<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT [X]
FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
CHECK THE APPROPRIATE BOX:
[ ] PRELIMINARY PROXY STATEMENT
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2))
[X] DEFINITIVE PROXY STATEMENT
[ ] DEFINITIVE ADDITIONAL MATERIALS
[ ] SOLICITING MATERIAL UNDER RULE 14a-12
DATA DIMENSIONS, INC.
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] NO FEE REQUIRED.
[ ] FEE COMPUTED ON TABLE BELOW PER EXCHANGE ACT RULES 14a-6(i)(1) and 0-11.
(1) TITLE OF EACH CLASS OF SECURITIES TO WHICH TRANSACTION APPLIES:
(2) AGGREGATE NUMBER OF SECURITIES TO WHICH TRANSACTION APPLIES:
(3) PER UNIT PRICE OR OTHER UNDERLYING VALUE OF TRANSACTION COMPUTED
PURSUANT TO EXCHANGE ACT RULE 0-11 (SET FORTH THE AMOUNT ON
WHICH THE FILING FEE IS CALCULATED AND STATE HOW IT WAS
DETERMINED):
(4) PROPOSED MAXIMUM AGGREGATE VALUE OF TRANSACTION:
(5) TOTAL FEE PAID:
[ ] FEE PAID PREVIOUSLY WITH PRELIMINARY MATERIALS.
[ ] CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY EXCHANGE ACT RULE
0-11(a)(2) AND IDENTIFY THE FILING FOR WHICH THE OFFSETTING FEE WAS PAID
PREVIOUSLY. IDENTIFY THE PREVIOUS FILING BY REGISTRANT STATEMENT
NUMBER, OR THE FORM OR SCHEDULE AND THE DATE OF ITS FILING.
(1) AMOUNT PREVIOUSLY PAID:
(2) FORM, SCHEDULE OR REGISTRATION STATEMENT NO.:
(3) FILING PARTY:
(4) DATE FILED:
<PAGE> 2
[DATA DIMENSIONS LOGO]
April 10, 2000
Dear Stockholder:
You are cordially invited to attend the Data Dimensions, Inc. Annual
Meeting of Stockholders on Tuesday, May 16, 2000 at 9:00 a.m. (Pacific Daylight
Savings Time). The meeting will be held at the Hyatt Regency Bellevue, 900
Bellevue Way N.E., Bellevue, Washington 98004. The matters to be acted upon are
described in the accompanying Notice of Annual Meeting and Proxy Statement.
At the meeting, we will also report on Data Dimensions' operations and
respond to any questions you may have.
Your vote is important. Whether or not you plan to attend the meeting, it
is important that your shares be represented. Please complete, sign, date and
promptly return the enclosed proxy to ensure that your vote is counted. If you
attend the Annual Meeting, you will have the right to revoke the proxy and vote
your shares in person.
On behalf of the Directors and management of Data Dimensions, I would like
to thank you for your continued support and confidence.
Sincerely,
/s/ Peter A. Allen
Peter A. Allen
<PAGE> 3
DATA DIMENSIONS, INC.
STERLING PLAZA, 3RD FLOOR
3535 FACTORIA BOULEVARD SE
BELLEVUE, WASHINGTON 98006
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 16, 2000
------------------------
To the Stockholders of Data Dimensions, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of DATA
DIMENSIONS, INC. (the "Company"), a Delaware corporation, will be held at the
Hyatt Regency Bellevue, 900 Bellevue Way N.E., Bellevue, Washington 98004 on
Tuesday, May 16, 2000 at 9:00 a.m. Pacific Daylight Savings Time. The purposes
of the Annual Meeting will be:
1. To elect two directors to serve as the Class I directors on the
Company's Board of Directors for a three-year term;
2. To consider and act upon any other matter which may properly come before
the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 31, 2000 as
the record date for determining the stockholders entitled to notice of, and to
vote at, the meeting or any adjournment thereof. Only holders of record of
Common Stock of the Company at the close of business on the record date will be
entitled to notice of, and to vote at, the meeting and any adjournment thereof.
All stockholders are cordially invited to attend the Annual Meeting.
Management will present a review of the Company's operations for the year ended
December 31, 1999, as well as its direction for 2000 and beyond. The Company's
Proxy Statement is attached hereto. In addition, financial and other information
concerning the Company is contained in the enclosed Annual Report to
Stockholders for the fiscal year ended December 31, 1999. WHETHER OR NOT YOU
PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SIGN, DATE AND PROMPTLY RETURN THE
ENCLOSED PROXY CARD, WHICH YOU MAY REVOKE AT ANY TIME PRIOR TO ITS USE. PROMPTLY
SIGNING AND RETURNING YOUR PROXY CARD WILL HELP ENSURE THE PRESENCE OF A QUORUM
FOR THE MEETING AND WILL HELP AVOID ADDITIONAL PROXY SOLICITATION EXPENSE. A
prepaid, self-addressed envelope is enclosed for your convenience. Your shares
will be voted at the meeting in accordance with your proxy. If you attend the
meeting, you may revoke your proxy and vote in person.
By Order of the Board of Directors,
/s/ Laurence Leslie
Executive Vice President,
Chief Financial Officer and Secretary
Bellevue, Washington
April 10, 2000
<PAGE> 4
DATA DIMENSIONS, INC.
STERLING PLAZA, 3RD FLOOR
3535 FACTORIA BOULEVARD S.E.
BELLEVUE, WASHINGTON 98006
------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 16, 2000
------------------------
SOLICITATION AND REVOCATION OF PROXIES
This Proxy Statement, the accompanying Annual Report to Stockholders, the
attached Notice of Annual Meeting and the proxy card are being furnished to the
stockholders of Data Dimensions, Inc., a Delaware corporation (the "Company"),
in connection with the solicitation of proxies by the Company's Board of
Directors for use at the Company's 2000 Annual Meeting of Stockholders (the
"Annual Meeting") to be held at the Hyatt Regency Bellevue, 900 Bellevue Way
N.E., Bellevue, Washington 98004 on May 16, 2000, at 9:00 a.m., Pacific Daylight
Savings Time, and any adjournment thereof. All expenses of the Company
associated with this solicitation will be borne by the Company. The solicitation
of proxies by mail may be followed by personal solicitation of certain
stockholders by officers, directors or regular employees of the Company, without
additional remuneration, in person or by telephone or facsimile transmission.
The Company will also request brokerage firms, banks, nominees, custodians and
fiduciaries to forward proxy materials to the beneficial owners of shares of
Common Stock as of the record date and will reimburse such persons for the cost
of forwarding the proxy materials in accordance with customary practice.
The Board of Directors has designated the two persons named on the enclosed
proxy card, Peter A. Allen and Laurence C. Leslie, to serve as proxies in
connection with the Annual Meeting. All properly executed proxy cards will be
voted (except to the extent that authority to vote has been withheld) and where
a choice has been specified by the stockholder as provided in the proxy card, it
will be voted in accordance with the specification so made. PROXY CARDS
SUBMITTED WITHOUT SPECIFICATION WILL BE VOTED FOR PROPOSAL NO. 1 TO ELECT THE
DIRECTOR NOMINEES AS CLASS I DIRECTORS.
A stockholder may revoke a proxy prior to its execution by giving written
notice to the Secretary of the Company, by submission of another proxy bearing a
later date, or by voting in person at the Annual Meeting. Such notice or later
proxy will not affect a vote on any matter taken prior to the receipt thereof by
the Company.
These proxy materials and the accompanying Annual Report to Stockholders
are being mailed on or about April 10, 2000 to holders of record of the
Company's Common Stock as of March 31, 2000. The principal executive office and
mailing address of the Company is Sterling Plaza, 3rd Floor, 3535 Factoria
Boulevard S.E., Bellevue, Washington 98006.
VOTING AT THE MEETING
In accordance with the Company's Second Amended and Restated Bylaws, the
stock transfer records were compiled on March 31, 2000, the record date set by
the Board of Directors for determining the stockholders entitled to notice of,
and to vote at, the Annual Meeting and any adjournment thereof. On March 31,
2000, there were 13,560,972 shares of the Company's common stock, par value
$.001 per share ("Common Stock"), outstanding and entitled to vote. These shares
of Common Stock constitute the only class of securities entitled to notice of,
and to vote at, the Annual Meeting.
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock is necessary to constitute a quorum at the
Meeting. With respect to Proposal No. 1 (Election of the
<PAGE> 5
Director Nominees), brokers and other "street name" nominees holding shares for
the account of the beneficial owner of such shares generally may vote the shares
in their own discretion. In contrast, brokers and nominees generally do not have
authority to vote for non-routine matters without securing voting instructions
with respect to such matters from the beneficial owners of such stock. A broker
or nominee who does not receive instructions from the beneficial owner with
respect to such non-routine matters nevertheless may vote the proxy with respect
to a routine matter, such as the election of directors. Such proxies are
considered to be voted only with respect to the routine matter, but not with
respect to the non-routine matter (commonly referred to as "Broker Non-Votes").
For purposes of determining the existence of a quorum, abstentions from voting
identified as such on the proxy card and Broker Non-Votes are treated as present
at the Annual Meeting. With respect to tabulating the vote necessary for
shareholder action on the Proposal at the Annual Meeting, abstentions and Broker
Non-Votes will have no effect on the votes. If a quorum is present at the Annual
Meeting, the nominees for the director position who receive the greatest number
of votes cast by the shares of Common Stock present in person or represented by
proxy at the Annual Meeting and entitled to vote shall be elected.
PROPOSAL NO. 1:
ELECTION OF DIRECTOR NOMINEES
In accordance with the Company's Certificate of Incorporation and Second
Amended and Restated Bylaws, the Board of Directors may consist of no less than
three and no more than 15 directors, the specific number to be determined by
resolution adopted by the Board of Directors. The size of the Board is currently
set at five persons, and the Board of Directors is divided into three classes
with staggered three-year terms. Class I and Class II each consists of two
directors, and Class III consists of one director. The Class I directors, Peter
A. Allen and Lucie J. Fjeldstad, will be nominated for election at the Annual
Meeting.
Robert T. Knight, a Class II director, has been elected to a term that
expires in the year 2001. Thomas W. Fife, the only Class III director, has been
elected to a term that expires in the year 2002. Larry W. Martin, a Class II
director, resigned effective December 31, 1999. Dennis W. Walsh was elected to
the Board of Directors by the Board of Directors, effective March 21, 2000, to
fill the vacancy created by the resignation of Mr. Martin. Mr. Walsh's term as a
Class II director will expire in the year 2001.
NOMINEES FOR DIRECTOR
Certain information concerning Mr. Peter A. Allen and Ms. Lucie J.
Fjeldstad are set forth below. THE BOARD OF DIRECTORS RECOMMENDS THAT
STOCKHOLDERS VOTE FOR THE ELECTION OF MR. ALLEN AND MS. FJELDSTAD. Shares
represented by proxies will be voted for the election of the persons named below
unless authority has been withheld in the proxy. The nominees have consented to
serve as directors and the Board of Directors has no reason to believe that the
nominees will be unable to so serve. In the event of the death or unavailability
of a nominee, the proxy holders will have discretionary authority under the
proxy to vote for a suitable substitute nominee as the Board of Directors may
recommend. Proxies may not be voted for more than one nominee.
Lucie J. Fjeldstad was elected to the Board of Directors in September 1997.
Ms. Fjeldstad is Chief Executive Officer and President of DataChannel, Inc., a
software development company, a position she has held since October 1998.
Formerly, from August 1997 until October 1998 and from May 1993 until January
1995, Ms. Fjeldstad served as President of Fjeldstad International, a management
consulting firm. Prior to starting the consulting firm, Ms. Fjeldstad was a
Corporate Vice President at IBM Corporation. From January 1995 until August
1997, she was President, Video Division, of Tektronix Incorporated. Ms.
Fjeldstad is a member of the Board of Regents of Santa Clara University.
Peter A. Allen was elected Chief Executive Officer, President and Director
of the Company in December 1998. From 1996 to 1998, Mr. Allen was Vice President
and Chief Operating Officer of CSC Pinnacle Alliance, a business unit of
Computer Sciences Corporation. From 1990 to 1996, Mr. Allen served as Vice
President, Consulting, Outsourcing, and Systems Integration with Computer
Sciences Corporation. Mr. Allen has been Chairman of the Company since January
1, 2000.
2
<PAGE> 6
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 3, 2000, certain information
furnished to the Company with respect to ownership of the Company's Common Stock
of (i) each director and the director nominees, (ii) the current Chief Executive
Officer, (iii) the "Named Executive Officers" (as defined herein under
"Executive Compensation") other than the current Chief Executive Officer, and
(iv) all executive officers and directors as a group. As of March 3, 2000, the
Company knows of no person, entity or group that beneficially owns 5% or more of
the Company's Common Stock, except as listed below.
<TABLE>
<CAPTION>
COMMON STOCK
-------------------------
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
OWNERSHIP(1) CLASS(2)
------------ ----------
<S> <C> <C>
NAME AND ADDRESS OF BENEFICIAL OWNER
DIRECTORS
Peter A. Allen(3)........................................... 252,500 1.86%
Thomas W. Fife(4)........................................... 27,749 *
Lucie J. Fjeldstad(5)....................................... 18,250 *
Robert T. Knight(6)......................................... 32,950 *
Dennis W. Walsh............................................. -0- *
NAMED EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
John W. Cramer(7)........................................... 18,125 *
Gordon A. Gardiner(8)....................................... 3,800 *
Nigel G. Martin-Jones(9).................................... 22,500 *
Stephen W. Moses(10)........................................ 2,850 *
5% BENEFICIAL OWNERS
Larry W. Martin (11)........................................ 1,986,521 14.65%
605 Evergreen Point Road
P.O. Box 294
Medina, Washington 98039
ALL DIRECTORS, EXECUTIVE OFFICERS AND THE
DIRECTOR NOMINEES, AS A GROUP (12 persons)(12).............. 834,327 6.15%
</TABLE>
- ---------------
* Less than one percent
(1) According to the rules adopted by the Securities and Exchange Commission, a
person is the "beneficial owner" of securities if (s)he has or shares the
power to vote them or to direct their investment or has the right to
acquire beneficial ownership of such securities within 60 days through the
exercise of an option, warrant or otherwise. Except as otherwise indicated,
the stockholders identified in this table have sole voting and investment
power with regard to the shares shown as beneficially owned by them. Shares
of Common Stock subject to options or warrants exercisable on or before May
2, 2000 ("Vested Options") are deemed outstanding for computing the
percentage ownership of the person holding such options or warrants, but
are not deemed outstanding for computing the percentage of any other
person.
(2) Based on 13,558,306 shares of common stock issued and outstanding as of
March 3, 2000.
(3) Includes 237,500 Vested Options.
(4) Includes 11,757 Vested Options.
(5) Includes 13,250 Vested Options.
(6) Includes 16,950 Vested Options.
(7) Includes 18,125 Vested Options.
(8) Mr. Gardiner ceased to be an employee of the Company effective September
30, 1999.
(9) Includes 7,500 Vested Options.
3
<PAGE> 7
(10) Includes 2,850 Vested Options.
(11) Includes 9,000 shares held by Mr. Martin's spouse; Mr. Martin resigned as a
director of the Company effective December 31, 1999.
(12) Includes 330,432 Vested Options.
DIRECTORS AND EXECUTIVE OFFICERS
The following table identifies the current directors and executive officers
of the Company, the positions that they hold, and the year in which they began
serving in their respective capacities. Officers of the Company are elected by
the Board of Directors immediately following each Annual Meeting of the
Company's stockholders to hold office until their successors are elected and
qualified.
<TABLE>
<CAPTION>
POSITION HELD
NAME AGE CURRENT POSITION(S) WITH COMPANY SINCE
---- --- -------------------------------- -------------
<S> <C> <C> <C>
Thomas W. Fife 74 Director (Class III, expires 2002) 1995
Lucie J. Fjeldstad 55 Director (Class I, expires 2000) 1997
Robert T. Knight 62 Director (Class II, expires 2001) 1996
Dennis W. Walsh 53 Director (Class II, expires 2001) 2000
Peter A. Allen 39 President, Chief Executive Officer, & Chairman of the Board 1998
(Class I, expires 2000)
Laurence C. Leslie 41 Executive Vice President, Finance & Administration, Chief 1999
Financial Officer, Secretary
John W. Cramer 55 Executive Vice President, International Services 1998
Timothy P. Hicks 45 Executive Vice President, Marketing 1998
Nigel G. Martin-Jones 47 Executive Vice President, National Sales 1999
Stephen W. Moses 42 Executive Vice President, Consulting Services 1999
Eugene M. Stabile 59 Executive Vice President & President, Data Dimensions 1997
Information Services, Inc.
</TABLE>
- ---------------
For information on the business background of Mr. Allen and Ms. Fjeldstad, see
"Nominees For Director" above.
Thomas W. Fife has been a director since June 1995. Mr. Fife is the
co-founder and former Chief Executive Officer and Chairman of the Board of
VoiceCom Systems, Inc., a provider of enhanced voice-processing systems. Mr.
Fife was Chief Executive Officer of VoiceCom Systems, Inc. from 1984 through
1997 and served as Chairman of its Board of Directors from June 1993 until
acquisition of the company by Premiere Technologies, Inc. in September 1997. Mr.
Fife also serves as a Director of Tegris Corp. and Wyngate d/b/a VTL Link.
Robert T. Knight was elected as a director in November 1996. Mr. Knight is
President of Technology Venture Services, a consulting and venture capital firm
located in Santa Barbara, California. From January 1991 until February 1995, Mr.
Knight was Chairman and Chief Executive Officer of Digital Sound Corporation, a
telecommunications software company located in Carpinteria, California. Prior to
joining Digital Sound, he was a Corporate Vice President at Computer Sciences
Corporation and Senior Vice President and corporate officer of Xerox
Corporation. Mr. Knight is a member of the Board of Directors of PictureTel
Corporation. In addition to these corporate boards, he serves as a trustee of
the University of California at Santa Barbara Foundation, and is Chairman of its
Engineering Advisory Committee.
Dennis W. Walsh was elected as a director in March 2000. Since April 1997,
Mr. Walsh has served as Chief Information Technology Officer in General Motors'
Information Systems and Services organization. From April 1996 until April 1997,
Mr. Walsh was President of Conservation Through Innovation, a software and
hardware company for heating, ventilation and air conditioning systems, located
in Prescott, Arizona. From December 1991 until April 1996, Mr. Walsh was Vice
President, Information Systems and Chief Information Officer for Entergy
Corporation, a power production and electric service company.
4
<PAGE> 8
John W. Cramer joined the Company in August 1997 to head the Company's
International Services Division. On March 30, 1998, Mr. Cramer was elected
Executive Vice President, International Services. From 1995 until joining the
Company, Mr. Cramer was employed by AT&T Tridom as Managing Director, Europe,
Middle East, Africa and CIS. During 1993 and 1994, Mr. Cramer was employed by
OMS, Inc. as Vice President, Worldwide Marketing and U.S. & Latin American
Sales.
Timothy P. Hicks joined the Company in September 1998 as Executive Vice
President, Marketing. Prior to joining the Company, Mr. Hicks was a principal
with Pacific Asia Research from 1995 to 1998. From 1992 until 1995, Mr. Hicks
was Director of Strategic and Business Planning for NCR Company.
Laurence C. Leslie has been Executive Vice President and Chief Financial
Officer of the Company since September 23, 1999. Mr. Leslie served as the Vice
President, Finance from January 1999 to September 1999. From 1996 through
January 1999, Mr. Leslie was the Corporate Controller of Fluke Corporation and
from 1993 to 1996 was the International Controller, Treasury Manager at Fluke.
Nigel G. Martin-Jones has been Executive Vice President of National Sales
of the Company since May 1999. Mr. Martin-Jones served as Vice President of the
Company's International Operations from January 1996 to December 1997 and served
as Vice President, Corporate Development of the Company from December 1997 until
April 1999. Mr. Martin-Jones joined the Company in 1992.
Stephen W. Moses joined the Company in January of 1997 as Managing
Consultant. Mr. Moses has been Executive Vice President, Consulting, of the
Company since March 1999. From January 1995 through January 1996, Mr. Moses was
the President and Chief Operating Officer of Advanced Data Concepts, Inc., a
technical, administrative and consulting services company.
Eugene M. Stabile is the President of Data Dimensions Information Services,
Inc., a wholly owned subsidiary of the Company, formerly named Pyramid
Information Services, Inc. ("Pyramid"). The acquisition of Pyramid by the
Company was completed in November 1997. Mr. Stabile was the co-founder and sole
shareholder of Pyramid, a Los Angeles-based company providing computer
processing and management services. Mr. Stabile served as Vice President of
Pyramid from 1981 to 1994 and as President from 1994 until completion of the
acquisition.
Officers serve at the discretion of the Company's Board of Directors. No
family relationship exists among any directors or executive officers of the
Company or the nominees for election to the Company's Board of Directors.
5
<PAGE> 9
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning
compensation awarded to, earned by or paid to the Company's Chief Executive
Officer and each of the four other most highly compensated executive officers of
the Company determined as of the end of the last fiscal year, (hereafter
referred to as the "Named Executive Officers") for the fiscal years ended
December 31, 1999, 1998 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
--------------------------- ---- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Larry W. Martin 1999 $350,000 $150,000 $ 0 0 $ 0
Chairman of the Board(1) 1998 297,187 118,584 0 0 0
1997 200,000 400,000 12,281 0 0
Peter A. Allen 1999 350,000 0 0 200,000 67,706
Chief Executive Officer, 1998 18,846 92,000 0 400,000 0
President(2) 1997 -- -- -- -- --
John W. Cramer 1999 160,000 0 29,408 15,000 0
Executive Vice President, 1998 160,000 5,000 24,000 12,500 0
International Services(3) 1997 64,616 0 8,000 25,000 0
Gordon A. Gardiner 1999 162,021 0 0 75,000 91,667
Executive Vice President, 1998 200,000 28,125 0 0 0
Chief Financial Officer(4) 1997 17,692 0 0 150,000 0
Nigel G. Martin-Jones 1999 200,000 0 258,996 75,000 0
Executive Vice President, 1998 200,000 10,000 239,916 15,000 17,500
National Sales(5) 1997 115,756 0 88,862 0 0
Stephen W. Moses 1999 182,811 4,042 0 100,000 0
Executive Vice President, 1998 138,846 43,170 0 2,500 0
Consulting(6) 1997 108,077 0 0 2,000 0
</TABLE>
- ---------------
(1) Mr. Martin served as Chairman of the Board, Chief Executive Officer and
President of the Company until December 1998, at which time he relinquished
the offices of President and Chief Executive Officer. Mr. Martin resigned as
Chairman of the Board effective December 31, 1999. The bonus paid to Mr.
Martin in January 1999 was subject to repayment if Mr. Martin resigned prior
to December 31, 1999. Mr. Martin's base compensation for 1999 was set by the
Board at $350,000 per year.
(2) Mr. Allen was elected Chief Executive Officer and President of the Company
effective December 7, 1998. Effective January 1, 2000, Mr. Allen was elected
as Chairman of the Board of the Company. His annualized salary is $350,000.
Pursuant to his employment agreement, Mr. Allen received a one-time signing
bonus of $92,000 in 1998 which was paid in 1999. Compensation reported under
"All Other Compensation" reflects a one-time payment of relocation expenses
in 1999.
(3) Mr. Cramer's annualized salary for 1999 was $160,000. Mr. Cramer's
employment with the Company commenced in August 1997. Compensation under
"Other Annual Compensation" includes $24,000, $24,000 and $8,000 paid in
1999, 1998 and 1997, respectively, to Mr. Cramer for living expenses.
(4) Mr. Gardiner's employment with the Company commenced in December 1997. His
annualized salary was $200,000. Mr. Gardiner's employment with the Company
terminated effective September 30, 1999. Mr. Gardiner received $91,667 in
severance pay in 1999.
(5) Mr. Martin-Jones' annualized salary for 1999 was $200,000. Compensation
reported under "Other Annual Compensation" reflects payment of earned
commissions pursuant to a commission bonus program approved by the Board.
Compensation reported under "All Other Compensation" reflects a one-time
payment of relocation expenses in 1998.
(6) Mr. Moses' annualized salary for 1999 was $190,000.
6
<PAGE> 10
The following table sets forth all individual grants of stock options made
by the Company during the fiscal year ended December 31, 1999 to each of the
Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATE OF
--------------------------------------------------------------- STOCK PRICE
PERCENT OF APPRECIATION FOR
TOTAL OPTIONS EXERCISE FIVE YEAR OPTION
NUMBER OF SECURITIES GRANTED TO OR BASE TERM(3)
UNDERLYING OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------
NAME GRANTED(1) FISCAL YEAR(2) ($/SHARE) DATE 5% 10%
---- -------------------- --------------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Larry W. Martin................ -- -- -- -- -- --
Peter A. Allen................. 100,000 8.6% 3.560 6/10/04 $98,356 $217,341
25,000 2.15% 3.560 6/10/05 $30,268 $ 68,668
25,000 2.15% 3.560 6/10/06 $36,231 $ 84,435
25,000 2.15% 3.560 6/10/07 $42,493 $101,779
25,000 2.15% 3.560 6/10/08 $49,068 $120,857
Nigel G. Martin-Jones.......... 18,750 1.61% 3.563 6/10/05 $22,720 $ 51,545
18,750 1.61% 3.563 6/10/06 $27,196 $ 63,380
18,750 1.61% 3.563 6/10/07 $31,897 $ 76,398
18,750 1.61% 3.563 6/10/08 $36,832 $ 90,719
John W. Cramer................. 3,750 0.32% 3.563 6/10/05 $ 4,544 $ 10,309
3,750 0.32% 3.563 6/10/06 $ 5,439 $ 12,676
3,750 0.32% 3.563 6/10/07 $ 6,379 $ 15,279
3.750 0.32% 3.563 6/10/08 $ 7,366 $ 18,143
Stephen W. Moses............... 18,750 1.61% 3.563 6/10/05 $22,720 $ 51,545
18,750 1.61% 3.563 6/10/06 $27,196 $ 63,380
18,750 1.61% 3.563 6/10/07 $31,897 $ 76,398
18,750 1.61% 3.563 6/10/08 $36,832 $ 90,719
6,250 0.54% 3.25 12/10/05 $ 6,908 $ 15,672
6,250 0.54% 3.25 12/10/06 $ 8,269 $ 19,270
6,250 0.54% 3.25 12/10/07 $ 9,698 $ 23,229
6,250 0.54% 3.25 12/10/08 $11,198 $ 27,583
Gordon A. Gardiner............. 18,750 1.61% 3.563 9/30/99 $22,720 $ 51,545
18,750 1.61% 3.563 9/30/99 $27,196 $ 63,380
18,750 1.61% 3.563 9/30/99 $31,897 $ 76,398
18,750 1.61% 3.563 9/30/99 $36,832 $ 90,719
</TABLE>
- ---------------
(1) Generally, options granted pursuant to the Company's 1997 Stock Option Plan
vest in equal installments over the four-year period following the option
grant. Upon the occurrence of certain "Corporate Transactions" (as defined
in the 1997 Plan Summary contained in this Proxy Statement), all options
granted under the 1997 Plan will become immediately exercisable without
regard to any contingent vesting provision.
(2) Based on stock options representing an aggregate of 1,162,000 shares of
Common Stock granted to employees during the fiscal year ended December 31,
1999.
(3) These assumed rates of appreciation are provided in order to comply with the
requirements of the Securities and Exchange Commission and do not represent
the Company's expectation as to the actual rate of appreciation of the
Common Stock. These gains are based on assumed rates of annual compound
stock price appreciation of 5% and 10% from the date the options were
granted over the full option term. The actual value of the options will
depend on the performance of the Common Stock and may be greater or less
than the amounts shown.
7
<PAGE> 11
The following table sets forth information, on an aggregated basis,
concerning the exercise of stock options during the fiscal year ended December
31, 1999 by each of the Named Executive Officers and the fiscal year-end value
of unexercised options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES ACQUIRED VALUE FY-END FY-END
ON EXERCISE REALIZED (#) ($)(2)
NAME (#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Larry W. Martin............... -- -- 0 / 0 $0 / $0
Peter A. Allen................ -- -- 237,500 / 362,500 $0 / $0
Nigel G. Martin-Jones......... 10,000 $67,530 8,750 / 86,250 $2,815 / $0
John W. Cramer................ -- -- 18,125 / 34,375 $0 / $0
Stephen W. Moses.............. -- -- 1,825 / 102,675 $0 / $0
Gordon A. Gardiner............ -- -- 0 / 0 $0 / $0
</TABLE>
- ---------------
(1) Market value of the underlying securities at exercise date minus exercise
price of the options.
(2) The closing price of the Company's stock as of its fiscal year-end was
$2.563. Except as set forth above, the exercise price of all options held by
the Named Executive Officers set forth in the table exceeds the market value
of the underlying shares.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
AND CHANGE OF CONTROL ARRANGEMENTS
As an incentive to Mr. Martin to remain an employee of the Company
throughout 1999 and to remain available to consult with and advise the Chief
Executive Officer and other members of management, the Board approved a
compensation package pursuant to which Mr. Martin received in January 1999 a
bonus of $150,000, subject to repayment if Mr. Martin resigned as an employee
prior to December 31, 1999. Mr. Martin resigned effective December 31, 1999 and
was entitled to retain the $150,000. In addition, Mr. Martin received $350,000
compensation payable according to the Company's normal payroll schedule in
fiscal year 1999.
In connection with Mr. Allen's employment in December 1998 as Chief
Executive Officer and President, the Company entered into an agreement with Mr.
Allen pursuant to which he is entitled to base salary and certain bonuses, as
reported in the Executive Compensation Table. In addition, pursuant to the terms
of the Agreement, Mr. Allen was granted options as disclosed in the Option Grant
Table. Under the terms of his agreement, Mr. Allen is entitled to use a leased
automobile for the duration of his employment. The agreement also provides that,
if Mr. Allen is terminated without cause, he is entitled to twelve months
severance pay.
In connection with Mr. Gardiner's employment in December 1997 as Chief
Financial Officer and Executive Vice President, the Company entered into an
agreement with Mr. Gardiner under which he was entitled to severance pay equal
to six months salary in the event the Company terminated his employment other
than for cause. Mr. Gardiner resigned effective September 30, 1999, and he
received $91,667 as severance pay in 1999. Mr. Gardiner's options expired in
1999.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held ten meetings during the year ended December 31,
1999.
8
<PAGE> 12
During 1999, the members of the Compensation Committee were Mr. Fife, Ms.
Fjeldstad and Mr. Knight. The Compensation Committee is responsible for setting
the compensation of the Chief Executive Officer and the Chairman of the Board
and consults with the Chief Executive Officer regarding the compensation of
other corporate officers. The Compensation Committee, which also serves as the
Administrative Committee for the Company's 1988 and 1997 Stock Option Plans,
held three meetings and took action pursuant to two unanimous written consents
during 1999. During 1999, the members of the Audit Committee were Ms. Fjeldstad,
Mr. Fife and Mr. Knight. The Audit Committee held two meetings during 1999. The
Board of Directors does not have a Nominating Committee.
DIRECTOR COMPENSATION
The Company pays no additional remuneration to employees of the Company who
serve as directors. All directors are entitled to reimbursement for expenses
incurred in traveling to and from meetings of the Company's Board of Directors.
Effective August 3, 1999, the Board of Directors adopted the following
compensation plan for non-employee directors ("Eligible Directors"): (a) upon
first joining the Board, the Eligible Director is granted a stock option
exercisable for 10,000 shares of the Company's Common Stock at an exercise price
equal to the fair market value of the stock on the date of grant with such
options exercisable as to twenty-five percent (25%) of the shares one year after
the date of grant and as to an additional twenty-five percent (25%) on each of
the second, third and fourth anniversaries of the date of grant; such options
terminate upon the earlier of ten (10) years from the date of grant or ninety
(90) days after the date on which the grantee is no longer serving as a Director
of the Company; (b) on each anniversary of an Eligible Director's election to
the Board of Directors, the Eligible Director is granted a stock option
exercisable for 7,500 shares of the Company's Common Stock at an exercise price
equal to the fair market value of the stock on the date of grant with such
options fully exercisable upon grant; such options terminate upon the earlier of
ten (10) years from the date of grant or ninety (90) days after the date on
which the grantee is no longer serving as a Director of the Company, and (c)
Eligible Directors receive an annual cash retainer in the amount of $15,000 for
service as a Director, and $1,000 for each board meeting and committee meeting
attended for which an agenda has been prepared and which has a duration of one
hour or more.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD
OF DIRECTORS ON EXECUTIVE COMPENSATION*
The Board of Directors of the Company (the "Board") has delegated to the
Compensation Committee of the Board (the "Committee") the authority to establish
and administer the Company's compensation programs. The Compensation Committee
is comprised of three non-employee directors: Thomas W. Fife, Robert T. Knight
and Lucie J. Fjeldstad. The Committee is responsible for: 1) determining the
most effective overall executive compensation strategy based upon the business
needs of the Company and consistent with shareholders' interests; 2)
administering the Company's executive compensation programs and policies; 3)
monitoring corporate performance and its relationship to compensation of
executive officers; and 4) reviewing and making appropriate changes to executive
officers' compensation as recommended by the Company's Chief Executive Officer.
COMPENSATION PHILOSOPHY
The policies of the Committee with respect to executive officers, including
the Chief Executive Officer, are to enable it to attract and retain talented
executives and to reward them appropriately. The Committee attempts to determine
the total level of compensation, as well as the appropriate mix of base salary,
annual
- ---------------
* The report of the Compensation Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under either the Securities Act of 1933, as amended,
or the Exchange Act of 1934 (together, the "Acts"), except to the extent that
the Company specifically incorporates such report by reference; and further,
such report shall not otherwise be deemed filed under the Acts.
9
<PAGE> 13
incentives and long-term incentives. In determining compensation, consideration
is given both to overall Company performance and to individual performance,
taking into account the contributions made by the executive toward improving
Company performance. Consideration is also given to the executive's position,
location, and level of responsibility in the structure of the Company and the
job performance of the executive in planning, providing direction for, and
implementing the Company's strategy. There is no singular objective formula by
which compensation is determined and the decisions are ultimately largely
subjective.
These policies are implemented using a mix of the following key elements:
1) the Company pays base salaries that are generally competitive with other
leading information technology ("IT") services companies with which the Company
competes for talent; to ensure that its salaries are sufficient to attract and
retain highly qualified executives and other key employees, the Company
regularly compares its salaries with those of its competitors and sets salary
parameters based on this review; 2) the Company pays cash bonuses based on the
achievement of specific operating goals and high levels of performance; and 3)
the Company provides significant equity-based incentives pursuant to the
Company's 1997 Stock Option Plan (the "1997 Plan") to ensure that the Company's
executive officers and key employees are motivated to achieve the Company's
long-term goals. Stock incentive awards under the 1997 Plan produce value to
executives only if the price of the Company's stock appreciates, thereby
directly aligning the interests of executives with those of shareholders.
CHIEF EXECUTIVE OFFICER COMPENSATION
The same procedures, as described above, that are used in reviewing and
approving executive officers' compensation are also applied in establishing the
base salary, bonus and equity incentive awards for the Company's Chief Executive
Officer.
Peter A. Allen served as President and Chief Executive Officer during 1999.
Mr. Allen joined the Company on December 7, 1998. Pursuant to the terms of an
employment agreement, Mr. Allen was paid an annual base salary of $350,000. In
1999, Mr. Allen was entitled to receive an annual incentive bonus up to a
maximum of 100% of his annual base salary. Mr. Allen did not receive any
incentive bonus payment in 1999. Mr. Allen received a one-time signing bonus of
$92,000 in 1998 which was paid in 1999. Under the Company's executive
compensation program, total compensation mix for senior executives emphasizes
long-term rewards in the form of stock options. In 1999, the Committee approved
the grant to Mr. Allen of options to purchase 200,000 shares of Common Stock at
an exercise price of $3.56 per share, of which 100,000 options vested December
9, 1999, with the remaining options to vest over four years. In determining the
grant to Mr. Allen, the Committee reviewed the stock option grants to chief
executive officers of other comparable IT services companies in connection with
their employment services.
Respectfully submitted,
Thomas W. Fife
Lucie J. Fjeldstad
Robert T. Knight
10
<PAGE> 14
PERFORMANCE GRAPH
The following graph compares the performance of the Company's Common Stock
for the periods indicated with the performance of the Russell 2000 Index and the
NASDAQ Computer Programming, Data Processing and Other Computer Related Services
Index (SIC Codes 7370-7379). The comparison assumes $100 was invested on
December 31, 1994 in the Company's Common Stock and in each of the foregoing
indices and the reinvestment of any dividends.
COMPARATIVE FIVE-YEAR TOTAL RETURNS
DATA DIMENSIONS, INC., RUSSELL 2000, PEER GROUP
(Performance results through 12/31/1999)
<TABLE>
<CAPTION>
NASDAQ COMPUTER
DATA DIMENSIONS RUSSELL 2000 INDEX RELATED
--------------- ------------------ ---------------
<S> <C> <C> <C>
1994 100.00 100.00 100.00
1995 260.07 128.44 145.05
1996 1588.37 149.63 193.40
1997 2315.44 183.08 244.54
1998 1149.33 178.42 397.45
1999 343.96 216.35 778.05
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From January 1999 through October 1999, Mr. Martin's son, who was employed
by the Company in a sales management position, earned salary and commissions in
the amount of $268,676. In October 1999, his employment with the Company was
terminated.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the 1934 Act requires the Company's directors and
executive officers and persons who own more than ten percent of the outstanding
shares of the Company's Common Stock ("ten percent stockholders"), to file with
the Securities and Exchange Commission initial reports of beneficial ownership
and reports of changes in beneficial ownership of shares of Common Stock and
other equity securities of the Company. To the Company's knowledge, based solely
on its review of the copies of such reports furnished to the Company or
otherwise in its files and on written representations from its directors,
executive officers and ten percent shareholders that no other reports were
required, during the fiscal year ended December 31, 1999, the Company's
officers, directors and ten percent stockholders complied with all applicable
Section 16(a) filing requirements.
11
<PAGE> 15
STOCKHOLDER PROPOSALS
Stockholders who intend to have a proposal considered for inclusion in the
Company's proxy materials for presentation at the year 2001 Annual Meeting of
Stockholders must submit the proposal to the Company no later than December 8,
2000. Stockholders who intend to present a proposal at the year 2001 Annual
Meeting of Stockholders without inclusion of such proposal in the Company's
proxy materials must deliver or cause to be delivered notice to the Company, at
its principal executive offices, no later than 75 days nor more than 90 days
prior to the year 2001 Annual Meeting; provided, however, that in the event less
than 90 days notice or prior public disclosure of the date of the Annual Meeting
is given or made to shareholders, notice by the shareholder to be timely must be
so received not later than the close of business on the 15th day following the
day on which such notice of Annual Meeting was mailed or such public disclosure
made, whichever first occurs.
INDEPENDENT PUBLIC ACCOUNTANTS
On March 26, 1998, the Company notified BDO Seidman, LLP that it intended
to engage another accounting firm as the Company's independent accountants for
the fiscal year ending December 31, 1998. The decision to change independent
accountants was approved by the Company's Board of Directors on March 26, 1998.
The report of BDO Seidman, LLP on the Company's consolidated financial
statements for the years ended December 31, 1995, 1996 and 1997 contained no
adverse opinion and was unmodified, except for the inclusion of a disclosure
that the consolidated financial statements give retroactive effect to the merger
of Data Dimensions, Inc. and Pyramid Information Services, Inc., which merger
has been accounted for as a pooling of interests.
There have been no disagreements with BDO Seidman, LLP on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure which, if not resolved to the satisfaction of BDO Seidman,
LLP, would have caused BDO Seidman, LLP to make reference to the matter in their
report.
On March 26, 1998, the Company appointed PricewaterhouseCoopers LLP as its
independent accountants for the fiscal year ending December 31, 1998, pursuant
to the approval of the Company's Board of Directors. PricewaterhouseCoopers LLP
was retained as the Company's independent accountants for the fiscal year ending
December 31, 1999 and is selected as the Company's independent accountant's for
the fiscal year ending December 31, 2000.
A representative of PricewaterhouseCoopers LLP is expected to be present at
the Annual Meeting. The representative will be given the opportunity to make a
statement on behalf of their firm if such representative so desires, and will be
available to respond to appropriate stockholder questions.
TRANSACTION OF OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors is not aware
of any other matters that may come before the Annual Meeting. It is the
intention of the persons named in the enclosed proxy card to vote the proxy in
accordance with their best judgment if any other matters do properly come before
the Annual Meeting.
12
<PAGE> 16
Please return the enclosed proxy card as soon as possible. Unless a quorum
consisting of a majority of the outstanding shares entitled to vote is
represented at the Annual Meeting, no business can be transacted. Therefore,
please be sure to date and sign your proxy card exactly as your name appears on
your stock certificate and return it in the enclosed postage prepaid return
envelope. Please act promptly to insure that you will be represented at this
important meeting. THE COMPANY WILL PROVIDE, WITHOUT CHARGE, ON THE WRITTEN
REQUEST OF ANY BENEFICIAL OWNER OF SHARES OF THE COMPANY'S COMMON STOCK ENTITLED
TO VOTE AT THE ANNUAL MEETING, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K AS FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION FOR THE COMPANY'S
FISCAL YEAR ENDED DECEMBER 31, 1999. WRITTEN REQUESTS SHOULD BE MAILED TO:
INVESTOR RELATIONS
DATA DIMENSIONS, INC.
STERLING PLAZA, 3RD FLOOR
3535 FACTORIA BOULEVARD S.E.
BELLEVUE, WASHINGTON 98006
By the Order of the Board of
Directors:
/s/ Laurence C. Leslie
Executive Vice President,
Chief Financial Officer & Secretary
Dated: April 10, 2000
13
<PAGE> 17
DATA DIMENSIONS, INC.
Proxy for Annual Meeting of Shareholders to be Held May 16, 2000.
The undersigned hereby names, constitutes and appoints Peter A. Allen
and Laurence C. Leslie, or either of them acting in the absence of the other,
with full power of substitution, my true and lawful attorneys and proxies for me
and in my place and stead to attend the Annual Meeting of the Shareholders of
Data Dimensions, Inc. (the "Company") to be held at the Hyatt Regency Bellevue,
900 Bellevue Way N.E., Bellevue, Washington 98004 on May 16, 2000 at 9:00 a.m.
Pacific Daylight Savings Time, and at any adjournment thereof, and to vote all
the shares of Common Stock held of record in the name of the undersigned on
March 31, 1999, with all the powers that the undersigned would possess if (s)he
were personally present.
1. PROPOSAL 1 -- Election of Class I Directors
[ ] FOR nominee named below [ ] WITHHOLD AUTHORITY for nominee named below
Mr. Peter A. Allen
[ ] FOR nominee named below [ ] WITHHOLD AUTHORITY for nominee named below
Ms. Lucie J. Fjeldstad
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE NOMINEES NAMED
ABOVE.
2. Upon such other matters as may properly come before, or incident to the
conduct of, the Annual Meeting, the Proxy holders shall vote in such
manner as they determine to be in best interests of the Company.
Management is not presently aware of any such matters to be presented
for action at the meeting.
<PAGE> 18
THE MANAGEMENT OF THE COMPANY SOLICITS THIS PROXY. IF NO SPECIFIC DIRECTION IS
GIVEN AS TO THE ABOVE ITEMS, THIS PROXY WILL BE VOTED FOR THE NOMINEES NAMED IN
PROPOSAL 1.
Dated
--------------------------------------------
--------------------------------------------------
Shareholder (PRINT NAME)
--------------------------------------------------
Shareholder (SIGN NAME)
I DO [ ] DO NOT [ ] PLAN TO ATTEND THE MEETING.
The shareholder signed above reserves the right to
revoke this Proxy at any time prior to its exercise
by written notice delivered to the Company's
Secretary at the Company's corporate offices at
Sterling Plaza, 3rd Floor, 3535 Factoria Boulevard
S.E., Bellevue, Washington 98006, prior to the
Annual Meeting. The power of the Proxy holders shall
also be suspended if the shareholder signed above
appears at the Annual Meeting and elects in writing
to vote in person.
