-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Bsr52uewAUg7FgndZqN3HfKb2aekmWj8k+oe1KYt0THsCvvOsFxpfVnPwlr8/TFv WKhmlQm6d6EIYNaz/HqCzw== 0000930661-96-001264.txt : 19960927 0000930661-96-001264.hdr.sgml : 19960927 ACCESSION NUMBER: 0000930661-96-001264 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961106 FILED AS OF DATE: 19960926 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMPUSA INC CENTRAL INDEX KEY: 0000880323 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-COMPUTER & COMPUTER SOFTWARE STORES [5734] IRS NUMBER: 752261497 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-11566 FILM NUMBER: 96634648 BUSINESS ADDRESS: STREET 1: 14951 N DALLAS PKWY CITY: DALLAS STATE: TX ZIP: 75240 BUSINESS PHONE: 2149824000 DEF 14A 1 DEFINITIVE PROXY STATEMENT SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant [X] Filed by a Party other than the Registrant [_] Check the appropriate box: [_] Preliminary Proxy Statement [_] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [X] Definitive Proxy Statement [_] Definitive Additional Materials [_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12 CompUSA Inc. - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) CompUSA Inc. - ------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or Item 22(a)(2) of Schedule 14A. [_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a- 6(i)(3). [_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. (1) Title of each class of securities to which transaction applies: --------------------------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: ---------------------------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): ---------------------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: --------------------------------------------------------------------------- (5) Total fee paid: --------------------------------------------------------------------------- [X] Fee paid previously with preliminary materials. [_] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: ---------------------------------------------------------------------------- (2) Form, Schedule or Registration Statement No.: --------------------------------------------------------------------------- (3) Filing Party: --------------------------------------------------------------------------- (4) Date Filed: --------------------------------------------------------------------------- Notes: CompUSA Inc. 14951 North Dallas Parkway Dallas, Texas 75240 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS To Be Held November 6, 1996 To the Stockholders of CompUSA Inc. Notice is hereby given that the Annual Meeting of Stockholders (the "Meeting") of CompUSA Inc., a Delaware corporation (the "Company"), will be held at The Grand Kempinski Hotel, 15201 North Dallas Parkway, Dallas, Texas, on November 6, 1996, at 10:00 a.m., local time, for the following purposes: (1) To elect two members of the Board of Directors, which will consist of seven directors, for the term of office stated in the Proxy Statement. (2) To amend the Company's Restated and Amended Certificate of Incorporation to increase the number of authorized shares of Common Stock from 100,000,000 to 200,000,000. (3) To amend the CompUSA Inc. Long-Term Incentive Plan to increase the number of shares of Common Stock authorized for issuance thereunder by 2,000,000, from 6,394,368 to 8,394,368. (4) To consider and ratify the selection of the Company's independent auditors. (5) To transact any other business that may properly come before the Meeting and any adjournments thereof. The close of business on September 9, 1996, has been fixed as the record date for determining stockholders entitled to notice of and to vote at the Meeting and any adjournments thereof. For a period of at least 10 days prior to the Meeting, a complete list of stockholders entitled to vote at the Meeting will be open to the examination of any stockholder during ordinary business hours at CompUSA Inc., 14951 North Dallas Parkway, Dallas, Texas. Information concerning the matters to be acted upon at the Meeting is set forth in the accompanying Proxy Statement. STOCKHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING IN PERSON ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. By Order of the Board of Directors Mark R. Walker Senior Vice President-General Counsel and Secretary Dallas, Texas September 27, 1996 CompUSA Inc. 14951 North Dallas Parkway Dallas, Texas 75240 PROXY STATEMENT for ANNUAL MEETING OF STOCKHOLDERS To Be Held November 6, 1996 This Proxy Statement is being first mailed on September 27, 1996, to stockholders of CompUSA Inc. (the "Company") by the board of directors of the Company (the "Board of Directors" or the "Board") to solicit proxies (the "Proxies") for use at the Annual Meeting of Stockholders (the "Meeting") to be held at The Grand Kempinski Hotel, 15201 North Dallas Parkway, Dallas, Texas, on Wednesday, November 6, 1996, at 10:00 a.m., local time, and at such other time and place to which the Meeting may be adjourned. All shares represented by valid Proxies, unless the stockholder otherwise specifies, will be voted (i) FOR the election of the persons named herein under "Election of Directors" as nominees for election as a director of the Company for the term described therein; (ii) FOR the amendment of the Company's Restated and Amended Certificate of Incorporation (the "Charter") to increase the number of authorized shares of Common Stock, par value $.01 per share, of the Company (the "Common Stock") from 100,000,000 to 200,000,000; (iii) FOR the proposal to amend the CompUSA Inc. Long-Term Incentive Plan (the "Long-Term Incentive Plan") to increase the number of shares of Common Stock authorized for issuance thereunder by 2,000,000, from 6,394,368 to 8,394,368; (iv) FOR the ratification of the selection of Ernst & Young LLP as the Company's independent auditors for the fiscal year ending June 28, 1997 ("fiscal 1997"); and (v) at the discretion of the Proxyholders with regard to any other matters that may properly come before the Meeting and any adjournments thereof. Any stockholder executing a Proxy retains the right to revoke it at any time prior to exercise at the Meeting. A Proxy may be revoked by delivery of written notice of revocation to the Secretary of the Company, by execution and delivery of a later Proxy or by voting the shares in person at the Meeting. If not revoked, all shares represented by properly executed Proxies will be voted as specified therein or as noted above, as applicable. RECORD DATE AND VOTING SECURITIES The record date for determining the stockholders entitled to notice of and to vote at the Meeting and any adjournments thereof is the close of business on September 9, 1996 (the "Record Date"). On April 22, 1996, the Company issued 21,047,172 shares of Common Stock as the result of a 2-for-1 stock split in the form of a stock dividend on the Common Stock outstanding at the close of business on April 8, 1996. All share numbers stated in this Proxy Statement, except for authorized shares, reflect the stock split. In addition, on May 30, 1996, the Company issued 2,632,717 shares of Common Stock pursuant to an Agreement and Plan of Merger by which the Company acquired PCs Compleat, Inc., a direct reseller of brand-name personal microcomputers and peripherals ("PCs Compleat"). As a result of these and other issuances of Common Stock, 45,320,525 shares of Common Stock were issued and outstanding as of the close of business on the Record Date. Common Stock is the only class of outstanding voting securities of the Company. QUORUM AND VOTING The presence at the Meeting, in person or by proxy, of the holders of a majority of the Common Stock issued and outstanding and entitled to vote thereat is necessary to constitute a quorum to transact business. Each share represented at the Meeting in person or by proxy will be counted toward a quorum. In deciding all questions and other matters, a holder of Common Stock on the Record Date shall be entitled to cast one vote for each share of Common Stock registered in such holder's name. Election of the director nominees named in Proposal No. 1, or either of them, requires the affirmative vote of a plurality of the shares of Common Stock present or represented at the Meeting and entitled to vote thereon. Votes may be cast in favor or withheld with respect to both of the director nominees, or either of them. Votes that are withheld will be counted toward a quorum, but will be excluded entirely from the tabulation for the proposal and, therefore, will not otherwise affect the outcome of the vote on the proposal. Approval of Proposal No. 2 requires the affirmative vote of a majority of the shares of Common Stock outstanding and entitled to vote. Abstentions on the proposal may be specified and will have the same effect as a vote against the proposal. In order for certain stock options granted under the Long-Term Incentive Plan to qualify as "incentive stock options" under Section 422 of the Internal Revenue Code, approval of Proposal No. 3 requires the affirmative vote of a majority of the shares of Common Stock present or represented at the Meeting and entitled to vote thereon. Abstentions on the proposal may be specified and will have the same effect as a vote against the proposal. Approval of Proposal No. 4 requires the affirmative vote of a majority of the shares of Common Stock present or represented at the Meeting and entitled to vote thereon. Abstentions on the proposal may be specified and will have the same effect as a vote against the proposal. Brokers or nominees have discretionary power to vote on each of the Proposals. 2 PRINCIPAL STOCKHOLDERS AND MANAGEMENT OWNERSHIP The following table sets forth information as of the Record Date regarding the beneficial ownership of Common Stock by (i) each person or group known by the Company to own beneficially more than 5% of the outstanding shares of Common Stock, (ii) each director and nominee for director of the Company, (iii) the Company's Named Officers (as defined under "EXECUTIVE COMPENSATION-- Summary Compensation Table") and (iv) all directors and executive officers of the Company as a group.
Beneficial Ownership of Common Stock (1) -------------------------------------------------- Amount and Nature of Beneficial Percent of Name and Address of Beneficial Owner Ownership (2) Common Stock - ------------------------------------ ------------------- ------------------ FMR Corp. (3) 82 Devonshire Street Boston, Massachusetts 02109 6,219,500 13.4% Forstmann-Leff Associates Inc. (4) 55 East 52nd Street New York, New York 10055 3,588,600 7.7% Giles H. Bateman 153,587 * Leonard L. Berry, Ph.D. 22,397 * Warren D. Feldberg 33,109 * James F. Halpin (5) 475,311 1.0% Lawrence Mittman 1,982 * Kevin J. Roche 113,775 * Edith Weiner 3,426 * Harold F. Compton (5) 190,493 * Lawrence N. Mondry (5) 256,607 * James E. Skinner (5) 190,849 * J. Samuel Crowley (5) 45,675 * All directors and executive officers as a group (30 persons) (5) 2,008,082 4.3%
- ------------------------ *Less than 1.0% (1) "Beneficial owner" means generally any person who, directly or indirectly, has or shares voting power or investment power with respect to a security. All information with respect to the beneficial ownership of any stockholder has been furnished by such stockholder and the Company believes that, except as otherwise indicated, each stockholder has sole voting and investment power with respect to shares listed as beneficially owned by such stockholder. (2) Includes shares of Common Stock issuable upon exercise of options that were exercisable on the Record Date or within 60 days thereafter by Messrs. Bateman, Berry, Feldberg, Halpin, Mittman, Roche, Compton, Mondry, Skinner, Crowley and Ms. Weiner and all directors and executive officers as a group, with such shares numbering 56,287; 9,897; 13,109; 309,081; 950; 9,897; 66,810; 15,986; 181,284; 29,448; 1,826 and 1,079,838, respectively. These numbers do not reflect the options granted by the Compensation Committee on August 16, 1996, subject to stockholder approval of Proposal No. 3. See footnote 1 to the table set forth under "Proposal No. 3 - AMENDMENT TO LONG-TERM INCENTIVE PLAN - Grant of Awards Under the Long-Term Incentive Plan." (3) Based on a Report on Schedule 13G dated February 14, 1996, which was filed with the Securities and Exchange Commission (the "Commission") by FMR Corp. ("FMR"). FMR reported sole voting power with respect to 111,400 shares and sole dispositive power with respect to 6,219,500 shares. (notes continued on following page) 3 (notes continued from previous page) (4) Based on a Report on Schedule 13G dated February 15, 1996, which was filed with the Commission by Forstmann-Leff Associates Inc. ("Forstmann-Leff"). Forstmann-Leff reported sole voting power with respect to 2,424,200 shares and sole dispositive power with respect to 2,556,600 shares. (5) Includes shares of Common Stock restricted by the Company as to their sale, assignment, transfer, pledge or other encumbrance by Messrs. Halpin, Compton, Mondry, Skinner, Crowley and all directors and executive officers as a group; with such shares numbering 26,131; 22,456; 8,147; 8,147; 8,147 and 119,553, respectively. The vesting period of these restricted stock awards may be accelerated if specified performance goals are met. See "EXECUTIVE COMPENSATION - Summary Compensation Table." Proposal No. 1 ELECTION OF DIRECTORS The Board of Directors is divided into three classes of directors serving staggered three-year terms. All directors of one class hold their positions until the annual meeting of stockholders at which the terms of the directors in such class expire and their respective successors are elected and qualified. The Charter provides that the number of directors will not be less than three nor greater than thirteen and will be divided into three classes as nearly equal in number as the then authorized number of directors permits. The Bylaws of the Company provide that the number of directors will be established by resolution of the Board of Directors within the limitations set forth in the Charter. The Board of Directors has set the number of directors at seven. The Board of Directors has approved the recommendation of the Nominating Committee that Warren D. Feldberg and Kevin J. Roche be submitted as nominees to the stockholders to serve three-year terms as directors expiring at the 1999 annual meeting of stockholders and until their successors are elected and have qualified. Both have served as members of the Board of Directors since prior to the last annual meeting of stockholders. Proxies may not be voted for a greater number of persons than the number of nominees named in this Proxy Statement. It is the intention of the persons named in the enclosed form of Proxy to vote such Proxy FOR the election of the nominees named above, unless authorization is withheld on the Proxy. Directors will be elected by the affirmative vote of a plurality of the shares of Common Stock present or represented at the Meeting and entitled to vote thereon, provided a quorum is present. The nominees named above have consented to serve as members of the Board of Directors if elected. If any of the above nominees for any reason is unable or unwilling to serve at the time of the Meeting, the Proxyholders will have discretionary authority to vote the Proxies for a substitute nominee or nominees. The following sets forth information as to the nominees for election at the Meeting and each of the directors whose term of office will continue after the Meeting, including their ages, present principal occupations, other business experience during the last five years, memberships on committees of the Board of Directors and directorships in other publicly-held companies. 4
Served as Year Director Term Name Age Position Since Expires - ---------------------------- --- ------------------- ---------- --------- Nominees for three-year terms ending in 1999: Warren D. Feldberg (4) 46 Director 1992 1996 Kevin J. Roche (2)(3)(4) 38 Director 1989 1996 Continuing directors: James F. Halpin (1)(2) 45 President, Chief 1993 1997 Executive Officer and Director Lawrence Mittman (3) 45 Director 1995 1997 Edith Weiner 47 Director 1995 1997 Giles H. Bateman (1)(2) 51 Chairman of the 1991 1998 Board of Directors Leonard L. Berry, 53 Director 1993 1998 Ph.D. (4) - ----------------
(1) Member of the Nominating Committee (2) Member of the Finance Committee (3) Member of the Audit Committee (4) Member of Compensation Committee Warren D. Feldberg has served as a director of the Company since October 1992. Since May 1996, Mr. Feldberg has been President and Chief Operating Officer of The Caldor Corporation, a discount department store retail chain. Mr. Feldberg served as Chairman and Chief Executive Officer of Marshalls, Inc., a retail organization and a subsidiary of Melville Corporation, from October 1991 to June 1995. 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 division, most recently as President during 1991. Kevin J. Roche has served as a director of the Company since 1989. Mr. Roche has served as Senior Vice President of First Union Capital Partners, Inc. since 1993, Senior Vice President of First Union Corporation since 1991 and Senior Vice President of First Union National Bank of North Carolina since 1988. James F. Halpin has served as President and a director of the Company since May 1993 and as Chief Executive Officer since December 1993. Mr. Halpin also served as Chief Operating Officer from May 1993 to January 1995. From 1990 to November 1992, Mr. Halpin was President of HomeBase, a home center warehouse retailer. From 1988 to 1990, Mr. Halpin was President of BJ's Wholesale Club, a chain of warehouse club retail stores. He also served as Executive Vice President of Waban Inc., the parent corporation of HomeBase and BJ's Wholesale Club, from 1988 to May 1993. He is also a director of Toy Biz, Inc., Lowe's Companies, Inc., and Interphase Corporation. Lawrence Mittman has served as a director of the Company since January 1995. Mr. Mittman is a partner of the New York City law firm Battle Fowler, where he has been employed since 1979. Edith Weiner has served as a director of the Company since March 1995. Ms. Weiner is President of Weiner, Edrich, Brown, Inc., a management consulting firm, where she has been employed since 1977. She also serves as a director of First Unum 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 Boatracs, Inc. 5 Leonard L. Berry, Ph.D. has served as a director of the Company since November 1993. Mr. Berry has served as a Professor of Marketing and as Director of the Center for Retailing Studies at Texas A&M University since 1982. He has also held the J.C. Penney Chair of Retailing Studies since January 1991. 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 six times and acted by unanimous written consent four times during fiscal 1996. During such period, all members of the Board of Directors participated in at least 75% of all Board and applicable Committee meetings. The Board of Directors has four standing committees (each a "Committee"): The Nominating Committee, the Finance Committee, the Audit Committee and the Compensation Committee. The functions of these committees, their current members, the number of meetings held and the number of times action was taken by written consent during fiscal 1996 are described below. The Nominating 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 Committee is comprised of James F. Halpin (Chairman) and Giles H. Bateman. The Nominating Committee met informally once during fiscal 1996. 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 Giles H. Bateman (Chairman), James F. Halpin and Kevin J. Roche. The Finance Committee met once and acted by written consent once during fiscal 1996. 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 Kevin J. Roche (Chairman) and Lawrence Mittman. The Audit Committee met seven times during fiscal 1996. The Compensation Committee has the responsibility of reviewing planning for succession to senior executive positions, fixing annual salaries and bonuses for the officers and key employees of the Company and administering the Long-Term Incentive Plan. The Compensation Committee is comprised of Warren D. Feldberg (Chairman), Kevin J. Roche and Leonard L. Berry, Ph.D. The Compensation Committee met six times during fiscal 1996. Director Compensation Directors who are also employees of the Company or its subsidiaries receive no compensation in their capacities as directors. Nonemployee directors receive an annual retainer of $25,000, plus a fee of $1,000 for each Board meeting and $500 for each Committee meeting in which the director participates. All directors are reimbursed for expenses connected with attendance at Board or Committee meetings. In addition, nonemployee directors receive annual automatic grants of stock options to purchase $50,000 of Common Stock (based on market value). For fiscal 1996, the Company (i) paid Messrs. Bateman, Berry, Feldberg, Mittman and Roche $30,000, $33,000, $32,500, $30,500 and $35,000, respectively, and paid the firm of Weiner, Edrich, Brown, Inc., $29,000 in respect of Ms. Weiner's services and (ii) granted each of Messrs. Bateman, Berry, Feldberg, Mittman and Roche and Ms. Weiner options to purchase 2,846 shares of Common Stock at an exercise price of $17.52 per share. For his services as Chairman of the Board of Directors during fiscal 1996, Mr. Bateman received an additional $69,000 as an annual salary. In addition, Mr. Dean Groussman, who resigned as a director in August 1995, was paid $13,917 for services rendered in fiscal 1996. 6 Proposal No. 2 INCREASE IN THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK The Board of Directors has unanimously approved, subject to approval by the stockholders of the Company, a proposal to amend the Fourth Article of the Charter to increase the number of shares of Common Stock authorized and available for issuance from 100,000,000 to 200,000,000. Management believes that this amendment would benefit the Company by providing greater flexibility to the Board of Directors to issue additional equity securities, for example, to raise additional capital, to facilitate possible future acquisitions, to provide stock-related employee benefits and to effect stock splits of the outstanding Common Stock. If the increase is approved at the Meeting, generally, no stockholder approval would be necessary for the issuance of all or any portion of the additional shares of Common Stock unless required by law or any rules or regulations to which the Company is subject. However, as long as the Common Stock is quoted for trading through the New York Stock Exchange (the "NYSE"), the flexibility that this amendment would provide the Board of Directors will be limited by the rules of such exchange which, as presently in effect, would generally require stockholder approval for the issuance of shares when: (i) a stock option or purchase plan is to be established or other arrangements made pursuant to which stock may be acquired by directors or officers, except for warrants or rights issued generally to securityholders of the Company or broadly-based plans or arrangements including other employees; (ii) a business, a company, tangible or intangible assets or property or securities representing any such interest are to be acquired, directly or indirectly, from a director, officer or substantial securityholder of the Company (including its subsidiaries, affiliates or other closely related persons) or from any company or party in which one of such persons has a substantial direct or indirect interest if the number of shares of Common Stock to be issued or the number of shares of Common Stock into which the securities may be convertible exceeds one percent of the number of shares of Common Stock, or one percent of the voting power, outstanding before the issuance; (iii) Common Stock or securities convertible into or exercisable for Common Stock are to be issued in any transaction or series of related transactions, other than a public offering for cash, if (a) the Common Stock to be issued has, or will have upon issuance, voting power equal to or in excess of 20% of the voting power outstanding before the issuance of such Common Stock or securities convertible into or exercisable for Common Stock, or (b) the number of shares of Common Stock to be issued is, or will be, equal to or in excess of 20% of the number of shares of Common Stock outstanding before the issuance of the Common Stock; or (iv) the issuance would result in a change in control of the Company. Although the Company considers from time to time mergers, acquisitions and other transactions that may involve the issuance of additional shares of Common Stock (any one or more of which may be under consideration or acted upon at any time), the Company is not a party to any agreements with respect to any such transactions, nor does it have any agreements, commitments or understandings with respect to such transactions or that would involve the issuance of additional shares of Common Stock in amounts that would exceed the number of currently authorized and unissued shares. Depending upon the consideration per share received by the Company for any subsequent issuance of Common Stock, such issuance could have a dilutive effect on those stockholders who paid a higher consideration per share for their stock. Also, future issuances will increase the number of outstanding shares of Common Stock, thereby decreasing the percentage ownership in the Company (for voting, distributions and all other purposes) represented by existing shares of Common Stock. The availability for issuance of the additional shares of Common Stock and any issuance thereof, or both, may be viewed as having the effect of discouraging an unsolicited attempt by another person or entity to acquire control of the Company. Although the Board of Directors has no present intention of doing so, the Company's authorized but unissued Common Stock could be issued in one or more transactions that would make a takeover of the Company more difficult or costly, and therefore less likely. The Company is not aware of any person or entity who is seeking to acquire control of the Company. Holders of Common Stock do not have any preemptive rights to acquire any additional securities issued by the Company. As of the Record Date, 45,320,525 shares of Common Stock were issued and outstanding and 5,147,464 shares of Common Stock were reserved for issuance pursuant to the Company's employee benefit plans. Accordingly, only an additional 49,532,011 unreserved shares of Common Stock are available for issuance under the Charter. If the proposed amendment to the Charter is not adopted, it would be necessary to convene a special meeting of 7 stockholders before the Company could consummate any transaction in which the number of shares of Common Stock that would be issued, together with all other new issuances of Common Stock after the Record Date, would exceed 49,532,011 shares. This could potentially add to the costs of a proposed transaction and the added time necessary to prepare for and hold a stockholders meeting could serve as a disincentive for third parties otherwise interested in making an investment in, or entering into other transactions with, the Company. It is for these and similar reasons that companies have authorized and unissued shares available for issuance. Vote Required Adoption of the proposal to increase the number of authorized shares of Common Stock requires the affirmative vote of the holders of a majority of the outstanding shares of Common Stock on the Record Date. If approved by the stockholders, such increase in the number of authorized shares will become effective upon the filing with the Secretary of State of the State of Delaware of an amendment to the Charter setting forth such increase. Unless otherwise instructed, it is the intent of the persons named in the Proxy to vote all Proxies "FOR" the adoption of this proposal. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE INCREASE IN THE NUMBER OF AUTHORIZED SHARES OF THE COMPANY'S COMMON STOCK TO 200,000,000 Proposal No. 3 AMENDMENT TO LONG-TERM INCENTIVE PLAN The Board of Directors and the Compensation Committee (referred to collectively as the "Board of Directors" with respect to this Proposal) unanimously approved an amendment to the Company's Long-Term Incentive Plan, subject to approval by the stockholders, to increase the number of shares of Common Stock issuable pursuant to the Long-Term Incentive Plan by 2,000,000, from 6,394,368 to 8,394,368. The Board of Directors has unanimously approved certain additional amendments to the Long-Term Incentive Plan, as set forth herein, that do not require stockholder approval. See "--Amendments Not Requiring Stockholder Approval." Description of Long-Term Incentive Plan The Long-Term Incentive Plan provides that the Compensation Committee may, from time to time and in its sole discretion, grant options to acquire shares of Common Stock, restricted stock awards, stock appreciation rights, performance share awards and stock unit awards to full-time and part-time employees, nonemployee directors, consultants and advisors ("Participants") of or to the Company or a subsidiary thereof (referred to collectively as the "Company" with respect to this Proposal). The Company has six nonemployee directors and approximately 11,000 employees. The Compensation Committee, composed of two or more nonemployee directors of the Company, has the authority to fix the number and terms of awards to be granted under the Long-Term Incentive Plan, the persons to receive awards and any conditions for the receipt of awards. The Board of Directors has all the powers of the Compensation Committee under the Long-Term Incentive Plan and may take any action under or with respect to the Long-Term Incentive Plan that the Compensation Committee is entitled to take. The Long-Term Incentive Plan currently provides for the issuance of up to 6,394,368 shares of Common Stock pursuant thereto, upon the exercise of stock options or in the form of restricted stock awards, performance stock awards or stock unit awards granted thereunder. The maximum aggregate number of shares of Common Stock with respect to which awards may be granted to any Participant during the term of the Long-Term Incentive Plan is one-half of the total number of shares of Common Stock that may be issued from time to time thereunder. Awards may be granted under the Long-Term Incentive Plan through May 8, 2005. Stock Options. Under the Long-Term Incentive Plan, options may be granted in the form of "incentive stock options" as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or nonstatutory stock options. The options generally become exercisable with respect to one-third or one-fourth of the shares purchasable thereunder on each anniversary of the date of the option grant. The options generally expire 8 within 10 years after the date of grant (five years in the case of incentive stock options granted to employees owning more than 10% of the Common Stock), except as follows. If a Participant ceases to be employed by the Company because the participant is terminated for Cause (as defined in the Long-Term Incentive Plan), any options held by the Participant will automatically expire. If a Participant's employment by the Company is terminated for any reason other than for Cause or due to death, such Participant's option will be exercisable (to the extent exercisable on the date of termination of the Participant's employment by the Company or, if the Compensation Committee, in its sole discretion, has accelerated the vesting of such option, to the extent exercisable following such acceleration) at any time within 30 days after the Participant ceases to be an employee (or within (i) three months after termination on account of retirement or (ii) 12 months after termination on account of disability), unless by its terms the option expires earlier or unless, with respect to a nonstatutory stock option, the Compensation Committee agrees, in its sole discretion, to extend the term of such option. If a Participant dies while employed by the Company, or within three months after ceasing to be an employee, such Participant's option will be exercisable (to the extent exercisable on the date of death, or, if the Compensation Committee, in its sole discretion, has accelerated the vesting of such option, to the extent exercisable following such acceleration) at any time within 12 months after the date of death, unless by its terms the option expires earlier or unless, with respect to any nonstatutory stock option, the Compensation Committee agrees, in its sole discretion, to extend the term of such option. If a nonemployee Participant's association with the Company is terminated for Cause, any options held by such Participant will automatically expire. In all other cases, any options held by such a Participant, to the extent exercisable on the date of termination of the Participant's association with the Company, will remain exercisable and will expire in accordance with the terms of the applicable option agreement. The Compensation Committee does not have the authority to extend the term of any option beyond its original term. In the event of certain mergers and reorganizations involving the Company or upon the occurrence of a change in control (as defined in the Long-Term Incentive Plan) or threatened change in control of the Company, all outstanding options will become immediately exercisable with respect to the full number of shares purchasable under such options. Incentive stock options may not be transferred or assigned other than by will or the laws of descent and distribution and may be exercised during the lifetime of the Participant only by the Participant or by the Participant's legally authorized representative. With respect to nonstatutory stock options, the Compensation Committee may, in its sole discretion, provide for the transferability of such options as it deems appropriate. The exercise price of each incentive stock option granted under the Long- Term Incentive Plan may not be less than 100% of the fair market value of the Common Stock on the date of grant (or 110% in the case of incentive stock options granted to employees owning more than 10% of the Common Stock), while the exercise price for nonstatutory stock options may be less than the fair market value on the date of grant. The closing price of the Common Stock on the NYSE on the Record Date was $45.50 per share. The exercise price of an option may be paid in cash, by certified or cashier's check, by shares of Common Stock, if permitted by the Compensation Committee, by a promissory note for the total purchase price of the shares of Common Stock being purchased, which note shall contain such terms and provisions as the Compensation Committee may approve, including without limitation the right to repay the note partially or wholly with Common Stock, or by delivery of a copy of irrevocable instructions from the Participant to a broker or dealer, reasonably acceptable to the Company, to sell certain of the shares of Common Stock purchased upon exercise of the option or to pledge them as collateral for a loan and promptly deliver to the Company the amount of sale or loan proceeds necessary to pay such purchase price. As of the Record Date, options to purchase an aggregate of 6,773,141 shares of Common Stock had been granted under the Long-Term Incentive Plan, of which options to purchase 2,369,025 shares of Common Stock had been exercised, options to purchase 1,912,638 shares of Common Stock had been cancelled, and options to purchase 2,491,478 shares of Common Stock remain outstanding. These numbers do not reflect the options granted by the Compensation Committee on August 16, 1996, subject to stockholder approval of Proposal No. 3. See footnote 1 to the table set forth below under the caption "--Grant of Awards Under the Long-Term Incentive Plan." Restricted Stock Awards. Under the Long-Term Incentive Plan, the Compensation Committee may, in its sole discretion, award shares of Common Stock, subject to certain restrictions, as determined by the Compensation Committee. The general terms and conditions of restricted stock awards are as follows: (i) any shares of Common Stock awarded to a Participant will be restricted for a period of time to be determined by the Compensation 9 Committee, but not more than ten years; (ii) the restrictions will prohibit the sale, assignment, transfer, pledge or other encumbrance of such shares, and will provide for possible reversion thereof to the Company during the period of restriction; (iii) all restricted stock awarded to a Participant will be forfeited and returned to the Company in the event the Participant's employment by or other association with the Company is terminated prior to the expiration of the period of restriction, unless the Participant's termination of employment by or other association with the Company is due to his death, disability or retirement or unless the Compensation Committee, in its sole discretion, waives the restrictions established with respect to any or all of the shares of restricted stock; (iv) in the event of a Participant's death or disability, the restrictions established will lapse with respect to all restricted stock awarded to the Participant prior to any such event and the shares of Common Stock involved will cease to be restricted stock and will no longer be subject to forfeiture to the Company; (v) in the event of a Participant's retirement, the restrictions established will continue to apply unless the Compensation Committee, in its sole discretion, shortens the restriction period; (vi) from the time of grant of the restricted stock award, the Participant will be entitled to all rights (including dividend and voting rights) with respect to the shares of Common Stock covered by the award, subject to forfeiture of such Common Stock; and (vii) upon the expiration of a restriction period, the Company will issue a certificate for such shares that does not bear a restrictive legend. The vesting of certain restricted stock awards may be accelerated if specified performance goals are met (such restricted stock is referred to herein as "performance accelerated restricted stock" or "PARS"). As of the Record Date, the Company has awarded a total of 121,783 shares of restricted stock, all of which shares were PARS, with James F. Halpin, Harold F. Compton, J. Samuel Crowley, Lawrence N. Mondry and James E. Skinner receiving PARS in the following amounts, respectively: 26,131; 22,456; 8,147; 8,147 and 8,147 shares. Stock Appreciation Rights. Under the Long-Term Incentive Plan, the Compensation Committee may, in its sole discretion, grant stock appreciation rights. A stock appreciation right entitles a Participant to receive an amount equal to (or if the Compensation Committee shall so determine at the time of grant, less than) the excess of the market value on the date of exercise over the market value on the date of grant of such right (or such other price as is set by the Compensation Committee), multiplied by the number of shares of Common Stock with respect to which the stock appreciation right shall have been exercised. A stock appreciation right may be granted in combination with, in addition to, or completely independent of, an option or any other award. Settlement of a stock appreciation right may be made in cash, by certified or cashier's check, in shares of Common Stock, if permitted by the Compensation Committee, or in any other form of valid consideration, as determined by the Compensation Committee in its sole discretion. However, any stock appreciation right exercised upon or subsequent to the occurrence of certain mergers, reorganizations or a change in control must be paid in cash. The Compensation Committee may, in its sole discretion, determine the transferability of the stock appreciation rights granted to any Participant. Whenever a stock appreciation right is granted in relation to an option and the exercise of one affects the right to exercise the other, the number of shares of Common Stock available under the option to which the stock appreciation right relates will decrease by a number equal to the number of shares of Common Stock for which the stock appreciation right is exercised. Upon the exercise of an option, any related stock appreciation right will terminate as to any number of shares of Common Stock subject to such stock appreciation right that exceeds the total number of shares of Common Stock for which the option remains unexercised. Whenever a stock appreciation right is granted in relation to an option and the exercise of one affects the right to exercise the other, in the event of the termination of the Participant's employment by or other association with the Company, the stock appreciation right may be exercised only during the period, if any, within which the option to which it relates may be exercised. If a Participant who is a Company employee is granted a stock appreciation right independently of an option, the following provisions will apply: (i) if a Participant ceases to be employed by the Company because the Participant is terminated for Cause (as defined in the Long-Term Incentive Plan), any stock appreciation rights held by that Participant will automatically expire; (ii) if a Participant's employment by the Company is terminated for any reason other than Cause or due to death, such Participant's stock appreciation right will be exercisable (to the extent exercisable on the date of termination of the Participant's employment by the Company or, if the Compensation Committee, in its sole discretion, has accelerated the vesting of such stock appreciation right, to the extent exercisable following such acceleration) at any time within 30 days after the Participant ceases to be an employee (or within (a) three months after termination if on account of retirement or (b) 12 months after termination if on account of disability), unless by its terms it expires earlier or unless the Compensation Committee agrees, in its sole discretion, to extend the term of such stock appreciation right; provided that the term of any such stock appreciation right will not be extended beyond its original term, and (iii) if a Participant dies while employed by the Company or within three months after ceasing to be an employee, such 10 Participant's stock appreciation right will be exercisable (to the extent exercisable on the date of death, or, if the Compensation Committee, in its sole discretion, has accelerated the vesting of such stock appreciation right, to the extent exercisable following such acceleration) at any time within 12 months after the date of death, unless by its terms it expires earlier or unless the Compensation Committee agrees, in its sole discretion, to extend the term of such stock appreciation right; provided that the term of any such stock appreciation right will not be extended beyond its original term. Military or sick leave will not be deemed a termination of employment by the Company; provided that it does not exceed the longer of three-months or the period during which the absent Participant's reemployment rights, if any, are guaranteed by statute or by contract. If a nonemployee Participant is granted a stock appreciation right independently of an option under the Long-Term Incentive Plan, the following provisions will apply: (i) if the Participant's association with the Company is terminated for Cause, any stock appreciation right held by the Participant will automatically expire and (ii) in all other cases, any stock appreciation right held by a Participant will remain exercisable to the extent exercisable on the date of termination of the Participant's association with the Company and will remain exercisable in accordance with the terms of the applicable stock appreciation right agreement. As of the Record Date, no stock appreciation rights have been granted. Whenever an incentive stock option and a stock appreciation right are granted together and the exercise of one affects the right to exercise the other, the following requirements apply: (i) the stock appreciation right will expire no later than the expiration of the underlying incentive stock option; (ii) the stock appreciation right may be for no more than the difference between the exercise price of the underlying incentive stock option and the market value of the Common Stock subject to the underlying incentive stock option at the time the stock appreciation right is exercised; (iii) the stock appreciation right is transferable only when the underlying incentive stock option is transferable and under the same conditions; (iv) the stock appreciation right may be exercised only when the underlying incentive stock option is eligible to be exercised; and (v) the stock appreciation right may be exercised only when the market value of the Common Stock subject to the underlying incentive stock option exceeds the exercise price of the underlying incentive stock option. Performance Shares. Under the Long-Term Incentive Plan, the Compensation Committee may, in its sole discretion, grant performance shares. Performance shares may be earned based on the attainment of performance goals established by the Compensation Committee for a particular performance cycle. The Compensation Committee may establish performance goals with such criteria and objectives as the Compensation Committee may from time to time select. After the end of each performance cycle, the Compensation Committee will determine the number of performance shares, if any, earned by each Participant with respect to the performance cycle in accordance with the following: (i) if the performance goal is attained or exceeded, a Participant will be deemed to have earned the full number of performance shares granted to the Participant; (ii) if the minimum performance goal is not attained, a Participant will be deemed to have earned no performance shares; (iii) if the performance goal is not attained, but the minimum performance goal is attained or exceeded, the number of performance shares deemed to have been earned by a Participant will be a portion of the performance shares, as determined based on a formula established by the Compensation Committee at the time of grant; (iv) if a Participant's employment by or other association with the Company has terminated because of death, disability or retirement prior to the end of a performance cycle, the number of performance shares such Participant will be deemed to have earned shall be the number of performance shares determined as though such Participant's employment by or other association with the Company had not terminated, multiplied by a fraction, the numerator of which is the number of months such Participant was employed by or was otherwise associated with the Company during the performance cycle (including the month during which employment by or other association with the Company terminated) and the denominator of which is the total number of months in the performance cycle; (v) if the Participant's employment by or other association with the Company has terminated for any reason other than death, disability or retirement, such Participant will be deemed to have earned no performance shares except as and to the extent the Compensation Committee may determine; provided that the number of performance shares that may be so determined by the Compensation Committee to have been earned may not exceed the number that would have been earned had the provisions of subparagraph (i) been applicable; and (vi) at any time prior to the end of a performance cycle, the Compensation Committee may adjust downward (but not upward) the performance goal and/or the minimum performance goal as a result of major events unforeseen at the time the performance shares were awarded, such as changes in the economy, the industry, laws affecting the operation of the Company, changes in applicable tax laws or accounting principles or any other event the Compensation Committee determines would have a significant impact upon the probability of attaining the previously established performance goal and/or minimum performance goal. Payment in respect of earned performance shares will be made to the Participant or, if the Participant has died, to the Participant's designated beneficiary, as soon as practicable after the expiration of the performance cycle and the 11 Compensation Committee's determination. Payment in respect of earned performance shares may be made in cash, in shares of Common Stock or a combination thereof, as determined by the Compensation Committee, in its sole discretion, at the time of payment. In the sole discretion of the Compensation Committee, a performance share award may provide the Participant with dividends or dividend equivalents (payable on a current or deferred basis) and cash payments in lieu of or in addition to such award. As of the Record Date, no performance shares have been granted. Stock Unit Awards. Under the Long-Term Incentive Plan, the Compensation Committee may, in its sole discretion, grant stock unit awards. Stock unit awards may be in the form of Common Stock or units, the value of which is based, in whole or in part, on the market value of the Common Stock. Stock unit awards will be subject to such terms, restrictions, conditions, vesting requirements, payment requirements and rights upon termination of employment by or other association with the Company as the Compensation Committee may determine, in its sole discretion, at the time of grant, including without limitation the following: (i) any shares of Common Stock that are part of a stock unit award may be subject to restrictions on sale, assignment, transfer, pledge or other encumbrance; (ii) stock unit awards may provide for the payment of cash consideration by the Participant or provide that the award, and any Common Stock to be issued in connection therewith, if applicable, shall be delivered without the payment of cash consideration; (iii) stock unit awards may relate in whole or in part to certain performance criteria established by the Compensation Committee; and (iv) stock unit awards may provide for deferred payment schedules and/or vesting over a specified period of employment by or other association with the Company. In the sole discretion of the Compensation Committee, a stock unit award may provide the Participant with dividends or dividend equivalents (payable on a current or deferred basis) and cash payments in lieu of or in addition to such award. As of the Record Date, no stock unit awards have been granted. Description of Proposed Amendment The Board of Directors has unanimously approved an amendment to the Long- Term Incentive Plan, subject to approval by the stockholders, to increase the number of shares of Common Stock issuable pursuant to the Long-Term Incentive Plan by 2,000,000, from 6,394,368 to 8,394,368, which amendment, if approved by the stockholders, will be effective as of August 16, 1996. Amendments Not Requiring Stockholder Approval The Board of Directors has unanimously approved certain amendments to the Long-Term Incentive Plan that did not require stockholder approval and became effective August 16, 1996, including the elimination of: (i) certain restrictions on the transferability of nonstatutory stock options, restricted stock awards and stock appreciation rights; and (ii) certain minimum vesting or holding periods applicable to awards. Summary of Federal Income Tax Consequences Summary of Certain Federal Income Tax Consequences Relating to Incentive Stock Options. No taxable income is realized by a Participant and no tax deduction is available to the Company upon either the grant or exercise of an incentive stock option. If a Participant holds the shares acquired upon the exercise of an incentive stock option for more than one year after the issuance of the shares upon exercise of the incentive stock option and more than two years after the date of the grant of the incentive stock option (the "holding period"), the difference between the exercise price and the amount realized upon the sale of the shares will be treated as a long-term capital gain or loss and no deduction will be available to the Company. If the shares are transferred before the expiration of the holding period, the Participant will realize ordinary income, and the Company will be entitled to a deduction, on the portion of the gain, if any, equal to the difference between the incentive stock option exercise price and the fair market value of the shares on the date of exercise or, if less, the difference between the amount realized on the disposition and the adjusted basis of the stock; provided that the deduction will not be allowed if such amount exceeds the annual $1,000,000 limitation on the deduction that an employer may claim for compensation of certain executives pursuant to Section 162(m) of the Code (the "Deduction Limitation") and no exception to the Deduction Limitation is applicable. Any further gain or loss from the arm's length sale or exchange will be taxable as a long-term or short-term capital gain or loss depending upon the holding period before disposition. Certain special rules apply if an incentive stock option is exercised by tendering stock. The difference between the incentive stock option exercise price and the fair market value, at the time of exercise, of the Common Stock acquired upon the exercise of 12 an incentive stock option may give rise to alternative minimum taxable income subject to an alternative minimum tax. Summary of Certain Federal Income Tax Consequences Relating to Nonqualified Stock Options. No taxable income generally is realized by the Participant upon the grant of a nonqualified stock option, and no deduction generally is then available to the Company. Upon exercise of a nonqualified stock option, the excess of the fair market value of the shares on the date of exercise over the exercise price will be taxable to the Participant as ordinary income. This amount will also be deductible by the Company unless the amount exceeds the Deduction Limitation and no exception to the Deduction Limitation is applicable. The tax basis of shares acquired by the Participant will be the fair market value on the date of exercise. When a Participant disposes of shares acquired upon exercise of a nonqualified stock option, any amount realized in excess of the fair market value of the shares on the date of exercise generally will be treated as a long-term or short-term capital gain, depending on the holding period of the shares. The holding period commences upon exercise of the nonqualified stock option. If the amount received is less than such fair market value, the loss will be treated as a long-term or short-term capital loss, depending on the holding period of the shares. The exercise of a nonqualified stock option will not trigger the alternative minimum tax consequences applicable to incentive stock options. Summary of Certain Federal Income Tax Consequences Relating to Restricted Stock. Unless a Participant otherwise elects to be taxed upon receipt of shares of restricted stock under the Long-Term Incentive Plan, the Participant must include in the Participant's taxable income the difference between the fair market value of the shares and the amount paid, if any, for the shares, as of the first date the Participant's interest in the shares is no longer subject to a substantial risk of forfeiture or such shares become transferable. A Participant's rights in restricted stock awarded under the Long-Term Incentive Plan are subject to a substantial risk of forfeiture if the rights to full enjoyment of the shares are conditioned, directly or indirectly, upon the future performance of substantial services by the Participant. Where shares of restricted stock received under the Long-Term Incentive Plan are subject to a substantial risk of forfeiture, the Participant can elect to report the difference between the fair market value of the shares on the date of receipt and the amount paid, if any, for the stock as ordinary income in the year of receipt (an "Election"). To be effective, an Election must be filed with the Internal Revenue Service within 30 days after the date the shares are transferred to the Participant. The Company is entitled to a tax deduction equal in amount to the amount includable as compensation in the gross income of the Participant unless such amount exceeds the Deduction Limitation and no exception to the Deduction Limitation is applicable. The amount of taxable gain arising from a Participant's sale of shares of restricted stock acquired pursuant to the Long-Term Incentive Plan is equal to the excess of the amount realized on such sale over the sum of the amount paid, if any, for the stock and the compensation element included by the Participant in taxable income. The Participant will realize long-term capital gain or loss upon disposition of stock held for more than one year after (i) it is no longer subject to a substantial risk of forfeiture or (ii) the date of receipt if an Election has been timely made. Summary of Certain Federal Income Tax Consequences Relating to Stock Appreciation Rights. No taxable income will be realized by a Participant upon the grant of a stock appreciation right and no deduction is then available to the Company. Upon the exercise of a stock appreciation right, the Participant will realize taxable income equal to the cash or the fair market value (on the date of exercise) of the shares, or both, received, and the Company will be entitled to a deduction of the same amount unless such amount exceeds the Deduction Limitation and no exception to the Deduction Limitation is applicable. The tax basis of any shares received will be the fair market value on the date of exercise, and, if the shares received are held for more than one year, the Participant will realize long-term capital gain or loss upon disposition. Summary of Certain Federal Income Tax Consequences Relating to Performance Shares. No taxable income will be realized by a Participant upon the grant of a performance share award and no deduction is then available to the Company. A Participant will realize ordinary income at the time the award is paid in an amount equal to the amount of cash paid or the value of the shares delivered to the Participant and the Company will have a corresponding deduction unless such amounts exceed the Deduction Limitation and no exception to the Deduction Limitation is applicable. Summary of Certain Federal Income Tax Consequences Relating to Stock Units. No taxable income will be realized by a Participant upon the grant of a stock unit award and no deduction is then available to the Company. A Participant will realize ordinary income at the time the award is paid in an amount equal to the amount of cash 13 paid or the value of the shares delivered to the Participant and the Company will have a corresponding deduction unless such amounts exceed the Deduction Limitation and no exception to the Deduction Limitation is applicable. Grant of Awards Under the Long-Term Incentive Plan The following table sets forth certain information regarding options received under the Long-Term Incentive Plan from its inception through the Record Date by (i) the Company's Chief Executive Officer, (ii) each of the Company's four other most highly compensated executive officers for fiscal 1996 individually, (iii) all current executive officers as a group, (iv) all current directors who are not executive officers as a group, (v) each nominee for election as a director, and (vi) all employees, excluding executive officers, as a group and excluding all canceled options.
Name of Individual Aggregate Shares of Common or Group Stock Subject to Options -------------------------------------------- -------------------------- James F. Halpin............................. 602,384 Harold F. Compton........................... 160,756 J. Samuel Crowley........................... 60,132 Lawrence N. Mondry.......................... 343,792 James E. Skinner............................ 223,058 Warren D. Fledberg.......................... 17,622 Kevin J . Roche............................. 14,410 All current executive officers as a group....................... 2,259,372 All current directors who are not executive......................... 141,884 All employees, excluding executive officers, as a group and excluding all canceled options...................... 2,784,236
- ------------ (1) On August 16, 1996, the Compensation Committee, subject to stockholder approval of Proposal No. 3, granted options under the Long-Term Incentive Plan to purchase shares of Common Stock (the "Executive Options") to the Company's senior management in order to maintain long-term incentives and to help enable the Company to retain its executive team. Share amounts in the foregoing table do not include shares of Common Stock issuable upon exercise of the Executive Options. Executive Options granted Messrs. Halpin, Compton, Crowley, Mondry, Skinner, and all current executive officers as a group, numbered: 500,000; 340,000; 170,000; 170,000; 170,000; and 1,920,000 shares respectively. If Proposal No. 3 is approved by the stockholders, the Executive Options will have a term of ten years from the date of grant, and will vest with respect to one-fourth of the shares covered thereby annually, beginning May 6, 1997. With respect to each grant of Executive Options, approximately one-third of such options will have an exercise price of $45, one-third will have an exercise price of $55, and one-third will have an exercise price of $65. The exercise prices of all Executive Options were above $41.38, the closing price per share of the Common Stock on the NYSE on August 16, 1996, the date of grant. In the event of a change in control of the Company (as defined in Long-Term Incentive Plan), however, any unexerciseable portion of the Executive Options would become immediately exerciseable. The amounts that would be receivable in the future by the individuals or groups named in the table above under the Long-Term Incentive Plan as proposed to be amended are not determinable at this time. Vote Required Approval of the amendment to the Long-Term Incentive Plan to increase the number of shares issuable thereunder requires the approval of the affirmative vote of a majority of the shares of Common Stock present or represented at the meeting and entitled to vote thereon. If approved by the stockholders, such amendment will be effective as of August 16, 1996. Unless otherwise instructed or restricted, it is the intent of the persons named in the Proxy to vote all Proxies "FOR" the adoption of this proposal. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT TO THE COMPANY'S LONG-TERM INCENTIVE PLAN. 14 MANAGEMENT Executive Officers The following table sets forth certain information regarding the Company's executive officers. Officers are elected annually by the Board of Directors and serve at its discretion.
Name Age Position - -------------------------- ------- --------------------------------------------------- James F. Halpin............ 45 President, Chief Executive Officer and Director Harold F. Compton.......... 49 Executive Vice President, Chief Operating Officer and President--CompUSA Stores J. Samuel Crowley.......... 46 Executive Vice President--Operations Gordon B. Hoffstein........ 44 Executive Vice President--Mail Order Lawrence N. Mondry......... 36 Executive Vice President--Merchandising James E. Skinner........... 43 Executive Vice President, Chief Financial Officer, Treasurer and Assistant Secretary Ronald J. Gilmore.......... 41 Senior Vice President--Marketing & Advertising Jack Littman-Quinn......... 41 Senior Vice President--Mail Order Melvin D. McCall........... 51 Senior Vice President--Human Resources Paul B. Poyfair............ 44 Senior Vice President--Services & Administration Mark R. Walker............. 39 Senior Vice President--General Counsel and Secretary Anthony J. Cincotta........ 55 Vice President--Merchandising & General Merchandise Manager Aka A. DeMesa.............. 45 Vice President--Commercial Products Paul F. Ewert.............. 48 Vice President--Merchandising & General Merchandise Manager Rick L. Fountain........... 43 Vice President--Technical Services J. Robert Gary............. 41 Vice President--Finance Robyn Gatch-Priest......... 46 Vice President, Controller and Assistant Treasurer Harold D. Greenberg........ 49 Vice President--Inventory Management Dr. James L. Infinger...... 39 Vice President--Information Systems and Chief Information Officer Leslie C. Marshall......... 51 Vice President--Loss Prevention Barry C. McCook............ 49 Vice President--Operations, East Jack A. Phelps............. 47 Vice President--Operations, West Ronald D. Strongwater...... 53 Vice President--Real Estate Anthony A. Weiss........... 29 Vice President--Direct Sales
See "Proposal No. 1 - Election of Directors" for biographical information regarding Mr. Halpin. Harold F. Compton has served as Executive Vice President and Chief Operating Officer since January 1995. In July 1996, Mr. Compton was promoted to the additional position of President--CompUSA Stores. He served as Executive Vice President--Operations from August 1994 to January 1995. Prior to joining the Company, Mr. Compton served as President and Chief Operating Officer of Central Electric Inc. from December 1993 to August 1994. Previously, Mr. Compton had served as Executive Vice President--Operations & Human Resources of HomeBase from 1989 to 1993. 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. Gordon B. Hoffstein has served as Executive Vice President--Mail Order since May 1996. Mr. Hoffstein also serves as Chairman of the Board and Chief Executive Officer of PCs Compleat, Inc., which positions he has held since 1991. 15 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. James E. Skinner has served as Executive Vice President, Chief Financial Officer and Treasurer since September 1994. He served as Senior Vice President--Finance and Planning and Chief Accounting Officer from December 1993 to September 1994, as Vice President--Finance and Planning and Chief Accounting Officer from June 1992 to December 1993, and as Vice President and Chief Accounting Officer from September 1991 to June 1992. Mr. Skinner served as Assistant Treasurer from October 1992 to September 1994 and has also served as Assistant Secretary since October 1992. Prior to joining the Company, Mr. Skinner was a partner of Ernst & Young, an international public accounting firm, where he had been employed since 1975. Mr. Skinner is a Certified Public Accountant. Ronald J. Gilmore has served as Senior Vice President--Marketing & Advertising since May 1994. He served as Vice President--Advertising & Sales Promotion from July 1993 to April 1994. Prior to joining the Company, Mr. Gilmore served as Vice President--Marketing of the Good Guys!, Inc., a consumer electronics retailer, from April 1993 to July 1993. Mr. Gilmore was employed by HomeBase from April 1991 to April 1993, serving as Vice President--Marketing & Advertising. From April 1990 to April 1991, Mr. Gilmore was employed by Montgomery Ward, Inc. as Media Director, and from 1989 to 1990, he was employed by Harte Hanks Communications, Inc., serving as Director of Advertising Sales of the Boston Newspaper Group. Jack Littman-Quinn has served as Senior Vice President--Mail Order since May 1996. Mr. Littman-Quinn also serves as President and Chief Operating Officer of PCs Compleat, Inc., which positions he has held since 1991. 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 from 1991 to May 1995. From 1987 to 1991, Mr. McCall served as Senior Vice President of Human Resources and Administration of Dominick's Finer Foods, a regional supermarket chain. Paul B. Poyfair has served as Senior Vice President--Services & Administration since October 1995. He served as Senior Vice President--Human Resources, Training and Administration from December 1993 to October 1995 and as Vice President--Human Resources from September 1993 to December 1993. Prior to joining the Company, Mr. Poyfair was employed by HomeBase from October 1990 to September 1993, serving as Vice President--Human Resources and by Kenworth Truck Company from 1986 to 1990, serving as Director of Human Resources. Mark R. Walker has served as Senior Vice President--General Counsel and Secretary since November 1995. He served as Vice President--General Counsel and Secretary from August 1993 to November 1995. Prior to joining the Company, he was employed as Vice President, Secretary and General Counsel from May 1990 to February 1993 by AmeriCredit Corp., an indirect consumer finance company. Mr. Walker practiced general corporate and securities law from 1986 to 1990 with Mayer, Brown & Platt in Chicago, Illinois. Anthony Cincotta has served as Vice President--Merchandising & General Merchandise Manager since February 1996. Prior to joining the Company, Mr. Cincotta served as President and Chief Executive Officer of Aaron Brothers, Inc. a specialty framing and art supplier based in City of Industry, California from October 1993 to October 1995, and prior to that as Senior Vice President-- Merchandising of Handy-Andy Home Improvement, Inc., based in Schaumberg, Illinois from January 1993 to October 1993. From August 1990 to January 1993, Mr. Cincotta served as Senior Vice President--Merchandising & Marketing of Grossmans, Inc. Aka A. DeMesa has served as Vice President--Commercial Products since April 1996. From July 1995 to April 1996, he served as Senior Director--Commercial Products for the Company. Prior to joining the Company, Mr. DeMesa served as Vice President of Product Line Management & Purchasing of CompuCom Systems, Inc. a corporate computer reseller from 1992 to July 1995. From 1990 to 1992, he was Vice President of Product Management for Computer Factory, Inc., a CompuCom Systems, Inc. subsidiary. Paul F. Ewert has served as Vice President--Merchandising & General Merchandise Manager since February 1996. From January 1994 to February 1996, he served as Vice President--Merchandising and from 1991 to January 1994, he served as Senior Director of Hardware Merchandising. Prior to joining the Company, Mr. Ewert served as Vice President--Fashion Accessories of Broadway Department Stores, from 1990 to 1991. Mr. Ewert served as General Manager and Regional Merchandiser of Target, a division of Dayton Hudson Corporation, from 1983 to 1990. Rick L. Fountain has served as Vice President--Technical Services since July 1996. From September 1994 to July 1996, he served as Senior Director - --Technical Services and from February 1990 to September 1994, he served as the East Coast Regional Manager of the Company. Prior to joining the Company, he was employed by Federated Electronics Superstores from 1985 to 1990, where he last held the position of Vice President--Operations. 16 J. Robert Gary has served as Vice President--Finance since May 1996. Prior to joinig the Company, Mr. Gary served as Senior Vice President and Chief Financial Officer for Wireless One, Inc. from September 1995 to May 1996, and from 1992 to September 1995, he was Executive Vice President, Chief Operating Officer and Chief Financial Officer for Greentee Software, Inc. From 1990 to 1992, Mr. Gary was employed as Vice President--Business Manager for the Trade Division of Simon & Schuster. Robyn Gatch-Priest has served as Vice President since January 1994 and as Controller since 1991. Prior to joining the Company, she served as Chief Financial Officer of Hofbauer, Inc., a software development firm, from 1989 to 1991. Ms. Gatch-Priest is a Certified Public Accountant. Harold D. Greenberg has served as Vice President--Inventory Management since April 1994. 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 during 1993. Dr. James L. Infinger has served as Vice President--Information Systems and Chief Information Officer since June 1994. Prior to joining the Company, he was employed by Old American Insurance Services, a personal lines insurance company, as Vice President--Data Processing from February 1992 to June 1994. From 1989 to February 1992, Mr. Infinger was employed by Siemens Information Systems, an international software and hardware vendor for the retail industry, serving as Director of Systems Development for Retail. Leslie C. Marshall has served as Vice President--Loss Prevention since July 1996. From 1992 to July 1996, he served as Senior Director--Loss Prevention of the Company. Prior to joining the Company, Mr. Marshall served as Director of Risk Management and Loss Prevention for Pic "N" Save Corporation, an inventory closeout retailing chain, from 1986 to 1991. Barry C. McCook has served as Vice President--Operations, East since March 1995. He 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. Jack A. Phelps has served as Vice President--Operations, West since February 1994. He served as Senior Vice President of the Company and as President of the CompUSA West Division from May 1993 to February 1994, as Vice President--Human Resources from 1990 to May 1993, as Vice President--Operations from 1989 to 1990 and as a Director of Operations during 1989. Ronald D. Strongwater has served as Vice President--Real Estate since April 1994. Prior to joining the Company, he served as President of The RDS GROUP, a nationwide real estate/management services consulting firm, from 1990 to April 1994. Mr. Strongwater also served as Senior Vice President--Real Estate of Wickes Companies, Inc. from 1982 to 1990. Anthony A. Weiss has served as Vice President--Direct Sales since September 1995. He joined the Company in 1988 and has served in various positions, most recently as Senior Director, Direct Sales. 17 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. 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 are based primarily upon the achievement of Company performance goals that are reviewed and approved annually by the Compensation Committee. Accordingly, in years in which these performance goals are achieved or exceeded, executive compensation tends to be higher than in years in which the Company's performance is below expectations. 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, 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 1996 base salary levels for the Company's executive officers, including the Chief Executive Officer, were competitively set relative to companies in the retail industry and other comparable companies. See "--Employment Agreements." In determining salaries, the Compensation Committee took into account individual experience and performance and specific issues particular to the Company, counseled with an outside compensation consultant, and reviewed independent compensation data to establish base salary levels that were within the range of persons holding positions of comparable responsibility at other similarly situated companies, both regionally and nationally. Annual Cash Incentive Compensation The Company maintains annual incentive compensation plans for its executive officers. For fiscal 1996, incentive bonuses for senior executives were based on the Company achieving its targeted earnings per share (the "EPS Target"). For example, if the EPS target is achieved, senior executives will receive awards ranging from 30% to 40% of their respective base salaries (each an "Award"). If the EPS Target is surpassed, an individual's Award will increase 2% to 5% for each percentage point by which reported earnings per share exceeds the EPS Target, with no limit. If the EPS Target is not achieved, an individual's Award will decrease by 6.67% for each percentage point by which reported earnings per share falls below the EPS Target. Thus, if reported earnings per share were to fall 15% or more below the EPS Target, all Awards would be eliminated. Officers other than senior executives also participate in this plan and are eligible for Awards based on achievement of the EPS Target or other performance 18 goals. The Company is obligated to maintain incentive compensation plans during the terms of the employment agreements described below. These incentive bonuses are reflected in the Summary Compensation Table below. Long-Term Incentive Plan The Long-Term Incentive Plan (formerly the 1990 Stock Option Plan) has been the Company's long-term incentive plan for executive officers since 1990. The objectives of the Long-Term Incentive Plan are to align executive and stockholder long-term interests by creating a strong and direct link between executive compensation and stockholder return and to enable executives to develop and maintain a significant long-term ownership position in the Common Stock. The Company proposes to amend the Long-Term Incentive Plan as discussed under "Proposal No. 3 - AMENDMENT TO LONG-TERM INCENTIVE PLAN." CompSavings Plan for Employees of CompUSA Inc. The CompSavings Plan for Employees of CompUSA Inc. (the "401(k) Plan") is intended to enable eligible employees of the Company to accumulate capital for their future economic security, encourage eligible employees to remain in the service of the Company and provide incentives for employee performance on behalf of the Company. All employees of the Company are eligible to participate in the 401(k) Plan if they have attained age 21 and completed six months of service with a minimum of 500 hours worked during that period. An eligible employee may elect to make pre-tax contributions to the 401(k) Plan through payroll deductions in an amount up to 15% of such employee's compensation. The 401(k) Plan provides for Company matching contributions of 25% on the first 5% of an eligible employee's pre-tax contributions. Company matching contributions are made one-fourth in cash and the remaining three-fourths in Common Stock. In addition, the Company may elect to make supplemental matching contributions in an amount based on the Company's profitability for the fiscal year that ends within the 401(k) Plan's fiscal year. The 401(k) Plan is a defined contribution retirement plan within the meaning of Section 401(a) of the Code. Participants in the 401(k) Plan may direct the investment of their 401(k) Plan accounts among specified investment funds, including a fund that invests primarily in Common Stock. The 401(k) Plan is administered by the CompSavings Plan Committee, which is comprised of James F. Halpin, James E. Skinner and Melvin D. McCall. CompUSA Inc. Deferred Compensation Plan The CompUSA Inc. Deferred Compensation Plan (the "SERP") is a supplemental executive retirement plan maintained in conjunction with the 401(k) Plan that is intended to provide certain benefits to a select group of the Company's management and highly compensated employees. The SERP is a nonqualified plan for federal income tax purposes that allows eligible employees to make pre-tax contributions through payroll deductions in excess of certain limitations imposed on pre-tax contributions by these employees to the 401(k) Plan. Eligible employees who make pre-tax contributions to the SERP are eligible to receive an allocation of Company matching contributions on the same basis as Company matching contributions to the 401(k) Plan. The SERP is administered by the CompSavings Plan Committee. PCs Compleat Plans In connection with its acquisition of PCs Compleat, the Company assumed all outstanding obligations under PCs Compleat's stock option and 401(k) plans. The Company has reserved 325,413 shares of Common Stock for issuance upon exercise of options granted under the PCs Compleat stock option plan. Neither the Company nor PCs Compleat intends to issue any additional stock options or make any additional contributions under these PCs Compleat plans. Benefits The Company provides medical benefits to its executive officers pursuant to an executive medical plan. This report of the Compensation Committee on executive compensation is submitted by the current members of the committee as noted below: Warren D. Feldberg Kevin J. Roche Leonard L. Berry, Ph.D. 19 Summary Compensation Table The following contains information concerning the compensation earned by, awarded to or paid to the Company's Chief Executive Officer and each of the other four most highly compensated executive officers of the Company (collectively, the "Named Officers") for services rendered to the Company during fiscal years 1994 through 1996.
Long-Term Compensation ------------------------------------ Annual Compensation Awards Payouts -------------------------------------------- ------------------------------------ Securities Restricted Underlying Other Annual Stock Options/ LTIP All Other Fiscal Salary Bonus Compensation Award(s) SARS Payouts Compensation Name and Principal Position Year ($) ($) (1) ($) (2) ($) (3) (#) (4) ($) ($) (2) - ------------------------------------------------------------------------------- --------------------------------------------------- James F. Halpin 1996 653,078 1,496,003 -- -- 71,138 -- -- President and Chief 1995 550,000 440,000 -- 232,502 131,246 -- -- Executive Officer 1994 441,667 -- -- -- 80,000 -- -- Harold F. Compton (5) 1996 420,193 842,189 203,195 (6) -- 20,326 -- -- Executive Vice President and 1995 332,292 217,708 327,944 (7) 200,005 140,430 -- -- Chief Operating Officer 1994 -- -- -- -- -- -- -- J. Samuel Crowley 1996 204,404 351,038 -- -- 7,602 -- -- Executive Vice President-- 1995 160,067 85,866 -- 71,033 17,256 -- -- Operations 1994 131,252 -- -- -- 14,584 -- -- Lawrence N. Mondry 1996 273,264 469,924 -- -- 7,602 -- -- Executive Vice President-- 1995 236,905 142,143 -- 71,033 19,256 -- -- Merchandising 1994 214,268 -- -- -- 16,000 -- -- James E. Skinner 1996 220,769 379,500 -- -- 7,602 -- -- Executive Vice President, 1995 189,250 113,550 -- 71,033 23,256 -- -- Chief Financial Officer, 1994 156,083 -- -- -- 12,000 -- -- Treasurer and Assistant Secretary
- ----------------------------------- (1) Includes bonuses earned in fiscal 1995 and 1996, respectively, under the incentive compensation plans of the Named Officers that were or are to be paid in fiscal 1996 and 1997, respectively. (2) Except for the compensation for Mr. Compton noted below, no compensation was paid to any of the Named Officers during fiscal 1994, 1995 or 1996 that constituted Other Annual Compensation. In fiscal 1994, 1995 and 1996, the value of perquisites and other personal benefits, if any, did not equal or exceed the lesser of $50,000 or 10% of the total amount of annual salary and bonus for any Named Officer. (3) The value of the restricted stock awards at the end of the last fiscal is year $641,141, $551,528, $195,878, $195,878 and $195,878 for Messrs. Halpin, Compton, Crowley, Mondry and Skinner, respectively. The number of the restricted stock awards held by Messrs. Halpin, Compton, Crowley, Mondry and Skinner at the end of the last fiscal year is 18,788; 16,162; 5,740; 5,740 and 5,740 shares, 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. (4) Options to acquire shares of Common Stock under the Long-Term Incentive Plan. Does not include options granted by the Compensation Committee on August 16, 1996, subject to stockholder approval of Proposal No. 3. See "Proposal No. 3 -- AMENDMENT TO LONG-TERM INCENTIVE PLAN -- Grant of Awards Under the Long-Term Incentive Plan." (5) Mr. Compton joined the Company in August 1994. (6) Of this amount, $86,628 represents additional reimbursement of relocation expenses and $98,073 constitutes additional reimbursement of federal income taxes incurred by Mr. Compton due to his receipt of certain payments in respect of his relocation in fiscal 1995. (7) Of this amount, $187,631 constitutes reimbursement of relocation expenses and $129,313 constitutes reimbursement of federal income taxes incurred by Mr. Compton due to his receipt of certain payments in respect of his relocation. 20 Option Grants During Fiscal 1996 The following table sets forth information regarding stock options granted to Named Officers during fiscal 1996 pursuant to the Long-Term Incentive Plan.
Individual Grants ---------------------------------------------------------------------- Securities % of Total Potential Realized Value at Underlying Options/SARs Assumed Annual Rates of Stock Options/SARs Granted to Exercise or Price Appreciation For Option Granted Employees in Base Price Expiration Term (1) ------------------------------ Name (#)(2)(3)(4) Fiscal Year (2) ($/Share) (5) Date 5% ($) 10% ($) - ------------------------ ---------------------------------------------------------------------- ------------------------------ James F. Halpin 71,138 15.5% $17.69 1/25/06 791,441 2,005,656 Harold F. Compton 20,326 4.4% $17.69 1/25/06 226,136 573,069 J. Samuel Crowley 7,602 1.7% $17.69 1/25/06 84,576 214,330 Lawrence N. Mondry 7,602 1.7% $17.69 1/25/06 84,576 214,330 James E. Skinner 7,602 1.7% $17.69 1/25/06 84,576 214,330
- ----------------------- (1) The potential realized value portion of the foregoing table illustrates the value that might be realized upon exercise of the options immediately prior to the expiration of their term, assuming the specified compounded rates of appreciation on the Common Stock over the exercise price of the options (which is equal to the fair market value at the date of grant) over the term of the options. These amounts do not take into account provisions providing for termination of options following termination of employment, nontransferability or vesting over periods of up to three years. (2) The Company has not granted any stock appreciation rights (SARs). (3) Options vest with respect to one-third or one-fourth of the shares covered thereby annually, beginning on the first anniversary of the date of grant. In the event of a change in control of the Company (as defined in the Long- Term Incentive Plan), however, any unexercisable portion of the options will become immediately exercisable. (4) Does not include options granted by the Compensation Committee on August 16, 1996, subject to stockholder approval of Proposal No. 3. See "Proposal No. 3 -- AMENDMENT TO LONG-TERM INCENTIVE PLAN -- Grant of Awards Under the Long-Term (5) The exercise price was equal to the fair market value of the Common Stock on the date of grant. 21 Option Exercises During Fiscal 1996 and Fiscal Year End Option Values The following table provides information regarding options exercised by the Named Officers during fiscal 1996 and the number and value of options held at fiscal year end. The Company does not have any outstanding stock appreciation rights.
Number of Securities Underlying Value of Unexercised Unexercised Options/SARs at In-the-Money Fiscal Year End (#) Options/SARs at Fiscal Year End Shares Value ($) (2) (3) Acquired on Realized -------------------------------- -------------------------------- Name Exercise (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable ---- ------------ --------- ----------- ------------- ----------- ------------- James F. Halpin -- -- 289,081 313,303 6,386,387 6,639,560 Harold F. Compton -- -- 46,810 113,946 1,265,618 2,865,344 J. Samuel Crowley -- -- 26,132 34,000 560,252 701,250 Lawrence N. Mondry 65,286 1,063,550 11,986 25,774 305,160 581,867 James E. Skinner -- -- 139,910 63,148 4,284,411 1,752,393
- ------------------- (1) Value is calculated based on the difference between the option exercise price and the closing price of the Common Stock on the date of exercise multiplied by the number of shares to which the exercise relates. (2) The closing price of the Common Stock on the NYSE on June 29, 1996, was $34.125 per share. In-the-money option values are calculated on the basis of the difference between the per share option exercise price and $34.125 multiplied by the number of shares of Common Stock purchasable under the option. (3) Does not include options granted by the Compensation Committee on August 16, 1996, subject to stockholder approval of Proposal No. 3. See "Proposal No. 3 -- AMENDMENT TO LONG-TERM INCENTIVE PLAN -- Grant of Awards Under the Long-Term Incentive Plan." Employment Agreements Halpin Agreement. The Company is a party to an employment agreement with James F. Halpin (the "Halpin Agreement") dated August 16, 1996, pursuant to which Mr. Halpin currently serves as President and Chief Executive Officer. The Halpin Agreement provides for annual salary increases at the sole discretion of the Compensation Committee of the Board of Directors. Mr. Halpin's current annual base salary is $700,000. In addition, Mr. Halpin is eligible to receive in respect of each fiscal year an incentive bonus determined by the management incentive bonus plan. See "Report of the Compensation Committee on Executive Compensation -- EXECUTIVE OFFICER COMPENSATION PROGRAM --Annual Cash Incentive Compensation." The term of employment under the Halpin Agreement will expire on August 15, 2000. Mr. Halpin has agreed to certain noncompetition restrictions with the Company during the term of his agreement and for two years thereafter. The Halpin Agreement provides for certain severance arrangements. See "-- Severance Arrangements." Compton Agreement. The Company is a party to an employment agreement with Harold F. Compton (the "Compton Agreement") dated August 16, 1996, pursuant to which Mr. Compton currently serves as Executive Vice President and Chief Operating Officer. 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 $450,000. In addition, Mr. Compton is eligible to receive in respect of each fiscal year an incentive bonus determined by the management incentive bonus plan. See "Report of the Compensation Committee on Executive Compensation -- EXECUTIVE OFFICER COMPENSATION PROGRAM -- Annual Cash Incentive Compensation." The term of employment under the Compton Agreement will expire on August 15, 2000. Mr. Compton has agreed to certain noncompetition restrictions with the Company during the term of his agreement and for two years thereafter. The Compton Agreement provides for certain severance arrangements. See "--Severance Arrangements." Crowley Agreement. The Company is a party to an employment agreement with J. Samuel Crowley (the "Crowley Agreement") dated May 1, 1996, as amended, pursuant to which Mr. Crowley currently serves as Executive Vice President - Operations. The Crowley Agreement provides for annual salary increases at the sole discretion of the Compensation Committee of the Board of Directors. Mr. Crowley's current annual base salary is $217,000. In addition, Mr. Crowley is eligible to receive in respect of each fiscal year an incentive bonus determined by the 22 management incentive bonus plan. See "Report of the Compensation Committee on Executive Compensation -- EXECUTIVE OFFICER COMPENSATION PROGRAM -- Annual Cash Incentive Compensation." The term of employment under the Crowley Agreement will expire on May 1, 1998. Mr. Crowley has agreed to certain noncompetition restrictions with the Company during the term of his agreement and for two years thereafter. The Crowley Agreement provides for certain severance arrangements. See "--Severance Arrangements." Mondry Agreement. The Company is a party to an employment agreement with Lawrence N. Mondry (the "Mondry Agreement") dated May 1, 1996, as amended, pursuant to which Mr. Mondry currently serves as Executive Vice President-- Merchandising. The Mondry Agreement provides for annual salary increases at the sole discretion of the Compensation Committee of the Board of Directors. Mr. Mondry's current annual base salary is $300,000. In addition, Mr. Mondry is eligible to receive in respect of each fiscal year an incentive bonus determined by the management incentive bonus plan. See "Report of the Compensation Committee on Executive Compensation -- EXECUTIVE OFFICER COMPENSATION PROGRAM -- Annual Cash Incentive Compensation." The term of employment under the Mondry Agreement will expire on May 1, 1998. Mr. Mondry has agreed to certain noncompetition restrictions with the Company during the term of his agreement and for two years thereafter. The Mondry Agreement provides for certain severance arrangements. See "--Severance Arrangements." Skinner Agreement. The Company is a party to an employment agreement with James E. Skinner (the "Skinner Agreement") dated May 1, 1996, as amended, pursuant to which Mr. Skinner currently serves as Executive Vice President and Chief Financial Officer. The Skinner Agreement provides for annual salary increases at the sole discretion of the Compensation Committee of the Board of Directors. Mr. Skinner's current annual base salary is $240,000. In addition, Mr. Skinner is eligible to receive in respect of each fiscal year an incentive bonus determined by the management incentive bonus plan. See "Report of the Compensation Committee on Executive Compensation -- EXECUTIVE OFFICER COMPENSATION PROGRAM --Annual Cash Incentive Compensation." The term of employment under the Skinner Agreement will expire on May 1, 1998. Mr. Skinner has agreed to certain noncompetition restrictions with the Company during the term of his 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 by the Company of employment other than for "cause," as defined in the agreements. Under the Halpin Agreement, Mr. Halpin is entitled to receive the amount of his monthly base salary (at the rate in effect immediately prior to termination of employment) as severance pay for a period of 48 months following termination of employment. Under the Compton Agreement, Mr. Compton is entitled to receive the amount of his monthly base salary (at the rate in effect immediately prior to termination of employment) as severance pay for a period of 36 months following termination of employment. Under the Crowley, Mondry and Skinner Agreements, each is entitled to receive the amount of his monthly base salary (at the rate in effect immediately prior to termination of employment) as severance pay for a period of 18 months following termination of employment. The agreements provide for lump sum severance payments in lieu of the foregoing payments upon termination of employment in connection with a "change in control" (as defined in the agreements) of the Company. The Company's obligation under the agreements applies to specified employment terminations during the 90 day period preceding a change in control and to any employment termination (other than one due to death) during the 12 month period following a change in control. The amount of the lump sum severance payment is equal to 2.99 times the sum of the following: (i) the terminated executive's base pay, (ii) two times the terminated executive's target bonus for the bonus period in which the change in control occurs and (iii) the terminated executive's annualized automobile allowance, all determined at the time of employment termination. The lump sum payment also includes a payment in lieu of continued group insurance coverage and an amount necessary to reimburse the terminated executive for excise taxes, if any, that the executive may be expected to incur as a result of the severance payments. Under the agreements, the Company is obligated to reimburse the executive for outplacement consulting service costs incurred during the two year period following employment termination in connection with a change in control. The agreements provide that Messrs. Halpin, Compton, Crowley, Mondry and Skinner, if requested by the Company, will enter into consulting agreements with the Company for a period of six months following termination of employment in connection with a change in control. Modified noncompetition restrictions apply for a period of two years under the agreements in the event of employment termination in connection with a change in control. 23 Officers of the Company who are not Named Officers have employment agreements that provide for severance payments upon termination by the Company of employment other than for "cause" as defined in the agreements. The agreements provide for severance payments for periods of 18 months following termination of employment of Mr. Hoffstein and 12 and 6 months following termination of employment of Senior Vice Presidents and Vice Presidents, respectively. The agreements also provide for lump sum severance payments in lieu of the foregoing payments upon termination of employment in connection with a change in control of the Company. The change in control severance provisions of the agreements with officers of the Company who are not Named Officers are substantially similar to the change in control severance provisions of the Named Officers; provided that for Vice Presidents, (i) the amount of the lump sum severance payments will be equal to 1.00 times the sum of the items enumerated in the preceding paragraph, (ii) consulting agreements are not required and (iii) modified noncompetition restrictions apply for a period of one year. Key employees not covered by employment agreements are covered by a plan containing severance provisions substantially similar to the change in control severance provisions contained in the agreements of the Named Officers; provided that the amount of the lump sum severance payments will be equal to .50 times the sum of the terminated employee's base pay, target bonus and annualized automobile allowance. Key employees not covered by employment agreements are not required to enter into consulting agreements following termination of employment in connection with a change in control and are not subject to noncompetition restrictions at any time. The plan covers 49 key employees and continues to May 1, 1998; provided that if a change in control of the Company occurs prior to May 1, 1998, the plan will continue for a period of 12 months following the change in control. SECTION 16 REQUIREMENTS Section 16(a) of the Exchange Act requires the Company's directors and officers, and persons who own more than 10% of a registered class of the Company's equity securities, to file reports of ownership and changes of ownership with the Commission. Based solely on its review of the copies of such forms received by it, and written representations from certain reporting persons, the Company believes that during fiscal 1996 all filing requirements applicable to its directors, officers and greater than 10% beneficial owners were complied with. 24 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 stocks comprising the Standard & Poor's Retail-Specialty Index over the period commencing December 17, 1991 (the date of the first public trading of the Common Stock) and ending June 29, 1996 (assuming the investment of $100 on December 17, 1991, in Common Stock, the stocks comprising the NYSE Index and the stocks comprising the Standard & Poor's Retail-Specialty Index, and reinvestment of all dividends). The companies whose stocks comprise the Standard & Poor's Retail-Specialty Index are Circuit City Stores, Inc., Home Depot, Inc., Lowe's Companies, Inc., Melville Corporation, Pep Boys--Manny, Moe & Jack, Price/Costco Inc., Tandy Corporation, Toys R Us, Inc. and Woolworth Corporation. Comparison Of Cumulative Total Return On Common Stock, Standard & Poor's Retail- Specialty Index And NYSE Index
- -----------------------------FISCAL YEAR ENDING-------------------------------- COMPANY 1991 1992 1993 1994 1995 1996 COMPUSA INC 100 155.74 212.30 56.56 196.72 447.54 INDUSTRY INDEX 100 101.74 127.05 123.28 121.88 148.91 BROAD MARKET 100 98.25 111.42 115.30 137.64 172.20
- -------------- (1) Common Stock (2) Standard & Poor's Retail-Specialty Index (3) NYSE Index Proposal No. 4 INDEPENDENT AUDITORS Upon the recommendation of the Audit Committee and subject to ratification by the stockholders at the Meeting, the Board of Directors has selected Ernst & Young LLP to audit the consolidated financial statements of the Company for fiscal 1997. Ernst & Young LLP has served the Company in this capacity since 1988. Representatives of Ernst & Young LLP are expected to be present at the Meeting, will have the opportunity to make a statement if they desire to do so, and will be available to respond to appropriate questions. 25 STOCKHOLDERS' PROPOSALS Stockholders may submit proposals on matters appropriate for stockholder action at subsequent annual meetings of the Company consistent with Rule 14a-8 promulgated under the Exchange Act. For such proposals to be considered in the Proxy Statement and Proxy relating to the 1997 annual meeting of stockholders, such proposals must be received by the Company not later than May 30, 1997. Such proposals should be directed to CompUSA Inc., 14951 North Dallas Parkway, Dallas, Texas 75240, Attention: Secretary. OTHER BUSINESS The Board of Directors knows of no matters other than those described herein that will be presented for consideration at the Meeting. However, should any other matters properly come before the Meeting or any adjournments thereof, it is the intention of the persons named in the Proxy to vote on such matters in accordance with their best judgment in the interest of the Company. MISCELLANEOUS All costs incurred in the solicitation of Proxies will be borne by the Company. In addition to solicitation by mail, employees of the Company may solicit Proxies by telephone, or personally, without additional compensation. The Company may also make arrangements with brokerage houses and other custodians, nominees and fiduciaries for the forwarding of solicitation materials to the beneficial owners of shares of Common Stock held of record by such persons, and the Company may reimburse such brokerage houses and other custodians, nominees and fiduciaries for their out-of-pocket expenses incurred in connection with these activities. In addition, Corporate Investor Communications, Inc. ("CIC") may be retained by the Company to aid in the solicitation of Proxies. If CIC is so retained, it would solicit Proxies by mail, telephone, telegraph and personal interview and may request brokerage houses and other custodians, nominees and fiduciaries to forward soliciting material to beneficial owners of shares of Common Stock held of record by such persons. For these services, CIC would be paid fees not to exceed $5,000 and would be reimbursed for its expenses. ANNUAL REPORT Incorporated by Reference Accompanying this Proxy Statement is a copy of the Company's Annual Report for the fiscal year ended June 29, 1996. Reference is made to the Consolidated Financial Statements and Selected Financial Data and Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Annual Report, all of which are incorporated by reference into this Proxy Statement. By Order of the Board of Directors Mark R. Walker Senior Vice President--General Counsel and Secretary Dallas, Texas September 27, 1996 26 CompUSA Inc. PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD NOVEMBER 6, 1996 The undersigned hereby appoints James F. Halpin and Harold F. Compton, each with the power to act without the other and with full power of substitution, as Proxies to vote, as designated below, all stock of CompUSA Inc. owned by the undersigned at the Annual Meeting of Stockholders to be held at The Grand Kempinski Hotel, 1501 North Dallas Parkway, Dallas, Texas on Wednesday, November 6, 1996, at 10:00 a.m., local time, and at any adjournments of the meeting, upon such business as may properly come before the meeting, including the following: 1. Election as directors of the two nominees listed below. [ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote on (except as indicated to the one or more nominees as listed contrary below): below: Warren D. Feldberg Kevin J. Roche INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominee's name on the line provided below. - ---------------------------------------------------------------------------- 2. Approval of the amendment to the Restated and Amended Certificate of Incorporation to increase the number of authorized shares of Common Stock from 100,000,000 to 200,000,000. [ ] FOR [ ] AGAINST [ ] ABSTAIN 3. Approval of the amendment to the CompUSA Inc. Long-Term Incentive Plan to increase the number of shares of Common Stock available for issuance upon exercise of options under such plan by 2,000,000, from 6,394,368 to 8,394,368. [ ] FOR [ ] AGAINST [ ] ABSTAIN (Continued, and to be signed and dated, on the reverse side) (Continued from other side) 4. Approval of the selection of Earnst & Young LLP as the Company's independent auditors for the fiscal year ending June 28, 1997. [ ] FOR [ ] AGAINST [ ] ABSTAIN 5. In their discretion on any matter that may properly come before the meeting and any adjournments thereof. The shares represented by this proxy will be voted as directed. WHERE NO DIRECTION IS GIVEN, THE SHARES WILL BE VOTED FOR MATTERS 1, 2, 3 AND 4. Please sign below, date and return promptly. Dated:----------------1996 ------------------------------- Signature ------------------------------- (Signature if held jointly) IMPORTANT: Please sign exactly as name appears to the left. When signing on behalf of a corporation, partnership, estate, trust or in other representative capacity, please sign name and title. If executed by a corporation, the proxy should be signed by a duly authorized officer. If executed by a partnership, please sign in the partnership name by an authorized person. For joint accounts, each joint owner must sign. This proxy may be revoked prior to the exercise of the powers conferred by the proxy. -----END PRIVACY-ENHANCED MESSAGE-----