COMPENSATION DISCUSSION AND ANALYSIS
This CD&A provides an overview of our executive compensation program for our fiscal year 2020, and our executive compensation philosophies and objectives. This CD&A reviews
compensation for our three NEOs: our Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer.
Our NEOs for the fiscal year ended March 31, 2020, were:
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Mark P. Marron
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Chief Executive Officer and President
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Elaine D. Marion
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Chief Financial Officer
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Darren S. Raiguel
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Chief Operating Officer
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This CD&A is divided into three sections:
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Overview
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• Fiscal Year 2020 Financial Highlights
• Our Executive Compensation Program
• Our Executive Compensation Practices
• 2019 Say-On-Pay Vote
• Long-Term Cash Incentive Compensation
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What We Pay and Why
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• Fiscal Year 2020 Executive Compensation Decisions
• Base Salary
• Annual Cash Incentive Awards
• Long-Term Incentive Program
• Other Elements of Our Fiscal Year 2020 Executive Compensation Program
• 2020 Pay Ratio Disclosure
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How We Make Executive Compensation Decisions
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• Role of the Board and Compensation Committee, and our Executive Officers
• Guidance from the Compensation Committee’s Independent Compensation Consultant
• Comparison Peer Groups
• Alignment of Senior Management Team to Drive Performance
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Fiscal
Year 2020 Financial Highlights
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•
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Net sales increased 15.7% from the prior year to $1,588.4 million
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•
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Services revenues increased 29.2% to $193.1 million
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•
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Consolidated gross profit increased 18.4% from the prior year to $391.2 million
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•
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Consolidated operating income increased 19.8% from the prior year
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•
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Net earnings increased 9.3% over the prior year to $69.1 million
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•
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Diluted earnings per share increased 10.8% to $5.15
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Our
Executive Compensation Program
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The Company’s goal for its executive compensation (as well as its non-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, is aligned with its business strategy, and maximizes
shareholders’ long-term interests. 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. The table below summarizes
the components of our fiscal year 2020 executive compensation.
Pay Element
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Salary
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Annual
Cash Incentive
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Long-Term
Cash Incentive
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Restricted
Stock
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Who Receives
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All NEOs
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All NEOs
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ALL NEOs
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All NEOs
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When Granted
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Annually
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Annually
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Annually
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Annually
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Form of Delivery
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Cash
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Cash
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Cash
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Equity
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Performance Type
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Short-Term Fixed
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Short-Term Variable
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Long-Term Variable
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Long-Term Fixed
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Performance Period
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1 Year
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1 Year
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3 Years
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Vesting Annually
over 3 years
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How Payout Determined
|
Amount Determined
by Compensation
Committee
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Formula Determined
by Compensation
Committee
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Fomula Determined
by Compensation
Committee
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Amount Determined
by Compensation
Committee
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Performance Measures
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Individual
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Consolidated Net Sales;
Financing Segment
Operating Income;
Earnings Before Taxes;
Services Revenue
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Target Increase in
Operating Income
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Our Executive Compensation Practices
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Our Compensation Committee regularly reviews the Company’s executive compensation program to evaluate whether it is aligned with shareholder interests and supports the Company’s executive
compensation philosophies and objectives. Our executive compensation practices include the following, each of which the Compensation Committee believes reinforces our executive compensation objectives:
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Our Executive Compensation Practices
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What We Do
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What We Don’t Do
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✔ Significant percentage of cash compensation delivered in the form of variable compensation, which is “at-risk” and
tied to quantifiable performance measures
✔ Long-term vesting of restricted stock, to align executive and shareholder interests (minimum of three-year vesting)
✔ Compensation Committee consists of independent directors only
✔ Annual review of our executive compensation programs
✔ Annual advisory vote to approve executive compensation programs (say-on-pay)
✔ Periodic market comparison of executive compensation against relevant peer group information
✔ Periodic use of an independent compensation consultant reporting directly to the Compensation Committee and
providing no services to the Company
✔ Robust executive officer stock ownership guidelines require NEOs to hold ePlus
stock
✔ Clawback policy mitigates undue risk regarding executive compensation practices
✔ Double-trigger equity acceleration for change-in-control
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û No excessive executive perquisites
û No excessive severance benefits
û No supplemental executive retirement plans
û No acceleration of unvested stock upon retirement
û No hedging or short sales of our securities
û No pledging of our securities, except in limited circumstances with pre-approval
û No tax gross-ups on benefits (other than as also provided to non-executive officer
employees)
û No resetting of financial targets once established for a performance period
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As part of its review of the Company’s executive compensation program, the Compensation Committee considers the results of the annual, non-binding advisory vote by the shareholders to approve
named executive compensation. Approximately 91% of the votes cast for the Company’s say-on-pay proposal at our 2019 Annual Meeting of Shareholders were to approve the Committee’s decisions regarding executive compensation. The Compensation
Committee believes the results of the say-on-pay vote demonstrate shareholder support for the Company’s executive compensation program. Accordingly, the Compensation Committee believes that the Company’s executive compensation philosophies and
objectives continue to be appropriate, and therefore made no material changes to the Company’s executive compensation program in response to the 2019 say-on-pay vote.
Long-Term Cash Incentive Compensation
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Beginning with the 2020 fiscal year, the Compensation Committee revised the executive compensation program by adding a long-term cash component to further encourage executives to focus on the
long-term value to shareholders. The long-term cash awards are made pursuant to our 2012 Employee Long-Term Incentive Plan, and are based on a 3-year financial metric. For more information on the long-term cash incentive compensation, see
“Long-Term Incentive Program” below.
Fiscal Year 2020 Executive Compensation Decisions
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Consistent with our pay philosophy and executive compensation program objectives described below, in determining the fiscal year 2020 adjustments to executive compensation levels and the mix
of compensation elements for each NEO, the Compensation Committee and our CEO (in making recommendations regarding the CFO’s and COO’s compensation) considered each NEO’s span of responsibility, prior performance and experience, Company
performance, the competitive market data to provide a perspective on external practices, and input from the Compensation Committee’s independent compensation consultant, Pearl Meyer (the “Consultant”), as
more fully described below under “Guidance from the Compensation Committee’s Independent Compensation Consultant.”
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 by the Compensation Committee, and ratified by the Board, after taking into account the competitive landscape—the compensation practices of
the companies in our selected peer group and survey data from a broader index of comparable companies—as well as our business strategy and short- and long-term performance goals, and individual factors, such as position, individual performance
and contribution, length of service with the Company, experience in the position, and placement within the general base salary range offered to our NEOs.
The base salary for each of our NEOs as of March 31, 2020 and 2019 is set forth below:
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Base salary as of March 31,
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2020
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2019
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Mark P. Marron
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$
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800,000
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$
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800,000
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Elaine D. Marion
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$
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450,000
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$
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450,000
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Darren S. Raiguel
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$
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450,000
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$
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450,000
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Annual Cash Incentive
Awards
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During the 2020 fiscal year, we provided our NEOs with short-term cash incentive compensation through our annual Cash Incentive Plan (“CIP”). This
short-term, variable cash compensation represents a significant portion of each NEO’s target total cash compensation opportunity in a given year.
Cash Incentive Plan Pay for Performance Alignment
Our Compensation Committee annually reviews, and then sets, performance goals under a Cash Incentive Plan. The combination of performance goals the Compensation Committee chose for fiscal
year 2020 emphasizes factors that the Compensation Committee believes are important to Company strategy and enhancing shareholder value.
In light of the tax changes discussed in “Deductibility of Executive Compensation and the Tax Cuts and Jobs Act of 2017” in “Tax and Accounting Considerations” below, the Compensation
Committee adopted the 2018 Cash Incentive Plan (“2018 Cash Incentive Plan” or “2018 CIP”). During the 2020 fiscal year, performance goals and awards were made under
our 2018 CIP.
The 2018 CIP includes a provision for an adjusted award if 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, the participant to reimburse to the Company any amount received with respect to such an award. The 2018 CIP also provides that cash payments under the plan are subject to recovery by the Company to the extent
required by Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”) and the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), and any
regulations promulgated thereunder. The Compensation Committee administers the 2018 CIP, and has full authority to determine which of the Company’s executive officers will participate in the 2018 CIP; the terms and amounts of each participant’s
minimum, target, and maximum awards; and the period during which the performance is to be measured.
Cash Incentive Awards for Fiscal Year 2020
For the fiscal year ended March 31, 2020, our NEOs’ cash bonuses were earned pursuant to the 2018 CIP, based on the following financial performance goals: consolidated net sales (20%),
financing segment operating income (20%), earnings before tax (30%), and services revenue (30%).
The award opportunity in fiscal 2020 was based on a target amount, which was adjusted based on the level of attainment of financial performance as set forth in each participant’s award
agreement, and payouts may range between 0% to 200% of target award amounts. All three of the participating executive officers had the same financial performance goals. The fiscal year 2020 financial performance weights and target amounts for
each participant were as follows:
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Consolidated Net Sales
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Financing Segment Operating income
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Earnings Before Taxes
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Services Revenue
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Named Executive Officer
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Percentage of
Total Bonus
|
|
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Target Bonus
Amount ($)
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Percentage of
Total Bonus
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Target Bonus
Amount ($)
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Percentage of
Total Bonus
|
|
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Target Bonus
Amount ($)
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Percentage of
Total Bonus
|
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Target
Amount ($)
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Mark P. Marron
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20.0
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%
|
|
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160,000
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|
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20.0
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%
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|
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160,000
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|
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30.0
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%
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|
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240,000
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|
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30.0
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%
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240,000
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Elaine D. Marion
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20.0
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%
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80,000
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20.0
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%
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80,000
|
|
|
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30.0
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%
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120,000
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|
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30.0
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%
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120,000
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Darren S. Raiguel
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20.0
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%
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80,000
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|
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20.0
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%
|
|
|
80,000
|
|
|
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30.0
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%
|
|
|
120,000
|
|
|
|
30.0
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%
|
|
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120,000
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|
Results were adjusted to exclude any gain or loss attributable to the business operations of any entity acquired by the Company during the 2020 fiscal year. The 2018 CIP
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, and the incentive compensation expensed by ePlus for payments under the 2018 CIP.
Bonus payouts possible ranged between 0% and 200% of the target amount, depending on the level of achievement of the performance goals for the fiscal year 2020. The financial performance
goals were as follows:
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Performance Goals
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Performance Level
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Consolidated Net
Sales
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Financing Segment
Operating Income
|
|
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Earnings Before
Taxes
|
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Services Revenue
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Maximum
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n/a
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(1)
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n/a
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(1)
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n/a
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(1)
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n/a
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(1)
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Target
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|
$
|
1,496,686,000
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$
|
21,051,000
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|
|
$
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88,242,000
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$
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185,877,000
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Threshold (75% of Performance Goal)
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$
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1,122,514,500
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$
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15,788,250
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$
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66,181,500
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$
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139,407,750
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Below Threshold
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< $1,122,514,500
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< $15,788,250
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< $66,181,500
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< $139,407,750
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(1)
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The threshold and escalators for each performance goal are as follows:
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Amount of Goal Achieved
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Award Amount
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Less than 75% of Goal Target
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No award relating to that target
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Between 75% - 100% of Goal Target
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Award shall be 50% of target, plus an additional 2.0% for each percentage point over 75% of Goal Target achieved
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100% of Goal Target
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100% of target for that Goal
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More than 100% of Goal Target
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100% of target for that Goal, plus an additional 5.0% for each percentage point over 100% of Goal Target achieved
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Total Maximum Award for all goals combined
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200% of Target
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At the conclusion of the fiscal year ended March 31, 2020, the Compensation Committee determined which of the financial objectives described under the 2018 CIP 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 2018 CIP. The achievement of the financial performance goals is set forth below.
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Goal
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Achievement (1)
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Percentage Payout
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Consolidated Net Sales
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$
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1,496,686,000
|
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$
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1,566,299,000
|
|
|
|
104.7
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%
|
Financing Segment Operating Income
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|
$
|
21,051,000
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|
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$
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33,899,000
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|
|
|
161.0
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%
|
Earnings Before Taxes
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|
$
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88,242,000
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|
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$
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98,348,000
|
|
|
|
111.5
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%
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Services Revenue
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|
$
|
185,877,000
|
|
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$
|
188,646,000
|
|
|
|
101.5
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%
|
(1)
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Performance Criteria were adjusted to exclude the incentive compensation accrued by the Company, results for entities acquired during fiscal year 2020 , and income and expenses
related to those acquisitions.
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The following table details the payments earned in the fiscal year ended March 31, 2020 and 2019, respectively (but paid in the subsequent fiscal year) for each NEO:
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FY 2020 Annual Incentive Cash
Payment Earned ($)
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FY 2019 Annual Incentive Cash
Payment Earned ($)
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% Change
|
Mark P. Marron
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1,480,778
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666,540
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122%
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Elaine D. Marion
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740,389
|
266,616
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178%
|
Darren S. Raiguel
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740,389
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266,616
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178%
|
Long-Term Incentive Program
|
Under our 2012 Employee Long-Term Incentive Plan (the “2012 Employee LTIP”), the Compensation Committee has the authority to award various forms of
long-term incentive compensation grants, such as cash awards, stock options, restricted stock awards, and restricted stock units. The Compensation Committee’s objectives for the fiscal year 2020 long-term equity-based and cash incentive awards
to our NEOs were to focus executives on long-term profitable growth and shareholder value creation and the Company’s long-term strategic plan, and retain the services of our executives through multi-year vesting requirements.
Mr. Marron makes recommendations to the Committee for equity grants to NEOs, including to himself. However, the Compensation Committee deliberates and reaches its own decision with regard to
grants to all NEOs, including Mr. Marron’s. Mr. Marron does not participate in any deliberations regarding his own compensation. When determining the level of the grant, the Compensation Committee considers each NEO’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 and cash compensation, an analysis of how the Company performed on multiple
financial metrics as compared to certain peers, information from our compensation consultant (if any), and each executive’s total compensation, including cash compensation. However, the Compensation Committee does not use a formula or assign a
particular weight to any given factor in determining equity award grant levels. Rather, the Compensation Committee’s determination of grant levels is subjective, and the Compensation Committee grants awards that it believes in its judgment are
reasonably competitive.
The Compensation Committee believes that restricted stock helps to create incentives for performance and further align the interests of executives with those of shareholders because the
stock’s value increases or decreases in conjunction with the Company’s stock price. In addition, the Compensation Committee believes that granting awards with multi-year vesting periods creates a substantial retention incentive and encourages
the NEOs to focus on the Company’s long-term business objectives and stock performance. Most restricted shares granted to executive officers and 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.
For fiscal year 2020, the Compensation Committee used a combination of long-term incentive vehicles, including time-based restricted stock and cash performance awards. These vehicles focus
NEOs on driving long-term profitable growth and shareholder value creation.
Element of LTI
|
Weight (by value)
|
Overview of Design
|
Time-Based Restricted Stock
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CEO: 90%
Other NEOs: 91%
|
• Vests in equal one-third increments per year on the first three one-year anniversaries of the grant
|
Cash Performance Award
|
CEO: 10%
Other NEOs: 9%
|
• Grant is tied to achievement of operating income growth
• Three-year performance period
• Vesting and payout occurs on third year anniversary of grant
• Actual payout can range between 0% and 150%
|
The table below shows the long-term incentive award values granted in fiscal year 2020 for each of the NEOs:
NEO
|
TB-Restricted Stock (1)
|
Cash Performance Award (2)
|
Total Value
|
Mark P. Marron
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$1,749,980
|
$200,000
|
$1,949,980
|
Elaine D. Marion
|
$999,989
|
$100,000
|
$1,099,989
|
Darren S. Raiguel
|
$999,989
|
$100,000
|
$1,099,989
|
(1)
|
Award amounts for Time-Based Restricted Stock were determined based on the closing price of our common stock on the date of grant on June 13, 2019.
|
(2) Amounts shown are the target amounts.
More information about the long-term incentive awards granted to each NEO in fiscal year 2020 are set forth in “Grants of Plan-Based Awards.”
Generally the Compensation Committee determines compensation for our CEO using the same criteria it uses for other executive officers,
Other
Elements of Our Fiscal Year 2020 Executive Compensation Program
|
Severance and Change in Control Provisions
Severance and change in control provisions are designed to facilitate our ability to attract and retain executives as we compete for talented employees in a marketplace where such protections
are frequently offered. Severance benefits are designed to provide benefits to ease an executive’s transition following an employment termination by the Company due to changes in our employment needs. Additionally, severance agreements increase
the enforceability of non-competition provisions to which all of our executives are contractually bound. Change in control benefits are intended to encourage executives to remain focused on the Company’s business in the event of rumored or
actual fundamental corporate changes. Both severance and change in control benefits are often an important part of an executive’s compensation package. See further details under the section entitled “Employment Agreements, Severance and Change
in Control Provisions.”
Our executive compensation arrangements with our NEOs, including our CIP, employment agreements, and long-term cash performance awards, provide that bonuses or other compensation are subject
to recovery by the Company to the extent required by Dodd-Frank and Sarbanes-Oxley, and any regulations promulgated thereunder. This provision does not apply to base salary, or to time-vested restricted stock which is not awarded, granted, or
vested based on financial measures required to be reported under the securities laws.
Stock Ownership Guidelines
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 are
expressed as a multiple of the executives’ base salary as of each January 1st, or as of the date they are first identified as executive officers. Our executive
officers are expected to retain stock ownership valued at a multiple of two times their annual base salary within five years of first being identified as an executive officer. Our CEO is expected to retain stock ownership valued at a multiple
of five times his annual base salary within the same time frame. 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.
Hedging and Short Sales Policies
Our Insider Trading Policy applies to all of our employees and directors. Under the policy, our directors, officers, and employees who are “Insiders” (as defined in the Policy) are absolutely
prohibited from hedging, including using prepaid variable forward contracts, equity swaps, collars and exchange funds, and similar transactions that establish downside price protection, including short sales, and buying or selling put options,
call options, or other derivatives of Company securities.
All trades of Company stock by directors, executive officers, and Insiders require pre-approval from our General Counsel, and must be made in accordance with the Insider Trading Policy.
Tax and Accounting Considerations
Deductibility of Executive Compensation
IRC Section 162(m), as amended, generally denies a publicly traded company a federal income tax deduction for compensation in excess of $1 million paid to certain of its named executive
officers (“Covered NEOs”) unless, for tax years prior to January 1, 2018, such compensation met certain criteria, including being based solely upon the attainment of objective performance criteria. On
December 22, 2017, the performance-based exception under Section 162(m) was repealed for fiscal years commencing on or after January 1, 2018, subject to certain transition relief. As a result, the deduction will not be available for any
executive officer beginning with our fiscal year ended March 31, 2019.
The Compensation Committee will review and consider the deductibility of executive compensation, taking into account to IRC Section 162(m), as applicable. The Company believes that tax
deductibility of compensation is an important factor, but not the sole factor, to be considered in setting executive compensation policy, and in light of the changes to IRC Section 162(m), it is expected that the Compensation Committee will
authorize payments that are not deductible for federal income tax purposes when it believes that such payments are appropriate to attract, retain, and incentivize executive talent.
Our executive employment agreements also provide that, if a severance payment is subject to the excise tax provided in IRC Section 280G, the executive will receive a lesser payment if he or
she would receive a greater after-tax benefit, which will better enable the Company to obtain a tax deduction.
Accounting Considerations
Accounting considerations also play a role in the design of our executive compensation programs and policies. Codification Topic Compensation—Stock Compensation requires us to expense the cost of stock-based compensation awards. We consider the relative impact of the expense, in addition to other factors such as
stockholder dilution, retentive impact, motivational impact, and the overall competitiveness of compensation packages when selecting long-term equity incentive instruments.
Our NEOs participate in benefit plans generally available to all of our employees, including medical, health, life insurance, and disability plans. They also are eligible to participate in
our 401(k) plan, and receive Company matching contributions, to the extent made by the Company, on the same terms as generally available to our employees. Pursuant to their employment agreements, they also are entitled to reimbursement for
annual participation in an executive health assessment program.
Our executive officers are provided with relatively limited perquisites, which we believe is in the best interests of the Company. In some years, certain of our executive officers have
received certain company-paid travel, meals, and entertainment costs for their families to attend the Company’s sales meeting. All attendees at the sales meeting are likewise eligible to have their families attend the meeting with the Company’s
paying the same costs.
HOW WE MAKE EXECUTIVE COMPENSATION
DECISIONS
Role of the Board
and Compensation Committee, and our Executive Officers
|
Role of the Board and Compensation Committee
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 CEO, CFO, and COO. The Compensation 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 Compensation Committee may consider such
factors as the Company’s performance, the individual performance of an executive officer, information from our compensation consultant (if any), and recommendations from management. In some cases, our Board of Directors ratifies the
Compensation Committee’s decisions. The Compensation Committee also considers any recommendations from the Board relating to the CEO’s performance.
Role of the Chief Executive Officer
Our CEO, Mr. Marron, was responsible for the implementation and administration of our executive compensation program during the fiscal year. Mr. Marron recommended the overall structure for
our executive compensation program, including base salary, metrics for the 2018 CIP award agreements for fiscal 2020, and the 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 CEO is not present during any deliberations or voting with regard to his own compensation.
Guidance from the
Compensation Committee’s Independent Compensation Consultant
|
An independent compensation Consultant periodically provides executive compensation consulting services to the Compensation Committee. The Compensation Committee reviewed the independence of
the Consultant under NASDAQ and SEC rules, and concluded that the work of the Consultant has not raised any conflict of interest. The Consultant is engaged directly by the Compensation Committee.
In the spring of 2019, the Consultant provided services relating to a review, including a competitive market study, of our CEO’s,
CFO’s, and COO’s compensation arrangement, including base salary, annual incentives, total cash compensation, long-term incentives, and total direct compensation. The Compensation Committee referred to this report in April 2019 when assessing
compensation for Messrs. Marron and Raiguel, and Ms. Marion.
The Consultant performed a competitive market analysis of the pay levels described above. While the Consultant provided general observations on the Company’s compensation programs, it did not
determine or recommend the amount or form of compensation for Messrs. Marron and Raiguel, or Ms. Marion.
The Compensation Committee approves the compensation for the NEOs based on its own evaluation, input from our CEO (for all executive officers except himself), internal pay equity
considerations, the tenure, role, and performance of each NEO, as well as input from the Compensation Consultant and market data.
The Compensation Committee periodically reviews the compensation practices of peer companies as part of its decision-making process so it can set total compensation levels that it believes
are reasonably competitive. In April 2019, the Compensation Committee reviewed multiple market data sets in analyzing competitive and appropriate compensation packages. One data set included the seven of the companies that the Committee had
previously identified. 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. While we also view a number of other companies as potential peers, because they are privately held and no compensation data was available for
those entities, they were not included in our peer group.
|
|
|
PC Connection Inc.
|
Insight Enterprises, Inc.
|
CDW Corporation
|
|
PCM, Inc. (f/k/a PC Mall)
|
Presidio, Inc.
|
ScanSource, Inc.
|
|
|
|
ManTech International Corp.
|
Two companies from the prior year, Black Box Corp. and Ciber, Inc., had been acquired and therefore no current data was available.
In addition to the peer group companies, the Compensation Committee, in consultation with the Consultant, considered the following market data sets:
The companies fell into four categories: Data Processing and Outsourced Services, IT Consulting and Other Services, Technology Distributor, and Internet Services and
Infrastructure. They had a median revenue of $1.5 billion, compared to ePlus’ $1.4 billion, and a median market capitalization of $1.9 billion compared to ePlus’ $1.2 billion.
Six additional market data cuts were then developed based on those 80 companies:
Market Data Subset
|
|
|
Description/Rationale
|
ePlus’ Peers
|
|
|
Current Peers
|
Technology Distributors
|
|
|
Same sub-industry as ePlus
|
IT Services Companies
|
|
|
Same industry as Direct Peer Presidio
|
Technology Distributors and IT Consulting and Other Services
|
|
|
Same sub-industries as ePlus and direct peers (Presidio, CDW, Insight and Avent)
|
Companies with Similar Market Cap to Revenue Ratio
|
|
|
Reflects companies with similar valuation multiple as ePlus (defined range: 50% - 150% of ePlus multiple)
|
Companies with similar 3-year revenue growth
|
|
|
Reflects companies with similar growth as ePlus (defined range: 50% - 150% of ePlus growth rate)
|
This broad range of data was considered by the Compensation Committee to ascertain whether the compensation for our executive officers is appropriately positioned above or below the median to
properly reflect various factors, such as our companies’ performance, the unique characteristics of each executive’s position, and applicable retention considerations. The Compensation Committee does not set compensation components to meet
specific benchmarks, such as targeting salaries “above the median” or equity compensation at a particular percentile.
Alignment
of Senior Management Team to Drive Performance
|
Our performance goals are designed to drive shareholder value creation by aligning members of senior management with our strategy and common performance goals. To match performance to our
goals, the Company engages in extensive communications on what members of senior management, together with their teams, should strive toward to impact achievement of the Company’s goals. We believe this understanding of the link between
individual, team, and Company performance helps the Company to focus on actions that have the greatest potential to drive the Company toward more profitable growth and shareholder value.
2020 EXECUTIVE COMPENSATION
The following table includes information concerning compensation earned by our NEOs during fiscal years 2020, 2019, and 2018.
2020 Summary Compensation Table
|
Name and Principal Position
|
Year
|
Salary
($)
|
Stock
Awards
($)(1)
|
Non-Equity
Incentive Plan
Compensation
($)(2)
|
All Other
Compensation
($)(3)
|
Total
($)
|
Mark P. Marron – President and Chief Executive Officer
|
2020
|
800,000
|
1,749,980
|
1,480,778
|
12,315
|
4,043,073
|
2019
|
800,000
|
1,704,119
|
666,540
|
10,535
|
3,181,194
|
2018
|
740,720
|
1,594,000
|
542,726
|
13,542
|
2,890,988
|
Elaine D. Marion – Chief Financial Officer
|
2020
|
450,000
|
999,989
|
740,389
|
10,416
|
2,200,794
|
2019
|
450,000
|
960,500
|
266,616
|
10,019
|
1,687,135
|
2018
|
443,504
|
956,400
|
226,136
|
14,211
|
1,640,251
|
Darren S. Raiguel – Chief Operating Officer
|
2020
|
450,000
|
999,989
|
740,389
|
9,391
|
2,199,769
|
2019
|
436,381
|
1,089,625
|
266,616
|
7,669
|
1,800,291
|
2018
|
-
|
-
|
-
|
-
|
-
|
(1)
|
The values in this column represent the aggregate grant date fair values of restricted stock awards granted in the respective fiscal year, computed in accordance with Codification Topic Compensation—Stock Compensation. Assumptions used in calculating these values may be found in Note 13 of our financial statements in our 2020 Form 10-K. Each of these amounts reflect our expected
aggregate accounting expense for these awards as of the grant date and do not necessarily correspond to the actual values that will be expensed by us or realized by the NEOs.
|
(2)
|
These amounts reflect cash payments under our 2018 CIP, which were earned during the fiscal year identified. A detailed description of the fiscal 2020 payments can be found in the CD&A.
|
(3)
|
Each of our executive officers received other compensation during fiscal years 2020, 2019, and 2018, in the form of an employer 401(k) match (which is available on the same terms to all employees), and each
received travel, meals, and entertainment costs for their family to attend the Company’s sales meeting. The amounts received by each NEO in fiscal year 2020 are enumerated below:
|
Other Compensation
|
|
|
|
Employer 401K
Match
|
|
|
Sales
Meeting (a)
|
|
|
Total Other
|
|
Mark P. Marron
|
|
$
|
3,700
|
|
|
$
|
8,615
|
|
|
$
|
12,315
|
|
Elaine D. Marion
|
|
$
|
3,700
|
|
|
$
|
6,716
|
|
|
$
|
10,416
|
|
Darren S. Raiguel
|
|
$
|
3,700
|
|
|
$
|
5,691
|
|
|
$
|
9,391
|
|
|
(a)
|
The amounts shown reflect the costs incurred by the Company relating to the executives’ family’s attendance at the sales meeting, grossed up to cover the taxes incurred by the
executive. This payment was received similarly by all attendees at the sales meeting.
|
2020 Grants of Plan-Based Awards Table
|
The following table provides information regarding the grants of plan-based awards during fiscal year 2020 under the 2018 CIP and the Company’s 2012 Employee Long-Term Incentive Plan.
|
|
Estimated
Possible Payouts
Under Non-Equity
Incentive Plan Awards
|
All Other
Stock
Awards:
Number of
Shares of
|
All Other
Option
Awards:
Number of
Securities
|
Exercise
or Base
Price of
|
Grant Date Fair
Value of Stock
|
Name
|
Grant Date
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Stock or
Units
(#)(3)
|
Underlying
Options
(#)
|
Option
Awards
($/Sh)
|
and Option
Awards
($)(4)
|
|
|
|
|
|
|
|
|
|
|
Mark P. Marron
|
6/13/2019
|
|
|
|
|
24,171
|
-
|
-
|
1,749,980
|
(1)
|
|
60,000
|
800,000
|
|
1,600,000
|
|
|
|
|
(2)
|
7/3/2019
|
100,000
|
200,000
|
|
300,000
|
|
|
|
|
Elaine D. Marion
|
6/13/2019
|
|
|
|
|
13,812
|
-
|
-
|
999,989
|
(1)
|
|
30,000
|
400,000
|
|
800,000
|
|
|
|
|
(2)
|
7/3/2019
|
50,000
|
100,000
|
|
150,000
|
|
|
|
|
Darren S. Raiguel
|
6/13/2019
|
|
|
|
|
13,812
|
-
|
-
|
999,989
|
(1)
|
|
30,000
|
400,000
|
|
800,000
|
|
|
|
|
(2)
|
7/3/2019
|
50,000
|
100,000
|
|
150,000
|
|
|
|
|
(1)
|
These amounts reflect award opportunities under the 2018 CIP and are described more fully in the CD&A under the heading “Annual Cash Incentive Awards” and subheading “Cash Incentive Awards for Fiscal
Year 2020.” Threshold amounts represent minimal level of achievement of the lowest weighted financial performance metric, and maximum amounts represent 200% of target values. Actual payments with respect to the awards for fiscal 2019 (and
paid in fiscal 2020) are disclosed in the Non-Equity Incentive Plan Compensation column of the 2020 Summary Compensation Table.
|
(2)
|
These amounts reflect non-equity award opportunities under our 2012 Employee LTIP, and are more fully described in the CD&A under the heading “Long-Term Incentive Program.” Threshold amounts represent
minimal level of achievement of the lowest weighted financial performance metric, and maximum amounts represent 150% of target values. These awards are earned on the third anniversary of the grant date to the extent the Company achieves a
performance goal relating to growth in operating income.
|
(3)
|
These amounts represent the number of shares of restricted stock granted to the NEOs under our 2012 Employee LTIP. Equity awards granted to the executive officers and reflected in the 2020 Grants of
Plan-Based Awards Table vest equally over a three-year period, and may be accelerated in limited circumstances as set forth in the Employee LTIP, award agreements, and/or employment agreements.
|
(4)
|
These amounts reflect the grant date fair value of the restricted stock granted in fiscal year 2020. This represents the aggregate amount that we expected to expense for such grants in accordance with
Codification Topic Compensation—Stock Compensation over the grants’ respective service period. These amounts do not necessarily correspond to the actual values that will be expensed by us or
realized by the NEOs. Assumptions used in calculating these values with respect to restricted stock awards may be found in Note 13 of our 2020 Annual Report.
|
Outstanding Equity Awards at 2020 Fiscal Year End
|
The following table provides information concerning the outstanding equity-based awards as of March 31, 2020.
|
Stock Awards
|
Name
|
Number of Shares or
Units of Stock That Have
Not Vested (1)
|
Market Value of Shares or Units
of Stock That Have
Not Vested ($)(2)
|
|
|
|
Mark P. Marron
|
62,266
|
3,899,097
|
Elaine D. Marion
|
36,479
|
2,284,315
|
Darren S. Raiguel
|
23,146
|
1,449,403
|
(1)
|
The following table shows the dates on which the outstanding stock awards as of March 31, 2020, will vest, subject to continued employment through the vest date, or acceleration in limited circumstances as
set forth in the 2012 Employee LTIP, award agreements, and/or employment agreements.
|
Vest Date
|
Mark P. Marron
|
Elaine D. Marion
|
Darren S. Raiguel
|
5/7/20
|
-
|
-
|
3,333
|
6/8/20
|
6,667
|
4,000
|
1,000
|
6/13/20
|
8,057
|
4,604
|
4,604
|
6/14/20
|
5,914
|
3,333
|
833
|
6/17/20
|
19,600
|
12,000
|
-
|
5/7/21
|
-
|
-
|
3,334
|
6/13/21
|
8,057
|
4,604
|
4,604
|
6/14/21
|
5,914
|
3,334
|
834
|
6/13/22
|
8,057
|
4,604
|
4,604
|
(2)
|
We calculated market value by multiplying the closing price of our common stock ($62.62) on the last business day of our fiscal year, March 31, 2020, by the number of shares in the first column.
|
Fiscal
Year 2020 Options Exercised and Stock Vested
|
The following table sets forth information with respect to the shares of Company common stock acquired through vesting of restricted stock during our fiscal year 2020. There were no stock
options outstanding during fiscal year 2020.
|
Stock Awards
|
Name
|
Number of Shares Acquired
on Vesting (#)
|
Value Realized on Vesting
($) (1)
|
Mark P. Marron
|
44,854
|
3,223,363
|
Elaine D. Marion
|
25,339
|
1,814,898
|
Darren S. Raiguel
|
6,902
|
574,219
|
(1)
|
Market value was computed by multiplying the closing price of our common stock on the day of vesting by the number of shares acquired. Additionally, the restricted stock shares were net-share settled such
that the Company withheld shares with value equivalent to the NEO’s minimum statutory tax obligation for the applicable income and other employment taxes, and remitted cash to the appropriate taxing authorities. The amounts in the table
represent the gross number of shares and value realized on vesting for each of the NEOs. The net number of shares acquired were: Mr. Marron, 26,508; Ms. Marion, 16,004, and Mr. Raiguel, 4,828.
|
Employment
Agreements, Severance, and Change in Control Provisions
|
Our incentive plans for and employment agreements with our NEOs reflect our compensation philosophy. In addition to our employment agreements with Mr. Marron and Ms. Marion, which became
effective December 12, 2017, we entered into an employment agreement with Mr. Raiguel in conjunction with his promotion to COO, which became effective May 7, 2018.
All of our employment agreements with our NEOs contain “clawback” provisions as required by Dodd-Frank and Sarbanes-Oxley.
In all cases, our NEO’s receipt of severance payments is contingent upon their executing a release, and certifying that they will comply with certain confidentiality, non-competition, and
non-solicitation provisions of the employment agreement.
The Company’s employment agreements with its NEOs are intended to comply with IRC Section 409A. The material terms of the employment agreements are described below. Also, pursuant to our 2012
Employee LTIP and standard award agreement, unvested stock issued to any employee will vest upon a “Change in Control,” as defined in the 2012 Employee LTIP.
|
•
|
Mr. Marron’s currently effective agreement was entered into on August 1, 2016, and was Amended and Restated on December 12, 2017.
|
|
•
|
Mr. Marron’s agreement had an initial termination date of January 31, 2018, however, the agreement contains automatic two-year successive renewal periods unless either party terminates the agreement 60
days prior to the end of the then-current term. As no notice of termination was provided, the expiration date of his agreement is now January 31, 2022.
|
|
•
|
In the event of disability, termination without cause, or termination for good reason (all as defined in the agreement), Mr. Marron is entitled to eighteen months of his base salary, in addition to a
pro-rated payment under our CIP, to the extent that the Performance Goals have been met, with the payment to be made after the end of the fiscal year at the time the payment would have been made had there been no termination.
Additionally, the Company also would be responsible to pay Mr. Marron an amount in cash equal to the cost of premiums the Company paid prior to the date of termination for Mr. Marron and his dependents’ qualified coverage under the
Company’s medical, prescription, dental, and other health benefits, for 18 months.
|
|
•
|
In the event of termination without cause, or by Mr. Marron for good reason, he is also entitled to, at the Company’s election, either the acceleration of unvested restricted stock, or cash in an amount
equal to the value of the stock on the date of termination.
|
|
•
|
Mr. Marron’s employment agreement was amended on July 16, 2018, to increase his base salary to $800,000, effective April 1, 2018.
|
The table below summarizes the potential payments and benefits to Mr. Marron upon the occurrence of certain triggering events. The table assumes a hypothetical effective date of termination
of March 31, 2020, and a payment of the target award under the 2018 CIP. The table does not include accrued, unused vacation time, which is paid to all employees upon termination of employment, pursuant to ePlus’
policies.
Triggering Event
|
|
Cash Severance
|
|
|
Target Cash
Incentive (2)
|
|
|
Cash Long-Term
Incentive Award (3)
|
|
|
Equity-Based
Compensation
Awards (4)
|
|
|
Benefits
|
|
|
Total
|
|
Termination Without Cause, or for Good Reason, as defined in the agreement
|
|
$
|
1,241,533
|
|
|
$
|
800,000
|
|
|
$
|
66,660
|
|
|
$
|
3,899,097
|
|
|
$
|
-
|
|
|
$
|
6,007,290
|
|
Change in Control
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
$
|
3,899,097
|
|
|
$
|
-
|
|
|
$
|
3,899,097
|
|
Death or Disability (1)
|
|
$
|
1,241,533
|
|
|
$
|
800,000
|
|
|
$
|
66,660
|
|
|
$
|
3,899,097
|
|
|
$
|
-
|
|
|
$
|
6,007,290
|
|
(1) The Cash Severance column assumes disability. No cash severance is due in the event of death.
(2)
|
In the event of disability, termination without cause or by Mr. Marron for good reason, all as defined in the agreement, Mr. Marron is entitled to a pro-rated amount of the payment under our CIP, to the
extent that the Performance Goals have been met, with the payment to be made after the end of the fiscal year at the time the payment would have been made had there been no termination. The above table assumes the target goal is reached
but not exceeded.
|
(3)
|
Pursuant to a Cash Long-Term Incentive Award made pursuant to our 2012 Employee LTIP, in the event the participant’s employment is terminated due to death, death, disability as defined in the 2012 Employee
LTIP, or without cause as defined in any applicable employment agreement, the Company shall pay to the Participant, or his or her estate, a pro-rated amount of the target award, based on the number of days elapsed before employment
termination, divided by the number of days in the performance period.
|
(4)
|
Pursuant to the 2012 Employee LTIP, and our standard restricted stock award agreements, upon death or a change in control, as defined by the 2012 Employee LTIP, all unvested stock for all employees will
vest. The value of the equity-based compensation awards for all termination tables herein is calculated using the closing price of our common stock ($62.62) on the last business day of our fiscal year, March 31, 2020.
|
|
•
|
Ms. Marion’s agreement was amended and restated on December 12, 2017.
|
|
•
|
Ms. Marion’s agreement had an initial termination date of July 31, 2018, however, the agreement contains automatic one-year successive renewal periods unless either party terminates the agreement 60 days
prior to the end of the then-current term. As no notice of termination was provided, the expiration date of her agreement is now July 31, 2021.
|
|
•
|
In the event of disability, termination without cause, or termination for good reason (all as defined in the agreement), Ms. Marion is entitled to twelve months of her base salary, in addition to a
pro-rated amount of the payment under our CIP. Additionally, the Company would be required to pay to Ms. Marion an amount in cash equal to the cost of premiums the Company paid prior to the date of termination for Ms. Marion and her
dependents’ qualified coverage under the Company’s medical, prescription, dental, and other health benefits, for 18 months.
|
|
•
|
In the event of termination without cause or by Ms. Marion for good reason, she is also entitled to, at the Company’s election, either the acceleration of unvested restricted stock, or cash in an amount
equal to the value of the stock on the date of termination.
|
|
•
|
In the event of termination without cause by the Company or for good reason by Ms. Marion, an amount in cash equal to the cost of premiums the Company paid prior to the date of termination for Ms. Marion
and her dependents’ qualified coverage under the Company’s medical, prescription, dental, and other health benefits, for 18 months.
|
|
•
|
Ms. Marion’s employment agreement was amended on June 8, 2017, to increase her base salary to $450,000.
|
The table below summarizes the potential payments and benefits to Ms. Marion upon the occurrence of certain triggering events. The table assumes a hypothetical effective date of termination
of March 31, 2020, and a payment of the target award under the 2018 CIP. The table does not include accrued, unused vacation time, which is paid to all employees upon termination of employment, pursuant to ePlus’
policies.
Triggering Event
|
|
Cash Severance
|
|
|
Target Cash
Incentive (2)
|
|
|
Cash Long-Term
Incentive Award (3)
|
|
|
Equity-Based
Compensation
Awards (4)
|
|
|
Benefits
|
|
|
Total
|
|
Termination Without Cause, or for Good Reason, as defined in the agreement
|
|
$
|
492,200
|
|
|
$
|
400,000
|
|
|
$
|
33,333
|
|
|
$
|
2,284,315
|
|
|
$
|
-
|
|
|
$
|
3,209,848
|
|
Change in Control
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
$
|
2,284,315
|
|
|
$
|
-
|
|
|
$
|
2,284,315
|
|
Death or Disability (1)
|
|
$
|
492,200
|
|
|
$
|
400,000
|
|
|
$
|
33,333
|
|
|
$
|
2,284,315
|
|
|
$
|
-
|
|
|
$
|
3,209,848
|
|
(1)
|
The Cash Severance column assumes disability. No cash severance is due in the event of death.
|
(2)
|
In the event of disability, termination by the Company without cause, or by Ms. Marion for good reason, all as defined in the agreement, Ms. Marion is entitled to a pro-rated amount of the payment under
our CIP. The above table assumes the target goal is reached but not exceeded.
|
(3)
|
Pursuant to a Cash Long-Term Incentive Award made pursuant to our 2012 Employee LTIP, in the event the participant’s employment is terminated due to death, death, disability as defined in the 2012 Employee
LTIP, or without cause as defined in any applicable employment agreement, the Company shall pay to the Participant, or his or her estate, a pro-rated amount of the target award, based on the number of days elapsed before employment
termination, divided by the number of days in the performance period.
|
(4)
|
Pursuant to the 2012 Employee LTIP, and our standard restricted stock award agreements, upon death or a change in control, as defined by the 2012 Employee LTIP, all unvested stock for all employees will
vest. The value of the equity-based compensation awards for all termination tables herein is calculated using the closing price of our common stock ($62.62) on the last business day of our fiscal year, March 31, 2020.
|
|
•
|
Effective as of May 7, 2018.
|
|
•
|
Mr. Raiguel’s agreement had an initial termination date of July 31, 2019, however, the agreement contains automatic one-year successive renewal periods unless either party terminates the agreement 60 days
prior to the end of the then-current term. As no notice of termination was provided, the expiration date of his agreement is now July 31, 2021.
|
|
•
|
In the event of disability, termination without cause, or termination for good reason (all as defined in the agreement), Mr. Raiguel is entitled to twelve months of his base salary, in addition to a
pro-rated amount of the payment under our CIP. Additionally, the Company would be required to pay to Mr. Raiguel an amount in cash equal to the cost of premiums the Company paid prior to the date of termination for Mr. Raiguel and his
dependents’ qualified coverage under the Company’s medical, prescription, dental, and other health benefits, for 18 months.
|
|
•
|
In the event of termination without cause or by Mr. Raiguel for good reason, he is also entitled to, at the Company’s election, either the acceleration of unvested restricted stock, or cash in an amount
equal to the value of the stock on the date of termination.
|
The table below summarizes the potential payments and benefits to Mr. Raiguel upon the occurrence of certain triggering events. The table assumes a hypothetical effective
date of termination of March 31, 2020, and a payment of the target award under the 2018 CIP. The table does not include accrued, unused vacation time, which is paid to all employees upon termination of employment, pursuant to ePlus’ policies.
Triggering Event
|
|
Cash Severance
|
|
|
Target Cash
Incentive (2)
|
|
|
Cash Long-Term
Incentive Award (3)
|
|
|
Equity-Based
Compensation
Awards (4)
|
|
|
Benefits
|
|
|
Total
|
|
Termination Without Cause, or for Good Reason, as defined in the agreement
|
|
$
|
492,200
|
|
|
$
|
400,000
|
|
|
$
|
33,333
|
|
|
$
|
1,449,403
|
|
|
$
|
-
|
|
|
$
|
2,374,936
|
|
Change in Control
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
$
|
1,449,403
|
|
|
$
|
-
|
|
|
$
|
1,449,403
|
|
Death or Disability (1)
|
|
$
|
492,200
|
|
|
$
|
400,000
|
|
|
$
|
33,333
|
|
|
$
|
1,449,403
|
|
|
$
|
-
|
|
|
$
|
2,374,936
|
|
(1)
|
The Cash Severance column assumes disability. No cash severance is due in the event of death.
|
(2)
|
In the event of disability, termination by the Company without cause, or by Mr. Raiguel for good reason, all as defined in the agreement, Mr. Raiguel is entitled to a pro-rated amount of the payment under
our CIP. The above table assumes the target goal is reached but not exceeded.
|
(3)
|
Pursuant to a Cash Long-Term Incentive Award made pursuant to our 2012 Employee LTIP, in the event the participant’s employment is terminated due to death, death, disability as defined in the 2012 Employee
LTIP, or without cause as defined in any applicable employment agreement, the Company shall pay to the Participant, or his or her estate, a pro-rated amount of the target award, based on the number of days elapsed before employment
termination, divided by the number of days in the performance period.
|
(4)
|
Pursuant to the 2012 Employee LTIP, and our standard restricted stock award agreements, upon death or a change in control, as defined by the 2012 Employee LTIP, all unvested stock for all employees will
vest. The value of the equity-based compensation awards for all termination tables herein is calculated using the closing price of our common stock ($62.62) on the last business day of our fiscal year, March 31, 2020.
|
2020 Pay Ratio Disclosure
|
Pursuant to Item 402(u) of Regulation S-K, the Company is required to provide annual disclosure of the ratio of the median of the total annual compensation of all employees of the Company
(other than Mr. Marron, the Company’s CEO) to the total annual compensation of the principal executive officer, which for ePlus is our CEO, Mr. Marron. The purpose of the required disclosure is to
provide a measure of the equitability of pay within the Company. ePlus believes its compensation philosophy and process yield an equitable result and presents such information as follows:
Median employee
total annual compensation
|
Mr. Marron’s
total annual compensation
|
$113,329
|
$4,043,074
|
Based on this information, for our 2020 fiscal year, the ratio of the annual total compensation of Mr. Marron to the annual total compensation of our median employee was estimated to be 35.68
to 1. This pay ratio is a reasonable estimate, calculated in a manner consistent with the applicable SEC requirements.
In determining our median employee, a list was prepared of all employees’ compensation as of December 31, 2019. Except as described herein, the list included the full annual
compensation of all individuals who were employed throughout the entire 2019 calendar year, and annualized compensation for employees who joined ePlus during 2019. Our employee population, after taking into consideration the adjustments permitted by SEC rules and described below, consisted of approximately 1,460 individuals. There were two groups of employees we did not include
in the calculation. First, we did not include any of the 77 employees who joined ePlus as part of its acquisition of certain assets and
liabilities of Innovative Systems & Solutions, Inc., a Virginia corporation d/b/a ABS Technology, which closed on August 23, 2019. Second, we did not include our 58 non-U.S.-based employees,
which is less than 5% of our total workforce, and includes 24 employees in the United Kingdom, 33 employees in India, and one employee in Singapore. We selected our median employee from the list of the remaining employees. To identify our
median employee, we calculated compensation as the sum of (i) base salary, (ii) commissions, and (iii) equity that vested during the year. Mr. Marron’s compensation was calculated using the same methodology that the Company used to calculate
the CEO’s annual total compensation for the 2020 Summary Compensation Table described below.
Once we identified our median employee, we calculated his or her fiscal year 2020 annual total compensation under the Summary Compensation Table rules in a manner that is consistent with the
calculation of our CEO’s compensation, without any adjustments or estimates. The SEC requirements for identifying our median employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a
variety of methodologies, apply certain exclusions, and make reasonable estimates and assumptions that reflect their compensation practices. Accordingly, the pay ratio we report may not be comparable to the pay ratio other companies report.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of March 31, 2020, 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.
|
Number of securities
to be issued upon
exercise of
outstanding options,
warrants, and rights
|
Weighted
average
exercise price
of outstanding
options,
warrants, and
rights
|
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
first column)
|
Equity compensation plans approved by security holders
|
-
|
n/a
|
737,401
|
(1)
|
Equity compensation plans not approved by security holders
|
-
|
n/a
|
-
|
|
Total
|
-
|
|
737,401
|
|
(1)
|
This number includes 126,757 shares reserved for issuance under the 2017 Non-Employee Director Long-Term Incentive Plan and available for future restricted stock awards, and 610,644 shares reserved for
issuance under the 2012 Employee LTIP and available for future awards.
|
PROPOSAL 3 – Ratification of the Selection of Deloitte & Touche LLP as
our Independent Registered Public Accounting Firm for our Fiscal Year Ending March 31, 2021
The Board and the Audit Committee recommend that the shareholders ratify the selection of Deloitte as the Company’s independent registered public accounting firm for the fiscal year ending
March 31, 2021. Deloitte is currently the Company’s independent registered public accounting firm, and the Audit Committee approved the selection and retention of Deloitte for fiscal year 2021.
Neither the Company’s Bylaws or other governing documents nor the law require shareholder ratification of the selection of Deloitte as the Company’s independent registered accounting firm. As
a matter of good corporate practice, however, the Company is submitting the selection of Deloitte to the shareholders for ratification. If the shareholders fail to ratify the selection, the Audit Committee will reconsider whether to retain
Deloitte. Even if the selection is ratified, the Audit Committee retains discretion to direct the selection of a different independent registered accounting firm at any time if the Audit Committee determines that such a change would be in the
best interest of the Company and its shareholders.
Representatives of Deloitte are expected to attend the 2020 Annual Meeting and will have the opportunity to make a statement and respond to appropriate questions.
THE BOARD RECOMMENDS VOTING FOR RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE
FISCAL YEAR ENDING MARCH 31, 2021.