.<PAGE>
SECURITIES AND EXCHANGE COMMISSION 1
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
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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
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CDI CORP.
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(Exact name of Registrant as specified in its charter)
Pennsylvania 23-2394430
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
1717 Arch Street, 35th Floor, Philadelphia, PA 19103-2768
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 569-2200
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Common stock, $.10 par value New York Stock Exchange
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(Title of each class) (Name of exchange on which registered)
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
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Indicate if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or
any amendment to this Form 10-K. [X]
The aggregate market value as of February 20, 1998 of voting stock
of the Registrant held by shareholders other than officers, directors or
known beneficial owners of 10% or more of such stock of the Registrant
was:
Common stock, $.10 par value $536,200,000
Class B common stock, $.10 par value Not applicable
The outstanding shares of each of the Registrant's classes of
common stock as of February 20, 1998 were:
Common stock, $.10 par value 19,924,035 shares
Class B common stock, $.10 par value None
DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K into
Documents which incorporated
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Proxy Statement for Annual Meeting
of Shareholders to be Held May 5, 1998 Part III
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2
PART I
Item 1. BUSINESS.
BUSINESS SEGMENTS
The following table sets forth (in thousands) the revenues and
operating profit attributable to the continuing operations of the
business segments of the Registrant and its consolidated subsidiaries
during the years indicated and the identifiable assets attributable to
each segment as of the end of each such year.
Years ended December 31,
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1997 1996 1995
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Revenues:
Technical Services $ 927,609 920,955 819,923
Information Technology Services 285,105 211,766 174,605
Temporary Services 190,504 163,206 141,779
Management Recruiters 93,540 78,954 66,629
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$ 1,496,758 1,374,881 1,202,936
========= ========= =========
Operating profit:
Technical Services $ 41,653 47,322 34,964
Information Technology Services 21,454 15,216 9,991
Temporary Services 11,005 8,552 7,174
Management Recruiters 17,059 11,003 9,993
Corporate expenses (12,053) (8,398) (6,652)
--------- --------- ---------
$ 79,118 73,695 55,470
========= ========= =========
Identifiable assets:
Technical Services $ 193,206 185,744 183,655
Information Technology Services 69,583 57,629 44,932
Temporary Services 40,855 33,690 30,418
Management Recruiters 25,682 20,370 11,961
Corporate 7,309 5,484 4,412
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336,635 302,917 275,378
Net assets of discontinued
operations 12,202 37,257 48,185
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$ 348,837 340,174 323,563
========= ========= =========
Beginning with 1997, the Registrant is breaking out Information
Technology Services as a separate business segment. Previously the
operations of this segment had been included within the
Technical Services segment. Prior periods have been restated
accordingly.
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3
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.
TECHNICAL SERVICES
The Registrant's Technical Services segment provides staffing,
outsourcing and consulting services in the engineering and other
technical fields.
In providing its staffing services, the segment recruits and hires
personnel and provides these personnel to customers on a contract or
project basis. Customers use the segment's personnel for expansion
programs, to staff special projects and to meet peak period manpower
needs.
In managed staffing, the segment not only provides the personnel
but also manages the customer's entire contract staffing needs. When
providing managed staffing services the segment usually establishes a
branch office at the customer's facilities, staffs it with management
personnel from the segment, and ties that branch into the segment's
computer network.
In managed technical outsourcing, the segment usually takes over
a customer's entire technical department, staffing the department with
technical personnel and managing the production of the department's
output. To date most managed technical outsourcing relationships
involve computer-aided-design. In most instances the managed department
is located on-site at the customer's premises, but in some cases the
customer may prefer an off-site location, and in this case the segment
might be called upon to furnish the site as well as to furnish the
computer systems needed to support the operations.
Technical Services also performs engineering consulting, providing
services such as project planning and feasibility studies, conceptual
engineering, detail engineering and design, procurement and project
management. These services generally are directed toward the
implementation of a customer's previously conceived ideas and programs.
These activities typically take place at the segment's own facilities
where the segment furnishes the computer systems support.
During the year ended December 31, 1997, Technical Services
provided services to approximately 3,000 customers. Much of its
business is performed for large industrial corporations in the
aircraft/aerospace, automotive, hydrocarbon/petrochemical,
construction, electronics, industrial equipment, marine, power/energy,
telecommunications and other fields. Customers are widely dispersed
geographically. Managed staffing, outsourcing and consulting services
are concentrated among a small number of these customers, which tend to
be among the very largest U.S. industrial corporations.
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4
During the year ended December 31, 1997, approximately 1% of the
Registrant's consolidated revenues were derived directly from prime
contracts with the United States Government and an additional
approximately 14% of the consolidated revenues were derived from
subcontracts on United States Government work. Much of the Government
business is defense related.
Services are performed in customers' facilities ("in-customer") and
in Technical Services' own facilities ("in-house") depending upon
industry practice and the needs and preferences of customers. During
the year ended December 31, 1997, approximately 85% of the segment s
revenues were generated through in-customer work with the remaining 15%
generated in-house.
In-customer staffing employees are hired by the segment and
assigned to work for a customer. The period of assignment depends upon
the duration of the need for the skills of an individual employee. At
the end of an assignment, an employee is either assigned to perform
services with another customer, or employment is terminated.
Technical personnel are attracted to this type of employment by the
opportunity to frequently work on "state-of-the-art" projects and by the
geographic and industry diversity of the projects. In addition,
personnel may be compensated at higher rates than the hourly rate
equivalent paid to personnel with similar backgrounds and experience who
are employed by the segment's customers in industry or government.
When performing services on an in-customer basis, Technical
Services personnel are on Technical Services' payroll and are subject to
its administrative control. The customer retains technical and
supervisory control. When the segment provides services to manage as
well as to provide the staffing, the segment may provide additional
administrative supervision for its employees.
When services are performed in-house, Technical Services
generally provides supervision for employees, and may have increased
responsibility for the performance of work which is generally monitored
in conjunction with customer personnel.
The demand for managed services and in-house services is generally
more constant than for in-customer staffing services. Consequently, the
duration of employment of employees working in managed services and
in-house services is usually longer than for employees working in
in-customer staffing. Supervisory personnel at managed programs and at
in-house facilities are generally long-term employees and are important
to the continuing relationship with customers.
The ability of Technical Services to find and hire personnel with
the capabilities required by customers is critical to its operations.
Such personnel usually have prior experience in their area of expertise.
During periods of high demand for specific skills, it is
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not uncommon for Technical Services to experience pressure to pay higher
wage rates or lose employees to competitors who will pay such rates in
an attempt to attract personnel with the required skills.
To assist in fulfilling its personnel needs, a computerized retrieval
system facilitates the rapid selection of resumes on file so that
customers' requirements may be filled quickly.
Pricing under most contracts between Technical Services and its
customers is based on prevailing hourly rates of pay, and contracts
generally do not obligate the customer to pay for any fixed number of
hours. Both the customer and the segment have the right to terminate
the contract, usually on short notice. Similarly, Technical Services
has the right to terminate the employment of its employees without
notice. Some customer contracts contain limitations on the maximum cost
to the customer expressed either in a dollar amount or a maximum number
of worker hours to be provided.
Technical Services operates through a network of approximately 107
sales and recruiting offices and in-house facilities which are situated
in major markets throughout the United States, with 4 offices in Canada
and 8 offices located overseas. A few of those locations are shared
with the Information Technology Services segment.
Each office is responsible for determining the potential market for
services in its geographic and industrial area, and developing that
market through personal contact with prospective and existing customers.
Additionally, Technical Services' operating management stays abreast of
emerging demand for services so that efforts can be expanded or
redirected to take advantage of potential business either in established
or new marketing areas.
Customers typically invite several companies to bid for contracts,
which are awarded primarily on the basis of price, prior performance and
previous experience in successful project completion. Many times
customers grant contracts to more than one company to perform work on
the same project.
The market for the Technical/Information Technology sector of the
staffing industry is estimated by industry analysts to be approximately
$15 billion. The Company's Technical Services and Information
Technology Services segments operate in this sector of the staffing
industry. The Registrant believes that it is the largest company
providing services in this sector of the market, but that neither it nor
any small group of companies is dominant. Competition in the industry
is intense both from national as well as smaller local or regional
companies, some of which serve only selected markets.
INFORMATION TECHNOLOGY SERVICES
The Registrant's Information Technology Services segment provides
staffing and outsourcing services in the information technology field.
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6
In providing its staffing services, the segment recruits and hires
personnel and provides these personnel to customers on a contract or
project basis. Customers use the segment's personnel to develop, design
and maintain information systems.
In managed staffing, the segment not only provides the personnel
but also manages the customer's entire information technology contract
staffing needs. When providing managed staffing services the segment
usually establishes a branch office at the customer s facilities,
staffs it with management personnel from the segment, and ties that
branch into the segment's computer network.
In managed information technology outsourcing, the segment assumes
certain responsibilities for a service or a deliverable. Outsourcing is
focused on three key service areas: application development and
maintenance; distributed systems management, such as operating systems
migrations, ongoing contract support, LAN/WAN management and internet
services; and help desk services, including consulting, strategy and
staffing and managing the operations. In most instances these
outsourcing services are located on site at the customer's premises.
The segment provides staffing services to customers on projects
dealing with software modifications to avoid software failures related
to the year 2000. Although this activity is expected to continue on
beyond the year 2000, it is not anticipated to become a major component
of the segment's services.
During the year ended December 31, 1997, Information Technology
Services provided services to several hundred customers. Much of its
business is performed for large industrial corporations, but
additionally the segment is beginning to penetrate non-industrial fields
such as banking, financial services and insurance. Customers
are widely dispersed geographically. Managed staffing, outsourcing and
consulting services are concentrated among a small number of these
customers, which tend to be among the very largest U.S. corporations.
In 1997 and 1996, one large industrial corporation comprised 30% and
20%, respectively, of Information Technology Services' total revenues.
Staffing employees are hired by the segment and assigned to work
for a customer. The period of assignment depends upon the duration of
the need for the skills of an individual employee. At the end of an
assignment, an employee is either assigned to perform services with
another customer, or employment is terminated.
Information Technology personnel are attracted to this type of
employment by the opportunity to frequently work on "state-of-the-art"
projects and by the geographic and industry diversity of the projects.
In addition, personnel may be compensated at higher rates than the
hourly rate equivalent paid to personnel with similar backgrounds and
experience who are employed by the segment's customers in industry or
government.
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7
Information Technology Services personnel are on Information
Technology Services' payroll and are subject to its administrative
control. The customer retains technical and supervisory control. When
the segment provides services to manage as well as to provide the
staffing, the segment may provide additional administrative supervision
for its employees.
The ability of Information Technology Services to find and hire
personnel with the capabilities required by customers is critical to its
operations. Such personnel usually have prior experience in their area
of expertise. To assist in fulfilling its personnel needs, a
computerized retrieval system facilitates the rapid selection of resumes
on file so that customers' requirements may be filled quickly.
Information Technology personnel of virtually every kind of skill
are currently in extraordinarily high demand, and this level of demand
is expected to remain high, or to even accelerate, for several years
ahead. The segment is finding its greatest challenge in finding and
retaining qualified information technology professionals, and
consequently the segment is employing aggressive recruiting
methodologies and it has been enhancing its benefits and incentive
compensation packages for these professionals.
Pricing under most contracts between Information Technology
Services and its customers is based on prevailing hourly rates of pay,
and contracts generally do not obligate the customer to pay for any
number of hours. Both the customer and the segment have the right to
terminate the contract, usually on short notice. Similarly,
Information Technology Services has the right to terminate the
employment of its employees without notice. Some customer contracts
contain limitations on the maximum cost to the customer expressed either
in a dollar amount or a maximum number of worker hours to be provided.
Information Technology Services operates through a network of
approximately 47 sales and recruiting offices and in-house facilities
which are situated in major markets throughout the United States, with
5 offices in Canada. A few of those locations are shared with the
Technical Services segment.
Customers typically invite several companies to bid for contracts,
which are awarded primarily on the basis of price, prior performance and
previous experience in successful project completion. Many times
customers grant contracts to more than one company to perform work on
the same project.
The market for the Technical/Information Technology sector of the
staffing industry is estimated by industry analysts to be approximately
$15 billion. The Company's Technical Services and Information
Technology Services segments operate in this sector of the staffing
industry. No single company or small group of companies is dominant.
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8
Competition in the industry is intense both from national as well as
smaller local or regional companies, some of which serve only selected
markets.
TEMPORARY SERVICES
The Registrant's Temporary Services segment provides clerical,
secretarial, office support, legal, financial and a small number of
semi-skilled light industrial personnel to customers on a temporary
basis. The segment recruits and hires the personnel and provides these
personnel to the customer on a contract or project basis. In managed
staffing, the segment not only provides the personnel but also manages
the customer's entire contract staffing needs.
Customers retain Temporary Services to meet peak period manpower
needs, to temporarily replace employees on vacation and to staff special
projects. During the year ended December 31, 1997, these services were
provided to approximately 11,000 customers.
Services are performed in customers' facilities by Temporary
Services' employees who are hired to work on customers' projects.
The period of assignment depends upon the duration of the need for
the skills possessed by an individual employee. At the end of an
assignment, an employee is assigned to perform services with another
customer, or employment is terminated. Temporary Services personnel
are on Temporary Services' payroll and are subject to its
administrative control. The customer retains supervisory control and
responsibility for the performance of the employee's services. The
ability of Temporary Services to locate and hire personnel with
capabilities required by customers is critical to its operations.
Pricing under most contracts between Temporary Services and its
customers is based on prevailing hourly rates of pay, and contracts
generally do not obligate the customer to pay for any fixed number of
hours. Both the customer and the segment have the right to terminate
the contract, usually on short notice. Similarly, Temporary Services
has the right to terminate the employment of its temporary employees
without notice.
Temporary Services operates through a network of approximately
121 sales and recruiting offices, 22 of which are franchised,
situated in the United States and Canada. Each office is responsible
for determining the potential market for services in its geographic area
and developing that market through personal contact with prospective and
existing customers.
Revenues from both company and franchised offices are reflected
in the segment's revenues. Temporary Services employs all the temporary
personnel, including those recruited by the franchised
offices, and also bears the responsibility for billing services to
customers and for collection of billings. Franchisees are responsible
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9
for selling services to customers, recruiting temporary personnel and
administrative costs. Franchisees are paid a portion of the gross
profit on their accounts by Temporary Services.
The segment competes with industry leaders such as Kelly and
Manpower as well as several other large companies and many smaller
companies in regional and local markets. The market for the Temporary
Services segment is estimated by industry analysts to be approximately
$15 billion.
MANAGEMENT RECRUITERS
The Registrant's Management Recruiters segment recruits manage-
ment, technical, sales and clerical personnel for permanent employment
positions. Candidates are recruited for many different capacities
including accounting, finance, administrative, information technology,
managerial, personnel, production, research and development, sales,
supervision and technical.
Fees for placement services paid by the employers are generally a
percentage of the annual compensation to be paid to the new employee.
Fees are paid on a retainer basis or after a qualified candidate has
been hired and remains employed for a trial period, generally 30 days.
Management Recruiters also provides professional, executive, middle
management and clerical personnel on a temporary basis with
the objective of permanently placing such personnel with the customer-
employer, although Management Recruiters will provide these temporary
services to customers in situations where eventual permanent employment
is not contemplated. Management Recruiters employs these temporary
personnel.
As of December 31, 1997 Management Recruiters had 677 franchised
offices and 45 company-owned offices throughout North America, providing
services to both large and small employers in virtually all industries.
The broad geographic scope of operations enables franchisees and
company-owned offices to provide nationwide recruiting
and matching of employers with job candidates. The network utilizes an
inter-office referral system on both national and regional levels which
enables all offices to cooperate in fulfilling a customer's
requirements.
Franchisees pay an initial fee approximating $60,000 to acquire a
franchise. The fee is designed to cover the cost of establishing and
bringing a new franchise into the system. Franchisees also pay ongoing
royalties based on a percentage of the franchisee's placement fees.
Franchisees benefit from Management Recruiters' expertise in the
business, and from its national marketing, public relations and
advertising campaigns. Further, they receive extensive pre-opening
training and start-up assistance on site. Franchisees also have the
rights to use Management Recruiters' trade names, trademarks, the
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10
inter-office referral system, operating techniques, advertising
materials, sales programs, video and live interactive training programs,
computer programs, manuals and forms.
A large number of companies are engaged in the recruitment business
and Management Recruiters encounters competition from many
of these. Employers commonly offer to more than one company the
opportunity to find qualified candidates for a position making
competition for qualified individuals intense. Management Recruiters'
ability to obtain placements with employers is determined more on its
ability to find qualified candidates than on its fee structure.
EMPLOYEES
At December 31, 1997 the Registrant had approximately 2,000 sales
and administrative staff employees. The Registrant believes that its
relations with its employees are generally good.
Item 2. PROPERTIES.
The Technical Services and Information Technology Services business
segments have approximately 154 facilities related to its continuing
operations throughout the United States, 9 facilities in Canada and 8
facilities overseas, occupying a total of approximately one million
square feet of space. Approximately 400,000 square feet was devoted to
in-house technical services and the balance to sales, marketing and
administrative functions. The facilities were leased under terms
generally extending up to five years.
The Temporary Services business segment occupied 150,000 square
feet of office space at approximately 99 locations for its company-owned
temporary services offices. These facilities are leased for
varying terms generally extending up to eight years. Temporary Services
also has 22 franchised offices. Franchisees enter into their own leases
for which the segment assumes no obligation.
The Management Recruiters business segment occupied 140,000 square
feet of office space at 45 locations, primarily for its company-owned
personnel placement offices. These facilities are leased for varying
terms, the majority of which extend up to five years. Management
Recruiters also had 677 franchised offices. Franchisees enter into
their own leases for which the segment assumes no obligation.
The Registrant's corporate headquarters are located in
Philadelphia, Pennsylvania where office space of approximately 40,000
square feet is leased.
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Item 3. LEGAL PROCEEDINGS.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
Stock price and other information regarding the Registrant's common
stock is for the years ended December 31, 1997 and 1996. The
Registrant's common stock is traded on the New York Stock Exchange.
1997 1996
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High Low High Low
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First quarter 37-3/8 27-3/4 28-1/2 18-1/8
Second quarter 43-3/4 35 37-1/4 26-3/4
Third quarter 42-11/16 33-1/4 34-1/8 23-1/4
Fourth quarter 45-3/4 36-15/16 30-3/8 25
No cash dividends were declared during the years ended December 31,
1997 and 1996. The Company has no present intention of paying
cash dividends during the year ending December 31, 1998.
Shareholders of record on February 20, 1998 numbered 660. The
660 counts each street name account as one shareholder, when, in fact,
such an account may represent multiple owners. Taking into account such
multiple owners, the total number of shareholders approximated
8,000.
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Item 6. SELECTED FINANCIAL DATA.
Following is Selected Financial Data for the years ended December
31, 1997, 1996, 1995, 1994 and 1993. The data presented is in
thousands, except for per share data.
1997 1996 1995 1994 1993
--------- --------- --------- ------- -------
Earnings Data
- -------------
Revenues $ 1,496,758 1,374,881 1,202,936 952,583 797,234
Earnings from
continuing
operations $ 46,934 42,470 31,185 17,570 8,639
Discontinued
operations (9,322) (11,072) (26,046) 4,801 (809)
--------- --------- --------- ------- -------
Net earnings $ 37,612 31,398 5,139 22,371 7,830
========= ========= ========= ======= =======
Basic earnings per
share:
Earnings from
continuing
operations $ 2.36 2.14 1.58 .89 .44
Discontinued
operations $ (.47) (.56) (1.32) .24 (.04)
Net earnings $ 1.89 1.58 .26 1.13 .40
Diluted earnings
per share:
Earnings from
continuing
operations $ 2.36 2.14 1.57 .89 .44
Discontinued
operations $ (.47) (.56) (1.31) .24 (.04)
Net earnings $ 1.89 1.58 .26 1.13 .40
Cash dividends $ - - - - -
Balance Sheet Data
- ------------------
Total assets $ 348,837 340,174 323,563 278,969 254,026
Long-term debt $ - 48,866 67,865 58,798 61,111
Shareholders' equity $ 215,792 176,932 145,369 138,877 116,503
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13
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of operations, year ended December 31, 1997 vs. year ended
December 31, 1996
- ------------------------------------------------------------------
Consolidated revenues from continuing operations advanced 9% over
the prior year. Operating profit margin from continuing operations was
5.3% in 1997 compared to 5.4% in 1996.
Beginning in 1997 the Company is separating its Technical Services
Segment into two new segments, Technical Services and Information
Technology Services, reflecting the growth in importance of the
Information Technology Services business to the Company. Prior periods
have been restated accordingly.
Technical Services' revenues from continuing operations, which in
1997 represented 62% of the Company's consolidated revenues from
continuing operations, increased 1% from the prior year. Technical
Services' growth in project and managed staffing revenue during the year
was driven primarily by strength in the aircraft/ aerospace and
electronics markets offset by lower revenue from telecommunications.
Technical Services staffing revenue growth was offset by weakness in the
Company's engineering business, which is focused primarily on the
petrochemical sector and the impact of the divestiture of non-strategic
operations including the Company's aircraft maintenance staffing
business, wastewater treatment business and the light industrial
staffing operations of the Company's United Kingdom based subsidiary.
The annualized revenue from divested operations totaled approximately
$40 million.
Operating profit margins for Technical Services were 4.5% in 1997
compared to 5.1% in 1996. The decline in operating margins primarily
reflects the weakness in the Company's engineering business. Technical
Services' operating profit in 1997 included an approximately $2 million
pre-tax gain, recorded in the third quarter, for the divestiture of the
non-strategic operations. The after tax impact on earnings from
continuing operations of the gain was approximately $300,000 and
includes a charge of approximately $600,000 for the minority interests'
participation in the gain. Technical Services operating profit in 1996
included an approximately $2 million pre-tax favorable adjustment,
recorded in the third quarter, resulting from an annual actuarial study
of the Company's workers compensation liabilities.
Information Technology Services segment revenue, which represented
19% of the Company s consolidated revenues, grew 35% over the prior year
in response to the continued strong demand for information technology
professionals throughout American business. Operating profit margins for
Information Technology Services were 7.5% in 1997 compared to 7.2% in
1996. All of the growth in the Company's Information Technology
Services segment to date has been generated internally.
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Each of the Technical Services segment's and Information Technology
Services segment's many contracts is individually price negotiated, and
as a result the price-to-direct cost mix is constantly changing. The
cost structure of both segments is generally variable. In periods of
substantial increases in revenues, operating profit margins can widen
because the segments can take advantage of certain
economies of scale in the support cost structure. Conversely, in
periods of decline in demand, operating results can deteriorate quickly
because realization of cost savings typically lags implementation of
downsizing and cost reduction programs.
The Company's Temporary Services segment operates under the name of
Todays Temporary. The segment's revenues, which in 1997 represented 13%
of the Company's consolidated revenue, grew 17% over the prior year in
response to continued strong demand for office/clerical temporary
services. As a result, operating profit margins for Temporary Services
were 5.8% in 1997 compared to 5.2% in 1996. The Temporary Services
segment is not capital intensive.
Management Recruiters International's revenues, which in 1997
represented 6% of consolidated revenues, grew 18% over the prior year in
response to continued strong demand for middle management search and
recruiting services. Operating profit margins for Management
Recruiters were 18.2% in 1997 compared to 13.9% in 1996 due to the
strong demand for search and recruiting services and performance
improvements at the company-owned operations. The segment is generally
not price sensitive and it is not capital intensive.
At the end of 1995 the Company adopted a plan to dispose of the
automotive manufacturing technology division of a subsidiary. A portion
of that division was liquidated and the other portion sold.
During 1996 the Company investigated strategic alternatives for the
automotive developmental engineering division of a subsidiary, and at
the end of 1996 adopted a plan to dispose of that division. During 1997
the Company attempted to sell this division but was unsuccessful due to
deteriorating market conditions. As a consequence, the Company
undertook to liquidate the division by winding down contracts with
customers and disposing of assets. Liquidation of the division was
substantially complete at the end of 1997 and will be completed in 1998.
Fourth quarter 1996 discontinued operations included a reserve
of $16 million ($11 million after taxes) for estimated losses on
discontinuing the automotive developmental engineering division and
for estimated losses from operations of that discontinued business.
Offsetting the fourth quarter 1996 reserve was a gain of $7 million
($5 million after taxes) resulting from revisions of certain reserves
set aside at the end of 1995 for estimated losses associated with
discontinuing the manufacturing technology division. In the fourth
quarter 1997, an addition to the loss reserve for discontinued
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operations of $14 million ($9 million after taxes) was recorded. This
adjustment primarily results from an additional reserve related to a
major automotive developmental engineering contract on which work was
terminated in late 1996. Negotiations to settle this project have
become protracted as the dispute between the parties intensified around
the end of 1997. The adjustment also includes additional reserves for
operating losses through the final wind-down of the businesses.
Interest expense for 1997 decreased as the year progressed because
of reduced levels of debt outstanding due to the cash flow generated by
the Company's operations.
Full year 1997 results reflect a credit of $2 million recorded in
the third quarter from the reduction of income tax reserves no longer
required.
The Company recognizes the need to ensure that its operations will
not be adversely impacted by Year 2000 software failures. Software
failures due to processing errors potentially arising from calculations
using the Year 2000 date are a known risk. The Company is in the
process of conducting a comprehensive review of its computer systems to
identify the systems that could be affected by the Year 2000 issue. The
Company presently believes that, with modifications to existing software
and converting to new software, the Year 2000 problem will not pose
significant operational problems for the Company's computer systems as
so modified and converted. However, if such modifications
and conversions are not completed on a timely basis, the Year 2000
problem may have a material adverse impact on the operations of the
Company. The costs of the modifications are not expected to have a
material adverse effect on the results of operations or liquidity of the
Company.
Results of Operations, year ended December 31, 1996 vs. year ended
December 31, 1995
- ------------------------------------------------------------------
Consolidated revenues from continuing operations advanced 14% over
the prior year, and operating profit margins from continuing operations
improved to 5.4% from 4.6% in 1995.
Technical Services' revenues from continuing operations, which in
1996 represented 67% of the Company's consolidated revenues from
continuing operations, grew 12% over the prior year. The segment's
profit margins from continuing operations were 5.1% in 1996 compared
with margins from continuing operations of 4.3% in 1995.
Technical Services' growth in managed staffing slowed in 1996 from
1995 primarily because the Company elected not to take large volume, low
margin managed staffing contracts, but rather participated in those
managed staffing contracts where higher value-added content provided
better margins.
<PAGE>
16
Growth in demand in the aircraft/aerospace and electronics markets
continued at high levels in 1996, while chemicals and petrochemicals
demand flattened around mid-1996 and telecommunications declined late in
the year.
Third quarter 1996 Technical Services results from continuing
operations included an approximately $2 million pre-tax favorable
adjustment based on an annual actuarial study of the Company's workers
compensation liabilities. In 1995 there was a comparable adjustment
reflected in the third quarter for approximately $1 million.
Information Technology Services' revenues, which in 1996
represented 15% of the Company's consolidated revenues from continuing
operations, grew 21% over the prior year. The segment's profit margins
were 7.2% in 1996 compared to 5.7% in 1995.
The Company's Temporary Services segment s revenues, which in 1996
represented 12% of the Company's consolidated revenues, grew 15% over
the prior year in response to continued strong demand for office/
clerical temporary services. Operating profit margins for Temporary
Services were 5.2% in 1996 compared with 5.1% in 1995.
Management Recruiters' revenues, which in 1996 represented 6% of
consolidated revenues, grew 18% over the prior year in response to
strong demand for middle management search and recruiting services.
Operating profit margins for Management Recruiters were 13.9% in 1996
compared with 15.0% in 1995.
Fourth quarter 1996 discontinued operations included a reserve of
$16 million ($11 million after taxes) for estimated losses on
discontinuing the automotive developmental engineering division and for
estimated anticipated losses from operations of that discontinued
business. Offsetting the reserve was a gain of $7 million ($5 million
after taxes) resulting from revisions of certain reserves set aside at
the end of 1995 for estimated losses associated with discontinuing the
manufacturing technology division. In this latter instance, demand for
services recovered in 1996 substantially faster and stronger than
anticipated and costs associated with a specialized leased facility were
less than expected. Fourth quarter 1995 losses from discontinued
operations included a reserve of $23 million ($16 million after taxes)
for estimated losses on discontinuing the automotive manufacturing
technology division and for estimated losses from operations of the
discontinued business from the beginning of 1996 until the then
estimated dates of final termination or sale. As noted above, this
reserve was revised.
Inflation
- ---------
The Technical Services, Information Technology Services and
Temporary Services business segments' services are priced generally in
close relationship with direct labor costs. Management Recruiters'
<PAGE>
17
middle management search services are priced as a function of salary
levels of job candidates. In recent years inflation has not been a
meaningful factor.
Liquidity and Capital Resources
- -------------------------------
Expansions and contractions in the levels at which the Company's
businesses operate directly affect consolidated working capital, which
in turn has a direct relationship to total capital employed because of
the high concentration of total assets represented by current assets.
Working capital, associated with continuing operations, increased in
1997 primarily because of the higher levels of business at which the
Company was operating. The ratio of current assets to current
liabilities was 2.4 to 1, 2.7 to 1, and 2.5 to 1 as of December 31 1997,
1996, and 1995, respectively. The Company had no long term debt at
December 31, 1997. The ratio of long-term debt to total capital (long-
term debt plus shareholders equity) as of December 31, 1996 was 22% and
as of December 31, 1995 was 32%.
The Company's main sources of liquidity have been from operations
and from borrowings, including a revolving credit agreement and short-
term lines of credit with banks. The revolving credit agreement
provides for borrowings of up to $100 million. Since the revolving
credit agreement and short-term lines of credit are all priced at
floating rates of interest, the Company would be subjected to market
risks as interest rates change. Considering the most restrictive of the
limitations placed on bank borrowings by the agreements, the available
borrowing capacity to the Company under the revolving credit agreement
(considering that there were no borrowings outstanding as of December,
31, 1997) was $100 million. These sources have been adequate to support
growth opportunities in the Company's businesses. The Company is
considering a change to its revolving credit agreement to increase
maximum borrowings permitted and reduce the cost structure and simplify
the covenants to reflect current market conditions.
The Company does not have any off-balance sheet financial
instruments or derivatives.
Current assets represent a high portion of consolidated total
assets and are an important source of liquidity. This source could be
tapped voluntarily by reducing the volume of business accepted, thereby
turning a portion of working capital into cash. Similarly, when the
company s business levels contract, such as during periods of economic
decline, a portion of working capital is turned into cash. The Company
believes that the public and private debt and equity markets would be
currently available as sources of additional capital.
New Accounting Standards
- ------------------------
In June, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131, Disclosures about
<PAGE>
18
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.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
See discussion on Liquidity and Capital Resources in Item 7.
Forward-looking Information
- ---------------------------
Certain information in this annual report, including Management's
Discussion and Analysis of Financial Condition and Results of Operations
and Quantitative and Qualitative Disclosures About Market Risk, contains
forward-looking statements as such term is defined in Section 27A of the
Securities Act and Section 21E of the Exchange Act. Certain forward-
looking statements can be identified by the use of forward-looking
terminology such as, "believes," "expects," "may," "will," "should,"
"seeks," "approximately," "intends," "plans," "estimates," or
"anticipates" or the negative thereof or other comparable terminology,
or by discussions of strategy, plans or intentions. Forward-looking
statements involve risks and uncertainties that could cause actual
results to differ materially from those in the forward-looking
statements. These include risks and uncertainties 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, unforeseen
events associated with the disposition of discontinued operations and
delays or unexpected costs in making modifications to existing software
and converting to new software to resolve issues related to Year 2000.
Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak
only as of the date hereof. The Company assumes no obligation to update
such information.
<PAGE>
19
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
CDI CORP. AND SUBSIDIARIES
Consolidated Statements of Earnings
Years ended December 31, 1997, 1996 and 1995
(In thousands, except per share data)
1997 1996 1995
--------- --------- ---------
Revenues $ 1,496,758 1,374,881 1,202,936
Cost of services 1,144,061 1,062,409 938,680
--------- --------- ---------
Gross profit 352,697 312,472 264,256
Operating and administrative costs 273,579 238,777 208,786
--------- --------- ---------
Operating profit 79,118 73,695 55,470
Interest expense 2,337 3,451 3,603
--------- --------- ---------
Earnings from continuing operations
before income taxes and minority
interests 76,781 70,244 51,867
Income taxes 28,652 27,607 20,562
--------- --------- ---------
Earnings from continuing operations
before minority interests 48,129 42,637 31,305
Minority interests 1,195 167 120
--------- --------- ---------
Earnings from continuing operations 46,934 42,470 31,185
Discontinued operations (9,322) (11,072) (26,046)
--------- --------- ---------
Net earnings $ 37,612 31,398 5,139
========= ========= =========
Basic earnings per share:
Earnings from continuing
operations $ 2.36 2.14 1.58
Discontinued operations $ (.47) (.56) (1.32)
Net earnings $ 1.89 1.58 .26
Diluted earnings per share:
Earnings from continuing
operations $ 2.36 2.14 1.57
Discontinued operations $ (.47) (.56) (1.31)
Net earnings $ 1.89 1.58 .26
See accompanying notes to financial statements.
<PAGE>
20
CDI CORP. AND SUBSIDIARIES
Consolidated Statements of Retained Earnings
Years ended December 31, 1997, 1996 and 1995
(In thousands)
1997 1996 1995
------- ------- -------
Balance at beginning of year $ 162,669 131,271 126,132
Net earnings 37,612 31,398 5,139
------- ------- -------
Balance at end of year $ 200,281 162,669 131,271
======= ======= =======
See accompanying notes to financial statements.
<PAGE>
21
CDI CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1997 and 1996
(In thousands, except share data)
Assets 1997 1996
- ------ ------- -------
Current assets:
Cash $ 6,998 6,066
Accounts receivable, less allowance for
doubtful accounts of $4,995-1997;
$4,094-1996 259,415 233,455
Prepaid expenses 3,980 3,908
Deferred income taxes 6,990 7,288
Net assets of discontinued operations 12,202 37,257
------- -------
Total current assets 289,585 287,974
Fixed assets, at cost:
Computers 41,963 34,526
Equipment and furniture 26,127 26,119
Leasehold improvements 8,015 8,151
------- -------
76,105 68,796
Accumulated depreciation 49,718 43,292
------- -------
Net fixed assets 26,387 25,504
Deferred income taxes 5,759 4,180
Goodwill and other intangible assets, net 16,220 15,611
Other assets 10,886 6,905
------- -------
$ 348,837 340,174
======= =======
<PAGE>
22
CDI CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1997 and 1996
(In thousands, except share data)
Liabilities and Shareholders' Equity 1997 1996
- ------------------------------------ ------- -------
Current liabilities:
Obligations not liquidated because of
outstanding checks $ 13,139 6,834
Accounts payable 25,127 12,423
Withheld payroll taxes 5,256 4,950
Accrued compensation and related costs 52,650 57,606
Other accrued expenses 18,933 18,031
Currently payable income taxes 6,203 7,006
------- -------
Total current liabilities 121,308 106,850
Long-term debt - 48,866
Deferred compensation 10,127 6,934
Minority interests 1,610 592
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 19,950,800 shares - 1997;
19,853,983 shares - 1996 1,995 1,985
Class B common stock, $.10 par value -
authorized 3,174,891 shares; none issued - -
Additional paid-in capital 16,014 12,866
Retained earnings 200,281 162,669
Unamortized value of restricted stock issued (1,819) -
Less common stock in treasury, at cost -
27,265 shares - 1997; 24,921 shares - 1996 (679) (588)
------- -------
Total shareholders' equity 215,792 176,932
------- -------
$ 348,837 340,174
======= =======
See accompanying notes to financial statements.
<PAGE>
23
CDI CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1997, 1996 and 1995
(In thousands)
1997 1996 1995
------ ------ ------
Continuing Operations
Operating activities:
Earnings from continuing operations $ 46,934 42,470 31,185
Minority interests 1,195 167 120
Depreciation 10,427 9,198 6,882
Amortization of intangible assets 1,706 1,969 1,826
Gain on dispositions of businesses (938) - -
Income tax provision greater (less)
than tax payments (2,042) (12,778) 1,788
Change in assets and liabilities
net of effects from acquisitions:
(Increase) in accounts receivable (29,223) (21,060) (62,283)
Increase in payables and accrued
expenses 9,568 19,206 13,109
Other (2,216) 48 124
------ ------ ------
35,411 39,220 (7,249)
------ ------ ------
Investing activities:
Purchases of fixed assets (11,932) (13,545) (13,805)
Acquisitions net of cash acquired (3,270) (2,765) (103)
Dispositions of businesses 6,034 - -
Other 532 471 1,515
------ ------ ------
(8,636) (15,839) (12,393)
------ ------ ------
Financing activities:
Borrowings long-term debt 10,724 12,498 22,032
Payments long-term debt (59,590) (31,497) (12,965)
Obligations not liquidated
because of outstanding checks 6,305 (2,810) 2,911
Exercises of stock options 985 165 1,353
------ ------ ------
(41,576) (21,644) 13,331
------ ------ ------
Net cash flows from continuing
operations (14,801) 1,737 (6,311)
Net cash flows from discontinued
operations 15,733 (166) 5,646
------ ------ ------
Increase (decrease) in cash 932 1,571 (665)
Cash at beginning of year 6,066 4,495 5,160
------ ------ ------
Cash at end of year $ 6,998 6,066 4,495
====== ====== ======
See accompanying notes to financial statements.
<PAGE>
24
CDI CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Significant Accounting Policies
- -------------------------------
Principles of Consolidation - The consolidated financial statements
include the accounts of the Company and all majority-owned subsidiaries
after elimination of intercompany balances and transactions.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Fixed Assets - Depreciation of fixed assets is provided generally on the
straight-line method at rates calculated to provide for retirement of
assets at the end of their estimated useful lives. The annual rates
generally used are 25% for computers, 10% to 25% for equipment and
furniture and the lesser of the life of the lease or asset for lease-
hold improvements.
Goodwill and Other Intangible Assets - The net assets of subsidiaries
acquired, which were accounted for as purchases, have been reflected at
their fair values at dates of acquisition. The excess of acquisition
costs over such net assets is reflected in the consolidated balance
sheets as goodwill - $13,007,000 at December 31, 1997 and $13,500,000 at
December 31, 1996. Goodwill, net of amortization, of $11,927,000
at December 31, 1997 and $12,420,000 at December 31, 1996 is being
amortized on the straight-line method generally over twenty years.
Amortization for goodwill in 1997 and 1996 was $1,128,000 and
$1,036,000, respectively. Accumulated amortization was $4,895,000 as of
December 31, 1997 and $5,276,000 as of December 31, 1996.
Other intangible assets include agreements with individuals not to enter
into competing businesses with the Company, the value for an established
customer base, the value for acquired temporary services franchise
arrangements and capitalized software. Other intangible assets, net of
amortization, of $3,213,000 and $2,111,000 at December 31, 1997 and
1996, respectively, are being amortized on the straight- line method
over five to twelve years. Amortization for other intangible assets in
1997 and 1996 was $578,000 and $933,000, respectively. Accumulated
amortization was $3,786,000 as of December 31, 1997 and $3,541,000 as of
December 31, 1996.
Long-Lived Assets, Goodwill and Other Intangible Assets - The Company
reviews long-lived assets and certain identifiable intangibles to be
held, used or disposed of for impairment based on the undiscounted
<PAGE>
25
cash flows from the related assets whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable.
Obligations Not Liquidated Because of Outstanding Checks - The Company
manages its levels of cash in banks to minimize its cash balances. Cash
balances as reflected by banks are higher than the Company's book
balances because of checks in float throughout the banking system. Cash
is generally not provided to accounts until checks are presented for
payment. The differences in balances created by this float result in
negative cash balances in the Company's records. These negative
balances are reflected in current liabilities as Obligations Not
Liquidated Because of Outstanding Checks.
Stock-Based Compensation - The Company uses the intrinsic value based
method of accounting for stock options and similar instruments granted
to employees and directors. The Company has not adopted the fair value
based method as encouraged by Statement No. 123, Accounting for Stock-
Based Compensation, issued by the Financial Accounting Standards Board.
If the fair value based method of accounting were applied to grants of
stock options additional compensation cost would have been recorded.
Giving effect to such additional cost in 1997, 1996 and 1995, pro forma
earnings from continuing operations would have been $46,211,000,
$42,330,000, and $31,140,000, respectively and pro forma diluted
earnings per share from continuing operations would have been $2.32,
$2.13, and $1.57, respectively. The pro forma effects on basic earnings
per share from continuing operations would be similar.
In estimating the fair value of stock option grants in 1997, 1996 and
1995, the Black-Scholes option pricing model was used incorporating the
following weighted-average assumptions: 1997-risk free interest rate of
6.52%; expected life of 7 years; and expected volatility of 44%; 1996-
risk free interest rate of 6.26%; expected life of 4 years; and expected
volatility of 45%; 1995-risk free interest rate of 6.50%; expected life
of 4 years; and expected volatility of 43%. There was no expected
dividend yield assumed in any of the years.
Pro forma earnings from continuing operations presented above only
considers the impact of stock options granted in 1997, 1996 and 1995.
The full impact of compensation cost for those stock options under
Statement 123 is not reflected in the pro forma earnings because
compensation cost is recognized over the vesting periods of the options.
Furthermore, compensation cost for options granted prior to January 1,
1995 is not considered.
Income Taxes - The Company and its wholly-owned U.S. subsidiaries file a
consolidated federal income tax return. Deferred income taxes are
recorded for taxes estimated to be payable in future years based upon
differences between the financial reporting and tax bases of assets and
liabilities and for operating loss carryforwards. Deferred tax assets
<PAGE>
26
and liabilities are determined using enacted tax rates expected to apply
to taxable income in the years the temporary differences are expected to
be recovered or settled.
Fair Value of Financial Instruments - The carrying value of significant
financial instruments approximates fair value. The Company's financial
instruments are accounts receivable, accounts payable, accrued expenses
and long-term debt. The Company does not have any off-balance sheet
financial instruments or derivatives.
Per Share Data - In February, 1997 the Financial Accounting Standards
Board issued Statement No. 128, Earnings per Share. The provisions of
Statement No. 128 are effective for years ending after December 15,
1997. Accordingly, earnings per share data is presented in accordance
with those provisions and prior year data has been restated.
Earnings used to calculate both basic and diluted earnings per share for
all periods are the reported earnings in the Company's consolidated
statement of earnings. Because of the Company's capital structure, all
reported earnings pertain to common shareholders and no other assumed
adjustments are necessary.
The number of common shares used to calculate basic and diluted earnings
per share for 1997, 1996 and 1995 was determined as follows:
1997 1996 1995
---------- ---------- ----------
Basic
Average shares outstanding 19,904,888 19,825,900 19,753,813
Restricted shares issued
not vested (50,900) - -
---------- ---------- ----------
19,853,988 19,825,900 19,753,813
Diluted
Shares used for basic 19,853,988 19,825,900 19,753,813
Dilutive effect of stock
options 71,672 46,505 77,037
Dilutive effect of
restricted shares issued
not vested 3,581 - -
---------- ---------- ----------
19,929,241 19,872,405 19,830,850
Comprehensive Income - In June, 1997 the Financial Accounting Standards
Board issued Statement No. 130, Reporting Comprehensive Income.
Statement No. 130 requires that all items that are required to be
recognized under accounting standards as components of comprehensive
income be reported in a separate financial statement. The only
component of comprehensive income that applies to the Company for 1997,
1996 and 1995 is earnings as reported in the consolidated statement of
earnings. Accordingly, a separate financial statement reflecting
comprehensive income is not necessary.
<PAGE>
27
Accounts Receivable
- -------------------
The Company's principal asset is accounts receivable. Receivables
arise from services provided pursuant to contracts or agreements with
customers for such services. Historically, losses due to customers'
inability to comply with the payment terms of their contracts or
agreements with the Company have not been significant. The primary
users of the Company's services are large U.S. based industrial and
commercial concerns, many of which are Fortune 500 companies.
Accounts receivable as of December 31, 1997 for Technical Services,
Information Technology Services, Temporary Services and Management
Recruiters were $154,624,000, $67,145,000, $26,025,000 and $11,621,000,
respectively, and as of December 31, 1996 were
$149,330,000, $54,725,000, $20,281,000 and $9,119,000, respectively. As
of December 31, 1997 receivables from customers in the electronics/
information processing industries comprised approximately 25% of
consolidated receivables, and receivables from customers in the
aircraft/aerospace and hydrocarbon/petrochemical industries each
comprised approximately 15% of consolidated receivables. As of December
31, 1996 receivables from customers in the aircraft/aerospace and
electronics/information processing industries each comprised
approximately 20% of consolidated receivables, and receivables from
customers in hydrocarbon/petrochemical and telecommunications each
comprised approximately 15% of consolidated receivables. It is not
Company or industry practice to require collateral or other security for
receivables because of the nature of the customer base involved.
Long-term Debt
- --------------
Long-term debt at December 31, 1997 and 1996 was as follows
($000s):
1997 1996
------ ------
Notes payable to banks under revolving
credit agreement with interest at
5-7/8%-1996 $ - 42,000
Notes payable to banks under short-term
lines of credit with interest at 6-3/4%-
1996 - 4,700
Other - 2,166
------ ------
$ - 48,866
====== ======
A revolving credit agreement with a syndicate of banks provides for
borrowings up to $100 million through March 31, 1999. Borrowings
outstanding on March 31, 1999 may be converted into term debt which
would mature in quarterly installments payable over four years.
There was an initial one-time fee paid equal to 1/8% of the banks'
commitments and there is an annual facility fee equal to 3/10% of the
<PAGE>
28
banks' commitments. Interest rate alternatives are available whereby
the Company can elect to have interest be at either (i) rates quoted
competitively by the syndicate banks on a transactional basis with
borrowings awarded to the lowest bidder(s), (ii) rates quoted on the
Interbank Eurodollar Market ("LIBOR") (adjusted for reserve require-
ments) plus a LIBOR margin that can range from 1/2% to 1-1/2% depending
upon the ratio of all of the Company's borrowings to its cash flow, or
(iii) rates determined by the greater of either (a) the prime rate or
(b) the overnight Federal Funds rate plus 1/2%. The ratio for the LIBOR
margin is determined each quarter using borrowings outstanding at the
end of the quarter and cash flow for the four quarters then ended.
The resulting ratio is used to determine the applicable LIBOR margin for
the ensuing quarter.
Uncommitted short-term lines of credit with six banks are also
available under which interest rates are quoted on a transactional basis
and are related to the banks' costs of funds.
The revolving credit agreement places limitations on certain
transactions that include acquisition by the Company of its securities,
payment of cash dividends and investments in other businesses. In
addition, the credit agreement includes certain other requirements.
A consolidated current ratio of at least 1.5 is to be maintained.
Consolidated tangible net worth (total shareholders' equity less
goodwill and other intangible assets) shall be at least $70 million plus
35% of consolidated net earnings after December 31, 1992 ($106,523,000
as of December 31, 1997). If interest coverage (ratio
of operating profit to interest expense using the most recent four
quarters) is less than 1 to 1, the tangible net worth requirement is
increased by $5 million. The ratio of consolidated indebtedness for
borrowings to total capital (sum of consolidated current and long-
term debt, non-current deferred income taxes, minority interests and
tangible net worth) shall not exceed .60. The Company was in compliance
with the terms of the credit agreement through December 31, 1997.
Capital Stock
- -------------
Common stock and Class B common stock have equal rights except that
dividends, other than stock dividends, may be declared and paid on
common stock in excess of amounts declared and paid on Class B common
stock. The Class B common stock is convertible on a share-for-share
basis into common stock and Class B shares so converted shall be
cancelled.
At December 31, 1997, 1,428,833 shares of common stock were
reserved for issuance under the non-qualified stock option and stock
appreciation rights plan.
During the year ended December 31, 1997 there were 45,917 shares of
common stock issued upon the exercise of stock options granted under
<PAGE>
29
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 $5,000, additional paid-in capital was increased
by $1,076,000 and treasury stock was increased by $96,000.
During the year ended December 31, 1997, there were 50,900 shares
of restricted common stock issued to officers of the Company under their
employment agreements. Of these shares, 28,450 shares will vest over
periods of time ranging from three years to ten years. The remaining
22,450 shares will vest depending upon the percentage
achievement of predetermined goals covering periods of time ranging from
three years to five years. Shares which do not vest are forfeited.
The 28,450 shares that will vest over time have a fixed value of
$1,050,000, the market value of the shares when issued. The value for
the 22,450 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 December 31, 1997, these performance-based shares
were valued at $1,027,000. Of the total value of $2,077,000 ascribed to
these restricted shares as of December 31, 1997, $5,000 increased common
stock and $2,072,000 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 December 31, 1997,
$258,000 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, 200 shares of common stock held in treasury were
reissued. These shares had a cost of $5,000.
During the year ended December 31, 1996, 8,500 shares of common
stock were issued pursuant to the exercises of stock options under the
Company's non-qualified stock option and stock appreciation rights plan.
The issuance of these shares increased additional paid-in
capital by $165,000. In addition, 134 shares of common stock held in
treasury were reissued. These shares had a cost of $2,000 and their
reissuance reduced additional paid-in capital by that amount.
During the year ended December 31, 1995, 105,500 shares of common
stock were issued pursuant to the exercises of stock options under the
Company's non-qualified stock option and stock appreciation rights plan.
The issuance of these shares increased common stock by $11,000 and
additional paid-in capital by $1,342,000.
<PAGE>
30
Stock Plan
- ----------
Under the terms of a non-qualified stock option and stock
appreciation rights plan, options and stock appreciation rights to
purchase an aggregate of 1,428,833 shares of common stock may be granted
separately or in tandem to salaried employees, consultants and
directors. Stock appreciation rights may also be granted with respect
to outstanding options. Grants under the plan, except for grants to
certain directors who are not full-time employees and whose retainer
fees are paid via stock options, are determined by the Compensation and
Stock Option Committee appointed by the Board of Directors. Stock
options granted to directors in lieu of payment of fees in cash are not
significant. The price at which options or stock appreciation rights
may be exercised shall not be less than 50% of the market value per
share of the Company's common stock on the date of grant and, unless
otherwise determined by the Committee, options or rights granted under
the plan shall not be exercised after five years from date of grant.
The plan permits optionees to purchase stock via cash payment, the
delivery of shares of the Company's common stock in lieu of cash, or a
combination of both. Upon the exercise of stock appreciation rights,
the recipient of such rights will receive an amount equal to the excess
of the then market price of the shares subject to the rights over the
exercise price of the rights. The amount of such excess is payable
one-half in cash and one-half in shares of the common stock of the
Company, valued at the then market price. The exercise of one
alternative by a holder of a tandem grant also reduces the number of
shares then exercisable with respect to the other alternative.
During the years ended December 31, 1997, 1996 and 1995 options
were granted to purchase 422,700 shares, 40,000 shares and 36,700
shares, respectively, at weighted average option prices per share of
$35.69, $28.56 and $19.04, respectively. All such options granted have
option prices equal to the per share market price of the Company's
common stock on the dates of grant. Therefore, no compensation cost was
recognized for any of these options granted. No stock appreciation
rights were granted during any of these years.
During the years ended December 31, 1997, 1996 and 1995, stock
options were exercised for 45,917 shares, 8,500 shares and 105,500
shares, respectively, at weighted average option prices per share of
$13.08, $14.85 and $9.70, respectively. No stock appreciation rights
were exercised during the years ended December 31, 1997, 1996 and 1995.
During the years ended December 31, 1997, 1996 and 1995 stock
options lapsed or were forfeited for 20,333 shares, 6,750 shares and
128,000 shares, respectively, which had weighted average option prices
per share of $25.67, $17.73 and $10.58, respectively.
<PAGE>
31
At December 31, 1997, 1996, 1995 and 1994 options were outstanding
to purchase 535,400, 178,950, 154,200 and 351,000 shares of common
stock, respectively, at weighted average prices of $32.10, $17.83,
$14.88 and $11.32 per share, respectively. Options to purchase 73,010
shares, 67,200 shares and 40,250 shares were exercisable at December 31,
1997, 1996 and 1995, respectively, at weighted average prices of
$21.14, $17.17 and $11.60, respectively. No stock appreciation rights
were outstanding as of December 31, 1997, 1996, 1995 and 1994.
For options outstanding on December 31, 1997 option prices ranged
from $13.00 per share to $41.69 per share and the weighted average
remaining life for such options as of December 31, 1997 was
approximately 4.9 years.
<PAGE>
32
Income Taxes
- ------------
The provision for income taxes relating to continuing operations
for the years ended December 31, 1997, 1996 and 1995 was comprised of
the following ($000s):
Total Federal State Foreign
------- ------- ------ -------
1997
- ----
Current $ 30,062 23,986 4,066 2,010
Deferred (1,410) (1,258) (219) 67
------ ------ ----- -----
$ 28,652 22,728 3,847 2,077
====== ====== ===== =====
1996
- ----
Current $ 26,033 22,760 2,873 400
Deferred 1,574 1,124 535 (85)
------ ------ ----- -----
$ 27,607 23,884 3,408 315
====== ====== ===== =====
1995
- ----
Current $ 29,988 25,265 4,269 454
Deferred (9,426) (8,014) (1,413) 1
------ ------ ----- -----
$ 20,562 17,251 2,856 455
====== ====== ===== =====
The tax effects of the principal components creating net deferred
income tax assets as of December 31, 1997 and 1996 were as follows
($000s):
1997 1996
------ ------
Components creating deferred tax liabilities
Deferral of revenues and accounts receivable $ 6,951 7,237
Other 1,155 1,094
------ ------
8,106 8,331
Components creating deferred tax assets
Expenses not currently deductible (18,787) (17,656)
Intangible assets amortization (1,640) (1,746)
Other (432) (184)
Operating loss carryforwards - (303)
------ ------
(20,859) (19,889)
Valuation allowances 4 90
------ ------
$(12,749) (11,468)
====== ======
<PAGE>
33
The net change in the valuation allowances for the years ended
December 31, 1997 and 1996 was a decrease of $86,000 and $109,000,
respectively. In assessing the realizability of deferred tax assets,
the Company considers whether it is more likely than not that some
portion or all of the benefits of the deferred tax assets will not be
achieved. The ultimate realization of deferred tax assets is dependent
upon a number of things, including past and future taxable income.
Based upon the assessment of the prospects for achieving the benefits of
the deferred tax assets, net of existing valuation allowances, the
Company believes it is more likely than not that such benefits will be
realized.
The effective income tax rates relating to continuing operations
for the years ended December 31, 1997, 1996 and 1995 differed from the
applicable federal rate as follows:
1997 1996 1995
---- ---- ----
Federal rate 35% 35% 35%
State income taxes 3% 3% 4%
Expenses permanently nondeductible
for tax purposes 1% 1% 1%
Income tax reserve no longer required (3%) - -
Other 1% - -
--- --- ---
Effective income tax rate 37% 39% 40%
=== === ===
Retirement Plans
- ----------------
Trusteed contributory and non-contributory defined contribution
retirement plans have been established for the benefit of eligible
employees. Costs of the plans are charged to earnings and are based
on either a formula using a percentage of compensation or an amount
determined by the board of directors of a company limited to the amount
allowable for Federal income tax purposes. Costs of these plans are
funded. Charges to earnings for contributions to these retirement plans
for the years ended December 31, 1997, 1996 and 1995 were $3,718,000,
$2,444,000 and $2,337,000, respectively.
Except for retirement plans, the Company provides no other
postretirement benefits. Further, the Company does not provide
postemployment benefits.
Leases
- ------
Offices used for sales, recruiting and administrative functions and
facilities used for in-house engineering, design and drafting are
occupied under numerous leases which expire through 2011. In addition,
there are leases for computers and office equipment. Rentals under all
leases for the years ended December 31, 1997, 1996 and 1995 were
$21,650,000, $15,087,000 and $13,589,000, respectively.
<PAGE>
34
For periods after December 31, 1997, approximate minimum annual
rentals under non-cancelable leases aggregate $50,860,000 with rentals
of $14,027,000 due in 1998, $11,342,000 due in 1999, $7,899,000 due in
2000, $4,697,000 due in 2001 and $3,530,000 due in 2002.
Business Segments
- -----------------
Beginning with 1997 the Company is breaking out Information
Technology Services as a separate business segment. Previously the
operations of this segment had been included within the Technical
Services segment. Prior periods have been restated accordingly.
Technical Services - This segment provides principally technical
staffing supplying supplemental engineering and technical personnel to a
broad range of customers.
Information Technology Services - This segment provides information
technology staffing personnel to a broad range of customers.
Temporary Services - This segment provides temporary office,
clerical, legal and financial staffing personnel to a broad range of
commercial customers.
Management Recruiters - This segment provides principally a search
and recruiting service for permanent employment of management in many
fields including information technology, sales and sales management,
healthcare, accounting and finance. In addition, a range of management
staffing services is provided through several specialized divisions.
Business segment data for the years ended December 31, 1997, 1996
and 1995 follows ($000s):
1997 1996 1995
--------- --------- ---------
Revenues
- --------
Technical Services $ 927,609 920,955 819,923
Information Technology Services 285,105 211,766 174,605
Temporary Services 190,504 163,206 141,779
Management Recruiters 93,540 78,954 66,629
--------- --------- ---------
$ 1,496,758 1,374,881 1,202,936
========= ========= =========
Operating profit
- ----------------
Technical Services $ 41,653 47,322 34,964
Information Technology Services 21,454 15,216 9,991
Temporary Services 11,005 8,552 7,174
Management Recruiters 17,059 11,003 9,993
Corporate expenses (12,053) (8,398) (6,652)
--------- --------- ---------
$ 79,118 73,695 55,470
========= ========= =========
<PAGE>
35
1997 1996 1995
--------- --------- ---------
Identifiable assets
- -------------------
Technical Services $ 193,206 185,744 183,655
Information Technology Services 69,583 57,629 44,932
Temporary Services 40,855 33,690 30,418
Management Recruiters 25,682 20,370 11,961
Corporate 7,309 5,484 4,412
--------- --------- ---------
336,635 302,917 275,378
Net assets of discontinued
operations 12,202 37,257 48,185
--------- --------- ---------
$ 348,837 340,174 323,563
========= ========= =========
Capital additions
- -----------------
Technical Services $ 7,188 6,234 7,768
Information Technology Services 1,093 1,368 2,181
Temporary Services 2,109 1,426 3,065
Management Recruiters 1,021 4,339 696
Corporate 521 178 95
--------- --------- ---------
$ 11,932 13,545 13,805
========= ========= =========
Depreciation expense
- --------------------
Technical Services $ 6,490 6,036 4,257
Information Technology Services 1,260 1,044 1,246
Temporary Services 1,434 1,211 784
Management Recruiters 1,065 847 512
Corporate 178 60 83
--------- --------- ---------
$ 10,427 9,198 6,882
========= ========= =========
Operating profit in 1997 for Technical Services included an
approximately $2 million pre-tax gain for the divestiture of non-
strategic operations including the Company's aircraft maintenance
staffing business, wastewater treatment business and the light
industrial staffing operations of the Company's United Kingdom based
subsidiary. The after-tax impact on earnings from continuing operations
of the gain was approximately $300,000 and includes a charge of
approximately $600,000 for the minority interests' participation in the
gain.
<PAGE>
36
Discontinued Operations
- -----------------------
On December 30, 1996 the Company adopted a plan to dispose of the
automotive developmental engineering division of a subsidiary. This
division provided developmental and experimental engineering and design
of automotive vehicles, components and assembly processes.
On December 28, 1995 the Company adopted a plan to dispose of the
automotive manufacturing technology division of a subsidiary. This
division provided production quality prototypes and production tooling
fixtures.
Each of these divisions had been a separate line of business within
the Technical Services segment and, accordingly, each has been
classified as a discontinued operation in the Company's reported results
of operations for each of the years reported upon.
The production tooling fixtures portion of the automotive
manufacturing technology division was liquidated and the portion of the
manufacturing technology division that provided production quality
prototypes was sold. During 1997 the Company attempted to sell the
automotive developmental engineering division but was unsuccessful due
to deteriorating market conditions. As a consequence, the Company
undertook to liquidate the division by winding down contracts with
customers and disposing of assets. Liquidation of the division was
substantially complete at the end of 1997 and will be completed in 1998.
Summary results of the discontinued operations for the years ended
December 31, 1997, 1996 and 1995 are as follows ($000s):
1997 1996 1995
------ ------- -------
Revenues:
Developmental engineering $ - 79,273 67,517
Manufacturing technology - - 65,588
------ ------- --------
$ - 79,273 133,105
Operating profit (loss):
Developmental engineering $ - (7,212) 367
Manufacturing technology - - (13,525)
------ ------- -------
- (7,212) (13,158)
Interest expense:
Developmental engineering - 749 851
Manufacturing technology - - 1,007
------ ------- -------
- 749 1,858
<PAGE>
37
1997 1996 1995
------ ------- -------
Losses before income taxes and
before provisions related to
phase-out periods and disposals
and subsequent adjustments of
such provisions:
Developmental engineering - (7,961) (484)
Manufacturing technology - - (14,532)
------ ------- -------
- (7,961) (15,016)
Income taxes:
Developmental engineering - (2,826) 38
Manufacturing technology - - (4,966)
------ ------- -------
- (2,826) (4,928)
Losses before provisions
related to phase-out periods
and disposals and subsequent
adjustments of such provisions:
Developmental engineering - (5,135) (522)
Manufacturing technology - - (9,566)
------ ------- -------
- (5,135) (10,088)
Estimated losses during phase-out
periods:
Developmental engineering,
net of income tax benefits
of ($680) - (1,264) -
Manufacturing technology,
net of income tax benefits
of ($1,991) - - (3,698)
Estimated losses on disposals of
operations:
Developmental engineering,
net of income tax benefits of
($4,146) - (9,517) -
Manufacturing technology,
net of income tax benefits
of ($4,696) - - (12,260)
Adjustments of prior years' provisions
related to phase-out periods and
disposals, net of income taxes of
($4,998)-1997 and $2,608-1996 (9,322) 4,844 -
------ ------ ------
$ (9,322) (11,072) (26,046)
====== ====== ======
<PAGE>
38
Adjustments were made to prior year provisions in 1997 primarily
for an additional reserve related to a major automotive developmental
engineering contract on which work was terminated in late 1996.
Negotiations to settle this project have become protracted as the
dispute between the parties intensified around the end of 1997. The
adjustments also include additional reserves for operating losses
through the final wind-down of the businesses. Adjustments were made in
1996 related to manufacturing technology because demand for services
recovered substantially faster and stronger than anticipated and costs
associated with a specialized leased facility were substantially less
than previously anticipated.
Summary balance sheet accounts of the discontinued operations as of
December 31, 1997 and 1996 are as follows ($000s):
1997 1996
------ ------
Working capital $ (3,909) 24,283
Net fixed assets 6,570 7,171
Other assets 84 87
Deferred income taxes 9,457 5,716
------ ------
$ 12,202 37,257
====== ======
Net assets associated with the developmental engineering division
as of December 31, 1997 and 1996 were approximately $9 million and $23
million, respectively, and net assets for the manufacturing technology
division were approximately $3 million and $14 million, respectively.
Interest expense was allocated to the discontinued operations based
upon their proportionate share of consolidated net assets during each of
the years.
Contracts with customers for the discontinued operations included
fixed price based contracts. Accordingly, revenues were recognized
using the percentage of completion method of accounting for those
contracts.
Effective income tax rates for the discontinued operations differed
from the federal statutory rate primarily because of expenses
permanently non-deductible for tax purposes.
Legal Proceedings and Claims
- ----------------------------
There are litigation and other claims pending which arise in the
ordinary course of business. There are substantive defenses and/or
insurance available such that the outcome of these items should not have
a material adverse effect on the financial condition or results
of operations of the Company.
<PAGE>
39
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of CDI Corp.:
We have audited the accompanying consolidated balance sheets of CDI
Corp. and subsidiaries as of December 31, 1997 and 1996 and the related
consolidated statements of earnings, retained earnings, and cash flows
for each of the years in the three-year period ended December 31, 1997.
In connection with our audits of the consolidated financial statements,
we also have audited the related financial statement schedule listed
under the heading "Financial statement schedules" on page 41. These
consolidated financial statements and financial statement schedule are
the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of CDI Corp. and subsidiaries as of December 31, 1997 and 1996 and the
results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1997, in conformity with
generally accepted accounting principles. Also in our opinion, the
related financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
Philadelphia, PA /s/ KPMG Peat Marwick LLP
February 19, 1998 ---------------------------------
KPMG Peat Marwick LLP
<PAGE>
40
CDI CORP. AND SUBSIDIARIES
Quarterly Earnings
Years ended December 31, 1997 and 1996
(In thousands, except per share data)
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- ---------
1997
- ----
Revenues $ 360,461 378,144 383,073 375,080 1,496,758
Gross profit 81,942 89,022 89,491 92,242 352,697
Operating profit 18,792 21,009 22,079 17,238 79,118
Interest expense 704 788 694 151 2,337
Earnings from
continuing operations 10,741 11,915 13,775 10,503 46,934
Discontinued operations - - - (9,322) (9,322)
Net earnings $ 10,741 11,915 13,775 1,181 37,612
Basic earnings per share:
Earnings from
continuing operations $ .54 .60 .69 .53 2.36
Discontinued operations $ - - - (.47) (.47)
Net earnings $ .54 .60 .69 .06 1.89
Diluted earnings
per share:
Earnings from
continuing operations $ .54 .60 .69 .53 2.36
Discontinued operations $ - - - (.47) (.47)
Net earnings $ .54 .60 .69 .06 1.89
1996
- ----
Revenues $ 330,808 338,846 353,676 351,551 1,374,881
Gross profit 73,879 76,325 82,170 80,098 312,472
Operating profit 15,525 18,661 22,365 17,144 73,695
Interest expense 864 997 900 690 3,451
Earnings from
continuing operations 8,733 10,564 12,818 10,355 42,470
Discontinued operations (237) (1,139) (2,579) (7,117) (11,072)
Net earnings $ 8,496 9,425 10,239 3,238 31,398
Basic earnings per share:
Earnings from
continuing operations $ .44 .53 .65 .52 2.14
Discontinued operations $ (.01) (.06) (.13) (.36) (.56)
Net earnings $ .43 .48 .52 .16 1.58
Diluted earnings
per share:
Earnings from
continuing operations $ .44 .53 .65 .52 2.14
Discontinued operations $ (.01) (.06) (.13) (.36) (.56)
Net earnings $ .43 .47 .52 .16 1.58
<PAGE>
41
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
Part III of this form is omitted by the Registrant since it will
file with the Commission a definitive proxy statement pursuant to
Regulation 14A involving the election of directors not later than 120
days after the close of the fiscal year.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K.
(a) Documents filed as part of this report
Financial statements
The consolidated balance sheets of the Registrant as of
December 31, 1997 and 1996, the related consolidated
statements of earnings, retained earnings and cash flows
for each of the years ended December 31, 1997, 1996 and
1995, the footnotes thereto and the report of KPMG Peat
Marwick LLP, independent auditors, are filed herein.
Financial statement schedules
Schedule submitted for the years ended December 31, 1997,
1996 and 1995.
II - Valuation and Qualifying Accounts
<PAGE>
42
(b) Registrant has not filed a Form 8-K during the quarter ended
December 31, 1997.
(c) 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
<PAGE>
43
the Registrant on April 1, 1997 in connection
with 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
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, incorporated herein by
reference to Registrant's report on Form 10-Q for
the quarter ended September 30, 1997. (File No.
1-5519). (Constitutes a management contract or
compensatory plan or arrangement)
h. Supplemental Retirement Agreement dated as of
April 7, 1997 by and between Registrant and
Mitchell Wienick. (Constitutes a management
contract or compensatory plan or arrangement)
i. Employment Agreement dated October 29, 1997,
Restricted Stock Agreement dated November 10, 1997
and Non-Qualified Stock Option Agreement dated
November 10, 1997 each by an between Registrant
and John D. Sanford. (Constitutes a management
contract or compensatory plan or arrangement)
j. Supplemental Retirement Agreement dated as of
November 18, 1997 by and between Registrant and
Robert J. Mannarino. (Constitutes a management
contract or compensatory plan or arrangement)
k. Supplemental Retirement Agreement dated as of
November 20, 1997 by and between Registrant and
John D. Sanford. (Constitutes a management
contract or compensatory plan or arrangement)
l. Consulting Agreement dated as of December 3, 1997
by and between Registrant and Edgar D. Landis.
(Constitutes a management contract or compensatory
plan or arrangement)
21. Subsidiaries of the Registrant.
23. Consents of experts and counsel.
27. Financial Data Schedule.
44
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
- -------------------------------------
By: /s/ Mitchell Wienick
- -------------------------------------
Mitchell Wienick, President
and Chief Executive Officer
Date: February 26, 1998
- -------------------------------------
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
By: /s/ Mitchell Wienick
- -------------------------------------
Mitchell Wienick
President, Chief Executive
Officer and Director
(Principal Executive Officer)
Date: February 26, 1998
- -------------------------------------
By: /s/ John D. Sanford
- -------------------------------------
John D. Sanford
Executive Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
Date: February 26, 1998
- -------------------------------------
<PAGE>
45
By: /s/ Walter E. Blankley
- -------------------------------------
Walter E. Blankley
Director
Date: February 27, 1998
- -------------------------------------
By: /s/ Walter R. Garrison
- -------------------------------------
Walter R. Garrison
Director
Date: February 26, 1998
- -------------------------------------
By: /s/ Christian M. Hoechst
- -------------------------------------
Christian M. Hoechst
Director
Date: February 27, 1998
- -------------------------------------
By: /s/ Lawrence C. Karlson
- -------------------------------------
Lawrence C. Karlson
Director
Date: February 26, 1998
- -------------------------------------
By: /s/ Edgar D. Landis
- -------------------------------------
Edgar D. Landis
Director
Date: February 27, 1998
- -------------------------------------
<PAGE>
46
By: /s/ Allen M. Levantin
- -------------------------------------
Allen M. Levantin
Director
Date: February 27, 1998
- -------------------------------------
By: /s/ Alan B. Miller
- -------------------------------------
Alan B. Miller
Director
Date: March 4, 1998
- -------------------------------------
By: /s/ Barton J. Winokur
- -------------------------------------
Barton J. Winokur
Director
Date: February 26, 1998
- -------------------------------------
<PAGE>
47
Schedule II
-----------
CDI CORP. AND SUBSIDIARIES
Valuation and Qualifying Accounts
(Allowance for Uncollectible Receivables)
Years ended December 31, 1997, 1996 and 1995
Uncollectible
Additions receivables
Balance at charged written off, Balance
beginning to net of Other at end
of year earnings recoveries changes of year
---------- --------- ------------- ---------- ---------
December 31, 1997 $ 4,094,000 3,249,000 2,348,000 - 4,995,000
December 31, 1996 $ 3,520,000 1,642,000 1,068,000 - 4,094,000
December 31, 1995 $ 2,785,000 2,489,000 1,754,000 - 3,520,000
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CDI CORP.
EXHIBITS
to
Annual Report
FORM 10-K
Year ended December 31, 1997
Under
SECURITIES EXCHANGE ACT OF 1934
<PAGE>
48
INDEX TO EXHIBITS
Number Exhibit 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 on April 1,
1997 in connection with 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
arrangement)
49
INDEX TO EXHIBITS
Number Exhibit Page
- ------- ------------------------------------------------------- ----
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,
incorporated herein by reference to Registrant's report
on Form 10-Q for the quarter ended September 30, 1997.
(File No. 1-5519). (Constitutes a management contract
or compensatory plan or arrangement)
h. Supplemental Retirement Agreement dated as of April 7, 50
1997 by and between Registrant and Mitchell Wienick
(Constitutes a management contract or compensatory plan
or arrangement)
i. Employment Agreement dated October 29, 1997, Restricted 55
Stock Agreement dated November 10, 1997 and Non-
Qualified Stock Option Agreement dated November 10,
1997 each by an between Registrant and John D. Sanford.
(Constitutes a management contract or compensatory plan
or arrangement)
j. Supplemental Retirement Agreement dated as of November 79
18, 1997 by and between Registrant and Robert J.
Mannarino. (Constitutes a management contract or
compensatory plan or arrangement)
k. Supplemental Retirement Agreement dated as of November 82
20, 1997 by and between Registrant and John D. Sanford.
(Constitutes a management contract or compensatory
plan or arrangement)
l. Consulting Agreement dated as of December 3, 1997 by 85
and between Registrant and Edgar D. Landis.
(Constitutes a management contract or compensatory plan
or arrangement)
21. Subsidiaries of the Registrant. 92
23. Consents of experts and counsel. 94
27. Financial Data Schedule. 95
<PAGE>
50
SUPPLEMENTAL RETIREMENT AGREEMENT
This SUPPLEMENTAL RETIREMENT AGREEMENT (the "Agreement") is entered
into as of this 7th day of April, 1997 between CDI Corp., a Pennsylvania
corporation (the "Company"), and Mitchell Wienick ("Wienick ).
Background
The Company and Wienick have entered into an Employment Agreement
dated March 11, 1997 (the Employment Agreement ), pursuant to which
Wienick will assume the position, and duties, of President and Chief
Executive Officer of the Company. Under Section 5(e) of the Employment
Agreement, Wienick is entitled to participate in the employee benefit
programs made available by the Company to its senior executive officers
from time to time.
Two of those programs, the CDI Corporation Retirement Plan (the
Retirement Plan ), and the CDI Corporation Employee Savings Plan (the
"401(k) Plan") require, among other things, one year of service as a
precondition of eligibility to participate. Under the terms of those
Plans, Wienick will be eligible to participate in the Retirement Plan on
January 1, 1998 and in the 401(k) Plan on May 1, 1998.
Through this Agreement, the Company intends to provide Wienick with
a supplemental retirement benefit substantially similar to the benefit
Wienick would have received with respect to 1997 services if
he had been immediately eligible to participate in the Retirement Plan
and the 401(k) upon assuming his duties under the Employment Agreement.
For the years 1998 and following, the one year of service rule will have
no adverse effect on Wienick s benefits under either Plan.
Therefore, intending to be legally bound, the Company and Wienick
agree as follows:
Agreement
1. Establishment of Account. The Company will establish a
bookkeeping account (the Account ) that will be used to calculate the
supplemental retirement benefit due to Wienick under the terms of this
Agreement. The Account will be used solely as a device to measure and
determine the amount of the supplemental retirement benefits to be paid
to Wienick as specified herein. The Account shall not constitute or be
treated as a trust fund of any kind. The Company shall be under no
obligation to segregate any of its assets for purposes of the Account.
Any amounts at any time credited to the Account shall be and remain the
sole property of the Company. Wienick will not have by virtue of the
Account any ownership interest or rights of any nature with respect to
specific assets of the Company. Wienick s rights shall be limited to
those of a recipient of an unfunded, unsecured promise to pay amounts
<PAGE>
51
in the future and his position with respect to the amounts credited to
his Account shall be that of a general unsecured creditor of the
Company.
2. Credits to the Account. The account will be divided into a
Retirement Sub-Account and a 401(k) Sub-Account. The amount to be
credited to the Account will be the total of the Contribution Credits
and the Earnings Credits to those Sub-Accounts, determined as follows:
(a) Contribution Credits:
--------------------
(1) Retirement Sub-Account. The Company will credit to
the Retirement Sub-Account the amount that would have been contributed
on Wienick s behalf under the Retirement Plan for the years 1997 if
Wienick had been eligible to participate in that Plan upon assuming his
duties under the Employment Agreement. That credit will be made at the
time the Company otherwise makes its 1997 contribution to the Retirement
Plan.
(2) 401(k) Sub-Account. By entering into this Agreement,
Wienick agrees to accept a reduction of his otherwise payable 1997
compensation in the amount of $9500. That reduction will be reflected
ratably over the number of pay periods beginning on or after the date
this Agreement is signed by Wienick. In return, the Company agrees to
credit that amount, plus an amount equal to the amount of Company
matching contributions that would have been made under the 401(k) Plan
on Wienick's behalf for 1997 if the $9500 reduction in his compensation
had been contributed to the 401(k) Plan during 1997, to the 401(k) Plan
during 1997, to the 401(k) Sub-Account. That credit will be deemed to
have been made ratably over the portion of 1997 beginning on the date
Wienick assumes his duties under the Employment Agreement.
(b) Earnings Credits:
----------------
(1) Retirement Sub-Account. Earnings (or losses) shall
be credited to the Retirement Sub-Account annually, or at such other
more frequent intervals as the Company may determine, at the same rate
as is generated by the Retirement Plan s investments of amounts actually
contributed thereto, beginning with the date upon which the Company s
1997 contribution is paid to the Retirement Plan.
(2) 401(k) Sub-Account
------------------
(A) 1997 Earnings. Earnings (or losses) shall be
credited on the full amount credited to the 401(k) Sub-Account for 1997
at 50% of the prorated average rate generated by the 401(k) Plan
invesment funds selected by Wienick on the 401(k) Plan election form
delivered to the Company before the date of this Agreement. The
<PAGE>
52
prorated average earnings rate will be computed by multiplying the full
year's earnings rate for those funds by a fraction, the numerator of
which is the number of days in 1997 beginning on or after the date
Wienick assumes his duties under the Employment Agreement and the
denominator of which is 365.
(B) 1998 Earnings. Earnings (or losses) on the
401(k) Sub-Account for 1998 will be credited at the averae rate
generated by the 401(k) Plan investment funds selected by Wienick on the
401(k) Plan election form referred to in subparagraph (A) above.
(C) 1999 and Following. For 1999 and following,
earnings (or losses) on the 401(k) Sub-Account shall be credited each
year at the same average rate as that generated by the actual
investments of Wienick's account under the 401(k) Plan, giving effect to
any changes he may make in his investment elections under the 401(k)
Plan.
3. Excess Benefit Plan Participation. In addition to the
supplemental retirement benefits to be provided through the Account,
Wienick will also be eligible to participate in the Company s Excess
Benefit Plan for 1997. The amount to be credited to his account udner
the Excess Benefit Plan for 1997 shall be determined by subtracting the
amount of $160,000 from his 1997 "Compensation" as that term is defined
by the Retirement Plan and applying to that amount theh applicable
Excess Benefit Fplan contribution rate for 1997. Earnings on, and
payment of, benefits under this paragraph 3 will be governed by the
terms of the Excess Benefit Plan.
4. Vesting.
-------
(a) Retirement Sub-Account. Wienick shall have no vested
interest in the right to receive amounts credited to the Retirement Sub-
Account until he has been credited with five years of vesting service
under the terms of the Retirement Plan. At that point, he will have a
100% vested interest in right to receive the amounts credited to the
Retirement Sub-Account in accordance with the terms of this Agreement.
Wienick s (or his beneficiary s) right to receive those amounts shall
also become 100% vested upon Wienick s Disability as defined in the
Retirement Plan, or his death.
(b) 401(k) Account. Wienick will, at all times, have a 100%
vested interest in the right to receive amounts credited to the 401(k)
Sub-Account in accordance with the terms of this Agreement.
5. Payment of Account.
(a) Vested Rights. As soon as practicable following Wienick s
termination of employment for any reason, the amounts credited to the
Account that Wienick (or in the case of death his
<PAGE>
53
beneficiary) has a vested right to receive will be paid to Wienick, or
in the event of his death his beneficiary, in a single sum payment.
Wienick s beneficiary will be:
(1) Retirement Sub-Account. Wienick's beneficiary
with respect to his vested right to receive amounts from the Retirement
Sub-Account will be his beneficiary designated under the terms of the
Retirement Plan;
(2) 401(k) Sub-Account. Wienick's beneficiary with
respect to his vested right to receive amounts from the 401(k) Sub-
Account will be his beneficiary designated under the terms of the 401(k)
Plan; or
(3) Alternate Designation. With respect to either
the Retirement Sub-Account or the 401(k) Sub-Account, or both, the
beneficiary or beneficiaries designated by Wienick in a writing
delivered to the Company and specifying both the Sub-Account or Sub-
Accounts to which the designation applies and if there ismore than one
beneficiary, the percentage of the relevant Sub-Account(s) to be paid to
each.
(b) Unvested Rights. If, at the time of Wienick s termination
of employment there are amounts in the Retirement Sub-Account that
neither Wienick nor his beneficiary has a right to receive, those
amounts will be forfeited and the Company shall have no further
obligation with respect to those amounts.
6. Effect on Employment Agreement. This Agreement is not intended
to, in any way, modify or amend the Employment Agreement.
7. Governing Law. This Agreement is being entered into in, and
shall be construed in accordance with the laws of, the Commonwealth of
Pennsylvania, without giving effect to the conflicts of laws 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.
8. Binding Effect. This Agreement shall be binding upon, and
shall inure to the benefit of, Wienick and the Company, and the
respective successors of each. Wienick s rights under this Agreement
shall not, in any voluntary or involuntary manner, be assignable and may
not be pledged or hypothecated.
9. 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 Wienick and the Company.
<PAGE>
54
IN WITNESS WHEREOF, the undersigned have executed this Agreement
the date and year first written above.
COMPANY: EXECUTIVE:
- ------- ---------
CDI CORP.
By:
------------------------------ ----------------------------
Walter R. Garrison, Chairman Mitchell Wienick
<PAGE>
55
CDI CORP.
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of
this 29th day of October, 1997 between CDI Corp., a Pennsylvania
corporation (the "Company"), and John Sanford ("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 Financial 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. Management & Board Duties.
-------------------------
Executive shall carry out such duties as are customarily
associated with the position of Executive Vice President and Chief
Financial Officer, including but not limited to providing leadership and
direction to the Company s financial functions to ensure effective
accomplishment of both financial and business objectives. Executive
will direct the Company s treasury, control, financial planning and
reporting, audit, tax and investor relations activities. 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") is three years and shall commence as of November
10, 1997 and, unless sooner terminated pursuant to Section 7 of this
Agreement, shall continue until the close of business on the third
anniversary of the date hereof. 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
<PAGE>
56
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.
SECTION 4. Extent of Services.
------------------
During the Employment Period, Executive shall devote his full
business time and attention and give his best efforts, skills and
abilities exclusively to providing leadership and direction to the
financial and related operations of the Company and 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 rendering of such
services. 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 for 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 Sixty-Five Thousand Dollars ($265,000) per annum during 1997 (to
be increased to $270,000 during 1998 and $275,000 during 1999) 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. As of the date of this Agreement, Executive
shall be granted 5,400 restricted shares of the Company's Common Stock
(the "Restricted Stock") 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. Of the 5,400 shares of Restricted Stock,
one-half of those shares (2,700 shares) shall vest pursuant to the bonus
award 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 5,400 shares of Restricted Stock (2,700 shares) shall vest
over time as described in Section 4 of the Restricted Stock Agreement.
(c) Nonqualified Stock Options. As of the date hereof, Executive
shall be granted non-qualified stock options to purchase 50,000 shares
<PAGE>
57
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 period, and, if earned,
shall consist of a cash payment and, beginning in 1998, a vesting of
Restricted Stock.
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 2,700 shares of Restricted Stock referred to above 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
$150,000 and shall be determined in accordance with the performance
goals set forth below and shall be reduced on a pro-rata basis to
reflect that this period is less than a full calendar year. Since no
shares of Restricted Stock are eligible for vesting with respect to 1997
performance, the pro-rated cash payment that Executive may earn in 1997
is referred to herein as the "1997 Maximum Bonus Award", and shall be
determined as follows:
(A) Executive shall have the opportunity to receive up
to 75% 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 one-eighth 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 12.5 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
<PAGE>
58
(C) Executive shall have the opportunity to receive up
to one-eighth 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 12.5 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 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. The maximum cash
bonus awards for 1998 and 1999 shall be $155,000 and $160,000,
respectively. The President shall establish goals for Executive for
these and future calendar years based on the final operational plan and
budget of the Company for such year, and Executive shall receive a
percentage of the Maximum Bonus Award, up to 100%, depending on whether
the Company attains all or a portion of such goals.
Any of the Company's financial results that are used to calculate
bonuses under this Section 7(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. No bonuses will be paid to
Executive, and no shares of Restricted Stock shall vest, if Executive's
employment with the Company has terminated before the bonus has been
paid, regardless of whether he would have been entitled to a bonus based
on the Company's financial results for the prior year, unless the
Company terminates Executive without Cause after a year has ended but
before the bonus becomes payable for such 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. Executive shall be
entitled annually to 4 weeks of paid vacation.
(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>
59
SECTION 6. Expense Reimbursements.
----------------------
Temporary Housing and Relocation. Executive currently maintains a
primary residence in Wheaton, Illinois. In connection with Executive
becoming Executive Vice President and Chief Financial Officer of the
Company, shall be required to maintain his primary residence in the
Philadelphia metropolitan area. 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 in the Philadelphia metropolitan area, or
(ii) February 1, 1998. The Company shall also reimburse Executive for
the reasonable moving expenses he incurs in connection with relocating
from Wheaton, Illinois to the Philadelphia metropolitan area in
accordance with the Company's policies generally applicable to its
senior executive officers.
(b) Ordinary Business Expenses. 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, 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 termiante 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 30 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 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:
<PAGE>
60
(i) Executive's commission of a felony or other crime
involving moral turpitude;
(11) 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 (i)
by the Company other than for Cause; (ii) by Executive for Good Reason,
as hereinafter defined, or (iii) as a result of Executive's death or
Disability, 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 (a) one year from the date of such
termination or (b) 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
<PAGE>
61
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 described in this Section 7(e)
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 employment 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.
(g) Any severance compensation granted in this Section 7 and any
earned compensation described in Section 7(d) shall be the sole and
exclusive compensation or benefit due to Executive upon termination of
Executive's employment.
<PAGE>
62
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 Financial Officer, Executive will be put in a
position of trust and confidence and have access to Confidential
Information, will be supervising the financial operations of the Company
and the employees working in those operations, will be in contact with
customers and prospective customers, will participate in the preparation
and submission of bids and proposals to customers and prospective
customers, and in the formulation and implementation of the Company's
strategic plans.
(d) Executive acknowledges that as the Company's Executive Vice
President and Chief Financial 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
<PAGE>
63
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 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 business 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 or
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.
<PAGE>
64
(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, compilations and pictorial
representations and other works (whether or not copyright-able).
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 otherwise
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
<PAGE>
65
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
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.
<PAGE>
66
SECTION 11. Waiver of Breach.
----------------
The waiver by either party of a breach of any provision of this
Agreement by the other party shall not operate or be construed as a
waiver of any other or subsequent breach by the other party 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.
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: Board of Directors
with a required copy to:
CDI Corp.
3500 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
Attention: General Counsel
To Executive:
John Sanford
1921 Hampton Drive
Wheaton, IL 60187
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.
<PAGE>
67
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 unenforce- able, 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.
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 counterparts, 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.
<PAGE>
68
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.
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:
------------------------------------------
John Sanford
<PAGE>
69
EMPLOYMENT AGREEMENT
CDI CORP. AND JOHN SANFORD
EXHIBIT A
PROPOSED 1997 QUALITATIVE CFO CDI CORP. GOALS
- - COMPLETE FUNCTIONAL TRANSITION PROCESS WITH ED LANDIS INCLUDING
BRIEFINGS WITH FINANCIAL RELATIONS BOARD AND KEY CDI STOCK ANALYSTS.
FINALIZE TRANSITION OF CDI ACCOUNTING CENTER TO FINANCE FUNCTION.
COMPLETE ORIENTATION AND BECOME ACTIVELY INVOLVED IN SELECTION OF
NEW COMPANY FINANCIAL SYSTEMS.
MAKE PRELIMINARY ASSESSMENT OF BUSINESS UNIT AND CORPORATE FINANCIAL
TALENT.
FINALIZE 1998 FINANCIAL GOALS WITH SENIOR MANAGEMENT, BOARD OF
DIRECTORS, AND KEY OPERATING UNIT PERSONNEL.
AS APPROPRIATE, HELP EVALUATE CURRENT I T ACQUISITION CANDIDATES
AND FINALIZE OFFER AND PURCHASE STRUCTURE.
COMPLETE ORIENTATIONS FROM KPMG (OUTSIDE AUDITORS), ARTHUR ANDERSON
(INSIDE AUDITORS), BAIN & CO., AND LAZARD FR RES.
HELP SELECT PRIMARY CDI INVESTMENT BANKING RELATIONSHIP.
CONCUR IN RENEGOTIATION OF CDI LINES OF CREDIT MINDFUL OF FUNDING
NEEDS FOR FUTURE ACQUISITIONS.
WORKING WITH CEO, DEVELOP PLANS TO EXECUTE NEW COMPANY STRATEGIC
DIRECTION WHEN FINALIZED.
<PAGE>
70
CDI CORP.
RESTRICTED STOCK AGREEMENT
SECTION 1. Grant of Restricted Stock.
-------------------------
CDI Corp. (the "Company") hereby grants to John Sanford (the
"Executive ) 5,400 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 5,400 shares of the Company's common stock ("Stock") to
Executive. The Stock shall consist of 10 certificates of 540 shares
each, all registered in Executive's name (the "Certificates"), subject
to the restrictions set forth herein.
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.
---------------------------
Executive will vest, if at all, in 2,700 of the shares of Stock at
the rate of 540 shares per year for each of years 1998 through 2002
pursuant to the terms of Section 5(d) of the Employment Agreement
between Executive and the Company, dated October 29, 1997 (the
"Employment Agreement"). Executive will vest in the other 2,700 shares
of Stock (the 2,700 Time-Vesting Shares ) at the rate of 540 shares per
year on the anniversary date of the Employment Agreement in each of the
years 1998 through 2002. If Executive s employment is terminated by the
Company other than for Cause, or as a result of Executive s death or
Disability, or if Executive terminates his employment for Good Reason,
as such terms are defined in the Employment Agreement, Executive shall
continue to vest in the Time-Vesting Shares for the
<PAGE>
71
duration of the Severance Period, as such term is defined in the
Employment Agreement. If Executive s employment with the Company
terminates for any reason other than as specified in the immediately
preceding sentence, none of the unvested Time-Vesting 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.
-------------------
Executive shall forfeit all remaining escrowed Stock upon the
termination of his service as an employee of the Company for any reason
other than a termination of his service by the Company without Cause, as
defined in the Employment Agreement, or upon any attempt by Executive to
sell, exchange, transfer, pledge, hypothecate or otherwise dispose or
encumber any of the escrowed Stock. Executive shall also forfeit any
shares of escrowed Stock that were subject to vesting under Section 5(d)
of the Employment Agreement, but which did not vest thereunder in a
given year because Executive was not entitled to the Maximum Bonus Award
for that year. 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
<PAGE>
72
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.
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
the date and year first written above.
COMPANY:
CDI CORP.
By:
---------------------------------------
Mitch Wienick
President and Chief Executive Officer
EXECUTIVE:
------------------------------------------
John Sanford
<PAGE>
73
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 John Sanford (the "Optionee") an option (the "Option"
when reference is made to the right to purchase all of the Shares) to
purchase up to 50,000 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 October 29, 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
<PAGE>
74
(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 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 November 10, 1997, the date on which the
Option is awarded pursuant to the Plan and this Agreement.
(h) "Disability" shall have the same meaning as "Total Disability"
under the CDI Corporation Long Term Disability Benefits Program, or such
other comparable program as may then be in effect that provides long
term disability coverage to the Company's management employees.
(i) "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.
<PAGE>
75
(j) "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, 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.
(k) "Option Price" means $40-11/16, representing the Fair Market
Value of a share of Stock on the last trading date immediately preceding
the Date of Grant.
(l) "President means the President and Chief Executive Officer of
the Company.
(m) "Stock" means the Company's common stock, par value $.10 per
share.
(n) "Termination Date" means the earliest of:
(i) the date on which Optionee's employment with the
Company terminates if such termination is by the Company for Cause or by
Optionee without Good Reason;
(ii) in the event of termination of Optionee's employment by
the Company without Cause or by Optionee for Good Reason, the date two
weeks after the date of such termination;
(iii) in the event of the death or Disability of the
Optionee, the date six months after the date of the Optionee's death or
Disability; or
(iv) November 9, 2007.
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 at any time
after vesting until the Termination Date in whole or in part.
SECTION 4. Option Vesting.
--------------
(a) Vesting. Subject to the accelerated vesting provisions of
Section 4(b) below, the Option will vest over time as to a certain
number of shares each year on the anniversary of the Date of Grant.
<PAGE>
76
The following table shows the number of shares as to which the Option
will vest on the anniversary of the Date of Grant in each of the listed
years:
1998 1999 2000 2001 2002
---- ---- ---- ---- ----
10,000 10,000 10,000 10,000 10,000
Notwithstanding the above, no Shares will vest on or after the
Termination Date except as provided in Section 4(c) below.
(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 the Company
without Cause or by the Optionee for Good Reason. In addition, if the
Company terminates Optionee's employment without Cause prior to three
years after the Date of Grant, any of the Shares scheduled to vest in
1998, 1999 and 2000 which have not vested shall vest and become
immediately exercisable upon such termination of employment.
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.
77
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,
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.
<PAGE>
78
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 adjustment
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 Compensation and OPTIONEE
Stock Option Committee
of the Board of Directors of
CDI Corp.
By:
-------------------------- --------------------------
John Sanford
<PAGE>
79
SUPPLEMENTAL RETIREMENT AGREEMENT
This SUPPLEMENTAL RETIREMENT AGREEMENT (the "Agreement") is entered
into as of this 18th day of November, 1997 between CDI Corp.,
a Pennsylvania corporation (the "Company"), and Robert J. Mannarino
("Mannarino ).
Background
The Company and Mannarino have entered into an Employment Agreement
dated August 11, 1997 (the Employment Agreement ), pursuant to which
Mannarino will assume the position, and duties, of Executive Vice
President and Chief Operating Officer of the Company. Under Section
5(e) of the Employment Agreement, Mannarino is entitled to participate
in the employee benefit programs made available by the Company to its
senior executive officers from time to time.
One of those programs, the CDI Corporation Retirement Plan (the
Retirement Plan ), requires, among other things, one year of service as
a precondition of eligibility to participate. Under the terms of this
Plan, Mannarino will be eligible to participate on January 1, 1999.
Through this Agreement, the Company intends to provide Mannarino
with a supplemental retirement benefit substantially similar to the
benefit Mannarino would have received with respect to 1997 and 1998
services if he had been immediately eligible to participate in the
Retirement Plan upon assuming his duties under the Employment Agreement.
For the years 1999 and following, the one year of service rule will have
no adverse effect on Mannarino s benefits under either Plan.
Therefore, intending to be legally bound, the Company and Mannarino
agree as follows:
Agreement
1. Establishment of Account. The Company will establish a
bookkeeping account (the Account ) that will be used to calculate the
supplemental retirement benefit due to Mannarino under the terms of this
Agreement. The Account will be used solely as a device to measure and
determine the amount of the supplemental retirement benefits to be paid
to Mannarino as specified herein. The Account shall not constitute or
be treated as a trust fund of any kind. The Company shall be under no
obligation to segregate any of its assets for purposes of the Account.
Any amounts at any time credited to the Account shall be and remain the
sole property of the Company. Mannarino will not have by virtue of the
Account any ownership interest or rights of any nature with respect to
specific assets of the Company. Mannarino s rights shall be limited to
those of a recipient of an
<PAGE>
80
unfunded, unsecured promise to pay amounts in the future and his
position with respect to the amounts credited to his Account shall be
that of a general unsecured creditor of the Company.
2. Credits to the Account. The amount to be credited to the
Account will be the total of the Contribution Credits and the Earnings
Credits, determined as follows:
(a) Contribution Credits: The Company will credit to the
Retirement Account the amount that would have been contributed on
Mannarino s behalf under the Retirement Plan for the years 1997 and 1998
if Mannarino had been eligible to participate in that Plan upon assuming
his duties under the Employment Agreement. That credit will be made at
the time the Company otherwise makes its 1997 contribution to the
Retirement Plan.
(b) Earnings Credits: Earnings (or losses) shall be credited
to the Retirement Account annually, or at such other more frequent
intervals as the Company may determine, at the same rate as is generated
by the Retirement Plan s investments of amounts actually contributed
thereto, beginning with the date upon which the Company s 1997
contribution is paid to the Retirement Plan.
3. Excess Benefit Plan Participation. In addition to the
supplemental retirement benefits to be provided through the Account,
Mannarino will also be eligible to participate in the Company s Excess
Benefit Plan for 1997.
4. Vesting: Mannarino shall have no vested interest in the right
to receive amounts credited to the Retirement Account until he has been
credited with five years of vesting service under the terms of the
Retirement Plan. At that point, he will have a 100% vested interest in
right to receive the amounts credited to the Retirement Sub-Account in
accordance with the terms of this Agreement. Mannarino s (or his
beneficiary s) right to receive those amounts shall also become 100%
vested upon Mannarino s Disability as defined in the Retirement Plan, or
his death.
5. Payment of Account.
(a) Vested Rights. As soon as practicable following
Mannarino s termination of employment for any reason, the amounts
credited to the Account that Mannarino (or in the case of death his
beneficiary) has a vested right to receive will be paid to Mannarino in
a single sum payment. Mannarino s beneficiary with respect to his
vested right to receive amounts from the Retirement Account will be his
beneficiary designated under the terms of the Retirement Plan.
(b) Unvested Rights. If, at the time of Mannarino s
termination of employment there are amounts in the Retirement Account
<PAGE>
81
that neither Mannarino nor his beneficiary has a right to receive, those
amounts will be forfeited and the Company shall have no further
obligation with respect to those amounts.
6. Effect on Employment Agreement. This Agreement is not intended
to, in any way, modify or amend the Employment Agreement. Neither the
provisions of this Agreement nor the crediting or payment of any benefit
hereunder shall be construed to in any way alter the terms of the
Employment Agreement.
7. Governing Law. This Agreement is being entered into in, and
shall be construed in accordance with the laws of, the Commonwealth of
Pennsylvania, without giving effect to the conflicts of laws 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.
8. Binding Effect. This Agreement shall be binding upon, and
shall inure to the benefit of, Mannarino and the Company, and the
respective successors of each. Mannarino s rights under this Agreement
shall not, in any voluntary or involuntary manner, be assignable and may
not be pledged or hypothecated.
9. 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 Mannarino and the Company.
IN WITNESS WHEREOF, the undersigned have executed this Agreement the
date and year first written above.
COMPANY: EXECUTIVE:
CDI CORP.
By:
------------------------------ ----------------------------
Mitch Wienick, President Robert J. Mannarino
and Chief Executive Officer
<PAGE>
82
SUPPLEMENTAL RETIREMENT AGREEMENT
This SUPPLEMENTAL RETIREMENT AGREEMENT (the "Agreement") is entered
into as of this 20th day of November, 1997 between CDI Corp.,
a Pennsylvania corporation (the "Company"), and John D. Sanford
("Sanford ).
Background
The Company and Sanford have entered into an Employment Agreement
dated October 29, 1997 (the Employment Agreement ), pursuant to which
Sanford will assume the position, and duties, of Executive Vice
President and Chief Operating Officer of the Company. Under Section
5(e) of the Employment Agreement, Sanford is entitled to participate in
the employee benefit programs made available by the Company to its
senior executive officers from time to time.
One of those programs, the CDI Corporation Retirement Plan (the
Retirement Plan ), requires, among other things, one year of service as
a precondition of eligibility to participate. Under the terms of this
Plan, Sanford will be eligible to participate on January 1, 1999.
Through this Agreement, the Company intends to provide Sanford with
a supplemental retirement benefit substantially similar to the benefit
Sanford would have received with respect to 1997 and 1998 services if he
had been immediately eligible to participate in the Retirement Plan upon
assuming his duties under the Employment Agreement. For the years 1999
and following, the one year of service rule will have no adverse effect
on Sanford s benefits under either Plan.
Therefore, intending to be legally bound, the Company and Sanford
agree as follows:
Agreement
1. Establishment of Account. The Company will establish a
bookkeeping account (the "Account") that will be used to calculate the
supplemental retirement benefit due to Sanford under the terms of this
Agreement. The Account will be used solely as a device to measure and
determine the amount of the supplemental retirement benefits to be paid
to Sanford as specified herein. The Account shall not constitute or be
treated as a trust fund of any kind. The Company shall be under no
obligation to segregate any of its assets for purposes of the Account.
Any amounts at any time credited to the Account shall be and remain the
sole property of the Company. Sanford will not have by virtue of the
Account any ownership interest or rights of any nature with respect to
specific assets of the Company. Sanford s rights shall be limited to
those of a recipient of an unfunded, unsecured promise to pay amounts in
the future and his position with respect to the amounts credited to his
Account shall be that of a general unsecured creditor of the Company.
<PAGE>
83
2. Credits to the Account. The amount to be credited to the
Account will be the total of the Contribution Credits and the Earnings
Credits, determined as follows:
(a) Contribution Credits: The Company will credit to the
Retirement Account the amount that would have been contributed on
Sanford s behalf under the Retirement Plan for the years 1997 and 1998
if Sanford had been eligible to participate in that Plan upon assuming
his duties under the Employment Agreement. That credit will be made at
the time the Company otherwise makes its 1997 contribution to the
Retirement Plan.
(b) Earnings Credits: Earnings (or losses) shall be credited
to the Retirement Account annually, or at such other more frequent
intervals as the Company may determine, at the same rate as is generated
by the Retirement Plan s investments of amounts actually contributed
thereto, beginning with the date upon which the Company s 1997
contribution is paid to the Retirement Plan.
3. Excess Benefit Plan Participation. In addition to the
supplemental retirement benefits to be provided through the Account,
Sanford will also be eligible to participate in the Company s Excess
Benefit Plan for 1997.
4. Vesting: Sanford shall have no vested interest in the right to
receive amounts credited to the Retirement Account until he has been
credited with five years of vesting service under the terms of the
Retirement Plan. At that point, he will have a 100% vested interest in
right to receive the amounts credited to the Retirement Sub-Account in
accordance with the terms of this Agreement. Sanford s (or his
beneficiary s) right to receive those amounts shall also become 100%
vested upon Sanford s Disability as defined in the Retirement Plan, or
his death.
5. Payment of Account.
(a) Vested Rights. As soon as practicable following Sanford s
termination of employment for any reason, the amounts credited to the
Account that Sanford (or in the case of death his beneficiary) has a
vested right to receive will be paid to Sanford in a single sum payment.
Sanford s beneficiary with respect to his vested right to receive
amounts from the Retirement Account will be his beneficiary designated
under the terms of the Retirement Plan.
(b) Unvested Rights. If, at the time of Sanford s termination
of employment there are amounts in the Retirement Account that neither
Sanford nor his beneficiary has a right to receive, those amounts will
be forfeited and the Company shall have no further obligation with
respect to those amounts.
<PAGE>
84
6. Effect on Employment Agreement. This Agreement is not intended
to, in any way, modify or amend the Employment Agreement. Neither the
provisions of this Agreement nor the crediting or payment of any benefit
hereunder shall be construed to in any way alter the terms of the
Employment Agreement.
7. Governing Law. This Agreement is being entered into in, and
shall be construed in accordance with the laws of, the Commonwealth of
Pennsylvania, without giving effect to the conflicts of laws 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.
8. Binding Effect. This Agreement shall be binding upon, and
shall inure to the benefit of, Sanford and the Company, and the
respective successors of each. Sanford s rights under this Agreement
shall not, in any voluntary or involuntary manner, be assignable and may
not be pledged or hypothecated.
9. 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 Sanford and the Company.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
the date and year first written above.
COMPANY: EXECUTIVE:
- ------- ---------
CDI CORP.
By:
----------------------------- -----------------------------
Mitch Wienick, President John D. Sanford
and Chief Executive Officer
<PAGE>
85
CONSULTING AGREEMENT
THIS IS A CONSULTING AGREEMENT (hereinafter referred to as
"Agreement") made as of this third day of December, 1997, by and between
CDI Corp., a Pennsylvania corporation (hereinafter referred to as "CDI";
as the context requires in this Agreement, "CDI" will also refer to CDI
Corp.'s subsidiary, CDI Corporation) and Edgar D. Landis (hereinafter
referred to as "Landis").
Background
A. Landis currently serves as a member of CDI Corp.'s Board of
Directors and until recently served as CDI s Executive Vice President
and Chief Financial Officer and as a director and/or officer of numerous
CDI subsidiaries; and
B. Landis and CDI entered into an employment agreement as of April
30, 1973 (hereinafter referred to as the "Employment Agreement"), which
governs the terms of Landis employment with CDI; and
C. Landis will retire from CDI and its subsidiaries as of December
31, 1997 and the Employment Agreement will terminate at that time; and
D. Landis and CDI desire to set forth in writing the consulting
arrangement to which Landis and CDI have agreed, Landis agreement not
to compete with CDI, and Landis release and waiver of claims against
CDI.
Agreement
NOW, THEREFORE, for and in consideration of the mutual promises and
undertakings set forth below, the sufficiency of which is hereby
acknowledged by both parties, and intending to be legally bound hereby,
CDI and Landis agree as follows:
1. Term; Termination of Employment Agreement.
(a) The term of this Agreement shall commence as of January
1, 1998, and, unless sooner terminated in accordance with Section 8,
shall terminate on December 31, 2002.
(b) Effective as of December 31, 1997, Landis will retire
from employment with CDI. Effective as of November 10, 1997, Landis has
resigned as Executive Vice President and Chief Financial Officer of CDI
and as a director and officer of all direct and indirect subsidiaries of
CDI (but not as a director of CDI Corp.). Landis will
<PAGE>
86
remain an employee of CDI through December 31, 1997 under the current
terms and conditions of the Employment Agreement. CDI and Landis agree
that Landis employment under the Employment Agreement will terminate on
December 31, 1997.
(c) CDI shall pay Landis a bonus of $200,000 for services
rendered by Landis during 1997 within two weeks after the delivery of
audited financial statements to CDI for 1997.
(d) Following Landis termination of employment from CDI,
Landis, with such assistance from CDI as he may reasonably request, may
choose supplemental Medicare coverage (the "Insurance Policy") at a cost
that is reasonably acceptable to CDI. For the period January 1998
through June 30, 1999, CDI will reimburse Landis for the same percentage
of the premiums for the Insurance Policy that CDI contributed toward
Landis medical insurance coverage under the CDI group health insurance
plan in effect for CDI's active employees immediately prior to his
termination of employment from CDI.
(e) CDI shall pay Landis, on or before January 9, 1998, for
all of Landis earned but unused PDO s as of December 31, 1997 and for
all PDO s accrued through December 31, 1997. Payment for such days will
be based on Landis salary level as of December, 1997.
2. Consulting Services. During the 1998 calendar year, Landis
will render up to twenty (20) days of consulting services to CDI. These
services will be rendered at the request of the Chief Executive Officer
or the then Chief Financial Officer of CDI at times reasonably
convenient to Landis. In consideration for the consulting services, CDI
will pay Landis $80,000, such amount to be payable in two equal
installments of $40,000, each, on or before January 9, 1998 and July 1,
1998. CDI will also reimburse Landis for all necessary and reasonable
business expenses incurred by Landis in connection with his performance
of the consulting services.
3. Board Service. Landis agrees to continue to serve as a
director of CDI Corp. for the remainder of the term to which he has been
elected. Landis shall be compensated for his service on the Board in
the same manner as other outside directors, i.e., 1,334 stock options
(if permissible under CDI s stock option program for director
compensation and under applicable securities rules; otherwise Landis
will be paid $6,667) plus attendance fees.
4. Confidentiality. Landis acknowledges that during his term of
employment with CDI he has had access to confidential information of
both a technical nature and of a sensitive nature relating to CDI and
its customers. Landis acknowledges that such confidential information
is proprietary, material and important to CDI and its non-disclosure is
essential to the effective and successful conduct of CDI's business.
Landis agrees that during and after the term of this Agreement he will
hold all of this confidential information in the strictest confidence
<PAGE>
87
and will not use any of it for any purpose and will not publish,
disseminate, disclose or otherwise make any such confidential
information available to any third party, except as may be required in
connection with the performance of the consulting services contemplated
under Section 2 of this Agreement, or if CDI gives Landis prior written
consent to use such confidential information. Landis further agrees to
return to CDI upon request all CDI property and any other items that in
any way incorporate, embody or reflect any confidential information.
5. Non-Competition Obligations. Landis represents and warrants
that his experience and capabilities are such that the provisions of
this Section 5 will not prevent him from earning his livelihood, and
acknowledges that it would cause CDI serious and irreparable injury and
cost if Landis were to use his ability and knowledge in competition with
CDI or to otherwise breach the obligations contained in this Section 5.
(a) Landis acknowledges that it is essential for CDI's
protection that Landis be restrained following the termination of
Landis employment with, and consulting for, CDI from soliciting or
inducing any of CDI's officers and management employees to leave CDI's
employ, hiring or attempting to hire any of CDI's officers or management
employees, soliciting CDI's customers and suppliers for a competitive
purpose, and competing against CDI for a reasonable period of time.
(b) For the five-year term of this Agreement, Landis 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
with any entity that engages or intends to engage in any Competing
Business anywhere in the world; but ownership of not more than one
percent (1%) of the outstanding stock of any publicly traded company
will not constitute a violation of this provision. "Competing Business"
means any business or other enterprise which engages in any business
conducted by CDI at the date of this Agreement or at any time during the
period Landis renders consulting services hereunder; and
(ii) directly or indirectly, solicit, interfere with or
attempt to entice away from CDI, any officer or management employees of
CDI or anyone who was one of CDI'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 CDI, any customer on behalf of a Competing Business.
<PAGE>
88
(c) References in this Section 5 to CDI shall include CDI,
its subsidiaries, divisions and affiliates.
(d) Landis acknowledges that in the event of a breach or
threat of a breach of any portion of this Section 5, CDI's remedies at
law will be inadequate, and in any such event CDI will be entitled to an
injunction to prevent breaches of this Agreement and to enforce
specifically the provisions hereof, in addition to any other remedy to
which CDI may be entitled at law or equity.
6. Non-Competition Consideration. Subject to paragraphs (b) and
(c) below, CDI will make the payments described in paragraph (a) below
provided that Landis has complied with his non-competition obligations
under Section 5 above:
(a) Commencing on March 31, 1998, and on each June 30,
September 30, December 31 and March 31 thereafter up to and including
December 31, 2002, CDI will pay Landis the sum of $25,000.
(b) If at any time Landis fails to comply with his
obligations under Section 5 hereof, and such failure is not cured within
thirty (30) days following notice from CDI of such failure, CDI's
obligation to make any further payments under Section 6(a) shall cease
and terminate forever. CDI's right to cease such payments upon a breach
by Landis of his obligations under Section 5 shall not constitute CDI's
sole remedy for such breach, and Landis acknowledges that in the event
of a breach of Section 5 of this Agreement, CDI shall remain entitled to
an injunction to prevent further breaches of the Agreement and to
enforce specifically the provisions hereof and to all other remedies
available at law or in equity for such breach.
(c) CDI's obligations to make any further payments under this
Section 6 shall cease and terminate forever upon Landis' death.
7. Release. Landis hereby, on behalf of himself, his
descendants, ancestors, dependents, heirs, executors, administrators,
assigns and successors, covenants not to make any claim or initiate any
lawsuit, and fully and forever releases and discharges CDI and its
subsidiaries, affiliates, divisions, successors, and assigns, together
with its past and present directors, officers, agents, attorneys,
insurers, employees, stockholders, and representatives (hereinafter
collectively referred to as the "CDI Group"), from any and all claims,
wages, demands, rights, liens, agreements, contracts, covenants,
actions, suits, causes of action, obligations, debts, costs, expenses,
attorneys' fees, damages, judgments, orders or liabilities of whatsoever
kind or nature in law, equity or otherwise, whether now known or
unknown, suspected or unsuspected which Landis now owns or holds or has
at any time heretofore owned or held against the CDI Group, arising out
of or in any way connected with Landis employment with CDI, or the
cessation of that employment, or any other
<PAGE>
89
transactions, occurrences, acts or omissions or any loss, damage or
injury whatsoever, known or unknown, suspected or unsuspected, resulting
from any act or omission by or on the part of the CDI Group committed or
omitted prior to the date of this Agreement, including, but not limited
to claims under Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act, any other federal, state or local
statute or ordinance which deals with discrimination or any claim for
severance pay, bonus, salary, sick leave, holiday pay, vacation pay,
life insurance, health or medical insurance or any other fringe benefit
or disability benefit. This release and waiver of claims will not apply
with respect to (i) amounts payable to Landis with respect to his
employment through December 31, 1997 under the Employment Agreement,
(ii) any vested benefits due Landis under any CDI Corp. benefit plan, or
(iii) any amounts payable to Landis under this Agreement.
8. Taxes. The parties agree that Landis will perform the
consulting services contemplated by Section 2 of this Agreement as an
independent contractor, and that the parties will not take a position on
their tax returns (both federal and state, income and employment)
inconsistent with this position. Landis warrants and agrees that he is
responsible for any federal, state, and local taxes which may be owed by
him by virtue of the receipt of any portion of the consideration paid
hereunder and agrees to fully indemnify CDI from and against any and all
claims by any governmental authority relating to Landis failure to
fully pay such taxes.
9. Termination. The consulting arrangement shall automatically
terminate upon Landis death or his inability to perform the consulting
services requested of him due to his complete or partial disability.
CDI shall also have the right to terminate this Agreement if Landis
breaches the provisions of this Agreement in any material respect;
provided, however, that a termination of this Agreement by CDI shall not
be effective unless CDI provides written notice to Landis of its
intention to terminate this Agreement due to Landis breach and Landis
fails, to the reasonable satisfaction of CDI, to cure the defects stated
in such written notice within thirty (30) days after the notice was
given to Landis.
10. Legal Advice. Landis acknowledges that he has been encouraged
to seek the advice of an attorney of his choice in regard to this
Agreement. Landis hereby acknowledges that he understands the
significance and consequences of this Agreement and represents that the
terms of this Agreement are fully understood and voluntarily accepted by
him.
11. Drafting. Both Landis and CDI have cooperated in the drafting
and preparation of this Agreement. Hence, in any construction to be
made of this Agreement, the same shall not be construed against any
party on the basis that the party was the drafter.
<PAGE>
90
12. Revocation Period. Landis acknowledges that he was given at
least twenty-one (21) days to consider (while remaining free to execute
the Agreement at an earlier point in time) the terms of this Agreement
prior to his signing it. Landis further understands that he may revoke
this Agreement any time up to seven (7) days following the date he signs
the Agreement by giving written notice of such revocation to CDI. Such
notice must be dated no later than the seventh (7th) day following the
date on which he signed the Agreement and must be received promptly
thereafter by CDI.
13. Counterparts; Section Headings. This Agreement may be
executed in any number of counterparts, 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.
14. Entire Agreement. This Agreement constitutes the entire
agreement concerning all subject matters addressed herein. This
Agreement supersedes and replaces all prior negotiations. All
agreements, proposed or otherwise, whether written or oral, concerning
all subject matters covered herein are incorporated into this Agreement.
If any provision of this Agreement is determined by any court of
competent jurisdiction to be unenforceable by reason of its extending
for too long a period of time or over too large a geographical area or
by reason of its being too extensive in any other respect, it will be
deemed reformed to extend only over the longest period of time for which
it may be enforceable, and/or over the largest geographical area as to
which it may be enforceable and/or to the maximum extent in all other
respects as to which it may be enforceable, all as determined by such
court in such action. Any such determination of unenforceability or
subsequent reformation will not affect any other provision or
application of this Agreement which can be given effect without the
unenforceable or reformed provision and will not invalidate, render
unenforceable or require the reformation of such provision in any other
jurisdiction. The time period for Landis's obligations contained in
Section 5 of this Agreement will be extended beyond the time period
specified therein by the length of time, if any, during which he has
been in breach (as determined by a court of competent jurisdiction in a
final, nonappealable judgment, ruling or order or by an arbitration) of
the provisions in Section 5.
15. 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:
<PAGE>
91
To CDI: CDI Corp.
1717 Arch Street, 35th Floor
Philadelphia, PA 19103-2768
Attention: General Counsel
To Landis: Mr. Edgar D. Landis
222 Church Road
Ardmore, PA 19003
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 fourth (4th) 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.
16. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of
Pennsylvania.
ATTEST: CDI CORP.
By:
- ------------------------------ -------------------------------
Mitch Wienick
President and
Chief Executive Officer
WITNESS:
- ------------------------------ ----------------------------------
Edgar D. Landis
<PAGE>
92
EXHIBIT 21
Subsidiaries of the Registrant
The following are subsidiaries of the Registrant as of December 31,
1997 and the jurisdiction in which each is organized. The voting
securities of each are all owned directly or indirectly by the
Registrant, except for CDI-Anders Glaser Wills Limited, the ownership of
which is set forth below. Each of the subsidiaries conducts its
business using the names indicated except as separately set forth
herein. Certain subsidiaries are not listed. These omitted
subsidiaries either individually or in the aggregate would not
constitute a significant subsidiary.
State or
Country of
Subsidiary Organization
- ---------- ------------
Subsidiary of the Registrant:
CDI Corporation (a) Pennsylvania
Subsidiaries of CDI Corporation:
CDI-Anders Glaser Wills Limited (b)(c) United
Kingdom
CDI Engineering Group, Inc. Delaware
CDI Marine Company Florida
CDI Telecommunications, Inc. Pennsylvania
CompData Services Corporation Delaware
The M&T Company Pennsylvania
Management Recruiters International, Inc. (d) Delaware
Modern Engineering, Inc. Michigan
Todays Temporary, Inc. (e) Pennsylvania
1175748 Ontario Limited Canada
Subsidiary of CDI Marine Company:
CDI Power Systems Group, Inc. Delaware
Subsidiaries of Management Recruiters International, Inc.:
InterExec, Inc. (f) Ohio
Sales Consultants, Inc. Ohio
Subsidiary of Modern Engineering, Inc.:
Modern Engineering (Deutschland) GmbH Germany
Subsidiaries of Todays Temporary, Inc.:
Todays Temporary, Ltd. Canada
Todays Legal Staffing, Inc. Pennsylvania
Subsidiary of 1175748 Ontario Limited:
CDI Technical Services, Ltd. (g) Canada
<PAGE>
93
(a) CDI Corporation also conducts its business using the trade names
of CDI CAD Services, CDI Computer Services, CDI Information
Services, CDI Managed CADD Services, CDI Managed Information
Services and CDI Managed Staffing Services.
(b) CDI Corporation holds a 68% ownership interest in CDI-Anders
Glaser Wills Limited.
(c) CDI-Anders Glaser Wills Limited also conducts its business using
the trade name of CDI Technical Services.
(d) Management Recruiters International, Inc. also conducts its
business using the trade names of Sales Consultants, Office Mates
5, CompuSearch and ConferView.
(e) Todays Temporary, Inc. also conducts its business using the trade
name Todays Legal Staffing.
(f) InterExec, Inc. also conducts its business using the trade names
of DayStar and Sales Staffers.
(g) CDI Technical Services Ltd. also conducts its business using the
trade name of CDI Information Services.
<PAGE>
94
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
CDI Corp.:
We consent to incorporation by reference in Registration Statement
No. 33-7263 on Form S-8 of CDI Corp., in Registration Statement No.
33-30357 on Form S-8 of CDI Corp. and in Registration Statement No. 333-
9793 on Form S-3 of CDI Corp. of our report dated February 19, 1998
relating to the consolidated balance sheets of CDI Corp. and
subsidiaries as of December 31, 1997 and 1996 and the related
consolidated statements of earnings, retained earnings, and cash flows
and the related financial statement schedule for each of the years in
the three-year period ended December 31, 1997, which report appears in
the December 31, 1997 annual report on Form 10-K of CDI Corp.
Philadelphia, PA /s/ KPMG Peat Marwick LLP
March 5, 1998 ---------------------------
KPMG Peat Marwick LLP
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains financial information extracted from the consolidated
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> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 6,998
<SECURITIES> 0
<RECEIVABLES> 264,410
<ALLOWANCES> 4,995
<INVENTORY> 0
<CURRENT-ASSETS> 289,585
<PP&E> 76,105
<DEPRECIATION> 49,718
<TOTAL-ASSETS> 348,837
<CURRENT-LIABILITIES> 121,308
<BONDS> 0
0
0
<COMMON> 1,995
<OTHER-SE> 213,797
<TOTAL-LIABILITY-AND-EQUITY> 348,837
<SALES> 0
<TOTAL-REVENUES> 1,496,758
<CGS> 0
<TOTAL-COSTS> 1,144,061
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,337
<INCOME-PRETAX> 76,781
<INCOME-TAX> 28,652
<INCOME-CONTINUING> 46,934
<DISCONTINUED> (9,322)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37,612
<EPS-PRIMARY> 1.89
<EPS-DILUTED> 1.89
</TABLE>
