Document:

lantronix_8k-1001.htm

 

 

 

EXHIBIT 10.1

 

  September 8, 2011

 

 

Mr. Jeremy Whitaker

2100 S. Ola Vista

San Clemente, CA 92672

 

Dear Jeremy:

 

 

This letter (“Agreement”) will confirm our understanding and agreement regarding your employment with Lantronix Inc. (“Lantronix” or the “Company”), commencing September 26, 2011 (“Commencement Date”).  

 

1.Position; Exclusivity.  The Company hereby agrees to employ you as its Chief Financial Officer and Corporate Secretary.  Your office is located at the Company headquarters in Irvine, California. You accept such employment pursuant to the terms of this Agreement.  You shall report to the President and CEO, Kurt Busch, and shall perform such duties and responsibilities which shall be consistent with your position as a senior officer of the Company.  You agree to devote your full business time, attention and energy to performing your duties and
responsibilities to the Company under this Agreement.  During your employment with Lantronix, you will not render any services to any other person or entity, whether for compensation or otherwise, or engage in any business activities competitive with or adverse to the Company’s business or welfare, whether alone, as an employee, as a partner, as a member, or as a shareholder, officer or director of any other corporation, or as a trustee, fiduciary or in any other similar representative capacity of any other entity, without the prior written consent of the Board of Directors of the Company (the “Board”).

 

2.Base Salary.  The Company shall pay you a bi-weekly basis a base salary of $8,076.92 ($210,000 on an annualized basis, the “Base Salary”), less applicable withholdings and deductions, which shall be paid on the Company’s regular payroll dates.  Your salary will be reviewed annually by the Board, and the Board may, in its sole discretion, adjust it to reflect Company performance, your performance, market conditions and other factors deemed relevant by the Board.  

3.Bonus.  You will be fully eligible to participate in the Lantronix Performance Bonus Plan at a target rate of up to 35% of your Base Salary (the “Performance Bonus”).  You will be fully eligible to participate in the Fiscal Year 2012 Lantronix Performance Bonus Plan and any Performance Bonus Plan for each full fiscal year during which this Agreement is in effect.   The Board hereby waives the requirement to be employed by the Company as of July 1, 2011 to be eligible to participate in the first half of Fiscal Year 2012 Performance
Bonus Plan without pro-ration.  Currently the Performance Bonus is paid out semi-annually following the close of the applicable fiscal quarters to which such Performance Bonus payment is applicable.  At 100% payout, the target annualized Performance Bonus is $73,500.   Lantronix reserves the right to change or discontinue the plan at any time. The Performance Bonus Plan shall be subject to the following:

  

  

  

 

i.The Compensation Committee of the Board will define the Performance Bonus Plan annually, determining the objectives for the fiscal year that must be met to earn the Performance Bonus.  Such objectives may include, but shall not be limited to, operating metrics, objective and subjective leadership dimensions and performance metrics in the operation of the Company, the achievement of financial objectives set forth in the Board approved Annual Operating Plan (the “Annual Operating Plan”) for a particular fiscal year, or such other objectives as the Compensation Committee of the Board, in its sole discretion, shall
determine.

 

ii.You must be employed by the Company on the respective dates set forth in the eligibility requirements for such Fiscal Year’s Performance Plan to be eligible to receive the applicable Performance Bonus for such period (i.e., December 31st and June 30th, when the Performance Bonus Plan is paid semi-annually).  The Performance Bonus for the first half of the Fiscal Year shall be paid to you no later than March 15 of the following year (e.g, for the first half of the 2012 Fiscal Year ending on December 31, 2011, you shall be paid no later than March 15,
2012).  The Performance Bonus for the second half of the Fiscal Year shall be paid no later than March 15 of the year following the year in which the second half of the Fiscal Year concludes (e.g., for the Fiscal Year terminating on June 30, 2012, you shall be paid on account of the second half Performance Bonus no later than March 15, 2013).  If the Performance Bonus is paid annually, you shall be paid no later than March 15 of the year following the calendar year in which the Fiscal Year concludes.

 

iii.All Performance Bonus awards are subject to the terms of the Performance Bonus Plan agreement for the applicable Fiscal Year.

4.Stock Option Award.  Subject to the terms of the Company’s 2010 Stock Plan and the form of stock option agreement thereunder, the Company shall issue you a stock option to purchase 55,000 shares of Lantronix common stock.  The stock option shall be an incentive stock option to the extent permitted by the $100,000 rule of Internal Revenue Code Section 422(d).  The grant shall be effective on your Commencement Date and the strike price of the options shall be the closing price of one share of common stock on the Commencement Date.  None
of these options shall vest until such time as you and the Company enter into a written stock option agreement with respect to the option for 55,000 shares.  The stock option agreement shall provide, among other things that your options shall vest according to the following schedule: 25% (13,750) of your options shall vest on the first anniversary of the Commencement Date and the remaining options shall vest ratably each month thereafter for a period of 36 months, subject to your remaining a Service Provider to the Company through such dates (as defined in the Company’s 2010 Stock Plan).    

 

5.Change in Control.  In the event of a “Change in Control” of the Company as defined in Attachment A after your Commencement Date, then, subject to the terms of this Agreement, the Company shall compensate you as set forth in Attachment A. 

 

6.Employee Benefits.  You shall be entitled to the benefits and perquisites which the Company generally provides to its other senior executives under the applicable Company plans and policies, excluding any automobile allowance, and to future benefits and perquisites made generally available to senior executives of the Company.  Your participation in such benefits plans shall be on the same basis as applies to other senior executives of the Company.  All such benefits and perquisites are subject to modification and/or elimination in the Company’s
discretion.  You shall pay any contributions which are generally required of senior executives to receive any such benefits. 

7.Vacation.  Vacation is accrued on a bi-weekly basis.  Subject to the Company’s vacation accrual policies and caps, you shall accrue vacation according to the following schedule:  two (2) weeks per year for the first three (3) years of service; three (3) weeks per year for after three (3) years of service and until completion of five (5) years of service;  three weeks and two and a half days (3.5 weeks) after six (6) years of service and until completion of nine years of service; and four (4) weeks after nine (9) years of
service.  

  

  

  

8.Life Insurance.  Basic Life and Accidental Death & Dismemberment coverage is provided to employees through Anthem Blue Cross at the rate of two times your annual Base Salary, up to a maximum $500,000.  Supplemental life insurance can be purchased by the employee to cover additional family members.

9.Health Insurance.  The Company offers group insurance plans designed to meet those needs to all active regular full-time employees.  Regular full-time employees are eligible to enroll in group insurance benefits on the first of the month following their first day of employment.   Based on your hire date of September 26, 2011, you will be eligible for benefits on October 1, 2011. If your start date is extended, it will affect the date you will be eligible for benefits.  Group medical,
dental, vision and prescription coverage is presently offered through Anthem Blue Cross.  You have a choice among these medical and dental plan options:  HMO (a health maintenance organization), and a PPO (Preferred Provider Organization).  The Company currently pays a significant portion of the premium, with the employee contributing the difference through a bi-weekly payroll deduction.

10.  Unspecified Term, At-Will Employment and Termination.

a.Notwithstanding anything to the contrary in this Agreement or in any prior relationship with the Company, express or implied, your employment is for an unspecified term and either you or Lantronix may terminate your employment at-will and with or without Cause (as defined in Attachment B hereto) or notice; provided however, that if your employment is terminated by the Company without Cause (as defined in Attachment B hereto), in exchange for a full general release of claims against the Company in a form reasonably
acceptable to the Company becoming effective in accordance with its terms, the Company will pay you severance pay in a total amount to be calculated as follows: (i) if employment is terminated within a one (1) year period from your Commencement Date, an amount equal to three (3) months of your then current Base Salary; or (ii) if employment is terminated anytime following the one year anniversary of your Commencement Date, an amount to be determined by the Board, in its sole discretion, prior to the first anniversary of your Commencement Date (“Severance Payment”).   The Severance Payment shall be less required tax deductions and withholdings and shall be paid in a lump sum on the 53rd day following your date of termination or such later date as is required to avoid potentially
adverse taxation under Internal Revenue Code Section 409A pursuant to Section 15 hereof.

    

b.This Agreement (and your employment) may be terminated immediately and without notice for Cause without further liability or obligation to you other than payment of compensation earned by you through the effective date of termination.   

11.  Confidential Information; Non-Solicitation of Employees.

 

a.As an employee of Lantronix, you will have access to certain Company confidential information and you may, in the course of your employment, develop certain information or inventions, which will be the property of the Company.  To protect the interests of the Company, you will be asked to sign the Company’s Employment, Confidential Information, and Invention Assignment Agreement forms as a condition of employment.  We wish to impress upon you that we do not want you to bring with you any confidential or proprietary information from a previous employer or violate any obligation you may have to that employer.

 

b.In consideration of the promises and covenants contained in this Agreement, you agree that for a period of one (1) year following your effective date of termination or resignation, you will not, either directly or indirectly, either on your own behalf or on behalf of any other person, recruit or solicit for hire any individual who is then employed by the Company.

 

c.You acknowledge and agree that the restrictions contained in Sections 11(a) and (b) are reasonable and appropriate.  You further acknowledge and agree that the restrictions contained in Sections 11(a) and (b) will not preclude you from engaging in any trade, business or profession that you are qualified to engage in.  

  

  

  

 

12.Mutual Agreement to Arbitrate.  To the fullest extent allowed by law, any controversy, claim or dispute between you and the Company (and/or any of its affiliates, owners, shareholders, directors, officers, employees, volunteers or agents) relating to or arising out of your employment or cessation of that employment will be submitted to final and binding arbitration as provided in Attachment C hereto.

 

13.Successors and Assigns.  This Agreement will be assignable by the Company to any successor or to any other company owned or controlled by the Company, and will be binding upon any successor to the business of the Company, whether direct or indirect, by purchase of securities, merger, consolidation, purchase of all or substantially all of the assets of the Company or otherwise.

14.Withholding of Taxes; Tax Reporting.  The Company may withhold from any amounts payable under this Agreement all such federal, state, city and other taxes, and may file with appropriate governmental authorities all such information, returns or other reports with respect to the tax consequences of any amounts payable under the Agreement, as may, in its judgment, be required by law.  It is expressly understood and agreed that all such taxes shall be your sole responsibility.

15.   Sections 280G and Compliance with Section 409A.

a.In the event that the severance and other benefits provided for in this agreement or otherwise payable to you (a) constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) and (b) would be subject to the excise tax imposed by Section 4999 of the Code, then such benefits shall be either be:

 

(i)delivered in full, or

 

(ii)delivered as to such lesser extent which would result in no portion of such severance benefits being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account the applicable federal, state and local income and employment taxes and the excise tax imposed by Section 4999, results in the receipt by you, on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under Section 4999 of the Code.  Unless the Company and you otherwise agree in writing, any determination required under this Section 5
will be made in writing by a national “Big Four” accounting firm selected by the Company or such other person or entity to which the parties mutually agree (the “Accountants”), whose determination will be conclusive and binding upon you and the Company for all purposes.  For purposes of making the calculations required by this Section 15a, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and you shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section.  The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations
contemplated by this Section.  Any reduction in payments and/or benefits required by this Section shall occur in the following order: (A) cash payments shall be reduced first and in reverse chronological order such that the cash payment owed on the latest date following the occurrence of the event triggering such excise tax will be the first cash payment to be reduced; and (B) accelerated vesting of stock awards shall be cancelled/reduced next and in the reverse order of the date of grant for such stock awards (i.e., the vesting of the most recently granted stock awards will be reduced first), with full-value awards reversed before any stock option or stock appreciation rights are reduced.

 

b.This Agreement is intended to be exempt to the extent possible from the requirements of Internal Revenue Code Section 409A, including current and future guidance and regulation interpreting such provisions.  Notwithstanding anything to the contrary in this Agreement, no Deferred Compensation Separation Benefits (as defined below) payable under this Agreement will be considered due or payable until and unless you have a “separation from service” within the meaning of Section 409A of the Code, as amended and the final regulations and any guidance promulgated under Section 409A, as each may be amended from time to time
(together, “Section 409A”).  Notwithstanding anything to the contrary in this Agreement, if you are a “specified employee” within the meaning of Section 409A at the time of your “separation from service” other than due to your death, then any severance benefits payable pursuant to this Agreement and any other severance payments or separation benefits, that in each case when considered together may be considered deferred compensation under Section 409A (together, the “Deferred Compensation Separation Benefits”) and are otherwise due to you on or within the six (6) month period following your “separation from service” will accrue during such six (6) month period and will instead become payable in a lump sum payment on the date six (6) months and one (1) day following the date of your “separation from
service.”  All subsequent Deferred Compensation Separation Benefits, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit.  Each payment and benefit payable under this Agreement is intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.  It is the intent of this Agreement to comply with the requirements of Section 409A so that none of the severance payments and benefits to be provided under this Agreement will be subject to the additional tax imposed under Section 409A, and any ambiguities in this Agreement will be interpreted to so comply.  The Company and you agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid
imposition of any additional tax or income recognition under Section 409A prior to actual payment to you.

  

  

  

 

c.Any good faith determinations made by the Company or the Accountants hereunder shall be final, biding and conclusive upon you and the Company.

 16.   Immigration; Background Check.

 

a.For purposes of federal immigration law, you will be required to provide to the Company documentary evidence of your identity and eligibility for employment in the United States.  Such documentation must be provided to us within three (3) business days of your Commencement Date, or our employment relationship with you may be terminated.

 

b.This offer of employment is also contingent upon the successful verification of the information you provided to the Company during your application process, as well as a general background check performed by the Company to confirm your suitability for employment.  By accepting this offer of employment, you warrant that all information provided by you is true and correct to the best of your knowledge, you agree to execute any and all documentation necessary for the Company to conduct a background check and you expressly release the Company from any claim or cause of action arising out of the Company’s verification of such
information.

 

17.Entire Agreement.  This Agreement, together with the documents referenced herein, contains the entire integrated agreement of the parties hereto with respect to the subject matter hereof and it supersedes any and all other agreements, either oral or in writing, between the parties hereto with respect to the subject matter hereof.  Each party to this Agreement acknowledges that no representations, inducements, promises or agreements, written, oral or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not embodied herein,
and that no other agreement, statement or promise not contained in this Agreement shall be valid or binding.  This Agreement may not be modified or amended by oral agreement, but only by an agreement in writing signed by an authorized member of the Board and you.

  

  

  

 

We are excited to have you join Lantronix, and we look forward to your Commencement Date on September 26, 2011.  Please sign, date and return the enclosed copy of this Agreement to me for our files to acknowledge your agreement with the above.

 

	  	
Very truly yours,

	  	  
	  	
Lantronix, Inc.

	  	  
	  	
By: /s/ Kurt Busch                                         

	  	
      Kurt Busch

	  	
      Chief Executive Officer, 

	  	
      Lantronix, Inc.

 

Acknowledged and Agreed:

 

 

/s/ Jeremy Whitaker                       

 

Jeremy Whitaker

 

Dated:  9/9_____________________, 2011

 

  

  

  

ATTACHMENT A

 

CHANGE OF CONTROL

 

 

 

	
I.

	
Definitions.

	 	
a.“

	
Change in Control” means the occurrence of any of the following events:

	
  

	
(i)

	
Any “person” (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than the TL Parties (as defined below) becomes the “beneficial owner” (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or,  more of the total voting power represented by the Company’s then outstanding voting securities; or

	
  

	
(ii)

	
The consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets, other than to the TL Parties; or

	
  

	
(iii)

	
The consummation of a merger or consolidation of the Company with any other corporation, other than (Y) to the TL Parties or (Z) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least seventy percent (70%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation.

 

	 	
b.

	
“Good Reason” for you means only if you resign within one hundred and twenty (120) days after the Company has taken any of the following actions without your express written consent: (i) the Company “Substantially Lessens Your Title” (as defined herein); (ii) the Company “Substantially Reduces Your Senior Authority” (as defined herein); (iii) the Company assigns material duties to you which are materially lesser than the duties commensurate  with your then-current status; (iv) the Company reduces your  base
 salary  or  benefits  from  that  in  effect  at  the  Commencement   Date  (unless  such reduction is in connection with a salary or benefit reduction program of general application at the senior level executives of the Company); or(v) the Company fails to obtain the assumption of this Agreement by any successor or assign of the Company. Notwithstanding  the foregoing, Good  Reason shall  not exist unless you provide the Company
written notice of the existence of the one or more of the actions, conditions or events set forth above in this definition of Good Reason within ninety (90) days after the initial existence or occurrence of such action, condition  or event, and if such action, event or condition is curable, the Company fails to cure such action, event or condition  within thirty (30) days after its receipt of such notice.

 

	 	
c.

	
“Market Cap” shall mean a dollar amount that equals the share price multiplied by the number of outstanding shares (shares that have been authorized, issued, and purchased by investors) of the Company.

 

	 	
d.

	
"Substantially Lessens Your Title" shall mean that you do not have the title of Chief Financial Officer of the Company or an enterprise equivalent to the Company.

 

	 	
e.

	
"Substantially Reduces Your Senior Authority" shall mean that you no longer have substantially similar authority, scope of responsibility,  functions or duties as Chief  inancial Officer of the Company or an enterprise equivalent to the Company.

 

 

 

  

  

  

 

	 	
f.

	
“TL Parties” shall mean, either individually or collectively, Bernhard Bruscha, TL Investments GmbH, any party or entity affiliated with the aforementioned, including but not limited to any “group” (as defined in Section 13(d)(3) of the Exchange Act) to which any of the aforementioned belong.

 

 

	
II.

	
Change of Control Benefits.

  

	 	
a.

	
In the event of a Change of Control where the Market Cap of the Company is equal to or less than $50 million, the Company shall immediately vest the 55,000 Incentive Stock Options described in Section 4 of the Agreement,provided, that if such aforementioned Change of Control results in your resignation for Good Cause, the Company shall pay you severance, in lieu of the severance otherwise payable to you under Section 10(a) hereof, in an amount equivalent to six
(6) months of your then current Base Salary.  Such payment shall be subject to the effectiveness of the release of claims referred to in Section 10(a) and subject to the same timing and other terms set forth in Section 10(a).

 

	 	
b.

	
In the event of a Change of Control where the Market Cap of the Company is greater than $50 million, the Company shall immediately vest the 55,000 Incentive Stock Options described in Section 4 of the Agreement,provided, that if such aforementioned Change of Control results in your resignation for Good cause, the Company shall pay you severance, in lieu of the severance otherwise payable to you under Section 10(a) hereof, an amount equivalent to twelve (12)
months of your then current Base Salary. Such payment shall be subject to the effectiveness of the release of claims referred to in Section 10(a) and subject to the same timing and other terms set forth in Section 10(a).

 

 

 

 

 

 

 

 

 

 

 

  

  

  

ATTACHMENT B

 

 

“Cause” shall include but not me limited to, the following: (i) your commission of a crime or your possession, use or sale of a controlled substance (other than the use or possession of a legally prescribed medication used for its prescribed purposes); (ii) your significant neglect, or materially inadequate performance of, your duties as an employee of the Company; (iii) your breach of a fiduciary duty to the Company or its shareholders; (iv) your willful breach of a duty in the course of your employment; (v) your violation of the Company’s personnel or business policies; (vi) your willful misconduct; (vii) your death; or
(viii) your disability.  For purposes of this Agreement, you shall be considered disabled if you have been physically or mentally unable to perform your job duties hereunder for (x) a continuous period of at least one hundred twenty (120) days or (y) a total of one hundred fifty (150) days during any one hundred and eighty (180) day period, and you have not recovered and returned to the full time performance of your duties within thirty (30) days after written notice is given to you by the Company following such 120 day period or 180 day period, as applicable.  Notwithstanding the foregoing, Cause shall not exist under any definition set out in subsection (ii), (Iii), (iv), (v), or (vi) unless the Company provides you with written notice of the existence of one or more of the actions, conditions or events set forth above in such definition of Cause, and if such
action, event or condition is curable, you fail to cure such action, event or condition within thirty (30) days after receipt of such notice.

 

 

 

 

 

 

 

 

 

 

 

 

  

  

  

ATTACHMENT C

 

MUTUAL AGREEMENT TO ARBITRATE

 

 

To the fullest extent allowed by law, any controversy, claim or dispute between Executive and the Company (and/or any of its affiliated, subsidiary, or related entities, owners, directors, officers, employees, volunteers or agents) relating to or arising out of this Agreement or Executive's employment (or the cessation thereof), will be submitted to final and binding arbitration in Orange County, California, for determination in accordance with the American Arbitration Association's ("AAA") Employment Arbitration Rules as the exclusive remedy for such controversy, claim or dispute.  In any such arbitration, the parties may conduct discovery to the same extent as would be permitted in a court of law.  The arbitrator shall issue a reasoned, written decision, and shall have
full authority to award all remedies which would be available in court.  The Company shall pay the arbitrator's fees and any AAA administrative expenses.  Any judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.  Possible disputes covered by the above include (but are not limited to) unpaid wages, breach of contract (including this Agreement), torts, violation of public policy, discrimination, harassment, or any other employment-related claims under laws including, but not limited to, Title VII of the Civil Rights Act of 1964, the Americans With Disabilities Act, the California Labor Code, the California Fair Employment and Housing Act, the Age Discrimination in Employment Act, the Americans with Disabilities Act, and any other statutes or laws relating to Executive’s relationship with the Company
regardless of whether such dispute is initiated by Executive or the Company.  Thus, this bilateral arbitration agreement fully applies to any and all claims that the Company may have against Executive, including but not limited to claims for misappropriation of Company property, disclosure of proprietary information or trade secrets, interference with contracts, trade libel, gross negligence, or any other claim for alleged wrongful conduct or breach of the duty of loyalty.  However, claims for workers’ compensation benefits, unemployment insurance and those arising under the National Labor Relations Act (or any other claims where mandatory arbitration is prohibited by law) are not covered by this arbitration agreement, and such claims may be presented to the appropriate court or government agency.  BY AGREEING TO THIS BINDING ARBITRATION PROVISION,
BOTH YOU AND THE COMPANY GIVE UP ALL RIGHTS TO TRIAL BY JURY.  

 

 

This mutual arbitration agreement is to be construed as broadly as is permissible under applicable law.

 

 

	
EXECUTIVE

	
LANTRONIX INC. (the “Company”)

	
/s/ Jeremy Whitaker_________________________

	
By: /s/ Kurt Busch_________________________

	
Jeremy Whitaker

	
Title: CEO________________________

	
Dated:__9/9__________________, 2011

	
Dated: __9/9________________, 2011ex10-1.htm

2008 NON-EMPLOYEE DIRECTOR LONG-TERM INCENTIVE PLAN

Section 1.    Establishment and Purposes of the Plan.

(a)           Purpose.  The purposes of this ePlus inc. 2008 Non-Employee Director Long-Term Incentive Plan (the “Plan”) are to attract, retain and compensate for service as members of the Board of Directors of ePlus inc. (the “Company”) highly qualified individuals who are not current employees of the Company and to enable them to
increase their ownership in the Company’s Common Stock.  The Plan will be beneficial to the Company and its stockholders since it will allow these Directors to have a greater personal financial stake in the Company through the ownership of Common Stock, in addition to underscoring their common interest with stockholders in increasing the long-term value of the Common Stock.

(b)           Effective Date; Shareholder Approval.  The Plan is effective September 15, 2008, subject to the approval by the Company’s shareholders.

Section 2.    Definitions.

As used herein, the following definitions shall apply:

“Affiliate” shall mean (i) any entity that, directly or through one or more intermediaries, is controlled by the Company and (ii) any entity in which the Company has a significant equity interest, as determined by the Committee.

“Applicable Laws” means the requirements relating to the administration of equity plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Restricted Shares are, or will be, granted under the Plan.

“Board” means the Board of Directors of the Company.

“Change in Control” means the occurrence of any of the following events with respect to the Company:

(i) the consummation of any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of Common Stock immediately prior to the merger own more than fifty percent (50%) of the outstanding common stock of the surviving corporation immediately after the merger; or

(ii) the consummation of any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company, other than to a subsidiary or affiliate; or

(iii) any action pursuant to which any person (as such term is defined in Section 13(d) of the Exchange Act), corporation or other entity shall become the “beneficial owner” (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of shares of capital stock entitled to vote generally for the election of directors of the Company (“Voting Securities”) representing more than fifty (50%) percent of the combined voting power of the Company’s then outstanding Voting Securities (calculated as provided in Rule 13d-3(d) in the case of rights to acquire any such securities); or

(iv) the individuals (x) who, as of the Effective Date, constitute the Board (the “Original Directors”) and (y) who thereafter are elected to the Board and whose election, or nomination for election, to the Board was approved by a vote of a majority of the Original Directors then still in office (such Directors being called “Additional Original Directors”) and (z) who thereafter are elected to the Board and whose election or nomination for election to the Board was approved by a vote of a majority of the Original Directors and Additional Original Directors then still in office,
cease for any reason to constitute a majority of the members of the Board; or

 

(v) the dissolution or liquidation of the Company.

“Code” means the Internal Revenue Code of 1986, as amended.

“Committee” means a committee designated by the Board and composed of not less than two “Non-Employee Directors” as defined in Rule 16b-3 under the Exchange Act, or any successor rule or definition adopted by the Securities and Exchange Commission.

“Common Stock” means the common stock, par value $0.01 per share, of the Company.

“Director” means a member of the Board.

“Disability” means any illness or other physical or mental condition of a Participant which renders the Participant incapable of performing his or her customary and usual duties for the Company, or any medically determinable illness or other physical or mental condition resulting from a bodily injury, disease, or mental disorder that in the judgment of the Committee is permanent and continuous in nature. The Committee may require such medical or other evidence as it deems necessary to judge the nature and permanency of the Participant’s condition.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Fair Market Value” means, as of any date, the value of Common Stock determined as follows:

(i) if the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq Global Market or The Nasdaq Capital Market of The Nasdaq Stock Market, the fair market value of a share of Common Stock shall be the closing sales price of a share of Common Stock as quoted on such exchange or system for such date (or the most recent trading day preceding such date if there were no trades on such date), as reported in The Wall Street Journal or such other source as the Committee deems reliable;

(ii) if the Common Stock is regularly quoted by a recognized securities dealer but is not listed in the manner contemplated by clause (i) above, the Fair Market Value of a Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the day of determination, as reported in The Wall Street Journal or such other source as the Committee deems reliable; or

(iii) if neither clause (i) above nor clause (ii) above applies, the fair market value of a share of Common Stock shall be determined in good faith by the Committee based on the reasonable application of a reasonable valuation method.

“Outside Director” means any Director who, on the date such person is to receive a grant of Restricted Shares hereunder is not a current employee of the Company or any of the Company’s subsidiaries.

“Participant” shall mean any Outside Director who holds a Restricted Stock Award granted or issued pursuant to the Plan.

“Plan” means this ePlus inc. 2008 Non-Employee Director Long-Term Incentive Plan.

“Restricted Shares” means Shares subject to a Restricted Stock Award.

“Restricted Stock Agreement” means any written agreement, contract, or other instrument or document, including an electronic communication, evidencing the terms and conditions of a Restricted Stock Award.

“Restricted Stock Award” means a grant of Restricted Shares pursuant to Section 7 of the Plan.

“Share” means a share of Common Stock, as adjusted in accordance with Section 9 of the Plan.

Section 3.    Stock Subject to the Plan.

Subject to the provisions of Section 9 of the Plan, the maximum aggregate number of Shares that may be issued as Restricted Shares under the Plan is two hundred fifty thousand (250,000) Shares.  The Shares may be authorized, but unissued, or treasury Shares.  Restricted Shares that have been transferred back to the Company shall be available for future grants of Restricted Shares under the Plan.

Section 4.    Administration of the Plan.

(a)            Administration.  The Plan shall be administered by the Committee.  The Committee shall have the authority, in its discretion:

(i)             to determine the Fair Market Value of Common Stock;

(ii)            to approve forms of agreement for use under the Plan;

(iii)           to determine the number of Shares that may be issued as Restricted Shares and the terms and conditions of such Restricted Shares;

(iv)           to construe and interpret the terms of the Plan;

(v)            to prescribe, amend and rescind rules and regulations relating to the Plan;

(vi)           to allow Participants to satisfy withholding tax obligations by having the Company withhold from the shares of Common Stock to be issued upon vesting of Restricted Shares that number of Shares having a Fair Market Value equal to the amount required to be withheld, provided that withholding is calculated at the minimum statutory withholding level.  The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined.  All determinations to have Shares withheld for this purpose shall be made by the Committee in its discretion;

(vii)          to instruct a corporate officer to execute on behalf of the Company any instrument required to effect the grant of a Restricted Stock Award granted by the Committee; and

(viii)         to make all other determinations deemed necessary or advisable for administering the Plan.

(b)           Effect of Committee’s Decision.  The Committee’s decisions, determinations and interpretations shall be final and binding on all Participants and anyone else who may claim an interest in Restricted Shares.

Section 5.    Eligibility.

The only persons who shall be eligible to receive Restricted Stock Awards under the Plan shall be persons who, on the date such Awards are granted, are Outside Directors.

Section 6.    Term of the Plan.

No Restricted Stock Award may be granted under the Plan after September 15, 2018.

 

Section 7.    Grants of Restricted Stock Awards.

 

(a)           Initial Grant.  Each individual who first becomes an Outside Director on or after the date of the approval of this Plan by the stockholders of the Company shall, upon first qualifying as an Outside Director, automatically be granted a number of Restricted Shares, on the terms and conditions set forth in Section 8 below, having a Fair Market Value on the date of grant (determined without regard to the restrictions applicable thereto) equal to the product of the amount of cash compensation earned by an individual Outside Director during the twelve months immediately prior to his
becoming an Outside Director multiplied by the quotient of the number of days until the next Annual Grant Date (as defined below) divided by 365; provided, however, that grants of Restricted Shares under this Plan shall not be made until a Form S-8 registration statement in respect of the Shares is filed with, and declared effective by, the Securities and Exchange Commission.

 

(b)            Annual Grant.  On September 25th of each year (the “Annual Grant Date”), beginning with September 25, 2008, or the next following business day if September 25th is not a business day, each Outside Director shall automatically be granted a number of Restricted Shares, on the terms and conditions set forth in Section 8 below, having a Fair Market Value on the
date of grant (determined without regard to the restrictions applicable thereto) equal to the aggregate dollar amount of cash compensation earned by an individual Outside Director who served on the board  during the Company’s entire fiscal year ended immediately prior to the respective Annual Grant Date; provided, however, that grants of Restricted Shares under this Plan shall not be made until a Form S-8 registration statement in respect of the Shares is filed with, and declared effective by, the Securities and Exchange Commission.        

 

(c)            Special Grant.  On the date which is two business days after the date that a Form S-8 registration statement in respect of the Shares is filed with, and declared effective by, the Securities and Exchange Commission, each Outside Director who was serving as an Outside Director on the day prior to the date of the approval of this Plan by the stockholders of the Company shall automatically be granted a number of Restricted Shares, on the terms and conditions set forth in Section 8 below, having a Fair Market Value on the date of grant (determined without regard to the restrictions
applicable thereto) equal to thirty-five thousand dollars ($35,000).

 

(d)            Stock Fee Election.   An Outside Director may make an election (a "Stock Fee Election") to receive Restricted Shares in lieu of all or any part of the cash compensation payable to him or her for service on the Board for a calendar year.  Any Stock Fee Election and any change or revocation thereof shall be made by delivering written notice thereof to the Committee prior to the end of the calendar year preceding the calendar year of service for which it is to be effective.   Such Stock Fee Election shall remain in effect for each subsequent calendar year
of service unless changed.  An Outside Director may not elect to change his or her Stock Fee Election for a calendar year after the last day of the calendar year preceding the calendar year of service for which the election is made.  Any Restricted Stock that relates to a Stock Fee Election shall be treated as a Restricted Stock Award for purposes of this Plan.  The number of shares shall be determined by dividing the cash compensation deferred for a calendar quarter of service by the Fair Market Value as of the first business day of the following calendar quarter, and each such first business day shall be considered the grant date of the Restricted Stock Award.

 

Section 8.    Terms of Restricted Stock Awards.

Except as provided herein, Restricted Shares shall be subject to restrictions (“Restrictions”) prohibiting such Restricted Shares from being sold, transferred, assigned, pledged or otherwise encumbered or disposed of.  The Restrictions with respect to each award of Restricted Shares shall lapse as to one-half of such Restricted Shares on each of the one-year and second-year anniversary date of the grant of such award; provided, however, that the Restrictions with respect to such Restricted Shares shall lapse immediately in the
event that (i) the Participant is nominated for a new term as an Outside Director but is not elected by stockholders of the Company, or (ii) the Participant ceases to be a member of the Board due to death, disability or mandatory retirement (if any). Notwithstanding the foregoing, the Restrictions with respect to all of a Participant's Restricted Shares shall lapse immediately prior to a Change in Control provided that the Participant is a member of the Board immediately prior to such Change in Control.

The Company shall issue, in the name of each Participant to whom Restricted Shares have been granted, stock certificates (in tangible or electronic form) representing the total number of Restricted Shares granted to such Participant as soon as reasonably practicable after the grant.  However, the Company or its transfer agent shall hold such certificates, properly endorsed for transfer, for the Participant’s benefit until such time as the Restriction Period applicable to such Restricted Shares lapses.  Upon the expiration or termination of the Restricted Period, the restrictions applicable to the Restricted Shares shall lapse and a stock certificate for the number of Restricted Shares with
respect to which the restrictions have lapsed shall be delivered, free of all such restrictions, to the Participant or his or her beneficiary or estate, as the case may be.  Except as described in the above paragraph, in the event that a Participant ceases to be a member of the Board before the applicable Restriction Period has expired or under circumstances in which the Restriction Period does not otherwise lapse, the Restricted Shares granted to such Participant shall thereupon be forfeited and transferred back to the Company.

 

During the Restriction Period, a Participant shall have the right to vote his or her Restricted Shares.  At the end of the Restriction Period, the Participant shall have the right to receive any cash dividends, with respect to such Restricted Shares, that were paid during the Restriction Period.  All distributions, if any, received by a Participant with respect to Restricted Shares as a result of any stock split, stock distribution, combination of shares, or other similar transaction shall be subject to the same restrictions as are applicable to the Restricted Shares to which such distributions relate.

Section 9.    Adjustments Upon Changes in Capitalization.

Subject to any required action by the stockholders of the Company, the number of shares of Common Stock covered by each outstanding Restricted Stock Award, and the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Restricted Stock Awards have yet been granted or which have been returned to the Plan upon cancellation or expiration of a Restricted Stock Award, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common
Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Committee, whose determination in that respect shall be final, binding and conclusive.  Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to a Restricted Stock Award.

Section 10.    Grant Agreement.

Each grant of a Restricted Stock Award under the Plan will be evidenced by a Restricted Stock Agreement.  Such document will contain such provisions as the Committee may in its discretion deem advisable, provided that such provisions are not inconsistent with any of the provisions of the Plan.

Section 11.    Amendment and Termination of the Plan.

(a)           Amendment and Termination.  The Board may at any time amend, alter, suspend or terminate the Plan.

(b)           Shareholder Approval.  The Company shall obtain shareholder approval of any Plan amendment to the extent necessary to comply with Applicable Laws.

(c)           Effect of Amendment or Termination.  No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Participant, unless mutually agreed otherwise between the Participant and the Committee, which agreement must be in writing and signed by the Participant and the Company.  Termination of the Plan shall not affect the Committee’s ability to exercise the powers granted to it hereunder with respect to Restricted Shares granted under the Plan prior to the date of such termination.

Section 12.    Conditions Upon Issuance of Shares.

(a)           Legal Compliance.  Shares shall not be issued pursuant to a Restricted Stock Award unless the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance.

(b)           Investment Representations.  As a condition to the issuance of Restricted Shares, the Company may require the Participant to represent and warrant at the time of any such issuance that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.  Not in limitation of any of the foregoing, in any such case referred to in the preceding sentence the Committee may also require the Participant to execute and deliver documents containing
such representations (including the investment representations described in this Section 12(b) of the Plan), warranties and agreements as the Committee or counsel to the Company shall deem necessary or advisable to comply with any exemption from registration under the Securities Act of 1933, as amended, any applicable State securities laws, and any other applicable law, regulation or rule.

(c)           Additional Conditions.  The Committee shall have the authority to condition the grant of any Restricted Shares in such other manner that the Committee determines to be appropriate, provided that such condition is not inconsistent with the terms of the Plan.

Section 13.    Inability to Obtain Authority.

The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

Section 14.    Reservation of Shares.

The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

Section 15.    Stockholder Approval.

The Plan shall be subject to approval by the stockholders of the Company.  Such stockholder approval shall be obtained in the manner and to the degree required under Applicable Laws.

Section 16.    Withholding; Notice of Sale.

Each Participant shall, no later than the date as of which the value of a Restricted Stock Award or of any Shares or other amounts received thereunder first becomes includable in the gross income of the Participant for Federal income tax purposes, pay to the Company, or make arrangements satisfactory to the Committee regarding payment of, any Federal, state, or local taxes of any kind required by law to be withheld with respect to such income.  The Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant.  The Company’s obligation to deliver stock certificates to any Participant is subject to and
conditioned on any such tax obligations being satisfied by the Participant.  Subject to approval by the Committee, a Participant may elect to have the minimum required tax withholding obligation satisfied, in whole or in part, by (i) authorizing the Company to withhold from Shares to be issued pursuant to any Restricted Stock Award a number of Shares with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the withholding amount due, or (ii) transferring to the Company Shares owned by the Participant with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the minimum withholding amount due.

Section 17.      Code Section 83(b) Elections

 

Neither the Company, any Affiliate, nor the Committee shall have any responsibility in connection with a Participant’s election, or attempt to elect, under Code section 83(b) to include the value of a Restricted Stock Award in the Participant’s gross income for the year of payment.  Any Participant who makes a Code section 83(b) election with respect to any such Restricted Stock Award shall promptly notify the Committee of such election and provide the Committee with a copy thereof.

 

Section 18.       No Right to Continue as a Director

Neither this Plan, nor the granting of a Restricted Stock Award under this Plan, nor any other action taken pursuant to this Plan shall constitute or be evidence of any agreement or understanding, express or implied, that the Company will retain a director for any period of time, or at any particular rate of compensation.

Section 19.    Governing Law.

This Plan shall be governed by the laws of the State of Delaware.

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