This excerpt taken from the DTLK DEF 14A filed Mar 29, 2007.
Proxies solicited by the Board of Directors will, unless otherwise directed, be voted FOR the amendment to the 2000 Director Stock Option Plan.
At our 2001 annual meeting, the stockholders approved the Datalink Corporation 2000 Director Stock Option Plan, which was amended in 2001, 2002, 2004 and 2006 (the Director Plan). The purpose of the Director Plan is to reward and compensate non-employee directors for membership on the Board of Directors and participation in board and committee meetings. Our specific compensation structure for non-employee directors under the Director Plan which includes stock grants is discussed under the caption Director Compensation on page 23 of this proxy statement.
The Director Plan covers a maximum of 300,000 shares. As of January 1, 2007, we no longer had sufficient shares available under the Director Plan to make stock grants to our non-employee directors electing to be paid in stock. On February 20, 2007, upon recommendation of the Compensation Committee, the Board of Directors adopted an amendment to the Director Plan to increase the number of shares of common stock that may be issued thereunder from 300,000 shares to 550,000 shares. This is the only amendment to the Director Plan.
Only non-employee Board members may participate in the Director Plan. Currently, we have six non-employee Board members who will participate in the Director Plan.
New Benefits as a Result of the Amendment
The amendment to the Director Plan will not be effective unless the stockholders approve it at the annual meeting. The only benefit as a result of the amendment will be our ability to make stock grants in fiscal 2007 and thereafter to those non-employee directors desiring compensation in stock under the Director Plan. If we are unable to make such awards, our non-employee directors will receive cash in lieu of stock grants. Therefore, until the amendment is approved, we will not be able to make stock awards under the Director Plan, and none have been granted, awarded or received under the amendment.
Benefits under the amendment depend on the number and type of meetings attended through a board service year, services as a chairperson, and whether a non-employee director elects to receive grants of stock in lieu of cash payment for annual retainers and board and committee attendance fees. Thus, it is not possible to determine the total benefits that will be received by our non-employee directors if the amendment is approved by the stockholders. Our specific compensation structure for non-employee directors under the Director Plan is discussed under the caption Director Compensation on page 23 of this proxy statement.
We had sufficient shares under the Director Plan during fiscal 2006 to make stock-based awards to those non-employee directors who desired stock-based awards in lieu of cash. See our Directors Compensation Table on page 23 of this proxy statement.
Further Amending the Director Plan.
Generally, the Director Plan permits the Board of Directors to amend the Director Plan without stockholder approval except for certain amendments relating to exempt transactions under Section 16b-3 of the Securities and Exchange Act of 1934.
Federal Income Tax Consequences of Amendment to Director Plan
Participants receiving awards under the Director Plan of either cash or shares of our common stock must recognize ordinary income equal to (a) the amount of cash received or, as applicable, (b) the excess of (i) the fair market value of the shares received (determined as of the date of receipt) over (ii) the amount (if any) paid for the shares by the holder of the award. We will generally be entitled at that time to an income tax deduction for the same amount.