<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) OR Rule 14a-12
</TABLE>
INSIGHT ENTERPRISES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------
(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:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] 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:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE> 2
INSIGHT ENTERPRISES, INC.
6820 SOUTH HARL AVENUE
TEMPE, ARIZONA 85283
------------------------
NOTICE OF 1997 ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 30, 1997
------------------------
TO OUR STOCKHOLDERS:
The 1997 Annual Meeting of Stockholders of Insight Enterprises, Inc., a
Delaware corporation (the "Company"), will be held on Thursday, October 30,
1997, at 3:00 p.m. local time, at the Company's corporate headquarters, 6820
South Harl Avenue, Tempe, Arizona 85283, for the following purposes:
(1) To elect two directors as Class III Directors to serve until the
2000 Annual Meeting of Stockholders and until their successors are
duly elected and qualified;
(2) To approve the Company's 1998 Long-Term Incentive Plan;
(3) 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 September 22, 1997 to receive notice of and
to vote at the Annual Meeting or any adjournment 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 1997 Annual Report
to Stockholders, which includes audited financial statements, is enclosed.
All stockholders are cordially invited to attend the Annual Meeting in
person.
By order of the Board of Directors
STANLEY LAYBOURNE
Secretary, Treasurer
and Chief Financial Officer
Tempe, Arizona
September 22, 1997
IMPORTANT
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, STOCKHOLDERS ARE
REQUESTED TO COMPLETE, DATE AND MAIL THE ENCLOSED PROXY. A POSTAGE-PAID ENVELOPE
IS PROVIDED FOR MAILING IN THE UNITED STATES.
<PAGE> 3
INSIGHT ENTERPRISES, INC.
6820 SOUTH HARL AVENUE
TEMPE, ARIZONA 85283
------------------------
PROXY STATEMENT
1997 ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 30, 1997
------------------------
SOLICITATION, EXECUTION AND REVOCATION OF PROXIES
This Proxy Statement is furnished to the stockholders of record of Insight
Enterprises, Inc. (the "Company") in connection with the solicitation of proxies
to be used at the Annual Meeting of Stockholders (the "Annual Meeting") to be
held on Thursday, October 30, 1997, at 3:00 p.m. local time, at the Company's
corporate headquarters, 6820 South Harl Avenue, Tempe, Arizona 85283, and at any
and all adjournments thereof. THE ENCLOSED PROXY IS SOLICITED BY THE BOARD OF
DIRECTORS OF THE COMPANY. The proxy materials will be mailed on or about
September 23, 1997, to stockholders of record at the close of business on
September 22, 1997 (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.
A stockholder executing and returning a proxy has the power to revoke it at
any time before it is voted. A stockholder who wishes to revoke a proxy can do
so by executing a later-dated proxy relating to the same shares and delivering
it to the Secretary of the Company at 6820 South Harl Avenue, Tempe, Arizona
85283 prior to the vote at the Annual Meeting, by written notice of revocation
received by the Secretary prior to the vote at the Annual Meeting or by
appearing in person at the Annual Meeting, filing a written notice of revocation
and voting in person the shares to which the proxy relates.
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 certain other custodians, nominees and fiduciaries for the forwarding of
solicitation materials to the beneficial owners of Common Stock held of record
by such persons, and 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.
RECENT STOCK SPLIT
On August 13, 1997, the Company's Board of Directors approved a 3-for-2
stock split effected in the form of a stock dividend and payable on September
17, 1997 to the stockholders of record at the close of business on August 27,
1997. All share amounts and share prices in this Proxy Statement have been
retroactively adjusted to reflect this 3-for-2 stock split.
VOTING SECURITIES OUTSTANDING
Only holders of record of the Company's Common Stock at the close of
business on September 22, 1997 (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 10,271,513 shares of the Company's Common Stock. Each holder of
Common Stock is entitled to one vote, exercisable in person or by proxy, for
each share of the Company's
<PAGE> 4
Common Stock held of record on the Record Date. The presence of a majority of
the shares of Common Stock entitled to vote, in person or by proxy, is required
to constitute a quorum for the conduct 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.
The affirmative vote of a plurality of the shares represented at the
meeting, in person or by proxy, and entitled to vote is required with respect to
the election of directors. The affirmative vote of a majority of the shares
represented at the meeting, in person or by proxy, and entitled to vote thereon
is required to approve the 1998 Long-Term Incentive Plan. Abstentions and broker
non-votes are each included in the determination of the number of shares present
for quorum purposes. Abstentions will have no effect on the voting for the
election of directors, but will have the same effect as a vote cast against the
1998 Long-Term Incentive Plan. A broker non-vote will not be regarded as
representing a share entitled to vote on a proposal and, accordingly, will have
no effect on the voting for the election of directors or the 1998 Long-Term
Incentive Plan.
All shares represented by properly executed proxies, unless such proxies
have previously been revoked, will be voted in accordance with the direction on
the proxies. If no direction is indicated, the shares will be voted in favor of
the proposals to be acted upon at the Annual Meeting. The Board of Directors is
not aware of any other matter 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 in accordance
with their best judgment.
ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of five members. The
present terms of Timothy A. Crown and Stanley Laybourne, who are Class III
incumbent directors, will expire at the Annual Meeting. Messrs. Crown and
Laybourne have been nominated for re-election as directors of the Company and,
unless otherwise instructed, the proxy holders will vote the proxies received by
them 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
at the time of the Annual Meeting, the proxies will be voted for any nominee who
shall be designated by the present Board of Directors to fill the vacancy. It is
not expected that any nominee will be unable or will decline to serve as a
director.
INFORMATION CONCERNING DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The names of the Company's directors whose terms continue beyond the Annual
Meeting, nominees for directors and executive officers, and certain information
about them, are set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------- --- -------------------------------------------------------------
<S> <C> <C>
Eric J. Crown(1)....... 35 Chief Executive Officer and Chairman of the Board of the
Company
Timothy A. Crown(1).... 33 President and Director of the Company
Stanley Laybourne(1)... 48 Chief Financial Officer, Secretary, Treasurer and
Director of the Company
Larry A. Gunning(2).... 53 Director of the Company
Robertson C.
Jones(2)............. 53 Director of the Company
Michael A. Gumbert..... 38 Chief Operating Officer of Insight Direct, Inc.,
a subsidiary of the Company
Branson M. Smith....... 41 Chief Operating Officer of Direct Alliance Corporation,
a subsidiary of the Company
</TABLE>
- ---------------
(1) Member of Executive Committee of the Board of Directors.
(2) Member of Audit and Compensation Committees of the Board of Directors.
2
<PAGE> 5
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 the 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 1986, Mr. Crown operated an independent computer and business consulting
firm. From 1986 to 1988, Mr. Crown was a partner in MicroNet Consulting, a
computer consulting and sales company. 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. He received a Bachelor of Science degree in
Business and Computer Science from the University of Kansas in 1986. From 1986
until 1987, Mr. Crown was employed by NCR Corporation as an Administrative
Analyst. From 1987 to 1988, Mr. Crown was a partner in MicroNet Consulting.
Timothy A. Crown is the brother of Eric J. Crown.
Stanley Laybourne. Mr. Laybourne has been a director of the Company since
1994. Mr. Laybourne was an independent consultant to the Company or its
predecessors from September 1990 through March 1991 and became the Chief
Financial Officer and Treasurer in April 1991. In November 1994, he became
Secretary of the Company. Mr. Laybourne received a Bachelor of Science degree in
Accounting from The Ohio State University in 1971, with 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 Fiesta
Bowl and a member of the City of Scottsdale Citizens' Bond Review Commission.
Mr. Laybourne is a Certified Public Accountant.
Larry A. Gunning. Mr. Gunning has been a director of the Company since
January 1995. He has been President of Pasco One, Inc. and Pasco Petroleum
Corp., petroleum marketing companies, since 1990 and 1988, respectively. 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
January 1995. Mr. Jones has been Vice President and General Counsel of Del Webb
Corporation, a developer of master-planned residential communities, since
January 1992. From March 1990 to November 1991 he was a partner with the law
firm of Gaston & Snow, and from January 1985 to February 1990 he was a director
and shareholder of Moya, Bailey, Bowers & Jones, P.C., which was a predecessor
of Gaston & Snow. During November and December 1991, Mr. Jones was an attorney
with the law firm of Quarles & Brady. 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.
Michael A. Gumbert. Mr. Gumbert was hired on July 1, 1996, as Chief
Operating Officer of Insight Direct, 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 June 1995, Mr. Gumbert held several positions with Merisel, Inc.,
including Senior Vice President, Sales and Operation from April 1992 to June
1995. From August 1995 to June 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.
Branson M. Smith. Mr. Smith was employed by Insight Direct, Inc., a
subsidiary of the Company, from March 1992 to September, 1996 and served as its
Vice President of Distribution and Senior Vice President of Fulfillment
Services. In September 1996, Mr. Smith was promoted to Chief Operating Officer
of Direct Alliance Corporation., a subsidiary of the Company. From December 1987
to May 1991, Mr. Smith was a
3
<PAGE> 6
Division Manager of Shape West, a computer disk manufacturer. From May 1991 to
March 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. Mr. Smith is a member of
the Board of Advisors of the National Catalog Operations Forum.
MEETINGS OF THE BOARD AND ITS COMMITTEES
The Board of Directors held a total of six meetings during the fiscal year
ended June 30, 1997, including taking action by consent in lieu of a meeting two
times. 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 currently consists of Messrs.
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 currently consists of Messrs. Larry A. Gunning and
Robertson C. Jones and met one time in fiscal 1997. Subsequent to the fiscal
1997 year-end, they met two times related to fiscal 1997 audit. 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 and monitoring the
performance of non-audit services by the Company's auditors. The Committee is
also responsible for recommending the engagement or discharge of the Company's
independent auditors.
The Compensation Committee currently consists of Messrs. Gunning and Jones
and met one time in fiscal 1997. The Compensation Committee administers salaries
and benefit programs designed for senior management, officers and directors and
the Company's Stock Option Plan with a view 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.
4
<PAGE> 7
EXECUTIVE COMPENSATION
The following table sets forth for each of the last three fiscal years the
total compensation awarded to, earned by or paid to (i) the Company's Chief
Executive Officer and (ii) each of the Company's other executive officers who
were serving as executive officers at the end of fiscal 1997 and whose salary
and bonus aggregated at least $100,000 for services rendered to the Company
during fiscal 1997 (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION($)(1) OPTIONS COMPENSATION(2)
- ---------------------------- ----- -------- ------- ------------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Eric J. Crown............... 1997 $225,000(3) 0 -- 0 $ 1,878
Chief Executive Officer 1996 $225,000(3) 0 -- 0 $ 3,043
1995 $293,750(3) 0 -- 0 $ 1,601
Timothy A. Crown............ 1997 $225,000(3) 0 -- 0 $ 1,878
President 1996 $225,000(3) 0 -- 0 $ 3,080
1995 $293,750(3) 0 -- 0 $ 1,585
Stanley Laybourne........... 1997 $150,000 $51,516 -- 0 $ 2,956
Chief Financial Officer, 1996 $137,500 0 -- 75,000 $ 2,516
Secretary and Treasurer 1995 $125,000 0 -- 0 $ 1,294
Michael A. Gumbert(4)....... 1997 $175,000 $71,432 -- 97,500 $ 1,607
Chief Operating Officer
of Insight Direct, Inc.
Branson M. Smith............ 1997 $134,000 $24,592 -- 0 $ 1,621
Chief Operating Officer 1996 $127,404(5) $ 500 -- 30,000 $ 1,385
of Direct Alliance 1995 $118,000 $18,333 -- 30,000 $ 1,390
Corporation
</TABLE>
- ---------------
(1) The cost of certain perquisite 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 payments for disability insurance premiums and 401(k)
contributions made by the Company to the account of the executive officer in
the following amounts, respectively: $1,060 and $818 in 1997, $652 and
$2,391 in 1996 and $578 and $1,023 in 1995 for Eric J. Crown; $1,060 and
$818 in 1997, $652 and $2,428 in 1996 and $578 and $1,007 in 1995 for
Timothy A. Crown; $885 and $2,071 in 1997, $454 and $2,062 in 1996 and $395
and $899 in 1995 for Mr. Laybourne; $1,006 and $601 in 1997 for Mr. Gumbert;
and $784 and $837 in 1997, $362 and $1,023 in 1996 and $333 and $1,057 in
1995 for Mr. Smith.
(3) Effective October 1, 1994, the salaries for the Chief Executive Officer and
President were each set at $225,000 for the remainder of fiscal 1995 and for
each of fiscal years 1996 and 1997. See "Employment Contracts, Termination
of Employment and Change-in-Control Agreements" below.
(4) Mr. Gumbert was hired as Chief Operating Officer of Insight Direct, Inc. on
July 1, 1996.
(5) Includes $2,404 of salary that was due at the end of fiscal 1995, but was
paid in fiscal 1996.
5
<PAGE> 8
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding stock options
granted during the fiscal year ended June 30, 1997 to the Named Executive
Officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT
----------------------------------------------------------- ASSUMED ANNUAL RATES OF
NUMBER OF PERCENT OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM(1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED(#) FISCAL YEAR ($/SHARE) DATE 5% 10%
- ------------------------ ---------- ---------------- ----------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Eric J. Crown........... 0 0 0 0 N/A 0
Timothy A. Crown........ 0 0 0 0 N/A 0
Stanley Laybourne....... 0 0 0 0 N/A 0
Michael A. Gumbert...... 90,000(2) 18.59% $ 15.83 7/8/06 $ 896,176 $ 2,271,085
7,500(2) 1.55% $ 17.67 1/2/07 $ 83,328 $ 211,172
Branson M. Smith........ 0 0 0 0 N/A 0
</TABLE>
- ---------------
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term (10 years).
The potential realizable value of the foregoing options 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.
(2) One-third of the options become exercisable on each of the first three
anniversaries of the grant date.
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 June 30, 1997 held by the
Named Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FY-END(#) OPTIONS AT FY-END(2)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Eric J. Crown........... 0 0 0 0 0 0
Timothy A. Crown........ 0 0 0 0 0 0
Stanley Laybourne....... 34,500 $ 713,768 58,971 50,000 $ 948,978 $ 568,744
Michael A. Gumbert...... 0 0 0 97,500 0 $ 396,563
Branson M. Smith........ 15,000 $ 153,750 17,501 27,500 $ 219,069 $ 332,807
</TABLE>
- ---------------
(1) Value as of June 30, 1997 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
Effective October 1, 1994, Eric J. Crown and Timothy A. Crown each entered
into an employment agreement with the Company on substantially identical terms.
Each employment agreement provided for an annual salary of $225,000 for the
remainder of 1995 and throughout fiscal years 1996 and 1997 and further provided
that no bonus would be paid either to Eric J. Crown or to Timothy A. Crown with
respect to the 1996 or 1997 fiscal year. Pursuant to their terms, both
agreements terminated on June 30, 1997.
The Company is in the process of preparing employment agreements for each
of its Named Executive Officers. It is anticipated that the agreements will
provide for base salaries, incentive bonuses and contain non-competition and
change of control provisions. The Board of Directors approved, based upon the
Compensation
6
<PAGE> 9
Committee's recommendation, the base salaries and incentive bonuses for Eric J.
Crown, Timothy A. Crown and Stanley Laybourne for fiscal 1998.
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, for
fiscal 1998 equal to 2.5%, 2.5% and 0.5%, respectively, of the Company's net
earnings (before deducting the incentive bonuses) provided that (i) the
Company's net earnings are $2.5 million per quarter or greater and (ii) in no
event will the incentive bonuses exceed (A) with respect to Messrs. Crown and
Crown 270% of their base salaries and (B) with respect to Messr. Laybourne 70%
of his base salary.
Eric J. Crown, the Company's Chief Executive Officer approved the base
salaries and incentive bonuses for Michael A. Gumbert and Branson M. Smith for
fiscal 1998. The bases salaries for Michael A. Gumbert and Branson M. Smith are
set at $215,000 and $155,000, respectively. Messrs. Gumbert and Smith are
entitled to receive an incentive bonus, payable quarterly, for fiscal 1998 equal
to 0.75% of Insight Direct, Inc.'s and 2.0% of Direct Alliance Corporation's net
earnings (before deducting the incentive bonuses) provided that (i) the
Company's net earnings are $2.5 million per quarter or greater and (ii) in no
event will the incentive bonuses exceed 70% of their base salaries.
The Compensation Committee and the Chief Executive Officer utilized KPMG
Peat Marwick LLP to analyze and review the competitiveness of executive pay. The
review has provided the basis for recommendations and approvals with respect to
the terms and provisions included in the 1998 executive employment agreements.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive a retainer of $2,000
per quarter plus $500 per meeting attended plus $300 per committee meeting
attended, plus reimbursement of reasonable expenses and certain formula-based
stock option awards as described in the next paragraph. Directors who are
employees of the Company do not receive compensation for their service as
directors.
Directors who are not employees of the Company ("nonemployee directors")
are eligible to receive nonqualified stock options only pursuant to a formula
grant provision of the Option Plan. The formula provided for an initial grant of
options for 3,750 shares to each nonemployee director on the closing date of the
Company's initial public offering. Commencing with the 1996 Annual Meeting of
Stockholders, nonemployee directors started receiving options for 2,250 shares
each time they are elected for a three-year term on the Board. Nonemployee
directors initially elected to the Board between annual meetings will receive
options for 750 shares multiplied by the number of full and partial years of
their initial terms. Additionally, the nonemployee directors received options
for 3,000 shares during fiscal 1997. This additional grant was based on a
compensation comparison to the Company's competitors for nonemployee directors
which was prepared by an independent company. Options granted under the formula
provision of the Option Plan 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.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
charged with the responsibility of:
(1) reviewing and approving the annual salary, bonus and other
benefits, direct and indirect, 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
7
<PAGE> 10
Compensation Committee has delegated its authority to make compensation
decisions to Eric J. Crown, the Company's Chief Executive Officer, with respect
to Messrs. Gumbert and Smith. The Committee currently is comprised of Larry A.
Gunning and Robertson C. Jones, each of whom is an outside director.
COMPENSATION PHILOSOPHY
The general philosophy of the Company's executive compensation program is
to offer executive officers compensation that is competitive in the marketplace,
but also is 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). 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
Executive officer base salaries for fiscal 1997 were set by the Committee
or Eric J. Crown, the Company's Chief Executive Officer, during fiscal 1996.
With the exception of the increase in base salary paid to Branson M. Smith,
described below, executive officer base salaries for fiscal 1996 were maintained
at the rate which had previously been established for fiscal 1996. The annual
base salary of Branson M. Smith, Chief Operating Officer of the Company's
subsidiary, Direct Alliance Corporation, was increased during fiscal 1997 from
$125,000 to $137,500 based upon an appraisal of the contributions of Mr. Smith.
Several factors were considered in originally setting each executive's base
salary, primarily including compensation data for comparable companies in the
Company's industry and compensation data for executives with comparable
responsibilities in the Phoenix, Arizona metropolitan area, as derived primarily
from published industry data and proxy statements of publicly-held companies.
The Company did not utilize an independent consulting firm in formulating
compensation decisions in fiscal 1997.
Effective October 1, 1994 and in anticipation of the Company's initial
public offering, each of Eric J. Crown, Chief Executive Officer, and Timothy A.
Crown, President, entered into an employment agreement with the Company that
provided for, among other things, an annual base salary of $225,000 for the
remainder of fiscal 1995 and for fiscal years 1996 and 1997. These employment
agreements terminated according to their terms on June 30, 1997. The Company is
in the process of preparing new employment agreements for each of its Named
Executive Officers. As described under "Employment Contracts, Termination of
Employment and Change-of-Control Arrangements, the Compensation Committee,
utilized KPMG Peat Marwick LLP to analyze and review the competitiveness of
executive pay. The review has provided the basis for recommendations and
approvals with respect to the terms and provisions included in the 1998
executive employment agreements.
The base salaries for Eric J. Crown, Timothy A. Crown, Stanley Laybourne,
Michael A. Gumbert and Branson M. Smith are set at $250,000, $250,000, $190,000,
$215,000 and $155,000 respectively, for 1998. Additionally, Messrs. Crown, Crown
and Laybourne are entitled to receive an incentive bonus, payable quarterly, for
1998 equal to 2.5%, 2.5% and 0.5%, respectively, 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, for 1998 equal to
0.75% of Insight Direct, Inc.'s and 2.0% of Direct Alliance Corporation's net
earnings (before deducting the incentive bonuses), respectively, provided that
(i) the Company's net earnings are $2.5 million per quarter or greater and (ii)
in no event will the incentive bonuses exceed (A) with respect to Messrs. Crown
and Crown, 270% of their base salaries and (B) with respect to Messrs.
Laybourne, Gumbert and Smith 70% of their base salaries.
CASH BONUSES
Traditionally, the Company has viewed cash bonuses for executive officers
as an opportunity to tie a portion of an executive officer's compensation to the
financial performance of the Company. As mentioned above, the employment
agreements for the Chief Executive Officer and President specifically provided
that no
8
<PAGE> 11
bonuses would be paid to those officers for performance during fiscal years
1995, 1996 and 1997. The Company did pay bonuses to its other executive officers
during fiscal 1997, based on both the Company's performance and their individual
contributions.
STOCK INCENTIVES
In November 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, nonemployee directors
and consultants. As described under "Proposal -- Approval of the Company's 1998
Long-Term Incentive Plan", the Company's Board of Directors recently approved,
and has submitted for stockholder approval the 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 incentive component of the
Company's overall executive compensation program because it directly ties an
executive's compensation to the value realized by the Company's owners -- its
stockholders -- and because it permits the Company to recruit and retain top
talent.
During fiscal 1997, stock options to purchase a total of 97,500 shares of
Company Common Stock were granted to the Company's executive officers under the
1994 Option Plan, all of which were granted to Michael A. Gumbert, Chief
Operating Officer of Insight Direct, Inc.
Subsequent to fiscal 1997 year-end, stock options to purchase a total of
202,500 shares of Company Common Stock were granted to the Company's Named
Executive Officers under the 1994 Option Plan as follows: Eric J.
Crown -- 67,500 shares; Timothy A. Crown -- 67,500 shares; Stanley
Laybourne -- 22,500 shares; Michael Gumbert -- 22,500 shares; and Branson
Smith -- 22,500 shares.
All of the options granted during fiscal 1997 and those granted subsequent
to fiscal year end 1997 to Named Executive Officers provide that one-third of
the options vest on each of the first three anniversaries of the date of grant,
provided the optionee is still an employee of the Company at that time. A staged
vesting was employed in order to provide incentive for the Company's key
executives to remain at the Company for at least three years following the date
of option grant to promote continuity of the Company's previously 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 optionee'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 limits, to $1 million, the
deductibility by a publicly held corporation of compensation paid in a taxable
year 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 possible 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
9
<PAGE> 12
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 with the
cumulative total return of the Nasdaq Composite Index and the Nasdaq Retail
Trade Index for the period commencing January 24, 1995 (the date on which
trading in the Company's Common Stock commenced) and ended June 30, 1997. The
graph assumes that $100 was invested on January 24, 1995 in Company 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 dividends on
the Common Stock.
Historical stock price performance shown on the graph is not necessarily
indicative of future price performance.
<TABLE>
<CAPTION>
Nasdaq Stock
Insight Market U.S. Nasdaq Retail
Measurement Period Enterprises, Inc. Companies|(Market Trade Stock (Peer
(Fiscal Year Covered) Common Stock Index) Index)
<S> <C> <C> <C>
Jan. 24,1995 100.0 100.0 100.0
Jun-95 149.4 122.7 111.3
Jun-96 224.1 157.5 135.3
Jun-97 289.8 191.6 144.2
</TABLE>
PROPOSAL
APPROVAL OF THE COMPANY'S 1998 LONG-TERM INCENTIVE PLAN
The Board of Directors of the Company has approved and recommends that the
stockholders approve the Insight Enterprises, Inc. 1998 Long-Term Incentive Plan
(the "LTIP") for officers, employees, directors and consultants or independent
contractors. The LTIP authorizes grants of incentive stock options ("ISOs");
non-qualified stock options ("NQSOs"), stock appreciation rights ("SARs"),
performance shares, restricted stock and performance-based awards. The total
number of shares of Common Stock initially available for awards under the LTIP
is 525,000. Additionally, for each fiscal year beginning July 1, 1998 and ending
June 30, 2007, an additional 1% to 4%, at the determination of the Board of
Directors, of the outstanding shares of Common Stock shall be reserved for
issuance under the Plan on a cumulative basis with a calculation of such
additional shares to be made on the first day of each quarter of the applicable
fiscal year; provided, each such calculation of additional shares shall be
limited to an amount of additional shares such that the number of shares of
Common Stock remaining for grant under the Plan and any of the Company's other
option plans, plus the number of shares of Common Stock granted but not yet
exercised under the Plan and any of the Company's other option plans shall not
exceed 20% of the outstanding shares of Common Stock of the Company at the time
of calculation of the additional shares. The last reported sales price of Common
Stock on September 15, 1997, as reported on the Nasdaq National Market, was
$49.50 per share.
10
<PAGE> 13
The Board of Directors believes the LTIP will promote the success and
enhance the value of the Company by (i) linking the personal interests of
participants to those of the Company's stockholders, (ii) providing participants
with an incentive for outstanding performance; and (iii) 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 following summary of the LTIP is qualified in its
entirety by reference to the LTIP, a copy of which is attached as Exhibit A.
The LTIP will be administered by the Compensation Committee of the Board of
Directors. Except as provided below, the Compensation Committee has the
exclusive authority to administer the LTIP, including the power to determine
eligibility, the types of awards to be granted, the price and the timing of
awards. The LTIP does, however, provide that the Company's CEO has the authority
to grant awards to any individual (other than the three highest-ranking
executives of the Company) and provided further that any grant to an individual
who is subject to Section 16 of the Security Exchange Act of 1934 may not be
exercisable for at least six months from the date of grant.
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
11
<PAGE> 14
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.
STOCK APPRECIATION RIGHTS
An 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
LTIP, 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 LTIP, 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 LTIP, 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
goals are not met, the stock is forfeited.
In the year in which the applicable restrictions lapse or the applicable
goals 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.
12
<PAGE> 15
PERFORMANCE-BASED AWARDS
Grants of performance-based awards under the LTIP enable the Compensation
Committee to treat restricted stock and performance share awards granted under
the LTIP 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, hence, 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 currently
anticipates that all options granted under the LTIP 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 LTIP, the
maximum number that may be awarded over the term of the LTIP to any one
participant as awards of ISOs, NQSOs, performance shares, restricted stock, or
any combination of each, is 750,000 shares.
The maximum number of shares of Common Stock that may be awarded under
performance-based awards during any performance period is 750,000. In the event
the performance-based award is payable in cash, the maximum amount is determined
by multiplying 750,000 by the fair market value of the Common Stock as of the
date the performance-based award is granted.
CHANGE OF CONTROL
In the event of a public 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 LTIP will be
immediately exercisable.
13
<PAGE> 16
Upon the occurrence of a Change of Control (as defined in the LTIP), all
outstanding awards granted under the LTIP shall become fully exercisable and all
restrictions on outstanding awards shall lapse. The LTIP defines a "Change of
Control" to include (i) when individual 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 the same proportionate
ownership of Common Stock of the surviving corporation immediately after the
merger; (iv) at 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.
REQUIRED VOTE
Approval of the LTIP requires the affirmative vote of a majority of shares
of Common Stock present at the Annual Meeting, in person or by proxy.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR ADOPTION OF
THE 1998 LONG-TERM INCENTIVE PLAN.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors,
its 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 fiscal year ended June 30,
1997.
14
<PAGE> 17
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 the Record Date 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.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED(2)
----------------------
NUMBER OF
NAME(1) SHARES PERCENT
- ------------------------------------------------------------------------ --------- -------
<S> <C> <C>
Eric J. Crown........................................................... 1,131,194(3) 11.0%
Timothy A. Crown........................................................ 1,131,044 11.0%
Pilgrim Baxter & Associates............................................. 988,950(10) 9.6%
AIM Management Group, Inc............................................... 676,500(11) 6.6%
Stanley Laybourne....................................................... 58,971(4) *
Michael A. Gumbert...................................................... 30,000(5) *
Branson M. Smith........................................................ 17,501(6) *
Larry A. Gunning........................................................ 1,500(7) *
Robertson C. Jones...................................................... 3,750(8) *
All directors and executive officers as a group
(7 persons)........................................................... 2,373,960(9) 22.9%
</TABLE>
- ---------------
* Less than 1%
(1) The address of Messrs. Crown, Crown, Laybourne, Gumbert, Smith, Gunning and
Jones is c/o Insight Enterprises, Inc., 6820 South Harl Avenue, Tempe,
Arizona 85283.
(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) Includes 150 shares beneficially owned by Mr. Crown's spouse.
(4) Consists of 58,971 shares subject to options exercisable within 60 days of
the Record Date.
(5) Consists of 30,000 shares subject to options exercisable within 60 days of
the Record Date.
(6) Consists of 17,501 shares subject to options exercisable within 60 days of
the Record Date.
(7) Consists of 1,500 shares subject to options exercisable within 60 days of
the Record Date.
(8) Includes 3,000 shares subject to options exercisable within 60 days of the
Record Date.
(9) Includes 110,972 shares subject to options exercisable within 60 days of
the Record Date.
(10) Number of shares based on the stockholder's 13(f) filing for March of 1997.
The address of Pilgrim Baxter & Associates is 1255 Drummers Lane, Wayne, PA
19087
(11) Number of shares based on the stockholder's 13(f) filing for June of 1997.
The address of AIM Management Group, Inc. is P.O. Box 4333, Houston, TX
77210
CERTAIN TRANSACTIONS AND RELATIONSHIPS
Eric J. Crown and Timothy A. Crown each own 15% of the voting securities of
Concentric Systems, Inc., a reseller of computer products. Concentric Systems,
Inc. purchased $894,521, $2,572,315 and $2,383,655, of
15
<PAGE> 18
products from the Company, consisting primarily of computer hard disk drives,
for the fiscal years 1997, 1996 and 1995, respectively. These products were sold
to Concentric Systems, Inc. at an average mark-up of approximately one percent
over the cost of such products to the Company in fiscal 1997 and 1996 and
approximately five percent over cost in fiscal 1995.
Commencing October 1993, the Company began leasing a parcel of vacant land
owned by a corporation that is owned by Eric J. Crown and Timothy A. Crown
pursuant to a month-to-month lease in which the Company paid a total of $33,960
in lease payments for fiscal 1997. The vacant land is adjacent to one of the
Company's facilities and is used as an employee parking lot. In early fiscal
1998, the property was sold to an unrelated party.
In July 1996, the Company loaned $75,000 to Michael A. Gumbert, Chief
Operating Officer of Insight Direct, Inc. The loan was evidenced by a promissory
note and was collateralized with shares of the Company's Common Stock owned by
Mr. Gumbert. The note was interest free until January 1, 1997 and then accrued
interest at a rate of 6%. At June 30, 1997, the note had an outstanding balance
of $57,000.
The Company believes that transactions it has entered into with affiliates
are at arm's-length and on terms equivalent or similar to terms under which the
Company would conduct business with unaffiliated third parties.
RELATIONSHIP WITH INDEPENDENT AUDITORS
The principal independent accounting firm utilized by the Company during
the fiscal year ended June 30, 1997, was KPMG Peat Marwick LLP, independent
certified public accountants. KPMG Peat Marwick LLP has audited the Company's
financial statements annually since 1988. It is presently contemplated that KPMG
Peat Marwick LLP will be retained as the principal accounting firm to be
utilized by the Company during the 1998 fiscal year. A representative of KPMG
Peat Marwick 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 they desire to do so.
STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be presented
by such stockholders at the Company's Annual Meeting for the fiscal year ending
June 30, 1998 must be received by the Company no later than July 1, 1998 in
order that they may be considered for inclusion in the proxy statement and form
of proxy relating to that meeting. Proposals should be addressed to the
Secretary of the Company at 6820 South Harl Avenue, Tempe, Arizona 85283.
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.
STANLEY LAYBOURNE
Secretary, Treasurer
and Chief Financial Officer
September 22, 1997
16
<PAGE> 19
EXHIBIT A
INSIGHT ENTERPRISES, INC.
1998 LONG-TERM INCENTIVE PLAN
ARTICLE 1
PURPOSE
1.1 General. The purpose of the Insight Enterprises, Inc. 1998 Long-Term
Incentive Plan (the "Plan") is to promote the success, and enhance the value, of
Insight Enterprises, Inc. (the "Company") by linking the personal interests of
its officers, employees, directors, and consultants or independent contractors
to those of Company stockholders and by providing its officers, employees,
directors, and consultants or independent contractors with an incentive for
outstanding performance. The Plan is further intended to provide flexibility to
the Company in its ability to motivate, attract, and retain 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 operation is largely dependent. Accordingly, the Plan permits the
grant of incentive awards from time to time to officers, employees, directors,
and consultants or independent contractors.
ARTICLE 2
EFFECTIVE DATE
2.1 Effective Date. The Plan is effective as of October 30, 1997 (the
"Effective Date").
ARTICLE 3
DEFINITIONS AND CONSTRUCTION
3.1 Definitions. When a word or phrase appears in this Plan with the
initial letter capitalized, and the word or phrase does not commence a sentence,
the word or phrase shall generally be given the meaning ascribed to it in this
Section or in Sections 1.1 or 2.1 unless a clearly different meaning is required
by the context. The following words and phrases shall have the following
meanings:
(a) "Award" means any Option, Stock Appreciation Right, Restricted
Stock Award, Performance Share Award, or Performance-Based Award granted to
a Participant under the Plan.
(b) "Award Agreement" means any written agreement, contract, or other
instrument or document evidencing an Award.
(c) "Board" means the Board of Directors of the Company.
(d) "Change of Control" means and includes each of the following:
(1) When the individuals who, at the beginning of any period of two
years or less, constituted the Board of Directors of the Company cease,
for any reason, to constitute at least a majority thereof, unless the
election or nomination for election of each new director was approved by
the vote of at least two-thirds of the directors then still in office
who were directors at the beginning of such period;
(2) A change of control of the Company through a transaction or
series of transactions, such that any person (as that term is used in
Section 13 and 14(d)(2) of the 1934 Act), excluding affiliates of the
Company as of the Effective Date, is or becomes the beneficial owner (as
that term is used in Section 13(d) of the 1934 Act) directly or
indirectly of securities of the Company representing 30% or more of the
combined voting power of the Company's then outstanding securities;
(3) Any consolidation or liquidation of the Company in which the
Company is not the continuing or surviving corporation or pursuant to
which Stock would be converted into cash,
17
<PAGE> 20
securities or other property, other than a merger of the Company in
which the holders of the shares of Stock immediately before the merger
have the same proportionate ownership of common stock of the surviving
corporation immediately after the merger;
(4) The stockholders of the Company approve any plan or proposal
for the liquidation or dissolution of the Company; or
(5) Substantially all of the assets of the Company are sold or
otherwise transferred to parties that are not within a "controlled group
of corporations" (as defined in Section 1563 of the Code) of which the
Company is a member.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Committee" means the committee of the Board described in Article
4.
(g) "Covered Employee" means an Employee who is a "covered employee"
within the meaning of Section 162(m) of the Code.
(h) "Disability" shall mean any illness or other physical or mental
condition of a Participant which renders the Participant incapable of
performing his customary and usual duties for the Company, or any medically
determinable illness or other physical or mental condition resulting from a
bodily injury, disease or mental disorder which in the judgment of the
Committee is permanent and continuous in nature. The Committee may require
such medical or other evidence as it deems necessary to judge the nature
and permanency of the Participant's condition.
(i) "Fair Market Value" means, as of any given date, the fair market
value of Stock or other property on a particular date determined by such
methods or procedures as may be established from time to time by the
Committee. Unless otherwise determined by the Committee, the Fair Market
Value of Stock as of any date shall be the closing price for the Stock as
reported on the NASDAQ National Market System (or on any national
securities exchange on which the Stock is then listed) for that date or, if
no closing price is so reported for that date, the closing price on the
next preceding date for which a closing price was reported.
(j) "Incentive Stock Option" means an Option that is intended to meet
the requirements of Section 422 of the Code or any successor provision
thereto.
(k) "Non-Employee Director" means a member of the Board who qualifies
as a "Non-Employee Director" as defined in Rule 16b-3(b)(3) of the Exchange
Act, or any successor definition adopted by the Board.
(l) "Non-Qualified Stock Option" means an Option that is not intended
to be an Incentive Stock Option.
(m) "Option" means a right granted to a Participant under Article 7 of
the Plan to purchase Stock at a specified price during specified time
periods. An Option may be either an Incentive Stock Option or a
NonQualified Stock Option.
(n) "Participant" means a person who, as an officer, employee,
director, and consultant or independent contractor of the Company or any
Subsidiary, has been granted an Award under the Plan.
(o) "Performance-Based Awards" means the Performance Share Awards and
Restricted Stock Awards granted to selected Covered Employees pursuant to
Articles 9 and 10, but which are subject to the terms and conditions set
forth in Article 11. All Performance-Based Awards are intended to qualify
as "performance-based compensation" under Section 162(m) of the Code.
(p) "Performance Criteria" means the criteria that the Committee
selects for purposes of establishing the Performance Goal or Performance
Goals for a Participant for a Performance Period. The Performance Criteria
that will be used to establish Performance Goals are limited to the
following: 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, Stock price growth, stockholder
returns, gross
18
<PAGE> 21
or net profit margin, earnings per share, price per share of Stock, and
market share, any of which may be measured either in absolute terms or as
compared to any incremental increase or as compared to results of a peer
group. The Committee shall, within the time prescribed by Section 162(m) of
the Code, define in an objective fashion the manner of calculating the
Performance Criteria it selects to use for such Performance Period for such
Participant.
(q) "Performance Goals" means, for a Performance Period, the goals
established in writing by the Committee for the Performance Period based
upon the Performance Criteria. Depending on the Performance Criteria used
to establish such Performance Goals, the Performance Goals may be expressed
in terms of overall Company performance or the performance of a division,
business unit or an individual. The Committee, in its discretion, may,
within the time prescribed by Section 162(m) of the Code, adjust or modify
the calculation of Performance Goals for such Performance Period in order
to prevent the dilution or enlargement of the rights of Participants, (i)
in the event of, or in anticipation of, any unusual or extraordinary
corporate item, transaction, event, or development; or (ii) in recognition
of, or in anticipation of, any other unusual or nonrecurring events
affecting the Company, or the financial statements of the Company, or in
response to, or in anticipation of, changes in applicable laws,
regulations, accounting principles, or business conditions.
(r) "Performance Period" means the one or more periods of time, which
may be of varying and overlapping durations, as the Committee may select,
over which the attainment of one or more Performance Goals will be measured
for the purpose of determining a Participant's right to, and the payment
of, a Performance-Based Award.
(s) "Performance Share" means a right granted to a Participant under
Article 9, to receive cash, Stock, or other Awards, the payment of which is
contingent upon achieving certain performance goals established by the
Committee.
(t) "Plan" means the Insight Enterprises, Inc. 1998 Long-Term
Incentive Plan, as amended from time to time.
(u) "Restricted Stock Award" means Stock granted to a Participant
under Article 10 that is subject to certain restrictions and to risk of
forfeiture.
(v) "Retirement" means a Participant's termination of employment with
the Company after attaining any normal or early retirement age specified in
any pension, profit sharing or other retirement program sponsored by the
Company.
(w) "Stock" means the common stock of the Company and such other
securities of the Company that may be substituted for Stock pursuant to
Article 12.
(x) "Stock Appreciation Right" or "SAR" means a right granted to a
Participant under Article 8 to receive a payment equal to the difference
between the Fair Market Value of a share of Stock as of the date of
exercise of the SAR over the grant price of the SAR, all as determined
pursuant to Article 8.
(y) "Subsidiary" means any corporation of which a majority of the
outstanding voting stock or voting power is beneficially owned directly or
indirectly by the Company.
ARTICLE 4
ADMINISTRATION
4.1 Committee. The Plan shall be administered by a Committee that is
appointed by, and shall serve at the discretion of, the Board. The Committee
shall consist of at least two individuals, each of whom qualifies as (i) a
NonEmployee Director, and (ii) an "outside director" under Code Section 162(m)
and the regulations issued thereunder; provided, however that the Chief
Executive Officer of the Company shall have the authority to grant Awards to
individuals who are not subject to Section 16 of the Securities Exchange Act of
1934 and to those individuals who are subject to Section 16 (other than the
three highest ranking executives of the Company), provided that any grant to a
Section 16 insider shall not become exercisable for at least six
19
<PAGE> 22
months from the date of grant. When the Chief Executive Officer is acting to
grant Awards under this Plan, solely for purposes of this Plan, the Chief
Executive Officer shall be deemed to be acting as the Committee.
4.2 Action by the Committee. A majority of the Committee shall constitute
a quorum. The acts of a majority of the members present at any meeting at which
a quorum is present and acts approved in writing by a majority of the Committee
in lieu of a meeting shall be deemed the acts of the Committee. Each member of
the Committee is entitled to, in good faith, rely or act upon any report or
other information furnished to that member by any officer or other employee of
the Company or any Subsidiary, the Company's independent certified public
accountants, or any executive compensation consultant or other professional
retained by the Company to assist in the administration of the Plan.
4.3 Authority of Committee. The Committee has the exclusive power,
authority and discretion to:
(a) Designate Participants to receive Awards;
(b) Determine the type or types of Awards to be granted to each
Participant;
(c) Determine the number of Awards to be granted and the number of
shares of Stock to which an Award will relate;
(d) Determine the terms and conditions of any Award granted under the
Plan including but not limited to, the exercise price, grant price, or
purchase price, any restrictions or limitations on the Award, any schedule
for lapse of forfeiture restrictions or restrictions on the exercisability
of an Award, and accelerations or waivers thereof, based in each case on
such considerations as the Committee in its sole discretion determines;
provided, however, that the Committee shall not have the authority to
accelerate the vesting, or waive the forfeiture, of any Performance-Based
Awards;
(e) Determine whether, to what extent, and under what circumstances an
Award may be settled in, or the exercise price of an Award may be paid in,
cash, Stock, other Awards, or other property, or an Award may be canceled,
forfeited, or surrendered;
(f) Prescribe the form of each Award Agreement, which need not be
identical for each Participant;
(g) Decide all other matters that must be determined in connection
with an Award;
(h) Establish, adopt or revise any rules and regulations as it may
deem necessary or advisable to administer the Plan; and
(i) Make all other decisions and determinations that may be required
under the Plan or as the Committee deems necessary or advisable to
administer the Plan.
4.4 Decisions Binding. The Committee's interpretation of the Plan, any
Awards granted under the Plan, any Award Agreement and all decisions and
determinations by the Committee with respect to the Plan are final, binding, and
conclusive on all parties.
ARTICLE 5
SHARES SUBJECT TO THE PLAN
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 initially be 525,000 (which number takes into account the stock split
effective in September, 1997). In addition, for each fiscal year beginning July
1, 1998 and ending June 30, 2007, an additional one to four percent of the
outstanding shares of Stock of the Company (in the Board's discretion) shall be
reserved for issuance under the Plan on a cumulative basis, with the calculation
of such additional shares to be made on the first day of each quarter of the
applicable fiscal year; provided, each such calculation of additional shares
shall be limited to an amount of additional shares 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 at the time of calculation of such additional shares.
Notwith-
20
<PAGE> 23
standing the above, the maximum number of shares of Stock that may be issued
under the plan as ISOs shall be 750,000.
5.2 Lapsed Awards. To the extent that an Award terminates, expires or
lapses for any reason, any shares of Stock subject to the Award will again be
available for the grant of an Award under the Plan and shares subject to SARs or
other Awards settled in cash will be available for the grant of an Award under
the Plan.
5.3 Stock Distributed. Any Stock distributed pursuant to an Award may
consist, in whole or in part, of authorized and unissued Stock, treasury Stock
or Stock purchased on the open market.
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 100,000.
ARTICLE 6
ELIGIBILITY AND PARTICIPATION
6.1 Eligibility. Persons eligible to participate in this Plan include all
officers, employees, directors, and consultants or independent contractors of
the Company or a Subsidiary, as determined by the Committee, including employees
who are also members of the Board.
6.2 Actual Participation. Subject to the provisions of the Plan, the
Committee may, from time to time, select from among all eligible individuals,
those to whom Awards shall be granted and shall determine the nature and amount
of each Award. No individual shall have any right to be granted an Award under
this Plan.
ARTICLE 7
STOCK OPTIONS
7.1 General. The Committee is authorized to grant Options to Participants
on the following terms and conditions:
(a) Exercise Price. The exercise price per share of Stock under an
Option shall be determined by the Committee and set forth in the Award
Agreement. It is the intention under the Plan that the exercise price for
any Option shall not be less than the Fair Market Value as of the date of
grant; provided, however that the Committee may, in its discretion, grant
Options (other than Incentive Stock Options) with an exercise price of less
than Fair Market Value on the date of grant.
(b) Time and Conditions of Exercise. The Committee shall determine
the time or times at which an Option may be exercised in whole or in part.
The Committee also shall determine the performance or other conditions, if
any, that must be satisfied before all or part of an Option may be
exercised.
(c) Payment. The Committee shall determine the methods by which the
exercise price of an Option may be paid, the form of payment, including,
without limitation, cash, shares of Stock, or other property (including
broker-assisted "cashless exercise" arrangements), and the methods by which
shares of Stock shall be delivered or deemed to be delivered to
Participants.
(d) Evidence of Grant. All Options shall be evidenced by a written
Award Agreement between the Company and the Participant. The Award
Agreement shall include such provisions as may be specified by the
Committee.
21
<PAGE> 24
7.2 Incentive Stock Options. Incentive Stock Options shall be granted
only to employees and the terms of any Incentive Stock Options granted under the
Plan must comply with the following additional rules:
(a) Exercise Price. The exercise price per share of Stock shall be
set by the Committee, provided that the exercise price for any Incentive
Stock Option may not be less than the Fair Market Value as of the date of
the grant.
(b) Exercise. In no event, may any Incentive Stock Option be
exercisable for more than ten years from the date of its grant.
(c) Lapse of Option. An Incentive Stock Option shall lapse under the
following circumstances:
(1) The Incentive Stock Option shall lapse ten years from the date
it is granted, unless an earlier time is set in the Award Agreement.
(2) The Incentive Stock Option shall lapse three months after the
Participant's termination of employment, if the termination of
employment was attributable to (i) Disability, (ii) Retirement, or (iii)
for any other reason, provided that the Committee has approved, in
writing, the continuation of any Incentive Stock Option outstanding on
the date of the Participant's termination of employment.
(3) If the Participant separates from employment other than as
provided in paragraph (2), the Incentive Stock Option shall lapse seven
(7) days following the Participant's termination of employment.
(4) If the Participant dies before the Option lapses pursuant to
paragraph (1), (2) or (3), above, the Incentive Stock Option shall
lapse, unless it is previously exercised, on the earlier of (i) the date
on which the Option would have lapsed had the Participant lived and had
his employment status (i.e., whether the Participant was employed by the
Company on the date of his death or had previously terminated
employment) remained unchanged; or (ii) 12 months after the date of the
Participant's death. Upon the Participant's death, any Incentive Stock
Options exercisable at the Participant's death may be exercised by the
Participant's legal representative or representatives, by the person or
persons entitled to do so under the Participant's last will and
testament, or, if the Participant shall fail to make testamentary
disposition of such Incentive Stock Option or shall die intestate, by
the person or persons entitled to receive said Incentive Stock Option
under the applicable laws of descent and distribution.
(d) Individual Dollar Limitation. The aggregate Fair Market Value
(determined as of the time an Award is made) of all shares of Stock with
respect to which Incentive Stock Options are first exercisable by a
Participant in any calendar year may not exceed $100,000.00 or such other
limitation as imposed by Section 422(d) of the Code, or any successor
provision. To the extent that Incentive Stock Options are first exercisable
by a Participant in excess of such limitation, the excess shall be
considered Non-Qualified Stock Options.
(e) Ten Percent Owners. An Incentive Stock Option shall be granted to
any individual who, at the date of grant, owns stock possessing more than
ten percent of the total combined voting power of all classes of Stock of
the Company only if such Option is granted at a price that is not less than
110% of Fair Market Value on the date of grant and the Option is
exercisable for no more than five years from the date of grant.
(f) Expiration of Incentive Stock Options. No Award of an Incentive
Stock Option may be made pursuant to this Plan after the tenth anniversary
of the Effective Date.
(g) Right to Exercise. During a Participant's lifetime, an Incentive
Stock Option may be exercised only by the Participant.
22
<PAGE> 25
ARTICLE 8
STOCK APPRECIATION RIGHTS
8.1 Grant of SARs. The Committee is authorized to grant SARs to
Participants on the following terms and conditions:
(a) Right to Payment. Upon the exercise of a Stock Appreciation
Right, the Participant to whom it is granted has the right to receive the
excess, if any, of:
(1) The Fair Market Value of a share of Stock on the date of
exercise; over
(2) The grant price of the Stock Appreciation Right as determined
by the Committee, which shall not be less than the Fair Market Value of
a share of Stock on the date of grant in the case of any SAR related to
any Incentive Stock Option.
(b) Other Terms. All awards of Stock Appreciation Rights shall be
evidenced by an Award Agreement. The terms, methods of exercise, methods of
settlement, form of consideration payable in settlement, and any other
terms and conditions of any Stock Appreciation Right shall be determined by
the Committee at the time of the grant of the Award and shall be reflected
in the Award Agreement.
ARTICLE 9
PERFORMANCE SHARES
9.1 Grant of Performance Shares. The Committee is authorized to grant
Performance Shares to Participants on such terms and conditions as may be
selected by the Committee. The Committee shall have the complete discretion to
determine the number of Performance Shares granted to each Participant. All
Awards of Performance Shares shall be evidenced by an Award Agreement.
9.2 Right to Payment. A grant of Performance Shares gives the Participant
rights, valued as determined by the Committee, and payable to, or exercisable
by, the Participant to whom the Performance Shares are granted, in whole or in
part, as the Committee shall establish at grant or thereafter. The Committee
shall set performance goals and other terms or conditions to payment of the
Performance Shares in its discretion which, depending on the extent to which
they are met, will determine the number and value of Performance Shares that
will be paid to the Participant, provided that the time period during which the
performance goals must be met shall, in all cases, exceed six months.
9.3 Other Terms. Performance Shares may be payable in cash, Stock, or
other property, and have such other terms and conditions as determined by the
Committee and reflected in the Award Agreement.
ARTICLE 10
RESTRICTED STOCK AWARDS
10.1 Grant of Restricted Stock. The Committee is authorized to make
Awards of Restricted Stock to Participants in such amounts and subject to such
terms and conditions as may be selected by the Committee. All Awards of
Restricted Stock shall be evidenced by a Restricted Stock Award Agreement.
10.2 Issuance and Restrictions. Restricted Stock shall be subject to such
restrictions on transferability and other restrictions as the Committee may
impose (including, without limitation, limitations on the right to vote
Restricted Stock or the right to receive dividends on the Restricted Stock).
These restrictions may lapse separately or in combination at such times, under
such circumstances, in such installments, or otherwise, as the Committee
determines at the time of the grant of the Award or thereafter.
10.3 Forfeiture. Except as otherwise determined by the Committee at the
time of the grant of the Award or thereafter, upon termination of employment
during the applicable restriction period, Restricted Stock that is at that time
subject to restrictions shall be forfeited and reacquired by the Company,
provided, however, that the Committee may provide in any Award Agreement that
restrictions or forfeiture conditions relating to Restricted Stock will be
waived in whole or in part in the event of terminations resulting from
23
<PAGE> 26
specified causes, and the Committee may in other cases waive in whole or in part
restrictions or forfeiture conditions relating to Restricted Stock.
10.4 Certificates for Restricted Stock. Restricted Stock granted under
the Plan may be evidenced in such manner as the Committee shall determine. If
certificates representing shares of Restricted Stock are registered in the name
of the Participant, certificates must bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to such Restricted Stock, and
the Company shall retain physical possession of the certificate until such time
as all applicable restrictions lapse.
ARTICLE 11
PERFORMANCE-BASED AWARDS
11.1 Purpose. The purpose of this Article 11 is to provide the Committee
the ability to qualify the Restricted Stock Awards under Article 10 and the
Performance Share Awards under Article 9 as "performance-based compensation"
under Section 162(m) of the Code. If the Committee, in its discretion, decides
to grant a Performance-Based Award to a Covered Employee, the provisions of this
Article 11 shall control over any contrary provision contained in Articles 9 or
10.
11.2 Applicability. This Article 11 shall apply only to those Covered
Employees selected by the Committee to receive Performance-Based Awards. The
Committee may, in its discretion, grant Restricted Stock Awards or Performance
Share Awards to Covered Employees that do not satisfy the requirements of this
Article 11. The designation of a Covered Employee as a Participant for a
Performance Period shall not in any manner entitle the Participant to receive an
Award for the period. Moreover, designation of a Covered Employee as a
Participant for a particular Performance Period shall not require designation of
such Covered Employee as a Participant in any subsequent Performance Period and
designation of one Covered Employee as a Participant shall not require
designation of any other Covered Employees as a Participant in such period or in
any other period.
11.3 Discretion of Committee with Respect to Performance Awards. With
regard to a particular Performance Period, the Committee shall have full
discretion to select the length of such Performance Period, the type of
Performance-Based Awards to be issued, the kind and/or level of the Performance
Goal, and whether the Performance Goal is to apply to the Company, a Subsidiary
or any division or business unit thereof.
11.4 Payment of Performance Awards. Unless otherwise provided in the
relevant Award Agreement, a Participant must be employed by the Company or a
Subsidiary on the last day of the Performance Period to be eligible for a
Performance Award for such Performance Period. Furthermore, a Participant shall
be eligible to receive payment under a Performance-Based Award for a Performance
Period only if the Performance Goals for such period are achieved.
In determining the actual size of an individual Performance-Based Award,
the Committee may reduce or eliminate the amount of the Performance-Based Award
earned for the Performance Period, if in its sole and absolute discretion, such
reduction or elimination is appropriate.
11.5 Maximum Award Payable. Notwithstanding any provision contained in
the Plan to the contrary, the maximum Performance-Based Award payable to any one
Participant under the Plan for a Performance Period is 100,000 shares of Stock,
or in the event the Performance-Based Award is paid in cash, such maximum
Performance-Based Award shall be determined by multiplying 100,000 by the Fair
Market Value of one share of Stock as of the date of grant of the
Performance-Based Award.
ARTICLE 12
PROVISIONS APPLICABLE TO AWARDS
12.1 Stand-Alone, Tandem, and Substitute Awards. Awards granted under the
Plan may, in the discretion of the Committee, be granted either alone or in
addition to, in tandem with, or in substitution for, any other Award granted
under the Plan. If an Award is granted in substitution for another Award, the
24
<PAGE> 27
Committee may require the surrender of such other Award in consideration of the
grant of the new Award. Awards granted in addition to or in tandem with other
Awards may be granted either at the same time as or at a different time from the
grant of such other Awards.
12.2 Exchange Provisions. The Committee may at any time offer to exchange
or buy out any previously granted Award for a payment in cash, Stock, or another
Award (subject to Section 12.1), based on the terms and conditions the Committee
determines and communicates to the Participant at the time the offer is made.
12.3 Term of Award. The term of each Award shall be for the period as
determined by the Committee, provided that in no event shall the term of any
Incentive Stock Option or a Stock Appreciation Right granted in tandem with the
Incentive Stock Option exceed a period of ten years from the date of its grant.
12.4 Form of Payment for Awards. Subject to the terms of the Plan and any
applicable law or Award Agreement, payments or transfers to be made by the
Company or a Subsidiary on the grant or exercise of an Award may be made in such
forms as the Committee determines at or after the time of grant, including
without limitation, cash, Stock, other Awards, or other property, or any
combination, and may be made in a single payment or transfer, in installments,
or on a deferred basis, in each case determined in accordance with rules adopted
by, and at the discretion of, the Committee.
12.5 Limits on Transfer. No right or interest of a Participant in any
Award may be pledged, encumbered, or hypothecated to or in favor of any party
other than the Company or a Subsidiary, or shall be subject to any lien,
obligation, or liability of such Participant to any other party other than the
Company or a Subsidiary. Except as otherwise provided by the Committee, no Award
shall be assignable or transferable by a Participant other than by will or the
laws of descent and distribution.
12.6 Beneficiaries. Notwithstanding Section 12.5, a Participant may, in
the manner determined by the Committee, designate a beneficiary to exercise the
rights of the Participant and to receive any distribution with respect to any
Award upon the Participant's death. A beneficiary, legal guardian, legal
representative, or other person claiming any rights under the Plan is subject to
all terms and conditions of the Plan and any Award Agreement applicable to the
Participant, except to the extent the Plan and Award Agreement otherwise
provide, and to any additional restrictions deemed necessary or appropriate by
the Committee. If the Participant is married, a designation of a person other
than the Participant's spouse as his beneficiary with respect to more than 50
percent of the Participant's interest in the Award shall not be effective
without the written consent of the Participant's spouse. If no beneficiary has
been designated or survives the Participant, payment shall be made to the person
entitled thereto under the Participant's will or the laws of descent and
distribution. Subject to the foregoing, a beneficiary designation may be changed
or revoked by a Participant at any time provided the change or revocation is
filed with the Committee.
12.7 Stock Certificates. All Stock certificates delivered under the Plan
are subject to any stop-transfer orders and other restrictions as the Committee
deems necessary or advisable to comply with Federal or state securities laws,
rules and regulations and the rules of any national securities exchange or
automated quotation system on with the Stock is listed, quoted, or traded. The
Committee may place legends on any Stock certificate to reference restrictions
applicable to the Stock.
12.8 Tender Offers. In the event of a public tender for all or any
portion of the Stock, or in the event that a proposal to merge, consolidate, or
otherwise combine with another company is submitted for stockholder approval,
the Committee may in its sole discretion declare previously granted Options to
be immediately exercisable. To the extent that this provision causes Incentive
Stock Options to exceed the dollar limitation set forth in Section 7.2(d), the
excess Options shall be deemed to be Non-Qualified Stock Options.
12.9 Acceleration Upon a Change of Control. If a Change of Control
occurs, all outstanding Options, Stock Appreciation Rights, and other Awards
shall become fully exercisable and all restrictions on outstanding Awards shall
lapse. To the extent that this provision causes Incentive Stock Options to
exceed the dollar limitation set forth in Section 7.2(d), the excess Options
shall be deemed to be Non-Qualified Stock Options. Upon, or in anticipation of,
such an event, the Committee may cause every Award outstanding hereunder to
25
<PAGE> 28
terminate at a specific time in the future and shall give each Participant the
right to exercise Awards during a period of time as the Committee, in its sole
and absolute discretion, shall determine, except in the event that the surviving
or resulting entity agrees to assume the Awards on terms and conditions that
substantially preserve the Participant's rights and benefits of the Award then
outstanding.
ARTICLE 13
CHANGES IN CAPITAL STRUCTURE
13.1 General. In the event a stock dividend is declared upon the Stock,
the shares of Stock then subject to each Award (and the number of shares subject
thereto) shall be increased proportionately without any change in the aggregate
purchase price therefor. In the event the Stock shall be changed into or
exchanged for a different number or class of shares of Stock or of another
corporation, whether through reorganization, recapitalization, stock split-up,
combination of shares, merger or consolidation, there shall be substituted for
each such share of Stock then subject to each Award (and for each share of Stock
then subject thereto) the number and class of shares of Stock into which each
outstanding share of Stock shall be so exchanged, all without any change in the
aggregate purchase price for the shares then subject to each Award.
ARTICLE 14
AMENDMENT, MODIFICATION AND TERMINATION
14.1 Amendment, Modification and Termination. With the approval of the
Board, at any time and from time to time, the Committee may terminate, amend or
modify the Plan.
14.2 Awards Previously Granted. 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.
ARTICLE 15
GENERAL PROVISIONS
15.1 No Rights to Awards. No Participant, employee, or other person shall
have any claim to be granted any Award under the Plan, and neither the Company
nor the Committee is obligated to treat Participants, employees, and other
persons uniformly.
15.2 No Stockholders Rights. No Award gives the Participant any of the
rights of a stockholder of the Company unless and until shares of Stock are in
fact issued to such person in connection with such Award.
15.3 Withholding. The Company or any Subsidiary shall have the authority
and the right to deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient to satisfy Federal, state, and local taxes
(including the Participant's FICA obligation) required by law to be withheld
with respect to any taxable event arising as a result of this Plan.
15.4 No Right to Employment. Nothing in the Plan or any Award Agreement
shall interfere with or limit in any way the right of the Company or any
Subsidiary to terminate any Participant's employment at any time, nor confer
upon any Participant any right to continue in the employ of the Company or any
Subsidiary.
15.5 Unfunded Status of Awards. The Plan is intended to be an "unfunded"
plan for incentive compensation. With respect to any payments not yet made to a
Participant pursuant to an Award, nothing contained in the Plan or any Award
Agreement shall give the Participant any rights that are greater than those of a
general creditor of the Company or any Subsidiary.
15.6 Indemnification. To the extent allowable under applicable law, each
member of the Committee or of the Board shall be indemnified and held harmless
by the Company from any loss, cost, liability, or expense that may be imposed
upon or reasonably incurred by such member in connection with or resulting from
any claim, action, suit, or proceeding to which he or she may be a party or in
which he or she may be involved by reason of any action or failure to act under
the Plan and against and from any and all amounts paid
26
<PAGE> 29
by him or her in satisfaction of judgment in such action, suit, or proceeding
against him or her provided he or she gives the Company an opportunity, at its
own expense, to handle and defend the same before he or she undertakes to handle
and defend it on his or her own behalf. The foregoing right of indemnification
shall not be exclusive of any other rights of indemnification to which such
persons may be entitled under the Company's Articles of Incorporation or
By-Laws, as a matter of law, or otherwise, or any power that the Company may
have to indemnify them or hold them harmless.
15.7 Relationship to Other Benefits. No payment under the Plan shall be
taken into account in determining any benefits under any pension, retirement,
savings, profit sharing, group insurance, welfare or other benefit plan of the
Company or any Subsidiary.
15.8 Expenses. The expenses of administering the Plan shall be borne by
the Company and its Subsidiaries.
15.9 Titles and Headings. The titles and headings of the Sections in the
Plan are for convenience of reference only, and in the event of any conflict,
the text of the Plan, rather than such titles or headings, shall control.
15.10 Fractional Shares. No fractional shares of stock shall be issued
and the Committee shall determine, in its discretion, whether cash shall be
given in lieu of fractional shares or whether such fractional shares shall be
eliminated by rounding up.
15.11 Securities Law Compliance. With respect to any person who is, on
the relevant date, obligated to file reports under Section 16 of the 1934 Act,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the 1934 Act. To the extent any
provision of the Plan or action by the Committee fails to so comply, it shall be
void to the extent permitted by law and voidable as deemed advisable by the
Committee.
15.12 Government and Other Regulations. The obligation of the Company to
make payment of awards in Stock or otherwise shall be subject to all applicable
laws, rules, and regulations, and to such approvals by government agencies as
may be required. The Company shall be under no obligation to register under the
Securities Act of 1933, as amended (the "1933 Act"), any of the shares of Stock
paid under the Plan. If the shares paid under the Plan may in certain
circumstances be exempt from registration under the 1933 Act, the Company may
restrict the transfer of such shares in such manner as it deems advisable to
ensure the availability of any such exemption.
15.13 Governing Law. The Plan and all Award Agreements shall be construed
in accordance with and governed by the laws of the State of Delaware.
27
<PAGE> 30
PROXY
INSIGHT ENTERPRISES, INC.
1997 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints ERIC J. CROWN and STANLEY LAYBOURNE, or any one
of them acting in the absence of the other with full powers of substitution,
the true and lawful attorneys and proxies of the undersigned to vote, as
designated below, all shares of Common Stock of Insight Enterprises, Inc. (the
"Company") which the undersigned is entitled to vote at the 1997 Annual Meeting
of Stockholders of the Company to be held at Insight's corporate headquarters,
6820 South Hart Avenue in Tempe, Arizona 85283, on Thursday, October 30, 1997
at 3:00 p.m. local time and at any and all adjournments or postponements
thereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS CARD USING THE ENCLOSED ENVELOPE
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 31
1. Election of Two Class III Directors:
FOR / / WITHHELD FOR ALL / /
VOTE FOR nominees listed below
Nominees: Timothy A. Crown
Stanley Laybourne
WITHHELD FOR: (Write that nominee's name in the space provided below).
- ----------------------------------------------------------------------
2. To approve the Company's 1998 Long Term Incentive Plan
FOR / / AGAINST / / ABSTAIN / /
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS INDICATED, WILL BE
VOTED FOR THE DIRECTOR NOMINEES AND TO APPROVE THE COMPANY'S LONG TERM
INCENTIVE PLAN, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY
COME BEFORE THE MEETING.
Signature ___________________________________________
Signature if held jointly ____________________________
Date _______________________
Please sign exactly as your name appears. If shares are held by joint tenants,
both should sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
