Form DEF 14A EPLUS INC For: Sep 15

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This Proxy Statement is furnished to the shareholders of ePlus inc. ("we," "us," "our," or "the Company"), a Delaware corporation, in connection with the solicitation of proxies by our Board of Directors (also referred to herein as the Board) to be voted at the Annual Meeting of Shareholders or any adjournments or postponements of that meeting.  The Annual Meeting of Shareholders will be held on September 15, 2016, at 8:00 a.m. at The Westin Washington Dulles Airport, 2520 Wasser Terrace, Herndon, Virginia 20171.

We are using the "Notice and Access" method of furnishing proxy materials to you over the Internet.  "Notice and Access" rules adopted by the Securities and Exchange Commission (the "SEC") permit us to furnish proxy materials, including this Proxy Statement and our Annual Report on Form 10-K for fiscal year 2016, to our shareholders by providing access to such documents on the Internet instead of mailing printed copies.  We believe that this process will provide you with a convenient and quick way to access your proxy materials and vote your shares, while allowing us to reduce the environmental impact of our Annual Meeting and the costs of printing and distributing the proxy materials.  On or about August 3, 2016, we mailed to our shareholders a Notice of Internet Availability of Proxy Materials (the "Notice") containing instructions on how to access our Proxy Statement and Annual Report on Form 10-K and how to vote electronically over the Internet or request a printed set of the proxy materials.  The Notice provides instructions on how to vote and identifies the items to be voted on at the Annual Meeting.  You may vote: (i) by Internet; (ii) by telephone; (iii) by requesting and returning a paper proxy card or voting instruction card; or (iv) by submitting a ballot in person at the Annual Meeting.  You cannot vote by marking the Notice and returning it.  The Notice also contains instructions on how to receive a paper copy of the proxy materials.  Most shareholders will not receive printed copies of the proxy materials unless they request them.  If you would like to receive a paper or email copy of our proxy materials, you should follow the instructions for requesting such materials in the Notice.  Any request to receive proxy materials by mail will remain in effect until you revoke it.

Only holders of record of our common stock at the close of business on July 21, 2016 (the "Record Date"), will be entitled to vote at the Annual Meeting of Shareholders and any postponements or adjournments of that meeting.  On the Record Date, we had 7,132,979 outstanding shares of Common Stock.  Each share of common stock is entitled to one vote, and there is no cumulative voting.

You are voting on:

Our Board recommends that you vote your shares as follows:

How to Vote

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Whichever method you use (other than voting in person), the named proxies will vote the shares of which you are the shareholder of record in accordance with your instructions.  By submitting your proxy, you authorize the proxies to use their judgment to determine how to vote on any other matter brought before the Annual Meeting, or any adjournments or postponements thereof.  We do not know of any other business to be considered at the Annual Meeting.

Making Changes to Your Proxy.  You can revoke your proxy at any time before the final vote at the Annual Meeting.  If you are a shareholder of record, you may revoke your proxy in any one of three ways:

Please note that to be effective, your new proxy card or written notice of revocation must be received by the Corporate Secretary prior to the Annual Meeting.

If you are a beneficial owner of shares, you may submit new voting instructions by contacting your broker or other agent.  You may also vote in person at the Annual Meeting if you obtain a legally valid proxy from your broker or other agent as described above.

 

ePlus inc.

www.eplus.com

 

How Proxies are Voted

All shares represented by valid proxies received prior to the Annual Meeting will be voted and, where a shareholder specifies by means of the proxy a choice with respect to any matter to be acted upon, the shares will be voted in accordance with the shareholder’s instructions.

If you do not give specific voting instructions, your shares will be voted as described below.

Shareholders of Record.  If you are a shareholder of record and indicate when voting on the Internet or by telephone that you wish to vote as recommended by the Board, or (if you have opted for a printed set of materials, you sign and return a proxy card without giving specific voting instructions) your shares will be voted as recommended by the Board by the persons named as proxies and as the proxy holders may determine in their discretion with respect to any other matters properly presented for a vote at the Annual Meeting.

Beneficial Owner of Shares Held in Street Name.  If you are a beneficial owner of shares held in street name and do not provide the organization that holds your shares with specific voting instructions, under the rules of various national and regional securities exchanges, the organization that holds your shares may generally vote on “routine” matters but cannot vote on “non-routine” matters.  If the organization that holds your shares does not receive instructions from you on how to vote your shares on a non-routine matter, the organization that holds your shares will inform the inspector of elections that it does not have the authority to vote on this matter with respect to your shares.  This is generally referred to as a “broker non-vote.”

The ratification of the selection of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending March 31, 2017, (Proposal No. 3) is a matter considered routine under applicable rules.  A broker or other nominee may generally vote on routine matters, and therefore no broker non-votes are expected to exist in connection with Proposal No. 3.

The election of directors (Proposal No. 1) and the advisory vote on executive compensation (Proposal No. 2), are matters considered non-routine under applicable rules.  A broker or other nominee cannot vote without instructions on non-routine matters, and therefore there may be broker non-votes on Proposals No. 1 and No. 2.

Vote Requirements for Each Proposal

For Proposal No. 2, the favorable vote of holders of a majority of the shares entitled to vote and present in person or by proxy at the meeting will be required for approval, on an advisory basis.  As advisory votes, this proposal is not binding upon the Company.  However, the Compensation Committee, which is responsible for designing and administering the Company’s executive compensation program, values the opinions expressed by shareholders and will consider the outcome of the vote when making future compensation decisions.  Broker non-votes will have no effect.

 

ePlus inc.

www.eplus.com

 

Approval of Proposal No. 3 requires the affirmative vote of holders of a majority of shares entitled to vote and present in person or by proxy at the meeting.

Effect of Broker Non-Votes and Abstentions

A broker non-vote is considered present for purposes of determining whether a quorum exists, but is not considered a “vote cast” or “entitled to vote” with respect to such matter.  A share voted “abstain” with respect to any proposal is considered as present and entitled to vote with respect to that proposal, but is not considered a vote cast with respect to that proposal.  Therefore, an abstention will not have any effect on the election of directors.  Because each of the other proposals requires the affirmative vote of the holders of a majority of the shares present and entitled to vote on each such proposal in order to pass, an abstention will have the effect of a vote against each of the other proposals.

Quorum Requirements

A quorum of shareholders is necessary to hold a valid Annual Meeting.  A quorum will be present if at least a majority of the outstanding shares entitled to vote at the Annual Meeting are represented by proxy or by shareholders present in person at the Annual Meeting.  On the Record Date, there were 7,132,979 shares outstanding and entitled to vote.  Thus, at least 3,566,490 shares must be represented by proxy and by shareholders present and entitled to vote at the Annual Meeting to have a quorum.

Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker or bank), vote via Internet or by telephone, or if you vote in person at the Annual Meeting.  We will count abstentions and broker non-votes for purposes of determining a quorum.  If there is no quorum, the chairman of the Annual Meeting or holders of a majority of the votes present at the Annual Meeting may adjourn the Annual Meeting to another time or date.

Cost of Proxy Solicitation

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The Company’s historical practice was to combine the Chief Executive Officer and Chairman roles, coupled with a strong, independent, and clearly defined lead director position, which we believe further strengthens the governance structure.  Beginning August 1, 2016, when Mr. Mark Marron was promoted to CEO, Mr. Norton stepped down as CEO and retained his Chairman position.  However, Mr. Norton’s Executive Chairman position is a management position, and Mr. C. Thomas Faulders, III currently serves as our Lead Independent Director.  The Board believes this will to provide an efficient and effective leadership model for the Company.   Board oversight is further enhanced by the fact that all of the Board’s key committees – Audit, Compensation, and Nominating and Corporate Governance, are comprised entirely of independent directors.  The Board, as part of its regular review of the effectiveness of the Company’s governance structure, reviews at least annually whether or not combining the roles of CEO and Chairman will serve the best interests of the Company and its shareholders.

The Nominating and Corporate Governance Committee annually reviews and assesses the continuing effectiveness of the role of Lead Independent Director.  As provided in our Corporate Governance Guidelines and Policies, the Lead Independent Director’s responsibilities include:

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The Lead Independent Director also occasionally approves non-material changes to corporate policies, when proposed changes arise outside the Board’s scheduled review process.

The Board oversees the Company’s enterprise risk management process.  Management reviews the process with the full Board on a periodic basis, including identification of key risks and steps taken to monitor or mitigate them.  Although the full Board is responsible for this oversight function, the Audit, Compensation and Nominating and Corporate Governance Committees assist the Board in discharging its oversight duties.  Accordingly, while each of the three committees contributes to the risk management oversight function by assisting the Board in the manner outlined below, the Board itself remains responsible for the oversight of the Company’s risk management program.

The Audit Committee discusses with management and the independent auditor, as appropriate, (i) risks related to its duties and responsibilities as described in its charter, (ii) management’s policies and processes for risk assessment and risk management and (iii) in the period between the Board’s risk oversight reviews, management’s evaluation of the Company’s major risks and the steps management has taken or proposes to take to monitor and mitigate such risks.  The Company’s Compensation Committee reviews risks related to the subject matters enumerated in its charter, including the Company’s compensation programs and plans and incentive compensation and equity plans.  The Nominating and Corporate Governance Committee considers risks related to the subject matters for which it is responsible, primarily corporate governance matters and related person transactions.

We are committed to ethical behavior in all that we do.  Our Code of Conduct 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 concerns may be raised regarding accounting or financial reporting matters, or other matters of concern.  The hotline is available in the United States and the United Kingdom, 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, as well as to our General Counsel and Vice President of Human Resources.

Each year, the Nominating and Corporate Governance Committee recommends to the Board the slate of directors to serve as nominees for election by the shareholders 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 capabilities, 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 shareholders.  In evaluating such nominations, the Nominating and Corporate Governance Committee seeks to achieve a balance of knowledge, experience, and capabilities on the Board, including factors such as technical experience, IT business expertise, financial experience, and ability to contribute toward business development.  Furthermore, any member of the Board shall meet the following criteria:

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Additionally, the Nominating and Corporate Governance Committee annually reviews the Board’s size, structure, composition and functioning, to ensure an appropriate blend and balance of diverse skills and experience.  Diversity may encompass a candidate’s gender, race, national origin, educational and professional experiences, expertise and specialized or unique technical backgrounds and/or other tangible or intangible aspects of the candidate’s qualifications in relation to the qualifications of the then current board members and other potential candidates.  The Nominating and Corporate Governance Committee does not have a formal policy specifying how diversity should be applied in identifying or evaluating director candidates, and diversity is but one of many factors the Nominating and Corporate Governance Committee may consider.

Persons interested in communicating with the directors regarding concerns or issues may address correspondence to a particular director, to the Board, or to the independent directors generally, in care of ePlus inc. at 13595 Dulles Technology Drive, Herndon, Virginia 20171-3413.  If no particular director is named, letters will be forwarded, as appropriate and depending on the subject matter, by the General Counsel to the Chair of the Audit Committee, the Chair of the Compensation Committee, or the Chair of the Nominating and Corporate Governance Committee.  The General Counsel reviews such communications for spam (such as junk mail or solicitations) or misdirected communications.

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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 the following current directors, Messrs. O’Donnell, Hunt, Herman, Faulders, Hovde and Callies are independent under the Nasdaq Marketplace 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 for the respective committees on which they serve.  In determining the independence of the directors, the Board additionally considered the relationships described under “Related Person Transactions,” which it determined were immaterial to the individuals’ independence.

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The following table sets forth the compensation for the members of the Board of ePlus for the fiscal year ended March 31, 2016.  Mr. Norton, the Company’s Executive Chairman of the Board, and who served as President and Chief Executive Officer during the fiscal year, and Mr. Bowen, the Company’s founder, who currently performs a business development and special projects role as an employee with the Company, do not receive any additional compensation for their service as a director.  Mr. Norton’s compensation is reported under “Executive Compensation” herein and accordingly is not included in the following table.  As Mr. Bowen is not an executive officer, his compensation is included in the table below.

The general policy of the Board is that compensation for non-employee directors should be a mix of cash and equity-based compensation.  For the fiscal year ended March 31, 2016, each non-employee director received an annual cash retainer of $75,000, paid in quarterly installments, or, alternatively, at the director’s election, a director may receive his cash compensation in non-forfeitable restricted stock.  In addition, each non-employee 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 a non-employee director during the Company’s fiscal year ended immediately prior to the annual grant date.  All awards of restricted stock 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 pro-rata awards will also vest ratably over two years.  The restricted stock grants described in this paragraph are rounded down, to avoid a fractional share award.

Directors are also reimbursed for their out-of-pocket expenses incurred to attend Board and committee meetings.

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The following table sets forth the name, age and position of each person who was an executive officer of ePlus on June 30, 2016.  There are no family relationships between any director or executive officer and any other director or executive officer of ePlus.  Additional information relating to Mr. Norton, who is the Chairman of our Board and an executive officer of the Company, may be found in the section entitled “Proposal 1 – Election of Directors.”

(1)	On July 21, 2016, Mr. Norton advised that he would be stepping  down from his role as President and Chief Executive Officer, and, effective August 1, 2016, continued employment with the Company as Executive Chairman.

(2)	On July 21, 2016, the Board appointed Mr. Marron as President and Chief Executive Officer of the Company, effective August 1, 2016.

The business experience of each non-director executive officer of ePlus is described below.

 

ePlus inc.

www.eplus.com

 

Elaine D. Marion joined us in 1998.  Ms. Marion became our Chief Financial Officer on September 1, 2008.  Since 2004, Ms. Marion served as our Vice President of Accounting.  Prior to that, she was the Controller of ePlus Technology, inc., a subsidiary of ePlus, from 1998 to 2004.  Ms. Marion serves on the Advisory Board of the School of Business at the University of Mary Washington.  Ms. Marion is a graduate of George Mason University, where she earned a Bachelor of Science degree with a concentration in Accounting.

Mark P. Marron was appointed as our President and Chief Executive Officer, effective August 1, 2016.  Mr. Marron first joined our subsidiary ePlus Technology, inc. in 2005 as Senior Vice President of Sales.  On April 22, 2010, he was appointed as Chief Operating Officer of ePlus inc. and President of ePlus Technology, inc.  Prior to joining us, from 2001 – 2005 Mr. Marron served as Senior Vice President of Worldwide Sales of NetIQ.  Prior to joining NetIQ, Mr. Marron served as Senior Vice President and General Manager of Worldwide Channel Sales for Computer Associates International Inc.  Mr. Marron has a Bachelor of Science degree in Computer Science from Montclair State University.

Each of our executive officers is chosen by the Board 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 resigns or is removed by the Board.

The information contained in this 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 Exchange Act, whether made before or after the date hereof and irrespective any general incorporation of this proxy statement by reference.

The Compensation Committee has reviewed the Compensation Discussion and Analysis and discussed that Analysis with management.  Based on its review and discussions with management, the committee recommended to our Board of Directors that the Compensation Discussion and Analysis, as it appears below, be included in this proxy statement and incorporated by reference into the Company’s 2016 Annual Report on Form 10-K.

Submitted by the Compensation Committee

John E. Callies (Chairman)

C. Thomas Faulders, III

Eric D. Hovde

Ira A. Hunt, III

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Introduction

The primary focus of the Compensation Discussion and Analysis is to provide information regarding our executive compensation guiding principles, the elements of our executive compensation program and the factors that were considered in making compensation decisions for our named executive officers.  Our named executive officers for the fiscal year ended March 31, 2016 were as follows:

 

Phillip G. Norton (1)	Chairman, President and Chief Executive Officer
Elaine D. Marion	Chief Financial Officer
Mark P. Marron (2)	Chief Operating Officer
Steven J. Mencarini	Senior Vice President

(1)	On July 21, 2016, Mr. Norton advised that he would be stepping down from his role as President and Chief Executive Officer, and, effective August 1, 2016, continued employment with the Company as Executive Chairman.

(2)	On July 21, 2016, the Board appointed Mr. Marron as President and Chief Executive Officer of the Company, effective August 1, 2016.

Executive Summary

The Compensation Committee oversees the executive compensation program and determines the compensation for the Company’s executive officers.  The Company believes the compensation program for the named executive officers contributed to the Company’s financial performance in fiscal year 2016.  During the 2016 fiscal year net sales increased 5.3% to $1.2 billion, from $1.17 billion in fiscal year 2015, and operating income rose 7.1% to $75.8 million, up from $70.7 million in fiscal year 2015.

The Company’s goal for its executive compensation program is to attract, motivate and retain a talented, entrepreneurial, ethical and creative team of executives who will provide leadership for the Company’s success in dynamic and competitive markets.  The Company seeks to accomplish this goal in a way that rewards performance and is aligned with its shareholders’ long-term interests.  Our executive compensation program evolves and is adjusted over time to support ePlus’ business goals and promote both short- and long-term profitable growth of the Company.  Cash compensation consists primarily of base salary and payments under our annual executive incentive plan that, for the fiscal year ended on March 31, 2016, are based on three Company financial performance metrics.  These performance metrics provide an objective, quantifiable measurement, which promotes accountability and directly ties compensation to performance.  Additionally, using only financial performance metrics enables the Company to utilize the IRS Code Section 162(m) exclusion, thus reducing the Company’s tax liability.  Equity-based compensation, which vests over several years, is used to align compensation with the long-term interests of ePlus’ shareholders by focusing our executive officers on increasing shareholder value.

The compensation for our named executive officers for the fiscal year ended March 31, 2016, consisted of three elements— base salaries, annual performance-based cash bonuses, and long-term equity awards in the form of restricted stock—that are designed to reward performance in a straightforward manner.  The annual bonus program provides incentives for executives to help achieve the Company’s annual financial goals and to focus on certain business goals.  Restricted stock awards provide incentives for executives to remain employed by the Company and to create and maintain long-term value for shareholders, since the shares vest over a multi-year period.  These components of the program are directly linked to the principle that executive compensation should be based on performance.  Additionally, on July 21, 2016, the Compensation Committee approved the Company’s entering into an employment agreement with Mr. Norton, effective August 1, 2016, through which he will receive three retention payments in the amounts of $250,000, $250,000 and $500,000, on January 31, 2017, July 31, 2017, and January 31, 2018, respectively.

The Company’s executive compensation program is also intended to promote and maintain stability within the executive team by issuing restricted stock with multi-year vesting terms.  Most restricted stock awards made to the named executive officers have vested over a three-year vesting period.  In June 2015 Ms. Marion and Mr. Marron each received a grant of restricted stock which will vest over a five-year period, and in July 2016, in connection with Mr. Norton’s transition to Executive Chairman, stock that had been granted in June 2016 with a three-year vest schedule was modified to be a two-year vest schedule.  Each named executive officer has been an employee of the Company for at least 10 years.  The Company expects each named executive officer to contribute to the Company’s overall success as a member of the executive team rather than focus solely on specific objectives within the officer’s area of responsibility.

 

ePlus inc.

www.eplus.com

 

The Company believes its executive compensation program is simple in design and serves the Company and its shareholders well.

The Compensation Committee and ePlus’ management believe that compensation is an important tool that should help recruit, retain and motivate the employees that the Company will depend on for current and future success.  The primary objectives of the Compensation Committee are to design and administer a compensation program for our named executive officers to:

The Company holds and annual advisory vote on executive compensation (colloquially referred to as “Say on Pay”) at its Annual Meeting of shareholders.  At our Annual Meeting of shareholders in September 2015, we included a Say on Pay proposal for our shareholders to provide an advisory vote.  Shareholders voted strongly in support of our executive compensation program in 2015 with approximately 97% of the votes cast in support of the program.  The Compensation Committee evaluated the results of the 2015 advisory vote, together with the other factors and data discussed in this Compensation Discussion and Analysis in determining executive compensation policies and decisions.  The Compensation Committee considered the vote results and did not make any significant changes to our executive compensation policies and decisions for fiscal year 2016 directly as a result of the 2015 advisory vote.

The Compensation Committee, which is composed entirely of independent directors, generally establishes the components of our compensation program and may evaluate the components from time to time.  The Compensation Committee is responsible for evaluating and setting the compensation for our Chief Executive Officer.  The Committee reviews the executive compensation program on an annual basis, with awards and adjustments generally being made in June.  Compensation decisions may be made at other times of the year in the case of promotions, new hires, or changes in responsibilities.  In making these determinations, the Committee may consider the company’s performance, the individual performance of a named executive officer, information from our compensation consultant, and recommendations from management.

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ePlus inc.

www.eplus.com

 

Role of the Chief Executive Officer

Mr. Norton, who was our Chief Executive Officer through the fiscal year ended March 31, 2016, assisted by our Human Resources department, was responsible for the implementation and administration of our executive compensation program during the fiscal year.  Mr. Norton recommended the overall structure for our executive compensation program, including metrics for the Performance Cash Bonuses and amount and vesting schedule of equity awards to be granted.  The final decisions regarding executive compensation were, however, made by the Compensation Committee.   Additionally, the President and CEO is not present during any deliberations or voting with regard to his own compensation.

The Role of the Compensation Consultant

The Company established the overall features of its current compensation program in September 2009.  At that time, the Compensation Committee retained the services of Towers Perrin (now Towers Watson), an independent compensation advisory firm, to perform a review of our executive compensation program.  Towers Watson performed several subsequent reviews of our executive compensation program.  Most recently, Towers Watson was retained by the Compensation Committee in June 2016 (for the Chief Executive Officer position only) and in 2015.  The review includes a competitive review of our executive total compensation for our named executive officers, including base salary, annual cash incentive, total cash compensation (base salary plus annual cash incentives), long-term incentives, total direct compensation (total cash compensation plus long-term incentives), and severance provisions.  In July 2016, the Compensation Committee considered the June 2016 Towers Watson report in establishing compensation for Mark Marron in his new role as President and Chief Executive Officer.  While Towers Watson provided general observations on the Company’s compensation programs, it did not determine or recommend the amount or form of compensation for the named executive officers.  In the past, Towers Watson has also performed some additional compensation-related services, such as a review of executive stock ownership guidelines, review of board compensation, and a compensation assessment for select employees who are not named executive officers.  The Committee has considered the independence of its compensation consultant and has not identified any conflicts of interest regarding the services of its consultant or the consultant’s employees.

The Compensation Committee reviews compensation practices at peer companies as part of its decision-making process so it can set total compensation levels that it believes are reasonably competitive.  The Compensation Committee, however, does not set compensation components to meet specific benchmarks, such as targeting salaries “above the median” or equity compensation at a particular percentile.  Furthermore, the Compensation Committee believes that over-reliance on benchmarking can result in compensation that is unrelated to the value delivered by the named executive officers.

In June 2015, the Committee considered whether to update the composition of our peer group.  After a review, which included the advice of Towers Watson, with regard to our CEO and CFO positions, the Committee established the revised peer group listed below:

 

Ciber, Inc.	Black Box Corp.	CDW Corporation
PCM, Inc. (f/k/a PC Mall)	Datalink Corporation	ScanSource, Inc.
PC Connection Inc.	Insight Enterprises, Inc.	ManTech International Corp.

In determining our peer group, we considered our revenue, net earnings, earnings before interest, taxes, depreciation and amortization (“EBITDA”), market capitalization, number of employees, ISS-selected peers, Industry GICS Code, and companies with whom we compete for customers.  We also view a number of other companies as potential peers, however, because they are privately held, no compensation data was available for those entities and they were not included in our peer group.  The June 2016 Towers Watson Report, which was for the Chief Executive Officer position only, used the same peer group as the 2015 report.

 

ePlus inc.

www.eplus.com

 

Compared to our June 2013 peer group, one company, MAXIMUS, was removed, as we believe they are less similar to our business.  Another company, SoftChoice, was removed as it went private and compensation data is therefore no longer available.  Two companies, ManTech International and ScanSource were added, as they matched our screening criteria.

In addition to the peer groups described above, in 2015 the Compensation Committee also considered survey data provided by Towers Watson.  For both Mr. Norton and Ms. Marion, the data included the 2014 Towers Watson – General Industry Executive and the 2015 Culpepper Executive Compensation Survey, for the Chief Executive Officer and the Chief Financial Officer, respectively.

Sufficient proxy data were not available for Mr. Marron’s role as Chief Operating Officer or Mr. Mencarini’s position.  For each of their positions, Towers Watson utilized two survey databases, the 2014 Towers Watson – General Industry Executive, and the 2015 Culpepper Executive Compensation Survey.

In the case of Mark Marron’s role as Chief Operating Officer, both surveys matched Mr. Marron’s position for revenue scope and job responsibilities.  The most closely matched survey position description, for both surveys, is:

Also in the case of Mr. Mencarini, sufficient proxy data was not available for Senior Vice President of Business Operations positions.  The survey analysis matched his position as follows, for each survey:

Components of Compensation and 2016 Compensation Determinations

Our named executive officer compensation program is based upon:

The named executive officers are also eligible to participate in the Company’s health and welfare programs, 401(k) plan, and other broad-based programs on the same basis as other employees.  Also, Mr. Mencarini had previously been compensated through a Supplemental Benefit Plan, or Supplemental Plan.  The Supplemental Plan terminated in August 2014, however, as more fully described below, in the section titled Deductibility of Named Executive Officer Compensation, Mr. Mencarini received the second of two payments in April 2015.  The Board and Compensation Committee no longer employ the Supplemental Plan as part of the executive compensation program.

 

ePlus inc.

www.eplus.com

 

Cash Compensation

Base salaries and cash bonuses comprise the named executive officers’ cash compensation.  The Committee targets base salaries and cash bonuses for our named executive officers at competitive levels, i.e., generally near the median for executives in positions with similar responsibilities within the compensation peer group, while also taking into consideration the long-term compensation provided by our equity grants to our named executive officers.  Base salaries represent a fixed (non-variable) cash payment and cash bonuses are short-term performance-based cash payments.  The cash bonuses for the fiscal year ended March 31, 2016 are based on three annual company financial goals, which were set by the Committee within 90 days of the start of the fiscal year.

Base Salary

Base salary represents annual fixed compensation and is a standard element of compensation necessary to attract and retain talent.  It is the minimum payment for a satisfactory level of individual performance as long as the executive remains employed with the Company.  Base salary is set at the Committee’s discretion after taking into account the competitive landscape including the compensation practices of the companies in our selected peer group and survey data from a broader index of comparable companies, our business strategy, our short- and long-term performance goals, and individual factors, such as position, salary history, individual performance and contribution, an individual’s length of service with the Company, experience in the position, and placement within the general base salary range offered to our named executive officers.

The base salary for each of our executive officers as of March 31, 2016 is set forth below:

As described above, the Compensation Committee retained the services of Towers Watson in June 2015 to perform a review of our executive compensation program.  The Compensation Committee concluded in June 2015 that the base salary for Mr. Norton, Mr. Marron, and Ms. Marion should be adjusted.  Ms. Marion’s annual base salary was most recently adjusted in June 2015, when it was raised to $415,000 from $400,000.  Effective August 1, 2016, Mr. Norton’s annual base salary was reduced to $300,000, and Mr. Marron’s increased to $700,000, from $525,000, in connection with their transition to Executive Chairman, and President and Chief Executive Officer, respectively.  Generally, the Committee sets base salary near the median for our peer group, based on information provided by Towers Watson, while also acknowledging that individual base salaries may vary based on factors such as individual responsibilities, complexity of position versus that of the market benchmark(s), performance, experience (including experience in the specific position and more broadly), future potential, and other, non-cash compensation received by each individual executive.

Performance Cash Bonuses.   For the fiscal year ended March 31, 2016, our executives’ cash bonuses were based on the following three metrics:   earnings before tax (“EBT”), percentage increase in gross profit from services (“Services”) and financing origination volume (“Origination”).

The Company’s current Executive Incentive Plan was amended and restated, effective April 1, 2014 (the “Executive Incentive Plan” or the “Executive Incentive Plan”), pursuant to its approval by shareholders in September 2014.  Messrs. Norton, Marron and Mencarini and Ms. Marion were named as participants in the plan for the fiscal year ended March 31, 2016.  The Executive Incentive Plan provides for performance-based goals, which may enable “Covered Awards” to “Covered Employees” (as defined thereunder) based on such performance goals to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (“Section 162(m)”).  The Executive Incentive Plan also permits awards which are not intended to qualify as performance-based compensation under Section 162(m).  The performance goals under the Executive Incentive Plan were presented to shareholders for approval at our 2014 Annual Meeting of shareholders.  Those performance goals were approved by 98.5% of votes present and entitled to vote.  The Executive Incentive Plan also includes a provision for an adjusted award in the event it is determined that an award was paid based on incorrect financial results, and permits the Compensation Committee to require, to the extent permitted by law, reimbursement by the participant of any amount paid to or received by the participant with respect to such an award.  The Executive Incentive Plan further provides that cash payments under the plan are subject to recovery by the Company to the extent required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) and any regulations promulgated thereunder.

 

ePlus inc.

www.eplus.com

 

The Executive Incentive Plan is administered by the Compensation Committee, which has full authority to determine from among executive employees of the Company the participants in the Executive 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.  Awards for any particular participant for each fiscal year under the Executive Incentive Plan are subject to a maximum of $1,250,000 for fiscal years beginning on and after April 1, 2014.

The award opportunity under the Executive Incentive Plan is based on a target amount, which is adjusted based on the level of attainment of financial performance as set forth in each participant’s award agreement and payouts range between 0% to 200% of target award amounts.  The fiscal year 2016 performance weights and target amounts for each participant were as follows:

The plan provides that results will be adjusted to exclude the incentive compensation accrued by the Company under the Executive Incentive Plan, and any income, gain or loss attributable to the business operations of any entity acquired by the Company during the 2016 fiscal year, and certain fees and income relating to litigation matters.  The Executive Incentive Plan also 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 realized in the ordinary course of business.

Bonus payouts range between 0% and 200% of the target amount, depending on the level of achievement of the performance goals for the fiscal year 2016, as follows:

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ePlus inc.

www.eplus.com

 

The achievement of the performance goals is set forth below.  All executives had the same financial performance goals.

(1)	Actual earnings before taxes were adjusted to exclude the incentive compensation accrued by the Company, certain costs relating to litigation matters, and results for an entity acquired during fiscal year 2016.

(2)	Actual services gross profit from the entity acquired during fiscal year 2016 was excluded.

At the conclusion of the fiscal year ended March 31, 2016, the Compensation Committee determined which of the financial objectives described under the Executive Incentive Plan and in the award agreements were achieved.  There were no waivers or modifications to any specified performance targets, goals or conditions with respect to the Executive Incentive Plan.  The following table details the annual incentive cash payments earned in the fiscal year ended March 31, 2016 and 2015, respectively (but paid in the subsequent fiscal year) for each named executive officer:

Long-Term Equity Compensation

The Compensation Committee believes long-term equity awards are the most effective way to attract and retain a talented executive team and align executives’ interests with those of shareholders.  Our long-term equity compensation is focused on rewarding long-term growth in shareholder value.  When determining the level of the grant, the Committee considers each named executive officer’s functional and enterprise management responsibilities, potential contributions to the Company’s profitability and growth, the value of prior long-term incentive grants and other non-cash compensation (such as, in the case of Mr. Mencarini, participation in the Supplemental Benefit Plan), an analysis of how the Company performed on multiple financial metrics as compared to its peers, data from the 2015 Towers Watson report referenced above, and each executive’s total compensation, including cash compensation.  However, the Committee does not use a formula or assign a particular weight to any one factor in determining equity award grant levels.  Rather, the Committee’s determination of grant levels is subjective, and the Committee grants awards that it believes in its judgment are reasonably competitive.

In determining the number of shares to award, the Committee also reviewed the salary and cash bonus of each executive officer.  With regard to functional and enterprise management responsibilities, during the fiscal year ended March 31, 2016, Mr. Norton and Ms. Marion had company-wide responsibility for strategic planning and risk management, SEC filings, profitability and growth.  Mr. Norton’s responsibilities further included responsibility for organic growth or a financially and strategically viable acquisition that meets certain criteria, and an increase in sales in each of the Company’s two business segments.  Ms. Marion’s responsibilities include such matters as overseeing the financial and IT functions of the organization, timely and accurate filings with the SEC, overseeing the internal control environment, and managing the Company’s participation in internal and external audits.  During the fiscal year ended March 31, 2016, Mr. Marron was our Chief Operating Officer, and also the president of our subsidiary, ePlus Technology, inc., which is part of the technology segment and encompasses more than 90% of the Company’s total revenue.  His responsibilities included participating in setting strategic objectives for the Company as a whole, achieving specified growth in certain areas, and other tasks which are critical to the efficient and effective functioning of a team that consists of over 700 sales and marketing, and professional services employees.  Our Senior Vice President of Business Operations, Mr. Mencarini, manages the insurance aspect of our risk management process, as well as our proposals group, contracts and human resources departments.  He is not responsible for profitability or growth, and leads a team of approximately two dozen people.

 

ePlus inc.

www.eplus.com

 

The Company believes that restricted stock helps to create incentives for performance and further align the interests of executives with those of shareholders because a restricted stock’s value increases or decreases in conjunction with the Company’s stock price.  In addition, the Company believes granting awards with long vesting periods creates a substantial retention incentive and encourages the named executive officers to focus on the Company’s long-term business objectives and stock performance.  Most restricted shares granted to executive officers or other employees vest over a three-year period.  Grants made in June 2015 to Mr. Marron and Ms. Marion vest over a five-year period, to further align their long-term interests with shareholders, and a June 2016 grant made to Mr. Norton, which originally had a vesting schedule of three years, was changed to a two-year vesting schedule in connection with his transition to Executive Chairman from his role as President and Chief Executive Officer.

Consistent with the philosophy described above, the Compensation Committee awarded 9,009 shares of restricted stock on June 16, 2016, to Mr. Norton, Mr. Marron and Ms. Marion.  Mr. Marron and Ms. Marion’s awards vest over a three-year period, and as described above, Mr. Norton’s shares will vest over a two-year period.  The restricted stock is subject to each named executive officer’s continued service to the Company, with limited exceptions, such as death, disability, change in control, or termination without cause or the executive’s resignation for good reason, as described in the executives’ respective employment agreements.  On July 21, 2016, the Compensation Committee awarded Mr. Marron an additional 10,000 shares of restricted stock in connection with his promotion to President and Chief Executive Officer, which shares vest over a three-year period.

Other Aspects of Our Executive Compensation Program

Benefits and Perquisites

Our named executive officers receive a variety of benefits, including the following benefits that are available to all full-time employees:

Additionally, pursuant to his employment agreement, our Chief Executive Officer is entitled to be reimbursed by us, not more often than once annually, for his participation in an executive health assessment program.

In some years, certain of our executive officers have received certain company-paid travel, meals and entertainment costs for their families to attend a company sales meeting (hereinafter “Sales Meeting”) which is attended by our high-achieving sales persons.  All attendees at that meeting are likewise eligible to have their families attend the meeting with the Company’s paying the same costs as for the other employees’ families.

Stock Ownership Guidelines and Return of Incentive Compensation by Named Executive Officers

Our Board has adopted Stock Ownership Guidelines for our executive officers, to further align the interests of our executive officers with the interests of our shareholders.  The guidelines, which were most recently updated in February 2016, are expressed as a multiple of the executives’ base salary as of each April 1^st or as of the date they are identified as executive officers.  Our Chief Executive Officer is expected to retain stock ownership valued at a multiple of three times his annual base salary, and other executive officers are expected to reach a multiple of one time their annual base salary.  Executive officers are expected to retain one-half of all equity grants until such time as the target stock ownership is reached.  The guidelines may be waived at the discretion of  our Compensation Committee in the event of an extraordinary expense (such as, for example, housing or higher education needs), or if compliance would create a severe hardship or prevent an executive from complying with a court order, as in the case of a divorce or other property settlement.  However, the Company expects such instances to be rare, and has not granted any waivers.  At this time, all of our executive officers meet their respective guideline requirement.

 

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ePlus inc.

www.eplus.com

 

Beginning with our fiscal year ended March 31, 2012, our Executive Incentive Plan provides that in the event an award was paid based on incorrect financial results, the Compensation Committee will review the payment.  If the amount of the payment would have been lower had the level of achievement of applicable financial performance goals been calculated based on the correct financial results, the Compensation Committee may, in its sole discretion, decrease the amount of such payment so that it reflects the amount that would have applied based on the correct financial results, and, to the extent permitted by applicable law, require the reimbursement by the participant of any amount paid to or received by the participant with respect to such award.  Additionally, the Executive Incentive Plan provides that cash payments under the plan are subject to recovery by the Company to the extent required by the Dodd-Frank Act and Sarbanes-Oxley and any regulations promulgated thereunder.

Deductibility of Named Executive Officer Compensation

Within our performance-based compensation program, one goal is to compensate our named executive officers in a manner that is tax-effective for the Company.  Under Section 162(m) of the Internal Revenue Code, annual compensation in excess of $1 million for a taxable year to each of a company’s CEO and three other most highly compensated executive officers (except for the Chief Financial Officer) (“Covered Employees”) that is not paid pursuant to a plan approved by shareholders and does not satisfy the performance-based exception of Section 162(m) is not deductible as a compensation expense for federal income tax purposes.  Executive compensation is also subject to other limitations as to deductibility.

Because qualified performance-based compensation is not subject to the $1 million deduction limit per taxable year for each Covered Employee if certain requirements are met, one consideration in our executive compensation program is to structure most at-risk elements for awards under the Executive Incentive Plan so as to qualify those elements as performance-based compensation.   Our Executive Incentive Plan enables us to structure awards so as to qualify as performance-based compensation.  For the fiscal year ended March 31, 2016, the payments made under the Executive Incentive Plan to Messrs. Norton, Marron and Mencarini qualified as performance-based.  Additionally, during the fiscal year ended March 31, 2016, Mr. Mencarini received one payment under a Supplemental Benefit Plan, which had been deferred from the prior year in order to not exceed the $1 million limit for a taxable year.

In addition, our Employee LTIP was structured so that, in the discretion of the Compensation Committee, certain equity awards may be made to the Covered Employees that are intended to constitute qualified performance-based compensation under Section 162(m).  Awards structured in such manner may not be subject to the respective $1 million annual deduction limitation per Covered Employee.  However, to date no awards under the Employee LTIP will qualify for that exception from the Section 162(m) deduction limitation.

Hedging and Short Sales Policies

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The following table includes compensation information concerning compensation paid to or earned by the named executive officers during fiscal years 2016, 2015, and 2014.

2016 Summary Compensation Table

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Fiscal Year 2016 Grants of Plan-Based Awards

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ePlus inc.

www.eplus.com

 

Outstanding Equity Awards At March 31, 2016

The following table provides information concerning the outstanding equity-based awards as of March 31, 2016.  No named executive officer held any unexercised stock options as of March 31, 2016.

2016 Option Exercises and Stock Vested

The following table provides information regarding shares of stock acquired upon vesting of restricted stock during the 2016 fiscal year.

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ePlus inc.

www.eplus.com

 

2016 Nonqualified Deferred Compensation

The following table shows the contributions to, the earnings of, and the distribution from, each named executive officer's account under the Company's nonqualified deferred compensation plan for fiscal year 2016.

Supplemental Benefit Plan

On February 28, 2005, our Board approved the adoption of an ePlus inc. Supplemental Benefit Plan for Mr. Mencarini and the other then-executive officers other than Mr. Norton.  The plans were developed and designed to provide these executive officers with a long-term incentive plan outside of the Company’s normal incentive plans.

The Supplemental Benefit Plan was unfunded and nonqualified and was designed to provide Mr. Mencarini with a cash benefit that is payable only upon the earlier to occur of:

The plan expired on August 11, 2014, and at that time Mr. Mencarini had the right to receive a single lump sum cash distribution.  The terms of the plan enabled the Company to defer payment of a portion of that lump sum until the beginning of our subsequent fiscal year, in order to not exceed the $1 million threshold under which executive compensation is not tax-deductible by the Company.  As a result, during the fiscal year ended March 31, 2015, Mr. Mencarini received a distribution of $581,826, and during the fiscal year ended March 31, 2016, he received an additional distribution of $221,610.  There are no payments remaining to be made under the plan.

Incentive Plan Awards Paid to Named Executive Officers

In September 2014, the Company submitted a proposal to shareholders to approve performance goals and other material terms of a new Executive Incentive Plan.  Ninety-eight percent of votes present and entitled to vote at our September 2014 Annual Meeting of shareholders approved the performance goals and other material terms.

The Executive Incentive Plan is administered by the Compensation Committee of the Board, which has full authority to determine the participants in the Executive Incentive Plan, the terms and amounts of each participant’s threshold, 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, 2016, the Compensation Committee determined which of the performance objectives described under the Executive Incentive Plan were achieved.  A cash payment to each respective executive was based on the level of attainment of the applicable performance objectives.

 

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ePlus inc.

www.eplus.com

 

The award amount paid is a percentage of salary target award, based on the level of attainment of the applicable performance goals as set forth in each participant’s award agreement.

As described above under “Compensation Discussion and Analysis – Components of Compensation and 2016 Compensation Determinations – Cash Compensation”, in accordance with the Executive Incentive Plan’s provisions, such earnings were adjusted to exclude the incentive compensation accrued by the Company under the Executive Incentive Plan, to exclude effects attributable to the business operations of an entity acquired by the Company during the fiscal year ended March 31, 2016 and to exclude certain costs relating to litigation matters.  For the fiscal year ended March 31, 2016, Mr. Norton’s cash incentive was capped at $900,000, Mr. Marron’s at $550,000, Ms. Marion’s at $400,000, and Mr. Mencarini’s at $275,000.  There were no waivers or modifications to any specified performance targets, goals or conditions with respect to the Executive Incentive Plan.

Long-Term Equity Incentive Plans

We currently have two long-term equity incentive plans in effect.  Our 2008 Non-Employee Director Long-Term Incentive Plan, or the “Director LTIP,” was approved by our shareholders at our September 2008 Annual Meeting.  In September 2012, shareholders approved our 2012 Employee Long-Term Incentive Plan, or the “Employee LTIP” or the “2012 Employee LTIP.”  The 2012 Employee LTIP authorizes 750,000 shares for grants of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, and other stock-based awards to our employees.

The Employee LTIP is administered by the Compensation Committee, and is designed to encourage our employees to acquire a proprietary interest in the growth and performance of ePlus, thus enhancing the value of ePlus for the benefit of its shareholders, and to enhance our ability to attract and retain exceptionally qualified individuals.  We have issued grants of restricted stock to our executive officers and other employees under our 2012 Employee LTIP.

Employment Agreements

We entered into employment agreements (collectively, the “Agreements”) with each of our named executive officers.  The forms of the agreements have been changed from time to time over the years to address tax or legal developments, or to reflect changes in roles or compensation.  Each employment agreement and amendment thereto is approved by our Compensation Committee.

On July 21, 2016, the Company entered into a new employment agreement with Mr. Norton, reflecting his new position, effective August 1, 2016, as Executive Chairman.  His agreement will terminate on July 31, 2018.  In his new role, Mr. Norton’s annual base salary will be $300,000, and he will additionally be entitled to retention payments in the amount of $250,000, $250,000 and $500,000, on January 31, 2017, July 31, 2017 and January 31, 2018, respectively.

On July 21, 2016, the Company also entered into an amended and restated employment agreement with Mr. Marron, reflecting his new role as Chief Executive Officer.  Effective August 1, 2016, Mr. Marron’s annual base salary was adjusted to $700,000.  His employment agreement , which was also effective August 1, 2016, has an expiration date of January 31, 2018, and will automatically renew for successive two-year periods, unless either Mr. Marron or the Company provides notice of termination 60 days prior to the end of a term.

Ms. Marion and Mr. Mencarini entered into an amended and stated employment agreement effective August 1, 2016, and August 1, 2013, respectively.  Each of their agreements provides for an initial employment term through July 31, of the following year, and is automatically renewed for successive one-year periods, unless either the executive or the Company provides notice of termination 60 days prior to July 31 of each year.  To date, each agreement has annually renewed.  Ms. Marion entered into an amendment to her previous employment agreement, on June 9, 2015, in which her annual base salary was increased to $415,000.

With the exception of annual executive physical for the Chief Executive Officer, the Agreements do not provide for any specific perquisites or other personal benefits for the named executive officers during the terms of their employment, other than those available to all our full-time employees.

 

ePlus inc.

www.eplus.com

 

All of our Agreements with our named executive officers provides that bonuses or other compensation are subject to recovery by the Company to the extent required by the Dodd-Frank Act and Sarbanes-Oxley and any regulations promulgated thereunder.  This provision does not apply to time-vested stock options, restricted stock or restricted stock units which are not awarded, granted or vested based on financial measure required to be reported under the securities laws.  The agreements also provide that in the event a severance payment would be subject to the excise tax provided in IRS Code Section 280G, the executive will receive a lesser payment if he or she would receive a greater after-tax benefit.  This will better enable the Company to obtain a tax deduction.

The Agreements also all additionally include certain non-competition and non-solicitation provisions, which serve to protect the Company’s business interests in the event the executive’s employment terminates.  Prior to receiving any of the severance described below, the Agreements require each executive to execute a release of possible specified claims against the Company and to certify that the executive has complied with the confidentiality, intellectual property, non-competition, non-solicitation, conflict of interest, and return of property requirements in the Agreements.  The requirement to sign a release may be waived in the event the executive’s death or disability prohibits him or her from signing.

The Agreements with our named executive officers provide certain benefits in the event an executive’s employment terminates upon the termination of the agreement, or if the employment (a) terminated during the term of the agreement due to death or disability (as defined in the Agreements), is terminated by the executive for “good reason” (as defined in the agreement, or is terminated by the Company for any reason other than for “good cause” (as defined in the agreement).  “Good reason” includes termination of employment by the Executive for any reason within 90 days after a change in control, as defined in the 2012 Employee Long-Term Incentive Plan.  The below table summarizes the severance due in the event of termination by the executive for Good Reason, or by the Company for any reason other than Good Cause, pursuant to their respective employment agreements which became effective August 1, 2016 for Mr. Marron, Mr. Norton and Ms. Marion, and August 1, 2013 for Mr. Mencarini.

(1)

The bonus due will be the value of the award that otherwise would have been received based on the extent to which Performance Goals are determined to have been met by the Compensation Committee, multiplied by a fraction, the numerator of which is the number of months (including partial months) in the period beginning on the first day of the relevant performance period and ending with the date as of which the Executive's employment with the Company terminated and the denominator of which is the number of months in such performance period (the "pro-rated EIP award, to the extent Performance Goals are met").  Any such payment shall be made at the time the payment would have been made had there been no termination of employment.

(2)	Mr. Norton will also be entitled to certain retention payments, to the extent the payment has not previously been made.

(3)

The bonus due will be the value of the target amount due under any Executive Incentive Plan ("EIP") award agreement, multiplied by a fraction, the numerator of which is the number of months (including partial months) in the period beginning on the first day of the relevant performance period and ending with the date as of which Ms. Marion's employment with the Company terminated and the denominator of which is the number of months in such performance period.

Estimated Payments Upon Termination or Change in Control

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Equity Compensation Plan Information

The following table provides information as of March 31, 2016, about our common stock that may be issued upon the exercise of options, warrants, and rights under our prior equity compensation plans.  It also provides information regarding the number of securities available for future issuance under our current equity compensation plans, under which there are no outstanding options, warrants or rights.

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Our Board proposes that shareholders provide advisory (non-binding) approval of the compensation of our named executive officers, as disclosed in this proxy statement in accordance with the SEC’s rules (commonly known as a “say-on-pay” proposal).  We recognize the interest our shareholders have in the compensation of our executives, and we are providing this advisory proposal in recognition of that interest and as required by the Dodd-Frank Act.

As described in detail under the heading “Compensation Discussion and Analysis,” our named executive officer compensation program is designed to attract, motivate, and retain our named executive officers, while ensuring alignment of their interests with shareholders’ interests.  Our named executive officers are critical to our success, and our compensation program is designed to reward them for their service to the Company, the achievement of specific performance goals, and the realization of increased shareholder value.  The Compensation Committee reviews the compensation programs for our named executive officers, at least annually, to ensure the fulfillment of our compensation philosophy and goals.  The Compensation Committee and the Board believe that the policies and procedures articulated in the “Compensation Discussion and Analysis” are effective in achieving our goals and that the compensation of our named executive officers reported in this proxy statement has supported and contributed to the Company’s recent and long-term success.

Please read the “Compensation Discussion and Analysis,” beginning on page 16, which describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, and the summary compensation table and other related compensation tables and narrative, beginning on page 25, which provide detailed information on the compensation of our executive officers.

We are asking our shareholders to indicate their support for our named executive officer compensation as described in this proxy statement.  Accordingly, we will ask our shareholders to vote “FOR” the following resolution at our Annual Meeting:

“RESOLVED, that the compensation paid to the named executive officers, as disclosed in the Company’s Proxy Statement for the 2016 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the Summary Compensation Table and the other related compensation tables and narrative disclosure, is hereby APPROVED.”

The say-on-pay vote is advisory, and therefore not binding on the Company, the Compensation Committee or our Board.  However, we value the opinion of our shareholders and to the extent there is any significant vote against the named executive officer compensation as disclosed in this proxy statement, we will consider our shareholders’ concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.

The Audit Committee of the Board has selected Deloitte & Touche LLP, or “Deloitte”, as the Company’s independent registered accounting firm for the fiscal year ending March 31, 2017.  Deloitte has served as the Company’s accounting firm since 1990.

 

ePlus inc.

www.eplus.com

 

Neither the Company’s Bylaws nor other governing documents or law require shareholder ratification of the selection of Deloitte as the Company’s independent registered accounting firm.  However, the Company is submitting the selection of Deloitte to the shareholders for ratification as a matter of good corporate practice.  If the shareholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain that firm.  Even if the selection is ratified, the Audit Committee in its discretion may direct the selection of a different independent registered accounting firm at any time if they determine that such a change would be in the best interest of the Company and its shareholders.

Representatives of Deloitte 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, 2016, and March 31, 2015, the aggregate fees billed by Deloitte were as follows:

Audit-Related Fees. There were no audit-related fees billed by Deloitte for the fiscal years ended March 31, 2016 or 2015.

Tax Fees. There were no fees billed by Deloitte for tax-related services rendered for the fiscal years ended March 31, 2016 or 2015.

All Other Fees. There were other fees billed by Deloitte for an annual license to online resources in the amount of $5,000 and $2,600 for the fiscal years ended March 31, 2016 and 2015, respectively.

There were no non-audit related services provided by Deloitte during the last two fiscal years.  The Audit Committee pre-approves all auditing services (which may entail providing comfort letters in connection with securities underwriting), and all non-audit services provided to us by Deloitte, subject to a de minimis exception as set forth by the SEC.

Vote Required

To be approved, Proposal 3 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.

The Board unanimously recommends voting FOR ratification of the selection of Deloitte & Touche LLP as the Company’s independent auditor for the fiscal year ending March 31, 2017.

The following is the report of the Audit Committee with respect to the Company’s audited consolidated financial statements for the year ended March 31, 2016.  The information contained in this 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 Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation of this proxy statement by reference.

 

ePlus inc.

www.eplus.com

 

Management is responsible for the preparation, presentation and integrity of the Company's financial statements and for the establishment and effectiveness of internal control over financial reporting, and for maintaining appropriate accounting and financial reporting principles and policies and internal controls and procedures that provide for compliance with accounting standards and applicable laws and regulations.  The independent registered public accounting firm, Deloitte & Touche LLP (“Deloitte”), is responsible for planning and carrying out a proper audit of the Company's annual financial statements in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States)(“PCAOB”), expressing an opinion as to the conformity of such financial statements with generally accepted accounting principles and auditing the effectiveness of internal control over financial reporting.

In performing its oversight role, the Audit Committee has considered and discussed the audited consolidated financial statements with management and Deloitte.  The Audit Committee has discussed with Deloitte the matters required to be discussed by Auditing Standard No. 16, Communications with Audit Committees, as adopted by the PCAOB.  The Audit Committee has received the written disclosures and the letter from Deloitte required by the applicable requirements of the PCAOB regarding the independent auditors’ communications with the Audit Committee concerning independence, and has discussed with Deloitte its independence.  Deloitte has free access to the Audit Committee to discuss any matters the firm deems appropriate.

Members of the Audit Committee rely without independent verification on the information provided to them and on the representations made by management and the independent registered public accounting firm.  Accordingly, the Audit Committee's oversight does not provide an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations.  Furthermore, the Audit Committee's considerations and discussions referred to above do not assure that the audit of the Company's consolidated financial statements has been carried out in accordance with the auditing standards of the PCAOB, that the consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America, that Deloitte is in fact "independent", or the effectiveness of the Company's internal controls.

Based on the reports and discussions, and subject to the limitations on the role and responsibilities of the Audit Committee, described above, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Annual Report on Form 10-K for the fiscal year ended March 31, 2016.

Submitted by the Audit Committee

Terrence O’Donnell, Chairman

John E. Callies

C. Thomas Faulders, III

Lawrence S. Herman

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The following table shows the shares of ePlus common stock beneficially owned by each named executive officer, director and nominee, and all directors and executive officers as a group as of July 21, 2016.

*  Less than 1%

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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 July 21, 2016.  For purposes of this table, beneficial ownership of securities generally means the power to vote or dispose of securities, regardless of any economic interest in the securities.  All information shown is based on information reported on Schedule 13G or an amendment thereto filed with the SEC on the dates indicated in the footnotes to this table (percentages are calculated assuming continued beneficial ownership at July 21, 2016).