As filed with the Securities and Exchange Commission on April 30, 2001.
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
[x] Definitive Proxy Statement the Commission Only
[ ] Definitive Additional Materials (as permitted by
[ ] Soliciting Material Pursuant to Rule Rule 14a-6(e)(2))
14a-11(c) or Rule 14a-12
PROGRAMMER'S PARADISE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(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)(1) 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 identity 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:
- --------------------------------------------------------------------------------
PROGRAMMER'S PARADISE, INC.
1157 Shrewsbury Avenue
Shrewsbury, New Jersey 07702
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 12, 2001
To our Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders ("the
Meeting") of Programmer's Paradise, Inc. (the "Company") will be held at the
Molly Pitcher Inn, Red Bank, New Jersey, on June 12, 2001 at 9:00 AM, local
time, for the following purposes:
1. To elect a Board of six Directors to serve until the next annual
meeting of stockholders or until their successors are elected and
qualified;
2. To consider and take action upon such other matters as may properly
come before the Meeting and any adjournment or postponements thereof.
The close of business on April 23, 2001 has been fixed as the record
date for the determination of stockholders entitled to notice of and to vote at
the Meeting and any adjournments or postponements thereof. Commencing 10 days
prior to the Meeting, a complete list of stockholders will be open to the
examination of any stockholder for any purpose germane to the Meeting, during
ordinary business hours, at the Company's headquarters, 1157 Shrewsbury Avenue,
Shrewsbury, New Jersey. 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 fill in, sign,
date and return the enclosed proxy promptly in the accompanying envelope, which
requires no postage if mailed in the United States.
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2000 is enclosed herewith.
By Order of the Board of Directors,
William H. Willett,
Chairman and Chief Executive Officer
April 30, 2001
2
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 ("the Meeting") to be
held at the Molly Pitcher Inn, Red Bank, New Jersey, on June 12, 2001 at 9:00
AM, local time, and at any adjournments or postponements 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
address or 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
30, 2001.
VOTING SECURITIES
Only holders of shares of Common Stock, $.01 par value per share
("Common Stock"), of record at the close of business on April 23, 2001 are
entitled to vote at the Meeting. On the record date, the Company had issued and
outstanding 5,210,125 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. Accordingly, shares not voted in the election of directors (including
shares covered by a proxy as to which authority is withheld to vote for all
nominees) and shares not voted for any particular nominee (including shares
covered by a proxy as to which authority is withheld to vote for only one or
less than all of the identified nominees) will not prevent the election of any
of the nominees for director. For all other matters, if any, submitted to
stockholders at the Meeting, if a quorum is present, the affirmative vote of a
majority of the shares represented at the Meeting and entitled to vote is
required for approval. As a result, abstention votes will have the effect of a
vote against such matters. Abstentions and broker non-votes are counted for
purposes of determining the presence or absence of a quorum for the transaction
of business. 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 FOR the election of the nominees set forth under the caption
"Election of Directors" and in discretion of the persons named in the proxies as
proxy appointees as to any other matter that may properly come before the
Meeting.
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.
3
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of April 15, 2001 by (i) each person
who, to the knowledge of the Company, beneficially owns more than 5% of the
outstanding Common Stock of the Company, (ii) the directors and certain officers
of the Company and (iii) all directors and officers of the Company as a group.
Except as indicated, each person listed below has sole voting and investment
power with respect to the shares set forth opposite such person's name.
Shares Beneficially Owned(1)
-------------------------
Name Number Percentage
------ ----------
Edwin Morgens (2)(3) 187,421 3.6%
Allan D. Weingarten (2)(4) 32,000 *
F. Duffield Meyercord (2)(5) 46,275 *
William H. Willett (2)(6) 230,200 4.2
Mark T. Boyer (2)(7) 925,300 17.8
James W. Sight (2)(8) 435,200 8.4
Jeffrey Largiader (2)(9) 71,750 1.3
All directors and executive officers as a group 1,941,146 34.6
(9 persons) (2)(10)
ROI Capital Management, Inc. (11) 894,300 17.2
Matador Capital Management Corp. (12) 456,675 8.8
Dimensional Fund Advisors, Inc. (13) 364,100 7.0
- ------------------------
* Less than 1%.
(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. Unless otherwise
noted below, the information as to beneficial ownership is based upon
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) The address for each director and executive officer of the Company is
c/o Programmer's Paradise, 1157 Shrewsbury Avenue, Shrewsbury, New
Jersey 07702.
(3) Includes options to purchase 34,125 shares of Common Stock that may be
acquired upon the exercise of options within 60 days April 15, 2001.
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.
(4) Includes 30,000 shares of Common Stock that may be acquired upon the
exercise of options within 60 days of April 15, 2001.
4
(5) Includes 35,025 shares of Common Stock that may be acquired upon the
exercise of options within 60 days of April 15, 2001.
(6) Includes 215,937 shares of Common Stock that may be acquired upon the
exercise of options within 60 days of April 15, 2001.
(7) Beneficial ownership information is based upon information provided by
ROI Capital Management, Inc. and Mr. Boyer. By virtue of Mr. Boyer's
ownership interest in ROI Capital Management, Mr. Boyer may be deemed
to beneficially own the 894,300 shares beneficially owned by ROI
Capital Management. See footnote 11 below. Mr. Boyer beneficially owns
directly 31,000 shares.
(8) Beneficial ownership information is based upon information set forth in
Mr. Sight's Schedule 13D/A, filed April 9, 2001.
(9) Includes 64,750 shares of Common Stock that may be acquired upon the
exercise of options within 60 days of April 15, 2001.
(10) Includes 392,837 shares of Common Stock that may be acquired upon the
exercise of options within 60 days of April 15, 2001.
(11) The address for ROI Capital Management, Inc. is 17 E. Sir Francis Drake
Blvd., Suite 225, Larkspur, CA 94939. Beneficial ownership information
is based upon information provided to the Company by ROI Capital
Management, Inc.
(12) The address for Matador Capital Management Corp. is 200 First Avenue
North, Suite 203, St. Petersburg, FL 33701. Beneficial ownership
information is based upon information set forth in Matador Capital
Management's Schedule 13G/A filed on January 25, 2001.
(13) The address for Dimensional Fund Advisors, Inc. is 1299 Ocean Avenue,
11th Floor, Santa Monica, CA 90401. Beneficial ownership information is
based upon information set forth in Dimensional Fund Advisors' Schedule
13G filed on February 2, 2001.
ELECTION OF DIRECTORS
---------------------
At the Meeting, six 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 of the Company,
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.
Set forth below is certain information, as of April 30, 2001, with
respect to each nominee:
Name Age Principal Occupation Director Since
- ---- --- -------------------- --------------
William H. Willett 64 Mr. Willett has served as a director of the December 1996
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.
5
Name Age Principal Occupation Director Since
- ---- --- -------------------- --------------
F. Duffield Meyercord 54 Mr. Meyercord has served as a director of December 1991
the Company since December 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.
Edwin H. Morgens 59 Mr. Morgens was a founder of the Company and May 1982
has served as a director of the Company
since May 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.
Allan Weingarten 63 Mr. Weingarten has served as a director of April 1997
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. Since January 2001, Mr. Weingarten
has been the Senior Vice President/Chief
Financial Officer of U.S. Industries, Inc.
Prior to this Mr. Weingarten was a business
consultant.
James W. Sight 44 Mr. Sight was appointed to the Board in April 2001
April 2001. Mr. Sight currently serves as a
director of two other public companies:
Westmoreland Coal and Mining Services Int.
and is a consultant for LSB Industries,
assisting the Chairman and CFO in the
reorganization of that diversified Company.
Prior to this Mr. Sight served as a director
to US Home Corp. until he retired from the
Board in 2000.
6
Mark T. Boyer 43 Mr. Boyer was appointed to the Board in April 2001
April 2001. Mr. Boyer is and has been the
President and a director of ROI Capital
Management in Larkspur, CA since 1992.
Prior to that Mr. Boyer was general partner
and portfolio manager with Volpe, Welty &
Company, in San Francisco, CA.
All directors hold office until the next annual meeting of stockholders
and until their successors are duly elected. Officers are elected to serve,
subject to the discretion of the Board of Directors. There are no family
relationships among any of the directors or executive officers of the Company.
The Board of Directors held nine meetings during the last fiscal year.
None of the directors who were in office in the year 2000 attended fewer than
75% of the number of meetings of the Board of Directors or any committee of
which he is a member, held in 2000 during the period in which he was a director
or a committee member, as applicable.
The Compensation Committee, presently consisting of Messrs. Meyercord,
Weingarten and Morgens, 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 one meeting during the last
fiscal year. The Audit Committee, consisting of Messrs. Meyercord, Weingarten
and Morgens, meets with management and the Company's independent auditors to
determine the adequacy of internal controls and other financial reporting
matters. All of the members of the Audit Committee are "independent" for
purposes of the National Association of Securities Dealers' listing standards.
The Audit Committee held four meetings 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 received 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 vest in equal quarterly
installments of 5%, and have an exercise price of $4.00 per share. Messrs.
Willett, Weingarten, Sight and Boyer 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 then serving
on the Board was awarded an additional stock option grant for 15,000 shares
under the 1995 Non-Employee Director Plan with an exercise price of $6.375.
These options vested over a two-year period with two thirds vesting on July 23,
1999 and the balance one year thereafter. This particular option grant also
included acceleration of vesting under change of control provisions.
7
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 believes
that during 2000 all required events of its officers, directors and 10%
stockholders required to be so reported, have been filed.
8
EXECUTIVE COMPENSATION
The following table sets forth, for the last three completed fiscal
years, a summary of the annual and long-term compensation for services in all
capacities of the Company's Chief Executive Officer and the three other most
highly compensated executive officers of the Company whose total salary and
bonus exceeded $100,000 and who were serving as such as of December 31, 2000
(the "Named Executive Officers").
Summary Compensation Table
Securities
Fiscal Underlying All Other
Name and Position Year ended Salary Bonus Options (#) Compensation (1)
- ----------------- ---------- ------ ----- ----------- ----------------
William H. Willett, President and 2000 $225,000 $100,000 0 $ 6,226
Chief Executive Officer 1999 225,000 0 0 5,976
1998 105,865(2) 0 200,000(3) 2,711
William H. Sheehy, Vice President 2000 $137,025(4) $66,000 40,000(5) $ 707
and Chief Financial Officer 1999 0 0 0 0
1998 0 0 0 0
Jeffrey Largiader, Vice President 2000 129,374 0 0 $4,578
Marketing 1999 139,948 0 0 3,929
1998 136,388 14,053 15,000(6) 3,011
Simon Nynens, Vice President 2000 140,000 49,000 0 0
1999 81,390 7,500 5,000(7) 650
1998 70,000 0 5,000(8) 6,000
1) Represents (i) matching contributions paid by the Company to such
executive's account under the Company's 401(k) Savings 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 $225,00 paid in 1998 since such date.
3) Represents options to purchase Common Stock with an exercise price of
$6.375 per share, which are fully vested granted in connection with
commencement of his employment.
4) Mr. Sheehy was hired by the Company in February 2000. Represents the
portion of his salary of $160,000 paid in 2000 since such date.
5) Represents options to purchase Common Stock with an exercise price of $5.81
per share, vesting in equal annual installments over a five-year period.
6) 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.
7) Represents options to purchase Common Stock with an exercise price of $9.75
per share, vesting in equal annual installments over a five-year period.
8) Represents options to purchase Common Stock with an exercise price of $8.63
per share, vesting in equal annual installments over a five-year period.
9
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 2000 were approximately
$93,000.
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 2001 and subsequent fiscal years and that bonuses under this plan in the
2001 fiscal year and thereafter will be based on the Company 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, 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 of Common Stock. A total of 521,891 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
10
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 125,625 options granted to Outside Directors have exercise
prices ranging from approximately $3.50 to $7.50. All options granted to Outside
Directors have an exercise price equal to 100% of the fair market value on the
date of grant. There are currently 16,875 shares of Common Stock available for
grant under the 1995 Director Plan. The 1995 Director Plan requires that options
granted thereunder will expire on the date which is ten years from the date of
grant. Each option granted under the 1995 Director Plan becomes exercisable over
a five-year period, and vests in an installment of 20% of the total option grant
upon the expiration of one year from the date of the option grant, and
thereafter vests in equal quarterly installments of 5%.
Options. The following tables set forth certain information with
respect to stock options granted to and exercised by the Named Executive
Officers during the fiscal year ended December 31, 2000.
Individual Grants
------------------------------------------------------------- Potential Realizable Value at
Number of % of Total Assumed Annual Rate of
Securities Options Exercise Stock Price Appreciation for
Underlying Granted to Price Option Term (4)
Options Employees in Per Share Expiration ----------------------------
Name Granted (#) Fiscal Year (1) ($/Sh) (2) Date (3) 5% ($) 10% ($)
---- ----------- --------------- ---------- -------- ------ -------
William Sheehy 40,000(5) 33.33% $5.813 2/22/2010 $146,231 $370,577
(1) Based on a total of 80,000 options granted to employees and directors of
the Company in fiscal 2000, including the Named Executive Officers.
(2) The exercise price per share of options granted represented the fair
market value of the underlying shares of Common Stock on the date the
options were granted.
(3) The options granted have a term of ten years, subject to earlier
termination upon the occurrence of certain events related to termination
of employment.
(4) The potential realizable value is calculated based upon the term of the
option at its time of grant (ten years). It is calculated by assuming that
the stock price on the date of grant appreciates at the indicated annual
rate, compounded annually for the entire term of the option, and that the
option is exercised and sold on the last day of its term for the
appreciated stock price.
(5) Options to purchase Common Stock vest in equal annual installments over a
five-year period.
11
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Value Table
Shares Number of Securities Value of Unexercised
Acquired Underlying Unexercised In-The Money Options
on Value Options at Fiscal Year-End at Fiscal Year-End (1)
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ------------ ----------- ------------- ----------- -------------
Jeffrey Largiader 2,500 9,557 63,950 14,600 61,239 0
William Sheehy 0 0 0 40,000 0 0
(1) Calculated on the basis of the fair market value of the Common Stock of
the Company on December 29, 2000 of $2.563 per share as determined by the
closing price for the Company's Common Stock as reported on the NASDAQ
National Market.
12
Employment Agreements
Each of the Named Executive Officers has entered into an agreement that
includes a covenant not-to-compete and a confidentiality provision. 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 Mr. Willett in
July 1998, which provides for a base salary of $225,000 per year. The agreement
expires on January 15, 2002 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 agreement), 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 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.
CERTAIN TRANSACTIONS
The Company has adopted a policy whereby all transactions between the
Company and its principal officers, 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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Edwin H. Morgens, F. Duffield Meyercord and Allan Weingarten served as
members of the Compensation Committee during the last completed fiscal year.
None of Messrs. Morgens, Meyercord 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.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The report of the Compensation Committee shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933, as
amended, or the Exchange Act, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
13
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 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. 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 2000 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 2000, 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 2000
consisted of a base salary. In addition, a special cash bonus (as described
below) was paid, however no stock options were granted to the Chief Executive
Officer. Base salary level was established considering base salaries of peer
Chief Executive Officers with similar executive responsibilities.
In connection with the successful completion of the Company's strategic
plan for the year 2000, the Compensation Committee awarded special cash bonuses
of $100,000, $50,000 and $49,000, respectively, to the Company's Chief Executive
Officer, Chief Financial Officer and Simon Nynens, a Vice President of the
Company and formerly the head of the Company's European operations.
The Compensation Committee
--------------------------
Edwin H. Morgens
F. Duffield Meyercord
Allan Weingarten
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., Computer Discount Warehouse 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 January 1, 1996, $100 was invested, alternatively,
in the Company's Common Stock, the Standard & Poor's Midcap 400 Index and the
Custom Peer Group Index.
14
[GRAPH OMITTED]
Base
Period Return Return Return Return Return Return
1/1/96 3/31/96 6/30/96 9/30/96 12/31/96 3/31/97 6/30/97
--------------------------------------------------------------------------------
Programmer's Paradise, Inc. $ 100.00 $ 56.25 $ 61.25 $ 65.00 $ 72.50 $ 68.75 $ 95.00
S&P MIDCAP 400 INDEX $ 100.00 $ 112.41 $ 115.65 $ 119.01 $ 126.22 $ 124.34 $ 142.62
PEER GROUP $ 100.00 $ 71.94 $ 97.93 $ 105.86 $ 61.89 $ 59.58 $ 70.85
Return Return Return Return Return Return Return
9/30/97 12/31/97 3/31/98 6/30/98 9/30/98 12/31/98 3/31/99
---------------------------------------------------------------------------------
Programmer's Paradise, Inc. $ 132.50 $ 93.75 $ 95.00 $ 82.50 $ 56.25 $ 126.25 $ 121.25
S&P MIDCAP 400 INDEX $ 165.56 $ 166.94 $ 185.32 $ 181.35 $ 155.12 $ 198.83 $ 186.14
PEER GROUP $ 104.33 $ 73.30 $ 79.50 $ 72.22 $ 66.67 $ 144.59 $ 92.03
Return Return Return Return Return Return Return
6/30/99 9/30/99 12/31/99 3/31/00 6/30/00 9/30/00 12/31/00
---------------------------------------------------------------------------------
Programmer's Paradise, Inc. $ 122.50 $ 66.88 $ 76.25 $ 86.10 $ 58.34 $ 46.3 $ 37.96
S&P MIDCAP 400 INDEX $ 212.49 $ 194.65 $ 228.10 $ 242.74 $ 234.74 $ 263.26 $ 253.12
PEER GROUP $ 85.57 $ 61.07 $ 78.52 $ 340.58 $ 456.56 $ 495.83 $ 198.80
15
INDEPENDENT PUBLIC ACCOUNTANTS
------------------------------
The Board of Directors has appointed Ernst & Young LLP, as the
independent certified public accountants of the Company for the fiscal year
ending December 31, 2001. Representatives of Ernst & Young LLP are expected to
be present at the Annual Meeting. The representatives will have the opportunity
to make a statement, although they are currently not expected to do so. The
representatives are expected to be available to respond to appropriate
questions.
Report of the Audit Committee
Under the guidance of a written charter adopted by the Board of
Directors (which is attached as Exhibit 1 to this Proxy Statement), the Audit
Committee oversees the Company's financial reporting process on behalf of the
Company's Board of Directors. Management has the primary responsibility for the
financial statements and the reporting process, including the systems of
internal controls.
In fulfilling its oversight responsibilities, the Audit Committee
reviewed the audited financial statements in the 2000 Annual Report on Form 10-K
with management, including a discussion of the quality, not just the
acceptability, of the accounting principles, the reasonableness of significant
judgments and the clarity of disclosures in the financial statements.
The Audit Committee reviewed with the independent auditors, who are
responsible for expressing an opinion on the conformity of those financial
statements with accounting principles generally accepted in the United States,
their judgments as to the quality, not just the acceptability, of the Company's
accounting principles and such other matters as are required to be discussed
with the Audit Committee under auditing standards generally accepted in the
United States. In addition, the Audit Committee has discussed with the
independent auditors the auditors' independence from the Company and its
management, including the matters in the written disclosures and letter which
were received by the Audit Committee from the independent auditors as required
by Independence Standards Board Standard No. 1, Independence Discussions with
Audit Committees, as amended, and considered the compatibility of non-audit
services with the auditor's independence.
The Audit Committee discussed with the Company's independent auditors
the overall scope and plans for their audit. The Audit Committee met with the
independent auditors, with and without management present, to discuss the
results of their examination, their evaluation of the Company's internal
controls, and the overall quality of the Company's financial reporting. The
Audit Committee held four meetings during the fiscal year ended December 31,
2000.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors (and the Board approved) that
the audited financial statements be included in the Annual Report on Form 10-K
for the fiscal year ended December 31, 2000 for filing with the Securities and
Exchange Commission. The Audit Committee has recommended, and the Board has
approved, the selection of the Company's independent auditors.
April 12, 2001 Respectfully submitted,
AUDIT COMMITTEE
F. Duffield Meyercord
Allan Weingarten
Edwin H. Morgens
16
Audit Fees; Financial Information Systems Design and Implementation Fees;
All Other Fees
In addition to performing the audit of the Company's consolidated
financial statements, Ernst & Young LLP has provided various other services
during fiscal 2000. The aggregate fees billed for fiscal 2000 for each of the
following categories of services are set forth below:
Audit of the Company's annual financial statements for the year ended
December 31, 2000 and review of the financial statements included in the
Company's Quarterly Reports on Form 10-Q in 2000: $162,800. All other services:
$72,120.
Ernst & Young LLP has not provided any information technology services
to the Company during fiscal 2000. The fee set forth above for "other services"
includes tax related services and services rendered in connection with SEC
filings.
The Audit Committee has reviewed summaries of the services provided by
Ernst & Young LLP and the related fees and has considered whether the provision
of non-audit services is compatible with maintaining the independence of Ernst &
Young LLP.
On recommendation of the Audit Committee, the Board has appointed Ernst
& Young LLP to audit the Company's 2001 financial statements.
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 designated therein as proxy
appointees.
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 its officers or employees any compensation for the
solicitation of proxies.
The Annual Report on Form 10-K to Stockholders for the fiscal year
ended December 31, 2000 has been forwarded to all stockholders. The Annual
Report on Form 10-K, 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 on Form 10-K 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 H. Willett, President, Programmer's
Paradise, Inc, 1157 Shrewsbury Avenue, Shrewsbury New Jersey 07702.
17
STOCKHOLDER PROPOSALS
---------------------
The Annual Meeting of Stockholders for the fiscal year ending December
31, 2001 is expected to be held on or about June 15, 2002, with the mailing of
proxy materials for such meeting to be made on or about April 30, 2002. 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 January 1, 2002 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,
William H. Willett, Chairman
and Chief Executive Officer
April 30, 2001
18
Exhibit 1
Programmer's Paradise, Inc.
Audit Committee Charter
June 2000
1. Organization
This Charter governs the operations of the Programmer's Paradise, Inc. ("the
Company") Audit Committee ("the Committee"). The Committee shall review and
reassess the Charter at least annually and obtain the approval of the Board of
Directors. The Committee shall be appointed by the Board of Directors and, no
later than June 14, 2001, shall comprise at least three directors, each of whom
is "independent" of management and the Company as that term is used by the
National Associate Securities Dealers. Members of the committee shall be
considered independent if they have no relationship that may interfere with the
exercise of their independence from management and the Company. All committee
members shall be financially literate, (or shall become financially literate
within a reasonable period of time after appointment to the committee,) and at
least one member shall have accounting or related financial management
expertise.
2. Statement of Policy
The Committee shall provide assistance to the Board of Directors in fulfilling
their oversight responsibility to the shareholders, potential shareholders, the
investment community, and others, relating to the Company's financial statements
and the financial reporting process, the systems of internal accounting and
financial controls, the internal audit function, the annual independent audit of
the Company's financial statements, and the legal compliance and ethics programs
as established by management and the Board. In so doing, it is the
responsibility of the Committee to maintain free and open communication between
the Committee, independent auditors, the internal auditors, and management of
the Company. In discharging its oversight role, the Committee is empowered to
investigate any matter brought to its attention with full access to all books,
records, facilities, and personnel of the Company and the power to retain
outside counsel or other experts for this purpose.
3. Responsibilities and Processes
The primary responsibility of the Committee is to oversee the Company's
financial reporting process on behalf of the Board and report the results of
their activities to the Board. Management is responsible for preparing the
Company's financial statements, and the independent auditors are responsible for
auditing those financial statements. The Committee in carrying out its
responsibilities believes its policies and procedures should remain flexible, in
order to best react to changing conditions and circumstances. The Committee
should take the appropriate actions to set the overall corporate "tone" for
quality financial reporting, sound business risk practices, and ethical
behavior.
The following shall be the principal recurring processes of the Committee in
carrying out its oversight responsibilities. The processes are set forth as a
guide with the understanding that the committee may supplement them as
appropriate.
o The Committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately
accountable to the Board and the Committee, as representatives of the
Company's shareholders. The Committee shall have the ultimate authority and
responsibility to evaluate and, where appropriate, replace the independent
auditors. The committee shall discuss with the auditors their independence
from management and the Company and the matters included in the written
disclosures required by the Independence Standards Board. Annually, the
Committee shall review and recommend to the board the selection of the
Company's independent auditors.
o The Committee shall discuss with the internal auditors and the independent
auditors the overall scope and plans for their respective audits including
the adequacy of staffing and compensation. Also, the Committee shall
discuss with management, the internal auditors, and the independent
auditors the adequacy and effectiveness of the accounting and financial
controls, including the Company's system to monitor and manage business
risk, and legal and ethical compliance programs. Further, the Committee
shall meet separately with the internal auditors and the independent
auditors, with and without management present, to discuss the results of
their examinations.
o The Committee shall review the interim financial statements with management
and the independent auditors prior to the filing of the Company's Quarterly
Report on Form 10-Q. Also, the Committee shall discuss the results of the
quarterly review and any other matters required to be communicated to the
committee by the independent auditors under generally accepted auditing
standards. The chair of the Committee may represent the entire Committee
for the purposes of this review.
o The Committee shall review with management and the independent auditors the
financial statements to be included in the Company's Annual Report on Form
10-K (or the annual report to shareholders if distributed prior to the
filing of Form 10-K), including their judgement about the quality, not just
acceptability, of accounting principles, the reasonableness of significant
judgements, and the clarity of the disclosures in the financial statements.
Also, the Committee shall discuss the results of the annual report and
other matters.
o Annual audit and any other matters required to be communicated to the
Committee by the independent auditors under generally accepted auditing
standards.
Approved: /s/ Allan Weingarten Date: June 12, 2000
--------------------------------------------
Allan Weingarten
Chairman of the Audit Committee
Proxy Card
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 H. WILLETT and WILLIAM H.
SHEEHY 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 23, 2001, at the Annual Meeting
of Stockholders to be held on June 12, 2001 at 9:00 AM, local time at the Molly
Pitcher Inn, 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
(except as marked to the contrary below) nominees listed below |_|
(INSTRUCTION: To withhold authority to vote for
any individual nominee write that nominee's
name on the space provided below)
- --------------------------------------------------------------------------------
WILLIAM H. WILLETT, F. DUFFIELD MEYERCORD, EDWIN H. MORGENS, ALLAN WEINGARTEN,
JAMES W. SIGHT AND MARK T. BOYER
2. 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 PROPOSAL 1 AND AS THE PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS
MAY PROPERLY COME BEFORE THE MEETING.
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: , 2001
-------------------------------------
--------------------------------------------------
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