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, 2006
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 company's
headquarters at 1157 Shrewsbury Avenue, Shrewsbury, New Jersey, on June 14, 2006
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 approve an amendment to the Company's Amended and Restated
Certificate of Incorporation to change our corporate name to Wayside
Technology Group, Inc.;
3. To approve the 2006 Stock Incentive Plan (the "2006 Plan");
4. To ratify the appointment of Amper, Politziner & Mattia P.C. as the
Company's independent registered public accounting firm for 2006; and
5. 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 25, 2006 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,
2005 is enclosed herewith.
By Order of the Board of Directors,
William H. Willett,
Chairman
April 28, 2006
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
corporate headquarters, 1157 Shrewsbury Ave, Shrewsbury, New Jersey, on June 14,
2006 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 Corporate 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 28,
2006.
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 25, 2006 are
entitled to vote at the Meeting. On April 25, 2006 (the "Record Date"),
4,143,262 shares of Common Stock were issued and outstanding. In addition, on
that date, 1,138,738 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 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", FOR the amendment to the Company's Amended and Restated
Certificate of Incorporation, FOR the approval of the 2006 Stock Incentive Plan
and FOR the ratification of the Company's independent public accountants, 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.
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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, 2006 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 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, 2005 (the "Named
Executive Officers") 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
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Mark T. Boyer (1) 393,842 9.4%
William H. Willett (2) 210,893 4.9%
Edwin Morgens (3) 200,969 4.8%
Jeffrey Largiader (4) 92,500 2.2%
Simon F. Nynens (5) 114,320 2.7%
F. Duffield Meyercord (6) 75,362 1.8%
Allan D. Weingarten (7) 32,362 0.8%
Vito Legrottaglie (8) 55,270 1.3%
Dan Jamieson (9) 45,000 1.1%
All Directors and executive officers as a group (9 persons) (10) 1,220,518 25.3%
ROI Master Fund, Ltd. (11) 267,568 6.5%
J. Steven Emerson (12) 262,951 6.3%
Barclays Global Investors, NA (13) 223,730 5.4%
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, Inc., 1157 Shrewsbury Avenue, Shrewsbury, New Jersey
07702.
(1) Beneficial ownership information is based upon information provided by
ROI Master Fund, Ltd. ("ROI") and Mr. Boyer. By virtue of Mr. Boyer's
ownership interest in ROI, Mr. Boyer may be deemed to beneficially own
the 267,568 shares beneficially owned by ROI. See footnote 11 below.
Mr. Boyer beneficially owns directly 78,100 shares. Includes 48,174
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, 2006.
(2) Includes 200,893 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, 2006.
(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 45,632 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, 2006.
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(4) Includes 90,000 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, 2006.
(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, 2006.
(6) Includes 45,362 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, 2006.
(7) Includes 30,362 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, 2006.
(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, 2006.
(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, 2006.
(10) Includes 674,473 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, 2006.
(11) Based solely on information provided by ROI in a Schedule 13G/A filed
with the Securities and Exchange Commission on March 7, 2006. The
address for ROI is 300 Drakes Landing Road, Suite 175, Greenbrae, CA
94904. Beneficial ownership information is based upon information
provided by ROI.
(12) Based solely on information provided by J. Steven Emerson in a Schedule
13G/A filed with the Securities and Exchange Commission on November 17,
2005. The address of J. Steven Emerson is 1522 Ensley Avenue, Century
City, CA 90024. Includes 25,151 shares of Common Stock owned by Emerson
Partners, over which Mr. Emerson exercises voting and dispositive
powers.
(13) Based solely on information provided by Barclays Global Investors, NA
in a Schedule 13G filed with the Securities and Exchange Commission on
January 26, 2006. The address of Barclays Global Investor is 45
Freemont Street, San Francisco, CA 94105.
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 six times in 2005. 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 2005.
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.
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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.
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 2005.
The Audit Committee operates under a written charter adopted by the Board of
Directors. A copy of the charter is 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 25 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 2005.
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 23 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 met once during 2005. The Nominating and
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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 statement and form
of proxy for the annual meeting of stockholders to be held in 2007, 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 SEC promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") 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 experiences 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
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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 Option Plans--1995
Non-Employee Director Plan." On April 21, 2005, each non-employee Director
received non-qualified options to purchase 3,000 shares of Common Stock with an
exercise price of $12.85 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.
PROPOSAL 1
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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. Each of the nominees has consented to be
named in this proxy statement and to serve as a Director upon election, and
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 25, 2006, with respect to
each nominee:
Director
Name Age Principal Occupation Since
---- --- -------------------- -----
William H. 69 Mr. Willett has served as a Director of the Company since December 1996. In July 1998, December
Willett Mr. Willett was appointed to the position of Chairman. Mr. Willett also served as 1996
President and Chief Executive Officer of the company from July 1998 to January 2006.
Simon F. Nynens 34 Mr. Nynens was appointed President and Chief Executive Officer in January 2006. Mr. January
Nynens also was elected to the Board to fill the vacancy on the Board in January 2006. 2006
He previously held the positions of Executive Vice President and Chief Financial Officer
since June 2004, and Vice President and Chief Financial Officer from January 2002 to
June 2004. Prior to that appointment he served as the Vice President and Chief Operating
Officer of the Company's European operations.
F. Duffield 59 Mr. Meyercord has served as a Director of the Company since December 1991. Mr. Meyercord December
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Director
Name Age Principal Occupation Since
---- --- -------------------- -----
Meyercord is a Managing Partner and a Director of Carl Marks Consulting Group, LLC in New York. He 1991
is also the Managing Director and founder of Meyercord Advisors, Inc. a consulting firm
offering financial and operational assistance to corporations. Mr. Meyercord currently
serves as a Director of the Peapack Gladstone Bank and Headway Corporate Resources.
Edwin H. Morgens 64 Mr. Morgens was a founder of the Company and has served as a Director of the Company May
since May 1982. Mr. Morgens is and has been the Chairman and co-founder of Morgens, 1982
Waterfall, Vintiadis & Co. Inc., an investment firm in New York, New York since 1968.
Mr. Morgens currently serves as a Director of TransMontaigne, Inc.
Allan D. 68 Mr. Weingarten has served as a Director of the Company since April 1997. From January April
Weingarten 2001, until retiring in December 2003, Mr. Weingarten was the Senior Vice President and 1997
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 48 Mr. Boyer was appointed to the Board in April 2001. Mr. Boyer is and has been the April
President and a Director of ROI Capital Management in Greenbrae, California since 1992. 2001
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.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF EACH OF
THE NOMINATED DIRECTORS.
PROPOSAL 2
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TO APPROVE AN AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION TO CHANGE OUR CORPORATE NAME TO WAYSIDE TECHNOLOGY GROUP, INC.
The Board of Directors has determined that it is advisable to change the name of
the Company from Programmer's Paradise, Inc. to Wayside Technology Group, Inc.
and has voted to recommend that the stockholders adopt an amendment to our
amended and restated certificate of incorporation effecting the proposed name
change.
We have expanded our service offerings beyond the niche of serving programmers.
This change in our company name signals to the market our identity as a unified
and integrated technology company. The name Wayside Technology Group, Inc. will
provide our subsidiaries with a flexible corporate structure and gives us the
flexibility to build on our strong brands and start new divisions focused on
consultancy and additional services. We have started to report our financial
information per segment and this new corporate structure is a logical step
towards an expanding technology company.
Our customers from our operating subsidiaries Lifeboat Distribution and
Programmers Paradise will not see any change in the name of our powerful brands
- Lifeboat Distribution and Programmer's Paradise. We have no intentions to
sunset any of our brands.
Having a stronger, clearer identity will enhance our competitive advantage. It
will offer clarity and simplicity in the marketplace. While the Programmer's
Paradise brand has strong brand recognition, Wayside Technology Group provides
the structure many software vendors, customers, key upstream partners and
stockholders would like to see.
8
Upon approval we will change our stock ticker symbol to "WSTG". Since this will
only affect our corporate name we believe that this name change can be
cost-effectively implemented in a timely manner.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSAL TO CHANGE OUR
CORPORATE NAME.
PROPOSAL 3
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APPROVAL OF THE 2006 STOCK INCENTIVE PLAN
The board of directors adopted the 2006 Stock Incentive Plan (the "2006 Plan")
on April 12, 2006 subject to stockholder approval at the 2006 Annual meeting.
The board believes that it is in the best interests of the Company to adopt the
2006 Plan so that the Company can continue to attract and retain services of
those persons essential to the Company's growth and financial success.
The following is a summary of the principal features of the 2006 plan. The
summary does not purport to be a complete description of all the provisions of
the 2006 Plan and is qualified by its entirety by reference to the 2006 Plan
document, a copy of which has been filed with the Securities and Exchange
Commission and as Exhibit A to this proxy statement. Capitalized terms not
otherwise defined in this summary have the meanings given to them in the 2006
Plan. Any stockholder of the Company who wishes to obtain a copy of the actual
2006 Plan may do so upon written request to the Corporate Secretary at the
Company's principal executive offices in Shrewsbury, New Jersey.
General. The 2006 Plan will authorize the grant of Stock Units, Options, Stock
Appreciation Rights, Restricted Stock, Deferred Stock, Stock Bonuses, and other
equity-based awards (collectively, "Awards"). Options granted under the 2006
Plan may be either "incentive stock options" as defined in section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or nonqualified stock
options, as determined by the Compensation Committee of our Board (the
"Committee").
Number of Shares Authorized. The number of shares of Common Stock initially
available for award under the 2006 Plan is 800,000 shares. If any Award is
forfeited, or if any Option terminates, expires or lapses without being
exercised, shares of Common Stock subject to such Award will again be available
for future grant. In addition, any shares under the 2006 Plan that are used to
satisfy award obligations under the plan of another entity that is acquired by
the Company will not count against the remaining number of shares available.
Finally, if there is any change in the Company's corporate capitalization, the
Committee in its sole discretion may cancel and make substitutions of Awards or
may adjust the number of shares available for award under the 2006 Plan, the
number and kind of shares covered by Awards then outstanding under the 2006 Plan
and the exercise price of outstanding Options and Stock Appreciation Rights.
Administration. The Committee will administer the 2006 Plan. Subject to the
other provisions of the 2006 Plan, the Committee has the authority to:
o interpret the 2006 Plan;
o establish and amend rules and regulations relating to the 2006 Plan;
o select the participants and determine the type of Awards to be made to
participants, the number of shares subject to Awards and the terms,
conditions, restrictions and limitations of Awards; provided, however,
that the Company's Nominating and Corporate Governance Committee shall
recommend to the Board, and the Board, not the Committee, shall have
the sole and absolute authority to grant Awards to non-employee
directors; and
o make all other determinations it deems necessary or advisable for the
administration of the 2006 Plan.
Eligibility. The 2006 Plan provides that Awards may be granted to employees,
non-employee directors and
9
consultants of the Company or its subsidiaries. Incentive stock options may be
granted only to employees. The maximum number of shares that may be awarded to a
participant in the form of Options or SARs, any calendar year shall not exceed
300,000 in the aggregate. The maximum payment to an individual based on the
achievement of performance goals applicable to Awards of Deferred Stock,
Restricted Stock, Stock Bonuses and/or Stock Units may not exceed $1,500,000 for
any performance period.
Each Award granted under the 2006 Plan will be evidenced by a written award
agreement between the participant and the Company, which will describe the Award
and state the terms and conditions applicable to such Award. The principal terms
and conditions of each particular type of Award are described below.
Performance Goals
The Award agreements may provide for vesting or earning the Award based on
achievement of performance goals. Performance goals may be established on a
Company-wide basis; with respect to one or more subsidiary corporations,
business units, divisions, department, or functions, and in either absolute
terms or relative to the performance of one or more comparable companies or an
index covering multiple companies. Performance goals, the number of shares or
units to which they pertain, the time and manner of payment of the Award shall
be specified in the Award agreement.
Except in the case of Awards intended to meet the requirements of Section 162(m)
of the Code applicable to qualified performance-based compensation ("Qualified
Performance-Based Awards"), the Committee may modify performance goals in whole
or in part, during the performance period, as it deems appropriate and
equitable. In the case of Qualified Performance-Based Awards, the applicable
performance goals are limited to one or more of the following:
o the price of Common Stock;
o the market share of the Company and any subsidiary (or any business
unit thereof);
o sales by the Company or any subsidiary (or any business unit thereof);
o earnings per share of Common Stock;
o return on stockholder equity of the Company;
o costs of the Company or any subsidiary (or any business unit thereof);
o cash flow of the Company (or any business unit thereof);
o return on total assets of the Company or any subsidiary (or any
business unit thereof);
o return on invested capital of the Company or any subsidiary (or any
business unit thereof);
o return on net assets of the Company or any subsidiary (or any business
unit thereof);
o operating income of the Company or any subsidiary (or any business unit
thereof); and
o net income of the Company or any subsidiary (or any business unit
thereof).
Stock Units and Stock Bonuses
Awards of Stock Units may be made under the 2006 Plan. A Stock Unit is a
book-entry unit with a value equal to one share of Common Stock. A grant of
Stock Units will vest and become payable to the participant upon termination of
employment or other service or upon other future events, including the
achievement during a specified performance period of performance goals
established by the Committee. Payment of Stock Units shall be made in cash equal
to the fair market value of the shares of Common Stock to which the Award
relates multiplied by the number of Stock Units granted.
Stock Bonuses may be granted to participants entitling them to payment of a
specified number of shares of Common Stock, which shares may (but need not) be
payable at a future date and subject to such conditions as the Committee shall
determine appropriate, including achievement of performance goals specified at
the time of grant.
Options
An Option is the right to purchase shares of Common Stock for a specified period
of time at a fixed price (the
10
"exercise price"). As of April 12, 2006, the closing price per share for our
Common Stock was $12.75. Each Option agreement will specify the exercise price,
the type of Option, the term of the Option, the date when the Option will become
exercisable and any applicable performance goals. Incentive stock options may
only be granted to employees, shall only be transferable by will or under the
laws of descent and distribution, and, during the participant's lifetime, may
only be exercised by the participant. No Award of incentive stock options may
permit the fair market value of any such Options becoming first exercisable in
any calendar year to exceed $100,000.
Exercise Price. The Committee will determine the exercise price of an Option at
the time the Option is granted. The exercise price under an incentive stock
option or non-qualified stock option will not be less than 100% of the fair
market value of Common Stock on the date the Option is granted. However, any
optionee who owns more than 10% of the combined voting power of all classes of
the Company's outstanding Common Stock (a "10% Stockholder") will not be
eligible for the grant of an incentive stock option unless the exercise price of
the incentive stock option is at least 110% of the fair market value of the
Common Stock on the date of grant.
Consideration. The means of payment for shares issued upon exercise of an Option
will be specified in each Option agreement and generally may be made by the
participant in cash, in a cash payment through a broker or bank from the
proceeds of the sale of the shares purchased through the exercise of the Option
(a "cashless exercise"), with the Committee's consent, in whole or in part with
shares of Common Stock owned by the participant for at least six months, or a
combination of the foregoing methods. The Committee may also permit a
non-qualified Option to be exercised with Restricted Stock that has not yet
vested, in which case the shares received upon exercise of the Option will,
unless otherwise determined by the Committee, be subject to the same
restrictions as the Restricted Stock.
Term of the Option. The term of an Option granted under the 2006 Plan will be no
longer than ten years from the date of grant. In the case of an Option granted
to a 10% Stockholder, the term of an incentive stock option will be for no more
than five years from the date of grant.
Stock Appreciation Rights
A stock appreciation right ("SAR") entitles the recipient to receive, upon
exercise of the SAR, the increase in the fair market value of a specified number
of shares of Common Stock from the date of the grant of the SAR to the date of
exercise, payable in cash, shares of Common Stock, shares of Deferred Stock,
shares of Restricted Stock or any combination thereof. An SAR may be granted in
tandem with an Option or separately (a "free-standing SAR"). The Committee shall
set the exercise price of an SAR which shall not be less than the Fair Market
Value of the underlying Common Stock on the date of the grant. Any grant may
specify a waiting period or periods before the SAR may become exercisable and
permissible dates or periods on or during which the SAR shall be exercisable. No
SAR may be exercised more than ten years from the grant date.
Restricted and Deferred Shares
An Award of Restricted Stock is a grant to the recipient of a specified number
of shares of Common Stock which are subject to forfeiture upon specified events
during the restriction period. Each grant of Restricted Stock will specify the
length of the restriction period and will include restrictions on transfer to
third parties during the restriction period.
An Award of Deferred Stock is an agreement by the Company to deliver to the
recipient a specified number of shares of Common Stock at the end of a specified
deferral period, subject to the fulfillment of any conditions specified by the
Committee.
General Provisions
Vesting. Each grant of Stock Units and Stock Bonuses shall specify the
conditions, including performance goals, if applicable, that must be satisfied
in order for payment to be made. Each grant of Options or SARs shall specify the
length of service and/or any applicable performance goals that must be achieved
before it becomes exercisable. Each
11
grant of Restricted Stock shall specify the duration of the restriction period
and any other conditions that under which the Restricted Stock would be
forfeitable to the Company, including any applicable performance goals. Each
grant of Deferred Stock shall specify the deferral period and any other
conditions to which future delivery of shares to the recipient is subject,
including any applicable performance goals. Each grant may provide for the early
exercise rights or termination of a restriction or deferral period in the event
of a Change in Control or similar transaction or event.
Dividends/Ownership Rights. Unless otherwise provided by the Committee, an Award
of Bonus Stock or Restricted Stock entitles the participant to dividend, voting
and other ownership rights during the restriction period. An Award of Deferred
Stock does not entitle the participant to any transfer, voting or any other
ownership rights with respect to the Deferred Shares. Any grant of Deferred
Stock may provide for the payment of dividend equivalents in cash or additional
shares.
Nontransferability of Awards. In general, during a participant's lifetime, his
or her Awards shall be exercisable only by the participant and shall not be
transferable other than by will or laws of descent and distribution. However,
the Committee may provide for limited lifetime transfers of Awards, other than
incentive stock options, to certain family members. In addition, an Award grant
may provide for additional transfer restrictions on vested shares received upon
exercise, delivery, or payment of an Award, including restrictions relating to
minimum share ownership requirements applicable to any participant.
Termination of Employment, Consulting Services, or Other Services. The Committee
may take actions which it believes equitable under the circumstances or in the
best interests of the Company with respect to Awards that are not fully vested
in the event of termination of employment or service by reason of death,
disability, normal retirement, early retirement with the consent of the
Committee, other termination or a leave of absence that is approved by the
Committee, or in the event of hardship or other special circumstances that are
approved by the Committee. Unless otherwise determined by the Committee, upon a
participant's termination for Cause, all outstanding Options or SARs shall
expire and all shares of Restricted Stock still subject to a restriction period
and Deferred Stock still subject to a deferral period shall be forfeited.
Award Deferrals. An Award Agreement may provide for the deferral of any Award,
dividend or dividend equivalent until a specified time and under such terms as
established by the Committee.
Change in Control
Unless otherwise determined by the Committee, in the event of a Change in
Control (as defined in the 2006 Plan), all Awards that have not vested or been
cancelled or forfeited shall become fully vested and exercisable immediately
upon such event, provided the Award has not been forfeited and the participant
has remained employed by, or otherwise in the service of, the Company at the
date of such event. Alternatively, the Committee may cancel and cash out
outstanding Awards or arrange for the substitution of outstanding Awards with
new awards of equal value. If a Change of Control occurs during one or more
performance periods for which the Committee has not yet made a determination as
to whether the applicable performance objectives were met, the performance
period shall immediately terminate and it shall be assumed that the applicable
performance objectives have been attained at a level of one hundred percent
(100%). A participant shall be considered to have earned, and therefore be
entitled to receive, payment of a prorated portion of the performance Awards
that he or she would have received for the whole performance period, based on
the portion of the performance period completed before the Change in Control. In
addition, any Award deferred by a participant may be payable in connection with
such Change in Control.
Effective Date, Amendments, and Termination of the 2006 Plan. The 2006 Plan will
be effective upon its approval by Company stockholders. The Board of Directors
has the authority to amend or terminate the 2006 Plan at any time; provided,
however, that stockholder approval is required for any amendment which (i)
materially increases the number of shares available for Awards under the 2006
Plan (other than to reflect a change in the Company's capital structure), (ii)
materially increases the maximum number of shares allowed for grants to any
participant, (iii) materially changes the class of persons eligible to receive
grants of Awards or the types of Awards available under the 2006 Plan, (iv)
12
materially increases the benefits to participants under the 2006 Plan, or (v) as
otherwise required by applicable law or the NASDAQ rules. Further, no Award may
be repriced, replaced, regranted through cancellation, or modified without
stockholder approval. Finally, the 2006 Plan will terminate automatically ten
years after it is approved by stockholders.
Certain Federal Income Tax Considerations
The following discussion is a summary of certain federal income tax
considerations that may be relevant to participants in the 2006 Plan. The
discussion is for general informational purposes only and does not purport to
address specific federal income tax considerations that may apply to a
participant based on his or her particular circumstances, nor does it address
state or local income tax or other tax considerations that may be relevant to a
participant.
Stock Units and Stock Bonuses
A participant realizes no taxable income and the Company is not entitled to a
deduction when Stock Units or Stock Bonuses payable in the future and subject to
conditions such as the achievement of performance goals (a "Conditional Stock
Bonus") are awarded. Stock Bonuses not subject to future conditions constitute
taxable income to the participant when granted and the Company is entitled to a
corresponding deduction. When the Stock Units or Conditional Stock Bonuses vest
and become payable as a result of the satisfaction of the terms and conditions
on such Award, including, if applicable, achievement of performance goals, the
participant will realize ordinary income equal to the amount of cash received or
the fair market value of the shares received minus any amount paid for the
shares, and, subject to Section 162(m) of the Code, the Company will be entitled
to a corresponding deduction.
A participant's tax basis in shares of Common Stock received upon payment will
be equal to the fair market value of such shares when the participant receives
them. Upon a sale of the shares, the participant will realize short-term or
long-term capital gain or loss, depending upon whether the shares have been held
for more than one year at the time of sale. Such gain or loss will be equal to
the difference between the amount realized upon the sale of the shares and the
tax basis of the shares in the participant's hands.
Deferred Stock
A participant realizes no taxable income and the Company is not entitled to a
deduction when Deferred Stock is awarded. When the deferral period for the Award
ends and the participant receives shares of Common Stock, the participant will
realize ordinary income equal to the fair market value of the shares at that
time, and, subject to Section 162(m) of the Code, the Company will be entitled
to a corresponding deduction. A participant's tax basis in shares of Common
Stock received at the end of a deferral period will be equal to the fair market
value of such shares when the participant receives them. Upon sale of the
shares, the participant will realize short-term or long-term capital gain or
loss, depending upon whether the shares have been held for more than one year at
the time of sale. Such gain or loss will be equal to the difference between the
amount realized upon the sale of the shares and the tax basis of the shares in
the participant's hands.
Restricted Stock
Restricted Stock received pursuant to Awards will be considered subject to a
substantial risk of forfeiture for federal income tax purposes. If a participant
who receives such Restricted Stock does not make the election described below,
the participant realizes no taxable income upon the receipt of Restricted Stock
and the Company is not entitled to a deduction at such time. When the forfeiture
restrictions with respect to the Restricted Stock lapse, the participant will
realize ordinary income equal to the fair market value of the shares at that
time, and, subject to Section 162(m) of the Code, the Company will be entitled
to a corresponding deduction. A participant's tax basis in Restricted Stock will
be equal to their fair market value when the forfeiture restrictions lapse, and
the participant's holding period for the shares will begin when the forfeiture
restrictions lapse. Upon sale of the shares, the participant will realize
short-term or long-term gain or loss, depending upon whether the shares have
been held for more than one year at the time of
13
sale. Such gain or loss will be equal to the difference between the amount
realized upon the sale of the shares and the tax basis of the shares in the
participant's hands.
Participants receiving Restricted Stock may make an election under Section 83(b)
of the Code with respect to the shares. By making a Section 83(b) election, the
participant elects to realize compensation income with respect to the shares
when the shares are received rather than at the time the forfeiture restrictions
lapse. The amount of such compensation income will be equal to the fair market
value of the shares when the participant receives them (valued without taking
the restrictions into account), and the Company will be entitled to a
corresponding deduction at that time. By making a Section 83(b) election, the
participant will realize no additional compensation income with respect to the
shares when the forfeiture restrictions lapse, and will instead recognize gain
or loss with respect to the shares when they are sold. The participant's tax
basis in the shares with respect to which a Section 83(b) election is made will
be equal to their fair market value when received by the participant, and the
participant's holding period for such shares begins at that time. If, however,
the shares are subsequently forfeited to the Company, the participant will not
be entitled to claim a loss with respect to the shares to the extent of the
income realized by the participant upon the making of the Section 83(b)
election. To make a Section 83(b) election, a participant must file an
appropriate form of election with the Internal Revenue Service and with his or
her employer, each within 30 days after shares of restricted stock are received,
and the participant must also attach a copy of his or her election to his or her
federal income tax return for the year in which the shares are received.
Generally, during the restriction period, dividends and distributions paid with
respect to Restricted Stock will be treated as compensation income (not dividend
income) received by the participant. Dividend payments received with respect to
shares of restricted stock for which a Section 83(b) election has been made will
be treated as dividend income, assuming the Company has adequate current or
accumulated earnings and profits.
Non-Qualified Options
A participant realizes no taxable income and the Company is not entitled to a
deduction when a non-qualified option is granted. Upon exercise of a
non-qualified option, a participant will realize ordinary income equal to the
excess of the fair market value of the shares received over the exercise price
of the non-qualified option, and, subject to Section 162(m) of the Code, the
Company will be entitled to a corresponding deduction. A participant's tax basis
in the shares of Common Stock received upon exercise of a non-qualified option
will be equal to the fair market value of such shares on the exercise date, and
the participant's holding period for such shares will begin at that time. Upon
sale of the shares of Common Stock received upon exercise of a non-qualified
option, the participant will realize short-term or long-term capital gain or
loss, depending upon whether the shares have been held for more than one year.
The amount of such gain or loss will be equal to the difference between the
amount realized in connection with the sale of the shares, and the participant's
tax basis in such shares.Under the 2006 Plan, non-qualified options may, with
the consent of the Committee, be exercised in whole or in part with shares of
Common Stock or Restricted Stock held by the participant. Payment in Common
Stock or Restricted Stock will be treated as a tax-free exchange of the shares
surrendered for an equivalent number of shares of Common Stock received, and the
equivalent number of shares received will have a tax basis equal to the tax
basis of the surrendered shares. In the case of payment in Restricted Stock,
however, the equivalent number of shares of Common Stock received shall be
subject to the same risks of forfeiture or restrictions on transfer as those
that applied to the Restricted Stock surrendered. The fair market value of
shares of Common Stock received in excess of the number of shares surrendered
will be treated as ordinary income and such shares have a tax basis equal to
their fair market value on the date of the exercise of the non-qualified option.
Incentive Stock Options
A participant realizes no taxable income and the Company is not entitled to a
deduction when an incentive stock option is granted or exercised. Provided the
participant meets the applicable holding period requirements for the shares
received upon exercise of an incentive stock option (two years from the date of
grant and one year from the date of exercise), gain or loss realized by a
participant upon sale of the shares received upon exercise will be long-term
capital gain or loss, and the Company will not be entitled to a deduction. If,
however, the participant disposes of
14
the shares before meeting the applicable holding period requirements (a
"disqualifying disposition"), the participant will realize ordinary income at
that time equal to the excess of the fair market value of the shares on the
exercise date over the exercise price of the incentive stock option. Any amount
realized upon a disqualifying disposition in excess of the fair market value of
the shares on the exercise date of the incentive stock option will be treated as
capital gain and will be treated as long-term capital gain if the shares have
been held for more than one year. If the sales price is less than the sum of the
exercise price of the incentive stock option and the amount included in ordinary
income due to the disqualifying disposition, this amount will be treated as a
short-term or long-term capital loss, depending upon whether the shares have
been held for more than one year. Notwithstanding the above, individuals who are
subject to Alternative Minimum Tax may recognize ordinary income upon exercise
of an incentive stock option. Under the 2006 Plan, incentive stock options may,
with the consent of the Committee, be exercised in whole or in part with shares
of Common Stock held by the participant. Such an exercise will be treated as a
tax-free exchange of the shares of Common Stock surrendered (assuming the
surrender of the previously-owned shares does not constitute a disqualifying
disposition of those shares) for an equivalent number of shares of Common Stock
received, and the equivalent number of shares received will have a tax basis
equal to the tax basis of the surrendered shares. Shares of Common Stock
received in excess of the number of shares surrendered will have a tax basis of
zero.
SARs
A participant realizes no taxable income and the Company is not entitled to a
deduction when a SAR is granted. Upon exercising a SAR, a participant will
realize ordinary income in an amount equal to the cash or the fair market value
of the shares received minus any amount paid for the shares, and, subject to
Section 162(m) of the Code, the Company will be entitled to a corresponding
deduction. A participant's tax basis in the shares of Common Stock received upon
exercise of a SAR will be equal to the fair market value of such shares on the
exercise date, and the participant's holding period for such shares will begin
at that time. Upon a sale of the shares of Common Stock received upon exercise
of a SAR, the participant will realize short-term or long-term capital gain or
loss, depending upon whether the shares have been held for more than one year.
The amount of such gain or loss will be equal to the difference between the
amount realized in connection with the sale of the shares, and the participant's
tax basis in such shares.
Deferral Elections
Generally, Awards deferred by recipients are not taxable until the Awards are
paid to the recipient. At that time, the amounts will be includible in income
and the Company will be entitled to a deduction
Section 162(m) Limitations
Section 162(m) of the Code limits the deductibility of compensation paid to
certain executive officers, unless the compensation is "performance-based
compensation" and meets certain other requirements outlined in Code Section
162(m) and related regulations ("Qualified Performance-Based Awards"). If Awards
to such persons are intended to qualify as Qualified Performance-Based Awards,
the 2006 Plan requires that the maximum fair market value of any
performance-based Award or Awards that may be granted to the recipient during
any one performance period is $1,000,000.
Withholding
The Company is entitled to deduct from the payment of any Award (whether made in
stock or in cash) all applicable income and employment taxes required by
federal, state, local or foreign law to be withheld, or may require the
participant to pay such withholding taxes to the Company as a condition of
receiving payment of the Award. The Committee may allow a participant to satisfy
his or her withholding obligations by directing the Company to retain the number
of shares necessary to satisfy the withholding obligation, or by delivering
shares held by the participant to the Company in an amount necessary to satisfy
the withholding obligation.
15
NEW PLAN BENEFITS
2006 Stock Incentive Plan
Name and Position Dollar Value ($) Number of Units
------------------------------------ ------------------ ---------------
William H. Willett, Chairman (1) - 0
Simon Nynens, President and Chief - 200,000 shares of
Executive Officer (2) Common Stock underlying
options (3)
Jeffrey Largiader, Vice President - 0
Sales & Marketing
Vito Legrottaglie, Vice President MIS - 0
Dan Jamieson, Vice President and - 0
General Manager-Lifeboat
All current executive officers as - 200,000 shares of
a group Common Stock underlying
options (4)
All current directors who are not - 0
executive officers as a group
All employees, including all current - 0
officers who are not executive
officers, as a group
(1) Mr. Willet was President and Chief Executive Officer for all of 2005 and
resigned from these positions on January 9, 2006.
(2) Mr. Nynens was Executive Vice President and Chief Financial Officer until
his appointment on January 9, 2006 to the positions of President and Chief
Executive Officer.
(3) All of these options are to be granted to Mr. Nynens upon approval of the
2006 Plan by the stockholders. Each option will have an exercise price
equal to the fair market value of a share of Common Stock on the date of
grant, and 20% of the options will vest each year over a five-year period.
(4) Represents the options to be granted to Mr. Nynens.
At the present time, other than as set forth in the New Plan Benefits table
above, there are no other Awards or grants to be received by or allocated to any
other person under the 2006 Plan.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSAL TO APPROVE THE 2006 STOCK
INCENTIVE PLAN.
16
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) under the Exchange Act requires the Company's officers and
Directors and holders of more than ten percent of the Company's outstanding
shares of 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 2005 all required events of its
officers, Directors and 10% stockholders required to be so reported, were 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 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, 2005 225,000 101,443 14,250 (3) 7,000
Chairman(2) 2004 225,000 334,000 125,000 (4) 6,424
2003 225,000 196,000 -- 6,855
Simon Nynens, 2005 175,000 91,253 14,250 (3) 6,781
President and Chief 2004 162,997 123,238 100,000 (4) 6,180
Executive Officer(5) 2003 140,000 97,500 - 5,280
Jeffrey Largiader, Vice 2005 149,375 47,438 5,000 (3) 6,127
President Sales & 2004 144,583 104,856 40,000 (4) 6,421
Marketing 2003 140,000 87,250 -- 5,895
Vito Legrottaglie, 2005 138,730 37,907 5,000 (3) 4,713
Vice President MIS (6) 2004 130,000 60,000 40,000 (4) 5,795
2003 118,750 50,000 20,000 (7) 4,046
Dan Jamieson, 2005 137,500 57,525 5,000 (3) 5,175
Vice President and 2004 116,917 70,000 40,000 (4) 5,907
General Manager-Lifeboat 2003 83,000 67,000 -- 4,308
(*) 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.
(**) The Company did not make any restricted stock awards or payouts pursuant to
long-term incentive plans to the Named Executive Officers during the last
three completed fiscal years.
(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.
17
(2) Mr. Willet was President and Chief Executive officer for all of 2005 and
resigned from these positions on January 9, 2006.
(3) Represents options to purchase Common Stock with an exercise price of
$12.85 per share, vesting immediately.
(4) Represents options to purchase Common Stock with an exercise price of $8.03
per share, vesting immediately.
(5) Mr. Nynens was Executive Vice President and Chief Financial officer until
his appointment on January 9, 2006 to the position of President and Chief
Executive Officer.
(6) 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.
(7) 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 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 2005 were
approximately $121,000.
The Company maintains a performance bonus plan for our senior executives which
provides for a bonus of up to 120% 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 of bonus plan will continue in effect for 2006
and subsequent fiscal years and that bonuses under this plan in the 2006 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, 2006, a total of 663,463
shares of Common Stock are subject to outstanding Options under the 1995 Stock
Plan at exercise prices ranging from $2.01 to $12.85 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.
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
18
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, 2006, a total of 81,000 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 $7.50 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 2005 AND YEAR-END VALUES
This table gives information for options exercised by each of the Named
Executive Officers in 2005 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 $11.93 of the Company's Common Stock on December 31, 2005.
--------------------- ---------------- --------------- ------------------------------------ -------------------------------------
Shares Number of Securities Value of Unexercised
acquired on Value Underlying Unexercised In The Money Options
Exercise (#) Realized ($) Options/SAR's at FY-End (#) at Fiscal Year-End
--------------------- ---------------- --------------- ------------------------------------ -------------------------------------
Name Exercisable Unexercisable Exercisable($) Unexercisable ($)
--------------------- ------ --------- --------------- -------------- --------------------- ---------------- --------------------
William Willett 50,000 $585,950 308,070 50,000 $2,040,563 $477,000
Simon Nynens 0 $0 114,320 0 $390,000 $0
Jeffrey Largiader 0 $0 97,500 0 $670,500 $0
Vito Legrottaglie 10,000 $60,500 55,000 0 $254,000 $0
Dan Jamieson 0 $0 45,000 0 $156,000 $0
--------------------- ---------------- --------------- -------------- --------------------- ---------------- --------------------
OPTION GRANTS IN 2005
This table shows all options to purchase the Company's Common Stock granted to
each of our Named Executive Officers in 2005 and the potential value of such
grants at stock price appreciation rates of 0%, 5% and 10%, compounded annually
over the maximum ten-year term of the options. The 5% and 10% rates of
appreciation are required to be disclosed by SEC rules and are not intended to
forecast possible future appreciation, if any, in the Company's stock price.
19
----------------------- --------------------------------------------------------- --------------------------------
Individual Grants Potential Realizable Value
--------------------------------------------------------- --------------------------------
Number of % of Total Exercise Expiration at Assumed Annual Rate
Securities Options Price Date (3) of Stock Price
Underlying Granted to Per Share Appreciation
Options Employees in ($/Sh) (2) for Option Term (4)
Name Granted (1) Fiscal Year 5% ($) 10% ($)
----------------------- -------------- --------------- ------------- ------------ ------------- ------------------
William Willett 14,320 29.44% 12.85 4/21/2015 115,724 293,268
Simon Nynens 14,320 29.44% 12.85 4/21/2015 115,724 293,268
Jeffrey Largiader 5,000 10.28% 12.85 4/21/2015 40,406 102,398
Vito Legrottaglie 5,000 10.28% 12.85 4/21/2015 40,406 102,398
Dan Jamieson 5,000 10.28% 12.85 4/21/2015 40,406 102,398
----------------------- -------------- --------------- ------------- ------------ ------------- ------------------
(1) All stock options granted in 2005 to the Named Executive Officers were
granted under the 1995 Stock 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) and one day. 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, 2005, regarding
securities authorized for issuance upon the exercise of stock options under all
of the Company's equity compensation plans.
------------------------------------ ------------------------- ----------------- -----------------------------------------------
(a) (b) (c)
Weighted
Average Number of Securities Remaining Available
Number of Securities to Exercise Price for Future Issuance Under Equity
be Issued Upon Exercise of Outstanding Compensation Plans (Excluding Securities
Plan Category of Outstanding Options Options Reflected in Column (a))
------------------------------------ ------------------------- ----------------- -----------------------------------------------
Equity Compensation Plans Approved 886,287 6.49 --
by Stockholders (1)
------------------------- ----------------- -----------------------------------------------
Equity Compensation Plans Not 50,000 2.39 --
Approved by Stockholders (2)
------------------------------------ ------------------------- ----------------- -----------------------------------------------
Total 936,287 6.60 --
------------------------------------ ------------------------- ----------------- -----------------------------------------------
20
(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) Includes 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.
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.
On January 9, 2006, the company appointed Simon Nynens President and Chief
Executive Officer and entered into an employment agreement which expires June
30, 2007. The agreement provides for a base salary of $250,000 and a bonus, if
certain targets are met. Additionally, should the stockholders of the company
approve a long-term incentive plan consisting of stock options, restricted stock
and/or other equity-based compensation ( a "LTIP"), Mr. Nynens will be eligible
to participate in the LTIP based upon and consistent with the Company's
participation for a President and Chief Executive Officer. Such level of Mr.
Nynens' participation will be at least equal to options exercisable for 200,000
shares of Common Stock (or equivalent awards).
If a LTIP is approved and there is a price increase of the Common Stock of the
Company prior to the grant of such options under the LTIP, Mr. Nynens will be
entitled to a performance bonus equal to the increase (if any) in the closing
share price from January 12, 2006 to the date of the grant of the options
multiplied by 200,000. If there shall be a change of control in the Company
prior to the grant of such options under the LTIP, Mr. Nynens will be entitled
to a bonus equal to the increase in the closing share price from January 12,
2006 to the date of the change of control multiplied by 200,000.
In the event that Mr. Nynens' 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. Nynens' 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.
On January 9, 2006, William Willett resigned as President and Chief Executive
Officer. In connection with the resignation, the Company entered into a
Consulting Agreement with Mr. Willett. Under terms of the Consulting Agreement,
Mr. Willett will remain Chairman of the Board until the 2006 Annual Meeting of
Shareholders. Mr. Willett's termination of employment will be treated as a
voluntary termination under the Employment Agreement between Mr. Willett and the
Company dated July 15, 2002 (the "Willett Employment Agreement"). The Willett
Employment Agreement is amended such that only the non-competition provisions
will survive and be extended for a period of time equal to that of the
Consulting Agreement. Mr. Willett will provide consulting services to the
Company for a one-year period beginning in July 2006. The total compensation to
Mr. Willett for these consulting services will be $250,000, and Mr. Willett will
be obligated to perform up to 200 hours to assist the Chief Executive Officer of
the Company.
The Company has entered into a severance agreement with Mr. Legrottaglie, Vice
President of Information Systems, under which 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.
21
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 2005.
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.
22
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 120% 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 April 21, 2005, the Company granted 60,640 options at an option
price of $12.85 per share to officers and key-employees of the Company. The
options granted vested immediately on April 21, 2005. The Company granted
options to purchase 14,320 shares to William H. Willett, the Company's then
President and Chief Executive Officer; options to purchase 14,320 shares to
Simon Nynens, the Company's then Executive Vice President and Chief Financial
Officer; options to purchase 5,000 shares to Jeffrey Largiader, the Company's
Vice President Sales & Marketing; options to purchase 5,000 shares to Vito
Legrottaglie, the Company's Vice President and Chief Information Officer;
options to purchase 5,000 shares to Dan Jamieson, General Manager of the
Company's Lifeboat division; and options to purchase 5,000 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
3,000 shares of the Company's Common Stock at an option price of $12.85 per
share.
The compensation of the Company's Chief Executive Officer in 2005 consisted of a
base salary, an automobile allowance, a performance bonus as well as options
exercisable for 14,320 shares of Common Stock. The total compensation package
was established considering base salaries of peer Chief Executive Officers with
similar executive responsibilities.
The Compensation Committee
--------------------------
F. Duffield Meyercord, Chairman
Edwin H. Morgens
Allan Weingarten
23
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 500 Computer and
Electronics Retail Index for the period commencing December 31, 2000 and ending
December 31, 2005, assuming $100 was invested on December 31, 2000 and the
reinvestment of dividends.
[GRAPHIC OMITTED]
INDEXED RETURNS
Base Years Ending
Period
Company / Index Dec00 Dec01 Dec02 Dec03 Dec04 Dec05
---------------------------------------------------- --------- ---------- ---------- --------- ---------- ---------
PROGRAMMERS PARADISE INC 100 105.37 76.88 298.54 668.33 564.25
S&P MIDCAP 400 INDEX 100 99.40 84.97 115.24 134.23 151.08
S&P 500 COMPUTER & ELECTRONICS
RETAIL 100 160.88 82.80 160.77 187.68 197.70
24
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
Annex A to the Company's proxy statement for its 2005 Annual Meeting of
Stockholders, which was filed with the SEC on April 29, 2005. In the course of
fulfilling its responsibilities during fiscal year 2005, the Audit Committee
has:
o reviewed and discussed with management the audited financial statements
for the year ended December 31, 2005;
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, 2005.
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 2006.
Respectfully submitted,
Allan Weingarten, Chairman
F. Duffield Meyercord
Edwin H. Morgens
25
PROPOSAL 4
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, 2005 was Amper, Politziner & Mattia P.C. Amper, Politziner & Mattia P.C. who
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
2006. 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 $89,240 and
$77,641, respectively, for professional services rendered for the audit of our
financial statements for the years ended December 31, 2005 and 2004 and its
reviews of our unaudited financial statements included in our quarterly reports
on Form 10-Q for the quarterly periods in the years ended December 31, 2005 and
2004, respectively.
Audit-Related Fees. During the years ended December 31, 2005 and 2004, Amper,
Politziner & Mattia P.C. did not provide or bill for other audit or
audit-related services not included above.
Tax Fees. The aggregate fees billed for professional services rendered by Amper,
Politziner & Mattia P.C. during fiscal 2005 and 2004 for tax compliance, tax
advice and tax planning were $18,375 and $28,420 respectively.
All Other Fees. During the years ended December 31, 2005 and 2004, 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 P.C.'s independence. All permissible
audit and non-audit services provided by Amper, Politziner & Mattia P.C. in 2004
and 2005 were pre-approved by the Audit Committee.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE RATIFICATION OF
AMPER, POLITZINER & MATTIA P.C. AS THE COMPANY'S INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM FOR 2006.
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.
26
STOCKHOLDER PROPOSALS FOR INCLUSION IN THE COMPANY'S 2007 ANNUAL MEETING PROXY
STATEMENT AND PROXY CARD
Any Stockholder proposal to be considered by us for inclusion in the Company's
2007 proxy statement and form of proxy card for next year's Annual Meeting of
Stockholders, expected to be held in June 2007, 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, 2006 (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 2007 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 2007 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) does 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 2007 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
April 28, 2006
27
Exhibit A
PROGRAMMER'S PARADISE, INC.
2006 STOCK-BASED COMPENSATION PLAN
1. Purpose
The Plan has been established by Programmer's Paradise, Inc. (i) to attract and
retain persons eligible to participate in the Plan; (ii) motivate Participants,
by means of appropriate incentives, to achieve long-range goals; and (iii) link
participants' interests with those of Programmer's Paradise, Inc.'s shareholders
through compensation that is based on the common stock, and thereby promote the
continued growth and financial success of the Company.
2. Definitions
For purposes of the Plan, the following terms shall have the meanings set forth
below:
(a) "Award" means an Option, SAR, Stock Bonus, Restricted Stock, Deferred
Stock, Stock Unit or other equity-based award granted under the terms
of the Plan.
(b) "Award Agreement" means an agreement, in such form and including such
terms as the Committee in its sole discretion shall determine,
evidencing an Award.
(c) "Board" means the Board of Directors of Programmer's Paradise, Inc.
(d) "Cause" means: (i) the Participant's conviction of any crime (whether
or not involving the Company) constituting a felony in the jurisdiction
involved; (ii) conduct of the Participant related to the Participant's
employment or service for which either criminal or civil penalties
against the Participant or the Company may be sought; (iii) material
violation of the Company's policies, including but not limited to those
relating to sexual harassment, the disclosure or misuse of confidential
information, or those set forth in Company manuals or statements of
policy; (iv) serious neglect or misconduct in the performance of the
Participant's duties for the Company or willful or repeated failure or
refusal to perform such duties. If, subsequent to a Participant's
termination of employment or service (whether voluntary or involuntary)
without Cause, it is discovered that the Participant's employment or
service could have been terminated for Cause, such Participant's
employment or service shall be deemed to have been terminated for
Cause. A Participant's termination of employment or service for Cause
shall be effective as of the date of the occurrence of the event giving
rise to Cause, regardless of when the determination of Cause is made.
(e) "Change in Control" means a change in control of a nature that would be
required to be reported in response to Item 5.01 of a Current Report on
Form 8-K as in effect on the date the Plan becomes effective under
section 13 or 15(d) of the Exchange Act, provided that, without
limitation, a Change in Control shall be deemed to have occurred if:
(i) Any "Person" (as such term is used in sections 13(d) and 14(d)
of the Exchange Act), other than:
(1) Programmer's Paradise, Inc.,
(2) any Person who on the date hereof is a director or
officer of Programmer's Paradise, Inc., or
(3) a trustee or fiduciary holding securities under an
employee benefit plan of Programmer's Paradise, Inc.,
is or becomes the "beneficial owner," (as defined in
Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of Programmer's Paradise,
Inc. representing more than 50% of the combined voting
power of Programmer's Paradise, Inc.'s then outstanding
securities; or
(ii) During any period of two consecutive years during the term of
this Plan, individuals who at the beginning of such period
constitute the Board of Directors of Programmer's Paradise,
Inc. cease for any reason to constitute at least a majority
thereof, unless the election of each director who was not a
director at the beginning of such period has been approved in
advance by directors representing at least two-thirds of the
directors then in office who were directors at the beginning
of the period; or
(iii) The shareholders of Programmer's Paradise, Inc. approve: (A) a
plan of complete liquidation of Programmer's Paradise, Inc.;
or (B) an agreement for the sale or disposition of all or
substantially all of
28
Programmer's Paradise, Inc.'s assets; or (C) a merger,
consolidation, or reorganization of Programmer's Paradise,
Inc. with or involving any other corporation, other than a
merger, consolidation, or reorganization (collectively, a
"Transaction"), that would result in the voting securities of
Programmer's Paradise, Inc. outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity), at least 50% of the combined voting
power of the voting securities of Programmer's Paradise, Inc.
(or the surviving entity, or an entity which as a result of
the Transaction owns Programmer's Paradise, Inc. or all or
substantially all of Programmer's Paradise, Inc.'s assets
either directly or through one or more subsidiaries)
outstanding immediately after the Transaction.
(f) "Code" means the Internal Revenue Code of 1986, as amended. A reference
to any provision of the Code shall include reference to any successor
provision of the Code.
(g) "Committee" means the Compensation Committee of the Board; provided,
however, that the Committee shall at all times have at least two
members, all of whom are "non-employee directors" within the meaning of
Rule 16b-3 under the Exchange Act, "outside directors" within the
meaning of section 162(m) of the Code, and independent within the
meaning of any applicable stock exchange rule.
(h) "Common Stock" means the common stock of Programmer's Paradise, Inc.,
par value $0.25 per share.
(i) "Company" means Programmer's Paradise, Inc. and any "subsidiary
corporation" (as that term is defined in Code section 424(f)) with
respect to Programmer's Paradise, Inc.
(j) "Deferred Stock" means an Award made under Section 7 to receive Common
Stock at the end of a specified Deferral Period.
(k) "Deferral Period" means the period during which the receipt of a
Deferred Stock Award under Section 7 will be deferred.
(l) "Disability" means a disability described in section 422(c)(6) of the
Code.
(m) "Employee" means an officer or salaried employee of the Company
providing key services to the Company, including a director who is such
an employee. Employee shall also include individuals of the Company who
are not salaried employees, but who receive Awards under the Plan
conditioned on their becoming an Employee.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(o) "Fair Market Value" of Common Stock on any given date shall be
determined according to the following rules:
(i) If the Common Stock is at the time listed or admitted to
trading on any stock exchange, then the "Fair Market Value"
shall be the mean between the highest and lowest prices of the
Common Stock on the date in question on the principal national
securities exchange on which it is then listed or admitted to
trading. If no reported sale of Common Stock takes place on
the date in question on the principal exchange, then the
reported closing asked price of the Common Stock on such date
on the principal exchange shall be determinative of "Fair
Market Value."
(ii) If the Common Stock is not at the time listed or admitted to
trading on a stock exchange, the "Fair Market Value" shall be
the mean between the highest reported asked price and lowest
reported bid price of the Common Stock on the date in question
in the over-the-counter market, as such prices are reported in
a publication of general circulation selected by the Committee
and regularly reporting the market price of Common Stock in
such market.
(ii) If the Common Stock is not listed or admitted to trading on
any stock exchange or traded in the over-the-counter market,
the "Fair Market Value" shall be as determined in good faith
by the Committee.
29
(p) "Incentive Stock Option" means an Option that meets the requirements of
an incentive stock option as defined in section 422 of the Code.
(q) "Option" means the right granted under Section 6 to purchase Common
Stock for a specified period of time at a stated price. An Option may
be an Incentive Stock Option or a Non-Qualified Stock Option.
(r) "Non-Qualified Stock Option" means an Option that is not intended to be
an Incentive Stock Option.
(s) "Participant" means an Employee, director or consultant who is eligible
to participate in the Plan in accordance with Section 3 and to whom an
Award is granted under the Plan.
(t) "Performance Goal" means a goal that must be met by the end of a period
specified by the Committee (but that is substantially uncertain to be
met before the grant of the Award) based on: (i) the price of the
Common Stock; (ii) the market share of the Company (or any business
unit thereof); (iii) sales by the Company (or any business unit
thereof); (iv) earnings per share of Common Stock; (v) return on
shareholder equity of Programmer's Paradise, Inc.; (vi) costs of the
Company (or any business unit thereof); (vii) cash flow of Programmer's
Paradise, Inc. (or any business unit thereof); (viii) return on total
assets of the Company (or any business unit thereof); (ix) return on
invested capital of the Company (or any business unit thereof); (x)
return on net assets of the Company (or any business unit thereof);
(xi) operating income of the Company (or any business unit thereof); or
(xii) net income of the Company (or any business unit thereof).
(u) "Restricted Stock" means a share of Common Stock that is awarded under
Section 8 and that is subject to the restrictions set forth in such
Section.
(v) "Restriction Period" means the period during which Restricted Stock is
subject to forfeiture, which, if the Committee so provides may not
expire until Retirement.
(w) "Retirement" means: (i) with respect to a Participant who is an active
participant in any qualified pension plan maintained by the Company,
retirement with the Company under the provisions of such plan; and (ii)
with respect to any other Participant, termination of employment or
service (with respect to directors, but not consultants) with the
Company under the procedures established by the Committee. (x) "SAR"
means a stock appreciation right awarded under Section 10 and subject
to the terms and conditions contained therein.
(y) "Programmer's Paradise, Inc." means PROGRAMMER'S PARADISE, INC., a
Delaware corporation, or any successor thereto.
(z) "Stock Unit" means the right granted under Section 11 to receive cash
equal to the Fair Market Value of a share of Common Stock multiplied by
the number of Stock Units awarded. For purposes of this Plan,
fractional Stock Units, measured to the nearest four decimal places,
may be credited.
(aa) "Stock Bonus" means an award of a bonus payable in shares of Common
Stock under Section 9.
(bb) "Ten Percent Shareholder" means a person who on any given date owns,
either directly or indirectly (taking into account the attribution
rules contained in Code section 424(d)), stock possessing more than 10
percent of the total combined voting power of all classes of stock of
the Company or any subsidiary corporation under Code section 424(f).
3. Eligibility
Any Employee, non-Employee director of the Company or key consultant to the
Company who is designated by the Committee as eligible to participate in the
Plan shall be eligible to receive an Award under the Plan, provided that an
Incentive Stock Option may only be granted to an Employee of the Company.
30
4. Administration and Implementation of the Plan
(a) Subject to Section 4(b), the Plan shall be administered by the
Committee, which shall have full power to interpret and administer the
Plan and full authority to act in selecting the Participants to whom
Awards will be granted, in determining the times at which Awards will
be granted, in determining the type and amount of Awards to be granted
to each such Participant, the terms and conditions of Awards granted
under the Plan (including whether Awards may be exchanged for cash,
made on a tandem basis, or deferrable or transferable by a Participant)
and the terms of agreements which will be entered into with
Participants. The Committee shall have the power to establish different
terms and conditions with respect to (i) the various types of Awards
granted under the Plan, (ii) the granting of the same type of Award to
different Participants (regardless of whether the Awards are granted at
the same time or at different times), and (iii) the establishment of
different Performance Goals for different Participants.
(b) The Committee shall not have the power to make or grant Awards to
non-Employee directors of the Company. The Company's Nominating and
Corporate Governance Committee shall have the authority to make
recommendations to the full Board regarding Awards that should be made
to non-Employee directors of the Company. The full Board shall have
sole and absolute authority to make Awards to non-Employee directors
hereunder, upon the Nominating and Corporate Governance Committee's
recommendation. Awards made to non-Employee directors shall be subject
to the other provisions of the Plan and shall be administered by the
Committee, unless the full Board provides otherwise.
(c) The Committee shall have the power to adopt regulations for carrying
out the Plan (including regulations regarding the form and timing of
elections and notices under the Plan) and to make changes in such
regulations as it shall, from time to time, deem advisable. Any
interpretation by the Committee of the terms and provisions of the Plan
(including determinations of existence Cause and Disability hereunder)
and the administration thereof, and all action taken by the Committee
shall be final, binding and conclusive for all purposes and upon all
Participants.
(d) The Committee may condition the grant of any Award or the lapses of any
Deferral or Restriction Period (or any combination thereof) upon the
Participant's achievement of a Performance Goal that is established by
the Committee before the grant of the Award. The Committee shall have
the discretion to determine the specific targets with respect to each
of these categories of Performance Goals. Before granting an Award or
permitting the lapse of any Deferral or Restriction Period, the
Committee shall certify that an individual has satisfied the applicable
Performance Goal.
(e) Except to the extent prohibited by applicable law or the applicable
rules of a stock exchange, the Committee may allocate all or any
portion of its responsibilities and powers to any one or more of its
members and may delegate all or any part of its responsibilities and
powers to any person or persons selected by it. Any such allocation or
delegation may be revoked by the Committee at any time.
(f) The Committee may employ attorneys, consultants, accountants and other
service providers. The Committee, the Board, the Company and the
Company's officers shall be entitled to rely upon the advice and
opinions of any such person. No member of the Committee or the Board
shall be personally liable for any action, determination or
interpretation made with respect to the Plan and all members of the
Committee and the Board shall be fully protected by Programmer's
Paradise, Inc. in respect of any such action, determination or
interpretation in the manner provided in Programmer's Paradise, Inc.'s
bylaws.
31
5. Shares Subject to the Plan
(a) Subject to the following provisions of this Section, the maximum number
of shares that may be delivered to Participants (or, if applicable,
their heirs, legatees or permitted transferees) under the Plan shall
not exceed 800,000 shares of Common Stock. Any shares issued under the
Plan may consist, in whole or in part, of authorized and unissued
shares or treasury shares.
(b) Any shares of Common Stock issued under the Plan that are forfeited
because of the failure to meet an Award contingency or condition shall
again be available for delivery pursuant to new Awards granted under
the Plan. To the extent any shares of Common Stock covered by an Award
are not delivered to a Participant (or, if applicable, his heir,
legatee or permitted transferee) because the Award is forfeited or
canceled, or the shares are not delivered because the Award is settled
in cash, such shares shall not be deemed to have been delivered for
purposes of determining the maximum number of shares of Common Stock
available for delivery under the Plan.
(c) If the Exercise Price of any Option granted under the Plan is satisfied
by tendering shares of Common Stock to Programmer's Paradise, Inc. (by
either actual delivery or by attestation), only the number of shares
issued net of the shares of Common Stock tendered shall be deemed
delivered for purposes of determining the maximum number of shares of
Common Stock available for delivery under the Plan.
(d) Shares of Common Stock delivered under the Plan in settlement,
assumption or substitution of outstanding awards (or obligations to
grant future awards) under the plans or arrangements of another entity
shall not reduce the maximum number of shares of Common Stock available
for delivery under the Plan, to the extent that such settlement,
assumption or substitution is a result of the Company acquiring another
entity (or an interest in another entity).
(e) Subject to the other provisions of this Section, the following
additional maximums are imposed under the Plan.
(i) The maximum number of shares of Common Stock that may be
covered by Awards granted to any one individual under Sections
2 and 10 (relating to Options and SARs) shall be 300,000
shares during any calendar year.
(ii) The maximum payment that can be made for Awards granted to any
one individual under Sections 7, 8, and 9 (relating to
Deferred Stock, Restricted Stock, Stock Bonus and Stock Units)
shall be $1,500,000 for any single or combined performance
goals established for any performance period, as determined by
reference to the Fair Market Value on the date of grant of the
Award.
6. Options
The Committee may grant Options under the Plan. Options shall be evidenced by a
written Award Agreement. Such Award Agreements shall conform to the requirements
of the Plan, and may contain such other provisions as the Committee shall deem
advisable. The grant of Options shall comply with and be subject to the
following terms and conditions:
(a) Identification of Options. Each Option granted under the Plan shall be
clearly identified in the applicable Award Agreement as either an
Incentive Stock Option or as a Non-Qualified Stock Option. In the
absence of such identification, an Option shall be deemed to be a
Non-Qualified Stock Option.
(b) Number of Options. Subject to Section 5(e), the Award Agreement for
each Option award shall specify the number of shares of Common Stock
that a Participant may receive with respect to the Participant's
option.
(c) Exercise Price. The price per share at which Common Stock may be
purchased upon exercise of an Option shall be determined by the
Committee, but shall be not less than the Fair Market Value of a share
of Common Stock on the date of grant. In the case of any Incentive
Stock Option granted to a Ten Percent Shareholder, the option price per
share shall not be less than 110% of the Fair Market Value of a share
of Common Stock on the date of grant.
32
(d) Term and Exercise of Options.
(i) An Award Agreement shall specify when an Option may be
exercisable and the terms and conditions applicable thereto.
The term of an Option shall in no event be greater than ten
years.
(ii) An Option may be exercised only for a whole number of shares
of Common Stock. The Committee shall establish the time and
the manner in which an Option may be exercised. The option
price of the shares of Common Stock received upon the exercise
of an Option shall be paid within three days of the date of
exercise: (i) in cash or, (ii) in cash received from a
broker-dealer whom the Participant has authorized to sell all
or a portion of the Common Stock covered by the Option, or
(iii) with the consent of the Committee, in whole or in part
in shares of Common Stock held by the Participant for at least
six months and valued at their Fair Market Value on the date
of exercise. With the consent of the Committee, payment upon
the exercise of a Non-Qualified Option may be made in whole or
in part by Restricted Stock which has been held by the
Participant for at least six months (based on the Fair Market
Value of the Restricted Stock on the date the Option is
exercised, as determined by the Committee). In such case the
Common Stock to which the Option relates shall be subject to
the same forfeiture restrictions originally imposed on the
Restricted Stock exchanged therefor.
(e) Limitations on Grants of Incentive Stock Options.
(i) Each provision of the Plan and each Award Agreement relating
to an Incentive Stock Option shall be construed so that each
Incentive Stock Option shall be an incentive stock option as
defined in section 422 of the Code, and any provisions of the
Option Agreement thereof that cannot be so construed shall be
disregarded. Only an Employee may be granted an Incentive
Stock Option. In no event may a Participant be granted an
Incentive Stock Option which does not comply with such grant
and vesting limitations as may be prescribed by section 422(b)
of the Code. Without limiting the foregoing, the aggregate
Fair Market Value (determined as of the time the Option is
granted) of the Common Stock with respect to which an
Incentive Stock Option may first become exercisable by a
Participant in any one calendar year under the Plan shall not
exceed $100,000.
(ii) No Incentive Stock Option shall be transferable otherwise than
by will or the laws of descent and distribution and, during
the lifetime of the Participant, shall be exercisable only by
the Participant. Upon the death of a Participant, the person
to whom the rights have passed by will or by the laws of
descent and distribution may exercise an Incentive Stock
Option only in accordance with this Section.
7. Deferred Stock
The Committee may award Deferred Stock under the Plan, which shall be evidenced
by an Award Agreement in such form as the Committee shall from time to time
approve. Deferred Stock Awards shall comply with and be subject to the following
terms and conditions:
(a) Crediting of Deferred Stock. Upon determination of the number of shares
of Deferred Stock to be awarded to a Participant, the Committee shall
direct that the same be credited to the Participant's account on the
books of the Company but that issuance and delivery of the same shall
be deferred until the date or dates provided in Section 7(e).
(b) Deferral Period and Performance Goals.
(i) The Committee may condition the grant of an Award of Deferred
Stock or the expiration of the Deferral Period upon the
Participant's achievement of one or more Performance Goal(s)
specified in the Award Agreement. If the Participant fails to
achieve the specified Performance Goal(s), the Committee shall
not grant the Deferred Stock Award to the Participant, or the
Participant shall forfeit the Award and no Common Stock shall
be transferred to him pursuant to the Deferred Stock Award.
33
(ii) The Award Agreement shall specify the duration of the Deferral
Period taking into account termination of employment or
service on account of death, Disability, Retirement or Cause.
The Deferral Period may consist of one or more installments.
At the end of the Deferral Period or any installment thereof
the shares of Deferred Stock applicable to such installment
credited to the account of a Participant shall be issued and
delivered to the Participant (or, if applicable, his heir,
legatee or permitted transferee) in accordance with the terms
of the Award Agreement. Notwithstanding the Deferral Period
provided in an Award Agreement, the Committee may accelerate
the delivery of all or any part of a Deferred Stock Award or
waive the deferral limitations for all or any part of a
Deferred Stock Award.
(c) Voting Rights and Dividends.
(i) Prior to issuance and delivery, the Participant shall have no
rights as a shareholder with respect to any shares of Deferred
Stock credited to the Participant's account.
(ii) Amounts equal to any dividends declared during the Deferral
Period with respect to the number of shares covered by a
Deferred Stock Award will be paid to the Participant
currently, or deferred and deemed to be reinvested in
additional Deferred Stock, or otherwise reinvested on such
terms as are determined at the time of the Award and specified
in the Award Agreement.
8. Restricted Stock
The Committee may award shares of Restricted Stock. Each grant of shares of
Restricted Stock shall be evidenced by Award Agreements in such form and
containing such terms and conditions and subject to such agreements or
understandings as the Committee shall from time to time approve. Each grant of
shares of Restricted Stock shall comply with and be subject to the following
terms and conditions:
(a) Terms of Restricted Stock. The Award Agreement for a grant of
Restricted Stock shall conform to the requirements of the Plan, and
shall specify (i) the number of shares of Common Stock subject to the
Award, (ii) the Restriction Period applicable to the Award, (iii) the
events that will give rise to a forfeiture of the Award, and (iv) the
Performance Goals, if any, that must be achieved in order for the
restriction to be removed from the Award. The agreement may contain
such other provisions not inconsistent with the terms of the Plan as
the Committee shall deem advisable.
(b) Issuance of Certificates. The Committee shall direct that a certificate
or certificates representing the number of shares of Common Stock be
issued to the Participant with the Participant designated as the
registered owner. The certificate(s) representing such shares shall be
legended as to restrictions on the sale, transfer, assignment, pledge
or other encumbrances during the Restriction Period and deposited by
the Participant, together with a stock power endorsed in blank, with
the Company.
(c) Satisfaction of the Restriction Period. At the end of the Restriction
Period, the Committee shall determine, in light of the terms and
conditions set forth in the Award Agreement, the number of shares of
Restricted Stock with respect to which the restrictions imposed
hereunder have lapsed. The Restricted Stock with respect to which the
restrictions shall lapse shall be converted to unrestricted Common
Stock by the removal of the restrictive legends from the Restricted
Stock. Thereafter, Common Stock equal to the number of shares of the
Restricted Stock with respect to which the restrictions hereunder shall
lapse shall be delivered to the Participant (or, where appropriate, the
Participant's legal representative).
(d) Voting Rights and Dividends.
(i) Unless otherwise determined by the Committee, during the
Restriction Period the Participant shall have the right to
vote all shares of Restricted Stock.
(ii) Dividends will be authorized by Programmer's Paradise, Inc. to
be paid to the Participant during the period the restriction
is enforced, subject to the same restrictions as the
underlying shares upon which the restriction is declared.
9. Stock Bonus
The Committee may grant Stock Bonuses in such amounts as it shall determine from
time to time. A Stock Bonus shall be paid at such time (including a future date
selected by the Committee at the time of grant) and subject to such conditions
34
as the Committee shall determine at the time of the grant of such Stock Bonus,
including, if applicable, Section 14. By way of example and not by way of
limitation, the Committee may require, as a condition to the payment of a Stock
Bonus, that the Participant or the Company achieve such performance criteria as
the Committee may specify at the time of the grant. Prior to the date on which a
Stock Bonus awarded hereunder is required to be paid, such Award shall
constitute an unfunded, unsecured promise by the Company to distribute Common
Stock in the future.
10. Stock Appreciation Rights
The Committee may grant SARs under the Plan, which shall be evidenced by Award
Agreements in such form as the Committee shall from time to time approve. SARs
shall comply with and be subject to the following terms and conditions:
(a) Benefits Upon Exercise.
(i) An SAR shall entitle the recipient to receive a payment equal
to the excess of the Fair Market Value of the shares of Common
Stock covered by the SAR on the date of exercise over the base
price of the SAR. Such payment may be in cash, in shares of
Common Stock, in shares of Deferred Stock, in shares of
Restricted Stock or any combination, as the Committee shall
determine. An SAR may be granted in tandem with all or a
portion of a related Option under the Plan ("Tandem SAR"), or
may be granted separately ("Freestanding SAR"). A Tandem SAR
may be granted either at the time of the grant of the Option
or at any time thereafter during the term of the Option and
shall be exercisable only to the extent that the related
Option is exercisable.
(ii) Upon exercise of a Tandem SAR as to some or all of the shares
of Common Stock covered by the grant, the related Option shall
be canceled automatically to the extent of the number of
shares of Common Stock covered by such exercise, and such
shares shall no longer be available for purchase under the
Option. Conversely, if the related Option is exercised as to
some or all of the shares of Common Stock covered by the
grant, the related Tandem SAR, if any, shall be canceled
automatically to the extent of the number of shares of Common
Stock covered by the Option exercise.
(b) Exercise Price. The base price of a Tandem SAR shall be the option
price under the related Option. The base price of a Freestanding SAR
shall be determined by the Committee at the time of the grant of such
SAR but shall be not less than 100% of the Fair Market Value of the
Common Stock on the date of grant of the Freestanding SAR.
(c) Other Restrictions. SARs shall generally be subject to the same terms,
conditions and limitations applicable to Options granted under Section
6.
11. Stock Units
(a) Grant of Stock Units. Subject to the other terms of the Plan, the
Committee shall, in its discretion as reflected by the terms of the
applicable Award Agreement: (i) authorize the granting of Stock Units
to Participants and (ii) determine or impose other conditions to the
grant of Stock Units under the Plan as it may deem appropriate.
(b) Term. The Committee may provide in an Award Agreement that any
particular Stock Unit shall expire at the end of a specified term not
to exceed 10 years.
(c) Vesting.
(i) Stock Units shall vest and first become exercisable according
to the terms and conditions set forth in the Award Agreement,
as determined by the Committee at the time of grant. Stock
Units may be payable upon termination of employment or service
or upon other future event (including attainment of a
Performance Goal).
(ii) Unless otherwise provided in the Award Agreement (except due
to a termination for Cause), if a Participant terminates
employment or service with the Company, any and all of the
Participant's Stock Units which have not vested prior to or as
of such termination shall thereupon, and with no further
action, be forfeited and cease to be outstanding.
(iii) If a Participant terminates employment or service with the
Company for Cause, any and all of the Participant's Stock
Units which have not vested prior to or as of such termination
shall thereupon, and with no further action, be forfeited and
cease to be outstanding.
35
(d) Settlement of Stock Units.
(i) Each vested and outstanding Stock Unit shall be settled by the
payment to the Participant of cash equal to the Fair Market
Value of the Common Stock times the number of Stock Units to
be settled. The Fair Market Value shall be determined by
reference to the date of termination or other future event as
specified in the Award Agreement.
(ii) Unless otherwise provided in an Award Agreement, each Stock
Unit shall be settled with a single-sum payment by the
Company.
(iii) Unless otherwise provided in an Award Agreement and subject to
Section 14, if applicable, the settlement date with respect to
a Participant is the first day of the month to follow the
Participant's termination of employment or service.
(e) Nature of Stock Units. Stock Units are solely a device for the
measurement and determination of the amounts to be paid to a
Participant under the Plan. Each Participant's right in the Stock Units
is limited to the right to receive payment, if any, as may herein be
provided. The Stock Units do not constitute Common Stock and shall not
be treated as (or as giving rise to) property or as a trust fund of any
kind; provided, however, that the Company may establish a mere
bookkeeping reserve to meet its obligations hereunder or a trust or
other funding vehicle that would not cause the Plan to be deemed to be
funded for tax purposes or for purposes of Title I of the Employee
Retirement Income Security Act of 1974, as amended. The right of any
Participant of Stock Units to receive payments by virtue of
participation in the Plan shall be no greater than the right of any
unsecured general creditor of the Company. Nothing contained in the
Plan shall be construed to give any Participant any rights with respect
to Shares or any ownership interest in the Company. Without limiting
Section 8, no provision of the Plan shall be interpreted to confer any
voting, dividend or derivative or other similar rights with respect to
any Stock Units.
12. Other Equity-Based Awards
The Committee may grant other types of equity-based Awards in such amounts and
subject to such terms and conditions, as the Committee shall in its sole
discretion determine, subject to the provisions of the Plan. Awards may entail
the transfer of actual shares of Common Stock to Participants, or payment in
cash or otherwise of amounts based on the value of shares of Common Stock.
13. Effect of Termination of Employment or Service on Awards
(a) Options and SARs.
(i) Unless otherwise provided in an applicable Award Agreement and
subject to Section 6(e), in the event that the employment or
service of a Participant with the Company shall terminate for
any reason other than Retirement, Cause, Disability or death
(i) Options or SARs or SARs granted to such Participant, to
the extent that they were exercisable on the Participant's
termination date, shall remain exercisable until the
expiration of 90 days after such termination date, on which
date they shall expire, and (ii) Options or SARs or SARs
granted to such Participant, to the extent that they were not
exercisable on his termination date, shall expire at the close
of business on such date; provided, however, that no Option or
SAR shall be exercisable after the expiration of its term.
(ii) Unless otherwise provided in an applicable Award Agreement and
subject to Section 6(e), in the event that the employment or
service of a Participant with the Company shall terminate on
account of the death of the Participant, all Options or SARs
or SARs granted to such Participant, to the extent that they
were exercisable on the Participant's termination date, shall
remain exercisable until the expiration of one year after such
date, on which date they shall expire.
(iii) Unless otherwise provided in an applicable Award Agreement and
subject to Section 6(e), in the event that the employment or
service of a Participant with the Company shall terminate on
account of the Disability or Retirement of the Participant,
all Options or SARs or SARs granted to such Participant, to
the extent that they were exercisable on the Participant's
termination date (or, in the case of Retirement such later
date determined by the Committee), shall remain exercisable
until the expiration of the term specified in their applicable
Award Agreement, on which date they shall expire.
(iv) In the event of the termination of a Participant's employment
or service for Cause, all outstanding Options or SARs or SARs
granted to such Participant shall expire at the commencement
of business on the Participant's termination date (or deemed
termination under Section 2(e)).
36
(b) Restricted Stock and Deferred Stock.
(i) In the event that the employment or service of a Participant
with the Company shall terminate for any reason (other than a
termination that is for Cause) prior to the expiration of the
Restriction Period or Deferral Period with respect to such
shares of Restricted Stock or Deferred Stock, unless otherwise
provided by the Committee in its sole discretion, such
termination shall cause the immediate forfeiture of all shares
of Restricted Stock, Deferred Stock or Stock Bonus that have
not vested as of the Participant's termination date.
(ii) In the event a Participant's employment or service is or is
deemed to have been terminated for Cause, all shares of
Restricted Stock still subject to a Restriction Period and all
shares of Deferred Stock still subject to a Deferral Period as
of his termination date immediately shall be forfeited.
14. Deferral Election
Notwithstanding any provision of the Plan to the contrary, any Participant may
elect, with the concurrence of the Committee and consistent with any rules and
regulations established by the Committee, to defer to a specified date the
receipt of unrestricted Common Stock (or a cash payment hereunder) that the
Participant would otherwise be entitled to receive pursuant to an Award. Such
deferral may be, at the Committee's sole discretion, be made in accordance with
the terms of a non-qualified deferred compensation plan maintained by the
Company. Notwithstanding such an election, the Committee may distribute the
unrestricted Common Stock (or cash payment, if applicable) deferred by any
Participant under this Section if the Committee determines, in its discretion,
that the continued deferral of Common Stock hereunder is no longer in the best
interest of the Company or that such deferred Award would be immediately taxable
to the Participant.
15. Adjustments upon Changes in Capitalization
In the event of a reorganization, recapitalization, stock split, spin-off,
split-off, split-up, stock dividend, issuance of stock rights, combination of
shares, merger, consolidation or any other change in the corporate structure of
Programmer's Paradise, Inc. affecting Common Stock, any distribution to
shareholders other than a cash dividend, or any change in the corporate
structure of the Company (or any sub-unit of the Company), the Committee, in its
discretion, shall make appropriate adjustment in the number and kind of shares
authorized by the Plan and any other adjustments to outstanding Awards as it
determines appropriate. No fractional shares of Common Stock shall be issued
pursuant to such an adjustment. The Fair Market Value of any fractional shares
resulting from adjustments under this Section shall, where appropriate, be paid
in cash to the Participant. The determinations and adjustments made by the
Committee under this Section shall be conclusive.
16. Effect of a Change in Control
Unless otherwise provided by the Committee in an Award Agreement, any Award
granted hereunder that has not been vested hereunder, or been canceled or
forfeited under any provision of the Plan, shall become fully exercisable and
vest immediately upon a Change in Control. Any Awards deferred under Section 14
shall be paid prior to or as soon as practicable following a Change in Control,
as determined by the Committee in its sole discretion.
17. Tax Withholding
Whenever the Company proposes or is required to issue or transfer shares of
Common Stock under the Plan, the Company shall have the right to require the
recipient to remit to the Company an amount sufficient to satisfy any Federal,
state or local withholding tax requirements prior to the delivery of any
certificate for such shares, or in the discretion of the Committee, the Company
may withhold from the shares to be delivered shares sufficient to satisfy all or
a portion of such tax withholding requirements. Whenever under the Plan payments
are to be made in cash, such payments may be net of an amount sufficient to
satisfy any Federal, state and local tax withholding requirements.
18. Award Forfeiture Provision
Notwithstanding any other provision of this Plan to the contrary, the Committee
may provide for the forfeiture of Awards under the Plan and the benefits derived
therefrom, in the event a Participant (or, if applicable, his heir, legatee or
permitted transferee) engages in conduct deemed to be harmful to, or not in the
best interests of, the Company or if the Participant (or, if applicable, his
heir, legatee or permitted transferee) fails to comply with any of the terms and
conditions of the Plan or the agreement executed by such Participant (or, if
applicable, his heir, legatee or permitted transferee) evidencing an Award,
unless such failure is remedied by within ten days after having been notified of
such
37
failure by the Committee. Such provisions shall be included in the Award
Agreements approved from time to time by the Committee and may be waived by the
Committee, or its duly appointed agent, as determined in the Committee's sole
discretion.
19. Transferability
(a) Except as specifically provided in Section 19(b), no Awards may be
transferred by the Participant otherwise than by will, by the laws of
descent and distribution, and during the Participant's lifetime an
Option may be exercised only by him. During the Restriction Period or
Deferral Period, if applicable, immediately upon any attempt to
transfer any rights under or to a share of Restricted Stock or Deferred
Stock, such share, and all of the rights related thereto, shall be
forfeited by the Participant and the transfer shall be of no force or
effect. Upon the death of a Participant, outstanding Awards granted to
such Participant may be exercised (if applicable) only by those person
or persons who shall have acquired such right to exercise by will or
the laws of descent and distribution. Such Awards shall be subject to
the restrictions, conditions and limitations that were applicable to
such Award at the time of the Participant's death and such other
restrictions, conditions and limitations that the Committee shall
determine in its sole discretion upon the death of the Participant.
(b) The Committee, in its discretion, may allow for transferability of
Non-Qualified Options by the Participant to children, grandchildren,
spouse or common law spouse, siblings or parents of the Participant or
to bona fide trusts, partnerships or other entities controlled by and
of which the beneficiaries are Immediate Family Members of the
Participant ("Immediate Family Members"). Any Awards that are
transferable are further conditioned on the Participant and Immediate
Family Members agreeing to abide by the Company's then current transfer
guidelines applicable to such types of Award.
20. Effective Date, Termination and Amendment
(a) Subject to the approval of the shareholders of Programmer's Paradise,
Inc. at Programmer's Paradise, Inc.'s 2006 annual meeting of
shareholders, the Plan shall be effective as of July 5, 2006 (the
"Effective Date"). The Plan shall remain in full force and effect until
the earlier of ten years from the date of shareholder approval, or the
date it is terminated by the Board. The Board shall have the power to
amend, suspend or terminate the Plan at any time, provided that no such
amendment shall be made without shareholder approval to the extent such
approval is required under section 422 of the Code, section 162(m) of
the Code, the rules of a stock exchange or any other applicable law.
Termination of the Plan under this Section shall not affect Awards
outstanding under the Plan at the time of termination.
(b) The Committee shall have the power unilaterally and without approval of
a Participant to amend an existing Award in order to carry out the
purposes of the Plan so long as such an amendment does not take away
any benefit granted to a Participant by the Award and as long as the
amended Award comports with the terms of the Plan; provided, however,
that prior to a Change in Control, if and to the extent that the
Committee determines Programmer's Paradise, Inc.'s federal tax
deduction in respect of an Award may be limited as a result of section
162(m) of the Code, the Committee may take any and all actions it deems
necessary, in its sole and absolute discretion with respect to any
Award (including the amendment, delay or cancellation of an Award to
the detriment of a Participant) hereunder to eliminate or minimize the
non-deductible portion of any Award. Nothing herein shall restrict the
Committee's ability to exercise its discretionary authority pursuant to
Section 4, which discretion may be exercised without amendment to the
Plan or an Award.
21. Limitation of Implied Rights
(a) Neither a Participant nor any other person shall, by reason of the
Plan, acquire any right in or title to any assets, funds or property of
the Company whatsoever, including, without limitation, any specific
funds, assets, or other property which the Company, in their sole
discretion, may set aside in anticipation of a liability under the
Plan. A Participant shall have only a contractual right to the stock or
amounts, if any, payable under the Plan, unsecured by any assets of the
Company. Nothing contained in the Plan shall constitute a guarantee
that the assets of such companies shall be sufficient to pay any
benefits to any person.
(b) Nothing contained in the Plan or any Award shall confer upon any
Participant any right with respect to the continuation of his
employment or service by the Company or interfere in any way with the
right of the Company, subject to the terms of any separate agreement to
the contrary, at any time to terminate such employment or service
38
or to increase or decrease the compensation of the Participant from the
rate in existence at the time of the grant of an Award.
(c) No person shall have any claim or right to receive an Award hereunder.
The Committee's granting of an Award to a Participant at any time shall
neither require the Committee to grant an Award to such Participant or
any other Participant or other person at any time nor preclude the
Committee from making subsequent grants to such Participant or any
other Participant or other person.
(d) No person shall have any rights as a shareholder with respect to any
shares of Common Stock covered by or relating to any Award granted
under this Plan until the date that the Participant becomes the
registered owner of such shares. Except as otherwise expressly provided
in an Award Agreement, no adjustment to any Award shall be made for
dividends or other rights for which the record date occurs prior to the
date such stock certificate is issued.
22. Securities Law Matters
The Company shall be under no obligation to effect the registration pursuant to
the Securities Act of 1933, as amended, of any interests in the Plan or any
shares of Common Stock to be issued hereunder or to effect similar compliance
under any state laws. Notwithstanding anything herein to the contrary,
Programmer's Paradise, Inc. shall not be obligated to cause to be issued or
delivered any certificates evidencing shares of Common Stock under the Plan
unless and until Programmer's Paradise, Inc. is advised by its counsel that the
issuance and delivery of such certificates is in compliance with all applicable
laws, regulations of governmental authority and the requirements of any
securities exchange on which shares of Common Stock are traded. The Committee
may require, as a condition of the issuance and delivery of certificates
evidencing shares of Common Stock under the terms hereof, that the recipient of
such shares make such covenants, agreements and representations, and that such
certificates bear such legends, as the Committee, in its sole discretion, deems
necessary or desirable.
(a) The exercise of any Option granted hereunder shall be effective only at
such time as counsel to Programmer's Paradise, Inc. shall have
determined that the issuance and delivery of shares of Common Stock
pursuant to such exercise is in compliance with all applicable laws,
regulations of governmental authority and the requirements of any
securities exchange on which shares of Common Stock are traded. The
Committee may, in its sole discretion, and in accordance with
procedures established by the Committee, defer the effectiveness of any
exercise of an Option granted hereunder in order to allow the issuance
of shares of Common Stock pursuant thereto to be made pursuant to
registration or an exemption from registration or other methods for
compliance available under federal or state securities laws.
(b) It is intended that the Plan be applied and administered in compliance
with Rule 16b-3 of the Exchange Act, as amended from time to time. If
any provision of the Plan would be in violation of Rule 16b-3 if
applied as written, such provision shall not have effect as written and
shall be given effect so as to comply with Rule 16b-3, as determined be
the Committee and such provision may be amended or Award modified as
determined in the sole discretion of the Committee.
23. Severability of Provisions
If any provision of this Plan is held to be invalid or unenforceable, the other
provisions of the Plan shall not be affected but shall be applied as if the
invalid or unenforceable provision had not been included in the Plan.
24. Applicable Law
Except to the extent preempted by any applicable federal law, the Plan will be
construed and administered in accordance with the laws of the Commonwealth of
Delaware, without reference to the principles of conflicts of law.
39
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., that the undersigned would be entitled to vote if personally present at
the Annual Meeting of Stockholders to be held at the offices of Programmers
Paradise Inc. (the "Company"), 1157 Shrewsbury Ave, Shrewsbury, New Jersey, on
June 14, 2006 at 10:00 AM, local time 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, SIMON F. NYNENS, F. DUFFIELD MEYERCORD, EDWIN H. MORGENS,
ALLAN WEINGARTEN AND MARK T. BOYER
----------------------------------------------------------------------------------- For Against Abstain
Vote on Proposals
2. Approve Amendment to the Company's Amended and Restated Certificate of |_| |_| |_|
Incorporation
3. Approve 2006 Stock Incentive Plan |_| |_| |_|
4. To ratify Amper, Politziner and Mattia P.C as the
Company's independent registered public accounting firm |_| |_| |_|
(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 ITEM 1 AND FOR PROPOSAL 2, 3 AND 4 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: , 2006
------------------------------------------
------------------------------------------------------
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