<PAGE>
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CompUSA Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
CompUSA Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
COMPUSA INC.
14951 NORTH DALLAS PARKWAY
DALLAS, TEXAS 75240
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 5, 1997
To the Stockholders of
CompUSA Inc.
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of CompUSA Inc., a Delaware corporation (the "Company"), will be
held at The Grand Kempinski Hotel, 15201 North Dallas Parkway, Dallas, Texas, on
November 5, 1997, at 10:00 a.m., local time, for the following purposes:
(1) To elect three members of the Board of Directors, which will consist
of nine directors, for the term of office stated in the Proxy
Statement.
(2) To consider and approve a proposal to amend the Company's Restated and
Amended Certificate of Incorporation to increase the number of
authorized shares of Common Stock from 200,000,000 to 325,000,000.
(3) To consider and approve the adoption of the CompUSA Inc. Officers'
Bonus Plan.
(4) To consider and ratify the selection of the Company's independent
auditors.
(5) To transact any other business that may properly come before the
Meeting and any adjournments thereof.
The close of business on September 8, 1997, has been fixed as the record
date for determining stockholders entitled to notice of and to vote at the
Meeting and any adjournments thereof. For a period of at least ten days prior
to the Meeting, a complete list of stockholders entitled to vote at the Meeting
will be open for the examination by any stockholder during ordinary business
hours at the Company's headquarters, which is located at 14951 North Dallas
Parkway, Dallas, Texas.
Information concerning the matters to be acted upon at the Meeting is set
forth in the accompanying Proxy Statement.
STOCKHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING IN PERSON ARE
URGED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors
Mark R. Walker
Senior Vice President-General
Counsel and Secretary
Dallas, Texas
September 26, 1997
<PAGE>
COMPUSA INC.
14951 NORTH DALLAS PARKWAY
DALLAS, TEXAS 75240
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 5, 1997
This Proxy Statement is first being mailed on September 26, 1997, to
stockholders of CompUSA Inc. (the "Company") by the board of directors of the
Company (the "Board of Directors" or the "Board") to solicit proxies (the
"Proxies") for use at the Annual Meeting of Stockholders (the "Meeting") to be
held at The Grand Kempinski Hotel, 15201 North Dallas Parkway, Dallas, Texas, on
Wednesday, November 5, 1997, at 10:00 a.m., local time, and at such other times
and places to which the Meeting may be adjourned.
All shares represented by valid Proxies, unless the stockholder
otherwise specifies, will be voted (i) FOR the election of the persons named
herein under "Election of Directors" as nominees for election as a director of
the Company for the term described herein; (ii) FOR the amendment of the
Company's Restated and Amended Certificate of Incorporation (the "Charter") to
increase the number of authorized shares of Common Stock, $.01 per share par
value ("Common Stock"), from 200,000,000 to 325,000,000; (iii) FOR the adoption
of the CompUSA Inc. Officers' Bonus Plan (the "Bonus Plan"); (iv) FOR the
ratification of the selection of Ernst & Young LLP as the Company's independent
auditors for the fiscal year ending June 27, 1998 ("fiscal 1998"); and (v) at
the discretion of the Proxyholders with regard to any other matters that may
properly come before the Meeting and any adjournments thereof.
Any stockholder executing a Proxy retains the right to revoke it at
any time prior to exercise at the Meeting. A Proxy may be revoked by delivery
of written notice of revocation to the Secretary of the Company, by execution
and delivery of a later Proxy or by voting the shares in person at the Meeting.
If not revoked, all shares represented by properly executed Proxies will be
voted as specified herein or as noted above, as applicable.
RECORD DATE AND VOTING SECURITIES
The record date for determining the stockholders entitled to notice of
and to vote at the Meeting and any adjournments thereof is the close of business
on September 8, 1997 (the "Record Date"). On December 2, 1996, the Company
issued 45,662,667 shares of Common Stock as the result of a 2-for-1 stock split
that was effected in the form of a stock dividend on the Common Stock
outstanding at the close of business on November 18, 1996. All share numbers
stated in this Proxy Statement, except for authorized shares, reflect the stock
split. As a result of this and other issuances of Common Stock, 91,844,120
shares of Common Stock were outstanding as of the close of business on the
Record Date. Common Stock is the only class of outstanding voting securities of
the Company.
As a result of the stock split described in the preceding paragraph
and a 2-for-1 stock split on April 22, 1996 effected in the form of a stock
dividend on the Common Stock outstanding at the close of business on April 8,
1996, the number of preferred stock purchase rights ("Rights") associated with
each outstanding share of Common Stock was adjusted downward from one full Right
to one-fourth of one Right in accordance with the Company's Rights Agreement.
The Rights Agreement did not require any adjustment as a result of the stock
splits to the number of shares of Series A Junior Participating Preferred Stock
of the Company that the holder of each Right would be entitled to purchase upon
the occurrence of certain events or the purchase price thereof.
<PAGE>
QUORUM AND VOTING
The presence at the Meeting, in person or by proxy, of the holders of
a majority of the Common Stock issued and outstanding and entitled to vote
thereat is necessary to constitute a quorum to transact business. Each share
represented at the Meeting in person or by proxy will be counted for purposes of
determining whether a quorum is present. In deciding all matters, a holder of
Common Stock on the Record Date shall be entitled to cast one vote for each
share of Common Stock then registered in such holder's name.
Election of the director nominees named in Proposal No. 1, or any of
them, requires the affirmative vote of a plurality of the shares of Common Stock
present or represented at the Meeting and entitled to vote thereon. Votes may
be cast in favor of or withheld with respect to all of the director nominees, or
any of them. Votes that are withheld will be counted for quorum purposes, but
will be excluded entirely from the tabulation of votes in respect of the
proposal and, therefore, will not otherwise affect the outcome of the vote on
the proposal. Proxies may not be voted for a greater number of persons than the
number of nominees named in this Proxy Statement.
Approval of Proposal No. 2 requires the affirmative vote of a majority
of the shares of Common Stock outstanding and entitled to vote. Abstentions on
this proposal may be specified and will have the same effect as a vote against
the proposal.
Approval of each of Proposal No. 3 and Proposal No. 4 requires the
affirmative vote of a majority of the shares of Common Stock present or
represented at the Meeting and entitled to vote thereon. Abstentions on these
proposals may be specified and will be counted for purposes of determining the
number of shares present or represented and entitled to vote thereon. As a
result, abstentions will have the same effect as votes against these proposals.
Under the rules of the New York Stock Exchange (the "NYSE"), brokers
who hold shares in street name have discretionary authority to vote on certain
"routine" items even if they have not received instructions from the persons
entitled to vote such shares. However, brokers do not have authority to vote on
"nonroutine" items without such instructions. Such "broker nonvotes" (shares
held by brokers or nominees as to which they have no discretionary power to vote
on a particular matter and have received no instructions from the persons
entitled to vote such shares) are counted as present and entitled to vote for
purposes of determining whether a quorum is present but are not entitled to vote
on any nonroutine matter to be acted upon. For matters requiring the
affirmative vote of a plurality of the shares of Common Stock present or
represented at the Meeting, such as Proposal No. 1, broker nonvotes will have no
effect on the outcome of the vote. For matters requiring the affirmative vote of
a majority of the shares of Common Stock outstanding, such as Proposal No. 2,
broker nonvotes will have the effect of votes against such proposal. For
matters requiring the affirmative vote of a majority of the shares of Common
Stock present or represented at the Meeting and entitled to vote, such as
Proposal No. 3 and Proposal No. 4, broker nonvotes will not be counted as among
the shares entitled to vote with respect to such matters. Thus, the effect of
any broker nonvotes with respect to Proposal No. 3 and Proposal No. 4 will be
to reduce the number of affirmative votes required to approve the proposals and
the number of negative votes required to block such approval. Because brokers
will have discretionary authority to vote on each of Proposal No. 1 and Proposal
No. 4, there will be no broker nonvotes on such proposals. However, brokers will
not have discretionary authority to vote on Proposal No. 2 or Proposal No. 3.
2
<PAGE>
PRINCIPAL STOCKHOLDERS AND MANAGEMENT OWNERSHIP
The following table sets forth information as of the Record Date
regarding the beneficial ownership of Common Stock by (i) each person or group
known by the Company to own beneficially more than 5% of the outstanding shares
of Common Stock, (ii) each director and nominee for director of the Company,
(iii) the Company's Named Officers (as defined under "EXECUTIVE COMPENSATION--
Summary Compensation Table") and (iv) all directors and executive officers of
the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
OF COMMON STOCK (1)
-----------------------------------------------
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP (2) (3) COMMON STOCK
- ------------------------ -------------------- -----------------
<S> <C> <C>
FMR Corp. (4)
82 Devonshire Street
Boston, Massachusetts 02109 12,038,100 12.5%
The Equitable Companies Incorporated (5)
787 Seventh Avenue
New York, New York 10019 10,684,810 11.1%
Putnam Investments, Inc. (6)
One Post Office Square
Boston, Massachusetts 02109 7,388,149 7.7%
Pilgrim Baxter & Associates, Ltd. (7)
11255 Drummers Lane, Suite 300
Wayne, Pennsylvania 19067 6,314,500 6.6%
Nicholas Applegate Capital Management (8)
600 West Broadway, 29th Floor
San Diego, California 92101 5,806,080 6.1%
Giles H. Bateman 307,215 *
Leonard L. Berry, Ph.D. 21,019 *
Warren D. Feldberg 46,943 *
James F. Halpin 1,490,453 1.6%
Morton E. Handel 1,000 *
Denise Ilitch Lites 2,000 *
Lawrence Mittman 4,690 *
Kevin J. Roche 191,275 *
Barry L. Williams -0- --
Harold F. Compton 674,638 *
J. Samuel Crowley 209,867 *
Lawrence N. Mondry 620,620 *
James E. Skinner 322,095 *
All directors and executive officers as a group (34 persons) 4,886,696 5.2%
</TABLE>
_____________________
* Less than 1.0%
(notes continued on following page)
3
<PAGE>
(notes continued from previous page)
(1) "Beneficial owner" means generally any person who, directly or indirectly,
has or shares voting power or investment power with respect to a security.
All information with respect to the beneficial ownership of any stockholder
has been furnished by such stockholder and the Company believes that,
except as otherwise indicated, each stockholder has sole voting and
investment power with respect to shares listed as beneficially owned by
such stockholder.
(2) Includes shares of Common Stock issuable upon exercise of options that were
exercisable on the Record Date or within 60 days thereafter by Messrs.
Bateman, Berry, Feldberg, Halpin, Mittman, Roche, Compton, Crowley, Mondry,
Skinner and all directors and executive officers as a group, with such
shares numbering 139,965; 20,519; 26,943; 1,105,082; 4,690; 20,519;
410,788; 172,713; 124,958; 145,073; and 2,801,689, respectively.
(3) Includes shares of Common Stock restricted by the Company as to their sale,
assignment, transfer, pledge or other encumbrance by Messrs. Halpin,
Compton, Crowley, Mondry, Skinner and all directors and executive officers
as a group, with such shares numbering 67,088; 60,028; 20,839; 20,839;
20,839; and 316,408, respectively. The vesting of these restricted stock
awards may be accelerated if specified performance goals are met. See
"EXECUTIVE COMPENSATION -- Summary Compensation Table."
(4) Based on a Report on Schedule 13G dated February 7, 1997, which was jointly
filed with the Securities and Exchange Commission (the "Commission") by FMR
Corp. ("FMR"), Edward C. Johnson 3d and Abigail P. Johnson. FMR reported
sole voting power with respect to 70,000 shares and sole dispositive power
with respect to all 12,038,100 shares. Mr. Johnson and Ms. Johnson
reported sole dispositive power with respect to all 12,038,100 shares.
(5) Based on a Report on Schedule 13G dated July 10, 1997, which was jointly
filed with the Commission by The Equitable Companies Incorporated
("Equitable") and certain of its affiliates and on information provided to
the Company by Equitable. Such Report indicates that the shares may be
beneficially owned by Alpha Assurances Vie Mutuelle, AXA Assurance I.A.R.D.
Mutuelle, AXA Assurances Vie Mutuelle and AXA Courtage Assurance Mutuelle,
as a group (collectively, the "Mutuelles Group"), acting as a parent
holding company; AXA-UAP, as a parent holding company; and Equitable, as
a parent holding company. The Report indicates that such entities
beneficially own an aggregate of 5,184,810 shares, representing 5.4% of the
total outstanding shares of Common Stock, but such number excludes an
additional 5,500,000 shares described in the Report as shares owned by
Alliance Capital Management L.P., a subsidiary of Equitable ("Alliance"),
that may be disposed of upon the exercise of call options written by
Alliance. The Report further indicates that of the 5,184,810 shares
reported as being beneficially owned by the foregoing entities, such
entities have sole voting power with respect to 4,799,492 shares, shared
voting power with respect to 381,551 shares, sole dispositive power with
respect to 5,184,559 shares and shared dispositive power with respect to
251 shares. All shares reported in such Report (including the shares
subject to call options) are held directly by subsidiaries of Equitable,
including Alliance. The Mutuelles Group and AXA-UAP disclaimed beneficial
ownership of all shares.
(6) Based on a Report on Schedule 13G dated April 8, 1997, which was jointly
filed with the Commission by Marsh & McClennan Companies, Inc. ("Marsh &
McClennan"), Putnam Investments, Inc., a wholly-owned subsidiary of Marsh &
McClennan ("Putnam Investments"), Putnam Investment Management, Inc., a
wholly-owned subsidiary of Putnam Investments ("Putnam Management"), and
Putnam Advisory Company, Inc., a wholly-owned subsidiary of Putnam
Investments ("Putnam Advisory"). Marsh & McClennan disclaimed beneficial
ownership of all shares. Putnam Investments reported shared voting power
with respect to 128,315 of the 7,388,149 shares it beneficially owns.
Putnam Management claimed beneficial ownership of 7,158,834 of the
7,388,149 shares beneficially owned by Putnam Investments. Putnam Advisory
claimed beneficial ownership of 229,315 of the 7,388,149 shares
beneficially owned by Putnam Investments and reported shared voting power
with respect to 128,315 of such shares.
(7) Based on a Report on Schedule 13G dated February 14, 1997, which was
jointly filed with the Commission by Pilgrim Baxter & Associates, Ltd.
("Pilgrim Baxter"), Harold J. Baxter and Gary L. Pilgrim. Pilgrim Baxter,
Mr. Baxter and Mr. Pilgrim reported shared voting power and sole
dispositive power with respect to all shares beneficially owned.
(8) Based on a Report on Schedule 13G dated February 4, 1997, which was filed
with the Commission by Nicholas Applegate Capital Management ("Nicholas
Applegate"). Nicholas Applegate reported sole voting power with respect to
4,482,118 shares and shared voting power with respect to 4,500 shares.
Nicholas Applegate reported sole dispositive power with respect to all
shares beneficially owned.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes of directors serving
staggered three-year terms. All directors of one class hold their positions
until the annual meeting of stockholders at which the terms of the directors in
such class expire and their respective successors are elected and qualified.
The Company's Charter provides that the number of directors will not be less
than three nor greater than thirteen and will be divided into three classes as
nearly equal in number as the then authorized number of directors permits. The
Bylaws of the Company provide that the number of directors will be established
by resolution of the Board of Directors within the limitations set forth in the
Charter.
4
<PAGE>
In October 1996, Edith Weiner resigned from the Board of Directors, and in
January 1997 Denise Ilitch Lites was elected by the Board of Directors to serve
for the remainder of Ms. Weiner's term, which expires at the Meeting. In
addition, during fiscal 1997, the Board of Directors was increased from seven to
nine members and Morton E. Handel and Barry L. Williams were elected by the
Board to serve as directors for terms expiring at the annual meetings of
stockholders in 1998 and 1999, respectively.
The Board of Directors has approved the recommendation of the Nominating
and Governance Committee that James F. Halpin, Denise Ilitch Lites and Lawrence
Mittman be submitted as nominees to the stockholders to serve three-year terms
as directors expiring at the 2000 annual meeting of stockholders and until their
successors are elected and have qualified. Messrs. Halpin and Mittman have
served as members of the Board of Directors since prior to the last annual
meeting of stockholders.
The Nominating and Governance Committee will consider nominees for election
to the Board of Directors recommended by stockholders entitled to vote for the
election of directors, provided such recommendations are made in accordance with
the Bylaws of the Company. Generally, the Bylaws provide that a stockholder
must deliver written notice of such recommendations to the Secretary of the
Company not later than 75 days prior to the date on which, in the immediately
preceding year, the annual meeting of stockholders was held.
The nominees named above have consented to serve as members of the Board of
Directors if elected. If any of the above nominees for any reason are unable or
unwilling to serve at the time of the Meeting, the Proxyholders will have
discretionary authority to vote the Proxies for a substitute nominee or
nominees. The following sets forth information as to the nominees for election
at the Meeting and each of the directors whose term of office will continue
after the Meeting, including their ages, present principal occupations, other
business experience during the last five years, memberships on committees of the
Board of Directors and directorships in other publicly-held companies.
<TABLE>
<CAPTION>
SERVED YEAR
AS TERM
NAME AGE POSITION WITH THE COMPANY DIRECTOR EXPIRES
SINCE
- ------------------------------------------ ------ ------------------------------------------------ --------- --------
<S> <C> <C> <C> <C>
Nominees for three-year terms ending
in 2000:
James F. Halpin (1)(2) 46 President, Chief Executive Officer and Director 1993 1997
Denise Ilitch Lites (3) 41 Director 1997 1997
Lawrence Mittman (4) 46 Director 1995 1997
Continuing directors:
Giles H. Bateman (1) (2) 52 Chairman of the Board of Directors 1991 1998
Leonard L. Berry, Ph.D. (3) 55 Director 1993 1998
Morton E. Handel (4) 62 Director 1997 1998
Warren D. Feldberg (3) 47 Director 1992 1999
Kevin J. Roche (2) (3) 39 Director 1989 1999
Barry L. Williams (4) 53 Director 1997 1999
</TABLE>
_________________
(1) Member of the Nominating and Governance Committee
(2) Member of the Finance Committee
(3) Member of the Compensation Committee
(4) Member of the Audit Committee
James F. Halpin has served as President and a director of the Company since
May 1993 and as Chief Executive Officer since December 1993. Mr. Halpin also
served as Chief Operating Officer from May 1993 to January 1995. From 1990 to
November 1992, Mr. Halpin was President of HomeBase, a home center warehouse
retailer. From 1988 to 1990, Mr. Halpin was President of BJ's Wholesale Club, a
chain of warehouse club retail stores. He also served as Executive Vice
President of Waban Inc., the parent corporation of HomeBase and BJ's Wholesale
Club, from 1988 to May 1993. He is also a director of Toy Biz, Inc., Lowe's
Companies, Inc. and Interphase Corporation.
5
<PAGE>
Denise Ilitch Lites has served as a director of the Company since January
1997. Ms. Ilitch Lites is President of Olympia Development, Inc., a Detroit-
based real estate and entertainment development company, where she has been
employed since February 1996. Ms. Ilitch Lites is also Vice Chairwoman of
Little Caesar Enterprises, Inc., an international pizza restaurant chain, where
she has served since May 1997. From January 1993 to January 1997, Ms. Ilitch
Lites operated her own retail marketing firm, Bright Lites, Inc., and from July
1989 to June 1993 served as Senior Vice President of Little Caesar Enterprises,
Inc. Ms. Ilitch Lites also holds advisory positions in marketing with the
Dallas Stars and Detroit Red Wings hockey teams and with the Detroit Tigers
baseball team. She is also a director of Beauticontrol Cosmetics, Inc., and the
Detroit Branch of the Federal Reserve Bank of Chicago.
Lawrence Mittman has served as a director of the Company since January
1995. Mr. Mittman is a Partner of the New York City law firm Battle Fowler,
where he has been employed since 1979.
Giles H. Bateman has served as a director of the Company since December
1991 and as Chairman of the Board of Directors since December 1993. Since
January 1992, Mr. Bateman has been an investor in and director of several
private companies primarily engaged in retailing. In 1991, Mr. Bateman served
as a Visiting Professor at the University of San Diego Olin Hall School of
Business Administration. Mr. Bateman was a co-founder of The Price Company, the
operator of The Price Club chain of warehouse club retail superstores. Mr.
Bateman served as a director and Chief Financial Officer of The Price Company
from 1976 to 1991 and as Vice Chairman from 1986 to 1991. He is also a director
of Boatracs, Inc.
Leonard L. Berry, Ph.D. has served as a director of the Company since
November 1993. Mr. Berry has served as a Professor of Marketing and as Director
of the Center for Retailing Studies at Texas A&M University since 1982. He has
also held the J.C. Penney Chair of Retailing Studies at Texas A&M University
since January 1991.
Morton E. Handel has served as a director of the Company since January
1997. Mr. Handel is President of S&H Consulting, Ltd., a privately held
financial and consulting firm based in West Hartford, Connecticut, where he has
been employed since 1991. From 1988 to 1991 he was Chairman and Chief Executive
Officer of Coleco Industries, Inc. Mr. Handel is also currently President,
Chief Executive Officer and a director of Ranger Industries, Inc., an inactive
company; Chairman of the Board and a director of Concurrent Computer
Corporation; a director of Ithaca Industries, Inc. and Toy Biz, Inc.; and Vice
Chairman of the Board of Regents of the University of Hartford.
Warren D. Feldberg has served as a director of the Company since October
1992. Since January 1997, Mr. Feldberg has been Chairman and Chief Executive
Officer of The Caldor Corporation, a discount department store retail chain. Mr.
Feldberg served as President and Chief Operating Officer of The Caldor
Corporation from May 1996 to January 1997. Mr. Feldberg served as Chairman and
Chief Executive Officer of Marshalls, Inc., a retail organization and a
subsidiary of CVS Corp. (formerly known as Melville Corporation), from October
1991 to June 1995. Mr. Feldberg also served as Vice President of CVS Corp.
during the same period. From 1988 to October 1991, Mr. Feldberg was employed by
Dayton Hudson Corporation, where he served in a variety of positions for its
Target retail division, most recently as President during 1991.
Kevin J. Roche has served as a director of the Company since 1989. Mr.
Roche has served as Senior Vice President of First Union Capital Partners, Inc.
since 1993, Senior Vice President of First Union Corporation since 1991 and
Senior Vice President of First Union National Bank since 1988.
Barry L. Williams has served as a director of the Company since May 1997.
Since July 1992, he has been President of Williams Pacific Ventures Inc., a
venture capital and real estate investment and consulting firm. He was
President of C.N. Flagg Power Inc., a construction services company, from July
1988 until its sale in July 1992, and a Managing Principal of Bechtel
Investments, Inc. until May 1987. He is also a director of Tenera, Inc., CH2M
Hill Companies, Ltd., The USA Group, Inc., PG&E Corporation, Simpson
Manufacturing Company, Inc., APL LIMITED, and Newhall Land and Farming Co., Inc.
6
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The business of the Company is managed under the direction of the Board of
Directors. The Board meets on a regularly scheduled basis to review significant
developments affecting the Company and to act on matters requiring Board
approval. It also holds special meetings and acts by written consent when
important matters require Board action between scheduled meetings. The Board of
Directors met seven times during fiscal 1997. During such period, all members
of the Board of Directors participated in at least 75% of all Board and
applicable Committee meetings.
The Board of Directors has four standing committees (each a "Committee"):
the Nominating and Governance Committee, the Finance Committee, the Audit
Committee and the Compensation Committee. The functions of these Committees,
their current members, the number of meetings held and the number of times
action was taken by written consent during fiscal 1997 are described below.
The Nominating and Governance Committee is empowered to recommend nominees
for election to the Board and review the role, composition and structure of the
Board and its Committees. The Nominating and Governance Committee is comprised
of James F. Halpin (Chairman) and Giles H. Bateman. The Nominating and
Governance Committee acted by written consent three times during fiscal 1997.
The Finance Committee has the responsibility of making recommendations to
the Board with respect to the Company's credit arrangements, the issuance of
equity and long-term debt securities and other matters. The Finance Committee
is comprised of Kevin J. Roche (Chairman), Giles H. Bateman and James F. Halpin.
The Finance Committee met once during fiscal 1997.
The Audit Committee was established to review the professional services and
independence of the Company's independent auditors and to review the Company's
financial statements, procedures and internal controls. The Audit Committee is
comprised of Morton E. Handel (Chairman), Lawrence Mittman and Barry L.
Williams. The Audit Committee met five times during fiscal 1997.
The Compensation Committee has the responsibility of reviewing planning for
succession to senior executive positions, fixing annual salaries and bonuses for
the officers and key employees of the Company and administering the Long-Term
Incentive Plan and, if approved at the Meeting, the Bonus Plan. See "Proposal
No. 3 -- Approval of the CompUSA Inc. Officers' Bonus Plan." The Compensation
Committee is comprised of Warren D. Feldberg (Chairman), Dr. Leonard Berry,
Kevin J. Roche and Denise Ilitch Lites. The Compensation Committee met seven
times and acted by written consent once during fiscal 1997.
DIRECTOR COMPENSATION
Directors who are also employees of the Company or its subsidiaries receive
no compensation in their capacities as directors. Nonemployee directors receive
an annual retainer of $25,000 ($30,000 if they chair a Committee), plus a fee of
$1,000 for each Board meeting and $500 for each Committee meeting in which the
director participates. All directors are reimbursed for expenses connected with
attendance at Board or Committee meetings. In addition, nonemployee directors
receive annual automatic grants of stock options to purchase $50,000 of Common
Stock (based on market value on the date of grant).
For fiscal 1997, the Company (i) paid Messrs. Bateman, Berry, Feldberg,
Handel, Mittman and Roche and Ms. Ilitch Lites $33,500, $35,000, $35,417,
$9,167, $34,500, $40,000 and $6,250, respectively, and (ii) granted each of
Messrs. Bateman, Berry, Feldberg, Mittman and Roche options to purchase 2,172
shares of Common Stock at an exercise price of $23.00 per share. The Company
also granted Mr. Handel, Ms. Ilitch Lites and Mr. Williams options to purchase
1,652, 1,652 and 565 shares of Common Stock, respectively, at exercise prices of
$15.13, $15.13 and $22.13 per share, respectively. For his services as Chairman
of the Board of Directors during fiscal 1997, Mr. Bateman received an additional
$69,000 as an annual salary. In addition, the Company paid the firm of Weiner,
Edrich, Brown, Inc., $17,500 in respect of Edith Weiner, who resigned as a
director in October 1996, for services rendered in fiscal 1997.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF ALL NOMINEES
FOR DIRECTOR NAMED HEREIN.
7
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS
The following table sets forth certain information regarding the
Company's executive officers. Officers are elected annually by the Board of
Directors and serve at its discretion.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ---------------------------------------- ---------- ------------------------------------------------------------------
<S> <C> <C>
James F. Halpin......................... 46 President, Chief Executive Officer and Director
Harold F. Compton....................... 50 Executive Vice President, Chief Operating Officer and
President-- CompUSA Stores
J. Samuel Crowley....................... 47 Executive Vice President--Operations
Ronald J. Gilmore....................... 42 Executive Vice President--Marketing
Lawrence N. Mondry...................... 37 Executive Vice President--Merchandising
Paul B. Poyfair......................... 45 Executive Vice President--Services and New Businesses
James E. Skinner........................ 44 Executive Vice President, Chief Financial Officer, Treasurer
and Assistant Secretary
Michael J. Edwards...................... 37 Senior Vice President--Operations
Paul F. Ewert........................... 49 Senior Vice President--Merchandising
Harold D. Greenberg..................... 50 Senior Vice President--Inventory Management
Jack Littman-Quinn...................... 42 Senior Vice President--Mail Order
Melvin D. McCall........................ 52 Senior Vice President--Human Resources
Barry C. McCook......................... 49 Senior Vice President--Operations
Stuart M. Needleman..................... 49 Senior Vice President and President--CompUSA Direct
Mark R. Walker.......................... 40 Senior Vice President--General Counsel and Secretary
Anthony A. Weiss........................ 30 Senior Vice President--Direct Sales and Distribution
Aka A. DeMesa........................... 46 Vice President--Commercial Products
Rick L. Fountain........................ 44 Vice President--Technical Services
J. Robert Gary.......................... 42 Vice President--Finance
Robyn Gatch-Priest...................... 47 Vice President, Controller and Assistant Treasurer
Dina M. Gundelfinger.................... 33 Vice President--Advertising
Dr. James L. Infinger................... 40 Vice President--Information Systems and Chief Information Officer
Leslie C. Marshall...................... 52 Vice President--Loss Prevention
Robert S. Seay.......................... 34 Vice President--Technological Training
Ronald D. Strongwater................... 54 Vice President--Real Estate
</TABLE>
See "Proposal No. 1 -- Election of Directors" for biographical information
regarding Mr. Halpin.
Harold F. Compton has served as Executive Vice President and Chief
Operating Officer since January 1995. In July 1996, Mr. Compton was promoted to
the additional position of President--CompUSA Stores. He served as Executive
Vice President--Operations from August 1994 to January 1995. Prior to joining
the Company, Mr. Compton served as President and Chief Operating Officer of
Central Electric Inc., from December 1993 to August 1994. Previously, Mr.
Compton had served as Executive Vice President--Operations & Human Resources of
HomeBase, a home center warehouse retailer, from 1989 to 1993. Mr. Compton is
also a director of Jumbo Sports, Inc., and Stage Stores, Inc.
J. Samuel Crowley has served as Executive Vice President--Operations since
March 1995. He served as Vice President--Operations, East from April 1994 to
March 1995, as Vice President--Retail Sales from July 1993 to April 1994 and as
a Regional Manager from 1989 to July 1993. Prior to joining the Company, Mr.
Crowley was employed by The Federated Group, a chain of consumer electronics
stores, for eight years, serving as Vice President/General Manager from 1987 to
1988 and as Regional Vice President from 1984 to 1987.
8
<PAGE>
Ronald J. Gilmore has served as Executive Vice President--Marketing since
May 1997. He served as Senior Vice President--Marketing & Advertising from May
1994 to May 1997 and as Vice President--Advertising & Sales Promotion from July
1993 to April 1994. Prior to joining the Company, Mr. Gilmore served as Vice
President--Marketing of the Good Guys!, Inc., a consumer electronics retailer,
from April 1993 to July 1993. Mr. Gilmore was employed by HomeBase from April
1991 to April 1993, serving as Vice President--Marketing & Advertising. From
April 1990 to April 1991, Mr. Gilmore was employed by Montgomery Ward, Inc., a
chain of retail department stores, as Media Director, and from 1989 to 1990, he
was employed by Harte Hanks Communications, Inc., serving as Director of
Advertising Sales of the Boston Newspaper Group.
Lawrence N. Mondry has served as Executive Vice President--Merchandising
since December 1993. He served as Senior Vice President and General Merchandise
Manager from 1990 to December 1993. Prior to joining the Company, Mr. Mondry was
employed by Highland Superstores, Inc., a chain of retail appliance and consumer
electronics stores, from 1983 to 1990, serving as Vice President and National
Merchandise Manager from 1988 to 1990.
Paul B. Poyfair has served as Executive Vice President--Services and New
Businesses since May 1997. He served as Senior Vice President--Services &
Administration from October 1995 to May 1997 and as Senior Vice President--Human
Resources, Training and Administration from December 1993 to October 1995 and as
Vice President--Human Resources from September 1993 to December 1993. Prior to
joining the Company, Mr. Poyfair was employed by HomeBase from October 1990 to
September 1993, serving as Vice President--Human Resources, and by Kenworth
Truck Company, a manufacturer of heavy duty trucks, from 1986 to 1990, serving
as Director of Human Resources.
James E. Skinner has served as Executive Vice President, Chief Financial
Officer and Treasurer since September 1994. He served as Senior Vice President--
Finance and Planning and Chief Accounting Officer from December 1993 to
September 1994, as Vice President--Finance and Planning and Chief Accounting
Officer from June 1992 to December 1993, and as Vice President and Chief
Accounting Officer from September 1991 to June 1992. Mr. Skinner served as
Assistant Treasurer from October 1992 to September 1994 and has also served as
Assistant Secretary since October 1992. Prior to joining the Company, Mr.
Skinner was a partner of Ernst & Young, an international public accounting firm,
where he had been employed since 1975. Mr. Skinner is a Certified Public
Accountant.
Michael J. Edwards has served as Senior Vice President--Operations since
May 1997. He served as Vice President/Operations--West from November 1996 to May
1997, as a Regional Manager from October 1993 to November 1996, as a General
Manager of a CompUSA Computer Superstore from March 1991 to October 1993 and as
a Store Operations Manager from June 1990 to March 1991. Prior to joining the
Company, he served in several positions with Target, a retail division of Dayton
Hudson Corporation, most recently as Store Merchandise Manager.
Paul F. Ewert has served as Senior Vice President--Merchandising since May
1997. He served as Vice President--Merchandising & General Merchandise Manager
from February 1996 to May 1997. From January 1994 to February 1996, he served as
Vice President--Merchandising and from 1991 to January 1994, he served as Senior
Director of Hardware Merchandising. Prior to joining the Company, Mr. Ewert
served as Vice President--Fashion Accessories of Broadway Department Stores, a
regional chain of retail department stores, from 1990 to 1991. Mr. Ewert served
as General Manager and Regional Merchandiser of Target, from 1983 to 1990.
Harold D. Greenberg has served as Senior Vice President--Inventory
Management since May 1997. He served as Vice President--Inventory Management
from April 1994 to May 1997. Prior to joining the Company, he was employed by
Ames Department Stores, Inc., a regional chain of discount department stores,
where he served in several positions from 1989 to December 1993, most recently
as Director of Planning and Analysis.
Jack Littman-Quinn has served as Senior Vice President--Mail Order of the
Company since May 1996. Mr. Littman-Quinn served as President and Chief
Operating Officer of PCs Compleat, Inc., from 1991 to May 1996 (when the Company
acquired PCs Compleat, Inc.).
9
<PAGE>
Melvin D. McCall has served as Senior Vice President--Human Resources
since October 1995. He served as Vice President--Human Resources from May 1995
to October 1995. Prior to joining the Company, he was a principal of HR
Partners, a human resources consulting firm, from 1991 to May 1995. From 1987
to 1991, Mr. McCall served as Senior Vice President of Human Resources and
Administration of Dominick's Finer Foods, a regional supermarket chain.
Barry C. McCook has served as Senior Vice President--Operations since May
1997. He served as Vice President--Operations, East from March 1995 to May 1997.
Mr. McCook also served as Regional Manager of the Southeast from February 1994
to March 1995, as Vice President--Retail Sales from July 1993 to February 1994,
and as Regional Manager from 1990 to July 1993.
Stuart M. Needleman has served as Senior Vice President of the Company and
President of CompUSA Direct since June 1997. Prior to joining the Company, Mr.
Needleman was President of Work 'N Gear, a work wear chain, since October 1993.
From 1989 to 1993, he served as Chief Operating Officer at Casual Male, a retail
clothing store chain. From 1972 to 1989, Mr. Needleman was employed by Zayre
Corp., where he last held the position of Senior Vice President of Distribution
Services.
Mark R. Walker has served as Senior Vice President--General Counsel and
Secretary since November 1995. He served as Vice President--General Counsel and
Secretary from August 1993 to November 1995. Prior to joining the Company, he
was employed as Vice President, Secretary and General Counsel from May 1990 to
February 1993 by AmeriCredit Corp., an indirect consumer finance company. Mr.
Walker practiced general corporate and securities law from 1986 to 1990 with
Mayer, Brown & Platt in Chicago, Illinois.
Anthony A. Weiss has served as Senior Vice President--Direct Sales and
Distribution since May 1997. He served as Vice President--Direct Sales from
September 1995 to May 1997. Mr. Weiss joined the Company in 1988 and served in
various positions, including the positions of Regional Manager from 1992 to
February 1995 and Senior Director, Direct Sales from February 1995 to September
1995.
Aka A. DeMesa has served as Vice President--Commercial Products since
April 1996. From July 1995 to April 1996, he served as Senior Director--
Commercial Products for the Company. Prior to joining the Company, Mr. DeMesa
served as Vice President of Product Line Management & Purchasing of CompuCom
Systems, Inc., a corporate computer reseller, from 1992 to July 1995. From 1990
to 1992, he was Vice President of Product Management for Computer Factory, Inc.,
a CompuCom Systems, Inc. subsidiary.
Rick L. Fountain has served as Vice President--Technical Services since
July 1996. From September 1994 to July 1996, he served as Senior Director--
Technical Services and from February 1990 to September 1994, he served as the
East Coast Regional Manager of the Company. Prior to joining the Company, he was
employed by Federated Electronics Superstores, a chain of retail appliance and
consumer electronics stores, from 1985 to 1990, where he last held the position
of Vice President--Operations.
J. Robert Gary has served as Vice President--Finance since May 1996. Prior
to joining the Company, Mr. Gary served as Senior Vice President and Chief
Financial Officer of Wireless One, Inc., an owner and operator of wireless cable
television systems, from September 1995 to May 1996, and from 1992 to September
1995, he was Executive Vice President, Chief Operating Officer, and Chief
Financial Officer of Greentree Software, Inc., a developer of advanced
purchasing and material management software solutions. From 1990 to 1992, Mr.
Gary was employed as Vice President--Business Manager of the Trade Division of
Simon & Schuster.
Robyn Gatch-Priest has served as Vice President since January 1994 and as
Controller since 1991. Prior to joining the Company, she served as Chief
Financial Officer of Hofbauer, Inc., a software development firm, from 1989 to
1991. Ms. Gatch-Priest is a Certified Public Accountant.
Dina M. Gundelfinger has served as Vice President--Advertising since May
1997. Since joining the Company in 1988, Ms. Gundelfinger has served in a
variety of positions within the advertising department, including the positions
of Director--Advertising from 1991 to October 1995 and Senior Director--
Advertising from October 1995 to May 1997.
10
<PAGE>
Dr. James L. Infinger has served as Vice President--Information Systems and
Chief Information Officer since June 1994. Prior to joining the Company, he was
employed by Old American Insurance Services, a personal lines insurance company,
as Vice President--Data Processing from February 1992 to June 1994. From 1989 to
February 1992, Dr. Infinger was employed by Siemens Information Systems, an
international software and hardware vendor for the retail industry, serving as
Director of Systems Development for Retail.
Leslie C. Marshall has served as Vice President--Loss Prevention since July
1996. From 1992 to July 1996, he served as Senior Director--Loss Prevention of
the Company. Prior to joining the Company, Mr. Marshall served as Director of
Risk Management and Loss Prevention for Pic-"N"-Save Corporation, an inventory
close-out retailing chain, from 1986 to 1991.
Robert S. Seay has served as Vice President--Training since May 1997. Mr.
Seay has been employed by the Company since 1991 and has held various field
operation positions, including General Manager of a CompUSA Computer Superstore,
Regional Manager and most recently Senior Director--Training from November 1996
to May 1997. From 1984 to 1991, he was employed by Home Depot, Inc., a home
center warehouse retailer, in operations.
Ronald D. Strongwater has served as Vice President--Real Estate since
April 1994. Prior to joining the Company, he served as President of The RDS
GROUP, a nationwide real estate/management services consulting firm, from 1990
to April 1994. Mr. Strongwater also served as Senior Vice President--Real
Estate of Wickes Companies, Inc. from 1982 to 1990.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
OVERVIEW AND PHILOSOPHY
Recommendations regarding base salary and annual incentive compensation for
executive officers are prepared by the Compensation Committee and presented to
the Board of Directors for final approval. The Compensation Committee, which is
composed entirely of nonemployee directors, has access to independent
compensation data and has available to it advice and reports from outside
compensation consultants.
The objectives of the Company's executive compensation program are to:
. Support the achievement of desired Company performance.
. Provide competitive compensation that will attract and retain superior
talent and reward performance.
. Align the executive officers' interests with those of the stockholders by
placing a portion of their pay at risk because it is dependent upon
corporate performance, including the attainment of performance goals.
To achieve the above objectives, the Company's executive compensation
policies integrate annual base compensation with bonuses based on overall
corporate performance and individual initiatives and performance. The
measurement of corporate performance and the award of bonuses historically has
been based primarily upon the achievement of Company performance goals that are
reviewed and approved annually by the Compensation Committee. Beginning in
fiscal 1998, bonuses will be awarded to officers under the Bonus Plan, if it is
approved by the stockholders. See "Proposal No. 3--Approval of the CompUSA Inc.
Officers' Bonus Plan." Under the Bonus Plan, the performance goals may be based
on the performance of the Company generally (in the absolute or compared to its
peers) or the performance of a particular employee or the performance of the
subsidiary, division or other unit to which an employee is assigned. Performance
goals may vary between employees and will be weighted to reflect their relative
importance to the Company. For years in which performance goals are achieved or
exceeded, executive compensation tends to be higher than for years in which
performance goals are not achieved. Annual cash compensation, together with the
payment of long-term equity-based incentive compensation through stock options,
restricted stock and other equity-based awards, is designed to attract and
retain qualified executives and to ensure that such executives have a continuing
stake in the long-term success of the Company.
The executive compensation program is designed to provide an overall level
of compensation that is competitive within the retail industry, as well as with
a broader group of companies of comparable size and complexity. The actual
compensation levels of the Company's executive officers may be greater or less
than average compensation levels in other companies based upon annual and long-
term overall Company performance as
11
<PAGE>
well as individual performance. The Compensation Committee uses its discretion
to set executive compensation at levels warranted in its judgment by external,
internal and individual circumstances.
EXECUTIVE OFFICER COMPENSATION PROGRAM
The Company's executive officer compensation program is comprised of base
salary, annual cash incentive compensation, long-term incentive compensation in
the form of stock options, restricted stock and other equity-based awards, and
various benefits, including a 401(k) plan, deferred compensation plan and an
executive medical plan.
Base Salary
Subject to the provisions of any applicable employment agreements, in
fiscal 1997 base salary levels for the Company's executive officers, including
the Chief Executive Officer, were competitively set relative to companies in the
retail industry and other comparable companies. See "--Employment Agreements."
In determining salaries, the Compensation Committee took into account individual
experience and performance and specific issues particular to the Company,
counseled with an outside compensation consultant, and reviewed independent
compensation data to establish base salary levels that were within the range of
persons holding positions of comparable responsibility at other similarly
situated companies, both regionally and nationally.
Annual Cash Incentive Compensation
The Company maintains an annual incentive compensation plan for its
officers. Generally, incentive bonuses for senior executives, including the
Chief Executive Officer, are based on the Company achieving its targeted
earnings per share (the "EPS Target"). For example, if the EPS Target is
achieved, officers receive awards ranging from 30% to 40% of their respective
base salaries (each an "Award"). If the EPS Target is surpassed, an individual's
Award increases 2% to 12% for each percentage point by which reported earnings
per share exceeds the EPS Target, with no limit. If the EPS Target is not
achieved, an individual's Award decreases by 6.67% for each percentage point by
which reported earnings per share falls below the EPS Target. Thus, if reported
earnings per share falls 15% or more below the EPS Target, all Awards are
eliminated. Key management personnel other than officers also participate in
this plan and are eligible for Awards based on achievement of the EPS Target or
other performance goals. The Company is obligated to maintain an incentive
compensation plan during the terms of the employment agreements described below.
These incentive bonuses are reflected in the Summary Compensation Table below.
The Board of Directors has adopted the Bonus Plan, and stockholders are
being asked to consider and approve the Bonus Plan. If approved, annual cash
incentive compensation for the Company's officers will be paid pursuant to the
Bonus Plan beginning in fiscal 1998. Annual cash incentive compensation for
other key management personnel will continue to be paid under the existing plan
and will be unaffected by such approval of the Bonus Plan. See "Proposal No. 3--
Approval of the CompUSA Inc. Officers' Bonus Plan."
Long-Term Incentive Plan
The Long-Term Incentive Plan has been the Company's long-term incentive
plan for executive officers since 1990. The objectives of the Long-Term
Incentive Plan are to align executive and stockholder long-term interests by
creating a strong and direct link between executive compensation and stockholder
return and to enable executives to develop and maintain a significant long-term
ownership position in the Common Stock. The Long-Term Incentive Plan provides
for awards of stock options, restricted stock, stock appreciation rights,
performance shares and stock units, or any combination thereof. A further
purpose of the Long-Term Incentive Plan is to provide a means by which the
Company may attract able persons to become directors of the Company and to
provide directors with additional incentive and reward opportunities designed to
strengthen their concern for the welfare of the Company and its stockholders.
The total number of shares of Common Stock issuable pursuant to the Long-Term
Incentive Plan is 16,788,736. As of the Record Date, 3,962,533 shares of Common
Stock remained available for awards under the Long-Term Incentive Plan. In
administering the Long-Term Incentive Plan, the Compensation Committee has
discretion to determine, among other things, the specific types of awards to be
granted, to whom they will be granted and the number of shares of Common Stock
subject to such awards.
12
<PAGE>
CompSavings Plan for Employees of CompUSA Inc.
The CompSavings Plan for Employees of CompUSA Inc. (the "401(k) Plan") is
intended to enable eligible employees of the Company to accumulate capital for
their future economic security, encourage eligible employees to remain in the
service of the Company and provide incentives for employee performance on behalf
of the Company. All employees of the Company are eligible to participate in the
401(k) Plan if they have attained age 21 and completed six months of service
with a minimum of 500 hours worked during that period. An eligible employee may
elect to make pre-tax contributions to the 401(k) Plan through payroll
deductions in an amount up to 15% of such employee's compensation, subject to
certain limitations contained in the Internal Revenue Code. The 401(k) Plan
provides for Company matching contributions equal to 25% of an eligible
employee's pre-tax contributions with respect to the first 5% of such employee's
compensation. Company matching contributions are made one-fourth in cash and
the remaining three-fourths in Common Stock. In addition, the Company may elect
to make supplemental matching contributions in an amount based on the Company's
profitability for the fiscal year that ends within the 401(k) Plan's fiscal
year. The 401(k) Plan is a defined contribution retirement plan within the
meaning of Section 401(a) of the Code. Participants in the 401(k) Plan may
direct the investment of their 401(k) Plan accounts among specified investment
funds, including a fund that invests primarily in Common Stock. The 401(k) Plan
is administered by the CompSavings Plan Committee, which is comprised of James
F. Halpin, James E. Skinner and Melvin D. McCall.
CompUSA Inc. Deferred Compensation Plan
The CompUSA Inc. Deferred Compensation Plan (the "SERP") is a supplemental
executive retirement plan maintained in conjunction with the 401(k) Plan that is
intended to provide certain benefits to a select group of the Company's
management and highly compensated employees. The SERP is a nonqualified plan
for federal income tax purposes that allows eligible employees to make pre-tax
contributions through payroll deductions in excess of certain limitations
imposed on pre-tax contributions by these employees to the 401(k) Plan.
Eligible employees who make pre-tax contributions to the SERP are eligible to
receive an allocation of Company matching contributions on the same basis as
Company matching contributions to the 401(k) Plan. The SERP is administered by
the CompSavings Plan Committee.
PCs Compleat, Inc. Plans
In connection with its acquisition of PCs Compleat, Inc., which has been
integrated into the Company's CompUSA Direct division, the Company assumed all
outstanding obligations under PCs Compleat's stock option and 401(k) plans. The
Company has reserved 650,826 shares of Common Stock for issuance upon exercise
of options granted under the PCs Compleat stock option plan. Neither the
Company nor CompUSA Direct intends to issue any additional stock options or make
any additional contributions under these plans.
Benefits
The Company provides medical benefits to its executive officers pursuant to
an executive medical plan.
This report of the Compensation Committee on executive compensation is
submitted by the current members of the committee as noted below:
Warren D. Feldberg
Leonard L. Berry, Ph.D.
Denise Ilitch Lites
Kevin J. Roche
Ms. Ilitch Lites was first elected to the Board of Directors and appointed
to the Compensation Committee in January 1997 and did not participate in the
decisions regarding the executive officer compensation program described in the
foregoing report.
13
<PAGE>
SUMMARY COMPENSATION TABLE
The following contains information concerning the compensation earned by,
awarded to or paid to the Company's Chief Executive Officer and each of the
other four most highly compensated executive officers of the Company
(collectively, the "Named Officers") for services rendered to the Company during
fiscal years 1995 through 1997.
<TABLE>
<CAPTION>
Long-Term Compensation
-------------------------------------
Annual Compensation Awards Payouts
-------------------------------------------- -------------------------------------
Securities
Restricted Underlying
Other Annual Stock Options/ LTIP All Other
Fiscal Salary Bonus Compensation Award(s) SARS Payouts Compensation
Name and Principal Position Year ($) ($) (1) ($) (2) ($) (3) (#) (4) ($) ($) (5)
- ----------------------------------------------------------------------------- ----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James F. Halpin 1997 836,544 744,851 -- 248,751 1,331,591 -- 4,750
President and Chief 1996 653,078 1,496,003 -- -- 142,276 -- 9,370
Executive Officer 1995 550,000 440,000 -- 232,502 262,492 -- --
Harold F. Compton 1997 584,619 521,926 -- 213,216 955,597 -- 4,750
Executive Vice President and 1996 420,193 842,189 203,195 (6) -- 40,652 -- 9,370
Chief Operating Officer and 1995 332,292 217,708 327,944 (7) 200,005 280,860 -- --
President--CompUSA Stores
J. Samuel Crowley 1997 275,038 184,018 -- 81,540 348,572 -- 4,750
Executive Vice President-- 1996 204,404 351,038 -- -- 15,204 -- 8,501
Operations 1995 160,067 85,866 -- 71,033 34,512 -- --
Lawrence N. Mondry 1997 344,425 229,692 -- 81,540 348,572 -- 4,750
Executive Vice President-- 1996 273,264 469,924 -- -- 15,204 -- 7,750
Merchandising 1995 236,905 142,143 -- 71,033 38,512 -- --
James E. Skinner 1997 293,071 195,854 -- 81,540 348,572 -- 4,750
Executive Vice President, 1996 220,769 379,500 -- -- 15,204 -- 8,501
Chief Financial Officer, 1995 189,250 113,550 -- 71,033 46,512 -- --
Treasurer and Assistant
Secretary
</TABLE>
______________
(1) Includes bonuses earned in fiscal 1995, 1996 and 1997, respectively, under
the incentive compensation plans of the Named Officers that were or are to
be paid in fiscal 1996, 1997 and 1998, respectively.
(2) Except for the compensation for Mr. Compton noted below, no compensation
was paid to any of the Named Officers during fiscal 1995, 1996 or 1997 that
constituted Other Annual Compensation. In fiscal 1995, 1996 and 1997, the
value of perquisites and other personal benefits, if any, did not equal or
exceed the lesser of $50,000 or 10% of the total amount of annual salary
and bonus for any Named Officer.
(3) The aggregate value of the restricted stock awards at the end of fiscal
1997 is: $1,133,458, $974,051, $353,384, $353,384 and $353,384 for Messrs.
Halpin, Compton, Crowley, Mondry and Skinner, respectively. The number of
shares of restricted stock held by Messrs. Halpin, Compton, Crowley, Mondry
and Skinner at the end of the last fiscal year is 52,262; 44,912; 16,294;
16,294; and 16,294, respectively. Restrictions lapse after five years,
subject to accelerated vesting if specific performance goals are met;
however, such vesting period will not be less than three years. Holders
of restricted stock are entitled to receive any dividends paid to holders
of Common Stock.
(4) Options to acquire shares of Common Stock under the Long-Term Incentive
Plan. See "EXECUTIVE COMPENSATION -- Executive Officer Compensation
Program -- Long-Term Incentive Plan."
(5) Reflects the Company's contributions to the 401(k) Plan and the SERP in
respect of these individuals.
(6) Of this amount, $86,628 constitutes reimbursement of relocation expenses
and $98,073 constitutes reimbursement of additional federal income taxes
incurred by Mr. Compton due to his receipt of certain payments in respect
of his relocation in fiscal 1995.
(7) Of this amount, $187,631 constitutes reimbursement of relocation expenses
and $129,313 constitutes reimbursement of federal income taxes incurred by
Mr. Compton due to his receipt of certain payments in respect of his
relocation in fiscal 1995.
14
<PAGE>
OPTION GRANTS DURING FISCAL 1997
The following table sets forth information regarding stock options granted
to Named Officers during fiscal 1997 pursuant to the Long-Term Incentive Plan.
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------------------
Number of
Securities % of Total Potential Realizable Value at Assumed
Underlying Options/SARs Assumed Annual Rates of Stock Price
Options/SARs Granted to Exercise or Price Appreciation For Option
Granted Employees in Base Price Expiration Term (1)
-------------------------------------
Name (#)(2)(3) Fiscal Year (2) ($/Share) (4) Date 5% ($) 10% ($)
- ----------------------- --------------------------------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
James F. Halpin 333,334 7.0% 22.50 8/16/06 3,733,592 10,388,245
333,334 7.0% 27.50 8/16/06 2,066,922 8,721,575
333,332 7.0% 32.50 8/16/06 400,249 7,054,862
81,591 1.7% 20.50 2/02/07 1,052,075 2,666,149
250,000 5.2% 27.50 2/24/07 1,473,625 6,419,250
Harold F. Compton 226,666 4.8% 22.50 8/16/06 2,538,829 7,063,971
226,666 4.8% 27.50 8/16/06 1,405,499 5,930,641
226,668 4.8% 32.50 8/16/06 272,172 4,797,354
25,597 0.5% 20.50 2/02/07 330,061 836,433
250,000 5.2% 27.50 2/24/07 1,473,625 6,419,250
J. Samuel Crowley 113,334 2.4% 22.50 8/16/06 1,269,426 3,532,017
113,334 2.4% 27.50 8/16/06 702,756 2,965,347
113,332 2.4% 32.50 8/16/06 136,083 2,398,634
8,572 0.2% 20.50 2/02/07 110,532 280,107
Lawrence N. Mondry 113,334 2.4% 22.50 8/16/06 1,269,426 3,532,017
113,334 2.4% 27.50 8/16/06 702,756 2,965,347
113,332 2.4% 32.50 8/16/06 136,083 2,398,634
8,572 0.2% 20.50 2/02/07 110,532 280,107
James E. Skinner 113,334 2.4% 22.50 8/16/06 1,269,426 3,532,017
113,334 2.4% 27.50 8/16/06 702,756 2,965,347
113,332 2.4% 32.50 8/16/06 136,083 2,398,634
8,572 0.2% 20.50 2/02/07 110,532 280,107
</TABLE>
____________________
(1) The potential realizable values shown in the table illustrate the values
that might be realized upon exercise of the options immediately prior to
the expiration of their terms, based on the difference between the
appreciated value of the Common Stock over the ten-year term of the options
(assuming the specified compounded rates of appreciation) and the exercise
price of the options. These amounts do not take into account provisions
providing for termination of options following termination of employment,
nontransferability or vesting over periods of up to four years.
(2) The Company has not granted any stock appreciation rights (SARs).
(3) All options have ten-year terms. The options granted on August 16, 1996
vest with respect to one-fourth of the shares covered thereby annually
beginning May 8, 1997, and the options granted on February 2, 1997 and
February 24, 1997 vest with respect to one-third of the shares covered
thereby annually beginning on the first anniversary of the date of grant.
In the event of a change in control of the Company (as defined in the Long-
Term Incentive Plan), however, any unexercisable portion of the options
will become immediately exercisable. Except for incentive stock options
covering an aggregate of 7,764 shares granted to Mr. Compton, an aggregate
of 975 shares granted to Mr. Crowley, an aggregate of 1,965 shares granted
to Mr. Mondry and an aggregate of 11,861 shares granted to Mr. Skinner, all
options set forth in the table are nonqualified options.
(4) The exercise price of the options granted on February 2, 1997 was equal to
the fair market value of the Common Stock on the date of grant. The
exercise price of the options granted on February 24, 1997 was greater than
the fair market value of the Common Stock ($20.50) on the date of grant.
The options granted on August 16, 1996 have three exercise prices, each of
which is applicable to approximately one-third of the total shares covered
by the option and was greater than the fair market value of the Common
Stock ($20.69) on the date of grant. Each of the three tranches of the
options granted on August 16, 1996 is reflected in the table as if it were
a separate option.
15
<PAGE>
AGGREGATED OPTION EXERCISES DURING FISCAL 1997 AND FISCAL YEAR END OPTION VALUES
The following table provides information regarding options exercised by the
Named Officers during fiscal 1997 and the number and value of options held at
fiscal year end. The Company does not have any outstanding stock appreciation
rights.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs at Fiscal Year Options/SARs at Fiscal Year
Shares Value End (#) End ($) (2)
--------------------------------- -------------------------------
Acquired on Realized
Name Exercise (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
- -------------------------------------------------------------------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
James F. Halpin 39,336 862,953 1,105,082 1,391,941 13,419,365 4,722,939
Harold F. Compton -- -- 370,788 906,321 3,571,345 2,077,164
J. Samuel Crowley -- -- 170,079 298,757 1,303,538 524,427
Lawrence N. Mondry 12,586 182,695 124,959 286,547 698,098 363,367
James E. Skinner 320,400 8,365,771 145,073 289,215 1,012,478 412,708
</TABLE>
____________________
(1) Value is calculated based on the difference between the closing price of
the Common Stock on the date of exercise and the per share option exercise
price multiplied by the number of shares to which the exercise relates.
(2) The closing price of the Common Stock on the NYSE on June 28, 1997, was
$21.688 per share. In-the-money option values are calculated on the basis
of the difference between $21.688 and the per share option exercise price
multiplied by the number of shares of Common Stock purchasable under the
option.
EMPLOYMENT AGREEMENTS
Halpin Agreement. The Company is a party to an employment agreement with
James F. Halpin (the "Halpin Agreement") dated August 16, 1996, pursuant to
which Mr. Halpin currently serves as President and Chief Executive Officer. The
Halpin Agreement provides for annual salary increases at the sole discretion of
the Compensation Committee of the Board of Directors. Mr. Halpin's current
annual base salary is $850,000. In addition, Mr. Halpin is eligible to receive
in respect of each fiscal year an incentive bonus determined in accordance with
the management incentive bonus plan. See "Report of the Compensation Committee
on Executive Compensation -- EXECUTIVE OFFICER COMPENSATION PROGRAM -- Annual
Cash Incentive Compensation." The term of employment under the Halpin Agreement
will expire on August 15, 2000. Mr. Halpin has agreed to certain noncompetition
restrictions with the Company during the term of the Halpin Agreement and for
two years thereafter. The Halpin Agreement provides for certain severance
arrangements. See "--Severance Arrangements."
Compton Agreement. The Company is a party to an employment agreement with
Harold F. Compton (the "Compton Agreement") dated August 16, 1996, pursuant to
which Mr. Compton currently serves as Executive Vice President, Chief Operating
Officer and President--CompUSA Stores. The Compton Agreement provides for annual
salary increases at the sole discretion of the Compensation Committee of the
Board of Directors. Mr. Compton's current annual base salary is $600,000. In
addition, Mr. Compton is eligible to receive in respect of each fiscal year an
incentive bonus determined in accordance with the management incentive bonus
plan. See "Report of the Compensation Committee on Executive Compensation --
EXECUTIVE OFFICER COMPENSATION PROGRAM -- Annual Cash Incentive Compensation."
The term of employment under the Compton Agreement will expire on August 15,
2000. Mr. Compton has agreed to certain noncompetition restrictions with the
Company during the term of the Compton Agreement and for two years thereafter.
The Compton Agreement provides for certain severance arrangements. See "--
Severance Arrangements."
16
<PAGE>
Crowley Agreement. The Company is a party to an employment agreement with
J. Samuel Crowley (the "Crowley Agreement") dated May 1, 1996, as amended,
pursuant to which Mr. Crowley currently serves as Executive Vice President--
Operations. The Crowley Agreement provides for annual salary increases at the
sole discretion of the Compensation Committee of the Board of Directors. Mr.
Crowley's current annual base salary is $285,000. In addition, Mr. Crowley is
eligible to receive in respect of each fiscal year an incentive bonus determined
in accordance with the management incentive bonus plan. See "Report of the
Compensation Committee on Executive Compensation -- EXECUTIVE OFFICER
COMPENSATION PROGRAM -- Annual Cash Incentive Compensation." The term of
employment under the Crowley Agreement will expire on May 1, 1998. Mr. Crowley
has agreed to certain noncompetition restrictions with the Company during the
term of the Crowley Agreement and for two years thereafter. The Crowley
Agreement provides for certain severance arrangements. See "--Severance
Arrangements."
Mondry Agreement. The Company is a party to an employment agreement with
Lawrence N. Mondry (the "Mondry Agreement") dated May 1, 1996, as amended,
pursuant to which Mr. Mondry currently serves as Executive Vice President--
Merchandising. The Mondry Agreement provides for annual salary increases at the
sole discretion of the Compensation Committee of the Board of Directors. Mr.
Mondry's current annual base salary is $345,000. In addition, Mr. Mondry is
eligible to receive in respect of each fiscal year an incentive bonus determined
in accordance with the management incentive bonus plan. See "Report of the
Compensation Committee on Executive Compensation -- EXECUTIVE OFFICER
COMPENSATION PROGRAM -- Annual Cash Incentive Compensation." The term of
employment under the Mondry Agreement will expire on May 1, 1998. Mr. Mondry has
agreed to certain noncompetition restrictions with the Company during the term
of the Mondry Agreement and for two years thereafter. The Mondry Agreement
provides for certain severance arrangements. See "--Severance Arrangements."
Skinner Agreement. The Company is a party to an employment agreement with
James E. Skinner (the "Skinner Agreement") dated May 1, 1996, as amended,
pursuant to which Mr. Skinner currently serves as Executive Vice President and
Chief Financial Officer. The Skinner Agreement provides for annual salary
increases at the sole discretion of the Compensation Committee of the Board of
Directors. Mr. Skinner's current annual base salary is $300,000. In addition,
Mr. Skinner is eligible to receive in respect of each fiscal year an incentive
bonus determined in accordance with the management incentive bonus plan. See
"Report of the Compensation Committee on Executive Compensation --EXECUTIVE
OFFICER COMPENSATION PROGRAM -- Annual Cash Incentive Compensation." The term of
employment under the Skinner Agreement will expire on May 1, 1998. Mr. Skinner
has agreed to certain noncompetition restrictions with the Company during the
term of the Skinner Agreement and for two years thereafter. The Skinner
Agreement provides for certain severance arrangements. See "--Severance
Arrangements."
SEVERANCE ARRANGEMENTS
The Halpin, Compton, Crowley, Mondry and Skinner Agreements provide for
severance payments to such officers upon termination of their employment by the
Company other than for "cause," as defined in the agreements. Under the Halpin
Agreement, Mr. Halpin is entitled to receive the amount of his monthly base
salary (at the rate in effect immediately prior to termination of employment) as
severance pay for a period of 48 months following termination of employment.
Under the Compton Agreement, Mr. Compton is entitled to receive the amount of
his monthly base salary (at the rate in effect immediately prior to termination
of employment) as severance pay for a period of 36 months following termination
of employment. Under the Crowley, Mondry and Skinner Agreements, each is
entitled to receive the amount of his monthly base salary (at the rate in effect
immediately prior to termination of employment) as severance pay for a period of
18 months following termination of employment.
The agreements provide for lump sum severance payments in lieu of the
foregoing payments upon termination of employment in connection with a "change
in control" (as defined in the agreements) of the Company. The Company's
obligations under the agreements apply to specified employment terminations
during the 90-day period preceding a change in control and to any employment
termination (other than one due to death) during the 12-month period following a
change in control. The amount of the lump sum severance payment is equal to 2.99
times the sum of the following: (i) the terminated executive's annual base pay,
(ii) two times the terminated executive's target bonus for the bonus period in
which the change in control occurs and (iii) the terminated executive's
annualized automobile allowance, all determined at the time of employment
termination. The lump sum payment also includes a payment in lieu of continued
group insurance coverage and an amount necessary to reimburse the terminated
executive for excise taxes, if any, that the executive may be expected to incur
as a result of the severance payments. Under the agreements, the Company is
obligated to reimburse the executive for
17
<PAGE>
outplacement consulting service costs incurred during the two-year period
following employment termination in connection with a change in control. The
agreements provide that Messrs. Halpin, Compton, Crowley, Mondry and Skinner, if
requested by the Company, will enter into consulting agreements with the Company
for a period of six months following termination of employment in connection
with a change in control. Modified noncompetition restrictions apply for a
period of two years under the agreements in the event of employment termination
in connection with a change in control.
Officers of the Company who are not Named Officers have employment
agreements that provide for severance payments upon termination by the Company
of employment other than for "cause" as defined in the agreements. The
agreements provide for severance payments for periods of 18, 12 and six months
following termination of employment of Executive Vice Presidents, Senior Vice
Presidents and Vice Presidents, respectively. The agreements also provide for
lump sum severance payments in lieu of the foregoing payments upon termination
of employment in connection with a change in control of the Company. The change
in control severance provisions of the agreements with officers of the Company
who are not Named Officers are substantially similar to the change in control
severance provisions of the Named Officers; provided that for Vice Presidents,
(i) the amount of the lump sum severance payments will be equal to 1.00 times
the sum of the items enumerated in the preceding paragraph, (ii) consulting
agreements are not required and (iii) modified noncompetition restrictions apply
for a period of one year.
Key employees not covered by employment agreements are covered by a plan
containing severance provisions substantially similar to the change in control
severance provisions contained in the agreements of the Named Officers; provided
that the amount of the lump sum severance payments will be equal to .50 times
the sum of the terminated employee's annual base pay, target bonus and
annualized automobile allowance. Key employees not covered by employment
agreements are not required to enter into consulting agreements following
termination of employment in connection with a change in control and are not
subject to noncompetition restrictions at any time. The plan covers over 110 key
employees and expires May 1, 1998; provided that if a change in control of the
Company occurs prior to May 1, 1998, the plan will continue for a period of 12
months following the change in control.
SECTION 16 REQUIREMENTS
Section 16(a) of the Exchange Act requires the Company's directors and
officers, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes of
ownership with the Commission. Based solely on its review of the copies of such
forms received by it, and written representations from certain reporting
persons, the Company believes that during fiscal 1997 all filing requirements
applicable to its directors, officers and greater than 10% beneficial owners
were complied with.
18
<PAGE>
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total stockholder return on Common
Stock with the cumulative total return on the stocks comprising the NYSE
Composite Index (the "NYSE Index"), the Standard & Poor's Retail--Specialty
Index and the Standard & Poor's Retail Composite Index for the periods from June
27, 1992 through June 28, 1997 (assuming the investment of $100 on June 27,
1992, in Common Stock and the stocks comprising the NYSE Index, the Standard &
Poor's Retail--Specialty Index and the Standard & Poor's Retail Composite Index,
and reinvestment of all dividends).
Standard & Poor's has discontinued the publication of its Retail--Specialty
Index. The Company has elected to replace such index in future years with
Standard & Poor's Retail Composite Index. In accordance with the rules and
regulations of the Commission, both indices are included in the graph for this
transitional year. Information regarding the performance of the Retail--
Specialty Index was compiled for the Company based on published information
regarding the performance of the component companies' stock.
Standard & Poor's Retail--Specialty Index included nine companies, all of
which are included in Standard & Poor's Retail Composite Index. The companies
whose stocks comprise the Standard & Poor's Retail Composite Index are
Albertsons, Inc.; American Stores Company; AutoZone, Inc.; Charming Shoppes;
Circuit City Stores, Inc.; Costco Companies, Inc.; CVS Corp.; Dayton Hudson
Corp.; Dillards, Inc.; Federated Department Stores; GAP, Inc.; Giant Food, Inc.;
Great Atlantic & Pacific Tea Company; Harcourt General, Inc.; Home Depot, Inc.;
K-Mart Corp.; Kroger Company; Limited, Inc.; Longs Drug Stores, Inc.; Lowe's
Companies, Inc.; May Department Stores Companies; Mercantile Stores Company,
Inc.; Nordstrom, Inc.; J.C. Penney Company; Pep Boys-Manny, Moe & Jack; Rite Aid
Corporation; Sears Roebuck & Company; Sherwin-Williams Company; Tandy
Corporation; TJX Companies, Inc.; Toys R Us, Inc.; Wal-Mart Stores; Walgreen
Company; Winn-Dixie Stores, Inc.; and Woolworth Corp.
COMPARISON OF CUMULATIVE TOTAL RETURN ON COMMON STOCK, STANDARD & POOR'S
RETAIL--SPECIALTY INDEX, STANDARD & POOR'S RETAIL COMPOSITE INDEX AND NYSE INDEX
<TABLE>
<CAPTION>
- ---------------------------------------------FISCAL YEAR ENDING----------------
COMPANY 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
CompUSA (1) 100 136.32 36.32 126.32 287.37 362.11
Industry Index (old)(2) 100 124.19 119.56 116.74 144.55 175.46
Industry Index (new)(3) 100 112.88 112.49 121.55 145.00 176.20
Broad Market (4) 100 113.41 117.36 140.09 175.27 228.94
</TABLE>
_____________
(1) Common Stock
(2) Standard & Poor's Retail--Specialty Index
(3) Standard & Poor's Retail Composite Index
(4) NYSE Index
19
<PAGE>
PROPOSAL NO. 2
AMENDMENT OF THE CHARTER TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK
The Board of Directors has unanimously approved, subject to approval by the
stockholders of the Company, a proposal to amend the Fourth Article of the
Charter to increase the number of shares of Common Stock authorized and
available for issuance from 200,000,000 to 325,000,000.
Management believes that this amendment would benefit the Company by
providing greater flexibility to the Board of Directors to issue additional
equity securities, for example, to raise additional capital, to facilitate
possible future acquisitions, to provide stock-related employee benefits and to
effect stock splits of the outstanding Common Stock. If the amendment is
approved at the Meeting, generally, no stockholder approval would be necessary
for the issuance of all or any portion of the additional shares of Common Stock
unless required by law or any rules or regulations to which the Company is
subject. However, as long as the Common Stock is quoted for trading through the
NYSE, the flexibility that this amendment would provide the Board of Directors
will be limited by the rules of such exchange which, as presently in effect,
would generally require stockholder approval for the issuance of Common Stock
when: (i) a stock option or purchase plan is to be established or other
arrangements made pursuant to which Common Stock may be acquired by directors or
officers, except for warrants or rights issued generally to securityholders of
the Company or broadly-based plans or arrangements including other employees;
(ii) a business, a company, tangible or intangible assets or property, or
securities representing any such interest, are to be acquired, directly or
indirectly, from a director, officer or substantial securityholder of the
Company (including its subsidiaries, affiliates or other closely related
persons) or from any company or party in which one of such persons has a
substantial direct or indirect interest if the number of shares of Common Stock
to be issued or the number of shares of Common Stock into which the securities
may be convertible exceeds one percent of the number of shares of Common Stock,
or one percent of the voting power, outstanding before the issuance; (iii)
Common Stock or securities convertible into or exercisable for Common Stock are
to be issued in any transaction or series of related transactions, other than a
public offering for cash, if (a) the Common Stock to be issued has, or will have
upon issuance, voting power equal to or in excess of 20% of the voting power
outstanding before the issuance of such Common Stock or securities convertible
into or exercisable for Common Stock, or (b) the number of shares of Common
Stock to be issued is, or will be, equal to or in excess of 20% of the number of
shares of Common Stock outstanding before the issuance of the Common Stock; or
(iv) the issuance would result in a change in control of the Company.
Although the Company considers from time to time mergers, acquisitions and
other transactions that may involve the issuance of additional shares of Common
Stock (any one or more of which may be under consideration or acted upon at any
time), the Company is not a party to any agreements with respect to any such
transactions, nor does it have any agreements, commitments or understandings
with respect to such transactions or that would involve the issuance of
additional shares of Common Stock in amounts that would exceed the number of
currently authorized and unissued shares.
Depending upon the consideration per share received by the Company for any
subsequent issuance of Common Stock, such issuance could have a dilutive effect
on those stockholders who paid a higher consideration per share for their stock.
Also, future issuances of Common Stock will increase the number of outstanding
shares, thereby decreasing the percentage ownership in the Company (for voting,
distributions and all other purposes) represented by existing shares of Common
Stock. The availability for issuance of the additional shares of Common Stock
may be viewed as having the effect of discouraging an unsolicited attempt by
another person or entity to acquire control of the Company. Although the Board
of Directors has no present intention of doing so, the Company's authorized but
unissued Common Stock could be issued in one or more transactions that would
make a takeover of the Company more difficult or costly, and therefore less
likely. The Company is not aware of any person or entity who is seeking to
acquire control of the Company. Holders of Common Stock do not have any
preemptive rights to acquire any additional securities issued by the Company.
20
<PAGE>
As of the Record Date, 91,844,120 shares of Common Stock were outstanding
and 14,161,006 shares of Common Stock were reserved for issuance pursuant to the
Company's employee benefit plans. Accordingly, only an additional 93,994,874
unreserved shares of Common Stock are available for issuance under the Charter.
If the proposed amendment to the Charter is not adopted, it would be necessary
to convene a special meeting of stockholders before the Company could consummate
any transaction in which the number of shares of Common Stock that would be
issued, together with all other new issuances of Common Stock after the Record
Date, would exceed 93,994,874. This could potentially add to the costs of a
proposed transaction and the added time necessary to prepare for and hold a
stockholders meeting could serve as a disincentive for third parties otherwise
interested in making an investment in, or entering into other transactions with,
the Company. It is for these and similar reasons that companies have a
substantial number of authorized and unissued shares available for issuance.
VOTE REQUIRED
Adoption of the proposal to amend the Charter to increase the number of
authorized shares of Common Stock requires the affirmative vote of the holders
of a majority of the outstanding shares of Common Stock on the Record Date. If
approved by the stockholders, such increase in the number of authorized shares
will become effective upon the filing with the Secretary of State of the State
of Delaware of an amended and restated Charter setting forth such increase.
Unless otherwise instructed, it is the intent of the persons named in the Proxy
to vote all Proxies FOR the adoption of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT TO THE COMPANY'S
CHARTER TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK TO 325,000,000.
PROPOSAL NO. 3
APPROVAL OF THE COMPUSA INC. OFFICERS' BONUS PLAN
The Board of Directors adopted the Bonus Plan. Stockholders are being asked
to consider and approve the Bonus Plan. Section 162(m) of the Internal Revenue
Code ("Section 162(m)") limits the federal income tax deduction that the Company
may take for compensation paid to "Covered Employees" unless certain
requirements are satisfied. Section 162(m) places a $1,000,000 limit on the
deduction that may be taken for compensation paid to any Covered Employee unless
the compensation satisfies the criteria for an exemption. One exemption applies
to compensation that is based on the attainment of objective performance goals
established in advance by a committee of two or more outside directors if the
material terms of the performance goal under which the compensation is to be
paid are disclosed to and approved by stockholders. "Covered Employees" are the
chief executive officer of the Company and the four highest compensated officers
(other than the chief executive officer) as determined pursuant to the executive
compensation disclosure rules under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The Bonus Plan is intended to preserve the
deductibility of incentive compensation paid to Bonus Plan participants who are
Covered Employees.
SUMMARY OF THE BONUS PLAN
The following summary of the Bonus Plan is qualified in its entirety by
reference to the copy of the Bonus Plan attached to this Proxy Statement as
Exhibit A.
Purpose. The purpose of the Bonus Plan is to provide incentive compensation
opportunities for certain officers of the Company and its affiliates. The Bonus
Plan is designed to assist in the attraction, motivation and retention of
superior talent at the officer level, to align the officers' interests with
those of the stockholders by placing a portion of their pay at risk depending
upon corporate performance, and to support the achievement of desired Company
performance. Participants in the Bonus Plan will have the opportunity to earn
awards upon the attainment of performance goals established by the Compensation
Committee as promptly as practicable but in any event within the first 90 days
of each fiscal year.
Eligibility. All employees of the Company or any affiliate thereof who are
"officers" of the Company as defined in Rule 16a-1(f) promulgated by the
Commission under Section 16 of the Exchange Act are eligible to participate in
the Bonus Plan.
21
<PAGE>
An employee must be employed in a "Bonus Eligible Position" as of the last
day of the fiscal year and have at least 30 consecutive days of service in a
Bonus Eligible Position during the fiscal year in order to be eligible to
receive an award for that fiscal year. A "Bonus Eligible Position" is a position
of employment with the Company or one of its affiliates that is designated by
the Compensation Committee or management of the Company or any of its affiliates
as eligible for an award under the Bonus Plan. An employee whose employment
terminates during the fiscal year for any reason other than disability,
retirement or death is not eligible to receive an award for that fiscal year.
For purposes of determining an employee's period of service in a Bonus Eligible
Position during a fiscal year and for purposes of determining whether an
employee is employed in a Bonus Eligible Position on the last day of a fiscal
year, an employee is deemed to be employed if on vacation or on family and
medical leave. A participant whose employment terminates due to disability,
retirement or death is eligible for a pro rata award for that year if the
participant completes at least 30 consecutive days of service in a Bonus
Eligible Position during the year.
Bonus Plan Administration. The Compensation Committee has the right and
authority to adopt, amend or rescind administrative and interpretive rules and
regulations relating to the Bonus Plan, to construe the Bonus Plan, to make all
other determinations necessary or advisable for administering the Bonus Plan,
and to exercise the powers conferred on the Compensation Committee under the
Bonus Plan. The Compensation Committee may correct any defect or supply any
omission or reconcile any inconsistency in the Bonus Plan in the manner and to
the extent it shall deem expedient to carry it into effect, and it is the sole
and final judge of such expediency. The following persons currently are members
of the Compensation Committee: Warren D. Feldberg (Chairman), Dr. Leonard Berry,
Kevin J. Roche and Denise Ilitch Lites. The Board of Directors has the exclusive
authority to amend, modify, suspend or terminate the Bonus Plan at any time with
or without notice, except that no amendment, modification, suspension or
termination may in any manner adversely affect the right of any participant to
receive any amount to which such participant has become entitled. To qualify for
the exemption from the deduction limitation of Section 162(m), stockholders must
approve certain material amendments to the Bonus Plan, such as a change in the
business criteria upon which performance goals are based, the maximum amount of
a participant's bonus, and a change in the class of employees eligible to
participate in the Bonus Plan.
Calculation of Award. The awards granted pursuant to the Bonus Plan are
determined according to a formula based on several factors, which include target
performance goals, threshold levels of performance, individual target award
levels, and the participant's base earnings. For this purpose, base earnings are
defined as the base earnings paid to the participant while serving in a Bonus
Eligible Position during the fiscal year. As soon as practicable but in any
event within the first 90 days of each fiscal year, the Compensation Committee
will establish target award levels expressed as a percentage of a participant's
base earnings for the year, the performance goals and the respective threshold
and target levels of performance associated with each. The performance goals
established by the Compensation Committee for a fiscal year may be based on one
or more of the following factors: earnings per share, stock price, cash flow,
gross income, net income, operating income, inventory shrinkage, expense levels,
debt balance, debt ratings, total stockholder return, return on investment,
return on equity, economic value added, production volumes, gross margin
dollars, sales, or net asset value per share. The Compensation Committee may
establish other performance goal criteria for any participant as it determines
to be appropriate, even though any award or portion of an award paid to a
participant that is based upon such a performance goal criteria will not qualify
for exemption from the deduction limitation of Section 162(m). The performance
goals may be based on the performance of the Company generally, in the absolute
or in relation to its peers, or the performance of a particular employee, or the
performance of a particular division, department, branch, subsidiary or other
unit to which a particular employee is assigned. Different performance goals may
be established for different participants. Each performance goal will be
weighted to reflect its relative importance to the Company's business plan for
the year. The sum of the weightings of the target performance goals for a
participant for the year must equal 100 percent.
As promptly as practicable but in any event within 75 days after the end of
each fiscal year, the Compensation Committee will certify performance scores for
each performance goal for each participant. Each participant's award will then
be determined by multiplying the target award by the performance score; provided
that no award will be made in respect of any performance goal unless the
threshold level of performance has been achieved. At any time during a fiscal
year, the Compensation Committee will have the discretion to reduce (but not
increase after the first 90 days of the fiscal year) the factors entering into
the calculation of any participant's award for the year. The maximum award that
may be paid to any single participant pursuant to the Bonus Plan based upon
attainment of performance goals for a fiscal year is $5,000,000.
22
<PAGE>
In addition to the awards based upon attainment of performance goals as set
forth above, the Compensation Committee may, in its sole discretion, grant ad
hoc bonuses pursuant to the Bonus Plan to any participant or group of
participants in such amount or amounts as it determines to be appropriate based
upon such factors as it deems to be relevant. Any such ad hoc bonuses must be
paid within 75 days following the end of the fiscal year. Ad hoc bonuses will be
subject to the deduction limitation of Section 162(m).
Payment of Awards. Awards under the Bonus Plan will be paid in cash within
75 days following the end of the fiscal year.
EFFECT OF STOCKHOLDER APPROVAL
If approved by the stockholders, the Bonus Plan will be effective as of
June 29, 1997 and, except as noted above, awards paid under the Bonus Plan will
be exempt from the deduction limitation of Section 162(m). It would be necessary
for the stockholders to approve the material terms of the Bonus Plan at their
annual meeting held in 2002 for awards paid under the Bonus Plan thereafter to
be exempt from the deductions limitation of Section 162(m).
VOTE REQUIRED
Approval of the Bonus Plan requires the affirmative vote of a majority of
the shares of Common Stock present or represented at the Meeting and voting
thereon. Unless otherwise instructed or restricted, it is the intent of the
persons named in the Proxy to vote Proxies FOR the adoption of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
PROPOSAL TO APPROVE THE BONUS PLAN.
POSSIBLE BONUS PAYMENTS IF STOCKHOLDERS FAIL TO APPROVE THE BONUS PLAN
IF THE STOCKHOLDERS FAIL TO APPROVE THE BONUS PLAN, THE COMPENSATION
COMMITTEE COULD MEET THEREAFTER AND ADOPT THE SAME TYPES OF FORMULAS FOR BONUSES
AS PROPOSED HEREIN, ALTHOUGH THE COMPANY HAS MADE NO COMMITMENT TO DO SO.
BONUSES PAID PURSUANT TO SUCH FORMULAS WOULD BE SUBJECT TO THE DEDUCTION
LIMITATION OF SECTION 162(M). THERE CAN BE NO ASSURANCES THAT THE COMPENSATION
COMMITTEE WOULD NOT ADOPT THE SAME TYPES OF FORMULAS FOR BONUSES OR THAT THE
BONUSES WOULD NOT BE PAID IF STOCKHOLDERS DO NOT APPROVE THE BONUS PLAN.
PROPOSAL NO. 4
INDEPENDENT AUDITORS
Upon the recommendation of the Audit Committee and subject to ratification
by the stockholders at the Meeting, the Board of Directors has selected Ernst &
Young LLP to audit the consolidated financial statements of the Company for
fiscal 1998. Ernst & Young LLP has served the Company in this capacity since
1988. Representatives of Ernst & Young LLP are expected to be present at the
Meeting, will have the opportunity to make a statement if they desire to do so,
and will be available to respond to appropriate questions.
VOTE REQUIRED
Ratification of the selection of the Company's independent auditors
requires the affirmative vote of a majority of the shares of Common Stock
present or represented at the Meeting and voting thereon. Unless otherwise
instructed or restricted, it is the intent of the persons named in the Proxy to
vote Proxies FOR ratification of the selection of the Company's independent
auditors.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
PROPOSAL TO RATIFY THE SELECTION OF THE COMPANY'S INDEPENDENT AUDITORS.
23
<PAGE>
STOCKHOLDERS' PROPOSALS
Stockholders may submit proposals on matters appropriate for stockholder
action at subsequent annual meetings of the Company consistent with Rule 14a-8
promulgated under the Exchange Act and the Company's Bylaws. For such a proposal
to be considered for inclusion in the Proxy Statement and Proxy relating to the
1998 annual meeting of stockholders, the proposal must contain the information
required by the Company's Bylaws and must be received by the Company not later
than May 29, 1998 in accordance with Rule 14a-8. In addition, the Company's
Bylaws provide that a stockholder desiring to submit a proposal to an annual
meeting of stockholders generally must deliver written notice of such proposal,
together with the information required by the Bylaws, to the Secretary of the
Company no later that 75 days prior to the date on which, in the immediately
preceding year, the annual meeting of stockholders was held. For such a proposal
to be considered for inclusion on the agenda for the 1998 annual meeting of
stockholders, the proposal and the required information must be received by the
Company no later than August 22, 1998. Such proposals should be directed to
CompUSA Inc., 14951 North Dallas Parkway, Dallas, Texas 75240, Attention:
Secretary.
OTHER BUSINESS
The Board of Directors knows of no matters other than those described
herein that will be presented for consideration at the Meeting. However, should
any other matters properly come before the Meeting or any adjournments thereof,
it is the intention of the persons named in the Proxy to vote on such matters in
accordance with their best judgment in the interest of the Company.
MISCELLANEOUS
All costs incurred in the solicitation of Proxies will be borne by the
Company. In addition to solicitation by mail, employees of the Company may
solicit Proxies by telephone, or personally, without additional compensation.
The Company may also make arrangements with brokerage houses and other
custodians, nominees and fiduciaries for the forwarding of solicitation
materials to the beneficial owners of shares of Common Stock held of record by
such persons, and the Company may reimburse such brokerage houses and other
custodians, nominees and fiduciaries for their out-of-pocket expenses incurred
in connection with these activities. In addition, Corporate Investor
Communications, Inc. ("CIC") may be retained by the Company to aid in the
solicitation of Proxies. If CIC is so retained, it would solicit Proxies by
mail, telephone, telegraph and personal interview and may request brokerage
houses and other custodians, nominees and fiduciaries to forward soliciting
material to beneficial owners of shares of Common Stock held of record by such
persons. For these services, CIC would be paid fees not to exceed $7,500 and
would be reimbursed for its expenses.
ANNUAL REPORT
Accompanying this Proxy Statement is a copy of the Company's Annual Report
to Stockholders for the fiscal year ended June 28, 1997.
By Order of the Board of Directors
Mark R. Walker
Senior Vice President--General
Counsel and Secretary
Dallas, Texas
September 26, 1997
24
<PAGE>
EXHIBIT A
COMPUSA INC.
OFFICERS' BONUS PLAN
ARTICLE I
PURPOSE OF THE PLAN
The purpose of this CompUSA Inc. Officers' Bonus Plan is to provide incentive
compensation opportunities for certain officers of the Company and its
affiliates. The Plan is designed to assist in the attraction, motivation and
retention of superior talent at the officer level, align the officers' interests
with those of the stockholders by placing a portion of their pay at risk
depending upon corporate performance, and support the achievement of desired
Company performance. Participants in the Plan will have the opportunity to earn
Awards upon the attainment of Performance Goals established by the Compensation
Committee as promptly as practicable but in any event within the first 90 days
of each Plan Year.
ARTICLE II
DEFINITIONS
When used in the Plan, the following terms shall have the following meanings:
2.1 Award means an annual incentive compensation award under the Plan.
2.2 Base Earnings means base earnings paid to a Participant while serving in a
Bonus Eligible Position during the Plan Year.
2.3 Board of Directors means the Board of Directors of the Company.
2.4 Bonus Eligible Position means a position of employment with the Company, or
one of its affiliates, that is designated by the Compensation Committee or
management of the Company or any of its affiliates as eligible for an
Award.
2.5 Company means CompUSA Inc., a Delaware corporation.
2.6 Compensation Committee means the Compensation Committee of the Board of
Directors, which will have overall responsibility for administering the
Plan.
2.7 Disability: the "Disability" of a Participant shall be deemed to have
occurred whenever a Participant is rendered unable to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or
that has lasted or can be expected to last for a continuing period of not
less than twelve months. In the case of any dispute, the determination of
Disability will be made by a licensed physician selected by the
Compensation Committee, which physician's decision will be final and
binding.
2.8 Participant means any employee of the Company or any affiliate thereof who
is described as eligible to participate in the Plan as set forth in Article
III hereof.
2.9 Performance Goals means the performance goals established each Plan Year
pursuant to the Plan against which performance will be measured.
2.10 Plan means this CompUSA Inc. Officers' Bonus Plan, effective as of June
29, 1997, as set forth herein.
2.11 Plan Year means the performance period of the Plan, which shall be
commensurate with the Company's fiscal year.
2.12 Retirement means resignation by the Participant on or after the date on
which the Participant has served the Company or one or more of its
affiliates for at least five years in the aggregate.
<PAGE>
2.13 Target Award means an Award that may be earned by a Participant for service
in a Bonus Eligible Position upon attainment of all Performance Goals at
the Target Level of Performance. The amount of the Target Award for a
Participant shall be equal to that Participant's Base Earnings multiplied
by the Target Percentage.
2.14 Target Percentage means the percentage (which may exceed 100%) of Base
Earnings of each Participant determined by the Compensation Committee
pursuant to Section 5.1.
2.15 Target Level of Performance means the level of performance of a Performance
Goal that, if attained, will entitle the Participant to 100% of the portion
of the Target Award that is related to that Performance Goal.
2.16 Threshold Level of Performance means the minimum level of attainment of a
Performance Goal that will entitle the Participant to some percentage, less
than 100%, of the portion of the Target Award that is related to that
Performance Goal.
ARTICLE III
ELIGIBILITY
3.1 Subject to the further provisions of this Article III, all employees of the
Company or an affiliate thereof who are "officers" of the Company as
defined in Rule 16a-1(f) promulgated by the Securities and Exchange
Commission under Section 16 of the Securities Exchange Act of 1934, as
amended, are eligible to participate in the Plan.
3.2 An employee must be employed (including approved annual vacation leave) in
a Bonus Eligible Position as of the last day of the Plan Year and have at
least 30 consecutive days of service in a Bonus Eligible Position during
the Plan Year in order to be eligible to receive an Award for such Plan
Year. An employee whose employment terminates during the Plan Year for any
reason other than those reasons set forth in Section 3.4 is not eligible to
receive an Award for such Plan Year.
3.3 Any provision of the Plan to the contrary notwithstanding: (i) for purposes
of determining an employee's period of service in a Bonus Eligible Position
during a Plan Year, any period of approved annual vacation leave, and any
period of a leave of absence (whether paid or unpaid) to which the employee
is entitled pursuant to the Family and Medical Leave Act, shall be included
as service for such Plan Year; and (ii) for purposes of determining whether
an employee is employed in a Bonus Eligible Position as of the last day of
a Plan Year, an employee on a leave of absence as of the last day of a Plan
Year (whether paid or unpaid) to which the employee is entitled pursuant to
the Family and Medical Leave Act who was employed in a Bonus Eligible
Position when such leave of absence commenced, shall be deemed to be
employed as of such date.
3.4 Any Participant whose employment terminates during a Plan Year (but prior
to the last day of such Plan Year) due to Disability, Retirement or death
shall be eligible for an Award for the Plan Year based on the Participant's
service in a Bonus Eligible Position during the Plan Year, provided such
Participant has completed 30 consecutive days of service in a Bonus
Eligible Position during the Plan Year. In the event of an employee's
death, the beneficiary of the employee under the Plan shall be the same as
the Participant's designated beneficiary under the CompSavings Plan for
Employees of CompUSA Inc.
(ii)
<PAGE>
ARTICLE IV
ADMINISTRATION OF THE PLAN; AMENDMENT AND TERMINATION
4.1 The Plan shall be administered by the Compensation Committee. Subject to
the provisions of the Plan, the Compensation Committee shall have the right
and authority, in its sole and absolute discretion, to: (i) adopt, amend or
rescind administrative and interpretive rules and regulations relating to
the Plan, (ii) construe the Plan, (iii) make all other determinations
necessary or advisable for administering the Plan and (iv) exercise the
powers conferred on the Compensation Committee under the Plan. The
Compensation Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Plan in the manner and to the extent it
shall deem expedient to carry it into effect, and it shall be the sole and
final judge of such expediency. The determinations of the Compensation
Committee on the matters referred to in this Section 4.1 shall be final and
binding.
4.2 Subject to the provisions of the Plan, the Board of Directors shall have
the exclusive authority to amend, modify, suspend or terminate the Plan at
any time with or without notice; provided that no amendment, modification,
suspension or termination of the Plan shall in any manner adversely affect
the right of any Participant to receive any amount to which such
Participant has become entitled prior to such amendment, modification,
suspension or termination.
ARTICLE V
DETERMINATION OF BONUS ELIGIBLE POSITIONS, PERFORMANCE GOALS AND TARGETS
5.1 As promptly as practicable but in any event within the first 90 days of
each Plan Year, the Compensation Committee shall determine (i) Bonus
Eligible Positions (which determination may be delegated to management of
the Company or any of its affiliates), (ii) Performance Goals for each
Participant, (iii) the Threshold Level of Performance and the Target Level
of Performance for each Performance Goal of each Participant and (iv) the
Target Percentage for each Participant. The Performance Goals established
by the Compensation Committee for a Plan Year may be based on earnings per
share, stock price, cash flow, gross income, net income, operating income,
inventory shrinkage, expense levels, debt balance, debt ratings, total
stockholder return, return on investment, return on equity, economic value
added, production volumes, gross margin dollars, sales or net asset value
per share. The Performance Goals may be based on (i) the performance of the
Company generally, in the absolute or in relation to its peers, (ii) the
performance of a particular Participant or (iii) the performance of a
particular division, department, branch, subsidiary or other unit to which
a Participant is assigned. If the Compensation Committee determines that
any Participant shall have more than one Performance Goal, each Performance
Goal shall be weighted (expressed as a percentage) to reflect its relative
importance to the Company's business plan for the Plan Year. The sum of the
weightings of the Performance Goals for a Participant for the Plan Year
shall equal 100%.
5.2 In addition to the Performance Goals established by the Compensation
Committee pursuant to Section 5.1, the Compensation Committee may, in its
sole discretion, establish Performance Goals for any Participant or group
of Participants for any Plan Year based on such factors other than those
listed in Section 5.1 as the Compensation Committee determines to be
appropriate for such Plan Year, even though any Award or portion of an
Award paid to a Participant that is based upon a Performance Goal not
listed in Section 5.1 may not qualify for exemption from the deduction
limitations of Section 162(m) of the Internal Revenue Code of 1986.
5.3 At any time during a Plan Year, the Compensation Committee may, in its sole
discretion, but subject to Section 4.2, cancel or revise its
determinations for such Plan Year made with respect to (i) Bonus Eligible
Positions, (ii) Performance Goals for each Participant, (iii) the Threshold
Level of Performance and the Target Level of Performance for each
Performance Goal of each Participant and (iv) the Target Percentage for
each Participant; provided that no revision that might result in an
increase of the amount of a Participant's Award for a Plan Year may be made
after the first 90 days of the Plan Year.
(iii)
<PAGE>
ARTICLE VI
AMOUNT OF AWARDS
6.1 As promptly as practicable but in any event within 75 days after the end of
each Plan Year, a performance score, expressed as a percentage (which may
exceed 100%), shall be determined by management of the Company or any of
its affiliates and certified in writing by the Compensation Committee for
each Performance Goal of each Participant, with the degree of achievement
based upon actual performance compared to the Target Level of Performance.
If the degree of achievement for any Performance Goal is less than the
Threshold Level of Performance for such Performance Goal, the performance
score shall be zero.
6.2 If for any Plan Year a Participant has only one Performance Goal, the
Participant's Award for such Plan Year shall be determined by multiplying
the Participant's Target Award by the performance score applicable to such
Performance Goal as determined pursuant to Section 6.1. If more than one
Performance Goal has been established for a Participant, the amount of the
Participant's Award shall be determined by multiplying the Participant's
Target Award by a cumulative performance score that takes into account the
Participant's degree of achievement of each Performance Goal as well as the
weightings of all Performance Goals. Any provision of the Plan to the
contrary notwithstanding, the maximum Award that may be paid to any
Participant for a Plan Year calculated as described above shall be
$5,000,000.
6.3 In addition to the Awards based upon attainment of Performance Goals as set
forth above, the Compensation Committee may, in its sole discretion, grant
ad hoc bonuses to any Participant or group of Participants in such amount
or amounts as it shall determine to be appropriate based upon such factors
as it shall deem to be relevant. Any such ad hoc bonuses shall be paid
within 75 days following the end of the Plan Year.
ARTICLE VII
FORM AND TIMING OF AWARDS
7.1 Awards under the Plan shall be paid in cash by the Company, or with respect
to a Participant in the employ of an affiliate, by such affiliate, within
75 days following the end of the Plan Year. Awards shall be subject to the
normal rules and regulations regarding withholding for taxes and other
deductions, if any, as may be in effect from time to time.
ARTICLE VIII
NO RIGHT OF EMPLOYMENT
8.1 Nothing in the Plan, including the employee's eligibility for participation
in the Plan, will confer upon such employee any right with respect to the
continuation of such employee's employment by the Company or an affiliate
thereof or interfere in any way with the right of the Company or an
affiliate thereof at any time to terminate such employment or to increase
or decrease the compensation of the employee.
ARTICLE IX
MISCELLANEOUS
9.1 A Participant shall not have the right to anticipate, alienate, sell,
transfer, assign, pledge, or encumber his or her right to receive any
Award.
9.2 The Plan is intended to constitute an unfunded plan of incentive
compensation. No Participant shall have any lien on or rights with respect
to any assets of the Company or any affiliate thereof that are greater than
those of a general creditor by reason of any rights to any Award.
9.3 The adoption of the Plan or any modification or amendment hereof does not
imply any commitment to continue or adopt the same plan, or any
modification hereof, or any other plan for incentive compensation for any
succeeding year.
(iv)
<PAGE>
9.4 The internal laws of the State of Texas (and not the principles relating to
conflicts of laws) shall govern the Plan.
9.5 The Plan shall be binding upon and inure to the benefit of the successors
and assigns of the Company and its affiliates.
9.6 The Plan shall be deemed adopted by the Board of Directors as of June 29,
1997. The Plan shall be deemed effective as of that date, provided it is
duly approved by the holders of a majority of the shares of Common Stock of
the Company present, or represented, and entitled to vote at the 1997
annual meeting of stockholders of the Company. If the Plan is not approved
by the stockholders at the 1997 annual meeting of stockholders, the Plan
shall terminate and all actions taken hereunder shall be null and void.
(v)
<PAGE>
COMPUSA INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD NOVEMBER 5, 1997
The undersigned hereby appoints Giles H. Bateman and Harold F. Compton,
each with the power to act without the other and with full power of
substitution, as Proxies to vote, as designated below, all stock of CompUSA Inc.
owned by the undersigned at the Annual Meeting of Stockholders to be held at The
Grand Kempinski Hotel, 15201 North Dallas Parkway, Dallas, Texas on Wednesday,
November 5, 1997, at 10:00 a.m., local time, and at any adjournments of the
meeting, upon such business as may properly come before the meeting, including
the following:
1. Election as directors of the three nominees listed below.
[_] FOR all nominees listed below [_] WITHHOLD AUTHORITY to vote
(except as indicated to the for all nominees listed below
contrary below): (or to withhold authority to vote
for any nominees, strike a line
through the nominee's name
below):
James F. Halpin Denise Ilitch Lites Lawrencem Mittman
2. Approval of the amendment to the Restated and Amended Certificate of
Incorporation to increase the number of authorized shares of Common Stock
from 200,000,000 to 325,000,000.
[_] FOR [_] AGAINST [_] ABSTAIN
3. Approval of the adoption of the CompUSA Inc. Officers' Bonus Plan.
[_] FOR [_] AGAINST [_] ABSTAIN
4. Approval of the selection of Ernst & Young LLP as the Company's independent
auditors for the fiscal year ending June 27, 1998.
[_] FOR [_] AGAINST [_] ABSTAIN
5. In their discretion on any other matter that may properly come before the
meeting and any adjournments thereof.
(CONTINUED, AND TO BE SIGNED AND DATED, ON THE REVERSE SIDE)
________________________________________________________________________________
<PAGE>
The shares represented by this proxy will be voted as directed. WHERE NO
DIRECTION IS GIVEN, THE SHARES WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES
NAMED IN PROPOSAL NO. 1 AND FOR THE APPROVAL OF PROPOSALS 2, 3 AND 4.
Please sign below, date and return promptly.
Dated:____________________,1997
_______________________________
Signature
_______________________________
(Signature if held jointly)
IMPORTANT: Please sign exactly
as name appears to the left.
When signing on behalf of a
corporation, partnership,
estate, trust or in other
representative capacity, please
sign name and title. If
executed by a corporation, the
proxy should be signed by a
duly authorized officer. If
executed by a partnership,
please sign in the partnership
name by an authorized person.
For joint accounts, each joint
owner must sign.
THIS PROXY MAY BE REVOKED PRIOR TO THE EXERCISE OF THE POWERS CONFERRED BY THE
PROXY.
