<PAGE>
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 29, 1996
OR
[ ] 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
(I.R.S. EMPLOYER
(STATE OR OTHER JURISDICTION OF IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
14951 NORTH DALLAS PARKWAY, DALLAS, TEXAS 75240
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (972) 982-4000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
<S> <C>
Common Stock, $.01 per share par value New York Stock Exchange
9 1/2% Senior Subordinated Notes Due 2000 New York Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
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 X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant, based on the closing price of these shares on the New York Stock
Exchange on September 9, 1996, was $1,570,006,120. For the purposes of this
disclosure only, the registrant has assumed that its directors, executive
officers, and beneficial owners of 5% or more of the registrant's common stock
are the affiliates of the registrant.
The registrant had 45,320,525 shares of common stock, $.01 per share par
value, outstanding as of September 9, 1996.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's definitive proxy statement for the annual meeting
of stockholders of the Company to be held November 6, 1996 are incorporated by
reference into Part III of this Report.
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I
Item 1. Business........................................................ 1
Item 2. Properties...................................................... 5
Item 3. Legal Proceedings............................................... 6
Item 4. Submission of Matters to a Vote of Security Holders............. 6
PART II
Item 5. Market for the Company's Common Equity and Related Stockholder
Matters........................................................ 7
Item 6. Selected Financial Data......................................... 8
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................... 9
Item 8. Financial Statements and Supplementary Data..................... 15
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure........................................... 15
PART III
Item 10.Directors and Executive Officers of the Company................. 16
Item 11. Executive Compensation......................................... 16
Item 12. Security Ownership of Certain Beneficial Owners and Management. 16
Item 13. Certain Relationships and Related Transactions................. 16
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K........................................................... 17
Signatures.............................................................. 20
Index to Consolidated Financial Statements.............................. F-1
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS
CompUSA Inc. ("CompUSA" or the "Company") is the leading retailer of
personal computers and related products and services, principally through its
Computer Superstores(SM) located throughout the United States. Although retail
sales through its Computer Superstores are the largest component of the
Company's business, its stores also fulfill the principal marketing, product,
and service functions of the Company's other businesses, including direct
sales to corporate, government, education, and mail order customers and
training and technical services.
The Company opened its first retail store in April 1985 and its first
Computer Superstore in April 1988. As of September 1, 1996, the Company
operated 106 Computer Superstores in 50 metropolitan areas in 33 states. The
stores average approximately 27,000 square feet and achieved average sales per
square foot in fiscal 1996 of $1,422.
In May 1996, the Company acquired PCs Compleat, Inc. ("PCs Compleat"), a
leading direct reseller of brand-name personal computers and peripherals,
located in Marlborough, Massachusetts. PCs Compleat, a wholly-owned subsidiary
of the Company, operates a centralized facility with integrated telephone,
computer, and distribution systems. The Company believes the acquisition of
PCs Compleat provides a vehicle to more rapidly expand the Company's position
in the personal computer mail order business.
The Company was incorporated in Delaware in 1988 to effect the acquisition
of a company formed in 1984 called Soft Warehouse, Inc. Until March 1991, the
Company operated under the name "Soft Warehouse, Inc." Except where the
context indicates otherwise, all references in this Annual Report to "CompUSA"
or "the Company" include all subsidiaries of CompUSA. The Company's principal
executive offices are located at 14951 North Dallas Parkway, Dallas, Texas
75240, and its telephone number is (972) 982-4000.
MERCHANDISE
The Company offers thousands of personal computer hardware, software,
accessory, and related products as an essential component of its merchandising
strategy. In addition to its in-store selection, which the Company believes is
sufficiently broad to satisfy the needs of most of its customers, CompUSA
offers customers the ability to special order approximately 25,000 additional
products. Although prices for products and services are typically determined
centrally, local personnel regularly compare these centrally determined prices
with those of competitors and managers have the authority to adjust prices in
response to local competitive conditions within guidelines established and
controlled centrally. Additionally, prices for special order items are
established at each store. Major products offered are as follows:
HARDWARE. Hardware products include desktop and laptop model personal
computers, peripherals, such as printers, modems, monitors, data storage
devices, add-on circuit boards, and connectivity products and certain business
machines. Major vendors include Apple, Canon, Compaq, Digital, Epson, Hewlett-
Packard, IBM, Maxtor, NEC, Packard Bell, Sony, Texas Instruments, and Toshiba.
The Company also sells personal computers and related hardware products under
its own Compudyne(R) trademark. The private label Compudyne products are
manufactured exclusively for the Company by third party manufacturers. The
Company has been approached by certain patent owners, including computer
manufacturers, that contend the Company should pay royalties in connection
with the alleged use of certain patented technology in the assembly and sale
of Compudyne personal computers. None of these patent owners has to date
provided sufficient information to the Company to lead it to conclude it has
any such royalty obligations. However, as additional information becomes
available, the Company's assessment of these issues may change.
1
<PAGE>
SOFTWARE. The Company sells approximately 1,500 different software packages
in the business and personal productivity, utility, language, multimedia,
education, reference, and entertainment categories. Major vendors include
Broderbund, Claris, Disney Interactive, IBM, Intuit, Lotus, Microsoft,
Netscape, Novell, SoftKey, and Symantec.
ACCESSORIES. Accessories sold by the Company include a broad range of
personal computer related items and supplies such as diskettes, printer
accessories, mice, cables, scanners, CD ROM storage, and furniture. Major
vendors include 3M, Avery, Curtis, Fellowes, Daisytek, Gemini, Globe, Hewlett-
Packard, Iomega, Kensington, Microsoft, O'Sullivan, Sony, U.S. Robotics, and
Western Digital.
DIRECT SALES
The Company believes that its presence in 50 metropolitan areas, broad
product assortment, competitive pricing, customer service, and training and
technical services position it to serve the diverse needs of corporate,
government, education, and mail order customers by offering a "total solution"
to their personal computing needs. CompUSA targets these customers primarily
through direct solicitations, telemarketing sales, and catalogs. Direct sales
are fulfilled by the Company either from the on-hand inventories in its
Computer Superstores or from its central distribution and configuration
facility located in the Dallas/Fort Worth area, consisting of approximately
56,000 square feet of distribution space and 10,000 square feet of
configuration space.
CORPORATE. Each of the Company's stores has a corporate sales group that
solicits potential corporate customers and offers phone ordering, delivery,
business credit, leasing, and other services, including a corporate assistance
window for merchandise pickup and technical assistance. The Company offers
volume purchase and national account agreements to qualified major customers.
The Company's corporate sales group markets overall merchandise selection,
pricing, and service along with classroom training and technical services.
Larger customers are assigned specific account executives who manage the
Company's relationships with these customers. Account managers process the
orders from each location.
GOVERNMENT AND EDUCATION. The government and education sales group markets
to federal, state, and local governments, government related entities, and the
education market, both directly and as a supplier to systems integrators and
other contractors. Approximately 10,000 products from 50 vendors have been
approved by the General Services Administration ("GSA") on the fiscal 1996-
1999 GSA schedule, making such products eligible for purchase by federal
agencies and certain state and local governments. The Company is also an
approved training and service vendor on the GSA schedule.
MAIL ORDER. The Company conducts mail order sales both through its Computer
Superstores and through PCs Compleat, a wholly-owned subsidiary.
Through its Computer Superstores, CompUSA offers mail order customers most
of the products that are carried in its stores and sells such products at
competitive prices. CompUSA maintains a central call center for telephone
orders and fulfills these orders either through its Computer Superstores or
the Company's central distribution and configuration facility. Substantially
all of CompUSA's advertisements, including its color circulars, feature the
Company's toll free mail order telephone number, 1-800-COMPUSA. The Company
advertises major brands of personal computer hardware, software, and supplies,
as well as its full service offerings of training and technical services in
computer journals, airline magazines, catalogs, and many other publications.
PCs Compleat is a leading direct marketer of brand-name personal computers
and peripherals primarily to small and home office users and small to medium
size businesses. Founded in 1992, PCs Compleat is one of the top "super
direct" sources of brand-name personal computer products and services in the
United States. PCs Compleat's mission is to provide its customers with the
broad product selection of a superstore, the value and convenience of a direct
marketer, and superior service. PCs Compleat's operating strategy utilizes a
centralized distribution facility occupying approximately 55,000 square feet
in Marlborough, Massachusetts with integrated, state-of-the-art telephone,
computer, and distribution systems.
2
<PAGE>
SERVICES
TRAINING. The Company offers training for customers in each of its
businesses through classroom facilities located in all of its stores. Classes
are offered for a variety of application and advanced technology software. A
Computer Superstore typically has three classrooms, each equipped with a
personal computer for each participant. In total, the Company has over 325
classrooms in its stores. Classrooms can accommodate from eight to 14 students
and each store offers approximately five to six full-day classes in each
classroom per week. The Company's instructors receive periodic training both
from software vendors and from the Company. The Company has also opened four
stand-alone Training Supercenter Plus(SM) locations, with one in each of the
Boston, Dallas, Los Angeles, and Seattle markets. In addition, training can be
provided at a customer's facility or at other off-site locations.
TECHNICAL SERVICES. The Company provides its customers with numerous
technical services. Each store maintains a technical services department, open
during the store's regular business hours, that employs from five to 15
people. In addition, in fiscal 1996, the Company established outbound
technical support and integration service centers in eight markets: Atlanta,
Cleveland, Dallas, Los Angeles, New York, North Los Angeles, San Francisco and
Washington, D.C. to cater to the needs of corporate and government customers.
Services include personal computer systems design, configuration, integration,
and testing, technical advice and repairs, including authorized service under
many manufacturers' warranties, and installation and delivery. The Company
also sells various extended service contracts that are administered and
insured by an independent third party. In addition, hardware customers whose
purchases are still under manufacturers' warranties may call the Company for
technical support at no charge. Technical service is also available by
telephone to the general public on a per-minute fee basis.
PURSHASING, VENDOR SELECTION, AND PRODUCT OBSOLESCENCE
The Company manages the purchase and replenishment of all store merchandise
centrally. The inventory management department makes all purchases and directs
merchandise transportation and transfers between the Company's facilities. The
Company purchases a majority of its merchandise inventory directly from
manufacturers, with additional purchases from distributors. Both manufacturers
and distributors may ship merchandise inventories directly to the Company's
stores, the Company's Dallas/Fort Worth area central distribution and
configuration facility, PCs Compleat's centralized distribution facility in
Marlborough, Massachusetts, or the Company's three regional cross-dock
facilities that consolidate vendor shipments and transfer merchandise to the
stores. Substantially all inventory is held at the Company's stores.
The Company considers numerous factors in vendor selection, including
customer demand, product availability, product performance, price, and credit
terms. The Company believes that its significant purchase volumes generally
allow it to acquire products at or near the lowest prices available. The
Company has maintained long-term relationships with vendors but does not have
material long-term contracts or commitments with any of them. Brand names and
individual products are important to the Company's business. In fiscal 1996,
purchases of products from Hewlett-Packard Company constituted in excess of
10% of the Company's aggregate purchases for the year.
As a retailer of personal computer products, the Company's exposure to
product obsolescence and technological advances is less than that faced by
manufacturers of such products. Substantially all of the Company's major
vendors, either contractually or as a result of the vendor following industry
practices, have reduced the Company's exposure to inventory obsolescence by
providing favorable provisions, including price protection, stock balancing
privileges, and other return privileges, subject to restrictions and
limitations in certain circumstances, and promotional allowances for most
products purchased. The Company further reduces technology and obsolescence
risk through inventory management policies designed to maximize rapid
inventory turnover. In fiscal 1996, the Company turned its inventory 7.7
times.
3
<PAGE>
CREDIT
CompUSA extends credit to qualified corporate, government, education, and
mail order customers, generally pursuant to 30 day payment terms. CompUSA
makes available revolving credit payment terms through its own private label
credit card program, which is provided by an independent financial services
company. In addition, the Company accepts most major credit cards, including
Visa, Mastercard, American Express, Diners Club, and Discover Card.
The Company has a third party leasing program pursuant to which the Company
refers corporate customers desiring financing to an independent leasing
company that purchases the applicable equipment and leases it directly to
these customers.
SEASONALITY
Based upon its past operating history, 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. See Note 14 of Notes to
Consolidated Financial Statements.
PERSONNEL
The Company considers its relationship with its employees to be excellent.
None of the Company's employees are covered by collective bargaining
agreements. At August 31, 1996, the Company employed 8,461 full-time and 2,691
part-time employees.
INDUSTRY AND COMPETITION
The Company believes that sales of personal computers and related products
and services have increased as a result of the following factors: (i) growth
of the service/information-based sector of the economy; (ii) improvements in
personal computer hardware performance and new software applications; (iii)
the emergence of industry standards and component compatibility; (iv)
reductions in prices of hardware and software; (v) increased user familiarity
with personal computers; (vi) the replacement of obsolete hardware, software
and peripherals; (vii) increased consumer awareness created, in part, by the
"information superhighway" and Internet capabilities; and (viii) office
automation and the reengineering of the workplace. The Company also believes
that as higher performance personal computers continue to become available at
even more attractive prices, the market for personal computers and related
products and services should continue to grow.
The personal computer industry is undergoing significant change. Rapid
technological advances, in combination with an increasingly computer literate
population, have increased the use and popularity of personal computers,
resulting in the emergence and growth of a variety of distribution channels.
The Company believes that individuals, businesses, and governments, having
gained familiarity with personal computers, require less assistance in making
their purchasing decisions and have become increasingly price sensitive. At
the same time, intense competition for market share has forced hardware and
accessory manufacturers, along with software vendors, to reduce prices and
seek new channels through which to sell their products. These factors have
resulted in widespread and intense competition among personal computer product
resellers. CompUSA believes that its business strategy positions it well to
compete successfully in this industry.
The Company competes with a large number and variety of resellers of
personal computers and related products and services in various businesses. In
the retail business, the Company primarily competes with other large format
computer retailers, large format consumer electronics and office supply
retailers, national mail order houses, mass merchants, discounters, specialty
electronics retailers, software specialty retailers, and other personal
computer retailers. In the corporate, government, and education businesses,
the Company primarily competes with outbound dealers, manufacturers, value-
added resellers, other large format computer retailers, large format office
supply retailers, and general office equipment retailers. In the mail order
business, the
4
<PAGE>
Company competes with national mail order houses, manufacturers and
distributors that sell directly to the public through the use of mail order
catalogs and general trade publications, and other large format computer
retailers. In the training business, the Company primarily competes with
various local, regional, and national chains of training centers and other
large format computer retailers. In the technical services business, the
Company primarily competes with other large format computer retailers,
manufacturers, various other computer retailers, specialty electronics
retailers, and large format consumer electronics and office supply retailers.
The Company believes that the major competitive factors in its businesses
include customer service, breadth and depth of selection, price, technical
support, and marketing and sales capabilities. The Company's utilization of
trained personnel and the ability to use national and local advertising media
are important to the Company's ability to compete in its businesses. The
Company believes it is a strong competitor with respect to each of the factors
referenced above. Given the highly competitive nature of the personal computer
industry, no assurances can be given that the Company will continue to compete
successfully with respect to the factors referenced above. Also, the Company
would be adversely affected if its competitors were to offer their products at
significantly lower prices or if the Company were unable to obtain products in
a timely manner for an extended period of time. Some of the Company's
competitors are larger and/or have substantially greater resources than the
Company.
TRADEMARKS AND SERVICE MARKS
The Company conducts its business under the tradenames "CompUSA" and "PCs
Compleat." The Company has been issued registrations for "CompUSA,"
"Compudyne," "PCs Compleat," and several other marks and has applied in the
United States for registrations for several other trademarks and service
marks. The Company has also applied for registration of various trademarks and
service marks in numerous foreign countries. The Company pursues a program of
procuring and maintaining rights under its trademarks and service marks and
the associated goodwill. All rights with respect to the Company's trademarks
and service marks are fully reserved.
The Company sells products under various trademarks, service marks, and
trade names to which reference is made in this Annual Report that are the
property of owners other than the Company. Such owners have reserved all
rights with respect to their respective trademarks, service marks, and trade
names.
ITEM 2. PROPERTIES
At September 1, 1996, the Company operated 106 Computer Superstores in 50
metropolitan areas in the 33 states listed below.
<TABLE>
<CAPTION>
NUMBER
STATE OF STORES
- ----- ---------
<S> <C>
Alaska.................. 1
Arizona................. 3
California.............. 20
Colorado................ 3
Connecticut............. 2
Delaware................ 1
Florida................. 7
Georgia................. 4
Idaho................... 1
Illinois................ 3
Indiana................. 1
Iowa.................... 1
Kansas.................. 1
Louisiana............... 1
Maryland................ 3
Massachusetts........... 3
Michigan................ 3
</TABLE>
<TABLE>
<CAPTION>
NUMBER
STATE OF STORES
- ----- ---------
<S> <C>
Minnesota............... 2
Missouri................ 1
Nevada.................. 1
New Hampshire........... 1
New Jersey.............. 4
New York................ 6
North Carolina.......... 2
Ohio.................... 6
Oklahoma................ 1
Pennsylvania............ 3
Rhode Island............ 1
Tennessee............... 1
Texas................... 12
Virginia................ 4
Washington.............. 2
Wisconsin............... 1
</TABLE>
5
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All but one of the Company's stores are leased or subleased by the Company
with lease terms expiring between 1996 and 2016. In most instances, the
Company has renewal options at increased rents. One store is owned by the
Company. The Company's stores range in size from 16,000 to 58,800 square feet
and average approximately 27,000 square feet. The Company's headquarters,
located in Dallas, Texas, occupies approximately 177,000 square feet of leased
space. The initial lease term for the Company's headquarters has approximately
seven years remaining and the Company has renewal options on the lease at
increased rents. The Company also leases space to operate four stand-alone
Training Supercenter Plus locations, averaging approximately 5,200 square
feet. In addition, the Company leases warehouse and office space that
aggregates approximately 262,000 square feet and is subject to leases expiring
at various dates through 2003. See Note 6 of Notes to Consolidated Financial
Statements.
ITEM 3. LEGAL PROCEEDINGS
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matter to a vote of security holders during
the fourth quarter of fiscal 1996.
6
<PAGE>
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
PRICE RANGE OF COMMON STOCK
The Common Stock is listed on the New York Stock Exchange (the "NYSE") under
the symbol "CPU." The following table sets forth the high and low sales price
per share for the Common Stock as reported to the Company by the NYSE for the
periods indicated, as adjusted for the two-for-one stock split declared by the
Company's Board of Directors effective April 8, 1996:
<TABLE>
<CAPTION>
FISCAL YEAR HIGH LOW
----------- ---- ---
<S> <C> <C>
1995
First Quarter.......................................... $6 3/4 $3 3/8
Second Quarter......................................... 7 1/4 4 3/4
Third Quarter.......................................... 10 15/16 6 5/8
Fourth Quarter......................................... 16 13/16 8 3/4
1996
First Quarter.......................................... 21 15/16 14 5/8
Second Quarter......................................... 21 15/16 14 7/16
Third Quarter.......................................... 25 1/8 12 7/8
Fourth Quarter......................................... 47 5/8 24
</TABLE>
At September 9, 1996, there were 1,356 holders of record of the Common
Stock.
DIVIDEND POLICY
The Company has not paid and has no current plans to pay cash dividends on
the Common Stock. The Company currently intends to retain earnings for use in
the operation and expansion of its business and therefore does not anticipate
paying cash dividends in the foreseeable future. The terms of the Senior
Subordinated Notes limit the Company's ability to pay dividends generally to
50% of cumulative net income since June 17, 1993, plus 100% of the
consideration received from the issuance of capital stock since such date,
less the amount of other restricted payments, as defined. See Note 8 of Notes
to Consolidated Financial Statements. In addition, the terms of the Company's
bank credit agreement prohibit the payment of dividends on the Common Stock.
See Note 7 of Notes to Consolidated Financial Statements.
7
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ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial and operating
data for the periods from June 27, 1992 through June 29, 1996. As more fully
described in Note 2 of Notes to Consolidated Financial Statements, the Company
acquired PCs Compleat on May 30, 1996 in a merger transaction accounted for
under the pooling of interests method of accounting. Under the pooling of
interests method of accounting, the historical book values of the assets,
liabilities, and stockholders' equity of PCs Compleat, as reported on its
balance sheet, have been carried over onto the consolidated balance sheet of
the Company and no goodwill or other intangible assets were created. In
addition, the Company has restated its consolidated statements of operations
to include the results of operations of PCs Compleat for each of the fiscal
years presented. This information should be read in conjunction with the
Consolidated Financial Statements and related Notes thereto of the Company and
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations," which are included elsewhere in this Annual Report on Form 10-
K.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------------------------
JUNE 29, JUNE 24, JUNE 25, JUNE 26, JUNE 27,
1996(1) 1995 1994 1993 1992
---------- ---------- ---------- ---------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND SELECTED
OPERATING DATA)
INCOME STATEMENT DATA: ----------
<S> <C> <C> <C> <C> <C>
Net sales............... $3,829,786 $2,935,901 $2,219,457 $1,369,749 $822,815
Cost of sales and
occupancy costs........ 3,311,682 2,573,945 1,955,183 1,189,675 716,531
---------- ---------- ---------- ---------- --------
Gross profit............ 518,104 361,956 264,274 180,074 106,284
Store operating
expenses............... 328,344 263,654 208,356 123,516 71,026
Pre-opening expenses.... 5,466 2,454 7,266 6,111 2,010
General and
administrative
expenses............... 75,488 54,940 47,963 31,466 22,897
Transaction costs
related to Merger (2).. 3,453 -- -- -- --
Restructuring costs (3). -- -- 9,918 -- --
---------- ---------- ---------- ---------- --------
Operating income (loss). 105,353 40,908 (9,229) 18,981 10,351
Interest expense........ 12,487 12,015 12,156 2,256 2,669
Other income, net (4)... (6,983) (2,409) (2,063) (468) (358)
---------- ---------- ---------- ---------- --------
Income (loss) before
income taxes........... 99,849 31,302 (19,322) 17,193 8,040
Income tax expense
(benefit).............. 40,184 6,963 (2,298) 7,510 415
---------- ---------- ---------- ---------- --------
Net income (loss)....... $ 59,665 $ 24,339 $ (17,024) $ 9,683 $ 7,625
========== ========== ========== ========== ========
Income (loss) applicable
to Common Stock (5).... $ 59,665 $ 24,339 $ (17,024) $ 9,683 $ 5,999
========== ========== ========== ========== ========
Income (loss) per common
and common equivalent
share (6).............. $ 1.31 $ 0.60 $ (0.44) $ 0.25 $ 0.23
========== ========== ========== ========== ========
Weighted average number
of shares
outstanding(6)......... 45,610 40,868 38,535 38,291 25,881
SELECTED OPERATING DATA:
Stores open at end of
period................. 105 85 76 48 28
Average net sales per
gross square foot (7).. $ 1,422 $ 1,336 $ 1,268 $ 1,458 $ 1,452
Total gross square
footage at end of
period................. 2,850,000 2,254,500 1,965,200 1,197,600 680,700
Percentage increase in
comparable store
sales (8).............. 12.6% 10.3% 9.0% 20.8% 13.3%
BALANCE SHEET DATA:
Working capital......... $ 305,899 $ 190,128 $ 210,018 $ 216,205 $ 59,655
Total assets............ 909,337 641,329 522,501 449,399 211,550
Long-term debt,
excluding current
portion................ 115,066 115,153 153,292 115,716 3,383
Stockholders' equity.... 325,905 186,704 160,372 163,869 86,072
</TABLE>
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Notes on following page
8
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(1) The Company's fiscal year is a 52/53 week year ending on the last Saturday
of each June. The Company's fiscal year ended June 29, 1996 contained
fifty-three weeks. The fiscal years ended June 24, 1995, June 25, 1994,
June 26, 1993, and June 27, 1992 contained fifty-two weeks.
(2) For a discussion of the Company's acquisition of PCs Compleat, see Note 2
of Notes to Consolidated Financial Statements.
(3) For a discussion of the Company's restructuring charge, see Note 9 of
Notes to Consolidated Financial Statements.
(4) Fiscal 1992 includes an extraordinary loss of $233,000 from early
extinguishment of debt.
(5) Income (loss) applicable to Common Stock represents the portion of the
Company's income (loss) applicable to common stockholders. Such amount for
fiscal 1992 was calculated by adjusting net income (loss) for the
accretion and dividend requirements of certain redeemable securities. All
such accretion and dividend requirements terminated with the completion of
the Company's public offering in December 1991.
(6) All references in this table to the number of shares and income per common
and common equivalent share amounts have been adjusted on a retroactive
basis to reflect the two-for-one stock split declared by the Company's
Board of Directors effective April 8, 1996 and the Company's acquisition
of PCs Compleat.
(7) Calculated using net sales divided by gross square footage of stores open
at the end of period, weighted by the number of months open during the
period. Net sales for this calculation consist of combined retail and
direct sales generated from the Company's retail stores. Net sales for
this calculation exclude mail order sales generated by PCs Compleat and,
until the beginning of the fourth quarter of fiscal 1993, exclude the mail
order sales of the Company's former wholly-owned subsidiary Compudyne
Direct, Inc. Beginning with the fourth quarter of fiscal 1993, mail order
sales by the Company (excluding PCs Compleat) have been fulfilled by the
Company's retail stores and are included in the stores' net sales. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations--General." Average net sales per gross square foot for the
fiscal year ended June 29, 1996 has been calculated on the basis of a
fifty-two week fiscal year.
(8) Comparable store sales are net sales for stores open the same months in
both the indicated and the previous period, including stores that were
relocated or expanded during either period. Comparable store sales for the
fiscal year ended June 29, 1996 has been calculated based on sales for the
fifty-three weeks then ended compared to the fifty-three weeks ended July
1, 1995.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CAUTIONARY STATEMENT REGARDING RISKS AND UNCERTAINTIES THAT MAY AFFECT FUTURE
RESULTS
This Annual Report on Form 10-K contains 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, dependence on manufacturers' product
development, various inventory risks due to changes in market conditions,
changes in tax and other governmental rules and regulations applicable to the
Company, 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. When
used in this Annual Report on Form 10-K, the words "believes," "estimates,"
"plans," "expects," and "anticipates" and similar expressions as they relate
to the Company or its management are intended to identify 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
9
<PAGE>
substantially completed the transition phase of its fiscal 1995 business plan
and, in fiscal 1996, the Company focused on the execution and growth of its
businesses.
All references herein to "fiscal 1996" relate to the fifty-three weeks ended
June 29, 1996, and references to "fiscal 1995" and "fiscal 1994" relate to the
fifty-two weeks ended June 24, 1995 and June 25, 1994, respectively.
The following table sets forth certain operating data for the Company:
<TABLE>
<CAPTION>
FISCAL YEAR
----------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Stores open at end of year.............................. 105 85 76
Stores opened during the year........................... 20 9 28
Stores relocated during the year........................ 1 2 1
Average net sales per gross square foot (1)............. $1,422 $1,336 $1,268
Comparable store sales increase (2)..................... 12.6% 10.3% 9.0%
</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. Average net sales per gross square foot for fiscal 1996 has been
calculated on the basis of a fifty-two week fiscal year.
(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 either period. The comparable store sales
increase for fiscal 1996 has been calculated by comparing net sales for
the fifty-three weeks ended June 29, 1996 with net sales for the fifty-
three weeks ended July 1, 1995.
Average net sales per gross square foot increased during fiscal 1996 compared
with fiscal 1995 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. Mature stores typically have higher net sales per gross square foot
than new stores. Average net sales per gross square foot increased during
fiscal 1995, compared with fiscal 1994, primarily due to increased customer
demand, the maturation of the Company's store base, and changes associated with
the implementation of the fiscal 1995 business plan.
In certain instances, the Company has opened additional Computer Superstores
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.
10
<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>
FISCAL YEAR
-------------------
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Net sales................................................. 100.0% 100.0% 100.0%
Cost of sales and occupancy costs......................... 86.5 87.7 88.1
----- ----- -----
Gross profit.............................................. 13.5 12.3 11.9
Store operating expenses.................................. 8.6 9.0 9.4
Pre-opening expenses...................................... 0.1 -- 0.3
General and administrative expenses....................... 2.0 1.9 2.2
Transaction costs related to Merger (1)................... 0.1 -- --
Restructuring costs....................................... -- -- 0.4
----- ----- -----
Operating income (loss)................................... 2.7 1.4 (0.4)
Interest expense and other income, net.................... 0.1 0.3 0.5
----- ----- -----
Income (loss) before income taxes......................... 2.6 1.1 (0.9)
Income tax expense (benefit).............................. 1.0 0.3 (0.1)
----- ----- -----
Net income (loss)......................................... 1.6% 0.8% (0.8)%
===== ===== =====
</TABLE>
- --------
(1) For a discussion of the Company's acquisition of PCs Compleat, see Note 2
of Notes to Consolidated Financial Statements.
Fiscal 1996 compared with Fiscal 1995
Net sales for fiscal 1996 increased 30% to $3.83 billion from $2.94 billion
for fiscal 1995. The increase in net sales was due to the additional sales
volume attributable to the new stores opened during and subsequent to fiscal
1995 and an increase in comparable store sales of 12.6%. 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 either
period. The Company believes 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 $518 million, or 13.5% of net sales, in fiscal 1996,
compared with $362 million, or 12.3% of net sales, in 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 and freight, leveraging of occupancy costs due to higher average
sales per store, and an increase in the ratio of service revenues to total
revenues. Service revenues typically have higher gross margins than merchandise
sales.
Store operating expenses were $328 million, or 8.6% of net sales, in fiscal
1996, compared with $264 million, or 9.0% of net sales, in 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. These decreases 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.
11
<PAGE>
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 fiscal 1996, the Company incurred $5.5 million in
pre-opening expenses in connection with the opening of 20 new stores, the
relocation of one store, and the opening of two Training Supercenter Plus
locations, compared with $2.5 million in pre-opening expenses incurred in
fiscal 1995 in connection with the opening of nine new stores, two Training
Supercenter Plus locations, and the relocation of two stores. The Company
incurred average pre-opening expenses of $260,000 per store for the 20 new
stores opened during fiscal 1996 and $240,000 per store for the nine new stores
opened during fiscal 1995.
General and administrative expenses of $75.5 million, or 2.0% of net sales,
for fiscal 1996 increased as a percentage of net sales, compared with $54.9
million, or 1.9% of net sales, for fiscal 1995. The increase in general and
administrative expenses as a percentage of net sales was primarily due to
charges of approximately $2.0 million for professional fees and related costs
in the third quarter of fiscal 1996 regarding the Company's acquisition review
of Tandy Corporation's Computer City division. Discussions relating to such
possible acquisition were terminated in February 1996. Excluding the $2.0
million of fees and costs related to such possible purchase, general and
administrative expenses aggregated approximately 1.9% of net sales in fiscal
1996. Increases in general and administrative expenses in fiscal 1996 related
to increased incentive compensation were offset by the leveraging of personnel
expenses over higher sales.
Interest expense and other income, net, was $5.5 million in fiscal 1996,
compared with $9.6 million in 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 fiscal 1996 was 40%, compared with an
effective tax rate of 22% for fiscal 1995. The effective tax rate differed in
fiscal 1996 from the federal statutory rate primarily due to state income taxes
and nondeductible transaction costs related to the Company's acquisition of PCs
Compleat, offset in part by the benefits from tax exempt interest income earned
by the Company. The fiscal 1995 effective tax rate differed from the federal
statutory rate primarily due to the recognition of the previously unrecognized
tax benefit associated with the fiscal 1994 loss.
As a result of the above, net income for fiscal 1996 was $59.7 million, or
$1.31 per share, compared with net income of $24.3 million, or $0.60 per share,
for fiscal 1995.
Fiscal 1995 compared with Fiscal 1994
Prior to fiscal 1995, the Company had been rapidly expanding its store base,
opening 28 Computer Superstores in fiscal 1994 and 20 Computer Superstores in
fiscal 1993, which represented 58% and 71% unit growth, respectively. With
several changes in senior management beginning in the second quarter of fiscal
1994, the Company adjusted its strategy from a high growth, decentralized
approach to a more controlled growth, centralized approach. In addition, the
Company developed a business plan for fiscal 1995 that redirected the Company's
focus from rapid store growth to improving operations, controlling and reducing
expenses, and reorienting the Company's corporate culture to emphasize
profitability. To enable the Company to apply its resources toward
implementation of the fiscal 1995 business plan, the Company reduced its store
expansion to nine Computer Superstores in fiscal 1995.
Net sales for fiscal 1995 increased 32% to $2.94 billion from $2.22 billion
in fiscal 1994. The increase in net sales was due to both additional sales
volume attributable to the new stores opened during fiscal 1994 and fiscal 1995
and an increase in comparable store sales of 10.3% for fiscal 1995. The Company
believes the increase in comparable store sales was due primarily to increased
customer demand, maturation of the Company's existing store base, and changes
associated with the implementation of the fiscal 1995 business plan.
12
<PAGE>
Gross profit was $362 million, or 12.3% of net sales, for fiscal 1995,
compared with $264 million, or 11.9% of net sales, in fiscal 1994. The
increase in gross profit as a percentage of net sales was positively affected
by reduced inventory shrinkage and by changes in the Company's sales mix.
Although the Company's inventory shrinkage has historically been and continues
to be below retail industry averages, as a part of the fiscal 1995 business
plan, the Company placed increased emphasis on reducing inventory shrinkage by
implementing certain loss prevention measures, including new security
procedures and additional employee training. In fiscal 1995, the Company's
retail and mail order sales constituted a greater proportion of total sales as
compared with the sales mix in fiscal 1994. Retail and mail order sales
typically have higher gross margins than direct sales.
Store operating expenses were $264 million, or 9.0% of net sales, for fiscal
1995, compared with $208 million, or 9.4% of net sales, in fiscal 1994. The
decline in store operating expenses as a percentage of net sales was primarily
due to a decrease in advertising expenses as a percentage of net sales, offset
in part by an increase in the blended discount rate charged by third-party
credit card providers. Advertising expenses were lower as a percentage of net
sales in fiscal 1995 due to multi-market advertising efficiencies and
increased vendor participation. During the second quarter of fiscal 1994, the
Company began accepting the American Express Card as a form of payment in its
stores, and in the first quarter of fiscal 1995, the Company began offering,
from time to time, a six month, zero percent interest financing program to
holders of the Company's private label credit card, which is provided by an
independent financial services company. Both the American Express Card and the
six month, zero percent interest financing program have higher discount rates
than the Company's other credit cards and financing programs.
In fiscal 1995, the Company incurred $2.5 million in pre-opening expenses in
connection with the opening of nine stores and the relocation of two stores,
compared with $7.3 million in pre-opening expenses incurred in fiscal 1994 in
connection with the opening of 28 stores and the relocation of one store. For
new stores opened, the Company incurred average pre-opening expense of
$240,000 per store in fiscal 1995, compared with $252,000 per store in fiscal
1994. The reduction in pre-opening expenses per store resulted from cost
reduction measures and other improvements realized through implementation of
the fiscal 1995 business plan.
General and administrative expenses were $54.9 million, or 1.9% of net
sales, for fiscal 1995, compared with $48.0 million, or 2.2% of net sales, in
fiscal 1994. This decrease as a percentage of net sales was primarily due to
economies of scale and cost reduction measures associated with the fiscal 1995
business plan.
Interest expense and other income, net, of $9.6 million in fiscal 1995
remained relatively constant, compared with $10.1 million in fiscal 1994.
The Company's effective tax rate for fiscal 1995 was 22%, compared with an
effective tax rate of 12% in fiscal 1994. The effective tax rate differs in
fiscal 1995 from the federal statutory tax rate primarily due to the
recognition of the previously unrecognized tax benefit associated with the
prior year's loss.
As a result of the above, net income for fiscal 1995 was $24.3 million, or
$0.60 per share, compared with a net loss of $17.0 million, or $.44 per share,
in fiscal 1994.
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.
Based upon its past operating history, 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. See Note 14 of Notes to
Consolidated Financial Statements.
13
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
In September 1995, the Company completed a public offering, selling
4,025,000 newly-issued shares of Common Stock and receiving net proceeds of
approximately $76.8 million (net of offering costs of approximately $3.5
million).
In December 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 made a cash
contribution to its 401(k) plan to effect the Company's required contribution
to the plan for 1995, which the plan used to purchase 46,470 shares of
treasury stock from the Company.
At June 29, 1996, total assets were $909 million, $770 million of which were
current assets, including $208 million of cash and cash equivalents. Net cash
provided by operating activities for fiscal 1996 was $87.7 million, compared
with net cash provided by operating activities of $135.6 million for fiscal
1995. Net cash provided by operating activities for fiscal 1995 was positively
affected by the accounts payable to inventory ratio rising to 91% at June 24,
1995, compared with 57% at June 25, 1994. This improvement was due, in part,
to the Company's inventory turnover rate improving to 8.1 inventory turns for
fiscal 1995, compared with an inventory turnover rate of 6.7 inventory turns
for fiscal 1994.
Approximately three-fourths of the Company's net sales during 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 card. The
remaining net sales were primarily sales for which the Company provided credit
terms to corporate, government, and education customers.
Capital expenditures during fiscal 1996 were $47.4 million, $15.5 million of
which were for fiscal 1996 new stores, compared with $30.1 million of capital
expenditures during fiscal 1995, $8.8 million of which were for fiscal 1995
new stores. During fiscal 1996, the Company opened 20 new Computer
Superstores. 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 available cash and cash equivalents
and vendor and bank financing.
The Company has an unsecured $75 million credit agreement (the "Credit
Agreement") with a consortium of banks that expires in June 1999. At June 29,
1996, no amounts were outstanding under the Credit Agreement and the Company
had approximately $74.4 million available for future borrowings after
reduction for outstanding letters of credit. The Company also finances certain
fixture and equipment acquisitions through equipment lessors. Lease financing
is available from numerous sources and the Company 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, and funds available under the Credit Agreement should be
sufficient to finance its continuing operations and expansion plans through
the end of fiscal 1997 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.
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.
14
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Consolidated Financial Statements on page F-1. Supplementary
quarterly financial information for the Company is included in Note 14 of Notes
to Consolidated Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
15
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The information concerning the directors of the Company is set forth in the
Proxy Statement (the "Proxy Statement") to be sent to stockholders in
connection with the Company's Annual Meeting of Stockholders to be held
November 6, 1996, under the heading "Proposal No. 1--Election of Directors,"
which information is incorporated herein by reference. Information concerning
each executive officer of the Company is set forth in the Proxy Statement
under the heading "MANAGEMENT--Executive Officers," which information is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information concerning executive compensation is set forth in the Proxy
Statement under the heading "EXECUTIVE COMPENSATION," which information is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information concerning security ownership of certain beneficial owners
and management is set forth in the Proxy Statement under the heading
"PRINCIPAL STOCKHOLDERS AND MANAGEMENT OWNERSHIP," which information is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
16
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Annual Report on Form
10-K.
1. Consolidated Financial Statements:
See Index to Consolidated Financial Statements on page F-1.
2. Exhibits:
<TABLE>
<C> <S>
2.1 Agreement and Plan of Merger, dated as of May 15, 1996, by and among
the Company, Snowstorm Merger Corp., a Delaware corporation and a
wholly-owned subsidiary of the Company, and PCs Compleat, pursuant
to which the Company acquired PCs Compleat (the "Plan of Merger").
(9)
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., asTrustee. (8)
4.5 Second Supplemental Indenture dated as of February 7, 1996 among the
Company, CompTeam Inc., CompFinance Inc., CompService Inc., CompUSA
Holdings II Inc., and U.S. Trust Company of Texas, N.A., as Trustee.
(13)
4.6 Third Supplemental Indenture dated as of May 14, 1996 among the
Company, CompFinance Inc., CompService Inc., CompTeam Inc., CompUSA
Holdings II Inc., Snowstorm Merger Corp. and U.S. Trust Company of
Texas, N.A., as Trustee. (13)
4.7 Fourth Supplemental Indenture dated as of May 30, 1996 among the
Company, CompFinance Inc., CompService Inc., CompTeam Inc., CompUSA
Holdings II Inc., PCs Compleat, Inc. and U.S. Trust Company of
Texas, N.A., as Trustee. (13)
4.8 Form of Fifth Supplemental Indenture dated as of June 14, 1996 among
the Company, CompFinance Inc., CompService Inc., CompTeam Inc.,
CompUSA Holdings II Inc., PCs Compleat, Inc., CompUSA Holdings I
Inc., CompUSA Management Company, CompUSA Stores L.P., CompUSA
Holdings Company and U.S. Trust Company of Texas, N.A., as Trustee.
(13)
4.9 Subsidiary Guarantees executed by CompTeam Inc., CompUSA Holdings II
Inc., PCs Compleat, Inc., CompUSA Holdings I Inc., CompUSA
Management Company, CompUSA Stores L.P. and CompUSA Holdings
Company. (13)
4.10 Rights Agreement dated April 29, 1994, between the Company and Bank
One, Texas, N.A., as Rights Agent. (5)
4.11 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)
4.12 Letter of the Company dated August 16, 1996, appointing American
Stock Transfer & Trust Company as substitute Rights Agent under the
Rights Agreement. (13)
10.1 CompUSA Inc. Long-Term Incentive Plan (formerly CompUSA Inc. 1990
Stock OptionPlan). (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. (9)
</TABLE>
17
<PAGE>
<TABLE>
<C> <S>
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 Agreements and Adoptions of Subsidiary Guaranty executed by CompTeam
Inc., CompUSA Holdings II Inc., PCs Compleat, Inc., CompUSA Holdings
I Inc., CompUSA Management Company, CompUSA Stores L.P., and CompUSA
Holdings Company. (13)
10.11 Subordination Agreement dated June 16, 1995, among CompFinance Inc.,
CompService Inc., NationsBank of Texas, N.A. and certain lenders.
(6)
10.12 Agreements and Adoptions of Subordination Agreement executed by
CompTeam Inc., CompUSA Holdings II Inc., PCs Compleat, Inc., CompUSA
Holdings I Inc., CompUSA Management Company, CompUSA Stores L.P.,
and CompUSA Holdings Company. (13)
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 Form of Employment Agreement dated as of May 1, 1996, as amended,
between the Company and each of J. Samuel Crowley, Ronald J.
Gilmore, Melvin D. McCall, Lawrence N. Mondry, Paul Poyfair, James
E. Skinner and Mark R. Walker. (13)
10.16 Form of Employment Agreement dated as of May 1, 1996, as amended,
between the Company and each of Anthony J. Cincotta, Aka A. DeMesa,
Paul F. Ewert, Robyn Gatch-Priest, Harold D. Greenberg, James L.
Infinger, Barry C. McCook, Jack A. Phelps, Ronald D. Strongwater and
Anthony A. Weiss. (13)
10.17 Form of Employment Agreement dated as of May 27, 1996, between the
Company and J. Robert Gary. (13)
10.18 Form of Employment Agreement between the Company and each of Gordon
B. Hoffstein and Jack Littman-Quinn. (13)
10.19 Form of Employment Agreement dated as of July 9, 1996, between the
Company and each of Rick L. Fountain and Leslie C. Marshall. (13)
10.20 Form of Employment Agreement dated as of August 16, 1996, between
the Company and James F. Halpin. (13)
10.21 Form of Employment Agreement dated as of August 16, 1996, between
the Company and Harold F. Compton. (13)
10.22 CompSavings Plan for Employees of CompUSA Inc. (10)
10.23 CompUSA Inc. Deferred Compensation Plan (11)
10.24 PCs Compleat, Inc. 1991 Stock Option Plan (12)
11 Computations of Income per Common and Common Equivalent Share. (13)
21 List of the Company's Subsidiaries. (13)
23 Consent of Ernst & Young LLP. (13)
</TABLE>
(b) Reports on Form 8-K.
1. Report on Form 8-K filed with the Securities and Exchange Commission
(the "SEC") on May 20, 1996, disclosing that the Company had entered
into the Plan of Merger pursuant to which it agreed to acquire PCs
Compleat, subject to regulatory approval and customary closing
conditions.
18
<PAGE>
- --------
(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) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended March 23, 1996 and incorporated herein
by reference.
(9) Previously filed as an exhibit to the Company's Report on Form 8-K filed
with the SEC on June 14, 1996, as amended by Form 8-K/A filed with the SEC
on August 2, 1996.
(10) Previously filed as an exhibit to Registration Statement No. 33-86314 on
Form S-8 and incorporated herein by reference.
(11) Previously filed as an exhibit to Registration Statement No. 33-99280 on
Form S-8 and incorporated herein by reference.
(12) Previously filed as an exhibit to Registration Statement No. 333-06235 on
Form S-8 and incorporated herein by reference.
(13) Filed herewith.
19
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ James F. Halpin President and Chief September 20, 1996
____________________________________ Executive Officer
James F. Halpin
/s/ James E. Skinner Executive Vice President and September 20, 1996
____________________________________ Chief Financial Officer
James E. Skinner (Principal Financial and
Accounting Officer)
</TABLE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Giles H. Bateman Chairman of the Board of September 20, 1996
____________________________________ Directors
Giles H. Bateman
/s/ James F. Halpin Director September 20, 1996
____________________________________
James F. Halpin
/s/ Leonard L. Berry Director September 20, 1996
____________________________________
Leonard L. Berry, Ph.D.
/s/ Warren D. Feldberg Director September 20, 1996
____________________________________
Warren D. Feldberg
Director September 20, 1996
____________________________________
Lawrence Mittman
/s/ Kevin J. Roche Director September 20, 1996
____________________________________
Kevin J. Roche
/s/ Edith Weiner Director September 20, 1996
____________________________________
Edith Weiner
</TABLE>
20
<PAGE>
COMPUSA INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
The following consolidated financial statements of CompUSA Inc. are included
in response to Item 8:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors............................................ F-2
Consolidated Balance Sheets as of June 29, 1996 and June 24, 1995......... F-3
Consolidated Statements of Operations for the fiscal years ended
June 29, 1996, June 24, 1995, and June 25, 1994.......................... F-4
Consolidated Statements of Stockholders' Equity for the fiscal
years ended June 29, 1996, June 24, 1995, and June 25, 1994.............. F-5
Consolidated Statements of Cash Flows for the fiscal years ended
June 29, 1996, June 24, 1995, and June 25, 1994.......................... F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
Separate financial statements relating to the Company's subsidiaries are
omitted since all of them are wholly owned and have each 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.
All financial statement schedules have been omitted because the required
information is not present or is not present in amounts sufficient to require
submission of the schedule or because the information required is included in
the financial statements, including the notes thereto.
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
CompUSA Inc.
We have audited the accompanying consolidated balance sheets of CompUSA Inc.
(the "Company") as of June 29, 1996 and June 24, 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows
for each of the three years in the period ended June 29, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of CompUSA Inc.
at June 29, 1996 and June 24, 1995, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
June 29, 1996, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Dallas, Texas
August 14, 1996
F-2
<PAGE>
COMPUSA INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
JUNE 29, JUNE 24,
1996 1995
ASSETS -------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $207,614 $ 96,494
Accounts receivable, net of allowance for doubtful
accounts of $1,692 and $1,176 at June 29, 1996 and June
24, 1995, respectively................................... 148,109 103,934
Merchandise inventories................................... 398,841 312,202
Prepaid expenses and other................................ 15,669 14,506
-------- --------
Total current assets.................................... 770,233 527,136
Property and equipment, net (Note 3)........................ 131,184 106,290
Other assets................................................ 7,920 7,903
-------- --------
$909,337 $641,329
======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable.......................................... $377,774 $282,885
Accrued liabilities (Note 4).............................. 82,178 49,076
Current portion of capital lease obligations (Note 6)..... 4,382 5,047
-------- --------
Total current liabilities............................... 464,334 337,008
Capital lease obligations (Note 6).......................... 5,066 5,153
Senior Subordinated Notes (Note 8).......................... 110,000 110,000
Deferred income taxes (Note 5).............................. 4,032 2,464
Commitments and contingencies (Notes 6 and 10).............. -- --
Stockholders' equity (Note 12):
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 45,107,858 shares issued
and outstanding at June 29, 1996; no par value,
$.01 per share stated value, with 40,465,920 shares
issued and outstanding at June 24, 1995.................. 451 405
Paid-in capital........................................... 255,667 173,348
Retained earnings......................................... 72,616 12,951
-------- --------
328,734 186,704
Less: Treasury stock, at cost, 189,730 shares at June 29,
1996....................................................... (2,829) --
-------- --------
Total stockholders' equity.............................. 325,905 186,704
-------- --------
$909,337 $641,329
======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE>
COMPUSA INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------
JUNE 29, JUNE 24, JUNE 25,
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Net sales.................................. $3,829,786 $2,935,901 $2,219,457
Cost of sales and occupancy costs.......... 3,311,682 2,573,945 1,955,183
---------- ---------- ----------
Gross profit............................. 518,104 361,956 264,274
Store operating expenses................... 328,344 263,654 208,356
Pre-opening expenses....................... 5,466 2,454 7,266
General and administrative expenses........ 75,488 54,940 47,963
Transaction costs related to Merger
(Note 2).................................. 3,453 -- --
Restructuring costs (Note 9)............... -- -- 9,918
---------- ---------- ----------
Operating income (loss).................. 105,353 40,908 (9,229)
Other expense (income):
Interest expense......................... 12,487 12,015 12,156
Other income, net........................ (6,983) (2,409) (2,063)
---------- ---------- ----------
5,504 9,606 10,093
---------- ---------- ----------
Income (loss) before income taxes.......... 99,849 31,302 (19,322)
Income tax expense (benefit) (Note 5)...... 40,184 6,963 (2,298)
---------- ---------- ----------
Net income (loss).......................... $ 59,665 $ 24,339 $ (17,024)
========== ========== ==========
Income (loss) per common and common
equivalent share.......................... $ 1.31 $ 0.60 $ (0.44)
========== ========== ==========
Weighted average common and common
equivalent shares......................... 45,610 40,868 38,535
</TABLE>
See accompanying notes.
F-4
<PAGE>
COMPUSA INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
COMMON STOCK
--------------------- RETAINED
STATED/PAR PAID-IN EARNINGS TREASURY
SHARES VALUE CAPITAL (DEFICIT) STOCK TOTAL
---------- ---------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 26,
1993, as reported...... 36,195,814 $362 $148,834 $10,070 $ -- $159,266
Effect of Merger
(Note 2)............... 1,887,740 19 9,017 (4,434) -- 4,602
---------- ---- -------- ------- ------- --------
Balance at June 26,
1993, as restated...... 38,083,554 381 157,851 5,636 -- 163,868
Issuance of Common
Stock pursuant to
stock option and stock
purchase plans and
other.................. 769,413 8 3,494 -- -- 3,502
Issuance of Common
Stock for cash, net of
offering costs......... 645,607 6 10,019 -- -- 10,025
Net loss................ -- -- -- (17,024) -- (17,024)
---------- ---- -------- ------- ------- --------
Balance at June 25,
1994................... 39,498,574 395 171,364 (11,388) -- 160,371
Issuance of Common
Stock pursuant to
stock option and stock
purchase plans and
other.................. 967,346 10 1,984 -- -- 1,994
Net income.............. -- -- -- 24,339 -- 24,339
---------- ---- -------- ------- ------- --------
Balance at June 24,
1995................... 40,465,920 405 173,348 12,951 -- 186,704
Issuance of Common
Stock for cash, net of
offering costs......... 4,025,000 40 76,745 -- -- 76,785
Issuance of Common
Stock upon exercise of
stock options and
other.................. 616,938 6 5,454 -- -- 5,460
Purchase of treasury
stock.................. -- -- -- -- (3,521) (3,521)
Sale of treasury stock
to benefit plan........ -- -- 120 -- 692 812
Net income.............. -- -- -- 59,665 -- 59,665
---------- ---- -------- ------- ------- --------
Balance at June 29,
1996.................... 45,107,858 $451 $255,667 $72,616 $(2,829) $325,905
========== ==== ======== ======= ======= ========
</TABLE>
See accompanying notes.
F-5
<PAGE>
COMPUSA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------
JUNE
JUNE 29, 24, JUNE 25,
1996 1995 1994
-------- ------- --------
<S> <C> <C> <C>
Cash flows provided by (used in) operating
activities:
Net income (loss)............................... $ 59,665 $24,339 $(17,024)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization................. 27,625 21,285 15,148
Restructuring costs........................... (214) (2,504) 2,718
Deferred income tax........................... 266 (4,645) (1,133)
Changes in assets and liabilities:
Decrease (increase) in:
Accounts receivable....................... (44,175) (9,875) (24,968)
Income tax receivable..................... (417) 2,479 (1,540)
Merchandise inventories................... (86,639) (29,603) (73,614)
Prepaid expenses and other................ 139 286 (1,703)
Other assets.............................. (63) (694) 258
Increase in:
Accounts payable and accrued liabilities.. 126,384 134,495 31,638
Income taxes payable...................... 5,140 41 --
-------- ------- --------
Total adjustments...................... 28,046 111,265 (53,196)
-------- ------- --------
Net cash provided by (used in) operating
activities........................... 87,711 135,604 (70,220)
Cash flows used in investing activities:
Capital expenditures............................ (47,418) (30,057) (46,488)
Other........................................... (565) 572 385
-------- ------- --------
Net cash used in investing activities.. (47,983) (29,485) (46,103)
Cash flows provided by (used in) financing
activities:
Proceeds from issuance of Common Stock.......... 79,344 1,994 13,527
Purchase of treasury stock...................... (3,521) -- --
Sale of treasury stock to benefit plan.......... 812 -- --
Borrowings under line of credit agreements...... 48,750 54,127 113,428
Repayments of borrowings under line of credit
agreements..................................... (48,750) (92,627) (75,428)
Payments under capital lease obligations........ (5,243) (5,149) (3,770)
-------- ------- --------
Net cash provided by (used in)
financing activities................. 71,392 (41,655) 47,757
-------- ------- --------
Net increase (decrease) in cash and cash
equivalents...................................... 111,120 64,464 (68,566)
Cash and cash equivalents at beginning of year.... 96,494 32,030 100,596
-------- ------- --------
Cash and cash equivalents at end of year.......... $207,614 $96,494 $ 32,030
======== ======= ========
</TABLE>
See accompanying notes.
F-6
<PAGE>
COMPUSA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business - CompUSA Inc. (the "Company") is a retailer of personal computer
hardware, software, accessories, and related products and services conducting
its operations principally through its Computer Superstores in the United
States. At June 29, 1996, June 24, 1995, and June 25, 1994, the Company
operated 105, 85, and 76 Computer Superstores, respectively. In addition to
the retail sales of its stores, the Company's stores also fulfill the
principal marketing, product, and service functions of the Company's other
businesses, including direct sales to corporate, government, education, and
mail order customers and training and technical services. In addition, the
Company conducts mail order operations both through its stores and through PCs
Compleat, Inc. ("PCs Compleat"), a wholly-owned subsidiary of the Company.
Fiscal year - The Company's fiscal year is a 52/53-week year ending on the
last Saturday of each June. All references to the fiscal year ended June 29,
1996 relate to the fifty-three weeks then ended. All references to the fiscal
years ended June 24, 1995 and June 25, 1994, respectively, relate to the
fifty-two weeks then ended.
Consolidation - The financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany transactions
have been eliminated.
Use of Estimates - The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management
to make certain estimates and assumptions. These estimates and assumptions
affect the reported amounts of assets, liabilities, revenues, and expenses and
the disclosure of gain and loss contingencies at the date of the consolidated
financial statements. Actual results could differ from those estimates.
Cash and cash equivalents - Cash on hand in stores, deposits in banks, and
short-term investments with original maturities of three months or less are
considered cash and cash equivalents. Cash and cash equivalents are carried at
cost, which approximates fair value.
Accounts receivable - Accounts receivable represent amounts due from
customers related to the sale of the Company's products and services. Such
receivables are generally unsecured and are generally due from a diverse group
of corporate, government, and education customers located throughout the
United States and, accordingly, do not include any specific concentrations of
credit risk. The Company believes it has provided adequate reserves for
potentially uncollectible accounts. For the fiscal years ended June 29, 1996,
June 24, 1995, and June 25, 1994, the Company's bad debt expense was $878,000,
$766,000, and $762,000, respectively.
Merchandise inventories - Merchandise inventories are valued at the lower of
cost, determined on a weighted average basis, or market.
Property and equipment - Property and equipment are stated at cost.
Depreciation is provided in amounts sufficient to charge the cost of the
respective assets to operations over their estimated service lives on a
straight-line basis. Estimated service lives are as follows:
<TABLE>
<S> <C>
Furniture and fixtures..................................... 5-10 years
Equipment.................................................. 3-5 years
Leasehold improvements..................................... Life of lease
Equipment under capital leases............................. Life of lease
</TABLE>
F-7
<PAGE>
COMPUSA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Advertising Expenses - Advertising expenses are expensed in the month
incurred, subject to reduction by reimbursement from vendors. Net advertising
expenses were not a significant component of store operating expenses for the
fiscal years ended June 29, 1996, June 24, 1995, and June 25, 1994.
Pre-opening costs - Pre-opening costs are deferred prior to the date of the
store's grand opening and are expensed in the month of the store's grand
opening. Pre-opening costs consist primarily of personnel and advertising
expenses incurred prior to a store's opening and promotional costs associated
with the opening.
Income taxes - Income taxes are maintained in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes," whereby deferred income tax assets and liabilities result from
temporary differences. Temporary differences are differences between the tax
bases of assets and liabilities and their reported amounts in the consolidated
financial statements that will result in taxable or deductible amounts in
future years.
Income (loss) per share - Income (loss) 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. If dilutive, the
effects of stock options are 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") were
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 on a
retroactive basis to reflect the stock split and the Company's acquisition of
PCs Compleat (Note 2).
Long-Lived Assets - In March 1995, the Financial Accounting Standards Board
("FASB") issued SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of." SFAS No. 121 requires
that losses on the impairment of long-lived assets used in operations be
recorded when indicators of impairment are present and the undiscounted cash
flows to be generated by those assets are less than the assets' carrying
amounts. The standard is effective for fiscal years beginning after December
15, 1995 and will be adopted by the Company in the preparation of its
financial statements for the first quarter of its fiscal year ending June 28,
1997. Based on current circumstances, the Company does not believe that the
adoption of the standard will have any material impact on the Company's
financial position or results of operations.
Stock-Based Compensation - In October 1995, the FASB issued SFAS No. 123,
"Accounting for Stock-Based Compensation." SFAS No. 123 gives companies a
choice of recognizing compensation expense related to stock-based awards by
adopting a new fair value based method of accounting or by continuing to
account for those awards using the accounting prescribed by APB Opinion 25,
"Accounting for Stock Issued to Employees." The Company will adopt the
disclosure requirements of SFAS No. 123 in its fiscal year ending June 28,
1997 and plans to continue to account for stock compensation using APB Opinion
25, making pro forma disclosures of net income and earnings per share as if
the fair value based method had been applied.
Reclassifications - Certain prior year balances have been reclassified to
conform to the current year basis of presentation.
F-8
<PAGE>
COMPUSA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. ACQUISITION OF PCS COMPLEAT, INC.
On May 30, 1996, pursuant to an Agreement and Plan of Merger dated as of May
15, 1996 (the "Merger Agreement") between the Company and PCs Compleat, PCs
Compleat became a wholly-owned subsidiary of the Company (the "Merger"). PCs
Compleat is engaged in the direct resale of brand-name personal computers and
peripherals.
The Merger was approved by the unanimous written consent of the stockholders
of PCs Compleat as of May 29, 1996. Pursuant to the Merger, each share of
common stock, Series A Preferred Stock, Series B Preferred Stock, and Series C
Preferred Stock of PCs Compleat was canceled and converted into the right to
receive 0.18923226893 shares (the "Exchange Ratio") of Common Stock of the
Company. Pursuant to the terms of the Merger Agreement, 2,632,717 shares of
Common Stock were issued by the Company. In addition, the Company assumed all
outstanding options granted under a stock option plan maintained by PCs
Compleat and converted such options into options to purchase an aggregate of
325,413 shares of Common Stock of the Company.
The Company's consolidated financial statements reflect the Merger under the
application of the pooling of interests method of accounting. Under the
pooling of interests method of accounting, the historical book values of the
assets, liabilities, and stockholders' equity of PCs Compleat, as reported on
its balance sheet, have been carried over onto the consolidated balance sheet
of the Company and no goodwill or other intangible assets were created. In
addition, the Company has restated its consolidated statements of operations
to include the results of operations of PCs Compleat for each of the fiscal
years presented.
Separate and combined results of operations of the Company and PCs Compleat
are as follows:
<TABLE>
<CAPTION>
PCS
COMPANY COMPLEAT CONSOLIDATED
---------- -------- ------------
(IN THSOUANDS)
<S> <C> <C> <C>
Fiscal year ended June 29, 1996
Net sales.................................. $3,608,250 $221,536 $3,829,786
Net income................................. 56,743 2,922 59,665
Fiscal year ended June 24, 1995
Net sales.................................. $2,813,064 $122,837 $2,935,901
Net income................................. 22,956 1,383 24,339
Fiscal year ended June 25, 1994
Net sales.................................. $2,145,739 $ 73,718 $2,219,457
Net loss................................... (16,760) (264) (17,024)
</TABLE>
F-9
<PAGE>
COMPUSA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. PROPERTY AND EQUIPMENT
Property and equipment consist of:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------
JUNE 29, JUNE 24,
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Furniture, fixtures, and equipment........................... $103,425 $ 75,858
Leasehold improvements....................................... 37,899 30,945
Equipment under capital leases............................... 22,995 19,396
Land......................................................... 2,842 2,842
Capital projects in progress................................. 30,984 19,510
-------- --------
198,145 148,551
Less accumulated depreciation and amortization............... 66,961 42,261
-------- --------
$131,184 $106,290
======== ========
</TABLE>
4. ACCRUED LIABILITIES
Accrued liabilities consist of:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------
JUNE 29, JUNE 24,
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Salaries and bonuses.......................................... $30,757 $18,589
Taxes, other than income and payroll.......................... 17,622 10,282
Rent.......................................................... 9,337 6,991
Royalties..................................................... 1,406 2,648
Other......................................................... 23,056 10,566
------- -------
$82,178 $49,076
======= =======
</TABLE>
F-10
<PAGE>
COMPUSA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. INCOME TAXES
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------
JUNE 29, JUNE 24, JUNE 25,
1996 1995 1994
-------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Income tax provision (benefit):
Current:
Federal.......................................... $35,325 $10,183 $(1,683)
State............................................ 4,593 1,425 518
Deferred........................................... 266 (4,645) (1,133)
------- ------- -------
$40,184 $ 6,963 $(2,298)
======= ======= =======
</TABLE>
The reconciliation of the income tax provision (benefit) to the amount
calculated based on the federal statutory rate is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------
JUNE 29, JUNE 24, JUNE 25,
1996 1995 1994
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Income tax expense (benefit) at statutory rate...... $34,947 $10,956 $(6,762)
State income taxes, less federal benefit............ 3,047 926 427
Alternative minimum tax............................. -- (2,805) 2,533
Unrecognized future benefits of temporary
differences........................................ -- -- 1,621
Reversal of valuation allowance..................... (1,252) (2,008) --
Nondeductible expenses, primarily transaction costs. 1,209 -- --
Tax-exempt interest income.......................... (1,471) -- --
Other............................................... 3,704 (106) (117)
------- ------- -------
$40,184 $ 6,963 $(2,298)
======= ======= =======
</TABLE>
F-11
<PAGE>
COMPUSA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The tax effects of temporary differences giving rise to the deferred tax
asset (liability) at June 29, 1996 and June 24, 1995 are as follows:
<TABLE>
<CAPTION>
DEFERRED TAX ASSET (LIABILITY)
--------------------------------------
JUNE 29, 1996 JUNE 24, 1995
------------------ -------------------
CURRENT NONCURRENT CURRENT NONCURRENT
------- ---------- ------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Fixed assets............................ $ -- $(3,859) $ -- $(4,811)
Accounts receivable..................... 498 -- 335 --
Merchandise inventories................. 567 -- 3,717 --
Net operating loss carryforward of PCs
Compleat............................... 510 -- 1,569 --
Deferred rentals........................ -- 3,286 -- 2,447
Prepaid expenses and other deferrals.... 2,991 (3,459) (1,941) (100)
Accrued liabilities..................... 3,366 -- 4,202 --
------ ------- ------- -------
$7,932 $(4,032) $ 7,882 $(2,464)
Less effect of valuation allowance...... -- -- (1,252) --
------ ------- ------- -------
$7,932 $(4,032) $ 6,630 $(2,464)
====== ======= ======= =======
</TABLE>
Prior to the Merger, PCs Compleat was not included in the Company's
consolidated tax return but rather represented a separate taxpaying entity. At
June 24, 1995, a valuation allowance of $1,252,000 was recorded to reduce the
carrying value of the PCs Compleat net deferred tax asset as of June 24, 1995
to zero. The tax benefits associated with PCs Compleat's deferred tax asset
were recognized in the fiscal year ended June 29, 1996 and the valuation
allowance was reversed.
6. LEASES
The Company leases equipment under capital and operating leases that expire
at various dates through 2000. The Company operates in facilities leased under
noncancelable operating leases that expire at various dates through 2016 and
the majority of which contain renewal options and require the Company to pay a
proportionate share of common area maintenance.
At June 29, 1996, future minimum lease payments under all leases with
initial or remaining noncancelable lease terms in excess of one year are as
follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
FISCAL YEAR LEASES LEASES
- ----------- ------- ---------
(IN THOUSANDS)
<S> <C> <C>
1997.......................................................... $ 4,991 $ 45,480
1998.......................................................... 3,194 47,148
1999.......................................................... 1,488 47,540
2000.......................................................... 657 46,331
2001.......................................................... 146 43,355
Thereafter.................................................... -- 314,985
------- --------
Total minimum lease payments.................................. 10,476 $544,839
========
Less amount representing interest............................. 1,028
-------
Present value of minimum lease payments....................... 9,448
Less current portion.......................................... 4,382
-------
Capital lease obligations due after one year.................. $ 5,066
=======
</TABLE>
F-12
<PAGE>
COMPUSA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Rental expense of the Company amounted to $37,692,000, $30,943,000, and
$23,777,000 for the fiscal years ended June 29, 1996, June 24, 1995, and June
25, 1994, respectively.
7. CREDIT AGREEMENT
At June 29, 1996, the Company has an unsecured credit agreement (the "Credit
Agreement") with a consortium of banks that provides for borrowings and
letters of credit up to a maximum of $75,000,000. The Credit Agreement
replaced a previous $50,000,000 secured credit facility that was terminated in
June 1995. Borrowings under the Credit Agreement are subject to a borrowing
base limitation (the "Borrowing Base") that is equal to the sum of (a) 80% of
eligible accounts, as defined, and (b) an amount equal to 40% of eligible
inventory, which is defined as inventory minus outstanding trade accounts
payable incurred with respect to the purchase or production of eligible
inventory (provided that the amount computed in (b) above cannot comprise more
than $20,000,000 of the Borrowing Base), less (c) outstanding letters of
credit (which may not exceed $35,000,000 in the aggregate). At June 29, 1996
and June 24, 1995, no amounts were outstanding under the Credit Agreement and
the Company had $74,400,000 and $60,000,000, respectively, available for
future borrowings (after reduction for outstanding letters of credit).
Borrowings under the Credit Agreement bear interest, at the Company's
option, at either a prime rate (8.25% per annum as of June 29, 1996) or a rate
based on the London Interbank Offering Rate ranging from 5.5% to 6.125% per
annum as of June 29, 1996, plus a specified margin. The Company also pays
certain commitment and agent fees. Although the Credit Agreement expires in
June 1999, the Company has the annual option to extend the Credit Agreement
for an additional year with the banks' approval. Borrowings under the credit
facility in place before the Credit Agreement bore interest at the bank's
prime rate.
The Credit Agreement requires the maintenance of certain financial ratios.
If the Company is unable to maintain certain minimum financial ratios, the
banks may require outstanding borrowings under the Credit Agreement to be
secured by the Company's accounts receivable and certain approved inventories.
The Credit Agreement also imposes credit limitations on mergers and
consolidations and prohibits the payment of dividends. The indebtedness under
the Credit Agreement is guaranteed on a full, unconditional, and joint and
several basis by all the current subsidiaries of the Company.
8. SENIOR SUBORDINATED NOTES
In June 1993, the Company issued $110,000,000 in principal amount of 9 1/2%
Senior Subordinated Notes due June 15, 2000 (the "Senior Subordinated Notes").
Interest on the Senior Subordinated Notes is payable semi-annually on each
June 15 and December 15. The Senior Subordinated Notes are subordinated in
right of payment to all existing and future senior indebtedness of the
Company, as defined. Senior indebtedness, which totaled approximately
$387,000,000 and $293,000,000 at June 29, 1996 and June 24, 1995,
respectively, consists primarily of capital lease obligations, indebtedness
incurred under the Credit Agreement, and trade payables.
The Senior Subordinated Notes are redeemable on or after June 15, 1998, at
the option of the Company, in whole or in part, at 102.714% of the principal
amount, declining to 100% of the principal amount on June 15, 1999 and
thereafter. The Senior Subordinated Notes grant the holders the right to
require the Company to repurchase all or any portion of their notes at 101% of
the principal amount thereof, together with accrued interest, following the
occurrence of a change in control of the Company, as defined.
The indenture related to the Senior Subordinated Notes restricts, among
other things, the ability of the Company and its subsidiaries to incur
additional indebtedness or issue preferred stock, pay dividends and make
F-13
<PAGE>
COMPUSA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
other distributions, sell or issue stock of a subsidiary, create encumbrances
on the ability of any subsidiary that is a guarantor to pay dividends or make
other restricted payments, engage in certain transactions with affiliates,
dispose of certain assets, merge or consolidate with or into, or sell or
otherwise transfer their properties and assets as an entirety to, another
entity, incur indebtedness that would rank senior in right of payment to the
Senior Subordinated Notes and be subordinated to any other indebtedness of the
Company, or create additional liens.
The Senior Subordinated Notes are guaranteed on a full, unconditional and
joint and several basis by all of the Company's direct and indirect
subsidiaries, each of which is wholly owned. The combined summarized
information of these subsidiaries is as follows:
<TABLE>
<CAPTION>
AS OF AND FOR
THE FISCAL YEAR
ENDED
-----------------
JUNE 29, JUNE 24,
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Intercompany receivables....................................... $ -- $92,293
Other current assets........................................... 39,442 40,001
Noncurrent assets.............................................. 3,955 1,880
Intercompany payables.......................................... 362 6,123
Other current liabilities...................................... 22,775 15,009
Long-term debt and liabilities................................. 704 61
Intercompany revenues.......................................... 60,933 28,434
Other revenues................................................. 221,536 123,304
Costs and expenses............................................. 218,742 122,004
Net income..................................................... 42,302 15,611
</TABLE>
In preparation of the Company's consolidated financial statements, all
intercompany accounts were eliminated.
The fair value of the Senior Subordinated Notes, based on quoted market
prices, was approximately $111,650,000 and $105,875,000 at June 29, 1996 and
June 24, 1995, respectively.
9. RESTRUCTURING CHARGE
In the second quarter of the fiscal year ended June 25, 1994, the Company
recognized a pre-tax restructuring charge of $9,918,000 in connection with the
reorganization of the Company's operating management structure, elimination of
its international division, centralization of certain inventory management
functions, and the outsourcing of both the majority of the assembly of its
private label computers and its spare parts fulfillment operations. The
primary components of the restructuring charge were the writedown of certain
nonstrategic assets to net realizable value, certain accruals for future lease
obligations, and termination and employee severance costs. Substantially all
of these costs were charged against the restructuring reserve during the
fiscal year ended June 25, 1994. Management believes the changes resulting
from the implementation of the restructuring plan have positively affected
store operating and general and administrative expenses, including payroll,
depreciation, and occupancy costs.
10. COMMITMENTS AND CONTINGENCIES
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 assurance that
future
F-14
<PAGE>
COMPUSA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 the litigation.
11. EMPLOYEE BENEFIT PLANS
The Company sponsors a defined contribution profit sharing plan (the "401(k)
Plan") covering employees of the Company and its subsidiaries, other than PCs
Compleat, who are at least 21 years of age and have worked at least 500 hours
during the six months prior to the plan entry dates. The 401(k) Plan is
intended to constitute a qualified profit sharing plan within the meaning of
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
which includes a qualified cash or deferred arrangement within the meaning of
Code section 401(k). In addition, the Company sponsors a deferred compensation
plan that permits eligible officers and employees to defer a portion of their
compensation. Contributions to both the 401(k) Plan and the deferred
compensation plan consist of employee pre-tax contributions determined as a
percentage of each participating employee's compensation and the Company's
matching contributions up to a specified limit. The Company may make
additional contributions to either or both plans at the discretion of the
Company's Board of Directors. The Company's expense for contributions to the
401(k) Plan and the deferred compensation plan for the fiscal years ended June
29, 1996 and June 24, 1995 aggregated $1,735,000 and $512,000, respectively.
PCs Compleat sponsors a defined contribution profit sharing plan that is
intended to be qualified within the meaning of Code section 401(a) and that
includes a qualified cash or deferred arrangement within the meaning of Code
section 401(k). The plan covers substantially all employees of PCs Compleat
who meet minimum age and service requirements and allows participants to defer
a portion of their annual compensation on a pre-tax basis. No contributions
were made to the plan by PCs Compleat for the fiscal years ended June 29,
1996, June 24, 1995, and June 25, 1994.
12. STOCKHOLDERS' EQUITY
Common Stock - In September 1995, the Company completed a public offering,
selling 4,025,000 newly-issued shares of Common Stock and receiving net
proceeds of approximately $76.8 million (net of offering costs of
approximately $3.5 million).
In May 1994, PCs Compleat completed a private offering of 3,411,663 shares
of preferred stock, receiving net proceeds of approximately $10.0 million.
These shares, as well as all other shares of common stock and preferred stock
of PCs Compleat at the date of the Merger, were converted into shares of
Common Stock of the Company. The 3,411,663 shares of preferred stock of PCs
Compleat sold in May 1994 represent the equivalent of 645,607 shares of Common
Stock of the Company.
Treasury Stock - In December 1995, the Company repurchased 236,200 shares of
Common Stock, to be held as treasury stock, at a weighted average cost of
$14.89 per share, excluding transaction costs. In February 1996, the Company
made a cash contribution to the 401(k) Plan to effect the Company's required
contribution to the plan for 1995, which the plan used to purchase 46,470
shares of treasury stock from the Company.
Stock-Based Incentive Compensation Plans - The CompUSA Inc. Long-Term
Incentive Plan (the "Long-Term Incentive Plan") provides for the granting of
stock-based incentive compensation in the form of stock options, restricted
stock grants, stock appreciation rights, performance share awards, and stock
unit awards, or a combination thereof. The Long-Term Incentive Plan, as
restated and amended, authorizes the issuance of up to 6,394,368 shares of
Common Stock upon the exercise of such incentive awards to employees,
nonemployee directors, and advisors of the Company.
F-15
<PAGE>
COMPUSA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Under the Long-Term Incentive Plan, stock option awards may be granted in
the form of incentive stock options or nonstatutory stock options and are
generally exercisable for up to ten years following the date such option
awards are granted. Exercise prices of incentive stock options must be equal
to or greater than 100% of the fair market value of the Common Stock on the
grant date.
Prior to the Merger, PCs Compleat maintained a stock option plan (the "PCs
Compleat Plan") for the benefit of its employees. In connection with the
Merger, the Company assumed all outstanding options granted under the PCs
Compleat Plan and converted such options into options to purchase an aggregate
of 325,413 shares of Common Stock of the Company. Subsequent to the Merger, no
additional options will be granted pursuant to the PCs Compleat Plan.
A summary of stock option transactions related to both the Long-Term
Incentive Plan and the PCs Compleat Plan for the fiscal years ended June 29,
1996, June 24, 1995, and June 25, 1994 is set forth below:
<TABLE>
<CAPTION>
OPTION
SHARES PRICES
---------- ------------
<S> <C> <C>
Outstanding at June 26, 1993.......................... 3,231,301 $0.53-$15.69
Granted............................................... 1,432,148 $0.53-$16.06
Exercised............................................. (482,573) $0.53-$13.44
Canceled.............................................. (349,881) $0.53-$16.06
----------
Outstanding at June 25, 1994.......................... 3,830,995 $0.53-$16.06
Granted............................................... 1,416,621 $1.85-$12.37
Exercised............................................. (716,931) $0.53-$13.44
Canceled.............................................. (1,376,416) $0.53-$16.06
----------
Outstanding at June 24, 1995.......................... 3,154,269 $0.53-$15.56
Granted............................................... 514,165 $2.65-$35.37
Exercised............................................. (535,156) $0.53-$15.65
Canceled.............................................. (161,050) $0.53-$17.69
----------
Outstanding at June 29, 1996.......................... 2,972,228 $0.53-$35.37
==========
Options exercisable at June 29, 1996.................. 1,136,037
==========
</TABLE>
For the fiscal year ended June 29, 1996, the Company granted restricted
stock awards for 81,786 shares of Common Stock to the Company's officers. The
restricted stock awards vest to the employees on the fifth anniversary of the
grant date. The vesting period may be accelerated to a minimum of three years
if specified performance goals are met. Based upon the attainment of the
specified performance goals for the fiscal year ended June 29, 1996, the
restricted stock awards will vest no later than the fourth anniversary of the
grant date. At June 29, 1996, none of the restricted stock awards were vested.
At June 29, 1996, there were 4,425,998 shares of Common Stock reserved for
future issuance pursuant to the Long-Term Incentive Plan and the PCs Compleat
Plan.
Employee Stock Purchase Plan - The 1991 Employee Stock Purchase Plan (the
"Stock Purchase Plan") was terminated by the Company effective July 1, 1994.
Prior to its termination, shares of Common Stock were sold under the Stock
Purchase Plan pursuant to options automatically available to all employees
(excluding employees who would own beneficially more than 5% of the
outstanding Common Stock after grant of an option) who were employed by the
Company for at least six months and were customarily employed by the Company
for at least 20 hours per week and for more than five months per year. For the
fiscal years ended June 24, 1995 and June 24, 1994, 223,244 and 223,440 shares
of Common Stock, respectively, were sold under the Stock Purchase Plan.
F-16
<PAGE>
COMPUSA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Preferred Stock - The Company has authorized 10,000 shares of preferred
stock, $.01 per share par value, none of which was issued and outstanding as
of June 29, 1996. However, the Board of Directors has the authority, without
further stockholder approval, to issue shares of preferred stock in one or
more series and to determine the dividend rights, any conversion rights or
rights of exchange, voting rights, rights and terms of redemption (including
sinking fund provisions), liquidation preferences, and any other rights,
preferences, privileges, and restrictions of any series of preferred stock,
and the number of shares constituting such series and the designation thereof.
The Company has no present plans to issue any shares of preferred stock. The
terms of the Company's Senior Subordinated Notes limit the Company's ability
to issue preferred stock (See Note 8).
Rights Agreement - On April 29, 1994, the Board of Directors of the Company
declared a dividend of one right to purchase preferred stock (a "Right") for
each outstanding share of Common Stock. The Rights will expire on April 28,
2004. Each Right will entitle stockholders, in certain circumstances, to buy
one ten-thousandth of a newly issued share of Series A Junior Participating
Preferred Stock (the "Junior Preferred Stock") of the Company at the purchase
price of $120.
The Rights will be exercisable and transferable apart from the Common Stock
only if a person or group acquires beneficial ownership of 20% or more of the
Common Stock or commences a tender or exchange offer upon consummation of
which such person or group would beneficially own 20% or more of the Common
Stock.
The Company will generally be entitled to redeem the Rights at $.001 per
Right at any time until a person or group has become the beneficial owner of
20% or more of the Common Stock. Under the Rights "flip-in" feature, if any
person or group becomes the beneficial owner of 20% or more of the Common
Stock, then each Right not owned by such person or group of certain related
parties will entitle its holder to purchase, at the Right's then current
purchase price, shares of Common Stock (or in certain circumstances as
determined by the Board of Directors, cash, other property, or other
securities) having a value of twice the Right's purchase price.
Under the Rights' "flip-over" provision, if, after any person or group
becomes the beneficial owner of 20% or more of the Common Stock, the Company
is involved in a merger or other business combination transaction with another
person, or sells 50% or more of its assets or earning power in one or more
transactions, each Right will entitle its holder to purchase, at the Right's
then current purchase price, shares of common stock of such other person
having a value of twice the Right's purchase price.
The Junior Preferred Stock will not be redeemable and, unless otherwise
provided in connection with the creation of a subsequent series of preferred
stock, will be subordinate to all other series of the Company's preferred
stock. Each share of Junior Preferred Stock will represent the right to
receive, when and if declared, a quarterly dividend at an annual rate equal to
the greater of $1.00 per share or 10,000 times the quarterly per share cash
dividends declared on the Common Stock during the immediately preceding fiscal
year. In addition, each share of Junior Preferred Stock will represent the
right to receive 10,000 times any noncash dividends (other than dividends
payable in Common Stock) declared on the Common Stock, in like kind. In the
event of the liquidation, dissolution or winding up of the Company, each share
of Junior Preferred Stock will represent the right to receive a liquidation
payment in an amount equal to the greater of $1.00 per share or 10,000 times
the liquidation payment made per share of Common Stock. Each share of Junior
Preferred Stock will have 10,000 votes, voting together with the Common Stock.
In the event of any merger, consolidation, or other transaction in which
common shares are exchanged, each share of Junior Preferred Stock represents
the right to receive 10,000 times the amount received per share of Common
Stock. The rights of the Junior Preferred Stock as to dividends, liquidation,
voting rights, and merger participation are protected by anti-dilution
provisions.
Executive Severance Arrangements - The Company has severance arrangements
for all officers and certain key employees that provide severance pay benefits
in the event of a change in control of the Company, as defined
F-17
<PAGE>
COMPUSA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
in the severance agreements. The Company's officers have employment agreements
containing provisions pursuant to which those persons will receive lump sum
severance payments in an amount up to 2.99 times the sum of (i) their current
base salary at the time of termination, (ii) two times their target bonus for
the bonus period in which the change in control occurs, and (iii) their
annualized automobile allowance, together with payments in lieu of continued
group insurance benefits. Key employees not covered by employment agreements
are covered by a plan pursuant to which they will receive, in the event of a
change in control of the Company, lump sum severance payments in an amount
equal to 0.50 times the sum of (i) their annual base salary, (ii) their target
bonus for the bonus period in which the change occurs, and (iii) their
annualized automobile allowance, together with payments in lieu of continued
group insurance benefits. The plan covers 49 key employees.
13. SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for interest and income taxes are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------
JUNE 29, JUNE 24, JUNE 25,
1996 1995 1994
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest.............................................. $11,611 $12,274 $11,768
======= ======= =======
Income taxes.......................................... $35,253 $11,065 $ 1,156
======= ======= =======
</TABLE>
Financing and investing activities not affecting cash are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------
JUNE 29, JUNE 24, JUNE 25,
1996 1995 1994
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Additions to property and equipment under capital
leases............................................. $ 4,491 $ 2,257 $11,185
======= ======= =======
</TABLE>
14. SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- ---------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Fiscal Year Ended June 29, 1996:
Net sales............................... $781,978 $983,228 $1,065,731 $998,849
Cost of sales and occupancy costs....... 684,090 852,177 916,837 858,578
Operating income........................ 12,951 31,865 38,603 21,934
Net income.............................. 6,207 18,748 22,933 11,777
Income per common and common equivalent
share.................................. $ 0.15 $ 0.40 $ 0.50 $ 0.25
Weighted average common and common
equivalent shares...................... 42,535 46,509 46,287 47,109
Fiscal Year Ended June 24, 1995:
Net sales............................... $614,097 $791,863 $ 805,580 $724,361
Cost of sales and occupancy costs....... 540,498 696,616 702,865 633,966
Operating income (loss)................. (1,204) 14,755 19,177 8,180
Net income (loss)....................... (2,943) 9,945 12,642 4,695
Income (loss) per common and common
equivalent share...................... $ (0.07) $ 0.24 $ 0.31 $ 0.11
Weighted average common and common
equivalent shares..................... 39,679 40,757 41,270 41,762
</TABLE>
F-18
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. INDEX TO EXHIBITS NO.
------- ----------------- -----
<C> <S> <C>
2.1 Agreement and Plan of Merger, dated as of May 15, 1996, by and
among the Company, Snowstorm Merger Corp., a Delaware
corporation and a wholly-owned subsidiary of the Company, and
PCs Compleat, pursuant to which the Company acquired PCs
Compleat (the "Plan of Merger"). (9)
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 Second Supplemental Indenture dated as of February 7, 1996
among the Company, CompTeam Inc., CompFinance Inc.,
CompService Inc., CompUSA Holdings II Inc., and U.S. Trust
Company of Texas, N.A., as Trustee. (13)
4.6 Third Supplemental Indenture dated as of May 14, 1996 among
the Company, CompFinance Inc., CompService Inc., CompTeam
Inc., CompUSA Holdings II Inc., Snowstorm Merger Corp. and
U.S. Trust Company of Texas, N.A., as Trustee. (13)
4.7 Fourth Supplemental Indenture dated as of May 30, 1996 among
the Company, CompFinance Inc., CompService Inc., CompTeam
Inc., CompUSA Holdings II Inc., PCs Compleat, Inc. and U.S.
Trust Company of Texas, N.A., as Trustee. (13)
4.8 Form of Fifth Supplemental Indenture dated as of June 14, 1996
among the Company, CompFinance Inc., CompService Inc.,
CompTeam Inc., CompUSA Holdings II Inc., PCs Compleat, Inc.,
CompUSA Holdings I Inc., CompUSA Management Company, CompUSA
Stores L.P., CompUSA Holdings Company and U.S. Trust Company
of Texas, N.A., as Trustee. (13)
4.9 Subsidiary Guarantees executed by CompTeam Inc., CompUSA
Holdings II Inc., PCs Compleat, Inc., CompUSA Holdings I Inc.,
CompUSA Management Company, CompUSA Stores L.P. and CompUSA
Holdings Company. (13)
4.10 Rights Agreement dated April 29, 1994, between the Company and
Bank One, Texas, N.A., as Rights Agent. (5)
4.11 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)
4.12 Letter of the Company dated August 16, 1996, appointing
American Stock Transfer & Trust Company as substitute Rights
Agent under the Rights Agreement. (13)
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. (9)
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)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. INDEX TO EXHIBITS NO.
------- ----------------- -----
<C> <S> <C>
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 Agreements and Adoptions of Subsidiary Guaranty executed by
CompTeam Inc., CompUSA Holdings II Inc., PCs Compleat, Inc.,
CompUSA Holdings I Inc., CompUSA Management Company, CompUSA
Stores L.P., and CompUSA Holdings Company. (13)
10.11 Subordination Agreement dated June 16, 1995, among CompFinance
Inc., CompService Inc., NationsBank of Texas, N.A. and certain
lenders. (6)
10.12 Agreements and Adoptions of Subordination Agreement executed
by CompTeam Inc., CompUSA Holdings II Inc., PCs Compleat,
Inc., CompUSA Holdings I Inc., CompUSA Management Company,
CompUSA Stores L.P., and CompUSA Holdings Company. (13)
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 Form of Employment Agreement dated as of May 1, 1996, as
amended, between the Company and each of J. Samuel Crowley,
Ronald J. Gilmore, Melvin D. McCall, Lawrence N. Mondry, Paul
Poyfair, James E. Skinner and Mark R. Walker. (13)
10.16 Form of Employment Agreement dated as of May 1, 1996, as
amended, between the Company and each of Anthony J. Cincotta,
Aka A. DeMesa, Paul F. Ewert, Robyn Gatch-Priest, Harold D.
Greenberg, James L. Infinger, Barry C. McCook, Jack A. Phelps,
Ronald D. Strongwater and Anthony A. Weiss. (13)
10.17 Form of Employment Agreement dated as of May 27, 1996, between
the Company and J. Robert Gary. (13)
10.18 Form of Employment Agreement between the Company and each of
Gordon B. Hoffstein and Jack Littman-Quinn. (13)
10.19 Form of Employment Agreement dated as of July 9, 1996, between
the Company and each of Rick L. Fountain and Leslie C.
Marshall. (13)
10.20 Form of Employment Agreement dated as of August 16, 1996,
between the Company and James F. Halpin. (13)
10.21 Form of Employment Agreement dated as of August 16, 1996,
between the Company and Harold F. Compton. (13)
10.22 CompSavings Plan for Employees of CompUSA Inc. (10)
10.23 CompUSA Inc. Deferred Compensation Plan (11)
10.24 PCs Compleat, Inc. 1991 Stock Option Plan (12)
11 Computations of Income per Common and Common Equivalent Share.
(13)
21 List of the Company's Subsidiaries. (13)
23 Consent of Ernst & Young LLP. (13)
</TABLE>
<PAGE>
- --------
(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) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended March 23, 1996 and incorporated herein
by reference.
(9) Previously filed as an exhibit to the Company's Report on Form 8-K filed
with the SEC on June 14, 1996, as amended by Form 8-K/A filed with the SEC
on August 2, 1996.
(10) Previously filed as an exhibit to Registration Statement No. 33-86314 on
Form S-8 and incorporated herein by reference.
(11) Previously filed as an exhibit to Registration Statement No. 33-99280 on
Form S-8 and incorporated herein by reference.
(12) Previously filed as an exhibit to Registration Statement No. 333-06235 on
Form S-8 and incorporated herein by reference.
(13) Filed herewith.
<PAGE>
EXHIBIT 4.5
________________________________________________________________________________
CompUSA Inc.,
as Issuer,
CompFinance Inc.,
CompService Inc.,
CompTeam Inc.
and
CompUSA Holdings II Inc.
as Guarantors,
and
U.S. TRUST COMPANY OF TEXAS, N.A.,
as Trustee
_________________
SECOND SUPPLEMENTAL INDENTURE
Dated as of February 7, 1996
_________________
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>
SECOND SUPPLEMENTAL INDENTURE
-----------------------------
SECOND SUPPLEMENTAL INDENTURE, dated as of February 7, 1996, among CompUSA
Inc., a corporation duly organized and existing under the laws of the State of
Delaware (the "Issuer"), CompUSA Holdings II Inc., a corporation duly organized
and existing under the laws of the State of Delaware and CompTeam Inc.,
CompFinance Inc. and CompService Inc. (collectively, with CompUSA Holdings II
Inc., 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, CompUSA Inc., CompFinance Inc., CompService Inc., CompTeam Inc.
and U.S. Trust Company of Texas, N.A. heretofore executed and delivered to the
Trustee the First Supplemental Indenture dated as of December 1, 1995, by which
CompTeam Inc. was added as a Guarantor of the Indenture;
WHEREAS, CompUSA Holdings II Inc. 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, CompUSA Holdings II Inc. desires in and by this Second
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 Second Supplemental Indenture and to make this Second 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:
<PAGE>
ARTICLE ONE
DEFINITIONS
Section 1.01. For all purposes of the Indenture and this Second
------------
Supplemental Indenture, except as otherwise expressly provided or unless the
context otherwise requires:
(a) the words "herein", "hereof" and "hereunder" and other words of similar
import refer to the Indenture and this Second 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.,
CompTeam Inc. and CompUSA Holdings II 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. CompUSA Holdings II Inc. 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 CompUSA Holdings II Inc.'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 Second 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 Second Supplemental Indenture.
Section 3.03. In case any provision in this Second Supplemental Indenture
------------
shall be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions of this Second Supplemental Indenture
or the Indenture shall not in any way be affected or impaired thereby.
<PAGE>
Section 3.04. This Second 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 Second 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.
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:
Attest: Title:
/s/ Mark R. Walker
- --------------------------------
CompFinance Inc.
[SEAL]
By:
_____________________________
Name:
Attest: Title:
________________________________
CompService Inc.
[SEAL]
By:
_____________________________
Name:
Attest: Title:
________________________________
<PAGE>
Section 3.04. This Second 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 Second 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.
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:_____________________________________
Name:
Attest: Title:
_____________________________
CompFinance Inc.
[SEAL]
/s/ Joan Dobrzynski
By:-------------------------------------
Name: Joan Dobrzynski
Attest: Title: President
[SIGNATURE ILLEGIBLE]
- -----------------------------
CompService Inc.
[SEAL]
/s/ Joan Dobrzynski
By:-------------------------------------
Name: Joan Dobrzynski
Attest: Title: President
[SIGNATURE ILLEGIBLE]
- -----------------------------
<PAGE>
CompTeam Inc.
[SEAL]
By: /s/ Mark R.Walker
-------------------------------------
Name: Mark Walker
Attest: Title: V.P. Secretary
/s/ Peggy F. Cattell
- -----------------------------
CompUSA Holdings II Inc.
[SEAL]
By: /s/ James E. Skinner
-------------------------------------
Name:
Attest: Title:
/s/ Mark R. Walker
- -----------------------------
U.S. Trust Company of Texas, N.A.
[SEAL]
By:_____________________________________
Name:
Attest: Title:
_____________________________
<PAGE>
CompTeam Inc.
[SEAL]
By:________________________________
Name:
Attest: Title:
_____________________________
CompUSA Holdings II Inc.
[SEAL]
By:________________________________
Name:
Attest: Title:
_____________________________
U.S. Trust Company of Texas, N.A.
[SEAL]
By: /s/ John C. Stohlmann
--------------------------------
Name: JOHN C. STOHLMANN
Attest: Title: VICE PRESIDENT
/s/ Susan Jane Chapman
- -----------------------------
Susan Jane Chapman
ASSISTANT VICE PRESIDENT
<PAGE>
Exhibit 4.6
EXECUTION COPY
THIRD SUPPLEMENTAL INDENTURE
THIRD SUPPLEMENTAL INDENTURE, dated as of May 14, 1996, among CompUSA Inc.,
a corporation duly organized and existing under the laws of the State of
Delaware (the "Issuer"), Snowstorm Merger Corp., a corporation duly organized
and existing under the laws of the State of Delaware ("Merger Sub") and CompUSA
Holdings II Inc., CompTeam Inc., CompFinance Inc. and CompService Inc.
(collectively, with Merger Sub, 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, the Issuer, CompFinance Inc., CompService Inc. and CompTeam Inc.
heretofore executed and delivered to the Trustee a First Supplemental Indenture
dated as of December 1, 1995 (the "First Supplemental Indenture"), by which
CompTeam Inc. guarantees the obligation of the Issuer to pay the principal and
interest on the Securities;
WHEREAS, the Issuer, CompFinance Inc., CompService Inc., CompTeam Inc. and
CompUSA Holdings II Inc. heretofore executed and delivered to the Trustee a
Second Supplemental Indenture dated as of February 7, 1996 (the "Second
Supplemental Indenture"), by which CompUSA Holdings II Inc. guarantees the
obligation of the Issuer to pay the principal and interest on the Securities;
WHEREAS, the Original Indenture, as supplemented by the First Supplemental
Indenture and the Second Supplemental Indenture, is hereinafter referred to as
the "Indenture";
WHEREAS, Merger Sub 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 Indenture, "Amendments --Without Consent of
Securityholders", provides that provisions of the Indenture may be amended or
supplemented without the consent
<PAGE>
of the Holders with respect to certain matters therein identified;
WHEREAS, Merger Sub desires in and by this Third 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 Third Supplemental Indenture and to make this Third 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 Third Supplemental
Indenture, except as otherwise expressly provided or unless the context
otherwise requires:
(a) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to the Indenture and this Third 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., CompTeam
Inc., CompUSA Holdings II Inc. and Snowstorm Merger Corp., 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. Merger Sub 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 Merger Sub's status as a Guarantor.
-2-
<PAGE>
ARTICLE THREE
MISCELLANEOUS
Section 3.01. Except as amended by the First Supplemental Indenture, the
Second Supplemental Indenture and this Third Supplemental Indenture, the
Indenture remains in full force and effect in accordance with its terms.
Section 3.02. The Trustee accepts the modification of the Indenture
effected by this Third 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 Third Supple mental Indenture.
Section 3.03. In case any provision in this Third Supplemental Indenture
shall be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions of this Third Supplemental Indenture
or the Indenture shall not in any way be affected or impaired thereby.
Section 3.04. This Third Supplemental Indenture shall be governed by and
construed in accordance with the laws of the jurisdiction which governs the
Indenture and its construction.
Section 3.05. This Third 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.
Section 3.06. The address for any notice or communication to Snowstorm
Merger Corp. is:
Snowstorm Merger Corp.
c/o CompUSA Inc.
14951 North Dallas Parkway
Dallas, TX 75240
Telecopier No.: (214) 982-4449
Attention: Assistant Secretary
-3-
<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 to be hereunto duly affixed, all as of the day and the year first
above written.
CompUSA Inc.
By: /s/ Mark R. Walker
------------------------------------
Name: Mark R. Walker
Title: [SIGNATURE ILLEGIBLE]
CompFinance Inc.
By: __________________________________
Name: Joan Dobrzynski
Title: President
CompService Inc.
By: __________________________________
Name: Joan Dobrzynski
Title: President
CompTeam Inc.
By: /s/ Mark R. Walker
----------------------------------
Name: Mark R. Walker
Title: V.P. Security
CompUSA Holdings II Inc.
By: /s/ Mark R. Walker
----------------------------------
Name: Mark R. Walker
Title: V.P. Security
<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 to be hereunto duly authorized to be hereunto duly affixed, all as of
the day and year first above written.
CompUSA Inc.
By:
_______________________________
Name:
Title:
CompFinance Inc.
By: /s/ Joan Dobrzynski
-------------------------------
Name: Joan Dobrzynski
Title: President
CompService Inc.
By: /s/ Joan Dobrzynski
-------------------------------
Name: Joan Dobrzynski
Title: President
CompTeam Inc.
By:
_______________________________
Name:
Title:
CompUSA Holdings II Inc.
By:
_______________________________
Name:
Title:
<PAGE>
Snowstorm Merger Corp.
By: /s/ Mark R. Walker
----------------------------
Name: Mark R. Walker
Title: V.P. Security
U.S. Trust Company of Texas, N.A.,
as trustee
By:
____________________________
Name:
Title:
<PAGE>
Snowstrom Merger Corp.
By:
_______________________________
Name:
Title:
U.S. Trust Company of Texas, N.A.,
as trustee
By: /s/ John C. Stohlman
-------------------------------
Name: John C. Stohlman
Title: Vice President
<PAGE>
Exhibit 4.7
EXECUTION COPY
FOURTH SUPPLEMENTAL INDENTURE
FOURTH SUPPLEMENTAL INDENTURE, dated as of May 30, 1996, among CompUSA
Inc., a corporation duly organized and existing under the laws of the State of
Delaware (the "Issuer"), PCs Compleat, Inc., a corporation duly organized and
existing under the laws of the State of Delaware ("PCs Compleat") and CompUSA
Holdings II Inc., CompTeam Inc., CompFinance Inc. and CompService Inc.
(collectively, with PCs Compleat, 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, the Issuer, CompFinance Inc., CompService Inc. and CompTeam Inc.
heretofore executed and delivered to the Trustee a First Supplemental Indenture
dated as of December 1, 1995 (the "First Supplemental Indenture"), by which
CompTeam Inc. guarantees the obligation of the Issuer to pay the principal and
interest on the Securities;
WHEREAS, the Issuer, CompFinance Inc., CompService Inc., CompTeam Inc. and
CompUSA Holdings II Inc. heretofore executed and delivered to the Trustee a
Second Supplemental Indenture dated as of February 7, 1996 (the "Second
Supplemental Indenture"), by which CompUSA Holdings II Inc. guarantees the obli
gation of the Issuer to pay the principal and interest on the Securities;
WHEREAS, the Issuer, CompFinance Inc., CompService Inc., CompTeam Inc.,
CompUSA Holdings II Inc. and Snowstorm Merger Corp. heretofore executed and
delivered to the Trustee a Third Supplemental Indenture dated as of May 14, 1996
(the "Third Supplemental Indenture"), by which Snowstorm Merger Corp. guaranteed
the obligation of the Issuer to pay the principal and interest on the
Securities;
WHEREAS, the Original Indenture, as supplemented by the First Supplemental
Indenture, the Second Supplemental Indenture
<PAGE>
and the Third Supplemental Indenture is hereinafter referred to as the
"Indenture";
WHEREAS, Snowstorm Merger Corp. has been merged with and into PCs Compleat
and is therefore no longer in existence;
WHEREAS, PCs Compleat is now a 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 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, PCs Compleat desires in and by this Fourth 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 Fourth Supplemental Indenture and to make this Fourth 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 Fourth Supplemental
Indenture, except as otherwise expressly provided or unless the context
otherwise requires:
(a) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to the Indenture and this Fourth 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., CompTeam
Inc., CompUSA Holdings II Inc. and PCs Compleat, and any other direct or
indirect Subsidiary of the
-2-
<PAGE>
Company that executes a Subsidiary Guarantee after the date hereof, and their
respective successors or assigns.
Section 2.02 PCs Compleat hereby assumes all of the obligations of
Snowstorm Merger Corp. under the Securities and the Indenture and 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 PCs Compleat's sta tus as a
Guarantor.
ARTICLE THREE
MISCELLANEOUS
Section 3.01. Except as amended by the First Supplemental Indenture, the
Second Supplemental Indenture, the Third Supplemental Indenture and this Fourth
Supplemental Indenture, the Indenture remains in full force and effect in
accordance with its terms.
Section 3.02. The Trustee accepts the modification of the Indenture
effected by this Fourth 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 Fourth Supplemental Indenture.
Section 3.03. In case any provision in this Fourth Supplemental Indenture
shall be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions of this Fourth Supplemental Indenture
or the Indenture shall not in any way be affected or impaired thereby.
Section 3.04. This Fourth Supplemental Indenture shall be governed by and
construed in accordance with the laws of the jurisdiction which governs the
Indenture and its construction.
Section 3.05. This Fourth 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 counter parts shall together constitute but one and the same
instrument.
Section 3.06. The address for any notice or communication to PCs Compleat
is:
PCs Compleat, Inc.
c/o CompUSA Inc.
14951 North Dallas Parkway
Dallas, TX 75240
Telecopier No.: (214) 982-4449
Attention: Assistant Secretary
-3-
<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 to be hereunto duly affixed, all as of the day and the year first
above written.
CompUSA Inc.
By: /s/ Mark R. Walker
-----------------------------------
Name: Mark R. Walker
Title: S.R.V.P. - General Counsel
CompFinance Inc.
By: ___________________________________
Name: Joan Dobrzynski
Title: President
CompService Inc.
By: ___________________________________
Name: Joan Dobrzynski
Title: President
CompTeam Inc.
By: /s/ Mark R. Walker
-----------------------------------
Name: Mark R. Walker
Title: Vice President - Secretary
CompUSA Holdings II Inc.
By: /s/ Mark R. Walker
-----------------------------------
Name: Mark R. Walker
Title: Vice President - Secretary
<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 to be hereunto duly affixed, all as of the day and the year first
above written.
CompUSA Inc.
By: __________________________
Name:
Title:
CompFinance Inc.
By: /s/ Joan Dobreynski
--------------------------
Name: Joan Dobreynski
Title: President
CompService Inc.
By: /s/ Joan Dobreynski
--------------------------
Name:
Title:
CompTeam Inc.
By: __________________________
Name:
Title
CompUSA Holdings II Inc.
By: __________________________
Name:
Title:
<PAGE>
PCs Compleat, Inc.
By: /s/ Gordan B. Hoffstein
------------------------------------
Name: Gordan B. Hoffstein
Title: Chief Executive Officer
U.S. Trust Company of Texas, N.A.,
as Trustee
By: ____________________________________
Name:
Title:
<PAGE>
PCs Compleat, Inc.
By: _______________________________
Name:
Title:
U.S. Trust Company of Texas, N.A.,
as Trustee
By: John C. Stohlman
_______________________________
Name: John C. Stohlman
Title: Vice President
<PAGE>
EXHIBIT 4.8
CompUSA Inc.,
as Issuer,
CompFinance Inc.
CompService Inc.
CompTeam Inc.
CompUSA Holdings II Inc.
PCs Compleat, Inc.
CompUSA Holdings I Inc.
CompUSA Stores L.P.
CompUSA Holdings Company
and
CompUSA Management Company
as Guarantors,
and
U.S. TRUST COMPANY OF TEXAS, N.A.,
as Trustee
----------------------
FIFTH SUPPLEMENTAL INDENTURE
Dated as of June 14, 1996
----------------------
Supplement to Indenture dated as of June 17, 1993, among 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>
FIFTH SUPPLEMENTAL INDENTURE
----------------------------
FIFTH SUPPLEMENTAL INDENTURE, dated as of June 14, 1996, among CompUSA
Inc., a corporation duly organized and existing under the laws of the State of
Delaware (the "Issuer"), CompUSA Management Company and CompUSA Holdings
Company, both business trusts duly organized and existing under the laws of the
State of Delaware, CompUSA Stores L.P., a limited partnership duly organized and
existing under the laws of the State of Texas, and CompFinance Inc., CompService
Inc., CompTeam Inc., CompUSA Holdings II Inc., PCs Compleat, Inc., and CompUSA
Holdings I Inc., all corporations duly organized and existing under the laws of
the State of Delaware (collectively, 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 "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"); and
WHEREAS, Compudyne Products, Inc. and Compudyne Direct, Inc. have been
merged with and into the Issuer and are therefore no longer in existence; and
WHEREAS, the Issuer, CompFinance Inc., CompService Inc. and CompTeam Inc.
heretofore executed and delivered to the Trustee the First Supplemental
Indenture dated as of December 1, 1995, by which CompTeam Inc. was added as a
Guarantor of the Indenture; and
WHEREAS, the Issuer, CompFinance Inc., CompService Inc., CompTeam Inc. and
CompUSA Holdings II Inc. heretofore executed and delivered to the Trustee the
Second Supplemental Indenture dated as of February 7, 1996, by which CompUSA
Holdings II Inc. was added as a Guarantor of the Indenture; and
WHEREAS, the Issuer, CompFinance Inc., CompService Inc., CompTeam Inc.,
CompUSA Holdings II Inc. and Snowstorm Merger Corp. heretofore executed and
delivered to the Trustee the Third Supplemental Indenture dated as of May 14,
1996, by which Snowstorm Merger Corp. was added as a Guarantor of the Indenture;
and
WHEREAS, Snowstorm Merger Corp. has been merged with and into PCs Compleat,
Inc. and is therefore no longer in existence; and
WHEREAS, the Issuer, CompFinance Inc., CompService Inc., CompTeam Inc.,
CompUSA Holdings II Inc. and PCs Compleat, Inc. heretofore executed and
delivered to the Trustee the Fourth Supplemental Indenture dated as of May 30,
1996, by which PCs Compleat, Inc. was added as a Guarantor of the Indenture; and
<PAGE>
WHEREAS, CompUSA Holdings I Inc., CompUSA Management Company, CompUSA
Stores L.P. and CompUSA Holdings Company are newly formed, wholly owned
subsidiaries of the Issuer and wish to guarantee the Issuer's obligations with
respect to the Securities; and
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; and
WHEREAS, CompUSA Holdings I Inc., CompUSA Management Company, CompUSA
Stores L.P. and CompUSA Holdings Company desire in and by this Fifth
Supplemental Indenture to guarantee the obligation of the Issuer to pay the
principal and interest on the Securities; and
WHEREAS, all conditions necessary to authorize the execution and delivery
of this Fifth Supplemental Indenture and to make this Fifth 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 Fifth
------------
Supplemental Indenture, except as otherwise expressly provided or unless the
context otherwise requires:
(a) the words "herein", "hereof" and "hereunder" and other words of similar
import refer to the Indenture and this Fifth 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:
-3-
<PAGE>
"Guarantor" means each of CompFinance Inc., CompService Inc., CompTeam
Inc., CompUSA Holdings II Inc., PCs Compleat, Inc., CompUSA Holdings I
Inc., CompUSA Management Company, CompUSA Stores L.P., CompUSA
Holdings Company 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. CompUSA Holdings I Inc., CompUSA Management Company, CompUSA
------------
Stores L.P. and CompUSA Holdings Company hereby agree to be bound by all of the
terms and conditions of the Indenture as Guarantors and to execute such
documents, including without limitation a written Guarantee, as shall be
necessary to evidence their status as Guarantors. CompUSA Holdings I Inc.'s
obligations undertaken pursuant to this Fifth Supplemental Indenture shall be
effective as of February 7, 1996. CompUSA Management Company's obligations
undertaken pursuant to this Fifth Supplemental Indenture shall be effective as
of May 31, 1996. CompUSA Stores L.P.'s obligations undertaken pursuant to this
Fifth Supplemental Indenture shall be effective as of June 3, 1996. CompUSA
Holdings Company's obligations undertaken pursuant to this Fifth Supplemental
Indenture shall be effective as of June 14, 1996.
ARTICLE THREE
MISCELLANEOUS
Section 3.01. Except as amended by the First Supplemental Indenture, the
------------
Second Supplemental Indenture, the Third Supplemental Indenture, the Fourth
Supplemental Indenture and this Fifth Supplemental Indenture, the Indenture
remains in full force and effect in accordance with its terms.
Section 3.02. The Trustee accepts the modification of the Indenture
------------
effected by this Fifth 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 Fifth Supplemental Indenture.
Section 3.03. In case any provision in this Fifth Supplemental Indenture
------------
shall be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions of this Fifth Supplemental Indenture
or the Indenture shall not in any way be affected or impaired thereby.
Section 3.04. This Fifth Supplemental Indenture shall be governed by and
------------
construed in accordance with the laws of the jurisdiction which governs the
Indenture and its construction.
Section 3.05. This Fifth 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.
-4-
<PAGE>
Section 3.06. The addresses for any notice or communication to CompUSA
------------
Holdings I Inc., CompUSA Management Company, CompUSA Holdings Company and
CompUSA Stores L.P. are:
CompUSA Holdings I Inc.
14951 North Dallas Parkway
Dallas, Texas 75240
Attention: President
CompUSA Management Company
14951 North Dallas Parkway
Dallas, Texas 75240
Attention: President
CompUSA Holdings Company
14951 North Dallas Parkway
Dallas, Texas 75240
Attention: President
CompUSA Stores L.P.
14951 North Dallas Parkway
Dallas, Texas 75240
Attention: President of General Partner
-5-
<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:
--------------------------------
Name: Robyn Gatch-Priest
Attest: Title: Vice President-Controller
and Assistant Treasurer
- -------------------------------
CompFinance Inc.
[SEAL]
By:
--------------------------------
Name: Joan Dobrynski
Attest: Title: President
- -------------------------------
CompService Inc.
[SEAL]
By:
--------------------------------
Name: Joan Dobrynski
Attest: Title: President
- -------------------------------
CompTeam Inc.
[SEAL]
By:
--------------------------------
Name: Melvin D. McCall
Attest: Title: Senior Vice President-
Human Resources
- -------------------------------
-6-
<PAGE>
CompUSA Holdings II Inc.
[SEAL]
By:
--------------------------------
Name: Melvin D. McCall
Attest: Title: Senior Vice President-
Human Resources
- -------------------------------
PCs Compleat, Inc.
[SEAL]
By:
--------------------------------
Name: Mark R. Walker
Attest: Title: Vice President-
Asst-Secretary
- -------------------------------
CompUSA Holdings I Inc.
[SEAL]
By:
--------------------------------
Name: Melvin D. McCall
Attest: Title: Senior Vice President-
Human Resources
- -------------------------------
CompUSA Management Company
[SEAL]
By:
--------------------------------
Name: James E. Skinner
Attest: Title: Executive Vice President-
Finance and Treasurer
- -------------------------------
-7-
<PAGE>
CompUSA Stores L.P.
[SEAL] By: CompUSA Inc., General Partner
By:
--------------------------------
Name: Harold F. Compton
Attest: Title: Executive Vice President
and Chief Operating Officer
- -------------------------------
CompUSA Holdings Company
[SEAL]
By:
--------------------------------
Name: James F. Halpin
Attest: Title: President
- -------------------------------
U.S. Trust Company of Texas, N.A.
[SEAL]
By:
--------------------------------
Name:
Attest: Title:
- -------------------------------
-8-
<PAGE>
Exhibit 4.9
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 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
<PAGE>
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.
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
<PAGE>
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>
SUBSIDIARY GUARANTEE
CompUSA Holdings II 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 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
<PAGE>
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.
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
<PAGE>
obligations under the Subsidiary Guarantee without any action required on the
part of the Trustee or any Securityholder.
CompUSA Holdings II Inc.
By: /s/ James E Skinner
-----------------------------------
Its: Executive Vice President - Finance
-----------------------------------
<PAGE>
SUBSIDIARY GUARANTEE
PCs Compleat, Inc., a Delaware corporation ("Guarantor"), hereby
executes this SUBSIDIARY GUARANTEE (this "Subsidiary Guarantee"), dated as of
May 30, 1996, 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
subsidiar ies (collectively, with the Guarantor, the "Guarantors") and U.S.
TRUST COMPANY OF TEXAS, N.A., as Trustee (the "Trustee"). Capi talized 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 Securi ties 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 under the Indenture and the Securities 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 matu
rity, 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, present ment, 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
<PAGE>
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 rein
stated 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 payment in full of all
obligations guaranteed hereby. The Guarantor further agrees that, as between the
Guar antors, 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 Inden ture for the purposes of this
Subsidiary Guarantee, notwithstand ing 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 obli gations
(whether or not due and payable) shall forthwith become due and payable by the
Guarantors for the purpose of this Subsid iary Guarantee. The Guarantor shall
have the right to seek con tribution 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 Subsid iary 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 the Subsidiary Guarantee not
constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy
Law, the Uniform Fraud ulent Conveyance Act, the Uniform Fraudulent Transfer Act
or any similar federal or state law. To effectuate the foregoing inten tion, the
Guarantor hereby irrevocably agrees that the obliga tions of such Guarantor
under the Subsidiary Guarantee shall be limited to the maximum amount as will,
after giving effect to all other contingent and fixed liabilities of the
Guarantor and 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.
2
<PAGE>
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 sub ject 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.
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.
3
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Subsidiary
Guaranty as of the date first written above.
PCs COMPLEAT, INC.
By: /s/ Gordon B Hoffstein
-------------------------------------
Name: Gordon B. Hoffstein
Title: Chief Executive Officer
<PAGE>
SUBSIDIARY GUARANTEE
CompUSA Holdings I 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 under the Indenture and the Securities 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 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
<PAGE>
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 all other contingent and fixed liabilities of the Guarantor and
after giving effect to any collection 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.
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
-2-
<PAGE>
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.
EXECUTED as of the 7th day of February, 1996.
CompUSA Holdings I Inc.
By: /s/ Melvin D. McCall
--------------------------------
Name: Melvin D. McCall
Title Senior Vice President-
Human Resources
-3-
<PAGE>
SUBSIDIARY GUARANTEE
CompUSA Management Company, a Delaware business trust ("Guarantor"), hereby
executes this Subsidiary Guarantee (this "Subsidiary Guarantee") on behalf of
its sole shareholder, CompUSA Inc., a Delaware corporation, in connection with
that certain Indenture (the "Indenture") dated as of June 17, 1993, among
CompUSA Inc., a Delaware corporation (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 under the Indenture and the Securities 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 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
<PAGE>
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 all other contingent and fixed liabilities of the Guarantor and
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 or trustee, 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 or trustee.
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.
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
<PAGE>
obligations under the Subsidiary Guarantee without any action required on the
part of the Trustee or any Securityholder.
Executed as of the 31st day of May, 1996.
CompUSA Management Company
By: /s/ James E. Skinner
--------------------------
Name: James E. Skinner
Title: Executive Vice President-
Finance and Treasurer
<PAGE>
SUBSIDIARY GUARANTEE
CompUSA Stores L.P., a Texas limited partnership ("Guarantor"), hereby
executes this Subsidiary Guarantee (this "Subsidiary Guarantee") on behalf of
its general partner, CompUSA Inc., a Delaware Corporation, in connection with
that certain Indenture (the "Indenture") dated as of June 17, 1993, among
CompUSA Inc., a Delaware corporation (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 under the Indenture and the Securities 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 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
<PAGE>
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 all other contingent and fixed liabilities of the Guarantor and
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 limited partner, 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 limited partner.
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.
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
-2-
<PAGE>
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.
EXECUTED as of the 3rd day of June, 1996.
CompUSA Stores L.P.
By: CompUSA Inc., General Partner
By: /s/ Harold F. Compton
--------------------------------
Name: Harold F. Compton
Title: Executive Vice President
and Chief Operating Officer
-3-
<PAGE>
SUBSIDIARY GUARANTEE
CompUSA Holdings Company, a Delaware business trust ("Guarantor"),
hereby executes this Subsidiary Guarantee (this "Subsidiary Guarantee") on
behalf of its sole shareholder, CompUSA Inc., a Delaware corporation, in
connection with that certain Indenture (the "Indenture") dated as of June 17,
1993, among CompUSA Inc., a Delaware corporation (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 under the Indenture and the Securities 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 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
<PAGE>
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 all other contingent and fixed liabilities of the Guarantor and
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 or trustee, 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 or
trustee.
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.
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
-2-
<PAGE>
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.
EXECUTED as of the 14th day of June, 1996.
CompUSA Holdings Company
By: /s/ James F. Halpin
----------------------
Name: James F. Halpin
Title: President
-3-
<PAGE>
Exhibit 4.12
[COMPUSA INC. LETTERHEAD APPEARS HERE]
August 16, 1996
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Attn: Susan Silber
Re: Rights Agreement
Ladies and Gentlemen:
This is to inform you that, pursuant to Section 21 of the Rights Agreement
between CompUSA Inc. (the "Company") and Bank One, Texas, N.A., dated as of
April 29, 1994 (the "Rights Agreement"), the Company hereby appoints American
Stock Transfer & Trust Company to serve as successor Rights Agent in replacement
of and substitution for First Interstate Bank of Texas, N.A. (which succeeded
Bank One, Texas, N.A., as Rights Agent on November 1, 1995), effective as of
August 19, 1996. The address set forth above shall be substituted as the
address for notice to you pursuant to Section 26 of the Rights Agreement. If
you agree to such appointment and further agree to be bound by and perform in
accordance with the terms and provisions of the Rights Agreement, please so
signify by executing a copy of this letter in the space provided below.
Very truly yours,
CompUSA Inc.
By: /s/ Mark R. Walker
----------------------
Title: SR. V.P.-General Counsel
--------------------------
By its execution hereof, the undersigned hereby accepts appointment as of
the date of this letter as Rights Agent pursuant to the Rights Agreement, and
agrees that the undersigned is vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent thereunder.
American Stock Transfer & Trust Company
By: Herbert J. Lemmer
-----------------------------------
Title: /s/ Herbert J Lemmer
--------------------------------
VICE 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
1. 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.
2. 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").
3. On December 1, 1995, the Company formed CompTeam, a wholly-owned
Subsidiary of the Company.
4. Section 7.3(d) of the Credit Agreement requires that CompTeam
immediately become a party to the Subsidiary Guaranty.
5. 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:
1. 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.
2. 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.
3. 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.
4. 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.
- 2 -
<PAGE>
(b) The Subsidiary Guaranty, as affected hereby, shall remain in full
fore and effect and is hereby ratified and confirmed.
5. 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).
6. 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.
7. 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.
8. 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
================================================================================
- 3 -
<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
---------------
- 4 -
<PAGE>
AGREEMENT AND ADOPTION OF SUBSIDIARY GUARANTY
THIS AGREEMENT AND ADOPTION OF SUBSIDIARY GUARANTY (this "Agreement"),
dated as of February 7, 1996 is executed by CompUSA Holdings II Inc., a Delaware
corporation ("Holdings"), in favor of the Administrative Lender and the Lenders
(each as defined in the Credit Agreement referred to below).
BACKGROUND
1. 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.
2. CompFinance Inc., a Delaware corporation ("CompFinance"), and
CompService Inc., a Delaware corporation ("CompService"), entered into that
certain Subsidiary Guaranty, dated as June 16, 1995 (the "Subsidiary Guaranty").
On December 1, 1995, the Company formed CompTeam Inc., a Delaware corporation
("CompTeam"), a wholly-owned Subsidiary of the Company, and CompTeam immediately
became a party to the Subsidiary Guaranty (CompFinance, CompService and CompTeam
being collectively the "Existing Guarantors").
3. On February 7, 1996, the Company formed Holdings, a wholly-owned
subsidiary of the Company.
4. Section 7.3(d) of the Credit Agreement requires that Holdings
immediately become a party to the Subsidiary Guaranty.
5. The Board of Directors of Holdings 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, Holdings.
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:
1. Agreement. Holdings 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.
2. Representations and Warranties. By its execution and delivery hereof,
------------------------------
Holdings represents and warrants to the Lenders as follows:
<PAGE>
(a) The execution, delivery and performance by Holdings of this
Agreement and each other document and instrument to be delivered hereunder:
(i) are within Holdings'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 Holdings;
(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 Holdings.
(c) This Agreement is the legal, valid and binding obligation of
Holdings, enforceable against Holdings in accordance with its terms, except
as enforceability may be limited by applicable Debtor Relief Laws and
general principles of equity.
3. 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 Holdings and acknowledged by the Existing
Guarantors;
(b) The Administrative Lender shall have received an Officer's
Certificate of Holdings, containing (i) the Certificate of Incorporation of
Holdings, (ii) bylaws of Holdings, (iii) certified corporate resolutions of
the Board of Directors of Holdings authorizing Holdings to enter into this
Agreement and the documents, transactions and matters contemplated hereby,
and (iv) the names and true signatures of the officers of Holdings
authorized to execute and deliver this Agreement on behalf of Holdings.
(c) The Administrative Lender shall have received an executed copy of
the Agreement and Adoption of Subordination Agreement executed by all
parties thereto.
- 2 -
<PAGE>
4. 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.
5. Costs, Expenses and Taxes. Holdings 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).
6. 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.
7. 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.
8. 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
================================================================================
- 3 -
<PAGE>
IN WITNESS WHEREOF, Holdings has caused this Agreement to be duly executed
and delivered by its duly authorized officer on the date first above written.
COMPUSA HOLDINGS II INC.
By: James E. Skinner
---------------------------------------------
Name: James E. Skinner
----------------------------------------
Title: Executive Vice President of Finance
---------------------------------------
Address for CompUSA Holdings II Inc.:
c/o CompUSA Inc.
14951 North Dallas Parkway
Dallas, Texas 75240
Attention: James E. Skinner
Executive Vice President-Finance
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:
_______________________________
Name:
__________________________
Title:
_________________________
COMPSERVICE INC.
By:
_______________________________
Name:
__________________________
Title:
_________________________
- 4 -
<PAGE>
IN WITNESS WHEREOF, Holdings has caused this Agreement to be duly executed
and delivered by its duly authorized officer on the date first above written.
COMPUSA HOLDINGS II INC.
By:
____________________________
Name:
____________________________
Title:
____________________________
Address for CompUSA Holdings II Inc.:
c/o CompUSA Inc.
14951 North Dallas Parkway
Dallas, Texas 75240
Attention: James E. Skinner
Executive Vice President-Finance
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
-------------------------
- 4 -
<PAGE>
COMPTEAM INC.
By:/s/ Mark R. Walker
-------------------------------
Name: Mark Walker
------------------------
Title: V.P. Secretary
-----------------------
- 5 -
<PAGE>
AGREEMENT AND ADOPTION OF SUBSIDIARY GUARANTY
THIS AGREEMENT AND ADOPTION OF SUBSIDIARY GUARANTY (this "Agreement"),
dated as of May 30, 1996 is executed by PCs COMPLEAT, INC., a Delaware
corporation ("Compleat"), in favor of the Administrative Lender and the Lenders
(each as defined in the Credit Agreement referred to below).
BACKGROUND
1. 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.
2. CompFinance Inc., a Delaware corporation ("CompFinance"), and
CompService Inc., a Delaware corporation ("CompService"), entered into that
certain Subsidiary Guaranty, dated as June 16, 1995 (the "Subsidiary Guaranty").
On December 1, 1995, the Company formed CompTeam Inc., a Delaware corporation
("CompTeam"), a wholly-owned Subsidiary of the Company, and CompTeam immediately
became a party to the Subsidiary Guaranty. On February 7, 1996, the Company
formed CompUSA Holdings II Inc., a Delaware corporation ("Holdings II") and a
wholly-owned Subsidiary of the Company, and Holdings II immediately became a
party to the Subsidiary Guaranty (CompFinance, CompService, CompTeam and
Holdings II being collectively the "Existing Guarantors").
3. On May 30, 1996, Compleat became a wholly-owned Subsidiary of the
Company.
4. Section 7.3(d) of the Credit Agreement requires that Compleat
immediately become a party to the Subsidiary Guaranty.
5. The Board of Directors of Compleat 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, Compleat.
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:
1. Agreement. Compleat 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.
<PAGE>
2. Representations and Warranties. By its execution and delivery hereof,
------------------------------
Compleat represents and warrants to the Lenders as follows:
(a) The execution, delivery and performance by Compleat of this
Agreement and each other document and instrument to be delivered hereunder:
(i) are within Compleat'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
Compleat;
(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 Compleat.
(c) This Agreement is the legal, valid and binding obligation of
Compleat, enforceable against Compleat in accordance with its terms, except
as enforceability may be limited by applicable Debtor Relief Laws and
general principles of equity.
3. 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 Compleat and acknowledged by the Existing
Guarantors;
(b) The Administrative Lender shall have received an Officer's
Certificate of Compleat, containing (i) the Certificate of Incorporation of
Compleat, (ii) bylaws of Compleat, (iii) certified corporate resolutions of
the Board of Directors of Compleat authorizing Compleat to enter into this
Agreement and the documents, transactions and matters contemplated hereby,
and (iv) the names and true signatures of the officers of Compleat
authorized to execute and deliver this Agreement on behalf of Compleat.
(c) The Administrative Lender shall have received an executed copy of
the Agreement and Adoption of Subordination Agreement executed by all
parties thereto.
- 2 -
<PAGE>
4. 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.
5. Costs, Expenses and Taxes. Compleat 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).
6. 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.
7. 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.
8. 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
===============================================================================
- 3 -
<PAGE>
IN WITNESS WHEREOF, Compleat has caused this Agreement to be duly executed
and delivered by its duly authorized officer on the date first above written.
PCS COMPLEAT, INC.
By: /s/ Gordon B. Hoffstein
-----------------------------
Name: Gordon B. Hoffstein
------------------------
Title: Chief Executive Officer
------------------------
Address for PCs Compleat, Inc.
c/o CompUSA Inc.
14951 North Dallas Parkway
Dallas, Texas 75240
Attention: James E. Skinner
Executive Vice President-Finance
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: __________________________
Name:_____________________
Title:____________________
COMPSERVICE INC.
By:____________________________
Name:_____________________
Title:____________________
- 4 -
<PAGE>
IN WITNESS WHEREOF, Compleat has caused this Agreement to be duly executed
and delivered by its duly authorized officer on the date first above written.
PCS COMPLEAT, INC.
By: ________________________
Name:___________________
Title:__________________
Address for PCs Compleat, Inc.
c/o CompUSA Inc.
14951 North Dallas Parkway
Dallas, Texas 75240
Attention: James E. Skinner
Executive Vice President-Finance
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 L. DOBROZYNSKI
--------------------------
Name: JOAN L. DOBROZYNSKI
---------------------
Title: PRESIDENT
--------------------
COMPSERVICE INC.
By: /s/ JOAN L. DOBROZYNSKI
--------------------------
Name: JOAN L. DOBROZYNSKI
---------------------
Title: PRESIDENT
--------------------
- 4 -
<PAGE>
COMPTEAM INC.
By: /s/ Mark R. Walker
--------------------------
Name: Mark R. Walker
---------------------
Title: Vice President-Secretary
--------------------
COMPUSA HOLDINGS II INC.
By: /s/ Mark R. Walker
---------------------------
Name: Mark R. Walker
--------------------
Title: Vice President- Secretary
--------------------
- 5 -
<PAGE>
AGREEMENT AND ADOPTION OF SUBSIDIARY GUARANTY
THIS AGREEMENT AND ADOPTION OF SUBSIDIARY GUARANTY (this "Agreement"),
dated as of February 7, 1996 is executed by CompUSA Holdings I Inc., a Delaware
corporation ("Holdings"), in favor of the Administrative Lender and the Lenders
(each as defined in the Credit Agreement referred to below).
BACKGROUND
1. 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.
2. CompFinance Inc., a Delaware corporation ("CompFinance"), and
CompService Inc., a Delaware corporation ("CompService"), entered into that
certain Subsidiary Guaranty, dated as June 16, 1995 (the "Subsidiary Guaranty").
On December 1, 1995, the Company formed CompTeam Inc., a Delaware corporation
("CompTeam"), a wholly-owned Subsidiary of the Company, and CompTeam immediately
became a party to the Subsidiary Guaranty (CompFinance, CompService and CompTeam
being collectively the "Existing Guarantors").
3. On February 7, 1996, the Company formed Holdings, a wholly-owned
subsidiary of the Company.
4. Section 7.3(d) of the Credit Agreement requires that Holdings
immediately become a party to the Subsidiary Guaranty.
5. The Board of Directors of Holdings 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, Holdings.
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:
1. Agreement. Holdings 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.
2. Representations and Warranties. By its execution and delivery hereof,
------------------------------
Holdings represents and warrants to the Lenders as follows:
<PAGE>
(a) The execution, delivery and performance by Holdings of this
Agreement and each other document and instrument to be delivered hereunder:
(i) are within Holdings'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
Holdings;
(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 Holdings.
(c) This Agreement is the legal, valid and binding obligation of
Holdings, enforceable against Holdings in accordance with its terms, except
as enforceability may be limited by applicable Debtor Relief Laws and
general principles of equity.
3. 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 Holdings and acknowledged by the Existing
Guarantors;
(b) The Administrative Lender shall have received an Officer's
Certificate of Holdings, containing (i) the Certificate of Incorporation of
Holdings, (ii) bylaws of Holdings, (iii) certified corporate resolutions of
the Board of Directors of Holdings authorizing Holdings to enter into this
Agreement and the documents, transactions and matters contemplated hereby,
and (iv) the names and true signatures of the officers of Holdings
authorized to execute and deliver this Agreement on behalf of Holdings.
(c) The Administrative Lender shall have received an executed copy of
the Agreement and Adoption of Subordination Agreement executed by all
parties thereto.
- 2 -
<PAGE>
4. 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.
5. Costs, Expenses and Taxes. Holdings 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).
6. 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.
7. 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.
8. 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
================================================================================
- 3 -
<PAGE>
IN WITNESS WHEREOF, Holdings has caused this Agreement to be duly executed
and delivered by its duly authorized officer on the date first above written.
COMPUSA HOLDINGS I INC.
By: _______________________________
Name:__________________________
Title:_________________________
Address for CompUSA Holdings I Inc.:
c/o CompUSA Inc.
14951 North Dallas Parkway
Dallas, Texas 75240
Attention: James E. Skinner
Executive Vice President-Finance
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: ________________________________
Name:___________________________
Title:__________________________
COMPSERVICE INC.
By: ________________________________
Name:___________________________
Title:__________________________
- 4 -
<PAGE>
COMPTEAM INC.
By: ________________________________
Name:___________________________
Title:__________________________
- 5 -
<PAGE>
AGREEMENT AND ADOPTION OF SUBSIDIARY GUARANTY
THIS AGREEMENT AND ADOPTION OF SUBSIDIARY GUARANTY (this "Agreement"),
dated as of May 31, 1996 is executed by CompUSA Management Company, a Delaware
business trust ("Management"), in favor of the Administrative Lender and the
Lenders (each as defined in the Credit Agreement referred to below).
BACKGROUND
1. 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.
2. CompFinance Inc., a Delaware corporation ("CompFinance"), and
CompService Inc., a Delaware corporation ("CompService"), entered into that
certain Subsidiary Guaranty, dated as June 16, 1995 (the "Subsidiary Guaranty").
On December 1, 1995, the Company formed CompTeam Inc., a Delaware corporation
("CompTeam"), a wholly-owned Subsidiary of the Company, and CompTeam immediately
became a party to the Subsidiary Guaranty. On February 7, 1996, the Company
formed CompUSA Holdings I Inc., a Delaware corporation ("Holdings I") and a
wholly-owned Subsidiary of the Company, and CompUSA Holdings II Inc., a Delaware
corporation ("Holdings II") and a wholly-owned Subsidiary of the Company, and
each of which immediately became a party to the Subsidiary Guaranty. On May 30,
1996, PCs Compleat, Inc., a Delaware corporation ("Compleat"), became a wholly-
owned Subsidiary of the Company, and Compleat immediately became a party to the
Subsidiary Guaranty (CompFinance, CompService, CompTeam, Holdings I, Holdings II
and Compleat being collectively the "Existing Guarantors").
3. On May 31, 1996, the Company formed Management, a wholly-owned
subsidiary of the Company.
4. Section 7.3(d) of the Credit Agreement requires that Management
immediately become a party to the Subsidiary Guaranty.
5. The Regular Trustees of Management have 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, Management.
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:
<PAGE>
1. Agreement. Management 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.
2. Representations and Warranties. By its execution and delivery hereof,
------------------------------
Management represents and warrants to the Lenders as follows:
(a) The execution, delivery and performance by Management of this
Agreement and each other document and instrument to be delivered hereunder:
(i) are within Management'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
Management;
(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
Management.
(c) This Agreement is the legal, valid and binding obligation of
Management, enforceable against Management in accordance with its terms,
except as enforceability may be limited by applicable Debtor Relief Laws
and general principles of equity.
3. 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 Management and acknowledged by the Existing
Guarantors;
(b) The Administrative Lender shall have received a Certificate of
Management, containing (i) a copy of the Certificate of Trust of
Management, (ii) a copy of the Agreement and Declaration of Trust, and
(iii) the names and true signatures of the Regular Trustees of Management
authorized to execute and deliver this Agreement on behalf of Management.
-2-
<PAGE>
(c) The Administrative Lender shall have received an executed copy of
the Agreement and Adoption of Subordination Agreement executed by all
parties thereto.
4. 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.
5. Costs, Expenses and Taxes. Management 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).
6. 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.
7. 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.
8. 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
================================================================================
-3-
<PAGE>
IN WITNESS WHEREOF, Management has caused this Agreement to be duly
executed and delivered by its duly authorized officer on the date first above
written.
COMPUSA MANAGEMENT COMPANY
By: _______________________
James E. Skinner
Executive Vice President-Finance
and Treasurer
Address for CompUSA Management Company:
c/o CompUSA Inc.
14951 North Dallas Parkway
Dallas, Texas 75240
Attention: James E. Skinner
Executive Vice President-Finance
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: _______________________________
Name:__________________________
Title:_________________________
COMPSERVICE INC.
By: _______________________________
Name:__________________________
Title:_________________________
-4-
<PAGE>
COMPTEAM INC.
By: ________________________________
Melvin D. McCall
Senior Vice President-Human Resources
COMPUSA HOLDINGS I INC.
By: ________________________________
Melvin D. McCall
Senior Vice President-Human Resources
COMPUSA HOLDINGS II INC.
By: ________________________________
Melvin D. McCall
Senior Vice President-Human Resources
PCs COMPLEAT, INC.
By: ________________________________
Name:___________________________
Title:__________________________
-5-
<PAGE>
AGREEMENT AND ADOPTION OF SUBSIDIARY GUARANTY
THIS AGREEMENT AND ADOPTION OF SUBSIDIARY GUARANTY (this "Agreement"),
dated as of June 3, 1996 is executed by CompUSA Stores L.P., a Texas limited
partnership ("Stores"), in favor of the Administrative Lender and the Lenders
(each as defined in the Credit Agreement referred to below).
BACKGROUND
1. 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.
2. CompFinance Inc., a Delaware corporation ("CompFinance"), and
CompService Inc., a Delaware corporation ("CompService"), entered into that
certain Subsidiary Guaranty, dated as June 16, 1995 (the "Subsidiary Guaranty").
On December 1, 1995, the Company formed CompTeam Inc., a Delaware corporation
("CompTeam"), a wholly-owned Subsidiary of the Company, and CompTeam immediately
became a party to the Subsidiary Guaranty. On February 7, 1996, the Company
formed CompUSA Holdings I Inc., a Delaware corporation ("Holdings I") and a
wholly-owned Subsidiary of the Company, and CompUSA Holdings II Inc., a Delaware
corporation ("Holdings II") and a wholly-owned Subsidiary of the Company, and
each of which immediately became a party to the Subsidiary Guaranty. On May 30,
1996, PCs Compleat, Inc., a Delaware corporation ("Compleat"), became a wholly-
owned Subsidiary of the Company, and Compleat immediately became a party to the
Subsidiary Guaranty. On May 31, 1996, the Company formed CompUSA Management
Company, a Delaware business trust ("Management") and a wholly-owned Subsidiary
of the Company, and Management immediately became a party to the Subsidiary
Guaranty (CompFinance, CompService, CompTeam, Holdings I, Holdings II, Compleat
and Management being collectively the "Existing Guarantors").
3. On June 3, 1996, the Company and Holdings I formed Stores. The Company
is a 1% general partner of Stores and Holdings I is a 99% limited partner of
Stores.
4. Section 7.3(d) of the Credit Agreement requires that Stores
immediately become a party to the Subsidiary Guaranty.
5. The Board of Directors of the Company and Holdings I have 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, Stores.
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:
<PAGE>
1. Agreement. Stores 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.
2. Representations and Warranties. By its execution and delivery hereof,
------------------------------
Stores represents and warrants to the Lenders as follows:
(a) The execution, delivery and performance by Stores of this
Agreement and each other document and instrument to be delivered hereunder:
(i) are within Stores'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 Stores;
(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 Stores.
(c) This Agreement is the legal, valid and binding obligation of
Stores, enforceable against Stores in accordance with its terms, except as
enforceability may be limited by applicable Debtor Relief Laws and general
principles of equity.
3. 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 Stores and acknowledged by the Existing Guarantors;
(b) The Administrative Lender shall have received a Certificate of
the Company, in its capacity as general partner of Stores, containing (i) a copy
of the Certificate of Limited Partnership of Stores, (ii) a copy of the
Agreement of Limited Partnership of Stores, and (iii) the names and true
signatures of the officers of the Company authorized to execute and deliver this
Agreement on behalf of Stores.
- 2 -
<PAGE>
(c) The Administrative Lender shall have received an executed copy of
the Agreement and Adoption of Subordination Agreement executed by all
parties thereto.
4. 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.
5. Costs, Expenses and Taxes. Stores 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).
6. 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.
7. 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.
8. 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
================================================================================
- 3 -
<PAGE>
IN WITNESS WHEREOF, Stores has caused this Agreement to be duly executed
and delivered by its duly authorized officer on the date first above written.
COMPUSA STORES L.P.
By: COMPUSA INC., its general partner
By: ____________________________
Harold F. Compton
Executive Vice President and
Chief Operating Officer
Address for CompUSA Stores L.P.
c/o CompUSA Inc.
14951 North Dallas Parkway
Dallas, Texas 75240
Attention: James E. Skinner
Executive Vice President-Finance
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: ____________________________
Name:_______________________
Title:______________________
COMPSERVICE INC.
By: ____________________________
Name:_______________________
Title:______________________
- 4 -
<PAGE>
COMPTEAM INC.
By: ________________________________
Melvin D. McCall
Senior Vice President-Human Resources
COMPUSA HOLDINGS I INC.
By: ________________________________
Melvin D. McCall
Senior Vice President-Human Resources
COMPUSA HOLDINGS II INC.
By: ________________________________
Melvin D. McCall
Senior Vice President-Human Resources
PCs COMPLEAT, INC.
By: ________________________________
Name:___________________________
Title:__________________________
COMPUSA MANAGEMENT COMPANY
By: ________________________________
James E. Skinner
Executive Vice President-Finance
and Treasurer
- 5 -
<PAGE>
AGREEMENT AND ADOPTION OF SUBSIDIARY GUARANTY
THIS AGREEMENT AND ADOPTION OF SUBSIDIARY GUARANTY (this "Agreement"),
dated as of June 14, 1996 is executed by CompUSA Holdings Company, a Delaware
business trust ("Holdings"), in favor of the Administrative Lender and the
Lenders (each as defined in the Credit Agreement referred to below).
BACKGROUND
1. 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.
2. CompFinance Inc., a Delaware corporation ("CompFinance"), and
CompService Inc., a Delaware corporation ("CompService"), entered into that
certain Subsidiary Guaranty, dated as June 16, 1995 (the "Subsidiary Guaranty").
On December 1, 1995, the Company formed CompTeam Inc., a Delaware corporation
("CompTeam"), a wholly-owned Subsidiary of the Company, and CompTeam immediately
became a party to the Subsidiary Guaranty. On February 7, 1996, the Company
formed CompUSA Holdings I Inc., a Delaware corporation ("Holdings I") and a
wholly-owned Subsidiary of the Company, and CompUSA Holdings II Inc., a Delaware
corporation ("Holdings II") and a wholly-owned Subsidiary of the Company, and
each of which immediately became a party to the Subsidiary Guaranty. On May 30,
1996, PCs Compleat, Inc., a Delaware corporation ("Compleat"), became a wholly-
owned Subsidiary of the Company, and Compleat immediately became a party to the
Subsidiary Guaranty. On May 31, 1996, the Company formed CompUSA Management
Company, a Delaware business trust ("Management") and a wholly-owned Subsidiary
of the Company, and Management immediately became a party to the Subsidiary
Guaranty. On June 3, 1996, the Company formed CompUSA Stores L.P., a Texas
limited partnership ("Stores") and a wholly-owned Subsidiary of the Company, and
Stores immediately became a party to the Subsidiary Guaranty (CompFinance,
CompService, CompTeam, Holdings I, Holdings II, Compleat, Management and Stores
being collectively the "Existing Guarantors").
3. On June 14, 1996, the Company formed Holdings, a wholly-owned
subsidiary of the Company.
4. Section 7.3(d) of the Credit Agreement requires that Holdings
immediately become a party to the Subsidiary Guaranty.
5. The Regular Trustees of Holdings have 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, Holdings.
<PAGE>
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:
1. Agreement. Holdings 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.
2. Representations and Warranties. By its execution and delivery hereof,
------------------------------
Holdings represents and warrants to the Lenders as follows:
(a) The execution, delivery and performance by Holdings of this
Agreement and each other document and instrument to be delivered hereunder:
(i) are within Holdings'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
Holdings;
(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 Holdings.
(c) This Agreement is the legal, valid and binding obligation of
Holdings, enforceable against Holdings in accordance with its terms, except
as enforceability may be limited by applicable Debtor Relief Laws and
general principles of equity.
3. 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 Holdings and acknowledged by the Existing
Guarantors;
(b) The Administrative Lender shall have received a Certificate of
Holdings, containing (i) a copy of the Certificate of Trust of Holdings,
(ii) a copy of the Agreement
-2-
<PAGE>
and Declaration of Trust, and (iii) the names and true signatures of the
Regular Trustees of Holdings authorized to execute and deliver this
Agreement on behalf of Holdings.
(c) The Administrative Lender shall have received an executed copy of
the Agreement and Adoption of Subordination Agreement executed by all
parties thereto.
4. 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.
5. Costs, Expenses and Taxes. Holdings 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).
6. 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.
7. 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.
8. 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
================================================================================
-3-
<PAGE>
IN WITNESS WHEREOF, Holdings has caused this Agreement to be duly executed
and delivered by its duly authorized officer on the date first above written.
COMPUSA HOLDINGS COMPANY
By: ____________________________
James F. Halpin
President
Address for CompUSA Holdings Company:
c/o CompUSA Inc.
14951 North Dallas Parkway
Dallas, Texas 75240
Attention: James E. Skinner
Executive Vice President-Finance
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: ________________________________
Name:___________________________
Title:__________________________
COMPSERVICE INC.
By: ________________________________
Name:___________________________
Title:__________________________
-4-
<PAGE>
COMPTEAM INC.
By: ________________________________
Melvin D. McCall
Senior Vice President-Human Resources
COMPUSA HOLDINGS I INC.
By: ________________________________
Melvin D. McCall
Senior Vice President-Human Resources
COMPUSA HOLDINGS II INC.
By: ________________________________
Melvin D. McCall
Senior Vice President-Human Resources
PCs COMPLEAT, INC.
By: ________________________________
Name:___________________________
Title:__________________________
COMPUSA MANAGEMENT COMPANY
By: ________________________________
James E. Skinner
Executive Vice President-Finance
and Treasurer
-5-
<PAGE>
COMPUSA STORES L.P.
By: COMPUSA INC., its General Partner
By: ______________________________
Harold F. Compton
Executive Vice President and Chief
Operating Officer
-6-
<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
1. 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.
2. 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").
3. On December 1, 1995, the Company formed CompTeam, a wholly-owned
Subsidiary of the Company.
4. Section 7.3(d) of the Credit Agreement requires that CompTeam
immediately become a party to the Subordination Agreement.
5. 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:
1. 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.
2. Representations and Warranties. By its execution and delivery hereof,
------------------------------
CompTeam represents and warrants to the Lenders as follows:
<PAGE>
(a) The execution, delivery and performance by CompTeam of this
Agreement and each other document and instrument to be delivered hereunder:
(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.
3. 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.
-2-
<PAGE>
4. 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.
5. 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).
6. 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.
7. 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.
8. 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
================================================================================
-3-
<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
-----------------
-4-
<PAGE>
CONSENTED AND AGREED TO:
COMPUSA INC.
By: /s/ James E. Skinner
-------------------------------
Name: James E. Skinner
--------------------------
Title: Executive Vice President
-------------------------
-5-
<PAGE>
AGREEMENT AND ADOPTION OF SUBORDINATION AGREEMENT
THIS AGREEMENT AND ADOPTION OF SUBORDINATION AGREEMENT (this "Agreement"),
dated as of February 7, 1996, is executed by CompUSA Holdings II Inc., a
Delaware corporation ("Holdings"), in favor of the Administrative Lender and the
Lenders (each as defined in the Credit Agreement referred to below).
BACKGROUND
1. 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.
2. CompFinance Inc., a Delaware corporation ("CompFinance"), CompService
Inc., a Delaware corporation ("CompService"), and the Administrative Lender for
the Lenders entered into that certain Subordination Agreement, dated as June 16,
1995 (the "Subordination Agreement"). On December 1, 1995, the Company formed
CompTeam Inc., a Delaware corporation ("CompTeam") and a wholly-owned Subsidiary
of the Company, and CompTeam immediately became a party to the Subordination
Agreement (CompFinance, CompService and CompTeam being collectively the
"Existing Subordinate Creditors").
3. On February 7, 1996, the Company formed Holdings, a wholly-owned
Subsidiary of the Company.
4. Section 7.3(d) of the Credit Agreement requires that Holdings
immediately become a party to the Subordination Agreement.
5. The Board of Directors of Holdings 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, Holdings.
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:
1. Agreement. Holdings 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.
<PAGE>
2. Representations and Warranties. By its execution and delivery hereof,
------------------------------
Holdings represents and warrants to the Lenders as follows:
(a) The execution, delivery and performance by Holdings of this
Agreement and each other document and instrument to be delivered hereunder:
(i) are within Holdings'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 Holdings;
(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 Holdings.
(c) This Agreement is the legal, valid and binding obligation of
Holdings, enforceable against Holdings in accordance with its terms,
except as enforceability may be limited by applicable Debtor Relief
Laws and general principles of equity.
3. 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 Holdings and acknowledged by the Existing Subordinate
Creditors;
(b) The Administrative Lender shall have received an Officer's
Certificate of Holdings, containing (i) the Certificate of Incorporation of
Holdings, (ii) bylaws of Holdings, (iii) certified corporate resolutions of
the Board of Directors of Holdings authorizing Holdings to enter into this
Agreement and the documents, transactions and matters contemplated hereby,
and (iv) the names and true signatures of the officers of Holdings
authorized to execute and deliver this Agreement on behalf of Holdings.
(c) The Administrative Lender shall have received an executed copy of
the Agreement and Adoption of Subsidiary Guaranty executed by all parties
thereto.
-2-
<PAGE>
4. 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.
5. Costs, Expenses and Taxes. Holdings 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).
6. 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.
7. 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.
8. 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
================================================================================
-3-
<PAGE>
IN WITNESS WHEREOF, Holdings has caused this Agreement to be duly executed
and delivered by its duly authorized officer on the date first above written.
COMPUSA HOLDINGS II INC.
/s/ James E. Skinner
By: ---------------------------------
Name: James E. Skinner
---------------------------
Title: Executive Vice President-
--------------------------
Finance
-------
Address for CompUSA Holdings II Inc.
c/o CompUSA Inc.
14951 North Dallas Parkway
Dallas, Texas 75240
Attention: James E. Skinner
Executive Vice President-Finance
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: ________________________
Name:___________________
Title:__________________
COMPSERVICE INC.
By: ________________________
Name:___________________
Title:__________________
-4-
<PAGE>
IN WITNESS WHEREOF, Holdings has caused this Agreement to be duly executed
and delivered by its duly authorized officer on the date first above written.
COMPUSA HOLDINGS II INC.
By: ________________________________
Name: __________________________
Title: _________________________
Address for CompUSA Holdings II Inc.
c/o CompUSA Inc.
14951 North Dallas Parkway
Dallas, Texas 75240
Attention: James E. Skinner
Executive Vice President-Finance
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 Dbrzynski
------------------------
Name: Joan Dbrzynski
-------------------
Title: President
------------------
COMPSERVICE INC.
/s/ Joan Dbrzynski
By: ------------------------
Name: Joan Dbrzynski
-------------------
Title: President
------------------
-4-
<PAGE>
COMPTEAM INC.
/s/ Mark R. Walker
By: ------------------------
Name: Mark R. Walker
--------------------
Title: V.P. Secretary
-------------------
CONSENTED AND AGREED TO:
COMPUSA INC.
/s/ James E. Skinner
By: ------------------------
Name: James E.Skinner
-------------------
Title: Executive Vice President and Chief Financial Officer
-----------------------------------------------------
-5-
<PAGE>
AGREEMENT AND ADOPTION OF SUBORDINATION AGREEMENT
THIS AGREEMENT AND ADOPTION OF SUBORDINATION AGREEMENT (this "Agreement"),
dated as of May 30, 1996, is executed by PCs COMPLEAT, INC., a Delaware
corporation ("Compleat"), in favor of the Administrative Lender and the Lenders
(each as defined in the Credit Agreement referred to below).
BACKGROUND
1. 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.
2. CompFinance Inc., a Delaware corporation ("CompFinance"), CompService
Inc., a Delaware corporation ("CompService"), and the Administrative Lender for
the Lenders entered into that certain Subordination Agreement, dated as June 16,
1995 (the "Subordination Agreement"). On December 1, 1995, the Company formed
CompTeam Inc., a Delaware corporation ("CompTeam") and a wholly-owned Subsidiary
of the Company, and CompTeam became a party to the Subordination Agreement. On
February 7, 1996, the Company formed CompUSA Holdings II Inc., a Delaware
corporation ("Holdings II") and a wholly-owned Subsidiary of the Company, and
Holdings II became a party to the Subordination Agreement (CompFinance,
CompService, CompTeam and Holdings II being collectively the "Existing
Subordinate Creditors").
3. On May 30, 1996, Compleat became a wholly-owned Subsidiary of the
Company.
4. Section 7.3(d) of the Credit Agreement requires that Compleat
immediately become a party to the Subordination Agreement.
5. The Board of Directors of Compleat 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, Compleat.
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:
1. Agreement. Compleat 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.
<PAGE>
2. Representations and Warranties. By its execution and delivery hereof,
------------------------------
Compleat represents and warrants to the Lenders as follows:
(a) The execution, delivery and performance by Compleat of this
Agreement and each other document and instrument to be delivered hereunder:
(i) are within Compleat'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 Compleat;
(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 Compleat.
(c) This Agreement is the legal, valid and binding obligation of
Compleat, enforceable against Compleat in accordance with its terms, except
as enforceability may be limited by applicable Debtor Relief Laws and
general principles of equity.
3. 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 Compleat and acknowledged by the Existing Subordinate
Creditors;
(b) The Administrative Lender shall have received an Officer's
Certificate of Compleat, containing (i) the Certificate of Incorporation of
Compleat, (ii) bylaws of Compleat, (iii) certified corporate resolutions of
the Board of Directors of Compleat authorizing Compleat to enter into this
Agreement and the documents, transactions and matters contemplated hereby,
and (iv) the names and true signatures of the officers of Compleat
authorized to execute and deliver this Agreement on behalf of Compleat.
(c) The Administrative Lender shall have received an executed copy of
the Agreement and Adoption of Subsidiary Guaranty executed by all parties
thereto.
-2-
<PAGE>
4. 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.
5. Costs, Expenses and Taxes. Compleat 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).
6. 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.
7. 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.
8. 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
================================================================================
-3-
<PAGE>
IN WITNESS WHEREOF, Compleat has caused this Agreement to be duly executed
and delivered by its duly authorized officer on the date first above written.
PCS COMPLEAT, INC.
By: /s/ Gordon B. Hoffstein
---------------------------------
Name: Gordon B. Hoffstein
-------------------------
Title: Chief Executive Officer
-------------------------
Address for PCs Compleat, Inc.
c/o CompUSA Inc.
14951 North Dallas Parkway
Dallas, Texas 75240
Attention: James E. Skinner
Executive Vice President-Finance
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: ________________________
Name: _________________
Title: _________________
COMPSERVICE INC.
By: _________________________
Name: __________________
Title: __________________
-4-
<PAGE>
IN WITNESS WHEREOF, Compleat has caused this Agreement to be duly executed
and delivered by its duly authorized officer on the date first above written.
PCS COMPLEAT, INC.
By:__________________________________
Name:_____________________________
Title:____________________________
Address for PCs Compleat, Inc.
c/o CompUSA Inc.
14951 North Dallas Parkway
Dallas, Texas 75240
Attention: James E. Skinner
Executive Vice President-Finance
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 L. Dobrzynski
-----------------------------
Name: Joan L. Dobrzynski
----------------------
Title: President
----------------------
COMPSERVICE INC.
By: /s/ Joan L. Dobrzynski
-----------------------------
Name: Joan L. Dobrzynski
----------------------
Title: President
----------------------
-4-
<PAGE>
COMPTEAM INC.
By: /s/ Mark R. Walker
---------------------------------
Name: Mark R. Walker
--------------------------
Title: Vice President - Secretary
--------------------------
COMPUSA HOLDINGS II INC.
By: /s/ Mark R. Walker
---------------------------------
Name: Mark R. Walker
--------------------------
Title: Vice President - Secretary
--------------------------
CONSENTED AND AGREED TO:
COMPUSA INC.
By: /s/ Mark R. Walker
-------------------------------
Name: Mark R. Walker
------------------------
Title: SRVP - General Counsel
------------------------
-5-
<PAGE>
AGREEMENT AND ADOPTION OF SUBORDINATION AGREEMENT
THIS AGREEMENT AND ADOPTION OF SUBORDINATION AGREEMENT (this "Agreement"),
dated as of February 7, 1996, is executed by CompUSA Holdings I Inc., a Delaware
corporation ("Holdings"), in favor of the Administrative Lender and the Lenders
(each as defined in the Credit Agreement referred to below).
BACKGROUND
1. 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.
2. CompFinance Inc., a Delaware corporation ("CompFinance"), CompService
Inc., a Delaware corporation ("CompService"), and the Administrative Lender for
the Lenders entered into that certain Subordination Agreement, dated as June 16,
1995 (the "Subordination Agreement"). On December 1, 1995, the Company formed
CompTeam Inc., a Delaware corporation ("CompTeam") and a wholly-owned Subsidiary
of the Company, and CompTeam immediately became a party to the Subordination
Agreement (CompFinance, CompService and CompTeam being collectively the
"Existing Subordinate Creditors").
3. On February 7, 1996, the Company formed Holdings, a wholly-owned
Subsidiary of the Company.
4. Section 7.3(d) of the Credit Agreement requires that Holdings
immediately become a party to the Subordination Agreement.
5. The Board of Directors of Holdings 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, Holdings.
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:
1. Agreement. Holdings 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.
<PAGE>
2. Representations and Warranties. By its execution and delivery hereof,
------------------------------
Holdings represents and warrants to the Lenders as follows:
(a) The execution, delivery and performance by Holdings of this
Agreement and each other document and instrument to be delivered hereunder:
(i) are within Holdings'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
Holdings;
(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 Holdings.
(c) This Agreement is the legal, valid and binding obligation of
Holdings, enforceable against Holdings in accordance with its terms, except
as enforceability may be limited by applicable Debtor Relief Laws and
general principles of equity.
3. 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 Holdings and acknowledged by the Existing
Subordinate Creditors;
(b) The Administrative Lender shall have received an Officer's
Certificate of Holdings, containing (i) the Certificate of Incorporation of
Holdings, (ii) bylaws of Holdings, (iii) certified corporate resolutions of
the Board of Directors of Holdings authorizing Holdings to enter into this
Agreement and the documents, transactions and matters contemplated hereby,
and (iv) the names and true signatures of the officers of Holdings
authorized to execute and deliver this Agreement on behalf of Holdings.
(c) The Administrative Lender shall have received an executed copy of
the Agreement and Adoption of Subsidiary Guaranty executed by all parties
thereto.
-2-
<PAGE>
4. 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.
5. Costs, Expenses and Taxes. Holdings 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).
6. 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.
7. 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.
8. 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
================================================================================
-3-
<PAGE>
IN WITNESS WHEREOF, Holdings has caused this Agreement to be duly executed
and delivered by its duly authorized officer on the date first above written.
COMPUSA HOLDINGS I INC.
By: ____________________________
Name:_______________________
Title:______________________
Address for CompUSA Holdings I Inc.
c/o CompUSA Inc.
14951 North Dallas Parkway
Dallas, Texas 75240
Attention: James E. Skinner
Executive Vice President-Finance
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: ___________________________
Name:______________________
Title:_____________________
COMPSERVICE INC.
By: ___________________________
Name:______________________
Title:_____________________
-4-
<PAGE>
COMPTEAM INC.
By: _____________________________
Name:________________________
Title:_______________________
CONSENTED AND AGREED TO:
COMPUSA INC.
By: _____________________________
Name:________________________
Title:_______________________
-5-
<PAGE>
AGREEMENT AND ADOPTION OF SUBORDINATION AGREEMENT
THIS AGREEMENT AND ADOPTION OF SUBORDINATION AGREEMENT (this "Agreement"),
dated as of May 31, 1996, is executed by CompUSA Management Company, a Delaware
business trust ("Management"), in favor of the Administrative Lender and the
Lenders (each as defined in the Credit Agreement referred to below).
BACKGROUND
1. 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.
2. CompFinance Inc., a Delaware corporation ("CompFinance"), CompService
Inc., a Delaware corporation ("CompService"), and the Administrative Lender for
the Lenders entered into that certain Subordination Agreement, dated as June 16,
1995 (the "Subordination Agreement"). On December 1, 1995, the Company formed
CompTeam Inc., a Delaware corporation ("CompTeam") and a wholly-owned Subsidiary
of the Company, and CompTeam immediately became a party to the Subordination
Agreement. On February 7, 1996, the Company formed CompUSA Holdings I Inc., a
Delaware corporation ("Holdings I") and a wholly-owned Subsidiary of the
Company, and CompUSA Holdings II Inc., a Delaware corporation ("Holdings II")
and a wholly-owned Subsidiary of the Company, and each of which immediately
became a party to the Subordination Agreement. On May 30, 1996, PCs Compleat,
Inc., a Delaware corporation ("Compleat"), became a wholly-owned Subsidiary of
the Company, and Compleat immediately became a party to the Subordination
Agreement (CompFinance, CompService, CompTeam, Holdings I, Holdings II and
Compleat being collectively the "Existing Subordinate Creditors").
3. On May 31, 1996, the Company formed Management, a wholly-owned
Subsidiary of the Company.
4. Section 7.3(d) of the Credit Agreement requires that Management
immediately become a party to the Subordination Agreement.
5. The Regular Trustees of Management have 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, Management.
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:
<PAGE>
1. Agreement. Management 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.
2. Representations and Warranties. By its execution and delivery hereof,
------------------------------
Management represents and warrants to the Lenders as follows:
(a) The execution, delivery and performance by Management of this
Agreement and each other document and instrument to be delivered hereunder:
(i) are within Management'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
Management;
(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
Management.
(c) This Agreement is the legal, valid and binding obligation of
Management, enforceable against Management in accordance with its terms,
except as enforceability may be limited by applicable Debtor Relief Laws
and general principles of equity.
3. 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 Management and acknowledged by the Existing
Subordinate Creditors;
(b) The Administrative Lender shall have received a Certificate of
Management, containing (i) a copy of the Certificate of Trust of
Management, (ii) a copy of the Agreement and Declaration of Trust, and
(iii) the names and true signatures of the
-2-
<PAGE>
Regular Trustees of Management authorized to execute and deliver this
Agreement on behalf of Management.
(c) The Administrative Lender shall have received an executed copy of
the Agreement and Adoption of Subsidiary Guaranty executed by all parties
thereto.
4. 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.
5. Costs, Expenses and Taxes. Management 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).
6. 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.
7. 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.
8. 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
================================================================================
-3-
<PAGE>
IN WITNESS WHEREOF, Management has caused this Agreement to be duly
executed and delivered by its duly authorized officer on the date first above
written.
COMPUSA MANAGEMENT COMPANY
By: ________________________________
James E. Skinner
Executive Vice President-Finance
and Treasurer
Address for CompUSA Management Company
c/o CompUSA Inc.
14951 North Dallas Parkway
Dallas, Texas 75240
Attention: James E. Skinner
Executive Vice President-Finance
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: ___________________________
Name: _____________________
Title: ____________________
COMPSERVICE INC.
By: ___________________________
Name: _____________________
Title: ____________________
-4-
<PAGE>
COMPTEAM INC.
By: ____________________________
Melvin D. McCall
Senior Vice President-Human Resources
COMPUSA HOLDINGS I INC.
By: ____________________________
Melvin D. McCall
Senior Vice President-Human Resources
COMPUSA HOLDINGS II INC.
By: ____________________________
Melvin D. McCall
Senior Vice President-Human Resources
PCs COMPLEAT, INC.
By: ____________________________
Name: ______________________
Title: _____________________
-5-
<PAGE>
CONSENTED AND AGREED TO:
COMPUSA INC.
By: ____________________________
Robyn Gatch-Priest
Vice President-Controller and
Assistant Secretary
-6-
<PAGE>
AGREEMENT AND ADOPTION OF SUBORDINATION AGREEMENT
THIS AGREEMENT AND ADOPTION OF SUBORDINATION AGREEMENT (this "Agreement"),
dated as of June 3, 1996, is executed by CompUSA Stores L.P., a Texas limited
partnership ("Stores"), in favor of the Administrative Lender and the Lenders
(each as defined in the Credit Agreement referred to below).
BACKGROUND
1. 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.
2. CompFinance Inc., a Delaware corporation ("CompFinance"), CompService
Inc., a Delaware corporation ("CompService"), and the Administrative Lender for
the Lenders entered into that certain Subordination Agreement, dated as June 16,
1995 (the "Subordination Agreement"). On December 1, 1995, the Company formed
CompTeam Inc., a Delaware corporation ("CompTeam") and a wholly-owned Subsidiary
of the Company, and CompTeam immediately became a party to the Subordination
Agreement. On February 7, 1996, the Company formed CompUSA Holdings I Inc., a
Delaware corporation ("Holdings I") and a wholly-owned Subsidiary of the
Company, and CompUSA Holdings II Inc., a Delaware corporation ("Holdings II")
and a wholly-owned Subsidiary of the Company, and each of which immediately
became a party to the Subordination Agreement. On May 30, 1996, PCs Compleat,
Inc., a Delaware corporation ("Compleat"), became a wholly-owned Subsidiary of
the Company, and Compleat immediately became a party to the Subordination
Agreement. On May 31, 1996, the Company formed CompUSA Management Company, a
Delaware business trust ("Management") and a wholly-owned Subsidiary of the
Company, and Management immediately became a party to the Subordination
Agreement (CompFinance, CompService, CompTeam, Holdings I, Holdings II, Compleat
and Management being collectively the "Existing Subordinate Creditors").
3. On June 3, 1996, the Company and Holdings I formed Stores. The Company
is a 1% general partner of Stores and Holdings I is a 99% limited partner of
Stores.
4. Section 7.3(d) of the Credit Agreement requires that Stores
immediately become a party to the Subordination Agreement.
5. The Board of Directors of the Company and Holdings I have 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, Stores.
<PAGE>
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:
1. Agreement. Stores 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.
2. Representations and Warranties. By its execution and delivery hereof,
------------------------------
Stores represents and warrants to the Lenders as follows:
(a) The execution, delivery and performance by Stores of this
Agreement and each other document and instrument to be delivered hereunder:
(i) are within Stores'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
Stores;
(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 Stores.
(c) This Agreement is the legal, valid and binding obligation of
Stores, enforceable against Stores in accordance with its terms, except as
enforceability may be limited by applicable Debtor Relief Laws and general
principles of equity.
3. 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 Stores and acknowledged by the Existing
Subordinate Creditors;
- 2 -
<PAGE>
(b) The Administrative Lender shall have received a Certificate of
the Company, in its capacity as general partner of Stores, containing (i) a
copy of the Certificate of Limited Partnership of Stores, (ii) a copy of
the Agreement of Limited Partnership of Stores, and (iii) the names and
true signatures of the officers of the Company authorized to execute and
deliver this Agreement on behalf of Stores.
(c) The Administrative Lender shall have received an executed copy of
the Agreement and Adoption of Subsidiary Guaranty executed by all parties
thereto.
4. 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.
5. Costs, Expenses and Taxes. Stores 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).
6. 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.
7. 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.
8. 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.
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================================================================================
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<PAGE>
IN WITNESS WHEREOF, Stores has caused this Agreement to be duly executed
and delivered by its duly authorized officer on the date first above written.
COMPUSA STORES L.P.
By: COMPUSA INC., its general partner
By: ______________________________
Harold F. Compton
Executive Vice President and
Chief Operating Officer
Address for CompUSA Stores L.P.
c/o CompUSA Inc.
14951 North Dallas Parkway
Dallas, Texas 75240
Attention: James E. Skinner
Executive Vice President-Finance
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: _______________________________
Name:__________________________
Title:_________________________
- 4 -
<PAGE>
COMPSERVICE INC.
By: _______________________________
Name:__________________________
Title:_________________________
COMPTEAM INC.
By: _______________________________
Melvin D. McCall
Senior Vice President-Human Resources
COMPUSA HOLDINGS I INC.
By: _______________________________
Melvin D. McCall
Senior Vice President-Human Resources
COMPUSA HOLDINGS II INC.
By: _______________________________
Melvin D. McCall
Senior Vice President-Human Resources
PCs COMPLEAT, INC.
By: _______________________________
Name:__________________________
Title:_________________________
- 5 -
<PAGE>
COMPUSA MANAGEMENT COMPANY
By: _______________________________
James E. Skinner
Executive Vice President-Finance and
Treasurer
CONSENTED AND AGREED TO:
COMPUSA INC.
By: _______________________________
Robyn Gatch-Priest
Vice President-Controller and
Assistant Treasurer
- 6 -
<PAGE>
AGREEMENT AND ADOPTION OF SUBORDINATION AGREEMENT
THIS AGREEMENT AND ADOPTION OF SUBORDINATION AGREEMENT (this "Agreement"),
dated as of June 14, 1996, is executed by CompUSA Holdings Company, a Delaware
business trust ("Holdings"), in favor of the Administrative Lender and the
Lenders (each as defined in the Credit Agreement referred to below).
BACKGROUND
1. 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.
2. CompFinance Inc., a Delaware corporation ("CompFinance"), CompService
Inc., a Delaware corporation ("CompService"), and the Administrative Lender for
the Lenders entered into that certain Subordination Agreement, dated as June 16,
1995 (the "Subordination Agreement"). On December 1, 1995, the Company formed
CompTeam Inc., a Delaware corporation ("CompTeam") and a wholly-owned Subsidiary
of the Company, and CompTeam immediately became a party to the Subordination
Agreement. On February 7, 1996, the Company formed CompUSA Holdings I Inc., a
Delaware corporation ("Holdings I") and a wholly-owned Subsidiary of the
Company, and CompUSA Holdings II Inc., a Delaware corporation ("Holdings II")
and a wholly-owned Subsidiary of the Company, and each of which immediately
became a party to the Subordination Agreement. On May 30, 1996, PCs Compleat,
Inc., a Delaware corporation ("Compleat"), became a wholly-owned Subsidiary of
the Company, and Compleat immediately became a party to the Subordination
Agreement. On May 31, 1996, the Company formed CompUSA Management Company, a
Delaware business trust ("Management") and a wholly-owned Subsidiary of the
Company and Management immediately became a party to the Subordination
Agreement. On June 3, 1996, the Company formed CompUSA Stores L.P., a Texas
limited partnership ("Stores") and a wholly-owned Subsidiary of the Company, and
Stores immediately became a party to the Subordination Agreement (CompFinance,
CompService, CompTeam, Holdings I, Holdings II, Compleat, Management and Stores
being collectively the "Existing Subordinate Creditors").
3. On June 14, 1996, the Company formed Holdings, a wholly-owned
Subsidiary of the Company.
4. Section 7.3(d) of the Credit Agreement requires that Holdings
immediately become a party to the Subordination Agreement.
5. The Regular Trustees of Holdings have 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, Holdings.
<PAGE>
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:
1. Agreement. Holdings 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.
2. Representations and Warranties. By its execution and delivery hereof,
------------------------------
Holdings represents and warrants to the Lenders as follows:
(a) The execution, delivery and performance by Holdings of this
Agreement and each other document and instrument to be delivered hereunder:
(i) are within Holdings'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
Holdings;
(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 Holdings.
(c) This Agreement is the legal, valid and binding obligation of
Holdings, enforceable against Holdings in accordance with its terms, except
as enforceability may be limited by applicable Debtor Relief Laws and
general principles of equity.
3. 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 Holdings and acknowledged by the Existing Subordinate
Creditors;
- 2 -
<PAGE>
(b) The Administrative Lender shall have received a Certificate of
Holdings, containing (i) a copy of the Certificate of Trust of Holdings, (ii) a
copy of the Agreement and Declaration of Trust, and (iii) the names and true
signatures of the Regular Trustees of Holdings authorized to execute and deliver
this Agreement on behalf of Holdings.
(c) The Administrative Lender shall have received an executed copy of
the Agreement and Adoption of Subsidiary Guaranty executed by all parties
thereto.
4. 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.
5. Costs, Expenses and Taxes. Holdings agrees to pay on demand all reaso
-------------------------
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).
6. 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.
7. 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.
8. 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.
================================================================================
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================================================================================
- 3 -
<PAGE>
IN WITNESS WHEREOF, Holdings has caused this Agreement to be duly executed
and delivered by its duly authorized officer on the date first above written.
COMPUSA HOLDINGS COMPANY
By:___________________________
James F. Halpin
President
Address for CompUSA Holdings Company
c/o CompUSA Inc.
14951 North Dallas Parkway
Dallas, Texas 75240
Attention: James E. Skinner
Executive Vice President-Finance
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: ______________________________
Name:_________________________
Title:________________________
COMPSERVICE INC.
By: _____________________________
Name:________________________
Title:_______________________
- 4 -
<PAGE>
COMPTEAM INC.
By: _________________________________
Melvin D. McCall
Senior Vice President-Human Resources
COMPUSA HOLDINGS I INC.
By: _________________________________
Melvin D. McCall
Senior Vice President-Human Resources
COMPUSA HOLDINGS II INC.
By: _________________________________
Melvin D. McCall
Senior Vice President-Human Resources
PCs COMPLEAT, INC.
By: ________________________________
Name:___________________________
Title:__________________________
COMPUSA MANAGEMENT COMPANY
By: ________________________________
James E. Skinner
Executive Vice President-Finance
and Treasurer
- 5 -
<PAGE>
COMPUSA STORES L.P.
By: COMPUSA INC., its General Partner
By: __________________________________
Harold F. Compton
Executive Vice President and Chief
Operating Officer
CONSENTED AND AGREED TO:
COMPUSA INC.
By: _______________________________________
Robyn Gatch-Priest
Vice President-Controller and
Assistant Treasurer
- 6 -
<PAGE>
EXHIBIT 10.15
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.
SECTION 4. Compensation and Benefits. In consideration for the services
of Employee hereunder, Employer shall compensate Employee as follows:
<PAGE>
(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
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<PAGE>
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.
(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 and Bonuses.
(i) Termination Upon Death or Disability. Employee shall not be
entitled to any severance pay or other compensation upon termination of his
employment hereunder pursuant to Section 6(a)(i) except for the following:
(1) his Base Salary accrued but unpaid as of the date of
termination;
(2) unpaid expense reimbursements under Section 5 for expenses
incurred in accordance with the terms hereof prior to termination;
(3) compensation for accrued, unused vacation as of the date of
termination; and
(4) any bonus to which Employee would have been entitled for the
Bonus Period if he were still employed hereunder on the last day of the
Bonus Period. Any such bonus shall be paid to Employee at the same time
bonuses are paid in respect of the Bonus Period to other employees of
Employer entitled to receive bonuses for the Bonus Period. In the event
the determination of Employee's bonus in respect of the Bonus Period
involves any subjective assessment, such assessment shall be made in a
manner most favorable to Employee. For purposes of this Section
6(b)(i)(4), the term "Bonus Period" means the full fiscal year or other
applicable bonus period during which an Employee's employment hereunder
was terminated.
-3-
<PAGE>
(ii) Termination Without Cause; Separation Payments. 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. 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.
Employer shall also pay Employee the following:
(1) his Base Salary accrued but unpaid as of the date of termination;
(2) unpaid expense reimbursements under Section 5 for expenses incurred
in accordance with the terms hereof prior to termination; and
(3) compensation for accrued, unused vacation as of the date of
termination.
This Section 6(b)(ii) is subject to the provisions of Section 10(k) dealing
with the coordination of payments in the event of a Change In Control.
(iii) Termination For Cause. Employee shall not be entitled to any
severance pay or other compensation upon termination of his employment
hereunder pursuant to Section 6(a)(ii) except for the following:
(1) his Base Salary accrued but unpaid as of the date of
termination;
(2) unpaid expense reimbursements under Section 5 for
expenses incurred in accordance with the terms hereof prior to
termination; and
(3) compensation for accrued, unused vacation as of the
date of termination.
(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 the
Company. For purposes of Section 6(b)(ii), the termination of Employee's
employment hereunder
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<PAGE>
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 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)
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<PAGE>
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
-6-
<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 Designated
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:
-7-
<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
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(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 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):
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(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
(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.
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(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 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.
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(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 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. (S)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:
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(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. (S)1.280G-1, Q&A 24(c) to a payment described in Prop. Treas. Reg.
(S)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.
(S)1.280G-1, Q&A 24(c)(2) (or if Prop. Treas. Reg. (S)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. (S)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.
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(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 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
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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.
(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:
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(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
(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.
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(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
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
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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.
(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
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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.
(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).
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(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).
(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).
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(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 that
would be paid to Employee under the management incentive bonus plan of Employer
assuming the measurement
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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).
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<PAGE>
EXECUTED as of the date and year first above written.
CompUSA Inc.
By
-------------------------------------
James F. Halpin, President and Chief
Executive Officer
-------------------------------------
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<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:
_____________________
_____________________
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(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 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.
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<PAGE>
(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.
EXECUTED as of the date and year first above written.
CompUSA Inc.
By
-------------------------------------
-------------------------------------
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<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 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.
SECTION 4. Compensation and Benefits. In consideration for the services
of Employee hereunder, Employer shall compensate Employee as follows:
<PAGE>
(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.
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<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 and Bonuses.
(i) Termination Upon Death or Disability. Employee shall not be
entitled to any severance pay or other compensation upon termination of his
employment hereunder pursuant to Section 6(a)(i) except for the following:
(1) his Base Salary accrued but unpaid as of the date of
termination;
(2) unpaid expense reimbursements under Section 5 for expenses
incurred in accordance with the terms hereof prior to termination;
(3) compensation for accrued, unused vacation as of the date of
termination; and
(4) any bonus to which Employee would have been entitled for the
Bonus Period if he were still employed hereunder on the last day of the
Bonus Period. Any such bonus shall be paid to Employee at the same time
bonuses are paid in respect of the Bonus Period to other employees of
Employer entitled to receive bonuses for the Bonus Period. In the event
the determination of Employee's bonus in respect of the Bonus Period
involves any subjective assessment, such assessment shall be made in a
manner most favorable to Employee. For purposes of this Section
6(b)(i)(4), the term "Bonus Period" means the full fiscal year or other
applicable bonus period during which an Employee's employment hereunder
was terminated .
(ii) Termination Without Cause; Separation Payments. 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
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<PAGE>
"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. 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. Employer shall also pay Employee the
following:
(1) his Base Salary accrued but unpaid as of the date of
termination;
(2) unpaid expense reimbursements under Section 5 for expenses
incurred in accordance with the terms hereof prior to termination; and
(3) compensation for accrued, unused vacation as of the date of
termination.
This Section 6(b)(ii) is subject to the provisions of Section 10(j) dealing
with the coordination of payments in the event of a Change In Control.
(iii) Termination For Cause. Employee shall not be entitled to any
severance pay or other compensation upon termination of his employment
hereunder pursuant to Section 6(a)(ii) except for the following:
(1) his Base Salary accrued but unpaid as of the date of
termination;
(2) unpaid expense reimbursements under Section 5 for expenses
incurred in accordance with the terms hereof prior to termination; and
(3) compensation for accrued, unused vacation as of the date of
termination.
(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 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.
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<PAGE>
(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 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
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<PAGE>
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 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.
(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
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<PAGE>
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);
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(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;
(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
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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 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 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), (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;
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(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);
(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. (S)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. (S)1.280G-1, Q&A 24(c) to a payment described in Prop. Treas. Reg.
(S)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. (S)1.280G-1, Q&A 24(c)(2) (or if Prop. Treas. Reg. (S)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. (S)1.280G-1 and that are applicable to the Termination
Payment, Gross Up Payment, or both).
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(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
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") 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.
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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.
(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
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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
(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
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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.
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 Facsimile Number: (214) 953-6115
If to Employee, to:
____________________
____________________
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(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 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 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.
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(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.
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).
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(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(b).
(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.
(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.
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(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(a).
(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).
(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).
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(ii) Triggering Termination has the meaning ascribed to it in Section
10(a).
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EXECUTED as of the date and year first above written.
CompUSA Inc.
By
--------------------------------
James F. Halpin, President and Chief
Executive Officer
--------------------------------
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Exhibit 10.17
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), dated as of May 27, 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 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.
SECTION 4. Compensation and Benefits. In consideration for the services
of Employee hereunder, Employer shall compensate Employee as follows:
<PAGE>
(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.
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(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 and Bonuses.
(i) Termination Upon Death or Disability. Employee shall not be
entitled to any severance pay or other compensation upon termination of his
employment hereunder pursuant to Section 6(a)(i) except for the following:
(1) his Base Salary accrued but unpaid as of the date of
termination;
(2) unpaid expense reimbursements under Section 5 for expenses
incurred in accordance with the terms hereof prior to termination;
(3) compensation for accrued, unused vacation as of the date of
termination; and
(4) any bonus to which Employee would have been entitled for
the Bonus Period if he were still employed hereunder on the last day
of the Bonus Period. Any such bonus shall be paid to Employee at the
same time bonuses are paid in respect of the Bonus Period to other
employees of Employer entitled to receive bonuses for the Bonus
Period. In the event the determination of Employee's bonus in respect
of the Bonus Period involves any subjective assessment, such
assessment shall be made in a manner most favorable to Employee. For
purposes of this Section 6(b)(i)(4), the term "Bonus Period" means the
full fiscal year or other applicable bonus period during which an
Employee's employment hereunder was terminated.
(ii) Termination Without Cause; Separation Payments. 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
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"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. 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. Employer shall also pay Employee the
following:
(1) his Base Salary accrued but unpaid as of the date of
termination;
(2) unpaid expense reimbursements under Section 5 for expenses
incurred in accordance with the terms hereof prior to termination; and
(3) compensation for accrued, unused vacation as of the date of
termination.
This Section 6(b)(ii) is subject to the provisions of Section 10(j) dealing
with the coordination of payments in the event of a Change In Control.
(iii) Termination For Cause. Employee shall not be entitled to any
severance pay or other compensation upon termination of his employment
hereunder pursuant to Section 6(a)(ii) except for the following:
(1) his Base Salary accrued but unpaid as of the date of
termination;
(2) unpaid expense reimbursements under Section 5 for expenses
incurred in accordance with the terms hereof prior to termination; and
(3) compensation for accrued, unused vacation as of the date of
termination.
(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 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.
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(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 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
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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 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.
(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
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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);
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(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;
(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
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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 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 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), (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;
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(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);
(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. (S)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. (S)1.280G-1, Q&A 24(c) to a payment described in Prop.
Treas. Reg. (S)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. (S)1.280G-1, Q&A 24(c)(2) (or if Prop. Treas. Reg. (S)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. (S)1.280G-1 and that are applicable to the
Termination Payment, Gross Up Payment, or both).
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(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
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") 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.
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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.
(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
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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
(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
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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.
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 Facsimile Number: (214) 953-6115
If to Employee, to:
____________________
____________________
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(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 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 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.
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(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.
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).
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(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(b).
(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.
(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.
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(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(a).
(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).
(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).
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(ii) Triggering Termination has the meaning ascribed to it in Section
10(a).
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<PAGE>
EXECUTED as of the date and year first above written.
CompUSA Inc.
By _______________________________________
James F. Halpin, President and Chief
Executive Officer
____________________________________________
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EXHIBIT 10.18
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), dated as of ______________, 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 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 _____________, unless earlier terminated pursuant to Section 6 or Section
10.
SECTION 4. Compensation and Benefits. In consideration for the services
of Employee hereunder, Employer shall compensate Employee as follows:
<PAGE>
(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 120 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
and any renewals of such term mutually agreed to by Employer and Employee,
except that the
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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.
(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;
provided that, in the case of a failure or breach that is not part of
a continual pattern of misconduct or undertaken in bad faith, Employee
has failed to cure such failure or breach within 30 days after receipt
of written notice of such failure or breach from Employer.
(iii) Without Cause. Without Cause upon notice by Employer to
Employee.
(iv) Termination by Employee. By Employee for "Good Reason" upon 10
days prior written notice to Employer. For purposes of this Agreement, Good
Reason shall exist if:
(1) Employee is required to perform his duties at any location
that is more than 50 miles from Employer's current facility in
Marlborough, Massachusetts, except for necessary travel on Employer
business;
(2) Employer routinely requires Employee to perform duties
materially inconsistent with those core duties ordinarily and
customarily assigned to individuals employed by Employer in a similar
executive capacity; or
(3) Employer decreases Employee's base salary below the level
set forth in Section 4(a);
provided that Employee has given written notice to Employer of the
existence of facts that constitute Good Reason and Employer has not, within
30 days after such notice, modified or remedied the facts set forth in the
notice so that Good Reason no longer exists.
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(b) Severance Pay and Bonuses.
(i) Termination Upon Death or Disability. Employee shall not be
entitled to any severance pay or other compensation upon termination of his
employment hereunder pursuant to Section 6(a)(i) except for the following:
(1) his Base Salary accrued but unpaid as of the date of
termination;
(2) unpaid expense reimbursements under Section 5 for expenses
incurred in accordance with the terms hereof prior to termination;
(3) compensation for accrued, unused vacation as of the date
of termination; and
(4) any bonus to which Employee would have been entitled for
the Bonus Period if he were still employed hereunder on the last day
of the Bonus Period. Any such bonus shall be paid to Employee at the
same time bonuses are paid in respect of the Bonus Period to other
employees of Employer entitled to receive bonuses for the Bonus
Period. In the event the determination of Employee's bonus in respect
of the Bonus Period involves any subjective assessment, such
assessment shall be made in a manner most favorable to Employee. For
purposes of this Section 6(b)(i)(4), the term "Bonus Period" means the
full fiscal year or other applicable bonus period during which an
Employee's employment hereunder was terminated.
(ii) Termination Without Cause or By Employee; Separation Payments.
In the event Employee's employment hereunder is terminated pursuant to
Section 6(a)(iii) or Section 6(a)(iv), 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 __________________ 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. 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. Employer shall also pay
Employee the following:
(1) his Base Salary accrued but unpaid as of the date of
termination;
(2) unpaid expense reimbursements under Section 5 for expenses
incurred in accordance with the terms hereof prior to termination; and
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(3) compensation for accrued, unused vacation as of the date
of termination.
This Section 6(b)(ii) is subject to the provisions of Section 10(k) dealing
with the coordination of payments in the event of a Change In Control.
(iii) Termination For Cause. Employee shall not be entitled to any
severance pay or other compensation upon termination of his employment
hereunder pursuant to Section 6(a)(ii) except for the following:
(1) his Base Salary accrued but unpaid as of the date of
termination;
(2) unpaid expense reimbursements under Section 5 for expenses
incurred in accordance with the terms hereof prior to termination; and
(3) compensation for accrued, unused vacation as of the date
of termination.
(c) Certain Benefits. If Employee's employment hereunder is terminated
before the end of the term of employment specified in Section 3 by:
(i) Employer for any reason other than Cause or disability; or
(ii) Employee for Good Reason;
all options held by Employee to purchase common stock of Employer that were
issued to Employee in substitution for Employee's options to purchase common
stock of PCs Compleat, Inc. and that would otherwise have vested prior to
December 31, 1998 shall, to the extent not fully vested on the date of
termination, become fully vested and shall be exercisable in accordance with the
provisions of the PCs Compleat, Inc. 1991 Stock Option Plan.
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
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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 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,
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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
(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.
(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 or
from being employed by a manufacturer in the Designated Industry in a position
that does not directly relate to the retail or direct sale of computer hardware,
software, peripherals, training or computer sales related services to end users.
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
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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:
(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.
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<PAGE>
(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 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
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(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 60% 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
(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
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(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.
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(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 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:
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(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
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. (S)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
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(6) for purposes of applying the rules set forth in Prop.
Treas. Reg. (S)1.280G-1, Q&A 24(c) to a payment described in Prop.
Treas. Reg. (S)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. (S)1.280G-1, Q&A 24(c)(2) (or if Prop. Treas. Reg. (S)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. (S)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.
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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 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
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(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.
(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
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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, Computer Discount
Warehouse, Inc., Dell Computer Corporation and Gateway 2000, 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.
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<PAGE>
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
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.
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<PAGE>
(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.
(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.
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<PAGE>
(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.
(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
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<PAGE>
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).
(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.
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<PAGE>
(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) Good Reason has the meaning ascribed to it in Section 6(a)(iii).
(bb) Gross Up Payment has the meaning ascribed to it in Section 10(d)(i).
(cc) Incentive Plan means the CompUSA Inc. Long-Term Incentive Plan and the
PCs Compleat, Inc. 1991 Stock Option Plan, collectively, as such plans may be
amended from time to time.
(dd) Inventions has the meaning ascribed to it in Section 7(a).
(ee) Options has the meaning ascribed to it in Section 10(j).
(ff) Parachute Payments has the meaning ascribed to such term in Section
280G(b)(2) of the Code.
(gg) Restricted Stock has the meaning ascribed to it in Section 10(j).
(hh) Rights Agreement has the meaning ascribed to it in Section 10(c).
(ii) Separation Payment Period has the meaning ascribed to it in Section
6(b)(ii).
(jj) Separation Payments has the meaning ascribed to it in Section
6(b)(ii).
(kk) 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.
(ll) Termination Payment has the meaning ascribed to it in Section
10(b)(i)(2).
(mm) Triggering Termination has the meaning ascribed to it in Section
10(a).
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<PAGE>
EXECUTED as of the date and year first above written.
CompUSA Inc.
By ______________________________________
_________________________________________
____________________________________
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<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 ________________, 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
<PAGE>
by Consultant in the performance of his duties under this Agreement that have
not been so advanced.
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
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<PAGE>
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 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.
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<PAGE>
(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.
EXECUTED as of the date and year first above written.
CompUSA Inc.
By ______________________________________
_________________________________________
_____________________________________
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Exhibit 10.19
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), dated as of July 9, 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 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 to 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.
SECTION 4. Compensation and Benefits. In consideration for the services
of Employee hereunder, Employer shall compensate Employee as follows:
<PAGE>
(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.
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(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 and Bonuses.
(i) Termination Upon Death or Disability. Employee shall not be entitled
to any severance pay or other compensation upon termination of his employment
hereunder pursuant to Section 6(a)(i) except for the following:
(1) his Base Salary accrued but unpaid as of the date of termination;
(2) unpaid expense reimbursements under Section 5 for expenses
incurred in accordance with the terms hereof prior to termination;
(3) compensation for accrued, unused vacation as of the date of
termination; and
(4) any bonus to which Employee would have been entitled for the
Bonus Period if he were still employed hereunder on the last day of the
Bonus Period. Any such bonus shall be paid to Employee at the same time
bonuses are paid in respect of the Bonus Period to other employees of
Employer entitled to receive bonuses for the Bonus Period. In the event the
determination of Employee's bonus in respect of the Bonus Period involves
any subjective assessment, such assessment shall be made in a manner most
favorable to Employee. For purposes of this Section 6(b)(i)(4), the term
"Bonus Period" means the full fiscal year or other applicable bonus period
during which an Employee's employment hereunder was terminated.
(ii) Termination Without Cause; Separation Payments. 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
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"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. 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. Employer shall also pay Employee the
following:
(1) his Base Salary accrued but unpaid as of the date of
termination;
(2) unpaid expense reimbursements under Section 5 for expenses
incurred in accordance with the terms hereof prior to termination; and
(3) compensation for accrued, unused vacation as of the date
of termination.
This Section 6(b)(ii) is subject to the provisions of Section 10(j) dealing
with the coordination of payments in the event of a Change In Control.
(iii) Termination For Cause. Employee shall not be entitled to any
severance pay or other compensation upon termination of his employment
hereunder pursuant to Section 6(a)(ii) except for the following:
(1) his Base Salary accrued but unpaid as of the date of
termination;
(2) unpaid expense reimbursements under Section 5 for expenses
incurred in accordance with the terms hereof prior to termination; and
(3) compensation for accrued, unused vacation as of the date
of termination.
(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 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.
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(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 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
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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 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.
(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
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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);
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(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;
(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
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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 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 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), (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;
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(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);
(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. (S)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. (S)1.280G-1, Q&A 24(c) to a payment described in Prop.
Treas. Reg. (S)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. (S)1.280G-1, Q&A 24(c)(2) (or if Prop. Treas. Reg. (S)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. (S)1.280G-1 and that are applicable to the
Termination Payment, Gross Up Payment, or both).
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(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
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") 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.
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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.
(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
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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
(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
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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.
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 Facsimile Number: (214) 953-6115
If to Employee, to:
____________________
____________________
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(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 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 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.
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(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.
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).
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(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(b).
(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.
(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.
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(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(a).
(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).
(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).
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(ii) Triggering Termination has the meaning ascribed to it in Section
10(a).
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EXECUTED as of the date and year first above written.
CompUSA Inc.
By __________________________________________
James F. Halpin, President and Chief
Executive Officer
_____________________________________________
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Exhibit 10.20
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), dated as of August 16, 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 have
entered into a written agreement dated as of May 1, 1996 and an amendment
thereto dated as of May 2, 1996 (collectively, the "Prior Agreement"), to
specify the terms and conditions of Employee's employment with Employer.
B. Employer and Employee desire to extend the term of the Prior Agreement
for a period of four years from the date hereof by replacing the Prior Agreement
with this Agreement.
C. Employer considers the maintenance of a sound management team,
including Employee, essential to protecting and enhancing its best interests and
those of its stockholders.
D. 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.
E. Employee is a key executive of Employer and an integral member of its
management team.
F. 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, including the mutual
release of Employer and Employee of their respective obligations under the Prior
Agreement 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 August 15, 2000, unless earlier terminated pursuant to Section 6 or
Section 10.
SECTION 4. Compensation and Benefits. In consideration for the services
of Employee hereunder, Employer shall compensate Employee as follows:
<PAGE>
(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. Employer shall pay for and provide a health
club membership of Employee's choice to Employee for the duration of Employee's
employment with Employer.
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:
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(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 Board of Directors.
(iii) Without Cause. Without Cause upon notice by Employer to
Employee.
(b) Severance Pay and Bonuses.
(i) Termination Upon Death or Disability. Employee shall not be
entitled to any severance pay or other compensation upon termination of his
employment hereunder pursuant to Section 6(a)(i) except for the following:
(1) his Base Salary accrued but unpaid as of the date of
termination;
(2) unpaid expense reimbursements under Section 5 for expenses
incurred in accordance with the terms hereof prior to termination;
(3) compensation for accrued, unused vacation as of the date of
termination; and
(4) any bonus to which Employee would have been entitled for
the Bonus Period if he were still employed hereunder on the last day
of the Bonus Period. Any such bonus shall be paid to Employee at the
same time bonuses are paid in respect of the Bonus Period to other
employees of Employer entitled to receive bonuses for the Bonus
Period. In the event the determination of Employee's bonus in respect
of the Bonus Period involves any subjective assessment, such
assessment shall be made in a manner most favorable to Employee. For
purposes of this Section 6(b)(i)(4), the term "Bonus Period" means the
full fiscal year or other applicable bonus period during which an
Employee's employment hereunder was terminated.
(ii) Termination Without Cause; Separation Payments. 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
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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 _____ 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. 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.
Employer shall also pay Employee the following:
(1) his Base Salary accrued but unpaid as of the date of
termination;
(2) unpaid expense reimbursements under Section 5 for expenses
incurred in accordance with the terms hereof prior to termination; and
(3) compensation for accrued, unused vacation as of the date of
termination.
This Section 6(b)(ii) is subject to the provisions of Section 10(k) dealing
with the coordination of payments in the event of a Change In Control.
(iii) Termination For Cause. Employee shall not be entitled to any
severance pay or other compensation upon termination of his employment
hereunder pursuant to Section 6(a)(ii) except for the following:
(1) his Base Salary accrued but unpaid as of the date of
termination;
(2) unpaid expense reimbursements under Section 5 for expenses
incurred in accordance with the terms hereof prior to termination; and
(3) compensation for accrued, unused vacation as of the date of
termination.
(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 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).
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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 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
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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
(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.
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(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:
(I) Employee or any Concurring Person conduct any
investigation or consult with any other person or group (except
only for
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<PAGE>
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
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Gross Up Payment received by Employee (together with interest,
if any, actually earned on the funds 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;
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(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
(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
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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 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
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"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 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. (S)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:
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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. (S)1.280G-1, Q&A 24(c) to a payment described in Prop.
Treas. Reg. (S)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. (S)1.280G-1, Q&A 24(c)(2) (or if Prop. Treas. Reg. (S)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. (S)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 __________, 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.
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(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 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
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(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.
(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
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(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(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
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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
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.
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(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.
(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
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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.
(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).
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(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).
(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.
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<PAGE>
(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 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).
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EXECUTED as of the date and year first above written.
CompUSA Inc.
By___________________________________________
Melvin D. McCall, Senior Vice-President-
Human Resources
_____________________________________________
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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:
_____________________
_____________________
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(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 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.
EXECUTED as of the date and year first above written.
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CompUSA Inc.
By_________________________________
___________________________________
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EXHIBIT 10.21
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), dated as of August 16, 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
have entered into a written agreement dated as of May 1, 1996 and an amendment
thereto dated as of May 2, 1996 (collectively, the "Prior Agreement"), to
specify the terms and conditions of Employee's employment with Employer.
B. Employer and Employee desire to extend the term of the Prior Agreement
for a period of four years from the date hereof by replacing the Prior Agreement
with this Agreement.
C. Employer considers the maintenance of a sound management team,
including Employee, essential to protecting and enhancing its best interests and
those of its stockholders.
D. 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.
E. Employee is a key executive of Employer and an integral member of its
management team.
F. 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, including the mutual
release of Employer and Employee of their respective obligations under the Prior
Agreement 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 August 15, 2000, unless earlier terminated pursuant to Section 6 or
Section 10.
SECTION 4. Compensation and Benefits. In consideration for the services
of Employee hereunder, Employer shall compensate Employee as follows:
<PAGE>
(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 $300 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:
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(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 and Bonuses.
(i) Termination Upon Death or Disability. Employee shall not be
entitled to any severance pay or other compensation upon termination of his
employment hereunder pursuant to Section 6(a)(i) except for the following:
(1) his Base Salary accrued but unpaid as of the date of
termination;
(2) unpaid expense reimbursements under Section 5 for
expenses incurred in accordance with the terms hereof prior to
termination;
(3) compensation for accrued, unused vacation as of the date
of termination; and
(4) any bonus to which Employee would have been entitled for
the Bonus Period if he were still employed hereunder on the last day
of the Bonus Period. Any such bonus shall be paid to Employee at the
same time bonuses are paid in respect of the Bonus Period to other
employees of Employer entitled to receive bonuses for the Bonus
Period. In the event the determination of Employee's bonus in respect
of the Bonus Period involves any subjective assessment, such
assessment shall be made in a manner most favorable to Employee. For
purposes of this Section 6(b)(i)(4), the term "Bonus Period" means the
full fiscal year or other applicable bonus period during which an
Employee's employment hereunder was terminated.
(ii) Termination Without Cause; Separation Payments. 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
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<PAGE>
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 _____ 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. 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.
Employer shall also pay Employee the following:
(1) his Base Salary accrued but unpaid as of the date of
termination;
(2) unpaid expense reimbursements under Section 5 for
expenses incurred in accordance with the terms hereof prior to
termination; and
(3) compensation for accrued, unused vacation as of the date
of termination.
This Section 6(b)(ii) is subject to the provisions of Section 10(k) dealing
with the coordination of payments in the event of a Change In Control.
(iii) Termination For Cause. Employee shall not be entitled to any
severance pay or other compensation upon termination of his employment
hereunder pursuant to Section 6(a)(ii) except for the following:
(1) his Base Salary accrued but unpaid as of the date of
termination;
(2) unpaid expense reimbursements under Section 5 for
expenses incurred in accordance with the terms hereof prior to
termination; and
(3) compensation for accrued, unused vacation as of the date
of termination.
(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 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).
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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 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
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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
(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.
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(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:
(I) Employee or any Concurring Person conduct any
investigation or consult with any other person or group (except
only for
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<PAGE>
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
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Gross Up Payment received by Employee (together with interest,
if any, actually earned on the funds 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;
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(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
(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
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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 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
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"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
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. (S)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:
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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. (S)1.280G-1, Q&A 24(c) to a payment described in Prop.
Treas. Reg. (S)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. (S)1.280G-1, Q&A 24(c)(2) (or if Prop. Treas. Reg. (S)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. (S)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 __________, 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.
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<PAGE>
(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 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
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<PAGE>
(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.
(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
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<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(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
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<PAGE>
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
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.
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<PAGE>
(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.
(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
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<PAGE>
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.
(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).
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<PAGE>
(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).
(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.
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<PAGE>
(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 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).
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<PAGE>
EXECUTED as of the date and year first above written.
CompUSA Inc.
By ___________________________________
James F. Halpin, President and Chief
Executive Officer
_____________________________________
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<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:
_____________________
_____________________
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(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 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.
EXECUTED as of the date and year first above written.
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CompUSA Inc.
By _________________________________
_________________________________
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<PAGE>
EXHIBIT 11
COMPUSA INC.
COMPUTATION OF INCOME (LOSS) PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------
JUNE 29, JUNE 24, JUNE 25,
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Common Stock outstanding at beginning of year...... 40,466 39,499 38,084
Weighted average number of shares of Common Stock
issued during the year............................ 3,289 400 451
Incremental shares related to assumed exercises of
stock options..................................... 1,855 969 --
------- ------- --------
Weighted common and common equivalent shares....... 45,610 40,868 38,535
======= ======= ========
Net income (loss).................................. $59,665 $24,339 $(17,024)
======= ======= ========
Income (loss) per common and common equivalent
share (1)......................................... $ 1.31 $ 0.60 $ (0.44)
======= ======= ========
</TABLE>
- --------
(1) The computation of income (loss) per common and common equivalent share on
a fully diluted basis does not materially differ from the amounts
calculated on a primary basis.
<PAGE>
EXHIBIT 21
EXHIBIT 21
(subsidiaries of CompUSA Inc.)
1. CompTeam Inc., a Delaware corporation
2. CompUSA Holdings II Inc., a Delaware corporation
3. PCs Compleat, Inc., a Delaware corporation
4. CompUSA Holdings I Inc., a Delaware corporation
5. CompUSA Management Company, a Delaware business trust
6. CompUSA Stores L.P., a Texas limited partnership
7. CompUSA Holdings Company, a Delaware business trust
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference of our report dated August 14,
1996, with respect to the consolidated financial statements of CompUSA Inc.
included in this Form 10-K for the fiscal year ended June 29, 1996, in each of
the following: (i) the Registration Statement of CompUSA Inc. (Form S-3 No.
333-08715) and related Prospectus in connection with the sale of securities by
certain stockholders of CompUSA Inc., (ii) the Registration Statement of
CompUSA Inc. (Form S-8 No. 33-86314) and related Prospectus pertaining to the
CompSavings Plan for Employees of CompUSA Inc., (iii) the Registration
Statement of CompUSA Inc. (Form S-8 No. 33-99280) and related Prospectus in
connection with the CompUSA Inc. Deferred Compensation Plan, (iv) the
Registration Statements of CompUSA Inc. (Form S-8 No. 33-72718, Form S-8 No.
33-45339 and Form S-8 No. 33-99282) and related Prospectuses in connection
with the CompUSA Inc. Long-Term Incentive Plan, and (v) the Registration
Statement of CompUSA Inc. (Form S-8 No. 333-06235) and related Prospectus in
connection with the PCs Compleat, Inc. 1991 Stock Option Plan. We also consent
to the reference to our firm under the caption "Experts" in the Registration
Statement of CompUSA Inc. (Form S-8 No. 33-86314) and related Prospectus
pertaining to the CompSavings Plan for Employees of CompUSA Inc. and to the
incorporation by reference therein of our report dated August 9, 1995, with
respect to the consolidated financial statements of CompUSA Inc. included in
its Annual Report on Form 10-K for the year ended June 24, 1995, filed with
the Securities and Exchange Commission.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Dallas, Texas
September 20, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF COMPUSA INC. INCLUDED IN ITS ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED JUNE 29, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-START> JUN-25-1995
<PERIOD-END> JUN-29-1996
<CASH> 207,614
<SECURITIES> 0
<RECEIVABLES> 149,801
<ALLOWANCES> 1,692
<INVENTORY> 398,841
<CURRENT-ASSETS> 770,233
<PP&E> 198,145
<DEPRECIATION> 66,961
<TOTAL-ASSETS> 909,337
<CURRENT-LIABILITIES> 464,334
<BONDS> 110,000
0
0
<COMMON> 451
<OTHER-SE> 325,454
<TOTAL-LIABILITY-AND-EQUITY> 909,337
<SALES> 3,829,786
<TOTAL-REVENUES> 3,829,786
<CGS> 3,311,682
<TOTAL-COSTS> 3,311,682
<OTHER-EXPENSES> 412,751
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,487
<INCOME-PRETAX> 99,849
<INCOME-TAX> 40,184
<INCOME-CONTINUING> 59,665
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 59,665
<EPS-PRIMARY> 1.31
<EPS-DILUTED> 1.31
</TABLE>
