SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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400 Herndon Parkway
Herndon, Virginia 20170
July 28, 2004
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders of ePlus
inc. on September 14, 2004. The annual meeting will begin at 8:00 a.m. local
time at the Courtyard Marriott, 533 Herndon Parkway, Herndon, Virginia 20170.
The formal notice of the meeting follows on the next page. In addition,
information regarding each of the matters you will be asked to vote on at the
annual meeting is contained in the attached proxy statement. We urge you to read
the proxy statement carefully. We first began mailing these proxy materials on
or about July 28, 2004 to all stockholders of record at the close of business on
July 16, 2004. This mailing includes the proxy statement, proxy card, a return
envelope, and the ePlus 2004 annual report.
It is important that you vote at the annual meeting. Whether or not you plan to
attend in person, we urge you to complete, date, and sign the enclosed proxy
card and return it as promptly as possible in the accompanying envelope. If you
are a stockholder of record and do attend the meeting and wish to vote your
shares in person, even after returning your proxy, you may still do so.
We look forward to seeing you in Herndon, Virginia on September 14, 2004.
Very truly yours,
/s/ Phillip G. Norton
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Phillip G. Norton, President
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held September 14, 2004
To the Stockholders of ePlus inc.:
The annual meeting of stockholders of ePlus inc., a Delaware corporation, will
be held on September 14, 2004, at the Courtyard Marriott, 533 Herndon Parkway,
Herndon, Virginia 20170, at 8:00 a.m. local time for the purposes stated below:
1. To elect two Class II Directors, each to serve a term of three years
and until their successors have been duly elected and qualified.
2. To ratify the appointment of Deloitte & Touche LLP as our independent
auditors for our fiscal year ending March 31, 2005.
3. To transact such other business as may properly come before the annual
meeting.
Under the provisions of our Bylaws, and in accordance with Delaware law, the
Board of Directors has fixed the close of business on July 16, 2004 as the
record date for stockholders entitled to notice of and to vote at the annual
meeting.
Whether or not you expect to be present at the meeting, please date and sign the
enclosed proxy card and mail it promptly in the enclosed envelope to NATIONAL
CITY BANK, Corporate Trust Operations, Post Office Box 92301, Cleveland, Ohio
44193-0900.
ePlus inc.
/s/ Erica S. Stoecker
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July 28, 2004 Erica S. Stoecker
Corporate Secretary
TABLE OF CONTENTS
Page
----
Information about ePlus inc....................................................1
Information about the Annual Meeting...........................................1
Information about this Proxy Statement.........................................1
Information about Voting.......................................................2
Quorum Requirements............................................................2
Voting Requirements............................................................3
Dissenters' Rights of Appraisal................................................3
Voting Securities, Principal Holders thereof, and Management...................4
Directors and Executive Officers...............................................5
Compensation of Directors and Executive Officers..............................14
Performance Graph.............................................................18
Certain Transactions..........................................................19
Proposal 1: Election of Class II Directors...................................21
Proposal 2: Ratification of Appointment of Deloitte & Touche LLP as Independent
Auditors......................................................................21
Other Proposed Action.........................................................22
Executive Sessions............................................................23
Stockholder Proposals and Submissions.........................................23
Communications with the Board.................................................23
Appendix A: ePlus inc. Audit Committee Charter...............................24
Appendix B: ePlus inc. Nominating and Corporate Governance Committee Charter
...............................................................................28
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INFORMATION ABOUT EPLUS INC.
ePlus inc. has been in the business of selling, leasing, financing, and managing
information technology and other assets for over 13 years. We have developed our
Enterprise Cost Management model through development and acquisition of
software, products, and business process services over the past six years. The
address of our principal executive office is 400 Herndon Parkway, Herndon,
Virginia 20170 and our telephone number at that address is (703) 834-5710. Our
website is located at www.eplus.com. The information on our website is not
incorporated into this proxy statement.
INFORMATION ABOUT THE ANNUAL MEETING
Our annual meeting will be held on September 14, 2004 at 8:00 a.m. local time at
the Courtyard Marriott, 533 Herndon Parkway, Herndon, Virginia 20170.
The annual meeting has been called to consider and take action on the following
proposals:
1. To elect two Class II Directors, each to serve a term of three years
and until their successors have been duly elected and qualified.
2. To ratify the appointment of Deloitte & Touche LLP as our independent
auditors for our fiscal year ending March 31, 2005.
3. To transact such other business as may properly come before the annual
meeting.
Our Board of Directors, or in the case of proposal 2, the Audit Committee of our
Board of Directors, has unanimously approved each of the proposals and
recommends that you vote in favor of each of the proposals. All holders of
record of our common stock at the close of business on July 16, 2004, the record
date, will be entitled to vote at the annual meeting.
INFORMATION ABOUT THIS PROXY STATEMENT
We have sent you this proxy statement because ePlus' Board of Directors is
soliciting your proxy to vote at the annual meeting. ePlus is bearing the cost
of this proxy solicitation. If you own ePlus common stock in more than one
account, such as individually and also jointly with your spouse, you may receive
more than one set of these proxy materials. To assist us in saving money and to
provide you with better stockholder services, we encourage you to have all of
your accounts registered in the same name and address. You may do this by
contacting our transfer agent, National City Bank, Victor LaTessa, at (216)
222-3579. This proxy statement contains information that we are required to
provide to you under the rules of the Securities and Exchange Commission and is
designed to assist you in voting your shares. On or about July 28, 2004, we
began mailing these proxy materials to all stockholders of record at the close
of business on July 16, 2004.
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INFORMATION ABOUT VOTING
Stockholders can vote in person at the annual meeting or by proxy. To vote by
proxy, please mail the enclosed proxy card in the enclosed envelope. Please sign
and date your proxy card before mailing.
Each share of ePlus common stock is entitled to one vote on all matters
presented at the annual meeting. If your shares are held in the name of a bank,
broker, or other holder of record, you will receive instructions from the holder
of record that you must follow in order for your shares to be voted. If your
shares are not registered in your own name and you plan to attend the annual
meeting and vote your shares in person, you should contact your broker or agent
in whose name your shares are registered to obtain a broker's proxy card and
bring it to the annual meeting in order to vote. If you vote by proxy, the
individuals named on the card (your proxy holders) will vote your shares in the
manner you indicate. You may specify whether your shares should be voted for
none, one, or both of the nominees for director and for or against the other
proposal. If you sign and return the card without indicating your instructions,
your shares will be voted for:
o the election of both the Class II nominees for director; and
o the ratification of the appointment of Deloitte & Touche LLP as our
independent auditors for the fiscal year ending March 31, 2005.
You may revoke or change your proxy at any time before it is voted by sending a
written notice of your revocation to ePlus' Corporate Secretary, Erica S.
Stoecker at ePlus' principal executive office.
QUORUM REQUIREMENTS
As of July 16, 2004, the record date for this solicitation of proxies, there
were 8,916,258 shares of common stock outstanding, each of which is entitled to
one vote. The holders of record of a majority of the shares of common stock
entitled to vote at the meeting, present in person, or by proxy, will constitute
a quorum for the transaction of business at the annual meeting or any
adjournment thereof. If a quorum is not present, the annual meeting may be
adjourned until a quorum is obtained.
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VOTING REQUIREMENTS
Proposal 1: Election of Class II Directors
To be elected as a Class II Director, a nominee must be one of the two persons
receiving the greatest number of affirmative votes cast at the meeting for Class
II Directors.
Proposal 2: Ratification of Appointment of Deloitte & Touche LLP as Independent
Auditors
To be approved, Proposal 2 requires the affirmative vote of the holders of at
least a majority of the shares present in person or represented by proxy at the
meeting and entitled to vote on the proposal.
Effect of Abstentions and Broker Non-Votes
Abstentions and broker non-votes will be counted only for the purpose of
determining the existence of a quorum, but will not be counted as an affirmative
vote for the purposes of determining whether a proposal has been approved.
Therefore, an abstention or a broker non-vote will not have any effect on the
votes for proposal 1 but will have the effect as a vote against proposal 2.
All signed proxies received will be voted in accordance with the choices
specified on such proxies. Proxies will be voted in favor of a proposal if no
contrary specification is made. All valid proxies obtained will be voted at the
discretion of the Board of Directors with respect to any other business that may
come before the annual meeting.
We may solicit proxies by use of the mails, in person, by telephone, e-mail, or
other electronic communications. We will bear the cost of soliciting proxies in
the accompanying form. We may reimburse brokerage firms and others for their
expenses in forwarding proxy materials to the beneficial owners and soliciting
them to execute the proxies.
DISSENTERS' RIGHTS OF APPRAISAL
The Board of Directors does not propose any action for which the laws of the
state of Delaware, or the Certificate of Incorporation, Bylaws, or corporate
resolutions of ePlus provide a right of a stockholder to dissent and obtain
payment for shares.
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VOTING SECURITIES, PRINCIPAL HOLDERS THEREOF, AND MANAGEMENT
Except as set forth below, the following table sets forth certain information as
of July 16, 2004 with respect to: (1) each executive officer, director, and
director nominee; (2) all executive officers and directors of ePlus as a group;
and (3) all persons known by ePlus to be the beneficial owners of more than five
percent of our common stock.
Number of Shares Percentage
Beneficially of Shares
Name of Beneficial Owner(1) Owned (2) Outstanding
--------------------------- ------------ -----------
Phillip G. Norton (3).................................................. 2,346,000 25.4
Bruce M. and Elizabeth D. Bowen (4).................................... 775,000 8.6
Steven J. Mencarini (5)................................................ 101,700 1.1
Kleyton L. Parkhurst (6)............................................... 238,000 2.6
C. Thomas Faulders, III (7)............................................ 53,507 *
Terrence O'Donnell (8)................................................. 70,000 *
Milton E. Cooper, Jr. ................................................. 0 0
Lawrence S. Herman (9)................................................. 17,500 *
All directors and named executive officers as a group (8 Individuals).. 3,601,707 36.6
Eric D. Hovde (10)..................................................... 917,245 10.3
Putnam, LLC, Marsh & McLennan Companies, Inc., Putnam Investment Management,
LLC, The Putnam Advisory Company, LLC (11)............................. 1,049,283 11.8
* less than 1%
(1) The business address of Messrs. Norton, Bowen, Mencarini, Parkhurst,
Faulders, O'Donnell, Cooper, and Herman is 400 Herndon Parkway, Herndon,
Virginia, 20170. The business address of Mr. Hovde is 1826 Jefferson Place,
NW, Washington, DC 20036. The business address of Putnam LLC is One Post
Office Square, Boston, Massachusetts 02109.
(2) Unless otherwise indicated and subject to community property laws where
applicable, each of the stockholders named in this table has sole voting
and investment power with respect to the shares shown as beneficially owned
by such stockholder. A person is deemed to be the beneficial owner of
securities that can be acquired by such person within 60 days from July 16,
2004, upon exercise of options or warrants. Each beneficial owner's
percentage ownership is determined by assuming that options or warrants
that are held by such person (but not by any other person) and that are
exercisable within 60 days from July 16, 2004, have been exercised. The
ownership amounts reported for persons who we know own more than 5% of our
common stock are based on the Schedules 13D and 13G filed with the SEC by
such persons, unless we have reason to believe that the information
contained in those filings is not complete or accurate.
(3) Includes 2,040,000 shares held by J.A.P. Investment Group, L.P., a Virginia
limited partnership, of which J.A.P., Inc., a Virginia corporation, is the
sole general partner. The limited partners are: Patricia A. Norton, the
spouse of Mr. Norton, trustee for the benefit of Phillip G. Norton, Jr.,
u/a dated as of July 20, 1983; Patricia A. Norton, the spouse of Mr.
Norton, trustee for the benefit of Andrew L. Norton, u/a dated as of July
20, 1983; Patricia A. Norton, trustee for the benefit of Jeremiah O.
Norton, u/a dated as of July 20, 1983; and Patricia A. Norton. Patricia A.
Norton is the sole stockholder of J.A.P., Inc. Also includes 305,000 shares
of common stock issuable to Mr. Norton under options.
(4) Includes 470,000 shares held by Mr. and Mrs. Bowen, as tenants by the
entirety, and 160,000 shares held by Bowen Holdings LLC, a Virginia limited
liability company, composed of Mr. Bowen and three minor children of whom
Mr. Bowen is legal guardian and for which shares Mr. Bowen serves as
manager. Also includes 145,000 shares of common stock issuable to Mr. Bowen
under options.
(5) Includes 101,700 shares of common stock issuable to Mr. Mencarini under
options.
(6) Includes 225,000 shares of common stock issuable to Mr. Parkhurst under
options.
(7) Includes 53,507 shares of common stock issuable to Mr. Faulders under
options.
(8) Includes 70,000 shares of common stock issuable to Mr. O'Donnell under
options.
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(9) Includes 17,500 shares of common stock issuable to Mr. Herman under
options.
(10) Of the 917,245 shares beneficially owned by Eric D. Hovde, 328,719 of the
shares beneficially owned are as Managing Member of Hovde Capital, L.L.C.,
the General Partner to Financial Institution Partners II, L.P., the direct
owner; 30,000 of the shares beneficially owned are as Managing Member of
Hovde Acquisition II, L.L.C., the direct owner; 19,000 of the shares
beneficially owned are as Trustee for Hovde Financial, Inc. Profit Sharing
Plan and Trust, the direct owner; 17,000 of the shares beneficially owned
are as Trustee for The Eric D. Hovde and Steven D. Hovde Foundation, the
direct owner; 39,170 of the shares beneficially owned are as Managing
Member of Hovde Capital Limited IV LLC, the General Partner to Financial
Institution Partners IV, L.P., the direct owner; 221,271 of the shares
beneficially owned are as Managing Member of Hovde Capital, Ltd., the
General Partner to Financial Institution Partners III, L.P., the direct
owner; 194,736 of the shares beneficially owned are as Managing Member of
Hovde Capital IV, LLC, the General Partner to Financial Institution
Partners, L.P., the direct owner; 34,525 of the shares beneficially owned
are as Managing Member to Hovde Capital Offshore LLC, the Management
Company to Financial Institution Partners, Ltd., the direct owner; 32,824
of the shares beneficially owned are held directly. This information was
obtained from a Form 3 filed by Eric D. Hovde dated May 14, 2004.
(11) The information as to Putnam, LLC, Marsh & McLennan Companies, Inc., Putnam
Investment Management, LLC and The Putnam Advisory Company, LLC is derived
from a Schedule 13G/A dated February 9, 2004. The Schedule 13G/A states
that Marsh & McLennan Companies, Inc. has no voting or dispositive power
with respect to the 1,049,283 shares, that Putnam, LLC has shared voting
power with respect to 539,102 shares and shared dispositive power with
respect to all 1,049,283 shares, that Putnam Investment Management, LLC has
shared dispositive power with respect to 469,200 shares and that The Putnam
Advisory Company, LLC has shared voting power with respect to 539,102
shares and shared dispositive power with respect to 580,083 shares.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age, and position with ePlus inc. of
each person who is an executive officer or director.
Name Age Position Class
---- --- -------- -----
Phillip G. Norton.......................60 Chairman of the Board, President, and Chief Executive Officer III
Bruce M. Bowen..........................52 Director and Executive Vice President III
Steven J. Mencarini.....................49 Senior Vice President and Chief Financial Officer
Kleyton L. Parkhurst....................41 Senior Vice President, Assistant Secretary, and Treasurer
Terrence O'Donnell......................60 Director II
Milton E. Cooper, Jr....................66 Director II
C. Thomas Faulders, III.................54 Director I
Lawrence S. Herman......................60 Director I
The name and business experience during the past five years of each director and
executive officer of ePlus are described below.
Phillip G. Norton joined us in March 1993 and has served since then as our
Chairman of the Board and Chief Executive Officer. Since September 1996, Mr.
Norton has also served as our President. Mr. Norton is a 1966 graduate of the
U.S. Naval Academy.
Bruce M. Bowen founded our company in 1990 and served as our President until
September 1996. Since September 1996, Mr. Bowen has served as our Executive Vice
President, and from September 1996 to June 1997 also served as our Chief
Financial Officer. Mr. Bowen has served on our Board of Directors since our
founding. He is a 1973 graduate of the University of Maryland and in 1978
received a Masters of Business Administration from the University of Maryland.
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Steven J. Mencarini joined us in June of 1997 as Senior Vice President and Chief
Financial Officer. Prior to joining us, Mr. Mencarini was Controller of the
Technology Management Group of Computer Sciences Corporation, one of the
nation's three largest information technology outsourcing organizations. Mr.
Mencarini joined Computer Sciences Corporation in 1991 as Director of Finance
and was promoted to Controller in 1996. Mr. Mencarini is a 1976 graduate of the
University of Maryland and received a Masters of Taxation from American
University in 1985.
Kleyton L. Parkhurst joined us in May 1991 as Director of Finance and served as
our Secretary and Treasurer from September 1996 until September 2001. Since
September 2001 Mr. Parkhurst has served as our Assistant Secretary and
Treasurer. In July 1998, Mr. Parkhurst was made Senior Vice President for
Corporate Development. Mr. Parkhurst is currently responsible for all of our
mergers and acquisitions, investor relations, marketing, and the ePlus Group's
finance department. Mr. Parkhurst is a 1985 graduate of Middlebury College.
Terrence O'Donnell joined our Board of Directors in November 1996 upon the
completion of our initial public offering. Mr. O'Donnell is a partner with the
law firm of Williams & Connolly LLP in Washington, D.C. and Executive Vice
President and General Counsel of Textron, Inc. Mr. O'Donnell has practiced law
since 1977, and from 1989 through 1992 served as General Counsel to the U.S.
Department of Defense. Mr. O'Donnell presently also serves as a director 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. Mr. O'Donnell has been nominated by the Board of
Directors for re-election as a Class II Director at the 2004 Annual Meeting of
Stockholders.
Milton E. Cooper, Jr. joined us in November 2003. Mr. Cooper served with
Computer Sciences Corporation (CSC) from September 1984 through May 2001, first
as Vice President, Business Development and then (from January 1992) as
President, Federal Sector. Before joining CSC, Mr. Cooper served in marketing
and general management positions with IBM Corporation, Telex Corporation, and
Raytheon Company. He is also Chairman of the Board of Directors of Identix,
Inc., which is a NASDAQ-traded company, and serves on the Board of Directors,
the Audit Committee, and the Compensation Committee of 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. Mr. Cooper has been nominated by the Board
of Directors to serve as a Class II Director at the 2004 Annual Meeting of
Stockholders.
C. Thomas Faulders, III joined our Board of Directors in July 1998. Mr. Faulders
is the Chairman, President, and Chief Executive Officer of LCC International,
Inc. From July 1998 to December 1999, Mr. Faulders served as Chairman of the
Board of Telesciences, Inc., an information services company. From 1995 to 1998,
Mr. Faulders was Executive Vice President, Treasurer, and Chief Financial
Officer of BDM International, Inc., a prominent systems integration company. Mr.
Faulders is a member of the Board of Directors of United Defense Inc., Universal
Technology and Systems, Inc., and Sentori, Inc. 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.
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Lawrence S. Herman joined our Board of Directors in March 2001. Mr. Herman is
one of BearingPoint's most senior Managing Directors and is responsible for
managing national alliances with e-government and enterprise software companies
in the company's state and local government practice. During his career, Mr.
Herman has specialized in developing, evaluating, and implementing financial and
management systems and strategies for state and local governments around the
nation. Mr. Herman has been with BearingPoint for over thirty-five years. He has
directed a statewide performance audit of North Carolina, resulting in a
strategic fiscal plan. He further directed similar statewide fiscal strategies
for the Commonwealth of Kentucky, the State of Louisiana, the State of Oklahoma,
and the District of Columbia. Mr. Herman received his B.S. degree in Mathematics
and Economics from Tufts University in 1965 and his Masters of Business
Administration in 1967 from Harvard Business School.
Each executive officer of ePlus is chosen by the Board of Directors and holds
his or her office until his or her successor shall have been duly chosen and
qualified or until his or her death or until he or she shall resign or be
removed as provided by the Bylaws.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
ePlus' officers, directors, and persons who own more than ten percent of a
registered class of ePlus' equity securities, to file reports of ownership and
changes in ownership of equity securities of ePlus with the SEC. Officers,
directors, and greater-than-ten-percent stockholders are required by SEC
regulations to furnish ePlus with copies of all Section 16(a) forms that they
file.
Based solely upon a review of Forms 3, Forms 4, and Forms 5 furnished to ePlus
pursuant to Rule 16a-3 under the Exchange Act, ePlus believes that all such
forms required to be filed pursuant to Section 16(a) of the Exchange Act were
timely filed, as necessary, by the officers, directors, and security holders
required to file such forms.
The Board of Directors
Our Board of Directors is divided into three classes: Class I, comprised of two
directors; Class II, comprised of two directors; and Class III, comprised of two
directors. Subject to the provisions of the Bylaws, at each annual meeting of
stockholders, the successors to the class of directors whose term is then
expiring shall be elected to hold office for a term expiring at the third
succeeding annual meeting of stockholders. Messrs. O'Donnell and Cooper, our
Class II Directors, are standing for re-election at the 2004 annual meeting.
Each director holds office until his or her successor has been duly elected and
qualified or until he or she has resigned or been removed in the manner provided
in the Bylaws. The members of the three classes of directors are as follows:
o Class I
C. Thomas Faulders, III
Lawrence S. Herman
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o Class II
Terrence O'Donnell
Milton E. Cooper, Jr.
o Class III
Phillip G. Norton
Bruce M. Bowen
The Class III Directors will stand for re-election at the Annual Meeting of
Stockholders in 2005. The Class I Directors will stand for re-election at the
Annual Meeting of Stockholders in 2006. The classification of the Board of
Directors, with staggered terms of office, was implemented for the purpose of
maintaining continuity of management and of the Board of Directors.
There are no material proceedings to which any director, executive officer, or
affiliate of ePlus, any owner of record or beneficially of more than five
percent of any class of voting securities of ePlus, or any associate of any such
director, executive officer, affiliate of ePlus, or security holder is a party
adverse to ePlus or any of its subsidiaries or has a material interest adverse
to ePlus or any of its subsidiaries. Directors Milton E. Cooper, Jr., C. Thomas
Faulders III, Lawrence S. Herman, and Terrence O'Donnell are independent as that
term is defined under the rules of the National Association of Securities
Dealers.
Director Compensation
Directors who are also employees of ePlus do not currently receive any
compensation for service as members of the Board of Directors. Each outside
director receives an annual grant of 10,000 stock options and $500 for each
committee meeting. All directors will be reimbursed for their out-of-pocket
expenses incurred to attend board or committee meetings.
Meetings and Committees of the Board of Directors
The Board of Directors met six times during the fiscal year ended March 31,
2004. In addition to meetings of the full Board, directors also attended
meetings of Board Committees. No incumbent director attended fewer than 75% of
the total number of meetings held by the Board of Directors and the meetings of
any committee on which the director served. Directors are encouraged to attend
Annual Meetings of ePlus Stockholders. Five directors attended last year's
Annual Meeting. The Board of Directors has the following committees: the Audit
Committee, the Compensation Committee, the Stock Incentive Committee, and the
Nominating and Corporate Governance Committee.
Audit Committee
General. The Audit Committee of the Board of Directors is responsible for
selecting ePlus' independent public accountants, monitoring and reviewing the
quality and activities of ePlus' internal and external audit functions,
-8-
monitoring the adequacy of ePlus' operating and internal controls as reported by
management and the external or internal auditors, and reviewing ePlus' periodic
reports that are filed with the Securities and Exchange Commission. The members
of the Audit Committee as of March 31, 2004 were Terrence O'Donnell (Chairman),
C. Thomas Faulders, III, and Lawrence S. Herman. Each member of the Audit
Committee is independent as that term is defined under the rules of the National
Association of Securities Dealers. In addition, the Board of Directors has
determined that C. Thomas Faulders III qualifies as an "Audit Committee
Financial Expert" as defined in regulations issued by the Securities and
Exchange Commission. During the fiscal year ended March 31, 2004, four meetings
of the Audit Committee were held. The Charter of the Audit Committee is attached
hereto as Appendix A.
Audit Committee Report. The Audit Committee is composed of three directors who
are independent as defined under the rules of the National Association of
Securities Dealers. The committee operates under a written charter approved by
the Board of Directors, which was included as Appendix A to ePlus' proxy
statement for the 2001 annual meeting of stockholders.
The committee reviews ePlus' financial reporting process on behalf of the Board
of Directors. In fulfilling its responsibilities, the committee has reviewed and
discussed the audited financial statements contained in our Annual Report on
Form 10-K for the year ended March 31, 2004 with ePlus' management. Management
is responsible for our financial statements and the financial reporting process,
including internal controls. The independent accountants are responsible for
expressing an opinion on the conformity of those audited financial statements
with accounting principles generally accepted in the United States of America.
The Audit Committee has discussed with the independent accountants the matters
required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as amended. The committee has discussed
with the independent accountant the accountants' independence from ePlus and its
management including the matters in the written disclosures provided to the
committee as required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees. The committee has also
considered whether the provision of non-audit services by the independent
accountants to ePlus is compatible with maintaining auditors' independence.
Based on the reviews and discussions referred to above, the committee
recommended to the Board of Directors, and the Board of Directors approved, that
the audited financial statements be included in our Annual Report on Form 10-K
for the year ended March 31, 2004 for filing with the Securities and Exchange
Commission.
By The Audit Committee
Terrence O'Donnell (Chairman)
C. Thomas Faulders, III
Lawrence S. Herman
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Compensation Committee
General. The Compensation Committee of the Board of Directors is responsible for
reviewing the salaries, benefits, and other compensation, including stock-based
compensation, of Mr. Norton and Mr. Bowen, and making recommendations to the
Board of Directors based on its review. The members of the Compensation
Committee during the fiscal year ended March 31, 2004 were C. Thomas Faulders,
III (Chairman), Terrence O'Donnell, and Lawrence S. Herman, all of whom were
independent directors as that term is defined under the rules of the National
Association of Securities Dealers. Mr. Norton and Mr. Bowen, as directors, do
not vote on any matters affecting their personal compensation. Mr. Bowen and Mr.
Norton are responsible for reviewing and establishing salaries, benefits, and
other compensation, excluding stock-based compensation, for all other employees.
Compensation arrangements during our 2004 fiscal year were determined in
accordance with the executive compensation policy set forth below. The
Compensation Committee considers compensation paid to our executive officers to
be deductible for purposes of Section 162(m) of the Internal Revenue Code.
Compensation Committee Report. The Compensation Committee of the Board of
Directors has prepared the following report on our policies with respect to the
compensation of executive officers for the fiscal year ended March 31, 2004. The
compensation programs of ePlus are designed to align compensation with business
objectives and performance, and to enable ePlus to attract, retain, and reward
executives who contribute to the long-term success of ePlus.
The Compensation Committee believes that executive pay should be linked to
performance. Therefore, ePlus provides an executive compensation program which
includes three principal elements: (1) base pay, (2) potential cash bonus, and
(3) long-term incentive opportunities through the use of stock options.
Criteria for Determination of Executive Compensation. In determining each of the
principal elements of each executive's compensation, as well as the overall
compensation package thereof, the following criteria are considered by the
persons responsible for recommending or approving such compensation: (1) the
compensation awarded to executives with comparable titles and responsibilities
to those of such executive by companies in our industry (or, to the extent
information is not available, in comparable industries) whose revenues and
earnings are comparable to those of ePlus, as reported by reliable independent
sources; (2) the results of operations of ePlus during the past year, on an
absolute basis and compared with ePlus' targeted results for such year as well
as with the results of the comparable companies, as reported by reliable
independent sources; (3) the performance of such executive during the past year,
on an absolute basis and as compared with the performance targets set by ePlus
for such executive for such year and the performance of the other executives of
ePlus during such year; and (4) any other factor which the Compensation
Committee determines to be relevant. The weight to be given to each of the
foregoing criteria is determined by the Compensation Committee in the exercise
of its reasonable judgment in accordance with the purposes of this executive
compensation policy and may vary from time to time or from executive to
executive.
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The role of the Compensation Committee is limited to the review of the
compensation, excluding stock-based compensation for Mr. Norton and Mr. Bowen,
who are principal stockholders of ePlus. Section 162(m) of the Internal Revenue
Code imposes a limit, with certain exceptions, on the amount that a
publicly-held corporation may deduct in any year for the compensation paid with
respect to its five most highly compensated executive officers. While the
Compensation Committee cannot predict with certainty how ePlus' compensation tax
deduction might be affected, the Compensation Committee tries to preserve the
tax deductibility of all executive compensation while maintaining flexibility
with respect to ePlus' compensation programs as described in this report.
Chief Executive Officer Compensation. The executive compensation policy
described above is applied in setting Mr. Norton's compensation. Mr. Norton
generally participates in the same executive compensation plans and arrangements
available to the other executives. Accordingly, his compensation also consists
of an annual base salary, a potential annual cash bonus, and, potentially,
long-term equity-linked compensation in the form of stock options. The
Compensation Committee's general approach in establishing Mr. Norton's
compensation is to be competitive with peer companies, but to have a large
percentage of his target based upon objective performance criteria and targets
established in our strategic plan.
Mr. Norton's compensation for the year ended March 31, 2004 included $250,000 in
base salary. Mr. Norton received a bonus of $150,000 for the fiscal year ended
March 31, 2004. Mr. Norton's salary was based on, among other factors, ePlus'
performance and the 2003 compensation of chief executive officers of comparable
companies, although his compensation was not linked to any particular group of
these companies.
During the fiscal year ended March 31, 2004, three meetings of the Compensation
Committee were held.
BY THE COMPENSATION COMMITTEE
C. Thomas Faulders, III (Chairman)
Terrence O'Donnell
Lawrence S. Herman
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Stock Incentive Committee
The Stock Incentive Committee of the Board of Directors is authorized to award
stock, and various stock options and rights and other stock-based compensation
grants under the ePlus inc. Amended and Restated 1998 Long-Term Incentive Plan.
The members of the Stock Incentive Committee during the fiscal year ended March
31, 2004 were Mr. Bowen and Mr. Norton. Except for formula plan grants to the
outside directors and grants that are approved by a majority of the
disinterested members of the Board of Directors, no member of the Stock
Incentive Committee or the Compensation Committee is eligible to receive grants
under the ePlus inc. Amended and Restated 1998 Long-Term Incentive Plan. During
the fiscal year ended March 31, 2004, one meeting of the Stock Incentive
Committee was held.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee assists the Board of Directors
in fulfilling its oversight responsibilities under the NASDAQ Stock Market
listing standards and Delaware law. This committee is authorized and designated
for the purposes of (1) identifying individuals qualified to serve on the Board
of Directors and to select, or to recommend that the Board of Directors select a
slate of director nominees for election by the stockholders of ePlus at each
annual meeting of the stockholders of ePlus, in accordance with ePlus'
Certificate of Incorporation and Bylaws and with Delaware law, and (2)
evaluating, developing, and recommending to the Board of Directors a set of
corporate governance policies and principles to be applicable to ePlus. Terrence
O'Donnell, C. Thomas Faulders, III, and Lawrence S. Herman, all of whom are
independent directors as that term is defined under the rules of the National
Association of Securities Dealers, were the members of the Nominating and
Corporate Governance Committee as of March 31, 2004. During the fiscal year
ended March 31, 2004, one meeting of the Nominating and Corporate Governance
Committee was held.
The Charter of the Nominating and Corporate Governance Committee is attached
hereto as Appendix B.
It is the policy of the Nominating and Corporate Governance Committee to
consider properly submitted stockholder nominations for membership on the Board
of Directors. Any stockholder nomination must comply with the Bylaws of ePlus.
The notice must be in writing and delivered to the Corporate Secretary not later
than 90 days in advance of the Annual Meeting or, if later, the seventh day
following the first public announcement of the Meeting. The notice must set
forth: (i) the name and address of the stockholder who intends to make the
nomination and of the person or persons to be nominated; (ii) a representation
that the stockholder is a holder of record of stock of ePlus entitled to vote at
such meeting and intends to appear in person or by proxy at the Meeting and
nominate the person or persons specified in the notice; (iii) a description of
all arrangements or understandings between the stockholder and each nominee or
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the stockholder; (iv) such other
information regarding each nominee proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the United States Securities and Exchange Commission had the nominee been
nominated, or intended to be nominated, by the Board of Directors; and (v) the
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consent of each nominee to serve as a Director of ePlus if so elected. In
addition, the stockholder making such nomination shall promptly provide any
other information reasonably requested by ePlus.
In evaluating such nominations, the Nominating and Corporate Governance
Committee seeks to achieve a balance of knowledge, experience, and capability on
the Board of Directors. Furthermore, any member of the Board of Directors must
have the highest personal ethics and values and have experience at the
policy-making level of business, and should be committed to enhancing
stockholder value.
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COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Summary Compensation Table
The following table provides certain summary information concerning the
compensation earned, for services rendered in all capacities to ePlus, by ePlus'
Chief Executive Officer and certain other executive officers of ePlus, who we
refer to as the "named executive officers," for the fiscal years ended March 31,
2002, 2003, and 2004. Certain columns have been omitted from this summary
compensation table, as they are not applicable.
Long-Term
Annual Compensation Compensation
------------------- ------------
Securities
Underlying All Other
Name and Fiscal Bonus/ Options Compensation
Principal Position Year Salary Commission (#) (1)
------------------ ---- ------ ---------- --- ---
Phillip G. Norton 2004 $250,000 $150,000 -- $1,320
Chairman, Chief Executive 2003 250,000 150,000 -- --
Officer, and President 2002 250,000 150,000 -- 1,500
Bruce M. Bowen 2004 225,000 100,000 1,320
Director and 2003 225,000 100,000 -- --
Executive Vice President 2002 225,000 100,000 -- 1,500
Kleyton L. Parkhurst 2004 200,000 52,894 1,320
Senior Vice President, Assistant 2003 200,000 100,000 30,000 (2) --
Secretary, and Treasurer 2002 200,000 75,000 -- 1,500
Steven J. Mencarini 2004 215,000 46,875 1,320
Chief Financial Officer and 2003 185,000 71,250 12,000(2) --
Senior Vice President 2002 182,500 43,750 1,500
-------------------------
(1) All amounts reported represent ePlus' employer 401(k) plan matching
contributions.
(2) Stock options granted on June 28, 2002 under the ePlus Amended and Restated
Long-Term Incentive Plan.
Fiscal Year-end Option Values
The following table sets forth information regarding the value of unexercised
options held by the named executive officers at the end of fiscal year 2004. The
named executive officers did not exercise any options during fiscal year 2004.
Number of Securities Value of Unexercised
Underlying Unexercised Options In-the-Money Options at Fiscal
at Fiscal Year-End (#) Year-End($)(1)
---------------------- ---------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
Phillip G. Norton................. 305,000 -- 1,462,100 --
Bruce M. Bowen.................... 145,000 -- 685,650 --
Kleyton L. Parkhurst.............. 216,000 24,000 1,023,100 144,000
Steven J. Mencarini............... 98,100 9,600 286,832 57,600
----------------
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(1) Based on a last sale price of $12.97 per share as of the close of
business on March 31, 2004.
Equity Compensation Plan Information
The following table gives information about ePlus' common stock that may be
issued upon the exercise of options, warrants, and rights under all of ePlus'
existing equity compensation plans as of March 31, 2004, 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.
Number of securities
remaining available for
Number of securities to Weighted-average future issuance under equity
be issued upon exercise exercise price of compensation plans
of outstanding options, outstanding options, (excluding securities
Plan Category warrants, and rights warrants, and rights reflected in column)
------------- -------------------- -------------------- --------------------
Equity compensation plans
approved by security holders.... 1,786,232 $9.24 756,591
Equity compensation plans not
approved by security holders.... -- -- --
Total...................... 1,786,232 $9.24 756,591
Employment Contracts and Termination of Employment and Change in Control
Arrangements
ePlus has entered into employment agreements with Phillip G. Norton and Bruce M.
Bowen, each effective as of September 1, 1996, and with Kleyton L. Parkhurst and
Steven J. Mencarini, effective as of October 31, 2003. Each of Messrs. Norton's
and Bowen's employment agreements provided for an initial term of three years,
and is subject to an automatic one-year renewal at the expiration thereof unless
ePlus or the employee provides notice of an intention not to renew at least
three months prior to expiration. Each of Messrs. Parkhurst's and Mencarini's
employment agreements provided for an initial term of two years, and is subject
to an automatic one-year renewal at the expiration thereof unless ePlus provides
at least six months' prior notice of termination or the employee resigns for any
reason.
The current annual base salaries ($250,000 in the case of Phillip G. Norton;
$225,000 in the case of Bruce M. Bowen; $200,000 in the case of Kleyton L.
Parkhurst; and $225,000 in the case of Steven J. Mencarini) are in effect and
each employee may be eligible for commissions or performance bonuses. The
performance bonuses for Phillip G. Norton and Bruce M. Bowen are discretionary,
based on the performance of ePlus and as approved by the Compensation Committee.
The performance bonuses for Kleyton L. Parkhurst and Steven J. Mencarini are
paid based upon performance criteria established by Phillip G. Norton and Bruce
M. Bowen.
Under the employment agreements, each receives certain other benefits, including
medical, insurance, death and long-term disability benefits, employer 401(k)
contributions, and reimbursement of employment-related expenses. Mr. Bowen's
country club dues are paid by ePlus. In the fiscal year ended March 31, 2004,
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the amount of these dues totaled $4,575. The employment agreements of Messrs.
Norton and Bowen contain a covenant not to compete on the part of each, whereby
in the event of a voluntary termination of employment, upon expiration of the
term of the agreement, or upon the termination of employment by ePlus for cause,
each are subject to restrictions upon acquiring, consulting with, or otherwise
engaging in or assisting in the providing of capital needs for competing
business activities or entities within the United States for a period of one
year after the date of such termination or expiration of the term of the
employment agreement.
Under his original employment agreement, Phillip G. Norton was granted options
to acquire 130,000 shares of common stock at a price per share equal to $8.75.
These options have a ten year term and became exercisable and vested in 25%
increments over four years, ending on November 20, 1999. In February 1998, Mr.
Norton was also granted options to purchase 25,000 shares of common stock at a
price per share equal to $12.65, however these options expired without being
exercised on February 5, 2003. In August 1999, Mr. Norton was granted options to
purchase 175,000 shares of common stock at a price per share equal to $7.75
Under his original employment agreement, Bruce M. Bowen was granted options to
acquire 15,000 shares of common stock at a price per share equal to $8.75. These
options have a ten year term and became exercisable and vested in 25% increments
over four years, ending on November 20, 1999. In February 1998, Mr. Bowen was
also granted options to purchase 15,000 shares of common stock at a price per
share equal to $11.50 and in August 1999 was granted options to purchase 115,000
shares of common stock at a price per share equal to $7.75.
Under his original employment agreement, Kleyton L. Parkhurst was granted
options to acquire 100,000 shares of common stock at a price per share equal to
$6.40. These options have a ten year term and became exercisable and vested in
25% increments over four years ending on November 20, 1999. In February 1998,
Mr. Parkhurst was also granted options to purchase 10,000 shares of common stock
at a price per share equal to $11.50 and in September 1998 was granted options
to purchase 50,000 shares of common stock at a price per share of $8.75. In
August 1999, Mr. Parkhurst was granted options to purchase 20,000 shares of
common stock at a price per share equal to $7.75 and in September 2000 was
granted options to purchase 30,000 shares of common stock at a price per share
equal to $17.375. In June 2002, Mr. Parkhurst was also granted 30,000 options to
purchase common stock at a price per share equal to $6.97.
In connection with his original employment, Steven J. Mencarini was granted
options to acquire 16,200 shares of common stock at a price per share equal to
$12.75. These options have a ten year term, and become exercisable and vest in
20% increments over five years at the end of each year of service, and are
subject to acceleration upon certain conditions. In September 1997, Mr.
Mencarini was also granted options to purchase 5,100 shares of common stock at a
price per share equal to $13.25 and in December 1997 was granted options to
purchase 9,400 shares of common stock at a price per share equal to $12.25. In
February 1998, Mr. Mencarini was granted options to purchase 5,000 shares of
common stock at a price per share equal to $11.50; in October 1998, he was
granted options to purchase 25,000 shares of common stock at a price per share
equal to $8.00; in August 1999 he was granted options to purchase 20,000 shares
of common stock at a price per share equal to $7.75; in September 2000 he was
granted options to purchase 10,000 shares of common stock at a price per share
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equal to $17.375; and in December 2000 he was granted options to purchase 5,000
shares of common stock at a price per share equal to $7.75. In June 2002, Mr.
Mencarini was also granted 12,000 options to purchase common stock at a price
per share equal to $6.97 per share.
ePlus maintains key-man life insurance on Mr. Norton in the amount of $11
million.
Compensation Committee Interlocks and Insider Participation
For the year ended March 31, 2004, all decisions regarding executive
compensation were made by the Compensation Committee with respect to Mr. Norton
and Mr. Bowen. Compensation for other executives was made by the committee, Mr.
Norton, or Mr. Bowen consistent with Compensation Committee policy. The members
of the Compensation Committee as of March 31, 2004 were C. Thomas Faulders III
(Chairman), Terrence O'Donnell, and Lawrence S. Herman. None of the executive
officers of ePlus currently serves on the Compensation Committee of another
entity or any other committee of the Board of Directors of another entity
performing similar functions.
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PERFORMANCE GRAPH
The following graph shows the value as of March 31, 2004 of a $100 investment
made on March 31, 1999 in ePlus' common stock (with dividends, if any,
reinvested), as compared with similar investments based on (1) the value of the
NASDAQ Stock Market Index (U.S.) (with dividends reinvested) and (2) the value
of the NASDAQ financial index. The stock performance shown below is not
necessarily indicative of future performance.
3/00 3/01 3/02 3/03 3/04
EPLUS INC. 401.52 111.37 115.03 87.27 157.21
NASDAQ STOCK MARKET (U.S.) 195.66 80.80 63.59 51.95 87.02
NASDAQ FINANCIAL 99.03 110.36 136.54 124.59 178.37
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CERTAIN TRANSACTIONS
Advances and Loans to Employees
ePlus has in the past provided loans and advances to employees. Such balances
are to be repaid from personal funds or commissions earned by the employees on
successful sales or financing arrangements obtained on behalf of ePlus. Loans
and advances to employees outstanding as of March 31, 2004 totaled $12,119.
There were no loans or extensions of credit by ePlus or any ePlus subsidiary to
any of the ePlus directors or executive officers.
Leases with Related Parties
ePlus leases certain office space from related parties. During the year ended
March 31, 2004, ePlus paid $279,600 in rent attributable to Phillip G. Norton,
our Chief Executive Officer and President. All leases with related parties are
approved in advance by the Board of Directors.
Indemnification Agreements
We have entered into separate but identical indemnification agreements with each
of our directors and executive officers, and we expect to enter into similar
indemnification agreements with persons who become directors or executive
officers in the future. The indemnification agreements provide that ePlus will
indemnify the director or officer against any expenses or liabilities incurred
in connection with any proceeding in which the director or officer may be
involved as a party or otherwise, by reason of the fact that the director or
officer is or was a director or officer of ePlus or by reason of any action
taken by or omitted to be taken by the director or officer while acting as an
officer or director of ePlus. However, ePlus is only obligated to provide
indemnification under the indemnification agreements if:
(1) the director or officer was acting in good faith and in a manner the
director or officer reasonably believed to be in the best interests of
ePlus, and, with respect to any criminal action, the director or
officer had no reasonable cause to believe the director's or officer's
conduct was unlawful;
(2) the claim was not made to recover profits made by the director or
officer in violation of Section 16(b) of the Exchange Act, as amended,
or any successor statute;
(3) the claim was not initiated by the director or officer;
(4) the claim was not covered by applicable insurance; or
(5) the claim was not for an act or omission of a director of ePlus from
which a director may not be relieved of liability under Section
103(b)(7) of the DGCL. Each director and officer has undertaken to
repay ePlus for any costs or expenses paid by ePlus if it is
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ultimately determined that the director or officer is not entitled to
indemnification under the indemnification agreements.
Future Transactions
ePlus' policy requires that all material transactions between ePlus and its
officers, directors, or other affiliates must be approved by a majority of the
disinterested members of the Board of Directors of ePlus, and be on terms no
less favorable to ePlus than could be obtained from unaffiliated third parties.
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PROPOSAL 1
To Elect Two Class II Directors to Serve for Three Years and until their
Respective Successors Have Been Duly Elected and Qualified.
The Board of Directors has concluded that the re-election of Terrence O'Donnell
and Milton E. Cooper, Jr. as Class II Directors is in the best interest of ePlus
and recommends stockholder approval of the re-election of Terrence O'Donnell and
Milton E. Cooper, Jr. as Class II Directors. The remaining four directors will
continue to serve in their positions for the remainder of their terms.
Biographical information concerning Mr. O'Donnell and Mr. Cooper, and ePlus'
other directors, can be found under "Directors and Executive Officers."
Unless otherwise instructed or unless authority to vote is withheld, all signed
proxies will be voted for the election of Terrence O'Donnell and Milton E.
Cooper, Jr. as Class II Directors. Although the Board of Directors of ePlus does
not contemplate that such nominees will be unable to serve, if such a situation
arises prior to the annual meeting, the persons named in the enclosed proxy card
will vote for the election of such other person or persons as may be nominated
by the Board of Directors.
Vote Required for Approval. The two persons receiving the greatest number of
affirmative votes cast at the annual meeting will be elected as Class II
Directors.
Board of Directors Recommendation. The Board of Directors unanimously recommends
that you vote in favor of the election of Terrence O'Donnell and Milton E.
Cooper, Jr. as Class II Directors .
PROPOSAL 2
To Ratify the Appointment of Deloitte & Touche LLP as ePlus' Independent
Auditors for ePlus' Fiscal Year Ending March 31, 2005.
Subject to stockholder ratification, the Audit Committee has reappointed the
firm of Deloitte & Touche LLP as the independent auditors to examine ePlus'
financial statements for the fiscal year ending March 31, 2005. Deloitte &
Touche has audited ePlus' financial statements since its inception. If the
stockholders do not ratify this appointment, other independent auditors will be
considered by the Audit Committee.
Representatives of Deloitte & Touche are expected to attend the annual meeting
and will have the opportunity to make a statement if they desire and to respond
to appropriate questions.
Vote Required for Approval. The affirmative vote of the holders of at least a
majority of the shares of common stock present in person or by proxy and
entitled to vote at the annual meeting on the proposal will constitute approval
of Proposal 2.
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Audit Committee Recommendation. The Audit Committee unanimously recommends that
you vote in favor of the ratification of the appointment of Deloitte & Touche
LLP as independent auditors for the fiscal year ending March 31, 2005.
Fees Incurred by Deloitte & Touche LLP. The following table shows the fees paid
or accrued by ePlus for the audit and other services provided by Deloitte &
Touche LLP for fiscal 2004 and 2003.
2004 2003
---- ----
Audit Fees $350,000 $255,000
Audit-Related Fees 0 0
Tax Fees 0 0
All Other Fees 0 0
-------- --------
Total $350,000 $255,000
----- -------- --------
AUDIT FEES. The aggregate fees to be charged by Deloitte & Touche LLP for
professional services rendered for the audit of our annual financial statements
for the fiscal year ended March 31, 2004 and for the reviews of the financial
statements included in our Quarterly Reports on Form 10-Q for that fiscal year
are $350,000. The aggregate fees charged by Deloitte & Touche LLP for
professional services rendered for the audit of our annual financial statements
for the fiscal year ended March 31, 2003 and for the reviews of the financial
statements included in our Quarterly Reports on Form 10-Q for that fiscal year
were $255,000.
AUDIT-RELATED FEES. There were no fees billed by Deloitte & Touche LLP for
audit-related services rendered for the fiscal years ended March 31, 2004 or
2003.
TAX FEES. There were no fees billed by Deloitte & Touche LLP for tax-related
services rendered for the fiscal years ended March 31, 2004 or 2003.
ALL OTHER FEES. There were no other fees billed in the last two fiscal years for
professional services rendered by Deloitte & Touche LLP.
There were no non-audit related services provided by Deloitte & Touche LLP
during the last two fiscal years. The Audit Committee pre-approves all auditing
services (which may entail providing comfort letters in connection with
securities underwriting), and all non-audit services provided to ePlus by
Deloitte & Touche LLP, subject to a de minimis exception as set forth by the
SEC.
OTHER PROPOSED ACTION
The Board of Directors does not intend to bring any other matters before the
annual meeting, nor does the Board of Directors know of any matters which other
persons intend to bring before the annual meeting. If, however, other matters
not mentioned in this proxy statement properly come before the annual meeting,
the persons named in the accompanying form of proxy will vote thereon in
accordance with the recommendation of the Board of Directors.
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You should note that ePlus' Bylaws provide that in order for a stockholder to
bring business before a meeting or to make a nomination for the election of
directors, the stockholder must give written notice complying with the
requirements of the Bylaws to the Secretary of ePlus not later than 90 days in
advance of the meeting or, if later, the seventh day following the first public
announcement of the date of the meeting.
EXECUTIVE SESSIONS
Executive sessions of non-management directors are held at least twice per year.
Any non-management director can request that an executive session be scheduled.
STOCKHOLDER PROPOSALS AND SUBMISSIONS
If any stockholder wishes to present a proposal for inclusion in the proxy
materials to be solicited by the ePlus Board of Directors with respect to the
next annual meeting of stockholders, that proposal must be presented to ePlus'
management prior to March 30, 2005.
In accordance with ePlus' Bylaws, for a stockholder proposal or nomination to be
considered at a meeting of stockholders, the proposal must be submitted in
writing to the Secretary of ePlus not less than 90 days in advance of such
meeting or, if later, the seventh day following the first public announcement of
the date of such meeting.
Whether or not you expect to be present at the annual meeting, please sign and
return the enclosed proxy card promptly. Your vote is important. If you are a
stockholder of record and attend the annual meeting and wish to vote in person,
you may withdraw your proxy at any time prior to the vote.
COMMUNICATIONS WITH THE BOARD
Individuals may communicate with the Board of Directors of ePlus by sending
correspondence to:
ePlus
Attn: Corporate Secretary
400 Herndon Parkway
Herndon, VA 20170-5245
Communications that are intended for non-management directors should be sent to
the above address, to the attention of the Chairman of the Nominating and
Corporate Governance Committee.
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APPENDIX A
ePlus inc.
AUDIT COMMITTEE CHARTER
The Audit Committee of the Board of Directors of ePlus inc. (the "Committee")
shall consist of no fewer than three members. All members of the Committee shall
be independent directors and shall satisfy the independence and qualification
standards established by NASDAQ and the Securities Exchange Commission (the
"SEC"). It is the goal of the Committee that at least one member of the
Committee shall be an "audit committee financial expert" as defined by the SEC.
As also determined by the Board of Directors, all members of the Committee shall
have sufficient financial experience and ability to enable them to read and
understand financial statements at the time of their appointment to the
Committee and to discharge their responsibilities under this charter. No
Committee member shall simultaneously serve on the audit committees of more than
two other public companies, unless the Board of Directors determines that such
service would not impair the member's ability to effectively serve on the Audit
Committee. The members of the Committee shall be appointed by the Board of
Directors upon recommendation of the Nominating and Corporate Governance
Committee and may be removed by the Board of Directors in its discretion.
The purpose of the Committee shall be to (a) assist Board of Directors oversight
of (i) the integrity of the Company's financial statements, (ii) the Company's
compliance with legal and regulatory requirements, (iii) the independent
auditor's qualifications and independence, and (iv) the performance of the
Company's internal audit function and independent auditor, and (b) prepare the
report SEC rules require be included in the Company's annual proxy statement. In
furtherance of this purpose, the Committee shall have the following duties and
responsibilities:
1. To be directly responsible for the appointment, compensation,
retention and oversight of the work of any registered public
accounting firm engaged (including resolution of disagreements between
management and the registered public accounting firm regarding
financial reporting) for the purpose of preparing or issuing an audit
report and performing other audit, review or attest services for the
Company, including the authority to retain or to terminate the
registered public accounting firm. The registered public accounting
firm shall report directly to the Committee. The Committee shall
pre-approve all auditing services (which may entail providing comfort
letters in connection with securities underwritings), and all
non-audit services provided to the Company by the Company's registered
public accounting firm, subject to a de minimis exception as set forth
by the SEC. The Committee may, in its sole discretion, delegate to one
or more of its members the authority to pre-approve any audit or
non-audit services to be performed by the registered public accounting
firm, provided that any such approvals are ratified by the Committee
at its next scheduled meeting.
2. To, at least annually, obtain and review a report by the registered
public accounting firm describing: the firm's internal quality-control
procedures; any material issues raised by the most recent internal
quality-control review, or peer review, of the firm, or by any inquiry
-24-
or investigation by governmental or professional authorities, within
the preceding five years, respecting one or more independent audits
carried out by the firm, and any steps taken to deal with any such
issues, and (to assess the auditor's independence) all relationships
between the registered public accounting firm and the Company.
3. To discuss the annual audited financial statements with management and
the registered public accounting firm, including the Company's
disclosures under "Management's Discussion and Analysis of Financial
Condition and Results of Operations", and recommend to the Board of
Directors whether the audited financial statements should be included
in the Company's Form 10-K.
4. To discuss the Company's unaudited financial statements and related
footnotes and the "Management Discussion and Analysis" portion of the
Company's Form 10-Q for each interim quarter with management and the
registered public accounting firm and ensure that the registered
public accounting firm also reviews the Company's interim financial
statements before the Company files its quarterly report on Form 10-Q
with the SEC.
5. To discuss with the registered public accounting firm (i) all critical
accounting policies and practices to be used, (ii) all alternative
treatments of financial information within GAAP that have been
discussed with management, the ramifications of such alternative
disclosures and treatments, and the accounting treatment "preferred"
by the independent auditor and (iii) any other material written
communications with management, such as a management letter or
schedule of unadjusted differences.
6. To discuss earnings press releases, as well as financial information
and earnings guidance provided to analysts and ratings agencies with
management and the registered public accounting firm, as appropriate.
7. To engage outside advisors, including counsel, as it determines
necessary to carry out is duties and approve appropriate funding and
retention terms, as determined by the Committee.
8. To discuss policies with management and the registered public
accounting firm, as appropriate, with respect to risk assessment and
risk management, including the Company's major financial risk
exposures and the steps management has taken to monitor and control
such exposures.
9. To meet separately, periodically, with management, with internal
auditors and with the registered public accounting firm, provided that
with respect to the internal auditors and the registered public
accounting firm, such meetings shall occur at least quarterly.
10. To review with the registered public accounting firm any audit
problems or difficulties and management's response, including any
restrictions on the scope of the independent auditor's activities or
on access to requested information, and to resolve all disagreements
between the Company's management and the registered public accounting
firm regarding financial reporting.
-25-
11. To set clear hiring policies for employees or former employees of the
independent auditors.
12. Ensure that the registered public accounting firm submits to the
Committee written disclosures and the letter from the registered
public accounting firm required by Independence Standards Board
Standard No. 1 [Independence Discussions with Audit Committees], and
discuss with the registered public accounting firm their firm's
independence.
13. Discuss with the registered public accounting firm the matters
required to be discussed by SAS 61 [Communication with Audit
Committees] and SAS 90 [Audit Committee Communications].
14. To report regularly to the Board of Directors, including review of any
issues that arise with respect to the quality or integrity of the
Company's compliance with legal or regulatory requirements, the
performance and independence of the Company's the registered public
accounting firm, or the performance of the internal audit function.
15. To establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls, or auditing matters, and the confidential,
anonymous submission by employees of concerns regarding questionable
accounting or auditing matters.
Oversight of the Company's Internal Audit Function
16. Ensure that the Company has an internal audit function.
17. Review and concur in the appointment, replacement, reassignment or
dismissal of the senior internal auditing executive, and the
compensation package for such person.
18. Review the significant reports to management prepared by the internal
auditing department and management's responses.
19. Communicate with management and the internal auditors to obtain
information concerning internal audits, accounting principles adopted
by the Company, internal controls of the Company, management, and the
Company's financial and accounting personnel, and review the impact of
each on the quality and reliability of the Company's financial
statements.
20. Evaluate the internal auditing department and its impact on the
accounting practices, internal controls and financial reporting of the
Company.
21. Discuss with the registered public accounting firm the internal audit
department's responsibilities, budget and staffing and any recommended
changes in the planned scope of the internal audit.
-26-
The Committee shall provide for appropriate funding, as determined by the
Committee, for payment of compensation to the registered public accounting firm
for the purpose or preparing or issuing an audit report or performing other
audit, review or attest services for the Company and to any advisors employed by
the Committee, and for ordinary administrative expenses of the Committee that
are necessary or appropriate in carrying out its duties.
The Committee may, in its sole discretion, delegate any of its duties and
responsibilities to subcommittees.
The Committee shall conduct an annual performance evaluation of the Committee
and shall review at least annually the adequacy of this charter and recommend
any proposed changes to the Board of Directors for approval.
-27-
APPENDIX B
----------
ePLUS inc.
NOMINATING AND CORPORATE GOVERNANCE
COMMITTEE CHARTER
The Nominating and Corporate Governance Committee of the Board of Directors of
ePlus Inc. ("the Committee") shall consist of no fewer than two members. All
members of the Committee shall be independent directors and shall satisfy the
independence standards established by NASDAQ and Securities and Exchange
Commission. The members of the Committee shall be appointed by the Board of
Directors in its discretion.
The purpose of the Committee shall be to identify individuals qualified to
become board members, and to recommend that the board select the director
nominees for the next annual meeting of shareholders, to develop and recommend
to the board a set of corporate governance principles applicable to the
Corporation, and to make recommendations on compensation of the Board of
Directors.
In furtherance of this purpose, the Committee shall have the following goals and
responsibilities:
1. To identify, review and recommend to the Board of Directors, in timely
fashion, qualified candidates for director nominees to fill any
existing or anticipated vacancy on the Board of Directors;
2. To identify, review and recommend to the Board of Directors, prior to
each year's annual meeting of shareholders, successors to the class of
Directors whose term shall then expire (including any Director in such
class proposing to stand for election to another term), and additional
director nominees, if any, for election to the Board of Directors on
whose behalf the Board of Directors will solicit proxies;
3. To recommend to the Board of Directors the size of the Board of
Directors;
4. To review and make recommendations to the Board of Directors with
respect to suggestions for director nominees made by shareholders to
the Board of Directors or to management in accordance with the By-Laws
of the Corporation;
5. To review annually the Board of Director's overall performance and
oversee the annual performance evaluation for each of its committees;
6. To recommend to the Board of Directors whether resignations tendered
by members who have had a substantial change in their job
responsibilities should be accepted; To annually review the Board of
Directors committee structure, charters and membership and recommend
to the Board of Directors changes, if any; and to, in consultation
with the Chairman of the Board, recommend to the Board of Directors
the assignment of members of the Board of Directors to the various
committees and appointment, rotation or removal of committee chairs;
-28-
7. To review and make recommendations to the Board of Directors with
respect to changes in Directors' compensation and benefits; and
8. To develop and recommend to the Board of Directors a set of corporate
governance guidelines and to review the guidelines at least annually
and recommend changes as necessary.
The Committee shall have sole authority to retain any search firm engaged to
assist in identifying director candidates, and to retain outside counsel and any
other advisors as the committee may deem appropriate in its sole discretion. The
committee shall have sole authority to approve related fees and retention terms.
The Committee shall conduct an annual performance evaluation of the Committee
and the Committee shall review at least annually the adequacy of this charter
and recommend any proposed changes to the Board of Directors for approval.
The Committee shall regularly report its actions and recommendations to the
Board of Directors.
-29-
[FORM OF PROXY CARD]
ePlus inc. Proxy
Annual Meetings of Stockholders Of
ePlus inc.
September 14, 2004
THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Kleyton L. Parkhurst and Steven J. Mencarini,
and each or either of them, proxies, with power of substitution, to vote all
shares of the undersigned at the annual meeting of stockholders of ePlus inc., a
Delaware corporation, to be held on September 14, 2004 at 8:00 a.m. at the
Courtyard Marriott, 533 Herndon Parkway, Herndon, 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 two Class II 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
Terrence O'Donnell Milton E. Cooper, Jr.
OR TO VOTE FOR EACH NOMINEE SEPARATELY
Terrence O'Donnell [ ] FOR [ ] WITHHOLD AUTHORITY
Milton E. Cooper, Jr. [ ] FOR [ ] WITHHOLD AUTHORITY
2. To ratify the appointment of Deloitte & Touche LLP as ePlus' independent
auditors for ePlus' fiscal year ending March 31, 2005.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Dated:________________, 2004
Signature: _______________________________________________________________
Signature if held jointly: _______________________________________________
NOTE: When shares are held by joint tenants, both should sign. Persons
signing as Executor, Administrator, Trustee, etc. should so indicate.
Please sign exactly as the name appears on the proxy.
THE SHARES REPRESENTED BY ALL PROXIES RECEIVED WILL BE VOTED IN ACCORDANCE
WITH THE CHOICES SPECIFIED ON SUCH PROXIES. THE SHARES REPRESENTED BY A
PROXY WILL BE VOTED IN FAVOR OF A PROPOSAL IF NO CONTRARY SPECIFICATION IS
MADE. ALL VALID PROXIES OBTAINED WILL BE VOTED AT THE DISCRETION OF THE
BOARD OF DIRECTORS WITH RESPECT TO ANY OTHER BUSINESS THAT MAY COME BEFORE
THE ANNUAL MEETING.
PLEASE MARK, SIGN, AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.