<PAGE>
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934
Check the appropriate box:
[ ] Preliminary Information Statement [ ] Confidential, for Use of the
[X] Definitive Information Statement Commission Only (as permitted by
Rule 14c-5(d)(2))
EN POINTE TECHNOLOGIES, INC.
------------------------------------------------------
(Name of Registrant As Specified in Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
(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):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
(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:
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<PAGE>
EN POINTE TECHNOLOGIES, INC.
100 NORTH SEPULVEDA BOULEVARD, 19TH FLOOR
EL SEGUNDO, CALIFORNIA 90245
NOTICE OF ACTION BY WRITTEN CONSENT OF STOCKHOLDERS
To the Stockholders of En Pointe Technologies, Inc.:
The Board of Directors of En Pointe Technologies , Inc. (the "Company") has
taken action to amend the Company's 1996 Stock Incentive Plan (the "1996 Stock
Plan"). The 1996 Stock Plan is more fully described in the attached Information
Statement.
A total of five stockholders holding an aggregate of approximately 52% of
the issued and outstanding shares of the Company's Common Stock, $.001 par value
(the "Common Stock"), have also approved in writing the amendment to the 1996
Stock Plan. The adoption and approval by the stockholders of the Company shall
not become effective until September 30, 1998, which date is at least twenty
(20) days after the mailing of the enclosed Information Statement.
Your consent to the amendment to the 1996 Stock Plan is not required and is
not being solicited in connection with this action. This Information Statement
will serve as notice pursuant to Section 228 of the Delaware General Corporation
Law and pursuant to the Securities Exchange Act of 1934 (the "1934 Act") of the
approval by less than the unanimous written consent of the stockholders of the
Company with respect to the addition of 300,000 authorized shares to the 1996
Stock Plan.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY. THE ATTACHED MATERIAL IS BEING SENT TO YOU FOR INFORMATION PURPOSES ONLY.
By Order of the Board of Directors
Naureen Din
Secretary
El Segundo, California
September 10, 1998
2
<PAGE>
EN POINTE TECHNOLOGIES, INC.
100 NORTH SEPULVEDA BOULEVARD, 19TH FLOOR
EL SEGUNDO, CALIFORNIA 90245
INFORMATION STATEMENT RELATING TO THE APPROVAL
OF AN AMENDMENT TO THE 1996 STOCK INCENTIVE PLAN
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO
SEND US A PROXY
THE APPROXIMATE DATE OF MAILING OF THIS INFORMATION STATEMENT
IS SEPTEMBER 10, 1998
This Information Statement is being furnished by En Pointe Technologies,
Inc., a Delaware corporation (the "Company" or "En Pointe"), to the holders of
the Company's Common Stock, $.001 par value (the "Common Stock"), in connection
with the approval and adoption of an amendment to the Company's 1996 Stock
Incentive Plan (the "1996 Stock Plan"). The amendment is to increase the number
of shares subject to the 1996 Stock Plan from 960,000 to 1,260,000 (the
"Amendment").
The Board of Directors of the Company has taken action to approve and adopt
the Amendment to the 1996 Stock Plan, which requires the approval by the
affirmative vote of a majority of the outstanding shares of the Common Stock for
purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code") (which imposes a $1 million compensation deduction limitation) and
Section 422 of the Code (which provides for the grant of "incentive" stock
options by a company). A total of five stockholders holding approximately 52%
of the issued and outstanding shares of the Company's Common Stock consented in
writing to the approval and adoption of the Amendment to the 1996 Stock Plan.
Accordingly, all corporate actions necessary to approve and adopt the
Amendment to the 1996 Stock Plan have already been taken. Pursuant to the
regulations promulgated under the Securities Exchange Act of 1934 (the "1934
Act"), the approval and adoption of the Amendment to the 1996 Stock Plan by the
stockholders of the Company will not become effective until September 30, 1998,
which date is at least twenty (20) days after the Company has mailed this
Information Statement to the stockholders of the Company.
The Company has asked brokers and other custodians as well as fiduciaries
to forward this Information Statement to the beneficial owners of the Common
Stock held of record by such persons and will reimburse such persons for
out-of-pocket expenses incurred in forwarding such materials.
THE AMENDMENT TO THE 1996 STOCK PLAN HAS BEEN APPROVED AND ADOPTED BY
STOCKHOLDERS WHO HOLD SUFFICIENT VOTING SECURITIES TO APPROVE THE ACTION. THIS
INFORMATION STATEMENT IS BEING PROVIDED TO YOU SOLELY FOR YOUR INFORMATION. WE
ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
The executive offices of the Company are located at 100 North Sepulveda
Boulevard, 19th Floor, El Segundo, California 90245. All holders of the Common
Stock of record at the close of business on September 2, 1998 will receive this
Information Statement.
3
<PAGE>
VOTING SECURITIES
The Board of Directors has fixed the close of business on September 2, 1998
as the record date (the "Record Date") for the determination of stockholders
entitled to vote with respect to stockholder authorization of the Amendment to
the 1996 Stock Plan. As of the Record Date, the Company had 5,899,407 shares of
Common Stock outstanding. The consent of the holders of a majority of the
outstanding shares of Common Stock was necessary to approve and adopt the
Amendment to the 1996 Stock Plan.
4
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of September 2, 1998 by (i) each stockholder who is
known by the Company to own beneficially more than five percent of the Company's
outstanding Common Stock, (ii) each director and nominee for director of the
Company, (iii) each of the Company's executive officers named in the Summary
Compensation Table (see "Executive Compensation") and (iv) by all executive
officers and directors of the Company as a group. The information as to each
person or entity has been furnished by such person or group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED (1)
NAME OF BENEFICIAL OWNER(1) NUMBER PERCENTAGE
- --------------------------- ------ ----------
<S> <C> <C>
Attiazaz "Bob" Din(2) . . . . . . . . . . . . 765,286 12.9%
Naureen Din(2). . . . . . . . . . . . . . . . 726,952 12.3
Zubair Ahmed(3) . . . . . . . . . . . . . . . 935,496 15.9
Mark Briggs(4). . . . . . . . . . . . . . . . 9,667 *
Verdell Garroutte(5). . . . . . . . . . . . . 14,500 *
Susan Bailey(6) . . . . . . . . . . . . . . . 187,334 3.1
Stephen Cordial(7). . . . . . . . . . . . . . 25,000 *
Javed Latif(8). . . . . . . . . . . . . . . . 88,034 1.5
Kevin Schatzle(9) . . . . . . . . . . . . . . 87,734 1.5
Ellis Posner(10). . . . . . . . . . . . . . . 26,166 *
Robert Mercer(11) . . . . . . . . . . . . . . 11,000 *
Ali Mohyuddin Din(12) . . . . . . . . . . . . 311,551 5.3
Mediha M. Din(12) . . . . . . . . . . . . . . 311,551 5.3
All executive officers and directors as a
group (11 persons)(13) . . . . . . . . . . . 2,877,169 45.3
</TABLE>
- -----------------------
* Less than 1%.
(1) Applicable percentage of ownership at September 2, 1998, is based upon
5,899,407 shares of Common Stock outstanding. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission and includes voting and investment power with respect to
shares shown as beneficially owned. Shares of Common Stock subject to
options or warrants currently exercisable or exercisable within 60
days of September 2, 1998 are deemed outstanding for computing the
shares and percentage ownership of the person holding such options or
warrants, but are not deemed outstanding for computing the percentage
ownership of any other person or entity. Except as otherwise
indicated, the persons or entities listed below have sole voting and
investment power with respect to all shares shown as beneficially
owned by them.
(2) Bob and Naureen Din are married, and each may therefore be deemed to
have a beneficial interest in each other's shares of Common Stock.
Does not include 311,551 shares of Common Stock owned of record by
Mediha Din, Mr. and Mrs. Din's minor child. The address of Mr. and
Mrs. Din is at the Company's principal executive offices, 100 North
Sepulveda Boulevard, 19th Floor, El Segundo, California 90245. Mr.
and Mrs. Din have each disclaimed beneficial ownership in each other's
shares. Mr. Din's shares include 33,334 shares issuable pursuant to
currently exercisable options.
5
<PAGE>
(3) The address of such stockholder is at the Company's principal
executive offices, 100 North Sepulveda Boulevard, 19th Floor, El
Segundo, California 90245.
(4) Includes 1,667 shares issuable pursuant to currently exercisable
options.
(5) Includes 10,000 shares issuable pursuant to currently exercisable
options.
(6) Includes 183,334 shares issuable pursuant to currently exercisable
options.
(7) Includes 25,000 shares issuable pursuant to currently exercisable
options.
(8) Includes 83,334 shares issuable pursuant to currently exercisable
options.
(9) Includes 83,334 shares issuable pursuant to currently exercisable
options.
(10) Includes 21,666 shares issuable pursuant to currently exercisable
options.
(11) Includes 10,000 shares issuable pursuant to currently exercisable
options.
(12) Ali Mohyuddin Din and Mediha M. Din are the children of Bob and
Naureen Din. The address of such stockholders is at the Company's
principal executive offices, 100 North Sepulveda Boulevard, 19th
Floor, El Segundo, California 90245.
(13) Includes 451,669 shares issuable pursuant to currently exercisable
options.
6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows the cash compensation paid or accrued to the most
highly compensated executive officers of the Company (the "Named Executive
Officers"), whose total annual salary and bonus exceeded $100,000 for the fiscal
years ended September 30, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION(1) ----------------------
FISCAL ---------------------- SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (#)
- --------------------------- ---- ------ ----- -----------
<S> <C> <C> <C> <C>
Attiazaz "Bob" Din. . . . . . . . . . . . . . . . . . 1997 $437,500 $202,864(2) 50,000
Chairman of the Board and 1996 381,280 --
Chief Executive Officer 1995 231,000 22,250
Susan Bailey(3) . . . . . . . . . . . . . . . . . . . 1997 $20,833 -- 275,000
President
Javed Latif . . . . . . . . . . . . . . . . . . . . . 1997 $151,000 $ 81,001(4) 50,000
Executive Vice President 1996 125,833 126,300 50,000
1995 168,500 22,160 --
Kevin Schatzle. . . . . . . . . . . . . . . . . . . . 1997 $150,000 $689,860(5) 50,000
Senior Vice President 1996 142,500 190,330 50,000
1995 178,000 -- --
Ellis Posner. . . . . . . . . . . . . . . . . . . . . 1997 $123,000 $106,094(6) 10,000
Senior Vice President of Sales 1996 120,000 62,515 15,000
1995 122,000 8,339 --
</TABLE>
- -----------------
(1) Does not include the value of prerequisites and other personal benefits
granted to the Named Executive Officers which in the aggregate did not
exceed the lesser of $50,000 or 10% of such officer's salary and bonus.
(2) Consists of a pro-rated bonus payment (accrued from April 1, 1997) payable
pursuant to an April 1997 amendment to Mr. Din's employment agreement. See
" Employment Agreements."
(3) Ms. Bailey was hired as the President of the Company in September 1997.
See " Employment Agreements" for a description of the terms of the
employment agreement between the Company and Ms. Bailey.
(4) Consists of a pro-rated bonus payment (accrued from July 1, 1997) payable
pursuant to the establishment of a bonus plan for Mr. Latif in May 1997.
(5) Includes $627,860 of sales commission payments.
(6) Consists of a bonus payment payable pursuant to Mr. Posner's employment
agreement in effect for fiscal 1997.
7
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth stock options granted to the Named Executive
Officers during fiscal 1997:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------
PERCENT OF
TOTAL POTENTIAL REALIZABLE VALUE AT
NUMBER OPTIONS ASSUMED ANNUAL RATES OF
OF SECURITIES GRANTED TO STOCK PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES OPTION TERM
OPTIONS IN LAST EXERCISE EXPIRATION -----------------------------
NAME GRANTED FISCAL YEAR PRICE DATE 5% 10%
---- ------- ----------- ----- ---- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Attiazaz "Bob" Din. . . . . . . . 50,000 9.3 $ 10.45 5/02 $ 144,357 $ 318,991
Susan Bailey. . . . . . . . . . .275,000 51.2 14.38 9/07 2,486,099 6,302,454
Javed Latif . . . . . . . . . . . 50,000 9.3 9.50 5/07 298,725 757,028
Kevin Schatzle. . . . . . . . . . 50,000 9.3 9.50 5/07 298,725 757,028
Ellis Posner. . . . . . . . . . . 10,000 1.9 9.50 5/07 59,745 151,406
</TABLE>
FISCAL 1997 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY
FISCAL YEAR END OPTIONS AT FISCAL YEAR END(1)
----------------------------------- --------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Attiazaz "Bob" Din. . . . . . . . . 16,667 33,333 $191,621 $ 383,330
Susan Bailey. . . . . . . . . . . . -- 275,000 -- $3,954,000
Javed Latif . . . . . . . . . . . . 50,000 50,000 $678,347 $626,653
Kevin Schatzle. . . . . . . . . . . 50,000 50,000 $678,347 $626,653
Ellis Posner. . . . . . . . . . . . 13,333 11,667 $178,995 $147,005
</TABLE>
(1) Based on a per share price of $19.86, the closing price of the Common Stock
as reported on the Nasdaq National Market on September 30, 1997.
STOCK OPTION AND PURCHASE PLANS
1996 STOCK PLAN
The En Pointe Technologies, Inc. 1996 Stock Incentive Plan (the "1996 Stock
Plan") was adopted by the Company's Board of Directors and stockholders in March
1996 and provides for the granting of "incentive stock options," within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), nonstatutory options and rights to purchase Common Stock. Incentive
stock options may be granted only to employees of the Company and its
subsidiaries. Nonstatutory options and rights to purchase Common Stock may be
granted to employees and consultants to the Company and its subsidiaries. A
participant may not receive a grant of an option for or the right to purchase
more than 275,000 shares of Common Stock in any calendar year period. As
amended, the 1996 Stock Plan authorizes up to 1,260,000 shares of the Company's
Common Stock for issuance. If options or rights to purchase are forfeited or
any shares of Common Stock are required by the Company pursuant to an option or
right to purchase agreement, those shares are again available for grant under
the 1996 Stock Plan. The 1996 Stock Plan is administered by the Compensation
Committee of the Board of Directors (the "Compensation Committee"), which has
sole discretion and authority, consistent with the provisions of the 1996 Stock
Plan, to determine which eligible participants will receive options and/or
purchase rights, the time when options and/or purchase rights will be granted,
the terms of options and/or purchase granted and the number of shares which will
be subject to options and/or purchase rights granted under the 1996 Stock Plan.
However, there is a formula grant to non-employee directors. As of September 2,
1998 there were 1,013,621 options
8
<PAGE>
outstanding under the 1996 Stock Plan. Of the outstanding options, 489,079 were
exercisable as of September 2, 1998.
The exercise price of incentive stock options is determined by the
Compensation Committee, but which must be not less than the fair market value of
a share of Common Stock on the date the option is granted (110% with respect to
optionees who own at least 10% of the outstanding Common Stock). Nonstatutory
options shall have such exercise price as determined by the Compensation
Committee, but which shall not be less than 80% of the fair market value per
share of Common Stock on the date the option is granted. The Compensation
Committee has the authority to determine the time or times at which options
granted under the 1996 Stock Plan become exercisable, provided that options
expire no later than ten years from the date of grant (five years with respect
to holders of incentive stock options who own at least 10% of the outstanding
Common Stock). Options and purchase rights are nontransferable, other than upon
death by will or the laws of descent and distribution.
A right to purchase Common Stock gives the offeree the right to purchase a
number of shares of Common Stock for a period and at a price (which may be less
than fair market value) all as determined by the Compensation Committee, and
subject to such other terms, conditions and restrictions as are established by
the Compensation Committee and set forth in the applicable stock purchase
agreement. As of September 2, 1998, no rights to purchase Common Stock had been
granted under the 1996 Stock Plan.
In the event of a "change in control" of the Company, all outstanding
options and rights to purchase Common Stock will become fully vested and
immediately exercisable. A change in control means generally (i) the
acquisition by a person or group of more than 50% of the outstanding securities
of the Company, (ii) a merger or consolidation in which the Company is not the
survivor, (iii) the sale or disposition of substantially all of the assets of
the Company, (iv) a liquidation or dissolution of the Company, or (v) or reverse
merger in which more than 50% of the combined voting power of the Company's
outstanding securities are transferred.
The Board of Directors may, in its discretion, amend or terminate the 1996
Stock Plan. However, no amendment or termination may adversely affect a
participant's rights as to prior grants. The Plan shall terminate in any event
on March 1, 2006.
EMPLOYEE STOCK PURCHASE PLAN
The En Pointe Technologies, Inc. Employee Stock Purchase Plan (the
"Purchase Plan") was adopted by the Board of Directors and stockholders in March
1996, covering an aggregate of 250,000 shares of Common Stock. The Purchase
Plan, which is intended to qualify as an "employee stock purchase plan" under
Section 423 of the Code, will be implemented by six-month offerings with
purchases occurring at six-month intervals. The Purchase Plan is administered
by the Compensation Committee. Employees are eligible to participate if they
are employed by the Company for at least 20 hours per week, are customarily
engaged for more than five months per calendar year and if they have been
employed by the Company or a designated subsidiary for at least 90 days. The
Purchase Plan permits eligible employees to purchase Common Stock through
payroll deductions, which may not exceed 20% of an employee's annual
compensation. The maximum number of shares of Common Stock that an employee may
purchase during any offering period is 2,500 and during any calendar year is
$25,000 (determined using the fair market value at the grant date). The price
of Common Stock purchased under the Purchase Plan will be 85% of the lower of
the fair market value of the Common Stock at the beginning of the six-month
offering period or the applicable purchase date. Employees may end their
participation in the offering at any time during the offering period, and
participation ends automatically upon termination of employment. The Board of
Directors may at any time amend or terminate the Purchase Plan, except that no
such amendment or termination may adversely affect shares previously purchased
under the Purchase Plan, and amendments which (i) increase the number of shares
that may be issued under the Plan, (ii) materially modify eligibility
requirements or (iii) materially increase the benefits accruing to participants,
must have stockholder approval. The Purchase Plan will terminate on October 31,
2006.
9
<PAGE>
EMPLOYMENT AGREEMENTS
Mr. Din's employment agreement with the Company was originally entered into
as of March 1, 1996, and was amended in April 1997. This agreement provides for
an annual base salary of $500,000, plus, beginning in April 1997, a bonus equal
to 3.5% of the Company's pre-tax net income (if $4.5 million or greater) and
terminates on the later of (i) the fifth anniversary of the date the agreement
was entered into, or (ii) five years following the date on which either Mr. Din
or the Company gives a notice of non-renewal or termination. Upon termination
of Mr. Din's employment agreement by the Company for reason other than "cause",
as defined in the employment agreement, or by Mr. Din for "good reason", as
defined in the employment agreement, Mr. Din will be entitled to receive, as
severance pay, guaranteed monthly salary payments in the amount of Mr. Din's
current salary for a period of five years, plus the payment of certain
additional benefits, such as health insurance for the same term. However, Mr.
Din's agreement prohibits him from competing with the Company for five years
following the date of his termination. Pursuant to his employment agreement,
Mr. Din is obligated, subsequent to his termination, to offer first to the
Company any block of 50,000 shares or more of the Company's Common Stock offered
by him or his wife for sale, if offered for sale other than pursuant to an
over-the-counter or exchange transaction. Mr. Din's agreement also contains
confidentiality, intellectual property rights and dispute resolution provisions.
In fiscal 1996, the Company entered into employment agreements with each of
Javed Latif and Kevin Schatzle. Each of these agreements has a five-year term
ending in 2001, with an automatic three-year extension. Mr. Latif's and Mr.
Schatzle's agreements provide for annual base salaries of $151,000 and $150,000,
respectively. Mr. Schatzle receives an additional 10% of the applicable GMD as
commission on all business generated from the IBM account and the Northrop
Grumman account. Beginning in April 1997, Mr. Latif became entitled to a
quarterly bonus equal to 2.5% of the Company's pre-tax net income in that
quarter beginning on July 1, 1997. In addition, each of Mr. Latif and Mr.
Schatzle is entitled to receive a minimum of four weeks annual vacation, an
automobile allowance of at least $1,500 per month as well as medical and
disability insurance. The Board of Directors may also, at its discretion, award
each of Mr. Latif and Mr. Schatzle a bonus, with such bonus to be paid
consistent with executive bonus programs of the Company, if any, in existence
during any of Mr. Latif's or Mr. Schatzle's period of employment with the
Company. These agreements also provide for severance payments consisting of
twelve months' salary in the event that the Company terminates either of Mr.
Latif's or Mr. Schatzle's employment without "cause" (as defined in each of Mr.
Latif's or Mr. Schatzle's employment agreement) or if either of Mr. Latif or Mr.
Schatzle terminates his employment with the Company for "good reason" (as
defined in each of Mr. Latif's and Mr. Schatzle's employment agreement). These
agreements may be terminated by the Company with or without "cause." These
agreements contain additional provisions regarding benefits and dispute
resolution.
In September 1997, the Company entered into an employment agreement with
Susan Bailey, the Company's President. Ms. Bailey's agreement provides for an
annual base salary of $250,000. In addition, Ms. Bailey is entitled to a bonus
of $31,250 per fiscal quarter in which the Company meets or exceeds certain
financial targets. In addition, Ms. Bailey is entitled to four weeks paid
vacation per year, an accountable expense allowance, an automobile allowance not
to exceed $1,500 per month, and certain other employee benefits, such as medical
and disability insurance. Ms. Bailey is entitled to a guaranteed quarterly
bonus of $25,000 per quarter for the first and second fiscal quarters of her
employment with the Company. Ms. Bailey was also granted a stock option to
purchase 275,000 shares of Common Stock at an exercise price of $14.38, which
was the fair market value of the Common Stock on September 2, 1997, the date the
option was granted. Ms. Bailey's option becomes exercisable with respect to
one-third (1/3) of the shares subject to such option on December 2, 1997,
one-third (1/3) of the shares on June 2, 1998 and one-third (1/3) of the shares
on December 2, 1999. Ms. Bailey's employment agreement is scheduled to
terminate on September 2, 2000. The agreement may be terminated by the Company
with or without "cause" by written notice of the Company. In the event the
Company terminates her employment without "cause" or if Ms. Bailey terminates
her agreement for "good reason," the Company shall pay a cash severance payment
equal to eighteen (18) months' total base salary. Under the terms of the
agreement, Ms. Bailey is prohibited from competing with the Company for a period
of eighteen (18) months following the date of her termination. The agreement
contains additional provisions regarding benefits and dispute resolution.
10
<PAGE>
Effective October 1, 1997, the Company entered into an employment agreement
with Ellis Posner, pursuant to which Mr. Posner is entitled to receive an annual
salary of $149,000 plus a monthly draw of $7,583 against any bonus payable to
Mr. Posner, an accountable expense allowance, an automobile allowance of $1,000
per month, up to three weeks of paid vacation per year and certain other
employee benefits such as medical and disability insurance. Mr. Posner is
entitled to a quarterly bonus based upon the number of new sales offices opened
each quarter, a guaranteed quarterly bonus of $25,000 and a quarterly bonus
based upon the Company meeting certain revenue targets. Mr. Posner's employment
agreement is scheduled to terminate on October 1, 2000. The agreement may be
terminated by the Company with or without "cause" by written notice of the
Company. In the event the Company terminates his employment without "cause" or
if Mr. Posner terminates his agreement for "good reason," the Company shall pay
a cash severance payment equal to twelve (12) months' total base salary. Under
the terms of the agreement, Mr. Posner is prohibited from competing with the
Company for a period of twelve (12) months following the date of his
termination. The agreement contains additional provisions regarding benefits
and dispute resolution.
OTHER COMPENSATION ARRANGEMENTS
401(K) PLAN
Effective as of July 1993, the Company adopted the En Pointe Technologies,
Inc. Employee Savings Plan (the "401(k) Plan"), which is a retirement profit
sharing plan that covers all U.S. employees of the Company who are 21 years old
or older and have completed six months of service. The 401(k) Plan provides
that employees may elect to defer, in the form of contributions to the 401(k)
Plan, up to 20% of the total compensation that would otherwise be paid to the
employee. However, the administrator of the 401(k) Plan has adopted a policy of
limiting the contributions of employees whose annual total compensation is equal
to or less than $66,000 up to 15% of total compensation, and limiting the
contributions of employees whose annual total compensation is greater than
$66,000 to up to 8% of total compensation that would otherwise be paid to the
employee, in either case not to exceed $9,500 in 1997 (subject to adjustment
annually as provided in the Code). The Company may make discretionary matching
contributions to the 401(k) Plan, but the Company has not made any contributions
to the 401(k) Plan to date. Contributions are held under a group annuity
contract and are invested in selected eligible investments. Employee
contributions are fully vested and nonforfeitable at all times.
DIRECTORS' COMPENSATION
The Company's directors do not receive cash compensation for attendance at
Board of Directors or committee meetings, but may be reimbursed for certain
expenses in connection with attendance at Board of Directors and committee
meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation Committee during the fiscal year
ended September 30, 1997 consisted of Mansoor Ijaz and Verdell Garroutte,
neither of whom has served as an executive officer of the Company or any of
its subsidiaries.
11
<PAGE>
AMENDMENT TO THE 1996 STOCK OPTION PLAN TO INCREASE THE TOTAL
NUMBER OF SHARES ISSUABLE UNDER THAT PLAN FROM 960,000 TO 1,260,000 SHARES
INTRODUCTION
On July 21, 1998, the Board of Directors approved the Amendment to the 1996
Stock Plan, which amended the 1996 Stock Plan to increase the authorized number
of shares of Common Stock issuable thereunder by 300,000 shares and to reserve
the additional shares for issuance under the 1996 Stock Plan, bringing the total
number of shares of Common Stock subject to the 1996 Stock Plan to 1,260,000.
On August 11, 1998, the holders of a majority of the outstanding shares of
Common Stock approved the Amendment to the 1996 Stock Plan by means of written
consent. Thus, the other stockholders are not required to vote on the approval
of the Amendment to the 1996 Stock Plan.
The following description of the 1996 Stock Plan is being provided for
informational purposes only. Copies of the 1996 Stock Plan can be obtained by
writing the Secretary, En Pointe Technologies, Inc., 100 N. Sepulveda Boulevard,
19th Floor, El Segundo, California 90245.
DESCRIPTION OF THE 1996 STOCK PLAN
The 1996 Stock Plan, as amended, currently authorizes up to 1,260,000
shares of Common Stock for issuance under the terms of the 1996 Stock Plan,
subject to adjustment in the number and kind of shares subject to the 1996 Stock
Plan and to outstanding shares in the event of stock splits, stock dividends or
certain other similar changes in the capital structure of the Company. The 1996
Stock Plan provides for grants of "incentive stock options" as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
nonqualified stock options and rights to purchase shares of Common Stock
("Purchase Rights"). Incentive stock options, nonqualified stock options and
Purchase Rights may be granted to employees of the Company and its subsidiaries
and affiliates. Nonqualified stock options and Purchase Rights may be granted
to employees of the Company and its subsidiaries and affiliates, non-employee
directors and officers, consultants and other service providers. As of
September 10, 1998, approximately 585 persons were eligible to participate in
the 1996 Stock Plan.
The Compensation Committee of the Board of Directors administers the 1996
Stock Plan (the "Administrator"). The Administrator has the full power and
authority to interpret the 1996 Stock Plan, select the recipients of options and
Purchase Rights, determine and authorize the type, terms and conditions of,
including vesting provisions, and the number of shares subject to, grants under
the 1996 Stock Plan, and adopt, amend and rescind rules relating to the 1996
Stock Plan. The term of options may not exceed 10 years from the date of grant
(5 years in the case of an incentive stock option granted to a person who owns
more than 10% of the combined voting power of all classes of stock of the
Company). The option exercise price for each share granted pursuant to a
nonqualified stock option may not be less than 80% of the fair market value of a
share of Common Stock at the time such option is granted. The option exercise
price for each share granted pursuant to an incentive stock option may not be
less than 100% of the fair market value of a share of Common Stock at the time
such option is granted (110% of fair market value in the case of an incentive
stock option granted to a person who owns more than 10% of the combined voting
power of all classes of stock of the Company). There is no minimum purchase
price for shares of Common Stock purchased pursuant to a Purchase Right, and any
such purchase price shall be determined by the Administrator. The maximum
number of shares for which options or Purchase Rights may be granted to any one
person during any one calendar year under the 1996 Stock Plan is 275,000. The
aggregate fair market value of the Common Stock (determined as of the date of
grant) with respect to which incentive stock options granted under the 1996
Stock Plan or any other stock option plan of the Company become exercisable for
the first time by any optionee during any calendar year may not exceed $100,000.
The option price of an incentive stock option or nonqualified stock option
is payable in full upon exercise, and the purchase price of stock purchased
pursuant to a Purchase Right must be paid in full upon the acceptance of the
Purchase Right. Payment of the option price upon exercise of a stock option or
for shares purchased pursuant to a Purchase Right may be made in cash, by check,
by the delivery of shares of Common Stock (valued at their fair
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market value as of the date of the exercise of an option or Purchase Right), by
the optionee's or purchaser's promissory note in a form and on terms acceptable
to the Administrator, by the cancellation of indebtedness of the Company to the
optionee or purchaser, by the waiver of compensation due or accrued to the
optionee or purchaser for services rendered, or by any combination of the
foregoing methods of payment. In addition, the option price for options granted
under the 1996 Stock Plan may be made by a "same day sale" commitment from the
optionee and a broker-dealer that is a member of the National Association of
Securities Dealers, Inc. ("NASD Dealer") whereby the optionee irrevocably elects
to exercise his or her option and to sell a portion of the shares so purchased
to pay for the exercise price and whereby the NASD Dealer irrevocably commits
upon receipt of such shares to forward the Exercise Price directly to the
Company, by a "margin" commitment from the optionee and an NASD Dealer whereby
the optionee irrevocably elects to exercise his or her option and to pledge the
shares so purchased to the NASD Dealer in a margin account as security for a
loan from the NASD Dealer in the amount of the exercise price, and whereby the
NASD Dealer irrevocably commits upon receipt of such shares to forward the
exercise price directly to the Company, or any combination of the foregoing
methods of payment.
Neither options nor Purchase Rights granted under the 1996 Stock Plan may
be transferred other than by will or by the laws of descent and distribution.
Shares purchased pursuant to Purchase Rights generally shall be restricted for a
period of time, during which such shares may be repurchased by the Company, and
therefore these shares may not be sold, assigned, pledged or transferred until
such time as the Company no longer has the right to reacquire any such shares.
The 1996 Stock Plan provides that each non-employee director of the Company
shall automatically be granted a non-qualified option to purchase 5,000 shares
of Common Stock upon his or her election and reelection to the Board of
Directors so long as such reelection occurs at least twelve months after his or
her initial election to the Board of Directors of the Company. The option price
of such options shall be at 80% of the fair market value of the Common Stock on
the date such director is elected or reelected, as the case may be, and shall
become exercisable with respect to one-third (1/3) of the shares subject to such
option three months after such election or reelection and the remaining
one-third (1/3) of such shares twenty-seven (27) months after such election or
reelection. The term of such options shall be ten years. The Board of
Directors may alter, amend, suspend or terminate the 1996 Stock Plan at any
time. However, any changes which affect or impair the rights of any person who
holds an outstanding stock option or Purchase Right may not be effected without
such person's consent. Unless sooner terminated by the Board of Directors, the
1996 Stock Plan will terminate on March 1, 2006.
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The following table contains information concerning certain stock options
granted under the Company's 1996 Stock Plan during the fiscal year ended
September 30, 1997:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE PRICE
NAME AND POSITION ($/SHARE) NUMBER OF SHARES
----------------- -------------- ----------------
<S> <C> <C>
Attiazaz "Bob" Din. . . . . . . . . . . . . . $10.45 50,000
Susan Bailey. . . . . . . . . . . . . . . . . $14.38 275,000
Javed Latif . . . . . . . . . . . . . . . . . $9.50 50,000
Kevin Schatzle. . . . . . . . . . . . . . . . $9.50 50,000
Ellis Posner. . . . . . . . . . . . . . . . . $9.50 10,000
All Current Executive Officers as a Group
(6 persons). . . . . . . . . . . . . . . . . $12.69 435,000
Non-Executive Director Group (4 persons). . . $10.88 10,000
Non-Executive Officer Employee Group
(428 persons). . . . . . . . . . . . . . . . $9.50 71,600
</TABLE>
- ----------------
* As of September 3, 1998, the market value of the Company's Common Stock as
reported by the Nasdaq Stock Market was $6.25 per share.
FEDERAL INCOME TAX CONSEQUENCES
The federal income tax discussion set forth below is intended for general
information only. State and local income tax consequences are not discussed,
and may vary from locality to locality.
INCENTIVE STOCK OPTIONS. There is no taxable income to an employee when an
incentive stock option is granted or when that option is exercised; however,
generally the amount by which the fair market value of the shares at the time of
exercise exceeds the option price will be included in the optionee's alternative
minimum taxable income upon exercise. If stock received on exercise of an
incentive stock option is disposed of in the same year the option was exercised,
and the amount realized is less than the stock's fair market value at the time
of exercise, the amount includable in the alternative minimum taxable income
will be the amount realized upon the sale or exchange of the stock, less the
taxpayer's basis in the stock. Gain realized by an optionee upon the sale of
stock issued upon exercise of an incentive stock option is taxable as long-term
capital gain, and no tax deduction is available to the Company, unless the
optionee disposes of the stock within two years after the date of grant of the
option or within one year after the date of exercise. In such event the
difference between the option exercise price and the and fair market value of
the shares on the date of the optionee's exercise will be taxed at ordinary
income rates, and, subject to Section 162(m) of the Code (which limits the
deductibility of compensation in excess of $1,000,000 for certain executive
officers), the Company will be entitled to a deduction to the extent the
employee must recognize ordinary income.
NONQUALIFIED STOCK OPTIONS. The recipient of a nonqualified stock option
will not realize taxable income upon the grant of the option, nor will the
Company will be entitled to take any deduction. Upon the exercise of a
nonqualified stock option, the optionee will realize ordinary income and,
subject to Section 162(m) of the Code, the Company will be entitled to a
deduction in an amount equal to the difference between the option exercise price
and the fair market value of the stock on the date of exercise. The Company may
be required to withhold taxes on the ordinary income realized by an optionee
upon exercise of nonqualified stock options in order to be entitled to the tax
deduction. An optionee's basis for the stock for purposes of determining gain
or loss on any subsequent disposition of the shares generally will be the fair
market value of the stock on the date of exercise of the nonqualified stock
option.
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PURCHASE RIGHTS. The receipt of restricted stock pursuant to a Purchase
Right will not cause a recipient to realize taxable income until the expiration
of any repurchase rights retained by the Company with respect to such stock,
unless the recipient makes an election under Section 83(b) of the Code to be
taxed as of the date of purchase. If no repurchase rights are retained or if a
Section 83(b) election is made, the participant will recognize ordinary income
in an amount equal to the difference between the purchase price paid for the
shares and the fair market value of such shares on the date of purchase. If no
Section 83(b) election is made or if repurchase rights are retained, the
recipient will realize taxable income on each date that the recipient's
ownership rights vest (i.e., when the Company no longer has the right to
repurchase all or a portion of the shares). The recipient will recognize
ordinary income, and, subject to Section 162(m) of the Code, the Company will be
entitled to a deduction on each date shares vest in an amount equal to the
excess of the fair market value of such shares on that date over the purchase
price paid for such shares. However, if the recipient is subject to
Section 16(b) of the Exchange Act, and if no Section 83(b) election was made at
the time of purchase, the date that ordinary income is recognized for shares
which vest within six months of purchase date shall be deferred to six months
from the date of purchase.
DISSENTER'S RIGHTS
Under Delaware law, stockholders are not entitled to dissenter's rights of
appraisal with respect to the Company's increase of shares reserved for issuance
pursuant to the 1996 Stock Plan.
By Order of the Board of Directors
Naureen Din
Secretary
El Segundo, California
September 10, 1998
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