and all of such payments shall be treated as
Parachute
Payments; provided that nothing in this Section 10(d)(iii)(4) shall
limit or reduce the payment of any amount similar to the Gross Up
Payment under the Consulting Agreement;
(5) the "ascertainable fair market value" (as set forth in
Prop. Treas. Reg. Sec. 1.280G-1, Q&A 13) of the Options, the vesting
of which was accelerated by the Change In Control as provided in the
Incentive Plan and as further provided in Section 10(j), shall be
equal to the product of (I) and (II) as set forth below:
(I) the number of shares covered by such Options;
and
(II) the difference between:
a. the fair market value per share as of
the date of the Change In Control; and
b. the exercise price per share of stock
subject to such Options; and
(6) for purposes of applying the rules set forth in Prop.
Treas. Reg. Sec. 1.280G-1, Q&A 24(c) to a payment described in Prop.
Treas. Reg. Sec. 1.280G-1, Q&A 24(b), the amount reflecting the
lapse
of the obligation to continue performing services shall be equal to
the minimum amount allowed for such payment as set forth in Prop.
Treas. Reg. Sec. 1.280G-1, Q&A 24(c)(2) (or if Prop. Treas. Reg.
Sec.
1.280G-1 has been superseded by temporary or final regulations, the
<PAGE> minimum amount provided for in any temporary or final regulations
that supersede Prop. Treas. Reg. Sec. 1.280G-1 and that are
applicable to the Termination Payment, Gross Up Payment, or both).
(iv) Time For Payment. Employer shall pay the estimated Gross Up
Payment amount in cash to Employee concurrent with the payment of the
Termination Payment. Employee and Employer agree to reasonably cooperate
in the determination of the actual Gross Up Payment amount. Further,
Employee and Employer agree to make such adjustments to the estimated
Gross Up Payment amount as may be necessary to equal the actual Gross Up
Payment amount, which in the case of Employee shall refer to refunds of
prior overpayments and in the case of Employer shall refer to makeup of
prior underpayments.
(e) Term. Notwithstanding the provisions of Section 3, if a Change In
Control occurs prior to April 30, 1998, Sections 10, 11 and 12 shall continue
in effect for a period of 12 months after the date of the Change In Control.
(f) Consulting Agreement. To preserve a sound and vital management team
for the Company during the period immediately following a Change In Control,
Employee agrees that, in the event of a Triggering Termination, Employee
shall
enter into a Consulting Agreement (the "Consulting Agreement") in the form
attached hereto if requested by the Board of Directors of the Company within
30 days after the Change In Control. If Employee breaches his obligation
under the preceding sentence by declining to enter into a Consulting
Agreement, as liquidated damages for such breach and not as a penalty,
Employee shall pay to Employer the amount that Employee otherwise would have
received as compensation from Employer under the Consulting Agreement
assuming
Employee fully performed his obligations thereunder.
(g) No Duty to Mitigate Damages. Employee's rights and privileges under
this Section 10 shall be considered severance pay in consideration of his
past
service and his continued service to Employer from the Commencement Date, and
his entitlement thereto shall neither be governed by any duty to mitigate his
damages by seeking further employment nor offset by any compensation that he
may receive from future employment.
(h) Arbitration. Except as provided in Section 10(j) and in Section
11(d) with respect to Section 10(m), any controversy or claim arising out of
or relating to this Section 10, or the breach thereof, shall be settled
exclusively by arbitration in Dallas, Texas, in accordance with the
Commercial
Arbitration Rules of the American Arbitration Association then in effect.
Judgment upon the award rendered by the arbitrator may be entered in, and
enforced by, any court having jurisdiction thereof.
(i) No Right To Continued Employment. This Section 10 shall not give
Employee any right of continued employment or any right to compensation or
benefits from Employer except the rights specifically stated herein.
(j) Restricted Stock and Exercise of Stock Options. Employee may hold
options ("Options") issued under the Incentive Plan that become immediately
exercisable upon a Change In Control. In addition, Employee may hold
restricted stock ("Restricted Stock") issued under the Incentive Plan
pursuant
<PAGE>
to which applicable restrictions will lapse upon a Change In Control.
Employer shall take no action to facilitate a transaction involving a Change
In Control, including without limitation redemption of the Rights issued
pursuant to the Rights Agreement, unless it has taken such action as may be
necessary to ensure that Employee has the opportunity to exercise all Options
he may then hold, and obtain certificates containing no restrictive legends
in
respect of any Restricted Stock he may then hold, at a time and in a manner
that shall give Employee the opportunity to sell or exchange the securities
of
Employer acquired upon exercise of his Options and upon receipt of
unrestricted certificates for shares of Common Stock in respect of his
Restricted Stock, if any (collectively, the "Acquired Securities"), at the
earliest time and in the most advantageous manner any holder of the same
class
of securities as the Acquired Securities is able to sell or exchange such
securities in connection with such Change In Control. Employer acknowledges
that its covenants in the preceding sentence (the "Covenants") are reasonable
and necessary in order to protect the legitimate interests of Employer in
maintaining Employee as one of its employees and that any violation of the
Covenants by Employer would result in irreparable injuries to Employee, and
Employer therefore acknowledges that in the event of any violation of the
Covenants by Employer or its directors, officers or employees, or any of
their
respective agents, Employee shall be entitled to obtain from any court of
competent jurisdiction temporary, preliminary and permanent injunctive relief
in order to (i) obtain specific performance of the Covenants, (ii) obtain
specific performance of the exercise of his Options, delivery of certificates
containing no restrictive legends in respect of his Restricted Stock and the
sale or exchange of the Acquired Securities in the advantageous manner
contemplated above or (iii) prevent violation of the Covenants; provided that
in the event Employee fails to obtain such injunctive relief, nothing in this
Agreement shall be deemed to prejudice Employee's rights to damages for
violation of the Covenants.
(k) Coordination With Other Payments.
(i) After the termination of Employee's employment hereunder:
(1) if Employee is entitled to receive Separation Payments;
and
(2) Employee subsequently becomes entitled to receive a
Termination Payment, Gross Up Payment or both, then
(ii) prior to the disbursement of the Termination Payment and Gross
Up Payment:
(1) the payment date of all unpaid Separation Payments shall
be accelerated to the payment date of the Termination Payment and
such Separation Payments shall be made (in this event, Employer
waives any requirement that Employee reduce the Separation Payments
by the amount of any income earned by Employee thereafter); and
(2) the Termination Payment shall be reduced by the amount of
the Separation Payments so accelerated and made.
<PAGE>
(l) Outplacement Services. If Employee becomes entitled to receive a
Termination Payment under this Section 10, Employer agrees to reimburse
Employee for any outplacement consulting fees and expenses incurred by
Employee during the two year period following the Change In Control; provided
that the aggregate amount reimbursed by Employer shall not exceed 15% of
Employee's Base Salary in effect immediately prior to the Change In Control.
In addition and as to each reimbursement payment, to the extent that any
reimbursement under this Section 10(l) is not deductible by Employee for
federal, state and local income tax purposes, Employer shall pay Employee an
additional amount such that the net amount retained by Employee, after
deduction of any federal, state and local income tax on the reimbursement and
such additional amount, shall be equal to the reimbursement payment. All
amounts under this Section 10(l) shall be paid by Employer within 15 days
after Employee's presentation to Employer of any statements of such amounts
and thereafter shall bear interest at the maximum rate allowed by law until
paid by Employer; and all accrued and unpaid interest shall bear interest at
the same rate, all of which interest shall be compounded daily.
(m) Noncompetition.
(i) Following the occurrence of a Triggering Termination, Employee
shall not:
(1) for a period of two years following the date of the
Triggering Termination engage directly or indirectly, alone or as a
shareholder, partner, director, officer, employee of or consultant
to, any entity other than Employer that is in existence on the date
of the Triggering Termination and is at that time engaged directly,
or indirectly through any subsidiary, division or other business
unit
(individually, an "Entity"), in retail or direct sales of computer
hardware, software, peripherals, training or other computer related
services to end users (the "Change In Control Designated Industry");
or
(2) for a period of one year following the date of the
Triggering Termination solicit or encourage any director, officer,
employee of or consultant to Employer to end his relationship with
Employer and commence any such relationship with any competitor of
Employer in the Change In Control Designated Industry.
(ii) Notwithstanding the foregoing, an Entity shall not be deemed to
be engaged in the Change In Control Designated Industry if retail and
direct sales of computer hardware, software, peripherals, training or
other computer related services to end users are incidental to such
Entity's business. Retail and direct sales of computer hardware,
software, peripherals, training or other computer related services shall
be deemed incidental to an Entity's business so long as:
(1) the aggregate of such sales by such Entity is 40% or less
of the total sales of such Entity for the fiscal quarter of such
Entity immediately preceding the date of the Triggering Termination
or any of the eight immediately subsequent fiscal quarters of such
Entity; and
<PAGE>
(2) such Entity is not a member of a group of Entities under
common control that includes one or more Computer Sales Entities;
provided that the foregoing restriction shall be deemed not to have
been violated if Employee terminates his employment or other
prohibited relationship with an Entity promptly after his discovery
that the Entity first became a Computer Sales Entity (during the
term
of his relationship) during the preceding fiscal quarter of such
Entity. A "Computer Sales Entity" is defined as an Entity whose
retail and direct sales of computer hardware, software, peripherals,
training and other computer related services to end users, in the
aggregate, are more than 40% of the total sales of such Entity,
measured over any fiscal quarter. Notwithstanding the foregoing,
the
following Entities shall be deemed to be Computer Sales Entities
engaged in the Change In Control Designated Industry: Best Buy,
Circuit City, Tandy Corporation (and its subsidiaries, affiliates
and
divisions including Computer City), Fry's, Micro Electronics, Inc.
(d/b/a Micro Center), Elek-Tek, Silo/Fretter and Computer Discount
Warehouse, Inc.
(iii) If at any time the provisions of this Section 10(m) are
determined to be invalid or unenforceable by reason of being vague or
unreasonable as to area, duration or scope of activity, this Section
10(m)
shall be considered divisible and shall be immediately amended to only
such area, duration or scope of activity as shall be determined to be
reasonable and enforceable by the court or other body having jurisdiction
over the matter; and Employee agrees that this Section 10(m) as so
amended
shall be valid and binding as though any invalid or unenforceable
provision had not been included herein. Notwithstanding the foregoing,
Employee's noncompetition obligations hereunder shall not preclude
Employee from owning stock with less than five percent of the voting
power
or economic interest in any publicly traded corporation conducting
business activities in the Change In Control Designated Industry.
Section 11. General.
(a) Notices. Except as provided in Section 10(b)(iv), all notices and
other communications hereunder shall be in writing or by written
telecommunication, and shall be deemed to have been duly given if delivered
personally or if mailed by certified mail, return receipt requested or by
written telecommunication, to the relevant address set forth below, or to
such
other address as the recipient of such notice or communication shall have
specified to the other party in accordance with this Section 11(a):
If to Employer, to: with a copy to:
CompUSA Inc. Jackson & Walker, L.L.P.
14951 North Dallas Parkway 901 Main Street, Suite 6000
Dallas, Texas 75240 Dallas, Texas 75202
Attention: Chairman of the Board Attention: Fred W. Fulton
Facsimile Number: (214) 982-4276 Facsimile Number: (214) 953-6115
<PAGE>
If to Employee, to:
___________________
___________________
___________________
(b) Withholding; No Offset. All payments required to be made to
Employee
by Employer shall be subject to the withholding of such amounts, if any,
relating to federal, state and local taxes as may be required by law. No
payments under Section 10 shall be subject to offset or reduction
attributable
to any amount Employee may owe to Employer or any other person.
(c) Legal and Accounting Costs. Employer shall pay all attorneys' and
accountants' fees and costs incurred by Employee as a result of any breach by
Employer of its obligations under this Agreement, including without
limitation
all such costs incurred in contesting or disputing any determination made by
Employer under Section 10 or in connection with any tax audit or proceeding
to
the extent attributable to the application of Section 4999 of the Code to any
payment under Section 10. Reimbursements of such costs shall be made by
Employer within 15 days after Employee's presentation to Employer of any
statements of such costs and thereafter shall bear interest at the maximum
rate allowed by law until paid by Employer, and all accrued and unpaid
interest shall bear interest at the same rate, all of which interest shall be
compounded daily.
(d) Equitable Remedies. Each of the parties hereto acknowledges and
agrees that upon any breach by Employee of his obligations under any of
Sections 7, 8, 9 and 10(m), Employer shall have no adequate remedy at law and
accordingly shall be entitled to specific performance and other appropriate
injunctive and equitable relief.
(e) Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable, such provision shall be fully severable,
and this Agreement shall be construed and enforced as if such illegal,
invalid
or unenforceable provision never comprised a part hereof, and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its
severance herefrom. Furthermore, in lieu of such illegal, invalid or
unenforceable provision, there shall be added automatically as part of this
Agreement a provision as similar in its terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and
enforceable.
(f) Waivers. No delay or omission by either party in exercising any
right, power or privilege hereunder shall impair such right, power or
privilege, nor shall any single or partial exercise of any such right, power
or privilege preclude any further exercise thereof or the exercise of any
other right, power or privilege.
(g) Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
<PAGE>
(h) Captions. The captions in this Agreement are for convenience of
reference only and shall not limit or otherwise affect any of the terms or
provisions hereof.
(i) Reference to Agreement. Use of the words "herein," "hereof,"
"hereto," "hereunder" and the like in this Agreement refer to this Agreement
only as a whole and not to any particular section or subsection of this
Agreement, unless otherwise noted.
(j) Binding Agreement. This Agreement shall be binding upon and inure
to
the benefit of the parties and shall be enforceable by the personal
representatives and heirs of Employee and the successors and assigns of
Employer. This Agreement may be assigned by the Company or any Employer to
any Employer; provided that in the event of any such assignment, the Company
shall remain liable for all of its obligations hereunder and shall be liable
for all obligations of all such assignees hereunder. If Employee dies while
any amounts would still be payable to him hereunder, such amounts shall be
paid to Employee's estate. This Agreement is not otherwise assignable by
Employee.
(k) Entire Agreement; Effect on Prior Agreement. This Agreement
contains
the entire understanding of the parties, supersedes all prior agreements and
understandings relating to the subject matter hereof and may not be amended
except by a written instrument hereafter signed by each of the parties
hereto.
Employee and the Company hereby agree that, if any other employment agreement
between Employee and the Company (or its subsidiaries or other affiliates) is
in existence on the Commencement Date, then this Agreement shall supersede
such other employment agreement in its entirety, and such other employment
agreement shall no longer be of any force and effect after the date hereof.
(l) Governing Law. This Agreement and the performance hereof shall be
construed and governed in accordance with the laws of the State of Texas,
without regard to its choice of law principles.
(m) Gender and Number. The masculine gender shall be deemed to denote
the feminine or neuter genders, the singular to denote the plural, and the
plural to denote the singular, where the context so permits.
Section 12. Definitions. As used in this Agreement, the following
terms will have the following meanings:
(a) Accountants has the meaning ascribed to it in Section 10(d)(iii).
(b) Acquired Securities has the meaning ascribed to it in Section 10(j).
(c) Agreement has the meaning ascribed to it in the heading of this
document.
(d) Agreement Termination has the meaning ascribed to it in Section
10(a)(v)(1). References in this Agreement to termination of Employee's
employment with Employer, in any form, shall be deemed to include (whether or
not so expressed) an Agreement Termination.
<PAGE>
(e) Applicable Period means, with respect to any Change In Control, the
period of 90 days immediately preceding the Change In Control.
(f) Base Salary has the meaning ascribed to it in Section 4(a).
(g) Cause has the meaning ascribed to it in Section 6(a)(ii).
(h) Change In Control has the meaning ascribed to it in Section 10(c).
(i) Change In Control Designated Industry has the meaning ascribed to it
in Section 10(m)(i)(1).
(j) Code means the Internal Revenue Code of 1986, as amended.
(k) Commencement Date has the meaning ascribed to it in Section 3.
(l) Company means CompUSA Inc., a Delaware corporation.
(m) Computer Sales Entity has the meaning ascribed to it in Section
10(m)(ii)(2).
(n) A Concurring Person is an individual who is the Chairman of the
Board
of Directors of the Company or a member of the Compensation Committee of the
Board of Directors of the Company (or, if no Compensation Committee exists,
or
there are fewer than two members of the Compensation Committee, a nonemployee
member of the Board of Directors of the Company) at the time in question.
(o) Confidential Information has the meaning ascribed to it in Section
8(b).
(p) Constructively Terminated with respect to an Employee's employment
with Employer will be deemed to have occurred if Employer:
(i) demotes Employee to a lesser position, either in title or
responsibility, than the highest position held by Employee with Employer
at any time during Employee's employment with Employer;
(ii) decreases Employee's compensation below the highest level in
effect at any time during Employee's employment with Employer or reduces
Employee's benefits and perquisites below the highest levels in effect at
any time during Employee's employment with Employer (other than as a
result of any amendment or termination of any employee or group or other
executive benefit plan, which amendment or termination is applicable to
all executives of Employer); or
(iii) requires Employee to relocate to a principal place of
business more than 25 miles from the principal place of business occupied by
Employer on the first day of an Applicable Period.
(q) Consulting Agreement has the meaning ascribed to it in Section
10(f).
(r) Continued Performance Obligation has the meaning ascribed to it in
Section 10(a)(v)(3).
<PAGE>
(s) Covenants has the meaning ascribed to it in Section 10(j).
(t) Designated Industry has the meaning ascribed to it in Section
9(a)(i)(1).
(u) Determination has the meaning ascribed to such term in Section
1313(a) of the Code.
(v) Disability with respect to an Employee shall be deemed to exist if
he
meets the definition of disability under the terms of the disability
insurance
policy referred to in Section 4(d). Any refusal by Employee to submit to a
reasonable medical examination to determine whether Employee is so disabled
shall be deemed conclusively to constitute evidence of Employee's Disability.
(w) Employee has the meaning ascribed to it in the heading of this
Agreement.
(x)
Employer refers collectively to the Company and its subsidiaries and other
affiliates. In Section 10, the term "Employer" shall be deemed to refer to
the Company, and for purposes of Section 10, Employee shall be deemed to be
employed by the Company and all compensation and benefits paid or provided to
Employee by any Employer under this Agreement at any time shall be deemed to
have been paid or provided to Employee by the Company.
(y) Entity has the meaning ascribed to it in Section 10(m)(i)(1).
(z) Excise Tax has the meaning ascribed to it in Section 10(d)(i).
(aa) Gross Up Payment has the meaning ascribed to it in Section 10(d)(i).
(bb) Incentive Plan means the CompUSA Inc. Long-Term Incentive Plan, as
amended from time to time.
(cc) Inventions has the meaning ascribed to it in Section 7(a).
(dd) Options has the meaning ascribed to it in Section 10(j).
(ee) Parachute Payments has the meaning ascribed to such term in Section
280G(b)(2) of the Code.
(ff) Restricted Stock has the meaning ascribed to it in Section 10(j).
(gg) Rights Agreement has the meaning ascribed to it in Section 10(c).
(hh) Separation Payment Period has the meaning ascribed to it in Section
6(b)(ii).
(ii) Separation Payments has the meaning ascribed to it in Section
6(b)(ii).
(jj) Target Bonus means, with respect to each Employee, the dollar amount
that is equal to the established percentage of such Employee's Base Salary
<PAGE>
that would be paid to Employee under the management incentive bonus plan of
Employer assuming the measurement criteria contained in such plan with
respect
to Employee were achieved for the bonus period in which the Change In Control
occurred.
(kk) Termination Payment has the meaning ascribed to it in Section
10(b)(i)(2).
(ll) Triggering Termination has the meaning ascribed to it in Section
10(a).
<PAGE>
<PAGE>
EXECUTED as of the date and year first above written.
CompUSA Inc.
By
-----------------------------------------
James F. Halpin, President and Chief
Executive Officer
_____________________________________
<PAGE>
<PAGE>
CONSULTING AGREEMENT
This Consulting Agreement ("Agreement"), dated as of
, 19 ("Effective Date"), is between CompUSA Inc., a Delaware
corporation ("Company"), and _______________ ("Consultant").
R E C I T A L S:
A. Consultant was formerly employed by the Company (or one of its
subsidiaries or affiliates) as an executive officer.
B. Consultant and the Company previously entered into an Employment
Agreement, dated as of May 1, 1996 ("Employment Agreement"), under which
Consultant is obligated to enter into this Agreement at the request of the
Board of Directors of the Company under certain circumstances.
C. The Board of Directors of the Company has requested that Consultant
enter into this Agreement and Consultant is willing to do so.
NOW, THEREFORE, for and in consideration of the mutual promises contained
in this Agreement, and on the terms and subject to the conditions set forth
in
this Agreement, the parties agree as follows:
Section 1. Duties. The Company retains Consultant to provide, and
Consultant agrees to render, such consulting and advisory services as may be
requested from time to time by the Company's Board of Directors. Consultant
agrees to devote his attention, skills and best efforts to the performance of
his duties under this Agreement. Consultant shall not be obligated, however,
to devote more than 30 hours per month to the discharge of his
responsibilities under this Agreement. Consultant shall be an independent
contractor, not an employee of the Company, during the term of this
Agreement.
Section 2. Term. The term for providing consulting services under
this Agreement commences on the Effective Date and continues, unless earlier
terminated pursuant to Section 5, until 180 days after the date of the Change
In Control, as defined in the Employment Agreement.
Section 3. Compensation. In consideration for the services provided
by Consultant, the Company shall pay to Consultant during the term of this
Agreement compensation at a rate equal to the rate of his annual base
compensation considered for purposes of Section 10(b)(i)(1)(I) of the
Employment Agreement, which payments shall be made monthly in advance.
Section 4. Expenses. The parties anticipate that Consultant, in
connection with the services to be performed by him under this Agreement,
will
incur expenses for travel, lodging and similar items. The Company shall
advance the estimated amount of such expenses to Consultant and shall, within
15 days after Consultant's presentation to the Company of reasonable
documentation of the actual expenses, reimburse Consultant for all expenses
incurred by Consultant in the performance of his duties under this Agreement
that have not been so advanced.
<PAGE>
Section 5. Early Termination.
(a) Events of Early Termination. This Agreement may terminate prior to
the expiration of the term specified in Section 2 as follows:
(i) Death. Upon the death of Consultant during the term hereof.
(ii) For Cause. For "Cause" immediately upon written notice by the
Company to Consultant. For purposes of this Agreement, a termination
shall be for Cause if:
(I) Consultant commits an unlawful or criminal act involving
moral turpitude; or
(II) Consultant (A) fails to obey written directions delivered
to Consultant by the Company's Board of Directors; or (B) commits a
material breach of any of the covenants, terms and provisions of
this
Agreement and such failure or breach continues uncured for more than
30 days after receipt by Consultant of written notice of such
failure
or breach.
(b) Payments Upon Early Termination. Consultant shall not be entitled
to
any compensation upon termination of this Agreement pursuant to this Section
5
except for his compensation accrued but unpaid as of the date of such
termination and unpaid expense reimbursements under Section 4 for expenses
incurred in accordance with the terms hereof prior to such termination.
Section 6. General.
(a) Notices. All notices and other communications hereunder shall be in
writing or by written telecommunication and shall be deemed to have been duly
given if delivered personally or if mailed by certified mail, return receipt
requested or by written telecommunication, to the relevant address set forth
below, or to such other address as the recipient of such notice or
communication shall have specified to the other party hereto in accordance
with this Section 6(a):
If to the Company, to: with a copy to:
CompUSA Inc. Jackson & Walker, L.L.P.
14951 North Dallas Parkway 901 Main Street, Suite 6000
Dallas, Texas 75240 Dallas, Texas 75202
Attention: Chairman of the Board Attention: Fred W. Fulton
Facsimile Number: (214) 982-4276 Facsimile Number: (214) 953-6115
If to Consultant, to:
___________________
___________________
___________________
(b) Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable, such provision shall be fully severable,
and this Agreement shall be construed and enforced as if such illegal,
invalid
<PAGE>
or unenforceable provision never comprised a part hereof, and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its
severance herefrom. Furthermore, in lieu of such illegal, invalid or
unenforceable provision, there shall be added automatically as part of this
Agreement a provision as similar in its terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and
enforceable.
(c) Waivers. No delay or omission by either party hereto in exercising
any right, power or privilege hereunder shall impair such right, power or
privilege, nor shall any single or partial exercise of any such right, power
or privilege preclude any further exercise thereof or the exercise of any
other right, power or privilege.
(d) Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
(e) Captions. The captions in this Agreement are for convenience of
reference only and shall not limit or otherwise affect any of the terms or
provisions hereof.
(f) Reference to Agreement. Use of the words "hereof," "hereto,"
"hereunder" and the like in this Agreement refer to this Agreement as a whole
and not to any particular section or subsection of this Agreement, unless
otherwise noted.
(g) Binding Agreement. This Agreement shall be binding upon and inure
to
the benefit of the parties and shall be enforceable by the personal
representatives and heirs of Consultant and the successors of the Company.
If
Consultant dies while any amounts would still be payable to him hereunder,
such amounts shall be paid to Consultant's estate. This Agreement is not
otherwise assignable by Consultant or by the Company.
(h) Entire Agreement. This Agreement contains the entire understanding
of the parties, supersedes all prior agreements and understandings relating
to
the subject matter hereof and may not be amended except by a written
instrument hereafter signed by each of the parties hereto.
(i) Governing Law. This Agreement and the performance hereof shall be
construed and governed in accordance with the laws of the State of Texas,
without regard to its choice of law principles.
(j) Gender and Number. The masculine gender shall be deemed to denote
the feminine or neuter genders, the singular to denote the plural, and the
plural to denote the singular, where the context so permits.
<PAGE>
EXECUTED as of the date and year first above written.
CompUSA Inc.
By
--------------------------------------
_____________________________________
<PAGE>
Exhibit 10.17
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), dated as of May 1, 1996, is
between CompUSA Inc., a Delaware corporation, and _________________________
("Employee").
R E C I T A L S:
A. Employee has been employed by Employer, and Employer and Employee
desire to enter into a written agreement to specify the terms and conditions
of Employee's continued employment with Employer.
B. Employer considers the maintenance of a sound management team,
including Employee, essential to protecting and enhancing its best interests
and those of its stockholders.
C. Employer recognizes that the possibility of a change in control of
Employer may result in the departure or distraction of management to the
detriment of Employer and its stockholders.
D. Employee is a vice president of Employer and an integral member of
its management team.
E. Employer has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of selected
members of Employer's management team to their assigned duties without the
distraction arising from the possibility of a change in control of Employer.
NOW, THEREFORE, in consideration of Employee's past and future employment
with Employer and other good and valuable consideration, the parties agree as
follows:
Section 1. Employment. Employer hereby employs Employee, and
Employee
hereby accepts employment, upon the terms and subject to the conditions
hereinafter set forth.
Section 2. Duties. Employee shall be employed as Vice President -
______________ of Employer, or such other position to which he may be
appointed by the Board of Directors. Employee agrees to devote his full time
and best efforts to the performance of the duties attendant to his executive
position with Employer.
Section 3. Term. The term of employment of Employee hereunder shall
commence on the date of this Agreement (the "Commencement Date") and continue
until May 1, 1998, unless earlier terminated pursuant to Section 6 or Section
10.
<PAGE>
Section 4. Compensation and Benefits. In consideration for the
services of Employee hereunder, Employer shall compensate Employee as
follows:
(a) Base Salary. Until the termination of Employee's employment
hereunder, Employer shall pay Employee, semi-monthly in arrears, a base
salary
at an annual rate of $________ (the "Base Salary"). The Base Salary may not
be decreased at any time during the term of Employee's employment hereunder
and shall be reviewed by Employer each October. Any increase in the Base
Salary shall be in the sole discretion of the Compensation Committee of the
Board of Directors of the Company.
(b) Management Incentive Bonus. Employee shall be eligible to receive
from Employer such annual management incentive bonuses as may be provided in
management incentive bonus plans adopted from time to time by Employer.
(c) Vacation. Employee shall be entitled to _____ hours of paid
vacation
per year at the reasonable and mutual convenience of Employer and Employee.
Unless otherwise approved by the Compensation Committee of the Board of
Directors of the Company, accrued vacation not taken in any calendar year
shall not be carried forward or used in any subsequent calendar year.
(d) Insurance Benefits. Employer shall provide accident, health,
dental,
disability and life insurance for Employee under the group accident, health,
dental, disability and life insurance plans maintained by Employer for its
full-time, salaried employees.
(e) Car Allowance. As a condition of Employee's employment, Employee
shall from time to time be required to travel by automobile on Employer's
business. Accordingly, during the term of Employee's employment hereunder,
Employer shall provide Employee with a monthly car allowance of $600, payable
in equal semi-monthly installments, to cover Employee's costs of obtaining,
maintaining and insuring a suitable automobile.
Section 5. Expenses. The parties anticipate that in connection with
the services to be performed by Employee pursuant to the terms of this
Agreement, Employee will be required to make payments for travel,
entertainment of business associates and similar expenses. Employer shall
reimburse Employee for all reasonable expenses of types authorized by
Employer
and incurred by Employee in the performance of his duties hereunder.
Employee
shall comply with such budget limitations and approval and reporting
requirements with respect to expenses as Employer may establish from time to
time.
Section 6. Termination.
(a) General. Employee's employment hereunder shall commence on the
Commencement Date and continue until the end of the term specified in Section
3, except that the employment of Employee hereunder shall terminate prior to
such time in accordance with the following:
(i) Death or Disability. Upon the death of Employee during the
term
of his employment hereunder or, at the option of Employer, in the event
of
Employee's Disability, upon 30 days' notice to Employee.
<PAGE>
(ii) For Cause. For "Cause" immediately upon written notice by
Employer to Employee. A termination shall be for Cause if:
(1) Employee commits a criminal act involving moral
turpitude; or
(2) Employee commits a material breach of any of the
covenants, terms and provisions hereof or fails to obey written
directions delivered to Employee by the Company's Chairman of the
Board, President, Chief Executive Officer or its Board of Directors
or by any of the Company's Executive Vice Presidents or Senior Vice
Presidents.
(iii) Without Cause. Without Cause upon notice by Employer to
Employee.
(b) Severance Pay.
(i) Termination Upon Death or Disability or For Cause. Employee
shall not be entitled to any severance pay or other compensation upon
termination of his employment pursuant to Section 6(a)(i) or (ii) except
for his Base Salary accrued but unpaid as of the date of termination,
unpaid expense reimbursements under Section 5 for expenses incurred in
accordance with the terms hereof prior to termination, and compensation
for accrued, unused vacation as of the date of termination.
(ii) Termination Without Cause. In the event Employee's employment
hereunder is terminated pursuant to Section 6(a)(iii), Employer shall pay
Employee Separation Payments as Employee's sole remedy in connection with
such termination. "Separation Payments" are payments made at the semi-
monthly rate of Employee's Base Salary in effect immediately preceding
the
date of termination. Separation Payments shall be made for six months
after the date of termination (the "Separation Payment Period") and shall
be paid by Employer in equal semi-monthly payments in arrears.
Separation
Payments shall be reduced by the amount of any personal services income
earned by Employee during the Separation Payment Period. Employer shall
also pay Employee his Base Salary accrued but unpaid as of the date of
termination, unpaid expense reimbursements under Section 5 for expenses
incurred in accordance with the terms hereof prior to termination, and
compensation for accrued, unused vacation as of the date of termination.
Separation Payments shall be made for the number of months specified
above
without regard to the number of months remaining in the term of this
Agreement. This paragraph is subject to the provisions of Section 10(j)
dealing with the coordination of payments in the event of a Change In
Control.
(c) Transfers of Employment. Employee's employment hereunder shall
continue until the earlier of the following:
(i) Employee's employment with all Employers terminates; or
(ii) the last Employer (other than the Company) by which Employee is
employed under this Agreement ceases to be a subsidiary or affiliate of
<PAGE>
the Company. For purposes of Section 6(b)(ii), the termination of
Employee's employment hereunder pursuant to this Section 6(c)(ii) shall
be
treated as a termination by Employer without Cause pursuant to Section
6(a)(iii).
Section 7. Inventions; Assignment.
(a) Inventions Defined. All rights to discoveries, inventions,
improvements, designs and innovations (including all data and records
pertaining thereto) that relate to the business of Employer, whether or not
patentable, copyrightable or reduced to writing, that Employee may discover,
invent or originate during the term of his employment hereunder, and for a
period of six months thereafter, either alone or with others and whether or
not during working hours or by the use of the facilities of Employer
("Inventions"), shall be the exclusive property of Employer. Employee shall
promptly disclose all Inventions to Employer, shall execute at the request of
Employer any assignments or other documents Employer may deem necessary to
protect or perfect its rights therein, and shall assist Employer, at
Employer's expense, in obtaining, defending and enforcing Employer's rights
therein. Employee hereby appoints Employer as his attorney-in-fact to
execute
on his behalf any assignments or other documents deemed necessary by Employer
to protect or perfect its rights to any Inventions.
(b) Covenant to Assign and Cooperate. Without limiting the generality
of
the foregoing, Employee shall assign and transfer to Employer the world-wide
right, title and interest of Employee in the Inventions. Employee agrees
that
Employer may apply for and receive patent rights (including Letters Patent in
the United States) for the Inventions in Employer's name in such countries as
may be determined solely by Employer. Employee shall communicate to Employer
all facts known to Employee relating to the Inventions and shall cooperate
with Employer's reasonable requests in connection with vesting title to the
Inventions and related patents exclusively in Employer and in connection with
obtaining, maintaining and protecting Employer's exclusive patent rights in
the Inventions.
(c) Successors and Assigns. Employee's obligations under this Section 7
shall inure to the benefit of Employer and its successor and assigns and
shall
survive the expiration of the term of this Agreement for such time as may be
necessary to protect the proprietary rights of Employer in the Inventions.
Section 8. Confidential Information.
(a) Acknowledgment of Proprietary Interest. Employee acknowledges the
proprietary interest of Employer in all Confidential Information. Employee
agrees that all Confidential Information learned by Employee during his
employment with Employer or otherwise, whether developed by Employee alone or
in conjunction with others or otherwise, is and shall remain the exclusive
property of Employer. Employee further acknowledges and agrees that his
disclosure of any Confidential Information will result in irreparable injury
and damage to Employer.
(b) Confidential Information Defined. "Confidential Information" means
all confidential and proprietary information of Employer, including without
<PAGE>
limitation (i) information derived from reports, investigations, experiments,
research and work in progress, (ii) methods of operation, (iii) market data,
(iv) proprietary computer programs and codes, (v) drawings, designs, plans
and
proposals, (vi) marketing and sales programs, (vii) client lists, (viii)
historical financial information and financial projections, (ix) pricing
formulae and policies, (x) all other concepts, ideas, materials and
information prepared or performed for or by Employer and (xi) all information
related to the business, products, purchases or sales of Employer or any of
its suppliers and customers, other than information that is publicly
available.
(c) Covenant Not To Divulge Confidential Information. Employer is
entitled to prevent the disclosure of Confidential Information. As a portion
of the consideration for the employment of Employee and for the compensation
being paid to Employee by Employer, Employee agrees at all times during the
term of his employment hereunder and thereafter to hold in strict confidence
and not to disclose or allow to be disclosed to any person, firm or
corporation, other than to persons engaged by Employer to further the
business
of Employer, and not to use except in the pursuit of the business of
Employer,
the Confidential Information, without the prior written consent of Employer.
(d) Return of Materials at Termination. In the event of any termination
or cessation of his employment with Employer for any reason, Employee will
promptly deliver to Employer all documents, data and other information
derived
from or otherwise pertaining to Confidential Information. Employee shall not
take or retain any documents or other information, or any reproduction or
excerpt thereof, containing or pertaining to any Confidential Information.
Section 9. Noncompetition.
(a) Until one year after termination of Employee's employment hereunder,
Employee shall not do any of the following:
(i) engage directly or indirectly, alone or as a shareholder,
partner, director, officer, employee of or consultant to any other
business organization, in any business activities that:
(1) relate to the wholesale, direct or retail sale of
computer hardware, software, peripherals, training or other computer
related services (the "Designated Industry"); or
(2) were either conducted by Employer prior to the
termination of Employee's employment hereunder or proposed to be
conducted by Employer at the time of such termination;
(ii) divert to any competitor of Employer in the Designated Industry
any customer of Employer; or
(iii) solicit or encourage any director, officer, employee of or
consultant to Employer to end his relationship with Employer or commence
any such relationship with any competitor of Employer in the Designated
Industry.
<PAGE>
(b) Employee's noncompetition obligations hereunder shall not preclude
Employee from owning less than five percent of the common stock of any
publicly traded corporation conducting business activities in the Designated
Industry. If at any time the provisions of this Section 9 are determined to
be invalid or unenforceable by reason of being vague or unreasonable as to
area, duration or scope of activity, this Section 9 shall be considered
divisible and shall be immediately amended to only such area, duration and
scope of activity as shall be determined to be reasonable and enforceable by
the court or other body having jurisdiction over the matter, and Employee
agrees that this Section 9 as so amended shall be valid and binding as though
any invalid or unenforceable provision had not been included herein.
Section 10. Termination of Employment in Connection With a Change In
Control.
(a) Applicability. The provisions of this Section 10 shall apply in
lieu
of all conflicting provisions in this Agreement in the event Employee's
employment hereunder is terminated in a Triggering Termination. Each of the
following events constitutes a "Triggering Termination" when Employee's
employment hereunder is:
(i) actually terminated by Employer during an Applicable Period
other than for Good Reason;
(ii) Constructively Terminated by Employer during an Applicable
Period other than for Good Reason;
(iii) terminated by Employee for any reason (other than death)
in
the period commencing 180 days after the Change In Control and ending 210
days after the Change in Control; or
(iv) terminated pursuant to Section 6(c)(ii) during an Applicable
Period.
(b) Termination Payment.
(i) Amount. Upon the occurrence of a Triggering Termination,
Employer shall pay Employee a lump sum payment in cash (the "Termination
Payment") equal to one times the sum of the following items:
(1) Employee's annual base compensation determined by
reference to his highest annual base compensation in effect at any
time during Employee's employment with Employer;
(2) two times the Target Bonus that would be payable to
Employee by Employer for the bonus period in which the Change In
Control occurred; provided that the amount determined under this
Section 10(b)(i)(2) shall not be less than 50% of the amount
determined under Section 10(b)(i)(1);
(3) Employee's annualized car allowance determined by
reference to his highest car allowance rate in effect at any time
during Employee's employment with Employer;
<PAGE>
(4) the amount of Employee's Base Salary accrued but unpaid
as of the date of the Triggering Termination;
(5) reimbursement under Section 5 for unpaid expenses
incurred in the performance of his duties hereunder prior to the
date
of the Triggering Termination;
(6) any other benefit accrued but unpaid as of the date of
the Triggering Termination; and
(7) an amount that represents the estimated cost to Employee
of obtaining accident, health, dental, disability and life insurance
coverage for the 12 month period following the expiration of his
continuation (COBRA) rights; provided that this Section 10(b)(i)(7)
shall be applied without regard to, and the amount payable under
this
Section 10(b)(i)(7) is in addition to, any continuation (COBRA)
rights or conversion rights under any plan provided by Employer,
which rights are not affected by any provision hereof.
(ii) Time for Payment; Interest. Employer shall pay the Termination
Payment to Employee concurrent with the Triggering Termination.
Employer's obligation to pay to Employee any amounts under this Section
10, including without limitation the Termination Payment and any Gross Up
Payment due under Section 10(d), shall bear interest at the maximum rate
allowed by law until paid by Employer, and all accrued and unpaid
interest
shall bear interest at the same rate, all of which interest shall be
compounded daily.
(c) Change In Control. A Change In Control shall be deemed to have
occurred for purposes hereof when any Person meets the requirements for
becoming an Acquiring Person, whether or not a Distribution Date occurs or
the
Rights are redeemed by Employer, as those terms are defined in the Rights
Agreement between the Company and Bank One, Texas, N.A. as Rights Agent
(First
Interstate Bank of Texas, N.A. became successor Rights Agent as of November
1,
1995), dated as of April 29, 1994 (the "Rights Agreement"); provided that a
Change In Control shall not be deemed to have occurred for purposes hereof
with respect to any Person meeting the requirements of clauses (i) and (ii)
of
Rule 13d-1(b)(1) promulgated under the Securities Exchange Act of 1934, as
amended.
(d) Gross Up Payment.
(i) Excess Parachute Payment. If Employee incurs the tax (the
"Excise Tax") imposed by Section 4999 of the Code on "excess parachute
payments" within the meaning of Section 280G(b)(1) of the Code as the
result of the receipt of any payments under this Agreement, Employer
shall
pay to Employee an amount (the "Gross Up Payment") such that the net
amount retained by Employee, after deduction of (1) any Excise Tax upon
any payments under this Agreement (other than payments provided by this
Section 10(d)(i)) and (2) any federal, state and local income and
employment taxes (together with penalties and interest) and Excise Tax
upon the payments provided by this Section 10(d)(i), shall be equal to
the
amount of the payments that Employee is entitled to receive under this
<PAGE>
Agreement (other than payments provided by this Section 10(d)(i)).
(ii) Applicable Rates. For purposes of determining the amount of the
Gross Up Payment, Employee shall be deemed:
(1) to pay federal income taxes at the highest marginal rate
of federal income taxation applicable to individual taxpayers in the
calendar year in which the Gross Up Payment is made (which rate
shall
be adjusted as necessary to take into account the effect of any
reduction in deductions, exemptions or credits otherwise available
to
Employee had the Gross Up Payment not been received);
(2) to pay additional employment taxes as a result of the
receipt of the Gross Up Payment in an amount equal to the highest
marginal rate of employment taxes applicable to wages; provided that
if any employment tax is applied only up to a specified maximum
amount of wages, such limit shall be taken into account for purposes
of such calculation; and
(3) to pay state and local income taxes at the highest
marginal rates of taxation in the state and locality of Employee's
residence on the date of the Triggering Termination, net of the
maximum reduction in federal income taxes that could be obtained
from
deduction of such state and local taxes.
(iii) Determination of Gross Up Payment Amount. The
determination of the amount of the Gross Up Payment shall be made by
Ernst
& Young LLP or another nationally recognized public accounting firm
selected by Employee (in either case, the "Accountants"). If the amount
of the Excise Tax payable by Employee, based upon a "Determination," is
different from the Excise Tax computed by the Accountants for purposes of
determining the Gross Up Payment amount, then appropriate adjustments to
the Gross Up Payment amount shall be made in the manner provided in
Section 10(d)(iv). For purposes of determining the Gross Up Payment
amount prior to a Determination of the Excise Tax, the following
assumptions shall be utilized:
(1) that portion of the Termination Payment that is
attributable to the items described in Sections 10(b)(i)(1), (2),
(3)
and (7), and the Gross Up Payment, shall be treated as Parachute
Payments, without regard to whether a Change In Control satisfies
the
requirements of Section 280G(b)(2)(A)(i) of the Code;
(2) no portion of any payment made pursuant to Sections
10(b)(i)(4), (5) or (6) or Section 11(c) shall be treated as a
Parachute Payment;
(3) the amount payable to Employee pursuant to Section 10(k)
shall be:
(I) deemed to be equal to 15% of the amount determined
under Section 10(b)(i)(1);
<PAGE>
(II) deemed to have been paid immediately following the
Change In Control;
(III) deemed to include the additional amount payable
under Section 10(k), if any, for additional taxes payable by
Employee as a result of the receipt of the payment described in
Section 10(k); and
(IV) treated 100% as a Parachute Payment;
(4) the "ascertainable fair market value" (as set forth in
Prop. Treas. Reg. Sec. 1.280G-1, Q&A 13) of the Options, the vesting
of which was accelerated by the Change In Control as provided in the
Incentive Plan and as further provided in Section 10(i), shall be
equal to the product of (I) and (II) as set forth below:
(I) the number of shares covered by such Options; and
(II) the difference between:
a. the fair market value per share as of the
date of the Change In Control; and
b. the exercise price per share of stock subject
to such Options; and
(5) for purposes of applying the rules set forth in Prop.
Treas. Reg. Sec. 1.280G-1, Q&A 24(c) to a payment described in Prop.
Treas. Reg. Sec. 1.280G-1, Q&A 24(b), the amount reflecting the
lapse
of
the obligation to continue performing services shall be equal to the
minimum amount allowed for such payment as set forth in Prop. Treas.
Reg. Sec. 1.280G-1, Q&A 24(c)(2) (or if Prop. Treas. Reg. Sec.
1.280G-1 has been superseded by temporary or final regulations, the
minimum amount provided for in any temporary or final regulations
that supersede Prop. Treas. Reg. Sec. 1.280G-1 and that are
applicable to the Termination Payment, Gross Up Payment, or both).
(iv) Time For Payment. Employer shall pay the estimated Gross Up
Payment amount in cash to Employee concurrent with the payment of the
Termination Payment. Employee and Employer agree to reasonably cooperate
in the determination of the actual Gross Up Payment amount. Further,
Employee and Employer agree to make such adjustments to the estimated
Gross Up Payment amount as may be necessary to equal the actual Gross Up
Payment amount, which in the case of Employee shall refer to refunds of
prior overpayments and in the case of Employer shall refer to makeup of
prior underpayments.
(e) Term. Notwithstanding the provisions of Section 3, if a Change In
Control occurs prior to April 30, 1998, Sections 10, 11 and 12 shall continue
in effect for a period of 24 months after the date of the Change In Control.
(f) No Duty to Mitigate Damages. Employee's rights and privileges under
this Section 10 shall be considered severance pay in consideration of his
past
<PAGE>
service and his continued service to Employer from the Commencement Date, and
his entitlement thereto shall neither be governed by any duty to mitigate his
damages by seeking further employment nor offset by any compensation that he
may receive from future employment.
(g) Arbitration. Except as provided in Section 10(i) and in Section
11(d) with respect to Section 10(l), any controversy or claim arising out of
or relating to this Section 10, or the breach thereof, shall be settled
exclusively by arbitration in Dallas, Texas, in accordance with the
Commercial
Arbitration Rules of the American Arbitration Association then in effect.
Judgment upon the award rendered by the arbitrator may be entered in, and
enforced by, any court having jurisdiction thereof.
(h) No Right To Continued Employment. This Section 10 shall not give
Employee any right of continued employment or any right to compensation or
benefits from Employer except the rights specifically stated herein.
(i) Restricted Stock and Exercise of Stock Options. Employee may hold
options ("Options") issued under the Incentive Plan that become immediately
exercisable upon a Change In Control. In addition, Employee may hold
restricted stock ("Restricted Stock") also issued under the Incentive Plan
pursuant to which applicable restrictions will lapse upon a Change In
Control.
Employer shall take no action to facilitate a transaction involving a Change
In Control, including without limitation redemption of the Rights issued
pursuant to the Rights Agreement, unless it has taken such action as may be
necessary to ensure that Employee has the opportunity to exercise all Options
he may then hold, and obtain certificates containing no restrictive legends
in
respect of any Restricted Stock he may then hold, at a time and in a manner
that shall give Employee the opportunity to sell or exchange the securities
of
Employer acquired upon exercise of his Options and upon receipt of
unrestricted certificates for shares of Common Stock in respect of his
Restricted Stock, if any (collectively, the "Acquired Securities"), at the
earliest time and in the most advantageous manner any holder of the same
class
of securities as the Acquired Securities is able to sell or exchange such
securities in connection with such Change In Control. Employer acknowledges
that its covenants in the preceding sentence (the "Covenants") are reasonable
and necessary in order to protect the legitimate interests of Employer in
maintaining Employee as one of its employees and that any violation of the
Covenants by Employer would result in irreparable injuries to Employee, and
Employer therefore acknowledges that in the event of any violation of the
Covenants by Employer or its directors, officers or employees, or any of
their
respective agents, Employee shall be entitled to obtain from any court of
competent jurisdiction temporary, preliminary and permanent injunctive relief
in order to (i) obtain specific performance of the Covenants, (ii) obtain
specific performance of the exercise of his Options, delivery of certificates
containing no restrictive legends in respect of his Restricted Stock and the
sale or exchange of the Acquired Securities in the advantageous manner
contemplated above or (iii) prevent violation of the Covenants; provided that
in the event Employee fails to obtain such injunctive relief, nothing in this
Agreement shall be deemed to prejudice Employee's rights to damages for
violation of the Covenants.
(j) Coordination With Other Payments.
<PAGE>
(i) After the termination of Employee's employment hereunder:
(1) if Employee is entitled to receive Separation Payments;
and
(2) Employee subsequently becomes entitled to receive a
Termination Payment, Gross Up Payment or both, then
(ii) prior to the disbursement of the Termination Payment and Gross
Up Payment:
(1) the payment date of all unpaid Separation Payments shall
be accelerated to the payment date of the Termination Payment and
such Separation Payments shall be made (in this event, Employer
waives any requirement that Employee reduce the Separation Payments
by the amount of any income earned by Employee thereafter); and
(2) the Termination Payment shall be reduced by the amount of
the Separation Payments so accelerated and made.
(k) Outplacement Services. If Employee becomes entitled to receive a
Termination Payment under this Section 10, Employer agrees to reimburse
Employee for the amount of any outplacement consulting fees and expenses
incurred by Employee during the two year period following the Change In
Control; provided that the aggregate amount reimbursed by Employer shall not
exceed 15% of the amount determined pursuant to Section 10(b)(i)(1). In
addition and as to each reimbursement payment, to the extent that any
reimbursement under this Section 10(k) is not deductible by Employee for
federal, state and local income tax purposes, Employer shall pay Employee an
additional amount such that the net amount retained by Employee, after
deduction of any federal, state and local income tax on the reimbursement and
such additional amount, shall be equal to the reimbursement payment. All
amounts under this Section 10(k) shall be paid by Employer within 15 days
after Employee's presentation to Employer of any statements of such amounts
and thereafter shall bear interest at the maximum rate allowed by law until
paid by Employer, and all accrued and unpaid interest shall bear interest at
the same rate, all of which interest shall be compounded daily.
(l) Noncompetition.
(i) Following the occurrence of a Triggering Termination, Employee
shall not:
(1) for a period of one year following the date of the
Triggering Termination engage directly or indirectly, alone or as a
shareholder, partner, director, officer, employee of or consultant
to, any entity other than Employer that is in existence on the date
of the Triggering Termination and is at that time engaged directly,
or indirectly through any subsidiary, division or other business
unit
(individually, an "Entity"), in retail or direct sales of computer
hardware, software, peripherals, training or other computer related
services to end users (the "Change In Control Designated Industry");
or
<PAGE>
(2) for a period of one year following the date of the
Triggering Termination solicit or encourage any director, officer,
employee of or consultant to Employer to end his relationship with
Employer and commence any such relationship with any competitor of
Employer in the Change In Control Designated Industry.
(ii) Notwithstanding the foregoing, an Entity shall not be deemed to
be engaged in the Change In Control Designated Industry if retail and
direct sales of computer hardware, software, peripherals, training or
other computer related services to end users are incidental to such
Entity's business. Retail and direct sales of computer hardware,
software, peripherals, training or other computer related services shall
be deemed incidental to an Entity's business so long as:
(1) the aggregate of such sales by such Entity is 40% or less
of the total sales of such Entity for the fiscal quarter of such
Entity immediately preceding the date of the Triggering Termination
or any of the eight immediately subsequent fiscal quarters of such
Entity; and
(2) such Entity is not a member of a group of Entities under
common control that includes one or more Computer Sales Entities;
provided that the foregoing restriction shall be deemed not to have
been violated if Employee terminates his employment or other
prohibited relationship with an Entity promptly after his discovery
that the Entity first became a Computer Sales Entity (during the
term
of his relationship) during the preceding fiscal quarter of such
Entity. A "Computer Sales Entity" is defined as an Entity whose
retail and direct sales of computer hardware, software, peripherals,
training and other computer related services to end users, in the
aggregate, are more than 40% of the total sales of such Entity,
measured over any fiscal quarter. Notwithstanding the foregoing,
the
following Entities shall be deemed to be Computer Sales Entities
engaged in the Change In Control Designated Industry: Best Buy,
Circuit City, Tandy Corporation (and its subsidiaries, affiliates
and
divisions including Computer City), Fry's, Micro Electronics, Inc.
(d/b/a Micro Center), Elek-Tek, Silo/Fretter and Computer Discount
Warehouse, Inc.
(iii) If at any time the provisions of this Section 10(l) are
determined to be invalid or unenforceable by reason of being vague or
unreasonable as to area, duration or scope of activity, this Section
10(l)
shall be considered divisible and shall be immediately amended to only
such area, duration or scope of activity as shall be determined to be
reasonable and enforceable by the court or other body having jurisdiction
over the matter; and Employee agrees that this Section 10(l) as so
amended
shall be valid and binding as though any invalid or unenforceable
provision had not been included herein. Notwithstanding the foregoing,
Employee's noncompetition obligations hereunder shall not preclude
Employee from owning stock with less than five percent of the voting
power
or economic interest in any publicly traded corporation conducting
business activities in the Change In Control Designated Industry.
<PAGE>
Section 11. General.
(a) Notices. All notices and other communications hereunder shall be in
writing or by written telecommunication, and shall be deemed to have been
duly
given if delivered personally or if mailed by certified mail, return receipt
requested or by written telecommunication, to the relevant address set forth
below, or to such other address as the recipient of such notice or
communication shall have specified to the other party in accordance with this
Section 11(a):
If to Employer, to: with a copy to:
CompUSA Inc. Jackson & Walker, L.L.P.
14951 North Dallas Parkway 901 Main Street, Suite 6000
Dallas, Texas 75240 Dallas, Texas 75202
Attention: Chairman of the Board Attention: Fred W. Fulton
Facsimile Number: (214) 982-4276
If to Employee, to:
___________________
___________________
___________________
(b) Withholding; No Offset. All payments required to be made to
Employee
by Employer under this Agreement shall be subject to the withholding of such
amounts, if any, relating to federal, state and local taxes as may be
required
by law. No payments under Section 10 of this Agreement shall be subject to
offset or reduction attributable to any amount Employee may owe to Employer
or
any other person.
(c) Legal and Accounting Costs. Employer shall pay all attorneys' and
accountants' fees and costs incurred by Employee as a result of any breach by
Employer of its obligations under this Agreement, including without
limitation
all such costs incurred in contesting or disputing any determination made by
Employer under Section 10 or in connection with any tax audit or proceeding
to
the extent attributable to the application of Section 4999 of the Code to any
payment under Section 10. Reimbursements of such costs shall be made by
Employer within 15 days after Employee's presentation to Employer of any
statements of such costs and thereafter shall bear interest at the maximum
rate allowed by law until paid by Employer, and all accrued and unpaid
interest shall bear interest at the same rate, all of which interest shall be
compounded daily.
(d) Equitable Remedies. Each of the parties hereto acknowledges and
agrees that upon any breach by Employee of his obligations under any of
Sections 7, 8, 9 and 10(l), Employer shall have no adequate remedy at law and
accordingly shall be entitled to specific performance and other appropriate
injunctive and equitable relief.
(e) Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable, such provision shall be fully severable,
and this Agreement shall be construed and enforced as if such illegal,
invalid
<PAGE>
or unenforceable provision never comprised a part hereof, and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its
severance herefrom. Furthermore, in lieu of such illegal, invalid or
unenforceable provision, there shall be added automatically as part of this
Agreement a provision as similar in its terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and
enforceable.
(f) Waivers. No delay or omission by either party in exercising any
right, power or privilege hereunder shall impair such right, power or
privilege, nor shall any single or partial exercise of any such right, power
or privilege preclude any further exercise thereof or the exercise of any
other right, power or privilege.
(g) Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
(h) Captions. The captions in this Agreement are for convenience of
reference only and shall not limit or otherwise affect any of the terms or
provisions hereof.
(i) Reference to Agreement. Use of the words "herein," "hereof,"
"hereto," "hereunder" and the like in this Agreement refer to this Agreement
only as a whole and not to any particular section or subsection of this
Agreement, unless otherwise noted.
(j) Binding Agreement. This Agreement shall be binding upon and inure
to
the benefit of the parties and shall be enforceable by the personal
representatives and heirs of Employee and the successors and assigns of
Employer. This Agreement may be assigned by the Company or any Employer to
any Employer; provided that in the event of any such assignment, the Company
shall remain liable for all of its obligations hereunder and shall be liable
for all obligations of all such assignees hereunder. If Employee dies while
any amounts would still be payable to him hereunder, such amounts shall be
paid to Employee's estate. This Agreement is not otherwise assignable by
Employee.
(k) Entire Agreement. This Agreement contains the entire understanding
of the parties, supersedes all prior agreements and understandings relating
to
the subject matter hereof and may not be amended except by a written
instrument hereafter signed by each of the parties hereto.
(l) Governing Law. This Agreement and the performance hereof shall be
construed and governed in accordance with the laws of the State of Texas,
without regard to its choice of law principles.
(m) Gender and Number. The masculine gender shall be deemed to denote
the feminine or neuter genders, the singular to denote the plural, and the
plural to denote the singular, where the context so permits.
<PAGE>
Section 12. Definitions. As used in this Agreement, the following
terms will have the following meanings:
(a) Accountants has the meaning ascribed to it in Section 10(d)(iii).
(b) Acquired Securities has the meaning ascribed to it in Section 10(i).
(c) Agreement has the meaning ascribed to it in the heading of this
document.
(d) Applicable Period means, with respect to any Change In Control, the
period of 27 months commencing 3 months before the Change In Control and
ending 24 months after the Change In Control.
(e) Base Salary has the meaning ascribed to it in Section 4(a).
(f) Cause has the meaning ascribed to it in Section 6(a)(ii).
(g) Change In Control has the meaning ascribed to it in Section 10(c).
(h) Change In Control Designated Industry has the meaning ascribed to it
in Section 10(l)(i)(1).
(i) Code means the Internal Revenue Code of 1986, as amended.
(j) Commencement Date has the meaning ascribed to it in Section 3.
(k) Company means CompUSA Inc., a Delaware corporation.
(l) Computer Sales Entity has the meaning ascribed to it in Section
10(l)(ii)(2).
(m) Confidential Information has the meaning ascribed to it in Section
8.
(n) Constructively Terminated with respect to an Employee's employment
with Employer will be deemed to have occurred if Employer:
(i) demotes Employee to a lesser position, either in title or
responsibility, than the highest position held by Employee with Employer
at any time during Employee's employment with Employer;
(ii) decreases Employee's compensation below the highest level in
effect at any time during Employee's employment with Employer or reduces
Employee's benefits and perquisites below the highest levels in effect at
any time during Employee's employment with Employer (other than as a
result of any amendment or termination of any employee or group or other
executive benefit plan, which amendment or termination is applicable to
all executives of Employer); or
(iii) requires Employee to relocate to a principal place of
business more than 25 miles from the principal place of business occupied
by Employer on the first day of an Applicable Period.
<PAGE>
(o) Covenants has the meaning ascribed to it in Section 10(i).
(p) Designated Industry has the meaning ascribed to it in Section
9(a)(i)(1).
(q) Determination has the meaning ascribed to such term in Section
1313(a) of the Code.
(r) Disability with respect to an Employee shall be deemed to exist if
he
meets the definition of disability under the terms of the disability
insurance
policy referred to in Section 4(d). Any refusal by Employee to submit to a
reasonable medical examination to determine whether Employee is so disabled
shall be deemed conclusively to constitute evidence of Employee's Disability.
(s) Employee has the meaning ascribed to it in the heading of this
Agreement.
(t)
Employer refers collectively to the Company and its subsidiaries and other
affiliates. In Section 10, the term "Employer" shall be deemed to refer to
the Company, and for purposes of Section 10, Employee shall be deemed to be
employed by the Company and all compensation and benefits paid or provided to
Employee by any Employer under this Agreement at any time shall be deemed to
have been paid or provided to Employee by the Company.
(u) Entity has the meaning ascribed to it in Section 10(l)(i)(1).
(v) Excise Tax has the meaning ascribed to it in Section 10(d)(i).
(w) Good Reason means the termination of Employee's employment with
Employer as a result of Employee's commission of a felony or failure to obey
written directions delivered to Employee by Employer's Chairman of the Board,
President, Chief Executive Officer or its Board of Directors or by any of
Employer's Executive Vice Presidents or Senior Vice Presidents.
(x) Gross Up Payment has the meaning ascribed to it in Section 10(d)(i).
(y) Incentive Plan means the CompUSA Inc. Long-Term Incentive Plan, as
amended from time to time.
(z) Inventions has the meaning ascribed to it in Section 7.
(aa) Options has the meaning ascribed to it in Section 10(i).
(bb) Parachute Payments has the meaning ascribed to such term in Section
280G(b)(2) of the Code.
(cc) Restricted Stock has the meaning ascribed to it in Section 10(i).
(dd) Rights Agreement has the meaning ascribed to it in Section 10(c).
(ee) Separation Payment Period has the meaning ascribed to it in Section
6(b)(ii).
<PAGE>
(ff) Separation Payments has the meaning ascribed to it in Section
6(b)(ii).
(gg) Target Bonus means, with respect to each Employee, the dollar amount
that is equal to the established percentage of such Employee's Base Salary
that would be paid to Employee under the management incentive bonus plan of
Employer assuming the measurement criteria contained in such plan with
respect
to Employee were achieved for the bonus period in which the Change In Control
occurred.
(hh) Termination Payment has the meaning ascribed to it in Section
10(b)(i).
(ii) Triggering Termination has the meaning ascribed to it in Section
10(a).
<PAGE>
<PAGE>
EXECUTED as of the date and year first above written.
CompUSA Inc.
By
-------------------------------------
James F. Halpin, President and Chief
Executive Officer
_____________________________________
<PAGE>
Exhibit 11
CompUSA Inc.
COMPUTATIONS OF
INCOME PER COMMON AND COMMON EQUIVALENT SHARE (1)(2)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Thirteen weeks ended Thirty-nine weeks ended
----------------------------- -----------------------------
March 23, March 25, March 23, March 25,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Common shares outstanding at
beginning of period. . . . . . . . . . . 42,114 37,138 37,134 36,902
Weighted average number of shares
issued during the period . . . . . . . . 111 78 3,676 234
Weighted average treasury shares. . . . . . . (224) -- (76) --
Incremental shares related to
assumed exercise of stock
options. . . . . . . . . . . . . . . . . . 1,396 1,210 1,490 936
------------ ------------ ------------ ------------
Weighted average common and
common equivalent shares . . . . . . . . . 43,397 38,426 42,224 38,072
============ ============ ============ ============
Net income. . . . . . . . . . . . . . . . . .$ 22,069 $ 12,101 $ 45,510 $ 18,666
============ ============ ============ ============
Income per common and common
equivalent share . . . . . . . . . . . . .$ 0.51 $ 0.31 $ 1.08 $ 0.49
============ ============ ============ ============
</TABLE>
(1) The computation of income per common share on a fully diluted basis does
not materially differ from the amounts calculated on a primary basis shown
above.
(2) The table reflects a two-for-one stock split completed by the Company on
April 22, 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
financial statements for the periods indicated and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-END> MAR-23-1996
<CASH> 295318
<SECURITIES> 0
<RECEIVABLES> 118138
<ALLOWANCES> 0
<INVENTORY> 412663
<CURRENT-ASSETS> 838706
<PP&E> 122404
<DEPRECIATION> 19470
<TOTAL-ASSETS> 968093
<CURRENT-LIABILITIES> 555719
<BONDS> 110000
0
0
<COMMON> 423
<OTHER-SE> 291256
<TOTAL-LIABILITY-AND-EQUITY> 968093
<SALES> 2669985
<TOTAL-REVENUES> 2669985
<CGS> 2308450
<TOTAL-COSTS> 2308450
<OTHER-EXPENSES> 280564
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9164
<INCOME-PRETAX> 76134
<INCOME-TAX> 30624
<INCOME-CONTINUING> 45510
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45510
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.08
</TABLE>
