CompUSA 2009 Annual Report Download - page 23

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TRANSACTIONS WITH RELATED PERSONS
Under the Company’ s Corporate Ethics Policy, all officers, Directors and employees (collectively the “Company Representatives”)
are required to avoid conflicts of interest, appearances of conflicts of interest and potential conflicts of interest. A “conflict of interest”
occurs when a Company Representative’ s private interest interferes in any way with the interests of the Company. A conflict can arise
when a Company Representative takes actions or has interests that may make it difficult to perform his or her Company work
objectively and effectively. Conflicts of interest also arise when a Company Representative, or a member of his or her family, receives
improper personal benefits as a result of his or her position in the Company. Company Representatives cannot allow any consideration
such as the receipt of gifts or financial interests in other businesses or personal or family relationships to interfere with the independent
exercise of his or her business judgment and work activities to the benefit of the Company. Loans to, or guarantees of obligations of,
Company Representatives are prohibited unless permitted by law and authorized by the Board or a Committee designated by the
Board. If a Company Representative becomes aware of a potential conflict of interest he or she must communicate such potential
conflict of interest to the Company.
The Company’ s written corporate approval policy requires transactions with related persons, including but not limited to
leases with related persons and sales or purchases of Company assets by related persons, to be reviewed and approved or ratified by the
Company’ s Audit Committee as well as by the Company’ s Chief Executive Officer, Chief Financial Officer and General Counsel. In
this regard, all such transactions are first discussed with the Chief Financial Officer and are submitted to the General Counsel’ s office,
including for an initial determination of whether such further related person transaction review is required. The Company utilizes the
definition of related persons under applicable SEC rules, defined as any executive officer, director or nominee for director of the
Company, any beneficial owner of more than 5% of the outstanding shares of the Company’ s common stock, or any immediate family
member of any such person. In reviewing these transactions, the Company strives to assure that the terms of any agreement between
the Company and a related party is at arm’ s length, fair and at least as beneficial to the Company as could be obtained from third
parties. The Audit Committee, in its discretion, may consult with third party appraisers, valuation advisors or brokers to make such
determination.
Leases
The Company has leased its facility in Port Washington, NY since 1988 from an entity owned by Richard Leeds, Bruce Leeds and
Robert Leeds, Directors of the Company. Rent expense under this lease totaled approximately $866,000 for fiscal year 2009. The
Company believes that these payments were no higher than would be paid to an unrelated lessor for comparable space.
Stockholders Agreement
Certain members of the Leeds family (including Richard Leeds, Bruce Leeds and Robert Leeds) and family trusts of Messrs. Leeds
entered into a stockholders agreement pursuant to which the parties agreed to vote in favor of the nominees for the Board designated by
the holders of a majority of the Shares held by such stockholders at the time of the Company’ s initial public offering of the Shares. In
addition, the agreement prohibits the sale of the Shares without the consent of the holders of a majority of the Shares held by all parties
to the agreement, subject to certain exceptions, including sales pursuant to an effective registration statement and sales made in
accordance with Rule 144. The agreement also grants certain drag-along rights in the event of the sale of all or a portion of the Shares
held by holders of a majority of the Shares. As of the end of fiscal year 2009, the parties to the stockholders agreement beneficially
owned 25,296,800 Shares subject to such agreement (constituting approximately 69% of the Shares outstanding).
Pursuant to the stockholders agreement, the Company granted to the parties demand and incidental, or “piggy-back,” registration
rights with respect to the Shares. The demand registration rights generally provide that the holders of a majority of the Shares may
require, subject to certain restrictions regarding timing and number of Shares that the Company register under the Securities Act all or
part of the Shares held by such stockholders. Pursuant to the incidental registration rights, the Company is required to notify such
stockholders of any proposed registration of any Shares under the Securities Act and if requested by any such stockholder to include in
such registration any number of shares of Shares held by it subject to certain restrictions. The Company has agreed to pay all expenses
and indemnify any selling stockholders against certain liabilities, including under the Securities Act, in connection with the registration
of Shares pursuant to such agreement.