<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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
----------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<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 Employee Stock Purchase Plan (the
"Purchase Plan"). The Purchase Plan is more fully described in the attached
Information Statement.
A total of five stockholders holding an aggregate of approximately 51%
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
Purchase Plan. The adoption and approval by the stockholders of the Company
shall not become effective until October 18, 1999, which date is at least
twenty (20) days after the mailing of the enclosed Information Statement.
Your consent to the amendment to the Purchase 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 250,000 authorized
shares to the Purchase 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 24, 1999
<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 EMPLOYEE STOCK PURCHASE 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 24, 1999
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 Employee Stock Purchase Plan (the "Purchase Plan"). The amendment
is to increase the number of shares subject to the Purchase Plan from 250,000
to 500,000 (the "Amendment").
The Board of Directors of the Company has taken action to approve and
adopt the Amendment to the Purchase 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 423 of the Code (which provides for the grant of
stock options by a company pursuant to an "employee stock purchase plan"). A
total of five stockholders holding approximately 51% 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 Purchase Plan.
Accordingly, all corporate actions necessary to approve and adopt the
Amendment to the Purchase 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 Purchase Plan by the
stockholders of the Company will not become effective until October 18, 1999,
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 PURCHASE 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 17, 1999 will
receive this Information Statement.
1
<PAGE>
VOTING SECURITIES
A total of five stockholders holding approximately 51% of the issued
and outstanding shares of Common Stock approved the amendment to the Purchase
Plan by means of written consent on August 15, 1999. As of August 15, 1999,
the Company had 5,934,635 shares of Common Stock outstanding. The Board of
Directors has fixed the close of business on September 17, 1999 as the record
date for the determination of stockholders entitled to receive this
Information Statement.
2
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the
beneficial ownership of Common Stock as of August 31, 1999 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)................ 781,952 13.0%
Naureen Din(3)....................... 603,652 10.1
Zubair Ahmed(4)...................... 885,496 14.9
Mark Briggs(5)....................... 13,001 *
Verdell Garroutte(6)................. 19,501 *
Susan Bailey......................... 0 ---
Javed Latif(7)....................... 108,750 1.8
Kevin Schatzle(8).................... 107,144 1.8
Ellis Posner(9)...................... 42,860 *
Ali Mohyuddin Din(10)................ 311,551 5.2
Mediha M. Din(10).................... 311,551 5.2
All executive officers and directors
as a group (11 persons)(11)........ 2,590,808 41.1
</TABLE>
- --------------------------
* Less than 1%.
(1) Applicable percentage of ownership at August 31, 1999, is
based upon 5,949,135 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 August 31, 1999 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 above have sole voting and investment power with respect
to all shares shown as beneficially owned by them.
(2) Includes 50,000 shares issuable upon exercise of options within
60 days of August 31, 1999. Does not include 603,652 shares of
Common Stock owned by Naureen Din. 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. However, Mr.
and Mrs. Din have each disclaimed beneficial ownership in each
other's shares. Does not include 311,551 shares of Common
Stock owned of record by Mediha Din, Mr. and Mrs. Din's minor
child, or 311,551 shares of Common Stock owned of record by Ali
Din, Mr. and Mrs. Din's adult son. The address of Mr. Din is
at the Company's principal executive offices, 100 North
Sepulveda Boulevard, 19th Floor, El Segundo, California 90245.
3
<PAGE>
(3) Does not include 781,952 shares of Common Stock owned by Bob
Din. 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. However, Mr. and Mrs. Din have each
disclaimed beneficial ownership in each other's shares. Does
not include 311,551 shares of Common Stock owned of record by
Mediha Din, Mr. and Mrs. Din's minor child, or 311,551 shares
of Common Stock owned of record by Ali Din, Mr. and Mrs. Din's
adult son. The address of Mrs. Din is at the Company's
principal executive offices, 100 North Sepulveda Boulevard,
19th Floor, El Segundo, California 90245.
(4) The address of such stockholder is at the Company's principal
executive offices, 100 North Sepulveda Boulevard, 19th Floor,
El Segundo, California 90245.
(5) Includes 5,001 shares issuable upon exercise of options
within 60 days of August 31, 1999.
(6) Includes 15,001 shares issuable upon exercise of options
within 60 days of August 31, 1999.
(7) Includes 108,750 shares issuable upon exercise of options
within 60 days of August 31, 1999.
(8) Includes 107,144 shares issuable upon exercise of options
within 60 days of August 31, 1999.
(9) Includes 42,860 shares issuable upon exercise of options
within 60 days of August 31, 1999.
(10) 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.
(11) Includes 357,208 shares issuable upon exercise of options
within 60 days of August 31, 1999.
4
<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, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------
ANNUAL COMPENSATION (1) SECURITIES UNDERLYING
-----------------------
FISCAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER OPTIONS (#)
- --------------------------- ------ ------ ------- ------- -----------
<S> <C> <C> <C> <C> <C>
Attiazaz "Bob" Din (2).............. 1998 $500,000 ----- ----- -----
Chairman of the Board and 1997 437,500 $202,864(3) ----- 50,000
Chief Executive Officer 1996 381,280 -----
Susan Bailey (4).................... 1998 $250,000 $62,500 ----- -----
President 1997 20,833 ----- ----- 275,000
Javed Latif (5)..................... 1998 $168,422 $73,019(6) ----- 25,000
Chief Financial Officer and 1997 151,000 81,001(6) ----- 50,000
Executive Vice President 1996 125,833 126,300 ----- 50,000
Kevin Schatzle...................... 1998 $150,000 $395,418(7) ----- 20,000
Senior Vice President 1997 150,000 689,860(8) ----- 50,000
1996 142,500 190,330 ----- 50,000
Ellis Posner........................ 1998 $158,026 $120,500(9) $41,500(10) 50,000
Senior Vice President of Sales 1997 123,000 106,094(9) ----- 10,000
1996 120,000 62,515 ----- 15,000
</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) Mr. Din was appointed Chief Executive Officer in January 1996 and became
President of the Company on January 8, 1999.
(3) Consists of a bonus payment payable pursuant to an April 1997 amendment
to Mr. Din's employment agreement. See "--Employment Agreements."
(4) Ms. Bailey resigned as the President of the Company on January 8, 1999.
(5) Mr. Latif became Chief Financial Officer of the Company on January 1, 1999.
(6) Consists of a bonus payment payable pursuant to the establishment of a
bonus plan for Mr. Latif in May 1997.
(7) Includes $374,583 of sales commission payments.
(8) Includes $627,860 of sales commission payments.
(9) Consists of a bonus payment payable pursuant to Mr. Posner's employment
agreement. See "--Employment Agreements."
(10) Other compensation consists of unaccountable allowances for auto
($9,000) and expenses ($32,500).
5
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth stock options granted to the Named
Executive Officers during fiscal 1998:
<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...... ----- ----- $ ----- ----- $ ----- $ -----
Susan Bailey............ ----- ----- ----- ----- ----- -----
Javed Latif............. 25,000 6.0 7.81 8/08 122,831 311,278
Kevin Schatzle.......... 20,000 4.8 7.81 8/08 98,265 249,022
Ellis Posner............ 50,000 12.0 7.81 8/08 245,662 622,556
</TABLE>
FISCAL 1998 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..................... 33,334 16,666 $ ----- $ -----
Susan Bailey........................... 183,333 91,667 ----- $ -----
Javed Latif............................ 83,334 41,666 $ 23,750 $ -----
Kevin Schatzle......................... 83,334 36,666 $ 23,750 $ -----
Ellis Posner........................... 21,666 53,333 $ 4,750 $ -----
</TABLE>
- ------------------------------
(1) Based on a per share price of $6.875, the closing price of the Common
Stock as reported on the Nasdaq National Market on September 30, 1998.
STOCK OPTION AND PURCHASE PLANS
1996 STOCK INCENTIVE PLAN
The En Pointe Technologies, Inc. 1996 Stock Incentive Plan (the
"Incentive 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 Incentive 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 Incentive Plan. The Incentive
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 Incentive 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
6
<PAGE>
subject to options and/or purchase rights granted under the Incentive Plan.
However, there is a formula grant to non-employee directors. As of August
31, 1999 there were 1,077,056 options outstanding under the Incentive Plan.
Of the outstanding options, 537,197 were exercisable as of August 31, 1999.
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 Incentive 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 August 31, 1999, no rights
to purchase Common Stock had been granted under the Incentive 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
Incentive Plan. However, no amendment or termination may adversely affect a
participant's rights as to prior grants. The Incentive 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 and, as amended, covers an aggregate of 500,000 shares of Common
Stock. The Purchase Plan, which is intended to qualify as an "employee stock
purchase plan" under Section 423 of the Code, is 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 is
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.
7
<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 resigned as President on January 8, 1999. As part of her
separation agreement, she was paid a severance of $375,000. Under the terms
of her 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.
8
<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 1998 (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, 1998 consisted of Mark Briggs and Verdell Garroutte,
neither of whom has served as an executive officer or employee of the Company
or any of its subsidiaries through September 30, 1998.
9
<PAGE>
AMENDMENT TO THE STOCK PURCHASE PLAN TO INCREASE THE TOTAL
NUMBER OF SHARES PURCHASABLE UNDER THAT PLAN FROM 250,000 TO 500,000 SHARES
INTRODUCTION
On May 6, 1999, the Board of Directors approved the Amendment to the
Purchase Plan, which amended the Purchase Plan to increase the authorized
number of shares of Common Stock purchasable thereunder by 250,000 shares and
to reserve the additional shares for purchase under the Purchase Plan,
bringing the total number of shares of Common Stock subject to the Purchase
Plan to 500,000. On August 15, 1999, the holders of a majority of the
outstanding shares of Common Stock approved the Amendment to the Purchase
Plan by means of written consent. Thus, the other stockholders are not
required to vote on the approval of the Amendment to the Purchase Plan.
The following description of the Purchase Plan is being provided for
informational purposes only. Copies of the Purchase 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 PURCHASE PLAN
The Purchase Plan, as amended, currently authorizes up to 500,000
shares of Common Stock for purchase under its terms. The Purchase Plan
allows eligible employees of the Company to subscribe for and purchase shares
of the Company's Common Stock directly from the Company at a discount from
the market price in installments through payroll deductions. The Purchase
Plan is not a qualified plan under Section 401(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and is not subject to any of the
provisions of ERISA. The Purchase Plan is designed to be an employee stock
purchase plan under Section 423 of the Code, providing the participants the
benefits afforded under Code Section 421. As of September 1, 1999,
approximately 540 persons were eligible to participate in the Purchase Plan.
The Compensation Committee of the Board of Directors administers the
Purchase Plan (the "Administrator"). Subject to the specific provisions of
the Purchase Plan, the Administrator has the full and final authority to
construe, interpret and implement the Purchase Plan, and to make, administer
and interpret such rules and regulations as it deems necessary to administer
the Purchase Plan. Each employee of the Company who is customarily engaged,
on a regularly-scheduled basis of more than twenty hours per week for more
than five months per calendar year and who has been employed by the Company
for at least 90 days prior to the date an offering is made under the Purchase
Plan is eligible to become a participant in the Purchase Plan (an "Eligible
Employee"). Employees who own, or immediately after an offering under the
Purchase Plan would be deemed to own (under Section 425(d) of the Code)
shares of the Company's stock possessing 5% or more of the total combined
voting power of all classes of stock of the Company (or of any parent or
subsidiary of the Company) are ineligible to participate in the Purchase
Plan. For purposes of this calculation, shares of Common Stock which an
employee may purchase under outstanding stock options shall be treated as
stock owned by the employee. No employee shall be entitled to purchase stock
under the Purchase Plan in an amount which would permit his or her rights
(under the Purchase Plan and any similar plans of the Company, including any
parent or subsidiary corporations of the Company) to accrue at a rate which
exceeds $25,000 in fair market value (as set forth below), determined as of
the "Offering Date" (as defined below), for each calendar year in which the
employee participates in the Purchase Plan.
Each offering under the Purchase Plan will commence on such date (the
"Offering Date") and continue for such period (the "Offering Period") as the
Administrator shall designate from time to time. Unless the Administrator
designates otherwise, offerings will be made twice per year and each Offering
Period shall be for a period of six (6) months. Each employee who will have
satisfied the eligibility requirements of the Purchase Plan as of an Offering
Date may become a participant for that particular Offering Period upon his or
her completion and delivery to the Company of a completed subscription
agreement. Each eligible employee must complete a subscription agreement for
each Offering Period in which such employee wishes to participate. Each
subscription agreement shall authorize the Company to withhold a percentage
of the participant's base pay through regular payroll deductions during the
applicable Offering Period, and the amount withheld shall be credited to the
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participant's account for payment for the shares to be purchased. Subject to
the other limitations contained in the Purchase Plan, a participant may elect
to have withheld from his or her paycheck a percentage of his or her
"Compensation" (as defined below) during an Offering Period, up to a maximum
of 20%. A participant may elect to increase, decrease or terminate his or
her level of participation during each Offering Period by filing the
requisite form with the Human Resources Department prior to the last day of
the applicable Offering Period. All payroll deductions previously made
during such Offering Period will be refunded as soon as possible to the
participant without the payment of any interest. A participant who has
withdrawn from the Purchase Plan shall be excluded from participation for the
remainder of the particular Offering Period but may re-enroll to participate
in subsequent Offering Periods by executing and delivering a new Stock
Purchase Agreement.
The purchase price per share (the "Purchase Price") for which shares
of Common Stock will be sold in an Offering Period under the Purchase Plan is
the lower of (1) 85% of the fair market value of a share of Common Stock on
the Grant Date or (2) 85% of the fair market value of a share of Common Stock
on the last day of the Offering Period (the "Purchase Date"). The fair
market value of the Common Stock shall be the closing sale price of the
Common Stock as reported on the Nasdaq National Market System or, if the
Common Stock is listed or admitted to trading on any stock exchange, the
closing sale price on such date on the principal stock exchange on which the
Common Stock is listed or admitted to trading. If no such closing sale price
is quoted on any day, or if no sale takes place on such day, then the fair
market value shall be the closing sale price for the Common Stock on the
Nasdaq National Market System or such exchange on the next preceding day on
which a sale occurred.
The Purchase Price of shares purchased under the Purchase Plan shall
be paid by means of accumulated payroll deductions on behalf of a participant
during the Offering Period. For the purposes of the Purchase Plan, a
participant's "Compensation" shall include all salaries and regular hourly
wages, but shall not include bonuses, commissions, extra pay for extra hours
worked outside the participant's regular work schedule, or other special
payments, fees or allowances. Payroll deductions for a participant commence
on the first payday following the Grant Date and continue thereafter until
the last payday prior to the Purchase Date, unless the participant chooses to
terminate his or her participation in the Purchase Plan. The Company shall
establish and maintain a separate account for each participant. All payroll
deductions are credited to the participant's account under the Purchase Plan
and are deposited with the general funds of the Company. All payroll
deductions received or held by the Company may be used by the Company for any
corporate purpose.
On each Purchase Date, the maximum number of whole shares which may be
purchased with each participant's accumulated payroll deductions during such
Offering Period will automatically be purchased for the participant at the
applicable Purchase Price. A stock certificate or certificates representing
the shares purchased for a participant may be issued to a contract
administrator, or upon election by the participant, may be issued directly to
the participant and delivered to him or her as promptly as practicable after
each Purchase Date. Any cash remaining in the participant's account because
such cash is insufficient to purchase a whole share will be carried forward
to the next Offering Period. The maximum number of shares of Common Stock
purchasable by each participant on any Purchase Date is 2,500 shares.
Termination of a participant's employment for any reason, including
retirement, death or discharge, cancels his or her participation in the
Purchase Plan immediately. In such event, the payroll deductions credited to
the participant's account or any Company stock purchased under the Plan will
be returned to such participant or, in the case of death, to the
participant's beneficiary, without interest. No rights or accumulated
payroll deductions of a participant under the Purchase Plan may be pledged,
assigned or transferred for any reason (other than upon the death of a
participant).
The Board of Directors may at any time may amend, suspend or terminate
the Purchase Plan, except that the participants' rights to purchase Common
Stock for any current "Offering Period" may not be adversely affected without
the participants' consent. No amendment may be made to the Purchase Plan
without approval of the stockholders of the Company if such amendment would
(1) increase the aggregate number of shares authorized for sale under the
Purchase Plan or (2) change the eligibility requirements for participation in
the Purchase Plan. In the event of the merger or consolidation of the
Company into another corporation, or the acquisition by another corporation
of all or substantially all of the Company's assets, the Purchase Plan shall
terminate, unless provision is
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made in writing in connection with such transaction providing for the
assumption or substitution of the purchase rights under the Purchase Plan.
Unless terminated earlier, the Purchase Plan shall terminate on February 28,
2006.
The following table contains information concerning certain stock
purchased under the Company's Purchase Plan during the fiscal year ended
September 30, 1998:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
PURCHASE PRICE
NAME AND POSITION ($/SHARE) NUMBER OF SHARES
----------------- ------------- ----------------
<S> <C> <C>
Attiazaz "Bob" Din..................................... $ --- 0
Chairman of the Board and
Chief Executive Officer
Susan Bailey........................................... $ --- 0
President
Javed Latif............................................ $ --- 0
Chief Financial Officer and
Executive Vice President
Kevin Schatzle.......................................... $ --- 0
Senior Vice President
Ellis Posner............................................ $ --- 0
Senior Vice President of Sales
All current executive officers as a group (8 persons).... $ 6.96 417
Non-executive director group (2 persons)................. $ --- 0
Non-executive officer employee group (532 persons)....... $ 7.80 62,576
</TABLE>
- ------------
* As of September 21, 1999, the market value of the Company's Common Stock
as reported by the Nasdaq Stock Market was $10.125 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.
The Purchase Plan and the right of participants to make purchases
thereunder are intended to qualify under the provisions of Sections 421 and
423 of the Code. Under these provisions, no income will be taxable to a
participant at the time of purchase of shares. However, a participant may
become liable for tax upon disposition of shares acquired under the Purchase
Plan, and the tax consequences will depend upon how long a participant has
held the shares before disposition.
If the shares are disposed of at least two years after the Offering
Date and at least one year after the Purchase Date, or in the event of a
participant's death (whenever occurring) while owning such shares, then the
lesser of (i) the excess of the fair market value of the shares at the time
of such disposition over the Purchase Price of the shares or (ii) fifteen
percent of the fair market value of the shares on the Offering Date will be
treated as ordinary income to the participant. Any further gain upon such
disposition will be taxed as long-term capital gain. Any long-term capital
gain would be taxed as capital gain at the rates then in effect. If the
shares are sold and the sale price is less than the Purchase Price, there is
no ordinary income and the participant will have a long-term
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capital loss equal to the difference between the sale price and the Purchase
Price. The ability of a participant to utilize such a capital loss would
depend upon the participant's other tax attributes and the statutory
limitation on capital loss deductions not discussed herein.
If the shares are sold or disposed of (including any disposition by
way of gift) before the expiration of the two-year holding period described
above or within one year after the shares are transferred to the participant,
then the excess of the fair market value of the shares on the Purchase Date
over the Purchase Price will be treated as ordinary income to the
participant. This excess will constitute ordinary income for the year of
sale or other disposition even if no gain is realized on the sale or a
gratuitous transfer of shares is made. The balance of the gain will be taxed
as capital gain at the rates then in effect. If the shares are sold for less
than their fair market value on the Purchase Date, the same amount of
ordinary income is attributed to the participant and a capital loss is
recognized equal to the difference between the sale price and the fair market
value of the shares on such Purchase Date. As indicated above, the ability
of the participant to utilize such a capital loss would depend upon the
participant's other tax attributes and the statutory limitation on capital
losses not discussed herein.
The ordinary income reported under the rules described above, added to
the actual Purchase Price of the shares, determines the tax basis of the
shares for the purpose of determining gain or loss on the sale or exchange of
the shares. The Company is entitled to a deduction for amounts taxed as
ordinary income to a participant only to the extent that ordinary income must
be reported upon disposition of shares by the participant before the
expiration of the holding periods described above.
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 purchase pursuant to the Purchase Plan.
By Order of the Board of Directors
Naureen Din
Secretary
El Segundo, California
September 24, 1999
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