ENTEX INFORMATION SERVICES INC, 10-12G/A, 1998-07-06

ENTEX INFORMATION SERVICES INC
10-12G/A, 1998-07-06
COMPUTERS & PERIPHERAL EQUIPMENT & SOFTWARE

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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AMENDMENT NO. 4

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.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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<S> <C>
DELAWARE 93-133715291
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER IDENTIFICATION NO.)
ORGANIZATION) 10573-1058
6 INTERNATIONAL DRIVE, RYE BROOK, NEW YORK (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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COMPANY'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(914) 935-3600

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
(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.(1)

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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(1) 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 and 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.

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

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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 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."

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EMPLOYEES

As of March 29, 1998, 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 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

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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 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,

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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 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

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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 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."

Year 2000 Compliance. The Company uses a significant number of computer
software programs and operating systems in its internal operations, including
applications used in financial business systems and various administration
functions. As the year 2000 approaches, each of these computer systems will be
affected in some way by the rollover of the two digit year value to 00. If these
systems are unable to properly recognize date sensitive information when the
year changes to 2000, they 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 year 2000 compliance. It is
anticipated that all reprogramming efforts will be complete by December 31, 1999
allowing adequate time for testing.* In this connection, the Company will be
implementing the R3(TM)Enterprise Resource Planning solution from SAP at an
estimated cost of $30 million over the next 12 months. Given the information
known at this time about the Company's systems, coupled with the Company's
ongoing efforts to upgrade or replace business critical systems, the Company
does not believe that any additional costs will have a material adverse effect
on the Company's business, operating results and financial condition. However,
the Company is still analyzing its computer systems and, to the extent they are
not fully year 2000 compliant, there can be no assurance that the costs
necessary to update software or potential systems interruptions would not have a
material adverse effect on the Company's business, operating results and
financial condition.

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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,
approximately 18% of the outstanding shares of Common Stock are owned by certain
employees and former employees ("Participants"), which ownership is subject to a
Stockholders' Agreement dated as of December 10, 1993 (as amended, the
"Stockholders' Agreement"). Under certain circumstances, the Cameron Affiliates
have a right to purchase additional shares of Common Stock from certain
Participants, including John A. McKenna and David J. Csira(1). Pursuant to the
Stockholders' Agreement, in the event the employment of certain Participants is
terminated, 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."

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.

- ---------------

(1) Mr. Csira resigned in May, 1998.

9
<PAGE> 10

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 March 29, 1998 and June 29, 1997, the Company's total
interest bearing outstanding debt was $328.5 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 $286.5 million as of March 29, 1998.
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"). At March 29, 1998, $17.3 million of principal was outstanding under
the Long-Term Loan and $10.0 million of principal was outstanding under the
Special Working Capital Advance. 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

10
<PAGE> 11

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."

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 statement of operations for the year ended August 5,
1993 is derived from unaudited archived predecessor company financial
statements, which are not included herein. The consolidated statements of
operations data for the nine months ended March 29, 1998 and March 30, 1997 and
the consolidated balance sheet data as of March 29, 1998 are derived from
unaudited financial statements included elsewhere in the Registration Statement.
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
10 of Notes to Consolidated Financial Statements.

11
<PAGE> 12

<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
----------------------- ---------------------------------------------------------------
MARCH 29, MARCH 30, JUNE 29, JUNE 30, JULY 2, JULY 3, AUGUST 5,
1998 1997 1997 1996 1995 1994(1) 1993(3)
---------- ---------- ---------- ---------- ---------- ---------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenues:
Product revenues........ $1,523,963 $1,584,941 $2,126,973 $1,940,796 $1,342,323 $1,019,010 $1,102,223
Service revenues........ 331,090 249,268 353,624 207,511 130,940 75,917 77,929
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total net revenues.... 1,855,053 1,834,209 2,480,597 2,148,307 1,473,263 1,094,927 1,180,152
---------- ---------- ---------- ---------- ---------- ---------- ----------
Cost of revenues:
Cost of products sold... 1,366,067 1,439,985 1,922,826 1,764,775 1,236,940 917,939 991,141
Cost of services
provided.............. 254,124 188,710 267,554 168,957 110,349 64,300 64,321
---------- ---------- ---------- ---------- ---------- ---------- ----------
Cost of revenues...... 1,620,191 1,628,695 2,190,380 1,933,732 1,347,289 982,239 1,055,462
---------- ---------- ---------- ---------- ---------- ---------- ----------
Product gross margin...... 157,896 144,956 204,147 176,021 105,383 101,071 111,082
Services gross margin..... 76,966 60,558 86,070 38,554 20,591 11,617 13,608
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total gross margin.... 234,862 205,514 290,217 214,575 125,974 112,688 124,690
Selling, general and
administrative
expenses................ 189,133 187,265 251,963 192,312 132,586 100,790 164,858
Nonrecurring stock
compensation costs...... -- -- -- 18,185 -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from
operations.......... 45,729 18,249 38,254 4,078 (6,612) 11,898 (40,168)
Interest expense, net... 27,698 27,308 37,147 29,726 23,151 17,444 11,730
Other income............ -- -- 462 -- -- -- (483)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
income taxes........ 18,031 (9,059) 1,569 (25,648) (29,763) (5,546) (52,381)
Provision (benefit) for
income taxes............ 12 24 25 28 (509) (2,225) 180
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)..... $ 18,019 (9,083) $ 1,544 $ (25,676) $ (29,254) $ (3,321) (52,561)
---------- ---------- ---------- ---------- ---------- ---------- ----------
COMMON SHARE DATA:
Basic earnings (loss) per
share................... .56 (.28) .05 (.82) (.93) (.12) N/A
========== ========== ========== ========== ========== ========== ==========
Diluted earnings (loss)
per share............... .53 (.28) .04 (.82) (.93) (.12) N/A
========== ========== ========== ========== ========== ========== ==========
Basic weighted average
number of shares of
common stock
outstanding(2).......... 32,341,754 32,312,020 34,005,738 31,348,340 31,333,300 28,053,165 N/A
Diluted weighted average
number of shares of
common stock
outstanding............. 33,668,184 32,312,020 35,296,435 31,348,340 31,333,300 28,053,165 N/A
========== ========== ========== ========== ========== ========== ==========
</TABLE>

12
<PAGE> 13

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------------------------
MARCH 29, JUNE 29, JUNE 30, JULY 2, JULY 3, AUGUST 5,
1998 1997 1996 1995 1994 1993
----------- -------- -------- -------- -------- ------------
(UNAUDITED) (IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets.............................. $673,389 $683,590 $590,588 $415,170 $351,777 $329,701
Total long-term liabilities............... 54,638 49,486 52,509 37,224 38,425 37,382
Stockholders' equity (deficit)............ (19,312) (37,732) (39,515) (31,305) (2,623) (11,767)
</TABLE>

- ---------------
(1) The statements of operations data for the Company's 1994 fiscal year
presents the results of operations from August 5, 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.

(3) The data for the Company's 1993 fiscal year reflects the results of
operations for the information systems business of JWP Inc. (predecessor
company) for the 12 month period ending August 5, 1993 which does not
reflect purchase accounting adjustments reflected in all other columns.

13
<PAGE> 14

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.

14
<PAGE> 15

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>
NINE MONTHS ENDED FISCAL YEAR ENDED
--------------------- -----------------------------
MARCH 29, MARCH 30, JUNE 29, JUNE 30, JULY 2,
1998 1997 1997 1996 1995
--------- --------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net revenues:
Product revenues............................. 82.2% 86.4% 85.7% 90.3% 91.1%
Service revenues............................. 17.8 13.6 14.3 9.7 8.9
----- ----- ----- ----- -----
Total net revenues........................ 100.0 100.0 100.0 100.0 100.0
Cost of revenues............................... 87.3 88.8 88.3 90.0 91.4
----- ----- ----- ----- -----
Gross margin(1)................................ 12.7 11.2 11.7 10.0 8.6
Selling, general and administrative expenses... 10.2 10.2 10.2 9.0 9.0
Nonrecurring stock compensation costs.......... -- -- -- 0.8 --
----- ----- ----- ----- -----
Income (loss) from operations.................. 2.5 1.0 1.5 0.2 (0.4)
Interest expense, net.......................... 1.5 1.5 1.4 1.4 1.6
Income (loss) before income taxes.............. 1.0 (.5) 0.1 (1.2) (2.0)
Provision (benefit) for income taxes........... -- -- -- -- --
----- ----- ----- ----- -----
Net income (loss).............................. 1.0% (.5)% 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>
NINE MONTHS ENDED FISCAL YEAR ENDED
---------------------- -------------------------------
MAR. 29, MAR. 30, JUNE 29, JUNE 30, JULY 2,
1998 1997 1997 1996 1995
--------- --------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Product gross margin..................... 10.4% 9.1% 9.6% 9.1% 7.9%
Services gross margin.................... 23.2% 24.3% 24.3 18.6 15.7
</TABLE>

Nine Months Ended March 29, 1998 Compared to Nine Months Ended March 30, 1997

The Company's net income improved in the nine months ended March 29, 1998
to $18.0 million compared to a net loss of $9.1 million in the nine months ended
March 30, 1997. The improvement was a result of an increase in product gross
margins attributable to enhanced controls over vendor programs and a higher
percentage of services in the revenue base.

Product revenues. Product revenues were $1.524 billion for the nine months
ended March 29, 1998 as compared to $1.585 billion for the nine months ended
March 30, 1997, a decrease of $61.0 million or 3.8%. While the Company
experienced overall unit growth in sales of desktops, laptops and server units
during the nine months ended March 29, 1998, the revenue decline reflects the
price reductions in average sales price driven by lower manufacturer prices and
intense competition.

Service revenues. Service revenues were $331.1 million for the nine months
ended March 29, 1998 as compared to $249.3 million for the nine months ended
March 30, 1997, an increase of $81.8 million or 32.8%. Service revenues as a
percentage of total net revenues increased to 17.8% for the nine months ended
March 29, 1998 as compared to 13.6% in the nine months ended March 30, 1997.
These increases reflect increase in demand from existing customers and the
addition of new large accounts. The Company is focused on continuing to increase
service revenue.

Gross margins. Total gross margins increased to 12.7% for the nine months
ended March 29, 1998 as compared to 11.2% for the nine months ended March 30,
1997. Product gross margin as a percentage of

15
<PAGE> 16

product revenues increased to 10.4% or $157.9 million for the nine months ended
March 29, 1998 as compared to 9.1% or $145.0 million for the nine months ended
March 30, 1997. These increases reflect the Company's efforts to improve product
margins through improved controls over price protection arrangements and vendor
allowances and the Company's participation 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 margin percentage declined slightly from 24.3% to 23.2%
reflecting the investment in national accounts and the billing/utilization
inefficiencies in certain markets.

Selling, general and administrative expenses. Selling, general and
administrative expenses were essentially flat, $189.1 million for the nine
months ended March 29, 1998 as compared to $187.3 million for the nine months
ended March 30, 1997. Selling, general, and administrative expenses as a
percentage of total revenues remained at 10.2%.

Income from operations. Income from operations was $45.7 million for the
nine months ended March 29, 1998 as compared to $18.2 million in the nine months
ended March 30, 1997, an increase of $27.5 million. The increase reflects growth
in the higher margin service business and significant improvements in product
gross margins, while containing selling, general and administrative expenses to
support the business expansion.

Interest expense, net. Net interest expense increased to $27.7 million for
the nine months ended March 29, 1998 as compared to $27.3 million for the nine
months ended March 30, 1997, an increase of $400 thousand or 1.4%. The increase
was driven by higher working capital needs.

Provisions for income taxes. The Company utilized net operating loss
carryforwards to offset federal income tax requirements for the nine months
ended March 29, 1998. Although the Company recognized net income for the nine
months ended March 29, 1998, based on the history of negative pretax earnings,
the Company has determined that it would be prudent to maintain the valuation
reserve against the deferred tax asset until it can sustain several quarters of
profitable operations. While the Company considered the improved operations over
the course of fiscal year 1997, and fiscal 1998 interim periods, the Company did
not believe that it had sufficient reason to conclude that it was more likely
than not that the deferred tax asset would be realized. The Company will
reevaluate the foregoing premise in connection with future periods.

Net income. As a result of the factors mentioned above, net income for the
nine months ended March 29, 1998 was $18.0 million as compared to a net loss of
$9.1 million for the nine months ended March 30, 1997.

Fiscal 1997 Compared to Fiscal 1996

The Company's net income improved in fiscal 1997 to $1.5 million compared
to a net loss of $25.7 million in fiscal 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

- ---------------
* 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.

16
<PAGE> 17

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 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. Although the Company recognized net income for fiscal 1997, based
on the history of negative pretax earnings, the Company has determined that it
would be prudent to maintain the valuation reserve against the deferred tax
asset until it can sustain several quarters of profitable operations. While the
Company considered the improved operations over the course of fiscal year 1997,
the Company did not believe that two quarters of profitable operations following
two years of fairly unprofitable operations was sufficient to conclude that it
was more likely than not that the deferred tax asset would be realized. The
Company will reevaluate the foregoing premise in connection with future periods.

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.

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.

17
<PAGE> 18

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.

18
<PAGE> 19

QUARTERLY RESULTS OF OPERATIONS

The following table sets forth certain unaudited quarterly statements of
operations data for the seven quarters ended March 29, 1998, 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
----------------------------------------------------------------------------------------------
MARCH 29, DECEMBER 28, SEPTEMBER 28, JUNE 29, MARCH 30, DECEMBER 31, SEPTEMBER 29,
1998 1997 1997 1997 1997 1996 1996
--------- ------------ ------------- -------- --------- ------------ -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues:
Product revenues....... $479,267 $543,758 $500,938 $542,032 $506,370 $552,609 $525,962
Service revenues....... 114,567 110,622 105,901 104,356 92,824 84,770 71,674
-------- -------- -------- -------- -------- -------- --------
Total net revenues... 593,834 654,380 606,839 646,388 599,194 637,379 597,636
-------- -------- -------- -------- -------- -------- --------
Cost of revenues:
Cost of products
sold................. 428,968 486,318 450,781 482,841 456,088 501,181 482,716
Cost of services
provided............. 87,299 86,953 79,872 78,844 71,161 63,510 54,039
-------- -------- -------- -------- -------- -------- --------
Cost of revenues..... 516,267 573,271 530,653 561,685 527,249 564,691 536,755
-------- -------- -------- -------- -------- -------- --------
Product gross margin..... 50,299 57,440 50,157 59,191 50,282 51,428 43,246
Services gross margin.... 27,268 23,669 26,029 25,512 21,663 21,260 17,635
-------- -------- -------- -------- -------- -------- --------
Total gross margin... 77,567 81,109 76,186 84,703 71,945 72,688 60,881
Selling, general and
administrative
expenses............... 63,995 63,323 61,815 64,698 61,811 66,907 58,547
-------- -------- -------- -------- -------- -------- --------
Income from operations... 13,572 17,786 14,371 20,005 10,134 5,781 2,334
Interest expense, net.... 8,702 9,327 9,669 9,839 9,418 9,758 8,132
Other income............. -- -- -- 462 -- -- --
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes....... 4,870 8,459 4,702 10,628 716 (3,977) (5,798)
Provision (benefit) for
income taxes........... 4 6 2 1 9 5 10
-------- -------- -------- -------- -------- -------- --------
Net income (loss).... $ 4,866 $ 8,453 $ 4,700 $ 10,627 $ 707 $ (3,982) $ (5,808)
======== ======== ======== ======== ======== ======== ========
</TABLE>

19
<PAGE> 20

- ---------------
(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:

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 $75.1
million, $(26.1) million, $(74.7) million and $(10.1) million during the nine
months ended March 29, 1998 and in fiscal years 1997, 1996 and 1995,
respectively. Cash provided by operations during the nine months ended March 29,
1998 resulted primarily from net income of $18.0 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 $(12.2) million, $(27.8) million,
$(33.1) million and $(9.0) million during the nine months ended March 29, 1998
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 $(69.5) million,
$57.2 million, $108.3 million and $19.9 million during the nine months ended
March 29, 1998 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 March 29, 1998, 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 $286.5 million as of March 29, 1998. 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 March 29, 1998). 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
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. In addition, $10.0 million of the $20.0 million Special Working Capital

20
<PAGE> 21

Advance has been paid down. 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 March 29, 1998). At March 29, 1998, $17.3 million of principal was
outstanding under the IBMCC Long-Term Loan, and $10.0 million of principal was
outstanding under the Special Working Capital Advance.

As of March 29, 1998, 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 March 29, 1998, the principal
amount outstanding under this line of credit was $62.0 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 which require the Company to, among other things, (i)
maintain a ratio of current assets to current liabilities of at least 0.83 to
1.00; (ii) maintain the total liabilities minus the aggregate outstanding
principal amount of certain indebtedness during each fiscal year at an amount no
greater than $800 million; (iii) not permit the sum of tangible net worth plus
the aggregate outstanding principal amount of certain indebtedness to be less
than $60 million for the fiscal quarter ended December 1997, $48.2 million for
the fiscal quarter ended March 1998 and $38.7 million for all periods
thereafter; (iv) not permit the ratio of EBIT for interest expense for the
period of two consecutive fiscal quarters then ended to be less than 1.40 to
1.00 for the fiscal quarter ended December 1997, 1.60 to 1.00 for the fiscal
quarter ended March 1998 and 1.70 to 1.00 for each fiscal quarter thereafter;
(v) not permit the consolidated net income for the fiscal quarter ended December
1997 to be less than .70% of sales for such fiscal quarter and for any fiscal
quarter thereafter to be less than 1.00% of sales for such fiscal quarter; (vi)
not permit the aggregate amount of capital expenditures made in any fiscal year
to exceed $30 million net of dispositions related to such capital expenditures;
and (vii) maintain working capital deficit of no more than ($100.5) million for
the fiscal quarter ended December 1997, ($92.3) million for the fiscal quarter
ended March 1998 and at least ($83.8) million for periods thereafter. As of
March 29, 1998, the Company is in compliance with these restrictive covenants
except for (v) for which IBMCC has waived compliance.

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.* In this connection, the Company will
be implementing the R3(TM) Enterprise Resource Planning solution from SAP at an
estimated cost of $30 million over the next 12 months. Given the information
known at this time about the Company's systems, coupled with the Company's
ongoing efforts to upgrade or replace business critical systems, the Company
does not believe that any additional costs will have a material adverse effect
on the Company's business, operating results and financial condition. However,
the Company is still analyzing its computer systems and, to the extent they are
not fully year 2000 compliant, there can be no assurance that the costs
necessary to update software or potential systems interruptions would not have a
material adverse effect on the Company's business, operating results and
financial condition.

21
<PAGE> 22

The Company expects to spend approximately $25 million in capital
expenditures during fiscal year ended June 28, 1998 of which $1 million was
committed under existing purchase orders as of June 29, 1997. 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, approximately 12,100 square feet under a lease
which expires December 31, 1998 and approximately 3,800 square feet under a
lease which expires April 29, 2000. 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 150,000 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, 2003.

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 March 29, 1998 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 and sections
not so identified may also contain forward-looking information.

22
<PAGE> 23

<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, New York 10573................................. 25,150,000 77.3%
IBM Credit Corporation(3)
1133 Westchester Avenue
White Plains, New York 10604.............................. 2,436,055 7.4%
John A. McKenna, Jr.(4)(5).................................. 1,544,210 4.6%
Kenneth A. Ghazey(6)........................................ 333,333 1.0%
Dale H. Allardyce(7)........................................ 325,000 1.0%
David J. Csira(5)(8)(9)..................................... 238,333 *
John F. Lyons............................................... 125,000 *
Richard Nathanson........................................... -- --
R. Randolph Devening(10).................................... 29,689 *
Linwood A. (Chip) Lacy, Jr.(11)............................. 29,689 *
Frank W. Miller............................................. 17,190 *
All directors and executive officers as a group (14
persons)(12).............................................. 27,973,944 82.6%
</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 March 29, 1998 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 150,000 shares of the
Company's Common Stock owned by Mr. Cameron which are subject to an option
exercisable within 60 days of March 29, 1998. 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) Includes 877,560 shares of the Company's Common Stock owned by Mr. McKenna
which are subject to an option exercisable within 60 days of March 29,
1998. Excludes unvested options to purchase 847,560 shares of the Company's
Common Stock.

(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."

23
<PAGE> 24

(6) Includes 333,333 shares of the Company's Common Stock owned by Mr. Ghazey
which are subject to an option exercisable within 60 days of March 29,
1998.

(7) Includes 25,000 shares of the Company's Common Stock currently owned by Mr.
Allardyce which are subject to an option exercisable within 60 days of
March 29, 1998.

(8) Includes 38,333 shares of the Company's Common Stock owned by Mr. Csira
which are subject to an option exercisable within 60 days of March 29,
1998.

(9) Mr. Csira resigned in May 1998.

(10) Includes 12,499 shares of the Company's Common Stock owned by Mr. Devening
which are subject to an option exercisable within 60 days of March 29,
1998.

(11) Includes 12,499 shares of the Company's Common Stock owned by Mr. Lacy
which are subject to an option exercisable within 60 days of March 29,
1998.

(12) Includes 1,480,724 shares of the Company's Common Stock which are subject
to options exercisable within 60 days of March 29, 1998.

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 March 29, 1998, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Dort A. Cameron III.................... 53 Chairman of the Board of Directors
John A. McKenna, Jr. .................. 42 President, Chief Executive Officer and Director
Kenneth A. Ghazey...................... 42 Executive Vice President, Finance and Administration,
Chief Financial Officer and Director
Dale H. Allardyce...................... 48 Executive Vice President, Operations
David J. Csira(1)...................... 40 Executive Vice President, Field Operations
Michael G. Archambault................. 46 Vice President, Treasurer
Richard P. Bannon...................... 51 Senior Vice President, Controller
Lynne A. Burgess....................... 48 Senior Vice President, General Counsel
John F. Lyons.......................... 44 Senior Vice President, Sales & Marketing
Mark G. Mindell........................ 47 Senior Vice President, Human Resources
Richard Nathanson...................... 40 Senior Vice President, Services
William K. Todd........................ 53 Senior Vice President, Manufacturing and Distribution
R. Randolph Devening(2)................ 56 Director
Linwood A. (Chip) Lacy, Jr.(2)......... 52 Director
Frank W. Miller(2)..................... 53 Director
</TABLE>

- ---------------

(1) Mr. Csira resigned in May 1998.

(2) 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."

24
<PAGE> 25

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
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. Archambault joined the Company in May 1997 as Vice President and
Treasurer. From September 1989 to 1997, Mr. Archambault served as Vice President
of Finance and Investor Relations for Symbol Technologies, Inc., a manufacturer
of bar code data capture systems worldwide. From 1988 to September 1989, Mr.
Archambault was Vice President of Finance at American Savings Bank. From 1980 to
1988, Mr. Archambault held various Accounting and Treasury positions with
Combustion Engineering, Inc., most recently as Director of Investor Relations.
Mr. Archambault is a Certified Public Accountant and holds an M.S. in Accounting
and a B.S. in Finance from Northeastern University.

Mr. Bannon joined the Company in December, 1996 as VP and Controller and
has served as Senior Vice President and Controller since January, 1998. From
January 1968 to December 1996, Mr. Bannon held various accounting and finance
positions at IBM. Most recently, Mr. Bannon served as Director of Accounting
Services. While at IBM, Mr. Bannon also held the positions of Director, External
Financial Reporting; Controller, Storage Systems Division; Controller, Data
Systems Division and Functional Manager Positions in Corporate Consolidation
Accounting and Financial Planning. Mr. Bannon holds a B.B.A. from Iona College.

Ms. Burgess joined the Company in May 1994 as Vice President and General
Counsel and has served as Senior Vice President and General Counsel since
January 1998. From October 1992 to May 1994, Ms. Burgess was Of Counsel at the
law firm of Collier, Shannon, Rill and Scott, specializing in commercial and
antitrust matters. From August 1978 to October 1991, Ms. Burgess was legal
counsel for various business units within American National Can Company and
served as Assistant General Counsel at American National Can Company from
January 1987 to October 1991. Ms. Burgess holds a B.A. from William Smith
College and a J.D. from Fordham University School of Law.

Mr. Csira joined the Company as Vice President, West Operations in August
1993 in connection with the acquisition of JWPIS, served as Senior Vice
President, West Operations from October 1995 to November 1996 and then served as
Executive Vice President, Field Operations. 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. Csira resigned in May 1998.

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.

25
<PAGE> 26

Dr. Mindell joined the Company in March 1998 as Senior Vice President,
Human Resources. Immediately prior to joining the Company, he served as Vice
President & CIO, Organization Networking for Wonderware Corporation, a plant
floor automation software development company. From 1991 to 1995, Dr. Mindell
held the positions of Director, Information Services & Business Reengineering
and Director, Organization Planning & Development for Siemens Corporation, and,
from 1985 to 1991, was President and CEO of Orecon Associates, a human
resources, systems development and business reengineering consulting
corporation. Dr. Mindell holds B.A. degrees in Communications and Political
Science from Northern Illinois University, an M.A. in Organizational
Communication from Central Michigan University and a Ph.D. in Organization
Behavior from Kent State 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. Todd joined the Company as Director of Distribution in August 1993 in
connection with the acquisition of JWPIS. Mr. Todd served as Vice President of
Logistics from July 1995 to January, 1998, and since January 1998, has served as
Senior Vice President of Manufacturing and Distribution at the Company's
Integration Center in Erlanger, Kentucky. From September 1992 to August 1993,
Mr. Todd was Director of Distribution for JWPIS. From September 1982 to August
1992, Mr. Todd held various positions at Wang Laboratories, most recently as
Director of Manufacturing, including two years in Limerick, Ireland. Mr. Todd
holds a B.B.S. in Business Management from New Hampshire College.

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 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

26
<PAGE> 27

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(3)................................ 1997 226,999 116,877 100,000
Executive Vice President, Field Operations
John F. Lyons.................................... 1997 179,907 101,516 --
Senior Vice President, Sales and Marketing
Richard Nathanson................................ 1997 258,048 193,787(4) 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) Mr. Csira resigned in May 1998.

(4) Includes $120,787 bonus payable by FCP at the time of the acquisition and
paid by the Company after the closing.

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 reflects the nine-for-one stock

27
<PAGE> 28

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 VALUE
PERCENT OF OF ASSUMED ANNUAL RATES
NUMBER OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION FOR OPTION
UNDERLYING GRANTED TO PRICE 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 43.2% $2.04 5/27/07 1,127,885 2,858,281
David J. Csira(5)(6)......... 100,000 4.91 2.04 6/26/07 128,169 324,805
Richard Nathanson............ 154,885(7) 7.61 2.04 7/10/01 87,209 192,712
32,510(8) 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 an additional
one-third of such option shall vest after each anniversary of June 26, 1997.

(6) Mr. Csira resigned in May 1998.

(7) 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.

(8) 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.

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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.

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, John F. Lyons, the
Company's Senior Vice President, Sales & Marketing, 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 and Mr. Lyons' agreements are 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 and Mr. Lyons'
retention agreements provide 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.

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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 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, Mr. Lyons' 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 in the amount of $500,000.

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

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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 5,860,690 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 certain
Participants die or become disabled (the "Non-Electing Participants"), the
Company will have the right to purchase all of the shares of Common Stock of
such Participants. Upon death or disability, the Non-Electing 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 Non-Electing Participants
total six individuals who collectively own 788,240 shares. The Company has
obtained an insurance policy that would cover the purchase price of such shares
in the event of the exercise of such put options. The Company will have the
right to purchase shares of Common Stock if certain other Participants,
including John McKenna and David Csira ("Plan 2 Participants") are 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 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

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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, as adjusted 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.
"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 is the beneficial owner of 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 $286.5
million as of March 29, 1998. The amount of 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 March 29, 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
December 1996 and 1997 amendments also included favorable revisions to the
financial covenant requirements and the payment schedule for the Company,
including agreements to waive all financial covenant defaults pertaining to
fiscal 1997. The Short-Term Loan was repaid in full subsequent to September 28,
1997. In addition, $10.0 million of the 20.0 million Special Working Capital
Advance has been paid down. 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 March 29, 1998). At March 29, 1998, $17.3 million of principal was
outstanding under the IBMCC Long-Term Loan, and $10.0 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 $.02 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 committed
to by Entex Holdings in August 1993 and issued in November 1994 in connection
with a settlement of a dispute between International Business Machines
Corporation, JWPIS and ENTEX Holdings. 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 on 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 "Warrant
Shares") along with any sale of Common Stock representing more than 20% of the
capital stock of the Company held by the Cameron Affiliates. Mr. Cameron has a
right to require IBMCC to sell the Warrant Shares along with any sale of Common
Stock

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representing 50% or more of the capital stock of the Company by the 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 7 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 March 29, 1998, the Company had outstanding 32,404,610 shares of
Common Stock held by 2,180 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 March 29, 1998, 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 3,500 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 750 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 March 1998, ENTEX Holdings and the
Company issued to approximately 76 key employees an aggregate of 5,860,690
shares of Common Stock, net of repurchases, for an aggregate purchase price
of $117,214. At the same time, Entex Holdings issued promissory notes in
the aggregate principal amount of $770,991 for cash and notes of such
employee purchasers.

(e) From December 1993 to June 1996, ENTEX Holdings issued to
approximately 2,100 employees of the Company, 1,262,750 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 2,809,010 options with exercise prices ranging from $4.63 to $9.02, 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.

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(i) In June 1996, ENTEX Holdings issued warrants for the purchase of
375,000 shares of Common Stock to Microsoft Corporation which were
exercisable at $14.40 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
771,545 options with exercise prices ranging from $2.04 to $9.38, 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 March 1998, the Company issued an aggregate of
2,591,500 options with exercise prices ranging from $2.04 to $6.64, 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(i) above.

(q) In December 1997, the Company issued 10,350 shares to Non-employee
Directors pursuant to the Non-employee Director Share Plan.

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), (m) and (q) 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 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

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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 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.

35
<PAGE> 36

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 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.

36
<PAGE> 37

ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

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 March 29, 1998 (unaudited)
and as of June 29, 1997 and June 30, 1996................. F-2
Consolidated Statements of Operations for the Nine Months
ended March 29, 1998 and March 30, 1997 (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 Nine Months
ended March 29, 1998 and March 30, 1997 (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.

(b) Exhibits

<TABLE>
<C> <S>
2.1 (a) 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 (a) Certificate of Incorporation of the Company, as amended.
3.2 (a) Bylaws of the Company.
4.1 (a) Form of the Company's Common Stock Certificate.
10.1 (a) Form of Indemnification Agreement entered into by the
Company with each of its directors and executive officers.
10.2 (a) Agreement between John A. McKenna, Jr. and the Company dated
August 7, 1994 and related amendment.
</TABLE>

37
<PAGE> 38

<TABLE>
<C> <S>
10.3 (a) Letter Agreement between Kenneth A. Ghazey and the Company
dated January 6, 1997.
10.4 (a) Retention Agreement between Dale H. Allardyce and the
Company dated November 17, 1997.
10.51(a) Retention Agreement between John F. Lyons and the Company
dated November 17, 1997.
10.52 Letter Agreement between David J. Csira and the Company
dated November 15, 1996.
10.6 (a) Employment Agreement between Richard Nathanson and the
Company dated July 10, 1996.
10.7 (a) Stockholders' Agreement among Entex Holdings, Inc., Dort A.
Cameron III and Entex Associates, L.P. dated December 10,
1993 and related amendments.
10.8 (a) ENTEX Holdings, Inc. 1996 Stock Option Plan and related
agreements.
10.9 (a) ENTEX Information Services, Inc. 1996 Stock Option Plan and
related agreements.
10.10(a) 1996 Performance Incentive Plan and related agreements.
10.11(a) 1996 Non-Employee Director Stock Plan.
10.12(a) 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.
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(a) Warrant Agreement between IBM Credit Corporation, Entex
Holdings, Inc. and the Company dated November 15, 1994.
10.22(a) Warrant Agreement between IBM Credit Corporation and the
Company dated July 15, 1997.
11.1 (a) Statement of computation of earnings per share.
21.1 (a) Subsidiaries of the Company.
27.1 (a) Financial Data Schedule.
</TABLE>

- ---------------

(a) Previously filed.

(b) Portion previously filed; portion filed herewith.

38
<PAGE> 39

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: May 14, 1998

39
<PAGE> 40

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 10
which is as of November 28, 1997

F-1
<PAGE> 41

ENTEX INFORMATION SERVICES, INC.

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
MARCH 29, JUNE 29, JUNE 30,
1998 1997 1996
----------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash.................................................... $ 9,231 $ 15,838 $ 12,603
Trade receivables, net of allowance for doubtful
accounts of $4,771, $4,746 and $4,101,
respectively......................................... 346,841 334,196 295,011
Vendor receivables, net of allowance of $1,933, $2,000
and $0 respectively.................................. 43,020 37,789 21,340
Inventories............................................. 168,084 183,957 171,453
Other current assets.................................... 8,262 9,228 8,334
-------- -------- --------
Total current assets................................. 575,438 581,008 508,741
Property, plant and equipment, net........................ 53,670 55,049 44,812
Goodwill, net of accumulated amortization of $11,475,
$8,903 and $4,664, respectively......................... 42,976 45,887 35,319
Other assets, net......................................... 1,305 1,646 1,716
-------- -------- --------
Total assets.................................... $673,389 $683,590 $590,588
======== ======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable........................................ 293,708 $269,962 $277,864
Accrued liabilities..................................... 69,569 53,598 29,952
Notes payable and current installments of long-term
debt................................................. 274,786 348,276 269,778
-------- -------- --------
Total current liabilities............................ 638,063 671,836 577,594
-------- -------- --------
Long-term debt............................................ 53,688 48,215 52,158
Other long-term liabilities............................... 950 1,271 351
-------- -------- --------
Total long-term liabilities.......................... 54,638 49,486 52,509
-------- -------- --------
Total liabilities............................... 692,701 721,322 630,103
-------- -------- --------
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, 32,404,610, 32,357,840 and 32,677,155 shares
issued respectively..................................... 3 3 3
Additional paid-in capital................................ 19,426 19,003 18,735
Retained earnings (deficit)............................... (38,688) (56,707) (58,251)
Treasury stock, shares at cost............................ (2) (2) (2)
Cumulative translation adjustments........................ (51) (29) --
-------- -------- --------
Total stockholders' equity (deficit)............ (19,312) (37,732) (39,515)
-------- -------- --------
$673,389 $683,590 $590,588
======== ======== ========
</TABLE>

See accompanying notes to consolidated financial statements.
F-2
<PAGE> 42

ENTEX INFORMATION SERVICES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
----------------------- ------------------------------------
MARCH 29, MARCH 30, JUNE 29, JUNE 30, JULY 2,
1998 1997 1997 1996 1995
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues:
Product revenues............................ $1,523,963 $1,584,941 $2,126,973 $1,940,796 $1,342,323
Service revenues............................ 331,090 249,268 353,624 207,511 130,940
---------- ---------- ---------- ---------- ----------
Total net revenues....................... 1,855,053 1,834,209 2,480,597 2,148,307 1,473,263
---------- ---------- ---------- ---------- ----------
Cost of revenues:
Cost of products sold....................... 1,366,067 1,439,985 1,922,826 1,764,775 1,236,940
Cost of services provided................... 254,124 188,710 267,554 168,957 110,349
---------- ---------- ---------- ---------- ----------
Cost of revenues......................... 1,620,191 1,628,695 2,190,380 1,933,732 1,347,289
---------- ---------- ---------- ---------- ----------
Product gross profit.......................... 157,896 144,956 204,147 176,021 105,383
Services gross profit......................... 76,966 60,558 86,070 38,554 20,591
---------- ---------- ---------- ---------- ----------
Total gross profit....................... 234,862 205,514 290,217 214,575 125,974
Selling, general and administrative
expenses.................................... 189,133 187,265 251,963 192,312 132,586
Nonrecurring stock compensation costs......... -- -- -- 18,185 --
---------- ---------- ---------- ---------- ----------
Income (loss) from operations............ 45,729 18,249 38,254 4,078 (6,612)
Interest expense, net......................... 27,698 27,308 37,147 29,726 23,151
Other income.................................. -- -- 462 -- --
Income (loss) before income taxes........ 18,031 (9,059) 1,569 (25,648) (29,763)
Provision (benefit) for income taxes.......... 12 24 25 28 (509)
---------- ---------- ---------- ---------- ----------
Net income (loss)........................ $ 18,019 $ (9,083) $ 1,544 $ (25,676) $ (29,254)
---------- ---------- ---------- ---------- ----------
Common Share Data:
Basic earnings (loss) per share............. .56 (.28) .05 (.82) (.93)
========== ========== ========== ========== ==========
Diluted earnings (loss) per share........... .53 (.28) .04 (.82) (.93)
========== ========== ========== ========== ==========
Basic weighted average number of shares of
common stock outstanding................. 32,341,754 32,312,020 34,005,738 31,348,340 31,333,300
Common equivalent shares from stock options
and warrants using the treasury stock
method................................... 1,326,430 -- 1,290,697 -- --
========== ========== ========== ========== ==========
Diluted weighted average number of shares of
common stock outstanding................. 33,668,184 32,312,020 35,296,435 31,348,340 31,333,300
========== ========== ========== ========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.
F-3
<PAGE> 43

ENTEX INFORMATION SERVICES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
UNAUDITED NINE
MONTHS ENDED YEARS ENDED
--------------------- ------------------------------
MARCH 29, MARCH 30, JUNE 29, JUNE 30, JULY 2,
1998 1997 1997 1996 1995
--------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................................. $ 18,019 $ (9,083) $ 1,544 $(25,676) $(29,254)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Stock compensation costs........................ -- -- -- 16,185 --
Depreciation and amortization................... 13,969 9,970 14,146 10,628 5,911
Amortization of goodwill........................ 2,911 3,248 4,239 3,012 847
Provision for doubtful trade and vendor
receivables................................... (43) 441 2,393 2,245 233
Accretion on long-term debentures and notes..... 1,756 1,547 2,032 1,996 1,609
Gain on sale of assets.......................... -- -- (504) -- --
Stock benefit plans compensation costs.......... 132 --
Other........................................... (22) (1,207) 20 404 (508)
Changes in working capital, net of effects of
acquisitions:
Trade receivables.................................. (12,670) (13,296) (31,168) (66,645) (41,026)
Inventories........................................ 15,873 (27,454) (8,161) (24,141) (11,437)
Vendor receivables................................. (5,163) (15,246) (18,219) (11,463) (931)
Other current assets............................... 965 1,513 (396) 1,710 (2,636)
Accounts payable and accrued liabilities........... 39,718 21,963 8,635 17,371 67,696
Other long-term liabilities........................ (321) (533) (661) (296) (565)
--------- -------- -------- -------- --------
Net cash provided by (used in) operating
activities.................................... 75,124 (28,137) (26,100) (74,670) (10,061)
--------- -------- -------- -------- --------
Cash flows from investing activities:
Sale of assets, net of expenses.................... -- -- 2,285 8,483 --
Capital expenditures............................... (12,249) (18,629) (21,737) (19,205) (7,178)
Cash paid for acquisitions......................... -- (6,478) (7,216) (21,970) (1,615)
Other.............................................. -- (1,179) (1,181) (395) (161)
--------- -------- -------- -------- --------
Net cash (used in) provided by investing
activities.................................... (12,249) (26,286) (27,849) (33,087) (8,954)
--------- -------- -------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of notes payable............ 80,658 75,000 87,090 112,050 16,784
Change in cash overdraft........................... 7,927 (9,861) (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............ 291 (120) 268 385 --
Payments on debt................................... (158,358) (13,469) (16,487) (44,332) (2,798)
--------- -------- -------- -------- --------
Net cash (used in) provided from financing
activities.................................... (69,482) 51,550 57,184 108,279 19,904
--------- -------- -------- -------- --------
Increase (decrease) in cash.......................... (6,607) (2,873) 3,235 522 889
Cash at beginning of period.......................... 15,838 12,603 12,603 12,081 11,192
--------- -------- -------- -------- --------
Cash at end of period................................ $ 9,231 $ 9,730 $ 15,838 $ 12,603 $ 12,081
========= ======== ======== ======== ========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest paid...................................... $ 27,387 $ 25,529 $ 36,458 $ 28,081 $ 22,085
========= ======== ======== ======== ========
Taxes paid/(refund)................................ $ (372) $(12,188) $(12,087) $ 11,701 $ 4,446
========= ======== ======== ======== ========
</TABLE>

See accompanying notes to consolidated financial statements.
F-4
<PAGE> 44

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> 45

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., ("Holdings")
was merged with and into the Company. Holdings' investment in the Company
represented its only substantive assets and operations, and accordingly, was
accounted for like a pooling-of-interests transaction.

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.

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.

(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 years for furniture and equipment.
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-6
<PAGE> 46
ENTEX INFORMATION SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(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
based on time elapsed or hours incurred if performed over a service contract
period. Unrecognized service revenue is deferred and included with accrued
liabilities.

(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 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

F-7
<PAGE> 47
ENTEX INFORMATION SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 common stock equivalents
are not considered in the calculation of basic earnings per share. Basic
earnings per share under FAS No. 128 will not be significantly different from
amounts presented herein.

(M) Earnings Per Share

Basic earnings per share is computed using the weighted average number of
shares of Common Stock outstanding during the period. Diluted earnings per share
reflect the dilutive effect of common stock equivalents using the treasury stock
method. Common stock equivalents include amounts computed on options and
warrants issued during the periods presented.

(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 nine months
ended March 29, 1998 and March 30, 1997. 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

F-8
<PAGE> 48
ENTEX INFORMATION SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

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
MARCH 29, JUNE 29, JUNE 30,
1998 1997 1996
--------- -------- --------
<S> <C> <C> <C>
Finished goods held for resale............... $158,543 $175,300 $164,805
Spare parts.................................. 9,541 8,657 6,648
-------- -------- --------
$168,084 $183,957 $171,453
======== ======== ========
</TABLE>

(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-9
<PAGE> 49
ENTEX INFORMATION SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(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>

(A) 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. Under the
financing agreement with IBM Credit Corporation, a term loan in the original
principal amount of $20 million is required to be outstanding unless there are
no outstanding interest bearing advances under such financing agreement. 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, 1996, 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.

(B) 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 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 and $23,081 outstanding at June 29, 1997 and June 30,
1996, respectively), (b) $17,250 note (outstanding at June 29, 1997 and June 30,

F-10
<PAGE> 50
ENTEX INFORMATION SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1996, respectively) 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, of which $5,149 and
$5,475 was outstanding at June 29, 1997 and June 30, 1996, respectively, (d)
$4,146 (outstanding at June 29, 1997 and June 30, 1996, respectively) 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, (e) $9,000 face amount
six year interest bearing note ($0 and $8,103 outstanding at June 29, 1997 and
June 30, 1996, respectively), due June 2002 bearing interest at 4.0% for the
first two years, and at 6.0% for the final four years, (f) $372 note related to
the management buyout ($0 and $372 outstanding at June 29, 1997 and June 30,
1996, respectively) and (g) $484 note related to an acquisition ($0 and $484
outstanding at June 29, 1997 and June 30, 1996, respectively).

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>

(6) 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........................................ -- -- --
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.

F-11
<PAGE> 51
ENTEX INFORMATION SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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
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.

(7) 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

F-12
<PAGE> 52
ENTEX INFORMATION SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 based on fair value of the stock. The fair value of $3.56 was derived by
applying average market multiples of publicly traded competitors of the Company
to the Company's sales, operating income, EBITDA and forecasted net income. In
addition, the Company assumed the obligation for 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. Warrants to purchase
333,350 shares of common stock were granted on November 15, 1994, are
exercisable for $.20 in total and expire on July 15, 2001. These warrants were
issued in connection with a settlement of a dispute between the Company and the
vendor. Warrants to purchase 375,000 shares of common stock were granted on June
21, 1996, are exercisable for $14.40 per share and expire on June 21, 2003.
These warrants were issued as consideration for less than market rate debt.

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>
$ .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-13
<PAGE> 53
ENTEX INFORMATION SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

(8) 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.

(9) 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:

<TABLE>
<CAPTION>
YEAR ENDING JUNE:
- -----------------
<S> <C>
1998...................................................... $ 8,456
1999...................................................... 7,762
2000...................................................... 6,361
2001...................................................... 4,973
2002...................................................... 3,269
Thereafter................................................ 6,368
-------
Total minimum lease payments................................ $37,189
=======
</TABLE>

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.

F-14
<PAGE> 54
ENTEX INFORMATION SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

(10) SUBSEQUENT EVENTS

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.

In connection with an amendment to the IBMCC Financing Agreement on 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 may be exercised at any time prior to July 1, 2004 at
an exercise price of $7.55, which is in excess of the estimated fair value of
the Company's stock.

On November 12, 1997, the Company issued an additional 340,230 warrants to
Microsoft pursuant to the anti-dilution provisions in the original warrant
purchase agreement. Concurrently, the exercise price was revised, also pursuant
to the anti-dilution provisions of the original warrant purchase agreement. The
fair value of the re-priced 715,230 warrants was slightly below the $897,000
recorded in June 1996, as such no additional discount on the debt has been
recorded.

F-15
<PAGE> 55

ENTEX INFORMATION SERVICES, INC.

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO
BEGINNING COSTS AND OTHER BALANCE AT
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS END OF 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> 56

ENTEX INFORMATION SERVICES, INC.

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER NUMBER
- ------- ----------
<C> <S> <C>
2.1(a) 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(a) Certificate of Incorporation of the Company, as amended.....
3.2(a) Bylaws of the Company.......................................
4.1(a) Form of the Company's Common Stock Certificate..............
10.1(a) Form of Indemnification Agreement entered into by the
Company with each of its directors and executive officers...
10.2(a) Agreement between John A. McKenna, Jr. and the Company dated
August 7, 1994 and related amendment........................
10.3(a) Letter Agreement between Kenneth A. Ghazey and the Company
dated January 6, 1997.......................................
10.4(a) Retention Agreement between Dale H. Allardyce and the
Company dated November 17, 1997.............................
10.51(a) Retention Agreement between John F. Lyons and the Company
dated November 17, 1997.....................................
10.52 Letter Agreement between David J. Csira and the Company
dated November 15, 1996.....................................
10.6(a) Employment Agreement between Richard Nathanson and the
Company dated July 10, 1996.................................
10.7(a) Stockholders' Agreement among Entex Holdings, Inc., Dort A.
Cameron III and Entex Associates, L.P. dated December 10,
1993 and related amendments.................................
10.8(a) ENTEX Holdings, Inc. 1996 Stock Option Plan and related
agreements..................................................
10.9(a) ENTEX Information Services, Inc. 1996 Stock Option Plan and
related agreements..........................................
10.10(a) 1996 Performance Incentive Plan and related agreements......
10.11(a) 1996 Non-Employee Director Stock Plan.......................
10.12(a) 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> 57

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SEQUENTIAL
EXHIBIT PAGE
NUMBER NUMBER
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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(a) Warrant Agreement between IBM Credit Corporation, Entex
Holdings, Inc. and the Company dated November 15, 1994......
10.22(a) Warrant Agreement between IBM Credit Corporation and the
Company dated July 15, 1997.................................
11.1(a) Statement of computation of earnings per share..............
21.1(a) Subsidiaries of the Company.................................
27.1(a) Financial Data Schedule.....................................
</TABLE>

- ---------------
(a) Previously filed.

(b) Portion previously filed; portion filed herewith.

<PAGE> 1

EXHIBIT 10.52

[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:

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<S> <C>
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 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.
</TABLE>

Sincerely, Accepted:

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<S> <C>
/s/ JOHN A. MCKENNA /s/ DAVID J. CSIRA
- -------------------------------------------- --------------------------------------------
John A. McKenna, President & CEO David J. Csira
</TABLE>
<PAGE> 2

DAVID J. CSIRA

RELOCATION COVERAGE

- -------------------------------------------------------------------------------

- - Third party relocation package including buyout of current residence at
appraised value.

- - Movement of personal goods.

- - Broker fees on sale up to 6%.

- - Points on new mortgage up to 2%.

- - "Reasonable" number of house hunting trips.

- - "Reasonable" number of weekend visits home.

- - Customary meals and related expenses associated with trips.

- - Temporary living expenses for up to three (3) months.