<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
DIVERSIFIED CORPORATE RESOURCES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
April 30, 1999
Dear Shareholder:
You are cordially invited to attend the 1999 Annual Meeting of Shareholders
(the "Annual Meeting") of Diversified Corporate Resources, Inc. (the "Company"),
which will be held at Embassy Suites Hotel, Dallas Park Central Area, 13131
North Central Expressway, Dallas, Texas 75243 on June 17, 1999 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 1998 Non-employee Director Stock Option Plan of the Company, and (3) 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 17, 1999
---------------------
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 Embassy Suites Hotel, Dallas Park Central Area, 13131 North Central
Expressway, Dallas, Texas 75243 on Thursday, June 17, 1999 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 1998 Non-employee Director Stock Option Plan of the Company.
3. 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 20, 1999, 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, 1999
<PAGE>
DIVERSIFIED CORPORATE RESOURCES, INC.
12801 N. CENTRAL EXPRESSWAY, SUITE 350
DALLAS, TEXAS 75243
------------------------
PROXY STATEMENT
FOR
1999 ANNUAL MEETING OF SHAREHOLDERS
JUNE 17, 1999
------------------------
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 14, 1999. 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 the Company's
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.
1
<PAGE>
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.
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 20, 1999 (the
"Record Date"). At the close of business on the Record Date there were 2,726,397
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 or other announcement, 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
(a) a plurality of the shares of Common Stock represented and voting at the
Annual Meeting is required for the election of directors, and (b) a majority of
the shares of Common Stock present in person or represented by proxy at the
Annual Meeting and entitled to vote therein is required to (i) approve 1998
Non-employee Director Stock Option Plan of the Company (the "Directors Plan"),
and (ii) approve any and all other business 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, or
the approval of the Directors 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 20, 1999 by (a) each person known by
the Company to own beneficially five percent or more of the outstanding Common
Stock; (b) each of the Company's directors; (c) each of the executive officers
named in the Summary Compensation Table below; and (d) 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.............................................. 621,700(3) 22.8%
J. Michael Moore.................................................. 830,032(4) 29.3%
M. Ted Dillard.................................................... 177,224(5) 6.4%
Samuel E. Hunter.................................................. 28,750(6) 1.0%
Deborah A. Farrington............................................. 21,250(7) *
A. Clinton Allen.................................................. 21,250(8) *
Douglas G. Furra.................................................. 23,832(9) *
Anthony J. Bruno.................................................. 5,400 10) *
James L. Woo...................................................... 5,160 11) *
FMR Corp.......................................................... 257,200 12) 9.4%
First Wilshire Securities Management, Inc......................... 163,300 13) 6.0%
All directors and executive officers as a group
(8 persons)1, 2, 4, 5, 6, 7, 8, 9, 10, 11........................ 1,112,898 37.4%
</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 2,726,397 shares of Common
Stock issued and outstanding on the Record Date. In the case of parties
holding options, the percentage ownership is calculated on the assumption
that (a) the shares purchasable within the next 60 days underlying such
options are outstanding, and (b) the shares which are vested or will be
vested in the next 60 days, but are not exercisable until October 23, 1999,
are also outstanding. See "Report From the Compensation Committee--Ten-Year
Option/SAR Repricings" below.
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.
No. 2 holds sole voting and investment power with respect to the Shares,
subject to the rights retained by (a) Imperial Bank in connection with a
loan (the "Imperial Loan") to No. 2, the current balance of
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<PAGE>
which is $750,000 and is due July 1999, (b) Bank One Texas in connection
with a loan (the "Bank One Loan") to No. 2, the current balance of which is
$825,000 and is due July 1999, and (c) Compass Bank in connection with two
loans (collectively the "Compass Loan") to No. 2, the current balance of
which is $427,000 and is due May 15, 2000. No. 2 has granted a security
interest to (i) Imperial Bank to secure the Imperial Loan in 250,000 shares
of Common Stock, (ii) to Bank One Texas to secure the Bank One Loan in
175,000 shares of Common stock, (iii) Compass Bank to secure the Compass
Loan in 165,000 shares of Common Stock, and (iv) to the Company, in
connection with the Compass Bank transaction, in 50,000 shares of Common
Stock (see "Certain Relationships and Related Transactions" for more
information related to the Company's agreement to purchase the Compass Loan
in the event No. 2 and J. Michael Moore default in their obligations to
repay the Compass Loan). 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 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
substantially all of the capital stock of No. 2) , and 110,832 shares of
Common Stock issuable upon exercise of options.
5. Includes 43,224 shares of Common Stock issuable upon the exercise of
options. Mr. Dillard owns 7.5% of the capital stock of No. 2 and will have
the right to acquire an additional 2.5% of the capital stock of No. 2, on or
after January 1, 2000.
6. Includes 23,750 shares of Common Stock issuable upon the exercise of
options, 3,750 of which were granted pursuant to the Directors 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.
7. Consists of 21,250 shares of Common Stock issuable upon the exercise of
options, 3,750 of which were granted pursuant to the Directors 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. Consists of 21,250 shares of Common Stock issuable upon the exercise of
options, 3,750 of which were granted pursuant to the Directors 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 23,332 shares of Common Stock issuable upon the exercise of
options.
10. Includes 4,800 shares of Common Stock issuable upon the exercise of options.
11. Includes 4,000 shares of Common Stock issuable upon the exercise of options.
12. The address of FMR Corp. is 82 Devonshire St., Boston, MA 02109.
13. The address of First Wilshire Securities Management, Inc. is 600 South Lake
Street, Suite 100, Pasadena, CA 91106.
4
<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 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 their 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................................. 52 Executive Officer 1991
M. Ted Dillard................................... 46 President and Secretary 1991
A. Clinton Allen................................. 55 None 1998
Deborah A. Farrington............................ 48 None 1997
Samuel E. Hunter................................. 64 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, since 1986. Mr. Moore is
the principal shareholder of DCRI L.P. No. 2, Inc., a Texas corporation. See
"Security Ownership of Certain Beneficial Owners and 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 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., Image Guided Technologies and Legal Club of America, Inc.
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.
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. Since May
1998, Ms. Farrington has been a consultant to the Company in addition to
functioning as a director (see "Certain Relationship and Related Party
Transactions"). Since May, 1998, Ms. Farrington has been Co-Chairman of StarVest
Management, Inc. (a private equity investment firm). 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 based staffing
services company. From 1991 to 1993, she served
5
<PAGE>
as Executive Vice President and a director of Tigera Group, Inc., a NASDAQ
National Market System listed company, where she also served as Co-Chairman of
the Board from 1995 to 1996.
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. 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).
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held fifteen (15) meetings during the year ended
December 31, 1998. During the year ended December 31, 1998, 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 Mr. Hunter (Chairman), Ms. Farrington, and Mr.
Allen. The function of the Audit Committee is to make recommendations concerning
the engagement of independent public accountants, review with the independent
public accountants the plans and results of the audit engagement, approve
professional services provided by the independent public accountants, review the
independence of the independent public accountants, consider the range of audit
and non-audit fees and review the adequacy of the Company's internal accounting
controls. During 1998, the Audit Committee held one meeting.
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 1998, the Compensation Committee held five meetings and took
certain actions by unanimous consent.
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
Prior to April 1998, non-employee members of the Board of Directors each
received $1,000 for each Directors' meeting attended, and 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 receive $500 for each committee meeting attended. For
serving as the Chairman of the Audit committee, Mr. Hunter receives $1,000 (as
opposed to $500) for each 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.
6
<PAGE>
In June 1998, the compensation of the non-employee members of the Board of
Directors for Director's meeting attended was changed so that such Directors
receive $6,000 per quarter with no meeting fees; in December, 1998 the quarterly
amount was increased to $8,000 per quarter. The compensation of Directors
related to committee services and meetings were not changed and remains as above
set forth.
In December 1998, the Board of Directors of the Company approved the
Directors Plan and granted to each of Mr. Hunter, Ms. Farrington and Mr. Allen
options to purchase 15,000 shares of Common Stock with an exercise price of
$5.75 per share; such approval and grants are subject to shareholder approval of
the Directors Plan. In connection with this action, the Board of Directors
terminated all options previously granted to these three individuals which had
not vested by December 31, 1998. See "Proposal to Approve the 1998 Non-employee
Director Stock Option Plan of the Company" for more information related to
options granted to Mr. Hunter, Ms. Farrington and Mr. Allen.
In May 1998, the Company entered into a consulting agreement with Deborah A.
Farrington, a director of the Company, pursuant to which Ms. Farrington agreed
to provide consulting services to the Company in connection with an acquisition
program of the Company. Pursuant to such agreement, the Company paid $15,000 in
cash to Ms. Farrington and agreed to pay her $4,000 per month plus such
additional amounts, if any, as the Board of Directors of the Company may
determine in connection with acquisitions, if any, made in the future by the
Company.
In October 1998, the Company paid $89,000 to Ms. Farrington as a commission
in connection with the Company's acquisition of Texcel, Inc., $50,000 of which
was paid in cash with the remainder being offset by the previously paid monthly
consulting fee.
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.
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.................... 37 Chief Financial Officer and Treasurer
Anthony J. Bruno.................... 63 President, Management Alliance Corporation
James L. Woo........................ 48 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
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<PAGE>
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, subject to
certain renewal and termination provisions 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, 1999, subject to certain
renewal and termination provisions 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 met.
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 AWARDS
ANNUAL COMPENSATION -------------------
----------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) COMPENSATION($)(2) OPTIONS/SARS(#)(3) COMPENSATION($)
- --------------------------- --------- ----------- ------------- ------------------- ------------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
J. Michael Moore........... 1998 $ 188,320 $ 55,805 $ 23,500 100,000(4) $ --
Chairman and Chief 1997 172,196 54,078 3,000 -- --
Executive Officer 1996 117,000 37,585 1,500 155,000 --
M. Ted Dillard............. 1998 $ 157,707 $ 46,504 $ 18,700 66,667 $ --
President, Secretary 1997 135,664 45,065 3,000 -- --
and Treasurer 1996 111,314 27,216 1,500 105,000 --
Douglas G. Furra(5)........ 1998 $ 115,408 $ 27,902 $ -- 10,000 $ --
Chief Financial Officer 1997 57,500 $ 20,279 -- 30,000 --
1996 -- -- -- -- --
Anthony J. Bruno(6)........ 1998 $ 117,333 $ 33,923 $ 18,000 -- $ --
President Management 1997 110,000 27,018 18,000 12,000 --
Alliance Corporation 1996 56,625 15,000 50,500 -- --
James L. Woo(7)............ 1998 $ 101,333 $ 25,442 $ -- -- $ --
Executive Vice-President 1997 96,000 20,263 -- 10,000 --
Management Alliance 1996 96,000 13,188 -- -- --
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 subsidiary companies on a
consolidated basis. Bonuses for Messrs. Bruno and Woo are calculated as a
percentage of Profits of Management Alliance Corporation.
8
<PAGE>
(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 $1,500, $3,000, and
$1,500 in 1998, 1997 and 1996, respectively. Includes deferred compensation
for each of Mr. Moore and Mr. Dillard of $22,000 and $16,500, respectively,
in 1998. Includes compensation of $700 for Mr. Dillard attributable to
interest at a below market rate in connection with a loan made to him by the
Company on July 17, 1998; see "Certain Relationships and Related
Transactions."
(3) All options granted in 1997 and 1996 were granted pursuant to the 1996
Nonqualified Stock Option Plan (the "1996 Plan"). All options granted in
1998 were granted pursuant to the 1998 Non-Qualified Stock Option Plan (the
"1998 Plan").
(4) In April 1998, Mr. Moore was granted (the "1998 Grant") options to purchase
100,000 shares of Common Stock contingent upon the exercise by Mr. Moore of
previously granted options (the "Existing Options") to purchase 124,000
shares. In April 1999, the 1998 Grant was reduced to options to purchase
62,500 shares as a result of Mr. Moore's partial exercise of the Existing
Options. As reduced, the 1998 Grant vests at the rate of 8,333 shares per
quarter, beginning June 30, 1998.
(5) Mr. Furra became the Chief Financial Officer of the Company in June 1997.
(6) 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 in 1996, and a housing allowance of $18,000 in each of
1998 and 1997.
(7) Mr. Woo became the Executive Vice-President of Management Alliance
Corporation, a wholly owned subsidiary of the Company, in August 1996.
STOCK OPTION GRANTS DURING 1998
The following table provides information with respect to the Named Executive
Officers concerning the grant of options to acquire Common Stock in 1998.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------------------- VALUE OF ASSUMED
% OF TOTAL ANNUAL
NUMBER OF OPTIONS/SARS RATES OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM(4)
OPTIONS/SARS IN OR BASE EXPIRATION ----------------------
NAME GRANTED(#)(1) FISCAL YEAR PRICE($/SH) DATE 5%($) 10%($)
- ---------------------------------- --------------- ----------------- ----------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
J. Michael Moore.................. 100,000(2) 46.2% $ 12.75 4-08 $ 352,259 $ 778,400
M. Ted Dillard.................... 66,667 30.8% (3) 4-08 $ 234,841 $ 518,936
Douglas G. Furra.................. 10,000 4.6% (3) 4-08 $ 35,226 $ 77,840
Anthony J. Bruno.................. -- -- -- -- -- --
James L. Woo...................... -- -- -- -- -- --
</TABLE>
- ------------------------------
(1) All of the options granted to Named Executive Officers in 1998 were granted
under the 1998 Plan.
(2) See footnote 4 to the "Summary Compensation Table," above.
(3) The options had an exercise price of $12.75 per share at grant date and were
repriced at $5.125 per share on October 23, 1998. As a condition of such
repricing, none of these options may be exercised prior to October 23, 1999
even if vested. The options vest quarterly over three years beginning with
the quarter ended June 30, 1998.
(4) The dollar amounts under these columns represent the potential realizable
value of each grant of options assuming that the market price of the
Company's Common Stock appreciates in value from the date of grant at the 5%
and 10% annual rates prescribed by the SEC and, therefore, are not intended
to forecast possible future appreciation, if any, of the price of the
Company's Common Stock.
9
<PAGE>
AGGREGATED STOCK OPTION/SAR EXERCISES DURING 1998 AND STOCK OPTION/SAR VALUES AS
OF DECEMBER 31, 1998
The following table sets forth information with respect to the Chief
Executive Officer and the Named Executive Officers concerning the exercise of
options during 1998 and unexercised options held as of December 31, 1998:
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS/SARS
OPTIONS/SARS AT FISCAL
AT FISCAL YEAR END
YEAR END (#)(1) ($)(1)(2)
SHARES VALUE ----------------- -------------
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) ($) UNEXERCISABLE UNEXERCISABLE
- ------------------------------------------------- ----------- ----------- ----------------- -------------
<S> <C> <C> <C> <C>
J. Michael Moore................................. -- -- 149,000/106,000(3) $ 240,250/$0
M. Ted Dillard................................... 84,000 $ 219,000 0/87,667 $ 0/$0
Douglas G. Furra................................. -- -- 10,000/30,000 $ 10,000/$0
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, 1998 that were not repriced on October 23, 1998 and the
amounts under the headings entitled "Unexercisable" reflect options that
have not vested as of December 31, 1998 and those that were vested but were
repriced on October 23, 1998 and are not exercisable until October 23, 1999.
See "Report From the Compensation Committee Regarding Executive
Compensation--Ten-Year Option/ SAR Repricings" below.
(2) Values stated are pre-tax and net of cost, and are based on the $5.00 per
share closing price of the Common Stock on December 31, 1998.
(3) See footnote 4 to the "Summary Compensation Table," above.
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 SEC 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.
REPORT FROM THE COMPENSATION COMMITTEE REGARDING EXECUTIVE COMPENSATION
MEMBERSHIP. The Compensation Committee currently consists of three
individuals: A. Clinton Allen (who is the Chairman of the Compensation
Committee), Deborah A. Farrington and Samuel E. Hunter. Mr. Allen became a
member of the Board and the Chairman of the Compensation Committee on April 21,
10
<PAGE>
1998. Prior to such date in 1998, the Compensation Committee consisted of Ms.
Farrington and Mr. Hunter.
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 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 performance
as well as upon his or her own level of performance. Accordingly, each executive
officer's compensation package is comprised of three elements: (a) base salary,
which reflects individual performance and is designed primarily to be
competitive with salary levels of similarly sized companies; (b) annual variable
performance awards payable in cash and tied to the Company's achievement of
performance goals; and (c) 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 than 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 1998, all of the Company's executive officers, including the Chief
Executive Officer, received salaries averaging 11% over 1997 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 1998, as a result of the Company's performance and
based upon the factors discussed above, the Compensation Committee established
the Company's 1998 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. In April 1999, 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 1999
Bonus Plan as follows: (a) 2% and 1.5%, respectively, of the after tax net
income of Management Alliance Corporation for each of Messrs. Bruno and Woo; and
(b) 3%, 2.5% and 1.5% of the after tax net income of the Company on a
consolidated basis for each of Messrs. Moore, Dillard and Furra, respectively.
See "Executive Compensation--Summary Compensation Table," above.
11
<PAGE>
CHIEF EXECUTIVE OFFICER. In April 1998, the Compensation Committee
determined that, due to the Company's improved operating results in 1997, an
increase in the Chief Executive Officer's compensation was warranted 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 and options to purchase 100,000 shares of Common Stock. See
"--Equity Compensation," below. Accordingly, the Compensation Committee
increased the annual salary of the Chief Executive Officer to $192,000 effective
May 1, 1998.
PRESIDENT. In April 1998, the Compensation Committee determined that, due
to the Company's improved operating results in 1997, an increase in the
President's compensation was warranted 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 and options to purchase
66,667 shares of Common Stock. See "--Equity Compensation," below. Accordingly,
the Compensation Committee 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, corporate
and individual performance, and the number of unexercised options outstanding at
the date of grant. Emphasis is placed on the long-term performance of the
Company and is subjective with no particular emphasis being placed on any one
factor. See "Certain Relationships and Related Transactions" for more
information related to these matters.
In April 1998, the Compensation Committee granted to each of Messrs. Moore,
Dillard and Furra options to purchase 100,000, 66,667 and 10,000, respectively,
shares of the Company's Common Stock with the exercise price of such options
being $12.75 per share. Each of these options are to vest over a three year
period. In addition, the awards to Messrs. Moore and Dillard were expressly
conditioned upon their exercise of options to purchase 124,000 and 84,000
shares, respectively. With respect to such options, in January 1999, Mr. Moore
purchased 72,500 shares of stock and waived his right to purchase an additional
5,000 shares of the Company's Common Stock. As a result of such partial
exercise, in April 1999 the Compensation Committee reduced its original grant to
Mr. Moore of options to purchase 100,000 shares to options to purchase 62,500
shares. In July 1998, Mr. Dillard purchased the 84,000 shares of the Company's
Common Stock covered by such options. See "Certain Relationships and Related
Transactions" below for more information related to these matters.
OPTION REPRICING. In October 1998, the Compensation Committee and the Board
of Directors agreed to reprice, at $5.125 per share, all options previously
granted to employees of the Company which involved an exercise price in excess
of such price. The only exception to such action was that the options to
purchase 100,000 shares granted to Mr. Moore in April 1998 were not repriced. As
a result of this action, the Board of Directors mandated that none of the
repriced options could be exercised prior to October 23, 1999 even if such
options become fully vested prior to such date. As a result of this action, the
number of shares under options repriced for executive officers of the Company
are as follows: Mr. Moore--31,000 shares, Mr. Dillard--87,667 shares, Mr.
Furra--30,000 shares, Mr. Bruno--12,000 shares, and Mr. Woo-- 10,000 shares.
The Compensation Committee and Board of Directors determined that it was in
the best interests of the Company to reduce the exercise price of options
granted to employees. The decision was attributable to the unexpected and
significant decline in the price of the Common Stock, the belief that such price
decline was not attributable to poor performance by the Company and its
management team, and the desire to insure that the Company retains and
incentivizes all of its management personnel. See "Ten-Year Option Repricings"
below.
12
<PAGE>
TAX CONSEQUENCES. The Omnibus Budget Reconciliation Act of 1993 added
Section 162(m) ("Section 162(m)") to the Internal Revenue 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 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 previously 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 decided not to alter the Company's compensation
plans with respect to existing 1996 Options, but does believe that options
granted and repriced to Covered Employees under the 1998 Plan will meet the
deductibility requirements of Section 162(m).
COMPENSATION COMMITTEE
A. Clinton Allen
Deborah A. Farrington
Samuel E. Hunter
13
<PAGE>
TEN-YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF
SECURITIES MARKET ORIGINAL
UNDERLYING PRICE OF EXERCISE TERM
NUMBER OF STOCK AT PRICE AT NEW REMAINING AT
OPTIONS TIME OF TIME OF EXERCISE DATE OF
NAME DATE REPRICED REPRICING REPRICING PRICE REPRICING
- ------------------------------------------- --------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
J. Michael Moore........................... 10/23/98 31,000 $ 5.125 $ 8.00 $ 5.125 38 Months
Chairman of the Board and Chief Executive
Officer
M. Ted Dillard............................. 10/23/98 21,000 $ 5.125 $ 8.00 $ 5.125 38 Months
President and Secretary 10/23/98 66,667 $ 5.125 $ 12.75 $ 5.125 114 Months
Douglas G. Furra........................... 10/23/98 20,000 $ 5.125 $ 8.00 $ 5.125 43 Months
Chief Financial Officer 10/23/98 10,000 $ 5.125 $ 12.75 $ 5.125 114 Months
and Treasurer
Anthony J. Bruno........................... 10/23/98 12,000 $ 5.125 $ 10.00 $ 5.125 108 Months
President,
Management Alliance Corporation
James L. Woo............................... 10/23/98 10,000 $ 5.125 $ 10.00 $ 5.125 108 Months
Executive Vice President,
Management Alliance Corporation
</TABLE>
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
The Company has entered into employment agreements with Messrs. Moore and
Dillard that provide that: (a) base compensation payable to Mr. Moore and Mr.
Dillard be not less than $150,000 per annum and $125,000 per annum, respectively
(the current annual salaries for such individuals are $192,000 for Mr. Moore,
and $162,000 for Mr. Dillard); (b) Mr. Moore shall be the Chief Executive
Officer of the Company and shall report to the Board of Directors of the
Company; (c) Mr. Dillard shall be the President of the Company and shall report
to Mr. Moore; and (d) 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 prior to the
Termination Date 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.
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
14
<PAGE>
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 terminated for cause during
the twenty-four (24) month period beginning on the Effective Date of such change
in control, (a) 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 (b) the Company's obligation to fund the
Deferred Compensation Program shall extend until the expiration of the Extension
Period.
With respect to change of control provisions related to stock options, each
of the 1996 Plan and the 1998 Plan contain certain change in control provisions.
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 (a) 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 (b) if, 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 (c) if, 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: (a) compensation payable to Mr. Furra of $99,600 per annum; (b)
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;
(c) Mr. Furra serves as the Chief Financial Officer of the Company; (d) Mr.
Furra receives options for the purchase of 30,000 shares of Common Stock
(options to purchase an additional 10,000 shares of Common Stock were granted to
Mr. Furra on April 29, 1998 and repriced on October 23, 1998); and (e) 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 was set at
$116,112.
The Company has entered into an employment agreement with Mr. Bruno that
provides that (a) the compensation payable to Mr. Bruno is $110,000 per annum;
(b) the term of employment is for two (2) years commencing January 1, 1998; (c)
Mr. Bruno serves as the President of Management Alliance
15
<PAGE>
Corporation; (d) 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, 1999; (e) Mr. Bruno receives options for
the purchase of 12,000 shares of Common Stock pursuant to the 1996 Plan; and (f)
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 was set at $121,000.
The Company has entered into an employment agreement with Mr. Woo that
provides that (a) the compensation payable to Mr. Woo is $96,000 per annum; (b)
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; (c) Mr. Woo serves as the Executive Vice President of Management
Alliance Corporation; (d) Mr. Woo receives options for the purchase of 10,000
shares of Common Stock pursuant to the Company's 1996 Plan; and (e) 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
without cause, Mr. Woo shall be entitled to receive (i) three 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 was set at $104,000.
16
<PAGE>
COMPARATIVE TOTAL RETURNS
PERFORMANCE GRAPH
The following Performance Graph shows the changes over the five year period
from December 31, 1993 to December 31, 1998 in the value of $1,000 invested in:
(a) the Company's Common Stock; (b) the Russell 2000 Index; and (c) the common
stock of the 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, 1998, results from the price of the Company's Common Stock
decreasing from $8.00 per share at December 31, 1997 to $5.00 per share at
December 31, 1998. Management believes that prior to the Company's offering of
its Common Stock in September of 1997, the Company's Common Stock was somewhat
illiquid due to a limited public float.
COMPARISON OF CUMULATIVE TOTAL RETURNS FROM YEAR-END 1993 THROUGH YEAR-END 1998
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
RUSSELL 2000 DCRI PEER GROUP
<S> <C> <C> <C>
12/31/93 $1,000 $1,000 $1,000
12/31/94 $1,170 $1,000 $1,050
12/31/95 $1,390 $1,920 $1,140
12/31/96 $1,600 $25,000 $2,550
12/31/97 $1,850 $61,540 $2,380
12/31/98 $1,680 $38,460 $2,400
</TABLE>
The Company's Peer Group, as selected by the Company's Compensation
Committee, consists of the following companies whose businesses, taken as a
whole, resemble the Company's activities: Butler International, Inc., General
Employment Enterprises, Inc, RCM Technologies, Inc., Professional Staffing,
Lamalie Associates, Comforce Corp., National Technical Systems, Inc., and
National TechTeam, Inc.
This graph above assumes $1,000 invested on December 31, 1993 in the Common
Stock of the Company, the Russell 2000 Index, and the Peer Group and was plotted
using the following data:
<TABLE>
<CAPTION>
31-DEC-93 31-DEC-94 31-DEC-95 31-DEC-96 31-DEC-97 31-DEC-98
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Russell 2000........................ $ 1,000 $ 1,170 $ 1,390 $ 1,600 $ 1,850 $ 1,680
DCRI................................ $ 1,000 $ 1,000 $ 1,920 $ 25,000 $ 61,540 $ 38,460
Peer Group.......................... $ 1,000 $ 1,050 $ 1,140 $ 2,550 $ 2,380 $ 2,400
</TABLE>
17
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1998, the Company paid various expenses on behalf of Mr. Moore or
various entities that he controls in the amount of approximately $77,000.
Approximately $56,000 of this amount was applied to Mr. Moore's 1998 bonus. The
remaining $21,000 was repaid in January 1999. The majority of these amounts are
related to litigation associated with a lawsuit with Ditto Properties Company,
in connection with the Company initially being involved therein as garnishee.
During 1998, the Company advanced Mr. Moore $20,000 which was represented by a
note bearing interest at 8%, which was repaid in January 1999.
On July 17, 1998, Mr. Dillard exercised options to purchase 84,000 shares of
Common Stock for an aggregate purchase price of $257,250. The purchase price was
paid with 7,500 shares (acquired in 1997) of Common Stock valued at $89,500
(based upon the closing price of the Common Stock on July 16, 1998, on the
American Stock Exchange) and the remainder was paid in cash. In connection with
this transaction the Company loaned Mr. Dillard approximately $149,000, which
was subsequently reduced to approximately $90,000 (the "Tax Loan"), to cover his
income tax liability associated with the transaction. The Tax Loan bears
interest at the applicable federal rate which is payable quarterly, is
collateralized by 20,000 shares of Common Stock, and is due July 17, 2003. On
October 1, 1998, the Company advanced Mr. Dillard approximately $39,000 against
his 1998 bonus. In addition, on October 12, 1998, the Company loaned Mr. Dillard
approximately $125,000 (the "Company Loan"). The Company Loan bears interest at
8%, provides that interest is payable quarterly, is collateralized by 35,400
shares of Common Stock, and is due October 12, 2001. The collateral for the
Company Loan will be increased if the market value of the Common Stock declines
to the point where the market value of all stock pledged to secure the Company
Loan is less than the principal amount of the Company Loan.
On January 12, 1999, the Company entered into (a) a note purchase agreement
(the "Agreement") with Compass Bank (the "Bank"), and DCRI L.P. No. 2, Inc., a
Texas corporation (the "Borrower"), which is principally owned by Mr. Moore,
pursuant to which the Company agreed to purchase from the Bank, in the event of
a default by the Borrower and Mr. Moore (as guarantor), the following: (i) two
promissory notes (collectively the "Notes") executed by the Borrower payable to
the Bank in the principal amount of $500,000, and (ii) all instruments
collateralizing repaying of the Notes including, without limitation, a pledge
agreement related to 165,000 shares of Common Stock which are owned by the
Borrower and which have been pledged by the Borrower as collateral for the
Notes, and (b) a bank transaction agreement (the "Related Agreement") with the
Borrower and Mr. Moore which obligated the Borrower and/or Mr. Moore to (i)
pledge to the Company an additional 50,000 shares of Common Stock to
collateralize the Company under the terms of both the Agreement and the Related
Agreement, (ii) pay the Company for entering into the Agreement by conveying to
the Company 5,000 shares of Common Stock which are owned by the Borrower, and
(iii) waive the right of Mr. Moore to exercise options to purchase, at $2.50 per
share, 5,000 shares of Common Stock pursuant to options previously granted to
Mr. Moore by the Company. The proceeds from the loans evidenced by the Notes
have been partially advanced by the Bank and have been used in part to fund Mr.
Moore's purchase, at $2.50 per share (for an aggregate amount of $181,250), of
72,500 shares of Common Stock pursuant to exercising stock options previously
granted to him by the Company.
With respect to Ms. Farrington, see "Board of Directors and
Committees--Director Compensation," above.
18
<PAGE>
PROPOSAL TO APPROVE THE 1998 NON-EMPLOYEE DIRECTOR
STOCK OPTION PLAN OF THE COMPANY
(PROPOSAL 2)
GENERAL
In 1998, the Board of Directors approved, effective as of December 8, 1998,
the 1998 Non-employee Director Stock Option Plan of the Company (the "Directors
Plan"). The purpose of the Directors Plan is to enable the Company to be able to
continue to obtain and retain the services of the types of non-employee
directors who will contribute to the Company's long range success and to give
them the opportunity to participate in a special stock option program designed
to provide them with significant incentives to remain in the service of the
Company as non-employee directors.
The Company plans to register the shares issuable pursuant to the Directors
Plan (the "Directors Shares") under the Securities Act of 1933, as amended (the
"Act"). The Directors Shares issued upon exercise of options (the "Directors
Options") granted under the Directors Plan 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 Act), to compliance with the
provisions of Rule 144 other than the holding period requirement.
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 Directors Plan. If the shareholders fail to ratify the Directors
Plan, the Company will not grant further Directors Options pursuant to the
Directors Plan and grants previously made pursuant to the Directors Plan will be
rendered null and void. In such event, the stock options which were granted
under other stock option plans of the Company, and which terminated on December
31, 1998, for the three non-employee directors, would be reinstated (see "Board
of Directors and Committees--Director Compensation"). 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 DIRECTOR PLAN
A copy of the Directors Plan is attached to this Proxy statement as Exhibit
A. A summary of the principal provisions of the Directors Plan is set forth
below.
Options granted under the Directors Plan will be stock options not intended
to qualify for incentive stock option treatment. The Directors 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 Directors Plan, options to purchase, with an exercise price of
$5.75 per share, 15,000 shares of Common Stock were granted to the three
non-employee directors of the Company, and each person who becomes a
non-employee director of the Company in the future will be granted,
automatically, without further action by the Board of Directors, an option to
purchase 15,000 shares of Common Stock with an exercise price at the market
value of such shares at the time the person becomes a director. In addition, on
January 1 of each year commencing January 1, 2000 or, for any new non-employee
directors, on the anniversary date of their election, each non-employee director
then serving as a director will be granted, automatically, without further
action by the Board of Directors, options to purchase 12,500 shares of Common
Stock with an exercise price at the market value of the shares on the last
business day preceding the automatic grant date involved.
Options will only be granted under the Directors Plan to persons who are
non-employee directors of the Company.
19
<PAGE>
ADMINISTRATION
The Directors Plan will be administered by the Board of Directors of the
Company.
VESTING
The Directors Plan involves vesting on a quarterly basis for one (1) year
from the effective date of the applicable grant of options involved. A Director
Option shall not be deemed to have vested unless the non-employee director
continues to be a non-employee director throughout the quarterly period
involved,
including the last day of such quarterly periods.
TRANSFERABILITY
A Director Option shall not be assignable or transferable by an optionee
otherwise than by will or by the law of descent and distribution or as provided
in an option agreement entered into pursuant to the Directors Plan.
CHANGE OF CONTROL
Each Directors Option outstanding shall terminate upon 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 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 Directors
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 Directors
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 Company shall have the right in its sole discretion to pay to each
optionee possessing unexercised Directors 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 provision)
under the unexercised Directors Options less the exercise price of such
unexercised Directors Options (the "Net Value"). Upon payment of the Net Value,
all Directors Options outstanding under the Directors Plan shall be null and
void, and the optionee shall have no further rights thereunder.
AMENDMENT AND TERMINATION
The Directors Plan provides that the Board may amend or terminate the
Directors 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 of Common Stock represented at a meeting of
shareholders for which a quorum is present: (a) to increase the number of shares
issuable under the Directors Plan; (b) to materially increase the benefits
accruing to participants under the Directors Plan; or (c) to materially modify
the requirements for eligibility under the Directors Plan.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the federal income tax consequences of
participation in the Directors 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
Directors Plan to vary.
20
<PAGE>
An optionee will not recognize any income upon the grant of a Directors
Option pursuant to the Directors Plan. Upon exercise of a Directors Option, the
amount by which the fair market value of the Directors 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 Directors 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 Directors 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 Directors Shares, any amount received by the
optionee in excess of the sum of (a) the exercise price, and (b) any amount
includable in income with respect to the exercise of such Directors Option, will
generally be treated as long-term or short-term capital gain, depending upon the
holding period of the Directors Shares. To qualify for long-term capital gain
treatment, the Directors Shares must have been held for more than 12 months, and
to qualify for the lowest level of federal income tax on capital gains, must be
held for 18 months. If the Directors 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 Directors 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 Directors 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 Directors Shares.
TERMINATION OF OPTIONS
If an optionee ceases to be a member of the Board of Directors for any
reason, the options of such optionee under the Directors Plan shall thereafter
cease to vest. To the extent vested at such time, such options may be exercised
for six months after the optionee ceases to be a director unless the optionee
ceased to be a director due to death or disability. If an optionee ceases to be
a director due to death or disability (as determined by the Board of Directors),
the options of such optionee under the Directors Plan may be exercised for
twelve months after the optionee ceases to be a member of the Board of
Directors.
SHARES OF COMMON STOCK SUBJECT TO THE DIRECTORS PLAN
The Directors Plan authorizes the granting of options to persons who are
non-employee directors at the present or who may become a non-employee director
in the future. A total of 300,000 shares of Common Stock (subject to certain
adjustments below discussed) have been reserved for issuance upon the exercise
of Directors Options under the Directors Plan. As of April 20, 1999 Directors
Options for 45,000 shares had been granted under the Directors Plan. If a
Directors Option expires fully or partially unexercised, the shares then subject
to such Directors 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 Directors Options.
21
<PAGE>
PAYMENT OF EXERCISE PRICE
The exercise price for Directors Options shall be paid solely in cash, or by
check, or, in whole or in part by delivery of shares of Common Stock or by
reducing the number of shares purchasable upon exercise of the Directors
Options, 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 or reduced
number of option shares.
STOCK OPTION AGREEMENTS
Each grant of a Director Option shall be evidenced by a stock option
agreement in the form from time to time adopted by the Board of Directors
containing such terms, not inconsistent with the Directors Plan, that the Board
of Directors deems appropriate.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO
APPROVE THE DIRECTORS PLAN.
OTHER BUSINESS
(PROPOSAL 3)
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.
SHAREHOLDER PROPOSALS
PROPOSALS FOR 2000 ANNUAL MEETING
Shareholders may submit proposals for consideration at future shareholder
meetings, including director nominations. In order for a shareholder proposal to
be considered for inclusion in the Company's proxy statement for next year's
annual meeting, presently scheduled to be held in June 2000, the written
proposal must be received by the Company no later than December 31, 1999. Any
such proposal also will need to comply with SEC regulations regarding the
inclusion of shareholder proposals in company-sponsored proxy materials.
Similarly, in order for a shareholder proposal, including a nomination for
director, to be raised from the floor during next year's annual meeting, written
notice must be received by the Company pursuant to the Company's Bylaws no
earlier than March 19, 2000, and no later than April 18, 2000, and shall contain
such information as required under the Company's Bylaws. If such proposal is
timely received by the Company and is in accordance with the Company's Bylaws,
management's discretion to vote proxies with respect to such proposal will be
limited by the provisions of Rule 14a-4, which is one of the proxy rules
promulgated by the SEC.
You may contact the Company's corporate Secretary at Company headquarters
for a copy of the relevant Bylaw provisions regarding the requirements for
making shareholder proposals, including nominating director candidates.
22
<PAGE>
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 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 Act or the Exchange Act.
By Order of the Board of Directors,
M. TED DILLARD
SECRETARY
Dallas, Texas
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.
23
<PAGE>
DIVERSIFIED CORPORATE RESOURCES, INC.
1998 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. STATEMENT OF PURPOSE. This 1998 Non-employee Director Stock Option Plan
(the "Plan") is intended to promote the interests of Diversified Corporate
Resources, Inc., a Texas corporation (the "Company"), by offering non-employee
members of the Board of Directors of the Company (individually a "Non-employee
Director" and collectively "Non-employee Directors") the opportunity to
participate in a special stock option program designed to provide them with
significant incentives to remain in the service of the Company.
2. ELIGIBILITY. Each Non-employee Director shall be eligible to receive
automatic grants of non-statutory options under this Plan (individually an
"Option" and collectively "Options") pursuant to the provisions of Section 4
hereof.
3. STOCK SUBJECT TO PLAN. The stock issuable under this Plan shall be
shares of the Company's Common Stock, par value $.01 per share (the "Common
Stock"). Subject to adjustment as herein provided, the total number of shares
reserved and available for issuance under the Plan shall be 300,000 shares of
Common Stock. Such shares may be made available from authorized but unissued
shares of Common Stock or shares of Common Stock reacquired by the Company.
4. AUTOMATIC GRANTING OF OPTIONS.
a. INITIAL GRANT OF OPTIONS. Each individual who was serving as a
Non-employee Director on December 9, 1998 (herein sometimes referred to as
an "Initial Director") shall be automatically granted, on such date, an
Option to purchase 15,000 shares of Common Stock. Each individual who is
initially elected or appointed as a Non-employee Director subsequent to
December 9, 1998 (herein sometimes referred to as a "New Director") shall
receive, as of the date of his or her initial election or appointment
(herein referred to as the "Election Date"), an automatic grant of an Option
to purchase 15,000 shares of Common Stock. Subject to the provisions hereof,
each Option granted pursuant to this Section 4(a) (herein referred to
individually as an "Initial Option" and collectively as "Initial Options")
shall be for a term of ten (10) years.
b. ANNUAL GRANT OF OPTIONS. Commencing with the first business day of
calendar year 2000, and continuing in effect on January 1 of each subsequent
calendar year, each Initial Director who is, on the automatic grant date
involved, serving as a Non-employee Director shall receive an additional
automatic grant of an Option to purchase 12,500 shares of Common Stock.
Commencing one (1) year and one (1) day after the Election Date of a New
Director, and continuing in effect on the same day of each subsequent
calendar year, if the New Director involved is at the time serving as a Non-
employee Director, such New Director shall receive an additional automatic
grant on an Option to purchase 12,500 shares of Common Stock; unless New
Directors have the same Election Date, the dates on which the aforesaid
Options shall be deemed to be granted shall vary for each of the New
Directors. Each Option granted pursuant to this Section 4(b) (herein
referred to individually as an "Annual Option" or collectively as "Annual
Options") shall be for a term of ten (10) years from the date of the
automatic grant involved.
c. DEFINITIONS. The foregoing automatic grant dates under Sections
4(a) and 4(b) are herein referred to individually as an "Automatic Grant
Date" and collectively as "Automatic Grant Dates" and the Non-employee
Directors receiving Options are herein referred to individually as an
"Optionee" and collectively as "Optionees". Options granted under this Plan
are not intended to the treated as incentive stock options as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
24
<PAGE>
d. TERMINATED OR CANCELLED OPTIONS. In the event that an Option
expires or is terminated or canceled unexercised as to any shares of Common
Stock, the shares subject to the Option, or portion thereof not so
exercised, shall be available for subsequent automatic Option grants under
this Plan.
e. ADDITIONAL SHARES. Should the total number of shares of Common
Stock at the time available under this Plan not be sufficient for the
automatic grants to the made at that particular time, the available shares
shall be allocated proportionately among all automatic Option grants to be
made at that time.
5. VESTING. Each Option granted pursuant to Section 4 shall vest on an
equal quarterly basis over a one (1) year period as follows:
a. INITIAL DIRECTORS. With respect to the Initial Directors, the right
to exercise (i) the Initial Options shall vest in quarterly increments of
3,750 shares for each quarter during the one (1) year period commencing
January 1, 1999, and (ii) the Annual Options shall vest in quarterly
increments of 3,125 shares for each quarter during the one (1) year period
commencing on the Automatic Grant Date involved.
b. NEW DIRECTORS. With respect to the New Directors the right to
exercise (i) the Initial Options shall vest in quarterly installments of
3,750 shares for each quarter during the one (1) year period commencing on
the Election Date for each New Director, and (ii) the Annual Options shall
vest in quarterly installments of 3,125 shares for each quarter during the
one (1) year period commencing on the Automatic Grant Date of the New
Director involved.
c. CONTINUED SERVICE. With respect to the manner of vesting, an Option
shall not be deemed to have vested unless the Non-employee Director
continues to be a Non-employee Director throughout the quarterly period
involved including the last day of such quarterly period.
d. PURCHASE SUBJECT TO VESTING. No shares of Common Stock may be
purchased in connection with Options unless and to the extent that the
Non-employee Director has become vested with respect to the Option involved
pursuant to the terms of this Plan.
6. EXERCISE PRICE. The price per share payable upon exercise of an Option
(the "Exercise Price") shall be the fair market value per share of Common Stock
as of the close of business on the last business day preceding the applicable
Automatic Grant Date. For the purposes of establishing the Exercise Price, if
shares Common Stock are listed on a national stock exchange, or the NASDAQ Stock
Market, the fair market value per share of the Common Stock on any relevant date
shall be deemed to be the price of the Common Stock at the close of the trading
day next preceding the applicable Automatic Grant Date. However, if the shares
of Common Stock are then publicly traded but not quoted on a national stock
exchange or the NASDAQ Stock Market, the fair market value of the Common Stock
shall be the mean of the closing bid and ask price of the Common Stock on the
date next preceding the applicable Automatic Grant Date. If the Common Stock is
not publicly traded, the fair market value of shares of Common Stock shall be
determined by the Board of Directors of the Company in its reasonable
discretion. In no event shall the Exercise Price per share be less than the par
value of a share of Common Stock.
With respect to the Initial Options granted, (a) the Exercise Price shall be
$5.75 per share for each Non-employee Director who was a Director on December 9,
1998, and (b) for all other Non-employee Directors, the Exercise Price shall be
the fair market value per share of the Common Stock, as determined in this
Section 6, as of the close of business on the last business day preceding the
Election Date of the Director involved.
7. EXERCISE OF OPTION. An Option may be exercised by giving written notice
to the Company, attention of the Secretary, specifying the number of shares to
be purchased, accompanied by the full purchase price for the shares to be
purchased either in cash, by check, by shares of Common Stock having a fair
market value equal to the exercise price, or by reduction of the number of
shares to be received upon
25
<PAGE>
exercise of the Option (by designating that the number of shares of Common Stock
issuable to the Optionee upon such exercise shall be reduced by the number of
shares of Common Stock having a fair market value equal to the amount of the
total exercise price for such exercise), or by a combination of these methods.
For purposes of this Section 7, the fair market per share of the Common Stock
shall be determined as in Section 6, on the last business day preceding the date
on which the Non-employee Directors gives written notice to the Company of an
exercise of an Option in accordance with this Section 7.
At any time of any exercise of any Option, the Company may, if it shall
determine it necessary or desirable for any reason, require the Optionee (or the
Optionee's heirs, legatees or legal representative, as the case may be) as a
condition upon the exercise thereof, to deliver to the Company a written
representation of present intention to purchase the shares for investment and
not for distribution. In the event such representation is required to be
delivered, an appropriate legend shall be placed upon each certificate delivered
to the Optionee (or the Optionee's heirs, legatees or legal representative, as
the case may be) upon the exercise of part or all of the Option, and the
Company's transfer agent may be requested to notify the Company in the event of
any attempt to transfer shares if such transfer is not in compliance with this
Plan or applicable securities laws. Each Option shall also be subject to the
requirement that, if at any time the Company determines, in its discretion, that
the listing, registration or qualification of the shares subject to the Option
upon any securities exchange or under any state or federal law or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of or in connection with the issue or purchase of shares thereunder,
the Option may not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Company.
At the time of the exercise of any Option, if required to do so by law, the
Company shall require, as a condition of the exercise of such Option, the
Optionee to pay the Company an amount equal to the amount of tax the Company may
be required to withhold to obtain a deduction for federal income tax purposes as
a result of the exercise of such Option by the Optionee.
8. TERMINATION OF BOARD MEMBERSHIP--EXERCISE THEREAFTER. Should an
Optionee cease to be a member of the Board of Directors of the Company for any
reason, other than death or permanent disability, such Optionee's Options shall
thereafter cease to vest, but to the extent vested at the time such Optionee
ceases to be a member of the Board of Directors of the Company, such Optionee's
Options may be exercised, in whole or in part, by such Optionee at any time or
times prior to the date (the "Expiration Date") which is six (6) months after
the date such Optionee ceases to be a member of the Board of Directors of the
Company for any reason other than the death or disability of the Optionee
involved; to the extent not exercised on or before the Expiration Date, all of
such Optionee's Options under the Plan shall expire, and all rights to purchase
shares pursuant thereto shall terminate.
Should an Optionee cease to be a member of the Board of Directors of the
Company because of death or permanent disability (as determined by the Board of
Directors of the Company), such Optionee's Options shall thereafter cease to
vest but, to the extent vested at the time such Optionee ceases to be a member
of the Board of Directors of the Company, such Optionee's Options may be
exercised, in whole or in part, by such Optionee (or such Optionee's heirs,
legatees or legal representatives, as the case may be), at any time or times
prior to the date (the "Termination Date") which is one (1) year after the date
such Optionee ceases to be a member of the Board of Directors of the Company due
to the death or disability of the Optionee involved; to the extent not exercised
on or before the Termination Date, all of such Optionee's Options under the Plan
shall expire, and all rights to purchase shares of Common Stock pursuant thereto
shall terminate.
9. NON-TRANSFERABILITY. Options shall not be assignable or transferable by
an Optionee otherwise than by will or by the laws of descent and distribution,
or as provided in an option agreement entered into
26
<PAGE>
pursuant to the Plan. During the lifetime of an Optionee, Options shall be
exercisable only by such Optionee.
10. ADJUSTMENTS. The number of shares subject to this Plan and to Options
granted under this Plan shall be adjusted as follows: (a) in the event that the
number of outstanding shares of Common Stock is changed by any stock dividend,
stock split or combination of shares, the number of shares subject to this Plan
and the exercise price of Options granted hereunder shall be proportionately
adjusted; (b) in the event of any merger, consolidation or reorganization of the
Company with any other corporation or corporations, there shall be substituted,
on an equitable basis for each share of Common Stock then subject to this Plan,
whether or not at the time subject to outstanding Options, the number and kind
of shares of stock or other securities or property (including cash) to which the
holders of shares of Common Stock will be entitled pursuant to the transaction;
and (c) in the event of any change in the capitalization of the Company which is
identified in this Section 10, an equitable adjustment shall be made in the
number of shares of Common Stock then subject to this Plan, whether or not then
subject to outstanding Options. In the event of any such adjustment, the
Exercise Price per share shall be proportionately adjusted.
11. CHANGE OF CONTROL. Each Option outstanding shall terminate upon 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 (such transactions are collectively referred
to as a "Change in Control") provided that (a) each Non-employee Director 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 Option in whole or in part with respect to the
total number of shares of Common Stock to which the Option relates (less the
number of shares, if any, of Common Stock preciously 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 Non-employee Director 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); and (b) in its sole and absolute
discretion, the surviving entity may, but shall not be obligated to, tender to
any Non-employee Director 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 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 Company shall have
the right in its sole discretion to pay to each Non-employee Director 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 of
Common Stock purchasable (without regard to vesting provisions) under the
unexercised Options less the Exercise Price of such unexercised Options (the
"Net Value").
If the Company elects to pay each Non-employee Director the Net Value rather
than grant the Non-employee Directors the rights described in this Section 11,
the Non-employee Directors shall not be entitled to prior notice of such Change
of Control. Upon payment of the Net Value, all Options outstanding under this
Plan shall be null and void and the Non-employee Directors 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 Non-employee Directors.
Section 11 shall not apply to a Change of Control in which the Company is
the surviving entity. The determination as to which party to a Change of Control
is the "surviving entity" shall be made by the Board of Directors.
12. AMENDMENT OR DISCONTINUANCE OF PLAN. This Plan may from time to time
be amended or discontinued by action of the Board of Directors, provided,
however, that (a) no such amendment or discontinuance shall adversely change or
impair any Options previously granted without the consent of the
27
<PAGE>
Optionee, and (b) approval of the stockholders of the Company is required with
respect to any amendment to the Plan which would (i) materially increase the
benefits accruing to participants under this Plan, (ii) increase the number of
shares of Common Stock which may be issued under this Plan, and/or (iii)
materially modify the requirements as to eligibility for participation in this
Plan .
13. NO IMPAIRMENT OF RIGHTS. Nothing in this Plan or any automatic grant
made pursuant to this Plan shall be construed or interpreted so as to affect
adversely or otherwise impair the Company's right to remove any Optionee from
service on the Board of Directors of the Company at any time in accordance with
the provisions of applicable law.
14. EFFECTIVE DATE. Subject to ratification by the stockholders of the
Company, the Plan was adopted and authorized by the Board of Directors of the
Company on December 9, 1998, and became effective as of such date.
15. TERM OF THE PLAN. No option shall be granted pursuant to the Plan
after December 8, 2008, but options granted prior to such date may extend beyond
that date.
16. STOCK OPTION AGREEMENT. Each grant of an Option pursuant to the Plan
shall be evidenced by a stock option agreement between the Optionee and the
Company in the form from time to time adopted by the Board of Directors and
containing such terms and conditions that the Board of Directors of the Company
deems appropriate. The provisions of the various stock option agreements entered
into under the Plan need not be identical.
17. ADMINISTRATION. The Plan shall be administered by the Board of
Directors of the Company. Any questions concerning the interpretation provisions
of the Plan and stock option agreements entered pursuant thereto, including the
incorporated provisions of the Plan, shall be determined by the Board of
Directors in its reasonable discretion.
28
<PAGE>
DIVERSIFIED CORPORATE RESOURCES, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS, JUNE 17, 1999
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 17, 1999, upon such business as may properly come before the meeting
or any adjournment 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 below / / WITHHOLD AUTHORITY
(EXCEPT AS MARKED TO THE CONTRARY BELOW) TO VOTE FOR ALL NOMINEES
LISTED BELOW
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,
please place a line through the nominee's name above.)
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 1998 Non-employee Director Stock Option Plan of the Company.
FOR / / AGAINST / / ABSTAIN / /
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN.
(Continued on reverse side)
<PAGE>
3. 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:____________________ , 1999
_________________________________
(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 AND 2
AND THE PROXIES WILL USE THEIR
DISCRETION WITH RESPECT TO ANY
MATTER REFERRED TO IN PROPOSAL 3.
