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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
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(AMENDMENT NO. 1)
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMPUSA INC.
(NAME OF SUBJECT COMPANY)
COMPUSA INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
209432107
(CUSIP NUMBER OF CLASS OF SECURITIES)
JAMES F. HALPIN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
COMPUSA INC.
14951 NORTH DALLAS PARKWAY
DALLAS, TEXAS 75240
(972) 982-4000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICE AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
COPIES TO:
THOMAS M. CERABINO, ESQ.
WILLKIE FARR & GALLAGHER
787 SEVENTH AVENUE
NEW YORK, NEW YORK 10019
(212) 728-8000
[ ] CHECK THE BOX IF THE FILING RELATES SOLELY TO PRELIMINARY COMMUNICATIONS
MADE BEFORE THE COMMENCEMENT OF A TENDER OFFER.
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This Amendment No. 1 to the Solicitation/Recommendation Statement on
Schedule 14D-9 initially filed on January 24, 2000 (as amended, "Schedule
14D-9") of CompUSA Inc., a Delaware corporation, relates to the offer by TPC
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Grupo
Sanborns, S.A. de C.V., a corporation organized under the laws of the United
Mexican States, to purchase all outstanding shares of the common stock of
CompUSA Inc., par value $0.01 per share (the "Common Stock"), for a purchase
price of $10.10 per share, net to the seller in cash, without interest thereon,
upon the terms and subject to the conditions set forth in the Offer to Purchase,
dated February 1, 2000, and in the related Letter of Transmittal. This Schedule
14D-9 is being filed on behalf of CompUSA Inc.
ITEM 1. SUBJECT COMPANY INFORMATION.
(a) The name of the subject company is CompUSA Inc., a Delaware corporation
(the "Company"), and the address of the principal executive offices of the
Company is 14951 North Dallas Parkway, Dallas, Texas 75240, Telephone: (972)
982-4000.
(b) The title of the class of equity securities to which this Statement
relates is the common stock, par value $0.01 per share, of the Company. As of
January 28, 2000, there were 92,693,889 shares of Common Stock outstanding.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON.
(a) The filing person is the subject company.
(d) This Statement relates to the tender offer disclosed in a Tender Offer
Statement on Schedule TO dated February 1, 2000 (the "Schedule TO") of Grupo
Sanborns, S.A. de C.V., a corporation organized under the laws of the United
Mexican States ("Parent"), and its wholly-owned subsidiary, TPC Acquisition
Corp., a Delaware corporation ("Purchaser"), to purchase all of the outstanding
shares of Common Stock (the "Shares") not owned by Parent or its affiliates at a
price of $10.10 per Share (the "Offer Price"), net to the Seller in cash upon
the terms and subject to the conditions set forth in the Offer to Purchase dated
February 1, 2000 (the "Offer to Purchase") and the related Letter of Transmittal
and any supplement thereto (which together constitute the "Offer"). A copy of
the Offer to Purchase and the related Letter of Transmittal have been filed as
Exhibit 1 and Exhibit 2 hereto, respectively, and each is incorporated herein by
reference.
The Offer is being made pursuant to a Merger Agreement, dated as of January
23, 2000 (the "Merger Agreement"), among the Company, Parent and Purchaser. The
Merger Agreement provides, among other things, that as soon as practicable
following the satisfaction or waiver of the conditions set forth in the Merger
Agreement, Purchaser will be merged (the "Merger") with and into the Company,
and the Company shall continue as the surviving corporation (the "Surviving
Corporation"). The Merger Agreement further provides that those Shares that are
not acquired in the Offer will be converted into the right to receive $10.10 per
Share in cash.
According to the Schedule TO, the address of the principal executive
offices of Parent are located at Avenida San Fernando 649, Colonia Pena Pobre
Tlalpan, Mexico, D.F., Mexico 14060 and the principal executive offices of
Purchaser are located at 1000 Louisiana Street, Suite 565, Houston, Texas 7700.
ITEM 3. PAST CONTRACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
Certain contracts, agreements, arrangements or understandings between the
Company or its affiliates and certain of its directors and executive officers
are, except as noted below, described in the Information Statement pursuant to
Schedule 14f-1 (the "Information Statement") which is attached as Schedule II
hereto and is incorporated herein by reference. Except as described herein
(including in the Exhibits hereto and in Schedule II hereto) or incorporated by
reference herein, to the knowledge of the Company, as of the date hereof there
exists no material agreement, arrangement or understanding and no actual or
potential conflict of interest between the Company or its affiliates and (i) the
Company's executive officers, directors or affiliates or (ii) Purchaser or
Purchaser's executive officers, directors or affiliates.
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The Merger Agreement. The summary of the Merger Agreement contained in the
Offer to Purchase, which has been filed with the Securities and Exchange
Commission (the "Commission") as an exhibit to the Schedule TO and a copy of
which is enclosed with this Schedule 14D-9, is incorporated herein by reference.
Such summary should be read in its entirety for a more complete description of
the terms and provisions of the Merger Agreement. A copy of the Merger Agreement
has been filed as Exhibit 3 hereto and is incorporated herein by reference.
Interests of Certain Persons in the Transaction. Certain members of the
Company's Board of Directors (the "Board") and management may be deemed to have
certain interests in the Merger that are in addition to their interest as
stockholders of the Company generally. The Board was aware of and discussed
these interests in connection with its consideration and approval of the Merger
Agreement. In considering the recommendation of the Board with respect to the
Offer and the Merger, the stockholders should be aware of these interests which
may present actual or potential conflicts of interest.
Executive Employment Agreements. The named executive officers (as
described in the Company's most recent Commission filing) have each entered into
an Amendment to Employment Agreement (the "Amendment") in the form attached to
the Merger Agreement. Under their employment agreements with the Company, the
named executive officers are entitled to certain payments under certain
circumstances as a result of the consummation of the Offer. The Amendment
provides that, in the event the respective executive is entitled to such
payments, the Company shall withhold twenty percent of such payment (the
"Deferred Payment") and deposit an amount equal to the Deferred Payment into an
escrow account for the benefit of the executive. The Company will pay the
executive the Deferred Payment (plus earnings thereon) on the earlier to occur
of (i) the three-month anniversary of the date that the initial payment was made
to the executive, if the executive is employed by the Company at such time or
(ii) two (2) business days after the date on which the executive's employment
with the Company terminates for any reason other than by the Company for Cause
(as defined in the Amendment) or the executive's voluntary resignation. If
employment is terminated for Cause or the executive voluntarily resigns prior to
such three-month anniversary, the Deferred Payment will be forfeited.
It is expected that certain other executive vice presidents and senior vice
presidents of the Company will also enter into certain amendments to their
individual employment agreements, subject to the provisions of the Merger
Agreement.
The foregoing description is qualified in its entirety by reference to the
employment agreements, which are described in the Information Statement, and by
reference to the Amendments, copies of which are attached as Exhibits 4, 5, 6, 7
and 8 hereto, respectively, and are incorporated herein by reference.
Options and Other Equity-Based Awards. Pursuant to the Merger Agreement
and by virtue of the Merger, (i) each outstanding option or similar right to
acquire Shares under the Company's stock option plans or any similar plan of the
Company, whether or not then exercisable or vested, will be canceled and
converted into the right to receive an amount in cash, without interest, equal
to the excess, if any, of the Offer Price over the per share exercise or
purchase price of such option or similar right, and (ii) each incentive award or
other right relating to Shares that was granted under any employee incentive or
similar plan of the Company, whether or not then vested, will be canceled and
converted into the right to receive an amount in cash, without interest,
determined pursuant to the terms thereof based on the value of a Share being
equal to the Offer Price. Holders of such options and incentive awards include
executive officers and directors of the Company.
Indemnification. Pursuant to the Merger Agreement, Parent and Purchaser
have agreed to cause the Surviving Corporation to indemnify each director,
officer, employee, fiduciary or agent of the Company against any costs or
expense (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages, liabilities and amounts paid in settlement in connection with
any claim, action, suit, proceeding or investigation, including, without
limitation, liabilities arising out of the transactions contemplated by the
Merger Agreement, to the extent that they were based on the fact that such
person is or was a director, officer or employee of the Company and arising out
of actual or alleged actions or omissions occurring at or prior to the effective
time of the Merger (the "Effective Time"). Parent has also agreed to cause the
Surviving Corporation to maintain policies of directors' and officers' liability
insurance equivalent to the current policies
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of the Company, subject to certain limitations, for six years after the
Effective Time; provided, that the Surviving Company will not be required, in
order to maintain such policies, to pay an annual premium in excess of 200% of
the aggregate annual amounts currently paid by the Company to maintain the
existing policies; and provided further, that if equivalent coverage cannot be
obtained, or can be obtained only by paying an annual premium in excess of 200%
of such amount, the Surviving Corporation will only be required to obtain as
much coverage as can be obtained by paying an annual premium equal to 200% of
such amount.
Confidentiality Agreement. On January 23, 2000, the Company and Parent
signed a Confidentiality Agreement (the "Confidentiality Agreement") providing
that, subject to the terms of the Confidentiality Agreement, Parent and its
affiliates will keep confidential certain non-public information provided by the
Company. The foregoing description is qualified in its entirety by reference to
the Confidentiality Agreement, a copy of which is attached as Exhibit 9 hereto
and is incorporated herein by reference.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT, THE OFFER AND THE MERGER, DETERMINED THAT THE OFFER AND THE MERGER
ARE ADVISABLE AND FAIR TO, AND IN THE BEST INTERESTS OF, THE HOLDERS OF SHARES
(OTHER THAN PARENT AND ITS AFFILIATES) AND UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
A letter to the Company's stockholders communicating the Board's
recommendations and the joint press release announcing the Merger Agreement and
related transactions and the press release announcing the Company's financial
results for the second quarter of fiscal 2000 are filed as Exhibits 10, 11 and
12 hereto, respectively, and are incorporated herein by reference.
(b)(i) BACKGROUND OF THE OFFER; CONTACTS WITH PARENT
On September 10, 1999, Parent and its affiliates reported publicly their
ownership of approximately 14.8% of the then outstanding Shares.
On September 13, 1999, Mr. James F. Halpin, President and Chief Executive
Officer of the Company, contacted representatives of Parent and discussed in
general terms Parent's investment in the Company. During this discussion, Mr.
Halpin proposed that the parties meet the following day in Mexico City.
On September 14, 1999, Mr. Halpin and other representatives of the Company
met with Mr. Carlos Slim Domit, Chief Executive Officer of Parent, and other
representatives of Parent in Mexico City and continued their discussions of
Parent's investment in the Company. The parties also discussed the possibility
of establishing various commercial arrangements between the Company and Parent
and its affiliates, including joint ventures. During this visit, representatives
of the Company toured several of Parent's retail stores in Mexico City.
During the week of September 20, 1999, representatives of Parent visited
the Company's headquarters in Dallas, Texas and toured several of the Company's
stores. During this week, representatives of Parent indicated to representatives
of the Company that Parent would be interested in increasing its investment in
the Company. In light of provisions under Delaware law restricting certain
transactions between Delaware corporations and persons holding 15% or more of
their outstanding voting stock, representatives of Parent requested that the
Company consider taking the necessary corporate action to make these
restrictions inapplicable to an increased Parent investment, provided that
Parent and its affiliates agree to limit their ownership to less than 20% of the
outstanding Shares.
The Board met telephonically on September 29, 1999 to consider Parent's
request. After considering the matter, Mr. Halpin was instructed to advise
Parent that the Company would consider taking such action only if Parent entered
into a confidentiality and "standstill" agreement with the Company. The
representatives of Parent indicated that they would consider the possibility of
entering into such an agreement, and requested that the Company prepare a draft
agreement.
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On October 1, 1999, the Company furnished Parent with a draft
confidentiality and "standstill" agreement and, on October 22, 1999, Parent
informed the Company that Parent was not interested in entering into the
agreement on the terms proposed by the Company.
On October 5-6, 1999, representatives of the Company met with
representatives of Parent in Mexico City to discuss voting of the Shares owned
by Parent at the upcoming annual shareholder meeting of the Company.
On November 5, 1999, Mr. Halpin met with representatives of Parent in
Mexico City. During this meeting, the parties discussed the possibility of
establishing various commercial arrangements between the Company and Parent and
its affiliates, and representatives of Parent indicated in general terms that
Parent continued to be interested in exploring the possibility of increasing its
investment in the Company.
During the week of November 29, 1999, in a telephone call, representatives
of Parent advised representatives of the Company that Parent would be interested
in exploring the possibility of making a proposal to acquire the Company at a
valuation of approximately $7.00 to $7.50 per Share, although no specific
proposal was made. Mr. Halpin responded that the Company would consider a
proposal at such a valuation to be inadequate.
On December 3, 1999, in a telephone call, and on December 8-9, 1999 at
meetings in Mexico City, representatives of Parent indicated that Parent would
consider increasing its valuation to approximately $8.00 per Share for the
Company, although again no specific proposal was made. Mr. Halpin indicated that
such a valuation would still be considered inadequate by the Company.
On December 16, 1999, a representative of Parent met again with Mr. Halpin
and other representatives of the Company in Dallas, Texas to continue their
discussions. At this meeting, the parties concluded that they had differing
views with respect to the valuation of the Company and agreed to defer further
discussions.
During the week of January 3, 2000, representatives of Parent and the
Company reopened discussions regarding possible commercial arrangements between
the Company and an affiliate of Parent.
During the week of January 10, 2000, representatives of Parent suggested to
Mr. Halpin that they might consider making an acquisition proposal at a
valuation of up to $9.00 per Share. Mr. Halpin informed Parent that he would
discuss such matter with the Board. The Board held a previously scheduled
meeting on January 12, 2000. At this meeting, the Board requested that
management, together with Credit Suisse First Boston Corporation ("Credit Suisse
First Boston"), the Company's financial advisor, review possible valuations of
the Company.
The Board met telephonically on January 16, 2000 and discussed with Company
management and Credit Suisse First Boston their respective views on valuation.
The Board authorized Mr. Halpin and Credit Suisse First Boston to have further
discussions with Parent to seek a higher price than had been suggested in the
earlier discussions.
On January 18, 2000, Credit Suisse First Boston, at the direction of the
Board, informed representatives of Parent that the Company would not be
receptive to a proposal involving a valuation of $9.00 per Share. On January 19,
2000, Credit Suisse First Boston, at the direction of the Board, discussed
various prices and transaction terms with representatives of Parent. During
these discussions, representatives of Parent advised Credit Suisse First Boston
that Parent would consider making a proposal to acquire the Company at a
valuation of approximately $9.50 per Share and, after continued discussions,
Parent incrementally increased such valuations to $10.10 per Share. Credit
Suisse First Boston indicated that it would discuss such proposal with the
Board. On January 21, 2000, Parent submitted to the Company a proposed merger
agreement and the parties and their legal advisors met in New York to continue
to negotiate the terms of the proposed acquisition. On January 22-23, 2000, the
parties concluded negotiating the terms of the Merger Agreement and related
documents.
At a meeting held on January 23, 2000, following presentations by the
Company's senior management, as well as its legal counsel and financial
advisors, the Board unanimously approved the Merger Agreement, the
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Offer and the Merger, determined that the Offer and the Merger are advisable and
fair to, and in the best interest of, the holders of Shares (other than Parent
and its affiliates) and unanimously resolved to recommend that shareholders
accept the Offer and tender their Shares pursuant to the Offer. The Company,
Parent and Purchaser executed the Merger Agreement on January 23, 2000.
On January 24, 2000, prior to the opening of trading on the New York Stock
Exchange, Parent and the Company issued a joint press release announcing the
execution of the Merger Agreement. On February 1, 2000, Purchaser commenced the
Offer.
(b)(ii) REASONS FOR THE RECOMMENDATION BY THE BOARD OF DIRECTORS
In reaching its conclusions and recommendation described above, the Board
considered a number of factors, including without limitation the following
material factors:
1. Information with regard to the financial condition, results of
operations, competitive position, business and prospects of the Company, as
reflected in the Company's projections, current economic and market
conditions (including current conditions in the industry in which the
Company is engaged) and the going concern value of the Company.
2. The familiarity of the Board with the business, results of
operations, properties and financial condition of the Company and the
nature of the industry in which its operates.
3. The possible alternatives to the Offer and the Merger, including
continuing to operate the Company as an independent entity and the risks
associated therewith.
4. The financial and other terms and conditions of the Offer, the
Merger and the Merger Agreement.
5. The historical market price of, and recent trading activity in, the
Shares, particularly the fact that the Offer and the Merger will enable the
stockholders of the Company to realize a premium of in excess of 49.6% over
the closing price of the Shares on January 21, 2000, the last trading day
prior to the public announcement, and a premium of in excess of 77% over
the average closing price of the Shares for the three months during which
such securities traded prior to January 21, 2000.
6. The opinion, dated January 23, 2000, to the Board, of Credit Suisse
First Boston to the effect that, as of that date and based upon and subject
to the matters described in such opinion, the $10.10 per Share cash
consideration to be received in the Offer and the Merger, taken together,
by the holders of Shares was fair, from a financial point of view, to such
holders (other than Parent and its affiliates). The full text of Credit
Suisse First Boston's written opinion dated January 23, 2000, which sets
forth the assumptions made, procedures followed, matters considered and
limitations on the review undertaken by Credit Suisse First Boston, is
attached hereto as Schedule I and is incorporated herein by reference.
Credit Suisse First Boston's opinion is directed only to the fairness, from
a financial point of view, of the $10.10 per Share cash consideration to be
received in the Offer and the Merger, taken together, by the holders of
Shares (other than Parent and its affiliates) and is not intended to
constitute, and does not constitute, a recommendation as to whether any
stockholder should tender Shares pursuant to the Offer or as to any other
matter relating to the Offer or the Merger. HOLDERS OF SHARES ARE URGED TO
READ SUCH OPINION CAREFULLY IN ITS ENTIRETY.
7. The fact that the structure of the acquisition of the Company by
Parent as provided for in the Merger Agreement involves a cash tender offer
for all outstanding Shares to be commenced within seven business days of
the public announcement of the Merger Agreement to be followed as promptly
as practicable by a merger for the same consideration, thereby enabling the
Company's stockholders to obtain cash for their Shares at the earliest
possible time.
8. The fact that the obligations of Parent and Purchaser to consummate
the Offer and the Merger pursuant to the terms of the Merger Agreement are
not conditioned upon financing.
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9. The fact that the terms of the Merger Agreement should not unduly
discourage other third parties from making bona fide proposals subsequent
to signing the Merger Agreement and, if any such proposal were made, the
Board, in the exercise of its fiduciary duties, could determine to provide
information to and engage in negotiations with any other third party.
10. The regulatory approvals required to consummate the Merger,
including antitrust approvals and the prospects for receiving such
approvals.
11. The fact that the Merger Agreement, which prohibits the Company,
its subsidiaries and their respective officers, directors, employees,
representatives or agents from soliciting, initiating or encouraging any
Acquisition Proposal (as defined in the Merger Agreement) or participating
in any discussion regarding any Acquisition Proposal, does permit the
Company to furnish non-public information to, and participate in
negotiations with, any person that makes an unsolicited bona fide
Acquisition Proposal that the Board determines constitutes or could
constitute a Superior Proposal (as defined in the Merger Agreement) if the
Board, based upon the advice of the Company's outside counsel, determines
in good faith that failing to take such action would be inconsistent with
the fiduciary duties of the Board under applicable law.
12. The fact that in the event that the Board decides to accept an
Acquisition Proposal from a third party, the Board may terminate the Merger
Agreement and pay Parent a termination fee of $20,000,000 inclusive of fees
and expenses. The Board did not believe that such termination provision
would be a significant deterrent to a higher offer by a third party
interested in acquiring the Company.
The foregoing discussion of the information and factors considered and
given weight by the Board is not intended to be exhaustive. The Board did not
quantify or otherwise assign relative weights to the specific factors considered
in reaching its determination.
(c) After reasonable inquiry and to the best of the Company's knowledge,
each executive officer, director and affiliate of the Company currently intends
to tender all Shares, held of record or beneficially owned by such person, to
Purchaser as of the expiration date of the Offer.
ITEM 5. PERSONS/ASSETS RETAINED, EMPLOYED, COMPENSATED OR USED.
The Company has retained Credit Suisse First Boston as its financial
advisor in connection with the Offer and the Merger. Pursuant to the terms of
Credit Suisse First Boston's engagement, the Company has agreed to pay Credit
Suisse First Boston for its services an aggregate financial advisory fee equal
to 0.8% of the total consideration, including certain liabilities assumed,
payable in the Offer and the Merger. The Company also has agreed to reimburse
Credit Suisse First Boston for reasonable out-of-pocket expenses, including the
fees of legal counsel and any other advisor retained by Credit Suisse First
Boston, and to indemnify Credit Suisse First Boston and certain related parties
against certain liabilities, including liabilities under the federal securities
laws, arising out of Credit Suisse First Boston's engagement. Credit Suisse
First Boston and its affiliates have in the past provided services to the
Company and affiliates of Parent unrelated to the Offer and the Merger, for
which services Credit Suisse First Boston has received compensation. In the
ordinary course of business, Credit Suisse First Boston and its affiliates may
actively trade or hold the securities of the Company and Parent and its
affiliates for their own account or for the account of customers and,
accordingly, may at any time hold a long or short position in such securities.
Neither the Company nor any person acting on its behalf currently intends
to employ, retain or compensate any other person to make solicitations or
recommendations to security holders on its behalf concerning the Offer or the
Merger.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
On December 27, 1999, Phil Boerger and Jerry Luther, both executive
officers of the Company, were each granted options to purchase 4,570 Shares at
an exercise price of $5.3125 per Share under the Company's Long Term Incentive
Plan, as amended and restated as of September 1, 1999.
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Except for the issuance of Shares upon exercise of outstanding options and
except as described in the foregoing paragraph, no transactions in Shares have
been effected during the past 60 days by the Company or, to the best of the
Company's knowledge, by an executive officer, director, subsidiary or affiliate
of the Company.
ITEM 7. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
1. Except as set forth above or in this Schedule 14D-9, no negotiation is
being undertaken or is underway by the Company in response to the Offer which
relates to: (1) a tender offer for or other acquisition of the Company's
securities by the Company, any subsidiary of the Company or any other person;
(2) any extraordinary transaction, such as a merger, reorganization or
liquidation, involving the Company or any subsidiary of the Company; (3) any
purchase, sale or transfer of a material amount of assets of the Company or any
subsidiary of the Company; or (4) any material change in the present dividend
rate or policy, or indebtedness or capitalization, of the Company.
2. Except as described in Item 3 or 4(a) or (b) above (the provisions of
which are hereby incorporated by reference), there are no transactions, Board
resolutions, agreements in principle or signed contracts in response to the
Offer that relate to or would result in one or more of the events referred to in
Item 7(1) above.
ITEM 8. ADDITIONAL INFORMATION.
1. The Information Statement attached as Schedule II hereto is being
furnished in connection with the possible designation by Purchaser, pursuant to
the Merger Agreement, of certain persons to be appointed to the Board other than
at a meeting of the Company's stockholders.
2. Section 203 of the Delaware General Corporation Law
As a Delaware corporation, the Company is subject to Section 203 ("Section
203") of the Delaware General Corporation Law. Under Section 203, certain
"business combinations" between a Delaware corporation whose stock is publicly
traded or held of record by more than 2,000 stockholders and an "interested
stockholder" are prohibited for a three-year period following the time that such
a stockholder became an interested stockholder, unless (i) the corporation has
elected in its original certificate of incorporation not to be governed by
Section 203 (the Company did not make such an election), (ii) the transaction in
which the stockholder became an interested stockholder or the business
combination was approved by the Board of Directors of the corporation before the
other party to the business combination became an interested stockholder, (iii)
upon consummation of the transaction that made it an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the commencement of the transaction (excluding voting stock owned
by directors who are also officers or held in employee benefit plans in which
the employees do not have a confidential right to tender or vote stock held by
the plan) or (iv) the business combination was approved by the Board of
Directors of the corporation and ratified by 66 2/3% of the voting stock which
the interested stockholder did not own. The term "business combination" is
defined generally to include mergers or consolidations between a Delaware
corporation and an "interested stockholder," transactions with an "interested
stockholder" involving the assets or stock of the corporation or its
majority-owned subsidiaries and transactions which increase an "interested
stockholder's" percentage ownership of stock. The term "interested stockholder"
is defined generally as a stockholder who, together with affiliates and
associates, owns (or, if such stockholder is an affiliate of the corporation,
within three years prior, did own) 15% or more of a Delaware corporation's
voting stock.
In accordance with the Merger Agreement and Section 203, the Board approved
the Offer, the Merger and the other transactions contemplated by the Merger
Agreement and, therefore, the restrictions of Section 203 are inapplicable to
the Offer, the Merger and the related transactions.
3. Antitrust
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act") and the rules that have been promulgated thereunder by the
Federal Trade Commission ("FTC"), certain acquisition transactions may not be
consummated unless certain information has been furnished to the
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Antitrust Division of the Department of Justice (the "Antitrust Division") and
the FTC and certain waiting period requirements have been satisfied. The
acquisition of Shares pursuant to the Offer is subject to such requirements.
There may be similar antitrust requirements in other jurisdictions.
Each of Grupo Carso, S.A. de C.V. ("Grupo Carso") and the Company expects
to file on or about February 1, 2000 with the FTC and the Antitrust Division a
Premerger Notification and Report Form in connection with the purchase of Shares
pursuant to the Offer. Under the provisions of the HSR Act applicable to the
Offer, the purchase of Shares pursuant to the Offer may not be consummated until
the expiration of a 15-calendar day waiting period following the filing by Grupo
Carso and the Company, unless both the Antitrust Division and the FTC terminate
the waiting period prior thereto. If, within such 15-calendar day waiting
period, either the Antitrust Division or the FTC requests additional information
or documentary material from Grupo Carso and/or the Company, the waiting period
would be extended for an additional 10 calendar days following substantial
compliance by Grupo Carso and/or the Company with such request. Thereafter, the
waiting period could be extended only by court order. Only one extension of such
waiting period pursuant to a request for additional information is authorized by
the HSR Act and the rules promulgated thereunder, except by court order. Any
such extension of the waiting period will not give rise to any withdrawal rights
not otherwise provided for by applicable law.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
Purchaser pursuant to the Offer. At any time before or after the purchase by
Purchaser of Shares pursuant to the Offer, either of the FTC or the Antitrust
Division could take such action under the antitrust laws as it deems necessary
or desirable in the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer or seeking the divestiture of Shares purchased by
Purchaser or the divestiture of substantial assets of Grupo Carso, its
subsidiaries or the Company. Private parties and state attorneys general may
also bring legal action under federal or state antitrust laws under certain
circumstances.
Although the Company believes that the Purchaser's acquisition of Shares
pursuant to the Offer would not violate the antitrust laws, there can be no
assurance that a challenge to the Offer on antitrust grounds will not be made
or, if such challenge is made, what the outcome will be.
4. Legal Proceedings
A complaint seeking class action status entitled Daniel Exner v. CompUSA
Inc. et al., Cause No. CC-00-00921-C, was filed in the County Court At Law of
Dallas County, Texas on January 24, 2000 by Daniel Exner, a shareholder of the
Company, in connection with the proposed Merger, against the Company and Messrs.
Barry L. Williams, Mortin E. Handel, Lawrence Mittman, Giles H. Bateman, Leonard
L. Berry, James F. Halpin, Warren D. Feldberg and Kevin J. Roche (each a
director and/or officer of the Company). Plaintiff alleges that the individual
defendants breached their fiduciary duties of loyalty and care to the Company
and its shareholders by, among other things, entering into the Merger Agreement
at an unfair price, failing to maximize shareholder value, and benefitting
themselves at the expense of shareholders. The complaint seeks a declaration
that the individual defendants breached their duties of loyalty and care, an
injunction against the Merger, unspecified monetary damages, costs and fees, and
other relief.
5. Amendment to the Rights Agreement
Pursuant to the Merger Agreement, the Company and American Stock Transfer &
Trust Company, parties to a Rights Agreement dated April 29, 1994 (the "Rights
Agreement"), amended such Rights Agreement in accordance with the terms and
conditions set for in the Amendment No. 1 to Rights Agreement ("Amendment No.
1"), a copy of which is attached as Exhibit 13 hereto and is incorporated herein
by reference. Pursuant to Amendment No. 1, any and all provisions in the Rights
Agreement which prohibit the consummation of any transaction contemplated by the
Merger Agreement are thereby waived. A copy of the Rights Agreement is attached
as Exhibit 14 hereto and is incorporated herein by reference.
8
10
ITEM 9. EXHIBITS.
Exhibit 1 Offer to Purchase, dated as of February 1, 2000.(1)(3)
Exhibit 2 Form of Letter of Transmittal.(1)(3)
Exhibit 3 Merger Agreement, dated as of January 23, 2000, among Grupo
Sanborns, S.A. de C.V., TPC Acquisition Corp. and CompUSA
Inc.(2)
Exhibit 4 Amendment to Employment Agreement, dated January 23, 2000
between CompUSA Inc. and James F. Halpin.(1)
Exhibit 5 Amendment to Employment Agreement, dated January 23, 2000
between CompUSA Inc. and James E. Skinner.(1)
Exhibit 6 Amendment to Employment Agreement, dated January 23, 2000
between CompUSA Inc. and Lawrence N. Mondry.(1)
Exhibit 7 Amendment to Employment Agreement, dated January 23, 2000
between CompUSA Inc. and Harold F. Compton.(1)
Exhibit 8 Amendment to Employment Agreement, dated January 23, 2000
between CompUSA Inc. and J. Samuel Crowley.(1)
Exhibit 9 Confidentiality Agreement, dated as of January 23, 2000, by
Grupo Sanborns, S.A. de C.V. in favor of CompUSA Inc.
Exhibit 10 Letter to Stockholders of CompUSA Inc., dated February 1,
2000.(3)
Exhibit 11 Joint Press Release of TPC Acquisition Corp. and CompUSA
Inc., dated January 24, 2000.(2)
Exhibit 12 Press Release of CompUSA Inc., dated February 1, 2000.
Exhibit 13 Amendment No. 1 to Rights Agreement, dated as of January 23,
2000, by and between CompUSA Inc. and American Stock
Transfer & Trust Company.(2)
Exhibit 14 Rights Agreement, dated April 29, 1994 between CompUSA Inc.
and America Stock Transfer & Trust Company (formerly Bank
One, Texas, N.A.), as Rights Agent.(4)
Exhibit 15 Form of Employment Agreement between CompUSA Inc. and each
of J. Samuel Crowley, Rick L. Fountain, J. Robert Gary,
Ronald J. Gilmore, Harold D. Greenberg, Alann R. Hurlebaus,
Melvin D. McCall, Barry C. McCook, Lawrence N. Mondry,
Honorio J. Padron, Paul Poyfair, Bob Sayewitz, James E.
Skinner, Mark R. Walker and Anthony A. Weiss.(5)
Exhibit 16 Form of Employment between CompUSA Inc. and each of Gary M.
Bale, Phil Boerger, Michael D. Bryk, George A. Coll, Brian
J. Curran, Jeff Dill, Richard Foster, Ronald E. Freeman,
Robert M. Howe III, Edmund G. Jurica, Jr., John S.
Lostroscio, Jerry Luther, Leslie C. Marshall, Kellie J.
McCluskey, T. Dale Stapleton, Catherine Witt, Blake A. Wolff
and John W. Woodson.(5)
Exhibit 17 Employment Agreement, dated as of August 16, 1996, between
CompUSA Inc. and James F. Halpin.(6)
Exhibit 18 Employment Agreement, dated as of August 16, 1996, between
CompUSA Inc. and Harold F. Compton.(6)
- ---------------
(1) Filed as an exhibit to Grupo Sanborns, S.A. de C.V.'s and TPC Acquisition
Corp.'s Tender Offer Statement on Schedule TO, dated February 1, 2000, and
incorporated herein by reference.
(2) Previously filed on January 26, 2000 as an exhibit to CompUSA Inc.'s Form
8-K.
(3) Included in copies mailed to Stockholders.
(4) Previously filed as an exhibit to CompUSA Inc.'s Quarterly Report on Form
10-Q for the fiscal quarter ended March 26, 1994, and incorporated herein by
reference.
(5) Previously filed as an exhibit to CompUSA Inc.'s Annual Report on Form 10-K
for the fiscal year ended June 27, 1998, and incorporated herein by
reference.
(6) Previously filed as an exhibit to CompUSA Inc.'s Annual Report on Form 10-K
for the fiscal year ended June 29, 1996, and incorporated herein by
reference.
9
11
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
CompUSA Inc.
/s/ James F. Halpin
Name: James F. Halpin
Title: President and Chief Executive
Officer
Dated: February 1, 2000
10
12
SCHEDULE I
[LETTERHEAD OF CREDIT SUISSE FIRST BOSTON CORPORATION]
January 23, 2000
Board of Directors
CompUSA Inc.
14951 North Dallas Parkway
Dallas, Texas 75240
Members of the Board:
You have asked us to advise you with respect to the fairness to the holders
of the common stock of CompUSA Inc. ("CompUSA"), other than Grupo Sanborns, S.A.
de C.V. ("Grupo Sanborns") and its affiliates, from a financial point of view,
of the Cash Consideration (as defined below) set forth in the Agreement and Plan
of Merger, dated as of January 23, 2000 (the "Merger Agreement"), among Grupo
Sanborns, TPC Acquisition Corp., a wholly owned subsidiary of Grupo Sanborns
("Sub"), and CompUSA. The Merger Agreement provides for, among other things, (i)
a tender offer by Sub to purchase all outstanding shares of the common stock,
par value $0.01 per share, of CompUSA ("CompUSA Common Stock") at a purchase
price of $10.10 per share, net to the seller in cash (the "Cash Consideration"
and, such tender offer, the "Tender Offer") and (ii) subsequent to the Tender
Offer, the merger of Sub and CompUSA (the "Merger" and, together with the Tender
Offer, the "Transaction") pursuant to which each outstanding share of CompUSA
Common Stock not acquired in the Tender Offer will be converted into the right
to receive the Cash Consideration.
In arriving at our opinion, we have reviewed the Merger Agreement and
certain publicly available business and financial information relating to
CompUSA. We have also reviewed certain other information relating to CompUSA,
including financial forecasts, provided to or discussed with us by CompUSA, and
have met with the management of CompUSA to discuss the business and prospects of
CompUSA. We have also considered certain financial and stock market data of
CompUSA, and we have compared those data with similar data for other publicly
held companies in businesses similar to CompUSA, and we have considered, to the
extent publicly available, the financial terms of certain other business
combinations and other transactions which have recently been effected. We also
considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria which we deemed
relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
such information being complete and accurate in all material respects. With
respect to the financial forecasts, we have been advised, and have assumed, that
such forecasts have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the management of CompUSA as to
the future financial performance of CompUSA. In addition, we have not been
requested to make, and we have not made, an independent evaluation or appraisal
of the assets or liabilities (contingent or otherwise) of CompUSA, nor have we
been furnished with any such evaluations or appraisals. Our opinion is
necessarily based upon information available to us, and financial, economic,
market and other conditions as they exist and can be evaluated, on the date
hereof. In connection with our engagement, we did not solicit third party
proposals for the acquisition of CompUSA.
We have acted as financial advisor to CompUSA in connection with the
Transaction and will receive a fee for such services, a significant portion of
which is contingent upon the consummation of the Transaction. Credit Suisse
First Boston and its affiliates have in the past provided services to CompUSA
and affiliates of Grupo Sanborns unrelated to the proposed Transaction, for
which services we have received compensation. In the ordinary course of
business, Credit Suisse First Boston and its affiliates may actively trade the
debt and
13
Board of Directors
CompUSA Inc.
January 23, 2000
Page 2
equity securities of CompUSA and Grupo Sanborns and its affiliates for their own
accounts and for the accounts of customers and, accordingly, may at any time
hold long or short positions in such securities.
It is understood that this letter is for the information of the Board of
Directors of CompUSA in connection with its evaluation of the Transaction and
does not constitute a recommendation to any stockholder as to whether such
stockholder should tender shares of CompUSA Common Stock pursuant to the Tender
Offer or how such stockholder should vote with respect to any matter relating to
the Merger. This letter is not to be quoted or referred to, in whole or in part,
in any registration statement, prospectus or proxy statement, or in any other
document used in connection with the offering or sale of securities, nor shall
this letter be used for any other purposes, without our prior written consent,
except that this letter may be attached in its entirety as an exhibit to
CompUSA's Schedule 14D-9 relating to the Tender Offer.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Cash Consideration to be received in the Transaction by the
holders of CompUSA Common Stock is fair to such holders (other than Grupo
Sanborns and its affiliates) from a financial point of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
14
SCHEDULE II
COMPUSA INC.
14951 NORTH DALLAS PARKWAY
DALLAS, TEXAS 75240
INFORMATION PURSUANT TO SECTION 14(f)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14f-1 THEREUNDER
This Information Statement is being furnished to holders of the common
stock, par value $0.01 per share ("Common Stock" or the "Shares"), of CompUSA
Inc., a Delaware corporation (the "Company"), in connection with the possible
designation by TPC Acquisition Corp., a Delaware corporation ("Purchaser") and
wholly-owned subsidiary of Grupo Sanborns, S.A. de C.V., a corporation organized
under the laws of the United Mexican States ("Parent"), of at least a majority
of the board of directors of the Company (the "Board") pursuant to the terms of
a Merger Agreement, dated as of January 23, 2000 (the "Merger Agreement"), by
and among the Company, Purchaser and Parent. This Information Statement is part
of the Solicitation/Recommendation Statement on Schedule 14D-9 (as amended from
time to time, the "Schedule 14D-9") of the Company. Capitalized terms used
herein and not otherwise defined shall have the respective meanings set forth in
the Schedule 14D-9. THIS INFORMATION IS BEING PROVIDED SOLELY FOR INFORMATIONAL
PURPOSES AND NOT IN CONNECTION WITH A VOTE OF THE COMPANY'S STOCKHOLDERS.
Pursuant to the Merger Agreement, after Purchaser has accepted for payment,
and paid for, Shares pursuant to the Offer, and from time to time thereafter,
Purchaser has the right to have persons designated by it become directors of the
Company (the "Purchaser Designees") so that the total number of such persons
equals the number, rounded up to the next whole number, which is the product of
(i) the total number of directors on the Board of Directors of the Company and
(ii) the percentage that such number of Shares so purchased bears to the total
number of Shares then outstanding. The Merger Agreement provides that the
Company will promptly take all actions necessary to cause such Purchaser
Designees to be so elected, including (a) upon request by Purchaser, increasing
the size of the Board or (b) if necessary, seeking the resignations of one or
more existing directors (except that there must be no fewer than two Continuing
Directors (as defined below)). Following the election or appointment of
Purchaser Designees and prior to the time the Merger becomes effective (the
"Effective Time") if any of the directors of the Company then in office is a
director of the Company on the date hereof (a "Continuing Director"), any
amendment or termination of the Merger Agreement which requires action by the
Company, any extension of time for the performance of any of the obligations or
other acts of Parent or Purchaser under the Merger Agreement and any exercise or
waiver of any of the provisions of the Merger Agreement providing rights or
remedies to the Company, will require the affirmative vote of a majority of the
Continuing Directors.
The information contained in this Schedule II concerning Purchaser has been
furnished to the Company by Purchaser, and the Company assumes no responsibility
for the accuracy or completeness of any such information.
15
VOTING SECURITIES OF THE COMPANY
As of January 28, 2000, there were issued and outstanding 92,693,889 shares
of Common Stock, each of which entitles the holder to one vote.
BOARD OF DIRECTORS, ACQUISITION DESIGNEES
AND EXECUTIVE OFFICERS
BOARD BIOGRAPHICAL INFORMATION
The persons named below are the current members of the Board. The following
sets forth as to each director his age (as of February 1, 2000), principal
occupation and business experience, the period during which he has served as a
director, any family relationship with any other director or executive officer
of the Company and the directorships currently held by him in corporations whose
shares are publicly registered.
SERVED AS A
DIRECTOR YEAR TERM
NAME AGE POSITION WITH COMPANY SINCE EXPIRES
- ---- --- --------------------- ----------- ---------
Warren D. Feldberg(1)........... 50 Director 1992 2002
Kevin J. Roche(1)(2)............ 41 Director 1989 2002
Barry L. Williams(3)............ 55 Director 1997 2002
Giles H. Bateman(2)(4).......... 55 Chairman of the Board of Directors 1991 2001
Leonard L. Berry, Ph.D.(3)...... 57 Director 1993 2001
Morton E. Handel(1)(2).......... 64 Director 1997 2001
James F. Halpin(2)(4)........... 49 President, Chief Officer and Director 1993 2000
Lawrence Mittman(3)............. 48 Director 1995 2000
- ---------------
(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
2
16
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.
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.
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.
PURCHASER DESIGNEE BIOGRAPHICAL INFORMATION
Purchaser has informed the Company that it will choose the Purchaser
Designees from the individuals shown in the table below to serve on the Board.
The information contained herein has been furnished to the Company by Purchaser
and the Company assumes no responsibility for the accuracy or completeness of
such information. None of the Purchaser Designees is a director of, or holds any
position with, the Company. To the best of Purchaser's knowledge, except as set
forth under "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" or
in the accompanying Offer to Purchase, no Purchaser Designee or any of its
respective associates beneficially owns any equity securities or rights to
acquire securities of the Company, nor has any such person been involved in any
transaction with the Company or any of its directors, executive officers or
affiliates that is required to be disclosed pursuant to the rules and
regulations of the Commission. The name, age, present principal occupation or
employment and five-year employment history of each of the following individuals
are set forth below. Carlos Slim Domit and Patrick Slim Domit are brothers; no
other Purchaser Designee is a relative of any other Purchaser Designee or any of
the Company's directors or executive officers. Except as set forth below, each
of the Purchaser Designees is a citizen of Mexico and has held his present
position as set forth below for the past five years.
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PROPOSED DIRECTOR LIST
NAME AND CITIZENSHIP AGE PRESENT OCCUPATIONS OR EMPLOYMENT AND DIRECTORSHIPS
- -------------------- --- ---------------------------------------------------
Carlos Slim Domit.................. 32 Chairman of the Board and Chief Executive Officer of
Parent since 1999, and Chairman of the Board of
Grupo Carso, S.A. de C.V. since 1998. Director of
Telefonos de Mexico, S.A. de C.V. and President of
Sanborns Hermanos since 1995.
Patrick Slim Domit................. 30 President of Grupo Carso, S.A. de C.V. since 1998;
Director of Parent and President of Industrias
Nacobre, S.A. de C.V. since 1994.
Angel Eduardo Peralta Rosado....... 68 Vice Chairman of the Board of Parent since April
1999. Expansion Director of Sanborns Hermanos since
1967.
Rafael Robles...................... 34 Partner of Franck, Galicia, Duclaud y Robles, S.C.
Secretary of the Board of Carso Global Telecom since
July 23, 1996.
Eduardo Valdes Acra................ 35 President of Inversora Bursatil, S.A. de C.V., Casa
de Bolsa, Grupo Financiero Inbursa.
James Nakfoor...................... 36 Vice President of Securities Trading, Inversora
Bursatil, S.A. de C.V. Director of Prodigy
Communications Corp. since September 1997 and
Director of Spitrock Services Inc. since April 1999.
Citizen of the United States of America.
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), Morton E.
Handel and Kevin J. Roche. The Compensation Committee met six times and acted by
written consent twice during fiscal 1999.
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 Barry L. Williams (Chairman), Dr. Leonard Berry and Lawrence
Mittman. The Audit Committee met eight times during fiscal 1999.
4
18
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.
After the consummation of the Merger, it is expected that the Company's
Board will act to appoint new members to all of the committees of the Board. To
the Company's knowledge, no decision has been made by the Purchaser Designees
regarding the membership of any such committee of the Board.
COMPENSATION OF DIRECTORS
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.
MANAGEMENT
EXECUTIVE OFFICERS
The following table sets forth, as of February 1, 2000, certain information
regarding the Company's executive officers, each of whom is expected to serve in
such capacity until the consummation of the Merger. Officers are elected
annually by the Board of Directors and serve at its discretion.
NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
James F. Halpin............... 49 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............. 45 Executive Vice President -- Marketing
Lawrence N. Mondry............ 39 Executive Vice President -- Merchandising
Honorio J. Padron............. 48 Executive Vice President and Chief Information Officer
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................ 45 Senior Vice President -- Finance and Chief Financial
Officer -- CompUSA Stores
Harold D. Greenberg........... 53 Senior Vice President -- Inventory Management
Robert M. Howe III............ 53 Senior Vice President and President -- CompUSA PC Inc.
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NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
Alann R. Hurlebaus............ 53 Senior Vice President -- Operations/Western Division and
Rural Stores
Melvin D. McCall.............. 55 Senior Vice President -- Human Resources
Barry C. McCook............... 52 Senior Vice President -- Operations/Southeastern Division
Robert N. Sayewitz............ 45 Senior Vice President -- Direct Sales
Mark R. Walker................ 43 Senior Vice President -- General Counsel and Secretary
Gary M. Bale.................. 43 Vice President -- Merchandising/Software and Accessories
Phil Boerger.................. 41 Vice President -- Direct Sales
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
Edmund G. Jurica, Jr. ........ 43 Vice President -- Information Systems
John S. Lostroscio............ 42 Vice President -- Merchandising/Hardware
Jerry Luther.................. 53 Vice President -- Real Estate
Leslie C. Marshall............ 55 Vice President -- Loss Prevention
Kellie J. McCluskey........... 41 Vice President -- Advertising
T. Dale Stapleton............. 42 Vice President -- Controller
Catherine C. Witt............. 48 Vice President -- Systems Operations
John W. Woodson............... 36 Vice President -- E-Commerce
Blake A. Wolff................ 35 Vice President -- Call Center Services
Business Experience
See "Board Biographical Information" above for biographical information
regarding Mr. Halpin.
Harold F. Compton has served as Executive Vice President and Chief
Operating Officer since January 1995. In July 1996, Mr. Compton was promoted to
the additional position of President -- CompUSA Stores. He served as Executive
Vice President -- Operations from August 1994 to January 1995. Prior to joining
the Company, Mr. Compton served as President and Chief Operating Officer of
Central Electric Inc., 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
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20
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.
Honorio J. Padron has served as Executive Vice President and Chief
Information Officer since November 1999. He served as Senior Vice
President -- Engineering Processes and Chief Information Officer from November
1997 to November 1999. 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 and Loss Improvements. From 1982 to 1985,
he was Owner and Chief Executive Officer of H&A Restaurant Management Company.
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
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
7
21
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.
Robert M. Howe has served as Senior Vice President and President -- CompUSA
PC Inc. since November 1999. He served as Vice President and General Merchandise
Manager -- CompUSA PC Inc. from November 1997 to November 1999. 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 personal computer distributor.
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.
Robert N. Sayewitz has served as Senior Vice President -- Direct Sales
since January 2000. He served as Senior Vice President --
Operations/Northeastern Division from September 1998 to January 2000. Mr.
Sayewitz served as a Regional Manager of the Company from August 1993 to
September 1998. He 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.
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22
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.
Phil Boerger has served as Vice President -- Direct Sales since January
2000. He served as Regional Manager from September 1998 to December 1999. From
April 1998 to September 1998, Mr. Boerger served as Vice President -- Business
Services for Inca Computer Builders, a manufacturer and retailer of computers
and provider of computer-related services. Prior to April 1998, Mr. Boerger
served as Senior Director of Direct Sales of the Company from December 1996 to
April 1998 and Regional Director of Direct Sales from December 1994 to December
1996.
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 stores, 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.
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.
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
9
23
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.
Jerry Luther has served as Vice President -- Real Estate of the Company
since January 2000. He served as Senior Director of Real Estate from May 1999 to
January 2000 and as Director of Real Estate from September 1995 to May 1999.
Prior to joining the Company, Mr. Luther served as Director of Development of
Discovery Zone, Inc., an owner and operator of pay-for-play children's
entertainment centers from October 1993 to September 1995.
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
January 1999. He served as Senior Director of Financial Accounting from December
1997 to January 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.
John W. Woodson has served as Vice President -- E-Commerce of the Company
since November 1999. Prior to joining the Company, Mr. Woodson served as Senior
Vice President -- Strategic Marketing of Associates First Capital Corporation, a
consumer and commercial financial organization, from June 1997 to November 1999,
and from January 1995 to June 1997, he was Vice President -- Advanced
Development of KeyCorp, a commercial and retail banking organization.
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.
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24
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth information as of January 28, 2000 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.
BENEFICIAL OWNERSHIP
OF COMMON STOCK(1)
---------------------------------
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP(2)(3) COMMON STOCK
- ------------------------ ----------------- ------------
Grupo Sanborns, S.A. de C.V.(4)............................. 13,750,000 14.8%
Av. San Fernando 649
Colonia Pena Pobre, Tlalpan
Mexico, D.F. 14060
Mexico
Massachusetts Financial Services Company(5)................. 6,483,373 7.0%
500 Boylston Street
Boston, Massachusetts 02116
Pilgrim Baxter & Associates, Ltd.(6)........................ 6,314,500 6.8%
11255 Drummers Lane, Suite 300
Wayne, Pennsylvania 19067
FMR Corp.(7)................................................ 5,191,200 5.6%
82 Devonshire Street
Boston, Massachusetts 02109
Giles H. Bateman............................................ 358,695 *
Leonard L. Berry, Ph.D...................................... 55,823 *
Warren D. Feldberg.......................................... 89,747 *
James F. Halpin............................................. 4,051,408 4.2%
Morton E. Handel............................................ 21,983 *
Lawrence Mittman............................................ 29,331 *
Kevin J. Roche.............................................. 255,079 *
Barry L. Williams........................................... 17,896 *
Harold F. Compton........................................... 2,682,422 2.8%
J. Samuel Crowley........................................... 720,352 *
Lawrence N. Mondry.......................................... 1,082,995 1.2%
James E. Skinner............................................ 848,891 *
All directors and executive officers as a group (42
persons)(8)............................................... 14,307,014 13.8%
Carlos Slim Domit(4)(9)..................................... 13,750,000 14.8%
Patrick Slim Domit(4)(9).................................... 13,750,000 14.8%
Angel Eduardo Peralta Rosado................................ 0 *
Rafael Robles............................................... 0 *
Eduardo Valdes Acra......................................... 0 *
James Nakfoor............................................... 0 *
- ---------------
* Less than 1.0%
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25
(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) Assumes the conversion into shares of Common Stock of all outstanding
options upon the consummation of the Merger. With respect to Messrs.
Bateman, Berry, Feldberg, Halpin, Handel, Mittman, Roche, Williams, Compton,
Crowley, Mondry, Skinner and all directors and executive officers as a
group, such shares number 165,835; 48,323; 54,747; 3,276,923; 18,983;
29,331; 48,323; 17,896; 2,224,175; 615,523; 538,611; 604,259 and 10,646,802,
respectively.
(3) Assumes the vesting, upon the consummation of the Merger, of all shares of
Common Stock restricted by the Company as to their sale, assignment,
transfer, pledge or other encumbrance (including, without limitation, shares
issued under the CompUSA Inc. Long-Term Incentive Plan and under the CompUSA
Inc. Restricted Stock Plan) which are held 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.
(4) Based on a Report on Schedule 13D dated November 22, 1999, with the
Securities and Exchange Commission (the "Commission") by Parent 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
beneficially owned by Parent. As the parent company of Parent, Grupo Carso
may be deemed to be a beneficial owner of such Shares. The Slim Family,
through a Mexican corporation and a Mexican trust, beneficially own a
majority of the outstanding voting equity securities of Grupo Carso, and,
therefore, each member of the Slim Family may be deemed to be a beneficial
owner of such Shares. All Shares are held subject to shared voting power and
dispositive power among Parent, Grupo Carso and the Slim Family.
(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. 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.
(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.
(8) Includes 40,000 shares of Common Stock (which number includes 36,000 shares
of Common Stock restricted by the Company as to their sale, assignment,
transfer, pledge or other encumbrance) and options to acquire 36,000 shares
of Common Stock held as of January 28, 2000 by R. Stephen Polley, Executive
Vice President-Internet Strategies and President and Chief Executive
Officer -- cozone.com inc. Mr. Polley tendered his resignation from all
positions with the Company and cozone.com inc., effective January 31, 2000.
(9) The principal business address for Carlos Slim Domit and Patrick Slim Domit
is Paseo de las Palmas 736, Colonia Lomas de Chapultepec, Mexico, D.F.,
Mexico, 11000.
12
26
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
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27
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.
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 CompUSA Inc. Long-Term Incentive Plan, as amended and restated as of
September 1, 1999 (the "Long-Term Incentive Plan") has been the Company's
long-term incentive plan for executive officers since
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28
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 number of shares authorized for issuance under the Long-Term Incentive
Plan is 16,416,699, plus a number of shares equal to the number of shares of
PARs (as defined below) outstanding as of September 1, 1999 that are forfeited
and returned to the Company at any time on or after September 1, 1999. As of
January 28, 2000, options to purchase an aggregate of 13,350,910 of such shares
had been granted, leaving 3,065,789 shares (plus any shares of PARs (as defined
below) that are thereafter forfeited) available for future grants. The terms of
the Long-Term Incentive Plan prohibit the repricing of options granted under the
Long-Term Incentive Plan, other than standard anti-dilution adjustments. The
Long-Term Incentive Plan will expire on August 31, 2009.
Restricted Stock Plan
The CompUSA Inc. Restricted Stock Plan (the "Restricted Stock Plan"),
approved by the Board of Directors on 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 January 28, 2000, 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 number of shares, respectively: 118,644; 106,780; 60,332;
60,332 and 60,332.
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.
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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.
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
Mort Handel
Kevin J. Roche
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
---------------------------------
AWARDS PAYOUTS
----------------------- -------
ANNUAL COMPENSATION SECURITIES
------------------------------------------- RESTRICTED UNDERLYING
OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
FISCAL SALARY BONUS COMPENSATION AWARD(S) SARS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2) ($)(3) (#)(4) ($) ($)(5)
- --------------------------- ------ --------- ------- ------------ ---------- ---------- ------- ------------
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 President and 1998 796,154 -- -- 375,066 104,508 -- 3,150
Chief Operating Officer 1997 584,619 521,926 -- 213,216 955,597 -- 4,750
of the Company and
President -- CompUSA Stores
J. Samuel Crowley............. 1999 362,789 -- -- 421,868 36,113 -- 1,600
Executive Vice President -- 1998 332,500 -- -- 112,773 19,590 -- 2,996
Operations 1997 275,038 184,018 -- 81,540 348,572 -- 4,750
Lawrence N. Mondry............ 1999 414,615 -- -- 421,868 36,113 -- 1,600
Executive Vice President -- 1998 385,192 -- -- 112,773 19,590 -- 3,150
Merchandising 1997 344,425 229,692 -- 81,540 348,572 -- 4,750
James E. Skinner.............. 1999 375,577 -- -- 421,868 36,113 -- 1,600
Executive Vice President, 1998 336,538 -- -- 112,773 19,590 -- 2,375
Chief Financial Officer, 1997 293,071 195,854 -- 81,540 348,572 -- 4,750
Treasurer and Assistant
Secretary
- ---------------
(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
16
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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 $235,755 for Messrs. Halpin,
Compton, Crowley, Mondry and Skinner, respectively. The number of shares of
restricted stock held by Messrs. Halpin, Compton, Crowley, Mondry and
Skinner at the end of fiscal 1999 was 76,970; 68,043; 32,240; 32,240 and
32,240, respectively. Restrictions lapse after five years, subject to
accelerated vesting if specific performance goals are met; however, such
vesting period will not be less than three years. Holders of restricted
stock are entitled to receive any dividends paid to holders of Common Stock.
(4) Options to acquire Common Stock under the Long-Term Incentive Plan. See
"Report of the Compensation Committee on Executive Compensation -- EXECUTIVE
OFFICER COMPENSATION PROGRAM -- Long-Term Incentive Plan."
(5) Reflects the Company's contributions to the 401(k) Plan and the SERP in
respect of these individuals.
OPTION GRANTS DURING FISCAL 1999
The following table sets forth information regarding stock options granted
to the Named Officers during fiscal 1999 pursuant to the Long-Term Incentive
Plan.
INDIVIDUAL GRANTS
------------------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED ANNUAL
SECURITIES % OF TOTAL RATES OF STOCK PRICE
UNDERLYING OPTIONS/SARS APPRECIATION FOR OPTION
OPTIONS/SARS GRANTED TO EXERCISE OR BASE TERM(1)
GRANTED EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME (#)(2)(3) FISCAL YEAR(2) ($/SHARE)(4) DATE 5% ($) 10% ($)
- ---- ------------ -------------- ---------------- ---------- ---------- ----------
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
- ---------------
(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.
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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
SHARES OPTIONS/SARS AT FISCAL OPTIONS/SARS AT FISCAL
ACQUIRED ON VALUE YEAR END (#) YEAR END ($)(2)
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
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 --
- ---------------
(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 New York Stock Exchange
("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
$7.3125 and the per share option exercise price multiplied by the number of
shares of Common Stock purchasable under the option.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
The following table sets forth information regarding bonus awards to the
Named Officers during fiscal 1999 under the Supplemental Bonus Plan.
NUMBER OF SHARES, UNITS PERFORMANCE OR OTHER PERIOD
NAME OR OTHER RIGHTS ($)(1) UNTIL MATURATION OR PAYOUT
- ---- ----------------------- ---------------------------
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)
- ---------------
(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.
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EMPLOYMENT AGREEMENTS
Halpin Agreement. The Company is a party to an employment agreement with
James F. Halpin (the "Halpin Employment Agreement") dated August 16, 1996, as
amended by the Amendment to Employment Agreement dated January 23, 2000 (the
"Halpin Amendment" and, together with the Halpin Employment Agreement, the
"Halpin Agreement"), 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 $1,040,000. 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." Although the term of
employment under the Halpin Agreement is scheduled to expire on August 15, 2000,
the Halpin Amendment provides that Mr. Halpin will render services to the
Company as an employee on a full-time basis during the six-month period
commencing on the date on which the termination payment and gross-up payment
which are owed to Mr. Halpin upon a "change of control" of the Company (as
defined in the Halpin Agreement) would be required to be paid pursuant to the
Halpin Agreement. 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 Employment Agreement") dated August 16, 1996, as
amended by the Amendment to Employment Agreement dated January 23, 2000 (the
"Compton Amendment" and, together with the Compton Employment Agreement, the
"Compton Agreement"), 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 $935,000. 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." Although the term of
employment under the Compton Agreement is scheduled to expire on August 15,
2000, the Compton Amendment provides that Mr. Compton will render services to
the Company as an employee on a full-time basis during the six-month period
commencing on the date on which the termination payment and gross-up payment
which are owed to Mr. Compton upon a "change of control" of the Company (as
defined in the Compton Agreement) would be required to be paid pursuant to the
Compton Agreement. 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 Employment Agreement") dated August 16, 1996, as
amended by the Amendment to Employment Agreement dated January 23, 2000 (the
"Crowley Amendment" and, together with the Crowley Employment Agreement, the
"Crowley Agreement"), 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 $385,000. 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." Although the term of
employment under the Crowley Agreement is scheduled to expire on May 1, 2000,
the Crowley Amendment provides that Mr. Crowley will render services to the
Company as an employee on a full-time basis during the six-month period
commencing on the date on which the termination payment and gross-up payment
which are owed to Mr. Crowley upon a "change of control" of the Company
19
33
(as defined in the Crowley Agreement) would be required to be paid pursuant to
the Crowley Agreement. 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 Employment Agreement") dated August 16, 1996, as
amended by the Amendment to Employment Agreement dated January 23, 2000 (the
"Mondry Amendment" and, together with the Mondry Employment Agreement, the
"Mondry Agreement"), 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 $460,000. 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." Although the term of
employment under the Mondry Agreement is scheduled to expire on May 1, 2000, the
Mondry Amendment provides that Mr. Mondry will render services to the Company as
an employee on a full-time basis during the six-month period commencing on the
date on which the termination payment and gross-up payment which are owed to Mr.
Mondry upon a "change of control" of the Company (as defined in the Mondry
Agreement) would be required to be paid pursuant to the Mondry Agreement. 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 Employment Agreement") dated August 16, 1996, as
amended by the Amendment to Employment Agreement dated January 23, 2000 (the
"Skinner Amendment" and, together with the Skinner Employment Agreement, the
"Skinner Agreement"), pursuant to which Mr. Skinner currently serves as
Executive Vice President and Chief Financial Officer. The Skinner Agreement
provides for annual salary increases at the sole discretion of the Compensation
Committee of the Board of Directors. Mr. Skinner's current annual base salary is
$425,000. 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." Although the term of employment under the Skinner Agreement is
scheduled to expire on May 1, 2000, the Skinner Amendment provides that Mr.
Skinner will render services to the Company as an employee on a full-time basis
during the six-month period commencing on the date on which the termination
payment and gross-up payment which are owed to Mr. Skinner upon a "change of
control" of the Company (as defined in the Skinner Agreement) would be required
to be paid pursuant to the Skinner Agreement. 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 such 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
20
34
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.
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 Company's employment agreements with its officers provide for lump sum
payments in lieu of the foregoing severance payments in connection with a
"change in control" (as defined in the agreements) of the Company; provided,
however, that with respect to the Named Officers, the payments described in this
paragraph are modified to the extent described in the succeeding paragraph. 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 payment is equal to
2.99 times the sum of the following: (i) the executive's annual base pay, (ii)
two times the executive's target bonus and (iii) the executive's annualized
automobile allowance; provided, however, that with respect to Vice Presidents,
the amount of the lump sum payments will be equal to 1.00 times the sum of the
items enumerated in this sentence. 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 that the executive may incur
as a result of the payments. 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; provided, however, that with respect to
Vice Presidents, such modified noncompetition restrictions apply for a period of
one year. The consummation of the Offer will result in a "change of control"
under the employment agreements.
Under each of the Halpin Amendment, the Compton Amendment, the Crowley
Amendment, the Mondry Amendment and the Skinner Amendment (together, the
"Amendments"), the Company shall withhold a portion of any change in control
payments to be made to the Named Officers at the consummation of the Offer (the
"Deferred Payment") and deposit an amount equal to the Deferred Payment into an
escrow account for the benefit of the executive. The Company will pay the
executive the Deferred Payment (plus earnings thereon) on the earlier to occur
of (i) the three-month anniversary of the date that the initial payment was made
to the executive, if the executive is employed by the Company at such time, and
(ii) two (2) business days after the date on which the executive's employment
with the Company terminates for any reason other than by the Company for "cause"
(as defined in the Amendments) or the executive's voluntary resignation. If
employment is terminated for "cause" or the executive voluntarily resigns prior
to such three-month anniversary, the Deferred Payment will be forfeited.
CERTAIN RELATIONSHIPS AND RELATED 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 -- Direct Sales,
which loan was repaid July 1, 1999.
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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.
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
30, 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
COMPUSA INC. PEER GROUP INDEX NYSE INDEX
------------ ---------------- ----------
6/24/1994 100.00 100.00 100.00
6/26/1995 347.82 107.12 119.37
6/28/1996 791.29 130.54 149.34
6/30/1997 997.08 158.12 195.08
6/30/1998 840.56 250.90 248.59
6/30/1999 344.92 334.93 282.59
- ---------------
(1) Common Stock
(2) Standard & Poor's Retail Composite Index
(3) NYSE Composite Index
22