Exhibit 99.1
CONFIDENTIAL MEMORANDUM
To: All Officers of Insight and its Subsidiaries
From: Sidney R. Knafel
Michael S. Willner
Date: September 16, 2005
Re: Going Private Transaction
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As you are aware, on July 28, 2005, we entered into a merger agreement with
Insight Acquisition Corp., a corporation organized by affiliates of The Carlyle
Group for the sole purpose of effecting the merger and related transactions. The
transaction would have the effect of taking Insight private through the
acquisition of all of the outstanding publicly-held shares of Insight. The
proposed transaction is not expected to result in a change in the operational
aspects of our business. Following consummation of the proposed transaction, we
would continue to provide great customer service and state-of-the-art products
to our customers.
Consummation of the transaction is subject to stockholder approval (including
approval by a majority of the disinterested public stockholders) and the
satisfaction of a number of other legal requirements, including rules and
regulations issued by the Securities and Exchange Commission. If the proposed
transaction is consummated, currently outstanding shares of Insight's common
stock, other than certain shares held by certain continuing investors, would be
converted into a right to receive a cash payment equal to $11.75 per share, and
Insight would be recapitalized and new classes of stock would be issued to our
new stockholders.
Insight's records indicate that you presently own the Insight equity set forth
on the attached Statement of Equity Holdings. This Statement does not reflect
any restricted shares or shares that you may have acquired outside of Insight's
plans (such as direct purchase through a broker). If you believe any of this
information is incorrect or incomplete, please contact Gerald Isaacs, Human
Resources Coordinator, as soon as possible. Attached to the Statement of Equity
Holdings are appendices that describe the treatment of equity holdings in the
proposed transaction. Certain of these documents also contain brief descriptions
of certain federal income tax consequences associated with the going-private
proposal. Of course, tax consequences may vary depending upon individual
circumstances and these materials are not intended to provide you with tax
advice. Accordingly, we urge you to consult with your personal tax adviser
regarding your own federal income tax consequences, as well as any state and
local tax consequences.
To the extent that you currently own Insight stock options and you remain
employed by Insight following the merger, you would be eligible to receive
shares of another new series of incentive-based stock of the private company in
consideration for future services to be provided by you to Insight.
If the transaction is not approved by the stockholders or does not otherwise
close, Insight would continue operating as a public company and your equity
holdings would be unaffected.
We have enclosed a Questionnaire requesting information regarding any Insight
common stock you or any member of your immediate family may own. The
Questionnaire asks you to specify the number of shares of Insight common stock
that you own (other than shares held in your 401(k) account) or any member of
your family owns. As indicated in the Questionnaire, under the terms of the
proposed merger agreement, the number of shares held by officers of Insight and
their immediate family must be excluded in determining whether the condition
that the merger be approved by a majority of the disinterested stockholders has
been satisfied. Please complete the Questionnaire and return it to Elliot
Brecher BY NO LATER THAN SEPTEMBER 26, 2005. You should return the completed
Questionnaire REGARDLESS of whether you own any Insight stock.
We are also providing you with a copy of the preliminary proxy statement
previously filed with the Securities and Exchange Commission ("SEC") that
provides detailed information regarding the proposed transaction. The
preliminary proxy statement is subject to review by the SEC and the SEC will
likely require changes to the proxy statement, some of which may be substantial.
However, we believe the description of the proposed merger and the related
transactions may be of interest to you and useful.
THIS MEMORANDUM IS NOT A SOLICITATION OF A PROXY OR A SUBSTITUTE FOR ANY PROXY
STATEMENT OR OTHER FILINGS THAT WILL BE MADE WITH THE SEC. YOU ARE URGED TO
THOROUGHLY REVIEW AND CONSIDER INSIGHT'S PRELIMINARY PROXY STATEMENT FILED WITH
THE SEC AND INCLUDED WITH THIS MEMORANDUM AND TO THOROUGHLY REVIEW AND CONSIDER
ANY OTHER MATERIAL RELATED TO THE TRANSACTION WHEN FILED WITH THE SEC BECAUSE
THEY DO AND WILL CONTAIN IMPORTANT INFORMATION. ANY SUCH DOCUMENTS, ONCE FILED,
WILL BE AVAILABLE FREE OF CHARGE AT THE SEC'S WEBSITE (WWW.SEC.GOV) AND FROM
INSIGHT. YOU SHOULD NOT PUT UNDUE RELIANCE ON THE PRELIMINARY PROXY STATEMENT,
AS IT IS NOT COMPLETE AND REMAINS SUBJECT TO REVIEW BY THE SEC AND INSIGHT AND
CHANGES MAY BE SUBSTANTIAL.
September 16, 2005
INSIGHT COMMUNICATIONS COMPANY, INC.
STATEMENT OF EQUITY HOLDINGS
NAME:
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I. CURRENT OPTION HOLDINGS - SEE ATTACHED "STOCK OPTION APPENDIX" FOR
EXPLANATION
Cash At Closing
Current Options Exercise Price (before taxes)
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II. NEW PARTICIPATING COMMON STOCK to be granted (subject to specific terms and
conditions) after closing - SEE ATTACHED "STOCK OPTION APPENDIX" FOR
EXPLANATION
Shares of Series E
Non-Voting Common Participation Level
Stock Threshold
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III. 401(K) SHARES - SEE ATTACHED "401(K) APPENDIX" FOR EXPLANATION
Shares of Class A Cash to be
Common Stock Received in
Currently Held in 401(k) at Closing
401(k)
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IV. DEFERRED SHARES - SEE ATTACHED "DEFERRED SHARES APPENDIX" FOR EXPLANATION
Deferred Shares
Currently Held
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Note: Any shares held after the closing of the proposed merger will be subject
to terms, conditions and restrictions applicable to such shares and any equity
or equity based awards made by the Company after the closing will be subject to
certain additional terms, conditions and restrictions.
INSIGHT COMMUNICATIONS COMPANY, INC.
QUESTIONNAIRE FOR OFFICERS
Insight has entered into a merger agreement with Insight Acquisition Corp., an
entity organized by affiliates of The Carlyle Group, for the sole purpose of
effecting the merger and related transactions. Pursuant to the merger agreement,
publicly held shares of Insight's common stock (other than certain shares held
by certain continuing investors) will be converted into the right to receive
$11.75 per share in cash. The merger agreement, in part, requires that the
merger agreement be adopted and approved by a majority of the outstanding share
of Insight Class A common stock entitled to vote thereon NOT held by: Insight
Acquisition Corp., the continuing investors (or any member of the immediate
families thereof); Carlyle or any affiliates thereof; or any officers or
directors of Insight (or any member of the immediate families thereof). As an
officer of Insight, we are asking you to provide us with the following
information in order to comply with this requirement under the merger agreement.
You should complete this Questionnaire with care, as Insight will rely on the
information supplied by you. If you need more space to complete your response to
any question below, please complete your response on a separate sheet of paper
and attach it to this Questionnaire. If you have any questions regarding this
Questionnaire, you may contact Elliot Brecher at (917) 286-2230.
1. Your Name:
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2. Please indicate below the total number of shares of common stock (other than
shares held in your 401(k) account) beneficially owned by you, your spouse or
for the benefit (in trust or otherwise) of your minor children or any relative
of you or your spouse who shares your home, including any restricted shares
owned by you. Review the definition of "beneficial ownership" in Appendix A
before answering this question.
(a) Total number of shares of common stock (including restricted shares):
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(b) If you participated in the exchange offer completed in May, 2005,
pursuant to which your Insight loan was cancelled in exchange for
restricted shares, indicate the total number of shares from line (a)
that are restricted shares:
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(c) Nature of ownership of shares from line (a) (e.g., individually,
through spouse, trust, etc.), and the number of shares held in each
such capacity, if more than one capacity:
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(d) If held through an account at a broker, bank or other institution,
please provide the following information for each such account:
1. Name of bank, broker or other institution:
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2. Exact title of this account as it appears on your Statement (for
example, your name):
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3. Your Account Number:
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4. Number of shares held in this account:
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3. Please complete the following table with respect to all purchases, sales and
other transactions of Insight's common stock on or after January 1, 2003. If the
appropriate response is "none," please so state.
Nature of Transaction Date Number of Shares Price Per Share
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Please execute the Certification below and return your completed Questionnaire
to Elliot Brecher NO LATER THAN SEPTEMBER 26, 2005.
CERTIFICATION
I hereby certify that to the best of my knowledge and belief, the
information given by me in this Questionnaire is correct and complete.
Signature:
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Name:
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Date:
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APPENDIX A
BENEFICIAL OWNERSHIP. As used in this Questionnaire, the term "beneficial
ownership" does not carry its ordinary connotation. Rather, it is a technical
term which has been specifically defined by the Securities and Exchange
Commission (the "SEC"). The term as defined by the SEC is used in a very broad
sense to encompass many situations which might not be thought to confer
ownership in the usual sense. It is therefore important to give careful
consideration to the definition and the discussion which follows. If you are
uncertain whether a particular set of facts warrants a conclusion that you
beneficially own securities, please resolve your doubts in favor of reporting
the securities in question (and please note that, notwithstanding your reporting
of such securities, you may disclaim beneficial ownership of any such reported
securities by making an appropriate notation on the Questionnaire if you
nevertheless believe that attribution of beneficial ownership to you is
unwarranted).
The SEC has provided the following general definition:
A "beneficial owner" of a security includes any person who, directly
or indirectly, through any contract, arrangement, understanding,
relationship, or otherwise, has or shares:
(1) voting power, which includes the power to vote, or to direct
the voting of, such security; and/or
(2) investment power, which includes the power to dispose, or to
direct the disposition, of such security.
It should be emphasized that the possession of EITHER voting power OR investment
power as described above suffices to confer beneficial ownership.
To be "beneficially owned," the securities need not be registered in your
name. For example, you would ordinarily be considered the beneficial owner of
securities held in the name of a family member if you have the power to vote or
dispose of such securities, held by a trust of which you are a trustee, held for
you in the name of a nominee such as a broker or held by a corporation you
control or a partnership of which you are a partner.
On the other hand, securities would not be beneficially owned by you if you
only have the right to receive dividends on, or the sale proceeds of, such
securities and do not have or share the power to vote or dispose of them. For
example, a beneficiary of the income from securities held in a trust managed by
independent trustees would not ordinarily be the beneficial owner of the
securities held in the trust.
STOCK OPTION APPENDIX
A. VESTED AND UNVESTED "IN THE MONEY" STOCK OPTIONS (I.E., STOCK OPTIONS WITH
AN EXERCISE PRICE LOWER THAN THE $11.75 PRICE TO BE PAID FOR INSIGHT SHARES
IN THE MERGER)
CASH-OUT. Upon the consummation of the merger, these options (whether vested or
unvested) would be canceled in exchange for a cash payment per option share
equal to the difference between the exercise price and the $11.75 per share
merger price. This cash payment would be taxable to you as ordinary income.
NEW SERIES E SHARES. In addition, after the consummation of the merger, in
consideration for future services to be provided by you to Insight, Insight will
grant you one (1) share of a new series of Insight stock (Series E) for every
share subject to the canceled options. Your shares of Series E stock would be
entitled to participate in the per share appreciation of the value of Insight
over the $11.75 per share merger price. These shares would be subject to a five
(5) year vesting schedule, as well as certain other terms and conditions which
would be contained in a subscription agreement that you would be required to
sign as a condition to receiving these shares. In addition, you would be
required to enter into a Securityholders Agreement, which would contain, among
other provisions, restrictions on the sale or other transfer of Insight stock
and certain restrictions on voting rights, but would give shareholders rights to
sell their shares as part of certain sale transactions initiated by other
specified shareholders. The agreement also would require you to sell your shares
in connection with certain future sale transactions.
B. VESTED AND UNVESTED "OUT OF THE MONEY" OPTIONS (I.E., OPTIONS WITH AN
EXERCISE PRICE EQUAL TO OR HIGHER THAN THE $11.75 PRICE TO BE PAID FOR
INSIGHT SHARES IN THE MERGER).
Upon the consummation of the merger, you would receive no cash payments for
these options and they would be canceled.
NEW SERIES E STOCK. After the consummation of the merger, in consideration for
future services to be provided by you to Insight, Insight will grant you one (1)
share of a new series of Insight stock (Series E) for every share subject to the
canceled options. Your shares of Series E stock would be entitled to participate
in the per share appreciation of the value of Insight over the exercise price of
your canceled options. These shares would be subject to a vesting schedule that
mirrors the vesting schedule of the canceled options, so you will be immediately
vested in the same number of Series E shares as any option shares that already
are vested under the canceled options. The vesting terms, as well as certain
other terms and conditions, would be contained in a subscription agreement that
you would be required to sign as a condition to receiving these shares. In
addition, you would be required to enter into a Securityholders Agreement which
would contain, among other provisions, restrictions on the sale or other
transfer of Insight stock and certain restrictions on voting rights, but would
give shareholders rights to sell their shares as part of certain sale
transactions initiated by other specified shareholders. The agreement also would
require you to sell your shares in connection with certain future sale
transactions.
C. TAX CONSEQUENCES
Any cash payment you receive for "In The Money" stock options would be taxable
to you as ordinary income. Any new Series E shares you receive after the merger
that are vested as of the date they are awarded would be taxable as ordinary
income as of the date of the award. The amount you would be required to
recognize as ordinary income would be based on the fair market value of the
Series E shares at the time of the award. Series E shares you receive that are
not vested as of the date they are awarded would ordinarily be taxable at the
time they become vested unless you make a special election under Internal
Revenue Code Section 83(b), which would cause you to recognize ordinary income
equal to the fair market value of the Series E shares at the time of the award.
Any new Series E shares you receive after the merger are not currently expected
to have a significant value at the time of the grant. As a result, there may be
advantages to you in making an 83(b) election. The potential advantage to such
an election is that future appreciation in the value of the shares from the date
of the award (rather than the vesting dates) would be taxable as capital gains
on ultimate sale of the shares. In the event that an 83(b) election is made, any
depreciation in the value of the shares may be treated as a capital loss upon
disposition. However, any forfeiture of the shares may not be treated as a
capital loss. You will need to evaluate the potential costs and benefits to
making such an election taking your personal circumstances into consideration.
Additional information about the Section 83(b) election will be forthcoming. Of
course, tax consequences may vary depending on individual circumstances and
these materials are not intended to provide you with tax advice. Accordingly, we
urge you to consult with your own personal tax advisor regarding your own
federal income tax consequences, as well as any state and local tax
consequences.
DEFERRED SHARES APPENDIX
Holders of deferred shares will not receive any cash in connection with the
merger. Upon consummation of the merger, Insight will adjust the terms of the
deferred share award agreements so that the holders will be entitled to receive
the same number of shares of Insight's new Series C stock, instead of the Class
A common stock currently provided for under the deferred shares award
agreements. The Series C stock is the same series of stock that would be
received by all shareholders who are "rolling over" shares as continuing
investors in Insight upon completion of the merger, including Sidney Knafel and
Michael Willner. Insight also will modify the awards to provide that the
deferral period will continue until the earlier of a change in control of
Insight or your termination of employment. The terms of the deferred share
awards would otherwise remain unchanged. You should note that the Company is
currently considering modifying the terms of these awards to distribute shares
only upon the occurrence of a future change in control in order to avoid causing
a tax liability at a time when the shares are not liquid. Insight also is
considering other changes that may be necessary or advisable as the result of
recent changes to certain tax rules applicable to these types of arrangements.
We will provide you with further information about such changes.
TAX CONSEQUENCE
You should not recognize taxable income on this adjustment to your deferred
share award. You should note that, unrelated to the merger, in 2004, new
provisions were added to the Internal Revenue Code that affect deferred
compensation arrangements including Insight's deferred share arrangements. As
additional guidance is issued by the IRS, further modification of your deferred
share arrangements may be required. We will provide you with additional
information as developments occur. Of course, tax consequences may vary
depending on individual circumstances and these materials are not intended to
provide you with tax advice. Accordingly, we urge you to consult your own
personal tax advisor regarding your own federal income tax consequences, as well
as any state and local tax consequences.
ADDITIONAL AGREEMENTS
To the extent that modifications to the deferred share arrangements are required
either as the result of the merger or due to new tax rules, you may be required
to execute a new deferred share agreement. In addition, in the event you receive
a distribution of shares under the program prior to a change in control, you
would be required to enter into a Securityholders Agreement with the other
Insight shareholders and Insight. The Securityholders Agreement would contain,
among other provisions, restrictions on the sale or other transfer of Insight
stock and certain restrictions on voting rights, but would give shareholders
rights to sell their shares as part of certain sale transactions initiated by
other specified shareholders. The agreement also would require you to sell your
shares in connection with certain future sale transactions.
401(K) APPENDIX
Upon consummation of the merger, you would continue to participate in the 401(k)
plan. Shares of Insight stock that you currently hold in your 401(k) account,
including any fractional shares, would be cashed out in the merger at the merger
price of $11.75 per share. That transaction would be tax deferred. You will also
receive information regarding the reinvestment of the cash proceeds received
into your account.
After the merger, Insight will continue to provide matching contributions in the
401(k) plan. The amount and form of the matching contribution would not be
determined until after the closing of the merger by the newly constituted Board
of Directors. We do expect, however, that Insight will continue to provide a
competitive and attractive matching contribution after closing.