<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
FOR THE QUARTERLY PERIOD ENDED: MARCH 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
for the transition period from __________ to __________
Commission File Number: 0-25092
INSIGHT ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 86-0766246
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
6820 SOUTH HARL AVENUE, TEMPE, ARIZONA 85283
(Address of principal executive offices) (Zip code)
(602) 902-1001
(Registrant's telephone number, including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes /X/ No / /
The number of shares outstanding of the issuer's common stock as of the April
30, 1998 was 10,618,086
<PAGE> 2
INSIGHT ENTERPRISES, INC.
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements:
Condensed Consolidated Balance Sheets -
March 31, 1998 and December 31, 1997................................... 3
Condensed Consolidated Statements of Earnings -
Three Months Ended March 31, 1998 and 1997............................. 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1998 and 1997............................. 5
Notes to Condensed Consolidated Financial Statements................... 6
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................. 8
PART II - OTHER INFORMATION............................................... 12
Item 6 - Exhibits and Reports on Form 8-K................................. 12
SIGNATURE................................................................. 13
2
<PAGE> 3
INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
-------- --------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................................ $ 8,587 $ 6,982
Accounts receivable, net ................................................. 100,025 86,771
Inventories .............................................................. 31,411 46,100
Prepaid expenses and other current assets ................................ 6,940 8,195
-------- --------
Total current assets ............................................ 146,963 148,048
Property and equipment, net ................................................... 21,799 20,432
Other assets .................................................................. 114 35
-------- --------
$168,876 $168,515
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ......................................................... $ 44,147 $ 29,081
Accrued expenses and other current liabilities ........................... 4,257 4,304
-------- --------
Total current liabilities ....................................... 48,404 33,385
Line of credit ................................................................ 10,800 32,750
Stockholders' equity:
Preferred stock, $.01 par value, 3,000,000 shares authorized,
no shares issued ....................................................... -- --
Common stock, $.01 par value, 30,000,000 shares authorized,
10,528,326 at March 31, 1998 and 10,367,742 at
December 31, 1997 shares issued and outstanding ........................ 105 104
Paid-in capital .......................................................... 75,557 72,616
Retained earnings ........................................................ 34,010 29,660
-------- --------
Total stockholders' equity ..................................... 109,672 102,380
-------- --------
$168,876 $168,515
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------------
1998 1997
------------ -----------
<S> <C> <C>
Net sales .................................. $ 206,796 $ 130,825
Costs of goods sold ........................ 181,454 114,103
------------ -----------
Gross profit ...................... 25,342 16,722
Selling, general and administrative expenses 17,875 12,340
------------ -----------
Earnings from operations .......... 7,467 4,382
Non-operating income (expense), net ........ (377) 122
------------ -----------
Earnings before income taxes ...... 7,090 4,504
Income tax expense ......................... 2,757 1,758
------------ -----------
Net earnings ...................... $ 4,333 $ 2,746
============ ===========
Earnings per share:
Basic ............................. $ 0.41 $ 0.27
============ ===========
Diluted ........................... $ 0.40 $ 0.26
============ ===========
Shares used in per:
Basic ............................. 10,457,273 10,107,768
============ ===========
Diluted ........................... 10,969,085 10,626,590
============ ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1998 1997
---------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings .........................................................$ 4,333 $ 2,746
Adjustments to reconcile net earnings to net cash
used in operating activities:
Depreciation ...................................................... 709 580
Tax benefit from stock options exercised .......................... 2,093 942
Provision for losses on accounts receivable ....................... 777 593
Provision for obsolete and slow-moving inventories ................ 225 161
Deferred income tax benefit ....................................... 593 (691)
Loss on disposal of property and equipment ........................ -- 11
Change in assets and liabilities:
Increase in accounts receivable .............................. (14,006) (11,627)
Decrease (increase) in inventories ........................... 14,465 (958)
Decrease in prepaid expenses and other current
assets ....................................................... 661 454
Decrease (increase) in other assets .......................... (80) 41
Increase in accounts payable ................................. 14,992 314
Increase (decrease) in accrued expenses and
other current liabilities ................................ (6) 539
-------- --------
Net cash provided by (used in) operating activities ...... 24,756 (6,895)
-------- --------
Cash flows from investing activities:
Purchases of property and equipment ................................... (2,074) (2,905)
-------- --------
Net cash used in investing activities .................... (2,074) (2,905)
-------- --------
Cash flows from financing activities:
Net borrowings (repayments) on line of credit ......................... (21,950) --
Issuance of common stock .............................................. 850 377
-------- --------
Net cash provided by (used in) financing activities ...... (21,100) 377
-------- --------
Effect of exchange rate on cash and cash equivalents ....................... 23 --
-------- --------
Increase (decrease) in cash and cash equivalents .......................... 1,605 (9,423)
Cash and cash equivalents at beginning of period ........................... 6,982 21,166
-------- --------
Cash and cash equivalents at end of period ................................. $ 8,587 $ 11,743
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
INSIGHT ENTERPRISES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. DESCRIPTION OF BUSINESS
Insight Enterprises, Inc. and subsidiaries ("Insight" or the "Company")
is a direct marketer of computers, hardware and software. The Company markets
primarily to small and medium-sized enterprises, through a combination of
outbound telemarketing, electronic commerce, targeted direct marketing and
advertising in computer magazines and publications. Additionally, Insight
provides direct marketing services to manufacturers seeking to outsource their
direct marketing activities. The services provided include marketing, sales and
distribution.
2. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
and notes have been prepared in accordance with the requirements of Form 10-Q
and consequently do not include all of the disclosure normally required by
generally accepted accounting principles. In the opinion of management, the
accompanying unaudited condensed consolidated financial statements contain all
adjustments, consisting only of normal recurring accruals, necessary to present
fairly the financial position of Insight as of March 31, 1998, the results of
operations for the three months ended March 31, 1998 and 1997, and the cash
flows for the three months ended March 31, 1998 and 1997. The condensed
consolidated balance sheet as of December 31, 1997 was derived from the audited
consolidated financial statement at such date. The results of operations for
such interim periods are not necessarily indicative of results for the full
year. It is suggested that these condensed consolidated financial statements be
read in conjunction with the consolidated financial statements, including the
related notes thereto, in Insight's Annual Report on Form 10-K for the year
ended December 31, 1997.
The condensed consolidated financial statements include the accounts of
Insight Enterprises, Inc. and its wholly-owned subsidiaries. Intercompany
accounts and transactions have been eliminated in consolidation.
In August 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, share prices and earnings per share have been
retroactively adjusted to reflect this 3-for-2 stock split.
In January 1998, Insight changed its fiscal year end to December 31
from June 30.
3. LINE OF CREDIT
Insight has a $70,000,000 credit facility with a finance company. The
agreement provides for cash advances outstanding at any one time up to a maximum
of $70,000,000 on the line of credit, subject to limitations based upon the
Company's eligible accounts receivable and inventories. As of March 31, 1998,
$41,396,000 was available under the line of credit. Cash advances bear interest
at the London Interbank Offered Rate (LIBOR) plus 1.40% (7.09% at March 31,
1998) payable monthly. The credit facility can be used to facilitate the
purchases of inventories from certain suppliers and that portion is classified
on the balance sheet as accounts payable. As of March 31, 1998, the balance of
this portion of the credit facility was $9,534,000.
6
<PAGE> 7
INSIGHT ENTERPRISES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The credit facility expires in August 2000 at which time the
outstanding balance is due. The line is secured by substantially all of the
assets of the Company. The line of credit contains various covenants including
the requirements that the Company maintain a specific dollar amount of tangible
net worth and restrictions on payment of cash dividends.
4. INCOME TAXES
Income tax expense as provided for the three months ended March 31,
1998 and 1997 is based upon the estimated annual income tax rate of the Company.
5. EARNINGS PER SHARE
Basic earnings per share is computed by dividing earnings available to
common stockholders by the weighted average number of common shares outstanding
during each period. Diluted earnings per share includes the impact of stock
options assumed to be exercised using the treasury stock method. The denominator
for diluted earnings per share is greater than the denominator used in basic
earnings per share by 511,812 shares and 518,822 shares for the three months
ended March 31, 1998 and 1997, respectively. The numerator is the same for both
basic and diluted earnings per share.
6. COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" (SFAS 130), effective January 1, 1998.
SFAS 130 establishes standards for the reporting and presentation of
comprehensive income and its components in financial statements. Comprehensive
income encompasses net income and "other comprehensive income," which includes
all other non-owner transactions and events which change stockholders' equity.
Other comprehensive income for the three months ended March 31, 1998 and 1997
was immaterial.
7. SUBSEQUENT EVENT
In April 1998, Insight acquired 100% of the stock of a United Kingdom
("UK") - based computer direct marketer, Choice Peripherals Limited ("Choice").
Additionally, Insight also acquired a related Choice company, Plusnet
Technologies Limited, dba Force9 ("Force9"), an Internet Service Provider and
Web site hosting/development company. Under the terms of the agreements, Insight
will acquire 100% of Choice and 85% of Force9 for approximately $2.9 million
(1.7 million Pounds sterling) in cash and $3.3 million (2.0 million Pounds
sterling) in Insight stock, with additional consideration contingent on
profitability over the next three years. Such acquisitions will be accounted for
using the purchase method.
Choice, based in Worksop, England, was founded in 1992 and is currently
one of the UK's leading computer direct marketing companies. Choice's net sales
for the year ended December 31, 1997 were in excess of $60 million
(approximately 36 million Pounds sterling). Both Choice and Force9 were
privately held and had common ownership and management.
7
<PAGE> 8
INSIGHT ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial
Condition and Results of Operations contains forward-looking statements that are
inherently subject to risk and uncertainties. Forward-looking statements can be
identified by the use of forward-looking terminology such as "expects,"
"should," "believes," or "anticipates" or the negative thereof or comparable
terminology, or by discussions of Company goals and strategy. The Company's
actual results could differ materially from those anticipated in these
forward-looking statements as a result of many factors, including but not
limited to the following: fluctuations in operating results, intense
competition, management of rapid growth, need for additional financing, reliance
on suppliers, rapid change in product standards, inventory obsolescence, risk of
business interruption, changing methods of distribution, sales and income tax
uncertainty, future acquisitions, increasing marketing, postage and shipping
cost, reliance on outsourcing arrangements, year 2000 issues, and dependence on
key personnel. These factors are discussed in greater detail under "Factors That
May Affect Future Results and Financial Condition" in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997, as filed with the
Securities and Exchange Commission.
OVERVIEW
The Company commenced operations in 1988 as a direct marketer of hard
disk drives and other mass storage products. In calendar 1990, the Company began
marketing its own Insight-brand computers and in calendar 1991 and 1992 added
hardware, software and other name brand computers to its product line. Through
calendar 1992, the Company based its marketing practices primarily on
advertising in computer magazines and the use of inbound toll-free
telemarketing. In calendar 1993, the Company shifted its marketing strategy to
include the publication of proprietary catalogs and the use of outbound account
executives focused on the business, education and government markets. During
calendar 1995, the Company began to de-emphasize the sale of Insight-branded
computers and discontinued the sale of Insight-branded computers in the fourth
quarter of calendar 1995. Although the cost savings from this decision have
positively impacted earnings from operations, gross profit percentage has been
negatively affected. The Company expects gross margins to continue to decline in
1998 primarily due to pricing strategies and market conditions.
During calendar 1995, the Company nearly doubled its catalog
circulation to aggressively test new lists and generate leads. In calendar 1997,
the Company did not increase its catalog circulation because the Company used
the information generated from prior years' tests to target mailings to its best
prospective customers while increasing its focus on penetrating existing
accounts. In calendar 1997, Insight continued to increase its focus on the
business, education and government markets, which aggregated approximately 89%
of its business in calendar 1997. The Company has hired a number of senior sales
managers and account executives, and plans to continue to actively increase its
account executive base by approximately 50 to 75, net, per quarter during 1998.
In order to leverage its infrastructure, the Company, in calendar 1992,
began providing direct marketing services to third parties. Under some of the
Company's outsourcing arrangements, the Company takes title to inventories of
products and assumes the risk of collection of accounts receivable in addition
to its sales functions. Revenues derived from the sales of such products are
included in the Company's net sales. Certain other outsourcing arrangements are
primarily service-based, and the Company generally derives net sales from these
types of arrangements based on a percentage of the net sales generated from
products sold. Accordingly, the rate of the Company's net sales growth in future
periods may be affected by the mix of outsourcing arrangements which are in
place from time to time. Additionally, some of the programs may be more seasonal
in nature, as their target customers can have cyclical buying patterns.
Outsourcing represented 6.9% and 6.0% of the Company's sales for the three
months ended March 31, 1998 and 1997, respectively.
8
<PAGE> 9
INSIGHT ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Generally, pricing in the computer and related products industry is
very aggressive. The Company expects pricing pressures to continue and that it
will be required to reduce its prices to remain competitive. The continued
acceptance of electronic commerce might place additional pricing pressure on the
Company. Such price reductions could have a material adverse effect on the
Company's financial condition and results of operations.
RESULTS OF OPERATIONS
The following table sets forth for the fiscal periods indicated certain
financial data as a percentage of net sales:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------
1998 1997
------ ------
<S> <C> <C>
Net sales ..................................... 100.0% 100.0%
Costs of goods sold ........................... 87.7 87.2
------ ------
Gross profit ......................... 12.3 12.8
Selling, general and administrative
expenses ................................. 8.7 9.5
------ ------
Earnings from operations ............. 3.6 3.3
Non-operating income (expense), net ........... (0.2) 0.1
------ ------
Earnings before income taxes ......... 3.4 3.4
Income tax expense ............................ 1.3 1.3
------ ------
Net earnings ......................... 2.1% 2.1%
====== ======
</TABLE>
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
Net Sales. Net sales increased $76 million, or 58%, to $206.8 million
for the three months ended March 31, 1998 from $130.8 million for the three
months ended March 31, 1997. The Company's net sales are comprised of two
components: direct marketing sales and sales from outsourcing arrangements with
manufacturers. Sales derived from direct marketing increased $69.6 million, or
57%, to $192.5 million for the three months ended March 31, 1998 from $122.9
million for the three months ended March 31, 1997. The increase in direct
marketing sales resulted primarily from increased emphasis on outbound
telemarketing, deeper account penetration, a greater percentage of business
customers, an increase in the Company's customer base and an increase in the
average order size. The percentage of net sales to business customers increased
from 86% for the three months ended March 31, 1997 to 91% for the three months
ended March 31, 1998. This continued shift to a customer segment that makes
larger purchases resulted in an increase in average order size, for the direct
marketing business, of 9% to $985 for the three months ended March 31, 1998
compared to $906 for the three months ended March 31, 1997.
Sales derived from outsourcing arrangements increased $6.4 million, or
82%, to $14.3 million for the three months ended March 31, 1998 from $7.9
million for the three months ended March 31, 1997. The increase in sales from
outsourcing services resulted from the successful addition of new programs. Some
of these new outsourcing programs can be seasonal in nature, as their target
customers can have cyclical buying patterns. The Company is actively seeking
other outsourcing arrangements with major manufacturers.
9
<PAGE> 10
INSIGHT ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997 (CONTINUED)
Gross Profit. Gross profit increased $8.6 million, or 52%, to $25.3
million for the three months ended March 31, 1998 from $16.7 million for the
three months ended March 31, 1997. As a percentage of sales, gross profit
decreased from 12.8% for the three months ended March 31, 1997 to 12.3% for the
three months ended March 31, 1998. As a percentage of net sales, gross margin on
the Company's direct marketing sales decreased due to a continued shift in
product mix, pricing strategies and market conditions. The Company experienced
significant growth in the software category which carries a lower gross profit
percentage and a significant decline in hard disk drives as a percentage of
sales which carries a higher gross profit percentage. The Company expects gross
profit percentage from its direct marketing sales to continue to decline in 1998
primarily due to pricing strategies and market conditions. The gross profit
percentage on the Company's outsourcing business decreased primarily as a result
of a change in product mix within the revenue-based portion of its outsourcing
business. Also, the addition of new outsourcing programs, over the last 12
months has had a negative impact on the overall gross profit percentage.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $5.5 million, or 45%, to $17.9 million for the
three months ended March 31, 1998 from $12.3 million for the three months ended
March 31, 1997, but decreased as a percentage of net sales to 8.7% for the three
months ended March 31, 1998 from 9.5% for the three months ended March 31, 1997.
The decline was attributable to increased economies of scale, an increase in the
average order size and more effective marketing which were partially offset by
the additional costs of hiring and training new account executives and costs
associated with rapid growth.
Non-Operating Income (Expense), Net. Non-operating income (expense),
net, which consists primarily of interest, changed to $377,000 of expense, net,
for the three months ended March 31, 1998 from $122,000 of interest income, net,
for the three months ended March 31, 1997. Interest expense primarily relates to
borrowings under the Company's line of credit which have been necessary to
finance the Company's growth. Interest income was generated by the Company
through short term investments, some of which are tax advantaged bonds.
Income Tax Expense. The Company's effective tax rate was 38.9% and
39.0% for the quarters ended March 31, 1998 and 1997, respectively. The decrease
in the effective tax rate reflects the implementation of a tax minimization
strategy implemented during fiscal 1998, but was partially offset by an increase
in the Company's marginal tax rate. The prior year effective tax rate includes
the benefits of investments made in tax-advantaged bonds.
10
<PAGE> 11
INSIGHT ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997 (CONTINUED)
SEASONALITY
The Company has historically experienced seasonal fluctuations in its
growth of net sales, earnings from operations and net earnings. As the Company
has increased its percentage of sales from the business, education and
government markets, the Company's quarterly net sales, earnings from operations
and net earnings have been less impacted by seasonality. The Company's net sales
growth rate, earnings from operations and net earnings as a percentage of net
sales could be affected by the mix of outsourcing arrangements which are in
place from time to time. Additionally, some of the outsourcing programs can be
seasonal in nature, as their target customers can have cyclical buying patterns.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital needs have been to fund the working
capital requirements and capital expenditures necessitated by its sales growth.
Cash flows from operations have generally been negative due primarily
to increases in accounts receivable and inventories necessitated by sales growth
and the continued shift from sales to the home market to sales in the business,
education and government markets. However, the Company's net cash provided by
operating activities was $24.8 million for the three months ended March 31,
1998, as compared to $6.9 used in operating activities for the three months
ended March 31, 1997. The positive cash flow in the current quarter was
primarily funded with a $15.0 million increase in accounts payable, a $14.5
million decrease in inventory and net earnings of $4.3 million. These funds were
primarily used to fund a $14.0 million increase in accounts receivable and net
repayments of $22 million on the line of credit.
Capital expenditures for the three months ended March 31, 1998 and 1997
were $2.0 million and $2.9 million, respectively. Capital expenditures for the
three months ended March 31, 1998 primarily relate to equipment for the
Company's new distribution center in Indiana and furniture and equipment for
additional office space in Tempe, Arizona. Capital expenditures for the three
months ended March 31, 1997 primarily relate to the continued upgrade of the
Company's equipment, systems and facilities.
The Company's future capital requirements include financing the growth
of working capital items such as accounts receivable and inventories, and the
purchase of equipment, furniture and fixtures to accomplish future growth. The
Company anticipates that cash flow from operations together with the funds
available under its credit facility should be adequate to support the Company's
presently anticipated cash and working capital requirements through 1998. The
Company's ability to continue funding its planned growth beyond 1998 is
dependent upon its ability to generate sufficient cash flow or to obtain
additional funds through equity or debt financing, or from other sources of
financing, as may be required.
11
<PAGE> 12
INSIGHT ENTERPRISES, INC.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Employment Agreement between Insight Enterprises,
Inc. and Eric J. Crown, dated as of March 31, 1998.
10.2 Employment Agreement between Insight Enterprises,
Inc. and Timothy A. Crown, dated as of March 31,
1998.
10.3 Employment Agreement between Insight Enterprises,
Inc. and Stanley Laybourne, dated as of March 31,
1998.
21.1 Subsidiaries of the Registrant for the three months
ended March 31, 1998
27.1 Financial Data Schedule for the three months ended
March 31, 1998.
27.2 Financial Data Schedule for the three months ended
March 31, 1997.
(b) Reports on Form 8-K
On January 30, 1998, the Company filed a report on a Form 8-K
to disclose the change in its fiscal year end from June 30 to
December 31.
On April 20, 1998, the Company filed a report on Form 8-K to
disclose the issuance of 83,212 shares of Common Stock
pursuant to the exemptions provided by Section 4 (2) of the
Securities Act of 1933, as amended and/or by Regulation S.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INSIGHT ENTERPRISES, INC.
BY: /S/ ERIC CROWN
-------------------------------
ERIC J. CROWN
CHIEF EXECUTIVE OFFICER
DATE: MAY 12, 1998 BY: /S/ STANLEY LAYBOURNE
-------------------------------
STANLEY LAYBOURNE
CHIEF FINANCIAL OFFICER, SECRETARY
AND TREASURER
13
<PAGE> 14
INDEX OF EXHIBITS
Exhibit Number
10.1 Employment Agreement between Insight Enterprises,
Inc. and Eric J. Crown, dated as of March 31, 1998.
10.2 Employment Agreement between Insight Enterprises,
Inc. and Timothy A. Crown, dated as of March 31,
1998.
10.3 Employment Agreement between Insight Enterprises,
Inc. and Stanley Laybourne, dated as of March 31,
1998.
21.1 Subsidiaries of the Registrant for the three months
ended March 31, 1998
27.1 Financial Data Schedule for the three months ended
March 31, 1998.
27.2 Financial Data Schedule for the three months ended
March 31, 1997.
<PAGE> 1
Exhibit 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into on March
31, 1998 between INSIGHT ENTERPRISES, INC., a Delaware corporation
("Company"), and ERIC J. CROWN ("Executive") to be effective as of July 1,
1997.
R E C I T A L S
A. Executive is currently employed by Company in the position of Chief
Executive officer.
B. Company has decided to offer Executive a new employment
agreement, the terms and provisions of which are set forth
below, to replace Executive's employment agreement that
expired June 30, 1997.
C. NOW, THEREFORE, IT IS HEREBY MUTUALLY AGREED AS FOLLOWS:
1. TERMS OF AGREEMENT.
(a) INITIAL TERM. Executive shall be employed by Company for
the duties set forth in Section 2 for a two-year term, commencing as of July 1,
1997 and ending on June 30, 1999 (the "Initial Term"), unless sooner terminated
in accordance with the provisions of this Agreement.
(b) RENEWAL TERM; EMPLOYMENT PERIOD DEFINED. On each
successive day after the commencement of the Initial Term, without further
action on the part of Company or Executive, this Agreement shall be
automatically renewed for a new 2-year term dated effective and beginning upon
each such successive day (the "Renewal Term"); provided, however, that Company
may notify Executive, or the Executive may notify the Company, at any time, that
there shall be no renewal of this Agreement, and in the event of such notice,
<PAGE> 2
neither party shall be under any obligation to renew or extend this Agreement.
The period of time commencing as of the date hereof and ending on the effective
date of the termination of employment of Executive under this or any successor
Agreement shall be referred to as the "Employment Period."
2. POSITION AND DUTIES.
(a) JOB DUTIES. Company does hereby employ, engage and hire
Executive as Chief Executive Officer of Company, and Executive does hereby
accept and agree to such employment, engagement, and hiring. Executive's duties
and authority during the Employment Period shall be such executive and
managerial duties as the Board of Directors of the Company (the "Board") shall
reasonably determine; provided that such duties and authority shall not be
materially different than they are at the date of this Agreement; provided
further that the authority of Executive shall not be diminished, and that
Executive shall not be demoted. Executive will devote such time as the Board
shall reasonably determine; provided that such devotion of time shall not be
materially different from Executive's devotion of time at the date of this
Agreement, reasonable absences because of illness, personal and family
exigencies excepted.
(b) BEST EFFORTS. Executive agrees that at all times during
the Employment Period he will faithfully, and to the best of his ability,
experience and talents, perform the duties that may be required of and from him
and fulfill his responsibilities hereunder pursuant to the express terms hereof.
Executive's ownership of, or
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participation (including any board memberships) in, any entity (other than
Company) must be disclosed to the Board; provided, however, that Executive need
not disclose any equity interest held in any public company or any private
company that is not engaged in a competing business as defined in Section 10 of
this Agreement when such interest constitutes less than 5% of the issued and
outstanding equity of such public or private company.
3. COMPENSATION.
(a) BASE SALARY. Company shall pay Executive a "Base Salary"
in consideration for Executive's services to Company at the rate of $250,000 per
annum. The Base Salary shall be payable as nearly as possible in equal
semi-monthly installments or in such other installments as are customary from
time to time for Company's executives. The Base Salary may be adjusted from time
to time in accordance with the procedures established by Company for salary
adjustments for executives, provided that the Base Salary shall not be reduced.
(b) INCENTIVE COMPENSATION. Executive shall also be permitted
to participate in such incentive compensation plans as adopted by the Board from
time to time. During the Employment Period, the Executive shall be entitled to
an incentive bonus, calculated and payable quarterly, equal to 2.5% of the
Company's "net earnings" provided that the Company's net earnings exceed the
Minimum Amount for the applicable fiscal quarter; and provided further that the
incentive bonus for the total of the four quarters constituting the fiscal year
ending December 31, 1998 shall not exceed 270% of Executive's annual Base Salary
for that fiscal year,
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and such limitation shall not be applicable thereafter. For purposes of
calculating Executive's incentive bonus pursuant to this subsection (b), the
Company's "net earnings" shall be the Company's consolidated net earnings prior
to any incentive bonus amounts for Executive and other executives of Company.
The amounts payable pursuant to this subparagraph (b) shall be paid on or before
thirty (30) days after the end of the applicable fiscal quarter. For purposes of
this subparagraph (b) the term "Minimum Amount" means $2.5 million for the
applicable fiscal quarters ending on or before December 31, 1998, and for
applicable fiscal quarters ending after December 31, 1998, means an amount equal
to eighty percent (80%) of the average of the Company's net earnings for the
immediately preceding four fiscal quarters ended prior to the applicable fiscal
quarter.
(1) If upon final presentation of consolidated financial
statements of Company, the "net earnings" are adjusted, then, within
thirty (30) days after the presentation, Company or Executive, as the
case may be, shall pay to the other the amount necessary to cause the
net amount of incentive bonus paid to be the proper amount after
adjustment; provided that if Executive shall pay Company pursuant to
the provisions of this clause (1), then the amount the Executive shall
pay will be reduced by the taxes withheld by Company attributable to
such amount ("Withheld Portion"), and the Withheld Portion shall be
offset against the next subsequent payments of Base Salary and
incentive compensation made pursuant to Sections
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3(a) and (b).
(c) INCENTIVE AND BENEFIT PLANS. Executive will be entitled to
participate in those incentive compensation and benefit plans reserved for the
Company's executives, including any stock option plan maintained by the Company,
in accordance with the terms of such compensation and benefit plans.
Additionally, the Executive shall be entitled to participate in any other
benefit plans sponsored by company, including but not limited to, any savings
plan, life insurance plan and health insurance plan available generally to
employees of Company from time to time, subject to any restrictions specified
in, or amendments made to, such plans. The Executive shall be entitled to four
(4) weeks vacation during the calendar year, and such additional vacation time
as the Board shall approve, with such vacation to be scheduled and taken in
accordance with the Company's standard vacation policies, but this provision is
not intended to interfere with or limit Executive's discretion to determine the
appropriate time to be devoted to his duties hereunder.
4. BUSINESS EXPENSES.
The Company will reimburse Executive for any and all
necessary, customary and usual expenses which are incurred by Executive on
behalf of Company, provided Executive provides Company with receipts to
substantiate the business expense in accordance with Company's policies or
otherwise reasonably justifies the expense to the Company.
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5. DEATH OR DISABILITY.
(a) DEATH. This Agreement shall terminate upon Executive's
death. Executive's estate shall be entitled to receive the Base Salary due
through the date of his death and any incentive compensation payable for
quarters ended prior to Executive's death, but no Base Salary or other payment
or benefit will be payable after death except as expressly provided elsewhere in
this Agreement. Whether any bonuses or incentive compensation will be payable
for quarters ending following Executive's death will be determined in accordance
with the provisions of any incentive compensation program, practice, or policy
in which Executive participates at the time of Executive's death. If there is no
written incentive compensation program, policy, or practice in effect at the
time of Executive's death, Company, in the exercise of its discretion, may elect
to pay to Executive's estate a portion of the incentive compensation to which
Executive would have been entitled (had Executive not died) for the year in
which this Agreement terminated due to Executive's death.
(b) DISABILITY. This Agreement shall also terminate in the
event of Executive's "Disability". For purposes of this Agreement, "Disability"
means the total and complete inability of Executive to perform the essential
duties associated with his normal position with Company (after any
accommodations required by the Americans with Disabilities Act or applicable
state law) due to a physical or mental injury or illness that occurs while
Executive is actively employed by Company.
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If this Agreement is terminated due to Executive's Disability,
Executive shall receive all of the payments and benefits called for by Section
6(c).
6. TERMINATION BY COMPANY.
(a) TERMINATION FOR CAUSE. Company may terminate this
Agreement at any time during the Initial Term or any Renewal Terms for "Cause"
upon written notice to Executive. If Company terminates this Agreement for
"Cause," Executive's Base Salary shall immediately cease, and Executive shall
not be entitled to severance payments, incentive compensation payments or any
other payments or benefits pursuant to this Agreement, except for any vested
rights pursuant to any benefit plans in which Executive participates and any
accrued compensation, vacation pay and similar items. For purposes of this
Agreement, the term "Cause" shall mean the termination of Executive's employment
by Company for one or more of the following reasons:
(1) The criminal conviction for any felony involving
theft or embezzlement from Company or any affiliate;
(2) The criminal conviction for any felony involving
moral turpitude that reflects adversely upon the standing of
Company in the community; or
(3) The criminal conviction for any felony involving
fraud committed against Company, any affiliate or any
individual or entity that provides goods or services to,
receives goods or services from or otherwise
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deals with Company or any affiliate.
(4) Acts by Executive that constitute repeated and
material violations of this Agreement, any written employment
policies of Company or any written directives of Company. A
violation will not be considered to be "repeated" unless such
violation has occurred more than once and after receipt of
written notice from Company of such violation.
Any termination of Executive when there is not Cause is
"without Cause." If Company terminates Executive for Cause, and it is later
determined that Cause did not exist, Company will pay Executive the amount he
would have received under this Agreement if his employment had been terminated
by Company without Cause, plus interest at the Prime Rate published by the Wall
Street Journal on the date of termination. Such payments and interest shall be
calculated as of the effective date of the initial termination. Payment shall be
made within fifteen (15) days after such later determination is made.
(b) TERMINATION WITHOUT CAUSE. Company also may terminate this
Agreement at any time during the Initial Term or Renewal Terms without Cause. If
Company terminates this Agreement pursuant to this paragraph, Company shall
provide Executive with ninety (90) days advance written notice. This Agreement
shall continue during such notice period. The termination of this Agreement
shall be effective on the ninetieth (90th) day (the "Termination Date")
following the day on which the notice is given.
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Company may, at its discretion, place Executive on a paid administrative leave
during all or any part of said notice period. During the administrative leave,
Company may bar Executive's access to Company's offices or facilities if
reasonably necessary to the smooth operation of Company, or may provide
Executive with access subject to such reasonable terms and conditions as Company
chooses to impose.
(c) SEVERANCE COMPENSATION. Should Executive's employment by
Company be terminated without Cause, Executive shall receive as a lump sum
immediately upon such termination of the total amount of his Base Salary for the
remainder of the Initial Term or Renewal Terms, if later, determined as if the
employment of the Executive had not been terminated prior to the end of such
term and as if the Executive had continued to perform all of his obligations
under this Agreement and as an employee, officer, and director of the Company.
Executive shall have no duty to mitigate damages in order to receive the
Compensation described by this Subsection and the Compensation shall not be
reduced or offset by other income, payments or profits received by Executive
from any source.
(d) INCENTIVE COMPENSATION. Executive shall not be entitled to
receive any incentive compensation payments for the fiscal quarter in which his
employment is terminated for Cause or any later quarters. If Executive is
terminated without Cause, Executive shall receive as a lump sum immediately upon
such termination the total amount of incentive compensation payments
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determined in accordance with the provisions of any incentive compensation
program, practice, or policy in which Executive participates on the effective
date of the termination, determined as if the employment of the Executive had
not been terminated prior to the end of the Initial Term or latest Renewal Term,
if later, and as if the financial performance of Company upon which the
programs, practice, or policy is determined continues as it had been for the
immediately preceding last four (4) fiscal quarters ended prior to either (i)
the date of notice of termination or (ii) the date of termination, as Executive
shall elect after receiving the report of such performance for the applicable
fiscal quarters, and as if the Executive had continued to perform all of his
obligation under this Agreement and as an employee, officer, and director of the
Company. Executive shall have no duty to mitigate damages in order to receive
the Compensation described by this Subsection and the Compensation shall not be
reduced or offset by other income, payments or profits received by Executive
from any source. If there is no binding incentive compensation program, policy,
or practice in effect on the effective date of the termination, Company, in the
exercise of its discretion, may elect to pay Executive a portion of the
incentive compensation to which he would have been entitled (had his employment
not terminated) for the quarter in which his employment is terminated without
Cause.
(a) OTHER PLANS. Except to the extent specified in this
Section 6 and as provided in this Subsection (e), termination of this Agreement
shall not affect Executive's participation in,
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distributions from, and vested rights under any employee benefit plan of
Company, which will be governed by the terms of those respective plans, in the
event of Executive's termination of employment. If Executive is terminated
without Cause, then Executive shall be fully vested under any and all stock
bonus and stock option plans and agreements in which Executive had an interest,
vested or contingent. If applicable law prohibits such vesting, then Company
shall pay Executive an amount equal to the value of the benefits and rights that
would have, but for such prohibition, been vested. Executive shall have no duty
to mitigate damages in order to receive the Compensation described by this
Subsection and the Compensation shall not be reduced or offset by other income,
payments or profits received by Executive from any source.
(f) EXAMPLE. For example, if Company provides notice to
Executive of Termination without Cause on January 1, 1999, then the Employment
Period ends ninety days thereafter, on April 1, 1999, and Company will pay to
Executive in a lump sum payment immediately thereafter the sum of an amount
equal to (i) Executive's Base Salary for the next two (2) years totaling
$500,000 (assuming the Base Salary was at that time $250,000) plus (ii) the
incentive compensation for eight fiscal quarters computed as stated above, and
Executive shall be fully vested in all stock bonus and stock option plans and
agreements in which Executive had an interest.
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7. TERMINATION BY EXECUTIVE
(a) GENERAL. Executive may terminate this Agreement at any
time, with or without "Good Reason." If Executive terminates this Agreement
without Good Reason, Executive shall provide Company with ninety (90) days
advance written notice. If Executive terminates this Agreement with Good Reason,
Executive shall provide Company with thirty (30) days advance written notice.
(b) GOOD REASON DEFINED. For purposes of this Agreement, "Good
Reason" shall mean and include each of the following (unless Executive has
expressly agreed to such event in a signed writing):
(1) The demotion of Executive by Company, such as (i)
assignment to Executive of any duties that are inconsistent
with or inferior to his positions, duties, responsibilities,
and status with Company as in effect on the date of execution
of this Agreement (the "Relevant Date"); (ii) an adverse
change in his titles, offices, or authority as in effect on
the Relevant Date; (iii) the involuntary (I) removal of
Executive as a member of the Board or (II) failure of the
Executive to be a Member of an executive committee of the
Board, if any such committee is established; or (iv) any
removal of him from or any failure to re-appoint or renew him
to any of such positions; except in connection with the
termination of this Agreement for Cause, Executive's death or
Disability, termination by Executive other than for Good
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Reason, or the expiration of the Agreement without renewal;
(2) The recommended travel of Executive by the Board in furtherance of
Company business which is materially more extensive than at the Relevant Date;
(3) The assignment of Executive by the Company to a location more than
50 miles from the present executive offices of the Company.
(4) Reduction by Company in Executives Base Salary as set forth in
this Agreement or as the same may be increased from time to time.
(5) Failure by Company to continue in effect any incentive
compensation program, policy or practice, or any savings, life insurance, health
and accident or disability plan in which Executive is participating on the
Relevant Date (or plans which provide Executive with substantially similar
benefits) or the taking of any action by Company which would adversely affect
Executive's participation in or materially reduce his benefit under any of such
plans or deprive him of any material fringe benefit enjoyed by him as of the
Relevant Date or any later date. Amendment or modification of said plans, to the
extent required pursuant to applicable federal law and the procedures set forth
in the respective plan, or amendments of such plans that apply to either all
employees generally or all senior
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executives shall not be considered to be "Good Reason" for
purposes of this clause (5).
(6) Failure of Company to obtain a specific written
agreement satisfactory to Executive from any successor to the
business, or substantially all the assets, of Company to
assume this Agreement or issue a substantially similar
agreement.
(7) The termination of this Agreement by Company
without Cause or any attempted termination by Company
purportedly for Cause if it is thereafter determined that
Cause did not exist under this Agreement with respect to the
termination.
(8) Breach of any material provisions of this
Agreement by Company which is not cured within thirty (30)
days after receipt by Company of written notice of such breach
from Executive.
(9) Any action taken by Company over the specific,
contemporaneous, written objection of the Executive that is
likely (i) to cause a material reduction in the value of this
Agreement to Executive or (ii) to materially impair
Executive's abilities to discharge his duties hereunder. This
provision is not intended to affect either the Company's or
Executive's right to terminate this Agreement as provided for
elsewhere herein.
(c) EFFECT OF GOOD REASON TERMINATION. If Executive terminates
this Agreement for Good Reason (as defined in Section
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7(b)), Executive shall be entitled to receive all of the payments and benefits
provided by Section 6 and otherwise in this Agreement to the same extent as if
this Agreement had been terminated by Company without Cause.
(d) EFFECT OF TERMINATION WITHOUT GOOD REASON. If Executive
terminates this Agreement without Good Reason, Executive shall be entitled to
receive his Base Salary through the effective date of his termination.
Executive's entitlement to receive any other amount shall be determined in
accordance with the provisions of any benefit plans in which Executive
participates on the effective date of the termination. Executive shall not be
entitled to receive any incentive compensation for the quarter in which his
employment is terminated by him without Good Reason or any later quarter.
8. CHANGE IN CONTROL OF COMPANY
(a) GENERAL. Company considers the maintenance of a sound and
vital management to be essential to protecting and enhancing the best interests
of Company and its shareholders. Company recognizes that, as is the case with
many publicly held corporations, the continuing possibility of an unsolicited
tender offer or other takeover bid for Company may be unsettling to Executive
and other senior executives of Company and may result in the departure or
distraction of management personnel to the detriment of Company and its
shareholders. The Board and the Compensation Committee of the Board (the
"Committee") have previously determined that it is in the best interests of
Company
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and its shareholders for Company to minimize these concerns by making this
Change in Control provision an integral part of this Employment Agreement, which
would provide the Executive with a continuation of benefits in the event the
Executive's employment with Company terminates under certain limited
circumstances.
This provision is offered to help assure a continuing
dedication by Executive to his duties to Company notwithstanding the occurrence
of a tender offer or other takeover bid. In particular, the Board and the
Committee believe it important, should Company receive proposals from third
parties with respect to its future, to enable Executive, without being
influenced by the uncertainties of his own situation, to assess and advise the
Board whether such proposals would be in the best interests of Company and its
shareholders and to take such other action regarding such proposals as the Board
might determine to be appropriate. The Board and the Committee also wish to
demonstrate to Executive that company is concerned with his welfare and intends
to see he is treated fairly.
(b) CONTINUED ELIGIBILITY TO RECEIVE BENEFITS. In view of the
foregoing and in further consideration of Executive's continued employment with
Company, if a Change in Control occurs, Executive shall be entitled to a
lump-sum severance benefit provided in subparagraph (c) of this Section 8 if,
prior to the expiration of twenty-four (24) months after the Change in Control,
Executive notifies Company of his intent to terminate his employment with
Company for Good Reason or Company terminates
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Executive's employment without Cause or if, prior to the expiration of one
hundred twenty (120) days after the Change in Control, Executive terminates his
employment with Company. If Executive triggers the application of this Section
by terminating employment for Good Reason, he must do so within one hundred
twenty (120) days following his receipt of notice of the occurrence of the last
event that constitutes Good Reason. The full severance benefits provided by this
Section shall be payable regardless of the period remaining until the expiration
of the Agreement without renewal.
(c) RECEIPT OF BENEFITS. If Executive is entitled to receive a
severance benefit pursuant to Section 8(b) hereof, Company will provide
Executive with the following benefits:
(1) A lump sum severance payment within ten (10) days
following Executive's last day of work equal to the sum of (i)
three times the greater of Executive's annualized Base Salary
in effect on the date of termination of employment or
Executive's highest annualized Base Salary in effect on any
date during the term of this Agreement and (ii) three times
the amount of all incentive compensation paid or accrued to
Executive for the Company's most recent last four fiscal
quarters then ended.
(2) Executive shall be vested in any and all stock
bonus and stock option plans and agreements of Company in
which Executive had an interest, vested or contingent. If
applicable law prohibits such vesting, then Company
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shall pay Executive an amount equal to the value of benefits and rights that
would have, but for such prohibition, have been vested in Executive.
(3) Executive will continue to receive life, disability, accident and
group health and dental insurance benefits substantially similar to those which
he was receiving immediately prior to his termination of employment until the
earlier of (i) the end of the period of 24 months following his termination of
employment or (ii) the day on which he becomes eligible to receive any
substantially similar continuing health care benefits under any plan or program
of any other employer. The benefits provided pursuant to this Section shall be
provided on substantially the same terms and conditions as they were provided
prior to the Change in Control, except that the full cost of such benefits shall
be paid by Company. Executive's right to receive continued coverage under
Company's group health plans pursuant to Section 601 et seq. of the Employee
Retirement Income Security Act of 1974, as it may be amended or replaced from
time to time, shall commence following the expiration of his right to receive
continued benefits under this Agreement. Executive's right to receive all forms
of benefits under this Section is reduced to the extent he is eligible to
receive any health care benefit from any other employer without his request to
pay any
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premium with respect thereto.
Executive shall have no duty to mitigate damages or loss in order to
receive the benefits provided by this Section or in this Agreement. If Executive
is entitled to receive the payments called for by this Section 8(c), Executive's
right to receive the compensation provided by Section 6(c) or 7(c) shall to the
extent of such payments be reduced.
(d) CHANGE IN CONTROL DEFINED. For purposes of this Agreement,
a "Change in Control" means any one or more of the following events:
(1) When the individuals who, at the beginning of any
period of two years or less, constituted the Board cease, for
any reason, to constitute at least a majority 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
Securities Exchange Act of 1934 (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 20% or more of the combined voting
power of the Company's
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then outstanding securities;
(3) Any merger, consolidation or liquidation of the
Company in which the Company is not the continuing or
surviving company or pursuant to which stock would be
converted into cash, 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
company immediately after the merger;
(4) The shareholders 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) in which the company is a member at
the Relevant Date.
(e) GOOD REASON DEFINED. For purposes of this Section, "Good
Reason" shall have the meaning assigned to it in Section 7(b).
(f) NOTICE OF TERMINATION BY EXECUTIVE. Any termination by
Executive under this Section 8 shall be communicated by written notice to
Company which shall set forth generally the facts and circumstances claimed to
provide a basis for such termination.
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(g) GROSS-UP ALLOWANCE
(1) GENERAL RULES. The Code places significant tax consequences on
Executive and Company if the total payments made to Executive due, or deemed
due, to a Change in Control exceed prescribed limits. For example, if
Executive's "Base Period Income" (as defined below) is $100,000 and Executive's
"Total Payments" exceed 299% of such Base Period Income (the "Cap"), Executive
will be subject to an excise tax under Section 4999 of the Code of 20% of all
amounts paid to him in excess of $100,000. In other words, if Executive's Cap is
$299,999, he will not be subject to an excise tax if he receives exactly
$299,999. If Executive receives $300,000, he will be subject to an excise tax of
$40,000 (20% of $200,000). In the event such a consequence occurs, for any
reason, due to this Agreement or otherwise, Company shall pay to Executive a
"gross-up allowance" equal in amount to the sum of (i) the excise tax liability
of Executive on the Total Payments, and (ii) all the total excise, income, and
payroll tax liability of Executive on the "gross-up allowance," further
increased by all additional excise, and income, and payroll tax liability
thereon, which increase shall be part of the "gross-up allowance" for purpose of
computing the gross-up allowance. Company shall indemnify and hold Executive
harmless from such additional tax liability for the income and payroll tax
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arising from the "gross-up allowance" and all excise tax arising with respect to
compensation and other payments made to Executive under this Agreement and
excise, income, and payroll tax on the "gross-up allowance, 11 and all penalties
and interest thereon. The purpose and effect of the gross-up allowance is to
cause Executive to have the same net compensation after income, excise, and
payroll taxes that Executive would have if there was no tax under Code Section
4999.
(2) SPECIAL DEFINITIONS. For purposes of this Section, the following
specialized terms will have the following meanings:
(i) "BASE PERIOD INCOME". "Base Period Income" is an
amount equal to Executive's "annualized includable
compensation" for the "base period" as defined in
Sections 28OG(d)(1) and(2)of the Code and the
regulations adopted thereunder. Generally,
Executive's "annualized includable compensation" is
the average of his annual taxable income from the
Company for the "base period," which is the five
calendar years prior to the year in which the
Change of Control occurs.
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(ii) "CAP" OR 280G CAP". "Cap" or "28OG Cap" shall
mean an amount equal to 2.99 times Executive's "Base
Period Income." This is the maximum amount which he
may receive without becoming subject to the excise
tax imposed by Section 4999 of the Code or which
Company may pay without loss of deduction under
Section 28OG of the Code.
(iii)"TOTAL PAYMENTS". The "Total Payments" include
any "payments in the nature of compensation" (as
defined in Section 280G of the Code and the
regulations adopted thereunder), made pursuant to
this Agreement or otherwise, to or for Executive's
benefit, the receipt of which is contingent or deemed
contingent on a Change of Control and to which
Section 28OG of the Code applies.
(h) EFFECT OF REPEAL. In the event that the provisions of
Sections 28OG and 4999 of the Code are repealed without succession, this Section
shall be of no further force or effect.
(i) EMPLOYMENT BY SUCCESSOR. For purposes of this Agreement
employment by a successor of Company or a successor of any subsidiary of Company
that has assumed this Agreement shall be considered to be employment by Company
or one of its subsidiaries.
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As a result, if Executive is employed by such a successor following a Change in
Control, he will not be entitled to receive the benefits provided by Section 8
unless his employment with the successor is subsequently terminated without
Cause or he terminates his employment for Good Reason.
9. CONFIDENTIALITY.
Executive covenants and agrees to hold in strictest
confidence, and not disclose to any person, firm or company, without the express
written consent of Company, any and all of Company's confidential data,
including but not limited to information and documents concerning Company's
business, customers, and suppliers, market methods, files, trade secrets, or
other "know-how" or techniques or information not of a published nature or
generally known (for the duration they are not published or generally known)
which shall come into his possession, knowledge, or custody concerning the
business of Company, except as such disclosure may be required by law or in
connection with Executive's employment hereunder or except as such matters may
have been known to Executive at the time of his employment by Company. This
covenant and agreement of Executive shall survive this Agreement and continue to
be binding upon Executive after the expiration or termination of this Agreement,
whether by passage of time or otherwise so long as such information and data
shall be treated as confidential by Company.
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10. RESTRICTIVE COVENANTS.
(a) COVENANT-NOT-TO-COMPETE. In consideration of Company's
agreements contained herein and the payments to be made by it to Executive
pursuant hereto and except for termination of Executive's employment by Company
without Cause or termination of employment by Executive for Good Reason,
Executive agrees that, for two years following his termination of employment and
so long as company is continuously not in default of its obligations to
Executive hereunder or under any other agreement, covenant, or obligation, he
will not, without prior written consent of Company, consult with or act as an
advisor to another company about activity which is a "Competing Business" of
such company in the United States. For purposes of this Agreement, Executive
shall be deemed to be engaged in a "Competing Business" if, in any capacity,
including but not limited to proprietor, partner, officer, director or employee,
he engages or participates, directly or indirectly, in the operation, ownership
or management of the activity of any proprietorship, partnership, company or
other business entity which activity is competitive with the then actual
business in which Company is engaged on the date of, or any business
contemplated by the Company's business plan in effect on the date of notice of,
Executive's termination of employment. Nothing in this subparagraph is intended
to limit Executive's ability to own equity in a public company constituting less
than five percent (5%) of the outstanding equity of such company, when Executive
is not actively engaged in the management thereof. Company shall furnish
Executive
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with a good-faith written description of the business or businesses in which
Company is then actively engaged within 30 days after Executive's termination of
employment, and only those activities so timely described which are in fact
actively engaged by Company may be treated as activities of which one may be
engaged that is competitive with Company.
(b) NON-SOLICITATION. Executive recognizes that Company's
customers are valuable and proprietary resources of Company. Accordingly,
Executive agrees that for a period of one year following his termination of
employment, and only so long as company is continuously not in default of its
obligations to Executive hereunder or under any other agreement, covenant, or
obligation, he will not directly or indirectly, through his own efforts or
through the efforts of another person or entity, solicit business from any
individual or entity located in the state of Arizona which obtained services
from Company at any time during Executive's employment with Company; he will not
solicit business from any individual or entity located in the state of Arizona
which may have been solicited by Executive on behalf of Company and he will not
solicit employees of Company who would have the skills and knowledge necessary
to enable or assist efforts by Executive to engage in a Competing Business.
(c) REMEDIES: REASONABLENESS. Executive acknowledges and
agrees that a breach by Executive of the provisions of this Section 10 will
constitute such damage as will be irreparable and the exact amount of which will
be impossible to ascertain and, for
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that reason, agrees that Company will be entitled to an injunction to be issued
by any court of competent jurisdiction restraining and enjoining Executive from
violating the provisions of this Section. The right to an injunction shall be in
addition to and not in lieu of any other remedy available to Company for such
breach or threatened breach, including the recovery of damages from Executive.
Executive expressly acknowledges and agrees that (i) the
Restrictive Covenants contained herein are reasonable as to time and
geographical area and do not place any unreasonable burden upon him; (ii) the
general public will not be harmed as a result of enforcement of these
Restrictive Covenants; and (iii) Executive understands and hereby agrees to each
and every term and condition of the Restrictive Covenants set forth in this
Agreement.
(d) CHANGE OF CONTROL. The provisions of this Section 10 shall
lapse and be of no further force or effect if Executive's employment is
terminated by Company "without Cause" or by Executive for "Good Reason."
11. DISPUTE RESOLUTION.
(a) MEDIATION. Any and all disputes arising under, pertaining
to or touching upon this Agreement, or the statutory rights or obligations of
either party hereto, shall, if not settled by negotiation, be subject to
non-binding mediation before an independent mediator selected by the parties
pursuant to Section 11(d). Notwithstanding the foregoing, both Executive and
Company may seek preliminary injunctive or other judicial relief if such
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action is necessary to avoid irreparable damage during the pendency of the
proceedings described in this Section 11. Any demand for mediation shall be made
in writing and served upon the other party to the dispute, by certified mail,
return receipt requested, at the address specified in Section 13. The demand
shall set forth with reasonable specificity the basis of the dispute and the
relief sought. The mediation hearing will occur at a time and place convenient
to the parties in Maricopa County, Arizona, within thirty (30) days of the date
of selection or appointment of the mediator.
(b) ARBITRATION. In the event that the dispute is not settled
through mediation, the parties shall then proceed to binding arbitration before
an independent arbitrator selected pursuant to Section 11(d). The mediator shall
not serve as the arbitrator. EXCEPT AS PROVIDED IN SECTION 11 (a), ALL DISPUTES
INVOLVING ALLEGED UNLAWFUL EMPLOYMENT DISCRIMINATION, TERMINATION BY ALLEGED
BREACH OF CONTRACT OR POLICY, OR ALLEGED EMPLOYMENT TORT COMMITTED BY COMPANY OR
A REPRESENTATIVE OF COMPANY, INCLUDING CLAIMS OF VIOLATIONS OF FEDERAL OR STATE
DISCRIMINATION STATUTES OR PUBLIC POLICY, SHALL BE RESOLVED PURSUANT TO THIS
SECTION 11 AND THERE SHALL BE NO RECOURSE TO COURT, WITH OR WITHOUT A JURY
TRIAL.
The arbitration hearing shall occur at a time and place convenient to the
parties in Maricopa County, Arizona, within thirty (30) days of selection or
appointment of the arbitrator. If Company has adopted a policy that is
applicable to arbitrations with executives, the arbitration shall be conducted
in accordance with
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said policy, to the extent that the policy is consistent with this Agreement and
the Federal Arbitration Act, 9 U.S.C. Sections 1-16. If no such policy has
been adopted, the arbitration shall be governed by the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association
("AAA") in effect on the date of the first notice of demand for arbitration.
Notwithstanding any provisions in such rules to the contrary, the arbitrator
shall issue findings of fact and conclusions of law, and an award, within
fifteen (15) days of the date of the hearing unless the parties otherwise agree.
(c) DAMAGES. In case of breach of contract or policy, damages
shall be limited to contract damages. In cases of discrimination claims
prohibited by statute, the arbitrator may direct payment consistent with the
applicable statute. In cases of employment tort, the arbitrator may award
punitive damages if proved by clear and convincing evidence. Issues of
procedure, arbitrability, or confirmation of award shall be governed by the
Federal Arbitration Act, 9 U.S.C. SS 1-16, except that court review of the
arbitrator's award shall be that of an appellate court reviewing a decision of a
trial judge sitting without a jury.
(d) SELECTION OF MEDIATOR OR ARBITRATOR. The parties shall
select the mediator and arbitrator from a panel list made available by the AAA.
If the parties are unable to agree to a mediator or an arbitrator within ten
(10) days of receipt of a demand for mediation or arbitration, the mediator or
arbitrator will be chosen by alternatively striking from a list of five (5)
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mediators or arbitrators obtained by Company from the AAA. Executive shall have
the first strike.
(e) EXPENSES. The costs and expenses of any arbitration shall
be borne by Company. Should Executive or Company, at any time, initiate
mediation or arbitration for breach of this Agreement, Company shall reimburse
Executive for all amounts spent by Executive to pursue such mediation or
arbitration (including reasonable attorneys fees and costs), regardless of the
outcome, unless the mediator or arbitrator finds Executive's action to have been
frivolous and without merit.
12. BENEFIT AND BINDING EFFECT
This Agreement shall inure to the benefit of and be binding
upon company, its successors and assigns, including but not limited to any
Company, person, or other entity which may acquire all or substantially all of
the assets and business of Company or any Company with or into which Company may
be consolidated or merged, and Executive, his heirs, executors, administrators,
and legal representatives, provided that the obligations of Executive may not be
delegated.
13. NOTICES
All notices hereunder shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid and return
receipt requested:
If to Company, to: Insight Enterprises, Inc.
6820 South Hall Avenue
Tempe, Arizona 85283
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If to Executive, to: Eric J. Crown
1820 West Drake, No. 108
Tempe, AZ 85281
Either party may change the address to which notices are to be sent to it by
giving ten (10) days written notice of such change of address to the other party
in the manner above provided for giving notice. Notices will be considered
delivered on personal delivery or on the date of deposit in the United States
mail in the manner provided for giving notice by mail.
14. ENTIRE AGREEMENT
The entire understanding and agreement between the parties has
been incorporated into this Agreement, and this Agreement supersedes all other
agreements and understandings between Executive and Company with respect to the
relationship of Executive with Company, except with respect to other continuing
or future bonus, incentive, stock option, health, benefit and similar plans or
agreements.
15. GOVERNING LAW
This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Arizona.
16. CAPTIONS
The captions included herein are for convenience and shall not
constitute a part of this Agreement.
17. DEFINITIONS
Throughout this Agreement, certain defined terms will be
identified by the capitalization of the first letter of the defined word or the
first letter of each substantive word in a defined
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phrase. Whenever used, these terms will be given the indicated meaning.
18. SEVERABILITY
If any one or more of the provisions or parts of a provision
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity or unenforceability shall not
affect any other provision or part of a provision of this Agreement, but this
Agreement shall be reformed and construed as if such invalid, illegal or
unenforceable provision or part of a provision had never been contained herein
and such provisions or part thereof shall be reformed so that it would be valid,
legal and enforceable to the maximum extent permitted by law. Any such
reformation shall be read as narrowly as possible to give the maximum effect to
the mutual intentions of Executive and Company.
19. TERMINATION OF EMPLOYMENT
The termination of this Agreement by either party also shall
result in the termination of Executive's employment relationship with Company in
the absence of an express written agreement providing to the contrary. Neither
party intends that any oral employment relationship continue after the
termination of this Agreement.
20. TIME IS OF THE ESSENCE
Company and Executive agree that time is of the essence with
respect to the duties and performance of the covenants and promises of this
Agreement.
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21. NO CONSTRUCTION AGAINST EITHER PARTY
This Agreement is the result of negotiation between Company
and Executive and both have had the opportunity to have this Agreement reviewed
by their legal counsel and other advisors. Accordingly, this Agreement shall not
be construed for or against Company or Executive, regardless of which party
drafted the provision at issue.
INSIGHT ENTERPRISES, INC., a
Delaware Corporation
By: Timothy A. Crown
---------------------------------
Its: President
/s/ Eric J. Crown
---------------------------------
ERIC J. CROWN
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Exhibit 10.2
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into on
March 31, 1998 between INSIGHT ENTERPRISES, INC., a Delaware
corporation ("Company"), and TIMOTHY A. CROWN ("Executive") to be
effective as of July 1, 1997.
R E C I T A L S
A. Executive is currently employed by Company in the position of
President.
B. Company has decided to offer Executive a new employment agreement,
the terms and provisions of which are set forth below, to replace Executive's
employment agreement that expired June 30, 1997.
NOW, THEREFORE, IT IS HEREBY MUTUALLY AGREED AS FOLLOWS:
1. TERMS OF AGREEMENT.
(a) INITIAL TERM. Executive shall be employed by Company for
the duties set forth in Section 2 for a two-year term, commencing as of July 1,
1997 and ending on June 30, 1999 (the "Initial Term"), unless sooner terminated
in accordance with the provisions of this Agreement.
(b) RENEWAL TERM; EMPLOYMENT PERIOD DEFINED. On each
successive day after the commencement of the Initial Term, without further
action on the part of Company or Executive, this Agreement shall be
automatically renewed for a new 2-year term dated effective and beginning upon
each such successive day (the "Renewal Term"); provided, however, that Company
may notify Executive, or the Executive may notify the Company, at any time, that
there shall be no renewal of this Agreement, and in the event of such notice,
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neither party shall be under any obligation to renew or extend this Agreement.
The period of time commencing as of the date hereof and ending on the effective
date of the termination of employment of Executive under this or any successor
Agreement shall be referred to as the "Employment Period."
2. POSITION AND DUTIES.
(a) JOB DUTIES. Company does hereby employ, engage and hire
Executive as President of Company, and Executive does hereby accept and agree to
such employment, engagement, and hiring. Executive's duties and authority during
the Employment Period shall be such executive and managerial duties as the Board
of Directors of the Company (the "Board") shall reasonably determine; provided
that such duties and authority shall not be materially different than they are
at the date of this Agreement; provided further that the authority of Executive
shall not be diminished, and that Executive shall not be demoted. Executive will
devote such time as the Board shall reasonably determine; provided that such
devotion of time shall not be materially different from Executive's devotion of
time at the date of this Agreement, reasonable absences because of illness,
personal and family exigencies excepted.
(b) BEST EFFORTS. Executive agrees that at all times during
the Employment Period he will faithfully, and to the best of his ability,
experience and talents, perform the duties that may be required of and from him
and fulfill his responsibilities hereunder pursuant to the express terms hereof.
Executive's ownership of, or participation (including any board memberships) in,
any entity
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(other than Company) must be disclosed to the Board; provided, however, that
Executive need not disclose any equity interest held in any public company or
any private company that is not engaged in a competing business as defined in
Section 10 of this Agreement when such interest constitutes less than 5% of the
issued and outstanding equity of such public or private company.
3. COMPENSATION.
(a) BASE SALARY. Company shall pay Executive a "Base Salary"
in consideration for Executive's services to Company at the rate of $250,000 per
annum. The Base Salary shall be payable as nearly as possible in equal
semi-monthly installments or in such other installments as are customary from
time to time for Company's executives. The Base Salary may be adjusted from time
to time in accordance with the procedures established by Company for salary
adjustments for executives, provided that the Base Salary shall not be reduced.
(b) INCENTIVE COMPENSATION. Executive shall also be permitted
to participate in such incentive compensation plans as adopted by the Board from
time to time. During the Employment Period, the Executive shall be entitled to
an incentive bonus, calculated and payable quarterly, equal to 2.5% of the
Company's "net earnings" provided that the Company's net earnings exceed the
Minimum Amount for the applicable fiscal quarter; and provided further that the
incentive bonus for the total of the four quarters constituting the fiscal year
ending December 31, 1998 shall not exceed 270% of Executive's annual Base Salary
for that fiscal year,
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and such limitation shall not be applicable thereafter. For purposes of
calculating Executive's incentive bonus pursuant to this subsection (b), the
Company's "net earnings" shall be the Company's consolidated net earnings prior
to any incentive bonus amounts for Executive and other executives of Company.
The amounts payable pursuant to this subparagraph (b) shall be paid on or before
thirty (30) days after the end of the applicable fiscal quarter. For purposes of
this subparagraph (b) the term "Minimum Amount" means $2.5 million for the
applicable fiscal quarters ending on or before December 31, 1998, and for
applicable fiscal quarters ending after December 31, 1998, means an amount equal
to eighty percent (80%) of the average of the Company's net earnings for the
immediately preceding four fiscal quarters ended prior to the applicable fiscal
quarter.
(1) If upon final presentation of consolidated financial
statements of Company, the "net earnings" are adjusted, then, within
thirty (30) days after the presentation, Company or Executive, as the
case may be, shall pay to the other the amount necessary to cause the
net amount of incentive bonus paid to be the proper amount after
adjustment; provided that if Executive shall pay Company pursuant to
the provisions of this clause (1), then the amount the Executive shall
pay will be reduced by the taxes withheld by Company attributable to
such amount ("Withheld Portion"), and the Withheld Portion shall be
offset against the next subsequent payments of Base Salary and
incentive compensation made pursuant to Sections
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3(a) and (b).
(c) INCENTIVE AND BENEFIT PLANS. Executive will be entitled to
participate in those incentive compensation and benefit plans reserved for the
Company's executives, including any stock option plan maintained by the Company,
in accordance with the terms of such compensation and benefit plans.
Additionally, the Executive shall be entitled to participate in any other
benefit plans sponsored by company, including but not limited to, any savings
plan, life insurance plan and health insurance plan available generally to
employees of Company from time to time, subject to any restrictions specified
in, or amendments made to, such plans. The Executive shall be entitled to four
(4) weeks vacation during the calendar year, and such additional vacation time
as the Board shall approve, with such vacation to be scheduled and taken in
accordance with the Company's standard vacation policies, but this provision is
not intended to interfere with or limit Executive's discretion to determine the
appropriate time to be devoted to his duties hereunder.
4. BUSINESS EXPENSES.
The Company will reimburse Executive for any and all
necessary, customary and usual expenses which are incurred by Executive on
behalf of Company, provided Executive provides Company with receipts to
substantiate the business expense in accordance with Company's policies or
otherwise reasonably justifies the expense to the Company
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5. DEATH OR DISABILITY.
(a) DEATH. This Agreement shall terminate upon Executive's
death. Executive's estate shall be entitled to receive the Base Salary due
through the date of his death and any incentive compensation payable for
quarters ended prior to Executive's death, but no Base Salary or other payment
or benefit will be payable after death except as expressly provided elsewhere in
this Agreement. Whether any bonuses or incentive compensation will be payable
for quarters ending following Executive's death will be determined in accordance
with the provisions of any incentive compensation program, practice, or policy
in which Executive participates at the time of Executive's death. If there is no
written incentive compensation program, policy, or practice in effect at the
time of Executive's death, Company, in the exercise of its discretion, may elect
to pay to Executive's estate a portion of the incentive compensation to which
Executive would have been entitled (had Executive not died) for the year in
which this Agreement terminated due to Executive's death.
(b) DISABILITY. This Agreement shall also terminate in the
event of Executive's "Disability". For purposes of this Agreement, "Disability"
means the total and complete inability of Executive to perform the essential
duties associated with his normal position with Company (after any
accommodations required by the Americans with Disabilities Act or applicable
state law) due to a physical or mental injury or illness that occurs while
Executive is actively employed by Company.
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If this Agreement is terminated due to Executive's Disability,
Executive shall receive all of the payments and benefits called for by Section
6(c).
6. TERMINATION BY COMPANY.
(a) TERMINATION FOR CAUSE. Company may terminate this
Agreement at any time during the Initial Term or any Renewal Terms for "Cause"
upon written notice to Executive. If Company terminates this Agreement for
"Cause," Executive's Base Salary shall immediately cease, and Executive shall
not be entitled to severance payments, incentive compensation payments or any
other payments or benefits pursuant to this Agreement, except for any vested
rights pursuant to any benefit plans in which Executive participates and any
accrued compensation, vacation pay and similar items. For purposes of this
Agreement, the term "Cause" shall mean the termination of Executive's employment
by Company for one or more of the following reasons:
(1) The criminal conviction for any felony involving
theft or embezzlement from Company or any affiliate;
(2) The criminal conviction for any felony involving
moral turpitude that reflects adversely upon the standing of
Company in the community; or
(3) The criminal conviction for any felony involving
fraud committed against Company, any affiliate or any
individual or entity that provides goods or services to,
receives goods or services from or otherwise
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deals with Company or any affiliate.
(4) Acts by Executive that constitute repeated and
material violations of this Agreement, any written employment
policies of Company or any written directives of Company. A
violation will not be considered to be "repeated" unless such
violation has occurred more than once and after receipt of
written notice from Company of such violation.
Any termination of Executive when there is not Cause is
"without Cause." If Company terminates Executive for Cause, and it is later
determined that Cause did not exist, Company will pay Executive the amount he
would have received under this Agreement if his employment had been terminated
by Company without Cause, plus interest at the Prime Rate published by the Wall
Street Journal on the date of termination. Such payments and interest shall be
calculated as of the effective date of the initial termination. Payment shall be
made within fifteen (15) days after such later determination is made.
(b) TERMINATION WITHOUT CAUSE. Company also may terminate this
Agreement at any time during the Initial Term or Renewal Terms without Cause. If
Company terminates this Agreement pursuant to this paragraph, Company shall
provide Executive with ninety (90) days advance written notice. This Agreement
shall continue during such notice period. The termination of this Agreement
shall be effective on the ninetieth (90th) day (the "Termination Date")
following the day on which the notice is given.
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Company may, at its discretion, place Executive on a paid administrative leave
during all or any part of said notice period. During the administrative leave,
Company may bar Executive's access to Company's offices or facilities if
reasonably necessary to the smooth operation of Company, or may provide
Executive with access subject to such reasonable terms and conditions as Company
chooses to impose.
(c) CONTINUED COMPENSATION. Should Executive's employment by
Company be terminated without Cause, Executive shall receive as a lump sum
immediately upon such termination of the total amount of his Base Salary for the
remainder of the Initial Term or Renewal Terms, if later, determined as if the
employment of the Executive had not been terminated prior to the end of such
term and as if the Executive had continued to perform all of his obligations
under this Agreement and as an employee, officer, and director of the Company.
Executive shall have no duty to mitigate damages in order to receive the
Compensation described by this Subsection and the Compensation shall not be
reduced or offset by other income, payments or profits received by Executive
from any source.
(d) INCENTIVE COMPENSATION. Executive shall not be entitled to
receive any incentive compensation payments for the fiscal quarter in which his
employment is terminated for Cause or any later quarters. If Executive is
terminated without Cause, Executive shall receive as a lump sum immediately upon
such termination the total amount of incentive compensation payments
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determined in accordance with the provisions of any incentive compensation
program, practice, or policy in which Executive participates on the effective
date of the termination, determined as if the employment of the Executive had
not been terminated prior to the end of the Initial Term or latest Renewal Term,
if later, and as if the financial performance of Company upon which the
programs, practice, or policy is determined continues as it had been for the
immediately preceding last four (4) fiscal quarters ended prior to either (i)
the date of notice of termination or (ii) the date of termination, as Executive
shall elect after receiving the report of such performance for the applicable
fiscal quarters, and as if the Executive had continued to perform all of his
obligation under this Agreement and as an employee, officer, and director of the
Company. Executive shall have no duty to mitigate damages in order to receive
the Compensation described by this Subsection and the Compensation shall not be
reduced or offset by other income, payments or profits received by Executive
from any source. If there is no binding incentive compensation program, policy,
or practice in effect on the effective date of the termination, Company, in the
exercise of its discretion, may elect to pay Executive a portion of the
incentive compensation to which he would have been entitled (had his employment
not terminated) for the quarter in which his employment is terminated without
Cause.
(a) OTHER PLANS. Except to the extent specified in this
Section 6 and as provided in this Subsection (e), termination of this Agreement
shall not affect Executive's participation in,
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distributions from, and vested rights under any employee benefit plan of
Company, which will be governed by the terms of those respective plans, in the
event of Executive's termination of employment. If Executive is terminated
without Cause, then Executive shall be fully vested under any and all stock
bonus and stock option plans and agreements in which Executive had an interest,
vested or contingent. If applicable law prohibits such vesting, then Company
shall pay Executive an amount equal to the value of the benefits and rights that
would have, but for such prohibition, been vested. Executive shall have no duty
to mitigate damages in order to receive the Compensation described by this
Subsection and the Compensation shall not be reduced or offset by other income,
payments or profits received by Executive from any source.
(f) EXAMPLE. For example, if Company provides notice to
Executive of Termination without Cause on January 1, 1999, then the Employment
Period ends ninety days thereafter, on April 1, 1999, and Company will pay to
Executive in a lump sum payment immediately thereafter the sum of an amount
equal to (i) Executive's Base Salary for the next two (2) years totaling
$500,000 (assuming the Base Salary was at that time $250,000) plus (ii) the
incentive compensation for eight fiscal quarters computed as stated above, and
Executive shall be fully vested in all stock bonus and stock option plans and
agreements in which Executive had an interest.
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7. TERMINATION BY EXECUTIVE
(a) GENERAL. Executive may terminate this Agreement at any
time, with or without "Good Reason." If Executive terminates this Agreement
without Good Reason, Executive shall provide Company with ninety (90) days
advance written notice. If Executive terminates this Agreement with Good Reason,
Executive shall provide Company with thirty (30) days advance written notice.
(b) GOOD REASON DEFINED. For purposes of this Agreement, "Good
Reason" shall mean and include each of the following (unless Executive has
expressly agreed to such event in a signed writing):
(1) The demotion of Executive by Company, such as (i)
assignment to Executive of any duties that are inconsistent
with or inferior to his positions, duties, responsibilities,
and status with Company as in effect on the date of execution
of this Agreement (the "Relevant Date"); (ii) an adverse
change in his titles, offices, or authority as in effect on
the Relevant Date; (iii) the involuntary (I) removal of
Executive as a member of the Board or (II) failure of the
Executive to be a Member of an executive committee of the
Board, if any such committee is established; or (iv) any
removal of him from or any failure to re-appoint or renew him
to any of such positions; except in connection with the
termination of this Agreement for Cause, Executive's death or
Disability, termination by Executive other than for Good
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Reason, or the expiration of the Agreement without renewal;
(2) The recommended travel of Executive by the Board in furtherance of
Company business which is materially more extensive than at the Relevant Date;
(3) The assignment of Executive by the Company to a location more than
50 miles from the present executive offices of the Company.
(4) Reduction by Company in Executives Base Salary as set forth in this
Agreement or as the same may be increased from time to time.
(5) Failure by Company to continue in effect any incentive compensation
program, policy or practice, or any savings, life insurance, health and accident
or disability plan in which Executive is participating on the Relevant Date (or
plans which provide Executive with substantially similar benefits) or the taking
of any action by Company which would adversely affect Executive's participation
in or materially reduce his benefit under any of such plans or deprive him of
any material fringe benefit enjoyed by him as of the Relevant Date or any later
date. Amendment or modification of said plans, to the extent required pursuant
to applicable federal law and the procedures set forth in the respective plan,
or amendments of such plans that apply to either all employees generally or all
senior
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executives shall not be considered to be "Good Reason" for
purposes of this clause (5).
(6) Failure of Company to obtain a specific written
agreement satisfactory to Executive from any successor to the
business, or substantially all the assets, of Company to
assume this Agreement or issue a substantially similar
agreement.
(7) The termination of this Agreement by Company
without Cause or any attempted termination by Company
purportedly for Cause if it is thereafter determined that
Cause did not exist under this Agreement with respect to the
termination.
(8) Breach of any material provisions of this
Agreement by Company which is not cured within thirty (30)
days after receipt by Company of written notice of such breach
from Executive.
(9) Any action taken by Company over the specific,
contemporaneous, written objection of the Executive that is
likely (i) to cause a material reduction in the value of this
Agreement to Executive or (ii) to materially impair
Executive's abilities to discharge his duties hereunder. This
provision is not intended to affect either the Company's or
Executive's right to terminate this Agreement as provided for
elsewhere herein.
(c) EFFECT OF GOOD REASON TERMINATION. If Executive terminates
this Agreement for Good Reason (as defined in Section
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7(b)), Executive shall be entitled to receive all of the payments and benefits
provided by Section 6 and otherwise in this Agreement to the same extent as if
this Agreement had been terminated by Company without Cause.
(d) EFFECT OF TERMINATION WITHOUT GOOD REASON. If Executive
terminates this Agreement without Good Reason, Executive shall be entitled to
receive his Base Salary through the effective date of his termination.
Executive's entitlement to receive any other amount shall be determined in
accordance with the provisions of any benefit plans in which Executive
participates on the effective date of the termination. Executive shall not be
entitled to receive any incentive compensation for the quarter in which his
employment is terminated by him without Good Reason or any later quarter.
8. CHANGE IN CONTROL OF COMPANY
(a) GENERAL. Company considers the maintenance of a sound and
vital management to be essential to protecting and enhancing the best interests
of Company and its shareholders. Company recognizes that, as is the case with
many publicly held corporations, the continuing possibility of an unsolicited
tender offer or other takeover bid for Company may be unsettling to Executive
and other senior executives of Company and may result in the departure or
distraction of management personnel to the detriment of Company and its
shareholders. The Board and the Compensation Committee of the Board (the
"Committee") have previously determined that it is in the best interests of
Company
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and its shareholders for Company to minimize these concerns by making this
Change in Control provision an integral part of this Employment Agreement, which
would provide the Executive with a continuation of benefits in the event the
Executive's employment with Company terminates under certain limited
circumstances.
This provision is offered to help assure a continuing
dedication by Executive to his duties to Company notwithstanding the occurrence
of a tender offer or other takeover bid. In particular, the Board and the
Committee believe it important, should Company receive proposals from third
parties with respect to its future, to enable Executive, without being
influenced by the uncertainties of his own situation, to assess and advise the
Board whether such proposals would be in the best interests of Company and its
shareholders and to take such other action regarding such proposals as the Board
might determine to be appropriate. The Board and the Committee also wish to
demonstrate to Executive that company is concerned with his welfare and intends
to see he is treated fairly.
(b) CONTINUED ELIGIBILITY TO RECEIVE BENEFITS. In view of the
foregoing and in further consideration of Executive's continued employment with
Company, if a Change in Control occurs, Executive shall be entitled to a
lump-sum severance benefit provided in subparagraph (c) of this Section 8 if,
prior to the expiration of twenty-four (24) months after the Change in Control,
Executive notifies Company of his intent to terminate his employment with
Company for Good Reason or Company terminates
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Executive's employment without Cause or if, prior to the expiration of one
hundred twenty (120) days after the Change in Control, Executive terminates his
employment with Company. If Executive triggers the application of this Section
by terminating employment for Good Reason, he must do so within one hundred
twenty (120) days following his receipt of notice of the occurrence of the last
event that constitutes Good Reason. The full severance benefits provided by this
Section shall be payable regardless of the period remaining until the expiration
of the Agreement without renewal.
(c) RECEIPT OF BENEFITS. If Executive is entitled to receive a
severance benefit pursuant to Section 8(b) hereof, Company will provide
Executive with the following benefits:
(1) A lump sum severance payment within ten (10) days
following Executive's last day of work equal to the sum of (i)
three times the greater of Executive's annualized Base Salary
in effect on the date of termination of employment or
Executive's highest annualized Base Salary in effect on any
date during the term of this Agreement and (ii) three times
the amount of all incentive compensation paid or accrued to
Executive for the Company's most recent last four fiscal
quarters then ended.
(2) Executive shall be vested in any and all stock
bonus and stock option plans and agreements of Company in
which Executive had an interest, vested or contingent. If
applicable law prohibits such vesting, then Company
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shall pay Executive an amount equal to the value of benefits and rights that
would have, but for such prohibition, have been vested in Executive.
(3) Executive will continue to receive life, disability, accident and
group health and dental insurance benefits substantially similar to those which
he was receiving immediately prior to his termination of employment until the
earlier of (i) the end of the period of 24 months following his termination of
employment or (ii) the day on which he becomes eligible to receive any
substantially similar continuing health care benefits under any plan or program
of any other employer. The benefits provided pursuant to this Section shall be
provided on substantially the same terms and conditions as they were provided
prior to the Change in Control, except that the full cost of such benefits shall
be paid by Company. Executive's right to receive continued coverage under
Company's group health plans pursuant to Section 601 et seq. of the Employee
Retirement Income Security Act of 1974, as it may be amended or replaced from
time to time, shall commence following the expiration of his right to receive
continued benefits under this Agreement. Executive's right to receive all forms
of benefits under this Section is reduced to the extent he is eligible to
receive any health care benefit from any other employer without his request to
pay any
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premium with respect thereto.
Executive shall have no duty to mitigate damages or loss in order to
receive the benefits provided by this Section or in this Agreement. If Executive
is entitled to receive the payments called for by this Section 8(c), Executive's
right to receive the compensation provided by Section 6(c) or 7(c) shall to the
extent of such payments be reduced.
(d) CHANGE IN CONTROL DEFINED. For purposes of this Agreement,
a "Change in Control" means any one or more of the following events:
(1) When the individuals who, at the beginning of any
period of two years or less, constituted the Board cease, for
any reason, to constitute at least a majority 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
Securities Exchange Act of 1934 (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 20% or more of the combined voting
power of the Company's
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then outstanding securities;
(3) Any merger, consolidation or liquidation of the
Company in which the Company is not the continuing or
surviving company or pursuant to which stock would be
converted into cash, 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
company immediately after the merger;
(4) The shareholders 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) in which the company is a member at
the Relevant Date.
(e) GOOD REASON DEFINED. For purposes of this Section, "Good
Reason" shall have the meaning assigned to it in Section 7(b).
(f) NOTICE OF TERMINATION BY EXECUTIVE. Any termination by
Executive under this Section 8 shall be communicated by written notice to
Company which shall set forth generally the facts and circumstances claimed to
provide a basis for such termination.
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(g) GROSS-UP ALLOWANCE
(1) GENERAL RULES. The Code places significant tax consequences on
Executive and Company if the total payments made to Executive due, or deemed
due, to a Change in Control exceed prescribed limits. For example, if
Executive's "Base Period Income" (as defined below) is $100,000 and Executive's
"Total Payments" exceed 299% of such Base Period Income (the "Cap"), Executive
will be subject to an excise tax under Section 4999 of the Code of 20% of all
amounts paid to him in excess of $100,000. In other words, if Executive's Cap is
$299,999, he will not be subject to an excise tax if he receives exactly
$299,999. If Executive receives $300,000, he will be subject to an excise tax of
$40,000 (20% of $200,000). In the event such a consequence occurs, for any
reason, due to this Agreement or otherwise, Company shall pay to Executive a
"gross-up allowance" equal in amount to the sum of (i) the excise tax liability
of Executive on the Total Payments, and (ii) all the total excise, income, and
payroll tax liability of Executive on the "gross-up allowance," further
increased by all additional excise, and income, and payroll tax liability
thereon, which increase shall be part of the "gross-up allowance" for purpose of
computing the gross-up allowance. Company shall indemnify and hold Executive
harmless from such additional tax liability for the income and payroll tax
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arising from the "gross-up allowance" and all excise tax arising with respect to
compensation and other payments made to Executive under this Agreement and
excise, income, and payroll tax on the "gross-up allowance, 11 and all penalties
and interest thereon. The purpose and effect of the gross-up allowance is to
cause Executive to have the same net compensation after income, excise, and
payroll taxes that Executive would have if there was no tax under Code Section
4999.
(2) SPECIAL DEFINITIONS. For purposes of this Section, the following
specialized terms will have the following meanings:
(i) "BASE PERIOD INCOME". "Base Period Income" is an
amount equal to Executive's "annualized includable
compensation" for the "base period" as defined in
Sections 28OG(d)(1) and(2)of the Code and the
regulations adopted thereunder. Generally,
Executive's "annualized includable compensation" is
the average of his annual taxable income from the
Company for the "base period," which is the five
calendar years prior to the year in which the Change
of Control occurs.
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(ii) "CAP" OR 280G CAP". "Cap" or "28OG Cap"
shall mean an amount equal to 2.99 times
Executive's "Base Period Income." This is
the maximum amount which he may receive
without becoming subject to the excise tax
imposed by Section 4999 of the Code or which
Company may pay without loss of deduction
under Section 28OG of the Code.
(iii)"TOTAL PAYMENTS". The "Total Payments"
include any "payments in the nature of
compensation" (as defined in Section 280G of
the Code and the regulations adopted
thereunder), made pursuant to this Agreement
or otherwise, to or for Executive's benefit,
the receipt of which is contingent or deemed
contingent on a Change of Control and to
which Section 28OG of the Code applies.
(h) EFFECT OF REPEAL. In the event that the provisions of
Sections 28OG and 4999 of the Code are repealed without succession, this Section
shall be of no further force or effect.
(i) EMPLOYMENT BY SUCCESSOR. For purposes of this Agreement
employment by a successor of Company or a successor of any subsidiary of Company
that has assumed this Agreement shall be considered to be employment by Company
or one of its subsidiaries.
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As a result, if Executive is employed by such a successor following a Change in
Control, he will not be entitled to receive the benefits provided by Section 8
unless his employment with the successor is subsequently terminated without
Cause or he terminates his employment for Good Reason.
9. CONFIDENTIALITY.
Executive covenants and agrees to hold in strictest
confidence, and not disclose to any person, firm or company, without the express
written consent of Company, any and all of Company's confidential data,
including but not limited to information and documents concerning Company's
business, customers, and suppliers, market methods, files, trade secrets, or
other "know-how" or techniques or information not of a published nature or
generally known (for the duration they are not published or generally known)
which shall come into his possession, knowledge, or custody concerning the
business of Company, except as such disclosure may be required by law or in
connection with Executive's employment hereunder or except as such matters may
have been known to Executive at the time of his employment by Company. This
covenant and agreement of Executive shall survive this Agreement and continue to
be binding upon Executive after the expiration or termination of this Agreement,
whether by passage of time or otherwise so long as such information and data
shall be treated as confidential by Company.
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10. RESTRICTIVE COVENANTS.
(a) COVENANT-NOT-TO-COMPETE. In consideration of Company's
agreements contained herein and the payments to be made by it to Executive
pursuant hereto and except for termination of Executive's employment by Company
without Cause or termination of employment by Executive for Good Reason,
Executive agrees that, for two years following his termination of employment and
so long as company is continuously not in default of its obligations to
Executive hereunder or under any other agreement, covenant, or obligation, he
will not, without prior written consent of Company, consult with or act as an
advisor to another company about activity which is a "Competing Business" of
such company in the United States. For purposes of this Agreement, Executive
shall be deemed to be engaged in a "Competing Business" if, in any capacity,
including but not limited to proprietor, partner, officer, director or employee,
he engages or participates, directly or indirectly, in the operation, ownership
or management of the activity of any proprietorship, partnership, company or
other business entity which activity is competitive with the then actual
business in which Company is engaged on the date of, or any business
contemplated by the Company's business plan in effect on the date of notice of,
Executive's termination of employment. Nothing in this subparagraph is intended
to limit Executive's ability to own equity in a public company constituting less
than five percent (5%) of the outstanding equity of such company, when Executive
is not actively engaged in the management thereof. Company shall furnish
Executive
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with a good-faith written description of the business or businesses in which
Company is then actively engaged within 30 days after Executive's termination of
employment, and only those activities so timely described which are in fact
actively engaged by Company may be treated as activities of which one may be
engaged that is competitive with Company.
(b) NON-SOLICITATION. Executive recognizes that Company's
customers are valuable and proprietary resources of Company. Accordingly,
Executive agrees that for a period of one year following his termination of
employment, and only so long as company is continuously not in default of its
obligations to Executive hereunder or under any other agreement, covenant, or
obligation, he will not directly or indirectly, through his own efforts or
through the efforts of another person or entity, solicit business from any
individual or entity located in the state of Arizona which obtained services
from Company at any time during Executive's employment with Company; he will not
solicit business from any individual or entity located in the state of Arizona
which may have been solicited by Executive on behalf of Company and he will not
solicit employees of Company who would have the skills and knowledge necessary
to enable or assist efforts by Executive to engage in a Competing Business.
(c) REMEDIES: REASONABLENESS. Executive acknowledges and
agrees that a breach by Executive of the provisions of this Section 10 will
constitute such damage as will be irreparable and the exact amount of which will
be impossible to ascertain and, for
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that reason, agrees that Company will be entitled to an injunction to be issued
by any court of competent jurisdiction restraining and enjoining Executive from
violating the provisions of this Section. The right to an injunction shall be in
addition to and not in lieu of any other remedy available to Company for such
breach or threatened breach, including the recovery of damages from Executive.
Executive expressly acknowledges and agrees that (i) the
Restrictive Covenants contained herein are reasonable as to time and
geographical area and do not place any unreasonable burden upon him; (ii) the
general public will not be harmed as a result of enforcement of these
Restrictive Covenants; and (iii) Executive understands and hereby agrees to each
and every term and condition of the Restrictive Covenants set forth in this
Agreement.
(d) CHANGE OF CONTROL. The provisions of this Section 10 shall
lapse and be of no further force or effect if Executive's employment is
terminated by Company "without Cause" or by Executive for "Good Reason."
11. DISPUTE RESOLUTION.
(a) MEDIATION. Any and all disputes arising under, pertaining
to or touching upon this Agreement, or the statutory rights or obligations of
either party hereto, shall, if not settled by negotiation, be subject to
non-binding mediation before an independent mediator selected by the parties
pursuant to Section 11(d). Notwithstanding the foregoing, both Executive and
Company may seek preliminary injunctive or other judicial relief if such
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<PAGE> 28
action is necessary to avoid irreparable damage during the pendency of the
proceedings described in this Section 11. Any demand for mediation shall be made
in writing and served upon the other party to the dispute, by certified mail,
return receipt requested, at the address specified in Section 13. The demand
shall set forth with reasonable specificity the basis of the dispute and the
relief sought. The mediation hearing will occur at a time and place convenient
to the parties in Maricopa County, Arizona, within thirty (30) days of the date
of selection or appointment of the mediator.
(b) ARBITRATION. In the event that the dispute is not settled
through mediation, the parties shall then proceed to binding arbitration before
an independent arbitrator selected pursuant to Section 11(d). The mediator shall
not serve as the arbitrator. EXCEPT AS PROVIDED IN SECTION 11 (a), ALL DISPUTES
INVOLVING ALLEGED UNLAWFUL EMPLOYMENT DISCRIMINATION, TERMINATION BY ALLEGED
BREACH OF CONTRACT OR POLICY, OR ALLEGED EMPLOYMENT TORT COMMITTED BY COMPANY OR
A REPRESENTATIVE OF COMPANY, INCLUDING CLAIMS OF VIOLATIONS OF FEDERAL OR STATE
DISCRIMINATION STATUTES OR PUBLIC POLICY, SHALL BE RESOLVED PURSUANT TO THIS
SECTION 11 AND THERE SHALL BE NO RECOURSE TO COURT, WITH OR WITHOUT A JURY
TRIAL.
The arbitration hearing shall occur at a time and place convenient to the
parties in Maricopa County, Arizona, within thirty (30) days of selection or
appointment of the arbitrator. If Company has adopted a policy that is
applicable to arbitrations with executives, the arbitration shall be conducted
in accordance with
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said policy, to the extent that the policy is consistent with this Agreement and
the Federal Arbitration Act, 9 U.S.C. Sections 1-16. If no such policy has
been adopted, the arbitration shall be governed by the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association
("AAA") in effect on the date of the first notice of demand for arbitration.
Notwithstanding any provisions in such rules to the contrary, the arbitrator
shall issue findings of fact and conclusions of law, and an award, within
fifteen (15) days of the date of the hearing unless the parties otherwise agree.
(c) DAMAGES. In case of breach of contract or policy, damages
shall be limited to contract damages. In cases of discrimination claims
prohibited by statute, the arbitrator may direct payment consistent with the
applicable statute. In cases of employment tort, the arbitrator may award
punitive damages if proved by clear and convincing evidence. Issues of
procedure, arbitrability, or confirmation of award shall be governed by the
Federal Arbitration Act, 9 U.S.C. SS 1-16, except that court review of the
arbitrator's award shall be that of an appellate court reviewing a decision of a
trial judge sitting without a jury.
(d) SELECTION OF MEDIATOR OR ARBITRATOR. The parties shall
select the mediator and arbitrator from a panel list made available by the AAA.
If the parties are unable to agree to a mediator or an arbitrator within ten
(10) days of receipt of a demand for mediation or arbitration, the mediator or
arbitrator will be chosen by alternatively striking from a list of five (5)
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mediators or arbitrators obtained by Company from the AAA. Executive shall have
the first strike.
(e) EXPENSES. The costs and expenses of any arbitration shall
be borne by Company. Should Executive or Company, at any time, initiate
mediation or arbitration for breach of this Agreement, Company shall reimburse
Executive for all amounts spent by Executive to pursue such mediation or
arbitration (including reasonable attorneys fees and costs), regardless of the
outcome, unless the mediator or arbitrator finds Executive's action to have been
frivolous and without merit.
12. BENEFIT AND BINDING EFFECT
This Agreement shall inure to the benefit of and be binding
upon company, its successors and assigns, including but not limited to any
Company, person, or other entity which may acquire all or substantially all of
the assets and business of Company or any Company with or into which Company may
be consolidated or merged, and Executive, his heirs, executors, administrators,
and legal representatives, provided that the obligations of Executive may not be
delegated.
13. NOTICES
All notices hereunder shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid and return
receipt requested:
If to Company, to: Insight Enterprises, Inc.
6820 South Hall Avenue
Tempe, Arizona 85283
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If to Executive, to: Timothy A. Crown
1820 West Drake, No. 108
Tempe, AZ 85281
Either party may change the address to which notices are to be sent to it by
giving ten (10) days written notice of such change of address to the other party
in the manner above provided for giving notice. Notices will be considered
delivered on personal delivery or on the date of deposit in the United States
mail in the manner provided for giving notice by mail.
14. ENTIRE AGREEMENT
The entire understanding and agreement between the parties has
been incorporated into this Agreement, and this Agreement supersedes all other
agreements and understandings between Executive and Company with respect to the
relationship of Executive with Company, except with respect to other continuing
or future bonus, incentive, stock option, health, benefit and similar plans or
agreements.
15. GOVERNING LAW
This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Arizona.
16. CAPTIONS
The captions included herein are for convenience and shall not
constitute a part of this Agreement.
17. DEFINITIONS
Throughout this Agreement, certain defined terms will be
identified by the capitalization of the first letter of the defined word or the
first letter of each substantive word in a defined
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phrase. Whenever used, these terms will be given the indicated meaning.
18. SEVERABILITY
If any one or more of the provisions or parts of a provision
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity or unenforceability shall not
affect any other provision or part of a provision of this Agreement, but this
Agreement shall be reformed and construed as if such invalid, illegal or
unenforceable provision or part of a provision had never been contained herein
and such provisions or part thereof shall be reformed so that it would be valid,
legal and enforceable to the maximum extent permitted by law. Any such
reformation shall be read as narrowly as possible to give the maximum effect to
the mutual intentions of Executive and Company.
19. TERMINATION OF EMPLOYMENT
The termination of this Agreement by either party also shall
result in the termination of Executive's employment relationship with Company in
the absence of an express written agreement providing to the contrary. Neither
party intends that any oral employment relationship continue after the
termination of this Agreement.
20. TIME IS OF THE ESSENCE
Company and Executive agree that time is of the essence with
respect to the duties and performance of the covenants and promises of this
Agreement.
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21. NO CONSTRUCTION AGAINST EITHER PARTY
This Agreement is the result of negotiation between Company
and Executive and both have had the opportunity to have this Agreement reviewed
by their legal counsel and other advisors. Accordingly, this Agreement shall not
be construed for or against Company or Executive, regardless of which party
drafted the provision at issue.
INSIGHT ENTERPRISES, INC., a
Delaware Corporation
By: /s/ Eric J.Crown
---------------------------
Its: CEO
/s/Timothy A. Crown
------------------------------
TIMOTHY A. CROWN
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<PAGE> 1
Exhibit 10.3
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into on
March 31 , 1998 between INSIGHT ENTERPRISES, INC., a Delaware
corporation ("Company"), and STANLEY LAYBOURNE ("Executive") to be
effective as of July 1, 1997.
R E C I T A L S
A. Executive is currently employed by Company in the position of Chief
Financial officer.
B. Company has decided to offer Executive a new employment agreement,
the terms and provisions of which are set forth below.
NOW, THEREFORE, IT IS HEREBY MUTUALLY AGREED AS FOLLOWS:
1. TERMS OF AGREEMENT.
(a) INITIAL TERM. Executive shall be employed by Company for
the duties set forth in Section 2 for a two-year term, commencing as of July 1,
1997 and ending on June 30, 1999 (the "Initial Term"), unless sooner terminated
in accordance with the provisions of this Agreement.
(b) RENEWAL TERM; EMPLOYMENT PERIOD DEFINED. On each
successive day after the commencement of the Initial Term, without further
action on the part of Company or Executive, this Agreement shall be
automatically renewed for a new 2-year term dated effective and beginning upon
each such successive day (the "Renewal Term"); provided, however, that Company
may notify Executive, or the Executive may notify the Company, at any time, that
there shall be no renewal of this Agreement, and in the event of such notice,
<PAGE> 2
neither party shall be under any obligation to renew or extend this Agreement.
The period of time commencing as of the date hereof and ending on the effective
date of the termination of employment of Executive under this or any successor
Agreement shall be referred to as the "Employment Period."
2. POSITION AND DUTIES.
(a) JOB DUTIES. Company does hereby employ, engage and hire
Executive as Chief Financial Officer of Company, and Executive does hereby
accept and agree to such employment, engagement, and hiring. Executive's duties
and authority during the Employment Period shall be such executive and
managerial duties as the Board of Directors of the Company (the "Board") shall
reasonably determine; provided that such duties and authority shall not be
materially different than they are at the date of this Agreement; provided
further that the authority of Executive shall not be diminished, and that
Executive shall not be demoted. Executive will devote such time as the Board
shall reasonably determine; provided that such devotion of time shall not be
materially different from Executive's devotion of time at the date of this
Agreement, reasonable absences because of illness, personal and family
exigencies excepted.
(b) BEST EFFORTS. Executive agrees that at all times during
the Employment Period he will faithfully, and to the best of his ability,
experience and talents, perform the duties that may be required of and from him
and fulfill his responsibilities hereunder pursuant to the express terms hereof.
Executive's ownership of, or
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participation (including any board memberships) in, any entity (other than
Company) must be disclosed to the Board; provided, however, that Executive need
not disclose any equity interest held in any public company or any private
company that is not engaged in a competing business as defined in Section 10 of
this Agreement when such interest constitutes less than 5% of the issued and
outstanding equity of such public or private company.
3. COMPENSATION.
(a) BASE SALARY. Company shall pay Executive a "Base Salary"
in consideration for Executive's services to Company at the rate of $190,000 per
annum. The Base Salary shall be payable as nearly as possible in equal
semi-monthly installments or in such other installments as are customary from
time to time for Company's executives. The Base Salary may be adjusted from time
to time in accordance with the procedures established by Company for salary
adjustments for executives, provided that the Base Salary shall not be reduced.
(b) INCENTIVE COMPENSATION. Executive shall also be permitted
to participate in such incentive compensation plans as adopted by the Board from
time to time. During the Employment Period, the Executive shall be entitled to
an incentive bonus, calculated and payable quarterly, equal to 0.5% of the
Company's "net earnings" provided that the Company's net earnings exceed the
Minimum Amount for the applicable fiscal quarter; and provided further that the
incentive bonus for the total of the four quarters constituting the fiscal year
ending December 31, 1998 shall not
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exceed 70% of Executive's annual Base Salary for that fiscal year, and such
limitation shall not be applicable thereafter. For purposes of calculating
Executive's incentive bonus pursuant to this subsection (b), the Company's "net
earnings" shall be the Company's consolidated net earnings prior to any
incentive bonus amounts for Executive and other executives of Company. The
amounts payable pursuant to this subparagraph (b) shall be paid on or before
thirty (30) days after the end of the applicable fiscal quarter. For purposes of
this subparagraph (b) the term "Minimum Amount" means $2.5 million for the
applicable fiscal quarters ending on or before December 31, 1998, and for
applicable fiscal quarters ending after December 31, 1998, means an amount equal
to eighty percent (80%) of the average of the Company's net earnings for the
immediately preceding four fiscal quarters ended prior to the applicable fiscal
quarter.
(1) If upon final presentation of consolidated financial
statements of Company, the "net earnings" are adjusted, then, within
thirty (30) days after the presentation, Company or Executive, as the
case may be, shall pay to the other the amount necessary to cause the
net amount of incentive bonus paid to be the proper amount after
adjustment; provided that if Executive shall pay Company pursuant to
the provisions of this clause (1), then the amount the Executive shall
pay will be reduced by the taxes withheld by Company attributable to
such amount ("Withheld Portion"), and the Withheld Portion shall be
offset against the next subsequent payments of Base
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Salary and incentive compensation made pursuant to Sections 3(a) and
(b).
(c) INCENTIVE AND BENEFIT PLANS. Executive will be entitled to
participate in those incentive compensation and benefit plans reserved for the
Company's executives, including any stock option plan maintained by the Company,
in accordance with the terms of such compensation and benefit plans.
Additionally, the Executive shall be entitled to participate in any other
benefit plans sponsored by company, including but not limited to, any savings
plan, life insurance plan and health insurance plan available generally to
employees of Company from time to time, subject to any restrictions specified
in, or amendments made to, such plans. The Executive shall be entitled to four
(4) weeks vacation during the calendar year, and such additional vacation time
as the Board shall approve, with such vacation to be scheduled and taken in
accordance with the Company's standard vacation policies, but this provision is
not intended to interfere with or limit Executive's discretion to determine the
appropriate time to be devoted to his duties hereunder.
4. BUSINESS EXPENSES.
The Company will reimburse Executive for any and all
necessary, customary and usual expenses which are incurred by Executive on
behalf of Company, provided Executive provides Company with receipts to
substantiate the business expense in accordance with Company's policies or
otherwise reasonably justifies the expense to the Company.
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5. DEATH OR DISABILITY.
(a) DEATH. This Agreement shall terminate upon Executive's
death. Executive's estate shall be entitled to receive the Base Salary due
through the date of his death and any incentive compensation payable for
quarters ended prior to Executive's death, but no Base Salary or other payment
or benefit will be payable after death except as expressly provided elsewhere in
this Agreement. Whether any bonuses or incentive compensation will be payable
for quarters ending following Executive's death will be determined in accordance
with the provisions of any incentive compensation program, practice, or policy
in which Executive participates at the time of Executive's death. If there is no
written incentive compensation program, policy, or practice in effect at the
time of Executive's death, Company, in the exercise of its discretion, may elect
to pay to Executive's estate a portion of the incentive compensation to which
Executive would have been entitled (had Executive not died) for the year in
which this Agreement terminated due to Executive's death.
(b) DISABILITY. This Agreement shall also terminate in the
event of Executive's "Disability". For purposes of this Agreement, "Disability"
means the total and complete inability of Executive to perform the essential
duties associated with his normal position with Company (after any
accommodations required by the Americans with Disabilities Act or applicable
state law) due to a physical or mental injury or illness that occurs while
Executive is actively employed by Company.
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If this Agreement is terminated due to Executive's Disability,
Executive shall receive all of the payments and benefits called for by Section
6(c).
6. TERMINATION BY COMPANY.
(a) TERMINATION FOR CAUSE. Company may terminate this
Agreement at any time during the Initial Term or any Renewal Terms for "Cause"
upon written notice to Executive. If Company terminates this Agreement for
"Cause," Executive's Base Salary shall immediately cease, and Executive shall
not be entitled to severance payments, incentive compensation payments or any
other payments or benefits pursuant to this Agreement, except for any vested
rights pursuant to any benefit plans in which Executive participates and any
accrued compensation, vacation pay and similar items. For purposes of this
Agreement, the term "Cause" shall mean the termination of Executive's employment
by Company for one or more of the following reasons:
(1) The criminal conviction for any felony involving
theft or embezzlement from Company or any affiliate;
(2) The criminal conviction for any felony involving
moral turpitude that reflects adversely upon the standing of
Company in the community; or
(3) The criminal conviction for any felony involving
fraud committed against Company, any affiliate or any
individual or entity that provides goods or services to,
receives goods or services from or otherwise
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deals with Company or any affiliate.
(4) Acts by Executive that constitute repeated and
material violations of this Agreement, any written employment
policies of Company or any written directives of Company. A
violation will not be considered to be "repeated" unless such
violation has occurred more than once and after receipt of
written notice from Company of such violation.
Any termination of Executive when there is not Cause is
"without Cause." If Company terminates Executive for Cause, and it is later
determined that Cause did not exist, Company will pay Executive the amount he
would have received under this Agreement if his employment had been terminated
by Company without Cause, plus interest at the Prime Rate published by the Wall
Street Journal on the date of termination. Such payments and interest shall be
calculated as of the effective date of the initial termination. Payment shall be
made within fifteen (15) days after such later determination is made.
(b) TERMINATION WITHOUT CAUSE. Company also may terminate this
Agreement at any time during the Initial Term or Renewal Terms without Cause. If
Company terminates this Agreement pursuant to this paragraph, Company shall
provide Executive with ninety (90) days advance written notice. This Agreement
shall continue during such notice period. The termination of this Agreement
shall be effective on the ninetieth (90th) day (the "Termination Date")
following the day on which the notice is given.
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Company may, at its discretion, place Executive on a paid administrative leave
during all or any part of said notice period. During the administrative leave,
Company may bar Executive's access to Company's offices or facilities if
reasonably necessary to the smooth operation of Company, or may provide
Executive with access subject to such reasonable terms and conditions as Company
chooses to impose.
(c) CONTINUED COMPENSATION. Should Executive's employment by
Company be terminated without Cause, Executive shall receive as a lump sum
immediately upon such termination of the total amount of his Base Salary for the
remainder of the Initial Term or Renewal Terms, if later, determined as if the
employment of the Executive had not been terminated prior to the end of such
term and as if the Executive had continued to perform all of his obligations
under this Agreement and as an employee, officer, and director of the Company.
Executive shall have no duty to mitigate damages in order to receive the
Compensation described by this Subsection and the Compensation shall not be
reduced or offset by other income, payments or profits received by Executive
from any source.
(d) INCENTIVE COMPENSATION. Executive shall not be entitled to
receive any incentive compensation payments for the fiscal quarter in which his
employment is terminated for Cause or any later quarters. If Executive is
terminated without Cause, Executive shall receive as a lump sum immediately upon
such termination the total amount of incentive compensation payments
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determined in accordance with the provisions of any incentive compensation
program, practice, or policy in which Executive participates on the effective
date of the termination, determined as if the employment of the Executive had
not been terminated prior to the end of the Initial Term or latest Renewal Term,
if later, and as if the financial performance of Company upon which the
programs, practice, or policy is determined continues as it had been for the
immediately preceding last four (4) fiscal quarters ended prior to either (i)
the date of notice of termination or (ii) the date of termination, as Executive
shall elect after receiving the report of such performance for the applicable
fiscal quarters, and as if the Executive had continued to perform all of his
obligation under this Agreement and as an employee, officer, and director of the
Company. Executive shall have no duty to mitigate damages in order to receive
the Compensation described by this Subsection and the Compensation shall not be
reduced or offset by other income, payments or profits received by Executive
from any source. If there is no binding incentive compensation program, policy,
or practice in effect on the effective date of the termination, Company, in the
exercise of its discretion, may elect to pay Executive a portion of the
incentive compensation to which he would have been entitled (had his employment
not terminated) for the quarter in which his employment is terminated without
Cause.
(a) OTHER PLANS. Except to the extent specified in this
Section 6 and as provided in this Subsection (e), termination of this Agreement
shall not affect Executive's participation in,
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distributions from, and vested rights under any employee benefit plan of
Company, which will be governed by the terms of those respective plans, in the
event of Executive's termination of employment. If Executive is terminated
without Cause, then Executive shall be fully vested under any and all stock
bonus and stock option plans and agreements in which Executive had an interest,
vested or contingent. If applicable law prohibits such vesting, then Company
shall pay Executive an amount equal to the value of the benefits and rights that
would have, but for such prohibition, been vested. Executive shall have no duty
to mitigate damages in order to receive the Compensation described by this
Subsection and the Compensation shall not be reduced or offset by other income,
payments or profits received by Executive from any source.
(f) EXAMPLE. For example, if Company provides notice to
Executive of Termination without Cause on January 1, 1999, then the Employment
Period ends ninety days thereafter, on April 1, 1999, and Company will pay to
Executive in a lump sum payment immediately thereafter the sum of an amount
equal to (i) Executive's Base Salary for the next two (2) years totaling
$380,000 (assuming the Base Salary was at that time $190,000) plus (ii) the
incentive compensation for eight fiscal quarters computed as stated above, and
Executive shall be fully vested in all stock bonus and stock option plans and
agreements in which Executive had an interest.
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7. TERMINATION BY EXECUTIVE
(a) GENERAL. Executive may terminate this Agreement at any
time, with or without "Good Reason." If Executive terminates this Agreement
without Good Reason, Executive shall provide Company with ninety (90) days
advance written notice. If Executive terminates this Agreement with Good Reason,
Executive shall provide Company with thirty (30) days advance written notice.
(b) GOOD REASON DEFINED. For purposes of this Agreement, "Good
Reason" shall mean and include each of the following (unless Executive has
expressly agreed to such event in a signed writing):
(1) The demotion of Executive by Company, such as (i)
assignment to Executive of any duties that are inconsistent
with or inferior to his positions, duties, responsibilities,
and status with Company as in effect on the date of execution
of this Agreement (the "Relevant Date"); (ii) an adverse
change in his titles, offices, or authority as in effect on
the Relevant Date; (iii) the involuntary (I) removal of
Executive as a member of the Board or (II) failure of the
Executive to be a Member of an executive committee of the
Board, if any such committee is established; or (iv) any
removal of him from or any failure to re-appoint or renew him
to any of such positions; except in connection with the
termination of this Agreement for Cause, Executive's death or
Disability, termination by Executive other than for Good
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Reason, or the expiration of the Agreement without renewal;
(2) The recommended travel of Executive by the Board in furtherance of
Company business which is materially more extensive than at the Relevant Date;
(3) The assignment of Executive by the Company to a location more than
50 miles from the present executive offices of the Company.
(4) Reduction by Company in Executives Base Salary as set forth in this
Agreement or as the same may be increased from time to time.
(5) Failure by Company to continue in effect any incentive compensation
program, policy or practice, or any savings, life insurance, health and accident
or disability plan in which Executive is participating on the Relevant Date (or
plans which provide Executive with substantially similar benefits) or the taking
of any action by Company which would adversely affect Executive's participation
in or materially reduce his benefit under any of such plans or deprive him of
any material fringe benefit enjoyed by him as of the Relevant Date or any later
date. Amendment or modification of said plans, to the extent required pursuant
to applicable federal law and the procedures set forth in the respective plan,
or amendments of such plans that apply to either all employees generally or all
senior
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executives shall not be considered to be "Good Reason" for purposes of this
clause (5).
(6) Failure of Company to obtain a specific written agreement
satisfactory to Executive from any successor to the business, or substantially
all the assets, of Company to assume this Agreement or issue a substantially
similar agreement.
(7) The termination of this Agreement by Company without Cause or any
attempted termination by Company purportedly for Cause if it is thereafter
determined that Cause did not exist under this Agreement with respect to the
termination.
(8) Breach of any material provisions of this Agreement by Company
which is not cured within thirty (30) days after receipt by Company of written
notice of such breach from Executive.
(9) Any action taken by Company over the specific, contemporaneous,
written objection of the Executive that is likely (i) to cause a material
reduction in the value of this Agreement to Executive or (ii) to materially
impair Executive's abilities to discharge his duties hereunder. This provision
is not intended to affect either the Company's or Executive's right to terminate
this Agreement as provided for elsewhere herein.
(c) EFFECT OF GOOD REASON TERMINATION. If Executive terminates this Agreement
for Good Reason (as defined in Section
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7(b)), Executive shall be entitled to receive all of the payments and benefits
provided by Section 6 and otherwise in this Agreement to the same extent as if
this Agreement had been terminated by Company without Cause.
(d) EFFECT OF TERMINATION WITHOUT GOOD REASON. If Executive
terminates this Agreement without Good Reason, Executive shall be entitled to
receive his Base Salary through the effective date of his termination.
Executive's entitlement to receive any other amount shall be determined in
accordance with the provisions of any benefit plans in which Executive
participates on the effective date of the termination. Executive shall not be
entitled to receive any incentive compensation for the quarter in which his
employment is terminated by him without Good Reason or any later quarter.
8. CHANGE IN CONTROL OF COMPANY
(a) GENERAL. Company considers the maintenance of a sound and
vital management to be essential to protecting and enhancing the best interests
of Company and its shareholders. Company recognizes that, as is the case with
many publicly held corporations, the continuing possibility of an unsolicited
tender offer or other takeover bid for Company may be unsettling to Executive
and other senior executives of Company and may result in the departure or
distraction of management personnel to the detriment of Company and its
shareholders. The Board and the Compensation Committee of the Board (the
"Committee") have previously determined that it is in the best interests of
Company
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and its shareholders for Company to minimize these concerns by making this
Change in Control provision an integral part of this Employment Agreement, which
would provide the Executive with a continuation of benefits in the event the
Executive's employment with Company terminates under certain limited
circumstances.
This provision is offered to help assure a continuing
dedication by Executive to his duties to Company notwithstanding the occurrence
of a tender offer or other takeover bid. In particular, the Board and the
Committee believe it important, should Company receive proposals from third
parties with respect to its future, to enable Executive, without being
influenced by the uncertainties of his own situation, to assess and advise the
Board whether such proposals would be in the best interests of Company and its
shareholders and to take such other action regarding such proposals as the Board
might determine to be appropriate. The Board and the Committee also wish to
demonstrate to Executive that company is concerned with his welfare and intends
to see he is treated fairly.
(b) CONTINUED ELIGIBILITY TO RECEIVE BENEFITS. In view of the
foregoing and in further consideration of Executive's continued employment with
Company, if a Change in Control occurs, Executive shall be entitled to a
lump-sum severance benefit provided in subparagraph (c) of this Section 8 if,
prior to the expiration of twenty-four (24) months after the Change in Control,
Executive notifies Company of his intent to terminate his employment with
Company for Good Reason or Company terminates
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Executive's employment without Cause or if, prior to the expiration of one
hundred twenty (120) days after the Change in Control, Executive terminates his
employment with Company. If Executive triggers the application of this Section
by terminating employment for Good Reason, he must do so within one hundred
twenty (120) days following his receipt of notice of the occurrence of the last
event that constitutes Good Reason. The full severance benefits provided by this
Section shall be payable regardless of the period remaining until the expiration
of the Agreement without renewal.
(c) RECEIPT OF BENEFITS. If Executive is entitled to receive a
severance benefit pursuant to Section 8(b) hereof, Company will provide
Executive with the following benefits:
(1) A lump sum severance payment within ten (10) days
following Executive's last day of work equal to the sum of (i)
three times the greater of Executive's annualized Base Salary
in effect on the date of termination of employment or
Executive's highest annualized Base Salary in effect on any
date during the term of this Agreement and (ii) three times
the amount of all incentive compensation paid or accrued to
Executive for the Company's most recent last four fiscal
quarters then ended.
(2) Executive shall be vested in any and all stock
bonus and stock option plans and agreements of Company in
which Executive had an interest, vested or contingent. If
applicable law prohibits such vesting, then Company
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<PAGE> 18
shall pay Executive an amount equal to the value of benefits and rights that
would have, but for such prohibition, have been vested in Executive.
(3) Executive will continue to receive life, disability, accident and
group health and dental insurance benefits substantially similar to those which
he was receiving immediately prior to his termination of employment until the
earlier of (i) the end of the period of 24 months following his termination of
employment or (ii) the day on which he becomes eligible to receive any
substantially similar continuing health care benefits under any plan or program
of any other employer. The benefits provided pursuant to this Section shall be
provided on substantially the same terms and conditions as they were provided
prior to the Change in Control, except that the full cost of such benefits shall
be paid by Company. Executive's right to receive continued coverage under
Company's group health plans pursuant to Section 601 et seq. of the Employee
Retirement Income Security Act of 1974, as it may be amended or replaced from
time to time, shall commence following the expiration of his right to receive
continued benefits under this Agreement. Executive's right to receive all forms
of benefits under this Section is reduced to the extent he is eligible to
receive any health care benefit from any other employer without his request to
pay any
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premium with respect thereto.
Executive shall have no duty to mitigate damages or loss in order to
receive the benefits provided by this Section or in this Agreement. If Executive
is entitled to receive the payments called for by this Section 8(c), Executive's
right to receive the compensation provided by Section 6(c) or 7(c) shall to the
extent of such payments be reduced.
(d) CHANGE IN CONTROL DEFINED. For purposes of this Agreement,
a "Change in Control" means any one or more of the following events:
(1) When the individuals who, at the beginning of any
period of two years or less, constituted the Board cease, for
any reason, to constitute at least a majority 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
Securities Exchange Act of 1934 (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 20% or more of the combined voting
power of the Company's
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then outstanding securities;
(3) Any merger, consolidation or liquidation of the
Company in which the Company is not the continuing or
surviving company or pursuant to which stock would be
converted into cash, 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
company immediately after the merger;
(4) The shareholders 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) in which the company is a member at
the Relevant Date.
(e) GOOD REASON DEFINED. For purposes of this Section, "Good
Reason" shall have the meaning assigned to it in Section 7(b).
(f) NOTICE OF TERMINATION BY EXECUTIVE. Any termination by
Executive under this Section 8 shall be communicated by written notice to
Company which shall set forth generally the facts and circumstances claimed to
provide a basis for such termination.
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(g) GROSS-UP ALLOWANCE
(1) GENERAL RULES. The Code places significant tax consequences on
Executive and Company if the total payments made to Executive due, or deemed
due, to a Change in Control exceed prescribed limits. For example, if
Executive's "Base Period Income" (as defined below) is $100,000 and Executive's
"Total Payments" exceed 299% of such Base Period Income (the "Cap"), Executive
will be subject to an excise tax under Section 4999 of the Code of 20% of all
amounts paid to him in excess of $100,000. In other words, if Executive's Cap is
$299,999, he will not be subject to an excise tax if he receives exactly
$299,999. If Executive receives $300,000, he will be subject to an excise tax of
$40,000 (20% of $200,000). In the event such a consequence occurs, for any
reason, due to this Agreement or otherwise, Company shall pay to Executive a
"gross-up allowance" equal in amount to the sum of (i) the excise tax liability
of Executive on the Total Payments, and (ii) all the total excise, income, and
payroll tax liability of Executive on the "gross-up allowance," further
increased by all additional excise, and income, and payroll tax liability
thereon, which increase shall be part of the "gross-up allowance" for purpose of
computing the gross-up allowance. Company shall indemnify and hold Executive
harmless from such additional tax liability for the income and payroll tax
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arising from the "gross-up allowance" and all excise tax arising with respect to
compensation and other payments made to Executive under this Agreement and
excise, income, and payroll tax on the "gross-up allowance, 11 and all penalties
and interest thereon. The purpose and effect of the gross-up allowance is to
cause Executive to have the same net compensation after income, excise, and
payroll taxes that Executive would have if there was no tax under Code Section
4999.
(2) SPECIAL DEFINITIONS. For purposes of this Section, the following
specialized terms will have the following meanings:
(i) "BASE PERIOD INCOME". "Base Period Income" is an
amount equal to Executive's "annualized includable
compensation" for the "base period" as defined in
Sections 28OG(d)(1) and(2)of the Code and the
regulations adopted thereunder. Generally,
Executive's "annualized includable compensation" is
the average of his annual taxable income from the
Company for the "base period," which is the five
calendar years prior to the year in which the
Change of Control occurs.
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(ii) "CAP" OR 280G CAP". "Cap" or
"28OG Cap" shall mean an amount
equal to 2.99 times Executive's
"Base Period Income." This is the
maximum amount which he may
receive without becoming subject
to the excise tax imposed by
Section 4999 of the Code or which
Company may pay without loss of
deduction under Section 28OG of
the Code.
(iii)"TOTAL PAYMENTS". The "Total
Payments" include any "payments
in the nature of compensation"
(as defined in Section 280G of
the Code and the regulations
adopted thereunder), made
pursuant to this Agreement or
otherwise, to or for Executive's
benefit, the receipt of which is
contingent or deemed contingent
on a Change of Control and to
which Section 28OG of the Code
applies.
(h) EFFECT OF REPEAL. In the event that the provisions of
Sections 28OG and 4999 of the Code are repealed without succession, this Section
shall be of no further force or effect.
(i) EMPLOYMENT BY SUCCESSOR. For purposes of this Agreement
employment by a successor of Company or a successor of any subsidiary of Company
that has assumed this Agreement shall be considered to be employment by Company
or one of its subsidiaries.
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As a result, if Executive is employed by such a successor following a Change in
Control, he will not be entitled to receive the benefits provided by Section 8
unless his employment with the successor is subsequently terminated without
Cause or he terminates his employment for Good Reason.
9. CONFIDENTIALITY.
Executive covenants and agrees to hold in strictest
confidence, and not disclose to any person, firm or company, without the express
written consent of Company, any and all of Company's confidential data,
including but not limited to information and documents concerning Company's
business, customers, and suppliers, market methods, files, trade secrets, or
other "know-how" or techniques or information not of a published nature or
generally known (for the duration they are not published or generally known)
which shall come into his possession, knowledge, or custody concerning the
business of Company, except as such disclosure may be required by law or in
connection with Executive's employment hereunder or except as such matters may
have been known to Executive at the time of his employment by Company. This
covenant and agreement of Executive shall survive this Agreement and continue to
be binding upon Executive after the expiration or termination of this Agreement,
whether by passage of time or otherwise so long as such information and data
shall be treated as confidential by Company.
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10. RESTRICTIVE COVENANTS.
(a) COVENANT-NOT-TO-COMPETE. In consideration of Company's
agreements contained herein and the payments to be made by it to Executive
pursuant hereto and except for termination of Executive's employment by Company
without Cause or termination of employment by Executive for Good Reason,
Executive agrees that, for two years following his termination of employment and
so long as company is continuously not in default of its obligations to
Executive hereunder or under any other agreement, covenant, or obligation, he
will not, without prior written consent of Company, consult with or act as an
advisor to another company about activity which is a "Competing Business" of
such company in the United States. For purposes of this Agreement, Executive
shall be deemed to be engaged in a "Competing Business" if, in any capacity,
including but not limited to proprietor, partner, officer, director or employee,
he engages or participates, directly or indirectly, in the operation, ownership
or management of the activity of any proprietorship, partnership, company or
other business entity which activity is competitive with the then actual
business in which Company is engaged on the date of, or any business
contemplated by the Company's business plan in effect on the date of notice of,
Executive's termination of employment. Nothing in this subparagraph is intended
to limit Executive's ability to own equity in a public company constituting less
than five percent (5%) of the outstanding equity of such company, when Executive
is not actively engaged in the management thereof. Company shall furnish
Executive
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with a good-faith written description of the business or businesses in which
Company is then actively engaged within 30 days after Executive's termination of
employment, and only those activities so timely described which are in fact
actively engaged by Company may be treated as activities of which one may be
engaged that is competitive with Company.
(b) NON-SOLICITATION. Executive recognizes that Company's
customers are valuable and proprietary resources of Company. Accordingly,
Executive agrees that for a period of one year following his termination of
employment, and only so long as company is continuously not in default of its
obligations to Executive hereunder or under any other agreement, covenant, or
obligation, he will not directly or indirectly, through his own efforts or
through the efforts of another person or entity, solicit business from any
individual or entity located in the state of Arizona which obtained services
from Company at any time during Executive's employment with Company; he will not
solicit business from any individual or entity located in the state of Arizona
which may have been solicited by Executive on behalf of Company and he will not
solicit employees of Company who would have the skills and knowledge necessary
to enable or assist efforts by Executive to engage in a Competing Business.
(c) REMEDIES: REASONABLENESS. Executive acknowledges and
agrees that a breach by Executive of the provisions of this Section 10 will
constitute such damage as will be irreparable and the exact amount of which will
be impossible to ascertain and, for
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that reason, agrees that Company will be entitled to an injunction to be issued
by any court of competent jurisdiction restraining and enjoining Executive from
violating the provisions of this Section. The right to an injunction shall be in
addition to and not in lieu of any other remedy available to Company for such
breach or threatened breach, including the recovery of damages from Executive.
Executive expressly acknowledges and agrees that (i) the
Restrictive Covenants contained herein are reasonable as to time and
geographical area and do not place any unreasonable burden upon him; (ii) the
general public will not be harmed as a result of enforcement of these
Restrictive Covenants; and (iii) Executive understands and hereby agrees to each
and every term and condition of the Restrictive Covenants set forth in this
Agreement.
(d) CHANGE OF CONTROL. The provisions of this Section 10 shall
lapse and be of no further force or effect if Executive's employment is
terminated by Company "without Cause" or by Executive for "Good Reason."
11. DISPUTE RESOLUTION.
(a) MEDIATION. Any and all disputes arising under, pertaining
to or touching upon this Agreement, or the statutory rights or obligations of
either party hereto, shall, if not settled by negotiation, be subject to
non-binding mediation before an independent mediator selected by the parties
pursuant to Section 11(d). Notwithstanding the foregoing, both Executive and
Company may seek preliminary injunctive or other judicial relief if such
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action is necessary to avoid irreparable damage during the pendency of the
proceedings described in this Section 11. Any demand for mediation shall be made
in writing and served upon the other party to the dispute, by certified mail,
return receipt requested, at the address specified in Section 13. The demand
shall set forth with reasonable specificity the basis of the dispute and the
relief sought. The mediation hearing will occur at a time and place convenient
to the parties in Maricopa County, Arizona, within thirty (30) days of the date
of selection or appointment of the mediator.
(b) ARBITRATION. In the event that the dispute is not settled
through mediation, the parties shall then proceed to binding arbitration before
an independent arbitrator selected pursuant to Section 11(d). The mediator shall
not serve as the arbitrator. EXCEPT AS PROVIDED IN SECTION 11 (a), ALL DISPUTES
INVOLVING ALLEGED UNLAWFUL EMPLOYMENT DISCRIMINATION, TERMINATION BY ALLEGED
BREACH OF CONTRACT OR POLICY, OR ALLEGED EMPLOYMENT TORT COMMITTED BY COMPANY OR
A REPRESENTATIVE OF COMPANY, INCLUDING CLAIMS OF VIOLATIONS OF FEDERAL OR STATE
DISCRIMINATION STATUTES OR PUBLIC POLICY, SHALL BE RESOLVED PURSUANT TO THIS
SECTION 11 AND THERE SHALL BE NO RECOURSE TO COURT, WITH OR WITHOUT A JURY
TRIAL.
The arbitration hearing shall occur at a time and place convenient to the
parties in Maricopa County, Arizona, within thirty (30) days of selection or
appointment of the arbitrator. If Company has adopted a policy that is
applicable to arbitrations with executives, the arbitration shall be conducted
in accordance with
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said policy, to the extent that the policy is consistent with this Agreement and
the Federal Arbitration Act, 9 U.S.C. Sections 1-16. If no such policy has
been adopted, the arbitration shall be governed by the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association
("AAA") in effect on the date of the first notice of demand for arbitration.
Notwithstanding any provisions in such rules to the contrary, the arbitrator
shall issue findings of fact and conclusions of law, and an award, within
fifteen (15) days of the date of the hearing unless the parties otherwise agree.
(c) DAMAGES. In case of breach of contract or policy, damages
shall be limited to contract damages. In cases of discrimination claims
prohibited by statute, the arbitrator may direct payment consistent with the
applicable statute. In cases of employment tort, the arbitrator may award
punitive damages if proved by clear and convincing evidence. Issues of
procedure, arbitrability, or confirmation of award shall be governed by the
Federal Arbitration Act, 9 U.S.C. SS 1-16, except that court review of the
arbitrator's award shall be that of an appellate court reviewing a decision of a
trial judge sitting without a jury.
(d) SELECTION OF MEDIATOR OR ARBITRATOR. The parties shall
select the mediator and arbitrator from a panel list made available by the AAA.
If the parties are unable to agree to a mediator or an arbitrator within ten
(10) days of receipt of a demand for mediation or arbitration, the mediator or
arbitrator will be chosen by alternatively striking from a list of five (5)
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mediators or arbitrators obtained by Company from the AAA. Executive shall have
the first strike.
(e) EXPENSES. The costs and expenses of any arbitration shall
be borne by Company. Should Executive or Company, at any time, initiate
mediation or arbitration for breach of this Agreement, Company shall reimburse
Executive for all amounts spent by Executive to pursue such mediation or
arbitration (including reasonable attorneys fees and costs), regardless of the
outcome, unless the mediator or arbitrator finds Executive's action to have been
frivolous and without merit.
12. BENEFIT AND BINDING EFFECT
This Agreement shall inure to the benefit of and be binding
upon company, its successors and assigns, including but not limited to any
Company, person, or other entity which may acquire all or substantially all of
the assets and business of Company or any Company with or into which Company may
be consolidated or merged, and Executive, his heirs, executors, administrators,
and legal representatives, provided that the obligations of Executive may not be
delegated.
13. NOTICES
All notices hereunder shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid and return
receipt requested:
If to Company, to: Insight Enterprises, Inc.
6820 South Hall Avenue
Tempe, Arizona 85283
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If to Executive, to: Stanley Laybourne
10830 East San Salvador Drive
Scottsdale, AZ 85259
Either party may change the address to which notices are to be sent to it by
giving ten (10) days written notice of such change of address to the other party
in the manner above provided for giving notice. Notices will be considered
delivered on personal delivery or on the date of deposit in the United States
mail in the manner provided for giving notice by mail.
14. ENTIRE AGREEMENT
The entire understanding and agreement between the parties has
been incorporated into this Agreement, and this Agreement supersedes all other
agreements and understandings between Executive and Company with respect to the
relationship of Executive with Company, except with respect to other continuing
or future bonus, incentive, stock option, health, benefit and similar plans or
agreements.
15. GOVERNING LAW
This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Arizona.
16. CAPTIONS
The captions included herein are for convenience and shall not
constitute a part of this Agreement.
17. DEFINITIONS
Throughout this Agreement, certain defined terms will be
identified by the capitalization of the first letter of the defined word or the
first letter of each substantive word in a defined
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phrase. Whenever used, these terms will be given the indicated meaning.
18. SEVERABILITY
If any one or more of the provisions or parts of a provision
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity or unenforceability shall not
affect any other provision or part of a provision of this Agreement, but this
Agreement shall be reformed and construed as if such invalid, illegal or
unenforceable provision or part of a provision had never been contained herein
and such provisions or part thereof shall be reformed so that it would be valid,
legal and enforceable to the maximum extent permitted by law. Any such
reformation shall be read as narrowly as possible to give the maximum effect to
the mutual intentions of Executive and Company.
19. TERMINATION OF EMPLOYMENT
The termination of this Agreement by either party also shall
result in the termination of Executive's employment relationship with Company in
the absence of an express written agreement providing to the contrary. Neither
party intends that any oral employment relationship continue after the
termination of this Agreement.
20. TIME IS OF THE ESSENCE
Company and Executive agree that time is of the essence with
respect to the duties and performance of the covenants and promises of this
Agreement.
32
<PAGE> 33
21. NO CONSTRUCTION AGAINST EITHER PARTY
This Agreement is the result of negotiation between Company
and Executive and both have had the opportunity to have this Agreement reviewed
by their legal counsel and other advisors. Accordingly, this Agreement shall not
be construed for or against Company or Executive, regardless of which party
drafted the provision at issue.
INSIGHT ENTERPRISES, INC., a
Delaware Corporation
By: /s/ Eric J. Crown
---------------------
Its: CEO
/s/ Stanley Laybourne
--------------------------
STANLEY LAYBOURNE
33
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
SUBSIDIARY STATE OF
INCORPORATION
Apex Financial, Inc. Arizona
B&M Distributing, Inc. Arizona
Direct Alliance Corporation Arizona
Express Micro Limited United Kingdom
Insight Canada, Inc. Arizona
Insight Credit Corporation Arizona
Insight Direct (UK) Limited United Kingdom
Insight Direct Canada, Inc. Canada
Insight Direct, Inc. Arizona
Insight Distribution G.P., Inc. Arizona
Insight Distribution LLC Arizona
Insight Distribution Network International, Inc. Arizona
Insight Distribution Network, Inc. Arizona
Insight International, Inc. Arizona
Insight.com Bowl, Inc. Arizona
ITA, Inc. Arizona
JDC, Inc. Arizona
Plusnet Technologies Limited United Kingdom
Refurb Services, Inc. Arizona
TC Computers, Inc. Arizona
Technology Direct, Inc. Arizona
TN, Inc. Arizona
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET OF INSIGHT ENTERPRISES, INC. AND
SUBSIDIARIES AS OF MARCH 31, 1998 AND THE RELATED CONDENSED CONSOLIDATED
STATEMENT OF EARNINGS FOR THE 3 MONTHS ENDED MARCH 31, 1998 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FOR THE QUARTERLY PERIOD ENDING
MARCH 31,1998.
</LEGEND>
<CIK> 0000932696
<NAME> INSIGHT ENTERPRISES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 8,587
<SECURITIES> 0
<RECEIVABLES> 104,273
<ALLOWANCES> 4,248
<INVENTORY> 31,411
<CURRENT-ASSETS> 146,963
<PP&E> 28,750
<DEPRECIATION> 6,951
<TOTAL-ASSETS> 168,876
<CURRENT-LIABILITIES> 48,404
<BONDS> 10,800
0
0
<COMMON> 105
<OTHER-SE> 109,567
<TOTAL-LIABILITY-AND-EQUITY> 168,876
<SALES> 206,796
<TOTAL-REVENUES> 206,796
<CGS> 181,454
<TOTAL-COSTS> 181,454
<OTHER-EXPENSES> 17,100
<LOSS-PROVISION> 777
<INTEREST-EXPENSE> 375
<INCOME-PRETAX> 7,090
<INCOME-TAX> 2,757
<INCOME-CONTINUING> 4,333
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,333
<EPS-PRIMARY> 0.41<F1>
<EPS-DILUTED> 0.40<F1>
<FN>
<F1>EPS-PRIMARY AND EPS-DILUTED ARE RESTATED TO INCLUDE THE IMPACT OF FINANCIAL
ACCOUNTING STANDARDS BOARD STATEMENT NO. 128.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET OF INSIGHT ENTERPRISES, INC. AND
SUBSIDIARIES AS OF MARCH 31, 1997 AND THE RELATED CONDENSED CONSOLIDATED
STATEMENT OF EARNINGS FOR THE 3 MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FOR THE QUARTERLY PERIOD ENDING
MARCH 31, 1997.
</LEGEND>
<CIK> 0000932696
<NAME> INSIGHT ENTERPRISES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 11,743
<SECURITIES> 0
<RECEIVABLES> 62,627
<ALLOWANCES> 3,821
<INVENTORY> 28,327
<CURRENT-ASSETS> 103,531
<PP&E> 20,101
<DEPRECIATION> 4,321
<TOTAL-ASSETS> 119,383
<CURRENT-LIABILITIES> 31,377
<BONDS> 0
0
0
<COMMON> 67
<OTHER-SE> 87,939
<TOTAL-LIABILITY-AND-EQUITY> 119,383
<SALES> 130,825
<TOTAL-REVENUES> 130,825
<CGS> 114,103
<TOTAL-COSTS> 114,103
<OTHER-EXPENSES> 11,577
<LOSS-PROVISION> 593
<INTEREST-EXPENSE> 48
<INCOME-PRETAX> 4,504
<INCOME-TAX> 1,758
<INCOME-CONTINUING> 2,746
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,746
<EPS-PRIMARY> 0.27<F1>
<EPS-DILUTED> 0.26<F1>
<FN>
<F1>EPS-PRIMARY AND EPS-DILUTED ARE RESTATED TO INCLUDE THE IMPACT OF FINANCIAL
ACCOUNTING STANDARDS BOARD STATEMENT NO. 128 AND THE EFFECT OF A 3-FOR-2 STOCK
SPLIT IN THE FORM OF A STOCK DIVIDEND PAID ON SEPTEMBER 17, 1997.
</FN>
</TABLE>
