SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. 1)
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|_| Preliminary proxy statement |_| Confidential, for use of the Commission
|X| Definitive proxy statement only (as permitted by Rule 14a-6(e)(2))
|_| Definitive additional materials
|_| Soliciting material under Rule 14a-12
EPLUS INC.
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(Name of Registrant as Specified in Its Charter)
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and 0-11.
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[EPLUS LETTERHEAD]
August 23, 2002
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders of ePlus
inc. on September 19, 2002. The annual meeting will begin at 10:30 a.m. local
time at Hyatt Regency Reston, 1800 Presidents Street, Reston, Virginia 20191.
The formal notice of the meeting follows on the next page. In addition,
information regarding each of the matters you will be asked to vote on at the
annual meeting is contained in the attached proxy statement. We urge you to read
the proxy statement carefully. Mailing of proxy materials will begin on or about
August 23, 2002 to all stockholders of record at the close of business on July
25, 2002. The mailing will include the proxy statement, proxy card, a return
envelope, and the ePlus 2002 annual report.
It is important that you vote at the annual meeting. Whether or not you plan to
attend in person, we urge you to complete, date, and sign the enclosed proxy
card and return it as promptly as possible in the accompanying envelope. If you
are a stockholder of record and do attend the meeting and wish to vote your
shares in person, even after returning your proxy, you still may do so.
We look forward to seeing you in Reston, Virginia on September 19, 2002.
Very truly yours,
/s/ Phillip G. Norton
Phillip G. Norton, President
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held September 19, 2002
To the Stockholders of ePlus inc.:
The annual meeting of stockholders of ePlus inc., a Delaware corporation, will
be held on September 19, 2002, at the Hyatt Regency Reston, 1800 Presidents
Street, Reston, Virginia 20191, at 10:30 a.m. local time for the purposes stated
below:
1. To elect two Class III Directors, each to serve a term of three years
and until their successors have been duly elected and qualified.
2. To ratify the appointment of Deloitte & Touche LLP as our independent
auditors for our fiscal year ending March 31, 2003.
3. To transact such other business as may properly come before the annual
meeting.
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, 2002 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 meeting, please date and sign the
enclosed proxy card and mail it promptly in the enclosed envelope to Wachovia
Bank, National Association, 1525 West W.T. Harris Blvd., 3C3, Charlotte, NC
28288-1153.
ePlus inc.
/s/ Kleyton L. Parkhurst
August 23, 2002 Kleyton L. Parkhurst, Secretary
TABLE OF CONTENTS
Page
Information about ePlus Inc....................................................1
Information about the Annual Meeting...........................................1
Information about the Proxy Statement..........................................1
Information about Voting.......................................................2
Quorum Requirements............................................................2
Voting Requirements............................................................2
Dissenters' Rights of Appraisal................................................3
Voting Securities, Principal Holders thereof, and Management...................4
Directors and Executive Officers...............................................5
Compensation of Directors and Executive Officers..............................12
Performance Graph.............................................................16
Certain Transactions..........................................................17
Proposal 1....................................................................19
Proposal 2....................................................................19
Other Proposed Action.........................................................20
Stockholder Proposals and Submissions.........................................20
INFORMATION ABOUT EPLUS INC.
ePlus inc. has been in the business of selling, leasing, financing and managing
information technology and other assets for over 10 years. We have developed our
Enterprise Cost Management model through development and acquisition of
software, products, and business process services over the past five years. The
address of our principal executive office is 400 Herndon Parkway, Herndon,
Virginia 20170 and our telephone number at that address is (703) 834-5710. Our
website is located at www.ePlus.com. The information on our website is not
incorporated into this proxy statement.
INFORMATION ABOUT THE ANNUAL MEETING
Our annual meeting will be held on September 19, 2002 at 10:30 a.m. local time
at the Hyatt Regency Reston, 1800 Presidents Street, Reston, Virginia 20191.
The annual meeting has been called to consider and take action on the following
proposals:
1. To elect two Class III Directors, each to serve a term of three years
and until their successors have been duly elected and qualified.
2. To ratify the appointment of Deloitte & Touche LLP as our independent
auditors for our fiscal year ending March 31, 2003.
3. To transact such other business as may properly come before the
meeting.
Our board of directors has unanimously approved each of the proposals and
recommends that you vote in favor of each of the proposals. All holders of
record of our common stock at the close of business on July 25, 2002, the record
date, will be entitled to vote at the annual meeting.
INFORMATION ABOUT THE PROXY STATEMENT
We have sent you this proxy statement because ePlus' board of directors is
soliciting your proxy to vote at the annual meeting. ePlus is bearing the cost
of this proxy solicitation. If you own ePlus common stock in more than one
account, such as individually and also jointly with your spouse, you may receive
more than one set of these proxy materials. To assist us in saving money and to
provide you with better stockholder services, we encourage you to have all of
your accounts registered in the same name and address. You may do this by
contacting our transfer agent, Wachovia Bank, National Association, at (800)
829-8432. This proxy statement contains information that we are required to
provide to you under the rules of the Securities and Exchange Commission and is
designed to assist you in voting your shares. On or about August 23, 2002, we
began mailing these proxy materials to all stockholders of record at the close
of business on July 25, 2002.
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INFORMATION ABOUT VOTING
Stockholders can vote in person at the annual meeting or by proxy. To vote by
proxy, please mail the enclosed proxy card in the enclosed envelope. Please sign
and date your proxy card before mailing.
Each share of ePlus common stock is entitled to one vote on all matters
presented at the annual meeting. If your shares are held in the name of a bank,
broker or other holder of record, you will receive instructions from the holder
of record that you must follow in order for your shares to be voted. If your
shares are not registered in your own name and you plan to attend the annual
meeting and vote your shares in person, you should contact your broker or agent
in whose name your shares are registered to obtain a broker's proxy card and
bring it to the annual meeting in order to vote. If you vote by proxy, the
individuals named on the card (your proxy holders) will vote your shares in the
manner you indicate. You may specify whether your shares should be voted for or
against or if authority to vote is withheld as to the nominees for director and
as to each of the other proposals. If you sign and return the card without
indicating your instructions, your shares will be voted for:
o the election of both the Class III nominees for director; and
o the ratification of the appointment of Deloitte & Touche LLP as our
independent auditors for the fiscal year ending March 31, 2003.
You may revoke or change your proxy at any time before it is voted by sending a
written notice of your revocation to ePlus' Corporate Secretary, Kleyton L.
Parkhurst at ePlus' principal executive office.
QUORUM REQUIREMENTS
As of July 25, 2002, the record date for this solicitation of proxies, there
were 10,490,320 shares of common stock outstanding. The holders of record of a
majority of the shares of common stock entitled to vote at the meeting, present
in person or by proxy, will constitute a quorum for the transaction of business
at the annual meeting or any adjournment thereof. If a quorum should not be
present, the annual meeting may be adjourned until a quorum is obtained.
VOTING REQUIREMENTS
Proposal 1
To be elected as a Class III Director, a nominee must be one of the two persons
receiving the greatest number of affirmative votes cast at the meeting for Class
III Directors.
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Proposal 2
To be approved, Proposal 2 requires the affirmative vote of the holders of at
least a majority of the shares present in person or represented by proxy at the
meeting and entitled to vote on the proposal.
Effect of Abstentions and Broker Non-Votes
Abstentions and broker non-votes will be counted only for the purpose of
determining the existence of a quorum, but will not be counted as an affirmative
vote for the purposes of determining whether a proposal has been approved.
Therefore, an abstention or a broker non-vote will not have any effect on the
votes for Proposals 1 and 2.
All proxies received will be voted in accordance with the choices specified on
such proxies. Proxies 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.
We may solicit proxies by use of the mails, in person or by telephone, e-mail or
other electronic communications. We will bear the cost of soliciting proxies in
the accompanying form. We may reimburse brokerage firms and others for their
expenses in forwarding proxy materials to the beneficial owners and soliciting
them to execute the proxies.
DISSENTERS' RIGHTS OF APPRAISAL
The board of directors does not propose any action for which the laws of the
state of Delaware, or the Certificate of Incorporation, Bylaws or corporate
resolutions of ePlus provide a right of a stockholder to dissent and obtain
payment for shares.
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VOTING SECURITIES, PRINCIPAL HOLDERS THEREOF, AND MANAGEMENT
The following table sets forth certain information as of July 25, 2002, the
record date, with respect to: (1) each executive officer, director and director
nominee; (2) all executive officers and directors of ePlus as a group; and (3)
all persons known by the ePlus to be the beneficial owners of more than five
percent of our common stock.
NUMBER OF
SHARES PERCENTAGE OF
BENEFICIALLY OWNED SHARES OUTSTANDING
NAME OF BENEFICIAL OWNER (1) (2)
Phillip G. Norton (3) 2,370,000 21.9%
Bruce M. and Elizabeth D. Bowen (4) 825,000 7.8
Steven J. Mencarini (5) 84,820 *
Kleyton L. Parkhurst (6) 208,000 1.9
C. Thomas Faulders, III (7) 33,507 *
Terrence O'Donnell (8) 50,000 *
Lawrence S. Herman 7,500 *
Thomas L. Hewitt 5,000 *
All directors and named executive officers as a group (8 Individuals) 3,583,827 32.1
Eric D. Hovde (9) 560,024 5.3
Putnam Investments LLC (10) 1,198,853 11.4
* less than 1%
(1) The business address of Messrs. Norton, Bowen, Mencarini, Parkhurst,
Faulders, O'Donnell, Herman and Hewitt is 400 Herndon Parkway, Herndon
Virginia, 20170.
(2) Unless otherwise indicated and subject to community property laws where
applicable, each of the stockholders named in this table has sole voting
and investment power with respect to the shares shown as beneficially owned
by such stockholder. A person is deemed to be the beneficial owner of
securities that can be acquired by such person within 60 days from July 25,
2002, the record date, 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 from July 25, 2002, the
record date, have been exercised. The ownership amounts reported for
persons who we know own more than 5% of our common stock are based on the
Schedules 13D and 13G filed with the SEC by such persons, unless we have
reason to believe that the information contained in those filings is not
complete or accurate.
(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, 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 330,000 shares of common stock issuable to Mr.
Norton under options.
(4) Includes 520,000 shares held by Mr. and Mrs. Bowen, as tenants by the
entirety, and 160,000 shares held by Bowen Holdings LLC, a Virginia limited
liability company, composed of Mr. Bowen and three minor children of whom
Mr. Bowen is legal guardian and for which shares Mr. Bowen serves as
manager. Also includes 145,000 shares of common stock issuable to Mr. Bowen
under options.
(5) Includes 84,820 shares of common stock issuable to Mr. Mencarini under
options.
(6) Includes 195,000 shares of common stock issuable to Mr. Parkhurst under
options.
(7) Includes 33,507 shares of common stock issuable to Mr. Faulders under
options.
(8) Includes 50,000 shares of common stock issuable to Mr. O'Donnell under
options.
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(9) Includes 383,400 shares owned by Hovde Capital, L.L.C., of which Mr. Hovde
is the managing member; 19,000 shares owned by Hovde Financial, Inc. Profit
Sharing Plan and Trust, of which Mr. Hovde is trustee; 30,000 shares owned
by Hovde Acquisition II, L.L.C., of which Mr. Hovde is the managing member;
17,000 shares owned by The Eric D. Hovde and Steven D. Hovde Foundation, of
which Mr. Hovde is trustee; 77,800 shares owned by Hovde Capital, Ltd., of
which Mr. Hovde is the managing member; and 32,824 held directly by Mr.
Hovde.
(10) Includes shares held by the series of funds of Putnam to which Putnam
Investments LLC is investment adviser.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age and position with ePlus of each
person who is an executive officer, director or significant employee.
Name Age Position Class
Phillip G. Norton....... 58 Chairman of the Board, President and III
Chief Executive Officer
Bruce M. Bowen.......... 50 Director and Executive Vice President III
Steven J. Mencarini..... 47 Senior Vice President and Chief Financial
Officer
Kleyton L. Parkhurst.... 39 Senior Vice President, Secretary and
Treasurer
Terrence O'Donnell...... 58 Director II
Thomas L. Hewitt........ 63 Director II
C. Thomas Faulders, III. 52 Director I
Lawrence S. Herman...... 58 Director I
The name and business experience during the past five years of each director,
executive officer and key employee of ePlus are described below.
Phillip G. Norton joined us in March 1993 and has served since then as our
Chairman of the Board and Chief Executive Officer. Since September 1996, Mr.
Norton has also served as our President. Mr. Norton is a 1966 graduate of the
U.S. Naval Academy. Mr. Norton has been nominated by the board of directors for
re-election as a Class III Director at the 2002 annual meeting of stockholders.
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 Chief
Financial Officer. Mr. Bowen has served on our board of directors 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.
Mr. Bowen has been nominated by the board of directors for re-election as a
Class III Director at the 2002 annual meeting of stockholders.
Steven J. Mencarini joined us in June of 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, one of the
nation's three largest information technology outsourcing organizations. Mr.
Mencarini joined Computer Sciences Corporation in 1991 as Director of Finance
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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 joined us in May 1991 as Director of Finance and, since
September 1996, has also served as our Secretary and Treasurer. 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, marketing, and the ePlus Group's finance department. Mr.
Parkhurst is a 1985 graduate of Middlebury College.
Terrence O'Donnell joined our board of directors in November 1996 upon the
completion of our initial public offering. Mr. O'Donnell is a partner with the
law firm of Williams & Connolly LLP in Washington, D.C. and Executive Vice
President and General Counsel of Textron, Inc. Mr. O'Donnell he has practiced
law since 1977, with the exception of the period from 1989 through 1992 when he
served as General Counsel to the U.S. Department of Defense. Mr. O'Donnell
presently also serves as a director of IGI, Inc., a Nasdaq National Market
company. Mr. O'Donnell is a 1966 graduate of the U.S. Air Force Academy and in
1971 received a Juris Doctor from Georgetown University Law Center.
Thomas L. Hewitt joined our board of directors in June 2001. Until the sale of
the company in 2000, Mr. Hewitt was the Chief Executive Officer and Chairman of
Federal Sources, Inc., which he founded in December 1984. Federal Sources, Inc.
is a market research and consulting firm focused on information technology in
the federal government. He is also the Chief Executive Officer of Global
Governments, Inc., which he founded in January 2000. Global Governments, Inc. is
a company focused on strategic planning and marketing in the international
government information technology marketplace. Mr. Hewitt also serves on the
board of directors of Halifax, Inc., an America Stock Exchange company. Mr.
Hewitt received his Bachelor of Science in Aeronautical Engineering from North
Carolina State University and his masters of Business Administration from Long
Island University.
C. Thomas Faulders, III joined our board of directors in July 1998. Mr. Faulders
is the Chairman, President and Chief Executive Officer of LCC International,
Inc. From July 1998 to December 1999, Mr. Faulders served as Chairman of the
Board of Telesciences, Inc., an information services company. 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 directors of Headstrong, Inc., Universal
Technology and Systems, Inc., Sentori, Inc., and the Ronald Reagan Institute for
Emergency Medicine. 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 of directors in March 2001. Mr. Herman is
one of KPMG Consulting's most senior Managing Directors and is responsible for
managing national alliances with e-government and enterprise software companies
in the company's state and local government practice. 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. Mr. Herman has been with KPMG for over thirty-five years. He has
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directed a statewide performance audit of North Carolina, resulting in a
strategic fiscal plan. He further directed similar statewide fiscal strategies
for the Commonwealth of Kentucky, the State of Louisiana, the state of Oklahoma
and the District of Columbia. 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.
Each executive officer of ePlus is chosen by the board of directors and holds
his or her office until his or her successor shall have been duly chosen and
qualified or until his or her death or until he or she shall resign or be
removed as provided by the Bylaws.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
ePlus' officers and directors, and persons who own more than ten percent of a
registered class of ePlus' equity securities, to file reports of ownership and
changes in ownership of equity securities of ePlus with the SEC and the Nasdaq
National Market. Officers, directors and greater-than-ten-percent stockholders
are required by SEC regulation to furnish ePlus with copies of all Section 16(a)
forms that they file.
Based solely upon a review of Forms 3, Forms 4 and Forms 5 furnished to ePlus
pursuant to Rule 16a-3 under the Exchange Act, ePlus believes that all such
forms required to be filed pursuant to Section 16(a) of the Exchange Act were
timely filed, as necessary, by the officers, directors and security holders
required to file such forms.
The Board of Directors
ePlus' Bylaws, as amended, provide that the number of directors of ePlus shall
be six, until this number is amended by a resolution duly adopted by the board
of directors or the stockholders (subject to certain provisions of the Bylaws
relating to the entitlement of holders of preferred stock to elect directors).
Our board of directors is divided into three classes: Class I, comprised of two
directors; Class II, comprised of two directors; and Class III, comprised of two
directors. Subject to the provisions of the Bylaws, at each annual meeting of
stockholders, the successors to the class of directors whose term is then
expiring shall be elected to hold office for a term expiring at the third
succeeding annual meeting of stockholders. Each director holds office until his
or her successor has been duly elected and qualified or until he or she has
resigned or been removed in the manner provided in the Bylaws. The members of
the three classes of directors are as follows:
o Class I
C. Thomas Faulders, III
Lawrence S. Herman
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o Class II
Terrence O'Donnell
Thomas L. Hewitt
o Class III
Phillip G. Norton
Bruce M. Bowen
The Class III Directors will stand for re-election at the annual meeting of
stockholders in 2002, The Class I Directors will stand for re-election at the
annual meeting of stockholders in 2003. The Class II Directors will stand for
re-election at the annual meeting of stockholders in 2004. The classification of
the board of directors, with staggered terms of office, was implemented for the
purpose of maintaining continuity of management and of the board of directors.
There are no material proceedings to which any director, executive officer or
affiliate of ePlus, any owner of record or beneficially of more than five
percent of any class of voting securities of ePlus, or any associate of any such
director, executive officer, affiliate of ePlus or security holder is a party
adverse to ePlus or any of its subsidiaries or has a material interest adverse
to ePlus or any of its subsidiaries.
Director Compensation
Directors who are also employees of ePlus do not currently receive any
compensation for service as members of the board of directors. Each outside
director receives an annual grant of 10,000 stock options and $500 for each
special committee meeting. All directors will be reimbursed for their
out-of-pocket expenses incurred to attend board or committee meetings.
Meetings and Committees of the Board of Directors
The board of directors met four times during the fiscal year ended March 31,
2002. In addition to meetings of the full board, directors also attended
meetings of board committees. No incumbent director attended fewer than 75% of
the total number of meetings held by the board of directors and the meetings of
any committee on which the director served. The board of directors has the
following committees: the audit committee, the compensation committee and the
stock incentive committee.
Audit Committee
General. The audit committee of the board of directors is responsible for making
recommendations to the board concerning the engagement of independent public
accountants, monitoring and reviewing the quality and activities of ePlus'
internal and external audit functions and monitoring the adequacy of ePlus'
operating and internal controls as reported by management and the external or
internal auditors. The members of the audit committee are C. Thomas Faulders,
III, Terrence O'Donnell and Lawrence S. Herman. During the fiscal year ended
March 31, 2002, two meetings of the audit committee were held.
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Audit Committee Report. The audit committee is composed of three directors who
are independent as defined under the rules of the National Association of
Securities Dealers. The committee operates under a written charter approved by
the board of directors, which was included as Appendix A to ePlus' proxy
statement for the 2001 annual meeting of stockholders.
The committee reviews ePlus' financial reporting process on behalf of the board
of directors. In fulfilling its responsibilities, the committee has reviewed and
discussed the audited financial statements contained in our Annual Report on
Form 10-K for the year ended March 31, 2002 with ePlus' management. Management
is responsible for our financial statements and the financial reporting process,
including internal controls. The independent accountants are responsible for
expressing an opinion on the conformity of those audited financial statements
with accounting principles generally accepted in the United States of America.
While generally the audit committee has discussed with the independent
accountants the matters required to be discussed by Statement on Auditing
Standards No. 61, Communication with Audit Committees, as amended, the audit
committee has yet to discuss these matters in connection with the fiscal year
ended March 31, 2002, but intends to on August 15, 2002. In addition, the
committee did discuss these matters with the Chief Financial Office prior to the
filing of the annual report on Form 10K for the year ended March 31, 2002. The
committee has previously discussed with the independent accountant the
accountants' independence from ePlus and its management including the matters in
the written disclosures provided to the committee as required by Independence
Standards Board Standard No. 1, Independence Discussions with Audit Committees.
The committee has also considered whether the provision of non-audit services by
the independent accountants to ePlus is compatible with maintaining auditors'
independence.
Based on the reviews and discussions referred to above, the committee
recommended to the board of directors, and the board of directors approved, that
the audited financial statements be included in our Annual Report on Form 10-K
for the year ended March 31, 2002, for filing with the Securities and Exchange
Commission.
BY THE AUDIT COMMITTEE
C. Thomas Faulders, III
Terrence O'Donnell
Lawrence S. Herman
Compensation Committee
General. The compensation committee of the board of directors is responsible for
reviewing the salaries, benefits and other compensation, including stock-based
compensation, of Mr. Norton and Mr. Bowen and making recommendations to the
board of directors based on its review. The members of the compensation
committee are Terrence O'Donnell, C. Thomas Faulders, III and Thomas L. Hewitt,
all of whom are non-employee directors. Mr. Norton and Mr. Bowen, as directors,
do not vote on any matters affecting their personal compensation. Mr. Bowen and
Mr. Norton are responsible for reviewing and establishing salaries, benefits and
other compensation, excluding stock-based compensation, for all other employees.
Compensation arrangements during our 2002 fiscal year were determined in
accordance with the executive compensation policy set forth below. The
compensation committee considers compensation paid to our executive officers to
be deductible for purposes of Section 162(m) of the Internal Revenue Code.
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Report Of The Compensation Committee. The compensation committee of the board of
directors has prepared the following report on our policies with respect to the
compensation of executive officers for the fiscal year ended March 31, 2002. The
compensation programs of ePlus are designed to align compensation with business
objectives and performance, and to enable ePlus to attract, retain and reward
executives who contribute to the long-term success of ePlus.
The compensation committee believes that executive pay should be linked to
performance. Therefore, ePlus provides an executive compensation program which
includes three principal elements: (1) base pay, (2) potential cash bonus, and
(3) long-term incentive opportunities through the use of stock options.
Criteria for Determination of Executive Compensation. In determining each of the
principal elements of each executive's compensation, as well as the overall
compensation package thereof, the following criteria are considered by the
persons responsible for recommending or approving such compensation: (1) the
compensation awarded to executives with comparable titles and responsibilities
to those of such executive by companies in our industry (or, to the extent
information is not available, in comparable industries) whose revenues and
earnings are comparable to those of ePlus, as reported by reliable independent
sources; (2) the results of operations of ePlus during the past year, on an
absolute basis and compared with ePlus's targeted results for such year as well
as with the results of the comparable companies, as reported by reliable
independent sources; (3) the performance of such executive during the past year,
on an absolute basis and as compared with the performance targets set by ePlus
for such executive for such year and the performance of the other executives of
ePlus during such year; and (4) any other factor which the compensation
committee determines to be relevant. The weight to be given to each of the
foregoing criteria is determined by the compensation committee in the exercise
of its reasonable judgment in accordance with the purposes of this executive
compensation policy and may vary from time to time or from executive to
executive.
The role of the compensation committee is limited to the review of the
compensation, excluding stock-based compensation for Mr. Norton and Mr. Bowen,
who are principal stockholders of ePlus. Section 162(m) of the Internal Revenue
Code imposes a limit, with certain exceptions, on the amount that a
publicly-held corporation may deduct in any year for the compensation paid with
respect to its five most highly compensated executive officers. While the
compensation committee cannot predict with certainty how ePlus' compensation tax
deduction might be affected, the compensation committee tries to preserve the
tax deductibility of all executive compensation while maintaining flexibility
with respect to ePlus' compensation programs as described in this report.
Chief Executive Officer Compensation. The executive compensation policy
described above is applied in setting Mr. Norton's compensation. Mr. Norton
generally participates in the same executive compensation plans and arrangements
available to the other executives. Accordingly, his compensation also consists
of an annual base salary, a potential annual cash bonus and, potentially,
long-term equity-linked compensation in the form of stock options. The
10
compensation committee's general approach in establishing Mr. Norton's
compensation is to be competitive with peer companies, but to have a large
percentage of his target based upon objective performance criteria and targets
established in our strategic plan.
Mr. Norton's compensation for the year ended March 31, 2002 included $250,000 in
base salary. Mr. Norton received a bonus of $150,000 for 2002. Mr. Norton's
salary was based on, among other factors, ePlus's performance and the 2001
compensation of chief executive officers of comparable companies, although his
compensation was not linked to any particular group of these companies.
During the fiscal year ended March 31, 2002, one meeting of the compensation
committee was held.
BY THE COMPENSATION COMMITTEE
Terrence O'Donnell
C. Thomas Faulders, III
Thomas L. Hewitt
Stock Incentive Committee
The stock incentive committee of the board of directors is authorized to award
stock, and various stock options and rights and other stock-based compensation
grants under ePlus' 1998 Long Term Incentive Plan. The members of the stock
incentive committee are Mr. Bowen, Mr. Hewitt and Mr. Norton. Except for formula
plan grants to the outside directors and grants that are approved by a majority
of the disinterested members of the board of directors, no member of the stock
incentive committee or the compensation committee is eligible to receive grants
under the 1998 Long Term Incentive Plan. During the fiscal year ended March 31,
2002, one meeting of the stock incentive committee was held.
BY THE STOCK INCENTIVE COMMITTEE
Bruce M. Bowen
Phillip G. Norton
Thomas L. Hewitt
11
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Summary Compensation Table
The following table provides certain summary information concerning the
compensation earned, for services rendered in all capacities to ePlus, by ePlus'
Chief Executive Officer and certain other executive officers of ePlus, who we
refer to as the "named executive officers," for the fiscal years ended March 31,
2000, 2001 and 2002. Certain columns have been omitted from this summary
compensation table, as they are not applicable.
ANNUAL COMPENSATION Long Term
Compensation All Other
Awards Compensation
Name and Principal Position Fiscal Year Salary ($) Bonus/ Options/SARs (#) ($) (1)
Commission ($)
Phillip G. Norton 2002 $250,000 $150,000 $1,500
Chairman, Chief Executive 2001 250,000 147,773 1,500
Officer and President 2000 233,000 132,000 175,000 1,500
Bruce M. Bowen 2002 225,000 100,000 1,500
Director and Executive Vice 2001 225,000 100,000 1,500
President 2000 191,667 100,000 115,000 1,500
Kleyton L. Parkhurst 2002 200,000 75,000 1,500
Senior Vice President, 2001 175,000 70,000 30,000 1,500
Secretary and Treasurer 2000 140,000 60,000 20,000 1,500
Steven J. Mencarini 2002 182,500(2) 43,750 1,500
Chief Financial Officer and 2001 168,751 25,000 15,000 1,500
Senior Vice President 2000 150,000 25,000 20,000 1,500
------------------------
(1) All amounts reported represent ePlus' employer 401(k) plan matching
contributions.
(2) Difference in salary represents a salary increase effective 7/1/01 to $185,000.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-end
Option/SAR Values
The following table sets forth certain information with respect to options
exercised during ePlus' fiscal year ended March 31, 2002 by the named executive
officers, and with respect to unexercised options held by such persons at the
end of fiscal year 2002.
12
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs at Fiscal Options/SARs at Fiscal
Year-End (#) Year-End
($) (1)
Shares
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
Phillip G. Norton -- -- 330,000 -- $400,700 --
Bruce M. Bowen -- -- 145,000 -- 211,200 --
Kleyton L. Parkhurst -- -- 186,000 24,000 380,800 --
Steven J. Mencarini -- -- 77,560 18,140 73,790 $6,960
------------------------
(1) Based on a closing bid price of $9.49 per share as of the close of business on March 28, 2002.
Equity Compensation Plan Information
The following table gives information about the ePlus's common stock that may be
issued upon the exercise of options, warrants and rights under all of ePlus's
existing equity compensation plans as of March 31, 2002, including ePlus's 1998
Long Term Incentive Plan, Amended and Restated Incentive Stock Option Plan,
Amended and Restated Outside Director Stock Option Plan, Amended and Restated
Nonqualified Stock Option Plan, and the Employee Stock Purchase Plan.
--------------------------- ------------------------- -------------------------- ----------------------------
Plan category Number of securities to Weighted-average Number of securities
be issued upon exercise exercise price of remaining available for
of outstanding options, outstanding options, future issuance under
warrants and rights warrants and rights equity compensation plans
(excluding securities
reflected in column (a))
--------------------------- ------------------------- -------------------------- ----------------------------
--------------------------- ------------------------- -------------------------- ----------------------------
(a) (b) (c)
--------------------------- ------------------------- -------------------------- ----------------------------
--------------------------- ------------------------- -------------------------- ----------------------------
Equity compensation plans
approved by security
holders 2,180,585 $9.20 287,685 (1)
--------------------------- ------------------------- -------------------------- ----------------------------
--------------------------- ------------------------- -------------------------- ----------------------------
Equity compensation plans
not approved by security
holders --- --- ---
--------------------------- ------------------------- -------------------------- ----------------------------
--------------------------- ------------------------- -------------------------- ----------------------------
Total 2,180,585 --- 287,685
--------------------------- ------------------------- -------------------------- ----------------------------
(1) The Company has reserved for issuance upon the grant or exercise of awards
pursuant to the 1998 Long-Term Incentive Plan that number of shares of the
authorized but unissued shares of common stock equal to (i) 20% of the
total number of shares of common stock outstanding from time to time, as
determined immediately after giving pro forma effect to the assumed
exercise of all options or other rights to acquire common stock, less (ii)
any shares of common stock that have been purchased under the Employee
Stock Purchase Plan from time to time, and less (iii) any shares granted
pursuant to the exercise of options or otherwise granted as awards under
the 1997 Incentive Plans.
13
Employment Contracts and Termination of Employment and Change in Control
Arrangements
ePlus has entered into employment agreements with Phillip G. Norton, Bruce M.
Bowen and Kleyton L. Parkhurst, each effective as of September 1, 1996, and with
Steven J. Mencarini, effective as of June 18, 1997. Each employment agreement
provided for an initial term of three years, and is subject to an automatic
one-year renewal at the expiration thereof unless ePlus or the employee provides
notice of an intention not to renew at least three months prior to expiration.
The current annual base salary ($250,000 in the case of Phillip G. Norton;
$225,000 in the case of Bruce M. Bowen; $200,000 in the case of Kleyton L.
Parkhurst and $185,000 in the case of Steven J. Mencarini) are in effect and
each employee may be eligible for commissions or performance bonuses. The
performance bonuses for Phillip G. Norton and Bruce M. Bowen are discretionary,
based on the performance of ePlus and as approved by the compensation committee.
The performance bonuses for Kleyton L. Parkhurst and Steven J. Mencarini are
paid based upon performance criteria established by Phillip G. Norton and Bruce
M. Bowen.
Under the employment agreements, each receives certain other benefits, including
medical, insurance, death and long-term disability benefits, employer 401(k)
contributions, and reimbursement of employment-related expenses. Mr. Bowen's
country club dues are paid by ePlus. The employment agreements of Messrs.
Norton, Bowen and Mencarini 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 ePlus for cause, each are subject to restrictions upon acquiring, consulting
with or otherwise engaging in or assisting in the providing of 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.
Under his original employment agreement, Phillip G. Norton was granted options
to acquire 130,000 shares of common stock at a price per share equal to $8.75.
These options have a ten year term and became exercisable and vested in 25%
increments over four years, ending on November 20, 1999. In February 1998, Mr.
Norton was also granted options to purchase 25,000 shares of common stock at a
price per share equal to $12.65 and in August 1999 was granted options to
purchase 175,000 shares of common stock at a price per share equal to $7.75
Under his original employment agreement, Bruce M. Bowen was granted options to
acquire 15,000 shares of common stock at a price per share equal to $8.75. These
options have a ten year term and became exercisable and vested in 25% increments
over four years, ending on November 20, 1999. In February 1998, Mr. Bowen was
also granted options to purchase 15,000 shares of common stock at a price per
share equal to $11.50 and in August 1999 was granted options to purchase 115,00
shares of common stock at a price per share equal to $7.75.
14
Under his original employment agreement, Kleyton L. Parkhurst was granted
options to acquire 100,000 shares of common stock at a price per share equal to
$6.40. These options have a ten year term and became exercisable and vested in
25% increments over four years ending on November 20, 1999. In February 1998,
Mr. Parkhurst was also granted options to purchase 10,000 shares of common stock
at a price per share equal to $11.50 and in September 1998 was granted options
to purchase 50,000 shares of common stock at a price per share of $8.75. In
August 1999, Mr. Parkhurst was granted options to purchase 20,000 shares of
common stock at a price per share equal to $7.75 and in May 2000 was granted
options to purchase 30,000 shares of common stock at a price per share equal to
$18.75.
In connection with his original employment, Steven J. Mencarini was granted
options to acquire 16,200 shares of common stock at a price per share equal to
$12.75. These options have a ten year term, and become exercisable and vest in
20% increments over five years at the end of each year of service, and are
subject to acceleration upon certain conditions. In September 1997, Mr.
Mencarini was also granted options to purchase 5,100 shares of common stock at a
price per share equal to $13.75 and in December 1997 was granted options to
purchase 9,400 shares of common stock at a price per share equal to $12.35. In
February 1998, Mr. Mencarini was granted options to purchase 5,000 shares of
common stock at a price per share equal to $11.50; in October 1998, he was
granted options to purchase 25,000 shares of common stock at a price per share
equal to $8.00; and in May 2000 he was granted options to purchase 10,000 shares
of common stock at a price per share equal to $18.75.
ePlus maintains key-man life insurance on Mr. Norton in the amount of $11
million.
Compensation Committee Interlocks and Insider Participation
For the year ended March 31, 2002, all decisions regarding executive
compensation were made by the compensation committee with respect to Mr. Norton
and Mr. Bowen. Compensation for other executives was made by the committee, Mr.
Norton or Mr. Bowen. The members of the compensation committee are Terrence
O'Donnell, C. Thomas Faulders, III and Lawrence S. Herman. None of the executive
officers of ePlus currently serves on the compensation committee of another
entity or any other committee of the board of directors of another entity
performing similar functions.
15
PERFORMANCE GRAPH
The following graph shows the value as of March 31, 2002 of a $100 investment
made on March 31, 1997 in ePlus' common stock (with dividends, if any,
reinvested), as compared with similar investments based on (1) the value of the
NASDAQ Stock Market Index (U.S.) (with dividends reinvested) and (2) the value
of the NASDAQ financial index. The stock performance shown below is not
necessarily indicative of future performance.
3/98 3/99 3/00 3/01 3/02
EPLUS INC................. 114.58 68.75 276.04 76.57 79.08
NASDAQ STOCK MARKET (U.S.) 151.57 204.77 380.94 152.35 153.42
NASDAQ FINANCIAL.......... 155.38 140.01 132.69 146.75 182.95
16
CERTAIN TRANSACTIONS
Advances and Loans to Employees and Stockholders
ePlus has in the past provided loans and advances to employees and certain
stockholders. Such balances are to be repaid from personal funds or commissions
earned by the employees and/or stockholders on successful sales or financing
arrangements obtained on behalf of ePlus. Loans and advances to employees and/or
stockholders totaled $69,042 for the year ended March 31, 2002.
Leases with Related Parties
ePlus leases certain office space from related parties. During the year ended
March 31, 2002, ePlus paid $46,600 in rent to Phillip G. Norton, our chief
executive office and president, and $228,000 in rent to Vince Marino, president
of ePlus Technology inc of PA, a wholly owned subsidiary of ePlus. All leases
with related parties are approved in advance by the Board of Directors.
Indemnification Agreements
We have entered into separate but identical 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 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:
(1) 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;
(2) the claim was not made to recover profits made by the director
or officer in violation of Section 16(b) of the Exchange Act, as
amended, or any successor statute;
(3) the claim was not initiated by the director or officer;
(4) the claim was not covered by applicable insurance; or
(5) 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 103(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.
17
Future Transactions
ePlus' policy requires that all material transactions between ePlus and its
officers, directors or other affiliates must be approved by a majority of the
disinterested members of the board of directors of ePlus, and be on terms no
less favorable to ePlus than could be obtained from unaffiliated third parties.
18
PROPOSAL 1
To Elect Two Class III Directors to Serve for Three Years and until their
Respective Successors Have Been Duly Elected and Qualified.
The board of directors has concluded that the re-election of Bruce M. Bowen and
Phillip G. Norton as Class III Directors is in the best interest of ePlus and
recommends stockholder approval of the re-election of Bruce M. Bowen and Phillip
G. Norton as Class III directors. The remaining four directors will continue to
serve in their positions for the remainder of their terms. Biographical
information concerning Mr. Bowen and Mr. Norton, and ePlus' other directors can
be found under "Directors and Executive Officers."
Unless otherwise instructed or unless authority to vote is withheld, all proxies
will be voted for the election of Bruce M. Bowen and Phillip G. Norton as Class
III Directors. Although the board of directors of ePlus does not contemplate
that such nominees will be unable to serve, if such a situation arises prior to
the annual meeting, the persons named in the enclosed proxy card will vote for
the election of such other person or persons as may be nominated by the board of
directors.
Vote Required for Approval. The two persons receiving the greatest number of
affirmative votes cast at the annual meeting will be elected as Class III
Directors.
Board of Directors Recommendation. The board of directors unanimously recommends
that you vote in favor of the election of Bruce M. Bowen and Phillip G. Norton
as Class III Directors.
PROPOSAL 2
To Ratify the Appointment of Deloitte & Touche LLP as ePlus' Independent
Auditors for ePlus' Fiscal Year Ending March 31, 2003.
Subject to stockholder ratification, the board of directors has reappointed the
firm of Deloitte & Touche LLP as the independent auditors to examine ePlus'
financial statements for the fiscal year ending March 31, 2003. Deloitte &
Touche has audited ePlus' financial statements since its inception. If the
stockholders do not ratify this appointment, other independent auditors will be
considered by the board of directors upon recommendation of the audit committee.
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.
Audit Fees. The aggregate fees billed by Deloitte & Touche for professional
services rendered for the audit of our annual financial statements for the
fiscal year ended March 31, 2002 and for the reviews of the financial statements
included in our Quarterly Reports on Form 10-Q for that fiscal year were
$177,300.
19
Financial Information Systems Design and Implementation Fees. There were no fees
billed by Deloitte & Touche for professional services rendered for information
technology services relating to financial information systems design and
implementation for the fiscal year ended March 31, 2002.
All Other Fees. There were no fees billed by Deloitte & Touche for services
rendered to the ePlus, other than the services described above under "Audit
Fees" and "Financial Information Systems Design and Implementation Fees" for the
fiscal year ended March 31, 2002.
Vote Required for Approval. The affirmative vote of the holders of at least a
majority of the shares of common stock present in person or by proxy and
entitled to vote at the annual meeting on the proposal will constitute approval
of Proposal 2.
Board of Directors Recommendation. The board of directors unanimously recommends
that you vote in favor of the ratification of the appointment of Deloitte &
Touche LLP as independent auditors for the fiscal year ending March 31, 2003.
OTHER PROPOSED ACTION
The board of directors does not intend to bring any other matters before the
annual meeting, nor does the board of directors know of any matters which other
persons intend to bring before the annual meeting. If, however, other matters
not mentioned in this proxy statement properly come before the annual meeting,
the persons named in the accompanying form of proxy will vote thereon in
accordance with the recommendation of the board of directors.
You should note that ePlus' Bylaws provide that in order for a stockholder to
bring business before a meeting or to make a nomination for the election of
directors, the stockholder must give written notice complying with the
requirements of the Bylaws to the Secretary of ePlus not later than 90 days in
advance of the meeting or, if later, the seventh day following the first public
announcement of the date of the meeting.
STOCKHOLDER PROPOSALS AND SUBMISSIONS
If any stockholder wishes to present a proposal for inclusion in the proxy
materials to be solicited by ePlus' board of directors with respect to the next
annual meeting of stockholders, that proposal must be presented to ePlus'
management prior to April 24, 2003.
In accordance with ePlus' bylaws, for a stockholder proposal or nomination to be
considered at a meeting of stockholders, the proposal must be submitted in
writing to the Secretary of ePlus not less than 90 days in advance of such
meeting or, if later, the seventh day following the first public announcement of
the date of such meeting.
Whether or not you expect to be present at the annual meeting, please sign and
return the enclosed proxy card promptly. Your vote is important. If you are a
stockholder of record and attend the annual meeting and wish to vote in person,
you may withdraw your proxy at any time prior to the vote.
20
[FORM OF PROXY CARD]
ePlus inc. Proxy
Annual Meetings of Stockholders Of
ePlus inc.
September 19, 2002
THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Kleyton L. Parkhurst and Steven J.
Mencarini, 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 19, 2002 at 10:30
a.m. at Hyatt Regency Reston, 1800 Presidents Street, Reston, Virginia 20191, 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.
1. TO ELECT TWO CLASS III DIRECTORS TO SERVE FOR THREE YEARS AND UNTIL THEIR
SUCCESSORS HAVE BEEN DULY ELECTED AND QUALIFIED.
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 [ ]FOR [ ]WITHHOLD AUTHORITY
Bruce M. Bowen [ ]FOR [ ]WITHHOLD AUTHORITY
2. TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS EPLUS' INDEPENDENT
AUDITORS FOR EPLUS' FISCAL YEAR ENDING MARCH 31, 2003.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
Dated:________________, 2002
Signature:
Signature if held jointly:
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.