<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
INSIGHT ENTERPRISES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
INSIGHT ENTERPRISES, INC.
6820 SOUTH HARL AVENUE
TEMPE, ARIZONA 85283
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
MAY 13, 1999
TO OUR STOCKHOLDERS:
The 1999 Annual Meeting of Stockholders of Insight Enterprises, Inc., a
Delaware corporation (the "Company"), will be held on Thursday, May 13, 1999, at
3:00 p.m. local time, at the Company's corporate headquarters, 6820 South Harl
Avenue, Tempe, Arizona 85283, for the following purposes:
(1) To elect two Class II Directors to serve until the 2002 Annual
Meeting of Stockholders or until their successors have been
duly elected and qualified;
(2) To approve amendments to the Company's Amended and Restated
Certificate of Incorporation to increase the total authorized
number of shares of Common Stock, $.01 par value per share,
from 30,000,000 to 100,000,000 and of Preferred Stock, $.01
par value per share, from 3,000,000 to 10,000,000;
(3) To approve amendments to the Insight Enterprises, Inc. 1998
Long-Term Incentive Plan to increase the number of shares
authorized for issuance thereunder to 3,214,125 and to make
certain other amendments; and
(4) To transact such other business as may properly come before
the Annual Meeting or any adjournment thereof. Management is
presently aware of no other business to come before the Annual
Meeting.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Each outstanding share of the Company's Common Stock entitles the holder of
record at the close of business on March 17, 1999 to receive notice of and to
vote at the Annual Meeting or any adjournment or postponement thereof. Shares of
Common Stock can be voted at the Annual Meeting only if the holder is present at
the Annual Meeting in person or by valid proxy. A copy of the Company's 1998
Annual Report to Stockholders, which includes audited financial statements, is
enclosed.
All stockholders are cordially invited to attend the Annual Meeting.
By order of the Board of Directors
/s/ Stanley Laybourne
Tempe, Arizona Stanley Laybourne
March 31, 1999 Secretary, Treasurer
and Chief Financial Officer
IMPORTANT
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN, DATE AND MAIL THE ENCLOSED PROXY SO THAT YOUR SHARES MAY BE
REPRESENTED AT THE MEETING. A POSTAGE-PAID ENVELOPE IS PROVIDED FOR MAILING IN
THE UNITED STATES.
<PAGE> 3
INSIGHT ENTERPRISES, INC.
6820 SOUTH HARL AVENUE
TEMPE, ARIZONA 85283
PROXY STATEMENT
1999 ANNUAL MEETING OF STOCKHOLDERS
MAY 13, 1999
SOLICITATION, EXECUTION AND REVOCATION OF PROXIES
This Proxy Statement is furnished to the stockholders of record of Insight
Enterprises, Inc. (the "Company") in connection with the solicitation of proxies
to be used at the Annual Meeting of Stockholders (the "Annual Meeting") to be
held on Thursday, May 13, 1999, at 3:00 p.m. local time, at the Company's
corporate headquarters, 6820 South Harl Avenue, Tempe, Arizona 85283, and at any
and all adjournments or postponements thereof. THE ENCLOSED PROXY IS SOLICITED
BY THE BOARD OF DIRECTORS OF THE COMPANY. The proxy materials will be mailed on
or about April 20, 1999, to stockholders of record at the close of business on
March 17, 1999 (the "Record Date").
When stock is in the name of more than one person, the proxy is valid if
signed by any of such persons unless the Company receives written notice to the
contrary. If the stockholder is a corporation, the proxy should be signed in the
name of such corporation by an executive or other authorized officer. If signed
as attorney, executor, administrator, trustee, guardian or in any other
representative capacity, the signer's full title should be given and, if not
previously furnished, a certificate or other evidence of appointment should be
furnished.
A stockholder executing and returning a proxy has the power to revoke it at
any time before it is voted. A stockholder who wishes to revoke a proxy can do
so by executing a later-dated proxy relating to the same shares and delivering
it to the Secretary of the Company at 6820 South Harl Avenue, Tempe, Arizona
85283 prior to the vote at the Annual Meeting, by written notice of revocation
received by the Secretary prior to the vote at the Annual Meeting or by
appearing in person at the Annual Meeting, filing a written notice of revocation
and voting in person the shares to which the proxy relates. Please note,
however, that if a stockholder's shares are held of record by a broker, bank or
other nominee and that stockholder wishes to vote at the Annual Meeting, the
stockholder must bring to the Annual Meeting a letter from the broker, bank or
other nominee confirming that stockholder's beneficial ownership of the shares.
In addition to the use of the mails, proxies may be solicited by personal
interview, telephone and telegram by the directors, officers and regular
employees of the Company. Such persons will receive no additional compensation
for such services. Arrangements will also be made with certain brokerage firms
and certain other custodians, nominees and fiduciaries for the forwarding of
solicitation materials to the beneficial owners of Common Stock held of record
by such persons, and such brokers, custodians, nominees and fiduciaries will be
reimbursed for their reasonable out-of-pocket expenses incurred in connection
therewith. All expenses incurred in connection with this solicitation will be
borne by the Company.
<PAGE> 4
VOTING SECURITIES OUTSTANDING
Only holders of record of the Company's Common Stock at the close of
business on the Record Date will be entitled to notice of and to vote at the
Annual Meeting. On the Record Date, there were issued and outstanding 25,533,064
shares of the Company's Common Stock. Each holder of Common Stock is entitled to
one vote on each proposal that comes before the Annual Meeting, exercisable in
person or by proxy, for each share of the Company's Common Stock held of record
on the Record Date. The presence of a majority of the shares of outstanding
Common Stock entitled to vote, in person or by proxy, is required to constitute
a quorum for the transaction of business at the Annual Meeting. The Inspector of
Election appointed by the Board of Directors shall determine the shares
represented at the meeting and the validity of proxies and ballots, and shall
count all votes and ballots. Shares represented by proxies pursuant to which
votes have been withheld from any nominee for director, or which contain one or
more abstentions, are counted as present or represented for purposes of
determining both (i) the presence or absence of a quorum for the Annual Meeting
and (ii) the total number of shares entitled to vote. A "broker non-vote" occurs
when a broker or other nominee holding shares for a beneficial owner does not
vote on a particular proposal because the broker or other nominee does not have
discretionary voting power with respect to that item and has not received
instructions from the beneficial owner. Broker non-votes are counted as present
or represented for purposes of determining the presence or absence of a quorum
for the Annual Meeting, but are not counted for purposes of determining the
number of shares entitled to vote with respect to any proposal for which the
broker or other nominee lacks discretionary authority.
All shares represented by valid proxies, unless such proxies have
previously been revoked, will be voted in accordance with the direction on the
proxies. Any proxy on which no direction is indicated, will be voted FOR
Proposals 1, 2 and 3. The Board of Directors is not aware of any other matter
which may come before the meeting. If any other matters are properly presented
at the meeting for action, including a question of adjourning the meeting from
time to time, the persons named in the proxies and acting thereunder will have
discretion to vote on such matters.
STOCK SPLITS
On January 6, 1999, the Company's Board of Directors approved a 3-for-2
stock split effected in the form of a stock dividend and payable on February 18,
1999 to the stockholders of record at the close of business on January 25, 1999.
Additionally, 3-for-2 stock splits were effected in the form of stock dividends
on September 8, 1998 and September 17, 1997. All share amounts, share prices and
related figures are restated in this Proxy Statement to reflect these 3-for-2
stock splits.
3
<PAGE> 5
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of five members divided
into three classes, with the directors in each class serving for a term of three
years. The present terms of Larry A. Gunning and Robertson C. Jones, who are
Class II incumbent directors, will expire at the Annual Meeting. The Board of
Directors has nominated Messrs. Gunning and Jones for re-election as directors
of the Company and, unless otherwise instructed, the proxy holders will vote the
proxies received by them for the election of Messrs. Gunning and Jones as
directors of the Company.
If any nominee of the Company is unable or declines to serve as a director
or if a vacancy should occur before election (which events are not anticipated),
the proxies will be voted for the election of such other person or persons
nominated by the present Board of Directors to fill the vacancy. It is not
expected that any nominee will be unable or will decline to serve as a director.
REQUIRED VOTE
Directors are elected by a plurality of the shares represented at the
meeting, in person or by proxy, and entitled to vote at the Annual Meeting,
provided that a quorum is present. Votes may be cast FOR the nominees or
WITHHELD. In addition, a stockholder may indicate that he or she is voting FOR
the nominees except for any nominee(s) specified in writing on the proxy card.
The two nominees who receive the greatest number of votes cast FOR the election
of such nominees shall be elected as directors. As a result, any vote other than
a vote FOR the nominee will have the practical effect of voting AGAINST the
nominee. An abstention will have the same effect as voting WITHHELD for election
of directors, and, pursuant to Delaware law, a broker non-vote will not be
treated as voting in person or by proxy on the proposal.
Information concerning the director nominees is set forth below.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ELECTION OF EACH OF
THE DIRECTOR NOMINEES.
4
<PAGE> 6
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
The names of the Company's directors and executive officers, and certain
information about them, are set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Eric J. Crown (1) 37 Chief Executive Officer and Chairman of the Board of
the Company (Term expires in 2001)
Timothy A. Crown (1) 35 President and Director of the Company (Term expires
in 2000)
Stanley Laybourne (1) 50 Chief Financial Officer, Secretary, Treasurer and
Director of the Company (Term expires in 2000)
Larry A. Gunning (2) 55 Director of the Company (Term expires in 1999)
Robertson C. Jones (2) 54 Director of the Company (Term expires in 1999)
Michael A. Gumbert 40 Chief Operating Officer of Insight Direct USA, Inc.,
a subsidiary of the Company
Branson M. Smith 43 Chief Operating Officer of Direct Alliance
Corporation, a subsidiary of the Company
Robert J. Armao 35 Executive Vice President of the Company
Dennis A. Faggioni 50 Chief Information Officer of the Company
</TABLE>
(1) Member of Executive Committee of the Board of Directors.
(2) Member of Audit and Compensation Committees of the Board of Directors.
Eric J. Crown. Mr. Crown has been the Chief Executive Officer and Chairman
of the Board of the Company since 1994, has held various officer and director
positions with the predecessor corporations since 1988, and is one of the
Company's founders. In 1984, he received a Bachelor of Science degree in
Business Computer Information Systems from Arizona State University. From 1983
to 1988, Mr. Crown operated an independent computer and business consulting
firm. Eric J. Crown is the brother of Timothy A. Crown.
Timothy A. Crown. Mr. Crown has been a director of the Company since 1994.
Mr. Crown has been employed by the Company or one of its predecessors since 1988
and has been President since 1989. He received a Bachelor of Science degree in
Business and Computer Science from the University of Kansas in 1986. From 1986
to 1987, Mr. Crown was employed by NCR Corporation as an Administrative Analyst.
From 1987 to 1988, Mr. Crown partnered with Eric Crown in operating an
independent computer consulting and sales company. Timothy A. Crown is the
brother of Eric J. Crown.
Stanley Laybourne. Mr. Laybourne has been a director of the Company since
1994. Mr. Laybourne became the Chief Financial Officer and Treasurer in April
1991. In November 1994, he became Secretary of the Company. Mr. Laybourne
received a Bachelor of Science degree in Accounting from The Ohio State
University in 1971, with a Masters in Business Administration degree from
Arizona State University in 1972. From 1972 to 1985, he was employed by Touche,
Ross & Co., a predecessor to Deloitte & Touche, where he was an audit partner
from 1983 to 1985. From 1985 to 1989, Mr. Laybourne was President and Chief
Executive Officer of The Scottscom Group, a financial services company. From
1989 to 1990, Mr. Laybourne was Executive Vice President of Ovation Broadcasting
Company, a company which operated commercial radio broadcast properties. Mr.
Laybourne is the Chief Financial Officer of the Arizona Sports Foundation, d/b/a
Fiesta Bowl, Fiesta Events, Inc. and the Tucson Bowl Foundation d/b/a
Insight.com Bowl and is a member of the City of Scottsdale Citizens' Bond Review
Commission. Mr. Laybourne is a Certified Public Accountant.
5
<PAGE> 7
Larry A. Gunning. Mr. Gunning has been a director of the Company since
January 1995. He has been President and Director of Pasco Petroleum Corp., a
petroleum marketing company, since 1988. Mr. Gunning received a Bachelor of
Science degree in Business Management from Arizona State University in 1966. Mr.
Gunning is a member of the Arizona State University College of Business Dean's
Council of 100 and a director of several nonprofit organizations.
Robertson C. Jones. Mr. Jones has been a director of the Company since
January 1995. Mr. Jones was Vice President and General Counsel of Del Webb
Corporation, a developer of master-planned residential communities, since
January 1992 and was named Senior Vice President in May 1998. Mr. Jones received
his Bachelor of Arts degree from Williams College in 1966, his Masters in
Business Administration degree from Oklahoma City University in 1969 and his
Juris Doctor degree from University of California, Hastings College of Law, in
1977. Mr. Jones is a director of several nonprofit organizations, including the
Arizona Chamber of Commerce.
Michael A. Gumbert. Mr. Gumbert was hired in July 1996 as Chief Operating
Officer of Insight Direct USA, Inc., a subsidiary of the Company. From 1983
through 1990, Mr. Gumbert held various positions within MicroAmerica, Inc., a
value added computer distributor. In 1990, MicroAmerica, Inc. was acquired by
Merisel, Inc., a distributor of computers, software and peripherals. From 1990
through June 1995, Mr. Gumbert held several positions with Merisel, Inc.,
including Senior Vice President, Sales and Operation from April 1992 to June
1995. From August 1995 to June 1996, Mr. Gumbert was Senior Vice President,
General Manager of Tandy Corporation, a consumer electronic retailer. Mr.
Gumbert received a Bachelor of Business Administration in Marketing from North
Texas State University.
Branson M. Smith. Mr. Smith was employed by Insight Direct USA, Inc., a
subsidiary of the Company, from March 1992 to September 1996, serving as its
Vice President of Distribution and Senior Vice President of Fulfillment
Services. In September 1996, Mr. Smith was promoted to Chief Operating Officer
of Direct Alliance Corporation, a subsidiary of the Company. From December 1987
to May 1991, Mr. Smith was a Division Manager of Shape West, a computer disk
manufacturer. From May 1991 to March 1992, Mr. Smith was a principal in
Southwest Automation, an industrial operations consulting firm. Mr. Smith
received a Bachelor of Science degree in Business Administration from the
University of Arizona.
Robert J. Armao. Mr. Armao was hired in October 1998 as Executive Vice
President of Insight Enterprises, Inc. with responsibility for the Company's
overseas operations. From 1990 through 1996, Mr. Armao held various positions
within Intel Corporation including a business management role in their OEM
motherboard and systems operations, as well as the position of Business
Development Manager responsible for external investments and technology
licensing. From 1996 through 1998, Mr. Armao was Vice President of Business
Operations at NEC Corporation in their PC hardware division. Mr. Armao received
a Bachelor of Science degree in Finance from Bentley College and a Masters
degree in Business Administration from Purdue University.
Dennis A. Faggioni. Mr. Faggioni was hired in March 1998 as Chief
Information Officer of the Company. From 1996 to 1998, Mr. Faggioni held the
position of Vice President Information Systems with DSC Communications, a global
communications equipment developer and manufacturer. From 1993 to 1996, Mr.
Faggioni worked at Hogan Systems, an international financial software provider.
During that time his responsibilities included information systems, worldwide
customer support and maintenance, ending his employment there as Vice President
and General Manager of the client-server product group. Mr. Faggioni received
his Bachelor of Science degree from San Jose State University.
6
<PAGE> 8
MEETINGS OF THE BOARD AND ITS COMMITTEES
The Board of Directors held a total of three meetings during the year ended
December 31, 1998. No director attended fewer than 75% of the aggregate of all
meetings of the Board of Directors and any committee on which such director
served during the period of such service. The Board presently has an Executive
Committee, an Audit Committee and a Compensation Committee.
The Executive Committee currently consists of Eric J. Crown, Timothy A.
Crown and Stanley Laybourne. The Executive Committee is empowered to act on
Board matters that arise between meetings of the full Board of Directors.
The Audit Committee currently consists of Larry A. Gunning and Robertson C.
Jones and met three times in 1998. The Audit Committee meets independently with
representatives of the Company's independent auditors and with representatives
of senior management. The Committee reviews the general scope of the Company's
annual audit, the fee charged by the independent auditors and other matters
relating to internal control systems. In addition, the Audit Committee is
responsible for reviewing and monitoring the performance of non-audit services
by the Company's auditors. The Committee is also responsible for recommending
the engagement or discharge of the Company's independent auditors.
The Compensation Committee currently consists of Messrs. Gunning and Jones
and met one time in 1998. The Compensation Committee administers salaries and
benefit programs designed for senior management, officers and directors and the
Company's Stock Option Plans with a view to insure that the Company is
attracting and retaining highly qualified managers through competitive salary
and benefit programs and encouraging extraordinary effort through incentive
rewards.
The Company does not have a nominating committee or a committee performing
the functions of a nominating committee. Nominations of persons to be directors
are considered by the full Board of Directors.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company ("nonemployee directors")
receive a retainer of $2,000 per quarter, $500 per Board meeting attended, $300
per committee meeting attended, reimbursement of reasonable expenses and certain
formula-based stock option awards as described below. Directors who are
employees of the Company do not receive compensation for their service as
directors. Nonemployee directors are eligible to receive nonqualified stock
options only pursuant to an annual formula grant. The formula provided for an
initial grant of options for 8,437 shares to each nonemployee director on the
closing date of the Company's initial public offering. Commencing with the 1996
Annual Meeting of Stockholders, nonemployee directors started receiving options
for 5,062 shares each time they were elected for a three-year term on the Board.
Nonemployee directors initially elected to the Board between annual meetings
will receive options for 1,687 shares multiplied by the number of full and
partial years of their initial terms. Additionally, the nonemployee directors
received options for 10,125 shares during 1996. This additional grant was based
on a compensation comparison to the Company's competitors for nonemployee
directors which was prepared by an independent company. Options granted are
exercisable for 10 years at the fair market value of the stock on the date of
grant and vest over a three year period, subject to continued Board service.
7
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth for each of the last three years the total
compensation awarded to, earned by or paid to (i) the Company's Chief Executive
Officer and (ii) its four other most highly compensated executive officers
(collectively, the "Named Executive Officers") for services rendered in all
capacities.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------- ---------------------------------
OTHER
ANNUAL RESTRICTED SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION COMPEN- STOCK UNDERLYING COMPEN-
YEAR SALARY BONUS SATION($)(1) AWARDS($)(2) OPTIONS(#) SATION($)(3)
- ----------------------------- ------- ----------- ----------- ----------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Eric J. Crown 1998 $250,000 $111,879 -- $456,845 168,750 $ 2,279
Chief Executive Officer 1997 $237,500(4) $195,042 -- - 151,872 $ 1,542
1996 $225,000(4) 0 -- - 0 $ 2,876
Timothy A. Crown 1998 $250,000 $111,879 -- $456,845 168,750 $ 1,732
President 1997 $237,500(4) $195,042 -- - 151,872 $ 1,396
1996 $225,000(4) 0 -- - 0 $ 2,876
Stanley Laybourne 1998 $190,000 $ 22,391 -- $91,392 90,000 $ 1,851
Chief Financial Officer, 1997 $170,000 $ 85,342 -- - 50,622 $ 2,916
Secretary and Treasurer 1996 $150,000 $ 5,182 -- - 168,750 $ 2,716
Michael A. Gumbert (5) 1998 $215,000 $ 52,980 -- $70,875 90,000 $ 3,363
Chief Operating Officer 1997 $192,500 $110,967 -- - 67,497 $ 3,195
of Insight Direct USA, Inc. 1996 $ 87,500 $ 42,859 - 202,500 $ 457
Branson M. Smith 1998 $155,000 $ 20,922 -- $31,988 56,250 $ 1,737
Chief Operating Officer 1997 $146,000 $ 36,118 -- - 67,500 $ 1,620
of Direct Alliance 1996 $128,000 $ 9,478 -- - 67,500 $ 1,476
Corporation
</TABLE>
- ----------
(1) The cost of certain perquisites and other personal benefits are not
included because they did not exceed, in the case of any executive
officer, the lesser of $50,000 or 10% of the total of the annual salary
and bonus for such executive.
(2) Represents value based upon the number of shares awarded multiplied by the
closing price on the date of grant as reported on the Nasdaq National
Market. The value of the 19,218, 19,218, 3,844, 2,674, and 1,377 shares of
restricted stock granted in 1998 to Messrs. Crown, Crown, Laybourne,
Gumbert and Smith, respectively (calculated as described in the preceding
sentence) was $651,817, $651,817, $130,377, $90,694, and $46,704 as of
December 31, 1998. Recipients of restricted stock are entitled to receive
any dividends declared on the Company's Common Stock, regardless of
whether such shares have vested. The restricted stock vests quarterly over
a period of three years from the date of grant.
(3) Represents payments for disability insurance premiums and 401(k)
contributions made by the Company to the account of the executive officers
in the following amounts, respectively: $1,060 and $1,219 in 1998, $1,060
and $482 in 1997, and $853 and $2,023 in 1996 for Eric J. Crown; $1,060
and $672 in 1998, $914 and $482 in 1997, and $853 and $2,023 in 1996 for
Timothy A. Crown; $885 and $966 in 1998, $885 and $2,031 in 1997, and $690
and $2,026 in 1996 for Stanley Laybourne; $1,097 and $2,266 in 1998,
$1,097 and $2,098 in 1997, and $457 and $0 in 1996 for Michael A. Gumbert;
$784 and $953 in 1998, $783 and $837 in 1997, and $609 and $867 in 1996
for Branson M. Smith.
(4) Effective October 1, 1994, the salaries for the Chief Executive Officer
and President were each set at $225,000 until June 30, 1997. See
"Employment Contracts, Termination of Employment and Change-in-Control
Agreements" below.
(5) Mr. Gumbert was hired as Chief Operating Officer of Insight Direct USA,
Inc. in July 1996.
8
<PAGE> 10
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding stock options
granted during the year ended December 31, 1998 to the Named Executive Officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE AT
NUMBER OF TOTAL ASSUMED ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE OR TERM (2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -------------------------------
NAME GRANTED (#)(1) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
- ----------------------- ---------------- -------------- ------------ ------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Eric J. Crown 168,750 7.8% $ 17.81 07/01/08 $ 1,889,658 $ 4,788,764
Timothy A. Crown 168,750 7.8% $ 17.81 07/01/08 $ 1,889,658 $ 4,788,764
Stanley Laybourne 90,000 4.2% $ 17.81 07/01/08 $ 1,007,817 $ 2,554,007
Michael A. Gumbert 90,000 4.2% $ 17.81 07/01/08 $ 1,007,817 $ 2,554,007
Branson M. Smith 56,250 2.6% $ 17.81 07/01/08 $ 629,886 $ 1,596,255
</TABLE>
- -----------
(1) One-third of the options become exercisable on each of the first three
anniversaries of the grant date.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term (10 years).
The potential realizable value of the foregoing options is calculated by
assuming that the market price of the underlying security appreciates in
value from the date of grant to the end of the term of the option at the
specified annual rates, and that the option is exercised at the exercise
price and sold on the last day of its term at the appreciated price. These
gains are based on assumed rates of stock appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date and are not presented to forecast possible future
appreciation, if any, in the price of the Common Stock.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to option exercises
of and the number and value of options outstanding at December 31, 1998 held by
the Named Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FY-END (#) OPTIONS AT FY-END ($)(1)
ACQUIRED ON VALUE ----------------------------- ---------------------------
NAME EXERCISE (#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Eric J. Crown 45,000 $ 538,318 5,624 269,998 $ 141,175 $ 5,240,281
Timothy A. Crown 44,999 $ 503,272 5,625 269,998 $ 136,234 $ 5,240,281
Stanley Laybourne 146,368 $ 2,632,182 36,372 179,998 $ 1,009,789 $ 3,988,319
Michael A. Gumbert 89,994 $ 1,049,099 3 202,498 $ 79 $ 4,404,787
Branson M. Smith 56,246 $ 929,817 0 112,498 $ 0 $ 2,429,864
</TABLE>
- -----------
(1) Value as of December 31, 1998 is based upon the closing price on that date
as reported on the Nasdaq National Market minus the exercise price,
multiplied by the number of shares underlying the option.
9
<PAGE> 11
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND
CHANGE-OF-CONTROL ARRANGEMENTS
The Company has entered into employment agreements with three of its Named
Executive Officers. The agreements provide for base salaries and incentive
bonuses and contain non-competition and change of control provisions. The Board
of Directors approved, based upon the Compensation Committee's recommendation,
the base salaries and incentive bonuses for Eric J. Crown, Timothy A. Crown and
Stanley Laybourne for a period of two years, effective July 1, 1997. These
agreements contain provisions that constantly renew the agreement for additional
two year terms.
The base salaries for Eric J. Crown, Timothy A. Crown and Stanley Laybourne
are set at $250,000, $250,000 and $190,000, respectively. Messrs. Crown, Crown
and Laybourne are entitled to receive an incentive bonus, payable quarterly, for
the period under their two year agreement equal to 2.5%, 2.5% and 0.5%,
respectively, of the Company's net earnings (before deducting the incentive
bonuses) provided that (i) the Company's net earnings exceed certain stated
minimums and (ii) in no event will the incentive bonuses exceed (A) with respect
to Messrs. Crown and Crown 270% of their base salaries and (B) with respect to
Mr. Laybourne 70% of his base salary. These incentive bonuses have been paid in
either cash or in the form of restricted stock, which vests quarterly over three
years with the unvested shares being forfeited if the recipient is no longer an
employee of the Company.
The agreements for Messrs. Crown, Crown and Laybourne contain
Change-of-Control (as defined) provisions and noncompete provisions that, upon a
Change-of-Control, could result in payments to these individuals equal to three
times their base salary and incentive bonus for the preceding four quarters (all
payments are to be grossed up for the individuals' taxes) and could accelerate
the vesting of all outstanding stock options and restricted stock.
The Compensation Committee and the Chief Executive Officer utilized KPMG
LLP, in 1997, to analyze and review the competitiveness of executive pay. The
analysis has provided the basis for recommendations and approvals with respect
to the terms and provisions included in the current executive employment
agreements. The analysis provided information regarding "peer" compensation
levels and long-term incentive compensation obtained from publicly held company
reports and SEC filings, executive compensation surveys and other relevant
sources. The Compensation Committee and the Chief Executive Officer considered
all such factors in its decision to adopt the related agreements. The
Compensation Committee continues to believe that the agreements provide
appropriate compensation for the individuals.
10
<PAGE> 12
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
charged with:
(1) reviewing and approving the annual salary, bonus and other benefits, direct
and indirect, including perquisites and personal benefits, to be paid or
awarded to the Company's executive officers;
(2) reviewing and recommending to the Board of Directors new compensation and
stock plans and changes to existing plans; and
(3) administering the incentive compensation plans, stock option and other
stock-based plans, and other employee benefit plans of the Company and its
subsidiaries.
The Committee currently makes compensation decisions with respect to Eric
J. Crown, Timothy A. Crown and Stanley Laybourne, but not with respect to
Michael A. Gumbert and Branson M. Smith. The Compensation Committee has
delegated its authority to make compensation decisions to Eric J. Crown, the
Company's Chief Executive Officer, with respect to Messrs. Gumbert, Smith and
all others. The Committee currently is comprised of Larry A. Gunning and
Robertson C. Jones, each of whom is an outside director.
The Compensation Committee and the Chief Executive Officer utilized KPMG
LLP, in 1997, to analyze and review the competitiveness of executive pay. The
analysis has provided the basis for recommendations and approvals with respect
to the terms and provisions included in the current executive employment
agreements. The analysis provided information regarding "peer" compensation
levels and long-term incentive compensation obtained from publicly held company
reports and SEC Filings, executive compensation surveys and other relevant
sources. The Compensation Committee and the Chief Executive Officer considered
all such factors in setting executive pay.
COMPENSATION PHILOSOPHY
The general philosophy of the Company's executive compensation program is
to offer executive officers compensation that is competitive in the marketplace
but also is based upon the Company's performance and/or the employee's
individual contribution and performance. The Company's executive compensation
policies are intended to motivate and reward executives for long-term strategic
management and the enhancement of stockholder value through cash payments
(salary and bonus) and equity incentives (in the form of stock options and
restricted stock). The ultimate goal of the Committee in its administration of
the Company's executive compensation program is to ensure that the Company
attracts and retains highly qualified managers through competitive salary and
benefit programs and encourages extraordinary effort on the part of management
through well-designed incentive opportunities.
BASE SALARY
Effective October 1, 1994 and in anticipation of the Company's initial
public offering, each of Eric J. Crown, Chief Executive Officer, and Timothy A.
Crown, President, entered into an employment agreement with the Company that
provided for, among other things, an annual base salary of $225,000 until June
30, 1997. These employment agreements terminated according to their terms on
June 30, 1997. As described under "Employment Contracts, Termination of
Employment and Change-of-Control Arrangements," the Compensation Committee
utilized KPMG LLP, in 1997, to analyze and review the competitiveness of
executive pay. The review has provided the basis for recommendations and
approvals with respect to the terms and provisions included in the current
executive employment agreements.
The 1998 base salaries for Eric J. Crown, Timothy A. Crown, Stanley
Laybourne, Michael A. Gumbert and Branson M. Smith were set at $250,000,
$250,000, $190,000, $215,000 and $155,000 respectively. Additionally, Messrs.
Crown, Crown and Laybourne are entitled to receive an incentive bonus,
11
<PAGE> 13
payable quarterly, during the two year agreement based on a percentage of the
Company's net earnings (before deducting the incentive bonuses) and Messrs.
Gumbert and Smith are entitled to receive an incentive bonus, payable quarterly,
based on a percentage of net earnings (before deducting the incentive bonuses),
of their respective subsidiaries, provided that (i) the Company's net earnings
exceed stated minimums and (ii) in no event will the incentive bonuses exceed
(A) with respect to Messrs. Crown and Crown, 270% of their base salaries and (B)
with respect to Mr. Laybourne 70% of his base salary.
CASH BONUSES AND RESTRICTED STOCK BONUSES
Traditionally, the Company has viewed cash bonuses for executive officers
as an opportunity to tie a portion of an executive officer's compensation to the
financial performance of the Company. Additionally, the Company paid some of the
bonuses due to the Company's Named Executive Officers with restricted stock
instead of cash. These restricted stock shares vest quarterly over three years
with the unvested shares being forfeited if the recipient is no longer an
employee of the Company. Messrs. Crown, Crown and Laybourne received a cash
bonus for the first quarter of 1998 and restricted stock for the remaining
quarters of 1998. Messrs. Gumbert and Smith received cash for the first and
second quarters and restricted stock for the third and fourth quarters. During
calendar 1998, cash bonuses were earned by the Company's Named Executive
Officers as follows: Eric J. Crown - $111,879; Timothy A. Crown - $111,879;
Stanley Laybourne - $22,391; Michael A. Gumbert - $52,980; and Branson M. Smith
- - $20,922. For 1998, the number of restricted stock shares earned by the
Company's Named Executive Officers are as follows: Eric J. Crown - 19,218
shares; Timothy A. Crown - 19,218 shares; Stanley Laybourne - 3,844 shares;
Michael A. Gumbert - 2,674 shares; and Branson M. Smith - 1,377 shares.
STOCK INCENTIVES
In November 1994, the Company's Board of Directors adopted and the
Company's private stockholders approved the 1994 Stock Option Plan (the "1994
Option Plan") under which incentive stock options and nonqualified stock options
may be granted to executive officers, other key employees, nonemployee directors
and consultants. In October 1997, the Company's Board of Directors adopted and
the Company's stockholders approved the Company's 1998 Long-Term Incentive Plan
(the "LTIP") under which a variety of stock-based awards may be granted to
officers, employees, directors, and consultants or independent contractors,
including officers who are also directors of the Company and its subsidiaries.
Stock-based compensation is viewed as a critical incentive component of the
Company's overall executive compensation program because it directly ties an
executive's compensation to the value realized by the Company's owners -- its
stockholders -- and because it permits the Company to recruit and retain top
talent.
During calendar 1998, stock options to purchase a total of 573,750 shares
of Company Common Stock were granted to the Company's Named Executive Officers
as follows: Eric J. Crown - 168,750 shares; Timothy A. Crown - 168,750 shares;
Stanley Laybourne - 90,000 shares; Michael A. Gumbert - 90,000 shares; and
Branson M. Smith - 56,250 shares.
All of the options granted during 1998 to Named Executive Officers provide
that one-third of the options vest on each of the first three anniversaries of
the date of grant, provided the optionee is still an employee of the Company at
that time. A staged vesting was employed in order to provide incentive for the
Company's key executives to remain at the Company for at least three years
following the date of option grant to promote continuity of the Company's
previously successful management team. All of the options were granted with an
exercise price equal to the market value of the Company's Common Stock at the
close of trading on the date of grant, thus serving to focus the optionee's
attention on managing the Company from the perspective of an owner with an
equity stake in the business.
12
<PAGE> 14
SECTION 162(m)
Section 162(m) of the Internal Revenue Code limits, to $1 million, the
deductibility by a publicly held corporation of compensation paid in a taxable
year to the Chief Executive Officer and any other executive officer whose
compensation is required to be reported in the Summary Compensation Table.
Qualified performance-based compensation will not be subject to the deduction
limit if certain conditions are met. It is the Committee's intent to evaluate
and, to the extent possible consistent with its other compensation objectives
and overall compensation philosophy, take the steps necessary to satisfy those
conditions in order to preserve the deductibility of executive compensation.
Nevertheless, the Company may not be able to preserve deductibility of executive
compensation recognized in connection with the exercise of certain options that
have been granted to covered executive officers. Specifically, compensation
resulting from the exercise of options granted to a covered executive officer
under the 1994 Option Plan will not qualify for deductibility to the extent that
the total of the base salary, bonuses and compensation from such option exercise
received by any covered executive officer exceeds $1 million in any taxable
year.
COMPENSATION COMMITTEE:
Larry A. Gunning
Robertson C. Jones
13
<PAGE> 15
STOCK PRICE PERFORMANCE GRAPH
Set forth below is a graph comparing the percentage change in the
cumulative total stockholder return on the Company's Common Stock with the
cumulative total return of the Nasdaq Composite Index and the Nasdaq Retail
Trade Index for the period commencing January 24, 1995 (the date on which
trading in the Company's Common Stock commenced) and ended December 31, 1998.
The graph assumes that $100 was invested on January 24, 1995 in Company Common
Stock and in each of the two Nasdaq indices, and that, as to such indices,
dividends were reinvested. The Company has not, since its inception, paid any
dividends on the Common Stock.
Historical stock price performance shown on the graph is not necessarily
indicative of future price performance.
<TABLE>
<CAPTION>
Jan. 24, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
-------- -------- -------- -------- --------
1995 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Insight Enterprises, Inc. Common Stock $100.00 $120.48 $269.88 $531.33 $1,103.31
Nasdaq Stock Market U.S. Companies (Market $100.00 $139.15 $171.12 $209.87 $ 295.72
Index)
Nasdaq Retail Trade Stock (Peer Index) $100.00 $112.54 $134.16 $157.63 $ 191.66
</TABLE>
14
<PAGE> 16
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors,
its executive officers, and any persons holding more than 10% of the Company's
Common Stock are required to report their initial ownership of the Company's
Common Stock and any subsequent changes in that ownership to the Securities and
Exchange Commission. Specific due dates for these reports have been established
and the Company is required to disclose any failure to file by these dates.
Based upon a review of such reports furnished to the Company, or written
representations that no reports were required, the Company believes that all of
these filing requirements were satisfied during the year ended December 31,
1998, except that Branson M. Smith was one month late reporting a gift of 2,250
shares to a non-profit organization.
15
<PAGE> 17
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock by (i) each person or entity known to
the Company to own beneficially more than 5% of the outstanding shares of Common
Stock, (ii) each of the Company's directors, (iii) each of the Named Executive
Officers, and (iv) all directors and executive officers of the Company as a
group.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED(2)
-----------------------
NAME(1) NUMBER OF
- ------- SHARES PERCENT
------ -------
<S> <C> <C>
Eric J. Crown 1,910,218(3) 7.5%
Timothy A. Crown 1,808,510(4) 7.1%
Pilgrim Baxter & Associates 2,082,967(11) 8.2%
AIM Management Group, Inc. 2,049,225(12) 8.1%
Maverick Capital Limited 1,481,250(13) 5.8%
Stanley Laybourne 102,145(5) *
Michael A. Gumbert 6,994(6) *
Branson M. Smith 23,597(7) *
Larry A. Gunning 6,750(8) *
Robertson C. Jones 18,563(9) *
All directors and executive officers as a group 3,930,777(10) 15.4%
(9 persons)
</TABLE>
- -----------
* Less than 1%
(1) The address of Messrs. Crown, Crown, Laybourne, Gumbert, Smith, Gunning and
Jones is c/o Insight Enterprises, Inc., 6820 South Harl Avenue, Tempe,
Arizona 85283.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission ("SEC") and generally includes voting or
investment power with respect to securities. In accordance with SEC rules,
shares which may be acquired upon exercise of stock options which are
currently exercisable or which become exercisable within 60 days of the
date of the information in the table are deemed to be beneficially owned by
the optionee. Except as indicated by footnote, and subject to community
property laws where applicable, to the Company's knowledge the persons or
entities named in the table above have sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned by
them.
(3) Includes 337 shares beneficially owned by Mr. Crown's spouse and 5,624
shares subject to options exercisable within 60 days of the Record Date.
(4) Includes 5,624 shares subject to options exercisable within 60 days of the
Record Date.
(5) Includes of 92,624 shares subject to options exercisable within 60 days of
the Record Date.
(6) Includes of 5,627 shares subject to options exercisable within 60 days of
the Record Date.
(7) Includes of 22,499 shares subject to options exercisable within 60 days of
the Record Date.
(8) Consists of 6,750 shares subject to options exercisable within 60 days of
the Record Date.
(9) Consists of 16,875 shares subject to options exercisable within 60 days of
the Record Date and 1,688 shares held in the name of a family trust.
(10) Includes 185,623 shares subject to options exercisable within 60 days of
the Record Date.
(11) Number of shares based on the stockholder's 13G filing for December 31,
1998. The address of Pilgrim Baxter & Associates is 825 Dupertail Road,
Wayne, PA 19087.
(12) Number of shares based on the stockholder's 13G filing for December 31,
1998. The address of AIM Management Group, Inc. is P.O. Box 4333, Houston,
TX 77210.
(13) Number of shares based on the stockholder's 13G filing for December 31,
1998. The address of Maverick Capital Limited is 8080 N. Central Expressway
Suite 1, Dallas, TX 75206.
16
<PAGE> 18
PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO THE COMPANY'S
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
DESCRIPTION OF PROPOSED AMENDMENT
The Board of Directors has approved, and is recommending to the
stockholders for approval at the Annual Meeting, an amendment to Article 4 of
the Company's Amended and Restated Certificate of Incorporation ("Certificate of
Incorporation") (i) to increase the total authorized number of shares of Common
Stock, $.01 par value per share, from 30,000,000 to 100,000,000 and (ii) to
increase the total authorized number of shares of Preferred Stock, $.01 par
value per share, from 3,000,000 to 10,000,000. The Board of Directors determined
that this amendment is advisable and directed that the proposed amendment be
submitted to the stockholders for their approval at the Annual Meeting. The full
text of the proposed amendment to the Certificate of Incorporation is set forth
in Appendix A to this Proxy Statement. If adopted by the stockholders, the
amendment would become effective upon filing of an appropriate certificate with
the Secretary of State of the State of Delaware.
PURPOSES AND EFFECTS OF PROPOSED AMENDMENT
The proposed amendment would increase the number of shares of Common Stock
which the Company is authorized to issue from 30,000,000 to 100,000,000 and the
number of shares of Preferred Stock which the Company is authorized to issue
from 3,000,000 to 10,000,000. The additional shares of Common Stock and
Preferred Stock authorized by the proposed amendment would have the same rights
and privileges as the shares of Common Stock and Preferred Stock currently
authorized.
At March 18, 1999, 25,533,064 shares of Common Stock were issued and
outstanding, and 4,063,463 shares of Common Stock were reserved for issuance
under the Company's stock option and benefit plans. Consequently, under certain
circumstances, the Company may not be able to issue additional shares of Common
Stock if necessary for mergers or acquisitions, financing transactions, stock
splits in the form of stock dividends or for other corporate purposes without
first obtaining the approval of its stockholders. The Company has split its
Common Stock several times, most recently in the first quarter of 1999, by means
of a stock dividend, resulting in the issuance of additional shares of Common
Stock. The proposed increase in the number of authorized shares of Common Stock
will afford the Company additional flexibility to take advantage of business and
financial opportunities without the delay and expense of seeking stockholders'
approval for the authorization of additional stock.
Although no shares of Preferred Stock are issued and outstanding, the
Company is seeking to increase the number of shares of authorized Preferred
Stock in order to maintain the ratio of one share of authorized Preferred Stock
for every ten shares of Common Stock and to afford the Company the additional
flexibility referred to above.
If this proposal is approved, all or any of the authorized shares of Common
Stock and Preferred Stock may be issued without further action by the
stockholders (unless such approval is required by applicable law or regulatory
authorities) and without first offering such shares to the stockholders for
subscription. Thus, the issuance of additional shares of Common Stock and
Preferred Stock might dilute, under certain circumstances, the ownership and
voting rights of stockholders.
Other than for the possibility of issuing new shares of Common Stock under
the Company's stock option or benefit plans and under "earn-out" provisions
pursuant to the Company's recent acquisitions, the Company has no present
arrangements, commitments, understandings or pending negotiations for the
issuance of additional shares of newly authorized Common Stock or Preferred
Stock.
17
<PAGE> 19
The Company has not proposed the increase in the authorized number of
shares of Common Stock and Preferred Stock with the intention of using the
additional shares for anti-takeover purposes, although the Company could
theoretically use the additional shares to make more difficult or to discourage
an attempt to acquire control of the Company. The Company is not aware of any
pending or threatened efforts to acquire control of the Company.
REQUIRED VOTE
Approval of the proposal to increase the number of authorized shares of
Common Stock and Preferred Stock by amending the Company's Amended and Restated
Certificate of Incorporation requires the affirmative vote of a majority of the
shares outstanding on the Record Date. Votes may be cast FOR or AGAINST the
proposal, and stockholders may also ABSTAIN from voting on the proposal.
Abstentions and broker non-votes will be counted as present or represented for
purposes of determining both the presence or absence of a quorum. However,
because shares represented by abstentions or broker non-votes are considered
outstanding, as a practical matter abstentions and broker non-votes will have
the same effect as a vote AGAINST the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL OF
THE PROPOSED AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE TOTAL NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
TO 100,000,000 AND THE TOTAL NUMBER OF AUTHORIZED SHARES OF PREFERRED STOCK TO
10,000,000.
18
<PAGE> 20
PROPOSAL NO. 3
AMENDMENTS TO INSIGHT ENTERPRISES, INC.
1998 LONG-TERM INCENTIVE PLAN
GENERAL
At the Annual Meeting, the Company will seek stockholder approval of
amendments (the "Amendments") to the Insight Enterprises, Inc. 1998 Long-Term
Incentive Plan (the "Plan") to increase the number of shares of Common Stock
authorized for issuance thereunder to 3,214,125 and to make certain other
changes. The closing price for the Common Stock on March 17, 1999, as reported
on Nasdaq, was $23.50.
The Plan promotes the success and enhances the value of the Company by (i)
linking the personal interests of participants to those of the Company's
stockholders; (ii) providing participants with an incentive for outstanding
performance; and (iii) providing flexibility in motivating, attracting, and
retaining the services of officers, employees, directors, and consultants or
independent contractors upon whose judgment, interest, and special effort the
successful conduct of the Company's business is largely dependent.
The Company's Board of Directors has approved, subject to stockholder
approval, the Amendments to the Plan and has directed that the Amendments be
submitted as a proposal for stockholder approval at the Annual Meeting. The Plan
was originally adopted in October, 1997. A copy of the Amendments as proposed
herein is set forth in Appendix B. The description of the Plan herein is
qualified in its entirety by the actual text of such plan.
PLAN PROVISIONS
The Plan authorizes grants of incentive stock options ("ISOs"),
non-qualified stock options ("NQSOs"), stock appreciation rights ("SARs"),
performance shares, restricted stock and performance-based awards to officers,
employees, directors, and consultants or independent contractors. A total of
1,875 individuals are currently eligible to participate in the Plan. The maximum
number of shares of Stock that may be issued under the Plan as ISOs shall be
3,000,000.
The Plan is administered by the Compensation Committee of the Board of
Directors. Except as provided below, the Compensation Committee has the
exclusive authority to administer the Plan, including the power to determine
eligibility, the types of awards to be granted, the price and the timing of
awards. The Plan does, however, provide that the Company's Chief Executive
Officer has the authority to grant awards to any individual (other than the
three highest-ranking executives of the Company) and provides further that any
grant to an individual who is subject to Section 16 of the Securities Exchange
Act of 1934 may not be exercisable for at least six months from the date of
grant.
19
<PAGE> 21
INCENTIVE STOCK OPTIONS
ISOs are stock options that satisfy the requirements specified in Section
422 of the Internal Revenue Code, as amended (the "Code"). Under the Code, ISOs
may only be granted to employees. In order for an option to qualify as an ISO,
the price payable to exercise the option must equal or exceed the fair market
value of the underlying stock at the date of the grant, the option must lapse no
later than ten (10) years from the date of the grant, and the stock subject to
ISOs that are first exercisable by an employee in any calendar year must not
have a value of more than $100,000 as of the date of grant. Certain other
requirements must also be met.
An employee will not recognize taxable income upon either the grant of an
ISO or upon the exercise of an ISO. However, the difference between the exercise
price and the fair market value of the stock at the time of exercise is an item
of tax preference at the time of exercise in determining liability for the
alternative minimum tax, assuming that the Common Stock is either transferable
or is not subject to a substantial risk of forfeiture under Section 83 of the
Code.
If Common Stock acquired by the exercise of an ISO is not sold or otherwise
disposed of within two years from the date of its grant and is held for at least
one year after the date of exercise, such disposition is treated as long-term
capital gain or loss. If such Common Stock is disposed of before the expiration
of the above-mentioned holding periods, a "disqualifying disposition" occurs. If
a disqualifying disposition occurs, the employee realizes ordinary income in the
year of the disposition in an amount equal to the difference between the fair
market value of the Common Stock on the date of exercise and the exercise price,
or the selling price of the Common Stock and the exercise price, whichever is
less. The balance of the employee's gain on a disqualifying disposition, if any,
is taxed as capital gain.
The Company is not entitled to any tax deduction as a result of the grant
or exercise of an ISO, or on a later disposition of the Common Stock received,
except in the event of a disqualifying disposition, the Company is entitled to a
deduction equal to the amount of ordinary income realized by the employee.
NON-QUALIFIED STOCK OPTIONS
A NQSO is any stock option other than an ISO. Such options are referred to
as "non-qualified" because they do not meet the requirements of and are not
eligible for the favorable tax treatment provided by Section 422 of the Code.
If an employee is granted a NQSO, the grant itself typically does not
produce any taxable income for the employee, and the Company is not entitled to
a deduction at that time. On the date the NQSO is exercised, the employee
recognizes ordinary income in an amount equal to the difference between the fair
market value of the underlying stock at the date of exercise and the exercise
price. The Company generally is entitled to a corresponding deduction in the
same amount and in the same year in which the employee recognizes such income.
When an employee sells the stock acquired upon the exercise of an NQSO, the
employee recognizes capital gain equal to the difference between the sales price
of the stock and the fair market value of the stock as of the date of the
exercise. If the employee holds the stock for more than one (1) year following
the exercise of the option, the gain is treated as long-term capital gain.
STOCK APPRECIATION RIGHTS
An SAR is the right granted to an employee to receive the appreciation in
the value of a share of Common Stock over a certain period of time. Under the
Plan, the Company may pay that amount in cash, Common Stock, or a combination of
both.
20
<PAGE> 22
If an employee receives the appreciation inherent in the SARs in cash, the
cash is compensation income taxable to the employee. If the employee receives
the appreciation in the form of Common Stock, the stock received is taxable to
the employee in an amount equal to its fair market value. The Company is
entitled to receive a deduction in an amount equal to that taxable to the
employee in the year in which the employee recognizes taxable income with
respect to the SAR.
PERFORMANCE SHARES
Under the Plan, the Company may grant performance share units to an
eligible employee. Typically, each performance share unit will be deemed to be
the equivalent of one share of Common Stock. An award of a performance share
does not entitle an employee to any ownership, dividend, voting, or other rights
of a stockholder until distribution is made in Common Stock, if the award is
paid in stock. The value of the employee's performance share units generally is
measured by the fair market value of an equivalent number of shares of Common
Stock. At the end of the performance period, if the employee has satisfied
certain performance criteria established by the Compensation Committee, the
employee will be entitled to a payment equal to the difference between the value
of the performance share units on the date of grant and the value of such units
at the end of the performance period. The award may be payable in cash, Common
Stock, or property.
An employee who has been granted a performance share award will not realize
taxable income at the time of grant and the Company is not entitled to a
deduction at that time. However, the employee will recognize income in the year
the award is paid in an amount equal to the amount of cash and the fair market
value of the Common Stock issued to the employee. The Company generally is
entitled to a corresponding deduction at the same time.
RESTRICTED STOCK AWARDS
Under the restricted stock feature of the Plan, an eligible employee may be
granted a specified number of shares of the Company's Common Stock. However,
vested rights to such stock are subject to certain restrictions or are
conditioned on the attainment of certain goals. If the employee violates any of
the restrictions during the period specified by the Compensation Committee or
goals are not met, the stock is forfeited.
In the year in which the applicable restrictions lapse or the applicable
goal is satisfied, an employee will include in taxable income the excess of the
fair market value of restricted stock received over the amount, if any, paid for
the restricted stock. The Company is entitled to a corresponding deduction at
the same time.
Instead of postponing the tax consequences of a restricted stock award
until the applicable restrictions lapse or until the applicable goal is
satisfied, an employee may elect to include the fair market value of the stock
in income in the year the award is granted by filing an appropriate election
with the Internal Revenue Service within thirty (30) days of grant. This
election is made under Section 83(b) of the Code.
PERFORMANCE-BASED AWARDS
Grants of performance-based awards under the Plan enable the Compensation
Committee to treat restricted stock and performance share awards granted under
the Plan as "performance-based compensation" under Section 162(m) of the Code
and preserve the deductibility of these awards for Federal income tax purposes.
Because Section 162(m) of the Code only applies to those employees who are
"covered employees," as defined in Section 162(m) of the Code, only covered
employees are eligible to receive performance-based awards.
Participants for any given performance period are only entitled to receive
payment for a performance-based award for such period to the extent that
pre-established performance goals set by the Compensation Committee of the
21
<PAGE> 23
period are satisfied. These pre-established performance goals must be based on
one or more of the following performance criteria: pre- or after-tax net
earnings, sales growth, operating earnings, operating cash flow, return on net
assets, return on stockholders' equity, return on assets, return on capital,
share price growth, stockholder returns, gross or net profit margin, earnings
per share, price per share, and market share. These performance criteria may be
measured in absolute terms or as compared to any incremental increase or as
compared to results of a peer group. With regard to a particular performance
period, the Compensation Committee shall have the discretion to select the
length of the performance period, the type of performance-based awards to be
granted, and the goals that will be used to measure the performance for the
period. In determining the actual size of an individual performance-based award
for a performance period, the Compensation Committee may reduce or eliminate
(but not increase) the award. Generally, a participant will have to be employed
on the last day of the performance period in order to be eligible for a
performance-based award for that period.
SECTION 162(m)
Section 162(m) of the Code generally limits, to $1 million, the amount
that can be deducted by a publicly-held corporation for compensation paid to any
"covered employee" in any taxable year. The term "covered employee" for this
purpose is defined generally as the chief executive officer and the four other
highest paid employees of the corporation.
Performance-based compensation is outside the scope of the $1 million
limitation and, hence, generally can be claimed by a publicly-held corporation
without regard to amount, provided that among other requirements, such
compensation is approved by the Company's stockholders. Among the items of
performance-based compensation that can be deducted without regard to amount
(assuming stockholder approval and other applicable requirements are satisfied)
is compensation associated with the exercise price of a stock option so long as
the option has an exercise price equal to or greater than the fair market value
of the underlying stock at the date of the option grant. The Company currently
anticipates that all options granted under the Plan will have an exercise price
at least equal to the fair market value of the underlying stock on the date of
grant.
Of the shares of Common Stock available for awards under the Plan, the
maximum number that may be awarded annually to any one participant as awards of
ISOs, NQSOs, performance shares, restricted stock, or any combination of each,
is 225,000 shares.
The maximum number of shares of Common Stock that may be awarded under
performance-based awards during any performance period is 225,000. In the event
the performance-based award is payable in cash, the maximum amount is determined
by multiplying 225,000 (as adjusted for stock splits) by the fair market value
of the Common Stock as of the date the performance-based award is granted.
CHANGE OF CONTROL
In the event of a public tender for all or any portion of the Company's
Common Stock, or in the event a proposal to merge, consolidate, or otherwise
combine with another company is submitted to the Company's stockholders for
approval, the ISOs or NQSOs previously granted under the Plan will be
immediately exercisable.
Upon the occurrence of a Change of Control (as defined in the Plan), all
outstanding awards granted under the Plan shall become fully exercisable and all
restrictions on outstanding awards shall lapse. The Plan defines a "Change of
Control" to include (i) when the individuals who, at the beginning of any period
of two years or less, constituted the Board cease, for any reason, to constitute
at least a majority of the Board, unless the election (or nomination) for each
new director was approved by at least two-thirds of the directors then still in
office who were directors at the beginning of the period; (ii) a change of
control through a transaction or series of transactions, such that any person
(excluding affiliates of the Company as of October 30, 1997) is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the Company's then
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<PAGE> 24
outstanding securities; (iii) any consolidation or liquidation of the Company
in which the Company is not the continuing or surviving corporation or pursuant
to which the Company's Common Stock would be converted into cash, securities or
other property, other than a merger of the Company in which the holders of the
Company's Common Stock immediately before the merger have same proportionate
ownership of Common Stock of the surviving corporation immediately after the
merger; (iv) the stockholders' approval of any plan or proposal for the
liquidation or dissolution of the Company; or (v) the sale or other transfer of
substantially all of the assets of the Company to parties that are not within a
controlled group of corporations in which the Company is a member.
AMENDMENT AND TERMINATION
The Committee, subject to the approval of the Board, may terminate, amend
or modify the Plan at any time; provided, however, that shareholder approval
will be obtained for any amendment to the extent necessary and desirable to
comply with any applicable law, regulation or rule.
No termination, amendment, or modification of the Plan shall adversely
affect in any material way any award previously granted under the Plan, without
the written consent of the participant.
PLAN BENEFITS
The following table sets forth grants of options made under the Plan during
1998 to (i) each of the Named Executive Officers identified above; (ii) all
current executive officers as a group; (iii) all current directors who are not
executive officers, as a group; and (iv) all employees, including all current
officers who are not executive officers, as a group. Grants under the Plan are
made at the discretion of the Committee. Accordingly, future grants under the
Plan are not yet determinable.
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<PAGE> 25
1998 LONG-TERM INCENTIVE PLAN
<TABLE>
<CAPTION>
Weighted Average
Securities Underlying Exercise Price of Restricted Stock
Name and Position Options Granted (#) Options Granted ($) Awards (#)
- ----------------- ------------------- ------------------- -----------------
<S> <C> <C> <C>
Eric J. Crown 168,750 $ 17.81 14,412
Chairman of the Board of Directors and Chief
Executive Officer
Timothy A. Crown 168,750 $ 17.81 14,412
President and Director
Stanley Laybourne 90,000 $ 17.81 2,883
Chief Financial Officer,
Secretary, Treasurer and Director
Michael A. Gumbert 90,000 $ 17.81 1,366
Chief Operating Officer of
Insight Direct USA, Inc.
Branson M. Smith 56,250 $ 17.81 1,098
Chief Operating Officer of
Direct Alliance Corporation
Executive Officer Group 757,500 $ 17.49 56,671
Non-Executive Director Group - - -
Non-Executive Employee Group 1,355,771 $ 16.00 -
</TABLE>
PROPOSED AMENDMENTS TO PLAN
The Board of Directors has reviewed the number of shares currently
remaining in the pool for the Plan and has determined that it is appropriate to
increase the number of shares authorized for issuance under the Plan. As of
March 18, 1999, (i) 254,620 shares have been issued upon exercise of options or
as restricted stock and are included in the total number of shares of
outstanding Common Stock and (ii) option grants representing 1,950,332 shares
were outstanding under the Plan. Accordingly, there are only options to purchase
514,436 shares of Common Stock available under the Plan. The Board believes that
an increase in the number of authorized shares is necessary for the continued
optimal use of the Plan. In addition, the maximum number of options that may be
granted as ISOs is being increased to accommodate the proposed increase in the
total number of shares authorized for issuance under the Plan. Therefore, the
Board is proposing the Amendments to the Plan that would (i) increase the number
of shares authorized for issuance under the Plan to 3,214,125 and (ii) increase
the maximum number of options that may be granted as ISOs under the Plan to
3,000,000.
24
<PAGE> 26
In addition, the Plan, prior to the Amendment, provides that for each year
an additional one to four percent of the outstanding shares of Stock of the
Company (in the Board's discretion) shall be reserved for issuance under the
Plan, subject to quarterly increases to account for additional outstanding
shares. The Amendment, in addition to increasing the number of shares authorized
under the Plan, also provides that the Board may reserve additional shares of
Stock for grant under the Plan (in its discretion) from time to time; provided,
the aggregate number of shares of Stock reserved for grant under the Plan is
limited to an amount such that the number of shares of Stock remaining available
for grant under the Plan (and any other option plan sponsored by the Company)
plus the number of shares of Stock granted but not yet exercised or cancelled
(under the Plan and any other option plan sponsored by the Company) may not
exceed twenty percent (20%) of the outstanding shares of Stock of the Company.
The Amendments, if approved by stockholders, would be effective as of March 18,
1999, the date of the Board's approval of the Amendments.
REQUIRED VOTE
Approval of the Amendments to the Plan requires the affirmative vote of a
majority of shares present, in person or by proxy, and entitled to vote at the
Annual Meeting, provided that a quorum is present. Votes may be cast FOR or
AGAINST the proposal, and stockholders may also ABSTAIN from voting on the
proposal. Abstentions will be counted as present or represented for purposes of
determining both the presence or absence of a quorum and the number of shares
entitled to vote on the proposal and as a practical matter will have the same
effect as a vote AGAINST the proposal. Broker non-votes will be counted as
present or represented for purposes of determining the presence or absence of a
quorum but will not be counted for purposes of determining the number of shares
entitled to vote on the proposal. The practical effect of broker non-votes is to
reduce the number of affirmative votes required to achieve a majority for the
proposal by reducing the total number of shares from which the majority is
calculated.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR ADOPTION OF
THE AMENDMENTS TO THE 1998 LONG-TERM INCENTIVE PLAN.
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<PAGE> 27
RELATIONSHIP WITH INDEPENDENT AUDITORS
The principal independent accounting firm utilized by the Company during
the year ended December 31, 1998 was KPMG LLP, independent certified public
accountants. KPMG LLP has audited the Company's financial statements annually
since 1988. It is presently contemplated that KPMG LLP will be retained as the
principal accounting firm to be utilized by the Company during 1999. A
representative of KPMG LLP is expected to be present at the Annual Meeting for
the purpose of responding to appropriate questions and will be given the
opportunity to make a statement if he or she desires to do so.
STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be presented
by such stockholders at the Company's 2000 Annual Meeting must be received by
the Company no later than December 21, 1999 in order that they may be considered
for inclusion in the proxy statement and form of proxy relating to that meeting.
Stockholders who intend to present a proposal at the 2000 Annual Meeting of
Stockholders without inclusion of such proposal in the Company's proxy materials
are required to provide notice of such proposal to the Company no later than
March 6, 2000. The Company reserves the right to reject, rule out of order, or
take other appropriate action with respect to any proposal that does not comply
with these and other applicable requirements. Proposals should be addressed to
the Secretary of the Company at 6820 South Harl Avenue, Tempe, Arizona 85283.
OTHER MATTERS
The Company knows of no other matters to be brought before the Annual
Meeting. If any other matter properly comes before the Annual Meeting, it is the
intention of the persons named in the enclosed proxy card to vote the shares
represented by the proxies as the Board of Directors may recommend.
The foregoing Notice and Proxy Statement are sent by order of the Board of
Directors.
INSIGHT ENTERPRISES, INC.
/s/ Stanley Laybourne
March 31, 1999 Stanley Laybourne
Secretary, Treasurer
and Chief Financial Officer
26
<PAGE> 28
INSIGHT ENTERPRISES, INC.
ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, MAY 13, 1999
3:00 P.M. LOCAL TIME
INSIGHT CORPORATE HEADQUARTERS
6820 SOUTH HARL AVENUE
TEMPE, ARIZONA 85283
Insight Logo
INSIGHT ENTERPRISES, INC.
6820 S. HARL AVENUE, TEMPE, AZ 85283 PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL MEETING
ON MAY 13, 1999.
The shares of stock you hold in your account will be voted as you specify.
IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED "FOR" ITEMS 1, 2 AND 3.
By signing this proxy, you revoke all prior proxies and appoint ERIC J. CROWN
and STANLEY LAYBOURNE, and each of them, with full power of substitution, to
vote your shares on the matters shown on the reverse side and any other matters
which may come before the Annual Meeting and all adjournments.
See reverse for voting instructions.
<PAGE> 29
Company #
Control #
THERE ARE THREE WAYS TO VOTE YOUR PROXY:
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES
IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
VOTE BY PHONE -- TOLL FREE - 800-240-6326 - QUICK *** EASY *** IMMEDIATE
- - Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a
week.
- - You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which is located above.
- - Follow the simple instructions the Voice provides you.
VOTE BY INTERNET - www.eproxy.com/nsit/ - QUICK *** EASY *** IMMEDIATE
- - Use the Internet to vote your proxy 24 hours a day, 7 days a week.
- - You will be prompted to enter your 3-digit Company number and your 7-digit
Control Number which is located above to obtain your records and create an
electronic ballot.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to Insight Enterprises, Inc. c/o Shareowner
Services, P.O. Box 64873, St. Paul, MN 55164-9397.
If you vote by Phone or Internet, Please do not mail your Proxy Card
-- Please detach here --
Share Amounts
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3.
1. Election of Two Class II Directors:
01 Larry A. Gunning 02 Robertson C. Jones
/ / / /
Vote FOR Vote WITHHELD
all nominees from all nominees
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE,
WRITE THE NUMBER OF THE NOMINEE IN THE BOX PROVIDED TO THE RIGHT.)
2. To approve an amendment to the Company's Amended and Restated Certificate
of Incorporation increasing the number of authorized shares of Common
Stock, $.01 par value, from 30,000,000 to 100,000,000 and of Preferred
Stock, $.01 par value, from 3,000,000 to 10,000,000
/ / / / / /
For Against Abstain
3. To approve amendments to the Company's 1998 Long-Term Incentive Plan
/ / / / / /
For Against Abstain
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL.
Address Change? Mark Box / / Planning to Date:
attend Annual ----------------------------
Indicate changes below: Meeting?
Mark box / /
Address area
Signature(s) in Box
Proxy # Account #
Please sign exactly as your name(s)
appear on Proxy. If held in joint
tenancy, all persons must sign.
Trustees, administrators, etc. should
include title and authority.
Corporations should provide full name or
corporation and title of authorized
officer signing the proxy.
