As filed with the Securities and Exchange Commission on April 30, 2003.
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 (as
|_| Definitive Additional Materials permitted by Rule 14a-6(e)(2))
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PROGRAMMER'S PARADISE, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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 to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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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 24, 2003
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 offices of
Dechert LLP, 30 Rockefeller Plaza, New York, New York, on June 24, 2003 at 10:00
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
postponement thereof.
The close of business on April 28, 2003 has been fixed as the record date for
the determination of stockholders entitled to notice of and to vote at the
Meeting and any adjournment or postponement 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, 2002 is enclosed herewith.
By Order of the Board of Directors,
William H. Willett,
Chairman and Chief Executive Officer
April 30, 2003
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
offices of Dechert LLP, 30 Rockefeller Plaza, New York, New York, on June 24,
2003 at 10:00 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,
2003.
VOTING SECURITIES
Only holders of shares of the Company's Common Stock, $.01 par value per share
("Common Stock"), of record at the close of business on April 28, 2003 are
entitled to vote at the Meeting. On April 28, 2003 (the "Record Date"),
3,745,205 shares of Common Stock were issued and outstanding. In addition, on
that date, 1,485,045 shares were held in Treasury by the Company and deemed
issued but not outstanding. 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.
2
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 each of the nominees set forth under the caption
"Election of Directors" and in the discretion of the persons named in the
proxies as proxy appointees as to any other matter that may properly come before
the Meeting.
Your vote is important. Accordingly, you are urged to fill in, sign, date 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.
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, 2003 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 executive officers of the
Company and (iii) all Directors and executive 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.
Number of shares
Name beneficially owned Percent
---- ------------------ -------
Mark T. Boyer (1) 824,462 21.8%
William H. Willett (2) 244,908 6.1%
Edwin Morgens (3) 187,046 4.9%
Simon F. Nynens (4) 100,000 2.6%
Jeffrey Largiader (5) 80,000 2.1%
F. Duffield Meyercord (6) 45,000 1.2%
Allan D. Weingarten (6) 35,750 *
James W. Sight (7) 29,062 *
All Directors and executive officers
as a group (9 persons) 1,561,228 36.1%
ROI Capital Management, Inc. (8) 817,900 21.7%
Dimensional Fund Advisors, Inc. (9) 347,300 9.2%
* Less than 1%.
3
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.
The address for each Director and executive officer of the Company is c/o
Programmer's Paradise, 1157 Shrewsbury Avenue, Shrewsbury, New Jersey 07702.
(1) 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 817,900 shares beneficially owned by ROI Capital Management. See
footnote 8 below. Mr. Boyer beneficially owns directly 54,262 shares.
Includes 6,562 shares of Common Stock that may be acquired upon the
exercise of options within 60 days of April 15, 2003.
(2) Includes 218,750 shares of Common Stock that may be acquired upon the
exercise of options within 60 days of April 15, 2003.
(3) 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. Includes 33,750 shares of Common Stock that may be
acquired upon the exercise of options within 60 days of April 15, 2003.
(4) Includes 100,000 shares of Common Stock that may be acquired upon the
exercise of options within 60 days of April 15, 2003.
(5) Includes 62,500 shares of Common Stock that may be acquired upon the
exercise of options within 60 days of April 15, 2003.
(6) Includes 33,750 shares of Common Stock that may be acquired upon the
exercise of options within 60 days of April 15, 2003.
(7) Includes 6,562 shares of Common Stock that may be acquired upon the
exercise of options within 60 days of April 15, 2003.
(8) 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 set forth in ROI Capital Management's Schedule 13D
filed on January 15, 2003.
(9) 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/A
filed on February 13, 2003.
4
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 15, 2003, with respect to
each nominee:
Director
Name Age Principal Occupation Since
---- --- -------------------- --------
William H. 66 Mr. Willett has served as a Director of the Company since December 1996. December
Willett In July 1998, Mr. Willett was appointed to the position of Chairman, 1996
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.
F. Duffield 56 Mr. Meyercord has served as a Director of the Company since December 1991. December
Meyercord Mr. Meyercord is a Managing Partner and a Director of Carl Marks 1991
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 61 Mr. Morgens was a founder of the Company and has served as a Director of May 1982
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.
Allan D. 65 Mr. Weingarten has served as a Director of the Company since April 1997. April 1997
Weingarten Since January 2001, Mr. Weingarten has been the Senior Vice
President and Treasurer of U.S. Industries, Inc. Mr. Weingarten also
currently serves as a Director of AXS-One, Inc. Prior to this Mr.
Weingarten was a business consultant.
5
Director
Name Age Principal Occupation Since
---- --- -------------------- --------
James W. Sight 47 Mr. Sight was appointed to the Board in April 2001. Mr. Sight currently April 2001
serves as a Director of one other public company: Westmoreland Coal
Company. Prior to this Mr. Sight was a Director for US Home Corp. and
Nevada Chemical. until he retired from these Boards in 2000 and 2001,
respectively.
Mark T. Boyer 45 Mr. Boyer was appointed to the Board in April 2001. Mr. Boyer is and has April 2001
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 six meetings during the last fiscal year. None of
the Directors who were in office in the year 2002 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 2002 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. See "Stock Option Plans -1995 Non-Employee
Director Plan."
6
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 2002
all required events of its officers, Directors and 10% stockholders required to
be so reported, have been timely filed.
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 four 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, 2002 (the
"Named Executive Officers").
Summary Compensation Table
Long-Term
Annual Compensation Awards Compensation
------------------------------------ -----------------------
Fiscal Securities
Year Underlying All Other
Name and Position ended Salary Bonus Options (#) Compensation (1)
----------------- ----- ------ ----- ----------- ----------------
William H. Willett, President and 2002 $225,000 $0 200,000(2) $21,099
Chief Executive Officer 2001 225,000 0 0 19,651
2000 225,000 100,000 0 22,381
Simon Nynens, Vice President 2002 140,000 31,475 100,000(2) 4,826
And Chief Financial Officer 2001 181,732 0 45,000(3) 3,556
2000 140,000 49,000 5,000(4) 0
John Lore, Vice President 2002 145,000 0 0 4,982
and Chief Information Officer * 2001 145,000 0 0 5,070
2000 45,080(5) 10,000 25,000(6) 1,998
Jeffrey Largiader, Vice President 2002 140,000 31,475 55,000(2) 4,517
Marketing 2001 137,750 0 0 4,578
2000 129,374 0 0 3,929
Darren Bethke, Director of 2002 83,334 (7) 0 20,000(2) 2,106
Sales ** 2001 0 0 0 0
2000 0 0 0 0
* Mr. John Lore served as Vice President and Chief Information Officer
until January 3, 2003.
** Mr. Bethke served as Director of Sales until April 1, 2003.
7
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. For Mr. Willett, this also includes the
estimated annual value of vehicles and related maintenance benefits
provided to Mr. Willett in all years presented.
2) Represents options to purchase Common Stock with an exercise price of $2.13
per share, vesting immediately.
3) 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.
Mr. Nynens surrendered these options for cancellation on February 28, 2002.
4) 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.
Mr. Nynens surrendered these options for cancellation on February 28, 2002.
5) The Company hired Mr. Lore in September 2000. Represents the portion of his
salary of $145,000 paid in 2000 after such date.
6) Represents options to purchase Common Stock with an exercise price of $3.50
per share, vesting in equal annual installments over a five-year period.
7) The Company hired Mr. Bethke in May 2002. Represents the portion of his
salary of $130,000 paid in 2002 after 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 2002 were approximately
$73,000.
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 2003 and
subsequent fiscal years and that bonuses under this plan in the 2003 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
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 7,500 shares of Common Stock are presently subject to outstanding
options under the 1986 Option Plan, at an exercise price of $0.67 per share. Due
to its expiration and termination, no additional options may be granted under
the 1986 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,
8
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 433,750 shares of Common Stock
are presently subject to outstanding Options under the 1995 Stock Plan at
exercise prices ranging from $2.01 to $8.375 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 174,375 options granted to Outside Directors have exercise
prices ranging from approximately $2.13 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. The 1995 Director Plan requires that options granted there under
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%.
TOTAL OPTIONS EXERCISED IN 2002 AND YEAR-END VALUES
This table gives information for options exercised by each of the Named
Executive Officers in 2002 and the value (stock price less exercise price) of
the remaining options held by those executive officers at year-end, using the
closing price of $1.97 of the Company's common stock on December 31, 2002.
9
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-The Money Options
acquired Options at Fiscal Year-End at Fiscal Year-End
on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ------------ ----------- ------------- ----------- -------------
William Willett 0 $0 218,750 0 $0 $0
Simon Nynens 0 $0 100,000 0 $0 $0
John Lore 0 $0 10,000 15,000 $0 $0
Jeffrey Largiader 0 $0 62,500 0 $9,750 $0
Darren Bethke 0 $0 20,000 0 $0 $0
OPTION GRANTS IN 2002
This table shows all options to purchase the Company's common stock granted to
each of our Named Executive Officers in 2002 and the potential value of such
grants at stock price appreciation rates of 0%, 5% and 10%, compounded annually
over the maximum ten-year term of the options. The 5% and 10% rates of
appreciation are required to be disclosed by SEC rules and are not intended to
forecast possible future appreciation, if any, in the Company's stock price.
Individual Grants Potential Realizable Value at
Number of % of Total Assumed Annual Rate of
Securities Options Exercise Stock Price Appreciation for
Underlying Granted to Price Option Term (4)
Options Employees in Per Share Expiration
Name Granted (1) Fiscal Year (2) ($/Sh) (3) Date (4) 5% ($) 10% ($)
---- ----------- --------------- ---------- -------- ------ -------
William Willett 200,000 45.91% 2.13 9/10/2012 261,394 668,559
Simon Nynens 100,000 22.96% 2.13 9/10/2012 130,697 334,280
John Lore 5,000 1.15% 2.13 9/10/2012 6,535 16,714
Jeffrey Largiader 55,000 12.63% 2.13 9/10/2012 71,883 183,854
Darren Bethke 20,000 4.64% 2.13 9/10/2012 26,139 66,856
(1) Option grants consisted of grants that are fully exercisable on the date of
grant, September 9, 2002.
(2) Based on a total of 430,625 options granted to employees and Directors of
the Company in fiscal 2000, including the Named Executive Officers.
(3) 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.
(4) The options granted have a term of ten years and one day, subject to
earlier termination upon the occurrence of certain events related to
termination of employment.
(5) 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.
10
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table sets forth information, as of December 31, 2002, regarding
securities authorized for issuance upon the exercise of stock options and stock
units under all of the Company's equity compensation plans.
A B C
Number of Securities
Remaining Available
for Future Issuance
Number of Securities Weighted Under Equity
to Average Compensation Plans
be Issued Upon Exercise (Excluding
Exercise Price of Securities
of Outstanding Outstanding Reflected in Column
Plan Category Options Options A)
-------------------------------------------------- ------------------------- ----------------- ----------------------
Equity Compensation Plans Approved by
Shareholders 633,250 2.96 666,843
Equity Compensation Plans Not Approved by
Shareholders (1) 50,000 2.39 -
------------------------- ----------------- -----------------------
Total 683,250 2.92 666,843
------------------------- ----------------- -----------------------
1) Included 50,000 Stock appreciation rights granted to Mr. Willett as part of
his employment agreement. If there shall be a change in control, as defined
in Mr. Willett's employment agreement, prior to the termination of the
employment period, the Company will be required to pay to Mr. Willett a
bonus equal to the amount, if any, by which the value per share received by
shareholders exceeds the exercise price of the stock appreciation rights.
EMPLOYMENT AND SEVERANCE 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, 2004, subject to automatic renewals for twelve-month periods unless
either party provides ninety-day advance notice.
The agreement includes the grant of certain stock options, an automobile
allowance and participation in the
11
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 twelve 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.
The Company has entered into letter agreements with Mr. Nynens, Mr. Lore and Mr.
Bethke. Mr. Nynens and Mr. Lore are entitled to severance payments for nine
months at the then applicable annual base salary if the Company terminates their
employment for any reason other than for cause. Mr. Bethke is entitled to
severance payments for six months at the then applicable annual base salary if
the Company terminates his employment for any reason other than for cause. Mr.
Bethke and Mr. Lore are no longer employed by the Company and are currently
receiving severance payments in accordance with their respective letter
agreements.
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 Company 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.
12
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.
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 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 2002, 380,000 options at an exercise price of $2.13 were granted to
the Named Executive Officers.
The compensation of the Company's Chief Executive Officer in 2002 consisted of a
base salary, an automobile allowance and stock options. The total compensation
package was established considering base salaries of peer Chief Executive
Officers with similar executive responsibilities.
The Compensation Committee
--------------------------
Edwin H. Morgens
F. Duffield Meyercord
Allan Weingarten
13
STOCK PRICE PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in the
cumulative total shareholder return on the Company's Common Stock with the
cumulative total return of the S&P Midcap 400 Index and the S&P 400 Computer and
Electronics Retail Index for the period commencing December 31, 1997 and ending
December 31, 2002 where $100 was invested on December 31, 1997.
[GRAPH OMITTED]
INDEXED RETURNS
Base Years Ending
Period
Company / Index Dec97 Dec98 Dec99 Dec00 Dec01 Dec02
-------------------------------------------------- ------------ ------------ ---------- ---------- ---------- ----------
PROGRAMMERS PARADISE INC 100 134.67 81.33 27.33 28.80 21.01
S&P MIDCAP 400 INDEX 100 119.12 136.65 160.57 159.60 136.44
S&P 400 COMPUTER & ELECTRONICS RETAIL 100 136.75 206.63 178.79 344.49 281.25
14
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees the Company's financial reporting process on behalf
of the Board of Directors. The Audit Committee consists of three independent
directors. Its duties and responsibilities are set forth in a written charter
(the "Audit Committee Charter"). The Audit Committee Charter was attached as
Exhibit A to the Company's Proxy Statement for the 2002 Annual Meeting of
Shareholders. The duties and responsibilities of public company audit committees
have been the subject of several recent rulemaking initiatives of the Securities
and Exchange Commission and The NASDAQ Stock Market. At such time as these
rulemaking initiatives are finalized, the Board of Directors will amend the
Audit Committee Charter in order to reflect the new scope of the Audit
Committee's duties and responsibilities. The Audit Committee believes that it is
in full compliance with all regulatory requirements that are currently
applicable to it.
In the course of fulfilling its responsibilities during fiscal year 2002, the
Audit Committee has:
o reviewed and discussed with management the audited financial statements
for the year ended December 31, 2002;
o discussed with representatives of Amper, Politziner & Mattia P.A. (the
"Independent Auditor") the matters required to be discussed by Statement
on Auditing Standards No. 61, Communication with Audit Committees, as
amended;
o received the written disclosures and the letter from the Independent
Auditor required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, as amended;
o discussed with the Independent Auditor its independence from the Company
and management; and
o considered whether the provision by the Independent Auditor of non-audit
services is compatible with maintaining the Independent Auditor's
independence.
Based on the foregoing, the Audit Committee recommended to the Board of
Directors that the audited financial statements referred to above be included in
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2002.
The Audit Committee Charter provides that one duty of the Audit Committee is to
provide advice to the Board of Directors in selecting, evaluating and replacing
the independent auditors. In performing that duty, the Audit Committee evaluated
firms that provided proposals to serve as Programmer's Paradise, Inc.'s
independent auditors for 2003 and recommended that the Board of Directors
appoint Amper, Politziner & Mattia P.A. The Board of Directors agreed with this
recommendation and, accordingly, appointed Amper, Politziner & Mattia as
Programmer's Paradise, Inc.'s independent auditors for 2003.
Respectfully submitted,
F. Duffield Meyercord
Allan Weingarten
Edwin H. Morgens
15
INFORMATION REGARDING CHANGE OF INDEPENDENT AUDITORS
The Audit Committee annually considers and recommends to the Board of Directors
the selection of the Company's independent auditors. As recommended by the Audit
Committee, the Board of Directors on April 16, 2002 decided to no longer engage
Ernst & Young LLP as the Company's independent auditors and engaged Amper,
Politziner & Mattia P.A. to serve as the Company's independent auditors for
2002.
Ernst & Young LLP's reports on the Company's consolidated financial statements
for the years ended December 31, 2000 and 2001 did not contain an adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope or accounting principles. Ernst & Young LLP's report on
the Company's consolidated financial statements for 2001 does not contain an
adverse opinion or disclaimer of opinion, nor was it qualified or modified as to
uncertainty, audit scope or accounting principles. During the Company's fiscal
years 2000 and 2001 and through April 16, 2002, there were no disagreements with
Ernst & Young LLP on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure which, if not resolved to
Ernst & Young LLP's satisfaction, would have caused them to make reference to
the subject matter in connection with their report on the Company's consolidated
financial statements for such years; and there were no reportable events, as
listed in Item 304(a)(1)(v) of SEC Regulation S-K.
During fiscal 2000 and 2001 and through March 8, 2002, the Company did not
consult Amper, Politziner & Mattia P.A. with respect to the application of
accounting principles to a specified transaction, either completed or proposed,
or the type of audit opinion that might be rendered on Programmer's Paradise,
Inc.'s consolidated financial statements, or any other matters or reportable
events listed in Items 304(a)(2)(i) and (ii) of SEC Regulation S-K.
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, upon recommendation of the Audit Committee, has
appointed Amper, Politziner & Mattia P.A. as the Company's independent auditors
for the fiscal year ending December 31, 2003. In addition to performing the
audit of the Company's consolidated financial statements, Amper, Politziner &
Mattia P.A. has provided various other services during fiscal 2002. The
aggregate fees billed for fiscal 2002 for each of the following categories of
services are set forth below:
Audit Fees. The aggregate fees billed for professional services rendered by
Amper, Politziner & Mattia P.A. for the year ended December 31, 2002 for the
audit of the Company's financial statements for the year ended December 31, 2002
were $67,000.
Audit-Related Fees. There were no audit-related fees billed by Amper, Politziner
& Mattia P.A. for financial information system design and implementation
services during 2002.
16
Tax Fees. The aggregate fees billed for professional services rendered by Amper,
Politziner & Mattia P.A. during fiscal 2002 for tax compliance, tax advice and
tax planning were $10,000.
All Other Fees. The aggregate fees billed for professional services rendered by
Amper, Politziner & Mattia P.A. during fiscal 2002 for services other than those
described under "Audit Fees," "Audit-Related Fees" and "Tax Fees" were $12,500.
All other fees in 2002 consisted principally of other audit fees related to the
Company's defined contribution plan.
The Audit Committee has reviewed summaries of the services provided by Amper,
Politziner & Mattia P.A. and the related fees and has considered whether the
provision of non-audit services is compatible with maintaining the independence
of Amper, Politziner & Mattia P.A.
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, telecopy 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, 2001 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 Simon F.
Nynens, Chief Financial Officer, Programmer's Paradise, Inc, 1157 Shrewsbury
Avenue, Shrewsbury, New Jersey 07702.
17
STOCKHOLDER PROPOSALS FOR INCLUSION IN THE COMPANY'S 2004 ANNUAL MEETING PROXY
STATEMENT AND PROXY CARD
Any Stockholder proposal to be considered by us for inclusion in the Company's
2004 proxy statement and form of proxy card for next year's Annual Meeting of
Stockholders, expected to be held in June 2004, must be received by the
Company's Secretary at the Company's principal executive offices located at 1157
Shrewsbury Avenue, Shrewsbury, NJ 07702, no later than December 31, 2003 (120
days prior to the first anniversary of the date of this proxy statement). The
Securities and Exchange Commission rules set forth standards as to what
stockholders proposals are required to be included in a proxy statement.
OTHER STOCKHOLDER PROPOSALS FOR PRESENTATION AT THE COMPANY'S 2004 ANNUAL
MEETING
For any proposal that is not submitted for inclusion in next year's proxy
statement (as described above) but is instead sought to be presented directly at
the 2004 annual meeting, Securities and Exchange Commission rules permit
management to vote proxies in its discretion if the Company: (a) receives notice
of the proposal more than 45 days prior to the anniversary of the mailing date
of this proxy statement and the Company advises stockholders in next year's
proxy statement about the nature of the matter and how management intends to
vote on such matter, or (b) do not receive notice of the proposal at least 45
days prior to the anniversary of the mailing date of this proxy statement.
Notices of intention to present proposals at the 2004 annual meeting should be
addressed to the Company's Secretary at the Company's principal executive
offices located at 1157 Shrewsbury Avenue, Shrewsbury, NJ 07702.
By Order of the Board of Directors,
William H. Willett, Chairman
and Chief Executive Officer
April 30, 2003
18
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 SIMON F. NYNENS
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 28, 2003, at the
Annual Meeting of Stockholders to be held at the offices of Dechert LLP, 30
Rockefeller Plaza, New York, New York, on June 24, 2003 at 10:00 AM, local
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 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: ____________________, 2003
-----------------------------------------
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