<PAGE> 1
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.
- --------------------------------------------------------------------------------
(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
------------------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies: N/A
------------------------------------------------------------------
(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
------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction: N/A
------------------------------------------------------------------
(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:
------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
------------------------------------------------------------------
(3) Filing party:
------------------------------------------------------------------
(4) Date filed:
------------------------------------------------------------------
2
<PAGE> 2
MLC HOLDINGS, INC.
11150 Sunset Hills Road, Suite 110
Reston, Virginia 20190-5321
July 29, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of MLC
Holdings, Inc. on September 16, 1998. The Annual Meeting will begin at 10:00
a.m. local time at the 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 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 Reston, VA on September 16, 1998.
Very truly yours,
Phillip G. Norton, President
3
<PAGE> 3
MLC HOLDINGS, INC.
11150 Sunset Hills Road, Suite 110
Reston, Virginia 20190-5321
----------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 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 16,
1998, at 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 two Class II directors to serve for three years and until their
respective successors have been duly elected and shall qualify.
2. To approve the 1998 Long-Term Incentive Plan.
3. To ratify the appointment of Deloitte & Touche LLP as the Company's
independent auditors for the Company's fiscal year ending March 31, 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 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.
----------------------------------
July 29, 1998 Kleyton L. Parkhurst, Secretary
4
<PAGE> 4
MLC HOLDINGS, INC.
PROXY STATEMENT
Dated 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 on September 16, 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 two Class II directors to serve for three years and
until their successors have been duly elected and shall qualify; (ii) to approve
the 1998 Long Term Incentive Plan; (iii) to ratify the appointment of Deloitte &
Touche LLP as the Company's independent auditors for the Company's fiscal year
ending March 31, 1999; and (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
July 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 AUGUST
7, 1998.
VOTING REQUIREMENTS
As of July 23, 1998, the Record Date, there were outstanding 6,345,483 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 nominees to be selected as Class II 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 approval of Proposals 2 and 3 to be considered at the Annual
Meeting each 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 Executive Officers of the Company, as a group of eight persons,
owned beneficially 3,785,240 shares (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.
5
<PAGE> 5
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 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.
The Company's Annual Report on Form 10-K for the fiscal year ended March 31,
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 II
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 adoption of the 1998 Long Term Incentive Plan.
VOTING SECURITIES, PRINCIPAL HOLDERS
THEREOF, AND MANAGEMENT
Only holders of record of the outstanding 6,345,483 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 officers in the Summary Compensation Table, Director and the Director
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.
6
<PAGE> 6
<TABLE>
<CAPTION>
Shares Beneficially Owned
Name of Beneficial Owner(1) Number Percent
<S> <C> <C>
Phillip G. Norton(2) 2,865,730 44.5%
Bruce M. and Elizabeth D. Bowen(3) 771,250 12.1%
William J. Slaton 400,000 6.3%
Patrick J. Norton(4) 363,260 5.7%
Kevin M. Norton(4) 376,500 5.9%
Kleyton L. Parkhurst (5) 118,000 1.8%
Thomas B. Howard, Jr. 6,000 *
Steven J. Mencarini 4,260 *
Terrence O'Donnell 10,000 *
Carl J. Rickertsen 10,000 *
C. Thomas Faulders, III --- ---
Laifer Capital Management(6) 532,500 9.9%
All directors and executive officers as a group
(8 individuals) 3,785,240 57.9%
</TABLE>
- ------------------------
* 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 97,500 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 57,500 options to acquire shares of Common Stock which are not vested
and not immediately exercisable. See " 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
11,250 shares of Common Stock that Bruce M. Bowen has rights to acquire pursuant
to options and excludes 18,750 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 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.
7
<PAGE> 7
(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
75,000 shares of Common Stock that Kleyton L. Parkhurst has option rights to
acquire, and excludes 35,000 options to acquire Common Stock which are not
vested and not immediately exercisable. See "Executive Compensation --
Compensation Arrangements and Employment Agreements."
(6) Based on information obtained from the company, Laifer Capital Management,
Inc. is the beneficial owner of 532,500 shares, or 9.9%. The 532,500 shares of
Common Stock beneficially owned by Laifer Capital Management, Inc. includes: (i)
278,300 shares of Common Stock beneficially owned by Laifer Capital Management,
Inc. in its capacity as General Partner and investment advisor to Hilltop
Partners, L.P.; and (ii) 254,200 shares of Common Stock beneficially owned by
Laifer Capital Management, Inc. in its capacity as investment advisor to various
other 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, executive officers and key employees of the Company are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION CLASS
- ---- --- -------- -----
<S> <C> <C> <C>
Phillip G. Norton**.............................54 Chairman of the Board,
President, and Chief
Executive Officer III
Thomas B. Howard, Jr............................51 Vice President; Executive
Vice President, and Chief
Operating Officer of MLC Group
Bruce M. Bowen .................................46 Director and Executive Vice
President III
Steven J. Mencarini ............................43 Senior Vice President, and
Chief Financial Officer
C. Thomas Faulders,III..........................48 Director I
Terrence O'Donnell..............................54 Director II
Carl J. Rickertsen..............................38 Director II
Kleyton L. Parkhurst............................35 Senior Vice President,
Secretary and Treasurer
</TABLE>
8
<PAGE> 8
<TABLE>
<CAPTION>
NAME AGE POSITION CLASS
- ---- --- -------- -----
<S> <C> <C> <C>
Kevin M. Norton**...............................42 Vice President of Brokerage
Operations
William J. Slaton...............................50 Vice President of Marketing
Thomas K. McNamara..............................53 Vice President
</TABLE>
**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 a 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.
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. 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. 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.
9
<PAGE> 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 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,
and since July, 1998, as Senior Vice President of Corporate Development. Mr.
Parkhurst is responsible for all of the Company's financing activities, 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.
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
<PAGE> 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 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 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.
SECTION 16(a) BENEFICIAL 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 SEC and 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 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. 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 is composed of three classes of directors as follows:
Class I-C. Thomas Faulders III, who was appointed in July 1998 to fill a
vacancy, Class II--Terrence O'Donnell and Carl J. Rickertsen and Class III--
Phillip G. Norton and Bruce M. Bowen. Class I Directors are expected to stand
for re-election at the annual meeting of Stockholders in 2000; Class II
Directors are expected to stand for re-election at the next annual meeting
(i.e., the 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 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
<PAGE> 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 five times during the fiscal year ended March 31,
1998. No incumbent Director attended fewer than 75% of the total
number of meetings held by the Board of 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
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 making 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, C. 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 all other employees. If the Long Term Incentive Plan is
adopted, the Compensation Committee will also assume responsibility for stock
based compensation for all 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 and its component plans, which include
the Amended and Restated Incentive Stock Option Plan, the Amended and Restated
Outside Director Stock Option Plan, the Amended and Restated Nonqualified Stock
Option Plan, and the Employee Stock Purchase Plan. If the Long Term Incentive
Plan is adopted, the Board of Directors has 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 Mr. Bowen and Mr. Norton. If the 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 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.
12
<PAGE> 12
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 years ended March 31, 1996, 1997, and 1998. Certain
columns have been omitted from this summary compensation table as they are not
applicable.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
Other
Bonus/ Annual All Other
Name and Principal Position Year Salary Commission Compensation Compensation
<S> <C> <C> <C> <C> <C>
Phillip G. Norton 1998 $200,000 $ $348(2) --
Chairman, Chief Executive 1997 67,265 -- 348 $90,000(1)
Officer and President 1996 984 -- -- 120,000(1)
Bruce M. Bowen 1998 150,000 10,000 1,500(2) ---
Director, Chief Financial 1997 130,000 10,000 12,729(2)(3) ---
Officer, Executive Vice President 1996 120,000 40,000 13,206(2)(3) 1,000(4)
Kleyton L. Parkhurst 1998 120,000 20,000 1,500(2) --
Senior Vice President, 1997 40,000(5) 117,567 1,500(2) --
Secretary and Treasurer 1996 -- 169,352 1,356(2) --
Thomas B. Howard, Jr. 1998 125,000(6) 20,000 --- ---
Chief Operating Officer, Vice President 1997 --- --- --- ---
Executive Vice President of MLC Group, Inc. 1996 --- --- --- ---
Steven J. Mencarini 1998 97,596(6) --- --- ---
Chief Financial Officer, Senior 1997 --- --- --- ---
Vice President 1996 --- --- --- ---
</TABLE>
- ----------------------------
(1) Represents guarantee fees paid to Mr. Norton's spouse, Patricia Norton.
(2) Employer 401(k) plan match.
(3) Includes $11,229 in fiscal year 1997 and $10,000 in fiscal years 1996 and
1995, respectively, of interest paid on loans by Mr. Bowen to the Company;
the balance represents employer 401(k) plan match amounts.
(4) Represents the personal use of the Company's country club membership.
(5) Until December 1, 1996 Kevin M. Norton were paid on a commission basis and
thereafter, pursuant to his employment agreements received base salary plus
bonus. See "--Compensation Arrangements and Employment Agreements."
(6) Mr. Howard commenced employment in January 1997. Mr. Mencarini commenced
employment in June, 1997. See "--Compensation Arrangements and Employment
Agreements."
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information with respect to options
granted during the last fiscal year to the Named Executive Officers in the above
Summary Compensation Table.
<TABLE>
<S> <C> <C> <C> <C>
Percent of Total
Number of Securities Options/SARS Granted to
Underlying Employees in Exercise or Base
Name Options/SARS Granted (#) Fiscal Year(4) Price ($/Sh) Expiration Date
---- ------------------------ ------------------ ------- ---------------
</TABLE>
<TABLE>
<S> <C>
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for Option
Name Term (5)
---- --------
5% ($) 10% ($)
------ -------
</TABLE>
13
<PAGE> 13
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Phillip G. Norton 25,000(1) 9.0% $12.65 02/05/2003 $50,681 $146,772
Bruce M. Bowen 15,000(1) 5.4% $11.50 02/05/2008 108,484 274,921
Kleyton L. Parkhurst 10,000(2) 3.6% $11.50 02/05/2008 72,323 183,280
Thomas B. Howard, Jr. 30,000(3) 10.8% $10.75 04/25/2007 202,819 513,982
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
</TABLE>
- ------------------------------
(1) The options were granted to Mr. Norton and Mr. Bowen on February 5, 1998.
The options granted to Mr. Norton were under the Incentive Stock Option
Plan, a component of the Company's Stock Incentive Plan, and are
exercisable in four annual installments beginning one 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 on February 5, 1998. These options were issued
under the Incentive Stock Option Plan, a component of the Company's Master
Stock Incentive Plan and are exercisable in three annual installments
beginning one year after date of grant.
(3) The options were granted in connection with employment. The options were
granted under the Incentive Stock Option Plan, a component plan of the
Company's Stock Incentive Program. These options become exercisable in five
annual installments beginning one year after grant. [See Note 10 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) Based on an aggregate of 277,200 shares granted during fiscal 1998 to
certain employees of the Company.
(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, 1998 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 1998.
<TABLE>
<CAPTION>
Shares
Acquired Number of Securities Value of Unexercised in the
On Value Underlying Unexercised Money Options/SARs at
Name Exercise Realized Options/SARS at FY-End (#) FY-End ($)(1)
---- -------- -------- -------------------------- -------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Philip G. Norton --- --- 65,000 90,000 $325,000 $381,250
Bruce M. Bowen --- --- 7,500 22,500 37,500 71,250
Kleyton L. Parkhurst --- --- 50,000 60,000 367,500 390,000
Thomas B. Howard, Jr. --- --- --- 32,500 --- 95,625
Steven J. Mencarini --- --- --- 35,700 --- 44,100
</TABLE>
(1) Based on a closing bid price of $13.75 per share as of the close of
business on March 31, 1998.
14
<PAGE> 14
Director Compensation. Directors who are also employees of the Company
do not currently receive any compensation for 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 director 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 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 non-employee director on the anniversary of each
year of serve 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 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 "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
$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.
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
September 1, 1996 and September 1, 1997, and the balance will be exercisable and
vest in 25% increments over three years on September 1, 1997, September 1,
1998, and 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 "Certain
Transactions -- Guarantee Fees."
15
<PAGE> 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 September 20,
1996 and September 1, 1998, and the balance will be exercisable and vest in 25%
increments over three years on September 1, 1997, September 1, 1998, and
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 September 1, 1997,
September 1, 1998, and 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.
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. The Company maintains key-man life insurance on Mr. Norton in the form
of two separate policies, one with the First Colony Life Insurance Company and
the second with CNA/Valley Forge, each in the amount of $5 million.
Master Stock Incentive Plan. The Company has established a stock
incentive program (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 under a series of component plans. These
component plans include tax advantaged incentive stock options for employees
under the Incentive Stock Option Plan, formula length of service based
nonqualified options to nonemployee directors under the Outside Director Stock
Plan, nonqualified stock options under the Nonqualified Stock Option Plan, 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, as well as
other restrictive stock and performance based stock awards and programs which
may be established by the Board of Directors. The aggregate number of shares
reserved for grant under all plans which are a part of the Master Stock
Incentive Plan is 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, 1998, based on 6,082,005 shares outstanding, this 20% number would be
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
<PAGE> 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.
The Outside Director Stock Option Plan 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.
The Company has adopted an Employee Stock Purchase Plan. Under the plan,
employees are eligible to purchase up to $2,500 of stock each 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 plan 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 calendar quarter
or (b) the Fair Market Value of a share of Stock on the last day of the calendar
quarter.
Compensation Committee Interlocks and Insider Participation. For the
year ended March 31, 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 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, 1998 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.
17
<PAGE> 17
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
---------------------------------------------------------------------
11/15/96 12/96 3/97 6/97 9/97 12/97 3/98
<S> <C> <C> <C> <C> <C> <C> <C>
MLC HOLDINGS, INC. 100.00 100.00 126.32 139.47 142.11 127.63 144.74
NASDAQ STOCK MARKET (U.S.) 100.00 102.52 96.97 114.74 134.15 125.80 147.16
NASDAQ FINANCIAL 100.00 104.93 109.47 127.46 148.74 160.29 169.75
</TABLE>
CERTAIN TRANSACTIONS
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 facility on June 10, 1997, all
stockholders' personal guarantees were removed and collateral pledges released.
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 $1.3 million. During the year ended March
31, 1997, and 1998, respectively, the Company recognized remarketing fees from
New Energy in the amount of $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.
UNITED 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 United 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 United 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
<PAGE> 18
As of March 31, 1997 and 1998, $72,000 and $85,020, respectively, was receivable
from United Federal, the payment of which is unlikely. As of March 31, 1997 and
1998, the Company fully reserved for the receivable from United Federal. During
the year ended March 31, 1998, the Company recognized re-marketing fees of
$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 totalled
$77,664, $70,612 and $53,582 for March 31, 1996, 1997, and 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 Exchange Act, 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
transactions with an unaffiliated party. The Company requires 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
<PAGE> 19
Directors of the Company, and (ii) be on terms no less favorable to the Company
than could be obtained from unaffiliated third parties.
PROPOSAL 1
TO ELECT TWO CLASS II DIRECTORS TO SERVE FOR THREE YEARS
AND UNTIL THEIR RESPECTIVE SUCCESSORS HAVE BEEN DULY ELECTED AND
SHALL QUALIFY.
The Board of Directors has concluded that the re-election of Terrence O'Donnell
and Carl J. Rickertsen as Class II Directors is in the best interest of the
Company and recommends Stockholder approval of the re-election of Terrence
O'Donnell and Carl J. Rickertsen as Class II directors. The remaining three
Directors will continue to serve in their positions for the remainder of their
terms. Biographical information concerning Mr. O'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 Terrence O'Donnell and Carl J.
Rickertsen, the nominees listed herein. Although the Board of Directors of the
Company does not contemplate that such nominees will be unable to serve, if such
a situation arises prior to the Annual Meeting, the persons named in the
enclosed proxy will vote for the election of such other person or persons as may
be nominated by the Board of Directors.
VOTE REQUIRED FOR APPROVAL. The 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 II director.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF
TERRENCE O'DONNELL AND CARL J. RICKERTSEN, THE NOMINEES LISTED ABOVE.
PROPOSAL 2
APPROVAL OF THE
1998 LONG-TERM INCENTIVE PLAN
The Company currently maintains the MLC Master Stock Option Plan (the
"1997 Master Plan") and the following related sub-plans: the Amended and
Restated Nonqualified Stock Option Plan, the Amended and Restated Incentive
Stock Option Plan, the Amended and Restated Outside Director Stock Option Plan,
and the 1997 Employee Stock Purchase Plan (the "ESPP") (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 1997 Plans at the 1997 annual meeting, and also approved the
reservation and issuance thereunder of up to (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, and less (iii) and shares granted pursuant to
options granted under the 1997 Master Plan. The aggregate number of shares
reserved for issuance under each of the Amended and Restated Incentive Stock
Option Plan and the ESPP was further capped at 4,000,000.
The Board of Directors has determined 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 the
20
<PAGE> 20
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 Annual Meeting. The Board of Directors also adopted,
subject to shareholder ratification of the LTIP, a resolution terminating the
1997 Incentive Plans, and an amendment to the ESPP to designate the Compensation
Committee as the "committee" under the ESPP and to modify the number of shares
subject to the 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 LTIP. Options issued under the 1997 Incentive plans before July 28,
1998, will remain valid in accordance with their terms and the number 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 the authorized but unissued
shares of Common Stock equal to (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 plan" feature ("ISO
Feature") and the number of shares that may be issued under the 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 LTIP 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 LTIP 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 ("Options"), which may be
incentive stock options or non-qualified options, (ii) stock appreciation rights
("SARs"); (iii) performance 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 shares 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
21
<PAGE> 21
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 to non-employee directors, the Committee has
the power, authority and discretion to designate 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 meeting of the 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 Stock (each, a "Director
Option"). Appropriate pro-rata grants will be made if at any time there are
insufficient shares under the LTIP to make the full scheduled grants of Director
Options. The exercise price for each Director Option will be 100% of the fair
market value of the Stock on the date of grant. Each Director Option will expire
on the tenth anniversary of the date of grant unless earlier terminated as
provided below. A Director Option will not automatically lapse by reason of the
optionee 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,
22
<PAGE> 22
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 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.
23
<PAGE> 23
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 Committee 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
Company 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 LTIP may adversely affect any Award previously
granted under the LTIP, without the written consent of the participant.
CERTAIN FEDERAL INCOME TAX EFFECTS
24
<PAGE> 24
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 participant of the Common Stock
will constitute 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 ISO or the exercise thereof by the participant.
If the participant holds the shares of Common Stock for the greater of two years
after the date the Option was granted or one year after the acquisition of such
shares 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 entitled 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 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.
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, 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 shows
the minimum benefits that will accrue under the LTIP, for each year that it is
in effect through September 2006, to non-employee directors as a group.
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
Name and Position Dollar Value ($) No. of Options (#)
- ----------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE> 25
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
All Non-Employee Directors, as a Group (1) 30,000 (2)
- ----------------------------------------------------------------------------------------------------
</TABLE>
(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 or represented by proxy and entitled to vote
at the Annual Meeting on this proposal will constitute approval of the LTIP.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE
LTIP.
PROPOSAL 3
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.
VOTE 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 Company not later
26
<PAGE> 26
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, 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.
----------------------------------
Kleyton L. Parkhurst, Secretary
27
<PAGE> 27
MLC HOLDINGS, INC. PROXY
ANNUAL MEETINGS OF STOCKHOLDERS OF
MLC HOLDINGS, INC.
ON SEPTEMBER 16, 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 16, 1997 at 10:00 a.m. at
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 TWO CLASS II DIRECTORS TO SERVE FOR THREE YEARS AND UNTIL THEIR
SUCCESSORS HAVE BEEN DULY ELECTED AND SHALL QUALIFY.
<TABLE>
<S><C>
[ ]FOR THE NOMINEES LISTED BELOW [ ]WITHHOLD AUTHORITY
to vote for the nominees listed below
Carl J. Rickertsen and Terrence O'Donnell
</TABLE>
2. TO APPROVE AND ADOPT THE 1998 LONG-TERM INCENTIVE PLAN.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
3. TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE COMPANY'S FISCAL YEAR ENDING MARCH 31, 1999.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
Dated: , 1998
Signature
28
<PAGE> 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
<PAGE> 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:
<PAGE> 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
- 2 -
<PAGE> 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.
- 3 -
<PAGE> 32
"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.
- 4 -
<PAGE> 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
- 5 -
<PAGE> 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.
- 6 -
<PAGE> 35
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
- 7 -
<PAGE> 36
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
- 8 -
<PAGE> 37
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.
- 9 -
<PAGE> 38
(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.
- 10 -
<PAGE> 39
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
- 11 -
<PAGE> 40
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
- 12 -
<PAGE> 41
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.
- 13 -
<PAGE> 42
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
- 14 -
<PAGE> 43
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
- 15 -
<PAGE> 44
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
- 16 -
<PAGE> 45
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
- 17 -
<PAGE> 46
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.
- 18 -
<PAGE> 47
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.
- 19 -
<PAGE> 48
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:
---------------------------
- 20 -
