**UNITEDSTATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C.20549**

 

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** **

**Form 10-K/A**

**AmendmentNo. 2**

 

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| **x**                                                                                                                                                          | **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)  OF  THE SECURITIES EXCHANGE ACT OF 1934**    |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------|
| ** **                                                                                                                                                     | ** **                                                                                              |
| ** **                                                                                                                                                     | **For  the fiscal year ended December 31, 2007**                                                   |
| ** **                                                                                                                                                     | ** **                                                                                              |
| **o**                                                                                                                                                          | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
| ** **                                                                                                                                                     | ** **                                                                                              |
| **For  the transition period  from          to          ** |

 

**CommissionFile Number: 0-25790**

 

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**PC MALL, INC.**

(Exact name of Registrant as specified in itscharter)

 

| **Delaware**                    | ** ** | **95-4518700**         |
|---------------------------------|------------|------------------------|
| (State or other jurisdiction of | ** ** | (IRS Employer          |
| incorporation or organization)  | ** ** | Identification Number) |

 

**2555 West190th Street, Suite 201, Torrance, CA 90504**

(Addressof principal executive offices, including zip code)

 

**(310) 354-5600**

(Registrant’stelephone number, including area code)

 

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Securitiesregistered pursuant to Section 12(b) of the Act:

 

| **Title  of Each Class**                           | ** ** | **Name of  Exchange on Which Registered** |
|----------------------------------------------------|------------|-------------------------------------------|
| **Common Stock, $0.001 par  value per share** | ** ** | **The NASDAQ Stock Market LLC**           |

 

Securitiesregistered pursuant to Section 12(g) of the Act:

**None**

 

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Indicate bycheck mark if the registrant is a well-known seasoned issuer, as defined in Rule 405of the Securities Act.   Yes  o    No  x

 

Indicate bycheck mark if the registrant is not required to file reports pursuant to Section 13or Section 15(d) of the Act.   Yes  o   No  x

 

Indicate bycheck mark whether the registrant: (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.    Yes   x    No  o

 

Indicate bycheck mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, and will not be contained, to the bestof registrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K. x

 

Indicate bycheck mark whether the registrant is a large accelerated filer, an acceleratedfiler, a non-accelerated filer, or a smaller reporting company. See thedefinitions of “large accelerated filer,” “accelerated filer” and “smaller reportingcompany” in Rule 12b-2 of the Exchange Act. (Check one):

 

|   | Large accelerated filer  o |   | Accelerated  filer         |   x |
|--------|--------------------------------------|--------|----------------------------|---------------|
|   |                                 |   |                       |          |
|   | Non-accelerated filer  o   |   | Smaller  reporting company |   o |

 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2of the Act).  Yes   ̈  No  x

 

As of June 30, 2007, the aggregate market value of the CommonStock held by non-affiliates of the registrant was approximately $127.2million, based upon the closing sales price of the registrant’s Common Stock onsuch date, as reported on the Nasdaq Global Market. Shares of Common Stock heldby each executive officer, director and each person owning more than 10% of the outstanding Common Stock of the registranthave been excluded in that such persons may be deemed to be affiliates of theregistrant. This determination of affiliate status is not necessarily aconclusive determination for other purposes.

 

As of April 23,2008, the registrant had 13,274,087 shares of common stock outstanding.

 

 

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**EXPLANATORY NOTE**

 

This Amendment No. 2 onForm 10-K/A (the “Amendment”) amends the Annual Report on Form 10-K of PC Mall,Inc. for the fiscal year ended December 31, 2007, originally filed with theSecurities and Exchange Commission (“SEC”) on March 17, 2008 (the “OriginalFiling”), as amended by Amendment No. 1 to the Original Filing (“Amendment No.1”) filed with the SEC on April 29, 2008. We are filing this Amendment tocorrect typographical errors in the “Summary Compensation Table” and the tableunder the section entitled “Potential Payments Upon Termination or Change inControl” included in Item 11 of Part III, and to make certain formattingchanges. 

 

Except as describedabove, no other changes have been made to the Original Filing as amended byAmendment No. 1.

 

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** **

**PCMALL, INC.**

** **

**TABLE OFCONTENTS**

 
| ** **        | ** **                                                                                       | **Page**   |
|-------------------|--------------------------------------------------------------------------------------------------|------------|
| **PART III** | ** **                                                                                       | ** ** |
| Item 10.     | Directors, Executive  Officers and Corporate Governance                                          | 2          |
| Item 11.     | Executive Compensation                                                                           | 3          |
| Item 12.     | Security  Ownership of Certain Beneficial Owners and Management and Related Stockholder  Matters | 18         |
| Item 13.     | Certain  Relationships and Related Transactions, and Director Independence                       | 20         |
| Item 14.     | Principal  Accounting Fees and Services                                                          | 21         |
| **PART IV**  | ** **                                                                                       | ** ** |
| Item 15.     | Exhibits  and Financial Statement Schedules                                                      | 23         |
| Signatures        |                                                                                             | 27         |

** **

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**PC MALL, INC.**

** **

**PART III**

 

**ITEM 10.  DIRECTORS,EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE**

 

**InformationRegarding Our Board of Directors**

 

Set forth below iscertain information, as of April 29, 2008, regarding the members of PCMall, Inc.’s (“PC Mall,” “we” or “us”) board of directors. Each of ourdirectors holds office until our next annual meeting of stockholders, or untilhis successor is elected and qualified.

 
| **Name**               | ** ** | **Age** | ** ** | **Position**                                                  | ** ** | **Director  Since** |
|------------------------|------------|---------|------------|---------------------------------------------------------------|------------|---------------------|
| Frank F. Khulusi       |       | 41      |       | Chairman of the Board,  President and Chief Executive Officer |       | 1987                |
| Thomas A. Maloof(2)    |       | 56      |       | Director                                                      |       | 1998                |
| Ronald B. Reck(1)(2)   |       | 59      |       | Director                                                      |       | 1999                |
| Paul C. Heeschen(1)(2) |       | 51      |       | Director                                                      |       | 2006                |

 

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(1)      Memberof our compensation committee.

(2)      Memberof our audit committee.

 

*FrankF. Khulusi*is one of our co-founders and has served as ourChairman of the Board and Chief Executive Officer since our inception in 1987,served as President until July 1999, and resumed the office of Presidentin March 2001. Mr. Khulusi attended the University of SouthernCalifornia.

 

*ThomasA. Maloof*has served as one of our directors since May 1998.He served as Chief Financial Officer of Hospitality Marketing Concepts from January 2001to August 2005, and has been an independent consultant since August 2005.Mr. Maloof served as President of Perinatal Practice Management, Inc. fromFebruary 1998 to November 2000. From August 2004 through April 11,2005, Mr. Maloof served on the board of directors of our formersubsidiary, eCOST.com, Inc. Mr. Maloof also serves as a director forFarmer Brothers Coffee (Nasdaq: FARM) and The Ensign Group (Nasdaq: ENSG).

 

*RonaldB. Reck*has served as one of our directors since April 1999.Mr. Reck was employed by Applebee’s International from 1987 to 1997,serving most recently as Executive Vice President and Chief AdministrativeOfficer. Since 1998, Mr. Reck has served as President and Chief ExecutiveOfficer of Joron Properties, LLC, a real estate company.

 

*PaulC. Heeschen*has served as one of our directors since February 2006.Mr. Heeschen has served as a member of the board of directors of DiedrichCoffee, Inc. since January 1996, and was elected to serve as itschairman in February 2001. For the past 13 years, Mr. Heeschenhas been a principal of Heeschen & Associates, a private investmentfirm.

 

**ExecutiveOfficers**

 

A list of ourexecutive officers is included in Part I, Item 4A of our originalfiling of this Form 10-K under the caption “Executive Officers of theRegistrant.”

 

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On March 17, 2008, the Company’s Board of Directors appointedJoseph B. Hayek as Executive Vice President, Corporate Development and InvestorRelations. From August 2000 to March 2008,  Mr. Hayek worked in corporate finance atRaymond James & Associates, an investment banking firm, where he mostrecently was a Senior Vice President and headed the firm’s Supply ChainTechnologies Practice. Before joining Raymond James, Mr. Hayek was aninvestment banker in the technology group at Wachovia Securities. Mr. Hayekreceived a B.S. degree in Business from Miami University (Ohio) and received anMBA from Duke University.

 

**CorporateGovernance**

 

**Identificationof Our Audit Committee**

 

We have aseparately designated standing audit committee established in accordance withthe Securities Exchange Act of 1934. The members of our audit committee areThomas A. Maloof (Chair), Paul C. Heeschen and Ronald B. Reck. Our board ofdirectors has determined that each of the members of our audit committee is “independent”as that term is defined in Rule 10A-3(b)(1) promulgated under theExchange Act and is an “independent director” as defined in Rule 4200(a)(15)of the Nasdaq listing standards. Our board of directors has determined thateach of Mr. Maloof and Mr. Heeschen is an “audit committee financialexpert” as that term is defined by regulations of the Securities and ExchangeCommission and that each of them has accounting and related financialmanagement expertise within the meaning of the applicable rules of Nasdaq.

 

**Code ofBusiness Conduct and Ethics**

 

We have adopted aCode of Business Conduct and Ethics that applies to each of our directors,officers and employees, including our principal executive officer, principalfinancial officer, principal accounting officer or controller, or personsperforming similar functions. Our Code of Business Conduct and Ethics,including any amendments to, or waivers from such code, is posted in the “InvestorRelations” section of our website at www.pcmall.com. We will provide a copy ofour Code of Business Conduct and Ethics to any person, without charge, uponreceipt of a written request directed to our Secretary at our principalexecutive offices.

 

**Section 16(a) BeneficialOwnership Reporting Compliance**

 

Section 16(a) ofthe Securities Exchange Act of 1934 requires our executive officers anddirectors, and persons who own more than ten percent of a registered class ofour equity securities, to file reports of ownership on Form 3 and changesin ownership on Forms 4 or 5 with the SEC. Those officers, directors andten percent stockholders are also required by the SEC’s rules to furnishus with copies of all Section 16(a) forms they file.

 

Based solely onour review of the copies of the forms we received, or representations fromcertain reporting persons that no Forms 5 were required for such persons,we believe that during the fiscal year ended December 31, 2007, all Section 16(a) filingrequirements applicable to our officers, directors and ten percent stockholderswere complied with.

 

**ITEM 11.  EXECUTIVECOMPENSATION**

 

**COMPENSATION DISCUSSION ANDANALYSIS**

 

**Executive Compensation Philosophy and Principles**

 

TheCompensation Committee of our Board of Directors establishes our executivecompensation philosophy and principles and oversees our executive compensationprograms. The following are the primary principles of our executivecompensation programs, which together constitute our executive compensationphilosophy:

 

·         linkexecutive compensation to the creation of stockholder value;

 

·         rewardcontributions of executive officers that enhance our specific businessgoals; and

 

·         attract,retain and motivate high quality individuals.

 

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Ourexecutive compensation programs have been designed and adopted by theCompensation Committee in an effort to implement the above principles. The keyelements of our executive compensation program include base salary, quarterlybonuses, stock incentive awards, health and welfare benefits, and otherperquisites. The discussion below describes each of the key elements of ourexecutive compensation for the fiscal year ended December 31, 2007.

 

**Executive Compensation Process**

 

Inestablishing compensation, our Compensation Committee, among other things:

 

·         reviewsthe performance of our executive officers and each of the components of theircompensation;

 

·         evaluatesthe effectiveness of our overall executive compensation program on a periodicbasis; and

 

·         administersour stock and bonus plans and, within the terms of the respective stock plan,determines the terms and conditions of the issuances under the plans.

 

Inaddition, our Compensation Committee annually reviews and approves ourcorporate goals and objectives relative to our Chief Executive Officer’scompensation, evaluates his compensation in light of such goals and objectives,and has the sole authority to set the Chief Executive Officer’s compensationbased on this evaluation. The Compensation Committee also reviews the ChiefExecutive Officer’s recommendations regarding the compensation of our otherexecutive officers and sets compensation for these individuals based in part onthe recommendations of the Chief Executive Officer.

 

In April 2007,the Compensation Committee engaged Towers Perrin, a nationally recognizedcompensation consulting firm, to advise the Committee on our executivecompensation programs and to conduct an independent competitive assessment ofour director and executive officer compensation in an effort to ensure thatsuch compensation levels and practices satisfy our compensation philosophiesand principles and are established in part based upon consideration ofobjective market compensation data. Towers Perrin provided the CompensationCommittee with an initial report on June 20, 2007, which was presented anddiscussed by the Committee at a regularly scheduled meeting of the Committee.Based in part on data provided to the Compensation Committee in this report,together with qualitative input from our Chief Executive Officer regardingretention and incentive objectives for each of our other executive officers,the Committee made certain increases to the base salaries of our executiveofficers other than our Chief Executive Officer, continued the executive bonusplans previously adopted for the 2007 fiscal year and made certain optiongrants to executive officers other than our Chief Executive Officer, whosecompensation the Committee continued to assess. A final report was issued byTowers Perrin and was reviewed and discussed by the Committee at a specialmeeting of the Compensation Committee, at which meeting the CompensationCommittee determined to continue the rate of our Chief Executive Officer’s basesalary and bonus plan and granted him additional options as long-term incentivecompensation as discussed in more detail below.

 

**Total Compensation of Executive Officers**

 

Ourexecutive compensation programs consist primarily of (i) base salary, (ii) short-term incentive compensation in the form of quarterly cash bonuses and (iii) long-termincentive compensation in the form of stock options. We also provide ourexecutive officers with other benefits, including certain perquisites andseverance and change of control agreements discussed in more detail below. Eachof these components of executive compensation has been provided to satisfy ourcompensation philosophy and principles after review of market executivecompensation data provided by a nationally recognized compensation consultingfirm and, for executives other than the Chief Executive Officer, based in parton qualitative input and recommendations made to the Compensation Committee byour Chief Executive Officer. In the 2007 fiscal year, each of our executive officersreceived cash compensation in the form of an annual base salary and quarterlycash bonuses, and each also received long-term incentive compensation in theform of stock option grants.

 

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Indetermining the compensation for our Chief Executive Officer, in addition tothe applicable factors set forth below, the Compensation Committee also tookinto consideration the record of his leadership and vision over the past20 years; his close identification with us by our employees and vendors,the financial community and the general public; and the recognition by theCompensation Committee and others in our industry of the importance of hisleadership to our continued success.

 

Pleaserefer to the tables under the section entitled “Executive and DirectorCompensation” below for a detailed presentation of the specific compensationearned by each of our named executive officers in the 2007 fiscal year.

 

Inassessing the competitiveness of our executive compensation, our CompensationCommittee reviewed reports from Towers Perrin, the independent compensationconsulting firm engaged by the Committee, which developed comparable marketcompensation data using both surveys and public proxy data reported for theyear ended December 31, 2006 by direct competitors as well as selectedretail and technology industry peers. The peer group included the followingdirect competitors, retail industry peers and technology industry peers:

 

*Direct Peers:* CDW Corporation, GSICommerce, Inc., GTSI Corp., Insight Enterprises, Inc., PC Connection, Inc.,Systemax, Inc. and Zones, Inc.

 

*Retail Peers:* Netflix, Inc. andOverstock.com, Inc.

 

*Technology Industry Peers:*Adaptec, Inc.,Foundry Networks, Inc., Gateway, Inc., Iomega Corp., NETGEAR, Inc.,Palm, Inc., Plantronics, Inc. and Polycom, Inc.

 

 We include our direct competitors and otheronline retail companies because we compete with them for business, as well astalent. We include leading national technology companies because they have alarge influence on industry compensation practices. The retail and technologypeer companies were included for the first time in the Compensation Committee’sreview of 2007 executive compensation based on the advice of its independentcompensation consulting firm. Survey data used in the report were collectedfrom Towers Perrin’s 2006 Retail/Wholesale Industry Executive CompensationDatabase and were benchmarked based on job titles and scope of responsibilitiesfor each of our named executive officers. Target pay levels were thendetermined by using regression analysis to adjust both survey and proxy databased on annual revenues of $1 billion for our company.

 

TheCompensation Committee reviewed and considered this comparative peer group datatogether with qualitative input from the Chief Executive Officer regardingretention and incentive requirements (for executive officers other than theChief Executive Officer), in establishing our executive compensation programsfor 2007. The Committee determined for each executive officer that the totalcompensation and each component of compensation to be provided to each suchofficer in 2007 was within the range of total compensation and the range ofeach component of compensation paid to similarly situated executive officers inthe reviewed data. However, the Compensation Committee did not establish anyspecific peer group comparative percentile targets or relative percentages oftotal compensation that any component of compensation should represent for ourexecutives’ compensation levels.

 

**Base Salaries**

 

Thebase salaries we provide to our executive officers are intended as compensationfor each executive officer’s ongoing contributions to the performance of theoperational area(s) for which he or she is responsible. In keeping withour compensation philosophy to attract and retain individuals of high quality,executive officer base salaries have been targeted to be competitive with basesalaries paid to executive officers of the peer companies described above basedon data reviewed by the Compensation Committee and, for executive officersother than our Chief Executive Officer, were established in part based uponqualitative input from our Chief Executive Officer about retention andincentive requirements after discussions with individual executive officers.

 

Thebase salaries of our executive officers are reviewed annually and adjusted fromtime to time from the original amounts provided in employment agreements torecognize individual performance, promotions, competitive compensation levels,retention and incentive requirements and other qualitative factors. In additionto adjustments made for competitive, retention and incentive reasons, theCommittee has periodically adjusted executive officer base salaries based on itsassessment of each executive’s performance and history with us and our overallbudgetary 

 

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considerations forsalary increases. Based in part on the reports provided to the Committee by theindependent compensation consulting firm in August 2007, the Committeeincreased the base salaries of each of our executive officers, other than ourChief Executive Officer, to bring such base salaries more in line with thecompetitive peer group base salary levels identified in the compensationreports utilized by the Committee in 2007.

 

**Short-Term Incentive Compensation**

 

Eachof our named executive officers other than our General Counsel and InterimChief Financial Officer are generally eligible to participate in our executivebonus plan, which was initially adopted by our Compensation Committee in February 2005.The plan was designed to award quarterly cash bonuses to eligible officers onlyin the event we achieved short-term financial goals. For 2007, these financialgoals consist of year-over-year quarterly improvements in our consolidatedadjusted pre-tax income. The plan was intended to reward and motivate ourexecutives and to align the interests of management with our stated objectivesto focus on our profitability and increase shareholder value. Under thisexecutive bonus plan, for each fiscal quarter, eligible executive officersparticipate in a bonus pool equaling a maximum aggregate cash bonus amountequal to 10% of any amount by which our consolidated adjusted pre-tax incomefor such quarter exceeded our consolidated adjusted pre-tax income for the samequarter of the prior year. For purposes of the executive bonus plan, “adjustedincome” is defined as our consolidated pre-tax income for the applicablequarter, less certain costs that are excluded from the calculation on aquarterly basis by the Compensation Committee in its sole discretion. Suchadjustments were intended to allow the Committee to exclude expenses that itdetermined did not allow for a fair comparison of performance in the applicablequarters or expenses which it determined were not in the control of theeligible executives. The Compensation Committee retains discretion to awardless than the full amount of the bonuses permitted under the executive bonusplan as well as discretion as to the items to be excluded in the calculation of“adjusted income.” Historically, these excluded items have included stock-basedcompensation expense and litigation settlement charges.

 

TheCommittee allocates available amounts under the plan to eligible executiveofficers based on maximum quarterly fixed percentages of the pool for eachofficer. These maximum amounts are subject to reduction by the CompensationCommittee in its discretion. Reductions in the maximum amounts paid toindividual named executive officers have generally been made based onqualitative recommendations from our Chief Executive Officer. Our ChiefExecutive Officer is entitled to receive a maximum of up to 38% of theavailable quarterly executive bonus pool and our other remaining eligible namedexecutive officers participating in the plan, Kris Rogers and Dan DeVries, areeach eligible to receive up to a maximum of 12% each. Our former ChiefFinancial Officer, who resigned effective June 30, 2007, was eligible toreceive a maximum of 12% of the executive bonus pool; however, no bonus waspaid to him for the 2007 fiscal year.

 

In2007, some amounts which may otherwise have been paid under the executive bonusplan relating to the first three quarters of 2007 were not paid to the namedexecutive officers in 2007 because the executive bonus plan for 2007 was underreview by the Committee during the first half of 2007. In February 2008,the Compensation Committee determined to pay the named executive officersadditional bonuses that otherwise would have been available to be paid to themin 2007 under the executive bonus plan but were not approved or paid in 2007because of such pending review. Accordingly, Mr. Khulusi, Ms. Rogersand Mr. Devries each received additional bonuses approved in February 2008that were calculated based on the historic executive bonus plan and the Company’squarterly performance in the first three quarters of 2007. The amounts of suchadditional bonuses approved in February of 2008 were $124,653, $43,995 and$21,624, respectively, and have been included in the “Summary CompensationTable” for the 2007 fiscal year.

 

Indetermining to continue the executive bonus plan for 2007, the CompensationCommittee considered data and analysis contained in the reports provided to theCommittee by the independent compensation consulting firm. Based on this dataand analysis, the Committee determined that the amounts paid to the executiveofficers in accordance with the executive bonus plan for 2007 allowed for atotal cash compensation for each such officer within the peer group range fortotal cash compensation.

 

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Thebonuses paid to our General Counsel, Mr. Newton, and Interim ChiefFinancial Officer, Mr. LaVerne, were paid in accordance with theirrespective employment agreements or arrangements, as such amounts have beenincreased from time to time by the Compensation Committee. Additional amountswere also paid to each of Mr. Newton and Mr. LaVerne in thediscretion of the Compensation Committee. The total amount of bonuses paid toeach of Mr. Newton and Mr. LaVerne were based in each case in partupon the Committee’s review of the total cash compensation data relative to thepeer groups provided in the reports to the Compensation Committee from theindependent compensation consulting firm and in part upon the recommendation ofour Chief Executive Officer after a qualitative evaluation of theircontributions to the Company.

 

**Long-Term Incentive Compensation**

 

Ourlong-term incentive compensation has historically consisted only of stockoption grants, which are provided under our 1994 Stock Incentive Plan andadministered by the Compensation Committee. We have made periodic grants ofstock options to executives for the purpose of aligning their long-termmotivations with the interests of our stockholders and in consideration of thefact that we offer no other significant long-term, deferred or retirementcompensation to our executive officers.

 

Stockoptions have historically generally been granted to our executive officersbased on a subjective and market-based evaluation by the Compensation Committee(based in part upon recommendations from our Chief Executive Officer withrespect to executive officers other than the Chief Executive Officer) of arecipient’s contributions and continuing value to us and the performance of hisor her respective operational areas of responsibility. Compensation previouslyrealized by our executive officers from the exercise of vested optionshistorically has not been considered by our Compensation Committee when givingnew equity awards but may be considered when making future grants.

 

 Our Compensation Committee also historicallyhas not considered the amount of unexercised and unvested stock options held byan executive when making the decision to make additional stock option grantsand in determining the number of options to award. In determining whatlong-term incentive programs to offer our executive officers, the CompensationCommittee considers the impact of our adoption of SFAS 123R “Share-BasedPayment,” which requires us to expense the compensation costs related to stockoption awards ratably over their vesting periods.

 

Fromtime to time, our Compensation Committee evaluates the structure of ourlong-term incentive programs and may make modifications to these programs toreflect our changing needs and our need to attract, retain and motivate ourexecutive officers. These changes may be based, in part, on market conditionsand the compensation programs of our competitors. As new long-term incentiveinstruments are developed and the tax and accounting treatment of variousinstruments are subject to change over time, management and the CompensationCommittee regularly review our compensation programs to determine whether theseprograms are accomplishing our goals in a cost-effective manner.

 

   The compensation reports provided to theCompensation Committee by the independent compensation consulting firm includedlong-term, non-cash incentive compensation market competitive data andanalysis, which was reviewed and considered by the Committee in determining the2007 stock option grants to executives. This data and analysis contemplated theannualized expected value of option grants ultimately provided to our executiveofficers in 2007 relative to long-term, non-cash incentive compensationprovided to peer group executives. The value of each grant also was analyzedfor its effect on total compensation, representing the long-term, non-cashcomponent of our executive compensation. The Committee determined that thelevel of each grant in 2007 to each of our executive officers was within the rangeof annual long-term, non-cash incentive compensation relative to the consideredpeer groups for each executive officer and further determined that the level ofeach grant in 2007 to each executive officer when considered together with thetotal cash compensation for 2007 placed the level of 2007 total compensationfor each executive officer within the market range.

 

**Timing, Pricing and Terms of Stock Option Awards**

 

Wehave generally considered option grants to our executive officers on an annualbasis at scheduled meetings of the Compensation Committee. Formal approval ofstock option grants is obtained on the date of grant. We do not have, and donot intend to have, any program, plan or practice to time the grant of stockoptions in coordination with the release of material non-public information. Wealso do not have, and do not intend to have, any program, plan or practice totime the release of material non-public information for the purpose ofaffecting the value to executive 

 

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compensation. Theexercise price for stock options we have granted equals the closing price ofour common stock on the grant date. We have granted fixed-price stock optionsthat generally vest in equal quarterly installments usually over a three orfour year period. Our option grants have not historically contained performancevesting features in part because of unfavorable accounting consequencesassociated with performance vesting prior to the adoption of SFAS 123R.

 

Becausethe value of stock option awards increase only if the price of our common stockincreases after grant, the time vesting feature of our option grants has beenintended as an important feature of each option designed to motivate ourexecutive officers to enhance our stockholders’ value over a long-term period.

 

**Employment Agreements and Severance and Change-in-ControlArrangements**

 

In January 1995,prior to our initial public offering, we entered into an employment agreementwith Frank F. Khulusi, our Chairman, President and Chief ExecutiveOfficer. Mr. Khulusi’s employment agreement, which was amended in December 2005,provides for one-year extensions unless it is terminated by us or Mr. Khulusi.Mr. Khulusi’s annual salary pursuant to his employment agreement has beenincreased periodically, and was most recently increased by our CompensationCommittee, effective March 1, 2006, from $600,000 to $800,000. Previously,in May 2005, Mr. Khulusi voluntarily elected to reduce his annualbase compensation from $800,000 to $600,000. Mr. Khulusi is eligible toparticipate in our employee benefit plans that are generally available tosimilarly situated employees.

 

Mr. Khulusi’semployment agreement provides that he is entitled to certain severance benefitsin the event that his employment is terminated by us without cause or by Mr. Khulusifor good reason or following a change of control as follows:

 

·         IfMr. Khulusi’s employment is terminated by the Company without cause (whichmay occur at any time upon 90 days’ advance written notice to Mr. Khulusi),the Company will pay him his salary through the end of the notice period and,in addition, a lump sum amount equal to two times the total salary and bonuscompensation paid to him for the twelve months immediately preceding the noticeof termination;

 

·         IfMr. Khulusi’s employment is terminated by him for good reason (which mayoccur upon 30 days’ advance written notice to the Company), including as aresult of the Company notifying him of its decision to not renew the employmentagreement for an additional period as described above, the Company will pay hima lump sum upon such termination equal to two times the total salary and bonuscompensation paid to him for the twelve months immediately preceding the noticeof termination; and

 

·         Inthe event of a change of control of the Company, upon consummation of thechange of control, Mr. Khulusi’s employment agreement will terminate andhe will receive a lump sum payment equal to two times the total salary andbonus compensation paid to him for the twelve months immediately preceding thechange of control.

 

If the severancepayment payable under his employment agreement in the event of a change ofcontrol, either alone or together with other payments he has the right toreceive from us, would not be deductible (in whole or in part) by the Companyas a result of the payment constituting a “parachute payment” under Section 280Gof the Internal Revenue Code, the severance payment under the employmentagreement will be reduced to the maximum deductible amount under the Code.

 

Forthe purposes of Mr. Khulusi’s employment agreement, a “change of control”of the Company will be deemed to have occurred if:

 

·         thereis consummated (i) any consolidation or merger of the Company in which theCompany is not the continuing or surviving corporation or pursuant to whichshares of the Company’s common stock would be converted into cash, securitiesor other property, other than a merger of the Company in which the holders ofthe Company’s common stock immediately prior to the merger have the sameproportionate ownership of common stock of the surviving corporationimmediately after the merger, (ii) any reverse merger in which the Companyis the continuing or surviving corporation but in which securities possessingmore than 50% of the total combined voting power of the Company’s outstandingsecurities are transferred to a person or persons different from those who holdsuch securities immediately prior to the merger, or (iii) any sale, lease,exchange or other transfer (in one or more related transactions) of all, orsubstantially all, of the assets of the Company;

 

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·         ourstockholders approve a plan or proposal for the liquidation or dissolution ofus;

 

·         anyperson other than Mr. Khulusi or certain of his relatives or affiliatesbecome the direct or indirect beneficial owners of 20% or more of our commonstock (other than as a result of purchases by such person directly fromus); or

 

·         duringany 12-month period, individuals who at the beginning of the period constituteour entire Board of Directors cease for any reason to constitute a majoritythereof unless the election, or the nomination for election by ourstockholders, of each new director was approved by a vote of at least amajority of the directors then still in office who were directors at thebeginning of the period.

 

If Mr. Khulusi’semployment is terminated due to death or disability, the terms of hisemployment agreement require that he (or his beneficiaries, as applicable) bepaid his salary through the end of the month in which the termination occurs.If Mr. Khulusi is terminated for cause (which may occur upon 30 days’advance written notice to Mr. Khulusi), the terms of his employmentagreement require that he be paid his salary through the end of the noticeperiod.

 

In January 2000,we entered into an employment agreement with Kristin M. Rogers, our ExecutiveVice President, Sales. Pursuant to Ms. Rogers’ employment agreement, hercompensation includes (i) an annual base salary and (ii) an annualbonus based upon the achievement of goals mutually agreed upon by us and Ms. Rogers.Pursuant to the terms of our agreement with Ms. Rogers, she is an “at will”employee and is currently entitled to an annual base salary of $335,000, whichthe Compensation Committee increased from $300,000, effective August 31,2007. Ms. Rogers’ employment agreement also provides that in the event sheis terminated by us without cause (as defined in her employment agreement),upon the execution of a separation agreement satisfactory to us, Ms. Rogersis entitled to receive a severance payment equal to six months of her basecompensation and health insurance coverage for Ms. Rogers and her familyfor up to six months or for a shorter period if other employment is accepted byMs. Rogers. The severance payments would be made in equal installmentsover the six month (or shorter) period, as applicable. Instead of receiving anannual bonus as set forth in her employment agreement, Ms. Rogersparticipates, in the discretion of our Compensation Committee, in our executivebonus plan, and is entitled to receive discretionary bonuses from time to timein the discretion of the Compensation Committee and our Chief ExecutiveOfficer. Ms. Rogers is entitled to receive a monthly automobile allowance,and is eligible to participate in our employee benefit plans that are generallyavailable to similarly situated employees.

 

In June 2004,we entered into an employment agreement with Robert I. Newton, our GeneralCounsel and Secretary. Mr. Newton’s employment agreement was amended in February 2005.Pursuant to the terms of our agreement with Mr. Newton, he is an “at will”employee and is currently entitled to an annual base salary of $300,000, whichthe Compensation Committee increased from $250,000 effective August 31,2007. Mr. Newton is eligible to receive an annual bonus of up to $120,000,as well as discretionary bonuses as determined from time to time by theCompensation Committee, and is entitled to severance pay equal to six months ofhis annual base salary in the event his employment is terminated without cause.The severance payments would be made in equal installments over six months andis contingent upon his execution of a satisfactory severance and releaseagreement. Mr. Newton is eligible to participate in our employee benefitplans that are generally available to similarly situated employees.

 

In January 2004,we entered into a written employment agreement with Dan DeVries, our ExecutiveVice President, Marketing. Pursuant to the terms of our agreement with Mr. DeVries,he is an “at will” employee and is currently entitled to an annual base salaryof $275,000, which the Compensation Committee increased from $257,500 effectiveAugust 31, 2007. Mr. DeVries is eligible to participate in ourexecutive bonus plan in the discretion of our Compensation Committee, as wellas to receive discretionary bonuses from time to time in the discretion of ourCompensation Committee and our Chief Executive Officer. In January 2006,we entered into a severance agreement with Mr. DeVries, which was approvedby our Compensation Committee, pursuant to which Mr. DeVries is entitledto severance pay equal to six months of his annual base salary in the event hisemployment is terminated without cause. The severance payments would be made inequal installments over six months and is contingent upon his execution of a satisfactoryseverance and release agreement. Mr. DeVries is also entitled to receive amonthly automobile allowance, and is eligible to participate in our employeebenefit plans that are generally available to similarly situated employees.

 

9

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In January 2007,we entered into a severance agreement with Mr. LaVerne, pursuant to which Mr. LaVerneis entitled to severance pay equal to six months of his annual base salary inthe event his employment is terminated without cause within a twelve monthperiod following a change-in-control of our company.

 

Inaddition to the above discussed agreements, under the terms of our optionagreements with our executive officers, upon the occurrence of (i) certainevents resulting in a change of control of our company or (ii) certainmajor corporate transactions, all of the unvested stock options for our ChiefExecutive Officer will become fully vested and exercisable, subject to certainexceptions and limitations and a portion of the unvested stock options of ourother executive officers will become vested and exercisable, subject to certainexceptions and limitations.

 

Theemployment agreements and severance and change-in-control benefits provided toour executives under these agreements were approved by our CompensationCommittee following our negotiations with our executive officers and weredetermined to be reasonable and necessary in order to hire and retain theseindividuals. Mr. Khulusi’s agreement was originally executed in 1995 andat that time we established certain change-in-control and severance protectionsfor Mr. Khulusi. We believe that it is important to provide continuedprofessional stability to those executive-level employees who helped build ourcompany and whose leadership is important to our continued success. Further, webelieve that the interests of our stockholders will be best served if theinterests of our most senior management are aligned with them. Providing changein control benefits, including the severance and option acceleration benefits,is designed to reduce the reluctance of senior management to pursue potentialchange of control transactions that may be in the best interests of ourstockholders. The severance and change-in-control benefits offered to ourexecutive officers did not affect the Compensation Committee’s determination ofthe total compensation, or any component of compensation, we provided to ourexecutive officers in 2007.

 

Copiesof each of the above-referenced employment agreements, as well as a summary ofour executive bonus plan, are filed as exhibits to our original filing of thisAnnual Report on Form 10-K filed with the Securities and ExchangeCommission on March 17, 2008.

 

**Perquisites and Other Benefits**

 

Weprovide our executive officers, including our Chief Executive Officer, withperquisites that we believe are reasonable, competitive and consistent with ouroverall executive compensation program. We believe that our perquisites help usto hire and retain qualified executives. Our executive officers receive healthcare benefits in the form of subsidized health care insurance premium paymentswe made on behalf of our executives and their family members. Ms. Rogersand Mr. DeVries each receive monthly car allowances. For additionalinformation regarding perquisites we provided to each of our named executiveofficers in 2007, please refer to the “Summary Compensation Table” below.

 

**Policy Regarding Deductibility of Compensation**

 

Section 162(m) ofthe Internal Revenue Code, enacted in 1993, generally disallows a tax deductionto public companies for compensation over $1.0 million paid to the ChiefExecutive Officer or any of the other four most highly compensated executiveofficers. However, certain compensation meeting a tax law definition of “performance-based”is generally exempt from this deduction limit. We do not currently have apolicy regarding qualification of cash compensation, such as salary andbonuses, for deductibility under Section 162(m). We have includedprovisions in the 1994 Stock Incentive Plan designed to enable grants ofoptions and stock appreciation rights to executives affected by Section 162(m) toqualify as “performance-based” compensation. Such grants cannot qualify untilthey are made by a committee consisting of “outside directors” under Section 162(m).In fiscal 2007, our executives did not receive compensation at a level thatexceeds the $1 million limit, except for our Chief Executive Officer whoearned total cash compensation of $1.2 million. However, the CompensationCommittee believes that in certain circumstances factors other than taxdeductibility take precedence when determining the forms and levels ofexecutive compensation most appropriate and in the best interests of us and ourstockholders. Given our changing industry and business, as well as thecompetitive market for outstanding executives, the

 

10

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CompensationCommittee believes that it is important to retain the flexibility to designcompensation programs consistent with its overall executive compensationphilosophy even if some executive compensation is not fully deductible.Accordingly, the Compensation Committee may from time to time deem itappropriate to approve elements of compensation for certain officers that arenot fully deductible.

 

**EXECUTIVEAND DIRECTOR COMPENSATION**

 

**SummaryCompensation Table**

 

The followingtable sets forth the cash and non-cash compensation for fiscal years 2007 and2006 awarded to or earned by our Chief Executive Officer, our Chief FinancialOfficer and each of our other three most highly compensated executive officerswhose compensation exceeded $100,000. The individuals listed in the followingtable are sometimes referred to as the “named executive officers.”

 
| **Name and Principal Position** | ** ** | **Year**   | ** ** | **Salary  ($)** | ** ** | **Bonus  ($)** | ** ** | **Option  Awards  ($)(1)** | ** ** | **All Other  Compensation  ($)** | ** ** | **Total  ($)** | ** ** |
|------------------------------------------------|------------|------------|------------|-----------------|------------|----------------|------------|----------------------------|------------|---------------------------------------|------------|----------------|------------|
| ** **                                     | ** ** | ** ** | ** ** | ** **      | ** ** | ** **     | ** ** | ** **                 | ** ** | ** **                            | ** ** | ** **     | ** ** |
| Frank F. Khulusi                               |       | 2007       |       | $               | 800,000    |           | $          | 355,491                    |       | $                                     | 103,740    |           | $          | 9,512 | (4) | $ | 1,268,743 |   |
| *President and CEO*                            |       | 2006       |       | 767,702         |       | 157,357        | (2)(3)     | 103,740                    |       | 10,701                                | (4)        | 1,039,500      |       |
|                                           |       |       |       |            |       |           |       |                       |       |                                  |       |           |       |
| Brandon H. LaVerne (5)                         |       | 2007       |       | 194,604         |       |           | 53,350     |                       | 47,692     |                                  | 5,232      | (4)            | 300,878    |   |
| *Interim Chief Financial Officer*              |       |       |       |            |       |           |       |                       |       |                                  |       |           |       |
|                                           |       |       |       |            |       |           |       |                       |       |                                  |       |           |       |
| Theodore R. Sanders (5)                        |       | 2007       |       | 161,538         |       | —         |       | 40,844                     |       | 8,255                                 | (6)   | 210,637        |       |
| *Chief Financial Officer*                      |       | 2006       |       | 300,000         |       | 84,384         | (3)        | 81,691                     |       | 16,721                                | (6)        | 482,796        |       |
|                                           |       |       |       |            |       |           |       |                       |       |                                  |       |           |       |
| Kristin M. Rogers                              |       | 2007       |       | 312,865         |       | 125,468        |       | 108,561                    |       | 16,971                                | (7)        | 563,865        |       |
| *Executive Vice President, Sales*              |       | 2006       |       | 296,403         |       | 82,928         |       | 98,917                     |       | 15,598                                | (6)        | 493,846        |       |
|                                           |       |       |       |            |       |           |       |                       |       |                                  |       |           |       |
| Daniel J. DeVries                              |       | 2007       |       | 264,346         |       | 103,098        |       | 67,193                     |       | 20,656                                | (7)        | 455,293        |       |
| *Executive Vice President,  Marketing*         |       | 2006       |       | 257,500         |       | 78,143         |       | 57,549                     |       | 19,481                                | (6)        | 412,673        |       |
|                                           |       |       |       |            |       |           |       |                       |       |                                  |       |           |       |
| Robert I. Newton                               |       | 2007       |       | 267,692         |       | 135,000        |       | 118,341                    |       | 6,784                                 | (4)        | 527,817        |       |
| *General Counsel and Secretary*                |       | 2006       |       | 250,000         |       | 90,000         |       | 159,980                    |       | 4,955                                 | (4)        | 504,935        |       |
|                                                |            |            |            |                 |            |                |            |                            |            |                                       |            |                |            |  |  |  |  |  |

 

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| (1) |   | Represents the dollar  amounts associated with the named executive officers’ option grants that are  recognized as stock-based compensation expense in the 2007 and 2006 fiscal  years for financial statement reporting purposes in accordance with  SFAS 123R, resulting from the vesting in 2007 and 2006, respectively, of  options granted in the years 2007, 2004 and 2005. For a detailed discussion  of the assumptions made in the valuation of stock option awards, please see  Notes 2 and 3 of our Notes to the Consolidated Financial Statements  included in our original filing of this Annual Report on Form 10-K for  the year ended December 31, 2007. |
|-----|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) |   | Excludes certain bonus  amounts under our executive bonus plan, which were awarded to  Mr. Khulusi by the Compensation Committee, but which Mr. Khulusi  voluntarily declined to receive as follows: $13,718 and $38,228 relating to  the quarters ended March 31, 2006 and June 30, 2006, and $55,955,  representing half of his bonus relating the quarter ended September 30,  2006. In total, Mr. Khulusi elected not to receive bonus payments  aggregating $107,901 for fiscal 2006.                                                                                                                                                                          |

 

11

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| (3) |   | Bonus amounts relating  to 2006 for Mr. Khulusi and Mr. Sanders were previously reported in  the “Non-Equity Incentive Plan Compensation” column for the 2006 fiscal year,  and are reported in the “Bonus” column in the table above for comparison  purposes. All such reported amounts were paid under our executive bonus plan. |
|-----|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (4) |   | Includes medical and  dental insurance premiums we subsidized on behalf of the executive above and  beyond pricing that is available to the general employee population, and  company matched 401(k) contributions on behalf of the executive which  the Company began matching as of July 1, 2007.                                                     |
| (5) |   | On June 7, 2007,  our board of directors appointed Mr. LaVerne as Interim Chief Financial  Officer effective upon the departure of our former Chief Financial Officer,  Theodore R. Sanders, on June 30, 2007.                                                                                                                                     |
| (6) |   | Includes medical and  dental insurance premiums we subsidized on behalf of the executive above and  beyond pricing that is available to the general employee population, and car  allowances.                                                                                                                                                                     |
| (7) |   | Includes medical and  dental insurance premiums we subsidized on behalf of the executive above and  beyond pricing that is available to the general employee population, company  matched 401(k) contributions on behalf of the executive, and car  allowances.                                                                                              |

 

**Grantsof Plan-Based Awards (2007)**

 
| **Name**           | ** ** | **Grant  Date** | ** ** | **All Other  Option  Awards:  Number of  Securities  Underlying  Options (#)** | ** ** | **Exercise  or Base   Price of  Option  Awards  ($/sh)** | ** ** | **Grant Date  Fair  Value of  Option  Awards (3)** | ** ** |
|--------------------|------------|-----------------|------------|-----------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------|------------|-------------------------------------------------------------------|------------|
| Frank F. Khulusi   |       | 12/14/2007      |       | 90,000(1)                                                                                     |       | $                                                                       | 10.50      |                                                              | $          | 579,424 |   |
| Brandon H. LaVerne |       | 08/31/2007      |       | 15,000(2)                                                                                     |       | 12.27                                                                   |       | 115,729                                                           |       |
| Kristin M. Rogers  |       | 08/31/2007      |       | 20,000(2)                                                                                     |       | 12.27                                                                   |       | 154,306                                                           |       |
| Daniel J. DeVries  |       | 08/31/2007      |       | 20,000(2)                                                                                     |       | 12.27                                                                   |       | 154,306                                                           |       |
| Robert I. Newton   |       | 08/31/2007      |       | 20,000(2)                                                                                     |       | 12.27                                                                   |       | 154,306                                                           |       |
|                    |            |                 |            |                                                                                               |            |                                                                         |            |                                                                   |            |  |  |

 

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| (1) |   | These options vest  quarterly in equal installments over four years, with full vesting on  December 14, 2011, and have term of ten years.                                                                                                                                                                                                                                                                      |
|-----|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) |   | These options vest  quarterly in equal installments over four years, with full vesting on  August 31, 2011, and have a term of ten years.                                                                                                                                                                                                                                                                      |
| (3) |   | The grant date fair  value of the stock options granted were computed in accordance with SFAS  No. 123R. For a detailed discussion of the assumptions made in the  valuation of stock option awards, please see Notes 2 and 3 of our Notes  to the Consolidated Financial Statements included in our original filing of  this Annual Report on Form 10-K for the year ended December 31,  2007. |

 

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**OutstandingEquity Awards at Fiscal Year-End (2007)**

 

The followingtable sets forth information regarding unexercised options for each of ournamed executive officers outstanding as of December 31, 2007.

 
| ** **         | ** ** | **Option Awards**                                                                       | ** ** |
|--------------------|------------|----------------------------------------------------------------------------------------------|------------|
| **Name**           | ** ** | **Number of   Securities  Underlying  Unexercised  Options (#)  Exercisable** | ** ** | **Number of   Securities  Underlying  Unexercised  Options (#)  Unexercisable** | ** ** | **Option  Exercise  Price ($)** | ** ** | **Option  Expiration  Date** | ** ** |
| Frank F. Khulusi   |       | 50,000                                                                                       |       | — |   | $ | 2.84 |   | 06/10/2009 |   |
|               |       | 81,250                                                                                       |       | 18,750(1) |   | 6.23 |   | 10/28/2014 |   |
|               |       | —                                                                                       |       | 90,000(2) |   | 10.50 |   | 12/14/2017 |   |
|               |       |                                                                                         |       |   |   |   |   |   |   |
| Brandon H. LaVerne |       | 7,000                                                                                        |       | — |   | 5.02 |   | 11/21/2013 |   |
|               |       | 14,000                                                                                       |       | 6,000(3) |   | 6.36 |   | 05/24/2014 |   |
|               |       | 5,583                                                                                        |       | 1,417(4) |   | 4.49 |   | 06/29/2015 |   |
|               |       | 938                                                                                          |       | 14,062(5) |   | 12.27 |   | 08/31/2017 |   |
|               |       |                                                                                         |       |   |   |   |   |   |   |
| Kristin M. Rogers  |       | 34,500                                                                                       |       | — |   | 3.23 |   | 01/19/2010 |   |
|               |       | 40,000                                                                                       |       | — |   | 0.60 |   | 04/17/2011 |   |
|               |       | 27,500                                                                                       |       | — |   | 0.90 |   | 08/15/2012 |   |
|               |       | 32,500                                                                                       |       | 7,500(1) |   | 6.23 |   | 10/28/2014 |   |
|               |       | 41,667                                                                                       |       | 8,333(6) |   | 4.41 |   | 06/28/2015 |   |
|               |       | 1,250                                                                                        |       | 18,750(5) |   | 12.27 |   | 08/31/2017 |   |
|               |       |                                                                                         |       |   |   |   |   |   |   |
| Daniel J. DeVries  |       | 15,086                                                                                       |       | — |   | 0.65 |   | 06/15/2008 |   |
|               |       | 35,000(7)                                                                                    |       | — |   | 2.84 |   | 06/10/2009 |   |
|               |       | 42,606                                                                                       |       | — |   | 0.60 |   | 04/17/2011 |   |
|               |       | 22,737                                                                                       |       | — |   | 0.90 |   | 08/15/2012 |   |
|               |       | 18,750                                                                                       |       | 6,250(8) |   | 6.23 |   | 10/28/2014 |   |
|               |       | 16,667                                                                                       |       | 3,333(6) |   | 4.41 |   | 06/28/2015 |   |
|               |       | 1,250                                                                                        |       | 18,750(5) |   | 12.27 |   | 08/31/2017 |   |
|               |       |                                                                                         |       |   |   |   |   |   |   |
| Robert I. Newton   |       | 50,000                                                                                       |       | — |   | 6.92 |   | 06/08/2014 |   |
|               |       | 41,667                                                                                       |       | 8,333(6) |   | 4.41 |   | 06/28/2015 |   |
|               |       | 1,250                                                                                        |       | 18,750(5) |   | 12.27 |   | 08/31/2017 |   |
|                    |            |                                                                                              |            |  |  |  |  |  |  |  |

 

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| (1) |   | These options were granted on October 28, 2004 and vested as to 25% on grant date, with the remaining 75% vesting quarterly in equal installments over four years, with full vesting on October 28, 2008. |
|-----|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) |   | These options were  granted on December 14, 2007 and vest quarterly in equal installments  over four years, with full vesting on December 14, 2011.                                                       |
| (3) |   | These options were  granted on May 24, 2004 and vest quarterly in equal installments over  five years, with full vesting on May 24, 2009.                                                                 |
| (4) |   | These options were granted  on June 29, 2005 and vest quarterly in equal installments over three  years, with full vesting on June 29, 2008.                                                              |
| (5) |   | These options were  granted on August 31, 2007 and vest quarterly in equal installments over  four years, with full vesting on August 31, 2011.                                                           |
| (6) |   | These options were  granted on June 28, 2005 and vest quarterly in equal installments over  three years, with full vesting on June 28, 2008.                                                              |
| (7) |   | This includes options  to purchase 17,357 shares of our common stock that have been transferred  pursuant to a divorce settlement.                                                                             |

 

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| (8) |   | These options were  granted on October 28, 2004 and vest quarterly in equal installments  over four years, with full vesting on October 28, 2008. |
|-----|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

**Option Exercises and Stock Vested (2007)**

 

The followingtable provides information regarding each exercise of stock option awards foreach of our named executive officers during the fiscal year ended December 31,2007.

 
| ** **              | ** ** | **Option Awards**                                              | ** ** |
|-------------------------|------------|---------------------------------------------------------------------|------------|
| **Name**                | ** ** | **Number of Shares  Acquired on Exercise  (#)** | ** ** | **Value Realized  on Exercise  ($)(2)** | ** ** |
| Frank F. Khulusi        |       | —                                                              |       | — |   |
| Brandon H. LaVerne      |       | —                                                              |       | — |   |
| Theodore R. Sanders (1) |       | 171,883                                                             |       | $ | 1,916,878 |   |
| Kristin M. Rogers       |       | —                                                              |       | — |   |
| Daniel J. DeVries       |       | 7,500                                                               |       | 88,200 |   |
| Robert I. Newton        |       | —                                                              |       | — |   |
|                         |            |                                                                     |            |  |  |  |

 

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| (1) |   | Mr. Sanders  resigned from our company effective June 30, 2007. Mr. Sanders  exercised all of his outstanding options upon his departure.                 |
|-----|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) |   | Value realized was  computed by calculating the difference between the market price of our stock  at the exercise date and the exercise prices of the options exercised. |

 

**PotentialPayments Upon Termination or Change in Control (2007)**

 

Provisions of ouremployment and change of control arrangements with the named executive officersand our equity incentive plan or individual award agreements thereunder providefor certain payments to our named executive officers at, following or inconnection with a termination of their employment or a change of control of PCMall. See “Employment Agreements and Severance and Change-in-ControlArrangements” in our Compensation Discussion and Analysis section above for adiscussion of the specific circumstances that would trigger payments under theemployment agreements with our named executive officers

 

The agreementspursuant to which we granted stock options to Mr. Khulusi provide for fullacceleration of vesting of their unvested options in the event of a change ofcontrol of our company. The agreements pursuant to which each of our othernamed executive officers received stock options provide that, in the event of achange of control, a portion of the unvested options then outstanding willbecome fully vested and exercisable if:

 

·         the option is not assumedor replaced (by an option or comparable cash incentive) by the successor entityas part of such transaction; or

 

·         the option is assumed orreplaced, but such officer’s employment is terminated by the successor entitywithout cause or by the executive for “good reason” within twelve(12) months of the change of control.

 

Under our stockincentive plan, a change of control is deemed to occur upon:

 

·         the direct or indirectacquisition by any person or related group of persons of more than 50% of thetotal voting power our outstanding stock;

 

·         a change in thecomposition of our board over a period of 36 months or less such that amajority of our continuing directors cease to be members of our board;

 

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·         a merger or consolidationin which we are not the surviving entity or in which we survive as an entitybut in which more than 50% of the voting power of our outstanding securitiesare transferred to persons different from those who held such securitiesimmediately prior to such merger; or

 

·         the sale, transfer orother disposition of all or substantially all of our assets or the liquidationor dissolution of us.

 

The table belowsets forth the estimated payments that would be made to each of our namedexecutive officers (other than Mr. Sanders, who resigned from our companyeffective June 30, 2007) upon voluntary termination, involuntarytermination, a change of control, and death or permanent disability. The actualamounts to be paid out can only be determined at the time of such namedexecutive officer’s separation from PC Mall. The information set forth in thetable assumes, as necessary:

 

·         The termination and/orthe qualified change in control event occurred on December 31, 2007 (thelast business day of our last completed fiscal year);

 

·         The price per share ofour common stock on the date of termination is $9.31 (the closing market priceof our common stock on the Nasdaq Global Market on December 31,2007); and

 

·         Withrespect to unvested stock options, the options are not assumed or replaced asdescribed above.

 
| **Name**                         | ** ** | **Voluntary  Termination** | ** ** | **Death or  Permanent  Disability** | ** ** | **Change of  Control** | ** ** | **Involuntary  Termination** | ** ** |
|----------------------------------|------------|----------------------------|------------|------------------------------------------|------------|-----------------------------|------------|------------------------------|------------|
| Frank F. Khulusi                 |       |                       |       |                                     |       |                        |       |                         |       |
| Employment Agreement             |       | $                          | 2,056,342  | (1)(2)                                   | See        | (8)                         | $          | 2,056,342                    | (2)(3)     | $ | 2,056,342 | (2)(7) |
| Acceleration of Unvested Options |       | —                     |       | —                                   |       | 57,750                      | (5)        | —                       |       |
| Total:                           |       | $                          | 2,056,342  |                                     | —     |                        | $          | 2,114,092                    |       | $ | 2,056,342 |   |
|                             |       |                       |       |                                     |       |                        |       |                         |       |
| Brandon H. LaVerne               |       |                       |       |                                     |       |                        |       |                         |       |
| Employment Agreement             |       | —                     |       | —                                   |       | —                      |       | $                            | 103,374    | (4)(7) |
| Acceleration of Unvested Options |       | —                     |       | —                                   |       | $                           | 20,597     | (5)                          | —     |   |
| Total:                           |       | —                     |       | —                                   |       | $                           | 20,597     |                         | $          | 103,374 |   |
|                             |       |                       |       |                                     |       |                        |       |                         |       |
| Kristin M. Rogers                |       |                       |       |                                     |       |                        |       |                         |       |
| Employment Agreement             |       | —                     |       | —                                   |       | —                      |       | $                            | 173,187    | (6)(7) |
| Acceleration of Unvested Options |       | —                     |       | —                                   |       | $                           | 63,932     | (5)                          | —     |   |
| Total:                           |       | —                     |       | —                                   |       | $                           | 63,932     |                         | $          | 173,187 |   |
|                             |       |                       |       |                                     |       |                        |       |                         |       |
| Daniel J. DeVries                |       |                       |       |                                     |       |                        |       |                         |       |
| Employment Agreement             |       | —                     |       | —                                   |       | —                      |       | $                            | 137,500    | (4)(7) |
| Acceleration of Unvested Options |       | —                     |       | —                                   |       | $                           | 35,582     | (5)                          | —     |   |
| Total:                           |       | —                     |       | —                                   |       | $                           | 35,582     |                         | $          | 137,500 |   |
|                             |       |                       |       |                                     |       |                        |       |                         |       |
| Robert I. Newton                 |       |                       |       |                                     |       |                        |       |                         |       |
| Employment Agreement             |       | —                     |       | —                                   |       | —                      |       | $                            | 150,000    | (4)(7) |
| Acceleration of Unvested Options |       | —                     |       | —                                   |       | $                           | 40,832     | (5)                          | —     |   |
| Total:                           |       | —                     |       | —                                   |       | $                           | 40,832     |                         | $          | 150,000 |   |

 

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| (1) |   | This severance benefit  is provided pursuant to Mr. Khulusi’s employment agreement if his  employment with us is terminated by Mr. Khulusi for “good reason,” as  defined in his employment agreement, including if we choose to not renew the  agreement.                                                                                                                                                                                                                                       |
|-----|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) |   | Estimated severance  payment is to be made in a single lump sum payment upon the termination or  change of control, as applicable.                                                                                                                                                                                                                                                                                                                                                                                        |
| (3) |   | Pursuant to the terms  of his employment agreement, to the extent the severance payment payable to  Mr. Khulusi in the event of a change of control, either alone or  together with other payments he has the right to receive from us, would not  be deductible (in whole or in part) by us as a result of the payment  constituting a “parachute payment” under Section 280G of the Internal  Revenue Code, the severance payment will be reduced to the maximum deductible  amount under the Code. |

 

15

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| (4) |   | Severance payments are  to be made in equal installments over a period of six months following the  date of termination.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|-----|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (5) |   | Represents the value of outstanding stock options as of December 31, 2007 that would vest upon consummation of a change in control. Assumes that the vested options are immediately exercised and the shares received upon exercise are immediately resold at the assumed per share price on the date of termination. As described above, the option agreements of Mr. Khulusi and Mr. Sanders provide for the full acceleration of vesting upon a change of control. The option agreements of our other named executive officers provide for partial acceleration of vesting upon a change of control if certain additional conditions occur, as described above. The amounts indicated in the table for the other named executive officers assume that the additional conditions occurred at or following a change of control. |
| (6) |   | Includes $5,687 of  severance benefit relating to costs to continue health insurance benefits for  Ms. Rogers and her family. Payments are to be made in equal bi-monthly  installments over the six month severance period following the date of  termination. All severance payment obligations, however, shall cease as of a  date on which Ms. Rogers obtains other employment during the six month  severance period.                                                                                                                                                                                                                                                                                                                                                                                                            |
| (7) |   | The amount  indicated reflects payments upon a termination not for cause. In the event of  the individual’s termination for cause, no payment would be payable, except  that pursuant to Mr. Khulusi’s employment agreement, if he is terminated  for cause (which may occur upon 30 days’ advance written notice), he is  to be paid his salary through the end of the notice period.                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (8) |   | Upon executive’s death,  we are required to pay to executive’s beneficiaries or estate the  compensation to which he is entitled through the end of the month in which  death occurs. Upon executive’s disability, which in the sole opinion of the  Board, if executive is not able to properly perform his duties for more than  270 days in the aggregate or 180 consecutive days in any twelve month  period, then executive’s employment shall termination on the last day of the  month in which the Board determines executive to be disabled and be entitled  to executive’s compensation through executive’s last day of employment.                                                                                                                                                                |

 

**DirectorCompensation (2007)**

 

The followingtable provides information regarding the compensation earned for servicesperformed for us as a director by each member of our board of directors, otherthan directors who are also named executive officers, during the fiscal yearended December 31, 2007.

 
| **Name**         | ** ** | **Fees Earned or   Paid in Cash ($)** | ** ** | **Stock  Awards  ($)(1)(2)** | ** ** | **Option  Awards  ($)(3)(4)** | ** ** | **All Other  Compensation ($)** | ** ** | **Total ($)** | ** ** |
|------------------|------------|---------------------------------------------------------------------|------------|------------------------------|------------|-------------------------------|------------|-------------------------------------------|------------|--------------------|------------|
| Thomas A. Maloof |       | $55,000                                                             |       | $9,203                       |       | $25,839                       |       | —                                    |       | $90,042            |       |
| Ronald B. Reck   |       | 54,500                                                              |       | 9,203                        |       | 17,226                        |       | $1,131                                    |       | 82,060             |       |
| Paul C. Heeschen |       | 50,000                                                              |       | 9,203                        |       | 43,910                        |       | —                                    |       | 103,113            |       |

 

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| (1) |   | Represents the dollar  amount associated with the director’s stock award grant that is recognized as  stock-based compensation expense in the 2007 fiscal year for financial  statement reporting purposes in accordance with SFAS 123R, resulting  from the vesting in 2007 of stock awards granted in 2007. For a detailed  discussion of the assumptions made in the valuation of stock awards, please  see Notes 2 and 3 of our Notes to the Consolidated Financial Statements  included in our original filing of this Annual Report on Form 10-K for  the year ended December 31, 2007.       |
|-----|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) |   | As of December 31,  2007, each of our directors had the following aggregate number of restricted  stock awards outstanding: Mr. Maloof – 2,250, Mr. Reck –  2,250 and Mr. Heeschen – 2,250.                                                                                                                                                                                                                                                                                                                                                                                |
| (3) |   | Represents the dollar  amount associated with the director’s option grant that is recognized as  stock-based compensation expense in the 2007 fiscal year for financial  statement reporting purposes in accordance with SFAS 123R, resulting  from the vesting in 2007 of options granted in 2005 and 2006. For a detailed  discussion of the assumptions made in the valuation of stock option awards,  please see Notes 2 and 3 of our Notes to the Consolidated Financial  Statements included in our original filing of this Annual Report on  Form 10-K for the year ended December 31, 2007. |
| (4) |   | As of December 31,  2007, each of our directors had the following aggregate number of option  awards outstanding: Mr. Maloof – 56,000, Mr. Reck –  51,000 and Mr. Heeschen - 20,000.                                                                                                                                                                                                                                                                                                                                                                                            |

 

16

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During the firstthree quarters of 2007, we paid each director who is not employed by us or anyof our affiliates a quarterly retainer of $6,000, plus $2,500 for each regularboard meeting attended in person or telephonically, $1,000 for each specialboard meeting attended in person or telephonically, $1,000 for each committeemeeting attended in person, and $500 for each committee meeting attendedtelephonically. We also paid the chairperson of the Audit Committee of ourBoard of Directors an additional quarterly retainer of $3,125 for serving insuch capacity. Directors who are employed by us or any of our affiliates arenot paid any additional compensation for their service on our board ofdirectors. We reimburse each of our directors for reasonable out-of-pocketexpenses that they incur in connection with attending board or committeemeetings. We have entered into indemnification agreements, a form of which hasbeen attached as an exhibit to our original filing of this Annual Report on Form 10-K,with each of our directors.

 

During the fourth quarter of 2007, weincreased the quarterly retainer paid to each of our non-employee directorsfrom $6,000 to $7,000 and the fee paid for attending each committee meetingtelephonically from $500 to $1,000. We also paid the chairperson of theCompensation Committee of our Board of Directors an additional quarterlyretainer of $1,250 for serving in such capacity for all four quarters of 2007.

 

Our directors arealso eligible to participate in our 1994 Plan, which is administered by ourCompensation Committee under authority delegated by our board of directors. Theterms and conditions of option and stock bonus grants to our non-employeedirectors under our 1994 Plan are determined in the discretion of ourCompensation Committee, and must be consistent with the terms of the 1994 Plan,which is filed as an exhibit to our original filing of this Annual Report on Form 10-K.

 

On August 31,2007, our Compensation Committee approved and granted, under the 1994 Plan theaward of 3,000 restricted stock to each of our non-employee members of the boardfor a total award of 9,000 shares of restricted stock. The restricted stockawards each vest quarterly in equal amounts over a one year period from thedate of grant. We valued the restricted stock award at fair value in accordancewith SFAS 123R as of the grant date. See footnotes 1 and 2 in the table abovefor more information on restricted stock awards.

 

**COMPENSATIONCOMMITTEE INTERLOCKS AND INSIDER PARTICIPATION**

 

Mr. Reck and Mr. Heeschenserved as members of our Compensation Committee during the fiscal year ended December 31,2007. There are no Compensation Committee interlocks between us and otherentities involving our executive officers and board members who serve asexecutive officers of such companies.

 

**COMPENSATIONCOMMITTEE REPORT**

 

The CompensationCommittee of the Board has reviewed and discussed the Compensation Discussionand Analysis with management. Based on its review and discussions withmanagement, the Committee recommended to our Board that the CompensationDiscussion and Analysis be included in our Form 10-K for the year ended December 31,2007 and our Proxy Statement for the 2008 Annual Meeting of Stockholders.

 

The CompensationCommittee

 

Ronald B. Reck (Chair)

Paul C. Heeschen

 

17

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** **
| **ITEM 12.** | ** ** | **SECURITY  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT****AND RELATED STOCKHOLDER MATTERS** |
|-------------------|------------|--------------------------------------------------------------------------------------------------------|

 

The followingtable sets forth certain information regarding the beneficial ownership of ourcommon stock as of April 23, 2008 by: (i) each of the named executiveofficers; (ii) each director; (iii) all of our current directors andexecutive officers as a group; and (iv) each person known to us to be thebeneficial owner of more than 5% of the outstanding shares of our common stock.Percentage ownership is based on an aggregate of 13,274,087 shares of ourcommon stock outstanding on April 23, 2008. The table is based uponinformation provided by officers, directors and principal stockholders, as wellas upon information contained in Schedules 13D and 13G filed with the SEC.Except as otherwise indicated, and subject to applicable community propertylaws, the persons named in the table have sole voting and investment power withrespect to all of the shares of our common stock beneficially owned by them.Unless otherwise indicated, the address for each person is: c/o PC Mall, Inc.,2555 W. 190th Street, Suite 201, Torrance, California90504.

 
| **Name of Beneficial Owner**                               | ** ** | **Number of Shares  Beneficially Owned** | ** ** | **Percentage of  Shares Beneficially  Owned** | ** ** |
|---------------------------------------------------------------------------|------------|---------------------------------------------------------|------------|---------------------------------------------------------|------------|
| *5% or Greater Stockholders:*                                             |       |                                                    |       |                                                    |       |
| Jonathan L. Kimerling(1)                                                  |       | 1,000,100                                               |       | 7.5%                                                    |       |
| Wells Fargo and Company(2)                                                |       | 709,560                                                 |       | 5.3                                                     |       |
|                                                                      |       |                                                    |       |                                                    |       |
| *Directors and Executive Officers:*                                       |       |                                                    |       |                                                    |       |
| Frank F. Khulusi                                                          |       | 2,197,181                                               | (3)        | 16.4                                                    |       |
| Theodore R. Sanders                                                       |       | 119,800                                                 | (4)        | *                                                       |       |
| Brandon H. LaVerne                                                        |       | 32,305                                                  | (5)        | *                                                       |       |
| Kristin M. Rogers                                                         |       | 187,833                                                 | (6)        | 1.4                                                     |       |
| Daniel J. DeVries                                                         |       | 150,130                                                 | (7)        | 1.1                                                     |       |
| Robert I. Newton                                                          |       | 99,583                                                  | (8)        | *                                                       |       |
| Thomas A. Maloof                                                          |       | 59,000                                                  | (9)        | *                                                       |       |
| Ronald B. Reck                                                            |       | 79,000                                                  | (10)       | *                                                       |       |
| Paul C. Heeschen                                                          |       | 26,727                                                  | (11)       | *                                                       |       |
| All current directors and executive officers as a  group (9 persons) |       | 2,836,447                                               | (12)       | 20.2%                                                   |       |

 

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| *      |   | Less than 1%                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (1)    |   | Based on information  contained in Schedule 13D/A filed on March 17, 2008 by  Jonathan L. Kimerling and Four Leaf Management, LLC, Jonathan L.  Kimerling has sole voting and dispositive power with respect to  1,000,100 shares of our common stock (includes all shares held by  Mr. Kimerling in an investment retirement account and shares held as  custodian on behalf of Joel Kimerling) and Four Leaf Management, LLC has sole  voting and dispositive power with respect to 960,100 shares of our  common stock. Mr. Kimerling is the sole managing member of Four Leaf  Management LLC. The address for Mr. Kimerling and Four Leaf Management  LLC is c/o Jonathan L. Kimerling, 2968 Cherokee Road, Birmingham,  Alabama 35223. |

 

18

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| (2)  |   | Based on information  contained in Schedule 13G/A filed on January 25, 2008 by Wells  Fargo and Company and Wells Capital Management Incorporated, Wells Fargo and  Company has sole voting power with respect to 707,860 shares and sole  dispositive power with respect to 709,560 shares of our common stock,  and Wells Capital Management Incorporated has sole voting power with respect  to 662,560 shares and sole dispositive power with respect to  709,560 shares of our common stock. Wells Fargo and Company is the  parent holding company of Wells Capital Management Incorporated, which is a  registered investment advisor. The address for Wells Fargo and Company is 420  Montgomery Street, San Francisco, California 94104 and the address  for Wells Capital Management Incorporated is 525 Market Street,  San Francisco, California 94105. |
|------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3)  |   | Consists of  1,646,656 shares held by the Khulusi Family Revocable Trust dated  November 3, 1993, 400,000 shares held by Frank F. Khulusi, and  151,875 shares underlying options which are presently vested or will  vest within 60 days of April 23, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (4)  |   | Mr. Sanders resigned  from exployment with our company effective June 30, 2007. The number of  shares beneficially owned by Mr. Sanders is presented as of September 25,  2007, the latest date as of which such information was available to us.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| (5)  |   | Includes  32,105 shares issuable upon exercise of stock options which are  presently vested or will vest within 60 days of April 23, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (6)  |   | Consists of  187,833 shares issuable upon exercise of stock options which are  presently vested or will vest within 60 days of April 23, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (7)  |   | Includes  142,030 shares issuable upon exercise of stock options which are  presently vested or will vest within 60 days of April 23, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (8)  |   | Consists of  99,583 shares issuable upon exercise of stock options which are  presently vested or will vest within 60 days of April 23, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| (9)  |   | Includes of 56,000 shares  issuable upon exercise of stock options which are presently vested or will  vest within 60 days of April 23, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| (10) |   | Includes 51,000 shares  issuable upon exercise of stock options which are presently vested or will  vest within 60 days of April 23, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (11) |   | Includes 20,000 shares  issuable upon exercise of stock options which are presently vested or will  vest within 60 days of April 23, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (12) |   | This figure includes an  aggregate of 745,114 shares issuable upon exercise of stock options  which are presently vested or will vest within 60 days of April 23,  2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

 

19

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** **

**EquityCompensation Plan Information**

 

The followingtable sets forth information about shares of our common stock that may beissued upon exercise of options and warrants under all of our equitycompensation plans as of December 31, 2007:

 
| **Plan Category**                                  | ** ** | **Number of  Securities to be  Issued Upon  Exercise of  Outstanding  Options,Warrants  and Rights** | ** ** | **Weighted-Average  Exercise Price of  Outstanding  Options, Warrants  and Rights** | ** ** | **Number of  Securities  Remaining Available  for Future Issuance   Under Equity  Compensation Plans** | ** ** |
|---------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------|------------|
| Equity Compensation Plans Approved by Security  Holders |       | 1,805,409                                                                                                                          |       | $                                                                                                       | 5.50       |                                                                                                                                      | 1,588,233  | (1) |
| Equity Compensation Plans Not Approved by Security      |       |                                                                                                                               |       |                                                                                                    |       |                                                                                                                                      |       |
| Holders(2)                                              |       | 30,000                                                                                                                             |       | 1.59                                                                                                    |       | ––                                                                                                                              |       |
| Total                                                   |       | 1,835,409                                                                                                                          |       | 5.44                                                                                                    |       | 1,588,233                                                                                                                                 |       |
|                                                         |            |                                                                                                                                    |            |                                                                                                         |            |                                                                                                                                           |            |  |

 

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| (1)    |   | Represents shares  available for issuance under our 1994 Stock Incentive Plan, as amended, as of  December 31, 2007. The 1994 Stock Incentive Plan, as amended, contains  an evergreen provision pursuant to which on January 1 of each year, the  aggregate number of shares reserved for issuance under the 1994 Stock  Incentive Plan, as amended, will increase by a number of shares equal to 3%  of the outstanding shares on December 31 of the preceding year. On  January 1, 2008, an additional 397,802 shares became available  under the plan pursuant to the evergreen provision. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (2)    |   | Represents a warrant to  purchase 30,000 shares of our common stock issued in June 2003 to a  consulting firm for investor and public relations services. The warrant was  issued at an exercise price of $3.99, adjusted to $1.59 on April 11,  2005 as a result of the adjustments made to outstanding options and warrants  in connection with the spin-off of eCOST.com, with a five year term, and  vested monthly over a one year period from the date of grant.                                                                                                                                   |

 

**ITEM 13.  CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR****INDEPENDENCE**

 

**Review,Approval or Ratification of Transactions with Related Persons**

 

We have a writtenpolicy covering the review and approval of transactions with related persons,which policy requires that we comply with the Nasdaq continued listingstandards. Our general counsel reviews and monitors the terms and conditions ofall related party transactions and an independent committee of the board ofdirectors approves all related party transactions.

 

**CertainRelationships and Related Transactions**

 

We have enteredinto indemnification agreements with each of our current directors andexecutive officers that provide the maximum indemnity available to directorsand officers under Section 145 of the Delaware General Corporation Law andour amended and restated certificate of incorporation, as well as certainprocedural protections. We have also entered into transactions with certain ofour directors and officers, as described under the section “ExecutiveCompensation.”

 

Sam U. Khulusi,the brother of Frank F. Khulusi, was employed as a Senior Vice President of AFServices, LLC, a wholly-owned subsidiary of PC Mall, in fiscal year 2008 andearned compensation in the amount of $211,253. Sam U. Khulusi did not earn anybonus during 2008. Sam U. Khulusi is eligible to participate in our employeebenefit plans that are generally available to similarly situated employees.

 

SimonM. Abuyounes, the brother-in-law of Frank F. Khulusi, was employed as thePresident of AF Services, LLC in fiscal year 2008 and earned compensation inthe amount of $343,319, which includes quarterly bonuses totaling $77,742 andcompany matched 401(k) contribution totaling $749. Mr. Abuyounes isentitled to six

 

20

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months severancebased on his base salary in the event his employment is terminated by uswithout cause. Mr. Abuyounes is also eligible to participate in ouremployee benefit plans that are generally available to similarly situatedemployees. Mr. Abuyounes was granted options to purchase 20,000 shares of ourcommon stock on August 31, 2007 at an exercise price of $12.27. The optionsvest quarterly over a four year period.

 

**DirectorIndependence**

 

Nasdaq listingstandards require that a majority of the members of a listed company’s board ofdirectors qualify as “independent,” as affirmatively determined by the board ofdirectors. After review of all of the relevant transactions or relationshipsbetween each director (and his family members) and us, our senior managementand our independent registered public accounting firm, our board of directorshas affirmatively determined that each of Mr. Maloof, Mr. Heeschenand Mr. Reck is “independent” within the meaning of the applicable Nasdaqlisting standards.

 

Each member of ourboard of directors serving on our audit and compensation committees is “independent”within the meaning of the applicable Nasdaq listing standards. The board ofdirectors does not have a nominating committee. As permitted by the Nasdaqlisting standards, in lieu of a nominating committee, nominations for directorcandidates are presented to the full board of directors for consideration andapproval upon the recommendation of no less than a majority of the independentmembers of the board of directors as defined in Rule 4200(a)(15) of theNasdaq listing standards.

 

**ITEM 14.  PRINCIPALACCOUNTING FEES AND SERVICES**

 

**AuditFees**

 

The aggregate feesPricewaterhouseCoopers LLP billed us in each of the last two fiscal years forprofessional services it rendered to us for the audit of our annual financialstatements included in our annual reports on Form 10-K and review of ourfinancial statements included in our quarterly reports on Form 10-Q, aswell as for services that are normally provided by PricewaterhouseCoopers LLPin connection with statutory and regulatory filings or engagements for thoseyears was $1,032,900 in 2007 and $892,500 in 2006. Fiscal year 2007 alsoinclude services rendered and billed relating to the audit of our internalcontrol over financial reporting and the related attestation report on theeffectiveness of internal control over financial reporting as required by Section 404of the Sarbanes-Oxley Act of 2002.

 

**Audit-RelatedFees**

 

The aggregate feesPricewaterhouseCoopers LLP billed us in fiscal year 2007 for assurance orrelated services regarding the performance of its audit or review of ourfinancial statements, other than those reported above under the caption “AuditFees” was $40,100. For fiscal 2007, the fees were primarily related to servicesperformed in connection with our acquisition of SARCOM. No such fees werebilled to us by PricewaterhouseCoopers LLP in fiscal 2006.

 

**Tax Fees**

 

The aggregate feesPricewaterhouseCoopers LLP billed us in fiscal years 2007 and 2006 forprofessional services rendered for tax compliance, tax advice or tax planningwas $71,254 and $26,662, respectively.

 

**AllOther Fees**

 

PricewaterhouseCoopersLLP did not provide us, or bill us for, any products or services in the lasttwo fiscal years, other than the services performed in connection with the feesreported under the captions “Audit Fees,” “Audit-Related Fees” and “Tax Fees”above.

 

21

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** **

**AuditCommittee Pre-Approval Policy**

 

The auditcommittee of our board of directors has adopted a policy requiring that allservices provided to us by our approved independent registered accounting firmbe pre-approved by the audit committee. The policy pre-approves specific typesof services that the independent registered accounting firm may provide us ifthe types of services do not exceed specified cost limits. Any type of servicethat is not clearly described in the policy, as well as any type of describedservice that would exceed the pre-approved cost limit set forth in the policy,must be explicitly approved by our audit committee prior to any engagement withrespect to that type of service. Our audit committee reviews the pre-approvalpolicy and establishes fee limits annually, and may revise the list ofpre-approved services from time to time.

 

Additionally, ouraudit committee delegated to its chairman the authority to explicitlypre-approve engagements with our independent registered accounting firm,provided that any pre-approval decisions must be reported to our auditcommittee at its next scheduled meeting. If explicit pre-approval is requiredfor any service, our Chief Financial Officer and our independent registeredaccounting firm must submit a joint request to the audit committee, or itsauthorized delegate, describing in detail the specific services proposed andthe anticipated costs of those services, as well as a statement as to whetherand why, in their view, providing those services will be consistent with theSEC’s rules regarding auditor independence.

 

22

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**PART IV**

 

**ITEM 15.  EXHIBITS ANDFINANCIAL STATEMENT SCHEDULES**

 

(a) Thefollowing documents are filed as part of this report:

 

(1)               FinancialStatements — See Part II, Item 8 — Financial Statements ofour original filing of this Form 10-K.

 

(2)               Financial StatementSchedule II — Valuation and Qualifying Accounts — See Part IV,Item 15 — Exhibits and Financial Statement Schedules of our original filing ofthis Form 10-K.

 

(3)               Exhibits — Thefollowing exhibits are filed or incorporated herein by reference as part ofthis report:

 

| **Exhibit  Number** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|---------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **          | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 2.1                 |       | Agreement and Plan of  Merger, dated as of August 17, 2007, by and among PC Mall, Inc.,  Mall Acquisition 2, Inc., SARCOM, Inc., Zohar CDO 2003-1, Limited,  Zohar II 2005-1, Limited, Charles E. Sweet, Robert F. Angart &  Company, John R. Strauss, Daniel A. Schneider and Howard Schapiro  (incorporated herein by reference to Exhibit 2.1 to the Current Report  on Form 8-K of PC Mall, Inc. (File No. 0-25790) filed with the  Securities and Exchange Commission (the “Commission”) on September 18,  2007) |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 3.1                 |       | Amended and Restated  Certificate of Incorporation of PC Mall, Inc. (incorporated herein by  reference to Exhibit 3.1(C) to the Quarterly Report on  Form 10-Q of PC Mall, Inc. for the quarter ended September 30,  2003 (File No. 0-25790) filed with the Commission on November 14,  2002)                                                                                                                                                                                                                                                 |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 3.2                 |       | Amended and Restated  Bylaws of PC Mall, Inc. (incorporated herein by reference to  Exhibit 3.2 to the Annual Report on Form 10-K of PC Mall, Inc.  for the year ended December 31, 2000 (File No. 0-25790) filed with  the Commission on April 2, 2001 (the “2000 Form 10-K”))                                                                                                                                                                                                                                                     |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.1*               |       | Amended and Restated  1994 Stock Incentive Plan (amended as of June 19, 2002) (incorporated  herein by reference to Annex A to the Definitive Proxy Statement of PC  Mall, Inc. (File No. 0-25790) filed with the Commission on  June 24, 2002)                                                                                                                                                                                                                                                                                                                   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.2*               |       | Employment Agreement,  dated January 1, 1995, between Creative Computers, Inc. and Frank  F. Khulusi (incorporated herein by reference to the Registration Statement on  Form S-1 of PC Mall, Inc. (File No. 33-89572), declared  effective on April 4, 1995 (the “1995 Form S-1”))                                                                                                                                                                                                                                                      |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.3*               |       | Amendment to Employment  Agreement made and entered into as of December 28, 2005, by and between  PC Mall, Inc. and Frank F. Khulusi (incorporated herein by reference to  Exhibit 10.32 to the Annual Report on Form 10-K of PC  Mall, Inc. for the year ended December 31, 2005 (File  No. 0-25790) filed with the Commission on March 31, 2006 (the  “December 31, 2005 Form 10-K))                                                                                                                                         |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.4*               |       | Second Amendment to  Employment Agreement made and entered into as of December 28, 2005, by and  between PC Mall, Inc. and Frank F. Khulusi (incorporated herein by reference  to Exhibit 10.33 to the December 31, 2005 Form 10-K)                                                                                                                                                                                                                                                                                                                                              |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.5*               |       | Employment Agreement,  dated January 20, 2000, between PC Mall, Inc. and Kristin M. Rogers  (incorporated herein by reference to Exhibit 10.45 to the Annual Report  on Form 10-K of PC Mall, Inc. for the year ended December 31,  2001 (File No. 0-25790) filed with the Commission on April 1, 2002)                                                                                                                                                                                                                                       |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.6*               |       | Employment Agreement,  dated January 1, 1994, between Creative Computers, Inc. and Daniel  J. DeVries (incorporated herein by reference to the 1995 Form S-1)                                                                                                                                                                                                                                                                                                                                                                                                          |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.7*               |       | Severance Agreement,  dated January 31, 2006, between PC Mall Inc. and Daniel J. DeVries  (incorporated herein by reference to Exhibit 10.1 to the Current Report  on Form 8-K of PC Mall, Inc. (File No. 0-25790) filed with the  Commission on February 3, 2006)                                                                                                                                                                                                                                                                                      |

 

23

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| **Exhibit  Number** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|---------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **          | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.8*               |       | Employment Agreement,  dated June 8, 2004, between PC Mall, Inc. and Rob Newton  (incorporated herein by reference to Exhibit 10.54 to the Quarterly  Report on Form 10-Q of PC Mall, Inc. for the quarter ended  June 30, 2004 (File No. 0-25790) filed with the Commission on  August 11, 2004)                                                                                                                                 |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.9*               |       | Amendment to Employment  Agreement, dated March 22, 2005, between PC Mall, Inc. and Rob  Newton (incorporated herein by reference to Exhibit 10.2 to the Current  Report on form 8-K of PC Mall, Inc. (File No. 0-25790) filed with  the Commission on March 25, 2005)                                                                                                                                                                      |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.10*              |       | Severance Agreement  between AF Services, LLC and Brandon LaVerne (incorporated herein by  reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q of  PC Mall, Inc. for the quarter ended September 30, 2007 (File  No. 0-25790) filed with the Commission on November 14, 2007 (the  “September 30, 2007 Form 10-Q”))                                                                                          |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.11*              |       | Form of Executive  Non-Qualified Stock Option Agreement (full acceleration upon change in control)  (incorporated herein by reference to Exhibit 10.61 to the Quarterly  Report on Form 10-Q of PC Mall, Inc. for the quarter ended  September 30, 2004 (File No. 0-25790) filed with the Commission on  November 15, 2004 (the “September 30, 2004 Form 10-Q”))                                                   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.12*              |       | Form of Executive  Non-Qualified Stock Option Agreement (partial acceleration upon change in  control) (incorporated herein by reference to Exhibit 10.62 to the  September 30, 2004 Form 10-Q)                                                                                                                                                                                                                                                       |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.13*              |       | Directors’  Non-Qualified Stock Option Plan, amended and restated as of May 18, 1999  (incorporated herein by reference to Exhibit 10.2 to the Quarterly  Report on Form 10-Q of PC Mall, Inc. for the quarter ended  June 30, 1999 (File No. 0-25790) filed with the Commission on  August 16, 1999)                                                                                                                             |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.14*              |       | Form of  Indemnification Agreement between PC Mall, Inc. and each of its  directors and executive officers (incorporated herein by reference to  Exhibit 10.48 to the Annual Report on Form 10-K of PC  Mall, Inc. for the year ended December 31, 2002 (File No. 0-25790)  filed with the Commission on March 31, 2003)                                                                                                          |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.15*              |       | Form of Director  Restricted Stock Bonus Award Agreement (incorporated herein by reference to  Exhibit 10.3 to the September 30, 2007 Form 10-Q)                                                                                                                                                                                                                                                                                                      |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.16               |       | Master Separation and  Distribution Agreement, dated September 1, 2004, between PC  Mall, Inc. and eCOST.com, Inc. (incorporated herein by reference to  Exhibit 10.56 to the Current Report on Form 8-K of PC  Mall, Inc. (File No. 0-25790) filed with the Commission on  September 8, 2004 (the “September 8, 2004 Form 8-K”))                                                                             |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.17               |       | Tax Allocation and  Indemnification Agreement, dated September 1, 2004, between PC  Mall, Inc. and eCOST.com, Inc. (incorporated herein by reference to  Exhibit 10.57 to the September 8, 2004 Form 8-K)                                                                                                                                                                                                                                   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.18               |       | Employee Benefit  Matters Agreement, dated September 1, 2004, between PC Mall, Inc.  and eCOST.com, Inc. (incorporated herein by reference to  Exhibit 10.58 to the September 8, 2004 Form 8-K)                                                                                                                                                                                                                                             |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.19               |       | Office Lease by and  between St. Paul Properties, Inc., as Landlord, and PC Mall, Inc.,  as Tenant (incorporated herein by reference to Exhibit 10.1 to the  Current Report on Form 8-K of PC Mall, Inc. (File No. 0-25790)  filed with the Commission on June 21, 2007)                                                                                                                                                               |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.20               |       | Lease Agreement, dated  September 1, 2003, between PC Mall, Inc. and Anderson Tully Company  for the premises located at 4715 E. Shelby Drive, Memphis, TN (incorporated  herein by reference to Exhibit 10.63 to the Annual Report on  Form 10-K of PC Mall, Inc. for the year ended December 31,  2004 (File No. 0-25790) filed with the Commission on March 31, 2005  (the “December 31, 2004 Form 10-K”)) |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.21               |       | Renewal Letter for  lease of property in Memphis, Tennessee, entered into on October 2, 2006  (incorporated herein by reference to Exhibit 10.1 to the Current Report  on Form 8-K of PC Mall, Inc. (File No. 0-25790) filed with the  Commission on October 6, 2006)                                                                                                                                                                       |

 

24

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| **Exhibit  Number** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|---------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **          | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.22               |       | Lease Agreement, dated  June 11, 2003, among PC Mall, Inc., PC Mall Canada, Inc. and  Canaprev, Inc. for the premises located at 1100, University, 2nd Floor,  Montreal (Quebec) Canada (incorporated herein by reference to  Exhibit 10.64 to the December 31, 2004 Form 10-K)                                                                                                                                                               |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.23               |       | Addendum to Lease  Agreement, dated January 26, 2004, between PC Mall, Inc., PC Mall  Canada, Inc. and Canaprev, Inc. for premises located at 1100  University, Montreal, Quebec, Canada, dated January 26, 2004  (incorporated herein by reference to Exhibit 10.70 to the  December 31, 2004 Form 10-K)                                                                                                                                |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.24               |       | Lease Agreement, dated  as of July 1, 2001, by and between Sarcom Properties, Inc. and  Sarcom Desktop Solutions, Inc., as amended as of December 1, 2002  and as of March 22, 2004 (incorporated herein by reference to  Exhibit 10.8 to the September 30, 2007 Form 10-Q)                                                                                                                                                              |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.25               |       | Addendum No. 2, by  and between Complexe Rue Universite S.E.C., PC Mall Canada, Inc. and PC  Mall, Inc., dated January 10, 2008 (incorporated herein by  reference to Exhibit 10.1 to the Current Report on Form 8-K of PC Mall, Inc.  (File No. 0-25790) filed with the Commission on January 15, 2008)                                                                                                                            |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.26               |       | Amended and Restated  Loan and Security Agreement, dated as of August 1, 2005, by and among PC  Mall, Inc., certain subsidiaries of PC Mall, Inc., Wachovia Capital  Finance Corporation (Western) and certain other financial institutions  (incorporated herein by reference to Exhibit 10.1 to the Current Report  on Form 8-K of PC Mall, Inc. (File No. 0-25790) filed with the  Commission on September 8, 2005)                   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.27               |       | Second Amendment to  Amended and Restated Loan and Security Agreement, dated as of June 11,  2007, by and among the Registrant, certain subsidiaries of the Registrant,  Wachovia Capital Finance Corporation (Western) and certain other financial  institutions (incorporated herein by reference to Exhibit 10.1 to the  Current Report on Form 8-K of PC Mall, Inc. (File No. 0-25790)  filed with the Commission on June 15, 2007)            |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.28               |       | Third Amendment to  Amended and Restated Loan and Security Agreement, dated as of  September 17, 2007, by and among PC Mall, Inc., certain  subsidiaries of PC Mall, Inc., Wachovia Capital Finance Corporation  (Western) and certain other financial institutions (incorporated by reference  to Exhibit 10.1 to the Current Report on Form 8-K of PC  Mall, Inc. (File No. 0-25790) filed with the Commission on  September 18, 2007) |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.29               |       | Fourth Amendment to  Amended and Restated Loan and Security Agreement, dated as of  November 5, 2007, by and among PC Mall, Inc, certain of its  subsidiaries, Wachovia Capital Finance Corporation (Western) and certain  other financial institutions (incorporated by reference to Exhibit 10.1  to the Current Report on Form 8-K of PC Mall, Inc. (File  No. 0-25790) filed with the Commission on November 6, 2007)                          |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.30               |       | Asset Purchase  Agreement, dated as of September 7, 2006, by and among a wholly-owned  subsidiary of PC Mall Gov, Inc. GMRI and the shareholders of GMRI  (incorporated herein by reference to Exhibit 10.1 to the Current Report  on Form 8-K of PC Mall, Inc. (File No. 0-25790) filed with the  Commission on September 12, 2006)                                                                                                          |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.31               |       | Joint Stipulation of  Settlement and Release made and entered into by and between Plaintiff Nicole  Atkins, Class Representative and Defendants PC Mall, Inc. and PC  Mall Sales, Inc. (incorporated herein by reference to Exhibit 10.1  to the Quarterly Report on Form 10-Q of PC Mall, Inc. (File  No. 0-25790) for the period ended March 31, 2007 filed with the  Commission on May 15, 2007)                                 |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.32               |       | Registration Rights  Agreement, dated as of September 17, 2007, by and among PC  Mall, Inc., Zohar CDO 2003-1, Limited, Zohar II 2005-1, Limited, Charles  E. Sweet, Robert F. Angart & Company, John R. Strauss, Daniel A.  Schneider and Howard Schapiro (incorporated by reference to Exhibit 10.2  to the Current Report on Form 8-K of PC Mall, Inc. (File  No. 0-25790) filed with the Commission on September 18, 2007)       |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.33*              |       | Summary of Executive  Bonus Plan (incorporated herein by reference to Exhibit 10.68 to the  December 31, 2004 Form 10-K)                                                                                                                                                                                                                                                                                                                                          |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.34*†        |       | Summary of Executive  Salary and Bonus Arrangements                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.35*†        |       | Summary of Director  Compensation Arrangements                                                                                                                                                                                                                                                                                                                                                                                                                                   |

 

25

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| **Exhibit  Number** | ** ** | **Description**                                                                                                                                                                                                                                                                                   |
|---------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                |       |                                                                                                                                                                                                                                                                                              |
| 10.36*              |       | Employment Agreement,  by and between PC Mall, Inc. and Joseph B. Hayek, dated March 17,  2008 (incorporated by reference to Exhibit 10.1 to the Current Report on  Form 8-K of PC Mall, Inc. (File No. 0-25790) filed with the  Commission on March 19, 2008) |
|                |       |                                                                                                                                                                                                                                                                                              |
| 21.1†          |       | Subsidiaries of PC  Mall, Inc. as of December 31, 2007                                                                                                                                                                                                                                  |
|                |       |                                                                                                                                                                                                                                                                                              |
| 23.1†          |       | Consent of  PricewaterhouseCoopers LLP                                                                                                                                                                                                                                                            |
|                |       |                                                                                                                                                                                                                                                                                              |
| 31.1 †         |       | Certification of the  Chief Executive Officer of PC Mall, Inc. pursuant to Exchange Act  Rule 13a-14(a)                                                                                                                                                                                 |
|                |       |                                                                                                                                                                                                                                                                                              |
| 31.2 †         |       | Certification of the  Interim Chief Financial Officer of PC Mall, Inc. pursuant to Exchange  Act Rule 13a-14(a)                                                                                                                                                                         |
|                |       |                                                                                                                                                                                                                                                                                              |
| 31.3                |       | Certification of the  Chief Executive Officer of PC Mall, Inc. pursuant to Exchange Act  Rule 13a-14(a), required to be filed as exhibit to this Amendment  No. 2                                                                                                                  |
|                |       |                                                                                                                                                                                                                                                                                              |
| 31.4                |       | Certification of the  Interim Chief Financial Officer of PC Mall, Inc. pursuant to Exchange  Act Rule 13a-14(a), required to be filed as exhibit to this Amendment  No. 2                                                                                                          |
|                |       |                                                                                                                                                                                                                                                                                              |
| 32.1 †         |       | Certification of the  Chief Executive Officer of PC Mall, Inc. pursuant to 18 U.S.C. 1350, as  adopted by Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                 |
|                |       |                                                                                                                                                                                                                                                                                              |
| 32.2 †         |       | Certification of the  Interim Chief Financial Officer of PC Mall, Inc. pursuant to 18 U.S.C.  1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                         |

 

----

| *      |   | Management contract, or  compensatory plan or arrangement.                                                                                                                                         |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                               |
| † |   | Previously filed as an  exhibit to the Registrant’s Form 10-K for the year ended  December 31, 2007 (File No. 0-25790) filed with the Commission  on March 17, 2008. |

 

* * *

 

26

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** **

**SIGNATURES**

 

Pursuant to therequirements of Section 13 or 15(d) of the Securities Exchange Act of1934, the Registrant has duly caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized.

 
|                       | PC MALL, INC. |
|----------------------------|---------------|
|                       | (Registrant)  |
|                       |          |
| Date: April 29,  2008 | By:           | /s/  FRANK F.  KHULUSI |
|                       |          | Frank F. Khulusi |
|                       |          | Chairman of the Board,  President and |
|                       |          | Chief Executive Officer |

** **

**27**

----

** **

**PCMALL, INC.**

 

**EXHIBIT INDEX**

 
| **Exhibit  Number** | ** ** | **Description**                                                                                                                                                                          |
|---------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                |       |                                                                                                                                                                                     |
| 31.3                |       | Certification of the Chief Executive Officer of PC Mall, Inc. pursuant to Exchange Act Rule 13a-14(a), required to be filed as exhibit to this Amendment No. 2            |
|                |       |                                                                                                                                                                                     |
| 31.4                |       | Certification  of the Interim Chief Financial Officer of PC Mall, Inc. pursuant to  Exchange Act Rule 13a-14(a), required to be filed as exhibit to this  Amendment No. 2 |

 

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