<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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 Section240.14a-11(c) or
Section240.14a-12
MICRO WAREHOUSE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS OF
MICRO WAREHOUSE, INC.
To the Stockholders:
Notice Is Hereby Given that an Annual Meeting of the Stockholders of Micro
Warehouse, Inc. will be held at the Hyatt Regency Greenwich, 1800 East Putnam
Avenue, Greenwich, Connecticut 06870 on June 3, 1999 at 10:00 A.M. local time.
The meeting is being held for the following purposes:
- To elect four directors to the Board of Directors.
- To approve an amendment to our 1994 Stock Option Plan to increase the
number of shares reserved for issuance from 4,000,000 to 6,000,000.
- To ratify the appointment of PricewaterhouseCoopers LLP as our independent
public accountants.
- To transact such other business as may properly come before the meeting or
any adjournment thereof.
The Board of Directors has designated the close of business on April 9, 1998
as the record date for determination of stockholders entitled to notice of and
to vote at the meeting and any adjournment thereof. The stock transfer books
will not be closed. A list of stockholders entitled to vote at the meeting will
be available for inspection at the meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. THE BOARD OF
DIRECTORS EXTENDS A CORDIAL INVITATION TO ALL STOCKHOLDERS TO BE PRESENT AT THE
MEETING. ALL STOCKHOLDERS, WHETHER OR NOT THEY EXPECT TO ATTEND THE MEETING, ARE
REQUESTED TO FILL IN, DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT IN THE RETURN
ENVELOPE PROVIDED AS PROMPTLY AS POSSIBLE. STOCKHOLDERS WHO ATTEND THE MEETING
MAY WITHDRAW THEIR PROXIES AND VOTE IN PERSON.
By order of the Board of Directors,
/s/ Bruce L. Lev
BRUCE L. LEV
Secretary
Norwalk, Connecticut
April 30, 1998
<PAGE>
MICRO WAREHOUSE, INC.
535 CONNECTICUT AVENUE
NORWALK, CONNECTICUT 06854
------------------------
PROXY STATEMENT
------------------------
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 3, 1999
The accompanying proxy is solicited on behalf of the Board of Directors of
Micro Warehouse, Inc. for use at its Annual Meeting of Stockholders. The meeting
will be held at the Hyatt Regency Greenwich, 1800 East Putnam Avenue, Greenwich,
Connecticut 06870 on June 3, 1999 at 10:00 A.M. local time. The meeting is being
held for the following purposes:
- To elect directors.
- To approve an amendment to our 1994 Stock Option Plan to increase the
number of shares reserved for issuance from 4,000,000 to 6,000,000.
- To ratify the appointment of PricewaterhouseCoopers LLP as our independent
public accountants.
You have three choices when you vote for directors. By checking the
appropriate box on the proxy card you may:
- vote for all of the director nominees as a group, or
- withhold authority to vote for all director nominees as a group, or
- vote for all director nominees as a group except those nominees identified
in the appropriate area.
You also have three choices when voting on the other two proposals. By
checking the appropriate box you may:
- vote FOR any of the proposals, or
- vote AGAINST any of the proposals, or
- ABSTAIN from voting on any of the proposals.
If you give a proxy you may revoke it at any time before it is voted by:
- giving written notice to the Secretary of the Company, or
- filing with the Secretary a duly executed proxy bearing a later date, or
- attending the Annual Meeting and voting in person.
We will vote your properly executed proxy that has not been revoked as you
direct. If you make no direction your proxy will be voted for all of the
director nominees as a group and FOR the other two proposals.
We will bear all expenses in connection with the solicitation of proxies. We
will reimburse banks, brokerage firms and other custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses incurred in connection
with forwarding proxies to the beneficial owners of our Common Stock.
This Proxy Statement and the accompanying form of proxy are being first
mailed on or about May 3, 1999.
VOTING SECURITIES
Only stockholders of record at the close of business on April 9, 1998 will
be entitled to vote at the Annual Meeting. On that date, there were outstanding
and entitled to vote 35,687,820 shares of Common Stock, with each share entitled
to one vote. Broker non-votes and abstentions are not treated as votes cast for
purposes of any of the proposals to be voted on at the meeting.
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, four Directors will be elected to serve until the
next Annual Meeting of Stockholders or until their successors are elected and
qualified. Unless you direct otherwise we will vote your proxy for the four
nominees indicated below as a group. However, if any nominee becomes unavailable
or proves unable to serve for any reason, we will vote the proxies for the
election of another person or persons selected by the Board. Each nominee has
informed the Board that he will be available and able to serve. A plurality of
the votes cast is necessary for election.
NOMINEES
FELIX DENNIS, 51, co-founder, has served as a Director since October 1992
and as a principal consultant from our inception in 1987 through December 31,
1998. Since 1972, Mr. Dennis has been Chairman of Dennis Publishing, Ltd., an
independently owned publishing company that publishes MACUSER and COMPUTER
SHOPPER magazines, as well as other magazines in the United Kingdom and the
United States.
FREDERICK H. FRUITMAN, 48, became a Director in December of 1992. Since 1990
he has been a Managing Director of Loeb Partners Corporation, an investment
banking firm. Mr. Fruitman is a director of FIND/SVP, Inc.
PETER GODFREY, 53, co-founder, was appointed Chairman on January 25, 1994
and has served as President and Chief Executive Officer from our inception until
October 1996 and from October 1997 to the present. Mr. Godfrey has served as a
Director since our inception.
JOSEPH M. WALSH, 56, became a Director in February of 1993. Since November
1992 he has served as Chairman and Chief Executive Officer of Curtis Circulation
Company. From 1972 through 1974 and from 1982 through November 1992 he served as
President of Curtis. From 1974 through 1982 he was Executive Vice President of
Cadence Industries Corporation and President of certain of its subsidiaries
including Data Systems for Health (a computerized national billing company), US
Pencil and Stationery Company (primarily an advertising specialty mail-order
company) and Perfect Subscription Companies (which were formerly Perfect School
Plans, Moore-Cottrell and Keystone Readers Service) He is a Certified Public
Accountant.
2
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Peter Godfrey(1)..................................... 53 Chairman of the Board, President and Chief Executive
Officer
Stephen J. Carline................................... 38 Executive Vice President of Sales
Wayne P. Garten...................................... 46 Executive Vice President and Chief Financial Officer
Bruce L. Lev......................................... 55 Executive Vice President of Legal and Corporate
Affairs, General Counsel and Secretary
Adam Shaffer......................................... 33 Executive Vice President of Marketing, Advertising
and Purchasing
Geoffrey Boytos...................................... 41 Senior Vice President of Database Marketing and Brand
Management
Jeffrey Gentile...................................... 35 Senior Vice President of Merchandising
William S. Medve..................................... 40 Senior Vice President of Finance
John Vail............................................ 41 Senior Vice President and Chief Information Officer
</TABLE>
- ------------------------
(1) Additional information with respect to Mr. Godfrey can be found under
Proposal 1--Election of Directors.
STEPHEN J. CARLINE has served as Executive Vice President of Sales since
October 1998. Mr. Carline was co-founder and from November 1997 through November
1998 served as principal member of Discovery Training & Development, L.L.C., a
telesales and teleservice training and consulting firm specializing in
business-to-business sales for the IT industry. From September 1996 to July 1997
Mr. Carline was Vice President of Sales of Insight Enterprises, Inc., a direct
marketer of computers and computer-related products. From 1986 through 1996 he
served in a variety of positions at Careertrack, Inc., an international direct
marketer of training and development programs, including Vice President of Sales
and Operations from 1995 to 1996, Director, Sales Division from 1991 to 1995,
Director, Operations Division from 1989 to 1991 and Manager Customer Service
Department from 1986 through 1989.
WAYNE P. GARTEN has served as Executive Vice President and Chief Financial
Officer since December 1997 and as Senior Vice President and Chief Financial
Officer from February 1997 to December 1997. From 1983 to August 1996 Mr. Garten
was employed by Hanover Direct, Inc., a specialty brand direct marketer, and its
predecessor company The Horn and Hardart Company, where he served as Executive
Vice President and Chief Financial Officer from 1989 until 1996. Mr. Garten is a
Certified Public Accountant.
BRUCE L. LEV has served as Executive Vice President of Legal and Corporate
Affairs, General Counsel and Secretary since December 1997. From April 1995
until December 1997 he served as Vice President, General Counsel and Secretary.
Mr. Lev has served as Secretary since inception. The law firm of which he was
Senior Partner has served as an outside counsel since our inception. A successor
to that firm, Lev, Berlin & Dale, P.C., continues in this capacity and Mr. Lev
is of counsel to the firm. Prior to joining us, Mr. Lev had been a lawyer in
private practice since 1968.
ADAM SHAFFER has served as Executive Vice President of Marketing,
Advertising and Purchasing since December 1997 and served as Vice President of
Product and Marketing from November 1996 to December 1997. Mr. Shaffer served as
Vice President of Worldwide Marketing from January 1996 to
3
<PAGE>
November 1996. From April 1993 to January 1996 he served as Vice President of
Marketing. From April 1992 to March 1993 he served as Director of our MacShopper
division.
GEOFFREY BOYTOS has served as Senior Vice President of Database Marketing
and Brand Management since January of 1998 and served as Vice President of
Database Marketing from November 1996 to January 1998. From 1992 to 1996 Mr.
Boytos served as our Director of Database Marketing.
JEFFREY GENTILE has served as Senior Vice President of Merchandising since
January 1998. Mr. Gentile has been with us since 1992 serving in a variety of
management-level positions including Director of Datacomm Warehouse and Group
Director of Marketing.
WILLIAM S. MEDVE has served as Senior Vice President of Finance since June
1998. From June 1997 through May 1998 Mr. Medve was Vice President and
Controller. From 1995 through 1997 he served as Chief Financial Officer of The
Walt Disney Company's Childcraft Education Corporation, a direct marketer of
early childhood educational products. From 1994 through 1995 he was Controller
of Disney Direct Marketing Services, Inc., a catalog direct marketer. Prior to
joining Disney Direct Marketing Services Mr. Medve was employed by
PricewaterhouseCoopers LLC in various positions leading to senior management.
Mr. Medve is a Certified Public Accountant.
JOHN VAIL has served as Senior Vice President and Chief Information Officer
since May 1998. From 1996 through 1998 Mr. Vail was Vice President of
Information Technology of Scholastic, Inc., a children's publisher and media
company. From 1991 to 1996 he was Director, MIS (Application Development) for
Reader's Digest Association, a publisher and direct marketer of magazines, books
and home entertainment products.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the beneficial
ownership as of April 9, 1999 of each stockholder we know to own beneficially in
excess of 5% of the outstanding Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP % OF CLASS
- -------------------------------------------------------------------------------- ------------------ -----------
<S> <C> <C>
Peter Godfrey(1)................................................................ 2,880,295 8.07%
Micro Warehouse, Inc.
535 Connecticut Avenue
Norwalk, CT 06854
Massachusetts Financial Services Company(2)..................................... 4,370,921 12.25%
500 Boylston Street
Boston, MA 02116
MFS Series Trust II-MFS Emerging Growth Fund(2)................................. 2,857,100 8.01%
500 Boylston Street
Boston, MA 02116
Nicholas-Applegate Capital Management(3)........................................ 3,320,716 9.30%
600 West Broadway 29(th) Floor
San Diego, CA 92101
Putnam Investments, Inc.(4)..................................................... 1,899,200 5.32%
One Post Office Square
Boston, MA 02109
</TABLE>
- ------------------------
(1) Includes 79,333 shares of Common Stock that Mr. Godfrey has the right to
acquire within 60 days of April 9, 1999 through the exercise of stock
options.
4
<PAGE>
(2) Information concerning beneficial ownership by Massachusetts Financial
Services Company ("MFS") and MFS Series Trust II-MFS Emerging Growth Fund
("MEG") is based on a report on Schedule 13G filed with the Securities and
Exchange Commission dated February 11, 1999. This report indicates that, of
the 4,370,921 shares, MFS has sole voting power with respect to 4,357,371
shares and no shared voting power and has sole dispositive power with
respect to 4,370,921 shares. Additionally, of the 4,370,921 shares
beneficially owned by MFS, 2,857,100 shares or 8.01% of the Common Stock are
also beneficially owned by MEG and 1,513,821 shares are also beneficially
owned by certain other non-reporting entities as well as MFS. In total, MFS
and MEG beneficially own 4,370,921 shares or 12.25% of the Common Stock. MFS
and MEG have their principal business offices at 500 Boylston Street,
Boston, MA 02116.
(3) Information concerning beneficial ownership by Nicholas-Applegate Capital
Management is based on a report on Schedule 13G filed with the Securities
and Exchange Commission dated February 5, 1999. This report indicates that,
of the 3,320,716 shares beneficially owned by Nicholas-Applegate, it has
sole dispositive power with respect to all 3,320,716 shares, has sole voting
power with respect to 2,669,269 shares and has no shared voting power.
Nicholas-Applegate has its principal business office at 600 West Broadway,
29(th) Floor, San Diego, California 92101.
(4) Information concerning beneficial ownership by Putnam Investments, Inc.
("PI") is based on a report on Schedule 13G filed with the Securities and
Exchange Commission dated April 8, 1999. PI, which is a wholly owned
subsidiary of Marsh & McLennan Companies, Inc., wholly owns two registered
investment advisors: Putnam Investment Management Group ("PIM") and The
Putnam Advisory Company, Inc. ("PAC"). This report indicates that PI has
shared dispositive power with respect to all 1,899,200 shares beneficially
owned by it, has no sole voting power and has shared voting power with
respect to 116,600 shares. Additionally, of the shares beneficially owned by
PI, 1,673,800 shares are also beneficially owned by PIM. The report
indicates that PIM has shared dispositive power with respect to all
1,673,800 shares beneficially owned by it and has neither sole nor shared
voting power. PAC beneficially owns 225,400 shares, has shared dispositive
power with respect to all 225,400 shares and has shared voting power with
respect to 116,600 shares. In total, PI as parent to PIM and PAC
beneficially owns 1,899,200 shares or 5.32% of the Common Stock. PI has its
principal business offices at One Post Office Square, Boston, Massachusetts
02109.
5
<PAGE>
The following table sets forth certain information concerning the beneficial
ownership of Common Stock as of April 9, 1999 by:
- our Directors
- each of the Executive Officers named in the Summary Compensation Table
- all Directors and Executive Officers as a group.
The Amount and Nature of Beneficial Ownership column includes shares of
Common Stock that may be acquired within 60 days of April 9, 1999 through the
exercise of stock options.
<TABLE>
<CAPTION>
AMOUNT AND NATURE STOCK OPTIONS THAT
OF BENEFICIAL WILL BE VESTED
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP AS OF JUNE 8, 1999 % OF CLASS
- ------------------------------------------------------------ ------------------ ------------------- -----------
<S> <C> <C> <C>
Peter Godfrey............................................... 2,880,295 79,333 8.07%
Micro Warehouse, Inc.
535 Connecticut Avenue Norwalk, CT 06854
Felix Dennis................................................ 1,275,963 -- 3.58%
39 Goodge Street
London, England W1P 1FD
Frederick H. Fruitman....................................... 40,000 40,000 *
Loeb Partners Corporation
61 Broadway 24th Floor
New York, NY 10006
Joseph M. Walsh............................................. 40,000 35,000 *
Curtis Circulation Company
730 River Road
New Milford, NJ 07646
Wayne P. Garten............................................. 65,834 65,834 *
Micro Warehouse, Inc.
535 Connecticut Avenue
Norwalk, CT 06854
Bruce L. Lev................................................ 115,534 115,534 *
Micro Warehouse, Inc.
535 Connecticut Avenue
Norwalk, CT 06854
Adam Shaffer................................................ 212,178 212,178 *
Micro Warehouse, Inc.
535 Connecticut Avenue
Norwalk, CT 06854
Jeffrey Gentile............................................. 7,700 7,700 *
Micro Warehouse, Inc.
535 Connecticut Avenue
Norwalk, CT 06854
Stephen England (1)......................................... 53,234 52,834 *
11601 Uplands Ridge Drive
Austin, TX 78733
Jeffrey Sheahan (2)......................................... -- -- --
127 Alta Vista Way
Danville, California 94506
All Directors and Officers as a Group....................... 4,749,970 667,64 13.31%
(24 persons)
</TABLE>
- ------------------------
* Represents less than one percent
6
<PAGE>
(1) Mr. England resigned pursuant to an October 19, 1998 severance agreement.
(See "SEVERANCE AGREEMENT WITH NAMED EXECUTIVE OFFICER.")
(2) Mr. Sheahan resigned effective October 9, 1998.
BOARD MEETINGS, COMPENSATION OF CERTAIN DIRECTORS,
AND COMMITTEES OF THE BOARD
The Board held a total of four meetings during 1998. Each Director attended
in person or by telephone all of the meetings of the Board and their respective
committee meetings.
Frederick H. Fruitman became a Director in December 1992 and Joseph M. Walsh
became a Director in February 1993. Neither of them is an officer, employee or
consultant. Each receives an annual fee of $20,000 for services rendered as a
Director and as a member of the Board's Committees. In addition, each received a
bonus payment of $50,000 in early 1998 attributable to special assistance
provided beyond the normal scope of his Director responsibilities. As of January
1, 1999 each also receives a fee of $1,000 per Board meeting attended and $500
per Committee meeting attended.
AUDIT COMMITTEE
The Audit Committee's responsibilities include recommending to the Board the
independent public accountants to conduct the annual audit of our books and
accounts, reviewing the proposed scope of the audit and approving the audit fees
to be paid. The Audit Committee also reviews with the independent public
accountants and with management the adequacy and effectiveness of our internal
auditing, accounting, financial and ethical business conduct controls. In
addition, the Audit Committee reviews audited financial statements with the
independent public accountants. The members of the Audit Committee are Messrs.
Fruitman and Walsh. The Audit Committee held four meetings during 1998.
COMPENSATION AND STOCK OPTION COMMITTEE
The Compensation and Stock Option Committee's responsibilities include
reviewing our executive compensation policy and approving the salaries of all
officers and certain other of our employees. It also supervises the
administration of all stock option and benefit plans and other matters affecting
executive compensation, subject to further approval of the Board. The members of
the Compensation and Stock Option Committee are Messrs. Fruitman and Walsh. The
Compensation and Stock Option Committee held four meetings during 1998.
NOMINATING COMMITTEE
The Nominating Committee's responsibilities include proposing a slate of
Directors for selection by the stockholders at each annual meeting and proposing
candidates to fill vacancies on the Board. The members of the Nominating
Committee are Messrs. Fruitman and Walsh. There was one meeting of the
Nominating Committee prior to this date to propose the slate of Directors
described in Proposal 1 of this Proxy Statement.
The Nominating Committee will consider nominations by stockholders made in
accordance with the information and timely notice requirements of our By-Laws, a
copy of which may be obtained upon request mailed to Micro Warehouse, Inc., 535
Connecticut Avenue, Norwalk, Connecticut 06854, attention: Bruce L. Lev, General
Counsel and Secretary.
REPORT OF COMPENSATION AND STOCK OPTION COMMITTEE
GENERAL
One of the principal tasks of the Board has been to formulate an effective
compensation policy designed to balance the short-term need to attract qualified
executives with the long-term need to provide
7
<PAGE>
incentives to those executives and other employees in a manner that will
encourage a long-term commitment to our growth and enhancement of stockholder
value.
COMPENSATION PHILOSOPHY AND OBJECTIVES
In order to attract qualified executives, our philosophy has been and
continues to be to provide a total compensation package that is competitive
within the hardware, software and direct marketing industries and bears a close
relationship to individual performance and our long-term business objectives.
The total direct compensation package for our executive officers is presently
made up of three elements:
- an annual base salary
- a short-term incentive program in the form of a performance based bonus
(with certain discretionary components)
- a longer-term incentive program in the form of stock options.
ANNUAL BASE SALARY
We review the salaries of our officers annually. In determining salaries, we
consider, among other factors, the officer's scope of responsibility, prior
experience and data on comparable salaries in relevant markets and industries.
The annual base salaries of individual officers were increased in 1998 as a
result of promotions, individual periodic performance reviews and cost of living
adjustments.
PERFORMANCE-BASED BONUS
We continue to believe that incentive awards tied to achievement of our
goals as well as goals and objectives for individual employees should be an
important portion of each employee's compensation. In early 1998 we instituted
the 1998 Incentive Plan for our executive management that tied incentive
compensation directly to our budgeted profits and the achievement of the
executives' individual goals and objectives. The incentive plan for all other
employees ties bonuses to the overall profit achievement of either our U.S.
operations or, for non-U.S. employees, the appropriate international business
unit. In many instances bonuses will also be tied to agreed-upon individual
goals and objectives. For 1998 we paid a total of $5,676,397 to our employees as
incentive-based bonuses.
STOCK OPTIONS
The purpose of the stock option program is to provide additional incentives
to all employees to work to maximize stockholder value. To encourage growth in
stockholder value, we believe that employees should have a significant stake in
the ongoing success of our business and that stock options align the employee's
financial interests with that of the stockholders. In addition, the option plan
utilizes vesting periods to encourage employees to continue in our employ.
During 1998 we granted options to purchase 1,854,650 shares of Common Stock to
certain employees at exercise prices ranging from $11.34 to $28.41 per share. We
intend to continue granting stock options on a periodic basis to our employees,
directors and consultants.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The 1998 base salary of Mr. Godfrey was $558,916 pursuant to an employment
agreement effective as of January 1, 1995. Mr. Godfrey did not participate in
the Executive Management 1998 Incentive Plan. He did, however, receive a
discretionary bonus of $436,084 in early 1999 attributable to his leadership in
our strong financial and operating performance in 1998. Additionally, pursuant
to his employment agreement, in February 1998 Mr. Godfrey was granted 40,000
options to purchase Common Stock with an exercise price of $13.59 per share. As
of January 1, 1999 Mr. Godfrey entered into a new two-year employment
8
<PAGE>
agreement described below. (See "EMPLOYMENT AGREEMENTS WITH NAMED EXECUTIVE
OFFICERS.")
The Compensation and Stock Option Committee believes that our compensation
programs of base salary, incentive plans and stock option grants are appropriate
for Mr. Godfrey and other executive officers on the basis of industry standards,
competitive practices and our performance.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code disallows a deduction for
executive compensation exceeding one million dollars per year unless certain
conditions are satisfied. The Committee has reviewed and approved all of our
option plans and compensation programs. While we generally intend to preserve
the income tax deductibility under Section 162(m) of executive compensation, we
reserve the right to pay our executives as we determine appropriate. In this
connection, we have determined not to have our Executive Management Incentive
Plan and grants of stock options to certain executives comply with Section
162(m) and will retain discretion to authorize the payment of compensation that
does not qualify for income tax deductibility. By retaining this discretion, we
will maintain our flexibility to motivate and reward excellent performance
without compromising the expectations of our executives.
The Compensation and Stock Option Committee
FREDERICK H. FRUITMAN
JOSEPH M. WALSH
9
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth compensation information for the three years
ending December 31, 1996, 1997 and 1998 with respect to:
- the Chief Executive Officer
- the four most highly compensated executive officers other than the CEO who
were serving as executive officers as of December 31, 1998
- two additional individuals for each of whom disclosure would have been
provided above except for the fact that the individual was not serving as
an executive officer as of December 31, 1998.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY COMPENSATION OPTIONS/SARS (#) COMPENSATION
- -------------------------------------------- --------- ---------- ------------- ----------------- -------------
<S> <C> <C> <C> <C> <C>
Peter Godfrey............................... 1998 $ 558,916 $ 436,084 40,000 --
Chairman, President and 1997 528,902 -- 40,000 --
Chief Executive Officer 1996 513,633 -- 50,000 --
Wayne P. Garten............................. 1998 339,882 323,375 100,000 $ 4,571(1)
Executive Vice President and 1997 203,077 91,384 100,000 --
Chief Financial Officer(2) 1996 -- -- -- --
Bruce L. Lev................................ 1998 347,106 331,799 100,000 16,390(3)
Executive Vice President of Legal 1997 325,712 150,000 48,000 14,194(3)
And Corporate Affairs and 1996 319,459 -- 23,000 12,942(3)
General Counsel
Adam Shaffer................................ 1998 333,937 323,375 500,000 4,903(1)
Executive Vice President of 1997 233,856 194,887 50,000 2,375(1)
Marketing, Advertising and 1996 277,500 77,500 -- 2,325(1)
Purchasing
Jeffrey Gentile............................. 1998 197,588 87,863 14,250 4,755(1)
Senior Vice President 1997 157,667 40,000 30,500 2,375(1)
of Merchandising 1996 140,400 34,450 -- 2,375(1)
Stephen England............................. 1998 258,989 351,285 100,000 4,703(1)
Former Executive Vice President 1997 231,388 88,798 20,000 2,375(1)
Of Sales(4) 1996 202,245 86,152 30,000 2,375(1)
Jeffrey Sheahan............................. 1998 204,642 -- -- 82,142(6)
Former Senior Vice President and 1997 204,391 -- 35,000 91,922(6)
President of European 1996 206,479 42,500 13,000 78,617(6)
Operations(5)
</TABLE>
- ------------------------
(1) Represents matching contributions under our 401(k) Savings Plan.
(2) Mr. Garten became an executive officer and employee in February 1997.
10
<PAGE>
(3) Includes the following additional compensation to Mr. Lev:
<TABLE>
<CAPTION>
INSURANCE 401(K) MATCHING
YEAR PREMIUMS CONTRIBUTIONS
- --------- ----------- ---------------
<S> <C> <C>
1998 $ 11,819 $ 4,571
1997 11,747 2,375
1996 6,553 1,195
</TABLE>
(4) Mr. England resigned pursuant to an October 19, 1998 severance agreement.
(See "SEVERANCE AGREEMENT WITH NAMED EXECUTIVE OFFICER").
(5) Mr. Sheahan resigned effective October 9, 1998.
(6) Includes the following additional compensation to Mr. Sheahan:
<TABLE>
<CAPTION>
HOUSING, LIVING
AND
EDUCATION 401(K) MATCHING
YEAR EXPENSES CONTRIBUTIONS
- --------- ----------------- ---------------
<S> <C> <C>
1998 $ 77,514 $ 4,628
1997 89,547 2,375
1996 76,164 2,453
</TABLE>
OPTIONS GRANTED IN LAST FISCAL YEAR
The table below shows the individual grants of non-qualified stock options
to the Chief Executive Officer and the other executive officers named in the
Summary Compensation Table during 1998.
<TABLE>
<CAPTION>
POTENTIAL REALIZED VALUE AT
% OF TOTAL ASSUMED VALUE RATES OF
SHARES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED EXERCISE FOR OPTION TERM (3)
GRANT OPTIONS IN FY PRICE PER EXPIRATION ---------------------------
NAME DATE(1) GRANTED 1998 SHARE ($) DATE(2) 5%($) 10%($)
- ------------------------------- --------- ----------- ----------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Peter Godfrey.................. 2/26/98 40,000 2.16% $ 13.59 2/26/08 $ 340,075 $ 863,505
Wayne P. Garten................ 2/26/98 100,000 5.39% $ 13.59 2/26/08 $ 850,188 $ 2,158,763
Bruce L. Lev................... 2/26/98 100,000 5.39% $ 13.59 2/26/08 $ 850,188 $ 2,158,763
Adam Shaffer................... 2/26/98 500,000 29.96% $ 13.59 2/26/08 $ 4,250,942 $ 10,793,816
Jeffrey Gentile................ 1/12/98 14,250 0.77% $ 12.50 1/12/08 $ 106,219 $ 274,645
Stephen England................ 2/26/98 100,000 5.39% $ 13.59 2/26/08 $ 850,188 $ 2,158,763
Jeffrey Sheahan................ -- -- -- -- -- -- --
</TABLE>
- ------------------------
(1) The grants made to Messrs. Godfrey, Garten, Lev, Shaffer and England on
February 26, 1998 vest in equal installments on each of the first three
anniversaries of their grants. The grant to Mr. Gentile on January 12, 1998
vests in equal installments on each of the first five anniversaries of the
grant.
(2) Each of the options granted above has a ten-year term.
(3) The potential realizable value portion of the foregoing table illustrates
value that might be realized upon exercise of the options immediately prior
to the expiration of their term, assuming the specified compounded rates of
appreciation on our Common Stock over the full term of the options.
The rates of appreciation are established by the Securities and Exchange
Commission and are not intended as a forecast of future appreciation. The actual
gain, if any, realized by the recipient will depend upon the actual performance
of our Common Stock. There can be no assurance that the amounts reflected in
this table will be achieved.
11
<PAGE>
OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The table below lists the shares acquired on exercise of options by the
Chief Executive Officer and the other executive officers named in the Summary
Compensation Table during 1998 and certain information as to options unexercised
at December 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS AT
SHARES 1998 DECEMBER 31, 1998 (1)
ACQUIRED VALUE -------------------------- ---------------------------
NAME ON EXERCISE # REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------- ------------- ------------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Peter Godfrey.................... 0 -- 71,333 58,667 $ 529,752 $ 1,217,273
Wayne P. Garten.................. 0 -- 43,334 156,666 $ 893,472 $ 3,322,528
Bruce L. Lev..................... 0 $ 777,719 99,684 111,316 $ 1,303,144 $ 2,205,894
Adam Shaffer..................... 0 $ 820,914 200,303 382,458 $ 4,100,267 $ 7,781,663
Jeffrey Gentile.................. 14,400 $ 111,397 -- 32,150 -- $ 682,959
Stephen England.................. 68,500 $ 905,737 48,834 84,166 $ 1,014,953 $ 1,718,934
Jeffrey Sheahan.................. 28,859 $ 258,554 -- -- -- --
</TABLE>
- ------------------------
(1) Values have been calculated based on the closing price of our Common Stock
reported on the Nasdaq National Market on December 31, 1998 at $33.8125 per
share.
EMPLOYMENT AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
PETER GODFREY. As of January 1, 1999 we entered into a two-year employment
agreement with Mr. Godfrey under which he remained employed as Chief Executive
Officer. Under the agreement, Mr. Godfrey receives a base salary of $550,696, as
adjusted in the year 2000 for cost of living increases. In addition, Mr. Godfrey
may receive annual incentive compensation with a target amount of 75% of his
base salary and a maximum of 200% of his base salary.
STEPHEN J. CARLINE. As of October 28, 1998 we entered into a three-year
employment agreement with Mr. Carline. Under the agreement, Mr. Carline receives
an annual base salary of $250,000 and may receive annual incentive compensation
with a target amount of 50% of his base salary and a maximum of 100% of his base
salary. In addition, at the commencement of the agreement Mr. Carline was
granted options to purchase 50,000 shares of Common Stock at $19.44 per share
vesting one third per year on each of the first three anniversaries of the
agreement. The options will accelerate and become fully vested upon a change of
control.
WAYNE P. GARTEN. As of January 1, 1998 we entered into a three-year
employment agreement with Mr. Garten whereby he remained employed as Executive
Vice President and Chief Financial Officer. Under the agreement, Mr. Garten
receives an annual base salary of $325,000 (subject to upward adjustment for
cost of living increases) and may receive annual incentive compensation with a
target amount of 50% of his base salary and a maximum of 100% of his base
salary. Mr. Garten receives $50,000 per year as a guaranteed payment of his
incentive compensation paid on a quarterly basis. In addition, at the
commencement of the agreement Mr. Garten was granted options to purchase 100,000
shares of Common Stock at $13.59 per share vesting one third per year on
December 31 of 1998, 1999 and 2000. The options will accelerate and become fully
vested upon a change of control and certain events of termination.
BRUCE L. LEV. As of January 1, 1998 we entered into a three-year employment
agreement with Mr. Lev whereby he remained employed as Executive Vice President
of Legal and Corporate Affairs, General Counsel and Secretary. Under the
agreement, Mr. Lev receives an annual base salary of $333,466 (subject to upward
adjustment for cost of living increases) and may receive annual incentive
compensation with a target amount of 50% of his base salary and a maximum of
100% of his base salary. Mr. Lev receives $50,000 per year as a guaranteed
payment of his incentive compensation paid on a quarterly basis. In addition, at
the commencement of the agreement Mr. Lev was granted options to purchase
100,000 shares
12
<PAGE>
of Common Stock at $13.59 per share vesting one third per year on December 31 of
1998, 1999 and 2000. The options will accelerate and become fully vested upon a
change of control and certain events of termination.
ADAM SHAFFER. As of January 1, 1998 we entered into a three-year employment
agreement with Mr. Shaffer whereby he remained employed as Executive Vice
President of Marketing, Advertising and Purchasing Under the agreement, Mr.
Shaffer receives an annual base salary of $325,000 (subject to upward adjustment
for cost of living increases) and may receive annual incentive compensation with
a target amount of 50% of his base salary and a maximum of 100% of his base
salary. At the commencement of the agreement Mr. Shaffer was granted options to
purchase 500,000 shares of Common Stock at $13.59 per share, vesting one third
per year on December 31 of 1998, 1999 and 2000. The options will accelerate and
become fully vested upon a change of control and certain events of termination.
SEVERANCE AGREEMENT WITH NAMED EXECUTIVE OFFICER
STEPHEN ENGLAND. On October 19, 1998 we entered into a Severance Agreement
and General Release with Stephen England. Pursuant to the agreement, Mr. England
resigned as Executive Vice President of Sales and we agreed to pay his annual
base salary of $250,000 (as adjusted annually for cost of living adjustments) on
the regular payroll cycle through December 31, 2000. In addition, Mr. England
received incentive compensation plus his targeted commission for 1998 in an
aggregate amount of $351,285. Mr. England's outstanding stock options continue
to vest until December 31, 2000 and each may be exercised until the earlier of
(i) its expiration date or (ii) the later of 12 months after it vests or
December 31, 1999.
STOCK OPTION PLANS
Our Board and stockholders approved our 1992 Stock Option Plan and 1994
Stock Option Plan both of which provide for the grant of stock options to our
own and our subsidiaries' officers, directors, employees and consultants. Under
these stock option plans, we may grant options that are intended to qualify as
Incentive Stock Options within the meaning of Section 422A of the Internal
Revenue Code and options not intended to qualify as Incentive Stock Options,
also referred to as Nonstatutory Stock Options. Incentive Stock Options may not
be granted to consultants who are not also our employees. A total of up to
5,000,000 shares of Common Stock may be issued upon the exercise of options
granted under the plans. We are proposing that you approve an amendment to the
1994 Stock Option Plan that increases the number of shares reserved for issuance
under 1994 Stock Option Plan from 4,000,000 to 6,000,000. See "PROPOSAL
2--APPROVAL OF AN AMENDMENT TO THE 1994 STOCK OPTION PLAN."
We also succeeded to all of the obligations and responsibilities of Inmac
Corp.'s 1983 and 1992 Stock Option Plans and 1988 Director's Stock Option Plan
when we acquired Inmac in January 1996. A total of up to 943,920 shares of
Common Stock may be issued upon the exercise of options granted under these
plans.
All of our stock option plans may be administered by the Board or the
Compensation and Stock Option Committee. Subject to the provisions of each of
the stock option plans, the Board has the authority to select the employees,
directors or consultants to whom options are granted and determine the terms of
each option, including:
- the number of shares of Common Stock the option entitles the holder to
purchase
- the date on which the option becomes exercisable
- the price at which the option may be exercised, which must be equal to the
fair market value of the Common Stock as of the date of grant for
Incentive Stock Options and 85% of fair market value for Nonstatutory
Stock Options
- the duration of the option, which may not exceed ten years.
13
<PAGE>
SECTION 401(K) SAVINGS PLAN
We sponsor a 401(k) savings plan that covers full-time employees who meet
its eligibility requirements. Participants may make tax deferred contributions
of up to 15% of annual compensation (subject to other limitations specified by
the Internal Revenue Code). As of January 1, 1998 we increased from 25% to 50%
the matching contribution for amounts which do not exceed 6% of the
participant's annual compensation. Although we are entitled to make
discretionary profit sharing contributions to the plan, we have not made any
such contributions.
PERFORMANCE GRAPH
The following graph compares the performance of our Common Stock to each of
the Nasdaq Composite and Retail Trade Indexes for the period from December 31,
1993 until December 31, 1998.
The graph assumes that the value of the investment in our Common Stock and
each index was $100 at December 31, 1993. The results shown on the graph are not
necessarily indicative of long-term results.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DOLLARS
<S> <C> <C> <C> <C>
Year Ending MICRO WAREHOUSE INC. NASDAQ COMPOSITE NASDAQ RETAIL
Dec-93 100.00 100.00 100.00
Jun-94 102.10 104.83 93.03
Dec-94 168.16 112.21 96.14
Jun-95 221.02 139.93 104.75
Dec-95 207.80 158.70 105.91
Jun-96 96.09 179.66 127.31
Dec-96 54.46 195.19 126.26
Jun-97 82.28 218.45 125.69
Dec-97 66.96 239.53 148.79
Jun-98 74.47 287.87 196.64
Dec-98 162.46 336.12 183.47
</TABLE>
COMPENSATION STOCK OPTION COMMITTEE INTERLOCKS
AND INSIDERS PARTICIPATION
Members of the Compensation and Stock Option Committee are Messrs. Fruitman
and Walsh, neither of whom is an officer, employee or consultant. There were no
committee interlocks during 1998.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CONSULTING AGREEMENT
In 1998 Mr. Dennis received fees of $50,000 plus expenses for consulting
services to us under a consulting agreement dated January 1, 1989. The
consulting agreement expired on December 31, 1998. Additionally, Mr. Dennis has
agreed that he will not receive options under any of our stock option plans.
DENNIS PUBLISHING, LTD.
MacUser, PC Pro, MacShopper and Computer Shopper magazines are owned and
published in the United Kingdom by Dennis Publishing, Ltd., of which Felix
Dennis is a controlling stockholder and Chairman. Mr. Godfrey holds a 5%
interest in Computer Shopper magazine. We may from time to time purchase
advertising space in and rent subscriber lists from these magazines for purposes
of marketing products in the United Kingdom. Neither Mr. Dennis nor Mr. Godfrey
participates in any decision relating to the purchase of advertising space or
rental of subscription lists from these magazines, and all related
14
<PAGE>
fees are negotiated on an arm's-length basis between our operating
representatives and representatives of Dennis Publishing. Dennis Publishing,
Ltd. and Mr. Dennis are also affiliated with two companies that publish the
non-computer magazines, Maxim Magazine and Stuff Magazine, in which two
magazines Mr. Godfrey holds 12.5% interests. We have not purchased advertising
space or rented subscriber lists from these magazines.
CHARTERED AIRCRAFT
We periodically charter an aircraft owned and operated by a company wholly
owned by Mr. Godfrey. We paid a total of $7,825 in 1998 for the use of such
aircraft for business purposes.
LEASES
We lease 12,000 square feet of executive office space in South Norwalk,
Connecticut from Mr. Godfrey and 13,500 square feet of office space in South
Norwalk from an entity 50% owned by Mr. Godfrey under leases that expire
December 31, 1999. We paid a total of $292,339 in 1998 for rent of these
premises.
FUTURE POLICY
We believe that the related party transactions described above were at
rents, prices and terms no less favorable to us than would have been available
in similar transactions with unrelated parties. We have adopted a policy that
future transactions with affiliated entities or persons will be on terms no less
favorable than could be obtained from unrelated parties and all future
transactions with our officers, directors, principal stockholders and affiliates
will be approved by a majority of our independent directors.
PROPOSAL 2
APPROVAL OF AMENDMENT TO THE 1994 STOCK OPTION PLAN
The Board has unanimously adopted and recommended that our stockholders
approve an amendment to the 1994 Stock Option Plan to increase the number of
shares of Common Stock reserved for issuance pursuant to the 1994 Plan from
4,000,000 to 6,000,000.
The Board approved the 1994 Plan on January 25, 1994 and the stockholders
approved it on June 12, 1994. Subsequently the Board approved amendments to the
1994 Plan that the stockholders approved at the annual meetings on June 1, 1995,
June 4, 1996 and June 10, 1997.
As of December 31, 1998 3,890,503 options, net of forfeitures, had been
granted under the Plan, of which 432,657 had been exercised. As of December 31,
1998 668,613 of the outstanding options granted had vested and were exercisable
and 109,497 shares were available for future grants under the Plan.
We are asking you to approve an amendment to increase the number of shares
of Common Stock reserved for issuance pursuant to the 1994 Plan from 4,000,000
shares to 6,000,000 shares. We are submitting this proposal to ensure that
sufficient shares of Common Stock are reserved for the exercises of options
granted and to be granted in the future under the 1994 Plan.
Upon stockholder approval of the amendment we intend to file a registration
statement on Form S-8 under the Securities Act of 1933 with respect to the
additional shares.
DESCRIPTION OF THE 1994 PLAN
ADMINISTRATION. The 1994 Plan is administered in accordance with the
regulations promulgated under Rule 16b-3 of the Securities and Exchange Act of
1934 and Section 162(m) of the Internal Revenue Code. The 1994 Plan may be
administered by our Compensation and Stock Option Committee, which is
15
<PAGE>
comprised of two or more disinterested directors, or by all the directors if
pursuant to a specific formula with respect to grants to Board members.
ELIGIBILITY. The 1994 Plan permits Incentive Stock Option grants to
employees and Nonstatutory Option grants to employees, directors and
consultants. All employees, directors and consultants are presently eligible to
participate in the 1994 Plan.
OPTION PROVISIONS. Incentive Stock Options and Nonstatutory Stock Options
granted under the Plan will have an exercise price at least 100%, with respect
to Incentive Stock Options, or 85%, with respect to Nonstatutory Stock Options,
of the fair market value of the underlying common stock on the date of grant. On
the record date the closing price per share of the Common Stock as reported on
the Nasdaq National Market was $13.25. Each option will have a term of not more
than ten years from the date of grant. Options may not be transferred except by
will, the laws of descent or distribution and to family trusts or other like
entities and will be exercisable in accordance with the vesting schedule
established by the Board or Committee unless determined otherwise. The purchase
price payable upon the exercise of options must be paid in full on the date of
exercise in cash or in shares of common stock having a fair market value equal
thereto. The aggregate fair market value of shares of Common Stock subject to
Incentive Stock Options granted to any participant which first become
exercisable in any calendar year may not exceed $100,000. In addition, the
maximum number of shares of Common Stock underlying an option grant shall not
exceed 500,000 in any one year to any optionee.
In the event of termination of an option holder's employment including
termination by reason of death or disability, for a limited time thereafter, the
option holder may exercise all options that are exercisable through the date of
termination.
CHANGE IN CONTROL. Awards under the 1994 Plan may be subject to
acceleration, full vesting or other special treatment triggered by an actual or
anticipated change in control. The scope and details of such provisions may be
determined in the discretion of the Board or the Committee.
FEDERAL INCOME TAX CONSEQUENCES. The following is a brief discussion of the
Federal income tax consequences of transactions under the Plan based on the
Internal Revenue Code, as in effect as of the date hereof. The Plan is not
qualified under Section 401(a) of the Code. This discussion is not intended to
be exhaustive and does not discuss or describe the state or local tax
consequences.
INCENTIVE STOCK OPTIONS. No taxable income is realized by the
participant at the time of grant or exercise of an Incentive Stock Option.
If shares of Common Stock are issued to the participant upon the exercise of
an Incentive Stock Option and no disqualifying disposition of such shares is
made by the participant within two years after the grant or within one year
after the transfer of such shares to the participant, then:
- upon the sale of such shares, any amount realized in excess of the
exercise price will be taxed to such participant as a long-term capital
gain and any loss sustained will be a long-term capital loss, and
- no deduction will be allowed to the Company for Federal income tax
purposes.
If the shares of Common Stock acquired upon the exercise of an Incentive
Stock Option are disposed of prior to the expiration of either holding
period described above, generally:
- the participant will realize ordinary income in the year of disposition
in an amount equal to the excess (if any) of the fair market value of
the shares upon exercise (or, if less, the amount realized on the
disposition of such shares) over the exercise price paid for such
shares and
- the Company will be entitled to deduct such amount for Federal income
tax purposes if the amount represents an ordinary and necessary
business expense. Any further gain (or loss)
16
<PAGE>
realized by the participant will be taxed as a short-term or long-term
capital gain (or loss), as the case may be, and will not result in any
deduction to the Company.
NONSTATUTORY STOCK OPTIONS. A participant receiving a Nonstatutory
Option does not recognize taxable income upon the grant of the option
(provided the option is not freely transferable and publicly traded), and we
will not be entitled to a deduction for Federal income tax purposes at that
time. Generally, upon the exercise of a Nonstatutory Stock Option, the
participant will recognize ordinary income in an amount equal to the excess
of the fair market value of the shares acquired over the exercise price and
we will be entitled to a compensation deduction for Federal income tax
purposes in an equal amount. At sale, the appreciation (or depreciation)
after the date as of which amounts are includable as income is treated as
either long-term or short-term capital gains or losses depending on how long
the shares have been held.
TERM, AMENDMENT AND TERMINATION. The 1994 Plan will terminate on January
25, 2004 except with respect to options then outstanding, and no option grants
may be made under the 1994 Plan after that date. The Committee or the Board may
amend or terminate the 1994 Plan at any time; provided that no amendment may be
made without the approval of the stockholders that would:
- increase the total number of shares which may be purchased under the 1994
Plan,
- increase the maximum option periods, or
- change the minimum purchase prices specified in the 1994 Plan.
VOTE REQUIRED
For this proposal to be adopted, it must receive the affirmative vote of a
majority of the shares of stock eligible to vote at the annual meeting.
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL 2.
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board has approved PricewaterhouseCoopers LLP to serve as its
independent public accountants for the fiscal year ending December 31, 1999.
PricewaterhouseCoopers LLP has spent substantial time with our management and
our Board and has become familiar with our operations. The Board is satisfied
with PricewaterhouseCoopers' reputation in the auditing field, its personnel,
its professional qualifications and its independence. Representatives of
PricewaterhouseCoopers are expected to be present at the meeting with the
opportunity to make a statement, if they desire to do so, and are expected to be
available to respond to appropriate questions.
KPMG LLP served as our independent public accountants for the fiscal year
ending December 31, 1998. We do not expect representatives from KPMG to be
present at the meeting.
On March 19, 1999, we informed KPMG LLP that upon completion of the audit
for the fiscal year ended December 31, 1998, we would not reappoint it as our
independent public accountants for the fiscal year ending December 31, 1999. The
decision to change independent public accountants was recommended by the Audit
Committee of the Board and approved by the full Board.
In connection with the audits of the two fiscal years ended December 31,
1997 and 1998, there were no disagreements with KPMG LLP on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedures, which disagreements if not resolved to their satisfaction
would have caused them to make reference in connection with their opinion to the
subject matter of the disagreement.
17
<PAGE>
The audit reports of KPMG LLP on our consolidated financial statements as of
and for the two fiscal years ended December 31, 1997 and 1998 did not contain
any adverse opinion or disclaimer of opinion, nor were they qualified or
modified as to uncertainty, audit scope, or accounting principles. KPMG LLP has
furnished a letter to the Securities Exchange Commission stating that it agrees
with the above statements, except that it was not in a position to agree or
disagree with our statement that the change was recommended by the Audit
Committee of the Board and approved by the full Board. A copy of such letter is
attached as Exhibit 16.1 to our Form 8-K filed with the Commission on March 26,
1999.
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL 3.
FINANCIAL STATEMENTS
We have mailed all stockholders of record our Annual Report for 1998
including audited financial statements.
ITEM 3--OTHER MATTERS
The Board does not know of any business that will be presented at the
meeting other than those matters set forth in the accompanying notice of
meeting. If any other matters are properly presented for action, we intend that
the persons named in the accompanying form of proxy and acting thereunder will
vote in accordance with their best judgment on such matters.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities and Exchange Act requires our executive
officers and directors and persons who beneficially own more than ten percent of
a registered class of our equity securities to file reports of ownership on Form
3 and changes in ownership on Form 4 or 5 with the Commission and the National
Association of Securities Dealers. Such officers, directors and ten-percent
stockholders are also required by Commission rules to furnish us with copies of
all Section 16(a) forms that they file.
Based solely on our review of the copies of such forms received or written
representations from certain reporting persons with respect to their Form 4 and
Form 5 filing requirements, we believe that during the fiscal year ended
December 31, 1998 our executive officers, directors and ten-percent stockholders
filed their Section 16(a) reports on a timely basis.
STOCKHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
Stockholders who desire to submit proposals for inclusion in the Proxy
Statement of the Board to be utilized in connection with the 2000 Annual Meeting
of Stockholders must submit such proposals to us, attention Bruce L. Lev,
Secretary, no later than December 31, 1999.
Our By-Laws require advance written notice to the Secretary of
stockholder-proposed business or of a stockholder's intention to make a
nomination for director at an annual meeting of stockholders. Our By-Laws also
limit the business which may be conducted at any special meeting of stockholders
to business brought by the Board. Specifically, pursuant to our By-Laws,
business may be brought before the next annual meeting by a stockholder only if
the stockholder provides written notice to our Secretary no earlier than January
31, 2000 and no later than March 1, 2000, unless the date of the meeting is not
within 30 calendar days before or after June 3, 2000. In that case, a
stockholder's notice of proposed business must be provided no later than 10
calendar days following the date notice of the annual meeting is publicly
disclosed. A stockholder's notice must set forth:
- a brief description of the proposed business and the reasons for it
- the name and address of the stockholder making the proposal
- the class and number of shares of stock owned by the stockholder
18
<PAGE>
- a description of any material interest of the stockholder in the proposed
business
- a representation that the stockholder intends to raise this proposal at
the annual meeting
Our By-Laws also provide that a stockholder may nominate a director at an
annual meeting only after providing advance written notice to our Secretary
within the time limits described above. The stockholder's notice must set forth
all information about each nominee that would be required under the applicable
rules in a proxy statement soliciting proxies for the election of such nominee
and the nominee's business and residence address. The notice must also set forth
the name and record address of the stockholder making the nomination, the class
and number of shares of stock owned by that stockholder and the stockholder's
intent to nominate such person at the annual meeting. The proposed nominee must
provide a written consent to be nominated and serve as a director if elected.
By Order of the Board
/s/ Bruce L. Lev
Bruce L. Lev
Secretary
Dated: April 30, 1999
19
<PAGE>
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
<TABLE>
<S> <C>
- ------------------------------------------------------- For All With- For All
MICRO WAREHOUSE, INC. Nominees held Except
- ------------------------------------------------------- 1.Election of the Board's nominees for
Directors (the Board of Directors / / / / / /
Mark box at right if an address change or comment recommends a vote FOR).
has been noted on the reverse side of this card. / /
FELIX DENNIS
CONTROL NUMBER: FREDERICK H. FRUITMAN
RECORD DATE SHARES: PETER GODFREY
JOSEPH M. WALSH
IF YOU DO NOT WISH YOUR SHARES VOTED "FOR" A PARTICULAR NOMINEE, MARK
THE "FOR ALL EXCEPT" BOX AND STRIKE A LINE THROUGH THE NOMINEE(S)
NAME(S). YOUR SHARES WILL BE VOTED FOR THE REMAINING NOMINEE(S).
For Against Abstain
2.Approval of an amendment to the Company's
1994 Stock Option Plan to increase the number / / / / / /
of shares reserved for issuance from 4,000,000
to 6,000,000 shares.
For Against Abstain
3.Ratification of the appointment of
PricewaterhouseCoopers LLP, the Company' s / / / / / /
independent auditors, for the fiscal year
ending December 31, 1999.
</TABLE>
--------------------------------
Please be sure to sign and date this Proxy. Date
- --------------------------------------------------------------------------------
- ---Stockholder sign here-----------------Co-owner sign here---------------------
DETACH CARD DETACH CARD
MICRO WAREHOUSE, INC.
Dear Stockholder,
Please take note of the important information enclosed with this Proxy
Ballot. There are a number of issues related to the management and operation
of your Company that require your immediate attention and approval. These are
discussed in detail in the enclosed proxy materials.
Your vote counts and you are strongly encouraged to exercise your right to
vote your shares.
Please mark the boxes on this proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy vote in the
enclosed postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders on
June 3, 1999.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Bruce L. Lev
Secretary
<PAGE>
MICRO WAREHOUSE, INC.
NOTICE IS HEREBY GIVEN that an Annual Meeting of the Stockholders of MICRO
WAREHOUSE, INC. (the "Company") will be held at the Hyatt Regency Greenwich,
1800 East Putnam Avenue, Greenwich, Connecticut 05870, on Thursday, June 3,
1999 at 10:00 a.m., local time, for the purposes listed on the reverse side of
this card.
The Board of Directors has designated the close of business on April 3, 1999
as the record date for determination of stockholders of the Company entitled
to notice and to vote at the meeting and any adjournment thereof. The stock
transfer books will not be closed. A list of stockholders entitled to vote at
the meeting will be available for inspection at the meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. THE BOARD OF
DIRECTORS EXTENDS A CORDIAL INVITATION TO ALL STOCKHOLDERS TO BE PRESENT AT
THE MEETING. ALL STOCKHOLDERS, WHETHER OR NOT THEY EXPECT TO ATTEND THE
MEETING, ARE REQUESTED TO FILL IN, DATE AND SIGN THIS PROXY AND MAIL IT IN
THE RETURN ENVELOPE PROVIDED AS PROMPTLY AS POSSIBLE. STOCKHOLDERS WHO ATTEND
THE MEETING MAY WITHDRAW THEIR PROXIES AND VOTE IN PERSON.
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PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE
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Please sign this proxy exactly as your name appears on the books of the Company.
Joint owners should each sign personally. Trustees and other fiduciaries
should indicate the capacity in which they sign and where more than one name
appears a majority must sign. If a corporation, this signature should be that
of an authorized officer who should state his or her title.
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HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
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