SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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:
|_| 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 ss.240.14a-11(c) or ss.240.14a-12
DIGITAL INSIGHT CORPORATION
--------------------------------------------------------------------------------
(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)(4) 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 (set forth the amount on which
the filing fee is calculated and state how it was determined):
--------------------------------------------------------------------
4. Proposed maximum aggregate value 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 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:
--------------------------------------------------------------------
[INSERT LOGO]
DIGITAL INSIGHT CORPORATION
26025 MUREAU ROAD
Calabasas, CA 91302
March 22, 2002
Dear Stockholders:
On behalf of the Board of Directors and management of Digital Insight
Corporation, we cordially invite you to attend the annual meeting of
stockholders to be held on Thursday, May 2, 2002, at 10:00 a.m. at our Westlake
Village facilities located on 5601 N. Lindero Canyon Road, Westlake Village,
California 91362.
At the annual meeting, you will be asked to:
1. Elect three (3) Class III Directors;
2. Ratify the appointment of PricewaterhouseCoopers LLP as
Digital Insight's independent public accountants for the year
ending December 31, 2002; and
3. Transact such other business as may properly come before the
annual meeting or any adjournment or postponement thereof.
These matters are described in the accompanying Notice of Annual Meeting
and Proxy Statement.
We have included a copy of Digital Insight's Annual Report to Stockholders
with the Proxy Statement. We encourage you to read the Annual Report. It
includes our audited consolidated financial statements for the year ended
December 31, 2001 as well as information about our business, customers, and
product offerings.
It is important that your stock be represented at the meeting regardless
of the number of shares you hold. You are encouraged to specify your voting
preferences by so marking the enclosed proxy card. Please then sign and date the
proxy card and return it in the enclosed envelope whether or not you plan to
attend the meeting. If you are a stockholder of record and do attend and wish to
vote in person, you may revoke your proxy at the meeting. If you plan to attend
the meeting, please check the proxy card in the space provided. This will assist
us with meeting preparations.
Your vote is very important and we appreciate your cooperation in
considering and acting on the matters presented.
Sincerely,
/s/ John Dorman
John Dorman
Chairman and Chief Executive Officer
DIGITAL INSIGHT CORPORATION
26025 Mureau Road
Calabasas, CA 91302
(818) 871-0000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TIME 10:00 a.m. on Thursday, May 2, 2002
PLACE Company's offices at 5601 N. Lindero Canyon Road,
Westlake Village, California, 91362
ITEMS OF BUSINESS 1. Elect three (3) Class III Directors;
2. Ratify the appointment of PricewaterhouseCoopers
LLP as Digital Insight's independent public
accountants for the year ending December 31, 2002;
and
3. Transact such other business as may properly come
before the annual meeting or any adjournment or
postponement thereof.
RECORD DATE You are entitled to vote if you were a stockholder
at the close of business on Friday, March 15,
2002.
VOTING BY PROXY Please submit a proxy as soon as possible so that your
shares can be voted at the meeting in accordance with
your instructions. For specific instructions, please
refer to the Questions and Answers Section beginning on
page 1 of this proxy statement and the instructions on
the proxy card.
We intend to mail this proxy statement and the accompanying proxy card on
or about March 22, 2002, to all stockholders entitled to vote at the annual
meeting.
By Order of the Board of Directors,
/s/ Tae J. Rhee
Tae J. Rhee
Secretary, Vice President, and General Counsel
Calabasas, California
March 22, 2002
--------------------------------------------------------------------------------
To assure that your shares are represented at the meeting, please complete, date
and sign the enclosed proxy and mail it promptly in the postage-paid envelope
provided, whether or not you plan to attend the meeting. You can revoke your
proxy at any time before it is voted.
--------------------------------------------------------------------------------
DIGITAL INSIGHT CORPORATION
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 2, 2002
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING
Q: WHY AM I RECEIVING THESE MATERIALS?
A: The Board of Directors of Digital Insight Corporation, a Delaware
corporation, is providing these proxy materials for you in connection with
our annual meeting of stockholders, which will take place on May 2, 2002.
As a stockholder, you are invited to attend the meeting and are entitled
to and requested to vote on the proposals described in this proxy
statement.
Q: WHAT INFORMATION IS CONTAINED IN THESE MATERIALS?
A: The information included in this proxy statement relates to the proposals
to be voted on at the meeting, the voting process, the compensation of
directors and our most highly paid executive officers, and certain other
required information. Our 2001 Annual Report and our 2001 Form 10-K,
including our full 2001 consolidated financial statements, are also
enclosed. If any person who was a beneficial owner, as described below, of
our common stock on the record date for the 2002 annual meeting desires
additional copies of our Annual Report or 10-K, such copies will be
furnished without charge upon receipt of a written request. The request
should identify the person making the request as a stockholder of the
company and should be directed to:
DIGITAL INSIGHT CORPORATION
26025 Mureau Road
Calabasas, California 91302
Attn: Investor Relations
Q: WHAT PROPOSALS WILL BE VOTED ON AT THE MEETING?
A: There are two proposals scheduled to be voted on at the meeting:
1. The election of three (3) Class III Directors; and
2. The ratification of the appointment of PricewaterhouseCoopers LLP as
Digital Insight's independent public accountants for the year ending
December 31, 2002.
Q: WHAT IS THE VOTING RECOMMENDATION?
A: Our Board of Directors recommends that you vote your shares "FOR" each of
the nominees to the Board and "FOR" the ratification of the appointment of
PricewaterhouseCoopers LLP as Digital Insight's independent public
accountants for the year ending December 31, 2002.
1
Q: WHAT SHARES CAN I VOTE?
A: All shares owned by you as of the close of business on March 15, 2002, the
Record Date, may be voted by you. These shares include (1) shares held
directly in your name as the Stockholder of Record, including shares
purchased through our Employee Stock Purchase Plan and our employee stock
option plans, and (2) shares held for you as the Beneficial Owner through
a stockbroker, bank, or other nominee.
Q: WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A Stockholder of Record
AND AS A BENEFICIAL OWNER?
A: Most of our stockholders hold their shares through a stockbroker, bank or
other nominee rather than directly in their own name. As summarized below,
there are some distinctions between shares held of record and those owned
beneficially.
Stockholder of Record. If your shares are registered directly in
your name with our transfer agent, EquiServe Trust Company, N.A.,
you are considered, with respect to those shares, the Stockholder of
Record, and these proxy materials are being sent directly to you by
Digital Insight. As the Stockholder of Record, you have the right to
grant your voting proxy directly to us or to vote in person at the
meeting. We have enclosed or sent a proxy card for you to use.
Beneficial Owner. If your shares are held in a stock brokerage
account or by a bank or other nominee, you are considered the
Beneficial Owner of shares held in street name, and these proxy
materials are being forwarded to you by your broker or nominee which
is considered, with respect to those shares, the Stockholder of
Record. As the Beneficial Owner, you have the right to direct your
broker how to vote and are also invited to attend the meeting.
However, since you are not the Stockholder of Record, you may not
vote these shares in person at the meeting unless you obtain a
signed proxy from the record holder giving you the right to vote the
shares. Your broker or nominee has enclosed or provided a voting
instruction card for you to use in directing the broker or nominee
how to vote your shares.
Q: HOW CAN I VOTE MY SHARES IN PERSON AT THE MEETING?
A: Shares held directly in your name as the Stockholder of Record may be
voted in person at the annual meeting. If you choose to do so, please
bring the enclosed proxy card or proof of identification. If you are the
Beneficial Owner of the shares, you must have a signed proxy from the
Stockholder of Record.
Even if you currently plan to attend the annual meeting, we recommend that
you also submit your proxy as described below so that your vote will be
counted if you later decide not to attend the meeting.
Q: HOW CAN I VOTE MY SHARES WITHOUT ATTENDING THE MEETING?
A: Whether you hold shares directly as the Stockholder of Record or in street
name as a Beneficial Owner, you may direct your vote without attending the
meeting. You may vote by granting a proxy or, for shares held in street
name, by submitting voting instructions to your broker or nominee. In most
instances, you will be able to do this by mail. Please refer to the
summary instructions below and those included on your proxy card or, for
shares held in street name, the voting instruction card included by your
broker or nominee.
Q: CAN I CHANGE MY VOTE?
A: You may change your proxy instructions at any time prior to the vote at
the annual meeting. For shares held directly in your name, you may
accomplish this by granting a new proxy bearing a later date (which
automatically revokes the earlier proxy) or by attending the annual
meeting and voting in person. Attendance at the meeting will not cause
your previously granted proxy to be revoked unless you specifically so
request. For shares held beneficially by you, you may accomplish this by
submitting new voting instructions to your broker or nominee.
2
Q: HOW ARE VOTES COUNTED?
A: In the election of Directors, you may vote "FOR" all of the nominees or
your vote may be "WITHHELD" with respect to one or more of the nominees.
For the proposal ratifying the appointment of PricewaterhouseCoopers LLP,
you may vote "FOR," "AGAINST" or "ABSTAIN." If you "ABSTAIN," it has the
same effect as a vote "AGAINST." If you sign your proxy card or broker
voting instruction card with no further instructions, your shares will be
voted in accordance with the recommendations of the Board ("FOR" all of
the company's nominees to the Board and "FOR" the ratification of
PricewaterhouseCoopers LLP as independent auditors for the year ending
December 31, 2002 and in the discretion of the proxy holders on any other
matters that properly come before the meeting).
Q: WHAT IS THE VOTING REQUIREMENT TO APPROVE EACH OF THE PROPOSALS?
A: In the election of Directors, the three persons receiving the highest
number of "FOR" votes will be elected. All other proposals require the
affirmative "FOR" vote of a majority of those shares present and entitled
to vote. If you are a Beneficial Owner and do not provide the Stockholder
of Record with voting instructions, your shares may constitute Broker
Non-Votes, as described in "WHAT IS THE QUORUM REQUIREMENT FOR THE
MEETING?" below. In tabulating the voting result for any particular
proposal, shares that constitute Broker Non-Votes are not considered
entitled to vote on that proposal.
Q: WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY OR VOTING INSTRUCTION
CARD?
A: It means your shares are registered differently or are in more than one
account. Please provide voting instructions for all proxy and voting
instruction cards you receive.
Q: WHERE CAN I FIND THE VOTING RESULTS OF THE MEETING?
A: We will announce preliminary voting results at the meeting and publish
final results in our quarterly report on Form 10-Q for the second quarter
of 2002.
Q: WHAT HAPPENS IF ADDITIONAL PROPOSALS ARE PRESENTED AT THE MEETING?
A: Other than the two proposals described in this proxy statement, we do not
expect any matters to be presented for a vote at the annual meeting. If
you grant a proxy, the persons named as proxy holders, John Dorman, our
Chairman and Chief Executive Officer, and Dale R. Walker, our President
and Chief Operating Officer, will have the discretion to vote your shares
on any additional matters properly presented for a vote at the meeting. If
for any unforeseen reason any of our nominees is not available as a
candidate for Director, the persons named as proxy holders will vote your
proxy for such other candidate or candidates as may be nominated by the
Board of Directors.
Q: WHAT CLASSES OF SHARES ARE ENTITLED TO BE VOTED?
A: Each share of our common stock outstanding as of the close of business on
March 15, 2002, the Record Date, is entitled to vote on all items being
voted upon at the annual meeting. On the Record Date, we had approximately
32,022,569 shares of common stock issued and outstanding.
3
Q: WHAT IS THE QUORUM REQUIREMENT FOR THE MEETING?
A: The quorum requirement for holding the meeting and transacting business is
a majority of the outstanding shares present in person or represented by
proxy and entitled to be voted. Both abstentions and Broker Non-votes are
counted as present for the purpose of determining the presence of a
quorum. Abstentions are also counted as shares present and entitled to be
voted. Broker Non-votes, however, are not counted as shares present and
entitled to be voted with respect to the matter on which the broker has
expressly not voted. Thus, Broker Non-votes will not affect the outcome of
any of the matters being voted upon at the meeting. Generally, Broker
Non-votes occur when shares held by a broker for a beneficial owner are
not voted with respect to a particular proposal because (1) the broker has
not received voting instructions from the Beneficial Owner, and (2) the
broker lacks discretionary voting power to vote such shares.
Q: WHO WILL BEAR THE COST OF SOLICITING VOTES FOR THE MEETING?
A: Digital Insight is making this solicitation and will pay the entire cost
of preparing, assembling, printing, mailing and distributing these proxy
materials. In addition to the mailing of these proxy materials, the
solicitation of proxies or votes may be made in person, by telephone or by
electronic communication by our directors, officers and employees, who
will not receive any additional compensation for such solicitation
activities. We will reimburse brokerage houses and other custodians,
nominees and fiduciaries for their reasonable out-of-pocket expenses for
forwarding proxy and solicitation materials to stockholders.
Q: MAY I PROPOSE ACTIONS FOR CONSIDERATION AT NEXT YEAR'S ANNUAL MEETING OF
STOCKHOLDERS OR NOMINATE INDIVIDUALS TO SERVE AS DIRECTORS?
A: You may submit proposals for consideration at future stockholder meetings,
including director nominations. We expect to hold our 2003 annual meeting
of stockholders in May 2003. Rules of the Securities and Exchange
Commission require that any proposal by a stockholder of Digital Insight
for consideration at the 2003 annual meeting of stockholders must be
received by us no later than November 22, 2002 if any such proposal is to
be eligible for inclusion in our proxy materials for our 2003 annual
meeting. Under such rules, we are not required to include stockholder
proposals in our proxy materials unless certain other conditions specified
in such rules are met.
In order for a stockholder to bring any business or nominations before the
2003 annual meeting of stockholders, certain conditions set forth in
Section 2.14 of our bylaws must be complied with, including delivery of
notice to us not less than 60 days prior to the meeting as originally
scheduled. However, in the event that less than 65 days notice or public
disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be received not later than the
close of business on the 7th day following the date on which such notice
of the date of meeting was mailed or such public disclosure was made.
You may contact our Corporate Secretary at our headquarters for a copy of
the relevant bylaw provisions regarding the requirements for making
stockholder proposals and nominating director candidates.
4
PROPOSAL ONE
ELECTION OF DIRECTORS
Introduction
At the annual meeting, three Directors are to be elected for three-year
terms. Our Board is divided into three classes, and each member serves for a
staggered three-year term. The Board is currently comprised of two Class I
Directors (Dale R. Walker and Betsy S. Atkins), two Class II Directors (Michael
Hallman and Michael R. Splinter) and three Class III Directors (John Dorman,
James McGuire and Robert North). At each annual meeting of stockholders, the
successors to directors whose terms will then expire will be elected to serve
from the time of election and qualification until the third annual meeting
following election. The terms of the initial Class I Directors, Class II
Directors and Class III Directors will expire upon the election and
qualification of successor directors at the 2003, 2004 and 2005 annual meeting
of stockholders, respectively.
Shares represented by executed proxies will be voted, if authority to do
so is not withheld, for the election of the three nominees named below. In the
event that any nominee should be unavailable for election as a result of an
unexpected occurrence, such shares will be voted for the election of such
substitute nominee as the Board of Directors may select. Each person nominated
for election has agreed to serve if elected, and management has no reason to
believe that either nominee will be unable to serve.
The Board of Directors recommends a vote "FOR" each named nominee.
Nominees, Incumbent Directors and Executive Officers
The following sets forth certain information regarding the three nominees,
the four incumbent Directors whose terms will continue following the annual
meeting and the executive officers.
Nominees for Class III Directors
John Dorman. Mr. Dorman has been Digital Insight's Chief Executive Officer
and a director since October 1998 and was Digital Insight's President from
October 1998 to February 2001. Mr. Dorman was appointed Chairman of the Board in
June 1999. Prior to his appointment as Digital Insight's President and Chief
Executive Officer, Mr. Dorman, 51, was Senior Vice President for Oracle
Worldwide Financial Services from August 1997 to October 1998. Prior to joining
Oracle, Mr. Dorman was founder, Chairman, President, and Chief Executive Officer
of Treasury Services Corporation, known as TSC, a provider of management
information solutions to the financial services industry, from 1983 to 1997. TSC
was sold to Oracle in 1997. Prior to serving at TSC, Mr. Dorman spent 11 years
in the banking industry as a senior financial executive for Union Bank of
California. Mr. Dorman holds a BA degree in business administration and
philosophy from Occidental College and an MBA in finance from the University of
Southern California.
James McGuire. Mr. McGuire has been a director of Digital Insight since
March 1997 and served as Chairman of the Board from its inception until June
1999. Mr. McGuire, 58, has served as President of NJK Holding Corporation, an
investment company, since 1992. Mr. McGuire currently serves as a director for
Sylvan Learning Systems, a provider of educational services. Mr. McGuire holds a
BA degree in finance from the University of Notre Dame.
Robert North. Mr. North has been a director of Digital Insight since June
1997. Mr. North, 66, was Chairman of the Board of HNC Software, Inc., from
January to June of 2000 and served as the Chief Executive Officer of HNC
Software, Inc. from 1987 to January 2000. Mr. North is also a director of
Peerless Systems Corporation, a provider of software-based embedded imaging
systems, and Abacus Direct, a provider of information products and marketing
research services. Mr. North holds BS and MS degrees in electrical engineering
from Stanford University.
5
Incumbent Class I Directors (Terms expire in 2003)
Dale R. Walker. Mr. Walker has been a director of Digital Insight since
February 2001 and has served as its President and Chief Operating Officer since
then. Prior to joining Digital Insight, Mr. Walker, 59, was President of
Personal Financial Services, Executive Vice President and Director at Ford Motor
Credit from June 1999 to May 2000 and President of AIG Consumer Finance Group,
Inc. from 1995 to May 1999. Mr. Walker served as Chairman, President and CEO of
ITT Lyndon Insurance Group, Executive Vice President and Director at ITT
Financial Corporation, between 1993 and 1995. From 1981 to 1992, Mr. Walker held
the position of Executive Vice President and Group Head for the Real Estate
Group at Wells Fargo, N.A. Mr. Walker has a BS degree in mathematics from Wake
Forest University and an MBA from the University of North Carolina.
Betsy S. Atkins. Ms. Atkins has been a director of Digital Insight since
March 2001. Since April 2000, Ms. Atkins, 46, has been a member of the Board of
Directors of Lucent Technologies Inc. and a member of its Audit and Compensation
Committees. In addition, she currently serves as Chief Executive Officer of Baja
LLC, a venture capital company she founded in 1991 which focuses on investments
in early stage, high-tech companies. She presently serves as a director of
Polycom, Inc. She has previously served on the Boards of Directors of Olympic
Steel from July 1998 to May 2000, Paradyne Networks, Inc. from February 1999 to
May 2000, Secure Computing, Inc. from October 1997 to January 1999 and Selectica
Inc. from May 1996 to June 2001. Ms. Atkins helped found Ascend Communications,
Inc., and was a member of its board prior to its acquisition by Lucent in 1999.
She received a BA from the University of Massachusetts.
Incumbent Class II Directors (Terms expire in 2004)
Michael R. Splinter. Mr. Splinter has been a director of Digital Insight
since March 2001. Mr. Splinter, 51, currently serves as Executive Vice President
and General Manager, Technology and Manufacturing Group, Intel Corporation, a
position he has held since January 1999, and served as its Vice President and
General Manager, Technology and Manufacturing Group, from 1998 to January 1999.
Prior to that, Mr. Splinter was Intel's Vice President and Assistant General
Manager, Technology and Manufacturing Group from 1996 to 1998, and General
Manager, Components Manufacturing from 1992 to 1996. Mr. Splinter is a graduate
of the University of Wisconsin, where he earned BS and MS degrees in electrical
engineering.
Michael Hallman. Mr. Hallman has been a director of Digital Insight since
April 2001. Mr. Hallman, 56, founded The Hallman Group, a management consulting
firm, in 1992. From February 1990 to March 1992, he was President and Chief
Operating Officer of Microsoft Corporation. From 1987 to early 1990, Mr. Hallman
served as Vice President of the Boeing Company and President of Boeing Computer
Services. From 1967 to 1987, Mr. Hallman worked for the IBM Corporation in
various sales and marketing executive positions, including his last assignment
as Vice President of Field Operations, and was responsible for half of IBM's
United States sales volume. Mr. Hallman currently serves as a director of
Intuit, InFocus Corporation, WatchGuard Technologies and Network Appliance
Corporation. He received his BA degree and MBA from the University of Michigan.
Executive Officers
In addition to the directors and individuals nominated for director above
who are also executive officers of Digital Insight, the following individuals
presently serve as our executive officers.
Elizabeth S.C.S. Murray. Ms. Murray has served as our Executive Vice
President and Chief Financial Officer since March 2002. Ms. Murray, 46, served
as Executive Vice President, Chief Financial Officer and Treasurer of Korn/Ferry
International from July 1998 to March 2002. Prior to that, Ms. Murray served as
Executive Vice President and Chief Financial Officer of Tycom Inc. from June
1997 to December 1997, and from 1994 to June 1997 she was the Chief Financial
Officer and Vice President of Hughes Communications, Inc., a subsidiary of
Hughes Electronics Corporation. Ms. Murray is a Chartered Accountant with the
Institute of Chartered Accountants in Scotland and holds a BA degree in business
studies from Robert Gordon University.
6
Vincent R. Brennan. Mr. Brennan has served as Digital Insight's Senior
Vice President, Sales since February 2001 and was Digital Insight's Vice
President, Sales from February 2000 following the merger with nFront to February
2001. Mr. Brennan, 38, served as Senior Vice President--Sales of nFront from
March 1999 to February 2000. From September 1998 until March 1999, he served as
Senior Vice President--Sales and Marketing of nFront. Prior to joining nFront,
Mr. Brennan was employed by John H. Harland Co. from June 1986 until September
1998, serving as Senior Vice President--Sales, managing the financial markets
division from December 1995 until September 1998 and as Vice President from
April 1993 until December 1995. Mr. Brennan received a BA degree in business
administration from the University of Connecticut.
Drew Hyatt. Mr. Hyatt has served as Digital Insight's Senior Vice
President, Internet Banking Client Services since October 2001. Mr. Hyatt, 40,
was President, Chief Executive Officer and Director of ZMarket, an international
business-to-business channel management provider, from September 2000 to July
2001. From November 1999 to July 2000, he was President and Chief Executive
Officer of ECash Technologies, a digital currency company. Mr. Hyatt was
President of the Financial Services Division of HNC Software, Inc., a provider
of predictive software solutions, from November 1997 to November 1999. Mr. Hyatt
also worked as a Senior Manager for Ernst & Young Strategic Advisory Services
from 1993 to 1997. Mr. Hyatt received his BS degree in electrical engineering
from Lehigh University and his MBA from The Wharton School of Business at the
University of Pennsylvania.
Bruce Isaacson. Mr. Isaacson has served as Digital Insight's Senior Vice
President, Product Management, Marketing and Alliances since October 2001. Mr.
Isaacson, 38, was President of Home Services for Homestore.com, a provider of
software and marketing services to the real estate industry, from April 1999 to
April 2001. From the spring of 1997 to April 1999, he was Vice President of
Marketing for the Mortgage Division of Cendant Corporation. Mr. Isaacson
received his BS degree in engineering from Northwestern University and his
doctorate in business administration and MBA from Harvard Business School.
William Kontgis. Mr. Kontgis has served as Digital Insight's Senior Vice
President, Internet Banking Operations since October 2001 and as our Vice
President, Internet Banking Operations since April 2001. Mr. Kontgis, 52, was
Director of Data Center Services at Oxford Health Plans from September 1998 to
January 2001. From January 1991 to September 1998, he served as Senior Vice
President of First Nationwide Bank and from January 1990 to January 1991 he
served as Senior Vice President of California Federal Bank. Mr. Kontgis received
his BS degree in mathematics from the University of Utah.
Joe McDoniel. Mr. McDoniel has served as Digital Insight's Senior Vice
President, Strategic Opportunities since October 2001. He served as Digital
Insight's Senior Vice President, Operations from September 2000 to October 2001.
Mr. McDoniel, 60, was President of First Source Group, Inc. from August 1993 to
September 2000. First Source Group provides strategic planning and consulting
services relating to retail banking, bank operations, lending and information
technology to the financial services industry. Prior to joining Digital Insight
as an executive officer, Mr. McDoniel, through First Source Group, provided
consulting services to Digital Insight from October 1998 to September 2000.
Robert Surridge. Mr. Surridge joined Digital Insight in November 2000 as
Senior Vice President, Lending Division. Prior to joining Digital Insight, Mr.
Surridge, 38, served in various capacities at The Money Store Inc., a subsidiary
of First Union Corporation, which provides first and second mortgages, home
equity and home improvement loans, and lines of credit to customers with varying
credit quality. Most recently, he served as The Money Store's Vice President,
Strategic Implementation and Development from October 1999 to October 2000; from
June 1998 to September 1999, he served as Vice President, Direct Lending
Operations; from September 1995 to May 1998, he served as Vice President,
Centralized Lending; and from September 1994 to August 1995, he served as its
Vice President Sales, Central Region. Mr. Surridge holds a BS degree from the
University of Utah.
Melvin Takata. Dr. Takata has served as Digital Insight's Senior Vice
President and Chief Technology Officer since May 2001. Dr. Takata, 48, served as
Vice President of Operations and Technology at Yodlee, Inc., an account
aggregation service provider, from September 2000 to May 2001. He held various
positions at Citibank/Citigroup from July 1980 to September 2000, including
Director of Access Technologies from July 1995 to February 1998, Director of
Information Technology from February 1998 to August 1999, and Director of
Internet Platforms from August 1999 to September 2000. Dr. Takata received his
BS degree in computer science from the
7
University of Michigan and his masters and doctorate in computer science from
the University of California at Los Angeles.
Meetings and Compensation of Directors
During the fiscal year ended December 31, 2001, there were eight meetings
of our Board of Directors. During this period, all of the directors attended or
participated in more than 75% of the aggregate of (i) the total number of
meetings of the Board of Directors and (ii) the total number of meetings held by
all Committees of the Board on which each such director served, except Michael
R. Splinter who attended 44% of such meetings.
Directors are reimbursed for all reasonable expenses incurred by them in
attending Board and committee meetings. Independent directors who are not
employed by Digital Insight will be eligible to receive options under our 2001
Non-Employee Director Stock Option Plan. The Plan provides that each eligible
director, provided he or she has served as a director for at least six months,
will receive each year options to purchase 15,000 shares of stock on the day of
the annual meeting of stockholders, or options to purchase 10,000 shares if such
director elects to receive a cash retainer. These options will vest over a
12-month period. In addition, each newly elected or appointed non-employee
director will receive options to purchase 50,000 shares of our common stock upon
joining the Board, or 40,000 shares if such director elects to receive a cash
retainer, which options will vest over a three year period. In the year ended
December 31, 2001, Betsy S. Atkins, Michael R. Splinter and Michael Hallman each
received options to purchase 50,000 shares of Digital Insight common stock,
respectively, for his and her services as a director. Non-employee directors may
elect to receive a retainer in lieu of fewer options. The retainer consists of
$2,500 quarterly payments, $1,500 for each in-person attendance of a Board
meeting and $500 for each telephonic attendance of a Board meeting. The Board of
Directors has the discretion to grant additional options and rights to Directors
under its 1997 and 1999 stock plans. Employee Directors are also eligible to
participate in our employee stock purchase plan.
Committees of the Board of Directors
There are three standing committees of our Board of Directors: the
Compensation Committee, the Audit Committee and the Nominating Committee.
The Compensation Committee consists of Ms. Atkins and Messrs. Hallman,
McGuire and North (chair). The Compensation Committee makes recommendations
regarding our stock option plans and all matters concerning executive
compensation. The Compensation Committee held six meetings during the fiscal
year ended December 31, 2001.
The Audit Committee consists of Messrs. McGuire (chair), North and
Splinter. The Audit Committee approves our independent auditors, and has general
oversight of the scope and process of annual audits and any other
accounting-related services, legal and regulatory compliance, and systems of
internal controls. The Audit Committee held five meetings during the fiscal year
ended December 31, 2001.
The Nominating Committee consists of Ms. Atkins and Messrs. Hallman,
McGuire (chair), North and Splinter. The Nominating Committee considers and
makes recommendations regarding director nominees, where names will be submitted
for election at our annual meetings, and appointments to fill vacancies on the
Board. The Nominating Committee also reviews and makes recommendations to the
Board concerning the composition and size of the Board and its committees. The
Nominating Committee held two meetings during the fiscal year ended December 31,
2001.
Paul Fiore resigned from the Board as of February 2002. Mr. Fiore was not
a member of any Board committees during 2001.
8
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
earned during the fiscal year ended December 31, 2001 by our Chief Executive
Officer and each of our other four most highly compensated executive officers
who earned more than $100,000 during the fiscal year ended December 31, 2001 and
continue to be employed by us and two former executive officers who also met
that threshold during 2001.
Summary Compensation Table
For Fiscal Years Ended December 31, 2001, 2000 and 1999
Annual Long-Term
Compensation Awards
--------------------- --------------
Fiscal Year Securities All Other
Ended Salary Bonus Underlying Compensation
December 31, ($) ($) Options (#)(2) $
----------------------------------------------------------------
Name and Principal Position (1)
John Dorman
Chairman and Chief Executive Officer 2001 $316,667 $ 40,903 75,000 $ --
2000 290,625 -- 112,500 --
1999 225,000 123,751 -- --
Dale R. Walker (3)
President and Chief Operating Officer 2001 267,115 39,050 440,000 --
2000 -- -- -- --
1999 -- -- -- --
Vincent R. Brennan
Senior Vice President, Sales 2001 234,560 -- 30,000 --
2000 204,714 10,000 -- --
1999 -- -- -- --
Joe McDoniel (4)
Senior Vice President, Strategic Opportunities 2001 216,667 132,706 90,000 75,221
2000 62,192 -- 160,000 --
1999 -- -- 6,000 --
Kevin McDonnell (5)
Senior Vice President, Corporate Development 2001 195,000 23,928 50,000 115
2000 186,875 -- 60,000 --
1999 131,260 50,751 115,000 --
Thomas Bollum (6)
Former Executive Vice President and General Manager, 2001 312,718 -- -- 15,092
Lending Division 2000 211,248 85,000 15,000 --
1999 -- -- -- --
Steven Reich (7)
Former Senior Vice President, Business Development 2001 127,604 43,750 -- 11,274
2000 171,875 -- 60,000 --
1999 150,000 82,500 -- --
---------
(1) This table excludes information for Elizabeth S.C.S. Murray, our Executive
Vice President and Chief Financial Officer, who joined us in March 2002;
Drew Hyatt, our Senior Vice President, Internet Banking Client Services,
who joined us in October 2001; Bruce Isaacson, our Senior Vice President,
Product Management, Marketing and Alliances, who joined us in October
2001; Melvin Takata, our Senior Vice President and Chief Technology
Officer, who joined us in April 2001; and William Kontgis, who joined us
in April 2001, as Vice President, Internet Banking Operations and then was
appointed Senior Vice President, Internet Banking Operations in October
2001.
(2) Messrs. Dorman, McDonnell and Reich surrendered options to purchase
75,000, 40,000 and 40,000 shares respectively, pursuant to a Management
Surrender Program in November 2000.
9
(3) Mr. Walker joined us in February 2001. His annualized salary for 2001 was
$300,000.
(4) Mr. McDoniel joined us in September 2000. In 2001, he received moving and
relocation allowance of $75,207 and other compensation of $14. Mr.
McDoniel received options to purchase 6,000 shares and 5,000 shares in May
1999 and in April 2000, respectively, while serving as a consultant.
(5) Mr. McDonnell, our former Chief Financial Officer, former Senior Vice
President, Finance & Administration and currently, Senior Vice President,
Corporate Development, announced his resignation to be effective April 1,
2002. We have a severance agreement with Mr. McDonnell which requires a
total payment of $153,750.12 in semi-monthly installments over a 12-month
period.
(6) Mr. Bollum, our former Executive Vice President and General Manager,
Lending Division, resigned in January 2001. In connection with the
resignation, we paid Mr. Bollum $298,135 of severance payments, which is
included in his salary, and $14,027 of accrued vacation, which is included
in other compensation. Also included in other compensation is $1,065 for
an automobile allowance.
(7) Mr. Reich, our former Senior Vice President, Business Development,
resigned in June 2001. We have a severance agreement with Mr. Reich which
requires payments of $3,645.86 in semi-monthly installments over a
12-month period. Other compensation represents the payment of accrued
vacation.
Option Grants in Last Fiscal Year
The table below sets forth stock option and stock purchase rights
granted to each of the executive officers named in the Summary Compensation
Table during the fiscal year ended December 31, 2001. No options or stock
purchase rights were granted in 2001 under our 1997 Stock Plan. A total of
2,207,450 options and stock purchase rights were granted in 2001 under our 1999
Stock Plan. No stock appreciation rights were granted in 2001.
Options and stock purchase rights were granted at an exercise price
equal to the fair market value of our common stock, as determined by the Board
of Directors, on the date of grant. The 5% and 10% assumed annual rates of
compounded stock price appreciation are mandated by rules of the Securities and
Exchange Commission and do not reflect our projections or estimates of future
stock price growth.
Individual Grants
--------------------------------------------------------------------- Potential Realizable
Number of Value at Assumed
Securities Percent of Total Exercise or Annual Rates of Stock
Underlying Options Granted to Base Price Price Appreciation For
Options Employees in Per Expiration Option Term
Name Granted Fiscal Year Share Date 5% 10%
-------------------- ---------- ------------------ ------------- ---------- ---------- ----------
John Dorman 75,000 3.2% $ 13.2300 5/4/2011 $ 624,021 $1,581,391
Dale R. Walker 440,000 18.6 12.3125 3/5/2011 3,407,037 8,634,100
Vincent R. Brennan 30,000 1.3 13.2300 5/4/2011 249,608 632,556
Joe McDoniel 40,000 1.7 12.9375 3/6/2011 325,453 824,762
50,000 2.1 13.2300 5/4/2011 416,014 1,054,261
Kevin McDonnell 50,000 2.1 13.2300 5/4/2011 416,014 1,054,261
Thomas Bollum -- -- -- -- -- --
Steven Reich -- -- -- -- -- --
10
Aggregated Option Exercises in Last Fiscal Year and Year-End Option Values
The following table sets forth, for each of the executive officers named
in the Summary Compensation Table, certain information concerning the number and
value of shares acquired upon exercise of stock options and stock purchase
rights in 2001. Also reported are values for "in-the-money" options that
represent the positive spread between the respective exercise prices of
outstanding stock options and the closing price of our common stock on December
31, 2001.
Number of Securities Underlying Value of Unexercised
Shares Unexercised Options at Fiscal Year In-the-Money Options at
Acquired on Value End (#) Fiscal Year End ($)
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ------------ ----------- ------------- ----------- -------------
John Dorman 116,664 $890,146 231,767 205,736 $4,694,875 $3,323,942
Dale R. Walker -- -- -- 440,000 -- 4,852,100
Vincent R. Brennan -- -- 35,401 62,281 406,943 648,938
Joe McDoniel -- -- 74,227 181,773 237,760 769,880
Kevin McDonnell 5,000 29,688 56,144 90,315 928,279 1,189,742
Thomas Bollum -- -- -- -- -- --
Steven Reich 6,000 134,700 76,603 23,647 1,559,287 273,623
Employment Agreements and Change in Control Agreements
As of December 31, 2001, John Dorman (our Chairman and Chief Executive
Officer), Dale R. Walker (our President and Chief Operating Officer), Drew Hyatt
(our Senior Vice President, Internet Banking Client Services), Bruce Isaacson
(our Senior Vice President, Product Management, Marketing and Alliances),
William Kontgis (our Senior Vice President, Internet Banking Operations), Joe
McDoniel (our Senior Vice President, Strategic Opportunities), Melvin Takata
(our Senior Vice President and Chief Technology Officer), and Kevin McDonnell
(our former Senior Vice President, Finance & Administration and former Chief
Financial Officer) had or have option agreements with Digital Insight which
provide that 50% of the then unvested portion of the option shall accelerate and
immediately vest upon a change in control of Digital Insight.
Vincent Brennan, our Senior Vice President, Sales, and Digital Insight are
parties to an employment agreement dated February 10, 2000, which has the
following terms:
o The agreement will terminate on February 10, 2003.
o Mr. Brennan will receive a minimum annual base salary of $130,000.
o Mr. Brennan will be eligible to receive management stock option
grants consistent with options granted to other top executives of
Digital Insight.
o If we terminate Mr. Brennan's employment for reasons other than
cause or if Mr. Brennan terminates his employment for good reason,
he will be entitled to receive his base salary for the remainder of
the term.
o In order to receive severance payments and benefits, Mr. Brennan is
prohibited from competing with, or soliciting employees from,
Digital Insight for a period equal to the later of 12 months from
the termination date or two years from the date of the agreement.
Dale R. Walker, our President and Chief Operating Officer, and Digital
Insight are parties to an employment agreement dated February 1, 2001, which has
the following terms:
o Mr. Walker will receive a minimum annual base salary of $300,000 and
will be eligible to participate in our executive management
incentive program with targeted bonus compensation equal to 50% of
his annual salary, based upon performance targets set by the Board
of Directors.
o To assist Mr. Walker with his relocation expenses, we will reimburse
him for the direct cost of moving household goods, including the
cost of insuring those goods, which costs are estimated to be
approximately $25,000, and we will also provide Mr. Walker with a
non-recourse, interest-free loan of $210,000. The principal amount
of the loan will be forgiven in equal annual amounts over a three
(3)
11
year period contingent on Mr. Walker's continued employment with us.
The entire unpaid amount will be forgiven if we terminate Mr. Walker
without cause or if there is a change in control; the entire unpaid
amount will be due and payable if Mr. Walker voluntarily terminates
his employment or if we terminate him for cause.
o We will pay Mr. Walker the cost of temporary housing up to $10,000
per month for three months and the reasonable cost of travel between
Calabasas and New York for Mr. Walker and his wife during the
relocation process.
o Mr. Walker will be granted a stock option to purchase 440,000 shares
of our common stock; provided that, in the event of a change in
control, 50% of the then unvested portion of the option will
accelerate and immediately vest.
o If Mr. Walker's employment is terminated without cause after three
months but before 12 months of employment, we will provide salary
and benefits continuation for a period of up to nine months from the
termination date, ending no earlier than the one year anniversary of
his date of hire.
Melvin Takata, our Senior Vice President and Chief Technology Officer, and
Digital Insight are parties to an employment agreement dated April 17, 2001,
which has the following terms:
o Dr. Takata will receive a minimum annual base salary of $200,000 and
will be eligible to participate in our executive management
incentive program with targeted bonus compensation equal to 50% of
his annual salary. Additionally, Dr. Takata will be granted a sign
on bonus of $25,000.
o Dr. Takata will be granted two stock options to purchase a total of
175,000 shares of our common stock; provided that, in the event of a
change in control, 50% of the then unvested portion of the option
will accelerate and immediately vest.
Bruce Isaacson, our Senior Vice President, Product Management, Marketing
and Alliances, and Digital Insight are parties to an employment agreement dated
September 25, 2001, which has the following terms:
o Mr. Isaacson will receive a minimum annual base salary of $200,000
and will be eligible to participate in our executive management
incentive program with targeted cash bonus compensation equal to 50%
of his annual salary. Mr. Isaacson's 2001 bonus is guaranteed at
$25,000.
o Mr. Isaacson will be granted a stock option to purchase 175,000
shares of our common stock; provided that, in the event of a change
in control, 50% of the then unvested portion of the option will
accelerate and immediately vest.
o If Mr. Isaacson's employment is terminated without cause after three
months but before 12 months of employment, we will provide salary
and benefits continuation for a period of up to nine months from the
termination date, ending no earlier than the one year anniversary of
his date of hire. Also, immediately upon the termination date, the
number of unvested options that would have vested according to the
vesting schedule reflected in each respective option grant during
the nine-month period following the termination date shall vest
immediately.
Drew Hyatt, our Senior Vice President, Internet Banking Client Services,
and Digital Insight are parties to an employment agreement dated October 15,
2001, which has the following terms:
o Mr. Hyatt will receive a minimum annual base salary of $200,000 and
will be eligible to participate in our executive management
incentive program with targeted bonus compensation equal to 50% of
his annual salary. Mr. Hyatt's fiscal year 2002 bonus is guaranteed
at $40,000.
o To assist Mr. Hyatt with his relocation expenses, we will reimburse
him for the direct cost of moving household goods, including the
cost of insuring those goods, up to a maximum of $8,000, and we will
also provide Mr. Hyatt with a non-recourse, interest-free loan of
$171,760. The principal amount of the loan will be forgiven in equal
annual amounts over a three (3) year period contingent on Mr.
Hyatt's continued employment with us. The entire unpaid amount will
be forgiven if we terminate Mr. Hyatt without cause or if there is a
change in control; the entire unpaid amount will be due and payable
if Mr. Hyatt voluntarily terminates his employment or if we
terminate him for cause.
o We will pay Mr. Hyatt the cost of temporary housing up to $2,100 per
month for three months and the reasonable cost of travel between
Calabasas and Walnut Creek for Mr. Hyatt and his wife during the
relocation process.
12
o Mr. Hyatt will be granted a stock option to purchase 125,000 shares
of our common stock; provided that, in the event of a change in
control, 50% of the then unvested portion of the option will
accelerate and immediately vest.
o If Mr. Hyatt's employment is terminated without cause after three
months but before 12 months of employment, we will provide salary
and benefits continuation for a period of up to six months from the
termination date, ending no earlier than the one year anniversary of
his date of hire.
Elizabeth S.C.S. Murray, our Executive Vice President and Chief Financial
Officer, and Digital Insight are parties to an employment agreement dated
February 10, 2002 which has the following terms:
o Ms. Murray will receive a minimum annual base salary of $250,000 and
will be eligible to participate in our executive management
incentive program with targeted bonus compensation equal to 50% of
her annual salary, subject to the terms and conditions of the
program, and based on performance targets for her and/or Digital
Insight.
o A sign-on bonus of $75,000 will be paid to Ms. Murray upon the first
full payroll cycle following her hire date.
o Ms. Murray will be granted a stock option to purchase 225,000 shares
of our common stock; provided that, in the event of a change in
control, 50% of the then unvested portion of the option will
accelerate and immediately vest.
o If Ms. Murray's employment is terminated without cause after three
months but before 12 months of employment, we will provide salary
and benefits continuation for a period of up to six months from the
termination date, ending no earlier than the one year anniversary of
her hire date.
Kevin McDonnell, our former Senior Vice President, Finance &
Administration and our former Chief Financial Officer, and Digital Insight are
parties to a severance agreement dated March 19, 2002 which has the following
terms:
o Mr. McDonnell will receive a total payment of $153,750.12 in
semi-monthly installments over the next 12-month period in
semi-monthly installments. In the event of a change in control, Mr.
McDonnell is entitled to an immediate severance payment equal to any
remaining severance compensation due him.
o Digital Insight will defer unpaid principal of $50,000 and accrued
interest due it by Mr. McDonnell under a promissory note until
January 1, 2003, at which time such amounts will be immediately and
automatically forgiven.
13
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION+
The purpose of the Compensation Committee is to oversee compensation of
our directors, officers, and key employees. The Committee's policy is to ensure
that compensation programs contribute directly to our success, including
enhanced share value. The Compensation Committee is comprised of four outside
directors: Ms. Atkins and Messrs. Hallman, McGuire and North.
Executive Compensation Policies and Programs
Our executive compensation programs are designed to attract and retain
highly qualified executives and to motivate them to maximize stockholder
investment by achieving strategic company goals. There are three basic
components to our executive compensation program: base pay, annual incentive
bonus, and long-term, equity-based incentive compensation in the form of stock
options. Each component is established in light of company and individual
performance, compensation levels at comparable companies, equity among
employees, and cost effectiveness. In addition, employees are eligible to
participate in our 401(k) plan and certain insurance plans. All employees are
also eligible to participate in our Employee Stock Purchase Plan.
Senior Management Compensation Philosophy
We believe our success is greatly influenced by the caliber of our
employees. Our compensation program for senior management is designed to
attract, motivate and retain a highly skilled, professional and dedicated work
force. Our senior management compensation program consists of:
o Base salary compensation tied to prevailing industry compensation
practices.
o Annual merit and incentive pay compensation (bonuses) primarily
related to the company's and manager's performance for the previous
fiscal year.
o Long-term incentive compensation in the form of stock options,
restricted stock and stock purchase rights directly tied to
increasing stockholder value. This component of compensation can be
highly volatile because it is directly related to company
performance.
Our objective is for the base salary, annual merit and incentive
compensation and long-term incentive compensation of senior management to
approximate the median levels for an industry comparison group consisting
primarily of other providers of Internet banking with whom we compete for
executive talent. From year to year, however, relative compensation levels may
vary due largely to variances in individual and company performance.
Base Pay
Base pay is designed to be competitive as compared to salary levels for
equivalent positions at comparable companies. An executive's actual salary
within this competitive framework will depend on the individual's performance,
responsibilities, experience, leadership, and potential future contribution.
Base pay is determined in a way that allows a significant percentage of
compensation to be earned through incentive programs: the more senior the
executive, the larger the percentage of compensation payable through incentive
programs.
----------
+ The Compensation Committee Report shall not be deemed to be incorporated
by reference by any general statement incorporating by reference this
Proxy Statement into any filings of Digital Insight pursuant to the
Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended, except to the extent that Digital Insight specifically
incorporates the Compensation Committee Report by reference therein. The
report shall not be deemed soliciting material or otherwise deemed filed
under either such Act.
14
Annual Merit And Incentive Bonus
In addition to base pay, each executive is eligible to receive an annual
cash bonus based on a mix of the company's and the executive's performance.
Performance targets are intended to motivate our executives by providing bonus
payments for the achievement of specific financial goals within our business
plan. The following bonuses were paid to each of the named executive officers
with respect to fiscal 2001 performance.
Name Bonus (1)
------------------ ---------------
Dale R. Walker $94,484
Vincent R. Brennan --
Joe McDoniel 174,288 (2)
Kevin McDonnell 62,675
Thomas Bollum --
Steven Reich --
---------
(1) Some payments were made in 2002 for bonus earned for fiscal 2001
performance.
(2) Includes a guaranteed bonus of $105,000 payable to Mr. McDoniel pursuant
to the terms of his employment agreement.
In addition, Drew Hyatt, Bruce Isaacson and Melvin Takata received a bonus
in 2001 of $40,000, $25,000 and $25,000, respectively pursuant to the terms of
their employment agreements.
Long-Term, Equity-Based Incentive Compensation
The long-term, equity-based compensation program is tied directly to
stockholder return. Long-term incentive compensation consists of stock options
that generally do not fully vest until after four years and are exercisable only
if an executive is then an employee of Digital Insight. Stock options are
awarded with an exercise price equal to the fair market value of the common
stock on the date of grant. Accordingly, an executive is rewarded only if our
stockholders receive the benefit of appreciation in the price of the common
stock. Because long-term options vest over time, we periodically grant new
options to provide continuing incentives for future performance. The size of
periodic option grants is a function of the breadth of an executive's scope of
accountability, recent performance as determined by the Compensation Committee,
and other factors.
For the year ended December 31, 2001, we granted options to purchase
shares of our common stock under the commitments made to the following
individuals in their respective offers of employment, which were granted upon
the commencement of their employment with Digital Insight.
Name Options
-------------- ---------
Dale R. Walker 440,000
Drew Hyatt 125,000
Bruce Isaacson 175,000
William Kontgis 80,000
Melvin Takata 175,000
For 2002, the Compensation Committee intends to grant options to certain
key employees based solely upon the company's achievement of planned financial
objectives, taking into consideration the Committee's assessment of the
individual's contribution to the company's performance.
Savings and Investment Plan; Benefits
We maintain a 401(k) Savings Plan, which is funded by elective salary
deferrals by employees. The Savings Plan covers executive officers and
substantially all employees meeting minimum eligibility requirements. The
Savings Plan allows Digital Insight to make matching contributions, in amounts
determined by the company, to an employee's deferrals and provides for
additional discretionary contributions by Digital Insight. Through December 31,
2001, the company had not made any matching or additional discretionary
contributions under the Savings Plan. In addition, we provide medical and other
miscellaneous benefits to our officers.
15
Annual Reviews
Each year the Compensation Committee reviews its executive compensation
policies and programs and determines what changes, if any, are appropriate for
the following year. In addition, the Compensation Committee reviews the
performance of the Chief Executive Officer and, with the assistance of the Chief
Executive Officer, the individual performance of the other executive officers.
The Committee makes recommendations to the Board of Directors for final approval
of all material compensation matters.
Compensation of the Chief Executive Officer
The Compensation Committee annually reviews the performance and
compensation of the Chief Executive Officer based on the assessment of his past
performance and its expectation of his future contributions to the company's
performance. John Dorman has served as our Chief Executive Officer since October
1998. For the year ended December 31, 2001, Mr. Dorman's compensation plan
included a base salary of $325,000. Mr. Dorman was entitled to receive a bonus
based on the company's achievement of certain specified targets for 2001. The
company met most of the targets, and the Committee believed Mr. Dorman and the
rest of the executive officers made strong contributions to achieving the
targets. Consequently, the Board awarded, upon the recommendation of the
Compensation Committee, an aggregate of $102,358 in bonuses to Mr. Dorman for
his performance in 2001. The Compensation Committee believes that Mr. Dorman's
total compensation for 2001 was at or below the average total cash compensation
paid to chief executive officers by comparable companies. Mr. Dorman's initial
base salary for 2002 is $325,000. Mr. Dorman received options to purchase 75,000
shares of our common stock in 2001. Mr. Dorman will be entitled to receive a
raise in base salary and additional options during 2002, depending upon the
Compensation Committee's assessment of his performance and the company's
achievement of specified objectives.
Tax Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended, should
not affect the deductibility of compensation paid to our executive officers for
the foreseeable future. The majority of the options available for grant under
the 1997 and 1999 Stock Plans will comply with Section 162(m), so that
compensation resulting from these stock options will not be counted toward the
$1,000,000 limit on deductible compensation under Section 162(m). The
Compensation Committee has not formulated any policy with respect to qualifying
other types of compensation for deductibility under Section 162(m).
Submitted by the Compensation Committee
Robert North, Chairman
Betsy S. Atkins
Michael Hallman
James McGuire
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Ms. Atkins, and Messrs. Hallman,
McGuire and North, none of whom is an employee of Digital Insight. None of our
executive officers serves as a director or member of the Compensation Committee
or other Board committee performing equivalent functions of another entity that
has one or more executive officers serving on the Board of Directors or
Compensation Committee of Digital Insight.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act 1934 requires our Directors
and executive officers and persons who own beneficially more than 10% of our
common stock to file reports of ownership and changes in ownership of such stock
with the Securities and Exchange Commission. To our knowledge, based solely on
review of copies of such reports furnished to us and written representations
that no other reports were required, during the fiscal year ended December 31,
2001, all Section 16(a) filing requirements applicable to the Directors,
executive officers and greater than 10% beneficial owners were complied with by
such persons, other than the initial Form 3 of Melvin Takata which was filed
late.
16
STOCK PERFORMANCE GRAPH *
The following line-graph provides a comparison of the cumulative total
stockholder return on our common stock for the period from October 1, 1999, the
date of our initial public offering, through December 31, 2001, against the
cumulative stockholder return during such period achieved by the Nasdaq Stock
Market (U.S. Companies) and the JP Morgan H&Q Technology Index. All amounts have
been calculated as if all dividends were reinvested.
[GRAPHIC]
* Assumes $100 invested on October 1, 1999 in Digital Insight common
stock, the Nasdaq Stock Market (U.S.) Index, and the JP Morgan H&Q Technology
Index, and assumes reinvestment of dividends. The total stockholder returns
shown are not necessarily indicative of future returns. The Stock Performance
Graph shall not be deemed to be "soliciting material" or to be "filed" with the
Securities and Exchange Commission or subject to Regulation 14A or 14C or to the
liabilities of Section 18 of the Securities Exchange Act of 1934, except to the
extent that the company specifically requests that such information be treated
as soliciting material or specifically incorporates them by reference into a
filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
CERTAIN TRANSACTIONS
Stock Purchase Rights
In October 1997, Paul Fiore, a former director and a co-founder of Digital
Insight, exercised a stock purchase right to purchase an aggregate of 309,250
shares of common stock and entered into a restricted stock purchase agreement
with respect to this exercise. Mr. Fiore paid the $.30 exercise price per share
for these shares by delivery of a full-recourse promissory note bearing interest
at the rate of 7.0% per annum. The note is secured by the shares of common stock
purchased by Mr. Fiore. As of December 31, 2001, $123,615 in unpaid principal
and interest was outstanding in the aggregate under the note.
Other Transactions
We have entered into an indemnification agreement with each of our
executive officers and Directors.
17
PROPOSAL TWO
RATIFICATION OF INDEPENDENT ACCOUNTANTS
In January 2002, the Board of Directors appointed the accounting firm of
PricewaterhouseCoopers LLP to serve as its independent accountants. The
appointment of this firm was recommended to the Board by its Audit Committee. A
proposal to ratify that appointment will be presented at the annual meeting.
Representatives of PricewaterhouseCoopers LLP are expected to be present at the
meeting. They will have an opportunity to make a statement if they desire to do
so and will be available to respond to appropriate questions from stockholders.
The Board of Directors recommends a vote "FOR" the ratification of the
appointment of PricewaterhouseCoopers LLP as our independent accountants for the
fiscal year ending December 31, 2002.
AUDIT COMMITTEE REPORT++
The Audit Committee of the Board of Directors operates under a written
charter adopted by the Board of Directors, and serves as the representative of
the Board for general oversight of our financial accounting and reporting
process, system of internal control, audit process, and process for monitoring
compliance with laws and regulations. Our management has primary responsibility
for preparing Digital Insight's financial statements and our financial reporting
process. Our independent accountants, PricewaterhouseCoopers LLP, are
responsible for expressing an opinion on the conformity of our audited financial
statements to accounting principles generally accepted in the United States. It
should be noted that the Committee members are not professionally engaged in the
practice of accounting or auditing and are not experts in the fields of
accounting or auditing, including with respect to auditor independence. The
Committee members rely, without independent verification, on the information
provided to them and on the representations made by management and the
independent auditors. At the end of the fiscal year 2001, the Audit Committee
was comprised of three outside directors.
In this context, the Audit Committee hereby reports as follows:
1. The Audit Committee has reviewed and discussed with our management
the audited financial statements of Digital Insight as of December
31, 2000 and 2001 and for each of the three years in the period
ended December 31, 2001.
2. The Audit Committee has discussed with the independent accountants
the matters required to be discussed by SAS 61 (Codification of
Statements on Auditing Standards, AU 380).
3. The Audit Committee has received the written disclosures and the
letter from the independent accountants required by Independence
Standards Board Standard No. 1 (Independence Discussions with Audit
Committees) and had a discussion with the independent accountants
about their independence.
4. Based on the review and discussions referred to in paragraphs (1)
through (3) above, and relying thereon, the Audit Committee
recommended to the Board of Directors of Digital Insight, and the
Board has approved, that the audited consolidated financial
statements be included in our Annual Report on Form 10-K for the
year ended December 31, 2001, for filing with the Securities and
Exchange Commission.
Each of the members of the Audit Committee is independent as defined under
the listing standards of Nasdaq.
----------
++ The Audit Committee Report shall not be deemed to be incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filings of Digital Insight pursuant to the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, except to the extent that Digital Insight specifically
incorporates the Audit Committee Report by reference therein. The report
shall not be deemed soliciting material or otherwise deemed filed under
either such Act.
18
Submitted by the Audit Committee
James McGuire, Chairman
Robert North
Michael R. Splinter
Audit Fees
The aggregate fees billed by PricewaterhouseCoopers LLP for professional
services rendered for the audit of our annual financial statements for the year
December 31, 2001 and the reviews of our financial statements included in our
Forms 10-Qs for the year 2001 are $131,200.
Financial Information Systems Design and Implementation Fees
No fees were paid to PricewaterhouseCoopers LLP in 2001 for any
professional services related to financial information systems design or
implementation.
All Other Fees
PricewaterhouseCoopers LLP provided certain professional services in 2001
in connection with the preparation of our federal and state income tax returns,
the audit of our 401(k) plan, reviews of Registration Statements on Form S-8
related to employee option plans and other consulting services, for which we
paid $159,410. The Audit Committee has considered whether the provision of these
services is compatible with maintaining the independence of
PricewaterhouseCoopers LLP.
19
Security Ownership of Certain Beneficial Owners and Management
The common stock is our only outstanding class of voting securities. The
following table sets forth the amount and percent of shares of common stock
which, as of February 28, 2002, are deemed under the rules of the Securities and
Exchange Commission to be "beneficially owned" by each member of our Board of
Directors, by each nominee to become a member of the Board of Directors, by each
of our executive officers named in the Summary Compensation Table, by all
directors, nominees and executive officers as a group, and by any person or
"group" (as that term is used in the Securities Exchange Act of 1934, as
amended) known to us as of that date to be a "beneficial owner" of more than 5%
of the outstanding shares of our common stock.
Number of Shares %
Name of Beneficial Owner Beneficially Owned Owned
------------------------ ------------------ -----
5% Stockholders:
Waddell & Reed (1) 3,813,800 12.0%
Nasser J. Kazeminy and affiliated entities (2) 2,710,905 8.5%
Capital Group International, Inc. (3) 2,484,500 7.8%
David B. Becker (4) 1,901,907 6.0%
Directors and Executive Officers (5)
John Dorman 661,055 2.1%
Dale R. Walker 155,388 *
Betsy S. Atkins 18,055 *
Thomas Bollum 143,003 *
Vincent R. Brennan 42,636 *
Michael Hallman 19,166 *
Joe McDoniel 100,540 *
Kevin McDonnell 64,080 *
James McGuire 79,349 *
Robert North 47,895 *
Steven Reich 21,820 *
Michael R. Splinter 18,055 *
All Directors and officers as a group (15 persons) 1,158,391 3.6%
-----------
* Less than 1%
(1) The address of record for Waddell & Reed is 6300 Lamar Avenue, Overland
Park, Kansas 66202. As disclosed on a Schedule 13G/A filed with the SEC on
January 7, 2002, the shares are beneficially owned by one or more open-end
investment companies or other managed accounts which are advised or
sub-advised by Waddell & Reed Investment Management Company, an investment
advisory subsidiary of Waddell & Reed, Inc., which in turn is a
broker-dealer and underwriting subsidiary of Waddell & Reed Financial
Services, Inc., a parent holding company. Waddell & Reed Financial
Services, Inc. is a subsidiary of Waddell & Reed Financial, Inc. By
contract, Waddell & Reed Investment Management Company holds investment
power over the shares owned by its clients and, in most cases, voting
power. Therefore, Waddell & Reed Investment Management Company may be
deemed the direct beneficial owner of 3,813,800 shares of our common
stock. These companies are of the view that they are not acting as a
"group" for purposes of the Securities Exchange Act of 1934. Indirect
beneficial ownership is attributed to the respective parent companies
solely because of the parent companies' control relationship to Waddell &
Reed Investment Management Company.
(2) The address of record for Nasser J. Kazeminy is 760 Island Drive, Palm
Beach, Florida 33480. The address of record for Exponential Partners II
Limited Partnership is 400 South Fourth Street, Suite 1700, Las Vegas,
Nevada 89101. This information was obtained from a Schedule 13G/A filed
with the SEC on February 14, 2002, combined with additional information
from the transfer agent for our common stock. Nasser J. Kazeminy is the
sole limited partner of Exponential Partners II Limited Partnership and
the sole member of NJK Investments, LLC, which is the sole general partner
of Exponential Partners II Limited Partnership. As disclosed on the
Schedule 13G/A, Exponential Partners II Limited Partnership beneficially
owns 1,766,413 shares of our common stock. In addition, Mr. Kazeminy,
Nader C. Kazeminy and James A. Vose are trustees of the Nasser J. Kazeminy
Irrevocable Trust and share voting authority over 472,146 shares of our
common stock held by that Trust. Mr. Kazeminy, Nader C. Kazeminy and James
A. Vose are trustees of the Yvonne P. Kazeminy-Mofrad Irrevocable Trust
and share voting authority over the 472,346 shares held in that Trust. Mr.
Kazeminy disclaims beneficial ownership of the shares held by these
Trusts.
(3) The address of record for Capital Group International, Inc. is 11100 Santa
Monica Boulevard, Los Angeles, California 90025. As disclosed on a
Schedule 13G filed on February 11, 2002, Capital Group International is
the parent holding company of a group of investment management companies,
including banks and investment advisers. These investment management
companies provide investment advisory and management services for their
respective clients which include registered investment companies and
institutional accounts. Capital Group International does not have
investment power or voting power over any of the 2,484,500 shares of our
common stock held by its clients, but may be deemed to "beneficially own"
such shares for purposes of the Securities Exchange Act of 1934 as a
result of its serving as the investment manager of various institutional
accounts.
(4) The address of record of David B. Becker is 7820 Innovation Boulevard,
Indianapolis, Indiana 46278. As disclosed on a Schedule 13G filed on
January 31, 2002, Mr. Becker owns 1,426,428 shares directly and 475,469
shares as trustee of the David B. Becker 2000 Grantor Retained Annuity
Trust u/a/d 10-27-2000.
(5) Unless otherwise indicated, the address of each director and officer is
c/o Digital Insight Corporation, 26025 Mureau Road, Calabasas, California
91302.
20
[Front of proxy Card]
Digital Insight Corporation.
26025 Mureau Road
Calabasas, California 91302
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John Dorman and Dale R. Walker, and each
of them, with full power of substitution, as proxy, to represent and vote all
the shares of common stock of Digital Insight Corporation held of record by the
undersigned on March 15, 2002, at the annual meeting of stockholders to be held
on May 2, 2002 or any adjournment thereof, as designated on the reverse side
hereof and in their discretion as to other matters.
Please sign exactly as name appears on the reverse side. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
(Please date and sign on reverse)
(Continued on reverse side)
[Back of proxy Card]
The shares represented by this proxy will be voted as directed by the
stockholder. If no direction is given when the duly executed proxy is returned,
such shares will be voted "FOR" the Proposal.
The Board of Directors recommends a vote "FOR" each named nominee and a vote
"FOR" Proposal 2.
I PLAN TO ATTEND MEETING |_|
Proposal 1- Election of the following Nominees as Directors:
NOMINEES:
John Dorman
James McGuire
Robert North
FOR (Instruction: To withhold authority to
all Nominees WITHHELD vote for any individual nominee, strike a
listed at right for all Nominees line through the nominee's name as listed
(except as marked to the contrary) listed at right above.)
|_| |_|
Proposal 2- Approval of the appointment of PricewaterhouseCoopers LLP as
independent auditors of Digital Insight for the fiscal year ending December 31,
2002.
For Against Abstain
|_| |_| |_|
PLEASE MARK YOUR CHOICE LIKE THIS X IN BLUE OR BLACK INK.
-----------------------------
Date
-----------------------------
Signature
-----------------------------
Signature if held jointly
Please mark, date and sign as your name appears above and return in the enclosed
envelope.