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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
INSIGHT ENTERPRISES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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INSIGHT ENTERPRISES, INC.
1305 WEST AUTO DRIVE
TEMPE, ARIZONA 85284
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
MAY 16, 2000
TO OUR STOCKHOLDERS:
Notice is hereby given that the 2000 Annual Meeting of Stockholders of
Insight Enterprises, Inc., a Delaware corporation (the "Company"), will be held
on Tuesday, May 16, 2000, at 3:00 p.m. local time, at the Company's corporate
headquarters, 1305 West Auto Drive, Tempe, Arizona 85284, for the following
purposes:
(1) To elect two Class III Directors to serve until the 2003
Annual Meeting of Stockholders or until their successors have
been duly elected and qualified;
(2) To approve an amendment to the Company's Amended and Restated
Certificate of Incorporation increasing the authorized number
of shares of Common Stock, $.01 par value per share, from
30,000,000 to 100,000,000;
(3) To approve amendments to the Insight Enterprises, Inc. 1998
Long-Term Incentive Plan increasing the number of shares
authorized for issuance thereunder and to make certain other
amendments; and
(4) To transact such other business as may properly come before
the Annual Meeting or any adjournment thereof. Management is
presently aware of no other business to come before the Annual
Meeting.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Each outstanding share of the Company's Common Stock entitles the holder of
record at the close of business on March 21, 2000 to receive notice of and to
vote at the Annual Meeting or any adjournment or postponement thereof. Shares of
Common Stock can be voted at the Annual Meeting only if the holder is present at
the Annual Meeting in person or by valid proxy. A copy of the Company's 1999
Annual Report to Stockholders, which includes audited financial statements, is
enclosed. The Annual Report is not part of our proxy soliciting material.
All stockholders are cordially invited to attend the Annual Meeting.
By order of the Board of Directors
/s/ Stanley Laybourne
---------------------------
Tempe, Arizona Stanley Laybourne
March 31, 2000 Secretary, Treasurer
and Chief Financial Officer
IMPORTANT
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN, DATE AND MAIL THE ENCLOSED PROXY SO THAT YOUR SHARES MAY BE
REPRESENTED AT THE MEETING. A POSTAGE-PAID ENVELOPE IS PROVIDED FOR MAILING IN
THE UNITED STATES.
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INSIGHT ENTERPRISES, INC.
1305 WEST AUTO DRIVE
TEMPE, ARIZONA 85284
PROXY STATEMENT
2000 ANNUAL MEETING OF STOCKHOLDERS
MAY 16, 2000
SOLICITATION, EXECUTION AND REVOCATION OF PROXIES
This Proxy Statement is furnished to the stockholders of record of Insight
Enterprises, Inc. (the "Company") for the solicitation of proxies to be used at
the Annual Meeting of Stockholders (the "Annual Meeting") to be held on Tuesday,
May 16, 2000, at 3:00 p.m. local time, at the Company's corporate headquarters,
1305 West Auto Drive, Tempe, Arizona 85284, and at any and all adjournments or
postponements thereof. THE ENCLOSED PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
OF THE COMPANY. The proxy materials will be mailed on or about April 14, 2000,
to stockholders of record at the close of business on March 21, 2000 (the
"Record Date").
When stock is in the name of more than one person, the proxy is valid if
signed by any of such persons unless the Company receives written notice to the
contrary. If the stockholder is a corporation, the proxy should be signed in the
name of such corporation by an executive or other authorized officer. If signed
as attorney, executor, administrator, trustee, guardian or in any other
representative capacity, the signer's full title should be given and, if not
previously furnished, a certificate or other evidence of appointment should be
furnished.
You have the power to revoke the proxy at any time before it is voted by
executing a later-dated proxy relating to the same shares and delivering it to
the Secretary of the Company at 1305 West Auto Drive, Tempe, Arizona 85284 prior
to the vote at the Annual Meeting, or by written notice of revocation to the
Secretary prior to the vote at the Annual Meeting, or by appearing in person at
the Annual Meeting and voting the shares to which the proxy relates. If your
shares are held of record by a broker, bank or other nominee and you wish to
vote at the Annual Meeting, you must bring to the Annual Meeting a letter from
the broker, bank or other nominee confirming your beneficial ownership of the
shares.
In addition to the use of the mails, proxies may be solicited by personal
interview, telephone and telegram by the directors, officers and regular
employees of the Company. Such persons will receive no additional compensation
for such services. Arrangements will also be made with certain brokerage firms
and other custodians, nominees and fiduciaries for the forwarding of
solicitation materials to the beneficial owners of Common Stock. Such brokers,
custodians, nominees and fiduciaries will be reimbursed for their reasonable
out-of-pocket expenses incurred in connection therewith. All expenses incurred
in connection with this solicitation will be borne by the Company. The estimated
fee for this proxy solicitation is $15,000, plus reasonable out of pocket
expenses.
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VOTING SECURITIES OUTSTANDING
Only holders of record of the Company's Common Stock at the close of
business on the Record Date will be entitled to notice of and to vote at the
Annual Meeting. On the Record Date, there were issued and outstanding 26,904,269
shares of the Company's Common Stock. Each holder of Common Stock is entitled to
one vote on each proposal that comes before the Annual Meeting, exercisable in
person or by proxy, for each share of the Company's Common Stock held of record
on the Record Date. The presence of a majority of the shares of outstanding
Common Stock entitled to vote, in person or by proxy, is required to constitute
a quorum for the transaction of business at the Annual Meeting. The Inspector of
Election appointed by the Board of Directors shall determine the shares
represented at the meeting and the validity of proxies and ballots, and shall
count all votes and ballots. Shares represented by proxies marked "withhold
authority" with respect to the election of one or more directors, or which
contain one or more abstentions, are counted as present or represented for
purposes of determining both (i) the presence or absence of a quorum for the
Annual Meeting and (ii) the total number of shares entitled to vote. A "broker
non-vote" occurs when a broker or other nominee holding shares for a beneficial
owner does not vote on a particular proposal because the broker or other nominee
does not have discretionary voting power with respect to that item and has not
received instructions from the beneficial owner. Broker non-votes are counted as
present or represented for purposes of determining the presence or absence of a
quorum for the Annual Meeting, but are not counted for purposes of determining
the number of shares entitled to vote with respect to any proposal that the
broker or other nominee lacks discretionary authority.
All shares represented by valid proxies will be voted in accordance with
the direction on the proxies. Any proxy on which no direction is indicated, will
be voted FOR Proposals 1, 2 and 3. The Board of Directors is not aware of any
other matters, which may come before the meeting. If any other matters are
properly presented at the meeting for action, including a question of adjourning
the meeting from time to time, the persons named in the proxies and acting
thereunder will have discretion to vote on such matters.
STOCK SPLITS
On January 6, 1999, the Company's Board of Directors approved a 3-for-2
stock split in the form of a stock dividend payable on February 18, 1999 to the
stockholders of record at the close of business on January 25, 1999.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Board of Directors consists of five members divided into
three classes, with the directors in each class serving for a term of three
years. The three-year terms of Timothy A. Crown and Stanley Laybourne, who are
Class III directors, expire at the Annual Meeting. The Board of Directors has
nominated Messrs. Crown and Laybourne for re-election as directors and, unless
otherwise instructed, the proxy holders will vote for the election of Messrs.
Crown and Laybourne as directors of the Company.
If any nominee of the Company is unable or declines to serve as a director,
or if a vacancy occurs before election (which events are not anticipated), the
proxy holders will vote for the election of such other person or persons
nominated by the Board of Directors.
REQUIRED VOTE
The two nominees who receive the most votes will be elected to the Board of
Directors. Votes may be cast FOR the nominees or WITHHELD. In addition, you may
indicate that you are voting FOR the nominees except for any nominee(s)
specified in writing on the proxy card. An abstention will have the same effect
as voting WITHHELD for election of directors, and, pursuant to Delaware law, a
broker non-vote will not be treated as voting in person or by proxy on the
proposal.
Information concerning the director nominees is set forth below.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ELECTION OF EACH OF
THE DIRECTOR NOMINEES.
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INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
The names of the Company's directors and executive officers, and
information about them, are set forth below.
NAME AGE POSITION
- ---- --- --------
Eric J. Crown (1) 38 Co-Chief Executive Officer and Chairman of the Board
of the Company (Term expires in 2001)
Timothy A. Crown (1) 36 Co-Chief Executive Officer, President and Director
of the Company (Term expires in 2000)
Stanley Laybourne (1) 51 Chief Financial Officer, Secretary, Treasurer and
Director of the Company (Term expires in 2000)
Larry A. Gunning (2) 56 Director of the Company (Term expires in 2002)
Robertson C. Jones (2) 55 Director of the Company (Term expires in 2002)
Michael A. Gumbert 41 President and Chief Operating Officer of Insight
Direct Worldwide, Inc., a subsidiary of the Company
Branson M. Smith 44 President and Chief Operating Officer of Direct
Alliance Corporation, a subsidiary of the Company
(1) Member of Executive Committee of the Board of Directors.
(2) Member of Audit and Compensation Committees of the Board of Directors.
Eric J. Crown. Mr. Crown has been the Chief Executive Officer and Chairman
of the Board of the Company since 1994, has held various officer and director
positions with Insight's predecessor corporations since 1988, and is one of the
Company's founders. In 1984, he received a Bachelor of Science degree in
Business Computer Information Systems from Arizona State University. From 1983
to 1988, Mr. Crown operated an independent computer and business-consulting
firm. Eric J. Crown is the brother of Timothy A. Crown.
Timothy A. Crown. Mr. Crown has been a director of the Company since 1994.
Mr. Crown has been employed by the Company or one of its predecessors since 1988
and has been President since 1989. Mr. Crown was named as Co-Chief Executive
Officer on January 25, 2000. He received a Bachelor of Science degree in
Business and Computer Science from the University of Kansas in 1986. From 1986
to 1987, Mr. Crown was employed by NCR Corporation as an Administrative Analyst.
From 1987 to 1988, Mr. Crown partnered with Eric Crown in operating an
independent computer business-consulting firm. Timothy A. Crown is the brother
of Eric J. Crown.
Stanley Laybourne. Mr. Laybourne has been a director of the Company since
1994. He became the Chief Financial Officer and Treasurer in 1991, and in 1994
he became Secretary of the Company. Mr. Laybourne received a Bachelor of Science
degree in Accounting from The Ohio State University in 1971 and a Masters in
Business Administration degree from Arizona State University in 1972. From 1972
to 1985, he was employed by Touche, Ross & Co., a predecessor to Deloitte &
Touche, where he was an audit partner from 1983 to 1985. From 1985 to 1989, Mr.
Laybourne was President and Chief Executive Officer of The Scottscom Group, a
financial services company. From 1989 to 1990, Mr. Laybourne was Executive Vice
President of Ovation Broadcasting Company, a company which operated commercial
radio broadcast properties. Mr. Laybourne is the Chief Financial Officer of the
Arizona Sports Foundation, d/b/a Fiesta Bowl, Fiesta Events, Inc. and the Tucson
Bowl Foundation d/b/a Insight.com Bowl. Mr. Laybourne is a Certified Public
Accountant.
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Larry A. Gunning. Mr. Gunning has been a director of the Company since
1995. He has been President and Director of Pasco Petroleum Corp., a petroleum
marketing company, since 1988. Mr. Gunning received a Bachelor of Science degree
in Business Management from Arizona State University in 1966. Mr. Gunning is a
member of the Arizona State University College of Business Dean's Council of 100
and a director of several nonprofit organizations.
Robertson C. Jones. Mr. Jones has been a director of the Company since
1995. Mr. Jones is Senior Vice President and General Counsel of Del Webb
Corporation, a developer of master-planned residential communities, where he has
worked since 1992. Mr. Jones received his Bachelor of Arts degree from Williams
College in 1966, his Masters in Business Administration degree from Oklahoma
City University in 1969, and his Juris Doctor degree from University of
California, Hastings College of Law, in 1977. Mr. Jones is a director of several
nonprofit organizations, including the Arizona Chamber of Commerce.
Michael A. Gumbert. Mr. Gumbert was hired in 1996 as Chief Operating
Officer of Insight Direct USA, Inc., a subsidiary of the Company. In July 1999,
Mr. Gumbert was promoted to President of Insight Direct Worldwide, Inc., a
subsidiary of the Company. From 1983 through 1990, Mr. Gumbert held various
positions within MicroAmerica, Inc., a value-added computer distributor. In
1990, MicroAmerica, Inc. was acquired by Merisel, Inc., a distributor of
computers, software and peripherals. From 1990 through 1995, Mr. Gumbert held
several positions with Merisel, Inc., including Senior Vice President, Sales and
Operation. From 1995 to 1996, Mr. Gumbert was Senior Vice President, General
Manager of Tandy Corporation, a consumer electronic retailer. Mr. Gumbert
received a Bachelor of Business Administration in Marketing from North Texas
State University in 1981.
Branson M. Smith. Mr. Smith was employed by Insight Direct USA, Inc., a
subsidiary of the Company, from 1992 to 1996, serving as its Vice President of
Distribution and Senior Vice President of Fulfillment Services. In 1996, Mr.
Smith was promoted to Chief Operating Officer of Direct Alliance Corporation, a
subsidiary of the Company, and in July 1999 was further promoted to President.
From 1987 to 1991, Mr. Smith was a Division Manager of Shape West, a computer
disk manufacturer. From 1991 to 1992, Mr. Smith was a principal in Southwest
Automation, an industrial operations consulting firm. Mr. Smith received a
Bachelor of Science degree in Business Administration from the University of
Arizona in 1978.
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MEETINGS OF THE BOARD AND ITS COMMITTEES
The Board of Directors held five meetings during the year ended December
31, 1999. No director attended fewer than 75% of the aggregate of all meetings
of the Board of Directors and any committee on which such director served during
the period of such service. The Board presently has an Executive Committee, an
Audit Committee and a Compensation Committee.
The Executive Committee consists of Eric J. Crown, Timothy A. Crown and
Stanley Laybourne. The Executive Committee is empowered to act on Board matters
that arise between meetings of the full Board of Directors.
The Audit Committee consists of Larry A. Gunning and Robertson C. Jones and
met two times in 1999. The Audit Committee meets independently with
representatives of the Company's independent auditors and with representatives
of senior management. The Committee reviews the general scope of the Company's
annual audit, the fee charged by the independent auditors and other matters
relating to internal control systems. In addition, the Audit Committee is
responsible for reviewing the extent of non-audit services by the Company's
auditors in relation to the objectivity needed in the audit. The Committee is
responsible to review all related party transactions and to review potential
conflict of interest situations where appropriate. The Committee is also
responsible for recommending the engagement or discharge of the Company's
independent auditors.
The Compensation Committee consists of Messrs. Gunning and Jones and met
two times in 1999. The Compensation Committee administers salaries and benefit
programs designed for senior management, officers and directors and the
Company's stock option plans to insure that the Company is attracting and
retaining highly qualified managers through competitive salary and benefit
programs and encouraging extraordinary effort through incentive rewards.
The Company does not have a nominating committee or a committee performing
the functions of a nominating committee. Nominations of persons to be directors
are considered by the full Board of Directors.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company ("non-employee directors")
receive a retainer of $2,000 per quarter, $500 per Board meeting attended, $300
per committee meeting attended and reimbursement of reasonable expenses and
certain formula-based stock option awards as described below. Directors who are
employees of the Company do not receive compensation for their service as
directors. Non-employee directors are eligible to receive nonqualified stock
options pursuant to an annual formula grant. The formula provided for an initial
grant of options for 8,437 shares to each non-employee director on the closing
date of the Company's initial public offering. Commencing in 1996, non-employee
directors started receiving options for 5,062 shares each time they were elected
for a three-year term on the Board. Non-employee directors who are initially
elected to the Board between annual meetings receive options for 1,687 shares
multiplied by the number of full and partial years of their initial terms.
Options are exercisable for 10 years at the fair market value of the stock on
the date of grant and vest over a three year period, subject to continued Board
service.
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EXECUTIVE COMPENSATION
The following table sets forth for each of the last three years the total
for services rendered to the Company by (i) the Company's Chief Executive
Officer and (ii) its four other most highly compensated executive officers
(collectively, the "Named Executive Officers"). The amounts shown include both
amounts paid and amounts deferred.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
---------------------------------------------
OTHER
ANNUAL
NAME AND PRINCIPAL POSITION COMPEN-
YEAR SALARY ($) BONUS ($) SATION($)(1)
- ----------------------------- ------- ------------ ------------ ------------
Eric J. Crown 1999 $ 250,000 $ - --
Co-Chief Executive Officer 1998 $ 250,000 $ 111,879 --
1997 $ 237,500 $ 195,042 --
Timothy A. Crown 1999 $ 250,000 $ - --
Co-Chief Executive Officer 1998 $ 250,000 $ 111,879 --
& President 1997 $ 237,500 $ 195,042 --
Stanley Laybourne 1999 $ 190,000 $ - --
Chief Financial Officer, 1998 $ 190,000 $ 22,391 --
Secretary and Treasurer 1997 $ 170,000 $ 85,342 --
Michael A. Gumbert 1999 $ 215,000 $ 360,545 --
President and Chief Operating 1998 $ 215,000 $ 52,980 --
Officer of Insight Direct 1997 $ 192,500 $ 110,967 --
Worldwide, Inc.
Branson M. Smith 1999 $ 200,000 $ 65,038 --
President and Chief Operating 1998 $ 155,000 $ 20,922 --
Officer of Direct 1997 $ 146,000 $ 36,118 --
Alliance Corporation
LONG TERM COMPENSATION
AWARDS
----------------------------------
RESTRICTED SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION STOCK UNDERLYING COMPEN-
YEAR AWARDS ($) (2) OPTIONS(#) SATION($)(3)
- ----------------------------- ------- --------------- --------------- ------------
Eric J. Crown 1999 $ 848,495 120,000 $ 3,288
Co-Chief Executive Officer 1998 $ 456,845 168,750 $ 2,279
1997 - 151,872 $ 1,542
Timothy A. Crown 1999 $ 848,495 120,000 $ 3,311
Co-Chief Executive Officer 1998 $ 456,845 168,750 $ 1,732
& President 1997 - 151,872 $ 1,396
Stanley Laybourne 1999 $ 169,700 100,000 $ 3,322
Chief Financial Officer, 1998 $ 91,392 90,000 $ 1,851
Secretary and Treasurer 1997 - 50,622 $ 2,916
Michael A. Gumbert 1999 $ 102,139 100,000 $ 3,572
President and Chief Operating 1998 $ 70,875 90,000 $ 3,363
Officer of Insight Direct 1997 - 67,497 $ 3,195
Worldwide, Inc.
Branson M. Smith 1999 $ 41,235 100,000 $ 3,458
President and Chief Operating 1998 $ 31,988 56,250 $ 1,737
Officer of Direct 1997 - 67,500 $ 1,620
Alliance Corporation
- ----------------
(1) The cost of certain perquisites and other personal benefits are not
included because they did not exceed, in the case of any executive
officer, the lesser of $50,000 or 10% of the total of the annual
salary and bonus for such executive.
(2) Represents the value based upon the number of shares awarded
multiplied by the closing price on the date of grant as reported on
the Nasdaq National Market. The value of the 36,423, 36,423, 6,932,
5,839, and 2,544 shares of restricted stock held at December 31, 1999
by Messrs. Crown, Crown, Laybourne, Gumbert and Smith, respectively
(calculated by multiplying the number of shares held by the closing
price on December 31, 1999 as reported on the Nasdaq National Market)
was $1,479,684, $1,479,684, $281,613, $237,209, and $103,350 as of
December 31, 1999. Recipients of restricted stock are entitled to
receive any dividends declared on the Company's Common Stock,
regardless of whether such shares have vested. The restricted stock
vests quarterly over a period of three years from the date of grant,
subject to acceleration in certain circumstances.
(3) Represents payments for disability insurance premiums and 401(k)
contributions made by the Company to the accounts of the executive
officers in the following amounts, respectively: $788 and $2,500 in
1999, $1,060 and $1,219 in 1998, and $1,060 and $482 in 1997 for Eric
J. Crown; $811 and $2,500 in 1999, $1,060 and $672 in 1998 and $914
and $482 in 1997 for Timothy A. Crown; $822 and $2,500 in 1999, $885
and $966 in 1998 and $885 and $2,031 in 1997 for Stanley Laybourne;
$1,072 and $2,500 in 1999, $1,097 and $2,266 in 1998 and $1,097 and
$2,098 in 1997 for Michael A. Gumbert; $958 and $2,500 in 1999, $784
and $953 in 1998 and $783 and $837 in 1997 for Branson M. Smith.
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OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding stock options granted
during the year ended December 31, 1999 to the Named Executive Officers.
INDIVIDUAL GRANTS
------------------------------------------------------------------
PERCENT OF
NUMBER OF TOTAL POTENTIAL REALIZABLE VALUE AT
SECURITIES OPTIONS ASSUMED ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO EXERCISE PRICE APPRECIATION FOR OPTION
OPTIONS EMPLOYEES IN PRICE EXPIRATION TERM (2)
GRANTED (#)(1) FISCAL YEAR ($/SHARE) DATE ------------------------------
NAME 5%($) 10%($)
- ----------------------- ---------------- -------------- ------------ ------------ ------------- -----------
Eric J. Crown 50,000 3.1% $25.3750 07/01/09 $ 797,910 $2,022,061
20,000 1.3% $31.6562 10/01/09 $ 398,168 $1,009,037
25,000 1.6% $29.8750 10/08/09 $ 469,706 $1,190,326
25,000 1.6% $32.0000 11/19/09 $ 503,116 $1,274,994
------- ---- ---------- ----------
120,000 7.5% $2,168,900 $5,496,418
Timothy A. Crown 50,000 3.1% $25.3750 07/01/09 $ 797,910 $2,022,061
20,000 1.3% $31.6562 10/01/09 $ 398,168 $1,009,037
25,000 1.6% $29.8750 10/08/09 $ 469,706 $1,190,326
25,000 1.6% $32.0000 11/19/09 $ 503,116 $1,274,994
------- ---- ---------- ----------
120,000 7.5% $2,168,900 $5,496,418
Stanley Laybourne 25,000 1.6% $25.3750 07/01/09 $ 398,955 $1,011,030
75,000 4.7% $27.6250 09/28/09 $1,302,991 $3,302,035
------- ---- ---------- ----------
100,000 6.3% $1,701,946 $4,313,066
Michael A. Gumbert 25,000 1.6% $25.3750 07/01/09 $ 398,955 $1,011,030
75,000 4.7% $27.6250 09/28/09 $1,302,991 $3,302,035
------- ---- ---------- ----------
100,000 6.3% $1,701,946 $4,313,066
Branson M. Smith 25,000 1.6% $25.3750 07/01/09 $ 398,955 $1,011,030
75,000 4.7% $27.6250 09/28/09 $1,302,991 $3,302,035
------- ---- ---------- ----------
100,000 6.3% $1,701,946 $4,313,066
- ----------------
(1) One-third of the options become exercisable on each of the first three
anniversaries of the grant date.
(2) Amounts represent hypothetical gains that could be achieved over the
full option term (10 years). The potential realizable value is
calculated by assuming that the market price of the underlying
security appreciates in value from the date of grant to the end of the
term of the option at the specified annual rates, and that the option
is exercised at the exercise price and sold on the last day of its
term at the appreciated price. These gains are based on assumed rates
of stock appreciation of 5% and 10% compounded annually from the date
the respective options were granted to their expiration date and are
not presented to forecast possible future appreciation, if any, in the
price of the Common Stock.
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AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to option exercises
of and the number and value of options outstanding at December 31, 1999 held by
the Named Executive Officers.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED ON VALUE OPTIONS AT YEAR-END (#) OPTIONS AT YEAR-END ($) (1)
----------------------------- ----------------------------
NAME EXERCISE (#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ ----------- ----------- ------------- ----------- -------------
Eric J. Crown 112,498 $ 2,247,214 0 283,124 $ 0 $ 5,593,755
Timothy A. Crown 112,498 $ 2,242,272 0 283,124 $ 0 $ 5,593,755
Stanley Laybourne 139,497 $ 2,984,982 0 176,873 $ 0 $ 3,262,136
Michael A. Gumbert 120,002 $ 2,601,106 0 182,497 $ 0 $ 3,446,450
Branson M. Smith 58,119 $ 1,238,129 0 154,379 $ 0 $ 2,748,894
(1) Value as of December 31, 1999 is based upon the closing price on that
date as reported on the Nasdaq National Market minus the exercise price,
multiplied by the number of shares underlying the option.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-OF-CONTROL
ARRANGEMENTS
The Company has entered into employment agreements with five of its Named
Executive Officers. The agreements provide for base salaries, and incentive
bonuses and contain non-competition and change of control provisions. The Board
of Directors approved, based upon the Compensation Committee's recommendation,
the base salaries and incentive bonuses for Eric J. Crown, Timothy A. Crown and
Stanley Laybourne for an initial period of two years, effective July 1, 1997.
These agreements contain provisions that constantly renew the agreement for
additional two year terms.
The base salaries for Eric J. Crown, Timothy A. Crown and Stanley Laybourne
are set at $250,000, $250,000 and $190,000, respectively. Messrs. Crown, Crown
and Laybourne are entitled to receive an incentive bonus, payable quarterly,
under their respective agreements equal to 2.5%, 2.5% and 0.5%, respectively, of
the Company's net earnings (before deducting the incentive bonuses) provided
that the Company's net earnings exceed stated minimum amounts. These incentive
bonuses are paid in the form of either cash or restricted stock at the election
of the officer. The restricted stock vests quarterly over three years, subject
to acceleration in certain circumstances and unvested shares are forfeited if
the recipient ceases to be an employee of the Company.
Eric J. Crown, the Company's Co-Chief Executive Officer, approved the base
salaries and incentive bonuses for Michael A. Gumbert and Branson M. Smith for
an initial period of two years effective July 1, 1999. These agreements contain
provisions that constantly renew the agreement for additional two year terms.
The base salaries for Michael A. Gumbert and Branson M. Smith are set at
$215,000 and $200,000, respectively. Messrs. Gumbert and Smith are entitled to
receive an incentive bonus, payable quarterly, for the period under their
agreement based on a percentage of net earnings (before deducting the incentive
bonuses) of their respective subsidiaries provided that the Company's net
earnings exceed stated minimum amounts and provided further that the incentive
bonus for the fiscal year ending December 31, 1999 shall not exceed 270% of
Executive's annual Base Salary for that fiscal year, but such limitation shall
not be applicable thereafter.
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The agreements for Messrs. Crown, Crown and Laybourne contain
Change-of-Control (as defined) and non-compete provisions that, upon a
Change-of-Control, could result in payments to these individuals equal to three
times their base salary and an incentive bonus for the preceding four quarters
(all payments are to be grossed up for the individuals' taxes) and could
accelerate the vesting of all outstanding stock options and restricted stock.
The agreements for Michael A. Gumbert and Branson M. Smith contain the same
provisions except their payment could be two times their base salary and
incentive bonus for the preceding quarters four quarters, if a Change-of-Control
did occur.
The agreements for Messrs. Crown, Crown, Laybourne, Gumbert and Smith
provide that the individuals will receive certain benefits if their employment
is terminated without cause. In the event an agreement is terminated without
cause, the individual executive shall receive a lump sum distribution consisting
of (i) the total amount of his base salary for the remainder of the agreement
term, and (ii) the total amount of incentive compensation payments, calculated
based on a defined formula, as if the executive had not been terminated.
The Compensation Committee and the Co-Chief Executive Officers commissioned
KPMG LLP, in 1997, and Hewitt Associates, in 1999, to analyze and review the
competitiveness of executive compensation. The analyses have provided the basis
for recommendations and approvals with respect to the terms and provisions
included in the current executive employment agreements. The analyses provided
information regarding "peer" compensation levels and long-term incentive
compensation obtained from publicly held company reports and SEC filings,
executive compensation surveys and other relevant sources. The Compensation
Committee and the Co-Chief Executive Officers considered all such factors in
their decision to adopt the related agreements. The Co-Chief Executive Officers
as well as the Compensation Committee had separate meetings with KPMG LLP and
Hewitt Associates to review their findings. The Compensation Committee believes
that the agreements provide appropriate compensation for the individuals.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
charged with:
(1) reviewing and approving the annual salary, bonus and other benefits
including perquisites and personal benefits, to be paid or awarded to
the Company's executive officers;
(2) reviewing and recommending to the Board of Directors new compensation
and stock plans and changes to existing plans; and
(3) administering the incentive compensation plans, stock option and other
stock-based plans, and other employee benefit plans of the Company and
its subsidiaries.
The Committee currently makes compensation decisions with respect to Eric
J. Crown, Timothy A. Crown and Stanley Laybourne, but not with respect to
Michael A. Gumbert and Branson M. Smith. The Compensation Committee has
delegated its authority to make compensation decisions to Eric J. Crown, the
Company's Co-Chief Executive Officer, with respect to Messrs. Gumbert, Smith and
all others. The Committee currently is comprised of Larry A. Gunning and
Robertson C. Jones, each of whom is a non-employee director.
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The Compensation Committee and the Co-Chief Executive Officers commissioned
KPMG LLP, in 1997, and Hewitt Associates, in 1999, to analyze and review the
competitiveness of executive compensation. The analyses have provided the basis
for recommendations and approvals with respect to the terms and provisions
included in the current executive employment agreements. The analyses provided
information regarding "peer" compensation levels and long-term incentive
compensation obtained from publicly held company reports and SEC Filings,
executive compensation surveys and other relevant sources. The Co-Chief
Executive Officers as well as the Compensation Committee had separate meetings
with KPMG LLP and Hewitt Associates to review their findings. The Compensation
Committee and the Co-Chief Executive Officers considered all such factors when
setting executive compensation.
COMPENSATION PHILOSOPHY
The general philosophy of the Company's executive compensation program is
to place base salaries below the marketplace while bonuses and equity incentives
offer the executive compensation that is at least competitive in the
marketplace. Bonuses, including equity incentives are based upon the Company's
performance and/or the employee's individual contribution and performance. The
Company's executive compensation policies are intended to motivate and reward
executives for long-term strategic management and the enhancement of stockholder
value through cash payments (salary and bonus) and equity incentives (in the
form of stock options and restricted stock). The ultimate goal of the Committee
in its administration of the Company's executive compensation program is to
ensure that the Company attracts and retains highly qualified managers through
competitive salary and benefit programs and encourages extraordinary effort on
the part of management through well-designed incentive opportunities.
BASE SALARY
In 1999, the base salaries for Eric J. Crown, Timothy A. Crown, Stanley
Laybourne, Michael A. Gumbert and Branson M. Smith were set at $250,000,
$250,000, $190,000, $215,000 and $200,000, respectively. Additionally, Messrs.
Crown, Crown and Laybourne are entitled to receive an incentive bonus, payable
quarterly, based on a percentage of the Company's net earnings (before deducting
the incentive bonuses) and Messrs. Gumbert and Smith are entitled to receive an
incentive bonus, payable quarterly, based on a percentage of net earnings
(before deducting the incentive bonuses), of Insight Direct Worldwide, Inc., and
Direct Alliance Corporation, respectively (subsidiaries of the Company),
provided that the Company's net earnings exceed stated minimum amounts.
CASH BONUSES AND RESTRICTED STOCK BONUSES
The Company views bonuses for executive officers as an opportunity to
tie a portion of an executive officer's compensation to the financial
performance of the Company. These bonuses may be paid with restricted stock
instead of cash. Such restricted stock vests quarterly over three years and
unvested shares are forfeited if the recipient ceases to be an employee of the
Company. The vesting of such shares accelerates in the event that the Company's
stock closes at or above a certain price, ranging from $44 to $66. Messrs.
Crown, Crown and Laybourne received restricted stock for 1999, in lieu of cash
bonuses. Messrs. Gumbert and Smith received restricted stock for the first and
second quarters and cash for the third and fourth quarters of 1999. During 1999,
cash bonuses were earned by the Company's Named Executive Officers as follows:
Michael A. Gumbert - $360,545; and Branson M. Smith - $65,038.
During 1999, the number of restricted shares earned by the Company's Named
Executive Officers were as follows: Eric J. Crown - 30,859 shares; Timothy A.
Crown - 30,859 shares; Stanley Laybourne - 6,173 shares; Michael A. Gumbert -
4,491 shares; and Branson M. Smith - 1,793 shares.
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STOCK INCENTIVES
In 1994, the Company's Board of Directors adopted, and the Company's
private stockholders approved, the 1994 Stock Option Plan (the "1994 Option
Plan") under which incentive stock options and nonqualified stock options may be
granted to executive officers, other key employees, non-employee directors and
consultants. In 1997, the Company's Board of Directors adopted, and the
Company's stockholders approved, the Company's 1998 Long-Term Incentive Plan
(the "LTIP") under which a variety of stock-based awards may be granted to
officers, employees, directors, and consultants or independent contractors,
including officers who are also directors of the Company and its subsidiaries.
Stock-based compensation is viewed as a critical component of the Company's
overall executive compensation program because it ties directly an executive's
compensation to the value realized by the Company's stockholders, and because it
permits the Company to recruit and retain top talent.
During 1999, stock options to purchase a total of 540,000 shares of Company
Common Stock were granted to the Company's Named Executive Officers as follows:
Eric J. Crown - 120,000 shares; Timothy A. Crown - 120,000 shares; Stanley
Laybourne - 100,000 shares; Michael A. Gumbert - 100,000 shares; and Branson M.
Smith - 100,000 shares.
All of the options granted during 1999 to Named Executive Officers vest
equally on each of the first three anniversaries of the date of grant, provided
the officer is still an employee of the Company. The Company believes that
staged vesting provides an incentive for key executives to remain at the Company
for at least three years and promotes continuity of a successful management
team. All of the options were granted with an exercise price equal to the market
value of the Company's Common Stock at the close of trading on the date of
grant, thus serving to focus the officer's attention on managing the Company
from the perspective of an owner with an equity stake in the business.
SECTION 162(M)
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation over $1 million paid to the Chief
Executive Officer and any other executive officer whose compensation is required
to be reported in the Summary Compensation Table. Qualified performance-based
compensation will not be subject to the deduction limit if certain conditions
are met. It is the Committee's intent to evaluate and, to the extent consistent
with its other compensation objectives and overall compensation philosophy, take
the steps necessary to satisfy those conditions in order to preserve the
deductibility of executive compensation. Nevertheless, the Company may not be
able to preserve deductibility of executive compensation recognized in
connection with the exercise of certain options that have been granted to
covered executive officers. Specifically, compensation resulting from the
exercise of options granted to a covered executive officer under the 1994 Option
Plan will not qualify for deductibility to the extent that the total of the base
salary, bonuses and compensation from such option exercise received by any
covered executive officer exceeds $1 million in any taxable year.
COMPENSATION COMMITTEE:
Larry A. Gunning Robertson C. Jones
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STOCK PRICE PERFORMANCE GRAPH
Set forth below is a graph comparing the percentage change in the
cumulative total stockholder return on the Company's Common Stock (NSIT) with
the cumulative total return of the Nasdaq Stock Market U.S. Companies (Market
Index) and the Nasdaq Retail Trade Stocks (Peer Index) for the period commencing
January 24, 1995 (the date on which trading in the Company's Common Stock
commenced) and ended December 31, 1999. The graph assumes that $100 was invested
on January 24, 1995 in Insight Common Stock and in each of the two Nasdaq
indices, and that, as to such indices, dividends were reinvested. The Company
has not, since its inception, paid any cash dividends on the Common Stock.
Historical stock price performance shown on the graph is not necessarily
indicative of future price performance.
[LINE GRAPH]
Jan. 24, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
--------- -------- ------- --------- --------- -------
1995 1995 1996 1997 1998 1999
---- ------ ---- ---- ---- ------
Insight Enterprises, Inc. Common Stock $100.0 $120.5 $269.9 $531.3 $1,103.3 $1,321.5
(NSIT)
Nasdaq Stock Market U.S. Companies (Market $100.0 $139.1 $171.2 $209.7 $ 295.5 $ 533.9
Index)
Nasdaq Retail Trade Stocks (Peer Index) $100.0 $112.5 $134.2 $157.6 $ 191.7 $ 185.4
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors,
executive officers, and any persons holding more than 10% of the Company's
Common Stock are required to report their initial ownership of the Company's
Common Stock and any subsequent changes in that ownership to the Securities and
Exchange Commission. Specific due dates for these reports have been established
and the Company is required to disclose any failure to file by these dates.
Based upon a review of such reports furnished to the Company, or written
representations that no reports were required, the Company believes that all of
these filing requirements were satisfied during the year ended December 31,
1999.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock, as of December 31, 1999, by (i) each
person or entity known to the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) each of the Company's directors, (iii)
each of the Named Executive Officers, and (iv) all directors and executive
officers of the Company as a group.
SHARES OF COMMON STOCK
BENEFICIALLY OWNED(2)
-----------------------------
NAME(1) NUMBER OF
- ------- ---------
SHARES PERCENT
------ -------
AIM Management Group, Inc. 2,027,326(3) 7.6%
Janus Capital Corporation 1,941,066(4) 7.2%
Eric J. Crown 1,335,161(5) 5.0%
Timothy A. Crown 1,234,935(6) 4.6%
Stanley Laybourne 31,971(7) *
Robertson C. Jones 27,000(8) *
Michael A. Gumbert 25,741(9) *
Larry Gunning 8,439(10) *
Branson M. Smith 2,583(11) *
All directors and executive officers as a group (7 2,645,830(12) 9.9%
persons)
* Less than 1%
(1) The address of Messrs. Crown, Crown, Laybourne, Gumbert, Smith,
Gunning and Jones is c/o Insight Enterprises, Inc., 1305 West Auto
Drive, Tempe, Arizona, 85284.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission ("SEC") and generally includes
voting or investment power with respect to securities. In accordance
with SEC rules, shares which may be acquired upon exercise of stock
options which are currently exercisable or which become exercisable
within 60 days of the date of the information in the table are deemed
to be beneficially owned by the optionee. Except as indicated by
footnote, and subject to community property laws where applicable, to
the Company's knowledge the persons or entities named in the table
above have sole voting and investment power with respect to all shares
of Common Stock shown as beneficially owned by them.
(3) Number of shares based on the stockholder's 13G filing for December
31, 1999. The address of AIM Management Group, Inc. is 1315 Peachtree
Street, N.E., Atlanta, Georgia 30309. The information contained in
this section was obtained from a Schedule 13G filed February 4, 2000
by AIM Management Group, Inc. with the Securities Exchange Commission.
The Company makes no representation as to the accuracy or completeness
of the information reported.
(4) Number of shares based on the stockholder's 13G filing for December
31, 1999. The address of Janus Capital Corporation is 100 Fillmore
Street, Denver, Colorado 80206-4923. The information contained in this
section was obtained from a Schedule 13G filed February 15, 2000 by
Janus Capital Corporation with the Securities Exchange Commission. The
Company makes no representation as to the accuracy or completeness of
the information reported.
(5) Includes 20,000 shares held by a charitable foundation over which
Messrs. Crown and Crown have shared voting and investment power, 337
shares beneficially owned by Mr. Crown's spouse and 59 shares held in
the Company's 401(k) Plan.
(6) Includes 20,000 shares held by a charitable foundation over which
Messrs. Crown and Crown have shared voting and investment power and 39
shares held in the Company's 401(k) Plan.
(7) Includes 38 shares held in the Company's 401(k) Plan.
(8) Consists of 25,312 shares subject to options exercisable within 60
days of December 31, 1999 and 1,688 shares held in the name of a
family trust.
(9) Includes 5,622 shares subject to options exercisable within 60 days of
December 31, 1999, and 71 shares held in the Company's 401(k) Plan.
(10) Consists of 8,439 shares subject to options exercisable within 60 days
of December 31, 1999.
(11) Includes 39 shares held in the Company's 401(k) Plan.
(12) Includes 20,000 shares held by a charitable foundation over which
Messrs. Crown and Crown have shared voting and investment power,
39,373 shares subject to options exercisable within 60 days of
December 31, 1999, and 246 shares held in the Company's 401(k) Plan.
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PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO THE COMPANY'S
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
DESCRIPTION OF PROPOSED AMENDMENT
The Board of Directors has approved, and recommends that the stockholders
approve, an amendment to Article 4 of the Company's Amended and Restated
Certificate of Incorporation ("Certificate of Incorporation") increasing the
total authorized number of shares of Common Stock, $.01 par value per share,
from 30,000,000 to 100,000,000. The full text of the proposed amendment to the
Amended and Restated Certificate of Incorporation is set forth in Appendix A to
this Proxy Statement. If adopted by the stockholders, the amendment will become
effective upon filing of an appropriate certificate with the Secretary of State
of Delaware.
PURPOSES AND EFFECTS OF PROPOSED AMENDMENT
The proposed amendment would increase the number of shares of Common Stock
which the Company is authorized to issue from 30,000,000 to 100,000,000. The
additional shares of Common Stock authorized by the proposed amendment will have
the same rights and privileges as the shares of Common Stock currently
authorized.
At March 15, 2000, 26,904,269 shares of Common Stock were issued and
outstanding, and 5,260,631 shares of Common Stock were reserved for issuance
under the Company's stock option and benefit plans. The Board of Directors
recommends increasing the number of authorized common shares because, under
certain circumstances, the Company may not be able to issue additional shares of
Common Stock if necessary for mergers or acquisitions, financing transactions,
stock splits or for other corporate purposes without first obtaining the
approval of its stockholders. The Company has split its Common Stock several
times, most recently in the first quarter of 1999, by means of a stock dividend,
resulting in the issuance of additional shares of Common Stock. The proposed
increase in the number of authorized shares of Common Stock affords the Company
flexibility to take advantage of business and financial opportunities without
the delay and expense of seeking stockholders approval for the authorization of
additional stock.
If this proposal is approved, all or any of the authorized shares of Common
Stock may be issued without further action by the stockholders, unless such
approval is required by applicable law or regulatory authorities, and without
first offering such shares to the stockholders for subscription. Therefore, the
issuance of additional shares of Common Stock might dilute, under certain
circumstances, the ownership and voting rights of existing stockholders.
Except for the possibility of issuing new shares of Common Stock under the
Company's stock option or benefit plans and under "earn-out" provisions pursuant
to the Company's recent acquisitions, the Company has no present arrangements,
commitments, understandings or pending negotiations to issue shares of newly
authorized Common Stock.
The Company has not proposed the increase in the authorized number of
shares of Common Stock with the intention of using the additional shares for
anti-takeover purposes, although the Company could theoretically use the
additional shares to make more difficult or to discourage an attempt to acquire
control of the Company. The Company is not aware of any pending or threatened
efforts to acquire control of the Company.
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REQUIRED VOTE
Approval of the proposal to increase the number of authorized shares of
Common Stock by amending the Company's Amended and Restated Certificate of
Incorporation requires the affirmative vote of a majority of the shares
outstanding on the Record Date. Votes may be cast FOR or AGAINST the proposal,
and stockholders may also ABSTAIN from voting on the proposal. Abstentions and
broker non-votes will be counted as present or represented for purposes of
determining both the presence or absence of a quorum and the number of shares
outstanding and entitled to vote. However, because shares represented by
abstentions or broker non-votes are considered outstanding, as a practical
matter, abstentions and broker non-votes will have the same effect as a vote
AGAINST the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL OF
THE PROPOSED AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE TOTAL NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
TO 100,000,000.
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PROPOSAL NO. 3
AMENDMENTS TO INSIGHT ENTERPRISES, INC.
1998 LONG-TERM INCENTIVE PLAN
GENERAL
The Company seeks stockholder approval of amendments (the "Amendments") to
the Insight Enterprises, Inc. 1998 Long-Term Incentive Plan (the "Plan")
increasing the number of shares of Common Stock authorized for issuance
thereunder to 4,000,000, subject to the ability of the Board of Directors to
increase such amount without further stockholder approval provided that the
aggregate number of shares of stock reserved for grant under the Plan shall be
limited to an amount such that the number of shares of stock remaining available
for grant under the Plan (and any other option plan sponsored by the Company)
plus the number of shares of stock granted but not yet exercised (under the Plan
and any other option plan sponsored by the Company) may not exceed twenty
percent (20%) of the outstanding shares of stock of the Company, and to make
certain other changes. The closing price for the Common Stock on March 15, 2000,
as reported on Nasdaq, was $26.02.
The Plan promotes the success and enhances the value of the Company by:
- - linking the personal interests of participants to those of the Company's
stockholders,
- - providing participants with an incentive for outstanding performance, and
- - providing flexibility in motivating, attracting, and retaining the services
of officers, employees, directors, and consultants or independent
contractors upon whose judgment, interest, and special effort the
successful conduct of the Company's business is largely dependent.
The Company's Board of Directors recommends the stockholders approve the
Amendments. The Plan was originally adopted in October 1997. A copy of the
proposed Amendments as proposed herein are set forth as Appendix B.
PLAN PROVISIONS
The Plan authorizes grants of incentive stock options ("ISOs"),
non-qualified stock options ("NQSOs"), stock appreciation rights ("SARs"),
performance shares, restricted stock and performance-based awards to officers,
employees, directors, and consultants or independent contractors. A total of
2,350 individuals are currently eligible to participate in the Plan. The maximum
number of shares of Stock that may be issued under the Plan as ISOs shall be
3,000,000.
The Plan is administered by the Compensation Committee of the Board of
Directors. Except as provided below, the Compensation Committee has the
exclusive authority to administer the Plan, including the power to determine
eligibility, the types of awards to be granted, the price and the timing of
awards. The Plan does, however, provide that the Company's Co-Chief Executive
Officer has the authority to grant awards to any individual (other than the
three highest-ranking executives of the Company) and provides further that any
grant to an individual who is subject to Section 16 of the Securities Exchange
Act of 1934 may not be exercisable for at least six months from the date of
grant.
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INCENTIVE STOCK OPTIONS
ISOs are stock options that satisfy the requirements specified in Section
422 of the Internal Revenue Code, as amended (the "Code"). Under the Code, ISOs
may only be granted to employees. In order for an option to qualify as an ISO,
the price payable to exercise the option must equal or exceed the fair market
value of the underlying stock at the date of the grant, the option must lapse no
later than ten (10) years from the date of the grant, and the stock subject to
ISOs that are first exercisable by an employee in any calendar year must not
have a value of more than $100,000 as of the date of grant. Certain other
requirements must also be met.
An employee will not recognize taxable income upon either the grant of an
ISO or upon the exercise of an ISO. However, the difference between the exercise
price and the fair market value of the stock at the time of exercise is an item
of tax preference at the time of exercise in determining liability for the
alternative minimum tax, assuming that the Common Stock is either transferable
or is not subject to a substantial risk of forfeiture under Section 83 of the
Code.
If Common Stock acquired by the exercise of an ISO is not sold or otherwise
disposed of within two years from the date of its grant and is held for at least
one year after the date of exercise, such disposition is treated as long-term
capital gain or loss. If such Common Stock is disposed of before the expiration
of the above-mentioned holding periods, a "disqualifying disposition" occurs. If
a disqualifying disposition occurs, the employee realizes ordinary income in the
year of the disposition in an amount equal to the difference between the fair
market value of the Common Stock on the date of exercise and the exercise price,
or the selling price of the Common Stock and the exercise price, whichever is
less. The balance of the employee's gain on a disqualifying disposition, if any,
is taxed as capital gain.
The Company is not entitled to any tax deduction as a result of the grant
or exercise of an ISO, or on a later disposition of the Common Stock received,
except in the event of a disqualifying disposition, the Company is entitled to a
deduction equal to the amount of ordinary income realized by the employee.
NON-QUALIFIED STOCK OPTIONS
A NQSO is any stock option other than an ISO. Such options are referred to
as "non-qualified" because they do not meet the requirements of and are not
eligible for the favorable tax treatment provided by Section 422 of the Code.
If an employee is granted a NQSO, the grant itself typically does not
produce any taxable income for the employee, and the Company is not entitled to
a deduction at that time. On the date the NQSO is exercised, the employee
recognizes ordinary income in an amount equal to the difference between the fair
market value of the underlying stock at the date of exercise and the exercise
price. The Company generally is entitled to a corresponding deduction in the
same amount and in the same year in which the employee recognizes such income.
When an employee sells the stock acquired upon the exercise of an NQSO, the
employee recognizes capital gain equal to the difference between the sales price
of the stock and the fair market value of the stock as of the date of the
exercise. If the employee holds the stock for more than one (1) year following
the exercise of the option, the gain is treated as long-term capital gain.
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STOCK APPRECIATION RIGHTS
A SAR is the right granted to an employee to receive the appreciation in
the value of a share of Common Stock over a certain period of time. Under the
Plan, the Company may pay that amount in cash, Common Stock, or a combination of
both.
If an employee receives the appreciation inherent in the SARs in cash, the
cash is compensation income taxable to the employee. If the employee receives
the appreciation in the form of Common Stock, the stock received is taxable to
the employee in an amount equal to its fair market value. The Company is
entitled to receive a deduction in an amount equal to that taxable to the
employee in the year in which the employee recognizes taxable income with
respect to the SAR.
PERFORMANCE SHARES
Under the Plan, the Company may grant performance share units to an
eligible employee. Typically, each performance share unit will be deemed to be
the equivalent of one share of Common Stock. An award of a performance share
does not entitle an employee to any ownership, dividend, voting, or other rights
of a stockholder until distribution is made in Common Stock, if the award is
paid in stock. The value of the employee's performance share units generally is
measured by the fair market value of an equivalent number of shares of Common
Stock. At the end of the performance period, if the employee has satisfied
certain performance criteria established by the Compensation Committee, the
employee will be entitled to a payment equal to the difference between the value
of the performance share units on the date of grant and the value of such units
at the end of the performance period. The award may be payable in cash, Common
Stock, or property.
An employee who has been granted a performance share award will not realize
taxable income at the time of grant and the Company is not entitled to a
deduction at that time. However, the employee will recognize income in the year
the award is paid in an amount equal to the amount of cash and the fair market
value of the Common Stock issued to the employee. The Company generally is
entitled to a corresponding deduction at the same time.
RESTRICTED STOCK AWARDS
Under the restricted stock feature of the Plan, an eligible employee may be
granted a specified number of shares of the Company's Common Stock. However,
vested rights to such stock are subject to certain restrictions or are
conditioned on the attainment of certain goals. If the employee violates any of
the restrictions during the period specified by the Compensation Committee or
the goals are not met, the stock is forfeited.
In the year in which the applicable restrictions lapse or the applicable
goal is satisfied, an employee will include in taxable income the excess of the
fair market value of restricted stock received over the amount, if any, paid for
the restricted stock. The Company is entitled to a corresponding deduction at
the same time.
Instead of postponing the tax consequences of a restricted stock award
until the applicable restrictions lapse or until the applicable goal is
satisfied, an employee may elect to include the fair market value of the stock
in income in the year the award is granted by filing an appropriate election
with the Internal Revenue Service within thirty (30) days of grant. This
election is made under Section 83(b) of the Code.
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PERFORMANCE-BASED AWARDS
Grants of performance-based awards under the Plan enable the Compensation
Committee to treat restricted stock and performance share awards granted under
the Plan as "performance-based compensation" under Section 162(m) of the Code
and preserve the deductibility of these awards for Federal income tax purposes.
Because Section 162(m) of the Code only applies to those employees who are
"covered employees," as defined in Section 162(m) of the Code, only covered
employees are eligible to receive performance-based awards.
Participants for any given performance period are only entitled to receive
payment for a performance-based award for such period to the extent that
pre-established performance goals set by the Compensation Committee of the
period are satisfied. These pre-established performance goals must be based on
one or more of the following performance criteria: pre- or after-tax net
earnings, sales growth, operating earnings, operating cash flow, return on net
assets, return on stockholders' equity, return on assets, return on capital,
share price growth, stockholder returns, gross or net profit margin, earnings
per share, price per share, and market share. These performance criteria may be
measured in absolute terms or as compared to any incremental increase or as
compared to results of a peer group. With regard to a particular performance
period, the Compensation Committee shall have the discretion to select the
length of the performance period, the type of performance-based awards to be
granted, and the goals that will be used to measure the performance for the
period. In determining the actual size of an individual performance-based award
for a performance period, the Compensation Committee may reduce or eliminate
(but not increase) the award. Generally, a participant will have to be employed
on the last day of the performance period in order to be eligible for a
performance-based award for that period.
SECTION 162(m)
Section 162(m) of the Code generally limits, to $1 million, the amount that
can be deducted by a publicly-held corporation for compensation paid to any
"covered employee" in any taxable year. The term "covered employee" for this
purpose is defined generally as the chief executive officer and the four other
highest paid employees of the corporation. Performance-based compensation is
outside the scope of the $1 million limitation and, generally can be claimed by
a publicly held corporation without regard to amount, provided that among other
requirements, such compensation is approved by the Company's stockholders. Among
the items of performance-based compensation that can be deducted without regard
to amount (assuming stockholder approval and other applicable requirements are
satisfied) is compensation associated with the exercise price of a stock option
so long as the option has an exercise price equal to or greater than the fair
market value of the underlying stock at the date of the option grant. The
Company anticipates that all options granted under the Plan will have an
exercise price at least equal to the fair market value of the underlying stock
on the date of grant.
Of the shares of Common Stock available for awards under the Plan, the
maximum number that may be awarded annually to any one participant as awards of
ISOs, NQSOs, performance shares, restricted stock, or any combination of each,
is 500,000 shares (as the Plan is proposed to be Amended). In the event the
performance-based award is payable in cash, the maximum amount is determined by
multiplying 500,000 (as adjusted for stock splits) by the fair market value of
the Common Stock as of the date the performance-based award is granted.
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CHANGE OF CONTROL
In the event of a tender for all or any portion of the Company's Common
Stock, or in the event a proposal to merge, consolidate, or otherwise combine
with another company is submitted to the Company's stockholders for approval,
the ISOs or NQSOs previously granted under the Plan become immediately
exercisable.
Upon the occurrence of a Change of Control (as defined in the Plan), all
outstanding awards granted under the Plan become fully exercisable and all
restrictions on outstanding awards shall lapse. The Plan defines a "Change of
Control" to include (i) when the individuals who, at the beginning of any period
of two years or less, constituted the Board cease, for any reason, to constitute
at least a majority of the Board, unless the election (or nomination) for each
new director was approved by at least two-thirds of the directors then still in
office who were directors at the beginning of the period; (ii) a change of
control through a transaction or series of transactions, such that any person
(excluding affiliates of the Company as of October 30, 1997) is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the Company's then
outstanding securities; (iii) any consolidation or liquidation of the Company in
which the Company is not the continuing or surviving corporation or pursuant to
which the Company's Common Stock would be converted into cash, securities or
other property, other than a merger of the Company in which the holders of the
Company's Common Stock immediately before the merger have same proportionate
ownership of Common Stock of the surviving corporation immediately after the
merger; (iv) the stockholders' approval of any plan or proposal for the
liquidation or dissolution of the Company; or (v) the sale or other transfer of
substantially all of the assets of the Company to parties that are not within a
controlled group of corporations in which the Company is a member.
AMENDMENT AND TERMINATION
The Compensation Committee, subject to the approval of the Board, may
terminate, amend or modify the Plan at any time; provided, however, that
shareholder approval must be obtained for any amendment to the extent necessary
to comply with any applicable law, regulation or rule.
No termination, amendment, or modification of the Plan shall adversely
affect in any material way any award previously granted under the Plan, without
the written consent of the participant.
PLAN BENEFITS
The following table sets forth grants of options made under the Plan during
1999 to:
- - each of the Named Executive Officers identified above,
- - all current executive officers as a group,
- - all current directors who are not executive officers, as a group, and
- - all employees, including all current officers who are not executive
officers, as a group.
Grants under the Plan are made at the discretion of the Compensation
Committee. Accordingly, future grants under the Plan are not yet determinable.
The following table shows grants made under the Plan in 1999.
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1998 LONG-TERM INCENTIVE PLAN
Weighted Average
Securities Underlying Exercise Price of
Name and Position Options Granted (#) Options Granted ($)
----------------- ------------------- -------------------
Eric J. Crown 120,000 $ 28.74
Chairman of the Board of Directors and Co-Chief
Executive Officer
Timothy A. Crown 120,000 $ 28.74
Co-Chief Executive Officer, President and
Director
Stanley Laybourne 100,000 $ 27.06
Chief Financial Officer,
Secretary, Treasurer and Director
Michael A. Gumbert 100,000 $ 27.06
President of
Insight Direct Worldwide, Inc.
Branson M. Smith 100,000 $ 27.06
President of
Direct Alliance Corporation
Executive Officer Group 540,000 $ 27.81
Non-Executive Director Group 10,124 $ 27.00
Non-Executive Employee Group 390,032 $ 24.59
PROPOSED AMENDMENTS TO PLAN
The Board of Directors has reviewed the number of shares currently
remaining in the pool for the Plan and has determined that it is appropriate to
increase the number of shares authorized for issuance under the Plan. As of
March 15, 2000, (i) 889,062 shares have been issued upon exercise of options or
as restricted stock and are included in the total number of shares of
outstanding Common Stock and (ii) option grants representing 2,537,601 shares
were outstanding under the Plan. There are only options to purchase 409,074
shares of Common Stock available under the Plan. The Board believes that an
increase in the number of authorized shares is necessary for the continued
optimal use of the Plan. In addition, the maximum number of options that may be
granted as ISOs and the maximum number of shares that may be issued to any one
individual during a year are being increased as well. Therefore, the Board is
proposing Amendments to the Plan increasing (i) the number of shares authorized
for issuance under the Plan to 4,000,000, (ii) the maximum number of options
that may be granted as ISOs under the Plan to 3,000,000, and (iii) the maximum
number of shares of common stock that may be granted to any individual during
any calendar year from 225,000 to 500,000.
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26
In addition, the Plan, prior to the Amendment, provides that for each year
an additional one to four percent of the outstanding shares of Common Stock of
the Company, in the Board's discretion, may be reserved for issuance under the
Plan, subject to quarterly increases to account for additional outstanding
shares. The Amendment, in addition to increasing the number of shares authorized
under the Plan, also provides that the Board may reserve, from time to time,
additional shares of stock for grant under the Plan, in its discretion. However,
the aggregate number of shares of stock reserved for grant under the Plan is
limited to the following, which in the aggregate may not exceed twenty percent
(20%) of the outstanding shares of stock of the Company:
- - the number of shares of our Common Stock available for grant under the Plan
and any other option plan sponsored by the Company, and
- - the number of shares of our Common Stock granted, but not yet exercised or
cancelled, under the Plan and any other option plan sponsored by the
Company.
The Amendments, if approved by stockholders, would be effective as of March
13, 2000, the date of the Board's approval of the Amendments.
REQUIRED VOTE
Approval of the Amendments to the Plan requires the affirmative vote of a
majority of shares present, in person or by proxy, and entitled to vote on the
proposal, provided that a quorum is present. Votes may be cast FOR or AGAINST
the proposal, and stockholders may also ABSTAIN from voting on the proposal.
Abstentions will be counted as present or represented for purposes of
determining both the presence or absence of a quorum and the number of shares
entitled to vote on the proposal and as a practical matter will have the same
effect as a vote AGAINST the proposal. Broker non-votes will be counted as
present or represented for purposes of determining the presence or absence of a
quorum but will not be counted for purposes of determining the number of shares
entitled to vote on the proposal. The practical effect of broker non-votes is to
reduce the number of affirmative votes required to achieve a majority for the
proposal by reducing the total number of shares from which the majority is
calculated.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR ADOPTION OF
THE AMENDMENTS TO THE 1998 LONG-TERM INCENTIVE PLAN.
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RELATIONSHIP WITH INDEPENDENT AUDITORS
The principal independent accounting firm utilized by the Company during
the year ended December 31, 1999 was KPMG LLP, independent certified public
accountants. KPMG LLP has audited the Company's financial statements annually
since 1988. It is contemplated that KPMG LLP will be retained as the principal
accounting firm to be utilized by the Company during 2000. A representative of
KPMG LLP is expected to be present at the Annual Meeting for the purpose of
responding to appropriate questions and will be given the opportunity to make a
statement if he or she desires to do so.
STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be presented
by such stockholders at the Company's 2001 Annual Meeting must be received by
the Company no later than December 15, 2000 in order that they may be considered
for inclusion in the proxy statement and form of proxy relating to that meeting.
Stockholders who intend to present a proposal at the 2001 Annual Meeting of
Stockholders without inclusion of such proposal in the Company's proxy materials
are required to provide notice of such proposal to the Company no later than
March 6, 2001. The Company reserves the right to reject, rule out of order, or
take other appropriate action with respect to any proposal that does not comply
with these and other applicable requirements. Proposals should be addressed to
the Secretary of the Company at 1305 West Auto Drive, Tempe, Arizona 85284.
OTHER MATTERS
The Company knows of no other matters to be brought before the Annual
Meeting. If any other matter properly comes before the Annual Meeting, it is the
intention of the persons named in the enclosed proxy card to vote the shares
represented by the proxies as the Board of Directors may recommend.
The foregoing Notice and Proxy Statement are sent by order of the Board of
Directors.
INSIGHT ENTERPRISES, INC.
/s/ Stanley Laybourne
---------------------------
March 31, 2000 Stanley Laybourne
Secretary, Treasurer
and Chief Financial Officer
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APPENDIX A
ARTICLE 4 OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF INSIGHT ENTERPRISES, INC.
(AS PROPOSED TO BE AMENDED)
4. Authorized Capital. The total number of shares of stock which the
Corporation shall have authority to issue is 103,000,000 shares,
consisting of 100,000,000 shares of common stock having a par value of
$.01 per share (the "Common Stock") and 3,000,000 shares of preferred
stock having a par value of $.01 per share (the "Preferred Stock").
The Board of Directors is authorized, subject to limitations prescribed by
law and the provisions of this Article 4, to provide for the issuance of the
shares of Preferred Stock in series, and by filing a certificate pursuant to the
applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in each such series, and to fix the designation,
powers, preferences and rights of the shares of each such series and the
qualifications, limitations or restrictions thereof.
The authority of the Board with respect to each series shall include, but
not be limited to, determination of the following:
(a) The number of shares constituting that series and the distinctive
designation of that series;
(b) The dividend rate on the shares of that series, whether dividends
shall be cumulative, and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that series;
(c) Whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such voting rights;
(d) Whether that series shall have conversion privileges, and, if so,
the terms and conditions of such conversion, including provision for adjustment
of the conversion rate in such events as the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be redeemable, and,
if so, the terms and conditions of such redemption, including the date or dates
upon or after which they shall be redeemable, and the amount per share payable
in case of redemption, which amount may vary under different conditions and at
different redemption dates;
(f) Whether that series shall have a sinking fund for the redemption
or purchase of shares of that series, and, if so, the terms and amount of such
sinking fund;
(g) The rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the Corporation, and
the relative rights of priority, if any, of payment of shares of that series;
and
(h) Any other relative rights, preferences and limitations of that
series.
A-1
29
APPENDIX B
AMENDMENT TO THE INSIGHT ENTERPRISES, INC.
1998 LONG-TERM INCENTIVE PLAN
(AS PROPOSED)
Insight Enterprises, Inc. (the "Company") previously adopted the Insight
Enterprises, Inc. 1998 Long-Term Incentive Plan (the "Plan"). By this
instrument, the Company desires to amend the Plan as set forth below.
1. This Amendment shall amend only those provisions specified herein
and those provisions not amended hereby shall remain in full force and
effect.
2. Section 5.1 of the Plan is hereby amended and restated in its
entirety as follows:
"5.1. NUMBER OF SHARES. Subject to adjustment
provided in Section 13.1, the aggregate number of shares of
Stock reserved and available for grant under the Plan shall be
4,000,000. In addition, the Board may reserve additional
shares of Stock for grant under the Plan, in its discretion,
from time to time; provided, the aggregate number of shares of
Stock reserved for grant under the Plan shall be limited to an
amount such that the number of shares of Stock remaining
available for grant under the Plan (and any other option plan
sponsored by the Company) plus the number of shares of Stock
granted but not yet exercised (under the Plan and any other
option plan sponsored by the Company) shall not exceed twenty
percent (20%) of the outstanding shares of Stock of the
Company. Notwithstanding the above, the maximum number of
shares of Stock that may be issued under the Plan as ISOs
shall be 3,000,000."
3. Section 5.4 of the Plan is hereby amended and restated in its
entirety as follows:
"5.4. LIMITATION ON NUMBER OF SHARES SUBJECT TO
AWARDS. Notwithstanding any provision in the Plan to the
contrary, and subject to the adjustment in Section 13.1, the
maximum number of shares of Stock with respect to one or more
Awards that may be granted to any one Participant during the
Company's fiscal year shall be 500,000. "
4. This Amendment shall be effective as of the date adopted by the
Company's Stockholders.
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30
[INSIGHT LOGO]
INSIGHT ENTERPRISES, INC.
ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, MAY 16, 2000
3:00 P.M. LOCAL TIME
INSIGHT CORPORATE HEADQUARTERS
1305 WEST AUTO DRIVE
TEMPE, ARIZONA 85284
[INSIGHT LOGO]
INSIGHT ENTERPRISES, INC.
1305 WEST AUTO DRIVE, TEMPE, AZ 85284 PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL MEETING
ON MAY 16, 2000.
The shares of stock you hold in your account will be voted as you specify.
IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED "FOR" ITEMS 1, 2 AND 3.
By signing this proxy, you revoke all prior proxies and appoint ERIC J. CROWN
and STANLEY LAYBOURNE, and each of them, with full power of substitution, to
vote your shares on the matters shown on the reverse side and any other matters
which may come before the Annual Meeting and all adjournments.
31
Company #
Control #
See reverse for voting instructions.
THERE ARE THREE WAYS TO VOTE YOUR PROXY:
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES
IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
VOTE BY PHONE -- TOLL FREE - 800-240-6326 - QUICK *** EASY *** IMMEDIATE
- - Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a
week.
- - You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number (located above).
- - Follow the simple instructions of the automated attendant.
VOTE BY INTERNET - WWW.EPROXY.COM/NSIT/ - QUICK *** EASY *** IMMEDIATE
- - Use the Internet to vote your proxy 24 hours a day, 7 days a week.
- - You will be prompted to enter your 3-digit Company number and your 7-digit
Control Number (located above) to obtain your records and create an
electronic ballot.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to Insight Enterprises, Inc. c/o Shareowner
Services, P.O. Box 64873, St. Paul, MN 55164-9397.
If voting by phone or Internet, please do not mail your proxy card.
-- Please detach here --
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3.
1. Election of Two Class II Directors:
01 Timothy A. Crown 02 Stanley Laybourne
/ / Vote FOR / / Vote WITHHELD
all nominees from all nominees
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE,
WRITE THE NUMBER OF THE NOMINEE IN THE BOX PROVIDED TO THE RIGHT.)
2. To approve an amendment to the Company's Amended and Restated Certificate
of Incorporation increasing the number of authorized shares of Common
Stock, $.01 par value, from 30,000,000 to 100,000,000
/ / For / / Against / / Abstain
3. To approve amendments to the Company's 1998 Long-Term Incentive Plan
/ / For / / Against / / Abstain
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL.
Address Change? Mark Box / / Planning to attend the / /
Indicate changes below: Annual Meeting? Mark Box
Date:
-------------------
Signature(s) in Box Please
sign exactly as your name(s)
appear on the proxy. If held
in joint tenancy, all persons
must sign. Trustees,
administrators, etc. should
include title and authority.
Corporations should provide
full name or corporation and
title of authorized officer
signing the proxy.*