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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF
THE SECURITIES EXCHANGE ACT OF 1934
ENTEX INFORMATION SERVICES, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 93-133715291
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6 International Drive, Rye Brook, New York 10573-1058
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(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code: (914) 935-3600
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Securities to be registered pursuant to Section 12(b) of the Act: None.
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $.0001 par value
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(Title of class)
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INFORMATION REQUIRED IN REGISTRATION STATEMENT
CERTAIN FORWARD-LOOKING INFORMATION
The information contained in this Registration Statement includes
forward-looking statements, including without limitation statements set forth in
the sections entitled "Business" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained in Item 2 of this
Registration Statement. Since this information is based on current expectations
which involve risks and uncertainties, actual results could differ materially
from those expressed in the forward-looking statements. Various important
factors known to ENTEX Information Services, Inc. that could cause such material
differences are identified in the section entitled "Business Factors" contained
in Item 1 of this Registration Statement. Certain sentences in this Registration
Statement have been identified as forward-looking statements. The reader is
cautioned that other sections and sentences not so identified may also contain
forward-looking statements.
ITEM 1. BUSINESS
OVERVIEW
ENTEX Information Services, Inc. ("ENTEX" or the "Company") was
formed in August 1993 in a management-led buyout of the domestic information
systems business of JWP Inc. ("JWPIS"). ENTEX is a leading provider of personal
computer ("PC") solutions to meet the distributed information technology systems
and end-user support requirements of Fortune 1000 companies and other large
enterprises. The Company's total PC management capabilities include acquisition
and procurement services and network, professional and other outsourcing service
support for the PC-based network environment. The proliferation of complex
client/server networks and the deployment of mission critical applications and
databases on these networks has made the effective management of distributed
information technology resources a top priority for many large enterprises.
Currently, client/server networks may consist of thousands of PCs connected to
hundreds of servers, linked to dozens of midrange or mainframe hosts, and
internetnetworked over multiple sites. Large enterprises are finding it
challenging and costly to support and manage these extensive distributed
environments.
PRODUCTS AND SERVICES
ENTEX's integrated array of acquisition and procurement services and
network and professional services and other outsourcing services address
customers' needs throughout the life cycle of their PC-based systems, beginning
with the design, specification and acquisition of hardware, software and network
products and extending through the support and eventual replacement of the
system (or elements of the system) with a new technology solution.
ACQUISITION AND PROCUREMENT SERVICES
The Company sells and distributes a wide variety of personal
computer and network products and peripherals, providing its customers with a
single source for all their PC product needs. Customers use the Company for
product procurement because ENTEX provides product availability, rapid system
configuration customized for individual users, and accurate and reliable product
shipment. The Company believes its customers improve their purchasing decisions
by leveraging the Company's extensive experience in evaluating products for
performance, reliability, ease of use and compatibility with other hardware and
software products. The Company also provides logistics management services,
which involve the coordination of product delivery, receipt and installation.
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ENTEX and Solution Line are registered trademarks of the Company,
and ENTEX Information Services, Random Access and System Builder are trademarks
of the Company. This Registration Statement also includes trademarks of other
companies which are the property of their respective owners.
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To ensure product availability, the Company maintains a finished
goods inventory and build-to-order components at its Integration Center in
Erlanger, Kentucky, utilizes second source suppliers and participates with
certain vendors in their build-to-order programs. Using the Company's real-time
inventory management systems, ENTEX employees across the country can check on
product availability.
A majority of the PC systems shipped by ENTEX are customized to meet
customer specifications. The Company's configuration processes load and
configure operating systems, applications and proprietary software to customer
specifications. Through vendor build-to-order programs, ENTEX receives system
components from original equipment manufacturers and completes the manufacturing
process to a customer's specific requirements. ENTEX's configuration operations
have been ISO 9002 certified since August 1994.
Through ENTEX, customers may purchase application software either in
separate "shrink-wrapped" units or on a volume-licensed basis.
NETWORK, PROFESSIONAL AND OUTSOURCING SERVICES
ENTEX provides its customers with a broad array of services to
enable them to more effectively manage their distributed information technology
systems. These services include:
Network and Professional Services. The Company provides customers
with network design, implementation and integration services on a project basis.
The consulting services which the Company provides include design, installation
and upgrade of local-area, wide-area, and enterprise networks. The Company also
assists customers in the implementation of messaging and Internet/Intranet
technologies, provides comprehensive support to network managers and
administrators and assists customers with their network operating systems,
network-based applications and connectivity.
Migration Services. The Company provides a wide range of migration
services to assist customers in transitioning from one computing environment to
another. These migration services include Microsoft NT and BackOffice upgrades
and migrations; local area network migrations; desktop operating system
migrations; and messaging migrations.
Outsourcing Services. The Company provides customers with
outsourcing services under long and short term contracts. These services include
many of the network and professional services as well as the Company's core
support services, including network implementation, operation and support;
warranty services; help desk services; deskside support; and asset management
services. Outsourcing services are typically provided through a mixture of
on-site and centrally managed resources.
Core Support Services. The Company offers a variety of PC and
network operation and support services, including system installation,
integration, and relocation; maintenance and repair; warranty services; and
system management upgrades. Deskside support services include installation,
moves, adds, and changes to desktop computing devices. In addition, deskside
services include on-going support of PCs from an end-user perspective, including
application enablement, optimization and connectivity. The Company provides a
range of warranty programs, passing existing manufacturer warranties to clients.
Customers benefit by receiving a single point of contact for warranty services
on a wide range of products.
Help Desk Services. Help desk services for end-user hardware and
software support are provided on-site at customer locations as well as through
the Company's centralized Solution Line service. The Company also provides
network help desk services through its centralized Enterprise Support Line.
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Asset Management Services. The Company's asset management services
assist customers in formulating policies and procedures and implementing
automated processes to manage more effectively PC assets deployed throughout
their organizations.
OPERATIONS
The Company's National Service Center ("NSC") supports the Company's
field personnel with product acquisition specialists, order entry, order
management, product management, help desk services, remote network management
and national dispatch services. The NSC is located in a facility in Mason, Ohio
which houses the Company's centralized back office functions and personnel,
including its Corporate Account Center ("CAC"), Solution Line, dispatch services
and training centers. The Company has 48 branch offices located in 30 states and
five regional offices to support the Company's five operating regions (East,
Midwest, South, Central and West).
All of the Company's product configuration, build-to-order and
distribution activities are conducted at the Company's Integration Center
located in Erlanger, Kentucky, less than five miles from the Cincinnati/Northern
Kentucky International Airport. The facility is 255,000 square feet and is ISO
9002 certified.
SALES AND MARKETING
The Company targets its marketing efforts primarily at senior level
executive, financial, purchasing and information management personnel at Fortune
1000 companies and other large enterprises. ENTEX markets its products and
services through its direct sales force operating from 48 branch offices. Sales
personnel nationwide are also supported by the Company's CAC. In addition, the
Company participates in industry trade shows and conferences and distributes
sales and product literature.
In fiscal 1997, none of the Company's customers accounted for more
than 5% of the Company's total revenues.
COMPETITION
The computer products and services industry is intensely
competitive. The Company expects competition to intensify in the future. As an
integrated product and service provider, ENTEX competes with PC system
integrators, high-end system integrators, PC resellers and distributors, service
providers and direct marketers. In addition, there is increased competition from
manufacturers such as Hewlett Packard Company ("HP"), Compaq Computer
Corporation ("Compaq"), Digital Equipment Corporation ("DEC") and Unisys
Corporation ("Unisys"), who sell direct to the Company's customer base. PC
system integrators include GE Capital Information Technology Solutions, Inc.,
CompuCom Systems, Inc. and Vanstar Corp. High-end system integrators have
traditionally been mainframe-oriented service providers and include Andersen
Consulting, Computer Sciences Corporation, IBM Global Services and SHL
SystemHouse Inc., a division of MCI Communications Corp. PC resellers and
distributors include InaCom Corp. and MicroAge Inc. Service providers are firms
which have focused their business exclusively on providing PC and network
related services and include Decision One Corp. and Technology Service
Solutions. Direct marketers include Dell Computer Corp. ("Dell"). In addition to
these large national companies, ENTEX also competes against numerous regional
and local companies, many of which have long-standing customer relationships.
Some of the Company's competitors have greater financial, technical
and marketing resources at a lower cost structure than the Company. As a result,
such companies may be able to respond more quickly to new or emerging
technologies and changes in customer needs, devote more resources to the
development, promotion and sales of their services
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or deliver products at a lower price than the Company. In addition, competition
could result in price decreases and depress gross margins in the industry.
Further declines in the Company's gross margins may exacerbate the impact of
fluctuating net revenues on the Company's operating results and have a material
adverse effect on the Company's business, operating results and financial
condition.
The principal competitive factors in the Company's industry include
the breadth and quality of product and service offerings, product availability,
cost, pricing, sales and distribution strategies, and expertise and size of the
technical workforce. The Company believes that it competes favorably with
respect to each of these factors. However, there can be no assurance that the
Company will, in the future, be able to compete successfully against existing or
future competitors or that such competition will not adversely affect the
Company's business, operating results and financial condition. See "--Business
Factors--Intense Competition" and "--Increased Competition from Direct
Marketers."
EMPLOYEES
As of September 28, 1997, the Company had over 8,000 employees. None
of the Company's employees is subject to a collective bargaining agreement. The
Company has never experienced a work stoppage and considers its employee
relations to be good.
BUSINESS FACTORS
In evaluating the Company's business, the following business factors
should be carefully considered. In addition, this document contains certain
forward-looking statements and trend analysis based on current expectations.
Actual results may differ materially due to a number of factors, including those
set forth below.
Fluctuations in Quarterly Results. The Company's quarterly results
have varied in the past and the Company expects its quarterly operating results
to continue to fluctuate. The Company's net revenues may fluctuate due to a
variety of factors, including the level of expenditures by large enterprises for
PC hardware, software and related products and services in general, demand for
the Company's products and services in particular, the timing of orders for the
Company's products and services, product supply constraints, the Company's
build-to-order programs and customer demand driven by the introduction and
adoption of new products. Due to its narrow product gross margins, the Company's
operating results may be especially sensitive to changes in the mix of product
and service revenues, the margin mix of products sold, the margin mix of
services sold and the level of its operating expenses. The Company's expenses
may fluctuate as a result of numerous factors, including interest rates, the
timing and rate of new employee hiring, the amount and timing of vendor-provided
allowances, the utilization rate of service personnel, competitive conditions
and the impact of acquisitions. The Company's costs are largely fixed in the
near term and the Company may be unable to adjust spending in a timely manner to
compensate for an unexpected revenue shortfall. As a result, revenue shortfalls
may have an immediate and disproportionate adverse effect on operating results.
In addition, if the Company spends to build its capabilities to support higher
revenue levels, the Company's near term operating results will suffer until it
achieves its revenue goals. Due to the Company's recent growth, it is difficult
to discern seasonal trends. However, the Company believes that first and third
quarter revenues may be negatively affected due to generally lower computing
equipment purchases during the summer months which coincide with the first
quarter; and in January which falls within the third quarter. Due to all of
these factors, the Company believes that its operating results are likely to
vary on a quarterly basis. As a result, period-to-period comparisons of its
operating results are not necessarily meaningful, and quarterly results may not
be indicative of results to be expected for a full year. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Gross Margins for Product Sales. Approximately 86% of the
Company's net revenues in fiscal 1997 were generated through sales of PC
hardware, software and related products. The Company believes that competitive
conditions will continue to place pressures on its product gross margins.
Furthermore, the original
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purchase price of products is often offset by favorable vendor allowances and
negotiated price protection agreements against price decreases on inventory
carried by the Company. There can be no assurance that vendors will continue to
offer such vendor allowances or price protection at the current levels. A
reduction or elimination of such vendor programs could significantly decrease
the Company's product gross margins. In addition, such vendor allowances and
refunds for price decreases are not automatic and must be tracked and collected
by the Company. The Company's failure to effectively manage such vendor
receivables may further decrease product gross margins. Narrow product gross
margins result in fluctuations in net revenues and operating costs which may
have a disproportionate impact on the Company's operating results. Further
declines in the Company's product gross margins may have a material adverse
effect on the Company's business, operating results and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Dependence on Integration Center. All of the Company's product
configuration, build-to-order and distribution activities are conducted at the
Company's Integration Center in Erlanger, Kentucky. Disruption of operations at
its Integration Center for any reason, including power or telecommunications
failures, natural disasters such as fires, tornados or floods, or work
stoppages, would have a material adverse effect on the Company's business,
operating results and financial condition. In addition, the Company relies
almost entirely on Skyway Freight Systems, Inc. ("Skyway"), an independent
shipping company, for the delivery of its products. The failure or inability of
Skyway to deliver products to the Company's customers on a timely basis, whether
as a result of a work stoppage or slow-down, or the unanticipated termination of
the Company's arrangement with Skyway, could have a material adverse effect on
the Company's business, operating results and financial condition.
Increased Emphasis on Service Offerings. The Company's service
operations are characterized by higher gross margins than those attainable in
product sales. During fiscal 1997, service revenues grew 70% to $353.6 million
while product revenues grew 9.6% to $2.1 billion. The Company's success in
increasing its service revenues will depend primarily on the continued need for
the Company's services and the continued acceptance by large companies of
outsourcing as a solution to their PC management needs. In addition, the Company
must have the ability to identify opportunities where its service solutions are
appropriate, sell such service solutions at attractive margins, successfully
implement such solutions and maintain the quality of its service offerings. To
the extent that the Company does not successfully increase the proportion of
revenues attributable to its service business, the Company's operating margins
may be adversely affected. In order to expand its service operations, the
Company will need to recruit, train and retain a significant number of qualified
technical personnel, and integrate them into the Company. There can be no
assurance that the Company will do so successfully. The expense of these efforts
and the costs associated with the hiring of additional service personnel and
expansion of the Company's service infrastructure will be incurred prior to
increases in service revenues. If service revenues do not increase sufficiently
or the Company fails to accurately price its services, the Company's business,
operating results and financial condition would be materially and adversely
affected.
A number of the Company's service offerings depend on central
service and sales support or dispatch coordination from its NSC in Mason, Ohio.
Disruption of operations at the Mason facility, including power or
telecommunications failures, natural disasters such as fires, tornados or
floods, or work stoppages, would have a material adverse effect on the Company's
service operations and could affect customer relationships. See "--Need to
Recruit and Retain Management, Technical and Sales Personnel,"
"Business--Products and Services" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Need to Recruit and Retain Management, Technical and Sales
Personnel. The Company believes that its future success depends, to a large
extent, upon the efforts and abilities of its executive officers, managers,
technical and sales personnel. The Company's expansion of its service operations
requires the recruiting and training of a significant number of additional
qualified technical personnel, including project managers and network
integration specialists. Frequently, the Company must rapidly hire a significant
number of technical
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personnel to staff projects at customer sites. The Company's inability to hire
such personnel within the time schedule agreed to with the customer could damage
customer relationships and result in lost revenues. Competition for qualified
technical and sales personnel is intense. The Company competes with other
service providers as well as with its own customers, including those at whose
locations ENTEX employees work. Failure by the Company to attract and train
skilled managers, technical and sales personnel on a timely basis, or the
inability of the Company to retain such personnel, could materially and
adversely affect the Company's business, operating results and financial
condition. In 1987, Dort A. Cameron III, the Chairman of the Board of Directors
and a co-founder of the Company, was diagnosed with multiple sclerosis. See
"Directors and Executive Officers."
Management of Growth. The Company has experienced significant growth
since its inception. This rapid growth has placed, and is expected to continue
to place, a significant strain on the Company's management, financial, sales,
technical and support systems and personnel. The Company's ability to manage its
growth effectively will require it to continue to develop and improve its
operational, financial and other internal systems and train, manage and motivate
its employees. The Company has in the past and will continue in the future to
evaluate the acquisition of businesses that complement or expand the Company's
technical skills, service offerings or geographical presence. Integrating newly
acquired companies could be costly and may result in the loss of customers and
key personnel and may disrupt operations. Additionally, integrating newly
acquired businesses may divert significant management resources and attention
from day to day operations.
Intense Competition. The computer products and services industry is
intensely competitive. The Company expects competition to intensify in the
future. As an integrated product and service provider, ENTEX competes with PC
system integrators, high-end systems integrators, PC resellers and distributors,
service providers and direct marketers. In addition, there is increased
competition from manufacturers such as HP, Compaq, DEC and Unisys, who sell
direct to the Company's customer base. PC system integrators include GE Capital
Information Technology Solutions, Inc., CompuCom Systems, Inc. and Vanstar Corp.
High-end system integrators have traditionally been mainframe-oriented service
providers and include Andersen Consulting, Computer Sciences Corporation, IBM
Global Services and SHL SystemHouse Inc., a division of MCI Communications Corp.
PC resellers and distributors include InaCom Corp. and MicroAge Inc. Service
providers are firms which have focused their business exclusively on providing
PC and network related services and include Decision One Corp. and Technology
Service Solutions. Direct Marketers include Dell. In addition to these large
national companies, ENTEX also competes against numerous regional and local
companies, many of which have long-standing customer relationships. Some of the
Company's competitors have greater financial, technical and marketing resources
at a lower cost structure than the Company. As a result, such companies may be
able to respond more quickly to new or emerging technologies and changes in
customer needs, devote more resources to the development, promotion and sales of
their services or deliver products at a lower price than the Company. In
addition, competition could result in price decreases and depress gross margins
in the industry. Further declines in the Company's gross margins may exacerbate
the impact of fluctuating net revenues on the Company's operating results and
have a material adverse effect on the Company's business, operating results and
financial condition. See "--Increased Competition from Direct Marketers" and
"Business--Competition."
Increased Competition from Direct Marketers. The Company competes
with several manufacturers in meeting the distributed information needs of large
enterprises. Notably, direct marketers such as Dell compete with the Company by
selling directly to Fortune 1000 clients. The expansion of the direct selling
model has increased the competitive risks in an already highly competitive
market. To combat the additional competition, the Company has enhanced its
System Builder program to provide for final assembly services and has joined
with certain vendors to provide products to customers on a build-to-order basis.
However, there can be no assurance that ENTEX will be able to successfully
transition from its current systems which utilize high levels of inventory to
managing a more streamlined product fulfillment process. In addition, there can
be no
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assurance that the vendors can supply components on a "just-in-time" basis to
allow successful management of a build-to-order program. The Company's failure
to successfully transition to the build-to-order process could have a material
adverse effect on the Company's business, operating results and financial
condition. See "--Intense Competition."
Fixed Fee Service Contract and Service Level Agreement Risks. The
Company has begun implementing and intends to expand the use of new pricing
policies for its service offerings. Such new pricing policies include pricing on
a fixed fee or per end-user basis and on a service and support performance
metrics basis rather than on a time and materials basis. As a result, the
Company must accurately assess the scope of work of each project and estimate
the resources required to complete the project and to meet any service and
support performance metrics. Failure by the Company to accurately estimate the
scope of a project or support expenses or to meet service and support
performance metrics could have a material adverse effect on the Company's
business, operating results and financial condition. In addition, the Company
has certain warranty service commitments for which the Company seeks
reimbursement from manufacturers. A reduction by manufacturers in the scope or
duration of their reimbursements for warranties which the Company cannot
contractually pass on to its customers or the failure of the Company to properly
track and collect such reimbursements could have a material adverse effect on
the Company's business, operating results and financial condition.
Dependence on Vendors. A significant portion of the Company's
revenues are derived from sales of PC hardware, software and related products.
Approximately 62.2% of such product revenues in fiscal 1997 were attributable to
sales of products manufactured by Compaq, HP and IBM. The Company's agreements
with these manufacturers do not provide for long-term supply commitments and can
be terminated with 15 to 90 days' notice. From time to time, the PC industry has
experienced product constraints, with vendors allocating product based on
criteria beyond the buyer's control. In the event the Company is not able to
obtain sufficient quantities of products from its vendors or sufficient
component parts for use in its build-to-order programs, the Company's business,
operating results and financial condition could be materially and adversely
affected. The Company works closely with its key manufacturers. Many
manufacturers provide vendor allowances which the Company uses to reduce cost of
goods sold and to subsidize a variety of activities including many of its
employee and customer training programs. In addition, many manufacturers provide
ENTEX with early previews of new products and technology and instruction and
training for ENTEX technical and support personnel on the use of these new
products. There can be no assurance that these arrangements will continue in the
future. In the event that these arrangements were discontinued or industry
practices were to change, commercial terms with vendors were to change
generally, or the Company were to otherwise lose vendor support, the Company's
business, operating results and financial condition could be materially and
adversely affected. See "--Gross Margins for Product Sales."
Risks of Inventory Obsolescence; Inventory Management. In order to
offer rapid delivery and efficient support and service to its customers, the
Company maintains relatively high levels of products and parts inventory. The
Company attempts to protect itself from inventory obsolescence and inventory
price reductions by negotiating price protection and stock balancing
arrangements with its vendors and enforcing a limited return policy with its
customers. These arrangements entitle the Company to receive refunds from
manufacturers equal to price decreases on inventory carried by ENTEX and provide
ENTEX the ability to return, subject to certain conditions including restocking
fees, slow moving products. Such price protection and stock balancing provisions
provided through the Company's supply agreements or particular manufacturers'
sales policies may provide only limited protection against inventory risks. The
Company's suppliers have been decreasing the level of price protection and
return privileges offered and there can be no assurance that such suppliers will
not continue to further decrease or eliminate such protection in the future.
Manufacturers experiencing financial difficulties may also be unable or
unwilling to honor their price protection and stock balancing commitments.
Further, the Company regularly disposes of excess and obsolete inventory at
discounts to the Company's original purchase price. Although the Company sets up
reserves for losses associated with the disposal of excess and obsolete items
and records inventories net of these reserves, there can be no assurance that
such reserves will be adequate. Changes in industry practices which increase the
risks associated with maintaining high levels of inventory, the Company's
inability to effectively manage its current and future inventory, or significant
adjustments to the value of its inventory could materially and adversely affect
the Company's
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business, operating results and financial condition. See "--Increased
Competition from Direct Marketers," and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Rapid Technological Change. The personal computer products and
services industry is subject to rapid technological change, evolving industry
standards and frequent new product and service introductions. The Company must,
on a timely and cost-effective basis, continuously respond to new product
introductions. It must source such new products, develop and introduce new
services which keep pace with technological developments and increasingly
sophisticated network systems, and train its employees to provide the necessary
services to support new products and systems. There can be no assurance that the
Company will be able to source new products to meet customer demand, respond to
technological developments in a timely manner, if at all, or that its service
offerings will adequately meet the changing requirements of its customers and
achieve market acceptance. Further, suppliers may restrict the Company's access
to new products. The Company's failure to successfully source new products or
develop and introduce new services which meet evolving customer needs could have
a material adverse effect on the Company's business, operating results and
financial condition.
Control by Principal Stockholders. The directors and executive
officers of the Company beneficially own approximately 82% of the outstanding
shares of Common Stock. As a result, the directors and executive officers of the
Company are able to control the election of members of the Company's Board of
Directors and generally exercise control over the Company's corporate actions.
In particular, Dort A. Cameron III, the Company's Chairman, and entities
controlled by Mr. Cameron (the "Cameron Affiliates") exercise a high degree of
control over the Company's actions. The Cameron Affiliates together beneficially
own approximately 77% of the outstanding shares of Common Stock. In addition,
pursuant to certain provisions of a Stockholders' Agreement dated as of December
10, 1993 (as amended, the "Stockholders' Agreement"), the Cameron Affiliates
have a right to purchase additional shares of Common Stock from certain
employees of the Company (the "Participants") under certain circumstances. The
Participants own approximately 18% of the outstanding shares of Common Stock and
include John A. McKenna, Jr., Dale H. Allardyce and David J. Csira. Pursuant to
the Stockholders' Agreement, in the event that a Participant's employment is
terminated under certain circumstances, the Company will have an option to
purchase such Participant's shares of Common Stock. However, if the Company is
not able to pay the full amount of the total purchase price in cash in
connection with its repurchase rights, the Company must assign its rights to the
Cameron Affiliates. Further, pursuant to the Stockholders' Agreement, the
Participants have agreed to vote in the same manner as the Cameron Affiliates in
connection with certain transactions which are outside of the ordinary course of
business and the Cameron Affiliates have agreed to vote their shares of Common
Stock to elect a nominee of the Participants to the Board of Directors of the
Company. Such concentration of ownership as well as the voting provisions of the
Stockholders' Agreement may have the effect of delaying or preventing a change
in control of the Company. See "Security Ownership of Certain Beneficial Owners
and Management" and "Certain Transactions and Related Transactions."
Anti-Takeover Effects. Certain provisions of the Company's
Certificate of Incorporation, as amended, Bylaws and Delaware law may be deemed
to have an anti-takeover effect. The Company's Certificate of Incorporation
provides that the Board of Directors may issue additional shares of Common Stock
without stockholder approval. The Company's Bylaws do not permit anyone other
than the Board of Directors, the Chairman of the Board or the President to call
special meetings of the stockholders. In addition, the Company is subject to the
antitakeover provisions of Section 203 of the Delaware General Corporation Law
(the "DGCL"). In general, the statute prohibits a publicly-held Delaware
corporation or a privately-held Delaware corporation with more than 2,000
stockholders from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. Each of the foregoing provisions
gives the Board of Directors, acting without stockholder approval, the ability
to prevent, or render more difficult or costly, the completion of a takeover
transaction that stockholders might view as being in their best interests,
including a takeover transaction that might result in a premium over the market
price for the shares of Common Stock. See "Description of Company's Securities
to be Registered."
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Absence of Dividends. The Company has never declared or paid any
cash dividends on its Common Stock and does not presently intend to pay cash
dividends on the Common Stock in the foreseeable future. The Company currently
anticipates that it will retain future earnings for reinvestment in its
business. Furthermore, the Company's Fourth Amended and Restated Agreement for
Wholesale Financing, as amended from time to time (the "IBMCC Financing
Agreement") with IBM Credit Corporation ("IBMCC") prohibits the Company from
paying cash dividends on the Common Stock. See "--High Degree of Leverage;
Dependence on IBM Credit Corporation; Future Capital Needs."
High Degree of Leverage; Dependence on IBM Credit Corporation;
Future Capital Needs. The Company requires substantial working capital to fund
its business and, in particular, to finance product inventory, accounts
receivable and capital expenditures. To date, the Company has relied on several
credit facilities to finance its business and its expansion. As a result, the
Company is highly leveraged and at September 28, 1997 and June 29, 1997, the
Company's total interest bearing outstanding debt was $374.7 million and $396.5
million, respectively. The Company has financed a significant portion of its
working capital needs under the IBMCC Financing Agreement, a working capital
line of credit of up to $525 million (the "IBMCC Working Capital Line of
Credit"), the interest bearing portion of which was $333.3 million as of
September 28, 1997. Borrowings under the IBMCC Working Capital Line of Credit
are secured by the Company's assets, including certain accounts receivable,
certain inventory and other assets. The amount of available borrowings under the
IBMCC Working Capital Line of Credit may be increased for higher seasonal
purchasing requirements and may be reduced or terminated by IBMCC upon 60 days
prior notice. The IBMCC Financing Agreement is subject to annual renewal and
expires September 15, 1998. There can be no assurance that IBMCC will not reduce
amounts available under or terminate the IBMCC Working Capital Line of Credit
or that IBMCC will renew the IBMCC Financing Agreement in any year. The IBMCC
Financing Agreement provides for a term loan in the original principal amount of
$20 million (the "IBMCC Long-Term Loan"), a short term loan in the original
principal amount of $55 million (the "Short-Term Loan") and a special working
capital advance in the original principal amount of $20 million (the "Special
Working Capital Advance"). The IBMCC Long-Term Loan is required to remain
outstanding unless there are no outstanding interest bearing advances under the
IBMCC Financing Agreement. The Short-Term Loan has been repaid in full. The
Company also maintains a vendor relationship with International Business
Machines Corporation ("IBM"), of which IBMCC is an affiliate. There can be no
assurance that any deterioration in the vendor-customer relationship between the
Company and IBM will not adversely affect the Company's relationship with IBMCC
or its ability to secure adequate working capital through IBMCC. In addition,
from time to time, the Company has failed to comply with certain financial
covenants of the IBMCC Financing Agreement. In the past, IBMCC has promptly
waived such defaults. However, there can be no assurance that IBMCC will waive
future breaches of such covenants. If IBMCC substantially reduces the amounts
available under the IBMCC Working Capital Line of Credit or fails to renew or
otherwise terminates the IBMCC Financing Agreement, the Company would be
required to seek alternative sources of financing. No assurance can be given
that such alternative financing will be available or if available, will be
available on terms that are favorable to the Company. The Company's inability to
procure such financing would have a material adverse effect on the Company's
business, operating results and financial condition. In addition, if Dort A.
Cameron III ceases to own and/or control at least 35% of the issued and
outstanding capital stock of the Company, the Company will be deemed to be in
default under the IBMCC Financing Agreement. At present, the Cameron Affiliates
beneficially own approximately 77% of the outstanding shares of the capital
stock of the Company. However, there can be no assurance that they will continue
to do so.
Substantially all of the Company's outstanding indebtedness is tied
to the prime rate, including the IBMCC Working Capital Line of Credit which
bears interest at the prime rate plus .50% and the other loans under the IBMCC
Financing Agreement which bear interest at the prime rate plus 2.50%. The
Company is not currently a party to any financial instruments which would
mitigate the Company's exposure to increases in the prime interest rate.
Accordingly, increases in the prime rate could adversely impact the Company's
pretax income or otherwise materially and adversely affect the Company's
business, operating results and financial condition. Also, there can be no
assurance that the Company will be able to generate sufficient cash from
operations to satisfy future interest and principal payments under its credit
facilities. In the event that the Company is unable to meet its payment
obligations or needs additional capital to fund its business, the Company would
be required to seek alternative sources of financing or attempt to refinance its
existing credit facilities. There can be no assurance that such alternative
equity or debt funding would be available on terms acceptable to the Company, if
at all. Under such circumstances, the Company's inability to procure additional
funding or refinance existing indebtedness would have a material adverse effect
on the Company's business, operating results and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
-10-
<PAGE> 11
ITEM 2. FINANCIAL INFORMATION
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the consolidated financial statements of the Company and the
related notes thereto and Management's Discussion and Analysis of Financial
Condition and Results of Operations included elsewhere herein. The consolidated
statements of operations data set forth below with respect to the years ended
July 2, 1995, June 30, 1996 and June 29, 1997 and the consolidated balance sheet
data as of June 30, 1996 and June 29, 1997 are derived from the audited
consolidated financial statements included elsewhere in this Registration
Statement, which have been audited by KPMG Peat Marwick LLP. The consolidated
statements of operations data as set forth below with respect to the year ended
July 3, 1994 and the consolidated balance sheet data for the years ended July 3,
1994 and July 2, 1995 are derived from audited financial statements not included
herein. The consolidated statements of operations data for the three months
ended September 28, 1997 and September 29, 1996 and the consolidated balance
sheet data as of September 28, 1997 are derived from unaudited financial
statements included elsewhere in the Registration Statement. The balance sheet
data as of September 29, 1996 is derived from unaudited financial statements
which are not included elsewhere herein. The unaudited data has been prepared on
the same basis as the audited financial statements appearing elsewhere herein,
and include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of such information for the periods
presented. The information set forth in this Registration Statement reflects a
four-for-one stock dividend to holders of shares of the Company's Common Stock
which occurred in November 1997. See Note 13 of Notes to Consolidated Financial
Statements.
<TABLE>
<CAPTION>
Three Months Ended Years Ended
-------------------------- -----------------------------------------------------------
Sept. 28, Sept. 29, June 29, June 30, July 2, July 3,
1997 1996 1997 1996 1995 1994(1)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues:
Product revenues ................... $ 500,938 $ 525,962 $ 2,126,973 $ 1,940,796 $ 1,342,323 $ 1,019,010
Service revenues ................... 105,901 71,674 353,624 207,511 130,940 75,917
----------- ----------- ----------- ----------- ----------- -----------
Total net revenues .............. 606,839 597,636 2,480,597 2,148,307 1,473,263 1,094,927
----------- ----------- ----------- ----------- ----------- -----------
Cost of revenues:
Cost of products sold .............. 450,781 482,716 1,922,826 1,764,775 1,236,940 917,939
Cost of services provided .......... 79,872 54,039 267,554 168,957 110,349 64,300
----------- ----------- ----------- ----------- ----------- -----------
Cost of revenues ................ 530,653 536,755 2,190,380 1,933,732 1,347,289 982,239
----------- ----------- ----------- ----------- ----------- -----------
Product gross margin ................... 50,157 43,246 204,147 176,021 105,383 101,071
Services gross margin .................. 26,029 17,635 86,070 38,554 20,591 11,617
----------- ----------- ----------- ----------- ----------- -----------
Total gross margin .............. 76,186 60,881 290,217 214,575 125,974 112,688
Selling, general and administrative
expenses ........................... 61,815 58,547 251,963 192,312 132,586 100,790
Nonrecurring stock compensation costs .. -- -- -- 18,185 -- --
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) from operations ... 14,371 2,334 38,254 4,078 (6,612) 11,898
Interest expense, net .............. 9,669 8,132 37,147 29,726 23,151 17,444
Other income ....................... -- -- 462 -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before income taxes 4,702 (5,798) 1,569 (25,648) (29,763) (5,546)
Provision (benefit) for income taxes ... 2 10 25 28 (509) (2,225)
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) ............... $ 4,700 $ (5,808) $ 1,544 $ (25,676) $ (29,254) $ (3,321)
=========== =========== =========== =========== =========== ===========
Net income (loss) per share ............ $ .14 $ (.18) $ .04 $ (.82) $ (.93) $ (.12)
=========== =========== =========== =========== =========== ===========
Weighted average number of shares and
dilutive common stock equivalents
outstanding(2) ..................... 33,736,205 32,357,840 35,296,435 31,348,340 31,333,300 28,053,165
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------
Sept. 28, June 29, June 30, July 2, July 3,
1997 1997 1996 1995 1994
--------- -------- -------- ------- -------
(in thousands)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets ................. 665,644 683,590 590,588 415,170 351,777
Total long-term liabilities .. 49,477 49,486 52,509 37,224 38,425
Stockholders' equity (deficit) (32,929) (37,732) (39,515) (31,305) (2,623)
</TABLE>
- ----------
(1) The statements of operations data for the Company's 1994 fiscal year
presents the results of operations from August 6, 1993, the date the
Company acquired the net assets of the domestic information systems
business of JWP Inc.
(2) See Note 1 of Notes to Consolidated Financial Statements for an
explanation of the calculation of weighted average number of shares
outstanding.
-11-
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This section contains trend analysis and other forward looking
statements based on current expectations. Actual results may differ materially,
due to a number of factors including those set forth in the section entitled
"Business Factors" contained in Item 1 of this Registration Statement.
OVERVIEW
ENTEX is a leading provider of PC solutions to meet the distributed
information technology systems and end-user support requirements of Fortune 1000
companies and other large enterprises. The Company's total PC management
capabilities include acquisition and procurement services and network,
professional and other outsourcing service support for the PC-based network
environment.
During fiscal 1996 and 1997, the Company completed several acquisitions
to improve its ability to meet customer demands for expanded service offerings,
including (i) Random Access, Inc. ("Random Access"), a provider of information
technology solutions through the sale of microcomputers and technical services
to corporate and institutional clients in the western United States, and (ii)
FCP Technologies, Inc. ("FCP"), a systems integrator specializing in network
integration, migration and consulting services. Each acquisition was accounted
for as a purchase and the results of each have been included in the consolidated
financial statements since the date of the each acquisition. See Note 2 of Notes
to Consolidated Financial Statements.
The Company has two principal sources of revenues: product revenues and
service revenues. Product revenues include acquisition and procurement of
personal computer and network products, software and peripherals. Service
revenues include configuration services, network and professional services,
migration services, outsourcing services, PC and network operation support
services, on-site and centrally located help desk services, as well as asset
management services. ENTEX has expanded rapidly, growing from $1.1 billion in
total net revenues for the eleven months in fiscal 1994 to $2.5 billion in total
net revenues in fiscal 1997. While product revenues have historically accounted
for more than 80% of total net revenues, service revenues have grown in absolute
dollar terms and as a percentage of total net revenues in each fiscal year since
the Company's inception.
-12-
<PAGE> 13
RESULTS OF OPERATIONS
The following table sets forth the percentage of total net revenues
represented by the items in the Company's statements of operations for the
period indicated:
<TABLE>
<CAPTION>
Thee months ended Fiscal year ended
-------------------- -----------------------------
Sept. 28, Sept. 29, June 29, June 30, July 2,
1997 1996 1997 1996 1995
--------- --------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net revenues:
Product revenues ......... 82.5% 88.0% 85.7% 90.3% 91.1%
Service revenues ......... 17.5 12.0 14.3 9.7 8.9
----- ----- ----- ----- -----
Total net revenues .... 100.0 100.0 100.0 100.0 100.0
Cost of revenues ............. 87.4 89.8 88.3 90.0 91.4
----- ----- ----- ----- -----
Gross margin(1) .............. 12.6 10.2 11.7 10.0 8.6
Selling, general and
administrative expenses .. 10.2 9.8 10.2 9.0 9.0
Nonrecurring stock
compensation costs ....... -- -- -- 0.8 --
----- ----- ----- ----- -----
Income (loss) from operations. 2.4 0.4 1.5 0.2 (0.4)
Interest expense, net ........ 1.6 1.4 1.4 1.4 1.6
Income (loss) before income
taxes .................... 0.8 (1.0) 0.1 (1.2) (2.0)
Provision (benefit) for income
taxes .................... -- -- -- -- --
----- ----- ----- ----- -----
Net income (loss) ............ 0.8% (1.0)% 0.1% (1.2)% (2.0)%
===== ===== ===== ===== =====
</TABLE>
- ----------
(1) Product gross margin as a percentage of product revenues and service
gross margin as a percentage of service revenue for each period was as
follows:
<TABLE>
<CAPTION>
Three months ended Fiscal year ended
-------------------------- ----------------------------------------
Sept. 28, Sept. 29, June 29, June 30, July 2,
1997 1996 1997 1996 1995
--------- --------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Product gross margin ........... 10.0% 8.2% 9.6% 9.1% 7.9%
Services gross margin .......... 24.6 24.6 24.3 18.6 15.7
</TABLE>
Three Months Ended September 28, 1997 Compared to Three Months Ended September
29, 1996
The Company's net income improved in the three months ended
September 28, 1997 to $4.7 million compared to a net loss of $5.8 million in the
three months ended September 29, 1996. The improvement was a result of an
increase in product gross margins attributable to improved controls over vendor
programs and a higher percentage of services in the revenue base.
Product revenues. Product revenues were $500.9 million for the three
months ended September 28, 1997 as compared to $526.0 million for the three
months ended September 29, 1996, a decrease of $25.1 million or 4.8%. While the
Company experienced overall unit growth in sales of desktops, laptops and server
units during the three months ended September 28, 1997, the revenue decline
reflects price reductions in average sales price driven by lower manufacturer
prices and intense competition.
Service revenues. Service revenues were $105.9 for the three months
ended September 28, 1997 as compared to $71.7 million for the three months ended
September 29, 1996, an increase of $34.2 million or 47.8%. Service revenues as a
percentage of total net revenues increased to 17.5% for the three months ended
September 28, 1997 as compared to 12.0% in the three months ended September 29,
1996. These increases reflect
-13-
<PAGE> 14
increase in demand from existing customers and the addition of new large
accounts. The Company is focused on continuing to increase service revenue as a
percentage of total net revenues.*
Gross margins. Total gross margins increased to 12.6% for the three
months ended September 28, 1997 as compared to 10.2% for the three months ended
September 29, 1996. This increase was due primarily to the revenue growth in the
higher margin service business. Product gross margin increased to 10.0% or $50.2
million for the three months ended September 28, 1997 as compared to 8.2% or
$43.2 million for the three months ended September 29, 1996. These increases
reflect the Company's efforts to improve product margins through improved
controls over price protection arrangements and vendor allowances and to a
lesser extent, the Company's involvement in certain manufacturers' programs
designed to increase sales of specific products. Future product margins may be
adversely influenced by manufacturers' pricing strategies and increased
competition.* Service margins remained constant over the periods at 24.6%,
reflecting an improved mix of services, partially offset by pricing pressures.
Selling, general and administrative expenses. Selling, general and
administrative expenses were $61.8 million for the three months ended September
28, 1997 as compared to $58.5 million for the three months ended September 29,
1996, an increase of $3.3 million or 5.6%. The increase resulted from
expenditures in support of the Company's growth in services including
investments in the enterprise-wide technology infrastructure to support
operations.
Income from Operations. Income from operations was $14.4 million for
the three months ended September 28, 1997 as compared to $2.3 million in the
three months ended September 29, 1996, an increase of $12.1 million. The
increase reflects significant improvements in gross margins partially offset by
increases in selling, general and administrative expenses to support business
expansion.
Interest expense, net. Net interest expense increased to $9.6
million for the three months ended September 28, 1997 as compared to $8.1
million for the three months ended September 29, 1996, an increase of $1.5
million or 18.9%. The increase was driven by an increase in borrowing rates
under the Company's credit agreements and the prime rate in addition to
increased working capital needs.
Provisions for income taxes. The Company utilized net operating loss
carryforwards to offset federal income tax requirements for the three months
ended September 28, 1997 and September 29, 1996.
Net income. As a result of the factors mentioned above, net income
for the three months ended September 28, 1997 was $4.7 million as compared to a
net loss of $5.8 million for the three months ended September 29, 1996.
Fiscal 1997 Compared to Fiscal 1996
The Company's net income improved in the year ended June 29, 1997 to
$1.5 million compared to a net loss of $25.7 million in the year ended June 30,
1996. The improvement resulted from an increase in product gross margins
attributable to improved controls over vendor programs, an increased percentage
of higher margin services in the revenue base and the effect of a non-recurring
stock compensation charge in 1996.
Product revenues. Product revenues were $2.1 billion in fiscal 1997
as compared to $1.9 billion in fiscal 1996, an increase of $186.2 million or
9.6%. The increase was primarily due to an increase of $159 million in
equipment sales and a $27 million increase in software sales. The increase in
equipment sales reflected the sale of more desktops, laptops and server units to
existing customers as well as new customers, although at a lower average sales
price due to manufacturers' price reductions.
Service revenues. Service revenues were $353.6 million in fiscal
1997 as compared to $207.5 million in fiscal 1996, an increase of $146.1 million
or 70.4%. The increase was due to higher professional service and outsourcing
revenues which were favorably affected by the acquisition of FCP, increased
sales to existing customers and the addition of new customers. An increase in
unit volume of products sold, such as desktops and laptops, also contributed to
the growth in service revenues which the Company believes will continue
- --------
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that the Company's actual future performance will meet
the Company's current expectations. Investors are strongly encouraged to review
the section entitled "Business Factors" contained in Item 1 of this Registration
Statement, for a discussion of factors that could affect future performance. The
reader is cautioned that other sentences and sections not so identified may also
contain forward-looking information.
-14-
<PAGE> 15
to create demand for services such as configuration and installation.* The
Company's emphasis on growing service revenues was reflected in the growth of
service revenues as a percentage of total net revenues from 9.7% in fiscal 1996
to 14.3% in fiscal 1997.*
Gross margins. Total gross margins increased to 11.7% in fiscal 1997
from 10.0% in fiscal 1996, primarily due to the increased product and service
revenues, improved cost controls and increased service revenues in the mix of
products sold. Product gross margins were 9.6% in fiscal 1997 as compared to
9.1% in fiscal 1996. The increase in product gross margins was primarily due to
the Company's efforts to improve controls over price protection arrangements and
vendor allowances and to a lesser extent the Company's involvement in certain
manufacturers' programs designed to increase sales of specific products. The
increase was partially offset by competitive pricing strategies. Service gross
margins increased to 24.3% in fiscal 1997 from 18.6% in fiscal 1996 as a result
of pricing changes, a greater mix of higher margin professional services and the
Company's ability to further utilize its service personnel.
Selling, general and administrative expenses. Selling, general and
administrative expenses were $252.0 million in fiscal 1997 as compared to $192.3
million in fiscal 1996, an increase of $59.7 million or 31.1%. The increase was
in support of the Company's growth in services including investments in
enterprise-wide technology infrastructure to support operations.
Income from Operations. Income from operations was $38.3 million in
fiscal 1997 as compared to $4.1 million in fiscal 1996, an increase of $34.2
million. This increase was due to overall improved profit margins and the effect
of nonrecurring stock compensation costs of $18.2 million which were recorded in
fiscal 1996.
Interest expense, net. Net interest expense was $37.1 million in
fiscal 1997 as compared to $29.7 million in fiscal 1996, an increase of $7.4
million or 25.0%. The increase was due to increased interest rates charged to
the Company by lenders and increased financing to support revenue growth.
Provisions for income taxes. The Company utilized net operating loss
carryforwards to offset federal income tax requirements for the fiscal years
1997 and 1996.
Net income. As a result of the factors mentioned above, net income
was $1.5 million in fiscal 1997 as compared to a loss of $25.7 million in fiscal
1996.
- --------
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that the Company's actual future performance will meet
the Company's current expectations. Investors are strongly encouraged to review
the section entitled "Business Factors" contained in Item 1 of this Registration
Statement, for a discussion of factors that could affect future performance. The
reader is cautioned that other sentences and sections not so identified may also
contain forward-looking information.
-15-
<PAGE> 16
Fiscal 1996 Compared to Fiscal 1995
Product revenues. Product revenues were $1.9 billion in fiscal 1996
as compared to $1.3 billion in fiscal 1995, an increase of $598.5 million or
44.6%. This increase was primarily due to successful sales and marketing efforts
and increased product sales to existing customers as well as sales to new
customers and the acquisition of Random Access.
Service revenues. Service revenues were $207.5 million in fiscal
1996 as compared to $130.9 million in fiscal 1995, an increase of $76.6 million
or 58.5%. The increase was primarily due to successful sales and marketing
efforts and increased sales to existing customers and new customers.
Gross margins. Total gross margins increased to 10.0% in fiscal 1996
from 8.6% in fiscal 1995, primarily due to the increase in both product and
service gross margins. Product gross margins were 9.1% in fiscal 1996 as
compared to 7.9% in fiscal 1995. Product gross margins were favorably impacted
by increased sales of higher margin network products. Service gross margins were
18.6% in fiscal 1996 as compared to 15.7% in fiscal 1995.
Selling, general and administrative expenses. Selling, general and
administrative expenses were $192.3 million in fiscal 1996 as compared to $132.6
million in fiscal 1995, an increase of $59.7 million or 45%. The increase
reflected the integration of Random Access into the Company's operations and
investment in the Company's configuration capabilities, order processing
enhancements and enterprise-wide technology infrastructure upgrades.
Non-recurring stock compensation costs. Stock compensation costs in
fiscal 1996 were $18.2 million, consisting of $16.2 million related to
remeasurement of compensation expense to fair market value and the assumption of
$2.0 million in estimated tax withholding.
Income from Operations. Income from operations, exclusive of
nonrecurring stock compensation costs, was $22.3 million in fiscal 1996, as
compared to a loss of $6.6 million in fiscal 1995.
Interest expense, net. Net interest expense was $29.7 million in
1996 as compared to $23.1 million in 1995, an increase of $6.6 million or 28.4%.
The increase was primarily due to higher borrowings to finance increased working
capital requirements, partially offset by lower effective interest rates.
Net loss. As a result of the factors mentioned above, the Company
experienced a net loss of $25.7 million in 1996 as compared to a net loss of
$29.3 million in 1995. Exclusive of stock compensation costs, the Company's net
loss in fiscal 1996 was $7.5 million.
-16-
<PAGE> 17
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain unaudited quarterly
statements of operations data for the five quarters ended September 28, 1997, as
well as such data expressed as a percentage of total net revenues. The unaudited
data has been prepared on the same basis as the audited financial statements
appearing elsewhere herein, and include all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of such
information for the periods presented. Such statement of operations data should
be read in conjunction with the consolidated financial statements of the Company
and the related notes thereto appearing elsewhere herein. The operating results
for any quarter are not indicative of the operating results for any future
period.
<TABLE>
<CAPTION>
Three months ended
----------------------------------------------------------------------
Sept. 28, June 29, March 31, Dec. 31, Sept. 29,
1997 1997 1997 1996 1996
--------- --------- --------- --------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net revenues:
Product revenues ....................... $ 500,938 $ 542,032 $ 506,370 $ 552,609 $ 525,962
Service revenues ....................... 105,901 104,356 92,824 84,770 71,674
--------- --------- --------- --------- ---------
Total net revenues .................. 606,839 646,388 599,194 637,379 597,636
--------- --------- --------- --------- ---------
Cost of revenues:
Cost of products sold .................. 450,781 482,841 456,088 501,181 482,716
Cost of services provided .............. 79,872 78,844 71,161 63,510 54,039
--------- --------- --------- --------- ---------
Cost of revenues .................... 530,653 561,685 527,249 564,691 536,755
--------- --------- --------- --------- ---------
Product gross margin ....................... 50,157 59,191 50,282 51,428 43,246
Services gross margin ...................... 26,029 25,512 21,663 21,260 17,635
--------- --------- --------- --------- ---------
Total gross margin ..................... 76,186 84,703 71,945 72,688 60,881
Selling, general and administrative expenses 61,815 64,698 61,811 66,907 58,547
--------- --------- --------- --------- ---------
Income from operations ..................... 14,371 20,005 10,134 5,781 2,334
Interest expense, net ...................... 9,669 9,839 9,418 9,758 8,132
Other income ............................... -- 462 -- -- --
--------- --------- --------- --------- ---------
Income (loss) before income taxes ...... 4,702 10,628 716 (3,977) (5,798)
Provision (benefit) for income taxes ....... 2 1 9 5 10
--------- --------- --------- --------- ---------
Net income (loss) ...................... $ 4,700 $ 10,627 $ 707 $ (3,982) $ (5,808)
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Three months ended
---------------------------------------------------------
Sept. 28, June 29, March 31, Dec. 31, Sept. 29,
1997 1997 1997 1996 1996
-------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Net revenues:
Product revenues ....................... 82.5% 83.9% 84.5% 86.7% 88.0%
Service revenues ....................... 17.5 16.1 15.5 13.3 12.0
----- ----- ----- ----- -----
Total net revenues .................. 100.0 100.0 100.0 100.0 100.0
Cost of revenue ............................ 87.4 86.9 88.0 88.6 89.8
----- ----- ----- ----- -----
Gross margin(1) ............................ 12.6 13.1 12.0 11.4 10.2
Selling, general and administrative expenses 10.2 10.0 10.3 10.5 9.8
----- ----- ----- ----- -----
Income from operations ..................... 2.4 3.1 1.7 0.9 0.4
Interest expense, net ...................... 1.6 1.5 1.6 1.5 1.4
Other income ............................... -- -- -- -- --
----- ----- ----- ----- -----
Income (loss) before income taxes ...... 0.8 1.6 0.1 (0.6) (1.0)
Provision (benefit) for income taxes ....... 0.0 -- -- -- --
----- ----- ----- ----- -----
Net income (loss) ...................... 0.8% 1.6% 0.1% (0.6)% (1.0)%
===== ===== ===== ===== =====
</TABLE>
- ----------
(1) Product gross margin as a percentage of product revenues and
services gross margin as a percentage of service revenue for each
period were as follows:
<TABLE>
<CAPTION>
Three months ended
-----------------------------------------------------
Sept. 28, June 29, March 31, Dec. 31, Sept. 29,
1997 1997 1997 1996 1996
-------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Product gross margin ......... 10.0% 10.9% 9.9% 9.3% 8.2%
Services gross margin ........ 24.6 24.4 23.3 25.1 24.6
</TABLE>
-17-
<PAGE> 18
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations with borrowings
under various credit lines. Cash provided by (used in) operating activities was
$21.1 million, $(26.1) million, $(74.7) million and $(10.1) million during the
three months ended September 28, 1997 and in fiscal years 1997, 1996 and 1995,
respectively. Cash provided by operations during the three months ended
September 28, 1997 resulted primarily from net income of $4.7 million,
depreciation and other non-cash charges to income, and from changes in operating
assets and liabilities. Cash used in operations in fiscal years ended June 29,
1997 and June 30, 1996, respectively, increased due to greater working capital
requirements resulting from higher revenues. For fiscal year ended 1995, cash
used in operations increased primarily due to a net loss of $29.3 million which
was partially offset by a decrease in net working capital requirements.
Cash (used in) investing activities was $(4.2) million, $(27.8)
million, $(33.1) million and $(9.0) million during the three months ended
September 28, 1997 and in fiscal years 1997, 1996 and 1995, respectively. Cash
was used during these periods for capital expenditures and for acquisitions.
Cash provided from (used in) financing activities was $(22.4)
million, $57.2 million, $108.3 million and $19.9 million during the three months
ended September 28, 1997 and in fiscal years 1997, 1996 and 1995, respectively.
The fluctuations in cash from financing activities during these periods resulted
primarily from changes in the Company's borrowings to support the business
growth.
As of September 28, 1997, the Company's primary source of liquidity
consisted of various financing provided by IBMCC and an inventory financing
facility with FINOVA Capital Corporation ("FINOVA"). The IBMCC Financing
Agreement provides for borrowings under the IBMCC Working Capital Line of
Credit, the interest bearing portion of which was $333.3 million as of September
28, 1997. The amount of available borrowings under the IBMCC Financing Agreement
may be increased for higher seasonal purchasing requirements, and may be reduced
or terminated by IBMCC upon 60 days prior written notice. Amounts outstanding
under the IBMCC Working Capital Line of Credit bear interest at the prime rate
plus .50% (9.0% at September 28, 1997). Borrowings under the IBMCC Financing
Agreement are secured by the Company's assets, including certain accounts
receivable, certain inventories and other assets. The agreement is subject to
annual renewal and expires September 15, 1998.
In connection with the Company's acquisition of Random Access in
September 1995, the IBMCC Financing Agreement was amended to provide for the
IBMCC Long-Term Loan in the original principal amount of $20 million. The IBMCC
Long-Term Loan is required to remain outstanding unless there are no outstanding
interest bearing advances under the IBMCC Financing Agreement. The IBMCC
Financing Agreement was further amended in December 1996 and July 1997 to
provide for the Short-Term Loan in the original principal amount of $55 million
and the Special Working Capital Advance in the original principal amount of $20
million. The Short-Term Loan was repaid in full subsequent to September 28,
1997. Amounts outstanding under the IBMCC Long-Term Loan and Special Working
Capital Advance bear interest at the prime rate plus 2.50% (11.0% at September
28, 1997). At September 28, 1997, $17.3 million of principal was outstanding
under the IBMCC Long-Term Loan, $27.5 of principal was outstanding under the
Short-Term Loan and $20.0 million of principal was outstanding under the Special
Working Capital Advance.
As of September 28, 1997, the Company had $110 million available for
borrowing under its inventory line of credit with FINOVA. The line of credit is
secured by the Company's inventory financed by FINOVA. At September 28, 1997,
the principal amount outstanding under this line of credit was $70 million.
Under the terms of the agreement with FINOVA, the Company pays no interest on
this borrowing.
The IBMCC Financing Agreement provides that if Dort A. Cameron III
ceases to own and/or control at least 35% of the issued and outstanding capital
stock of the Company, the Company will be deemed to be in default under the
IBMCC Financing Agreement. In addition, the IBMCC Financing Agreement contains
restrictive covenants with respect to maintenance of minimum tangible net worth,
current ratio, fixed asset additions, fixed
-18-
<PAGE> 19
charges and certain additional indebtedness. In addition, the IBMCC Financing
Agreement prohibits the Company from paying cash dividends on Common Stock.
The Company is aware of the issues associated with the programming
code in existing computer systems as the millennium (year 2000) approaches. The
"year 2000" problem is complex since virtually every computer operation will be
affected in some way by the rollover of the two digit year value to 00. The
issue is whether computer systems will properly recognize date sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail. The Company is utilizing both internal and external resources to identify,
correct or reprogram, and test the systems for the year 2000 compliance. It is
anticipated that all reprogramming efforts will be complete by December 31,
1999, allowing adequate time for testing.* Management has not yet assessed the
amount required for the year 2000 compliance expense and related potential
effect on the Company's earnings.
The Company believes its current cash balances and its available
credit facilities will be sufficient to meet its anticipated cash needs for
capital expenditures for the next 12 months.* The Company intends to continue to
finance a significant portion of its working capital needs through credit
facilities. The Company believes that it may seek to raise additional funds
through public or private equity or debt financing or from other sources to
support the future growth of the business. However, there can be no assurance
that the Company will be able to raise such additional funding.
ITEM 3. PROPERTIES
The Company's headquarters are located in Rye Brook, New York, where
the Company leases approximately 31,200 square feet of office space under a
lease which expires on May 30, 2002 and approximately 12,100 square feet under a
lease which expires December 31, 1998. In addition, the Company owns a 255,000
square foot facility in Erlanger, Kentucky which serves as the Company's
integration center. The Company also leases approximately 151,949 square feet of
office space in Mason, Ohio, which houses the Company's NSC, including its CAC,
Solution Line, dispatch services and training centers. The lease for such
property expires on July 17, 2005. The Company leases approximately 19,200
square feet of office space in Canton, Massachusetts to accommodate the
Company's data processing and credit and collections departments under a lease
which expires June 30, 1998.
The Company leases additional office space for sales, services and
support staff in various states. The Company believes that alternate office
space is available on comparable terms in each location.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to
the beneficial ownership of the Company's Common Stock as of November 30, 1997
for (i) each person or entity who is known by the Company to beneficially own
five percent or more of the outstanding Common Stock of the Company, (ii) each
of the Company's directors, (iii) each of the Named Officers (as defined below),
and (iv) all directors and executive officers of the Company as a group and
reflects the nine-for-one stock dividend of Common Stock effected by the
Company on August 15, 1995 and the four-for-one stock dividend of Common Stock
effected by the Company on November 25, 1997:
- --------
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that the Company's actual future performance will meet
the Company's current expectations. Investors are strongly encouraged to review
the section entitled "Business Factors" contained in Item 1 of this Registration
Statement, for a discussion of factors that could affect future performance. The
reader is cautioned that other sentences sections not so identified may also
contain forward-looking information.
-19-
<PAGE> 20
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED(1)
--------------------------
NAME OF GROUP OR BENEFICIAL OWNERS NUMBER PERCENT
- ------------------------------------------------------- ------------ --------
<S> <C> <C>
Dort A. Cameron III(2)
c/o Entex Information Services, Inc.
Six International Drive
Rye Brook, NY 10573 ................................. 25,000,000 77.2%
IBM Credit Corporation(3)
1133 Westchester Avenue
White Plains, NY 10604 .............................. 2,436,055 7.5%
John A. McKenna, Jr.(4)(5)............................. 666,650 2.1%
Kenneth Ghazey(6) ..................................... 333,330 1.0%
Dale H. Allardyce(7) .................................. 300,000 *%
David J. Csira(5)(8) .................................. 233,330 *%
Richard Nathanson ..................................... -- --
R. Randolph Devening(9) ............................... 26,235 *%
Linwood A. (Chip) Lacy, Jr.(10) ....................... 26,235 *%
Frank W. Miller ...................................... 13,740 *%
All directors and executive officers as a
group (11 persons)(11) .............................. 26,924,520 82.1%
</TABLE>
- ----------
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission. In computing the number of
shares beneficially owned by a person and the percentage ownership
of that person, shares of Common Stock subject to options held by
that person that are currently exercisable or exercisable within 60
days of November 30, 1997 are deemed outstanding. Such shares,
however, are not deemed outstanding for the purposes of computing
the percentage ownership of each other person. Except as indicated
in the footnotes to this table, pursuant to the Stockholders'
Agreement and pursuant to applicable community property laws, each
stockholder named in the table has sole voting and investment power
with respect to the shares set forth opposite such stockholder's
name. See "Business-- Business Factors-- Control by Principal
Stockholders" and "Description of Company's Securities to be
Registered."
(2) Includes 21,500,000 shares registered in the name of ENTEX
Associates L.P. Dort A. Cameron III is the sole stockholder of the
Putnam Group, Inc., the general partner of ENTEX Associates L.P.
Includes 1,851,850 shares currently owned by Mr. Cameron which are
subject to an immediately exercisable option to purchase such shares
which Mr. Cameron granted to IBMCC. See "Certain Relationships and
Related Transactions."
(3) Includes 1,851,850 shares of Common Stock currently owned by Mr.
Cameron which are subject to an option immediately exercisable by
IBMCC to purchase such shares and 584,205 shares of the Company's
Common Stock subject to an immediately exercisable warrant. See
"Certain Relationships and Related Transactions."
(4) Excludes 1,695,120 shares of the Company's Common Stock which are
subject to unvested options.
(5) Pursuant to the Stockholders' Agreement, in the event that
Mr. McKenna's or Mr. Csira's employment is terminated for any
reason, the Company shall have a right to purchase all shares of
Common Stock owned by him. If the Company is unable to purchase
such shares in cash, the Cameron Affiliates will have a right to
purchase such shares. See "Business -- Business Factors -- Control
by Principal Stockholders" and "Certain Relationships and Related
Transactions."
(6) Includes 333,330 shares of the Company's Common Stock currently
owned by Mr. Ghazey which are subject to an option exercisable
within 60 days of November 30, 1997.
(7) Pursuant to the Stockholders' Agreement, in the event Mr.
Allardyce's employment is terminated as a result of death or
disability, the Company shall have the right to purchase and Mr.
Allardyce or his legal representative shall have the right to
require the Company to purchase all of his shares of Common Stock.
In the event Mr. Allardyce's employment is terminated for cause, the
Company shall have a right to purchase all of his shares of Common
Stock. See "Business -- Business Factors -- Control by Principal
Stockholder" and "Certain Relationships and Related Transactions."
(8) Includes 33,330 shares of the Company's Common Stock currently owned
by Mr. Csira which are subject to an option exercisable within 60
days of November 30, 1997.
(9) Includes 12,495 shares of the Company's Common Stock currently owned
by Mr. Devening which are subject to an option exercisable within 60
days of November 30, 1997.
(10) Includes 12,495 shares of the Company's Common Stock currently owned
by Mr. Lacy which are subject to an option exercisable within 60
days of November 30, 1997.
(11) Includes 391,650 shares of the Company's Common Stock which are
subject to options exercisable within 60 days of November 30, 1997.
-20-
<PAGE> 21
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
MANAGEMENT -- EXECUTIVE OFFICERS, DIRECTORS AND OTHER KEY EMPLOYEE
The executive officers, directors and other key employees of the
Company, and their ages and positions as of November 30, 1997, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------------- --- ----------------------------------------------------
<S> <C> <C>
Dort A. Cameron III.......................... 52 Chairman of the Board of Directors
John A. McKenna, Jr.......................... 42 President, Chief Executive Officer and Director
Kenneth Ghazey............................... 41 Executive Vice President, Finance and Administration,
Chief Financial Officer and Director
Dale H. Allardyce............................ 48 Executive Vice President, Operations
David J. Csira............................... 40 Executive Vice President, Field Operations
Philip R. Johnson............................ 49 Senior Vice President, Human Resources
John Lyons................................... 44 Senior Vice President, Sales and Marketing
Richard Nathanson............................ 40 Senior Vice President, Services
R. Randolph Devening(1)...................... 55 Director
Linwood A. (Chip) Lacy, Jr.(1)............... 52 Director
Frank W. Miller(1)........................... 52 Director
</TABLE>
- ----------
(1) Member of the Audit and Compensation Committees.
Mr. Cameron co-founded the Company in August 1993, and has served as
a director and Chairman of the Board of the Company since its formation. From
October 1988 to the present, Mr. Cameron has served as the managing general
partner of EBD, L.P., the general partner of The Airlie Group, L.P., a private
investment limited partnership; from June 1984 to the present, as the general
partner of BMA, the general partner of Investment Limited Partnership, a private
investment limited partnership; and from December 1995 to the present as
managing member of Airlie Enterprises LLC, a private consulting company ("Airlie
Enterprises"). Mr. Cameron holds a B.A. from Middlebury College and an M.B.A.
from Boston University. In 1983, Mr. Cameron was diagnosed with multiple
sclerosis. See "Business--Business Factors--Need to Recruit and Retain
Management, Technical and Sales Personnel" and "--Control by Principal
Stockholders."
Mr. McKenna co-founded the Company in August 1993, and has served as
a Director and as President of the Company since its inception and as Chief
Executive Officer since April 1996. From March 1989 to March 1993, Mr. McKenna
held various positions with JWPIS, including Executive Vice President of Sales
and Marketing, President of the Integration Services Division, and most recently
as Senior Executive Vice President. Mr. McKenna holds a B.A. from Trinity
College.
Mr. Ghazey joined the Company as Executive Vice President, Finance
and Administration, Chief Financial Officer and Director in January 1997. Mr.
Ghazey served as President, Chief Operating Officer and a Director for Darling
International, a publicly-owned food waste recycler, from 1993 to December 1996,
and as Executive Vice President, Chief Financial Officer and Treasurer of
Darling International from 1990 to 1992. Mr. Ghazey is a Certified Public
Accountant and holds a B.S. in accounting from the University of Vermont.
Mr. Allardyce joined the Company in February 1995 as Executive Vice
President, Operations. From January 1993 to February 1995, Mr. Allardyce served
as Senior Vice President of the TSI Business Unit at THORN Americas, Inc., a
consumer rental company. From March 1982 to December 1992, Mr. Allardyce was
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<PAGE> 22
employed by The Southland Corporation, an operator of convenience stores, most
recently as Vice President of Distribution, Manufacturing and Procurement. Mr.
Allardyce holds a B.B.A. in Industrial Management from the University of Texas.
Mr. Csira joined the Company as Vice President, West Operations in
August 1993 in connection with the acquisition of JWPIS and served as Senior
Vice President, West Operations from October 1995 to November 1996 and has
served as Executive Vice President, Operations since November 1996. From July
1989 to August 1993, Mr. Csira served in various sales and management positions
with JWPIS, most recently as Vice President, West Operations. Prior to joining
JWPIS, Mr. Csira served as Vice President of sales for Clancy-Paul, a New
Jersey-based computer reseller. Mr. Csira holds a B.S. in Business
Administration from the University of Southern California.
Mr. Johnson joined the Company in November 1994 as Senior Vice
President, Human Resources. From May 1993 to May 1994, Mr. Johnson served as
Senior Vice President, Human Resources, Corporate for R.H. Macy, Inc., a
department store operator. From April 1991 to May 1993, Mr. Johnson served as
Senior Vice President, Human Resources for Saks Fifth Avenue, a specialty store
operator. Mr. Johnson holds a B.S. in Industrial Engineering and an M.B.A. from
the University of Florida.
Mr. Lyons joined the Company in April 1994 as Vice President,
Marketing and has served as Senior Vice President, Sales and Marketing since
October 1996. From August 1993 until March 1994, Mr. Lyons was Vice President,
Sales and Marketing for Carrabassett Spring Water. From July 1976 to July 1993,
Mr. Lyons held various sales and marketing management positions at IBM. Mr.
Lyons holds a B.S. in marketing from Syracuse University.
Mr. Nathanson joined the Company in July 1996 as Senior Vice
President, Network and Professional Services in connection with the Company's
acquisition of FCP, a network integration and professional services consulting
firm and has served as Senior Vice President, Services since April 1997. From
February 1984 to July 1996, Mr. Nathanson served as President and Chief
Executive Officer of FCP.
Mr. Devening has served as a Director of the Company since June
1996. Since August 1994, Mr. Devening has served as Chairman, President and
Chief Executive Officer of Foodbrands America, Inc., a diversified food
manufacturing company. From April 1993 to July 1994, Mr. Devening served as Vice
Chairman and Chief Financial Officer of Fleming Companies, Inc., a food
distribution and marketing company. From July 1989 to March 1993, Mr. Devening
served as Executive Vice President and Chief Financial Officer at Fleming
Companies, Inc. Mr. Devening holds a B.A. from Stanford University and an M.B.A.
from the Harvard Graduate School of Business. Mr. Devening serves as a director
of Hancock Fabrics Inc., as well as numerous private companies.
Mr. Lacy has served as a Director of the Company since June 1996.
From July 1985 until May 1996, Mr. Lacy served as the Chief Executive Officer
and Chairman of Ingram Micro Inc. and its predecessor company Micro D Inc., a
distributor of microcomputer products. From December 1993 to January 1996, Mr.
Lacy served as President of Ingram Industries, the holding company of Ingram
Micro Inc., and continues to serve as a director of Ingram Industries. From June
1995 to April 1996, he served as the Chief Executive Officer of Ingram
Industries. From October 1996 to October 1997, Mr. Lacy served as President and
Chief Executive Officer of MicroWarehouse, a direct marketer of computer
products. Mr. Lacy holds a B.S. in Chemical Engineering and an M.B.A. from the
University of Virginia. Mr. Lacy serves as a director of Earthlink and Micro
Warehouse.
Mr. Miller has served as a Director of the Company since September
1994. Since January 1995, Mr. Miller has served as President of Miller
Associates, Inc., a management consulting firm. From February 1990
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<PAGE> 23
to December 1994, Mr. Miller served as the Vice Chairman and Chief Executive
Officer of Darling International, a publicly owned food waste recycling company.
Mr. Miller holds a B.S. in Industrial Management from the Lowell Technological
Institute. Mr. Miller serves on the boards of directors of several private
companies.
The Company currently has six directors. All directors serve on the
Board of Directors of the Company until the next annual meeting of the
stockholders of the Company, and until their successors are elected and
qualified. There are no family relationships among any of the directors or
executive officers of the Company. The Company's executive officers serve at the
discretion of the Board of Directors.
In June 1996, the Board of Directors established an Audit
Committee and a Compensation Committee. The Audit Committee is currently
comprised of Messrs. Devening, Lacy and Miller and is chaired by Mr. Miller. The
Audit Committee oversees the activities of the Company's independent auditors
and reviews the Company's internal accounting procedures and controls. The
Compensation Committee is currently comprised of Messrs. Devening, Lacy and
Miller and is chaired by Mr. Devening. The Compensation Committee makes
recommendations to the Board of Directors with respect to general compensation
and benefit levels and other related matters, reviews and approves the
compensation and benefits for the Company's executive officers, administers the
Company's stock purchase and stock option plans and makes recommendations to the
Board of Directors regarding such matters.
ITEM 6. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth information concerning the
compensation paid by the Company during the Company's fiscal year ending June
29, 1997 to the Company's Chief Executive Officer, and each of the Company's
four other most highly compensated executive officers (collectively, the "Named
Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARD
-----------
ANNUAL COMPENSATION SECURITIES
FISCAL -------------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (1)
- -------------------------------------------------------- ------ --------- --------- -----------
<S> <C> <C> <C> <C>
John A. McKenna, Jr .................................... 1997 357,199 150,171 --
President and Chief Executive Officer
Kenneth Ghazey(2) ...................................... 1997 130,246 -- 880,000
Executive Vice President, Finance and Administration,
and Chief Financial Officer
Dale H. Allardyce ...................................... 1997 239,623 135,371 --
Executive Vice President, Operations
David J. Csira ......................................... 1997 226,999 116,877 100,000
Executive Vice President, Field Operations
Richard Nathanson ...................................... 1997 258,048 193,787(3) 187,395
Senior Vice President, Services
</TABLE>
- ----------
(1) The stock options listed in the table represent options to purchase
Common Stock of the Company under the Company's 1996 Performance
Incentive Plan ("PIP") or the Company's 1996 Stock Option Plan (the
"EIS Plan") and reflect the nine-for-one stock dividend of Common
Stock effected by the Company on August 15, 1995 and the
four-for-one stock dividend of Common Stock effected by the Company
on November 25, 1997.
(2) Mr. Ghazey was appointed Executive Vice President, Finance and
Administration and Chief Financial Officer in January 1997.
(3) Includes $120,787 bonus payable by FCP at the time of the
acquisition and paid by the Company after the closing.
-23-
<PAGE> 24
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth for each of the Named Officers who
received options granted during the fiscal year ended June 29, 1997 certain
information concerning such grants and reflect the nine-for-one stock dividend
of Common Stock effected by the Company on August 15, 1995 and the four-for-one
stock dividend of Common Stock effected by the Company on November 25, 1997:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------
POTENTIAL REALIZABLE
PERCENT OF VALUE OF ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS EXERCISE PRICE APPRECIATION
UNDERLYING GRANTED TO PRICE FOR OPTION TERM(3)
OPTIONS EMPLOYEES PER EXPIRATION --------------------------
NAME GRANTED IN 1997 SHARE (1) DATE (2) 5%($) 10%($)
- -------------------------------------- ----------- ----------- --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth A. Ghazey(4).................. 880,000 43.22% $2.04 5/27/07 1,127,885 2,858,281
David J. Csira(5)..................... 100,000 4.91 2.04 6/26/07 128,169 324,805
Richard Nathanson..................... 154,885(6) 7.61 2.04 7/10/01 87,209 192,712
32,510(7) 1.60 2.04 8/01/01 18,305 40,450
</TABLE>
- ----------
(1) In determining the fair market value of the Company's Common Stock,
the Board of Directors considered various factors, including the
Company's financial condition and business prospects, its operating
results, the absence of a market for its Common Stock, the risks
normally associated with investments in companies engaged in similar
businesses and the market prices of securities of certain
competitors. The exercise price for options granted under the PIP
may be paid in any form as shall be permitted by the Company's
Compensation Committee of the Board of Directors, including without
limitation cash, shares of the Company's Common Stock, other awards
granted or other property, including promissory notes. The exercise
price for options granted under the EIS Plan may be paid in cash or
other property including promissory notes, shares of the Company's
Common Stock, or any form of "cashless" exercise, including by net
exercise, as shall be permitted by the Company's Compensation
Committee of the Board of Directors.
(2) Options may terminate before their expiration dates if the
optionee's status as an employee or consultant is terminated or upon
the optionee's death or disability. Options must generally be
exercised within 30 days of the termination of the optionee's status
as an employee or consultant of the Company, or within 12 months
after such optionee's death or disability. If, however, an optionee
is terminated for cause, all vested options shall be canceled on the
date of grant.
(3) The 5% and 10% assumed annual rates of compounded stock price
appreciation are mandated by rules of the Securities and Exchange
Commission and do not represent the Company's estimate or projection
of the Company's future Common Stock prices.
(4) Represents (i) 147,200 shares of the Company's Common Stock subject
to an incentive stock option, (ii) 352,800 shares of the Company's
Common Stock subject to a non-qualified stock option and (iii)
380,000 shares of the Company's Common Stock subject to a
performance stock option. All options were granted pursuant to the
Company's PIP. One-third of each of the incentive stock option and
the non-qualified stock option vested immediately upon grant and
additional one-third of such options shall vest after each
anniversary of January 6, 1997. The performance stock option shall
vest 100% on May 27, 2004, provided, however, that vesting may be
accelerated based on the value of the Company's Common Stock.
(5) Represents incentive stock option granted pursuant to the Company's
PIP. One-third of such option vested immediately upon grant and
additional one-third of such option shall vest after each
anniversary of June 26, 1997.
(6) Represents a non-qualified stock option granted pursuant to the
Company's EIS Plan. One-half of such option shall vest on July 10,
1998 and the remaining portion shall vest on July 10, 1999.
(7) Represents a non-qualified stock option granted pursuant to the
Company's EIS Plan. One-half of such option shall vest on August 1,
1998 and the remaining portion shall vest on August 1, 1999.
DIRECTOR COMPENSATION
The Company does not pay cash compensation to its directors.
However, under the Company's 1996 Non-Employee Director Stock Plan, each
non-employee director receives an annual retainer and fees for each Board or
committee meeting in the form of shares of the Company's Common Stock. In
addition, the Company reimburses directors for expenses incurred in attending
board and committee meetings.
Since inception, the Company has paid Mr. Cameron a salary for
services rendered in his capacity as Chairman of the Board. During fiscal 1997,
his annual salary was $400,000.
-24-
<PAGE> 25
EMPLOYMENT AGREEMENTS
The Company has entered into agreements with certain of the
Company's executive officers, including John A. McKenna, Jr. the Company's
President and Chief Executive Officer, Kenneth A. Ghazey, the Company's
Executive Vice President, Finance and Administration and Chief Financial
Officer, Dale H. Allardyce, the Company's Executive Vice President, Operations,
David J. Csira, the Company's Executive Vice President, Field Operations and
Richard Nathanson, the Company's Senior Vice President, Services.
Mr. McKenna's severance agreement provides that upon a Severance
Event (as defined below), he will be entitled to a payment equal to 12 times his
monthly compensation as of the date of termination (including his bonus or any
variable compensation at 100% of target). In addition, if a Severance Event
occurs or Mr. McKenna's employment is terminated prior to a public offering or
change of control (as defined below) and the Company elects to repurchase his
shares of Common Stock pursuant to the Stockholders' Agreement, Mr. McKenna
shall be entitled to receive (i) the difference between the book value as of the
end of the most recent fiscal year and the Share Value (as defined below) and
(ii) a tax gross-up for the difference between ordinary income tax treatment and
capital gains tax treatment resulting from such repurchase, computed to put Mr.
McKenna in the same position he would have been in if he had timely made an IRC
Section 83(b) election. A "Severance Event" is defined as (i) a termination for
any reason other than cause or as a result of his death, disability or voluntary
resignation or (ii) a change of control which results in a reduction of his base
compensation, a reduction in the level of authority or scope of responsibilities
or relocation. The agreement provides for the acceleration of the vesting period
pertaining to stock options granted to him in addition to extending his exercise
period to two years after termination in the event of a Severance Event. Mr.
McKenna's severance agreement terminates on August 6, 2000.
Mr. Ghazey's at-will employment agreement provides for an annual
base salary of $275,000 and participation in the ENTEX Management Incentive Plan
at a target bonus of 50% of his base salary for 100% achievement of established
goals. In addition, Mr. Ghazey's employment agreement provides that upon (i) the
termination of his employment by the Company for other than cause or as a result
of death, disability or voluntary resignation, (ii) a change of control (as
defined below) or (iii) a unilateral decrease in his aggregate compensation,
benefits and incentive package which is not uniformly applied to all other
senior executive officers, he will be entitled to one year's base salary at the
then current rate and all incentive compensation earned but not paid and under
the Management Incentive Plan then in effect.
Mr. Allardyce's agreement is effective until 24 months following a
change of control (as defined below) or until November 30, 1998 if no change of
control has occurred by such date. Mr. Allardyce's retention agreement provides
that upon a change of control followed by (i) a termination for other than cause
or as a result of his death, disability or voluntary resignation, (ii) a
reduction in his compensation, (iii) a reduction in the level of authority or
scope of responsibilities or (iv) a relocation, he will be entitled to 12 times
his monthly compensation as of the date of termination (including his bonus at
100% of target).
Mr. Csira's at-will employment agreement provides for an annual base
salary of $250,000 and participation in the ENTEX Management Incentive Plan at a
target bonus of 50% of his base salary for 100% achievement of established
goals. In addition, Mr. Csira's employment agreement provides that if he is
terminated following a change in control (as defined below), other than for
cause, he is entitled to one year base salary then in effect plus bonus at 100%
of target.
Mr. Nathanson's employment agreement provides for a monthly base
salary of $18,333, participation in the ENTEX Management Incentive Plan at a
target bonus of not less than 50% of his base salary and $1,000 per month for
mortgage expenses. In addition, Mr. Nathanson's employment agreement provides
that upon termination without cause, he will be entitled to
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<PAGE> 26
severance payments equal to 12 times his monthly compensation as of the date of
termination plus bonus at 100% of target. Mr. Nathanson is subject to a covenant
not to compete until the later of July 1999 or one year after his employment
with the Company is terminated.
A "change of control" for purposes of Mr. McKenna's and Mr. Csira's
agreements is defined as an event in which the Cameron Affiliates no longer own
voting securities of the Company entitled to cast a majority of votes for
election of the Board of Directors of the Company. A "change of control" for
purposes of Mr. Allardyce's and Mr. Ghazey's agreements is defined as a transfer
of ownership or control of more than 50% of all of the assets or shares of the
Company.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Share Ownership.
Dort A. Cameron III, the Company's Chairman, owns of record
3,500,000 shares of the Company's Common Stock. In addition, ENTEX Associates,
L.P., a Delaware limited partnership, owns 21,500,000 shares of the Company's
Common Stock. Mr. Cameron is the sole stockholder of The Putnam Group, Inc., the
general partner of ENTEX Associates, L.P. (the "Putnam Group"). Two of the
limited partners of ENTEX Associates, L.P., Airlie Associates and Airlie
Associates II, are general partnerships consisting of Mr. Cameron's relatives.
The other limited partners of ENTEX Associates, L.P. are business associates of
Mr. Cameron. Mr. Cameron has voting and dispositive power over the shares of the
Company's Common Stock held by ENTEX Associates, L.P. and, accordingly, may be
deemed to have beneficial ownership with respect to these shares. In connection
with the restructuring of indebtedness under the IBMCC Financing Agreement in
December 1996, Mr. Cameron and ENTEX Associates, L.P., along with Mr. McKenna,
have pledged the Common Stock held by each to IBMCC as additional collateral.
See "--IBMCC Financing."
Indebtedness Between the Company and Certain Affiliates
In July 1993, Mr. Cameron, Airlie Associates and Airlie Associates
II loaned $3.13 million, $340,000 and $780,000, respectively, to ENTEX Holdings.
In addition, Mr. Cameron, in December 1993, loaned ENTEX Holdings $312,500.
These loans are evidenced by promissory notes (the "1993 Notes"). The 1993 Notes
issued in July 1993 are due on July 29, 2000 and the 1993 Note issued in
December 1993 is due on August 6, 2000. The 1993 Notes have been assumed by the
Company and $415,925 principal amount repaid in connection with the merger of
ENTEX Holdings with and into the Company on June 28, 1996 (the "Holdings
Merger"). Interest on the 1993 Notes is payable quarterly at a rate equal to the
prime rate plus 2.50%. On August 6, 1993, the Company borrowed $5.3 million from
Citibank N.A. to partially finance the acquisition of JWPIS. Mr. Cameron
personally guaranteed the repayment of this loan. In connection with the
Holdings Merger, the outstanding balance of this loan, approximately $4.1
million, was repaid.
Payments to Affiliates
From December 1993 to December 1995, ENTEX Holdings paid to the
Putnam Group a monthly overhead allocation fee of $15,000 for a total of
$360,000. Such monthly fee was paid by ENTEX Holdings to Airlie Enterprises from
January 1996 to June 1996, and by the Company to Airlie Enterprises from July
1996 to the present. In addition, in October 1995, ENTEX Holdings paid a
consulting fee to Airlie Enterprises the amount of $500,000.
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<PAGE> 27
Transfer of Entex Holdings Investments; Assets
During fiscal years 1994, 1995 and 1996, ENTEX Holdings invested
$335,000 in National Teacher Academy, Inc. in exchange for promissory notes and
shares representing 51% of the outstanding capital stock of National Teacher
Academy, Inc. In connection with the Holdings Merger, ENTEX Holdings transferred
to Mr. Cameron the promissory notes and stock of National Teacher Academy, Inc.
in exchange for a $335,000 reduction in the amounts outstanding under the 1993
Notes. In July 1994, ENTEX Holdings invested $50,000 in Russian Investors, L.P.
in exchange for shares representing approximately 10% of the profit of Russian
Investors, L.P. In connection with the Holdings Merger, ENTEX Holdings
transferred to Mr. Cameron the partnership interest of Russian Investors, L.P.
in exchange for a $50,000 reduction in the amounts outstanding under the 1993
Notes. In June 1995, ENTEX Holdings loaned a consultant to the Company $30,925.
In connection with the Holdings Merger, Mr. Cameron acquired the loan in
exchange for a $30,925 reduction in Mr. Cameron's 1993 Note. In April 1996, the
Company sold to Knowledge Alliance Holdings, Inc. ("KAH"), a corporation
controlled by the Cameron Affiliates, the PC training business which the Company
had previously acquired in connection with the merger of Random Access. The book
value of such business was $1.1 million at the time of the transfer to KAH. In
consideration for this transfer, the Company received shares of KAH representing
25% of its then outstanding capital stock. The Company also entered into an
agreement with KAH to market these training services. The agreement granted the
Company an option to purchase up to an additional 2,500 shares of common stock
of KAH depending on the level of sales of such training services by the Company.
KAH was granted the option to purchase the assets of the training business
conducted by the Company in Minneapolis, Minnesota for book value of such assets
on the date of acquisition. This option was exercised on August 1, 1996.
Stockholders' Agreement.
On December 10, 1993, ENTEX Holdings, Dort A. Cameron III, ENTEX
Associates, L.P. and the Participants entered into the Stockholders' Agreement
in connection with the sale and purchase of a total of 5,930,690 shares, net of
repurchases, of the Common Stock (the "Original Shares") of ENTEX Holdings by
the Participants. The Stockholders' Agreement is binding on the Company as the
successor corporation of ENTEX Holdings and all obligations of the Participants
and the Cameron Affiliates relating to the shares of Common Stock of ENTEX
Holdings relate to the shares of Common Stock of the Company. Pursuant to the
Stockholders' Agreement, each of the Cameron Affiliates and each of the
Participants agreed to vote their shares of Common Stock to elect one
Participant nominated by the Participants and acceptable to the Cameron
Affiliates to the Board of Directors of the Company. In addition, in the event
of (i) any proposed capital reorganization of the Company, (ii) any
reclassification or recapitalization of the Company, (iii) any transfer of all
or substantially all of the assets of the Company, (iv) any consolidation or
merger involving the Company and any other person, (v) any dissolution,
liquidation or winding-up of the Company, or (vi) any material transaction
affecting the capital stock of the Company which is not in the ordinary course
of business and which is required by the laws of Delaware to be submitted to a
vote of the stockholders of the Company, the Participants agreed to vote their
shares of Common Stock in the same manner as the Cameron Affiliates.
In addition, pursuant to the Stockholders' Agreement, in the event
that the employment of certain Participants including Dale Allardyce (the
"Plan 1 Participants") is terminated for death, disability or cause, the Company
will have the right to purchase all of the shares of Common Stock of such
Participants. Upon termination as a result of death or disability the Plan 1
Participants and their legal representatives will have the right to require the
Company to purchase all of their shares of Common Stock. The per share price to
be paid by the Company shall equal the greater of the Original Purchase Price
(as defined below) or the Share Value (as defined below). The Company will have
the right to purchase shares of Common Stock if a Participant who is not a Plan
1 Participant, including John McKenna and David Csira (a "Plan 2 Participant")
is terminated for any reason. If a Plan 2 Participant's employment is terminated
for cause, the per share value shall equal the lesser of Original Purchase Price
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and the Book Value (as defined below) and if for any other reason, shall equal
the Book Value. If the Company is not able to pay for a Participant's shares of
Common Stock in cash, the Company must assign its rights to the Cameron
Affiliates.
"Share Value" shall mean the amount determined by multiplying (a)
the net income of the Company on a consolidated basis for the four most recent
fiscal quarters of the Company immediately preceding the date of the termination
of the Plan 1 Participant's employment, as shown on the financial statements of
the Company, determined in accordance with GAAP, by (b) the Earnings Multiple,
and dividing the product so obtained by the number of shares of Common Stock
issued and outstanding on a fully diluted basis. "Earnings Multiple" shall mean
the arithmetic average of the "price to earnings ratio" of each of certain
publicly traded companies as reported in composite transactions in the Wall
Street Journal on the last day of each of the six calendar months immediately
preceding the date of repurchase of such Common Stock. "Original Purchase
Price" shall mean the original purchase price paid for the Original Shares.
"Book Value" shall mean the book value of a share of Common Stock as of the end
of the most recent fiscal year.
The Stockholders' Agreement will terminate upon the consummation of
a public offering; provided, that the voting provisions shall terminate upon the
earlier of (a) the consummation of a public offering or (b) December 10, 2000,
and provided, further that certain provisions relating to the Company's right to
repurchase a Participant's shares of Common Stock shall terminate upon the
earlier of (x) the consummation of a public offering or (y) a change of control.
A "change of control" is defined as an event in which the Cameron Affiliates no
longer own voting securities of the Company entitled to cast a majority of votes
for election of the Board of Directors of the Company.
IBMCC Financing.
The Company has financed a significant portion of its working
capital needs under the IBMCC Financing Agreement. IBMCC holds more than 5% of
the outstanding capital stock of the Company. The IBMCC Financing Agreement
provides for borrowings under the IBMCC Working Capital Line of Credit of up to
$525.0 million, the interest bearing portion of which was $333.3 million as
of September 28, 1997. The amount of the interest bearing portion available
borrowings under the IBMCC Financing Agreement may be adjusted upwards for
higher seasonal purchasing requirements, and may be reduced or terminated by
IBMCC upon 60 days prior written notice. Amounts outstanding under the IBMCC
Working Capital Line of Credit bear interest at the prime rate plus .50% (9.0%
at September 28, 1997). In connection with the Company's acquisition of Random
Access in September 1995, the IBMCC Financing Agreement was amended to provide
for the IBMCC Long-Term Loan in the original principal amount of $20 million.
The IBMCC Long-Term Loan is required to remain outstanding unless there are no
outstanding interest bearing advances under the IBMCC Financing Agreement. The
IBMCC Financing Agreement was further amended in December 1996 and July 1997 to
provide for the Short-Term Loan in the original principal amount of $55 million
and the Special Working Capital Advance in the original principal amount of $20
million. The Short-Term Loan was repaid in full subsequent to September 28,
1997. Amounts outstanding under the IBMCC Long-Term Loan and Special Working
Capital Advance bear interest at the prime rate plus 2.50% (11.0% at September
28, 1997). At September 28, 1997, $17.3 million of principal was outstanding
under the IBMCC Long-Term Loan, $27.5 million of principal was outstanding under
the Short-Term Loan and $20.0 million of principal was outstanding under the
Special Working Capital Advance. The IBMCC Financing Agreement provides that if
Dort A. Cameron III ceases to own and/or control at least 35% of the issued and
outstanding capital stock of the Company, the Company will be deemed to be in
default. In connection with the financing arrangement, Mr. Cameron has granted
to IBMCC an option to acquire 1,851,850 shares of Common Stock held by him. The
option is immediately exercisable at a price of $.10 per share and expires July
15, 2001. IBMCC holds a warrant to purchase up to 333,350 shares of the
Company's Common Stock which was issued by ENTEX Holdings in November 1994 in
connection with the financing arrangement. In connection with the restructuring
of indebtedness under the IBMCC Financing Agreement in December 1996, Mr.
Cameron, Mr. McKenna and ENTEX Associates, L.P. have pledged the Common Stock
held by each to IBMCC as additional collateral. In connection with an amendment
to the IBMCC Financing Agreement in July 15, 1997, the Company entered into a
warrant agreement pursuant to which IBMCC was issued warrants to acquire up to
250,855 shares of Common Stock. All warrants issued to IBMCC under the warrant
agreement may be exercised at any time prior to July 31, 2004 at an exercise
price of $7.55. In addition, under the warrant agreement, IBMCC was granted the
right to sell the Common Stock issuable upon exercise of the warrants (the
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"Warrant Shares") along with any sale of Common Stock representing more than 20%
of the capital stock of the Company held by Cameron Affiliates. Mr. Cameron has
a right to require IBMCC to sell the Warrant Shares along with any sale of
Common Stock representing 50% or more of the capital stock of the Company by
Cameron Affiliates. IBMCC was also granted certain demand and piggyback
registration rights for the Warrant Shares. See "Business--Business Factors",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and Note 8 of the Notes to
Consolidated Financial Statements.
ITEM 8. LEGAL PROCEEDINGS
The Company is engaged in legal actions arising in the ordinary
course of business but is not currently a party to any legal actions which could
have a material adverse effect on its business, financial condition or results
of operations.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
As of November 30, 1997, the Company had outstanding 32,399,060
shares of Common Stock held by 2,189 stockholders and no shares of Preferred
Stock. There is no established public trading market for any class of the
Company's equity securities.
The Company has not paid any dividends on any of its capital stock
and does not anticipate that any cash dividends will be declared in the
foreseeable future. The IBMCC Financing Agreement prohibits the payment of
dividends.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
From June 30, 1993 through November 30, 1997, ENTEX Holdings and the
Company issued and sold the following securities (as adjusted, in the case of
equity securities, to reflect the nine-for-one stock dividend of Common Stock
effected by ENTEX Holdings on August 15, 1995 and the four-for-one stock
dividend of Common Stock effected by the Company on November 25, 1997):
(a) In August 1993, ENTEX Holdings issued 3,500,000 shares
of Common Stock to Dort A. Cameron III in exchange for
70 shares of Common Stock of the Company.
(b) In August 1993, ENTEX Holdings issued 750,000 shares of
Common Stock to ENTEX Associates, L.P. in exchange for
15 shares of Common Stock of the Company.
(c) In August 1993, ENTEX Holdings issued and sold
20,750,000 shares of Common Stock to ENTEX Associates,
L.P. for an aggregate purchase price of $415,000.
(d) From December 1993 through June 1997, ENTEX Holdings and
the Company issued to approximately 76 key employees an
aggregate of 5,930,690 shares of Common Stock, net of
repurchases, for an aggregate purchase price of $118,614
and promissory notes in the aggregate principal amount
of $770,991.
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(e) From December 1993 to June 1996, ENTEX Holdings issued
to approximately 2,100 employees of the Company,
1,260,500 Share Units, net of repurchases, with each
Share Unit representing a right to receive one share of
Common Stock of ENTEX Holdings or an equivalent amount
of cash, at the election of ENTEX Holdings pursuant to
the ENTEX Share Plan.
(f) In July 1994, ENTEX Holdings issued warrants for
purchase of 333,350 shares of Common Stock to IBMCC
which are currently exercisable at $.20.
(g) In January 1995, the Company issued options to purchase
up to 166,650 shares of Common Stock to an employee and
from April 1996 to May 1997, the Company issued 166,650
shares of Common Stock to such employee pursuant to the
exercise of such options.
(h) From February 1996 to June 1996, the Company issued an
aggregate of 2,846,260 options, net of forfeitures, to
purchase shares of Common Stock to officers, employees,
consultants and directors pursuant to the ENTEX
Holdings, Inc. 1996 Stock Option Plan, as amended.
(i) In June 1996, ENTEX Holdings issued warrants for the
purchase of 360,000 shares of Common Stock to Microsoft
Corporation which were exercisable at $15.00 per share.
In November 1997, these warrants were canceled and new
warrants were issued. See 10(p) below.
(j) In connection with the Holdings Merger, the Company
exchanged all outstanding shares of Common Stock of
ENTEX Holdings for shares of Common Stock of the Company
on a one-for-one basis. In addition, the Company
exchanged all outstanding Share Units of ENTEX Holdings
for an equivalent number of shares of the Company's
Common Stock.
(k) From July 1996 to August 1996, the Company issued an
aggregate of 812,275 options, net of forfeitures, to
purchase shares of Common Stock to officers, employees,
consultants and former employees of FCP pursuant to the
EIS Plan.
(l) From May 1997 to November 1997, the Company issued an
aggregate of 2,382,000 options, net of forfeitures,
to purchase shares of Common Stock to officers,
employees and consultants pursuant to the PIP.
(m) In June 1997, the Company issued 41,220 shares to
Non-employee Directors pursuant to the Non-employee
Director Share Plan.
(n) In July 1997, the Company issued warrants for purchase
of 167,235 shares of Common Stock to IBMCC which are
currently exercisable at $7.55 per share.
(o) In October 1997, the Company issued warrants for
purchase of 83,620 shares of Common Stock to IBMCC which
are currently exercisable at $7.55 per share.
(p) In November 1997, the Company issued warrants for
purchase of 715,230 shares of Common Stock to Microsoft
Corporation which are currently exercisable at $7.55 per
share. See note 10(h) above.
The issuances of the securities described in Items 15(a), (b), (c),
(d), (f), (g), (i), (n), (o) and (p) were deemed to be exempt from registration
under the Securities Act of 1933, as amended (the "Securities Act") in reliance
on Section 4(2). The issuance of the securities described in Items 15(e), (h),
(k), (l) and (m) were deemed to be exempt from registration under the Securities
Act in reliance on Rule 701 promulgated thereunder. The issuance of the
securities described in Item 15(j) were deemed to be exempt from registration
under the Securities Act in reliance on Section 3(a)(9). The recipients of
securities in each such transaction represented their intentions to acquire the
securities for investment
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only and not with a view to or for sale in connection with any distribution
thereof and appropriate legends were affixed to the share certificates issued in
such transactions. All recipients had access, through their relationships with
the Company, to information about the Company.
ITEM 11. DESCRIPTION OF COMPANY'S SECURITIES TO BE REGISTERED
The authorized capital stock of the Company consists of 100,000,000
shares of Common Stock, $0.0001 per share par value, and 2,000,000 shares of
undesignated Preferred Stock, $0.0001 per share par value.
The following summary of certain provisions of the Common Stock does
not purport to be complete and is subject to, and qualified in its entirety by,
the provisions of the Company's Certificate of Incorporation, as amended, which
is included as an exhibit to this Registration Statement, and by the provisions
of applicable law.
The holders of Common Stock are entitled to one vote for each share
held of record on all matters submitted to a vote of stockholders. The holders
of Common Stock shall receive dividends as and when declared by the Board of
Directors out of funds legally available for the payment of dividends. See
"Market Price of and Dividends on the Company's Common Equity and Related
Stockholder Matters." In the event of a liquidation, dissolution or winding up
of the Company, the holders of Common Stock are entitled to share ratably in all
assets. Holders of Common Stock have no preemptive rights or rights to convert
their Common Stock into any other securities. There are no redemption or sinking
fund provisions applicable to the Common Stock. All outstanding shares of Common
Stock are fully paid and non-assessable.
Pursuant to the Stockholders' Agreement, each of the Cameron
Affiliates and each of the Participants agreed to vote their shares of Common
Stock to elect one Participant nominated by the Participants and acceptable to
the Cameron Affiliates to the Board of Directors of the Company. In addition, in
the event of (i) any proposed capital reorganization of the Company, (ii) any
reclassification or recapitalization of the Company, (iii) any transfer of all
or substantially all of the assets of the Company, (iv) any consolidation or
merger involving the Company and any other person, (v) any dissolution,
liquidation or winding-up of the Company, or (vi) any material transaction
affecting the capital stock of the Company which is not in the ordinary course
of business and which is required by the laws of Delaware to be submitted to a
vote of the stockholders of the Company, the Participants agreed to vote their
shares of Common Stock in the same manner as the Cameron Affiliates. See
"Certain Relationships and Related Transactions."
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BYLAWS
AND DELAWARE LAW
CERTIFICATE OF INCORPORATION AND BYLAWS
The Company's Certificate of Incorporation authorizes the issuance
of additional shares of Common Stock, without stockholder approval. The
Company's Bylaws do not permit anyone other than the Board of Directors, the
Chairman of the Board or the President to call special meetings of the
stockholders. These provisions could discourage potential acquisition proposals
and could delay or prevent a change in control of the Company. Such provisions
also may have the effect of preventing changes in the management of the Company.
DELAWARE TAKEOVER STATUTE
The Company is subject to Section 203 of the DGCL ("Section 203")
which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in any business combination with any interested stockholder for a
period of three years following the date that such stockholder became an
interested stockholder, unless: (i) prior
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to such date, the board of directors of the corporation approved either the
business combination or the transaction which resulted in the stockholder
becoming an interested stockholder; (ii) upon consummation of the transaction
which resulted in the stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned (x) by persons
who are directors and also officers and (y) by employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) on or subsequent to such date, the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least 66
2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Section 203 defines business combination to include: (i) any merger
or consolidation involving the corporation and the interested stockholder; (ii)
any sale, transfer, pledge or other disposition involving the interested
stockholder of 10% or more of the assets of the corporation; (iii) subject to
certain exceptions, any transaction which results in the issuance or transfer by
the corporation of any stock of the corporation to the interested stockholder;
(iv) any transaction involving the corporation which has the effect of
increasing the proportionate share of the stock of any class or series of the
corporation beneficially owned by the interested stockholder; or (v) the receipt
by the interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation. In
general, Section 203 defines an interested stockholder as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Section 145 of the DGCL, the Company's Certificate
of Incorporation, as amended, includes a provision that eliminates the personal
liability of its directors for monetary damages for breach of their duty of
care. In addition, as permitted by Section 145 of the DGCL, the Bylaws of the
Company provide that: (i) the Company is required to indemnify its directors and
officers and persons serving in such capacities in other business enterprises
(including, for example, subsidiaries of the Company) at the Company's request,
to the fullest extent permitted by Delaware law; (ii) the Company is required to
indemnify its directors and officers and persons serving in such capacities in
other business enterprises at the Company's request in connection with any
action, suit, or proceeding initiated by such person only if such initiation was
authorized by the Board of Directors; (iii) the Company may, in its discretion,
indemnify employees and agents in those circumstances where indemnification is
not required by law; (iv) the Company is required to advance expenses, as
incurred, to its directors and officers in connection with defending a
proceeding; (v) the rights conferred in the Bylaws are not exclusive; and (vi)
the Company may not retroactively amend the Bylaw provisions in a way that is
adverse to such directors, officers and employees.
The Company's policy is to enter into indemnification agreements
with each of its directors and officers that provide the maximum indemnity
allowed to directors and officers by Section 145 of the DGCL and the Bylaws, as
well as certain additional procedural protections. In addition, the
indemnification agreements provide that directors and officers will be
indemnified to the fullest possible extent not prohibited by law against all
expenses (including attorney's fees) and settlement amounts paid or incurred by
them in any action or proceeding, including any action by or in the right of the
Company, arising out of such person's services as a director, officer, employee,
agent or fiduciary of the Company, any subsidiary of the Company or any other
company or enterprise to which such person provides services at the request of
the Company unless a reviewing party as appointed by the Board of Directors
determines that the Company is not obligated to indemnify under applicable law.
The Company will not be obligated pursuant to the indemnification agreements to
indemnify or advance expenses to an
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indemnified party with respect to proceedings or claims initiated by the
indemnified party and not by way of defense, except with respect to proceedings
specifically authorized by the Board of Directors or brought to enforce a right
to indemnification under the indemnification agreement, the Company's Bylaws or
any statute or law or as otherwise required under Section 145 of the DGCL. Under
the agreements, the Company is not obligated to indemnify the indemnified party
(i) for any expenses incurred by the indemnified party with respect to any
proceeding instituted by the indemnified party to enforce or interpret the
agreement, if a court having jurisdiction determines that each of the material
assertions made by the indemnified party in such proceeding was not made in good
faith or was frivolous (ii) for any expenses incurred by the indemnified party
with respect to any proceeding instituted by or in the name of the Company to
enforce or interpret the agreement, if a court of competent jurisdiction
determines that each of the material defenses made by the indemnified party in
such proceeding was made in bad faith or was frivolous, (iii) for any amounts
paid in settlement of a proceeding unless the Company consents to such
settlement; (iv) for any expenses resulting from acts, omissions or transactions
for which a court having jurisdiction makes a final judicial determination that
the indemnified party is prohibited from receiving indemnification under the
agreement or applicable law ; or (v) on account of any suit in which judgment is
rendered against the indemnified party for an accounting of profits made from
the purchase or sale by the indemnified party of securities of the Company
pursuant to the provisions of Section 16(b) of the Securities Exchange Act of
1934, as amended, and related laws.
The indemnification provisions in the Bylaws and the indemnification
agreements entered into between the Company and its directors and officers may
be sufficiently broad to permit indemnification of the Company's directors and
officers for liabilities arising under the Securities Act.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 15.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements and Schedules
1. Financial Statements. The following Consolidated Financial
Statements of ENTEX Information Services, Inc. and the Report of Independent
Auditors are included at pages F-1 through F-18 of this Registration Statement.
<TABLE>
<CAPTION>
DESCRIPTION PAGE NO.
- --------------------------------------------------------------------------- --------
<S> <C>
Independent Auditors Report................................................ F-1
Consolidated Balance Sheets as of September 28, 1997 (unaudited)
and as of June 29, 1997 and June 30, 1996................................ F-2
Consolidated Statements of Operations for the Three Months
ended September 28, 1997 and September 29, 1996 (unaudited)
and for the Years Ended June 29, 1997, June 30, 1996 and
July 2, 1995............................................................. F-3
Consolidated Statements of Cash Flows for the Three Months
ended September 28, 1997 and September 29, 1996
(unaudited) and for the Years Ended June 29, 1997, June 30, 1996
and July 2, 1995......................................................... F-4
Consolidated Statements of Stockholders' Equity (Deficit)
for the Years Ended June 29, 1997, June 30, 1996
and July 2, 1995......................................................... F-5
Notes to Consolidated Financial Statements................................. F-6
</TABLE>
2. Financial Statement Schedules. The following Consolidated
Financial Statement Schedules of ENTEX Information Services, Inc. are filed as
part of this Registration Statement and should be read in conjunction with the
Consolidated Financial Statements of ENTEX Information Services, Inc.
<TABLE>
<CAPTION>
DESCRIPTION PAGE NO.
- -------------------------------------------------------------------------- -------
<S> <C>
Schedule II--Valuation and Qualifying Accounts and Reserves................. II-1
</TABLE>
Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be set forth
therein is included in the Consolidated Financial Statements or notes thereto.
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<PAGE> 35
(b) Exhibits
2.1 Agreement and Plan of Reorganization by and between
ENTEX Holdings, Inc. and the Company dated as of June
28, 1996.
2.2(a) Agreement and Plan of Merger by and among the Company,
ENTEX Acquisition Corp. and Random Access, Inc. and
related amendment.
2.3(a) Agreement and Plan of Reorganization among the Company,
EIS Acquisition Corporation and FCP Technologies, Inc.
3.1 Certificate of Incorporation of the Company, as amended.
3.2 Bylaws of the Company.
4.1 Form of the Company's Common Stock Certificate.
10.1 Form of Indemnification Agreement entered into by
the Company with each of its directors and executive
officers.
10.2 Agreement between John A. McKenna, Jr. and the Company
dated August 7, 1994 and related amendment.
10.3 Letter Agreement between Kenneth A. Ghazey and the
Company dated January 6, 1997.
10.4 Retention Agreement between Dale H. Allardyce and the
Company dated November 17, 1997.
10.5 Letter Agreement between David J. Csira and the Company
dated November 15, 1996.
10.6 Employment Agreement between Richard Nathanson and the
Company dated July 10, 1996.
10.7 Stockholders' Agreement among Entex Holdings, Inc., Dort
A. Cameron III and Entex Associates, L.P. dated December
10, 1993 and related amendment.
10.8(b) ENTEX Holdings, Inc. 1996 Stock Option Plan and related
agreements.
10.9(b) ENTEX Information Services, Inc. 1996 Stock Option Plan
and related agreements.
10.10(b) 1996 Performance Incentive Plan and related agreements.
10.11 1996 Non-Employee Director Stock Plan.
10.12 ENTEX Management Incentive Plan.
10.13(a) Sublease Agreement dated June 6, 1997 between General
Electric Company and the Company and related consent.
10.14(a) Lease Agreement dated January 20, 1995 between Royal
Executive Park II and the Company and related amendment.
10.15(a) Sublease Agreement dated August 6, 1993 between JWP
Inc. and the Company and related amendments, consents
and lease agreements.
10.16(a) Lease Agreement dated December 31, 1996 between the
Company and Duke Realty Limited Partnership and related
amendments.
10.17(a) Lease Agreement dated May 15, 1995 between the Company
and Duke Realty Limited Partnership and related
amendments.
10.18(a) Lease Agreement dated February 29, 1992 between the
Company and 725 C.W. Associates Limited Partnership and
related amendments.
-35-
<PAGE> 36
10.19(a) Dealer Loan and Security Agreement between FINOVA
Capital Corporation and the Company dated April 21, 1995
and Letter Agreements dated April 17, 1995 and May 17,
1996.
10.20(a) Fourth Amended and Restated Agreement for Wholesale
Financing by and between IBM Credit Corporation and
the Company and related amendments.
10.21 Warrant Agreement between IBM Credit Corporation, Entex
Holdings, Inc. and the Company dated November 15, 1994.
10.22 Warrant Agreement between IBM Credit Corporation and
the Company dated July 15, 1997.
11.1 Statement of computation of earnings per share.
21.1 Subsidiaries of the Company.
27.1 Financial Data Schedule.
- ----------
(a) To be filed by amendment.
(b) Portion filed herewith and portion to be filed by amendment.
-36-
<PAGE> 37
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Company has duly caused this registration statement to
be signed on its behalf by the undersigned, thereunto duly authorized.
ENTEX INFORMATION SERVICES, INC.
By: /s/ John A. McKenna, Jr.
-----------------------------
John A. McKenna, Jr., President
and Chief Executive Officer
Dated: December 3, 1997
-37-
<PAGE> 38
INDEPENDENT AUDITORS REPORT
The Board of Directors and Stockholders
ENTEX Information Services, Inc.
We have audited the consolidated balance sheets of ENTEX Information Services,
Inc. and subsidiaries as of June 29, 1997 and June 30, 1996 and the related
consolidated statements of operations, cash flows and stockholders' equity for
each of the years in the three-year period ended June 29, 1997. In connection
with our audits of the consolidated financial statements, we have also audited
the financial statement schedule listed in Item 15(a)2. These consolidated
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express our opinion on these
consolidated financial statements and schedule based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ENTEX Information
Services, Inc. and subsidiaries as of June 29, 1997 and June 30, 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended June 29, 1997, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the consolidated financial statements
taken as a whole, presents fairly, in all material respects, the information set
forth therein.
KPMG Peat Marwick LLP
Stamford, Connecticut
September 17, 1997, except as to note 13
which is as of November 28, 1997
F-1
<PAGE> 39
ENTEX INFORMATION SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
Unaudited
September 28, June 29, June 30,
1997 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash ................................................. $ 10,330 $ 15,838 $ 12,603
Trade receivables, net of allowance for doubtful
accounts of $4,526, $4,746 and $4,101, respectively 327,723 334,196 295,011
Vendor receivables, net of allowance of $2,000,
$2,000 and $0 respectively ........................ 33,481 37,789 21,340
Inventories .......................................... 184,408 183,957 171,453
Other current assets ................................. 8,302 9,228 8,334
--------- --------- ---------
Total current assets ......................... 564,244 581,008 508,741
Property, plant and equipment, net ....................... 54,894 55,049 44,812
Goodwill, net of accumulated amortization of
$9,743, $8,903 and $4,664, respectively ................ 45,047 45,887 35,319
Other assets, net ........................................ 1,459 1,646 1,716
--------- --------- ---------
Total assets ......................................... $ 665,644 $ 683,590 $ 590,588
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable ..................................... $ 262,157 $ 269,962 $ 277,864
Accrued liabilities .................................. 60,660 53,598 29,952
Notes payable and current installments
of long-term debt ................................. 326,012 348,276 269,778
--------- --------- ---------
Total current liabilities .................... 648,829 671,836 577,594
--------- --------- ---------
Long-term debt ........................................... 48,653 48,215 52,158
Other long-term liabilities .............................. 1,091 1,271 351
--------- --------- ---------
Total long-term liabilities ....................... 49,744 49,486 52,509
--------- --------- ---------
Total liabilities .................................... 698,573 721,322 630,103
--------- --------- ---------
Stockholders' equity (deficit):
Preferred stock, 2,000,000 shares authorized; no shares
issued or outstanding ................................ -- --
Common stock, $.0001 par value; 100,000,000 shares
authorized, 32,399,060, 32,357,840 and
32,677,155 shares issued respectively ................ 3 3 3
Additional paid-in capital ............................... 19,114 19,003 18,735
Retained earnings (deficit) .............................. (52,008) (56,707) (58,251)
Treasury stock, shares at cost ........................... (2) (2) (2)
Cumulative translation adjustments........................ (37) (29) --
--------- --------- ---------
Total stockholders' equity (deficit) ................. (32,929) (37,732) (39,515)
--------- --------- ---------
$ 665,644 $ 683,590 $ 590,588
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE> 40
ENTEX INFORMATION SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share and per share data)
<TABLE>
<CAPTION>
Unaudited
Three Months Ended Years Ended
---------------------------- -----------------------------------------------
Sept. 28, Sept. 29, June 29, June 30, July 2,
1997 1996 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net revenues:
Product revenues ............ $ 500,938 $ 525,962 $ 2,126,973 $ 1,940,796 $ 1,342,323
Service revenues ............ 105,901 71,674 353,624 207,511 130,940
----------- ----------- ----------- ----------- -----------
Total net revenues ....... 606,839 597,636 2,480,597 2,148,307 1,473,263
----------- ----------- ----------- ----------- -----------
Cost of revenues:
Cost of products sold ....... 450,781 482,716 1,922,826 1,764,775 1,236,940
Cost of services provided ... 79,872 54,039 267,554 168,957 110,349
----------- ----------- ----------- ----------- -----------
Cost of revenues ......... 530,653 536,755 2,190,380 1,933,732 1,347,289
----------- ----------- ----------- ----------- -----------
Product gross margin ............ 50,157 43,246 204,147 176,021 105,383
Services gross margin ........... 26,029 17,635 86,070 38,554 20,591
----------- ----------- ----------- ----------- -----------
Total gross margin ....... 76,186 60,881 290,217 214,575 125,974
Selling, general and
administrative expenses ..... 61,815 58,547 251,963 192,312 132,586
Nonrecurring stock
compensation costs .......... -- -- -- 18,185 --
----------- ----------- ----------- ----------- -----------
Income (loss) from ....... 14,371 2,334 38,254 4,078 (6,612)
operations
Interest expense, net 9,669 8,132 37,147 29,726 23,151
Other income .................... -- -- 462 -- --
Income (loss) before
income taxes ........ 4,702 (5,798) 1,569 (25,648) (29,763)
Provision (benefit) for income
taxes ....................... 2 10 25 28 (509)
----------- ----------- ----------- ----------- -----------
Net income (loss) ........ $ 4,700 $ (5,808) $ 1,544 $ (25,676) $ (29,254)
=========== =========== =========== =========== ===========
Net income (loss) per share ..... $ .14 $ (.18) $ .04 $ (.82) $ (.93)
=========== =========== =========== =========== ===========
Weighted average number of
shares outstanding and
dilutive common stock
equivalents ................. 33,736,205 32,357,840 35,296,435 31,438,340 31,333,300
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 41
ENTEX INFORMATION SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Unaudited
Three Months Ended Years Ended
----------------------- -------------------------------------
Sept. 28, Sept. 29, June 29, June 30, July 2,
1997 1996 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ..................................... $ 4,700 $ (5,808) $ 1,544 $ (25,676) $ (29,254)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Stock compensation costs ........................... 111 -- -- 16,185 --
Depreciation and amortization ...................... 4,487 2,869 14,146 10,628 5,911
Amortization of goodwill ........................... 840 1,311 4,239 3,012 847
Provision for doubtful trade and vendor
receivables ...................................... -- 496 2,393 2,245 233
Accretion on long-term debentures and notes ........ 561 516 2,032 1,996 1,609
Gain on sale of assets ............................. -- -- (504) -- --
Other .............................................. 72 (1,213) 20 404 (508)
Changes in working capital, net of effects of acquisitions:
Trade receivables .................................. 6,473 (11,834) (31,168) (66,645) (41,026)
Inventories ........................................ (451) (34,469) (8,161) (24,141) (11,437)
Vendor receivables ................................. 4,308 5,206 (18,219) (11,463) (931)
Other current assets ............................... 926 1,596 (396) 1,710 (2,636)
Accounts payable and accrued liabilities ........... (743) 26,255 8,635 17,371 67,696
Other long-term liabilities ........................ (186) (46) (661) (296) (565)
--------- --------- --------- --------- ---------
Net cash provided by (used in) operating
activities .................................... 21,098 (15,121) (26,100) (74,670) (10,061)
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Sale of assets, net of expenses ....................... -- -- 2,285 8,483 --
Capital expenditures .................................. (4,219) (6,644) (21,737) (19,205) (7,178)
Cash paid for acquisitions ............................ -- (5,546) (7,216) (21,970) (1,615)
Other ................................................. -- (1,179) (1,181) (395) (161)
--------- --------- --------- --------- ---------
Net cash provided by (used in) investing
activities .................................... (4,219) (13,369) (27,849) (33,087) (8,954)
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of notes payable ............... 30,185 36,087 87,090 112,050 16,784
Change in cash overdraft .............................. 6,107 (3,636) (13,687) 11,176 5,347
Proceeds from long-term debt .......................... -- -- -- 28,103 --
Issue of common stock warrants ........................ -- -- -- 897 571
Proceeds from sale of common stock, net ............... -- 121 268 385 --
Payments on debt ...................................... (58,679) (451) (16,487) (44,332) (2,798)
--------- --------- --------- --------- ---------
Net cash provided from (used in) financing
activities .................................... (22,387) 32,121 57,184 108,279 19,904
--------- --------- --------- --------- ---------
Increase (decrease) in cash ............................... (5,508) 3,631 3,235 522 889
Cash at beginning of period ............................... 15,838 12,603 12,603 12,081 11,192
--------- --------- --------- --------- ---------
Cash at end of period ..................................... $ 10,330 $ 16,234 $ 15,838 $ 12,603 $ 12,081
========= ========= ========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest paid ......................................... $ 10,383 $ 8,427 $ 36,458 $ 28,081 $ 22,085
========= ========= ========= ========= =========
Taxes paid/(refund) ................................... $ (657) $ (1,276) $ (12,087) $ 11,701 $ 4,446
========= ========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 42
ENTEX INFORMATION SERVICES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands)
<TABLE>
<CAPTION>
Common Stock Additional Retained Cumulative
----------------- paid in Deferred earnings Treasury Translation
Shares Amount capital compensation (deficit) stock Adjustments Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, July 3, 1994 ............... 31,335 $ 3 $ 695 $ -- $ (3,321) $ (1) $ -- $ (2,624)
Purchase of treasury stock .......... -- -- -- -- -- (28) -- (28)
Issuance of treasury stock .......... -- -- -- -- -- 24 -- 24
Repurchase of common stock warrants . -- -- (44) -- -- -- -- (44)
Issuance of common stock warrants ... -- -- 621 -- -- -- -- 621
Net (loss) .......................... -- -- -- -- (29,254) -- -- (29,254)
-------- -------- -------- -------- -------- -------- -------- --------
Balance, July 2, 1995 ............... 31,335 3 1,272 -- (32,575) (5) -- (31,305)
Purchase of treasury stock .......... -- -- -- -- -- (7) -- (7)
Issuance of common stock under stock
purchase arrangements ........... 80 -- 381 -- -- 10 -- 391
Issuance of common stock warrants ... -- -- 897 -- -- -- -- 897
Issuance of common stock ............ 1,262 -- 4,484 -- -- -- -- 4,484
Deferred compensation ............... -- -- 11,701 (11,701) -- -- -- --
Amortization of deferred compensation -- -- -- 11,701 -- -- -- 11,701
Net (loss) .......................... -- -- -- -- (25,676) -- -- (25,676)
-------- -------- -------- -------- -------- -------- -------- --------
Balance, June 30, 1996 .............. 32,677 3 18,735 -- (58,251) (2) -- (39,515)
Return of treasury stock ............ (429) -- -- -- -- -- -- --
Issuance of common stock ............ 110 -- 268 -- -- -- -- 268
Foreign currency change ............. -- -- -- -- -- -- (29) (29)
Net income .......................... -- -- -- -- 1,544 1,544
-------- -------- -------- -------- -------- -------- -------- --------
Balance, June 29, 1997 .............. 32,358 $ 3 $ 19,003 $ -- $(56,707) $ (2) $ (29) $(37,732)
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 43
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) DESCRIPTION OF THE BUSINESS
ENTEX Information Services, Inc. ("ENTEX" or the "Company") was
formed for the purpose of acquiring, on August 6, 1993, the net
assets of the personal computer and systems integration business
of JWP Information Services, Inc. On June 28, 1996, the
Company's former parent, ENTEX Holdings, Inc., was merged with
and into the Company.
ENTEX is a leading provider of personal computer ("PC")
solutions to meet the distributed information technology systems
and end user support requirements of Fortune 1000 companies and
other large enterprises. The Company's total PC management
capabilities include acquisition services, network integration,
and advanced support for the PC-based networked environment.
Typical services provided include: hardware and software
acquisition and integration; network design, integration and
migration; selective outsourcing; end user support and a variety
of other professional services.
(B) FISCAL YEAR
The Company maintains its accounting records on a fifty-two week
basis ending on the Sunday closest to June 30. The accompanying
financial statements present the results of operations for the
fiscal years July 1, 1996 to June 29, 1997, July 3, 1995 to June
30,1996 and July 3, 1994 to July 2, 1995.
(C) CONSOLIDATION
The consolidated financial statements include the financial
statements of the Company and its wholly owned subsidiaries. All
significant intercompany balances and transactions have been
eliminated in consolidation.
The preparation of financial statements in accordance with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the consolidated financial statements and accompanying notes.
Actual results could differ from those estimates.
(D) INVENTORIES
Inventory for resale is stated at the lower of cost or market
value. Cost for finished goods is lowered when vendors announce
price reductions. Spare parts inventory is valued using a moving
weighted average market value method which approximates lower of
cost or market. The Company assesses the appropriateness of the
inventory valuations giving consideration to obsolete, slow
moving or non-saleable inventory.
F-6
<PAGE> 44
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(E) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost less
accumulated depreciation. Depreciation expense is calculated on
the straight-line method over the estimated useful lives of the
assets. Such useful lives range from 25 years for buildings and
three to seven Leasehold and capital improvements are amortized
straight-line over the estimated useful life of the property or
over the term of the lease, whichever is shorter. Capitalized
software is amortized using a straight-line basis over a period
of five years.
The Company systematically reviews the recoverability of its
long-lived assets by comparing their unamortized carrying value
to their related undiscounted future cash flows. Any impairment
is charged to expense when such determination is made.
(F) GOODWILL
Goodwill relates to the excess of cost over the net assets of
acquired businesses and is being amortized on a straight-line
basis from ten to 20 years.
The Company reviews the recoverability of goodwill by comparing
the unamortized balance to the related anticipated undiscounted
future cash flows and measures any impairment based on the
excess of the unamortized balance over the present value of
future cash flows, discounted using the Company's average cost
of funds.
(G) REVENUE RECOGNITION
Product revenue is recognized at the time of shipment to the
customer. Service revenue is recognized at the time the service
is rendered or ratably if performed over the service period of
the contract.
(H) VENDOR PROGRAMS
The Company receives volume incentives and rebates from certain
manufacturers related to sales of certain products which are
recorded as a reduction of cost of sales when related products
are sold. Other incentives may require specific incremental
action on the part of the Company such as training, advertising
or other pre-approved market development activities and are
recognized as an offset to the related costs when the required
action is performed.
(I) INCOME TAXES
The Company uses the asset and liability method of accounting
for income taxes. Under the asset and liability method of SFAS
109, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss
and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected
F-7
<PAGE> 45
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in the tax
rates is recognized in income in the period that includes the
enactment date.
(J) FINANCIAL INSTRUMENTS
The Company's financial instruments, principally cash, accounts
receivable and accounts payable are carried at cost, which
approximates fair value due to the short-term maturity of these
instruments. As amounts outstanding under the Company's credit
agreements bear interest approximating current market rates,
their carrying amounts approximate fair value.
(K) STOCK-BASED COMPENSATION
The Company accounts for its stock option plans in accordance
with Accounting Principles Board Opinion No. 25, "Accounting For
Stock Issued To Employees". Accordingly, no compensation expense
has been recognized in 1997 because the options had an exercise
price equal to or greater than the market value of the Common
Stock on the date of the grant.
(L) NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board recently issued
standards which will be applicable to the Company but which the
Company has not yet adopted: FASB Statement No. 130, Reporting
Comprehensive Income and FASB Statement No. 131, Disclosures
About Segments of an Enterprise and Related Information. These
statements are not expected to have a significant impact on the
financial statements.
In February 1997, the Financial Accounting Standards Board
issued Statement No. 128, Earnings Per Share, which is required
to be adopted for both interim and annual financial statements
for periods ending after December 15, 1997. At that time, the
Company will be required to change the method currently used to
compute earnings per share and to restate all prior periods.
Under the new requirements for calculating earnings per share,
the effect of stock options which are dilutive will be excluded.
The Company has not yet determined the impact of FASB Statement
No. 128.
(M) EARNINGS PER SHARE
Primary and fully diluted earnings per share are computed using
the weighted average number of shares of Common Stock and
dilutive common stock equivalents outstanding during the period.
Common stock equivalents are computed using the treasury stock
method. Common stock equivalents include amounts computed on
options and warrants issued during the periods presented.
F-8
<PAGE> 46
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(N) INTERIM FINANCIAL STATEMENTS
In the opinion of management, the information furnished in the
unaudited interim consolidated financial statements reflects all
adjustments necessary for a fair statement of the results of
operations as of and for the three months ended September 28,
1997 and September 29, 1996. The unaudited interim consolidated
financial statements have been prepared in accordance with the
instructions to Form 10-Q and therefore do not include some
information and notes necessary to conform with the annual
reporting requirements.
(2) ACQUISITIONS AND DIVESTITURES
On January 12, 1995, the Company acquired all the issued and outstanding
stock of CompuEase, Inc., d/b/a The L.E.A.D. Group for $2,400. The
L.E.A.D. Group was a private, value-added computer reseller and provider
of network services in Bloomfield, Michigan. The purchase price was
comprised of $1,400 in cash and non-interest bearing promissory notes
totaling $1,000. The acquisition has been accounted for as a purchase,
and the results of The L.E.A.D. Group have been included in the
accompanying consolidated financial statements since the date of
acquisition. The excess of the aggregate purchase price over the fair
value of net assets acquired was $1,595.
On September 19, 1995 the Company purchased all of the outstanding
shares of Random Access, Inc. ("Random Access") for $21,970. Random
Access was a provider of information technology solutions through the
sale of microcomputers and technical services to corporate and
institutional clients in the western United States. The Company issued a
$20,000 four year interest-bearing note payable to IBM Credit
Corporation to fund this purchase. The acquisition has been accounted
for as a purchase, and the results of operations of Random Access have
been included in the accompanying financial statements since the date of
acquisition. The excess of the aggregate purchase price over the fair
value of the net assets acquired was $28,317.
On April 2, 1996, the Company sold the training business that was
acquired as part of the Random Access acquisition to Knowledge Alliance
Holdings, Inc. ("KAH"), a wholly owned subsidiary of Training Holdings
LLC. Training Holdings LLC is a corporation controlled by Dort A.
Cameron III, the Company's chairman and majority stockholder, and his
affiliates. The training business assets had a net book value of
approximately $1,100 and were exchanged for 2,500 shares of KAH common
stock, which represented 25% of its outstanding shares. There was no
gain or loss recognized on the sale and the Company's $1,100 investment
in KAH is included in other assets. In connection with this sale, KAH
was granted the option to purchase the assets of the training business
conducted by ENTEX in Minneapolis, MN for the book value of the assets
on the date of acquisition. The option was exercised on August 1, 1996
and the purchase price was $235. The Company's share of earnings (loss)
in KAH since April 2, 1996 is insignificant.
F-9
<PAGE> 47
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
On July 12, 1996, the Company acquired all the issued and outstanding
stock of FCP Technologies Inc. ("FCP") for $7,216, including direct
acquisition costs. FCP was a systems integrator based in Frederick,
Maryland specializing in network integration, migration and consulting
services. The acquisition has been accounted for as a purchase, and the
results of operations of FCP have been included in the accompanying
financial statements since the date of acquisition. The excess of the
aggregate purchase price over the fair market value of the net assets
acquired was $14,077. The difference between the pro forma results of
operations under the assumption that the FCP acquisition occurred as of
July 1, 1996 and actual reported results is immaterial. Pro forma
consolidated revenue, net (loss) and net loss per share for the year
ended June 30, 1996 under the assumption that the FCP acquisition
occurred as of July 3, 1995 are $2,218,307, ($26,276) and $(.84),
respectively.
On April 18, 1997, the Company sold Education Access, acquired as part
of the acquisition of Random Access, for $2,285. The net gain on the
sale was $504.
(3) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
Unaudited
September 28, June 29, June 30,
1997 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Finished goods held for resale $175,428 $175,300 $164,805
Spare parts 8,980 8,657 6,648
-------- -------- --------
$184,408 $183,957 $171,453
======== ======== ========
</TABLE>
F-10
<PAGE> 48
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
June 29, June 30,
1997 1996
-------- --------
<S> <C> <C>
Land $ 1,305 $ 1,155
Building and building improvements 8,437 5,963
Office and computer equipment 47,061 29,227
Furniture and fixtures 11,471 9,547
Leasehold improvements 7,083 6,293
Capitalized software 7,590 5,773
Other equipment 6,363 7,048
-------- --------
89,310 65,006
-------- --------
Accumulated depreciation and amortization (34,261) (20,194)
-------- --------
$ 55,049 $ 44,812
======== ========
</TABLE>
F-11
<PAGE> 49
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(5) DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
June 29, June 30,
1997 1996
-------- --------
<S> <C> <C>
Floor Plan Financing $338,005 $263,025
Short-Term Debt 10,271 6,753
-------- --------
348,276 269,778
Long-Term Debt 48,215 52,158
-------- --------
Total $396,491 $321,936
======== ========
</TABLE>
FLOOR PLAN FINANCING
The Company has floor plan financing agreements with IBM Credit
Corporation and Finova Capital Corporation which made credit available of up to
$635,000 at June 29, 1997 and $645,000 at June 30, 1996. These agreements
provide that a portion of the balance outstanding be non-interest bearing for a
specific period of time ranging from 30 to 60 days. Interest rates under the
agreements are prime plus 1/2% (base rate) and prime plus 1/4% (base rate) at
June 29, 1997 and June 30, 1996, respectively, except for $62,500 which bears
interest at prime plus 2%. The agreements are generally secured by inventories,
equipment, and in certain instances, accounts receivable. The aggregate amounts
outstanding under these agreements as of June 29, 1997 and June 30, 1996 were
$421,075 and $454,564, respectively. Of these amounts, $338,005 and $263,025,
respectively, represent interest bearing liabilities and $83,070 and $191,539,
respectively, are non-interest bearing and are included within accounts payable.
The agreements may be terminated by the financiers immediately; upon certain
events of default; or otherwise within sixty days by either party with notice.
Under these agreements the Company had available an additional $213,925 and
$190,436, at June 29,1997 and June 30, l996, respectively.
The above floor plan agreements contain restrictive covenants with
respect to maintenance of minimum tangible net worth, current ratio, fixed asset
additions, fixed charges, and certain additional indebtedness. In addition, the
IBM Credit Corporation agreement prohibits the Company from paying cash
dividends on common stock. As of June 30, 1996, the Company was not in
compliance with all such covenants and, as a result of certain excess
borrowings, was in a collateral shortfall position with respect to the
contractual levels of collateral. Under the IBM Credit Agreement at June 29,
1997, the Company was not in compliance with all such covenants but continued to
maintain an excess collateral position. As of July 15, 1997, the Company amended
its financing agreement with IBM Credit Corporation. IBM Credit Corporation has
waived all defaults arising from such non-compliance with covenants.
F-12
<PAGE> 50
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
SHORT-TERM DEBT
Short-term debt includes current installments of long-term debt
totaling $984 at June 29, 1997 and $6,753 at June 30, 1996. Remaining amounts at
June 30, 1997 are notes payable carrying an effective interest rate of 4% to 7%.
LONG-TERM DEBT
Long-term debt consists primarily of (a) subordinated debentures
discounted to yield 20% that will accrete to their face value of $43,128 by
their due date of March 1, 2007 ($22,654 outstanding at June 29, 1997), (b)
$17,250 note issued in connection with the purchase of Random Access which bears
interest at prime plus 2.5% and is due on September 19, 1999, (c) a mortgage
loan of $5,149 relating to the integration center in Erlanger, Kentucky which
bears interest at 8.75% and is due February 2007, and (d) $4,146 in notes held
by entities owned or controlled by the Company's Chairman that bear interest at
prime plus 2.5% and are due on July 29, 2000.
Aggregate annual principal payments of long-term debt subsequent to
June 29, 1997 (including the subordinated debentures at face value)
are as follows:
<TABLE>
<S> <C>
1998 $ 984
1999 4,138
2000 4,173
2001 8,358
2002 4,254
Thereafter 47,766
--------
69,673
Less unaccreted interest (20,474)
--------
$ 49,199
========
</TABLE>
(9) INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
For the years ended
-------------------------------------
June 29, June 30, July 2,
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
Current:
Federal $ $ $(449)
State -- -- (68)
Foreign 25 28 8
Deferred:
Federal -- -- --
</TABLE>
F-13
<PAGE> 51
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
<TABLE>
<CAPTION>
For the years ended
-----------------------------------
June 29, June 30, July 2,
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
State -- -- --
----- ----- --------
Total $ 25 $ 28 $ 509
===== ===== ========
</TABLE>
Through June 30, 1996, the Company had generated net operating losses
for both book and tax purposes. For the current year the provision for
income taxes was offset by the utilization of a net operating loss
carryforward. Realization of the remaining deferred tax asset associated
with the net operating loss carryforward is dependent on the likelihood
of generating sufficient taxable income prior to its expiration.
Accordingly, the amount of the valuation allowance equals the excess of
the deferred tax assets over deferred tax liabilities.
A reconciliation of the differences between income taxes computed at
Federal statutory rates (34%) and the provision for income taxes is as
follows:
<TABLE>
<CAPTION>
June 29, June 30, July 2,
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Tax at statutory rate $ 533 $ (8,720) $(10,119)
Non-deductible goodwill 1,051 782 27
Non-deductible meals and entertainment expenses 437 263 79
State and local income carryback -- (589) (1,552)
Provision/(benefit) for valuation allowances (1,982) 4,335 11,161
Nondeductible stock compensation expense -- 3,978 --
Other (14) (21) (105)
-------- -------- --------
Provision for income taxes $ 25 $ 28 $ (509)
======== ======== ========
</TABLE>
Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and liabilities for
tax and financial reporting purposes. Significant components of the
Company's deferred tax assets and deferred tax liabilities at June 29,
1997 and June 30, 1996 are as follows:
<TABLE>
<CAPTION>
June 29, June 30,
1997 1996
------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward $19,425 $21,629
Accruals and reserves not currently deductible 3,768 4,888
Allowance for bad debts 1,576 1,303
Inventory valuation reserves 2,157 1,227
Other 1,873 1,824
</TABLE>
F-14
<PAGE> 52
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
<TABLE>
<CAPTION>
June 29, June 30,
1997 1996
-------- --------
<S> <C> <C>
Valuation allowance (17,015) (18,463)
-------- --------
Total $ 11,784 $ 12,408
======== ========
Deferred tax liabilities:
Discount in subordinated debentures $ 7,106 $ 7,859
Other 4,678 4,549
-------- --------
Total $ 11,784 $ 12,408
======== ========
</TABLE>
Net current and non-current assets/liabilities are insignificant.
At June 29, 1997, the Company had a net operating loss carryforward of
approximately $50,000, which will expire in 2009 through 2011. Of such
amounts, approximately $11,500 relates to purchased net tax benefits
which when realized will decrease goodwill by approximately $4,500.
(10) STOCK OPTIONS, STOCK BENEFIT PLANS AND WARRANTS
The Company has three stock options plans: the ENTEX Holdings 1996 Stock
Option Plan (the "Holdings Plan") adopted February 1996, EIS Stock
Option Plan (the "EIS Plan") adopted July 1996, and the Performance
Incentive Plan (the "PIP") adopted August 1996 (collectively, the
"Plans"). The Holdings Plan and the EIS Plan provide for the issuance of
incentive stock options ("ISOs") and stock options that are
non-qualified for Federal income tax purposes ("NQSOs"). The PIP
provides for the issuance of ISOs, NQSOs, stock appreciation rights,
restricted stock, deferred stock, dividend equivalents and other stock-
related awards. The exercise price of the ISOs under all Plans may not
be less than 100% of fair market value at the time of grant. Options
granted under the Holdings Plan and the EIS Plan have an expiration of
five years and generally vest over three years. Options granted under
the PIP have an expiration of ten years and generally vest over five
years. The Holdings Plan and EIS Plan were terminated in June 1996 and
August 1996, respectively, and therefore no further grants can be
awarded from such plans. At June 29, 1997 there were 9,045,000 shares
reserved for issuance under the PIP, and 5,120,805 options outstanding
under all Plans.
The Company has a Non-Employee Director Stock Plan, adopted August 1996,
which provides for the crediting of stock units representing the right
to receive common stock at not less than 100% of the fair market value
at the time of the credit. At June 29, 1997, 100,000 shares have been
reserved for issuance, of which no shares have been issued.
In fiscal year 1996, certain managers and employees owned common stock
of the Company pursuant to Securities Purchase and Stockholders'
Agreements ("Management Shares"), and share units pursuant to the 1993
Employee Share Unit Plan ("SharePlan Shares"). Effective June 28, 1996,
as a result of an amendment to such plans ownership was vested in the
management shares, common stock was issued for shares units, and the
Company recorded compensation expense of $11,701 relating to the
Management Shares and $4,484 relating to the SharePlan Shares. In
addition, the Company assumed the obligation for
F-15
<PAGE> 53
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
the tax withholding requirement for the SharePlan Shares of $2,000,
which was recorded as compensation expense. No compensation expense was
recognized in connection with the Management Shares or SharePlan Shares
for the year ended June 29, 1997.
At June 30, 1996 and June 29, 1997 there were 708,350 shares of common
stock reserved for outstanding warrants held by lenders.
A summary of the Company's stock option activity, and related
information for the fiscal years ended June 29, 1997 and June 30, 1996
is as follows (in thousands, except for the weighted average exercise
prices):
<TABLE>
<CAPTION>
1997 1996
------------------------- --------------------------
Weighted Weighted
average average
Shares exercise price Shares exercise price
-------- -------------- --------- --------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 3,260 $ 5.03 -- --
Granted 2,325 $ 5.34 3,565 $ 5.03
Exercised -- -- -- --
Canceled (465) $ 4.46 (305) $ 4.63
Outstanding--end of year 5,120 $ 5.19 3,260 $ 5.03
Exercisable--end of year 365 $ 2.38 10 $ 9.02
</TABLE>
The following summarizes information about the Company's stock options
outstanding and exercisable by price range at June 29, 1997 (options in
thousands):
<TABLE>
<CAPTION>
Wt. average
remaining
Range of Number contractual Weighted-average Number
exercise prices outstanding life years exercise price exercisable
---------------- ----------- ---------- ---------------- -----------
<S> <C> <C> <C> <C> <C>
$ .01 - $ 4.00 1,285 9.9 $ 2.04 295
$4.00 - $ 8.00 2,690 4.8 $ 4.63 60
$8.00 - $12.00 1,145 3.7 $ 9.53 10
</TABLE>
F-16
<PAGE> 54
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
Pro forma information regarding net income is required by SFAS No. 123
"Accounting for Stock Based Compensation", and has been determined as if
the Company had accounted for its stock option plan under the fair value
method of that statement. Pro forma net income (loss) and compensation
expense are as follows:
<TABLE>
<CAPTION>
June 29, June 30,
1997 1996
-------------- -----------
(in thousands, except per share data)
<S> <C> <C> <C>
Net income (loss)
As reported $ 1,544 $ (25,676)
Pro forma $ 721 $ (26,373)
Compensation Expense Pro forma $ 823 $ 697
Primary Earnings Per Share
As reported $ .04 $ (.82)
Pro forma $ .02 $ (.84)
</TABLE>
For purposes of pro forma disclosures only, the estimated fair value of
the options is amortized to expense over the options' vesting period.
The fair value for all options was estimated at the date of grant using
the Black-Scholes multiple option model with the following assumptions:
Risk-free interest rates of 6.22% to 6.39%, for fiscal year 1997 and
6.39% to 6.69% for fiscal year 1996; expected dividend yield of 0.0%;
and expected life of 3.7 to 9.9 years. The per share weighted-average
fair value of options granted was $1.40 during fiscal year 1997 and
$1.06 during fiscal 1996. Volatility was not a factor in calculating the
fairness of options since the Company is not a public company as defined
in SFAS, No. 123.
(11) 401(k) PLAN
The Company has a 401(k) Plan that covers all employees effective the
first day of the month following 30 days of employment and who are at
least 21 years of age. Employees may contribute between 1% and 15% of
compensation subject to the limitations imposed by law. The Company will
match up to 3% of the employee's eligible contribution. The amount
charged to expense for the matching contribution was $1,655 for the year
ended June 29, 1997. There was no matching contribution for the years
ended June 30, 1996 and July 2, 1995.
F-17
<PAGE> 55
(12) LEASES
The Company routinely leases office buildings, equipment and
automobiles. These leases expire at various dates through July 2005.
Certain leases contain renewal provisions and generally require the
Company to pay utilities, insurance, taxes, and other operating
expenses. Future minimum rental payments under operating leases that
have initial or remaining non-cancelable lease terms in excess of one
year as of July 29, 1997 as are follows:
Year Ending June:
1998 $ 8,456
1999 7,762
2000 6,361
2001 4,973
2002 3,269
Thereafter 6,368
-----------
Total minimum lease payments $ 37,189
===========
Rent expense for all operating leases totaled $11,908, $9,412 and $5,060
for the years ended June 29, 1997, June 30, 1996, and July 2, 1995,
respectively.
The cost of assets recorded under capital leases was $1,870 at June 29,
1997 and $1,502 at June 30, 1996 and July 2, 1995. Accumulated
amortization on such assets was $638, $343, and $109 at June 29, 1997,
June 30, 1996, and July 2, 1995, respectively. The present value of
capital leases as of June 29, 1997, June 30, 1996 and July 2, 1995 was
$579, $767, and $1,199, respectively.
(13) COMMON STOCK SPLIT
On November 25, 1997 the Board of Directors approved an increase in the
number of authorized common stock shares from 10,000,000 to
100,000,000. In addition, the Board of Directors authorized a stock
split in the form of a four-for-one stock dividend to holders of
record as of November 25, 1997, whereby each such share will be equal
to five shares of Common Stock. All references in the consolidated
financial statements referring to shares, share prices, per share
amounts and stock plans have been adjusted retroactively for the four-
for-one stock dividend.
F-18
<PAGE> 56
ENTEX INFORMATION SERVICES, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
--------- -------- -------- ---------- ------
<S> <C> <C> <C> <C> <C>
Description
Allowance for doubtful accounts
1997 $ 4,101 $ 474 $ -- $ 171(1) $ 4,746
1996 2,455 2,101 -- (455)(1) 4,101
1995 2,849 232 -- (626)(1) 2,455
Vendor receivable reserve
1997 -- 2,000 -- -- 2,000
1996 -- -- -- -- --
1995 -- -- -- -- --
</TABLE>
- ----------
(1) Uncollectible accounts written off, net of recoveries
II-1
<PAGE> 57
ENTEX INFORMATION SERVICES, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Sequential
Number Page Number
-------- ------------
<S> <C>
2.1 Agreement and Plan of Reorganization by and between
ENTEX Holdings, Inc. and the Company dated as of June
28, 1996.
2.2(a) Agreement and Plan of Merger by and among the Company,
ENTEX Acquisition Corp. and Random Access, Inc. and
related amendment.
2.3(a) Agreement and Plan of Reorganization among the Company,
EIS Acquisition Corporation and FCP Technologies, Inc.
3.1 Certificate of Incorporation of the Company, as amended.
3.2 Bylaws of the Company.
4.1 Form of the Company's Common Stock Certificate.
10.1 Form of Indemnification Agreement entered into by
the Company with each of its directors and executive
officers.
10.2 Agreement between John A. McKenna, Jr. and the Company
dated August 7, 1994 and related amendment.
10.3 Letter Agreement between Kenneth A. Ghazey and the
Company dated January 6, 1997.
10.4 Retention Agreement between Dale H. Allardyce and the
Company dated November 17, 1997.
10.5 Letter Agreement between David J. Csira and the Company
dated November 15, 1996.
10.6 Employment Agreement between Richard Nathanson and the
Company dated July 10, 1996.
10.7 Stockholders' Agreement among Entex Holdings, Inc., Dort
A. Cameron III and Entex Associates, L.P. dated December
10, 1993 and related amendment.
10.8(b) ENTEX Holdings, Inc. 1996 Stock Option Plan and related
agreements.
10.9(b) ENTEX Information Services, Inc. 1996 Stock Option Plan
and related agreements.
10.10(b) 1996 Performance Incentive Plan and related agreements.
10.11 1996 Non-Employee Director Stock Plan.
10.12 ENTEX Management Incentive Plan.
10.13(a) Sublease Agreement dated June 6, 1997 between General
Electric Company and the Company and related consent.
10.14(a) Lease Agreement dated January 20, 1995 between Royal
Executive Park II and the Company and related amendment.
10.15(a) Sublease Agreement dated August 6, 1993 between JWP
Inc., and the Company and related amendments consents
and lease agreements.
10.16(a) Lease Agreement dated December 31, 1996 between the
Company and Duke Realty Limited Partnership and related
amendments.
10.17(a) Lease Agreement dated May 15, 1995 between the Company
and Duke Realty Limited Partnership and related
amendments.
10.18(a) Lease Agreement dated February 29, 1992 between the
Company and 725 C.W. Associates Limited Partnership and
related amendments.
</TABLE>
<PAGE> 58
<TABLE>
<CAPTION>
Exhibit Sequential
Number Page Number
-------- ------------
<S> <C>
10.19(a) Dealer Loan and Security Agreement between FINOVA
Capital Corporation and the Company dated April 21, 1995
and Letter Agreements dated April 17, 1995 and May 17,
1996.
10.20(a) Fourth Amended and Restated Agreement for Wholesale
Financing by and between IBM Credit Corporation and
the Company and related amendments.
10.21 Warrant Agreement between IBM Credit Corporation, Entex
Holdings, Inc. and the Company dated November 15, 1994.
10.22 Warrant Agreement between IBM Credit Corporation and
the Company dated July 15, 1997.
11.1 Statement of computation of earnings per share.
21.1 Subsidiaries of the Company.
27.1 Financial Data Schedule.
- ----------
(a) To be filed by amendment.
(b) Portion filed herewith and portion to be filed by amendment.
</TABLE>
<PAGE> 1
Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
Entex Information Services, Inc.,
a Delaware Corporation
AND
Entex Holdings, Inc.,
a Delaware corporation
Dated as of June 28, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I - THE MERGER..........................................................1
1.1 The Merger..........................................................1
1.2 Effective Time......................................................1
1.3 Effect of the Merger................................................2
1.4 Articles of Incorporation; Bylaws...................................2
1.5 Directors and Officers..............................................2
1.6 Merger Consideration; Effect on Capital Stock.......................2
1.7 Surrender of Certificates; Payment of Merger Consideration..........3
1.8 No Further Ownership Rights in Parent Common Stock..................3
1.9 Lost, Stolen or Destroyed Certificates..............................3
1.10 Tax Consequences....................................................4
1.11 Exchange of Parent Share Units......................................4
1.12 Assumption of Management Stock Incentive Plan Agreements...........4
1.13 Assumption of Parent Stock Option Plan..............................4
1.14 Repayment of Citibank Loan..........................................4
1.15 Forgiveness of Intercompany Indebtedness............................4
1.16 Termination of Putnam Group Payments................................4
1.17 Transfer of Interests in National Teacher Academy, Inc..............5
1.18 Transfer of Interests in Russian Investors LP.......................5
1.19 Transfer of Automobile Lease........................................5
1.20 Taking of Necessary Action; Further Action..........................5
ARTICLE II -REPRESENTATIONS AND WARRANTIES OF PARENT...........................5
2.1 Organization........................................................5
2.2 Authorized Capitalization...........................................5
2.3 Authority...........................................................6
2.4 Fees................................................................6
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF EIS.............................6
3.1 Organization, Standing and Power....................................7
3.2 Authority...........................................................7
3.3 EIS Common Stock....................................................7
3.4 Continuity of Business Enterprise...................................7
3.5 Authorized Capitalization...........................................8
ARTICLE IV - TERMINATION, AMENDMENT AND WAIVER..................................8
4.1 Termination.........................................................8
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
4.2 Effect of Termination...............................................8
4.3 Amendment...........................................................8
4.4 Extension; Waiver...................................................9
4.5 Notice of Termination...............................................9
ARTICLE V - GENERAL PROVISIONS..................................................9
5.1 Notices.............................................................9
5.2 Interpretation.....................................................10
5.3 Counterparts.......................................................10
5.4 Entire Agreement; Assignment.......................................10
5.5 Severability........................................................9
5.6 Other Remedies.....................................................10
5.7 Governing Law......................................................10
5.8 Rules of Construction..............................................10
</TABLE>
-ii-
<PAGE> 4
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C>
Exhibit A Agreement of Merger
</TABLE>
<PAGE> 5
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of June 28, 1996 by and between Entex Information Services,
Inc., an Delaware corporation ("EIS"), and Entex Holdings, Inc., a Delaware
corporation (the "Parent").
RECITALS
A. The Boards of Directors of each of EIS and Parent believe it is in the
best interests of each company and their respective stockholders that EIS
acquire Parent through the statutory merger of Parent with and into EIS (the
"Merger") and, in furtherance thereof, have approved the Merger.
B. EIS and Parent believe that the Merger is in the best interests of each
company and their respective stockholders and, in furtherance thereof, have
approved the Merger.
C. Pursuant to the Merger, among other things, each of the issued and
outstanding shares of common stock, $.001 par value, of Parent (the "Parent
Common Stock") shall be converted into one (1) share of common stock of EIS,
$.001 par value (the "EIS Common Stock"), all in accordance with the terms and
subject to the conditions set forth in this Agreement.
D. EIS and Parent desire to make certain representations and warranties
and other agreements in connection with the Merger.
E. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the parties agree as follows:
ARTICLE I
THE MERGER; OTHER AGREEMENTS
1.1 The Merger. At the Effective Time (as defined in Section 2.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the California Corporations Code and the Colorado
Corporations Code, Parent shall be merged with and into EIS, the separate
corporate existence of Parent shall cease and EIS shall continue as the
surviving corporation and as a wholly-owned subsidiary of Parent. EIS as the
surviving corporation after the Merger is hereinafter sometimes referred to as
the "Surviving Corporation."
1.2 Effective Time. Unless this Agreement is earlier terminated pursuant
to Section 8.1, the closing of the Merger (the "Closing") will take place at the
offices of Wilson, Sonsini, Goodrich & Rosati, 650 Page Mill Road, Palo Alto,
California at such time and date as EIS and Parent may mutually
<PAGE> 6
select. The date upon which the Closing actually occurs is herein referred to as
the "Closing Date." On the Closing Date, the parties hereto shall cause the
Merger to be consummated by filing a Certificate of Merger (or like instrument)
with the Secretaries of State of the States of Delaware and Delaware (the
"Certificate of Merger"), in accordance with the relevant provisions of
applicable law (the time of acceptance by the Secretaries of State of the States
of Delaware and Delaware of such filing being referred to herein as the
"Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of Delaware law. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the property, rights, privileges, powers and franchises of Parent
shall vest in EIS, and all debts, liabilities, obligations and duties of Parent
shall become the debts, liabilities, obligations and duties of EIS.
1.4 Articles of Incorporation; Bylaws.
(a) At the Effective Time, the Articles of Incorporation of EIS,
as in effect immediately prior to the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law.
(b) The Bylaws of EIS, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
1.5 Directors and Officers. The directors of EIS immediately prior to the
Effective Time shall be the initial directors of the Surviving Corporation, each
to hold office in accordance with the Articles of Incorporation and Bylaws of
the Surviving Corporation. The officers of EIS immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation, each
to hold office in accordance with the Bylaws of the Surviving Corporation.
1.6 Merger Consideration; Effect on Capital Stock.
(a) Payment of Merger Consideration. Subject to the terms and
conditions of this Agreement, as of the Effective Time, by virtue of the Merger
and without any action on the part of EIS, Parent or the holders of any shares
of EIS Common Stock, each share of Parent Common Stock issued and outstanding as
of immediately prior to the Effective Time will be canceled and extinguished at
the Effective Time and will be converted at such time into the right to receive,
upon surrender of the certificate representing such share of Parent Common
Stock, one (1) share of EIS Common Stock (the "Merger Consideration"), provided
that no fractional shares of EIS Common Stock shall be issued, and in lieu
thereof, any fractional shares issuable to any holder after aggregating all
shares of EIS Common Stock owned by such holder shall be rounded up to a whole
share.
-2-
<PAGE> 7
(b) Capital Stock of EIS. Each share of common stock, par value
$0.001 per share, of Parent issued and outstanding immediately prior to the
Effective Time shall, following the Effective Time, represent one (1) validly
issued, fully paid and nonassessable share of common stock, par value $0.001 per
share, of the Surviving Corporation. Each stock certificate of EIS evidencing
ownership of any such shares shall continue to evidence ownership of such shares
of capital stock of the Surviving Corporation.
1.7 Surrender of Certificates; Payment of Merger Consideration.
(a) Exchange Agent. The Corporate Secretary of EIS shall act as
exchange agent (the "Exchange Agent") in the Merger.
(b) Parent to Provide Common Stock. Promptly after the Effective
Time, Parent shall make available to the Exchange Agent for exchange in
accordance with this Article II, the aggregate Merger Consideration payable
pursuant to Section 1.6 in exchange for outstanding shares of Parent Common
Stock.
(c) Exchange Procedures. Promptly after the Effective Time, Parent
shall deliver the Merger consideration in exchange for certificates representing
all outstanding shares of Parent Common Stock (the "Certificates"). Until so
surrendered, each outstanding Certificate that, prior to the Effective Time,
represented shares of Parent Common Stock, will be deemed from and after the
Effective Time, to evidence only the right to receive the Merger Consideration
in respect of each such share.
(d) Distributions With Respect to Unexchanged Shares. No dividends
or other distributions declared or made with a record date after the Effective
Time with respect to EIS Common Stock will be paid to the holder of any
unsurrendered Certificate with respect to the shares of EIS Common Stock
represented thereby until the holder of record of such Certificate shall
surrender such Certificate. Subject to applicable law, following surrender of
any such Certificate, there shall be paid to the record holder of the
certificates representing whole shares of EIS Common Stock issued in exchange
therefor, without interest, at the time of such surrender, the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of EIS Common Stock.
1.8 No Further Ownership Rights in Parent Common Stock. All amounts paid
upon the surrender for exchange of shares of Parent Common Stock in accordance
with the terms hereof shall be deemed to have been issued in full satisfaction
of all rights pertaining to such shares of Parent Common Stock, and there shall
be no further registration of transfers on the records of EIS of shares of
Parent Common Stock which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the Parent or
EIS for any reason, they shall be canceled and the Merger Consideration shall be
delivered to the person entitled thereto.
1.9 Lost, Stolen or Destroyed Certificates. In the event any Certificates
shall have been lost, stolen or destroyed, EIS shall make payment in exchange
for such lost, stolen or destroyed certificates,
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<PAGE> 8
upon the making of an affidavit of that fact by the holder thereof and an
agreement to indemnify EIS against any claim that may be made against EIS with
respect to the certificates alleged to have been lost, stolen or destroyed.
1.10 Tax Consequences. It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section 368(a) of
the Code.
1.11 Exchange of Parent Share Units. In connection with the Merger, the
Parent Share Unit Plan shall be amended, effective as of the Closing, to
provide, among other things:
(a) for the grant of one (1) share of EIS Common Stock in
exchange for each outstanding Parent Share Unit.
(b) for the payment by EIS of the federal and state income tax
withholding associated with this exchange.
1.12 Assumption of Management Stock Incentive Plan Agreements. In
connection with the Merger, each agreement under Parent's Management Stock
Incentive Plan shall be assumed by EIS subject to the amendment of each such
agreement, effective as of the Closing, to provide, among other things:
(a) that all references to Parent's Common Stock shall be deemed
to refer to the EIS Common Stock issued in the Merger.
(b) that the participant's put right in the event of his or her
disability or death shall be solely at book value, not fair
market value.
(c) for the elimination of the participant's put right in the
event of an involuntary termination without cause after
August __, 1996.
1.13 Assumption of Parent Stock Option Plan. In connection with the
Merger, each outstanding option to acquire a share of Parent Common Stock
previously granted under Parent's 1996 Stock Option Plan shall be assumed by EIS
and become an option to acquire one (1) share of EIS Common Stock, effective as
of the Closing.
1.14 Repayment of Citibank Loan. In connection with the Merger, the loan
from Citibank in the principal amount of $4,136,030.00 be shall repaid at the
Closing.
1.15 Forgiveness of Intercompany Indebtedness. In connection with the
Merger, the intercompany indebtedness of $9,198,731.45 owed by EIS to Parent
shall be forgiven at the Closing.
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<PAGE> 9
1.16 Termination of Putnam Group Payments. In connection with the Merger,
the monthly payments of approximately $15,000 to the Putnam Group shall
terminate effective as of the Closing.
1.17 Transfer of Interests in National Teacher Academy, Inc. In connection
with the Merger, all of Parent's interest in National Teacher Academy, Inc.
shall be transferred to Dort Cameron in exchange for a $295,000 reduction in the
principal amount of the $3.9 million promissory note owed by Parent to Mr.
Cameron ("Cameron's 1993 Note") at the Closing.
1.18 Transfer of Interests in Russian Investors LP. In connection with the
Merger, all of Parent's interest in Russian Investors LP be transferred to Dort
Cameron in exchange for a $50,000 reduction in the principal amount of Cameron's
1993 Note at the Closing.
1.19 Transfer of Automobile Lease. In connection with the Merger, all of
Parent's interest in that certain $32,000 automobile lease payable from a former
employee of EIS shall be transferred to Dort Cameron in exchange for a $32,000
reduction in the principal amount of Cameron's 1993 Note at the Closing.
1.20 Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest EIS with full right, title and possession
to all assets, property, rights, privileges, powers and franchises of Parent,
the officers and directors of EIS are fully authorized in the name of Parent to
take, and will take, all such lawful and necessary and/or desirable action so
long as such action is consistent with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to EIS as follows:
2.1 Organization. Parent is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware. Parent
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business. Parent is duly qualified and in good
standing as a foreign corporation in each jurisdiction in which the failure to
be so qualified would have a material adverse effect on the business or property
of Parent (a "Material Adverse Effect").
2.2 Authorized Capitalization. The authorized capitalization of Parent
consists of Eight Million (8,000,000) shares of Common Stock, of which Six
Million Two Hundred Eighty-One Thousand Six Hundred Fifty-Six (6,281,656) shares
have been issued and are outstanding. The shares have been duly authorized,
validly issued, are fully paid and nonassessable with no personal liability
attaching to the ownership thereof and were offered, issued, sold and delivered
by Parent in compliance with all applicable state and federal laws. Parent does
not have any outstanding rights, options, warrants, calls, commitments,
conversion or any other agreements of any character, whether oral or written,
obligating
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<PAGE> 10
it to issue any shares of its capital stock, whether authorized or not. Parent
is not a party to and is not bound by any agreement, contract, arrangement or
understanding, whether oral or written, giving any person or entity any interest
in, or any right to share, participate in or receive any portion of, Parent's
income, profits or assets, or obligating Parent to distribute any portion of its
income, profits or assets.
2.3 Authority. Parent has full power and lawful authority to execute and
deliver this Agreement and to consummate and perform the transactions
contemplated hereby. This Agreement constitutes (or shall, upon execution,
constitute) a valid and legally binding obligation upon Parent, enforceable in
accordance with its terms. Neither the execution and delivery of the Agreement
by Parent, nor the consummation and performance of the transactions contemplated
hereby, conflicts with, requires the consent, waiver or approval of, results in
a breach of or default under, or gives to others any interest or right of
termination, cancellation or acceleration in or with respect to, any material
agreement by which Parent is a party or by which Parent or any of its material
properties or assets are bound or affected.
2.4 Fees. All negotiations relating to this Agreement and the transactions
contemplated hereby have been conducted by Parent in such a manner as not to
give rise to any valid claim for any finder's fees, brokerage commission,
financial advisory fee or related expense or other like payment for which Parent
has obligated itself or EIS.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EIS
EIS represents and warrants to Parent as follows:
3.1 Organization, Standing and Power. EIS is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
EIS has the corporate power to own its properties and to carry on its business
as now being conducted and is duly qualified to do business and is in good
standing in each jurisdiction in which the failure to be so qualified would have
a Material Adverse Effect on EIS or the ability of Parent and EIS to consummate
the transactions contemplated hereby.
3.2 Authority. EIS has full power and lawful authority to execute and
deliver this Agreement and to consummate and perform the transactions
contemplated hereby. This Agreement constitutes (or shall, upon execution,
constitute) a valid and legally binding obligation upon EIS, enforceable in
accordance with its terms. Neither the execution and delivery of the Agreement
by EIS, nor the consummation and performance of the transactions contemplated
hereby, conflicts with, requires the consent, waiver or approval of, results in
a breach of or default under, or gives to others any interest or right of
termination, cancellation or acceleration in or with respect to, any material
agreement to which EIS is a party or by which EIS or any of its material
properties or assets are bound or affected. No consent, approval, order or
authorization of, or registration, declaration or filing with, any governmental
entity, is required by or with respect to EIS in connection with the execution
and delivery
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<PAGE> 11
of this Agreement by EIS or the consummation by EIS of the transactions
contemplated hereby, except for the filing of the Certificate of Merger with the
Delaware Secretary of State.
3.3 EIS Common Stock. The shares of EIS Common Stock, when issued in the
Merger in compliance with this Agreement, will be (i) validly issued, fully paid
and nonassessable, (ii) issued in compliance with applicable state and federal
securities laws and (iii) shall constitute an exempt security under Section
3(a)10 of the Securities Act of 1933.
3.4 Continuity of Business Enterprise. After the Effective Time, Parent
will continue a significant historic business line of EIS or use a significant
portion of EIS's historic business assets in a business, in each case within the
meaning of Treasury Regulation Section 1.368-1(d).
3.5 Authorized Capitalization. The authorized capitalization of EIS
consists of One Thousand (1000) shares of .001 par value Common Stock, of which
Eighty-Five (85) shares have been issued and are outstanding. The shares of EIS
Common Stock to be issued in the Merger have been duly authorized, validly
issued, are fully paid and nonassessable with no personal liability attaching to
the ownership thereof and were offered, issued, sold and delivered by Parent in
compliance with all applicable state and federal laws. Parent does not have any
outstanding rights, options, warrants, calls, commitments, conversion or any
other agreements of any character, whether oral or written, obligating it to
issue any shares of its capital stock whether authorized or not. Parent is not a
party to and is not bound by any agreement, contract, arrangement or
understanding, whether oral or written, giving any person or entity any interest
in, or any right to share, participate in or receive any portion of Parent's
income, profits or assets, or obligating Parent to distribute any portion of its
income, profits or assets.
ARTICLE IV
TERMINATION, AMENDMENT AND WAIVER
4.1 Termination. Except as provided in Section 8.2 below, this Agreement
may be terminated and the Merger abandoned at any time prior to the Effective
Time:
(a) by mutual consent of Parent and EIS;
(b) by Parent or EIS if the Closing has not occurred within
seventy-five (75) days following the date of this Agreement, other than due to
the failure of the party seeking to terminate this Agreement to perform its
obligations under this Agreement which are required to be performed at or prior
to the Effective Time;
(c) by Parent or EIS if there shall be a final nonappealable order
of a federal or state court in effect preventing consummation of the Merger; or
there shall be any action taken, or any statute, rule, regulation or order
enacted, promulgated or issued or deemed applicable to the Merger by any
Governmental Entity which would make the consummation of the Merger illegal;
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<PAGE> 12
(d) by Parent if it is not in breach of its obligations under this
Agreement and there has been a material breach of any representation, warranty,
covenant or agreement contained in this Agreement on the part of EIS, provided
that, if such breach is curable by EIS within forty-five (45) days through the
exercise of its reasonable best efforts, then for so long as EIS continues to
exercise such reasonable best efforts Parent may not terminate this Agreement
under this Section 4.1(d) unless such breach is not cured within forty-five (45)
days; or,
(e) by EIS if it is not in material breach of its obligations
under this Agreement and there has been a material breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of
Parent, provided that, if such breach is curable by Parent within 45 days
through the exercise of its reasonable best efforts, then for so long as Parent
continues to exercise such reasonable best efforts EIS may not terminate this
Agreement under this Section 4.1(e) unless such breach is not cured within
forty-five (45) days.
Where action is taken to terminate this Agreement pursuant to this Section
4.1, it shall be sufficient for such action to be authorized by the Board of
Directors (as applicable) of the party taking such action.
4.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 8.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of EIS or Parent, or their
respective officers, directors or stockholders, provided that each party shall
remain liable for any breaches of this Agreement prior to its termination; and
provided further that, the provisions of Article V and Article VI of this
Agreement shall remain in full force and effect and survive any termination of
this Agreement.
4.3 Amendment. Except as is otherwise required by applicable law, this
Agreement may be amended by the parties hereto at any time by execution of an
instrument in writing signed on behalf of each of the parties hereto.
4.4 Extension; Waiver. At any time prior to the Effective Time, either
Parent and EIS may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations of the other party hereto, (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto, and (iii) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
4.5 Notice of Termination. Any termination of this Agreement under Section
4.1 above will be effective immediately upon the delivery of written notice of
the terminating party to the other parties hereto.
ARTICLE V
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<PAGE> 13
GENERAL PROVISIONS
5.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgment of complete transmission)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to EIS, to: Entex Information Services, Inc.
Attn: John A. McKenna, Jr.
6 International Drive
Rye Brook, New York
ph: 914-935-3600
fax: 914-935-3880
(b) if to Parent, to: Entex Holdings, Inc.
Attn: John A. McKenna, Jr.
6 International Drive
Rye Brook, New York
ph: 914-935-3600
fax: 914-935-3880
5.2 Interpretation. The words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
5.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
5.4 Entire Agreement; Assignment. This Agreement, the schedules and
Exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof except for the Confidentiality Agreement,
which shall remain in full force and effect in accordance with their respective
terms; (b) are not intended to confer upon any other person any rights or
remedies hereunder; and (c) shall not be assigned by operation of law or
otherwise except as otherwise specifically provided, except that Parent and EIS
may assign their respective rights and delegate their respective obligations
hereunder to their respective affiliates.
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<PAGE> 14
5.5 Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
5.6 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
5.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Each of the parties hereto irrevocably consents to the exclusive jurisdiction
and venue of any court within New Castle County, State of Delaware, in
connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein, agrees that process may be served upon them in any
manner authorized by the laws of the State of Delaware for such persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction, venue and such process.
5.8 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
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<PAGE> 15
IN WITNESS WHEREOF, EIS and Parent have caused this Agreement to be signed
by their duly authorized respective officers, all as of the date first written
above.
ENTEX INFORMATION SERVICES, INC.
By
------------------------------------
John A. McKenna, Jr., President
ENTEX HOLDINGS, INC.
By
------------------------------------
John A. McKenna, Jr., President
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<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ENTEX INFORMATION SERVICES, INC.
(PURSUANT TO SECTION 242 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE)
ENTEX INFORMATION SERVICES, INC., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"DGCL") (the "Corporation"), DOES HEREBY CERTIFY:
FIRST: Pursuant to Section 242(b)(2) of the DGCL, the Board of Directors
of the Corporation duly adopted resolutions: (i) setting forth a proposed
amendment (the "Amendment") to the Certificate of Incorporation of the
Corporation, (ii) recommending the Amendment to the stockholders of the
Corporation, (iii) seeking the consent and approval of the holders of a majority
of the outstanding shares of the Corporation entitled to vote thereon, and (iv)
stating that the Amendment will be effective only after approval thereof by the
holders of a majority of the outstanding shares of the Corporation entitled to
vote thereon.
SECOND: Thereafter, pursuant to a resolution of the Board of Directors
of the Corporation, the Amendment was submitted to the holders of a majority of
the outstanding shares of the Corporation entitled to vote thereon and, pursuant
to
<PAGE> 2
Section 228(a) of the DGCL, the holders of a majority of the outstanding shares
of the Corporation entitled to vote thereon consented to and adopted the
following resolution to amend the Certificate of Incorporation of the
Corporation:
RESOLVED, that the Certificate of Incorporation be, and it
hereby is, amended by deleting in its entirety the present
Article FOURTH and substituting in lieu thereof the following new
Article FOURTH:
FOURTH:The total number of shares of stock which the
Corporation shall have authority to issue is one hundred two
million (102,000,000) which shall be divided into two (2) classes
as follows: one hundred million (100,000,000) shares of Common
Stock, par value $.0001 per share ("Common Stock"), and two
million (2,000,000) shares of Preferred Stock, par value $.0001
per share.
THIRD: Notice to those stockholders of the Corporation who have not
consented in writing of the taking of this corporate action without a meeting by
less than unanimous written consent has been given pursuant to Section 228(d) of
the DGCL.
FOURTH:The Amendment was duly adopted in accordance with the provisions
of Section 242 of the DGCL.
IN WITNESS WHEREOF, said ENTEX INFORMATION SERVICES, INC., has
caused this certificate to be signed by Lynne A. Burgess, its Vice President and
Assistant Secretary, as of the 24th day of November, 1997.
ENTEX INFORMATION SERVICES, INC.
By: /s/ LYNNE A. BURGESS
---------------------------------------
Lynne A. Burgess,
Vice President and
Assistant Secretary
2
<PAGE> 3
EXHIBIT 3.1
AGREEMENT OF MERGER
OF
ENTEX HOLDINGS, INC.
AND
ENTEX INFORMATION SERVICES, INC.
THIS AGREEMENT OF MERGER is dated June 28, 1996 ("Merger Agreement"), by
and between Entex Information Services, Inc., a Delaware corporation ("EIS"),
and Entex Holdings, Inc., a Delaware corporation ("Parent"). Capitalized terms
used herein but not otherwise defined herein shall have the meanings ascribed to
them in the Agreement and Plan of Reorganization (as defined below).
RECITALS
A. EIS was incorporated in the State of Delaware on May 13, 1993 and on
the date hereof has 85 shares of its Common Stock outstanding.
B. Parent was incorporated in the State of Delaware on June 30, 1993 and
on the date hereof has 6,281,656 shares of its Common Stock outstanding (the
"Parent Common Stock").
C. EIS and Parent and the principal shareholders of Parent have entered
into an Agreement and Plan of Reorganization dated June 28, 1996 (the "Agreement
and Plan of Reorganization") providing for certain representations, warranties,
covenants and agreements in connection with the transactions contemplated
hereby. This Merger Agreement and the Agreement and Plan of Reorganization are
intended to be construed together to effectuate their purpose.
D. The Boards of Directors of EIS and Parent deem it advisable and in
their mutual best interests and in the best interests of the shareholders of EIS
and Parent, respectively, that Parent be acquired by EIS through a merger
("Merger") of Parent with and into EIS.
E. The Boards of Directors of EIS and Parent and the shareholders of EIS
and Parent have approved the Merger.
AGREEMENTS
The parties hereto hereby agree as follows:
1. Parent shall be merged with and into EIS, and EIS shall be the
surviving corporation (the "Surviving Corporation").
<PAGE> 4
EXHIBIT 3.1
2. The Merger shall become effective at such time (the "Effective
Time" of the Merger) as this Merger Agreement and the officers' certificates of
EIS and Parent are filed with the Secretary of State of the State of Delaware
pursuant to Section 251 of the General Corporation Law of the State of Delaware
("DGCL").
3. Upon the Effective Time of the Merger, each outstanding share
of Parent Common shall be converted automatically into and exchanged for one (1)
share of EIS Common Stock. Those shares of EIS Common Stock to be issued as a
result of the Merger are referred to herein as the "EIS Shares."
4. Any Dissenting Shares shall not be converted into EIS Common
Stock but shall be converted into the right to receive such consideration as may
be determined to be due with respect to such Dissenting Shares pursuant to
Section 262 of the DGCL. If after the Effective Time any Dissenting Shares shall
lose their status as Dissenting Shares, then as of the occurrence of the event
which causes the loss of such status, such shares shall be converted into EIS
Common Stock in accordance with Section 3.
5. Notwithstanding any other term or provision hereof but subject
to the proviso in the first sentence of Section 3, no fractional shares of EIS
Common Stock shall be issued, but in lieu thereof each holder of shares of EIS
Common who would otherwise, but for rounding as provided herein, be entitled to
receive a fraction of a share of EIS Common Stock shall receive from EIS an
amount of cash equal to the per share market value of EIS Common Stock (based on
the average of the closing sales prices of EIS Common Stock for the ten business
days immediately preceding the Effective Time of the Merger, as quoted on the
Nasdaq National Market on the Closing Date and as reported in The Wall Street
Journal) multiplied by the fraction of a share of EIS Common Stock to which such
holder would otherwise be entitled. The fractional share interests of each EIS
shareholder shall be aggregated, so that no EIS shareholder shall receive cash
in an amount greater than the value of one full share of EIS Common Stock.
6. The conversion of Parent Common as provided by this Merger
Agreement shall occur automatically at the Effective Time of the Merger without
action by the holders thereof. Each holder of Parent Common Stock shall
thereupon be entitled to receive shares of EIS Common Stock in accordance with
Section 3. Such shareholder shall receive certificates that represent that
number of shares of EIS Common Stock in accordance with the following
procedures:
(a) As soon as practicable after the Effective Time of the
Merger, EIS shall make available for exchange in accordance with Section 3,
through such reasonable procedures as EIS may adopt, the shares of EIS Common
Stock issuable pursuant to Section 3 in exchange for outstanding shares of
Parent Common Stock.
(b) Within 15 days after the Effective Time of the Merger, the
Exchange Agent (as defined in Section 2.2 of the Agreement and Plan of
Reorganization) shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time of the Merger
represented outstanding shares of Parent Common Stock (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the certificates shall pass,
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<PAGE> 5
only upon delivery of the certificates to the Exchange Agent and shall be in
such form and have such other provisions as EIS may reasonably specify) and (ii)
instructions for use in effecting the surrender of the certificates in exchange
for certificates evidencing EIS Common Stock. Upon surrender of a certificate
for cancellation to the Exchange Agent or to such other agent or agents as may
be appointed by EIS, together with such letter of transmittal, duly executed,
the holder of such certificate shall be entitled to receive in exchange therefor
the number of shares of EIS Common Stock to which the holder of Parent Common
Stock is entitled pursuant to Section 3 hereof and is represented by the
certificate so surrendered, along with a check representing the value of any
fractional shares as defined pursuant to Section 5 hereof. The certificate so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of Parent Common Stock which is not registered in the transfer records of
Parent, EIS Common Stock may be delivered to a transferee if the certificate
representing such Parent Common Stock is presented to EIS and accompanied by all
documents required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 6, each certificate shall be deemed at any time
after the Effective Time of Merger, for all corporate purposes, other than the
payment of dividends, to evidence the ownership of the number of full shares of
EIS Common Stock into which such shares of Parent Common Stock shall have been
so converted and the right to receive an amount in cash in lieu of the issuance
of any fractional shares in accordance with Section 5 hereof.
(c) No dividends on the EIS Shares shall be paid to the holder
of any unsurrendered certificate until the holder of record of such certificate
shall surrender such certificate. Subject to the effect, if any, of applicable
escheat and other laws, following surrender of any certificate, there shall be
delivered to the person entitled thereto, without interest, the amount of
dividends theretofore paid with respect to the EIS Shares so withheld as of any
date subsequent to the Effective Time of the Merger and prior to such date of
delivery.
(d) All EIS Shares delivered upon the surrender for exchange
of shares of Parent Common Stock in accordance with the terms hereof shall be
deemed to have been delivered in full satisfaction of all rights pertaining to
such Parent Common Stock. There shall be no further registration of transfers on
the stock transfer books of the Surviving Corporation of the shares of Parent
Common Stock that were outstanding immediately prior to the Effective Time of
the Merger. If, after the Effective Time of the Merger, certificates are
presented to EIS for any reason, they shall be canceled and exchanged as
provided in this Section 6.
7. At the Effective Time of the Merger, the separate existence of
Parent shall cease, and EIS shall succeed, without other transfer, to all of the
rights and properties of Parent and shall be subject to all the debts and
liabilities thereof in the same manner as if EIS had itself incurred them. All
rights of creditors and all liens upon the property of each corporation shall be
preserved unimpaired, provided that such liens upon property of Parent shall be
limited to the property affected thereby immediately prior to the Effective Time
of the Merger.
8. This Merger Agreement is intended as a plan of reorganization
within the meaning of Section 368 of the Internal Revenue Code of 1986, as
amended.
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<PAGE> 6
EXHIBIT 3.1
9. The Bylaws of EIS in effect immediately prior to the Effective
Time shall be the Bylaws of the Surviving Corporation unless and until amended
or repealed as provided by applicable law, the Certificate of Incorporation of
the Surviving Corporation and such Bylaws.
10. (a) Notwithstanding the approval of this Merger Agreement
by the shareholders of EIS and Parent, this Merger Agreement may be terminated
at any time prior to the Effective Time of the Merger by mutual agreement of the
Boards of Directors of EIS and Parent.
(b) Notwithstanding the approval of this Merger Agreement by
the shareholders of EIS and Parent, this Merger Agreement shall terminate
forthwith in the event that the Agreement and Plan of Reorganization shall be
terminated as therein provided.
(c) In the event of the termination of this Merger Agreement
as provided above, this Merger Agreement shall forthwith become void and there
shall be no liability on the part of EIS or Parent or their respective officers
or directors, except as otherwise provided in the Agreement and Plan of
Reorganization.
(d) This Merger Agreement may be signed in one or more
counterparts, each of which shall be deemed an original and all of which shall
constitute one agreement.
(e) This Merger Agreement may be amended by the parties hereto
at any time before or after approval hereof by the shareholders of EIS and
Parent, but, after such approval, no amendments shall be made which by law
require the further approval of such shareholders without obtaining such
approval. This Merger Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
11. The Certificate of Incorporation of ENTEX Information
Services, Inc. as heretofore amended and as in effect on the date of the merger
provided for in this agreement, shall continue in full force and effect as the
Certificate of Incorporation of the corporation surviving this merger.
-4-
<PAGE> 7
IN WITNESS WHEREOF, the parties have executed this Merger Agreement as
of the date first written above.
ENTEX HOLDINGS, INC.
By:
-----------------------------------------------
John A. McKenna, Jr., President
ENTEX INFORMATION SERVICES, INC.
By:
-----------------------------------------------
John A. McKenna, Jr., President
[SIGNATURE PAGE TO AGREEMENT OF MERGER]
<PAGE> 8
CERTIFICATE OF AMENDMENT OF THE
CERTIFICATE OF INCORPORATION OF
ENTEX INFORMATION SERVICES, INC.
(PURSUANT TO SECTION 242 OF THE
DELAWARE GENERAL CORPORATION LAW)
David I. Chemerow certifies that:
1. He is the Executive Vice President and Chief Financial Officer of
ENTEX INFORMATION SERVICES, INC., a Delaware corporation.
2. Article FOURTH of the Certificate of Incorporation of this
corporation is amended in its entirety to read as follows:
"FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is twelve
million (12,000,000) which shall be divided into two (2)
classes as follows: ten million (10,000,000) shares of
Common Stock, par value $.0001 per share ("Common Stock"),
and two million (2,000,000) shares of Preferred Stock, par
value $.0001 per share."
3. This Certificate of Amendment of the Restated Certificate of
Incorporation (the "Certificate of Amendment") has been duly
approved by this corporation's Board of Directors in accordance
with Section 242 of the Delaware General corporation Law (the
"DGCL").
4. This Certificate of Amendment has been duly approved by the
stockholders in accordance with Section 242 of the DGCL. The
total number of outstanding shares of Common Stock of the
corporation entitled to vote upon the Certificate of Amendment
was 85 shares. The number of shares consenting to the Certificate
of Amendment equaled or exceeded consent required. The percentage
consent required was more than 50% of the outstanding Common
Stock.
I hereby further declare and certify under penalty of perjury under the
laws of the State of Delaware that the facts set forth in the foregoing
certificate are true and correct of my own knowledge and that this Certificate
of Amendment is my act and deed.
Executed at Rye Brook, New York, this 27th day of June 1996.
---------------------------------------------------
David I. Chemerow, Executive Vice President and
Chief Financial Officer
<PAGE> 9
EXHIBIT 3.1
CERTIFICATE OF CHANGE OF LOCATION OF REGISTERED
OFFICE AND REGISTERED AGENT
OF
ENTEX INFORMATION SERVICES, INC.
------------------------------------------------------
The Board of Directors of:
ENTEX INFORMATION SERVICES, INC.
a Corporation of the State of Delaware, on the 25th day of January, A.D. 1994,
do hereby resolve and order that the location of the Registered Office of this
Corporation within this State be, and the same hereby is:
1013 Centre Road, in the City of Wilmington, in the County of New Castle,
Delaware, 19805.
The name of the Registered Agent therein and in charge thereof upon whom
process against the Corporation may be served, is:
CORPORATION SERVICE COMPANY.
a Corporation of the State of Delaware, does hereby certify that the foregoing
is a true copy of a resolution adopted by the Board of Directors at a meeting
held as herein stated.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by its Vice President and Assistant Secretary, this 25th day of January,
A.D. 1994.
By:
----------------------------------------------
FREDERIC E. RUBIN
Vice President, Treasurer
ATTESTED BY:
----------------------------------------------
Assistant Secretary
<PAGE> 10
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT OF CERTIFICATE
OF INCORPORATION BEFORE PAYMENT OF
ANY PART OF THE CAPITAL
OF
IS MANAGEMENT ACQUISITION
-----------------------------------
It is hereby certified that:
1. The name of the corporation (hereinafter called the "corporation") is
IS Management Acquisition Corp.
2. The corporation has not received any payment for any of its stock.
3. The certificate of incorporation of the corporation is hereby amended
by striking out Article FIRST thereof and by substituting in lieu of said
Article the following new Article:
"FIRST: The name of the Corporation is ENTEX Information
Services, Inc. (the "Corporation").
4. The amendment of the certificate of incorporation of the corporation
herein certified was duly adopted, pursuant to the provisions of Section 241 of
the General Corporation Law of the State of Delaware, by at least a majority of
the directors who have been elected and qualified.
Signed on June 30, 1993.
Attest:
----------------------------------------
John McKenna
President
- -------------------------------------
Philip F. Strassler
Secretary
<PAGE> 11
CERTIFICATE OF INCORPORATION
OF
IS MANAGEMENT ACQUISITION CORP.
THE UNDERSIGNED, for the purpose of forming a corporation
pursuant to the provisions of the General Corporation Law of the State of
Delaware, does hereby certify as follows:
FIRST: The name of the corporation is IS Management Acquisition
Corp. (the "Corporation").
SECOND: The address of the Corporation's registered office in the
State of Delaware is 15 North Street, City of Dover, County of Kent, Delaware
19901. The name of its registered agent at such address is National Corporate
Research, Ltd.
THIRD: The nature of the business or purposes to be conducted or
promoted by the Corporation are to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law of the
State of Delaware.
FOURTH: The total number of shares of capital stock which the
Corporation shall have authority to issue is One Thousand (1,000) shares of
common stock, $0.01 par value per share (the "Common Stock").
FIFTH: The following provisions relate to the management of the
business and the conduct of the affairs of the Corporation and are not inserted
for the purpose of creating, defining, limiting and regulating the powers of the
Corporation or its directors or its shareholders:
(A) The election of officers may be conducted in any
manner the By-Laws provide, and need not be by written ballot.
(B) The Board of Directors shall have the power to make,
alter, amend or repeal the By-Laws of the Corporation, except to the extent that
the By-Laws otherwise provide.
SIXTH: The Corporation shall indemnify to the full extent
authorized by law any person made or threatened to be made a party to an action
or proceeding whether criminal, civil, administrative or investigative, by
reason of the fact that he, his testator or intestate is or was a director or
officer of the Corporation or serves or served any other enterprise as a
director or officer at the request of the Corporation or any predecesor of the
Corporation. No director of the Corporation shall be liable to the Corporation
or its shareholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its shareholders; (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law; (iii) under Section 174 of the Delaware
<PAGE> 12
EXHIBIT 3.1
General Corporation Law; or (iv) for any transaction from which the director
derived an improper personal benefit.
SEVENTH: Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them and/or between this
Corporation and its shareholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the shareholders or class of shareholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the shareholders or class of shareholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
shareholders or class of shareholders, of this Corporation, as the case may be,
and also on this Corporation.
EIGHTH: The Corporation reserves the right to amend or repeal any
provisions contained in this Certificate of Incorporation from time to time and
at any time in the manner now or hereafter prescribed by the law of the State of
Delaware, and all rights herein conferred upon shareholders, directors and
officers are subject to this reserved power.
NINTH: The name and mailing address of the sole Incorporator of
the Corporation is Nancy B. Zonana, c/o Reid & Priest, 40 West 57th Street, New
York, New York 10019.
IN WITNESS WHEREOF, the undersigned, being the sole Incorporator
hereinabove named, does hereby certify that the facts hereinabove stated are
truly set forth and, accordingly, hereby executes this Certificate of
Incorporation this 13th day of May, 1993.
Nancy B. Zonana
-----------------------------
Incorporator
-2-
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
ENTEX INFORMATION SERVICES, INC.
(A DELAWARE CORPORATION)
<PAGE> 2
BYLAWS OF
ENTEX INFORMATION SERVICES, INC.
(a Delaware corporation)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I CORPORATE OFFICES...................................................1
1.1 REGISTERED OFFICE................................................1
1.2 OTHER OFFICES....................................................1
ARTICLE II MEETINGS OF STOCKHOLDERS...........................................1
2.1 PLACE OF MEETINGS................................................1
2.2 ANNUAL MEETING...................................................1
2.3 SPECIAL MEETING..................................................1
2.4 NOTICE OF STOCKHOLDERS' MEETINGS.................................2
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER
BUSINESS.........................................................2
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.....................2
2.7 QUORUM...........................................................2
2.8 ADJOURNED MEETING; NOTICE........................................3
2.9 VOTING...........................................................3
2.10 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING.......................3
2.11 PROXIES..........................................................3
2.12 ORGANIZATION.....................................................4
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE............................4
ARTICLE III DIRECTORS.........................................................4
3.1 POWERS...........................................................4
3.2 NUMBER OF DIRECTORS..............................................4
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS.........................5
3.4 RESIGNATION AND VACANCIES........................................5
3.5 REMOVAL OF DIRECTORS.............................................6
3.6 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.........................6
3.7 FIRST MEETINGS...................................................6
3.8 REGULAR MEETINGS.................................................6
3.9 SPECIAL MEETINGS; NOTICE.........................................7
3.10 QUORUM...........................................................7
3.11 WAIVER OF NOTICE.................................................7
3.12 ADJOURNMENT......................................................7
3.13 NOTICE OF ADJOURNMENT............................................7
3.14 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING................8
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
3.15 FEES AND COMPENSATION OF DIRECTORS...............................8
3.16 APPROVAL OF LOANS TO OFFICERS....................................8
3.17 SOLE DIRECTOR PROVIDED BY CERTIFICATE OF INCORPORATION...........8
3.18 NOMINATION OF DIRECTORS; STOCKHOLDER BUSINESS AT ANNUAL
MEETINGS.........................................................8
ARTICLE IV COMMITTEES........................................................10
4.1 COMMITTEES OF DIRECTORS.........................................10
4.2 MEETINGS AND ACTION OF COMMITTEES...............................10
4.3 COMMITTEE MINUTES...............................................11
ARTICLE V OFFICERS...........................................................11
5.1 OFFICERS........................................................11
5.2 ELECTION OF OFFICERS............................................11
5.3 SUBORDINATE OFFICERS............................................11
5.4 REMOVAL AND RESIGNATION OF OFFICERS.............................12
5.5 VACANCIES IN OFFICES............................................12
5.6 CHAIRMAN OF THE BOARD...........................................12
5.7 PRESIDENT.......................................................12
5.8 VICE PRESIDENTS.................................................12
5.9 SECRETARY.......................................................13
5.10 CHIEF FINANCIAL OFFICER.........................................13
5.11 ASSISTANT SECRETARY.............................................13
5.12 ADMINISTRATIVE OFFICERS.........................................13
5.13 AUTHORITY AND DUTIES OF OFFICERS................................14
ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND
OTHER AGENTS......................................................14
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS.......................14
6.2 INDEMNIFICATION OF OTHERS.......................................15
6.3 INSURANCE.......................................................15
ARTICLE VII RECORDS AND REPORTS..............................................15
7.1 MAINTENANCE AND INSPECTION OF RECORDS...........................15
7.2 INSPECTION BY DIRECTORS.........................................16
7.3 REPRESENTATION OF SHARES OF OTHER CORPORATIONS..................16
7.4 CERTIFICATION AND INSPECTION OF BYLAWS..........................16
</TABLE>
-ii-
<PAGE> 4
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VIII GENERAL MATTERS.................................................16
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING...........16
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS.......................17
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED..............17
8.4 STOCK CERTIFICATES; TRANSFER; PARTLY PAID SHARES................17
8.5 SPECIAL DESIGNATION ON CERTIFICATES.............................18
8.6 LOST CERTIFICATES...............................................18
8.7 TRANSFER AGENTS AND REGISTRARS..................................18
8.8 CONSTRUCTION; DEFINITIONS.......................................18
ARTICLE IX AMENDMENTS........................................................19
</TABLE>
-iii-
<PAGE> 5
BYLAWS
OF
ENTEX INFORMATION SERVICES, INC.
(a Delaware corporation)
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be fixed in the certificate
of incorporation of the corporation.
1.2 OTHER OFFICES
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place within or outside the
State of Delaware designated by the board of directors. In the absence of any
such designation, stockholders' meetings shall be held at the principal
executive office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date and
at a time designated by the board of directors. In the absence of such
designation, the annual meeting of stockholders shall be held on the first
Monday in May in each year at 10:00 a.m. However, if such day falls on a legal
holiday, then the meeting shall be held at the same time and place on the next
succeeding full business day. At the meeting, directors shall be elected, and
any other proper business may be transacted.
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president.
<PAGE> 6
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings of stockholders shall be sent or otherwise given
in accordance with Section 2.5 of these bylaws not less than ten (10) nor more
than sixty (60) days before the date of the meeting. The notice shall specify
the place, date and hour of the meeting and (i) in the case of a special
meeting, the purpose or purposes for which the meeting is called (no business
other than that specified in the notice may be transacted) or (ii) in the case
of the annual meeting, those matters which the board of directors, at the time
of giving the notice, intends to present for action by the stockholders (but any
proper matter may be presented at the meeting for such action). The notice of
any meeting at which directors are to be elected shall include the name of any
nominee or nominees who, at the time of the notice, the board intends to present
for election.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
To be properly brought before an annual meeting or special meeting,
nominations for the election of directors or other business must be (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the board of directors, (b) otherwise properly brought before
the meeting by or at the direction of the board of directors or (c) otherwise
properly brought before the meeting by a stockholder.
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders shall be given either
personally or by first-class mail or by telegraphic or other written
communication. Notices not personally delivered shall be sent charges prepaid
and shall be addressed to the stockholder at the address of that stockholder
appearing on the books of the corporation or given by the stockholder to the
corporation for the purpose of notice. Notice shall be deemed to have been given
at the time when delivered personally or deposited in the mail or sent by
telegram or other means of written communication.
An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.7 QUORUM
The holders of a majority in voting power of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum is not present or
represented at any meeting of the stockholders, then either (i) the chairman of
the meeting or (ii) the stockholders entitled to vote thereat, present in person
or represented by proxy, shall have power to adjourn the meeting in accordance
with Section 2.8 of these bylaws.
When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which, by express provision of the laws of the State of Delaware or
of the certificate of incorporation or these bylaws, a different vote is
required, in which case such express provision shall govern and control the
decision of the question.
-2-
<PAGE> 7
If a quorum be initially present, the stockholders may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum, if any action taken is approved by a
majority of the stockholders initially constituting the quorum.
2.8 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time and place, unless these bylaws
otherwise require, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.9 VOTING
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint
owners, and to voting trusts and other voting agreements).
Except as may be otherwise provided in the certificate of incorporation or
these bylaws, each stockholder shall be entitled to one vote for each share of
capital stock held by such stockholder.
2.10 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING
For purposes of determining the stockholders entitled to notice of any
meeting or to vote thereat, the board of directors may fix, in advance, a record
date, which shall not precede the date upon which the resolution fixing the
record date is adopted by the board of directors and which shall not be more
than sixty (60) days nor less than ten (10) days before the date of any such
meeting, and in such event only stockholders of record on the date so fixed are
entitled to notice and to vote, notwithstanding any transfer of any shares on
the books of the corporation after the record date.
If the board of directors does not so fix a record date, the record date
for determining stockholders enti tled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the business day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting
unless the board of directors fixes a new record date for the adjourned meeting,
but the board of directors shall fix a new record date if the meeting is
adjourned for more than thirty (30) days from the date set for the original
meeting.
The record date for any other purpose shall be as provided in Section 8.1
of these bylaws.
2.11 PROXIES
Every person entitled to vote for directors, or on any other matter, shall
have the right to do so either in person or by one or more agents authorized by
a written proxy signed by the person and filed with the secretary
-3-
<PAGE> 8
of the corporation, but no such proxy shall be voted or acted upon after three
(3) years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission, telefacsimile or
otherwise) by the stockholder or the stockholder's attorney-in-fact. The
revocability of a proxy that states on its face that it is irrevocable shall be
governed by the provisions of Section 212(e) of the General Corporation Law of
Delaware (relating to the irrevocability of proxies).
2.12 ORGANIZATION
The chairman of the board, or in the absence of the chairman of the board,
the president, shall call the meeting of the stockholders to order, and shall
act as chairman of the meeting. In the absence of the chairman of the board, the
president, and all of the vice presidents, the stockholders shall appoint a
chairman for such meeting. The chairman of any meeting of stockholders shall
determine the order of business and the procedures at the meeting, including
such matters as the regulation of the manner of voting and the conduct of
business. The secretary of the corporation shall act as secretary of all
meetings of the stockholders, but in the absence of the secretary at any meeting
of the stockholders, the chairman of the meeting may appoint any person to act
as secretary of the meeting.
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware and
to any limitations in the certificate of incorporation or these bylaws relating
to action required to be approved by the stockholders or by the outstanding
shares, the business and affairs of the corporation shall be managed and all
corporate powers shall be exercised by or under the direction of the board of
directors.
3.2 NUMBER OF DIRECTORS
The board of directors shall consist of six (6) members. The number of
directors may be changed by an amendment to this bylaw, duly adopted by the
board of directors or by the stockholders, or by a duly adopted amendment to the
certificate of incorporation.
-4-
<PAGE> 9
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, directors shall hold
office until the expiration of the term for which elected and until a successor
has been elected and qualified; except that if any such election shall not be so
held, such election shall take place at a stockholders' meeting called and held
in accordance with the Delaware General Corporation Law.
3.4 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to the chairman
of the board, the president, the secretary or the board of directors, unless the
notice specifies a later time for that resignation to become effective. If the
resignation of a director is effective at a future time, the board of directors
may elect a successor to take office when the resignation becomes effective.
Each director so elected shall hold office until the expiration of the term of
office of the director whom he has replaced and until a successor has been
elected and qualified.
Effective upon the closing of a firm commitment underwritten public
offering of any of the corporation's securities pursuant to a registration
statement on Form S-1 under the Securities Act of 1933, as amended, vacancies
occurring on the Board of Directors for any reason and newly created
directorships resulting from an increase in the authorized number of directors
may be filled only by vote of a majority of the remaining members of the Board
of Directors, although less than a quorum, at any meeting of the Board of
Directors. A person so elected by the Board of Directors to fill a vacancy or
newly created directorship shall hold office until the next election of the
Class for which such director shall have been chosen and until his or her
successor shall have been duly elected and qualified.
Unless otherwise provided in the certificate of incorporation or these
bylaws (including, without limitation, the certificate of incorporation and
bylaws as amended effective upon the closing of a firm commitment underwritten
public offering of any of the corporation's securities pursuant to a
registration statement on Form S-1 under the Securities Act of 1933, as amended:
(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
certificate of incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware (relating to meetings
of shareholders).
-5-
<PAGE> 10
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole board
(as constituted immediately prior to any such increase), then the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten (10) percent of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office as aforesaid, which
election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware (relating to meetings of shareholders) as far as
applicable.
3.5 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of
incorporation or by these bylaws, any director or the entire board of directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors; provided, however,
that, if and so long as stockholders of the corporation are entitled to
cumulative voting, if less than the entire board is to be removed, no director
may be removed without cause if the votes cast against his removal would be
sufficient to elect him if then cumulatively voted at an election of the entire
board of directors. Whenever the holders of any class or series are entitled to
elect one or more directors by the certificate of incorporation, this Section
3.5 shall apply, in respect to the removal without cause of a director or
directors so elected, to the vote of the holders of the outstanding shares of
that class or series and not to the vote of the outstanding shares as a whole.
Effective upon the closing of a firm commitment underwritten public
offering of any of the corporation's securities pursuant to a registration
statement on Form S-1 under the Securities Act of 1933, as amended, any director
may be removed from office by the stockholders of the corporation only for
cause.
3.6 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
Regular meetings of the board of directors may be held at any place within
or outside the State of Delaware that has been designated from time to time by
resolution of the board. In the absence of such a designation, regular meetings
shall be held at the principal executive office of the corporation. Special
meetings of the board may be held at any place within or outside the State of
Delaware that has been designated in the notice of the meeting or, if not stated
in the notice or if there is no notice, at the principal executive office of the
corporation.
Any meeting of the board, regular or special, may be held by conference
telephone or similar communication equipment, so long as all directors
participating in the meeting can hear one another; and all such participating
directors shall be deemed to be present in person at the meeting.
3.7 FIRST MEETINGS
The first meeting of each newly elected board of directors shall be held
at such time and place as shall be fixed by the vote of the stockholders at the
annual meeting. In the event of the failure of the stockholders to fix the time
or place of such first meeting of the newly elected board of directors, or in
the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
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3.8 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice at
such time as shall from time to time be determined by the board of directors. If
any regular meeting day shall fall on a legal holiday, then the meeting shall be
held at the same time and place on the next succeeding full business day.
3.9 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail,
telecopy or telegram, charges prepaid, addressed to each director at that
director's address as it is shown on the records of the corporation. If the
notice is mailed, it shall be deposited in the United States mail at least four
(4) days before the time of the holding of the meeting. If the notice is
delivered personally or by telephone, telecopy or telegram, it shall be
delivered personally or by telephone or to the telegraph company at least
forty-eight (48) hours before the time of the holding of the meeting. Any oral
notice given personally or by telephone may be communicated either to the
director or to a person at the office of the director who the person giving the
notice has reason to believe will promptly communicate it to the director. The
notice need not specify the purpose or the place of the meeting, if the meeting
is to be held at the principal executive office of the corporation.
3.10 QUORUM
A majority of the authorized number of directors shall constitute a quorum
for the transaction of business, except to adjourn as provided in Section 3.12
of these bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the board of directors, subject to the provisions of the
certificate of incorporation and applicable law.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the quorum for that meeting.
3.11 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice, whether before or after the meeting, or (ii) who attends the
meeting other than for the express purposed of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. All such waivers shall be filed with the corporate records
or made part of the minutes of the meeting. A waiver of notice need not specify
the purpose of any regular or special meeting of the board of directors.
3.12 ADJOURNMENT
A majority of the directors present, whether or not constituting a quorum,
may adjourn any meeting of the board to another time and place.
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3.13 NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting of the board
need not be given unless the meeting is adjourned for more than twenty-four (24)
hours. If the meeting is adjourned for more than twenty-four (24) hours, then
notice of the time and place of the adjourned meeting shall be given before the
adjourned meeting takes place, in the manner specified in Section 3.9 of these
bylaws, to the directors who were not present at the time of the adjournment.
3.14 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the board of directors may
be taken without a meeting, provided that all members of the board individually
or collectively consent in writing to that action. Such action by written
consent shall have the same force and effect as a unanimous vote of the board of
directors. Such written consent and any counterparts thereof shall be filed with
the minutes of the proceedings of the board of directors.
3.15 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if any,
for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.15 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services.
3.16 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or any of its
subsidiaries, including any officer or employee who is a director of the
corporation or any of its subsidiaries, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.17 SOLE DIRECTOR PROVIDED BY CERTIFICATE OF INCORPORATION
In the event only one director is required by these bylaws or the
certificate of incorporation, then any reference herein to notices, waivers,
consents, meetings or other actions by a majority or quorum of the directors
shall be deemed to refer to such notice, waiver, etc., by such sole director,
who shall have all the rights and duties and shall be entitled to exercise all
of the powers and shall assume all the responsibilities otherwise herein
described as given to the board of directors.
3.18 NOMINATION OF DIRECTORS; STOCKHOLDER BUSINESS AT ANNUAL MEETINGS
Subject to the rights of holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation,
nominations for the election of directors may be made by the board of directors
or any nominating committee appointed by the board of directors or by any
stockholder entitled to
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vote in the election of directors generally. However, a stockholder generally
entitled to vote in the election of directors may nominate one or more persons
for election as directors at a meeting only of written notice of such
stockholder's intent to make such nomination or nominations has been given,
either by personal delivery or by United States mail, postage prepaid, to the
secretary of the corporation not later than (i) with respect to an election to
be held at an annual meeting of stockholders, 60 days in advance of such meeting
and (ii) with respect to an election to be held at a special meeting of
stockholders for the election of directors, the close of business on the seventh
day following the date on which notice of such meeting is first given to
stockholders. Each such notice shall set forth the following information: (a)
the name and address of the stockholder who intends to make the nomination and
of the person or persons to be nominated; (b) a representation that the
stockholder is a holder of record of stock of the corporation entitled to vote
at such meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (c) a description of all
arrangements or understandings between the stockholder, each nominee or any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder; (d) such other
information regarding each nominee proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission, had the nominee been nominated, or
intended to be nominated, by the board of directors of the corporation; and (e)
the consent of each nominee to serve as a director of the corporation if so
elected. At the request of the board of directors any person nominated by the
board of directors for election as a director shall furnish to the secretary of
the corporation that information required to be set forth in a stockholder's
notice of nomination which pertains to the nominee. No person shall be eligible
for election as a director of the corporation unless nominated in accordance
with the procedures set forth herein. A majority of the board of directors may
reject any nomination by a stockholder not timely made or otherwise not in
accordance with the terms of this Section 3.18. If a majority of the board of
directors reasonably determines that the information provided in a stockholder's
notice does not satisfy the informational requirements of this Section 3.18 in
any material respect, the secretary of the corporation shall promptly notify
such stockholder of the deficiency in writing. The stockholder shall have an
opportunity to cure the deficiency by providing additional information to the
secretary within such period of time, not to exceed ten days from the date such
deficiency notice is given to the stockholder, as a majority of the board of
directors shall reasonably determine. If the deficiency is not cured within such
period, or if a majority of the board of directors reasonably determines that
the additional information provided by the stockholder, together with the
information previously provided, does not satisfy the requirements of this
Section 3.18 in any material respect, then a majority of the board of directors
may reject such stockholder's nomination. The secretary of the corporation shall
notify a stockholder in writing whether the stockholder's nomination has been
made in accordance with the time and information requirements of this Section
3.18.
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting (i) by or at the
direction of the chairman of the meeting or (ii) by any stockholder of the
corporation who complies with the notice procedures set forth in this Section
3.18. For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the secretary of the corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
corporation not less than 60 days prior to the meeting; provided, however, that
in the event that less than 70 days notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the stockholder
to be timely must be received not later than the close of business on the tenth
day following the earlier of the day on which such notice of the date of the
annual meeting was mailed or such public disclosure was made. A stockholder's
notice to the secretary shall set forth as to each matter the stockholder
proposes to bring before the annual meeting the following information: (a) a
brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (b)
the name and address, as they appear
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on the corporation's books, of the stockholder proposing such business, (c) the
class and number of shares of the corporation which are beneficially owned by
the stockholder and (d) any material direct or indirect interest, financial or
otherwise of the stockholder or its affiliates or associates in such business.
The board of directors may reject any stockholder proposal not timely made in
accordance with this Section 3.18. If the board of directors determines that the
information provided in a stockholder's notice does not satisfy the
informational requirements hereof, the secretary of the corporation shall
promptly notify such stockholder of the deficiency in the notice. The
stockholder shall then have an opportunity to cure the deficiency by providing
additional information to the secretary within such period of time, not to
exceed ten days from the date such deficiency notice is given to the
stockholder, as the board of directors shall determine. If the deficiency is not
cured within such period, or if the board of directors determines that the
additional information provided by the stockholder, together with the
information previously provided, does not satisfy the requirements of this
Section 3.18, then the board of directors may reject such stockholder's
proposal. The secretary of the corporation shall notify a stockholder in writing
whether the stockholder's proposal has been made in accordance with the time and
information requirements hereof.
This provision shall not prevent the consideration and approval or
disapproval at an annual meeting of reports of officers, directors and
committees of the board of directors, but in connection therewith no new
business shall be acted upon at any such meeting unless stated, filed and
received as herein provided. Notwithstanding anything in these bylaws to the
contrary, no business shall be conducted at an annual meeting except in
accordance with procedures set forth in this Section 3.18.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one or more committees, each
consisting of two or more directors, to serve at the pleasure of the board. The
board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. The appointment of members or alternate members of a committee
requires the vote of a majority of the authorized number of directors. Any
committee, to the extent provided in the resolution of the board, shall have and
may exercise all the powers and authority of the board, but no such committee
shall have the power or authority to (i) amend the certificate of incorporation
(except that a committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by the board
of directors as provided in Section 151(a) of the General Corporation Law of
Delaware, fix the designations and any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation), (ii) adopt an agreement of
merger or consolidation under Sections 251 or 252 of the General Corporation Law
of Delaware (relating to mergers and consolidations of domestic and foreign
corporations), (iii) recommend to the stockholders the sale, lease or exchange
of all or substantially all of the corporation's property and assets, (iv)
recommend to the stockholders a dissolution of the corporation or a revocation
of a dissolution or (v) amend the bylaws of the corporation; and, unless the
board resolution estab lishing the committee, the bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock,
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or to adopt a certificate of ownership and merger pursuant to Section 253 of the
General Corporation Law of Delaware (relating to mergers of parent and
subsidiary corporations).
4.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the following provisions of Article III of these
bylaws: Section 3.6 (place of meetings; meetings by telephone), Section 3.8
(regular meetings), Section 3.9 (special meetings; notice), Section 3.10
(quorum), Section 3.11 (waiver of notice), Section 3.12 (adjournment), Section
3.13 (notice of adjournment) and Section 3.14 (board action by written consent
without meeting), with such changes in the context of those bylaws as are
necessary to substitute the committee and its members for the board of directors
and its members; provided, however, that the time of regular meetings of
committees may be determined either by resolution of the board of directors or
by resolution of the committee, that special meetings of committees may also be
called by resolution of the board of directors, and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The board of directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these bylaws.
4.3 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.
ARTICLE V
OFFICERS
5.1 OFFICERS
The Corporate Officers of the corporation shall be a president, a
secretary and a chief financial officer. The corporation may also have, at the
discretion of the board of directors, a chairman of the board, one or more vice
presidents (however denominated), one or more assistant secretaries, one or more
assistant treasurers, and such other officers as may be appointed in accordance
with the provisions of Section 5.3 of these bylaws. Any number of offices may be
held by the same person.
In addition to the Corporate Officers of the Company described above,
there may also be such Administrative Officers of the corporation as may be
designated and appointed from time to time by the president of the corporation
in accordance with the provisions of Section 5.12 of these bylaws.
5.2 ELECTION OF OFFICERS
The Corporate Officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Section 5.3 or Section 5.5 of
these bylaws, shall be chosen by the board of directors, subject to the rights,
if any, of an officer under any contract of employment, and shall hold their
respective offices for such terms as the board of directors may from time to
time determine.
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5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or may empower the president to
appoint, such other Corporate Officers as the business of the corporation may
require, each of whom shall hold office for such period, have such power and
authority, and perform such duties as are provided in these bylaws or as the
board of directors may from time to time determine.
The president may from time to time designate and appoint Administrative
Officers of the corporation in accordance with the provisions of Section 5.12 of
these bylaws.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of a Corporate Officer under any contract
of employment, any Corporate Officer may be removed, either with or without
cause, by the board of directors at any regular or special meeting of the board
or, except in case of a Corporate Officer chosen by the board of directors, by
any Corporate Officer upon whom such power of removal may be conferred by the
board of directors.
Any Corporate Officer may resign at any time by giving written notice to
the corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the Corporate
Officer is a party.
Any Administrative Officer designated and appointed by the president may
be removed, either with or without cause, at any time by the president. Any
Administrative Officer may resign at any time by giving written notice to the
president or to the secretary of the corporation.
5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise such other
powers and perform such other duties as may from time to time be assigned to him
by the board of directors or as may be prescribed by these bylaws. If there is
no president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the board
of directors to the chairman of the board, if there be such an officer, the
president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction and control of the business and the officers of the corporation. He or
she shall preside at all meetings of the stockholders and, in the absence or
nonexistence of a chairman of the board, at all meetings of the board of
directors. He or she shall have the general powers and duties of management
usually vested in the office of president of a corpo-
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ration, and shall have such other powers and perform such other duties as may be
prescribed by the board of directors or these bylaws.
5.8 VICE PRESIDENTS
In the absence or disability of the president, and if there is no chairman
of the board, the vice presidents, if any, in order of their rank as fixed by
the board of directors or, if not ranked, a vice president designated by the
board of directors, shall perform all the duties of the president and when so
acting shall have all the powers of, and be subject to all the restrictions
upon, the president. The vice presidents shall have such other powers and
perform such other duties as from time to time may be prescribed for them
respectively by the board of directors, these bylaws, the president or the
chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of the board of directors,
committees of directors and stockholders. The minutes shall show the time and
place of each meeting, whether regular or special (and, if special, how
authorized and the notice given), the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the board of directors required to be given by law or by
these bylaws. He or she shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the board of directors or by these bylaws.
5.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings and shares. The books of account shall at all reasonable times
be open to inspection by any director for a purpose reasonably related to his
position as a director.
The chief financial officer shall deposit all money and other valuables in
the name and to the credit of the corporation with such depositaries as may be
designated by the board of directors. He or she shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his or
her transactions as chief financial officer and of the financial condition of
the corporation, and shall have such other powers and perform such other duties
as may be prescribed by the board of directors or these bylaws.
5.11 ASSISTANT SECRETARY
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The assistant secretary, if any, or, if there is more than one, the
assistant secretaries in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the secretary or in the event of his or her inability or refusal
to act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
5.12 ADMINISTRATIVE OFFICERS
In addition to the Corporate Officers of the corporation as provided in
Section 5.1 of these bylaws and such subordinate Corporate Officers as may be
appointed in accordance with Section 5.3 of these bylaws, there may also be such
Administrative Officers of the corporation as may be designated and appointed
from time to time by the president of the corporation. Administrative Officers
shall perform such duties and have such powers as from time to time may be
determined by the president or the board of directors in order to assist the
Corporate Officers in the furtherance of their duties. In the performance of
such duties and the exercise of such powers, however, such Administrative
Officers shall have limited authority to act on behalf of the corporation as the
board of directors shall establish, including but not limited to limitations on
the dollar amount and on the scope of agreements or commitments that may be made
by such Administrative Officers on behalf of the corporation, which limitations
may not be exceeded by such individuals or altered by the president without
further approval by the board of directors.
5.13 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing powers, authority and duties, all officers of
the corporation shall respectively have such authority and powers and perform
such duties in the management of the business of the corporation as may be
designated from time to time by the board of directors.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner permitted
by the General Corporation Law of Delaware as the same now exists or may
hereafter be amended, indemnify any person against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred in connection with any threatened, pending or completed
action, suit, or proceeding in which such person was or is a party or is
threatened to be made a party by reason of the fact that such person is or was a
director or officer of the corporation. For purposes of this Section 6.1, a
"director" or "officer" of the corporation shall mean any person (i) who is or
was a director or officer of the corporation, (ii) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was a
director or officer of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
The corporation shall be required to indemnify a director or officer in
connection with an action, suit, or proceeding (or part thereof) initiated by
such director or officer only if the initiation of such action, suit, or
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proceeding (or part thereof) by the director or officer was authorized by the
board of Directors of the corporation.
The corporation shall pay the expenses (including attorney's fees)
incurred by a director or officer of the corporation entitled to indemnification
hereunder in defending any action, suit or proceeding referred to in this
Section 6.1 in advance of its final disposition; provided, however, that payment
of expenses incurred by a director or officer of the corporation in advance of
the final disposition of such action, suit or proceeding shall be made only upon
receipt of an undertaking by the director or officer to repay all amounts
advanced if it should ultimately be determined that the director or officer is
not entitled to be indemnified under this Section 6.1 or otherwise.
The rights conferred on any person by this Article shall not be exclusive
of any other rights which such person may have or hereafter acquire under any
statute, provision of the corporation's Certificate of Incorporation, these
bylaws, agreement, vote of the stockholders or disinterested directors or
otherwise.
Any repeal or modification of the foregoing provisions of this Article
shall not adversely affect any right or protection hereunder of any person in
respect of any act or omission occurring prior to the time of such repeal or
modification.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the maximum extent and in the
manner permitted by the General Corporation Law of Delaware as the same now
exists or may hereafter be amended, to indemnify any person (other than
directors and officers) against expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred in
connection with any threatened, pending or completed action, suit, or
proceeding, in which such person was or is a party or is threatened to be made a
party by reason of the fact that such person is or was an employee or agent of
the corporation. For purposes of this Section 6.2, an "employee" or "agent" of
the corporation (other than a director or officer) shall mean any person (i) who
is or was an employee or agent of the corporation, (ii) who is or was serving at
the request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was an
employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.3 INSURANCE
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify him or her
against such liability under the provisions of the General Corporation Law of
Delaware.
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ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at such
place or places as designated by the board of directors, keep a record of its
stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books and other records of its business and properties.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders and its other books and records for a purpose
reasonably related to his or her position as a director.
7.3 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, if any, the president, any vice president, the
chief financial officer, the secretary or any assistant secretary of this
corporation, or any other person authorized by the board of directors or the
president or a vice president, is authorized to vote, represent and exercise on
behalf of this corporation all rights incident to any and all shares of the
stock of any other corporation or corporations standing in the name of this
corporation. The authority herein granted may be exercised either by such person
directly or by any other person authorized to do so by proxy or power of
attorney duly executed by such person having the authority.
7.4 CERTIFICATION AND INSPECTION OF BYLAWS
The original or a copy of these bylaws, as amended or otherwise altered to
date, certified by the secretary, shall be kept at the corporation's principal
executive office and shall be open to inspection by the stockholders of the
corporation, at all reasonable times during office hours.
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ARTICLE VIII
GENERAL MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the stockholders entitled to receive payment
of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the board of directors may fix, in advance, a record date, which shall not
precede the date upon which the resolution fixing the record date is adopted and
which shall not be more than sixty (60) days before any such action. In that
case, only stockholders of record at the close of business on the date so fixed
are entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided by law.
If the board of directors does not so fix a record date, then the record
date for determining stockholders for any such purpose shall be at the close of
business on the day on which the board of directors adopts the applicable
resolution.
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
The board of directors, except as otherwise provided in these bylaws, may
authorize and empower any officer or officers, or agent or agents, to enter into
any contract or execute any instrument in the name of and on behalf of the
corporation; such power and authority may be general or confined to specific
instances. Unless so authorized or ratified by the board of directors or within
the agency power of an officer, no officer, agent or employee shall have any
power or authority to bind the corporation by any contract or engagement or to
pledge its credit or to render it liable for any purpose or for any amount.
8.4 STOCK CERTIFICATES; TRANSFER; PARTLY PAID SHARES
The shares of the corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and, upon request,
every holder of uncertificated shares, shall be entitled to have a certificate
signed by, or in the name of the corporation by, the chairman or vice-chairman
of the board of directors, or the president or vice-president, and by the chief
financial officer or an assistant treasurer, or the secretary or an assistant
secretary of such corporation representing the number of shares registered in
certificate form. Any or all of the signatures on the certificate
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<PAGE> 22
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate has
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the corporation with the same effect as if he or
she were such officer, transfer agent or registrar at the date of issue.
Certificates for shares shall be of such form and device as the board of
directors may designate and shall state the name of the record holder of the
shares represented thereby; its number; date of issuance; the number of shares
for which it is issued; a summary statement or reference to the powers,
designations, preferences or other special rights of such stock and the
qualifications, limitations or restrictions of such preferences and/or rights,
if any; a statement or summary of liens, if any; a conspicuous notice of
restrictions upon transfer or registration of transfer, if any; a statement as
to any applicable voting trust agreement; and, if the shares be assessable, or,
if assessments are collectible by personal action, a plain statement of such
facts.
Upon surrender to the secretary or transfer agent of the corporation of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, or upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.5 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences and the relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware (relating to transfers of stock, stock certificates and uncertificated
stock), in lieu of the foregoing requirements there may be set forth on the face
or back of the certificate that the corporation shall issue to represent such
class or series of stock a statement that the corporation will furnish without
charge to each stockholder who so requests the powers, the designations, the
preferences and the relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.
8.6 LOST CERTIFICATES
Except as provided in this Section 8.6, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The board of
directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; the board
may require indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense
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or liability, on account of the alleged loss, theft or destruction of the
certificate or the issuance of the replacement certificate.
8.7 TRANSFER AGENTS AND REGISTRARS
The board of directors may appoint one or more transfer agents or transfer
clerks, and one or more registrars, each of which shall be an incorporated bank
or trust company -- either domestic or foreign, who shall be appointed at such
times and places as the requirements of the corporation may necessitate and the
board of directors may designate.
8.8 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction and definitions in the General Corporation Law of Delaware shall
govern the construction of these bylaws. Without limiting the generality of this
provision, as used in these bylaws, the singular number includes the plural, the
plural number includes the singular, and the term "person" includes both an
entity and a natural person.
ARTICLE IX
AMENDMENTS
The original or other bylaws of the corporation may be adopted, amended or
repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its certificate of incorporation, confer the power to adopt,
amend or repeal bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal bylaws.
Whenever an amendment or new bylaw is adopted, it shall be copied in the
book of bylaws with the original bylaws, in the appropriate place. If any bylaw
is repealed, the fact of repeal with the date of the meeting at which the repeal
was enacted or the filing of the operative written consent(s) shall be stated in
said book.
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<PAGE> 1
EXHIBIT 4.1
NUMBER INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE SHARES
ENTEX INFORMATION SERVICES, INC.
The Corporation is Authorized to issue 100,000,000 Shares of Common Stock
Par Value $.0001 Per Share
This Certifies that __________________________________________ is the owner of
__________________________________________ fully paid and non-assessable Shares
of the above-named Corporation, transferable on the books of the Corporation by
the holder hereof in person or by duly authorized Attorney upon surrender of
this Certificate properly endorsed.
WITNESS the seal of the Corporation and the signatures of its duly
authorized officers.
Dated ________________________
______________________________ ___________________________
Secretary Treasurer Vice-President President
<PAGE> 2
Notice: The Signature to this assignment must correspond with the name as
written upon the face of the Certificate, in every particular, without
alternations or enlargements or any change whatsoever.
For value Received, ____________ hereby sell, assign and transfer unto
________________________________________________________________________________
________________________________________________________________________ Shares
represented by the within Certificate and do hereby irrevocably constitute and
appoint ________________________________________________________________________
_______________________________________________________________________ Attorney
to transfer the said shares on the Books of the within named Corporation with
full power of substitution in the premises.
Dated __________________ 19__
________________________________________
In Presence of _________________________________
<PAGE> 1
Exhibit 10.1
ENTEX INFORMATION SERVICES, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("AGREEMENT") is effective as of Date, by
and between ENTEX Information Services, Inc., a Delaware corporation (the
"COMPANY"), and Name ("INDEMNITEE").
WHEREAS, the Company desires to attract and retain the services of
highly qualified individuals, such as Indemnitee, to serve the Company and its
related entities;
WHEREAS, in order to induce Indemnitee to continue to provide services
to the Company, the Company wishes to provide for the indemnification of, and
the advancement of expenses to, Indemnitee to the maximum extent permitted by
law;
WHEREAS, the Company and Indemnitee recognize the continued difficulty
in obtaining liability insurance for the Company's directors, officers,
employees, agents and fiduciaries, the sig nificant increases in the cost of
such insurance and the general reductions in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, agents and fiduciaries to expensive litigation risks at the same time
as the availability and coverage of liability insurance has been severely
limited; and
WHEREAS, in view of the considerations set forth above, the Company
desires that Indemnitee shall be indemnified and advanced expenses by the
Company as set forth herein;
NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth
below.
1. Certain Definitions.
a. "CHANGE IN CONTROL" shall mean, and shall be deemed to have occurred
if, on or after the date of this Agreement, (i) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended), other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company acting in such capacity or a corporation
owned directly or indirectly by the stockholders of the Company in substantially
the same proportions as their ownership of stock of the Company, becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing more than 50% of the total
voting power represented by the Company's then outstanding Voting Securities (as
defined below), (ii) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board of Directors of the Company
and any new director whose
<PAGE> 2
election by the Board of Directors or nomination for election by the Company's
stockholders was approved by a vote of at least two thirds (2/3) of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof, or (iii) the stockholders
of the Company approve a merger or consolidation of the Company with any other
corporation other than a merger or consolidation which would result in the
Voting Securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into Voting Securities of the surviving entity) at least 80% of the total voting
power repre sented by the Voting Securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation, or the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of (in one
transaction or a series of related transactions) all or substantially all of the
Company's assets.
b. "CLAIM" shall mean with respect to a Covered Event (as defined
below): any threatened, pending or completed action, suit, proceeding or
alternative dispute resolution mechanism, or any hearing, inquiry or
investigation that Indemnitee in good faith believes might lead to the
institution of any such action, suit, proceeding or alternative dispute
resolution mechanism, whether civil, criminal, administrative, investigative or
other.
c. References to the "COMPANY" shall include, in addition to ENTEX
Information Services, Inc., any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger to which
ENTEX Information Services, Inc. (or any of its wholly owned subsidiaries) is a
party which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees, agents or
fiduciaries, so that if Indemnitee is or was a director, officer, employee,
agent or fiduciary of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee, agent
or fiduciary of another corporation, partnership, joint venture, employee
benefit plan, trust or other enterprise, Indemnitee shall stand in the same
position under the provisions of this Agreement with respect to the resulting or
surviving corporation as Indemnitee would have with respect to such constituent
corporation if its separate existence had continued.
d. "COVERED EVENT" shall mean any event or occurrence related to the
fact that Indemnitee is or was a director, officer, employee, agent or fiduciary
of the Company, or any subsidiary of the Company, or is or was serving at the
request of the Company as a director, officer, employee, agent or fiduciary of
another corporation, partnership, joint venture, trust or other enterprise, or
by reason of any action or inaction on the part of Indemnitee while serving in
such capacity.
e. "EXPENSES" shall mean any and all expenses (including attorneys' fees
and all other costs, expenses and obligations incurred in connection with
investigating, defending, being a witness in or participating in (including on
appeal), or preparing to defend, to be a witness in or to participate in, any
action, suit, proceeding, alternative dispute resolution mechanism, hearing,
inquiry or investigation), judgments, fines, penalties and amounts paid in
settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld), actually
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<PAGE> 3
and reasonably incurred, of any Claim and any federal, state, local or foreign
taxes imposed on the Indemnitee as a result of the actual or deemed receipt of
any payments under this Agreement.
f. "EXPENSE ADVANCE" shall mean a payment to Indemnitee pursuant to
Section 3 of Expenses in advance of the settlement of or final judgement in any
action, suit, proceeding or alternative dispute resolution mechanism, hearing,
inquiry or investigation which constitutes a Claim.
g. "INDEPENDENT LEGAL COUNSEL" shall mean an attorney or firm of
attorneys, selected in accordance with the provisions of Section 2(d) hereof,
who shall not have otherwise performed services for the Company or Indemnitee
within the last three years (other than with respect to matters concerning the
rights of Indemnitee under this Agreement, or of other indemnitees under similar
indemnity agreements).
h. References to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on
Indemnitee with respect to an employee benefit plan; and references to "serving
at the request of the company" shall include any service as a director,
officer, employee, agent or fiduciary of the Company which imposes duties on, or
involves services by, such director, officer, employee, agent or fiduciary with
respect to an employee benefit plan, its participants or its beneficiaries; and
if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed
to be in the interest of the participants and beneficiaries of an employee
benefit plan, Indemnitee shall be deemed to have acted in a manner "not opposed
to the best interests of the company" as referred to in this Agreement.
i. "REVIEWING PARTY" shall mean, subject to the provisions of Section
2(d), any person or body appointed by the Board of Directors in accordance with
applicable law to review the Company's obligations hereunder and under
applicable law, which may include a member or members of the Company's Board of
Directors, Independent Legal Counsel or any other person or body not a party to
the particular Claim for which Indemnitee is seeking indemnification.
j. "SECTION" refers to a section of this Agreement unless otherwise
indicated.
k. "VOTING SECURITIES" shall mean any securities of the Company that
vote generally in the election of directors.
2. Indemnification.
a. Indemnification of Expenses. Subject to the provisions of Section
2(b) below, the Company shall indemnify Indemnitee for Expenses to the fullest
extent permitted by law if Indemnitee was or is or becomes a party to or witness
or other participant in, or is threatened to be made a party to or witness or
other participant in, any Claim (whether by reason of or arising in part out of
a Covered Event), including all interest, assessments and other charges paid or
payable in connection with or in respect of such Expenses.
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<PAGE> 4
b. Review of Indemnification Obligations. Notwithstanding the foregoing,
in the event any Reviewing Party shall have determined (in a written opinion, in
any case in which Independent Legal Counsel is the Reviewing Party) that
Indemnitee is not entitled to be indemnified hereunder under applicable law, (i)
the Company shall have no further obligation under Section 2(a) to make any
payments to Indemnitee not made prior to such determination by such Reviewing
Party, and (ii) the Company shall be entitled to be reimbursed by Indemnitee
(who hereby agrees to reimburse the Company) for all Expenses theretofore paid
in indemnifying Indemnitee; provided, however, that if Indemnitee has commenced
or thereafter commences legal proceedings in a court of competent jurisdiction
to secure a determination that Indemnitee is entitled to be indemnified
hereunder under applicable law, any determination made by any Reviewing Party
that Indemnitee is not entitled to be indemnified hereunder under applicable law
shall not be binding and Indemnitee shall not be required to reimburse the
Company for any Expenses theretofore paid in indemnifying Indemnitee until a
final judicial determination is made with respect thereto (as to which all
rights of appeal therefrom have been exhausted or lapsed). Indemnitee's
obligation to reimburse the Company for any Expenses shall be unsecured and no
interest shall be charged thereon.
c. Indemnitee Rights on Unfavorable Determination; Binding Effect. If
any Reviewing Party determines that Indemnitee substantively is not entitled to
be indemnified hereunder in whole or in part under applicable law, Indemnitee
shall have the right to commence litigation seeking an initial determination by
the court or challenging any such determination by such Reviewing Party or any
aspect thereof, including the legal or factual bases therefor, and, subject to
the provisions of Section 15, the Company hereby consents to service of process
and to appear in any such proceeding. Absent such litigation, any determination
by any Reviewing Party shall be conclusive and binding on the Company and
Indemnitee.
d. Selection of Reviewing Party; Change in Control. If there has not
been a Change in Control, any Reviewing Party shall be selected by the Board of
Directors, and if there has been such a Change in Control (other than a Change
in Control which has been approved by a majority of the Company's Board of
Directors who were directors immediately prior to such Change in Control), any
Reviewing Party with respect to all matters thereafter arising concerning the
rights of Indemnitee to indemnification of Expenses under this Agreement or any
other agreement or under the Company's certificate of incorporation or bylaws as
now or hereafter in effect, or under any other applicable law, if desired by
Indemnitee, shall be Independent Legal Counsel selected by Indemnitee and
approved by the Company (which approval shall not be unreasonably withheld).
Such counsel, among other things, shall render its written opinion to the
Company and Indemnitee as to whether and to what extent Indemnitee would be
entitled to be indemnified hereunder under applicable law and the Company agrees
to abide by such opinion. The Company agrees to pay the reasonable fees of the
Independent Legal Counsel referred to above and to indemnify fully such counsel
against any and all expenses (including attorneys' fees), claims, liabilities
and damages arising out of or relating to this Agreement or its engagement
pursuant hereto. Notwithstanding any other provision of this Agreement, the
Company shall not be required to pay Expenses of more than one Independent Legal
Counsel in connection with all matters concerning a single Indemnitee, and such
Independent Legal Counsel shall be the Independent Legal Counsel for any or all
other Indemnitees unless (i) the
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<PAGE> 5
Company otherwise determines or (ii) any Indemnitee shall provide a written
statement setting forth in detail a reasonable objection to such Independent
Legal Counsel representing other Indemnitees.
e. Mandatory Payment of Expenses. Notwithstanding any other provision of
this Agreement other than Section 10 hereof, to the extent that Indemnitee has
been successful on the merits or otherwise, including, without limitation, the
dismissal of an action without prejudice, in defense of any Claim, Indemnitee
shall be indemnified against all Expenses incurred by Indemnitee in connection
therewith.
3. Expense Advances.
a. Obligation to Make Expense Advances. The Company shall make Expense
Advances to Indemnitee upon receipt of a written undertaking by or on behalf of
the Indemnitee to repay such amounts if it shall ultimately be determined that
the Indemnitee is not entitled to be indemnified therefor by the Company.
b. Form of Undertaking. Any written undertaking by the Indemnitee to
repay any Expense Advances hereunder shall be unsecured and no interest shall be
charged thereon.
c. Determination of Reasonable Expense Advances. The parties agree that
for the purposes of any Expense Advance for which Indemnitee has made written
demand to the Company in accordance with this Agreement, all Expenses included
in such Expense Advance that are certified by affidavit of Indemnitee's counsel
as being reasonable shall be presumed conclusively to be reasonable.
4. Procedures for Indemnification and Expense Advances.
a. Timing of Payments. All payments of Expenses (including without
limitation Expense Advances) by the Company to the Indemnitee pursuant to this
Agreement shall be made to the fullest extent permitted by law as soon as
practicable after written demand by Indemnitee therefor is presented to the
Company, but in no event later than forty-five (45) business days after such
written demand by Indemnitee is presented to the Company, except in the case of
Expense Advances, which shall be made no later than twenty (20) business days
after such written demand by Indemnitee is presented to the Company.
b. Notice/Cooperation by Indemnitee. Indemnitee shall, as a condition
precedent to Indemnitee's right to be indemnified or Indemnitee's right to
receive Expense Advances under this Agreement, give the Company notice in
writing as soon as practicable of any Claim made against Indemnitee for which
indemnification will or could be sought under this Agreement. Notice to the
Company shall be directed to the Chief Executive Officer of the Company at the
address shown on the signature page of this Agreement (or such other address as
the Company shall designate in writing to Indemnitee). In addition, Indemnitee
shall give the Company such information and cooperation as it may reasonably
require and as shall be within Indemnitee's power.
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<PAGE> 6
c. No Presumptions; Burden of Proof. For purposes of this Agreement, the
termination of any Claim by judgment, order, settlement (whether with or without
court approval) or conviction, or upon a plea of nolo contendere, or its
equivalent, shall not create a presumption that Indemnitee did not meet any
particular standard of conduct or have any particular belief or that a court has
determined that indemnification is not permitted by this Agreement or applicable
law. In addition, neither the failure of any Reviewing Party to have made a
determination as to whether Indemnitee has met any particular standard of
conduct or had any particular belief, nor an actual determination by any
Reviewing Party that Indemnitee has not met such standard of conduct or did not
have such belief, prior to the commencement of legal proceedings by Indemnitee
to secure a judicial determination that Indemnitee should be indemnified under
this Agreement or applicable law, shall be a defense to Indemnitee's claim or
create a presumption that Indemnitee has not met any particular standard of
conduct or did not have any particular belief. In connection with any
determination by any Reviewing Party or otherwise as to whether the Indemnitee
is entitled to be indemnified hereunder, the burden of proof shall be on the
Company to establish that Indemnitee is not so entitled.
d. Notice to Insurers. If, at the time of the receipt by the Company of
a notice of a Claim pursuant to Section 4(b) hereof, the Company has liability
insurance in effect which may cover such Claim, the Company shall give prompt
notice of the commencement of such Claim to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such Claim in accordance
with the terms of such policies.
e. Selection of Counsel. In the event the Company shall be obligated
hereunder to provide indemnification for or make any Expense Advances with
respect to the Expenses of any Claim, the Company, if appropriate, shall be
entitled to assume the defense of such Claim with counsel approved by Indemnitee
(which approval shall not be unreasonably withheld) upon the delivery to
Indemnitee of written notice of the Company's election to do so. After delivery
of such notice, approval of such counsel by Indemnitee and the retention of such
counsel by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees or expenses of separate counsel subsequently employed by
or on behalf of Indemnitee with respect to the same Claim; provided, however,
that (i) Indemnitee shall have the right to employ Indemnitee's separate counsel
in any such Claim at Indemnitee's expense and (ii) if (A) the employment of
separate counsel by Indemnitee has been previously authorized by the Company,
(B) Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense,
or (C) the Company shall not continue to retain such counsel to defend such
Claim, then the fees and expenses of Indemnitee's separate counsel shall be
Expenses for which Indemnitee may receive indemnification or Expense Advances
hereunder.
5. Additional Indemnification Rights; Nonexclusivity.
a. Scope. The Company hereby agrees to indemnify the Indemnitee to the
fullest extent permitted by law, notwithstanding that such indemnification is
not specifically authorized by the other provisions of this Agreement, the
Company's certificate of incorporation, the Company's
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<PAGE> 7
bylaws or by statute. In the event of any change after the date of this
Agreement in any applicable law, statute or rule which expands the right of a
Delaware corporation to indemnify a member of its board of directors or an
officer, employee, agent or fiduciary, it is the intent of the parties hereto
that Indemnitee shall enjoy by this Agreement the greater benefits afforded by
such change. In the event of any change in any applicable law, statute or rule
which narrows the right of a Delaware corporation to indemnify a member of its
board of directors or an officer, employee, agent or fiduciary, such change, to
the extent not otherwise required by such law, statute or rule to be applied to
this Agreement, shall have no effect on this Agreement or the parties' rights
and obligations hereunder except as set forth in Section 10(a) hereof.
b. Nonexclusivity. The indemnification and the payment of Expense
Advances provided by this Agreement shall be in addition to any rights to which
Indemnitee may be entitled under the Company's certificate of incorporation, its
bylaws, any other agreement, any vote of stockholders or disinterested
directors, the General Corporation Law of the State of Delaware, or otherwise.
The indemnification and the payment of Expense Advances provided under this
Agreement shall continue as to Indemnitee for any action taken or not taken
while serving in an indemnified capacity even though subsequent thereto
Indemnitee may have ceased to serve in such capacity.
6. No Duplication of Payments. The Company shall not be liable under
this Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, provision of the Company's certificate of
incorporation, bylaws or otherwise) of the amounts otherwise payable hereunder.
7. Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses incurred in connection with any Claim, but not, however, for
all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
8. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge
that in certain instances, federal law or applicable public policy may prohibit
the Company from indemnifying its directors, officers, employees, agents or
fiduciaries under this Agreement or otherwise. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the Securities and Exchange Commission to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Indemnitee.
9. Liability Insurance. To the extent the Company maintains liability
insurance applicable to directors, officers, employees, agents or fiduciaries,
Indemnitee shall be covered by such policies in such a manner as to provide
Indemnitee the same rights and benefits as are provided to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, agents or fiduciaries, if Indemnitee
is not an officer or director but is a key employee, agent or fiduciary.
-7-
<PAGE> 8
10. Exceptions. Notwithstanding any other provision of this Agreement,
the Company shall not be obligated pursuant to the terms of this Agreement:
a. Excluded Action or Omissions. To indemnify Indemnitee for Expenses
resulting from acts, omissions or transactions for which Indemnitee is
prohibited from receiving indemnification under this Agreement or applicable
law; provided, however, that notwithstanding any limitation set forth in this
Section 10(a) regarding the Company's obligation to provide indemnification,
Indemnitee shall be entitled under Section 3 to receive Expense Advances
hereunder with respect to any such Claim unless and until a court having
jurisdiction over the Claim shall have made a final judicial determination (as
to which all rights of appeal therefrom have been exhausted or lapsed) that
Indemnitee has engaged in acts, omissions or transactions for which Indemnitee
is prohibited from receiving indemnification under this Agreement or applicable
law.
b. Claims Initiated by Indemnitee. To indemnify or make Expense Advances
to Indemnitee with respect to Claims initiated or brought voluntarily by
Indemnitee and not by way of defense, counterclaim or crossclaim, except (i)
with respect to actions or proceedings brought to establish or enforce a right
to indemnification under this Agreement or any other agreement or insurance
policy or under the Company's certificate of incorporation or bylaws now or
hereafter in effect relating to Claims for Covered Events, (ii) in specific
cases if the Board of Directors has approved the initiation or bringing of such
Claim, or (iii) as otherwise required under Section 145 of the Delaware General
Corporation Law (relating to indemnification of officers, directors, employees
and agents; and insurance), regardless of whether Indemnitee ultimately is
determined to be entitled to such indemnification or insurance recovery, as the
case may be.
c. Lack of Good Faith. To indemnify Indemnitee for any Expenses incurred
by the Indemnitee with respect to any action instituted (i) by Indemnitee to
enforce or interpret this Agreement, if a court having jurisdiction over such
action determines as provided in Section 13 that each of the material assertions
made by the Indemnitee as a basis for such action was not made in good faith or
was frivolous, or (ii) by or in the name of the Company to enforce or interpret
this Agreement, if a court having jurisdiction over such action determines as
provided in Section 13 that each of the material defenses asserted by Indemnitee
in such action was made in bad faith or was frivolous.
d. Claims Under Section 16(b). To indemnify Indemnitee for expenses and
the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute; provided, however, that
notwithstanding any limitation set forth in this Section 10(d) regarding the
Company's obligation to provide indemnification, Indemnitee shall be entitled
under Section 3 to receive Expense Advances hereunder with respect to any such
Claim unless and until a court having jurisdiction over the Claim shall have
made a final judicial determination (as to which all rights of appeal therefrom
have been exhausted or lapsed) that Indemnitee has violated said statute.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
-8-
<PAGE> 9
12. Binding Effect; Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the parties hereto and their
respective successors, assigns (including any direct or indirect successor by
purchase, merger, consolidation or otherwise to all or substantially all of the
business or assets of the Company), spouses, heirs and personal and legal
representatives. The Company shall require and cause any successor (whether
direct or indirect, and whether by purchase, merger, consolidation or otherwise)
to all, substantially all, or a substantial part, of the business or assets of
the Company, by written agreement in form and substance satis factory to
Indemnitee, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession had taken place. This Agreement shall continue in effect
regardless of whether Indemnitee continues to serve as a director, officer,
employee, agent or fiduciary (as applicable) of the Company or of any other
enterprise at the Company's request.
13. Expenses Incurred in Action Relating to Enforcement or Interpretation. In
the event that any action is instituted by Indemnitee under this Agreement or
under any liability insurance policies maintained by the Company to enforce or
interpret any of the terms hereof or thereof, Indemnitee shall be entitled to be
indemnified for all Expenses incurred by Indemnitee with respect to such action
(including without limitation attorneys' fees), regardless of whether Indemnitee
is ultimately successful in such action, unless as a part of such action a court
having jurisdiction over such action makes a final judicial determination (as to
which all rights of appeal therefrom have been exhausted or lapsed) that each of
the material assertions made by Indemnitee as a basis for such action was not
made in good faith or was frivolous; provided, however, that until such final
judicial determination is made, Indemnitee shall be entitled under Section 3 to
receive payment of Expense Advances hereunder with respect to such action. In
the event of an action instituted by or in the name of the Company under this
Agreement to enforce or interpret any of the terms of this Agreement, Indemnitee
shall be entitled to be indemnified for all Expenses incurred by Indemnitee in
defense of such action (including without limitation costs and expenses incurred
with respect to Indemnitee's counterclaims and cross-claims made in such
action), unless as a part of such action a court having jurisdiction over such
action makes a final judicial determination (as to which all rights of appeal
therefrom have been exhausted or lapsed) that each of the material defenses
asserted by Indemnitee in such action was made in bad faith or was frivolous;
provided, however, that until such final judicial determination is made,
Indemnitee shall be entitled under Section 3 to receive payment of Expense
Advances hereunder with respect to such action.
14. Notice. All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed duly given (i) if delivered by
hand and signed for by the party addressed, on the date of such delivery, or
(ii) if mailed by domestic certified or registered mail with postage prepaid, on
the third business day after the date postmarked. Addresses for notice to either
party are as shown on the signature page of this Agreement or as subsequently
modified by written notice.
15. Consent to Jurisdiction. The Company and Indemnitee each hereby irrevocably
consent to the jurisdiction of the courts of the State of Delaware for all
purposes in connection with any action or proceeding which arises out of or
relates to this Agreement and agree that any action instituted
-9-
<PAGE> 10
under this Agreement shall be commenced, prosecuted and continued only in the
Court of Chancery of the State of Delaware in and for New Castle County, which
shall be the exclusive and only proper forum for adjudicating such a claim.
16. Severability. The provisions of this Agreement shall be severable in the
event that any of the provisions hereof (including any provision within a single
section, paragraph or sentence) are held by a court of competent jurisdiction to
be invalid, void or otherwise unenforceable, and the remaining provisions shall
remain enforceable to the fullest extent permitted by law. Furthermore, to the
fullest extent possible, the provisions of this Agreement (including without
limitation each portion of this Agreement containing any provision held to be
invalid, void or otherwise unenforceable, that is not itself invalid, void or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
17. Choice of Law. This Agreement, and all rights, remedies, liabilities, powers
and duties of the parties to this Agreement, shall be governed by and construed
in accordance with the laws of the State of Delaware without regard to
principles of conflicts of laws.
18. Subrogation. In the event of payment under this Agreement, the Company shall
be subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all documents required and shall do all acts that
may be necessary to secure such rights and to enable the Company effectively to
bring suit to enforce such rights.
19. Amendment and Termination. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless it is in writing signed
by both the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed to be or shall constitute a waiver of any other provisions
hereof (whether or not similar), nor shall such waiver constitute a continuing
waiver.
20. Integration and Entire Agreement. This Agreement sets forth the entire
understanding between the parties hereto and supersedes and merges all previous
written and oral negotiations, commitments, understandings and agreements
relating to the subject matter hereof between the parties hereto.
21. No Construction as Employment Agreement. Nothing contained in this Agreement
shall be construed as giving Indemnitee any right to be retained in the employ
of the Company or any of its subsidiaries or affiliated entities.
-10-
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed this
Indemnification Agreement as of the date first above written.
ENTEX Information Services, Inc.
By:
--------------------------------
John A. McKenna, Jr.
President & CEO
Address: ENTEX Information Services, Inc.
Six International Drive
Rye Brook, NY 10573-1058
AGREED TO AND ACCEPTED
BY INDEMNITEE:
(Name)
(Title)
- -----------------------------------
(signature)
-1-
<PAGE> 1
EXHIBIT 10.2
AGREEMENT
WHEREAS, John A. McKenna, Jr. (the "Executive") and ENTEX Information
Services, Inc. ("ENTEX") have entered into a Severance Agreement dated as of
August 7, 1994 (the "Severance Agreement"); and
WHEREAS, the Executive has purchased shares of Common Stock of ENTEX
Holdings, Inc. ("Holdings"), the parent of ENTEX, pursuant to a Securities
Purchase Agreement dated as of December 10, 1993 among Holdings and the
individuals listed on Schedule I thereto, including the Executive ("Executive's
Shares"); and
WHEREAS, certain terms of ownership of the Executive's Shares are set
forth in the Stockholders' Agreement dated as of December 10, 1993 (the
"Stockholders' Agreement") and the Amendment to Stockholders' Agreement dated
as of December 1, 1994 (the "1994 Amendment"), both of which agreements are by
and among Dort A. Cameron III, ENTEX Associates L.P. and the individuals listed
on Schedule A to such agreements, including the Executive; and
WHEREAS, the parties desire to amend the Severance Agreement for the
purpose of providing further financial incentive for the Executive to continue
his employment with ENTEX.
NOW THEREFORE, in consideration of the mutual promises contained herein
the parties agree as follows:
1. If a Severance Event occurs or the Executive's employment by ENTEX is
terminated as a result of his death or Disability prior to a Public Offering or
Change of Control, and Holdings elects, pursuant to the 1994 Amendment, to
repurchase the Executive's Shares, the Executive shall be entitled to receive:
(a) an amount equal to the different between the current Book Value
and current Share Value for such shares as such terms are defined in the
Stockholders' Agreement and 1994 Amendment, and
(b) a tax gross-up for the different between ordinary income tax
treatment and capital gains tax treatment resulting from such repurchase,
computed to put the Executive in the same position he would have been in had he
made a timely IRC Section 83(b) election when he originally purchased the
Executive's Shares.
Such amounts shall be in addition to the Termination Payment.
<PAGE> 2
2. The terms Severance Event and Termination Payment shall have the
meanings ascribed to them in the Severance Agreement.
3. The terms Public Offering, Change of Control and Disability shall
have the meanings ascribed to them in the Stockholders' Agreement.
4. Except as expressly set forth herein, the Severance Agreement remains
unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement this __ day
of April 1996.
ENTEX Information Services, Inc.
By: /s/
--------------------------------
Chairman
ENTEX Holdings, Inc.
By: /s/
--------------------------------
Chairman
/s/ John A. McKenna, Jr.
--------------------------------
John A. McKenna, Jr.
<PAGE> 3
AGREEMENT
This Agreement is entered into as of August 7, 1994 by and between ENTEX
Information Services, inc. ("Entex") and John A. McKenna, Jr. (the "Executive"),
a key employee of Entex, for the purpose of providing a financial incentive for
the Executive to continue his employment with Entex. To encourage the Executive
to provide continuing services to Entex and to provide for reasonable
compensation in the event the Executive's employment is terminated as a result
of certain circumstances specified herein, the parties agree as follows:
1. TERM OF AGREEMENT
This Agreement shall be in effect from August 7, 1994 until August 6,
2000.
2. TERMINATION PAYMENT
If, during the term of this Agreement, a "Severance Event", as defined
in Paragraph 3, occurs with respect to the Executive, then the Executive
shall be entitled to receive a termination payment from Entex (the
"Termination Payment"). The amount of the Termination Payment shall be
equal to the product of 12 times the Executive's "Target Total Monthly
Compensation." The Target Total Monthly Compensation shall mean the sum of
(i) the Executive's base salary as of date of termination, and (ii) a
monthly pro-rata share of any bonus or variable compensation due to the
Executive from any plan in which the Executive participates. The
Termination Payment shall be made in a lump sum not more than five days
following the effective date of a Severance Event. The Executive shall also
receive the full base salary for the month in which the Severance Event
occurs.
In addition to the Termination Payment, the Executive will be entitled
to continue participation in the Entex health and life insurance plans
subject to the plan provisions in effect at the time of termination. Entex
agrees to pay the COBRA (Consolidated Omnibus Budget Reconciliation Act of
1986) cost for health benefits, and to continue Basic Life Insurance
coverage for 12 months beginning the first of the month following the
effective date of the Severance Event.
3. SEVERANCE EVENTS
The following shall constitute Severance Events:
(a) The termination of the Executive's employment by Entex other
than for "Cause" or as a result of the Executive's death, disability
or voluntary resignation; or
<PAGE> 4
(b) A "Change in Control" of Entex, the result of which is (i) a
reduction of the Executive's base compensation below the base
compensation in effect immediately preceding the Change of Control; or
(ii) a reduction to a level not materially consistent with that
existing immediately preceding the Change of Control in the level of
authority or scope of the responsibilities of the Executive; or (iii)
a relocation of the office at which the Executive is expected to
perform his responsibilities greater than 35 miles from the location
of the office immediately preceding the Change of Control.
3. MISCELLANEOUS PROVISIONS
3.1 EMPLOYMENT AT WILL
Entex and the Executive acknowledge that the Executive's
employment is at will, as provided by applicable law. If the
Executive's employment terminates for any reason other than a
Severance Event, then the Executive shall only be entitled to such
severance pay and benefits (if any) to which the Executive may be
entitled under Entex's then-existing termination policies and
practices and benefit plans and policies at the time of termination.
3.2 WITHHOLDING TAXES
Any payment or distribution under this Agreement shall be subject
to reduction to the extent required to satisfy any withholding tax
obligation imposed by federal, state, local or foreign law.
3.3 ENTEX SUCCESSORS
This Agreement shall be binding upon and inure to the benefit of
Entex and any successor of Entex (including, without limitation, any
corporation or other entity which directly, or indirectly acquires all
or substantially all of the assets or shares of Entex whether by
merger, consolidation, sale, or otherwise) but shall not otherwise be
assignable by Entex. Entex shall require that any such successor
expressly assume and agree to perform this Agreement in the same
manner and to the same extent that Entex would be required to perform
this Agreement if no succession had taken place.
<PAGE> 5
4. DEFINITIONS
4.1 "Change of Control" means the transfer of ownership or
control of more than 50% of all of the assets or shares of Entex or
its parent Entex Holdings, Inc., whether by tender offer, merger,
consolidation, sale of assets or contested election or any combination
of the foregoing transactions, to any other person, firm, corporation
or other entity, provided, however, that no Change of Control shall be
deemed to have occurred if ownership or control is acquired by any
entity in which any member or group of members of the current
management of Entex, or its parent Entex Holdings, Inc., as the case
may be, has a controlling participation.
4.2 "Cause" means (i) a willful failure by the Executive to
substantially perform the Executive's duties; or (ii) a willful act by
the Executive which constitutes misconduct and which is materially
injurious to Entex.
IN WITNESS WHEREOF, the parties have executed this Agreement as of this
date first above written.
Entex Information Services, Inc.
By /s/
--------------------------------
Chairman
/s/ John A. McKenna, Jr.
--------------------------------
John A. McKenna, Jr.
<PAGE> 1
EXHIBIT 10.3
[ENTEX LETTERHEAD]
January 6, 1997
Mr. Kenneth A. Ghazey
385 Nashawtuc Road
Concord, MA 01742
Dear Ken:
We are pleased to confirm our agreement with you as Executive Vice President,
Chief Financial Officer and Director for ENTEX Information Services, Inc. The
terms of our agreement are as follows:
Salary: Annual salary of $275,000.00 paid on a bi-weekly basis. Your
effective date of hire will be January 6, 1997.
1997 Bonus: On a pro rata basis in fiscal year 1997, you will be
eligible to participate in the ENTEX Management Incentive
Plan at a target bonus of 50% of your base salary for 100%
achievement of established goals. Your bonus will be
determined by the performance of the Company as well as your
individual performance. A copy of the Management Incentive
Plan is enclosed.
Stock Options: You will be granted 176,000 options to purchase the common
stock of ENTEX at $10.19/share under its 1996 Performance
Incentive Plan (the "PIP") in the forms attached to this
letter as Exhibits A, B and C. 100,000 of such options will
vest one third (1/3) on your date of hire, one third (1/3)
on the first anniversary, and one third (1/3) on the second
anniversary of your date of hire. Vesting of the 76,000
options will be performance based, or 7 years from date of
hire, whichever occurs first.
Vacation: You will be eligible for four (4) weeks vacation per year.
Additionally, you will be eligible for nine (9) personal
days. Both vacation and personal time are accrued on a
monthly basis.
<PAGE> 2
Car Allowance: You will receive a car allowance of $600 per month.
Benefits: You are eligible to participate in all of the Company's
benefit plans, including the Comprehensive Health Plan.
Tax Home: Your tax home will be Massachusetts. Should the I.R.S. deem
travel and lodging at Rye Brook, N.Y. that is reimbursed to you
to be income, the corporation will gross up such amounts.
Termination: If during your employment a Severance Event occurs (as defined
below) then you are entitled to promptly receive:
o one (1) year's base salary continuation at the then current
rate; plus
o all incentive compensation earned, but not yet paid; plus
o a pro rata payout under the Management Incentive Plan in
effect for the fiscal year in which termination occurs (will
be payable to you promptly after the financial close of such
fiscal year); plus
o Health and Welfare benefits for one year.
A "Severance Event" is defined as:
(a) The termination of your employment by ENTEX other than for
"cause" or as a result of your death, disability or voluntary
resignation; or
(b) A "Change of Control" of ENTEX; or
(c) Your aggregate compensation, benefits and incentive package
is unilaterally reduced by ENTEX and equivalent reductions are
not uniformly applied to all other senior executive officers.
"Cause" is defined in the PIP.
"Change in Control" is defined as the transfer of ownership or
control of more than 50% of all the assets or shares of ENTEX,
whether by tender offer, merger, consolidation, sale of assets or
contested election or any combination of the foregoing
transactions, to any other person, firm, corporation or other
entity, provided, however, that no Change of Control shall be
deemed to have occurred if ownership or control is acquired by
any entity in which any member or group of members of the
2
<PAGE> 3
current management of ENTEX has a controlling participation.
In addition, all employees upon being hired must verify employment eligibility
on the Form I-9 required by the U.S. Immigration and Naturalization Service.
Employment with the Company is at-will employment. This means that either you or
the Company are free to terminate the employment relationship at any time for
any reason.
You will use your best efforts to become familiar with the Company policies
procedures and to abide by them.
Please acknowledge your acceptance of this offer by signing below and returning
one copy to me.
Sincerely, Agreed To:
/s/ JOHN A. MCKENNA /s/ KENNETH A. GHAZEY
- ----------------------------------- ---------------------------------
John A. McKenna Kenneth A. Ghazey
/s/ DORT A. CAMERON, III
- -----------------------------------
Dort A. Cameron, III
Enclosures
3
<PAGE> 1
EXHIBIT 10.4
ENTEX INFORMATION SERVICES, INC. RETENTION AGREEMENT
This Agreement is entered into as of November 17, 1997, by and between ENTEX
Information Services, Inc. (the "Company") and Dale H. Allardyce (the
"Executive"), a key employee of the Company, for the purpose of providing a
financial incentive for the Executive to remain with the Company. To encourage
the Executive to provide continuing services to the Company and to provide for
reasonable compensation in the event that the Executive's employment is
terminated as a result of a Change of Control or restructuring of the Company,
the parties agree as follows:
1. TERM OF AGREEMENT
This Agreement will be in effect from the date hereof until 24 months following
a "Change of Control" of the Company. If no Change of Control has occurred by
November 30, 1998, this Agreement will expire on that date.
2. TERMINATION PAYMENT
If a Change of Control Termination of the Executive's employment occurs during
the term of this Agreement, then the Executive shall be entitled to receive a
termination payment from the Company (the "Termination Payment"). The amount of
the Termination Payment shall be equal to the product of 12 times the
Executive's Target Total Monthly Compensation. The Target Total Monthly
Compensation shall be the sum of (i) 1/12 of the Executive's base salary as of
the date of termination and (ii) 1/12 of the annual target bonus under any
compensation plan in which the Executive participates assuming 100% achievement
of all bonus objectives. The Termination Payment will be made at regular
intervals on the payroll dates of the Company or any successor to the Company,
beginning with the month following the month in which a Change of Control
Termination occurs. The Executive shall also receive the full base salary and
target bonus for the month in which the Change of Control Termination occurs.
In addition, the Executive's participation (including dependent coverage) in
any life, disability, health and dental plans shall be continued, or equivalent
benefits provided by the Company, for a period of up to 12 months. The levels
of coverage and the Executive's contributions for such coverage will be those
in effect immediately prior to the Change of Control Termination.
The foregoing provisions of this Section 2 shall apply unconditionally and
shall not be affected by the Executive's death, disability or acceptance of
another position except that benefits provided under life, disability, health
or dental plans will terminate 90 days after the Executive has obtained other
employment which provides for such benefits. The Executive hereby agrees to
notify the Company promptly upon obtaining such other employment.
<PAGE> 2
3. OUTPLACEMENT
If a Change of Control Termination of the Executive's Employment occurs during
the term of this Agreement, the Executive shall be entitled to outplacement
services provided by a mutually acceptable outplacement service provider, with
a value not to exceed $10,000.
4. MISCELLANEOUS PROVISIONS
4.1 Employment at Will
The company and the Executive acknowledge that the Executive's employment is at
will, as provided by applicable law. If the Executive's employment terminates
for any reason other than a Change of Control Termination, then the Executive
shall only be entitled to such severance pay and benefits (if any) to which the
Executive may be entitled under the Company's then-existing termination
policies and practices and benefit plans and policies at the time of
termination.
4.2 Withholding Taxes
Any payments or distributions under the Agreement shall be subject to reduction
to the extent required to satisfy any withholding tax obligation imposed by
federal, state, local or foreign law.
4.3 Company's Successors
This Agreement shall be binding upon and inure to the benefit of the Company
and any successor of the Company (including, without limitation, any
corporation or other entity which directly or indirectly acquires all or
substantially all of the assets or shares of the Company, whether by merger,
consolidation, sale, or otherwise) but shall not otherwise be assignable by the
Company. The Company shall require that any such successor expressly assume
this Agreement and become obligated to perform all of the terms and conditions
hereof.
4.4 Executive's Successors
The terms of this Agreement shall be enforceable by and inure to the benefit of
the Executive's heirs and estate in the event of his/her death.
4.5 Indemnification
ENTEX hereby acknowledges and agrees that it shall remain subject to the
Indemnification Agreement dated August 1, 1996 between it and the
Executive after a Change of Control Termination.
5. DEFINITIONS
5.1 "Change of Control" means the transfer of ownership or control of more
than 50% of all of the assets or shares of the Company, whether by tender
offer, merger, consolidation, sale of assets or contested election or any
combination of the foregoing transactions.
<PAGE> 3
5.2 "Change of Control Termination" means a Change of Control followed by (i)
the termination of the Executive's employment other than for Cause or as a
result of the Executive's death, disability, or voluntary resignation; (ii) a
reduction of the Executive's base compensation and target bonus below the base
compensation and target bonus in effect immediately preceding the Change of
Control; (iii) a reduction to a level not materially consistent with that
existing immediately preceding the Change of Control in the level of authority
or scope of the responsibilities of the Executive; or (iv) a relocation of the
office at which the Executive is expected to perform his/her responsibilities
greater than 35 miles from the location of the office immediately preceding the
Change of Control.
5.3 "Cause" means (i) a continued and willful failure by the Executive to
substantially perform the Executive's duties which failure constitutes a gross
neglect of his or her duties, (ii) the commission by the Executive of an act of
fraud or embezzlement or an act which the Executive knew to be in gross
violation of his/her duties to the Company; or (iii) a felony conviction of or
plea by the Executive.
6. OTHER AGREEMENTS
This Agreement supersedes any and all agreements between the Company and the
Executive relating to payments upon termination of employment after a Change of
Control, whether oral or written.
7. AMENDMENTS
This Agreement may be amended only by written instrument signed by the Company
and the Executive.
8. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws
of the State of New York.
In Witness Whereof, the parties hereto have executed this Agreement as of the
day and year first above written.
ENTEX Information Services, Inc.
By: /s/ John A. McKenna, Jr.
---------------------------
John A. McKenna, Jr.
Executive:
/s/ Dale H. Allardyce
- ----------------------
- ----------------------
Date
<PAGE> 1
EXHIBIT 10.5
[ENTEX LETTERHEAD]
November 15, 1996
Mr. David J. Csira
767 Barracuda Way
Laguna Beach CA 92651
Dear Dave:
I am pleased to confirm our offer to you as Executive Vice President, Field
Operations, reporting to me. The terms of your offer are as follows:
Salary: Annual base salary of $250,000 paid on a bi-week basis.
This salary change will be effective on November 18,
1996.
1997 Bonus: You will continue to participate in the West Area Sr.
Vice President bonus plan through the second quarter of
FY 1997.
Beginning with the third quarter of 1997, you will
participate in the ENTEX Management Incentive Plan at a
target bonus of 50% of your base salary for 100%
achievement of established goals. Your bonus will be
determined by the performance of the company (75%) as
well as your individual performance (25%).
Stock Options: You will be granted 20,000 options for ENTEX stock at
an exercise price of $10.19 per share. Special vesting
terms are detailed in your stock option grant.
Car Allowance: You will receive a car allowance of $600 per month.
Termination Protection: If you are terminated from ENTEX following a change in
control, you will receive one year severance pay. The
amount of severance will include your base salary in
effect at the time of termination plus bonus at 100%
of target. If your termination is for cause, you will
not be eligible for severance pay. The definitions for
change of control and for cause termination are in the
Stock Purchase Agreement signed by you in December 1993
in connection with your purchase of shares in ENTEX.
This severance will be paid to biweekly. Your benefits
will end
<PAGE> 2
David J. Csira
November 15, 1996 Page 2
with the last day worked; however, you will have
continuation as provided by COBRA.
Benefits: You will continue to participate in all of the
Company's benefit plans.
Relocation: ENTEX will cover reasonable relocation expenses per our
normal relocation policy, with modifications per
attached.
Sincerely, Accepted:
/s/ John A. McKenna /s/ David J. Csira
- --------------------------- ---------------------------------
John A. McKenna, President & David J. Csira
CEO
<PAGE> 3
DAVID J. CSIRA
RELOCATION COVERAGE
- --------------------------------------------------------------------------------
o Third party relocation package including buyout of
current residence at appraised value.
o Movement of personal goods.
o Broker fees on sale up to 6%.
o Points on new mortgage up to 2%.
o "Reasonable" number of house hunting trips.
o "Reasonable" number of weekend visits home.
o Customary meals and related expenses associated with trips.
o Temporary living expenses for up to three (3) months.
<PAGE> 1
Exhibit 10.6
EMPLOYMENT AND NON-COMPETITION AGREEMENT
THIS EMPLOYMENT AND NON-COMPETITION AGREEMENT ("Agreement"), dated
as of the _____ day of July, 1996 is entered into by and between Entex
Information Services, Inc., a Delaware corporation ("Entex"), and Richard
Nathanson ("Employee").
RECITALS
A. Employee has been employed as an officer of FCP Technologies, Inc., a
Delaware corporation ("FCP");
B. Entex, Acquisition Sub and FCP have entered into an Agreement and Plan
of Reorganization dated the date hereof (the "Reorganization Agreement") and
Acquisition Sub and FCP have entered into an Agreement of Merger dated the date
hereof (the "Acquisition Agreement"), which requires, among other things, that
Employee enter into this Agreement in connection with the merger of the
Acquisition Sub with and into FCP, with FCP as the surviving entity (Capitalized
terms not otherwise defined herein shall have the meanings ascribed to them in
the Acquisition Agreement); and
C. This execution of this Agreement is a condition to the Reorganization
Agreement.
AGREEMENT
NOW, THEREFORE, IT IS HEREBY AGREED by and between the parties hereto, for
good and valuable consideration, the sufficiency and receipt of which is hereby
acknowledged, as follows:
1. Employment.
(a) Duties. Effective upon the closing of the Reorganization
Agreement (the "Closing Date"), Employee is hereby employed and accepts
employment as Senior Vice President, Network and Professional Services of Entex,
to perform such services as are commensurate with such a position and as may be
required or directed by the Board of Directors of Entex. During the Employment
Term (as defined in subsection (b) below), Employee shall carry out his duties
and responsibilities hereunder in a diligent and competent manner and shall
devote his full business time, attention and energy thereto. Employee shall
report directly to the individual appointed by the Board of Directors of Entex
as Chief Operating Officer thereof.
(b) Employment Term. The term of Employee's employment hereunder
(the "Employment Term") shall commence on the Closing Date and shall continue
for a period of six (6) months (the "Initial Term") from the Closing Date, after
which Employee shall be employed on an "at-will" basis, subject to Entex's
customary terms and condition of employment for its at-will employees; provided,
however, that Entex may terminate Employee's employment at any time, for any
reason whatsoever with Cause (as defined in Section 4(b) hereof) and without
prior notice, or following the Initial Term without Cause upon thirty (30) days'
advance written notice to Employee.
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(c) Place of Employment. During the Employment Term, Employee shall
render his services at the principal executive offices of Entex. Employee shall
do such traveling as shall be reasonably necessary in connection with his duties
and responsibilities hereunder.
(d) Severance. If Employee's employment terminates for any reason
other than (i) voluntary termination by Employee, (ii) termination as a result
of death or disability, or (iii) termination for Cause, Employee shall be
entitled to receive a severance payment from Entex (the "Severance Payment") in
an amount equal to the sum of twelve (12) times Employee's Base Salary at the
time of such termination plus Employee's interest in the bonus payment under the
Entex Management Incentive Plan in accordance with Section 2(d)(i) hereof, paid
in twelve (12) equal monthly installments on the first general payroll date of
each month then in effect under Entex's general payroll policies. The Severance
Payment shall be subject to applicable tax withholding and shall be subject to
receipt by Entex of a release from Employee in accordance with Entex's policies.
The Severance Payment shall be in lieu of any further payments to Employee.
Notwithstanding the preceding sentence, the Severance Payment shall not be
exclusive of any benefits Employee may be entitled to under the specific terms
of the benefit plans of Entex otherwise applicable to Employee.
For purposes of this Agreement, "Cause" shall mean:
(A) Employee's continued dereliction of his duties
and responsibilities after notice thereof from Entex to Employee;
(B) Employee personally engaging in knowing and
intentional illegal conduct directly harmful to Entex;
(C) Employee being convicted of a felony involving
moral turpitude, or committing an act of fraud or misappropriating Entex
property;
(D) Employee breaching in any material respect the
terms of this Agreement or the Confidential and Nonsolicitation Agreement; or
(E) Employee's commencement of employment with
another employer while he is an employee of Entex.
(e) Other Termination. If, during the Employment Term, Employee's
employment is terminated for Cause or if Employee resigns his employment
voluntarily, no compensation or payments will be paid or provided to Employee
for the periods following the date when such a termination of employment is
effective. Notwithstanding the preceding sentence, Employee's rights under the
benefit plans of Entex shall be determined under the provisions of those plans.
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(f) Death or Disability. If Employee's employment terminates as a
result of Employee's death or disability, no compensation or payments will be
made other than those to which Employee is otherwise entitled under Entex's
benefit plans.
(g) No Other Consulting. During the Employment Term and for a period
of three (3) years from the date of this Agreement, Employee will not, without
the prior written consent of the chief executive officer of Entex, accept any
consulting assignment for (or accept any board of directors position or
partnership position in) any business that is engaged or involved in or, to the
Employee's knowledge after due inquiry, planning or preparing to engage or
become involved in any activity or business similar to any activity or business
engaged in by Entex.
2. Compensation.
(a) Salary. During the Employment Term, Employee will receive a
salary of not less than $16,666.66 per month (the "Initial Base Salary"), which
shall be paid in accordance with Entex's normal payroll practice. In the event
that the Employment Term extends beyond one year, then the Initial Base Salary
shall be increased to an amount equal to $18,333.33 per month for the remainder
of the Employment Term (the Initial Base Salary and such higher monthly salary
shall collectively be referred to as the "Base Salary"). In the event that the
Employment Term extends beyond two years, the Base Salary shall be subject to
review and adjustment based upon Entex's normal performance review practices.
Unless otherwise specified herein, Entex will make such deduc tions,
withholdings and other payments from all sums payable pursuant to this Agreement
which Employee requests or which are required by law for taxes and other
charges.
(b) Benefit Plans. Employee will be entitled to participate in or
receive benefits under Entex's employee benefit plans and policies as in effect
from time to time in which Employee is eligible to participate, subject to the
applicable terms and conditions of the particular benefit plan. Entex may
change, amend, modify or terminate any benefit plan from time to time.
(c) Grant of Options. Entex shall grant to Employee, within ten (10)
days from the Closing Date, a nonqualified stock option to purchase 30,977
shares of Entex Common Stock at an exercise price of $50.00 (the "Option"). The
Option shall be issued pursuant to, and governed by, the terms of Entex's 1996
Stock Option Plan and a Stock Option Agreement dated as of even date herewith by
and between Entex and Employee (the "Option Agreement"). The Option Agreement
shall provide, among other things, that the Option shall vest with respect to
50% of the shares upon the second anniversary of the date of grant and 50% of
the shares upon the third anniversary of the date of grant; provided, however,
that the Option will vest in full in the event Employee's employment is
involuntarily terminated without Cause (including a "Constructive Termination").
For purposes of the Option Agreement, the term "Constructive Termination" shall
mean a termination by Employee within thirty days following (i) a material
diminution in the Base Salary of Employee, (ii) a material reduction in the
responsibilities of Employee, (iii) a material change in the executive officer
position to whom Employee shall report, or (iv) a relocation of Employee from
the principal executive offices of Entex without Employee's consent; provided,
however, that Employee
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shall give at least ten (10) days' prior written notice of Employee's intention
to treat such an event as a Constructive Termination in order to allow Entex to
remedy such event.
(d) Additional Compensation. Entex shall pay Employee additional
compensation as follows:
(i) Entex Management Incentive Plan Bonus. Bonuses paid in
accordance with the terms and conditions of the Entex Management Incentive Plan,
as amended from time to time, provided that aggregate bonuses paid in any
calendar year to Employee thereunder shall not be less than 50% of the then
applicable annual salary payable to Employee.
(ii) FCP Retention Bonus. On or before February 15, 1997, a
payment to Employee in accordance with the FCP Retention Bonus Program,
described in Exhibit 5.2 to the Reorganization Agreement.
(iii) Mortgage Assistance; Relocation Expense Reimbursement.
In connection with Employee's relocation to Entex's principal executive offices
in Rye Brook, New York, Entex shall pay to Employee:
(x) During the Employment Term, $2,000 per month for the
first 12 months following the Closing Date and $1,000 per month for the 12
months following the first anniversary of the Closing Date to assist Employee
with mortgage expenses.
(y) Reimbursement for Employee's reasonable
out-of-pocket moving expenses in accordance with Exhibit 2(a)(iii) attached
hereto.
3. Intellectual Property.
(a) Concurrently with the execution of this Agreement, Entex and
Employee will execute Entex's standard "Confidential and Nonsolicitation
Agreement" in the form attached hereto as Attachment 1.
4. Covenant Not to Compete.
(a) Non-Compete. In consideration of his employment by Entex, the
grant of the Option and the several other agreements made herein, Employee
agrees that until the later of three (3) years from the date of this Agreement
or one (1) year from the date Employee's employment with Entex is terminated, he
will not directly or indirectly engage in (whether as an employee, consultant,
proprietor, partner, director or otherwise), or have any ownership interest in,
or participate in the financing, operation, management or control of, any
person, firm, corporation or business that engages in a "Restricted Business" in
a "Restricted Territory" (as such terms are hereinafter defined).
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(b) Definitions. As used in this Agreement, the terms
(i) "Restricted Business" shall mean any business that is
engaged or involved in (or, to the Employee's knowledge after due inquiry,
planning or preparing to engage or become involved in) any activity or business
similar to any activity or business now or, during the Employment Term, engaged
in by Entex or any affiliate thereof.
(ii) "Restricted Territory" shall mean each and every
country, province, state, city or other political subdivision of the world in
which Entex or any subsidiary or affiliate of Entex is engaged in business or
otherwise sells its products or offers its services, now or in the future up to
and including the date (if any) on which Employee commences employment with
another employer.
(c) Severability. The parties intend that the covenants contained in
the preceding paragraphs shall be construed as a series of separate covenants,
one for each county, city, state, country and other political subdivision of the
Restricted Territory. Except for geographic coverage, each such separate
covenant shall be deemed identical in terms to the covenant contained in the
preceding paragraphs. If, in any judicial proceeding, a court shall refuse to
enforce any of the separ ate covenants (or any part thereof) deemed included in
said paragraphs, then such unenforceable covenant (or such part) shall be deemed
eliminated from this Agreement for the purpose of those proceedings to the
extent necessary to permit the remaining separate covenants (or portions
thereof) to be enforced by such court. It is the intent of the parties that the
covenants set forth herein be enforced to the maximum degree permitted by
applicable law.
(d) Reformation. In the event that the provisions of this Section 4
should ever be deemed to exceed the scope, time or geographic limitations of
applicable law regarding covenants not to compete, then such provisions shall be
reformed to the maximum scope, time or geographic limitations, as the case may
be, permitted by applicable laws.
5. Representations of Employee. Employee represents that:
(a) He (i) is familiar with the covenants not to compete and not to
solicit set forth in this Agreement, (ii) is fully aware of his obligations
hereunder, including, without limitation, the length of time, scope and
geographic coverage of these covenants, (iii) finds the length of time, scope
and geographic coverage of these covenants to be reasonable, and (iv) is
receiving specific, bargained-for consideration for his covenants not to compete
and not to solicit.
(b) The execution of this Agreement and the Confidential and
Nonsolicitation Agreement and performance of Employee's obligations hereunder
and thereunder, will not conflict with, or result in a violation or breach of,
any other agreement to which Employee is a party or any judgment, order or
decree to which Employee is subject.
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6. Assignment. This Agreement may not be assigned by Employee without the
written consent of Entex. This Agreement may not be assigned by Entex without
the written consent of Employee, except to an assignee (i) who is an affiliate
of Entex (including subsidiaries) or (ii) who acquires all or substantially all
of the business of Entex, whether by merger, consolidation, sale of assets or
otherwise. Entex will require any such assignee to assume and agree to perform
this Agreement in the same manner and to the same extent that Entex would be
required to perform it if no such succession had taken place.
7. Entire Agreement. This Agreement sets forth the entire Agreement and
understanding between Employee and Entex with respect to the subject matter
hereof, and supersedes any other negotiations, agreements, understandings,
representations or past or future practices, whether written or oral, including
any written or verbal employment agreements or other similar arrangements
between Employee and FCP or any predecessor thereof.
8. Notices. Any notice, report or other communication required or
permitted to be given hereunder shall be in writing to both parties and shall be
deemed given on the date of delivery, if delivered, or five days after mailing,
if mailed first-class mail, postage prepaid, to the following addresses:
(a) If to Entex:
Entex Information Services, Inc.
6 International Drive
Rye Brook, New York
Attention: Vice President, General Counsel
(b) If to Employee, to the address set forth on the signature page
hereof, or to such other address as any party hereto may designate by notice
given as herein provided.
9. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware without giving
effect to principles regarding conflict of laws.
10. Arbitration.
(a) At the option of either Entex or Employee, any and all disputes
or controversies whether of law or fact and of any nature whatsoever arising
from or respecting this Agreement shall be decided by arbitration under the
rules and regulations of the American Arbitration Association by one (1)
arbitrator selected in accordance with such rules.
(b) Such arbitration shall take place in New York County, New York.
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(c) At the request of either Entex or Employee, arbitration
proceedings will be conducted in the utmost secrecy; in such case all documents,
testimony and records shall be received, heard and maintained by the arbitrator
in secrecy under seal, available for the inspection only of Entex and Employee
and their respective attorneys and their respective experts who shall agree in
advance and in writing to receive all such information confidentially and to
maintain such information in secrecy until such information shall become
generally known. The arbitrator shall be able to decree any and all relief of an
equitable nature, including but not limited to such relief as a temporary
restraining order, a temporary and/or a permanent injunction, and shall also be
able to award damages, with or without an accounting and costs. The decree or
judgment of an award rendered by the arbitrator may be entered in any court
having jurisdiction thereof.
(d) The arbitrator may award to a prevailing party the recovery of
costs and expenses, including legal fees and expenses.
11. Amendments. This Agreement shall not be changed or modified in whole
or in part except by an instrument in writing signed by each party hereto, nor
shall any covenant or provision of this Agreement be waived except by an
instrument in writing signed by the party against whom enforcement of such
waiver is sought.
12. Effective Date. This Agreement shall become effective upon the Closing
Date.
13. Attorneys' Fees. In the event of any legal action or proceeding to
enforce or interpret the provisions hereof, the prevailing party shall be
entitled to reasonable attorneys' fees, whether or not the proceeding results in
a final judgment.
14. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
15. Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction or interpretation of this Agreement.
16. Definitions. All capitalized terms used herein shall have the meanings
ascribed to them in the Acquisition Agreement, unless such terms are otherwise
defined herein.
17. Delays or Omissions. No delay or omission to exercise any right, power
or remedy accruing to either party upon any breach or default of the other party
hereto shall impair any such right, power or remedy of such non-defaulting
party, nor shall it be construed to be a waiver of any such breach or default,
or an acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver, single breach or default be deemed a waiver of
any other breach or default theretofore or thereafter occurring.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
ENTEX INFORMATION SERVICES, INC.
By:
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John A. McKenna, Jr.
President
EMPLOYEE: RICHARD NATHANSON
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Address:
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ATTACHMENT 1
Confidential and Nonsolicitation Agreement
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Attachment 1
CONFIDENTIALITY/NON-SOLICITATION AGREEMENT
THIS AGREEMENT is made by and between ENTEX INFORMATION SERVICES, INC. (the
"Company"), and ____________________________ (the "Employee").
WHEREAS, the Employee acknowledges that during his/her employment by the
Company, s/he will receive, have access to, and contribute towards
Confidential Information which is a highly valuable and unique asset of the
Company's business and that the disclosure by Employee of any proprietary
and/or confidential information of the Company contrary to this Agreement would
cause permanent, incalculable and irreparable injury and damage to the Company.
WHEREAS, the Employee also acknowledges that s/he has received or will receive
specialized knowledge and/or training in the Company's business, at
considerable time and expense to the Company, and through such training
employee will have the opportunity to gain close knowledge of and possible
influence over customers and employees of the Company by reason of and during
the course of his/her employment with the Company, and will in such capacity
possess the good will of the Company, and that this Agreement is necessary to
protect the Company against unfair loss of said customers, employees, or good
will.
NOW, THEREFORE, in consideration of the promises contained in this Agreement,
as well as the Employee's continued employment by the Company, the parties
agree as follows:
1. Definition of Company -- "Company" means ENTEX Information Services,
Inc., its successors and assigns and any of its present or future subsidiaries
or organizations controlled by it, controlling it, or under common control with
it.
2. Employment -- Employee's employment shall be at-will, and may be
terminated by either party at any time for any reason with or without cause.
3. Lack of Conflict With Past Employment -- Employee hereby represents and
warrants that s/he is not bound by any non-compete or non-solicitation
restriction with any organization that would restrict the fulfillment of the
terms of his/her employment with the Company.
4. Notification of Existence of Agreement -- Employee agrees that in the
event that s/he is offered employment with another employer at any time during
the existence of this Agreement, the business of which is in any way
competitive with the Company, Employee shall immediately advise said other
employer of the existence of this Agreement and shall immediately provide said
employer with a copy of this Agreement and all of its terms.
5. Non-Disclosure/Confidentiality -- Employee agrees that s/he will forever
keep secret, confidential and inviolate, will not disclose during his/her
employment by the Company, and will not disclose or use at any time after
termination of employment by the Company, any proprietary or confidential
information or business secret of the Company including, without limitation
those relating to: a) the business, conduct, or operations of the Company, or
of any of its respective clients, customers, consultants, or licensees; b) any
methods, ways of doing business, etc., used in the sale, use or marketing of
the Company's product or services; c) the existence or betterment of, or
possible new uses or applications for, any such products or services; or d)
any of the Company's customer lists, pricing and purchasing information or
policies. Upon leaving the employ of the Company for any reason, the Employee
shall promptly return to the Company any and all notes,
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EXHIBIT 10.6
plans, computer files, customer lists or other records, RFP's, account
profiles, price sheets, reports, proposals, technical information, and
reproductions thereof, which relate in any way to the Company's operations,
business assets, employee files or records, or any of the foregoing items
covered by this paragraph. Employee also represents that she will not bring
with him/her, nor utilize impermissibly, any confidential information of a
previous employer.
6. Non-Solicitation/Non-Compete Provisions - Employee acknowledges that each of
the provisions of this Agreement are reasonable and necessary to preserve the
very strong business interests of the Company, its present and potential
business activities and the economic benefits derived therefrom; that they will
not prevent him/her from earning a livelihood in his/her chosen business and
are not an undue restraint on the trade of the Employee, or any of the public
interests which may be involved. Employee agrees and acknowledges:
a. that so long as she is an employee of the Company, she will devote
his/her best efforts and all his/her business time, efforts, and attention to
furthering the very strong business interests of the Company, and that s/he/
will not directly or indirectly engage in any business activity which is
competitive with any business activity conducted by the Company;
b. that the relationship between the Company and its customers are of a
near permanent nature and that the information in which Employee has had and
will have access to is of a confidential and proprietary nature, and the good
will of the Company and/or customer and supplier relationships which the
Employee has enjoyed and will enjoy while employed by the Company are
significant and valuable to the Company;
c. that the relationships between the Company and its employees are
valuable assets of the Company deserving protection from solicitation to assist
the Company in its interest in maintaining a stable work force, and because of
this interest, Employee agrees that at no time during the term of his/her
employment by the Company, and for a period of one (1) year thereafter, will
s/he/ directly or indirectly recruit, solicit, divert or employ any person who
is an employee of the Company;
d. that because of the Company's valuable interest in its customer
relationships, for a period of one (1) year following the termination of
Employee's employment with the Company for any reason, Employee will not
directly or indirectly solicit or divert any entity which is, as of the time of
the termination of Employee's employment or the immediate six month period
prior to such termination, a customer of the Company that Employee had prior
dealings with or knowledge about.
e. that Employee will not at any time take any action or do anything which
unfairly or unlawfully impairs or damages the business prospects or goodwill of
the Company.
7. Injunctive Relief - Employee acknowledge that a breach of any of the
covenants herein contained would cause irreparable harm to the Company's
business and that monetary damages alone be extremely difficult or impossible
to ascertain and would not afford an adequate remedy. Therefore, in the event
of any such breach, or threatened breach, in addition to such other remedies
which may be provided by law, the Company shall have the right to specific
performance of the covenants herein contained by way of temporary and/or
permanent injunctive relief, all as it elects.
8. Severability - The language of all parts of this Agreement shall in all
cases be construed as a whole, according to its fair meaning. The parties
believe the time restrictions herein to be reasonable to protect business
activity. However, in the event that a court of competent jurisdiction deems
any provision hereof to unreasonable, void or unenforceable, such provision(s)
shall be deemed severed from the remainder of the Agreement, which shall
continue in all other
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Agreement
Page 3 of 3
respects to be valid and enforceable. Any such provision(s) of this Agreement
declared void, unreasonable or unenforceable shall be deemed revised to the
minimum amount necessary in order to be valid and enforceable.
9. Binding Effect/Applicable Law - This Agreement and all of Employee's
obligations arising under it shall be governed by and construed under the law
of the State of New York; shall survive the termination of Employee's
employment regardless of the reason for such termination; shall be binding upon
Employee's heirs, executors and administrators. Employee specifically
acknowledges that the Agreement does not obligate the Company to continue to
employ him/her in any capacity for any period of time.
10. Other Agreements - In the event Employee has previously signed, or does
sign in the future, any one or more separate non-competition, non-solicitation,
or confidentiality agreement(s) with the Company, said agreement(s) shall
remain binding and enforceable and the Company may, at its option, assert any
and all such agreement(s) against Employee in addition to, or in lieu of this
Agreement.
11. The terms of any rider attached hereto are incorporated herein by
reference.
EMPLOYEE ENTEX INFORMATION SERVICES, INC.
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Signature Signature
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Print Name Print Name
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Date Position
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Witness
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EXHIBIT 10.7
STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT dated as of December 10, 1993 by and among
ENTEX HOLDINGS, INC., a Delaware corporation (the "Company"), DORT A. CAMERON
III, an individual ("Cameron"), and ENTEX ASSOCIATES, L.P., a Delaware limited
partnership ("ENTEX Associates"), and each of the individuals listed on
Schedule A hereto, who are sometimes collectively referred to herein as the
"Participants".
W I T N E S S E T H :
WHEREAS, pursuant to a Securities Purchase Agreement (the "Securities
Purchase Agreement") dated as of November 30, 1993, the Participants have
purchased from the Company a total of 133,333 shares of Common Stock, par value
$.001 per share ("Common Stock"), of the Company; and
WHEREAS, Cameron owns a total of 70,000 shares of Common Stock and
ENTEX Associates owns a total of 430,000 shares of Common Stock; and
WHEREAS, the parties desire to impose restrictions upon the sale,
transfer, hypothecation, assignment, pledge, negotiation or other disposition
of the Common Stock and upon the voting of the Common Stock; and
WHEREAS, the parties hereto desire to promote the best interests of
the Company and the mutual interests of the stockholders and believe that it is
in their respective interests
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to provide for continuity and control of the Company and the future operations
of its business;
NOW THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereto, intending to be legally bound, hereby
agree as follows:
Section 1. Definitions.
Unless the context otherwise requires:
(1) "Adjusted Book Value" on a particular date shall mean an amount
(but not less than $0.01 per share), equal to the Original Purchase Price
increased by an amount (if positive) or decreased by an amount (if negative)
equal to the difference between the Book Value on August 6, 1993 and the Book
Value as of the end of the fiscal quarter ended immediately prior to such date.
(2) "Affiliate" shall have the meaning ascribed to such term by Rule
405 under the Securities Act, as in effect on the date hereof.
(3) "Agreement" means this Stockholders' Agreement, as it may be
amended from time to time, and includes any counterpart of the Agreement when
signed by one or more Stockholders and delivered to the Company.
(4) "Board of Directors" shall mean the Board of Directors of the
Company, as the same shall exist from time to time.
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(5) "Book Value" of shares of Stock shall mean the book value per
share calculated on a Fully Diluted Basis on a consolidated basis, determined
in accordance with GAAP.
(6) "Cameron" shall mean Dort A. Cameron III.
(7) "Cameron Affiliate" shall mean each of Cameron, ENTEX Associates,
and any Affiliate of Cameron or member of Cameron's family or trust for the
benefit of Cameron or any member of his family that acquires the power to vote,
or direct the voting of, or the power to dispose, or direct the disposition of,
Stock that is the subject of this Agreement.
(8) "Cause" in respect of the termination of the employment of a
particular Participant shall mean termination by reason of (i) the willful
failure by such Participant to perform his duties (other than a failure
resulting from physical or mental disability), it being understood that no act,
or failure to act, by a Participant shall be considered "willful" unless the
Board of Directors, in the reasonable exercise of its business judgment
determines that such act or failure to act was committed without good faith and
without a reasonable belief that such act or failure to act was in the best
interests of the Company (ii) such Participant engaging in gross misconduct
injurious to the Company or (iii) the material breach by such Participant of
any Employment Agreement between the Company or any Affiliate of the Company
and such Participant or (iv) the conviction or admission of guilt in a court of
law of any crime that constitutes a felony in the jurisdiction involved.
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(9) "Change of Control" of a particular corporation shall be deemed
to have occurred at such time that the Cameron Affiliates no longer
collectively directly or indirectly own Voting Securities of such corporation
entitled to cast a majority of votes for the election of the board of directors
of such corporation.
(10) "Commission" shall mean the United States Securities and
Exchange Commission, or any other Federal agency of the United States at the
time administering the Securities Act.
(11) "Common Stock" means the Common Stock, $.001 par value,
authorized to be issued by the Company.
(12) "Company" means ENTEX Holdings, Inc., a Delaware corporation,
and any successor thereof.
(13) "Disability" shall mean the inability of a Participant to
perform his duties and responsibilities to the Company by reason of a physical
or mental disability or infirmity for a continuous period of 180 days.
(14) "Earnings Multiple" shall mean the arithmetic average of the
"price to earnings ratio" of each of the Peer Group Companies (excluding Peer
Group Companies which report losses) as reported in composite transactions in
the Wall Street Journal on the last day of each of the six (6) calendar months
immediately preceding the date on which Stock is purchased pursuant to Section
5.
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(15) "Fully Diluted Basis", for purposes of determining the Book
Value or the Share Value, includes all outstanding Stock and all shares of
Common Stock issuable pursuant to securities exercisable for, convertible into
or exchangeable for shares of Common Stock and all other shares of Common Stock
which have been reserved for issuance pursuant to the ENTEX Information
Services, Inc. Share Plan.
(16) "GAAP" shall mean generally accepted accounting principles as
applicable to the financial statements of the Company, consistently applied.
(17) "Notes" means the Promissory Notes due 2000 of the Company
issued pursuant to the Securities Purchase Agreement.
(18) "Note Purchaser Note" shall have the meaning ascribed to such
term in the Securities Purchase Agreement.
(19) "Original Purchase Price" of shares of Stock shall mean an
amount equal to the purchase price paid for such shares pursuant to the
Securities Purchase Agreement.
(20) "Ownership" of shares of Stock by a particular Participant shall
include all shares of Stock owned by a Participant together with his Permitted
Transferees.
(21) "Peer Group Companies" shall mean each of Compucom Systems,
Inc., Inacom Corp. and Future Now, Inc. If the common stock of a Peer Group
Company ceases to be Publicly Traded, then the Board of Directors of the
Company with the approval of the designee of the Participants on the Board of
Directors of the Company, shall designate a replacement Peer
<PAGE> 6
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Group Company. If no such replacement is designated, then the Earnings
Multiple shall be determined with reference to the remaining Peer Group
Companies. If no Peer Group Companies remain, then the Earnings Multiple shall
be determined by the Board of Directors in good faith, using such measure of
value as it deems appropriate to carry out the purpose and intent of this
Agreement. Notwithstanding the foregoing, the Board of Directors of the
Company (with the consent of the Participant Designee) shall have the authority
to add or delete Peer Group Companies to assure that the Peer Group Companies
fairly represent companies having businesses that are comparable to the
business of ENTEX Information Services, Inc., and to carry into effect the
intent of this Agreement.
(22) "Permitted Transferee" means, with respect to an individual, the
spouse or children of such individual, or a trust for the benefit of one or
more of such Persons.
(23) "Person" means any individual, partnership, corporation or other
legal entity.
(24) "Pledge Agreement" shall mean the Securities Pledge Agreement,
of even date herewith, between the Company and each of the Participants.
(25) "Public Offering" shall mean the offering by the Company in any
jurisdiction of its securities to the general public, or the consolidation
with, merger with or into, or acquisition of a Company that is Publicly Traded,
with the result that the Common Stock shall be Publicly Traded.
<PAGE> 7
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(26) "Publicly Traded" means traded through the facilities of a
national securities exchange registered as such under the Securities Exchange
Act of 1934, as amended, or traded in the over-the-counter market and reported
in the National Association of Securities Dealers Automated Quotation System,
or traded through the facilities of an established securities exchange outside
the United States.
(27) "Securities Act" shall mean the United States Securities Act of
1933, as amended, and the rules and regulation of the Commission thereunder, as
in effect from time to time on and after the date hereof.
(28) "Securities Purchase Agreement" means the Securities Purchase
Agreement dated as of the date hereof among the Company and the Management
Investors pursuant to which the Company has issued and sold to the Purchasers
(as defined in such Securities Purchase Agreement) $866,667 aggregate principal
amount of Notes and 133,333 shares of Common Stock.
(29) "Share Value" shall mean the amount determined by multiplying
(a) the net income of the Company on a consolidated basis for the four most
recent fiscal quarters of the Company immediately preceding the date of the
termination of a Participant's employment, as shown on the financial statements
of the Company, determined in accordance with GAAP, by (b) the Earnings
Multiple, and dividing the product so obtained by the number of shares of Stock
issued and outstanding on a Fully Diluted Basis. For the period commencing on
the date hereof and
<PAGE> 8
-8-
ending on August 5, 1994, the "Share Value" shall mean the greater of the
purchase price for such shares paid pursuant to the Securities Purchase
Agreement or the Book Value as of the end of the most recent fiscal quarter.
(30) "Stockholder" means each of the Cameron Affiliates, the
Participants, and any Permitted Transferee who is from time to time the owner
of record of shares of Stock.
(31) "Stock" shall mean Common Stock and any securities into which
such Stock shall be changed.
(32) "Unvested Shares" shall mean the number of Shares of Stock Owned
by a particular Participant multiplied by the Vesting Factor.
(33) "Vesting Factor" shall mean a percentage, expressed to the
nearest 0.1%, equal to 100% minus the Vesting Percentage.
(34) "Vesting Percentage" shall mean a percentage equal to (i) 10%,
during the period beginning on the date hereof and through and including
February 6, 1994; (ii) 20%, during the period beginning February 7, 1994 and
through and including August 6, 1994; (iii) 60%, beginning August 7, 1994 and
through and including the date August 6, 1995; (iv) 85%, beginning August 7,
1995 and through and including August 6, 1996; and (v) 100% thereafter;
provided, however, that (w) if the employment of a Participant is terminated
for Cause during a particular Vesting Period, then the Vesting Percentage
applicable to such Participant shall be the Vesting Percentage that would have
<PAGE> 9
-9-
applied on the first day of such Vesting Period; (x) if the employment of a
Participant is terminated as a result of the death or Disability of such
Participant, then the Vesting Percentage applicable to such Participant shall
be the Vesting Percentage that would apply if such Participant had continued to
be employed by the Company on the first day of the Vesting Period immediately
following the Vesting Period during which such termination occurs; (y) if the
employment of a Participant is terminated by the Company for other than Cause,
but not as a result of the death or Disability of such Participant, then the
Vesting Percentage applicable to such Participant shall be a percentage equal
to the sum of (I) the Vesting Percentage that would have applied to such
Participant on the first day of the Vesting Period during which such
termination occurs (the "Start-of-Period Vesting Percentage") plus (II) the
product of the excess of (A) the Vesting Percentage that would apply to such
Participant if such Participant had continued to be employed by the Company on
the first day of the Vesting Period immediately following the Vesting Period
during which such termination occurs over (B) the Start-of-Period Vesting
Percentage, multiplied by the portion (expressed as a fraction) of the Vesting
Period during which such termination occurs that such Participant was employed
by the Company; and (z) at any time following (I) a Change of Control of the
Company, or (II) a Change of Control of ENTEX Information Services, Inc., the
Vesting Percentage shall be 100%.
<PAGE> 10
-10-
(35) "Vested Shares" shall mean all shares of Stock purchased
pursuant to the Securities Purchase Agreement that are Owned by a particular
Participant other than Unvested Shares.
(36) "Vesting Period" shall mean each of the periods referred to in
clauses (i), (ii), (iii) and (iv) of the definition of "Vesting Percentage" in
subparagraph (33).
(37) "Voting Securities" shall mean securities of the Company
entitled to vote in an election of directors of the Company (other than
securities having such power only upon the happening of a contingency).
Section 2. Representations and Warranties.
(a) The Company represents and warrants that (i) it is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware; (ii) the Company possesses the requisite corporate power and
authority to execute, deliver and perform this Agreement; (iii) all corporate
action necessary to authorize the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby has been duly taken by
the Company; (iv) this Agreement has been duly executed and delivered by the
Company; (v) the execution, delivery and performance by the Company of this
Agreement and the consummation of the transactions contemplated hereby do not
violate or conflict with (A) any provision of the Certificate of Incorporation
or By-Laws of the Company or (B) any statute, rule, regulation, contract or any
other legal obligation
<PAGE> 11
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of the Company; and (vi) no consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority is required in connection with the execution, delivery and
performance of this Agreement by the Company and the consummation of the
transactions contemplated hereby.
(b) Each of the Cameron Affiliates that is a party hereto and the
Participants represent and warrant as to such party that (i) if such party is
not a natural person, (A) such entity has been duly organized and is validly
existing and in good standing under the laws of the jurisdiction of its
organization, and (B) the execution of this Agreement and the consummation of
the transactions contemplated hereby are within the organizational powers of
each party; (ii) if such party is not a natural person, all organizational
action necessary to authorize the execution of this Agreement and the
consummation of the transactions contemplated hereby has been duly taken; (iii)
this Agreement has been duly executed and delivered by such party; (iv) the
execution of this Agreement and the consummation by such party of the
transactions contemplated hereby do not violate or conflict with (A) if such
party is not a natural person, any provision of the organizational documents of
such party or (B) any statute, rule, regulation, contract or any other legal
obligation of such party; and (v) no consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority is required in
<PAGE> 12
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connection with the execution, delivery and performance of this Agreement by
such party and the consummation by such party of the transactions contemplated
hereby.
Section 3. Restrictions on Transfer.
(a) No Participant shall sell, transfer, pledge, hypothecate or
otherwise dispose of ("Transfer") any shares of Stock, except to the Company
pursuant to this Agreement, and any such purported Transfer shall be void,
except that a Participant may transfer shares of Stock to a Permitted
Transferee if such Permitted Transferee executes and delivers an agreement in
form and substance satisfactory to the Company to the effect that the shares of
Stock Transferred to such Permitted Transferee shall be bound by the terms of
this Agreement as if such Permitted Transferee were an original party hereto.
(b) Any provision of this Agreement to the contrary notwithstanding,
the Company may acquire shares of Stock Owned by a Participant pursuant to the
terms of the Securities Pledge Agreement between the Company and such
Participant.
(c) The certificate or certificates representing the shares of Stock
issued to the Participants or a Permitted Transferee shall have an appropriate
legend referring to the restrictions upon Transfer set forth herein and shall
be endorsed with substantially the following legend in addition to any other
legend which may appear thereon:
THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR ENCUMBRANCE OF THE SECURITIES
REPRESENTED BY
<PAGE> 13
-13-
THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF A
STOCKHOLDERS AGREEMENT DATED AS OF DECEMBER 10, 1993, AMONG ENTEX
HOLDINGS, INC. AND CERTAIN HOLDERS OF THE STOCK OF SUCH CORPORATION.
COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST
MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF
ENTEX HOLDINGS, INC.
Section 4. Voting Agreement.
(a) Each Stockholder agrees to vote his shares of Stock and to take
such other action as may be required to cause the Board of Directors of the
Company to include one Participant nominated by the Participants, acceptable to
the Cameron Affiliates (the "Participant Designee"), who shall initially be
John A. McKenna, Jr., and all other nominees nominated by the Cameron
Affiliates.
(b) Whenever any vacancy in the Board of Directors of the Company
occurs, the group (i.e., the Participants or the Cameron Affiliates, as the
case may be) which designated such vacating director under the provisions of
this Section 4 will be entitled to designate a successor to fill such vacancy,
and each Stockholder agrees to vote all the Common Stock then Owned or held of
record by such Stockholder so as to elect to the Board of Directors the person
so designated. The Participant Designee shall be selected by the vote of a
majority of the shares of Stock Owned by the Participants (the "Participants
Majority").
(c) The Stockholders agree to instruct their respective designees not
to authorize any proposal for, and the
<PAGE> 14
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Stockholders agree to vote their shares of Common Stock against, any proposal
for the amendment of the Certificate of Incorporation and/or By- laws of the
Company which would render said Certificate of Incorporation and/or By-laws
inconsistent with the provisions of this Agreement.
(d) In the event of (i) any proposed capital reorganization of the
Company, (ii) any reclassification or recapitalization of the Company, (iii)
any transfer of all or substantially all of the assets of the Company, (iv) any
consolidation or merger involving the Company and any other Person, (v) any
dissolution, liquidation or winding-up of the Company, or (vi) any material
transaction affecting the capital stock of the Company which is not in the
ordinary course of business and which is required by the laws of Delaware to be
submitted to a vote of the stockholders of the Company, the Participants agree
to vote their shares of Stock in respect of the authorization of any such
matter in the manner that the Cameron Affiliates vote the shares of Stock owned
by them.
(e) The Stockholders acknowledge their understanding that under the
laws of Delaware, the directors of the Company are obligated to exercise their
independent judgment in discharging their duties as directors and, as a
consequence thereof, may determine to disregard directions given to them by the
Stockholders.
<PAGE> 15
-15-
Section 5. Purchase of Participant Shares.
(a) The Company will purchase from each Participant whose employment
is terminated, other than by reason of death or Disability, on or before August
6, 1996, all of the shares of Stock Owned by such Participant not later than
sixty (60) days after the date of the termination of such Participant's
employment. The purchase price payable for such shares of Stock will be
determined as follows:
(i) in the case of all Unvested Shares, the purchase price shall
be an amount equal to the lesser of (A) the Original Purchase Price or
(B) the Adjusted Book Value of such shares;
(ii) in the case of Vested Shares being purchased from a
Participant whose employment is terminated by the Company without
Cause, the purchase price shall be an amount equal to the greater of
(A) the Original Purchase Price or (B) a price per share equal to the
Share Value; and
(iii) in the case of Vested Shares being purchased from a
Participant whose employment is terminated for Cause or whose
employment is voluntarily terminated by such Participant, the purchase
price shall be an amount equal to the lesser of (A) the Original
Purchase Price or (B) the Adjusted Book Value of such shares.
(b) The closing of any purchase of shares of Common Stock pursuant to
Section 5(a) shall be held at the executive
<PAGE> 16
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offices of the Company, unless the Company otherwise agrees, at a time agreed
upon by the Company and the Participant. At such closing, the Company shall
pay to the Participant the total purchase price to be paid for the Stock being
purchased by wire transfer to an account designated by such Participant of
immediately available funds in an amount equal to the total purchase price,
against delivery by such Participant of a certificate or certificates
representing all of the shares of Stock being purchased from such Participant,
together with a stock power duly executed in blank with signature guaranteed,
free and clear of all liens, claims, charges and encumbrances.
(c) If a Participant dies or a Participant's employment is terminated
by reason of such Participant's Disability, then the Company shall have the
option ("Call Option") to purchase from such Participant or his legal
representative, and the Participant or his legal representative shall have the
option ("Put Option") to require the Company to purchase from such Participant
all shares of Stock Owned by such Participant. The Put Option and the Call
Option shall each be exercisable by delivery of a written notice of exercise to
the other party thereto not later than ninety (90) days after the date of such
Participant's death or the date on which such Participant's employment
terminated. The purchase price payable for such shares of Stock will be (i) in
the case of Unvested Shares, an amount equal to the Original Purchase Price and
(ii) in the case of Vested Shares, an amount equal to the greater of (A) the
<PAGE> 17
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Original Purchase Price or (B) a price per share equal to the Share Value. The
closing of any purchase pursuant to the exercise of a Put Option or a Call
Option shall occur not later than thirty (30) days after the delivery of the
notice of exercise, at the executive offices of the Company, unless the Company
otherwise agrees and at a time agreed upon by the Company and the Participant.
At such closing, the Company shall pay to the Participant or his legal
representative the total purchase price to be paid for the Stock being
purchased by wire transfer to an account designated by such Participant of
immediately available funds in an amount equal to the total purchase price,
against delivery by such Participant or his legal representative of a
certificate or certificates representing all of the shares of Stock being
purchased from such Participant, together with a stock power duly executed in
blank with signature guaranteed, free and clear of all liens, claims, charges
and encumbrances.
(d) If a Participant's employment is terminated by the Company for
Cause on or after August 7, 1996, then the Company shall have the option to
purchase from such Participant or his legal representative all shares of Stock
Owned by such Participant. Such option shall be exercisable by delivery by the
Company of a written notice of exercise to the Participant not later than
ninety (90) days after the date on which such Participant's employment
terminated. The purchase price payable for such shares of Stock will be the
Share Value. The closing of any purchase pursuant to the exercise of this
option shall occur
<PAGE> 18
-18-
not later than thirty (30) days after the delivery of the notice of exercise,
at the executive offices of the Company, unless the Company otherwise agrees
and at a time agreed upon by the Company and the Participant. At such closing,
the Company shall pay to the Participant or his legal representative the total
purchase price to be paid for the Stock being purchased by wire transfer to an
account designated by such Participant of immediately available funds in an
amount equal to the total purchase price, against delivery by such Participant
of a certificate or certificates representing all of the shares of Stock being
purchased from such Participant, together with a stock power duly executed in
blank with signature guaranteed, free and clear of all liens, claims, charges
and encumbrances.
(e) If the Company is unable to pay the full amount of the total
purchase price required to be paid in cash pursuant to Section 5(a) or 5(c) due
to a restriction imposed upon it by a bank loan or other financing agreement or
by any instrument evidencing any indebtedness or similar obligation or by an
applicable provision of the Delaware General Corporation Law, then, it will
offer such Shares of Stock to Cameron by delivering to Cameron written notice
of such offer. Cameron shall have the right to assign his rights to purchase
shares of Stock under this Section 5(e) to one or more Cameron Affiliates.
Cameron and/or the Cameron Affiliates may exercise the rights to purchase
shares of Stock to be purchased by delivery of a notice of exercise to the
Company and the Participant not later than fifteen (15) days
<PAGE> 19
-19-
after delivery by the Company of its offer notice to Cameron. If Cameron
and/or the Cameron Affiliates exercise such right, then Cameron and/or the
Cameron Affiliates exercising such right shall purchase such shares of Stock
from the Participant for a total purchase price equal to the total purchase
price payable pursuant to Section 5(a) or 5(c), by wire transfer of immediately
available funds to an account designated by the Participant, or his legal
representative, as the case may be, and the Participant or his legal
representative, as the case may be, shall deliver to the purchaser certificates
representing the shares of Stock being purchased together with stock powers
duly endorsed in blank with signatures guaranteed, free and clear of all liens,
claims, charges and encumbrances.
(f) If Stock is purchased from a Participant pursuant to this Section
5, then, simultaneously with such purchase of Stock, such Participant shall
prepay all unpaid principal of, and interest on, such Participant's Note
Purchaser Note by wire transfer of immediately available funds to an account
designated by the Company.
(g) If the Company is unable to pay the full amount of the total
purchase price required to be paid in cash pursuant to Section 5(a) or 5(c) due
to a restriction imposed upon it by a bank loan or other financing agreement or
by any instrument evidencing any indebtedness or similar obligation or by an
applicable provision of the Delaware General Corporation Law, and a
Participant's Stock is not purchased by Cameron or one or more
<PAGE> 20
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Cameron Affiliates pursuant to Section 5(d), then the Company shall have no
further obligation to the Participant under this Section 5.
Section 6. Redemptions.
(a) If at any time the Company shall desire to redeem any of the
shares of Stock then outstanding, other than pursuant to a Call, it shall
deliver to the Participants notice of such proposed redemption (the "Notice of
Redemption") including the proposed price and proposed terms and conditions,
and each Participant shall have the right to sell to the Company, as a
condition to such redemption at the same price per share and on the same terms
and conditions as involved in such redemption, that number of shares of Stock
which equals the total number of shares of Stock the Company desires to redeem
multiplied by the percentage of the then Stock ownership of such Management
Investor.
(b) If any Participant desires to so participate in any redemption
under this Section 6(b), such Participant shall notify the Company in writing
of such intention within 10 days of receipt of the Notice of Redemption.
(c) The Company shall then redeem all of the shares of Stock proposed
to be redeemed by the Company and requested to be redeemed by such Participant
at not less than the price stated in the Notice of Redemption; provided,
however, that the Company may elect to withdraw the Notice of Redemption or
amend it by notice
<PAGE> 21
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to the Participants, and all rights theretofore existing shall be restored.
(d) Each Participant who has notified the Company that such
Participant desires to have his shares redeemed shall cause to be surrendered
to the Company upon the closing of the redemption and against receipt of
appropriate payment therefor, a certificate or certificates evidencing the
number of shares of Stock Owned by such Participant which such Participant is
entitled to have redeemed, together with stock powers duly endorsed in blank,
and with signature guaranteed.
Section 7. Sales to Third Parties.
(a) If at any time until seven years from the date hereof, the Cameron
Affiliates shall desire to sell all or any portion of the shares of Stock owned
by them at such time, they shall deliver to the Participants written notice of
such proposed sale which shall set forth the proposed purchaser, purchase price
and the other terms and conditions of the purchase ("Notice of Intent to
Sell"), and each Participant shall have the opportunity, subject to the terms
of this Section 7, to sell to such proposed purchaser, at the same price per
share and on the same terms and conditions as the Cameron Affiliates, that
number of shares of Stock which equals the total number of shares of Stock the
Cameron Affiliates desire to sell multiplied by the percentage of the then
Stock Ownership of such Participant.
<PAGE> 22
-22-
(b) If any Participant wishes to participate in any sale under Section
7(a), such Participant shall notify the Cameron Affiliates in writing of such
intention within ten business days of receipt of the Notice of Intent to Sell.
(c) Such Participants as have elected to participate shall sell to the
purchaser all, or at the option of the purchaser any, portions of the shares of
Stock proposed to be sold by them at not less than the price stated in the
Notice of Intent to Sell; provided, however, that any purchase of Stock from
Participants pursuant to Section 7(a) of less than all of such shares of Stock
by the purchaser shall be made pro rata among the Participants electing to
participate based upon the relative amounts of shares of Stock that each such
Participant then Owns.
(d) Notwithstanding any other provision of this Agreement, if Cameron
and/or the Cameron Affiliates shall propose to sell or exchange (in a business
combination or otherwise) all of their shares of Stock in a bona fide
arm's-length transaction, Cameron, at his option, may require that each
Participant and his Permitted Transferees sell all of their shares of Stock in
the same transaction and, if stockholder approval of the transaction is
required, that each Participant and his Permitted Transferees vote their shares
of Stock in favor thereof. In any such sale or exchange, the Participants and
their Permitted Transferees shall receive for their shares the identical
consideration payable per share of Stock to all other holders of shares of
Stock.
<PAGE> 23
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Section 8. Reissuance of Shares to Participants.
If any shares of Stock are purchased by the Company from Participants
pursuant to Section 5, then, not later than one hundred twenty (120) days after
such purchase is consummated, the Company shall offer such shares to one or
more employees of the Company (which employees may be Participants) upon such
terms and conditions as the Board of Directors of the Company shall determine.
Section 9. Specific Performance.
The Stock of the Company cannot be readily purchased or sold in the
open market, and for that reason, among other things, the Company and the
Stockholders will be irreparably damaged in the event that this Agreement is
not specifically enforced. Should any controversy arise concerning a sale or
disposition pending the resolution thereof, this Agreement shall be enforceable
in a court of equity by a decree of specific performance. Such remedy shall,
however, be cumulative and not exclusive, and shall be in addition to any other
remedies which the parties may have.
Section 10. Amendments and Termination.
(a) No amendment to this Agreement or any waiver or discharge of any
provision hereof shall be made without the prior written consent of Cameron and
by a majority in interest of the Participants whose rights would be adversely
affected thereby.
<PAGE> 24
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(b) This Agreement shall terminate upon the consummation of a Public
Offering; provided, however, that the provisions of Section 4 shall terminate
upon the earlier to occur of (A) the consummation of a Public Offering, or (B)
seven years from the date hereof, and (ii) the provisions of Section 3 shall
terminate upon the earlier to occur of (A) the consummation of a Public
Offering, or (B) three years from the date hereof; provided, however,
notwithstanding the foregoing, Section 3 shall not terminate with respect to
any Purchaser until the Purchaser has paid in full his Purchaser Note, as
defined in the Securities Purchase Agreement.
Section 11. Notices.
All notices and other communications shall be in writing and shall be
deemed to have been duly given if delivered by hand or mailed by first class,
registered or certified mail, return receipt requested, postage prepaid and
addressed as follows:
(a) If to the Company:
ENTEX Holdings, Inc.
Six International Drive
Rye Brook, New York 10573
Attention: President
(b) If to Cameron or any Cameron Affiliates:
Mr. Dort A. Cameron III
c/o Airlie Group, L.P.
115 East Putnam Avenue
Greenwich, Connecticut 06830
<PAGE> 25
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in each case with a copy to:
Reid & Priest
40 West 57th Street
New York, New York 10019-4097
Attention: Richard S. Green, Esq.
(c) If to any Participant,
to the address of such Participant
as shown in the records of the Company.
The addresses above may be changed by notice to the Company.
Section 12. Miscellaneous.
(a) Each individual Participant acknowledges and agrees that only the
number of shares of Common Stock Owned by such individual Participant is being
disclosed to such Participant, and, accordingly, waives such Participant's
right to receive a complete copy of Schedule A to this Agreement. The Company
agrees to keep Schedule A to this Agreement confidential, to retain such
Schedule A in the files of the Company, and to disclose such Schedule A only as
may be expressly authorized by the President of the Company.
(b) This Agreement represents the entire understanding of the parties
hereto and supersedes all other previous agreements among them with respect to
the subject matter hereof.
(c) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York applicable to contracts made and to be
performed entirely in such state.
(d) The headings contained herein are for convenience of reference
only, are not a part of this Agreement and shall not limit or otherwise affect
the meaning hereof.
<PAGE> 26
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(e) Whenever the context requires, references in this Agreement to
the singular number shall include the plural and, likewise, the plural number
shall include the singular, and words denoting gender shall include the
masculine, feminine and neuter.
(f) If any provision of this Agreement shall, for any reason, be
adjudged by any court of competent jurisdiction to be invalid or unenforceable,
such judgment shall not affect, impair or invalidate the remainder of this
Agreement but shall be confined in its operation to the provisions of this
Agreement directly involved in the controversy in which such judgment shall
have been rendered.
(g) This Agreement may be executed in several counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
<PAGE> 27
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
ENTEX HOLDINGS, INC.
By:
---------------------------------
Name:
Title:
ENTEX ASSOCIATES, L.P.
By: THE PUTNAM GROUP, INC.,
General Partner
By:
---------------------------------
Name:
Title:
------------------------------------
Dort A. Cameron III
------------------------------------
[Name of Participant]
<PAGE> 28
SCHEDULE A
Number of Shares
Name of Participant of Common Stock
- ------------------- ----------------
<PAGE> 29
AMENDMENT TO STOCKHOLDERS' AGREEMENT
AMENDATORY AGREEMENT dated as of December 1, 1994 by and among ENTEX
HOLDINGS, INC., a Delaware corporation (the "Company"), DORT A. CAMERON III,
an individual ("Cameron"), and ENTEX ASSOCIATES, L.P., a Delaware limited
partnership ("ENTEX Associates"), and each of the individuals listed on
Schedule A hereto, who are sometimes collectively referred to herein as the
"Plan 2 Participants".
W I T N E S S E T H :
WHEREAS, the Company, Cameron, ENTEX Associates, and the individual
stockholders of the Company (which stockholders include the Plan 2
Participants) are parties to that certain Stockholders' Agreement dated as of
December 10, 1993 (the "Existing Agreement"), pursuant to which the parties
agreed to certain restrictions upon the sale, transfer, hypothecation,
assignment, pledge, negotiation or other disposition of the Common Stock and
upon the voting of the Common Stock, all as set forth in the Existing
Agreement; and
WHEREAS, the Company, Cameron, ENTEX Associates and the Plan 2
Participants have determined that it will promote the best interests of the
Company and the mutual interests of the Participants (including the Plan 2
Participants) to amend the Existing Agreement as provided herein, it being
understood that the amendment of the Existing Agreement does not adversely
affect the interests of the Plan 1 Participants (as hereinafter defined);
<PAGE> 30
-2-
NOW THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereto, intending to be legally bound, hereby
agree that the Existing Agreement is amended as follows:
1. Amendment of Section 1 of the Existing Agreement.
(a) Section 1 of the Existing Agreement is hereby amended (i) by
renumbering subsections (24) through (37) as they currently exist as
subsections (26) through (39) respectively, and (ii) by adding thereto the
following new subsections (24) and (25), reading in their entirety as follows:
(24) "Plan 1 Participant" shall mean a Participant whose shares
of Stock are subject to repurchase as provided in Section 5 hereof.
Unless a Participant has agreed in writing to be treated as a Plan 2
Participant, each Participant shall be deemed to be a Plan 1
Participant.
(25) "Plan 2 Participant" shall mean each Participant who has
elected in writing to be treated as a Plan 2 Participant.
(b) Subsection (36) as renumbered (being the definition of "Vesting
Percentage"), is hereby amended by adding the following new sentence at the end
thereof:
"Notwithstanding the foregoing, the Vesting Percentage for Plan 2
Participants shall be 100%."
(c) Subsection (37), as renumbered, being the definition of "Vested
Shares", as amended by adding the following new sentence at the end thereof:
"All shares of Stock Owned by a Plan 2 Participant shall be Vested Shares."
2. Amendment of Section 5 of the Existing Agreement.
<PAGE> 31
-3-
(a) Section 5 of the Existing Agreement is hereby amended (i) by
recaptioning such Section 5 as "Purchase of Plan 1 Participant Shares", and by
inserting the words "Plan 1" immediately before the word "Participant" or
"Participant's" wherever such words appear in such Section 5.
(b) Section 5 of the Existing Agreement is hereby amended by inserting
the words "Plan 1" immediately before the words "Put Option" and "Call Option"
wherever such words appear in such Section 5.
3. Addition of New Section 6 Regarding Stock Owned by Plan 2 Participants.
The Existing Agreement is hereby amended by renumbering Sections 6 through 12
as they currently exist as Sections 7 through 13, respectively, and by adding
the following new Section 6, reading in its entirety as follows:
"Section 6. Right of First Refusal with Respect to Shares Owned by Plan 2
Participants.
(a) If the employment of a Plan 2 Participant is terminated for
any reason, then the Company shall have the option ("Plan 2 Call
Option") to purchase from such Plan 2 Participant or his legal
representative, all shares of Stock Owned by such Plan 2 Participant.
The Plan 2 Call Option shall be exercisable by delivery by the Company
of a written notice of exercise to the Plan 2 Participant or his or
her legal representative not later than ninety (90) days after the
date on which such Plan 2 Participant's employment is terminated. The
purchase price payable for such shares of Stock will be (i) if the
Plan 2 Participant's employment was terminated for any reason other
than Cause (including death or Disability), an amount equal to the
Book Value of the Shares as of the end of the most recent fiscal year
for which
<PAGE> 32
-4-
audited financial statements are available; and (ii) if the Plan 2
Participant's employment was terminated for Cause, an amount equal to
the lesser of (A) the Original Purchase Price or (B) a price per share
equal to the Book Value of the Shares as of the end of the most recent
fiscal year for which audited financial statements are available. The
closing of any purchase pursuant to the exercise of a Plan 2 Call
Option shall occur not later than thirty (30) days after the delivery
of the notice of exercise, at the executive offices of the Company,
unless the Company otherwise agrees and at a time agreed upon by the
Company and the Plan 2 Participant or his or her legal representative.
At such closing, the Company shall pay to the Plan 2 Participant or
his or her legal representative the total purchase price to be paid
for the Stock being purchased by wire transfer to an account
designated by such Plan 2 Participant of immediately available funds
in an amount equal to the total purchase price, against delivery by
such Plan 2 Participant or his or her legal representative of a
certificate or certificates representing all of the shares of Stock
being purchased from such Plan 2 Participant, together with a stock
power duly executed in blank with signature guaranteed, free and clear
of all liens, claims, charges and encumbrances.
(b) If the Company desires to exercise a Plan 2 Call Option but
is unable to pay the full amount of the total purchase price required
to be paid in cash pursuant to Section 6(a) due to a restriction
imposed upon it by a bank loan or other financing agreement or by any
instrument evidencing any indebtedness or similar obligation or by an
applicable provision of the Delaware General Corporation Law, then, it
will assign the Plan 2 Call Option with respect to such Shares of
Stock to Cameron by delivering to Cameron written notice of such
offer. Cameron shall have the right to assign his rights to purchase
shares of Stock under this Section 6(b) to one or more Cameron
Affiliates. Cameron and/or the Cameron Affiliates may exercise the
rights to purchase shares of Stock to be purchased by delivery of a
notice of exercise to the Company and the Plan 2 Participant not later
than fifteen (15) days after delivery by the Company of its assignment
notice to Cameron. If Cameron and/or the Cameron Affiliates exercise
such right, then Cameron and/or the Cameron Affiliates exercising such
right shall purchase such shares of Stock from the Plan 2 Participant
for a total purchase price equal to the total purchase price payable
pursuant to Section 6(a), by wire transfer of immediately available
funds to an account designated by the Plan 2 Participant, or his or
her legal representative, as the case may be, and the Plan 2
Participant or his or her legal representative, as the case may be,
shall deliver to the purchaser certificates representing the shares of
Stock being purchased together with stock powers duly endorsed in
<PAGE> 33
-5-
blank with signatures guaranteed, free and clear of all liens, claims,
charges and encumbrances.
(c) If Stock is purchased from a Plan 2 Participant pursuant to
this Section 6, then, simultaneously with such purchase of Stock, such
Plan 2 Participant shall prepay all unpaid principal of, and interest
on, such Plan 2 Participant's Note Purchaser Note by wire transfer of
immediately available funds to an account designated by the Company."
4. Conforming Amendments.
(a) Section 7 (as renumbered) of the Existing Agreement, being the
Section captioned "Redemptions," is hereby amended (i) by deleting the word
"Call" in Section 7(a) (as renumbered) and inserting the words "Plan 1 Call
Option or Plan 2 Call Option" in lieu thereof, and (ii) by deleting the
reference to "Section 6(b)" thereof in Section 7(b) (as renumbered) and in
inserting "Section 7(b)" in lieu thereof.
(b) All references in Section 8 (as renumbered) are hereby amended by
deleting the references to "Section 7" or "Section 7(a)" as they now exist and
inserting in lieu thereof "Section 7" or "Section 7(a)", as the context
requires.
(c) Section 9 (as renumbered) is hereby amended by adding the words
"or Section 6" immediately after the words "Section 5".
5. Amendment of Termination Provisions. Section 11 (as renumbered),
being the Section entitled "Amendments and Termination," is amended by amending
Section 11(b) (as renumbered) to read in its entirety as follows:
(b) This Agreement shall terminate upon the consummation of a
Public Offering; provided, however, that the provisions of Section 4
shall terminate upon
<PAGE> 34
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the earlier to occur of (A) the consummation of a Public Offering or
(B) seven years from the date hereof, (ii) the provisions of Section 3
shall terminate upon the earlier to occur of (A) the consummation of a
Public Offering or (B) three years from the date hereof, and (iii) the
provisions of Section 6 shall terminate upon the earlier to occur of
(A) the consummation of a Public Offering or (B) a Change of Control;
provided further, however, that notwithstanding the foregoing, Section
3 shall not terminate with respect to any Participant until the
Participant has paid in full his or her Note Purchaser Note, as
defined in the Securities Purchase Agreement.
6. Existing Agreement Remains in Force. Except as expressly set forth in
this Amendatory Agreement, the Existing Agreement remains unmodified and in
full force and effect.
7. Counterparts. This Amendatory Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE> 35
-7-
IN WITNESS WHEREOF, the parties hereto have executed this Amendatory
Agreement as of the day and year first above written.
ENTEX HOLDINGS, INC.
By:
---------------------------------
John A. McKenna, Jr.
President
ENTEX ASSOCIATES, L.P.
By: THE PUTNAM GROUP, INC.,
General Partner
By:
---------------------------------
Dort A. Cameron III
President
------------------------------------
Dort A. Cameron III
------------------------------------
[Name of Participant]
<PAGE> 36
SCHEDULE A
Number of Shares
Name of Participant of Common Stock
- ------------------- ----------------
<PAGE> 1
Exhibit 10.8
ENTEX HOLDINGS, INC.
1996 STOCK OPTION PLAN
---------------
AS AMENDED AND RESTATED JUNE 21, 1996
<PAGE> 2
ENTEX HOLDINGS, INC.
1996 STOCK OPTION PLAN
INTRODUCTION
ENTEX Holdings, Inc., a Delaware corporation (hereinafter
referred to as the "Corporation"), hereby establishes an incentive compensation
plan to be known as the "ENTEX 1996 Stock Option Plan" (hereinafter referred to
as the "Plan"), as set forth in this document. The Plan permits the grant of
Non-Qualified Stock Options and Incentive Stock Options.
The Plan shall become effective on February 1, 1996. However, it
shall be rendered null and void and have no effect, and all Plan Awards granted
hereunder shall be canceled, if the Plan is not approved by the affirmative vote
of the holders of a majority of the Corporation's issued and outstanding Common
Stock within twelve (12) months of such date.
The purpose of the Plan is to promote the success and enhance the
value of the Corporation by linking the personal interests of Participants to
those of the Corporation's stockholders, customers and employees, by providing
Participants with an incentive for outstanding performance. The Plan is further
intended to provide flexibility to the Corporation in its ability to motivate,
and retain the services of, Participants upon whose judgment, interest and
special effort the successful conduct of its operations is largely dependent.
<PAGE> 3
DEFINITIONS
For purposes of this Plan, the following terms shall be defined
as follows unless the context clearly indicates otherwise:
A. "Affiliate" shall have the meaning ascribed to it in Rule
12b-2 under the Exchange Act.
B. "Associate" shall have the meaning ascribed to it in Rule
12b-2 under the Exchange Act.
C. "Cameron" shall mean Dort A. Cameron III.
D. "Cameron Affiliates" shall mean persons or entities that are
Affiliates of Cameron.
E. "Code" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations thereunder.
F. "Committee" shall mean the Stock Option Committee of the Board
of Directors of the Corporation.
G. "Common Stock" shall mean the common stock, par value $0.001
per share, of the Corporation.
H. "Corporation" shall mean ENTEX Holdings, Inc., a Delaware
corporation, and each successor corporation thereto which continues the Plan.
I. "Disability" shall have the same meaning as the term
"permanent and total disability" under Section 22(e)(3) of the Code.
J. "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder.
K. "Fair Market Value" of the Corporation's Common Stock shall
mean the fair market value of the Common Stock determined by the Committee from
time to time in good faith, it being understood that such fair market value
shall be determined periodically, and shall not be required to be determined
with reference to any particular Options or any particular Participant. If the
Corporation's common stock is publicly traded, then the Fair Market Value of the
Corporation's Common Stock on a Trading Day shall mean the last reported sale
price for Common Stock or, in case no such reported sale takes place on such
Trading Day, the average of the closing bid and asked prices for the Common
Stock for such Trading Day, in either case on the principal securities exchange
on which the Common Stock is listed or admitted to trading, or if the Common
Stock is not listed or admitted to trading on any securities exchange, but is
traded in the over-the-counter market,
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<PAGE> 4
the closing sale price of the Common Stock or, if no sale is publicly reported,
the average of the closing bid and asked quotations for the Common Stock, as
reported by the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") or any comparable system or, if the Common Stock is not listed
on NASDAQ or a comparable system, the closing sale price of the Common Stock or,
if no sale is publicly reported, the average of the closing bid and asked
prices, as furnished by two members of the National Association of Securities
Dealers, Inc. who make a market in the Common Stock selected from time to time
by the Corporation for that purpose. In addition, for purposes of this
definition, a "Trading Day" shall mean, if the Common Stock is listed on any
securities exchange, a business day during which such exchange was open for
trading and at least one trade of Common Stock was effected on such exchange on
such business day, or, if the Common Stock is not listed on any national
securities exchange but is traded in the over-the-counter market, a business day
during which the over-the-counter market was open for trading and at least one
"eligible dealer" quoted both a bid and asked price for the Common Stock. An
"eligible dealer" for any day shall include any broker-dealer who quoted both a
bid and asked price for such day, but shall not include any broker-dealer who
quoted only a bid or only an asked price for such day.
L. "Good Cause" shall mean (i) the willful failure by such
Participant to perform his duties as an employee, director, consultant or other
service provider of the Corporation (other than a failure resulting from
physical or mental disability), it being understood that no act, or failure to
act, by a Participant shall be considered "willful" unless the Board of
Directors of the Corporation in the reasonable exercise of its business judgment
determines that such act or failure to act was committed without good faith and
without a reasonable belief that such act or failure to act was in the best
interests of the Company, (ii) such participant engaging in gross misconduct
injurious to the Corporation, (iii) the material breach by such Participant of
any Employment Agreement or other service agreement between the Corporation or
any Affiliate of the Corporation and such Participant or (iv) the conviction or
admission of guilt in a court of law of any crime that constitutes a felony in
the jurisdiction involved.
M. "Incentive Stock Option" shall mean a stock option satisfying
the requirements for tax-favored treatment under Section 422 of the Code.
N. "Initial Public Offering" shall mean the offering by the
Corporation in any jurisdiction of its securities to the general public with the
result that the Corporation shall be a Reporting Corporation.
O. "Non-Qualified Option" shall mean a stock option which does
not satisfy the requirements for tax-favored treatment under Section 422 of the
Code.
P. "Option" shall mean an Incentive Stock Option or a
Non-Qualified Stock Option granted pursuant to the provisions of Section V
hereof.
Q. "Optionee" shall mean a Participant who is granted an Option
under the terms of this Plan.
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<PAGE> 5
R. "Parent" shall mean a parent corporation of the Corporation
within the meaning of Section 424(e) of the Code.
S. "Participant" shall mean any employee or other individual
participating under the Plan.
T. "Public Offering" shall mean an Initial Public Offering or the
consolidation with, or merger with or into, or acquisition of a corporation or
other entity that is a Reporting Corporation.
U. "Reporting Corporation" shall mean, a corporation that is
required to register any class of equity securities under Section 12 of the
Exchange Act.
V. "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
W. "Subsidiary" shall mean a subsidiary corporation of the
Corporation within the meaning of Section 424(f) of the Code.
SECTION I
ADMINISTRATION
The Plan shall be administered by the Committee, which shall be
composed of at least two directors. Subject to the provisions of the Plan, the
Committee may establish from time to time such regulations, provisions,
proceedings and conditions of awards which, in its opinion, may be advisable in
the administration of the Plan. A majority of the Committee shall constitute a
quorum, and, subject to the provisions of Section IV of the Plan, the acts of a
majority of the members present at any meeting at which a quorum is present, or
acts approved in writing by a majority of the Committee, shall be the acts of
the Committee. If the Corporation is a Reporting Corporation, this Plan is
intended to be a bifurcated plan.
SECTION II
SHARES AVAILABLE
Subject to the adjustments provided in Section VI of the Plan,
the aggregate number of shares of the Common Stock which may be granted for all
purposes under the Plan shall be Nine Hundred Thirty-One Thousand (931,000)
shares. Shares of Common Stock underlying the grant of Options shall be counted
against the limitation set forth in the immediately preceding sentence and may
be reused (e.g., in the event that an Option expires, is terminated unexercised,
or is forfeited as to any shares covered thereby). Incentive and Non-Qualified
Stock Options awarded under the Plan may be fulfilled in accordance with the
terms of the Plan with either authorized and unissued shares of the Common
Stock, issued shares of such Common Stock held in the Corporation's treasury or
shares of Common Stock acquired on the open market.
- 4 -
<PAGE> 6
SECTION III
ELIGIBILITY
Present and future officers and key employees (including officers
or key employees who are also directors) of the Corporation, or of any Parent or
Subsidiary, who are regularly employed on a salaried basis as common law
employees shall be eligible to participate in the Plan. In addition,
non-employee directors, consultants or other service providers of the
Corporation, or of any Parent or Subsidiary, shall be eligible to participate in
the Plan.
SECTION IV
AUTHORITY OF COMMITTEE
The Plan shall be administered by, or under the direction of, the
Committee, which shall administer the Plan so as to comply at all times with the
Exchange Act, to the extent such compliance is required, and, subject to the
Code, shall otherwise have plenary authority to interpret the Plan and to make
all determinations specified in or permitted by the Plan or deemed necessary or
desirable for its administration or for the conduct of the Committee's business.
Subject to the provisions of Section X hereof, all interpretations and
determinations of the Committee may be made on an individual or group basis and
shall be final, conclusive, and binding on all interested parties. Subject to
the express provisions of the Plan, the Committee shall have authority, in its
discretion, to determine the persons to whom Options shall be granted, the times
when such Options shall be granted, the number of Options, the exercise price of
each Option, the period(s) during which such Option shall be exercisable
(whether in whole or in part), the restrictions to be applicable to Options and
the other terms and provisions thereof (which need not be identical). In
addition, the authority of the Committee shall include, without limitation, the
following:
A. Financing. The arrangement of temporary financing for an
Optionee by registered broker-dealers, under the rules and regulations of the
Federal Reserve Board, for the purpose of assisting the Optionee in the exercise
of an Option, such authority to include the payment by the Corporation of the
commissions of the broker-dealer.
B. Procedures for Exercise of Option. The establishment of
procedures for an Optionee (i) to exercise an Option by payment of cash or any
other property, including, but not limited to, Promissory Notes due 2000 of the
Corporation or other debt securities of the Corporation, at the fair value
thereof, acceptable to the Committee, (ii) to have withheld from the total
number of shares of Common Stock to be acquired upon the exercise of an Option
that number of shares having a Fair Market Value, which, together with such cash
as shall be paid in respect of fractional shares, shall equal the Option
exercise price of the total number of shares of Common Stock to be acquired,
(iii) to exercise all or a portion of an Option by delivering that number of
shares of Common Stock already owned by him having a Fair Market Value which
shall equal the Option exercise price for the portion exercised and, in cases
where an Option is not exercised in its entirety, to permit the Optionee to
deliver the shares of Common Stock previously acquired by him in payment of
shares of Common Stock to be received pursuant to the exercise of additional
portions of such Option, the effect of which
- 5 -
<PAGE> 7
shall be that an Optionee can in sequence utilize such newly acquired shares of
Common Stock in payment of the exercise price of the entire Option, together
with such cash as shall be paid in respect of fractional shares and (iv) to
engage in any form of "cashless" exercise.
C. Withholding. The establishment of a procedure whereby a number
of shares of Common Stock or other securities may be withheld from the total
number of shares of Common Stock or other securities to be issued upon exercise
of an Option, or for the tender of cash or shares of Common Stock owned by the
Participant to meet the obligation of withholding for taxes incurred by the
Optionee upon such exercise.
D. Types of Options. The Committee may grant Incentive Stock
Options and Non-Qualified Stock Options.
SECTION V
STOCK OPTIONS
The Committee shall have the authority, in its discretion, to
grant Incentive Stock Options or to grant Non-Qualified Stock Options or to
grant both types of Options. No Option shall be granted for a term of more than
ten (10) years. Notwithstanding anything contained herein to the contrary, an
Incentive Stock Option may be granted only to common law employees of the
Corporation or of any Parent or Subsidiary now existing or hereafter formed or
acquired, and not to any director, officer, consultant or service provider who
is not also such a common law employee. The terms and conditions of the Options
shall be determined from time to time by the Committee; provided, however, that
the Options granted under the Plan shall be subject to the following:
A. Exercise Price. The Committee shall establish the exercise
price at the time any Option is granted at such amount as the Committee shall
determine; provided, however, that the exercise price for each share of Common
Stock purchasable under any Incentive Stock Option granted hereunder shall be
such amount as the Committee shall, in its best judgment, determine to be not
less than one hundred percent (100%) of the Fair Market Value per share of
Common Stock at the date the Option is granted; and provided, further, that in
the case of an Incentive Stock Option granted to a person who, at the time such
Incentive Stock Option is granted, owns shares of stock of the Corporation or of
any Parent or Subsidiary which possess more than ten percent (10%) of the total
combined voting power of all classes of shares of stock of the Corporation or of
any Parent or Subsidiary, the exercise price for each share of Common Stock
shall be such amount as the Committee, in its best judgment, shall determine to
be not less than one hundred ten percent (110%) of the Fair Market Value per
share of Common Stock at the date the Option is granted. The exercise price will
be subject to adjustment in accordance with the provisions of Section VI of the
Plan.
B. Payment of Exercise Price. The price per share of Common Stock
with respect to each Option shall be payable at the time the Option is
exercised. Such price shall be payable in cash or, in the discretion of the
Committee, pursuant to any of the methods set forth in Sections IV(A) or (B)
hereof. Shares of Common Stock delivered to the Corporation in payment of
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<PAGE> 8
the exercise price shall be valued at the Fair Market Value of the Common Stock
on the date preceding the date of the exercise of the Option.
C. Employment Requirement. Unless otherwise provided by the
Committee at the time an Option is granted or by subsequent amendment of the
Option, each Option by its terms shall require the Optionee to remain in the
continuous full-time employ of the Corporation, or of any Parent or Subsidiary,
for at least two (2) years from the date of grant of the Option before the right
to exercise any part of the Option (by him or any other person) will accrue.
D. Exercisability of Options. Each Option shall be exercisable in
whole or in part, or in installments, and at such time(s), and subject to the
fulfillment of any conditions on exercisability as may be determined by the
Committee at the time of the grant of such Options; provided, however, that no
Option be exercised at any one time for fewer than one hundred (100) shares of
Common Stock; and provided further, however, that any Option to acquire fewer
than one hundred (100) shares of Common Stock may nevertheless be exercised, but
shall be exercisable in whole only. Subject to the limitations contained in the
preceding sentence, the right to purchase shares of Common Stock shall be
cumulative so that when the right to purchase any shares of Common Stock has
accrued, such shares of Common Stock or any part thereof may be purchased at any
time thereafter until the expiration or termination of the Option. Unless
otherwise provided by the Committee at the time an Option is granted or by
subsequent amendment of the Option, no Option shall become exercisable prior to
January 1, 1999, except that, if the Corporation consummates a Public Offering
prior to January 1, 1999, then the date on which the earliest Options granted
pursuant to this Plan may be exercised (the "Initial Exercise Date") shall be
advanced to a date (the "Advanced Exercise Date") that is one hundred eighty
(180) days after the consummation of such Public Offering, but (unless otherwise
provided by the Committee at the time an Option is granted or by subsequent
amendment of the Option) in no event earlier than January 1, 1998, and the
respective dates on which all other Options granted pursuant to this Plan may be
exercised shall be advanced by an amount of time equal to the amount of time
between the Advanced Exercise Date and the Initial Exercise Date.
E. Expiration of Options. No Option by its terms shall be
exercisable after the expiration of ten (10) years from the date of grant of the
Option; provided, however, in the case of an Incentive Stock Option granted to a
person who, at the time such Option is granted, owns shares of stock of the
Corporation or of any Parent or Subsidiary possessing more than ten percent
(10%) of the total combined voting power of all classes of shares of stock of
the Corporation or of any Parent or Subsidiary, such Option shall not be
exercisable after the expiration of five (5) years from the date such Option is
granted.
F. Exercise Upon Death of Optionee. Subject to the provisions of
Sections V(C) and V(I) hereof, in the event of the death of the Optionee prior
to his termination of employment or service relationship with the Corporation or
with any Parent or Subsidiary, his estate (or other beneficiary, if so
designated in writing by the Participant) shall have the right, within one (1)
year (or such longer period as may be provided by the Committee at the time an
Option is granted or by
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<PAGE> 9
subsequent amendment of the Option) after the date of death (but in no case
after the expiration date of the Option(s)), to exercise his Option(s) with
respect to all or any part of the shares of Common Stock as to which the
deceased Optionee had not exercised his Option at the time of his death, but
(unless otherwise provided by the Committee at the time an Option is granted or
by subsequent amendment of the Option) only to the extent the Option or Options
were exercisable as of the date of his death.
G. Exercise Upon Disability of Optionee. Subject to the
provisions of Sections V(C) and V(I) hereof, if an Optionee's employment or
service relationship with the Corporation or with any Parent or Subsidiary is
terminated because of Disability, he shall have the right, within one (1) year
(or such longer period as may be provided by the Committee at the time an Option
is granted or by subsequent amendment of the Option) after the date of such
termination (but in no case after the expiration of the Option(s)), to exercise
his Option(s) with respect to all or any part of the shares of Common Stock as
to which he had not exercised his Option at the time of such termination, but
(unless otherwise provided by the Committee at the time an Option is granted or
by subsequent amendment of the Option) only to the extent such Option or Options
were exercisable as of the date of his termination of employment or service
relationship due to Disability.
H. Exercise Upon Optionee's Termination of Service. Except as
provided in the following sentence, if an Optionee's employment or service
relationship with the Corporation or with any Parent or Subsidiary is terminated
for any reason other than those specified in Sections V(F) and (G) above, he
shall have the right, within thirty (30) days (or such longer period as may be
provided by the Committee at the time an Option is granted or by subsequent
amendment of the Option) after the date of such termination (but in no case
after the expiration date of the Option(s)), to exercise his Option(s), but
(unless otherwise provided by the Committee at the time an Option is granted or
by subsequent amendment of the Option) only with respect to that number of
shares of Common Stock that he was entitled to purchase pursuant to Options that
were exercisable immediately prior to such termination. If an Optionee's
employment or service relationship is terminated for Good Cause by the
Corporation or any Parent or Subsidiary, then the Optionee shall not have the
right to exercise any Options that are vested and nonforfeitable and such
Options shall be forfeited.
I. Buy-Out of Vested Options Not Yet Exercisable Upon
Termination. Unless otherwise provided by the Committee at the time an Option is
granted or by subsequent amendment of the Option, if an Optionee's employment or
service relationship is terminated for any reason other than death, Disability
or Good Cause, and such Optionee holds Options that are vested and
nonforfeitable, but which nevertheless are not yet exercisable, then such
Optionee shall surrender and sell to the Corporation, and the Corporation shall
purchase and acquire from such Optionee, all of such Options for a purchase
price equal to the excess, if any, of the total Fair Market Value of the shares
of Common Stock issuable upon the exercise of such Options, in effect at the
time of the termination of the employment or service relationship of such
Optionee, over the total exercise price of such Options. Such sale and purchase
shall occur not later than sixty (60) days after the date on which such
Optionee's employment or service relationship terminated. If the Corporation is
unable to pay the amount required to be paid to an Optionee pursuant to this
Section V(I) due to a restriction
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<PAGE> 10
imposed on it under the terms of any bank loan or the terms of any instrument or
agreement evidencing any indebtedness or other obligation of the Corporation or
under the Delaware General Corporation Law, the obligations of the Corporation
under this Section V(I) shall be deferred until the Corporation is legally
permitted to make the payment required under this Section V(I).
J. Maximum Amount of Incentive Stock Options. Each Incentive
Stock Option shall provide that to the extent the aggregate of the (i) Fair
Market Value of the shares of Common Stock (determined as of the time of the
grant of the Option) subject to such Incentive Stock Option and (ii) the fair
market values (determined as of the date(s) of grant of the options in question)
of all other shares of Common Stock subject to incentive stock options granted
to an Optionee by the Corporation or any Parent or Subsidiary, which are
exercisable for the first time by any person during any calendar year, exceed(s)
One Hundred Thousand Dollars ($100,000), such excess shares of Common Stock
shall not be deemed to be purchased pursuant to Incentive Stock Options. The
terms of the immediately preceding sentence shall be applied by taking options
into account in the order in which they are granted.
K. Corporation's Call Upon Option Shares Upon Termination for
Good Cause. Unless otherwise provided by the Committee at the time an Option is
granted or by subsequent amendment of the Option, if an Optionee's employment or
service relationship is terminated for Good Cause, then the Corporation shall
have the right, but not the obligation, to purchase from such Optionee all
shares of Common Stock purchased by such Optionee pursuant to this Plan for a
purchase price equal to the exercise price of the Options pursuant to which such
shares of Common Stock were purchased. The Corporation shall exercise such right
by delivery of a written notice of exercise to such Optionee not later than
sixty (60) days after the date on which such Optionee's employment or service
relationship terminated. The closing of any purchase pursuant to the exercise of
such option shall occur not later than thirty (30) days after the delivery of
the notice by the Corporation of its notice of exercise, at the principal
executive offices of the Corporation, unless the Corporation otherwise agrees,
and at a time agreed upon by the Corporation and the Optionee. At such closing,
the Corporation shall pay to the Optionee the total purchase price for the
shares of Common Stock being purchased by wire transfer to an account designated
by such Optionee of immediately available funds in an amount equal to the total
purchase price, against delivery by such Optionee or his legal representative of
a certificate or certificates representing all of the shares being purchased
from such Optionee, together with a stock power duly executed in blank, with
signature guaranteed, free and clear of all liens, claims, charges and
encumbrances.
L. Corporation's Call Upon Non-Qualified Stock Option Shares Upon
Termination Other than for Good Cause. (i) Unless otherwise provided by the
Committee at the time an Option is granted or by subsequent amendment of the
Option, if an Optionee's employment or service relationship is terminated other
than by reason of death, Disability or Good Cause, then the Corporation shall
have the right, but not the obligation, to purchase from such Optionee all
shares of Common Stock previously acquired pursuant to the exercise of a
Non-Qualified Stock Option granted pursuant to this Plan for a purchase price
equal to the Fair Market Value of such shares in effect on the date on which
such Optionee's employment or service relationship is terminated, or such other
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<PAGE> 11
amount as may be provided pursuant to the terms of such Optionee's Non-Qualified
Stock Option. The Corporation shall exercise such right by delivery of written
notice of exercise to such Optionee not later than sixty (60) days after the
date on which such Optionee's employment or service relationship is terminated
or such other date as may be provided pursuant to the terms of such Optionee's
Non-Qualified Stock Option. Such sale and purchase shall occur not later than
thirty (30) days after the date the Corporation provides its written notice of
exercise in accordance with the procedures set forth in Section V(K).
(ii) Unless otherwise provided by the Committee at the time an
Option is granted or by subsequent amendment of the Option, the Corporation
shall have the right, but not the obligation, to purchase shares of Common Stock
acquired by the Optionee or the Optionee's estate (or other beneficiary)
pursuant to the exercise of a Non-Qualified Stock Option after the Optionee's
termination of employment or service relationship pursuant to Section V(F) or
V(G) at a purchase price equal to the Fair Market Value of such shares in effect
on the date of such termination, or such other amount as may be provided
pursuant to the terms of such Optionee's Non-Qualified Stock Option. The
Corporation shall exercise such option by delivery of written notice of exercise
to such Optionee or the Optionee's estate (or beneficiary) not later than sixty
(60) days after the date of exercise by the Optionee or the Optionee's estate
(or beneficiary). Such sale and purchase shall occur not later than thirty (30)
days after the date the Corporation delivers its written notice of exercise in
accordance with the procedures set forth in Section V(K).
M. Corporation's Call Upon Incentive Stock Option Shares Upon
Termination Other than for Good Cause. (i) If the employment of the Optionee is
terminated other than by reason of Disability or Good Cause, then the
Corporation shall have the right, but not the obligation, to purchase from (x)
such Optionee or the Optionee's estate (or other beneficiary) all shares
previously acquired by the Optionee pursuant to the exercise of an Incentive
Stock Option granted pursuant to this Plan, or (y) the Optionee's estate (or
other beneficiary) pursuant to the exercise of an Incentive Stock Option granted
pursuant to this Plan, in accordance with Section V(F) after termination of
employment, for a purchase price equal to the total Fair Market Value of such
shares of Common Stock in effect on the date of termination of employment or
such other amount as may be provided pursuant to the terms of such Optionee's
Incentive Stock Option. The Corporation shall exercise such right by delivery of
a written notice of exercise to such Optionee or his legal representative not
later than sixty (60) days after the date of termination of employment or the
date of the exercise by the Optionee's legal representative of an Incentive
Stock Option in accordance with Section V(F), whichever is applicable. Such sale
and purchase shall occur not later than thirty (30) days after the date the
Corporation provides its written notice of exercise in accordance with the
procedures set forth in Section V(K).
(ii) If the employment of an Optionee is terminated by reason of
Disability, then the Corporation shall have the right, but not the obligation,
to purchase only such shares that have been acquired pursuant to the exercise of
an Incentive Stock Option and that have been held one (1) year or longer by the
Optionee, for a purchase price equal to the total Fair Market Value of such
shares determined as of the date of termination of employment or such other
amount as
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<PAGE> 12
may be provided pursuant to the terms of such Optionee's Incentive Stock Option.
The Corporation shall exercise such right by delivery of written notice of
exercise to such Optionee not later than sixty (60) days after termination of
employment or such other date as may be provided pursuant to the terms of such
Optionee's Incentive Stock Option. Such sale and purchase shall occur not later
than thirty (30) days after the date the Corporation provides its written notice
of exercise in accordance with the procedures set forth in Section V(K).
(iii) The Corporation retains the right, but not the obligation,
to purchase shares of Common Stock acquired by the Optionee pursuant to the
exercise of an Incentive Stock Option in accordance with Section V(G) after
termination of employment if the employment of the Optionee is terminated by
reason of Disability, for a purchase price equal to the total Fair Market Value
of such shares of Common Stock, in effect on the date of termination of
employment or such other amount as may be provided pursuant to the terms of such
Optionee's Incentive Stock Option. The Corporation shall exercise such right by
delivery of a written notice of exercise to such Optionee at any time during the
period beginning on the date which is one (1) year after the date of the
exercise by the Optionee and ending sixty (60) days thereafter. Such sale and
purchase shall occur not later than thirty (30) days after the date the
Corporation provides its written notice of exercise in accordance with the
procedures set forth in Section V(K).
N. Right of First Refusal with Respect to Acquired Shares.
(i) If any Participant desires to sell, assign, encumber, pledge,
or otherwise transfer ("Transfer") any shares of Common Stock acquired pursuant
to this Plan to any person or entity other than the Corporation ("Third Party"),
except pursuant to a Transfer by an individual Participant of all or a portion
of such shares to his ancestors, descendants or spouse (other than as an
incident to the dissolution of marriage) (collectively, "Family Donees"), or to
trusts for the benefit of a Participant or any of his Family Donees, either
inter vivos or, subject to Sections V(F), V(G), V(L) and V(M) hereof, pursuant
to applicable laws of descent and distribution, if such Family Donee or such
trust agrees in writing to be bound by the terms of the restriction contained
herein, such Transfer shall be made only in accordance with the terms of this
Plan and only for cash or cash equivalents.
(ii) Upon receipt by a Participant of any bona fide offer to
purchase all or any portion of the shares of Common Stock owned by such
Participant, his Family Donees, or trusts for his or their benefit, then the
party desiring to make such Transfer ("Offering Party") shall deliver written
notice ("Offer Notice") to the Corporation specifying the name of the Third
Party that is the proposed purchaser of the shares of Common Stock, the number
of shares proposed to be Transferred, the price to be paid in the proposed sale
and all other material conditions of the proposed sale. The Offering Party shall
notify the Corporation of any material changes in the terms of such proposed
Transfer, and such notice shall be treated as an original Offer Notice.
(iii) The Corporation shall have the right, but not the
obligation, to purchase all or any part of the shares of Common Stock offered
pursuant to the Offer Notice for the price and on the
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<PAGE> 13
terms specified in the Offer Notice by delivery of a written notice of exercise
within sixty (60) days after the receipt of the Offer Notice. The closing of any
purchase of shares shall occur within thirty (30) days after the delivery by the
Corporation of its notice of exercise of its rights under this Section V(N) in
accordance with the procedures set forth in Section V(K).
O. Assignability of Corporation's Rights in Certain Events. If
the Corporation is unable to exercise the rights granted to it pursuant to
Sections V(K), V(L), V(M) or V(N) due to a restriction imposed upon it under the
terms of any bank loan or the terms of any instrument or agreement evidencing
any indebtedness or other obligation of the Corporation or under an applicable
provision of the Delaware General Corporation Law, then it will offer to assign
its rights to Cameron by delivery to Cameron of written notice of such offer.
Cameron shall have the right, but not the obligation, to assign his rights under
this Section V(O) to one or more Cameron Affiliates. Cameron and/or the Cameron
Affiliates may exercise the rights of the Corporation to purchase shares of
Common Stock and/or Options assigned pursuant to this Section V(O) by delivery
of a written notice of exercise to the Corporation and the Participant not later
than fifteen (15) days after the delivery by the Corporation of its offer notice
to Cameron. If Cameron and/or the Cameron Affiliates exercise such rights, then
Cameron and/or the Cameron Affiliates shall purchase such shares of Common Stock
and/or Options from the Participant and/or his legal representative on the same
terms and subject to the same conditions as are applicable to the Corporation
under this Plan. If Cameron and/or the Cameron Affiliates do not exercise their
rights pursuant to this Section V(O), then the rights and obligations of the
Corporation under Sections V(K), V(L), V(M) and V(N) shall be deemed to have
been satisfied.
P. Applicability of Certain Provisions Prior to Public Offering.
The provisions of Sections V(L), V(M), V(N) and V(O) shall apply only prior to
the consummation by the Corporation of a Public Offering.
SECTION VI
ADJUSTMENT OF SHARES; MERGER OR
CONSOLIDATION, ETC. OF THE CORPORATION
A. Recapitalization, Etc. In the event there is any change in the
Common Stock of the Corporation by reason of any reorganization,
recapitalization, stock split, stock dividend or otherwise, there shall be
substituted for or added to each share of Common Stock theretofore appropriated
or thereafter subject, or which may become subject, to any Option, the number
and kind of shares of stock or other securities into which each outstanding
share of Common Stock shall be so changed or for which each such share shall be
exchanged, or to which each such share be entitled, as the case may be, and the
per share price thereof also shall be appropriately adjusted. Notwithstanding
the foregoing, (i) each such adjustment with respect to an Incentive Stock
Option shall comply with the rules of Section 424(a) of the Code and (ii) in no
event shall any adjustment be made which would render any Incentive Stock Option
granted hereunder to be other than an incentive stock option for purposes of
Section 422 of the Code.
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<PAGE> 14
B. Merger, Consolidation or Change in Control of Corporation.
Upon (i) the merger or consolidation of the Corporation with or into another
corporation (pursuant to which the stockholders of the Corporation immediately
prior to such merger or consolidation will not, as of the date of such merger or
consolidation, own a beneficial interest in the voting securities of the
corporation surviving such merger or consolidation having at least a majority of
the combined voting power of such corporation's then outstanding securities), if
the agreement of merger or consolidation does not provide for (A) the
continuance of the Options granted hereunder or (B) the substitution of new
Options granted hereunder, or for the assumption of such Options by the
surviving corporation, (ii) the dissolution, liquidation, or sale of
substantially all the assets, of the Corporation or (iii) the Change in Control
of the Corporation, then the Committee shall have the authority, in its
discretion, to provide that holders of some or all of any such Options
theretofore granted and still outstanding (and not otherwise expired) shall have
the right immediately prior to the effective date of such merger, consolidation,
dissolution, liquidation, sale of assets or Change in Control of the Corporation
to exercise such Option(s) in whole or in part and shall have the authority, in
its discretion further to provide that any such Option may be exercised without
regard to any installment provision that may have been made part of the terms
and conditions of such Option(s), provided that (unless otherwise provided by
the Committee at the time an Option is granted or by subsequent amendment of the
Option) any conditions precedent to the exercise of such Options, other than the
passage of time, have occurred. The Corporation, to the extent practicable,
shall give advance notice to affected Optionees of any such merger,
consolidation, dissolution, liquidation, sale of assets or Change in Control of
the Corporation. If the Committee makes such provision, then all such Options
which are not so exercised shall be forfeited as of the effective time of any
merger, consolidation, dissolution, liquidation or sale of assets (but not in
the case of a Change in Control of the Corporation).
C. Definition of Change in Control of the Corporation. As used
herein, a "Change in Control of the Corporation" shall be deemed to have
occurred if any person (including any individual, firm, partnership or other
entity) together with all Affiliates and Associates of such person acquires
beneficial ownership, directly or indirectly, of securities of the Corporation
having more than 50% of the combined voting power of the Corporation's then
outstanding securities, such person being hereinafter referred to as an
Acquiring Person. For purposes of this Section VI(C), an Acquiring Person
(including its Affiliates and Associates) shall be determined by excluding (i) a
trustee or other fiduciary holding securities under an employee benefit plan of
the Corporation or any subsidiary of the Corporation, (ii) a corporation owned,
directly or indirectly, by the stockholders of the Corporation in substantially
the same proportions as their ownership of the Corporation, (iii) the
Corporation or any subsidiary of the Corporation, (iv) any person who, as of the
effective date of this Plan, is the "Beneficial Owner" (as defined in Rule 13(d)
promulgated under the Exchange Act), directly or indirectly, of securities of
the Corporation having more than 50% of the combined voting power of the
Corporation's then outstanding securities, or (v) only as provided in the
immediately following sentence, a Participant, together with all Affiliates and
Associates of a Participant, who is or becomes the Beneficial Owner. The
provisions of clause (v) of the immediately preceding sentence shall apply only
in determining whether a Change in Control of the Corporation has occurred with
respect to the Option(s) held by the Participant who, together with his
Affiliates or Associates, if any, is or becomes the direct or indirect
Beneficial Owner of the percentage of securities set forth above.
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<PAGE> 15
SECTION VII
MISCELLANEOUS PROVISIONS
A. Administrative Procedures. The Committee may establish any
procedures determined by it to be appropriate in discharging its
responsibilities under the Plan. Subject to the provisions of Section X hereof,
all actions and decisions of the Committee shall be final.
B. Assignment or Transfer. No grant or award of any Option made
under the Plan or any rights or interests therein shall be assignable or
transferable by a Participant except by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order. During the
lifetime of a Participant Options granted hereunder shall be exercisable only by
the Participant.
C. Investment Representation. In the case of receipt of shares of
Common Stock or other securities upon exercise of an Option, the Committee may
require, as a condition of receiving such securities, that the Participant
furnish to the Corporation such written representations and information as the
Committee deems appropriate to permit the Corporation, in light of the existence
or nonexistence of an effective registration statement under the Securities Act
to deliver such securities in compliance with the provisions of the Securities
Act.
D. Withholding Taxes. The Corporation shall have the right to
deduct from all cash payments hereunder any federal, state, local or foreign
taxes required by law to be withheld with respect to such payments. In the case
of the issuance or distribution of Common Stock or other securities hereunder,
the Corporation, as a condition of such issuance or distribution, may require
the payment (through withholding from the Participant's salary, reduction of the
number of shares of Common Stock or other securities to be issued, or otherwise)
of any such taxes. Subject to the consent of the Committee, the Participant may
satisfy the withholding obligations by paying to the Corporation a cash amount
equal to the amount required to be withheld or by tendering to the Corporation a
number of shares of Common Stock having a value equivalent to such cash amount,
or by use of any available procedure as described under Section IV(C) hereof.
E. Costs and Expenses. The costs and expenses of administering
the Plan shall be borne by the Corporation and shall not be charged against any
award nor to any employee, director, consultant, or other service provider
receiving an Option.
F. Funding of Plan. The Plan shall be unfunded. The Corporation
shall not be required to segregate any of its assets to assure the payment of
any Option under the Plan. Neither the Participants nor any other persons shall
have any interest in any fund or in any specific asset or assets of the
Corporation or any other entity by reason of any Option, except to the extent
expressly provided hereunder. The interests of each Participant and former
Participant hereunder are unsecured and shall be subject to the general
creditors of the Corporation.
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<PAGE> 16
G. Other Incentive Plans. The adoption of the Plan does not
preclude the adoption by appropriate means of any other incentive plan for
employees, directors, consultants, or other service providers.
H. Plurals and Gender. Where appearing in the Plan, masculine
gender shall include the feminine and neuter genders, and the singular shall
include the plural, and vice versa, unless the context clearly indicates a
different meaning.
I. Headings. The headings and sub-headings in this Plan are
inserted for the convenience of reference only and are to be ignored in any
construction of the provisions hereof.
J. Severability. In case any provision of this Plan shall be held
illegal or void, such illegality or invalidity shall not affect the remaining
provisions of this Plan, but shall be fully severable, and the Plan shall be
construed and enforced as if said illegal or invalid provisions had never been
inserted herein.
K. Payments Due Missing Persons. The Corporation shall make a
reasonable effort to locate all persons entitled to benefits under the Plan;
however, notwithstanding any provisions of this Plan to the contrary, if, after
a period of one (1) year from the date such benefits shall be due, any such
persons entitled to benefits have not been located, their rights under the Plan
shall stand suspended. Before this provision becomes operative, the Corporation
shall send a certified letter to all such persons at their last known addresses
advising them that their rights under the Plan shall be suspended. Subject to
all applicable state laws, any such suspended amounts shall be held by the
Corporation for a period of one (1) additional year and thereafter such amounts
shall be forfeited and thereafter remain the property of the Corporation.
L. Liability and Indemnification. (i) Neither the Corporation nor
any Parent or Subsidiary shall be responsible in any way for any action or
omission of the Committee, or any other fiduciaries in the performance of their
duties and obligations as set forth in this Plan. Furthermore, neither the
Corporation nor any Parent or Subsidiary shall be responsible for any act or
omission of any of their agents, or with respect to reliance upon advice of
their counsel provided that the Corporation and/or the appropriate Parent or
Subsidiary relied in good faith upon the action of such agent or the advice of
such counsel.
(ii) Except for their own gross negligence or willful misconduct
regarding the performance of the duties specifically assigned to them under, or
their willful breach of the terms of, this Plan, the Corporation, each Parent
and Subsidiary and the Committee shall be held harmless by the Participants,
former Participants, beneficiaries and their representatives against liability
or losses occurring by reason of any act or omission. Neither the Corporation,
any Parent or Subsidiary, the Committee, nor any agents, employees, officers,
directors or shareholders of any of them, nor any other person shall have any
liability or responsibility with respect to this Plan, except as expressly
provided herein.
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<PAGE> 17
M. Incapacity. If the Committee shall receive evidence
satisfactory to it that a person entitled to receive shares of Common Stock
pursuant to an exercise of an Option is, at the time when such shares become
issuable, a minor, or is physically or mentally incompetent to receive such
shares and to give a valid release thereof, and that another person or an
institution is then maintaining or has custody of such person and that no
guardian, committee or other representative of the estate of such person shall
have been duly appointed, the Committee may make the transfer of such Common
Stock otherwise payable to such person to such other person or institution,
including a custodian under a Uniform Gifts to Minors Act, or corresponding
legislation (who shall be an adult, a guardian of the minor or a trust company),
and the release by such other person or institution shall be a valid and
complete discharge for the transfer of such Common Stock.
N. Cooperation of Parties. All parties to this Plan and any
person claiming any interest hereunder agree to perform any and all acts and
execute any and all documents and papers which are necessary or desirable for
carrying out this Plan or any of its provisions.
O. Governing Law. All questions pertaining to the validity,
construction and administration of the Plan shall be determined in accordance
with the laws of the State of Delaware, without reference to the conflicts of
law principles thereof.
P. Nonguarantee of Employment or Service Relationship. Nothing
contained in this Plan shall be construed as a contract of employment or service
relationship between the Corporation (or any Parent or Subsidiary), and any
Participant, as a right of any Participant to be continued in the employment of,
or service relationship with, the Corporation (or any Parent or Subsidiary), or
as a limitation on the right of the Corporation or any Parent or Subsidiary to
discharge any of its employees, directors, consultants or other service
providers, with or without cause.
Q. Notices. Each notice relating to this Plan shall be in writing
and delivered in person or by certified mail to the proper address. All notices
to the Corporation or the Committee shall be addressed to it at 6 International
Drive, Rye Brook, New York 10573, Attn: Senior Vice President, Human Resources.
All notices to Participants, former Participants, beneficiaries or other persons
acting for or on behalf of such persons shall be addressed to such person at the
last address for such person maintained in the Committee's records.
R. Written Agreements. Each Option shall be evidenced by a signed
written agreement between the Corporation and the Participant containing the
terms and conditions of the Option.
SECTION VIII
AMENDMENT OR TERMINATION OF PLAN
The Board of Directors of the Corporation shall have the right to
amend, suspend or terminate the Plan at any time, provided that no amendment
shall be made which shall increase the total number of shares of the Common
Stock of the Corporation which may be issued and sold pursuant to Options,
reduce the minimum exercise price in the case of an Incentive Stock Option
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<PAGE> 18
or modify the provisions of the Plan relating to eligibility with respect to
Incentive Stock Options unless such amendment is made by or with the approval of
the stockholders (such approval being granted within twelve (12) months of the
effective date of such amendment). The Board of Directors of the Corporation
shall be authorized to amend the Plan and the Options granted thereunder (i) to
maintain qualification as "incentive stock options" within the meaning of
Section 422 of the Code, if applicable or (ii) to comply with Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder. Except as
otherwise provided herein, no amendment, suspension or termination of the Plan
shall alter or impair any Options previously granted under the Plan, without the
consent of the holder thereof.
SECTION IX
TERM OF PLAN
The Plan shall remain in effect until the tenth anniversary of
the date the Plan was adopted by the Board of Directors of the Corporation,
unless sooner terminated by such Board of Directors. No Options may be granted
under the Plan subsequent to the termination of the Plan.
SECTION X
CLAIMS PROCEDURES
A. Denial. If any Participant, former Participant or beneficiary
is denied any vested benefit to which he is, or reasonably believes he is,
entitled under this Plan, either in total or in an amount less than the full
vested benefit to which he would normally be entitled, the Committee shall
advise such person in writing the specific reasons for the denial. The Committee
shall also furnish such person at the time with a written notice containing (i)
a specific reference to pertinent Plan provisions, (ii) a description of any
additional material or information necessary for such person to perfect his
claim, if possible, and an explanation of why such material or information is
needed and (iii) an explanation of the Plan's claim review procedure.
B. Written Request for Review. Within sixty (60) days of receipt
of the information stated in subsection (a) above, such person shall, if he
desires further review, file a written request for reconsideration with the
Committee.
C. Review of Document. So long as such person's request for
review is pending (including the sixty (60) day period in subsection (b) above),
such person or his duly authorized representative may review pertinent Plan
documents and may submit issues and comments in writing to the Committee.
D. Committee's Final and Binding Decision. A final and binding
decision shall be made by the Committee within sixty (60) days of the filing by
such person of this request for reconsideration; provided, however, that if the
Committee, in its discretion, feels that a hearing with such person or his
representative is necessary or desirable, this period shall be extended for an
additional sixty (60) days.
E. Transmittal of Decision. The Committee's decision shall be
conveyed to such person in writing and shall (i) include specific reasons for
the decision, (ii) be written in a manner
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<PAGE> 19
calculated to be understood by such person and (iii) set forth the specific
references to the pertinent Plan provisions on which the decision is based.
F. Limitation on Claims. Notwithstanding any provisions of this
Plan to the contrary, no Participant (nor the estate or other beneficiary of a
Participant) shall be entitled to assert a claim against the Corporation (or
against any Parent or Subsidiary) more than three (3) years after the date the
Participant (or his estate or other beneficiary) initially is entitled to
receive benefits hereunder.
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<PAGE> 1
Exhibit 10.9
ENTEX INFORMATION SERVICES, INC.
1996 STOCK OPTION PLAN
---------------
AS ADOPTED JULY 8, 1996
<PAGE> 2
ENTEX INFORMATION SERVICES, INC.
1996 STOCK OPTION PLAN
INTRODUCTION
ENTEX Information Services, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation"), hereby establishes an incentive
compensation plan to be known as the "ENTEX 1996 Stock Option Plan" (hereinafter
referred to as the "Plan"), as set forth in this document. The Plan permits the
grant of Non-Qualified Stock Options and Incentive Stock Options.
The Plan shall become effective on July 8, 1996. However, it shall
be rendered null and void and have no effect, and all Plan Awards granted
hereunder shall be canceled, if the Plan is not approved by the affirmative vote
of the holders of a majority of the Corporation's issued and outstanding Common
Stock within twelve (12) months of such date.
The purpose of the Plan is to promote the success and enhance the
value of the Corporation by linking the personal interests of Participants to
those of the Corporation's stockholders, customers and employees, by providing
Participants with an incentive for outstanding performance. The Plan is further
intended to provide flexibility to the Corporation in its ability to motivate,
and retain the services of, Participants upon whose judgment, interest and
special effort the successful conduct of its operations is largely dependent.
<PAGE> 3
DEFINITIONS
For purposes of this Plan, the following terms shall be defined as
follows unless the context clearly indicates otherwise:
A. "Affiliate" shall have the meaning ascribed to it in Rule 12b-2
under the Exchange Act.
B. "Associate" shall have the meaning ascribed to it in Rule 12b-2
under the Exchange Act.
C. "Cameron" shall mean Dort A. Cameron III.
D. "Cameron Affiliates" shall mean persons or entities that are
Affiliates of Cameron.
E. "Code" shall mean the Internal Revenue Code of 1986, as amended,
and the rules and regulations thereunder.
F. "Committee" shall mean the Stock Option Committee of the Board of
Directors of the Corporation.
G. "Common Stock" shall mean the common stock, par value $0.001 per
share, of the Corporation.
H. "Corporation" shall mean ENTEX Information Services, Inc., a
Delaware corporation, and each successor corporation thereto which continues the
Plan.
I. "Disability" shall have the same meaning as the term "permanent
and total disability" under Section 22(e)(3) of the Code.
J. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
K. "Fair Market Value" of the Corporation's Common Stock shall mean
the fair market value of the Common Stock determined by the Committee from time
to time in good faith, it being understood that such fair market value shall be
determined periodically, and shall not be required to be determined with
reference to any particular Options or any particular Participant. If the
Corporation's common stock is publicly traded, then the Fair Market Value of the
Corporation's Common Stock on a Trading Day shall mean the last reported sale
price for Common Stock or, in case no such reported sale takes place on such
Trading Day, the average of the closing bid and asked prices for the Common
Stock for such Trading Day, in either case on the principal securities exchange
on which the Common Stock is listed or admitted to trading, or if the Common
Stock is not listed or admitted to trading on any securities exchange, but is
traded in the over-the-counter market, the closing sale price of the Common
Stock or, if no sale is publicly reported, the average of the closing bid and
asked quotations for the Common Stock, as reported by the National Association
of Securities Dealers Automated Quotation System ("NASDAQ") or any comparable
system or, if the Common Stock is not listed on NASDAQ or a comparable system,
the closing sale price of the Common Stock or, if no sale is publicly reported,
the average of the closing bid and asked prices, as furnished by two members of
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the National Association of Securities Dealers, Inc. who make a market in the
Common Stock selected from time to time by the Corporation for that purpose. In
addition, for purposes of this definition, a "Trading Day" shall mean, if the
Common Stock is listed on any securities exchange, a business day during which
such exchange was open for trading and at least one trade of Common Stock was
effected on such exchange on such business day, or, if the Common Stock is not
listed on any national securities exchange but is traded in the over-the-counter
market, a business day during which the over-the-counter market was open for
trading and at least one "eligible dealer" quoted both a bid and asked price for
the Common Stock. An "eligible dealer" for any day shall include any
broker-dealer who quoted both a bid and asked price for such day, but shall not
include any broker-dealer who quoted only a bid or only an asked price for such
day.
L. "Good Cause" shall mean (i) the willful failure by such
Participant to perform his duties as an employee, director, consultant or other
service provider of the Corporation (other than a failure resulting from
physical or mental disability), it being understood that no act, or failure to
act, by a Participant shall be considered "willful" unless the Board of
Directors of the Corporation in the reasonable exercise of its business judgment
determines that such act or failure to act was committed without good faith and
without a reasonable belief that such act or failure to act was in the best
interests of the Company, (ii) such participant engaging in gross misconduct
injurious to the Corporation, (iii) the material breach by such Participant of
any Employment Agreement or other service agreement between the Corporation or
any Affiliate of the Corporation and such Participant or (iv) the conviction or
admission of guilt in a court of law of any crime that constitutes a felony in
the jurisdiction involved.
M. "Incentive Stock Option" shall mean a stock option satisfying the
requirements for tax-favored treatment under Section 422 of the Code.
N. "Initial Public Offering" shall mean the offering by the
Corporation in any jurisdiction of its securities to the general public with the
result that the Corporation shall be a Reporting Corporation.
O. "Non-Qualified Option" shall mean a stock option which does not
satisfy the requirements for tax-favored treatment under Section 422 of the
Code.
P. "Option" shall mean an Incentive Stock Option or a Non-Qualified
Stock Option granted pursuant to the provisions of Section V hereof.
Q. "Optionee" shall mean a Participant who is granted an Option
under the terms of this Plan.
R. "Parent" shall mean a parent corporation of the Corporation
within the meaning of Section 424(e) of the Code.
S. "Participant" shall mean any employee or other individual
participating under the Plan.
T. "Public Offering" shall mean an Initial Public Offering or the
consolidation with, or merger with or into, or acquisition of a corporation or
other entity that is a Reporting Corporation.
U. "Reporting Corporation" shall mean, a corporation that is
required to register any class of equity securities under Section 12 of the
Exchange Act.
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V. "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
W. "Subsidiary" shall mean a subsidiary corporation of the
Corporation within the meaning of Section 424(f) of the Code.
SECTION I
ADMINISTRATION
The Plan shall be administered by the Committee, which shall be
composed of at least two directors. Subject to the provisions of the Plan, the
Committee may establish from time to time such regulations, provisions,
proceedings and conditions of awards which, in its opinion, may be advisable in
the administration of the Plan. A majority of the Committee shall constitute a
quorum, and, subject to the provisions of Section IV of the Plan, the acts of a
majority of the members present at any meeting at which a quorum is present, or
acts approved in writing by a majority of the Committee, shall be the acts of
the Committee. If the Corporation is a Reporting Corporation, this Plan is
intended to be a bifurcated plan.
SECTION II
SHARES AVAILABLE
Subject to the adjustments provided in Section VI of the Plan, the
aggregate number of shares of the Common Stock which may be granted for all
purposes under the Plan shall be Two Hundred Thirty Thousand Six Hundred
Ninety-Eight (230,698) shares. Shares of Common Stock underlying the grant of
Options shall be counted against the limitation set forth in the immediately
preceding sentence and may be reused (e.g., in the event that an Option expires,
is terminated unexercised, or is forfeited as to any shares covered thereby).
Incentive and Non-Qualified Stock Options awarded under the Plan may be
fulfilled in accordance with the terms of the Plan with either authorized and
unissued shares of the Common Stock, issued shares of such Common Stock held in
the Corporation's treasury or shares of Common Stock acquired on the open
market.
SECTION III
ELIGIBILITY
Present and future officers and key employees (including officers or
key employees who are also directors) of the Corporation, or of any Parent or
Subsidiary, who are regularly employed on a salaried basis as common law
employees shall be eligible to participate in the Plan. In addition,
non-employee directors, consultants or other service providers of the
Corporation, or of any Parent or Subsidiary, shall be eligible to participate in
the Plan.
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SECTION IV
AUTHORITY OF COMMITTEE
The Plan shall be administered by, or under the direction of, the
Committee, which shall administer the Plan so as to comply at all times with the
Exchange Act, to the extent such compliance is required, and, subject to the
Code, shall otherwise have plenary authority to interpret the Plan and to make
all determinations specified in or permitted by the Plan or deemed necessary or
desirable for its administration or for the conduct of the Committee's business.
Subject to the provisions of Section X hereof, all interpretations and
determinations of the Committee may be made on an individual or group basis and
shall be final, conclusive, and binding on all interested parties. Subject to
the express provisions of the Plan, the Committee shall have authority, in its
discretion, to determine the persons to whom Options shall be granted, the times
when such Options shall be granted, the number of Options, the exercise price of
each Option, the period(s) during which such Option shall be exercisable
(whether in whole or in part), the restrictions to be applicable to Options and
the other terms and provisions thereof (which need not be identical). In
addition, the authority of the Committee shall include, without limitation, the
following:
A. Financing. The arrangement of temporary financing for an Optionee
by registered broker-dealers, under the rules and regulations of the Federal
Reserve Board, for the purpose of assisting the Optionee in the exercise of an
Option, such authority to include the payment by the Corporation of the
commissions of the broker-dealer.
B. Procedures for Exercise of Option. The establishment of
procedures for an Optionee (i) to exercise an Option by payment of cash or any
other property, including, but not limited to, Promissory Notes due 2000 of the
Corporation or other debt securities of the Corporation, at the fair value
thereof, acceptable to the Committee, (ii) to have withheld from the total
number of shares of Common Stock to be acquired upon the exercise of an Option
that number of shares having a Fair Market Value, which, together with such cash
as shall be paid in respect of fractional shares, shall equal the Option
exercise price of the total number of shares of Common Stock to be acquired,
(iii) to exercise all or a portion of an Option by delivering that number of
shares of Common Stock already owned by him having a Fair Market Value which
shall equal the Option exercise price for the portion exercised and, in cases
where an Option is not exercised in its entirety, to permit the Optionee to
deliver the shares of Common Stock previously acquired by him in payment of
shares of Common Stock to be received pursuant to the exercise of additional
portions of such Option, the effect of which shall be that an Optionee can in
sequence utilize such newly acquired shares of Common Stock in payment of the
exercise price of the entire Option, together with such cash as shall be paid in
respect of fractional shares and (iv) to engage in any form of "cashless"
exercise.
C. Withholding. The establishment of a procedure whereby a number of
shares of Common Stock or other securities may be withheld from the total number
of shares of Common Stock or other securities to be issued upon exercise of an
Option, or for the tender of cash or shares of Common Stock owned by the
Participant to meet the obligation of withholding for taxes incurred by the
Optionee upon such exercise.
D. Types of Options. The Committee may grant Incentive Stock Options
and Non-Qualified Stock Options.
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SECTION V
STOCK OPTIONS
The Committee shall have the authority, in its discretion, to grant
Incentive Stock Options or to grant Non-Qualified Stock Options or to grant both
types of Options. No Option shall be granted for a term of more than ten (10)
years. Notwithstanding anything contained herein to the contrary, an Incentive
Stock Option may be granted only to common law employees of the Corporation or
of any Parent or Subsidiary now existing or hereafter formed or acquired, and
not to any director, officer, consultant or service provider who is not also
such a common law employee. The terms and conditions of the Options shall be
determined from time to time by the Committee; provided, however, that the
Options granted under the Plan shall be subject to the following:
A Exercise Price. The Committee shall establish the exercise price
at the time any Option is granted at such amount as the Committee shall
determine; provided, however, that the exercise price for each share of Common
Stock purchasable under any Incentive Stock Option granted hereunder shall be
such amount as the Committee shall, in its best judgment, determine to be not
less than one hundred percent (100%) of the Fair Market Value per share of
Common Stock at the date the Option is granted; and provided, further, that in
the case of an Incentive Stock Option granted to a person who, at the time such
Incentive Stock Option is granted, owns shares of stock of the Corporation or of
any Parent or Subsidiary which possess more than ten percent (10%) of the total
combined voting power of all classes of shares of stock of the Corporation or of
any Parent or Subsidiary, the exercise price for each share of Common Stock
shall be such amount as the Committee, in its best judgment, shall determine to
be not less than one hundred ten percent (110%) of the Fair Market Value per
share of Common Stock at the date the Option is granted. The exercise price will
be subject to adjustment in accordance with the provisions of Section VI of the
Plan.
B Payment of Exercise Price. The price per share of Common Stock
with respect to each Option shall be payable at the time the Option is
exercised. Such price shall be payable in cash or, in the discretion of the
Committee, pursuant to any of the methods set forth in Sections IV(A) or (B)
hereof. Shares of Common Stock delivered to the Corporation in payment of the
exercise price shall be valued at the Fair Market Value of the Common Stock on
the date preceding the date of the exercise of the Option.
C Employment Requirement. Unless otherwise provided by the Committee
at the time an Option is granted or by subsequent amendment of the Option, each
Option by its terms shall require the Optionee to remain in the continuous
full-time employ of the Corporation, or of any Parent or Subsidiary, for at
least two (2) years from the date of grant of the Option before the right to
exercise any part of the Option (by him or any other person) will accrue.
D Exercisability of Options. Each Option shall be exercisable in
whole or in part, or in installments, and at such time(s), and subject to the
fulfillment of any conditions on exercisability as may be determined by the
Committee at the time of the grant of such Options; provided, however, that no
Option be exercised at any one time for fewer than one hundred (100) shares of
Common Stock; and provided further, however, that any Option to acquire fewer
than one hundred (100) shares of Common Stock may nevertheless be exercised, but
shall be exercisable in whole only. Subject to the limitations contained in the
preceding sentence, the right to purchase shares of Common Stock shall be
cumulative so that when the right to purchase any shares of Common Stock has
accrued, such shares
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of Common Stock or any part thereof may be purchased at any time thereafter
until the expiration or termination of the Option. Unless otherwise provided by
the Committee at the time an Option is granted or by subsequent amendment of the
Option, no Option shall become exercisable prior to January 1, 1999, except
that, if the Corporation consummates a Public Offering prior to January 1, 1999,
then the date on which the earliest Options granted pursuant to this Plan may be
exercised (the "Initial Exercise Date") shall be advanced to a date (the
"Advanced Exercise Date") that is one hundred eighty (180) days after the
consummation of such Public Offering, but (unless otherwise provided by the
Committee at the time an Option is granted or by subsequent amendment of the
Option) in no event earlier than January 1, 1998, and the respective dates on
which all other Options granted pursuant to this Plan may be exercised shall be
advanced by an amount of time equal to the amount of time between the Advanced
Exercise Date and the Initial Exercise Date.
E. Expiration of Options. No Option by its terms shall be
exercisable after the expiration of ten (10) years from the date of grant of the
Option; provided, however, in the case of an Incentive Stock Option granted to a
person who, at the time such Option is granted, owns shares of stock of the
Corporation or of any Parent or Subsidiary possessing more than ten percent
(10%) of the total combined voting power of all classes of shares of stock of
the Corporation or of any Parent or Subsidiary, such Option shall not be
exercisable after the expiration of five (5) years from the date such Option is
granted.
F. Exercise Upon Death of Optionee. Subject to the provisions of
Sections V(C) and V(I) hereof, in the event of the death of the Optionee prior
to his termination of employment or service relationship with the Corporation or
with any Parent or Subsidiary, his estate (or other beneficiary, if so
designated in writing by the Participant) shall have the right, within one (1)
year (or such longer period as may be provided by the Committee at the time an
Option is granted or by subsequent amendment of the Option) after the date of
death (but in no case after the expiration date of the Option(s)), to exercise
his Option(s) with respect to all or any part of the shares of Common Stock as
to which the deceased Optionee had not exercised his Option at the time of his
death, but (unless otherwise provided by the Committee at the time an Option is
granted or by subsequent amendment of the Option) only to the extent the Option
or Options were exercisable as of the date of his death.
G. Exercise Upon Disability of Optionee. Subject to the provisions
of Sections V(C) and V(I) hereof, if an Optionee's employment or service
relationship with the Corporation or with any Parent or Subsidiary is terminated
because of Disability, he shall have the right, within one (1) year (or such
longer period as may be provided by the Committee at the time an Option is
granted or by subsequent amendment of the Option) after the date of such
termination (but in no case after the expiration of the Option(s)), to exercise
his Option(s) with respect to all or any part of the shares of Common Stock as
to which he had not exercised his Option at the time of such termination, but
(unless otherwise provided by the Committee at the time an Option is granted or
by subsequent amendment of the Option) only to the extent such Option or Options
were exercisable as of the date of his termination of employment or service
relationship due to Disability.
H. Exercise Upon Optionee's Termination of Service. Except as
provided in the following sentence, if an Optionee's employment or service
relationship with the Corporation or with any Parent or Subsidiary is terminated
for any reason other than those specified in Sections V(F) and (G) above, he
shall have the right, within thirty (30) days (or such longer period as may be
provided by the Committee at the time an Option is granted or by subsequent
amendment of the Option) after the date of such termination (but in no case
after the expiration date of the Option(s)), to exercise his Option(s), but
(unless otherwise provided by the Committee at the time an Option is granted or
by subsequent
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amendment of the Option) only with respect to that number of shares of Common
Stock that he was entitled to purchase pursuant to Options that were exercisable
immediately prior to such termination. If an Optionee's employment or service
relationship is terminated for Good Cause by the Corporation or any Parent or
Subsidiary, then the Optionee shall not have the right to exercise any Options
that are vested and nonforfeitable and such Options shall be forfeited.
I. Buy-Out of Vested Options Not Yet Exercisable Upon Termination.
Unless otherwise provided by the Committee at the time an Option is granted or
by subsequent amendment of the Option, if an Optionee's employment or service
relationship is terminated for any reason other than death, Disability or Good
Cause, and such Optionee holds Options that are vested and nonforfeitable, but
which nevertheless are not yet exercisable, then such Optionee shall surrender
and sell to the Corporation, and the Corporation shall purchase and acquire from
such Optionee, all of such Options for a purchase price equal to the excess, if
any, of the total Fair Market Value of the shares of Common Stock issuable upon
the exercise of such Options, in effect at the time of the termination of the
employment or service relationship of such Optionee, over the total exercise
price of such Options. Such sale and purchase shall occur not later than sixty
(60) days after the date on which such Optionee's employment or service
relationship terminated. If the Corporation is unable to pay the amount required
to be paid to an Optionee pursuant to this Section V(I) due to a restriction
imposed on it under the terms of any bank loan or the terms of any instrument or
agreement evidencing any indebtedness or other obligation of the Corporation or
under the Delaware General Corporation Law, the obligations of the Corporation
under this Section V(I) shall be deferred until the Corporation is legally
permitted to make the payment required under this Section V(I).
J. Maximum Amount of Incentive Stock Options. Each Incentive Stock
Option shall provide that to the extent the aggregate of the (i) Fair Market
Value of the shares of Common Stock (determined as of the time of the grant of
the Option) subject to such Incentive Stock Option and (ii) the fair market
values (determined as of the date(s) of grant of the options in question) of all
other shares of Common Stock subject to incentive stock options granted to an
Optionee by the Corporation or any Parent or Subsidiary, which are exercisable
for the first time by any person during any calendar year, exceed(s) One Hundred
Thousand Dollars ($100,000), such excess shares of Common Stock shall not be
deemed to be purchased pursuant to Incentive Stock Options. The terms of the
immediately preceding sentence shall be applied by taking options into account
in the order in which they are granted.
K. Corporation's Call Upon Option Shares Upon Termination for Good
Cause. Unless otherwise provided by the Committee at the time an Option is
granted or by subsequent amendment of the Option, if an Optionee's employment or
service relationship is terminated for Good Cause, then the Corporation shall
have the right, but not the obligation, to purchase from such Optionee all
shares of Common Stock purchased by such Optionee pursuant to this Plan for a
purchase price equal to the exercise price of the Options pursuant to which such
shares of Common Stock were purchased. The Corporation shall exercise such right
by delivery of a written notice of exercise to such Optionee not later than
sixty (60) days after the date on which such Optionee's employment or service
relationship terminated. The closing of any purchase pursuant to the exercise of
such option shall occur not later than thirty (30) days after the delivery of
the notice by the Corporation of its notice of exercise, at the principal
executive offices of the Corporation, unless the Corporation otherwise agrees,
and at a time agreed upon by the Corporation and the Optionee. At such closing,
the Corporation shall pay to the Optionee the total purchase price for the
shares of Common Stock being purchased by wire transfer to an account designated
by such Optionee of immediately available funds in an amount equal to the total
purchase price, against delivery by such
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Optionee or his legal representative of a certificate or certificates
representing all of the shares being purchased from such Optionee, together with
a stock power duly executed in blank, with signature guaranteed, free and clear
of all liens, claims, charges and encumbrances.
L. Corporation's Call Upon Non-Qualified Stock Option Shares Upon
Termination Other than for Good Cause. (i) Unless otherwise provided by the
Committee at the time an Option is granted or by subsequent amendment of the
Option, if an Optionee's employment or service relationship is terminated other
than by reason of death, Disability or Good Cause, then the Corporation shall
have the right, but not the obligation, to purchase from such Optionee all
shares of Common Stock previously acquired pursuant to the exercise of a
Non-Qualified Stock Option granted pursuant to this Plan for a purchase price
equal to the Fair Market Value of such shares in effect on the date on which
such Optionee's employment or service relationship is terminated, or such other
amount as may be provided pursuant to the terms of such Optionee's Non-Qualified
Stock Option. The Corporation shall exercise such right by delivery of written
notice of exercise to such Optionee not later than sixty (60) days after the
date on which such Optionee's employment or service relationship is terminated
or such other date as may be provided pursuant to the terms of such Optionee's
Non-Qualified Stock Option. Such sale and purchase shall occur not later than
thirty (30) days after the date the Corporation provides its written notice of
exercise in accordance with the procedures set forth in Section V(K).
(ii) Unless otherwise provided by the Committee at the time an
Option is granted or by subsequent amendment of the Option, the Corporation
shall have the right, but not the obligation, to purchase shares of Common Stock
acquired by the Optionee or the Optionee's estate (or other beneficiary)
pursuant to the exercise of a Non-Qualified Stock Option after the Optionee's
termination of employment or service relationship pursuant to Section V(F) or
V(G) at a purchase price equal to the Fair Market Value of such shares in effect
on the date of such termination, or such other amount as may be provided
pursuant to the terms of such Optionee's Non-Qualified Stock Option. The
Corporation shall exercise such option by delivery of written notice of exercise
to such Optionee or the Optionee's estate (or beneficiary) not later than sixty
(60) days after the date of exercise by the Optionee or the Optionee's estate
(or beneficiary). Such sale and purchase shall occur not later than thirty (30)
days after the date the Corporation delivers its written notice of exercise in
accordance with the procedures set forth in Section V(K).
M. Corporation's Call Upon Incentive Stock Option Shares Upon
Termination Other than for Good Cause. (i) If the employment of the Optionee is
terminated other than by reason of Disability or Good Cause, then the
Corporation shall have the right, but not the obligation, to purchase from (x)
such Optionee or the Optionee's estate (or other beneficiary) all shares
previously acquired by the Optionee pursuant to the exercise of an Incentive
Stock Option granted pursuant to this Plan, or (y) the Optionee's estate (or
other beneficiary) pursuant to the exercise of an Incentive Stock Option granted
pursuant to this Plan, in accordance with Section V(F) after termination of
employment, for a purchase price equal to the total Fair Market Value of such
shares of Common Stock in effect on the date of termination of employment or
such other amount as may be provided pursuant to the terms of such Optionee's
Incentive Stock Option. The Corporation shall exercise such right by delivery of
a written notice of exercise to such Optionee or his legal representative not
later than sixty (60) days after the date of termination of employment or the
date of the exercise by the Optionee's legal representative of an Incentive
Stock Option in accordance with Section V(F), whichever is applicable. Such sale
and purchase shall occur not later than thirty (30) days after the date the
Corporation provides its written notice of exercise in accordance with the
procedures set forth in Section V(K).
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(ii) If the employment of an Optionee is terminated by reason of
Disability, then the Corporation shall have the right, but not the obligation,
to purchase only such shares that have been acquired pursuant to the exercise of
an Incentive Stock Option and that have been held one (1) year or longer by the
Optionee, for a purchase price equal to the total Fair Market Value of such
shares determined as of the date of termination of employment or such other
amount as may be provided pursuant to the terms of such Optionee's Incentive
Stock Option. The Corporation shall exercise such right by delivery of written
notice of exercise to such Optionee not later than sixty (60) days after
termination of employment or such other date as may be provided pursuant to the
terms of such Optionee's Incentive Stock Option. Such sale and purchase shall
occur not later than thirty (30) days after the date the Corporation provides
its written notice of exercise in accordance with the procedures set forth in
Section V(K).
(iii) The Corporation retains the right, but not the obligation, to
purchase shares of Common Stock acquired by the Optionee pursuant to the
exercise of an Incentive Stock Option in accordance with Section V(G) after
termination of employment if the employment of the Optionee is terminated by
reason of Disability, for a purchase price equal to the total Fair Market Value
of such shares of Common Stock, in effect on the date of termination of
employment or such other amount as may be provided pursuant to the terms of such
Optionee's Incentive Stock Option. The Corporation shall exercise such right by
delivery of a written notice of exercise to such Optionee at any time during the
period beginning on the date which is one (1) year after the date of the
exercise by the Optionee and ending sixty (60) days thereafter. Such sale and
purchase shall occur not later than thirty (30) days after the date the
Corporation provides its written notice of exercise in accordance with the
procedures set forth in Section V(K).
N. Right of First Refusal with Respect to Acquired Shares.
(i) If any Participant desires to sell, assign, encumber, pledge, or
otherwise transfer ("Transfer") any shares of Common Stock acquired pursuant to
this Plan to any person or entity other than the Corporation ("Third Party"),
except pursuant to a Transfer by an individual Participant of all or a portion
of such shares to his ancestors, descendants or spouse (other than as an
incident to the dissolution of marriage) (collectively, "Family Donees"), or to
trusts for the benefit of a Participant or any of his Family Donees, either
inter vivos or, subject to Sections V(F), V(G), V(L) and V(M) hereof, pursuant
to applicable laws of descent and distribution, if such Family Donee or such
trust agrees in writing to be bound by the terms of the restriction contained
herein, such Transfer shall be made only in accordance with the terms of this
Plan and only for cash or cash equivalents.
(ii) Upon receipt by a Participant of any bona fide offer to
purchase all or any portion of the shares of Common Stock owned by such
Participant, his Family Donees, or trusts for his or their benefit, then the
party desiring to make such Transfer ("Offering Party") shall deliver written
notice ("Offer Notice") to the Corporation specifying the name of the Third
Party that is the proposed purchaser of the shares of Common Stock, the number
of shares proposed to be Transferred, the price to be paid in the proposed sale
and all other material conditions of the proposed sale. The Offering Party shall
notify the Corporation of any material changes in the terms of such proposed
Transfer, and such notice shall be treated as an original Offer Notice.
(iii) The Corporation shall have the right, but not the obligation,
to purchase all or any part of the shares of Common Stock offered pursuant to
the Offer Notice for the price and on the terms specified in the Offer Notice by
delivery of a written notice of exercise within sixty (60) days after
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the receipt of the Offer Notice. The closing of any purchase of shares shall
occur within thirty (30) days after the delivery by the Corporation of its
notice of exercise of its rights under this Section V(N) in accordance with the
procedures set forth in Section V(K).
O. Assignability of Corporation's Rights in Certain Events. If the
Corporation is unable to exercise the rights granted to it pursuant to Sections
V(K), V(L), V(M) or V(N) due to a restriction imposed upon it under the terms of
any bank loan or the terms of any instrument or agreement evidencing any
indebtedness or other obligation of the Corporation or under an applicable
provision of the Delaware General Corporation Law, then it will offer to assign
its rights to Cameron by delivery to Cameron of written notice of such offer.
Cameron shall have the right, but not the obligation, to assign his rights under
this Section V(O) to one or more Cameron Affiliates. Cameron and/or the Cameron
Affiliates may exercise the rights of the Corporation to purchase shares of
Common Stock and/or Options assigned pursuant to this Section V(O) by delivery
of a written notice of exercise to the Corporation and the Participant not later
than fifteen (15) days after the delivery by the Corporation of its offer notice
to Cameron. If Cameron and/or the Cameron Affiliates exercise such rights, then
Cameron and/or the Cameron Affiliates shall purchase such shares of Common Stock
and/or Options from the Participant and/or his legal representative on the same
terms and subject to the same conditions as are applicable to the Corporation
under this Plan. If Cameron and/or the Cameron Affiliates do not exercise their
rights pursuant to this Section V(O), then the rights and obligations of the
Corporation under Sections V(K), V(L), V(M) and V(N) shall be deemed to have
been satisfied.
P. Applicability of Certain Provisions Prior to Public Offering. The
provisions of Sections V(L), V(M), V(N) and V(O) shall apply only prior to the
consummation by the Corporation of a Public Offering.
SECTION VI
ADJUSTMENT OF SHARES; MERGER OR
CONSOLIDATION, ETC. OF THE CORPORATION
A. Recapitalization, Etc. In the event there is any change in the
Common Stock of the Corporation by reason of any reorganization,
recapitalization, stock split, stock dividend or otherwise, there shall be
substituted for or added to each share of Common Stock theretofore appropriated
or thereafter subject, or which may become subject, to any Option, the number
and kind of shares of stock or other securities into which each outstanding
share of Common Stock shall be so changed or for which each such share shall be
exchanged, or to which each such share be entitled, as the case may be, and the
per share price thereof also shall be appropriately adjusted. Notwithstanding
the foregoing, (i) each such adjustment with respect to an Incentive Stock
Option shall comply with the rules of Section 424(a) of the Code and (ii) in no
event shall any adjustment be made which would render any Incentive Stock Option
granted hereunder to be other than an incentive stock option for purposes of
Section 422 of the Code.
B. Merger, Consolidation or Change in Control of Corporation. Upon
(i) the merger or consolidation of the Corporation with or into another
corporation (pursuant to which the stockholders of the Corporation immediately
prior to such merger or consolidation will not, as of the date of such merger or
consolidation, own a beneficial interest in the voting securities of the
corporation surviving such merger or consolidation having at least a majority of
the combined voting power of such corporation's then outstanding securities), if
the agreement of merger or consolidation does not provide for (A) the
continuance of the Options granted hereunder or (B) the substitution of new
Options granted hereunder, or for the assumption of such Options by the
surviving corporation, (ii) the dissolution,
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<PAGE> 13
liquidation, or sale of substantially all the assets, of the Corporation or
(iii) the Change in Control of the Corporation, then the Committee shall have
the authority, in its discretion, to provide that holders of some or all of any
such Options theretofore granted and still outstanding (and not otherwise
expired) shall have the right immediately prior to the effective date of such
merger, consolidation, dissolution, liquidation, sale of assets or Change in
Control of the Corporation to exercise such Option(s) in whole or in part and
shall have the authority, in its discretion further to provide that any such
Option may be exercised without regard to any installment provision that may
have been made part of the terms and conditions of such Option(s), provided that
(unless otherwise provided by the Committee at the time an Option is granted or
by subsequent amendment of the Option) any conditions precedent to the exercise
of such Options, other than the passage of time, have occurred. The Corporation,
to the extent practicable, shall give advance notice to affected Optionees of
any such merger, consolidation, dissolution, liquidation, sale of assets or
Change in Control of the Corporation. If the Committee makes such provision,
then all such Options which are not so exercised shall be forfeited as of the
effective time of any merger, consolidation, dissolution, liquidation or sale of
assets (but not in the case of a Change in Control of the Corporation).
C. Definition of Change in Control of the Corporation. As used
herein, a "Change in Control of the Corporation" shall be deemed to have
occurred if any person (including any individual, firm, partnership or other
entity) together with all Affiliates and Associates of such person acquires
beneficial ownership, directly or indirectly, of securities of the Corporation
having more than 50% of the combined voting power of the Corporation's then
outstanding securities, such person being hereinafter referred to as an
Acquiring Person. For purposes of this Section VI(C), an Acquiring Person
(including its Affiliates and Associates) shall be determined by excluding (i) a
trustee or other fiduciary holding securities under an employee benefit plan of
the Corporation or any subsidiary of the Corporation, (ii) a corporation owned,
directly or indirectly, by the stockholders of the Corporation in substantially
the same proportions as their ownership of the Corporation, (iii) the
Corporation or any subsidiary of the Corporation, (iv) any person who, as of the
effective date of this Plan, is the "Beneficial Owner" (as defined in Rule 13(d)
promulgated under the Exchange Act), directly or indirectly, of securities of
the Corporation having more than 50% of the combined voting power of the
Corporation's then outstanding securities, or (v) only as provided in the
immediately following sentence, a Participant, together with all Affiliates and
Associates of a Participant, who is or becomes the Beneficial Owner. The
provisions of clause (v) of the immediately preceding sentence shall apply only
in determining whether a Change in Control of the Corporation has occurred with
respect to the Option(s) held by the Participant who, together with his
Affiliates or Associates, if any, is or becomes the direct or indirect
Beneficial Owner of the percentage of securities set forth above.
SECTION VII
MISCELLANEOUS PROVISIONS
A. Administrative Procedures. The Committee may establish any
procedures determined by it to be appropriate in discharging its
responsibilities under the Plan. Subject to the provisions of Section X hereof,
all actions and decisions of the Committee shall be final.
B. Assignment or Transfer. No grant or award of any Option made
under the Plan or any rights or interests therein shall be assignable or
transferable by a Participant except by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order. During the
lifetime of a Participant Options granted hereunder shall be exercisable only by
the Participant.
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<PAGE> 14
C. Investment Representation. In the case of receipt of shares of
Common Stock or other securities upon exercise of an Option, the Committee may
require, as a condition of receiving such securities, that the Participant
furnish to the Corporation such written representations and information as the
Committee deems appropriate to permit the Corporation, in light of the existence
or nonexistence of an effective registration statement under the Securities Act
to deliver such securities in compliance with the provisions of the Securities
Act.
D. Withholding Taxes. The Corporation shall have the right to deduct
from all cash payments hereunder any federal, state, local or foreign taxes
required by law to be withheld with respect to such payments. In the case of the
issuance or distribution of Common Stock or other securities hereunder, the
Corporation, as a condition of such issuance or distribution, may require the
payment (through withholding from the Participant's salary, reduction of the
number of shares of Common Stock or other securities to be issued, or otherwise)
of any such taxes. Subject to the consent of the Committee, the Participant may
satisfy the withholding obligations by paying to the Corporation a cash amount
equal to the amount required to be withheld or by tendering to the Corporation a
number of shares of Common Stock having a value equivalent to such cash amount,
or by use of any available procedure as described under Section IV(C) hereof.
E. Costs and Expenses. The costs and expenses of administering the
Plan shall be borne by the Corporation and shall not be charged against any
award nor to any employee, director, consultant, or other service provider
receiving an Option.
F. Funding of Plan. The Plan shall be unfunded. The Corporation
shall not be required to segregate any of its assets to assure the payment of
any Option under the Plan. Neither the Participants nor any other persons shall
have any interest in any fund or in any specific asset or assets of the
Corporation or any other entity by reason of any Option, except to the extent
expressly provided hereunder. The interests of each Participant and former
Participant hereunder are unsecured and shall be subject to the general
creditors of the Corporation.
G. Other Incentive Plans. The adoption of the Plan does not preclude
the adoption by appropriate means of any other incentive plan for employees,
directors, consultants, or other service providers.
H. Plurals and Gender. Where appearing in the Plan, masculine gender
shall include the feminine and neuter genders, and the singular shall include
the plural, and vice versa, unless the context clearly indicates a different
meaning.
I. Headings. The headings and sub-headings in this Plan are inserted
for the convenience of reference only and are to be ignored in any construction
of the provisions hereof.
J. Severability. In case any provision of this Plan shall be held
illegal or void, such illegality or invalidity shall not affect the remaining
provisions of this Plan, but shall be fully severable, and the Plan shall be
construed and enforced as if said illegal or invalid provisions had never been
inserted herein.
K. Payments Due Missing Persons. The Corporation shall make a
reasonable effort to locate all persons entitled to benefits under the Plan;
however, notwithstanding any provisions of this Plan to the contrary, if, after
a period of one (1) year from the date such benefits shall be due, any such
persons entitled to benefits have not been located, their rights under the Plan
shall stand
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<PAGE> 15
suspended. Before this provision becomes operative, the Corporation shall send a
certified letter to all such persons at their last known addresses advising them
that their rights under the Plan shall be suspended. Subject to all applicable
state laws, any such suspended amounts shall be held by the Corporation for a
period of one (1) additional year and thereafter such amounts shall be forfeited
and thereafter remain the property of the Corporation.
L. Liability and Indemnification. (i) Neither the Corporation nor
any Parent or Subsidiary shall be responsible in any way for any action or
omission of the Committee, or any other fiduciaries in the performance of their
duties and obligations as set forth in this Plan. Furthermore, neither the
Corporation nor any Parent or Subsidiary shall be responsible for any act or
omission of any of their agents, or with respect to reliance upon advice of
their counsel provided that the Corporation and/or the appropriate Parent or
Subsidiary relied in good faith upon the action of such agent or the advice of
such counsel.
(ii) Except for their own gross negligence or willful misconduct
regarding the performance of the duties specifically assigned to them under, or
their willful breach of the terms of, this Plan, the Corporation, each Parent
and Subsidiary and the Committee shall be held harmless by the Participants,
former Participants, beneficiaries and their representatives against liability
or losses occurring by reason of any act or omission. Neither the Corporation,
any Parent or Subsidiary, the Committee, nor any agents, employees, officers,
directors or shareholders of any of them, nor any other person shall have any
liability or responsibility with respect to this Plan, except as expressly
provided herein.
M. Incapacity. If the Committee shall receive evidence satisfactory
to it that a person entitled to receive shares of Common Stock pursuant to an
exercise of an Option is, at the time when such shares become issuable, a minor,
or is physically or mentally incompetent to receive such shares and to give a
valid release thereof, and that another person or an institution is then
maintaining or has custody of such person and that no guardian, committee or
other representative of the estate of such person shall have been duly
appointed, the Committee may make the transfer of such Common Stock otherwise
payable to such person to such other person or institution, including a
custodian under a Uniform Gifts to Minors Act, or corresponding legislation (who
shall be an adult, a guardian of the minor or a trust company), and the release
by such other person or institution shall be a valid and complete discharge for
the transfer of such Common Stock.
N. Cooperation of Parties. All parties to this Plan and any person
claiming any interest hereunder agree to perform any and all acts and execute
any and all documents and papers which are necessary or desirable for carrying
out this Plan or any of its provisions.
O. Governing Law. All questions pertaining to the validity,
construction and administration of the Plan shall be determined in accordance
with the laws of the State of Delaware, without reference to the conflicts of
law principles thereof.
P. Nonguarantee of Employment or Service Relationship. Nothing
contained in this Plan shall be construed as a contract of employment or service
relationship between the Corporation (or any Parent or Subsidiary), and any
Participant, as a right of any Participant to be continued in the employment of,
or service relationship with, the Corporation (or any Parent or Subsidiary), or
as a limitation on the right of the Corporation or any Parent or Subsidiary to
discharge any of its employees, directors, consultants or other service
providers, with or without cause.
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<PAGE> 16
Q. Notices. Each notice relating to this Plan shall be in writing
and delivered in person or by certified mail to the proper address. All notices
to the Corporation or the Committee shall be addressed to it at 6 International
Drive, Rye Brook, New York 10573, Attn: Senior Vice President, Human Resources.
All notices to Participants, former Participants, beneficiaries or other persons
acting for or on behalf of such persons shall be addressed to such person at the
last address for such person maintained in the Committee's records.
R. Written Agreements. Each Option shall be evidenced by a signed
written agreement between the Corporation and the Participant containing the
terms and conditions of the Option.
SECTION VIII
AMENDMENT OR TERMINATION OF PLAN
The Board of Directors of the Corporation shall have the right to
amend, suspend or terminate the Plan at any time, provided that no amendment
shall be made which shall increase the total number of shares of the Common
Stock of the Corporation which may be issued and sold pursuant to Options,
reduce the minimum exercise price in the case of an Incentive Stock Option or
modify the provisions of the Plan relating to eligibility with respect to
Incentive Stock Options unless such amendment is made by or with the approval of
the stockholders (such approval being granted within twelve (12) months of the
effective date of such amendment). The Board of Directors of the Corporation
shall be authorized to amend the Plan and the Options granted thereunder (i) to
maintain qualification as "incentive stock options" within the meaning of
Section 422 of the Code, if applicable or (ii) to comply with Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder. Except as
otherwise provided herein, no amendment, suspension or termination of the Plan
shall alter or impair any Options previously granted under the Plan, without the
consent of the holder thereof.
SECTION IX
TERM OF PLAN
The Plan shall remain in effect until the tenth anniversary of the
date the Plan was adopted by the Board of Directors of the Corporation, unless
sooner terminated by such Board of Directors. No Options may be granted under
the Plan subsequent to the termination of the Plan.
SECTION X
CLAIMS PROCEDURES
A. Denial. If any Participant, former Participant or beneficiary is
denied any vested benefit to which he is, or reasonably believes he is, entitled
under this Plan, either in total or in an amount less than the full vested
benefit to which he would normally be entitled, the Committee shall advise such
person in writing the specific reasons for the denial. The Committee shall also
furnish such person at the time with a written notice containing (i) a specific
reference to pertinent Plan provisions, (ii) a description of any additional
material or information necessary for such person to perfect his claim, if
possible, and an explanation of why such material or information is needed and
(iii) an explanation of the Plan's claim review procedure.
B. Written Request for Review. Within sixty (60) days of receipt of
the information stated in subsection (a) above, such person shall, if he desires
further review, file a written request for reconsideration with the Committee.
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<PAGE> 17
C. Review of Document. So long as such person's request for review
is pending (including the sixty (60) day period in subsection (b) above), such
person or his duly authorized representative may review pertinent Plan documents
and may submit issues and comments in writing to the Committee.
D. Committee's Final and Binding Decision. A final and binding
decision shall be made by the Committee within sixty (60) days of the filing by
such person of this request for reconsideration; provided, however, that if the
Committee, in its discretion, feels that a hearing with such person or his
representative is necessary or desirable, this period shall be extended for an
additional sixty (60) days.
E. Transmittal of Decision. The Committee's decision shall be
conveyed to such person in writing and shall (i) include specific reasons for
the decision, (ii) be written in a manner calculated to be understood by such
person and (iii) set forth the specific references to the pertinent Plan
provisions on which the decision is based.
F. Limitation on Claims. Notwithstanding any provisions of this Plan
to the contrary, no Participant (nor the estate or other beneficiary of a
Participant) shall be entitled to assert a claim against the Corporation (or
against any Parent or Subsidiary) more than three (3) years after the date the
Participant (or his estate or other beneficiary) initially is entitled to
receive benefits hereunder.
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<PAGE> 1
Exhibit 10.10
ENTEX INFORMATION SERVICES, INC.
- --------------------------------------------------------------------------------
1996 PERFORMANCE INCENTIVE PLAN
- --------------------------------------------------------------------------------
As adopted August 15, 1996
<PAGE> 2
ENTEX INFORMATION SERVICES, INC.
- --------------------------------------------------------------------------------
1996 PERFORMANCE INCENTIVE PLAN
- --------------------------------------------------------------------------------
PAGE
----
1. Purpose.................................................................. 1
2. Definitions.............................................................. 1
3. Administration........................................................... 3
(a) Authority of the Committee.......................................... 3
(b) Manner of Exercise of Committee Authority........................... 3
(c) Limitation of Liability............................................. 4
4. Stock Subject to Plan.................................................... 4
(a) Overall Number of Shares Available for Delivery..................... 4
(b) Application of Limitation to Grants of Awards....................... 4
(c) Availability of Shares Not Delivered under Awards .................. 4
5. Eligibility; Per-Person Award Limitations................................ 5
6. Specific Terms of Awards................................................. 5
(a) General............................................................. 5
(b) Options............................................................. 5
(c) Stock Appreciation Rights........................................... 6
(d) Restricted Stock.................................................... 6
(e) Deferred Stock...................................................... 7
(f) Bonus Stock and Awards in Lieu of Obligations....................... 8
(g) Dividend Equivalents................................................ 8
(h) Other Stock-Based Awards............................................ 8
7. Certain Provisions Applicable to Awards.................................. 9
(a) Stand-Alone, Additional, Tandem, and Substitute Awards ............. 9
(b) Term of Awards...................................................... 9
(c) Form and Timing of Payment under Awards; Deferrals ................. 9
(d) Exemptions from Section 16(b) Liability............................. 9
(e) Cancellation and Rescission of Awards...............................10
8. Performance and Annual Incentive Awards..................................11
(a) Performance Conditions..............................................11
(b) Performance Awards Granted to Designated Covered Employees .........11
(c) Annual Incentive Awards Granted to Designated Covered Employees.....12
(d) Written Determinations..............................................13
(e) Status of Section 8(b) and 8(c) Awards under Code Section 162(m) ...14
<PAGE> 3
ENTEX INFORMATION SERVICES, INC.
- --------------------------------------------------------------------------------
1996 PERFORMANCE INCENTIVE PLAN
- -------------------------------------------------------------------------------
PAGE
----
9. General Provisions...................................................... 14
(a) Compliance with Legal and Other Requirements....................... 14
(b) Limits on Transferability; Beneficiaries........................... 14
(c) Adjustments........................................................ 15
(d) Taxes.............................................................. 15
(e) Changes to the Plan and Awards..................................... 16
(f) Limitation on Rights Conferred under Plan.......................... 16
(g) Unfunded Status of Awards; Creation of Trusts...................... 16
(h) Nonexclusivity of the Plan......................................... 17
(i) Payments in the Event of Forfeitures; Fractional Shares ........... 17
(j) Governing Law...................................................... 17
(k) Awards under Preexisting Plan...................................... 17
(l) Plan Effective Date and Stockholder Approval....................... 17
<PAGE> 4
ENTEX INFORMATION SERVICES, INC.
1996 PERFORMANCE INCENTIVE PLAN
1. PURPOSE. The purpose of this 1996 Performance Incentive Plan (the
"Plan") is to assist ENTEX Information Services, Inc., a Delaware corporation
(the "Company"), and its subsidiaries in attracting, retaining, and rewarding
high-quality executives, employees, and other persons who provide services to
the Company and/or its subsidiaries, enabling such persons to acquire or
increase a proprietary interest in the Company in order to strengthen the
mutuality of interests between such persons and the Company's stockholders, and
providing such persons with annual and long-term performance incentives to
expend their maximum efforts in the creation of shareholder value. The Plan is
also intended to qualify certain compensation awarded under the Plan for tax
deductibility under Code Section 162(m) (as hereafter defined) to the extent
deemed appropriate by the Committee (or any successor committee) of the Board of
Directors of the Company.
2. DEFINITIONS. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to such terms defined in Section 1
hereof:
(a) "Annual Incentive Award" means a conditional right granted to a
Participant under Section 8(c) hereof to receive a cash payment, Stock or
other Award, unless otherwise determined by the Committee, after the end
of a specified fiscal year.
(b) "Award" means any Option, SAR (including Limited SAR), Restricted
Stock, Deferred Stock, Stock granted as a bonus or in lieu of another
award, Dividend Equivalent, Other Stock-Based Award, Performance Award or
Annual Incentive Award, together with any other right or interest granted
to a Participant under the Plan.
(c) "Beneficiary" means the person, persons, trust or trusts which
have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or to which Awards
or other rights are transferred if and to the extent permitted under
Section 9(b) hereof. If, upon a Participant's death, there is no
designated Beneficiary or surviving designated Beneficiary, then the term
Beneficiary means person, persons, trust or trusts entitled by will or the
laws of descent and distribution to receive such benefits.
(d) "Board" means the Company's Board of Directors.
(e) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, including regulations thereunder and successor provisions
and regulations thereto.
(f) "Committee" means a committee of two or more directors designated
by the Board to administer the Plan; provided, however, that, unless
otherwise determined by the Board, the Committee shall consist solely of
two or more directors, each of whom shall be (i) a "non-employee director"
within the meaning of Rule 16b-3 under the Exchange Act, unless
administration of the Plan by "non-employee directors" is not then
required in order for exemptions under Rule 16b-3 to apply to transactions
under the Plan, and (ii) an "outside director" as defined under Code
Section 162(m), unless administration of the Plan by "outside
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<PAGE> 5
directors" is not then required in order to qualify for tax deductibility
under Code Section 162(m).
(g) "Covered Employee" means an Eligible Person who is a Covered
Employee as specified in Section 8(e) of the Plan.
(h) "Deferred Stock" means a right, granted to a Participant under
Section 6(e) hereof, to receive Stock, cash or a combination thereof at
the end of a specified deferral period.
(i) "Dividend Equivalent" means a right, granted to a Participant
under Section 6(g), to receive cash, Stock, other Awards or other property
equal in value to dividends paid with respect to a specified number of
shares of Stock, or other periodic payments.
(j) "Effective Date" means August 15, 1996, the effective date of the
Plan.
(k) "Eligible Person" means each Executive Officer and other officers
and employees of the Company or of any subsidiary, including such persons
who may also be directors of the Company, and each other person who
provides services to the Company and/or its subsidiaries. An employee on
leave of absence may be considered as still in the employ of the Company
or a subsidiary for purposes of eligibility for participation in the Plan.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, including rules thereunder and successor
provisions and rules thereto.
(m) "Executive Officer" means an executive officer of the Company as
defined under the Exchange Act.
(n) "Fair Market Value" means the fair market value of Stock, Awards
or other property as determined by the Committee or under procedures
established by the Committee. Unless otherwise determined by the
Committee, the Fair Market Value of Stock as of any given date shall be
the closing sale price per share reported on a consolidated basis for
Stock listed on the principal stock exchange or market on which Stock is
traded on the date as of which such value is being determined or, if there
is no sale on that date, then on the last previous day on which a sale was
reported.
(o) "Incentive Stock Option" or "ISO" means any Option intended to be
and designated as an incentive stock option within the meaning of Code
Section 422 or any successor provision thereto.
(p) "Limited SAR" means a right granted to a Participant under
Section 6(c) hereof.
(q) "Option" means a right, granted to a Participant under Section
6(b) hereof, to purchase Stock or other Awards at a specified price during
specified time periods.
(r) "Other Stock Based Awards" means Awards granted to a Participant
under Section 6(h) hereof.
(s) "Participant" means a person who has been granted an Award under
the Plan which remains outstanding, including a person who is no longer an
Eligible Person.
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<PAGE> 6
(t) "Performance Award" means a right, granted to a Participant under
Section 8 hereof, to receive Awards based upon performance criteria
specified by the Committee.
(u) "Preexisting Plans" mean the ENTEX Holdings, Inc. 1996 Stock
Option Plan and the ENTEX Information Services, Inc. 1996 Stock Option
Plan.
(v) "Restricted Stock" means Stock granted to a Participant under
Section 6(d) hereof, that is subject to certain restrictions and to a risk
of forfeiture.
(w) "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
(x) "Stock" means the Company's Common Stock, and such other
securities as may be substituted (or resubstituted) for Stock pursuant to
Section 9(c) hereof.
(y) "Stock Appreciation Rights" or "SAR" means a right granted to a
Participant under Section 6(c) hereof.
3. ADMINISTRATION.
(a) Authority of the Committee. The Plan shall be administered by the
Committee except to the extent the Board elects to administer the Plan, in
which case references herein to the "Committee" shall be deemed to include
references to the "Board". The Committee shall have full and final
authority, in each case subject to and consistent with the provisions of
the Plan, to select Eligible Persons to become Participants, grant Awards,
determine the type, number and other terms and conditions of, and all
other matters relating to, Awards, prescribe Award agreements (which need
not be identical for each Participant) and rules and regulations for the
administration of the Plan, construe and interpret the Plan and Award
agreements and correct defects, supply omissions or reconcile
inconsistencies therein, and to make all other decisions and
determinations as the Committee may deem necessary or advisable for the
administration of the Plan.
(b) Manner of Exercise of Committee Authority. Any action of the
Committee shall be final, conclusive and binding on all persons, including
the Company, its subsidiaries, Participants, Beneficiaries, transferees
under Section 9(b) hereof or other persons claiming rights from or through
a Participant, and stockholders. The express grant of any specific power
to the Committee, and the taking of any action by the Committee, shall not
be construed as limiting any power or authority of the Committee. The
Committee may delegate to officers or managers of the Company or any
subsidiary, or committees thereof, the authority, subject to such terms as
the Committee shall determine, (i) to perform administrative functions,
(ii) with respect to Participants not subject to Section 16 of the
Exchange Act, to perform such other functions as the Committee may
determine, and (iii) with respect to Participants subject to Section 16,
to perform such other functions of the Committee as the Committee may
determine to the extent performance of such functions will not result in
the loss of an exemption under Rule 16b-3 otherwise available for
transactions by such persons, in each case to the extent permitted under
applicable law and subject to the requirements set forth in Section 8(d).
The Committee may appoint agents to assist it in administering the Plan.
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<PAGE> 7
(c) Limitation of Liability. The Committee and each member thereof
shall be entitled to, in good faith, rely or act upon any report or other
information furnished to him or her by any executive officer, other
officer or employee of the Company or a subsidiary, the Company's
independent auditors, consultants or any other agents assisting in the
administration of the Plan. Members of the Committee and any officer or
employee of the Company or a subsidiary acting at the direction or on
behalf of the Committee shall not be personally liable for any action or
determination taken or made in good faith with respect to the Plan, and
shall, to the extent permitted by law, be fully indemnified and protected
by the Company with respect to any such action or determination.
4. STOCK SUBJECT TO PLAN.
(a) Overall Number of Shares Available for Delivery. Subject to
adjustment as provided in Section 9(c) hereof, the total number of shares
of Stock reserved and available for delivery in connection with Awards
under the Plan shall be (i) 878,000, plus (ii) shares subject to awards
under Preexisting Plans which become available after the Effective Date in
accordance with Section 4(c) hereof. Any shares of Stock delivered under
the Plan may consist, in whole or in part, of authorized and unissued
shares or treasury shares.
(b) Application of Limitation to Grants of Awards. No Award may be
granted if the number of shares of Stock to be delivered in connection
with such Award or, in the case of an Award relating to shares of Stock
but settleable only in cash (such as cash-only SARs), the number of shares
to which such Award relates, exceeds the number of shares of Stock
remaining available under the Plan minus the number of shares of Stock
issuable in settlement of or relating to then-outstanding Awards. The
Committee may adopt reasonable counting procedures to ensure appropriate
counting, avoid double counting (as, for example, in the case of tandem or
substitute awards) and make adjustments if the number of shares of Stock
actually delivered differs from the number of shares previously counted in
connection with an Award.
(c) Availability of Shares Not Delivered under Awards. Shares of
Stock subject to an Award under the Plan or award under a Preexisting Plan
that is canceled, expired, forfeited, settled in cash or otherwise
terminated without a delivery of shares to the Participant, including (i)
the number of shares withheld in payment of any exercise or purchase price
of an Award or award or taxes relating to Awards or awards, and (ii) the
number of shares surrendered in payment of any exercise or purchase price
of an Award or award or taxes relating to any Award or award, will again
be available for Awards under the Plan, except that if any such shares
could not again be available for Awards to a particular Participant under
any applicable law or regulation, such shares shall be available
exclusively for Awards to Participants who are not subject to such
limitation.
5. ELIGIBILITY; PER-PERSON AWARD LIMITATIONS. Awards may be granted under
the Plan only to Eligible Persons. In each fiscal year during any part of which
the Plan is in effect, an Eligible Person may not be granted Awards relating to
more than 100,000 shares of Stock, subject to adjustment as provided in Section
9(c), under each of Sections 6(b), 6(c), 6(d), 6(e), 6(f), 6(g), 6(h), 8(b) and
8(c). In addition, the maximum cash amount that may be earned under the Plan as
a final Annual Incentive Award or other cash annual Award in respect of any
fiscal year by any one Participant shall be $2 million, and the maximum cash
amount that may be earned under the Plan as a final Performance Award or other
cash Award in respect of a performance period by any one Participant shall be $4
million.
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<PAGE> 8
6. SPECIFIC TERMS OF AWARDS.
(a) General. Awards may be granted on the terms and conditions set
forth in this Section 6. In addition, the Committee may impose on any
Award or the exercise thereof, at the date of grant or thereafter (subject
to Section 9(e)), such additional terms and conditions, not inconsistent
with the provisions of the Plan, as the Committee shall determine,
including terms requiring forfeiture of Awards in the event of termination
of employment by the Participant and terms permitting a Participant to
make elections relating to his or her Award. The Committee shall retain
full power and discretion to accelerate, waive or modify, at any time, any
term or condition of an Award that is not mandatory under the Plan. Except
in cases in which the Committee is authorized to require other forms of
consideration under the Plan, or to the extent other forms of
consideration must by paid to satisfy the requirements of the Delaware
General Corporation Law, no consideration other than services may be
required for the grant (but not the exercise) of any Award.
(b) Options. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(i) Exercise Price. The exercise price per share of Stock
purchasable under an Option shall be determined by the Committee,
provided that such exercise price shall be not less than the Fair
Market Value of a share of Stock on the date of grant of such Option
except as provided under Section 7(a) hereof.
(ii) Time and Method of Exercise. The Committee shall determine
the time or times at which or the circumstances under which an Option
may be exercised in whole or in part (including based on achievement of
performance goals and/or future service requirements), the methods by
which such exercise price may be paid or deemed to be paid, the form of
such payment, including, without limitation, cash, Stock, other Awards
or awards granted under other plans of the Company or any subsidiary,
or other property (including notes or other contractual obligations of
Participants to make payment on a deferred basis), and the methods by
or forms in which Stock will be delivered or deemed to be delivered to
Participants.
(iii) ISOs. The terms of any ISO granted under the Plan shall
comply in all respects with the provisions of Code Section 422.
Anything in the Plan to the contrary notwithstanding, no term of the
Plan relating to ISOs (including any SAR in tandem therewith) shall be
interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be exercised, so as to disqualify either the
Plan or any ISO under Code Section 422, unless the Participant has
first requested the change that will result in such disqualification.
(c) Stock Appreciation Rights. The Committee is authorized to grant
SAR's to Participants on the following terms and conditions:
(i) Right to Payment. A SAR shall confer on the Participant to
whom it is granted a right to receive, upon exercise thereof, the
excess of (A) the Fair Market Value of one share of Stock on the date
of exercise (or, in the case of a "Limited SAR," the Fair Market Value
determined at the time of a change in control or other event specified
by the Committee), over (B) the grant price of the SAR as determined by
the Committee.
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(ii) Other Terms. The Committee shall determine at the date of
grant or thereafter, the time or times at which and the circumstances
under which a SAR may be exercised in whole or in part (including based
on achievement of performance goals and/or future service
requirements), the method of exercise, method of settlement, form of
consideration payable in settlement, method by or forms in which Stock
will be delivered or deemed to be delivered to Participants, whether or
not a SAR shall be in tandem or in combination with any other Award,
and any other terms and conditions of any SAR. Limited SARs that may
only be exercised in connection with a change in control or other event
as specified by the Committee may be granted on such terms, not
inconsistent with this Section 6(c), as the Committee may determine.
SARs and Limited SARs may be either freestanding or in tandem with
other Awards.
(d) Restricted Stock. The Committee is authorized to grant Restricted
Stock to Participants on the following terms and conditions:
(i) Grant and Restrictions. Restricted Stock shall be subject to
such restrictions on transferability, risk of forfeiture and other
restrictions, if any, as the Committee may impose, which restrictions
may lapse separately or in combination at such times, under such
circumstances (including based on achievement of performance goals
and/or future service requirements), in such installments or otherwise,
as the Committee may determine at the date of grant or thereafter.
Except to the extent restricted under the terms of the Plan and any
Award agreement relating to the Restricted Stock, a Participant granted
Restricted Stock shall have all of the rights of a stockholder,
including the right to vote the Restricted Stock and the right to
receive dividends thereon (subject to any mandatory reinvestment or
other requirement imposed by the Committee). During the restricted
period applicable to the Restricted Stock, subject to Section 9(b)
below, the Restricted Stock may not be sold, transferred, pledged,
hypothecated, margined or otherwise encumbered by the Participant.
(ii) Forfeiture. Except as otherwise determined by the Committee,
upon termination of employment during the applicable restriction
period, Restricted Stock that is at that time subject to restrictions
shall be forfeited and reacquired by the Company; provided that the
Committee may provide, by rule or regulation or in any Award agreement,
or may determine in any individual case, that restrictions or
forfeiture conditions relating to Restricted Stock shall be waived in
whole or in part in the event of terminations resulting from specified
causes, and the Committee may in other cases waive in whole or in part
the forfeiture of Restricted Stock.
(iii)Certificates for Stock. Restricted Stock granted under the
Plan may be evidenced in such manner as the Committee shall determine.
If certificates representing Restricted Stock are registered in the
name of the Participant, the Committee may require that such
certificates bear an appropriate legend referring to the terms,
conditions and restrictions applicable to such Restricted Stock, that
the Company retain physical possession of the certificates, and that
the Participant deliver a stock power to the Company, endorsed in
blank, relating to the Restricted Stock.
(iv) Dividends and Splits. As a condition to the grant of an Award
of Restricted Stock, the Committee may require that any cash dividends
paid on a share of Restricted Stock be automatically reinvested in
additional shares of Restricted Stock or applied to the purchase of
additional Awards under the Plan. Unless otherwise determined by the
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Committee, Stock distributed in connection with a Stock split or
Stock dividend, and other property distributed as a dividend, shall
be subject to restrictions and a risk of forfeiture to the same
extent as the Restricted Stock with respect to which such Stock or
other property has been distributed.
(e) Deferred Stock. The Committee is authorized to grant Deferred
Stock to Participants, which are rights to receive Stock, cash, or a
combination thereof at the end of a specified deferral period, subject to
the following terms and conditions:
(i) Award and Restrictions. Satisfaction of an Award of Deferred
Stock shall occur upon expiration of the deferral period specified for
such Deferred Stock by the Committee (or, if permitted by the
Committee, as elected by the Participant). In addition, Deferred Stock
shall be subject to such restrictions (which may include a risk of
forfeiture) as the Committee may impose, if any, which restrictions may
lapse at the expiration of the deferral period or at earlier specified
times (including based on achievement of performance goals and/or
future service requirements), separately or in combination, in
installments or otherwise, as the Committee may determine. Deferred
Stock may be satisfied by delivery of Stock, cash equal to the Fair
Market Value of the specified number of shares of Stock covered by the
Deferred Stock, or a combination thereof, as determined by the
Committee at the date of grant or thereafter.
(ii) Forfeiture. Except as otherwise determined by the Committee,
upon termination of employment during the applicable deferral period or
portion thereof to which forfeiture conditions apply (as provided in
the Award agreement evidencing the Deferred Stock), all Deferred Stock
that is at that time subject to deferral (other than a deferral at the
election of the Participant) shall be forfeited; provided that the
Committee may provide, by rule or regulation or in any Award agreement,
or may determine in any individual case, that restrictions or
forfeiture conditions relating to Deferred Stock shall be waived in
whole or in part in the event of terminations resulting from specified
causes, and the Committee may in other cases waive in whole or in part
the forfeiture of Deferred Stock.
(iii) Dividend Equivalents. Unless otherwise determined by the
Committee at date of grant, Dividend Equivalents on the specified
number of shares of Stock covered by an Award of Deferred Stock shall
be either (A) paid with respect to such Deferred Stock at the dividend
payment date in cash or in shares of unrestricted Stock having a Fair
Market Value equal to the amount of such dividends, or (B) deferred
with respect to such Deferred Stock and the amount or value thereof
automatically deemed reinvested in additional Deferred Stock, other
Awards or other investment vehicles, as the Committee shall determine
or permit the Participant to elect.
(f) Bonus Stock and Awards in Lieu of Obligations. The Committee is
authorized to grant Stock as a bonus, or to grant Stock or other Awards in
lieu of Company obligations to pay cash or deliver other property under
the Plan or under other plans or compensatory arrangements, provided that,
in the case of Participants subject to Section 16 of the Exchange Act, the
amount of such grants remains within the discretion of the Committee to
the extent necessary to ensure that acquisitions of Stock or other Awards
are exempt from liability under Section 16(b) of the Exchange Act. Stock
or Awards granted hereunder shall be subject to such other terms as shall
be determined by the Committee.
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<PAGE> 11
(g) Dividend Equivalents. The Committee is authorized to grant
Dividend Equivalents to a Participant, entitling the Participant to
receive cash, Stock, other Awards, or other property equal in value to
dividends paid with respect to a specified number of shares of Stock, or
other periodic payments. Dividend Equivalents may be awarded on a
free-standing basis or in connection with another Award. The Committee may
provide that Dividend Equivalents shall be paid or distributed when
accrued or shall be deemed to have been reinvested in additional Stock,
Awards, or other investment vehicles, and subject to such restrictions on
transferability and risks of forfeiture, as the Committee may specify.
(h) Other Stock-Based Awards. The Committee is authorized, subject to
limitations under applicable law, to grant to Participants such other
Awards that may be denominated or payable in, valued in whole or in part
by reference to, or otherwise based on, or related to, Stock, as deemed by
the Committee to be consistent with the purposes of the Plan, including,
without limitation, convertible or exchangeable debt securities, other
rights convertible or exchangeable into Stock, purchase rights for Stock,
Awards with value and payment contingent upon performance of the Company
or any other factors designated by the Committee, and Awards valued by
reference to the book value of Stock or the value of securities of or the
performance of specified subsidiaries. The Committee shall determine the
terms and conditions of such Awards. Stock delivered pursuant to an Award
in the nature of a purchase right granted under this Section 6(h) shall be
purchased for such consideration, paid for at such times, by such methods,
and in such forms, including, without limitation, cash, Stock, other
Awards, or other property, as the Committee shall determine. Cash awards,
as an element of or supplement to any other Award under the Plan, may also
be granted pursuant to this Section 6(h).
7. CERTAIN PROVISIONS APPLICABLE TO AWARDS.
(a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards
granted under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in substitution or
exchange for, any other Award or any award granted under another plan of
the Company, any subsidiary, or any business entity to be acquired by the
Company or a subsidiary, or any other right of a Participant to receive
payment from the Company or any subsidiary. Such additional, tandem, and
substitute or exchange Awards may be granted at any time. If an Award is
granted in substitution or exchange for another Award or award, the
Committee shall require the surrender of such other Award or award in
consideration for the grant of the new Award. In addition, Awards may be
granted in lieu of cash compensation, including in lieu of cash amounts
payable under other plans of the Company or any subsidiary, in which the
value of Stock subject to the Award is equivalent in value to the cash
compensation (for example, Deferred Stock or Restricted Stock), or in
which the exercise price, grant price or purchase price of the Award in
the nature of a right that may be exercised is equal to the Fair Market
Value of the underlying Stock minus the value of the cash compensation
surrendered (for example, Options granted with an exercise price
"discounted" by the amount of the cash compensation surrendered).
(b) Term of Awards. The term of each Award shall be for such period
as may be determined by the Committee; provided that in no event shall the
term of any Option or SAR exceed a period of ten years (or such shorter
term as may be required in respect of an ISO under Code Section 422).
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<PAGE> 12
(c) Form and Timing of Payment under Awards; Deferrals. Subject to
the terms of the Plan and any applicable Award agreement, payments to be
made by the Company or a subsidiary upon the exercise of an Option or
other Award or settlement of an Award may be made in such forms as the
Committee shall determine, including, without limitation, cash, Stock,
other Awards or other property, and may be made in a single payment or
transfer, in installments, or on a deferred basis. The settlement of any
Award may be accelerated, and cash paid in lieu of Stock in connection
with such settlement, in the discretion of the Committee or upon
occurrence of one or more specified events. Installment or deferred
payments may be required by the Committee (subject to Section 9(e) of the
Plan, including the consent provisions thereof in the case of any deferral
of an outstanding Award not provided for in the original Award agreement)
or permitted at the election of the Participant on terms and conditions
established by the Committee. Payments may include, without limitation,
provisions for the payment or crediting of reasonable interest on
installment or deferred payments or the grant or crediting of Dividend
Equivalents or other amounts in respect of installment or deferred
payments denominated in Stock.
(d) Exemptions from Section 16(b) Liability. It is the intent of the
Company that the grant of any Awards to or other transaction by a
Participant who is subject to Section 16 of the Exchange Act shall be
exempt under Rule 16b-3 (except for transactions acknowledged in writing
to be non-exempt by such Participant). Accordingly, if any provision of
this Plan or any Award agreement does not comply with the requirements of
Rule 16b-3 as then applicable to any such transaction, such provision
shall be construed or deemed amended to the extent necessary to conform to
the applicable requirements of Rule 16b-3 so that such Participant shall
avoid liability under Section 16(b).
(e) Cancellation and Rescission of Awards. Unless the Award agreement
specifies otherwise, the Committee may cancel any unexpired, unpaid, or
deferred Awards at any time, and the Company shall have the additional
rights set forth in Section 7(e)(iv) below, if the Participant is not in
compliance with all applicable provisions of the Award agreement and the
Plan including the following conditions:
(i) A Participant shall not render services for any organization
or engage directly or indirectly in any business which, in the judgment
of the Chief Executive Officer of the Company or other senior officer
designated by the Committee, is or becomes competitive with the
Company. For Participants whose employment has terminated, the judgment
of the Chief Executive Officer or other senior officer designated by
the Committee shall be based on the Participant's position and
responsibilities while employed by the Company, the Participant's
post-employment responsibilities and position with the other
organization or business, the extent of past, current and potential
competition or conflict between the Company and the other organization
or business, the effect on the Company's stockholders, customers,
suppliers and competitors of the Participant assuming the
post-employment position and such other considerations as are deemed
relevant given the applicable facts and circumstances. A Participant
who has terminated employment shall be free, however, to purchase as an
investment or otherwise, stock or other securities of such organization
or business so long as they are listed upon a recognized securities
exchange or traded over-the-counter, and such investment does not
represent a greater than five percent equity interest in the
organization or business. For purposes of this Section 7(e)(i), an
organization shall be considered to be competitive with the Company if
it is engaged directly or indirectly in the business of providing
information technology services or products, including, without
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<PAGE> 13
limitation, AmeriData Technologies, Inc., CompuCom Systems, Inc.,
DecisionOne Corporation, InaCom Corp., Intelligent Electronics, Inc.,
MicroAge, Inc., Vanstar Corporation, and their successors.
(ii) A Participant shall not, without prior written authorization
from the Company, disclose to anyone outside the Company, or use in
other than the Company's business, any confidential information or
material relating to the business of the Company that is acquired by
the Participant either during or after employment with the Company.
(iii) A Participant shall disclose promptly and assign to the
Company all right, title, and interest in any invention or idea,
patentable or not, made or conceived by the Participant during
employment by the Company, relating in any manner to the actual or
anticipated business, research or development work of the Company and
shall do anything reasonably necessary to enable the Company to secure
a patent where appropriate in the United States and in foreign
countries.
(iv) Upon exercise, settlement, payment or delivery pursuant to an
Award, the Participant shall certify on a form acceptable to the
Committee that he or she is in compliance with the terms and conditions
of the Plan. Failure to comply with the provisions of this Section 7(e)
prior to, or during the six months after, any exercise, payment or
delivery pursuant to an Award shall cause such exercise, payment or
delivery to be rescinded. The Company shall notify the Participant in
writing of any such rescission within two years after such exercise,
payment or delivery. Within ten days after receiving such a notice from
the Company, the Participant shall pay to the Company the amount of any
gain realized or payment received as a result of the rescinded
exercise, payment or delivery pursuant to an Award. Such payment shall
be made either in cash or by returning to the Company the number of
shares of Stock that the Participant received in connection with the
rescinded exercise, payment or delivery.
8. PERFORMANCE AND ANNUAL INCENTIVE AWARDS.
(a) Performance Conditions. The right of a Participant to exercise or
receive a grant or settlement of any Award, and the timing thereof, may be
subject to such performance conditions as may be specified by the
Committee. The Committee may use such business criteria and other measures
of performance as it may deem appropriate in establishing any performance
conditions, and may exercise its discretion to reduce or increase the
amounts payable under any Award subject to performance conditions, except
as limited under Sections 8(b) and 8(c) hereof in the case of a
Performance Award or Annual Incentive Award intended to qualify under Code
Section 162(m).
(b) Performance Awards Granted to Designated Covered Employees. If
the Committee determines that a Performance Award to be granted to an
Eligible Person who is designated by the Committee as likely to be a
Covered Employee should qualify as "performance-based compensation" for
purposes of Code Section 162(m), the grant, exercise and/or settlement of
such Performance Award shall be contingent upon achievement of
preestablished performance goals and other terms set forth in this Section
8(b).
(i) Performance Goals Generally. The performance goals for such
Performance Awards shall consist of one or more business criteria and a
targeted level or levels of performance with respect to each of such
criteria, as specified by the Committee
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consistent with this Section 8(b). Performance goals shall be
objective and shall otherwise meet the requirements of Code Section
162(m) and regulations thereunder (including Regulation 1.162-27 and
successor regulations thereto), including the requirement that the
level or levels of performance targeted by the Committee result in the
achievement of performance goals being "substantially uncertain." The
Committee may determine that such Performance Awards shall be granted,
exercised and/or settled upon achievement of any one performance goal
or that two or more of the performance goals must be achieved as a
condition to grant, exercise and/or settlement of such Performance
Awards. Performance goals may differ for Performance Awards granted to
any one Participant or to different Participants.
(ii) Business Criteria. One or more of the following business
criteria for the Company, on a consolidated basis, and/or for specified
subsidiaries or business units of the Company (except with respect to
the total stockholder return and earnings per share criteria), shall be
used by the Committee in establishing performance goals for such
Performance Awards: (1) earnings per share; (2) revenues; (3) cash
flow; (4) cash flow return on investment; (5) return on assets, return
on investment, return on capital, return on equity; (6) economic value
added; (7) operating margin; (8) net income; pretax earnings; pretax
earnings before interest, depreciation and amortization; pretax
operating earnings after interest expense and before incentives,
service fees, and extraordinary or special items; operating earnings;
(9) total stockholder return; and (10) any of the above goals as
compared to the performance of a published or special index deemed
applicable by the Committee including, but not limited to, the Standard
& Poor's 500 Stock Index, the Standard & Poor's Smallcap 600 Index, or
the Russell 2000 Technology Index. One or more of the foregoing
business criteria shall also be exclusively used in establishing
performance goals for Annual Incentive Awards granted to a Covered
Employee under Section 8(c) hereof.
(iii)Performance Period; Timing for Establishing Performance
Goals. Achievement of performance goals in respect of such Performance
Awards shall be measured over a performance period of up to ten years,
as specified by the Committee. Performance goals shall be established
not later than 90 days after the beginning of any performance period
applicable to such Performance Awards, or at such other date as may be
required or permitted for "performance-based compensation" under Code
Section 162(m).
(iv) Performance Award Pool. The Committee may establish a
Performance Award pool, which shall be an unfunded pool, for purposes
of measuring Company performance in connection with Performance Awards.
The amount of such Performance Award pool shall be based upon the
achievement of a performance goal or goals based on one or more of the
business criteria set forth in Section 8(b)(ii) hereof during the given
performance period, as specified by the Committee in accordance with
Section 8(b)(iii) hereof. The Committee may specify the amount of the
Performance Award pool as a percentage of any of such business
criteria, a percentage thereof in excess of a threshold amount, or as
another amount which need not bear a strictly mathematical relationship
to such business criteria.
(v) Settlement of Performance Awards; Other Terms. Settlement of
such Performance Awards shall be in cash, Stock, other Awards or other
property, in the discretion of the Committee. The Committee may, in its
discretion, reduce the amount
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of a settlement otherwise to be made in connection with such
Performance Awards, but may not exercise discretion to increase any
such amount payable to a Covered Employee in respect of a Performance
Award subject to this Section 8(b). The Committee shall specify the
circumstances in which such Performance Awards shall be paid or
forfeited in the event of termination of employment by the
Participant prior to the end of a performance period or settlement of
Performance Awards.
(c) Annual Incentive Awards Granted to Designated Covered Employees.
If the Committee determines that an Annual Incentive Award to be granted
to an Eligible Person who is designated by the Committee as likely to be a
Covered Employee should qualify as "performance-based compensation" for
purposes of Code Section 162(m), the grant, exercise and/or settlement of
such Annual Incentive Award shall be contingent upon achievement of
preestablished performance goals and other terms set forth in this Section
8(c).
(i) Annual Incentive Award Pool. The Committee may establish an
Annual Incentive Award pool, which shall be an unfunded pool, for
purposes of measuring Company performance in connection with Annual
Incentive Awards. The amount of such Annual Incentive Award pool shall
be based upon the achievement of a performance goal or goals based on
one or more of the business criteria set forth in Section 8(b)(ii)
hereof during the given performance period, as specified by the
Committee in accordance with Section 8(b)(iii) hereof. The Committee
may specify the amount of the Annual Incentive Award pool as a
percentage of any of such business criteria, a percentage thereof in
excess of a threshold amount, or as another amount which need not bear
a strictly mathematical relationship to such business criteria.
(ii) Potential Annual Incentive Awards. Not later than the end of
the 90th day of each fiscal year, or at such other date as may be
required or permitted in the case of Awards intended to be
"performance-based compensation" under Code Section 162(m), the
Committee shall determine the Eligible Persons who will potentially
receive Annual Incentive Awards, and the amounts potentially payable
thereunder, for that fiscal year, either out of an Annual Incentive
Award pool established by such date under Section 8(c)(i) hereof or as
individual Annual Incentive Awards. In the case of individual Annual
Incentive Awards intended to qualify under Code Section 162(m), the
amount potentially payable shall be based upon the achievement of a
performance goal or goals based on one or more of the business criteria
set forth in Section 8(b)(ii) hereof in the given performance year, as
specified by the Committee; in other cases, such amount shall be based
on such criteria as shall be established by the Committee. In all
cases, the maximum Annual Incentive Award of any Participant shall be
subject to the limitation set forth in Section 5 hereof.
(iii) Payout of Annual Incentive Awards. After the end of each
fiscal year, the Committee shall determine the amount, if any, of (A)
the Annual Incentive Award pool, and the maximum amount of potential
Annual Incentive Award payable to each Participant in the Annual
Incentive Award pool, or (B) the amount of potential Annual Incentive
Award otherwise payable to each Participant. The Committee may, in its
discretion, determine that the amount payable to any Participant as a
final Annual Incentive Award shall be increased or reduced from the
amount of his or her potential Annual Incentive Award, including a
determination to make no final Award whatsoever, but may not exercise
discretion to increase any such amount in the case of an Annual
Incentive Award intended to qualify under Code Section 162(m). The
Committee shall
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specify the circumstances in which an Annual Incentive Award shall be
paid or forfeited in the event of termination of employment by the
Participant prior to the end of a fiscal year or settlement of such
Annual Incentive Award.
(d) Written Determinations. All determinations by the Committee as to
the establishment of performance goals, the amount of any Performance
Award pool or potential individual Performance Awards and as to the
achievement of performance goals relating to Performance Awards under
Section 8(b), and the amount of any Annual Incentive Award pool or
potential individual Annual Incentive Awards and the amount of final
Annual Incentive Awards under Section 8(c), shall be made in writing in
the case of any Award intended to qualify under Code Section 162(m). The
Committee may not delegate any responsibility relating to such Performance
Awards or Annual Incentive Awards.
(e) Status of Section 8(b) and Section 8(c) Awards under Code Section
162(m). It is the intent of the Company that Performance Awards and Annual
Incentive Awards under Sections 8(b) and 8(c) hereof granted to persons
who are designated by the Committee as likely to be Covered Employees
within the meaning of Code Section 162(m) and regulations thereunder
(including Regulation 1.162-27 and successor regulations thereto) shall,
if so designated by the Committee, constitute "performance-based
compensation" within the meaning of Code Section 162(m) and regulations
thereunder. Accordingly, the terms of Sections 8(b), (c), (d) and (e),
including the definitions of Covered Employee and other terms used
therein, shall be interpreted in a manner consistent with Code Section
162(m) and regulations thereunder. The foregoing notwithstanding, because
the Committee cannot determine with certainty whether a given Participant
will be a Covered Employee with respect to a fiscal year that has not yet
been completed, the term Covered Employee as used herein shall mean only a
person designated by the Committee, at the time of grant of Performance
Awards or an Annual Incentive Award, as likely to be a Covered Employee
with respect to that fiscal year. If any provision of the Plan as in
effect on the date of adoption or any agreements relating to Performance
Awards or Annual Incentive Awards that are designated as intended to
comply with Code Section 162(m) does not comply or is inconsistent with
the requirements of Code Section 162(m) or regulations thereunder, such
provision shall be construed or deemed amended to the extent necessary to
conform to such requirements.
9. GENERAL PROVISIONS.
(a) Compliance with Legal and Other Requirements. The Company may, to
the extent deemed necessary or advisable by the Committee, postpone the
issuance or delivery of Stock or payment of other benefits under any Award
until completion of such registration or qualification of such Stock or
other required action under any federal or state law, rule or regulation,
listing or other required action with respect to any stock exchange or
automated quotation system upon which the Stock or other Company
securities are listed or quoted, or compliance with any other obligation
of the Company, as the Committee may consider appropriate, and may require
any Participant to make such representations, furnish such information and
comply with or be subject to such other conditions as it may consider
appropriate in connection with the issuance or delivery of Stock or
payment of other benefits in compliance with applicable laws, rules, and
regulations, listing requirements, or other obligations.
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<PAGE> 17
(b) Limits on Transferability; Beneficiaries. No Award or other right
or interest of a Participant under the Plan shall be pledged, hypothecated
or otherwise encumbered or subject to any lien, obligation or liability of
such Participant to any party (other than the Company or a subsidiary), or
assigned or transferred by such Participant otherwise than by will or the
laws of descent and distribution or to a Beneficiary upon the death of a
Participant, and such Awards or rights that may be exercisable shall be
exercised during the lifetime of the Participant only by the Participant
or his or her guardian or legal representative, except that Awards and
other rights (other than ISOs and SARs in tandem therewith) may be
transferred to one or more Beneficiaries or other transferees during the
lifetime of the Participant, and may be exercised by such transferees in
accordance with the terms of such Award, but only if and to the extent
such transfers are permitted by the Committee pursuant to the express
terms of an Award agreement (subject to any terms and conditions which the
Committee may impose thereon). A Beneficiary, transferee, or other person
claiming any rights under the Plan from or through any Participant shall
be subject to all terms and conditions of the Plan and any Award agreement
applicable to such Participant, except as otherwise determined by the
Committee, and to any additional terms and conditions deemed necessary or
appropriate by the Committee.
(c) Adjustments. In the event that any dividend or other distribution
(whether in the form of cash, Stock, or other property), recapitalization,
forward or reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase, share exchange, liquidation, dissolution or other
similar corporate transaction or event affects the Stock such that an
adjustment is determined by the Committee to be appropriate under the
Plan, then the Committee shall, in such manner as it may deem equitable,
adjust any or all of (i) the number and kind of shares of Stock which may
be delivered in connection with Awards granted thereafter, (ii) the number
and kind of shares of Stock by which annual per-person Award limitations
are measured under Section 5 hereof, (iii) the number and kind of shares
of Stock subject to or deliverable in respect of outstanding Awards and
(iv) the exercise price, grant price or purchase price relating to any
Award and/or make provision for payment of cash or other property in
respect of any outstanding Award. In addition, the Committee is authorized
to make adjustments in the terms and conditions of, and the criteria
included in, Awards (including Performance Awards and performance goals,
and Annual Incentive Awards and any Annual Incentive Award pool or
performance goals relating thereto) in recognition of unusual or
nonrecurring events (including, without limitation, events described in
the preceding sentence, as well as acquisitions and dispositions of
businesses and assets) affecting the Company, any subsidiary or any
business unit, or the financial statements of the Company or any
subsidiary, or in response to changes in applicable laws, regulations,
accounting principles, tax rates and regulations or business conditions or
in view of the Committee's assessment of the business strategy of the
Company, any subsidiary or business unit thereof, performance of
comparable organizations, economic and business conditions, personal
performance of a Participant, and any other circumstances deemed relevant;
provided that no such adjustment shall be authorized or made if and to the
extent that such authority or the making of such adjustment would cause
Options, SARs, Performance Awards granted under Section 8(b) hereof or
Annual Incentive Awards granted under Section 8(c) hereof to Participants
designated by the Committee as Covered Employees and intended to qualify
as "performance-based compensation" under Code Section 162(m) and
regulations thereunder to otherwise fail to qualify as "performance-based
compensation" under Code Section 162(m) and regulations thereunder.
- 14 -
<PAGE> 18
(d) Taxes. The Company and any subsidiary is authorized to withhold
from any Award granted, any payment relating to an Award under the Plan,
including from a distribution of Stock, or any payroll or other payment to
a Participant, amounts of withholding and other taxes due or potentially
payable in connection with any transaction involving an Award, and to take
such other action as the Committee may deem advisable to enable the
Company and Participants to satisfy obligations for the payment of
withholding taxes and other tax obligations relating to any Award. This
authority shall include authority to withhold or receive Stock or other
property and to make cash payments in respect thereof in satisfaction of a
Participant's tax obligations, either on a mandatory or elective basis in
the discretion of the Committee.
(e) Changes to the Plan and Awards. The Board may amend, alter,
suspend, discontinue or terminate the Plan or the Committee's authority to
grant Awards under the Plan without the consent of stockholders or
Participants, except that any amendment or alteration to the Plan shall be
subject to the approval of the Company's stockholders not later than the
annual meeting next following such Board action if such stockholder
approval is required by any federal or state law or regulation or the
rules of any stock exchange or automated quotation system on which the
Stock may then be listed or quoted, and the Board may otherwise, in its
discretion, determine to submit other such changes to the Plan to
stockholders for approval; provided that, without the consent of an
affected Participant, no such Board action may materially and adversely
affect the rights of such Participant under any previously granted and
outstanding Award. The Committee may waive any conditions or rights under,
or amend, alter, suspend, discontinue or terminate any Award theretofore
granted and any Award agreement relating thereto, except as otherwise
provided in the Plan; provided that, without the consent of an affected
Participant, no such Committee action may materially and adversely affect
the rights of such Participant under such Award. Notwithstanding anything
in the Plan to the contrary, if any right under this Plan would cause a
transaction to be ineligible for pooling of interest accounting that
would, but for the right hereunder, be eligible for such accounting
treatment, the Committee may modify or adjust the right so that pooling of
interest accounting shall be available, including the substitution of
Stock having a Fair Market Value equal to the cash otherwise payable
hereunder for the right which caused the transaction to be ineligible for
pooling of interest accounting.
(f) Limitation on Rights Conferred under Plan. Neither the Plan nor
any action taken hereunder shall be construed as (i) giving any Eligible
Person or Participant the right to continue as an Eligible Person or
Participant or in the employ or service of the Company or a subsidiary,
(ii) interfering in any way with the right of the Company or a subsidiary
to terminate any Eligible Person's or Participant's employment or service
at any time, (iii) giving an Eligible Person or Participant any claim to
be granted any Award under the Plan or to be treated uniformly with other
Participants and employees, or (iv) conferring on a Participant any of the
rights of a stockholder of the Company unless and until the Participant is
duly issued or transferred shares of Stock in accordance with the terms of
an Award.
(g) Unfunded Status of Awards; Creation of Trusts. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant
or obligation to deliver Stock pursuant to an Award, nothing contained in
the Plan or any Award shall give any such Participant any rights that are
greater than those of a general creditor of the Company; provided that the
Committee may authorize the creation of trusts and deposit therein cash,
Stock, other Awards or other property, or make other arrangements to meet
the Company's obligations under the Plan. Such trusts or other
- 15 -
<PAGE> 19
arrangements shall be consistent with the "unfunded" status of the
Plan unless the Committee otherwise determines with the consent of each
affected Participant. The trustee of such trusts may be authorized to
dispose of trust assets and reinvest the proceeds in alternative
investments, subject to such terms and conditions as the Committee may
specify and in accordance with applicable law.
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by
the Board nor its submission to the stockholders of the Company for
approval shall be construed as creating any limitations on the power of
the Board or a committee thereof to adopt such other incentive
arrangements as it may deem desirable including incentive arrangements and
awards which do not qualify under Code Section 162(m).
(i) Payments in the Event of Forfeitures; Fractional Shares. Unless
otherwise determined by the Committee, in the event of a forfeiture of an
Award with respect to which a Participant paid cash or other
consideration, the Participant shall be repaid the amount of such cash or
other consideration. No fractional shares of Stock shall be issued or
delivered pursuant to the Plan or any Award. The Committee shall determine
whether cash, other Awards or other property shall be issued or paid in
lieu of such fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.
(j) Governing Law. The validity, construction and effect of the Plan,
any rules and regulations under the Plan, and any Award agreement shall be
determined in accordance with the Delaware General Corporation Law,
without giving effect to principles of conflicts of laws, and applicable
federal law.
(k) Awards under Preexisting Plans. Upon approval of the Plan by
stockholders of the Company, as required under Section 9(l) hereof, no
further Awards shall be granted under the Preexisting Plans.
(l) Plan Effective Date and Stockholder Approval. The Plan has been
adopted by the Board with the consent of the stockholders of the Company
and shall become effective on August 15, 1996.
- 16 -
<PAGE> 1
Exhibit 10.11
ENTEX INFORMATION SERVICES, INC.
- --------------------------------------------------------------------------------
1996 NON-EMPLOYEE DIRECTOR STOCK PLAN
- --------------------------------------------------------------------------------
As amended and restated June 26, 1997
<PAGE> 2
ENTEX INFORMATION SERVICES, INC.
- --------------------------------------------------------------------------------
1996 NON-EMPLOYEE DIRECTOR STOCK PLAN
- --------------------------------------------------------------------------------
PAGE
----
1. Purpose................................................................ 1
2. Definitions............................................................ 1
3. Shares Available Under the Plan........................................ 1
4. Administration of the Plan............................................. 2
5. Eligibility............................................................ 2
6. Grants of Stock Units.................................................. 2
7. Crediting of Dividend Equivalents...................................... 3
8. Adjustment Provisions.................................................. 3
9. Changes to the Plan.................................................... 3
10. General Provisions..................................................... 4
<PAGE> 3
ENTEX INFORMATION SERVICES, INC.
1996 NON-EMPLOYEE DIRECTOR STOCK PLAN
1. PURPOSE. The purpose of this 1996 Non-Employee Director Stock Plan
(the "Plan") is to assist ENTEX Information Services, Inc., a Delaware
corporation (the "Company"), in attracting and retaining highly qualified
persons to serve as non-employee directors and to align such directors'
interests more closely with the interests of stockholders of the Company by
providing for the payment of a significant portion of their compensation in the
form of Company stock.
2. DEFINITIONS. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to the terms defined in Section 1
hereof:
(a) "Board" means the Company's Board of Directors.
(b) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, including rules thereunder and successor
provisions and rules thereto.
(c) "Fair Market Value" of a share of Stock means, as of any
given date, the fair market value of the Stock as determined by the
Board from time to time in good faith; provided, however, if the Stock
is publicly traded, then "Fair Market Value" means the closing sale
price per share reported on a consolidated basis for stock listed on the
principal stock exchange or market on which the Stock is traded on the
date as of which such value is being determined, or if there is no sale
on that date, then on the last previous day on which a sale was
reported.
(d) "Participant" means a director who has been granted Stock
Units which have not yet been settled under the Plan.
(e) "Stock" means the Company's Common Stock and such other
securities as may be substituted (or resubstituted) for Stock pursuant
to Section 8 hereof.
(f) "Stock Unit" means the credit to a Participant's Stock Unit
Account under Sections 6 or 7 hereof, which credit is denominated in
shares of Stock and represents the right to receive one share of Stock
upon settlement of the Stock Unit Account for each such credited Stock
Unit, subject to such conditions as are imposed under the Plan.
(g) "Stock Unit Account" means the account of a Participant to
which Stock Units are credited under Sections 6 and 7 hereof.
3. SHARES AVAILABLE UNDER THE PLAN. Subject to adjustment as provided in
Section 8 hereof, the total number of shares of Stock reserved and available for
issuance under the Plan is 20,000. Such shares may be authorized but unissued
shares or treasury shares.
<PAGE> 4
4. ADMINISTRATION OF THE PLAN. The Plan will be administered by the
Board.
5. ELIGIBILITY. Each director of the Company who, on any date on which
Stock Units are to be granted under Section 6 hereof, is not an executive
officer or employee, either full-time or part-time, of (i) the Company, (ii) any
parent of the Company, or (iii) any subsidiary of the Company, will be eligible,
on such date, to be granted Stock Units under Section 6 hereof. No person other
than those specified in this Section 5 will be eligible to participate in the
Plan.
6. GRANTS OF STOCK UNITS.
(a) Meeting Fees. At any date on which, under the Board policy
then in effect, fees are payable with respect to meetings of the Board
or a committee thereof to a director who is then eligible to receive
grants under Section 5 hereof, the Stock Unit Account of each such
director shall be credited with a number of Stock Units equal to the
number of shares of Stock having an aggregate Fair Market Value at that
date equal to $2,000 for each such meeting (or series of meetings
entitling a director to a single meeting fee under board policy)
attended by the director on such date.
(b) Retainer. On the last day of each month, the Stock Unit
Account of each director who is then eligible to receive grants under
Section 5 hereof shall be credited with a number of Stock Units equal to
the number of shares of Stock having an aggregate Fair Market Value at
that date equal to $1,666.67.
(c) Dividend Equivalents. A Participant to whose Stock Unit
Account any Stock Unit is credited under this Section 6 (whether pending
settlement in accordance with Section 6(d) or deferred settlement in
accordance with Section 6(e)) shall be entitled to receive dividend
equivalents, in the form of additional Stock Units, in accordance with
Section 7 hereof.
(d) Settlement of Stock Units. Except as provided in Section 6(e)
hereof, the Company will settle all Stock Units credited to each
Participant's Stock Unit Account on, or as soon as practicable after,
each December 31 and June 30. Settlement shall be made by delivering to
the Participant (or his or her beneficiary) the number of shares of
Stock equal to the number of such whole Stock Units then credited to the
Participant's Stock Unit Account, together with cash in lieu of any
fractional Stock Unit then credited to such Account.
(e) Elective Deferral. A Participant may elect to defer
settlement of any or all of his or her Stock Units, including Stock
Units with respect to which a previous deferral election has been made,
by filing an irrevocable written election with the Secretary of the
Company by such date as may be specified by the Board. The election
shall specify the Stock Units to which it relates and the period or
periods of deferral. The Company will settle Stock Units deferred under
this Section 6(e) by delivering to the Participant (or his or
- 2 -
<PAGE> 5
her beneficiary), as promptly as practicable after the end of the
applicable deferral period, the number of shares of Stock equal to the
number of whole Stock Units credited to the Participant's Stock Unit
Account as to which the deferral period has expired, together with cash
in lieu of any fractional Stock Unit then credited to such Account.
7. CREDITING OF DIVIDEND EQUIVALENTS. A Participant shall be entitled to
receive dividend equivalents, as of the payment date for any dividend or
distribution on Stock, in an amount equal to the cash or fair market value of
any property other than Stock paid as a dividend or distribution on a single
share of Stock at that date multiplied by the number of Stock Units (including
any fractional shares) credited to his or her Stock Unit Account as of the
record date for such dividend or distribution. Such dividend equivalents shall
be credited as a number of Stock Units determined by dividing the aggregate
amount of such cash and the fair market value of such property (as determined by
the Board) by the Fair Market Value of a share of Stock at the payment date of
the dividend or distribution. Dividends paid in the form of additional shares of
Stock shall not result in the crediting of dividend equivalents, but shall
instead result in an adjustment in the number of shares credited as Stock Units,
in accordance with Section 8 hereof.
8. ADJUSTMENT PROVISIONS. In the event that any dividend or other
distribution (whether in the form of cash, Stock, or other property),
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, share exchange, liquidation,
dissolution or other similar corporate transaction or event affects the Stock
such that an adjustment is determined by the Board to be appropriate in order to
prevent dilution or enlargement of Participants' rights under the Plan, then the
Board will, in a manner that is proportionate to the change to the Stock and is
otherwise equitable, adjust (i) the number and kind of shares reserved for
issuance under the Plan, (ii) the number and kind of shares subject to each
grant of Stock Units hereunder, and (iii) the number and kind of shares to be
issued and delivered in settlement of outstanding Stock Units. The foregoing
notwithstanding, no adjustment may be made hereunder except as shall be
necessary to maintain the proportionate interest of a Participant under the Plan
and to preserve, without exceeding, the value of outstanding Stock Units and
potential grants of Stock Units. If at any date an insufficient number of shares
of Stock are available under the Plan for the automatic grant of Stock Units at
that date, Stock Units will be automatically granted proportionately to eligible
directors, to the extent shares are then available.
9. CHANGES TO THE PLAN. The Board may amend, alter, suspend,
discontinue, or terminate the Plan without the consent of stockholders or
Participants, except that any such action will be subject to the approval of the
Company's stockholders if such stockholder approval is required by any federal
or state law or regulation or the rules of any stock exchange or automated
quotation system on which the Stock may then be listed or quoted, or if the
Board determines in its discretion to seek or obtain stockholder approval;
provided that, without the consent of an affected Participant, no such action
may impair the rights of such Participant in respect of any previously granted
or outstanding Stock Units or Stock Unit Account.
- 3 -
<PAGE> 6
10. GENERAL PROVISIONS.
(a) Unfunded Nature of Plan; Agreements. Stock Unit Accounts are
maintained solely as bookkeeping entries by the Company evidencing
unfunded obligations of the Company. Accordingly, Participants will not
have rights to specific property of the Company or otherwise have rights
other than as unsecured creditors in respect of such Stock Unit
Accounts. The Board may, however, authorize the creation of trusts and
deposit Stock therein, or make other arrangements, to meet the Company's
obligations under the Plan; provided, however, that such actions and all
other actions under this Section 10(a) shall be consistent with Section
10(d) hereof. Such trusts or other arrangements shall be consistent with
the "unfunded" status of the Plan unless the Board otherwise determines
with the consent of each affected Participant.
(b) Compliance with Laws and Obligations. The Company will not be
obligated to issue or deliver shares of Stock in settlement of Stock
Units in a transaction subject to the registration requirements of the
Securities Act of 1933, as amended, or any other federal or state
securities law, any requirement under any listing agreement between the
Company and any stock exchange or automated quotation system, or any
other law, regulation or contractual obligation of the Company, until
such laws, regulations and other obligations of the Company have been
complied with to the satisfaction of the Company. Certificates
representing shares of Stock issued under the Plan will be subject to
such stop-transfer orders and other restrictions as may be applicable
under such laws, regulations and other obligations of the Company,
including any requirement that a legend or legends be placed thereon.
(c) Limitations on Transferability. No Stock Units or right under
the Plan shall be pledged, hypothecated, or otherwise encumbered or
subject to any lien, obligation, or liability of a Participant to any
party (other than the Company or a subsidiary), or assigned or
transferred by such Participant otherwise than by will or the laws of
descent and distribution or to a designated beneficiary upon the death
of the Participant, unless, and only to the extent, such transfers are
expressly permitted by the Board (subject to any terms and conditions
which the Board may impose thereon). A beneficiary, transferee, or other
person claiming any rights under the Plan from or through any
Participant shall be subject to all terms and conditions of the Plan and
any award agreement applicable to such Participant, except as otherwise
determined by the Board, and to any additional terms and conditions
deemed necessary or appropriate by the Board.
(d) Compliance with Rule 16b-3. It is the intent of the Company
that this Plan comply in all respects with applicable provisions of Rule
16b-3 under the Exchange Act. The Plan shall be interpreted as necessary
to achieve this intent. In addition, the Board shall take no action
under the Plan which would cause transactions under the Plan to fail to
comply with Rule 16b-3.
- 4 -
<PAGE> 7
(e) Designation of Beneficiary. Each Participant may designate,
on forms provided by the Company, one or more beneficiaries to receive
the amounts distributable pursuant to the Plan in the event of such
Participant's death. The Company may rely upon the beneficiary
designation last filed in accordance with the terms of the Plan.
(f) Crediting of Fractional Shares. The number of Stock Units
credited to a Stock Unit Account shall include fractional shares,
calculated to at least three decimal places.
(g) Other Compensation Arrangements. Nothing set forth in this
Plan shall prevent the Board from adopting other or additional
compensation arrangements for directors.
(h) No Right To Continue as a Director. Nothing contained in the
Plan will confer upon any eligible director any right to continue to
serve as a director of the Company.
(i) No Stockholder Rights Conferred. Nothing contained in the
Plan, including the crediting of Stock Units to a Participant's Stock
Unit Account, will confer upon any Participant (or beneficiary or
transferee thereof) any rights of a stockholder of the Company unless
and until shares of Stock are in fact issued and delivered in settlement
of Stock Units to such Participant or his or her nominee (or beneficiary
or transferee or a nominee thereof).
(j) Governing Law. The validity, construction, and effect of the
Plan, and any rules and regulations under the Plan, shall be determined
in accordance with the laws of the State of Delaware, without giving
effect to principles of conflicts of laws, and applicable federal law.
(k) Stockholder Approval, Effective Date, and Plan Termination.
The Plan has been adopted by the Board with the consent of the
stockholders of the Company and shall become effective on January 1,
1997. Unless earlier terminated by action of the Board, the Plan shall
remain in effect until such time as no shares of Stock remain available
for issuance under the Plan and the Company and Participants have no
further rights or obligations under the Plan in respect of outstanding
Stock Units under the Plan.
- 5 -
<PAGE> 1
Exhibit 10.12
ENTEX INFORMATION SERVICES
MANAGEMENT INCENTIVE PLAN - 7/94
PLAN DOCUMENT - CONFIDENTIAL
I. PURPOSE
The Management Incentive Plan (the "MIP" or the "Plan") is intended to provide
an incentive for key management employees of ENTEX Information Services, Inc.
(the "Company") to meet and exceed individual performance goals and Company
financial objectives. The Plan will better allow the Company to recruit and
retain managers and professionals in its business operations.
II. PARTICIPANTS
Employees appointed as Officers of the Company (Vice President or above) and in
positions designated as "Director" or the equivalent will participate in this
plan. Other key managers and individual contributors may be nominated and
approved for participation.
Participants in this plan may not be participants in a sales compensation plan
or any other variable compensation programs.
III. ADMINISTRATION
The plan will be administered by the Compensation Committee of the Board of
Directors (the "Committee") in their sole discretion. The Committee will have
the authority and discretion to determine the individuals who will participate
in the plan, to set the performance measures for earning bonuses, to establish
target awards for each participant, and to establish the methods by which the
incentive awards are determined.
IV. COMMUNICATION TO PARTICIPANTS
Participants will be informed of any Plan provision changes, and the applicable
individual and financial performance targets at the beginning of each
measurement period. Initially, the awards will be on a semi-annual basis but
may be changed at the discretion of the Committee.
Participation in this plan is on a period-to-period basis and may be altered in
subsequent measurement periods. Award eligiblity is based on selection/approval
for plan participation, and active employment status on the plan payout date.
Changes in position responsibilities and/or employment status are described in
detail later in this document.
V. DETERMINATION OF AWARDS
Bonus award opportunities for each participant in the Management Incentive Plan
are established based on the impact that the incumbent is expected to have on
the profitability and success of the Company, as well as to remain competitive
with external total compensation levels for similar positions.
<PAGE> 2
ENTEX Information Services, Inc. Page 2
Professional Management Incentive Plan
Award opportunities will state a target award for the measurement period,
expressed as a percentage of base salary. Individual bonus award opportunities
may change during the year due to changes in position assignments.
The total bonus target will typically be allocated as follows:
<TABLE>
<CAPTION>
% of Bonus based on % of bonus based on
Company Performance Individual/Team Performance
------------------- ---------------------------
("Formula Target Award") ("Individual/Team Target Award")
<S> <C> <C>
Officers and/or 75% 25%
Operating Managers
Directors and/or 60% 40%
Staff Managers
</TABLE>
The Committee reserves the right to establish different allocation percentages
for participants.
OVERALL COMPANY PERFORMANCE
The Formula Target Award, based on the percentage indicated above, will be
determined by the overall financial performance of the company. The
Company target award will be factored based on the achievement of
semi-annual goals for the following key financial measures:
1) Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
2) Pre-Tax Income
EBITDA will determine 75% of the company performance target award, with
Pre-Tax Income achievement determining the remaining 25%. The performance
multiplier for both measures will be leveraged based on the following
achievement scale:
<PAGE> 3
ENTEX Information Services, Inc.
Professional/Management Incentive Plan Page 3
% of Performance
Target Achieved Multiplier
--------------- -------------
Less than 90% 0.00
90% 0.50
91 to 99% 0.50 plus 0.05 for each 1% over 90%
100% 1.00
101 to 110% 1.00 plus 0.04 for each 1% over 100%
111 to 120% 1.40 plus 0.03 for each 1% over 110%
Greater than 120% 1.70 plus 0.02 for each 1% over 120%
For the purpose of determining awards, the percent of target achieved for
EBITDA and Pre-Tax Income will be rounded to the nearest full percentage
point.
For the first measure period (July-December) in a fiscal year, the Company
achievement portion of the bonus will be paid out at 90% of the semi-annual
target, provided that the Company is performing (i.e. greater than = 90% of
target). Adjustments to this payout will be made when finalized fiscal year
results are available.
INDIVIDUAL/TEAM TARGET AWARD
At least two, and typically as many as five specific objectives will be
established at the beginning of each measurement period. The stated objectives
may be personal, team-oriented or department-wide in scope, but should be
within the influence of each participant. Each objective should be definable,
consistent, measurable, and should include appropriate measures of performance
along with time frames for completion and/or measurement. The stated objectives
will be weighted such that the total equals 1.0.
Achievement of objectives will be rated at the end of each measurement
period to establish the degree to which each objective was accomplished. This
will be based on a scale from 0 to 150%, with a score of 100% for performance
that meets established goals. A weighted average summary of achievement for all
objectives is then determined. The Individual/Team Target Award is multiplied
by the summary percent of achievement to determine the actual bonus award.
<PAGE> 4
ENTEX Information Services, Inc. Page 4
Professional/Management Incentive Plan
No bonus award under this portion of the Plan will be paid without
documented objectives and determination of achievement.
The annual bonus opportunity based on the attainment of individual/team
objectives will be available for payment regardless of whether a payment
is made under the Company achievement portion of the Plan.
VI. PAYMENT OF AWARDS
Awards will be determined as soon as possible following the close of the
measurement period. It is expected that awards will be paid within six weeks of
the end of each measurement period.
An advance payment of the Formula Target Award will be paid quarterly, provided
that financial performance is at least 90% of the quarterly goal. The quarterly
advance will equal 90% of a prorated portion (50%) of the Formula Target Award
for each semi-annual measurement period.
Any payments made as advances for the full period measurement are recoverable
and will be deducted from the actual total award for each participant. In the
event of termination prior to the end of the measurement period, the advance
may also be recovered from wages or other payments due the participant.
VII. NEW HIRES, TERMINATIONS, AND TRANSFERS
New hires after July 1, 1994 may be added to the Plan the month immediately
following their month of hire, if approved by the Committee. Awards will be
prorated based on the number of months in the Plan.
For participants whose employment with the Company terminates during the year,
eligibility to receive an award will be governed by the reason for termination
as follows:
o Voluntary Termination or Termination For Unsatisfactory Performance
Employees who voluntarily terminate during a measurement period will
not receive a bonus payment for that period. If an employee terminates
voluntarily after the completion of a measurement period, they are eligible
to be considered for bonus payout for that period. If an employee were to
voluntarily terminate after the completion of the first semi-annual
measurement period in a fiscal year but before the completion of the second
semi-annual measurement period, they would not be eligible for any
adjustment at fiscal year end on the Company achievement portion of the
bonus.
o Termination due to Retirement, Disability, Layoff or Sale of Business
The Committee will decide the amount and timing of the award
considering the specific circumstances and reason for termination.
Participants that terminate after one half of the measurement period will
normally receive a prorated
<PAGE> 5
ENTEX Information Services, Inc. Page 5
Professional/Management Incentive Plan
shares of the award. No pro-rated awards will be made for participants who
terminate prior to one half of the measurement period.
If a participant is transferred to a new position that is not eligible for an
award under this Plan, the Committee will determine if a pro-rated portion
should be received. If an award is granted, it will be prorated as to the
number of completed months in the Plan prior to transfer. Awards will be paid
on the regularly scheduled payout date.
VIII. UNFUNDED AND UNSECURED
Awards under this plan are payable from the general funds of the Corporation
and no separate fund is established or secured for payment.
IX. RIGHTS TO MODIFY OR CANCEL
The Committee may at any time terminate, suspend or modify the Plan, in whole
or in part.
<PAGE> 1
EXHIBIT 10.21
WARRANT AGREEMENT
-----------------
WARRANT AGREEMENT, dated as of November 15, 1994, among IBM Credit
Corporation, a Delaware corporation ("IBM Credit"), ENTEX Holdings, Inc., a
Delaware corporation ("Holdings"), and ENTEX Information Services, Inc., a
Delaware corporation ("ENTEX").
WHEREAS, by letter agreement dated August 6, 1993, among JWP
Information Services, Inc. ("JWPIS"), Holdings, and International Business
Machines Corporation, a New York corporation, acting through its PC Company
division ("IBM"), in consideration of the payment to IBM of $500,000 by ENTEX,
as the successor in interest of JWPIS, and the agreements of IBM contained
therein, it was agreed that IBM Credit, on behalf of IBM, would receive a
warrant to purchase one per cent (1%) of the shares of Common Stock, par value
$0.001 per share ("Common Stock"), of Holdings, issued and outstanding on a
fully diluted basis on the date hereof, as provided in this Agreement.
NOW THEREFORE, the parties hereto hereby agree as follows:
1. Issuance of Warrant. Simultaneously with the execution
hereof, Holdings shall issue to IBM Credit, its successors and permitted assigns
(as used herein, the term "Holder" shall mean IBM Credit and/or its successors
and permitted assigns, as the context shall require) a Warrant (the "Warrant"),
substantially in the form of Exhibit A attached hereto, to purchase a total of
Six Thousand Six Hundred Sixty-Seven (6,667) shares of Common Stock,
-1-
<PAGE> 2
subject to adjustment pursuant to Section 6 (the "Warrant Shares") for a total
exercise price of Ten Dollars ($10.00) (the "Exercise Price").
2. Exercise of Warrant. (a) The Warrant may be exercised by
the Holder in whole only, at any time, commencing on the date hereof and ending,
unless extended pursuant to the terms of Section 2(b) or 8(b) hereof, on or
before 12:00 Midnight, New York City Time, on July 15, 2001 (the "Expiration
Date").
(b) The Holder may exercise the Warrant by delivering to
Holdings a written notice of exercise substantially in the form attached as
Annex I to Exhibit A (the "Exercise Notice"). The Warrant may be exercised in
whole only and not in part. The Holder's obligation to purchase Warrant Shares
upon any exercise of the Warrant is subject to the conditions that (i) no
preliminary or permanent injunction or other order of any court of competent
jurisdiction prohibiting the purchase, issuance or delivery of the Warrant
Shares shall be in effect and (ii) any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), shall have been terminated or shall have expired; provided, however, that
any failure by the Holder to purchase the Warrant Shares upon exercise of the
Warrant at any Warrant Closing (as hereinafter defined) as a result of the
non-satisfaction of any of such conditions shall not affect or prejudice the
Holder's right to purchase such Warrant Shares upon the subsequent satisfaction
of such conditions. If filings are required to be made pursuant to the HSR Act,
then the applicable date of the Warrant Closing shall be extended to complete
such filings and any applicable waiting period under the HSR Act. The parties
hereto hereby agree to cooperate to prepare and make as promptly as reasonably
practicable any filings required to be made under the HSR Act as a result of any
exercise of the Warrant.
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<PAGE> 3
3. Warrant Closing. The purchase of Warrant Shares by the
Holder upon the exercise of the Warrant shall take place at a closing (the
"Warrant Closing") to be held not later than five (5) business days after the
delivery of the Exercise Notice at a time and place agreed on by the exercising
Holder and Holdings. At each Warrant Closing, (a) Holdings will deliver to the
exercising Holder a certificate or certificates representing the Warrant Shares
being purchased pursuant to the Notice of Exercise, registered in the name of
the exercising Holder, free and clear of all liens, claims, charges and
encumbrances, and (b) the exercising Holder shall pay the purchase price for
such Warrant Shares by delivery to Holdings of a certified or bank cashier's
check payable in New York Clearing House funds to the order of Holdings in the
amount of the Exercise Price.
4. Representations and Warranties of Holdings and ENTEX.
Holdings and ENTEX represent and warrant to the Holder that: (a) each of
Holdings and ENTEX is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the requisite corporate
power to enter into and perform this Agreement; (b) the execution, delivery and
performance by each of Holdings and ENTEX of this Agreement has been duly
authorized by all necessary corporate action on the part of each of Holdings and
ENTEX, respectively, and this Agreement has been duly executed and delivered by
each of Holdings and ENTEX and constitutes a valid and legally binding
obligation of each of Holdings and ENTEX enforceable in accordance with its
terms, except that (i) the enforceability hereof may be subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally and (ii)
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceedings therefor
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<PAGE> 4
may be brought; (c) the authorized capital stock of Holdings consists of
2,000,000 shares of Common Stock of which (i) a total of 633,333 shares are or
will be validly issued and outstanding, fully paid and nonassessable, including
(A) shares issued and outstanding on the date hereof, all of which are validly
issued and outstanding, fully paid and nonassessable, (B) shares reserved for
issuance to members of management of ENTEX, which, upon payment of the purchase
price therefor, will be validly issued and outstanding, fully paid and
nonassessable, and (C) the Warrant Shares, which have been duly reserved for
issuance pursuant to this Agreement and the Warrant, which, upon the exercise of
the Warrant and payment of the exercise price provided for in this Agreement,
will be validly issued and outstanding, fully paid and nonassessable, and (ii)
33,334 shares are reserved for issuance pursuant to the ENTEX Share Plan for the
benefit of employees of ENTEX which shares when issued and paid for in
accordance with such Share Plan will be validly issued and outstanding, fully
paid and nonassessable; (d) the Warrant Shares represent not less than one per
cent (1%) of the shares of Common Stock issued and outstanding on a fully
diluted basis on the date hereof; (e) all of the issued and outstanding capital
stock of ENTEX is owned by Holdings; (f) the execution, delivery and performance
by each of Holdings and ENTEX of this Agreement will not violate or conflict
with (i) their respective Certificates of Incorporation, as amended, or their
respective By-Laws, (ii) any agreement to which Holdings or ENTEX is a party, a
breach or violation of which would have a material adverse effect upon the
condition (financial or otherwise), assets, liabilities, business, operations or
prospects of Holdings or ENTEX or the ability of Holdings or ENTEX to perform
its obligations under this Agreement (an "ENTEX Material Adverse Effect"), (iii)
any license, franchise or permit applicable to Holdings or ENTEX a breach or
violation of which would have an ENTEX Material Adverse Effect or (iv) any law,
regulation,
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order, judgment or decree applicable to Holdings or ENTEX a breach or violation
of which would have an ENTEX Material Adverse Effect; (g) other than (i) as may
be required in connection with or in compliance with the provisions of the HSR
Act, and (ii) by reason of restrictions upon the repurchase of shares of Common
Stock contained in loan agreements to which Holdings, ENTEX or both may be a
party or applicable law, which may limit the ability of Holdings or ENTEX to
perform obligations under Section 7 thereof, no authorization, consent or
approval of, or any filing with, any governmental body or authority or any other
person is necessary for consummation by either Holdings or ENTEX of the
transactions contemplated hereby; (h) except for any claims or proceedings
relating to the restructuring or reorganization of JWP INC. or JWPIS, there are
no actions, suits, investigations or proceedings pending, or, to the knowledge
of Holdings or ENTEX, threatened, against Holdings or ENTEX, at law or in equity
or by any governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign or before any arbitrator of any kind, an
adverse determination of which would have a Material Adverse Effect or which in
any matter draws into question the validity of this Agreement; (i) (i) except as
disclosed in clauses (c) and (d) above (ii) except for the rights set forth in
the Option Agreement (the "IBMCC Option Agreement"), dated as of July 15, 1994,
among IBM Credit, Dort A. Cameron III ("Cameron"), Holdings and ENTEX and (iii)
except for any Conversion Rights (as hereinafter defined) issuable hereunder,
neither Holdings nor ENTEX has outstanding any other shares of capital stock or
securities convertible into or exchangeable for, or options or warrants or other
rights to acquire from Holdings or ENTEX or any other obligation to issue,
directly or indirectly, any shares of capital stock; (j) except for the
registration rights set forth in this Agreement and the IBMCC Option Agreement,
neither Holdings nor ENTEX is under any obligation to cause the registration of
any
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<PAGE> 6
of its currently outstanding capital stock or other securities or any of its
capital stock or other securities that may hereafter be issued; and (k) the sole
business activity of Holdings is its ownership of all of the capital stock of
ENTEX. Except as expressly set forth herein, neither Holdings nor ENTEX makes
any representations or warranties under this Agreement with respect to the
business, assets, liabilities, operations, condition (financial or otherwise),
or prospects of Holdings or ENTEX.
5. Representations and Warranties of IBM Credit. IBM Credit
represents and warrants to Holdings and ENTEX that: (a) IBM Credit is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite corporate power to enter into and
perform this Agreement; (b) the execution, delivery and performance by IBM
Credit of this Agreement has been duly authorized by all necessary corporate
action on the part of IBM Credit, and this Agreement has been duly executed and
delivered by IBM Credit and constitutes a valid and legally binding obligation
of IBM Credit enforceable in accordance with its terms except that (i) the
enforceability hereof may be subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceedings therefor may be brought; (c) the execution, delivery and performance
by IBM Credit of this Agreement will not violate or conflict with (i) in
Certificate of Incorporation or By-Laws, (ii) any agreement to which IBM Credit
is a party which is material to the financial condition or business of IBM
Credit, a breach or violation of which would have a material adverse effect upon
the condition (financial or otherwise), assets,
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<PAGE> 7
liabilities business, operations or prospects of IBM Credit or the ability of
IBM Credit to perform its obligations under this Agreement (an "IBM Credit
Material Adverse Effect"), (iii) any license, franchise or permit applicable to
IBM Credit, a breach or violation of which would have an IBM Credit Material
Adverse Effect, or (iv) any law, regulation, order, judgment or decree
applicable to IBM Credit, a breach or violation of which would have an IBM
Credit Material Adverse Effect; (d) other than as may be required in connection
with or in compliance with the provisions of the HSR Act, no authorization,
consent or approval of, or any filing with, any governmental body or authority
or any other person is necessary for consummation by IBM Credit of the
transactions contemplated hereby; and (e) IBM Credit acknowledges that it has
made its own investigation of Holdings and ENTEX and that, except as expressly
set forth herein, neither Holdings nor ENTEX makes any representations or
warranties under this Agreement with respect to the business, assets,
liabilities, operation, condition (financial or otherwise), or prospects of
Holdings or ENTEX.
6. Certain Adjustments. In the event of any change in the
number of issued and outstanding shares of Common Stock by reason of any stock
dividend, split-up, combination, reclassification, recapitalization, binding
share exchange, merger or consolidation with any other person or other change in
the corporate or capital structure of Holdings (a "Recapitalization Event"), the
exercising Holder shall receive upon its exercise of the Warrant or, if
applicable, the Conversion Rights, the Common Stock or other securities, cash or
property to which such Holder would have been entitled to receive on the date of
the exercise of the Warrant or Conversion Rights as a holder of record of Common
Stock on the record date fixed for determination of holders of Common Stock
entitled to receive such stock or other securities, cash or property, it being
understood that the Exercise Price shall remain unchanged.
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<PAGE> 8
7. Holder's Right to Require Purchase. (a) During the
period commencing on the fifth anniversary of the date hereof and ending on the
Expiration Date, if at the time the Put (as hereinafter defined) is exercised
neither Holdings nor ENTEX has ever been subject to the periodic reporting
requirements of the Securities Exchange Act of 1934, as amended (a "Reporting
Company"), the Holder shall have the irrevocable option (the "Put") to require
Holdings, or at the sole discretion of Holdings, ENTEX, to purchase all, or any
portion of, the Warrant or the Warrant Shares for a total purchase price equal
to the Put Value (as hereinafter defined). If the Holder exercises the Put in
part, then the purchase price to be paid for the Warrant Shares and for the
portion of the Option subject to the exercise of the Put, shall bear the same
proportion to the Put Value as the sum of (x) the number of Warrant Shares owned
by the Holder and subject to the exercise of the Put and (y) the number of
Warrant Shares issuable upon exercise of the portion of the Warrant which is
subject to the exercise of the Put bears to the total number of Warrant Shares
issued or issuable to the Holder upon the exercise of the Warrant.
(b) The Holder may exercise a Put by delivering to ENTEX a
written notice of exercise substantially in the form attached hereto as Exhibit
B (the "Put Exercise Notice"), specifying the portion of the Warrant or Warrant
Shares, as the case may be, to be purchased. Not later than ten (10) days after
receipt of the Put Exercise Notice, Holdings shall notify the exercising Holder
in writing as to whether Holdings or ENTEX will be the purchaser of the Warrant
or Warrant Shares that are the subject of the Put Exercise Notice.
8. Put Closings. (a) The purchase, upon exercise of the
Put, of the Warrant Shares and the portion of the Warrant specified in the Put
Exercise Notice shall take place not later than fifteen (15) business days after
the delivery of the Put Exercise Notice at a time and
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<PAGE> 9
place agreed on by the Exercising Holder and Holdings or ENTEX, as the case may
be ("Put Closing"); provided, however, that Holdings or ENTEX, as the case may
be, may, by written notice to the Holder, adjourn the time of the Put Closing to
a date not later than forty-five (45) business days after the delivery of the
Put Exercise Notice if such adjournment is required in order for ENTEX or
Holdings, as the case may be, to (i) obtain any consents required under
agreements pursuant to which either Holdings or ENTEX has incurred indebtedness
or (ii) obtain any financing required to consummate the purchase contemplated by
the Put Exercise Notice. At each Put Closing, (i) the exercising Holder will
deliver to Holdings or ENTEX, as the case may be, a certificate or certificates
representing the Warrant Shares being purchased pursuant to the Put Exercise
Notice duly registered in the name of the purchaser or accompanied by stock
powers duly endorsed in blank, free and clear of all liens, claims, charges and
encumbrances, together with an instrument of assignment with respect to the
portion of the Warrant which is the subject of the Put Exercise Notice in form
satisfactory to the purchaser, assigning all of the exercising Holder's right,
title and interest in and to the portion of the Warrant which is the subject of
the Put Exercise Notice free and clear of all liens, claims, changes and
encumbrances and (ii) the purchaser shall deliver the purchase price as provided
in Section 8(f).
(b) If neither Holdings nor ENTEX is able to purchase the
Warrant or the Warrant Shares pursuant to a Put Exercise Notice, because (i) (x)
such purchase is precluded by restrictions in agreements pursuant to which
either Holdings or ENTEX has incurred indebtedness, and (y) consents to the
waiver of such restrictions cannot be obtained, or (ii) such purchase would
result in a violation of any law applicable to Holdings or ENTEX, as the case
may be, then the Holder shall withdraw the Put Exercise Notice, and the
Expiration Date shall
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<PAGE> 10
be extended until such time as either Holdings or ENTEX is able to purchase the
Warrant or the Warrant Shares subject to the Put, and at such time the Holder
shall exercise the Put.
(c) For purposes of this Agreement, the "Put Value" shall
mean an amount equal to the product of (i) the Fair Market Value (as hereinafter
defined) of Holdings multiplied by (ii) a fraction, (x) the numerator of which
is the total number of Warrant Shares issued or issuable to the Holder upon
exercise of the Warrant and (y) the denominator of which is the total number of
Fully Diluted Shares (as defined below) outstanding, in each case as of the date
of the Put Closing.
(d) For purposes of this Agreement, the "Fully Diluted
Shares" shall mean the total number of outstanding shares of Common Stock on a
fully diluted basis, giving effect to the exercise of all outstanding options,
warrants (other than the Warrant) and shares and equity participations issued to
or allocable to members of management or employees of ENTEX and the conversion
or exchange of all securities convertible into or exchangeable for shares of
Common Stock.
(e) For purposes of this Agreement, the "Fair Market Value"
shall mean the fair market value of the Fully Diluted Shares of Holdings
substantially as an entirety on a consolidated basis as a going concern, as
determined by an independent investment banker of national reputation selected
jointly by Holdings and the Holder.
(f) The purchase price payable on the exercise of any Put
shall be payable by (i) the payment of 25% thereof at the Put Closing in cash by
wire transfer of immediately available funds to an account or accounts
designated by the exercising Holder and (ii) the delivery by the purchaser
(Holdings or ENTEX, as the case may be), of its unsecured subordinated note (the
"Subordinated Note") substantially in the form of Exhibit C attached
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<PAGE> 11
hereto, having a principal amount equal to the remainder of the purchase price,
bearing interest at a rate equal to the Prime Rate (as such term is defined in
the Third Amended and Restated Agreement for Wholesale Financing between IBM
Credit Corporation and ENTEX, as amended, supplemented or otherwise modified
from time to time (the "Wholesale Financing Agreement")), payable quarterly in
arrears, and providing for payment of principal in three consecutive annual
installments equal to 25% of the Put Value, commencing on the first anniversary
of the Put Closing.
(g) If, at any time while a Subordinated Note is
outstanding, either (i) Holdings or ENTEX becomes a Reporting Company, (ii)
there is a sale of Common Stock to a third party in which the Holder has a right
to participate pursuant to Section 10(a) hereof, or in which the Holder is
required to participate pursuant to Section 10(c) hereof, or (iii) the Holder
receives (x) notice of (A) the entering by Holdings, one or more stockholders of
Holdings, or ENTEX into an agreement in principle with respect to a transaction
in which the Holder would have a right to participate pursuant to Section 10(a)
hereof or would be required to participate pursuant to Section 10(c) hereof, or
(B) the announcement by Holdings or ENTEX of an intention to engage in an
initial public offering of shares of Common Stock or Common Stock of ENTEX (it
being agreed that notice of any such agreement in principle or announcement of
intention shall be given to the Holder not later than two business days after
such agreement or announcement), and (y) notice of prepayment of the
Subordinated Note, then the Holder shall have the right to convert ("Conversion
Rights") the Subordinated Note into a number of shares of Common Stock
("Conversion Shares") equal to the product of (A) the total number of Warrant
Shares that would be issuable if the entire Warrant remained outstanding and
unexercised at such time, multiplied by (B) a fraction, the numerator of which
is the outstanding
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<PAGE> 12
principal amount of the Subordinated Note and the denominator of which is the
Put Value; provided, however, that if the Common Stock have theretofore been
changed, exchange or converted into other securities as a consequence of a
Recapitalization Event, then the number and amount of securities issuable to the
Holder upon the exercise by the Holder of Conversion Right shall be
correspondingly adjusted; and provided, further, that in the case of any
Conversion Right arising by reason of the circumstances described in clause
(iii), such Conversion Rights may be exercised only during the period ending
sixty (60) days after the later to occur of the Holder's receipt of notice under
sub-clause (iii)(x) and the Holder's receipt of notice under sub-clause
(iii)(y). The Conversion Rights may be exercised in whole and not in part. The
Holder may exercise its Conversion Rights by delivering to Holdings a written
notice of exercise substantially in the form attached hereto as Exhibit D (the
"Conversion Notice") not later than 90 days after the occurrence of the event
which gives rise to the Conversion Rights. The closing of the conversion of the
Subordinated Note pursuant to exercise of the Conversion Rights shall take place
not later than five (5) business days after delivery of the Conversion Notice at
a time and place agreed on by the Holder and Holdings (the "Conversion
Closing"). At the Conversion Closing, (i) the exercising Holder shall surrender
the Subordinated Note to Holdings or its designee, together with such other
documents as Holdings may reasonably request to evidence such surrender free and
clear of all liens, claims, charges and encumbrances, and (ii) Holdings shall
deliver to the exercising Holder a certificate or certificates representing the
Conversion Shares registered in the name of the exercising Holder, free and
clear of all liens, claims, charges and encumbrances.
(h) If, at any time, more than one person or entity is
deemed to be a Holder under the terms of this Agreement, then any waiver or
consent, given or required to be given
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<PAGE> 13
pursuant to this Agreement shall be deemed to have been validly taken or given
only if such waiver or consent has been approved in writing by Holders that own
or have the right to acquire a majority of the Warrant Shares and, if
applicable, Conversion Shares (the "Majority Holders"), and such waiver or
consent, if given, shall be binding and conclusive upon all remaining Holders.
9. Certain Covenants. (a) Holdings hereby agrees that the
Holder shall have the right upon reasonable prior written notice and during
normal business hours to inspect the books and records of Holdings for a proper
purpose, as if the Holder were a holder of Common Stock of record on the date
such notice is delivered and to deliver to Holder all information that is given
by Holdings to stockholders of Holdings generally.
(b) All of the books and records of Holdings and its
subsidiaries will be maintained in accordance with generally accepted accounting
principles, consistently applied.
(c) Each of Holdings and ENTEX will, and will cause each of
its subsidiaries to, preserve and maintain its corporate existence and all of
the rights, privileges and franchises necessary or desirable in the ordinary
course of business and conduct its business in a regular manner; comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental body or authority, a violation of which would be reasonably likely
to have a Material Adverse Effect; pay and discharge all material taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any property belonging to it, prior to the date on
which penalties attach thereto, and all lawful claims that, if unpaid, might
become a lien upon the property of Holdings, ENTEX or any such subsidiary,
provided that neither Holdings nor ENTEX nor any such subsidiary shall be
required to pay any such tax, assessment, charge, levy or claim, the payment of
which is being contested in good faith and
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<PAGE> 14
by proper proceedings if it maintains adequate reserves with respect thereto;
and keep all of its properties necessary to the conduct of its business in good
working order and condition (taking into consideration, however, the condition
of such properties at the time such properties were acquired by Holdings, ENTEX
or such subsidiary), ordinary wear and tear excepted.
(d) Each of Holdings and ENTEX agrees to deliver to the
Holder such information concerning the business affairs and financial condition
of Holdings and its subsidiaries as it is obligated to deliver to the holder of
the option granted under the IBMCC Option Agreement.
(e) Neither Holdings nor ENTEX will enter into any
transaction (other than transactions between Holdings and members of the
management of ENTEX pursuant to management equity arrangements in effect from
time to time and any other transaction permitted by the Third Amendment and
Restated Agreement for Wholesale Financing dated as of August 6, 1993 (the
"Wholesale Financing Agreement"), between IBMCC and ENTEX, as the same may be
amended or modified from time to time, with or for the benefit of any Affiliates
except on terms no less favorable to Holdings or ENTEX, as the case may be, than
could be obtained in a comparable arm's-length transaction with an unaffiliated
person.
(f) Holdings will not amend or otherwise modify, or permit
to occur any amendment of modification of, the Certificate of Incorporation of
Holdings as in effect on the date hereof, if such amendment or modification
would alter or change the powers, preferences or rights of the shares of the
Common stock that would materially and adversely affect the Holder.
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<PAGE> 15
(g) Holdings will at all times following the issuance of the
Conversion Rights reserve such number of shares of its Common Stock as will be
sufficient to permit the exercise in full of all Conversion Rights issued to the
Holder.
(h) Each of Holdings and ENTEX will provide to the Holder at
least thirty (30) days' prior written notice of (x) any proposed sale or other
transfer by ENTEX of more than 50% of its assets to a person other than Holdings
or a subsidiary of Holdings or (y) any proposed transaction which, if
consummated, would result in Holdings ceasing to own, directly or indirectly,
more than 50% of the outstanding capital stock of ENTEX entitled to vote
generally in the election of directors.
10. Sales to Third Parties. (a) If at any time prior to the
Expiration Date, Cameron or any Affiliate of Cameron proposes to sell shares of
Common Stock beneficially owned by any of them (as used herein, "beneficial
ownership" refers to shares with respect which Cameron or Affiliates of Cameron,
as the case may be, possesses the power to dispose or direct the disposition),
and the total number of shares of Common Stock proposed to be sold in such
transaction represents at least 20% of the Fully Diluted Shares, then Cameron
shall deliver to the Holder written notice of such proposed sale which shall set
forth the proposed date of such sale, the proposed purchaser, the total number
of shares of Common Stock proposed to be sold, the proposed purchase price and
type of consideration (including, if the purchase price consists in whole or in
part of non-cash consideration, such information available to Cameron and his
Affiliates as may be reasonably necessary for the Holder to properly analyze the
economic value and investment risk of such non-cash consideration) and the other
material terms and conditions of the purchase ("Notice of Intent to Sell"), and
the Holder shall have the opportunity, subject to the terms of this Section
10(a), to sell to such proposed purchaser, at the
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same price per share and on the same terms and conditions as Cameron, a pro rata
portion of the Warrant Shares, Conversion Shares, or both Warrant Shares and
Conversion Shares, then owned by or issuable to the Holder that the Holder
proposes to sell, as notified to the Grantor pursuant to Section 10(b), based
upon the proportion that the total number of shares of Common Stock proposed to
be sold pursuant to the Notice of Intent to Sell bears to the total number of
shares of Common Stock (including the Warrant Shares, Conversion Shares or both
Warrant Shares and Conversion Shares that the Holder wishes to sell)
beneficially owned by Cameron (excluding all Warrant Shares then issuable to the
Holder, to the extent the Warrant remains unexercised), his Affiliates, the
Holder and all other security holders intending to participate in such proposed
sale.
(b) If the Holder wishes to participate in any sale under
Section 10(a) hereof, the Holder shall notify Cameron and Holdings in writing of
such intention and of the number of Warrant Shares, Conversion Shares or both
Warrant Shares and Conversion Shares proposed to be sold by the Holder not later
than seven (7) business days after receipt of the Notice of Intent to Sell.
(c) Notwithstanding any other provision of this Agreement,
if Cameron, Affiliates of Cameron, or both propose to sell or exchange (in a
business combination or otherwise) the Common Stock beneficially owned by them
in a bona fide arm's-length transaction, involving the sale or exchange of at
least 50% of the outstanding Common Stock, then Cameron, at his option, may
require that the Holder (A) sell or exchange in the same transaction a portion
of the Warrant Shares, Conversion Shares or both Warrant Shares and Conversion
Shares then owned by or issuable to the Holder in the same proportion as the
number of shares of Common Stock proposed to be sold or exchanged by Cameron
bears to the
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total number of shares of Common Stock (excluding all Warrant Shares issuable to
the Holder, to the extent that the Warrant remains unexercised) beneficially
owned by Cameron and his Affiliates and (B) if stockholder approval of the
transaction is required, that the Holder vote its shares of Common Stock in
favor thereof. In any such sale or exchange, the Holder shall receive for its
shares the identical consideration payable per share of Common Stock to all
other holders of shares of Common Stock participating in such sale or exchange
At least thirty (30) days prior to the date of such proposed sale or exchange,
Cameron shall deliver to the Holder written notice of such proposed sale or
exchange which shall set forth the proposed date of such sale or exchange, the
proposed purchaser, the total number of shares of Common Stock proposed to be
sold or exchanged, the number of shares of Common Stock (excluding the Option
Shares, as defined in the IBMCC Option Agreement) beneficially owned by Cameron
and his Affiliates, the amount and type of consideration (including, if the
consideration consists in whole or in part of non-cash consideration, such
information available to Cameron and his Affiliates as may be reasonably
necessary for the Holder to properly analyze the economic value and investment
risk of such non-cash consideration) and the other material terms of such
proposed sale or exchange. Notwithstanding any provision to the contrary
contained in this Section 10(c), (i) the Holder shall not be obligated to
participate in any such sale or exchange unless the Holder is entitled to rely
upon any opinion of counsel received by Cameron, Holdings or ENTEX, (ii) the
Holder shall not be required to make any representation or warranty in
connection with any such sale or exchange other than representations and
warranties as to its authority, the enforceability of its obligations and
ownership of the Warrant Shares, Conversion Shares or both Warrant Shares and
Conversion Shares, to be sold or exchanged by it, free and clear of all liens,
claims, charges and encumbrances, and (iii) Holdings, ENTEX and Cameron jointly
and severally agree to
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indemnify and hold harmless, to the fullest extent permitted by applicable law,
the Holder from and against all losses, claims, damages, liabilities, costs,
expenses (including, but not limited to, reasonable attorney's fees) arising out
of or relating to, claims made by third parties in connection with such sale or
exchange.
(d) For purposes of this Agreement, an "Affiliate" of any
particular person or entity shall mean any person or entity that directly or
indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with, such person or entity.
(e) The Holder shall not be obligated to pay any of the
fees, costs and expenses incurred in connection with any sale or exchange
described in this Section 10, other than its own legal fees, costs and expenses.
11. Restrictive Legend. Except as otherwise provided in this
Section 11, each certificate representing Warrant Shares or Conversion Shares
delivered to the Holder, and each certificate representing Common Stock issued
to any subsequent transferee of any such certificate, shall be stamped or
otherwise imprinted with a legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAW. NO TRANSFER OF THE SHARES REPRESENTED BY THIS
CERTIFICATE SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS
MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND IN COMPLIANCE
WITH ANY APPLICABLE STATE SECURITIES LAW, (B) SUCH TRANSFER IS TO AN
AFFILIATE OF THE HOLDER, (C) THE HOLDER OF THE SECURITIES PROPOSED
TO BE TRANSFERRED SHALL HAVE DELIVERED TO ENTEX HOLDINGS, INC.
EITHER A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION OR AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES
MATTERS TO THE EFFECT
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<PAGE> 19
THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND OF ANY APPLICABLE STATE SECURITIES LAWS
, WHICH OPINION IS IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO
ENTEX HOLDINGS, INC. OR (D) SUCH TRANSFER IS PURSUANT TO RULE 144
UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO ENTEX
HOLDINGS, INC. A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING
SUCH RULE TO THE PROPOSED TRANSFER."
12. Transfers. Neither the Warrant nor the Warrant Shares
nor the Conversion Shares shall be transferred to any person other than an
Affiliate of the Holder other than pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "Securities Act")
and any applicable state securities laws or an exemption from the registration
provisions thereof. Each certificate, if any, evidencing such shares of Common
Stock issued upon any such transfer, other than in a public offering pursuant to
an effective registration statement shall bear the restrictive legend set forth
in Section 11, unless in the opinion of counsel to the transferring Holder, such
legend is not required for the purposes of compliance with the Securities Act.
The Holder shall not be entitled to transfer the Warrant or the Warrant Shares
or the Conversion Shares except in accordance with this Section 12.
13. Demand Registration. (a) At any time after the date on
which Holdings, on its behalf and or on behalf of any of its security holders,
has (i) a registration statement under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), declared effective by the Securities and Exchange
Commission (the "Commission") and has a class of equity securities listed or
admitted to trading on any securities exchange or NASDAQ or (ii) has a
registration statement under the Securities Act on any form (other than a
registration statement on Form S-8, or any successor form for securities to be
offered to employees of Holdings pursuant to any employee benefit plan) declared
effective by the Commission (in the case of either clause (i) or
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<PAGE> 20
(ii), the "Effectiveness Date"), upon the written request of the Holder (whether
or not the Warrant has been exercised) or, if such rights are being exercised
with respect to the Conversion Shares, the holder of a majority of the
Conversion Shares (determined as if the Conversion Rights, if any, had been
exercised in their entirety) (the Warrant Shares and the Conversion Shares being
referred to collectively herein as the "Registrable Securities"), so long as IBM
Credit (or its assignee) has exercised its rights under Section 15 of the IBMCC
Option Agreement, Holdings shall be obligated to prepare and file and to use its
best efforts to effect the registration under the Securities Act of such
Registrable Securities (to the extent then owned by or issuable to the Holder)
as may be requested by the Holder, all in accordance with the following
provisions of this Agreement; provided, however, that Holdings shall not be
required to effect a registration of Registrable Securities: (A) more than one
(1) time; (B) within 120 days after the Effectiveness Date of a registration
statement with respect to which such Holder has had an opportunity to
participate without restriction as to amount in a "Piggy-Back Registration," as
set forth in Section 14 hereof; and (C) within the shorter of (aa) 270 days
following the Effectiveness Date of the initial registration statement of Common
Stock of Holdings and (bb) the period following the Effectiveness Date of the
initial registration statement of Common Stock during which Holdings, its
officers and directors and selling security holders are prohibited from selling
any shares of Common Stock pursuant to an agreement with any underwriters
engaged in the offering of Holdings securities; and, provided, further, that
Holdings may delay the filing or delay the effectiveness of a registration
statement required by this Section 13, for a period not to exceed 60 days in the
aggregate if Holdings shall have determined, upon the advice of counsel, that
Holdings would be required to disclose any actions taken or proposed to be taken
by Holdings in good faith and for valid business reasons, including without
limitation, the
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<PAGE> 21
incurring by Holdings of indebtedness, which disclosure would have a material
adverse effect on Holdings or such actions and Holdings provides notice to the
Holder of any such delay. It is understood and agreed that a registration
initiated pursuant to this Section 13 shall not be deemed to have been effected
until such registration has been declared effective under the Securities Act and
the Registrable Securities included in such registration have actually been
sold, unless such sale fails to occur by reason of a breach by the Holder of any
obligation of the Holder in connection therewith.
(b) Whenever Holdings shall be required pursuant to this
Section 13 to effect the registration of any of the Registrable Securities under
the Securities Act, Holdings shall promptly give written notice of such proposed
registration to the Holder and thereupon shall file a registration statement
within 60 days after the giving of such written request and use its best efforts
to effect, as expeditiously as possible, the registration under the Securities
Act of the Registrable Securities which Holdings has been requested to register
pursuant to this Section; all to the extent requisite to permit the disposition
by the Holder of such Registrable Securities.
(c) If a registration statement filed pursuant to a request
made under this Section 13 relates to an underwritten offering, and the managing
underwriter advises Holdings and the Holder in writing that in its opinion the
number of Registrable Securities requested to be included in such registration
exceeds the number which can be sold in such offering without adversely
affecting the marketability of such Registrable Securities or the price at which
such securities can be sold, Holdings will include in such registration (i)
first, all of the securities requested to be registered pursuant to the IBMCC
Option Agreement, (ii) second, all of the Registrable Securities requested to be
registered by the Holder, and (iii) third, other securities requested to be
included in such registration, pro rata among the respective holders of such
other
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<PAGE> 22
securities (if, and to the extent permitted, by such managing underwriter). If
any of Holdings or ENTEX shall at any time provide to any person rights with
respect to the registration of Common Stock under the Securities Act which are,
in the reasonable judgment of the Holder, on terms or conditions that are more
favorable to such person than the terms and conditions provided for in this
Section 13, Holdings and ENTEX shall provide (by way of amendment to this
Agreement or otherwise) such more favorable terms or conditions to the Holder.
14. Piggy-Back Registration. (a) If Holdings, at any time,
proposes to file on its behalf and/or on behalf of any of its security holders,
a registration statement under the Securities Act on any form (other than a
registration statement on Form S-8 or any successor form for securities to be
offered to employees of Holdings pursuant to any employee benefit plan or Form
S-4 or any successor form for securities to be offered in a transaction of the
type referred to in Rule 145 under the Securities Act) for the registration of
any class of its equity securities (as defined in Section 3(a)(11) of the
Exchange Act), other than a registration statement for a primary initial public
offering by Holdings in which no other security holders of Holdings are
participating, it will give written notice to the Holder as promptly as
reasonably possible, but in no event later than thirty (30) days prior to the
initial filing with the Commission of such registration statement, which notice
shall set forth the intended method of disposition of the securities proposed to
be registered by Holdings. The notice shall offer to include in such filing such
issued Registrable Securities, and such Registrable Securities issuable to the
Holder as the Holder may request, on the same terms and conditions as are
applicable to Holdings or other selling security holders.
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<PAGE> 23
(b) If the Holder desires to have Registrable Securities
registered under this Section 14, it shall advise Holdings in writing within
fifteen (15) days after the date of receipt of such offer from Holdings, setting
forth the number of such Registrable Securities for which registration is
requested. Holdings shall thereupon include in such filing the number of
Registrable Securities for which registration is so requested, subject to the
next sentence, and shall use its best efforts to, effect registration under the
Securities Act of such securities; provided, however, that Holdings may, at any
time, abandon any offering in which any such Registrable Securities would
otherwise be required to be included hereunder. If the managing underwriter of a
proposed underwritten public offering of Common Stock shall advise Holdings in
writing that, in its opinion, the distribution of the Registrable Securities
requested to be included in the registration concurrently with the securities
being registered by Holdings and any other shareholders of Holdings would
materially and adversely affect the distribution of such securities, then the
number of Registrable Securities determined by such underwriter to be the
maximum number capable of being included in such registration shall be allocated
as follows: (i) if the offering was initiated as a primary offering by Holdings,
first to the shares sought to be included by Holdings and second, to the shares
sought be included by the Holder and by any other shareholders of Holdings in
proportion to the number of shares sought be included by them in such
registration: and (ii) if the offering is a secondary offering initiated by
other shareholders of Holdings, first to the shares sought to be included by
such shareholders and by the Holder, in proportion to the numbers of shares
sought to be included by them in such registration, then to any shares sought to
be included by Holdings or any other shares in such registration. Except as
otherwise provided in Section 16, all expenses of any such registration shall be
borne by Holdings.
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<PAGE> 24
15. Registration Procedures. If Holdings is required by the
provisions of this Agreement to effect the registration of any Registrable
Securities under the Securities Act, Holdings shall, as soon as practicable:
(a) prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for a period of time
required for the disposition of such securities by the holders thereof;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the sale or
other disposition of all securities covered by such registration statement until
the earlier of such time as all of such securities have been disposed of in a
public offering or the expiration of nine months from the effective date of the
registration statement;
(c) furnish to the Holder such number of copies of a summary
prospectus or other prospectus (including, without limitation, a preliminary
prospectus) in conformity with the requirements of the Securities Act (in each
case including all exhibits), together with such other documents as the Holder
may reasonably request;
(d) use its best efforts to register or qualify the
securities covered by such registration statement under such other securities or
blue sky laws of such jurisdictions within the United States and Puerto Rico as
the Holder shall reasonably request (provided, however, that Holdings shall not
be obligated to qualify as a foreign corporation to do business under the laws
of any jurisdiction in which it is not then qualified, to file any general
consent to service
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<PAGE> 25
of process under the laws of any such jurisdiction or to do any such act that
would subject Holdings to the payment of taxes in any such jurisdiction), and do
such other reasonable acts and things as may be required of it to enable the
Holder to consummate the disposition in such jurisdiction of the securities
covered by such registration statement;
(e) use its best efforts to otherwise comply with all
applicable rules and regulations of the Commission and make available to its
securities holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months beginning with the first month of
the first fiscal quarter after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of Section 11
(a) of the Securities Act;
(f) provide and cause to be maintained, a transfer agent and
registrar for the Registrable Securities covered by such registration statement
from and after a date not later than the effective date of such registration
statement;
(g) if requested by the underwriters for any underwritten
offering on behalf of the Holder pursuant to a registration requested hereunder,
Holdings will enter into an underwriting agreement with such underwriters for
such offering, such agreement to contain such representations and warranties by
Holdings and such other terms and provisions as are customarily contained in
underwriting agreements with respect to secondary distributions, including
without limitation, indemnities to the effect and the extent provided in Section
17. The Holder shall be a party to any such underwriting agreement and the
representations and warranties by, and the other agreements on the part of,
Holdings to and for the benefit of such underwriters, shall also be made to and
for the benefit of the Holder. The Holder shall not be required by Holdings to
make any representations or warranties to or agreement with Holdings or the
underwriters other than reasonable and customary representations, warranties or
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<PAGE> 26
agreements regarding the Holder, the Registrable Securities and the Holder's
intended method or methods of disposition and any other representation required
by law;
(h) make available for inspection by the Holder, any
underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by such Holder or
underwriter, all financial or other records, pertinent corporate documents and
properties of Holdings, and cause Holdings' officers, directors, employees and
independent accountants to supply all information reasonably requested by the
Holder or any such underwriter, attorney, accountant or agent in connection with
such registration statement; provided that Holdings shall have no obligation to
make such information available to any person or entity which (A) is a direct
competitor of Holdings or (B) refuses to execute a confidentiality agreement
reasonably satisfactory to Holdings with respect to information not required by
such person or entity to be disclosed under the Securities Act or the Exchange
Act;
(i) furnish, at the written request of the Holder if the
Holder requests registration of Registrable Securities pursuant to Section 13 or
14, on the date that such Registrable Securities are delivered to the
underwriters for sale pursuant to such registration or, if Registrable
Securities are not being sold through underwriters, on the date that the
registration statement with respect to such Registrable Securities becomes
effective, (1) an opinion in customary form, dated such date, of the counsel
representing Holdings for the purposes of such registration, addressed to the
underwriters, if any, and to the Holder covering such matters as such
underwriters or the Holder may reasonably request and (2) a letter (the "Comfort
Letter") in customary form dated such date, from the independent certified
public accountants of Holdings, addressed to the underwriters, if any, and to
the Holder covering such matters as such underwriters or the Holder may
reasonably request (and, if such accountants refuse to deliver
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<PAGE> 27
such letter to the Holder, then the Comfort Letter shall be addressed to
Holdings and accompanied by a letter addressed to the Holder stating that they
may rely on the comfort letter addressed to Holdings);
(j) enter into such other customary agreements and take such
other actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities being registered;
(k) if requested by the Holder, prior to filing a
registration statement or prospectus or any amendment or supplement thereto,
furnish to the Holder and each underwriter, if any, of the Registrable
Securities covered by such registration statement, copies of such registration
statement, or amendment or supplement, as proposed to be filed; (1) after the
filing of any registration statement with respect to any Registrable Securities,
notify the Holder of any stop order issued or threatened by the Commission and
take all reasonable actions required to prevent the entry of such stop order or
to remove it if entered; and (m) use its best efforts to cause the Registrable
Securities to be registered to be listed on each national securities exchange on
which like securities issued by Holdings are then listed. It shall be a
condition precedent to the obligation of Holdings to take any action pursuant to
this Agreement in respect of the securities which are to be registered at the
request of the Holder that the Holder shall furnish to Holdings such information
regarding the securities held by the Holder and the intended method of
disposition thereof, as Holdings shall reasonably request and as shall be
required in connection with the action taken by Holdings.
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The managing underwriter or underwriters, for any offering of
Registrable Securities to be registered pursuant to Section 13, shall be
selected by the Holder and shall be reasonably acceptable to Holdings.
16. Expenses. Holdings shall bear all expenses incurred in
connection with any offering of securities contemplated by this Agreement,
including, without limitation, all registration and filing fees (including all
expenses incident to filing with the National Association of Securities
Dealers), printing expenses, fees and disbursements of counsel for Holdings,
expenses of any special "comfort letters" incident to or required by any such
registration and expenses of complying with the securities or blue sky laws of
any jurisdictions pursuant to Section 15(d), except that Holdings shall not be
liable for any fees, discounts or commissions to any underwriter with respect to
the sale of securities contemplated by this Agreement, any fees or expenses of
any brokers effecting the sale of securities contemplated by Sections 13 or 14,
the fees and expenses of any counsel to the Holder hereunder, or any expenses of
any special audits required in connection with a registration pursuant to
Section 13 hereof, beyond the annual audited financial statements of Holdings or
ENTEX.
17. Indemnification and Contribution. (a) In the event of
any registration of any of the Registrable Securities under the Securities Act
pursuant to Section 13 or 14, Holdings shall indemnify and hold harmless each
Holder of such Registrable Securities, such Holder's directors and officers and
each other person (including each underwriter) who participated in the offering
of such Registrable Securities and each other person, if any, who "controls"
(within the meaning of the Securities Act) such Holder or such participating
person against any losses, claims, damages or liabilities, joint or several, to
which such Holder or any such director or officer or participating person or
person "controlling" such person may become subject under
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<PAGE> 29
the Securities Act or any other statute or at common law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (i) any alleged untrue statement of any fact contained in
any registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, or (ii) any alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and shall reimburse such Holder or such
director, officer or participating person or person "controlling" such person
for any legal or any other expenses reasonably incurred by such Holder or such
director, officer or participating person or person "controlling" such person in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that Holdings shall not be liable in any
such case to the extent that any such loss, claim, damage or liability arises
out of or is based upon any alleged untrue statement or alleged omission made in
such registration statement, preliminary prospectus, prospectus or amendment or
supplement in reliance upon and in conformity with written information furnished
to Holdings by the Holder seeking indemnification or reimbursement hereunder for
use therein or (in the case of any registration pursuant to Section 13) so
furnished for such purposes by the underwriter seeking indemnification or
reimbursement hereunder for use thereon; provided further, however, that the
foregoing indemnity agreement is subject to the condition that, insofar as it
relates to any alleged untrue statement or alleged omission in any preliminary
prospectus but eliminated or remedied in the final prospectus, such indemnity
agreement shall not inure to the benefit of any underwriter from whom the person
asserting any such loss, claim, damage, liability or action purchased the
securities which are the subject thereof (or to the benefit of any person who
"controls" such underwriter), if a copy of the final prospectus was not sent or
given
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to such person with or prior to the written confirmation of the sale of such
securities to such person and the delivery thereof would have constituted a
defense to the claim by such person; and provided further, however, that
Holdings shall not, in connection with any one such action or proceeding or
separate but substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys (and appropriate local counsel) at any time for all indemnified
parties under this Section 17 which firm shall be designated in writing by such
indemnified parties. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Holder or such
director, officer or participating person or person "controlling" such person,
and shall survive the transfer of such securities by such Holder.
(b) Each Holder of Registrable Securities that are included
in any registration statement pursuant to Sections 13 or 14, by acceptance
thereof, agrees to indemnify and hold harmless Holdings, its directors and
officers and each other person who "controls" Holdings within the meaning of the
Securities Act against any losses, claims, damages or liabilities, joint or
several, to which Holdings or any such director or officer or any such person
may become subject under the Securities Act or any other statute or at common
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon information in writing provided
to Holdings by such Holder of Registrable Securities contained in any
registration statement under which securities were registered under the
Securities Act at the request of such Holder, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereto.
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(c) If the indemnification provided for in this Section 17
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or related to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 17(c) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11 (f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
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(d) Promptly after receipt by an indemnified party of notice
of the commencement of any action or proceeding involving a claim referred to in
the preceding subdivisions of this Section 17, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action; provided,
however, that the failure so to notify the indemnifying party shall not relieve
it from any liability which it may have under this Section 17 except to the
extent it has been prejudiced in any material respect by such failure. In case
any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party may assume the defense of such claim, to the extent that it
may wish, with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
consent of the indemnified party, consent to entry of any judgment or enter into
any settlement of such proceedings which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a complete and unconditional release from all liability in respect of such
claim or litigation.
(e) The indemnification required by this Section 17 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred.
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18. Opinion of Counsel. Simultaneously with the execution
and delivery of this Agreement, the Holder shall receive an opinion of Reid &
Priest, counsel to the Grantor and Holdings, substantially in the form attached
hereto as Exhibit E.
19. Expenses. Except as otherwise specified in Sections 16
and 17, each party hereto shall pay its or his own expenses incurred in
connection with this Agreement.
20. Amendment. The provisions of this Agreement may not be
modified, amended, altered or supplemented receipt upon the execution and
delivery of a written agreement executed by the Holder of a majority of the
Warrant Shares and Conversion Shares (determined as if the Warrant and
Conversion Rights, if any, had been exercised in their entirety) and the
provisions of this Agreement applicable to Holdings or ENTEX may not be
modified, amended, altered or supplemented except upon the execution and
delivery of a written agreement executed by Holdings or ENTEX, as the case may
be. Provisions of this Agreement relating to Cameron or Affiliates of Cameron
may not be modified, amended, altered or supplemented except upon the execution
and delivery of a written agreement executed by Cameron.
21. Assignment. No party to this Agreement may assign any of
its rights or obligations under this Agreement without the prior written consent
of the other parties hereto, except IBM may assign its rights hereunder to any
Affiliate of IBM without the consent of Holdings or to any other person with the
consent of Holdings.
22. Confidentiality. So long as neither Holdings nor ENTEX
has become a Reporting Company, the Holder agrees to keep the terms of this
Agreement confidential, except that the Holder may disclose this Agreement or
the terms hereof if such disclosure is required by law in the opinion of counsel
to the Holder (including, without limitation, any federal or state securities
law). The Holder further agrees to keep confidential any information regarding
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Holdings or ENTEX disclosed to it by Holdings or ENTEX pursuant to this
Agreement unless (i) in the opinion of counsel to the Holder, disclosure of such
information is required by law (including, without limitation, any federal or
state securities law), (ii) such information is generally available to the
public or (iii) such information was disclosed to the Holder by a party other
than Holdings or ENTEX that is not subject to any agreement restricting the
disclosure of such information. Nothwithstanding the generality of the preceding
two sentences, the Holder shall be permitted to disclose this Agreement, the
terms hereof or any such information (i) to its Affiliates, (ii) to its legal
counsel and independent auditors or independent certified public accountants,
(iii) upon the order or express direction of any court or government agency or
authority, (iv) to the extent reasonably required in connection with any
litigation to which one or more of the Holders, Cameron, ENTEX or Holdings are a
party adverse to one another, or (v) to the extent reasonably required in
connection with the enforcement of any rights hereunder. Holdings and ENTEX
agree to consult with the Holder before disclosing this Agreement or the terms
thereof to any third party, it being understood and agreed that such disclosure
may be required to be made by Holdings or ENTEX in connection with the obtaining
of financing or for other proper business purposes. If the Holder receives a
request to disclose all or any portion of this Agreement or the material terms
hereof under terms of a subpoena, order, civil investigative demand or similar
process or other oral or written request issued by a court of competent
jurisdiction or by a federal, state or local governmental regulatory body or
agency, the Holder agrees, to the extent reasonably practicable, to notify
Holdings and ENTEX of the existence, terms and circumstances surrounding such
request so that Holdings or ENTEX may seek an appropriate protective order or
waive compliance with this Section 22, and, to consult with Holdings and ENTEX
concerning the advisability of taking appropriate legal steps to resist
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or narrow such a request. If, failing the entry of a protective order or the
receipt of a waiver hereunder or a mutually agreeable narrowing of such request,
the Holder, in the opinion of its counsel, is compelled to disclose the terms of
this Agreement or such information, then the Holder may disclose such terms or
such information which its counsel advises the Holder that the Holder is
compelled to disclose.
23. Notices. All notices and other communications hereunder
shall be in writing and shall be given and shall be deemed to have been duly
given if delivered in person, by overnight delivery or facsimile transmission,
with transmission confirmed, to the parties as follows:
If to Cameron:
Mr. Dort A. Cameron III
c/o Airlie Group L.P.
115 East Putnam Avenue
Greenwich, CT 06830
Facsimile No: (203) 661-0479
If to Holdings:
ENTEX Holdings, Inc.
Six International Drive
Rye Brook, NY 10573
Attention: President
Facsimile No: (914) 935-3720
If to ENTEX:
ENTEX Information Services, Inc.
Six International Drive
Rye Brook, NY 10573
Attention: President
Facsimile No: (914) 955-3720
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<PAGE> 36
in each case with a copy to:
Reid & Priest
40 West 57th Street
New York, NY 100 19
Attention: Richard S. Green, Esq.
Facsimile No: (212) 603-2298
If to IBM Credit:
IBM Credit Corporation;
290 Harbor Drive
P.O. Box 10399
Stamford, Connecticut 06904-2399
Attention: Director, Working Capital
Financing Support
Facsimile No: (203) 973-5210
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt.
24. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same document.
25. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without reference
to the conflict of laws principles thereof.
26. Binding Effect. This Agreement shall be binding upon,
inure to the benefit of, and be enforceable by the heirs, personal
representatives, successors and assigns of the parties hereto. Nothing expressed
or referred to in this Agreement is intended or shall be construed to give any
person other than the parties to this Agreement, or their respective heirs,
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personal representatives, successors or assigns, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision contained
herein.
27. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof.
28. Severability. If any term, provision, covenant or
restriction of this Agreement, is held by a court of competent jurisdiction to
be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
29. Further Assurances. The Grantor will, upon the request
of the Holder, execute and deliver such documents and take such action
reasonably deemed by the Holder to be necessary or desirable to more effectively
complete and evidence the sale and transfer of any Option Shares or Conversion
Shares purchased by the Holder pursuant to this Agreement.
30. Miscellaneous. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
* * * * *
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<PAGE> 38
IN WITNESS WHEREOF, the undersigned have hereunto set their names as
of the day and year first above written.
ENTEX HOLDINGS, INC.
BY: /s John A. McKenna
Name: John A. McKenna, Jr.
Title: President
ENTEX INFORMATION SERVICES, INC.
By: /s/ John A. McKenna
Name John A. McKenna, Jr.
Title: President
IBM CREDIT CORPORATION
By:
---------------------------------
Name:
Title:
AGREED as to Section 10 hereof.
/s/ Dort A. Cameron
Dort A. Cameron III
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<PAGE> 39
IN WITNESS WHEREOF, the undersigned have hereunto set their names as
of the day and year first above written.
ENTEX HOLDINGS, INC.
By:
---------------------------------
Name:
Title:
ENTEX INFORMATION SERVICES, INC.
By:
---------------------------------
Name:
Title:
IBM CREDIT CORPORATION
By:/s/ Philip N. Morse
Name: Philip N. Morse
Title: Director, Remarketer Finance
Portfolio Controls
AGREED as to Section 10 hereof.
- -------------------------------
Dort A. Cameron III
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<PAGE> 1
Exhibit 10.22
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of July 15, 1997 (this "Agreement"),
between IBM Credit Corporation, a Delaware corporation ("IBM Credit"), and ENTEX
Information Services, Inc., a Delaware corporation ("ENTEX").
WHEREAS, pursuant to Section 5(C) of Amendment No. 8 dated as of
July 15, 1997 ("Amendment No. 8") to the Fourth Amended and Restated Agreement
for Wholesale Financing dated as of September 15, 1995, between IBM Credit and
ENTEX, it was agreed that IBM Credit would receive warrants (the "Warrants") to
purchase shares of Common Stock, par value $0.001 per share ("Common Stock"), of
ENTEX, in the amounts, at the times and subject to the terms and conditions
contained in this Agreement, in consideration for, among other things, the
execution and delivery by IBM Credit of Amendment No. 8, as provided in this
Agreement.
NOW THEREFORE, the parties hereto hereby agree as follows:
1. Issuance of Warrants. ENTEX shall issue to IBM Credit, its
successors and permitted assigns (as used herein, the term "Holder" shall mean
IBM Credit and/or its successors and permitted assigns, as the context shall
require) Warrants (the "Warrants"), substantially in the form of Exhibit A
attached hereto, to purchase shares of Common Stock, subject to adjustment
pursuant to Section 6 (the "Warrant Shares") at an exercise price of Thirty-
<PAGE> 2
Seven Dollars and Seventy-Five Cents ($37.75) per share (the "Exercise Price"),
covering the number of shares of Common Stock on the dates set forth below.
Percentage
Date of Issuance Number of Shares of Primary Shares
- ---------------- ------- ----
Date Hereof 33,447 0.50%
October 15, 1997 16,724 0.25%
December 15, 1997 16,724 0.25%
January 15, 1998 33,447 0.50%
February 15, 1998 33,448 0.50%
- ------------------ ------- -----
133,790 2.00%
provided, however, that ENTEX shall not be required to issue Warrants on or
after the payment by ENTEX in full of the Short Term Loan (as such term is
defined in Amendment No. 7 dated as of December 1, 1996, to the Fourth Amended
and Restated Agreement for Wholesale Financing dated as of September 15, 1995,
between IBM Credit and ENTEX).
2. Exercise of Warrants; Conversion Rights. (a) The Warrants may
be exercised by the Holder in whole or in part at any time, commencing on the
date hereof and ending, unless extended pursuant to the terms of Section 2(b)
hereof, on or before 12:00 Midnight, New York City Time, on July 31, 2004 (the
"Expiration Date").
(b) The Holder may exercise the Warrants by delivering to
Holdings a written notice of exercise substantially in the form attached as
Annex I to Exhibit A (the "Exercise Notice"). The Warrants may be exercised in
whole or in part. The Holder's obligation to purchase Warrant Shares upon any
exercise of Warrants is subject to the conditions that (i) no preliminary or
permanent injunction or other order of any court of competent jurisdiction
prohibiting the purchase, issuance or delivery of the Warrant Shares shall be in
effect and (ii) any applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976,
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<PAGE> 3
as amended (the "HSR Act"), shall have been terminated or shall have expired,
provided, however, that any failure by the Holder to purchase the Warrant Shares
upon exercise of the Warrants at any Warrant Closing (as hereinafter defined) as
a result of the non-satisfaction of any of such conditions shall not affect or
prejudice the Holder's right to purchase such Warrant Shares upon the subsequent
satisfaction of such conditions. If filings are required to be made pursuant to
the HSR Act, then the applicable date of the Warrant Closing shall be extended
to complete such filings and any applicable waiting period under the HSR Act.
The parties hereto hereby agree to cooperate to prepare and make as promptly as
reasonably practicable any filings required to be made under the HSR Act as a
result of any exercise of the Warrant.
(c) At any time or from time to time on or prior to the
Expiration Date when the Common Stock shall be listed on a national securities
exchange, quoted in the NASDAQ National Market or traded in the over-the-counter
market ("Publicly Traded") and the Exercise Price shall be less than the Current
Market Price (as hereinafter defined) of a share of Common Stock, the Holder of
the Warrants shall also have the right to convert the Warrants, or any portion
thereof (the "Conversion Right"), without payment by the Holder of the Warrant
of the Exercise Price or any other consideration, into shares of Common Stock as
provided in this Section 2(c). Upon exercise of the Conversion Right with
respect to a particular number of Warrant Shares (the "Converted Warrant
Shares"), ENTEX shall deliver to the Holder of the Warrant so converted (without
payment by the Holder of the converted Warrant of the Exercise Price or any
other consideration) that number of shares of Common Stock equal to the quotient
obtained by dividing (x) the difference between (1) the product of (A) the
Current Market Price of a share of Common Stock multiplied by (B) the number of
the Converted Warrant Shares,
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<PAGE> 4
and (2) the product of (A) the Exercise Price multiplied by (B) the number of
Converted Warrant Shares in each case as of the Conversion Date (as hereinafter
defined), by (y) the Current Market Price of a share of Common Stock on the
Conversion Date. No fractional Warrant Shares shall be issuable upon exercise of
the Conversion Right, and if the number of Warrant Shares to be issued
determined in accordance with the following formula is other than a whole
number, ENTEX shall pay to the Holder of the Warrant so converted an amount in
cash equal to the Current Market Price of the resulting fractional Warrant Share
on the Conversion Date.
(d) The Conversion Right may be exercised by the Holder of a
Warrant by the surrender of the Warrant being converted as provided in Section
2(c), together with a written statement specifying that the Holder of the
Warrant being converted intends to exercise the Conversion Right with respect to
such Warrant and setting forth the number of Converted Warrant Shares which
are covered by the exercise of the Conversion Right. Such conversion shall be
effective upon receipt by ENTEX of the Warrant being converted, together with
the aforesaid written statement, on such later date as is specified therein (the
"Conversion Date"). ENTEX shall issue to the Holder of the Warrant submitted for
conversion as of the Conversion Date a certificate representing the Warrant
Shares issuable upon exercise of the Conversion Right and, if applicable, a new
warrant of like tenor evidencing the balance of the Warrant Shares remaining
subject to the Warrant submitted for conversion.
(e) The "Current Market Price" of the Common Stock as of a
particular date shall mean the average closing sale price over the 20 prior
trading days, as reported on the principal stock exchange or quotation system on
which the Common Stock is listed or quoted.
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<PAGE> 5
(f) ENTEX shall not be required to issue a fractional share of
Common Stock upon the exercise of the Warrants. As to any fraction of a share
that the Holder of one or more Warrants, the rights of which are being exercised
in the same transaction, would otherwise be entitled to purchase upon such
exercise, if such fraction is equal to or greater than one-half (1/2) of a share
of Common Stock, ENTEX shall issue one share of Common Stock in respect of such
fraction, provided, however, that cash shall be paid in lieu of fractional
shares upon the exercise of the Conversion Right as provided in Section 2(c).
3. Warrant Closing. The purchase of Warrant Shares by the Holder
upon the exercise of a Warrant shall take place at a closing (the "Warrant
Closing") to be held not later than five (5) business days after the delivery of
the Exercise Notice at a time and place agreed on by the exercising Holder and
ENTEX. At each Warrant Closing, (a) ENTEX will deliver to the exercising Holder
a certificate or certificates representing the Warrant Shares being purchased
pursuant to the Notice of Exercise, registered in the name of the exercising
Holder, free and clear of all liens, claims, charges and encumbrances, and (b)
the exercising Holder shall pay the purchase price for such Warrant Shares by
delivery to ENTEX of a certified or bank cashier's check payable in New York
Clearing House funds to the order of ENTEX in the amount of the Exercise Price
or by wire transfer of immediately available funds to an account designated in
writing by ENTEX.
4. Representations &ad Warranties of ENTEX. ENTEX represents and
warrants to the Holder that: (a) ENTEX is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite corporate power to enter into and perform this Agreement; (b) the
execution, delivery and performance by
-5-
<PAGE> 6
ENTEX of this Agreement has been duly authorized by all necessary corporate
action on the part of ENTEX, and this Agreement has been duly executed and
delivered by ENTEX and constitutes a valid and legally binding obligation of
ENTEX enforceable in accordance with its terms, except that (i) the
enforceability hereof may be subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceedings therefor may be brought; (c) the authorized capital stock of ENTEX
consists of 2,000,000 shares of Preferred Stock, par value $0.001 per share,
none of which are issued or outstanding, and 10,000,000 shares of Common Stock,
of which (i)(A) a total of 6,479,812 shares are validly issued and outstanding,
fully paid and nonassessable (the "Outstanding Shares"), (B) a total of 66,670
shares (the "1994 IBMCC Warrant Shares") are reserved for issuance pursuant to
the Warrant Agreement (the "1994 IBMCC Warrant Agreement") dated as of November
15, 1994, among IBM Credit, ENTEX Holdings, Inc., a Delaware corporation and the
former parent corporation of ENTEX ("Holdings"), and ENTEX, which, upon the
exercise of the Warrant issued under the 1994 IBMCC Warrant Agreement (the "1994
IBMCC Warrant") and the payment of the exercise price provided for under the
1994 IBMCC Warrant Agreement and the 1994 IBMCC Warrant, will be validly issued
and outstanding, fully paid and nonassessable, and (C) a total of 143,046 shares
(the "Microsoft Shares") are reserved for issuance pursuant to the Common Stock
Purchase Warrant dated June 21, 1996, issued by Holdings to Microsoft
Corporation (the "Microsoft Warrant"), consisting of 75,000 shares originally
reserved and 68,046 shares additionally reserved pursuant to Section
-6-
<PAGE> 7
3.4 of the Microsoft Warrant, which shares, upon the exercise of the Microsoft
Warrant and the payment of the exercise price provided for under the Microsoft
Warrant, will be validly issued and outstanding, fully paid and nonassessable
(the Outstanding Shares, the 1994 IBMCC Warrant Shares and the Microsoft Shares
being hereinafter collectively referred to as the "Primary Shares"), and (ii) a
total of 1,821,932 shares are reserved for issuance (A) pursuant to Stock Option
Plans of Holdings and ENTEX adopted in 1996, (B) to independent directors for
services to ENTEX in such capacity, or (iii) pursuant to the ENTEX Performance
Incentive Plan (all of the foregoing shares being referred to collectively as
the "Compensatory Shares"); (d) the Warrant Shares represent the respective
percentages of the Primary Shares set forth in Section 2; (e) Holdings was
merged with and into ENTEX on June 28, 1996, with ENTEX being the surviving
corporation in such merger; (f) the execution, delivery and performance by ENTEX
of this Agreement will not violate or conflict with (i) its Certificate of
Incorporation or its By-Laws, each is amended to date (ii) any agreement to
which ENTEX is a party, a breach or violation of which would have a material
adverse effect upon the condition (financial or otherwise), assets, liabilities,
business, operations or prospects of ENTEX or the ability of ENTEX to perform
its obligations under this Agreement (an "ENTEX Material Adverse Effect"), (iii)
any license, franchise or permit applicable to ENTEX a breach or violation of
which would have an ENTEX Material Adverse Effect or (iv) any law, regulation,
order, judgment or decree applicable to ENTEX a breach or violation of which
would have an ENTEX Material Adverse Effect; (g) other than as may be required
in connection with or in compliance with the provisions of the HSR Act, no
authorization, consent or approval of, or any filing with, any governmental body
or authority or any other person is necessary for consummation by
-7-
<PAGE> 8
ENTEX of the transactions contemplated hereby; (h) there are no actions, suits,
investigations or proceedings pending, or, to the knowledge of ENTEX,
threatened; against ENTEX, at law or in equity or by any governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign or before any arbitrator of any kind, an adverse determination of which
would have an ENTEX Material Adverse Effect or which in any matter draws into
question the validity of this Agreement; (i) (i) except as disclosed in clause
(c) above, (ii) except for the rights set forth in the Option Agreement (the
"1994 IBMCC Option Agreement"), dated as of July 15, 1994, among IBM Credit,
Dort A. Cameron III ("Cameron"), Holdings, and ENTEX; and (iii) except for the
1994 IBMCC Warrant Shares, the Microsoft Warrant Shares, and the Compensatory
Shares, and conversion rights under the 1994 IBMCC Warrant Agreement and the
1994 IBMCC Option Agreement issuable thereunder, ENTEX does not have outstanding
any other shares of capital stock or securities convertible into or exchangeable
for, or options or warrants or other rights to acquire from ENTEX or any other
obligation to issue, directly or indirectly, any shares of capital stock; (j)
except for the registration rights set forth in this Agreement, the 1994 IBMCC
Warrant Agreement, the 1994 IBMCC Option Agreement, and the Microsoft Warrant,
ENTEX is not under any obligation to cause the registration under the Securities
Act of 1933 (the "Securities Act") of any of its currently outstanding capital
stock or other securities or any of its capital stock or other securities that
may hereafter be issued and (k) ENTEX has delivered to the Holder the
information set forth on Schedule I hereto (the "ENTEX Corporate Information"),
which ENTEX Corporate Information is true, correct and complete in all material
respects as of the respective dates of the particular items of information
included in such ENTEX Corporate
-8-
<PAGE> 9
Information, and such ENTEX Corporate Information, as of the respective dates of
the particular items of information included in such ENTEX Corporate
Information, does not contain an untrue statement of material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
5. Representations and Warranties of IBM Credit. IBM Credit
represents and warrants to ENTEX that:
(a) IBM Credit is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has the
requisite corporate power to enter into and perform this Agreement; (b) the
execution, delivery and performance by IBM Credit of this Agreement has been
duly authorized by all necessary corporate action on the part of IBM Credit, and
this Agreement has been duly executed and delivered by IBM Credit and
constitutes a valid and legally binding obligation of IBM Credit enforceable in
accordance with its terms except that (i) the enforceability hereof may be
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceedings
therefor may be brought; (c) the execution, delivery and performance by IBM
Credit of this Agreement will not violate or conflict with (i) its Certificate
of Incorporation or By-Laws, (ii) any agreement to which IBM Credit is a party
which is material to the financial condition or business of IBM Credit, a breach
or violation of which would have a material adverse effect upon the condition
(financial or otherwise), assets,
-9-
<PAGE> 10
liabilities, business, operations or prospects of IBM Credit or the ability of
IBM Credit to perform its obligations under this Agreement (an "IBM Credit
Material Adverse Effect"), (iii) any license, franchise or permit applicable to
IBM Credit, a breach or violation of which would have an IBM Credit Material
Adverse Effect, or (iv) any law, regulation, order, judgment or decree
applicable to IBM Credit, a breach or violation of which would have an IBM
Credit Material Adverse Effect; (d) other than as may be required in connection
with or in compliance with the provisions of the HSR Act, no authorization,
consent or approval of, or any filing with, any governmental body or authority
or any other person is necessary for consummation by IBM Credit of the
transactions contemplated hereby; (e) IBM Credit acknowledges that it has made
its own investigation of ENTEX and that, except as expressly set forth herein,
ENTEX makes no representations or warranties under this Agreement with respect
to the business, assets, liabilities, operations, condition (financial or
otherwise), or prospects of ENTEX; and (f) (i) IBM Credit is acquiring the
Warrants hereunder and will acquire Warrant Shares upon the exercise of the
Warrants for its own account, for investment and not with a view to the
distribution thereof; (ii) IBM Credit understands that the issuance of the
Warrants and the Warrant Shares will not be registered under the Securities Act,
because such issuance is exempt from the registration requirements of the
Securities Act and that such securities must be held indefinitely unless a
subsequent disposition thereof is registered under the Securities Act or is
exempt from the registration requirements thereunder, (iii) IBM Credit
understands that the exemption from registration under the Securities Act
afforded by Rule 144 promulgated thereunder ("Rule 144"), the provisions of
which are known to IBM Credit depends upon the satisfaction of various
conditions and that, if applicable, Rule 144 may only afford the basis for
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<PAGE> 11
sales under certain circumstances and only in limited amounts, and (iv) IBM
Credit is an "accredited investor" (as such term is defined in Rule 501 (a)
promulgated under the Securities Act).
6. Certain Adjustments. (a) In the event of any change in the
number of issued and outstanding shares of Common Stock by reason of any stock
dividend, split-up, combination, reclassification, recapitalization, binding
share exchange, merger or consolidation with any other person or other change in
the corporate or capital structure of ENTEX having an effect on all issued and
outstanding shares (a "Recapitalization Event"), the exercising Holder shall
receive upon its exercise of the Warrant the Common Stock or other securities,
cash or property to which such Holder would have been entitled to receive on the
date of the exercise of the Warrant as if such holder had been a holder of
record of issued and outstanding Warrant Shares on the record date fixed for
determination of holders of Common Stock entitled to receive such stock or other
securities, cash or property pursuant to such Recapitalization Event, and the
Exercise Price shall be appropriately adjusted to give effect to such
Recapitalization Event.
(b) If at any time prior to the Expiration Date and prior to the
time that the Common Stock is Publicly Traded ENTEX shall issue for cash shares
of Common Stock having an aggregate purchase price of more than Fifty Million
Dollars ($50,000,000) in any single transaction or a related series of
transactions to a party other than ENTEX for a price per share (the "Third Party
Purchase Price") that is less than the quotient of (A) Two Hundred Fifty Million
Dollars ($250,000,000) divided by (B) the number of shares equal to the number
of shares of Common Stock then issued and outstanding, increased by the number
of (i) authorized but unissued 1994 IBMCC Warrant Shares, (ii) authorized but
unissued Microsoft Shares, and
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<PAGE> 12
(iii) authorized but unissued Warrant Shares, but excluding the shares of
Common Stock to be issued to the Third Party, then the Exercise Price shall be
reduced to an amount equal to the Third Party Purchase Price.
(c) If the representation contained in Section 4(k) of this
Agreement is inaccurate in any material respect and the Holder notifies ENTEX of
the fact of such inaccuracy on or before March 1, 1998, then, without limiting
any other rights of the Holder, the Holder and ENTEX will negotiate in good
faith an equitable adjustment in the Exercise Price to reflect the impact of
such inaccuracy on the valuation of the Common Stock as of the date hereof.
7. Action by Majority Holders. If, at any time, more than one
person or entity is deemed to be a Holder under the terms of this Agreement,
then any waiver or consent, given or required to be given pursuant to this
Agreement shall be deemed to have been validly taken or given only if such
waiver or consent has been approved in writing by Holders that own or have the
right to acquire a majority of the Warrant Shares (the "Majority Holders"), and
such waiver or consent, if given, shall be binding and conclusive upon all
remaining Holders.
8. Certain Covenants. (a) ENTEX hereby agrees that the Holder
shall have the right upon reasonable prior written notice and during normal
business hours to inspect the books and records of ENTEX for a proper purpose,
as if the Holder were a holder of Common Stock of record on the date such notice
is delivered and to deliver to Holder all information that is given by ENTEX to
stockholders of ENTEX generally.
(b) All of the books and records of ENTEX and its subsidiaries
will be maintained in accordance with generally accepted accounting principles,
consistently applied.
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<PAGE> 13
(c) ENTEX will, and will cause each of its subsidiaries to,
preserve and maintain its corporate existence and all of the rights, privileges
and franchises necessary or desirable in the ordinary course of business and
conduct its business in a regular manner; comply with the requirements of all
applicable laws, rules, regulations and orders of any governmental body or
authority, a violation of which would be reasonably likely to have an ENTEX
Material Adverse Effect; pay and discharge all material taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any property belonging to it, prior to the date on which penalties attach
thereto, and all lawful claims that, if unpaid, might become a lien upon the
property of ENTEX or any such subsidiary, provided that neither ENTEX nor any
such subsidiary shall be required to pay any such tax, assessment, charge, levy
or claim, the payment of which is being contested in good faith and by proper
proceedings if it maintains adequate reserves with respect thereto; and keep all
of its properties necessary to the conduct of its business in good working order
and condition (taking into consideration, however, the condition of such
properties at the time such properties were acquired by ENTEX or such
subsidiary), ordinary wear and tear excepted.
(d) ENTEX agrees to deliver to the Holder such information
concerning the business affairs and financial condition of ENTEX and its
subsidiaries as it is obligated to deliver under the 1994 IBMCC Option Agreement
and the 1994 IBMCC Warrant Agreement.
(e) ENTEX will not enter into any transaction (other than
transactions between ENTEX and members of the management of ENTEX pursuant to
management equity arrangements in effect from time to time and any other
transaction permitted by the Fourth Amended and Restated Agreement for Wholesale
Financing between IBM Credit and ENTEX,
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<PAGE> 14
as the same may he amended or modified from time to time), with or for the
benefit of any Affiliates except on terms no less favorable to ENTEX, than could
be obtained in a comparable arm's-length transaction with an unaffiliated
person.
(f) ENTEX shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the purpose of
issuance upon the exercise of the Warrants, such number of shares of Common
Stock as shall be issuable upon the exercise of the Warrants. ENTEX further
covenants and agrees that, upon exercise of the Warrants and payment of the
Exercise Price therefor, if applicable, all Warrant Shares issuable upon
exercise of the Warrants shall be duly and validly issued, fully paid and
nonassessable.
(g) ENTEX will not amend or otherwise modify, or permit to occur
any amendment or modification of, the Certificate of Incorporation of ENTEX as
in effect on the date hereof, if such amendment or modification would alter or
change the powers, preferences or rights of the shares of the Common Stock that
would materially and adversely affect the Holder.
(h) ENTEX will provide to the Holder at least thirty (30) days'
prior written notice of any proposed sale or other transfer by ENTEX of more
than 50% of its assets.
9. Sales to Third Parties. (a) If at any time prior to the
Expiration Date, Cameron or any Affiliate of Cameron proposes to sell shares of
Common Stock beneficially owned by any of them (as used herein, "beneficial
ownership" refers to shares with respect to which Cameron or Affiliates of
Cameron, as the case may be, possesses the power to dispose or direct the
disposition), and the total number of shares of Common Stock proposed to be sold
in such transaction represents at least 20% of the Fully Diluted Shares, then
Cameron shall
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<PAGE> 15
deliver to the Holder written notice of such proposed sale which shall set forth
the proposed date of such sale, the proposed purchaser, the total number of
shares of Common Stock proposed to be sold, the proposed purchase price and type
of consideration (including, if the purchase price consists in whole or in part
of non-cash consideration, such information available to Cameron and his
Affiliates as may be reasonably necessary for the Holder to properly analyze the
economic value and investment risk of such non-cash consideration) and the other
material terms and conditions of the purchase ("Notice of Intent to Sell"), and
the Holder shall have the opportunity, upon exercise of the Warrants, subject to
the terms of this Section 9(a), to sell to such proposed purchaser, at the same
price per share and on the same terms and conditions as Cameron, a pro rata
portion of the Warrant Shares, then owned by or issuable to the Holder that the
Holder proposes to sell, as notified to Cameron pursuant to Section 9(b), based
upon the proportion that the total number of shares of Common Stock proposed to
be sold by Cameron pursuant to the Notice of Intent to Sell bears to the total
number of shares of Common Stock beneficially owned by Cameron (but excluding
the Option Shares, as defined in the 1994 IBMCC Option Agreement), his
Affiliates, the Holder and all other security holders intending to participate
in such proposed sale and the number of shares proposed to be sold by Cameron
and his Affiliates will be correspondingly reduced.
(b) If the Holder wishes to participate in any sale under Section
9(a) hereof, the Holder shall notify Cameron and ENTEX in writing of such
intention and of the number of Warrant Shares proposed to be sold by the Holder
not later than seven (7) business days after receipt of the Notice of Intent to
Sell.
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<PAGE> 16
(c) Notwithstanding any other provision of this Agreement, if
Cameron, Affiliates of Cameron, or both propose to sell or exchange (in a
business combination or otherwise) the Common Stock beneficially owned by them
in a bona fide arm's-length transaction, involving the sale or exchange of at
least 50% of the outstanding Common Stock, then Cameron, at his option, may
require that the Holder (A) sell or exchange in the same transaction a portion
of the Warrant Shares then owned by or issuable to the Holder in the same
proportion as the number of shares of Common Stock proposed to be sold or
exchanged by Cameron bears to the total number of shares of Common Stock
(excluding all Option Shares) beneficially owned by Cameron and his Affiliates
and (B) if stockholder approval of the transaction is required, that the Holder
vote its shares of Common Stock in favor thereof. In any such sale or exchange,
the Holder shall receive for its shares the identical consideration payable per
share of Common Stock to all other holders of shares of Common Stock
participating in such sale or exchange. At least thirty (30) days prior to the
date of such proposed sale or exchange, Cameron shall deliver to the Holder
written notice of such proposed sale or exchange which shall set forth the
proposed date of such sale or exchange, the proposed purchaser, the total number
of shares of Common Stock proposed to be sold or exchanged, the number of shares
of Common Stock (excluding the Option Shares) beneficially owned by Cameron and
his Affiliates, the amount and type of consideration (including, if the
consideration consists in whole or in part of non-cash consideration, such
information available to Cameron and his Affiliates as may be reasonably
necessary for the holder to property analyze the economic value and investment
risk of such non-cash consideration) and the other material terms of such
proposed sale or exchange. Notwithstanding any provision to the contrary
contained in
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<PAGE> 17
this Section 9(c), (i) the Holder shall not be obligated to participate in any
such sale or exchange unless the Holder is entitled to rely upon any opinion of
counsel received by Cameron or ENTEX, (ii) the Holder shall not be required to
make any representation or warranty in connection with any such sale or exchange
other than representations and warranties as to its authority, the
enforceability of its obligations and ownership of the Warrant Shares, to be
sold or exchanged by it, free and clear of all liens, claims, charges and
encumbrances, and (iii) ENTEX and Cameron jointly and severally agree to
indemnify and hold harmless, to the fullest extent permitted by applicable law,
the Holder from and against all losses, claims, damages, liabilities, costs,
expenses (including, but not limited to, reasonable attorney's fees) arising out
of or relating to, claims made by third parties in connection with such sale or
exchange.
(d) For purposes of this Agreement, an "Affiliate" of any
particular person or entity shall mean any person or entity that directly or
indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with, such person or entity.
(e) For purposes of this Agreement, the "Fully Diluted Shares"
shall mean the total number of outstanding shares of Common Stock, giving effect
to the exercise of all outstanding options, warrants (other than the Warrants),
including those issued to or allocable to officers, outside directors,
consultants or employees of ENTEX and the conversion or exchange of all
securities convertible into or exchangeable for shares of Common Stock.
(f) The Holder shall not be obligated to pay any of the fees,
costs and expenses incurred in connection with any sale or exchange described in
this Section 9, other than its own legal fees, costs and expenses.
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10. Restrictive Legends. (a) Except as otherwise provided in this
Section 10, each certificate representing Warrant Shares delivered to the
Holder, and each certificate representing Common Stock issued to any subsequent
transferee of any such certificate, shall be stamped or otherwise imprinted with
a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAW. NO TRANSFER OF THE SHARES REPRESENTED BY
THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH
TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND IN
COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES LAW, (B) SUCH
TRANSFER IS TO AN AFFILIATE OF THE HOLDER, (C) THE HOLDER OF THE
SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO
ENTEX INFORMATION SERVICES, INC. EITHER A NO-ACTION LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL
EXPERIENCED IN SECURITIES MATTERS TO THE EFFECT THAT SUCH
PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF
THE ACT AND OF ANY APPLICABLE STATE SECURITIES LAWS, WHICH
OPINION IS IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO ENTEX
INFORMATION SERVICES, INC. OR (D) SUCH TRANSFER IS PURSUANT TO
RULE 144 UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO
ENTEX INFORMATION SERVICES, INC. A CERTIFICATE SETTING FORTH THE
BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER.
(b) Except as otherwise provided in this Section 10, each Warrant
shall be stamped or otherwise imprinted with a legend in substantially the
following form:
NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF
THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS
REPRESENTED BY THIS CERTIFICATE OR OF THE SECURITIES ISSUABLE
UPON EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH
TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND IN COMPLIANCE
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<PAGE> 19
WITH ANY APPLICABLE STATE SECURITIES LAWS, OR (B) THE HOLDER OF
THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO
THE ISSUER EITHER A. NO-ACTION LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION OR AN OPINION OF COUNSEL EXPERIENCED IN
SECURITIES MATTERS TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND OF ANY
APPLICABLE STATE SECURITIES LAWS, WHICH OPINION IS IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER OR (C) SUCH
TRANSFER IS PURSUANT TO RULE 144 UNDER THE ACT AND SUCH HOLDER
SHALL HAVE DELIVERED TO THE ISSUER A CERTIFICATE SETTING FORTH
THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER.
(c) Notwithstanding the foregoing, the legend requirements of
this Section 10 shall terminates as to any particular Warrant or Warrant Share
when ENTEX shall have received from the holder thereof an opinion of counsel in
form and substance reasonably acceptable to the Company that such legend is not
required in order to ensure compliance with the Securities Act. Whenever the
restrictions imposed by this Section 10 shall terminate, the holder hereof or of
Warrant Shares, as the case may be, shall be entitled to receive from ENTEX
without cost to such holder a new Warrant or certificate for Warrant Shares of
like tenor, as the ease may be, without such restrictive legend.
11. Transfers. (a) Neither the Warrants nor the Warrant Shares
shall be transferred to any person other than an Affiliate of the Holder other
than pursuant to an effective registration statement under the Securities Act
and any applicable state securities laws or an exemption from the registration
provisions thereof. Each certificate, if any, evidencing such shares of Common
Stock issued upon any such transfer, other than in a public offering pursuant to
an effective registration statement shall bear the restrictive legend set forth
in Section 10, unless in the opinion of counsel to the transferring Holder, such
legend is not required for the
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purposes of compliance with the Securities Act. The Holder shall not be entitled
to transfer the Warrant or the Warrant Shares or the Conversion Shares except in
accordance with this Section 11 or Section 20 hereof.
(b) Subject to compliance with the restrictions on transfer set
forth in this Section 11, each transfer of the Warrants and all rights
thereunder, in whole or in part, shall be registered on the books of ENTEX to be
maintained for such purpose, upon surrender of a Warrant at the Designated
Office of ENTEX designated for such purpose pursuant to Section 20, together
with a written assignment of the Warrant in the form of Annex II to Exhibit A
hereto duly executed by the Holder or its agent or attorney. Upon such surrender
and delivery, ENTEX shall execute and deliver a new Warrant or Warrants in the
name of the assignee or assignees for the number of Warrant Shares specified in
such instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, if any. A Warrant, if
properly assigned in compliance with the provisions hereof, may be exercised by
a new holder for the purchase of Warrant Shares without having a new Warrant
issued. All Warrants issued upon any assignment of Warrants shall be the valid
obligations of ENTEX, evidencing the same rights, and entitled to the same
benefits as the Warrants surrendered upon such registration of transfer or
exchange.
12. Demand Registration. (a) In the event that the Common Stock
is Publicly Traded, the Holder may (i) on an unlimited number of occasions
require ENTEX to effect the registration of Warrant Shares issued or issuable
hereunder (the "Registerable Securities") on Form S-3 (or any successor form
thereto, a "Short Form Registration"); and (ii) in the event a Short Form
Registration is unavailable at the time of such request on up to two occasions,
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require ENTEX to effect the registration (but not for when-issued trading) of
Warrant Shares issued and issuable hereunder on Form S-1 (or any successor form
hereto), a "Long Form Registration"), in each case pursuant to the provisions of
this Section 12. If the Holder shall give notice to ENTEX to the effect that
such Holder desires to transfer Warrant Shares issued and issuable hereunder
pursuant to a public distribution (within the meaning of the Securities Act),
then ENTEX shall, as promptly as practicable after receipt of such notice (but
in any event within 120 days after receipt of such notice), file a registration
statement on the appropriate form pursuant to the Securities Act and cause
Warrant Shares to be registered under the Securities Act and qualified under the
securities or blue sky laws of any jurisdiction requested, subject to Section
14(d), to the end that such Warrant Shares may be sold by the Holders under the
Securities Act and pursuant to the securities or blue sky laws of the
jurisdictions requested, as promptly as is practicable thereafter, ENTEX will
use its best efforts to cause any such registration to become effective and to
keep the prospectus included therein current as provided in Section 14(b);
provided that such Holder shall furnish ENTEX with such appropriate information
in connection therewith as ENTEX may reasonably request in writing.
Notwithstanding the foregoing, ENTEX shall not be required to effect any
Long-Form Registration hereunder for a proposed maximum aggregate offering price
of less than $10.0 million or any Short-form Registration hereunder for a
proposed maximum aggregate offering price of less than $2.0 million unless, in
the case of any Short-form Registration hereunder, the registration covers all
of the remaining Warrant Shares purchased or purchasable by the Holder
hereunder. The managing underwriters, if any, for any offering made pursuant to
this Section
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<PAGE> 22
12 shall be selected by the Holder, subject to the consent of ENTEX, which
consent shall not he unreasonably withheld.
(b) If a registration statement filed pursuant to a request made
under this Section 12 relates to an underwritten offering, and the managing
underwriter advises ENTEX and the Holder in writing that in its opinion the
number of Registrable Securities requested to be included in such registration
exceeds the number which can be sold in such offering without adversely
affecting the marketability of such Registrable Securities or the price at which
such securities can be sold, ENTEX will include in such registration (i) first,
all of the securities requested to be registered pursuant to the 1994 IBMCC
Option Agreement, (ii) second, all of the Registrable Securities requested to be
registered pursuant to the 1994 IBMCC Warrant Agreement; (iii) third, all of the
Registerable Securities requested to be registered by the Holder; and (iv)
fourth, other securities requested to be included in such registration, pro rata
among the respective holders of such other securities (if, and to the extent
permitted, by such managing underwriter). If ENTEX shall at any time provide to
any person rights with respect to the registration of Common Stock under the
Securities Act which are, in the reasonable judgment of the Holder, on terms or
conditions that are more favorable to such person than the terms or conditions
provided for in this Section 12, ENTEX shall provide (by way of amendment to
this Agreement or otherwise) such more favorable terms or conditions to the
Holder.
13. Piggy-Back Registration. (a) If ENTEX, at any time, proposes
to file on its behalf and/or on behalf of any of its security holders, a
registration statement under the Securities Act on any form (other than a
registration statement on Form S-8 or any successor form for securities to be
offered to employees of ENTEX pursuant to any employee benefit plan
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<PAGE> 23
or Form S-4 or any successor form for securities to be offered in a transaction
of the type referred to in Rule 145 under the Securities Act) for the
registration of any class of its equity securities (as defined in Section
3(a)(11) of the Exchange Act), other than a registration statement for a primary
initial public offering by ENTEX in which no other security holders of ENTEX are
participating, it will give written notice to the Holder as promptly as
reasonably possible, but in no event later than thirty (30) days prior to the
initial filing with the Securities and Exchange Commission (the "Commission") of
such registration statement, which notice shall set forth the intended method of
disposition of the securities proposed to be registered by ENTEX. The notice
shall offer to include in such filing such issued Registrable Securities, and
such Registrable Securities issuable to the Holder as the Holder may request, on
the same terms and conditions as are applicable to ENTEX or other selling
security holders.
(b) If the Holder desires to have Registrable Securities
registered under this Section 13, it shall advise ENTEX in writing within
fifteen (15) days after the date of receipt of such offer from ENTEX, setting
forth the number of such Registrable Securities for which registration is
requested. ENTEX shall thereupon include in such filing the number of
Registrable Securities for which registration is so requested, subject to the
next sentence, and shall use its best efforts to effect registration under the
Securities Act of such securities; provided, however, that ENTEX may, at any
time, abandon any offering in which any such Registrable Securities would
otherwise be required to be included hereunder. If the managing underwriter of a
proposed underwritten public offering of Common Stock shall advise ENTEX in
writing that, in its opinion, the distribution of the Registrable Securities
requested to be included in the registration concurrently with the securities
being registered by ENTEX and any
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<PAGE> 24
other shareholders of ENTEX would materially and adversely affect the
distribution of such securities, then the number of Registrable Securities
determined by such underwriter to be the maximum number capable of being
included in such registration shall be allocated as follows: (i) if the offering
was initiated as a primary offering by ENTEX, first, to the shares sought to be
included by ENTEX and second, to the shares sought to be included by the Holder
and by any other shareholders of ENTEX in proportion to the number of shares
sought to be included in such registration; and (ii) if the offering is a
secondary offering initiated by other shareholders of ENTEX, first, to the
shares sought to be included by such shareholders and by the Holder, in
proportion to the numbers of shares sought to be included by them in such
registration, and then to any shares sought to be included by ENTEX or any other
shares in such registration.
14. Registration Procedures. If ENTEX is required by the
provisions of this Agreement to effect the registration of any Registrable
Securities under the Securities Act, ENTEX shall, as soon as practicable:
(a) prepare and file with the Commission a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become effective;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
such prospectus current for up to 270 days from the initial date of
effectiveness and to comply with the provisions of the Securities Act with
respect to the sale or other disposition of all securities covered by such
registration statement;
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<PAGE> 25
(c) furnish to the Holder such number of copies of the
registration statement, preliminary prospectuses and prospectuses and each
supplement or amendment thereto together with such other documents as the Holder
may reasonably request in order to facilitate the sale or other disposition of
the securities being sold by the Holder (i) in conformity with the requirements
of the Securities Act and (ii) the Holder's proposed method of distribution,
provided that ENTEX shall not be required to keep the registration statement
effective for a period longer than that specified in Section 14(b);
(d) use its best efforts to register or qualify the securities
covered by such registration statement under such other securities or blue sky
laws of such jurisdictions within the United States as the Holder shall
reasonably request (provided, however, that ENTEX shall not be obligated to
qualify as a foreign corporation to do business under the laws of any
jurisdiction in which it is not then qualified, to file any general consent to
service of process under the laws of any such jurisdiction or to do any such
act that would subject ENTEX to the payment of taxes in any such jurisdiction),
and do such other reasonable acts and things as may be required of it to enable
the Holder to consummate the disposition in such jurisdiction of the securities
covered by such registration statement;
(e) use its best efforts to otherwise comply with all applicable
rules and regulations of the Commission and make available to the holders of its
securities, as soon as reasonably practicable, but not later than 16 months
after the effective date of the registration statement an earnings statement
covering the period of at least twelve months beginning with the first month of
the first fiscal quarter after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of Section
10(a) of the Securities Act;
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(f) provide and cause to be maintained, a transfer agent and
registrar for the Registrable Securities covered by such registration statement
from and after a date not later than the effective date of such registration
statement;
(g) if requested by the underwriters for any underwritten
offering on behalf of the Holder pursuant to a registration requested hereunder,
ENTEX will enter into an underwriting agreement with such underwriters for such
offering, such agreement to contain such representations and warranties by ENTEX
and such other terms and provisions as are customarily contained in
underwriting agreements with respect to secondary distributions, including
without limitation, indemnities to the effect and the extent provided in Section
16. The Holder shall be a party to any such underwriting agreement and the
representations and warranties by, and the other agreements on the part of,
ENTEX to and for the benefit of such underwriters, shall also be made to and for
the benefit of the Holder; and the Holder shall not be required by ENTEX to
make any representations or warranties to or agreement with ENTEX or the
underwriters other than reasonable and customary representations, warranties or
agreements regarding the Holder, the Registerable Securities and the Holder's
intended method or methods of disposition and any other representation required
by law;
(h) make available for inspection by the Holder, any underwriter
participating in any disposition pursuant to such registration statement and any
attorney, accountant or other agent retained by such Holder or underwriter, all
financial or other records, pertinent corporate documents and properties of
ENTEX, and cause the officers, directors, employees and independent accountants
of ENTEX to supply all information reasonably requested by the Holder or any
such underwriter, attorney, accountant or agent in connection with such
registration
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statement; provided that ENTEX shall have no obligation to make such information
available to any person or entity which (A) is a direct competitor of ENTEX or
(B) refuses to execute a confidentiality agreement reasonably satisfactory to
ENTEX with respect to information not required by such person or entity to be
disclosed under the Securities Act or the Exchange Act;
(i) furnish, at the written request of the Holder if the Holder
requests registration of Registrable Securities pursuant to Section 13 or 14, on
the date that such Registrable Securities are delivered to the underwriters for
sale pursuant to such registration or, if Registrable Securities are not being
sold through underwriters, on the date that the registration statement with
respect to such Registrable Securities becomes effective, (1) an opinion in
customary form, dated such date, of the counsel representing ENTEX for the
purposes of such registration, addressed to the underwriters, if any, and to the
Holder covering such matters as such underwriters or the Holder may reasonably
request and (2) letters (the "Comfort Letters") in customary form dated,
respectively, (a) the effective date of the registration statement and (b) the
date on which such securities are delivered to the underwriters, if any, from
the independent certified public accountants of ENTEX, addressed to the
underwriters, if any, and to the Holder covering such financial, statistical and
accounting matters as such underwriters or the Holder may reasonably request
(and, if such accountants refuse to deliver such letter to the Holder, then the
Comfort Letters shall be addressed to ENTEX and accompanied by a letter
addressed to the Holder suiting that they may rely on the comfort letter
addressed to ENTEX);
(j) enter into such customary agreements and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities being registered;
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(k) if requested by the Holder, prior to filing a registration
statement or prospectus or any amendment or supplement thereto, furnish to the
Holder and each underwriters, if any, of the Registrable Securities covered by
such registration statement, copies of such registration statement, or
amendment or supplement, as proposed to be filed;
(1) keep the Holder advised in writing as to the initiation and
progress of any registration hereunder, as the case may be, and after the filing
of any registration statement with respect to any Registrable Securities, notify
the Holder of any stop order issued or threatened by the Commission and take all
reasonable actions required to prevent the entry of such stop order or to remove
it if entered;
(m) use its best efforts to cause the Registrable Securities to
be registered to be listed on each national securities exchange on which like
securities issued by ENTEX are then listed; and
(n) during the period when the registration statement is required
to be effective, notify the Holder of the happening of any event as a result of
which the prospectus included in the registration statement contains an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such securities, such prospectus will not contain
and untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading.
It shall be a condition precedent to the obligation of ENTEX to
take any action pursuant to this Agreement in respect of the securities which
are to be registered at the request
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of the Holder that the Holder shall furnish to ENTEX such information regarding
the securities held by the Holder and the intended method of disposition
thereof, as ENTEX shall reasonably request and as shall be required in
connection with the action taken by ENTEX.
The registration rights contained in Sections 12 and 13 shall
terminate at such time as all of the Warrant Shares have been sold pursuant to
an effective registration statement under the Securities Act and shall not be
available with respect to any proposed sale of Warrant Shares if, at the time of
such sale, such shares may be sold without registration pursuant to Rule 144.
15. Registration Expenses. ENTEX shall bear all expenses incurred
in connection with any offering of securities contemplated by this Agreement,
including, without limitation, all registration and filing fees (including all
expenses incident to filing with the National Association of Securities
Dealers), printing expenses, fees and disbursements of counsel for ENTEX,
expenses of any special "comfort letters" incident to or required by any such
registration and expenses of complying with the securities or blue sky laws of
any jurisdictions pursuant to Section 14(d), except that ENTEX shall not be
liable for any fees, discounts or commissions to any underwriter with respect to
the sale of securities contemplated by this Agreement, any fees or expenses of
any brokers effecting the sale of securities contemplated by Sections 12 or 13,
the fees and expenses of any counsel to the Holder hereunder, or any expenses of
any special audits required in connection with a registration pursuant to
Section 12 hereof, beyond the annual audited financial statements of ENTEX.
16. Indemnification and Contribution. (a) In the event of any
registration of any of the Registrable Securities under the Securities Act
pursuant to Section 12 or 13, ENTEX shall indemnify and hold harmless each
Holder of such Registrable Securities, such Holder's
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directors and officers and each other person (including each underwriter) who
participated in the offering of such Registrable Securities and each other
person, if any, who "controls" (within the meaning of the Securities Act) such
Holder or such participating person against any losses, claims, damages or
liabilities, joint or several, to which such Holder or any such director or
officer or participating person or person "controlling" such person may become
subject under the Securities Act or any other statute or at common law, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any alleged untrue statement of any fact
contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereto, or (ii)
any alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and shall
reimburse such Holder or such director, officer or participating person or
person "controlling" such person for any legal or any other expenses reasonably
incurred by such Holder or such director, officer or participating person or
person "controlling" such person in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that ENTEX
shall not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any alleged untrue statement
or alleged omission made in such registration statement, preliminary prospectus,
prospectus or amendment or supplement in reliance upon and in conformity with
written information furnished to ENTEX by the Holder seeking indemnification or
reimbursement hereunder for use therein or (in the case of any registration
pursuant to Section 12) so furnished for such purposes by the underwriter
seeking indemnification or reimbursement hereunder for use thereon; provided
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further, however, that the foregoing indemnity agreement is subject to the
condition that, insofar as it relates to any alleged untrue statement or alleged
omission in any preliminary prospectus but eliminated or remedied in the final
prospectus, such indemnity agreement shall not inure to the benefit of any
underwriter from whom the person asserting any such loss, claim, damage,
liability or action purchased the securities which are the subject thereof (or
to the benefit of any person who "controls" such underwriter), if a copy of the
final prospectus was not sent or given to such person with or prior to the
written confirmation of the sale of such securities to such person and the
delivery thereof would have constituted a defense to the claim by such person;
and provided further, however, that ENTEX shall not, in connection with any one
such action or proceeding or separate but substantially similar or related
actions or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys (and appropriate local counsel) at any
time for all indemnified parties under this Section 16 which firm shall be
designated in writing by such indemnified parties. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
such Holder or such director, officer or participating person or person
"controlling" such person, and shall survive the transfer of such securities by
such Holder.
(b) Each Holder of Registrable Securities that are included in
any registration statement pursuant to Sections 12 or 13, by acceptance thereof,
agrees to indemnify and hold harmless ENTEX, its directors and officers and each
other person who "controls" ENTEX within the meaning of the Securities Act
against any losses, claims, damages or liabilities, joint or several, to which
ENTEX or any such director or officer or any such person may become
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subject under the Securities Act or any other statute or at common law, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon information in writing provided to ENTEX by such
Holder of Registrable Securities contained in any registration statement under
which securities were registered under the Securities Act at the request of such
Holder, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto.
(c) If the indemnification provided for in this Section 16 from
the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or related to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
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The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 16(c) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11 (f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(d) Promptly after receipt by an indemnified party of notice of
the commencement of any action or proceeding involving a claim referred to in
the preceding subdivisions of this Section 16, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action; provided,
however, that the failure so to notify the indemnifying party shall not relieve
it from any liability which it may have under this Section 16 except to the
extent it has been prejudiced in any material respect by such failure. In case
any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party may assume the defense of such claim, to the extent that it
may wish, with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
consent of the indemnified party, consent to entry of any judgment or enter into
any settlement of such
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proceedings which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
complete and unconditional release from all liability in respect of such claim
or litigation.
(e) The indemnification required by this Section 16 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred.
17. Opinion of Counsel. Simultaneously with the execution and
delivery of this Agreement, IBM Credit shall receive an opinion of counsel to
ENTEX, who may be the General Counsel of ENTEX, substantially in the form
attached hereto as Exhibit B.
18. EXPENSES. Except (i) as otherwise specified in Sections 15
and 16 and (ii) that ENTEX will pay the reasonable expenses of IBM Credit
(including, but not limited to, the fees and expenses of legal counsel to IBM
Credit) incurred in connection with the preparation of this Agreement, each
party hereto shall pay its or his own expenses incurred in connection with this
Agreement.
19. Amendment. The provisions of this Agreement may not be
modified, amended, altered or supplemented except upon the execution and
delivery of a written agreement executed by the Majority Holders (determined as
if all Warrants had been exercised in their entirety) and the provisions of this
Agreement applicable to ENTEX may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by ENTEX. Provisions of this Agreement relating to Cameron or
Affiliates of Cameron may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by
Cameron.
-34-
<PAGE> 35
20. Assignment. No party to this Agreement may assign any of its
rights or interests or obligations under this Agreement without the prior
written consent of the other parties hereto, except IBM Credit may assign its
rights or interests hereunder to any Affiliate of IBM Credit without the consent
of ENTEX or to any other person with the consent of ENTEX. Notwithstanding
anything herein to the contrary, the Holder may not assign any interest herein
(including any interest in the Warrants or the Warrant Shares) to any person or
entity primarily engaged in the sale of personal computer systems or provision
of consulting, integration and support services to users of personal computers
without the prior written consent of ENTEX.
21. Confidentiality. So long as the Common Stock has not become
Publicly Traded, the Holder agrees to keep the terms of this Agreement
confidential, except that the Holder may disclose this Agreement or the terms
hereof if such disclosure is required by law in the opinion of counsel to the
Holder (including, without limitation, any federal or state securities law). The
Holder further agrees to keep confidential any information regarding ENTEX
disclosed to it by ENTEX pursuant to this Agreement unless (i) in the opinion of
counsel to the Holder, disclosure of such information is required by law
(including, without limitation, any federal or state securities law), (ii) such
information is generally available to the public or (iii) such information was
disclosed to the Holder by a party other than ENTEX that is not subject to any
agreement restricting the disclosure of such information. Notwithstanding the
generality of the preceding two sentences, the Holder shall be permitted to
disclose this Agreement, the terms hereof or any such information (i) to its
Affiliates, (ii) to its legal counsel and independent auditors or independent
certified public accountants, (iii) upon the order or
-35-
<PAGE> 36
express direction of any court or government agency or authority,
(iv) to the extent reasonably required in connection with any litigation to
which one or more of the Holders, Cameron or ENTEX are a party adverse to one
another, or (v) to the extent reasonably required in connection with the
enforcement of any rights hereunder. ENTEX agrees to consult with the Holder
before disclosing this Agreement or the terms thereof to any third party, it
being understood and agreed that such disclosure may be required to be made by
ENTEX in connection with the obtaining of financing or for other proper business
purposes. If the Holder receives a request to disclose all or any portion of
this Agreement or the material terms hereof under terms of a subpoena, order,
civil investigative demand or similar process or other oral or written request
issued by a court of competent jurisdiction or by a federal, state or local
governmental regulatory body or agency, the Holder agrees, to the extent
reasonably practicable, to notify ENTEX of the existence, terms and
circumstances surrounding such request so that ENTEX may seek an appropriate
protective order or waive compliance with this Section 20, and, to consult with
ENTEX concerning the advisability of taking appropriate legal steps to resist or
narrow such a request. If, failing the entry of a protective order or the
receipt of a waiver hereunder or a mutually agreeable narrowing of such request,
the Holder, in the opinion of its counsel, is compelled to disclose the terms of
this Agreement or such information, then the Holder may disclose such terms or
such information which its counsel advises the Holder that the Holder is
compelled to disclose.
22. Notices. All notices and other communications hereunder shall
be in writing and shall be given and shall be deemed to have been duly given if
delivered in person,
-36-
<PAGE> 37
by overnight delivery or facsimile transmission, with transmission confirmed, to
the parties as follows:
If to Cameron:
Mr. Dort A. Cameron III
c/o Airlie Enterprises, L.L.C.
115 East Putnam Avenue
Greenwich, CT 06830
Facsimile No: (203) 661-0479
If to ENTEX:
ENTEX Information Services, Inc.
Six International Drive
Rye Brook, NY 10573
Attention: General Counsel
Facsimile No: (914) 955-3880
in each case with a copy to:
Reid & Priest LLP
40 West 57th Street
New York, NY 10019
Attention: Richard S. Green, Esq.
Facsimile No: (212) 603-2001
If to IBM Credit:
IBM Credit Corporation
1133 Westchester Avenue
White Plains, New York 10604-3599
Attention: Director, Global Credit
Remarketing Financing
Facsimile No: (914) 642-3580
or to such other address as any party may have furnished to the other parties in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt.
-37-
<PAGE> 38
23. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same document.
24 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without reference
to the conflict of laws principles thereof.
25. Binding Effect. This Agreement shall be binding upon, inure
to the benefit of, and be enforceable by the heirs, personal representatives,
successors and assigns of the parties hereto. Nothing expressed or referred to
in this Agreement is intended or shall be construed to give any person other
than the parties to this Agreement, or their respective heirs, personal
representatives, successors or assigns, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision contained herein.
26. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof.
27. SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement, is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
28. Further Assurances. ENTEX will, upon the request of the
Holder, execute and deliver such documents and take such action reasonably
deemed by the Holder to be necessary or desirable to more effectively complete
and evidence the sale and transfer of any Option Shares or Conversion Shares
purchased by the Holder pursuant to this Agreement.
-38-
<PAGE> 39
29. Miscellaneous. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
* * * * *
IN WITNESS WHEREOF, the undersigned have hereunto set their names
as of the day and year first above written.
ENTEX INFORMATION SERVICES, INC.
By:/s/ JOHN A. McKENNA JR.
-------------------------------
Name: John A. McKenna Jr.
Title: President
IBM CREDIT CORPORATION
BY:
-------------------------------
Name:
Title :
AGREED as to
Section 9 hereof.
/s/ DORT A. CAMERON III
- -------------------------------
Dort A. Cameron III
-39-
<PAGE> 40
29. Miscellaneous. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
* * * * *
IN WITNESS WHEREOF, the undersigned have hereunto set their names
as of the day and year first above written.
ENTEX INFORMATION SERVICES, MAC.
By:
-------------------------------
Name:
Title:
IBM CREDIT CORPORATION
BY: /s/ PHILIP N. MORSE
-------------------------------
Name: Philip N. Morse
Title: Director Global Credit
[ILLEGIBLE] Financing
AGREED as to
Section 9 hereof.
- -------------------------------
Dort A. Cameron III
-39-
<PAGE> 41
EXHIBIT A
NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE SECURITIES
ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAW. NO
TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR OF THE SECURITIES
ISSUABLE UPON EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH
TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, AND IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES LAWS, (B)
THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERED SHALL HAVE DELIVERED TO
THE ISSUER EITHER A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION
OR AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS TO THE EFFECT THAT
SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REOUIREMENTS OF THE ACT
AND OF ANY APPLICABLE STATE SECURITIES LAWS, WHICH OPINION IS IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER OR (C) SUCH TRANSFER IS PURSUANT
TO RULE 144 UNDER THE ACT AND SUCH HOLDER SHALL HAVE DELIVERED TO THE ISSUER A
CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED
TRANSFER.
THE WARRANTS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS CONTAINED IN THE WARRANT AGREEMENT DATED AS OF JULY 15, 1997 BETWEEN
IBM CREDIT CORPORATION AND ENTEX INFORMATION SERVICES, INC., UNDER WHICH SUCH
WARRANTS WERE ISSUED. A COPY OF SUCH WARRANT AGREEMENT IS AVAILABLE AT THE
EXECUTIVE OFFICES OF THE ISSUER.
shares Warrant No. IBMCC 1997-1
FORM OF WARRANT CERTIFICATE
ENTEX INFORMATION SERVICES, INC.
THIS IS TO CERTIFY THAT IBM CREDIT CORPORATION, or registered
assigns, is entitled, at any time prior to the Expiration Date (such term, and
certain other capitalized terms used herein, have the meanings given such terms
in the Warrant Agreement, as defined below), to purchase from ENTEX INFORMATION
SERVICES, INC., a Delaware corporation ("ENTEX"), ___________________________
__________________________________ (_____________) authorized, but
theretofore unissued shares of the Common Stock, par value $0.001 per share at a
price of Thirty-Seven Dollars and Seventy Five Cents ($37.75) per share, all on
the terms and conditions and pursuant to the provisions set forth in the Warrant
Agreement dated as of July 15, 1997 between IBM Credit Corporation and
<PAGE> 42
ENTEX (the "Warrant Agreement"), to all of which the Holder of this Warrant by
acceptance hereof consents.
The Warrant represented hereby is one of the Warrants to purchase
shares of Common Stock of Holdings issued pursuant to the Warrant Agreement.
1. EXERCISE OF WARRANT
1.1. Manner of Exercise. From and after the Closing
Date and until 5:00 P.M., New York time, on the Expiration Date (the "Exercise
Period"), the Holder may from time to time exercise this Warrant, on any
Business Day, for all of the Warrant Shares purchasable hereunder. This warrant
may be exercised in whole or in part.
In order to exercise this Warrant, in whole or in part, the
Holder shall deliver to ENTEX a written notice of the Holder's election to
exercise this Warrant (an "Exercise Notice"), which Exercise Notice shall be
irrevocable. The Holder shall, as promptly as practicable, and in any event
within five (5) Business Days thereafter, deliver to ENTEX at the address
indicated in the Warrant Agreement (i) payment of the Exercise Price and (ii)
the Warrant to be exercised. The Exercise Notice shall be in the form of the
subscription form appearing at the end of this Warrant as Annex I, duly executed
by the Holder or its duly authorized agent or attorney. Upon receipt of the
Warrant Price and the Warrant, ENTEX shall, as promptly as practicable, and in
any event within five (5) Business Days thereafter, execute (or cause to be
executed) and deliver (or cause to be delivered) to the Holder a certificate or
certificates representing the aggregate number of shares of the Common Stock of
ENTEX issuable upon such exercise, together with cash in lieu of any fraction of
a share, as set forth below. The stock certificate or certificates so delivered
shall be, to the extent possible, in such denomination or denominations as such
Holder shall reasonably request in the Exercise Notice and shall be registered
in the name of the Holder or such other name as shall be designated in the
Exercise Notice, subject to the restrictions on transfer contained in the
Warrant Agreement. The Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and the Holder
or any other person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the date the
items specified in clauses (i) and (ii) above are received by ENTEX, subject to
the provisions set forth in Section 2(b) of the Warrant Agreement. Payment of
the Warrant Price shall be made by certified or bank cashier's check or by wire
transfer of immediately available funds to an account designated in writing by
ENTEX.
- 2 -
<PAGE> 43
1.2 Fractional Shares. ENTEX shall not be required to issue a
fractional share of Common Stock upon exercise of this Warrant. As to any
fraction of a share that the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, if such fraction is equal to or greater than
one-half (1/2) of a share of Common Stock, ENTEX shall issue one share of Common
Stock in respect of such fraction, provided, however, that cash shall be paid in
lieu of fractional shares upon the exercise of the Conversion Price set forth in
Section 2(c) of the Warrant Agreement.
1.3. Continued Validity and Application. A Holder of shares of
Warrant Stock issued upon the exercise of this Warrant, in whole or in part,
including any transferee of such shares (other than a transferee who acquires
such shares after the same have been publicly sold pursuant to a registration
statement under the Securities Act or sold pursuant to Rule 144 thereunder),
shall continue, with respect to such shares, to be entitled to all rights and to
be subject to all obligations that are applicable to such Holder by the terms of
this Warrant.
1.4. Conversion Rights. This warrant shall be convertible into
shares of Common Stock on the terms and subject to the conditions set forth in
Section 2 of the Warrant Agreement.
2. TRANSFER, DIVISION AND COMBINATION
This Warrant shall be subject to the provisions regarding transfer,
division and combination set forth in Sections 11 and 19 of the Warrant
Agreement.
3. REGISTRATION
The Holder of this Warrant shall have the demand and piggy-back
registration rights set forth in Sections 12 and 13 of the Warrant Agreement.
4. OFFICE OF ENTEX
As long as any of the Warrants remains outstanding, ENTEX shall
maintain an office or agency, which may be the principal executive offices of
ENTEX, where the Warrants may be presented for exercise, registration of
transfer, division or combination as provided in this Warrant. Such Designated
Office shall initially be the office of ENTEX at Six International Drive, Rye
Brook, New York 10573; thereafter, such office shall
- 3 -
<PAGE> 44
be the office of ENTEX or of an agency designated by ENTEX in a notice delivered
to the registered Holders of all Warrants.
5. FINANCIAL AND BUSINESS INFORMATION
Until the Expiration Date, ENTEX shall deliver to each Holder of
Warrants or of Warrant Stock the information set forth in Section 8 of the
Warrant Agreement.
6. RIGHTS AS HOLDERS OF WARRANTS
No Holder of this Warrant shall have any rights as a stockholder of
ENTEX until such Holder shall have exercised this Warrant pursuant to and in
accordance with the terms of this Agreement.
IN WITNESS WHEREOF, ENTEX has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
ENTEX INFORMATION SERVICES, INC.
By:
------------------------------------
Name:
Title:
Attest:
By:
----------------------------
Name:
Title:
- 4 -
<PAGE> 45
ANNEX I
NOTICE OF EXERCISE
ENTEX Information Services, Inc.
Six International Drive
Rye Brook, New York 10573
Attention: President
The undersigned hereby irrevocably elects to exercise the Warrant
granted pursuant to the Warrant Agreement, dated as of July 15, 1997, between
IBM Credit Corporation and ENTEX Information Services, Inc. ("ENTEX"), as
amended, modified or supplemented from time to time, to purchase shares of
Common Stock, par value $.001 per share, of ENTEX,* as provided therein.
Dated:
-------------------------------
Name of Holder or
Assignee (Please Print):
Address:
Taxpayer Identification No.
Signature:
Name and Title (Please Print):
Signature Guaranteed:
- ----------------------------
* Modify description of securities accordingly if Warrant Shares do not
consist of shares of Common Stock, par value $0.001 per share, of ENTEX.
<PAGE> 46
ANNEX II
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this warrant with respect to the number of
shares of Common Stock of ENTEX Information Services, Inc. ("ENTEX") set forth
below. Capitalized terms used but not defined herein have the meanings given
such terms in the Warrant Agreement dated as of July 15, 1997, between IBM
Credit Corporation and ENTEX.
Name and Address Number of Shares
of Assignee of Common Stock
---------------- ----------------
The undersigned does hereby irrevocably constitute and appoint__________
attorney-in-fact to register such transfer onto the books of ENTEX maintained
for the purpose, with full power of substitution in the premises.
Dated: Print Name:
----------------------- ---------------------------
Signature:
---------------------------
Witness:
------------------------------
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE> 47
SCHEDULE 1
TO
WARRANT AGREEMENT
BY AND BETWEEN
ENTEX INFORMATION SERVICES, INC.
AND
IBM CREDIT CORPORATION
DATED AS JULY 15, 1997
================================================================================
================================================================================
Consolidated balance sheet for ENTEX Information Services, Inc. as of March 31,
1997 and the consolidated statements of operations, stockholders' equity and
cash flows for the fiscal quarter ending March 31, 1997 received by IBM Credit
Corporation.
Quarterly balance sheet, income statement and statement of sources and uses of
funds projections, dated July 2, 1997, for each fiscal quarter through the
fiscal quarter ending June 1998.
Collateral Reports provided to IBM Credit from January 1, 1997 through September
14, 1997.
<PAGE> 1
Exhibit 11.1
ENTEX Information Services, Inc.
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Unaudited
Three months Three months
ended ended Year ended
--------------- ---------------- ------------------------------------------------------
September 28, September 29, June 29, June 30 July 2, July 3,
1997 1996 1997 1996 1995 1994
------------- --------------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Weighted average number of
common shares outstanding 31,014,425 32,357,840 34,005,738 31,348,340 31,333,300 28,053,165
Common equivalent shares from stock
options and warrants using the
treasury stock method 2,721,780 -- 1,290,697 -- -- --
------------- ----------- ----------- ----------- ------------ ------------
Shares used in computing earnings
per share 33,736,205 32,357,840 32,399,062 31,348,340 31,333,300 28,053,165
============ =========== =========== =========== ============ ============
Net income (loss) $ 4,700 $ (5,808) $ 1,544 $ (25,676) $ (29,254) $ (3,321)
============ =========== =========== ============ ============ ============
Primary and fully diluted earnings
per share $ 0.14 $ (0.18) $ 0.04 $ (0.82) $ (0.93) $ (0.12)
============ =========== =========== ============ ============ ============
</TABLE>
<PAGE> 1
EXHIBIT 21.1
SCHEDULE OF SUBSIDIARIES
ENTEX Information Services of Michigan, Inc.
Erlanger Land Company, Inc.
ENTEX Services, Inc.
ENTEX Information Services of Colorado, Inc.
ENTEX Information Services International, Ltd.
FCP Technologies, Inc.
Servicios Informacion de ENTEX S.R.L.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
CONSOLIDATED BALANCE SHEETS AND SEPTEMBERS 28, 1997, JUNE 239, 1997 AND JUNE 30,
1996, RESPECTIVELY, AND THE CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE
MONTHS ENDED SEPTEMBER 28, 1997, AND THE YEARS ENDED JUNE 29, 1997 AND JUNE 30,
1996.
</LEGEND>
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR YEAR
<FISCAL-YEAR-END> SEP-28-1997 JUN-29-1997 JUN-30-1996
<PERIOD-START> JUN-30-1997 JUL-01-1996 JUL-03-1995
<PERIOD-END> SEP-28-1997 JUN-29-1997 JUN-30-1996
<CASH> 10,330 15,838 12,603
<SECURITIES> 0 0 0
<RECEIVABLES> 332,249 338,942 299,112
<ALLOWANCES> 4,526 4,746 4,101
<INVENTORY> 184,408 183,957 171,453
<CURRENT-ASSETS> 0 581,008 508,741
<PP&E> 92,271 89,310 65,006
<DEPRECIATION> 37,377 34,261 20,194
<TOTAL-ASSETS> 665,644 683,590 590,588
<CURRENT-LIABILITIES> 648,829 671,836 577,594
<BONDS> 48,653 48,215 52,158
0 0 0
0 0 0
<COMMON> 3 3 3
<OTHER-SE> (32,932) (37,735) (39,518)
<TOTAL-LIABILITY-AND-EQUITY> 665,644 683,590 590,588
<SALES> 500,938 2,126,973 1,940,796
<TOTAL-REVENUES> 606,839 2,480,597 2,148,307
<CGS> 450,781 1,922,826 1,764,775
<TOTAL-COSTS> 530,653 2,190,380 1,933,732
<OTHER-EXPENSES> 61,815 251,963 192,312
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 9,669 37,147 29,726
<INCOME-PRETAX> 4,702 1,569 (25,648)
<INCOME-TAX> 2 25 28
<INCOME-CONTINUING> 4,700 1,544 (25,676)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 4,700 1,544 (25,676)
<EPS-PRIMARY> .14 .04 (.82)
<EPS-DILUTED> 0 0 0
</TABLE>
