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
CompuCom
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(Name of Registrant as Specified In Its Charter)
CompuCom
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
-May 17, 2001-
Dear CompuCom Stockholder:
The 2001 Annual Meeting of stockholders of CompuCom Systems, Inc. will be held
on Thursday, May 17, 2001, at CompuCom's principal executive offices at 7171
Forest Lane, Dallas, Texas 75230 at 2:00 p.m. local time.
Only stockholders who owned stock at the close of business on March 30, 2001 can
vote at this meeting or any adjournments that may take place. At the meeting we
will elect 11 directors, and attend to any other business properly presented at
the meeting. We also will report on CompuCom's 2000 business results and other
matters of interest to our stockholders. You will have an opportunity at the
meeting to ask questions, make comments and meet our management team.
CompuCom's board of directors is a vital resource. No matter how many shares
you hold, CompuCom considers your vote important, and we encourage you to vote
as soon as possible.
All stockholders are cordially invited to attend the meeting. Whether or not
you expect to attend the meeting, please fill in, date and sign the accompanying
proxy and mail it promptly in the enclosed envelope.
This proxy statement, accompanying proxy card, and 2000 annual report are being
mailed to stockholders beginning on or about April 19, 2001, in connection with
the solicitation of proxies by the board of directors.
Please contact M. Lazane Smith, senior vice president and chief financial
officer, at (972) 856-3600 with any questions or concerns.
Sincerely,
/s/ J. Edward Coleman /s/ M. Lazane Smith
J. Edward Coleman M. Lazane Smith
President and Chief Executive Officer Senior Vice President, Finance,
Chief Financial Officer, and
Secretary
April 19, 2001
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QUESTIONS AND ANSWERS
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Q: Who is entitled to vote?
A: Stockholders of record as of the close of business on March 30, 2001, may
vote at the annual meeting.
Q: How many shares can vote?
A: On March 30, 2001, there were 48,459,748 common shares and 1,500,000 series
B preferred shares issued and outstanding. In the election of directors,
each series B preferred share may cast five votes for each common share into
which a preferred share may be converted. Each series B preferred share is
convertible into 1.477104 common shares. Every common stockholder may cast
one vote for each share owned.
Q: What may I vote on?
A: You may vote on the election of 11 directors who have been nominated to
serve on our board of directors.
Q: How does the board recommend I vote on the proposal?
A: The board recommends a vote FOR each board nominee.
Q: How do I vote?
A: Sign and date each proxy card you receive, mark the box indicating how you
wish to vote, and return the proxy card in the prepaid envelope provided.
If you sign your proxy card but do not mark any boxes showing how you wish
to vote, J. Edward Coleman and M. Lazane Smith will vote your shares as
recommended by the board of directors.
Q: What if I hold my CompuCom shares in a brokerage account?
A: If you hold your CompuCom shares through a broker, bank or other nominee,
you will receive a voting instruction form directly from them describing how
to vote your shares. This form will, in most cases, offer you three ways to
vote:
1. by telephone,
2. via the Internet, or
3. by returning the form to your broker.
Q: What if I want to change my vote?
A: You may change your vote at any time before the meeting in any of the
following three ways:
1. notifying our chief financial officer, M. Lazane Smith, in writing,
2. voting in person at the meeting, or
3. submitting a proxy card with a later date.
If you hold your shares through a broker, bank or other nominee and wish to
vote at the meeting, you must obtain a legal proxy from that nominee
authorizing you to vote at the meeting. We will be unable to accept a vote
from you at the meeting without that form. If you hold your shares directly
and wish to vote at the meeting, no additional forms will be required.
Q: How will directors be elected?
A: The 11 nominees who receive the highest number of affirmative votes at a
meeting at which a quorum is present will be elected as directors.
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QUESTIONS AND ANSWERS (cont'd.)
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Q: Who will count the votes?
A: A representative of CompuCom will count the votes and act as the judge of
election.
Q: What does it mean if I get more than one proxy card?
A: Your shares may be registered differently or may be in more than one
account. We encourage you to have all accounts registered in the same name
and address (whenever possible). You may obtain information about how to do
this by contacting our transfer agent at:
Mellon Investor Services LLC
Plaza of the Americas
600 North Pearl Street, Suite 1010
Dallas, TX 75201-2884
(214-922-4400)
If you provide Mellon Investor Services with photocopies of the proxy cards
that you receive or with the account numbers that appear on each proxy card,
it will be easier for Mellon Investor Services to combine your accounts.
You also can find information on transferring shares and other useful
stockholder information on their website at www.mellon-investor.com.
Q: What is a quorum?
A: A quorum is a majority of the outstanding shares. The shares may be
represented at the meeting either in person or by proxy. To hold the
meeting, there must be a quorum present.
Q: What if I abstain or fail to give instructions to my broker?
A: If you submit a properly executed proxy, your shares will be counted as part
of the quorum even if you abstain from voting or withhold your vote for a
particular director.
Broker non-votes also are counted as part of the quorum. A broker non-vote
occurs when banks, brokers or other nominees holding shares on behalf of a
stockholder do not receive voting instructions from the stockholder by a
specified date before the meeting. In this event, banks, brokers or other
nominees may vote those shares on matters deemed routine such as the
election of directors.
Abstentions are counted in tabulations of the votes cast on proposals
presented to stockholders and have the effect of negative votes. A
"withheld" vote is treated the same as an abstention. Broker non-votes are
not counted for purposes of determining whether a proposal has been
approved.
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QUESTIONS AND ANSWERS (cont'd.)
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Q: Who can attend the meeting?
A: All stockholders are encouraged to attend the meeting. Admission tickets
are not required.
Q: Are there any expenses associated with collecting the stockholder votes?
A: We will reimburse brokerage firms and other custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy
and other materials to our stockholders. We do not anticipate hiring an
agency to solicit votes at this time.
Q: What is a stockholder proposal?
A: A stockholder proposal is your recommendation or requirement that CompuCom
or our board of directors take action on a matter that you intend to present
at a meeting of stockholders. However, under the proxy rules we have the
ability to exclude certain matters proposed, including those that deal with
matters relating to our ordinary business operations.
Q: Can anyone submit a stockholder proposal?
A: To be eligible to submit a proposal, you must have continuously held the
lesser of $2,000 in market value or 1% of our common stock for at least one
year by the date you submit your proposal. You also must continue to hold
those securities through the date of the meeting.
Q: If I wish to submit a stockholder proposal for the annual meeting in 2002,
what action must I take?
A: If you wish us to consider including a stockholder proposal in the proxy
statement for the annual meeting in 2002, you must submit the proposal, in
writing, so that we receive it no later than December 20, 2001. The proposal
must meet the requirements established by the SEC. Send your proposal to:
M. Lazane Smith, Senior Vice
President and Chief Financial Officer
CompuCom Systems, Inc.
7171 Forest Lane
Dallas, TX 75230
As to any proposal presented by a stockholder at the annual meeting that has
not been included in this proxy statement, management proxies will be
allowed to use their discretionary voting authority unless we receive notice
of such proposal no later than March 5, 2002.
Q: Who are CompuCom's largest stockholders?
A: Safeguard Scientifics, Inc. beneficially owns 53.25%, directors and officers
as a group beneficially own 2.75% and Dimensional Fund Advisors, Inc.
beneficially owns 5.81% of our common stock.
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ELECTION OF DIRECTORS
Item 1 on Proxy Card
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Directors are elected annually and serve a one-year term. There are 11 nominees
for election this year. The eleven nominees are currently serving as directors.
Each nominee, if elected, has consented to serve until the next annual meeting
or until his successor is elected and qualified. You will find detailed
information on each nominee below. If any director is unable to stand for re-
election after distribution of this proxy statement, the board may reduce its
size or designate a substitute. If the board designates a substitute, proxies
voting on the original director candidate will be cast for the substituted
candidate.
The board recommends a vote FOR each nominee. The 11 nominees who receive the
highest number of affirmative votes will be elected as directors.
================================================================================
J. EDWARD COLEMAN Director since 2000
Age 49
Mr. Coleman has served as chief executive officer of CompuCom since December
1999 and as President since July 2000. Prior to joining CompuCom, Mr. Coleman
served as a business development executive and director of marketing for
Computer Sciences Corporation from March 1995 to December 1999.
================================================================================
MICHAEL J. EMMI Director since 1994
Age 59
Mr. Emmi has been chairman of the board, president and chief executive officer
of Systems & Computer Technology Corporation, a provider of computer software
and services, since May 1985. Mr. Emmi is a director of Safeguard Scientifics,
Inc. and CDI Corp.
================================================================================
RICHARD F. FORD Director since 1991
Age 65
Mr. Ford is a managing general partner of the management companies which act as
a general partner of Gateway Mid-America Partners, L.P., Gateway Venture
Partners II, L.P., Gateway Venture Partners III, L.P. and Gateway Partners,
L.P., private venture capital funds formed in 1984, 1987, 1990 and 1995,
respectively. Mr. Ford is a director of Stifel Financial Corporation, D&K
Healthcare Resources, Inc. and TALX, Inc.
================================================================================
EDWIN L. HARPER Director since 2000
Age 59
Mr. Harper is executive vice president of operations and information technology
with Assurant Group. Prior to Assurant, during 1997, Mr. Harper served as vice
chairman and chief executive officer of Commodore Applied Technologies. From
1992 to 1997, Mr. Harper served as president and chief executive officer of the
Association of American Railroads.
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4
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ELECTION OF DIRECTORS (cont'd.)
Item 1 on Proxy Card
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DELBERT W. JOHNSON Director since 1995
Age 62
Mr. Johnson has been a vice president of Safeguard since 1980. Mr. Johnson
served as chairman of the board and chief executive officer of Pioneer Metal
Finishing, Inc., a former division of Safeguard, until October 1997. Mr. Johnson
is a director of Ault Inc. and U.S. Bancorp. Mr. Johnson is the brother of Jerry
L. Johnson, a Safeguard executive officer.
================================================================================
JOHN D. LOEWENBERG Director since 1995
Age 60
Mr. Loewenberg has been the managing partner of JDL Enterprises, a consulting
firm, since March 1996. From May 1995 through March 1996, Mr. Loewenberg served
as executive vice president and chief administrative officer of Connecticut
Mutual, a life insurance company. Mr. Loewenberg is a director of Sanchez
Computer Associates, Inc., Diamond Technology Partners Incorporated, DocuCorp
International, Inc. and Sherwood International, PLC.
================================================================================
WARREN V. MUSSER Director since 1984
Age 74
Mr. Musser has served as chairman of Safeguard Scientifics, Inc. since 1953. Mr.
Musser was chief executive officer of Safeguard from 1953 until April 2001.
Safeguard is a leader in identifying, developing, and operating infrastructure
technology companies with a focus on three sectors: software, communications,
and e-Services. He is chairman of the board of Cambridge Technology Partners
(Massachusetts), Inc., a director of Internet Capital Group, Inc. and TyCom,
Ltd. and a trustee of Brandywine Realty Trust. Mr. Musser also serves on a
variety of civic, educational and charitable boards of directors, and serves as
vice president/development, Cradle of Liberty Council, Boy Scouts of America,
vice chairman of The Eastern Technology Council, and chairman of the
Pennsylvania Partnership on Economic Education.
================================================================================
ANTHONY J. PAONI Director since 1999
Age 56
Mr. Paoni is a professor of information technology at the Kellogg Graduate
School of Management. Before 1996, Mr. Paoni spent 28 years in the information
technology industry, most recently as the chief executive officer of Eolas,
Inc., an Internet software company. Mr. Paoni manages the Kellogg Technology
Speaker Series and acts as a consultant to several companies including IBM,
Xerox, the American Medical Association and Phillips Petroleum Company. Mr.
Paoni is a strategic advisor to the US Navy for the CVX nuclear carrier program
and a director of US Freightways Corporation.
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5
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ELECTION OF DIRECTORS (cont'd.)
Item 1 on Proxy Card
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Edward N. Patrone Director since 1991
Age 66
Mr. Patrone, retired, was a senior consultant to Alco Standard Corporation, a
national distributor of paper and office products, from 1991 to 1997. From 1988
through 1991, he was president and chief executive officer of Paper Corporation
of America. He is also a director of Primesource Corporation and Global Imaging
Corp.
================================================================================
M. LAZANE SMITH Director since 2001
Age 46
Ms. Smith has served as senior vice president, finance and chief financial
officer since February 1997. Ms. Smith joined CompuCom in 1993 as corporate
controller and was promoted to vice president, finance and corporate controller
in 1994.
================================================================================
Harry Wallaesa Director since 1999
Age 50
Mr. Wallaesa has served as chairman of the board of CompuCom since May 1999.
Mr. Wallaesa became president and chief operating officer of Safeguard in March
1999 and since April 2001 has been a member of the Office of the Chief Executive
of Safeguard. Before joining Safeguard, Mr. Wallaesa served as president and
chief executive officer of aligne incorporated, which he co-founded in 1996,
until Safeguard acquired a majority of the company in March 1999. From 1985 to
1995, Mr. Wallaesa was the chief information officer and vice president of
management information systems at Campbell Soup Company, a global manufacturer
and marketer of branded food products. Mr. Wallaesa is a director of Safeguard,
Bowne, Inc., Redleaf Group LLC, aligne incorporated, Pennsylvania Academy of the
Fine Arts, Atlas Commerce and University of Pennsylvania Health Systems.
BOARD OF DIRECTORS -- ADDITIONAL INFORMATION
Meetings of the Board: The board of directors held seven meetings in 2000. Each
of the incumbent directors attended at least 75% of the total number of board
and committee meetings of which they were members during the period in which
they served as a director.
Annual and Meeting Attendance Fees: Directors who are executive officers of
Safeguard or employees of CompuCom receive no additional compensation other than
their normal salary for serving on the board or its committees. Non-employee
directors receive:
. $1,000 monthly cash retainer
. $750 for each board or committee
meeting attended, and
. reimbursement of out-of-pocket
expenses.
Stock Options: Directors who are not executive officers of Safeguard or
employees of CompuCom receive:
. a stock option to purchase 10,000
shares of CompuCom's common stock upon
initial election to the board, and
. service grants, upon the
determination of the compensation
committee.
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6
Directors' options have a ten-year term and vest 25% each year starting on the
first anniversary of the grant date. The exercise price is equal to the closing
price of a share of CompuCom common stock on the grant date.
In November 2000, Messrs. Emmi, Ford, Harper, Johnson, Loewenberg, Paoni and
Patrone were each granted an option to purchase 15,000 shares at an exercise
price of $1.83 per share.
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BOARD COMMITTEE MEMBERSHIP ROSTER
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Audit Compensation Executive
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Meetings held in 2000 5 2 0
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Michael J. Emmi
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Richard F. Ford * *
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Edwin L. Harper *
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Delbert W. Johnson
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John D. Loewenberg
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Warren V. Musser
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Edward N. Patrone
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Harry Wallaesa
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* Chairperson
Audit: committee of independent directors that operate under a written Audit
Committee Charter adopted by the board of directors, a copy of which is attached
as Exhibit A to this Proxy Statement, recommends our independent certified
public accountants, discusses the scope and results of our audit with the
independent certified public accountants, reviews with management and the
independent certified public accountants our interim and year-end operating
results, considers the adequacy of our internal accounting controls and audit
procedures, and reviews the non-audit services to be performed by the
independent certified public accountants.
Compensation: committee that reviews and approves management's recommendations
for compensation, including incentive compensation, for all of our officers, and
administers our stock option plans and management incentive plan.
Executive: committee that acts upon all matters with respect to the management
of our business and affairs, except that its authority to authorize and approve
investments, other than investments made in the normal course of business, is
limited to investments of up to $5 million in the aggregate between board
meetings.
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STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND
GREATER THAN 5% STOCKHOLDERS
AS OF MARCH 30, 2001:
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Shares Options Shares
Name Beneficially Exercisable Beneficially Percent of
Owned Within 60 Days Owned Shares
of March 30, Assuming
2001 Exercise of
Options
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Safeguard Scientifics, Inc. 26,984,066 0 26,984,066 53.25%
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
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Dimensional Fund Advisors 2,816,150 0 2,816,150 5.81%
1299 Ocean Avenue, 11/th/ Floor
Santa Monica, CA 90401
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J. Edward Coleman 50,000 220,000 270,000 *
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Michael J. Emmi 0 27,500 27,500 *
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Richard F. Ford 20,000 17,500 37,500 *
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Edwin L. Harper 1,000 2,500 3,500 *
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Delbert W. Johnson 23,275 17,500 40,775 *
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John D. Loewenberg 19,375 40,500 59,875 *
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Warren V. Musser 483,983 0 483,983 1.0%
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Anthony J. Paoni 1,000 7,500 8,500 *
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Edward N. Patrone 0 27,500 27,500 *
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M. Lazane Smith 7,318 208,000 215,318 *
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Harry Wallaesa 1,757 0 1,757 *
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David A. Loeser 1,762 75,000 76,762 *
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John F. McKenna 0 75,000 75,000 *
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Anthony F. Pellegrini 500 25,000 25,500 *
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Executive officers and directors as
a group (14 persons)
609,970 743,500 1,353,470 2.75%
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* Less than 1% of CompuCom's outstanding shares of common stock
Each individual has the sole power to vote and to dispose of the shares
(other than shares held jointly with spouse) except for the following
shares:
Safeguard Scientifics, Inc. Includes 22,087,848 shares held by
Safeguard Scientifics (Delaware), Inc.,
1,347,228 shares held by Safeguard
Delaware, Inc., and 1,333,333 shares
held by CompuShop, Inc., wholly-owned
subsidiaries of Safeguard Scientifics,
Inc. Safeguard Scientifics (Delaware),
Inc. also holds 1,500,000 shares of
Series B preferred shares. Those shares
are convertible into 2,215,657 shares of
common stock, which also are included.
Dimensional Fund Advisors, Inc. Dimensional Fund Advisors Inc.
("Dimensional"), an investment advisor
registered under Section 203 of the
Investment Advisors Act of 1940,
furnishes investment advice to four
investment companies registered under
the Investment Company Act of 1940, and
serves as investment manager to certain
other commingled group trusts and
separate accounts. These
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8
investment companies, trusts and
accounts are the "Funds". In its role as
investment adviser or manager,
Dimensional possesses voting and/or
investment power over the securities of
the Issuer described in this schedule
that are owned by the Funds. All
securities reported in this schedule are
owned by the Funds. Dimensional
disclaims beneficial ownership of such
securities.
Delbert W. Johnson Includes 20,000 shares held in a
Remainder Trust.
Warren V. Musser Includes 40,700 shares held by a trust
of which Mr. Musser is a co-trustee.
Excludes 26,984,066 shares beneficially
owned by Safeguard, for which Mr. Musser
serves as chairman of the board. Mr.
Musser disclaims beneficial ownership of
the shares beneficially owned by the
trust and Safeguard.
Shares Owned by Directors and Officers of Parent and Subsidiary Corporations:
Safeguard is the parent corporation of CompuCom. As of March 30, 2001,
executive officers and directors of CompuCom beneficially owned the following
percentage of the outstanding shares of Safeguard common stock:
. Mr. Musser 1.27%
. Mr. Wallaesa 1.19%
. all other officers and directors of CompuCom, as a group, beneficially
own less than 1% of Safeguard stock.
Section 16(a) Beneficial Ownership Reporting Compliance: The rules of the
Securities and Exchange Commission require that we disclose late filings of
reports of stock ownership by our directors and executive officers. To the best
of our knowledge, the only late filings during 2000 were a Form 4 filed late by
Warren V. Musser and a Form 5 filed late by each of the following individuals:
Michael J. Emmi, Edwin L. Harper, Delbert W. Johnson, David A. Loeser, John D.
Loewenberg, John F. McKenna, Anthony J. Paoni, Edward N. Patrone, Anthony F.
Pellegrini, and M. Lazane Smith.
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STOCK PERFORMANCE GRAPH
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The following graph compares the cumulative total return on our common stock for
the period from December 31, 1995, through December 31, 2000, with the
cumulative total return on the Nasdaq Index and the peer group index for the
same period.
COMPARISON OF COMULATIVE TOTAL RETURNS
[GRAPH APPEARS HERE]
1. The peer group consists of SIC Code 5045--Computer, Peripheral Equipment and
Software Wholesalers.
2. We have historically reinvested earnings in the growth of our business and
have not paid cash dividends on our common stock.
3. Assumes an investment of $100 on December 31, 1995.
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REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
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COMPENSATION PHILOSOPHY
Our mission is to succeed in a highly competitive business and achieve maximum
returns for our stockholders by being the leader in providing IT infrastructure
solutions to large enterprises based on a strategy of customer intimacy and
operational efficiency.
Our philosophy is to align the compensation of senior management and other
employees with that mission and the long-term interests of our stockholders.
This philosophy also helps us to:
. attract and retain outstanding employees who can thrive in a competitive
environment of continuous change,
. promote among our employees the economic benefits of stock ownership, and
. motivate and reward employees who, by their hard work, loyalty and
exceptional service, make contributions of special importance to the
success of our business.
COMPENSATION STRUCTURE
The compensation of our executives consists of:
. base salary,
. annual cash incentives, and
. stock options.
Base Pay
Base pay is established initially on a combination of factors, including a
review of various published salary surveys, and certain subjective factors
including experience and achievements of the individual and the level of
responsibility assumed at CompuCom. Salary increases for our CEO and other
highly compensated executives for 2000 were based on:
. level of achievement of financial and strategic objectives,
. individual performance, and
. contributions to the achievement of our objectives.
Annual Cash Incentives
Annual cash incentives are intended to create an incentive for executives who
significantly contribute to and influence our strategic plans and are
responsible for our performance. Our primary objectives are to:
. focus executives' attention on areas such as profitability and asset
management,
. encourage teamwork, and
. tie executives' pay to corporate performance goals consistent with the
long-term performance goals of our stockholders.
Incentives are generally awarded based on the achievement of annual financial
and/or strategic goals approved by the compensation committee, which goals may
include target ranges of:
. pretax earnings,
. earnings per share,
. return on equity, or
. some other objective measurement consistent with the long-term goals of our
stockholders.
For 2000, a significant factor in determining incentives was earnings per share.
Incentives may also be awarded based upon individual performance.
The committee determines a range of potential incentive amounts for each
executive, stated as a percentage of base salary, and based upon the executive's
ability to impact our performance.
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11
Incentives are awarded at year-end based on the actual achievement level of the
specified corporate goals compared to the target range of achievement.
Additional amounts may be awarded for outstanding individual performance. For
2000, the compensation committee determined that, based on CompuCom's
performance, there would be incentive awards.
CEO and other highly compensated executives' bonus compensation. The
compensation committee approved executive cash bonuses equal to approximately
100% of the applicable target bonus amounts.
Stock Options
Stock options are intended to align the interests of executives and key
employees with the long-term interests of our stockholders and other investors
and to encourage executives and key employees to remain in our employ. Grants
are not made in every year, but are awarded subjectively based on the following
factors including:
. the individual's level of responsibility,
. the amount and term of options already held by the individual,
. the individual's contributions to the achievement of our financial and
strategic objectives, and
. our achievement of financial and strategic objectives, which may include:
. developing strategic alliances,
. identifying and exploiting markets,
. expanding existing market share and penetration,
. expanding operating capabilities, and
. improving net operating margins.
2000 Stock Option Awards. The committee granted stock options during 2000 to
all directors who are not employees of CompuCom or Safeguard, certain executives
upon joining CompuCom and other executives and employees.
IRS Limits on Deductibility of Compensation.
The committee is aware that Internal Revenue Code section 162(m) provides that
publicly-held companies may not deduct in any taxable year compensation in
excess of one million dollars paid to any of the individuals named in the
compensation tables that is not "performance based" as defined in section
162(m). The committee believes that annual levels of executive compensation
that are not performance based are not likely to exceed one million dollars in
the foreseeable future.
Submitted by the compensation committee:
Richard F. Ford, Chairman
Michael J. Emmi
Warren V. Musser
Harry Wallaesa
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EXECUTIVE COMPENSATION & OTHER ARRANGEMENTS
2000 Annual Compensation for the Named Executive Officers
- -------------------------------------------------------------------------------------------------------
Long-Term
Annual Compensation Compensation
-----------------------
Awards
----------------------------------------------------
Securities Underlying All Other
Options/SARS (#) Compensation
Name and Principal ($)/(2)/
Position Year Salary ($) Bonus ($)/(1)/
- -------------------------------------------------------------------------------------------------------
J. Edward Coleman, 2000 $535,090 $642,000 200,000 $ 4,630
President and Chief 1999 26,750 100,000 800,000
Executive Officer/(3)/
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
M. Lazane Smith, Senior 2000 $294,705 $294,615 150,000 $ 3,750
Vice President, Finance 1999 260,000 206,000 3,571
and Chief Financial 1998 220,000 1,581 200,000 3,489
Officer
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
John F. McKenna 2000 $200,090 $200,000 150,000
Senior Vice President, 1999 192,387 100,000 100,000
Services/(3)/
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
David A. Loeser, Senior 2000 $200,000 $200,000 150,000 $ 4,375
Vice President, Human 1999 142,307 100,000 100,000
Resources/(3)/
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Anthony F. Pellegrini 2000 $153,888 $203,846 150,000 $63,288
Senior Vice President,
Sales(3)
- ------------------------------------------------------------------------------------------------------
Notes to Annual Compensation Table:
(1) With respect to Ms. Smith, includes a portion of the deferred bonus
from 1995. Approximately 9% of the bonus earned for 1995 was deferred.
Of this deferred amount, 25% was paid in February 1998 and 25% was
paid in 1999.
(2) For 2000, all other compensation includes the following:
Company Match
Name Defined Contribution Plan Relocation
----------------------- ----------------------------- ----------------
J. Edward Coleman $ 4,630 $
M. Lazane Smith 3,750
David A. Loeser 4,375
Anthony F. Pellegrini 1,154 62,134
(3) Mr. Coleman became chief executive officer in December 1999; Mr.
Loeser became senior vice president, human resources in April 1999;
Mr. Pellegrini became senior vice president, sales in March 2000; Mr.
McKenna joined us in January 1999 and became senior vice president,
services in September 1999.
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2000 Stock Option Grants
The following table relates to options to acquire CompuCom common stock,
unless otherwise noted in the footnotes.
- --------------------------------------------------------------------------------------------------------------------------------
Potential Realizable Value
At Assumed Annual Rates
Individual Grants Of Stock Price Appreciation
For Option Term/(1)/
- --------------------------------------------------------------------------------------------------------------------------------
% of Total
Number of Options/
Securities SARS
Underlying Granted To
Options/ Employees In Exercise Or
SARs Fiscal Base Price Expiration 5% 10%
Name Granted (#) Year ($/Sh)/(2)/ Date ($) ($)
- --------------------------------------------------------------------------------------------------------------------------------
J. Edward Coleman 200,000 4.83% $4.4375 2/16/2010 $1,445,644 $2,301,946
- --------------------------------------------------------------------------------------------------------------------------------
M. Lazane Smith 100,000 3.62% 4.4375 2/16/2010 895,892 1,426,558
50,000 2.125 7/27/2010
- --------------------------------------------------------------------------------------------------------------------------------
John F. McKenna 100,000 3.62% 4.4375 2/16/2010 895,892 1,426,558
50,000 2.125 7/27/2010
- --------------------------------------------------------------------------------------------------------------------------------
David A. Loeser 100,000 3.62% 4.4375 2/16/2010 895,892 1,426,558
50,000 2.125 7/27/2010
- --------------------------------------------------------------------------------------------------------------------------------
Anthony F. Pellegrini 100,000 3.62% 3.1406 4/25/2010 684,641 1,090,176
50,000 2.125 7/27/2010
- --------------------------------------------------------------------------------------------------------------------------------
(1) These values assume that the shares appreciate at the compounded annual
rate shown from the grant date until the end of the option term. These
values are not estimates of future price growth of our stock. Executives
will not benefit unless the common stock price increases above the stock
option exercise price.
(2) All options have an exercise price equal to or greater than the fair
market value on the grant date of the shares subject to each option. The
option exercise price may be paid in cash, by delivery of previously
acquired shares, subject to certain conditions, or same-day sales (that
is, a cashless exercise through a broker). The compensation committee,
upon exercise of an option, may elect to pay an individual, in cash or in
common stock, the difference between the exercise price and the fair
market value on the exercise date. The compensation committee may modify
the terms of outstanding options, including acceleration of the exercise
date.
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2000 Stock Option Exercises and Year-End Stock Option Values
- ------------------------------------------------------------------------------------------------------------------
Number Of Securities Value Of Unexercised
Underlying Unexercised In-The-Money
Shares Options/SARs Options/SARs
Acquired At Fiscal Year-End (#) At Fiscal Year-End ($) (1)
On Value
Name Exercise (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------
J. Edward Coleman 0 $ 0 220,000 750,000 $ 0 $ 0
- ------------------------------------------------------------------------------------------------------------------
M. Lazane Smith 0 0 208,000 242,000 0 0
- ------------------------------------------------------------------------------------------------------------------
John F. McKenna 0 0 75,000 175,000 0 0
- ------------------------------------------------------------------------------------------------------------------
David A. Loeser 0 0 75,000 175,000 0 0
- ------------------------------------------------------------------------------------------------------------------
Anthony F. Pellegrini 0 0 25,000 125,000 0 0
- ------------------------------------------------------------------------------------------------------------------
(1) Value is calculated using the difference between the option exercise price
and the year-end stock price, multiplied by the number of shares subject to
the option. The year-end stock price used was $1.2812 for each share of
CompuCom common stock.
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Employment Contracts; Severance and Change-in-Control Arrangements
J. Edward Coleman entered into an employment agreement with CompuCom that
provides for his employment as an executive officer until the employment
relationship is terminated under certain conditions, at a minimum monthly salary
of $44,583. In addition, Mr. Coleman was granted a non-qualified stock option to
purchase 800,000 shares of CompuCom at an exercise price per share equal to the
closing price of CompuCom's common stock on the date his employment commenced.
This option will become exercisable in equal increments over four years. The
agreement entitles Mr. Coleman to a bonus of up to 120% of his base salary.
CompuCom is required to purchase a renewable term life insurance policy in the
amount of $1,000,000, payable to Mr. Coleman's designated beneficiary, and a
comprehensive long-term disability insurance policy and provides Mr. Coleman
with other standard benefits available to senior management. If employment is
terminated without cause, or if CompuCom demotes him or reduces his salary or
benefits below the level described in his agreement, Mr. Coleman will be
entitled to a lump sum payment equal to two years' salary. Mr. Coleman has
agreed not to compete with CompuCom for two years after his voluntary
termination of employment, and if his employment is terminated for any reason
other than due cause, for the same period of time for which he receives
compensation. Within 10 days of a change in control, all unvested stock options
held by Mr. Coleman to purchase shares of CompuCom will be vested. If he
voluntarily leaves within six months of a change in control, he will be entitled
to receive, in lump sum payment, all payments due to him.
M. Lazane Smith entered into an employment agreement with CompuCom that provides
for her employment as an executive officer through October 24, 1999, subject to
annual renewals, at a minimum monthly salary of $16,666. The agreement entitles
Ms. Smith to a bonus of up to 50% of her base salary. CompuCom is required to
purchase a renewable term life insurance policy in the amount of $1,000,000,
payable to Ms. Smith's designated beneficiary, and a comprehensive long-term
disability insurance policy and provides Ms. Smith with other standard benefits
available to senior management. If her employment is terminated without cause,
or if CompuCom demotes her or reduces her salary or benefits below the level
described in her agreement, Ms. Smith will be entitled to a lump sum payment
equal to her salary for the remaining term of the agreement. Ms. Smith has
agreed not to compete with CompuCom for two years after her voluntary
termination of employment, and if her employment is terminated for any reason
other than due cause, for the same period of time for which she receives
compensation. Within 10 days of a change in control, all unvested stock options
held by Ms. Smith to purchase shares of CompuCom will be vested. If she
voluntarily leaves within six months of a change in control, she will be
entitled to receive, in a lump sum payment, all payments due to her for the
remainder of the agreement.
Anthony F. Pellegrini entered into an employment agreement with CompuCom that
provides for his employment until the employment relationship is terminated
under certain conditions, at a minimum monthly salary of $16,667. As part of the
employment agreement, Mr. Pellegrini received a one-time signing bonus of
$50,000. The agreement entitles Mr. Pellegrini to a bonus of up to 50% of his
base salary. If employment is terminated without cause, or if CompuCom demotes
him or reduces his salary or benefits below the level described in his
agreement, Mr. Pellegrini will be entitled to a lump sum payment equal to one
year's salary. Mr. Pellegrini has agreed not to compete with CompuCom for one
year after his voluntary termination of employment, and if his employment is
terminated for any reason other than due cause, for the same period of time for
which he receives compensation.
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16
In June 2000, CompuCom accepted the resignation of Thomas Lynch as president and
chief operating officer.
Relationships and Related Transactions with Management and Others
In December 1998, CompuCom loaned Thomas Lynch the sum of $796,875 which
provided Mr. Lynch with funds to pay the cost of exercising his stock options to
acquire 500,000 shares of stock and to pay related taxes in October 1998. The
loan was evidenced by a full recourse promissory note, with interest at the
annual rate of 4.33% and was secured by a pledge of 500,000 shares of CompuCom
common stock. The principal and interest was payable on December 31, 2001.
In February 2001, Mr. Lynch transferred 272,472 shares of CompuCom common stock
to CompuCom in satisfaction of the outstanding principal and interest balance on
the note described above.
Per a contractual agreement, CompuCom has historically paid Safeguard an
administrative support service fee equal to 1/4 of 1% of net sales, up to a
maximum of $600,000 annually, including reimbursement of certain out-of-pocket
expenses incurred by Safeguard. The administrative support services included
consultation regarding our general management, investor relations, financial
management, certain legal services, insurance programs administration, and tax
research and planning, but did not cover extraordinary services or services that
are contracted out. Effective April 1, 2000, this agreement was mutually
terminated. CompuCom incurred charges from Safeguard of $150,000 during 2000 for
these services.
INDEPENDENT PUBLIC ACCOUNTANTS
Since 1987, we have retained KPMG LLP as our independent public accountants and
intend to retain KPMG LLP for the current year ending December 31, 2001.
Representatives of KPMG LLP are expected to be present at the Annual Meeting,
will have an opportunity at the meeting to make a statement if they desire to do
so, and will be available to respond to appropriate questions.
AUDIT COMMITTEE REPORT
In accordance with its written charter adopted by the board of directors, a copy
of which is attached as Exhibit A, the Audit Committee assists the board in
fulfilling its responsibility for oversight of the quality and integrity of the
accounting, auditing and financial reporting practices of CompuCom.
Management is responsible for CompuCom's internal controls. CompuCom's
independent auditors are responsible for performing an independent audit of
CompuCom's consolidated financial statements in accordance with generally
accepted auditing standards and to issue a report thereon. The Audit Committee
has general oversight responsibility with respect to CompuCom's financial
reporting, and reviews the results and scope of the audit and other services
provided by CompuCom's independent auditors.
In this context, the Audit Committee has met and held discussions with
management and CompuCom's independent auditors. Management represented to the
Audit Committee that CompuCom's consolidated financial statements were prepared
in accordance with U.S. generally accepted accounting principles, and the Audit
Committee has reviewed and discussed the consolidated financial statements with
management and CompuCom's independent auditors. The Audit Committee discussed
with the independent auditors matters required to be discussed by Statement on
Auditing Standards No. 61 (Communication with Audit Committees).
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CompuCom's independent auditors also provided to the Audit Committee the written
disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the Audit Committee
discussed with the independent auditors' their independence and the
compatibility of non audit services with such independence.
Based upon the Audit Committee's discussion with management and the independent
auditors and the Audit Committee's review of the representations of management
and the report of the independent auditors to the Audit Committee, the Audit
Committee recommended that the board of directors include CompuCom's audited
consolidated financial statements in CompuCom's Annual Report on Form 10-K for
the year ended December 31, 2000 filed with the Securities and Exchange
Commission.
Audit Fees. The aggregate fees billed by CompuCom's independent auditors for
professional services rendered in connection with the audit of our consolidated
financial statements included in our Annual Report on Form 10-K for fiscal year
2000, as well as for the review of our consolidated financial statements
included in CompuCom's Quarterly Reports on Form 10-Q during 2000, totaled
$240,000 (excluding expenses reimbursed by CompuCom).
Financial Information Systems Design and Implementation Fees. No fees other than
those described above under the caption "Audit Fees" and those described below
under the caption "All Other Fees" were billed to CompuCom by our independent
auditors for professional services in 2000.
All Other Fees. Other fees totaling $47,500 billed to CompuCom by its principal
auditors during 2000, other than those described above, related to the following
services:
ISO 9001 Audit 14,000
Securitization Agreed-Upon
Procedures 8,000
401(k) Audit 10,000
InaCom Acquisition Services 9,500
S-8 Filings 6,000
The Audit Committee believes that the foregoing expenditures are compatible with
maintaining the independence of our auditors.
Submitted by the Audit Committee of the Board of Directors:
Edwin L. Harper, Chairman
Delbert W. Johnson
John D. Loewenberg
Edward N. Patrone
The foregoing Audit Committee Report shall not be deemed to be incorporated by
reference into any of CompuCom's previous or future filings with the Securities
and Exchange Commission, except as otherwise explicitly specified by CompuCom in
any such filing.
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Exhibit A
CompuCom Systems, Inc.
Audit Committee Charter
The Audit Committee (the "Committee") of CompuCom Systems, Inc. ("CompuCom") is
a committee of the Board of Directors ("Board"). Its primary function is to
assist the Board in fulfilling its oversight responsibilities by reviewing the
financial information which will be provided to the shareholders and others, the
systems of internal controls which management and the Board have established,
and the audit process.
In meeting its responsibilities, the Committee is expected to:
1. Provide an open avenue of communication between the internal auditors, the
independent accountants and the Board, as the internal auditors and the
independent accountants are ultimately accountable to the Board and the
Committee.
2. Review and update the Committee's charter annually.
3. Evaluate and select the independent accountants to be nominated, approve
the compensation of the independent accountants, and, if necessary, replace
the independent accountants. The Committee will inform the Board of its
decisions.
4. Review and concur in the appointment, replacement, reassignment, or
dismissal of the Director of Internal Audit.
5. Assess the independence of the internal auditor and the independent
accountants, including obtaining from the independent accountants a written
statement identifying all relationships between the independent accountants
and CompuCom and discussing with the independent accountants any disclosed
relationships that may impact objectivity and independence of the
independent accountants, and take any other actions deemed necessary to
assure the independence of the internal auditor and the independent
accountants.
6. Inquire of management, the Director of Internal Audit, and the independent
accountants about significant risks or exposures and assess the steps
management has taken to minimize such risk to CompuCom and whether the
independent accountants concur. Management will continue to communicate
with the Committee on a timely basis concerning issues which could have a
material effect on CompuCom.
7. Review, in consultation with the independent accountants and the Director
of Internal Audit, the audit scope and plan of the internal auditors and
independent accountants for CompuCom.
8. Review with the Director of Internal Audit and the independent accountants
the coordination of audit effort to assure completeness of coverage,
reduction of redundant efforts, and the effective use of audit resources.
9. Consider and review with the independent accountants and the Director of
Internal Audit:
a) The adequacy of CompuCom's internal controls including
computerized information system controls and security where
applicable.
b) Any related significant findings and recommendations of the
independent accountants and internal audit together with
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19
management's responses thereto.
10. Review with management and the independent accountants at the completion of
the annual examination:
a) CompuCom's annual financial statements and related footnotes.
b) The independent accountants' audit of the financial statements and its
report thereon.
c) Any significant changes in the financial statements and accounting
disclosures.
d) Any significant changes required in the independent accountants' audit
plan.
e) Any significant accounting or financial reporting issues, including
significant adjustments, management judgments and accounting
estimates, significant new accounting policies and disagreements with
management.
f) Other than noted in e) above, any significant difficulties or disputes
with management encountered during the course of the audit.
g) Other matters related to the conduct of the audit, which are to be
communicated to the Committee under generally accepted auditing
standards.
11. Review the Annual Report and SEC year-end filings, prior to issuance when
possible, and consider whether the information contained in these documents
is consistent with the information contained in the financial statements.
12. Review and discuss with management, the independent accountants and the
Director of the Internal Audit, any significant accounting or financial
reporting issues, including significant adjustments, management judgements
and accounting estimates, significant new accounting policies and
disagreements with management prior to filing interim financial reports
with the SEC or other regulators.
13. Effective January 1, 2001, review disclosures in CompuCom's Annual Proxy
Statement regarding the independence of the Committee members, the adoption
of a formal written Audit Committee charter, and approve the Audit
Committee charter for inclusion in the proxy statement. This inclusion
shall occur every three years, or as otherwise required by law or
regulation.
14. Effective January 1, 2001, review and approve a report to be included
annually in the proxy statement, which includes the following:
a) Statement that the Committee has reviewed and discussed the audited
financial statements with management.
b) Statement that the Committee has discussed with the independent
accountants' matters covered by SAS No. 61.
c) Statement that the Committee has received and discussed with the
independent accountants disclosures regarding the independent
accountants' independence.
15. Consider and review with management and the Director of Internal Audit:
a) Significant findings during the year and management's responses
thereto.
b) Any difficulties encountered in the course of their audits, including
any restrictions on the scope of their work or access to required
information.
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20
c) Any changes required in the planned scope of their audit plan.
d) The internal audit department budget and staffing.
e) The internal audit department charter.
16. Management will review policies and procedures with respect to officers'
expense accounts and perquisites, including use of corporate assets and
will report to the Committee once a year on its findings. The Committee
will also consider the results of any review of these areas by the
independent accountants.
17. Management will monitor compliance with CompuCom's code of conduct and
report to the Committee once a year.
18. Review legal and regulatory matters that may have a material impact on the
financial statements, related company compliance policies, and programs and
reports received from regulators.
19. Meet with the independent accountants, the Director of Internal Audit and
management in separate executive sessions to discuss any matters that the
Committee or these groups believe should be discussed privately with the
Committee.
20. Report Committee actions to the Board with such recommendations as the
Committee may deem appropriate.
21. The Committee shall have the power to conduct or authorize investigations
into any matters within the Committee's scope of responsibilities. The
Committee shall be empowered to retain independent counsel, accountants, or
others to assist it in the conduct of any investigation.
22. The Committee shall meet at least three times per year or more frequently
as circumstances require. The Committee may ask members of management or
others to attend the meeting and provide pertinent information as
necessary.
23. The Committee will perform such other functions as assigned by law,
CompuCom's charter or bylaws, or the Board.
24. The Committee shall be comprised as follows:
a) The Committee shall consist of three or more directors. The members
shall be designated by the full Board upon the recommendation of the
nominating committee. Each member shall be an independent director and
free from any relationship that, in the opinion of the Board, would
interfere with the exercise of independent judgment as a member of the
Committee. In determining whether any director is independent, the
Board shall take into consideration the requirements of the principal
exchange or system on which CompuCom's common stock is traded.
Directors who are affiliates of CompuCom, or officers or employees of
CompuCom or its subsidiaries, will not be considered independent.
However, until June 14, 2001, the Committee may consist of two or more
directors meeting the qualifications of this section.
b) All members of the Committee must be able to read and understand
fundamental financial statements, including a company's balance sheet,
income statement, and cash flow statement or become able to do so with
a reasonable period of time after appointment to the Committee, and at
least one member of the Committee is to have past employment
experience in finance or accounting, requisite professional
certification in accounting, or any other comparable experience or
background which results in the
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21
member's financial sophistication, including being or having been a
chief executive officer, chief financial officer or other senior
officer with financial oversight responsibilities.
c) The members of the Committee shall serve at the pleasure of the Board,
and are to be elected by the Board and shall serve until their
successors are duly elected and qualified. Unless a Chairman is
elected by the full Board, the members of the Committee may designate
a Chairman by majority vote of the full Committee membership.
25. The duties and responsibilities of a member of the Committee are in
addition to those duties set out for a member of the Board.
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PROXY
COMPUCOM SYSTEMS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Please sign and date this proxy, and indicate how you wish to vote, on the back
of this card. Please return this card promptly in the enclosed envelope. Your
vote is important.
When you sign and return this proxy card, you
. appoint J. Edward Coleman and M. Lazane Smith, and each of them (or any
substitutes they may appoint), as proxies to vote your shares, as you have
instructed, at the annual meeting on May 17, 2001, and at any adjournments of
that meeting,
. authorize the proxies to vote, in their discretion, upon any other business
properly presented at the meeting, and
. revoke any previous proxies you may have signed.
If you do not indicate how you wish to vote, the proxies will vote for all
nominees to the Board of Directors, and as they may determine, in their
discretion, with regard to any other matter properly presented at the meeting.
/\ FOLD AND DETACH HERE /\
The Board of Directors recommends a vote FOR Proposal 1. Please mark [X]
your vote as
indicated in
this example
1. ELECTION OF DIRECTORS Nominees: J. Edward Coleman, Michael J. Emmi, Richard F. Ford, Edwin L. Harper,
Delbert W. Johnson, John D. Loewenberg, Warren V. Musser, Anthony J. Paoni,
FOR all nominees WITHHOLD Edward N. Patrone, M. Lazane Smith, Harry Wallaesa
listed to the right AUTHORITY
(except as marked to vote for all nominees To withhold authority to vote for any individual nominee while voting for the
to the contrary) listed to the right remainder, strike a line through the nominee's name in the list.
[ ] [ ]
Signature _________________________________________ Signature _________________________________________ Date _______________, 2001
YOU MUST SIGN EXACTLY AS YOUR NAME APPEARS ON THIS CARD. If shares are jointly owned, you must both sign. Include title if you are
signing as an attorney, executor, administrator, trustee or guardian, or on behalf of a corporation or partnership.
/\ FOLD AND DETACH HERE /\
[COMPUCOM LOGO]
Your vote is important,
regardless of the number of shares you own.
Whether or not you plan to attend the meeting in person, please complete,
date and sign the above proxy card and return it without delay in the
enclosed envelope.