As filed with the Securities and Exchange Commission on April 29, 2005.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 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)
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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 14, 2005
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 14, 2005 at 10:00
AM, local time, for the following purposes:
1. To elect a Board of five 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 26, 2005 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 for the fiscal year ended December 31,
2004 is enclosed herewith.
By Order of the Board of Directors,
William H. Willett,
Chairman and Chief Executive Officer
April 29, 2005
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 14,
2005 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 29,
2005.
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 26, 2005 are
entitled to vote at the Meeting. On April 26, 2005 (the "Record Date"),
3,990,535 shares of Common Stock were issued and outstanding. In addition, on
that date, 1,293,965 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.
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.
2
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 25, 2005 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) 426,849 10.6%
William H. Willett (2) 318,070 7.4%
Edwin Morgens (3) 200,294 5.0%
Jeffrey Largiader (4) 111,500 2.7%
Simon F. Nynens (5) 114,320 2.8%
F. Duffield Meyercord (6) 74,687 1.9%
Allan D. Weingarten (7) 63,437 1.6%
Vito Legrottaglie (8) 55,270 1.4%
Dan Jamieson (9) 45,000 1.1%
All Directors and executive
officers as a group (9 persons) (10) 1,409,427 29.3%
ROI Capital Management, Inc. (11) 304,900 7.6%
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. ("ROI") and Mr. Boyer. By virtue of Mr. Boyer's
ownership interest in ROI, Mr. Boyer may be deemed to beneficially own the
304,900 shares beneficially owned by ROI. See footnote 11 below. Mr. Boyer
beneficially owns directly 78,200 shares. Includes 43,749 shares of Common
Stock that may be acquired upon the exercise of options that are currently
exercisable or will become exercisable within 60 days following April 25,
2005.
(2) Includes 308,070 shares of Common Stock that may be acquired upon the
exercise of options that are currently exercisable or will become
exercisable within 60 days following April 25, 2005.
(3) Includes 20,000 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 44,687 shares of Common Stock that may be
acquired upon the exercise of options that are currently exercisable or
will become exercisable within 60 days following April 25, 2005.
(4) Includes 100,000 shares of Common Stock that may be acquired upon the
exercise of options that are currently exercisable or will become
exercisable within 60 days following April 25, 2005.
3
(5) Includes 114,320 shares of Common Stock that may be acquired upon the
exercise of options that are currently exercisable or will become
exercisable within 60 days following April 25, 2005.
(6) Includes 44,687 shares of Common Stock that may be acquired upon the
exercise of options within that are currently exercisable or will become
exercisable within 60 days following April 25, 2005.
(7) Includes 63,437 shares of Common Stock that may be acquired upon the
exercise of options that are currently exercisable or will become
exercisable within 60 days following April 25, 2005.
(8) Includes 55,000 shares of Common Stock that may be acquired upon the
exercise of options that are currently exercisable or will become
exercisable within 60 days following April 25, 2005.
(9) Includes 45,000 shares of Common Stock that may be acquired upon the
exercise of options that are currently exercisable or will become
exercisable within 60 days following April 25, 2005.
(10) Includes 818,950 shares of Common Stock that may be acquired upon the
exercise of options that are currently exercisable or will become
exercisable within 60 days following April 25, 2005.
(11) The address for ROI Capital Management, Inc. is 300 Drakes Landing Road,
Suite 175, Greenbrae, CA 94904. Beneficial ownership information is based
upon information provided by ROI.
CORPORATE GOVERNANCE
Role of the Board of Directors
In accordance with the General Corporation Law of the State of Delaware and our
certificate of incorporation and bylaws, our business, property and affairs are
managed under the direction of the Board of Directors. Although our non-employee
Directors are not involved in our day-to-day operating details, they are kept
informed of our business through written reports and documents provided to them
regularly, as well as by operating, financial and other reports presented by our
officers at meetings of the Board of Directors and committees of the Board of
Directors.
Meetings of the Board of Directors
The Board met eight times in 2004. Each of the Directors attended at least 75%
of all meetings held by the Board of Directors and all meetings of each
committee of the Board of Directors on which such Director served during 2004.
Communication with the Board of Directors; Director Attendance at Annual
Meetings
Stockholders may communicate with a member or members of the Board of Directors
by addressing their correspondence to the Board member or members c/o the
Corporate Secretary, Programmer's Paradise, Inc., 1157 Shrewsbury Avenue,
Shrewsbury, NJ 07702. Our Corporate Secretary will review the correspondence and
forward it to the chair of the appropriate committee or to any individual
Director or Directors to whom the communication is directed, unless the
communication is unduly hostile, threatening, illegal, does not reasonably
relate to Programmer's Paradise or our business, or is similarly inappropriate.
Our Corporate Secretary has the authority to discard or disregard any
inappropriate communications or to take other appropriate actions with respect
to any such inappropriate communications.
Recognizing that Director attendance at our annual meetings can provide our
stockholders with a valuable opportunity to communicate with Board members about
issues affecting our Company, we encourage our Directors to attend each annual
meeting of stockholders. Each Board member attended last year's annual meeting
of stockholders.
Director Independence
The Board of Directors has determined that the following Directors are
independent under the NASDAQ listing standards: Messrs. Boyer, Meyercord,
Morgens and Weingarten.
Committees of the Board of Directors
The Board of Directors has an Audit Committee, Compensation Committee and a
Nominating and Governance Committee.
4
Audit Committee. The Board of Directors has an Audit Committee that monitors the
integrity of the Company's financial statements, financial reporting process and
internal controls regarding finance, accounting and legal compliance; monitors
the independence and performance of our independent registered public accounting
firm; provides an avenue of communication among the independent registered
public accounting firm, management, including internal audit, and our Board of
Directors; and monitors significant litigation and financial risk exposure. The
current members of the Audit Committee are Messrs. Weingarten (Chairman),
Meyercord and Morgens, each of whom is independent as defined by the NASDAQ
listing standards and applicable Securities and Exchange Commission ("SEC")
rules. The Board of Directors has determined that Mr. Weingarten meets the
criteria as an "audit committee financial expert" as defined in applicable SEC
rules. The Audit Committee met five times during 2004.
The Audit Committee operates under a written charter adopted by the Board of
Directors. A copy of the charter is included as Annex A to this proxy statement
and is also available in the investor relations section of our web site,
http://www.programmersparadise.com/company/overview.pasp. The report of the
Audit Committee begins on page 15 of this proxy statement.
Compensation Committee. The Board of Directors has a Compensation Committee
which reviews and monitors matters related to management development and
succession; develops and implements executive compensation policies and pay for
performance criteria for the Company; reviews and approves the initial and
annual base salaries, annual incentive bonus and all long-term incentive awards
of our Chairman of the Board and Chief Executive Officer; reviews and approves
such compensation arrangements for all corporate officers and certain other key
employees; approves stock-related incentives under our stock incentive and
executive compensation plans, and exercises all powers of the Board of Directors
under those plans other than the power to amend or terminate those plans;
reviews and approves material matters concerning our employee compensation and
benefit plans; and carries out such responsibilities as have been delegated to
it under various compensation and benefit plans and such other responsibilities
with respect to our compensation matters as may be referred to it by our Board
of Directors or management. The members of the Compensation Committee are
Messrs. Meyercord (Chairman), Morgens and Weingarten, each of whom is
independent as defined by the NASDAQ listing standards. The Compensation
Committee met two times during 2004.
The Compensation Committee operates under a written charter adopted by the Board
of Directors, a copy of which is available in the investor relations section of
our web site, http://www.programmersparadise.com/company/overview.pasp. The
report of the Compensation Committee begins on page 13 of this proxy statement.
Nominating and Governance Committee. The Board has a Nominating and Governance
Committee which identifies individuals qualified to become Board members and
recommends to the Board director nominees for election at the next Annual
Meeting of Stockholders. Currently, the members of the Nominating and Governance
Committee are Messrs. Boyer (Chairman), Morgens and Weingarten, each of whom is
independent as defined by the NASDAQ listing standards. The Nominating and
Governance Committee did not meet during 2004 and instead the entire Board
participated in nomination and evaluation functions. The Nominating and
Governance Committee operates under a written charter adopted by the Board of
Directors. The Nominating and Governance Committee charter is available in the
investor relations section of our web site, http://www.programmersparadise.com
/company/overview.pasp.
Director Nominations
The Nominating and Governance Committee will consider recommendations for
directorships submitted by our stockholders. Stockholders who wish the
Nominating and Governance Committee to consider their recommendations for
nominees for the position of Director should submit their recommendations, in
accordance with the procedures set forth below, in writing to: Corporate
Secretary, Programmer's Paradise, Inc., 1157 Shrewsbury Avenue, Shrewsbury, NJ
07702. In order to be considered for inclusion in the proxy
5
statement and form of proxy for the annual meeting of stockholders to be held in
2006, the stockholder's notice much be received by our Company not less than 120
days nor more than 150 days before the first anniversary of the date of this
proxy statement.
For nominations, such stockholder's notice shall set forth: (i) as to each
person whom the stockholder proposes to nominate for election as a Director, (A)
the name, age, business address and residential address of such person, (B) the
principal occupation or employment of such person, (C) the class and number of
shares of stock of our Company that are beneficially owned by such person, (D)
any other information relating to such person that is required to be disclosed
in solicitations of proxies for election of Directors or is otherwise required
by the rules and regulations of the Securities and Exchange Commission
promulgated under the Securities Exchange Act of 1934, as amended and (E) the
written consent of the nominee to be named in the proxy statement as a nominee
and to serve as a Director if elected and (ii) as to the stockholder giving the
notice, (A) the name, and business address and residential address, as they
appear on our stock transfer books, of the nominating stockholder, (B) a
representation that the nominating stockholder is a stockholder of record and
intends to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice, (C) the class and number of shares of stock of
our Company beneficially owned by the nominating stockholder and (D) a
description of all arrangements or understandings between the nominating
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the nominating stockholder.
In its assessment of each potential candidate, the Nominating and Governance
committee will review the nominee's professional ethics, integrity and values,
judgment, experience, independence, commitment to representing the long-term
interests of the stockholders, understanding of our Company's or other related
industries and such other factors the Nominating and Governance committee
determines are pertinent in light of the current needs of the Board of
Directors. The Nominating and Governance Committee seeks to identify candidates
representing diverse experience at policy-making levels in business, management,
marketing, finance, human resources, communications and in other areas that are
relevant to our activities. The Nominating and Governance Committee will also
take into account the ability of a Director to devote the time and effort
necessary to fulfill his or her responsibilities to our Company. After full
consideration, the stockholder proponent will be notified of the decision of the
Nominating and Governance Committee.
Nominees may also be recommended by Directors, members of management, or, in
some cases, by a third party firm. In identifying and considering candidates for
nomination to the Board, the Nominating and Governance Committee considers, in
addition to the requirements described above and set out in its charter, quality
of experience, our needs and the range of knowledge, experience and diversity
represented on the Board. Each Director candidate will be evaluated by the
Nominating and Governance Committee based on the same criteria and in the same
manner, regardless of whether the candidate was recommended by a company
stockholder or by others. The Nominating and Governance Committee will conduct
the appropriate and necessary inquiries with respect to the backgrounds and
qualifications of all Director nominees. The Nominating and Governance Committee
will also review the independence of each candidate and other qualifications of
all Director candidates, as well as consider questions of possible conflicts of
interest between Director nominees and our Company. After the nominating and
governance committee has completed its review of a nominee's qualifications and
conducted the appropriate inquiries, the Nominating and Governance Committee
will make a determination whether to recommend the nominee for approval by the
Board of Directors. If the Nominating and Governance Committee decides to
recommend the director nominee for nomination by the Board of Directors and such
recommendation is accepted by the Board, the form of our proxy solicited will
include the name of the director nominee.
Director Compensation and Arrangements
Each outside Director (i.e., non-employee) receives $2,000 per quarter for
serving on the Board, an additional $1,000 per meeting, $1,000 per Audit
Committee meeting and $500 per Compensation Committee meeting as well as
reimbursement for reasonable expenses incurred in connection with service as a
Director. 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
6
Option Plans--1995 Non-Employee Director Plan." On June 10, 2004, each
non-employee Director received non-qualified options to purchase 25,000 shares
of common stock with an exercise price of $8.03 per share, vesting immediately.
Code of Business Conduct and Ethics
In January 2004, we adopted a Code of Ethical Conduct. The full text of the Code
of Ethical Conduct, which applies to all employees, officers and Directors of
the Company, including our Chief Executive Officer, Chief Financial Officer and
Controller is available in the investor relations section of our web site,
http://www.programmersparadise.com /company/overview.pasp. The Company intends
to disclose any amendment to, or waiver from, a provision of the Code of Ethical
Conduct that applies to our Chief Executive Officer, Chief Financial Officer or
Controller in the investor relations section of our web site.
ELECTION OF DIRECTORS
At the Meeting, five 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.
Effective January 26, 2005, James W. Sight resigned his position as a Director.
If all five of the nominees are elected, one vacancy will remain on the Board of
Directors. Proxies cannot be voted for a greater number of persons than the
number of nominees named. The Company's Bylaws provide that vacancies on the
Board of Directors may be filled by the remaining members of the Board of
Directors.
Set forth below is certain information, as of April 25, 2005, with respect to
each nominee:
Name Age Principal Occupation Director Since
---- --- -------------------- --------------
William H. Willett 68 Mr. Willett has served as a December 1996
Director of the Company since
December 1996. In July 1998,
Mr. Willett was appointed to the
position of Chairman, President
and Chief Executive Officer.
F. Duffield Meyercord 58 Mr. Meyercord has served as a December 1991
Director of 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 63 Mr. Morgens was a founder of the May 1982
Company and 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 TransMontaigne, Inc.
7
Name Age Principal Occupation Director Since
---- --- -------------------- --------------
Allan D. Weingarten 67 Mr. Weingarten has served as a April 1997
Director of the Company since
April 1997. Until retiring in
December 2003, Mr. Weingarten was
the Senior Vice President and
Treasurer of Jacuzzi Brands, Inc.
(formerly known as U.S. Industries,
Inc.). Mr. Weingarten also currently
serves as a Director of AXS-One,
Inc.
Mark T. Boyer 47 Mr. Boyer was appointed to the April 2001
Board in April 2001. Mr. Boyer is
and has been the President and a
Director of ROI Capital Management
in Greenbrae, California since 1992.
All Directors hold office until the next annual meeting of stockholders and
until their successors are duly elected. Officers serve at the discretion of the
Board of Directors.
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 2004
all required events of its officers, directors and 10% stockholders required to
be so reported, have been timely filed, except that Mr. Boyer filed a Form 3
late; filed five Form 4's late on March 4, 2005 and March 7, 2005 relating to
the sale in September and November 2004 of an aggregate of 122,500 shares of
Common Stock owned by ROI (see footnote 9 of "Security Ownership of Certain
Beneficial Owners and Management"); and filed a Form 4 late for the disposition
on December 31, 2004 of 149,300 shares of Common Stock with respect to which ROI
gave up beneficial ownership when a client of ROI moved his portfolio from and
terminated his relationship with ROI as of December 31, 2004.
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 who were serving as such as of
December 31, 2004 (the "Named Executive Officers").
Summary Compensation Table
Long-Term
Annual Compensation Awards (*) Compensation
----------------------------------- ------------
Securities
Underlying Other
Name and Position Year Salary ($) Bonus ($) Options (#) Compensation (1)
----------------- ---- ---------- --------- ----------- ----------------
William H. Willett, 2004 225,000 334,000 125,000 (2) 6,424
President and Chief 2003 225,000 196,000 - 6,855
Executive Officer 2002 225,000 - 200,000 (3) 5,757
Simon Nynens, Executive 2004 162,997 123,238 100,000 (2) 6,180
Vice President and Chief 2003 140,000 97,500 - 5,280
Financial Officer 2002 181,732 31,475 100,000 (3) 4,826
Jeffrey Largiader, Vice 2004 144,583 104,856 40,000 (2) 6,421
President Sales & 2003 140,000 87,250 - 5,895
Marketing 2002 140,000 31,475 55,000 (3) 4,517
8
Vito Legrottaglie, Vice 2004 130,000 60,000 40,000 (2) 5,795
President MIS (4) 2003 118,750 50,000 20,000 (5) 4,046
Dan Jamieson, Vice 2004 116,917 70,000 40,000 (2) 5,907
President and General 2003 83,000 67,000 - 4,308
manager - Lifeboat
*) The cost of certain perquisites and other personal benefits are not included
because they did not exceed, in the case of any named executive officer, the
lesser of $50,000 or 10% of the total of the annual salary and bonus for
such executive.
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) Represents options to purchase Common Stock with an exercise price of $8.03
per share, vesting immediately.
3) Represents options to purchase Common Stock with an exercise price of $2.13
per share, vesting immediately.
4) The Company hired Mr. Legrottaglie in February 2003. For 2003, represents
the portion of his annual 2003 salary of $130,000 paid in 2003 after such
date.
5) Represents options to purchase Common Stock with an exercise price of $2.01
per share, vesting immediately.
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 our 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 2004 were approximately
$106,000.
The Company maintains a performance bonus plan for our senior executives which
provides for a bonus of up to 75% 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 2005 and
subsequent fiscal years and that bonuses under this plan in the 2005 fiscal year
and thereafter will be based on the Company meeting or exceeding profitability
targets established by the Compensation Committee.
STOCK OPTION PLANS
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 authorized the grant of Stock Rights to acquire up to
1,137,500 shares of Common Stock. As of April 25, 2005, a total of 781,940
shares of Common Stock are subject to outstanding Options under the 1995 Stock
Plan at exercise prices ranging from $2.01 to $8.375 per share. The 1995 Stock
Plan expired and terminated on April 21, 2005 (except as to Options outstanding
on that date) and no more grants may be made under the 1995 Stock Plan.
9
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
authorized 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 joined the Board after April 1995 automatically
received at that time, options to purchase 18,750 shares of Common Stock. As of
April 25, 2005, a total of 114,750 shares of Common Stock are subject to
outstanding Options under the 1995 Non-Employee Director Stock Plan at exercise
prices ranging from $2.13 to $6.375 per share. 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 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%. The 1995 Director Plan expired and was
terminated on April 21, 2005 (except as to Options outstanding on that date) and
no more grants may be made under the 1995 Director Plan.
TOTAL OPTIONS EXERCISED IN 2004 AND YEAR-END VALUES
This table gives information for options exercised by each of the Named
Executive Officers in 2004 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 $14.78 of the Company's Common Stock on December 31, 2004.
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-The Money Options
acquired Options/SAR's at FY-End (#) at Fiscal Year-End
on Value ---------------------------------------------------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable($) Unexercisable ($)
---- ------------ ------------ ----------- ------------- -------------- -----------------
William Willett 0 $ 0 343,750 50,000 $3,510,250 $619,500
Simon Nynens 50,000 $262,250 100,000 0 $ 675,000 $ 0
Jeffrey Largiader 0 $ 0 95,000 0 $ 965,750 $ 0
Vito Legrottaglie 5000 $ 45,150 55,000 0 $ 525,400 $ 0
Dan Jamieson 20,000 $168,200 40,000 0 $ 270,000 $ 0
OPTION GRANTS IN 2004
This table shows all options to purchase the Company's Common Stock granted to
each of our Named Executive Officers in 2004 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.
10
Individual Grants Potential Realizable Value
Number of % of Total at Assumed Annual Rate
Securities Options Exercise of Stock Price
Underlying Granted to Price Appreciation
Options Employees in Per Share Expiration for option Term (4)
Name Granted (1) Fiscal Year ($/Sh) (2) Date (3) 5% ($) 10% ($)
---- ----------- ----------- ---------- ---------- ------ -------
William Willett 125,000 26.60% 8.03 6/11/2014 631,253 1,599,719
Simon Nynens 100,000 21.28% 8.03 6/11/2014 505,002 1,279,775
Jeffrey Largiader 40,000 8.51% 8.03 6/11/2014 202,001 511,910
Vito Legrottaglie 40,000 8.51% 8.03 6/11/2014 202,001 511,910
Dan Jamieson 40,000 8.51% 8.03 6/11/2014 202,001 511,910
(1) All stock options granted in 2004 to the Named Executive Officers were
granted under the 1995 stock option plan and vest immediately.
(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 and one day, 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.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table sets forth information, as of December 31, 2004, regarding
securities authorized for issuance upon the exercise of stock options under all
of the Company's equity compensation plans.
(c)
Number of Securities
(b) Remaining Available
Weighted for Future Issuance
(a) Average Exercise Under Equity
Number of Securities to Price of Compensation Plans
be Issued Upon Exercise Outstanding (Excluding Securities
Plan Category of Outstanding Options Options Reflected in Column (a))
-----------------------------------------------------------------------------------------------------------
Equity Compensation Plans
Approved by Stockholders (1) 944,685 5.77 54,095
Equity Compensation Plans
Not Approved by Stockholders (2) 50,000 2.39 -
------------------------------------------------------------------------
Total 994,685 5.60 54,095
-----------------------------------------------------------------------------------------------------------
(1) Consists of options available for grant under the 1995 Stock Plan and the
1995 Director Plan. See "Stock Option Plans" in this proxy statement.
(2) 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 stockholders in
connection with the change of control exceeds the exercise price of the stock
appreciation rights.
11
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 2002,
which provides for a base salary of $225,000 per year. The agreement, which
currently expires on January 15, 2006, automatically renews each year for
successive twelve month periods unless either party gives the other at least
three months written notice of termination.
On December 16, 2003, the employment agreement was amended to provide that the
Company shall pay a performance bonus in the aggregate amount of $230,000,
payable in installments of $46,000 on each of December 31, 2003, March 31, 2004,
June 30, 2004, September 30, 2004 and December 31, 2004 provided that Mr.
Willett continues to be employed by the Company on such date. Such performance
bonus has been paid in full.
The agreement includes the grant of certain stock options; an automobile
allowance and participation in the Company's benefit plans. 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 and immediate vesting of all outstanding
stock awards. 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 severance agreements with Mr. Nynens and Mr.
Legrottaglie. Mr. Nynens is entitled to severance payments for nine months at
the then applicable annual base salary if the Company terminates his employment
for any reason other than for cause. Mr. Legrottaglie 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.
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
require pre-approval by a majority of the disinterested members of the Company's
Board of Directors. There were no such transactions in 2004.
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. Furthermore, no member of the Compensation Committee
had a relationship that requires disclosure under Item 402(j)(3) of Regulation
S-K.
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 75% 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. On June 10, 2004, the Company granted 495,000 options at an option
price of $8.03 per share to officers and key-employees of the Company. The
options granted vested immediately on June 10, 2004. The Company granted options
to purchase 125,000 shares to William H. Willett, the Company's President and
Chief Executive Officer; options to purchase 100,000 shares to Simon Nynens, the
Company's Executive Vice President and Chief Financial Officer; options to
purchase 40,000 shares to Jeffrey Largiader, the Company's Vice President Sales
& Marketing, options to purchase 40,000 shares to Vito Legrottaglie, the
Company's Vice President and Chief Information Officer, options to purchase
40,000 shares to Dan Jamieson, General manager of the Company's Lifeboat
division; and options to purchase 25,000 shares to Steve McNamara, the Vice
President and General Manager of Programmer's Paradise Canada. Each non-employee
director of the Company received options to purchase 25,000 shares of the
Company's Common Stock at an option price of $8.03 per share.
The compensation of the Company's Chief Executive Officer in 2004 consisted of a
base salary, an automobile allowance, a performance bonus as well as 125,000
options. The total compensation package was established considering base
salaries of peer Chief Executive Officers with similar executive
responsibilities. On December 16, 2003, the employment agreement of Mr. Willett
was amended to provide that the Company shall pay Mr. Willett a performance
bonus in the aggregate amount of $230,000, payable in installments of $46,000 on
each of December 31, 2004, March 31, 2004, June 30, 2004, September 30, 2004 and
December 31, 2004 provided that Mr. Willett continued to be employed by the
Company on such date. $46,000 of this bonus was paid in 2003 and $184,000 was
paid in 2004.
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, 1999 and ending
December 31, 2004, assuming $100 was invested on December 31, 1999 and the
reinvestment of dividends.
[GRAPH OMITTED]
INDEXED RETURNS
Base Years Ending
Period
Company / Index Dec99 Dec00 Dec01 Dec02 Dec03 Dec04
--------------------------------------------------------------------------------
PROGRAMMERS PARADISE INC 100 33.61 35.41 25.84 100.33 224.60
S&P MIDCAP 400 INDEX 100 117.51 116.80 99.85 135.41 157.73
S&P 500 COMPUTER & ELECTRONICS
RETAIL 100 57.22 92.06 47.38 92.00 107.40
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 is attached as
Exhibit A to this proxy statement.
In the course of fulfilling its responsibilities during fiscal year 2004, the
Audit Committee has:
o reviewed and discussed with management the audited financial statements
for the year ended December 31, 2004;
o discussed with representatives of Amper, Politziner & Mattia P.C. (the
"Independent Registered Public Accounting Firm") 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
Registered Public Accounting Firm required by Independence Standards
Board Standard No. 1, Independence Discussions with Audit Committees,
as amended;
o discussed with the Independent Registered Public Accounting Firm its
independence from the Company and management; and
o considered whether the provision by the Independent Registered Public
Accounting Firm of non-audit services is compatible with maintaining
the Independent Registered Public Accounting Firm'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 year ended December 31, 2004.
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 Company's independent registered public accounting firm. In performing that
duty, the Audit Committee recommended that the Board of Directors appoint Amper,
Politziner & Mattia P.C. The Board of Directors agreed with this recommendation
and, accordingly, appointed Amper, Politziner & Mattia as Programmer's Paradise,
Inc.'s independent registered public accounting firm for 2005.
Respectfully submitted,
F. Duffield Meyercord
Allan Weingarten
Edwin H. Morgens
15
APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee annually considers and recommends to the Board of Directors
the selection of the Company's independent registered public accounting firm.
Our independent registered public accounting firm during the year ended December
31, 2004 was Amper, Politziner & Mattia P.C. Amper, Politziner & Mattia P.C.
has audited our financial statements since 2002. As recommended by the Audit
Committee, the Board of Directors has appointed Amper, Politziner & Mattia P.C.
to serve as the Company's independent registered public accounting firm for
2005. One or more representatives of Amper, Politziner & Mattia P.C. are
expected to be present at the meeting. They will have the opportunity to make a
statement and will be available to respond to appropriate questions.
Fees and Independence
Audit Fees. We paid Amper, Politziner & Mattia P.C. an aggregate of $101,285 and
$71,905, respectively for professional services rendered for the audit of our
financial statements for the years ended December 31, 2004 and 2003 and its
reviews of our unaudited financial statements included in our quarterly reports
on Form 10-Q for the quarterly period in the years ended December 31, 2004 and
2003, respectively.
Audit-Related Fees. We paid Amper, Politziner & Mattia P.C. an aggregate of $0,-
and $28,870 for assurance and services related to the Company's defined
contribution plan and accounting consultations for the years ended December 31,
2004 and 2003, respectively.
Tax Fees. The aggregate fees billed for professional services rendered by Amper,
Politziner & Mattia P.C. during fiscal 2004 and 2003 for tax compliance, tax
advice and tax planning were $28,260 and $14,450 respectively.
All Other Fees. During the years ended December 31, 2004 and 2003, Amper,
Politziner & Mattia P.C. did not provide or bill for other services not included
above.
The Audit Committee has determined that the provision of services by Amper,
Politziner & Mattia P.C. described in the preceding paragraphs is compatible
with maintaining Amper, Politziner & Mattia's independence. All permissible
non-audit services provided by Amper, Politziner & Mattia P.C. in 2003 and 2004
were pre-approved by the Audit Committee.
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.
16
STOCKHOLDER PROPOSALS FOR INCLUSION IN THE COMPANY'S 2006 ANNUAL MEETING PROXY
STATEMENT AND PROXY CARD
Any Stockholder proposal to be considered by us for inclusion in the Company's
2006 proxy statement and form of proxy card for next year's Annual Meeting of
Stockholders, expected to be held in June 2006, must be received by the
Company's Corporate Secretary at the Company's principal executive offices
located at 1157 Shrewsbury Avenue, Shrewsbury, NJ 07702, no later than December
30, 2005 (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 2006 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 2006 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 2006 annual meeting should be
addressed to the Company's Corporate 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 29, 2005
17
Annex A
PROGRAMMER'S PARADISE, INC.
AUDIT COMMITTEE CHARTER
(Amended and Restated as of April 28, 2005)
PURPOSE
The primary function of the Audit Committee of the Board of Directors
of Programmer's Paradise, Inc. (the "Company") is to assist the Board of
Directors in the oversight of the integrity of the Company's financial
statements, the Company's compliance with legal and regulatory requirements, the
independent registered public accounting firm's qualifications and independence
and the performance of the Company's internal audit function and independent
registered public accounting firm. The Audit Committee shall also prepare the
Audit Committee Report required by the Securities and Exchange Commission (the
"SEC") to be included in the Company's annual proxy statement.
The Audit Committee shall fulfill its oversight responsibilities by
reviewing the following: the financial reports and other financial information
provided by the Company to its shareholders, the SEC and others; the Company's
systems of internal controls regarding finance, accounting, legal compliance and
business conduct that Management and the Board have established; and the
Company's auditing, accounting and financial processes generally. Consistent
with this function, the Audit Committee should encourage continuous improvement
of and adherence to these processes and systems. The Audit Committee's primary
duties and responsibilities are to:
o serve as an independent and objective party to monitor the
Company's financial reporting process and internal control
systems;
o review1 and appraise the audit efforts of the Company's
independent registered public accounting firm and exercise
ultimate authority over the relationship between the Company and
its independent registered public accounting firm; and
o provide an open avenue of communication among the independent
registered public accounting firm, financial and senior
Management and the Board of Directors.
In the exercise of its oversight responsibilities, it is not the duty
of the Committee to plan or conduct audits or to determine that the Company's
financial statements fairly present the Company's financial position and results
of operation and are in accordance with generally accepted accounting
principles. Instead, such duties remain the responsibility of Management and the
outside independent registered public accounting firm. Nothing contained in this
charter is intended to alter or impair the operation of the "business judgment
rule" as interpreted by the courts under the Delaware General Corporation Law.
Further, nothing contained in this charter is intended to alter or impair the
right of the members of the Committee under the Delaware General Corporation Law
to rely, in discharging their responsibilities, on the records of the Company
and on other information presented to the Committee, Board or the Company by its
officers or employees or by outside experts.
COMPOSITION OF THE AUDIT COMMITTEE
The Committee shall consist of three members of the Board. The members
shall be appointed by action of the Board and shall serve at the discretion of
the Board. The Board shall designate one member of the Committee to serve as its
chair. With respect to each Committee member, the Board shall affirmatively
determine that the member satisfies the requirements for "independence" imposed
by The NASDAQ Stock Market or other appropriate governing body, Section 10A(3)
of the Securities Exchange Act of 1934 (the "Exchange Act"), and all rules and
regulations promulgated thereunder by the SEC. Each Committee member must be
financially literate, as required by The NASDAQ Stock Market and
---------------------
1 Auditing literature, particularly, Statement of Auditing Standards No.
100, defines the term "review" to include a particular set of required
procedures to be undertaken by independent accountants. The members of the Audit
Committee are not independent accountants, and the term "review" as used in this
Audit Committee Charter is not intended to have this meaning. Consistent with
footnote 47 of SEC Release No. 34-42266, any use in this Audit Committee Charter
of the term "review" should not be interpreted to suggest that the Committee
members can or should follow the procedures required of auditors performing
reviews of interim financial statements.
18
determined by the Board in its business judgment, or must be able to become
financially literate within a reasonable period of time after his or her
appointment to the Committee. The Audit Committee must have at least on member
with accounting or related financial management expertise, as defined by the
Board in its business judgment. The Board and the Company shall use diligent
efforts to have at least one Audit Committee member who meets the criteria of
"audit committee financial expert" as prescribed by SEC rules. If an Audit
Committee member simultaneously serves on the audit committee of more than three
public companies, the Board must determine that such simultaneous service does
not impair the ability of such member to serve effectively on the Committee and
must disclose such determination in the annual proxy statement.
Determination of the true, actual and effective independence of any
Audit Committee member that has or had some relationship with the Company, will
be made by the Board of Directors in accordance with the requirements of The
NASDAQ Stock Market and the SEC, with weight given to both prudent principles
and "appearances."
The Audit Committee shall be designated and its membership appointed in
accordance with and subject to the Company's bylaws.
MEETINGS
The Committee shall meet at least four times annually, or more
frequently as circumstances dictate. As part of its job to foster open
communication, the Committee should meet at least four times annually with
Management, the independent registered public accounting firm and the internal
auditors, if any, in separate executive sessions to discuss any matters that the
Committee believes should be discussed privately. In addition, the Committee, or
at least its Chair, should meet with the independent registered public
accounting firm and Management quarterly in advance of any earnings press
release to review the Company's financials consistent with its responsibilities
and duties.
The Committee shall report to the Board of Directors at each regularly
scheduled Board meeting on significant results of its activities.
The Committee shall have the authority to establish its own rules and
procedures consistent with the bylaws of the Company for notice and conduct of
its meetings, should the Committee, in its discretion, deem it desirable to do
so.
The Committee may, in its discretion, utilize the services of the Company's
regular corporate legal counsel with respect to legal matters or, at its
discretion, retain other legal, accounting or other advisors if the Committee
determines that such counsel is necessary or appropriate under the
circumstances. The Audit Committee shall have sole authority to approve all fees
and terms of engagement of such advisors, and the Company shall provide
sufficient funding for the payment of any such advisors retained by the
Committee.
RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties, the Audit Committee shall:
Documents/Reports Review
o Discuss with Management and the independent registered public accounting
firm the Company's annual and interim financial statements, earnings press
releases, earnings guidance and any reports or other financial information
submitted to the shareholders, the SEC, analysts, rating agencies and
others, including any certification, report, opinion or review rendered by
the independent accountants.
o Review the regular internal reports to Management prepared by the internal
auditors, if any, and Management's response.
o Discuss with Management and the independent registered public accounting
firm the Quarterly Reports on Form 10-Q, the Annual Reports on Form 10-K,
including the Company's disclosures under "Management's Discussion and
Analysis of Financial Conditions and Results of Operations," and any related
public disclosure prior to its filing.
19
Independent Registered Public Accounting firm
o Have sole authority for the appointment, compensation, retention, oversight,
termination and replacement of the Company's independent registered public
accounting firm (subject, if applicable, to stockholder ratification). Such
appointment shall satisfy Sections 10A(j) and (l) of the Exchange Act and
any rules promulgated thereunder with respect to audit partner rotation and
conflict of interest, respectively. The independent registered public
accounting firm shall report directly to the Audit Committee. The Company
shall provide sufficient funding for the payment of the independent
registered public accounting firm.
o Pursuant to Section 10A(i)(1) of the Exchange Act, pre-approve all auditing
services and all non-audit services to be provided by the independent
registered public accounting firm, provided that the Audit Committee shall
not approve any prohibited non-audit services set forth in Section 10A(g) of
the Exchange Act.
o Periodically, the Committee should review and discuss with the independent
registered public accounting firm all significant relationships such firm
has with the Company which might affect its independence. In connection with
this review, the independent registered public accounting firm shall provide
the Committee with a written statement delineating all relationships between
the independent registered public accounting firm and the Company.
o Review the performance of the independent registered public accounting firm
with both Management and the independent registered public accounting firm.
o Subject to the overall direction of the Audit Committee, the internal audit
function will be managed on a day-to-day operational basis by the Chief
Executive Officer.
o Periodically meet with the independent registered public accounting firm
separately and privately to hear its views on the adequacy of the Company's
internal control over financial reporting, any special audit steps adopted
in light of material control deficiencies and the qualitative aspects of the
Company's financial reporting, including the quality and consistency of both
accounting policies and the underlying judgments, or any other matters
raised by it.
o Obtain and review a report from the independent registered public accounting
firm at least annually regarding (a) the independent registered public
accounting firm's internal quality-control procedures, (b) any material
issues raised by the most recent quality-control review, or peer review, of
the firm, or by any inquiry or investigation by governmental or professional
authorities within the preceding five years respecting one or more
independent audits carried out by the firm, (c) any steps taken to deal with
any such issues, and (d) all relationships between the independent
registered public accounting firm and its related entities and the Company
and its related entities.
Financial Reporting Processes
o Review with financial Management and the independent registered public
accounting firm the quality and consistency, not just the acceptability, of
the judgments and appropriateness of the accounting principles and financial
disclosure practices used by the Company, including an analysis of the
effects of any alternative GAAP methods on the financial statements. This
discussion shall cover the degree of aggressiveness or conservatism of both
the accounting principles employed and the underlying judgments.
o Approve any significant changes to the Company's auditing and accounting
principles and practices after considering the advice of the independent
registered public accounting firm and Management.
o Focus on the reasonableness of control processes for identifying and
managing key business, financial and regulatory reporting risks.
o Discuss with Management the Company's major financial risk exposures and the
steps Management has taken to monitor and control such exposures, including
the Company's risk assessment and risk management policies.
20
o Periodically meet with appropriate representatives of Management and the
internal auditors, if any, separately and privately to consider any matters
raised by them, including any audit problems or difficulties and
Management's response.
o Periodically review the effect of regulatory and accounting initiatives, as
well as any off-balance sheet structures, on the financial statements of the
Company.
Process Improvement
o Following the completion of the annual audit, review separately with
Management and the independent registered public accounting firm any
difficulties encountered during the course of the audit, including any
restrictions on the scope of work or access to required information.
o Periodically review processes and policies for communicating with investors
and analysts.
o Review and resolve any disagreement between Management and the independent
registered public accounting firm in connection with the annual audit or the
preparation of the financial statements.
o Review with the independent registered public accounting firm and Management
the extent to which changes or improvements in financial or accounting
practices, as approved by the Audit Committee, have been implemented. (This
review should be conducted at an appropriate time subsequent to
implementation of changes or improvements, as decided by the Committee.)
Business Conduct and Legal Compliance
o Review the Company's Code of Ethical Conduct and review Management's
processes for communicating and enforcing this Code.
o Review Management's monitoring of the Company's compliance with the
organization's Code of Ethical Conduct, and ensure that Management has the
proper review system in place to ensure that the Company's financial
statements, reports, and other financial information disseminated to
governmental organizations and to the public satisfy legal requirements.
o Review, with the Company's counsel, any legal matter that could have a
significant impact on the Company's financial statements.
Other Responsibilities
o Establish and review periodically procedures for (a) the receipt, retention
and treatment of complaints received by the Company regarding accounting,
internal accounting controls or auditing matters and (b) the confidential,
anonymous submission by employees of the Company of concerns regarding
questionable accounting or auditing matters.
o Provide the report for inclusion in the Company's annual proxy statement
that is required by Item 306 of Regulation S-K of the Securities and
Exchange Commission.
o Through its Chair, report periodically, as deemed necessary or desirable by
the Committee, but at least annually, to the full Board regarding the
Committee's actions and recommendations, if any.
o Establish policies for the Company's hiring of employees or former employees
of the independent registered public accounting firm who were engaged on the
Company's account.
o Perform any other activities consistent with this Charter, the Company's
bylaws and governing law, as the Committee or the Board deems necessary or
appropriate.
ANNUAL PERFORMANCE EVALUATION
The Audit Committee shall perform a review and evaluation, at least
annually, of the performance of the Audit Committee and its members, including
reviewing the compliance of the Audit Committee with this Charter, and report
the
21
results of such evaluation to the Board. In addition, the Audit Committee shall
review and reassess, at least annually, the adequacy of this Charter and
recommend to the Board any improvements to this Charter that the Compensation
Committee considers necessary or valuable.
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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 26, 2005, at the Annual Meeting
of Stockholders to be held at the offices of Dechert LLP, 30 Rockefeller Plaza,
New York, New York, on June 14, 2005 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 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 EACH OF THE NOMINEES IN 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: , 2005
--------------------------
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