SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (section) 240.14a-11(c) or
(section) 240.14a-12
PROGRAMMER'S PARADISE, INC.
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(Name of Registrant as Specified in Its Charter)
PROGRAMMER'S PARADISE, INC.
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No filing 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:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
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5) Total fee paid:
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[ ] 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:
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PROGRAMMER'S PARADISE, INC.
1157 Shrewsbury Avenue
Shrewsbury, New Jersey 07702
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 17, 1999
To our Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders of
Programmer's Paradise, Inc. (the "Company") will be held at the Molly Pitcher
Hotel, Red Bank, New Jersey, on June 17, 1999 at 9:00 a.m., local time, for the
following purposes:
1. To elect a Board of four Directors to serve until the next annual
meeting of stockholders or until their successors are elected and
qualified;
2. To ratify the appointment by the Board of Directors of Ernst &
Young LLP as the independent auditors of the Company to examine and report
on its financial statements for the fiscal year beginning January 1, 1999;
and
3. To consider and take action upon such other matters as may properly
come before the Meeting and any adjournment or adjournments thereof.
The close of business on April 27, 1999 has been fixed as the record date
for the determination of stockholders entitled to notice of and to vote at the
Meeting. The transfer books of the Company will not be closed.
All stockholders are cordially invited to attend the Meeting. Whether or
not you expect to attend, you are respectfully requested to sign, date and
return the enclosed proxy promptly in the accompanying envelope, which requires
no postage if mailed in the United States.
By Order of the Board of Directors,
/s/ William H. Willett
_____________________________________
William H. Willett,
Chairman and Chief Executive Officer
April 30, 1999
PROGRAMMER'S PARADISE, INC.
1157 SHREWSBURY AVENUE
SHREWSBURY, NEW JERSEY 07702
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Programmer's Paradise, Inc. (the "Company") of proxies
to be voted at the Annual Meeting of Stockholders to be held at the Molly
Pitcher Hotel, Red Bank, New Jersey, on June 17, 1999 at 9:00 a.m., local time,
and at any adjournment or adjournments thereof, for the purposes set forth in
the accompanying Notice of Annual Meeting of Stockholders. Any stockholder
giving such a proxy may revoke it at any time before it is exercised by written
notice to the Secretary of the Company at the above-stated addressor by giving a
later dated proxy. Attendance at the Meeting will not have the effect of
revoking the proxy unless such written notice is given, or unless the
stockholder votes by ballot at the Meeting.
The approximate date on which this Proxy Statement and the accompanying
form of proxy will first be sent or given to the Company's stockholders is April
27, 1999.
VOTING SECURITIES
Only holders of shares of Common Stock, $.01 par value per share (the
"Common Stock"), of record at the close of business on April 27, 1999 are
entitled to vote at the Meeting. On the record date, the Company had issued and
outstanding 5,148,186 shares of Common Stock. Each outstanding share of Common
Stock is entitled to one vote upon all matters to be acted upon at the Meeting.
A majority in interest of the outstanding Common Stock represented at the
Meeting in person or by proxy shall constitute a quorum. The affirmative vote of
a plurality of the shares present in person or represented by proxy at the
Meeting and entitled to vote is necessary to elect the nominees for election as
directors. The affirmative vote of a majority of shares present in person or
represented by proxy at the Meeting and entitled to vote is necessary to ratify
the selection of Ernst & Young LLP as the Company's independent auditors.
Abstentions and broker non-votes are counted for purposes of determining the
presence or absence of a quorum for the transaction of business. If a
stockholder, present in person or by proxy, abstains on any matter, the
stockholder's Common Stock will not be voted on such matter. Thus, an abstention
for voting on any matter has the same legal effect as a vote "against" the
matter even though the stockholder may interpret such action differently. Broker
non-votes are not counted for any purpose in determining whether a matter has
been approved.
If the enclosed proxy is properly executed and returned, the Common Stock
represented thereby will be voted in accordance with the instructions thereon.
If no instructions are indicated, the Common Stock represented thereby will be
voted (i) FOR the election of the nominees set forth under the caption "Election
of Directors" and (ii) FOR ratification of Ernst & Young LLP as the independent
auditors of the Company for fiscal 1999.
If you are a participant in the Company's 401 (k) Savings Plan, the proxy
represents the number of shares in your plan account as well as other shares,
registered in your name. For those shares in your plan account, the proxy will
serve as a voting instruction for the trustee of the plan. If voting
instructions are not received by the trustee for shares in your plan account,
the trustee will not be able to vote those shares on your behalf.
Your vote is important. Accordingly, you are urged to sign and return the
accompanying proxy card whether or not you plan to attend the Meeting. If you do
attend, you may vote by ballot at the Meeting, thereby canceling any proxy
previously given.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to the Company
with respect to beneficial ownership of the Company's Common Stock as of March
31, 1999, based on information provided to the Company, by (i) each of the
Company's directors, (ii) the Named Executive Officers and (iii) all executive
officers and directors of the Company as a group.
BENEFICIAL OWNERSHIP (1)
-------------------------------
BENEFICIAL OWNER NUMBER PERCENT
------------------ --------- ---------
Edwin Morgens (2) 168,671 3.3%
Allan Weingarten (3) 8,500 *
F. Duffield Meyercord (4) 27,525 *
William Willett (5) 101,770 1.9%
Peter Lorenz (6) 54,000 1.0%
John Broderick (7) 57,400 1.1%
Jeffrey Largiader (8) 58,575 1.1%
Frans van der Helm (7) 20,000 *
All Directors and Officers as a Group (9) 556,566 10.37%
* Less than 1 percent.
(1) To the Company's knowledge, except as set forth in the footnotes to this
table and subject to applicable community property laws, each person named
in the table has "beneficial ownership" with respect to the shares set
forth opposite such person's name. The information as to beneficial
ownership is based on statements furnished to the Company by the beneficial
owners. For purposes of computing the percentage of outstanding shares held
by each person named above, pursuant to the rules of the Securities and
Exchange Commission, any security that such person has the right to acquire
within 60 days of the date of calculation is deemed to be outstanding, but
is not deemed to be outstanding for purposes of computing the percentage
ownership of any other person.
(2) Includes options to purchase 15,375 shares of Common Stock. Also includes
36,439 shares of Common Stock held by a trust for the benefit of Mr.
Morgens' daughter, with respect to which Mr. Morgens disclaims beneficial
ownership.
(3) Includes options to purchase 7,500 shares of Common Stock
(4) Includes options to purchase 16,275 shares of Common Stock.
(5) Includes options to purchase 91,770 shares of Common Stock.
(6) Includes options to purchase 17,000 shares of Common Stock.
(7) Represents options to purchase shares of Common Stock
(8) Includes options to purchase 56,075 shares of Common Stock.
(9) See footnotes 1 through 8 above.
2
The following stockholders are known by the Company to own beneficially
more than 5% of the Company's Common Stock as of March 31, 1999:
Beneficial Owner Beneficial Ownership (1)
----------------- --------------------------
Number Percent
-------- ---------
ROI Capital Management, Inc.
17 E. Sir Francis Drake Blvd.
Suite 225
Larkspur, CA 94939 639,000 12.4%
Matador Capital Management Corp.
200 1st Avenue North
Suite 203
St. Petersburg, FL 33701 487,500 9.5%
The TCW Group, Inc.
865 South Figueroa Street
Los Angeles, CA 90017 294,200 5.7%
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(1) To the Company's knowledge, except as set forth in the footnotes to this
table and subject to applicable community property laws, each person named
in the table has "beneficial ownership" with respect to the shares set
forth opposite such person's name. The information as to beneficial
ownership is based on statements furnished to the Company by the beneficial
owners.
PROPOSAL 1
ELECTION OF DIRECTORS
At the Meeting, four Directors will be elected by the stockholders to serve
until the next annual meeting or until their successors are elected and
qualified. The accompanying proxy will be voted for the election as Directors of
the nominees listed below, all of whom are currently Directors, unless the proxy
contains contrary instructions. Management has no reason to believe that any of
the nominees will not be a candidate or will be unable to serve as a Director.
However, in the event that any of the nominees should become unable or unwilling
to serve as a Director, the proxy will be voted for the election of such person
or persons as shall be designated by the Directors.
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Set forth below is certain information with respect to each nominee:
Name Age Position(s)
------ ----- -------------
William Willett 62 President, Chief Executive
Officer and Chairman of
the Board
F. Duffield Meyercord(1)(2) 52 Director
Edwin H. Morgens(2) 57 Director
Allan Weingarten(1)(2) 61 Director
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(1) Member of Audit Committee
(2) Member of Compensation Committee
WILLIAM WILLETT has served as a director of the Company since December
1996. In July 1998, Mr. Willett was appointed to the position of Chairman,
President and Chief Executive Officer. Prior to joining the Company and since
1994, Mr. Willett was the President and Chief Operating Officer of Colorado
Prime Foods, located in New York. Mr. Willett also serves on the board of
directors of Concord Financial Services, Inc. Mr. Willett has a B.A. degree in
Marketing from the University of Bridgeport.
F. DUFFIELD MEYERCORD has served as a director of the Company since 1991.
Mr. Meyercord is a Managing Partner and a Director of Carl Marks Consulting
Group, LLC in New York. He is also the Managing Director and founder of
Meyercord Advisors, Inc. and a partner and founder of Venturtech Management
Inc., an affiliate of the Venturtech Group, both of which are management
consulting firms. Mr. Meyercord currently serves as a director of the Peapack
Gladstone Bank. Mr. Meyercord has a B.A. degree in accounting and economics from
Birmingham-Southern College.
EDWIN H. MORGENS was a founder of the Company and has served as a director
of the Company since 1982. Mr. Morgens is and has been the Chairman and
co-founder of Morgens, Waterfall, Vintiadis & Co. Inc., an investment firm in
New York, New York since 1968. Mr. Morgens currently serves as a director of two
other public companies: TransMontaigne Oil Company and Intrenet, Inc. Mr.
Morgens has a B.A. degree in English from Cornell University and an M.B.A.
degree from The Harvard Graduate School of Business Administration.
ALLAN D. WEINGARTEN has served as a director of the Company since April
1997. Mr. Weingarten is a former partner of Ernst & Young LLP, having served as
the engagement audit partner to the Company until his retirement in 1995. Mr.
Weingarten currently is the Executive Vice President and Chief Financial Officer
of VoCall Communications Corp. Mr. Weingarten holds a B.A. degree in Business
Administration from Pace University.
All directors hold office until the next annual meeting of stockholders and
until their successor are duly elected and qualified. Officers are elected to
serve, subject to the discretion of the Board of Directors, until their
successors are appointed. There are no family relationships among any of the
directors or executive officers of the Company.
The Board of Directors held ten meetings during the last fiscal year. None
of the directors attended fewer than 75% of the number of meetings of the Board
of Directors or any committee of which he is a member, held during the period in
which he was a director or a committee member, as applicable.
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The Compensation Committee, presently consisting of Messrs. Meyercord,
Morgens and Weingarten reviews and recommends to the Board of Directors the
compensation and benefits of all officers of the Company, reviews general policy
matters relating to compensation and benefits of employees of the Company, and
administers the issuance of stock options to the Company's employees, directors
and consultants. The Compensation Committee held two meetings during the last
fiscal year. The Audit Committee, consisting of Messrs. Meyercord and Weingarten
meets with management and the Company's independent auditors to determine the
adequacy of internal controls and other financial reporting matters. The Audit
Committee held one meeting during the last fiscal year. There is no nominating
committee of the Board of Directors.
The directors of the Company receive a fee of $1,000 per quarter and $500
per meeting for their services and are reimbursed for reasonable expenses
incurred in connection with attendance at Board and committee meetings. In April
1995, the Company adopted the 1995 Non-Employee Director Plan pursuant to which
the Company's non-employee directors receive automatic grants of options to
purchase shares of Common Stock, and Messrs. Morgens, and Meyercord were each
granted options to purchase 18,750 shares of Common Stock, which vest in an
installment of 20% of the total option grant upon the expiration of one year
from the date of the option grant, and thereafter vests in equal quarterly
installments of 5%, and have an exercise price of $4.00 per share. Messrs.
Willett and Weingarten also received similar grants upon their election to the
board at the appropriate fair market value of the stock on the date of grant See
"Stock Option Plans." During 1998 each director was awarded an additional stock
option grant for 15,000 shares under the 1995 Employee Stock Option Plan with an
exercise price of $6.375. These options vest over a two-year period with two
thirds vesting on July 23, 1999 and the balance one year thereafter. This
particular option grant also includes acceleration of vesting under change of
control provisions.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. Section 16(a) under the
Securities Exchange Act of 1934 (the "Exchange Act"), requires the Company's
officers and directors and holders of more than ten percent of the Company's
outstanding Common Stock to file reports of ownership and changes in ownership
with the Securities and Exchange Commission and to furnish the Company with
copies of these reports. Based solely upon a review of such forms, or on written
representations from certain reporting persons that no reports were required for
such persons, the Company believed that during 1998 all required events of its
officers, directors and 10% stockholders required to be so reported, have been
filed.
EXECUTIVE COMPENSATION
The following table sets forth, for the last three completed fiscal years,
the annual and long-term compensation for services in all capacities of the
Company's Chief Executive Officer and the six other most highly compensated
executive officers of the Company whose total salary and bonus exceeded $100,000
(the "Named Executive Officers").
5
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- -------------
SECURITIES
FISCAL UNDERLYING ALL OTHER
NAME AND POSITION YEAR ENDED SALARY BONUS OPTIONS(#) COMPENSATION (1)
----------------- ---------- ------ ----- ---------- ----------------
William H. Willett, President and 1998 $105,865 0 200,000 (2) $2,711
Chief Executive Officer 1997 __ __ __ __
1996 __ __ __ __
Roger Paradis, Former President and 1998 $236,296 0 0 $115,456 (9)
Chief Executive Officer 1997 $210,000 $50,000 50,000 (5) $6,545
1996 187,750 56,664 24,800 (7) 6,251
Peter Lorenz, Former Executive Vice 1998 $180,000 0 30,000 (3)(10) __
President, European Operations 1997 161,000 206,721 20,000 (5) __
1996 165,476 51,515 -- --
John P. Broderick, Senior Vice 1998 155,000 0 30,000 (4) $4,805
President and Chief Financial 1997 137,150 20,000 11,000 (5) 4,487
Officer 1996 127,500 35,252 27,500 (7)(8) 4,093
Jeffrey Largiader, Vice President 1998 119,800 0 15,000 (4) 3,929
Marketing 1997 118,000 0 14,000 (5) 3,888
1996 111,000 30,642 13,300 (7) 3,647
Frans van der Helm, Vice President 1998 114,971 45,988 0 0
European Operations 1997 26,216 5,243 20,000 (6)(11) 0
1996 __ __ __ __
(1) Represents (i) matching contributions paid by the Company to such
executive's account under the Company's 401(k) Plan and (ii) premiums paid
by the company in respect of term life insurance for the benefit of such
executive.
(2) Mr.Willett was hired by the Company in July 1998. Represents the portion of
his salary of $225,000 paid on 1998 since such date. Represents options to
purchase Common Stock with an exercise price of $6.375 per share, 100,000
options vest equally over a twelve-month period and 100,000 vest over the
six month period following such.
(3) Represents options to purchase Common Stock with an exercise price of
$6.875 per share, one half of which vest five months from the date of grant
and the remainder vest one year from the date of grant.
(4) Represents options to purchase Common Stock with an exercise price of
$6.375 per share, vesting in equal annual installments over a five-year
period.
(5) Represents options to purchase Common Stock with an exercise price of
$6.875 per share, vesting in equal annual installments over a five year
period and includes 291 options for Mr. Paradis to purchase Common Stock
with an exercise price of $6.875 per share which are fully vested.
(6) Represents options to purchase Common Stock with an exercise price of
$12.935 per share, which are fully vested.
(7) Represents non-qualified Options to purchase Common Stock with an exercise
price of $5.875 per share which are fully vested.
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(8) Includes 11,000 Options to purchase Common Stock with an exercise price of
$5.625 per share, vesting in equal annual installments over a three-year
period.
(9) Includes a payment to Mr. Paradis under a consulting contract.
(10) Mr. Lorenz resigned from the Company on February 26, 1999. These options
are forfeited.
(11) Mr. van der Helm was hired by the Company in September 1997. Represents a
portion of his annual salary of $104,866 paid since such date.
EMPLOYEE BENEFIT PLANS
The Company provides all employees, including executive officers, with
group medical, dental and disability insurance on a non-discriminatory basis.
Employees are required to contribute 20% of the premium costs of such policies.
The Company has a 401(k) savings and investment plan intended to qualify under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
for its domestic employees, which permits employee salary reductions for
tax-deferred savings purposes pursuant to Section 401(k) of the Code. The
Company matches 50% of domestic employee contributions up to the first 6% of
compensation. The Company's total contributions for 1998 were approximately
$79,000.
The Company maintains a performance bonus plan for its senior executives
which provides for a bonus of up to 25% of the executive's base salary in the
event certain performance targets, based upon revenue and operating
profitability, are achieved and also provides for additional incentive bonuses
based upon pre-established metrics. (the "Performance Bonus Plan"). The
Performance Bonus Plan also provides for an increase in the available bonus pool
for performance in excess of a specified net income after tax performance target
(the "over target bonus"). Subject to approval by its Board of Directors, the
Company anticipates that a similar type bonus plan will continue in effect for
the 1999 fiscal and subsequent years and that bonuses under this plan in the
1999 fiscal year and thereafter will be based on the Company's meeting or
exceeding profitability targets established by the Compensation Committee.
STOCK OPTION PLANS
1986 STOCK OPTION PLAN. The Company's 1986 Stock Option Plan (the "1986
Option Plan") expired in accordance with its terms in March 1996. Pursuant to
the 1986 Stock Option Plan "incentive stock options" ("ISO" or "ISOs") to
purchase shares of Common Stock were granted to officers and other key employees
(some of whom are also directors) of the Company. Additionally, the Directors of
the Company were granted non-qualified options pursuant to the 1986 Option Plan.
A total of 567,336 shares of Common Stock are subject to outstanding options and
have been reserved for issuance under the 1986 Option Plan, with exercise prices
ranging from $0.24 to $6.00 per share. Due to its expiration and termination, no
additional options may be granted under the 1986 Stock Option Plan.
1995 STOCK PLAN. The purpose of the Company's 1995 Stock Plan (the "1995
Stock Plan") is to provide incentives to officers, directors, employees and
consultants of the Company. Under the 1995 Stock Plan, officers and employees of
the Company and any present or future subsidiary are provided with opportunities
to purchase shares of Common Stock of the Company pursuant to options which may
qualify as ISOs, or which do not qualify as ISOs ("Non-Qualified Options") and,
in addition, such persons may be granted awards of stock in the Company
("Awards") and opportunities to make direct purchases of stock in the Company
("Purchases"). Both ISOs and Non-Qualified Options are referred to hereafter
individually as an "Option" and collectively as "Options." Options, Awards and
Purchases are referred to hereafter collectively as "Stock Rights." The 1995
Stock Plan contains terms and conditions relating to ISOs necessary to comply
with the provisions of Section 422 of the Code.
The 1995 Stock Plan currently authorizes the grant of Stock Rights to
acquire up to 1,137,500 shares
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of Common Stock. A total of 650,990 shares of Common Stock are presently subject
to outstanding Options under the 1995 Stock Plan at exercise prices ranging from
$4.00 to $12.94 per share. Unless sooner terminated, the 1995 Stock Plan will
terminate on April 21, 2005. The 1995 Stock Plan requires that each Option shall
expire on the date specified by the Compensation Committee, but not more than
ten years from its date of grant in the case of ISOs and ten years and one day
in the case of Non-Qualified Options. However, in the case of any ISO granted to
an employee or officer owning more than 10% of the total combined voting power
of all classes of stock of the Company or any present or future subsidiary, the
ISO expires no more than five years from its date of grant.
1995 NON-EMPLOYEE DIRECTOR PLAN. The purpose of the Company's 1995
Non-Employee Director Plan (the "1995 Director Plan") is to promote the
interests of the Company by providing an inducement to obtain and retain the
services of qualified persons who are not employees or officers of the Company
to serve as members of its Board of Directors ("Outside Directors"). The 1995
Director Plan authorizes the grant of options for up to 187,500 shares of Common
Stock and provides for automatic grants of nonqualified stock options to Outside
Directors. Under the 1995 Option Plan, each current Outside Director has
received, and each Outside Director who first joins the Board after April 1995
will automatically receive at that time, options to purchase 18,750 shares of
Common Stock. The 88,125 options granted to the current Outside Directors have
exercise prices ranging from $4.00 to $7.50. All options granted to Outside
Directors have an exercise price equal to 100% of the fair market value on the
date of grant. There are currently 75,000 shares of Common Stock available for
grant under the 1995 Director Plan. The 1995 Director Plan requires that options
granted thereunder will expire on the date which is ten years from the date of
grant. Each option granted under the 1995 Director Plan becomes exercisable over
a five-year period, and vests in an installment of 20% of the total option grant
upon the expiration of one year from the date of the option grant, and
thereafter vests in equal quarterly installments of 5%.
OPTIONS. The following tables set forth certain information with respect to
stock options granted to and exercised by the Named Executive Officers during
the fiscal year ended December 31, 1998.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-------------------------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATE OF
SECURITIES OPTIONS EXERCISE STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO PRICE OPTION TERM (4)
OPTIONS EMPLOYEES IN PER SHARE EXPIRATION -------------------------------
NAME GRANTED (#) FISCAL YEAR (1) ($/SH) (2) DATE (3) 5%($) 10%($)
---- ----------- --------------- ---------- -------- ----- ------
William Willett 200,000 (6) 57.63% $6.375 07/23/08 $801,720 $2,031,880
Peter Lorenz (8) 30,000 (7) 8.64% $6.875 07/24/08 $129,750 $328,650
John Broderick 30,000 (5) 8.64% $6.375 07/23/08 $120,258 $304,782
Jeffrey Largiader 15,000 (5) 4.32% $6.375 03/18/07 $ 60,129 $152,391
(1) Based on a total of 347,000 options granted to employees and directors of
the Company in fiscal 1998, including the Named Executive Officers.
(2) The exercise price per share of options granted represented the fair market
value of the underlying shares of Common Stock on the date the options were
granted.
(3) The options granted have a term of ten years, subject to earlier
termination upon the occurrence of certain events related to termination of
employment.
(4) The potential realizable value is calculated based upon the term of the
option at its time of grant (ten years). It is calculated by
8
assuming that the stock price on the date of grant appreciates at the
indicated annual rate, compounded annually for the entire term of the
option, and that the option is exercised and sold on the last day of its
term for the appreciated stock price.
(5) Options to purchase Common Stock vest in equal annual installments over a
five year period.
(6) Options to purchase Common Stock vest over an eighteen month period with an
initial increment of 100,000 that vest monthly over twelve months and the
second increment that vests over the following six months. All options will
vest immediately upon a change in control.
(7) Options to purchase Common Stock vest over a three year period.
(8) Mr. Lorenz resigned on February 26, 1999. The options granted were
forfeited.
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTION VALUE TABLE
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE MONEY OPTIONS
ACQUIRED OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END (1)
ON VALUE -------------------------- --------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
William Willett . . . . . __ __ 49,166 169,584 298,851 $1,047,243
Roger Paradis . . . . . . 44,800 117,800 73,938 55,000 754,356 359,375
Peter Lorenz . . . . . . 60,000 515,988 73,000 52,000 817,925 221,375
John P. Broderick . . . . 2,500 12,812 55,126 46,374 426,283 297,467
Jeffrey Largiader . . . . 2,500 21,900 56,700 29,350 586,264 185,319
Frans van der Helm. . . . __ __ 20,000 0 __ __
(1) Calculated on the basis of the fair market value of the Common Stock of the
Company on December 31, 1998 of $12.625 per share as determined by the
closing price for the Company's Common Stock as reported on the NASDAQ
National Market.
EMPLOYMENT AGREEMENTS
Each of the Named Executive Officers has entered into an agreement that
includes a covenant not-to-compete and a confidentiality provision (a
"Confidentiality and Non-Compete Agreement"). The covenant not-to-compete
prohibits the executive for a period of one year after termination from engaging
in a competing business. Such covenant also prohibits the executive from
directly or indirectly soliciting the Company's customers or employees.
The Company entered into an employment agreement with William Willett in
July 1998, which provides for a base salary of $225,000 per year. The agreement
expires on January 15, 2000 and is subject to automatic renewal for a
twelve-month period unless either party provides ninety day advance notice. The
agreement includes the grant of certain stock options, an automobile allowance
and participation in the Company's benefit plans. The agreement also provides a
performance bonus tied to stock price. Mr. Willett has the right to terminate
his employment at any time on not less than 90 days prior written notice. The
Company has the right to terminate Mr. Willett's employment with or without
"cause" (as defined in the employment letter), without prior written notice. In
the event that Mr. Willett's employment is terminated without cause or by the
rendering of a non-renewal notification, he is entitled to receive severance
payments equal to six months salary, immediate vesting of all outstanding stock
awards and a pro-rata performance bonus based upon stock price up to the date of
separation. Additionally, in the event that a change of control of the Company
occurs (as described in the employment agreement), Mr. Willett's outstanding
stock awards
9
become immediately vested and he is entitled to the pro-rata performance bonus
based upon stock price at the date of such change in control.
The Company entered into an employment agreement with John P. Broderick in
June 1998, which provides for a base salary of $155,000 per year and includes
participation in the Company's benefit plans and participation in the executive
bonus program. Under the terms of the agreement, the Company has the right to
terminate Mr. Broderick's employment without cause upon 30 days notification. In
the event of termination "without cause", Mr. Broderick shall be entitled to
receive severance payments equal to twelve months salary as well as any earned
but unpaid bonus. Additionally, in the event that a change of control of the
Company occurs (as described in the employment agreement), Mr. Broderick shall
be entitled to a maximum of twelve months severance.
In December 1998, the Company entered into an employment agreement with
Peter Lorenz which provides for a base salary of $190,000 and includes an
automobile allowance, a housing allowance, participation in an executive bonus
plan as well as participation in the Company's benefit plans. The agreement is
for a thirteen month period and expires on December 31, 1999 and is subject to
automatic renewal unless terminated by either party upon written notice 30 days
prior to expiration of the original term. The Company has the right to terminate
the contract with or without "cause" (as defined n the employment agreement),
without prior written notice. In the event that Mr. Lorenz' employment is
terminated without or cause or by non-renewal, or, if by reason of resignation
or retirement, Mr. Lorenz is entitled to severance payments equal to nine months
salary. In February 1999, Mr. Lorenz tendered his resignation with the Company.
Also in December 1998, the Company entered into an employment agreement
with Frans van der Helm who assumed the duties and responsibilities of Chief
Operating Office for European Operations. Under the terms of the contract, Mr.
van der Helm will receive a base salary of $160,000, participation in an
executive bonus plan as well as participation in the Company's benefit plans.
The agreement expires on December 14, 2000 and may be terminated by either party
on four months notice. Should the agreement be terminated by the Company, Mr.
Van der Helm will be entitled to severance payments equal to six months salary.
CERTAIN TRANSACTIONS
The Company has adopted a policy whereby all transactions between the
Company and its principal officer, directors and affiliates must be on terms no
less favorable to the Company than could be obtained from unrelated third
parties and will be approved by a majority of the disinterested members of the
Company's board of directors.
During 1998, options with respect to shares were granted to employees of
the Company pursuant to the 1995 Stock Plan in accordance with Rule 701
promulgated under the Exchange Act.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Edwin H. Morgens, Duffield Meyercord and Allan Weingarten served as members
of the Compensation Committee during the last completed fiscal year. Neither
Messrs. Meyercord, Morgens and Weingarten (i) was, during the last completed
fiscal year, an officer or employee of the Company or any of its subsidiaries,
(ii) was formerly an officer of the registrant or any of its subsidiaries, or
(iii) had any relationship requiring disclosure by the Company under any
paragraph of Item 404 of Regulation S-K which has not been already disclosed.
10
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
In evaluating the reasonableness of compensation paid to the Company's
executive officers, the Compensation Committee takes into account, among other
factors, how compensation compares to compensation paid by competing companies,
individual contributions and the Company's performance. Base salary is
determined based upon individual performance, competitive compensation trends
and a review of salaries for like jobs at similar companies. The Company also
maintains the Performance Bonus Plan for its senior executive which provides for
a bonus of up to 25% of the executive's base salary in the event certain
performance targets, based upon revenue and operating profitability, are
achieved. The Performance Bonus Plan also provides for an increase in the
available bonus pool for performance in excess of a specified net income after
tax performance target. For a further discussion of the Performance Bonus Plan,
and amounts paid in respect of the 1998 fiscal year, see the discussion under
"Employee Benefit Plans."
It is the Company's policy that the compensation of executive officers also
be based, in part, on the grant of stock options as an incentive to enhance the
Company's performance. Stock options are granted based upon a review of such
executive's responsibilities and relative position in the Company, such
executive's overall job performance and such executive's existing stock option
position. In 1998, in accordance with the above criteria, the executive officers
received stock options that are exercisable ratably over a five-year period.
The compensation of the Company's Chief Executive Officer in 1998 consisted
of base salary, performance-based cash bonuses and stock option grants. Of the
total cash bonus earned, 50% was based upon reaching preset consolidated net
income targets (i.e. the Performance Bonus Plan). Stock option grants to the
Chief Executive Officer were made in line with those granted to other executive
officers primarily considering responsibilities and relative position to other
members of the senior management team. Base salary level was established
considering base salaries of peer Chief Executive Officers with similar
executive responsibilities.
The Compensation Committee
---------------------------
Duffield Meyercord
Edwin H. Morgens
Allan Weingarten
11
STOCK PRICE PERFORMANCE GRAPH
The following graph and table illustrates a comparison of cumulative
shareholder return among the Company, the Standard & Poor's Midcap 400 Index and
an index of peer companies selected by the Company (the "Custom Peer Group
Index"). The members of the peer group are as follows: Creative Computers, Inc.,
Egghead Inc., Merisel, Inc., Microwarehouse, Inc. and Software Spectrum, Inc.
For the purpose of calculating the peer group average, the returns of each
company have been weighted according to its market capitalization. The
measurements assume that on July 18,1995 (the effective date of the Company's
Registration Statement on Form S-1), $100 was invested, alternatively, in the
Company's Common Stock, the Standard & Poor's Midcap 400 Index and the Custom
Peer Group Index.
[GRAPHIC]
Base
Period Return Return Return Return Return Return
7/18/95 12/31/95 3/31/96 6/30/96 9/30/96 12/31/96 3/31/97
----------------------------------------------------------------------------------------
Programmer's Paradise, Inc. $ 100.00 $ 67.50 $ 56.25 $ 61.25 $ 65.00 $ 72.50 $ 68.75
S&P MIDCAP 400 INDEX $ 100.00 $ 105.89 $ 112.41 $ 115.65 $119.01 $ 126.22 $ 124.34
PEER GROUP $ 100.00 $ 78.52 $ 71.94 $ 97.93 $105.86 $ 61.89 $ 59.58
Return Return Return Return Return Return Return
6/30/97 9/30/97 12/31/97 3/31/98 6/30/98 9/30/98 12/31/98
--------------------------------------------------------------------------------------
Programmer's Paradise, Inc. $ 95.00 $132.50 $ 93.75 $ 95.00 $ 82.50 $ 56.25 $ 126.25
S&P MIDCAP 400 INDEX $142.62 $165.56 $ 166.94 $ 185.32 $181.35 $155.12 $ 198.83
PEER GROUP $ 70.85 $104.33 $ 73.30 $ 79.50 $ 72.22 $ 66.67 $ 144.59
PROPOSAL 2
12
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company has designated Ernst & Young LLP
as the Company's independent auditors for the current fiscal year and recommends
ratification of their appointment. Representatives of Ernst & Young LLP are
expected to be present at the annual meeting of stockholders and will be
available to respond to appropriate questions and will be given the opportunity
to make a statement if they so desire.
GENERAL
The Management of the Company does not know of any matters other than
those stated in this Proxy Statement which are to be presented for action at the
Meeting. If any other matters should properly come before the Meeting, proxies
will be voted on these other matters in accordance with the judgment of the
persons voting the proxies. Discretionary authority to vote on such matters is
conferred by such proxies upon the persons voting them.
The Company will bear the cost of preparing, printing, assembling and
mailing all proxy material which may be sent to stockholders in connection with
this solicitation. Arrangements will also be made with brokerage houses, other
custodians, nominees and fiduciaries, to forward soliciting material to the
beneficial owners of the Company's Common Stock held by such persons. The
Company will reimburse such persons for reasonable out-of-pocket expenses
incurred by them. In addition to the solicitation of proxies by use of the
mails, officers and regular employees of the Company may solicit proxies without
additional compensation, by telephone, telecopier or telegraph. The Company does
not expect to pay any compensation for the solicitation of proxies.
The Annual Report of the Company on Form 10-K for the fiscal year
ended December 31, 1998 (the "Annual Report") has been forwarded to all
stockholders. The Annual Report, which includes audited financial statements,
does not form any part of the material for the solicitation of proxies.
The Company will furnish without charge to each person whose proxy is
being solicited, upon written request of any such person, a copy of the Annual
Report as filed with the Securities and Exchange Commission, including the
financial statements and schedules. Requests for copies of such report should be
directed to William Willett, President, Programmer's Paradise, Inc, 1157
Shrewsbury Avenue, Shrewsbury New Jersey 07702.
STOCKHOLDER PROPOSALS
The Annual Meeting of Stockholders for the fiscal year ending December
31, 1999 is expected to be held on or about June 15, 2000, with the mailing of
proxy materials for such meeting to be made on or about April 30, 2000. All
proposals of stockholders intended to be presented at the Company's next Annual
Meeting of Stockholders must be received at the Company's executive office no
later than November 30, 1999 in order to be consulted for inclusion in the proxy
statement and form of proxy related to that meeting.
By Order of the Board of Directors,
/s/ William Willett
------------------------------------
William Willett, Chairman
and Chief Executive Officer
13
April 30, 1999
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PROGRAMMER'S PARADISE, INC.
1157 SHREWSBURY AVENUE
SHREWSBURY, NEW JERSEY 07702
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints WILLIAM WILLETT and JOHN P. BRODERICK
with the power to appoint their substitutes, and hereby authorizes them to
represent and to vote on behalf of the undersigned all the shares of common
stock par value $.01 per share (the "Common Stock"), of Programmer's Paradise,
Inc., held of record by the undersigned on April 27, 1999, at the Annual Meeting
of Stockholders to be held on June 17, 1999 at 9:00 A.M. local time at the Molly
Pitcher Hotel, Red Bank, New Jersey, or any adjournment or adjournments thereof,
hereby revoking all proxies heretofore given with respect to such shares, upon
the following proposals more fully described in the notice of and proxy
statement for the Meeting (receipt whereof is hereby acknowledged).
1. ELECTION OF DIRECTORS
FOR all nominees listed below |_| WITHHOLD AUTHORITY to vote for nominees
listed below |_| (except as marked to the contrary below)
(INSTRUCTION: To withhold authority to vote for any individual nominee write
that nominee's name on the space provided below)
- --------------------------------------------------------------------------------
WILLIAM WILLETT , F. DUFFIELD MEYERCORD, EDWIN H. MORGENS and ALLAN WEINGARTEN
2. PROPOSAL TO RATIFY AND APPROVE the appointment of Ernst & Young LLP as the
Company's independent accountants for the fiscal year ending December 31,
1999.
|_| For |_| Against |_| Abstain
3. In their discretion the Proxies are authorized to vote upon such other
business as may properly be brought before the Meeting.
(continued, and to be executed, on the reverse side)
- --------------------------------------------------------------------------------
THIS PROXY WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2 and 3.
Please sign exactly as the name appears below. When shares are held by
joint tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a Partnership, please sign in partnership name by authorized person.
I will |_| will not |_| attend this Meeting.
Dated:_____________________________, 1999
__________________________________________
SIGNATURE
__________________________________________
SIGNATURE IF HELD JOINTLY.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
- --------------------------------------------------------------------------------