COMPUSA INC, DEF 14A, 1999-09-21

COMPUSA INC
DEF 14A, 1999-09-21
COMPUTER & COMPUTER SOFTWARE STORES

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<PAGE>
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant /X/
Filed by a party other than the Registrant / /

Check the appropriate box:
/ / 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)

- --------------------------------------------------------------------------------
(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)(1)
and 0-11

(1) Title of each class of securities to which transaction applies:

------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:

------------------------------------------------------------------------
(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):

------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:

------------------------------------------------------------------------
(5) Total fee paid:

------------------------------------------------------------------------

/ / 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:

------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:

------------------------------------------------------------------------
(3) Filing Party:

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(4) Date Filed:

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<PAGE>

COMPUSA INC.
14951 NORTH DALLAS PARKWAY
DALLAS, TEXAS 75240

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 3, 1999

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 Hotel Inter-Continental, 15201 North Dallas Parkway, Dallas, Texas, on
November 3, 1999, at 8:00 a.m., local time, for the following purposes:

(1) To elect three members of the Board of Directors for the term
of office stated in the Proxy Statement.

(2) To amend the CompUSA Inc. Long-Term Incentive Plan to (i)
increase by 7,500,000 the number of shares of Common Stock
authorized for issuance under the Long-Term Incentive Plan;
and (ii) extend the term of the Long-Term Incentive Plan
through August 31, 2009.

(3) To consider and ratify the selection of the Company's
independent auditors.

(4) To transact any other business that may properly come before
the Meeting and any adjournments thereof.

The close of business on September 8, 1999, 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 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

/s/ Mark R. Walker

Mark R. Walker
SENIOR VICE PRESIDENT-GENERAL
COUNSEL AND SECRETARY

Dallas, Texas
September 24, 1999

<PAGE>

COMPUSA INC.
14951 NORTH DALLAS PARKWAY
DALLAS, TEXAS 75240

PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 3, 1999

This Proxy Statement is first being mailed on September 24, 1999, 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 Hotel Inter-Continental, 15201 North Dallas Parkway, Dallas, Texas,
on Wednesday, November 3, 1999, at 8:00 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 proposal to amend the
CompUSA Inc. Long-Term Incentive Plan (the "Long-Term Incentive Plan") to (a)
increase the number of shares of Common Stock authorized for issuance thereunder
by 7,500,000, and (b) extend the term thereof through August 31, 2009; (iii) FOR
the ratification of the selection of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending June 24, 2000 ("fiscal 2000");
and (iv) 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 its 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 dated Proxy or by voting the shares in person at the
Meeting. If not revoked, all shares represented by properly executed Proxies
will be voted as specified therein or as noted above, as applicable.

RECORD DATE AND VOTING SECURITIES

The record date for determining the stockholders entitled to notice of
and to vote at the Meeting and any adjournments thereof is the close of business
on September 8, 1999 (the "Record Date"), at which time 91,766,129 shares of the
Company's Common Stock, $.01 per share par value ("Common Stock"), were
outstanding. Common Stock is the only class of outstanding voting securities of
the Company.

QUORUM AND VOTING

The presence at the Meeting, in person or by proxy, of the holders of a
majority of the Common Stock issued and outstanding and entitled to vote thereat
is necessary to constitute a quorum to transact business. Each share represented
at the Meeting in person or by proxy will be counted 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
voted at the Meeting. 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.

<PAGE>

In order for certain stock options granted under the Long-Term
Incentive Plan to qualify as "incentive stock options" under Section 422 of the
Internal Revenue Code, approval of Proposal No. 2 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 this proposal may be
specified and will be counted for purposes of determining the number of shares
present or represented at the Meeting and entitled to vote thereon. As a result,
abstentions will have the same effect as votes against this proposal.

Ratification of the selection of the Company's independent auditors, as
provided in Proposal No. 3, requires the affirmative vote of a majority of the
shares of Common Stock present or represented at the Meeting and entitled to
vote thereon. Abstentions on this proposal may be specified and will be counted
for purposes of determining the number of shares present or represented at the
Meeting and entitled to vote thereon. As a result, abstentions will have the
same effect as votes against this proposal.

Under the rules of the New York Stock Exchange (the "NYSE"), brokers
who hold shares in street name have discretionary authority to vote on routine
items even if they have not received instructions from the beneficial owner, who
is the person entitled to vote such shares. However, brokers do not have
authority to vote on certain "nonroutine" items without such instructions. The
NYSE reviews proxy statements, determines which items are routine and which are
nonroutine, and then notifies its member brokers as to the nonroutine items over
which they have no discretionary authority. Any 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. The effect of broker nonvotes on any
particular matter depends on the vote required to approve the matter. For
matters requiring the affirmative vote of a plurality of the shares of Common
Stock voted at the Meeting, such as Proposal No. 1, broker nonvotes have no
effect on the outcome of the vote. 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 thereon, such as Proposal No. 2 and Proposal No. 3, broker
nonvotes are not counted as among the shares entitled to vote with respect to
such matter, and thus have the effect of reducing the number of affirmative
votes required to approve the proposal and the number of negative votes or
abstentions required to block such approval.

<PAGE>

PRINCIPAL STOCKHOLDERS AND MANAGEMENT OWNERSHIP

The following table sets forth information as of September 10, 1999,
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) each of 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>
Grupo Sanborns, S.A. de C.V. (4)
Av. San Fernando 649
Colonia Pena Pobre, Tlalpan
Mexico, D.F. 14060
Mexico 12,930,000 14.1%

Massachusetts Financial Services Company (5)
500 Boylston Street
Boston, Massachusetts 02116 6,483,373 7.1%

Pilgrim Baxter & Associates, Ltd. (6)
11255 Drummers Lane, Suite 300
Wayne, Pennsylvania 19067 6,314,500 6.9%

FMR Corp. (7)
82 Devonshire Street
Boston, Massachusetts 02109 5,191,200 5.7%

Giles H. Bateman 343,752 *
Leonard L. Berry, Ph.D. 40,880 *
Warren D. Feldberg 74,804 *
James F. Halpin 2,743,841 2.9%
Morton E. Handel 6,489 *
Lawrence Mittman 14,388 *
Kevin J. Roche 210,136 *
Barry L. Williams 2,764 *
Harold F. Compton 1,572,521 1.7%
J. Samuel Crowley 497,593 *
Lawrence N. Mondry 827,561 *
James E. Skinner 594,629 *
All directors and executive officers as a group (40 persons) 9,020,345 9.3%

</TABLE>

- -------------------

* Less than 1.0%

(1) "Beneficial owner" means generally any person who, directly or
indirectly, has or shares voting power or investment power with respect
to a security. All information with respect to the beneficial ownership
of any stockholder has been furnished by such stockholder and the
Company believes that, except as otherwise indicated, each stockholder
has sole voting and investment power with respect to shares listed as
beneficially owned by such stockholder.

(2) Includes shares of Common Stock issuable upon exercise of options that
were exercisable on the Record Date or within 60 days thereafter by
Messrs. Bateman, Berry, Feldberg, Halpin, Handel, Mittman, Roche,
Williams, Compton, Crowley, Mondry, Skinner and all directors and
executive officers as a group, with such shares numbering 150,892;
33,380; 39,804; 1,968,491; 3,489; 14,388; 33,380; 2,764; 1,113,991;
361,260; 284,347; 349,995 and 5,369,082, respectively.

(NOTES CONTINUED ON FOLLOWING PAGE)

3
<PAGE>

(NOTES CONTINUED FROM PREVIOUS PAGE)

(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 195,614;
174,823; 92,572; 92,572; 92,572 and 1,420,501, respectively. The
vesting of these restricted stock awards may be accelerated if
specified performance goals are met. See "EXECUTIVE COMPENSATION -
Summary Compensation Table."

(4) Amount in the table reflects number of shares beneficially owned as of
September 10, 1999, according to a Schedule 13G filed September 10,
1999, with the Securities and Exchange Commission (the "Commission") by
Grupo Sanborns, S.A. de C.V. ("Grupo Sanborns") jointly with Grupo
Carso, S.A. de C.V., ("Grupo Carso") and Carlos Slim Helu, Carlos Slim
Domit, Marco Antonio Domit, Patrick Slim Domit, Maria Soumaya Slim
Domit. Vanessa Paolo Slim Domit and Johanna Monique Slim Domit (such
individuals collectively the "Slim Family"). All shares reflected in
the table are directly owned by Grupo Sanborns. As parent company of
Grupo Sanborns, Grupo Carso is deemed a beneficial owner of such
shares. The Slim Family, directly and through their ownership of a
majority of the voting and economic interests in a trust and a
corporation, owns a majority of the outstanding voting equity
securities of Grupo Carso, and each member of the Slim Family is
therefore also deemed a beneficial owner of such shares. All shares are
held subject to shared voting power and dispositive power among Grupo
Sanborns, Grupo Carso and the Slim Family. Beneficial ownership of the
securities of an issuer may be reported on a Schedule 13G only in the
event that the reporting person has acquired such securities in the
ordinary course of business and not with the purpose nor with the
effect of changing or influencing the control of the issuer, nor in
connection with or as a participant in any transaction having such
purpose or effect.

(5) Based on a Report on Schedule 13G dated February 11, 1999, which was
filed with the Commission by Massachusetts Financial Services Company
("MFS"). MFS reported sole voting power with respect to 6,403,873
shares and sole dispositive power with respect to all 6,483,373 shares.

(6) 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.

(7) Based on a Report on Schedule 13G dated January 7, 1999, which was
jointly filed with the Commission by FMR Corp. ("FMR"), Edward C.
Johnson 3d and Abigail P. Johnson. FMR reported sole voting power with
respect to 52,000 shares and sole dispositive power with respect to all
5,191,200 shares. Mr. Johnson and Ms. Johnson reported sole dispositive
power with respect to all 5,191,200 shares.

PROPOSAL NO. 1

ELECTION OF DIRECTORS

The Board of Directors is divided into three classes of three directors
each 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 Restated and Amended Certificate of Incorporation (the
"Charter") provides that the number of directors will not be less than three nor
greater than thirteen and will be divided into three classes as nearly equal in
number as the then authorized number of directors permits. The Bylaws of the
Company provide that the number of directors will be established by resolution
of the Board of Directors within the limitations set forth in the Charter.
Effective March 2, 1999, Denise Illitch resigned as a member of the Board of
Directors, and a vacancy will exist on the Board of Directors until a
replacement for Ms. Ilitch is appointed by the Board of Directors.

The Board of Directors has approved the recommendation of the
Nominating and Governance Committee that Warren D. Feldberg, Kevin J. Roche, and
Barry L. Williams be submitted as nominees to the stockholders to serve
three-year terms as directors expiring at the 2002 annual meeting of
stockholders and until their successors are elected and have qualified. Messrs.
Feldberg, Roche and Williams 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.

<PAGE>

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
AS YEAR
DIRECTOR TERM
NAME AGE POSITION WITH THE COMPANY SINCE EXPIRES
- ------------------------------------------- ----- ------------------------------------------------ ---------- ---------
<S> <C> <C> <C> <C>
Nominees for three-year terms ending
in 2002:
Warren D. Feldberg (1) 49 Director 1992 1999
Kevin J. Roche (1) (2) 41 Director 1989 1999
Barry L. Williams (3) 55 Director 1997 1999

Continuing directors:
James F. Halpin (2) (4) 48 President, Chief Executive Officer and Director 1993 2000
Lawrence Mittman (3) 48 Director 1995 2000
Giles H. Bateman (2) (4) 54 Chairman of the Board of Directors 1991 2001
Leonard L. Berry, Ph.D. (1) 56 Director 1993 2001
Morton E. Handel (2) (3) 64 Director 1997 2001

</TABLE>

- -----------------

(1) Member of the Compensation Committee
(2) Member of the Finance Committee
(3) Member of the Audit Committee
(4) Member of the Nominating and Governance Committee

Warren D. Feldberg has served as a director of the Company since
October 1992. Since September 1999, Mr. Feldberg has been President and Chief
Executive Officer of U.S. Office Products Company, a direct provider of office
supplies, office furniture and office breakroom products and services. From
January 1997 to January 1999, Mr. Feldberg served as 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. From October 1991 to June
1995, Mr. Feldberg served as Chairman and Chief Executive Officer of Marshalls,
Inc., a retail organization and then a subsidiary of Melville Corporation (now
CVS Corporation). Mr. Feldberg also served as Vice President of Melville
Corporation during the same period. From 1988 to October 1991, Mr. Feldberg was
employed by Dayton Hudson Corporation, where he served in a variety of positions
for its Target retail division, most recently as President from 1990 to 1991. He
is also a director of U.S. Office Products Company, the Alex-Lee Company and
Nassau Group, Inc.

Kevin J. Roche has served as a director of the Company since 1989. Mr.
Roche has served as an officer of various investment and banking affiliates of
First Union Corporation since 1988 and currently serves as President of First
Union Private Capital Inc., Senior Vice President of First Union Investors,
Inc., and Senior Vice President of First Union Capital Partners, Inc.

Barry L. Williams has served as a director of the Company since May
1997. Since June 1987, 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 CH2M Hill Companies,
Ltd., PG&E Corporation, Simpson Manufacturing Company, Inc., R.H. Donnelley &
Company, Newhall Land and Farming Co., Inc. and USA Group, Inc. Mr. Williams is
also a trustee of Northwestern Mutual Life Insurance Company.

<PAGE>

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,
Inc., a chain of warehouse club retail stores. He also served as Executive Vice
President of Waban Inc., the parent corporation of HomeBase, Inc. and BJ's
Wholesale Club, Inc., from 1988 to May 1993. He is also a director and member of
the Compensation Committee of Marvel Enterprises, Inc., Lowe's Companies, Inc.
and Interphase Corporation.

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, LLP,
where he has been employed since 1979. He is also a director of Marvel
Enterprises, Inc.

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 Arcoms Inc.
(formerly Boatracs, Inc.) and Cheap Tickets, Inc.

Leonard L. Berry, Ph.D. has served as a director of the Company
since November 1993. In September 1999, Dr. Berry was appointed Distinguished
Professor of Marketing at Texas A&M University. Dr. Berry has served as
Director of the Center for Retailing Studies at Texas A&M University and a
Professor of Marketing there since 1982. He has also held the J.C. Penney
Chair of Retailing Studies at Texas A&M University since January 1991. Dr.
Berry is also a director of Lowe's Companies, Inc., Hastings Entertainment,
Inc. and Genesco Inc.

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. Mr. Handel is also the President and Chief Executive
Officer of Ranger Industries, Inc. (formerly Coleco Industries, Inc., where he
was Chairman of the Board of Directors and Chief Executive Officer from 1988 to
1991). Mr. Handel is also currently the Chairman of the board of directors and a
member of the Compensation Committee of Marvel Enterprises, Inc., and a director
of Concurrent Computer Corporation, and Vice Chairman of the Board of Regents of
the University of Hartford.

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 nine times and acted by written consent twice during fiscal 1999.
During such period, all current members of the Board of Directors participated
in at least 75% of the aggregate of all meetings of the Board and any committees
on which they served.

The Board of Directors has four standing committees (each, a
"Committee"): the Compensation Committee, the Finance Committee, the Audit
Committee, and the Nominating and Governance 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 1999 are described
below.

The Compensation Committee has the responsibility of reviewing plans
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, the Officers' Bonus Plan, the Nonstatutory Option
Plan, the Supplemental Bonus and Retention Plan and the Restricted Stock Plan.
The Compensation Committee is comprised of Warren D. Feldberg (Chairman), Dr.
Leonard Berry and Kevin J. Roche. The Compensation Committee met six times and
acted by written consent twice during fiscal 1999.

<PAGE>

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, James F. Halpin and Morton E. Handel. The Finance
Committee met once during fiscal 1999.

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 eight times during fiscal
1999.

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 once during
fiscal 1999.

DIRECTOR COMPENSATION

Directors who are also employees of the Company or its subsidiaries
receive no compensation in their capacities as directors. The Chairman of the
Board of Directors, Mr. Bateman, receives an annual retainer of $75,000 and the
other nonemployee directors receive an annual retainer of $25,000 ($30,000 if
they chair a Committee). Each nonemployee director also receives a fee of $1,000
for each Board meeting and $1,000 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 1999, for their services as directors (and in the case of
Mr. Bateman, as Chairman), the Company (i) paid Messrs. Bateman, Berry,
Feldberg, Handel, Mittman, Roche and Williams retainer and meeting fees of
$74,415; $36,500; $41,500; $45,000; $37,000; $38,500 and $40,000, respectively,
and (ii) granted each of Messrs. Bateman, Berry, Feldberg, Handel, Mittman,
Roche, and Williams options to purchase 4,295 shares of Common Stock at an
exercise price of $14.25 per share. Mr. Bateman received an additional $69,000
as an annual salary for his services as Chairman of the Board of Directors
during fiscal 1999. In addition, Ms. Denise Ilitch, who resigned as a director
effective March 2, 1999, was paid $20,664 for services rendered in fiscal 1999.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
ELECTION OF ALL NOMINEES FOR DIRECTOR NAMED HEREIN.

<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.

NAME AGE POSITION WITH THE COMPANY
- ------------------------------------- --------- ------------------------------------------------------------------

<S> <C> <C>
James F. Halpin..................... 48 President, Chief Executive Officer and Director
Harold F. Compton................... 52 Executive Vice President, Chief Operating Officer and President--
CompUSA Stores
J. Samuel Crowley................... 49 Executive Vice President--Operations
Ronald J. Gilmore................... 44 Executive Vice President--Marketing
Lawrence N. Mondry.................. 39 Executive Vice President--Merchandising
R. Stephen Polley.................. 47 Executive Vice President--Internet Strategies, and President and
Chief Executive Officer--CompUSA Net.com Inc.
Paul B. Poyfair..................... 47 Executive Vice President--New Business Development
James E. Skinner.................... 46 Executive Vice President, Chief Financial Officer, Treasurer
and Assistant Secretary
Anthony A. Weiss.................... 32 Executive Vice President--Business Solutions
Rick L. Fountain.................... 46 Senior Vice President--Technical Services
J. Robert Gary...................... 44 Senior Vice President--Finance, and Chief Financial Officer--
CompUSA Stores
Harold D. Greenberg................. 52 Senior Vice President--Inventory Management
Alann R. Hurlebaus.................. 53 Senior Vice President--Operations/Western Division and
Rural Stores
Melvin D. McCall.................... 54 Senior Vice President--Human Resources
Barry C. McCook..................... 51 Senior Vice President--Operations/Southeastern Division
Honorio J. Padron................... 47 Senior Vice President--Process Engineering
and Chief Information Officer
Robert N. Sayewitz.................. 44 Senior Vice President--Operations/Northeastern Division
Mark R. Walker...................... 42 Senior Vice President--General Counsel and Secretary
Gary M. Bale........................ 42 Vice President--Merchandising/Software and Accessories
Michael D. Bryk..................... 45 Vice President--Finance
George A. Coll...................... 35 Vice President--Enterprise Business Solutions
Brian J. Curran..................... 36 Vice President--Direct Sales
Jeff Dill........................... 42 Vice President--Technology Training
Richard H. Foster................... 55 Vice President--Direct Sales
Ronald E. Freeman................... 51 Vice President--Distribution and Configuration
Robert M. Howe...................... 52 Vice President and General Merchandise Manager--CompUSA PC
Edmund G. Jurica, Jr................ 43 Vice President--Information Systems
John S. Lostroscio.................. 42 Vice President--Merchandising/Hardware
Leslie C. Marshall.................. 54 Vice President--Loss Prevention
Kellie J. McCluskey................. 41 Vice President--Advertising
T. Dale Stapleton................... 41 Vice President-- Controller
Catherine C. Witt................... 48 Vice President--Systems Operations
Blake A. Wolff...................... 34 Vice President--Call Center Services
</TABLE>

See "Proposal No. 1 - ELECTION OF DIRECTORS" for biographical
information regarding Mr. Halpin.

8
<PAGE>

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., an electronics retail company, from
December 1993 to August 1994. Previously, Mr. Compton had served as Executive
Vice President--Operations & Human Resources of HomeBase, Inc. a home center
warehouse retailer, from 1989 to 1993. Mr. Compton is also a director of
JumboSports, Inc., Linens `N Things, 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.
Mr. Crowley is also a director of United States Cellular Corporation.

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, Inc. 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.

R. Stephen Polley has served as Executive Vice President--Internet
Strategies of the Company, and President and Chief Executive Officer of
CompUSA Net.com Inc., the Company's Internet retail sales subsidiary, since
March 1999. Prior to joining the Company, Mr. Polley was employed by
Interphase Corporation, a supplier of server connectivity for enterprise
network environments, where he served as President and Chief Operating
Officer from November 1993 to June 1994. In June 1994, Mr. Polley was
promoted to the additional position of Chief Executive Officer and Chairman
of the Board Interphase Corporation. From August 1992 to June 1994, he served
as a director for Computer Automation, Inc., a provider of products and
services for use in facsimile management systems, minicomputers and
microcomputers. From 1987 to April 1992, Mr. Polley served as President and
Chief Executive Officer and director of Intellicall, Inc., a diversified
supplier of telecommunication products and services. Mr. Polley is also
Chairman of the Board of Interphase Corporation and a director of
ObjectSpace, a provider of distributed computing solutions.

Paul B. Poyfair has served as Executive Vice President--New Business
Development since May 1998. He served as Executive Vice President--Services
and New Businesses from May 1997 to May 1998, as Senior Vice
President--Services & Administration from October 1995 to May 1997, 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, Inc. 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
9
<PAGE>

Assistant Secretary since October 1992. Prior to joining the Company, Mr.
Skinner was a partner of Ernst & Young LLP, an international public
accounting firm, where he had been employed since 1975. Mr. Skinner is a
Certified Public Accountant.

Anthony A. Weiss has served as Executive Vice President--Business
Solutions since May 1998. He served as Senior Vice President--Sales,
Distribution and Support from May 1997 to May 1998 and 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.

Rick L. Fountain has served as Senior Vice President--Technical
Services since April 1999. He served as Vice President--Technical Services
from July 1996 to April 1999. 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, Mr. Fountain 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 Senior Vice President--Finance of the
Company and Chief Financial Officer of CompUSA Stores since January 1999. He
served as Vice President--Controller from September 1998 to December 1998 and
as Vice President--Finance from May 1996 to August 1998. 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, Inc.

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.

Alann R. Hurlebaus has served as Senior Vice President--Operations/
Western Division and Rural Stores since April 1999. Mr. Hurlebaus joined the
Company in 1991 and served in various positions, including Director of
Operations from April 1991 to October 1991, Senior Director of Operations from
October 1991 to May 1995, and Regional Manager of the Company from May 1995 to
June 1998. In June 1998, Mr. Hurlebaus was promoted to Senior Director of Rural
Stores and from October 1998 to April 1999, he served as Senior Director of
Operations and Rural Stores.

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, Inc., a regional
supermarket chain.

Barry C. McCook has served as Senior Vice President--Operations/
Southeastern Division 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.

Honorio J. Padron has served as Senior Vice President--Engineering
Processes and Chief Information Officer since November 1997. Prior to joining
the Company, Mr. Padron was Senior Vice President and Chief Information
Officer for Pepsico Restaurants, a fast food restaurant chain, from August
1996 to November 1997. From February 1995 to August 1996 he held the position
of Senior Vice President of Business Engineering and Technology and Chief
Information Officer for Flagstar, a restaurant management company. From 1988
to 1995, Mr. Padron was employed by Burger King Corporation, a fast-food
restaurant chain, where he held various positions including Senior Director
of Research and Development, Director of Reengineering, and Director of
Profit
10
<PAGE>

and Loss Improvements. From 1982 to 1985, he was Owner and Chief Executive
Officer of H&A Restaurant Management Company.

Robert N. Sayewitz has served as Senior Vice President--Operations/
Northeastern Division since September 1998. He served as a Regional Manager
of the Company from August 1993 to September 1998. Mr. Sayewitz also served
as General Manager of a CompUSA Computer Superstore from June 1992 to August
1993. Prior to joining the Company, Mr. Sayewitz was employed by The Computer
Factory, Inc., a computer reseller, where he last held the position of Vice
President--Sales from May 1991 to June 1992.

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.

Gary M. Bale has served as Vice President--Merchandising/Software
and Accessories since September 1998. He served as Merchandise
Manager--Software from December 1994 to September 1998. Mr. Bale joined the
Company in July 1993 and served in various buyer roles until December 1994,
most recently as computer and monitor buyer. Prior to joining the Company,
Mr. Bale was employed from January 1993 to July 1993 by Tops Appliance City,
Inc., an appliance and TV retailer, as an appliance buyer.

Michael D. Bryk has served as Vice President--Finance since October
1998. Mr. Bryk joined the Company in 1993 and served in various positions,
including Controller for Compudyne, Inc., then a wholly-owned subsidiary of
the Company, from January 1993 to October 1993, Director of Internal Audit
from October 1993 to September 1994, Director of Finance from September 1994
to February 1996, and Senior Director of Finance from February 1996 to
October 1998. Prior to joining the Company, Mr. Bryk was employed by Leeds
Building Products, Inc., a wholesale and retail supplier of building
products, from August 1990 to January 1993, where he last held the position
of Vice President and Chief Financial Officer.

George A. Coll has served as Vice President--Enterprise Business
Solutions since November 1998. He served as Senior Director--Technical
Services from June 1997 to October 1998 and as Director--Technical Services
from January 1996 to June 1997. Prior to joining the Company, Mr. Coll served
as a Regional Manager of Product Services with Montgomery Ward, Inc., a chain
of retail department stores, from April 1994 to January 1996. He also served
as Area Service Manager, Manager of Quality/Product/Training and Process
Control Engineer for General Electric Company from March 1989 to April 1994.

Brian J. Curran has served as Vice President--Direct Sales since
July 1999. Mr. Curran joined the Company in 1992 and served in various
positions including, Direct Sales Manager from December 1993 to January 1997,
Senior Director of Direct Sales from January 1997 to January 1998, Regional
Director of Direct Sales from January 1998 to December 1998 and Senior
Director of Small Business and Vertical Markets from December 1998 to July
1999. Prior to joining the Company, Mr. Curran was employed by Checkered
Flag, Inc., a supplier of automotive parts, from 1985 to 1992, where he last
held the position of Sales and Finance Manager.

Jeff Dill has served as Vice President--Technology Training since
May 1999. He served as a Regional Manager of the Company from December 1998
to April 1999 and as a General Manager of a CompUSA Computer Superstore from
February 1995 to December 1998. Prior to joining the Company, Mr. Dill was
President and Owner of Office Supply Room, an office supply company, from
October 1982 to December 1991. From March 1992 to April 1994, he was employed
by Office Depot, Inc., a chain of office supplies store, most recently as a
Store Manager.

Richard H. Foster has served as Vice President--Direct Sales since
July 1998. He served as Senior Director--Direct Sales from April 1998 to July
1998 and as Regional Director--Direct Sales from October 1996 to April 1998.
Prior to joining the Company, Mr. Foster was Regional Manager for Avnet,
Inc., a corporate computer reseller, from January 1995 to February 1996. From
October 1991 to December 1995, he was Vice President of Sales for Compucom
Systems, Inc., a corporate computer reseller.

11
<PAGE>

Ronald E. Freeman has served as Vice President--Distribution and
Configuration since June 1998. He served as a Senior Director--Distribution
and Configuration from July 1997 to June 1998. Prior to joining the Company,
Mr. Freeman was employed from 1989 to 1997 by Babbage's Etc., a computer
software specialty retailer, where he last held the position of Vice
President--Distribution. From 1981 to 1989, he served as Director of
Transportation and Logistics for Cullum Cos. Inc., a grocery retailer.

Robert M. Howe has served as Vice President and General Merchandise
Manager--CompUSA PC since November 1997. Prior to joining the Company, Mr.
Howe was Vice President--Strategic Planning for Packard Bell/NEC, a computer
manufacturer, from March 1997 to November 1997. From March 1996 to August
1996, he held the position of General Manager/Worldwide PC Channel Sales and
Marketing Consumer Division for International Business Machines Corporation.
From July 1994 to January 1996, he served as Vice President--Worldwide PC
Marketing for AT&T Corporation. From May 1992 to September 1993, Mr. Howe
served as Senior Vice President--Sales, Marketing and Service for Dell
Computer Corporation, a computer manufacturer and marketer. Mr. Howe held the
position of Vice President--Vendor Relations for Microage, a retailer of
personal computer products and accessories, from November 1990 to May 1992.
From May 1984 to October 1990, Mr. Howe was Vice President--Marketing for
Computer Bay, a PC distributor.

Edmund G. Jurica, Jr. has served as Vice President--Information
Systems since January 1998. He served as Senior Director of Information
Services from October 1997 to January 1998. Mr. Jurica joined the Company in
December 1994 and has held various other management positions, including
Director of Strategy and Technology and Director of Client Services. Prior to
joining the Company, Mr. Jurica worked from October 1986 to December 1994 at
Siemens, a technology solutions company, where he last held the position of
Software Development Manager.

John S. Lostroscio has served as Vice President--Merchandising/
Hardware since September 1998. He served as Divisional Merchandise
Manager--Hardware from January 1997 to September 1998; as Senior
Buyer--Accessories from January 1996 to January 1997 and as an accessories
buyer from April 1995 to January 1996. Prior to joining the Company, Mr.
Lostroscio was employed from January 1992 to April 1995 by Sound Advice, Inc.,
a consumer electronics specialty retailer, where he held the position of
Merchandise Manager.

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.

Kellie J. McCluskey has served as Vice President--Advertising since
July 1998. She served as Senior Director--Advertising from March 1998 to July
1998. Prior to joining the Company, Ms. McCluskey worked for Home Depot, Inc.
where she last held the position of Advertising Manager--West Coast Division
from July 1993 to March 1998. From 1985 to 1993 she was Manager of Print
Advertising for HomeBase, Inc., a home center warehouse retailer.

T. Dale Stapleton has served as a Vice President--Controller since
April 1999. He served as Senior Director of Financial Accounting from
December 1997 to April 1999 and as Director of Financial Accounting from
December 1995 to December 1997. Prior to joining the Company, Mr. Stapleton
was a Senior Manager for Ernst & Young LLP, an international public
accounting firm, from October 1989 to December 1995. Mr. Stapleton is a
Certified Public Accountant.

Catherine C. Witt has served as Vice President--Information Systems
Operations since March 1998. She served as Director of Operations and
Telecommunications from October 1994 to March 1998 and as Manager of Data
Processing from July 1993 to October 1994. Prior to joining the Company, Ms.
Witt was employed from 1981 to 1993 by Haggar Apparel Co., a clothing
manufacturer, where she last held the position of Manager of Network
Operations.

Blake A. Wolff has served as Vice President--Call Center Services
since May 1999. He served as Senior Director of Call Center Services from
October 1997 to May 1999. Mr. Wolff joined the Company in 1990 and has served
in various positions, including General Manager of a CompUSA Computer
Superstore from September 1990 to December 1993 and Regional Manager for the
Company from December 1993 to October 1997.

12
<PAGE>

EXECUTIVE COMPENSATION

REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION

OVERVIEW AND PHILOSOPHY

Recommendations regarding base salary and annual incentive compensation
for executive officers are prepared by the Compensation Committee and presented
to the Board of Directors for final approval. The Compensation Committee, which
is composed entirely of nonemployee directors, has access to independent
compensation data and has available to it advice and reports from outside
compensation consultants.

The objectives of the Company's executive compensation program are to:

- Support the achievement of desired Company performance.

- Provide competitive compensation that will attract and retain superior
talent and reward performance.

- Align the executive officers' interests with those of the stockholders
by placing a portion of their pay at risk because it is dependent upon
corporate performance, 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 to officers of the
Company may be based on the performance of the Company generally (in the
absolute or compared to its peers) or the performance of a particular officer or
the performance of the subsidiary, division or other unit to which an officer is
assigned. Performance goals may vary between officers and will be weighted to
reflect their relative importance to the Company. For other key management
personnel the award of bonuses is based primarily upon the achievement of
Company performance goals that are reviewed and approved annually by the
Compensation Committee. 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 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 including the Officers' Bonus
Plan, the Supplemental Bonus and Retention Plan, 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 1999 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.

13
<PAGE>

OFFICERS' BONUS PLAN

The CompUSA Inc. Officers' Bonus Plan (the "Bonus Plan") provides
incentive compensation opportunities for officers of the Company that are
designed to attract, motivate, and retain talented officers and 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. The awards granted pursuant to
the Bonus Plan are determined according to a formula based on several
factors, including target performance goals, threshold levels of performance,
individual target award levels, and the participant's base earnings. At the
beginning of the year, the Compensation Committee establishes target award
levels expressed as a percentage of a participant's base earnings for the
year, as well as the performance goals and the respective threshold and
target levels of performance associated with each. Different performance
goals may be established for different participants. Each participant's award
is determined by multiplying the target award by the performance score. The
maximum award that may be paid to any single participant for a fiscal year is
$5,000,000. Additionally, the Compensation Committee has discretion to grant
ad hoc bonuses pursuant to the Bonus Plan to any participant or group of
participants in such amounts as it determines to be appropriate. For fiscal
1999, the performance goal established for the Chief Executive Officer of the
Company was based on the Company achieving a targeted earnings per share (the
"EPS Target"). If the EPS Target for fiscal 1999 had been achieved, the Chief
Executive Officer would have received an award equal to 50% of his base
salary (the "Award"). If the EPS Target had been surpassed, the Award would
have increased 2% to 12% for each percentage point by which reported earnings
per share exceeded the EPS Target. If the EPS Target was not achieved, the
Award was to decrease 3% to 4% for each percentage point by which reported
earnings per share fell below the EPS Target. Because the Company reported a
loss for fiscal 1999, the Chief Executive Officer did not earn a bonus under
the Bonus Plan.

SUPPLEMENTAL BONUS AND RETENTION PLAN

The CompUSA Inc. Supplemental Bonus and Retention Plan (the
"Supplemental Bonus Plan"), approved by the Board of Directors May 4, 1999,
provides additional incentive compensation opportunities for certain officers
of the Company. The Supplemental Bonus Plan is designed to assist in the
attraction, motivation and retention of superior talent at the officer level
and to align the officers' interests with those of the stockholders by giving
those eligible to participate in the Supplemental Bonus Plan the opportunity
to earn cash bonuses based upon appreciation in the market price of the
Common Stock. The Compensation Committee has sole discretion to determine
which officers of the Company are eligible to participate in the Supplemental
Bonus Plan and the amount of the cash bonuses that the designated officers
are eligible to receive. Bonuses awarded to officers under the Supplemental
Bonus Plan vest in two equal parts on the first two anniversaries of the date
of the bonus award and expire on the day immediately preceding the fifth
anniversary of the date of the award. The Supplemental Bonus Plan constitutes
a "management incentive bonus plan" for purposes of any employment agreement
between the Company and the award recipient. Consequently, certain
change-in-control provisions in any such employment agreement may apply and
could result in acceleration of vesting of a bonus award in accordance with
the terms of the award recipient's employment agreement. A bonus recipient
will be eligible to receive the maximum amount of the award if certain target
market prices for the Common Stock are met at the time the officer elects to
receive vested increments of his award. Reduced amounts will be payable if
certain lower target market prices are met at such times. Elections to
receive payments pursuant to an award must be made during certain window
periods established by the Company.

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 Company
proposes to amend the Long-Term Incentive Plan as discussed under "Proposal
No. 2 - AMENDMENTS TO LONG-TERM INCENTIVE PLAN."

14
<PAGE>

RESTRICTED STOCK PLAN

The CompUSA Inc. Restricted Stock Plan (the "Restricted Stock
Plan"), approved by the Board of Directors July 7, 1999, provides for the
granting of stock-based incentive compensation in the form of restricted
stock. The Restricted Stock Plan authorizes the issuance of up to 1,000,000
shares of Common Stock to officers of the Company and its subsidiaries. Only
shares of Common Stock held in the Company's treasury may be issued pursuant
to grants under the Restricted Stock Plan. Restricted stock granted pursuant
to the Restricted Stock Plan will be restricted for a period of time to be
determined by the Compensation Committee at the time of the award, which
period shall not exceed ten years. The restricted stock will be forfeited if
a participant's employment is terminated prior to the end of the restriction
period. The Compensation Committee may waive any restrictions with respect to
shares of restricted stock in whole or in part at any time. In addition, all
restrictions with respect to outstanding shares of restricted stock will be
deemed lapsed, waived or satisfied upon the occurrence of certain sale,
merger or reorganization transactions involving the Company or in the event
the Company is otherwise subject to a change in control. The restrictions on
the stock prohibit the sale, assignment, transfer, pledge or other
encumbrance of the restricted stock. The termination of restrictions with
respect to certain restricted stock awards may be accelerated if specific
performance goals are met (such restricted stock is referred to in this Proxy
Statement as "performance accelerated restricted stock" or "PARs"). As of the
Record Date, 944,035 shares of PARs issued under the Restricted Stock Plan
were outstanding, with James F. Halpin, Harold F. Compton, J. Samuel Crowley,
Lawrence N. Mondry and James E. Skinner holding the following amounts,
respectively: 118,644; 106,780; 60,332; 60,332 and 60,332 shares.

COMPSAVINGS PLAN FOR EMPLOYEES OF COMPUSA INC.

The CompSavings Plan for Employees of CompUSA Inc. (the "401(k)
Plan") is intended to enable employees of the Company and its subsidiaries
who are at least 21 years of age 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. Eligible employees may become participants in the plan as of the
first day of the next calendar quarter after their hire date. 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 of 1986
(the "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 Harold F. Compton,
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.

15
<PAGE>

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.
Kevin J. Roche

16
<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 1997, 1998 and 1999.

Long-Term Compensation
-----------------------------------
Annual Compensation Awards Payouts
----------------------------------------- -----------------------------------
Securities
Restricted Underlying
Other Stock Options/ LTIP All Other
Fiscal Salary Bonus Annual Award(s) SARS Payouts Compensation
Name and Principal Year ($) ($) (1) Compensation ($) (3) (#) (4) ($) ($) (5)
Position ($) (2)
- --------------------------------------------------------------------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James F. Halpin 1999 1,000,000 -- -- 875,007 213,051 -- 1,600
President and Chief 1998 959,615 -- -- 367,870 122,951 -- 3,150
Executive Officer 1997 836,544 744,851 -- 248,751 1,331,591 -- 4,750

Harold F. Compton 1999 886,538 -- -- 743,750 191,746 -- 1,600
Executive Vice 1998 796,154 -- -- 375,066 104,508 -- 3,150
President and 1997 584,619 521,926 -- 213,216 955,597 -- 4,750
Chief Operating
Officer of the
Company and
President--
CompUSA Stores

J. Samuel Crowley 1999 362,789 -- -- 421,868 36,113 -- 1,600
Executive Vice 1998 332,500 -- -- 112,773 19,590 -- 2,996
President-- 1997 275,038 184,018 -- 81,540 348,572 -- 4,750
Operations

Lawrence N. Mondry 1999 414,615 -- -- 421,868 36,113 -- 1,600
Executive Vice 1998 385,192 -- -- 112,773 19,590 -- 3,150
President-- 1997 344,425 229,692 -- 81,540 348,572 -- 4,750
Merchandising

James E. Skinner 1999 375,577 -- -- 421,868 36,113 -- 1,600
Executive Vice 1998 336,538 -- -- 112,773 19,590 -- 2,375
President, 1997 293,071 195,854 -- 81,540 348,572 -- 4,750
Chief Financial
Officer, Treasurer
and Assistant
Secretary
</TABLE>

- ----------------------

(1) Includes bonuses earned in fiscal 1997 under the incentive compensation
plans of the Named Officers that were paid in fiscal 1998. No bonuses
were earned by the Named Officers in fiscal 1998 or fiscal 1999.

(2) No compensation was paid to any of the Named Officers during fiscal
1997, 1998 or 1999 that constituted Other Annual Compensation. In
fiscal 1997, 1998 and 1999, 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
1999 was: $562,843; $497,564; $235,755; $235,755 and $235,755 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 fiscal 1999 was 76,970;
68,043; 32,240; 32,240 and 32,240, 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 Common Stock under the Long-Term Incentive Plan.
"-See Report of the Compensation Committee on 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.

<PAGE>

OPTION GRANTS DURING FISCAL 1999

The following table sets forth information regarding stock options
granted to the Named Officers during fiscal 1999 pursuant to the Long-Term
Incentive Plan.

Individual Grants
-----------------------------------------------------------
Number of Potential Realizable Value
Securities % of Total at Assumed Annual Rates of
Underlying Options/SARs Stock Price Appreciation
Options/SARs Granted to Exercise or Base For Option Term (1)
Granted Employees in Price Expiration ----------------------------
Name (#)(2)(3) Fiscal Year (2) ($/Share) (4) Date 5% ($) 10% ($)
- -------------------------- ----------------------------------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
James F. Halpin 213,051 14.3% 14.25 11/03/08 1,909,629 4,839,347

Harold F. Compton 191,746 12.9% 14.25 11/03/08 1,718,667 4,355,415

J. Samuel Crowley 36,113 2.4% 14.25 11/03/08 323,690 820,289

Lawrence N. Mondry 36,113 2.4% 14.25 11/03/08 323,690 820,289

James E. Skinner 36,113 2.4% 14.25 11/03/08 323,690 820,289
</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. Options vest with respect to one-third
or one-fourth of the shares covered thereby annually, beginning on the
first anniversary of the date of grant. In the event of a change in
control of the Company (as defined in the Long-Term Incentive Plan),
however, any unexercisable portion of the options will become
immediately exercisable. All options set forth in the table are
nonqualified options.

(4) The exercise price was equal to the fair market value of the Common
Stock on the date of grant.

<PAGE>

AGGREGATED OPTION EXERCISES DURING FISCAL 1999 AND FISCAL YEAR END OPTION VALUES

The following table sets forth information regarding options exercised
by the Named Officers during fiscal 1999 and the number and value of options
held at fiscal year end. The Company does not have any outstanding stock
appreciation rights.

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 -- -- 1,897,474 655,551 637,778 --
Harold F. Compton -- -- 1,050,076 523,287 1,058,456 --
J. Samuel Crowley 11,504 90,371 349,223 137,032 32,009 --
Lawrence N. Mondry 57,866 496,450 272,310 137,033 -- --
James E. Skinner -- -- 337,958 137,033 144,200 --
</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 25, 1999, was
$7.3125 per share. The value of an in-the-money option is calculated on
the basis of the difference between $7.3125 and the per share option
exercise price multiplied by the number of shares of Common Stock
purchasable under the option.

LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR

The following table sets forth information regarding bonus awards to
the Named Officers during fiscal 1999 under the Supplemental Bonus Plan.

Number of Shares, Performance or Other
Units or Period Until
NAME Other Rights ($)(1) Maturation Or Payout
- ---------------------- ---------------------------- ---------------------
<S> <C> <C>
James F. Halpin 2,100,000 (2)
Harold F. Compton 2,100,000 (2)
J. Samuel Crowley 600,000 (2)
Lawrence N. Mondry 600,000 (2)
James E. Skinner 600,000 (2)
</TABLE>

- -------------------

(1) The amounts shown in this column are the maximum dollar amounts that
would be payable to the Named Officers if certain target market prices
for the Common Stock were met at the time the Named Officer elected to
receive all vested increments of his bonus award. Reduced amounts would
be payable if certain lower target market prices were met at the time
of such an election, and the difference between the maximum amounts and
such reduced amounts would be forfeited. The maximum target market
price with respect to the bonus awards shown for each Named Officer is
$15.01 per share. The minimum dollar amount each Named Officer could
receive if the lowest target market price ($5.00 per share) were not
met during the term of his bonus award is zero.

(2) The term of each bonus award is five years. One-half of each bonus
award vests on each of the first two anniversaries of the award. Each
Named Officer may elect to receive one or more vested increments of his
bonus award (but not less than all of a single vested increment) during
the five-year term, but only during certain window periods established
by the Company. A Named Officer will automatically be deemed to have
elected to receive all vested increments of a bonus award if the
maximum target market price is reached at a time when the Named Officer
has the right to make such an election. Bonus awards are subject to
early termination (and in certain circumstances, forfeiture) upon
termination of employment.

<PAGE>

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 $1,000,000. In addition, Mr. Halpin is eligible to receive
in respect of each fiscal year an incentive bonus determined in accordance with
any management incentive bonus plan then maintained by the Company. See "-Report
of the Compensation Committee on Executive Compensation - EXECUTIVE OFFICER
COMPENSATION PROGRAM -Officers' Bonus Plan and -Supplemental Bonus and Retention
Plan." 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 and Chief
Operating Officer of the Company and President of 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 $900,000. In addition, Mr. Compton is eligible to receive in
respect of each fiscal year an incentive bonus determined in accordance with any
management incentive bonus plan then maintained by the Company. See "-Report of
the Compensation Committee on Executive Compensation -EXECUTIVE OFFICER
COMPENSATION PROGRAM -Officers' Bonus Plan and -Supplemental Bonus and Retention
Plan." 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."

CROWLEY AGREEMENT. The Company is a party to an employment agreement
with J. Samuel Crowley (the "Crowley Agreement") dated May 1, 1998, 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 $367,500. In addition, Mr. Crowley is eligible to receive
in respect of each fiscal year an incentive bonus determined in accordance with
any management incentive bonus plan then maintained by the Company. See "-Report
of the Compensation Committee on Executive Compensation -EXECUTIVE OFFICER
COMPENSATION PROGRAM -Officers' Bonus Plan and -Supplemental Bonus and Retention
Plan." The term of employment under the Crowley Agreement will expire on May 1,
2000. 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, 1998, 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 $420,000. In addition, Mr. Mondry is eligible to receive
in respect of each fiscal year an incentive bonus determined in accordance with
any management incentive bonus plan then maintained by the Company. See -"Report
of the Compensation Committee on Executive Compensation -EXECUTIVE OFFICER
COMPENSATION PROGRAM -Officers' Bonus Plan and -Supplemental Bonus and Retention
Plan." The term of employment under the Mondry Agreement will expire on May 1,
2000. 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, 1998, 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

20
<PAGE>

discretion of the Compensation Committee of the Board of Directors. Mr.
Skinner's current annual base salary is $385,000. In addition, Mr. Skinner is
eligible to receive in respect of each fiscal year an incentive bonus determined
in accordance with any management incentive bonus plan then maintained by the
Company. See "-Report of the Compensation Committee on Executive Compensation
- -EXECUTIVE OFFICER COMPENSATION PROGRAM -Officers' Bonus Plan and -Supplemental
Bonus and Retention Plan." The term of employment under the Skinner Agreement
will expire on May 1, 2000. 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. In addition, the
Crowley, Mondry and Skinner Agreements provide that failure of the Company to
renew their agreements upon the expiration of their respective terms constitutes
termination other than for "cause", thus entitling them to the aforementioned
severance payments. 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 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. In addition,
the employment agreements for such officers provide that failure of the Company
to renew their agreements upon the expiration of their respective terms
constitutes termination other than for "cause", thus entitling them to the
aforementioned severance payments. 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.

21
<PAGE>

CERTAIN TRANSACTIONS

James F. Halpin, Jr., son of the Company's President and Chief
Executive Officer, is the owner and President of OMO Marketing, Inc., which acts
as a sales representative for Ferris Marketing, Inc., a parent holding company
for Worldwide Marketing, Inc., Compaccessories, Inc. and TR Systems, Inc.
(collectively, "Ferris Marketing"). The Company purchases import products from
Ferris Marketing in the ordinary course of business, and during fiscal 1999 made
aggregate purchases totaling $18,071,707 from Ferris Marketing. During fiscal
1999, OMO Marketing, Inc. received $44,111 from Ferris Marketing for services
rendered in connection with purchases made from Ferris Marketing by the Company.

On March 15, 1999, the Company made a $200,000 interest-free home
purchase loan to Robert Sayewitz, the Company's Senior Vice
President--Operations/Northeastern Division, which loan was repaid July 1, 1999.

SECTION 16 (a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 (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 1999 all filing requirements applicable to its directors, officers and
greater than 10% beneficial owners were complied with, except that R. Stephen
Polley, Executive Vice President--Internet Strategies and President and Chief
Executive Officer of CompUSA Net.com Inc., filed his initial report on Form 3
late; Ronald J. Gilmore, Executive Vice President--Marketing, filed one report
on Form 4, relating to a deemed acquisition of Common Stock upon his marriage,
late; and Morton E. Handel, a Director of the Company, filed a report on Form 4
late.

22
<PAGE>

COMPARATIVE STOCK PERFORMANCE

The graph below compares the cumulative total stockholder return on
Common Stock with the cumulative total return on the stocks comprising the NYSE
Composite Index (the "NYSE Index") and the Standard & Poor's Retail Composite
Index (the "Peer Group Index") for the period from June 24, 1994 through June
26, 1999 (assuming the investment of $100 on June 24, 1994, in Common Stock and
the stocks comprising the NYSE Index and the Peer Group Index, and reinvestment
of all dividends).

The companies whose stocks comprise the Peer Group Index are
Albertsons, Inc.; American Stores Company; AutoZone, Inc.; Charming Shoppes,
Inc.; Circuit City Stores, Inc.; Costco Companies, Inc.; CVS Corp.; Dayton
Hudson Corp.; Dillard's, Inc.; Federated Department Stores; GAP, 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; Nordstrom, Inc.; J.C. Penney Company,
Inc.; Pep Boys-Manny, Moe & Jack; Rite Aid Corporation; Sears Roebuck & Company;
Sherwin-Williams Company; Tandy Corporation; TJX Companies, Inc.; Toys R Us,
Inc.; Venator Group, Inc.; Wal-Mart Stores, Inc.; Walgreen Company and
Winn-Dixie Stores, Inc.

COMPARISON OF CUMULATIVE TOTAL RETURN ON COMMON STOCK,
PEER GROUP INDEX AND NYSE INDEX

----------------------------- FISCAL YEAR ENDING -----------------------------
COMPANY/INDEX/MARKET 6/24/1994 6/26/1995 6/28/1996 6/30/1997 6/30/1998 6/30/1999
<S> <C> <C> <C> <C> <C> <C>

CompUSA Inc.(1) $ 100.00 $ 347.82 $ 791.29 $ 997.08 $ 840.56 $ 344.92

Peer Group Index(2) 100.00 107.12 130.54 158.12 250.90 334.93

NYSE Index(3) 100.00 119.37 149.34 195.08 248.59 282.59

</TABLE>

- ----------
(1) Common Stock
(2) Standard & Poor's Retail Composite Index
(3) NYSE Composite Index

23
<PAGE>

PROPOSAL NO. 2

AMENDMENTS TO LONG-TERM INCENTIVE PLAN

The Board of Directors and the Compensation Committee (referred to
collectively as the "Board of Directors" with respect to this Proposal)
unanimously approved amendments to the Company's Long-Term Incentive Plan,
subject to approval by the stockholders, to (i) increase by 7,500,000 the number
of shares of Common Stock authorized for issuance under the Long-Term Incentive
Plan by providing that the number of shares authorized for issuance after
September 1, 1999 under the Long-Term Incentive Plan is 16,416,699, plus a
number of shares equal to the number of shares of PARs outstanding as of
September 1, 1999 that are forfeited and returned to the Company at any time on
or after September 1, 1999, and (ii) extend the term of the Long-Term Incentive
Plan through August 31, 2009. The Long-Term Incentive Plan currently provides
that 16,788,736 shares of Common Stock are issuable pursuant thereto over the
life of the plan, but 7,232,543 shares of Common Stock have been issued pursuant
to the exercise of options granted under the plan and 158,590 shares of PARs
have been issued and the restrictions have lapsed. As of September 1, 1999,
8,916,699 shares of Common Stock remained available for issuance under the
Long-Term Incentive Plan, but options to purchase an aggregate of 8,445,768 of
such shares had been granted, leaving only 470,931 shares (plus any shares of
PARs that are thereafter forfeited) available for future grants.

The Board of Directors also unanimously approved an amendment to the
Long-Term Incentive Plan prohibiting the repricing of options granted under the
Long-Term Incentive Plan, other than standard anti-dilution adjustments, which
amendment does not require stockholder approval.

DESCRIPTION OF LONG-TERM INCENTIVE PLAN AS CURRENTLY IN EFFECT

The Long-Term Incentive Plan provides that the Compensation Committee
may, from time to time and in its sole discretion, grant options to acquire
shares of Common Stock, restricted stock awards, stock appreciation rights,
performance share awards and stock unit awards to full-time and part-time
employees, nonemployee directors, consultants and advisors ("Participants") of
or to the Company or a subsidiary thereof (referred to collectively as the
"Company" with respect to this Proposal). The Company has seven nonemployee
directors and approximately 20,000 employees. The Compensation Committee,
composed of three nonemployee directors of the Company, has the authority to fix
the number and terms of awards to be granted under the Long-Term Incentive Plan,
the persons to receive awards and any conditions for the receipt of awards. The
Board of Directors has all the powers of the Compensation Committee under the
Long-Term Incentive Plan and may take any action under or with respect to the
Long-Term Incentive Plan that the Compensation Committee is entitled to take.

The maximum aggregate number of shares of Common Stock with respect to
which awards may be granted to any Participant during the term of the Long-Term
Incentive Plan is one-half of the total number of shares of Common Stock that
may be issued from time to time thereunder. Awards may be granted under the
Long-Term Incentive Plan through May 8, 2005.

STOCK OPTIONS. Under the Long-Term Incentive Plan, options may be
granted in the form of "incentive stock options" as defined in Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), or nonstatutory
stock options. The options generally become exercisable with respect to
one-third or one-fourth of the shares purchasable thereunder on each anniversary
of the date of the option grant. The options generally expire 10 years after the
date of grant (five years in the case of incentive stock options granted to
employees owning more than 10% of the Common Stock), except as follows. If a
Participant ceases to be employed by the Company because the participant is
terminated for Cause (as defined in the Long-Term Incentive Plan), any options
held by the Participant will automatically expire. If a Participant's employment
by the Company is terminated for any reason other than for Cause or due to
death, such Participant's option will be exercisable (to the extent exercisable
on the date of termination of the Participant's employment by the Company or, if
the Compensation Committee, in its sole discretion, has accelerated the vesting
of such option, to the extent exercisable following such acceleration) at any
time within 30 days after the Participant ceases to be an employee (or within
(i) three months after termination on account of retirement or (ii) 12 months
after termination on account of disability), unless by its terms the option
expires earlier or unless, with respect to a nonstatutory stock option, the
Compensation Committee agrees, in its sole discretion, to extend the term of
such option. Military or

24
<PAGE>

sick leave will not be deemed a termination of employment by the Company;
provided that it does not exceed the longer of three months or the period
during which the absent Participant's reemployment rights, if any, are
guaranteed by statute or by contract. If a Participant dies while employed by
the Company, or within three months after ceasing to be an employee, such
Participant's option will be exercisable (to the extent exercisable on the
date of death, or, if the Compensation Committee, in its sole discretion, has
accelerated the vesting of such option, to the extent exercisable following
such acceleration) at any time within 12 months after the date of death,
unless by its terms the option expires earlier or unless, with respect to any
nonstatutory stock option, the Compensation Committee agrees, in its sole
discretion, to extend the term of such option. If a nonemployee Participant's
association with the Company is terminated for Cause, any options held by
such Participant will automatically expire. In all other cases, any options
held by such a Participant, to the extent exercisable on the date of
termination of the Participant's association with the Company, will remain
exercisable and will expire in accordance with the terms of the applicable
option agreement. The Compensation Committee does not have the authority to
extend the term of any option beyond its original term. In the event of
certain mergers and reorganizations involving the Company or upon the
occurrence of a change in control (as defined in the Long-Term Incentive
Plan) or threatened change in control of the Company, all outstanding options
will become immediately exercisable with respect to the full number of shares
purchasable under such options.

Incentive stock options may not be transferred or assigned other than
by will or the laws of descent and distribution and may be exercised during the
lifetime of the Participant only by the Participant or by the Participant's
legally authorized representative. With respect to nonstatutory stock options,
the Compensation Committee may, in its sole discretion, provide for the
transferability of such options as it deems appropriate.

The exercise price of each incentive stock option granted under the
Long-Term Incentive Plan may not be less than 100% of the fair market value of
the Common Stock on the date of grant (or 110% in the case of incentive stock
options granted to employees owning more than 10% of the Common Stock), while
the exercise price for nonstatutory stock options may be less than the fair
market value on the date of grant. The closing price of the Common Stock on the
NYSE on the Record Date was $6.875 per share.

The exercise price of an option may be paid in cash, by certified or
cashier's check, by shares of Common Stock, if permitted by the Compensation
Committee, by a promissory note for the total purchase price of the shares of
Common Stock being purchased, which note shall contain such terms and provisions
as the Compensation Committee may approve, including without limitation the
right to repay the note partially or wholly with Common Stock, or by delivery of
a copy of irrevocable instructions from the Participant to a broker or dealer,
reasonably acceptable to the Company, to sell certain of the shares of Common
Stock purchased upon exercise of the option or to pledge them as collateral for
a loan and promptly deliver to the Company the amount of sale or loan proceeds
necessary to pay such purchase price.

RESTRICTED STOCK AWARDS. Under the Long-Term Incentive Plan, the
Compensation Committee may, in its sole discretion, award shares of Common
Stock, subject to certain restrictions, as determined by the Compensation
Committee. The general terms and conditions of restricted stock awards are as
follows: (i) any shares of Common Stock awarded to a Participant will be
restricted for a period of time to be determined by the Compensation Committee,
but not more than ten years; (ii) the restrictions will prohibit the sale,
assignment, transfer, pledge or other encumbrance of such shares, and will
provide for possible reversion thereof to the Company during the period of
restriction; (iii) all restricted stock awarded to a Participant will be
forfeited and returned to the Company in the event the Participant's employment
by or other association with the Company is terminated prior to the expiration
of the period of restriction, unless the Participant's termination of employment
by or other association with the Company is due to his death, disability or
retirement or unless the Compensation Committee, in its sole discretion, waives
the restrictions established with respect to any or all of the shares of
restricted stock; (iv) in the event of a Participant's death or disability, the
restrictions established will lapse with respect to all restricted stock awarded
to the Participant prior to any such event and the shares of Common Stock
involved will cease to be restricted stock and will no longer be subject to
forfeiture to the Company; (v) in the event of a Participant's retirement, the
restrictions established will continue to apply unless the Compensation
Committee, in its sole discretion, shortens the restriction period; (vi) from
the time of grant of the restricted stock award, the Participant will be
entitled to all rights (including dividend and voting rights) with respect to
the shares of Common Stock covered by the award, subject to forfeiture of such
Common Stock; and (vii) upon the expiration of a restriction period, the Company
will issue a certificate for such shares that does not bear a restrictive
legend.

25
<PAGE>

As of the Record Date, (i) 480,904 shares of PARs issued under the
Long-Term Incentive Plan were outstanding, with James F. Halpin, Harold F.
Compton, J. Samuel Crowley, Lawrence N. Mondry and James E. Skinner holding the
following amounts, respectively: 76,970; 68,043; 32,240; 32,240 and 32,240
shares, and (ii) all restrictions had lapsed on an aggregate of 158,590 shares
of PARs issued under the plan.

STOCK APPRECIATION RIGHTS. Under the Long-Term Incentive Plan, the
Compensation Committee may, in its sole discretion, grant stock appreciation
rights. A stock appreciation right entitles a Participant to receive an amount
equal to (or if the Compensation Committee shall so determine at the time of
grant, less than) the excess of the market value on the date of exercise over
the market value on the date of grant of such right (or such other price as is
set by the Compensation Committee), multiplied by the number of shares of Common
Stock with respect to which the stock appreciation right shall have been
exercised. A stock appreciation right may be granted in combination with, in
addition to, or completely independent of, an option or any other award.
Settlement of a stock appreciation right may be made in cash, by certified or
cashier's check, in shares of Common Stock, if permitted by the Compensation
Committee, or in any other form of valid consideration, as determined by the
Compensation Committee in its sole discretion. However, any stock appreciation
right exercised upon or subsequent to the occurrence of certain mergers,
reorganizations or a change in control must be paid in cash. The Compensation
Committee may, in its sole discretion, determine the transferability of the
stock appreciation rights granted to any Participant. Whenever a stock
appreciation right is granted in relation to an option and the exercise of one
affects the right to exercise the other, the number of shares of Common Stock
available under the option to which the stock appreciation right relates will
decrease by a number equal to the number of shares of Common Stock for which the
stock appreciation right is exercised. Upon the exercise of an option, any
related stock appreciation right will terminate as to the number of shares of
Common Stock with respect to which the option has been exercised.

Whenever a stock appreciation right is granted in relation to an option
and the exercise of one affects the right to exercise the other, in the event of
the termination of the Participant's employment by or other association with the
Company, the stock appreciation right may be exercised only during the period,
if any, within which the option to which it relates may be exercised. If a
Participant who is a Company employee is granted a stock appreciation right
independently of an option, the following provisions will apply: (i) if a
Participant ceases to be employed by the Company because the Participant is
terminated for Cause (as defined in the Long-Term Incentive Plan), any stock
appreciation rights held by that Participant will automatically expire; (ii) if
a Participant's employment by the Company is terminated for any reason other
than Cause or due to death, such Participant's stock appreciation right will be
exercisable (to the extent exercisable on the date of termination of the
Participant's employment by the Company or, if the Compensation Committee, in
its sole discretion, has accelerated the vesting of such stock appreciation
right, to the extent exercisable following such acceleration) at any time within
30 days after the Participant ceases to be an employee (or within (a) three
months after termination if on account of retirement or (b) 12 months after
termination if on account of disability), unless by its terms it expires earlier
or unless the Compensation Committee agrees, in its sole discretion, to extend
the term of such stock appreciation right; provided that the term of any such
stock appreciation right will not be extended beyond its original term, and
(iii) if a Participant dies while employed by the Company or within three months
after ceasing to be an employee, such Participant's stock appreciation right
will be exercisable (to the extent exercisable on the date of death, or, if the
Compensation Committee, in its sole discretion, has accelerated the vesting of
such stock appreciation right, to the extent exercisable following such
acceleration) at any time within 12 months after the date of death, unless by
its terms it expires earlier or unless the Compensation Committee agrees, in its
sole discretion, to extend the term of such stock appreciation right; provided
that the term of any such stock appreciation right will not be extended beyond
its original term. Military or sick leave will not be deemed a termination of
employment by the Company; provided that it does not exceed the longer of three
months or the period during which the absent Participant's reemployment rights,
if any, are guaranteed by statute or by contract. If a nonemployee Participant
is granted a stock appreciation right independently of an option under the
Long-Term Incentive Plan, the following provisions will apply: (i) if the
Participant's association with the Company is terminated for Cause, any stock
appreciation right held by the Participant will automatically expire and (ii) in
all other cases, any stock appreciation right held by a Participant will remain
exercisable to the extent exercisable on the date of termination of the
Participant's association with the Company and will remain exercisable in
accordance with the terms of the applicable stock appreciation right agreement.
As of the Record Date, no stock appreciation rights have been granted.

26
<PAGE>

Whenever an incentive stock option and a stock appreciation right are
granted together and the exercise of one affects the right to exercise the
other, the following requirements apply: (i) the stock appreciation right will
expire no later than the expiration of the underlying incentive stock option;
(ii) the stock appreciation right may be for no more than the difference between
the exercise price of the underlying incentive stock option and the market value
of the Common Stock subject to the underlying incentive stock option at the time
the stock appreciation right is exercised; (iii) the stock appreciation right is
transferable only when the underlying incentive stock option is transferable and
under the same conditions; (iv) the stock appreciation right may be exercised
only when the underlying incentive stock option is eligible to be exercised; and
(v) the stock appreciation right may be exercised only when the market value of
the Common Stock subject to the underlying incentive stock option exceeds the
exercise price of the underlying incentive stock option.

PERFORMANCE SHARES. Under the Long-Term Incentive Plan, the
Compensation Committee may, in its sole discretion, grant performance shares.
Performance shares may be earned based on the attainment of performance goals
established by the Compensation Committee for a particular performance cycle.
The Compensation Committee may establish performance goals with such criteria
and objectives as the Compensation Committee may from time to time select. After
the end of each performance cycle, the Compensation Committee will determine the
number of performance shares, if any, earned by each Participant with respect to
the performance cycle in accordance with the following: (i) if the performance
goal is attained or exceeded, a Participant will be deemed to have earned the
full number of performance shares granted to the Participant; (ii) if a minimum
performance goal is not attained, a Participant will be deemed to have earned no
performance shares; (iii) if the performance goal is not attained, but the
minimum performance goal is attained or exceeded, the number of performance
shares deemed to have been earned by a Participant will be a portion of the
performance shares, as determined based on a formula established by the
Compensation Committee at the time of grant; (iv) if a Participant's employment
by or other association with the Company has terminated because of death,
disability or retirement prior to the end of a performance cycle, the number of
performance shares such Participant will be deemed to have earned shall be the
number of performance shares determined as though such Participant's employment
by or other association with the Company had not terminated, multiplied by a
fraction, the numerator of which is the number of months such Participant was
employed by or was otherwise associated with the Company during the performance
cycle (including the month during which employment by or other association with
the Company terminated) and the denominator of which is the total number of
months in the performance cycle; (v) if the Participant's employment by or other
association with the Company has terminated for any reason other than death,
disability or retirement, such Participant will be deemed to have earned no
performance shares except as and to the extent the Compensation Committee may
determine; provided that the number of performance shares that may be so
determined by the Compensation Committee to have been earned may not exceed the
number that would have been earned had the provisions of subparagraph (i) been
applicable; and (vi) at any time prior to the end of a performance cycle, the
Compensation Committee may adjust downward (but not upward) the performance goal
and/or the minimum performance goal as a result of major events unforeseen at
the time the performance shares were awarded, such as changes in the economy,
the industry, laws affecting the operation of the Company, changes in applicable
tax laws or accounting principles or any other event the Compensation Committee
determines would have a significant impact upon the probability of attaining the
previously established performance goal and/or minimum performance goal. Payment
in respect of earned performance shares will be made to the Participant or, if
the Participant has died, to the Participant's designated beneficiary, as soon
as practicable after the expiration of the performance cycle and the
Compensation Committee's determination. Payment in respect of earned performance
shares may be made in cash, in shares of Common Stock or a combination thereof,
as determined by the Compensation Committee, in its sole discretion, at the time
of payment. In the sole discretion of the Compensation Committee, a performance
share award may provide the Participant with dividends or dividend equivalents
(payable on a current or deferred basis) and cash payments in lieu of or in
addition to such award. As of the Record Date, no performance shares have been
granted.

STOCK UNIT AWARDS. Under the Long-Term Incentive Plan, the Compensation
Committee may, in its sole discretion, grant stock unit awards. Stock unit
awards may be in the form of Common Stock or units, the value of which is based,
in whole or in part, on the market value of the Common Stock. Stock unit awards
will be subject to such terms, restrictions, conditions, vesting requirements,
payment requirements and rights upon termination of employment by or other
association with the Company as the Compensation Committee may determine, in its
sole discretion, at the time of grant, including without limitation the
following: (i) any shares of Common Stock that are part of a stock unit award
may be subject to restrictions on sale, assignment, transfer, pledge or other
encumbrance; (ii) stock unit awards may provide for the payment of cash
consideration by the

27
<PAGE>

Participant or provide that the award, and any Common Stock to be issued in
connection therewith, if applicable, shall be delivered without the payment of
cash consideration; (iii) stock unit awards may relate in whole or in part to
certain performance criteria established by the Compensation Committee; and (iv)
stock unit awards may provide for deferred payment schedules and/or vesting over
a specified period of employment by or other association with the Company. In
the sole discretion of the Compensation Committee, a stock unit award may
provide the Participant with dividends or dividend equivalents (payable on a
current or deferred basis) and cash payments in lieu of or in addition to such
award. As of the Record Date, no stock unit awards have been granted.

DESCRIPTION OF PROPOSED AMENDMENTS

AMENDMENTS SUBJECT TO STOCKHOLDER APPROVAL. The Board of Directors has
unanimously approved the following amendments to the Long-Term Incentive Plan,
subject to approval by the stockholders:

INCREASE IN NUMBER OF SHARES. The Board of Directors has approved an
amendment to the Long-Term Incentive Plan that would limit the number of shares
issuable under the Long-Term Incentive Plan after September 1, 1999 to
16,416,699, plus the number of any shares of restricted stock outstanding under
the Long-Term Incentive Plan as of September 1, 1999 that are later forfeited
and returned to the Company. The Long-Term Incentive Plan currently provides
that 16,788,736 shares of Common Stock are issuable pursuant thereto over the
life of the plan, but 7,232,543 shares of Common Stock have been issued pursuant
to the exercise of options granted under the plan and 158,590 shares of PARs
have been issued and the restrictions have lapsed. As of September 1, 1999,
8,916,699 shares of Common Stock remained available for issuance under the
Long-Term Incentive Plan, but options to purchase an aggregate of 8,445,768 of
such shares had been granted, leaving only 470,931 shares (plus any shares of
PARs that are thereafter forfeited) available for future grants. The amendment
approved by the Board of Directors would increase by 7,500,000 the number of
shares of Common Stock authorized for issuance under the Long-Term Incentive
Plan.

EXTENSION OF TERM. Currently, awards may be granted under the Long-Term
Incentive Plan through May 8, 2005. The Board of Directors has approved the
extension of the term of the Long-Term Incentive Plan through August 31, 2009.

AMENDMENT NOT SUBJECT TO STOCKHOLDER APPROVAL. The Board of Directors
has also unanimously approved the following amendment to the Long-Term Incentive
Plan that is not subject to stockholder approval:

PROHIBITION OF OPTION REPRICINGS. The Long-Term Incentive Plan provides
the Compensation Committee general authority to grant stock options and to
administer the Long-Term Incentive Plan, all in accordance with the terms
thereof. The Board of Directors has approved an amendment to the Long-Term
Incentive Plan to prohibit the repricing of options granted under the Long-Term
Incentive Plan, other than standard anti-dilution adjustments for events such as
stock splits. The amendment prohibits both (i) the amendment or modification of
any stock options previously granted under the Long-Term Incentive Plan to
reduce their exercise price and (ii) the cancellation of any stock options
previously granted under the Long-Term Incentive Plan in connection with a grant
of new stock options under the Long-Term Incentive Plan with a lower exercise
price.

SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES

SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES RELATING TO
INCENTIVE STOCK OPTIONS. No taxable income is realized by a Participant and no
tax deduction is available to the Company upon either the grant or exercise of
an incentive stock option. The difference between the incentive stock option
exercise price and the fair market value, at the time of exercise, of the Common
Stock acquired upon the exercise of an incentive stock option may give rise to
alternative minimum taxable income subject to an alternative minimum tax. If a
Participant holds the shares acquired upon the exercise of an incentive stock
option for more than one year after the issuance of the shares upon exercise of
the incentive stock option and more than two years after the date of the grant
of the incentive stock option (the "holding period"), the difference between the
exercise price and the amount realized upon the sale of the shares will be
treated as a long-term capital gain or loss and no deduction will be available
to the Company. If the shares are transferred before the expiration of the
holding period, the Participant will realize ordinary income, and the Company
will be entitled to a deduction, on the portion of the gain, if any, equal to
the difference between the incentive stock option exercise price and the fair
market value of the shares on the date of exercise or, if less, the difference
between the amount realized on the disposition and the
28
<PAGE>

adjusted basis of the stock; provided that the deduction will not be allowed if
such amount exceeds the annual $1,000,000 limitation on the deduction that an
employer may claim for compensation of certain executives pursuant to Section
162(m) of the Code (the "Deduction Limitation") and no exception to the
Deduction Limitation is applicable. Any further gain or loss from the arm's
length sale or exchange will be taxable as a long-term or short-term capital
gain or loss depending upon the holding period before disposition. Certain
special rules apply if an incentive stock option is exercised by tendering
stock.

SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES RELATING TO
NONQUALIFIED STOCK OPTIONS. No taxable income generally is realized by the
Participant upon the grant of a nonqualified stock option, and no deduction
generally is then available to the Company. Upon exercise of a nonqualified
stock option, the excess of the fair market value of the shares on the date of
exercise over the exercise price will be taxable to the Participant as ordinary
income and subject to withholding if the Participant is an employee. This
amount will also be deductible by the Company unless the amount exceeds the
Deduction Limitation and no exception to the Deduction Limitation is
applicable. The tax basis of shares acquired by the Participant will be the
fair market value on the date of exercise. When a Participant disposes of
shares acquired upon exercise of a nonqualified stock option, any amount
realized in excess of the fair market value of the shares on the date of
exercise generally will be treated as a long-term or short-term capital gain,
depending on the holding period of the shares. The holding period commences
upon exercise of the nonqualified stock option. If the amount received is less
than such fair market value, the loss will be treated as a long-term or
short-term capital loss, depending on the holding period of the shares. The
exercise of a nonqualified stock option will not trigger the alternative
minimum tax consequences applicable to incentive stock options. Certain special
rules apply if a nonqualified stock option is exercised by tendering stock.

SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES RELATING TO
RESTRICTED STOCK. Unless a Participant otherwise elects to be taxed upon
receipt of shares of restricted stock under the Long-Term Incentive Plan, the
Participant must include in the Participant's taxable income the difference
between the fair market value of the shares and the amount paid, if any, for
the shares, as of the first date the Participant's interest in the shares is no
longer subject to a substantial risk of forfeiture or such shares become
transferable. A Participant's rights in restricted stock awarded under the
Long-Term Incentive Plan are subject to a substantial risk of forfeiture if the
rights to full enjoyment of the shares are conditioned, directly or indirectly,
upon the future performance of substantial services by the Participant. Where
shares of restricted stock received under the Long-Term Incentive Plan are
subject to a substantial risk of forfeiture, the Participant can elect to
report the difference between the fair market value of the shares on the date
of receipt and the amount paid, if any, for the stock as ordinary income in the
year of receipt (an "Election"). To be effective, an Election must be filed
with the Internal Revenue Service within 30 days after the date the shares are
transferred to the Participant. The Company is entitled to a tax deduction
equal in amount to the amount includable as compensation in the gross income of
the Participant unless such amount exceeds the Deduction Limitation and no
exception to the Deduction Limitation is applicable. If the shares are later
forfeited, the Participant is not entitled to a deduction for the amount
previously includable as compensation income. The amount of taxable gain
arising from a Participant's sale of shares of restricted stock acquired
pursuant to the Long-Term Incentive Plan is equal to the excess of the amount
realized on such sale over the sum of the amount paid, if any, for the stock
and the compensation element included by the Participant in taxable income. The
Participant will realize long-term capital gain or loss upon disposition of
stock held for more than one year after (i) it is no longer subject to a
substantial risk of forfeiture or (ii) the date of receipt if an Election has
been timely made.

SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES RELATING TO STOCK
APPRECIATION RIGHTS. No taxable income will be realized by a Participant upon
the grant of a stock appreciation right and no deduction is then available to
the Company. Upon the exercise of a stock appreciation right, the Participant
will realize taxable income, subject to withholding if the Participant is an
employee, equal to the cash or the fair market value (on the date of exercise)
of the shares, or both, received. The Company will be entitled to a deduction
of the same amount unless such amount exceeds the Deduction Limitation and no
exception to the Deduction Limitation is applicable. The tax basis of any
shares received will be the fair market value on the date of exercise, and, if
the shares received are held for more than one year, the Participant will
realize long-term capital gain or loss upon disposition.

SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES RELATING TO
PERFORMANCE SHARES. No taxable income will be realized by a Participant upon
the grant of a performance share award and no deduction is then
29
<PAGE>

available to the Company. A Participant will realize ordinary income, subject
to withholding if the Participant is an employee, at the time the award is
paid in an amount equal to the amount of cash paid or the value of the shares
delivered to the Participant and the Company will have a corresponding
deduction unless such amounts exceed the Deduction Limitation and no
exception to the Deduction Limitation is applicable.

SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES RELATING TO STOCK
UNITS. No taxable income will be realized by a Participant upon the grant of a
stock unit award and no deduction is then available to the Company. A
Participant will realize ordinary income, subject to withholding if the
Participant is an employee, at the time the award is paid in an amount equal to
the amount of cash paid or the value of the shares delivered to the Participant
and the Company will have a corresponding deduction unless such amounts exceed
the Deduction Limitation and no exception to the Deduction Limitation is
applicable.

GRANT OF AWARDS UNDER THE LONG-TERM INCENTIVE PLAN

The following table sets forth information regarding options received
under the Long-Term Incentive Plan from its inception through the Record Date by
(i) the Company's Chief Executive Officer, (ii) each Named Officer, (iii) all
current executive officers as a group, (iv) all current directors who are not
executive officers as a group, (v) each nominee for election as a director, and
(vi) all employees, excluding executive officers, as a group and excluding all
canceled options.

<TABLE>
<CAPTION>
Name of Individual Aggregate Shares of Common Stock
or Group Subject to Options
- --------------------------------------------------------------- -------------------------------------------
<S> <C>
James F. Halpin............................................... 2,592,361
Harold F. Compton............................................. 1,573,363
J. Samuel Crowley............................................. 486,255
Lawrence N. Mondry............................................ 419,479
James E. Skinner.............................................. 489,991
Warren D. Feldberg............................................ 43,147
Kevin J. Roche................................................ 36,723
Barry L. Williams............................................. 6,296
All current executive
officers as a group....................................... 7,454,253
All current directors who
are not executive
officers as a group........................................ 311,102
All employees, excluding
executive officers, as
a group and excluding all
canceled options........................................... 8,224,058
</TABLE>

- -------------------

The amounts that would be receivable in the future by the individuals
or groups named in the table above under the Long-Term Incentive Plan as
proposed to be amended are not determinable at this time.

VOTE REQUIRED

Approval of the amendments to the Long-Term Incentive Plan to (i)
increase by 7,500,000 the number of shares of Common Stock authorized for
issuance thereunder, and (ii) extend the term thereof through August 31, 2009,
all as more fully described above, requires the approval of the affirmative vote
of a majority of the shares of Common Stock present or represented at the
Meeting and entitled to vote thereon. Unless otherwise instructed or restricted,
it is the intent of the persons named in the Proxy to vote all Proxies "FOR" the
adoption of this proposal.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
AMENDMENTS TO THE LONG-TERM INCENTIVE PLAN.

30
<PAGE>

PROPOSAL NO. 3

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 2000. 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 entitled to vote 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.

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 2000 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 26, 2000 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 2000 annual
meeting of stockholders, the proposal and the required information must be
received by the Company not later than August 20, 2000. 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.

31
<PAGE>

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 26, 1999.

By Order of the Board of Directors

/s/ Mark R. Walker
--------------------------------------
Mark R. Walker
SENIOR VICE PRESIDENT--GENERAL
COUNSEL AND SECRETARY

Dallas, Texas
September 24, 1999

32
<PAGE>

COMPUSA INC.

PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD NOVEMBER 3, 1999

The undersigned hereby appoints James F. Halpin and Harold F. Compton,
each with the power to act without the other and with full power of
substitution, as Proxies to vote, as designated below, all stock of CompUSA Inc.
owned by the undersigned at the Annual Meeting of Stockholders to be held at the
Hotel Inter-Continental, 15201 North Dallas Parkway, Dallas, Texas on Wednesday,
November 3, 1999, at 8:00 a.m., local time, and at any adjournments of the
meeting, upon such business as may properly come before the meeting, including
the following:

<TABLE>

<S> <C> <C>
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): (TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME BELOW):

Warren D. Feldberg Kevin J. Roche Barry L. Williams

2. Approval of the proposal to amend the Long-Term Incentive Plan to (i)
increase the number of shares of Common Stock authorized for issuance
thereunder by 7,500,000 and (ii) extend the term thereof through August
31, 2009.

/ / FOR / / AGAINST / / ABSTAIN

3. Approval of the selection of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending June 24, 2000.

/ / FOR / / AGAINST / / ABSTAIN

4. In their discretion on any other matter that may properly come before
the meeting and any adjournments thereof.
</TABLE>

(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 NO. 2 AND NO. 3.

Please sign below, date and return promptly.

Dated: __________________________, 1999

---------------------------------------
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.