<PAGE>
- --------------------------------------------------------------------------------
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
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
DIVERSIFIED CORPORATE RESOURCES, INC.
(Name of Registrant as Specified in its Charter)
M. TED DILLARD
PRESIDENT AND
SECRETARY
DIVERSIFIED CORPORATE RESOURCES, INC.
12801 N. CENTRAL EXPRESSWAY, SUITE 350
DALLAS, TEXAS 75243
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/ / $125 Per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: *
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and
state how it was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
----------------------------------------------
2) Form Schedule or Registration Statement No.:
-------------------------
3) Filing Party:
--------------------------------------------------------
4) Date Filed:
----------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
April 30, 1998
Dear Shareholder:
You are cordially invited to attend the 1998 Annual Meeting of Shareholders
(the "Annual Meeting") of Diversified Corporate Resources, Inc. (the "Company"),
which will be held at Sheraton Park Central located at 12720 Merit Drive,
Dallas, Texas 75251 on June 10, 1998 at 10:00 a.m. Central Time.
At the Annual Meeting, you will be asked to consider and vote upon the
following: (1) the election of five directors to hold office until the next
annual election of directors by shareholders or until their respective
successors shall have been duly elected and shall have qualified, (2) to approve
the amendment to the Diversified Corporate Resources, Inc. Amended and Restated
1996 Nonqualified Stock Option Plan, amended to increase the number of shares
from 450,000 to 500,000 and to modify the transferability provisions contained
therein as described in the attached Proxy Statement, (3) to approve the
Diversified Corporate Resources, Inc. 1998 Nonqualified Stock Option Plan, and
(4) the transaction of any and all other business that may properly come before
the meeting or any adjournment(s) thereof.
Whether or not you plan to attend the meeting, please date, sign, and
return the enclosed proxy for your shares of stock in the enclosed prepaid
envelope. Your cooperation in returning your executed proxy promptly is
appreciated. If you do attend the meeting, you may vote in person, which will
effectively revoke any proxy previously submitted.
Sincerely,
J. Michael Moore
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
<PAGE>
DIVERSIFIED CORPORATE RESOURCES, INC.
12801 N. CENTRAL EXPRESSWAY, SUITE 350
DALLAS, TX 75243
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 10, 1998
TO THE SHAREHOLDERS:
You are cordially invited to attend the Annual Meeting of Shareholders (the
"Annual Meeting") of Diversified Corporate Resources, Inc. (the "Company") to be
held at Sheraton Park Central located at 12720 Merit Drive, Dallas, Texas 75251
on Wednesday, June 10, 1998 for the following purposes:
1. To elect five directors of the Company to hold office until the next annual
meeting of shareholders or until their respective successors are duly
elected and qualified.
2. To approve the amendment to the Diversified Corporate Resources, Inc.
Amended and Restated Nonqualified 1996 Stock Option Plan, amended to
increase the number of shares from 450,000 to 500,000 and to modify the
transferability provisions contained therein as described in the attached
Proxy Statement.
3. To approve the Diversified Corporate Resources, Inc. 1998 Nonqualified
Stock Option Plan.
4. The transaction of any and all other business that may properly come before
the meeting or any adjournment(s) thereof.
Holders of record of the Company's Common Stock at the close of business on
April 27, 1998, will be entitled to notice of, and to vote at, the Annual
Meeting or any adjournment(s) thereof. The stock transfer books will not be
closed. A list of shareholders entitled to vote at the Annual Meeting will be
available for examination at the offices of the Company for ten (10) days prior
to the Annual Meeting.
You are cordially invited to attend the Annual Meeting; WHETHER OR NOT YOU
EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, HOWEVER, YOU ARE URGED TO MARK,
SIGN, DATE, AND MAIL THE ENCLOSED FORM OF PROXY PROMPTLY SO THAT YOUR SHARES OF
COMMON STOCK MAY BE REPRESENTED AND VOTED IN ACCORDANCE WITH YOUR WISHES AND IN
ORDER THAT THE PRESENCE OF A QUORUM MAY BE ASSURED AT THE ANNUAL MEETING. Your
proxy will be returned to you if you are present at the Annual Meeting and
request its return in the manner provided for revocation of proxies on the
initial page of the enclosed proxy statement.
By Order of the Board of Directors,
M. TED DILLARD
SECRETARY
Dallas, Texas
April 30, 1998
<PAGE>
DIVERSIFIED CORPORATE RESOURCES, INC.
12801 N. CENTRAL EXPRESSWAY, SUITE 350
DALLAS, TEXAS 75243
PROXY STATEMENT
FOR
1998 ANNUAL MEETING OF SHAREHOLDERS
JUNE 10, 1998
-------------------------------
SOLICITATION AND REVOCABILITY OF PROXIES
The enclosed form of proxy is solicited by the Board of Directors of
Diversified Corporate Resources, Inc. (the "Company") to be used at the Annual
Meeting of Shareholders (the "Annual Meeting") to be held at the time and place
and for the purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders (the "Notice") and at any adjournment(s) thereof. WHEN PROXIES IN
THE ACCOMPANYING FORM ARE PROPERLY EXECUTED AND RECEIVED, THE SHARES REPRESENTED
THEREBY WILL BE VOTED AT THE ANNUAL MEETING IN ACCORDANCE WITH THE DIRECTIONS
NOTED THEREON; IF NO DIRECTION IS INDICATED, SUCH SHARES WILL BE VOTED FOR THE
ELECTION OF DIRECTORS AND IN FAVOR OF THE OTHER PROPOSALS SET FORTH IN THE
NOTICE.
The executive offices of the Company are located at, and the mailing
address of the Company is, 12801 North Central Expressway, Suite 350, Dallas,
Texas 75243.
Management does not intend to present any business at the Annual Meeting
for a vote other than the matters set forth in the Notice and has no information
that others will do so. If other matters requiring a vote of the shareholders
properly come before the Annual Meeting, it is the intention of the persons
named in the accompanying form of proxy to vote the shares represented by the
proxies held by them in accordance with their judgment on such matters.
This proxy statement (the "Proxy Statement") and accompanying form of proxy
are being mailed on or about May 10, 1998. The Company's Annual Report is
enclosed herewith, but does not form any part of the materials for solicitation
of proxies.
The enclosed proxy, even though executed and returned, may be revoked at
any time prior to the voting of the proxy by giving written notice of revocation
to the Secretary of the Company at the Company's principal executive offices or
by executing and delivering a later-dated proxy or by attending the Annual
Meeting and voting in person. However, no such revocation shall be effective
until the Company at or before the Annual Meeting has received such notice. Such
revocation will not affect a vote on any matters taken prior to receipt of such
revocation. Mere attendance at the Annual Meeting will not of itself revoke the
proxy.
In addition to the solicitation of proxies by use of the mail, directors,
officers, and regular employees of the Company may solicit the return of
proxies, either by mail, telephone, telegraph, or through personal contact. Such
directors, officers, and employees will not be additionally compensated but will
be reimbursed for out-of-pocket expenses. Brokerage houses and other custodians,
nominees, and fiduciaries will, in connection with shares of Common Stock, par
value $.10 per share (the "Common Stock"), registered in their names, be
requested to forward solicitation material to the beneficial owners of such
shares of Common Stock.
The cost of preparing, printing, assembling, and mailing the Annual Report,
the Notice, this Proxy Statement, and the enclosed form of proxy, as well as the
cost of forwarding solicitation materials to the beneficial owners of shares of
Common Stock, and other costs of solicitation, are to be borne by the Company.
1
<PAGE>
VOTING SECURITIES OUTSTANDING; QUORUM
The record date for the determination of shareholders entitled to notice of
and vote at the Annual Meeting was the close of business on April 27, 1998 (the
"Record Date"). At the close of business on the Record Date there were 2,747,597
shares of Common Stock issued and outstanding, each of, which is entitled to one
vote on all matters properly, brought before the Annual Meeting. Shareholders
have no cumulative voting rights.
The presence in person or by proxy of the holders of a majority of the
issued and outstanding shares of Common Stock entitled to vote as of the Record
Date is necessary to constitute a quorum at the Annual Meeting. Abstentions and
broker non-votes are treated as present at the Annual Meeting and are,
therefore, counted to determine a quorum. If a quorum is not present, the
shareholders entitled to vote who are present in person or represented by proxy
at the Annual Meeting have the power to adjourn the meeting from time to time,
without notice other than an adjournment at the Annual Meeting, until a quorum
is present or represented. It is the intention of the persons named in the
accompanying form of proxy to vote the shares represented by the proxies held by
them for such an adjournment. At any adjourned meeting at which a quorum is
present, any business may be transacted that might have been transacted at the
Annual Meeting as originally notified.
Assuming the presence of a quorum, the affirmative vote of the holders
of (i) a plurality of the shares of Common Stock represented and voting at
the Annual Meeting is required for the election of directors and (ii) a
majority of the shares of Common Stock present in person or represented by
proxy at the Annual Meeting and entitled to vote thereon is required to (a)
approve the amendment (the "Amendment") to the Diversified Corporate
Resources, Inc. Amended and Restated 1996 Nonqualified Stock Option Plan (the
"1996 Plan"), amended to increase the number of shares from 450,000 to
500,000 and to modify the transferability provisions contained therein as
described in the Proxy Statement, (b) approve the Diversified Corporate
Resources, Inc. 1998 Nonqualified Stock Option Plan, and (c) approve any and
all other matters that may properly come before the meeting or any
adjournment(s) thereof.
Abstentions may be specified on all proposals except the election of
directors. Abstentions, with respect to any proposal other than the election of
directors, will have the same effect as a vote against such proposal. Broker
non-votes will have no effect on the outcome of the election of directors, the
approval of the amendment to the 1996 Plan or the approval of the 1998 Plan.
With regard to the election of directors, votes may be cast in favor of or
withheld from each nominee; votes that are withheld will be excluded entirely
from the vote and will have no effect.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of April 27, 1998 by (i) each person known by
the Company to own beneficially five percent or more of the outstanding Common
Stock; (ii) each of the Company's directors; (iii) each of the executive
officers named in the Summary Compensation Table below; and (iv) all directors
and executive officers of the Company as a group. The address of each person
listed below is 12801 N. Central Expressway, Suite 350, Dallas, Texas 75243,
unless otherwise indicated.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)(2)
-----------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT
------------------------------------ ------ -------
<S> <C> <C>
DCRI L.P. No. 2, Inc. . . . . . . . . . . . . . . 631,700(3) 22.99%
J. Michael Moore . . . . . . . . . . . . . . . . 780,700(4) 27.19%
M. Ted Dillard . . . . . . . . . . . . . . . . . 141,500(5) 4.99%
Samuel E. Hunter. . . . . . . . . . . . . . . . . 17,500(6) *
Deborah A. Farrington . . . . . . . . . . . . . . 10,000(7) *
A. Clinton Allen . . . . . . . . . . . . . . . . 10,000(8) *
Douglas G. Furra . . . . . . . . . . . . . . . . 10,500(9) *
Anthony J. Bruno . . . . . . . . . . . . . . . . 600(10) *
James L. Woo . . . . . . . . . . . . . . . . . . 1,160(11) *
FMR Corp. . . . . . . . . . . . . . . . . . . . 253,200(12) 9.22%
Bricoleur Capital Management, Inc. . . . . . . . 172,300(13) 6.27%
All directors and executive officers as a group
(8 persons)1, 2, 4, 5, 6, 7, 8, 9, 10, 11 . . 971,960 32.42%
</TABLE>
* Represents less than 1% of outstanding Common Stock.
1. Beneficial ownership as reported in the above table has been
determined in accordance with Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). The persons and entities named in the
table have sole voting and investment power with respect to all shares shown as
beneficially owned by them, except as noted below and subject to applicable
community property laws.
2. Except for the percentages of certain parties that are based on
presently exercisable options that are indicated in the following footnotes to
the table, the percentages indicated are based on 2,747,597 shares of Common
Stock issued and outstanding on the Record Date. In the case of parties holding
presently exercisable options, the percentage ownership is calculated on the
assumption that the shares presently held or purchasable within the next 60 days
underlying such options are outstanding.
3. The shares (the "Shares") were acquired by DCRI L.P. No. 2, Inc. ("No.
2") from Ditto Properties Co. ("DPC") as a result of a series of transactions
culminating in March of 1993. DPC has since filed a lawsuit against No. 2 (the
"Litigation") in which it is claiming, among other things, that its sale of the
Shares to No. 2 in March 1993 pursuant to a stock purchase agreement should be
rescinded. DPC has also filed a Schedule 13D claiming that it is the beneficial
owner of the Shares based on a successful outcome of DPC's rescission claim.
The litigation is described in the Company's Annual Report on Form 10-K, Item 3.
The trial court, however, granted No. 2's motion for summary judgment dismissing
DPC's rescission claim.
3
<PAGE>
No. 2 holds sole voting and investment power with respect to the Shares,
subject to the rights retained by Imperial Bank in connection with a loan (the
"Imperial Loan") to No. 2, the current balance of which is $1,500,000. No. 2
has granted a security interest to Imperial Bank to secure the Imperial Loan in
375,000 shares of Common Stock. The loan documents relating to the Imperial
Loan prohibit No. 2 from selling, transferring or encumbering the Shares without
the consent of Imperial Bank, other than a portion of the Shares that may be
sold by No. 2 to satisfy the Imperial Loan and other obligations of No. 2. No. 2
has granted an option (the "Hunter Option") to Samuel E. Hunter, a director of
the Company, to purchase an aggregate of 20,000 shares of Common Stock at $5.00
per share, which option expires on July 31, 2000. The Shares are subject to a
lock-up letter agreement (the "No. 2 Lock-up Letter") with Cruttenden Roth
Incorporated ("Cruttenden Roth"), subject to certain limited exceptions,
pursuant to which the Shares may not be transferred without the consent of
Cruttenden Roth. The No. 2 Lock-up Letter expires on October 1, 1998.
The address of No. 2 is 12801 North Central Expwy, Suite 260 Dallas, Texas
75243.
4. Includes the Shares beneficially owned by No. 2 (as J. Michael Moore
owns all of the capital stock of No. 2, subject to an option granted to M. Ted
Dillard to purchase up to 10% of the outstanding common stock of No. 2 over a
four-year vesting schedule) as described above in note 3, and 124,000 shares of
Common Stock issuable upon exercise of options within 60 days. The Shares are
subject to a lock-up letter agreement (the "Moore Lock-up Letter") with
Cruttenden Roth subject to certain limited exceptions, pursuant to which the
Shares may not be transferred without the consent of Cruttenden Roth. The Moore
Lock-up Letter expires on October 1, 1998.
5. Includes 84,000 shares of Common Stock issuable upon the exercise of
options within 60 days. Pursuant to an agreement between Mr. Moore, Mr. Dillard,
and No. 2, Mr. Dillard has the right to acquire a 10% ownership in No. 2,
pursuant to a vesting schedule over a four year period. The Shares are subject
to a lock-up letter agreement (the "Dillard Lock-up Letter") with Cruttenden
Roth subject to certain limited exceptions, pursuant to which the Shares may
not be transferred without the consent of Cruttenden Roth. The Dillard Lock-up
Letter expires on October 1, 1998.
6. Includes 12,500 shares of Common Stock issuable upon the exercise of
options within 60 days, 5,000 of which were granted pursuant to the 1998 Plan
and are, therefore, subject to shareholder approval as provided herein. This
number excludes 20,000 shares of Common Stock issuable upon exercise of the
Hunter Option. The address of Mr. Hunter is 501 East 87th Street, 17E, New York,
New York 10128. The shares are subject to a lock-up letter with Cruttenden Roth
pursuant to which the shares may not be transferred, subject to certain limited
exceptions, until October 1, 1998.
7. Consisting of 10,000 shares of Common Stock issuable upon the
exercise of options within 60 days, 5,000 of which were granted pursuant to
the 1998 Plan and are, therefore, subject to Shareholder approval as provided
herein. The address of Ms. Farrington is 929 Park Avenue, New York, New York
10028.
8. Consisting of 10,000 shares of Common Stock issuable upon the exercise
of options within 60 days, all of which were granted pursuant to the 1998 Plan
and are, therefore, subject to shareholder approval as provided herein. The
address of Mr. Allen is 1280 Massachusetts Avenue, No. 200, Cambridge, Mass.
02138.
9. Includes 10,000 shares of Common Stock issuable upon the exercise of
options within 60 days. The shares are subject to a lock-up letter with
Cruttenden Roth pursuant to which the shares may not be transferred, subject to
certain limited exceptions, until October 1, 1998.
10. The shares are subject to a lock-up letter with Cruttenden Roth
pursuant to which the shares may not be transferred, subject to certain limited
exceptions, until October 1, 1998.
4
<PAGE>
11. The shares are subject to a lock-up letter with Cruttenden Roth
pursuant to which the shares may not be transferred, subject to certain limited
exceptions, until October 1, 1998.
12. The address of FMR Corp. is 82 Devonshire St., Boston, MA 02109.
13. The address of Bricoleur Capital Management, Inc. is 8910 University
Center Lane, Suite 570, San Diego, CA 92122.
5
<PAGE>
ELECTION OF DIRECTORS
(PROPOSAL 1)
The Company's Bylaws provide that the number of directors, which shall
constitute the whole board, shall be fixed from time to time by resolution of
the Board of Directors but shall not be less than one. On April 21, 1998, the
number of directors comprising the Board of Directors for the ensuing year was
set at five.
The Board of Directors has nominated for directors the five individuals
named below to be elected at the Annual Meeting to hold office until the next
annual meeting of shareholders, or until his successor has been duly elected and
has qualified. All of the nominees are currently directors of the Company.
Unless otherwise directed in the enclosed proxy, it is the intention of the
persons named in such proxy to vote the shares represented by such proxy for the
election of the following named nominees for the offices of directors of the
Company to hold office until the next annual meeting of shareholders or until
their respective successors shall have been duly elected and shall have
qualified. Information regarding each nominee is set forth in the table and text
below.
<TABLE>
<CAPTION>
PRESENT
OFFICE(S) HELD DIRECTOR
NOMINEE AGE IN THE COMPANY SINCE
------- --- -------------- --------
<S> <C> <C> <C>
Chairman and Chief
J. Michael Moore . . . . . . 51 Executive Officer 1991
President, Secretary and
M. Ted Dillard . . . . . . . 45 Treasurer 1991
A. Clinton Allen . . . . . . 54 None 1998
Deborah A. Farrington . . . . 47 None 1997
Samuel E. Hunter . . . . . . 62 None 1997
</TABLE>
J. MICHAEL MOORE has served as the Chairman of the Board of Directors of
the Company since May 1991. Mr. Moore has served as Chief Executive Officer of
the Company since May 1993. He has been President and Chief Executive Officer of
United States Funding Group, Inc. a Texas corporation ("USFG"), since 1986.
USFG has been involved in acquiring, from the Resolution Trust Corporation and
the Federal Deposit Insurance Corporation, real estate and notes secured
primarily by real estate located within the United States. Mr. Moore is the sole
shareholder of DCRI L.P. No. 2, Inc., a Texas corporation. See "Principal
Shareholders and Stock Ownership of Management."
M. TED DILLARD has served on the Board of Directors of the Company since
August 1991. Mr. Dillard has served as President of the Company since October
1996. Prior to that, he was the Chief Financial Officer of the Company from
January 1994 to October 1996. He has been Secretary and Treasurer of the Company
since January 1994, and was Controller of the Company from June 1990 to January
1994. Mr. Dillard is also President of Preferred Funding Corporation, a wholly
owned subsidiary of the Company. Mr. Dillard is a Certified Public Accountant,
Certified Management Accountant and Certified Financial Planner.
A. CLINTON ALLEN was elected to the Board of Directors on April 21, 1998,
by unanimous consent of the Board of Directors. Mr. Allen has been Chairman and
Chief Executive Officer of A.C. Allen and Company, an investment banking and
consulting firm, since 1987. He also serves on the board of directors of
Psychemedics Corporation, Inc., The DeWolfe Companies, Swiss Army Brands Inc.,
Response U.S.A. Inc. and Image Guided Technologies. He served on the board of
directors of Blockbuster Entertainment Corporation from 1986 until the
acquisition of the company by Viacom/Paramount in September of 1994. None of
such companies is an affiliate of the Company.
6
<PAGE>
DEBORAH A. FARRINGTON was elected to the Board of Directors of the Company
on November 12, 1997, by unanimous vote of the Board of Directors. From 1993 to
1997, Ms. Farrington served as Co-Chairman of Victory Ventures LLC and President
and Chief Executive Officer of its predecessor Victory Capital, LLC, both
venture capital companies in New York City. From 1993 to 1996, Ms. Farrington
also served as Chairman of the Board of Staffing Resources Inc. a Dallas Texas
based staffing services company. From 1991 to 1993, she served as Executive Vice
President and a director of Tigera Group, Inc.; a NASDAQ listed company, where
she also served as Co-Chairman of the Board from 1995 to 1996. Ms. Farrington is
also engaged in various other business activities.
SAMUEL E. HUNTER was elected to the Board of Directors of the Company on
February 28, 1997, by unanimous vote of the Board of Directors. Since October 1,
1997 Mr. Hunter has served as Senior Vice President of sales for OptiMark
Technologies, Inc., an electronic trading network. From 1993 to 1997, he served
as managing director for equities trading for Ormes Capital Markets, Inc. in New
York City. From 1989 to 1993, he served as managing director of Invemed
Associates in New York City. Mr. Hunter is also engaged in various other
business activities.
None of the nominees is related to any other nominee or to any executive
officer or director of the Company by blood, marriage or adoption (except
relationships, if any, more remote than first cousin).
7
<PAGE>
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held six (6) regularly scheduled meetings during
the year ended December 31, 1997. In addition, the Board of Directors acted
two (2) times by unanimous written consent during the year ended December 31,
1997. During the year ended December 31, 1997, all persons who were directors
of the Company during that time attended 100% of the total number of meetings
of the Board of Directors.
Working committees of the Board include the Audit Committee and the
Compensation Committee. The Board of Directors does not have a standing
Nominating Committee.
AUDIT COMMITTEE. The Company established an Audit Committee on April 10,
1997, which currently consists of Ms. Farrington, Mr. Hunter and Mr. Allen. The
Audit Committee makes recommendations concerning the engagement of independent
public accountants, reviews with the independent public accountants the plans
and results of the audit engagement, approves professional services provided by
the independent public accountants, reviews the independence of the independent
public accountants, considers the range of audit and non-audit fees and reviews
the adequacy of the Company's internal accounting controls. During 1997, the
Audit Committee did not hold any regularly-scheduled meetings.
COMPENSATION COMMITTEE. The Company established a Compensation Committee
on April 10, 1997, which currently consists of Mr. Allen, Ms. Farrington and Mr.
Hunter. The Chairman of the Compensation Committee is Mr. Allen. The
Compensation Committee determines the compensation of the Company's executive
officers. During 1997, the Compensation Committee held one meeting.
OTHER COMMITTEES. The Board of Directors may establish other committees as
deemed necessary or appropriate from time to time, including, but not limited
to, an Executive Committee of the Board of Directors.
DIRECTOR COMPENSATION
During 1997, non-employee members of the Board of Directors each received
$1,000 for each Directors' meeting attended. During 1997, members of the Board
of Directors who were also employees of the Company received $500 for each
Directors' meeting attended.
Effective April 1, 1998, members of the Board of Directors who are
employees of the Company no longer receive additional compensation for attending
Directors' meetings. Effective April 1, 1998, non-employee members of the Board
of Directors receive $2,000 for each Directors' meeting attended. In addition,
members of committees will receive $500 for each committee meeting attended.
For serving as the Chairman of the Compensation Committee, Mr. Allen does not
receive $500 for each committee meeting attended but does receive $1,000 per
month.
The compensation of employee Directors of the Company is discussed at
"Executive Compensation" below.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
INDIVIDUALS NOMINATED FOR ELECTION AS A DIRECTOR.
8
<PAGE>
EXECUTIVE OFFICERS
The table and text below set forth the name, age, current position and term
of office of the Company's executive officers other than those executive
officers who are also directors of the Company and for whom such information is
set forth above under the caption "Election of Directors."
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- ----------------------------------------------
<S> <C> <C>
Douglas G. Furra . . . . 36 Chief Financial Officer
Anthony J. Bruno . . . . 62 President, Management Alliance Corporation
James L. Woo . . . . . . 47 Executive Vice President, Management Alliance
Corporation
</TABLE>
DOUGLAS G. FURRA has been the Chief Financial Officer of the Company since
June 1997. From January 1992 to April 1997, Mr. Furra was the audit manager on
the Company's audits by Weaver and Tidwell, L.L.P., the Company's previous
independent auditors. Mr. Furra was employed by Weaver and Tidwell, L.L.P. from
1985 until June 1997. Mr. Furra is a Certified Public Accountant. Mr. Furra's
employment agreement with the Company expires on May 31, 1999, subject to
renewal as described below. See "Employment Agreements and Change in Control
Arrangements," below.
ANTHONY J. BRUNO has been the President of Management Alliance Corporation
since August 1996. Prior to that he was a regional Manager of Management
Alliance Corporation from June 1995 to August 1996. He has over thirty years of
industry experience and is the author of several training manuals, planners and
motivational tapes and has held seminars and in-house training sessions all over
the country. Mr. Bruno is a Certified Personnel Consultant, Certified Temporary
Staffing Specialist, and Certified International Personnel Consultant. He is a
recipient of the Hall of Fame Award from the National Association of Personnel
Consultants. Mr. Bruno's employment agreement with the Company expires on
December 31, 1999, as described below. See "Employment Agreements and Change
in Control Arrangements," below.
JAMES L. WOO has been the Executive Vice President of Management Alliance
Corporation, since August 1996. Prior to that time he has been employed by the
Company since 1980 in various management positions. Mr. Woo's employment
agreement with the Company expires on December 31, 1998, subject to renewal
as described below. See "Employment Agreements and Change in Control
Arrangements," below.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities (the "10% Shareholders"), to file reports of
ownership and changes of ownership with the Securities and Exchange Commission
("SEC"). Officers, directors and 10% Shareholders of the Company are required
by SEC regulations to furnish the Company with copies of all Section 16(a)
forms so filed.
Based solely on a review of copies of such forms received, the Company
believes that, during the last fiscal year, all filing requirements under
Section 16(a) applicable to its officers, directors and 10% Shareholders were
timely except for the following forms that were filed late: Mr. Moore filed two
Form 4's (reflecting, respectively, four transactions and six transactions); Mr.
Dillard filed one Form 4 (reflecting two transactions); Donald A. Bailey, a
former director of the Company, failed to file a Form 4 for a transaction that
occurred in 1997; Mr. Hunter filed his Form 3 and one Form 4 (reflecting one
transaction); Mr. Furra filed his Form 3 and failed to file one Form 4
(reflecting one transaction); Mr. Bruno filed his Form 3 for 1996 and failed to
file one Form 4
9
<PAGE>
(reflecting one transaction); Mr. Woo filed his Form 3 for 1995 and failed to
file a Form 4 (reflecting one transaction). Messrs. Furra, Bruno and Woo each
timely filed a Form 5 in 1998 reflecting their failures to file a Form 4.
10
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes certain information regarding compensation
paid or accrued during each of the Company's last three fiscal years to the
Company's Chief Executive Officer and each of the Company's four other most
highly compensated executive officers (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------- ----------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL YEAR SALARY($) BONUS ($)(1) COMPENSATION ($)(2) OPTIONS/SARS #)(3) COMPENSATION($)
------------------ ---- --------- ------------ ------------------- ------------------ ---------------
POSITION
--------
<S> <C> <C> <C> <C> <C> <C>
J. Michael Moore . . . . . 1997 $172,196 $54,078 $ 3,000 - $ -
Chairman and Chief 1996 117,000 37,585 1,500 155,000 -
Executive Officer 1995 87,000 7,996 1,000 50,000 -
M. Ted Dillard . . . . . . 1997 $135,664 $45,065 $ 3,000 - $ -
President, Secretary 1996 111,314 27,216 1,500 105,000 -
and Treasurer 1995 78,000 2,962 1,000 50,000 -
Douglas G. Furra(4) . . . . 1997 $ 57,500 $20,279 $ - 30,000 $ -
Chief Financial Officer 1996 - - - - -
1995 - - - - -
Anthony J. Bruno(5) . . . . 1997 $ 110,000 $27,018 $18,000 12,000 $ -
President Management 1996 56,625 15,000 50,500 - -
Alliance Corporation 1995 - - 49,305 - -
James L. Woo(6) . . . . . . 1997 $96,000 $20,263 $ - 10,000 $ -
Executive Vice-President 1996 96,000 13,188 - - -
Management Alliance 1995 81,000 - - - -
Corporation
</TABLE>
(1) Each executive's Bonus is calculated as a percentage of after-tax net
income ("Profits"). Bonuses for Messrs. Moore, Dillard and Furra are calculated
as a percentage of Profits of the Company's staffing operations. Bonuses for
Messrs. Bruno and Woo are calculated as a percentage of Profits of Management
Alliance Corporation.
(2) Includes perquisites and other personal benefits if value is greater
than the lesser of $50,000 or 10% of reported salary and bonus. Includes
directors fees for each of Mr. Moore and Mr. Dillard of $3,000, $1,500 and
$1,000 in 1997, 1996 and 1995, respectively.
(3) All options granted in 1997 and 1996 were granted pursuant to the 1996
Nonqualified Stock Option Plan.
(4) Mr. Furra became the Chief Financial Officer of the Company in June
1997.
(5) Mr. Bruno became a full-time consultant of the Company in June 1995.
Mr. Bruno was named President of Management Alliance Corporation, a wholly owned
subsidiary of the Company, in August 1996. Amounts shown under Other Annual
Compensation reflect amounts paid to Mr. Bruno in his capacity as a full-time
consultant, including a housing allowance of $18,000 and $3,000 in 1997 and
1996, respectively.
(6) Mr. Woo became the Executive Vice-President of Management Alliance
Corporation, a wholly owned subsidiary of the Company, in August 1996.
11
<PAGE>
STOCK OPTION GRANTS DURING 1997
The following table provides information with respect to the Named
Executive Officers concerning the grant of options to acquire Common Stock in
1997.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE OF ASSUMED ANNUAL
RATES OF STOCK PRICE
INDIVIDUAL GRANTS APPRECIATION FOR OPTION TERM(2)
--------------------------------------------------------------- ----------------------------------
% OF TOTAL
NUMBER OF OPTIONS/SARS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE
OPTIONS/SARS IN OR BASE EXPIRATION
NAME GRANTED (#)(1) FISCAL YEAR PRICE ($/SH) DATE 5% ($) 10% ($)
---- -------------- ----------- ------------ ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
J. Michael Moore . . . . . . . - - - - $ - $ -
M. Ted Dillard . . . . . . . . - - - - $ - $ -
Douglas G. Furra. . . . . . . . 30,000 17.1% (4) 5-02 $ 11,051 $ 24,420
Anthony J. Bruno . . . . . . . 12,000 6.8% (3) 11-07 $ 10,181 $ 44,272
James L. Woo . . . . . . . . . 10,000 5.7% (3) 11-07 $ 8,484 $ 36,893
</TABLE>
(1) All of the options granted to Named Executive Officers in 1997 were
granted under the 1996 Plan, certain of which are subject to shareholder
approval of the Amendment.
(2) The dollar amounts under these columns represent the potential
realizable value of each grant of options assuming that the market price of the
Company's Common Stock appreciates in value from the date of grant at the 5% and
10% annual rates prescribed by the Securities and Exchange Commission ("SEC")
and, therefore, are not intended to forecast possible future appreciation, if
any, of the price of the Company's Common Stock.
(3) The options vest 40% on December 31, 1998 and 20% each year
thereafter. The options are exercisable at $10.00 per share.
(4) The options vest 33 1/3% on May 31, 1998, 1999, and 2000. The options
vesting on May 31, 1998 are exercisable at $4.00 per share. The options vesting
in 1999 and 2000 are exercisable at $8.00 per share.
12
<PAGE>
AGGREGATED STOCK OPTION/SAR EXERCISES DURING 1997 AND STOCK OPTION/SAR VALUES AS
OF DECEMBER 31, 1997
The following table sets forth information with respect to the Chief
Executive Officer and the Named Executive Officers concerning the exercise of
options during 1997 and unexercised options held as of December 31, 1997:
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT FISCAL IN-THE-MONEY OPTIONS/SARS
YEAR END (#)(1) AT FISCAL YEAR END ($)(1)(2)
----------------------------- --------------------------------
SHARES
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
---- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
J. Michael Moore . . . . 50,000 $55,000 124,000/31,000 $612,250/$0
M. Ted Dillard . . . . . 50,000 $55,000 84,000/21,000 $414,750/$0
Douglas G. Furra . . . . - - 0/30,000 $0/$40,000
Anthony J. Bruno . . . . - - 0/12,000 $0/$0
James L. Woo . . . . . . - - 0/10,000 $0/$0
</TABLE>
(1) The amounts under the headings entitled "Exercisable" reflect vested
options as of December 31, 1997 and the amounts under the headings entitled
"Unexercisable" reflect options that have not vested as of December 31, 1997.
(2) Values stated are pre-tax and net of cost.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee was an officer or employee of the
Company or any of its subsidiaries or had any relationship requiring disclosure
pursuant to Item 404 of Commission Regulation S-K. No executive officer of the
Company served as a member of a compensation committee of another corporation
(or other board committee of such company performing similar functions or, in
the absence of any such committee, the entire board of directors of such
corporation), one of whose executive officers served on the Compensation
Committee. No executive officer of the Company served as a director of another
corporation, one of whose executive officers served on the Compensation
Committee. No executive officer of the Company served as a member of a
compensation committee of another corporation (or other board committee of such
corporation performing similar functions or, in the absence of any such
committee, the entire board of directors), one of whose executive officers
served as a director of the Company.
13
<PAGE>
REPORT FROM THE COMPENSATION COMMITTEE REGARDING EXECUTIVE COMPENSATION
MEMBERSHIP. The Compensation Committee currently consists of three
individuals: Mr. Allen (who is the Chairman of the Compensation Committee), Ms.
Farrington and Mr. Hunter. During 1997, the Compensation Committee consisted of
Donald A. Bailey and Mr. Hunter from the time the Compensation Committee was
created in April until Mr. Bailey's resignation on September 30. Ms. Farrington
became a member of the Board and of the Compensation Committee on November 12,
1997, and Mr. Allen became a member of the Board and the Chairman of the
Compensation Committee on April 21, 1998.
RESPONSIBILITIES. The Compensation Committee is responsible for
establishing the level of compensation of the executive officers of the Company
and administering the 1996 Plan and the 1998 Plan. The compensation review and
evaluation is conducted by reviewing the overall performance of each individual
and comparing the overall performance of the Company with others in its
industry, as well as considering general economic and competitive conditions.
The financial performance of the Company on a yearly basis and as compared with
the Company's New Peer Group (see "Comparative Total Returns," below) and the
industry as a whole, the Company's stock price and market share, and the
individual performance of each of the executive officers, are among the factors
reviewed. No particular weight is assigned to one factor over another.
GENERAL COMPENSATION POLICY. Our fundamental policy is to offer the
Company's executive officers competitive compensation opportunities based upon
their personal performance, the financial performance of the Company and their
contribution to that performance. It is our objective to make a substantial
portion of each officer's compensation contingent upon the Company's
performances as well as upon his or her own level of performance. Accordingly,
each executive officer's compensation package is comprised of three elements:
(i) base salary, which reflects individual performance and is designed primarily
to be competitive with salary levels of similarly sized companies; (ii) annual
variable performance awards payable in cash and tied to the Company's
achievement of performance goals; and (iii) long-term stock based incentive
awards which strengthen the mutuality of interests between the executive
officers and the Company's shareholders. Generally, as an officer's level of
responsibility increases, a greater portion of his or her total compensation
will be dependent upon Company performance and stock price appreciation rather
the base salary.
EMPLOYMENT AGREEMENTS AND COMPENSATION. The Company is a party to
employment agreements with Messrs. Moore, Dillard, Furra, Bruno and Woo. Each
of these agreements provides for an annual base salary and certain other
benefits. The Compensation Committee has in the past, and may continue in the
future to approve salaries above the agreed-upon base salaries based upon the
factors listed above. See "Employment Contracts and Change in Control
Arrangements," below, for specific information as to the terms of each of these
employment agreements. Bonuses for the Company's executive officers are
determined by the Compensation Committee on a case-by-case basis. See
"--Executive Bonus Plan," below.
During 1997, all of the Company's executive officers, including the Chief
Executive Officer, received salaries averaging 20% over 1996 levels. In
comparison to the salary levels of the chief executive officers and presidents
of companies within the Company's Peer Group, the salaries of Messrs. Moore and
Dillard are below average. Likewise, the salaries of other executives of the
Company are lower than the average of those named in the public documents of the
Company's Peer Group.
EXECUTIVE BONUS PLAN. In 1997, as a result of the Company's performance
and based upon the factors discussed above, the Compensation Committee
established the Company's 1997 Bonus Plan whereby the Company's executive
officers and other significant employees (the "Bonus Participants") received
bonus compensation based upon a percentage of the after tax net income of the
Company and/or its subsidiaries. See "Executive Compensation--Summary
Compensation Table," above. In April of 1998, the Compensation Committee again
reviewed the performance of each of the Bonus Participants and determined the
respective percentages for each Bonus Participant in connection with the
Company's 1998 Bonus Plan as follows: (i) 2% and 1.5%, respectively, of the
after tax net income of Management Alliance Corporation for each of Messrs.
14
<PAGE>
Bruno and Woo; (ii) 1.5% of the after tax net income of the Company on a
consolidated basis for Mr. Furra; and (iii) as described below for each of
Messrs. Moore and Dillard.
CHIEF EXECUTIVE OFFICER. In 1997, the Compensation Committee took note of
the successful completion of the Company's public offering and the improvement
in sales, net income and the stock price of the Company and the fact that Chief
Executive Officer has not received a salary increase since October of 1996. As
a result of these factors, in October of 1997 the Compensation Committee
approved a performance bonus to the Chief Executive Officer of 3% ($54,078) of
the Company's staffing operations' after tax net income for 1997, pursuant to
the 1997 Bonus Plan. As a result of the continued improvement in the
performance of the Company and the Company's stock price, the Compensation
Committee has determined that an increase in the Chief Executive Officer's
compensation is warranted in 1998 and that the Chief Executive Officer should
be awarded a performance bonus of 3% of the Company's consolidated after tax
net income for 1998, pursuant to the Company's 1998 Bonus Plan. Accordingly,
the Compensation Committee has increased the annual salary of the Chief
Executive Officer to $192,000 effective May 1, 1998.
PRESIDENT. In 1997, the Compensation Committee took note of the successful
completion of the Company's public offering and the improvement in sales, net
income and the stock price of the Company and the fact that President has not
received a salary increase since October of 1996. As a result of these
factors, in October of 1997 the Compensation Committee approved a performance
bonus to the President of 2.5% ($45,065) of the Company's staffing operations'
after tax net income for 1997, pursuant to the 1997 Bonus Plan. As a result of
the continued improvement in the performance of the Company and the Company's
stock price, the Compensation Committee has determined that an increase in the
President's compensation is warranted in 1998 and that the President should be
awarded a performance bonus of 2.5% of the Company's consolidated after tax net
income for 1998, pursuant to the Company's 1998 Bonus Plan. Accordingly, the
Compensation Committee has increased the annual salary of the President to
$162,000 effective May 1, 1998.
EQUITY COMPENSATION. The executive officers are also granted stock options
from time to time under the 1996 Plan and the 1998 Plan. The timing of such
grants and the size of the overall option pools and their allocations are
determined by the Compensation Committee based upon market conditions and
corporate and individual performance. Emphasis is placed on the long-term
performance of the Company and is subjective with no particular emphasis being
placed on any one factor.
In order to obtain the services of Mr. Furra, the Compensation Committee
granted to Mr. Furra options to purchase 30,000 shares of the Company's common
stock, vesting over a three-year period. See "Stock Option Grants During 1997,"
below. In addition, in order to reward the performance of each of Messrs. Bruno
and Woo, the Compensation Committee awarded each of them options to purchase,
respectively, 12,000 and 10,000 shares of the Company's Common Stock. See
"Stock Options Grants During 1997," below. No stock options were granted during
1997 to the Company's Chief Executive Officer or President. In April 1998,
however, the Compensation Committee did approve the award of additional options,
over a three year vesting period, under the 1998 Plan, to each of Messrs.
Moore, Dillard and Furra in the amounts of 100,000, 66,667 and 10,000,
respectively, with the exercise price being the closing price of 12 3/4 on April
28, 1998. Such shares are expressly conditioned upon the approval by the
shareholders of the 1998 Plan. In addition, the awards to Messrs. Moore and
Dillard are expressly conditioned upon their exercise of options to purchase
124,000 and 84,000 shares, respectively.
TAX CONSEQUENCES. The Omnibus Budget Reconciliation Act of 1993 added
Section 162(m) ("Section 162(m)") to the Internal Revenue Code (the "Code").
With certain exceptions, Section 162(m) prevents publicly held corporations,
including the Company, from taking a tax deduction for compensation in excess of
$1 million paid to the Chief Executive Officer and the four other persons named
in the Summary Compensation Table in this Proxy Statement ("Covered Persons").
For purposes of Section 162(m), this limitation will apply to the tax year in
which the Company would otherwise take the deduction. For nonqualified stock
options the deduction is normally taken in the year the option is exercised.
However, Section
15
<PAGE>
162(m) will not apply to limit the deductibility of performance-based
compensation exceeding $1 million if (i) paid solely upon attainment of one or
more performance goals, (ii) paid pursuant to a performance-based compensation
plan adopted by the Compensation Committee, and (iii) the terms of the plan are
approved by the shareholders before payment of the compensation.
The Compensation Committee has reviewed the Company's compensation plans
with regard to the deduction limitation contained in Section 162(m). The
Compensation Committee believes that option grants under the 1996 Plan (the
"1996 Options") do not meet the requirements of Section 162(m) to be considered
performance-based compensation. Therefore, Section 162(m) could limit the
Company's deduction in any tax year in which a Covered Employee who received
1996 Options exercises some or all of such Covered Employee's 1996 Options and
such recipient's total compensation, including the value of the exercised
options, exceeds $1 million in that taxable year.
The Compensation Committee has decided not to alter the Company's
compensation plans with respect to existing 1996 Options, but does believe that
it is appropriate to permit grants of options to Covered Employees under the
1998 Plan that will meet the deductibility requirements of Section 162(m). The
Compensation Committee has therefore recommended to the Board of Directors that
the Company adopt the 1998 Plan, and the Board of Directors is therefore
submitting the 1998 Plan to the shareholders of the Company for approval.
COMPENSATION COMMITTEE
A. Clinton Allen
Deborah A. Farington
Samuel E. Hunter
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
The Company has entered into employment agreements with Messrs. Moore and
Dillard that provide that: (i) base compensation payable to Mr. Moore and Mr.
Dillard be not less than $150,000 per annum and $125,000 per annum,
respectively; (ii) Mr. Moore shall be the Chief Executive Officer of the Company
and shall report to the Board of Directors of the Company; (iii) Mr. Dillard
shall be the President of the Company and shall report to Mr. Moore; and (iv)
both individuals shall have the right to participate in all of the benefit,
bonus and incentive compensation plans of the Company and its subsidiaries.
Each employment agreement provides that during such executive's agreement, the
Company shall fund a deferred compensation program (the "Deferred Compensation
Program") for such executive in the amount of $2,000 and $1,500 per month,
respectively. Each employment agreement provides that the term of the
employment agreement shall be for a period of three (3) years beginning January
1, 1997 and ending December 31, 1999 (the "Termination Date"). The Termination
Date in effect shall be automatically extended for one (1) year unless (i) the
employment agreement has already been terminated for a reason permitted
thereunder, or (ii) either the Company or the executive gives written notice
(the "Non-Renewal Notice") that the employment agreement should not be renewed
at least six (6) months in advance of the Termination Date then in effect. Each
employment agreement provides that if the executive's employment with the
Company is terminated without cause, the Company agrees to pay such executive an
amount equal to the base compensation that would have been paid to such
executive during the period of the time from the date of termination of such
executive's employment with the Company until the Termination Date and for a
period of twelve (12) months (the "Extension Period") following the Termination
Date. In addition, if the executive's employment is terminated without cause,
the executive shall be entitled to receive a pro rata share of any bonus or
incentive compensation that such executive would otherwise have been entitled to
receive had he remained employed for the entirety of the calendar year involved
and shall have 12 months following such termination within which to exercise his
options.
16
<PAGE>
Effective April 30, 1998, the employment agreements of the Chief Executive
Officer and the President were amended. The amendments to these employment
agreements provide that upon a Special Change in Control (as defined below) of
the Company and if the executive's employment with the Company is terminated for
any reason other than Voluntary Termination (as defined in the respective
employment agreements) or termination for cause (as defined in the respective
employment agreements) during the twenty-four (24) month period beginning on the
effective date of such change in control, (i) the payments to the executive
under the employment agreement for the Extension Period shall be at such times
and in such amounts as would have been paid to the executive during the
Extension Period had the executive's employment not been terminated and (ii)
the Company's obligation to fund the Deferred Compensation Program shall
extend until the expiration of the Extension Period.
With respect to change in control provisions related to stock options,
each of the 1996 Plan and the 1998 Plan contains certain change in control
provisions. See "Proposal to Amend the Diversified Corporate Resources, Inc.
Amended and Restated 1996 Nonqualified Stock Option Plan" and "Proposal to
Approve the Diversified Corporate Resources, Inc. 1998 Nonqualified Stock
Option Plan," below. In addition, if with respect to any of Messrs. Moore,
Dillard or Furra a Special Change in Control occurs and such executive's
employment with the Company terminates for any reason other than Voluntary
Resignation or Termination for Cause (as defined in the executive's respective
Stock Option Agreement), such executive's stock options will become fully
vested, notwithstanding any other vesting provisions.
For this purpose, the term "Special Change in Control" means (i) any person
or entity, including a "group" as defined in Section 13(d)(3) of the Exchange
Act, other than the Company, a majority-owned subsidiary thereof, or Mr. Moore
and any affiliate of Mr. Moore, becomes the beneficial owner (as defined
pursuant to Schedule 13(d) under the Exchange Act) of the Company's securities
having 25% or more of the combined voting power of the then outstanding
securities of the Company that may be cast for the election of directors of the
Company; or (ii) as the result of, or in connection with, any cash tender or
exchange offer, merger or other business combination, sales of assets or
contested election, or any combination of the foregoing transactions, less than
a majority of the combined voting power of the then outstanding securities of
the Company or any successor corporation or entity entitled to vote generally in
the election of the directors of the Company or such other corporation or entity
after such transaction are beneficially owned (as defined pursuant to Section
13(d) of the Exchange Act) in the aggregate by the holders of the Company's
securities entitled to vote generally in the election of directors of the
Company immediately prior to such transaction; or (iii) during any period of two
consecutive years, individuals who at the beginning of any such period
constitute the Board of Directors of the Company cease for any reason to
constitute at least a majority thereof, unless the election, or the nomination
for election by the Company's shareholders, of each director of the Company
first elected during such period was approved by a vote of at least two-thirds
of the directors of the Company then still in office who were directors of the
Company at the beginning of any such period.
The Company has entered into an employment agreement with Mr. Furra that
provides that: (i) compensation payable to Mr. Furra of $99,600 per annum; (ii)
the term of employment is for one year commencing June 1, 1997, and renewing for
a one-year term unless either the Company or Mr. Furra determines not to renew;
(iii) Mr. Furra serves as the Chief Financial Officer of the Company; (iv) Mr.
Furra receives options for the purchase of 30,000 shares of Common Stock; and
(v) Mr. Furra has the right to participate in all of the benefit, bonus and
incentive compensation plans of the Company and its subsidiaries at the
discretion of the Compensation Committee of the Board of Directors. If such
employment agreement is terminated without cause, Mr. Furra shall be entitled to
receive (i) an amount equal to his then current annual base compensation,
payable over a one (1) year period (reduced by the amount of monthly
compensation otherwise received by Mr. Furra from other employment) and (ii) a
pro rata share of any bonus or incentive compensation that he would otherwise
have been entitled to receive had he remained employed by the Company for the
entirety of the calendar year involved. Effective May 1, 1998, the annual
salary for Mr. Furra has been set at $116,112.
The Company has entered into an employment agreement with Mr. Bruno that
provides that (i) the compensation payable to Mr. Bruno is $110,000 per annum;
(ii) the term of employment is for two (2) years commencing January 1, 1998;
(iii) Mr. Bruno serves as the President of Management Alliance Corporation;
(iv) Mr. Bruno receives a monthly allowance of $2,500 per month ($1,500 of
which is at the discretion of the Compensation Committee on a year-to-year
basis) until October 1, 1998; (v) Mr. Bruno receives options for
17
<PAGE>
the purchase of 12,000 shares of Common Stock pursuant to the 1996 Plan; and
(vi) Mr. Bruno has the right to participate in all other benefits, bonuses and
incentive compensation plans of Management Alliance Corporation at the
discretion of the Compensation Committee of the Board. If such employment
agreement is terminated without cause or due to his death or disability, Mr.
Bruno shall be entitled to receive (i) each month an amount equal to Mr.
Bruno's base compensation per month for the shorter of (a) the period of six
(6) months following the date of termination of Mr. Bruno's employment with
the Company or (b) the period from such termination to December 31, 1999, and
(ii) a pro rata share of any bonus or incentive compensation that Mr. Bruno
would otherwise have been entitled to receive had he remained employed by the
Company for the entirety of the calendar year involved. Effective April 22,
1998, the annual salary for Mr. Bruno has been set at $121,000.
The Company has entered into an employment agreement with Mr. Woo that
provides that (i) the compensation payable to Mr. Woo is $96,000 per annum;
(ii) the term of employment is for one (1) year commencing January 1, 1998, and
renewing for a one (1) year term unless either the Company or Mr. Woo determines
not to renew; (iii) Mr. Woo serves as the Executive Vice President of Management
Alliance Corporation; (iv) Mr. Woo receives options for the purchase of 10,000
shares of Common Stock pursuant to the 1996 Plan; and (v) Mr. Woo has the right
to participate in all other benefits, bonuses and incentive compensation plans
of Management Alliance Corporation at the discretion of the Compensation
Committee of the Board. If such employment agreement is terminated by
Management Alliance Corporation other than for cause, Mr. Woo shall be entitled
to receive (i) up to six (6) months' salary and (ii) a pro rata share of any
bonus or incentive compensation that Mr. Woo would otherwise have been entitled
to receive had he remained employed by the Company for the entirety of the
calendar year involved. Effective April 22, 1998, the annual salary for Mr. Woo
has been set at $104,000.
18
<PAGE>
COMPARATIVE TOTAL RETURNS
PERFORMANCE GRAPH
The following Performance Graph shows the changes over the five year period
from December 31, 1992 to December 31, 1997 in the value of $1,000 invested in:
(1) the Company's Common Stock; (2) the Russell 2000 Index; (3) the common stock
of the Old Peer Group (as defined below) of companies, whose returns represent
the arithmetic average for such companies and includes such companies in such
average only during the years that any of such companies were publicly traded;
and (4) the common stock of the New Peer Group (as defined below) of companies,
whose returns represent the arithmetic average for such companies and includes
such companies in such average only during the years that any of such companies
were publicly traded. The values with each investment as of the beginning of
each year are based on share price appreciation and the reinvestment with
dividends on the respective ex-dividend dates. The change in the Company's
performance for the year ended December 31, 1997, results from the price of the
Company's Common Stock increasing from $3.25 per share at December 31, 1996 to
$8.00 per share at December 31, 1997. Management believes that prior to the
Company's recent offering of its common stock in September of 1997, the
Company's Common Stock was somewhat illiquid due to a limited public float.
[GRAPH]
The Old Peer Group consists of the following companies whose businesses,
taken as a whole, resemble the Company's activities: Alternative Resources
Corp., Data Processing Resources Corp., General Employment Enterprises, Inc.,
RCM Technologies, Inc., Romac International, Inc., SCB Computer Technology,
Inc., and Source Services, Inc.
In April of 1998, the Compensation Committee, after reviewing the publicly
filed documents of the companies in the Old Peer Group, determined that the
companies listed in the Old Peer Group did not match the Company in terms of
market capitalization and market niche. The Compensation Committee has
determined that the following companies (the "New Peer Group") more closely
resemble the Company: Butler International, Inc., General Employment
Enterprises, Inc, RCM Technologies, Inc., Professional Staffing, PLC, Lamalie
Associates, Inc., Comforce Corp., National Technical Systems, Inc., and
National TechTeam, Inc.
This graph above assumes $1,000 invested on December 31, 1992 in the Common
Stock of the Company, the Russell 2000 Index, the Old Peer Group and the New
Peer Group and was plotted using the following data:
19
<PAGE>
<TABLE>
<CAPTION>
31-Dec-92 31-Dec-93 31-Dec-94 31-Dec-95 31-Dec-96 31-Dec-97
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Russell 2000 $1,000 $1,030 $1,200 $1,430 $1,650 $1,910
DCRI $1,000 $ 340 $ 340 $ 660 $8,550 $21,050
Old Peer $1,000 $1,530 $2,450 $4,440 $4,010 $6,540
Group
New Peer Group $1,000 $ 1,880 $ 1,990 $2,150 $4,800 $4,480
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1997 and 1996, the Company paid various expenses on behalf of Mr.
Moore or various entities that he controls in the amount of approximately
$173,000 and $129,000, respectively. Mr. Moore repaid these amounts in October
1997. The majority of these amounts are related to litigation defense associated
with a lawsuit with Ditto Properties, Inc., in connection with the Company being
named therein as garnishee. (See the Company's Annual Report on Form 10-K,
Item 3.) During 1996, the Company advanced Mr. Moore $31,000, which was
represented by notes bearing interest at 10%.
20
<PAGE>
PROPOSAL TO AMEND THE DIVERSIFIED CORPORATE RESOURCES, INC.
AMENDED AND RESTATED 1996 NONQUALIFIED STOCK OPTION PLAN
(PROPOSAL 2)
GENERAL
On April 29, 1998, the Board of Directors approved an amendment (the
"Amendment") to the Diversified Corporate Resources, Inc. Amended and Restated
1996 Nonqualified Stock Option Plan (the "1996 Plan") increasing the number of
shares reserved for issuance pursuant to the 1996 Plan from 450,000 to 500,000
(the additional shares being the "New Shares") and modifying the transferability
provisions contained therein. The purpose of the Amendment is to enable the
Company to carry out the grants of options made during 1997 and to be able to
continue to obtain and retain the services of the types of employees,
officers and directors who will contribute to the Company's long range
success and to provide incentives which are linked directly to increases in
share value that will inure to the benefit of all shareholders of the Company.
The Company will register the New Shares under the Securities Act of 1933,
as amended (the "1933 Act"). The New Shares issued upon exercise of options
after the effective date of such registration could immediately be sold in the
open market subject, in the case of affiliates (as defined in Rule 144 under the
1933 Act), to compliance with the provisions of Rule 144 other than the holding
period requirement.
On April 29, 1998, the last sale price of the Common Stock on the
American Stock Exchange was $13.00 per share.
Assuming the presence of a quorum, the affirmative vote of the holders
of a majority of the shares of Common Stock present at the meeting in person
or represented by proxy and entitled to vote thereon is necessary in order to
approve the adoption of the Amendment. If the shareholders fail to approve
the Amendment, the grants of options under the 1996 Plan previously made by
the Compensation Committee that are expressly subject to shareholder approval
will be rendered null and void. A failure to approve the Amendment will not
affect previous grants not conditioned upon shareholder approval. Proxies
will be voted for or against such approval in accordance with the
specifications marked thereon and, if no specification is made, will be voted
in favor of such approval.
DESCRIPTION OF THE COMPANY'S 1996 PLAN
A summary of the principal provisions of the 1996 Plan is set forth
below:
Options granted under the 1996 Plan will be stock options not intended to
qualify for incentive stock option treatment ("Non-Qualified Stock Options" or
"Options"). The 1996 Plan is not required to be qualified under Section 401(a)
of the Code, nor is it subject to the provisions of the Employee Retirement
Income Security Act of 1974, as amended.
ELIGIBILITY AND PARTICIPATION
Under the 1996 Plan, Non-Qualified Stock Options may be granted to
employees (including officers and directors) of the Company or a parent or
subsidiary of the Company (approximately 355 persons at April 29, 1998).
ADMINISTRATION
The 1996 Plan is administered by the Compensation Committee of the Company
or, in the absence of a Compensation Committee, by a committee composed of one
or more officers of the Company selected by the Board of Directors. Subject to
the provisions of the 1996 Plan, the Committee has authority to determine all
terms and provisions under which Options are granted pursuant to the 1996 Plan,
including, without limitation, (i) the number of shares subject to each Option,
(ii) when the Option becomes exercisable, (iii) the vesting schedule for each
grant, (iv) the exercise price and (v) the duration of the Option, which cannot
exceed ten years.
21
<PAGE>
TRANSFERABILITY
Without giving effect to the Amendment, an Option granted under the 1996
Plan is not transferable by the optionee except by will or by the laws of
descent and distribution and is exercisable during the lifetime of the optionee
only while the optionee is in the employ of the Company or within specified
periods of time after termination of employment.
Pursuant to the Amendment, transferability, provisions will be contained in
each optionee's stock option agreement as determined by the Compensation
Committee on a case-by-case basis. It is the present intent of the Compensation
Committee to permit, in addition to transfers by wills and by the laws of
descent and distribution, the pledging of options for the sole purpose of
exercising the Options, subject to the limitations deemed by the Compensation
Committee to be appropriate.
CHANGE IN CONTROL TRANSACTIONS
Each Option outstanding shall terminate upon (i) a merger or consolidation
in which the Company is not the surviving entity, or (ii) a sale or transfer of
all or substantially all of the capital stock or assets of the Company to any
entity or person that is not a parent or subsidiary and the Company is not the
surviving entity (each such transaction collectively referred to as a "Change of
Control"), provided that each optionee to whom no share options have been
tendered by the surviving entity on terms and provisions that substantially
preserve the rights and benefits of such optionee's Options under the Plan shall
have the right, prior to such Change of Control in which the Company is not the
surviving entity, to exercise his or her outstanding Options in whole or in
part, on the condition, however, that the Change of Control is actually
effected. If the Change of Control is actually effected, such exercise shall be
deemed effective (and, if applicable, the optionee shall be deemed a shareholder
with respect to the Option exercised) immediately preceding the effective time
of such Change of Control (on the date of record for shareholders entitled to
share in the securities or property distributed in such Change of Control, if a
record date is set). Notwithstanding the foregoing, in the event of a Change of
Control in which the Company is not the surviving entity, the Compensation
Committee shall have the right in its sole discretion to pay to each optionee
possessing unexercised Options, as soon as practicable following consummation of
such Change of Control, an amount equal to the fair market value of all shares
purchasable (without regard to vesting provisions) under the unexercised Options
LESS the exercise price of such unexercised Stock Options (the "Net Value").
Upon payment of the Net Value, all Options outstanding under the Plan shall be
null and void, and the optionee shall have no further rights thereunder.
VESTING
The 1996 Plan does not impose any specific vesting requirements.
AMENDMENT
The 1996 Plan provides that the Board may amend the 1996 Plan at any time
in such respect as the Board of Directors may deem desirable; provided that the
following amendments shall require approval by the holders of a majority of the
shares represented at a meeting of shareholders for which a quorum is present:
(i) to materially increase the aggregate number of shares eligible for issuance
under the 1996 Plan; (ii) to materially increase the benefits accruing to
participants under the 1996 Plan; or (iii) to materially modify the requirements
for eligibility under the 1996 Plan.
22
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the federal income tax consequences of
participation in the 1996 Plan is only a summary and does not purport to be
complete, and differences in individual optionees' financial situations may
cause federal, state and local income tax consequences of participation in the
1996 Plan to vary.
An optionee will not recognize any income upon the grant of a Non-Qualified
Stock Option. Upon exercise of the Non-Qualified Stock Option, the amount by
which the fair market value of the shares transferred ("Non-Qualified Option
Shares") at the time of exercise exceeds the exercise price must be treated as
ordinary income received by the optionee.
If an optionee exercises a Non-Qualified Stock Option by paying the
exercise price with shares of Common Stock, the optionee will be treated as
having made a nontaxable exchange of the number of shares transferred for an
equal number of shares received (the "Exchange Stock"). The basis and
holding period of the Exchange Stock will be the same as the basis and
holding period of the stock transferred. The fair market value of all shares
received in excess of the Exchange Stock (the "Excess Stock") are treated as
compensation income to the optionee, and the Company generally will have a
corresponding deduction to the extent the amount constitutes an ordinary and
necessary business expense and is not disallowed by Section 162(m). The
Excess Stock has a basis equal to the amount included in the optionee's
compensation income and a holding period that begins on the date the
Non-Qualified Stock Option is exercised.
The Company generally will be entitled to deduct the amount that the
optionee is required to treat as ordinary income in the Company's taxable year
that ends with or within the taxable year in which the optionee recognizes such
income, to the extent such amount constitutes an ordinary and necessary business
expense and is not disallowed under Section 162(m).
Upon a taxable disposition of Non-Qualified Option Shares, any amount
received by the optionee in excess of the sum of (i) the exercise price and
(ii) any amount includable in income with respect to the exercise of such
Non-Qualified Stock Option, will generally be treated as long-term or short-term
capital gain, depending upon the holding period of the Non-Qualified Option
Shares. To qualify for long-term capital gain treatment, the Non-Qualified
Option Shares must have been held for more than 12 months, and to qualify for
the lowest level of federal income tax on capital gains, such shares must be
held for more than 18 months. If the Non-Qualified Option Shares are held
for more than 12 months but not more than 18 months, the maximum federal
income tax rate applicable to individuals is currently 28%, and if the
Non-Qualified Option Shares are held for more than 18 months, the maximum
federal income tax rate for individuals is 20%. If, upon disposition, the
optionee receives an amount that is less than the fair market value of the
Non-Qualified Option Shares on the exercise date, the loss will generally be
treated as a long or short-term capital loss, depending upon the holding
period of such Non-Qualified Option Shares.
TERMINATION OF OPTIONS
Except as expressly provided in the Option agreements, each Option shall
terminate upon the optionee's termination of employment or status as a director.
23
<PAGE>
SHARES OF COMMON STOCK SUBJECT TO THE 1996 PLAN
The 1996 Plan authorizes the granting of Non-Qualified Stock Options to
optionees to purchase Common Stock. A total of 450,000 shares of Common
Stock (subject to certain adjustments discussed below) have been reserved for
sale upon the exercise of Options granted under the 1996 Plan. The
Compensation Committee has granted options to purchase 497,000 shares under
the 1996 Plan, including options to purchase 47,000 shares (the "Amendment
Shares") subject to shareholder approval of the Amendment. Therefore, if
the shareholders fail to approve the Amendment, those options to purchase the
Amendment Shares will be cancelled.
If an Option expires fully or partially unexercised, the shares then
subject to such Option are available for later grant. Upon a change in the
number of shares outstanding as a result of a declaration of a stock dividend
or any recapitalization resulting in a stock split, combination or exchange
of shares, there shall be a proportionate adjustment in the shares available
for grant and the shares subject to outstanding Options.
CERTAIN GRANTS UNDER THE 1996 PLAN
The Options that have been granted to the Named Executive Officers under
the 1996 Plan are set forth under "Executive Compensation--Summary Compensation
Table" for 1997 and 1996 in this Proxy Statement. The current executive
officers as a group have been granted Options to purchase 312,000 shares of
Common Stock under the 1996 Plan. As a group, current directors of the Company
who are not executive officers of the Company have been granted Options to
purchase 60,000 shares of Common Stock under the 1996 Plan. All employees of
the Company, including all current officers who are not executive officers, as
a group, have been granted Options to purchase 429,500 shares of Common Stock
under the 1996 Plan.
PAYMENT OF EXERCISE PRICE
The exercise price shall be paid solely in cash, or by check, or, if
either expressly permitted by the terms of the Option, or otherwise permitted
by the Compensation Committee in its sole discretion at the time of exercise,
in whole or in part by delivery of shares of Common Stock which will be
deemed payment of all or a portion of the exercise price in an amount equal
to the fair market value of such delivered shares.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENTS TO THE 1996
PLAN.
24
<PAGE>
PROPOSAL TO APPROVE THE DIVERSIFIED CORPORATE RESOURCES, INC. 1998
NONQUALIFIED STOCK OPTION PLAN
(PROPOSAL 3)
GENERAL
In 1998, the Board of Directors approved, effective as of January 1, 1998,
the Diversified Corporate Resources, Inc. 1998 Nonqualified Stock Option Plan
(the "1998 Plan"). The purpose of the 1998 Plan is to enable the Company to be
able to continue to obtain and retain the services of the types of employees,
officers and directors who will contribute to the Company's long range success
and to provide incentives which are linked directly to increases in share value
that will inure to the benefit of all shareholders of the Company.
The Company will register the shares (the "1998 Shares") issuable
pursuant to the 1998 Plan under the 1933 Act. The 1998 Shares issued upon
exercise of options after the effective date of such registration could
immediately be sold in the open market subject, in the case of affiliates (as
defined in Rule 144 under the 1933 Act), to compliance with the provisions of
Rule 144 other than the holding period requirement.
On April 29, 1998, the last sale price of the Common Stock on the
American Stock Exchange was $13.00 per share.
Assuming the presence of a quorum, the affirmative vote of the holders
of a majority of the shares of Common Stock present at the meeting in person
or represented by proxy and entitled to vote thereon is necessary in order to
approve the 1998 Plan. If the shareholders fail to approve the 1998 Plan,
all options granted thereunder will be rendered null and void. Proxies will
be voted for or against such approval in accordance with the specifications
marked thereon and, if no specification is made, will be voted in favor of
such approval.
DESCRIPTION OF THE COMPANY'S 1998 PLAN
A copy of the 1998 Plan is attached to this Proxy statement as Exhibit A.
A summary of the principal provisions of the 1998 Plan is set forth below:
Options granted under the 1998 Plan will be stock options not intended to
qualify for incentive stock option treatment ("1998 Non-Qualified Stock Options"
or "1998 Options"). The 1998 Plan is not required to be qualified under
Section 401(a) of the Code, nor is it subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended.
ELIGIBILITY AND PARTICIPATION
Under the 1998 Plan, 1998 Non-Qualified Stock Options may be granted to
employees (including officers and directors) of the Company or a parent or
subsidiary of the Company (approximately 355 persons at April 29, 1998). In no
case, however, may any employee be granted a 1998 Option covering more than
200,000 shares during any calendar year.
ADMINISTRATION
The 1998 Plan is administered by the Compensation Committee of the Company
or, in the absence of a Compensation Committee, by a committee composed of one
or more officers of the Company selected by the Board of Directors. Subject to
the provisions of the 1998 Plan, the Committee has authority to determine all
terms and provisions under which 1998 Options are granted pursuant to the 1998
Plan, including, without limitation, (i) the number of shares subject to each
1998 Option, (ii) when the 1998 Option becomes exercisable, (iii) the vesting
schedule for each grant, (iv) the exercise price and (v) the duration of the
1998 Option, which cannot exceed ten years.
25
<PAGE>
TRANSFERABILITY
Transferability provisions will be contained in each optionee's stock
option agreement as determined by the Compensation Committee on a
case-by-case basis. It is the present intent of the Compensation Committee to
permit, in addition to transfers by wills and by the laws of descent and
distribution, the pledging of options for the sole purpose of exercising 1998
options, subject to the limitations deemed by the Compensation Committee to
be appropriate.
CHANGE IN CONTROL TRANSACTIONS
Each Option outstanding shall terminate upon (i) a merger or consolidation
in which the Company is not the surviving entity, or (ii) a sale or transfer of
all or substantially all of the capital stock or assets of the Company to any
entity or person that is not a parent or subsidiary and the Company is not the
surviving entity (each such transaction collectively referred to as a "Change of
Control"), provided that each optionee to whom no share options have been
tendered by the surviving entity on terms and provisions that substantially
preserve the rights and benefits of such optionee's 1998 Options under the 1998
Plan shall have the right, prior to such Change of Control in which the Company
is not the surviving entity, to exercise his or her outstanding 1998 Options in
whole or in part, on the condition, however, that the Change of Control is
actually effected. If the Change of Control is actually effected, such exercise
shall be deemed effective (and, if applicable, the optionee shall be deemed a
shareholder with respect to the Option exercised) immediately preceding the
effective time of such Change of Control (on the date of record for shareholders
entitled to share in the securities or property distributed in such Change of
Control, if a record date is set). Notwithstanding the foregoing, in the event
of a Change of Control in which the Company is not the surviving entity, the
Compensation Committee shall have the right in its sole discretion to pay to
each optionee possessing unexercised 1998 Options, as soon as practicable
following consummation of such Change of Control, an amount equal to the fair
market value of all shares purchasable (without regard to vesting provisions)
under the unexercised 1998 Options less the exercise price of such unexercised
1998 Options (the "Net Value"). Upon payment of the Net Value, all 1998 Options
outstanding under the 1998 Plan shall be null and void, and the optionee shall
have no further rights thereunder.
VESTING
The 1998 Plan does not impose any specific vesting requirements.
AMENDMENT
The 1998 Plan provides that the Board may amend the 1998 Plan at any time
in such respect as the Board of Directors may deem desirable; provided that the
following amendments shall require approval by the holders of a majority of the
shares represented at a meeting of shareholders for which a quorum is present:
(i) to materially increase the aggregate number of shares eligible for issuance
under the 1998 Plan; (ii) to materially increase the benefits accruing to
participants under the 1998 Plan; or (iii) to materially modify the requirements
for eligibility under the 1998 Plan.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the federal income tax consequences of
participation in the 1998 Plan is only a summary and does not purport to be
complete, and differences in individual optionees' financial situations may
cause federal, state and local income tax consequences of participation in the
1998 Plan to vary.
An optionee will not recognize any income upon the grant of a Non-Qualified
Stock Option. Upon exercise of the Non-Qualified Stock Option, the amount by
which the fair market value of the shares transferred
26
<PAGE>
("Non-Qualified Option Shares") at the time of exercise exceeds the exercise
price must be treated as ordinary income received by the optionee.
If an optionee exercises a Non-Qualified Stock Option by paying the
exercise price with shares of Common Stock, the optionee will be treated as
having made a nontaxable exchange of the number of shares transferred for an
equal number of shares received (the "Exchange Stock"). The basis and holding
period of the Exchange Stock will be the same as the basis and holding period of
the stock transferred. The fair market value of all shares received in excess
of the Exchange Stock (the "Excess Stock") are treated as compensation income to
the optionee, and the Company generally will have a corresponding deduction to
the extent the amount constitutes an ordinary and necessary business expense and
is not disallowed by Section 162(m). The Excess Stock has a basis equal to the
amount included in the optionee's compensation income and a holding period that
begins on the date the Non-Qualified Stock Option is exercised.
The Company generally will be entitled to deduct the amount that the
optionee is required to treat as ordinary income in the Company's taxable year
that ends with or within the taxable year in which the optionee recognizes such
income, to the extent such amount constitutes an ordinary and necessary business
expense and is not disallowed under Section 162(m).
Upon a taxable disposition of Non-Qualified Option Shares, any amount
received by the optionee in excess of the sum of (i) the exercise price and
(ii) any amount includable in income with respect to the exercise of such
Non-Qualified Stock Option, will generally be treated as long-term or short-term
capital gain, depending upon the holding period of the Non-Qualified Option
Shares. To qualify for long-term capital gain treatment, the Non-Qualified
Option Shares must have been held for more than 12 months, and to qualify for
the lowest level of federal income tax on capital gains, such shares must be
held for more than 18 months. If the Non-Qualified Option Shares are held
for more than 12 months but less than 18 months, the maximum federal income
tax rate applicable to individuals is currently 28%, and if the Non-Qualified
Option Shares are held for not more than 18 months, the maximum federal
income tax rate for individuals is 20%. If, upon disposition, the optionee
receives an amount that is less than the fair market value of the
Non-Qualified Option Shares on the exercise date, the loss will generally be
treated as a long or short-term capital loss, depending upon the holding
period of such Non-Qualified Option Shares.
TERMINATION OF OPTIONS
Except as expressly provided in the Stock Option agreements, each Option
shall terminate upon the optionee's termination of employment or status as a
director.
SHARES OF COMMON STOCK SUBJECT TO THE 1998 PLAN
The 1998 Plan authorizes the granting of Non-Qualified Stock Options to
optionees to purchase Common Stock. A total of 300,000 shares of Common Stock
(subject to certain adjustments discussed below) have been reserved for sale
upon the exercise of 1998 Non-Qualified Stock Options granted under the 1998
Plan. As of April 29, 1998 Non-Qualified Stock Options for 256,667 shares had
been granted under the 1998 Plan. If a 1998 Non-Qualified Stock Option expires
fully or partially unexercised, the shares then subject to such 1998 Option are
available for later grant. Upon a change in the number of shares outstanding as
a result of a declaration of a stock dividend or any recapitalization resulting
in a stock split, combination or exchange of shares, there shall be a
proportionate adjustment in the shares available for grant and the shares
subject to outstanding Options.
CERTAIN GRANTS UNDER THE 1998 PLAN
Options have been granted, subject to shareholder approval, under the 1998
Plan, to certain of the Named Executive Officers as set forth above in the
"Report from the Compensation Committee." As a group, the current executive
officers have been granted, subject to shareholder approval, Options to
purchase 176,667 shares of Common Stock under the 1998 Plan. As a group, the
current directors of the Company who are not executive officers of the Company
have been granted, subject to shareholder approval, Options to purchase 60,000
shares of Common Stock under the 1998 Plan. As a group, all employees of the
Company, including all current officers who are not executive officers, have
been granted, subject to shareholder approval, Options to purchase 196,667
shares of Common Stock under the 1998 Plan.
27
<PAGE>
PAYMENT OF EXERCISE PRICE
The exercise price shall be paid solely in cash, or by check, or, if
either expressly permitted by the terms of the Option, or otherwise permitted
by the Compensation Committee in its sole discretion at the time of exercise,
in whole or in part by delivery of shares of Common Stock which will be
deemed payment of all or a portion of the exercise price in an amount equal
to the fair market value of such delivered shares.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO APPROVE THE 1998 PLAN.
OTHER BUSINESS
(PROPOSAL 4)
At the time this Proxy Statement was published, the Board of Directors knew
of no other business to be brought before the Annual Meeting. If, however, any
other business should properly come before the Annual Meeting, the persons named
in the accompanying proxy will vote the proxy as in their discretion they may
deem appropriate, unless they are directed by the proxy to do otherwise.
With respect to business to be brought before the Annual Meeting, the
Company has not received any notices from shareholders that the Company is
required to include in this Proxy Statement.
STOCKHOLDER PROPOSALS
PROPOSALS FOR 1999 ANNUAL MEETING
Pursuant to various rules promulgated by the SEC, any proposals of holders
of Common Stock of the Company intended to be presented to the Annual Meeting of
Stockholders of the Company to be held in 1999 must be received by the Company,
addressed to M. Ted Dillard, President, 12801 North Central Expwy., Suite 350,
Dallas, Texas 75243, no later than December 31, 1998 to be included in the
Company's proxy statement and form of proxy relating to that meeting, which
is tentatively scheduled for May 1999.
GENERAL
The information contained in this Proxy Statement in the sections entitled
"Executive Compensation -- Report From the Board of Directors Regarding
Executive Compensation" and "Comparative Total Returns" shall not be deemed
incorporated by reference by any general statement incorporating by reference
any information contained in this Proxy Statement into any filing under the 1933
Act, or the Exchange Act, except to the extent that the Company specifically
incorporates by reference the information contained in such sections, and shall
not otherwise be deemed filed under the 1933 Act or the Exchange Act.
By Order of the Board of Directors,
M. TED DILLARD
SECRETARY
Dallas, Texas
28
<PAGE>
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO NOT
EXPECT TO ATTEND THE ANNUAL MEETING AND WISH THEIR SHARES TO BE VOTED ARE URGED
TO DATE, SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED SELF-ADDRESSED
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
29
<PAGE>
DIVERSIFIED CORPORATE RESOURCES, INC.
1998 NONQUALIFIED STOCK OPTION PLAN
ARTICLE I. GENERAL PURPOSE OF PLAN
The name of this plan is the 1998 Nonqualified Stock Option Plan (the
"Plan") of Diversified Corporate Resources, Inc., a Texas corporation (the
"Company"). The purpose of the Plan is to enable the Company to obtain and
retain the services of the types of employees, officers and directors who will
contribute to the Company's long range success, and to provide incentives which
are linked directly to increases in share value which will inure to the benefit
of all shareholders of the Company.
ARTICLE II. DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set forth
below:
"BOARD OF DIRECTORS" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor thereto.
"COMMITTEE" means the Compensation Committee of the Company or, in the
absence of a Compensation Committee, a committee composed of one or more
officers of the Company as selected from time to time by the Board of Directors
of the Company.
"COMPANY" means Diversified Corporate Resources, Inc. (or any successor
business entity) and all of its subsidiaries.
"DATE OF GRANT" means the date on which the Board of Directors adopts a
resolution expressly granting a Stock Option to a Participant.
"ELIGIBLE PERSON" means any person who is a key employee (including
officers) of the Company or entity which is the parent of, or a subsidiary of,
the Company, or a director of the Company.
"EXERCISE PRICE" means the price at which the Shares subject to a Stock
Option may be purchased.
"PARTICIPANT" means any Eligible Person selected by the Board of Directors
to receive grants of Stock Options.
"PLAN" means the Company's 1998 Nonqualified Stock Option Plan.
A-1
<PAGE>
"RETIREMENT" means retirement from active employment with the Company, or
any parent or subsidiary of the Company.
"SHARES" means shares of Common Stock of the Company.
"STOCK OPTION" means any option to purchase Shares granted pursuant to the
Plan.
ARTICLE III. ADMINISTRATION
SECTION 3.1 THE ADMINISTRATOR.
a. The Plan shall be administered by the Committee.
b. Only the Committee shall have the power and authority to grant
Stock Options to Eligible Persons, pursuant to the terms of the Plan. The
Committee shall determine (i) those Eligible Persons to whom Stock Options
are to be granted, (ii) the number of Shares to be made subject to each
Stock Option, and (iii) the terms and conditions of each Stock Option,
including, without limitation, the exercise price and the medium of
payment.
c. All decisions made by the Committee pursuant to the provisions of
the Plan shall be final and binding on the Company and the Participants.
ARTICLE IV. SHARES SUBJECT TO THE PLAN
Subject to adjustment as herein provided, the total number of Shares
reserved and available for issuance under the Plan shall be 300,000 Shares which
shall consist, in whole or in part, of authorized and unissued shares of Common
Stock of the Company. Shares covered by Stock Options which are forfeited or
terminated for any reason, which expire unexercised, or which are exchanged for
other Stock Options, shall again be available for grant hereunder. Shares
received by the Company in connection with the exercise of Stock Options by
delivery of other shares, or by surrender of Shares subject to such Stock
Option, and shares received in connection with payment of withholding taxes,
shall again be available for grant hereunder.
ARTICLE V. ELIGIBILITY
All persons who are Eligible Persons shall be eligible to be granted Stock
Options hereunder subject to the limitations set forth in this Plan. Without
limitation, in no case may an Eligible Person be granted a Stock Option covering
more than 200,000 Shares during any calendar year.
ARTICLE VI. STOCK OPTIONS
SECTION 6.1 GENERAL. The Plan provides for the grant of Stock Options to
Eligible Persons selected by the Committee for participation in the Plan. Each
grant of Stock Options pursuant to the Plan shall be evidenced by a Stock Option
agreement between the Participant and
A-2
<PAGE>
the Company in the form from time to time adopted by the Committee and
containing such terms and conditions which the Committee deems appropriate. The
provisions of the various Stock Option agreements entered into under the Plan
need not be identical.
SECTION 6.2 TERMS AND CONDITIONS OF THE STOCK OPTIONS. Each Stock Option
granted pursuant to the Plan shall be evidenced by a written Stock Option
agreement between the Company and the Participant, which agreement shall comply
with and be subject to the following terms and conditions:
a. NUMBER OF SHARES. Each Stock Option agreement shall state the
number of Shares which may be purchased upon exercise of the Stock Option.
b. EXERCISE PRICE. Each Stock Option agreement shall state the
Exercise Price.
c. MEDIUM AND TIME OF PAYMENT. To the extent permitted under the
Texas law, as currently in effect, the Exercise Price shall be paid in
full, at the time of exercise, in cash or, with the approval of the
Committee, in Shares which have a fair market value equal to the Exercise
Price or in a combination of cash and such Shares.
d. RESTRICTIONS ON TRANSFER OF SHARES. Each Stock Option agreement
may contain such restrictions on the transfer of Shares sold under the Plan
as the Committee may determine, including, without limitation, rights of
repurchase and rights of first refusal.
e. TERM AND EXERCISE OF STOCK OPTION. Stock Options shall be
exercisable over the exercise period at the times the Committee may
determine, as reflected in the related Stock Option agreements. The
exercise period of any Stock Option shall not exceed ten (10) years from
the Date of Grant. The exercise period shall be subject to earlier
termination as provided in this Plan. A Stock Option may be exercised, as
to any or all full Shares as to which the Stock Option has become
exercisable, by giving written notice of such exercise to the Company.
ARTICLE VII. ADJUSTMENTS
SECTION 7.1 EFFECT OF CERTAIN CHANGES.
a. If there is any change in the number of Shares outstanding
through the distribution of Shares or through a recapitalization resulting
in Share splits or combinations or exchanges of the Shares outstanding, (i)
the number of Shares covered by Stock Options outstanding; (ii) the number
of Shares reserved and available for issuance under the Plan; and (iii)
the Exercise Price in effect prior to such change shall be proportionately
adjusted by the Committee to reflect any increase or decrease in the number
of Shares issued; PROVIDED, that any fractional Shares resulting from the
adjustment shall be eliminated.
A-3
<PAGE>
b. In the event of the proposed dissolution or liquidation of the
Company, or in the event of any corporate separation or division,
including, but not limited to, a split-up, split-off or spin-off (each, a
"liquidating event"), the Committee may provide that the holder of any
Stock Option then exercisable shall have the right to exercise such Stock
Option subsequent to the liquidating event, at the price provided in the
Stock Option agreement, for the total number of Shares to which the Stock
Option relates (less the number of Shares, if any, previously purchased
pursuant to the Plan), and for the balance of its term, solely for the kind
and amount of shares of stock and other securities, property, cash or any
combination thereof receivable upon such liquidating event by a holder of
the number of Shares for or with respect to which such Stock Option might
have been exercised immediately prior to such liquidating event; or the
Committee may provide, in the alternative, that each Stock Option granted
under the Plan shall terminate as of a date to be fixed by the Committee;
PROVIDED, that not less than thirty (30) days written notice of the date so
fixed shall be given to each Participant and if such notice is given, each
Participant shall have the right, during the period of thirty (30) days
preceding such termination, to exercise the Stock Option as to all or any
part of the Shares covered thereby, on the condition, however, that the
liquidating event actually occurs; and if the liquidating event actually
occurs, such exercise shall be deemed effective (and, if applicable, the
Participant shall be deemed a shareholder with respect to Stock Options
exercised immediately preceding the occurrence of the liquidating event) on
the date of record for shareholders entitled to share in such liquidating
event, if a record date is set.
c. Each Stock Option outstanding shall terminate upon (i) a merger
or consolidation in which the Company is not the surviving entity, or (ii)
a sale or transfer of all or substantially all of the capital stock or
assets of the Company to any entity or person that is not a parent or
subsidiary and the Company is not the surviving entity ((i) and (ii) shall
be collectively referred to as a "Change of Control") provided that (A)
each Participant to whom no Stock Options have been tendered by the
surviving entity pursuant to the terms of item (B) immediately below shall
have the right, exercisable during a ten-day period ending on the fifth
business day prior to such Change of Control in which the Company is not
the surviving entity, to exercise his or her Stock Option in whole or in
part with respect to the total number of Shares to which the Stock Option
relates (less the number of Shares, if any, previously purchased pursuant
to the Plan), on the condition, however, that the Change of Control is
actually effected; and if the Change of Control is actually effected, such
exercise shall be deemed effective (and, if applicable, the Participant
shall be deemed a shareholder with respect to the Stock Option exercised)
immediately preceding the effective time of such Change of Control (on the
date of record for shareholders entitled to share in the securities or
property distributed in such Change of Control, if a record date is set);
and (B) in its sole and absolute discretion, the surviving entity may, but
shall not be obligated to, tender to any Participant share options with
respect to the surviving entity, and such new share options shall contain
such terms and provisions as shall substantially preserve the rights and
benefits of any Stock Options then outstanding under the Plan.
Notwithstanding the foregoing, in the event of a Change of Control in which
the Company is not the surviving entity, the Committee shall have the right
in its sole discretion to pay to each Participant possessing unexercised
Stock Options, as soon as practicable following consummation of such Change
of Control, an amount
A-4
<PAGE>
equal to the fair market value of all Shares purchasable (without regard to
vesting provisions) under the unexercised Stock Options LESS the Exercise
Price of such unexercised Stock Options (the "Net Value").
If the Committee elects to pay each Participant the Net Value rather
than grant the Participants the rights described in this Section 7.1(c),
the Participants shall not be entitled to prior notice of such Change of
Control. Upon payment of the Net Value, all Stock Options outstanding
under this Plan shall be null and void and the Participants shall have no
further rights thereunder. The Company shall have the right to withhold
all applicable taxes from the Net Value prior to making payment to the
Participants.
d. Section 7.1(c) shall not apply to a Change of Control in which
the Company is the surviving entity.
e. The determination as to which party to a Change of Control is the
"surviving entity" shall be made by the Board of Directors.
f. In the event of a change in the Shares of the Company as
presently constituted which is limited to a change of all of its authorized
shares with par value into the same number of shares without par value, or
a change in the par value, the shares resulting from any such change shall
be "Shares" within the meaning of the Plan.
g. To the extent that the foregoing adjustments relate to shares or
securities of the Company, such adjustments shall be made by the Committee,
whose determination in that respect shall be final, binding and conclusive.
h. Except as hereinbefore expressly provided in this Article VII, no
Participant shall have any rights by reason of any subdivision or
consolidation of Shares or the payment of any dividend or any other
increase or decrease in the number of Shares of any class or by reason of
any liquidating event, Change of Control of assets or equity securities of
another equity, or any other issue by the Company of shares of any class,
or securities convertible into shares of any class; and except as provided
in this Article VII, none of the foregoing events shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or
price of Shares subject to Stock Options. The grant of a Stock Option
pursuant to the Plan shall not affect in any way the right or power of the
Company to make adjustments, reclassifications, reorganizations or changes
of its capital or business structures or to effect a Change of Control or
to dissolve, liquidate or sell, or transfer all of part of its business or
assets.
i. Except as specifically provided in this Article VII, a
Participant or a transferee of a Stock Option shall have no rights as a
shareholder with respect to any Shares covered by the Stock Options until
the date of the issuance of a Share certificate to him or her for such
Shares, and no adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or
distributions of other rights for which the record date is prior to the
date such Share certificate is issued, except as herein provided.
A-5
<PAGE>
ARTICLE VIII. AMENDMENT AND TERMINATION
The Board of Directors may amend, alter or discontinue the Plan, but no
amendment, alteration or discontinuance shall be made which would impair the
rights of the Participant under any Stock Option theretofore granted without
such Participant's consent, or which without the approval of the shareholders
would (a) except as provided in Article VII, materially increase the total
number of Shares reserved for the purposes of the Plan, (b) materially increase
the benefits accruing to Participants or Eligible Persons under the Plan, or (c)
materially modify the requirements for eligibility under the Plan.
The Board of Directors may amend the terms of any award theretofore
granted, prospectively or retroactively, but, subject to the terms of the Plan,
no such amendment shall impair the rights of any holder without his or her
consent.
ARTICLE IX. GENERAL PROVISIONS
SECTION 9.1 GENERAL PROVISIONS.
a. The Committee may require each person purchasing Shares pursuant
to the Plan to represent to and agree with the Company in writing that such
person is acquiring the Shares without a view to distribution thereof. The
certificates for such Shares may include any legend which the Committee
deems appropriate to reflect any restrictions on transfer.
b. All certificates for Shares delivered under the Plan shall be
subject to such stop transfer orders and other restrictions as the
Committee may deem advisable.
SECTION 9.2 OTHER COMPENSATION ARRANGEMENTS. Nothing contained in this
Plan shall prevent the Company from adopting other or additional compensation
arrangements, subject to shareholder approval if such approval is required; and
such arrangements may be either generally applicable or applicable only in
specific areas.
SECTION 9.3 TERMINATION OF EMPLOYMENT. Except as herein provided or in
any Stock Option agreement, no Stock Option may be exercised unless the
Participant is then in the employ of the Company, or any parent or any
subsidiary of the Company, and unless he or she has remained continuously so
employed since the Date of Grant. If the employment or services of a
Participant shall terminate, unless otherwise provided in the Stock Option
agreement, all Stock Options previously granted to the Participant shall
terminate on the date notice is given or received regarding such termination.
Nothing in the Plan or in any Stock Option granted pursuant to the Plan shall
confer upon an employee any right to continue in the employ of the Company, or
any parent or any subsidiary of the Company, or interfere in any way with the
right of the Company to terminate such employment at any time.
SECTION 9.4 NONTRANSFERABILITY OF STOCK OPTIONS. Except as otherwise
provided in any Stock Option agreement, Stock Options granted under the Plan
shall not be transferable otherwise than by will or by the laws of descent and
distribution, and Stock Options may be exercised,
A-6
<PAGE>
during the lifetime of the Participant, only by the Participant or by his or her
guardian or legal representative.
SECTION 9.5 REGULATORY MATTERS. Each Stock Option agreement shall provide
that no Shares shall be purchased or sold thereunder unless and until (a) any
then applicable requirements of state or federal laws and regulatory agencies
shall have been fully complied with to the satisfaction of the Company and its
counsel, and (b) if required to do so by the Company, the Participant shall have
executed and delivered to the Company a letter of investment intent in such form
and containing such provisions as the Committee may require.
SECTION 9.6 DELIVERY. Upon exercise of a Stock Option granted under this
Plan, the Company shall issue a Share certificate on the date of exercise, which
will be delivered to the Participant exercising the Stock Option as promptly as
practicable thereafter.
SECTION 9.7 OTHER PROVISIONS. The Stock Option agreements authorized
under the Plan may contain such other provisions not inconsistent with the Plan,
including, without limitation, restrictions upon the exercise of the Stock
Option, as the Board of Directors may deem advisable.
ARTICLE X. EFFECTIVE DATE OF THE PLAN
The Plan is effective January 1, 1998, provided that the Plan, and any
Stock Options granted hereunder, will be null and void ab initio unless on or
before January 1, 1999 the Plan is approved by the affirmative vote of the
holders of a majority of the shares present in person or represented by proxy at
the shareholder meeting of reference and entitled to vote on the matter in
question.
ARTICLE XI. TERM OF THE PLAN
No Stock Option shall be granted pursuant to the Plan after December 31,
2007, but Stock Options theretofore granted may extend beyond that date.
A-7
<PAGE>
DIVERSIFIED CORPORATE RESOURCES, INC.
AMENDED AND RESTATED 1996 NONQUALIFIED STOCK OPTION PLAN
ARTICLE I. GENERAL PURPOSE OF PLAN
The name of this plan is the Amended and Restated 1996 Nonqualified
Stock Option Plan (the "Plan") of Diversified Corporate Resources, Inc., a
Texas corporation (the "Company"), which amends and restates the Diversified
Corporate Resources, Inc. 1996 Nonqualified Stock Option Plan in its
entirety. The purpose of the Plan is to enable the Company, to obtain and
retain the services of the types of employees, officers and directors who
will contribute to the Company's long range success and to provide incentives
which are linked directly to increases in share value which will inure to the
benefit of all shareholders of the Company.
ARTICLE II. DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set
forth below:
"BOARD OF DIRECTORS" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor thereto.
"COMMITTEE" means the Compensation Committee of the Company or, in the
absence of a Compensation Committee, a committee composed of one or more
officers of the Company as selected from time to time by the Board of
Directors of the Company.
"COMPANY" means Diversified Corporate Resources, Inc. (or any successor
business entity) and all of its subsidiaries.
"DATE OF GRANT" means the date on which the Board of Directors adopts a
resolution expressly granting a Stock Option to a Participant.
"ELIGIBLE PERSON" means any person who is a key employee (including
officers) of the Company or entity which is the parent of, or a subsidiary
of, the Company, or a director of the Company.
"EXERCISE PRICE" means the price at which the Shares subject to a Stock
Option may be purchased.
"PARTICIPANT" means any Eligible Person selected by the Board of
Directors to receive grants of Stock Options.
AA-1
<PAGE>
"PLAN" means the Company's Amended and Restated 1996 Nonqualified Stock
Option Plan.
"RETIREMENT" means retirement from active employment with the Company,
or any parent or subsidiary of the Company.
"SHARES" means shares of Common Stock of the Company.
"STOCK OPTION" means any option to purchase Shares granted pursuant to
the Plan.
ARTICLE III. ADMINISTRATION
SECTION 3.1 THE ADMINISTRATOR.
a. The Plan shall be administered by the Committee.
b. Only the Committee shall have the power and authority to grant
Stock Options to Eligible Persons, pursuant to the terms of the Plan. The
Committee shall determine (i) those Eligible Persons to whom Stock Options
are to be granted, (ii) the number of Shares to be made subject to each
Stock Option, and (iii) the terms and conditions of each Stock Option,
including, without limitation, the exercise price and the medium of
payment.
c. All decisions made by the Committee pursuant to the provisions of
the Plan shall be final and binding on the Company and the Participants.
ARTICLE IV. SHARES SUBJECT TO THE PLAN
SECTION 4.1 SHARES SUBJECT TO THE PLAN. Subject to adjustment as
herein provided, the total number of Shares reserved and available for
issuance under the Plan shall be 450,000 Shares which shall consist, in whole
or in part, of authorized and unissued shares of Common Stock of the Company.
SECTION 4.2 UNEXERCISED SHARE OPTIONS. To the extent that any Stock
Options expire or are otherwise terminated without being exercised, the
Shares underlying such Stock Options shall again be available for issuance in
connection with future Stock Options granted under the Plan.
ARTICLE V. ELIGIBILITY
All persons who are Eligible Persons shall be eligible to be granted
Stock Options hereunder subject to the limitations set forth in this Plan.
AA-2
<PAGE>
ARTICLE VI. STOCK OPTIONS
SECTION 6.1 GENERAL. The Plan provides for the grant of Stock Options
to Eligible Persons selected by the Committee for participation in the Plan.
Each grant of Stock Options pursuant to the Plan shall be evidenced by a
Stock Option agreement between the Participant and the Company in the form
from time to time adopted by the Committee and containing such terms and
conditions which the Committee deems appropriate. The provisions of the
various Stock Option agreements entered into under the Plan need not be
identical.
SECTION 6.2 TERMS AND CONDITIONS OF THE STOCK OPTIONS. Each Stock
Option granted pursuant to the Plan shall be evidenced by a written Stock
Option agreement between the Company and the Participant, which agreement
shall comply with and be subject to the following terms and conditions:
a. NUMBER OF SHARES. Each Stock Option agreement shall state the
number of Shares which may be purchased upon exercise of the Stock Option.
b. EXERCISE PRICE. Each Stock Option agreement shall state the
Exercise Price.
c. MEDIUM AND TIME OF PAYMENT. To the extent permitted under the
Texas law, as currently in effect, the Exercise Price shall be paid in
full, at the time of exercise, in cash or, with the approval of the
Committee, in Shares which have a fair market value equal to the Exercise
Price or in a combination of cash and such Shares.
d. RESTRICTIONS ON TRANSFER OF SHARES. Each Stock Option agreement
may contain such restrictions on the transfer of Shares sold under the Plan
as the Committee may determine, including, without limitation, rights of
repurchase and rights of first refusal.
e. TERM AND EXERCISE OF STOCK OPTION. Stock Options shall be
exercisable over the exercise period at the times the Committee may
determine, as reflected in the related Stock Option agreements. The
exercise period of any Stock Option shall not exceed ten (10) years from
the Date of Grant. The exercise period shall be subject to earlier
termination as provided in this Plan. A Stock Option may be exercised, as
to any or all full Shares as to which the Stock Option has become
exercisable, by giving written notice of such exercise to the Company.
ARTICLE VII. ADJUSTMENTS
AA-3
<PAGE>
SECTION 7.1 EFFECT OF CERTAIN CHANGES.
a. If there is any change in the number of Shares outstanding
through the distribution of Shares or through a recapitalization resulting
in Share splits or combinations or exchanges of the Shares outstanding, (i)
the number of Shares covered by Stock Options outstanding; (ii) the number
of Shares reserved and available for issuance under the Plan; and (iii)
the Exercise Price in effect prior to such change shall be proportionately
adjusted by the Committee to reflect any increase or decrease in the number
of Shares issued; provided, that any fractional Shares resulting from the
adjustment shall be eliminated.
b. In the event of the proposed dissolution or liquidation of the
Company, or in the event of any corporate separation or division,
including, but not limited to, a split-up, split-off or spin-off (each, a
"liquidating event"), the Committee may provide that the holder of any
Stock Option then exercisable shall have the right to exercise such Stock
Option subsequent to the liquidating event, at the price provided in the
Stock Option agreement, for the total number of Shares to which the Stock
Option relates (less the number of Shares, if any, previously purchased
pursuant to the Plan), and for the balance of its term, solely for the kind
and amount of shares of stock and other securities, property, cash or any
combination thereof receivable upon such liquidating event by a holder of
the number of Shares for or with respect to which such Stock Option might
have been exercised immediately prior to such liquidating event; or the
Committee may provide, in the alternative, that each Stock Option granted
under the Plan shall terminate as of a date to be fixed by the Committee;
provided, that not less than thirty (30) days written notice of the date so
fixed shall be given to each Participant and if such notice is given, each
Participant shall have the right, during the period of thirty (30) days
preceding such termination, to exercise the Stock Option as to all or any
part of the Shares covered thereby, on the condition, however, that the
liquidating event actually occurs; and if the liquidating event actually
occurs, such exercise shall be deemed effective (and, if applicable, the
Participant shall be deemed a shareholder with respect to Stock Options
exercised immediately preceding the occurrence of the liquidating event) on
the date of record for shareholders entitled to share in such liquidating
event, if a record date is set.
c. Each Stock Option outstanding shall terminate upon (i) a merger
or consolidation in which the Company is not the surviving entity, or (ii)
a sale or transfer of all or substantially all of the capital stock or
assets of the Company to any entity or person that is not a parent or
subsidiary and the Company is not the surviving entity ((i) and (ii) shall
be collectively referred to as a "Change of Control") provided that (A)
each Participant to whom no Stock Options have been tendered by the
surviving entity pursuant to the terms of item (B) immediately below shall
have the right, exercisable during a ten-day period ending on the fifth
business day prior to such Change of Control in which the Company is not
the surviving entity, to exercise his or her Stock Option in whole or in
part with respect to the total number of Shares to which the Stock Option
relates (less the number of Shares, if any, previously purchased pursuant
to the Plan), on the condition,
AA-4
<PAGE>
however, that the Change of Control is actually effected; and if the
Change of Control is actually effected, such exercise shall be deemed
effective (and, if applicable, the Participant shall be deemed a
shareholder with respect to the Stock Option exercised) immediately
preceding the effective time of such Change of Control (on the date of
record for shareholders entitled to share in the securities or property
distributed in such Change of Control, if a record date is set); and (B)
in its sole and absolute discretion, the surviving entity may, but shall
not be obligated to, tender to any Participant share options with respect
to the surviving entity, and such new share options shall contain such
terms and provisions as shall substantially preserve the rights and
benefits of any Stock Options then outstanding under the Plan.
Notwithstanding the foregoing, in the event of a Change of Control in which
the Company is not the surviving entity, the Committee shall have the right
in its sole discretion to pay to each Participant possessing unexercised
Stock Options, as soon as practicable following consummation of such Change
of Control, an amount equal to the fair market value of all Shares
purchasable (without regard to vesting provisions) under the unexercised
Stock Options LESS the Exercise Price of such unexercised Stock Options
(the "Net Value").
If the Committee elects to pay each Participant the Net Value rather
than grant the Participants the rights described in this Section 7.1(c),
the Participants shall not be entitled to prior notice of such Change of
Control. Upon payment of the Net Value, all Stock Options outstanding
under this Plan shall be null and void and the Participants shall have no
further rights thereunder. The Company shall have the right to withhold
all applicable taxes from the Net Value prior to making payment to the
Participants.
d. Section 7.1(c) shall not apply to a Change of Control in which
the Company is the surviving entity.
e. The determination as to which party to a Change of Control is the
"surviving entity" shall be made by the Board of Directors.
f. In the event of a change in the Shares of the Company as
presently constituted which is limited to a change of all of its authorized
shares with par value into the same number of shares without par value, or
a change in the par value, the shares resulting from any such change shall
be "Shares" within the meaning of the Plan.
g. To the extent that the foregoing adjustments relate to shares or
securities of the Company, such adjustments shall be made by the Committee,
whose determination in that respect shall be final, binding and conclusive.
h. Except as hereinbefore expressly provided in this Article VII, no
Participant shall have any rights by reason of any subdivision or
consolidation of Shares or the payment of any dividend or any other
increase or decrease in the number of Shares of any class or by reason of
any liquidating event, Change of Control of assets or equity securities
AA-5
<PAGE>
of another equity, or any other issue by the Company of shares of any
class, or securities convertible into shares of any class; and except as
provided in this Article VII, none of the foregoing events shall affect,
and no adjustment by reason thereof shall be made with respect to, the
number or price of Shares subject to Stock Options. The grant of a Stock
Option pursuant to the Plan shall not affect in any way the right or power
of the Company to make adjustments, reclassifications, reorganizations or
changes of its capital or business structures or to effect a Change of
Control or to dissolve, liquidate or sell, or transfer all of part of its
business or assets.
i. Except as specifically provided in this Article VII, a
Participant or a transferee of a Stock Option shall have no rights as a
shareholder with respect to any Shares covered by the Stock Options until
the date of the issuance of a Share certificate to him or her for such
Shares, and no adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or
distributions of other rights for which the record date is prior to the
date such Share certificate is issued, except as herein provided.
ARTICLE VIII. AMENDMENT AND TERMINATION
The Board of Directors may amend, alter or discontinue the Plan, but no
amendment, alteration or discontinuance shall be made which would impair the
rights of the Participant under any Stock Option theretofore granted without
such Participant's consent, or which without the approval of the shareholders
would (a) except as provided in Article VII, materially increase the total
number of Shares reserved for the purposes of the Plan, (b) materially
increase the benefits accruing to Participants or Eligible Persons under the
Plan, or (c) materially modify the requirements for eligibility under the
Plan.
The Board of Directors may amend the terms of any award theretofore
granted, prospectively or retroactively, but, subject to the terms of the
Plan, no such amendment shall impair the rights of any holder without his or
her consent.
ARTICLE IX. GENERAL PROVISIONS
SECTION 9.1 GENERAL PROVISIONS.
a. The Committee may require each person purchasing Shares pursuant
to the Plan to represent to and agree with the Company in writing that such
person is acquiring the Shares without a view to distribution thereof. The
certificates for such Shares may include any legend which the Committee
deems appropriate to reflect any restrictions on transfer.
b. All certificates for Shares delivered under the Plan shall be
subject to such stop transfer orders and other restrictions as the
Committee may deem advisable.
AA-6
<PAGE>
SECTION 9.2 OTHER COMPENSATION ARRANGEMENTS. Nothing contained in this
Plan shall prevent the Company from adopting other or additional compensation
arrangements, subject to shareholder approval if such approval is required;
and such arrangements may be either generally applicable or applicable only
in specific areas.
SECTION 9.3 TERMINATION OF EMPLOYMENT. Except as herein provided or in
any Stock Option agreement, no Stock Option may be exercised unless the
Participant is then in the employ of the Company, or any parent or any
subsidiary of the Company, and unless he or she has remained continuously so
employed since the Date of Grant. If the employment or services of a
Participant shall terminate, unless otherwise provided in the Stock Option
agreement, all Stock Options previously granted to the Participant shall
terminate on the date notice is given or received regarding such termination.
Nothing in the Plan or in any Stock Option granted pursuant to the Plan shall
confer upon an employee any right to continue in the employ of the Company,
or any parent or any subsidiary of the Company, or interfere in any way with
the right of the Company to terminate such employment at any time.
SECTION 9.4 NONTRANSFERABILITY OF STOCK OPTIONS. Stock Options granted
under the Plan shall not be transferable otherwise than by will or by the
laws of descent and distribution, and Stock Options may be exercised, during
the lifetime of the Participant, only by the Participant or by his or her
guardian or legal representative.
SECTION 9.5 REGULATORY MATTERS. Each Stock Option agreement shall
provide that no Shares shall be purchased or sold thereunder unless and until
(a) any then applicable requirements of state or federal laws and regulatory
agencies shall have been fully complied with to the satisfaction of the
Company and its counsel, and (b) if required to do so by the Company, the
Participant shall have executed and delivered to the Company a letter of
investment intent in such form and containing such provisions as the
Committee may require.
SECTION 9.6 DELIVERY. Upon exercise of a Stock Option granted under
this Plan, the Company shall issue a Share certificate on the date of
exercise, which will be delivered to the Participant exercising the Stock
Option as promptly as practicable thereafter.
SECTION 9.7 OTHER PROVISIONS. The Stock Option agreements authorized
under the Plan may contain such other provisions not inconsistent with the
Plan, including, without limitation, restrictions upon the exercise of the
Stock Option, as the Board of Directors may deem advisable.
ARTICLE X. EFFECTIVE DATE OF THE PLAN
The Plan became effective as of December 27, 1996, the date as of which
the Plan was adopted by the Board of Directors.
AA-7
<PAGE>
ARTICLE XI. TERM OF THE PLAN
No Stock Option shall be granted pursuant to the Plan after December 27,
2006 but Stock Options theretofore granted may extend beyond that date.
AA-8
<PAGE>
FIRST AMENDMENT
TO THE
DIVERSIFIED CORPORATE RESOURCES, INC.
AMENDED AND RESTATED 1996 NONQUALIFIED STOCK OPTION PLAN
This First Amendment to the Diversified Corporate Resources, Inc.
Amended and Restated 1996 Stock Option Plan ("Plan") made and entered into
effective as of the 13th day of November, 1997.
W I T N E S S E T H:
WHEREAS, Diversified Corporate Resources, Inc. ("Company") established
the Plan effective December 27, 1996; and
WHEREAS, the Board of Directors ("Board") has the right under Article
VIII to amend the Plan at any time and in any respect, except that some
amendments are subject to the approval of shareholders; and
WHEREAS, the Board has determined that it will better serve the
interests of the Company if the Plan is amended (i) to increase the number of
Shares subject to grant under the Plan by 50,000, principally in order to
provide sufficient Shares to satisfy all of the Stock Options granted under
the Plan, and (ii) to authorize the Compensation Committee to exercise its
discretion in setting the transferability limitations (and to amend existing
Stock Option agreements) with respect to each Stock Option granted under the
Plan; and
WHEREAS, such amendments require the concurrence and approval of the
shareholders of the Company; and
WHEREAS, the Board has authorized the President, acting at the direction
and on behalf of the Board, to evidence the Board's action by executing this
First Amendment.
NOW THEREFORE, The Plan Is Hereby Amended As Follows:
I. Article IV is amended effective November 13, 1997 by deleting
"450,000" and substituting therefore "500,000".
II. Section 9.4 is amended effective November 13, 1997 by adding to the
first sentence thereof the words "Except as otherwise provided in any Stock
Option agreement,"
IN WITNESS WHEREOF, the undersigned has executed this First Amendment as
of this 29th day of April, 1998, but effective as of November 13, 1997;
provided, however, without limitation, that this Amendment, and the portion
of any Stock Options granted under the Plan to
AAA-1
<PAGE>
the minimum extent it requires the effectiveness of this First Amendment,
will be null and void ab initio unless, on or before November 13, 1998, this
First Amendment is approved by the affirmative vote of the holders of a
majority of the shares present in person or represented by proxy at the
shareholder meeting of reference and entitled to vote on the matter in
question.
DIVERSIFIED CORPORATE RESOURCES, INC.
BY:
---------------------------------------------------
NAME:
---------------------------------------------------
TITLE:
---------------------------------------------------
AAA-2
<PAGE>
DIVERSIFIED CORPORATE RESOURCES, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS, JUNE 10, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints J. Michael Moore and M. Ted Dillard, or
either of them, with full power of substitution, as Proxies to vote all stock of
Diversified Corporate Resources, Inc. (the "Company") owned by the undersigned
at the Annual Meeting of Shareholders to be held in Dallas, Texas on June 10,
1998, upon such business as may properly come before the meeting or any
adjournment(s) thereof, including the following items as set forth in the
Notice of Meeting and Proxy Statement, receipt of which is hereby acknowledged.
1. Proposal to elect as Directors of the Company the following persons to hold
office until the next annual election of Directors by shareholders or until
their successors have been duly elected and qualified.
/ / FOR all nominees listed
(except as marked below to the contrary)
/ / WITHHOLD AUTHORITY to vote for all nominees listed
J. Michael Moore A. Clinton Allen Samuel E. Hunter
M. Ted Dillard Deborah A. Farrington
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
INDIVIDUALS NOMINATED FOR ELECTION AS A DIRECTOR.
2. Approval of the amendment to the Company's Amended and Restated 1996
Nonqualified Stock Option Plan, amended to increase the number of shares
from 450,000 to 500,000 and to modify the transferability provisions
contained therein.
[] FOR [] AGAINST [] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT
TO THE DIVERSIFIED CORPORATE RESOURCES, INC. AMENDED AND RESTATED 1996
NONQUALIFIED STOCK OPTION PLAN.
<PAGE>
3. Approval of the Diversified Corporate Resources, Inc., 1998 Nonqualified
Stock Option Plan.
[] FOR [] AGAINST [] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE
DIVERSIFIED CORPORATE RESOURCES, INC., 1998 NONQUALIFIED STOCK OPTION PLAN.
4. In their discretion, the Proxies are authorized to vote upon such other
matters and business as may properly come before the meeting.
[] FOR [] AGAINST [] ABSTAIN
Your signature(s) on this proxy form should be exactly as your name or
names appear on this proxy. If the stock is held jointly, each holder should
sign. If signing as attorney, executor, administrator, trustee, guardian or
other fiduciary or representative capacity, please set forth your full title.
If a corporation, please sign in full corporate name as president or other
authorized officer. If a partnership, please sign in the partnership's name by
authorized person. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING
THE ENCLOSED ENVELOPE.
Dated: , 1998.
--------------- -----------------------------------
(Signature)
-----------------------------------
(Signature if held jointly)
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
SHAREHOLDER. IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY IS RETURNED,
SUCH SHARES WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF
DIRECTORS FOR PROPOSALS 1, 2, AND 3 AND THE PROXIES WILL USE THEIR DISCRETION
WITH RESPECT TO ANY MATTER REFERRED TO IN PROPOSAL 4.
