<PAGE> 1
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
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to
sec. 240.14a-11(c) or sec. 240.14a-12
</TABLE>
DATA PROCESSING RESOURCES 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 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
DATA PROCESSING RESOURCES CORPORATION
4400 MACARTHUR BOULEVARD, SUITE 600
NEWPORT BEACH, CALIFORNIA 92660
------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 17, 1997
TO THE SHAREHOLDERS OF DATA PROCESSING RESOURCES CORPORATION:
The 1997 Annual Meeting of Shareholders (the "1997 Annual Meeting") of Data
Processing Resources Corporation (the "Company" or "DPRC") will be held at 10:00
a.m., Pacific Time, on Tuesday, December 17, 1997 at The Sutton Place Hotel,
4500 MacArthur Boulevard, Newport Beach, California 92660, for the following
purposes:
1. To elect five Directors of the Company to serve during the ensuing
year and until their successors are elected and qualified.
2. To approve an amendment to the 1994 Stock Option Plan to increase the
number of shares reserved for issuance upon exercise of options
granted thereunder.
3. To ratify the appointment of Deloitte & Touche LLP as the Company's
independent auditors for the fiscal year ending July 31, 1998.
4. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only the shareholders of record at the close
of business on November 10, 1997 will be entitled to notice of and to vote at
the 1997 Annual Meeting or any adjournment or postponement thereof.
A copy of the Company's Annual Report to Shareholders for the fiscal year
ended July 31, 1997 is being mailed with this Notice but is not to be considered
part of the proxy soliciting material.
By Order of the Board of Directors
MICHAEL A. PIRAINO
Secretary
November 17, 1997
Newport Beach, California
YOU ARE URGED TO VOTE UPON THE MATTERS PRESENTED AND TO SIGN, DATE AND
PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED. IT IS IMPORTANT FOR
YOU TO BE REPRESENTED AT THE MEETING. PROXIES ARE REVOCABLE AT ANY TIME AND THE
EXECUTION OF YOUR PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ARE
PRESENT AT THE MEETING.
------------------------------
REQUESTS FOR ADDITIONAL COPIES OF PROXY MATERIALS SHOULD BE ADDRESSED TO
MICHAEL A. PIRAINO, CORPORATE SECRETARY, AT THE OFFICES OF THE COMPANY, 4400
MACARTHUR BOULEVARD, SUITE 600, NEWPORT BEACH, CALIFORNIA 92660.
<PAGE> 3
DATA PROCESSING RESOURCES CORPORATION
4400 MACARTHUR BOULEVARD, SUITE 600
NEWPORT BEACH, CALIFORNIA 92660
------------------------------
PROXY STATEMENT
1997 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 17, 1997
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Data Processing Resources
Corporation, a California corporation (the "Company"), for use at the 1997
Annual Meeting of Shareholders (the "1997 Annual Meeting") to be held on
Tuesday, December 17, 1997 at 10:00 a.m., Pacific Time at The Sutton Place
Hotel, 4500 MacArthur Boulevard, Newport Beach, California 92660, and any
adjournment or postponement thereof. This Proxy Statement and the form of proxy
to be utilized at the 1997 Annual Meeting were mailed or delivered to the
shareholders of the Company on or about November 17, 1997.
MATTERS TO BE CONSIDERED
The 1997 Annual Meeting has been called to (1) elect five Directors of the
Company to serve during the ensuing year and until their successors are elected
and qualified, (2) approve an amendment to the 1994 Stock Option Plan to
increase the number of shares reserved for issuance upon exercise of options
granted thereunder, (3) ratify the appointment of Deloitte & Touche LLP as the
Company's independent auditors for the fiscal year ending July 31, 1998 ("fiscal
1998") and (4) transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
RECORD DATE AND VOTING
The Board has fixed the close of business on November 10, 1997 as the
record date (the "Record Date") for the determination of shareholders entitled
to vote at the 1997 Annual Meeting and any adjournment or postponement thereof.
As of the Record Date, there were outstanding 11,079,683 shares of the Company's
common stock (the "Common Stock").
QUORUM AND VOTING REQUIREMENTS
The holders of record of a majority of the outstanding shares of Common
Stock will constitute a quorum for the transaction of business at the 1997
Annual Meeting. As to all matters, each shareholder is entitled to one vote for
each share of Common Stock held. Abstentions and broker non-votes are counted
for purposes of determining the presence or absence of a quorum for the
transaction of business. The Director nominees who receive the greatest number
of votes at the 1997 Annual Meeting will be elected to the Board of the Company.
Shareholders are not entitled to cumulate votes. Votes against a candidate and
votes withheld have no legal effect. In matters other than the election of
Directors, abstentions are counted as votes against in tabulations of the votes
cast on proposals presented to shareholders, whereas broker non-votes are not
counted for purposes of determining whether a proposal has been approved.
All proxies which are properly completed, signed and returned prior to the
1997 Annual Meeting will be voted. Any proxy given by a shareholder may be
revoked at any time before it is exercised, by filing with the Secretary of the
Company an instrument revoking it, by delivering a duly executed proxy bearing a
later date or by the shareholder attending the 1997 Annual Meeting and voting
his or her shares in person.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of November 1, 1997 by: (i) each
person (or group or affiliated persons) who is known by the Company to own
beneficially more than 5% of the Company's Common Stock; (ii) each of the
Company's Directors; (iii) each of the executive officers named in the Summary
Compensation Table; and (iv) the Company's Directors and executive officers as a
group. Except as indicated in the footnotes to this table, the persons named in
the table, based on information provided by such persons, have sole voting and
sole investment power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to community property laws where applicable.
<TABLE>
<CAPTION>
AMOUNT OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENTAGE
- --------------------------------------------------------------- ------------------ ----------
<S> <C> <C>
Mary Ellen Weaver(1)(2)........................................ 2,312,000 20.9%
David M. Connell(1)(3)......................................... 198,187 1.8
Michael A. Piraino(1)(4)....................................... 23,000 *
Richard E. Earley(1)(3)........................................ 46,500 *
Riordan, Lewis & Haden(5)...................................... 1,069,441 9.7
300 S. Grand Avenue, 29th Floor,
Los Angeles, California 90071
J. Christopher Lewis(6)........................................ 1,173,147 10.6
c/o Riordan, Lewis & Haden 300 S. Grand Avenue, 29th Floor,
Los Angeles, California 90071
Patrick C. Haden(6)............................................ 1,149,441 10.4
c/o Riordan, Lewis & Haden
300 S. Grand Avenue, 29th Floor,
Los Angeles, California 90071
Christopher W. Lancashire(7)................................... 692,850 6.3
c/o Computec International Strategic Resources, Inc.
801 North Brand Boulevard, Suite 650
Glendale, California 91203
All directors and executive officers as a group (7 persons).... 4,545,685 40.0%
</TABLE>
- ---------------
* Less than 1%.
(1) The address of such persons is c/o Data Processing Resources Corporation,
4400 MacArthur Blvd., Suite 600, Newport Beach, CA 92660.
(2) Includes 27,000 shares issuable upon exercise of options which are
exercisable as of, or will become exercisable within 60 days of November 1,
1997.
(3) Represents shares issuable upon exercise of options which are exercisable as
of, or will become exercisable within 60 days of November 1, 1997.
(4) Includes 22,000 shares issuable upon exercise of options which are
exercisable as of, or will become exercisable within 60 days of November 1,
1997.
(5) Shares are owned by RLH DPRC Partners, L.P., a partnership managed by
Riordan, Lewis & Haden ("RLH"). J. Christopher Lewis and Patrick C. Haden,
each a director of the Company, may be deemed to share voting and investment
power with respect to all such shares as the sole general partners of RLH.
No other person has voting power or investment power with respect to such
shares. Messrs. Lewis and Haden do not own any of these shares directly,
however, each of them owns additional shares individually.
(6) Includes 1,069,441 shares owned by RLH DPRC Partners, L.P.
(7) Includes 346,425 shares owned by Mr. Lancashire's spouse.
2
<PAGE> 5
PROPOSAL 1 -- ELECTION OF DIRECTORS
Five Directors are to be elected at the 1997 Annual Meeting to serve until
the next Annual Meeting of Shareholders and until their respective successors
have been elected and qualified. In the absence of instructions to the contrary,
proxies covering shares of Common Stock will be voted in favor of the election
of the persons listed below. In the event that any nominee for election as
Director should become unavailable to serve, it is intended that votes will be
cast, pursuant to the enclosed proxy, for such substitute nominee as may be
nominated by the Company. Management has no present knowledge that any of the
persons named will be unavailable to serve.
No arrangement or understanding exists between any nominee and any other
person or persons pursuant to which any nominee was or is to be selected as a
Director or nominee except that the Company is contractually obligated to
nominate Mr. Lancashire as a Director for the 1997 Annual Meeting. See "Certain
Transactions." None of the nominees has any family relationship to any other
nominee or to any executive officer of the Company.
INFORMATION CONCERNING INCUMBENT DIRECTORS AND NOMINEES TO BOARD OF DIRECTORS.
Information is set forth below concerning the incumbent Directors, all of
whom are also nominees for election as Directors, and the year in which each
incumbent Director was first elected as a Director of the Company. Each nominee
has furnished the information as to his or her beneficial ownership of Common
Stock as of November 1, 1997 and, if not employed by the Company, the nominee's
principal occupation. Each nominee has consented to being named in this Proxy
Statement as a nominee for Director and has agreed to serve as a Director if
elected. Ages are shown as of November 1, 1997.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION WITH THE COMPANY SINCE
- ------------------------------- --- ------------------------------------------ --------
<S> <C> <C> <C>
Mary Ellen Weaver.............. 46 Chairman of the Board, Chief Executive 1985
Officer and Director
David M. Connell............... 53 President, Chief Operating Officer and 1995
Director
J. Christopher Lewis*+......... 41 Director 1995
Patrick C. Haden*+............. 44 Director 1997
Christopher W. Lancashire...... 58 Director 1997
</TABLE>
- ---------------
* Member of the Compensation Committee.
+ Member of the Audit Committee.
Mary Ellen Weaver has served as Chairman of the Board and Chief Executive
Officer of the Company since February 1994 and served as President of the
Company from May 1989 to September 1994. Ms. Weaver also served as Chief
Financial Officer of the Company from December 1989 to February 1994 and as Vice
President from 1985 to May 1989. Ms. Weaver has been a director of the Company
since September 1985. Prior to joining the Company, Ms. Weaver was employed by
XXCAL, Inc., EG&G, Inc. and Thomas Temporaries.
David M. Connell has served as President and Chief Operating Officer of the
Company since September 1994 and as Director since March 1995. From October 1993
to September 1994, Mr. Connell provided consulting services to the Company.
Prior to his service with the Company, Mr. Connell was engaged by Welsh, Carson,
Anderson & Stowe, an investment fund which specializes in acquiring information
services companies and healthcare companies, to manage the following portfolio
companies: from June 1990 to July 1993, Mr. Connell served as Chairman and Chief
Executive Officer of Specialized Mortgage Services, Inc., an information
services company; from 1988 to 1990, he served as Chairman and Chief Executive
Officer of Wold Communications, Inc., which became Keystone Communication, Inc.
as a result of a merger with Bonneville Satellite Communications, Inc.; and from
1985 to 1988, Mr. Connell served as Chairman and Chief Executive Officer of a
systems integration subsidiary of Decision Data Computer Corporation. In each of
these three prior positions, Mr. Connell formulated and implemented merger and
acquisition growth strategies for the companies in addition to being responsible
for overall operations.
3
<PAGE> 6
J. Christopher Lewis was elected a Director of the Company in March 1995.
Since 1982, Mr. Lewis has been a general partner of RLH, a Los Angeles based
partnership which invests in management buy-out and venture capital
transactions. Mr. Lewis also serves as a Director of California Beach
Restaurants, Inc., Tetra Tech, Inc. ("Tetra Tech"), PIA Merchandising Services,
Inc. ("PIA") and several private companies.
Patrick C. Haden became a member of the Board of Directors of the Company
in June 1997. Since 1987, Mr. Haden has been a general partner of RLH, a Los
Angeles based partnership which invests in management buy-out and venture
capital transactions. Mr. Haden also serves as a director of Tetra Tech, PIA and
several private companies.
Christopher W. Lancashire became a member of the Board of Directors of the
Company in June 1997. Since 1992, Mr. Lancashire has served as President and
Chief Executive Officer of Computec International Strategic Resources, Inc.
("Computec"), a wholly-owned subsidiary of the Company, acquired by the Company
in April 1997. Mr. Lancashire serves as a Director of MQ Tech, a specialist
information technology consulting company.
THE BOARD OF DIRECTORS
COMMITTEES
The standing committees of the Board are the Audit Committee (the "Audit
Committee") and the Compensation Committee (the "Compensation Committee"). The
Audit Committee, which consisted of Mr. Lewis and Dr. Li-San Hwang throughout
fiscal 1997 and presently consists of Mr. Lewis and Mr. Haden, met twice during
the fiscal year ended July 31, 1997 ("fiscal 1997"). The Compensation Committee,
which consisted of Mr. Lewis and JoAnn W. Wagner throughout fiscal 1997 and
presently consists of Mr. Lewis and Mr. Haden, met eight times during fiscal
1997.
The Audit Committee makes recommendations concerning the engagement of
independent public accountants; reviews with the independent public accountants
the plans for and scope of the audit, the audit procedures to be utilized and
results of the audit; approves the professional services provided by the
independent public accountants; reviews the independence of the independent
public accountants; and reviews the adequacy and effectiveness of the Company's
internal accounting controls.
The Compensation Committee determines compensation for the Company's
executive officers and administers the Company's 1994 Stock Option Plan. See
"Report of the Compensation Committee of the Board of Directors."
MEETINGS AND REMUNERATION
During fiscal 1997, the Board held eight meetings and took various actions
by written consent. Each incumbent Director attended at least 75% of the
aggregate of (i) the total number of meetings held by the Board during fiscal
1997 (or during the period within which such individual was a Director) and (ii)
the total number of meetings held by all committees of the Board during fiscal
1997 (or during the period within which such individual was a Director or member
of such committee of the Board).
Each Director is elected to hold office until the next annual meeting of
shareholders and until his respective successor is elected and qualified.
Directors who are employees or officers of the Company do not receive
compensation for service on the Board or any committee of the Board. Each
Director of the Company who is not an officer or employee of the Company or a
subsidiary of the Company is entitled to receive $1,200 for each meeting of the
Board attended by such Director. Mr. Haden and Mr. Lewis have waived the right
to receive such compensation. In addition, Directors of the Company are
reimbursed for their reasonable out-of-pocket expenses in connection with their
travel to and attendance at the meetings of the Board.
4
<PAGE> 7
EXECUTIVE OFFICERS, COMPENSATION AND OTHER INFORMATION
EXECUTIVE OFFICERS
Set forth in the table below are the names, ages (as of November 1, 1997)
and current offices held by all executive officers of the Company.
<TABLE>
<CAPTION>
EXECUTIVE
OFFICER
NAME AGE POSITION WITH THE COMPANY SINCE
- ---------------------- --- ------------------------------------------- ---------
<S> <C> <C> <C>
Mary Ellen Weaver..... 46 Chairman of the Board, Chief Executive 1985
Officer and Director
David M. Connell...... 53 President, Chief Operating Officer and 1994
Director
Michael A. Piraino.... 44 Senior Vice President and Chief Financial 1996
Officer
Richard E. Earley..... 52 Senior Vice President, Marketing 1996
</TABLE>
Executive officers of the Company are elected by and serve at the
discretion of the Board. Each of the executive officers has entered into an
employee agreement with the Company. See "Employee Agreements." None of the
executive officers has any family relationship to any nominee for Director or to
any other executive officer of the Company. Set forth below is a brief
description of the business experience for the previous five years of all
executive officers except Ms. Weaver and Mr. Connell. See "Information
Concerning Incumbent Directors and Nominees to Board of Directors."
Michael A. Piraino joined the Company as Senior Vice President and Chief
Financial Officer in January 1996. Prior to joining the Company, Mr. Piraino had
served as Executive Vice President, Director and Chief Development Officer of
Imagyn Medical Technologies, Inc. (formerly known as Urohealth Systems, Inc.)
from October 1994. From July 1993 to October 1994, Mr. Piraino served as Senior
Vice President and Chief Financial Officer of Syncor International Corporation.
Mr. Piraino served as Senior Vice President and Chief Financial Officer of Total
Pharmaceutical Care, Inc. from May 1989 to June 1993. Prior to May 1989, Mr.
Piraino held executive officer positions with Lorimar Home Video and Winn
Enterprises. Mr. Piraino began his career with a national accounting firm. He is
a certified public accountant.
Richard E. Earley joined the Company as Senior Vice President, Marketing in
March 1996. Prior to joining the Company, since February 1992, Mr. Earley served
as the General Manager of the National Business Unit of DRT Systems
International, a subsidiary of Deloitte & Touche LLP which provides data
processing consulting services. From September 1988 to January 1992, Mr. Earley
served as Chief Operating Officer for Unitech Systems, a utility software firm.
From February 1980 to September 1988, Mr. Earley served as Senior Vice President
of Cap Gemini America and its predecessor, a data processing consulting firm.
5
<PAGE> 8
COMPENSATION
The following table sets forth all compensation for services rendered to
the Company in all capacities for each of the fiscal years in the three year
period ended July 31, 1997 by the Chief Executive Officer and each person
serving as an executive officer of the Company at July 31, 1997 whose salary and
bonus exceeded $100,000 (collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- AWARDS
OTHER ANNUAL SECURITIES ALL OTHER
SALARY(1) BONUS COMPENSATION(3) UNDERLYING COMPENSATION(4)
NAME AND PRINCIPAL POSITIONS YEAR ($) ($) ($) OPTIONS(#) ($)
- -------------------------------- ---- --------- ------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Mary Ellen Weaver............... 1997 125,000 196,000 -- 54,000 --
Chairman of the Board and 1996 225,000 27,000 -- -- --
Chief Executive Officer 1995 743,047 189,649(2) -- -- --
David M. Connell................ 1997 174,000 141,000 823,313 32,000 --
President and 1996 174,000 38,920 25,000 --
Chief Operating Officer 1995 147,900 228,382(2) -- 255,200 --
Michael A. Piraino.............. 1997 159,626 113,000 156,250 28,000 --
Senior Vice President, 1996 80,774 12,000 -- 80,000 --
Chief Financial Officer 1995 N/A N/A N/A N/A N/A
and Secretary
Richard E. Earley............... 1997 150,000 38,000 -- 23,000 --
Senior Vice President, 1996 58,850 -- -- 80,000 --
Marketing 1995 N/A N/A N/A N/A N/A
</TABLE>
- ---------------
(1) Amounts shown include compensation earned and received by executive officers
as well as amounts earned but deferred at the election of those officers.
(2) A substantial portion of these bonuses were paid in fiscal 1996.
(3) Represents the dollar value between the exercise price of options for Common
Stock granted to the Named Executive Officer and the fair market value of
such Common Stock on the date of exercise.
(4) The aggregate amount of all other compensation does not exceed the lesser of
either $50,000 or 10% of the total annual salary and bonus for each such
officer.
EMPLOYMENT AGREEMENTS
Ms. Weaver has a four-year employment agreement which terminates on July
31, 1999. Ms. Weaver's employment agreement was amended to reduce her base
salary to $125,000 per year from $225,000 effective August 5, 1996 and to
increase her base salary to $225,000 per year effective August 1, 1997. Ms.
Weaver also receives an annual incentive bonus of up to $225,000. Effective
September 2, 1997, Ms. Weaver's employment agreement was amended to provide that
payment of her incentive bonus will be based primarily on the achievement of
certain financial goals to be established by the Board of Directors. The Company
may terminate Ms. Weaver's employment with or without cause. In the event her
employment is terminated without cause, Ms. Weaver is entitled to receive her
base salary and certain benefits for up to 24 months and is entitled to receive
a prorated incentive bonus through the date of termination. Ms. Weaver's
employment agreement also includes certain non-competition agreements,
confidentiality agreements and indemnification agreements.
Mr. Connell also has a four-year employment agreement which terminates on
July 31, 1999. Effective August 1, 1997, Mr. Connell's employment agreement was
amended to increase his base salary to $225,000 per year. Mr. Connell is also
able to earn an incentive bonus of up to 100% of his base salary under an
incentive plan based primarily on the achievement of specified financial
objectives. In the event Mr. Connell's employment is terminated without cause,
he is entitled to receive his base salary and certain benefits for up to 18
months and a prorated incentive bonus through the date of termination. Effective
January 15, 1996,
6
<PAGE> 9
Mr. Connell was granted an option to purchase 25,000 shares of Common Stock
under the Company's 1994 Stock Option Plan. The option has an exercise price of
$9.00 per share and vests over four years, with 25% vesting on the first
anniversary of the date of grant, and the remainder vesting in 12 equal
quarterly installments over the following three years. Mr. Connell was
previously and subsequently granted additional stock options. See "-- Fiscal
Year-End Option Values" for the total number of unexercised options held by Mr.
Connell.
Mr. Piraino has a two-year employment agreement which terminates on
December 31, 1997. Effective March 1, 1997, Mr. Piraino's employment agreement
was amended to increase his base salary to $175,000 per year. Mr. Piraino's
employment agreement also provides for an incentive plan identical to Mr.
Connell's under which he is able to earn up to 100% of his base salary. In the
event of termination without cause, Mr. Piraino is entitled to receive his base
salary and certain benefits for up to six months. Effective January 15, 1996,
Mr. Piraino was granted an option to purchase 80,000 shares of Common Stock
under the Company's 1994 Stock Option Plan. The option has an exercise price of
$9.00 per share and vests over four years, with 25% vesting on the first
anniversary of the date of grant, and the remainder vesting in 12 equal
quarterly installments over the following three years. Since this initial grant,
Mr. Piraino was granted additional stock options. See "-- Fiscal Year-End Option
Values" for the total number of unexercised options held by Mr. Piraino.
Mr. Earley has an employment agreement which terminates on December 31,
1997 and provides for a base salary of $150,000 and an incentive plan identical
to Mr. Connell's under which he is able to earn up to 100% of his base salary.
In addition, Mr. Earley will be entitled to receive a commission based on his
achievement of certain goals. In the event of termination without cause, Mr.
Earley is entitled to receive his base salary and certain benefits for up to six
months. Mr. Earley was granted an option to purchase 80,000 shares of Common
Stock under the Company's 1994 Stock Option Plan effective March 5, 1996. The
option has an exercise price of $14.00 and vests over four years, with 25%
vesting on the first anniversary of the date of grant, and the remainder vesting
in 12 equal quarterly installments over the following three years. Since this
initial grant, Mr. Earley was granted additional stock options. See "-- Fiscal
Year-End Option Values" for the total number of unexercised options held by Mr.
Earley.
STOCK OPTIONS
The following table sets forth information concerning each grant of stock
options made during fiscal 1997 to each of the Named Executive Officer.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SHARES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM(1)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ----------------------
NAME GRANTED PERIOD PER SHARE DATE 5% 10%
- ------------------------------ --------- ------------- -------------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Mary Ellen Weaver............. 54,000(2) 8.5% $16.88 11/25/06 573,250 1,452,728
David M. Connell.............. 28,000(2)(3) 4.4% $16.88 11/25/06 297,241 753,266
4,000(3)(4) .6% $18.75 3/24/07 47,167 119,531
Michael A. Piraino............ 24,000(2)(3) 3.8% $16.88 11/25/06 254,778 645,657
4,000(3)(4) .6% $18.75 3/24/07 47,167 119,531
Richard E. Earley............. 23,000(2)(3) 3.6% $16.88 11/25/06 244,162 618,755
</TABLE>
- ---------------
(1) The potential realizable value is calculated based on the term of the option
at its time of grant (ten years). It is calculated by assuming that the
stock price on the date of grant appreciates at the indicated annual rate,
compounded annually for the entire term of the option.
(2) The options vest over a two-year period in eight equal quarterly
installments beginning on February 26, 1997 and ending November 26, 1998.
7
<PAGE> 10
(3) The options become immediately exercisable upon the sale of substantially
all of the Company's assets, a merger or consolidation in which the Company
is not the consolidated or surviving corporation or any acquisition of 35%
or more of the outstanding shares of Common Stock by any person.
(4) The options vest over a four-year period with 25% becoming exercisable on
March 25, 1998 and the remaining 75% vesting in equal quarterly installments
thereafter over the three years ending March 25, 2001.
The following table sets forth the number and value as of July 31, 1997 of
shares underlying unexercised options held by each of the Named Executive
Officers.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY OPTIONS AS OF
OPTIONS AS OF JULY 31, 1997 JULY 31, 1997(1)($)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Mary Ellen Weaver................................ 13,500 40,500 81,776 245,329
David M. Connell(2)(3)........................... 177,725 88,475 3,662,664 1,396,607
Michael A. Piraino(2)(4)......................... 26,000 72,000 315,095 822,660
Richard E. Earley(2)(5).......................... 30,750 72,250 258,268 596,054
</TABLE>
- ---------------
(1) Based on the fair market value (the closing price for the Company's Common
Stock as reported on the Nasdaq National Market as of July 31, 1997,
($22 15/16 per share), less the exercise price payable upon exercise of such
options.
(2) The options become immediately exercisable upon the sale of substantially
all of the Company's assets, a merger or consolidation in which the Company
is not the consolidated or surviving corporation or any acquisition of 35%
or more of the outstanding shares of Common Stock by any person.
(3) 209,200 of the options granted to Mr. Connell are subject to vesting over a
three and one-half year period. Of such options, 25% became exercisable on
March 1, 1995 and the remaining 75% vest in equal quarterly installments
thereafter over the three years ending March 1, 1998. 25,000 of the options
granted to Mr. Connell are subject to vesting over a four-year period with
25% exercisable on January 15, 1997 and the remaining 75% vesting in equal
quarterly installments thereafter over the three years ending January 15,
2000. The remaining 32,000 options granted to Mr. Connell vest as set forth
in the Option Grants in Last Fiscal Year Table above.
(4) 28,000 options granted to Mr. Piraino vest as set forth in the Option Grants
in Last Fiscal Year Table above. The remaining 70,000 options granted to Mr.
Piraino vest as set forth in "-- Employment Agreements."
(5) 23,000 options granted to Mr. Earley vest as set forth in the Option Grants
in Last Fiscal Year Table above. The remaining 80,000 options granted to Mr.
Earley vest as set forth in "-- Employment Agreements."
1994 STOCK OPTION PLAN
The Company's 1994 Stock Option Plan (the "1994 Plan") permits option
grants to employees, directors, officers and consultants of the Company in order
to further the growth, development and financial success of the Company. The
1994 Plan provides for the grant of incentive stock options and non-statutory
stock options. The Company has reserved, subject to shareholders approval at the
1997 Annual Meeting, 2,000,000 shares of Common Stock for issuance upon the
exercise of options granted under the 1994 Plan. The 1994 Plan is administered
by the Compensation Committee of the Board of the Company. The Compensation
Committee has discretion to determine which eligible individuals are to receive
option grants, the number of shares subject to each such grant, the status of
any granted option as either an incentive stock option or a non-statutory
option, and the vesting schedule to be in effect for the option grant. The
maximum term of options granted under the 1994 Plan is ten years, subject to
earlier termination following an optionee's
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<PAGE> 11
cessation of service with the Company. Options granted under the 1994 Plan are
non-transferable and generally expire 30 days after the termination of an
optionee's service to the Company. If a holder of an option is permanently
disabled or dies during his or her service to the Company, such option generally
may be exercised up to one year (90 days for death) following such disability or
death. Subject to certain restrictions, the Board may amend or modify the 1994
Plan at any time. The 1994 Plan will terminate on December 31, 2004, unless
sooner terminated by the Board. See "Proposal 2 -- Amendment of 1994 Stock
Option Plan."
EMPLOYEE STOCK PURCHASE PLAN
On October 1, 1996, the Company adopted an Employee Stock Purchase Plan, as
amended ("Purchase Plan") which was approved by the shareholders on December 17,
1996. The Purchase Plan allows employees of the Company to purchase Common
Stock, without having to pay any commissions on the purchases. The maximum
amount that any employee can contribute to the Purchase Plan per quarter is
$6,250, and the total number of shares which are reserved by the Company for
purchase under the Purchase Plan is 250,000 of which 231,765 shares were
available for purchase as of July 31, 1997.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Bylaws require the Company to indemnify its directors and
officers to the fullest extent permitted by California law against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
in connection with any proceeding arising by reason of the fact that any such
person is or was a director or officer of the Company. The Company is also
required to advance to such director or officer expenses incurred in defending
any such proceeding, to the maximum extent permitted by such law. The Company's
Bylaws also provide that the Board, in its discretion, may provide for
indemnification of or advance of expenses to other agents of the Company. The
Company is also authorized under its Articles of Incorporation and Bylaws to
enter into indemnification contracts with its directors, officers, employees and
agents, and indemnification agreements were entered into with all of the
Company's certain officers and directors prior to the completion of the
Company's initial public offering which closed on March 11, 1996 (the "Public
Offering"). The Company has purchased liability insurance covering its directors
and officers.
In addition, the Company's Articles of Incorporation provide that the
liability of the Company's directors for monetary damages will be eliminated to
the fullest extent permissible under California law. This provision in the
Articles of Incorporation does not eliminate a director's duty of care to the
Company, and in appropriate circumstances, equitable remedies such as injunctive
or other forms of non-monetary relief would remain available under California
law. This provision also does not affect a director's responsibilities under any
other laws, such as the federal securities laws or state or federal
environmental laws.
To the extent the Board or the shareholders of the Company may in the
future wish to limit or repeal the ability of the Company to provide
indemnification as set forth in the Company's Articles of Incorporation or
Bylaws, such repeal or limitation may not be effective as to directors and
officers who are parties to the indemnification agreements, because their rights
to full protection would be contractually assured by the indemnification
agreements. It is anticipated that similar contracts may be entered into, from
time to time, with future directors of the Company.
There is no pending litigation or proceeding involving a director, officer,
employee or other agent of the Company as to which indemnification is being
sought, nor is the Company aware of any pending or threatened litigation that
may result in claims for indemnification by any director, officer, employee or
other agent.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee was established prior to the beginning
of fiscal 1997 and during fiscal 1997 consisted of Mr. Lewis and JoAnn W.
Wagner. Neither Mr. Lewis nor Ms. Wagner was at any time during fiscal 1996 or
fiscal 1997 or at any other time an officer or employee of the Company. There
are no compensation committee interlocks between the Company and other entities
involving the Company's executive officers and Board members who serve as
executive officers or Board members of such other entities.
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<PAGE> 12
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board is currently comprised of Mr. Lewis
and Mr. Haden. During fiscal 1997 the Compensation Committee consisted of Mr.
Lewis and Ms. Wagner, two non-employee directors, that administered the
Company's executive compensation programs and policies. The Company's executive
compensation programs are designed to attract, motivate and retain the executive
talent needed to optimize shareholder value in a competitive environment. The
programs are intended to support the goal of increasing shareholder value while
facilitating the business strategies and long-range plans of the Company.
The following is the Compensation Committee's report submitted to the Board
addressing the compensation of the Company's executive officers for fiscal 1997.
COMPENSATION POLICY AND PHILOSOPHY
The Company's executive compensation policy is (i) designed to establish an
appropriate relationship between executive pay and the Company's annual
performance, its long term growth objectives and its ability to attract and
retain qualified executive officers; and (ii) based on the belief that the
interests of the executives should be closely aligned with the Company's
shareholders. The Compensation Committee attempts to achieve these goals by
integrating competitive annual base salaries with (i) annual incentive bonuses
based on corporate performance and on the achievement of specified performance
objectives set forth in the Company's financial plan for such fiscal year and
(ii) stock options through the 1994 Plan. In support of this philosophy, a
meaningful portion of each executive's compensation is placed at-risk and linked
to the accomplishment of specific results that are expected to lead to the
creation of value for the Company's shareholders from both the short-term and
long-term perspectives. The Compensation Committee believes that cash
compensation in the form of salary and performance-based incentive bonuses
provides company executives with short term rewards for success in operations,
and that long term compensation through the award of stock options encourages
growth in management stock ownership which leads to expansion of management's
stake in the long term performance and success of the Company. The Compensation
Committee considers all elements of compensation and the compensation policy
when determining individual components of pay.
The Board believes that leadership and motivation of the Company's
employees are critical to achieving the objective of becoming a leader in
information technology staffing in the United States. The Compensation Committee
is responsible to the Board for ensuring that its executive officers are highly
qualified and that they are compensated in a way that furthers the Company's
business strategies and which aligns their interests with those of the
shareholders. To support this philosophy, the following principles provide a
framework for executive compensation: (i) offer compensation opportunities that
attract the best talent to the Company; (ii) motivate individuals to perform at
their highest levels; (iii) reward outstanding achievement; (iv) retain those
with leadership abilities and skills necessary for building longterm shareholder
value; (v) maintain a significant portion of executives' total compensation at
risk, tied to both the annual and long-term financial performance of the Company
and the creation of incremental shareholder value; and (vi) encourage executives
to manage from the perspective of owners with an equity stake in the Company.
EXECUTIVE COMPENSATION COMPONENTS
As discussed below, the Company's executive compensation package is
primarily comprised of three components: base salary, annual incentive bonuses
and stock options.
Base Salary. For fiscal 1997, the Compensation Committee approved the base
salaries of the executive officers based on (i) salaries paid to executive
officers with comparable responsibilities employed by companies with comparable
businesses, (ii) performance and profitability of the Company in fiscal 1996,
which is the most important factor, and (iii) individual performance reviews for
fiscal 1996 for most executive officers. The Compensation Committee reviews
executive officer salaries annually and exercises its judgment based on all the
factors described above in making its decisions subject to the terms of such
officer's employment agreement. No specific formula is applied to determine the
weight of each criteria.
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<PAGE> 13
Annual Incentive Bonuses. For fiscal 1997, annual incentive bonuses for the
Chief Executive Officer and the other Named Executive Officers were based upon
the following three components: (i) the Company's targeted net income and
earnings per share estimates for fiscal 1997, and (ii) individual merit. The
Compensation Committee predetermined performance goals based on the components
described above, each executive officer's employment agreement sets forth
certain target thresholds based on the Company's performance and corresponding
target awards on an annual basis, and actual performance of the Company and the
executive determines the percentage used to calculate the bonus at the end of
the year with the size of the bonus varying between 0% and 100% of the target
award. Target awards for each executive officer were set in relation to his/her
base salary. On average, executive officer's actual bonuses were 80.2% of each
executive's base salary for fiscal year 1997. See "Summary Compensation Table."
Long Term Incentive Compensation. Stock options encourage and reward
effective management which results in long-term corporate financial success, as
measured by stock price appreciation. Stock options covering 137,000 shares, net
of cancellations, were granted to the executive officers of the Company and
stock options covering 495,977 shares were granted, net of cancellations, to 76
other employees or directors of the Company, during fiscal 1997 under the
Company's 1994 Plan. The number of options that each executive officer or
employee was granted was based primarily on the executive's or employee's
ability to influence the Company's long term growth and profitability. The
Compensation Committee believes that option grants afford a desirable long term
compensation method because they closely ally the interests of management with
shareholder value and that grants of stock options are the best way to motivate
executive officers to improve long-term stock market performance. The vesting
provisions of options granted under the 1994 Plan are designed to encourage
longevity of employment with the Company and generally extend over a four-year
period.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Compensation Committee believes that Mary Ellen Weaver, the Company's
Chief Executive Officer, provides valuable services to the Company and that her
compensation should therefore be competitive with that paid to executives at
comparable companies. In addition, the Compensation Committee believes that an
important portion of her compensation should be based on Company performance.
Ms. Weaver's annual base salary for fiscal 1997 was $125,000. The factors which
the Compensation Committee considered in setting her annual base salary were her
individual performance and pay practices of peer companies relating to
executives of similar responsibility. The annual incentive bonus paid to Ms.
Weaver for fiscal 1997 was $196,000. Such bonus was paid to Ms. Weaver for her
performance and role in effectuating the Company's achievement of certain
targeted earnings and growth estimates during fiscal 1997.
INTERNAL REVENUE CODE SECTION 162(M)
Under Section 162 of the Internal Revenue Code (the "Code"), the amount of
compensation paid to certain executives that is deductible with respect to the
Company's corporate taxes is limited to $1,000,000 annually. It is the current
policy of the Compensation Committee to maximize, to the extent reasonably
possible, the Company's ability to obtain a corporate tax deduction for
compensation paid to executive officers of the Company to the extent consistent
with the best interests of the Company and its shareholders.
Compensation Committee
J. Christopher Lewis
JoAnn W. Wagner
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<PAGE> 14
COMPANY PERFORMANCE
The following graph shows a comparison of cumulative total returns for the
Company, the Nasdaq Stock Market (U.S.) Index and a Company-constructed Peer
Group (as defined below) for the period during which the Company's Common Stock
has been registered under Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The Company-constructed Peer Group Index includes
the following companies: Ciber, Inc., Computer Horizons Corp., Computer
Management Sciences, Inc., Computer Task Group, Incorporated, Keane, Inc., SCB
Computer Technology, Inc., Whittman-Hart, Inc., Alternative Resources
Corporation, Analysts International Corporation, Cotelligent Group, Inc.,
Registry, Inc. and Metro Information Services, Inc. The peer group was selected
by the Company with the assistance of an outside research consultant. The search
was limited to publicly traded companies in the information technology or
computer staffing business. Primary Standard Industrial Classification ("SIC")
code was not the principal factor used in selecting the companies for the Peer
Group Index. The Peer Group Index has been weighted for market capitalization at
each data point.
COMPARISON OF 17 MONTH CUMULATIVE TOTAL RETURN*
AMONG DATA PROCESSING RESOURCES CORPORATION,
THE NASDAQ STOCK MARKET (U.S.) INDEX AND THE PEER GROUP
<TABLE>
<CAPTION>
DATA PROCESSING
MEASUREMENT PERIOD RESOURCES NASDAQ STOCK
(FISCAL YEAR COVERED) CORPORATION PEER GROUP MARKET (U.S.)
<S> <C> <C> <C>
03/06/96 100 100 100
07/96 129 109 100
07/97 164 240 147
</TABLE>
* Assumes $100 invested on March 6, 1996 in stock or index.
Total return assumes reinvestment of dividends.
Fiscal year ending July 31.
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<PAGE> 15
CERTAIN TRANSACTIONS
In March 1995, RLH, through a partnership of which it is the general
partner, purchased 1,480 shares of the Company's Series A Convertible Preferred
Stock for aggregate consideration of $1.6 million. This partnership concurrently
purchased 1,066,000 shares of Common Stock from Ms. Weaver for aggregate
consideration of $2.4 million. The shares of Series A Convertible Preferred
Stock held by RLH were automatically converted into 592,000 shares of Common
Stock immediately prior to the consummation of the Public Offering. Following
the consummation of these transactions, Mr. Lewis became a director of the
Company. Mr. Lewis is a general partner of RLH. In 1997, Mr. Haden, also a
general partner of RLH, became a director of the Company. The partnership
managed by RLH can require the Company to register the shares of Common Stock
purchased from Ms. Weaver and the shares of Common Stock issuable upon
conversion of the shares of Series A Convertible Preferred Stock for resale at
any time after March 11, 1997.
In connection with the March 1995 financing transactions, Ms. Weaver and
the partnership managed by RLH entered into certain agreements with respect to
the election of directors, future sales of capital stock by the Company and
sales of stock by Ms. Weaver and such partnership. All such agreements were
terminated upon the completion of the Public Offering.
The Company used the proceeds from the sale of the Series A Convertible
Preferred Stock and from borrowings under a five-year credit agreement (the
"Credit Agreement") to: (i) repay $2.3 million outstanding under the Company's
existing credit facility, which represented all of the Company's obligations
thereunder; (ii) pay all unpaid principal and interest in the amount of $4.4
million under a promissory note which was personally guaranteed by Ms. Weaver;
and (iii) repay outstanding indebtedness owed to Ms. Weaver in the amount of
$1.4 million.
In fiscal 1994, one of the Company's larger clients desired to outsource
its entire information systems department through an employee leasing
arrangement which would not adversely affect the employment package for the
personnel staffing such department. Because DPRC does not provide such employee
leasing services and was unable to provide a comparable employment package to
consultants working for this company, a separate company, Information Technology
Resources, Inc. ("ITR"), was formed by Ms. Weaver and certain other persons,
including certain former employees of the client, with Ms. Weaver owning
approximately 75.6% of the outstanding capital stock. As a result of this
arrangement, the Company provides certain management services to ITR to support
its operations, for which the Company receives a management fee. Management fees
received by DPRC were $934,000, $1,084,000 and $1,035,000 for fiscal 1995, 1996
and 1997, respectively. The management fees paid to DPRC have historically
represented in excess of 90% of ITR's profit before such management fees. As
part of the services provided to ITR, the Company from time to time makes
advances to ITR to assist it with its working capital needs. ITR also contracts
with DPRC for technical consultants to meet its staffing needs. Revenues from
the billing of technical consultants to ITR were $3,460,000, $4,974,000 and
$3,678,000 for fiscal 1997, 1996 and 1995, respectively. The Company also had
trade accounts receivable for technical consultants due from ITR of $180,000 and
$133,000 as of July 31, 1997 and 1996, respectively. Management believes that
the terms of DPRC's relationship with ITR, taken as a whole, are no less
favorable to DPRC than could be obtained in a transaction with an unrelated
third party and that the management services arrangement with ITR is at least as
profitable to the Company as if the Company were to provide services to ITR's
client directly. Receivables from affiliates (including a receivable from ITR
related to these management services) amounted to $23,000 and $104,000 as of
July 31, 1997 and 1996, respectively. Effective August 1, 1997 the management
service agreement with ITR has been renegotiated to reflect a reduction in the
management fee.
In March 1995, Ms. Weaver and RLH pledged all of the outstanding shares of
capital stock of the Company to the senior lender as security for the Company's
obligations under its senior credit facility. Such pledge was terminated on
August 30, 1996 when the Credit Agreement was terminated.
As of July 31, 1997, a company owned by Ms. Weaver and other former
shareholders of the Company owed the Company $20,000 for advances made. These
advances are non-interest bearing and repayable at $2,000 per month.
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<PAGE> 16
In December 1995, the Company paid $47,000 in principal amount and accrued
interest to prepay in full an equipment loan which had been personally
guaranteed by Ms. Weaver.
In connection with the acquisition of Computec by the Company, Mr.
Lancashire entered into an employment agreement effective as of April 29, 1997
with Computec which ends December 31, 1998 pursuant to which Mr. Lancashire is
entitled to receive an annual base salary of $140,000. The Company may terminate
Mr. Lancashire's employment with or without cause. In the event his employment
is terminated without cause, he is entitled to receive his base salary and
certain benefits until December 31, 1999 and is entitled to have released to him
any remaining shares of the 286,965 shares of Common Stock of the Company held
in escrow collateralizing certain indemnification obligations pursuant to the
terms of the Computec acquisition agreements. The acquisition agreements also
provide that the Company shall grant options covering up to 155,000 shares (and
up to 205,000 shares previously granted if any of such previously granted shares
are forfeited) of Common Stock under the 1994 Plan to certain employees of
Computec, including Mr. Lancashire and his spouse, to be designated by Mr.
Lancashire on or prior to January 1, 1999 at an exercise price equal to the then
current fair market value of the Common Stock at the date of grant pursuant to
the terms of such acquisition agreements. The Company is obligated to make
earnout payments contingent upon Computec's earnings before interest and taxes
through December 31, 1998 (the "Computec Earnout"). The maximum amount that Mr.
Lancashire or his spouse may receive in connection with the Computec Earnout,
either individually or beneficially, is an aggregate of approximately $36.5
million which is payable in a combination of cash and Common Stock. In addition,
Mr. Lancashire and his spouse were granted registration rights with respect to
all shares of the Common Stock received in connection with the acquisition of
Computec and any additional of Common Stock which may be issued to the
Lancashires' in connection with the Computec Earnout. The acquisition agreements
also provides that the Company will nominate Mr. Lancashire as a director at the
1997 Annual Meeting. Mr. Lancashire became a director in June 1997.
PROPOSAL 2 -- AMENDMENT OF 1994 STOCK OPTION PLAN
At the 1997 Annual Meeting, the shareholders will be asked to approve
amendments to the Company's 1994 Stock Option Plan, as amended (the "1994
Plan"). Such approval will require the affirmative vote of a majority of the
voting power of all outstanding shares of the Company's Common Stock present or
represented and entitled to vote at the 1997 Annual Meeting. Effective June 2,
1997 and November, 1, 1997, the Board adopted the amendments, subject to
shareholder approval as described herein, increasing the number of shares of
Common Stock available for issuance upon the exercise of options granted under
the 1994 Plan from 1,250,000 to 1,500,000 and from 1,500,000 to 2,000,000,
respectively. The increase in the number of shares under the 1994 Plan from
1,250,000 to 2,000,000 is collectively referred to as the "Amendment." The 1994
Plan, as amended by the Amendment, and information regarding options granted
thereunder is summarized below, but these descriptions are subject to and are
qualified in their entirety by the full text of the 1994 Plan, as amended by the
proposed Amendment, which is attached as Appendix 1 to this Proxy Statement.
The purpose of the Amendment is to increase the number of shares of Common
Stock available for option grants which can serve as an incentive and to
encourage stock ownership by officers and key employees of the Company and which
may be used in connection with any future acquisitions by the Company. At July
31, 1997, options to purchase 1,185,107 shares of Common Stock were outstanding
under the 1994 Plan, options to purchase 87,290 shares of Common Stock had been
exercised, leaving a balance of 227,603 additional shares of Common Stock which
could be subject to options granted under the 1994 Plan. The Board believes that
increasing the number of stock options available for grant under the 1994 Plan
is advisable because such awards promote interest in the welfare of the Company
by allowing such persons to share in the success of the Company and encouraging
them to remain in the service of the Company. It also gives the Company a means
to attract qualified new employees.
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<PAGE> 17
SUMMARY OF THE 1994 PLAN
The 1994 Plan was initially adopted by the sole director and the sole
shareholder of the Company by written consents effective January 1, 1994, and
amended as of January 15, 1996, as of June 2, 1997 and as of November 1, 1997.
Under the 1994 Plan, employees, directors, officers and consultants
(collectively referred to as "Employees") providing services to the Company or
its subsidiaries may be granted options to purchase shares of Common Stock of
the Company. The 1994 Plan permits the granting of both options that qualify for
treatment as incentive stock options ("Incentive Stock Options") under Section
422 of the Code, and/or options that do not qualify as Incentive Stock Options
("Nonqualified Stock Options"). Incentive Stock Options may only be granted to
employees of the Company.
The purpose of the 1994 Plan and of granting options to specified persons
is to promote the interests of the Company and its shareholders, by providing
stock-based incentives to certain Employees. Under the 1994 Plan, Employees can
receive certain options ("Stock Options") to purchase the Company's common stock
("Common Stock"), thus, strengthening the mutuality of interests between
Employees and the Company because the Employees have a proprietary interest in
pursuing the Company's long-term growth and financial success. In addition, by
allowing Employees to participate in the Company's success, the Company is able
to better attract, retain, and reward quality employees, directors, officers and
consultants.
Persons eligible to participate in the 1994 Plan are Employees providing
services to the Company and/or its subsidiaries (collectively referred to as the
"Company") who are in positions which enable them to make significant and
extraordinary contributions to the Company's long-term performance and growth.
In selecting Employees to whom Stock Options may be granted, consideration is
given to factors such as employment position, duties and responsibilities,
ability, productivity, length of service, morale, interest in the Company and
recommendations of supervisors. The maximum number of shares that may be issued
to a single Employee is 2,000,000.
The 1994 Plan is administered by the Compensation Committee. The members of
the Compensation Committee must qualify both as (1) "outside directors" under
Section 162(m) of the Code, and (2) "disinterested directors" under Rule 16b-3
of the Exchange Act.
The Committee has full and complete authority, in its discretion, but
subject to the express provisions of the 1994 Plan (1) to approve the Employees
nominated by the management of the Company to be granted Stock Options; (2) to
determine the number of Stock Options to be granted to an Employee; (3) to
determine the time or times at which Stock Options shall be granted; (4) to
establish the terms and conditions upon which Stock Options may be exercised;
(5) to establish the terms and conditions upon which Stock Options may vest; (6)
to remove or adjust any restrictions and conditions upon Stock Options; (7) to
specify, at the time of grant, provisions relating to exercisability of Stock
Options; (8) to accelerate, extend or otherwise modify the exercisability of any
Stock Options; and (9) to adopt such rules and regulations and to make all other
determinations deemed necessary or desirable for the administration of the 1994
Plan. All interpretations of the 1994 Plan by the Committee, and all of its
actions hereunder, are binding and conclusive on all persons for all purposes.
The number of shares of Common Stock in respect of which options may be
granted under the 1994 Plan shall not exceed 2,000,000. In the event of certain
changes in the Company's capitalization or structure, an appropriate adjustment
shall be made by the Compensation Committee in the number, kind or exercise
price of shares as to which options may thereafter be granted and as to shares
covered by unexercised outstanding options.
Each option granted under the 1994 Plan shall be evidenced by a written
agreement ("Option Agreement") in a form approved by the Compensation Committee
and executed by the Company and the Employee to whom the Stock Option is granted
("Optionee"). Stock Options are exercisable at such time(s) and are subject to
such terms and conditions as may be set forth in the Option Agreement between
the Employee and the Company.
The purchase price of shares of Common Stock subject to each Stock Option
which is intended to qualify as Incentive Stock Options shall be equal to the
fair market value of such shares (110% of fair market value in
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<PAGE> 18
the case of a holder of more than 10% of the Company's Common Stock) on the date
of grant of such Stock Option. The purchase price of any Stock Option which
shall not qualify as an incentive stock option shall be determined by the
Compensation Committee, but shall not be less than the fair market value of the
Common Stock in the case of a Stock Option granted to an individual who is a
"covered employee" under 162(m) of the Code. The fair market value of such
shares is the closing price of the Common Stock on the last preceding day prior
to the date of grant on which the Common Stock was traded.
Stock Options granted under the 1994 Plan may be exercised, to the extent
vested, by the Optionee by payment of the full purchase price therefor in cash,
by cashier's or certified check or by surrender of outstanding shares of the
Company's Common Stock. Options granted to an Employee are not transferable
during the individual's lifetime, and may be transferred in the event of death
only by will or the laws of descent and distribution.
Each option granted under the 1994 Plan shall set forth a termination date
thereof, which shall be not later than 10 years (5 years in the case of a holder
of more than 10% of the Company's Common Stock) from the date such option is
granted subject to earlier termination or forfeiture as set forth below, or as
otherwise set forth in each particular Option Agreement.
Unless earlier terminated by the Board, the 1994 Plan shall terminate on
December 31, 2004. The Board may at any time amend the 1994 Plan provided,
however, that no amendment or modification may be adopted without approval of
the shareholders which would (1) materially increase the benefits accruing to
Employees under the 1994 Plan, (2) materially increase the number of securities
which may be issued under the 1994 Plan (except for adjustments due to a change
in capitalization), or (3) materially modify the requirements as to eligibility
for participation in the 1994 Plan.
Future participants in the 1994 Plan and the amounts of their allotments
are to be determined by the Compensation Committee subject to any restrictions
outlined above. Since no such determinations have yet been made, it is not
possible to state the terms of any individual awards which may be issued under
the 1994 Plan or the names or positions of or respective amounts of the
allotment to any individual who may participate.
FEDERAL INCOME TAX CONSEQUENCES APPLICABLE TO THE 1994 PLAN
Based on current provisions of the Code, and the existing regulations
thereunder, the anticipated federal income tax consequences with respect to
options granted under the 1994 Plan are as described below.
Incentive Stock Options. No taxable income is recognized by a person upon
the grant or exercise of the Incentive Stock Option. Correspondingly, the
Company is not entitled to an income tax deduction as the result of the grant or
exercise of an Incentive Stock Option.
Any gain or loss resulting from the subsequent sale of shares of Common
Stock acquired upon exercise of any Incentive Stock Option will be long-term
capital gain or loss if the sale is made after the later of:
1. Two years from the date of the grant of the Incentive Stock Option;
or
2. One year from the date of the exercise ("Exercise Date") of the
Incentive Stock Option.
If the subsequent sale of Common Stock is made prior to the expiration of
the holding periods ("Disqualifying Disposition"), the Optionee will generally
recognize ordinary income in the year of the sale of the Common Stock in an
amount equal to the difference between the exercise price of the Stock Option
(the "Option Price") and the lesser of the fair market value of the shares of
Common Stock on the Exercise Date or on the date of the Disqualifying
Disposition. The Company will be entitled to an income tax deduction equal to
the amount taxable to the Optionee. Any excess gain recognized by the Optionee
upon the Disqualifying Disposition would be taxable as a capital gain, either as
long-term or short-term depending upon whether the shares of Common Stock have
been held for more than one year prior to the Disqualifying Disposition.
The amount by which the Fair Market Value (determined on the Exercise Date)
of the shares of Common Stock purchased upon exercise of an Incentive Stock
Option exceeds the Option Price constitutes an
16
<PAGE> 19
item of tax preference that may be subject to alternative minimum tax in the
year that the Incentive Stock Option is exercised, depending on the facts and
circumstances involved.
NonQualified Stock Options. Generally, no taxable income will be recognized
by the Optionee and the Company will not be entitled to a deduction at the time
of the grant of a Nonqualified Stock Option. Upon the exercise of a Nonqualified
Stock Option, the Optionee generally will recognize ordinary income, and the
Company will be entitled to an income tax deduction, in the amount by which the
fair market value of the shares of Common Stock issued to the Optionee at the
time of the exercise exceeds the Option Price. This income constitutes "wages"
with respect to which the Company is required to deduct and withhold federal
income tax.
Upon the subsequent disposition of shares of Common Stock acquired upon the
exercise of a Nonqualified Stock Option, the Optionee will recognize capital
gain or loss in an amount equal to the difference between the proceeds received
upon disposition and the fair market value of the shares on the Exercise Date.
If the shares have been held for more than one year at the time of the
disposition, the capital gain or loss will be long-term.
The foregoing summary of the effects of federal income taxation upon
Optionees and the Company with respect to shares of Common Stock issued under
the 1994 Plan does not purport to be complete and reference is made to the
applicable provisions of the Code.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE AMENDMENT TO THE 1994 STOCK OPTION PLAN.
PROPOSAL 3 -- RATIFICATION OF THE APPOINTMENT OF
DELOITTE & TOUCHE LLP AS INDEPENDENT ACCOUNTANTS
The Audit Committee of the Board has selected Deloitte & Touche LLP as
independent public accountants to audit the financial statements of the Company
for fiscal 1998. Deloitte & Touche LLP served as the Company's independent
public accountants for fiscal 1997. A member of that firm is expected to be
present at the 1997 Annual Meeting, will have an opportunity to make a statement
if so desired, and will be available to respond to appropriate questions. If the
shareholders do not ratify the selection of Deloitte & Touche LLP, if it should
decline to act or otherwise become incapable of acting, or if its employment is
discontinued, the Audit Committee will appoint independent public accountants
for fiscal 1998. Proxies solicited by the Board will be voted in favor of
ratification unless shareholders specify otherwise.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR 1998.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act ("Section 16(a)") requires the Company's
directors and certain of its officers, and persons who own more than 10% of a
registered class of the Company's equity securities (collectively, "Insiders"),
to file reports of ownership and changes in ownership with the Commission.
Insiders are required by Commission regulations to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5s were
required for those persons, the Company believes that its Insiders complied with
all applicable Section 16(a) filing requirements for fiscal 1997, with the
exception of Ms. Weaver, Mr. Earley and Phoebe Stenton (an executive officer
during a portion of fiscal 1997), each of which filed a late Form 5 to report a
grant of an option.
17
<PAGE> 20
OTHER BUSINESS
The Company is not aware of any other business to be presented at the 1997
Annual Meeting. All shares represented by Company proxies will be voted in favor
of the proposals of the Company described herein unless otherwise indicated on
the form of proxy. If any other matters properly come before the meeting,
Company proxy holders will vote thereon according to their best judgment.
SUBMISSION OF SHAREHOLDER PROPOSALS
Any shareholder who wishes to present a proposal for action at the 1998
Annual Meeting and who wishes to have it set forth in the corresponding proxy
statement and identified in the corresponding form of proxy prepared by
management must notify the Company no later than July 22, 1998 in such form as
required under the rules and regulations promulgated by the Commission.
ANNUAL REPORTS
A copy of the 1997 Annual Report to Shareholders is being mailed to each
shareholder of record together with this Proxy Statement. The Company has also
filed with the Commission its Annual Report on Form 10-K for the fiscal year
ended July 31, 1997. This Report contains information concerning the Company and
its operations. A COPY OF THIS REPORT WILL BE FURNISHED TO SHAREHOLDERS WITHOUT
CHARGE UPON REQUEST IN WRITING TO Michael A. Piraino at 4400 MacArthur
Boulevard, Suite 600, Newport Beach, California 92660. Such reports are not a
part of the Company's soliciting material.
PROXIES AND SOLICITATION
Proxies for the 1997 Annual Meeting are being solicited by mail directly
and through brokerage and banking institutions. The Company will pay all
expenses in connection with the solicitation of proxies. In addition to the use
of mails, proxies may be solicited by Directors, officers and regular employees
of the Company personally or by telephone. The Company will reimburse banks,
brokers custodians, nominees and fiduciaries for any reasonable expenses in
forwarding proxy materials to beneficial owners.
All shareholders are urged to complete, sign and promptly return the
enclosed proxy card.
By Order of the Board of Directors
MICHAEL A. PIRAINO
Secretary
Newport Beach, California
November 17, 1997
18
<PAGE> 21
APPENDIX-1
DATA PROCESSING RESOURCES CORPORATION
1994 STOCK OPTION PLAN, AS AMENDED
1. PURPOSE.
This Data Processing Resources Corporation 1994 Stock Option Plan, as
amended (the "Plan") is intended to allow employees, directors, officers and
consultants (all of whom are sometimes hereinafter referred to collectively as
"Employees", even though some, particularly directors, may not be employees) of
Data Processing Resources Corporation, a California corporation ("DPRC"), and
Subsidiaries which it may have from time to time (DPRC and such Subsidiaries
being together referred to herein as the "Company") to receive certain options
("Stock Options") to purchase DPRC's common stock (the "Common Stock"), as
herein provided. "Subsidiary" shall mean each corporation which is a "subsidiary
corporation" of DPRC, within the definition contained in Section 424(f) of the
Internal Revenue Code of 1986, as amended (the "Code"). "Parent" shall mean each
corporation which is a "parent corporation" of DPRC, within the definition
contained in Section 424(e) of the Code. The purpose of the Plan is to provide
Employees with additional incentives to make significant and extraordinary
contributions to the long-term performance and growth of the Company and to
attract and retain Employees of exceptional ability.
2. ADMINISTRATION.
2.1 The Plan shall be administered by the entire Board of Directors of DPRC
(the "Board"), or by a Compensation Committee consisting of two (2) or more
Board members (the Board, or if applicable, the Compensation Committee
administering the Plan shall hereinafter be referred to as the "Committee"). The
members of the Committee must qualify as "outside directors" under Section
162(m) of the Code and "disinterested directors" under Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to the extent
that those provisions apply. The Committee shall select one of its members as
Chairman and shall act by vote of a majority of a quorum, or by unanimous
written consent. A majority of its members shall constitute a quorum; provided,
however, that no member of the Committee or the Board shall be entitled to vote
upon the granting of Stock Options to himself or herself. The Committee shall be
governed by the provisions of DPRC's Bylaws and of California law applicable to
the Board, except as otherwise provided herein or determined by the Board.
2.2 The Committee shall have full and complete authority, in its
discretion, but subject to the express provisions of the Plan: to approve the
employees, directors, officers and/or consultants of the Company (all of whom
are sometimes hereinafter referred to collectively as "Employees", even though
some, particularly directors, may not be employees) nominated by the management
of the Company to be granted Stock Options; to determine the number of Stock
Options to be granted to an Employee; to determine the time or times at which
Stock Options shall be granted; to establish the terms and conditions upon which
Stock Options may be exercised; to establish the terms and conditions upon which
Stock Options may vest; to remove or adjust any restrictions and conditions upon
Stock Options; to specify, at the time of grant, provisions relating to
exercisability of Stock Options and to accelerate, extend or otherwise modify
the exercisability of any Stock Options; and to adopt such rules and regulations
and to make all other determinations deemed necessary or desirable for the
administration of the Plan. All interpretations and constructions of the Plan by
the Committee, and all of its actions hereunder, shall be binding and conclusive
on all persons for all purposes.
2.3 The Company hereby agrees to indemnify and hold harmless each Committee
member and each Employee, and the estate and heirs of such Committee member or
Employee, against all claims, liabilities, expenses, penalties, damages or other
pecuniary losses, including legal fees incurred by such Committee member or
employee, which such Committee member or Employee, his or her estate or heirs
may suffer as a result of his or her responsibilities, obligations or duties in
connection with the Plan, to the extent that insurance, if any, does not cover
the payment of such items, unless the losses are due to the individual's gross
negligence, willful misconduct or lack of good faith. The Company will have the
right to select counsel and to
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<PAGE> 22
control the prosecution or defense of the suit. The Company will not be required
to indemnify any individual for any amount incurred through any settlement
unless the Company consents in writing to the settlement.
3. ELIGIBILITY AND PARTICIPATION.
Employees eligible under the Plan shall be approved by the Committee from
those Employees who, in the opinion of the management of the Company, are in
positions which enable them to make significant and extraordinary contributions
to the long-term performance and growth of the Company. In selecting Employees
to whom Stock Options may be granted, consideration shall be given to factors
such as employment position, duties and responsibilities, ability, productivity,
length of service, morale, interest in the Company and recommendations of
supervisors.
4. GRANTS.
The Committee may grant Stock Options in such amounts, at such times, and
to such Employees nominated by the management of the Company as the Committee,
in its discretion, may determine. Stock Options granted under the Plan shall
constitute "incentive stock options" within the meaning of Section 422 of the
Code, if so designated by the Committee on the date of grant. The Committee
shall also have the discretion to grant Stock Options which do not constitute
incentive stock options and any such Stock Options shall be designated
nonstatutory stock options by the Committee on the date of grant. However,
incentive stock options may only be granted to employees of the Company. The
aggregate fair market value (determined as of the time an incentive stock option
is granted) of the Common Stock with respect to which incentive stock options
are exercisable for the first time by any Employee during any one calendar year
(under all plans of DPRC and any Parent or Subsidiary of DPRC) may not exceed
the maximum amount permitted under Section 422 of the Code (currently
$100,000.00). Nonstatutory stock options shall not be subject to the limitations
relating to incentive stock options contained in the preceding sentence. Each
Stock Option shall be evidenced by a written agreement (the "Option Agreement")
in a form approved by the Committee, which shall be executed on behalf of the
Company and by the Employee to whom the Stock Option is granted. If a Stock
Option expires, terminates or is cancelled for any reason without having been
exercised in full, the shares of Common Stock not purchased thereunder shall
again be available for purposes of the Plan.
5. PURCHASE PRICE.
The purchase price (the "Exercise Price") of shares of Common Stock subject
to each Stock Option ("Option Shares") which are intended to qualify as an
incentive stock option within the meaning of Section 422(b) of the Code shall be
equal to the fair market value ("Fair Market Value") of such shares on the date
of grant of such Stock Option. Notwithstanding the foregoing, the Exercise Price
of Option Shares subject to an incentive stock option granted to an Employee who
at the time of grant owns stock possessing more than 10% of the total combined
voting power of all classes of stock of DPRC or of any Parent or Subsidiary
(after taking into account the constructive ownership rules of Section 424(d) of
the Code) shall be at least equal to 110% of the Fair Market Value of such
shares on the date of grant of such Stock Option. The Fair Market Value of a
share of Common Stock on any date shall be equal to the closing price of the
Common Stock for the last preceding day on which DPRC's shares were traded, and
the method for determining the closing price shall be determined by the
Committee; provided, however, that if the Common Stock is not then traded on an
exchange, through an automated quotation system or otherwise in a manner
determined by the Committee suitable for determining the Fair Market Value, the
Committee shall determine the Fair Market Value in its reasonable judgment. The
Exercise Price of any Stock Option which shall not qualify as an incentive stock
option shall be determined by the Committee, but shall not be less than the Fair
Market Value of the Common Stock in the case of Option Shares granted to an
individual who is a "covered employee" as that term is defined in Code Section
162(m).
6. OPTION PERIOD.
The Stock Option period (the "Term") shall commence on the date of grant of
the Stock Option and shall be ten years or such shorter period as is determined
by the Committee. Notwithstanding the foregoing,
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<PAGE> 23
the Term of an incentive stock option granted to an Employee who at the time of
grant owns stock possessing more than 10% of the total combined voting power of
all classes of stock of DPRC or of any Parent or Subsidiary (after taking into
account the constructive ownership rules of Section 424(d) of the Code) shall
not exceed five years. Each Stock Option shall provide that it is exercisable
over its term in such periodic installments as the Committee in its sole
discretion may determine. Such provisions need not be uniform. Notwithstanding
the foregoing, but subject to the provisions of paragraph 2.2, Stock Options
granted to Employees who are subject to the reporting requirements of Section
16(a) of the Exchange Act ("Section 16 Reporting Persons") shall not be
exercisable until at least six months and one day from the date the Stock Option
is granted. If an Employee shall not in any period purchase all of the Option
Shares which the Employee is entitled to purchase in such period, the Employee
may purchase all or any part of such Option Shares at any time prior to the
expiration of the Stock Option.
7. EXERCISE OF OPTIONS.
7.1 Each Stock Option may be exercised in whole or in part (but not as to
fractional shares) by delivering it for surrender or endorsement to the Company,
attention of the Chief Financial Officer, at the principal office of the
Company, together with payment of the Exercise Price and an executed Notice and
Agreement of Exercise in the form prescribed by paragraph 7.2. Payment may be
made in cash, by cashier's or certified check, or by surrender of outstanding
shares of the Company's Common Stock valued pursuant to paragraph 5 (if the
Committee authorizes payment in stock).
7.2 Exercise of each Stock Option is conditioned upon the agreement of the
Employee to the terms and conditions of this Plan and of such Stock Option as
evidenced by the Employee's execution and delivery of a Notice and Agreement of
Exercise in a form to be determined by the Committee in its discretion. Such
Notice and Agreement of Exercise shall set forth the agreement of the Employee
that: (a) no Option Shares will be sold or otherwise distributed in violation of
the Securities Act of 1933, as amended (the "Securities Act"), or any other
applicable federal or state securities laws; (b) each Option Share certificate
may be imprinted with legends reflecting any applicable federal and state
securities law restrictions and conditions; (c) the Company may comply with said
securities law restrictions and issue "stop transfer" instructions to its
Transfer Agent and Registrar without liability; (d) if the Employee is a Section
16 Reporting Person, the Employee will furnish to the Company a copy of each
Form 4 or Form 5 filed by said Employee and will timely file all reports
required under federal securities laws; and (e) the Employee will report all
sales of Option Shares to the Company in writing on a form prescribed by the
Company.
7.3 No Stock Option shall be exercisable unless and until any applicable
registration or qualification requirements of federal and state securities laws,
and all other legal requirements, have been fully complied with. The Company
will use reasonable efforts to maintain the effectiveness of a Registration
Statement under the Securities Act for the issuance of Stock Options and shares
acquired thereunder, but there may be times when no such Registration Statement
will be currently effective. The exercise of Stock Options may be temporarily
suspended without liability to the Company during times when no such
Registration Statement is currently effective, or during times when, in the
reasonable opinion of the Committee, such suspension is necessary to preclude
violation of any requirements of applicable law or regulatory bodies having
jurisdiction over the Company. If any Stock Option would expire for any reason
except the end of its term during such a suspension, then if exercise of such
Stock Option is duly tendered before its expiration, such Stock Option shall be
exercisable and exercised (unless the attempted exercise is withdrawn) as of the
first day after the end of such suspension. The Company shall have no obligation
to file any Registration Statement covering resales of Option Shares.
7.4 Notwithstanding anything contained herein to the contrary,
7.4.1 Stock Options granted hereunder may be exercisable by the
Optionee in the amounts and at such time as shall be determined by the
Committee at the time the Stock Options are granted.
7.4.2 The Committee, with prior approval of the Board, may authorize
the Company to lend, to an Employee who shall desire to exercise his or her
options granted hereunder, an amount up to and including the exercise price
of such options, such loan to be evidenced by a promissory note issued by
said
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<PAGE> 24
Employee and secured by the Common Stock purchased by said Employee in
exercising his or her Stock Options.
8. SERVICE REQUIREMENTS.
Except as provided in paragraph 10 below, an Employee may not exercise a
Stock Option unless from the date of grant to the date of exercise such Employee
remains continuously in the service of the Company. For purposes of this
Paragraph 8, the period of continuous service of an Employee with the Company
shall be deemed to include (without extending the term of the Stock Option) any
period during which such Employee is on leave of absence with the consent of the
Company, provided that such leave of absence shall not exceed ninety (90) days,
unless the Employee's rights to reemployment are guaranteed by statute or
contract. However, an Employee will not be considered to have incurred a
severance of employment because of a transfer of employment between DPRC and a
Subsidiary or Parent (or vice versa). If such Employee fails to return to the
service of the Company at the expiration of such leave of absence, such
Employee's service with the Company shall be deemed terminated as of the date
such leave of absence commenced. For purposes of this paragraph 8, an Employee
who is a consultant to the Company shall be considered to be in continuous
employment as long as the Employee continues performing services for the
Company.
9. RESTRICTIONS ON TRANSFER.
Each Stock Option granted under this Plan shall be transferable only by
will or the laws of descent and distribution. No interest of any Employee under
the Plan shall be subject to attachment, execution, garnishment, sequestration,
the laws of bankruptcy or any other legal or equitable process. Each Stock
Option granted under this Plan shall be exercisable during an Employee's
lifetime only by such Employee.
10. TERMINATION OF EMPLOYMENT.
10.1 Upon an Employee's Retirement, Disability or death, all Stock Options
to the extent then presently exercisable shall remain in full force and effect
and may be exercised prior to the earlier to occur of (i) the expiration of a
period of ninety (90) days thereafter or (ii) the expiration at the end of the
fixed term of said Stock Options, except that, in the case of disability, the
foregoing ninety (90) day period shall be increased to one (1) year. Unless
otherwise provided by the Committee, all Stock Options to the extent not then
presently exercisable by such Employee shall terminate as of the date of such
termination of service with the Company and shall not be exercisable thereafter.
10.2 Upon the termination of the Employee's service with the Company for
any reason other than the reasons set forth in paragraph 10.1 hereof, unless
otherwise provided by the Committee, (a) all Stock Options to the extent then
presently exercisable by such Employee shall remain exercisable only for a
period of ninety (90) days after the date of such termination of service and may
be exercised pursuant to the provisions thereof, including expiration at the end
of the fixed term thereof, and (b) all Stock Options to the extent not then
presently exercisable by such Employee shall terminate as of the date of such
termination of service and shall not be exercisable thereafter.
10.3 For purposes of this Plan:
10.3.1 "Retirement" shall mean an Employee's retirement from service
with the Company on or after the date on which such Employee attains the
age of sixty-five (65) years; and
10.3.2 "Disability" shall mean the total and permanent disability of
an Employee in accordance with Section 22(e)(3) of the Code. An individual
is permanently and totally disabled if the Employee is unable to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or
which has lasted or can be expected to last for a continuous period of not
less than twelve (12) months. An individual shall not be considered to be
permanently and totally disabled unless the Employee furnishes proof of the
existence thereof in such form and manner, and at such times, as designated
by the Committee.
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<PAGE> 25
11. ADJUSTMENTS UPON CHANGE IN CAPITALIZATION.
11.1 The number and class of shares subject to each outstanding Stock
Option, the Exercise Price thereof (but not the total price), the maximum number
of Stock Options that may be granted under the Plan, and the minimum number of
shares as to which a Stock Option may be exercised at any one time, shall be
proportionately adjusted in the event of any increase or decrease in the number
of the issued shares of Common Stock which results from a split-up or
consolidation of shares, payment of a stock dividend, a recapitalization (other
than the conversion of convertible securities according to their terms), a
combination of shares or other like capital adjustment, so that upon exercise of
the Stock Option, the Employee shall receive the number and class of shares such
Employee would have received had such Employee been the holder of the number of
shares of Common Stock for which the Stock Option is being exercised upon the
date of such change or increase or decrease in the number of issued shares of
the Company.
11.2 Upon a reorganization, merger or consolidation of the Company with one
or more corporations as a result of which DPRC is not the surviving corporation,
or in which DPRC survives as a wholly-owned subsidiary of another corporation,
or upon a sale of all or substantially all of the property of the Company to
another corporation, or any dividend or distribution to shareholders, adequate
adjustment or other provisions shall be made by the Company or other party to
such transaction so that there shall remain and/or be substituted for the Option
Shares provided for herein, the shares, securities or assets which would have
been issuable or payable in respect of or in exchange for such Option Shares
then remaining, as if the Employee had been the owner of such shares as of the
applicable date. Any securities so substituted shall be subject to similar
successive adjustments.
12. WITHHOLDING TAXES.
The Company shall have the right at the time of exercise of any Stock
Option to make adequate provision for any federal, state, local or foreign taxes
which it believes are or may be required by law to be withheld with respect to
such exercise ("Tax Liability"), to ensure the payment of such Tax Liability.
The Company may provide for the payment of any Tax Liability by any of the
following means or a combination of such means, as determined by the Committee
in its sole and absolute discretion in the particular case: (i) by requiring the
Employee to tender a cash payment to the Company; (ii) by withholding from the
Employee's compensation; (iii) by withholding from the Option Shares which would
otherwise be issuable upon exercise of the Stock Option.
13. RELATIONSHIP TO OTHER EMPLOYEE BENEFIT PLANS.
Income recognized by an Employee as the result of the exercise of Stock
Options granted hereunder shall not be deemed to be salary or other compensation
to any Employee for purposes of any pension, thrift, profit-sharing, stock
purchase or any other employee benefit plan now maintained or hereafter adopted
by the Company.
14. AMENDMENTS AND TERMINATION.
The Board of Directors may at any time suspend, amend or terminate this
Plan. No amendment or modification of this Plan may be adopted, except subject
to shareholder approval, which would: (a) materially increase the benefits
accruing to Employees under this Plan; (b) materially increase the number of
securities which may be issued under this Plan (except for adjustments pursuant
to paragraph 11 hereof); or (c) materially modify the requirements as to
eligibility for participation in the Plan.
15. SUCCESSORS IN INTEREST.
The provisions of this Plan and the actions of the Committee shall be
binding upon all heirs, successors and assigns of the Company and of Employees.
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<PAGE> 26
16. OTHER DOCUMENTS.
All documents prepared, executed or delivered in connection with this Plan
shall be, in substance and form, as established and modified by the Committee or
by persons under its direction and supervision; provided, however, that all such
documents shall be subject in every respect to the provisions of this Plan, and
in the event of any conflict between the terms of any such document and this
Plan, the provisions of this Plan shall prevail. All Stock Options granted under
the Plan shall be evidenced by written agreements executed by the Company and
the Employees to whom the Stock Options have been granted. Each agreement shall
specify whether a Stock Option is an incentive stock option or a nonstatutory
stock option.
17. NO OBLIGATION TO CONTINUE ENGAGEMENT.
This Plan and grants hereunder shall not impose any obligation on the
Company to continue to engage the services of any Employee. Moreover, no
provision of this Plan or any document executed or delivered pursuant hereto
shall be deemed modified in any way by any employment contract or other
engagement agreement between an Employee and the Company.
18. MISCONDUCT OF AN EMPLOYEE.
Notwithstanding any other provision of this Plan, if an Employee commits
fraud or dishonesty toward the Company or wrongfully uses or discloses any trade
secret, confidential data or other information proprietary to the Company, or
intentionally takes any other action materially inimical to the best interests
of the Company, as determined by the Committee, in its sole and absolute
discretion, such Employee shall forfeit all rights and benefits under this Plan.
19. TERM OF PLAN.
This Plan was adopted by the Board effective January 1, 1994, and was
amended as of January 15, 1996, as of June 2, 1997 and as of November 1, 1997.
No Stock Option may be granted under this Plan after December 31, 2004.
20. GOVERNING LAW.
This Plan shall be construed in accordance with, and governed by, the laws
of the State of California.
21. SHAREHOLDER APPROVAL.
No Stock Option shall be exercisable unless and until the shareholders of
the Company have approved this Plan, including the classes of individuals
entitled to receive incentive stock options under the Plan and the aggregate
number of shares of Common Stock that may be issued under the Plan, and all
other legal requirements have been fully complied with.
22. PRIVILEGES OF STOCK OWNERSHIP.
The holder of a Stock Option shall not be entitled to the privileges of
stock ownership as to any shares of the Company Common Stock not actually issued
to such holder.
23. COMMON STOCK SUBJECT TO PLAN.
The total number of shares of Common Stock for which Stock Options may be
granted under this Plan shall not exceed in the aggregate 2,000,000 shares of
Common Stock, as such number may be adjusted from time to time in accordance
with Section 11. The maximum number of shares that may be issued to a single
Employee is 2,000,000.
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<PAGE> 27
PROXY
DATA PROCESSING RESOURCES CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Mary Ellen Weaver and David M. Connell, and each of
them, proxies with full power of substitution, to vote all shares of Common
Stock of Data Processing Resources Corporation (the "Company") held of record by
the undersigned as of November 10, 1997, the record date with respect to this
solicitation, at the Annual Meeting of Shareholders of the Company to be held at
The Sutton Place Hotel, 4500 MacArthur Boulevard, Newport Beach, California
92660, beginning at 10:00 a.m., Pacific Time, on Tuesday, December 17, 1997, and
at any adjournments thereof, upon the following matters:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS:
<TABLE>
<S> <C>
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below (except as noted [ ] WITHHOLD AUTHORITY
below) to vote for all nominees listed below
</TABLE>
(Instructions: To withhold authority to vote for any nominee, line through
or otherwise strike out the nominee's name below.)
Mary Ellen Weaver J. Christopher Lewis Patrick C. Haden David M.
Connell Christopher W. Lancashire
2. APPROVAL OF THE AMENDMENT OF THE COMPANY'S 1994 STOCK OPTION PLAN WHICH
AUTHORIZES AND RESERVES FOR ISSUANCE UPON EXERCISE OF OPTIONS GRANTED
THEREUNDER AN ADDITIONAL 750,000 SHARES OF COMMON STOCK, AS DESCRIBED IN THE
PROXY STATEMENT.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE LLP AS INDEPENDENT
AUDITORS FOR THE COMPANY FOR THE FISCAL YEAR ENDING JULY 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE> 28
(Continued from reverse side)
4. OTHER MATTERS
In their discretion, Mary Ellen Weaver and David M. Connell are authorized
to vote upon such other business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR
THE NOMINEES NAMED IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3 ABOVE. IF ANY NOMINEE
DECLINES OR IS UNABLE TO SERVE AS A DIRECTOR, THEN THE PERSONS NAMED AS PROXIES
SHALL HAVE FULL DISCRETION TO VOTE FOR ANY OTHER PERSON DESIGNATED BY THE BOARD
OF DIRECTORS.
Dated , 1997
------------------------
(Signature)
------------------------
(Signature)
Please sign exactly as
your name appears
hereon. Joint owners
should each sign. When
signing as attorney,
executor, administrator,
trustee, guardian or
corporate officer,
please give full title
as such. The signer
hereby revokes all
proxies heretofore given
by the signor to vote at
said meeting or any
adjournments thereof.
