INTELLIGENT ELECTRONICS, INC.
411 Eagleview Boulevard
Exton, PA 19341
(610) 458-5500
NOTICE AND PROXY STATEMENT
--------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD 9:00 A.M. AUGUST 22, 1996
To the Shareholders of Intelligent Electronics, Inc.:
NOTICE IS HEREBY GIVEN THAT the Annual Meeting of Shareholders of
Intelligent Electronics, Inc. (the "Company") will be held at J&J Catering,
880 Springdale Drive, Whiteland Business Park, Exton, Pennsylvania, on August
22, 1996 at 9:00 a.m. for consideration of and action upon the following
matters:
1. To elect three directors for a three-year term; and
2. To transact such other business as may properly come before the
Annual Meeting and any adjournment thereof, and matters incident to the
conduct of the Annual Meeting.
The Board of Directors has fixed the close of business on July 9, 1996,
as the record date for the determination of holders of Common Stock of the
Company entitled to notice of, and to vote at, the Annual Meeting. The
Company's Annual Report to Shareholders for the year ended February 3, 1996,
accompanies this Notice and Proxy Statement.
SHAREHOLDERS (WHETHER THEY OWN ONE OR MANY SHARES AND WHETHER THEY
EXPECT TO ATTEND THE ANNUAL MEETING OR NOT) ARE REQUESTED TO VOTE, SIGN, DATE
AND RETURN PROMPTLY THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
BY ORDER OF THE BOARD OF DIRECTORS,
Kathleen R. Mayo
Secretary
Exton, PA
July 23, 1996
<PAGE>
INTELLIGENT ELECTRONICS, INC.
411 Eagleview Boulevard
Exton, PA 19341
(610) 458-5500
PROXY STATEMENT
---------------
This Proxy Statement is furnished and is being mailed with the
accompanying proxy on or about July 23, 1996, to each Shareholder of record
of Intelligent Electronics, Inc. (the "Company") in connection with the
solicitation of proxies by the Board of Directors of the Company, to be voted
at the Annual Meeting of Shareholders of the Company (the "Meeting") to be
held on August 22, 1996 at 9:00 a.m. at J&J Catering, 880 Springdale Drive,
Whiteland Business Park, Exton, Pennsylvania, and at any adjournment thereof,
for the purposes stated below.
Any person giving a proxy has the power to revoke it at any time before
its exercise by a later dated proxy, a written revocation sent to the
Secretary of the Company or attendance at the Meeting and voting in person.
In the absence of contrary instructions, properly executed proxies, received
and unrevoked, will be voted by the persons named in the proxy for: (i) the
election of three directors nominated by the Board of Directors for a
three-year term; and (ii) any action, in their discretion, with respect to
such other business as may properly come before the Meeting and matters
incident to the conduct of the Meeting.
Each of the above proposals is discussed below.
VOTING SECURITIES OF THE COMPANY
Only Shareholders of record at the close of business on July 9, 1996 are
entitled to notice of, and to vote at, the Meeting. On that date, the
outstanding voting securities of the Company consisted of 34,745,203 shares
of Common Stock. Each share of Common Stock is entitled to one vote on all
matters presented to the Meeting with no right to vote cumulatively. Under
Pennsylvania law and the By-laws of the Company, the presence of a quorum is
required for each matter to be acted upon at the Meeting. The presence at
the Meeting, in person or by proxy, of Shareholders entitled to cast at least
a majority of the votes that all Shareholders are entitled to cast on a
particular matter shall constitute a quorum for the purposes of consideration
and action on the matter. Directors are elected by a plurality vote;
therefore, the three nominees who receive the largest number of votes cast
will be elected as directors. An affirmative vote of a majority of the votes
cast by Shareholders present in person or by proxy and entitled to vote at
the Meeting is required for approval of the other matters presented. Votes
withheld and abstentions will be counted in determining the presence of a
quorum, but will not be voted and will have no effect on matters to be voted
on at the Meeting. Broker non-votes will not be counted in determining the
presence of a quorum and will not be voted.
PRINCIPAL SHAREHOLDERS AND HOLDINGS OF OFFICERS AND DIRECTORS
The following table sets forth, as of June 1, 1996, the number and
percentage of shares of Common Stock which, according to information supplied
to the Company, are beneficially owned by (i) each person who is the
beneficial owner of more than 5% of the Common Stock; (ii) each of the
directors and the nominees for directorship of the Company individually;
(iii) the Company's Chief Executive Officer and each of the Company's four
other most highly compensated executive officers for the fiscal year ended
February 3, 1996 ("fiscal year 1995"); and (iv) all current directors and
officers of the Company as a group. Under rules adopted by the Securities
and Exchange Commission, a person is deemed to be a beneficial owner of
Common Stock with respect to which he has or shares voting power (which
includes the power to vote or to direct the voting of the security), or
investment power (which includes the power to dispose of, or to direct the
disposition of, the security). A person is also deemed to be the beneficial
owner of shares with respect to which he has the right to obtain voting or
investment power within 60 days, such as upon the exercise of options or
warrants.
<TABLE>
<CAPTION>
Percentage
Amount and Nature of Shares
of Beneficial Outstanding
Name of Beneficial Owner Ownership(a) (if 1% or greater)
----------------------------- ----------------- ------------------
<S> <C> <C>
Barry M. Abelson 447,879(b) 1.3%
Thomas J. Coffey 20,100 --
Timothy D. Cook 22,000 --
Christopher T. G. Fish 1,168,020(c) 3.4%
Roger J. Fritz 60,004 --
Arnold S. Hoffman 6,000 --
William E. Johnson 10,000 --
John A. Porter 40,000 --
Gregory A. Pratt 211,667 --
William L. Rulon-Miller 14,136 --
Richard D. Sanford 3,953,433(d) 11.3%
Alex A.C. Wilson 20,000 --
Wellington Management Company 1,943,742(e) 5.6%
Montag & Caldwell 3,538,219(f) 10.2%
Lazard Freres & Co. LLC 1,899,430(g) 5.5%
All directors and officers
as a group (13 persons) 5,703,722 16.2%
</TABLE>
(a) Includes the following number of shares purchasable upon the exercise of
stock options: Mr. Coffey, 20,000; Mr. Cook, 20,000; Mr. Johnson, 10,000;
Mr. Porter, 20,000; Mr. Pratt, 211,667; Mr. Sanford, 216,667; Mr. Wilson,
20,000, and all directors and officers as a group, 525,334.
(b) Includes 71,710 shares held in a trust (the beneficiary of which is a
child of Mr. Sanford) of which Mr. Abelson and Mr. Fish are co-trustees;
128,262 shares held by Mr. Abelson as custodian for the benefit of two
children of Mr. Sanford; and 205,007 shares held by two charities established
by Mr. Sanford, of which Mr. Abelson is a director or trustee. Mr. Abelson
disclaims beneficial ownership as to the shares held by the trust and
charities and as custodian.
(c) Includes 1,062,310 shares owned by Sprint Investments, S.A. The sole
shareholder of Sprint Investments, S.A. is a trust, the beneficiaries of
which are the wife and children of Mr. Fish. Also includes 71,710 shares
held in a trust (the beneficiary of which is a child of Mr. Sanford) of which
Mr. Fish and Mr. Abelson are co-trustees (as to which shares Mr. Fish
disclaims beneficial ownership) and 4,000 shares held as custodian and in the
name of Mr. Fish's daughter.
(d) Includes 205,007 shares held by two charities established by Mr. Sanford,
of which Mr. Sanford is a director or trustee. Mr. Sanford disclaims
beneficial ownership as to the shares held by the charities.
(e) The information with respect to Wellington Management Company was
reported on a Schedule 13-G filed by Wellington Management Company with the
Securities and Exchange Commission on January 30, 1996, a copy of which was
received by the Company and relied upon in making this disclosure. The
address of Wellington Management Company is 75 State Street, Boston,
Massachusetts, 02109.
(f) The information with respect to Montag & Caldwell was reported on a
Schedule 13-G filed by Montag & Caldwell with the Securities and Exchange
Commission on January 12, 1996, a copy of which was received by the Company
and relied upon in making this disclosure. The address of Montag & Caldwell
is 1100 Atlanta Financial Center, 3343 Peachtree Road, NE, Atlanta, Georgia,
30326.
(g) The information with respect to Lazard Freres & Co. LLC was reported on
a Schedule 13-G filed by Lazard Freres & Co. LLC with the Securities and
Exchange Commission on February 14, 1996, a copy of which was received by the
Company and relied upon in making this disclosure. The address of Lazard
Freres & Co. LLC is 30 Rockefeller Plaza, New York, New York, 10020.
<PAGE>
1. ELECTION OF DIRECTORS
In accordance with the Company's By-laws, the Board of Directors is
classified into three classes as nearly equal in number as possible. At the
Meeting, three directors will be elected, each for a three-year term expiring
at the 1999 Annual Meeting of Shareholders. The Board of Directors has
recommended three nominees for election as directors at the Meeting. It is
the intention of the persons named in the proxy, unless otherwise directed,
to vote all proxies for the election to the Board of Directors of the
nominees listed below. The Board of Directors has no reason to believe that
any of the nominees will be unable or unwilling to be a candidate for
election at the time of the Meeting. If any nominee is unable or unwilling
to serve, it is presently intended that the proxy shall be voted for the
election of a nominee who will be designated by the Board or its Executive
Committee, or the number of directors constituting the full Board may be
reduced.
Following are the names of the nominees for director of the Company to
serve for a three-year term expiring at the 1999 Annual Meeting of
Shareholders, their ages, and certain other information. The Board
recommends a vote for all nominees.
Name Age Position Term
---- --- -------- ----
Christopher T.G. Fish 53 Director 3 years
Gregory A. Pratt 47 Director 3 years
Richard D. Sanford 52 Director 3 years
Christopher T.G. Fish has been a director of the Company since its
incorporation in 1982. For more than five years, Mr. Fish has been a
principal of Sprint Investments, S.A., an investor company which is a holder
of the Company's Common Stock. Mr. Fish resides in the Channel Islands, U.K.
and is a citizen of the United Kingdom.
Gregory A. Pratt has been a director of the Company since May 1994.
Mr. Pratt joined the Company in March 1992 as Executive Vice President and was
appointed to the position of President and Chief Operating Officer shortly
thereafter. Mr. Pratt resigned as President and Chief Operating Officer and
was elected Executive Vice President in April 1996. Prior to joining the
Company, Mr. Pratt served as President of Atari Computer Corporation and Vice
President of Finance and Chief Financial Officer of Atari Corporation. He
also served on the Board of Directors of Atari Corporation and was a member
of that Board's Executive Committee.
Richard D. Sanford has been the Company's Chairman and Chief Executive
Officer since he founded the Company in May 1982. Mr. Sanford was elected
President of the Company in April 1996.
The names of the other directors of the Company who will continue after
the Meeting, their ages, the term for which they have been elected and
certain other information is set forth below:
Term Expires at
Name Age Position Annual Meeting in
---- --- -------- -----------------
Barry M. Abelson 50 Director 1998
William E. Johnson 55 Director 1998
William L. Rulon-Miller 48 Director 1998
Roger J. Fritz 67 Director 1997
Arnold S. Hoffman 60 Director 1997
John A. Porter 52 Director 1997
Alex A.C. Wilson 59 Director 1997
Barry M. Abelson has been a director of the Company since January
1989. In May 1992, he joined the law firm of Pepper, Hamilton & Scheetz,
Philadelphia, Pennsylvania, as a partner. Prior thereto, Mr. Abelson had
been a partner of the law firm of Braemer Abelson & Hitchner, Philadelphia,
Pennsylvania (and its predecessor firms). Mr. Abelson also serves on the
Board of Directors of Covenant Bank for Savings.
William E. Johnson has been a director of the Company since November
1994. He has been President of William E. Johnson Associates, a private
investment company, since 1993. From 1986 to 1992, Mr. Johnson served as
Chairman and CEO of Scientific Atlanta, a telecommunications company.
William L. Rulon-Miller serves as Senior Vice President and Co-Director
of Corporate Finance for Janney Montgomery Scott Inc., an investment banking
firm with which he has held several positions since 1979. Mr. Rulon-Miller
was a director of the Company from April 1983 until December 1986, and was
re-elected to the Board in November 1987. Mr. Rulon-Miller also serves on
the Board of Directors of Mothers Work, Inc.
Roger J. Fritz has been a director of the Company since its
incorporation in 1982. For more than five years, Mr. Fritz has been
President of Organization Development Consultants of Naperville, Illinois, an
organizational development/management consulting firm.
Arnold S. Hoffman has been a director of the Company since August
1985. In January 1992, Mr. Hoffman became Senior Managing Director of Legg
Mason Wood Walker Incorporated, an investment banking firm. Prior to that,
since September 1990, Mr. Hoffman was Chairman of the Middle Market Group, L.P.,
an investment banking firm. Mr. Hoffman also serves on the Board of Directors
of SunSource L.P.
John A. Porter has been a director of the Company since May 1994. Mr.
Porter has been Vice Chairman of WorldCom, Inc. (formerly LDDS/Metro Media
Communications), a long-distance carrier, since the fall of 1993. From 1988
until its merger with Metro Media Communications in 1993, he served as
Chairman of LDDS. Mr. Porter is the president and sole shareholder of PM
Restaurant Group, Inc., which filed a petition under Chapter 11 of the U.S.
Bankruptcy Code in March 1995. Mr. Porter also serves on the Board of
Directors of Uniroyal Technology Corporation.
Alex A.C. Wilson has been a director of the Company since May 1994.
Mr. Wilson has served as Senior Vice President of SCI Systems, a worldwide
contract manufacturing company in the electronics industry, since November
1993, and is General Manager for the European operations. Prior thereto, he
worked for IBM Corporation as Director of Manufacturing and Distribution. In
his 27-year career with IBM Corporation, Mr. Wilson worked in various
capacities. Mr. Wilson resides in Scotland and is a citizen of the United
Kingdom.
<PAGE>
BOARD OF DIRECTORS AND COMMITTEES
The Company's Board of Directors held eleven meetings and acted by
written consent three times during fiscal year 1995. During fiscal year
1995, each incumbent member of the Board attended at least 75% of the
aggregate meetings of the Board and its Committees for which he is a member,
except Messrs. Porter and Wilson.
The Board of Directors has established Audit, Compensation and Stock
Option, Investment and Finance, and Executive Committees to devote attention
to specific subjects and to assist in the discharge of its responsibilities.
The functions of those committees, their current members and the number of
meetings held during fiscal year 1995 are described below. The Board of
Directors has not established a Nominating Committee.
Audit Committee. The Audit Committee is currently composed of
Messrs. Fish, Fritz, Hoffman and Rulon-Miller. The functions of the Audit
Committee include the recommendation and selection of independent accountants,
the review of audit results and the evaluation of internal accounting procedures
of the Company. There were two meetings of the Audit Committee during fiscal
year 1995.
Compensation and Stock Option Committee. The Compensation and Stock
Option Committee is currently composed of Messrs. Abelson, Fritz, Hoffman and
Rulon-Miller. The Compensation and Stock Option Committee is responsible for
determining the annual salary, bonus and incentive compensation of the
Company's executive officers and, on the basis of recommendations received
from executive officers, awarding incentive compensation in the form of stock
options to the Company's employees generally. The Report of the Compensation
and Stock Option Committee is included later in this Proxy Statement. The
Compensation and Stock Option Committee acted by written consent seven times
during fiscal year 1995.
Investment and Finance Committee. The Investment and Finance
Committee is currently composed of Messrs. Abelson, Fish, Hoffman,
Rulon-Miller and Pratt. The functions of the Investment and Finance
Committee, which did not meet formally during fiscal year 1995, is to review
and make recommendations to the Board of Directors as to available investment
opportunities to the Company as well as reviewing the Company's investment
policies generally.
Executive Committee. The Executive Committee is currently composed of
Messrs. Abelson, Fish, Fritz, Hoffman, Johnson, Porter, Rulon-Miller, Sanford
and Wilson, and has the authority of the Board of Directors in the management
of the business and affairs of the Company, subject to applicable legal
limitations. The Executive Committee held two meetings and acted by written
consent two times during fiscal year 1995.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation paid during the years ended February 3, 1996, January 28, 1995,
and January 29, 1994, to the Company's Chief Executive Officer and each of
the Company's four other most highly compensated executive officers based on
salary and bonus earned during fiscal year 1995 (the "named executive
officers").
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-term
Compensation
Awards
--------------
Securities
Name and Principal Fiscal Annual Compensation Underlying All Other
Position Year Salary($) Bonus($) Options (#)(1) Compensation ($)(2)
- --------------------------- ------ --------- -------- -------------- -------------------
<S> <C> <C> <C> <C> <C>
Richard D. Sanford 1995 $850,000 $ 0 500,000 $ 453,879
Chairman of the 1994 850,000 0 None 496,945
Board and Chief 1993 850,000 569,160 450,000 457,205
Executive Officer (3)
Gregory A. Pratt 1995 500,000 0 200,000 8,024
President and Chief 1994 500,000 30,000 None 3,178
Operating Officer (4) 1993 272,500 410,000 150,000 73,757
Mark R. Briggs 1995 325,000 0 140,000 4,500
Senior Vice President (5) 1994 325,000 38,500 50,000 3,792
1993 210,000 221,900 10,000 4,513
Timothy D. Cook 1995 250,000 67,500 100,000 1,251
Senior Vice President 1994(6) 76,923 90,000 100,000 0
Thomas J. Coffey 1995(7) 177,846 100,000 100,000 0
Vice President and
Chief Financial Officer (8)
______________________________________________________________
(1) The amounts included in this column for fiscal year 1995 includes stock options repriced on February 25, 1995 (Mr. Sanford,
450,000; Mr. Pratt, 150,000; Mr. Briggs, 90,000; and Mr. Cook, 100,000).
(2) Except as indicated below, the amount included in this column for fiscal year 1995 represent the matching contributions under
the Company's 401(k) Plan (Mr. Sanford, $4,620; Mr. Pratt, $2,024; Mr. Briggs, $4,500; and Mr. Cook, $1,251) and directors' fees
(Mr. Sanford $7,000; and Mr. Pratt $6,000). The Company is a party to "split dollar" life insurance agreements with a trust
established by Mr. Sanford (of which Mr. Abelson, a member of the Board of Directors, is the trustee) under which the trust pays
the portion of the premiums attributable to the term life insurance component of permanent life insurance policies insuring the
life of Mr. Sanford and owned by the trust, and the Company pays the balance of the premiums. Upon the termination of the
agreements or Mr. Sanford's death, all premiums previously advanced by the Company under the policies are required to be
repaid by the trust. The Company retains an interest in the policies' cash values and excess death benefits to secure the trust's
repayment obligation. Included in the amounts shown for Mr. Sanford in fiscal years 1995, 1994 and 1993, are amounts
representing the value of the premium payments by the Company in such years, projected on an actuarial basis assuming that Mr.
Sanford retires at age 65 and the agreements are then terminated. In addition, in fiscal year 1994, the Company entered into a
deferred compensation agreement with Mr. Sanford which provides for the Company to credit $716,715 annually for Mr. Sanford's
account for five years commencing in fiscal year 1994, together with interest at an annual rate of 7%, compounded annually. All
credited amounts will be paid to Mr. Sanford in five equal annual installments commencing in fiscal year 1999. In the event of
his death, disability, termination by the Company without cause or a change of control of the Company, all amounts not yet
credited for future periods will be credited and all credited amounts will be paid to Mr. Sanford.
(3) Mr. Sanford was elected to the additional office of President in April 1996.
(4) Mr. Pratt resigned as President and Chief Operating Officer and was elected Executive Vice President in April 1996.
(5) Mr. Briggs resigned as Senior Vice President and was named Assistant to the Chairman in April 1996.
(6) Mr. Cook began his employment with the Company on October 10, 1994.
(7) Mr. Coffey began his employment with the Company on July 3, 1995.
(8) Mr. Coffey was promoted to Senior Vice President in March 1996 and elected to the additional office of Treasurer in May
1996.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Option Grants During Fiscal Year 1995
The following table provides information related to options to purchase Common Stock which were granted to the named
executive officers during fiscal year 1995.
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term (1)
- ---------------------------------------------------------------------------------------- ---------------------------
Number of % of Total
Securities Under- Options Granted Exercise or
lying Options to Employees Base Price Expiration
Name Granted (#) in Fiscal Year ($/Sh) Date 5%($) 10%($)
- ------------------- ----------------- ---------------- ----------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Richard D. Sanford 450,000(2) 11.85% $13.25 11/19/03 $755,371 $4,121,612
50,000(3) 1.32% 9.25 05/05/05 290,864 737,106
Gregory A. Pratt 50,000(4) 1.32% 13.25 03/10/03 59,012 386,053
100,000(5) 2.63% 13.25 12/22/03 174,460 935,307
50,000(3) 1.32% 9.25 05/05/05 290,864 737,106
Mark R. Briggs 30,000(6) 0.79% 13.25 12/05/01 9,590 160,425
10,000(4) 0.26% 13.25 03/10/03 11,802 77,211
50,000(7) 1.32% 13.25 02/25/04 93,773 487,000
50,000(3) 1.32% 9.25 05/05/05 290,864 737,106
Timothy D. Cook 100,000(8) 2.63% 13.25 10/10/04 234,353 1,115,029
Thomas J. Coffey 100,000(9) 2.63% 13.375 07/03/05 841,147 2,131,631
_____________________________________
(1) The potential realizable value portion of the foregoing table illustrates value that might be realized upon exercise of the
options immediately prior to the expiration of their term, assuming the specified compounded rates of appreciation of the
Company's Common Stock over the term of the options.
(2) The options were originally granted on November 19, 1993, and were repriced on February 25, 1995. The original vesting
schedule was retained and is as follows: 103,334 on November 19, 1994; 103,333 on November 19, 1995; and 243,333 on November
19, 1996.
(3) The options are exercisable in five equal annual installments beginning May 5, 1996.
(4) The options were originally granted on March 10, 1993, and were repriced on February 25, 1995. The original vesting schedule
was retained and the options are exercisable in five equal annual installments beginning March 10, 1994.
(5) The options were originally granted on December 22, 1993, and were repriced on February 25, 1995. The original vesting
schedule was retained and the options are exercisable in three equal annual installments beginning December 22, 1994.
(6) The options were originally granted on December 5, 1991, and were repriced on February 25, 1995. The original vesting
schedule was retained and the options are exercisable in five equal annual installments beginning December 5, 1992.
(7) The options were originally granted on February 25, 1994, and were repriced on February 25, 1995. The original vesting
schedule was retained and the options are exercisable in five equal annual installments beginning February 25, 1995.
(8) The options were originally granted on October 10, 1994, and were repriced on February 25, 1995. The original vesting
schedule was retained and the options are exercisable in five equal annual installments beginning October 10, 1995.
(9) The options are exercisable in five equal installments beginning July 3, 1996.
On March 4, 1996, the Board of Directors of the Company authorized the repricing of all outstanding options with
exercise prices in excess of $8.00 per share to $8.00 per share, held by currently-active employees, except Mr. Sanford, Mr. Pratt
and Mr. Briggs. As of that date, 1,767,447 options were repriced, of which 412,998 were exercisable at February 3, 1996.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Aggregated Option Exercises During Fiscal Year 1995 and Option Values at February 3, 1996
The following table provides information related to options to purchase Common Stock which were exercised by the
named executive officers during fiscal year 1995 and the number and value of options held on February 3, 1996.
Value of Unexercised
Number of Unexercised In-the-Money
Options/SARs Options/SARs
Shares Acquired Value at FY-End (#) at FY-End ($)(2)
Name on Exercise(#) Realized ($)(1) Exercisable Unexercisable Exercisable Unexercisable
- --------------------------- ---------------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard D. Sanford 20,000 $113,750 266,667 293,333 0 0
Gregory A. Pratt 0 0 146,667 203,333 0 0
Mark R. Briggs 0 0 74,000 106,000 0 0
Timothy D. Cook 0 0 20,000 80,000 0 0
Thomas J. Coffey 0 0 0 100,000 0 0
(1) Represents the difference between the exercise price and the market value on the date of exercise.
(2) Value based on the closing price of $4.50 per share on February 2, 1996.
</TABLE>
<TABLE>
<CAPTION>
Ten Year Option Repricing
The following table provides information related to options to purchase Common Stock which were repriced for executive
officers during fiscal year 1995.
Number of
Securities Market Value Exercise Length of
Underlying of Stock Price at New Original Option
Options at Time of Time of Exercise Term at Time
Name Date Repriced(#) Repricing($) Repricing($) Price($) of Repricing
- ---------------------- -------- ------------ ------------- ------------ -------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Richard D. Sanford 02/25/95 450,000 $9.75 $22.875 $13.25 8 years 267 days
Gregory A. Pratt 02/25/95 50,000 9.75 15.00 13.25 8 years 13 days
02/25/95 100,000 9.75 24.875 13.25 8 years 300 days
Mark R. Briggs 02/25/95 30,000 9.75 15.50 13.25 6 years 283 days
02/25/95 10,000 9.75 15.00 13.25 8 years 13 days
02/25/95 50,000 9.75 24.00 13.25 9 years 0 days
Timothy D. Cook 02/25/95 100,000 9.75 16.25 13.25 9 years 228 days
Kathleen R. Mayo 02/25/95 3,000 9.75 15.50 13.25 6 years 283 days
02/25/95 1,000 9.75 15.00 13.25 8 years 13 days
02/25/95 5,000 9.75 24.00 13.25 9 years 0 days
Stephanie Cohen 02/25/95 20,000 9.75 14.125 13.25 5 years 335 days
02/25/95 60,000 9.75 15.50 13.25 6 years 283 days
02/25/95 5,000 9.75 15.00 13.25 8 years 13 days
</TABLE>
<PAGE>
Compensation Committee Interlocks and Insider Participation
Mr. Abelson, a member of the Compensation and Stock Option Committee,
is a partner in the law firm of Pepper, Hamilton & Scheetz, which provides
legal services to the Company. See "Certain Relationships and Related
Transactions".
Stock Performance Chart
The following chart compares the yearly percentage change in the cumulative
total shareholder return of the Company's Common Stock during the five fiscal
years ended February 3, 1996, with the cumulative total return on the S&P Mid
Cap 400 Index and a peer index comprised of eight companies (1). The
comparison assumes $100 was invested on January 31, 1991, in the Company's
Common Stock and in each of the foregoing indices and assumes reinvestment of
dividends.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, S&P MID-CAP 400, AND PEER GROUP
MEASUREMENT PERIOD INTELLIGENT
FISCAL YEAR ENDED: PEER GROUP MID-CAP 400 ELECTRONICS
JANUARY 1991 $100.00 $100.00 $100.00
JANUARY 1992 187.39 141.57 149.11
JANUARY 1993 233.97 157.63 103.57
JANUARY 1994 363.86 181.53 221.12
JANUARY 1995 193.62 172.82 79.83
JANUARY 1996 205.46 227.21 41.73
(1) Assumes $100 invested on January 31, 1991 in the Company's Common Stock,
the S&P Mid Cap 400 Index and a composite index, weighted by market
capitalization, of the following eight companies: Ameridata Technologies,
Inc., Compucom Systems, Inc., Dataflex Corporation, Government Technology
Services, Inc., Inacom Corp., Merisel, Inc., MicroAge, Inc. and Tech Data
Corporation.
<PAGE>
COMPENSATION AND STOCK OPTION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation and Stock Option Committee (the "Committee") for
fiscal year 1995 consisted of four non-employee directors. The Committee is
responsible for determining the annual salary, bonus and incentive compensation
of the Company's executive officers and, on the basis of recommendations
received from executive officers, awarding incentive compensation in the form of
stock options to the Company's employees generally. This report describes the
policies of the Committee in establishing the principal components of executive
compensation for fiscal year 1995.
The Committee's compensation policies for executive officers reflect a
commitment to attract and retain quality executives, to provide incentives to
the executives to achieve performance objectives that enhance shareholder
value and to reward executives for operational excellence. The Committee
believes that its policies are best served by a compensation program that
provides executives a competitive base salary, annual incentive bonuses in
amounts that reflect achievement of prescribed financial targets and
long-term incentives in the form of stock options.
In establishing compensation for executive officers, the Committee
considers industry data generally, the Company's financial performance and
industry position and the recommendations of the Chairman of the Board and
Chief Executive Officer. The Committee exercises judgment and discretion in
the information and analyses it reviews and considers.
In 1995, the Committee determined to continue the base salary of
Richard D. Sanford, the Chairman and Chief Executive Officer, at the same
level as in fiscal year 1994. In contrast with the prior two fiscal years,
Mr. Sanford's fiscal year 1995 compensation package did not include any bonus
component. In May 1995, the Committee determined to grant options to purchase
50,000 shares of Common Stock to the Chief Executive Officer as well as to two
other named executive officers, as described in the table captioned "Option
Grants During Fiscal Year 1995" set forth above. The stock options were granted
in order to reinforce the importance of improving shareholder value over the
the long-term, and to encourage and facilitate the executives' Common Stock
ownership. The options were granted at 100% of the fair market value of the
Common Stock on the date of grant, have 10-year terms and vest in five equal
installments beginning on the first anniversary of the date of grant, which is
consistent with the terms of the stock options granted to employees generally.
In fiscal year 1995, the Committee approved the reduction of the
exercise price, to $13.25 per share, of all outstanding stock options having
exercise prices in excess of $13.25 per share. The Committee concluded that
the decline in the market price of the Company's Common Stock had frustrated
the purpose of these options (i.e., to attract and retain the employees'
services and to provide incentives for them to exert maximum efforts for the
Company's success), and that it was important to reduce the exercise price of
these options so as to reinstitute the incentive originally intended to be
afforded by the options. The terms of the repricings with respect to options
held by the Chief Executive Officer and certain other executive officers are
described in the table captioned "Ten-Year Option Repricing" set forth above.
The Company had not repriced any stock options during the ten fiscal years
prior to fiscal year 1995.
Section 162(m) of the Internal Revenue Code imposes a $1 million limit
on the allowable tax deduction of compensation paid by a publicly-held
corporation to its chief executive officer and its other four most highly
compensated officers employed at year-end, subject to certain pre-established
objective performance-based exceptions. The Committee intends to take
Section 162(m) into account when formulating its compensation policies for
the Company's executive officers and to comply with Section 162(m), if and
where the Committee determines compliance to be practicable and in the best
interests of the Company and its shareholders.
William L. Rulon-Miller
Barry M. Abelson
Roger J. Fritz
Arnold S. Hoffman
<PAGE>
EMPLOYMENT AND SEVERANCE AGREEMENTS
In connection with Mr. Pratt's assumption of the position of Executive
Vice President of the Company, in May 1996, Mr. Pratt entered into an employment
agreement with the Company. The agreement provides for Mr. Pratt to receive a
base annual salary of $300,000, together with an annual bonus of at least
$200,000 if certain performance objectives are achieved. Mr. Pratt is also
entitled to receive options to purchase 50,000 (subject to adjustment) shares of
common stock of XLConnect Solutions, Inc. ("XLC"), a wholly-owned subsidiary of
the Company, upon the effective date of an initial public offering of XLC's
common stock during Mr. Pratt's employment with the Company. The agreement
provides that if Mr. Pratt's employment is terminated by the Company without
cause (as defined in the agreement), the Company will be required to pay Mr.
Pratt either (i) $500,000, if termination occurs on or before December 13, 1996,
or (ii) his base annual salary as in effect at the time of termination, if
termination occurs thereafter, in either case payable in twelve monthly
installments during the year following termination. Pursuant to the agreement,
Mr. Pratt will be prohibited from competing with the Company and from soliciting
the Company's employees during the one-year period following the termination of
his employment by the Company without cause.
In March 1996, Mr. Briggs entered into an agreement with the Company
providing for the termination of his employment effective September 30, 1996
and for certain payments and other benefits to be provided by the Company to
Mr. Briggs following the termination of his employment. The agreement
provides that for a period of 18 months following the termination of his
employment, Mr. Briggs will continue to receive payments of his current base
annual salary of $325,000, participate in the Company's medical program, and
vest in his stock options, so long as Mr. Briggs' employment with the Company
is not terminated by the Company for cause on or before September 30, 1996.
During such 18-month period, Mr. Briggs will be prohibited from working for
certain of the Company's competitors, soliciting the Company's customers and
suppliers, or employing or retaining the Company's employees.
In May 1996, Mr. Cook entered into an employment agreement with the
Company. The agreement provides for Mr. Cook to receive a base annual salary
of $300,000 and reflects the grant to Mr. Cook of options to purchase 50,000
shares of Common Stock on April 24, 1996. The agreement provides that if Mr.
Cook's employment is terminated by the Company without cause (as defined in
the agreement), the Company will be required to pay Mr. Cook his base annual
salary as in effect at the time of termination in twelve monthly installments
during the year following termination. Pursuant to the agreement, Mr. Cook
will be prohibited from working for certain of the Company's competitors and
from soliciting the Company's employees during the one-year period following
the termination of his employment by the Company without cause. For purposes
of this agreement, Mr. Cook's employment will be considered to have been
terminated by the Company without cause if, following a change in control (as
defined in the agreement) of the Company, Mr. Cook voluntarily terminates his
employment as a result of a reduction in his base salary or a material
reduction in his duties or responsibilities.
In March 1996, Mr. Coffey entered into an employment agreement with the
Company. The agreement provides for Mr. Coffey to receive a base annual
salary of $350,000, with a minimum bonus of $100,000 for fiscal 1996. The
agreement also provides that if the Company terminates Mr. Coffey's employment
without cause on or before April 1, 1999, the Company will be obligated to
continue to pay Mr. Coffey's base annual salary plus all benefits then in effect
until April 1, 1999, provided that in the event such termination occurs before
April 1, 1998, the amount of total compensation in excess of $350,000 included
in such severance payments will be reduced by all compensation earned by Mr.
Coffey from all sources from the date of such termination until March 31, 1999.
The agreement also provides that if Mr. Coffey's base annual compensation for
fiscal 1997 is less than $450,000 and he voluntarily terminates his employment
after the Company files its Annual Report on Form 10-K for that fiscal year,
then the Company will be obligated to continue to pay Mr. Coffey's base annual
salary plus all benefits then in effect until April 1, 1999.
<PAGE>
DIRECTOR COMPENSATION
Directors received $500 for each Board meeting attended during the
fiscal year ended February 3, 1996. Directors are also reimbursed for
expenses in attending Board meetings. There was no additional compensation
for participation in or attendance at Committee meetings.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Barry M. Abelson is a partner in the law firm of Pepper, Hamilton &
Scheetz, which provided legal services to the Company in fiscal year 1995.
The Company believes that the fees charged by Pepper, Hamilton & Scheetz are
comparable to those charged by other law firms for comparable services.
Compliance with Section 16(a) of the Securities Exchange Act of 1934.
---------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file initial reports
of ownership and reports of changes in ownership with the Securities and
Exchange Commission (the "SEC"). Such persons are required by SEC regulation
to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it with
respect to fiscal year 1995, or written representations from certain
reporting persons, the Company believes that all filing requirements
applicable to its directors, officers and persons who own more than 10% of a
registered class of the Company's equity securities have been met and were
filed on a timely basis.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed the Company's present independent
public accountants, Price Waterhouse LLP, as the Company's Independent Public
Accountants for the fiscal year ending February 1, 1997. Representatives of
Price Waterhouse LLP are expected to be present at the Meeting, where they
will be available to respond to appropriate questions and will have the
opportunity to make a statement if they so desire.
OTHER BUSINESS
The Company knows of no business which will be presented at the Meeting
other than that set forth in this Proxy Statement and Notice of the Annual
Meeting. However, if other matters should properly come before the Meeting,
it is the intention of the persons named in the enclosed proxy to vote in
accordance with their best judgment on such matters.
EXPENSES OF SOLICITATION
This solicitation of proxies is being made on behalf of the Board of
Directors. All expenses in connection therewith will be paid by the Company.
Request will be made of brokerage houses and other custodians, nominees and
fiduciaries to forward the solicitation material, at the expense of the
Company, to the beneficial owners of stock held of record by such persons.
<PAGE>
SHAREHOLDER PROPOSALS
Proposals by shareholders intended to be presented at the next Annual
Meeting of Shareholders of the Company must be received by the Company at its
executive offices at 411 Eagleview Boulevard, Exton, PA 19341, on or before
April 24, 1997, to be included in the Company's Proxy Statement and Form of
Proxy for the 1997 Annual Meeting.
THE COMPANY WILL PROVIDE TO EACH PERSON SOLICITED, WITHOUT CHARGE
EXCEPT FOR EXHIBITS, UPON REQUEST IN WRITING, A COPY OF ITS ANNUAL REPORT ON
FORM 10-K AND FORM 10-K/A, INCLUDING THE FINANCIAL STATEMENTS AND FINANCIAL
STATEMENT SCHEDULES, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR
THE FISCAL YEAR ENDED FEBRUARY 3, 1996. REQUESTS SHOULD BE DIRECTED TO
INVESTOR RELATIONS DEPARTMENT, INTELLIGENT ELECTRONICS, INC., 411 EAGLEVIEW
BOULEVARD, EXTON, PA 19341.
BY ORDER OF THE BOARD OF DIRECTORS,
Kathleen R. Mayo
Secretary
DATE: July 23, 1996
<PAGE>
GRAPHIC MATERIAL CROSS-REFERENCE PAGE
A stock performance graph comparing the performance for the Company's Common
Stock with the Standard & Poor's Mid-Cap 400 Composite Stock Price Index (the
"S&P Mid-Cap 400") and a peer group index by measuring the changes in common
stock price from January 31, 1991 through February 3, 1996, plus assumed
reinvested dividends. Figures indicating the cumulative total return for the
Company's Common Stock, the S&P Mid-Cap 400 and the peer group index are
shown on page 9.
<PAGE>
INTELLIGENT ELECTRONICS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
Annual Meeting of Shareholders - August 22, 1996
The undersigned shareholder of INTELLIGENT ELECTRONICS, INC. (the
"Company"), revoking all previous proxies, hereby appoints KATHLEEN R. MAYO
and THOMAS J. COFFEY, and each of them acting individually, as the attorney
and proxy of the undersigned, with full power of substitution, to vote all
shares of stock of the Company which the undersigned would be entitled to
vote if personally present at the Annual Meeting of Shareholders of the
Company, to be held at J&J Catering, 880 Springdale Drive, Whiteland Business
Park, Exton, Pennsylvania, on August 22, 1996 at 9:00 a.m., and at any
adjournment or postponement thereof; provided that said proxies are
authorized and directed to vote as indicated with respect to the following
matters:
1. To elect three directors for
a term of three years expiring WITHHOLD
at the 1999 Annual Meeting FOR AUTHORITY
Christopher T.G. Fish [ ] [ ]
Gregory A. Pratt [ ] [ ]
Richard D. Sanford [ ] [ ]
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. UNLESS
OTHERWISE SPECIFIED, THE SHARES WILL BE VOTED "FOR" ELECTION OF THE NOMINEES
FOR DIRECTOR LISTED ON THE REVERSE SIDE HEREOF. THIS PROXY ALSO DELEGATES
DISCRETIONARY AUTHORITY WITH RESPECT TO ANY OTHER BUSINESS WHICH MAY PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL
MEETING AND PROXY STATEMENT.
Dated: _____________________, 1996
_______________________________________
Signature of Shareholder
_______________________________________
Signature of Shareholder
NOTE: PLEASE SIGN THIS PROXY EXACTLY AS NAME(S) APPEAR ON YOUR STOCK
CERTIFICATE. WHEN SIGNING AS ATTORNEY-IN-FACT, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE ADD YOUR TITLE AS SUCH, AND IF SIGNER IS A
CORPORATION, PLEASE SIGN WITH FULL CORPORATE NAME BY A DULY AUTHORIZED
OFFICER OR OFFICERS AND AFFIX THE CORPORATE SEAL. WHERE STOCK IS ISSUED IN
THE NAME OF TWO (2) OR MORE PERSONS, ALL SUCH PERSONS SHOULD SIGN.
