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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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Form 10-K/A
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(Mark One)
[X] AMENDMENT NO. 1 TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 MISSION
For the transition period from to
Commission File Number 0-23827
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PC CONNECTION, INC.
(Exact name of registrant as specified in its charter)
Delaware 02-0513618
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Rt. 101A, 730 Milford Road 03054
Merrimack, New Hampshire (Zip Code)
(Address of principal executive offices)
(603) 423-2000
Registrant's telephone number, including area code
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01
par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting and non-voting stock held by
non-affiliates of the Registrant, based upon the closing price of the
Registrant's Common Stock as reported on the NASDAQ National Market on March
20, 2002, was $79,122,304. Although directors and executive officers of the
registrant were assumed to be "affiliates" of the registrant for the purposes
of this calculation, this classification is not to be interpreted as an
admission of such status.
The number of outstanding shares of the Registrant's Common Stock on March
20, 2002 was 24,555,145.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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This Amendment No. 1 on Form 10-K/A amends and restates in its entirety
Items 10, 11, 12 and 13 of the Annual Report on Form 10-K for the fiscal year
ended December 31, 2001 (the "Annual Report") filed by PC Connection, Inc. (the
"Company") with the Securities and Exchange Commission on April 1, 2002.
In the Annual Report, the information required by Items 10, 11, 12 and 13
was incorporated by reference from the Proxy Statement relating to the
Company's 2002 Annual Meeting (the "Annual Meeting") of Stockholders (the
"Proxy Statement"), which Proxy Statement was to be filed within thirty (30)
days following the date of the filing of the Annual Report. However, due to the
date change of the Annual Meeting to June 18, 2002, the record date for the
Annual Meeting is a date more than thirty (30) days following the date of the
filing of the Annual Report. Accordingly, the Company's definitive Proxy
Statement will not be filed within thirty (30) days following the date of the
filing of the Annual Report; therefore the Company can no longer incorporate
Items 10, 11, 12 and 13 by reference by filing the Proxy Statement. The Company
is filing this Amendment No. 1 on Form 10-K/A to incorporate the required
information into the Company's Annual Report.
THIS AMENDMENT DOES NOT CHANGE ANY PREVIOUSLY REPORTED FINANCIAL RESULTS OF
OPERATIONS.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information under the caption "Executive Officers of PC Connection" in
Part 1 of this Annual Report on Form 10-K is incorporated by reference herein.
Directors
The Board of Directors is currently fixed at six members. The Company's
Bylaws provide that the directors of the Company will be elected at each annual
meeting of the Company's stockholders to serve until the next annual meeting of
stockholders or until their successors are duly elected and qualified. Mr.
Murrer will not stand for re-election at the 2002 Annual Meeting of
Stockholders. Mr. Barone shall be nominated for election at the 2002 Annual
Meeting of Stockholders.
Set forth below are the name, age and length of service as a director for
each member of the Board of Directors and the positions and offices held by him
or her, his or her principal occupation and business experience during the past
five years and the names of other publicly-held companies of which he or she
serves as a director.
Patricia Gallup, age 48, has served on the Company's Board of Directors
since September 1983. Ms. Gallup is a co-founder of the Company and has served
as Chairman since June 2001. From January 1998 to June 2001, Ms. Gallup served
as Chairman and Chief Executive Officer of the Company. From September 1995 to
January 1998, she served as the Chairman, President and Chief Executive Officer
of the Company. From September 1994 to September 1995, she served as Chairman
and Chief Executive Officer of the Company. From August 1990 to September 1994,
Ms. Gallup served as the Company's President and Chief Executive Officer.
David Hall, age 53, has served on the Company's Board of Directors since
September 1983. Mr. Hall is a co-founder of the Company and has served as Vice
Chairman of the Board since November 1997. From June 1997 to November 1997, he
served as the Vice Chairman of the Board, Executive Vice President and
Treasurer of the Company. From February 1995 to June 1997, Mr. Hall served as
the Company's Vice Chairman of the Board and Executive Vice President. From
March 1991 to February 1995, he served as the Executive Vice President of the
Company.
David B. Beffa-Negrini, age 48, has served on the Company's Board of
Directors since September 1994 and as the Vice President of Corporate
Communications since June 2000. From January 1998 to June 2000,
Mr. Beffa-Negrini served as the Vice President of Media Development, and from
January 1992 to January 1998, he served as the Company's Director of
Merchandising.
1
Bruce M. Barone, age 53, is being nominated for election. Mr. Barone has
worked as an independent consultant since December 1998. From December 1995 to
December 1998, he was President and Chief Executive Officer of Overseas
Partners Ltd. and Subsidiaries. He also served on the Board of Directors. From
September 1977 through December 1995, Mr. Barone was employed by United Parcel
Service (UPS) in a variety of positions, including Vice President Finance and
Vice President Financial Planning. He also served as a member of both the UPS
Finance and UPS Marketing committees.
Peter J. Baxter, age 50, has served on the Company's Board of Directors
since September 1997. Mr. Baxter was the Vice-Chairman and Chief Operating
Officer of People's Heritage Financial Group, a bank holding company, from
April 1998 to March 1999. Mr. Baxter also served as President, Chief Executive
Officer and a director of CFX Corporation, a bank holding company, from January
1989 to April 1998.
Joseph Baute, age 74, has served on the Company's Board of Directors since
June 2001. From 1979 to 1993, Mr. Baute served as Chairman and Chief Executive
Officer of Markem Corporation. Mr. Baute has served on a number of Boards
including Houghton-Mifflin Company and the Federal Reserve Bank of Boston,
where he was Chairman, and is currently on the Board of State Street Bank
Europe.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and holders of more than 10% of the Company's Common Stock
to file with the SEC initial reports of ownership and reports of changes in
beneficial ownership of Common Stock of the Company. Based solely on its review
of copies of reports filed by individuals required to make filings ("Reporting
Persons") pursuant to Section 16(a) of the Exchange Act or written
representations from certain Reporting Persons, the Company believes that all
such reports required to be filed under Section 16(a) of the Exchange Act for
the 2001 fiscal year were timely filed. In 2000, Ms. Gallup and Mr. Hall and
the Voting Trust were required to file a Form 4 -- Changes in Beneficial
Ownership and a Form 5 -- Annual Statement of Changes in Beneficial Ownership
to report a withdrawal of shares from the Voting Trust. The shares withdrawn
from the Voting Trust are held by Ms. Gallup and Mr. Hall individually. The
withdrawal from the Voting Trust did not result in any change to either Ms.
Gallup's or Mr. Hall's respective pecuniary interests. These reports were not
timely filed.
Item 11. Executive Compensation
Compensation of Directors
Messrs. Beffa-Negrini, Murrer, Baxter, and Baute each receive a $15,000
annual retainer and fees of $1,000 for each Board meeting attended and $500 for
each Board committee meeting attended on a day other than the day of the Board
meeting, as well as reimbursement for all reasonable expenses incurred in
attending Board and committee meetings. Mr. Barone is being nominated for
election as a director at the Company's 2002 Annual Meeting of Stockholders and
therefore did not receive any compensation, whether in cash or otherwise, in
2001.
Mr. Hall received $1,000 for each Board meeting he attended since August
2001.
Messrs. Beffa-Negrini, Murrer, Baxter, and Baute are also eligible to
participate in the Company's 1997 Stock Incentive Plan. Mr. Barone will also be
eligible to participate in the Company's 1997 Stock Incentive Plan.
The following table describes the cash payments and options granted under
the Company's 1997 Stock Incentive Plan to Directors during 2001.
Cash Payment for Shares Underlying Option
Director Board and Committees Grants under 1997 Plan
-------- -------------------- ------------------------
David Beffa-Negrini $24,000 2,500
Martin C. Murrer... $24,000 --
Peter J. Baxter.... $24,000 --
Joseph Baute....... $12,750 2,000
David Hall......... $ 3,000 --
2
Compensation of Executive Officers
The following table sets forth certain compensation information for the
years ended December 31, 2001, 2000 and 1999 for all persons who served as
Chief Executive Officer of the Company during 2001 and the four other most
highly compensated executive officers of the Company who were serving as
executive officers on December 31, 2001 and one other executive officer of the
Company who ceased serving as an executive officer during 2001 (collectively,
the "Named Executive Officers"), as required under applicable rules of the SEC.
Summary Compensation Table
Long-Term
Annual Compensation Awards Compensation
------------------------------- ------------
Other Annual Securities
Name and Principal Bonus Compensation Underlying All Other
Position Compensation Year Salary ($) ($)/(1)/ ($)/(2)/ Options (#) ($)
- --------------------- ---- ---------- ------- ------------ ------------ ---------
Patricia Gallup....................... 2001 $400,000 -- -- -- $1,194/(5)/
Chairman/(3)/ 2000 400,000 -- -- -- 3,435/(6)/
1999 300,000 -- -- -- 3,688/(7)/
Kenneth Koppel........................ 2001 220,673 -- -- 400,000 1,786/(5)/
Chief Executive Officer/(4)/ 2000 -- -- -- -- -- /(6)/
1999 -- -- -- -- -- /(7)/
Wayne L. Wilson....................... 2001 400,000 -- -- 20,000 1,831/(5)/
President and Chief Operating 2000 400,000 275,000 -- 55,000 1,242/(6)/
Officer 1999 375,000 370,000 -- 90,645 1,917/(7)/
Robert F. Wilkins..................... 2001 375,000 -- -- 20,000 640/(5)/
Executive Vice President 2000 375,000 250,000 -- 55,000 3,111/(6)/
1999 325,000 333,000 -- 60,000 2,172/(7)/
Mark A. Gavin......................... 2001 210,000 -- -- 15,000 2,943/(5)/
Senior Vice President of Finance 2000 210,000 100,000 -- 30,000 2,218/(6)/
and Chief Financial Officer 1999 180,000 86,000 -- 45,000 2,611/(7)/
John L. Bomba, Jr./(8)/............... 2001 108,750 -- -- 7,500 2,172/(5)/
Former Vice President of Information 2000 195,000 50,000 -- 18,750 3,388/(6)/
Systems and Chief Information Officer 1999 180,000 86,000 -- 11,250 3,424/(7)/
Bradley G. Mousseau................... 2001 140,000 -- -- 7,500 3,061/(5)/
Vice President of Human Resources 2000 132,441 45,000 -- 33,750 1,273/(6)/
1999 -- -- -- -- --
- --------
/(1)/ Bonuses indicated as earned in any fiscal year were generally paid during
the year or in the first quarter of the following fiscal year.
/(2)/ In accordance with the rules of the SEC, perquisites and other personal
benefits have been omitted in those instances where the aggregate amount
of such perquisites and other personal benefits constituted less than the
lesser of $50,000 or 10% of the total amount of annual salary and bonus
for the executive officer for the fiscal year indicated.
/(3)/ Ms. Gallup also served as Chief Executive Officer until June 26, 2001.
/(4)/ Mr. Koppel was appointed Chief Executive Officer effective June 26, 2001.
/(5)/ Consists of: (a) the Company's contributions for Messrs. Gavin, Bomba and
Mousseau under the Company's 401(k) Plan in the amount of $2,550, $1,631
and $2,475, respectively; and (b) the taxable portion of group term life
insurance premiums paid by the Company for Ms. Gallup, Messrs. Koppel,
Wilson, Wilkins, Gavin, Bomba and Mousseau in the amounts of $1,194,
$1,786, $1,831, $640, $393, $541 and $586, respectively.
/(6)/ Consists of: (a) the Company's contributions for Ms. Gallup, Messrs.
Wilkins, Gavin, Bomba and Mousseau under the Company's 401(k) Plan in the
amount of $2,625, $2,625, $1,768, $2,625, and $752, respectively, and (b)
the taxable portion of group term life insurance premiums paid by the
Company for Ms. Gallup, Messrs. Wilson, Wilkins, Gavin, Bomba and
Mousseau in the amounts of $810, $1,242, $486, $450, $763 and $521,
respectively.
/(7)/ Consists of: (a) the Company's contributions for Ms. Gallup, Messrs.
Wilkins, Gavin and Bomba under the Company's 401(k) Plan in the amount of
$2,500, $1,632, $2,275 and $2,500, respectively, and (b) the taxable
portion of group term life insurance premiums paid by the Company for Ms.
Gallup, Messrs. Wilson, Wilkins, Gavin and Bomba in the amounts of
$1,188, $1,917, $540, $336 and $924, respectively.
/(8)/ Mr. Bomba resigned in July 2001.
3
Employment and Severance Agreements
The Company is a party to employment agreements with certain of the Named
Executive Officers. Each employment agreement contains provisions for
establishing the annual base salary and bonus for each such executive officer.
Pursuant to the terms of the employment agreements, the 2002 annual base salary
for each of Ms. Gallup, and Messrs. Koppel, Wilson and Wilkins has been
established at $400,000, $425,000, $400,000, and $375,000, respectively. In
addition, the Named Executive Officers are eligible to receive an annual bonus
based upon the achievement of individual and Company goals. The employment
agreements may be terminated by the Named Executive Officer or by the Company.
Under the terms of Messrs. Koppel's, Wilson's and Wilkins' employment
agreements, if the Company terminates such executive's employment without cause
(as defined therein), the Company is required to pay to such executive
severance payments at the executive's then applicable base salary rate for a
period of twelve months. Mr. Koppel's employment agreement includes certain
non-compete obligations which extend for three years after termination of
employment. Messrs. Wilson's and Wilkins' employment agreements include certain
non-compete obligations which extend for two years after termination of
employment.
The Company has entered into letter agreements with Messrs. Gavin and
Mousseau providing for severance payments for six months of their respective
annual base salary if the Company terminates their employment for any reason
other than for cause or for a change in control. In the event of termination
resulting from a change in control of the Company, such severance payments
would extend for a total of twelve months. Each of Mr. Gavin's and Mr.
Mousseau's letter agreement includes certain non-compete obligations which
extend for eighteen months after termination of employment.
Mr. Bomba resigned his position with the Company in July 2001. As part of
Mr. Bomba's separation arrangement, the Company agreed to continue his base
salary and benefits for a period of twelve months following his resignation.
Mr. Bomba is also subject to certain non-compete obligations which extend for
eighteen months following the termination of his employment.
Option Grant Table. The following table sets forth certain information
regarding stock options granted during the year ended December 31, 2001 by the
Company to the Named Executive Officers:
Option Grants in Last Fiscal Year
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term /(1)/
-------------------------------------------------- -----------------------------
Number of Percent of
Securities Total Options
Underlying Granted to Exercise
Options Employees in or
Granted Fiscal Year Base Price Expiration
Name (#) (%)/(2)/ ( $/Sh)/(3)/ Date 5%($) 10%($)
- ---- ---------- ------------- ----------- ---------- ---------- ----------
Patricia Gallup.... -- -- -- -- -- --
Kenneth Koppel..... 400,000/(4)/ 51.5% $14.35 06/25/11 $3,609,855 $9,148,082
Wayne L. Wilson.... 20,000/(5)/ 2.6 10.81 03/16/11 136,005 344,663
Robert F. Wilkins.. 20,000/(5)/ 2.6 10.81 03/16/11 136,005 344,663
Mark A. Gavin...... 15,000/(5)/ 1.9 10.81 03/16/11 102,004 258,497
Bradley G. Mousseau 7,500/(5)/ 1.0 10.81 03/16/11 51,002 129,249
John L. Bomba, Jr.. 7,500/(6)/ 1.0 10.81 03/16/11 51,002 129,249
- --------
/(1)/ Potential realizable value is based on an assumption that the market
price of the stock will appreciate at the stated rate, compounded
annually, from the date of grant until the end of the option term. These
values are calculated based on rules promulgated by the SEC and do not
reflect the Company's estimate or projection
4
of future stock prices. Actual gains, if any, on stock option exercises will
depend on the future performance of the Common Stock on the date on which
the stock options are exercised.
/(2)/ Calculated based on an aggregate of 776,367 options granted under the
1997 Stock Incentive Plan to employees during the fiscal year ended
December 31, 2001.
/(3)/ The exercise price is equal to the closing price of the Company's Common
Stock as reported by the Nasdaq National Market on the date of grant.
/(4)/ Mr. Koppel's options become exercisable in four equal amount installments
beginning in June 2002.
/(5)/ Messrs. Wilson's, Wilkins', Gavin's and Mousseau's options become
exercisable in four equal annual installments beginning in January 2002.
/(6)/ Mr. Bomba's options were cancelled on October 20, 2001.
Option Exercises and Year-End Values. The following table sets forth
certain information regarding the aggregate shares of Common Stock acquired
upon stock option exercises by the Named Executive Officers and the value
realized upon such exercises during the year ended December 31, 2001, as well
as the number and value of unexercised stock options held by the Named
Executive Officers as of December 31, 2001:
Aggregate Option Exercises in Last Fiscal Year and
Year-End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options at
Options at Year-End (#) Year End ($)/(1)/
---------------------------- -------------------------
Shares Acquired Value
Name on Exercise (#) Realized ($)/(2)/ Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- ---------------- ----------- ------------- ----------- -------------
Patricia Gallup.... -- -- -- -- -- --
Kenneth Koppel..... -- -- 24,000/(3)/ 400,000 $ 75,919 $192,000
Wayne L. Wilson.... 100,000 $274,897 434,935 136,413 1,655,950 400,600
Robert F. Wilkins.. 22,149 58,015 313,569 128,751 1,030,917 376,366
Mark A. Gavin...... -- -- 26,249 75,002 69,621 192,010
Bradley G. Mousseau -- -- 8,438 32,812 0 30,127
John L. Bomba, Jr.. 5,626 6,672 0 0 0 0
- --------
/(1)/ Represents the difference between the last reported sales price of the
Company's Common Stock as reported by the Nasdaq National Market on
December 31, 2001 ($14.83), the last trading day of 2001, and the
exercise price of the option, multiplied by the number of shares subject
to the option.
/(2)/ Value is calculated based on the difference between the option exercise
price and the closing market price of the Company's Common Stock on the
Nasdaq National Market on the date of exercise, multiplied by the number
of shares exercised.
/(3)/ Mr. Koppel was a consultant for the Company prior to becoming Chief
Executive Officer of the Company and received option grants for his
service as a consultant.
5
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information, as of March 20, 2002, regarding
the beneficial ownership of the Company's Common Stock by: (i) persons known by
the Company to own more than 5% of the outstanding shares of Common Stock; (ii)
each of the directors of the Company; (iii) each of the executive officers of
the Company named in the Summary Compensation Table under the heading
"Executive Compensation" below; and (iv) all directors and executive officers
of the Company as a group.
Shares of
Common Stock Common Stock
Name and Address Beneficially Owned/(1)/ Outstanding/(2)/
- ---------------- ---------------------- ---------------
Patricia Gallup................................................. 8,714,094/(3)/ 35.5%
David Hall...................................................... 8,669,094/(4)/ 35.3%
Wayne L. Wilson................................................. 556,596/(5)/ 2.2%
Robert F. Wilkins............................................... 358,518/(6)/ 1.4%
David Beffa-Negrini............................................. 299,617/(7)/ 1.2%
Mark A. Gavin................................................... 154,863/(8)/ *
Martin C. Murrer................................................ 74,000/(9)/ *
Peter J. Baxter................................................. 25,000/(10)/ *
Kenneth Koppel.................................................. 24,000/(11)/ *
Bradley G. Mousseau............................................. 18,213/(12)/ *
Joseph Baute.................................................... 3,500 *
John L. Bomba, Jr............................................... -- --
All directors and executive officers as a group (11 individuals) 18,897,495/(13)/ 73.2%
- --------
* Less than 1% of the total number of outstanding shares of Common Stock of
the Company on March 20, 2002.
/(1)/ The number of shares beneficially owned by each director or executive
officer is determined under rules promulgated by the SEC, and the
information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, beneficial ownership includes any shares
as to which the individual has the sole or shared voting power or
investment power and also any shares which the individual has the right
to acquire within 60 days of March 20, 2002 through the exercise of any
stock option or other right. Unless otherwise indicated, each person has
sole investment and voting power (or shares such power with his or her
spouse) with respect to the shares set forth in the following table. The
inclusion herein of any shares deemed beneficially owned does not
constitute an admission of beneficial ownership of such shares.
/(2)/ The number of shares of Common Stock deemed outstanding for purposes of
determining such percentages include 24,555,145 shares outstanding as of
March 20, 2002 and any shares subject to issuance upon exercise of
options or other rights held by the person in question that were
exercisable on or within 60 days after March 20, 2002.
/(3)/ Includes 8,169,094 shares of Common Stock held of record by the 1998 PC
Connection Voting Trust and 15,000 shares held by Ms. Gallup's spouse, as
to which Ms. Gallup disclaims beneficial ownership.
/(4)/ Includes 8,169,094 shares of Common Stock held of record by the 1998 PC
Connection Voting Trust.
/(5)/ Includes 455,096 shares of Common Stock issuable upon exercise of
outstanding stock options which Mr. Wilson has the right to acquire
within 60 days after March 20, 2002.
/(6)/ Includes 326,069 shares of Common Stock issuable upon exercise of
outstanding stock options which Mr. Wilkins has the right to acquire
within 60 days after March 20, 2002 and 300 shares held of record by Mr.
Wilkins' children, as to which Mr. Wilkins disclaims beneficial ownership.
/(7)/ Includes 285,837 shares of Common Stock issuable upon exercise of
outstanding stock options which Mr. Beffa-Negrini has the right to
acquire within 60 days after March 20, 2002.
/(8)/ Includes 48,750 shares of Common Stock issuable upon exercise of
outstanding stock options which Mr. Gavin has the right to acquire within
60 days after March 20, 2002.
/(9)/ Consists of 74,000 shares of Common Stock issuable upon exercise of
outstanding stock options which Mr. Murrer has the right to acquire
within 60 days after March 20, 2002.
6
/(10) /Consists of 15,000 shares of Common Stock issuable upon exercise of
outstanding stock options which Mr. Baxter has the right to acquire
within 60 days after March 20, 2002, and 10,000 shares jointly owned by
Mr. Baxter and his spouse.
/(11)/ Consists of 24,000 shares of Common Stock issuable upon exercise of
outstanding stock options which Mr. Koppel has the right to acquire
within 60 days after March 20, 2002.
/(12)/ Includes 17,813 shares of Common Stock issuable upon exercise of
outstanding stock options which Mr. Mousseau has the right to acquire
within 60 days after March 20, 2002.
/(13)/ Includes an aggregate of 1,246,565 shares of Common Stock issuable to
the directors and executive officers upon exercise of outstanding stock
options which they have the right to acquire within 60 days after March
20, 2002.
Item 13. Certain Relationships and Related Transactions
The Company currently has leases for a facility in Marlow, New Hampshire and
two facilities in Keene, New Hampshire with Gallup & Hall ("G&H"), a
partnership owned solely by Patricia Gallup and David Hall, the Company's
principal stockholders. The leases for the Keene, New Hampshire facilities
expire in April 2002 and July 2008 and require annual rental payments of
$172,500 (subject to annual adjustment for changes in the consumer price
index). The lease for the Marlow, New Hampshire facility expires in May 2007
and requires annual rental payments of $6,000. These leases also obligate the
Company to pay certain real estate taxes and insurance premiums on the
premises. Rent expense under all such leases aggregated $178,500 for the year
ended December 31, 2001.
In November 1997, the Company entered into a fifteen-year lease for a new
114,000 square foot corporate headquarters in Merrimack, New Hampshire with G&H
Post, L.L.C., an entity owned solely by Patricia Gallup and David Hall. The
Company began occupying the new facility upon completion of construction in
late November 1998, and lease payments began in December 1998. Annual lease
payments under the terms of the lease are $911,400 for the first five years of
the lease, increasing to $1,025,350 for years six through ten and to $1,139,400
for years 11 through 15. The lease requires the Company to pay its
proportionate share of real estate taxes and common area maintenance charges as
additional rent and also to pay insurance premiums for the leased property. The
Company has the option to renew the lease for two additional terms of five
years.
During 2001 the Company provided various facilities management, maintenance,
financial, tax and legal services to certain affiliates in connection with the
operation of facilities leased by the Company from those affiliates. The
Company was reimbursed $73,932 by G&H Post, L.L.C. and $73,932 by G&H during
2001 for those services.
Voting Trust
In connection with the Company's initial public offering in March 1998,
Patricia Gallup and David Hall placed substantially all of the shares of Common
Stock that they beneficially owned immediately prior to the public offering
into a Voting Trust (the "Voting Trust") of which they serve as co-trustees.
The terms of the Voting Trust require that both Ms. Gallup and Mr. Hall, as
co-trustees, must agree as to the manner of voting the shares of Common Stock
of the Company held by the Voting Trust in order for the shares to be voted. In
the event the co-trustees are deadlocked with respect to the election of
directors at a meeting of stockholders, the Board of Directors may require the
co-trustees to execute and deliver to the Secretary of the Company a proxy
representing all shares issued and outstanding in the name of the Voting Trust
and entitled to vote in the election of directors. Such proxy shall confer upon
the proxyholder authority to attend the meeting for purposes of establishing a
quorum and to vote for the directors nominated by the Board of Directors,
provided that such nominees are incumbent directors elected with the consent of
the co-trustees. Each of Ms. Gallup and Mr. Hall may transfer shares of Common
Stock for value to unaffiliated third parties. Any shares so transferred will no
7
longer be subject to the Voting Trust and an equal number of the
non-transferring co-trustee's shares will be released from the Voting Trust.
Transfers by either of Ms. Gallup or Mr. Hall in excess of 75,000 shares in any
90-day period, or that would decrease the shares held by the Voting Trust to
less than a majority of the outstanding shares, will be subject to a right of
first refusal to the other. The Voting Trust will terminate when it holds less
than 10% of the outstanding shares of Common Stock of the Company or at the
death of both co-trustees. In addition, in the event of the death or incapacity
of either co-trustee, or when either of Ms. Gallup or Mr. Hall holds less than
25% of the beneficial interest held by the other in the Voting Trust, the other
will become the sole trustee of the Voting Trust with the right to vote all the
shares held by the Voting Trust.
8
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Amendment No. 1 to be
signed on its behalf by the undersigned, thereunto duly authorized.
PC CONNECTION, INC.
Date: April 30, 2002
/s/ MARK A. GAVIN
By: _______________________________
Mark A. Gavin,
Senior Vice President and
Chief Financial Officer
9