1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from TO
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Commission file number 1-5519
------
CDI CORP.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Pennsylvania 23-2394430
- ------------------------- -----------------------
(State or other jurisdic- (I.R.S. Employer
tion of incorporation or Identification Number)
organization)
1717 Arch Street, 35th Floor, Philadelphia, PA 19103-2768
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(Address of principal executive offices)
Registrant's telephone number, including area code: (215) 569-2200
--------------
Indicate whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
----- -----
Outstanding shares of each of the Registrant's classes of common
stock as of October 29, 1997 were:
Common stock, $.10 par value 19,916,785 shares
Class B common stock, $.10 par value None
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PART 1. FINANCIAL INFORMATION
CDI CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
September 30,
1997 December 31,
Assets (Unaudited) 1996
- ------ ------------- ------------
Current assets:
Cash $ 10,587 6,066
Accounts receivable, less allowance
for doubtful accounts of $4,670 -
September 30, 1997; $4,094 -
December 31, 1996 271,851 233,455
Prepaid expenses 4,802 3,908
Deferred income taxes 7,428 7,288
Net assets of discontinued operations 24,296 37,257
------- -------
Total current assets 318,964 287,974
Fixed assets, at cost:
Computers 39,959 34,526
Equipment and furniture 26,445 26,119
Leasehold improvements 8,909 8,151
------- -------
75,313 68,796
Accumulated depreciation 49,144 43,292
------- -------
Net fixed assets 26,169 25,504
Deferred income taxes 5,002 4,180
Goodwill and other intangible assets, net 17,587 15,611
Other assets 9,279 6,905
------- -------
$ 377,001 340,174
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CDI CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share data)
September 30,
1997 December 31,
Liabilities and Shareholders' Equity (Unaudited) 1996
- ------------------------------------ ------------- ------------
Current liabilities:
Obligations not liquidated because
of outstanding checks $ 9,030 6,834
Accounts payable 16,809 12,423
Withheld payroll taxes 4,474 4,950
Accrued expenses 91,912 75,637
Currently payable income taxes 7,684 7,006
------- -------
Total current liabilities 129,909 106,850
Long-term debt 22,800 48,866
Deferred compensation 8,396 6,934
Minority interests 1,483 592
Shareholders' equity:
Preferred stock, $.10 par value -
authorized 1,000,000 shares; none
issued - -
Common stock, $.10 par value -
authorized 100,000,000 shares;
issued 19,943,650 shares - September
30, 1997; 19,853,983 shares -
December 31, 1996 1,994 1,985
Class B common stock, $.10 par value -
authorized 3,174,891 shares; none
issued - -
Additional paid-in capital 15,533 12,866
Retained earnings 199,100 162,669
Unamortized value of restricted stock
issued (1,533) -
Less common stock in treasury, at cost -
27,365 shares - September 30, 1997;
24,921 shares - December 31, 1996 (681) (588)
------- -------
Total shareholders' equity 214,413 176,932
------- -------
$ 377,001 340,174
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CDI CORP. AND SUBSIDIARIES
Consolidated Statements of Earnings
(In thousands, except per share data; unaudited)
Quarter ended Nine months ended
September 30, September 30,
---------------- --------------------
1997 1996 1997 1996
------- ------- --------- ---------
Revenues $ 383,073 353,676 1,121,678 1,023,330
Cost of services 293,582 271,506 861,223 790,956
------- ------- --------- ---------
Gross profit 89,491 82,170 260,455 232,374
Operating and administrative
expenses 67,412 59,805 198,575 175,823
------- ------- --------- ---------
Operating profit 22,079 22,365 61,880 56,551
Interest expense 694 900 2,186 2,761
------- ------- --------- ---------
Earnings from continuing
operations before income
taxes and minority
interests 21,385 21,465 59,694 53,790
Income taxes 6,833 8,589 22,195 21,573
------- ------- --------- ---------
Earnings from continuing
operations before
minority interests 14,552 12,876 37,499 32,217
Minority interests 777 58 1,068 102
------- ------- --------- ---------
Earnings from continuing
operations 13,775 12,818 36,431 32,115
Discontinued operations - (2,579) - (3,955)
------- ------- --------- ---------
Net earnings $ 13,775 10,239 36,431 28,160
======= ======= ========= =========
Earnings per share:
Earnings from continuing
operations $ .69 .65 1.83 1.62
Discontinued operations $ - (.13) - (.20)
Net earnings $ .69 .52 1.83 1.42
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5
CDI CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands; unaudited)
Nine months ended
September 30,
-----------------
1997 1996
------ ------
Continuing Operations
Operating activities:
Earnings from continuing operations $ 36,431 32,115
Minority interests 1,068 102
Depreciation 7,474 6,756
Amortization of intangible assets 1,848 1,426
Income tax provision greater (less)
than tax payments (284) (12,944)
Change in assets and liabilities,
net of effects from acquisitions:
Increase in accounts receivable (38,396) (27,022)
Increase in payables and accrued
expenses 20,185 25,532
Other (2,433) 403
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25,893 26,368
------ ------
Investing activities:
Purchases of fixed assets (8,340) (11,498)
Acquisitions net of cash acquired (3,245) (2,763)
Other 228 509
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(11,357) (13,752)
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Financing activities:
Borrowings long-term debt 10,724 12,474
Payments long-term debt (36,790) (12,272)
Obligations not liquidated because
of outstanding checks 2,196 (1,120)
Exercises of stock options 894 152
------ ------
(22,976) (766)
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Net cash flows from continuing operations (8,440) 11,850
Net cash flows from discontinued operations 12,961 (6,085)
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Increase in cash 4,521 5,765
Cash at beginning of period 6,066 4,495
------ ------
Cash at end of period $ 10,587 10,260
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CDI CORP. AND SUBSIDIARIES
Comments to Financial Statements
Earnings per share of common stock are based on the weighted
average number of shares of common stock and dilutive common share
equivalents, which arise from stock options, outstanding during the
periods. No further dilution resulted from a computation of fully
diluted earnings per share. The number of shares used to compute
earnings per share for the third quarter and nine months of 1997 was
19,954,584 and 19,937,685 shares, respectively. For the third quarter
and nine months of 1996, 19,859,328 and 19,870,938 shares, respectively,
were used.
Revenues and operating profit attributable to the business segments
of the Company for the third quarter and nine months ended September 30,
1997 and 1996 follow ($000s):
Third quarter Nine months
---------------- --------------------
1997 1996 1997 1996
------- ------- --------- ---------
Revenues:
Technical Services $ 309,814 290,499 912,745 845,091
Temporary Services 49,295 41,791 140,265 119,695
Management Recruiters 23,964 21,386 68,668 58,544
------- ------- --------- ---------
$ 383,073 353,676 1,121,678 1,023,330
======= ======= ========= =========
Operating profit:
Technical Services $ 17,731 18,250 49,233 47,760
Temporary Services 3,264 2,775 8,269 6,187
Management Recruiters 4,561 3,166 12,357 8,633
Corporate expenses (3,477) (1,826) (7,979) (6,029)
------- ------- --------- ---------
$ 22,079 22,365 61,880 56,551
======= ======= ========= =========
During the nine months ended September 30, 1997, there were
44,167 shares of common stock issued upon the exercises of stock options
granted under the Company's non-qualified stock option and stock
appreciation rights plan. In payment for certain of the option shares,
optionees surrendered 2,544 shares of common stock already owned which
the Company placed in treasury stock. As a result of the option
exercises, common stock was increased by $4,000, additional paid-in
capital was increased by $986,000 and treasury stock was increased by
$96,000.
During the nine months ended September 30, 1997, there were
45,500 shares of restricted common stock issued to officers of the
Company under their employment agreements. Of these shares 25,750
shares will vest over periods of time ranging from three years to ten
years. The remaining 19,750 shares will vest depending upon the
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percentage achievement of predetermined goals covering periods of time
ranging from three years to five years. Shares which do not vest are
forfeited.
The 25,750 shares that will vest over time have a fixed value of
$941,000, the market value of the shares when issued. The value for the
19,750 shares that will vest based upon performance will fluctuate with
changes in their market value until there is a determination as
to their vesting. As of September 30, 1997, these performance-based
shares were valued at $745,000. Of the total value of $1,686,000
ascribed to these restricted shares as of September 30, 1997, $5,000
increased common stock and $1,681,000 increased additional paid-in
capital.
Over the periods of time that these shares may become vested, there
will be charges to earnings for the value related to the aggregate
number of these shares that become vested. As such earnings charges
occur, unamortized value of restricted stock issued reflected in
shareholders equity will be reduced. Through September 30, 1997,
$153,000 has been charged to earnings. To the extent that shares are
forfeited, unamortized value of restricted stock issued will also be
reduced and the forfeited shares will be placed in treasury stock.
During 1997, 100 shares of common stock held in treasury were
reissued. These shares had a cost of $3,000.
The automotive developmental engineering division of a subsidiary
and the automotive manufacturing technology division of the subsidiary
are classified as discontinued operations in the Company's financial
statements. As of December 31, 1996 a reserve remained for estimated
costs and losses associated with disposing of these businesses and for
operating losses through dates of disposition. Costs and losses
incurred during the nine months ended September 30, 1997 of $14.1
million relating to the discontinued businesses were charged against the
reserve. The charges to the reserve (primarily for operating losses and
the loss on disposing of the portion of the automotive manufacturing
technology division that provided production quality prototypes) were
for items that corresponded to those considered in establishing the
reserve. The net assets of the discontinued operations at September 30,
1997 were $24 million, compared to $37 million at December 31, 1996.
The financial statements included in this report are unaudited and
reflect all adjustments which, in the opinion of management, are
necessary for a fair statement of the results for the periods presented.
All such adjustments are of a normal recurring nature.
These comments contain only the information which is required by
Form 10-Q. Further reference should be made to the comprehensive
disclosures contained in the Company's annual report on Form 10-K for
the year ended December 31, 1996.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Discontinued Operations
-----------------------
The automotive developmental engineering division of a subsidiary
and the automotive manufacturing technology division of the subsidiary
are being disposed of pursuant to plans of disposition. These divisions
are classified as discontinued operations in the Company's financial
statements.
Results of Operations
---------------------
Consolidated revenues for the nine months and quarter ended
September 30, 1997 were 10% and 8% higher, respectively, compared to the
same periods a year ago. Operating profit for the nine months and third
quarter in 1997 was 5.5% and 5.8% of revenues, respectively, compared to
5.5% and 6.3% for the nine months and third quarter in 1996. Operating
results from continuing operations for the nine months and third quarter
of 1997 include a net gain of $2.1 million ($200,000 after tax,
including minority interests impact of $600,000) from the sale of a
small business and estimated losses anticipated on the sale of two other
small business units. In addition, earnings from continuing operations
for the nine months and third quarter of 1997 include a credit of $2
million from the reduction of income tax reserves no longer required.
Operating results from continuing operations for the nine months and
third quarter of 1996 include a favorable $2 million adjustment ($1.2
million after tax) based on an actuarial study of workers' compensation
liabilities.
Technical Services' revenues for the nine months and third quarter
of 1997 grew 8% and 7%, respectively, from last year's comparable
periods. Operating profit margins for the nine months and third quarter
of 1997 were 5.4% and 5.7%, respectively. Operating profit margins for
last year's comparable periods were 5.7% and 6.3%, respectively.
Operating results for Technical Services in 1997 include the net $2.1
million gain related to the disposal of business units described above
and for 1996 the $2 million adjustment related to workers' compensation
also described above.
Technical Services continued to have strong demand for information
technology and Year 2000 related staffing services. Revenues for the IT
sector were up 31% for the third quarter of 1997 over last year's third
quarter and are running at an annual rate of $280 million.
Offsetting gains from IT is the impact from the protracted weakness in
the petrochemical/hydrocarbons industry.
Temporary Services' revenues for the nine months and third quarter
of 1997 were 17% and 18% higher, respectively, compared to the same
periods a year ago. Operating profit margins for the nine months and
third quarter of 1997 were 5.9% and 6.6%, respectively, vs. 5.2% and
6.6% for last year's comparable periods. The Temporary Services
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segment continues to build a strong presence in existing target markets
and to identify new markets that offer high growth opportunities. In
addition, the segment is expanding in its services for legal temporary
staffing.
Management Recruiters' revenues were up 17% for the nine months of
this year and up 12% compared to last year's third quarter. Operating
profit margins for the nine months and third quarter of 1997 were 18.0%
and 19.0%, respectively, compared to 14.7% and 14.8%, respectively, for
the same periods in 1996. Demand for Management Recruiters' services
has remained strong, in part, due to lower unemployment rates and a
scarcity of qualified managers and other professionals. In addition,
the segment has had growth in its contracts for multiple position
assignments with new customers and has expanded its retained business.
During the third quarter of 1997 the disposition of the automotive
manufacturing technology division, included in discontinued operations,
was completed with the sale of the unit that provided production quality
prototypes. Existing contracts in the automotive developmental
engineering division (also included in discontinued operations) continue
to run off and are expected to be concluded in the near term.
Disposition of residual assets pertaining to the discontinued operations
is expected to occur in 1998. Costs and losses incurred during the nine
months ended September 30, 1997 of $14.1 million, primarily for
operating losses and the loss on the sale of the prototype unit of the
automotive manufacturing technology division, were charged against a
reserve for discontinued operations previously established for such
costs and losses. A significant customer receivable included in
discontinued operations is in dispute and resolution could be
protracted.
Financial Condition
-------------------
The ratio of current assets to current liabilities was 2.5 to 1
as of September 30, 1997 compared to 2.7 to 1 as of December 31, 1996.
The ratio of long-term debt to total capital (long-term debt plus
shareholders' equity) was 10% for September 30, 1997 and 22% for
December 31, 1996. The Company believes that capital resources
available from operations and financing arrangements are adequate to
support the Company's businesses.
New Accounting Standards
------------------------
In February, 1997, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No. 128,
Earnings Per Share. Statement 128 supersedes Accounting Principles
Board Opinion No. 15, Earnings Per Share, and introduces new methods
of calculating earnings per share. Statement 128 is effective for
financial statements for both interim and annual periods ending after
December 15, 1997. Therefore, reported earnings per share for the
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periods ended September 30, 1997 and 1996 have been determined using the
principles prescribed by Opinion No. 15. If the methods prescribed by
Statement 128 were applied for these quarterly periods, there would be
no difference in the reported per share amounts.
In June, 1997, the FASB issued Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income. Statement 130
requires that all items that are required to be recognized under
accounting standards as components of comprehensive income be reported
in a financial statement that is displayed with the same prominence as
other financial statements. Statement 130 is effective for both interim
and annual periods beginning after December 15, 1997. This Statement
affects reporting in financial statements only and will not have impact
upon results of operations, financial condition or long-term liquidity.
It is expected that the reporting of comprehensive income will not apply
to the Company.
In June, 1997, the FASB also issued Statement of Financial
Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information. Statement No. 131 supersedes
Statement of Financial Accounting Standards No. 14, Financial Reporting
for Segments of a Business Enterprise, and establishes new standards for
reporting information about operating segments in annual financial
statements and requires selected information about operating segments in
interim financial reports. Statement 131 also establishes standards for
related disclosures about products and services, geographic areas
and major customers. Statement 131 is effective for periods beginning
after December 15, 1997. This Statement affects reporting in financial
statements only and will not have impact upon results of operations,
financial condition or long-term liquidity. The Company will adopt the
standards established by this Statement as required.
Forward-looking Information
---------------------------
Certain information in this report, including Management's
Discussion and Analysis of Financial Condition and Results of
Operations, contains forward-looking statements as such term is defined
in Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Certain factors such as competitive
market pressures, material changes in demand from larger customers,
availability of labor, the Company's performance on contracts, changes
in customers' attitudes toward outsourcing, government policies adverse
to the staffing industry, changes in economic conditions, and unfore-
seen events associated with divestiture of discontinued operations,
including resolution of a disputed customer receivable could cause
actual results to differ materially from those in the forward-looking
statements.
<PAGE>
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.(i) Articles of incorporation of the Registrant,
incorporated herein by reference to the
Registrant's report on Form 10-Q for the
quarter ended June 30, 1990 (File No. 1-5519).
(ii) Bylaws of the Registrant, incorporated herein
by reference to the Registrant's report on
Form 10-Q for the quarter ended June 30, 1990
(File No. 1-5519).
10.a. CDI Corp. Non-Qualified Stock Option and Stock
Appreciation Rights Plan, incorporated herein
by reference to the Registrant's report on
Form 10-Q for the quarter ended June 30, 1997
(File No. 1-5519). (Constitutes a management
contract or compensatory plan or arrangement)
b. Employment Agreement dated April 30, 1973 by
and between Comprehensive Designers, Inc. and
Edgar D. Landis, incorporated herein by
reference to Exhibit 10.g. to Registrant's
registration statement on Form 8-B (File No.
1-5519). (Constitutes a management contract
or compensatory plan or arrangement)
c. Supplemental Pension Agreement dated April 11,
1978 between CDI Corporation and Walter R.
Garrison, incorporated herein by reference to
the Registrant's report on Form 10-K for the
year ended December 31, 1989 (File No. 1-5519).
(Constitutes a management contract or compensa-
tory plan or arrangement)
d. Non-competition and Consulting Agreement by and
between Registrant and Christian M. Hoechst
dated October 17, 1995, incorporated herein by
reference to Registrant's report on Form 10-K
for the year ended December 31, 1995 (File No.
1-5519). (Constitutes a management contract or
compensatory plan or arrangement)
e. Employment Agreement dated March 11, 1997,
including Restricted Stock Agreement and Non-
Qualified Stock Option Agreement, by and between
Registrant and Mitchell Wienick, incorporated
herein by reference to the EDGAR filing made by
the Registrant on April 1, 1997 in connection
with the Registrant's definitive Proxy Statement
<PAGE>
12
for its annual meeting of shareholders held on
April 28, 1997 (File No. 1-5519). (Constitutes
a management contract or compensatory plan or
arrangement)
f. Consulting Agreement dated as of April 7, 1997
by and between Registrant and Walter R. Garrison,
incorporated herein by reference to Registrant's
report on Form 10-Q for the quarter ended June
30, 1997 (File No. 1-5519). (Constitutes a
management contract or compensatory plan or
arrangement)
g. Employment Agreement, Restricted Stock Agreement
and Non-Qualified Stock Option Agreement, all
dated August 4, 1997, by and between Registrant
and Robert J. Mannarino. (Constitutes a manage-
ment contract or compensatory plan or arrangement)
11. Statement re computation of per share earnings.
27. Financial Data Schedule.
(b) The Registrant has not filed a Form 8-K during the quarter
ended September 30, 1997.
<PAGE>
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
CDI CORP.
--------------------------------------
November 5, 1997 By: /s/ Edgar D. Landis
-----------------------------------
EDGAR D. LANDIS
Executive Vice President, Finance
(Duly authorized officer and
principal financial officer of
Registrant)
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INDEX TO EXHIBITS
Number Exhibits Page
- ------ ------------------------------------------------------- ----
3.(i) Articles of incorporation of the Registrant,
incorporated herein by reference to the Registrant's
report on Form 10-Q for the quarter ended June 30,
1990 (File No. 1-5519).
(ii) Bylaws of the Registrant, incorporated herein by
reference to the Registrant's report on Form 10-Q
for the quarter ended June 30, 1990 (File No. 1-5519).
10.a. CDI Corp. Non-Qualified Stock Option and Stock
Appreciation Rights Plan, incorporated herein by
reference to the Registrant's report on Form 10-Q for
the quarter ended June 30, 1997 (File No. 1-5519).
(Constitutes a management contract or compensatory
plan or arrangement)
b. Employment Agreement dated April 30, 1973 by and
between Comprehensive Designers, Inc. and Edgar D.
Landis, incorporated herein by reference to Exhibit
10.g. to Registrant's registration statement on Form
8-B (File No. 1-5519). (Constitutes a management
contract or compensatory plan or arrangement)
c. Supplemental Pension Agreement dated April 11, 1978
between CDI Corporation and Walter R. Garrison,
incorporated herein by reference to the Registrant's
report on Form 10-K for the year ended December 31,
1989 (File No. 1-5519). (Constitutes a management
contract or compensatory plan or arrangement)
d. Non-competition and Consulting Agreement by and
between Registrant and Christian M. Hoechst dated
October 17, 1995, incorporated herein by reference
to Registrant's report on Form 10-K for the year
ended December 31, 1995 (File No. 1-5519).
(Constitutes a management contract or compensatory
plan or arrangement)
e. Employment Agreement dated March 11, 1997, including
Restricted Stock Agreement and Non-Qualified Stock
Option Agreement, by and between Registrant and
Mitchell Wienick, incorporated herein by reference to
the EDGAR filing made by the Registrant's definitive
Proxy Statement for its annual meeting of shareholders
held on April 28, 1997 (File No. 1-5519). (Constitutes
a management contract or compensatory plan or arrange-
ment)
<PAGE>
15
INDEX TO EXHIBITS
Number Exhibits Page
- ------ ------------------------------------------------------- ----
f. Consulting Agreement dated as of April 7, 1997 by and
between Registrant and Walter R. Garrison, incorporated
herein by reference to the Registrant's report on Form
10-Q for the quarter ended June 30, 1997 (File No.
1-5519). (Constitutes a management contract or compen-
satory plan or arrangement)
g. Employment Agreement, Restricted Stock Agreement and 16
Non-Qualified Stock Option Agreement, all dated August
4, 1997, by and between Registrant and Robert J.
Mannarino. (Constitutes a management contract or
compensatory plan or arrangement)
11. Statement re computation of per share earnings. 38
27. Financial Data Schedule. 39
<PAGE>
16
CDI CORP.
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is entered into as
of this 4th day of August, 1997 between CDI Corp., a Pennsylvania
corporation (the "Company"), and Robert J. Mannarino ("Executive").
The Company desires to employ Executive, and Executive is
willing to be employed by the Company, upon the terms and subject to the
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants set
forth herein, and intending to be legally bound hereby, the parties
agree as follows:
TERMS
SECTION 1. Employment.
The Company hereby employs Executive, and Executive hereby
accepts such employment and agrees to serve as the Company's Executive
Vice President and Chief Operating Officer and to render services to the
Company and its subsidiaries, divisions and affiliates, during the
Employment Period set forth in Section 3, subject to the terms and
conditions hereinafter set forth.
SECTION 2. Duties.
Executive shall carry out such duties as are customarily
associated with the position of Executive Vice President and Chief
Operating Officer including but not limited to providing leadership
and management of the Company's operating business units through the
presidents of those units, managing the integration of acquisitions into
the Company's operations and providing the leadership and manage-ment
necessary to develop and maintain cost-effective, innovative and
responsive operations at both the corporate and unit level. Executive
shall perform these duties under the direction of the Company's
President and Chief Executive Officer ("the President").
SECTION 3. Term.
The term of Executive's employment under this Agreement (the
"Employment Period") shall commence as of August 11, 1997 and, unless
sooner terminated pursuant to Section 7 of this Agreement, shall
continue until the close of business on December 31, 1999. At the end
of such original period, the Employment Period shall be automatically
extended thereafter for successive one-year periods unless sooner
terminated pursuant to Section 7 of this Agreement or unless either
party notifies the other party in writing at least 90 days prior to the
scheduled expiration of the Employment Period that it does not wish to
extend the Employment Period for any additional one-year periods. This
Agreement survives any termination of the Employment Period.
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17
SECTION 4. Extent of Services.
During the Employment Period, Executive shall devote his
full time and attention and give his best efforts, skills and abilities
exclusively to the performance of his duties hereunder, to the
operations of the Company and its business and to the business of its
subsidiaries, divisions and affiliates. Executive shall perform his
services hereunder at the Company's offices in Philadelphia,
Pennsylvania and at such other places as are required for the effective
management of the Company and its business and the business of its
subsidiaries, divisions and affiliates. During the Employment Period,
Executive shall, if elected or appointed, serve as an executive officer
and/or director of any subsidiary, division or affiliate of the Company
and shall hold, without any compensation other than that provided in
this Agreement, the offices in any such subsidiary, division or
affiliate to which Executive may, at any time or from time to time, be
elected or appointed.
SECTION 5. Compensation and Benefits.
(a) Base Salary. During the Employment Period, Executive
shall receive as compensation for his services a salary at the rate
of Two Hundred and Seventy-Five Thousand Dollars ($275,000) per annum
payable in equal installments at such intervals as the Company pays
its senior executive officers generally (the "Base Salary"). The Base
Salary shall be reviewed annually by the President and may be increased
if so determined by the President in his absolute and sole discretion.
(b) Restricted Stock. Executive shall be granted 6,000
restricted shares of the Company's Common Stock (the "Restricted
Stock") as of the commencement of the Employment Period, pursuant to the
terms of a Restricted Stock Agreement to be entered into between
Executive and the Company. Pursuant to Section 6 of the Restricted
Stock Agreement, Executive shall not be able to sell, transfer or
otherwise benefit from any of the Restricted Stock until such shares
vest pursuant to Section 4 of the Restricted Stock Agreement. One-half
of the shares in each Group will vest pursuant to the bonus awards
provision in Section 5(d) of this Agreement. Any share of Restricted
Stock that does not vest on the first date that such share was eligible
to vest because Executive did not receive the Maximum Bonus Award shall
be forfeited on that date and shall never vest. The other half of the
shares in each Group will vest over time as described in Section 4 of
the Restricted Stock Agreement.
(c) Nonqualified Stock Options. Executive shall be granted
non-qualified stock options, effective as of the commencement of the
Employment Period, to purchase 60,000 shares of the Company's Common
Stock pursuant to the terms of a Non-Qualified Stock Option Agreement to
be entered into between Executive and the Company.
(d) Bonus Awards. Executive shall be eligible to receive
bonus compensation during the Employment Period. Such bonus awards
shall be based upon the Company's annual financial results, as reflected
in the Company's audited financial statements for such
<PAGE>
18
period, and shall consist of a cash payment and a vesting of Restricted
Stock. The maximum bonus award for any calendar year would be a cash
payment and a vesting of up to the total number of shares of Restricted
Stock available for such year.
The maximum cash bonus award and the vesting of the maximum number of
shares of Restricted Stock available in a given year are, together,
referred to as the "Maximum Bonus Award" for that year. However, after
all of the above shares of Restricted Stock have either been vested or
forfeited, the Maximum Bonus Award shall consist solely of an annual
cash payment plus the vesting of any additional shares of restricted
stock that the Company may determine to make available to Executive.
The bonus award during Executive's employment with the Company shall be
determined as follows:
(i) 1997. The maximum cash bonus award for 1997 is
$175,000, one-half of which is guaranteed. The Maximum Bonus Award for
1997 shall not be reduced to reflect that this period is less than a
full calendar year. The maximum bonus that Executive may earn in 1997
is referred to herein as the "1997 Maximum Bonus Award" and shall be
determined in accordance with performance goals, as follows:
(A) Executive shall have the opportunity to
receive up to 40% of the 1997 Maximum Bonus Award based on the
President's determination of whether the qualitative goals set forth
on Exhibit A to this Agreement have been met during 1997;
(B) Executive shall have the opportunity to
receive up to 30% of the 1997 Maximum Bonus Award based on the Company's
achievement of its revenue target as provided in the Company's 1997
operational plan ("1997 Revenue Target"). Executive shall receive a
portion of the 1997 Maximum Bonus Award under this Section 7(d)(i)(B)
equal to 30% multiplied by the "Revenue Factor." The Revenue Factor
shall be a percentage ranging from 0% to 100%, with 100% representing
that the Company's 1997 revenue is equal to or exceeds the 1997 Revenue
Target, and with 0% representing that the Company's 1997 revenue is
equal to or less than the Company's 1996 revenue. If the Company's 1997
revenue is greater than its 1996 revenue, but less than its 1997 Revenue
Target, the Revenue Factor shall equal a fraction, the numerator of
which is the Company's 1997 revenue minus the Company's 1996 revenue,
and the denominator of which is the 1997 Revenue Target minus the
Company's 1996 revenue; and
(C) Executive shall have the opportunity to
receive up to 30% of the 1997 Maximum Bonus Award based on the Company's
achievement of its earnings before interest and taxes ("EBIT") target as
provided in the Company's 1997 operational plan ("1997 EBIT Target").
Executive shall receive a portion of the 1997 Maximum Bonus Award under
this Section 7(d)(i)(C) equal to 30% multiplied by the "EBIT Factor."
The EBIT Factor shall be a percentage ranging from 0% to 100%, with 100%
representing that the Company's 1997 EBIT is equal to or exceeds the
1997 EBIT Target, and with 0% representing that the Company's 1997 EBIT
is equal to or less than the Company's 1996 EBIT. If the Company's 1997
EBIT is greater than its
<PAGE>
19
1996 EBIT, but less than its 1997 EBIT Target, the EBIT Factor shall
equal a fraction, the numerator of which is the Company's 1997 EBIT
minus the Company's 1996 EBIT, and the denominator of which is the 1997
Target EBIT minus the Company's 1996 EBIT.
(ii) Calendar Years 1998 and Thereafter. Within a
mutually agreeable time period before the beginning of each calendar
year, the President shall establish goals for Executive for the next
calendar year based on the final operational plan and budget of the
Company for such year, and Executive shall be entitled to receive a
percentage of the Maximum Bonus Award, up to 100%, depending on whether
the Company attains all or a portion of such goals.
For calendar years 1998 and 1999, the maximum cash bonus amount will be
$200,000 with the additional cash bonus of $25,000 for each of those
years (i.e. over the 1997 $175,000 per year maximum cash bonus) being
payable if extraordinary financial performance goals for those years, as
set by the President, are achieved.
Any of the Company's financial results that are used to calculate
bonuses under this Section 5(d) shall be taken only from the Company's
audited financial statements for the applicable year.
(iii) Payment of Bonuses and Vesting of Restricted
Stock. All cash bonuses payable under this Section 5(d) shall be paid
to Executive within two weeks after the delivery of audited financial
statements to the Company for the prior calendar year. Any shares of
Restricted Stock that vest as a result of Executive receiving all or a
portion of the Maximum Bonus Award shall become vested on the same date
that the cash bonus is paid to Executive. In the event that Executive's
employment with the Company is terminated by the Company other than for
Cause, Executive will receive a proportionate amount of the maximum cash
bonus award (but no Restricted Stock vesting) for the year during which
the termination occurs. This proportionate amount will be calculated
using the same procedure as for full year cash bonus amounts, i.e., by
determining that portion of the year's qualitative and quantitative
goals that have been achieved by Executive for that portion of the year
during which he was employed by the Company. This proportionate amount
will be paid when the bonus otherwise would have been paid for that
year.
(e) Employee Benefits. During the Employment Period,
Executive shall be entitled to participate in all employee benefit plans
and programs as the Company shall provide generally to other senior
executive officers of the Company from time to time, other than any
bonus plans applicable to such other executives and with the exception
that, rather than the vacation schedule generally offered to such other
executives, Executive shall receive two weeks paid vacation in 1997 and
four weeks paid vacation during each calendar year thereafter.
(f) All payments to Executive or his estate made pursuant
to this Agreement shall be subject to such withholding as may be
required by any applicable laws.
<PAGE>
20
SECTION 6. Expense Reimbursements.
(a) Temporary Housing and Relocation. Executive currently
maintains a primary residence in Connecticut ("Current Residence").
In connection with Executive becoming Executive Vice President and Chief
Operating Officer of the Company, Executive shall be required
to maintain his primary residence in the Philadelphia metropolitan
area ("New Residence"). The Company shall reimburse Executive for
the reasonable cost of maintaining a temporary residence in the
Philadelphia metropolitan area until the earlier of (i) Executive
occupying his New Residence, or (ii) November 1, 1997. Before October
15, 1997 the Company shall, at its cost, hire two independent appraisers
to assess the fair market value of Executive's Current Residence (the
"Appraisals"). After the Appraisals are made and communicated to
Executive, he shall be given 14 days to decide whether he wishes to sell
his Current Residence on his own, or whether he wishes to transfer his
Current Residence to the Company or its designee, and to receive from
the Company or its designee an amount equal to the average of the two
Appraisals. To the extent not mentioned above, the Company shall
reimburse Executive for any additional reasonable moving expenses he
incurs for himself and his family in connection with their relocating
from Connecticut to the Philadelphia metropolitan area, in accordance
with the Company's policies generally applicable to its senior executive
officers.
(b) During the Employment Period, the Company shall
reimburse Executive for all reasonable and itemized out-of-pocket
expenses incurred by Executive in the ordinary course of the Company's
business pursuant to the terms of the Company's business expense
reimbursement policy and provided such expenses are properly reported to
the Company in accordance with its accounting procedures.
SECTION 7. Termination.
(a) The Employment Period may be terminated by either the
President on behalf of the Company or the Executive at any time or for
any reason, as provided in this Section 7(a). In addition to the
scheduled expiration of the Employment Period set forth in Section 3,
the Employment Period shall terminate upon the earliest to occur of the
following:
(i) the Executive's death or Disability;
(ii) delivery by the Company to Executive of a written
notice of the Company's election to terminate Executive's employment
hereunder, for any reason whatsoever; or
(iii) the close of business on the day which is 90 days
after the date on which the Executive shall have delivered to the
Company written notice of Executive's election to terminate Executive's
employment hereunder.
(b) For purposes of this Agreement, "Disability" shall have
the same meaning as "Total Disability" under the CDI Corporation Long
Term Disability Benefits Program, or such other comparable program
<PAGE>
21
as may then be in effect that provides long term disability coverage
to the Company's management employees.
(c) For purposes of this Agreement, "Cause" means any one
or more of the following bases for termination of Executive's employment
with the Company:
(i) Executive's commission of a felony or other crime
involving moral turpitude;
(ii) Executive's refusal to perform such services as
may be reasonably delegated or assigned to Executive, consistent with
his position, by the President; provided, however, that a termination
under this Section 7(c)(ii) shall not be for Cause unless the Company
provides written notice to Executive of its intention to terminate
Executive for Cause under this Section 7(c)(ii), and Executive fails, to
the reasonable satisfaction of the Company, to cure the defects stated
in such written notice within ten days after the notice was given to
Executive;
(iii) Executive's willful misconduct or gross
negligence in connection with the performance of his duties under this
Agreement that materially adversely affects Executive's ability to
perform his duties for the Company or materially adversely affects the
Company;
(iv) Executive's material breach of any of the terms
or conditions of this Agreement;
(v) receipt of notice from Executive of Executive's
intention to terminate his employment with the Company; or
(vi) receipt of reliable information from another
source of Executive's intention to terminate his employment with the
Company unless Executive delivers a written statement to Company
providing that he does not intend to terminate his employment with the
Company as long as such statement is delivered to the Company no later
than 48 hours after the Company has asked Executive whether its
information regarding his intended termination is accurate.
(d) Following any termination of Executive's employment
hereunder, all obligations of the Company under this Agreement shall
terminate except (i) any obligations with respect to the payment of
accrued and unpaid salary or expense reimbursements under Sections 5
or 6 hereof through the date of Executive's termination of employment
hereunder, and (ii) any obligations as set forth in Section 7(e).
(e) In the event of any termination of Executive's
employment:
by the Company other than for Cause;
by Executive for Good Reason (as hereinafter
defined); or
as a result of Executive's death or Disability
<PAGE>
22
the Company shall continue to pay Executive his Base Salary in the
same intervals and amounts that were in effect immediately prior to
termination, until the later of (i) one year from the date of such
termination or (ii) the next scheduled expiration of the Employment
Period, without regard for any renewals that would or might have taken
place but for Executive's termination of employment. The period during
which the Company is required to continue to pay Executive his Base
Salary under this Section 7(e) is referred to as the "Severance Period."
During the Severance Period, the Company shall continue to pay for
medical benefit plans and programs for Executive comparable to those in
which Executive participated and for which the Company paid
immediately prior to Executive's termination (except to the extent
Executive receives comparable benefits from another employer).
Notwithstanding the above, no amounts shall be paid or become payable to
Executive during the Severance Period until Executive has executed a
valid release and waiver of all claims and potential claims against the
Company and other related parties in a form that is reasonably
satisfactory to the Company, and any required waiting period under such
release and waiver has expired and Executive has not revoked the release
during such waiting period.
(i) "Good Reason" exists if the Executive voluntarily
terminates employment with the company following a Change in Control, as
hereinafter defined, because (A) Executive is assigned duties that are
demeaning or otherwise materially inconsistent with the duties currently
performed by Executive, or (B) Executive's place of employ-ment with the
Company is moved outside the Philadelphia metropolitan area. Before the
Executive terminates for Good Reason, he must notify the Company in
writing of his intention to terminate and the Company shall have 15 days
after receiving such written notice to remedy the situation, if
possible.
(ii) "Change in Control" shall mean a change in control
of a nature that would be required to be reported in response to Item 1
of Form 8-K promulgated under the Securities Exchange Act of 1934, as
amended (the "Act"), provided, that, without limitation, such a change
in control shall be deemed to have occurred if (A) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Act), other than the
Company or any "person" who on the date hereof is a director or officer
of the Company, is or becomes the "beneficial owner," (as defined in
Rule 13d-3 under the Act), directly or indirectly, of securities of the
Company representing more than 50% of the combined voting power of the
Company's then outstanding securities; or (B) during any period of two
consecutive years during the term of this Agreement, individuals who at
the beginning of such period constitute the Board (the "Incumbent
Board") cease for any reason to constitute at least a majority of the
Board, unless the election of each director who was not a director at
the beginning of such period has been approved in advance by directors
representing at least a majority of the directors then in office who
were members of the Incumbent Board or whose election was approved by
the Incumbent Board.
(f) Any termination by the Company or by Executive of
Executive's employment hereunder shall be communicated by written
notice.
<PAGE>
23
(g) Any severance compensation granted in this Section 7
shall be the sole and exclusive compensation or benefit due to Executive
upon termination of Executive's employment.
SECTION 8. Representations, Warranties and Acknowledgments of
Executive.
(a) Executive represents and warrants that his experience
and capabilities are such that the provisions of Section 9 will not
prevent him from earning his livelihood, and acknowledges that it would
cause the Company serious and irreparable injury and cost if Executive
were to use his ability and knowledge in competition with the Company or
to otherwise breach the obligations contained in Section 9.
(b) Executive acknowledges that (i) during the term of
Executive's employment with the Company, Executive will have access
to Confidential Information; (ii) such Confidential Information is
proprietary, material and important to the Company and its
non-disclosure is essential to the effective and successful conduct
of the Company's business; (iii) the Company's business, its customers'
business and the businesses of other companies with which the Company
may have commercial relationships could be damaged by the unauthorized
use or disclosure of this Confidential Information; and (iv) it is
essential to the protection of the Company's goodwill and to the
maintenance of the Company's competitive position that the Confidential
Information be kept secret, and that Executive not disclose the
Confidential Information to others or use the Confidential Information
to Executive's advantage or the advantage of others.
(c) Executive acknowledges that as the Company's Executive
Vice President and Chief Operating Officer, Executive will be put in
a position of trust and confidence and have access to Confidential
Information, will be supervising certain operations and employees of the
Company, will be in contact with customers and prospective customers and
will participate in the preparation and implementation
of the Company's strategic plans and its policies and procedures.
(d) Executive acknowledges that as the Company's Executive
Vice President and Chief Operating Officer, it is essential for the
Company's protection that Executive be restrained following the
termination of Executive's employment with the Company from soliciting
or inducing any of the Company's officers and management employees to
leave the Company's employ, hiring or attempting to hire any of the
Company's officers or management employees, soliciting the Company's
customers and suppliers for a competitive purpose, and competing against
the Company for a reasonable period of time.
(e) Executive represents and warrants that Executive is not
bound by any other agreement, written or oral, which would preclude
Executive from fulfilling all the obligations, duties and covenants in
this Agreement. Executive also represents and warrants that Executive
will not use, in connection with his employment under this Agreement,
any materials which may be construed to be confidential to a prior
employer or other persons or entities. In the event of a breach of this
Section 8 which results in damage to the Company, Executive will
<PAGE>
24
indemnify and hold the Company harmless with respect to such damage.
References in this Section 8 to the Company shall include the Company,
its subsidiaries, divisions and affiliates.
SECTION 9. Executive's Covenants and Agreements.
(a) Executive agrees to maintain full and complete records
of all transactions and of all services performed by Executive on behalf
of the Company and to submit this information to the Company in the
manner and at the times that the Company may, from time to time, direct.
(b) Executive agrees to devote Executive's entire
productive time, ability and attention to the Company's business during
the term of this Agreement. Executive further agrees not to, directly
or indirectly, render any services of a business, commercial or
professional nature to any other person or organization, whether for
compensation or otherwise, without the Company's prior written consent.
(c) Executive agrees to abide by and comply with all
personnel and company practices and policies applicable to Executive.
(d) Executive shall promptly and completely disclose to the
Company and the Company or its customers will own all rights, title and
interest to any Inventions made, recorded, written, first reduced to
practice, discovered, developed, conceived, authored or obtained by
Executive, alone or jointly with others, during the term of Executive's
employment with the Company (whether or not such Inventions are made,
recorded, written, first reduced to practice, discovered, developed,
conceived, authored or obtained during working hours) and for one year
after termination of Executive's employment with the Company. Executive
agrees to take all such action during the term of Executive's employment
with the Company or at any time thereafter as may be necessary,
desirable or convenient to assist the Company or its customers in
securing patents, copyright registrations, or other proprietary rights
in such Inventions and in defending and enforcing the Company's or such
customer's rights to such Inventions, including without limitation the
execution and delivery of any instruments of assignments or transfer,
affidavits, and other documents, as the Company or its customers may
request from time to time to confirm the Company's or its customers'
ownership of the Inventions. Executive represents and warrants that as
of the date hereof there are no works, software, inventions, discoveries
or improvements (other than those included in a copyright or patent of
application therefor) which were recorded, written, conceived, invented,
made or discovered by Executive before entering into this Agreement and
which Executive desires to be removed from the provisions of this
Agreement.
(e) For purposes of this Agreement, "Inventions" means
concepts, developments, innovations, inventions, information,
techniques, ideas, discoveries, designs, processes, procedures,
improvements, enhancements, modifications (whether or not patentable),
including, but not limited to, those relating to hardware, software,
languages, models, algorithms and other computer system components,
and writings, manuals, diagrams, drawings, data, computer programs,
<PAGE>
25
compilations and pictorial representations and other works (whether or
not copyrightable). Inventions does not include those which are made,
developed, conceived, authored or obtained by Executive without the use
of the Company's resources and which do not relate to any of the
Company's past, present or prospective activities.
(f) During and after the term of Executive's employment
with the Company, Executive will hold all of the Confidential
Information in the strictest confidence and will not use any
Confidential Information for any purpose and will not publish,
disseminate, disclose or other-wise make any Confidential Information
available to any third party, except as may be required in connection
with the performance of Executive's duties hereunder.
(g) For purposes of this Agreement, "Confidential
Information" means all information, data, know-how, systems and
procedures of a technical, sensitive or confidential nature in any
form relating to the Company or its customers, including without
limitation about Inventions, all business and marketing plans, marketing
and financial information, pricing, profit margin, cost and sales
information, operations information, forms, contracts, bids, agreements,
legal matters, unpublished written materials, names and addresses of
customers and prospective customers, systems for recruitment,
contractual arrangements, market research data, information about
employees, suppliers and other companies with which the Company has a
commercial relationship, plans, methods, concepts, computer programs or
software in various stages of development, passwords, source code
listings and object code.
(h) All files, records, reports, programs, manuals, notes,
sketches, drawings, diagrams, prototypes, memoranda, tapes, discs, and
other documentation, records and materials in any form that in any way
incorporate, embody or reflect any Confidential Information or
Inventions will belong exclusively to the Company and its customers and
Executive will not remove from the Company's or its customers' premises
any such items under any circumstances without the prior written consent
of the party owning such item. Executive will deliver to the Company
all copies of such materials in Executive's control upon the Company's
request or upon termination of Executive's employment with the Company
and, if requested by the Company, will state in writing that all such
materials were returned.
(i) If Executive's employment is terminated for any reason,
including resignation by Executive or termination by the Company, with
or without Cause, then for a period which extends to the later of two
years immediately following Executive's termination or the date of which
the Employment Period was scheduled to expire, Executive agrees not to:
(i) own, manage, operate, finance, join, control,
or participate in the ownership, management, operation, financing or
control of, or be connected, directly or indirectly, as proprietor,
partner, shareholder, director, officer, executive, employee, agent,
creditor, consultant, independent contractor, joint venturer, investor,
representative, trustee or in any other capacity or manner whatsoever
<PAGE>
26
with, any entity that engages or intends to engage in any Competing
Business anywhere in the world. "Competing Business" means any business
or other enterprise which engages in the staffing business; and
(ii) directly or indirectly, solicit, interfere with
or attempt to entice away from the Company, any officer or management
employees of the Company or anyone who was one of the Company's officers
or management employees within 12 months prior to such contact,
solicitation, interference or enticement; and
(iii) contact, solicit, interfere with or attempt to
entice away from the Company, any customer on behalf of a Competing
Business.
References in this Section 9 to the Company shall include the Company,
its subsidiaries, divisions and affiliates.
SECTION 10. Remedies.
Executive acknowledges that his promised services hereunder
are of a special, unique, unusual, extraordinary and intellectual
character, which give them peculiar value the loss of which cannot be
reasonably or adequately compensated in an action of law, and that, in
the event there is a breach hereof by Executive, the Company will suffer
irreparable harm, the amount of which will be impossible to ascertain.
Accordingly, the Company shall be entitled, if it so elects, to
institute and prosecute proceedings in any court of competent
jurisdiction, either at law or in equity, to obtain damages for any
breach or to enforce specific performance of the provisions or to enjoin
Executive from committing any act in breach of this Agreement. The
remedies granted to the Company in this Agreement are cumulative and are
in addition to remedies otherwise available to the Company at law or in
equity. If the Company is obliged to resort to the courts for the
enforcement of any of the covenants of Executive contained in Section 9
hereof, each such covenant shall be extended for a period of time equal
to the period of such breach, if any, which extension shall commence on
the later of (i) the date on which the original (unextended) term of
such covenant is scheduled to terminate or (ii) the date of the final
court order (without further right of appeal) enforcing such covenant.
SECTION 11. Waiver of Breach.
The waiver by the Company of a breach of any provision
of this Agreement by Executive shall not operate or be construed as a
waiver of any other or subsequent breach by Executive of such or any
other provision. No delay or omission by the Company or Executive in
exercising any right, remedy or power hereunder or existing at law or in
equity shall be construed as a waiver thereof, and any such right,
remedy or power may be exercised by the Company or Executive from time
to time and as often as may be deemed expedient or necessary by the
Company or Executive in its or his sole discretion.
<PAGE>
27
SECTION 12. Notices.
All notices required or permitted hereunder shall be made
in writing by hand-delivery, certified or registered first-class mail,
or air courier guaranteeing overnight delivery to the other party at the
following addresses:
To the Company:
CDI Corp.
3500 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
Attention: President/CEO
with a required copy to:
CDI Corp.
3500 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
Attention: General Counsel
To Executive:
Robert J. Mannarino
11 Tree Top Terrace
Greenwich, CT 06831
or to such other address as either of such parties may designate in a
written notice served upon the other party in the manner provided
herein. All notices required or permitted hereunder shall be deemed
duly given and received when delivered by hand, if personally delivered;
on the third day next succeeding the date of mailing if sent by
certified or registered first-class mail; and on the next business day,
if timely delivered to an air courier guaranteeing overnight delivery.
SECTION 13. Severability.
If any term or provision of this Agreement or the
application thereof to any person or circumstance shall, to any extent,
be held invalid or unenforceable by a court of competent jurisdiction,
the remainder of this Agreement or the application of any such term or
provision to persons or circumstances other than those as to which it is
held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Agreement shall be valid and enforceable to
the fullest extent permitted by law. If any of the provisions contained
in this Agreement shall for any reason be held to be excessively broad
as to duration, scope, activity or subject, it shall be construed by
limiting and reducing it, so as to be valid and enforceable to the
extent compatible with the applicable law or the determination by a
court of competent jurisdiction.
<PAGE>
28
SECTION 14. Governing Law; Exclusive Choice of Forum.
The implementation and interpretation of this Agreement
shall be governed by and enforced in accordance with the laws of the
Commonwealth of Pennsylvania without giving effect to the conflicts
of law provisions thereof. The parties hereby submit to the exclusive
jurisdiction of, and waive any venue objections against, the United
States District Court for the Eastern District of Pennsylvania and
the state and local courts of the Commonwealth of Pennsylvania,
Philadelphia County, for any litigation arising out of this Agreement.
SECTION 15. Binding Effect and Assignability.
The rights and obligations of both parties under this
Agreement shall inure to the benefit of and shall be binding upon their
heirs, successors and assigns. Executive's rights under this Agreement
shall not, in any voluntary or involuntary manner, be assignable and may
not be pledged or hypothecated without the prior written consent of the
Company.
SECTION 16. Counterparts; Section Headings.
This Agreement may be executed in any number of counter-
parts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument. The section
headings of this Agreement are for convenience of reference only.
SECTION 17. Survival.
Notwithstanding the termination of this Agreement or
Executive's employment hereunder for any reason, Sections 8, 9, 10, 13,
14 and 17 hereof shall survive any such termination.
SECTION 18. Entire Agreement.
This instrument constitutes the entire agreement with
respect to the subject matter hereof between the parties hereto and
replaces and supersedes as of the date hereof any and all prior oral or
written agreements and understandings between the parties hereto. This
Agreement may only be modified by an agreement in writing executed by
both Executive and the Company.
<PAGE>
29
IN WITNESS WHEREOF, the undersigned have executed this
Agreement the date and year first written above.
COMPANY:
CDI CORP.
By: _____________________________________
Mitchell Wienick
President and Chief Executive Officer
EXECUTIVE:
_________________________________________
Robert J. Mannarino
<PAGE>
30
CDI CORP.
RESTRICTED STOCK AGREEMENT
SECTION 1. Grant of Restricted Stock.
CDI Corp. (the "Company") hereby grants to Robert J.
Mannarino (the "Executive") 6,000 shares of the Company's common stock
par value $.10 per share subject to the restrictions set forth herein.
The Company, immediately following the execution of this Agreement, will
issue or transfer 6,000 shares of the Company's common stock ("Stock")
to Executive. The Stock shall consist of eight certificates, all
registered in Executive's name (the "Certificates"), subject to the
restrictions set forth herein, and in the following amounts:
4 certificates for 1,000 shares each and 4 certificates for 500 shares
each.
SECTION 2. Custody of Stock.
The Company will deliver the Certificates to the Secretary
of the Company ("Secretary"), to be held in escrow in accordance with
the terms of this Agreement. Simultaneously with the delivery of the
Certificates, Executive will sign and deliver to the Secretary an
undated stock power with respect to each of the Certificates,
authorizing the Secretary to transfer title to each Certificate to the
Company, in the event that Executive forfeits all or a portion of the
Stock in accordance with the terms of this Agreement.
SECTION 3. Rights to Vote Stock.
Executive will be considered a shareholder with respect to
the escrowed Stock and will have all corresponding rights, including the
right to vote the Stock and to receive all dividends and other
distributions with respect to the Stock, except that Executive will have
no right to sell, exchange, transfer, pledge, hypothecate or otherwise
dispose of any escrowed Stock, and Executive's rights in the escrowed
Stock will be subject to forfeiture as provided in Section 5
of this Agreement.
SECTION 4. Vesting of Restricted Stock.
The following table shows the number of shares which are
eligible for vesting in each of the years listed in the table.
Executive will vest, if at all, in half of each year's shares pursuant
to the terms of Section 5(d) of the Employment Agreement between
Executive and the Company, dated August 4, 1997 (the "Employment
Agreement"). Executive will vest in the other half of each year's
shares on December 31st of such year.
1998 1999 2000 2001
---- ---- ---- ----
1,000 2,000 2,000 1,000
<PAGE>
31
If Executive's employment with the Company terminates for any reason,
none of the unvested shares shall ever vest and such shares shall be
forfeited to the Company as of the date that Executive's employment with
the Company terminates. For all shares of Stock in which
Executive becomes vested, the escrow will terminate and the Secretary
will deliver the stock certificates to Executive as soon as practicable
after such shares vest.
SECTION 5. Forfeiture of Stock.
In addition to the reasons for forfeiture of restricted
shares described above, Executive shall also forfeit all remaining
escrowed Stock upon any attempt by Executive to sell, exchange,
transfer, pledge, hypothecate or otherwise dispose or encumber any of
the escrowed Stock. Title to all forfeited shares of Stock shall be
transferred back to the Company as soon as reasonably
practicable after they are forfeited.
SECTION 6. Restriction on Transfer Rights of Shares.
Whenever shares of Stock vest under this Agreement or the
Employment Agreement, one-half of those shares of Stock may not be sold
or transferred until the second anniversary of their respective vesting
date, and the other half may be sold or transferred at any time on or
after their respective vesting date. With respect to any shares of
Stock the sale or transfer of which is restricted under this Section 6,
Executive may not engage in any transaction designed to provide him with
substantially the same economic benefit of a sale of any shares of Stock
so restricted, such as a short sale or a sale of a put option.
Certificates representing any shares of Stock so restricted will be
inscribed with an appropriate legend prohibiting such transfer.
SECTION 7. Compliance with Laws.
All shares of Stock issued to Executive or his personal
representative shall be transferred in accordance with all applicable
laws, regulations or listing requirements of any national securities
exchange, and the Company may take all actions necessary or appropriate
to comply with such requirements including, without limitation,
withholding federal income and other taxes with respect to such Stock;
restricting (by legend or otherwise) such Stock as shall be necessary
or appropriate, in the opinion of counsel for the Company, to comply
with applicable federal and state securities laws, including Rule 16b-3
(or any similar rule) of the Securities and Exchange Commission, which
restrictions shall continue to apply after the delivery of certificates
for the Stock to Executive or his personal representative; and
postponing the issuance or delivery of any Stock. Notwithstanding any
provision in this Agreement to the contrary, the Company shall not be
obligated to issue or deliver any Stock if such action violates any
provision of any law or regulation of any governmental authority or any
national securities exchange.
<PAGE>
32
SECTION 8. Agreement Not to Affect Relationship with Company.
This Agreement shall not confer upon Executive any right
to continue in the employ or service of the Company.
SECTION 9. Adjustment for Capital Changes.
The number of shares of Stock subject to this Agreement
shall be appropriately adjusted in the event of a stock split, stock
dividend, recapitalization, or other capital change of the Company.
SECTION 10. Interpretation.
The Company shall have the sole power to interpret this
Agreement and to resolve any disputes arising hereunder.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
August 4, 1997.
CDI CORP.
By _____________________________________
Mitchell Wienick,
President and Chief Executive Officer
EXECUTIVE:
________________________________________
Robert J. Mannarino
<PAGE>
33
CDI CORP.
NON-QUALIFIED STOCK OPTION AGREEMENT
SECTION 1. Grant of Option.
The CDI Corp. Board of Directors' Stock Option Committee,
pursuant to the authority granted to it under the CDI Corp.
Non-Qualified Stock Option and Stock Appreciation Rights Plan, as
amended (the "Plan") hereby grants to Robert J. Mannarino (the
"Optionee") an option (the "Option" when reference is made to the right
to purchase all of the Shares) to purchase up to 60,000 shares of CDI
Corp. common stock (the "Shares" when reference is made to all or a
portion of the shares subject to the Option), according to the terms and
conditions set forth herein and in the Plan.
SECTION 2. Other Definitions.
(a) "Board" means the board of directors of the Company.
(b) "Cause" means termination of Optionee's employment
with the Company resulting from any one or more of the following events:
(i) Optionee's commission of a felony or other crime
involving moral turpitude;
(ii) Optionee's refusal to perform such services as
may be reasonably delegated or assigned to Optionee, consistent with his
position, by the President; provided, however, that a termination under
this Section 2(b)(ii) shall not be for Cause unless the Company
provides written notice to Optionee of its intention to terminate
Optionee for Cause under this Section 2(b)(ii), and Optionee fails, to
the reasonable satisfaction of the Company, to cure the defects stated
in such written notice within ten days after the notice was given to
Optionee;
(iii) Optionee's willful misconduct or gross
negligence in connection with the performance of his duties under his
Employment Agreement with the Company dated August 4, 1997 (the
"Employment Agreement") that materially adversely affects Optionee's
ability to perform his duties for the Company or materially adversely
affects the Company;
(iv) Optionee's material breach of any of the terms
or conditions of the Employment Agreement;
(v) receipt of notice from Optionee of Optionee's
intention to terminate his employment with the Company; or
(vi) receipt of reliable information from another
source of Optionee's intention to terminate his employment with the
Company unless Optionee delivers a written statement to Company
providing that he does not intend to terminate his employment with the
<PAGE>
34
Company as long as such statement is delivered to the Company no later
than 48 hours after the Company has asked Optionee whether its
information regarding his intended termination is accurate.
(c) "Change in Control" shall mean a change in control of
a nature that would be required to be reported in response to Item 1 of
Form 8-K promulgated under the Securities Exchange Act of 1934, as
amended (the "Act"), provided, that, without limitation, such a change
in control shall be deemed to have occurred if (i) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Act), other than the
Company or any "person" who on the date hereof is a director or officer
of the Company, is or becomes the "beneficial owner," (as defined in
Rule 13d-3 under the Act), directly or indirectly, of securities of the
Company representing more than 50% of the combined voting power of the
Company's then outstanding securities; or (ii) during any period of two
consecutive years during the term of this Agreement, individuals who at
the beginning of such period constitute the Board (the "Incumbent
Board") cease for any reason to constitute at least a majority of the
Board, unless the election of each director who was not a director at
the beginning of such period has been approved in advance by directors
representing at least a majority of the directors then in office who
were members of the Incumbent Board or whose election was approved by
the Incumbent Board.
(d) "Committee" means the Stock Option Committee of the
Board.
(e) "Company" means CDI Corp.
(f) "Date of Exercise" means the date on which the written
notice required by Section 8 below is received by the Treasurer of the
Company.
(g) "Date of Grant" means August 4, 1997, the date on
which the Option is awarded pursuant to the Plan and this Agreement.
(h) "Fair Market Value" of a share of Stock means the
closing price of actual sales of shares on the New York Stock Exchange
on a given date or, if there are no such sales on such date, the closing
price of the shares of Stock on such exchange on the last date on which
there was a sale.
(i) "Good Reason" exists if the Optionee voluntarily
terminates employment with the Company following a Change in Control
because (i) the Optionee is assigned duties that are demeaning or
otherwise materially inconsistent with the duties currently performed by
the Optionee and there is a corresponding reduction in Optionee's
compensation, or (ii) the Optionee's place of employment with the
Company is moved outside the Philadelphia metropolitan area. Before the
Optionee terminates for Good Reason, he must notify the Company in
writing of his intention to terminate and the Company shall have 15 days
after receiving such written notice to remedy the situation, if
possible.
<PAGE>
35
(j) "Option Price" means $38-5/16, representing the Fair
Market Value of a share of Stock on the last trading date immediately
preceding the Date of Grant.
(k) "President" means the President and Chief Executive
Officer of the Company.
(l) "Stock" means the Company's common stock, par value
$.10 per share.
(m) "Termination Date" means the earliest of:
(i) the date on which Optionee's employment with the
Company terminates for any reason other than death, termination by the
Company without Cause following a Change in Control, or termination by
Optionee for Good Reason;
(ii) in the event of termination of Optionee's
employment by the Company without Cause following a Change in Control or
by Optionee for Good Reason, the date two weeks after the date of such
termination;
(iii) in the event of the death of Optionee, the date
six months after the date of the Optionee's death; or
(iv) 12:00 a.m., August 4, 2004.
SECTION 3. Time of Exercise.
No Option shall be exercisable with respect to any Shares
unless the Option has vested with respect to such Shares in accordance
with Section 4 hereof. If vested, the Option may be exercised in whole
or in part as to the vested portion at any time after vesting until the
Termination Date.
SECTION 4. Option Vesting.
Subject to the accelerated vesting provisions of Section
4(b), the Option will vest over time, as to a certain number of shares
on August 4th of each year. the following table shows the number of
shares as to which the Option will vest on August 4th of each of the
listed years :
(a) Vesting Table.
1998 1999 2000 2001 2002
---- ---- ---- ---- ----
12,000 12,000 12,000 12,000 12,000
(b) Accelerated Vesting. In addition to the vesting
provisions above: the Option shall vest and be immediately exercisable
upon the termination of the Optionee's employment with the Company
following a Change in Control of the Company if such termination is by
Company without Cause or by the Optionee for Good Reason.
<PAGE>
36
SECTION 5. Payment for Shares by the Optionee.
Full payment for Shares purchased upon the exercise of the
Option shall be made by check or bank draft.
SECTION 6. Nontransferability of Option.
The Option may not be transferred, in whole or in part,
except by will or the applicable laws of descent and distribution.
The Option may not be exercised by any person other than the Optionee
or, in the case of the Optionee's death, by the person to whom the
Optionee's rights have passed by will or by the applicable laws of
descent and distribution.
SECTION 7. Restriction on Transfer Rights of Shares.
Whenever Shares are purchased through the exercise of all
or a portion of the Option, one-half of the purchased Shares may not be
sold or transferred until the second anniversary of their respective
Dates of Exercise, and the other half may be sold or transferred at
any time on or after their respective Dates of Exercise.
With respect to any Shares the sale or transfer of which is
restricted under this Section 7, Optionee may not engage in any
transaction designed to provide him with substantially the same economic
benefit of a sale of any Shares so restricted, such as a short sale or a
sale of a put option. Certificates representing any Shares so
restricted will be inscribed with an appropriate legend prohibiting such
transfer.
SECTION 8. Manner of Exercise.
The Option shall be exercised by giving written notice of
exercise to the Company's Treasurer, at 1717 Arch St., 35th Floor,
Philadelphia, Pennsylvania 19103-2768. Such notice must state the
number of Shares and the Group as to which the Option is exercised.
Each such notice shall be irrevocable once given. Notice of exercise
must be accompanied by full payment.
SECTION 9. Securities Laws.
The Committee may from time to time impose any conditions
on the exercise of the Option as it deems necessary or advisable to
ensure that all options granted under the Plan, and the exercise
thereof, satisfy Rule 16b-3 (or any similar rule) of the Securities and
Exchange Commission. Such conditions may include, without limitation,
the partial or complete suspension of the right to exercise the Option.
SECTION 10. Issuance of Certificates; Payment of Taxes.
(a) The Option can only be exercised as to whole shares of
Stock. Upon exercise of the Option and payment of the Option Price, a
certificate for the number of shares of Stock purchased through the
exercise will be issued and delivered by the Company to the Optionee,
provided that the Optionee has remitted to the Company an amount,
<PAGE>
37
determined by the Company, sufficient to satisfy the applicable
requirements to withhold federal, state, and local taxes, or made other
arrangements with the Company for the satisfaction of such withholding
requirements.
(b) Subject to the provisions of Section 9 above, the
Company may also condition delivery of certificates for shares of Stock
upon the prior receipt from the Optionee of any undertakings that it
determines are required to ensure that the certificates are being issued
in compliance with federal and state securities laws.
SECTION 11. Rights Prior to Issuance of Certificates.
Neither the Optionee nor the person to whom the Optionee's
rights shall have passed by will or by the laws of descent and
distribution shall have any of the rights of a shareholder with respect
to any shares of Stock issuable upon exercise of the Option until the
date of issuance to the Optionee of a certificate for such shares as
provided in Section 10 above.
SECTION 12. Option Not to Affect Relationship with Company.
The Option shall not confer upon the Optionee any right to
continue in the employ or service of the Company.
SECTION 13. Adjustment for Capital Changes.
In case the number of outstanding shares of the Company's
capital stock is changed as a result of a stock dividend, stock split,
recapitalization, combination, subdivision, issuance of rights or other
similar corporate change, the Board shall make an appropriate adjust-
ment in the aggregate number of Shares subject to, and the Option Price
of, any then outstanding Option.
SECTION 14. Interpretation.
The Committee shall have the sole power to interpret this
Agreement and to resolve any disputes arising hereunder.
Intending to be legally bound, the parties have executed
this Agreement as of the Date of Grant.
For the Stock Option Committee OPTIONEE
of the Board of Directors of
CDI Corp.
By:______________________________ _______________________________
Robert J. Mannarino
<PAGE>
38
EXHIBIT 11
Statement Re Computation of Per Share Earnings
Quarter ended Nine months ended
September 30, September 30,
--------------------- ---------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
Primary
- -------
Earnings from
continuing operations $13,775,000 12,818,000 36,431,000 32,115,000
Discontinued operations - (2,579,000) - (3,955,000)
---------- ---------- ---------- ----------
Net earnings $13,775,000 10,239,000 36,431,000 28,160,000
========== ========== ========== ==========
Common and common
equivalent shares:
Weighted average
common shares
outstanding 19,907,535 19,827,553 19,872,416 19,825,078
Assumed exercise of
stock options 47,049 31,775 65,269 45,860
---------- ---------- ---------- ----------
19,954,584 19,859,328 19,937,685 19,870,938
========== ========== ========== ==========
Earnings per share:
Earnings from
continuing operations $ .69 .65 1.83 1.62
Discontinued operations $ - (.13) - (.20)
Net earnings $ .69 .52 1.83 1.42
Fully diluted
- -------------
Earnings from
continuing operations $13,775,000 12,818,000 36,431,000 32,115,000
Discontinued operations - (2,579,000) - (3,955,000)
---------- ---------- ---------- ----------
Net earnings $13,775,000 10,239,000 36,431,000 28,160,000
========== ========== ========== ==========
Common and common
equivalent shares:
Weighted average
common shares
outstanding 19,907,535 19,827,553 19,872,416 19,825,078
Assumed exercise of
stock options 47,049 31,775 77,511 51,586
---------- ---------- ---------- ----------
19,954,584 19,859,328 19,949,927 19,876,664
========== ========== ========== ==========
Earnings per share:
Earnings from
continuing operations $ .69 .65 1.83 1.62
Discontinued operations $ - (.13) - (.20)
Net earnings $ .69 .52 1.83 1.42
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated financial statements of CDI Corp. and Subsidiaries and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 10,587
<SECURITIES> 0
<RECEIVABLES> 276,521
<ALLOWANCES> 4,670
<INVENTORY> 0
<CURRENT-ASSETS> 318,964
<PP&E> 75,313
<DEPRECIATION> 49,144
<TOTAL-ASSETS> 377,001
<CURRENT-LIABILITIES> 129,909
<BONDS> 22,800
0
0
<COMMON> 1,994
<OTHER-SE> 212,419
<TOTAL-LIABILITY-AND-EQUITY> 377,001
<SALES> 0
<TOTAL-REVENUES> 1,121,678
<CGS> 0
<TOTAL-COSTS> 861,223
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,186
<INCOME-PRETAX> 59,694
<INCOME-TAX> 22,195
<INCOME-CONTINUING> 36,431
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,431
<EPS-PRIMARY> 1.83
<EPS-DILUTED> 0
</TABLE>
