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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MLC HOLDINGS, INC.
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(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction
applies: N/A
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(2) Aggregate number of securities to which transaction
applies: N/A
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined): N/A
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(4) Proposed maximum aggregate value of transaction: N/A
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(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule
and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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MLC HOLDINGS, INC.
11150 Sunset Hills Road, Suite 110
Reston, Virginia 20190-5321
September 8, 1997July 29, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of MLC
Holdings, Inc. on September 30, 1997.16, 1998. The Annual Meeting will begin at 10:00
a.m. local time at The Four Seasons Hotel, 2800 Pennsylvania Avenue,
N.W., Washington, DC. 20007the Hyatt Regency Reston, 1800 Presidents Street, Reston, VA
20191.
Information regarding each of the matters to be voted upon at the Annual Meeting
is contained in the attached Proxy Statement. We urge you to read the Proxy
Statement carefully. The Proxy Statement is being mailed to all Stockholders on
or about September 8, 1997.August 7, 1998.
Because it is important that your shares be voted at the Annual Meeting, whether
or not you plan to attend in person, we urge you to complete, date, and sign the
enclosed proxy card and return it as promptly as possible in the accompanying
envelope. If you are a Stockholder of record and do attend the meeting and wish
to vote your shares in person, even after returning your proxy, you still may do
so.
We look forward to seeing you in Washington, DCReston, VA on September 30, 1997.16, 1998.
Very truly yours,
Phillip G. Norton, President
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MLC HOLDINGS, INC.
11150 Sunset Hills Road, Suite 110
Reston, Virginia 20190-5321
----------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 30, 1997
------------------------------------16, 1998
----------------------------------------
TO THE STOCKHOLDERS OF MLC HOLDINGS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of MLC Holdings,
Inc., a Delaware corporation (the "Company"), will be held on September 30, 1997,16,
1998, at The Four Seasons Hotel, 2800 Pennsylvania Avenue, N.W.,
Washington, DC 20007,the Hyatt Regency Reston, 1800 Presidents Street, Reston, VA 20191, at
10:00 a.m. local time, and thereafter as it may from time to time be adjourned
(the "Annual Meeting"), for the purposes stated below:
1. To elect onetwo Class I directorII directors to serve for three years and until his
successor hastheir
respective successors have been duly elected and shall qualify.
2. To approve and adopt an amendment to the Company's Certificate of
Incorporation to increase the number of shares of authorized stock of
the Company from 12 million shares (10 million shares of common stock,
par value $0.01, and 2 million preferred shares) to 27 million shares
(25 million shares of common stock, par value $0.01, and 2 million
preferred shares).1998 Long-Term Incentive Plan.
3. To approve amendments to the MLC Holdings, Inc. Master Stock Incentive
Plan (formerly the 1996 Stock Incentive Plan).
4. To approve adoption of the MLC Holdings, Inc. Employee Stock Purchase
Plan (a component plan of the Master Stock Incentive Plan).
5. To approve amendments to the MLC Holdings, Inc. Amended and Restated
Outside Director Stock Plan (formerly the 1996 Outside Director Stock
Option Plan).
6. To approve amendments to the MLC Holdings, Inc. Amended and Restated
Incentive Stock Option Plan (formerly the 1996 Incentive Stock Option
Plan).
7. To approve amendments to the MLC Holdings, Inc. Amended and Restated
Nonqualified Stock Option Plan (formerly the 1996 Nonqualified Stock
Option Plan).
8. To ratify the appointment of Deloitte & Touche LLP as the Company's
independent auditors for the Company's fiscal year ending March 31, 1998.
9.1999.
To transact such other business as may properly come before the Annual
Meeting.
All Stockholders are cordially invited to attend the Annual Meeting. Under the
provisions of the Bylaws, the Board of Directors has fixed the close of business
on August 14, 1997,July 23, 1998, as the record date for the determination of Stockholders
entitled to notice of and to vote at the Annual Meeting and any adjournments
thereof. The stock transfer books will not be closed.
Stockholders should note that the Company's By-Laws provide that in order for a
stockholder to bring business before a meeting or to make a nomination for the
election of directors, such stockholder must give written notice complying with
the requirements of the By-Laws to the Secretary of the Company not later than
90 days in advance of such meeting or, if later, the seventh day following the
first public announcement of the date of such meeting.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE DATE AND SIGN THE
ENCLOSED FORM OF PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE TO FIRST
UNION NATIONAL BANK, 1525 W.W.T. HARRIS BLVD., 3C3, CHARLOTTE, NC 28288-1113.
MLC HOLDINGS, INC.
September 8, 1997 /s/----------------------------------
July 29, 1998 Kleyton L. Parkhurst, ---------------------------------
Kleyton L. Parkhurst, Secretary
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MLC HOLDINGS, INC.
PROXY STATEMENT
DATED SEPTEMBER 8, 1997Dated July 29, 1998
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Directors of MLC Holdings, Inc., a Delaware corporation (the
"Company"), for use at the annual meeting of the Company's Stockholders to be
held at The Four Seasons Hotel, 2800 Pennsylvania Avenue,
N.W., Washington, DC, 20007 on September 30, 199716, 1998, at the Hyatt Regency Reston, 1800 Presidents Street,
Reston, VA 20191, at 10:00 a.m., local time, and at any adjournments thereof (the
"Annual Meeting"). The principal executive offices of the Company are located at
11150 Sunset Hills Road, Reston, Virginia 20190-5321; and its telephone number
is (703) 834-5710.
The Annual Meeting has been called to consider and take action on the following
proposals: (i) to elect onetwo Class I directorII directors to serve for three years and
until his successor hastheir successors have been duly elected and shall qualify; (ii) to approve
and adopt an amendment to the Company's Articles of Incorporation to
increase the number of shares of authorized stock of the Company from 12
million shares (10 million shares of common stock, par value $0.01, and 2
million preferred shares) to 27 million shares (25 million shares of common
stock, par value $0.01, and 2 million preferred shares);1998 Long Term Incentive Plan; (iii) to approve
amendments to the MLC Holdings, Inc. Master Stock Incentive Plan (formerly
the 1996 Stock Incentive Plan); (iv) to approve adoption of the MLC Holdings,
Inc. Employee Stock Purchase Plan (a component plan of the Master Stock
Incentive Plan); (v) to approve amendments to the MLC Holdings, Inc. Amended
and Restated Outside Director Stock Plan (formerly the 1996 Outside Director
Stock Option Plan); (vi) to approve amendments to the MLC Holdings, Inc.
Amended and Restated Incentive Stock Option Plan (formerly the 1996 Incentive
Stock Option Plan); (vi) to approve amendments to the MLC Holdings, Inc.
Amended and Restated Nonqualified Stock Option Plan (formerly the 1996
Nonqualified Stock Option Plan)(viii) to ratify the appointment of Deloitte &
Touche LLP as the Company's independent auditors for the Company's fiscal year
ending March 31, 1998;1999; and (viii)(iv) to transact such other business as may properly
come before the meeting.
The Company's Board of Directors has taken affirmative action with respect to
each of the foregoing proposals and recommends that the Stockholders vote in
favor of each of the proposals. All of the holders of record of common stock,
$.01 par value (the "Common Stock"), of the Company at the close of business on
August 14, 1997July 23, 1998 (the "Record Date") will be entitled to vote at the Annual
Meeting. The stock transfer books will not be closed.
THE APPROXIMATE DATE ON WHICH THE NOTICE OF ANNUAL MEETING OF STOCKHOLDERS,
PROXY STATEMENT AND PROXY CARD ARE FIRST SENT OR GIVEN TO STOCKHOLDERS IS SEPTEMBER 8, 1997.
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7, 1998.
VOTING REQUIREMENTS
As of August 14, 1997,July 23, 1998, the Record Date, there were outstanding 5,672,3076,345,483 shares of
the Common Stock. Only holders of shares of Common Stock of record as of the
close of business on the Record Date will be entitled to vote at the Annual
Meeting, such holders being entitled to one vote on all matters presented at the
Annual Meeting for each share held of record. The holders of record of a
majority in voting interest of the shares of stock of the Company entitled to
vote thereat, present in person or by proxy, shall constitute a quorum for the
transaction of business at the Annual Meeting or any adjournment thereof. If a
quorum should not be present, the Annual Meeting may be adjourned until a quorum
is obtained. The nomineenominees to be selected as a
Class I DirectorII Directors named in Proposal
1 must receive a plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote on the election of
directors. The affirmative vote of a
majority of the outstanding stock entitled to vote on Proposal 2 is required for
the approval of Proposal 2. The approval of each other matterProposals 2 and 3 to be considered at the Annual
Meeting requireseach require the affirmative vote of at least a majority of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the matter. Abstentions and broker non-votes will be counted only for the
purpose of determining the existence of a quorum, but will not be counted as an
affirmative vote for purposes of determining whether a proposal has been
approved.
As of the Record Date, all of the present Directors, as a group of five
persons, owned beneficially 3,656,980 shares (56.6%) and all of the present
Directors and officersExecutive Officers of the Company, as a group of twelveeight persons,
owned beneficially 4,119,1303,785,240 shares (77.6%(57.9% of the total outstanding shares) of
the Company. To the knowledge of management, as of the Record Date, the only
officers, directors and nominees for director who owned beneficially five
percent or more of the Company's outstanding shares were Phillip G. Norton,
Bruce M. Bowen, William J. Slaton, Kevin M. Norton and Patrick J. Norton.
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Proxies given by Stockholders of record for use at the Annual Meeting may be
revoked at any time prior to the exercise of the powers conferred. In addition
to revocation in any other manner permitted by law, Stockholders of record
giving a proxy may revoke the proxy by an instrument in writing, executed by the
Stockholder or his attorney authorized in writing or, if the Stockholder is a
corporation, under its corporate seal, by an officer or attorney thereof duly
authorized, and deposited either at the corporate headquarters of the Company at
any time up to and including the last business day preceding the day of the
Annual Meeting, or any adjournment thereof, at which the proxy is to be used, or
with the chairman of such Annual Meeting on the day of the Annual Meeting or
adjournment thereof, and upon either of such deposits the proxy is revoked.
ALL PROXIES RECEIVED WILL BE VOTED IN ACCORDANCE WITH THE CHOICES SPECIFIED ON
SUCH PROXIES. PROXIES WILL BE VOTED IN FAVOR OF A PROPOSAL IF NO CONTRARY
SPECIFICATION IS MADE. ALL VALID PROXIES OBTAINED WILL BE VOTED AT THE
DISCRETION OF THE BOARD OF DIRECTORS WITH RESPECT TO ANY OTHER BUSINESS THAT MAY
COME BEFORE THE ANNUAL MEETING.
Solicitation of proxies may be made by use of the mails, and may also be made in
person or by telephone, E-mail,e-mail or other electronic communications. The cost of
soliciting proxies in the accompanying form will be borne by the Company. The
Company may reimburse brokerage firms and others for their expenses in
forwarding proxy materials to the beneficial owners and soliciting them to
execute the proxies.
None of the matters to be acted on at the Annual Meeting give rise to
any statutory right of a Stockholder to dissent and obtain the appraisal of or
payment for such Stockholder's shares.
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The Company's Annual Report on Form 10-K for the fiscal year ended March 31,
1997,1998, including audited financial statements, will accompany the mailing to
Stockholders of this Proxy Statement.
DISSENTERS' RIGHTS OF APPRAISAL
The Board of Directors does not propose any action for which the laws of the
state of Delaware, or the Certificate of Incorporation, By-Laws or Corporate
Resolutions of the Company provide a right of a Stockholder to dissent and
obtain payment for shares.
INTEREST OF OFFICERS AND DIRECTORS
IN MATTERS TO BE ACTED UPON
Officers or Directors of the Company have a substantial interest in certain of
the matters to be acted upon at the Annual Meeting of Stockholders: the Class I director hasII
directors have been nominated for re-election to the office of director for a
term of three years; and every Officer and Director has an interest in the
approval of the amendments to the MLC Holdings, Inc. Master
Stock Incentive Plan (formerly the 1996 Stock Incentive Plan), the adoption of the MLC Holdings, Inc. Employee Stock Purchase Plan (a component plan of the
Stock1998 Long Term Incentive Plan), the amendments to the MLC Holdings, Inc. Amended and
Restated Outside Director Stock Plan (formerly the 1996 Outside Director Stock
Option Plan), the amendments to the MLC Holdings, Inc. Amended and Restated
Incentive Stock Option Plan (formerly the 1996 Incentive Stock Option Plan),
and the amendments to the MLC Holdings, Inc. Amended and Restated Nonqualified
Stock Option Plan (formerly the 1996 Nonqualified Stock Option Plan) (Proposals
3 through 7) to the extent that such persons are or will be eligible to
participate in such Plans. Phillip G. Norton and Bruce M. Bowen, who
presently serve on the Stock Incentive Committee, are ineligible to participate
in the Master Stock Incentive Plan and its component plans while they serve as
members of the Stock Incentive Committee.Plan.
VOTING SECURITIES, PRINCIPAL HOLDERS
THEREOF, AND MANAGEMENT
Only holders of record of the outstanding 5,672,3076,345,483 shares of Common Stock as of
the close of business on the Record Date will be entitled to vote at the Annual
Meeting. Each share of Common Stock is entitled to one vote. The Company has no
other voting securities outstanding. The following table sets forth certain
information as of the Record Date with respect to: (1) each of the named
executive officer,officers in the Summary Compensation Table, Director and the Director
nominee;nominees; (2) all executive officers and Directors of the Company as a group;
and (3) all persons known by the Company to be the beneficial owners of five
percent or more of the Company's Common Stock.
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Shares Beneficially Owned
-------------------------
Name and Address of Beneficial Owner(1) Number Percent
------------------------------------ ------ -------
Phillip G. Norton(2) 2,825,500 49.53%
1019 Basil Road
McLean, Virginia 22101
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Shares Beneficially Owned
-------------------------
Name and Address of Beneficial Owner(1) Number Percent
------------------------------------ ------ -------
2,865,730 44.5%
Bruce M. and Elizabeth D. Bowen(3) 763,750 13.46%
10895 Lake Windermere Drive
Great Falls, Virginia 22066771,250 12.1%
William J. Slaton 400,000 7.05%
1850 Maple Glen
Sacramento, California 958646.3%
Patrick J. Norton(4) 363,260 5.7%
Kevin M. Norton(4) 376,500 6.64%
5920 Royal Palm
Plano, Texas 75093
Patrick J. Norton(4) 376,500 6.64%
705 Brookfield Road
Raleigh, North Carolina 276155.9%
Kleyton L. Parkhurst(5) 68,000 1.2%
605 Abbott Lane
Falls Church, Virginia 22046
Jonathan J. Ledecky 10,000 *
1400 34th Street, N.W.
Washington, D.C. 20007
Thomas K. McNamara 10,000 *
420 Weldon Drive
Westchester, PA 19380Parkhurst (5) 118,000 1.8%
Thomas B. Howard, Jr. -0-6,000 *
11565 Embers Court
Reston, VA 20191
Steven J. Mencarini -0- -0-
1921 Batten Hollow Road
Vienna, VA 221824,260 *
Terrence O'Donnell 10,000 *
5133 Yuma Street, N.W.
Washington, D.C. 20016
Carl J. Rickertsen 10,000 *
4016 Linnean Avenue, N.W.
Washington, D.C. 20008
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Shares Beneficially Owned
-------------------------
Name and Address of Beneficial Owner(1) Number Percent
------------------------------------ ------ -------
Barbara J. Simmonds 1,880 *
3053 N. Peary Street
Arlington, VA 22207C. Thomas Faulders, III --- ---
Laifer Capital Management(6) 474,000 9.2%
114 West 47th Street
New York, NY 10036532,500 9.9%
All directors and namedexecutive officers as a group
(12(8 individuals) 4,099,130 72.3%3,785,240 57.9%
- --------------------------------------
*less------------------------
* less than 1%
(1) Unless otherwise indicated and subject to community property laws where
applicable, each of the stockholders named in this table has sole voting and
investment power with respect to the shares shown as beneficially owned by such
stockholder. A person is deemed to be the beneficial owner of securities that
can be acquired by such person within 60 days upon exercise of options and
warrants. Each beneficial owner's percentage ownership is determined by assuming
options that are held by such person (but not those held by any other person)
and that are exercisable within sixty days have been exercised.
(2) Includes 2,040,000 shares held by J.A.P. Investment Group, L.P., a Virginia
limited partnership, of which J.A.P., Inc., a Virginia corporation, is the sole
general partner, and Patricia A. Norton, trustee for the benefit of Phillip G.
Norton, Jr., u/a dated as of July 20, 1983, Patricia A. Norton, trustee for the
benefit of Andrew L. Norton u/a dated as of July 20, 1983, Patricia A. Norton,
trustee for the benefit of Jeremiah O. Norton u/a dated as of July 20, 1983, and
Patricia A. Norton are the limited partners. Patricia A. Norton, spouse of
Phillip G. Norton, is the sole stockholder of J.A.P., Inc. and Phillip G. Norton
is the sole director and President of J.A.P., Inc. Phillip G. Norton holds sole
voting rights as to all of the shares of Common Stock and as to all shares of
voting stock acquired in the future held by J.A.P. Investment Group, L.P., Kevin
M. Norton and Patrick J. Norton, Jr. under the Irrevocable Proxy and Stock
Rights Agreement. See also footnote (4). Also includes 32,50097,500 shares of Common
Stock that Phillip G. Norton has rights to acquire pursuant to options, which
vested upon completion of the Offering and which are immediately exercisable and
excludes 97,50057,500 options to acquire shares of Common Stock which are not vested
and not immediately exercisable. See "Irrevocable" Irrevocable Proxy and Stock Rights
Agreement" and "Executive Compensation -- Compensation Arrangements and
Employment Agreements."
(3) Includes 600,000 shares held by Bruce M. and Elizabeth D. Bowen, as tenants
by the entirety, and includes 160,000 shares held by Bowen Holdings L.C., a
Virginia limited liability Company composed of Bruce M. Bowen and three minor
children, Daniel Bowen, Sarah Bowen and Margaret Bowen, of whom Bruce M. Bowen
is legal guardian and for which Bruce M. Bowen serves as manager. Also includes
3,75011,250 shares of Common Stock that Bruce M. Bowen has rights to acquire pursuant
to options and excludes 11,25018,750 options to acquire Common Stock which are not
vested and not immediately exercisable. See "Executive Compensation --
Compensation Arrangements and Employment Agreements."
(4) Phillip G. Norton holds sole voting rights as to all of the foregoing shares
of Common Stock under an Irrevocable Proxy and Stock Rights Agreement.Agreement except for
9,900 shares held by Kevin M. Norton as custodian for his three minor children.
See "Irrevocable Proxy and Stock Rights Agreement." Phillip G. Norton, Kevin M.
Norton and Patrick J. Norton are brothers.
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(5) Includes 13,000 shares held by Kleyton L. Parkhurst, 30,000 shares held by
three minor children of Kleyton L. Parkhurst, Charlotte A. Parkhurst, Madeline
M. Parkhurst, and Kleyton L. Parkhurst, Jr., all of which are voted by Kleyton
L. Parkhurst, Custodian, under the Virginia Uniform Gift to Minors Act and
25,00075,000 shares of Common Stock that Kleyton L. Parkhurst has option rights to
acquire, and excludes 75,00035,000 options to acquire Common Stock which are not
vested and not immediately exercisable. See "Executive Compensation --
Compensation Arrangements and Employment Agreements."
(6) On May 28, 1997, a Schedule 13D was filed by Laifer Capital
Management, Inc. According toBased on information obtained from the filing,company, Laifer Capital Management,
Inc. is the beneficial owner of 474,000532,500 shares, or 9.2%9.9%. The 474,000532,500 shares of
Common Stock beneficially owned by Laifer Capital Management, Inc. includes: (i)
267,500278,300 shares of Common Stock beneficially owned by Laifer Capital Management,
Inc. in its capacity as General Partner 6
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and investment advisor to Hilltop
Partners, L.P.; and (ii) 206,500254,200 shares of Common Stock beneficially owned by
Laifer Capital Management, Inc. in its capacity as investment advisor to various
other clients. These clients include: (a) various Wolfson family
entities ("Wolfson"), with an address at One State Street Plaza, New
York, New York 10004-1505, and (b) Hilltop Offshore Limited, a Cayman
Islands company, with an address c/o Consolidated Fund Management
Limited, P.O. Box HM 2257, Par La Ville Place, 14 Par La Ville Road,
Hamilton HMJX, Bermuda (collectively, the "Clients"). Lance Laifer, as president, sole director and principal
stockholder of Laifer Capital Management, Inc., is deemed to have the same
beneficial ownership as Laifer Capital Management, Inc.
IRREVOCABLE PROXY AND STOCK RIGHTS AGREEMENT
Phillip G. Norton and J.A.P. Investments Group, L.P., Kevin M. Norton and
Patrick J. Norton have entered into an agreement entitled "Irrevocable Proxy and
Stock Rights Agreement" pursuant to the terms of which (i) each of J.A.P.
Investments, L.P., Kevin M. Norton and Patrick J. Norton have granted Phillip G.
Norton an irrevocable proxy to vote their shares of Common Stock, which proxy
terminates only upon the death or mental incapacity of Phillip G. Norton or in
the event of his death or mental incapacity, then to Patricia A. Norton, if then
living, or upon the sale or transfer to a third party of the shares of Common
Stock subject thereto and (ii) Kevin M. Norton or Patrick J. Norton have granted
Phillip G. Norton a first right to buy their shares of Common Stock in the event
they desire to sell or transfer any shares of Common Stock to a third party. The
foregoing first right to buy is at 85% of the market value, or if sold for less,
for a period of three years from November 20, 1996 (the date of closing of the
Offering) and at 95% of the market value thereafter. Phillip G. Norton may
assign his first right to buy to a third party, and if exercised, the terms of
the Irrevocable Proxy and Stock Rights Agreement provide for a deferred purchase
money note to finance the purchase. Any shares of Common Stock which Kevin M.
Norton or Patrick J. Norton offers to Phillip G. Norton and which are
subsequently sold or transferred to a third party after Phillip G. Norton's
nonexercise of his first right to buy, will no longer be subject to the
Irrevocable Proxy and Stock Rights Agreement.
DIRECTORS AND EXECUTIVE OFFICERS
The directors, and executive officers and key employees of the Company are as
follows:
NAME AGE POSITION CLASS
- ---- --- -------- -----
Phillip G. Norton**............. 53.............................54 Chairman of the Board,
President, and Chief
Executive Officer III
Thomas B. Howard, Jr............ 50Jr............................51 Vice President; Executive
Vice President, and Chief
Operating Officer of MLC Group
Bruce M. Bowen ................. 45.................................46 Director and Executive Vice
President III
Steven J. Mencarini ............ 42............................43 Senior Vice President, and
Chief Financial Officer
JonathanC. Thomas Faulders,III..........................48 Director I
Terrence O'Donnell..............................54 Director II
Carl J. Ledecky............. 39Rickertsen..............................38 Director III
Kleyton L. Parkhurst............................35 Senior Vice President,
Secretary and Treasurer
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NAME AGE POSITION CLASS
- ---- --- -------- -----
Terrence O'Donnell............. 52 Director II
Carl J. Rickertsen............. 37 Director II
Kleyton L. Parkhurst........... 34 Secretary and Treasurer
Barbara J. Simmonds............ 37 Vice President and Controller
Kevin M. Norton**.............. 41...............................42 Vice President of Brokerage
Operations
William J. Slaton.............. 50Slaton...............................50 Vice President of Marketing
Thomas K. McNamara............. 52McNamara..............................53 Vice President
**Phillip G. Norton, Kevin M. Norton and Patrick J. Norton are brothers. All
references to a Mr. Norton contained herein refer to Mr. Phillip G. Norton
unless otherwise indicated.
The name and business experience during the past five years of each director,
executive officer and key employee of the Company are described below.
Phillip G. Norton joined the Company in March, 1993 and has served since then as
its Chairman of the Board and Chief Executive Officer. Since September 1, 1996,
Mr. Norton has served as President of the Company. From October, 1990 through
March, 1993, Mr. Norton was an investor and devoted the majority of his time to
managing his personal investments. From October, 1992 to March, 1993, Mr. Norton
served as a consultant to the Company and engaged in private investment
activity. Prior to 1990, Mr. Norton was President and Chief Executive officer of
PacifiCorp Capital, Inc. (formerly Systems Leasing Corporation), a wholly owned
indirect subsidiary of PacifiCorp, Inc., an information technology leasing
company and an SECa Securities & Exchange Commission ("SEC") reporting entity. Mr.
Norton started his leasing career as the National Sales Manager at Federal
Leasing, Inc. Mr. Norton is a 1966 graduate of the U.S. Naval Academy. Phillip
G. Norton and Kevin M. Norton are brothers.
Bruce M. Bowen founded the Company in 1990 and served as its President until
September 1, 1996. Since September 1, 1996, Mr. Bowen has served as a director
and Executive Vice President of the Company, and from September 1, 1996 to June
18, 1997, he served as Chief Financial Officer. Mr. Bowen has been a director of
the Company since it was formed. Prior to founding the Company, from 1986
through 1990, Mr. Bowen was Senior Vice President of PacifiCorp Capital, Inc.
Prior to his tenure at PacifiCorp Capital Inc., Mr. Bowen was with Systems
Leasing Corporation and Federal Leasing, Inc., where his leasing career started
in 1975. Mr. Bowen is a past President of the Association of Government Leasing
and Finance and currently serves as Vice-Chairman for the State and Local Public
Enterprise Committee of the Information Technology Association of America. Mr.
Bowen is a 1973 graduate of the University of Maryland and in 1978 received a
Masters of Business Administration from the University of Maryland.
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Thomas B. Howard, Jr. joined the Company in January of 1997 as Vice President
and Chief Operating Officer. Prior to joining the Company, Mr. Howard was
President of Allstate Leasing, Inc., a third party lessor, from 1995 to January,
1997. Mr. Howard has spent over 20 years in the banking industry, most recently
having served as President of Signet Leasing and a Senior Vice President of
Signet Bank. As President of Signet Leasing, Mr. Howard directed all of the
capital equipment financing and leasing products for commercial, federal and
municipal accounts at the leasing Company. He oversaw a staff of
60 people and effectively led the Company's growth from approximately $25
million in assets to approximately $650 million in assets in nine years, while
maintaining loan loss ratios which were less than industry standards. Mr.
Howard trained and motivated sales teams which greatly increased business
volumes and led the leasing division through three major reorganizations in
five years, and to increased profitability each year. Mr. Howard began his career at Signet
in 1975 as an Assistant Vice President at Union Trust Bancorp, one of its
predecessor banks, and is a Certified Public Accountant in the State of
Maryland. Mr. Howard is a 1970 graduate of the University of Maryland and
received an MBA in Finance from Loyola College of Maryland.
Steven J. Mencarini joined the Company in June of 1997 as Senior Vice President
and Chief Financial Officer. Prior to joining the Company, Mr. Mencarini was
Controller of the Technology Management Group of Computer Sciences Corporation,
a New York Stock Exchange company and one of the nation's three largest
information technology outsourcing organizations. At CSC, Mr.
Mencarini supervised 72 people and was responsible for all financial and tax
reporting, financial review of MIS systems, financial planning and approval for
a $150 million capital annual budget, tax research, sales and personal property
tax, asset management of owned and leased equipment, and the review and
analysis of proposed work for outsourcing contracts which included costing,
pricing, residual analysis, lease financing, and equipment liquidation. Mr. Mencarini joined CSC in
1991 as Director of Finance and was promoted to Controller in 1996. Prior to
working at CSC, Mr. Mencarini was the Vice President-Finance of PacifiCorp
Capital from 1981 to 1991, and was Senior Auditor of Deloitte Haskins & Sells
from 1979 to 1981. Mr. Mencarini is a 1976 graduate of the University of
Maryland and has a Masters of Taxation from American University.
Jonathan J. Ledecky joined the Company's Board of Directors upon the
completion of the Company's Offering. Mr. Ledecky is the founder of U.S.
Office Products Company, a Nasdaq National Market Company, and has served as
Chairman and Chief Executive Officer of U.S. Office Products Company since its
organization in October of 1994. Prior to founding U.S. Office Products
Company, Mr. Ledecky served as the President of The Legacy Fund, Inc., an
investment management firm, from 1989 through 1994 and as President and Chief
Executive Officer of Legacy Dealer Capital, Inc., a wholly owned subsidiary of
Steelcase Inc., and the nation's largest manufacturer of office furniture
products from 1991 through 1994. Prior to his tenure at The Legacy Fund, Inc.,
Mr. Ledecky was a partner at Adler and Company, an investment management firm,
and a Senior Vice President at Allied Capital Corporation, a publicly traded
investment management Company. Mr. Ledecky is a 1979 graduate of Harvard
College, and in 1983, received a Masters of Business Administration from
Harvard Graduate School of Business Administration.9
9
Terrence O'Donnell joined the Company's Board of Directors upon the completion
of the Company's Initial Public Offering. Mr. O'Donnell is a partner with the
law firm of Williams & Connolly in Washington, D.C. Mr. O'Donnell has practiced
law with Williams & Connolly since 1977, with the exception of the period from
1989 through 1992 when he served as general counsel to the U.S. Department of
Defense. Prior to commencing his law practice, Mr. O'Donnell served as 9
12
Special
Assistant to President Ford from 1974 through 1976 and as Deputy Special
Assistant to President Nixon from 1972 through 1974. Mr. O'Donnell presently
also serves as a director of IGI, Inc., a Nasdaq National Market Company
(Nasdaq: "IG") which manufactures and markets a broad range of animal health
products used in poultry production and pet care. IGI also markets cosmetics,
consumer products and human pharmaceuticals. Mr. O'Donnell is a 1966 graduate of
the U.S. Air Force Academy, and in 1971, received a Juris Doctor from Georgetown
University Law Center. Mr. O'Donnell has been nominated for re-election as a
Class II Director at the upcoming Annual Meeting.
Carl J. Rickertsen joined the Company's Board of Directors upon the completion
of the Company's Initial Public Offering. Mr. Rickertsen is a partner in Thayer
Capital Partners, a $364 million institutional private equity fund based in
Washington, D.C. Mr. Rickertsen has been with Thayer Capital Partners since
September 1994. Prior to his tenure at Thayer Capital Partners, Mr. Rickertsen
acted as a private financial consultant from 1993 through 1994 and was a partner
of Hancock Park Associates, a private equity investment firm, from 1989 through
1993. Prior to that, Mr. Rickertsen was associated with Brentwood Associates
from 1987 through 1989 and was a Financial Analyst with Morgan Stanley & Co.,
Incorporated from 1983 through 1985. Mr. Rickertsen is a 1983 graduate of
Stanford University and, in 1987, received a Masters of Business Administration
from Harvard Graduate School of Business Administration. Mr. Rickertsen has been
nominated for re-election as a Class II Director at the upcoming Annual Meeting.
C. Thomas Faulders, III joined the Board of Directors on July 14, 1998. Mr.
Faulders is the Chairman of Axiom, Inc. (Nasdaq: "AXIM"), a provider of
real-time billing data collection and processing, fraud management and traffic
management systems. Mr. Faulders was most recently Executive Vice President,
Treasurer and Chief Financial Officer of BDM International, Inc., a prominent
systems integration company which is a wholly owned subsidiary of TRW, Inc.
Prior to BDM, Mr. Faulders was Vice President and Chief Financial Officer of
Comsat Corporation; Senior Vice President, Business Marketing and Vice
President, and Vice President and Treasurer of MCI Communications Corporation;
and Treasurer of Satellite Business Systems. Mr. Faulders was in the U.S. Navy
from 1971 to 1979. He is a 1971 graduate of the University of Virginia and has
an MBA from the Wharton School of the University of Pennsylvania, Class of 1981.
Mr. Faulders is on the board of directors of Intersolv, Inc., a software
development company (Nasdaq: "ISLI"), Universal Technology and Systems, Inc., a
private company, and the Ronald Reagan Institute for Emergency Medicine at
George Washington University Hospital, the Northside Hospital Advisory Board in
Atlanta, and the Leukemia Society of America.
Kleyton L. Parkhurst joined the Company in 1991 as Director of Finance and,
since September 1, 1996, has served as Secretary and Treasurer of the Company.Company,
and since July, 1998, as Senior Vice President of Corporate Development. Mr.
Parkhurst is responsible for all of the Company's financing activities, credit review,mergers
and acquisitions, equity syndications, and he manages the Company's bank
facilities. Mr. Parkhurst has syndication expertise in commercial nonrecourse
debt, federal government leases, state and local taxable and tax-exempt leases,
and computer lease equity placements. From 1988 through 1991, Mr. Parkhurst was
an Assistant Vice President of PacifiCorp Capital, Inc. Mr. Parkhurst is a 1985
graduate of Middlebury College.
Barbara J. Simmonds, a certified public accountant, joined the Company
in 1992, has served since then as Controller and, since September 1, 1996, has
served as a vice president of the Company. From 1982 through 1990, Ms.
Simmonds was an Assistant Controller for PacifiCorp Capital, Inc. Ms. Simmonds
is a 1982 graduate of the University of Virginia.
Kevin M. Norton joined the Company in 1991 and has served since then as Vice
President of Brokerage Operations. Mr. Norton is responsible for all of the
Company's equipment brokerage activities. He has a wide variety of equipment
experience including mainframes and peripheral equipment. Prior to joining the
Company, he was employed in a similar capacity with PacifiCorp Capital, Inc. Mr.
Norton is a 1979 graduate of the University of North Carolina. Kevin M. Norton
and Phillip G. Norton are brothers.
10
10
William J. Slaton joined the Company in 1991 and has served since then as Vice
President of Marketing. His primary responsibility is the management of the
Company's marketing of its public sector finance products. From 1986 through
1991 and from 1980 through 1986, Mr. Slaton held various marketing positions,
specializing in technology financing for local and state government agencies,
with PacifiCorp Capital, Inc. and Systems Leasing Corporation. From 1969 through
1977, Mr. Slaton held various marketing positions with IBM, also focusing on
state and local government customers in Texas and California. Mr. Slaton is a
1969 graduate of the University of Texas at Austin.
Thomas K. McNamara joined the Company in 1994 upon the acquisition by the
Company of the business assets of Pilot Associates and serves as Vice President
and Regional 10
13
Manager of the Pilot Associates division. In 1989, Mr. McNamara
co-founded and was responsible for sales at Pilot Associates. Prior to founding
Pilot Associates, Mr. McNamara served as Sales Representative with Memorex
Corporation from 1974 through 1989. Mr. McNamara was also previously with
Computer Communication, Inc.,Inc from 1970 through 1974 and with Philco Ford, Inc.
from 1966 through 1970. Mr. McNamara is a 1966 graduate of the Philco Technical
Institute.
Each officer of the Company is chosen by the Board of Directors and holds his or
her office until his or her successor shall have been duly chosen and qualified
or until his or her death or until he or she shall resign or be removed as
provided by the By-Laws.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT OF 1934BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires the Company's officers and directors, and persons who own more
than ten percent of a registered class of the Company's equity securities, to
file reports of ownership and changes in ownership of equity securities of the
Company with the SecuritiesSEC and Exchange Commission (the
"Commission") and NASDAQ.NASDAQ National Market. Officers, directors and
greater-than-ten-percent stockholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms that they file.
Based solely upon a review of Forms 3, Forms 4 and Forms 5 furnished to the
Company pursuant to Rule 16a-3 under the Exchange Act, the Company believes that
all such forms required to be filed pursuant to Section 16(a) of the Exchange
Act were timely filed, as necessary, by the officers, directors and security
holders required to file the same except that Forms 3 were filed
late by Thomas B. Howard, Jr. and Steven J. Mencarini.
11
14file.
THE BOARD OF DIRECTORS
The Company's By-Laws provide that the number of Directors of the Company shall
be five, until this number is amended by a resolution duly adopted by the Board
of Directors or the Stockholders (subject to certain provisions of the By-Laws
relating to the entitlement of holders of preferred stock to elect directors).
The Company's By-Laws provide that the Board of Directors shall be divided into
three classes: Class I, comprised of one Director; Class II, comprised of two
Directors; and Class III, comprised of two Directors. In accordance with the By-Laws, at the annual meeting of
Stockholders in 1996, the Class I Director was elected to hold office for a
term ending at the next succeeding annual meeting of Stockholders, the Class II
Director was elected to hold office for a term ending at the second succeeding
annual meeting of Stockholders, and the Class III Directors were elected to
hold office for a term ending at the third succeeding annual meeting of
Stockholders. Subject to the provisions
of the By-Laws, at each annual meeting of Stockholders, the successors to the
class of Directors whose term shall then expire shall be elected to hold office
for a term expiring at the third succeeding annual meeting of Stockholders. Each
Director shall hold office until his or her successor shall have been duly
elected and shall qualify or until he or she shall resign or shall have been
removed in the manner provided in the By-Laws.
The Board of Directors has designated the persons in each classis composed of three classes of directors as follows:
Class I-JonathanI-C. Thomas Faulders III, who was appointed in July 1998 to fill a
vacancy, Class II--Terrence O'Donnell and Carl J. Ledecky,Rickertsen and Class II--PhillipIII--
Phillip G. Norton and Bruce M. Bowen and Class III--Terrence O'Donnell and Carl J. Rickertsen.Bowen. Class I Directors are expected to stand
for re-election at the annual meeting of Stockholders in 1997 (i.e., the upcoming Annual Meeting);2000; Class II
Directors are expected to stand for re-election at the next annual meeting of Stockholders in
1998
(i.e., the annual meeting to be held in one year)upcoming Annual Meeting); and Class III Directors are expected to
stand for re-election at the annual meeting of Stockholders in 1999 (i.e., the
annual meeting to be held in two years)one year). Each member of the Board of Directors
then elected will serve for a term of three years or until a successor has been
elected and qualified. The classification of the Board of Directors, with
11
11
staggered terms of office, was implemented for the purpose of maintaining
continuity of management and of the Board of Directors.
The Board of Directors met one timefive times during the fiscal year ended March 31,
1997. In addition, prior to the closing upon the Company's initial public
offering in November, 1996 (the "Offering"), the Board of Directors, which
then consisted only of Bruce M. Bowen and Phillip G. Norton, acted by written
action in lieu of meeting. The Executive Compensation Committee did not meet
during the fiscal year ended March 31, 1997.1998. No incumbent Director attended fewer than 75% of the total
number of meetings held by the Board of Directors
meetings. One of the current director positions will be filled at the Annual
Meeting of Stockholders. The Class I Director, Jonathan J. Ledecky, will stand
for re-election to serve for three years and until his successor is duly
elected and qualified.Directors.
There are no material proceedings to which any Director, officer or affiliate of
the Company, any owner of record or beneficially of more than five percent of
any class of voting securities of the Company, or any associate of any such
Director, officer, affiliate of the Company or security holder is a party
adverse to the Company or any of its subsidiaries or has a material interest
adverse to the Company or any of its subsidiaries.
COMMITTEES OF THE BOARD OF DIRECTORS
12
15
Audit Committee. The audit committee of the Board of Directors (the "Audit
Committee") is responsible for making recommendations to the Board concerning
the engagement of independent public accountants, monitoring and reviewing the
quality and activities of the Company's internal and external audit functions
and monitoring the adequacy of the Company's operating and internal controls as
reported by management and the external or internal auditors. The members of the
Audit Committee are Terrence O'Donnell and Carl J. Rickertsen.
Compensation Committee. The compensation committee of the Board of
Directors (the "Compensation Committee") is responsible for reviewing the
salaries, benefits and other compensation, excluding stock based compensation,
of Mr. Norton and Mr. Bowen and will makemaking recommendations to the Board based on its
review. If the Long Term Incentive Plan is adopted, the Compensation Committee
will also assume responsibility for establishing stock based compensation for
Mr. Norton and Mr. Bowen. The members of the Compensation Committee are Terrence
O'Donnell, Jonathan J. LedeckyC. Thomas Faulders III and Carl J. Rickertsen. Mr. Norton and Mr.
Bowen, as directors, will not vote on any matters affecting their personal
compensation. Mr. Bowen and Mr. Norton will be responsible for reviewing and
establishing salaries, benefits and other compensation, excluding stock based
compensation, for other directors and all other employees. SinceIf the Long Term Incentive Plan is
adopted, the Compensation Committee will also assume responsibility for stock
based compensation for Mr. Norton and Mr. Bowen was established
prior to the Company's initial public offering in November, 1996, the
compensation committee did not meet during the fiscal year ending March 31,
1997.
The current members of the compensation committee were not appointed
until January 1997, and the compensation committee has neither reviewed nor
approved any compensation actions relating to the Company's fiscal year ended
March 31, 1997. The compensation committee recognizes that as a newly public
company, the Company needs a transition period during which to establish its
long-range compensation philosophy and objectives. The compensation committee
is developing its compensation policies and will describe them in the proxy
materials to be furnished in connection with the Company's 1998 annual meeting
of shareholders.
The Compensation Committee:
Terrence O'Donnell
Jonathan J. Ledecky
Carl J. Rickerstenall other employees.
Stock Incentive Committee. The stock incentive committee of the Board of
Directors (the "Stock Incentive Committee") is authorized to award stock, and
various stock options and rights and other stock based compensation grants under
the Company's Master Stock Incentive Plan (formerly the 1996 Stock
Incentive Plan prior to an amendment and restatement effective May 14, 1997
which has been adopted by the Board of Directors but which is subject to
stockholder ratification) and its component plans, which include
the Amended and Restated Incentive Stock Option Plan, (formerly the 1996 Incentive Stock
Option Plan prior to an amendment and restatement effective May 14, 1997 which
has been adopted by the Board of Directors but which is subject to stockholder
ratification), the Amended and Restated
Outside Director Stock Option Plan, (formerly the 1996 Outside Director Stock Option Plan prior to an amendment and
restatement effective May 14, 1997 which has been adopted by the Board of
Directors but which is subject to stockholder ratification), the Amended and Restated Nonqualified Stock
Option Plan, (formerly the 1996 Nonqualified Stock
Option Plan prior to an amendment and restatement effective May 14, 1997 which
has been adopted by the Board of Directors but which is subject to stockholder
ratification), and the Employee Stock Purchase Plan. If the Long Term Incentive
Plan (approved byis adopted, the Board of Directors but which is not effective until stockholder ratification). See
"Executive Compensation -- 1996has voted to terminate the Master Stock
Incentive Plan and each component plan except for the Employee Stock Purchase
Plan." It is anticipated that no new option grants will be made under the
Company's Master Stock Incentive Plan and its component plans (except for the
Employee Stock Purchase Plan), and that all new stock option and other long term
compensation awards will be made under the Long Term Incentive Plan to be voted
on during the 1998 Annual Meeting. The members of the Stock Incentive Committee
presently are Phillip G. Norton and Bruce M. Bowen.
Except for options granted to Mr. NortonBowen and Mr. Bowen underNorton. If the employment
agreements,Long Term Incentive Plan is
adopted, the Compensation Committee will supplant the role of the stock
incentive committee. Except for formula plan grants to the outside directors
under the Amended and Restated Outside Director Stock Option Plan (subject to stockholder approval of
amendments, including the May 14, 1997 amendment and restatement) and grants
that are approved by a majority of the disinterested members of the Board of
Directors, no member of the Stock Incentive Committee or the Compensation
Committee is eligible to receive grants under the Stock Incentive Plan or the
Long Term Compensation Plan.
The Company has no nominating committee or any committee serving a similar
function.
1312
1612
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning the
compensation earned, for services rendered in all capacities to the Company, by
the Company's Chief Executive Officer and certain other executive officers
(together with the Chief Executive Officer, the "Named Executive Officers") of
the Company for the fiscal yearyears ended March 31, 1997.1996, 1997, and 1998. Certain
columns have been omitted from this summary compensation table as they are not
applicable.
ANNUAL COMPENSATION
------------------------------------------------------------------------
Other
Bonus/ Annual All Other
Name and Principal Position Year Salary Commission Compensation Compensation
--------------------------- ---- ------ ---------- ------------ ------------
Phillip G. Norton 1997 $67,2651998 $200,000 $ $348 $90,000(1)$348(2) --
Chairman, Chief Executive 1997 67,265 -- 348 $90,000(1)
Officer and President 1996 984 -- -- 120,000(1)
Officer and President 1995 376 -- -- --
Bruce M. Bowen 1998 150,000 10,000 1,500(2) ---
Director, Chief Financial 1997 130,000 10,000 12,729(2)(3) --
Director, Chief Financial---
Officer, Executive Vice President 1996 120,000 40,000 13,206(2)(3) 1,000(4)
Officer, Executive Vice 1995Kleyton L. Parkhurst 1998 120,000 16,000 11,500(2)(3) 1,000(4)
President
Kevin M. Norton 1997 30,000(5) 249,01520,000 1,500(2) --
Senior Vice President, of 1996 -- 347,023 3,087(2) --
Brokerage Operations 1995 -- 348,944 1,068(2) --
Kleyton L. Parkhurst 1997 40,000(5) 117,567 1,500(2) --
Secretary and Treasurer 1996 -- 169,352 1,356(2) --
1995 -- 237,153 1,500(2) --
Thomas K. McNamaraB. Howard, Jr. 1998 125,000(6) 20,000 --- ---
Chief Operating Officer, Vice President 1997 42,000 351,781 1,109--- --- --- ---
Executive Vice President of MLC Group, Inc. 1996 --- --- --- ---
Steven J. Mencarini 1998 97,596(6) --- --- ---
Chief Financial Officer, Senior 1997 --- --- --- ---
Vice President 1996 42,000 98,257 3,234(2) --
1995 42,000 335,699 1,500 ----- --- --- ---
- --------------------------------------------------
(1) Represents guarantee fees paid to Mr. Norton's spouse, Patricia Norton. See "Certain Transactions -- Guarantee Fees."
(2) Employer 401(k) plan match.
(3) Includes $11,229 in fiscal year 1997 and $10,000 in fiscal years 1996 and
1995, respectively, of interest paid on loans by Mr. Bowen to the Company;
the balance represents employer 401(k) plan match amounts.
(4) Represents the personal use of the Company's country club membership.
(5) Until December 1, 1996 Kevin M. Norton and Kleyton L. Parkhurst were paid on a commission basis and
thereafter, pursuant to theirhis employment agreements received base salariessalary plus
bonus. See "--Compensation Arrangements and Employment Agreements".Agreements."
(6) Mr. Howard commenced employment in January 1997. Mr. Mencarini commenced
employment in June, 1997. See "--Compensation Arrangements and Employment
Agreements".Agreements."
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information with respect to options
granted during the last fiscal year to the Named Executive Officers in the above
Summary Compensation Table.
14
17
Percent of Total
Number of Securities Options/SARS Granted to
Underlying Employees in Exercise or Base
Name Options/SARS Granted (#) Fiscal Year(4) Price ($/Sh) Expiration Date
---- ------------------------ ------------------ ------- ---------------
Potential Realizable Value at
Number of Total
Assumed Annual Rates of Stock
Securities Options/SARS Price Appreciation for Option
Underlying Granted to Exercise orName Term (6)
Options/SARS Employees in Base Price Expiration(5)
---- --------
Name Granted (#) Fiscal Year(5) ($/Sh) Date
5% ($) 10% ($)
---- ----------- -------------- ------ ---- ------ -------
13
13
Phillip G. Norton 130,000(1) 36.7% $8.75 11/19/2006 715,390 1,812,85025,000(1) 9.0% $12.65 02/05/2003 $50,681 $146,772
Bruce M. Bowen 15,000(1) 4.2% $8.75 11/19/2006 82,545 209,175
Kevin M. Norton ---- --- --- --- --- ---5.4% $11.50 02/05/2008 108,484 274,921
Kleyton L. Parkhurst 100,000(2) 28.3% $6.40 11/19/2006 785,300 1,629,50010,000(2) 3.6% $11.50 02/05/2008 72,323 183,280
Thomas K. McNamara 5,000(3) 1.4% $8.75 11/19/2006 27,515 69,725
5,000(4) 1.4%B. Howard, Jr. 30,000(3) 10.8% $10.75 01/07/04/25/2007 17,515 59,725202,819 513,982
2,500(2) 0.9% $11.50 02/05/2008 18,081 45,820
Steven J. Mencarini 16,200(3) 5.8% $12.75 06/19/2007 129,898 329,188
5,100(4) 1.8% $13.25 09/08/2007 42,498 107,697
9,400(4) 3.4% $12.25 12/03/2007 72,417 183,519
5,000(2) 1.8% $11.50 02/05/2008 36,161 91,640
- ----------------------------------------------------
(1) The options were granted to Mr. Norton and Mr. Bowen on November 20,
1996 concurrent with closing ofFebruary 5, 1998.
The options granted to Mr. Norton were under the Company's initial public offering
with an exercise price equal to the initial public offering price.
These options are nonqualified options and were not issued as partIncentive Stock Option
Plan, a component of the Company's Stock Incentive Plan. All becomePlan, and are
exercisable in four annual installments beginning onone year after date of
grant. The options granted to Mr. Bowen were under the NonQualified Stock
Option Plan, a component of the Company's Master Stock Option Plan, and are
exercisable in three annual installments beginning one year after date of
grant.
(2) The options were granted to Mr. Parkhurst on September 1, 1996 under
an employment agreement.February 5, 1998. These options are nonqualified options and
were not issued
as partunder the Incentive Stock Option Plan, a component of the Company's Master
Stock Incentive Plan. All
becomePlan and are exercisable in fourthree annual installments
beginning on theone year after date of grant.
(3) The options were granted to Mr. McNamara on November 20, 1996in connection with employment. The options were
granted under the 1996 Incentive Stock Option Plan, a component plan of the
Company's Stock Incentive Program. These options become exercisable in fourfive
annual installments beginning one year after grant. See[See Note 1110 of the
Company's financial statements appearing elsewhere in the Annual Report on
Form 10-K for further discussion of the Company's Stock Incentive Plan.]
(4) The options were granted to Mr. McNamara on January 7, 1997 under the
1996 Incentive Stock Option Plan, a component plan of the Company's
Stock Incentive Program. These options become exercisable in four
installments beginning one year after grant. See Note 11 of the
Company's financial statements appearing elsewhere in the Annual
Report on Form 10-K for further discussion of the Company's Stock
Incentive Plan.
(5) Based on options to purchase an aggregate of 353,800277,200 shares granted during fiscal 19971998 to
certain employees of the Company.
(6)(5) Potential realizable value is calculated based on an assumption that the
price of the Company's Common Stock will appreciate at the assumed annual
rates shown (5% and 10%), compounded annually, from the date of grant of
the option until the end of the option term (10 years).and (5 years for
Phillip G. Norton) The 5% and 10% assumed rates of appreciation are
required by the rules of the SEC and do not represent the Company's
estimate of future market prices of the Common Stock.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table sets forth certain information with respect to options
exercised during the Company's fiscal year ended March 31, 19971998 by the Named
Executive Officers in the Summary Compensation Table, and with respect to
unexercised options held by such persons at the end of fiscal year 1997.1998.
Shares
Acquired Number of Securities Value of Unexercised in the
Acquired
On Value Underlying Unexercised Money Options/SARs at
Name Exercise Realized Options/SARS at FY-End (#) FY-End ($)(1)
---- ----------------- -------- -------------------------- --------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Philip G. Norton --- --- 32,500 97,500 105,625 316,875
15
18
65,000 90,000 $325,000 $381,250
Bruce M. Bowen --- --- 3,750 11,250 12,188 36,562
Kevin M. Norton --- --- --- --- --- ---7,500 22,500 37,500 71,250
Kleyton L. Parkhurst --- --- 25,000 75,000 140,000 420,00050,000 60,000 367,500 390,000
Thomas K. McNamaraB. Howard, Jr. --- --- --- 10,00032,500 --- 22,50095,625
Steven J. Mencarini --- --- --- 35,700 --- 44,100
- -------------
(1) Based on a closing bid price of $12.00$13.75 per share as of the close of
business on March 31, 1997.1998.
14
14
Director Compensation. Directors who are also employees of the Company
do not currently receive any compensation nor other servicesfor service as members of the Board of
Directors. Prior to May 14, 1997, the outside directors were paid $500 per
meeting. On May 14, 1997, the Board of Directors adopted a revised outside
director compensation program which provides for each outside directorsdirector to
receive a $10,000 annual retainer, and $500 for each special committee meeting.
The $500 fee for regular Board meetings was terminated. All directors will be
reimbursed for their out-of-pocket expenses incurred to attend board or
committee meetings. The Company has adopted the Amended and
Restated Outside Director Stock Option Plan (formerly the 1996 Outside Director
Stock Option Plan prior to an amendment and restatement effective May 14, 1997
which has been adopted by the Board of Directors but which is subject to
stockholder ratification), which provides for the award and exercise of certain
options to nonemployee directors on a formula basis based upon length of
service. In November 1996, under the 1996 Outside Director Stock Option Plan,
the Company granted options to its nonemployee directors to purchase an
aggregate of 30,000 shares of Common Stock at an exercise price equal to $8.75
per share, 50% of which may be exercised after the first year of service and
the remaining 50% of which may be exercised after the second year of service,
provided they continue to serve as directors. The Amended and Restated Outside Director Stock Option Plan
made the options granted in November, 1996 immediately exercisable (subject to
stockholder ratification) and also provides for the grant of options for 10,000
shares of common stock to each nonemployeenon-employee director on the anniversary of each
year of serviceserve as a director at an exercise price equal to the market price as of
the date of grant, with each option being subject to a one-yearone year vesting
requirement. If Proposal 2 is approved, non-employee directors will each receive
options to purchase 10,000 shares on the day following the Annual Meeting and
options to purchase 10,000 shares on the day following each subsequent annual
meeting held on or before September 1, 2006 provided such person continues to
serve as a director. See "Executive
Compensation -- 1996 Stock Incentive Plan" for a description of option grants
to nonemployee directors."Proposal 2."
Compensation Arrangements and Employment Agreements. The Company has
entered into employment agreements with Phillip G. Norton, Bruce M. Bowen,
Kleyton L. Parkhurst and William J. Slaton, each effective as of September 1,
1996, with Thomas B. Howard, Jr. effective as of April 1, 1997 and with Steven
J. Mencarini effective as of June 18, 1997. Each employment agreement provides
for an initial term of three years, and is subject to an automatic one-year
renewal at the expiration thereof unless the Company or the employee provides
notice of an intention not to renew at least three months prior to expiration.
Under each employment agreement, the employee began to receive, commencing with
the first day of the first calendar month after closing the Initial Public
Offering (November 20, 1996), an annual base salary ($200,000 in the case of
Phillip G. Norton; $150,000 in the case of Bruce M. Bowen; $120,000 in the case
of Kleyton L. Parkhurst and William J. Slaton; $125,000 in the case of Thomas B.
Howard, Jr. and Steven J. Mencarini) and are eligible for commissions or
performance bonuses. The performance bonus for Phillip G. Norton for each fiscal
year is equal to 5% of the increase in the Company's net income before taxes
over net income before taxes for the preceding fiscal year, not to exceed
16
19
$150,000 for any fiscal year. The performance bonus for Bruce M. Bowen for each
fiscal year is equal to 5% of the increase in the Company's net income before
taxes over net income before one time charges before taxes for the preceding
fiscal year, not to exceed $100,000 for any fiscal year. The performance bonus
for Kleyton L. Parkhurst, William J. Slaton, Thomas B. Howard, Jr. and Steven J.
Mencarini are paid based upon performance criteria established by Phillip G.
Norton and Bruce M. Bowen, not to exceed $80,000 each per fiscal year as to
Kleyton L. Parkhurst and William Slaton and not to exceed $100,000 for Thomas B.
Howard, Jr. and not to exceed $25,000 for Steven J. Mencarini. Thomas K. McNamara is compensated
pursuant to the Company's commission program which is generally based on the
profitability of business produced.
Under the employment agreements, each receives certain other benefits including
medical, insurance, death and long term disability benefits, 401(k), and
reimbursement of employment related expenses. Mr. Bowen's country club dues are
paid by the Company. The employment agreements of Messrs. Norton, Bowen, Slaton,
Howard and Mencarini contain a covenant not to compete on the part of each,
whereby in the event of a voluntary termination of employment, upon expiration
of the term of the agreement or upon the termination of employment by the
Company for cause, each are subject to restrictions upon acquiring, consulting
with or otherwise engaging in or assisting in the providing of capital needs for
competing business activities or entities within the United States for a period
of one year after the date of such termination or expiration of the term of the
employment agreement.
Under his employment agreement, Phillip G. Norton was granted options to acquire
130,000 shares of Common Stock at a price per share equal to $8.75 per share.
These options have a ten year term, and became exercisable and vested 25% on
November 20,September 1, 1996 and September 1, 1997, and the balance will be exercisable and
vest in 25% increments over three years on November 20,September 1, 1997, November 27,September 1,
1998, and November 20,September 1, 1999, respectively, subject to acceleration upon certain
conditions. The Company had paid a $120,000 annual guarantee fee payable in
$10,000 monthly payments to Patricia A. Norton, wife of Phillip G. Norton, in
consideration of providing certain guarantees and collateral for the
NationsBank and First Union Facilities. This fee was terminated when these
credit facilities were terminated and the guarantee released. See "Transactions"Certain
Transactions -- Guarantee Fees."
15
15
Under his employment agreement, Bruce M. Bowen was granted options to acquire
15,000 shares of Common Stock at a price equal to $8.75 per share. These options
have a ten year term, and became exercisable and vested 25% on NovemberSeptember 20,
1996 and September 1, 1998, and the balance will be exercisable and vest in 25%
increments over three years on November 20,September 1, 1997, November 27,September 1, 1998, and
November 20,September 1, 1999, respectively, subject to acceleration upon certain
conditions.
Under his employment agreement, Kleyton L. Parkhurst was granted options to
acquire 100,000 shares of Common Stock at a price per share equal to $6.40 per
share. These options have a ten year term, and became exercisable and vested 25%
on November 20, 1996 and September 1, 1998, and the balance will become
exercisable and vest in 25% increments over three years on November 20,September 1, 1997,
November 20,September 1, 1998, and November 20,September 1, 1999, respectively, subject to acceleration
upon certain conditions.
In connection with his employment, Thomas B. Howard, Jr. was granted incentive
stock options to acquire 30,000 shares of Common Stock at a price equal to
$11.00 per share. See "Executive Compensation -- Master Stock Incentive Plan."
These options have a ten year term, and will be exercisable and vest 20% at the
end of each year of service over five years, and are subject to acceleration
upon certain conditions.
17
20
In connection with his employment, Steven J. Mencarini was granted incentive
stock options to acquire 16,200 shares of Common Stock at a price equal to
$12.75 per share. See "Executive Compensation -- Master Stock Incentive Plan."
These options have a ten year term, and will be exercisable and vest 20% at the
end of each year of service over five years, and are subject to acceleration
upon certain conditions.
The Company maintains key-man life insurance on Mr. Norton in the amount of $10
million and on Mr. Bowen in the amount of $1 million. The Company maintains key-man life insurance on Mr. Norton in the form
of two separate policies, one with the PrudentialFirst Colony Life Insurance Company and
the second with TransAmerica Life Co.,CNA/Valley Forge, each in the amount of $5 million and on Mr.
Bowen with CNA Insurance Company in the amount of $1 million.
Master Stock Incentive Plan. The Company has established a stock
incentive program (the "Master Stock Incentive Plan")(formerly the 1996 Stock
Incentive Plan prior to amendment and restatement effective May 14, 1997 which
has been adopted by the Board of Directors but which is subject to stockholder
ratification) to provide an opportunity
for directors, executive officers, independent contractors, key employees, and
other employees of the Company to participate in the ownership of the Company.
The Master Stock Incentive Plan provides for the award to eligible directors,
employees, and independent contractors of the Company, of a broad variety of
stock-based compensation alternatives under a series of component plans. These
component plans include tax advantaged incentive stock options for employees
under the Incentive Stock Option Plan, (formerly the 1996 Incentive Stock Option Plan prior to amendment
and restatement effective May 14, 1997 which is subject to stockholder
ratification ), formula length of service based
nonqualified options to nonemployee directors under the Outside Director Stock
Plan, (formerly the 1996
Outside Director Stock Option Plan prior to amendment and restatement effective
May 14, 1997 subject to stockholder ratification), nonqualified stock options under the Nonqualified Stock Option Plan, (formerly the 1996 Nonqualified Stock
Option Plan prior to amendment and restatement effective May 14, 1997 subject
to stockholder ratification), a
program for employee purchase of Common Stock of the Company at 85% of fair
market value under a tax advantaged Employee Stock Purchase Plan, (approved by the Board of Directors but which is not
effective until stockholder ratification), as well as
other restrictive stock and performance based stock awards and programs which
may be established by the Board of Directors. The Company anticipates that the above described
amendments and restatements and the Employee Stock Purchase Plan (collectively
the May 14, 1997 Amendments") which require stockholder ratification will be
submitted for stockholder approval at the next annual meeting of the Company.
Prior to the May 14, 1997 Amendments which are subject to stockholder
ratification, the Company had reserved a total of 155,000 shares of Common
Stock for issuance upon exercise of options under: (i) the 1996 Incentive
Stock Option Plan (under which options for an aggregate of 58,800 shares were
granted on November 20, 1996, options for an aggregate of 15,000 shares were
granted on January 8, 1997, options for 30,000 were granted to Thomas B.
Howard, Jr. on April 25, 1997, and options for 16,200 shares were granted to
Steven J. Mencarini on June 19, 1997); (ii) the 1996 Outside Director Stock
Plan (under which options for an aggregate of 75,000 shares of Common Stock
were reserved for grant under a formula plan based upon length of service,
which reserved number was reduced to 30,000 shares which were transferred to
the Incentive Stock Option Plan by the Board of Directors on May 14, 1997,
subject to stockholder approval of the amendment and restatement of that plan
and under which options for 30,000 shares of Common Stock were granted on
November 20, 1996); and (iii) the 1996 Nonqualified Stock Option Plan (under
which options for an aggregate of 5,000 shares of Common Stock were granted on
January 8, 1997). The May 14, 1997 Amendments increase the aggregate number of shares
reserved for grant under all plans which are a part of the 18
21
Master Stock
Incentive Plan tois set at a floating number equal to 20% of the issued and
outstanding stock of the Company (after giving effect to pro forma assumed
exercise of all outstanding options and purchase rights). The number that may be
subject to options granted under the Incentive Stock Option Plan or purchased
under the Employee Stock Purchase Plan is also further capped at a maximum of
4,000,000 shares to comply with IRS requirements for a specified maximum. As of
June 30, 1997,1998, based on 5,150,0006,082,005 shares outstanding, and 400,000 shares of Common Stock for which options have been
granted, this 20% number would be
1,110,000 shares.1,216,401shares. As of June 30, 1998, the Company had issued 319,050 incentive
stock options (of which 24,060 were exercisable), 265,000 non-qualified stock
options (of which 123,500 were exercisable), 40,000 outside director stock
options (of which 20,000 were exercisable).
16
16
The Stock Incentive Plan is administered by the Stock Incentive Committee, which
is authorized to select from among the eligible participants the individuals to
whom options, restricted stock purchase rights and performance awards are to be
granted and to determine the number of shares to be subject thereto and the
terms and conditions thereof. The Stock Incentive Committee is also authorized
to adopt, amend and rescind the rules relating to the administration of the
Stock Incentive Plan. Except for grants that are approved by a majority of the
Company's Board of Directors, no member of the Stock Incentive Committee is
eligible to participate in future grants of options in the Stock Incentive Plan.
Incentive stock options issued under the 1996 Incentive Stock Option Plan are
designed to comply with the provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), and are subject to restrictions contained in the Code,
including a requirement that exercise prices be equal to at least 100% of fair
market value of the shares of Common Stock on the grant date and a ten-year
restriction on the option term. The incentive stock options may be subsequently
modified to disqualify them from treatment as incentive stock options. Under the
Stock Incentive Plan and the Code, non-employee directors are not permitted to
receive incentive stock options.
Nonqualified stock options issued under the Stock Incentive Plan, may be granted
to directors, officers, independent contractors and employees and will provide
for the right to purchase shares of Common Stock at a specified price which may
be less than fair market value on the date of grant, and usually will become
exercisable in installments after the grant date.
Nonqualified stock options may be granted for any reasonable term.
Under the Outside Director Stock Option Plan, each of the three
nonemployee directors were granted options, on November 20, 1996, to purchase
an aggregate of 30,000 shares of Common Stock, which, as amended, became
immediately exercisable in May 1997. The Outside Director Stock Option Plan
also provides for the grant of options for
10,000 shares to each nonemployee director (30,000 annually in the aggregate) on
each anniversary of service, at an exercise price equal to the market price as
of the date of grant, with each option being exercisable on the first
anniversary of grant.
In May 1997, the Board of DirectorsThe Company has adopted a resolution to approve an Employee Stock Purchase Plan, subject to stockholder vote and ratification.Plan. Under the plan,
employees will beare eligible to purchase up to the lesser of ten
percent of their total compensation or $5,000$2,500 of stock each six month period,calendar quarter,
subject to a $10,000 annual maximum, by committing to the number of shares
desired at the beginning of each plan period and purchasing the shares at the
end of the quarterplan period at a price equal to 85% of the lesser of (a) the Fair
Market Value of a share of Common Stock on the first day of the six month period (or such other
offering period as the Board may adopt)calendar quarter
or (b) the Fair Market Value of a share of Stock on the last day of the six month period (or such other offering period
as the Board may adopt). As a part of the Employee Stock Purchase Plan
employees will participate via payroll withholding.calendar
quarter.
Compensation Committee Interlocks and Insider Participation. For the
year ended March 31, 1997,1998, all decisions regarding executive compensation were
made by the Compensation Committee when applicable or by Mr. Norton as
President. None of the executive officers of the Company currently serves on the
Compensation Committee of another entity or 19
22
any other committee of the board of
directors of another entity performing similar functions. For a description of
transactions between the Company and Mr. Bowen, see "Certain Transactions."
The role of the Compensation Committee is limited to the review of the
compensation, excluding stock-based compensation for Mr. Norton and Mr. Bowen,
who are principal shareholders of the Company. Insomucha as the salaries and
bonuses of Mr. Norton and Mr. Bowen are pursuant to the terms of their
respective three year of their employment agreements, the Compensation Committee
did not take any action during the fiscal year ended March 31, 1998.
PERFORMANCE GRAPH
The following graph shows the value as of March 31, 19971998 of a $100 investment
made on November 15, 1996 in the Company's Common Stock (with dividends, if any,
reinvested), as compared with similar investments based on (i) the value of the
NASDAQ Stock Market Index (U.S.) (with dividends reinvested) and (ii) the value
of the NASDAQ financial index. The stock performance shown below is not
necessarily indicative of future performance.
[Graph]17
17
CUMULATIVE TOTAL RETURN
---------------------------------------------------------------------
11/15/96 12/96 3/97 6/97 9/97 12/97 3/98
$160
$140
$120
[GRAPH]
$100
$80
$60
11/15/96 11/96 12/96 1/97 2/97 3/97
COMPARATIVE VALUES
CUMULATIVE TOTAL RETURN
MLC HOLDINGS, INC. 100.00 100.00 126.32 139.47 142.11 127.63 144.74
NASDAQ STOCK MLC MARKET
YEAR HOLDINGS (U.S.) 100.00 102.52 96.97 114.74 134.15 125.80 147.16
NASDAQ FINANCIAL
11/15/96 100 100 100
11/96 96 106 106
12/96 100 106 108
1/97 142 114 108
2/97 132 107 108
3/97 126 100 108100.00 104.93 109.47 127.46 148.74 160.29 169.75
20
23
CERTAIN TRANSACTIONS
GUARANTEES OF NATIONSBANK FACILITY
Through December 1996, the NationsBank Facility was guaranteed by
Phillip G. Norton, Patricia A. Norton, Bruce M. Bowen, Elizabeth D. Bowen,
William J. Slaton, Margaret Newton, Kevin M. Norton, Brianna Norton and Patrick
J. Norton. In addition, this line was secured by a pledge of approximately
$1.5 million of cash collateral pledged by Phillip G. Norton and his spouse
Patricia A. Norton. The Company terminated the NationsBank Facility on
December 31, 1996, at which time all stockholders' personal guarantees were
removed and collateral pledges released.
GUARANTEES OF FIRST UNION FACILITY
On June 5, 1997, the Company entered into a $15,000,000 committed recourse line
of credit with First Union National Bank, N.A., successor by merger to
CoreStates Bank, N.A. (the "First Union Facility"). Through June 10, 1997, the
First Union Facility was guaranteed by Phillip G. Norton, Patricia A. Norton,
Bruce M. Bowen, Elizabeth D. Bowen, William J. Slaton, Kevin M. Norton and
Patrick J. Norton, each of whom is a beneficial owner of Common Stock. In
addition, the facility was secured by cash and securities having a value of
approximately $1.2 million, pledged as collateral by Patricia A. Norton, as
trustee for the Phillip G. Norton Jr. Trust, the Andrew L. Norton Trust and the
Jeremiah O. Norton Trust. Upon termination of the linefacility on June 10, 1997, all
stockholders' personal guarantees were removed and collateral pledges released.
GUARANTEES OF NATIONSBANC LEASING FACILITY
Through January 31, 1997, the NationsBanc Leasing Facility was
guaranteed by Phillip G. Norton and Bruce M. Bowen. The Company terminated the
Facility, at which time all stockholders' personal guarantees were removed.
STOCKHOLDER LOANS
During November 1996, the Company repaid a total of $275,000 in
outstanding borrowings from stockholders ($175,000 from Bruce M. Bowen and
$100,000 from William J. Slaton) with a portion of proceeds received from the
Offering. Each of these loans was evidenced by a promissory note dated March
1, 1995, bearing interest at the rate of 10% per annum, and due March 1, 1998.
The Company paid $17,500 and $10,000 in interest for fiscal year 1996, and
$11,229 and $6,417 in interest for fiscal year 1997 to Messrs. Bowen and
Slaton, respectively.
NEW ENERGY LEASING CORPORATION OBLIGATIONS
The Company is a party to an agreement entered into in 1994 with New Energy
Leasing Corporation ("New Energy"), of which Bruce M. Bowen is a 45%
stockholder. Under that arrangement, the Company has sold leases to New Energy
under which the Company remains obligated to manage the lease and to provide
remarketing or asset disposition services upon expiration or other termination
of the lease. The Company recognized revenue for such transactions of
approximately $1.3 million for the year ended March 31, 1996, and the basis of
the equipment sold was approximately $1.6$1.3 million. During the year ended March
31, 1997, and 1998, respectively, the 21
24
Company receivedrecognized remarketing fees from
New Energy in the amount of $224,126.$224,126 and $216,828. New Energy is entitled to the
first $75,000 of proceeds from any remarketing or sale of the assets, with the
Company being entitled to 90% of any proceeds above that amount. This agreement
and the lease transactions to which it relates are slated to expire in 1999. The
Company does not intend to enter into any further lease sale transactions with
New Energy.
MLCUNITED FEDERAL OBLIGATIONS
Marcella A. Dilworth and Donna O'Hear, sister-in-law of Philip G. Norton, two of
the Company's employees, own 51% and 49% respectively of United Federal Leasing,
Inc. (formerly MLC Federal, Inc.), a woman-owned small business which was
purchased from the Company in 1992. The Company and MLCUnited Federal have entered
into a Servicing Agreement which sets forth cost and profit sharing and
reimbursement for transactions which are jointly originated, serviced, or
financed by MLCUnited Federal and/or the Company. The Company expects to continue
this relationship to originate various federal government contracts and
financing arrangements. In July, 1997, Marcella Dilworth gave notice of her
resignation from the Company but may continue to work with the Company as an
outside contractor.
18
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As of March 31, 19961997 and 1997, $152,6061998, $72,000 and $72,000,$85,020, respectively, was receivable
from MLCUnited Federal, the payment of which is unlikely. As of March 31, 1997 and
1998, the Company fully reserved for the receivable from MLCUnited Federal. GUARANTEE FEES
From April 1, 1995 through DecemberDuring
the year ended March 31, 1996,1998, the Company paid a totalrecognized re-marketing fees of
$240,000 of guarantee fees, $10,000 per month, to Patricia A. Norton, the
spouse of Phillip G. Norton, as consideration for her providing personal
guarantees and pledging personal assets for the NationsBank Facility.$561,000 from United Federal.
ADVANCES AND LOANS TO EMPLOYEES AND STOCKHOLDERS
The Company has in the past provided loans and advances to employees and certain
stockholders. Such balances are to be repaid from personal funds or commissions
earned by the employees/stockholders on successful sales or financing
arrangements obtained on behalf of the Company. Loans and advances totaled
$47,812, $76,349,totalled
$77,664, $70,612 and $14,353 as of$53,582 for March 31, 1997, 1996, and 1995,
respectively. The aggregate amount of these advances equals $12,193, $139,500
and $61,583 for years ended March 31, 1997, 1996 and 1995, respectively.
Amounts of $53,941, $82,612 and $80,505 were repaid during the years ended
March 31, 1997, 1996 and 1995, respectively.
LOANS TO STOCKHOLDERS
In 1994, the Company loaned $40,000 to Kevin M. Norton, an officer and
a stockholder of the Company, pursuant to a promissory note dated February 15,
1994 bearing interest at 8% per annum and due July 31, 1995. Kevin M. Norton
paid interest of $2,048 and $382 during fiscal years 1995 and 1996,
respectively and made principal repayments of $25,505 and $14,495 during fiscal
years 1995 and 1996, respectively. The Company's $40,000 loan to Kevin M.
Norton was repaid in full during fiscal year 1996.
22
25
In 1995, the Company loaned $74,115 to William J. Slaton, an officer
and a stockholder of the Company, pursuant to a promissory note dated January
5, 1995 bearing no interest and due on demand. Mr. Slaton repaid this note in
full in 1995.
In 1995, the Company loaned $54,000 to Patrick J. Norton, a
stockholder of the Company, pursuant to a promissory note dated November 17,
1995, bearing interest at 8% per annum. Patrick J. Norton paid interest of
$1,608 and made principal repayments of $8,392 during fiscal year 1996 and
interest of $3,193 and principal payments of $14,507 during fiscal year 1997.
The Company's loan to Patrick J. Norton had balances of $31,101 and $45,608 as
of the end of March 31, 1997, and 1996,1998, respectively.
BROKERAGE FEE
During the year ended March 31, 1997, the Company recognized $250,000 in income
from broker fees for providing advisory services to a company which is owned, in
part, by Carl J. Rickertsen, one of the Company's outside directors.
REIMBURSEMENT OF CERTAIN EXPENSES
The Company is reimbursed for certain general and administrative expenses by a
company owned, in part, by an executive of a subsidiary of the Company. The
reimbursements totaled $128,310, $176,075 and $81,119 for the years ended March
31, 1996, 1997 and 1998.
The Company leases certain office space from entities which are owned, in part,
by executives of subsidiaries of the Company. During the years ended March 31,
1996, 1997, and 1998, rent expense paid to these related parties was $132,111,
$124,222 and $306,479, respectively.
INDEMNIFICATION AGREEMENTS
The Company has entered into separate but identical indemnification agreements
(the "Indemnification agreements") with each director and executive officer of
the Company and expects to enter into Indemnification Agreements with persons
who become directors or executive officers in the future. The Indemnification
Agreements provide that the Company will indemnify the director or officer (the
"Indemnitee") against any expenses or liabilities in connection with any
proceeding in which such Indemnitee may be involved as a party or otherwise, by
reason of the fact that such Indemnitee is or was a director or officer of the
Company or by reason of any action taken by or omitted to be taken by such
Indemnitee while acting as an officer or director of the Company, provided that
such indemnity shall only apply if (i) the Indemnitee was acting in good faith
and in a manner the Indemnitee reasonably believed to be in the best interests
of the Company, and, with respect to any criminal action, had no reasonable
cause to believe the Indemnitee's conduct was unlawful, (ii) the claim was not
made to recover profits made by such indemnitee in violation of Section 16(b) of
the Securities Exchange Act, of 1934, as amended, or any successor statute, (iii) the claim was not
initiated by the Indemnitee, or (iv) the claim was not covered by applicable
insurance, or (v) the claim was not for an act or omission of a director of the
Company from which a director may not be relieved of liability under Section
103(b)(7) of the DGCL. Each Indemnitee has undertaken to repay the Company for
any costs or expenses paid by the Company if it shall ultimately be determined
that such Indemnitee is not entitled to indemnification under the
Indemnification Agreements.
FUTURE TRANSACTIONS
Certain of the transactions described above may be on terms more favorable to
officers, directors and principal stockholders than they could obtain in
transactiontransactions with an unaffiliated party. The Company intends to adopt
a policy requiringrequires that all material
transactions between the Company and its officers, directors or other affiliates
must (i) be approved by a majority of the disinterested members of the Board of
19
19
Directors of the Company, and (ii) be on terms no less favorable to the Company
than could be obtained from unaffiliated third parties.
23
26
PROPOSAL 1
TO ELECT ONETWO CLASS I DIRECTORII DIRECTORS TO SERVE FOR THREE YEARS
AND UNTIL HIS SUCCESSOR HASTHEIR RESPECTIVE SUCCESSORS HAVE BEEN DULY ELECTED AND
SHALL QUALIFY.
The Board of Directors has concluded that the re-election of theTerrence O'Donnell
and Carl J. Rickertsen as Class I DirectorII Directors is in the best interest of the
Company and recommends Stockholder approval of the re-election of JonathanTerrence
O'Donnell and Carl J. LedeckyRickertsen as a Class I director.II directors. The remaining fourthree
Directors will continue to serve in their positions for the remainder of their
terms. Biographical information concerning Mr. LedeckyO'Donnell and Mr. Rickertsen and
the Company's other Directors can be found under "Directors and Executive
Officers."
Unless otherwise instructed or unless authority to vote is withheld, the
enclosed proxy will be voted for the election of JonathanTerrence O'Donnell and Carl J.
Ledecky,Rickertsen, the nomineenominees listed herein. Although the Board of Directors of the
Company does not contemplate that such nomineenominees will be unable to serve, if such
a situation arises prior to the Annual Meeting, the persons named in the
enclosed proxy will vote for the election of such other person or persons as may
be nominated by the Board of Directors.
VOTE REQUIRED FOR APPROVALAPPROVAL. The affirmative vote of a plurality of the
outstanding shares of Common Stock present in person or represented by proxy at
the annual meeting entitled to vote is required to elect a Class III director.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF
JONATHANTERRENCE O'DONNELL AND CARL J. LEDECKY,RICKERTSEN, THE NOMINEENOMINEES LISTED ABOVE.
PROPOSAL 2
TO APPROVE AND ADOPT AN AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF SHARES OF AUTHORIZED STOCKAPPROVAL OF THE
COMPANY FROM 12
MILLION SHARES (10 MILLION SHARES OF COMMON STOCK, PAR VALUE $0.01, AND 2
MILLION PREFERRED SHARES) TO 27 MILLION SHARES (25 MILLION SHARES OF COMMON
STOCK, PAR VALUE $0.01, AND 2 MILLION PREFERRED SHARES).
GENERAL.1998 LONG-TERM INCENTIVE PLAN
The Board of Directors has adopted a resolution declaring it
advisable and inCompany currently maintains the best interests of the Company and its stockholders that
the Company's Certificate of Incorporation be amended to provide for an
increase in the authorized number of shares of stock of the Company from twelve
million (10 million shares of common stock, par value $0.01, and 2 million
preferred shares) to 27 million shares (25 million shares of common stock, par
value $0.01, and 2 million preferred shares). Such resolution also recommends
that such amendment be approved and adopted by the Company's stockholders and
directs that such proposal be submitted to the Company's stockholders at the
Annual Meeting.
If the Board of Directors' proposal is approved by the Company's
stockholders, the Board of Directors would have authority to issue up to
twenty-five million (25,000,000) shares of Common Stock and to designate and
issue up to two million (2,000,000) shares of Preferred Stock to such persons,
for such consideration and with such rights and preferences as the Board of
Directors may determine without further action by the stockholders except as
may be required by law. As of the date hereof, the Company has not designated
or issued any shares of Preferred Stock and the proposal will not change the
authorized number of shares of Preferred Stock. As of the Record Date there
are 5,672,307 shares of Common Stock issued and outstanding. The Board of
Directors of the Company has reserved 245,000 shares of Common Stock for
issuance pursuant to the exercise of outstanding stock options and, in
addition, 155,000 shares of Common Stock have been reserved in connection with
theMLC Master
24
27
Stock Incentive Plan (formerly the 1996 Stock Incentive Plan)(which is the
subject of Proposal Three) and its component plans, the Amended and Restated
Incentive Stock Option Plan (formerly(the
"1997 Master Plan") and the 1996 Incentive Stock Option Plan),
the Amended and Restated Outside Director Stock Option Plan (formerly the 1996
Outside Director Stock Option Plan),following related sub-plans: the Amended and
Restated Nonqualified Stock Option Plan (formerly the 1996 Nonqualified Stock Option Plan).
Accordingly, there remain 3,927,693 shares of Common Stock which are unissued
and are not reserved for any specific purpose.
The Board of Directors has proposed the increase in and classification
of the authorized capital stock to provide shares which could be used for a
variety of corporate purposes, including stock splits, mergers, the raising of
additional capital (including public and private offerings of securities),
acquisitions and implementation of incentive and other option and stock
ownership plans. While the Board of Directors believes it important that the
Company have the flexibility that would be provided by having additional
authorized capital stock available and by having the ability to designate and
issue additional classes thereof, the Company does not currently have any
binding commitments or arrangements that would require the issuance of such
stock. The Company is obligated, subject to stockholder ratification of the
proposals referred to as Proposals 3,4,5,6, and 7, to grant options for an
aggregate total of 60,000 shares of common stock to key employees of
CompuVentures of Pitt County, a recent acquisition of the Company and options
for 3,800 shares to Steven Mencarini, who recently commenced employment as the
Company's Chief Financial Officer. In addition, the Company is presently in
negotiation with one or more possible acquisition targets, with the
contemplated terms involving payment of a material portion of the acquisition
price in the form of Company common stock. If such acquisitions are
consummated, the Company also expects that stock options will be granted to key
employees of the acquired businesses as part of such transactions. The Company
is also actively pursuing efforts to identify other acquisition targets. The
Board of Directors believes it would be in the Company's best interest,
therefore, to have such additional shares of authorized stock available to
enable the Company to take advantage of opportunities for possible future
acquisitions, raising capital for future growth and the continued use of stock
incentive and option plans, including the option plans composing the Master
Stock Incentive Plan as described in Proposals 3,4,5,6 and 7. If such
opportunities arise in the future, significant amounts of capital stock may be
issued by the Company's Board of Directors without further authorization by the
Company's stockholders. Such issuances could have a significant dilutive effect
on the current stockholders of the Company.
It is possible that the additional capital stock that would be
authorized by the proposed amendment could be issued in a transaction that
might discourage offers by takeover bidders or make such offers more difficult
or expensive to accomplish, although the Board of Directors has no current
plans for any such use of the capital stock. For example, the Board of
Directors could approve the issuance of stock, or grant rights or stock options
for such issuance, to persons, firms or entities that are known to be friendly
to management of the Company. The Board of Directors could also approve the
issuance of additional shares of capital stock having classes, series, rights
and preferences (including the number of votes applicable to each share of such
class or series of capital stock) which may render it more difficult in the
future for takeover bidders or others to accomplish takeovers or changes in
control of the Company. Any issuance of capital stock must be made for proper
business purposes and for proper consideration from the recipient. Designation
of certain classes, series, rights and preferences with respect to the
Company's capital stock would be subject to applicable rules and
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regulations of the exchange on which such securities are listed for quotation
(currently, the Nasdaq National Market(R)).
The text of the proposed amendment to the Certificate of Incorporation
is set forth in full in Exhibit A hereto and reference is made thereto for a
complete statement of its terms. The amendment to the Certificate of
Incorporation will become effective upon approval by the stockholders and the
filing of the Amendment to the Certificate of Incorporation containing such
amendment with the Secretary of State of Delaware. If approved by the
stockholders, the Company anticipates that such Amendment of the Certificate of
Incorporation will be filed as soon as practicable.
VOTE REQUIRED FOR APPROVAL.
Approval of the amendment of the Certificate of Incorporation will
require the affirmative vote of the holders of at least a majority of the
outstanding shares of Common Stock entitled to vote thereon.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL
OF THE AMENDMENT OF THE CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF
SHARES OF AUTHORIZED COMMON STOCK FROM TEN MILLION (10,000,000) SHARES OF
COMMON STOCK TO TWENTY-FIVE MILLION (25,000,000) SHARES OF COMMON STOCK AS SET
FORTH IN EXHIBIT A HERETO. UNLESS MARKED TO THE CONTRARY, SHARES REPRESENTED
BY PROXY CARDS RECEIVED FROM STOCKHOLDERS WILL BE VOTED IN FAVOR OF THE
PROPOSED AMENDMENT.
PROPOSAL 3
TO APPROVE ADOPTION OF AMENDMENTS TO THE MLC HOLDINGS, INC.,
MASTER STOCK INCENTIVE PLAN
(FORMERLY THE 1996 STOCK INCENTIVE PLAN).
The Board of Directors has approved and recommends to the stockholders
the adoption of an amendment and restatement of the 1996 Stock Incentive Plan
which (i) renames the amended and restated plan as the "Master Stock Incentive
Plan," (ii) increases the limitation of the number of shares of common stock
that may be subject to outstanding awards under the various constituent plans
under the Stock Incentive Plan from 155,000 shares of common stock to a number
of shares of common stock equal to twenty percent (20%) of the total number of
shares of Common Stock outstanding from time to time, as determined immediately
after giving pro forma effect to the assumed exercise of all option or purchase
rights under all of the component plans of the Master Stock Incentive Plan
("Reserved Shares"); and (iii) adds an employee stock purchase plan (referred
to as the "Employee Stock Purchase Plan " as an additional plan to the existing
plans which comprise the Master Stock Incentive Plan (See also Proposal 4).
The Board has adopted, as of May 14, 1997, both this amended and restated
Master Stock Incentive Plan, and the corresponding amendments to the existing
component plans: the Amended and Restated Outside Director Stock Option
Plan (formerly the 1996 Outside Director Stock Option Plan) -- see also
Proposal 5; the Amended and Restated Incentive Stock Option Plan (formerly the
1996 Incentive Stock Option Plan) -- see also Proposal 6; and the Amended and
Restated Nonqualified Stock Option Plan (formerly the 1996 Nonqualified
Stock Option Plan)-- see also Proposal 7.
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In the Board's judgment, the Master Stock Incentive Plan provides the
Company a means to offer a critical long-term incentive for a broad range of
employees and offers a competitive advantage as the Company acquires other
firms and seeks to attract, retain and motivate newly acquired personnel. The
Company believes that the Company's policy of granting stock options and making
stock purchase opportunities available to a broad base of employees will
provide it with valuable advantage in attracting acquisition candidates and
attracting and retaining top personnel.
During fiscal 1997, options for a total of 73,800 shares of common
stock were granted to a total of 39 employees (other than the Company's
executive officers) and options for a total of 5,000 shares of common stock
were granted to 2 independent contractors of the Company under the component
plans of the Master Stock Incentive Plan. Since the close of fiscal 1997,
options for 46,200 shares were granted to newly hired executive officers,
Thomas B. Howard Jr. (30,000 shares -- made available by reallocation of 30,00
shares previously reserved for future issuance under the Amended and Restated
Outside Director Stock Option Plan) and Steven J. Mencarini (16,200 shares)
(the Company intends to grant incentive stock options for an additional 3,800
shares to Steven J. Mencarini upon stockholder approval of Proposal 3 and
Proposal 6). The purpose of the amendment to the Stock Incentive Plan and the
component plans to increase the number of shares available is to provide the
compensation committee with continued and greater flexibility to utilize awards
of long-term equity based incentives to a wide range of employees, in
particular as a part of the Company's growth and acquisition strategy. The
incorporation of a formula for expansion of the number of shares based upon
fluctuations in the number of shares outstanding will provide for and
accommodate growth via stock acquisitions. The Company believes that providing
opportunities for stock awards and for stock purchase encourages employees at
all levels to focus on the long-term growth of stockholder value. The Board
believes that providing for flexibility in awarding long-term compensation
allows for greater use of equity based incentives as opposed to current cash
compensation for managers and other employees, which, in the Board's judgment,
promotes a better alignment of the interest of managers and stockholders and
also encourages key managers to remain with the Company over an extended
period. By increasing the number of shares that may be awarded under the Master
Stock Incentive Plan, the Board of Directors seeks to ensure that the long-term
incentives can continue to be awarded to a broad range of employees and will
remain available for ongoing strategic use as an attractive component of the
Company's acquisition program. The Board also believes that upon occasion in
connection with a major acquisition the Company may be able to offer
substantial option grants to reduce the up front price paid by the Company for
the acquired business and to encourage the owners of the business being
acquired to remain employed for an extended period of time (where such owners
are deemed to be particularly valuable employees).
The Board of Directors expects that annual option grants to any one
individual for in excess of 100,000 shares or at an exercise price below the
market value will be made only rarely, when special circumstances warrant or
demand unique compensation arrangements such as in connection with a major
acquisition.
Description of the Master Stock Incentive Plan
The Company has established the Master Stock Incentive Plan to
provide an opportunity for directors, executive officers, independent
contractors, key employees, and other employees of the Company to participate
in the ownership of the Company. The Master Stock Incentive Plan provides for
the award to eligible directors, employees, and independent contractors of the
Company, of a broad variety of stock-based compensation alternatives such as
incentive stock options for employees under the Amended and Restated Incentive
Stock Option Plan, formula length of service based nonqualified options to
nonemployee directors under the Amended and Restated Outside Director Stock
Plan, and
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nonqualified stock options under the Amended and Restated Nonqualified Stock
Option Plan, as well as other restrictive stock and performance based stock
awards and programs which may be established by the Board of Directors.
Currently, the Company has reserved a total of 155,000 shares of Common Stock
for issuance upon exercise of options under: (i)the Amended and Restated
Incentive Stock Option Plan (under which options for an aggregate of 60,000
shares were granted immediately upon completion of the Offering, options for an
additional 15,700 shares were granted January 8, 1997, options for 30,000 were
granted to Mr. Howard on April 25, 1997, and options for 16,200 shares were
granted to Mr. Mencarini on June 19, 1997); (ii) the Amended and Restated
Outside Director Stock Plan (under which options for an aggregate of 75,000
shares of Common Stock were reserved for grant under a formula plan based upon
length of service and for which 30,000 shares of Common Stock were granted upon
completion of the Offering, and which 45,000 shares were reserved for future
formula grants --which reserved shares were transferred to the Amended and
Restated Incentive Stock Option Plan by the Board in order to make available
shares for the granting of options in connection with the employment of Mr.
Howard and Mr. Mencarini); and (iii) the Amended and Restated Nonqualified
Stock Option Plan (under which options for 5,000 shares were granted on January
8, 1997 to two outside contractors who work with the Company).
In addition, the Company has agreed by the terms of an agreement for
the acquisition of CompuVentures of Pitt County, Inc., to grant incentive stock
options for an additional 60,000 shares to key employees of CompuVentures under
the Incentive Stock Option Plan, subject to stockholder approval of this
Proposal (and coordinating Proposal 6). Philip G. Norton has entered into an
agreement with CompuVentures of Pitt County, Inc. agreeing to vote the stock of
the Company controlled by Mr. Norton in favor of this proposal (and Proposal
6). Mr. Norton controls 2,825,000 shares of common stock of the Company or
53.6% of the shares entitled to vote, thus stockholder ratification of these
proposals is assured.
In May 1997, the Master Stock Incentive Plan was amended, subject to
stockholder approval, to increase the aggregate number of shares allocated to
the Stock Incentive Plan to a number equal to twenty percent (20%) of the total
number of shares of Common Stock outstanding from time to time, as determined
immediately after giving pro forma effect to the assumed exercise of all option
or purchase rights under all of the component plans of the Master Stock
Incentive Plan.
The Master Stock Incentive Plan is administered by the Stock Incentive
Committee, which is authorized to select from among the eligible participants
the individuals to whom options, restricted stock purchase rights and
performance awards are to be granted and to determine the number of shares to
be subject thereto and the terms and conditions thereof. The Stock Incentive
Committee is also authorized to adopt, amend and rescind the rules relating to
the administration of the Master Stock Incentive Plan. Except for grants that
are approved by a majority of the Company's Board of Directors, no member of
the Stock Incentive Committee is eligible to participate in future grants of
options in the Master Stock Incentive Plan.
Incentive stock options issued under the Amended and Restated
Incentive Stock Option Plan are designed to comply with the provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), and are subject to
restrictions contained in the Code, including a requirement that exercise
prices be equal to at least 100% of fair market value of the shares of Common
Stock on the grant date and a ten-year restriction on the option term. The
incentive stock options may be subsequently modified to disqualify them from
treatment as incentive stock options. Under the Master Stock Incentive Plan,
the Amended and Restated Incentive Stock Option Plan, and the Code,
non-employee directors are not permitted to receive incentive stock options.
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Nonqualified stock options issued under the Amended and Restated
Nonqualified Stock Option Plan, may be granted to directors, officers,
independent contractors and employees and will provide for the right to
purchase shares of Common Stock at a specified price which may be less than
fair market value on the date of grant, and usually will become exercisable in
installments after the grant date. Nonqualified stock options may be granted
for any reasonable term.
Under the Amended and Restated Outside Director Stock Option Plan,
each of the three nonemployee directors were granted options, immediately upon
the completion of the Offering, to purchase an aggregate of 30,000 shares of
Common Stock, which, as amended, became immediately vested in May 1997. The
Amended and Restated Outside Director Stock Option Plan also provides for the
grant of options for shares to each nonemployee director (15,000 annually in
the aggregate) on the second, third and fourth anniversary of service, at an
exercise price equal to the market price as of the date of grant, with each
option being exercisable as to 50% of the shares on the first anniversary of
grant and the remaining 50% of the shares as the second anniversary of grant.
Options for 15,000 shares become exercisable after the second, third and fourth
anniversaries of grants. The Board of Directors approved certain amendments to
the Amended and Restated Outside Director Stock Option Plan in May 1997,
subject to stockholder approval, to provide for the immediate exercisability of
options previously granted to purchase 10,000 shares (30,000 shares in the
aggregate) and to provide for the annual formula grant of options to purchase
10,000 shares to each nonemployee director on each anniversary of service,
subject to a one-year vesting requirement.
In May, 1997, the Board of Directors adopted a resolution to begin an
Employee Stock Purchase Plan, subject to stockholder vote and ratification.
Under the plan, employees will be eligible to purchase Common Stock on a
periodic basis ("Offering Periods") through payroll deductions elected prior to
the beginning of each Offering Period, which may not exceed the lesser of 10%
of an employee's compensation or $10,000 per year. The price at which stock may
be purchased under the Employee Stock Purchase Plan is equal to 85% of the
lower of the fair market value of the Common Stock on the first day of the
offering period or the last day of the offering period. The Employee Stock
Purchase Plan provides for semi-annual Offering Periods of six months duration,
however the Board of Directors may vary the length of the Offering Period (but
may not exceed twenty-seven months).
Except for the amendments described above, the Amended and Restated
Stock Incentive Plan, the Amended and Restated Incentive
Stock Option Plan, the Amended and Restated NonqualifiedOutside Director Stock Option Plan,
and the Amended and
Restated Outside Director Stock Option Plan are unchanged from the 1996 Stock
Incentive Plan, the 1996 Incentive Stock Option Plan, the 1996 Nonqualified
Stock Option Plan, and the 1996 Outside Director Stock Option Plan attached as
exhibit to the Company's Registration Statement on Form S-1 filed on September
11, 1996, and the description of the plans is qualified in its entirety by
reference to that exhibit.
Vote Required for Approval.
The affirmative vote of a majority of the outstanding shares of common
stock present in person or represented by proxy at the Annual Meeting entitled
to vote is required to approve the adoption of the amendment and restatement of
the Master Stock Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSAL
TO APPROVE THE ADOPTION OF THE AMENDMENT AND RESTATEMENT TO THE MASTER STOCK
INCENTIVE PLAN AND, UNLESS MARKED TO THE CONTRARY, PROXIES RECEIVED FROM
STOCKHOLDERS WILL
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BE VOTED IN FAVOR OF THE RATIFICATION OF THE PROPOSED AMENDMENT AND RESTATEMENT
TO THE MASTER STOCK INCENTIVE PLAN.
PROPOSAL 4
TO APPROVE ADOPTION OF THE MLC HOLDINGS, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN.
The Board of Directors has approved and recommends to the stockholders
the adoption of the Employee Stock Purchase Plan (the "Stock Purchase Plan""ESPP") which establishes a tax advantaged employee stock purchase program as an
additional plan(collectively, the "1997
Plans", and, excluding the ESPP, the "1997 Incentive Plans"). Except for the
ESPP, these plans were first adopted in 1996 and amended and restated in 1997.
The stockholders of the Company approved the adoption of the ESPP and
amendments to the existing plans which comprise1997 Plans at the Stock Incentive Plan.
The Employee Stock Purchase Plan will not be effective unless1997 annual meeting, and until
stockholder approval is obtained. The shares reserved foralso approved the
reservation and issuance under this
plan are also a partthereunder of theup to (i) 20% of the total number of shares of Common Stock
outstanding reserved under the Master Stock Incentive Plan and will be limited
to the lesser of (A) twenty percent (20%) of the total number of
shares of Common Stock outstanding from time to time, as determined immediately
after giving pro forma effect to the assumed exercise of all options or purchaseother
rights to acquire Common Stock, less (ii) any shares of Common Stock that have
been purchased under all of the component plans ofESPP, and less (iii) and shares granted pursuant to
options granted under the 1997 Master Stock Incentive Plan
("Reserved Shares"), or (B) 4,000,000 (IRS regulations require that a tax
advantaged incentive stock option plan have a specifiedPlan. The aggregate number of shares
as a
cap--this limit applies only toreserved for issuance under each of the Amended and Restated Incentive Stock
Option Plan and to the Stock Purchase Plan and not the other component plans of
the Master Stock Incentive Plan).
In the Board's judgment, the Stock Purchase Plan also provides the
Company with a critical long-term incentive for a broad range of employees and
offers a competitive advantage as the Company acquires other firms to retain
and motivate newly acquired personnel. As with all component plans under the
Master Stock Incentive Plan, the Company believes that the Company's policy of
granting stock options and/or making stock purchase opportunities available to
a broad base of employees will provide it with critical advantage in attracting
acquisition candidates and attracting and retaining top personnel.
Description of the Stock Purchase Plan
The Stock Purchase Plan, which is intended to qualify under Section
423 of the Code, will be administered by the Stock Incentive Committee of the
Board of Directors. Employees (including officers and employee directors of the
Company except for those serving as members of the Stock Incentive Committee)
are eligible to participate in the Stock Purchase Plan if they are customarily
employed for more than 20 hours per week five months per year. The Stock
Purchase Plan will be implemented during sequential six month Offering Periods
six (6) months duration or such other duration as the Board of Directors
shall determine. The Company has not yet offered or sold shares of Common
Stock to employees pursuant to the Stock Purchase Plan, but intends to initiate
the first offering under the Stock Purchase Plan commencing with the first
calendar quarter after the Stock Purchase Plan is ratified by the stockholders.
The Stock Purchase Plan permits eligible employees to purchase Common Stock
through payroll deductions, which may not exceed the lesser of 10% of an
employee's total compensation or $10,000 per year. The priceESPP was further capped at which stock
may be purchased under the Stock Purchase Plan is equal to 85% of the lower
of the fair market value of the Common Stock on the first day of the offering
period or the last day of the offering period. Employees may end their
participation in the offering at any time during the offering period, and
participation ends automatically on termination of a participant's employment
with the Company.
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The Employee Stock Purchase Plan is set forth as Exhibit B to this
Proxy Statement, and the description of the Stock Purchase Plan contained is
qualified in its entirety by reference to Exhibit B.
Vote Required for Approval.
The affirmative vote of a majority of the shares of common stock
present in person or represented by proxy at the annual meeting entitled
to vote is required to approve the adoption of the Stock Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSAL
TO APPROVE THE ADOPTION OF THE STOCK PURCHASE PLAN AND, UNLESS MARKED
TO THE CONTRARY, PROXIES RECEIVED FROM STOCKHOLDERS WILL BE VOTED IN FAVOR OF
THE RATIFICATION OF THE PROPOSED STOCK PURCHASE PLAN.
PROPOSAL 5
TO APPROVE ADOPTION OF AMENDMENTS TO THE MLC HOLDINGS, INC.,
AMENDED AND RESTATED OUTSIDE DIRECTOR STOCK OPTION PLAN
(FORMERLY THE 1996 OUTSIDE DIRECTOR STOCK OPTION PLAN).4,000,000.
The Board of Directors has approveddetermined that it is in the best interest
of the Company to adopt a "Long Term Incentive Plan" (the "LTIP") to afford the
Board of Directors and recommendsthe
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Compensation Committee expanded flexibility relating to stock and performance
based compensation and to comply with regulatory developments. The Board of
Directors has also determined that the Company's stock compensation plans should
provide for immediate vesting and exercisability upon a change of control of the
Company. Accordingly, on July 28, 1998, the Board of Directors adopted the MLC
Holdings, Inc. 1998 Long-Term Incentive Plan (the "LTIP"), subject to approval
of the LTIP by the stockholders at the Annual Meeting. No awards will be made
under the LTIP prior to the stockholdersAnnual Meeting. The Board of Directors also adopted,
subject to shareholder ratification of the adoption ofLTIP, a resolution terminating the
1997 Incentive Plans, and an amendment and restatement ofto the 1996 Outside Director Stock
Option Plan which (i) renamesESPP to designate the amended and restated planCompensation
Committee as the "Amended"committee" under the ESPP and Restated Outside Director Stock Option Plan," (ii) conforms the Amended and
Restated Outside Director Stock Option Plan to the increase in the limitation
ofmodify the number of shares
of Common Stock that may be subject to outstanding
awardsthe ESPP to provide for a reduction in that number to the extent that
shares (or share equivalent contract rights or performance grants) are granted
under the various constituent plansLTIP. Options issued under the Master Stock1997 Incentive Plan (which includesplans before July 28,
1998, will remain valid in accordance with their terms and the Amended and Restated Outside Director Stock Option
Plan) from 155,000number of shares
reserved for issuance under the LTIP will continue to take such previously
granted option rights into account, thus the LTIP will not increase the
aggregate number of shares reserved for issuance under the Company's stock based
compensation plans.
The Company has reserved for issuance upon the grant or exercise of
awards pursuant to the LTIP that number of shares of common stock to a number ofthe authorized but unissued
shares of Common Stock equal to twenty percent (20%)(i) 20% of the total number of shares of Common
Stock outstanding from time to time, as determined immediately after giving pro
forma effect to the assumed exercise of all options or other rights to acquire
Common Stock, less (ii) any shares of Common Stock that have been purchased
under the ESPP from time to time, and less (iii) any shares granted pursuant to
the exercise of options or otherwise granted as awards under the 1997 Incentive
Plans. The LTIP includes an "incentive stock option or purchase rightsplan" feature ("ISO
Feature") and the number of shares that may be issued under allthe ISO feature is
further capped at 4,000,000 to comply with Internal Revenue Code requirements
for a fixed cap upon the number of shares that may be subject to options granted
under such a tax advantaged plan. Therefore, the adoption of the component plansLTIP by the
stockholders will have no net effect on the aggregate number of shares that may
be issued in the form of incentive awards or sold to employees under the ESPP.
The LTIP will be effective as of as of its adoption by the Board. However, if
the stockholders fail to approve the LTIP at the Annual Meeting, the 1997
Incentive Plans will remain in effect and the LTIP will be of no effect.
A summary of the MasterLTIP is set forth below. The summary is qualified in
its entirety by reference to the full text of the LTIP, which is attached to
this Proxy Statement as Appendix A.
GENERAL
The purpose of the LTIP is to promote the success, and enhance the value, of the
Company by linking the personal interests of employees, officers, consultants
and directors to those of the stockholders, and by providing such employees,
officer, consultants and directors with an incentive for outstanding
performance. As of July 27,1998, there were approximately 180 persons eligible
to participate in the LTIP.
The LTIP authorizes the granting of awards ("Awards") to employees, officers,
consultants and directors of the Company or its subsidiaries in the following
forms: (i) options to purchase shares of Common Stock Incentive Plan ("Reserved Shares"Options"), which may be
incentive stock options or non-qualified options, (ii) stock appreciation rights
("SARs"); (iii) modifiesperformance units ("Performance Units"); (iv) restricted stock
("Restricted Stock"); (v) dividend equivalents ("Dividend Equivalents"); (vi)
other stock-based awards; or (vii) any other right or interest relating to
Common Stock or cash. Not more than 10% of the formulashares authorized under the LTIP
may be granted as Awards of Restricted Stock or unrestricted Stock Awards. The
maximum number of shares of Common Stock with respect to one or more Options
and/or SARs that may be granted during any one calendar year under the LTIP to
any one participant is 500,000. The maximum number of
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shares of Common Stock with respect to Incentive Stock Options that may be
granted during the life of the LTIP is 4,000,000. The maximum fair market value
of any Awards (other than Options and SARs) that may be received by a
participant (less any consideration paid by the participant for such Award)
during any one calendar year under the LTIP is $2,000,000.
Pursuant to Section 162(m) of the Code, the Company may not deduct compensation
in excess of $1 million paid to the Chief Executive Officer and the four next
most highly compensated executive officers of the Company. The LTIP is designed
to comply with Code Section 162(m) so that the grant of Options and SARs under
the LTIP, and other Awards, such as Performance Units, that are conditioned on
the performance goals described in Section 14.13 of the LTIP, will be excluded
from the calculation of annual compensation for purposes of Code Section 162(m)
and will be fully deductible by the Company. The Board has approved the LTIP for
submission to the stockholders in order to permit the grant of Awards thereunder
that will constitute deductible performance-based compensation for purposes of
Code Section 162(m).
ADMINISTRATION
The LTIP will be administered by the Compensation Committee of the Board of
Directors of the Company (the "Compensation Committee"). Except as such
discretion shall be limited by the automatic provisions of Article 13 with
respect to annual grants of options madeOptions to nonemployeenon-employee directors, the Committee has
the power, authority and discretion to provide for andesignate participants; determine the
type or types of Awards to be granted to each participant and the number, terms
and conditions thereof; establish, adopt or revise any rules and regulations as
it may deem necessary or advisable to administer the LTIP; and make all other
decisions and determinations that may be required under, or as the Committee
deems necessary or advisable to administer, the LTIP.
FORMULA GRANTS TO NON-EMPLOYEE DIRECTORS
Pursuant to Article 13 of the LTIP, on the day following the 1998 Annual Meeting
and on the day following each subsequent annual grantmeeting of an optionthe Company's
stockholders held on or before September 1, 2006, each non-employee director of
the Company who is serving in such capacity as of such day will be granted a
non-qualified Option to purchase 10,000 shares of common
stock onStock (each, a "Director
Option"). Appropriate pro-rata grants will be made if at any time there are
insufficient shares under the anniversaryLTIP to make the full scheduled grants of Director
Options. The exercise price for each yearDirector Option will be 100% of service of a nonemployee director,
which option is at the fair
market value of the Stock on the date of grant, vests and is
exercisable commencing one year after the date of grant, and expires 10 years
from the date of grant, (iv) amends the terms of existing options granted to
outside directors in November, 1996, to make such options immediately vested
and exercisable. The Board has adopted, as of May 14, 1997, the Amended and
Restated Outsidegrant. Each Director Stock Option Plan, and the corresponding amendments
to the Master Stock Incentive Plan -- see also Proposal 3.
In the Board's judgment, the Amended and Restated Outside Director
Stock Option Plan provides the Company a means to offer a critical long-term
incentive to attract and retain highly qualified outside directors and to
provide them an inducement to focus upon the long term growth of the Company
and appreciation in the value of the Company's Common Stock.
Description of the Amended and Restated Outside Director Stock Option
Plan
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Under the 1996 Outside Director Stock Option Plan prior to the
amendment and restatement, each of the three non-employee directors were
granted options, immediately upon the completion of the Offering, to purchase
10,000 shares of Common Stock, which vested 50% after one year of service as a
director and 50% after completion of of the second year of service. As a
result of the amendments made by the Amended and Restated Outside Director
Stock Option Plan, these options became immediately vested as of May, 1997.
Under the 1996 Outside Director Stock Option Plan, prior to the amendment and
restatement, each of the three non-employee outside directors would also have
been granted options for 5,000 shares of Common Stock (15,000 annually in the
aggregate to all three outside non-employee directors)will expire
on the second, third,
and fourthtenth anniversary of service as a director, at an exercise price equal to
the market price as of the date of grant with each option being exercisableunless earlier terminated as
to 50%provided below. A Director Option will not automatically lapse by reason of the
sharesoptionee ceasing to qualify as a non-employee director but remaining as a member
of the Board. However, Director Options will lapse under the earliest of the
following circumstances: (i) ten years after the date of grant; (ii) if the
optionee ceases to serve as a member of the Board for any reason other than by
reason of death or disability, his Director Options will lapse three months
after such termination as a member of the Board; provided, however, that if the
director is removed for cause, his Director Options will lapse immediately; and
(iii) if the optionee ceases to serve as a member of the Board by reason of his
death or disability, his Director Options will lapse one year after such
termination as a member of the Board.
Each Director Option will be immediately exercisable, in whole or in part, on
the first anniversary of the date of grant. Director Options are assignable or
transferable by the director by will, by the laws of descent and distribution,
or pursuant to a qualified domestic relations order, and will be transferable by
the director to any of the following permitted transferees, upon such reasonable
terms and conditions as the Committee may establish (and, unless specifically
permitted by the Board in advance, such transfers shall be limited to one
transfer per director to no more than four transferees): (i) one or more of the
following family members of the Participant: any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law,
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including adoptive relationships, (ii) a trust, partnership or other entity
established and existing for the sole benefit of, or under the sole control of,
one or more of the above family members of the Participant, or (iii) any other
transferee specifically approved by the Committee after taking into account any
state or federal tax, securities or other laws applicable to transferable
options.
No Director Options will be granted under Article 13 after September 1, 2006.
However, the Committee may make discretionary awards to non-employee directors
pursuant to the other provisions of the LTIP before or after September 1, 2006.
DISCRETIONARY AWARDS
Stock Options. The Committee is authorized to grant Options, which may
be incentive stock options ("ISOs") or nonqualified stock options ("NSOs"), to
participants. All Options will be evidenced by a written Award Agreement between
the Company and the remaining 50%participant, which will include such provisions as may be
specified by the Committee. The terms of any ISO must meet the requirements of
Section 422 of the Code.
Stock Appreciation Rights. The Committee may grant SARs to
participants. Upon the exercise of a SAR, the participant has the right to
receive the excess, if any, of: the fair market value of one share of Common
Stock on the date of exercise over the grant price of the SAR as determined by
the Committee, which will not be less than the fair market value of one share of
Common Stock on the date of grant. All awards of SARs will be evidenced by an
Award Agreement, reflecting the terms, methods of exercise, methods of
settlement, form of consideration payable in settlement, and any other terms and
conditions of the SAR, as determined by the Committee at the time of grant.
Performance Units. The Committee may grant Performance Units to
participants on such terms and conditions as may be selected by the Committee.
The Committee will have the complete discretion to determine the number of
Performance Units granted to each participant and to set performance goals and
other terms or conditions to payment of the Performance Units in its discretion
which, depending on the extent to which they are met, will determine the number
and value of Performance Units that will be paid to the participant.
Restricted Stock Awards. The Committee may make awards of Restricted
Stock to participants, which will be subject to such restrictions on
transferability and other restrictions as the Committee may impose (including,
without limitation, limitations on the right to vote Restricted Stock or the
right to receive dividends, if any, on the Restricted Stock).
Dividend Equivalents. The Committee is authorized to grant Dividend
Equivalents to participants subject to such terms and conditions as may be
selected by the Committee. Dividend Equivalents entitle the participant to
receive payments equal to dividends with respect to all or a portion of the
number of shares of Common Stock subject to an Option Award or SAR Award, as
determined by the Committee. The Committee may provide that Dividend Equivalents
be paid or distributed when accrued or be deemed to have been reinvested in
additional shares of Common Stock, or otherwise reinvested.
Other Stock-Based Awards. The Committee may, subject to limitations
under applicable law, grant to participants such other Awards that are payable
in, valued in whole or in part by reference to, or otherwise based on or related
to shares of Common Stock, as deemed by the Committee to be consistent with the
purposes of the LTIP, including without limitation shares of Common Stock
awarded purely as a "bonus" and not subject to any restrictions or conditions,
convertible or exchangeable debt securities, other rights convertible or
exchangeable into shares of Common Stock, and Awards valued by reference to book
value of shares of Common Stock or the value of securities of or the performance
of specified Parents or Subsidiaries of the Company. The Committee will
determine the terms and conditions of any such Awards.
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Performance Goals. The Committee may determine that any Award will be
determined solely on the basis of (a) the achievement by the Company or a parent
or subsidiary of a specified target return, or target growth in return, on
equity or assets, (b) the Company's, parent's or subsidiary's stock price, (c)
the achievement by an individual or a business unit of the Company, parent or
subsidiary of a specified target, or target growth in, revenues, net income or
earnings per share, (d) the achievement of objectively determinable goals with
respect to service or product delivery, service or product quality, customer
satisfaction, meeting budgets and/or retention of employees or (e) any
combination of the goals set forth in (a) through (d) above. Furthermore, the
Committee reserves the right for any reason to reduce (but not increase) any
Award, notwithstanding the achievement of a specified goal. If an Award is made
on such basis, the Committee must establish goals prior to the beginning of the
period for which such performance goal relates (or such later date as may be
permitted under Code Section 162(m)). Any payment of an Award granted with
performance goals will be conditioned on the written certification of the
Committee in each case that the performance goals and any other material
conditions were satisfied.
Limitations on Transfer; Beneficiaries. Except for Director Options
granted under Article 13 of the LTIP, no Award will be assignable or
transferable by a participant other than by will or the laws of descent and
distribution or, except in the case of an ISO, pursuant to a qualified domestic
relations order; provided, however, that the Committee may (but need not) permit
other transfers where the Committee concludes that such transferability (i) does
not result in accelerated taxation, (ii) does not cause any Option intended to
be an incentive stock option to fail to be described in Code Section 422(b), and
(iii) is otherwise appropriate and desirable, taking into account any factors
deemed relevant, including without limitation, any state or federal tax or
securities laws or regulations applicable to transferable Awards. A participant
may, in the manner determined by the Committee, designate a beneficiary to
exercise the rights of the participant and to receive any distribution with
respect to any Award upon the participant's death.
Acceleration Upon Certain Events. Upon the participant's death or
disability, all outstanding Options, SARs, and other Awards in the nature of
rights that may be exercised will become fully exercisable and all restrictions
on outstanding Awards will lapse. Any Options or SARs will thereafter continue
or lapse in accordance with the other provisions of the LTIP and the Award
Agreement. In the event of a Change in Control of the Company (as defined in the
LTIP), all outstanding Options, SARs, and other Awards in the nature of rights
that may be exercised will become fully vested and all restrictions on all
outstanding Awards will lapse; provided, however that such acceleration will not
occur if, in the opinion of the Company's accountants, such acceleration would
preclude the use of "pooling of interest" accounting treatment for a Change in
Control transaction that would otherwise qualify for such accounting treatment
and is contingent upon qualifying for such accounting treatment. In the event of
(i) the commencement of a public tender offer for all or any portion of the
Common Stock, or (ii) a proposal to merge, consolidate or otherwise combine into
and with another corporation (in which transaction the Company would not
survive) is submitted to the stockholders of the Company for approval, the
Committee may in its sole discretion declare all outstanding Options, SARs, and
other Awards in the nature of rights that may be exercised to become fully
vested, and/or all restrictions on all outstanding Awards to lapse, in each case
as of such date as the second anniversaryCommittee may, in its sole discretion, declare, which may
be on or before the consummation of such tender offer or other transaction or
event.
TERMINATION AND AMENDMENT
The Board or the Committee may, at any time and from time to time, terminate,
amend or modify the LTIP without stockholder approval; provided, however, that
the Committee may condition any amendment on the approval of stockholders of the
grant. As a resultCompany if such approval is necessary or deemed advisable with respect to tax,
securities or other applicable laws, policies or regulations. No termination,
amendment, or modification of the amendments madeLTIP may adversely affect any Award previously
granted under the LTIP, without the written consent of the participant.
CERTAIN FEDERAL INCOME TAX EFFECTS
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Nonqualified Stock Options. Under present federal income tax
regulations, there will be no federal income tax consequences to either the
Company or the participant upon the grant of a non-discounted NSO (including the
Director Options). However, the participant will realize ordinary income on the
exercise of the NSO in an amount equal to the excess of the fair market value of
the Common Stock acquired upon the exercise of such option over the exercise
price, and the Company will receive a corresponding deduction. The gain, if any,
realized upon the subsequent disposition by the Amended and Restated Outside Directorparticipant of the Common Stock
Option Plan,
each non-employee director will receiveconstitute short-, mid- or long-term capital gain, depending on the
participant's holding period.
Incentive Stock Options. Under present federal income tax regulations,
there will be no federal income tax consequences to either the Company or the
participant upon the grant of an option to purchase 10,000ISO or the exercise thereof by the participant.
If the participant holds the shares of common stock on each annual anniversaryCommon Stock for the greater of service, with each option being
exercisabletwo years
after the date the Option was granted or one year after the date of grant. Eachacquisition of such
optionsshares of Common Stock (the "required holding period"), the difference between
the aggregate option price and the amount realized upon disposition of the
shares of Common Stock will constitute mid- or long-term capital gain or loss,
and the Company will not be entitled to a federal income tax deduction. If the
shares of Common Stock are disposed of in a sale, exchange or other
"disqualifying disposition" during the required holding period, the participant
will realize taxable ordinary income in an amount equal to the excess of the
fair market value of the Common Stock purchased at the time of exercise over the
aggregate option price, and the Company will be exercisableentitled to a federal income tax
deduction equal to such amount.
SARs. Under present federal income tax regulations, a participant
receiving a SAR will not recognize income, and the Company will not be allowed a
tax deduction, at the time the Award is granted. When a participant exercises
the SAR, the amount of cash and the fair market pricevalue of any shares of Common
Stock received will be ordinary income to the participant and will be allowed as
a deduction for federal income tax purposes to the Company.
Performance Units. Under present federal income tax regulations, a
participant receiving Performance Units will not recognize income and the
Company will not be allowed a tax deduction at the time the Award is granted.
When a participant receives payment of Performance Units, the amount of cash and
the fair market value of any shares of Common Stock received will be ordinary
income to the participant and will be allowed as a deduction for federal income
tax purposes to the Company.
Restricted Stock. Under present federal income tax regulations, and
unless the participant makes an election to accelerate recognition of the income
to the date of grant.grant, a participant receiving a Restricted Stock Award will not
recognize income, and the Company will not be allowed a tax deduction, at the
time the Award is granted. When the restrictions lapse, the participant will
recognize ordinary income equal to the fair market value of the Common Stock,
and the Company will be entitled to a corresponding tax deduction at that time.
BENEFITS TO NAMED EXECUTIVE OFFICERS AND OTHERS
As of July 29, 1998, no awards had been granted or approved for grant under the
LTIP, other than the Director Options. Any other awards under the LTIP will be
made at the discretion of the Committee. Consequently, other than as shown
below, it is not presently possible to determine, with respect to (i) the
executive officers named in the Summary Compensation Table, (ii) all current
executive officers as a group, (iii) all non-executive directors, as a group, or
(iv) all eligible participants, including all current officers who are not
executive officers, as a group, either the benefits or amounts that will be
received by such persons or groups pursuant to the LTIP or the benefits or
amounts that would have been received by such persons or groups under the LTIP
if it had been in effect during the last fiscal year. The following table below sets forthshows
the minimum benefits that will be allocatedaccrue under the LTIP, for each year that it is
in effect through September 2006, to each
member of the Board who is not an employee of the Company if the Amended and
Restated Outside Director Stock Option Plan is adopted.
AMENDED AND RESTATED OUTSIDE
DIRECTOR STOCK OPTION PLAN BENEFITSnon-employee directors as a group.
One-Time Immediately Annual Option Grant for
Vested Existing- ----------------------------------------------------------------------------------------------------
Name and Position Dollar Value ($) No. of Options Below Specified Number of
(Number of Shares of Shares of Common Stock
Common Stock Subject to
Name Option)
Jonathan J. Ledecky ........ 10,000 10,000
Terrence O'Donnell ......... 10,000 10,000
Carl J. Rickersten ......... 10,000 10,000
TOTAL ......................(#)
- ----------------------------------------------------------------------------------------------------
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- ----------------------------------------------------------------------------------------------------
All Non-Employee Directors, as a Group (1) 30,000 30,000(2)
- ----------------------------------------------------------------------------------------------------
Vote Required for Approval.(1) On a per share basis, this amount will be equal to the excess of the
fair market value of the Common Stock on the date of exercise of the
option over the exercise price of the option.
(2) Number of options to be granted in any one year while Article 13 of the
LTIP is in effect, assuming there are three non-employee directors in
such year.
ADDITIONAL INFORMATION
The closing price of the Common Stock, as reported by the Nasdaq National Market
on July 28, 1998, was $13.50.
VOTE REQUIRED FOR APPROVAL. The affirmative vote of the holders of a majority of
the shares of Common Stock present and personallyor represented by proxy and entitled to vote
at the Annual Meeting entitled to
vote is required to approve the adoptionon this proposal will constitute approval of the amendment and restatement of
the Amended and Restated Outside Director Stock Option Plan.LTIP.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSAL
TO APPROVE THE ADOPTION OF THE AMENDMENT AND RESTATEMENT OF THE AMENDED AND
RESTATED OUTSIDE DIRECTOR STOCK OPTION PLAN AND, UNLESS MARKED TO THE
CONTRARY, PROXIES RECEIVED FROM STOCKHOLDERS WILL BE VOTED IN FAVOR OF THE
ADOPTION OF THE PROPOSED AMENDMENT AND RESTATEMENT OF THE AMENDED AND RESTATED
OUTSIDE DIRECTOR STOCK OPTION PLAN.
PROPOSAL 6
TO APPROVE ADOPTION OF AMENDMENTS TO THE MLC HOLDINGS, INC.,
AMENDED AND RESTATED INCENTIVE STOCK OPTION PLAN
(FORMERLY THE 1996 INCENTIVE STOCK OPTION PLAN).
The Board of Directors has approved and recommends to the stockholders
the adoption of an amendment and restatement of the 1996 Incentive Stock Option
Plan which (i) renames the amended and restated plan as the "Amended and
Restated Incentive Stock Option Plan," (ii) conforms the Amended and Restated
Incentive Stock Option Plan to the increase in the limitation of the
number of shares of Common Stock that may be subject to outstanding awards
under the various constituent plans under the Master Stock Incentive Plan
(which includes the Amended and Restated Incentive Stock Option Plan)
from 155,000 shares of Common Stock to a number of shares of Common Stock equal
to the lesser of (A) twenty percent (20%) of the total number of shares of
Common Stock outstanding from time to time, as determined immediately after
giving pro forma effect to the assumed exercise of all option or purchase
rights under all of the component plans of the Master Stock Incentive Plan
("Reserved Shares"), or (B) 4,000,000 (IRS regulations require that a tax
advantaged incentive stock option plan have a specified number of shares as a
cap -- this limit applies only to the Amended and Restated Incentive Stock
Option Plan and the Stock Purchase Plan and does not apply to other component
plans of the Master Stock Incentive Plan). The Board has adopted, as of
May 14, 1997, the Amended and Restated Incentive Stock Option Plan, and the
corresponding amendments to the Master Stock Incentive Plan -- see also
Proposal 3;
In the Board's judgment, the Amended and Restated Incentive Stock
Option Plan, together with other component plans of the Master Stock Incentive
Plan provides the Company a means to offer a critical long-term incentive for a
broad range of employees and offers a competitive advantage as the Company
acquires other firms and seeks to attract, retain and motivate newly acquired
personnel. The Company believes that the Company's policy of granting stock
options and making stock purchase opportunities available to a broad base of
employees will provide it with valuable advantage in attracting acquisition
candidates and attracting and retaining key personnel.
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During fiscal 1997, options for a total of 73,800 shares of common
stock were granted to a total of 39 employees (other than the Company's
executive officers) under the 1996 Incentive Stock Option Plan. Since the
close of fiscal 1997, options for 46,200 shares were granted to newly hired
executive officers, Thomas Howard (30,000 shares -- made available by
reallocation of 30,00 shares previously reserved for future issuance under the
1996 Outside Director Stock Option Plan) and Steven Mencarini, (16,200 shares).
The purpose of the Amended and Restated Incentive Stock Option Plan is to
increase the number of shares available to provide the compensation committee
with continued and greater flexibility to utilize awards of long-term equity
based incentives to a wide range of employees, in particular as a part of the
Company's acquisition and growth. The incorporation of a formula for expansion
of the number of shares based upon fluctuations in the number of shares
outstanding will provide for and accommodate growth via stock acquisitions.
The Company believes that providing opportunities for stock awards and for
stock purchase encourages employees at all levels to focus on the long-term
growth of stockholder value. The Board believes that providing for flexibility
in awarding long-term compensation allows for greater use of equity based
incentives as opposed to current cash compensation for managers and other
employees, which, in the Board's judgment, promotes a better alignment of the
interest of managers and stockholders and also encourages key managers to
remain with the Company over an extended period. By increasing the number of
shares that may be awarded under the Amended and Restated Incentive Stock
Option Plan, the Board of Directors seeks to insure that the long-term
incentives can continue to be awarded to a broad range of employees and will
remain available for ongoing strategic use as an attractive component of the
Company's acquisition program. The Board also believes that upon occasion in
connection with a major acquisition the Company may be able to offer
substantial option grants to reduce the up front price paid by the Company for
the acquired business and to encourage the owners of the business being
acquired remain employed for an extended period of time (where such owners are
deemed to be particularly valuable employees).
The Board of Directors expects that annual option grants for in excess
of 100,000 shares to any one individual or at an exercise price below the
market value will be made only rarely, when special circumstances warrant or
demand unique compensation arrangements such as in connection with a major
acquisition.
Description of the Amended and Restated Incentive Stock Option Plan
See Proposal 3 for a discussion of the Master Stock Incentive Plan and
the Amended and Restated Incentive Stock Option Plan.
In addition to options granted, the Company has agreed by the terms of
an agreement for the acquisition of CompuVentures of Pitt County, Inc.
("CompuVentures"), to grant incentive stock options for an additional 60,000
shares to key employees of CompuVentures under the Amended and restated
Incentive Stock Option Plan, subject to shareholder approval of this Proposal 6
(and coordinating Proposal 3). Phillip G. Norton has entered into an agreement
with CompuVentures agreeing to vote the Common Stock of the Company controlled
by Mr. Norton in favor of this proposal 6 (and Proposal 3). Mr. Norton
controls 2,825,000 shares of Common Stock of the Company or 49.53% of the
shares entitled to vote, thus stockholder ratification of these proposals is
virtually assured.
The Company's Stock Incentive Committee has also approved a grant of
additional incentive stock options to purchase 3,800 shares of Common Stock to
Steven Mencarini, subject to stockholder ratification of the Amended and
Restated Incentive Stock Option Plan.
In addition, the Company is considering several possible acquisitions
which, if consummated, would result in the grant of stock options to key
employees of the acquired businesses.
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Options granted under the Amended and Restated Incentive Stock Option
Plan will become exercisable and expire in accordance with the Amended and
Restated Incentive Stock Option Plan and the applicable option agreement,
provided that no option may become exercisable earlier than one year from the
date of grant.
Upon the exercise of an option, the full option price, either in cash,
Common Stock or a combination of cash and Common Stock, or in any other form of
consideration permitted by the Amended and Restated Incentive Stock Option
Plan, including under any cashless exercise program permitted by the Amended
and Restated Incentive Stock Option Plan, is required to be paid to the
Company.
If the aggregate fair market value of the Common Stock, determined at
the time of grant, with respect to which incentive stock options are granted
under the Amended and Restated Incentive Stock Option Plan or any other plan of
the Company, are exercisable for the first time by an optionee during any
calendar year exceeds $100,000, or such other amount as may be permitted under
the Code, such excess shall be considered non-qualified stock options. The
Amended and Restated Incentive Stock Option Plan also contains limitations on
the grant of incentive stock options to any holder of more than 10% of the
combined voting power of the Company's voting Common Stock.
An optionee will not be subject to federal income tax upon the grant
of an option under the Amended and Restated Incentive Stock Option Plan. Upon
exercise of a non-qualified stock option, the optionee generally must recognize
ordinary income in the amount of the "option spread" (the difference between
the fair market value of the option shares and the exercise price) at the date
of exercise and the optionee's employer generally is entitled to a tax
deduction in the same amount subject to applicable tax withholding
requirements; and upon sale, appreciation (or depreciation) after the date of
exercise is treated as either short-term or long-term capital gain (or loss)
depending on how long the shares have been held.
Upon exercise of an incentive stock option, the optionee generally
will not have to recognize any taxable income (except that the alternative
minimum tax may apply). Instead, the optionee will be subject to taxation only
upon the disposition of the shares acquired upon exercise of the incentive
stock option. If the optionee disposes of the shares acquired upon exercise of
an incentive stock option more than two years after the date of grant of the
incentive stock option and more than eighteen months after exercise, he or she
will realize a long-term capital gain (or loss) based on the difference between
the sale price of the shares and the exercise price of the option (or his or
her basis in the shares if it is not equal to the exercise price). Otherwise,
in the event the optionee disposes of the shares acquired pursuant to the
exercise of an incentive stock option prior to the expiration of two years from
the date of grant or eighteen months from the date of exercise of the incentive
stock option, the optionee will realize ordinary income in the year of
disposition in an amount equal to the excess (if any) of the fair market value
of such shares on the date of exercise or the amount realized on a sale
(whichever is less) over the option price, and the optionee's employer will be
entitled to deduct such amount for federal income tax purposes. Any further
gain (or loss) realized by the optionee upon the sale of the Common Stock will
be taxed as short-term or long-term capital gain (or loss), depending on how
long the shares have been held, and will not result in any further deduction by
the employer.
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Because all grants and awards under the Amended and Restated Incentive
Stock Option Plan are entirely within the discretion of the Committee, the
total benefits allocable under the Amended and Restated Incentive Stock Option
Plan in the future are not at present determinable. Except for the commitment
to employees of CompuVentures and the grant to Mr. Mencarini described above,
no grants or awards have been made to date and no grants or awards will be made
by the Corporation until such time as the Amended and Restated Incentive Stock
Option Plan is approved by the stockholders at the 1997 Annual Meeting.
In the Board's judgment, the Amended and Restated Incentive Stock
Option Plan provides the Company a means to offer a critical long-term
incentive to attract and retain highly qualified outside directors and to
provide them an inducement to focus upon the long term growth of the Company
and appreciation in the value of the Company's Common Stock.
The table below sets forth the determinable benefits that will be
allocated to each Executive Officer and each non-executive officer employee of
the Company if the Amended and Restated Incentive Stock Option Plan is adopted.
Additional options may be granted at the discretion of the Committee.
AMENDED AND RESTATED INCENTIVE
STOCK OPTION PLAN BENEFITS
Option Grants
(Number of Shares of
Name Common Stock Subject to Option)
- ---- -------------------------------
Steven J. Mencarini, Chief Financial Officer 3,800
- -------------------------------------------- -----
TOTAL EXECUTIVE OFFICER GROUP 3,800
William Garner . . . . . . . . . . . . . . . . . . . . . . 15,000
Elaine Denton . . . . . . . . . . . . . . . . . . . . . . 15,500
David Rose . . . . . . . . . . . . . . . . . . . . . . . . 10,500
Nan Spainhour . . . . . . . . . . . . . . . . . . . . . . 5,000
Susan Chatham . . . . . . . . . . . . . . . . . . . . . . 6,000
Darrin Scott . . . . . . . . . . . . . . . . . . . . . . . 2,000
Roy Richardson . . . . . . . . . . . . . . . . . . . . . . 2,000
Jim Wood . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
Chauncy Willard . . . . . . . . . . . . . . . . . . . . . 2,000
- --------------- -----
TOTAL NON-EXECUTIVE OFFICER
EMPLOYEE GROUP . . . . . . . . . . . . . . . . . . . . . . 60,000
Vote Required for Approval.
The affirmative vote of a majority of the shares of Common Stock
present and personally represented by proxy at the Annual Meeting entitled to
vote is required to approve the adoption of the amendment and restatement of
the Amended and Restated Incentive Stock Option Plan.
The Board of Directors recommends a vote FOR approval of the proposal
to approve the adoption of the proposed amendment and restatement of the
Amended and Restated Incentive Stock Option Plan and, unless marked to the
contrary, proxies received from Stockholders will be voted in favor of the
ratification of the amendment and restatement of the Amended and Restated
Incentive Stock Option Plan.
PROPOSAL 7
TO APPROVE ADOPTION OF AMENDMENTS TO THE MLC HOLDINGS, INC.,
AMENDED AND RESTATED NONQUALIFIED STOCK OPTION PLAN
(FORMERLY THE 1996 NONQUALIFIED STOCK OPTION PLAN).
The Board of Directors has approved and recommends to the stockholders
the adoption of an amendment and restatement of the 1996 Nonqualified Stock
Option Plan which (i) renames the amended and restated plan as the "Amended and
Restated Nonqualified Stock Option Plan," (ii) conforms the provisions of the
Amended and Restated Nonqualified Stock Option Plan with the increase in the
limitation of the number of shares of Common Stock that may be subject to
outstanding awards under the various constituent plans under the Master Stock
Incentive Plan. See Proposal 3. The Board has adopted, as of May 14, 1997,
both this Amended and Restated Nonqualified Stock Option Plan and the Master
Stock Incentive Plan, and the corresponding amendments to the other existing
component plans: the Amended and Restated Outside Director Stock Option Plan
(formerly the 1996 Outside Director Stock Option Plan) -- see also Proposal 5;
the Amended and Restated Incentive Stock Option Plan (formerly the 1996
Incentive Stock Option Plan) -- see also Proposal 6.
In the Board's judgment, the Amended and Restated Nonqualified Stock
Option Plan provides the Company a means to offer a critical long-term
incentive for a broad range of employees as well as independent contractors
and offers a competitive advantage as the Company acquires other firms and
seeks to attract, retain and motivate newly acquired personnel. The Amended
and
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Restated Nonqualified Stock Option Plan provides the Company the ability to
offer and structure option awards beyond the parameters imposed upon the tax
advantaged plans such as the Amended and Restated Incentive Stock Option Plan
and the Stock Purchase Plan.
During fiscal 1997, options for a total of 5,000 shares of Common
Stock were granted to 2 independent contractors of the Company under the 1996
Nonqualified Stock Option Plan.
The Board of Directors expects that annual option grants for in excess
of 100,00 shares or at an exercise price below the market value will be made
only rarely, when special circumstances warrant or demand unique compensation
arrangements such as in connection with a major acquisition.
Description of the Amended and Restated Nonqualified Stock Option Plan
See Proposal 3 for a discussion of the Master Stock Incentive Plan and
the Amended and Restated Nonqualified Stock Option Plan.
Vote Required for Approval.
The affirmative vote of a majority of the shares of Common Stock
present and personally represented by proxy at the Annual Meeting entitled to
vote is required to approve the adoption of the amendment and restatement of
the Amended and Restated Nonqualified Stock Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSAL
TO APPROVE THE AMENDMENT AND RESTATEMENT OF THE AMENDED AND RESTATED
NONQUALIFIED STOCK OPTION PLAN AND, UNLESS MARKED TO THE CONTRARY, PROXIES
RECEIVED FROM STOCKHOLDERS WILL BE VOTED IN FAVOR OF THE APPROVAL OF THE
AMENDMENT AND RESTATEMENT OF THE AMENDED AND RESTATED NONQUALIFIED STOCK OPTION
PLAN.LTIP.
PROPOSAL 83
TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS
THE COMPANY'S INDEPENDENT AUDITORS FOR THE COMPANY'S
FISCAL YEAR ENDING MARCH 31, 1998
Subject to stockholder ratification, the Board of Directors has reappointed the
firm of Deloitte and Touche LLP as the independent auditors to examine the
Company's financial statements for the fiscal year ending March 31, 1998.
Deloitte & Touche has audited the Company's and its principal operating
subsidiary, MLC Group, Inc.'s books since 1990. The Board of Directors
recommends that Stockholders vote FOR such ratification. If the Stockholders do
not ratify this appointment, other independent auditors will be considered by
the Board of Directors upon recommendation of the Audit Committee.
Representatives of Deloitte & Touche are expected to attend the Annual Meeting
and will have the opportunity to make a statement if they desire and to respond
to appropriate questions.
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39VOTE REQUIRED FOR APPROVAL. The affirmative vote of the holders of a majority of
the shares of Common Stock present or represented by proxy and entitled to vote
at the Annual Meeting on this proposal will constitute approval of the
ratification of the appointment of Deloitte & Touche LLP as independent
auditors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE
RATIFICATION OF THE APPROVAL OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS.
OTHER PROPOSED ACTION
The Board of Directors does not intend to bring any other matters before the
Annual Meeting, nor does the Board of Directors know of any matters which other
persons intend to bring before the Annual Meeting. If, however, other matters
not mentioned in this Proxy Statement properly come before the Annual Meeting,
the persons named in the accompanying form of Proxy will vote thereon in
accordance with the recommendation of the Board of Directors.
Stockholders should note that the Company's By-Laws provide that in order for a
stockholder to bring business before a meeting or to make a nomination for the
election of directors, such stockholder must give written notice complying with
the requirements of the By-Laws to the Secretary of the companyCompany not later
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than 90 days in advance of such meeting or, if later, the seventh day following
the first public announcement of the date of such meeting.
STOCKHOLDER PROPOSALS AND SUBMISSIONS
If any Stockholder wishes to present a proposal for inclusion in the proxy
materials to be solicited by the Company's Board of Directors with respect to
the next Annual Meeting of Stockholders, that proposal must be presented to the
Company's management prior to December 31, 1997.1998.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE SIGN AND
RETURN THE ENCLOSED PROXY PROMPTLY. YOUR VOTE IS IMPORTANT. IF YOU ARE A
STOCKHOLDER OF RECORD AND ATTEND THE ANNUAL MEETING AND WISH TO VOTE IN PERSON,
YOU MAY WITHDRAW YOUR PROXY AT ANY TIME PRIOR TO THE VOTE.
MLC HOLDINGS, INC.
/s/ Kleyton L. Parkhurst
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Kleyton L. Parkhurst, Secretary
3727
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EXHIBIT A
TEXT OF PROPOSED AMENDMENT
TO THE COMPANY'S CERTIFICATE OF INCORPORATION
(PROPOSAL 2)
PROPOSED SUBSTITUTE SECTION "FOURTH"
TO THE COMPANY'S CERTIFICATE OF INCORPORATION
FOURTH
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is twenty-seven million
(27,000,000) shares consisting of twenty-five million (25,000,000)
shares of common stock having a par value of $.01 per share (the
"Common Stock") and two million (2,000,000) shares of preferred stock
having a par value of $.01 per share (the "Preferred Stock").
The Board of Directors of the Corporation is authorized,
subject to limitations prescribed by law, to provide by resolution or
resolutions for the issuance of shares of the Preferred Stock as a
class or in series, and, by filing a certificate of designations,
pursuant to the Delaware General Corporation Law, setting forth a copy
of such resolution or resolutions to establish from time to time the
number of shares to be included in each such series and to fix the
designation, powers, preferences and rights of the shares of the class
or of each such series and the qualifications, limitations, and
restrictions thereof. The authority of the Board of Directors with
respect to the class or each series shall include, but not be limited
to, determination of the following:
a) the number of shares constituting any series and the
distinctive designation of that series;
b) the dividend rate of the shares of the class or of
any series, whether dividends shall be cumulative,
and if so, from which date or dates, and the relative
rights of priority, if any of payment of dividends on
shares of the class or of that series;
c) whether the class or any series shall have voting
rights, in addition to the voting
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rights provided by law, and if so, the terms of such
voting rights;
d) whether the class or any series shall have conversion
privileges and, if so, the terms and conditions of
conversion, including provision for adjustment of the
conversion rate in such events as the Board of
Directors shall determine;
e) whether or not the shares of the class or of any
series shall be redeemable, and, if so, the terms and
conditions of such redemption, including the date or
date upon or after which they shall be redeemable and
the amount per share payable in case of redemption,
which amount may vary under different conditions and
at different redemption dates;
f) whether the class or any series shall have a sinking
fund for the redemption or purchase of shares of the
class or of that series, and if so, the terms and
amount of such sinking fund;
g) the rights of the shares of the class or of any
series in the event of voluntary or involuntary
dissolution or winding up of the Corporation, and the
relative rights of priority, if any, of payment of
shares of the class or of that series; and
h) any other powers, preferences, rights,
qualifications, limitations and restrictions of the
class or of that series.
All rights accruing to the outstanding shares of the
Corporation not expressly provided for to the contrary herein or in
any certificate of designation shall be vested exclusively in the
Common Stock.
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MLC HOLDINGS, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
1.1 ESTABLISHMENT. The MLC Holdings, Inc. Employee Stock
Purchase Plan (the "PLAN") is established effective as of the date of approval
of this Plan by the stockholders (the "EFFECTIVE DATE").
1.2 PURPOSE. The purpose of the Plan is to provide Eligible
Employees of the Participating Company Group with an opportunity to acquire a
proprietary interest in the Company through the purchase of Stock. The Company
intends that the Plan qualify as an "employee stock purchase plan" under
Section 423 of the Code (including any amendments or replacements of such
section), and the Plan shall be so construed.
1.3 TERM OF PLAN. The Plan shall continue in effect until
the earlier of its termination by the Board or the date on which all of the
shares of Stock available for issuance under the Plan have been issued.
2. DEFINITIONS AND CONSTRUCTION.
2.1 DEFINITIONS. Any term not expressly defined in the Plan
but defined for purposes of Section 423 of the Code shall have the same
definition herein. Whenever used herein, the following terms shall have their
respective meanings set forth below:
(a) "BOARD" means the Board of Directors of the
Company. If one or more Committees have been appointed by the Board to
administer the Plan, "Board" also means such Committee(s).
(b) "CODE" means the Internal Revenue Code of 1986, as
amended, and any applicable regulations promulgated thereunder.
(c) "COMMITTEE" means a committee of the Board duly
appointed to administer the Plan and having such powers as shall be specified
by the Board. Unless the powers of the Committee have been specifically
limited, the Committee shall have all of the powers of the Board granted
herein, including, without limitation, the power to amend or terminate the Plan
at any time, subject to the terms of the Plan and any applicable limitations
imposed by law.
(d) "COMPANY" means MLC Holdings, Inc., a Delaware
corporation, or any successor corporation thereto.
(e) "COMPENSATION" means, with respect to any Offering
Period, a Participant's total compensation (base salary, commissions and
overtime) payable in cash during such Offering Period before deduction for any
contributions to any plan maintained by a Participating Company and described
in Section
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401(k) or Section 125 of the Code. Compensation shall not include
reimbursements of expenses, allowances, long-term disability, workers'
compensation or any amount deemed received without the actual transfer of cash
or any amounts directly or indirectly paid pursuant to the Plan or any other
stock purchase or stock option plan.
(f) "ELIGIBLE EMPLOYEE" means an Employee who meets
the requirements set forth in Section 5 for eligibility to participate in the
Plan.
(g) "EMPLOYEE" means a person treated as an employee
of a Participating Company for purposes of Section 423 of the Code. A
Participant shall be deemed to have ceased to be an Employee either upon an
actual termination of employment or upon the corporation employing the
Participant ceasing to be a Participating Company. For purposes of the Plan,
an individual shall not be deemed to have ceased to be an Employee while such
individual is on a military leave, sick leave or other bona fide leave of
absence approved by the Company of ninety (90) days or less. In the event an
individual's leave of absence exceeds ninety (90) days, the individual shall be
deemed to have ceased to be an Employee on the ninety-first (91st) day of such
leave unless the individual's right to reemployment with the Participating
Company Group is guaranteed either by statute or by contract. The Company
shall determine in good faith and in the exercise of its discretion whether an
individual has become or has ceased to be an Employee and the effective date of
such individual's employment or termination of employment, as the case may be.
All such determinations by the Company shall be, for purposes of an
individual's participation in or other rights under the Plan as of the time of
the Company's determination, final, binding and conclusive, notwithstanding
that the Company or any governmental agency subsequently makes a contrary
determination.
(h) "FAIR MARKET VALUE" means, as of any date, if
there is then a public market for the Stock, the closing sale price of a share
of Stock (or the mean of the closing bid and asked prices if the Stock is so
quoted instead) as quoted on the Nasdaq National Market, the Nasdaq Small-Cap
Market or such other national or regional securities exchange or market system
constituting the primary market for the Stock, as reported in The Wall Street
Journal or such other source as the Company deems reliable. If the relevant
date does not fall on a day on which the Stock has traded on such securities
exchange or market system, the date on which the Fair Market Value shall be
established shall be the last day on which the Stock was so traded prior to the
relevant date, or such other appropriate day as shall be determined by the
Board, in its sole discretion. If there is then no public market for the
Stock, the Fair Market Value on any relevant date shall be as determined by the
Board without regard to any restriction other than a restriction which, by its
terms, will never lapse. Notwithstanding the foregoing, the Fair Market Value
per share of Stock on the Effective Date shall be deemed to be the public
offering price set forth in the final prospectus filed with the Securities and
Exchange Commission in connection with the initial public offering of the
Stock.
(i) "OFFERING" means an offering of Stock as provided
in Section 6.
(j) "OFFERING DATE" means, for any Offering Period,
the first day of such Offering Period.
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(k) "OFFERING PERIOD" means a period established in
accordance with Section 6.1.
(l) "PARENT CORPORATION" means any present or future
"parent corporation" of the Company, as defined in Section 424(e) of the Code.
(m) "PARTICIPANT" means an Eligible Employee who has
become a participant in an Offering Period in accordance with Section 7 and
remains a participant in accordance with the Plan.
(n) "PARTICIPATING COMPANY" means the Company or any
Parent Corporation or Subsidiary Corporation designated by the Board as a
corporation the Employees of which may, if Eligible Employees, participate in
the Plan. The Board shall have the sole and absolute discretion to determine
from time to time which Parent Corporations or Subsidiary Corporations shall be
Participating Companies.
(o) "PARTICIPATING COMPANY GROUP" means, at any point
in time, the Company and all other corporations collectively which are then
Participating Companies.
(p) "PURCHASE DATE" means, for any Offering Period (or
Purchase Period if so determined by the Board in accordance with Section 6.2),
the last day of such period.
(q) "PURCHASE PERIOD" means a period, if any,
established in accordance with Section 6.2.
(r) "PURCHASE PRICE" means the price at which a share
of Stock may be purchased under the Plan, as determined in accordance with
Section 9.
(s) "PURCHASE RIGHT" means an option granted to a
Participant pursuant to the Plan to purchase such shares of Stock as provided
in Section 8, which the Participant may or may not exercise during the Offering
Period in which such option is outstanding. Such option arises from the right
of a Participant to withdraw any accumulated payroll deductions of the
Participant not previously applied to the purchase of Stock under the Plan and
to terminate participation in the Plan or any Offering thereunder at any time
during an Offering Period.
(t) "STOCK" means the common stock of the Company, as
adjusted from time to time in accordance with Section 4.2.
(u) "SUBSCRIPTION AGREEMENT" means a written agreement
in such form as specified by the Company, stating an Employee's election to
participate in the Plan and authorizing payroll deductions under the Plan from
the Employee's Compensation.
(v) "SUBSCRIPTION DATE" means the last business day
prior to the Offering Date of an Offering Period or such earlier date as the
Company shall establish.
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(w) "SUBSIDIARY CORPORATION" means any present or
future "subsidiary corporation" of the Company, as defined in Section 424(f) of
the Code.
2.2 CONSTRUCTION. Captions and titles contained herein are
for convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural and the plural shall include the singular.
Use of the term "or" is not intended to be exclusive, unless the context
clearly requires otherwise.
3. ADMINISTRATION.
3.1 ADMINISTRATION BY THE BOARD. The Plan shall be
administered by the Board, including any duly appointed Committee of the Board.
All questions of interpretation of the Plan, of any form of agreement or other
document employed by the Company in the administration of the Plan, or of any
Purchase Right shall be determined by the Board and shall be final and binding
upon all persons having an interest in the Plan or the Purchase Right. Subject
to the provisions of the Plan, the Board shall determine all of the relevant
terms and conditions of Purchase Rights granted pursuant to the Plan; provided,
however, that all Participants granted Purchase Rights pursuant to the Plan
shall have the same rights and privileges within the meaning of Section
423(b)(5) of the Code. All expenses incurred in connection with the
administration of the Plan shall be paid by the Company.
3.2 AUTHORITY OF OFFICERS. Any officer of the Company shall
have the authority to act on behalf of the Company with respect to any matter,
right, obligation, determination or election that is the responsibility of or
that is allocated to the Company herein, provided that the officer has apparent
authority with respect to such matter, right, obligation, determination or
election.
3.3 POLICIES AND PROCEDURES ESTABLISHED BY THE COMPANY. The
Company may, from time to time, consistent with the Plan and the requirements
of Section 423 of the Code, establish, change or terminate such rules,
guidelines, policies, procedures, limitations, or adjustments as deemed
advisable by the Company, in its sole discretion, for the proper administration
of the Plan, including, without limitation, (a) a minimum payroll deduction
amount required for participation in an Offering, (b) a limitation on the
frequency or number of changes in the rate of payroll deduction during an
Offering, (c) an exchange ratio applicable to amounts withheld in a currency
other than United States dollars, (d) a payroll deduction greater than or less
than the amount designated by a Participant in order to adjust for the
Company's delay or mistake in processing a Subscription Agreement or in
otherwise effecting a Participant's election under the Plan or as advisable to
comply with the requirements of Section 423 of the Code, and (e) determination
of the date and manner by which the Fair Market Value of a share of Stock is
determined for purposes of administration of the Plan.
4. SHARES SUBJECT TO THE PLAN.
4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment
as provided in Section 4.2, the maximum aggregate number of shares of Stock
that may be issued under the Plan,
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together with all other shares that may be issued under all other component
plans of the Company's Master Stock Incentive Plan, shall be a number of shares
of the common stock of MLC Holdings, Inc. equal to twenty percent (20%) of the
total number of shares of Common Stock outstanding from time to time, as
determined immediately after giving pro forma effect to the assumed exercise of
all option or purchase rights under all of the component plans of the Master
Stock Incentive Plan ("Reserved Shares"). Provided, that notwithstanding the
foregoing or any other provision of this Plan or the Master Stock Incentive
Plan, the aggregate number of shares which may be issued pursuant to options
granted under this Plan shall not exceed 4,000,000. If an outstanding Purchase
Right for any reason expires or is terminated or canceled, the shares
of Stock allocable to the unexercised portion of such Purchase Right shall
again be available for issuance under the Plan.
4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the
event of any stock dividend, stock split, reverse stock split,
recapitalization, combination, reclassification or similar change in the
capital structure of the Company, or in the event of any merger (including a
merger effected for the purpose of changing the Company's domicile), sale of
assets or other reorganization in which the Company is a party, appropriate
adjustments shall be made in the number and class of shares subject to the Plan
and each Purchase Right and in the Purchase Price. If a majority of the shares
which are of the same class as the shares that are subject to outstanding
Purchase Rights are exchanged for, converted into, or otherwise become (whether
or not pursuant to an Ownership Change Event) shares of another corporation
(the "NEW SHARES"), the Board may unilaterally amend the outstanding Purchase
Rights to provide that such Purchase Rights are exercisable for New Shares. In
the event of any such amendment, the number of shares subject to, and the
Purchase Price of, the outstanding Purchase Rights shall be adjusted in a fair
and equitable manner, as determined by the Board, in its sole discretion.
Notwithstanding the foregoing, any fractional share resulting from an
adjustment pursuant to this Section 4.2 shall be rounded down to the nearest
whole number, and in no event may the Purchase Price be decreased to an amount
less than the par value, if any, of the stock subject to the Purchase Right.
The adjustments determined by the Board pursuant to this Section 4.2 shall be
final, binding and conclusive.
5. ELIGIBILITY.
5.1 EMPLOYEES ELIGIBLE TO PARTICIPATE. Each Employee of a
Participating Company is eligible to participate in the Plan and shall be
deemed an Eligible Employee, except the following:
(a) Any Employee who is customarily employed by the
Participating Company Group for twenty (20) hours or less per week; and
(b) Any Employee who is customarily employed by the
Participating Company Group for not more than five (5) months in any calendar
year.
5.2 EXCLUSION OF CERTAIN SHAREHOLDERS. Notwithstanding any
provision of the Plan to the contrary, no Employee shall be granted a Purchase
Right under the Plan if, immediately after such grant, such Employee would own
or hold options to purchase stock of the Company or of any Parent Corporation
or Subsidiary Corporation possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of such corporation, as
determined in accordance with Section 423(b)(3) of the Code. For purposes of
this Section 5.2, the attribution
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rules of Section 424(d) of the Code shall apply in determining the stock
ownership of such Employee.
6. OFFERINGS.
6.1 OFFERING PERIODS. Except as otherwise set forth below,
the Plan shall be implemented by sequential semi-annual Offerings of six (6)
months duration or such other duration as the Board shall determine. The first
Offering Period shall commence on the first day of the first calendar quarter
occuring on or after the Effective Date (the "INITIAL OFFERING PERIOD").
Subsequent Offering Periods shall commence on or about January 1, and July
1, of each year and end on or about the last business day of each
such six month period, respectively. Notwithstanding the foregoing, the Board
may establish a different term for one or more Offerings or different
commencing or ending dates for such Offerings; provided, however, that no
Offering may exceed a term of twenty-seven (27) months. If the first or last
day of an Offering Period is not a day on which the national securities
exchanges or Nasdaq Stock Market are open for trading, the Company shall
specify the trading day that will be deemed the first or last day, as the case
may be, of the Offering Period.
6.2 PURCHASE PERIODS. If the Board so determines, in its
discretion, each Offering Period may consist of two (2) or more consecutive
Purchase Periods having such duration as the Board shall specify, and the last
day of each such Purchase Period shall be a Purchase Date. If the first or
last day of a Purchase Period is not a day on which the national securities
exchanges or Nasdaq Stock Market are open for trading, the Company shall
specify the trading day that will be deemed the first or last day, as the case
may be, of the Purchase Period.
7. PARTICIPATION IN THE PLAN.
7.1 INITIAL PARTICIPATION. An Eligible Employee may become a
Participant in an Offering Period by delivering a properly completed
Subscription Agreement to the Company's payroll office or other office
designated by the Company not later than the close of business for such office
on the Subscription Date established by the Company for such Offering Period.
An Eligible Employee who does not deliver a properly completed Subscription
Agreement to the Company's payroll office or other designated office on or
before the Subscription Date for an Offering Period shall not participate in
the Plan for that Offering Period or for any subsequent Offering Period unless
such Eligible Employee subsequently delivers a properly completed Subscription
Agreement to the appropriate office of the Company on or before the
Subscription Date for such subsequent Offering Period. An Employee who becomes
an Eligible Employee after the Offering Date of an Offering Period shall not be
eligible to participate in such Offering Period but may participate in any
subsequent Offering Period provided such Employee is still an Eligible Employee
as of the Offering Date of such subsequent Offering Period.
7.2 CONTINUED PARTICIPATION. A Participant shall
automatically participate in the next Offering Period commencing immediately
after the final Purchase Date of each Offering Period in which the Participant
participates provided that such Participant remains an Eligible Employee on the
Offering Date of the new Offering Period and has not either (a) withdrawn from
the Plan
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pursuant to Section 12.2 or (b) terminated employment as provided in Section 13.
A Participant who may automatically participate in a subsequent Offering Period,
as provided in this Section 7.2, is not required to deliver any additional
Subscription Agreement for the subsequent Offering Period in order to continue
participation in the Plan. However, a Participant may deliver a new Subscription
Agreement for a subsequent Offering Period in accordance with the procedures set
forth in Section 7.1 if the Participant desires to change any of the elections
contained in the Participant's then effective Subscription Agreement. Eligible
Employees may not participate simultaneously in more than one Offering if the
Company establishes concurrent Offerings.
8. RIGHT TO PURCHASE SHARES.
8.1 GRANT OF PURCHASE RIGHT. Except as set forth below, on
the Offering Date of each Offering Period, each Participant in such Offering
Period shall be granted automatically a Purchase Right consisting of an option
to purchase that number of whole shares of Stock determined by dividing the
lesser of (i) Five Thousand Dollars ($5,000) or (ii) ten percent (10%) of the
Participant's Compensation for such Offering Period by eighty-five percent
(85%) of the Fair Market Value of a share of Stock on the Offering Date of the
Offering Period. No Purchase Right shall be granted on an Offering Date to any
person who is not, on such Offering Date, an Eligible Employee.
8.2 PRO RATA ADJUSTMENT OF PURCHASE RIGHT. Notwithstanding
the provisions of Section 8.1, if the Board establishes an Offering Period of
less than five and one-half (5 1/2) months or more than six and one-half (6
1/2) months in duration, the number of shares of Stock subject to a Purchase
Right shall be the lesser of (i) Eight Hundred Thirty-Three and Thirty-Three
One Hundredths Dollars ($833.33) multiplied by the number of months (rounded
to the nearest whole month) in the Offering Period or (ii) ten percent (10%)
of the Participant's Compensation for such Offering Period divided by
eighty-five percent (85%) of the Fair Market Value of a share of Stock on the
Offering Date of the Offering Period and rounding the result to the nearest
whole share.
8.3 CALENDAR YEAR PURCHASE LIMITATION. Notwithstanding any
provision of the Plan to the contrary, no Purchase Right shall entitle a
Participant to purchase shares of Stock under the Plan at a rate which, when
aggregated with such Participant's rights to purchase shares under all other
employee stock purchase plans of a Participating Company intended to meet the
requirements of Section 423 of the Code, exceeds Twenty-Five Thousand Dollars
($25,000) in Fair Market Value (or such other limit, if any, as may be imposed
by the Code) for each calendar year in which such Purchase Right has been
outstanding at any time. For purposes of the preceding sentence, the Fair
Market Value of shares purchased during a given Offering Period shall be
determined as of the Offering Date for such Offering Period. The limitation
described in this Section 8.3 shall be applied in conformance with applicable
regulations under Section 423(b)(8) of the Code.
9. PURCHASE PRICE. The Purchase Price at which each share of Stock
may be acquired in an Offering Period upon the exercise of all or any portion
of a Purchase Right shall be established by the Board; provided, however, that
the Purchase Price shall not be less than eighty-five percent (85%) of the
lesser of (a) the Fair Market Value of a share of Stock on the Offering Date of
the Offering Period or (b) the Fair Market Value of a share of Stock on the
Purchase Date. Unless otherwise provided by the Board prior to the
commencement of an Offering Period, the Purchase
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Price for that Offering Period shall be eighty-five percent (85%) of the lesser
of (a) the Fair Market Value of a share of Stock on the Offering Date of the
Offering Period, or (b) the Fair Market Value of a share of Stock on the
Purchase Date.
10. ACCUMULATION OF PURCHASE PRICE THROUGH PAYROLL DEDUCTION.
Shares of Stock acquired pursuant to the exercise of all or any portion of a
Purchase Right may be paid for either (i) in cash, or (ii) by means of payroll
deductions from the Participant's Compensation accumulated during the Offering
Period for which such Purchase Right was granted, subject to the following:
10.1 AMOUNT OF PAYROLL DEDUCTIONS. Except as otherwise
provided herein, the amount to be deducted under the Plan from a Participant's
Compensation on each payday during an Offering Period shall be determined by
the Participant's Subscription Agreement. The Subscription Agreement shall set
forth the percentage of the Participant's Compensation to be deducted on each
payday during an Offering Period in one percent (1%) increments not exceeding
ten percent (10%) of the Participant's Compensation on such payday.
Notwithstanding the foregoing, the amount deducted from a Participant's
Compensation during each Offering Period shall not exceed Five Thousand
Dollars ($5,000); provided, however, that if the Board establishes an
Offering Period of less than two and one-half (2 1/2) months or more than six
and one-half (6 1/2) months in duration, the such dollar limit shall be
determined by multiplying Eight Hundred Thirty- Three and Thirty-Three One
Hundredths Dollars ($833.33) by the number of months (rounded to the nearest
whole month) in the Offering Period and rounding the product to the nearest
whole dollar. The Board may change the foregoing limits on payroll deductions
effective as of any future Offering Date.
10.2 COMMENCEMENT OF PAYROLL DEDUCTIONS. Payroll deductions
shall commence on the first payday following the Offering Date and shall
continue to the end of the Offering Period unless sooner altered or terminated
as provided herein.
10.3 ELECTION TO CHANGE OR STOP PAYROLL DEDUCTIONS. During an
Offering Period, a Participant may elect to increase or decrease the rate of or
to stop deductions from his or her Compensation by delivering to the Company's
payroll office or other designated office an amended Subscription Agreement
authorizing such change on or before the "Change Notice Date." The "CHANGE
NOTICE DATE" shall initially be the seventh (7th) day prior to the end of the
first pay period for which such election is to be effective. However, the
Company may change the Change Notice Date from time to time. A Participant who
elects to decrease the rate of his or her payroll deductions to zero percent
(0%) shall nevertheless remain a Participant in the current Offering Period
unless such Participant withdraws from the Offering or from the Plan as
provided in Section 12.1 or 12.2, respectively.
10.4 PARTICIPANT ACCOUNTS. Individual bookkeeping accounts
shall be maintained for each Participant. All payroll deductions from a
Participant's Compensation shall be credited to such Participant's Plan account
and shall be deposited with the general funds of the Company. All payroll
deductions received or held by the Company may be used by the Company for any
corporate purpose.
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10.5 NO INTEREST PAID. Interest shall not be paid on sums
deducted from a Participant's Compensation pursuant to the Plan.
11. PURCHASE OF SHARES.
11.1 EXERCISE OF PURCHASE RIGHT. On each Purchase Date of an
Offering Period, each Participant who has not withdrawn from the Offering and
whose participation in the Offering has not terminated on or before such
Purchase Date shall automatically acquire pursuant to the exercise of the
Participant's Purchase Right the number of whole shares of Stock determined by
dividing (a) the total amount of the Participant's payroll deductions
accumulated in the Participant's account during the Offering Period and not
previously applied toward the purchase of Stock by (b) the Purchase Price.
However, in no event shall the number of shares purchased by the Participant
during an Offering Period exceed the number of shares subject to the
Participant's Purchase Right. No shares of Stock shall be purchased on a
Purchase Date on behalf of a Participant whose participation in the Offering or
the Plan has terminated on or before such Purchase Date.
11.2 LIMIT ON NUMBER OF SHARES PURCHASABLE IN OFFERING PERIOD.
Any provision herein to the contrary notwithstanding, the Board may establish,
effective for any future Offering Period, a limit on the aggregate number of
shares of Stock which may be purchased under the Plan by all Participants
during such Offering Period.
11.3 PRO RATA ALLOCATION OF SHARES. In the event that the
number of shares of Stock which might be purchased by all Participants in the
Plan on a Purchase Date exceeds the number of shares of Stock available in the
Plan as provided in Section 4.1 or the aggregate limit established by the Board
pursuant to Section 11.2, the Company shall make a pro rata allocation of the
remaining shares in as uniform a manner as shall be practicable and as the
Company shall determine to be equitable.
11.4 DELIVERY OF CERTIFICATES. As soon as practicable after
each Purchase Date, the Company shall arrange the delivery to each Participant,
as appropriate, of a certificate representing the shares acquired by the
Participant on such Purchase Date; provided that the Company may deliver such
certificates to a broker that holds such certificates in street name for the
benefit of each Participant. Shares to be delivered to a Participant under the
Plan shall be registered in the name of the Participant, or, if requested by
the Participant, in the name of the Participant and his or her spouse, or, if
applicable, in the names of the heirs of the Participant.
11.5 RETURN OF CASH BALANCE. Any cash balance remaining in a
Participant's Plan account following any Purchase Date shall be refunded to the
Participant as soon as practicable after such Purchase Date. However, if the
cash to be returned to a Participant pursuant to the preceding sentence is an
amount less than the amount that would have been necessary to purchase an
additional whole share of Stock on such Purchase Date, the Company may retain
such amount in the Participant's Plan account to be applied toward the purchase
of shares of Stock in the subsequent Purchase Period or Offering Period, as the
case may be.
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11.6 TAX WITHHOLDING. At the time a Participant's Purchase
Right is exercised, in whole or in part, or at the time a Participant disposes
of some or all of the shares of Stock he or she acquires under the Plan, the
Participant shall make adequate provision for the foreign, federal, state and
local tax withholding obligations of the Participating Company Group, if any,
which arise upon exercise of the Purchase Right or upon such disposition of
shares, respectively. The Participating Company Group may, but shall not be
obligated to, withhold from the Participant's compensation the amount necessary
to meet such withholding obligations.
11.7 EXPIRATION OF PURCHASE RIGHT. Any portion of a
Participant's Purchase Right remaining unexercised after the end of the
Offering Period to which the Purchase Right relates shall expire immediately
upon the end of the Offering Period.
11.8 REPORTS TO PARTICIPANTS. Each Participant who has
exercised all or part of his or her Purchase Right shall receive, as soon as
practicable after the Purchase Date, a report of such Participant's Plan
account setting forth the total payroll deductions accumulated prior to such
exercise, the number of shares of Stock purchased, the Purchase Price for such
shares, the date of purchase and the cash balance, if any, remaining
immediately after such purchase that is to be refunded or retained in the
Participant's Plan account pursuant to Section 11.5.
12. WITHDRAWAL FROM OFFERING OR PLAN.
12.1 VOLUNTARY WITHDRAWAL FROM AN OFFERING. A Participant may
withdraw from an Offering by signing and delivering to the Company's payroll
office or other designated office a written notice of withdrawal on a form
provided by the Company for such purpose. Such withdrawal may be elected at
any time prior to the end of an Offering Period; provided, however, if a
Participant withdraws after a Purchase Date, the withdrawal shall not affect
shares of Stock acquired by the Participant on such Purchase Date. Unless
otherwise indicated by the Participant, withdrawal from an Offering shall not
result in the Participant's withdrawal from the Plan or any succeeding Offering
therein. Following a Participant's withdrawal from an Offering, the
Participant is prohibited from again participating at any time in the same
Offering. The Company may impose, from time to time, a requirement that the
notice of withdrawal from an Offering be on file with the Company's payroll
office or other designated office for a reasonable period prior to the
effectiveness of the Participant's withdrawal.
12.2 VOLUNTARY WITHDRAWAL FROM THE PLAN. A Participant may
withdraw from the Plan by signing and delivering to the Company's payroll
office or other designated office a written notice of withdrawal on a form
provided by the Company for such purpose. A Participant's withdrawal made
after a Purchase Date shall not affect shares of Stock acquired by the
Participant on such Purchase Date. A Participant who voluntarily withdraws
from the Plan is prohibited from resuming participation in the Plan in the same
Offering from which he or she withdrew, but may participate in any subsequent
Offering by again satisfying the requirements of Sections 5 and 7.1. The
Company may impose, from time to time, a requirement that the notice of
withdrawal from the Plan be on file with the Company's payroll office or other
designated office for a reasonable period prior to the effectiveness of the
Participant's withdrawal.
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12.3 RETURN OF PAYROLL DEDUCTIONS. Upon a Participant's
voluntary withdrawal from an Offering or the Plan pursuant to Sections 12.1 or
12.2, respectively, the Participant's accumulated payroll deductions which have
not been applied toward the purchase of shares of Stock shall be returned as
soon as practicable after the withdrawal, without the payment of any interest,
to the Participant, and the Participant's interest in the Offering or the Plan,
as applicable, shall terminate. Such accumulated payroll deductions may not be
applied to any other Offering under the Plan.
13. TERMINATION OF EMPLOYMENT OR ELIGIBILITY. Upon a Participant's
ceasing to be an Employee of the Participating Company Group for any reason,
including retirement, disability or death, or the failure of a Participant to
remain an Eligible Employee, the Participant's participation in the Plan shall
terminate immediately. In such event, the payroll deductions credited to the
Participant's Plan account since the last Purchase Date shall, as soon as
practicable, be returned to the Participant or, in the case of the
Participant's death, to the Participant's legal representative, and all of the
Participant's rights under the Plan shall terminate. Interest shall not be
paid on sums returned pursuant to this Section 13. A Participant whose
participation has been so terminated may again become eligible to participate
in the Plan by again satisfying the requirements of Sections 5 and 7.1.
14. TRANSFER OF CONTROL.
14.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to
have occurred if any of the following occurs with respect to the Company: (i)
the direct or indirect sale or exchange in a single or series of related
transactions by the shareholders of the Company of more than fifty percent
(50%) of the voting stock of the Company; (ii) a merger or consolidation in
which the Company a party; (iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or (iv) a liquidation or
dissolution of the Company.
(b) A "TRANSFER OF CONTROL" shall mean an Ownership
Change Event or a series of related Ownership Change Events (collectively, the
"TRANSACTION") wherein the shareholders of the Company immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
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14.2 EFFECT OF TRANSFER OF CONTROL ON PURCHASE RIGHTS. In the
event of a Transfer of Control, the surviving, continuing, successor, or
purchasing corporation or parent corporation thereof, as the case may be (the
"ACQUIRING CORPORATION"), shall assume the Company's rights and obligations
under the Plan. If the Acquiring Corporation elects not to assume the
Company's rights and obligations under outstanding Purchase Rights, the
Purchase Date of the then current Offering Period, or Purchase Period, as the
case may be, shall be accelerated to a date before the date of the Transfer of
Control specified by the Board, but the number of shares of Stock subject to
outstanding Purchase Rights shall not be adjusted. All Purchase Rights which are
neither assumed by the Acquiring Corporation in connection with the Transfer of
Control nor exercised as of the date of the Transfer of Control shall terminate
and cease to be outstanding effective as of the date of the Transfer of Control.
15. NONTRANSFERABILITY OF PURCHASE RIGHTS. A Purchase Right may not
be transferred in any manner otherwise than by will or the laws of descent and
distribution and shall be exercisable during the lifetime of the Participant
only by the Participant.
16. RESTRICTION ON ISSUANCE OF SHARES. The issuance of shares under
the Plan shall be subject to compliance with all applicable requirements of
foreign, federal or state law with respect to such securities. A Purchase
Right may not be exercised if the issuance of shares upon such exercise would
constitute a violation of any applicable foreign, federal or state securities
laws or other law or regulations or the requirements of any securities exchange
or market system upon which the Stock may then be listed. In addition, no
Purchase Right may be exercised unless (a) a registration statement under the
Securities Act of 1933, as amended, shall at the time of exercise of the
Purchase Right be in effect with respect to the shares issuable upon exercise of
the Purchase Right, or (b) in the opinion of legal counsel to the Company, the
shares issuable upon exercise of the Purchase Right may be issued in accordance
with the terms of an applicable exemption from the registration requirements of
said Act. The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company's legal counsel to be
necessary to the lawful issuance and sale of any shares under the Plan 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.
As a condition to the exercise of a Purchase Right, the Company may require the
Participant to satisfy any qualifications that may be necessary or appropriate,
to evidence compliance with any applicable law or regulation, and to make any
representation or warranty with respect thereto as may be requested by the
Company. The issuance of shares shall also be subject to the limitation upon the
maximum number of shares that may be issued under the Plan and under other plans
adopted under the Company's Amended and Restated Stock Incentive Plan, as
amended from time to time.
17. RIGHTS AS A SHAREHOLDER AND EMPLOYEE. A Participant shall have
no rights as a shareholder by virtue of the Participant's participation in the
Plan until the date of the issuance of a certificate for the shares purchased
pursuant to the exercise of the Participant's Purchase Right (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company). No adjustment shall be made for dividends,
distributions or other rights for which the record date is prior to the date
such certificate is issued, except as provided in Section 4.2. Nothing herein
shall confer upon a Participant any right to continue in the employ of the
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54
Participating Company Group or interfere in any way with any right of the
Participating Company Group to terminate the Participant's employment at any
time.
18. LEGENDS. The Company may at any time place legends or other
identifying symbols referencing any applicable foreign, federal or state
securities law restrictions or any provision convenient in the administration
of the Plan on some or all of the certificates representing shares of Stock
issued under the Plan. The Participant shall, at the request of the Company,
promptly present to the Company any and all certificates representing shares
acquired pursuant to a Purchase Right in the possession of the Participant in
order to carry out the provisions of this Section. Unless otherwise specified
by the Company, legends placed on such certificates may include but shall not
be limited to the following:
"THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE
CORPORATION TO THE REGISTERED HOLDER UPON THE PURCHASE OF SHARES UNDER AN
EMPLOYEE STOCK PURCHASE PLAN AS DEFINED IN SECTION 423 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED. THE TRANSFER AGENT FOR THE SHARES EVIDENCED HEREBY
SHALL NOTIFY THE CORPORATION IMMEDIATELY OF ANY TRANSFER OF THE SHARES BY THE
REGISTERED HOLDER HEREOF MADE ON OR BEFORE____________________. THE
REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE PLAN IN THE
REGISTERED HOLDER'S NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS
DATE."
19. NOTIFICATION OF SALE OF SHARES. The Company may require the
Participant to give the Company prompt notice of any disposition of shares
acquired by exercise of a Purchase Right within two years from the date of
granting such Purchase Right or one year from the date of exercise of such
Purchase Right. The Company may require that until such time as a Participant
disposes of shares acquired upon exercise of a Purchase Right, the Participant
shall hold all such shares in the Participant's name (or, if elected by the
Participant, in the name of the Participant and his or her spouse but not in
the name of any nominee) until the lapse of the time periods with respect to
such Purchase Right referred to in the preceding sentence. The Company may
direct that the certificates evidencing shares acquired by exercise of a
Purchase Right refer to such requirement to give prompt notice of disposition.
20. NOTICES. All notices or other communications by a Participant
to the Company under or in connection with the Plan shall be deemed to have
been duly given when received in the form specified by the Company at the
location, or by the person, designated by the Company for the receipt thereof.
21. INDEMNIFICATION. In addition to such other rights of
indemnification as they may have as members of the Board or officers or
employees of the Participating Company Group, members of the Board and any
officers or employees of the Participating Company Group to whom authority to
act for the Board is delegated shall be indemnified by the Company against all
reasonable expenses, including attorneys' fees, actually and necessarily
incurred in connection with the defense of any action, suit or proceeding, or
in connection with any appeal therein, to which they or any of them may be a
party by reason of any action taken or failure to act under or in connection
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55
with the Plan, or any right granted hereunder, and against all amounts paid by
them in settlement thereof (provided such settlement is approved by independent
legal counsel selected by the Company) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding, except in relation to matters
as to which it shall be adjudged in such action, suit or proceeding that such
person is liable for gross negligence, bad faith or intentional misconduct in
duties; provided, however, that within sixty (60) days after the institution of
such action, suit or proceeding, such person shall offer to the Company, in
writing, the opportunity at its own expense to handle and defend the same.
22. AMENDMENT OR TERMINATION OF THE PLAN. The Board may at any time
amend or terminate the Plan, except that (a) such termination shall not affect
Purchase Rights previously granted under the Plan, except as permitted under
the Plan, and (b) no amendment may adversely affect a Purchase Right previously
granted under the Plan (except to the extent permitted by the Plan or as may be
necessary to qualify the Plan as an employee stock purchase plan pursuant to
Section 423 of the Code or to obtain qualification or registration of the
shares of Stock under applicable foreign, federal or state securities laws).
In addition, an amendment to the Plan must be approved by the shareholders of
the Company within twelve (12) months of the adoption of such amendment if such
amendment would authorize the sale of more shares than are authorized for
issuance under the Plan or would change the definition of the corporations that
may be designated by the Board as Participating Companies.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing MLC Holdings, Inc. 1997 Employee Stock Purchase Plan was
duly adopted by the Board of Directors of the Company on May 14, 1997, and the
Shareholders of the Company on __________, 1997.
/s/
---------------------------------
Secretary
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56
EXHIBIT C27
MLC HOLDINGS, INC. PROXY
ANNUAL MEETINGS OF STOCKHOLDERS OF
MLC HOLDINGS, INC.
ON SEPTEMBER 30, 199716, 1998
THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Phillip G. Norton, Bruce M. Bowen, C. Thomas
Faulders, III, Terrence O'Donnell and Carl J. Rickersten, and each or any of
them, proxies, with power of substitution, to vote all shares of the undersigned
at the Annual Meeting of Stockholders of MLC Holdings, Inc., a Delaware
corporation (the "Company"), to be held on September 30,16, 1997 at 10:00 a.m. at
The Four Seasons Hotel, 2800
Pennsylvania Avenue, N.W., Washington, DC 20007,Hyatt Regency Reston, 1800 Presidents Street, Reston, VA 20191, or at any
adjournment thereof, upon the matters set forth in the Proxy Statement for such
meeting, and in their discretion, upon such other business as may properly come
before the meeting.
1. TO ELECT ONETWO CLASS I DIRECTORII DIRECTORS TO SERVE FOR THREE YEARS AND UNTIL HIS
SUCCESSOR HASTHEIR
SUCCESSORS HAVE BEEN DULY ELECTED AND SHALL QUALIFY.
[ ]FOR THE NOMINEE LISTED BELOW [ ]WITHHOLD AUTHORITY
to vote for the nominee listed below
Jonathan J. Ledecky
[ ]FOR THE NOMINEES LISTED BELOW [ ]WITHHOLD AUTHORITY
to vote for the nominees listed below
Carl J. Rickertsen and Terrence O'Donnell
2. TO APPROVE AND ADOPT AN AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF SHARES OF AUTHORIZED STOCK OF THE COMPANY FROM 12
MILLION SHARES (10 MILLION SHARES OF COMMON STOCK, PAR VALUE $0.01, AND
2 MILLION PREFERRED SHARES) T0 27 MILLION SHARES (25 MILLION SHARES OF
COMMON STOCK, PAR VALUE $0.01, AND 2 MILLION PREFERRED SHARES).1998 LONG-TERM INCENTIVE PLAN.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
3. TO APPROVE ADOPTION OF AMENDMENTS TO THE MLC HOLDINGS, INC., MASTER
STOCK INCENTIVE PLAN (FORMERLY THE 1996 STOCK INCENTIVE PLAN).
[ ]FOR [ ]AGAINST [ ]ABSTAIN
57
4. TO APPROVE ADOPTION OF THE MLC HOLDINGS, INC. 1997 EMPLOYEE STOCK
PURCHASE PLAN (A COMPONENT PLAN OF THE MASTER STOCK INCENTIVE PLAN).
[ ]FOR [ ]AGAINST [ ]ABSTAIN
5. TO APPROVE ADOPTION OF AMENDMENTS TO THE MLC HOLDINGS, INC., AMENDED
AND RESTATED OUTSIDE DIRECTOR STOCK OPTION PLAN (FORMERLY THE 1996
OUTSIDE DIRECTOR STOCK OPTION PLAN).
[ ]FOR [ ]AGAINST [ ]ABSTAIN
6. TO APPROVE ADOPTION OF AMENDMENTS TO THE MLC HOLDINGS, INC., AMENDED
AND RESTATED INCENTIVE STOCK OPTION PLAN (FORMERLY THE 1996 INCENTIVE
STOCK OPTION PLAN).
[ ]FOR [ ]AGAINST [ ]ABSTAIN
7. TO APPROVE ADOPTION OF AMENDMENTS TO THE MLC HOLDINGS, INC., AMENDED
AND RESTATED NONQUALIFIED STOCK OPTION PLAN (FORMERLY THE 1996
NONQUALIFIED STOCK OPTION PLAN).
[ ]FOR [ ]AGAINST [ ]ABSTAIN
8. TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE COMPANY'S FISCAL YEAR ENDING MARCH 31, 1998.1999.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
Dated: , 1997
--------------------
------------------------------1998
Signature
28
58
-----------------------------------28
Signature if held jointly
NOTE: When shares are held by joint tenants, both should sign. Persons signing
as Executor, Administrator, Trustee, etc. should so indicate. Please sign
exactly as the name appears on the proxy.
THE SHARES REPRESENTED BY ALL PROXIES RECEIVED WILL BE VOTED IN ACCORDANCE WITH
THE CHOICES SPECIFIED ON SUCH PROXIES. THE SHARES REPRESENTED BY A PROXY WILL BE
VOTED IN FAVOR OF A PROPOSAL IF NO CONTRARY SPECIFICATION IS MADE. ALL VALID
PROXIES OBTAINED WILL BE VOTED AT THE DISCRETION OF THE BOARD OF DIRECTORS WITH
RESPECT TO ANY OTHER BUSINESS THAT MAY COME BEFORE THE ANNUAL MEETING.
PLEASE MARK, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.
29
29
MLC HOLDINGS, INC.
1998 LONG-TERM INCENTIVE PLAN
APPENDIX A
ARTICLE I
PURPOSE
1.1 GENERAL. The purpose of the MLC Holdings, Inc. 1998 Long-Term
Incentive Plan (the "Plan") is to promote the success, and enhance the value, of
MLC Holdings, Inc. (the "Corporation"), by linking the personal interests of its
employees, officers, consultants and directors to those of Corporation
stockholders and by providing such persons with an incentive for outstanding
performance. The Plan is further intended to provide flexibility to the
Corporation in its ability to motivate, attract, and retain the services of
employees, officers, consultants and directors upon whose judgment, interest,
and special effort the successful conduct of the Corporation's operation is
largely dependent. Accordingly, the Plan permits the grant of incentive awards
from time to time to selected employees, officers, consultants and directors. In
addition, the Plan provides for automatic annual grants of options to
Non-Employee Directors of the Company as provided in Article 13.
ARTICLE 2
EFFECTIVE DATE
2.1 EFFECTIVE DATE. The Plan shall be effective as of the date upon
which it shall be approved by the Board. However, the Plan shall be submitted to
the stockholders of the Corporation for approval within 12 months of the Board's
approval thereof. No Incentive Stock Options granted under the Plan may be
exercised prior to approval of the Plan by the stockholders and if the
stockholders fail to approve the Plan within 12 months of the Board's approval
thereof, any Incentive Stock Options previously granted hereunder shall be
automatically converted to Non-Qualified Stock Options without any further act.
In the discretion of the Committee, Awards may be made to Covered Employees
which are intended to constitute qualified performance-based compensation under
Code Section 162(m). Any such Awards shall be contingent upon the stockholders
having approved the Plan.
ARTICLE 3
DEFINITIONS
3.1 DEFINITIONS. When a word or phrase appears in this Plan with the
initial letter capitalized, and the word or phrase does not commence a sentence,
the word or phrase shall generally be given the meaning ascribed to it in this
Section, unless a clearly different meaning is required by the context.
The following words and phrases shall have the following meanings:
30
"Award" means any Option, Stock Appreciation Right, Restricted Stock Award,
Performance Unit Award, Dividend Equivalent Award, or Other Stock-Based Award,
or any other right or interest relating to Stock or cash, granted to a
Participant under the Plan.
"Award Agreement" means any written agreement, contract, or other
instrument or document evidencing an Award.
"Board" means the Board of Directors of the Corporation.
"Change in Control" means and includes each of the following:
(1) The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the 1934 Act) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of
25% or more of the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however, that
for purposes of this subsection (1), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition by a Person who is on the
Effective Date the beneficial owner of 25% or more of the Outstanding Company
Voting Securities, (ii) any acquisition directly from the Company, (iii) any
acquisition by the Company, (iv) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any corporation
controlled by the Company, or (v) any acquisition by any corporation pursuant to
a transaction which complies with clauses (i), (ii) and (iii) of subsection (3)
of this definition; or
(2) Individuals who, as of the Effective Date, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the Effective Date whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(3) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners of the Outstanding Company Voting Securities
immediately prior to such Business Combination
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31
beneficially own, directly or indirectly, more than 50% of the combined voting
power of the then outstanding voting securities entitled to vote generally in
the election of directors of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Voting Securities, and (ii) no Person
(excluding any corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 25% or more of the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such ownership
existed prior to the Business Combination, and (iii) at least a majority of the
members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing for
such Business Combination; or
(4) Approval by the stockholders of the Company of a complete liquidation
or dissolution of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means the committee of the Board described in Article 4.
"Corporation" means MLC Holdings, Inc., a Delaware corporation.
"Covered Employee" means a covered employee as defined in Code Section
162(m)(3).
"Disability" shall mean any illness or other physical or mental condition
of a Participant that renders the Participant incapable of performing his
customary and usual duties for the Corporation, or any medically determinable
illness or other physical or mental condition resulting from a bodily injury,
disease or mental disorder which, 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.
"Dividend Equivalent" means a right granted to a Participant under Article
11.
"Effective Date" has the meaning assigned such term in Section 2.1.
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"Fair Market Value", on any date, means (i) if the Stock is listed on a
securities exchange or is traded over the Nasdaq National Market, the closing
sales price on such exchange or over such system on such date or, in the absence
of reported sales on such date, the closing sales price on the immediately
preceding date on which sales were reported, or (ii) if the Stock is not listed
on a securities exchange or traded over the Nasdaq National Market, the mean
between the bid and offered prices as quoted by Nasdaq for such date, provided
that if it is determined that the fair market value is not properly reflected by
such Nasdaq quotations, Fair Market Value will be determined by such other
method as the Committee determines in good faith to be reasonable.
"Incentive Stock Option" means an Option that is intended to meet the
requirements of Section 422 of the Code or any successor provision thereto.
"Non-Employee Director" means a member of the Board who is not an employee
of the Corporation or any Parent or Subsidiary.
"Non-Qualified Stock Option" means an Option that is not an Incentive Stock
Option.
"Option" means a right granted to a Participant under the Plan to purchase
Stock at a specified price during specified time periods. An Option may be
either an Incentive Stock Option or a Non-Qualified Stock Option; provided, that
Options granted under Article 13 shall be Non-Qualified Options.
"Other Stock-Based Award" means a right, granted to a Participant under
Article 12, that relates to or is valued by reference to Stock or other Awards
relating to Stock.
"Parent" means a corporation which owns or beneficially owns a majority of
the outstanding voting stock or voting power of the Corporation. For Incentive
Stock Options, the term shall have the same meaning as set forth in Code Section
424(e).
"Participant" means a person who, as an employee, officer, consultant or
director of the Corporation or any Subsidiary, has been granted an Award under
the Plan.
"Performance Unit" means a right granted to a Participant under Article 9,
to receive cash, Stock, or other Awards, the payment of which is contingent upon
achieving certain performance goals established by the Committee.
"Plan" means the MLC Holdings, Inc. 1998 Long-Term Incentive Plan, as
amended from time to time.
"Restricted Stock Award" means Stock granted to a Participant under Article
10 that is subject to certain restrictions and to risk of forfeiture.
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33
"Stock" means the $.01 par value common stock of the Corporation and such
other securities of the Corporation as may be substituted for Stock pursuant to
Article 15.
"Stock Appreciation Right" or "SAR" means a right granted to a Participant
under Article 8 to receive a payment equal to the difference between the Fair
Market Value of a share of Stock as of the date of exercise of the SAR over the
grant price of the SAR, all as determined pursuant to Article 8.
"Subsidiary" means any corporation, limited liability company, partnership
or other entity of which a majority of the outstanding voting stock or voting
power is beneficially owned directly or indirectly by the Corporation. For
Incentive Stock Options, the term shall have the meaning set forth in Code
Section 424(f).
"1933 Act" means the Securities Act of 1933, as amended from time to time.
"1934 Act" means the Securities Exchange Act of 1934, as amended from time
to time.
ARTICLE 4
ADMINISTRATION
4.1 COMMITTEE. The Plan shall be administered by the Compensation Committee
of the Board or, at the discretion of the Board from time to time, by the Board.
The Committee shall consist of two or more members of the Board. It is intended
that the directors appointed to serve on the Committee shall be "non-employee
directors" (within the meaning of Rule 16b-3 promulgated under the 1934 Act) and
"outside directors" (within the meaning of Code Section 162(m) and the
regulations thereunder). However, the mere fact that a Committee member shall
fail to qualify under either of the foregoing requirements shall not invalidate
any Award made by the Committee which Award is otherwise validly made under the
Plan. The members of the Committee shall be appointed by, and may be changed at
any time and from time to time in the discretion of, the Board. During any time
that the Board is acting as administrator of the Plan, it shall have all the
powers of the Committee hereunder, and any reference herein to the Committee
(other than in this Section 4.1) shall include the Board.
4.2 ACTION BY THE COMMITTEE. For purposes of administering the Plan, the
following rules of procedure shall govern the Committee. A majority of the
Committee shall constitute a quorum. The acts of a majority of the members
present at any meeting at which a quorum is present, and acts approved
unanimously in writing by the members of the Committee in lieu of a meeting,
shall be deemed the acts of the Committee. Each member of the Committee is
entitled to, in good faith, rely or act upon any report or other information
furnished to that member by any officer or other employee of the Corporation or
any Parent or Subsidiary, the Corporation's independent certified
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34
public accountants, or any executive compensation consultant or other
professional retained by the Corporation to assist in the administration of the
Plan.
4.3 AUTHORITY OF COMMITTEE. The Committee has the exclusive power,
authority and discretion to do the following; except as such discretion shall be
limited by the automatic provisions of Article 13 with respect to annual grants
of Options to Non-Employee Directors:
(a) Designate Participants;
(b) Determine the type or types of Awards to be granted to each
Participant;
(c) Determine the number of Awards to be granted and the number of
shares of Stock to which an Award will relate;
(d) Determine the terms and conditions of any Award granted under the
Plan, including but not limited to, the exercise price, grant price, or
purchase price, any restrictions or limitations on the Award, any schedule
for lapse of forfeiture restrictions or restrictions on the exercisability
of an Award, and accelerations or waivers thereof, based in each case on
such considerations as the Committee in its sole discretion determines;
(e) Accelerate the vesting or lapse of restrictions of any outstanding
Award, based in each case on such considerations as the Committee in its
sole discretion determines;
(f) Determine whether, to what extent, and under what circumstances an
Award may be settled in, or the exercise price of an Award may be paid in,
cash, Stock, other Awards, or other property, or an Award may be canceled,
forfeited, or surrendered;
(g) Prescribe the form of each Award Agreement, which need not be
identical for each Participant;
(h) Decide all other matters that must be determined in connection
with an Award;
(i) Establish, adopt or revise any rules and regulations as it may
deem necessary or advisable to administer the Plan;
(j) Make all other decisions and determinations that may be required
under the Plan or as the Committee deems necessary or advisable to
administer the Plan; and
(k) Amend the Plan or any Award Agreement as provided herein.
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4.4. DECISIONS BINDING. The Committee's interpretation of the Plan, any
Awards granted under the Plan, any Award Agreement and all decisions and
determinations by the Committee with respect to the Plan are final, binding, and
conclusive on all parties.
ARTICLE 5
SHARES SUBJECT TO THE PLAN
5.1. NUMBER OF SHARES. Subject to adjustment as provided in Section 15.1,
the aggregate number of shares of Stock reserved and available for Awards or
which may be used to provide a basis of measurement for or to determine the
value of an Award (such as with a Stock Appreciation Right or Performance Unit
Award) shall be that number of shares of Stock equal to: (i) 20% of the total
number of shares of Stock outstanding from time to time, as determined
immediately after giving pro forma effect to the assumed exercise of all options
or other rights to acquire Stock, less (ii) any shares of Stock that have been
purchased under the Corporation's 1997 Employee Stock Purchase Plan from time to
time, and less (iii) any shares granted pursuant to the exercise of options or
otherwise granted as awards under the MLC Master Stock Option Plan.
Notwithstanding the foregoing, (i) not more than 4,000,000 shares authorized
herein may be granted as Incentive Stock Options, and (ii) not more than 10% of
the shares authorized herein may be granted as Awards of Restricted Stock or
unrestricted Stock Awards.
5.2. LAPSED AWARDS. To the extent that an Award is canceled, terminates,
expires or lapses for any reason, any shares of Stock subject to the Award will
again be available for the grant of an Award under the Plan and shares subject
to SARs or other Awards settled in cash will be available for the grant of an
Award under the Plan.
5.3. STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award may
consist, in whole or in part, of authorized and unissued Stock, treasury Stock
or Stock purchased on the open market.
5.4. LIMITATION ON AWARDS. Notwithstanding any provision in the Plan to the
contrary, the maximum number of shares of Stock with respect to one or more
Options and/or SARs that may be granted during any one calendar year under the
Plan to any one Covered Employee shall be 500,000. The maximum fair market value
(measured as of the date of grant) of any Awards other than Options and SARs
that may be received by a Covered Employee (less any consideration paid by the
Participant for such Award) during any one calendar year under the Plan shall be
$2,000,000.
ARTICLE 6
ELIGIBILITY
6.1. GENERAL. Awards may be granted only to individuals who are employees,
officers, consultants or directors of the Corporation or a Parent or
Subsidiary.
ARTICLE 7
STOCK OPTIONS
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7.1. GENERAL. The Committee is authorized to grant Options to Participants
on the following terms and conditions:
(a) EXERCISE PRICE. The exercise price per share of Stock under an
Option shall be determined by the Committee, provided that the exercise
price for any Option shall not be less than the Fair Market Value as of the
date of the grant.
(b) TIME AND CONDITIONS OF EXERCISE. The Committee shall determine the
time or times at which an Option may be exercised in whole or in part. The
Committee also shall determine the performance or other conditions, if any,
that must be satisfied before all or part of an Option may be exercised.
The Committee may waive any exercise provisions at any time in whole or in
part based upon factors as the Committee may determine in its sole
discretion so that the Option becomes exerciseable at an earlier date.
(c) PAYMENT. The Committee shall determine the methods by which the
exercise price of an Option may be paid, the form of payment, including,
without limitation, cash, shares of Stock, or other property (including
"cashless exercise" arrangements), and the methods by which shares of Stock
shall be delivered or deemed to be delivered to Participants; provided that
if shares of Stock surrendered in payment of the exercise price were
themselves acquired otherwise than on the open market, such shares shall
have been held by the Participant for at least six months.
(d) EVIDENCE OF GRANT. All Options shall be evidenced by a written
Award Agreement between the Corporation and the Participant. The Award
Agreement shall include such provisions, not inconsistent with the Plan, as
may be specified by the Committee or, in the case of Options granted
pursuant to Article 13, by the provisions of Article 13.
7.2. INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock Options
granted under the Plan must comply with the following additional rules:
(a) EXERCISE PRICE. The exercise price per share of Stock shall be set
by the Committee, provided that the exercise price for any Incentive Stock
Option shall not be less than the Fair Market Value as of the date of the
grant.
(b) EXERCISE. In no event may any Incentive Stock Option be
exercisable for more than ten years from the date of its grant.
(c) LAPSE OF OPTION. An Incentive Stock Option shall lapse under the
earliest of the following circumstances; provided, however, that the
Committee may, prior to the lapse of the Incentive Stock Option under the
circumstances described in paragraphs (3), (4) and (5) below, provide in
writing that the Option will extend until a later date, but if Option is
exercised after the dates specified in
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paragraphs (3), (4) and (5) below, it will automatically become a
Non-Qualified Stock Option:
(1) The Incentive Stock Option shall lapse as of the option
expiration date set forth in the Award Agreement.
(2) The Incentive Stock Option shall lapse ten years after it is
granted, unless an earlier time is set in the Award Agreement.
(3) If the Participant terminates employment for any reason other
than as provided in paragraph (4) or (5) below, the Incentive Stock
Option shall lapse, unless it is previously exercised, three months
after the Participant's termination of employment; provided, however,
that if the Participant's employment is terminated by the Company for
cause or by the Participant without the consent of the Company, the
Incentive Stock Option shall (to the extent not previously exercised)
lapse immediately.
(4) If the Participant terminates employment by reason of his
Disability, the Incentive Stock Option shall lapse, unless it is
previously exercised, one year after the Participant's termination of
employment.
(5) If the Participant dies while employed, or during the
three-month period described in paragraph (3) or during the one-year
period described in paragraph (4) and before the Option otherwise
lapses, the Option shall lapse one year after the Participant's death.
Upon the Participant's death, any exercisable Incentive Stock Options
may be exercised by the Participant's beneficiary, determined in
accordance with Section 14.6.
Unless the exercisability of the Incentive Stock Option is accelerated
as provided in Article 15, if a Participant exercises an Option after
termination of employment, the Option may be exercised only with respect to
the shares that were otherwise vested on the Participant's termination of
employment.
(d) INDIVIDUAL DOLLAR LIMITATION. The aggregate Fair Market Value
(determined as of the time an Award is made) of all shares of Stock with
respect to which Incentive Stock Options are first exercisable by a
Participant in any calendar year may not exceed $100,000.00.
(e) TEN PERCENT OWNERS. No Incentive Stock Option shall be granted to
any individual who, at the date of grant, owns stock possessing more than
ten percent of the total combined voting power of all classes of stock of
the Corporation or any Parent or Subsidiary unless the exercise price per
share of such Option is at least 110% of the Fair Market Value per share of
Stock at the date of grant and the Option expires no later than five years
after the date of grant.
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(f) EXPIRATION OF INCENTIVE STOCK OPTIONS. No Award of an Incentive
Stock Option may be made pursuant to the Plan after the day immediately
prior to the tenth anniversary of the Effective Date.
(g) RIGHT TO EXERCISE. During a Participant's lifetime, an Incentive
Stock Option may be exercised only by the Participant or, in the case of
the Participant's Disability, by the Participant's guardian or legal
representative.
(h) NON-EMPLOYEES. The Committee may not grant an Incentive Stock
Option to a non-employee. The Committee may grant an Incentive Stock Option
to a director who is also an employee of the Corporation or Parent or
Subsidiary but only in that individual's position as an employee and not as
a director.
ARTICLE 8
STOCK APPRECIATION RIGHTS
8.1. GRANT OF SARs. The Committee is authorized to grant SARs to
Participants on the following terms and conditions:
(a) RIGHT TO PAYMENT. Upon the exercise of a Stock Appreciation Right,
the Participant to whom it is granted has the right to
receive the excess, if any, of:
(1) The Fair Market Value of one share of Stock on the date of
exercise; over
(2) The grant price of the Stock Appreciation Right as determined
by the Committee, which shall not be less than the Fair Market Value
of one share of Stock on the date of grant.
(b) OTHER TERMS. All awards of Stock Appreciation Rights shall be
evidenced by an Award Agreement. The terms, methods of exercise, methods of
settlement, form of consideration payable in settlement, and any other
terms and conditions of any Stock Appreciation Right shall be determined by
the Committee at the time of the grant of the Award and shall be reflected
in the Award Agreement.
ARTICLE 9
PERFORMANCE UNITS
9.1. GRANT OF PERFORMANCE UNITS. The Committee is authorized to grant
Performance Units to Participants on such terms and conditions as may be
selected by the Committee. The Committee shall have the complete discretion to
determine the number of Performance Units granted to each Participant. All
Awards of Performance Units shall be evidenced by an Award Agreement.
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9.2. RIGHT TO PAYMENT. A grant of Performance Units gives the Participant
rights, valued as determined by the Committee, and payable to, or exercisable
by, the Participant to whom the Performance Units are granted, in whole or in
part, as the Committee shall establish at grant or thereafter. The Committee
shall set performance goals and other terms or conditions to payment of the
Performance Units in its discretion which, depending on the extent to which they
are met, will determine the number and value of Performance Units that will be
paid to the Participant.
9.3. OTHER TERMS. Performance Units may be payable in cash, Stock, or other
property, and have such other terms and conditions as determined by the
Committee and reflected in the Award Agreement.
ARTICLE 10
RESTRICTED STOCK AWARDS
10.1. GRANT OF RESTRICTED STOCK. The Committee is authorized to make Awards
of Restricted Stock to Participants in such amounts and subject to such terms
and conditions as may be selected by the Committee. All Awards of Restricted
Stock shall be evidenced by a Restricted Stock Award Agreement.
10.2. ISSUANCE AND RESTRICTIONS. Restricted Stock shall be subject to such
restrictions on transferability and other restrictions as the Committee may
impose (including, without limitation, limitations on the right to vote
Restricted Stock or the right to receive dividends on the Restricted Stock).
These restrictions may lapse separately or in combination at such times, under
such circumstances, in such installments, upon the satisfaction of performance
goals or otherwise, as the Committee determines at the time of the grant of the
Award or thereafter.
10.3. FORFEITURE. Except as otherwise determined by the Committee at the
time of the grant of the Award or thereafter, upon termination of employment
during the applicable restriction period or upon failure to satisfy a
performance goal during the applicable restriction period, Restricted Stock that
is at that time subject to restrictions shall be forfeited and reacquired by the
Corporation; provided, however, that the Committee may provide in any Award
Agreement that restrictions or forfeiture conditions relating to Restricted
Stock will be waived in whole or in part in the event of terminations resulting
from specified causes, and the Committee may in other cases waive in whole or in
part restrictions or forfeiture conditions relating to Restricted Stock.
10.4. CERTIFICATES FOR RESTRICTED STOCK. Restricted Stock granted under the
Plan may be evidenced in such manner as the Committee shall determine. If
certificates representing shares of Restricted Stock are registered in the name
of the Participant, certificates must bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to such Restricted Stock.
ARTICLE 11 DIVIDEND EQUIVALENTS
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11.1 GRANT OF DIVIDEND EQUIVALENTS. The Committee is authorized to grant
Dividend Equivalents to Participants subject to such terms and conditions as may
be selected by the Committee. Dividend Equivalents shall entitle the Participant
to receive payments equal to dividends with respect to all or a portion of the
number of shares of Stock subject to an Award, as determined by the Committee.
The Committee may provide that Dividend Equivalents be paid or distributed when
accrued or be deemed to have been reinvested in additional shares of Stock, or
otherwise reinvested.
ARTICLE 12
OTHER STOCK-BASED AWARDS
12.1. GRANT OF OTHER STOCK-BASED AWARDS. The Committee is authorized,
subject to limitations under applicable law, to grant to Participants such other
Awards that are payable in, valued in whole or in part by reference to, or
otherwise based on or related to shares of Stock, as deemed by the Committee to
be consistent with the purposes of the Plan, including without limitation shares
of Stock awarded purely as a "bonus" and not subject to any restrictions or
conditions, convertible or exchangeable debt securities, other rights
convertible or exchangeable into shares of Stock, and Awards valued by reference
to book value of shares of Stock or the value of securities of or the
performance of specified Parents or Subsidiaries. The Committee shall determine
the terms and conditions of such Awards.
ARTICLE 13
ANNUAL AWARD OF OPTIONS TO NON-EMPLOYEE DIRECTORS
13.1. GRANT OF OPTIONS. Each Non-Employee Director who is serving in such
capacity as of the day following the annual meeting of the Corporation's
stockholders ("Annual Meeting") held in 1998 shall be granted a Non-Qualified
Option to purchase 10,000 shares of Stock, subject to adjustment as provided in
Section 15.1. As of the day following each subsequent Annual Meeting, each
Non-Employee Director who is serving in such capacity as of such date shall be
granted a Non-Qualified Option to purchase 10,000 shares of Stock, subject to
adjustment as provided in Section 15.1. Each such day that Options are to be
granted under this Article 13 is referred to hereinafter as a "Grant Date."
If on any Grant Date, shares of Stock are not available under the Plan to
grant to Non-Employee Directors the full amount of a grant contemplated by the
immediately preceding paragraph, then each Non-Employee Director shall receive
an Option (a "Reduced Grant") to purchase shares of Stock in an amount equal to
the number of shares of Stock then available under the Plan divided by the
number of Non-Employee Directors as of the applicable Grant Date. Fractional
shares shall be ignored and not granted.
If a Reduced Grant has been made and, thereafter, during the term of the
Plan, additional shares of Stock become available for grant, then each person
who was a Non-Employee Director both on the Grant Date on which the Reduced
Grant was made and on the date additional shares of Stock become available (a
"Continuing Non-Employee Director") shall receive an additional Option to
purchase shares of Stock. The number of
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newly available shares shall be divided equally among the Options granted to the
Continuing Non-Employee Directors; provided, however, that the aggregate number
of shares of Stock subject to a Continuing Non-Employee Director's additional
Option plus any prior Reduced Grant to the Continuing Non-Employee Director on
the applicable Grant Date shall not exceed 10,000 shares (subject to adjustment
pursuant to Section 15.1). If more than one Reduced Grant has been made,
available Options shall be granted beginning with the earliest such Grant Date.
13.2. OPTION PRICE. The option price for each Option granted under this
Article 13 shall be the Fair Market Value on the date of grant of the
Option.
13.3. TERM. Each Option granted under this Article 13 shall, to the extent
not previously exercised, terminate and expire on the date ten (10) years after
the date of grant of the option, unless earlier terminated as provided in
Section 13.4.
13.4 LAPSE OF OPTION. An Option granted under this Article 13 shall not
automatically lapse by reason of the Participant ceasing to qualify as a
Non-Employee Director but remaining as a member of the Board. An Option granted
under this Article 13 shall lapse under the earliest of the following
circumstances:
(1) The Option shall lapse ten years after it is granted.
(2) If the Participant ceases to serve as a member of the Board for any
reason other than as provided in paragraph (3) or (4) below, the Option
shall lapse, unless it is previously exercised, three months after the
Participant's termination as a member of the Board; provided, however, that
if the Participant is removed for cause (determined in accordance with the
Corporation's bylaws, as amended from time to time), the Option shall (to
the extent not previously exercised) lapse immediately.
(3) If the Participant ceases to serve as a member of the Board by reason
of his Disability, the Option shall lapse, unless it is previously
exercised, one year after the Participant's termination as a member of the
Board.
(4) If the Participant dies while serving as a member of the Board, or
during the three-month period described in paragraph (2) or during the
one-year period described in paragraph (3) and before the Option otherwise
lapses, the Option shall lapse one year after the Participant's death. Upon
the Participant's death, any exercisable Options may be exercised by the
Participant's beneficiary, determined in accordance with Section 14.6.
If a Participant exercises Options after termination of his service on the
Board, he may exercise the Options only with respect to the shares that were
otherwise exercisable on the date of termination of his service on the Board.
Such exercise otherwise shall be subject to the terms and conditions of this
Article 13.
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13.5. EXERCISABILITY. Each Option granted under this Article 13 shall be
immediately exercisable, in whole or in part, on the first anniversary
of the date of grant.
13.6. EXERCISE AND PAYMENT. An Option granted under this Article 13 shall
be exercised by written notice directed to the Secretary of the Company (or his
designee) and accompanied by payment in full of the exercise price in cash, by
check, in shares of Stock, or in any combination thereof; provided that if
shares of Stock surrendered in payment of the exercise price were themselves
acquired otherwise than on the open market, such shares shall have been held by
the Participant for at least six months. To the extent permitted under
Regulation T of the Federal Reserve Board, and subject to applicable securities
laws, such Options may be exercised through a broker in a so-called "cashless
exercise" whereby the broker sells the Option shares and delivers cash sales
proceeds to the Corporation in payment of the exercise price.
13.7. TRANSFERABILITY OF OPTIONS. Any Option granted pursuant to this
Article 13 shall be assignable or transferable by the Participant by will, by
the laws of descent and distribution, or pursuant to a qualified domestic
relations order that would satisfy Section 414(p)(1)(A) of the Code if such
section applied to an Award under the Plan. In addition, any Option granted
pursuant to this Article 13 shall be transferable by the Participant to any of
the following permitted transferees, upon such reasonable terms and conditions
as the Committee may establish (and, unless specifically permitted by the Board
in advance, such transfers shall be limited to one transfer per Participant to
no more than four transferees): (i) one or more of the following family members
of the Participant: any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including adoptive
relationships, (ii) a trust, partnership or other entity established and
existing for the sole benefit of, or under the sole control of, one or more of
the above family members of the Participant, or (iii) any other transferee
specifically approved by the Committee after taking into account any state or
federal tax, securities or other laws applicable to transferable options.
13.8. TERMINATION OF ARTICLE 13. No Options shall be granted under this
Article 13 after September 1, 2006.
13.9. NON-EXCLUSIVITY. Nothing in this Article 13 shall prohibit the
Committee from making discretionary Awards to Non-Employee Directors pursuant to
the other provisions of the Plan before or after September 1, 2006. Options
granted pursuant to this Article 13 shall be governed by the provisions of this
Article 13 and by other provisions of the Plan to the extent not inconsistent
with the provisions of Article 13.
ARTICLE 14
PROVISIONS APPLICABLE TO AWARDS
14.1. STAND-ALONE, TANDEM, AND SUBSTITUTE AWARDS. Awards granted under the
Plan may, in the discretion of the Committee, be granted either alone or in
addition to, in tandem with, or in substitution for, any other Award granted
under the Plan. If an Award is granted in substitution for another Award, the
Committee may
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require the surrender of such other Award in consideration of the
grant of the new Award. Awards granted in addition to or in tandem with other
Awards may be granted either at the same time as or at a different time from the
grant of such other Awards.
14.2. EXCHANGE PROVISIONS. The Committee may at any time offer to exchange
or buy out any previously granted Award for a payment in cash, Stock, or another
Award (subject to Section 14.1), based on the terms and conditions the Committee
determines and communicates to the Participant at the time the offer is made.
14.3. TERM OF AWARD. The term of each Award shall be for the period as
determined by the Committee, provided that in no event shall the term of any
Incentive Stock Option or a Stock Appreciation Right granted in tandem with the
Incentive Stock Option exceed a period of ten years from the date of its grant
(or, if Section 7.2(e) applies, five years from the date of its grant).
14.4. FORM OF PAYMENT FOR AWARDS. Subject to the terms of the Plan and any
applicable law or Award Agreement, payments or transfers to be made by the
Corporation or a Parent or Subsidiary on the grant or exercise of an Award may
be made in such form as the Committee determines at or after the time of grant,
including without limitation, cash, Stock, other Awards, or other property, or
any combination, and may be made in a single payment or transfer, in
installments, or on a deferred basis, in each case determined in accordance with
rules adopted by, and at the discretion of, the Committee.
14.5. LIMITS ON TRANSFER. No right or interest of a Participant in any
unexercised or restricted Award may be pledged, encumbered, or hypothecated to
or in favor of any party other than the Corporation or a Parent or Subsidiary,
or shall be subject to any lien, obligation, or liability of such Participant to
any other party other than the Corporation or a Parent or Subsidiary. No
unexercised or restricted Award shall be assignable or transferable by a
Participant other than by will or the laws of descent and distribution or,
except in the case of an Incentive Stock Option, pursuant to a domestic
relations order that would satisfy Section 414(p)(1)(A) of the Code if such
Section applied to an Award under the Plan; provided, however, that the
Committee may (but need not) permit other transfers where the Committee
concludes that such transferability (i) does not result in accelerated taxation,
(ii) does not cause any Option intended to be an incentive stock option to fail
to be described in Code Section 422(b), and (iii) is otherwise appropriate and
desirable, taking into account any factors deemed relevant, including without
limitation, any state or federal tax or securities laws or regulations
applicable to transferable Awards.
14.6 BENEFICIARIES. Notwithstanding Section 14.5, a Participant may, in the
manner determined by the Committee, designate a beneficiary to exercise the
rights of the Participant and to receive any distribution with respect to any
Award upon the Participant's death. A beneficiary, legal guardian, legal
representative, or other person claiming any rights under the Plan is subject to
all terms and conditions of the Plan and any Award Agreement applicable to the
Participant, except to the extent the Plan and Award Agreement otherwise
provide, and to any additional restrictions deemed necessary or appropriate by
the Committee. If no beneficiary has been designated or survives the
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Participant, payment shall be made to the Participant's estate. Subject to the
foregoing, a beneficiary designation may be changed or revoked by a Participant
at any time provided the change or revocation is filed with the Committee.
14.7. STOCK CERTIFICATES. All Stock certificates delivered under the Plan
are subject to any stop-transfer orders and other restrictions as the Committee
deems necessary or advisable to comply with federal or state securities laws,
rules and regulations and the rules of any national securities exchange or
automated quotation system on which the Stock is listed, quoted, or traded. The
Committee may place legends on any Stock certificate to reference restrictions
applicable to the Stock.
14.8 ACCELERATION UPON DEATH OR DISABILITY. Notwithstanding any other
provision in the Plan or any Participant's Award Agreement to the contrary, upon
the Participant's death or Disability during his employment or service as a
consultant or director, all outstanding Options, Stock Appreciation Rights, and
other Awards in the nature of rights that may be exercised (including, without
limitation, Options granted pursuant to Article 13) shall become fully
exercisable and all restrictions on outstanding Awards shall lapse. Any Option
or Stock Appreciation Rights Awards shall thereafter continue or lapse in
accordance with the other provisions of the Plan and the Award Agreement. To the
extent that this provision causes Incentive Stock Options to exceed the dollar
limitation set forth in Section 7.2(d), the excess Options shall be deemed to be
Non-Qualified Stock Options.
14.9. ACCELERATION UPON A CHANGE IN CONTROL. Except as otherwise provided
in the Award Agreement, upon the occurrence of a Change in Control, all
outstanding Options, Stock Appreciation Rights, and other Awards in the nature
of rights that may be exercised (including, without limitation, Options granted
pursuant to Article 13) shall become fully exercisable and all restrictions on
outstanding Awards shall lapse; provided, however that such acceleration will
not occur if, in the opinion of the Company's accountants, such acceleration
would preclude the use of "pooling of interest" accounting treatment for a
Change in Control transaction that (a) would otherwise qualify for such
accounting treatment, and (b) is contingent upon qualifying for such accounting
treatment. To the extent that this provision causes Incentive Stock Options to
exceed the dollar limitation set forth in Section 7.2(d), the excess Options
shall be deemed to be Non-Qualified Stock Options.
14.10. ACCELERATION UPON CERTAIN EVENTS NOT CONSTITUTING A CHANGE IN
CONTROL. In the event of the occurrence of any circumstance, transaction or
event not constituting a Change in Control (as defined in Section 3.1) but which
the Board of Directors deems to be, or to be reasonably likely to lead to, an
effective change in control of the Company of a nature that would be required to
be reported in response to Item 6(e) of Schedule 14A of the 1934 Act, the
Committee may in its sole discretion declare all outstanding Options, Stock
Appreciation Rights, and other Awards in the nature of rights that may be
exercised (including, without limitation, Options granted pursuant to Article
13) to be fully exercisable, and/or all restrictions on all outstanding Awards
to have lapsed, in each case, as of such date as the Committee may, in its sole
discretion, declare, which may be on or before the consummation of such
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transaction or event. To the extent that this provision causes Incentive Stock
Options to exceed the dollar limitation set forth in Section 7.2(d), the excess
Options shall be deemed to be Non-Qualified Stock Options.
14.11. ACCELERATION FOR ANY OTHER REASON. Regardless of whether an event
has occurred as described in Section 14.9 or 14.10 above, the Committee may in
its sole discretion at any time determine that all or a portion of a
Participant's Options, Stock Appreciation Rights, and other Awards in the nature
of rights that may be exercised (including, without limitation, Options granted
pursuant to Article 13) shall become fully or partially exercisable, and/or that
all or a part of the restrictions on all or a portion of the outstanding Awards
shall lapse, in each case, as of such date as the Committee may, in its sole
discretion, declare. The Committee may discriminate among Participants and among
Awards granted to a Participant in exercising its discretion pursuant to this
Section 14.11.
14.12 EFFECT OF ACCELERATION. If an Award is accelerated under Section 14.9
or 14.10, the Committee may, in its sole discretion, provide (i) that the Award
will expire after a designated period of time after such acceleration to the
extent not then exercised, (ii) that the Award will be settled in cash rather
than Stock, (iii) that the Award will be assumed by another party to the
transaction giving rise to the acceleration or otherwise be equitably converted
in connection with such transaction, or (iv) any combination of the foregoing.
The Committee's determination need not be uniform and may be different for
different Participants whether or not such Participants are similarly situated.
14.13. PERFORMANCE GOALS. The Committee may determine that any Award
granted pursuant to this Plan to a Participant (including, but not limited to,
Participants who are Covered Employees, but excluding Options granted pursuant
to Article 13) shall be determined solely on the basis of (a) the achievement by
the Corporation or a Parent or Subsidiary of a specified target return, or
target growth in return, on equity or assets, (b) the Corporation's, Parent's or
Subsidiary's stock price, (c) the achievement by an individual or a business
unit of the Corporation, Parent or Subsidiary of a specified target, or target
growth in, revenues, net income or earnings per share, (d) the achievement of
objectively determinable goals with respect to service or product delivery,
service or product quality, customer satisfaction, meeting budgets and/or
retention of employees or (e) any combination of the goals set forth in (a)
through (d) above. If an Award is made on such basis, the Committee shall
establish goals prior to the beginning of the period for which such performance
goal relates (or such later date as may be permitted under Code Section 162(m)
or the regulations thereunder) and the Committee may for any reason reduce (but
not increase) any Award, notwithstanding the achievement of a specified goal.
Any payment of an Award granted with performance goals shall be conditioned on
the written certification of the Committee in each case that the performance
goals and any other material conditions were satisfied.
14.14. TERMINATION OF EMPLOYMENT. Whether military, government or other
service or other leave of absence shall constitute a termination of employment
shall be determined in each case by the Committee at its discretion, and any
determination by the Committee shall be final and conclusive. A termination of
employment shall not occur
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in a circumstance in which a Participant transfers from the Corporation to one
of its Parents or Subsidiaries, transfers from a Parent or Subsidiary to the
Corporation, or transfers from one Parent or Subsidiary to another Parent or
Subsidiary.
ARTICLE 15
CHANGES IN CAPITAL STRUCTURE
15.1. GENERAL. In the event a stock dividend is declared upon the Stock,
the shares of Stock then subject to each Award shall be increased
proportionately without any change in the aggregate purchase price therefor. In
the event the Stock shall be changed into or exchanged for a different number or
class of shares of stock or securities of the Corporation or of another
corporation, whether through reorganization, recapitalization, reclassification,
stock split-up, combination of shares, merger or consolidation, there shall be
substituted for each such share of Stock then subject to each Award the number
and class of shares into which each outstanding share of Stock shall be so
exchanged, all without any change in the aggregate purchase price for the shares
then subject to each Award.
ARTICLE 16
AMENDMENT, MODIFICATION AND TERMINATION
16.1. AMENDMENT, MODIFICATION AND TERMINATION. The Board or the Committee
may, at any time and from time to time, amend, modify or terminate the Plan
without stockholder approval; provided, however, that the Board or Committee may
condition any amendment or modification on the approval of stockholders of the
Company if such approval is necessary or deemed advisable with respect to tax,
securities or other applicable laws, policies or regulations.
16.2 AWARDS PREVIOUSLY GRANTED. At any time and from time to time, the
Committee may amend, modify or terminate any outstanding Award without approval
of the Participant; provided, however, that, subject to the terms of the
applicable Award Agreement, such amendment, modification or termination shall
not, without the Participant's consent, reduce or diminish the value of such
Award determined as if the Award had been exercised, vested, cashed in or
otherwise settled on the date of such amendment or termination. No termination,
amendment, or modification of the Plan shall adversely affect any Award
previously granted under the Plan, without the written consent of the
Participant.
ARTICLE 17
GENERAL PROVISIONS
17.1. NO RIGHTS TO AWARDS. No Participant or employee, officer, consultant
or director shall have any claim to be granted any Award under the Plan, and
neither the Corporation nor the Committee is obligated to treat Participants and
employees, officers, consultants or directors uniformly.
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17.2. NO STOCKHOLDER RIGHTS. No Award gives the Participant any of the
rights of a stockholder of the Corporation unless and until shares of Stock are
in fact issued to such person in connection with such Award.
17.3. WITHHOLDING. The Corporation or any Parent or Subsidiary shall have
the authority and the right to deduct or withhold, or require a Participant to
remit to the Corporation, an amount sufficient to satisfy federal, state, and
local taxes (including the Participant's FICA obligation) required by law to be
withheld with respect to any taxable event arising as a result of the Plan. With
respect to withholding required upon any taxable event under the Plan, the
Committee may, at the time the Award is granted or thereafter, require that any
such withholding requirement be satisfied, in whole or in part, by withholding
shares of Stock having a Fair Market Value on the date of withholding equal to
the amount to be withheld for tax purposes, all in accordance with such
procedures as the Committee establishes.
17.4. NO RIGHT TO EMPLOYMENT OR OTHER STATUS. Nothing in the Plan or any
Award Agreement shall interfere with or limit in any way the right of the
Corporation or any Parent or Subsidiary to terminate any Participant's
employment or status as a consultant or director at any time, nor confer upon
any Participant any right to continue as an employee, officer, consultant or
director of the Corporation or any Parent or Subsidiary.
l6.5. UNFUNDED STATUS OF AWARDS. The Plan is intended to be an "unfunded"
plan for incentive and deferred compensation. With respect to any payments not
yet made to a Participant pursuant to an Award, nothing contained in the Plan or
any Award Agreement shall give the Participant any rights that are greater than
those of a general creditor of the Corporation or any Parent or Subsidiary.
17.6. RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall be
taken into account in determining any benefits under any pension, retirement,
savings, profit sharing, group insurance, welfare or benefit plan of the
Corporation or any Parent or Subsidiary unless provided otherwise in such other
plan.
17.7. EXPENSES. The expenses of administering the Plan shall be borne by
the Corporation and its Parents or Subsidiaries.
17.8. TITLES AND HEADINGS. The titles and headings of the Sections in the
Plan are for convenience of reference only, and in the event of any conflict,
the text of the Plan, rather than such titles or headings, shall control.
17.9. GENDER AND NUMBER. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
17.10. FRACTIONAL SHARES. No fractional shares of Stock shall be issued and
the Committee shall determine, in its discretion, whether cash shall be given in
lieu of fractional shares or whether such fractional shares shall be eliminated
by rounding up.
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17.11. GOVERNMENT AND OTHER REGULATIONS. The obligation of the Corporation
to make payment of awards in Stock or otherwise shall be subject to all
applicable laws, rules, and regulations, and to such approvals by government
agencies as may be required. The Corporation shall be under no obligation to
register under the 1933 Act, or any state securities act, any of the shares of
Stock paid under the Plan. The shares paid under the Plan may in certain
circumstances be exempt from registration under the 1933 Act, and the
Corporation may restrict the transfer of such shares in such manner as it deems
advisable to ensure the availability of any such exemption.
17.12. GOVERNING LAW. To the extent not governed by federal law, the Plan
and all Award Agreements shall be construed in accordance with and governed by
the laws of the State of Delaware.
17.13 ADDITIONAL PROVISIONS. Each Award Agreement may contain such other
terms and conditions as the Committee may determine; provided that such other
terms and conditions are not inconsistent with the provisions of this Plan.
The foregoing is hereby acknowledged as being the MLC Holdings, Inc. 1998
Long-Term Incentive Plan as adopted by the Board of Directors of the Company on
July _ _, 1998 and approved by the stockholders of the Company on _______, 1998.
MLC HOLDINGS, INC.
By:
----------------------------
Its:
---------------------------
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