Our Board plays an active role in overseeing management and representing the interests of stockholders.shareholders. 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, 2008,2010, the Board met a total of sevensix 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. All2010, with the exception of Eric D. Hovde. Seven members of the Board who were members of the Board on such date, attended the last meeting of our stockholders.shareholders.
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.
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 stockholdersshareholders at the annual meeting. Incumbent directors standing for reelection are evaluated by the Nominating and Corporate Governance Committee in accordance with the committee’s charter, which includes reviewing the incumbent’s capability, availability to serve, independence and other relevant factors. 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.shareholders. In evaluating such nominations, the Nominating and Corporate Governance CommitteeCommitt ee seeks to achieve a balance of knowledge, experience, and capability on the Board of Directors. Furthermore, any member of the Board of Directors mustshall meet the following criteria:
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, Hovde and HovdeCallies are independent under the Nasdaq Marketplace Rules.Rules and in accordance with the Corporate Governance Guidelines and Policies. 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 PartyPerson Transactions,” which it determined were immaterial to the individual’s independence.
The following table provides a summary of the membership of each of the committees of the Board of Directors as of March 31, 2008.2010.
The Audit Committee of the Board of Directors assists the Board in its oversight of the Company’s corporate accounting and financial reporting process.process; the Company’s process to manage business and financial risk; the Company’s compliance with legal and regulatory requirements; the independent auditor’s qualifications and independence; and the performance of the Company’s internal audit function and independent auditor. The Audit Committee is governed by a Board-approved charter stating its responsibilities. The Committee’s responsibilities include:
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 sixnine times during the fiscal year ended March 31, 2008.2010.
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 following table sets forth the compensation for the members of the Board of Directors of ePlusePlus for the fiscal year ended March 31, 2008.2010. 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 inunder “Executive Compensation” below 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. EachFor the first three quarters of the fiscal year ended on March 31, 2010, each director received an annual cash retainer of $35,000, paid in quarterly installments. Beginning January 1, 2010, each non-employee director receives an annual cash retainer of $35,000 cash,$45,000, which is paid in quarterly installments. Alternatively, directors may elect to receive their cash compensation in restricted stock. In addition, each non-employee director will receive on September 25th of each year 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 a non- employee director during the Company’s fiscal year ended immediately prior to the annual grant date. In accordance with the 2008 Non-Employee Director Long-Term Incentive Plan, on September 25, 2009, each director received an additional one-time grant of 2,269 shares of restricted stock. All awards of restricted stock will vest ratably over two years. Upon joining the Board, a new non-employee director will receive a pro-rata share of restricted stock awarded to the other non-employee directors, based on the number of days the new non-employee director will serve before the next regularly scheduled annual grant date (i.e., September 25th). These awards will also vest ratably over two years.
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.”
(8) | Includes 30,000 shares of common stock that Mr. Cooper has the right to acquire by exercise of stock options. Also includes 7,532 shares of restricted stock that have not vested as of June 30, 2010, however, Mr. Cooper has the right to vote such shares of restricted stock prior to vesting. |
(9) | Includes 47,500 shares of common stock that Mr. Herman has the right to acquire by exercise of stock options. Also includes 5,479 shares of restricted stock that have not vested as of June 30, 2010, however, Mr. Herman has the right to vote such shares of restricted stock prior to vesting. |
(10) | Of the 1,265,1291,333,315 shares of common stock beneficially owned by Eric D. Hovde, 28,559he owns 40,312 shares are owned directly;directly, which includes 8,167 shares of restricted stock that have not vested as of June 30, 2010, however, Mr. Hovde has the right to vote such shares of restricted stock prior to vesting. Eric D. Hovde is the managing member (“MM”)(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 51,97024,535 shares; Eric D. Hovde is the MM of Hovde Capital, Ltd., the general partner to Financial Institution Partners III, L.P., which owns 234,87696,093 shares; Eric D. Hovde is the MM of Hovde Capital IV,I, LLC, the general partner to Financial Institution Partners L.P.,Master Fund LP, 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 118,020773,391 shares; Eric D. Hovde is the MM of Hovde AcquisitionAcq uisition 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 19,00010,085 shares; Eric D. Hovde is the trustee to the Hovde Private Equity Advisors LLC 401(k) Profit Sharing Plan and Trust, which owns 1,149 shares; Eric D. Hovde is the trustee to the Hovde Capital Advisors LLC 401(k) Profit Sharing Plan and Trust, which owns 7,766 shares; and Eric D. Hovde is the trustee to The Eric D. and Steven D. Hovde Foundation, which owns 21,265 shares. |
(10)(11) | Includes 30,000Mr. Callies was appointed to the Board effective July 23, 2010 and received a grant of 402 shares of commonrestricted stock issuableon the same date. None of such shares of restricted stock have vested, however, Mr. Callies has the right to Mr.��Cooper under options that are exercisable within 60 daysvote such shares of June 30, 2008.restricted stock prior to vesting. |
SECTIONSECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE, RELATED PERSON TRANSACTIONS AND INDEMNIFICATION
Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and persons who own more than ten percent of a 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 stockholdersshareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.
To the Company’s knowledge, basedBased 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,Company believes that all Section 16(a) filing requirements applicable to ePlus’its executive officers, directors and greater than ten percent beneficial owners were complied with.with during the fiscal year ended March 31, 2010.
From April 1, 2007 to June 30, 2007,During the year ended March 31, 2010, we leased approximately 50,23255,880 square feet for use as our principal headquarterheadquarters from Norton Building 1, LLC for a monthly rent payment of approximately $76,000. Effective July 1, 2007, we entered into an amendment$102 thousand which increased the leased square footage to 55,880includes rent and the monthly rent payment to approximately $86,000.operating expenses. 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. We entered into amendments to the office lease agreement with Norton Building 1, LLC on June 18, 2009 and June 22, 2010 pursuant to which we will continue to lease 55,880 square feet for use as our principal headquarters. The term of the amended lease began on January 1, 2010, and will continue through December 31, 2014. In ad dition, we have the right to terminate the lease, with no penalty fee, on December 31, 2012 in the event that the facility no longer meets our needs, by giving six months’ prior written notice. The annual base rent, which includes an expenses factor, is $20.84 per square foot for the first year, with an annual rent escalation for operating cost increases, if any, plus 2.75% of the annual base rent, net of the expenses factor, for each year thereafter. The amended lease was approved by the Nominating and Corporate Governance Committee in accordance with our Related Person Transactions Policy, and was subsequently approved by our 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, weMr. Norton abstaining. We paid rent, which includes operating expenses, in the amount of $1,052,000$1,220 thousand during the year ended March 31, 2010, and $964,000, respectively.$1,126 thousand during the same period in 2009.
Two of Mr. Norton’s sons are employed at subsidiaries of the Company. The first, a Director of Finance at ePlusePlus Government, inc., earned $200,000$200 thousand and $204 thousand in each of the fiscal years ended March 31, 20072009 and 2008.2010, respectively. His compensation is comprised of a base salary and a bonus. The second, a Senior Account Executive at ePlusePlus Government, inc., earned $233,000$281 thousand and $331,000$440 thousand in the fiscal years ended March 31, 20072009 and 2008,2010, respectively, in base salary and commissions. Mr. Norton’s brother is atwo brothers are Senior Account ExecutiveExecutives at ePlusePlus Group, inc., who The first earned $194,000$139 thousand and $127 thousand in the fiscal yearyears ended March 31, 20072009 and $193,0002010, respectively, primarily in commissions. The second earned $281 thousand and $134 thousand in the fiscal yearyears ended March 31, 20082009 and 2010, respectively, primarily in base salary and commission.commissions. 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, BoardChairman of Director member, Chairman ofthe Audit Committee and member of the Nominating and Corporate Governance Committee, member, has a son-in-law serving as Senior Account Executive at ePlusePlus Group, inc. who earned $741,000$819 thousand and $845,000$530 thousand in base salary and commissioncommissions in the fiscal years ended March 31, 20072009 and 2008,2010, 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 adoptedThe Company has a written Related Party TransactionsPerson Transaction Policy, in order to establish more detailedwhich establishes processes, procedures and standards regarding the review, approval and ratification of related person transactions between the Company and to provideits directors, director nominees, executive officers, greater specificity regarding what typesthan five percent beneficial owners and their respective immediate family members, where the amount involved in the transaction exceeds the lesser of transactions constitute related person transactions.$120 thousand or one percent of the average of the Company’s total assets at year end for the last two completed fiscal years. All related person transactions are prohibited unless approved or ratified by the AuditNominating and Corporate Governance Committee, or, in certain circumstances, the Chair of the AuditNominating and Corporate Governance 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 ePlusePlus 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 ePlusePlus 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. ePlus.
However, ePlusePlus 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,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 ePlusePlus from which a director may not be relieved of liability under Section 102(b)(7) of the DGCL.Delaware General Corporation Law. Each Directordirector and officer has undertaken to repay ePlusePlus for any costs or expenses paid by ePlusePlus if it is ultimately determined that the Directordirector 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 outstanding shares of common stock as of June 30, 2008.2010. 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 13G13G/A filed with the SEC on the dates indicated in the footnotesfootnote 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 | |
Name of Beneficial Owner | | Number of Shares Beneficially Owned | | | Percentage of Shares Outstanding | |
| | | | | | | | |
Dimensional Fund Advisors LP (1) Palisades West, Building One 6300 Bee Cave Road Austin, TX 78746 | | | 636,331 | | | | 7.69 | |
(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 LP (“Dimensional”) is derived from a Schedule 13G/A filed with the SEC on February 6, 2008.8, 2010. Dimensional, Fund Advisors reports that it is an investment advisoradviser registered under Section 203 of the Investment AdvisorsAdvisers 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. These investment companies, trusts, and accounts (the “Funds”).are referred to as the “Funds.” In its role as investment advisoradviser 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 sharessecurities 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, 2008,2010, of each person who was an executive officer with ePlusof ePlus on such date. To the Company’s knowledge, thereJune 30, 2010. There are no family relationships between any director or executive officer and any other director or executive officer of the Company. Additionally, Mr.ePlus. Information pertaining to Messrs. Norton serves as the Chairmanand Bowen, who are both directors and executive officers of the BoardCompany, may be found in the section entitled “Proposal 1 – Election of Directors and Mr. Bowen serves on the Board.Directors.”
NAMEName | AGE | POSITIONAge | | Position |
| | | | |
Phillip G. NortonElaine D. Marion | 64 | Director, Chairman of the Board, President and 42 | | Chief ExecutiveFinancial Officer |
| | | | |
Bruce M. BowenMark P. Marron | 56 | Director and Executive Vice President49 | | Chief Operating Officer |
| | | | |
Steven J. Mencarini | 52 | 54 | | Senior Vice President and Chief Financial Officer |
| | |
Kleyton L. Parkhurst | 45 | Senior Vice President and Treasurerof Business Operations |
The business experience during the past five years of each executive officer of ePlusePlus is described below.
Phillip G. Norton, Chairman of the Board, President and Chief Executive Officer
Mr. NortonElaine D. Marion joined us in March 1993 and has1998. Ms. Marion became our Chief Financial Officer on September 1, 2008. Since 2004, Ms. Marion served since then as our Chairman of the Board and Chief Executive Officer. He was electedVice President of ePlusAccounting. Prior to that, she was the Controller of ePlus Technology, inc., a subsidiary of ePlus, from 1998 to 2004. Ms. Marion is a graduate of George Mason University, where she earned a Bachelor’s of Science degree with a concentration in September 1996. Mr. Norton graduated from the U.S. Naval Academy in 1966.Accounting.
Bruce M. Bowen, Director and Executive Vice President
Mr. Bowen foundedMark P. Marron became our CompanyChief Operating Officer on April 22, 2010. Prior to that, beginning in 1990 and2005 he served as Senior Vice President of Sales of our President until September 1996. Since September 1996,subsidiary, ePlus Technology, inc. A 20-year industry veteran, from 2001 - 2005 Mr. Bowen hasMarron was with NetIQ, where he held the position of senior vice president of worldwide sales. Prior to joining NetIQ, Mr. Marron served as our Executive Vice President,general manager of worldwide channel sales for Computer Associates International Inc., a provider of software and services that enables organizations to manage their IT environments. Mr. Marron has extensive experience throughout North America, Europe, the Middle East, and Africa. Mr. Marron holds a Bachelor’s of Science degree in Computer Science 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.Montclair State University.
Steven J. Mencarini Senior Vice President and Chief Financial Officer
Mr. Mencarini joined us in June 1997 as1997. On September 1, 2008 he became our Senior Vice President andof Business Operations. Prior to that, he served as our 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.University.
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 allEach of our mergersexecutive officers is chosen by the Board and acquisitions, investor relations,holds his or her office until his or her successor shall have been duly chosen and marketing. Mr. Parkhurst is a 1985 graduate of Middlebury College.qualified or until his or her death or until he or she shall resign or be removed as provided by the Bylaws.
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 offor the fiscal year ended March 31, 20082010 (the "named executive officers").
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 | | ($) | | ($) | | ($) | | ($)(1) | | ($) | | ($) | | ($) | | | ($) | |
| | | | | | | | | | | | | | | | | | | | |
Phillip G. Norton - Chairman of the Board, President, and Chief Executive Officer | | 2008 | | | 395,561 | | - | | - | | | 999,941 | | | 200,000 | | - | | | 1,500 | (2) | | | 1,597,002 | |
| 2007 | | | 375,000 | | | 150,000 | | - | | | 487,288 | | | - | | - | | | 1,500 | | | | 1,013,788 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Bruce M. Bowen - Executive Vice President | | 2008 | | | 300,000 | | | - | | - | | | 164,370 | | | 150,000 | | - | | | 190,952 | (3) | | | 805,322 | |
| 2007 | | | 300,000 | | | 75,000 | | - | | | 80,100 | | | - | | - | | | 166,712 | | | | 621,812 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Steven J. Mencarini - Chief Financial Officer and Senior Vice President | | 2008 | | | 286,827 | | | - | | - | | | 164,370 | | | 150,000 | | - | | | 74,292 | (4) | | | 675,489 | |
| 2007 | | | 225,000 | | | 100,000 | | - | | | 80,100 | | | - | | - | | | 65,615 | | | | 470,715 | |
Name and Principal Position | | Year | | Salary ($) | | | Bonus ($) | | | Stock Awards ($)(1) | | | Option Awards ($) | | | Non-Equity Incentive Plan Compensation ($) | | | Non-Qualified Deferred Compensation Earnings ($) | | | All Other Compensation ($) | | | Total ($) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Phillip G. Norton – Chairman of the Board, President, and Chief Executive Officer | | 2010 | | | 454,167 | | | | 85,000 | | | | 635,200 | | | | - | | | | 250,000 | | | | - | | | 1,500 | (2) | | | 1,425,967 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2009 | | | 400,000 | | | | | | | | | | | | | | | | 168,660 | | | | | | | 1,500 | | | | 570,160 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Bruce M. Bowen – Executive Vice President | | 2010 | | | 330,000 | | | | - | | | | 158,800 | | | | - | | | | 165,000 | | | | - | | | 82,424 | (3) | | | 736,224 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2009 | | | 310,692 | | | | | | | | | | | | | | | | 150,000 | | | | | | | 203,126 | | | | 663,818 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Mark Marron – Chief Operating Officer | | 2010 | | | 407,597 | | | | 159,786 | | | | 158,800 | | | | - | | | | | | | | | | | | | | | 726,183 | | |
(1) | The amountsvalues in this column showrepresent the amount we have expensed duringaggregate grant date fair values of restricted stock awards for the fiscal year 2007ended March 31, 2010. The grant date fair value is based on a grant date of November 9, 2009 and 2008 under FAS 123R. There were no stock awards made toa grant price determined by 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 canceledclosing price of the shares 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.such date. |
(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,$80,924 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.Plan during our fiscal year ended March 31, 2010. |
Supplemental Benefit Plans
On February 28, 2005, our Board approved the adoption of separate ePlusan ePlus inc. Supplemental Benefit PlansPlan (“the plan”) for each of Messrs.Mr. Bowen and Mencarini.other executive officers. The plans wereplan was developed and designed to provide each of the participating namedthese executive officers with a long-term incentive plan outside of the Company’s normal incentive plans.
The plans areplan is unfunded and nonqualified and areis designed to provide the participantsMr. Bowen with a cash benefit that is payable only upon the earlier to occur ofof:
| · | termination of employment; or |
| · | the expiration of the plans.plan. |
EachThe plan terminates on August 11, 2014. Under the terms of the plans, the participantsplan, Mr. Bowen or theirhis 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 doplan, Mr. Bowen does not have a right to accelerate payments of the benefits payable under the plans.plan. If a participantMr. Bowen’s employment is terminated for cause (as defined in eachthe plan) prior to the expiration of the respective plan, we will have no further obligation under the respective plan and the affected participantMr. Bowen will not be entitled to any payments under suchthe plan. In connection with the adoption of the plans,plan, we have established a grantor trust to which we have transferred assets intended to be used for the benefit of the participants.Mr. Bowen. 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, 2008,2010, there were no payments to the participantsMr. Bowen under the plan. The Compensation Committee takes the amounts accruing under these plansthis plan into consideration when setting other long-term compensation awards.
Incentive Plan Awards Paid to Named Executive Officers
On February 29, 2008,April 30, 2009, the Board of Directors of the Company adopted the ePlusePlus inc. Fiscal Year 2008 Executive Incentive Plan, ("theor "the Cash Incentive Plan"), effective March 6, 2008.April 1, 2009. 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, 2008,2010, 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 20082010 performance criteria and their relative weights for each participant were as follows: Company financial performance, 66.6%; and individual performance, 33.3%. The CompanyCompany’s financial performance was based on the Company’s net earnings before taxes for the 20082010 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. The Cash Incentive Plan and also would have excluded, if they had been applicable,permits the exclusion of all items of income, gain or loss determined by the Board to be extraordinary or unusual in nature and not incurred or realizedrea lized 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 20082010 fiscal year. The CompanyCompany’s 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 CompanyCompany’s financial performance was exceeded, eachno executive received more than 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.
Employment Agreements
On September 4, 2009, the Company entered into an employment agreement, or the “Norton Agreement”, with Phillip G. Norton, the company’s Chairman, Chief Executive Officer and President. The Agreement continues through and including September 30, 2011. Pursuant to the agreement, Mr. Norton receives a base annual salary of $500,000, with an annual review of the salary, and he is a participant in our Cash Incentive Plan. If Mr. Norton’s employment is terminated due to death or Incapacity (as defined in the Employment Agreement), the Company will pay any bonus determined by the Compensation Committee in accordance with the Cash Incentive Plan, and, in the case of Incapacity, an additional amount equal to 18 months of Mr. Norton’s base salary.
Under the terms of the Norton Agreement, the Company may terminate Mr. Norton’s employment at any time with or without Good Cause (as defined in the agreement). If the Company terminates Mr. Norton’s employment without Good Cause or Mr. Norton terminates his employment for Good Reason (as defined in the employment agreement), then he shall be entitled to (a) payment in an amount equal to 18 months of his base salary, (b) the target bonus pursuant to his then current Cash Incentive Plan and (c) continued medical and dental insurance for himself and his dependents through COBRA for a period not longer than 18 months after termination. If the Company and Mr. Norton have not entered into a new employment agreement or extended the Employment Term, and within ten (10) days following the end of the Employment Te rm, either the Company or Mr. Norton gives notice of an at-will termination, then he shall be entitled to (a) an amount equal to 18 months of his salary and (b) continued medical and dental insurance for himself and his dependents through COBRA for a period not longer than 18 months after termination. In addition, if Mr. Norton's employment terminates for any reason, he will be entitled to have any term insurance policies that the Company then owns on his life assigned to him, provided he pays to the Company the amount of premiums previously paid by the Company for life insurance coverage subsequent to the date of assignment.
On September 30, 2009, the Company entered into an employment agreement, or the “Bowen Agreement”, with its Executive Vice President Bruce M. Bowen. The Bowen Agreement is effective as of September 30, 2009 and continues through and including September 30, 2010 (the “Employment Term”). If the Employment Term ends without the parties’ entering into a new employment agreement or extending the Employment Term, Mr. Bowen shall continue as an at-will employee. The Bowen Agreement specifies an annual base salary of $330,000. In addition, Mr. Bowen will be eligible for an annual bonus under the terms and conditions of the Cash Incentive Plan, and certain other benefits and reimbursement of business expenses. If Mr. Bowen’s employment is terminated du e to death or Incapacity (as defined in the Bowen Agreement), the Company will pay any bonus determined by the Compensation Committee in accordance with its Cash Incentive Plan, and, in the case of Incapacity, an additional amount equal to one year of Mr. Bowen’s base salary. The Bowen Agreement provides that the Company may terminate Mr. Bowen’s employment at any time with or without Good Cause (as defined in the Bowen Agreement). If the Company terminates Mr. Bowen’s employment without Good Cause or Mr. Bowen terminates his employment for Good Reason (as defined in the Bowen Agreement), then he shall be entitled to (a) payment in an amount equal to one year of his base salary, and (b) continued medical and dental insurance for himself and his dependents through COBRA for a period not longer than one year after termination, paid by the Company. If the Company and Mr. Bowen have not entered into a new employment agreement or extended the Employment Term, and within ten (10) days following the end of the Employment Term, either the Company or Mr. Bowen gives notice of an at-will termination, then Mr. Bowen shall be entitled to (a) an amount equal to one year of his base salary and (b) continued medical and dental insurance for himself and his dependents through COBRA for a period not longer than one year after termination, paid by the Company.
On April 22, 2010, the Company entered into an employment agreement with its Chief Operating Officer, Mark Marron (the “Marron Agreement”). The Marron Agreement is effective as of April 22, 2010, and terminates on September 30, 2011 (the “Employment Term”). If the Employment Term ends without the parties’ entering into a new employment agreement or extending the Employment Term, Mr. Marron shall continue as an at-will employee. The agreement specifies a base annual salary of $450,000. In addition, Mr. Marron will be eligible for an annual bonus under the terms and conditions of the Cash Incentive Plan and certain other benefits such as reimbursement of business expenses. If Mr. Marron’s employment is terminated due to death or Incapacity (as defined in the Marron Agreement), the Co mpany will pay any bonus determined by the Compensation Committee in accordance with the Cash Incentive Plan, and, in the case of Incapacity, an additional amount equal to one year of his base salary. Under the terms of the Marron Agreement, the Company may terminate Mr. Marron’s employment at any time with or without Good Cause (as defined in the Marron Agreement). If the Company terminates Mr. Marron’s employment without Good Cause or Mr. Marron terminates his employment for Good Reason (as defined in the Marron Agreement), then he shall be entitled to (a) payment in an amount equal to one year of his base salary, and (b) continued medical and dental insurance paid by the company for himself and his dependents through COBRA for a period not longer than one year after termination. If the Company and Mr. Marron have not entered into a new employment agreement or extended the Employment Term, and within ten (10) days following the end of the Employment Term, either the Company or Mr. Ma rron gives notice of an at-will termination, then he shall be entitled to (a) an amount equal to one year of his base salary and (b) continued medical and dental insurance paid by the Company for himself and his dependents through COBRA for a period not longer than one year after termination.
Messrs. Norton, Bowen and Marron have each agreed to non-solicitation, non-compete and confidentiality provisions in their respective employment agreements.
OUTSTAOutstaNDING EQUITY AWARDS AT FISCAL YEAR-END 2008nding Equity Awards At Fiscal Year-End 2010
The following table sets forth outstanding option and stock awards held by our named executive officers as of March 31, 2008.2010.
| | Option awards | | Option Awards | | | Stock 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 | | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | | Option Exercise Price ($) | | | Option Expiration Date | | | Number of Shares or Units of Stock That Have Not Vested (#)(1) | | | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | |
Phillip G. Norton | | | 175,000 | | | | - | | | | - | | | | 7.75 | | 8/11/2009 | | | - | | | | - | | | | - | | | | - | | | | - | | | | 40,000 | | | | 702,000 | |
| | | | | | | | | | | | | | | | | | |
Mark Marron | | | | 40,000 | | | | | | | | | | | | 13.11 | | | 9/19/2015 | | | | 10,000 | | | | 175,500 | |
Bruce M. Bowen | | | 115,000 | | | | - | | | | - | | | | 7.75 | | 8/11/2009 | | | - | | | | - | | | | - | | | | - | | | | - | | | | 10,000 | | | | 175,500 | |
| | | | | | | | | | | | | | | | | | |
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) | Restricted Stock vests over a three year period beginning on the grant date and ending on the first anniversary of the grant date for one-third of the restricted stock, on the second anniversary of the grant date for one-third of the restricted stock and on the third anniversary of the grant date for the remaining one-third of the restricted stock. |
(2) | Based on the March 31, 2010 closing stock price of $17.55 per share. |
(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 millionTable of share-based compensation expense relating to the cancellation of these options.Contents
The following table provides information as of March 31, 2010 about our common stock that may be issued upon the exercise of options, warrants, and rights under allour prior equity compensation plans. It also provides information regarding the number of securities available for future issuance under our existingcurrent 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.under which there are no outstanding options, warrants or rights.
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 | | | 507,700 | | $ | 12.09 | | | | 1,105,573 | (1) |
Equity compensation plans not approved by security holders | | | - | | | - | | | | - | |
Total | | | 507,700 | | $ | 12.09 | | | | 1,105,573 | |
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 | |
| | | | | | | | | | |
(1) | This number includes 190,573 shares reserved for issuance under the 2008 Non-Employee Director Long-Term Incentive Plan and available for future restricted stock awards. |
(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 IThe Board of Directors three Class II Directors,has nominated directors Norton, Bowen, O’Donnell, Cooper, Faulders, Herman, Hovde and two Class III Directors. The last election of any director was held at ourCallies to be elected to serve until the next annual meeting of stockholders in September 2005. Because each class serves for three years orshareholders and until their successors are appointed, each class is presently up for election at this annual meeting.duly elected and qualified. 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 Biographical information as 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 informationJune 30, 2010 for each nominee is provided below. A plurality of votes cast
Unless otherwise instructed or unless authority to vote is requiredwithheld, all signed proxies will be voted for the election of Directors. Your Board unanimously recommends a vote FOR eachthe Board’s nominees. Each of the director-nominees.nominees has agreed to be named in this proxy statement and to serve if elected, and we know of no reason why any of the nominees would not be able to serve. However, if any nominee is unable or declines to serve as a director, or if a vacancy occurs before the election (which events are not anticipated), the proxy holders will vote for the election of such other person or persons as are nominated by the Board.
The eight nominees receiving the highest number of affirmative votes of the outstanding shares of the Company’s common stock present or represented by proxy and voting at the meeting, will be elected as directors to serve until the next annual meeting of shareholders and until their successors are duly elected and qualified.
Recommendation of the Board
Class I The Board of Directors unanimously recommends that you vote in favor of the election of Messrs. Norton, Bowen, O’Donnell, Cooper, Faulders, Herman, Hovde and Callies.
Phillip G. Norton, age 66, has served as Chairman of the Board of Directors, President and Chief Executive Officer of MLC Group, Inc., the Company’s subsidiary, since joining us in March, 1993, and Chairman of the Board of Directors, President and Chief Executive Officer of the Company since June, 1996. Mr. Norton was founder, Chairman of the Board of Directors, President and Chief Executive Officer of Systems Leasing Corporation, an equipment leasing and equipment brokerage company which he founded in 1978 and sold to PacifiCorp, Inc., a large Northwest utility, in 1986. From 1986 to 1990, Mr. Norton served as President and CEO of PacifiCorp Capital, Inc., the leasing entity of PacificCorp, Inc., which had over $650 million of leased assets. Fr om 1990 until 1993, Mr. Norton coached high school basketball and invested in real estate. From 1970-1975, he worked in various sales and management roles for Memorex Corporation, a manufacturer of storage and communication equipment and from 1975-1978, he was Vice President of Federal Leasing Corporation, a provider of financing and logistics to federal, state, and local governments. Mr. Norton is a 1966 graduate of the U.S. Naval Academy, with a BS in engineering, and served in the U.S. Navy from 1966-1970 as a Lieutenant in the Supply Corps.
With over thirty years of senior management experience in the equipment leasing and equipment sales markets, Mr. Norton brings leadership, vision, and extensive business, operating, and financing experience to the Company. He has tremendous knowledge of our markets, and since joining the Company in 1993, he has guided the expansion of our business lines and revenues. Today, we are a provider of advanced technology solutions, leasing, and software with over $680 million in revenues, as compared to our initial businesses of equipment leasing and brokerage with revenues of $40 million when the Company went public in 1996. As CEO, Mr. Norton has led several successful capital raising initiatives, including our IPO and secondary offerings and two private equity rounds; multiple accretive acquisitions in three d ifferent business lines; the hiring and retention of numerous highly qualified personnel; the successful litigation of multiple patent infringement lawsuits protecting our patent rights; and the development of strong industry relationships with key technology partners.
Bruce M. Bowen, age 58, 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 the Board since our founding.
Mr. Bowen has been in the equipment leasing business since 1975. Prior to founding the Company he served as Senior Vice President of PacifiCorp Capital, Inc. In the past he has served as Chairman of the Association for Government Leasing and Finance as well as committees of the Equipment Leasing and Finance Association, which gives him a broad understanding of issues affecting our industry. During his leasing career Mr. Bowen has participated in equipment lease financing in excess of $2 billion, involving many major vendors as well as government contractors. Throughout his leasing career he has been responsible for finance and funding, and sales and operations activities, providing the Board with a vast array of knowledge in a multitude of industry-specific areas.
Mr. Bowen is a 1973 graduate of the University of Maryland with a B.S. in Finance and in 1978 received a Masters of Business Administration in Finance from the University of Maryland.
Terrence O’Donnell, age 66, joined our Board in November 1996 upon the completion of our IPO. For the past ten 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 served on the Board of Directors and the Compensation, Nominating and Audit Committees of IGI Laboratories, Inc., an NYSE-Amex Equities company from 1993 to 2009. 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.
Mr. O’Donnell brings to the Board of Directors experience in a variety of capacities relevant to the business of the Company. His present role at Textron Inc., a multi-industry company with global operations including a commercial finance subsidiary, as Executive Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer, provides valuable experience in business, finance, compliance, leasing, government procurement, environmental, health and safety, corporate and securities law, board and corporate governance, and internal controls, all of which complement directly his service on the Board of ePlus. His public service as a White House staff member for 5 years, 1972-1977, and as General Counsel of the Department of Defense, 1989-1992, have provided a deep understanding of the federal government, an important customer of the Company. His service on the board and committees of another public company, IGI, Inc. for some 16 years, including his chairmanship of the IGI Audit Committee for over 12 years, provides insight and experience relevant to his service on the Board of ePlus and his role as Chairman of the Audit Committee. His private practice experience at Williams & Connolly has also provided significant experience into regulatory matters, litigation, and securities and corporate law.
Milton E. Cooper, Jr., age 71, 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. Under his leadership, CSC’s Federal Sector grew to more than 17,000 information technology professionals and accounted for approximately 25 percent of CSC’s fiscal year 2001 annual revenues of $10.5 billion. Prior to joining CSC, Mr. Cooper served in various marketing and general management positions at IBM Corporation, Telex Corporation and Raytheon Company.
Mr. Cooper has served on numerous committees and organizations including: Chairman, Armed Forces Communications and Electronics Association (AFCEA); Chairman, Secretary of the Army’s National Science Center Advisory Board; Member of the Board of Directors of the Information Technology Association of America (ITAA); and National Defense Industrial Association and the USO. He served on the Identix, Inc. Board from 2001 until its merger with Viisage in 2006. During that time, he was Chairman of the Board from 2004 – Term Expiring2006. He also serves on the Board of Directors and on the Compensation Committees of both L-1 Identity Solutions, Inc. and Applied Signal Technology, Inc. In 2002, he was recognized as the “20 Year Outstanding Industry Executive” by Government Computer News (a Washington Post Company). Mr. Coope r 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 20091963.
Mr. Cooper’s senior executive role at CSC has provided him with expertise in federal government contracting in the technology area. His skills in this area bring a depth of experience to the Board that is directly applicable to a core business for the Company. In addition, Mr. Cooper’s senior-level experience with the federal government provides him with valuable insights into the perspective of an important customer. Mr. Cooper dedicates substantial time to Board matters, serving as the Chairman of our Compensation Committee, and as a member of our Nominating and Corporate Governance Committee.
C. Thomas Faulders, III, age 60, joined our Board in July 1998. Mr. Faulders has been the President and Chief Executive Officer of the University of Virginia Alumni Association since 2005.2006. 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 also served as the Vice President and Chief Financial Officer of COMSAT Corporation, an international satellite communication company, from 1992 t o 1995. Prior to this, Mr. Faulders served in a variety of executive roles at MCI, including Treasurer and Senior Vice President of Marketing. Mr. Faulders is a member of the Board of Advisors of Morgan Franklin and the Board of Trustees of Randolph College.College in Lynchburg, Virginia. He has served on numerous boards in the past and has held roles as chairs of compensation, audit and governance committees. 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.
Mr. Faulders’ extensive executive and financial experience in the telecommunications and high tech sectors enables him to assist ePlus directly in the oversight of financial and SEC reporting matters, and the knowledge and experience to provide insight and guidance in the formulation of strategic planning. He qualifies as an audit committee financial expert within the meaning of SEC regulations.
Lawrence S. Herman, age 66, joined our Board of Directors in March 2001. Until his retirement in July 2007, Mr. Herman has been with BearingPoint, Inc. since June 1967 and was one of BearingPoint’s most senior managing directors, responsibleManaging Directors with responsibility for managing the strategy and emerging markets in the company’s state and local government practice. In July 2007,During his 40 year career with BearingPoint and KPMG, 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. In many assignments during his 40 plus year career with KPMG and BearingPoint, Mr. Herman was responsible for directing teams which evaluated, designed and implemented systems of internal controls coverin g procurement, accounting and human resources systems. He has directed accounting systems integration projects for private sector as well as 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, financial accounting and fiscal planning experts.
Mr. Herman’s senior executive role as Managing Director at both KPMG and BearingPoint provided him with significant expertise in private sector and public sector government systems and technology issues. These roles provide the Board and the Company with significant expertise and experience in market segments core to the Company's business. Mr. Herman dedicates substantial time to Board matters, serving as the Chairman of our Nominating and Corporate Governance Committee, and as a member of both our Compensation and Audit Committees.
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, age 46, joined our Board in November 2006. In 1987, Mr. Hovde founded Hovde Financial, Inc., and is the Chief Executive Officer Managing Member and ChairmanPortfolio Manager of Hovde Capital Advisors LLC, an SEC-registered investment adviser, which manages private investment funds and managed accounts focusing primarily on the financial services and real estate-related industry. As Portfolio Manager for Hovde Capital Advisors, Mr. Hovde is responsible for the investment strategy and day-to-day oversight of the portfolio investments managed by Hovde Capital Advisors. In this capacity, Mr. Hovde provides the investment team with strategic direction and guidance in their investment decisions. He is also Chief Investment Officer of Hovde Private Equity Advisors LLC, and Hovde Financial, Inc., respectively (the “Hovde Group”). The Hovde Group isa private equity firm also focused exclusively on the financial services industry and provides its clients within dustry. Mr. Hovde previously was the CEO of Hovde Financial, an investment banking asset managementorganization that he co-founded focused on the mergers and merchant banking services.acquisitions of banks and thrifts. In this capacity, he was involved in the negotiation, structuring, and consummation of countless private sector mergers and acquisitions, as well as numerous acquisitions from either the RTC or the FDIC on behalf of Hovde Financial’s clients. Mr. Hovde has also served as a director on numerous bank and thrift boards and currently serves onas the Board of Directors and the Compensation CommitteeChairman of Sunwest Bank in Orange County, California. Mr. HovdeHe also servesserved as a director on the Board of Directors and Audit Committee of Great Wolf Resorts, Inc. Mr. Hovde has also served on the boards and various committees of both public and private companies.
Mr. Hovde’s career has provided him with an expertise in the financial services industry and the investment management areas and, as such, he has been featured on numerous occasions on financial television and in national print media publications—including CNBC, Bloomberg TV, and The Wall Street Journal. His familiarity and understanding of the interplay between the economy and the financial and real estate markets has provided him with a knowledgeable perspective enabling him to act in multiple capacities – that of an executive, an industry commentator, and a financial industry expert.
Mr. Hovde is also the co-founder and a trustee of theThe Eric D. and Steven D. Hovde Foundation, ana non-profit 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 NASDFINRA as a registered representative and general securities principal.
Irving R. Beimler John E. Callies, age 56, joined our Boardboard on July 23, 2010. Mr. Callies was employed by IBM in November 2006. Mr. Beimler has been with the Hovde Group since November 1997. Currently,various capacities for twenty-five years. Most recently, 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 Membergeneral manager 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”)IBM Global Financing from September 19842004 until his retirement in May 2001, firstJune 2010. With operations in 55 countries supporting 125,000 clients, he led the world's largest information technology financing and asset management organization and Mr. Callies was responsible for business direction and management of a portfolio of nearly $35 billion in total assets. Previously, as Vice President,vice president, marketing, On Demand Business Developmentfor IBM, Mr. Callies had company-wide responsibility for all marketing efforts in support of On Demand Business, along with leading the marketing management discip line for IBM. In 2003, Mr. Callies was appointed vice president, marketing and then (from January 1992) as President, Federal Sector. Before joining CSC,strategy, of IBM Systems Group. Prior to that, beginning in 1996 when he was named general manager, small and medium business, IBM Asia Pacific Corporation, based in Tokyo, Japan, Mr. Cooper servedCallies has filled roles in marketing and marketing management. In 1991 he was named general managementmanager of IBM Credit Corporation’s end-user financing division, now called IBM Global Financing. His career at IBM Credit Corporation began in 1985, when he progressed through various executive positions with IBM Corporation, Telex Corporation,in sales and Raytheon Company.operations. Mr. Callies is a former Chair of the Board of Governors of Fairfield Preparatory School in Fairfield, Connecticut and former member of the advisory board of Lehigh University. He also serves on the Advisory Board of Directors and on the Compensation CommitteeLeeds School 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 ofBusiness at 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 directorColorado. Mr. Callies is a member1976 graduate of the Board immediately prior to such Change in Control.Lehigh University.
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.
Mr. Callies brings over thirty years of experience in the technology marketplace to the ePlus Board. In particular his broad understanding of the computer reseller channel, financing and international markets will help the Company going forward.
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 5sal 2 – Ratification of the appointmentThe Appointment of Deloitte & Touche LLP as our independent auditorsOur Independent Auditors for our fiscal year endingOur Fiscal Year Ending March 31, 20092011
(Proposal # 52 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, 2009.2011. Deloitte has served as the Company’s independent auditors since 1990, and is an independent registered public accounting firm.
Neither the Company’s bylawsBylaws 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 stockholdersshareholders for ratification as a matter of good corporate practice. If the stockholdersshareholders 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.shareholders.
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, 20072009 and March 31, 2008,2010, the aggregate fees billed by Deloitte were as follows:
| | Fiscal 2008 | | | Fiscal 2007 | | | Fiscal 2010 | | | Fiscal 2009 | |
Audit Fees | | $ | 2,029,800 | | | $ | 2,160,000 | | | $ | 1,000,000 | | | $ | 970,000 | |
Audit Related Fees | | __ | | | __ | | | | | | | | - | |
Tax Fees | | | | | | | | | | | | | | | - | |
All Other Fees | | $ | 2,029,800 | | | $ | 2,160,000 | | | | 2,200 | | | | - | |
TOTAL FEES | | | $ | 1,002,200 | | | $ | 970,000 | |
Audit-Related Fees. There were no audit-related fees billed by Deloitte & Touche LLP for the fiscal years ended March 31, 20082010 or 2007.2009.
Tax Fees. There were no fees billed by Deloitte & Touche LLP for tax-related services rendered for the fiscal years ended March 31, 20082010 or 2007.
All Other Fees. There were no other fees billed by Deloitte & Touche LLP for professional services fora license to online resources in the fiscal years ended March 31, 2008 or 2007.amount of $2,200.
There were no non-audit related services provided by Deloitte & Touche LLP during the last two fiscal years.years, except as described above. 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 5,2, 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, 2009.2011.
ReportReport of the Audit Committee
The primary role of the Audit Committee, as more fully described in its Charter,charter, is to assist the Board of Directors in its oversight of the Company’sour corporate accounting and financial reporting process and to interact directly with and evaluate the performance of the Company’sour independent auditors.
Management is responsible for the preparation, presentation and integrity of our consolidated financial statements, accounting and financial reporting principles, internal controls and procedures designed to assure compliance with accounting standards, applicable laws and regulations. Our independent registered public accounting firm, Deloitte & Touche LLP, is responsible for performing an independent audit of the consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board, or PCAOB.
In the performance of its oversight function, the Audit Committee has reviewed the Company’s audited consolidated financial statements for the fiscal year ended March 31, 20082010 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”)PCAOB in Rule 3200T), Deloitte & Touche LLP’s judgments as to the quality, not just the acceptability, of the Company’sour 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’sour internal controls and the overall quality of the Company’sour financial reporting.
The Audit Committee has received from Deloitte & Touche LLP the required written disclosures and letter regarding its independence from ePlus, as set forthrequired by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees)(as adopted byapplicable requirements of the PCAOB in Rule 3600T),regarding the independent accountant’s communications with the audit committee concerning independence, 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 consolidated financial statements of ePlusePlus for the fiscal year ended March 31, 20082010 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.
June 15, 2010.
The Audit Committee
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:
| (i) | designate Participants; |
| (ii) | determine the type or types of Awards to be granted to each Participant under the Employee Plan; |
| (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; |
| (iv) | determine the terms and conditions of any Award; |
| (v) | 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; |
| (vi) | 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; |
| (vii) | interpret and administer the Employee Plan and any instrument or agreement relating to, or Award made under, the Employee Plan; |
| (viii) | establish, amend, suspend, or waive such rules and guidelines; |
| (ix) | accelerate the vesting, exercise or payment of an Award; |
| (x) | make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Employee Plan; and |
| (xi) | 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. |
(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.
(b) | Accounting for Awards. For purposes of this Section 4,
|
| (i) | 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 |
| (ii) | 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) | 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. |
(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.
| (i) | 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: |
(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.
| (ii) | 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:
| (i) | 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) | 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) | 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) | 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) | 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; |
| (B) | All Options subject to the Award shall become immediately exercisable upon a Change in Control; |
| (C) | 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; |
| (D) | 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 |
| (E) | 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. |
| (v) | 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) | 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; |
| (B) | 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 |
| (C) | any combination of the foregoing. |
| (vi) | 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) | 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) | 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) | 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) | 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) | 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) | 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.
| (i) | 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) | Term. The term of each Stock Appreciation Right shall not exceed ten (10) years from the date of grant.
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| (iii) | 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.
| (i) | 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) | 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) | 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:
| (i) | may be denominated or payable in cash, Shares (including, without limitation, Restricted Stock), other securities, or other Awards; and |
| (ii) | 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. |
(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.
| (i) | 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) | 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) | 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) | 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) | 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) | 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) | 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) | 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) | 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) | 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) | 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) | 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) | 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:
| (i) | increase the total number of Shares available for Awards under the Employee Plan, except as provided in Section 4 hereof; or |
| (ii) | 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. |
(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:
| (i) | obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and |
| (ii) | 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. |
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.
| EPLUS INC. |
| |
| |
| Signature: __________________________ |
| |
| Name: _____________________________ |
| |
| Title: ______________________________ |
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.
1. | To elect as Directors, each to serve a term as described below |
| · | To elect three Class I Directors, each to serve a term of one year and until their successors have been duly elected and qualified. |
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
C. Thomas Faulders, III | £ FOR £ WITHHOLD AUTHORITY |
Lawrence S. Herman | £ FOR£ WITHHOLD AUTHORITY |
Eric D. Hovde | £ FOR £ WITHHOLD AUTHORITY |
| · | To elect three Class II Directors, each to serve a term of two years and until their successors have been duly elected and qualified. |
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
|
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. |
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 approve the 2008 Non-Employee Director Long-Term Incentive Plan
3. To approve the 2008 Employee Long-Term Incentive Plan
4.To approve our Amended and Restated Certificate of Incorporation
5. To ratify the appointment of Deloitte & Touche LLP as ePlus’ independent auditors for ePlus’ fiscal year ending March 31, 2009.
Dated:________________, 2008
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.