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 ((section))240.14a-11(c) or
((section))240.14a-12
PROGRAMMER'S PARADISE, INC.
--------------------------------------------------------
Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No Filing Fee Required.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and 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:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
Notes:
<PAGE>
PROGRAMMER'S PARADISE, INC.
1163 SHREWSBURY AVENUE
SHREWSBURY, NEW JERSEY 07702
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 16, 1998
To our Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders of
Programmer's Paradise, Inc. (the "Company") will be held at the Molly Pitcher
Hotel, Red Bank, New Jersey, on June 16, 1998 at 9:00 a.m., local time, for the
following purposes:
1. To elect a Board of five Directors to serve until the next annual
meeting of stockholders or until their successors are elected and
qualified;
2. To consider and vote upon a proposal to approve an amendment to the
Company's 1995 Stock Plan to authorize an additional 675,000 shares of
Common Stock for issuance thereunder;
3. To consider and vote upon a proposal to approve an amendment to the
Company's 1995 Director Plan to authorize an additional 75,000 shares of
Common Stock for issuance thereunder;
4. To ratify the appointment by the Board of Directors of Ernst &
Young LLP as the independent auditors of the Company to examine and report
on its financial statements for the fiscal year beginning January 1, 1998;
and
5. To consider and take action upon such other matters as may properly
come before the Meeting and any adjournment or adjournments thereof.
The close of business on April 29, 1998 has been fixed as the record date
for the determination of stockholders entitled to notice of and to vote at the
Meeting. 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 sign, date and
return the enclosed proxy promptly in the accompanying envelope, which requires
no postage if mailed in the United States.
By Order of the Board of Directors,
Roger Paradis,
Chairman and Chief Executive
Officer
April 30, 1998
<PAGE>
PROGRAMMER'S PARADISE, INC.
1163 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 to be held at the Molly
Pitcher Hotel, Red Bank, New Jersey, on June 16, 1998 at 9:00 a.m., local time,
and at any adjournment or adjournments thereof, for the purposes set forth in
the accompanying Notice of Annual Meeting of Stockholders. Any stockholder
giving such a proxy may revoke it by written notice to the Secretary of the
Company at the above-stated address at any time before it is exercised.
Attendance at the Meeting will not have the effect of revoking the proxy unless
such written notice is given, or unless the stockholder votes by ballot at the
Meeting.
The approximate date on which this Proxy Statement and the accompanying
form of proxy will first be sent or given to the Company's stockholders is April
30, 1998.
VOTING SECURITIES
Only holders of shares of Common Stock, $.01 par value per share (the
"Common Stock"), of record at the close of business on April 29, 1998 are
entitled to vote at the Meeting. On the record date, the Company had issued and
outstanding 4,824,498 shares of Common Stock. Each outstanding share of Common
Stock is entitled to one vote upon all matters to be acted upon at the Meeting.
A majority in interest of the outstanding Common Stock represented at the
Meeting in person or by proxy shall constitute a quorum. The affirmative vote of
a plurality of the shares present in person or represented by proxy at the
Meeting and entitled to vote is necessary to elect the nominees for election as
directors. The affirmative vote of a majority of shares present in person or
represented by proxy at the Meeting and entitled to vote is necessary to approve
the amendment to the Company's 1995 Stock Plan and the amendment to the
Company's 1995 Director Plan and also to ratify the selection of Ernst & Young
LLP as the Company's independent auditors. Abstentions and broker non-votes are
counted for purposes of determining the presence or absence of a quorum for the
transaction of business. If a stockholder, present in person or by proxy,
abstains on any matter, the stockholder's Common Stock will not be voted on such
matter. Thus, an abstention for voting on any matter has the same legal effect
as a vote "against" the matter even though the stockholder may interpret such
action differently. 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 (i) FOR the election of the nominees set forth under the caption "Election
of Directors", (ii) FOR the amendment to the Company's 1995 Stock Plan, (iii)
FOR the amendment to the Company's 1995 Director Plan and (iv) FOR ratification
of Ernst & Young LLP as the independent auditors of the Company for fiscal 1998.
Your vote is important. Accordingly, you are urged to sign and return the
accompanying proxy card whether or not you plan to attend the Meeting. If you do
attend, you may vote by ballot at the Meeting, thereby canceling any proxy
previously given.
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to the Company
with respect to beneficial ownership of the Company's Common Stock as of March
31, 1998, based on information provided to the Company, by (i) each of the
Company's directors, (ii) the Named Executive Officers and (iii) all executive
officers and directors of the Company as a group.
BENEFICIAL OWNERSHIP(1)
-------------------------
BENEFICIAL OWNER NUMBER PERCENT
- -------------------------------------------- --------- ----------
Roger Paradis(2) .................. 226,238 4.58%
Edwin Morgens (3) ................. 164,921 3.41%
Allan Weingarten (4) .............. 4,750 *
Daniel Bricklin (5) ............... 23,775 *
F. Duffield Meyercord (6) ......... 23,775 *
William Willett (7) ............... 10,000 *
Peter Lorenz (8) .................. 262,594 5.33%
Joseph Popolo (9) ................. 103,050 2.09%
John Broderick (10) ............... 49,657 1.02%
Jeffrey Largiader (11) ............ 61,700 1.26%
Kathleen Innacelli (12) ........... 37,750 *
Peter Lindsey (10) ................ 16,825 *
Massimo Freschi (10) .............. 4,750 *
All Directors and Officers as a
Group (13) ....................... 994,472 18.57%
- ----------
* Less than 1 percent.
(1) To the Company's knowledge, except as set forth in the footnotes to
this table and subject to applicable community property laws, each
person named in the table has "beneficial ownership" with respect to
the shares set forth opposite such person's name. The information as
to beneficial ownership is based on statements furnished to the
Company by the beneficial owners. For purposes of computing the
percentage of outstanding shares held by each person named above,
pursuant to the rules of the Securities and Exchange Commission, any
security that such person has the right to acquire within 60 days of
the date of calculation is deemed to be outstanding, but is not deemed
to be outstanding for purposes of computing the percentage ownership
of any other person.
(2) Includes options to purchase 118,738 shares of Common Stock. Includes
7,500 shares of Common Stock owned by his children with respect to
which Mr. Paradis disclaims beneficial ownership.
(3) Includes options to purchase 11,625 shares of Common Stock. Also
includes 36,439 shares of Common Stock held by a trust for the benefit
of Mr. Morgens' daughter, with respect to which Mr. Morgens disclaims
beneficial ownership.
(4) Includes options to purchase 3,750 shares of Common Stock.
(5) Includes options to purchase 11,250 shares of Common Stock.
(6) Includes options to purchase 12,525 shares of Common Stock.
(7) Includes options to purchase 4,687 shares of Common Stock.
(8) Includes options to purchase 103,000 shares of Common Stock.
(9) Includes options to purchase 99,050 shares of Common Stock.
(10) Includes options to purchase Common Stock.
(11) Includes options to purchase 59,200 shares of Common Stock.
(12) Includes options to purchase 34,750 shares of Common Stock.
(13) See footnotes 1 through 12 above.
2
<PAGE>
The following stockholders are known by the Company to own beneficially
more than 5% of the Company's Common Stock as of March 31, 1998:
BENEFICIAL OWNERSHIP
--------------------
BENEFICIAL OWNER NUMBER PERCENT
-------------------------------- --------- --------
Heartland Advisors Inc.
790 North Milwaukee Street
Milwaukee, WI 53202 ........... 337,000 7.0%
The TCW Group, Inc.
865 South Figueroa Street
Los Angeles, CA 90017 ......... 299,100 6.2%
PROPOSAL 1
ELECTION OF DIRECTORS
At the Meeting, five Directors will be elected by the stockholders to serve
until the next annual meeting or until their successors are elected and
qualified. The accompanying proxy will be voted for the election as Directors of
the nominees listed below, all of whom are currently Directors, unless the proxy
contains contrary instructions. Management has no reason to believe that any of
the nominees will not be a candidate or will be unable to serve as a Director.
However, in the event that any of the nominees should become unable or unwilling
to serve as a Director, the proxy will be voted for the election of such person
or persons as shall be designated by the Directors.
Set forth below is certain information with respect to each nominee:
NAME AGE POSITION(S)
- ----------------------------------- ----- ----------------------------------
Roger Paradis ..................... 53 President, Chief Executive Officer
and Chairman of the Board
F. Duffield Meyercord(1) .......... 51 Director
Edwin H. Morgens(2) ............... 56 Director
William Willett(2) ................ 61 Director
Allan Weingarten(1) ............... 60 Director
- ----------
(1) Member of Audit Committee
(2) Member of Compensation Committee
ROGER PARADIS joined the Company in 1988 as President, Chief Executive
Officer and a Director. Mr. Paradis has over twenty years experience in business
planning, financial management and product marketing. Prior to joining the
Company, Mr. Paradis was President of Amerinex Corporation, a private venture
capital firm in Saddle Brook, New Jersey. Mr. Paradis graduated from the United
States Naval Academy at Annapolis and the Navy's Nuclear Power School and has a
M.B.A. degree from The Harvard Graduate School of Business Administration.
F. DUFFIELD MEYERCORD has served as a director of the Company since
December 1991. Mr. Meyercord is the Managing Director and founder of Meyercord
Advisors, Inc. and a partner and founder of Venturtech Management Inc., an
affiliate of the Venturtech Group, both of which are management consulting
firms. Mr. Meyercord currently serves as a director of the Peapack Gladstone
Bank. Mr. Meyercord has a B.A. degree in accounting and economics from
Birmingham-Southern College.
EDWIN H. MORGENS was a founder of the Company and has served as a director
of the Company since 1982. Mr. Morgens is and has been the Chairman and
co-founder of Morgens, Waterfall, Vintiadis & Co. Inc., an investment firm in
New York, New York since 1968. Mr. Morgens currently serves as a director of two
other public companies: Sheffield Exploration Co. and Intrenet, Inc. Mr. Morgens
has a B.A. degree in English from Cornell University and a M.B.A. degree from
The Harvard Graduate School of Business Administration.
3
<PAGE>
WILLIAM WILLETT has served as a director of the Company since 1996. Mr.
Willett was the former President and Chief Operating Officer as well as a board
member of Colorado Prime Foods located in New York until his retirement in 1997.
Mr. Willett also serves on the board of directors of Concord Financial Services,
Inc. Mr. Willett has a B.A. degree in Marketing from the University of
Bridgeport.
ALLAN D. WEINGARTEN was appointed to the Board in April 1997. Mr.
Weingarten is a former partner of Ernst & Young LLP, having served as the
engagement audit partner to the Company until his retirement in 1995. Mr.
Weingarten currently is the Executive Vice President and Chief Financial Officer
of VoCall Communications Corp. Mr. Weingarten holds a B.A. degree in Business
Administration from Pace University.
All directors hold office until the next annual meeting of stockholders and
until their successor are duly elected and qualified. Officers are elected to
serve, subject to the discretion of the Board of Directors, until their
successors are appointed. There are no family relationships among any of the
directors or executive officers of the Company.
The Board of Directors held four meetings during the last fiscal year. None
of the directors attended fewer than 75% of the number of meetings of the Board
of Directors or any committee of which he is a member, held during the period in
which he was a director or a committee member, as applicable.
The Compensation Committee, presently consisting of Messrs. Willett and
Morgens, reviews and recommends to the Board of Directors the compensation and
benefits of all officers of the Company, reviews general policy matters relating
to compensation and benefits of employees of the Company, and administers the
issuance of stock options to the Company's employees, directors and consultants.
The Compensation Committee held two meetings during the last fiscal year. The
Audit Committee, consisting of Messrs. Meyercord and Weingarten meets with
management and the Company's independent auditors to determine the adequacy of
internal controls and other financial reporting matters. The Audit Committee
held two meetings during the last fiscal year. There is no nominating committee
of the Board of Directors.
The directors of the Company receive a fee of $1,000 per quarter and $500
per meeting for their services and are reimbursed for reasonable expenses
incurred in connection with attendance at Board and committee meetings. In April
1995, the Company adopted the 1995 Director Plan pursuant to which the Company's
directors receive automatic grants of options to purchase shares of Common
Stock, and Messrs. Morgens, and Meyercord were each granted options to purchase
18,750 shares of Common Stock, which vest in an installment of 20% of the total
option grant upon the expiration of one year from the date of the option grant,
and thereafter vests in equal quarterly installments of 5%, and have an exercise
price of $4.00 per share. Messrs. Willett and Weingarten also received similar
grants upon their election to the board at the appropriate fair market value of
the stock on the date of grant See "Stock Option Plans."
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. Section 16(a) under the
Securities Exchange Act of 1934 (the "Exchange Act"), requires the Company's
officers and directors and holders of more than ten percent of the Company's
outstanding Common Stock to file reports of ownership and changes in ownership
with the Securities and Exchange Commission and to furnish the Company with
copies of these reports. Based solely upon a review of such forms, or on written
representations from certain reporting persons that no reports were required for
such persons the Company believed that during 1997 all required events of its
officers, directors and 10% stockholders required to be so reported, have been
filed.
EXECUTIVE COMPENSATION
The following table sets forth, for the last three completed fiscal years,
the annual and long-term compensation for services in all capacities of the
Company's Chief Executive Officer and the six other most highly compensated
executive officers of the Company whose total salary and bonus exceeded $100,000
(the "Named Executive Officers").
4
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------ -----------------------
SECURITIES
FISCAL UNDERLYING ALL OTHER
NAME AND POSITION YEAR ENDED SALARY BONUS OPTIONS(#) COMPENSATION(1)
- --------------------------------------- ------------ ------------------- ---------- ----------------------- ----------------
<S> <C> <C> <C> <C> <C>
Roger Paradis, President and 1997 $ 210,000 $ 50,000 50,000 (3) $6,545
Chief Executive Officer ............... 1996 187,750 56,664 24,800 (4) 6,251
1995 175,000 120,145 37,500 (6) 6,778
Peter Lorenz, Executive Vice
President European 1997 161,000 206,721 20,000 (3) --
Operations ........................... 1996 165,476 51,515 -- --
1995 184,285 81,052 15,000 (7) --
Joseph Popolo, Executive Vice 1997 168,600 10,000 11,000 (3) 4,982
President Domestic 1996 157,500 43,387 19,100 (4) 3,596
Operations (12) ...................... 1995 138,077 34,727 86,250 (8) 3,129
John P. Broderick, Vice President 1997 137,150 20,000 11,000 (3) 4,487
of Finance and Chief Financial 1996 127,500 35,252 27,500 (4)(5) 4,093
Officer .............................. 1995 86,846 30,097 37,500 (9) 2,844
Jeffrey Largiader Vice President 1997 118,000 0 14,000 (3) 3,888
Marketing ............................ 1996 111,000 30,642 13,300 (4) 3,647
1995 101,667 24,309 7,875 (6) 3,495
Peter Lindsey, Vice President 1997 124,194 52,379 6,000 (3) --
Pan-European Catalog 1996 110,019 27,505 -- --
Operations ........................... 1995 10,607 (11) 7,872 25,000 (10) --
Kathleen Innacelli, Vice President 1997 96,800 0 5,000 (3) 6,562 (2)
Fulfillment Operations ............... 1996 89,550 24,622 10,900 (4) 6,605 (2)
1995 84,700 19,864 4,125 (6) 5,578 (2)
</TABLE>
- ----------
(1) Represents (i) matching contributions paid by the Company to such
executive's account under the Company's 401(k) Plan and (ii) premiums paid
by the company in respect of term life insurance for the benefit of such
executive.
(2) Also includes $2,645, $3,061 and $2,503 in tuition payments in 1997, 1996
and 1995 respectively.
(3) Options to purchase Common Stock with an exercise price of $6.875 per
share, vesting in equal annual installments over a five year period and
includes 291 options to purchase Common Stock with an exercise price of
$6.875 per share which are fully vested for a senior executive.
(4) Non-qualified Options to purchase Common Stock with an exercise price of
$5.875 per share, which are fully vested.
(5) Includes 11,000 Options to purchase Common Stock with an exercise price of
$5.625 per share, vesting in equal annual installments over a three-year
period.
(6) Options to purchase Common Stock with an exercise price of $4.00 per share
vest in equal annual installments over a five-year period.
(7) Options to purchase Common Stock with an exercise price of $0.67 per share,
vest in equal monthly installments over a four year period
(8) Includes options to purchase 75,000 shares of Common Stock with an exercise
price of $1.00 per share, which vest in equal monthly installments over a
three year period and options to purchase 11,250 shares of Common Stock
with an exercise price of $4.00 per share, which vest in equal annual
installments over a five year period.
(9) Options to purchase Common Stock have an exercise price of $4.00 per share
and vest in equal monthly installments over a four-year period.
(10) Options to purchase Common Stock have an exercise price of $7.50 per share
and vest in equal quarterly installments over a five-year period.
5
<PAGE>
(11) Mr. Lindsey was hired by the Company in November 1995. Represents the
portion of his annual salary paid in 1995 since such date.
(12) Mr. Popolo's employment with the Company was terminated on April 22, 1998.
EMPLOYEE BENEFIT PLANS
The Company provides all employees, including executive officers, with
group medical, dental and disability insurance on a non-discriminatory basis.
Employees are required to contribute 20% of the premium costs of such policies.
The Company has a 401(k) savings and investment plan intended to qualify under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
for its domestic employees, which permits employee salary reductions for
tax-deferred savings purposes pursuant to Section 401(k) of the Code. The
Company matches 50% of domestic employee contributions up to the first 6% of
compensation. The Company's total contributions for 1997 were approximately
$82,000.
The Company maintains a performance bonus plan for its senior executive
which provides for a bonus of up to 25% of the executive's base salary in the
event certain performance targets, based upon revenue and operating
profitability, are achieved and also provides for additional incentive bonuses
based upon pre-established metrics. (the "Performance Bonus Plan"). The
Performance Bonus Plan also provides for an increase in the available bonus pool
for performance in excess of a specified net income after tax performance target
(the "over target bonus"). In 1997, such over target bonus was set at 12% of the
amount by which the Company's net income after taxes exceeds the performance
target. The Company paid aggregate cash bonuses of $80,000 to officers and
senior executives pursuant to this bonus plan for the 1997 fiscal year. Subject
to approval by its Board of Directors, the Company anticipates that this bonus
plan will continue in effect for the 1998 fiscal and subsequent years and that
bonuses under this plan in the 1998 fiscal year and thereafter will be based on
the Company's meeting or exceeding profitability targets established by the
Compensation Committee.
STOCK OPTION PLANS
1986 STOCK OPTION PLAN. The Company's 1986 Stock Option Plan (the "1986
Option Plan") expired in accordance with its terms in March 1996. Pursuant to
the 1986 Stock Option Plan "incentive stock options" ("ISO" or "ISOs") to
purchase shares of Common Stock were granted to officers and other key employees
(some of whom are also directors) of the Company. Additionally, the Directors of
the Company were granted non-qualified options pursuant to the 1986 Option Plan.
A total of 567,336 shares of Common Stock are subject to outstanding options and
have been reserved for issuance under the 1986 Option Plan, with exercise prices
ranging from $0.24 to $6.00 per share. Due to its expiration and termination, no
additional options may be granted under the 1986 Stock Option Plan.
1995 STOCK PLAN. The purpose of the Company's 1995 Stock Plan (the "1995
Stock Plan") is to provide incentives to officers, directors, employees and
consultants of the Company. Under the 1995 Stock Plan, officers and employees of
the Company and any present or future subsidiary are provided with opportunities
to purchase shares of Common Stock of the Company pursuant to options which may
qualify as ISOs, or which do not qualify as ISOs ("Non-Qualified Options") and,
in addition, such persons may be granted awards of stock in the Company
("Awards") and opportunities to make direct purchases of stock in the Company
("Purchases"). Both ISOs and Non-Qualified Options are referred to hereafter
individually as an "Option" and collectively as "Options." Options, Awards and
Purchases are referred to hereafter collectively as "Stock Rights." The 1995
Stock Plan contains terms and conditions relating to ISOs necessary to comply
with the provisions of Section 422 of the Code.
The 1995 Stock Plan currently authorizes the grant of Stock Rights to
acquire up to 462,500 shares of Common Stock. A total of 419,000 shares of
Common Stock are presently subject to outstanding Options under the 1995 Stock
Plan at exercise prices ranging from $4.00 to $12.38 per share. Unless sooner
terminated, the 1995 Stock Plan will terminate on April 21, 2005. The 1995 Stock
Plan requires that each Option shall expire on the date specified by the
Compensation Committee, but not more than ten years from its date of grant in
the case of ISOs and ten years and one day in the case of Non--
6
<PAGE>
Qualified Options. However, in the case of any ISO granted to an employee or
officer owning more than 10% of the total combined voting power of all classes
of stock of the Company or any present or future subsidiary, the ISO expires no
more than five years from its date of grant.
1995 NON-EMPLOYEE DIRECTOR PLAN. The purpose of the Company's 1995
Non-Employee Director Plan (the "1995 Director Plan") is to promote the
interests of the Company by providing an inducement to obtain and retain the
services of qualified persons who are not employees or officers of the Company
to serve as members of its Board of Directors ("Outside Directors"). The 1995
Director Plan authorizes the grant of options for up to 112,500 shares of Common
Stock and provides for automatic grants of nonqualified stock options to Outside
Directors. Under the 1995 Director Plan, each current Outside Director has
received, and each Outside Director who first joins the Board after April 1995
will automatically receive at that time, options to purchase 18,750 shares of
Common Stock. The 93,750 options granted to the current Outside Directors have
exercise prices ranging from $4.00 to $7.50. All options granted to Outside
Directors have an exercise price equal to 100% of the fair market value on the
date of grant. There are currently 11,250 shares of Common Stock available for
grant under the 1995 Director Plan. The 1995 Director Plan requires that options
granted thereunder will expire on the date, which is ten years from the date of
grant. Each option granted under the 1995 Director Plan becomes exercisable over
a five-year period, and vests in an installment of 20% of the total option grant
upon the expiration of one year from the date of the option grant, and
thereafter vests in equal quarterly installments of 5%.
OPTIONS. The following tables set forth certain information with respect to
stock options granted to and exercised by the Named Executive Officers during
the fiscal year ended December 31, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZED
INDIVIDUAL GRANTS VALUE AT ASSUMED
---------------------------------------------------------------- ANNUAL RATE OF
STOCK PRICE
NUMBER OF % OF TOTAL APPRECIATION FOR
SECURITIES OPTIONS OPTION TERM(4)
UNDERLYING GRANTED TO EXERCISE ------------------------
OPTIONS EMPLOYEES PRICE PER EXPIRATION
NAME GRANTED(#) IN FISCAL YEAR(1) SHARE($/SH)(2) DATE(3) 5%($) 10%($)
- ---------------------------- --------------- ------------------- ---------------- ----------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Roger Paradis .............. 50,000(5) 18.91% $ 6.875 03/18/07 $216,183 $547,849
Peter Lorenz ............... 20,000(5) 7.56% $ 6.875 03/18/07 $ 86,473 $219,140
Joseph Popolo .............. 11,000(5) 4.16% $ 6.875 03/18/07 $ 47,560 $120,527
John Broderick ............. 11,000(5) 4.16% $ 6.875 03/18/07 $ 47,560 $120,527
Jeffrey Largiader .......... 14,000(5) 5.30% $ 6.875 03/18/07 $ 60,531 $153,398
Peter Lindsey .............. 6,000(5) 2.27% $ 6.875 03/18/07 $ 25,942 $ 65,742
Kathleen Innacelli ......... 5,000(5) 1.89% $ 6.875 03/18/07 $ 21,618 $ 54,785
</TABLE>
- ----------
(1) Based on a total of 264,400 options granted to employees and directors of
the Company in fiscal 1997, including the Named Executive Officers.
(2) The exercise price per share of options granted represented the fair market
value of the underlying shares of Common Stock on the date the options were
granted.
(3) The options granted have a term of ten years, subject to earlier
termination upon the occurrence of certain events related to termination of
employment.
(4) The potential realizable value is calculated based upon the term of the
option at its time of grant (ten years). It is calculated by assuming that
the stock price on the date of grant appreciates at the indicated annual
rate, compounded annually for the entire term of the option, and that the
option is exercised and sold on the last day of its term for the
appreciated stock price.
(5) Options to purchase Common Stock with an exercise price of $6.875 per share
vest in equal annual installments over a five-year period.
7
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUE TABLE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END (1)
----------------------------- ----------------------------
SHARES ACQUIRED
NAME ON EXERCISE (#) VALUE REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------- ----------------- -------------------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Roger Paradis .................. -- -- 96,393 77,345 $ 676,069 $288,113
Peter Lorenz ................... -- -- 113,498 41,502 968,020 207,205
Joseph V. Popolo ............... 4,000 29,500 94,600 17,750 685,663 63,781
John P. Broderick .............. 2,000 11,125 42,385 31,615 190,923 126,390
Jeffrey Largiader .............. -- -- 52,275 21,275 387,163 82,595
Peter Lindsey .................. -- -- 12,500 18,500 23,438 38,438
Kathleen Innacelli ............. 11,000 87,110 32,250 8,150 225,817 31,679
</TABLE>
- ----------
(1) Calculated on the basis of the fair market value of the Common Stock of the
Company on December 31, 1997 of $9.375 per share as determined by the
closing price for the Company's Common Stock as reported on the NASDAQ
National Market.
EMPLOYMENT AGREEMENTS
Each of the Named Executive Officers has entered into an agreement that
includes a covenant not-to-compete and a confidentiality provision (a
"Confidentiality and Non-Compete Agreement"). The covenant not-to-compete
prohibits the executive for a period of one year after termination from engaging
in a competing business. Such covenant also prohibits the executive from
directly or indirectly soliciting the Company's customers or employees.
The Company entered into an employment letter with Roger Paradis in May
1995 which provides for a base salary of $175,000 per year, with increases and
an annual bonus to be determined by the Board of Directors, the grant of certain
stock options, an automobile allowance, participation in the Company's benefit
plans and the right to designate a beneficiary to receive $500,000 of the $1.5
million key man insurance policy maintained by the Company. Mr. Paradis has the
right to terminate his employment at any time on not less than 60 days' prior
written notice. The Company has the right to terminate Mr. Paradis' employment
for "cause" (as defined in the employment letter), on 30 days' prior written
notice or without cause on 90 days' prior written notice. In the event that Mr.
Paradis' employment is terminated by the Company for any reason, he is entitled
to receive severance payments, including salary, benefits and automobile
allowance, for a period of four months from the date of termination, with an
automatic extension for an additional four months if Mr. Paradis has not
achieved employment in such time period. Additionally, in the event that a
change of control of the Company occurs (as described in the employment letter)
and Mr. Paradis elects to terminate his employment with the Company within 18
months thereafter, Mr. Paradis is entitled to receive in a lump-sum
distribution, an amount equal to two-thirds (2/3) of his then current annual
salary, plus any bonus he may have earned for the most recently completed full
year of employment, plus his pro-rata bonus for the year of termination, at such
time as he gives the Company written notice of such election.
The Company's employment letter with Joseph V. Popolo provides for a base
salary of $150,000 per year and the grant of options to purchase 75,000 shares
of Common Stock at an exercise price of $1.00 per share, vesting monthly over a
three-year period. Mr. Popolo is entitled to participate in the Performance
Bonus Plan and to receive the same employee benefits as the other executive
officers of the Company and up to six-months of severance payments, which
include his then current base salary and health insurance benefits. Mr. Popolo
has also entered into a Confidentiality and Non-Compete Agreement. Mr. Popolo's
employment with the Company was terminated on April 22, 1998.
The Company's employment letter with John P. Broderick provides for a base
salary of $120,000 per year and the grant of options to purchase 37,500 shares
of Common Stock at an exercise price of $4.00 per share, vesting over a
four-year period. Mr. Broderick is entitled to participate in the Performance
Bonus Plan and up to six-months of severance payments, which include his then
current base salary and health insurance benefits. Mr. Broderick has entered
into a Confidentiality and Non-Compete Agreement.
8
<PAGE>
In June 1994, in connection with the acquisition by the Company of ISP*D
International Software Partners GmbH ("ISP*D"), the Company's German subsidiary,
Peter Lorenz entered into an Employment Agreement with the Company and ISP*D,
dated as of May 26, 1994, for a term of five years and providing for a salary of
DM 238,000 (approximately $173,000) per year. Additionally, Mr. Lorenz was
granted options to purchase shares of Common Stock and is entitled to a
performance bonus of up to DM 100,000 (approximately $55,000) per year
contingent upon reaching agreed-upon performance targets, the use of a luxury
automobile, and a direct pension insurance payment in an approximate amount of
DM 3,000 (approximately $1,700) per year. The Company may terminate Mr. Lorenz's
employment at any time after May 31, 1996 and in such event Mr. Lorenz is
entitled to receive severance benefits, which include salary (at a rate equal to
his then base salary for the first year and one-half of the base salary for the
second year), automobile reimbursement and health insurance benefits for a
two-year period (unless replacement employment is obtained prior to the
expiration of such period, in which case certain amounts are offset from the
amounts due thereunder). Mr. Lorenz's Employment Agreement also contains
provisions protecting the Company and ISP*D, including a covenant not-to-compete
and a confidentiality provision. The covenant not-to-compete prohibits Mr.
Lorenz for a period of two years 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.
9
<PAGE>
CERTAIN TRANSACTIONS
The Company has adopted a policy whereby all transactions between the
Company and its principal officer, directors and affiliates must be on terms no
less favorable to the Company than could be obtained from unrelated third
parties and will be approved by a majority of the disinterested members of the
Company's board of directors.
The Company has not entered into any transactions required to be disclosed
pursuant to this item.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Edwin H. Morgens and William Willett served as members of the Compensation
Committee during the last completed fiscal year. Neither Messrs. Morgens and
Willett (i) was, during the last completed fiscal year, an officer or employee
of the Company or any of its subsidiaries, (ii) was formerly an officer of the
registrant or any of its subsidiaries, or (iii) had any relationship requiring
disclosure by the Company under any paragraph of Item 404 of Regulation S-K
which has not been already disclosed.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
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 executive which provides for
a bonus of up to 25% of the executive's base salary in the event certain
performance targets, based upon revenue and operating profitability, are
achieved. The Performance Bonus Plan also provides for an increase in the
available bonus pool for performance in excess of a specified net income after
tax performance target. For a further discussion of the Performance Bonus Plan,
and amounts paid in respect of the 1997 fiscal year, see the discussion under
"Employee Benefit Plans."
It is the Company's policy that the compensation of executive officers also
be based, in part, on the grant of stock options as an incentive to enhance the
Company's performance. Stock options are granted based upon a review of such
executive's responsibilities and relative position in the Company, such
executive's overall job performance and such executive's existing stock option
position. In 1997, in accordance with the above criteria, the executive officers
received stock options, which are exercisable ratably over a five-year period.
The compensation of the Company's Chief Executive Officer in 1997 consisted
of base salary, performance-based cash bonuses and stock option grants. Of the
total cash bonus earned, 50% was based upon reaching preset consolidated net
income targets (i.e. the Performance Bonus Plan). Stock option grants to the
Chief Executive Officer were made in line with those granted to other executive
officers primarily considering responsibilities and relative position to other
members of the senior management team. Base salary level was established
considering base salaries of other Chief Executive Officers with similar
executive responsibilities.
The Compensation Committee
--------------------------
William Willett
Edwin H. Morgens
10
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The following graph and table illustrates a comparison of cumulative
shareholder return among the Company, the Standard & Poor's Midcap 400 Index and
an index of peer companies selected by the Company (the "Custom Peer Group
Index"). The members of the peer group are as follows: Creative Computers, Inc.,
Egghead Inc., Merisel, Inc., Microwarehouse, Inc. and Software Spectrum, Inc.
For the purpose of calculating the peer group average, the returns of each
company have been weighted according to its market capitalization. The
measurements assume that on July 18, 1995 (the effective date of the Company's
Registration Statement on Form S-1), $100 was invested, alternatively, in the
Company's Common Stock, the Standard & Poor's Midcap 400 Index an the Custom
Peer Group Index.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
BASE
PERIOD RETURN RETURN RETURN RETURN RETURN
7/18/95 12/31/95 3/31/96 6/30/96 9/30/96 9/30/96
------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Programmer's Paradise, Inc. ......... $ 100.00 $ 67.50 $ 56.25 $ 61.25 $ 65.00 $ 72.50
S&P MIDCAP 400 INDEX ................ $ 100.00 $ 105.89 $ 112.41 $ 115.65 $ 119.01 $ 126.22
PEER GROUP .......................... $ 100.00 $ 78.52 $ 71.94 $ 97.93 $ 105.86 $ 61.89
<CAPTION>
RETURN RETURN RETURN RETURN
3/31/97 6/30/97 9/30/97 12/31/97
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Programmer's Paradise, Inc. ......... $ 68.75 $ 95.00 $ 132.50 $ 93.75
S&P MIDCAP 400 INDEX ................ $ 124.35 $ 142.62 $ 165.56 $ 166.94
PEER GROUP .......................... $ 59.58 $ 70.85 $ 104.33 $ 73.30
</TABLE>
11
<PAGE>
PROPOSAL 2
AMENDMENT TO THE 1995 STOCK PLAN
In 1995, the Board of Directors of the Company adopted and the stockholders
approved the 1995 Stock Plan for the Company and its subsidiaries. In 1996, the
1995 Stock Plan was amended to reserve an additional 200,000 shares of Common
Stock for issuance under the 1995 Stock Plan. As of March 31, 1998, there were
38,000 shares of Common Stock available for issuance under the 1995 Stock Plan.
The Company has used incentive stock options in conjunction with its recent
acquisitions to provide incentives for the retention of seller/managers of
acquired companies. The Company believes it to be in the Company's best
interests to have options available to provide incentives to key employees of
companies which may be acquired in the future as well as continuing employees.
Because of the limited number of remaining shares, the Board of Directors
authorized additional shares for future awards, subject to stockholder approval.
The 675,000 additional shares for which approval is sought represents
approximately 14% of the Company's outstanding shares of Common Stock at March
31, 1998 and approximately 12.7 % of the Company's outstanding shares on a fully
diluted basis on that date.
AMENDMENT TO THE 1995 STOCK PLAN
On March 12, 1997, the Board of Directors of the Company, subject to and
effective upon stockholder approval, adopted an amendment to the 1995 Stock Plan
to reserve an additional 675,000 shares of Common Stock for issuance under the
1995 Stock Plan.
DESCRIPTION OF THE 1995 STOCK PLAN. If the amendment is approved, a total
of 1,137,500 shares of Common Stock will be reserved for issuance upon the
exercise of options or in connection with awards or direct purchases of stock
under the 1995 Stock Plan (subject to adjustment for capital changes). Shares
subject to Options which for any reason expire or are terminated unexercised may
again be available for grant under the 1995 Stock Plan. Unless sooner
terminated, the 1995 Stock Plan will terminate on April 21, 2005, see "Executive
Compensation - 1995 Stock Plan" for a description of the 1995 Stock Plan. The
complete text of the 1995 Stock Plan is attached as Exhibit A hereto and the
foregoing description contained herein is qualified in its entirety by the full
text of the 1995 Stock Plan.
The 1995 Stock Plan is administered by the Compensation Committee (the
"Compensation Committee") of the Board of Directors of the Company which,
subject to the terms of the 1995 Stock Plan, has the authority to determine to
whom Stock Rights shall be granted (subject to certain eligibility requirements
for grants of ISOs), the number of shares covered by each such grant, the
exercise or purchase price per share, the time or times at which Stock Rights
shall be granted, and other terms and provisions governing the Stock Rights, as
well as the restrictions, if any, applicable to shares of Common Stock issuable
upon exercise of Stock Rights. The Compensation Committee may, from time to
time, adopt amendments, certain of which are subject to stockholder approval,
and may terminate the 1995 Stock Plan at any time (although such action shall
not affect Stock Rights previously granted). Holders of Stock Rights are
protected against dilution in the event of a stock dividend, recapitalization,
stock split, merger or similar transaction. 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
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 Related Corporation, the ISO expires no more than
five years from its date of grant.
Exercise of any Stock Right, in whole or in part, under the 1995 Stock Plan
is effected by a written notice of exercise delivered to the Company at its
principal office together with payment for the Common Stock in full, or, at the
discretion of the Compensation Committee, (i) by the delivery of shares of
Common Stock of the Company, valued at fair market value, a promissory note, or
any combination thereof, or (ii) through an exercise notice payment procedure.
The 1995 Stock Plan contains terms providing for the exercise of Stock Rights by
or on behalf of former and deceased employees. ISOs granted pursuant to the 1995
Stock Plan are not assignable or transferable other than by will or by the laws
of descent and distribution and are exercisable during the optionee's lifetime
only by the optionee. As of April 24, 1998, the market value of the securities
underlying the additional 657,000 shares of Common Stock authorized for issuance
under the 1995 Stock Plan was $6,328,125.
12
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES.
INCENTIVE STOCK OPTIONS. The following general rules are applicable for
Federal income tax purposes under existing law to employees who receive and
exercise ISOs granted under the 1995 Stock Plan:
Generally, no taxable income results to the optionee upon the grant of an
ISO or upon the issuance of shares to the optionee upon exercise of the ISO. If
shares acquired upon exercise of an ISO are disposed of after the later of (i)
two years following the date the Option was granted, or (ii) one year following
the date the shares are transferred to the optionee pursuant to the exercise of
the Option, the difference between the amount realized on such disposition of
the shares and the exercise price will be treated as long-term capital gain or
loss to the optionee. Under recent legislation, the maximum federal income tax
rate applicable to long-term capital gain with respect to shares held more than
18 months was lowered to 20% and the maximum federal income tax rate applicable
to long-term capital gain on shares held more than one year but not more than 18
months remains at 28%.
If shares acquired upon exercise of an ISO are disposed of before the
expiration of one or both of the requisite holding periods (a "disqualifying
disposition"), then in most cases any excess of the fair market value of the
shares at the time of exercise of the Option over the exercise price, or, if
less, the actual gain on disposition, will be treated as compensation to the
optionee and will be taxed as ordinary income in the year of such disqualifying
disposition. Any excess of the amount realized by the optionee as the result of
a disqualifying disposition over the sum of (i) the exercise price and (ii) the
amount of ordinary income recognized under the above rules will be treated as
either long-term or short-term capital gain, depending upon the time elapsed
between receipt and disposition of such shares. In addition the special rules
applicable to ISOs will not apply if the optionee is not employed by the Company
at all times during the period from the date the Option is granted through the
date three months before the date the Option is exercised (one year in the case
of permanent disability). Failure to satisfy this requirement will result in the
Option being treated as a Non-Qualified Option. See the discussion of
Non-Qualified Options below.
In general, no tax deduction is allowed to the Company upon either grant or
exercise of an ISO under the 1995 Stock Plan. However, in any year that an
optionee recognizes compensation income on a disqualifying disposition of shares
acquired by exercising an ISO, the Company will generally be entitled to a
corresponding deduction for income tax purposes.
An optionee may be entitled to exercise an ISO by delivering shares of the
Company's Common Stock ("old stock") to the Company in exchange for the Common
Stock received upon exercise of the ISO ("option stock"), if the optionee's ISO
agreement so provides. In general, if an optionee exchanges old stock for option
stock instead of, or in addition to, paying part or all of the exercise price in
cash, no gain or loss will be recognized with respect to the exchange of the old
stock, and shares acquired upon exercise of the ISO will not be subject to tax
as explained above until the shares are sold. However, an exception exists to
this rule when the old stock is "statutory option stock" (as defined below) that
has been held for a period less than the applicable holding periods under the
Code. In that event, the optionee will realize ordinary compensation income with
respect to the old stock in an amount equal to the lesser of (i) the excess of
the fair market value of the option stock on the date of exercise of the ISO
over the basis of the old stock, or (ii) the fair market value of the old stock
on the date it was originally exercised over the original option exercise price.
"Statutory option stock" consists of stock acquired through the exercise of a
"qualified stock option," "incentive stock option," an option acquired under an
"employee stock purchase plan" or a "restricted stock option," as these terms
are defined in the Code. Further, if the old stock used to exercise an ISO is
Restricted Stock (as defined below), exercise of the ISO with such Restricted
Stock may be treated as the lapse of the restrictions imposed on such Restricted
Stock under the rules discussed below, and the optionee may recognize income as
a result.
NON-QUALIFIED OPTIONS. The following general rules are applicable for
Federal income tax purposes under existing law to holders of Non-Qualified
Options and to the Company.
The optionee does not realize any taxable income upon the grant of a
Non-Qualified Option, and the Company is not allowed a deduction by reason of
such grant. The optionee will recognize ordinary compensation income at the time
of exercise of a Non-Qualified Option in an amount equal to the
13
<PAGE>
excess, if any, of the fair market value of the shares on the date of exercise
over the exercise price. In accordance with the terms of the option plans, the
Company may require the optionee to pay to the Company an amount sufficient to
satisfy withholding taxes in respect of such compensation income at the time of
the exercise of the Option. If the Company withholds shares instead of cash to
satisfy this withholding tax obligation, the optionee nonetheless will be
required to include in income the compensation income attributable to the shares
withheld. When the optionee sells the shares, such optionee will recognize a
capital gain or loss in an amount equal to the difference between the amount
realized upon the sale of the shares and such optionee's basis in the shares
(i.e., the exercise price plus the amount taxed to the optionee as compensation
income). If the optionee holds the shares for longer than the statutory holding
period, this gain or loss will be a long-term capital gain or loss. To qualify
for the lowest capital gain rate, the statutory holding period has recently been
changed to 18 months. In general, the Company will be entitled to a tax
deduction in the year in which compensation income attributed to the
Non-Qualified Options is recognized by the optionee. The foregoing rules are
based upon the assumptions that (i) the Options do not have a readily
ascertainable fair market value at the date of grant and (ii) the Common Stock
acquired by exercising the Non-Qualified Option is either transferable or not
subject to a "substantial risk of forfeiture" (as such terms are defined in
regulations under Section 83 of the Code).
An optionee may be entitled to exercise a Non-Qualified Option by
delivering shares of old stock to the Company in exchange for the Common Stock
received upon exercise of the option ("Non-Qualified Option stock"), if the
optionee's Non-Qualified Option agreement so provides. In general, if an
optionee exchanges old stock for Non-Qualified Option stock instead of, or in
addition to, paying part or all of the exercise price in cash, no gain or loss
will be recognized with respect to the exchange of the old stock. However, if
the fair market value of the Non-Qualified Option stock received exceeds the
fair market value of the old stock (at the time of exercise) delivered to
acquire the Non-Qualified Option stock, the transaction will be separated into
two parts for tax purposes. In the first part, the number of shares of old stock
delivered will be deemed exchanged, tax-free, for a like number of shares of the
Non-Qualified Option stock received, and the basis of the shares so received
will be the same as the basis of the shares of old stock delivered. In the
second part of the transaction, the balance of the shares of Non-Qualified
Option stock received will be treated as ordinary compensation income, and the
fair market value of these shares will constitute both the amount of
compensation income with respect to, and the basis for, such shares. Further, if
the old stock used to exercise a Non-Qualified Option is Restricted Stock (as
defined below), and the Common Stock acquired on exercise of the Non-Qualified
Option is not subject to restrictions substantially similar to those imposed on
such Restricted Stock, exercise of the Non-Qualified Option with such Restricted
Stock will be treated as the lapse of the restrictions imposed on such
Restricted Stock under the rules discussed below, and the optionee may recognize
income as a result.
SPECIAL RULES FOR RESTRICTED STOCK. Common Stock that is subject to
restrictions on transfer and also to a substantial risk of forfeiture (as
defined in regulations under Section 83 of the Code), referred to herein as
"Restricted Stock," is subject to special tax rules. If the Common Stock
acquired on the exercise of a Non-Qualified Option or pursuant to an Award or
Purchase is Restricted Stock, the amount of income recognized by the optionee
generally will be determined as of the time the restrictions lapse, and will be
equal to the difference between the amount paid for the Restricted Stock and the
fair market value of the Restricted Stock at that time. In that case, the
payment to the Company of withholding taxes will be required as the income
arises, i.e., at the time the transfer restrictions on the stock lapse or the
substantial risk of forfeiture no longer exists.
Due to certain securities law restrictions, the Common Stock acquired by
officers and directors of the Company who exercise Non-Qualified Options will be
treated for tax purposes as Restricted Stock. Similarly, the Common Stock
acquired by officers and directors of the Company who exercise ISOs will be
treated for alternative minimum tax purposes (but not regular tax purposes) as
Restricted Stock.
If an optionee transfers Restricted Stock to the Company to exercise an
ISO, the restrictions on such Restricted Stock will be deemed to have lapsed on
the date of transfer, and the optionee may recognize income at that time.
Similarly, if the optionee transfers Restricted Stock to the Company to exercise
a Non-Qualified Option, and the stock received by the optionee on exercise is
not subject to
14
<PAGE>
restrictions substantially similar to those imposed on such Restricted Stock,
the restrictions on that Restricted Stock will be deemed to have lapsed on the
date of transfer, and the optionee may recognize income at that time.
Under Section 83(b) of the Code, an election is available to the optionee
to include in gross income, in the taxable year that Restricted Stock is first
transferred to the optionee, the amount of any excess of the fair market value
(as determined under Section 83) of the Restricted Stock over the amount (if
any) paid for such stock. If this election is made and the optionee pays the tax
in year such election is made, no further tax liability will arise at the time
the transfer restrictions on the Restricted Stock lapse or the substantial risk
of forfeiture no longer exists. However, if shares of Restricted Stock for which
a Section 83(b) election is in effect are forfeited while such shares are both
nontransferable and subject to a substantial risk of forfeiture, the loss
realized by the optionee on the forfeiture, for federal income tax purposes, is
limited to the amount paid for such shares (not including any compensation
income recognized by the optionee at the time of transfer) less any amount
realized by the optionee on such forfeiture. Restricted Stock acquired by
exercising an ISO generally is not subject to the rules of Section 83, but
rather the rules discussed above under Incentive Stock Options.
MINIMUM TAX. In addition to the tax consequences described above, the
exercise of ISOs granted under the 1995 Stock Plan may result in a further
"minimum tax" under the Code. The Code provides that an "alternative minimum
tax" will be applied against a taxable base which is equal to regular taxable
income, adjusted for certain limited deductions and losses, increased by items
of tax preference, and reduced by a statutory exemption. The statutory exemption
is phased out for certain higher income taxpayers. The bargain element at the
time of exercise of an ISO, i.e., the amount by which the value of the Common
Stock received upon exercise of the ISO exceeds the exercise price, is included
in the optionee's alternative minimum taxable income for purposes of the minimum
tax, subject to the rules applicable to Restricted Stock.
Thus, if upon exercise of an ISO an optionee receives stock that is not
Restricted Stock, the bargain element is included in the optionee's alternative
minimum taxable income in the year of exercise. If the optionee receives
Restricted Stock on exercise of an ISO, the bargain element is measured and
included in alternative minimum taxable income in the year(s) that the
restrictions on the stock lapse(s), unless the optionee files a Section 83(b)
election under the Code with the Internal Revenue Service within 30 days of the
date of exercise of the ISO and thereby elects to include the bargain element in
alternative minimum taxable income in the year of exercise. For purposes of
determining alternative minimum taxable income (but not regular taxable income)
for any subsequent year in which the taxpayer sells the stock acquired by
exercise of the ISO, the basis of such stock will be its fair market value at
the time the ISO was exercised. A taxpayer is required to pay the higher of his
regular tax liability or the alternative minimum tax. A taxpayer that pays
alternative minimum tax attributable to the exercise of an ISO may be entitled
to a tax credit against regular tax liability in later years.
ERISA. The 1995 Stock Plan is not an employee benefit plan that is subject
to the provisions of the Employee Retirement Income Security Act of 1974, and
the provisions of Section 401(a) of the Code are not applicable to the 1995
Stock Plan.
OPTIONS GRANTED UNDER THE 1995 STOCK PLAN. The chart below indicates the
number of Options that have been granted as of March 31, 1998 pursuant to the
1995 Stock Plan to (i) the Named Executive Officers, (ii) all current executive
officers (other than the Named Executive Officers), as a group, (iii) all
current directors who are not executive officers, as a group and (iii) all
employees, including all current officers who are not executive officers, as a
group.
15
<PAGE>
NUMBER OF
OPTIONS
GRANTEE GRANTED
---------------------------------------------------- ---------
Roger Paradis ................................... 74,800
Peter W. Lorenz ................................. 20,000
Joseph V. Popolo ................................ 30,100
Jeffrey Largiader ............................... 27,300
John P. Broderick ............................... 27,500
Kathleen Innacelli .............................. 15,900
Peter Lindsey ................................... 31,000
All other executive officers as a group ......... 73,750
All non-employee directors as a group ........... 0
All other employees as a group .................. 112,150
The number of Stock Rights to be granted in the future pursuant to the 1995
Stock Plan is not currently determinable.
PROPOSAL 3
AMENDMENT TO THE 1995 DIRECTOR PLAN
In 1995, the Board of Directors of the Company adopted and the stockholders
approved the 1995 Director Plan to promote the interests of the Company by
providing an inducement to obtain and retain the services of qualified persons
who are not employees or officers of the Company to serve as members of its
Board of Directors. Under the terms of the Plan, each Director has received and
each future Director upon joining the Board will receive options to purchase
18,750 shares of Common Stock. No executive officers or employees of the Company
will be entitled to be granted options under the 1995 Director Plan. There are
presently 11,250 options available for future grant under the 1995 Director
Plan. Because of the limited number of remaining shares and the two unfilled
seats on the Board, the Board of Directors authorized additional shares for
future awards, subject to stockholder approval. The 75,000 additional shares for
which approval is sought represents approximately 1.5% of the Company's
outstanding shares of Common Stock at March 31, 1998. As of April 24, 1998, the
market value of the additional 75,000 shares of Common Stock authorized for
issuance under the 1995 Director Plan was $703,125.
AMENDMENT TO THE 1995 DIRECTOR PLAN
On March 12, 1997, the Board of Directors of the Company, subject to and
effective upon stockholder approval, adopted an amendment to the 1995 Director
Plan to reserve an additional 75,000 shares of Common Stock for issuance under
the 1995 Director Plan.
DESCRIPTION OF THE 1995 DIRECTOR PLAN. If the amendment is approved, a
total of 187,500 shares of Common Stock will be reserved for issuance upon the
exercise of options under the 1995 Director Plan (subject to adjustment to
capital changes). Shares subject to Options which for any reason expire or are
terminated unexercised may again be available for grant under the 1995 Director
Plan. Unless sooner terminated, the 1995 Director Plan will terminate on April
21, 2005. See "Executive Compensation - 1995 Non-Employee Director Plan" for a
description of the 1995 Director Plan. The complete text of the 1995 Director
Plan is attached as Exhibit B hereto and the description contained herein is
qualified in its entirety by the full text of the 1995 Director Plan.
For a general description of the Federal income tax consequences of the
issuance and exercise of options under the 1995 Director Plan, see "Amendments
to 1995 Stock Plan" -- "Federal Income Tax Consequences" -- "Non-Qualified
Options" and "Special Rules for Restricted Stock."
PROPOSAL 4
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company has designated Ernst & Young LLP as
the Company's independent auditors for the current fiscal year and recommends
ratification of their appointment. Representatives of Ernst & Young LLP are
expected to be present at the annual meeting of stockholders and will be
available to respond to appropriate questions and will be given the opportunity
to make a statement if they so desire.
16
<PAGE>
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 voting them.
The Company will bear the cost of preparing, printing, assembling and
mailing all proxy material that may be sent to stockholders in connection with
this solicitation. Arrangements will also be made with brokerage houses, other
custodians, nominees and fiduciaries, to forward soliciting material to the
beneficial owners of the Company's Common Stock held by such persons. The
Company will reimburse such persons for reasonable out-of-pocket expenses
incurred by them. In addition to the solicitation of proxies by use of the
mails, officers and regular employees of the Company may solicit proxies without
additional compensation, by telephone, telecopier or telegraph. The Company does
not expect to pay any compensation for the solicitation of proxies.
The Annual Report of the Company on Form 10-K for the fiscal year ended
December 31, 1997 (the "Annual Report") has been forwarded to all stockholders.
The Annual Report, which includes audited financial statements, does not form
any part of the material for the solicitation of proxies.
The Company will furnish without charge to each person whose proxy is being
solicited, upon written request of any such person, a copy of the Annual Report
as filed with the Securities and Exchange Commission, including the financial
statements and schedules. Requests for copies of such report should be directed
to Roger Paradis, President, Programmer's Paradise, Inc, 1163 Shrewsbury Avenue,
Shrewsbury New Jersey 07702.
STOCKHOLDER PROPOSALS
The Annual Meeting of Stockholders for the fiscal year ending December 31,
1998 is expected to be held on or about June 15, 1999, with the mailing of proxy
materials for such meeting to be made on or about April 30, 1999. All proposals
of stockholders intended to be presented at the Company's next Annual Meeting of
Stockholders must be received at the Company's executive office no later than
November 30, 1998 in order to be consulted for inclusion in the proxy statement
and form of proxy related to that meeting.
By Order of the Board of Directors,
Roger Paradis, Chairman
and Chief Executive Officer
April 30, 1998
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EXHIBIT A
PROGRAMMER'S PARADISE, INC.
1995 STOCK PLAN*
[AMENDMENT IS SET FORTH IN BOLD]
1. PURPOSE. The 1995 Stock Plan (the "Plan") is intended to provide
incentives: (a) to the officers and other employees of Programmer's Paradise,
Inc. (the "Company") and any present or future subsidiaries of the Company
(collectively, "Related Corporations") by providing them with opportunities to
purchase stock in the Company pursuant to options granted hereunder which
qualify as "incentive stock options" ("ISO" or "ISOs") under Section 422(b) of
the Internal Revenue Code of 1986, as amended (the "Code"); (b) to directors,
officers, employees and consultants of the Company and Related Corporations by
providing them with opportunities to purchase stock in the Company pursuant to
options granted hereunder which do not qualify as ISOs ("Non-Qualified Option"
or "Non-Qualified Options"); (c) to directors, officers, employees and
consultants of the Company and Related Corporations by providing them with
awards of stock in the Company ("Awards"); and (d) to directors, officers,
employees and consultants of the Company and Related Corporations by providing
them with 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
authorizations to make Purchases are referred to hereafter collectively as
"Stock Rights". As used herein, the terms "parent" and "subsidiary" mean "parent
corporation" and "subsidiary corporation", respectively, as those terms are
defined in Section 425 of the Code.
2. ADMINISTRATION OF THE PLAN.
(a) BOARD OR COMMITTEE ADMINISTRATION. The Plan shall be administered by
the Board of Directors of the Company (the "Board"). The Board may appoint a
Compensation Committee (the "Committee") of three or more of its members to
administer this Plan. To the extent required by Rule 16b-3 or any successor
provision ("Rule 16b-3") of the Securities Exchange Act of 1934, with respect to
specific grants of Stock Rights, the Plan shall be administered by a
disinterested administrator or administrators within the meaning of Rule 16b-3.
Subject to ratification of the grant or authorization of each Stock Right by the
Board (if so required by applicable state law), and subject to the terms of the
Plan, the Committee shall have the authority to (i) determine the employees of
the Company and Related Corporations (from among the class of employees eligible
under paragraph 3 to receive ISOs) to whom ISOs may be granted, and to determine
(from among the class of individuals and entities eligible under paragraph 3 to
receive Non-Qualified Options and Awards and to make Purchases) to whom
Non-Qualified Options, Awards and authorizations to make Purchases may be
granted; (ii) determine the time or times at which Options or Awards may be
granted or Purchases made; (iii) determine the option price of shares subject to
each Option, which price shall not be less than the minimum price specified in
paragraph 6, and the purchase price of shares subject to each Purchase; (iv)
determine whether each Option granted shall be an ISO or a Non-Qualified Option;
(v) determine (subject to paragraph 7) the time or times when each option shall
become exercisable and the duration of the exercise period; (vi) determine
whether restrictions such as repurchase options are to be imposed on shares
subject to Options, Awards and Purchases and the nature of such restrictions, if
any, and (vii) interpret the Plan and prescribe and rescind rules and
regulations relating to it. If the Committee determines to issue a Non-Qualified
Option, it shall take whatever actions it deems necessary, under Section 422 of
the Code and the regulations promulgated thereunder, to ensure that such Option
is not treated as an ISO. The interpretation and construction by the Committee
of any provisions of the Plan or of any Stock Right granted under it shall be
final unless otherwise determined by the Board. The Committee may from time to
time adopt such rules and regulations for carrying out the Plan as it may deem
best. No member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Stock Right
granted under it.
- ------------
* All numbers of shares of Common Stock set forth herein have been adjusted
to account for the four-for-three reverse stock split effected on May 25,
1995.
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<PAGE>
(b) COMMITTEE ACTION. The Committee may select one of its members as its
chairman, and shall hold meetings at such time and places as it may determine.
Acts by a majority of the Committee, or acts reduced to or approved in writing
by a majority of the members of the Committee, shall be the valid acts of the
Committee. All references in this Plan to the Committee shall mean the Board if
no Committee has been appointed. From time to time the Board may increase the
size of the Committee and appoint additional members thereof, remove members
(with or without cause) and appoint new members in substitution therefor, fill
vacancies however caused, or remove all members of the Committee and thereafter
directly administer the Plan.
(c) GRANT OF STOCK RIGHTS TO BOARD MEMBERS. Stock Rights may be granted to
members of the Board consistent with the provisions of the third sentence of
paragraph 2(a) above, if applicable. All grants of Stock Rights to members of
the Board shall in all other respects be made in accordance with the provisions
of this Plan applicable to other eligible persons. Consistent with the
provisions of the third sentence of paragraph 2(a) above, members of the Board
who are either (i) eligible for Stock Rights pursuant to the Plan or (ii) have
been granted Stock Rights may vote on any matters affecting the administration
of the Plan or the grant of any Stock Rights pursuant to the Plan, except that
no such member shall act upon the granting to himself of Stock Rights, but any
such member may be counted in determining the existence of a quorum at any
meeting of the Board during which action is taken with respect to the granting
to him of Stock Rights.
3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted to any employee of
the Company or any Related Corporation. Those officers and directors of the
Company who are not employees may not be granted ISOs under the Plan.
Non-Qualified Options, Awards and authorizations to make Purchases may be
granted to any director (whether or not an employee), officer, employee or
consultant of the Company or any Related Corporation. The Committee may take
into consideration a recipient's individual circumstances in determining whether
to grant an ISO, a Non-Qualified Option or an authorization to make a Purchase.
Granting of any Stock Right to any individual or entity shall neither entitle
that individual or entity to, nor disqualify him from, participation in any
other grant of Stock Rights.
4. STOCK. The stock subject to Options, Awards and Purchases shall be
authorized but unissued shares of Common Stock of the Company, par value $.01
per share (the "Common Stock"), or shares of Common Stock re-acquired by the
Company in any manner. The aggregate number of shares that may be issued
pursuant to the Plan is 1,137,500 shares, subject to adjustment as provided in
paragraph 13. Any such shares may be issued as ISOs, Non-Qualified Options or
Awards, or to persons or entities making Purchases, so long as the number of
shares so issued does not exceed such number, as adjusted or amended from time
to time by a vote of stockholders or otherwise pursuant to paragraph 13. If any
Option granted under the Plan shall expire or terminate for any reason without
having been exercised in full or shall cease for any reason to be exercisable in
whole or in part, the unpurchased shares subject to such Options shall again be
available for grants of Stock Rights under the Plan.
5. GRANTING OF STOCK RIGHTS. Stock Rights may be granted under the Plan at
any time on or after April 21, 1995 and prior to April 21, 2005. The date of
grant of a Stock Right under the Plan will be the date specified by the
Committee at the time it grants the Stock Right; provided, however, that such
date shall not be prior to the date on which the Committee acts to approve the
grant. The Committee shall have the right, with the consent of the optionee, to
convert an ISO granted under the Plan to a Non-Qualified Option pursuant to
paragraph 16.
6. MINIMUM OPTION PRICE; ISO LIMITATIONS.
(a) PRICE FOR NON-QUALIFIED OPTIONS. The exercise price per share specified
in the agreement relating to each Non-Qualified Option granted under the Plan
shall in no event be less than the lesser of (i) the book value per share of
Common Stock as of the end of the fiscal year of the Company immediately
preceding the date of such grant, or (ii) fifty (50%) percent of the fair market
value per share of Common Stock on the date of such grant.
(b) PRICE FOR ISOS. The exercise price per share specified in the agreement
relating to each ISO granted under the Plan shall not be less than the fair
market value per share of Common Stock on the date of such grant. In the case of
an ISO to be granted to an employee owning stock possessing more
19
<PAGE>
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any Related Corporation, the price per share specified
in the agreement relating to such ISO shall not be less than one hundred ten
percent (110%) of the fair market value per share of Common Stock on the date of
grant.
(c) $100,000 ANNUAL LIMITATION ON ISOS. Each eligible employee may be
granted ISOs only to he extent that, in the aggregate under this Plan and all
incentive stock option plans of the Company and any Related Corporation, such
ISOs do not become exercisable for the first time by such employee during any
calendar year in a manner which would entitle the employee to purchase more than
$100,000 in fair market value (determined at the time the ISOs were granted) of
Common Stock in that year. Any options granted to an employee in excess of such
amount will be granted as Non-Qualified Options.
(d) DETERMINATION OF FAIR MARKET VALUE. If, at the time an Option is
granted under the Plan, the Company's Common Stock is publicly traded, "fair
market value" shall be determined as of the last business day for which the
prices or quotes discussed in this sentence are available prior to the date such
Option is granted and shall mean (i) the average (on that date) of the high and
low prices of the Common Stock on the principal national securities exchange on
which the Common Stock is traded, if the Common Stock is then traded on a
national securities exchange; or (ii) the last reported sale price (on that
date) of the Common Stock on the NASDAQ National Market List, if the Common
Stock is not then traded on a national securities exchange; or (iii) the average
of the closing bid and asked prices last quoted (on that date) by an established
quotation service for over-the-counter securities, if the Common Stock is not
reported on the NASDAQ National Market List. However, if the Common Stock is not
publicly traded at the time an option is granted under the Plan, "fair market
value" shall be deemed to be the fair value of the Common Stock as determined by
the Committee after taking into consideration all factors which it deems
appropriate, including, without limitation, recent sale and offer prices of the
Common Stock in private transactions negotiated at arm's length.
(e) MAXIMUM OPTION GRANT. The maximum option grant that may be made to an
employee of the Company in any calendar year shall not cover more than 200,000
shares, subject to adjustment as provided in paragraph 13.
7. OPTION DURATION. Subject to earlier termination as provided in
paragraphs 9 and 10, each Option shall expire on the date specified by the
Committee, but not more than (i) ten years and one day from the date of grant in
the case of Non-Qualified Options, (ii) ten years from the date of grant in the
case of ISOs generally, and (iii) five years from the date of grant in the case
of ISOs granted to an employee owning stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or any Related Corporation. Subject to earlier termination as provided in
paragraphs 9 and 10, the term of each ISO shall be the term set forth in the
original instrument granting such ISO, except with respect to any part of such
ISO that is converted into a Non-Qualified Option pursuant to paragraph 16.
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9 through
12, each option granted under the Plan shall be exercisable as follows:
(a) FULL VESTING OR PARTIAL VESTING. The Option shall either be fully
exercisable on the date of grant or shall become exercisable thereafter in
such installments as the Committee may specify.
(b) FULL VESTING OF INSTALLMENTS. Once an installment becomes
exercisable it shall remain exercisable until expiration or termination of
the Option, unless otherwise specified by the Committee.
(c) PARTIAL EXERCISE. Each Option or installment may be exercised at
any time or from time to time, in whole or in part, for up to the total
number of shares with respect to which it is then exercisable.
(d) ACCELERATION OF VESTING. The Committee shall have the right to
accelerate the date of exercise of any installment of any Option; provided
that the Committee shall not accelerate the exercise date of any
installment of any Option granted to any employee as an ISO (and not
previously converted into a Non-Qualified Option pursuant to paragraph 16)
if such acceleration would violate the annual vesting limitation contained
in Section 422(b)(7) of the Code, as described in paragraph 6(c).
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<PAGE>
9. TERMINATION OF EMPLOYMENT. If an ISO optionee ceases to be employed by
the Company and all Related Corporations other than by reason of death or
disability as defined in paragraph 10, no further installments of his ISOs shall
become exercisable, and his ISOs shall terminate after the passage of sixty (60)
days from the date of termination of his employment, but in no event later than
on their specified expiration dates, except to the extent that such ISOs (or
unexercised installments thereof) have been converted into Non-Qualified Options
pursuant to paragraph 16. Employment shall be considered as continuing
uninterrupted during any bona fide leave of absence (such as those attributable
to illness, military obligations or governmental service) provided that the
period of such leave does not exceed ninety (90) days or, if longer, any period
during which such optionee's right to reemployment is guaranteed by statute. A
bona fide leave of absence with the written approval of the Committee shall not
be considered an interruption of employment under the Plan, provided that such
written approval contractually obligates the Company or any Related Corporation
to continue the employment of the optionee after the approved period of absence.
ISOs granted under the Plan shall not be affected by any change of employment
within or among the Company and Related Corporations, so long as the optionee
continues to be an employee of the Company or any Related Corporation. Nothing
in the Plan shall be deemed to give any grantee of any Stock Right the right to
be retained in employment or other service by the Company or any Related
Corporation for any period of time.
10. DEATH; DISABILITY.
(a) DEATH. If an ISO optionee ceases to be employed by the Company and all
Related Corporations by reason of his death, any ISO of his may be exercised, to
the extent of the number of shares with respect to which he could have exercised
it on the date of his death, by his estate, personal representative or
beneficiary who has acquired the ISO by will or by the laws of descent and
distribution, at any time prior to the earlier of the specified expiration date
of the ISO or 180 days from the date of the optionee's death.
(b) DISABILITY. If an ISO optionee ceases to be employed by the Company and
all Related Corporations by reason of his disability, he shall have the right to
exercise any ISO held by him on the date of termination of employment, to the
extent of the number of shares with respect to which he could have exercised it
on that date, at any time prior to the earlier of the specified expiration date
of the ISO or 180 days from the date of the termination of the optionee's
employment. For the purposes of the Plan, the term "disability" shall mean
"permanent and total disability" as defined in Section 22(e)(3) of the Code or
successor statute.
11. ASSIGNABILITY. No Option shall be assignable or transferable by the
grantee except by will or by the laws of descent and distribution, and during
the lifetime of the grantee each option shall be exercisable only by him.
12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. In granting any Non-Qualified Option, the
Committee may specify that such Non-Qualified Option shall be subject to the
restrictions set forth herein with respect to ISOs, or to such other termination
and cancellation provisions as the Committee may determine. The Committee may
from time to time confer authority and responsibility on one or more of its own
members and/or one or more officers of the Company to execute and deliver such
instruments. The proper officers of the Company are authorized and directed to
take any and all action necessary or advisable from time to time to carry out
the terms of such instruments.
13. ADJUSTMENTS. Upon the occurrence of any of the following events, an
optionee's rights with respect to options granted to him hereunder shall be
adjusted as hereinafter provided, unless otherwise specifically provided in the
written agreement between the optionee and the Company relating to such Option:
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<PAGE>
(a) STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common Stock
shall be subdivided or combined into a greater or smaller number of shares
or if the Company shall issue any shares of Common Stock as a stock
dividend on its outstanding Common Stock, the number of shares of Common
Stock deliverable upon the exercise of Options shall be appropriately
increased or decreased proportionately, and appropriate adjustments shall
be made in the purchase price per share to reflect such subdivision,
combination or stock dividend.
(b) CONSOLIDATIONS OR MERGERS. If the Company is to be consolidated
with or acquired by another entity in a merger, sale of all or
substantially all of the Company's assets or otherwise (an "Acquisition"),
the Committee or the board of directors of any entity assuming the
obligations of the Company hereunder (the "Successor Board"), shall, as to
outstanding Options, take one or more of the following actions: (a) make
appropriate provision for the continuation of such Options by substituting
on an equitable basis for the shares then subject to such Options, or make
provision for the exchange of such Options, the consideration payable with
respect to the outstanding shares of Common Stock in connection with the
Acquisition (less the exercise price thereof not paid); or (b) make
appropriate provision for the continuation of such Options by substituting
on an equitable basis for the shares then subject to such Options any
equity securities of the successor corporation; or (c) upon written notice
to the optionees, provide that all Options must be exercised, to the extent
then exercisable, within a specified number of days of the date of such
notice, at the end of which period the Options shall terminate; or (d)
terminate all Options in exchange for a cash payment equal to the excess of
the fair market value of the shares subject to such Options (to the extent
then exercisable) over the exercise price thereof; or (e) accelerate the
date of exercise of such options or of any installment of any such Options;
or (f) terminate all options in exchange for the right to participate in
any stock option or other employee benefit plan of any successor
corporation.
(c) RECAPITALIZATION OR REORGANIZATION. In the event of a
recapitalization or reorganization of the Company (other than a transaction
described in subparagraph (b) above) pursuant to which securities of the
Company or of another corporation are issued with respect to the
outstanding shares of Common Stock, an optionee upon exercising an option
shall be entitled to receive for the purchase price paid upon such exercise
the securities he would have received if he had exercised his Option prior
to such recapitalization or reorganization.
(d) MODIFICATION OF ISOS. Notwithstanding the foregoing, any
adjustments made pursuant to subparagraphs (a), (b) or (c) with respect to
ISOs shall be made only after the Committee, after consulting with counsel
for the Company, determines whether such adjustments would constitute a
"modification" of such ISOs (as that term is defined in Section 425 of the
Code) or would cause any adverse tax consequences for the holders of such
ISOs. If the Committee determines that such adjustments made with respect
to ISOs would constitute a modification of such ISOs, it may refrain from
making such adjustments.
(e) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution of the Company, each option will terminate immediately prior to
the consummation of such proposed action or at such other time and subject
to such other conditions as shall be determined by the Committee.
(f) ISSUANCES OF SECURITIES. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or
price of shares subject to Options. No adjustments shall be made for
dividends paid in cash or in property other than securities of the Company.
(g) FRACTIONAL SHARES. No fractional shares shall be issued under the
Plan and the optionee shall receive from the Company cash in lieu of such
fractional shares.
(h) ADJUSTMENTS. Upon the happening of any of the foregoing events
described in subparagraphs (a), (b) or (c) above, the class and aggregate
number of shares set forth in paragraph 4 hereof that are subject to Stock
Rights which previously have been or subsequently may be granted under the
Plan shall also be appropriately adjusted to reflect the events described
in such subpara-
22
<PAGE>
graphs. The Committee or the Successor Board shall determine the specific
adjustments to be made under this paragraph 13 and, subject to paragraph 2,
its determination shall be conclusive. If any person or entity owning
restricted Common Stock obtained by exercise of a Stock Right made hereunder
receives shares or securities or cash in connection with a corporate
transaction described in subparagraphs (a), (b) or (c) above as a result of
owning such restricted Common Stock, such shares or securities or cash shall
be subject to all of the conditions and restrictions applicable to the
restricted Common Stock with respect to which such shares or securities or
cash were issued, unless otherwise determined by the Committee or the
Successor Board.
14. MEANS OF EXERCISING STOCK RIGHTS. A Stock Right (or any part or
installment thereof) shall be exercised by giving written notice to the Company
at its principal office address. Such notice shall identify the Stock Right
being exercised and specify the number of shares as to which such Stock Right is
being exercised, accompanied by full payment of the purchase price therefor
either (a) in United States dollars in cash or by check, or (b) at the
discretion of the Committee, through delivery of shares of Common Stock having a
fair market value equal as of the date of the exercise to the cash exercise
price of the Stock Right, or (c) at the discretion of the Committee, by delivery
of the grantee's personal recourse note bearing interest payable not less than
annually at no less than 100% of the lowest applicable Federal rate, as defined
in Section 1274(d) of the Code, or (d) in the discretion of the Committee, by
delivery (including by telecopier) to the Company or its designated agent of an
executed irrevocable option exercise form together with irrevocable instructions
to a broker-dealer to sell (or margin) a sufficient portion of the shares and
deliver the sale (or margin loan) proceeds directly to the Company to pay for
the exercise price, or (e) at the discretion of the Committee, by any
combination of (a), (b), (c) or (d) above. If the Committee exercises its
discretion to permit payment of the exercise price of an ISO by means of the
methods set forth in clauses (b), (c), (d) or (e) of the preceding sentence,
such discretion shall be exercised in writing at the time of the grant of the
ISO in question. The holder of a Stock Right shall not have the rights of a
shareholder with respect to the shares covered by his Stock Right until the date
of issuance of a stock certificate to him for such shares. Except as expressly
provided above in paragraph 13 with respect to changes in capitalization and
stock dividends, no adjustment shall be made for dividends or similar rights for
which the record date is before the date such stock certificate is issued.
15. TERM AND AMENDMENT OF PLAN. The Plan shall expire on April 21, 2005
(except as to Options outstanding on that date). The Board may terminate or
amend the Plan in any respect at any time, except that, without the approval of
the stockholders obtained within 12 months before or after the Board adopts a
resolution authorizing any of the following actions: (a) the total number of
shares that may be issued under the Plan may not be increased (except by
adjustment pursuant to paragraph 13); (b) the provisions of paragraph 3
regarding eligibility for grants of ISOs may not be modified; (c) the provisions
of paragraph 6(b) regarding the exercise price at which shares may be offered
pursuant to ISOs may not be modified (except by adjustment pursuant to paragraph
13); and (d) the expiration date of the Plan may not be extended. Except as
otherwise provided in this paragraph 15, in no event may action of the Board or
stockholders alter or impair the rights of a grantee, without his consent, under
any Stock Right previously granted to him.
16. CONVERSION OF ISOS INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOS. The
Committee, at the written request of any optionee, may in its discretion take
such actions as may be necessary to convert such optionee's ISOs (or any
installments or portions of installments thereof) that have not been exercised
on the date of conversion into Non-Qualified Options at any time prior to the
expiration of such ISOs, regardless of whether the optionee is an employee of
the Company or a Related Corporation at the time of such conversion. Such
actions may include, but not be limited to, extending the exercise period or
reducing the exercise price of the appropriate installments of such Options. At
the time of such conversion, the Committee (with the consent of the optionee)
may impose such conditions on the exercise of the resulting Non-Qualified
Options as the Committee in its discretion may determine, provided that such
conditions shall not be inconsistent with the Plan. Nothing in the Plan shall be
deemed to give any optionee the right to have such optionee's ISOs converted
into Non-Qualified Options, and no such conversion shall occur until and unless
the Committee takes appropriate action. The Committee, with the consent of the
optionee, may also terminate any portion of any ISO that has not been exercised
at the time of such termination.
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<PAGE>
17. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for general corporate purposes.
18. GOVERNMENTAL REGULATION. The Company's obligation to sell and deliver
shares of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.
19. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a
Non-Qualified Option, the grant of an Award, the making of a Purchase of Common
Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 20) or the vesting of restricted Common
Stock acquired on the exercise of a Stock Right hereunder, the Company, in
accordance with Section 3402(a) of the Code, may require the optionee, Award
recipient or purchaser to pay additional withholding taxes in respect of the
amount that is considered compensation includable in such person's gross income.
The Committee in its discretion may condition (i) the exercise of an Option,
(ii) the grant of an Award, (iii) the making of a Purchase of Common Stock for
less than its fair market value, or (iv) the vesting of restricted Common Stock
acquired by exercising a Stock Right, on the grantee's payment of such
additional withholding taxes.
20. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. Each employee who
receives an ISO must agree to notify the Company in writing immediately after
the employee makes a Disqualifying Disposition of any Common Stock acquired
pursuant to the exercise of an ISO. A Disqualifying Disposition is any
disposition (including any sale) of such Common Stock before the later of (a)
two years after the date the employee was granted the ISO, or (b) one year after
the date the employee acquired Common Stock by exercising the ISO. If the
employee has died before such stock is sold, the holding period requirements do
not apply and no Disqualifying Disposition can occur thereafter.
21. GOVERNING LAW; CONSTRUCTION. The validity and construction of the Plan
and the instruments evidencing Stock Rights shall be governed by the laws of the
State of Delaware or the laws of any jurisdiction in which the Company or its
successors in interest may be organized. In construing this Plan, the singular
shall include the plural and the masculine gender shall include the feminine and
neuter, unless the context otherwise requires.
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<PAGE>
EXHIBIT B
PROGRAMMER'S PARADISE, INC.
1995 NON-EMPLOYEE DIRECTOR PLAN*
[AMENDMENT IS SET FORTH IN BOLD]
1. PURPOSE. This stock option plan, to be known as the 1995 Non-Employee
Director Plan (hereinafter, the "Plan"), is intended to promote the interests of
Programmer's Paradise, Inc., a Delaware corporation (hereinafter, the
"Company"), by providing an inducement to obtain and retain the services of
qualified persons who are neither employees nor officers of the Company to serve
as members of the Board of Directors and to demonstrate the Company's
appreciation for their service upon the Company's Board of Directors.
2. RIGHTS TO BE GRANTED. Under the Plan, non-qualified stock options are
granted that give an optionee the right for a specified period of time to
purchase a pre-determined number of shares of Common Stock, par value $.01 per
share, of the Company ("Common Stock"). The option price is determined
automatically at the time of the grant in each instance in accordance with the
terms of this Plan.
3. AVAILABLE SHARES. The total number of shares of Common Stock of the
Company for which options may be granted under the Plan shall not exceed 187,500
shares, subject to adjustment in accordance with Section 13 hereof. Shares of
Common Stock subject to the Plan are authorized but unissued shares or shares
that were once issued and subsequently reacquired by the Company. If any options
granted under this Plan are surrendered before exercise or lapse without
exercise, in whole or in part, the shares of Common Stock reserved therefor
shall revert to the option pool and continue to be available for grant under the
Plan.
4. ADMINISTRATION. This Plan shall be administered by the Board or by a
committee appointed by the Board (the "Committee"). In the event the Board fails
to appoint or refrains from appointing a Committee, the Board shall have all
power and authority to administer this Plan. In such event, the word "Committee"
wherever used herein shall be deemed to mean the Board. The Committee shall,
subject to the provisions of the Plan, have the power to construe this Plan, to
determine all questions hereunder, and to adopt and amend such rules and
regulations for the administration of this Plan as it may deem desirable. No
member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to this Plan or any option granted
under it.
5. OPTION AGREEMENT. Each option granted under the provisions of this Plan
shall be evidenced by an Option Agreement, in such form as may be approved by
the Committee, which Agreement shall be duly executed and delivered on behalf of
the Company and by the optionee to whom such option is granted. The Agreement
shall contain such terms, provisions, and conditions not inconsistent with the
Plan as may be determined by the officer executing it.
6. ELIGIBILITY AND LIMITATIONS. Options may be granted pursuant to the Plan
only to non-employee members of the Board of Directors of the Company who are
not officers of the Company and who must hold the options (and the shares of
Common Stock issuable upon exercise thereof) individually in their own names. In
the event any non-employee director also becomes an officer or employee of the
Company, then all future installments of any Option previously granted shall not
be exercisable from and after the date such person becomes an employee or
officer of the Company. The optionee shall nevertheless be entitled to exercise
any installment of any Option which was exercisable prior to the person becoming
an officer or employee of the Company.
7. OPTION PRICE. The purchase price of the Common Stock covered by an
option granted pursuant to the Plan shall be 100% of the fair market value of
such shares on the day the option is granted. The option price will be subject
to adjustment in accordance with the provisions of Section 13 hereof. For
- ------------
* All numbers of shares of Common Stock set forth herein have been adjusted to
account for the four for three reverse stock split effects on May 17, 1995.
25
<PAGE>
purposes of the Plan, the fair market value of a share of Common Stock on any
day shall be (a) the average (on that date) of the high and low prices of the
Common Stock on the principal national securities exchange on which the Common
Stock is traded, if the Common Stock is then traded on a national securities
exchange; or (b) the last reported sale price (on that date), of the Common
Stock on the NASDAQ National Market List, if the Common Stock is not then traded
on a national securities exchange; or (c) the average of the closing bid and
asked prices last quoted (on that date) by an established quotation service for
over-the-counter securities, if the Common Stock is not reported on the NASDAQ
National Market List; or (d) if the Common Stock is not then traded or listed
for quotation on any exchange, the fair market value of the Common Stock shall
be determined as of the most recent sale price for the Common Stock or the grant
of any option therefor under any other stock option plan of the Company.
8. AUTOMATIC GRANT OF OPTIONS. Each outside (i.e., non-employee) director
of the Company as of April 1, 1995 shall be granted a non-qualified option to
purchase 18,750 shares of Common Stock. Each individual who joins the Board as a
non-employee director after such date shall automatically be granted a
non-qualified stock option to purchase 18,750 shares of Common Stock at the time
such individual first joins the Board.
9. PERIOD OF OPTION. The options granted hereunder shall expire on a date
which is ten (10) years after the date of grant of the options and the Plan
shall terminate when all options granted hereunder have terminated.
10. EXERCISE OF OPTION. Subject to the terms and conditions of the Plan and
the Option Agreement, an option granted hereunder shall, to the extent then
exercisable, be exercisable in whole or in part by giving written notice to the
Company by first class or registered or certified mail or in person addressed to
the Treasurer or Chief Financial Officer of the Company, stating the number of
shares with respect to which the option is being exercised, accompanied by
payment in full for such shares, which payment may be in whole or in part in
shares of the Common Stock of the Company already owned by the person or persons
exercising the option, valued at fair market value determined in accordance with
the provisions of Section 7 hereof. There shall be no such exercise at any one
time as to fewer than one hundred (100) shares or all of the remaining shares
then purchasable by the person or persons exercising the option, if fewer than
one hundred (100) shares. Upon notification from the Company, the transfer agent
shall prepare a certificate or certificates representing such shares acquired
pursuant to exercise of the option, shall register the optionee as the owner of
such shares on the stock transfer books of the Company and shall cause the fully
executed certificates representing such shares to be delivered to the optionee
as soon as practicable after payment of the option price in full. The holder of
an option shall not have any rights of a shareholder with respect to the shares
covered by the option, except to the extent that one or more certificates for
such shares shall be delivered to him upon the due exercise of the option.
11. VESTING OF SHARES AND NON-TRANSFERABILITY OF OPTIONS.
(a) VESTING. On the terms and subject to the conditions set forth in
the Plan, shares of Common Stock underlying the options granted under the
Plan ("Option Shares") shall vest in the optionee and thus become
exercisable in installments, in accordance with the following schedule:
<TABLE>
<CAPTION>
CUMULATIVE NUMBER OF
OPTION SHARES FOR WHICH DATE OF VESTING AND
OPTION IS EXERCISABLE EXERCISABILITY OF OPTION
- ----------------------------- ----------------------------------------------------------
<S> <C>
20% of total Option Shares 1 year anniversary of the date of the grant of the option
40% of total Option Shares 2 year anniversary of the date of the grant of the option
60% of total Option Shares 3 year anniversary of the date of the grant of the option
80% of total Option Shares 4 year anniversary of the date of the grant of the option
100% of total Option Shares 5 year anniversary of the date of the grant of the option
</TABLE>
26
<PAGE>
The number of shares as to which options may be exercised shall be
cumulative, so that once the option shall become exercisable as to any shares it
shall continue to be exercisable as to said shares, until expiration or
termination of the option as provided in this Plan.
(b) LEGEND ON CERTIFICATES. The certificates representing such shares
shall carry such appropriate legend, and such written instructions shall be
given to the Company's Transfer Agent, as may be deemed necessary or
advisable by counsel to the Company in order to comply with the
requirements of the Securities Act of 1933 or any state securities laws.
(c) NON-TRANSFERABILITY. Any option granted pursuant to this Plan
shall not be assignable or transferable other than by will or the laws of
descent and distribution or pursuant to a domestic relations order and
shall be exercisable during the optionee's lifetime only by him or her.
12. TERMINATION OF OPTION RIGHTS.
(a) In the event an optionee voluntarily resigns or voluntarily ceases
to be a member of the Board of Directors of the Company for any reason
other than death or disability, any options granted to such optionee shall,
to the extent any portion of such options are not then exercisable,
immediately terminate and become void. Any options which are then
exercisable but have not been exercised at the time the optionee so ceases
to be a member of the Board of Directors may be exercised, to the extent
any portion of such options are then exercisable, by the optionee at any
time prior to the scheduled expiration date of the option. Notwithstanding
the foregoing, in the event any optionee (i) ceases to be a member of the
Board of Directors at the request of the Company, (ii) is removed without
cause, or (iii) otherwise does not stand for nomination or re-election as a
director of the Company at the request of the Company, then any portion of
any Option granted to such optionee which is not then exercisable shall be
accelerated and such Option shall be fully exercisable by the optionee at
any time prior to the scheduled expiration date. No portion of the option
may be exercised if the optionee is removed from the Board of Directors for
any one of the following reasons: (i) disloyalty, gross negligence,
dishonesty or breach of fiduciary duty to the Company; or (ii) the
commission of an act of embezzlement, fraud or deliberate disregard of the
rules or policies of the Company which results in loss, damage or injury to
the Company, whether directly or indirectly; or (iii) the unauthorized
disclosure of any trade secret or confidential information of the Company;
or (iv) the commission of an act which constitutes unfair competition with
the Company or which induces any customer of the Company to break a
contract with the Company; or (v) the conduct of any activity on behalf of
any organization or entity which is a competitor of the Company (unless
such conduct is approved by a majority of the disinterested members of the
Board of Directors).
(b) In the event that an optionee ceases to be a member of the Board
of Directors of the Company by reason of his or her disability or death,
any option granted to such optionee may be exercised, to the extent of the
number of shares with respect to which an optionee could have exercised it
on the date of such disability or death (by the optionee's personal
representative, heir or legatee, in the event of death) until the scheduled
expiration date of the option.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION AND OTHER MATTERS. Upon the
occurrence of any of the following events, an optionee's rights with respect to
options granted to him or her hereunder shall be adjusted as hereinafter
provided:
(a) STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common Stock
shall be subdivided or combined into a greater or smaller number of shares
or if the Company shall issue any shares of Common Stock as a stock
dividend on its outstanding Common Stock, the number of shares of Common
Stock deliverable upon the exercise of options shall be appropriately
increased or decreased proportionately, and appropriate adjustments shall
be made in the purchase price per share to reflect such subdivision,
combination or stock dividend.
(b) RECAPITALIZATION ADJUSTMENTS. If the Company is to be consolidated
with or acquired by another entity in a merger, sale of all or
substantially all of the Company's assets or otherwise, each option granted
under this plan which is outstanding but unvested as of the effective date
of such
27
<PAGE>
event shall become exercisable in full ten business days prior to the
effective date of such event. In the event of a reorganization,
recapitalization, merger, consolidation, or any other change in the
corporate structure or shares of the Company, to the extent permitted by
Rule 16b-3 under the Securities Exchange Act of 1934, adjustments in the
number and kind of shares authorized by the Plan and in the number and kind
of shares covered by, and in the option price of outstanding options under
this Plan necessary to maintain the proportionate interest of the optionee
and preserve, without exceeding, the value of such option, shall be made.
Notwithstanding the foregoing, no such adjustment shall be made which
would, within the meaning of any applicable provisions of the Internal
Revenue Code of 1986, as amended, constitute a modification, extension or
renewal of any Option or a grant of additional benefits to the holder of an
Option.
(c) ISSUANCES OF SECURITIES. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or
price of shares subject to options. No adjustments shall be made for
dividends paid in cash or in property other than securities of the Company.
(d) ADJUSTMENTS. Upon the happening of any of the foregoing events,
the class and aggregate number of shares set forth in Section 3 of this
Plan that are subject to options which previously have been or subsequently
may be granted under this Plan shall also be appropriately adjusted to
reflect such events. The Board shall determine the specific adjustments to
be made under this Section 13 and its determination shall be conclusive.
If an option hereunder shall be assumed, or a new option substituted
therefor, as a result of the sale of the Company, whether by a corporate merger,
consolidation or sale of property or stock, then membership on the Board of
Directors of such assuming or substituting corporation or by a parent
corporation or a subsidiary thereof shall be considered for purposes of an
option to be membership on the Board of Directors of the Company.
14. RESTRICTIONS ON ISSUANCE OF SHARES. Notwithstanding the provisions of
Sections 8 and 10 hereof, the Company shall have no obligation to deliver any
certificate or certificates upon exercise of an option until one of the
following conditions shall be satisfied:
(a) The shares with respect to which the option has been exercised are
at the time of the issue of such shares effectively registered under
applicable Federal and state securities acts as now in force or hereafter
amended; or
(b) Counsel for the Company shall have given an opinion that such
shares are exempt from registration under Federal and state securities acts
as now in force or hereafter amended; and until the Company has complied
with all applicable laws and regulations, including without limitation, all
regulations required by any stock exchange upon which the Company's
outstanding Common Stock is then listed.
The Company shall use its best efforts to bring about compliance with the
above conditions within a reasonable time, except that the Company shall be
under no obligation to cause a registration statement or a post-effective
amendment to any registration statement to be prepared at its expense solely for
the purpose of covering the issue of shares in respect of which any option may
be exercised under the Plan.
15. REPRESENTATION OF OPTIONEE. If requested by the Company, the optionee
shall deliver written warranties and representations upon exercise of the option
that are necessary to show compliance with Federal and state securities laws,
including to the effect that a purchase of shares under the option is made for
investment and not with a view to their distribution (as that term is used in
the Securities Act of 1933).
16. APPROVAL OF STOCKHOLDERS. The effectiveness of this Plan and the grant
of all options hereunder is in all respects subject to approval by the Company's
stockholders.
28
<PAGE>
17. ACCELERATION AND VESTING OF OPTION FOR BUSINESS COMBINATIONS. Upon any
merger, consolidation, sale of all or substantially all of the assets of the
Company, or other business combination involving the sale or transfer of all or
substantially all of the capital stock or assets of the Company in which the
Company is not the surviving entity, or, if it is the surviving entity, does not
survive as an operating going concern in substantially the same line of
business, then all options granted under the Plan shall, immediately prior to
the consummation of any of the foregoing events, become fully vested and
immediately exercisable by the optionee.
18. TERMINATION AND AMENDMENT OF PLAN. The Board may at any time terminate
the Plan or make such modification or amendment thereof as it deems advisable;
provided, however, that the Board may not, without approval by the affirmative
vote of the holders of a majority of the shares present in person or by proxy
and entitled to vote at a meeting of stockholders, (a) increase the maximum
number of shares for which options may be granted under the Plan or the number
of shares for which an option may be granted to any participating Director
hereunder; (b) change the provisions of the Plan regarding the termination of
the options or the time when they may be exercised; (c) change the period during
which any options may be granted or remain outstanding or the date on which the
Plan shall terminate; (d) change the designation of the class of persons
eligible to receive options, or otherwise change Section 7 hereof; or (e)
materially increase benefits accruing to option holders under the Plan. In no
event, however, may any provision of the Plan specified in Rule
16b-3(c)(2)(ii)(A) (or any successor or amended provision thereof) of the
Securities Exchange Act of 1934 (including without limitation, provisions as to
eligibility and who may participate in the Plan, the amount and price of shares
for which options may be granted or the timing of awards,) be amended more than
once every six months, other than to comport with changes in the Internal
Revenue Code, the Employee Retirement Income Security Act, or the rules
thereunder. Except as provided in Section 16, termination or any modification or
amendment of the Plan shall not, without consent of a participant, affect his
rights under an option previously granted to him.
19. COMPLIANCE WITH REGULATIONS. It is the Company's intent that the Plan
comply in all respects with Rule 16b-3 under the Securities Exchange Act of 1934
(or any successor or amended version thereof) and any applicable Securities and
Exchange Commission interpretations thereof. If any provision of this Plan is
deemed not to be in compliance with Rule 16b-3, the provision shall be null and
void.
20. GOVERNING LAW. The validity and construction of this Plan and the
instruments evidencing options shall be governed by the laws of the State of
Delaware, without giving effect to the principles of conflicts of law thereof.
29
<PAGE>
- --------------------------------------------------------------------------------
PROGRAMMER'S PARADISE, INC.
1163 SHREWSBURY AVENUE, SHREWSBURY, NEW JERSEY 07702
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints ROGER PARADIS and JOHN P. BRODERICK with
the power to appoint their substitutes, and hereby authorizes them to represent
and to vote on behalf of the undersigned all the shares of common stock par
value $.01 per share (the "Common Stock"), of Programmer's Paradise, Inc., held
of record by the undersigned on April 29, 1998, at the Annual Meeting of
Stockholders to be held on June 16, 1998 at 9:00 A.M. local time at the Molly
Pitcher Hotel, Red Bank, New Jersey, or any adjournment or adjournments thereof,
hereby revoking all proxies heretofore given with respect to such shares, upon
the following proposals more fully described in the notice of and proxy
statement for the Meeting (receipt whereof is hereby acknowledged).
1. ELECTION OF DIRECTORS FOR all nominees listed WITHHOLD AUTHORITY to vote
below [ ] 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)
- --------------------------------------------------------------------------------
ROGER PARADIS, F. DUFFIELD MEYERCORD, EDWIN H. MORGENS, WILLIAM WILLETT and
ALLAN WEINGARTEN
2. PROPOSAL TO APPROVE the amendment to the Company's 1995 Stock Plan to reserve
an additional 675,000 shares of Common Stock for issuance thereunder. - For -
Against - Abstain
3. PROPOSAL TO APPROVE the amendment to the Company's 1995 Non-Employee Director
Plan to reserve an additional 75,000 shares of Common Stock for issuance
thereunder. - For - Against - Abstain
4. PROPOSAL TO RATIFY AND APPROVE the appointment of Ernst & Young LLP as the
Company's independent accountants for the fiscal year ending December 31,
1998. - For - Against - Abstain
5. In their discretion the Proxies are authorized to vote upon such other
business as may properly be brought before the Meeting.
(continued, and to be executed, on the reverse side)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THIS PROXY WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2, 3,AND 4.
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:___________________, 1998
------------------------------
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
- --------------------------------------------------------------------------------
