formpre14a.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of
the
Securities Exchange Act of 1934 (Amendment
No. )
Filed
by
the Registrant T
Filed
by
a Party other than the Registrant £
Check
the
appropriate box:
T Preliminary
Proxy Statement
£ Confidential,
for Use of the
Commission Only (as permitted by Rule 14a-6(e)(2))
£ Definitive
Proxy Statement
£ Definitive
Additional Materials
£ Soliciting
Material Pursuant to §240.14a-12
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EPLUS
INC.
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(Name
of Registrant as Specified In Its Charter)
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment
of Filing Fee (Check the appropriate box):
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£
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction
applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is
calculated and state how it was
determined):
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(4)
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Proposed
maximum aggregate value of
transaction:
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£
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Fee
paid previously with preliminary
materials.
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£
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid
previously. Identify the previous filing by registration statement
number,
or the Form or Schedule and the date of its
filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement
No.:
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EPLUS
INC.
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To
be
held on [Monday, September 15, 2008]
To
the
Stockholders of ePlus
inc.:
The
Annual Meeting of Stockholders of ePlus
inc., a Delaware corporation, will be held on [September 15, 2008], at the
Hyatt
Regency, 1800 Presidents Street, Reston, Virginia, 20190 at 8:00 a.m. local
time
for the purposes stated below:
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1.
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To
elect as directors the two Class III Directors, three Class II Directors,
and three Class I Directors named in the attached proxy statement,
each to
serve a term as described in the proxy statement, and until their
successors have been duly elected and
qualified;
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2.
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To
approve the 2008 Non-Employee Director Long-Term Incentive
Plan;
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3.
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To
approve the 2008 Employee Long-Term Incentive
Plan;
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4.
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To
approve our Amended and Restated Certificate of
Incorporation;
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5.
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To
ratify the appointment of Deloitte & Touche LLP as our independent
auditors for our fiscal year ending March 31,
2009;
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6.
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To
transact such other business as may properly come before the Annual
Meeting and any adjournment or postponement
thereof.
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Under
the
provisions of our Bylaws, and in accordance with Delaware law, the Board of
Directors has fixed the close of business on [July 25, 2008] as the Record
Date
for stockholders entitled to notice of and to vote at the Annual
Meeting.
Whether
or not you expect to be present at the Annual Meeting, please date and sign
the
enclosed Proxy Card and mail it promptly in the enclosed envelope to Proxy
Tabulator, P.O. Box 535300, Pittsburgh, PA, 15253-9837. If you submit
your proxy and then decide to attend the Annual Meeting to vote your shares
in
person, you may still do so. Your proxy is revocable in accordance
with the procedures set forth in the Proxy Statement.
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By
Order of the Board of Directors
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/s/
Erica S. Stoecker
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[August
15, 2008]
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Erica
S. Stoecker
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Corporate
Secretary
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ePlus
inc.
www.eplus.com
PROXY
STATEMENT
FOR
THE
2008 ANNUAL MEETING OF STOCKHOLDERS
We
sent
you this proxy statement and the enclosed proxy card because the Board of
Directors of ePlus inc. (sometimes referred to as “we”, “us”, “our”, “the
Company” and “ePlus”), a Delaware corporation, is soliciting your proxy to vote
at the 2008 Annual Meeting of Stockholders and at any adjournment or
postponement thereof. The annual meeting will be held on [September
15, 2008] at [8:00 a.m.] at the Hyatt Regency, 1800 Presidents Street, Reston,
Virginia, 20190. You are invited to attend the annual meeting and we
request that you vote on the proposals described in this proxy
statement. However, you do not need to attend the annual meeting to
vote your shares. Instead, you may complete, sign and return the
enclosed proxy card.
The
Company intends to mail this proxy statement and accompanying proxy card on
or
about [August 15, 2008] to all stockholders of record entitled to vote at the
annual meeting.
Only
stockholders of record at the close of business on [July 25, 2008], or “record
date,” will be entitled to vote at the annual meeting. On this record
date, there were [NUMBER OF SHARES] shares of common stock outstanding and
entitled to vote. Each share of common stock is entitled to one vote
on each matter properly brought before the annual meeting.
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Ø
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What
is
the
difference between holding shares as a registered stockholder and
as a
beneficial holder?
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If
on the
record date your shares were registered directly in your name with our transfer
agent, National City Bank, then you are a stockholder of record. As a
stockholder of record, you may vote in person at the annual meeting or vote
by
proxy using the enclosed proxy card. Whether or not you plan to
attend the annual meeting, we urge you to complete, sign and return the proxy
card to ensure your vote is counted.
If
on the
record date your shares were held in an account at a brokerage firm, bank,
dealer, or other similar organization, then you are the beneficial owner of
shares held in “street name” and these proxy materials are being forwarded to
you by that organization. The organization holding your account is
considered the stockholder of record for purposes of voting at the annual
meeting. As a beneficial owner you have the right to direct your
broker or other agent on how to vote the shares in your account by following
the
voting instructions included in their mailing. You are also invited
to attend the annual meeting. However, since you are not the
stockholder of record you may not vote your shares in person at the annual
meeting unless you request and obtain a valid proxy from your broker or other
agent.
There
are
five matters scheduled for a vote:
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Election
of three Class I directors, three Class II directors and two Class
III
directors.
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Approval
of the 2008 Non-Employee Director Long-Term Incentive
Plan
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Approval
of the 2008 Employee Long-Term Incentive
Plan
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Approval
of our Amended and Restated Certificate of Incorporation;
and
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Ratification
of the appointment of Deloitte & Touche LLP as our independent
auditors for our fiscal year ending March 31,
2009.
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Ø
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Can
I change my
vote after submitting my
proxy?
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Yes. You
can revoke your proxy at any time before the final vote at the annual
meeting. If you are a stockholder of record, you may revoke your
proxy in any one of three ways:
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You
may submit another properly completed proxy card with a later
date.
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You
may send a written notice that you are revoking your proxy to the
Corporate Secretary, ePlus inc., 13595 Dulles Technology Drive, Herndon,
Virginia, 20171.
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You
may attend the annual meeting and vote in
person. Attending the annual meeting will not, by itself,
revoke your proxy.
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Please
note that to be effective, your new proxy card or written notice of revocation
must be received by the Corporate Secretary prior to the annual
meeting.
If
you
are a beneficial owner of shares, you may submit new voting instructions by
contacting your broker or other agent. You may also vote in person at
the annual meeting if you obtain a legally valid proxy from your broker or
other
agent as described above.
Votes
will be counted by the inspector of election appointed for the annual meeting,
who will separately count “For” and “Against” votes, abstentions and broker
non-votes. A “broker non-vote” occurs when a nominee holding shares
for a beneficial owner does not vote on a particular proposal because the
nominee does not have discretionary voting power with respect to that proposal
and has not received instructions with respect to that proposal from the
beneficial owner despite voting on at least one other proposal for which it
does
have discretionary authority or for which it has received
instructions. Discretionary authority is allowed for Proposal 1 and
Proposal 5. Discretionary authority is not allowed for Proposals 2, 3
or 4. Broker non-votes will have no effect and will not be counted
towards the vote for Proposals 1, 2, 3, and 5. For Proposal 4, broker
non-votes will have the same effect as “Against” votes. For Proposal
1, abstentions will have no effect. For Proposals 2, 3, 4 and 5,
abstentions will be counted toward the vote total and will have the same effect
as “Against” votes.
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What
are
the
voting requirements for each
proposal?
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For
Proposal 1, election of directors, nominees who receive a plurality
of the
votes cast will be elected director. Abstentions and broker
non-votes will have no effect.
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To
be approved, Proposal 2, approval of the 2008 Non-Employee Director
Long-Term Incentive Plan, must receive a “For” vote from the majority of
shares present and entitled to vote either in person or by
proxy. If you “Abstain” from voting, it will have the same
effect as an “Against” vote. Broker non-votes will have no
effect.
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To
be approved, Proposal 3, approval of the 2008 Employee Long-Term
Incentive
Plan, must receive a “For” vote from the majority of shares present and
entitled to vote either in person or by proxy. If you “Abstain”
from voting, it will have the same effect as an “Against”
vote. Broker non-votes will have no
effect.
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To
be approved, Proposal 4, approval of our Amended and Restated Certificate
of Incorporation, must receive a “For” vote from the majority of the
outstanding shares entitled to vote. Abstentions and broker
non-votes will have the same effect as an “Against”
vote.
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To
be approved, Proposal 5, ratification of appointment of independent
auditors, must receive a “For” vote from the majority of shares present
and entitled to vote either in person or by proxy. If you
“Abstain” from voting, it will have the same effect as an “Against”
vote. Broker non-votes will have no
effect.
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A
quorum
of stockholders is necessary to hold a valid annual meeting. A quorum
will be present if at least a majority of the outstanding shares are represented
by proxy or by stockholders present and entitled to vote at the annual
meeting. On the record date, there were [NUMBER OF SHARES] shares
outstanding and entitled to vote. Thus, at least [ NUMBER OF SHARES ]
shares must be represented by proxy or by stockholders present and entitled
to
vote at the annual meeting to have a quorum.
Your
shares will be counted towards the quorum only if you submit a valid proxy
(or
one is submitted on your behalf by your broker or bank) or if you vote in person
at the annual meeting. We will count abstentions and broker non-votes
for purposes of determining a quorum. If there is no quorum, the
chairman of the annual meeting or holders of a majority of the votes present
at
the annual meeting may adjourn the annual meeting to another time or
date.
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Who
pays for the
cost of this proxy
solicitation?
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We
will
pay for the entire cost of soliciting proxies. In addition to these
mailed proxy materials, our directors and employees may also solicit proxies
in
person, by telephone, or by other means of communication. Directors
and employees will not be paid any additional compensation for soliciting
proxies. We may retain the services of Georgeson Inc. in connection
with soliciting proxies for the Annual Meeting of Stockholders for an estimated
fee of $1,200 to $1,600, plus appropriate out-of-pocket expenses. We
may also reimburse brokerage firms, banks and other agents for the cost of
forwarding proxy materials to beneficial owners.
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Ø
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How
do
I submit
a proposal for the Annual Meeting of Stockholders in
2009?
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To
be
considered for inclusion in the Company’s proxy statement and form of proxy for
next year’s annual meeting, your stockholder proposal must be submitted in
writing by [April 17], 2009 to the Corporate Secretary, ePlus inc., 13595 Dulles
Technology Drive, Herndon, Virginia 20171. Proposals must
be received by that date and satisfy the requirements under applicable SEC
Rules
(including SEC Rule 14a-8) to be included in the proxy statement and on the
proxy card that will be used for solicitation of proxies by the Board for the
2009 Annual Meeting.
On
June
25, 2008, our Board of Directors approved the Amended and Restated Bylaws,
which
amended, among other things, the procedures for stockholders to submit proposals
or nominate directors. In accordance with our current Bylaws, if you wish to
submit a proposal for consideration at next year’s annual meeting that is not to
be included in next year’s proxy materials, or wish to nominate a candidate for
election to the Board of Directors at next year’s annual meeting, your proposal
or nomination must be submitted in writing and received by the Corporate
Secretary not less than 60 days before the date of the first anniversary of
this
2008 annual meeting if the 2009 annual meeting is held within 30 days of the
anniversary of this 2008 annual meeting, otherwise, within seven days after
the
first public announcement of the date of the 2009 annual meeting.
A
submission by an ePlus stockholder must contain the specific information
required in ePlus’ Bylaws. If you would like a copy of ePlus’ current
Bylaws, please write to the Corporate Secretary, ePlus inc., 13595 Dulles
Technology Drive, Herndon, Virginia 20171. ePlus’ current
Bylaws may also be found on the Company’s website at http://www.eplus.com/bylaws.htm.
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Ø
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Can
I find
additional information on the Company’s
website?
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Yes. Although
the information contained on our website is not part of this proxy statement,
you will find information about ePlus and our corporate governance practices
at
http://www.eplus.com/about_us.htm. Our
website contains information about our Board, Board Committees and their
charters, a copy of our Bylaws, and Standard of Conduct and
Ethics. Stockholders may obtain, without charge, hard copies of the
above documents by writing to: Corporate Secretary, ePlus inc., 13595
Dulles Technology Drive, Herndon,
Virginia 20171.
Role
of the Board of Directors
Our
Board
plays an active role in overseeing management and representing the interests
of
stockholders. Directors are expected to attend Board meetings and the
meetings of committees on which they serve. Directors are also
frequently in communication with management between formal
meetings. During the fiscal year ended March 31, 2008, the Board met
a total of seven times. All directors attended at least 75% of the
total Board and committee meetings to which they were assigned in the fiscal
year ended March 31, 2008. All members of the Board, who were members of the
Board on such date, attended the last meeting of our stockholders.
Standard
of Conduct and Ethics
We
are
committed to ethical behavior in all that we do. Our Standard of
Conduct and Ethics applies to all of our directors, officers and
employees. It sets forth our policies and expectations on a number of
topics, including our commitment to promoting a fair workplace, avoiding
conflicts of interest, compliance with laws (including insider trading laws),
appropriate relations with government officials and employees, and compliance
with accounting principles.
We
also
maintain a toll-free hotline through which employees may raise concerns
regarding accounting or financial reporting matters. The hotline is
available to all employees, 7 days a week, 24 hours a day, in English and in
Spanish. Employees using the hotline may choose to remain
anonymous. All hotline inquiries are forwarded to a member of our
Audit Committee.
Our
Standard of Conduct and Ethics is posted on our website at www.eplus.com/ethics.htm. Printed
copies of the Standard of Conduct and Ethics may be obtained by stockholders,
without charge, by contacting Corporate Secretary, ePlus inc., 13595 Dulles
Technology Drive, Herndon, Virginia 20171. We intend to make any
required disclosures regarding any amendments of our Standard of Conduct and
Ethics or waivers granted to any of our directors or executive officers on
our
website at www.eplus.com.
Identifying
and Evaluating Nominees for Directors
Each
year, the Nominating and Corporate Governance Committee recommends to the Board
the slate of directors to serve as management’s nominees for election by the
stockholders at the annual meeting. The process for identifying and
evaluating candidates to be nominated to the Board starts with an evaluation
of
a candidate by the Chairman of the Committee, followed by the Committee in
its
entirety. Director candidates may also be identified by
stockholders. In evaluating such nominations, the Nominating and Corporate
Governance Committee seeks to achieve a balance of knowledge, experience, and
capability on the Board of Directors. Furthermore, any member of the Board
of Directors must have the highest personal ethics and values and have
experience at the policy-making level of business, and should be committed
to enhancing stockholder value.
Stockholder
proposals for nominations to the Board should be submitted to the Secretary
of
the Corporation as specified in the Corporation’s Bylaws. The
information requirements for any stockholder proposal or nomination can be
found
in Section 2.8 of our Bylaws, available at http://www.eplus.com/bylaws.htm. Proposed
stockholder nominees are presented to the Chairman of the Nominating and
Corporate Governance Committee, who decides if further consideration should
be
given to the nomination by the Committee.
Communications
with the Board of Directors
Persons
interested in communicating with the directors regarding concerns or issues
may
address correspondence to a particular director, to the Board or to the
independent directors generally, in care of ePlus inc. at 13595 Dulles
Technology Drive, Herndon, Virginia 20171. If no particular director
is named letters will be forwarded, as appropriate and depending on the subject
matter, by the General Counsel to the Chair of the Audit Committee, the Chair
of
the Compensation Committee, or the Chair of the Nominating and Corporate
Governance Committee. The General Counsel reviews such communications
for spam (such as junk mail or solicitations) or misdirected
communications.
Effective
at the opening of business on July 20, 2007, our common stock was delisted
from
The Nasdaq Global Market due to non-compliance with financial statement
reporting requirements. Our common stock currently trades in the
Over-the-Counter market and, therefore, we are not subject to the Nasdaq
Marketplace Rules. However, our Board has reviewed the relationships concerning
independence of each director on the basis of the definition of “independent”
contained in the Nasdaq Marketplace Rules. In accordance with that
review, our Board has made a subjective determination as to each independent
director that no relationships exist that, in our Board’s opinion, would
interfere with his exercise of independent judgment in carrying out the
responsibilities of a director. In making these determinations, the Board
reviewed and discussed information provided by the directors and by management
with regard to each director’s business and personal activities as they may
relate to our business and our management.
The
Board
has determined that Messrs. O’Donnell, Cooper, Beimler, Herman, Faulders and
Hovde are independent under the Nasdaq Marketplace Rules. The Board has also
determined that the members of each committee of the Board are independent
under
the listing standards of the Nasdaq Marketplace Rules. In determining
the independence of the directors, the Board considered the relationships
described under “Related Party Transactions,” which it determined were
immaterial to the individual’s independence.
The
Board
of Directors has three standing committees: Audit, Compensation, and
Nominating and Corporate Governance. The Audit Committee and
Compensation Committee were prescribed by our bylaws throughout the year, and
on
June 25, 2008 the bylaws were amended to include, among other things, that
the
Nominating and Corporate Governance Committee shall also be a standing
committee. The charter for each of our committees can be found at
http://www.eplus.com/committee_charters.htm.
The
following table provides a summary of the membership of each of the committees
of the Board of Directors as of March 31, 2008.
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Name
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Audit
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Compensation
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Nominating
and Corporate Governance
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Mr.
Beimler
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Member
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Member
(6)
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Mr.
Cooper
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(1)
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Chair
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Member
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Mr.
Faulders
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Member
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Member
(2)
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(7)
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Mr.
Herman
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Member
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Member
(3)
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Chair
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Mr.
Hovde
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Member
(4)
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Member
(8)
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Mr.
O’Donnell
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Chair
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(5)
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Member
(9)
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(1)
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Mr.
Cooper was a member of the Audit Committee until June 13,
2007.
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(2)
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Mr.
Faulders was the Chairman of the Compensation Committee until June
13,
2007.
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(3)
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Mr.
Herman joined the Compensation Committee effective March 1,
2008.
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(4)
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Mr.
Hovde joined the Compensation Committee effective June 13,
2007.
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(5)
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Mr.
O’Donnell was a member of the Compensation Committee until March 1,
2008.
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(6)
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Mr.
Beimler joined the Nominating and Corporate Governance Committee
effective
June 13, 2007.
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(7)
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Mr.
Faulders was a member of the Nominating and Corporate Governance
Committee
until June 13, 2007.
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(8)
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Mr.
Hovde joined the Nominating and Corporate Governance Committee effective
June 13, 2007.
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(9)
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Mr.
O’Donnell joined the Nominating and Corporate Governance Committee
effective March 1, 2008.
|
The
Audit
Committee of the Board of Directors assists the Board in its oversight of the
Company’s corporate accounting and financial reporting process. The Audit
Committee is governed by a Board-approved charter stating its
responsibilities. The Committee’s responsibilities
include:
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·
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appointment,
compensation and oversight of the work of any registered public accounting
firm engaged for the purpose of preparing or issuing an audit report
and
performing other audit, review or attest services for the
Company;
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·
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to
discuss the annual audited financial statements with management and
the
registered public accounting firm, including the Company’s disclosures
under “Management’s Discussion and Analysis of Financial Condition and
Results of Operations,” and recommend to the Board of Directors whether
the audited financial statements should be included in the Company’s Form
10-K;
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·
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to
discuss the Company’s unaudited financial statements and related footnotes
and the “Management Discussion and Analysis” portion of the Company’s Form
10-Q for each interim quarter with management and the registered
public
accounting firm; and
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·
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to
discuss earnings press releases, as well as financial information
and
earnings guidance provided to analysts and ratings agencies with
management and the registered public accounting firm, as
appropriate.
|
For
additional information regarding the Audit Committee’s duties and
responsibilities, please refer to the Audit Committee’s charter, which is
available on the Company’s web site at http://www.eplus.com/committee_charters.htm.
Each
of
the members of the Audit Committee is independent within the meaning of the
listing standards of Nasdaq Marketplace Rules and applicable SEC regulations.
The Board has determined that Mr. Faulders is an audit committee financial
expert within the meaning of SEC regulations. The Audit Committee met
six times during the fiscal year ended March 31, 2008.
As
required under the Sarbanes-Oxley Act of 2002, the Audit Committee has in place
procedures to receive, retain and treat complaints received regarding
accounting, internal accounting controls or auditing matters, including
procedures for the confidential and anonymous submission by employees of
concerns regarding questionable accounting or auditing matters.
The
Compensation Committee of the Board of Directors reviews and approves the
overall compensation strategy and policies for the Company’s
executives. Each of the members of the Compensation Committee is an
independent director within the meaning of the Nasdaq Marketplace Rules, a
“non-employee director” within the meaning of Rule 16b-3 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and an “outside director”
for purposes of Section 162(m) of the Internal Revenue Code of 1986, as
amended. During the fiscal year ended March 31, 2008, the
Compensation Committee met eight times.
The
Compensation Committee reviews the effectiveness of the Company’s executive
officer compensation, including reviewing and approving goals and objectives
for
the Company’s executives. The Compensation Committee is responsible for
evaluating and setting the compensation for our Chief Executive Officer, Phillip
G. Norton. Mr. Norton is responsible for evaluating and recommending to the
Compensation Committee the amount of compensation of our other executive
officers. The Compensation Committee reviews such recommendations from Mr.
Norton and has the authority to approve or revise such
recommendations. The functions of the Committee can be found in its
charter on our website at http://www.eplus.com/committee_charters.htm.
The
Nominating and Corporate Governance Committee is responsible for developing
and
implementing policies and practices relating to corporate governance. The
Nominating and Corporate Governance Committee is governed by a Board-approved
charter stating its responsibilities. The Committee assists the Board by
selecting and recommending Board nominees and making recommendations concerning
the composition of Board committees. The Committee also reviews and
recommends to the Board the compensation of non-employee directors. The
Nominating and Corporate Governance Committee met five times during the fiscal
year ended March 31, 2008. Each of the members of the Committee is an
independent director within the meaning of the Nasdaq Marketplace
Rules. The functions of the Committee are further described on our
website at http://www.eplus.com/committee_charters.htm.
The
following table sets forth the compensation for the members of the Board of
Directors of ePlus for the fiscal year ended March 31, 2008. Mr.
Norton, the Company’s Chairman of the Board, President and Chief Executive
Officer, and Mr. Bowen, the Company’s Executive Vice President, do not receive
any additional compensation for their service as a director. Mr.
Norton’s and Mr. Bowen’s compensation is reported in “Executive Compensation”
and accordingly is not included in the following table.
The
general policy of the Board is that compensation for non-employee directors
should be a mix of cash and equity-based compensation. Each non-employee
director receives an annual retainer of $35,000 cash, which is paid in quarterly
installments. All directors are also reimbursed for their out-of-pocket
expenses incurred to attend Board or Committee meetings. In addition,
we are submitting to stockholders for their approval, the 2008 Non-Employee
Director Long-Term Incentive Plan which we intend to utilize for the
equity-based component of our non-employee director compensation. The
2008 Non-Employee Director Long-Term Incentive Plan is described in more detail
below under “Proposal 2.”
| |
|
Fees
Earned or Paid in
|
|
|
Stock
Awards
|
|
|
Option
Awards
|
|
|
Non-Equity
Incentive Plan Compen-sation
|
|
|
Change
in Pension Value and Nonqualified Deferred Compensation
|
|
|
All
Other Compen-sation
|
|
|
|
|
|
Name
|
|
Cash
($)
|
|
|
($)
|
|
|
($)
(1)
|
|
|
($)
|
|
|
Earnings
|
|
|
($)
|
|
|
Total
($)
|
|
|
C.
Thomas Faulders, III
|
|
35,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
35,000
|
|
|
Terrence
O'Donnell
|
|
35,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
35,000
|
|
|
Milton
E. Cooper, Jr.
|
|
35,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
35,000
|
|
|
Lawrence
S. Herman
|
|
35,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
35,000
|
|
|
Eric
D. Hovde
|
|
35,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
35,000
|
|
|
Irving
R. Beimler
|
|
35,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
35,000
|
|
|
(1)
|
The
outstanding number of stock options awarded to each director as of
March
31, 2008 was Mr. Faulders 83,507; Mr. O’Donnell 80,000; Mr.
Cooper 30,000; Mr. Herman 47,500; Mr. Hovde 0; and
Mr. Beimler 0.
|
The
following table shows the ePlus common stock beneficially owned by each named
executive officer, director, and all directors and named executive officers
as a
group as of June 30, 2008. All amounts are rounded to the nearest
one-tenth.
|
Name
of Beneficial Owner(1)
|
|
Number
of Shares Beneficially Owned (2)
|
|
|
Percentage
of Shares Outstanding
|
|
|
Phillip G. Norton
(3)
|
|
|
2,216,000 |
|
|
|
26.4 |
% |
|
Bruce M. Bowen
(4)
|
|
|
696,400 |
|
|
|
8.3 |
|
|
Steven J. Mencarini
(5)
|
|
|
60,000 |
|
|
|
* |
|
|
C.
Thomas Faulders, III (6)
|
|
|
83,507 |
|
|
|
1.0 |
|
|
Terrence O’Donnell
(7)
|
|
|
80,000 |
|
|
|
1.0 |
|
|
Milton E. Cooper,
Jr. (10)
|
|
|
30,000 |
|
|
|
* |
|
|
Lawrence S. Herman
(8)
|
|
|
47,500 |
|
|
|
* |
|
|
Eric D. Hovde
(9)
|
|
|
1,265,129 |
|
|
|
15.4 |
|
|
Irving R. Beimler
|
|
|
-- |
|
|
|
* |
|
|
All
directors and executive officers as a group (9
Individuals)
|
|
|
4,651,536 |
|
|
|
50.8 |
|
|
(1)
|
The
business address of
Messrs. Norton,
Bowen,
Mencarini, Faulders,
O’Donnell,
Cooper,
Herman,
Hovde and Beimler is
13595 Dulles
Technology Drive,
Herndon,
Virginia,
20171-3413.
|
|
(2)
|
A
person is deemed to be the beneficial owner of securities that can
be
acquired by such person within 60 days of June 30, 2008 upon exercise
of
options or warrants. Each beneficial owner’s percentage
ownership is determined by assuming that options or warrants that
are held
by such person (but not by any other person) and that are exercisable
within 60 days of June 30, 2008 have been
exercised.
|
|
(3)
|
Includes
2,040,000 shares held by
J.A.P. Investment Group, L.P.,
a Virginia
limited partnership, of which
J.A.P., Inc., a Virginia
corporation, is the sole general
partner. The limited partners are: Patricia A.
Norton, the spouse of Mr. Norton, trustee for the benefit of Phillip
G.
Norton, Jr., u/a dated as of July 20, 1983;
Patricia A. Norton, the spouse
of Mr. Norton, trustee for the benefit of Andrew L. Norton, u/a dated
as
of July 20,
1983; Patricia
A.
Norton, trustee for the benefit of Jeremiah O. Norton, u/a dated
as of
July 20,
1983; and Patricia
A. Norton. Patricia A. Norton is the sole stockholder of J.A.P.,
Inc. Also includes 175,000 shares of common stock issuable to
Mr. Norton under options that are exercisable within 60 days of
June 30,
2008. Mr.
Norton holds 1,000 shares of ePlus
individually.
|
|
(4)
|
Includes
421,400 shares held by
Mr. Bowen and his spouse, as tenants by the entirety, and 160,000
shares
held by Bowen Holdings LLC, a Virginia limited liability company
composed
of Mr. Bowen and his three children, for which shares Mr. Bowen serves
as
manager. Also includes 115,000 shares
of common stock issuable
to Mr. Bowen under options that are exercisable within 60 days of
June 30,
2008.
|
|
(5)
|
Includes
60,000 shares of common
stock issuable to Mr. Mencarini under options that are exercisable
within
60 days of June 30,
2008.
|
|
(6)
|
Includes
83,507 shares of common
stock issuable to Mr. Faulders under options that are exercisable
within
60 days of June 30,
2008.
|
|
(7)
|
Includes
80,000 shares of common
stock issuable to Mr. O’Donnell under options that are exercisable within
60 days of June 30,
2008.
|
|
(8)
|
Includes
47,500 shares of common
stock issuable to Mr. Herman under options that are exercisable within
60
days of June 30,
2008.
|
|
(9)
|
Of
the 1,265,129 shares
beneficially owned by Eric D. Hovde, 28,559 shares are owned directly;
Eric D. Hovde is the managing member (“MM”) of Hovde Capital, L.L.C., the
general partner to Financial Institution Partners II, L.P., which
owns
328,719 shares; Eric D. Hovde is the MM of Hovde Capital Limited
IV LLC,
the general partner to Financial Institution Partners IV, L.P., which
owns
51,970 shares; Eric D. Hovde is the MM of Hovde Capital, Ltd., the
general
partner to Financial Institution Partners III, L.P., which owns 234,876
shares; Eric D. Hovde is the MM of Hovde Capital IV, LLC, the general
partner to Financial Institution Partners, L.P., which owns 432,720
shares; Eric D. Hovde is the MM to Hovde Capital Offshore LLC, the
management company to Financial Institution Partners, Ltd., which
owns
118,020 shares; Eric D. Hovde is the MM of Hovde Acquisition II,
L.L.C.,
which owns 30,000 shares; Eric D. Hovde is the trustee to The Hovde
Financial, Inc. Profit Sharing Plan and Trust, which owns 19,000
shares;
Eric D. Hovde is the trustee to The Eric D. and Steven D. Hovde
Foundation, which owns 21,265
shares.
|
|
(10)
|
Includes
30,000 shares of common stock issuable to Mr. Cooper under options
that are exercisable within 60 days of June 30,
2008.
|
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires the Company’s directors and executive
officers, and persons who own more than ten percent of registered class of
the
Company’s equity securities, to file with the SEC initial reports of ownership
and reports of changes in ownership of common stock and other equity securities
of the Company. Officers, directors and greater than ten percent
stockholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
To
the
Company’s knowledge, based solely on a review of the copies of such reports
furnished to the Company and written representations that no other reports
were
required, during the fiscal year ended March 31, 2008, all Section 16(a) filing
requirements applicable to ePlus’ executive officers, directors and greater than
ten percent beneficial owners were complied with.
From
April 1, 2007 to June 30, 2007, we leased approximately 50,232 square feet
for
use as our principal headquarter from Norton Building 1, LLC for a monthly
rent
payment of approximately $76,000. Effective July 1, 2007, we entered
into an amendment which increased the leased square footage to 55,880 and the
monthly rent payment to approximately $86,000. Norton Building 1, LLC
is a limited liability company owned in part by Mr. Norton’s spouse and in
part in trust for his children. As of May 31, 2007, Mr. Norton, our
President and CEO, has no managerial or executive role in Norton Building 1,
LLC. The lease was approved by the Board of Directors prior to its
commencement, and viewed by the Board as being at or below comparable market
rents, and ePlus has the right to terminate up to 40% of the leased premises
for
no penalty, with six months’ notice. During the years ended March 31, 2008
and March 31, 2007, we paid rent in the amount of $1,052,000 and $964,000,
respectively.
Two
of
Mr. Norton’s sons are employed at the Company. The first, a Director of Finance
at ePlus Government, inc., earned $200,000 in each of the fiscal years ended
March 31, 2007 and 2008. His compensation is comprised of a base salary and
a
bonus. The second, a Senior Account Executive at ePlus Government, inc., earned
$233,000 and $331,000 in the fiscal years ended March 31, 2007 and 2008,
respectively, in base salary and commissions. Mr. Norton’s brother is a Senior
Account Executive at ePlus Group, inc., who earned $194,000 in the fiscal year
ended March 31, 2007 and $193,000 in the fiscal year ended March 31, 2008 in
base salary and commission. The Senior Account Executives’ compensation, like
that of their peers’, is based primarily on the calculation of commissions for
sales completed, in accordance with our commission plan.
Mr.
Terrence O’Donnell, Board of Director member, Chairman of Audit Committee
and Nominating and Corporate Governance Committee member, has a
son-in-law serving as Senior Account Executive at ePlus Group, inc. who earned
$741,000 and $845,000 in base salary and commission in the fiscal years ended
March 31, 2007 and 2008, respectively. His compensation, like that of
his peers’, is based primarily on the calculation of commissions for sales
completed, in accordance with our commission plan.
On
June
25, 2008 the Board adopted a written Related Party Transactions Policy in order
to establish more detailed processes, procedures and standards regarding the
review, approval and ratification of related person transactions and to provide
greater specificity regarding what types of transactions constitute related
person transactions. All related person transactions are prohibited unless
approved or ratified by the Audit Committee or, in certain circumstances, the
Chair of the Audit Committee.
We
have
entered into indemnification agreements with each of our directors and executive
officers, and we expect to enter into similar indemnification agreements with
persons who become directors or executive officers in the future. The
indemnification agreements provide that ePlus will indemnify the director or
officer against any expenses or liabilities incurred in connection with any
proceeding in which the director or officer may be involved as a party or
otherwise, by reason of the fact that the director or officer is or was a
director or officer of ePlus or by any reason of any action taken by or omitted
to be taken by the director or officer while acting as an officer or director
of
ePlus. However, ePlus is only obligated to provide indemnification
under the indemnification agreements if:
|
|
·
|
the
director or officer was acting in good faith and in a manner the
director
or officer reasonably believed to be in the best interests of ePlus,
and,
with respect to any criminal action, the director or officer had
no
reasonable cause to believe the director’s or officer’s conduct was
unlawful;
|
|
|
·
|
the
claim was not made to recover profits by the director or officer
in
violation of Section 16(b) of the Exchange Act or any successor
statute;
|
|
|
·
|
the
claim was not initiated by the director or
officer;
|
|
|
·
|
the
claim was not covered by applicable insurance;
or
|
|
|
·
|
the
claim was not for an act or omission of a director of ePlus from
which a
director may not be relieved of liability under Section 102(b)(7)
of the
DGCL. Each Director and officer has undertaken to repay ePlus
for any costs or expenses paid by ePlus if it is ultimately determined
that the Director or officer is not entitled to indemnification under
the
indemnification agreements.
|
The
following table shows information regarding each person known to be a
“beneficial owner” of more than 5% of our common stock as of June 30,
2008. For purposes of this table, beneficial ownership of securities
generally means the power to vote or dispose of securities, regardless of any
economic interest in the securities. All information shown is based
on information reported on Schedule 13G filed with the SEC on the dates
indicated in the footnotes to this table.
|
Name
of Beneficial Owner
|
|
Number
of Shares Beneficially Owned (2)
|
|
|
Percentage
of Shares Outstanding
|
|
|
John
H. Lewis (1)
|
|
|
416,373 |
|
|
|
5.1 |
% |
| |
|
|
|
|
|
|
|
|
|
Patrick
J. Retzer (2)
|
|
|
474,023 |
|
|
|
5.8 |
|
| |
|
|
|
|
|
|
|
|
|
Dimensional
Fund Advisors LP (3)
1299
Ocean Avenue, 11th Floor
Santa
Monica, CA 90401
|
|
|
557,552 |
|
|
|
6.8 |
|
|
(1)
|
The
information as to John H. Lewis is derived from a Schedule 13G filed
with
the SEC on April 9, 2008. John H. Lewis reports that he is the
controlling member of Osmium Partners, LLC, a Delaware limited liability
company ("Osmium Partners"), which serves as the general partner
of Osmium
Capital, LP, a Delaware limited partnership (the "Fund"), Osmium
Capital
II, LP, a Delaware limited partnership ("Fund II"), and Osmium Spartan,
LP, a Delaware limited partnership ("Fund III"). Mr. Lewis and Osmium
Partners may be deemed to share with the Fund, Fund II, Fund III
voting
and dispositive power with respect to such shares. Each filer disclaims
beneficial ownership with respect to any shares other than the shares
owned directly by such filer.
|
|
(2)
|
The
information as to Patrick J. Retzer is derived from a Schedule
13G filed with the SEC on April 23,
2008.
|
|
(3)
|
The
information as to Dimensional Fund Advisors is derived from a Schedule
13G/A filed with the SEC on February 6, 2008. Dimensional Fund
Advisors reports that it is an investment advisor registered under
Section
203 of the Investment Advisors Act of 1940, furnishes investment
advice to
four investment companies registered under the Investment Company
Act of
1940, and serves as investment manager to certain other commingled
group
trusts and separate accounts (the “Funds”). In its role as investment
advisor or manager, Dimensional possesses investment and/or voting
power
over our securities that are owned by the Funds, and may be deemed
to be
the beneficial owner of our shares held by the Funds. However,
Dimensional disclaims beneficial ownership of all securities reported
in
its Schedule 13G/A.
|
The
following table sets forth the name, age and position, as of June 30, 2008,
of
each person who was an executive officer with ePlus on such date. To
the Company’s knowledge, there are no family relationships between any director
or executive officer and any other director or executive officer of the
Company. Additionally, Mr. Norton serves as the Chairman of the Board
of Directors and Mr. Bowen serves on the Board.
|
NAME
|
AGE
|
POSITION
|
|
|
|
|
|
Phillip G. Norton
|
64
|
Director,
Chairman of the Board, President and Chief Executive
Officer
|
|
|
|
|
|
Bruce M. Bowen
|
56
|
Director
and Executive Vice President
|
|
|
|
|
|
Steven J. Mencarini
|
52
|
Senior
Vice President and Chief Financial Officer
|
|
|
|
|
|
Kleyton
L. Parkhurst
|
45
|
Senior
Vice President and Treasurer
|
The
business experience during the past five years of each executive officer of
ePlus is described below.
Phillip
G. Norton, Chairman of the Board, President and Chief Executive
Officer
Mr.
Norton joined us
in March 1993 and has served since then as our Chairman of the Board and Chief
Executive Officer. He was elected President of ePlus inc. in September
1996. Mr. Norton graduated from the U.S. Naval Academy in
1966.
Bruce
M. Bowen, Director and Executive Vice President
Mr.
Bowen
founded our Company in 1990 and served as our President until September
1996. Since September 1996, Mr. Bowen has served as our Executive Vice
President, and from September 1996 to June 1997 also served as our Chief
Financial Officer. Mr. Bowen has served on our Board since our
founding. He is a 1973 graduate of the University of Maryland and in 1978
received a Masters of Business Administration from the University of
Maryland.
Steven
J. Mencarini, Senior Vice President and Chief Financial Officer
Mr.
Mencarini joined us in June 1997 as Senior Vice President and Chief Financial
Officer. Prior to joining us, Mr. Mencarini was Controller of the
Technology Management Group of Computer Sciences Corporation (“CSC”). Mr.
Mencarini joined CSC in 1991 as Director of Finance and was promoted to
Controller in 1996. Mr. Mencarini is a 1976 graduate of the University of
Maryland and received a Masters of Taxation from American University in
1985.
Kleyton
L. Parkhurst, Senior Vice President and Treasurer
Kleyton
L. Parkhurst joined us in May 1991 as Director of Finance. Mr. Parkhurst has
served as Secretary or Assistant Secretary and Treasurer since September 1996.
In July 1998, Mr. Parkhurst was made Senior Vice President for Corporate
Development. Mr. Parkhurst is currently responsible for all of our mergers
and
acquisitions, investor relations, and marketing. Mr. Parkhurst is a 1985
graduate of Middlebury College.
The
following table includes certain compensation information concerning
compensation paid to or earned by the Chief Executive Officer and the two other
most highly compensated executive officers of our Company as of March 31, 2008
(the "named executive officers").
2008
Summary
Compensation Table
|
Name
and Principal
|
|
|
|
Salary
|
|
Bonus
|
|
Stock
Awards
|
|
Option
Awards
|
|
Non-Equity
Incentive Plan Compen-
sation
|
|
Non-Qualified
Deferred Compen-
sation
Earnings
|
|
All
Other Compen-
sation
|
|
|
Total
|
|
|
Position
|
|
Year
|
|
($)
|
|
($)
|
|
($)
|
|
($)(1)
|
|
($)
|
|
($)
|
|
($)
|
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phillip G. Norton
- Chairman of the Board, President, and Chief Executive
Officer
|
|
2008
|
|
|
395,561 |
|
- |
|
-
|
|
|
999,941 |
|
|
200,000 |
|
-
|
|
|
1,500 |
(2) |
|
|
1,597,002 |
|
| |
2007
|
|
|
375,000 |
|
|
150,000 |
|
-
|
|
|
487,288 |
|
|
- |
|
-
|
|
|
1,500 |
|
|
|
1,013,788 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce M. Bowen
- Executive Vice President
|
|
2008
|
|
|
300,000 |
|
|
- |
|
-
|
|
|
164,370 |
|
|
150,000 |
|
-
|
|
|
190,952 |
(3) |
|
|
805,322 |
|
| |
2007
|
|
|
300,000 |
|
|
75,000 |
|
- |
|
|
80,100 |
|
|
- |
|
-
|
|
|
166,712 |
|
|
|
621,812 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven J. Mencarini
- Chief Financial Officer and Senior Vice President
|
|
2008
|
|
|
286,827 |
|
|
- |
|
-
|
|
|
164,370 |
|
|
150,000 |
|
-
|
|
|
74,292 |
(4) |
|
|
675,489 |
|
| |
2007
|
|
|
225,000 |
|
|
100,000 |
|
-
|
|
|
80,100 |
|
|
- |
|
- |
|
|
65,615 |
|
|
|
470,715 |
|
|
(1)
|
The
amounts in this column show the amount we have expensed during the
fiscal
year 2007 and 2008 under FAS 123R. There were no stock awards made
to the
named executive officers in fiscal year 2007 or 2008. The
amounts shown in this column for fiscal year 2008 relate to options
which
were canceled on May 11, 2007. The assumptions used to
calculate the accounting expense recognized in fiscal 2008 for these
stock
option awards are set forth in Note 11, “Stock-Based Compensation” to the
Consolidated Financial Statements included in ePlus’ Annual Report on Form
10-K for fiscal 2008.
|
|
(2)
|
Includes
$1,500 of our employer 401(k) matching
contributions.
|
|
(3)
|
Includes
$5,790 of country club dues, $1,500 of our employer 401(k) matching
contributions, and $183,662, which represents for fiscal year 2008
the
increase the cash benefit under the Supplemental Benefit
Plan.
|
|
(4)
|
Includes
$1,500 of our employer 401(k) matching contributions, and $72,792
which
represents for fiscal year 2008 the increase in the cash benefit
under the
Supplemental Benefit Plan.
|
Supplemental
Benefit Plans
On
February 28, 2005, our Board approved the adoption of separate ePlus inc.
Supplemental Benefit Plans for each of Messrs. Bowen and Mencarini. The plans
were developed and designed to provide each of the participating named executive
officers with a long-term incentive plan outside of the Company’s normal
incentive plans.
The
plans
are unfunded and nonqualified and are designed to provide the participants
with
a cash benefit that is payable only upon the earlier to occur of
|
|
·
|
termination
of employment; or
|
|
|
·
|
the
expiration of the plans.
|
Each
plan
terminates on August 11, 2014. Under the terms of the plans, the participants
or
their beneficiaries have only the right to receive a single lump-sum cash
distribution upon the occurrence of one of the triggering events described
above. Under the terms of the plans, the participants do not have a right to
accelerate payments of the benefits payable under the plans. If a participant
is
terminated for cause (as defined in each plan) prior to the expiration of the
respective plan, we will have no further obligation under the respective plan
and the affected participant will not be entitled to any payments under such
plan. In connection with the adoption of the plans, we have established a
grantor trust to which we have transferred assets intended to be used for the
benefit of the participants. Through the date of distribution of plan benefits,
the assets of such trusts will remain subject to the claims of our creditors
and
the beneficiaries of the trusts shall have standing with respect to the trusts’
assets not greater than that of our general unsecured creditors. For the year
ended March 31, 2008, there were no payments to the participants under the
plan.
The Compensation Committee takes the amounts accruing under these plans into
consideration when setting other long-term compensation awards.
Incentive
Plan Awards Paid to Named Executive Officers
On
February 29, 2008, the Board of Directors of the Company adopted the ePlus
inc.
Fiscal Year 2008 Executive Incentive Plan ("the Cash Incentive Plan"), effective
March 6, 2008. Certain performance-based cash incentive compensation
was earned by eligible executive employees under the Cash Incentive
Plan.
The
Cash
Incentive Plan is administered by the Compensation Committee of the Board,
which
has full authority to determine the participants in the Cash Incentive Plan,
the
terms and amounts of each participant’s minimum, target and maximum awards, and
the period during which the performance is to be measured.
At
the
conclusion of the fiscal year ended March 31, 2008, the Compensation Committee
determined the various corporate, unit and individual performance objectives
described under the Cash Incentive Plan which were achieved. A
cash payment to each respective executive was based on the level of attainment
of the applicable performance objectives.
The
award
amount paid is a percentage of base salary based on the level of attainment
of
the applicable performance goals as set forth in each participant’s award
agreement. The 2008 performance criteria and their relative weights
for each participant were as follows: Company financial performance, 66.6%;
and
individual performance, 33.3%. The Company financial performance was based
on
the Company’s net earnings before taxes for the 2008 fiscal year as stated in
the Company’s Form 10-K for such year. Such earnings were adjusted to exclude
the incentive compensation accrued by the Company under the Cash Incentive
Plan,
and also would have excluded, if they had been applicable, all items of income,
gain or loss determined by the Board to be extraordinary or unusual in nature
and not incurred or realized in the ordinary course of business, and any income,
gain or loss attributable to the business operations of any entity acquired
by
the Company during the 2008 fiscal year. The Company financial
performance set forth in each executive’s plan was exceeded. The cash
incentive compensation was capped at 50% of each executive’s salary, therefore,
although the Company financial performance was exceeded, each executive received
the maximum cash incentive payment of 50% of his salary. There were
no waivers or modifications to any specified performance targets, goals or
conditions with respect to the Cash Incentive Plan.
Employment
Agreements
We
have
entered into employment agreements with Phillip G. Norton and Bruce M. Bowen,
each effective as of September 1, 1996, and with Steven J. Mencarini, effective
as of October 31, 2003.
Each
of
Messrs. Norton’s and Bowen’s employment agreements provide for an initial term
of three years, and is subject to an automatic one-year renewal at the
expiration thereof unless we or the employee provides notice of an intention
not
to renew at least thirty (30) days prior to expiration.
The
employment agreements of Messrs. Norton and Bowen also contain a covenant not
to
compete on the part of each, whereby, in the event of a voluntary termination
of
employment, upon expiration of the term of the agreement, or upon the
termination of employment by us for cause, each is subject to restrictions
on
acquiring, consulting with, or otherwise engaging in or assisting in providing
capital needs for competing business activities or entities within the United
States for a period of one year after the date of such termination or expiration
of the term of the employment agreement. Messrs. Norton and Bowen’s
employment agreements do not provide for payment in the event of a change of
control.
Mr.
Mencarini’s employment agreement provides for an initial term of two years, and
is subject to an automatic one-year renewal at the expiration thereof unless
we
provide at least six months’ prior notice of termination or the employee resigns
for any reason. On April 28, 2008, we timely provided six months’ notice
to Mr. Mencarini of non-renewal of his agreement. The notice did not
otherwise affect Mr. Mencarini’s employment with us. The employment
agreement requires us to pay severance to Mr. Mencarini if we terminate his
employment during the term of the agreement other than for cause or disability,
or if he resigns for good reason (as defined in the agreement). Mr.
Mencarini’s employment agreement further provides that, should his employment be
terminated for any reason within 90 days of a change of control, as defined
in
the agreement, and provided that he provides 180 days notice to the Company,
he
shall receive one year of salary and benefits.
Under
the
employment agreements, each receives certain other benefits, including medical,
insurance, death and long-term disability benefits and reimbursement of
employment-related expenses. Under Mr. Bowen’s employment agreement,
country-club dues are paid by us. If Mr. Bowen’s employment is terminated other
than for cause, he is able to retain the country club membership provided he
pays the country club dues. Under Mr. Norton’s employment agreement, we maintain
key-man term life insurance in the amount of $11 million. Upon termination
of
employment for any reason, Mr. Norton has the right to have this policy
transferred to him. However, we would not have further obligations to pay the
premiums due on the policy. In addition, upon termination of employment, other
than for cause, Mr. Norton has the right to receive season basketball tickets
held by us, provided that the cost of the tickets are paid by Mr.
Norton.
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END 2008
The
following table sets forth outstanding option awards held by our named executive
officers as of March 31, 2008.
|
|
|
Option
awards
|
|
Name
|
|
Number
of Securities Underlying Unexercised
Options (#) Exercisable (1)
|
|
|
Number
of Securities Underlying Unexercised
Options (#) Unexercisable
|
|
|
Equity
Incentive Plan Awards: Number of Securities
Underlying Unexercised Unearned Options (#)
|
|
|
Option
Exercise Price ($)
|
|
Option
Expiration Date
|
|
Phillip G. Norton
|
|
|
175,000 |
|
|
|
- |
|
|
|
- |
|
|
|
7.75 |
|
8/11/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce
M. Bowen
|
|
|
115,000 |
|
|
|
- |
|
|
|
- |
|
|
|
7.75 |
|
8/11/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven
J.
Mencarini
|
|
|
25,000 |
|
|
|
- |
|
|
|
- |
|
|
|
8.00 |
|
10/1/2008
|
|
|
|
|
20,000 |
|
|
|
- |
|
|
|
- |
|
|
|
7.75 |
|
8/11/2009
|
|
|
|
|
10,000 |
|
|
|
- |
|
|
|
- |
|
|
|
17.38 |
|
9/13/2010
|
|
|
|
|
5,000 |
|
|
|
- |
|
|
|
- |
|
|
|
7.75 |
|
12/27/2010
|
(1)
On
May 11, 2007, Messrs. Norton, Bowen, Parkhurst and Mencarini entered into
separate stock option cancellation agreements pursuant to which options to
purchase 300,000 shares, 50,000 shares, 50,000 shares, and 50,000 shares,
respectively, were cancelled. These cancelled awards are not included
in this column. In accordance with SFAS No. 123R, “Share-Based Payment,” we
recognized $1.5 million of share-based compensation expense relating to the
cancellation of these options.
The
following table provides information about our common stock that may be issued
upon the exercise of options, warrants, and rights under all of our existing
equity compensation plans as of March 31, 2008, including the ePlus inc. Amended
and Restated 1998 Long-Term Incentive Plan, Amended and Restated Incentive
Stock
Option Plan, Amended and Restated Outside Director Stock Option Plan, and
Amended and Restated Nonqualified Stock Option Plan.
|
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 (excluding securities
reflected in first column)
|
|
Equity
compensation plans approved by security holders
|
|
1,240,813 |
|
|
$ |
9.78 |
|
|
776,406 |
|
Equity
compensation plans not approved by security holders
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
|
1,240,813 |
|
|
$ |
9.78 |
|
|
776,406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Proposal
# 1 on Proxy Card)
In
accordance with the terms of our certificate of incorporation, our Board of
Directors is presently divided into three classes. Each class
consists, as nearly as possible, of one-third of the total number of directors,
and each class has a three-year term. Vacancies on the Board of
Directors may be filled by persons elected by a majority of the remaining
directors. A director elected by the Board of Directors to fill a
vacancy in a class shall serve for the remainder of the full term of that class,
and until such director’s successor is elected and qualified or until such
director’s death, resignation or removal. This includes vacancies
created by an increase in the number of directors.
The
Board
of Directors presently has eight members. There are three Class I
Directors, three Class II Directors, and two Class III
Directors. The last election of any director was held at our
annual meeting of stockholders in September 2005. Because each class
serves for three years or until their successors are appointed, each class
is
presently up for election at this annual meeting. Each of the
nominees for election is currently a director of the company and was selected
by
the Board of Directors as a nominee in accordance with the recommendation of
the
Nominating and Corporate Governance Committee.
At
the
2008 annual meeting, stockholders will also vote on a proposal to amend the
Company’s Certificate of Incorporation to de-classify the Board of Directors
(Proposal No. 4). If the proposal is approved, each nominee for director in
Classes II and III has agreed to resign effective at the 2009 annual meeting.
Hence, beginning with the 2009 annual meeting, each of our directors would
then
stand for election for a one-year term and until each director’s successor is
duly elected and qualified.
Biographical
information for each nominee is provided below. A plurality of votes
cast is required for the election of Directors. Your Board unanimously recommends
a
vote FOR each of the director-nominees.
C.
Thomas Faulders, III
joined our Board in July 1998. Mr. Faulders has been the President
and Chief Executive Officer of the University of Virginia Alumni Association
since 2005. Prior to that, Mr. Faulders served as the Chairman and Chief
Executive Officer of LCC International, Inc. from 1999 to 2005 and as Chairman
of Telesciences, Inc., an information services company, from 1998 to
1999. From 1995 to 1998, Mr. Faulders was Executive Vice President,
Treasurer, and Chief Financial Officer of BDM International, Inc., a prominent
systems integration company. Mr. Faulders is a member of the Board of
Advisors of Morgan Franklin and the Board of Trustees of Randolph
College. He is a 1971 graduate of the University of Virginia and in 1981
received a Masters of Business Administration from the Wharton School of the
University of Pennsylvania.
Lawrence
S. Herman joined our
Board in March 2001. Mr. Herman has been with BearingPoint, Inc. since June
1967 and was one of BearingPoint’s most senior managing directors, responsible
for managing the strategy and emerging markets in the company’s state and local
government practice. In July 2007, Mr. Herman transitioned to a new role
with BearingPoint as a managing director emeritus on a part time
basis. During his career, Mr. Herman has specialized in developing,
evaluating, and implementing financial and management systems and strategies
for
state and local governments around the nation. He has directed systems
integration projects for state and local governments, and several statewide
performance and budget reviews for California, North Carolina, South Carolina,
Louisiana, Oklahoma, and others, resulting in strategic fiscal and technology
plans. He is considered to be one of the nation’s foremost state budget and
fiscal planning experts. Mr. Herman received his B.S. degree in Mathematics
and Economics from Tufts University in 1965 and his Masters of Business
Administration in 1967 from Harvard Business School.
Eric
D. Hovde joined our
Board in November 2006. In 1987, Mr. Hovde founded Hovde Financial, Inc., and
is
the Chief Executive Officer, Managing Member and Chairman of, Hovde Capital
Advisors LLC, Hovde Private Equity Advisors LLC, and Hovde Financial, Inc.,
respectively (the “Hovde Group”). The Hovde Group is focused exclusively on
the financial services industry and provides its clients with investment
banking, asset management and merchant banking services. Mr. Hovde has also
served as a director on numerous bank and thrift boards and currently serves
on
the Board of Directors and the Compensation Committee of Sunwest Bank in Orange
County, California. Mr. Hovde also serves on the Board of Directors and
Audit Committee of Great Wolf Resorts, Inc. Mr. Hovde is the co-founder
and a trustee of the Eric D. and Steven D. Hovde Foundation, an organization
that actively supports clinical research in search of a cure for Multiple
Sclerosis and charitable relief in devastated areas around the world. Mr.
Hovde received his degrees in Economics and International Relations from the
University of Wisconsin. He is licensed with the NASD as a registered
representative and general securities principal.
Irving
R. Beimler joined our
Board in November 2006. Mr. Beimler has been with the Hovde
Group since November 1997. Currently, he is serving as Portfolio
Manager of Hovde Private Equity Advisors LLC. He has served as a senior
officer, Interim President and Chief Executive Officer and a Board Member of
numerous banks and thrifts during his career. He is a graduate of the State
University of New York at Geneseo.
Milton
E. Cooper, Jr. joined
our Board in November 2003. Mr. Cooper served with Computer Sciences
Corporation (“CSC”) from September 1984 until his retirement in May 2001, first
as Vice President, Business Development and then (from January 1992) as
President, Federal Sector. Before joining CSC, Mr. Cooper served in
marketing and general management positions with IBM Corporation, Telex
Corporation, and Raytheon Company. He also serves on the Board of Directors
and on the Compensation Committee of both L-1 Identity Solutions, Inc. and
Applied Signal Technology, Inc. Mr. Cooper is a 1960 graduate of the United
States Military Academy. He served as an artillery officer with the 82nd
Airborne Division before leaving active duty in 1963.
Terrence
O’Donnell joined our
Board in November 1996 upon the completion of our IPO. For the past eight
years, Mr. O’Donnell has been the Executive Vice President and General Counsel
of Textron, Inc. and a partner with the law firm of Williams & Connolly LLP
in Washington, D.C. Mr. O’Donnell has practiced law since 1977, and from
1989 to 1992 served as General Counsel to the U.S. Department of
Defense. Mr. O’Donnell presently also serves on the Board of Directors and
the Compensation, Nominating and Audit Committees of IGI, Inc., an American
Stock Exchange company. Mr. O’Donnell is a 1966 graduate of the U.S. Air
Force Academy and received a Juris Doctor from Georgetown University Law Center
in 1971.
Class
III Director Nominees – Term Expiring in 2011
Phillip
G. Norton joined us
in March 1993 and has served since then as our Chairman of the Board and
CEO. Since September 1996, Mr. Norton has also served as our
President. Mr. Norton is a 1966 graduate of the U.S. Naval
Academy.
Bruce
M. Bowen founded our
company in 1990 and served as our President until September 1996. Since
September 1996, Mr. Bowen has served as our Executive Vice President, and
from September 1996 to June 1997 also served as our CFO. Mr. Bowen has
served on our Board since our founding. He is a 1973 graduate of the
University of Maryland and in 1978 received a Masters of Business Administration
from the University of Maryland.
Proposal
2 –
Approval of the 2008 Non-Employee Director Long-Term Incentive
Plan
(Proposal
# 2 on Proxy Card)
On
June
25, 2008, the Board of Directors adopted the 2008 Non-Employee Director
Long-Term Incentive Plan, subject to stockholder approval (the “Non-Employee
Director Plan”). The Company’s current Long-Term Incentive Plan (the
“1998 Amended Plan”) was adopted by shareholders in 2003. The 1998
Amended Plan provided that Directors would annually receive 10,000 options
the
day after the Company’s annual meeting, but that no options shall be awarded
pursuant to that provision after September 1, 2006. The most
recent option grants awarded to non-employee directors under the 1998 Amended
Plan were awarded in September 2005. No equity awards were granted to the
non-employee directors during the 2006 or 2007 calendar years.
Eligible
participants in the Non-Employee Director Plan are directors who, on the date
such person is to receive a grant of restricted shares hereunder is not a
current employee of the Company or any of the Company’s subsidiaries (“Outside
Director”). Six of our directors proposed for election at the annual meeting
will be eligible to participate in the Non-Employee Director
Plan. Messrs. Norton and Bowen are not eligible to participate in the
Non-Employee Director Plan.
Under
the
proposed Non-Employee Director Plan, each Non-Employee Director will
receive a one-time grant on the date which is two business days after the date
that a Form S-8 registration statement in respect of the shares subject to
the
Non-Employee Director Plan is filed with, and declared effective by, the
Securities and Exchange Commission, of a number of restricted shares having
a
Fair Market Value (as defined in the Plan) on the date of grant (determined
without regard to the restrictions applicable thereto) of $35,000. Thereafter,
every September 25th
beginning
September 25, 2008, or, if September 25th
is not
a business day, then on the first business day thereafter,
each director will receive an annual grant of restricted
stock having a Fair Market Value on the date of grant (determined without regard
to the restrictions applicable thereto) equal to the aggregate dollar amount
of
cash compensation earned by an Outside Director during the
Company’s fiscal year ended immediately prior to the respective Annual Grant
Date. Alternatively, directors may elect to receive their cash
compensation in restricted stock.
The
restricted shares granted to directors under the Plan will be subject to
restrictions prohibiting such restricted shares from being sold, transferred,
assigned, pledged or otherwise encumbered or disposed of. The
restrictions with respect to each award of restricted shares shall lapse as
to
one-half of such restricted shares on each of the one-year and second-year
anniversary date of the grant of such award; provided, however, that the
restrictions with respect to such restricted shares shall lapse immediately
in
the event that (i) the director is nominated for a new term as an
Outside Director but is not elected by stockholders of the Company, or
(ii) the director ceases to be a member of the Board due to death, disability
or
mandatory retirement (if any). The restrictions with respect to all of a
director's restricted shares shall lapse immediately prior to a Change in
Control (as defined in the Non-Employee Director Plan) provided that the
director is a member of the Board immediately prior to such Change in
Control.
During
the restriction period, a director will have the right to vote his or her
restricted shares and have the right to receive any cash dividends with respect
to such restricted shares. All distributions, if any, received by a
director with respect to restricted shares as a result of any stock split,
stock
distribution, combination of shares, or other similar transaction will be
subject to the same restrictions as are applicable to the restricted shares
to
which such distributions relate.
The
purpose of the Non-Employee Director Plan is to align the economic interests
of
the directors with the interests of stockholders by including equity as a
component of pay and to attract, motivate and retain experienced and
knowledgeable directors.
Under
the
Non-Employee Director Plan, the total number of shares authorized for grant
to
non-employee directors is two hundred fifty thousand (250,000). The
1998 Amended Plan did not specify the total number of shares authorized for
grants solely to non-employee directors. If the Non-Employee Director Plan
is
approved by stockholders, we will register under the Securities Act of 1933,
as
amended, 250,000 shares of our common stock for issuance pursuant to awards
granted under the Non-Employee Director Plan.
The
Non-Employee Director Plan may be amended by the Board, in its sole discretion,
without stockholder approval, unless approval of a change is required by
applicable law. The equity payable under the Non-Employee Director Plan is
intended to constitute a designated percentage (initially 50%) of the
compensation paid to a director each year and if the directors approve an
increase in the total annual retainer, the value of the annual awards under
the
Non-Employee Director Plan will increase. It is not anticipated that stockholder
approval of an increase in the total annual retainer would be sought. Any
amendments made without stockholder approval could increase the costs of the
Non-Employee Director Plan. A director’s consent would be required to revoke or
alter an outstanding award in a manner unfavorable to such
director.
Stockholders
are requested in this Proposal 2 to approve the Non-Employee Director
Plan. The affirmative vote of the holders of a majority of
the shares present in person or represented by proxy and entitled to vote at
the
annual meeting will be required to approve the Non-Employee Director
Plan. If you “Abstain” from voting, it will have the same effect as
an “Against” vote. Broker non-votes will have no effect.
The
description above of the Non-Employee Director Plan is qualified in its entirety
by reference to the full text of the Non-Employee Director Plan, a copy of
which
is attached as Annex A to these proxy materials.
Your
Board unanimously recommends a vote FOR approval of the Non-Employee Director
Plan.
Proposal
3 –
Approval of the 2008 Employee Long-Term Incentive Plan
(Proposal
# 3 on Proxy Card)
On
June
25, 2008, the Board of Directors adopted the 2008 Long-Term Incentive Plan
(the
“Employee Plan”), subject to stockholder approval. No awards
have been issued under the 1998 Amended Plan since September
2006. Options granted under the 1998 Amended Plan, and any earlier
plan, will continue to be subject to the terms and conditions as set forth
in
the agreements evidencing such options, as well as the terms of the plan under
which they were granted.
Stockholders
are requested in this Proposal 3 to approve the Employee
Plan. The affirmative vote of the holders of a majority of
the shares present in person or represented by proxy and entitled to vote at
the
annual meeting will be required to approve the Employee Plan. If you
“Abstain” from voting, it will have the same effect as an “Against”
vote. Broker non-votes will have no effect.
The
description below of the Employee Plan is qualified in its entirety by reference
to the full text of the Employee Plan, a copy of which is attached as Annex
B to
these proxy materials.
Your
Board unanimously recommends a vote FOR approval of the 2008 Employee Long-Term
Incentive Plan.
Summary
of the Employee Plan
General
The
Employee Plan allows for the grant of incentive stock options, nonqualified
stock options, stock appreciation rights, restricted stock, restricted stock
units, performance awards, and other stock-based awards to ePlus employees.
Under the Employee Plan, the total number of shares authorized for grant is
1,000,000. This reflects a decrease of 2,000,000 from the 1998
Amended Plan. Awards granted under the 1998 Amended Plan or any
prior plan will not be counted toward the 1,000,000 authorized for grant under
the Employee Plan. The approval of the Employee Plan will allow the
Compensation Committee to continue to grant stock options and a broad array
of
other equity incentives at levels it determines appropriate, subject to certain
limitations set forth in the Employee Plan. The purposes of the
Employee Plan are to encourage employees of the Company to acquire a proprietary
interest in the growth and performance of the Company, to generate an increased
incentive to contribute to the Company’s future success and prosperity, thus
enhancing the value of the Company for the benefit of its stockholders, and
to
enhance the ability of the Company and its affiliates to attract and retain
exceptionally qualified individuals upon whom, in large measure, the sustained
progress, growth and profitability of the Company depend. Shares
under the Employee Plan will not be used to compensate our outside directors,
who may be compensated under a separate Non-Employee Director Plan, described
above under Proposal 2, if approved by stockholders.
The
Employee Plan includes certain provisions intended to ensure compliance with
Section 409A of the Internal Revenue Code regarding certain deferred
compensation arrangements. These provisions are designed to exempt
the awards from Section 409A, to preserve the intended tax treatments of the
benefits provided with respect to the award under Section 409A, and to otherwise
ensure compliance with the requirements of Section 409A.
Administration
Pursuant
to its terms, the Employee Plan is administered by the Compensation Committee
of
the Board of Directors. The Compensation Committee has the power to
do the following, among other powers: designate participants,
determine the number, terms and conditions of any award, interpret and
administer the Employee Plan, accelerate the vesting, exercise or payment of
an
award, correct any defect, supply any omission, or reconcile any inconsistency
in the Employee Plan or any award in the matter and to the extent it shall
deem
desirable to carry the Employee Plan into effect, and make any other
determination and take any other action that the Committee deems necessary
or
desirable for the administration of the Employee Plan.
Eligibility
In
general, any employee of ePlus and its consolidated subsidiaries is eligible
to
be designated as a participant. As of June 30, 2008, we had
approximately 687 employees.
Stock
Subject to the
Plan
A
maximum
of 1,000,000 shares of common stock are available for issuance under the
Employee Plan, subject to adjustment as provided under the terms of the Employee
Plan. Shares issuable under the Employee Plan may consist of
authorized but unissued shares or shares held in our treasury. If any
shares covered by an award granted under the Employee Plan are forfeited, or
if
an award otherwise terminates without the delivery of shares or of other
consideration, then the shares covered by such award, or the number of shares
otherwise counted against the aggregate number of shares available under the
Employee Plan with respect to such award, to the extent of any such forfeiture
or termination, shall again be available for granting awards under the Employee
Plan. No more than 300,000 shares shall be available as incentive
stock options, and no more than 500,000 may be available for awards granted
in
any form other than options or stock appreciation rights. In
addition, the Employee Plan includes an annual per-person limitation of 50,000
options and stock appreciation rights, and also a 50,000 annual limit on
restricted stock, restricted stock units, performance awards and other
stock-based awards.
Section
409A
Except
to
the extent specifically provided otherwise by the Committee, awards are intended
to satisfy the requirements of Section 409A of the Internal Revenue Code, so
as
to avoid the imposition of any additional taxes or
penalties. Notwithstanding any provision in the Employee Plan to the
contrary, with respect to any award that is subject to Section 409A,
distributions on account of a separation from service may not be made to a
“specified employee,” as defined by Section 409A, before six months after the
date of separation from service, or, if earlier, the date of death of the
employee.
Amendments
to and
Termination of the Plan
The
Board
of Directors may amend, alter, suspend, discontinue or terminate the Employee
Plan, in whole or in part, provided that no material amendment may be made
without stockholder approval if said approval is required by applicable law,
rule or regulation. No amendment, alteration, suspension or
discontinuation may be made without approval of stockholders if the action
would
increase the total number of shares available under the Employee Plan or would
result in a repricing, as described below. No amendment of the
Employee Plan may materially adversely affect any right of any participant
with
respect to any outstanding award without the participant’s written consent. If
not earlier terminated by the Board of Directors, the Employee Plan will
automatically terminate on [September 15, 2018]. No awards may be granted under
the Employee Plan after it is terminated, but any previously granted awards
will
remain in effect until they expire.
Prohibition
of
Repricing
Except
in
the event of a stock dividend, recapitalization, stock split, merger, or other
similar events defined in the Employee Plan, the Board may not, without
stockholder approval, take any action that would: permit options,
SARs, or other stock-based awards encompassing rights to purchase shares to
be
repriced, replaced, or regranted through cancellation, or by lowering the
exercise price of a previously granted option or the grant price of a previously
granted SAR, or the purchase price of a previously granted other stock-based
award.
Terms
of
Options
The
Committee may grant non-qualified stock options, incentive stock options, or
a
combination of the two. Each award will be evidenced by an agreement,
which may have additional conditions or restrictions so long as such provisions
are not inconsistent with the Employee Plan.
Exercise
Price. The exercise price shall no be less than 100% of the
fair market value (as defined in the Employee Plan) of the Company’s
common stock on the date of the grant.
Option
Term. The
term of each Option shall not exceed ten years from the date of the
grant.
Vesting. Unless
the award agreement provides otherwise, and subject to the Committee’s authority
to accelerate vesting, waive or amend terms, or otherwise modify an award,
options shall become vested as follows: 20% of the shares shall first
become exercisable on the one-year anniversary of the date of grant, 30% of
the
shares shall first become exercisable on the two-year anniversary of the date
of
grant, and the remainder shall first become exercisable on the three-year
anniversary of the date of grant. All options shall become
immediately exercisable upon a change in control.
Payment
of Exercise
Price. The exercise price shall be paid in full when an option
is exercised, or, at the Committee’s discretion, may be paid pursuant to a
broker-assisted cashless exercise, delivery of other shares of common stock
of
ePlus that have been held for at least six months, or a combination of the
above
methods.
Termination
of
Employment. Options become immediately exercisable upon the
death or disability of a participant, and must be exercised, if at all, within
one year after said death or disability, but in no event after the date the
options would otherwise lapse. Upon retirement, all options that are
not exercisable shall be forfeited, and if exercisable, the options must be
exercised, if at all, within one year of retirement but in no event after the
date the options would otherwise lapse. Options that are not
exercisable shall lapse upon a termination of employment for
cause. Upon termination of employment for any reason other than
death, disability, retirement or cause, all options that are not exercisable
as
of the date of termination shall be forfeited, and if exercisable, must be
exercised, if at all, within 90 days of termination of employment.
Restrictions
on
Transfer. No option shall be assignable, alienable, saleable
or transferable by a participant other than by will or the laws of descent
and
distribution. However, the Committee may permit a participant to
designate a beneficiary to exercise the rights of the participant upon the
participant’s death.
Incentive
Stock
Options
Terms. The
terms
of incentive stock options (“ISOs”) shall be designed to comply with Section 422
of the Internal Revenue Code. In the event any provisions of the
Employee Plan would contravene the Code, such Employee Plan provision shall
not
apply to ISOs. In addition to the above conditions regarding stock
options, the following also apply to ISOs:
Amount
of
Award. The aggregate fair market value of stock (determined as
of the time of grant) with respect to which such ISOs are exercisable for the
first time by the participant during any calendar year may not exceed
$100,000. To the extent an option initially designated as an ISO
exceeds this value limit or otherwise fails to satisfy the requirements
applicable to ISOs, it shall be deemed a non-qualified stock
option.
Timing
of
Exercise. If the Committee exercises its discretion to permit
an ISO to be exercised more than 90 days after the participant’s termination of
employment, and the exercise occurs more than 90 days after the participant
ceases being an employee (or more than 12 months in the event of the
participant’s death or disability), such ISO shall be treated for all purposes
as a non-qualified stock option.
Ten
Percent
Owners. Any ISO granted to any individual who, at the date of
grant, owns stock possessing more than ten percent of the total combined voting
power of all classes of the Company’s stock shall have an exercise price per
share of at least 110% of the fair market value of the stock at the date of
grant, and the ISO shall expire no later than five years after the date of
grant.
Stock
Appreciation
Rights
The
Committee may grant Stock Appreciation Rights (“SARs”). The grant
price shall not be less than 100% of the fair market value of the stock on
the
date of grant, except that if a SAR is granted in tandem with an option, the
grant price of the SAR shall not be less than the exercise price of the
option. As determined by the Committee, the payment upon
exercise may be paid in cash, shares to be valued at their fair market value
on
the date of exercise, by any other mode of payment deemed appropriate by the
Committee or by any combination thereof. The term of each SAR shall not exceed
ten years from the date of grant.
Restricted
Stock and
Restricted Stock Units
Restricted
stock and restricted stock units (“RSUs”) may be awarded under the Employee Plan
to any employee selected by the Compensation Committee. Generally, the
Compensation Committee has the discretion to fix the amount, terms, conditions
and restrictions applicable to restricted stock awards. Any
restricted stock or RSUs granted may be evidenced as the Committee deems
appropriate, including, without limitation, book-entry registration or issuance
of a stock certificate or certificates. In the event any stock certificate
is
issued in respect of shares of restricted stock granted under the Employee
Plan,
such certificate shall be registered in the name of the participant and shall
bear an appropriate legend referring to the terms, conditions, and restrictions
applicable to such restricted stock. Unless otherwise determined by
the Committee, all shares of restricted stock and RSUs still subject to
restriction shall be forfeited and reacquired by the Company upon termination
of
employment for any reason other than death or disability. Any
conditions or restrictions on restricted stock shall lapse upon a change in
control.
Performance
Awards
The
Employee Plan authorizes the Committee to grant Performance Awards, which
include arrangements under which the grant, issuance, retention, vesting and/or
transferability of any award is subject to performance criteria and additional
terms or conditions as designated by the Committee. A performance
award may be payable in cash, shares of common stock (including restricted
stock), other securities or other awards.
Dividend
Equivalents
The
Employee Plan authorizes the Committee to grant participants awards under which
the holders thereof are entitled to receive payments equivalent to dividends
or
interest, with respect to a number of shares determined by the Committee, and
the Committee may provide that such amounts (if any) shall be deemed to have
been reinvested in additional shares or otherwise reinvested.
Other
Stock-Based
Awards
The
Employee Plan authorizes the Committee to grant participants other awards that
are denominated or payable in shares, as the Committee deems consistent with
the
Employee Plan and as comply with applicable law. The awards shall be
granted for no cash consideration, or for such minimal cash consideration as
may
be required by applicable law. Payment of the award may be made in
cash, shares, rights in or to shares issuable under the award, other securities,
or other forms as determined by the Committee, or in any combination
thereof. The Committee may establish rules and procedures relating to
the awards. Except as provided by the Committee, the award shall not be
assignable, alienable, saleable, or transferable other than by will or the
laws
of descent and distribution, although the Committee may permit a participant
to
designate a beneficiary to exercise the rights of the participant upon the
death
of the participant.
Summary
of Federal Income Tax
Consequences of Options and Stock Appreciation Rights
The
following is a brief summary of the principal United States Federal income
tax
consequences of stock options and stock appreciation rights under the Employee
Plan, under current United States Federal income tax laws. This summary is
not
intended to constitute tax advice and is not intended to be exhaustive and,
among other things, does not describe state, local or foreign tax
consequences.
Nonqualified
Stock
Options. A participant will not recognize any income at the time a
nonqualified stock option or stock appreciation right is granted, nor will
we be
entitled to a deduction at that time. When a nonqualified stock option or
stock
appreciation right is exercised, the participant will recognize ordinary
income
in an amount equal to the excess of the fair market value of the shares to
which
the option exercise pertains on the date of exercise over the exercise price
(or, for a stock appreciation right, the cash or value of shares received
on
exercise). Payroll taxes are required to be withheld from the participant
on the
amount of ordinary income recognized by the participant. We generally will
be
entitled to a tax deduction with respect to a nonqualified stock option or
stock
appreciation right at the same time and in the same amount as the participant
recognizes income. The participant’s tax basis in any shares acquired by
exercise of a nonqualified stock option (or received on exercise of a stock
appreciation right) will be equal to the exercise price paid plus the amount
of
ordinary income recognized.
Upon
a
sale of the shares received by a participant upon the exercise of a nonqualified
stock option, any gain or loss will generally be treated as long-term or
short-term capital gain or loss, depending on how long the participant held
such
shares prior to sale.
Incentive
Stock
Options. A participant will not recognize any income at the time an
ISO is granted. Nor will a participant recognize any income at the time an
ISO
is exercised. However, the excess of the fair market value of the shares
on the
date of exercise over the exercise price paid will be a preference item that
could create an alternate minimum tax liability. If a participant disposes
of
the shares acquired on exercise of an ISO after the later of two years after
the
date of grant of the ISO or one year after the date of exercise of the ISO
(the
“holding period”), the gain (i.e., the excess of
the
proceeds received on sale over the exercise price paid), if any, will be
long-term capital gain eligible for favorable tax rates. If the participant
disposes of the shares prior to the end of the holding period, the disposition
is a “disqualifying disposition”, and the participant will recognize ordinary
income in the year of the disqualifying disposition equal to the excess
of the lesser of (i) the fair market value of the shares on the
date of exercise or (ii) the amount received for the shares, over the
exercise price paid. The balance of the gain or loss, if any, will be long-term
or short-term capital gain or loss depending on how long the shares were
held by
the participant prior to disposition.
We
generally are not entitled to a deduction as a result of the grant or exercise
of an ISO. If a participant recognizes ordinary income as a result of a
disqualifying disposition, we will be entitled to a deduction at the same
time
and in the same amount as the participant recognizes ordinary
income.
Code
Section 162(m). With
certain
exceptions, Section 162(m) of the Code limits deduction for compensation in
excess of $1,000,000 paid to certain “covered employees” whose compensation is
reported in the compensation table included in the Company’s annual proxy
statements. However, compensation paid to such employees will not be subject
to
such deduction limitation if it is considered “qualified performance-based
compensation” (within the meaning of Section 162(m) of the Code, which,
among other requirements, requires stockholder approval of the performance
measures available under a plan). As previously noted, notwithstanding the
adoption of the Employee Plan by stockholders, we reserve the right to pay
our
employees, including recipients of awards under the Employee Plan, amounts
which
may or may not be deductible under Section 162(m) or other provisions of
the Code.
Your
Board unanimously recommends a vote FOR approval of the 2008 Employee Long-Term
Incentive Plan.
Proposal
4 -
Approval of Amended
and Restated
Certificate of Incorporation
(Proposal
# 4 on Proxy Card)
The
Board
of Directors proposes to amend and restate our Certificate of Incorporation
(the
“Amended and Restated Certificate of Incorporation”) to provide for the annual
election of directors. Currently, the Board is divided into three classes,
with
directors elected to staggered three-year terms. Approximately one-third of
our
directors stand for election each year. If the proposed amendment to the
Certificate of Incorporation is approved, directors will be elected to one-year
terms of office starting at the 2009 Annual Meeting of Shareholders. The Amended
and Restated Certificate of Incorporation also makes less substantive revisions,
such as updating the name and address of our registered agent .
This
proposal results from an ongoing review of corporate governance matters by
the
Nominating and Corporate Governance Committee and the Board. In its review,
the
Committee and the Board considered the advantages of maintaining the classified
Board structure in light of our current circumstances, including that a
classified Board structure promotes Board continuity and stability, encourages
a
long-term perspective by company management, and reduces vulnerability to
coercive takeover tactics. While the Committee and the Board continue to
believe
that these are important considerations, the Committee and the Board also
considered potential advantages of declassification in light of our current
circumstances, including the ability of stockholders to evaluate directors
annually, as well as the maintenance of best practices in corporate governance
by the Company.
This
general description of the Amended and Restated Certificate of Incorporation
is
qualified in its entirety by reference to the full text of the Amended and
Restated Certificate of Incorporation, a copy of which is attached as Annex
C to
these proxy materials.
This
proposal will be approved, and the proposed Amended and Restated Certificate
of
Incorporation adopted, upon the affirmative vote of the holders of the
majority of the outstanding shares entitled to vote. Abstentions and
broker non-votes will have the same effect as an “Against” vote.
Your
Board unanimously recommends a vote FOR approval of the Amended and Restated
Certificate of Incorporation.
Proposal
5 –
Ratification of the appointment of Deloitte & Touche LLP as our independent
auditors for our fiscal year ending March 31, 2009
(Proposal
# 5 on Proxy Card)
The
Audit
Committee of the Board of Directors has selected Deloitte & Touche LLP
(“Deloitte”) as the Company’s independent auditor for the fiscal year ending
March 31, 2009. Deloitte has served as the Company’s independent auditors since
1990, and is an independent registered public accounting firm.
Neither
the Company’s bylaws nor other governing documents or law require stockholder
ratification of the appointment of Deloitte as the Company’s independent
auditors. However, the Company is submitting the appointment of
Deloitte to the stockholders for ratification as a matter of good corporate
practice. If the stockholders fail to ratify the appointment, the
Audit Committee will reconsider whether or not to retain that
firm. Even if the appointment is ratified, the Audit Committee in its
discretion may direct the appointment of different independent auditors at
any
time if they determine that such a change would be in the best interest of
the
Company and its stockholders.
Representatives
of Deloitte & Touche are expected to attend the annual meeting and will have
the opportunity to make a statement if they desire and to respond to appropriate
questions.
Auditor’s
Fees
With
respect to the fiscal years ended March 31, 2007 and March 31, 2008, the
aggregate fees billed by Deloitte were as follows:
|
|
|
Fiscal
2008
|
|
|
Fiscal
2007
|
|
|
Audit
Fees
|
|
$ |
2,029,800 |
|
|
$ |
2,160,000 |
|
|
Audit
Related Fees
|
|
__
|
|
|
__
|
|
|
Tax
Fees
|
|
|
|
|
|
|
|
|
|
All
Other Fees
|
|
$ |
2,029,800 |
|
|
$ |
2,160,000 |
|
Audit-Related
Fees. There were no audit-related fees billed by Deloitte & Touche LLP
for the fiscal years ended March 31, 2008 or 2007.
Tax
Fees. There were no fees billed by Deloitte & Touche LLP for
tax-related services rendered for the fiscal years ended March 31, 2008 or
2007.
All
Other
Fees. There were no other fees billed by Deloitte & Touche LLP for
professional services for the fiscal years ended March 31, 2008 or
2007.
There
were no non-audit related services provided by Deloitte & Touche LLP during
the last two fiscal years. The Audit Committee pre-approves all auditing
services (which may entail providing comfort letters in connection with
securities underwriting), and all non-audit services provided to us by Deloitte
& Touche LLP, subject to a de minimis exception as set forth by the
SEC.
To
be
approved, Proposal 5, ratification of appointment of independent auditors,
must
receive a “For” vote from the majority of shares present and entitled to vote
either in person or by proxy. If you “Abstain” from voting, it will
have the same effect as an “Against” vote. Broker non-votes will have
no effect.
Your
board unanimously recommends voting FOR ratification of Deloitte and Touche
LLP
as the Company’s independent auditor for the fiscal year ending March 31,
2009.
Report
of the Audit
Committee
The
primary role of the Audit Committee, as more fully described in its Charter,
is
to assist the Board of Directors in its oversight of the Company’s corporate
accounting and financial reporting process and to interact directly with
and
evaluate the performance of the Company’s independent
auditors.
In
the
performance of its oversight function, the Audit Committee has reviewed the
Company’s audited financial statements for the fiscal year ended March 31, 2008
and has met with both management and the Company’s independent auditors,
Deloitte & Touche LLP, to discuss those financial statements. The Audit
Committee has discussed with Deloitte & Touche LLP those matters related to
the conduct of the audit that are required to be communicated by the independent
auditors to the Audit Committee, including, as set forth in Statements of
Auditing Standards No. 61, as amended (as adopted by the Public Company
Accounting Oversight Board (“PCAOB”) in Rule 3200T), Deloitte & Touche
LLP’s judgments as to the quality, not just the acceptability, of the Company’s
accounting principles.
The
Audit
Committee met separately with the independent auditors, without management
present, to discuss the results of their audits, their evaluations of the
Company’s internal controls and the overall quality of the Company’s financial
reporting.
The
Audit
Committee has received from Deloitte & Touche LLP the required written
disclosures and letter regarding its independence from ePlus, as set forth
by
Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees)(as adopted by the PCAOB in Rule 3600T), and has discussed
with Deloitte & Touche LLP its independence. The Audit Committee has also
reviewed and considered whether the provision of other non-audit services
by
Deloitte & Touche LLP is compatible with maintaining the auditors’
independence.
Based
on
these reviews and discussions, the Audit Committee recommended to the Board
of
Directors, and the Board of Directors approved, that the audited financial
statements of ePlus for the fiscal year ended March 31, 2008 be included in
the Company’s Annual Report on Form 10-K, which was filed with the
Securities and Exchange Commission on July 3, 2008.
Terrence
O’Donnell, Chairman
The
foregoing Report is not
soliciting material, is not deemed filed with the SEC and is not to be
incorporated by reference in any filing of the Company under the Securities
Act
of 1933, as amended, or the Securities Exchange Act of 1934, as amended,
whether
made before or after the date hereof and irrespective of any general
incorporation language in any such filing.
ANNEX
A – 2008 NON-EMPLOYEE DIRECTOR LONG-TERM
INCENTIVE PLAN
Section
1. Establishment and Purposes of the
Plan.
(a) Purpose. The
purposes of this ePlus
inc. 2008 Non-Employee Director Long-Term Incentive Plan (the
“Plan”) are to attract,
retain and compensate for service as members of the Board of Directors of ePlus inc. (the “Company”)
highly qualified
individuals who are not current employees of the Company and to enable them
to
increase their ownership in the Company’s Common Stock. The Plan will
be beneficial to the Company and its stockholders since it will allow these
Directors to have a greater personal financial stake in the Company through
the
ownership of Common Stock, in addition to underscoring their common interest
with stockholders in increasing the long-term value of the Common
Stock.
(b) Effective
Date; Shareholder Approval. The Plan is effective [September 15],
2008, subject to the approval by the Company’s shareholders.
Section
2. Definitions.
As
used
herein, the following definitions shall apply:
“Affiliate”
shall
mean (i) any
entity that, directly or through one or more intermediaries, is controlled
by
the Company and (ii) any entity in which the Company has a significant equity
interest, as determined by the Committee.
“Applicable
Laws” means the
requirements relating to the administration of equity plans under U.S. state
corporate laws, U.S. federal and state securities laws, the Code, any stock
exchange or quotation system on which the Common Stock is listed or quoted
and
the applicable laws of any foreign country or jurisdiction where Restricted
Shares are, or will be, granted under the Plan.
“Board”
means
the Board of
Directors of the Company.
“Change
in Control” means the
occurrence of any of the following events with respect to the
Company:
(i)
the
consummation of any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to which Common
Stock
would be converted into cash, securities or other property, other than a merger
of the Company in which the holders of Common Stock immediately prior to the
merger own more than fifty percent (50%) of the outstanding common stock of
the
surviving corporation immediately after the merger; or
(ii)
the
consummation of any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, of the assets
of the Company, other than to a subsidiary or affiliate; or
(iii)
any
action pursuant to which any person (as such term is defined in Section 13(d)
of
the Exchange Act), corporation or other entity shall become the “beneficial
owner” (as such term is defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of shares of capital stock entitled to vote generally for the
election of directors of the Company (“Voting Securities”)
representing more than fifty (50%) percent of the combined voting power of
the
Company’s then outstanding Voting Securities (calculated as provided in Rule
13d-3(d) in the case of rights to acquire any such securities); or
(iv)
the
individuals (x) who, as of the Effective Date, constitute the Board (the “Original Directors”) and (y)
who thereafter are elected to the Board and whose election, or nomination for
election, to the Board was approved by a vote of a majority of the Original
Directors then still in office (such Directors being called “Additional Original
Directors”) and (z) who thereafter are elected to the Board and whose
election or nomination for election to the Board was approved by a vote of
a
majority of the Original Directors and Additional Original Directors then still
in office, cease for any reason to constitute a majority of the members of
the
Board; or
(v)
the
dissolution or liquidation of the Company.
“Code”
means
the Internal
Revenue Code of 1986, as amended.
“Committee”
means
a committee
designated by the Board and composed of not less than two “Non-Employee
Directors” as defined in Rule 16b-3 under the Exchange Act, or any successor
rule or definition adopted by the Securities and Exchange
Commission.
“Common
Stock” means the
common stock, par value $0.01 per share, of the Company.
“Director”
means
a member of
the Board.
“Disability”
means
any illness
or other physical or mental condition of a Participant which renders the
Participant incapable of performing his or her customary and usual duties for
the Company, or any medically determinable illness or other physical or mental
condition resulting from a bodily injury, disease, or mental disorder that
in
the judgment of the Committee is permanent and continuous in nature. The
Committee may require such medical or other evidence as it deems necessary
to
judge the nature and permanency of the Participant’s condition.
“Exchange
Act” means the
Securities Exchange Act of 1934, as amended.
“Fair
Market Value” means, as
of any date, the value of Common Stock determined as follows:
(i)
if
the Common Stock is listed on any established stock exchange or a national
market system, including without limitation the Nasdaq Global Market or The
Nasdaq Capital Market of The Nasdaq Stock Market, the fair market value of
a
share of Common Stock shall be the closing sales price of a share of Common
Stock as quoted on such exchange or system for such date (or the most recent
trading day preceding such date if there were no trades on such date), as
reported in The Wall
Street Journal or such other source as the Committee deems
reliable;
(ii)
if
the Common Stock is regularly quoted by a recognized securities dealer but
is
not listed in the manner contemplated by clause (i) above, the Fair Market
Value
of a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the day of determination, as reported in The Wall Street
Journal or such other source as the Committee deems reliable;
or
(iii)
if
neither clause (i) above nor clause (ii) above applies, the fair market value
of
a share of Common Stock shall be determined in good faith by the Committee
based
on the reasonable application of a reasonable valuation method.
“Outside
Director” means any
Director who, on the date such person is to receive a grant of Restricted Shares
hereunder is not a current employee of the Company or any of the Company’s
subsidiaries.
“Participant”
shall
mean any
Outside Director who holds a Restricted Stock Award granted or issued pursuant
to the Plan.
“Plan”
means
this ePlus inc. 2008 Non-Employee
Director Long-Term Incentive Plan.
“Restricted
Shares” means
Shares subject to a Restricted Stock Award.
“Restricted
Stock Agreement”
means any written agreement, contract, or other instrument or document,
including an electronic communication, evidencing the terms and conditions
of a
Restricted Stock Award.
“Restricted
Stock Award” means
a grant of Restricted Shares pursuant to Section 7 of the Plan.
“Share”
means
a share of
Common Stock, as adjusted in accordance with Section 9 of the Plan.
Section
3. Stock Subject to the
Plan.
Subject
to the provisions of Section 9 of the Plan, the maximum aggregate number of
Shares that may be issued as Restricted Shares under the Plan is two hundred
fifty thousand (250,000) Shares. The Shares may be authorized, but
unissued, or treasury Shares. Restricted Shares that have been
transferred back to the Company shall be available for future grants of
Restricted Shares under the Plan.
Section
4. Administration of
the
Plan.
(a)
Administration. The
Plan shall be administered by the Committee. The Committee shall have
the authority, in its discretion:
(i)
to determine the Fair Market Value of Common
Stock;
(ii)
to approve forms of agreement for use under the
Plan;
(iii) to
determine the number of Shares that may be issued as Restricted Shares and
the
terms and conditions of such Restricted Shares;
(iv) to
construe and interpret the terms of the Plan;
(v)
to prescribe, amend and rescind rules and regulations relating to
the Plan;
(vi) to
allow Participants to satisfy withholding tax obligations by having the Company
withhold from the shares of Common Stock to be issued upon vesting of Restricted
Shares that number of Shares having a Fair Market Value equal to the amount
required to be withheld, provided that withholding is calculated at the minimum
statutory withholding level. The Fair Market Value of the Shares to
be withheld shall be determined on the date that the amount of tax to be
withheld is to be determined. All determinations to have Shares
withheld for this purpose shall be made by the Committee in its
discretion;
(vii)
to instruct a corporate officer to execute on
behalf of the Company any instrument required to effect the grant of a
Restricted Stock Award granted by the Committee; and
(viii)
to make all other determinations deemed necessary
or advisable for administering the Plan.
(b) Effect
of Committee’s
Decision. The Committee’s decisions, determinations and
interpretations shall be final and binding on all Participants and anyone else
who may claim an interest in Restricted Shares.
Section
5. Eligibility.
The
only
persons who shall be eligible to receive Restricted Stock Awards under the
Plan
shall be persons who, on the date such Awards are granted, are Outside
Directors.
Section
6. Term of the Plan.
No
Restricted Stock Award may be granted under the Plan after [September 15],
2018.
Section
7. Grants of Restricted
Stock
Awards.
(a) Initial
Grant. Each individual who first becomes an Outside Director
on or after the date of the approval of this Plan by the stockholders of
the
Company shall, upon first qualifying as an Outside Director, automatically
be
granted a number of Restricted Shares, on the terms and conditions set forth
in
Section 8 below, having a Fair Market Value on the date of grant (determined
without regard to the restrictions applicable thereto) equal to the product
of the amount of cash compensation earned by an individual Outside Director
during the twelve months immediately prior to his becoming an Outside
Director multiplied by the quotient of the number of days until the next
Annual Grant Date (as defined below) divided by 365; provided,
however, that grants of Restricted Shares under this Plan shall not be
made until a Form S-8 registration statement in respect of the Shares is
filed
with, and declared effective by, the Securities and Exchange
Commission.
(b)
Annual
Grant. On September 25th
of each year (the “Annual
Grant
Date”), beginning with September 25, 2008, or the next following business
day if September 25th
is not a business day, each Outside Director shall automatically be granted
a
number of Restricted Shares, on the terms and conditions set forth in Section
8
below, having a Fair Market Value on the date of grant (determined without
regard to the restrictions applicable thereto) equal to the aggregate dollar
amount of cash compensation earned by an individual Outside Director who
served
on the board during the Company’s entire fiscal year ended
immediately prior to the respective Annual Grant Date; provided, however,
that
grants of Restricted Shares under this Plan shall not be made until a Form
S-8
registration statement in respect of the Shares is filed with, and declared
effective by, the Securities and Exchange Commission.
(c)
Special
Grant. On the date which is two business days after the date
that a Form S-8 registration statement in respect of the Shares is filed
with,
and declared effective by, the Securities and Exchange Commission, each Outside
Director who was serving as an Outside Director on the day prior to the date
of
the approval of this Plan by the stockholders of the Company shall automatically
be granted a number of Restricted Shares, on the terms and conditions set
forth
in Section 8 below, having a Fair Market Value on the date of grant (determined
without regard to the restrictions applicable thereto) equal to thirty-five
thousand dollars ($35,000).
(d)
Stock
Fee
Election. An Outside Director may make an election (a
"Stock Fee Election") to receive Restricted Shares in lieu of all or any
part of
the cash compensation payable to him or her for service on the Board for
a
calendar year. Any Stock Fee Election and any change or revocation
thereof shall be made by delivering written notice thereof to the Committee
prior to the end of the calendar year preceding the calendar year of service
for
which it is to be effective. Such Stock Fee Election shall
remain in effect for each subsequent calendar year of service unless
changed. An Outside Director may not elect to change his or her Stock
Fee Election for a calendar year after the last day of the calendar year
preceding the calendar year of service for which the election is
made. Any Restricted Stock that relates to a Stock Fee Election shall
be treated as a Restricted Stock Award for purposes of this Plan. The
number of shares shall be determined by dividing the cash compensation deferred
for a calendar quarter of service by the Fair Market Value as of the first
business day of the following calendar quarter, and each such first business
day
shall be considered the grant date of the Restricted Stock
Award.
Section
8. Terms of Restricted Stock Awards.
Except
as
provided herein, Restricted Shares shall be subject to restrictions (“Restrictions”) prohibiting
such Restricted Shares from being sold, transferred, assigned, pledged or
otherwise encumbered or disposed of. The Restrictions with respect to
each award of Restricted Shares shall lapse as to one-half of such Restricted
Shares on each of the one-year and second-year anniversary date of the grant
of
such award; provided,
however,
that the
Restrictions with respect to such Restricted Shares shall lapse immediately
in
the event that (i) the Participant is nominated for a new term as an Outside
Director but is not elected by stockholders of the Company, or (ii) the
Participant ceases to be a member of the Board due to death, disability or
mandatory retirement (if any). Notwithstanding the foregoing, the Restrictions
with respect to all of a Participant's Restricted Shares shall lapse immediately
prior to a Change in Control provided that the Participant is a member of the
Board immediately prior to such Change in Control.
The
Company shall issue, in the name of each Participant to whom Restricted Shares
have been granted, stock certificates (in tangible or electronic form)
representing the total number of Restricted Shares granted to such Participant
as soon as reasonably practicable after the grant. However, the
Company or its transfer agent shall hold such certificates, properly endorsed
for transfer, for the Participant’s benefit until such time as the Restriction
Period applicable to such Restricted Shares lapses. Upon the
expiration or termination of the Restricted Period, the restrictions applicable
to the Restricted Shares shall lapse and a stock certificate for the number
of
Restricted Shares with respect to which the restrictions have lapsed shall
be
delivered, free of all such restrictions, to the Participant or his or her
beneficiary or estate, as the case may be. Except as described in the
above paragraph, in the event that a Participant ceases to be a member of the
Board before the applicable Restriction Period has expired or under
circumstances in which the Restriction Period does not otherwise lapse, the
Restricted Shares granted to such Participant shall thereupon be forfeited
and
transferred back to the Company.
During
the Restriction Period, a Participant shall have the right to vote his or her
Restricted Shares and shall have the right to receive any cash dividends with
respect to such Restricted Shares. All distributions, if any,
received by a Participant with respect to Restricted Shares as a result of
any
stock split, stock distribution, combination of shares, or other similar
transaction shall be subject to the same restrictions as are applicable to
the
Restricted Shares to which such distributions relate.
Section
9. Adjustments Upon Changes in
Capitalization.
Subject
to any required action by the stockholders of the Company, the number of shares
of Common Stock covered by each outstanding Restricted Stock Award, and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but as to which no Restricted Stock Awards have yet been granted or
which have been returned to the Plan upon cancellation or expiration of a
Restricted Stock Award, shall be proportionately adjusted for any increase
or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification
of
the Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the Company;
provided, however,
that conversion of
any convertible securities of the Company shall not be deemed to have been
“effected without receipt of consideration.” Such adjustment shall be made by
the Committee, whose determination in that respect shall be final, binding
and
conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to a Restricted Stock Award.
Section
10. Grant Agreement.
Each
grant of a Restricted Stock Award under the Plan will be evidenced by a
Restricted Stock Agreement. Such document will contain such
provisions as the Committee may in its discretion deem advisable, provided that such provisions
are not inconsistent with any of the provisions of the Plan.
Section
11. Amendment and Termination
of the
Plan.
(a) Amendment
and
Termination. The Board may at any time amend, alter, suspend
or terminate the Plan.
(b) Shareholder
Approval. The Company shall obtain shareholder approval of any
Plan amendment to the extent necessary to comply with Applicable
Laws.
(c) Effect
of Amendment or
Termination. No amendment, alteration, suspension or
termination of the Plan shall impair the rights of any Participant, unless
mutually agreed otherwise between the Participant and the Committee, which
agreement must be in writing and signed by the Participant and the
Company. Termination of the Plan shall not affect the Committee’s
ability to exercise the powers granted to it hereunder with respect to
Restricted Shares granted under the Plan prior to the date of such
termination.
Section
12. Conditions Upon Issuance
of
Shares.
(a) Legal
Compliance. Shares shall not be issued pursuant to a
Restricted Stock Award unless the issuance and delivery of such Shares shall
comply with Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
(b) Investment
Representations. As a condition to the issuance of Restricted
Shares, the Company may require the Participant to represent and warrant at
the
time of any such issuance that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is
required. Not in limitation of any of the foregoing, in any such case
referred to in the preceding sentence the Committee may also require the
Participant to execute and deliver documents containing such representations
(including the investment representations described in this Section 12(b) of
the
Plan), warranties and agreements as the Committee or counsel to the Company
shall deem necessary or advisable to comply with any exemption from registration
under the Securities Act of 1933, as amended, any applicable State securities
laws, and any other applicable law, regulation or rule.
(c) Additional
Conditions. The Committee shall have the authority to
condition the grant of any Restricted Shares in such other manner that the
Committee determines to be appropriate, provided that such condition is not
inconsistent with the terms of the Plan.
Section
13. Inability to Obtain
Authority.
The
inability of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company’s counsel to be necessary
to the lawful issuance and sale of any Shares hereunder, shall relieve the
Company of any liability in respect of the failure to issue or sell such Shares
as to which such requisite authority shall not have been obtained.
Section
14. Reservation of
Shares.
The
Company, during the term of this Plan, will at all times reserve and keep
available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
Section
15. Stockholder
Approval.
The
Plan
shall be subject to approval by the stockholders of the Company. Such
stockholder approval shall be obtained in the manner and to the degree required
under Applicable Laws.
Section
16. Withholding; Notice
of
Sale.
Each
Participant shall, no later than the date as of which the value of a Restricted
Stock Award or of any Shares or other amounts received thereunder first becomes
includable in the gross income of the Participant for Federal income tax
purposes, pay to the Company, or make arrangements satisfactory to the Committee
regarding payment of, any Federal, state, or local taxes of any kind required
by
law to be withheld with respect to such income. The Company shall, to
the extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the Participant. The Company’s
obligation to deliver stock certificates to any Participant is subject to and
conditioned on any such tax obligations being satisfied by the
Participant. Subject to approval by the Committee, a Participant may
elect to have the minimum required tax withholding obligation satisfied, in
whole or in part, by (i) authorizing the Company to withhold from Shares to
be
issued pursuant to any Restricted Stock Award a number of Shares with an
aggregate Fair Market Value (as of the date the withholding is effected) that
would satisfy the withholding amount due, or (ii) transferring to the Company
Shares owned by the Participant with an aggregate Fair Market Value (as of
the
date the withholding is effected) that would satisfy the minimum withholding
amount due.
Section
17. Code Section 83(b) Elections
Neither
the Company, any Affiliate, nor the Committee shall have any responsibility
in
connection with a Participant’s election, or attempt to elect, under Code
section 83(b) to include the value of a Restricted Stock Award in the
Participant’s gross income for the year of payment. Any Participant
who makes a Code section 83(b) election with respect to any such Restricted
Stock Award shall promptly notify the Committee of such election and provide
the
Committee with a copy thereof.
Section
18. No Right to Continue as a
Director
Neither
this Plan, nor the granting of a Restricted Stock Award under this Plan, nor
any
other action taken pursuant to this Plan shall constitute or be evidence of
any
agreement or understanding, express or implied, that the Company will retain
a
director for any period of time, or at any particular rate of
compensation.
Section
19. Governing Law.
This
Plan
shall be governed by the laws of the State of Delaware.
ANNEX
B– 2008 EMPLOYEE LONG-TERM INCENTIVE PLAN
Section
1. Establishment and Purpose
(a)
Purpose. The
purposes of this ePlus
inc. 2008 Long-Term Incentive Plan (the “Employee Plan”) are to
encourage Employees of ePlus inc. (together
with any
successor thereto, the “Company”) and its Affiliates
(as defined below) to acquire a proprietary interest in the growth and
performance of the Company, to generate an increased incentive to contribute
to
the Company’s future success and prosperity, thus enhancing the value of the
Company for the benefit of its stockholders, and to enhance the ability of
the
Company and its Affiliates to attract and retain exceptionally qualified
individuals upon whom, in large measure, the sustained progress, growth and
profitability of the Company depend.
(b)
Effective
Date; Shareholder
Approval. The Plan is effective [September 15], 2008, subject
to approval by the Company’s shareholders.
Section
2. Definitions
As
used
in the Employee Plan, the following terms shall have the meanings set forth
below:
(a)
“Affiliate” shall mean
(i) any entity that, directly or through one or more intermediaries, is
controlled by the Company and (ii) any entity in which the Company has no less
than a 50% equity interest, as determined by the Committee. With
respect to Incentive Stock Options, “Affiliate” means any entity, domestic or
foreign, whether or not such entity now exists or is hereafter organized or
acquired by the Company or by an Affiliate that is a “subsidiary corporation”
within the meaning of Code Section 424(d) and the rules thereunder.
(b)
“Award” shall mean any
Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit,
Performance Award, Dividend Equivalent, or Other Stock-Based Award granted
under
the Employee Plan.
(c)
“Award Agreement” shall
mean any written agreement, contract, or other instrument or document, including
an electronic communication, evidencing any Award granted under the Employee
Plan.
(d)
“Board” shall mean the
Board of Directors of the Company.
(e)
“Cause” means (except
as otherwise provided in an Award Agreement) if the Committee, in its reasonable
and good faith discretion, determines that the employee (i) fails to
substantially perform his or her duties (other than as a result of Disability),
after the Board or the executive to which the Participant reports delivers
to
the Participant a written demand for substantial performance that specifically
identifies the manner in which the Participant has not substantially performed
his or her duties; (ii) engages in willful misconduct or gross negligence that
is materially injurious to the Company or a subsidiary; (iii) breaches his
or
her duty of loyalty to the Company or a subsidiary; (iv) removed
without proper authorization from the premises of the Company or a subsidiary
of
a document (of any media or form) relating to the Company or a subsidiary or
the
customers of the Company or a subsidiary; (v) breaches any confidentiality
and/or non-compete agreement between him or her and the Company; or (vi) has
committed a felony or a serious crime involving moral turpitude.
(f)
“Change in Control”
means an event that
is “a change in the ownership or effective control of the
corporation, or in the ownership of a substantial portion of the assets of
the
corporation" within the meaning of Section 409A and that also falls within
one
of the following events with respect to the Company:
(i)
the
consummation of any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to which Common
Stock
would be converted into cash, securities or other property, other than a merger
of the Company in which the holders of Common Stock immediately prior to the
merger own more than fifty percent (50%) of the outstanding common stock of
the
surviving corporation immediately after the merger; or
(ii)
the
consummation of any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, of the assets
of the Company, other than to a subsidiary or affiliate; or
(iii)
any
action pursuant to which any person (which term may include two or more persons
consistent with Section 13(d)(3) of the Exchange Act), corporation or other
entity shall become the “beneficial owner” (as such term is defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of shares of capital
stock entitled to vote generally for the election of directors of the Company
(“Voting Securities”)
representing more than fifty (50%) percent of the combined voting power of
the
Company’s then outstanding Voting Securities (calculated as provided in Rule
13d-3(d) in the case of rights to acquire any such securities); or
(iv)
the
individuals (x) who, as of the Effective Date, constitute the Board (the “Original Directors”) and (y)
who thereafter are elected to the Board and whose election, or nomination for
election, to the Board was approved by a vote of a majority of the Original
Directors then still in office (such Directors being called “Additional Original
Directors”) and (z) who thereafter are elected to the Board and whose
election or nomination for election to the Board was approved by a vote of
a
majority of the Original Directors and Additional Original Directors then still
in office, cease for any reason to constitute a majority of the members of
the
Board; or
(v)
the
dissolution or liquidation of the Company.
(g)
“Code” shall mean the
Internal Revenue Code of 1986, as amended from time to time.
(h)
“Committee” shall mean
the Compensation Committee of the Board of Directors of the Company, or such
other committee as may be designated by the Board. However, if a
member of the Compensation Committee is not an “outside director” within the
meaning of Section 162(m) of the Code or is not a “non-employee director” as
defined in Rule 16b-3 under the Exchange Act, the Compensation Committee may
from time to time delegate some or all of its functions under the Employee
Plan
to a committee or subcommittee composed of members that meet the relevant
requirements. The term “Committee” includes any such committee or
subcommittee, to the extent of the Compensation Committee’s
delegation.
(i)
“Common Stock” shall
mean shares of the Company’s common stock, par value $0.01 per
share.
(j)
“Disability” shall mean
any illness or other physical or mental condition of a Participant which renders
the Participant incapable of performing his or her customary and usual duties
for the Company, or any medically determinable illness or other physical or
mental condition resulting from a bodily injury, disease, or mental disorder
that in the judgment of the Committee is permanent and continuous in nature.
The
Committee may require such medical or other evidence as it deems necessary
to
judge the nature and permanency of the Participant’s condition.
(k)
“Dividend Equivalent”
shall mean any right
granted under Section 6(e) of the Employee
Plan.
(l)
“Employee” means any
person who is in the employ of the Company or any Affiliate, subject to the
control and direction of the Company or any Affiliate as to both the work to
be
performed and the manner and method of performance.
(m)
“Exchange Act” shall
mean the Securities Exchange Act of 1934, as amended.
(n)
“Fair Market Value”
shall mean, as of
any date, the value of Common Stock determined as
follows:
(i)
if
the Common Stock is listed on any established stock exchange or a national
market system, including without limitation the Nasdaq Global Market or The
Nasdaq Capital Market of The Nasdaq Stock Market, the Fair Market Value of
a
share of Common Stock shall be the closing sales price of a share of Common
Stock as quoted on such exchange or system for such date (or the most recent
trading day preceding such date if there were no trades on such date), as
reported in The Wall
Street Journal or such other source as the Committee deems
reliable;
(ii)
if
the Common Stock is regularly quoted by a recognized securities dealer but
is
not listed in the manner contemplated by clause (i) above, the Fair Market
Value
of a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day
of
determination, as reported in The Wall Street
Journal or such other source as the Committee deems reliable;
or
(iii)
if
neither clause (i) above nor clause (ii) above applies, the Fair Market Value
of
a share of a share of Common Stock shall be determined in good faith by the
Committee based on the reasonable application of a reasonable valuation
method.
(o)
“Incentive Stock
Option” shall mean an option granted under Section 6(a) of the Employee
Plan that is intended to meet the requirements of Sections 422 of the Code,
or
any successor provision thereto.
(p)
“Key Employee” shall
mean an Employee who is a “covered employee” within the meaning of Section
162(m)(3) of the Code.
(q)
“Non-Qualified Stock
Option” shall mean an option granted under Section 6(a) of the Employee
Plan that is not an Incentive Stock Option.
(r)
“Option” shall mean an
Incentive Stock Option or a Non-Qualified Stock Option.
(s)
“Other Stock-Based
Award” shall mean any right granted under Section 6(f) of the Employee
Plan.
(t)
“Participant” shall
mean an Employee of the Company or of any Affiliate designated to be granted
an
Award under the Employee Plan.
(u)
“Performance Award”
shall mean any right
granted under Section 6(d) of the Employee
Plan.
(v)
“Performance Criteria”
shall mean any quantitative
and/or qualitative measures, as determined by the
Committee, which may be used to measure the level of performance of the Company
or any individual Participant during a Performance Period, including any
Qualifying Performance Criteria. With respect to any Award
intended to satisfy the requirements of Code Section 162(m), performance
criteria shall mean the Qualifying Performance Criteria.
(w)
“Performance Period”
shall mean any period
as determined by the Committee in its sole
discretion.
(x)
“Person” shall mean any
individual, corporation, partnership, association, joint-stock company, trust,
unincorporated organization, or government or political subdivision
thereof.
(y)
“Qualifying Performance
Criteria” shall mean one or more of the following performance criteria,
either individually, alternatively or in any combination, applied to either
the
company as a whole or to a business unit or Affiliate, and measured either
annually or cumulatively over a period of years, on an absolute basis or
relative to a pre-established target, to a previous year’s results or to a
designated comparison group, in each case as specified by the Committee in
the
Award: revenue, sales, net income, net earnings, earnings per share, return
on
total capital, return on equity, cash flow, operating profit and margin rate,
subject to adjustment by the Committee to remove the effect of charges for
restructurings, discontinued operations, extraordinary items and all items
of
gain, loss or expense determined to be extraordinary or unusual in nature or
infrequent in occurrence, related to the disposal of a segment or a business,
or
related to a change in accounting principle or otherwise.
(z)
“Restricted Securities”
shall mean Awards
of Restricted Stock or other Awards under which issued and
outstanding Shares are held subject to certain restrictions.
(aa)
“Restricted Stock”
shall mean any award
of Shares granted under Section 6(c) of the Employee
Plan.
(bb)
“Restricted Stock Unit”
shall mean any right
granted under Section 6(c) of the Employee Plan that is
denominated in Shares.
(cc)
“Retirement” means
retirement (i) at or after age 55 with ten years of service or (ii) at or after
age 65.
(dd)
“Section 409A” means
Section 409A of Code, and the Treasury regulations and other authoritative
guidance issued thereunder.
(ee)
“Shares” shall mean the
Shares of Common Stock, and such other securities as may become the subject
of
Awards, or become subject to Awards, pursuant to an adjustment made under
Section 4(d) of the Employee Plan.
(ff)
“Stock Appreciation
Right” shall mean any right granted under Section 6(b) of the Employee
Plan.
Section
3. Administration
Except
as
otherwise provided herein, the Employee Plan shall be administered by the
Committee, which shall have the power to interpret the Employee Plan and to
adopt such rules and guidelines for implementing the terms of the Employee
Plan
as it may deem appropriate. The Committee shall have the ability to
modify the Employee Plan provisions, to the extent necessary, to accommodate
any
changes in laws and regulations in jurisdictions in which Participants will
receive Awards.
(a)
Subject to the terms of the Employee Plan and applicable law, the Committee
shall have full power and authority to:
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(i)
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designate
Participants;
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(ii)
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determine
the type or types of Awards to be granted to each Participant under
the
Employee Plan;
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(iii)
|
determine
the number of Shares to be covered by (or with respect to which payments,
rights, or other matters are to be calculated in connection with)
Awards;
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(iv)
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determine
the terms and conditions of any
Award;
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(v)
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determine
whether, to what extent, and under what circumstances Awards may
be
settled or exercised in cash, Shares, other securities, or other
Awards,
or canceled, forfeited, or suspended, and the method or methods by
which
Awards may be settled, exercised, canceled, forfeited, or
suspended;
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(vi)
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determine
whether, to what extent, and under what circumstances cash, Shares,
other
securities, other Awards, and other amounts payable with respect
to an
Award under the Employee Plan shall be deferred either automatically
or at
the election of the holder thereof or of the
Committee;
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(vii)
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interpret
and administer the Employee Plan and any instrument or agreement
relating
to, or Award made under, the Employee
Plan;
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(viii)
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establish,
amend, suspend, or waive such rules and
guidelines;
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(ix)
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accelerate
the vesting, exercise or payment of an
Award;
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(x)
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make
any other determination and take any other action that the Committee
deems
necessary or desirable for the administration of the Employee Plan;
and
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(xi)
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correct
any defect, supply any omission, or reconcile any inconsistency in
the
Employee Plan or any Award in the manner and to the extent it shall
deem
desirable to carry the Employee Plan into
effect.
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(b)
Unless otherwise expressly provided in the Employee Plan, all designations,
determinations, interpretations, and other decisions under or with respect
to
the Employee Plan or any Award shall be within the sole discretion of the
Committee, may be made at any time, and shall be final, conclusive, and binding
upon all Persons, including the Company, any Affiliate, any Participant, any
holder or beneficiary of any Award, any stockholder, and any employee of the
Company or of any Affiliate. In addition, actions of the Committee
may be taken by the Committee but with one or more members abstaining or
recusing himself or herself from acting on the matter, so long as two or more
members remain to act on the matter. Such action, authorized by the
Committee upon the abstention or recusal of such members, shall be the action
of
the Committee for purposes of the Employee Plan. The Committee may
designate the Secretary of the Company or other employees of the Company to
assist the Committee in the administration and operation of the Employee Plan
and may direct such persons to execute documents on behalf of the
Committee.
Section
4. Shares Available for Awards
(a)
Shares
Available. Subject to
adjustment as provided in Section 4(d),
The
total
number of shares of Common Stock reserved and available for delivery pursuant
to
Awards granted under the Employee Plan shall be one million (1,000,000); of
which no more than five hundred thousand (500,000) may be available for Awards
granted in any form provided for under the Employee Plan other than Options
or
Stock Appreciation Rights. If any Shares covered by an Award granted under
the
Employee Plan, or to which such an Award relates, are forfeited, or if an Award
otherwise terminates without the delivery of Shares or of other consideration,
then the Shares covered by such Award, or to which such Award relates, or the
number of Shares otherwise counted against the aggregate number of Shares
available under the Employee Plan with respect to such Award, to the extent
of
any such forfeiture or termination, shall again be available for granting Awards
under the Employee Plan. Notwithstanding the foregoing but subject to adjustment
as provided in Section 4(d), no more than three hundred thousand (300,000)
Shares shall be available for delivery pursuant to the exercise of Incentive
Stock Options.
Any
Award
made under a previous ePlus incentive plan
shall
continue to be subject to the terms and conditions of the plan under which
it
was awarded and the applicable Award Agreement.
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(b)
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Accounting
for Awards.
For purposes of this Section 4,
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(i)
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if
an Award (other than a Dividend Equivalent) is denominated in Shares,
the
number of Shares covered by such Award, or to which such Award relates,
shall be counted on the date of grant of such Award against the aggregate
number of Shares available for granting Awards under the Employee
Plan;
and
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(ii)
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Dividend
Equivalents denominated in Shares and Awards not denominated in Shares
but
potentially payable in Shares shall be counted against the aggregate
number of Shares available for granting Awards under the Employee
Plan in
such amount and at such time as the Dividend Equivalents and such
Awards
are settled in Shares, provided, however, that
Awards that operate in tandem with (whether granted simultaneously
with or
at a different time from), or that are substituted for, other Awards
may
only be counted once against the aggregate number of Shares available,
and
the Committee shall adopt procedures, as it deems appropriate, in
order to
avoid double counting. Any Shares that are delivered by the Company,
and
any Awards that are granted by, or become obligations of, the Company
through the assumption by the Company or an Affiliate of, or in
substitution for, outstanding awards previously granted by an acquired
company, shall not be counted against the Shares available for granting
Awards under this Plan.
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(iii)
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Notwithstanding
anything herein to the contrary, any Shares related to Awards which
terminate by expiration, forfeiture, cancellation, or otherwise without
the issuance of such Shares, are settled in cash in lieu of Shares,
or are
exchanged with the Committee’s permission, prior to the issuance of
Shares, for Awards not involving Shares, shall be available again
for
grant under this Plan. Shares subject to an Award under the Employee
Plan
may not again be made available for issuance under the Employee Plan
if
such Shares are: (x) Shares that were subject to an Option or a
stock-settled Stock Appreciation Right and were not issued upon the
net
settlement or net exercise of such Option or Stock Appreciation Right,
(y)
Shares delivered to or withheld by the Company to pay the exercise
price
or the withholding taxes under Options or Stock Appreciation Rights,
or
(z) Shares repurchased on the open market with the proceeds of an
Option
exercise.
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(c) Sources
of Shares Deliverable Under
Awards. Any Shares delivered pursuant to an Award may consist, in whole
or in part, of authorized but unissued Shares or of treasury
Shares.
(d) Adjustments.
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(i)
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In
the event that the Committee shall determine that any stock dividend,
recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase,
or
exchange of Shares or other securities of the Company, issuance of
warrants or other rights to purchase Shares or other securities of
the
Company, or other similar corporate transaction or event constitutes
an
equity restructuring transaction, as that term is defined in Statement
of
Financial Accounting Standards No. 123 (revised) or otherwise affects
the
Shares, then the Committee shall adjust the following in a manner
that is
determined by the Committee to be appropriate in order to prevent
dilution
or enlargement of the benefits or potential benefits intended to
be made
available under the Employee Plan:
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(A) the
number and type of Shares or other securities which thereafter may be made
the
subject of Awards including the limit specified in Section 4(a) regarding the
number of shares that may be granted in the form of Restricted Stock, Restricted
Stock Units, Performance Awards, or Other Stock-Based Awards;
(B) the
number and type of Shares or other securities subject to outstanding
Awards;
(C) the
number and type of Shares or other securities specified as the annual
per-participant limitation under Section 6(g)(v) and (vi);
(D) the
grant, purchase, or exercise price with respect to any Award, or, if deemed
appropriate, make provision for a cash payment to the holder of an outstanding
Award; and
(E)
other value determinations applicable to outstanding
awards.
Provided,
however, in each
case, that with respect to Awards of Incentive Stock Options no such adjustment
shall be authorized to the extent that such authority would cause the Employee
Plan to violate Sections 422(b)(1) of the Code or any successor provision
thereto; and provided further,
however, that the number of Shares subject to any Award denominated in
Shares shall always be a whole number. Notwithstanding the foregoing,
no adjustments shall be made with respect to Performance Awards granted to
a Key
Employee to the extent such adjustment would cause the Award to fail to qualify
as performance-based compensation under Section 162(m) of the Code and no
adjustment shall be required if the Committee determines that such action could
cause an Award to fail to satisfy the conditions of an applicable exception
from
the requirements of Section 409A of the Code or otherwise could subject a
Participant to the additional tax imposed under Section 409A in respect of
an
outstanding Award.
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(ii)
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Consolidation,
Merger or Sale
of Assets. Upon the occurrence of (i) a merger,
consolidation, acquisition of property or stock, reorganization or
otherwise involving the Company in which the Company is not to be
the
surviving corporation, (ii) a merger, consolidation, acquisition
of
property or stock, reorganization or otherwise involving the Company
in
which the Company is the surviving corporation but holders of Shares
receive securities of another corporation, or (iii) a sale of all
or
substantially all of the Company’s assets (as an entirety) or capital
stock to another person, any Award granted hereunder shall be deemed
to
apply to the securities, cash or other property (subject to adjustment
by
cash payment in lieu of fractional interests) to which a holder of
the
number of Shares equal to the number of Shares the Participant would
have
been entitled, and proper provisions shall be made to ensure that
this
clause is a condition to any such transaction; provided, however, that
for an Award that is not subject to Section 409A the Committee (or,
if
applicable, the board of directors of the entity assuming the Company’s
obligations under the Employee Plan) shall, in its discretion, have the
power to either:
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(a) provide,
upon written notice to Participants, that all Awards that are currently
exercisable must be exercised within the time period specified in the notice
and
that all Awards not exercised as of the expiration of such period shall be
terminated without consideration; provided, however, that the
Committee (or successor board of directors) may provide, in its discretion,
that, for purposes of this subsection, all outstanding Awards are currently
exercisable, whether or not vested; or
(b) cancel
any or all Awards and, in consideration of such cancellation, pay to each
Participant an amount in cash with respect to each Share issuable under an
Award
equal to the difference between the Fair Market Value of such Share on such
date
(or, if greater, the value per Share of the consideration received by holders
of
Shares as a result of such merger, consolidation, reorganization or sale) and
the Exercise Price.
Section
5. Eligibility
Any
Employee of the Company or of any Affiliate shall be eligible to be designated
a
Participant.
Section
6. Awards
(a)
Options.
Options granted
under the Employee Plan may, at the discretion of the Committee, be in the
form
of either Non-Qualified Stock Options, Incentive Stock Options or a combination
of the two. Where both a Non-Qualified Stock Option and an Incentive
Stock Option are granted to a Participant at the same time, such Awards shall
be
deemed to have been granted in separate grants, shall be clearly identified,
and
in no event will the exercise of one such Award affect the right to exercise
the
other Award. Unless otherwise specified, an Option shall be a
Non-Qualified Stock Option. Subject to Section 3, the Committee is
hereby authorized to grant Options to Participants with the following terms
and
conditions and with such additional terms and conditions, in either case not
inconsistent with the provisions of the Employee Plan, as the Committee shall
determine:
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(i)
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Amount
of Shares. The
Committee may grant Options to a Participant in such amounts as the
Committee may determine, subject to the limitations se forth in Section
6(g)(v) of the Employee Plan. The number of Shares subject to
an Option shall be set forth in the applicable Award
Agreement.
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(ii)
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Exercise
Price. The
exercise price per Share under an Option shall be determined by the
Committee; provided,
however, and except as provided in Section 4(d), that such exercise
price shall not be less than 100% of the Fair Market Value of a Share
on
the date of grant of such Option. The exercise price of an
Option, as determined by the Committee pursuant to this Section 6(a)(ii),
shall be set forth in the applicable Award
Agreement.
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(iii)
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Option
Term. Except as
set forth in Section 6(a)(vii) below, the term of each Option shall
not
exceed ten (10) years from the date of
grant.
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(iv)
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Timing
of Exercise.
Except as may otherwise be provided in the Award Agreement or as
the
Committee may otherwise determine, and subject to the Committee’s
authority under Section 3(a) to accelerate the vesting of an Award
and to waive or amend any terms, conditions, limitations or restrictions
of an Award, each Option granted under the Employee Plan shall be
exercisable in whole or in part, subject to the following conditions,
limitations and restrictions:
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(A)
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20%
of the Shares subject to an Option shall first become exercisable
on the
one-year anniversary of the date of grant, 30% shall first become
exercisable on the two-year anniversary of the date of grant and
the
remainder shall first become exercisable on the three-year anniversary
of
the date of grant;
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(B)
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All
Options subject to the Award shall become immediately exercisable
upon a
Change in Control;
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(C)
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All
Options granted to a Participant shall become immediately exercisable
upon
the death or Disability of the Participant and must be exercised,
if at
all, within one year after such Participant’s death or Disability, but in
no event after the date such Options would otherwise lapse. Options
of a
deceased Participant may be exercised only by the estate of the
Participant or by the person given authority to exercise such Options
by
the Participant’s will or by operation of law. In the event an Option is
exercised by the executor or administrator of a deceased Participant,
or
by the person or persons to whom the Option has been transferred
by the
Participant’s will or the applicable laws of descent and distribution, the
Company shall be under no obligation to deliver Shares thereunder
unless
and until the Company is satisfied that the person or persons exercising
the Option is or are the duly appointed executor(s) or administrator(s)
of
the deceased Participant or the person to whom the Option has been
transferred by the Participant’s will or by the applicable laws of descent
and distribution;
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(D)
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Upon
an Employee’s Retirement, all Options that have not become exercisable as
of the date of Retirement shall be forfeited and to the extent that
Options have become exercisable as of such date, such Options must
be
exercised, if at all, within one year after Retirement, but in no
event
after the date such Options would otherwise
lapse; and
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(E)
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The
Option shall lapse upon termination of employment for
Cause. Except as otherwise provided in Section 6(a)(vii)
or Section 6(g)(xii), upon an Employee’s termination of employment, for
any reason other than death, Disability, Retirement or Cause, all
Options
that have not become exercisable as of the date of termination shall
be
forfeited and to the extent that Options have become exercisable
as of
such date, such Options must be exercised, if at all, within 90 days
after such termination of
employment.
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(v)
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Payment
of Exercise
Price. The exercise price shall be paid in full when the Option
is
exercised and stock certificates shall be registered and delivered
only
upon receipt of such payment. Unless otherwise provided by the Committee,
payment of the exercise price may be made in cash or by certified
check,
bank draft, wire transfer, or postal or express money order or any
other
form of consideration approved by the Committee. In addition, at
the
discretion of the Committee, payment of all or a portion of the exercise
price may be made by
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(A)
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Delivering
a properly executed exercise notice to the Company, or its agent,
together
with irrevocable instructions to a broker to deliver promptly to
the
Company the amount of sale proceeds with respect to the portion of
the
Shares to be acquired upon exercise having a Fair Market Value on
the date
of exercise equal to the sum of the applicable portion of the exercise
price being so paid and appropriate tax
withholding;
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(B)
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Tendering
(actually or by attestation) to the Company previously acquired Shares
that have been held by the Participant for at least six months having
a
Fair Market Value on the day prior to the date of exercise equal
to the
applicable portion of the exercise price being so
paid; or
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(C)
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any
combination of the foregoing.
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(vi)
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Incentive
Stock
Options. The terms of any Incentive Stock Option granted under the
Employee Plan shall be designed to comply in all respects with the
provisions of Section 422 of the Code, or any successor provision
thereto,
and any regulations promulgated thereunder which are hereby incorporated
by reference. In the event that any provision of the Employee
Plan would contravene the Code rules that apply to Incentive Stock
Options, such Plan provision shall not apply to Incentive Stock
Options. Incentive Stock Options granted under the Employee
Plan shall be subject to the following additional conditions, limitations
and restrictions:
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(A)
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Timing
of Grant.
No Incentive
Stock Option shall be granted under the Employee Plan after the 10-year
anniversary of the date the Employee Plan is adopted by the
Board.
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(B)
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Amount
of Award. The
aggregate Fair Market Value of Shares (determined as of the time
of grant)
with respect to which such Incentive Stock Options are exercisable
for the
first time by the Participant during any calendar year (under all
plans of
the Company and any subsidiary) may not exceed $100,000, taking Incentive
Stock Option into account in the order in which they were
granted. To the extent an Option initially designated as an
Incentive Stock Option exceeds the value limit of this Section or
otherwise fails to satisfy the requirements applicable to Incentive
Stock
Options, it shall be deemed a Non-Qualified Stock Option and shall
otherwise remain in full force and
effect.
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(C)
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Timing
of
Exercise. In the event that the Committee exercises its
discretion to permit an Incentive Stock Option to be exercised by
a
Participant more than 90 days after the Participant’s termination of
employment and such exercise occurs more than 90 days after such
Participant has ceased being an Employee (or more than 12 months
after the Participant is Disabled or dies), such Incentive Stock
Option
shall thereafter be treated as a Non-Qualified Stock Option for all
purposes.
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(D)
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Transfer
Restrictions.
In no event shall the Committee permit an Incentive Stock Option
to be
transferred by a Participant other than by will or the laws of descent
and
distribution, and any Incentive Stock Option granted hereunder shall
be
exercisable, during his or her lifetime, only by the
Participant.
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(E)
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Ten
Percent Owners. No
Incentive Stock Option shall be granted to any individual who, at
the date
of grant, owns stock possessing more than ten percent of the total
combined voting power of all classes of stock of the Company or any
Affiliate unless the exercise price per share of such Option is at
least
110% of the Fair Market Value per Share at the date of grant and
the
Option expires no later than five years after the date of
grant.
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(vii)
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Extension
of Option Term for
Blackouts. At its discretion, the Committee may extend
the term of any Option beyond its earlier termination pursuant to
Section 6(a)(iii),(iv)(C), (iv)(D) or (iv)(E) if the
Company had prohibited the participant from exercising the Option
prior to
termination or expiration in order to comply with applicable Federal,
state, local or foreign law, provided that such extension may not
exceed the earlier of 30 days from the date such
prohibition is lifted or ten years after the Option grant
date.
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(b)
Stock
Appreciation Rights.
The Committee is hereby authorized to grant Stock Appreciation Rights to
Participants. Subject to the terms of the Employee Plan and any applicable
Award
Agreement, a Stock Appreciation Right Award granted under the Employee Plan
shall confer on the holder thereof a right to receive, upon exercise thereof,
the excess of (i) the Fair Market Value of one Share on the date of exercise
over (ii) the grant price of the Stock Appreciation Right as specified by the
Committee, multiplied by the number of Stock Appreciation Rights
granted. As determined by the Committee, the payment upon exercise
may be paid in cash, Shares to be valued at their Fair Market Value on the
date
of exercise, any other mode of payment deemed appropriate by the Committee
or
any combination thereof. The Committee may establish a maximum
appreciation value payable for stock appreciation rights.
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(i)
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Grant
Price. Shall be
determined by the Committee, provided, however, and
except as provided in Section 4(d), that such price shall not be
less than
100% of the Fair Market Value of one Share on the date of grant of
the
Stock Appreciation Right, except that if a Stock Appreciation Right
is at
any time granted in tandem with an Option, the grant price of the
Stock
Appreciation Right shall not be less than the exercise price of such
Option.
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(ii)
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Term.
The term of each
Stock Appreciation Right shall not exceed ten (10) years from the
date of
grant.
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(iii)
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Time
and Method of
Exercise. The Committee shall establish in the applicable Award
Agreement the time or times at which a Stock Appreciation Right may
be
exercised in whole or in part.
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(c)
Restricted
Stock and Restricted
Stock Units. The Committee is hereby authorized to grant Awards of
Restricted Stock and Restricted Stock Units to Participants.
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(i)
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Restrictions.
Shares of
Restricted Stock and Restricted Stock Units shall be subject to such
restrictions as the Committee may establish in the applicable Award
Agreement (including, without limitation, any limitation on the right
to
vote a Share of Restricted Stock or the right to receive any dividend
or
other right), which restrictions may lapse separately or in combination
at
such time or times, in such installments or otherwise, as the Committee
may deem appropriate. Unrestricted Shares, evidenced in such manner
as the
Committee shall deem appropriate, shall be delivered to the holder
of
Restricted Stock promptly after such restrictions have
lapsed.
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(ii)
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Registration.
Any
Restricted Stock or Restricted Stock Units granted under the Employee
Plan
may be evidenced in such manner as the Committee may deem appropriate,
including, without limitation, book-entry registration or issuance
of a
stock certificate or certificates. In the event any stock certificate
is
issued in respect of Shares of Restricted Stock granted under the
Employee
Plan, such certificate shall be registered in the name of the Participant
and shall bear an appropriate legend referring to the terms, conditions,
and restrictions applicable to such Restricted
Stock.
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(iii)
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Forfeiture.
Upon
termination of employment during the applicable restriction period
for any
reason other than death or Disability, except as determined otherwise
by
the Committee, all Shares of Restricted Stock and all Restricted
Stock
Units still, in either case, subject to restriction shall be forfeited
and
reacquired by the Company.
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(d)
Performance
Awards. The
Committee is hereby authorized to grant Performance Awards to Participants.
Performance Awards include arrangements under which the grant, issuance,
retention, vesting and/or transferability of any Award is subject to such
Performance Criteria and such additional conditions or terms as the Committee
may designate. The Committee may establish a maximum Performance Award. Subject
to the terms of the Employee Plan and any applicable Award Agreement, a
Performance Award granted under the Employee Plan:
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(i)
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may
be denominated or payable in cash, Shares (including, without limitation,
Restricted Stock), other securities, or other Awards;
and
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(ii)
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shall
confer on the holder thereof rights valued as determined by the Committee
and payable to, or exercisable by, the holder of the Performance
Award, in
whole or in part, upon the achievement of such performance goals
during
such Performance Periods as the Committee shall
establish.
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(e)
Dividend
Equivalents. The
Committee is hereby authorized to grant to Participants Awards under which
the
holders thereof shall be entitled to receive payments equivalent to dividends
or
interest with respect to a number of Shares determined by the Committee, and
the
Committee may provide that such amounts (if any) shall be deemed to have been
reinvested in additional Shares or otherwise reinvested. Subject to the terms
of
the Employee Plan and any applicable Award Agreement, such Awards may have
such
terms and conditions as the Committee shall determine.
(f)
Other
Stock-Based Awards. The
Committee is hereby authorized to grant to Participants such other Awards that
are denominated or payable in, valued in whole or in part by reference to,
or
otherwise based on or related to, Shares (including, without limitation,
securities convertible into Shares), as are deemed by the Committee to be
consistent with the purposes of the Employee Plan, provided, however, that such
grants must comply with applicable law. Subject to the terms of the Employee
Plan and any applicable Award Agreement, the Committee shall determine the
terms
and conditions of such Awards. Shares or other securities delivered pursuant
to
a purchase right granted under this Section 6(f) shall be purchased for such
consideration, which may be paid by such method or methods and in such form
or
forms, including, without limitation, cash, Shares, other securities, or other
Awards, or any combination thereof, as the Committee shall determine, the value
of which consideration, as established by the Committee, and except as provided
in Section 4(d), shall not be less than the Fair Market Value of such Shares
or
other securities as of the date such purchase right is.
(g)
General.
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(i)
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No
Cash Consideration for
Awards. Awards shall be granted for no cash consideration or for
such minimal cash consideration as may be required by applicable
law.
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(ii)
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Awards
may be Granted
Separately or Together. Awards may, in the discretion of the
Committee, be granted either alone or in addition to, in tandem with,
or
in substitution for any other Award or any award granted under any
other
plan of the Company or any Affiliate. Awards granted in addition
to or in
tandem with other Awards, or in addition to or in tandem with awards
granted under any other plan of the Company or any Affiliate, may
be
granted either at the same time as or at a different time from the
grant
of such other Awards.
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(iii)
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Forms
of Payment under
Awards. Subject to the terms of the Employee Plan and of any
applicable Award Agreement, payments or transfers to be made by the
Company or an Affiliate upon the grant, exercise, or payment of an
Award
may be made in such form or forms as the Committee shall determine,
including, without limitation, cash, Shares, rights in or to Shares
issuable under the Award or other Awards, other securities, or other
Awards, or any combination thereof, and may be made in a single payment
or
transfer, in installments, or on a deferred basis, in each case in
accordance with rules and procedures established by the Committee.
Such
rules and procedures may include, without limitation, provisions
for the
payment or crediting of reasonable interest on installment or deferred
payments or the grant or crediting of Dividend Equivalents in respect
of
installment or deferred payments.
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(iv)
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Limits
on Transfer of
Awards. Except as provided by the Committee, no Award and no right
under any such Award, shall be assignable, alienable, saleable, or
transferable by a Participant otherwise than by will or by the laws
of
descent and distribution provided, however,
that, if so determined by the Committee, a Participant may, in the
manner
established by the Committee, designate a beneficiary or beneficiaries
to
exercise the rights of the Participant with respect to any Award
upon the
death of the Participant. Each Award, and each right under any Award,
shall be exercisable, during the Participant’s lifetime, only by the
Participant or, if permissible under applicable law, by the Participant’s
guardian or legal representative. No Award and no right under any
such
Award, may be pledged, alienated, attached, or otherwise encumbered,
and
any purported pledge, alienation, attachment, or encumbrance thereof
shall
be void and unenforceable against the Company or any
Affiliate.
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(v)
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Per-Person
Limitation on
Options and SARs. The number of Shares with respect to which
Options and Stock Appreciation Rights may be granted under the Employee
Plan during any calendar year to an individual Participant shall
not
exceed fifty thousand (50,000) Shares, subject to adjustment as provided
in Section 4(d).
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(vi)
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Per-Person
Limitation on
Certain Awards. Other than Options and Stock Appreciation Rights,
the aggregate number of Shares with respect to which Restricted Stock,
Restricted Stock Units, Performance Awards and Other Stock-Based
Awards
may be granted under the Employee Plan during any calendar year to
an
individual Participant shall not exceed fifty thousand (50,000) Shares,
subject to adjustment as provided in Section
4(d).
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(vii)
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Conditions
and Restrictions
upon Securities Subject to Awards. The Committee may provide that
the Shares issued upon exercise of an Option or Stock Appreciation
Right
or otherwise subject to or issued under an Award shall be subject
to such
further agreements, restrictions, conditions or limitations as the
Committee in its discretion may specify prior to the exercise of
such
Option or Stock Appreciation Right or the grant, vesting or settlement
of
such Award, including without limitation, conditions on vesting or
transferability and forfeiture or repurchase provisions or provisions
on
payment of taxes arising in connection with an Award. Without limiting
the
foregoing, such restrictions may address the timing and manner of
any
resales by the Participant or other subsequent transfers by the
Participant of any Shares issued under an Award, including without
limitation: (A) restrictions under an insider trading policy or pursuant
to applicable law, (B) restrictions designed to delay and/or coordinate
the timing and manner of sales by Participant and holders of other
Company
equity compensation arrangements, (C) restrictions as to the use
of a
specified brokerage firm for such resales or other transfers and
(D)
provisions requiring Shares to be sold on the open market or to the
Company in order to satisfy tax withholding or other
obligations.
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(viii)
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Share
Certificates. All
Shares or other securities delivered under the Employee Plan pursuant
to
any Award or the exercise thereof shall be subject to such stop transfer
orders and other restrictions as the Committee may deem advisable
under
the Employee Plan or the rules, regulations, and other requirements
of the
Securities and Exchange Commission, any stock exchange or automated
quotation system upon which such Shares or other securities are then
listed, quoted, or traded, and any applicable Federal, state, or
local
securities laws, and the Committee may cause a legend or legends
to be put
on any such certificates or issue instructions to the transfer agent
to
make appropriate reference to such
restrictions.
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(ix)
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Suspension
of Exercise.
The Company reserves the right from time to time to suspend the exercise
of any stock option or stock appreciation right where such suspension
is
deemed by the Company as necessary or appropriate for corporate
purposes.
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(x)
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Change
in Control.
Notwithstanding anything to the contrary in the Employee Plan, any
conditions or restrictions on Restricted Stock shall lapse upon a
Change
in Control.
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(xi)
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Award
Agreement. Each grant of an Award under the Employee
Plan will be evidenced by an Award Agreement. Such document
will contain such provisions as the Committee may in its discretion
deem
advisable, provided that such
provisions are not inconsistent with any of the provisions of the
Employee
Plan.
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(xii)
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Special
Forfeiture
Provision. If the Committee, in its discretion,
determines and the applicable Award Agreement so provides, a Participant
who, without prior written approval of the Company, enters into any
employment or consultation arrangement (including service as an agent,
partner, stockholder, consultant, officer or director) to any entity
or
person engaged in any business in which the Company or its affiliates
is
engaged which, in the sole judgment of the Company, is competitive
with
the Company or any Affiliate, (i) shall forfeit all rights under any
outstanding Option or Stock Appreciation Right and shall return to
the
Company the amount of any profit realized upon the exercise, within
such
period as the Committee may determine, of any Option or Stock Appreciation
Right, and (ii) shall forfeit and return to the Company all Shares of
Restricted Stock and other Awards which are not then vested or which
vested but remain subject to the restrictions imposed by this
Section 6(g)(xii), as provided in the Award
Agreement.
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(xiii)
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No
Repricing. Repricing
of Options or Stock Appreciation Rights shall not be permitted without
stockholder approval. For this purpose, a “repricing”
means any
of
the following (or any other action that has the same effect as any
of the
following): (A) changing the terms of an Option or Stock Appreciation
Right to lower its exercise price (other than pursuant to
Section 4(d)); (B) any other action that is treated as a
“repricing” under generally accepted accounting principles; and
(C) repurchasing for cash or canceling an Option or Stock
Appreciation Right at a time when its exercise price is greater than
the
Fair Market Value of the underlying stock in exchange for another
Award,
unless the cancellation and exchange occurs in connection with an
event
set forth in Section 4(d). Such cancellation and exchange would be
considered a “repricing” regardless of whether it is treated as a
“repricing” under generally accepted accounting principles and regardless
of whether it is voluntary on the part of the
Participant.
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Section
7. Amendment and Termination
Except
to
the extent prohibited by applicable law and unless otherwise expressly provided
in an Award Agreement or in the Employee Plan:
(a)
Amendments
to the Employee
Plan. The Board of Directors of the Company may amend, alter, suspend,
discontinue, or terminate the Employee Plan, in whole or in part; provided, however, that
without the prior approval of the Company’s stockholders, no material amendment
shall be made if stockholder approval is required by applicable law, rule or
regulation, and; provided,
further, that, notwithstanding any other provision of the Employee Plan
or any Award Agreement, no such amendment, alteration, suspension,
discontinuation, or termination shall be made without the approval of the
stockholders of the Company that would:
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(i)
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increase
the total number of Shares available for Awards under the Employee
Plan,
except as provided in Section 4 hereof;
or
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(ii)
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except
as provided in Section 4(d), permit Options, Stock Appreciation Rights,
or
other Stock-Based Awards encompassing rights to purchase Shares to
be
repriced, replaced, or regranted through cancellation, or by lowering
the
exercise price of a previously granted Option or the grant price
of a
previously granted Stock Appreciation Right, or the purchase price
of a
previously granted Other Stock-Based
Award.
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(b)
Amendments
to Awards. The
Committee may waive any conditions or rights under, amend any terms of, or
amend, alter, suspend, discontinue, or terminate, any Awards theretofore
granted, prospectively or retroactively. No such amendment or alteration shall
be made which would impair the rights of any Participant, without such
Participant’s consent, under any Award theretofore granted, provided that no such consent
shall be required with respect to any amendment or alteration if the Committee
determines in its sole discretion that such amendment or alteration either
(i)
is required or advisable in order for the Company, the Employee Plan or the
Award to satisfy or conform to any law or regulation or to meet the requirements
of any accounting standard, or (ii) is not reasonably likely to significantly
diminish the benefits provided under such Award.
Section
8. General Provisions
(a)
No
Rights to Awards. No
Employee, Participant or other Person shall have any claim to be granted any
Award under the Employee Plan, or, having been selected to receive an Award
under this Plan, to be selected to receive a future Award, and further there
is
no obligation for uniformity of treatment of Employees, Participants, or holders
or beneficiaries of Awards under the Employee Plan. The terms and conditions
of
Awards need not be the same with respect to each recipient.
(b)
Withholding.
The Company or
any Affiliate shall be authorized to withhold from any Award granted or any
payment due or transfer made under any Award or under the Employee Plan the
amount (in cash, Shares, other securities, or other Awards) of withholding
taxes
due in respect of an Award, its exercise, or any payment or transfer under
such
Award or under the Employee Plan and to take such other action as may be
necessary in the opinion of the Company or Affiliate to satisfy statutory
withholding obligations for the payment of such taxes.
(c)
No
Limit on Other Compensation
Arrangements. Nothing contained in the Employee Plan shall prevent the
Company or any Affiliate from adopting or continuing in effect other or
additional compensation arrangements, and such arrangements may be either
generally applicable or applicable only in specific cases.
(d)
No
Right to Employment. The
grant of an Award shall not constitute an employment contract nor be construed
as giving a Participant the right to be retained in the employ of the Company
or
any Affiliate. Further, the Company or an Affiliate may at any time dismiss
a
Participant from employment, free from any liability, or any claim under the
Employee Plan, unless otherwise expressly provided in the Employee Plan or
in
any Award Agreement.
(e)
Governing
Law. The validity,
construction, and effect of the Employee Plan and any rules and regulations
relating to the Employee Plan shall be determined in accordance with the laws
of
the State of Delaware and applicable Federal law without regard to conflict
of
law.
(f)
Severability.
If any
provision of the Employee Plan or any Award is or becomes or is deemed to be
invalid, illegal, or unenforceable in any jurisdiction, or as to any Person
or
Award, or would disqualify the Employee Plan or any Award under any law deemed
applicable by the Committee, such provision shall be construed or deemed amended
to conform to applicable laws, or if it cannot be so construed or deemed amended
without, in the determination of the Committee, materially altering the intent
of the Employee Plan or the Award, such provision shall be stricken as to such
jurisdiction, Person, or Award, and the remainder of the Employee Plan and
any
such Award shall remain in full force and effect.
(g)
No
Trust or Fund Created.
Neither the Employee Plan nor any Award shall create or be construed to create
a
trust or separate fund of any kind or a fiduciary relationship between the
Company or any Affiliate and a Participant or any other Person. To the extent
that any Person acquires a right to receive payments from the Company or any
Affiliate pursuant to an Award, such right shall be no greater than the right
of
any unsecured general creditor of the Company or any Affiliate.
(h)
No
Fractional Shares. No
fractional Shares shall be issued or delivered pursuant to the Employee Plan
or
any Award, and the Committee shall determine whether cash or other securities
shall be paid or transferred in lieu of any fractional Shares, or whether such
fractional Shares or any rights thereto shall be canceled, terminated, or
otherwise eliminated.
(i)
Headings.
Headings are given
to the Sections and subsections of the Employee Plan solely as a convenience
to
facilitate reference. Such headings shall not be deemed in any way material
or
relevant to the construction or interpretation of the Employee Plan or any
provision thereof, and, in the event of any conflict, the text of the Employee
Plan, rather than such headings, shall control.
(j)
Indemnification.
Subject to
requirements of Delaware State law, each individual who is or shall have been
a
member of the Board, or a Committee appointed by the Board or a delegate of
the
Committee so acting, shall be indemnified and held harmless by the Company
against and from any loss, cost, liability, or expense that may be imposed
upon
or reasonably incurred by him or her in connection with or resulting from any
claim, action, suit, or proceeding to which he or she may be a party or in
which
he or she may be involved by reason of any action taken or failure to act under
this Plan and against and from any and all amounts paid by him or her in
settlement thereof, with the Company’s approval, or paid by him or her in
satisfaction of any judgment in any such action, suit, or proceeding against
him
or her, provided he or
she shall give the Company an opportunity, at its own expense, to handle and
defend the same before he or she undertakes to handle and defend it on his/her
own behalf, unless such loss, cost, liability, or expense is a result of his/her
own willful misconduct or except as expressly provided by statute. The foregoing
right of indemnification shall not be exclusive of any other rights of
indemnification to which such individuals may be entitled under the Company’s
Certificate of
Incorporation or Bylaws, as a matter of law, or otherwise, or any power that
the
Company may have to indemnify them or hold them harmless.
(k)
Compliance
with Section 409A.
Except to the extent specifically provided otherwise by the Committee, Awards
under the Employee Plan are intended to satisfy the requirements of Section
409A
so as to avoid the imposition of any additional taxes or penalties under Section
409A. If the Committee determines that an Award, Award Agreement, payment,
distribution, deferral election, transaction or any other action or arrangement
contemplated by the provisions of the Employee Plan would, if undertaken, cause
a Participant to become subject to any additional taxes or other penalties
under
Section 409A, then unless the Committee specifically provides otherwise, such
Award, Award Agreement, payment, distribution, deferral election, transaction
or
other action or arrangement shall not be given effect to the extent it causes
such result and the related provisions of the Employee Plan and/or Award
Agreement will be deemed modified, or, if necessary, suspended in order to
comply with the requirements of Section 409A to the extent determined
appropriate by the Committee, in each case without the consent of or notice
to
the Participant. Notwithstanding any provision in the Employee Plan
to the contrary, with respect to any Award that is subject to Section 409A,
distributions on account of a separation from service may not be made to a
“specified employee” (as defined by Section 409A) before the date which is six
(6) months after the date of separation from service (or, if earlier, the date
of death of the employee).
(l)
No
Representations or Covenants with
Respect to Tax Qualification. Although the Company may endeavor to (i)
qualify an Award for favorable U.S. tax provisions (e.g., incentive stock
options
under Section 422 of the Code) or (ii) avoid adverse tax treatment (e.g., under
Section 409A of the Code), the Company makes no representation to that effect
and expressly disavows any covenant to maintain favorable or avoid unfavorable
tax treatment. The Company shall be unconstrained in its corporate activities
without regard to the potential negative tax impact on holders of Awards under
the Employee Plan.
(m)
Compliance
with Laws. The
granting of Awards and the issuance of Shares under the Employee Plan shall
be
subject to all applicable laws, rules, and regulations, and to such approvals
by
any governmental agencies or stock exchanges or automated quotation systems
on
which the Company is listed, quoted or traded as may be required. The Company
shall have no obligation to issue or deliver evidence of title for Shares issued
under the Employee Plan prior to:
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(i)
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obtaining
any approvals from governmental agencies that the Company determines
are
necessary or advisable; and
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(ii)
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completion
of any registration or other qualification of the Shares under any
applicable national or foreign law or ruling of any governmental
body that
the Company determines to be necessary or advisable or at a time
when any
such registration or qualification is not current, has been suspended
or
otherwise has ceased to be
effective.
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The
inability or impracticability of the Company to obtain or maintain authority
from any regulatory body having jurisdiction, which authority is deemed by
the
Company’s counsel to be necessary to the lawful issuance and sale of any Shares
hereunder shall relieve the Company of any liability in respect of the failure
to issue or sell such Shares as to which such requisite authority shall not
have
been obtained.
(n)
Code
Section 83(b)
Elections. Neither the Company, any Affiliate, nor the
Committee shall have any responsibility in connection with a Participant’s
election, or attempt to elect, under Code section 83(b) to include the value
of
a Restricted Stock Award in the Participant’s gross income for the year of
payment. Any Participant who makes a Code section 83(b) election with
respect to any such Award shall promptly notify the Committee of such election
and provide the Committee with a copy thereof.
Section
9. Term of the Employee Plan
The
Plan
shall remain in full force and effect through [September 15], 2018, unless
sooner terminated by the Board. After the Employee Plan is
terminated, no future Awards may be granted, but Awards previously granted
shall
remain outstanding in accordance with their applicable terms and conditions
and
the Employee Plan’s terms and conditions.
ANNEX
C
–
AMENDED
AND RESTATED CERTIFICATE OF INCORPORATION OF EPLUS
INC.
The
present name of the corporation is ePlus inc. (the
“Corporation”). The Corporation was incorporated under the name “MLC
Holdings, Inc.” by filing of its original Certificate of Incorporation with the
Secretary of State of the State of Delaware on August 27, 1996. This
Amended and Restated Certificate of Incorporation of the Corporation, which
restates and integrates and also further amends the provisions of the
Corporation’s Certificate of Incorporation, was duly adopted in accordance with
the provisions of Sections 242 and 245 of the General Corporation Laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code, as
amended, and referred to as the “Delaware General Corporation
Law”). The Certificate of Incorporation of the Corporation is hereby
amended, integrated and restated to read in its entirety as
follows:
FIRST
The
name
of the Corporation is ePlus inc.
SECOND
The
address of the registered office of the Corporation in the State of Delaware
is
1209 Orange Street, City of Wilmington, County of New Castle, 19801, and the
name of the Corporation’s registered agent in the State of Delaware is The
Corporation Trust Company.
THIRD
The
purpose of the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the Delaware General Corporation
Law.
FOURTH
The
total
number of shares of all classes of stock which the Corporation shall have
authority to issue is 27 million (27,000,000) shares consisting of 25 million
(25,000,000) shares of common stock having a par value of $.01 per share (the
“Common Stock”) and two million (2,000,000) shares of preferred stock having a
par value of $.01 per share (the “Preferred Stock”).
The
Board
of Directors of the Corporation is authorized, subject to limitations prescribed
by law, to provide by resolution or resolutions for the issuance of shares
of
the Preferred Stock as a class or in series, and, by filing a certificate of
designations, pursuant to the Delaware General Corporation Law, setting forth
a
copy of such resolution or resolutions to establish from time to time the number
of shares to be included in each such series and to fix the designation, powers,
preferences and rights of the shares of the class or of each such series and
the
qualifications, limitations, and restrictions thereof. The authority
of the Board of Directors with respect to the class or each series shall
include, but not be limited to, determination of the following:
a)
the number of shares constituting any series and
the distinctive designation of that series;
b)
the dividend rate of the shares of the class or of any
series, whether dividends shall be cumulative, and if so, from which date or
dates, and the relative rights of priority, if any of payment of dividends
on
shares of the class or of that series;
c)
whether the class or any series shall have voting rights, in
addition to the voting rights provided by law, and if so, the terms of such
voting rights;
d)
whether the class or any series shall have conversion
privileges and, if so, the terms and conditions of conversion, including
provision for adjustment of the conversion rate in such events as the Board
of
Directors shall determine;
e)
whether or not the shares of the class or of any series shall be
redeemable, and, if so, the terms and conditions of such redemption, including
the date or date upon or after which they shall be redeemable and the amount
per
share payable in case of redemption, which amount may vary under different
conditions and at different redemption rates;
f)
whether the class or any series shall have a sinking
fund for the redemption or purchase of shares of the class or of that series,
and if so, the terms and amount of such sinking fund;
g)
the rights of the shares of the class or of any
series in the event of voluntary or involuntary dissolution or winding up of
the
Corporation, and the relative rights of priority, if any, of payment of shares
of the class or of that series; and
h)
any other powers, preferences, rights, qualifications,
limitations and restrictions of the class or of that series.
All
rights accruing to the outstanding shares of the Corporation not expressly
provided for to the contrary herein or in any certificate of designation shall
be vested exclusively in the Common Stock.
FIFTH
The
Corporation is to have perpetual existence.
SIXTH
In
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors of the Corporation is expressly authorized to make, alter, or
repeal the Bylaws of the Corporation.
SEVENTH
No
person
shall be personally liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director; provided, however,
that the
foregoing shall not eliminate or limit the liability of a director (i) for
any
breach of the director’s duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit.
EIGHTH
The
Corporation shall indemnify, in the manner and to the fullest extent permitted
by the Delaware General Corporation Law (and in the case of any amendment
thereto, to the extent that such amendment permits the Corporation to provide
broader indemnification rights than permitted prior thereto), any person (or
the
estate of any person) who is or was a party to, or is threatened to be made
a
party to, any threatened, pending or completed action, suit or proceeding,
whether or not by or in the right of the Corporation, and whether civil,
criminal, administrative, investigative or otherwise, by reason of the fact
that
such person is or was a director or officer of the Corporation, or is or was
serving at the request of the Corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, including
service with respect to an employee benefit plan. The corporation
may, to the fullest extent permitted by the Delaware General Corporation Law,
purchase and maintain insurance on behalf of any such person against any
liability which may be asserted against such person. To the fullest
extent permitted by the Delaware General Corporation Law, the indemnification
provided herein may include expenses (including attorneys’ fees), judgments,
fines and amounts paid in settlement and any such expenses may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the person seeking
indemnification to repay such amounts if it is ultimately determined that he
or
she is not entitled to be indemnified. The indemnification provided
herein shall not be deemed to limit the right of the Corporation to indemnify
any other person for any such expenses to the fullest extent permitted by the
Delaware General Corporation Law, nor shall it be deemed exclusive of any other
rights to which any person seeking indemnification from the Corporation may
be
entitled under any agreement, the Corporation’s Bylaws, vote of stockholders or
disinterested directors, or otherwise, both as to action in such person’s
official capacity and as to action in another capacity while holding such
office. The Corporation may, but only to the extent that the Board of
Directors may (but shall not be obligated to) authorize from time to time,
grant
rights to indemnification and to the advancement of expenses to any employee
or
agent of the Corporation to the fullest extent of the provisions of this Article
Eighth as they apply to the indemnification and advancement of expenses of
directors and officers of the Corporation.
NINTH
From
time
to time any of the provisions of this Certificate of Incorporation may be
amended, altered, or repealed, and other provisions authorized by the laws
of
the State of Delaware at the time in force may be added or inserted in the
manner and at the time prescribed by said laws, and all rights at any time
conferred upon the stockholders of the Corporation by this Certificate of
Incorporation are granted subject to the provisions of this Article
Ninth.
IN
WITNESS WHEREOF, ePlus inc. has caused this Amended and Restated Certificate
of
Incorporation to be executed by its duly authorized officer on this ______
day
of ___________, 2008.
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EPLUS
INC.
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Signature: __________________________
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Name: _____________________________
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Title: ______________________________
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Annual
Meeting of Stockholders Of
ePlus
inc.
[September
15, 2008]
THE
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The
undersigned hereby appoints Erica S. Stoecker and Kleyton L. Parkhurst, and
each
or either of them, proxies, with power of substitution, to vote all shares
of
the undersigned at the Annual Meeting of Stockholders of ePlus
inc., a Delaware corporation, to be held on [September 15, 2008] at 8:00 a.m.
at
the Hyatt Regency located at 1800 Presidents Street, Reston, Virginia 20170,
or
at any adjournment thereof, upon the matters set forth in the Proxy Statement
for such Meeting, and in their discretion, upon such other business as may
properly come before the Meeting.
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1.
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To
elect as Directors, each to serve a term as described
below
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·
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To
elect three Class I
Directors, each to serve a term of one year and until their successors
have been duly elected and
qualified.
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TO
VOTE
FOR ALL THE NOMINEES LISTED BELOW
£
FOR ALL THE
NOMINEES LISTED BELOW £
WITHHOLD
AUTHORITY
C.
Thomas
Faulders, III
Lawrence
S. Herman
Eric
D.
Hovde
OR
TO
VOTE FOR EACH NOMINEE SEPARATELY
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C.
Thomas Faulders, III
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£ FOR £
WITHHOLD
AUTHORITY |
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Lawrence
S. Herman
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£ FOR£ WITHHOLD
AUTHORITY |
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Eric
D. Hovde
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£ FOR
£ WITHHOLD
AUTHORITY |
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·
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To
elect three Class II
Directors, each to serve a term of two years and until their successors
have been duly elected and
qualified.
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TO
VOTE
FOR ALL THE NOMINEES LISTED BELOW
£
FOR ALL THE
NOMINEES LISTED BELOW £
WITHHOLD
AUTHORITY
Irving
R. Beimler
Milton
E.
Cooper, Jr.
Terrence
O’Donnell
OR
TO
VOTE FOR EACH NOMINEE SEPARATELY
|
Irving
R. Beimler
|
£ FOR £
WITHHOLD
AUTHORITY
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|
Milton
E. Cooper, Jr.
|
£ FOR £
WITHHOLD
AUTHORITY |
|
Terrence
O’Donnell
|
£ FOR
£ WITHHOLD
AUTHORITY |
|
|
·
|
To
elect two Class III
Directors, each to serve a term of three years and until their successors
have been duly elected and
qualified.
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TO
VOTE
FOR BOTH THE NOMINEES LISTED BELOW
£
FOR BOTH THE
NOMINEES LISTED BELOW £
WITHHOLD
AUTHORITY
Phillip G.
Norton
Bruce
M.
Bowen
OR
TO
VOTE FOR EACH NOMINEE SEPARATELY
|
Phillip
G. Norton
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£
FOR £
WITHHOLD
AUTHORITY
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|
Bruce
M. Bowen
|
£
FOR £
WITHHOLD
AUTHORITY
|
2. To
approve the 2008 Non-Employee Director Long-Term Incentive Plan
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£
FOR
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£
AGAINST
|
£
ABSTAIN
|
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3. To
approve the 2008 Employee Long-Term Incentive Plan
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£
FOR
|
£
AGAINST
|
£
ABSTAIN
|
|
4.To
approve our Amended and Restated Certificate of Incorporation
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£
FOR
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£
AGAINST
|
£
ABSTAIN
|
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5. To
ratify the appointment of Deloitte & Touche LLP as ePlus’ independent auditors
for ePlus’ fiscal year
ending March 31, 2009.
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£
FOR
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£
AGAINST
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£
ABSTAIN
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|
Dated:________________,
2008
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Signature
if held jointly:
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NOTE: When
shares are held by joint tenants, both should sign. Persons signing
as Executor, Administrator, Trustee, etc. should so indicate. Please
sign exactly as the name appears on the proxy.
THE
SHARES REPRESENTED BY ALL PROXIES RECEIVED WILL BE VOTED IN ACCORDANCE WITH
THE
CHOICES SPECIFIED ON SUCH PROXIES. THE SHARES REPRESENTED BY A PROXY
WILL BE VOTED IN FAVOR OF A PROPOSAL IF NO CONTRARY SPECIFICATION IS
MADE. ALL VALID PROXIES OBTAINED WILL BE VOTED AT THE DISCRETION OF
THE BOARD OF DIRECTORS WITH RESPECT TO ANY OTHER BUSINESS THAT MAY COME BEFORE
THE ANNUAL MEETING.
PLEASE
MARK, SIGN, AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.