<PAGE> 1
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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
The DeWolfe Companies, Inc.
(Name of Registrant as Specified In Its Charter)
The DeWolfe Companies, Inc.
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11 (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.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[DeWolfe LOGO]
April 2, 1998
Dear Stockholder:
We are pleased to invite you to attend the 1998 Annual Meeting of
Stockholders of The DeWolfe Companies, Inc., which will be held at the Newton
Marriott, 2345 Commonwealth Avenue, Newton, Massachusetts (Route 128 and the
Massachusetts Turnpike) on Tuesday, May 12, 1998, commencing at 10:00 a.m.,
Eastern time.
A description of business to be conducted at the Annual Meeting is in the
attached Notice of Annual Meeting and Proxy Statement. Also enclosed is a copy
of our Annual Report for 1997.
Your vote is important no matter how many shares you own. We hope you will
be able to attend the meeting in person, but if you cannot, please sign and date
the enclosed proxy and return it in the accompanying envelope. If you plan to
attend, please check the appropriate box on the proxy card.
Sincerely,
/s/ Richard B. DeWolfe
RICHARD B. DEWOLFE
Chairman and Chief Executive Officer
The DeWolfe Companies, Inc. - 80 Hayden Avenue - Lexington, MA 02173
781-863-5858 - Fax 781-860-7407
Homes - Mortgage - Relocation - Insurance - Moving Services
<PAGE> 3
THE DEWOLFE COMPANIES, INC.
80 HAYDEN AVENUE
LEXINGTON, MASSACHUSETTS 02173
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders will be held on May 12, 1998 at 10:00
a.m. Eastern Time at the Newton Marriott, 2345 Commonwealth Avenue, Newton,
Massachusetts (Route 128 and the Massachusetts Turnpike), for the following
purposes:
1. To fix the number of directors and to elect directors of the Company
for the ensuing year and until their respective successors are
chosen and qualified;
2. To approve the Company's 1998 Stock Option Plan;
3. To ratify the Company's selection of Ernst & Young LLP as auditors
of the Company for the year ending December 31, 1998; and
4. To consider and act upon matters incidental to the foregoing and to
transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on March 18, 1998 as
the record date for the determination of stockholders entitled to receive notice
of, and to vote at, the Annual Meeting of Stockholders.
By order of the Board of Directors,
PAUL J. HARRINGTON,
Clerk
April 2, 1998
The Company's Annual Report for 1997 containing a copy of the Company's
Form 10-K (excluding exhibits) for the year ended December 31, 1997 is enclosed
herewith.
PLEASE FILL IN, DATE, SIGN AND MAIL PROMPTLY THE ACCOMPANYING PROXY IN THE
RETURN ENVELOPE FURNISHED FOR THAT PURPOSE, WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING.
<PAGE> 4
THE DEWOLFE COMPANIES, INC.
80 HAYDEN AVENUE
LEXINGTON, MASSACHUSETTS 02173
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 12, 1998
This statement is furnished to the stockholders of The DEWOLFE COMPANIES,
INC. (hereinafter, the "Company") in connection with management's solicitation
of proxies to be used at the Annual Meeting of Stockholders on May 12, 1998 and
at any adjournment of that meeting. The approximate date on which this proxy
statement and accompanying proxy are being sent to stockholders of the Company
is April 2, 1998. Each proxy delivered pursuant to this solicitation is
revocable at the option of the person executing the same by written notice
delivered to the Clerk of the Company at any time before the proxy is voted. A
stockholder who attends the Annual Meeting in person may revoke his or her proxy
at that time and vote his or her shares if such stockholder so desires. The
presence in person or by proxy of stockholders entitled to cast a majority of
the outstanding shares, or 1,610,188 shares, shall constitute a quorum. With
respect to the election of Directors, the Company will treat votes withheld as
shares that are present for purposes of determining a quorum. A plurality is
required to elect Directors, so the four persons receiving the greatest number
of votes will be elected. Withheld votes will not affect the outcome of the
election. With respect to the approval of the 1998 Stock Option Plan and the
approval of auditors, the Company will treat abstentions as shares that are
present and entitled to vote for purposes of determining a quorum. Since a
majority of the shares represented at the meeting and entitled to vote is
required for approval, abstentions will have the effect of a vote against
approval of these proposals. If a broker indicates on a proxy that it does not
have discretionary authority as to certain shares to vote on a particular
matter, those shares will be considered as present for quorum purposes but not
as shares entitled to vote with respect to that matter. Accordingly, broker
non-votes will have no effect on such a matter.
All shares represented by a properly executed proxy will be voted unless it
is revoked and, if a choice is specified, will be voted in accordance with such
specification. If no choice is specified, the proxies will be voted FOR the
election of four directors, unless authority to do so is withheld with respect
to one or more of the nominees, FOR the approval of the 1998 Stock Option Plan,
and FOR the ratification of the Company's selection of Ernst & Young LLP as
auditors for the year ending December 31, 1998. In addition, the proxy will be
voted in the discretion of the proxy holders with respect to such other business
as may properly come before the meeting. The officers and directors of the
Company as a group own beneficially 57% (excluding, for this purpose, options
and warrants) of the outstanding shares of Common Stock of the Company (see
"Principal Stockholders and Stockholdings of Management"). The Company expects
that its officers and directors will vote the shares owned by them FOR the
election of such four nominees, FOR the approval of the 1998 Stock Option Plan,
and FOR the ratification of the Company's selection of Ernst & Young LLP as
auditors.
As of March 18, 1998, the Company had outstanding 3,220,374 shares of
Common Stock. Each share of the outstanding Common Stock is entitled to one
vote. Only holders of Common Stock of record on the books of the Company at the
close of business on March 18, 1998 will be entitled to receive notice of, and
to vote, at the Annual Meeting.
2
<PAGE> 5
ELECTION OF DIRECTORS
At the Annual Meeting, directors are to be elected to hold office for the
ensuing year and until their respective successors are chosen and qualified. The
Board of Directors has fixed the size of the Board at four, subject to the
ratification by the stockholders at the Annual Meeting and has nominated four
persons, all of whom are now directors of the Company, to serve until the next
Annual Meeting of Stockholders and until their successors are elected and
qualified. If the enclosed proxy is duly executed and received in time for the
Meeting, and unless authority to do so is withheld, it will be voted to elect as
directors the following nominees: Richard B. DeWolfe, A. Clinton Allen, R.
Robert Popeo and Paul R. Del Rossi. (For a description of the business
experience of such nominees, see "Business Experience of Nominees and Executive
Officers" below.) In the event that any of the nominees becomes unavailable,
then the proxy holders shall have the right: (i) to vote for such substitute, if
any, as the present Board of Directors may designate; (ii) to leave a vacancy on
the Board; or (iii) to fix the number of directors for the ensuing year at less
than four.
The Company did not have a nominating committee of the Board of Directors
in 1997. The Stock Option Committee, whose members are Messrs. Popeo and Del
Rossi, administers the Company's 1998 Stock Option Plan, and, until its
discontinuance in February, 1998, the Company's 1992 Stock Option Plan. The
Stock Option Committee held one meeting in 1997. The Compensation Committee,
whose members are Messrs. Allen, Popeo and Del Rossi met one time. The Audit
committee, whose members are Messrs. Popeo and Del Rossi met one time during
1997. During the year ended December 31, 1997, there were four meetings of the
Board of Directors. All of the directors attended, in person or by telephone,
all of the meetings of the Board of Directors. The directors regularly consult
with management and are kept informed of business developments and financial
results as they occur.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of copies of reports filed pursuant to Section
16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
or written representations from persons required to file such reports
("Reporting Persons"), the Company believes that, except as follows, all such
filings required to be made by such Reporting Persons were timely made in
accordance with the requirements of the Exchange Act. Mr. DeWolfe reported on
his 1997 Form 5 the exercise of a stock option by his wife which took place in
December, 1997. Ms. Griffin reported on her 1997 Form 5 the exercise of a stock
option which also took place in December, 1997.
3
<PAGE> 6
BUSINESS EXPERIENCE OF NOMINEES AND EXECUTIVE OFFICERS
Following is a list of names, ages and positions with the Company of all
nominees for election as directors and all executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Richard B. DeWolfe................... 54 Chief Executive Officer, President and Treasurer,
Chairman of the Board of Directors, and Nominee
A. Clinton Allen..................... 54 Director, Vice Chairman of the Board of Directors, and
Nominee
R. Robert Popeo...................... 59 Director and Nominee
Paul R. Del Rossi.................... 55 Director and Nominee
Paul J. Harrington................... 45 Chief Operating Officer, Executive Vice President and
Clerk; President of The DeWolfe Company, Inc.
Patricia A. Griffin.................. 51 Senior Vice President; President of DeWolfe Relocation
Services, Inc.
James A. Marcotte.................... 40 Senior Vice President and Chief Financial Officer
Gail F. Hayes........................ 49 Vice President; President of DeWolfe New England
Mortgage Services, Inc.
</TABLE>
All Directors hold office until the next annual meeting of stockholders or
until their successors are elected. Except as noted below, no officer holds his
office for a fixed term and the Board of Directors may terminate any officer's
term of office. Except as noted below, each officer and director described below
has been employed at his or her present place of employment for more than five
years.
Richard B. DeWolfe is the Company's Chief Executive Officer, President and
Treasurer, and the Chairman of the Board of Directors of the Company.
A. Clinton Allen has been Vice Chairman and a Director of the Company since
1991. Mr. Allen is Chairman and Chief Executive Officer of A.C. Allen & Company,
Inc., an investment banking consulting firm located in Cambridge, Massachusetts.
Mr. Allen currently serves as a director of Swiss Army Brands, Inc. and is a
member of its Executive Committee. He also serves as a director and Vice
Chairman of Psychemedics Corporation, and as a director of Response U.S.A., Inc.
R. Robert Popeo has been a Director of the Company since 1992. Mr. Popeo is
a member of the law firm of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.,
of Boston, Massachusetts and currently serves as its Chairman.
Paul R. Del Rossi has been a Director of the Company since 1992. Mr. Del
Rossi is President of General Cinema Theaters, Inc.
Paul J. Harrington has served as Chief Operating Officer of the Company and
as President of The DeWolfe Company, Inc., the Company's real estate sales
subsidiary, since August, 1997. Mr. Harrington was named an Executive Vice
President of the Company in March, 1995. From 1992 until August, 1997 he served
as President of DeWolfe Mortgage Services, Inc. He has also served as Clerk of
the Company since 1992.
Patricia A. Griffin is the Company's Senior Vice President and President of
DeWolfe Relocation Services, Inc. Ms. Griffin is Mr. DeWolfe's sister.
James A. Marcotte was appointed the Company's Chief Financial Officer and
Senior Vice President effective in June, 1996. From September, 1992 until June,
1996 Mr. Marcotte served as Senior Vice President
4
<PAGE> 7
and Chief Financial Officer of First NH Mortgage Corporation. Prior to
September, 1992 he was employed by the Federal Deposit Insurance Corporation.
Gail Hayes has been a Vice President of the Company and President of
DeWolfe Mortgage Services, Inc. since September, 1997. Prior to joining the
Company, Ms. Hayes served as Senior Vice President of Knutson Mortgage
Corporation, of Bloomington, Minnesota. She served as President of the Minnesota
Mortgage Bankers Association from 1994 to 1995. She is also a Certified Mortgage
Banker.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1997, the Company had advances and notes receivable from Mr. DeWolfe
totaling $103,487, including accrued interest. Included in this amount were
advances and demand notes in the aggregate principal amount of $66,000 which
bear interest at prime plus one-half percent, and a $25,000 term note which Mr.
DeWolfe repaid in January, 1998 together with interest at prime plus one-quarter
percent. The aggregate amount of principal and accrued unpaid interest under all
such loans to Mr. DeWolfe was approximately $79,280 at March 31, 1998.
As of December 31, 1997, the Company had outstanding indebtedness of
$495,000 to various individual lenders, which has been personally guaranteed by
Mr. DeWolfe.
Amherst Street Realty Trust, an entity controlled by Mr. DeWolfe, leases
office space to the Company in Nashua, New Hampshire on an oral tenancy-at-will
basis. Such space consists of 1,500 square feet and, until October, 1995, it was
used as a regional office for the Company. As of December 31, 1997, the trust
owed $51,000 to the Company pursuant to a non interest bearing note which is
secured by a mortgage on the property. The Company made payments of $46,031 to
the trust in 1997 for rent, and to reimburse the trust for insurance premiums
and taxes paid by the trust.
Canton Avenue Realty Trust, an entity controlled by Mr. DeWolfe, leases
office space to the Company in Milton, Massachusetts on an oral tenancy-at-will
basis. Such space consists of 3,750 square feet and is used for the Company's
Milton sales center. The Company made rent payments of $47,747 to such entity in
1997.
Wire Road Realty Trust, an entity controlled by Messrs. DeWolfe and
Harrington, leases office space to the Company in Merrimack, New Hampshire on an
oral tenancy-at-will basis. Such space consists of approximately 2,000 square
feet and until September, 1997, was used for the Company's Merrimack, New
Hampshire sales center. The Company made rent payments of $13,753 to such entity
in 1997.
The Company believes, based upon its experience in the real estate
industry, that its current leases of office space from affiliated parties are on
terms no less favorable than those which could be obtained from unaffiliated
parties.
During fiscal year 1997, the Company paid consulting fees to Mr. Allen in
the aggregate amount of $62,000 relating to investor relations and mergers and
acquisitions.
5
<PAGE> 8
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ended December 31, 1997,
1996, and 1995, the cash compensation paid by the Company and its subsidiaries,
as well as certain other compensation paid or accrued for such year, to the
Company's Chairman and Chief Executive Officer and to each of the other
executive officers of the Company whose salary and bonus exceeded $100,000 in
1997 (collectively the "named executive officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
--------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#) COMPENSATION($)
- --------------------------- ---- --------- -------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard B. DeWolfe....... 1997 327,209 108,150 5,306(1) 50,000 9,800(2)
Chairman & Chief 1996 307,292 64,000 12,890(1) -0- -0-
Chief Executive Officer 1995 294,230 22,625 4,304(1) -0- -0-
Paul J. Harrington....... 1997 197,808 54,375 11,000(3) 20,000 -0-
Executive Vice President 1996 180,769 25,695 12,000(3) 20,000 -0-
1995 149,038 -0- -0- -0- -0-
Patricia A. Griffin...... 1997 143,854 21,140 1,922 10,000 -0-
Senior Vice President 1996 129,808 9,375 1,647(1) 3,000 -0-
1995 125,000 -0- 3,055(1) -0- -0-
James A. Marcotte(4)..... 1997 140,579 11,000 -0- 7,500 -0-
Senior Vice President and 1996 63,462 -0- -0- 6,000 -0-
Chief Financial Officer
</TABLE>
- ---------------
(1) Represents commissions paid on transactions in which the named executive
served as a broker.
(2) Represents the value of the benefit to Mr. DeWolfe of the remainder of
premiums paid by the Company on his behalf pursuant to the Company's "split
dollar" insurance program.
(3) Represents amount paid as an expense allowance to the named executive
officer.
(4) Mr. Marcotte joined the Company on June 27, 1996.
6
<PAGE> 9
STOCK OPTION GRANT TABLE
The following table contains information concerning the grant of stock
options to the named executive officers during the Company's fiscal year ended
December 31, 1997:
OPTIONS GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
EXERCISE OF ASSUMED ANNUAL RATE OF
% OF TOTAL OR BASE STOCK APPRECIATION FOR
OPTIONS GRANTED TO PRICE OPTION TERM
GRANTED EMPLOYEES IN ($/SH)(5) EXPIRATION ----------------------------
NAME (#)(1) FISCAL YEAR (2) DATE 0% 5%($) 10%($)
---- ------- ------------ --------- ---------- -- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard B. DeWolfe.......... 50,000 28 5.98(3) 3-28-02 0 48,148 139,058
Paul J. Harrington.......... 20,000 11 5.44(4) 3-28-02 0 30,059 66,423
Patricia A. Griffin......... 10,000 6 5.44(4) 3-28-02 0 15,029 33,211
James A. Marcotte........... 7,500 4 5.44(4) 3-28-02 0 11,272 24,908
</TABLE>
- ---------------
(1) All options were granted under the Company's 1992 Stock Option Plan and have
a term of 5 years. They became exercisable with respect to 25% of the shares
covered thereby twelve months after the date of grant and will become
exercisable with respect to an additional 25% of the shares covered thereby
on each successive anniversary date thereafter. Under the terms of the 1992
Stock Option Plan the Stock Option Committee may, in its discretion,
accelerate the date on which any option granted thereunder becomes
exercisable in full.
(2) The exercise price and the withholding obligations related to exercise may
be paid by delivery of already owned shares, subject to certain conditions.
(3) Represents 110% of the market value on the date of grant.
(4) Represents the market value on the date of grant.
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<PAGE> 10
YEAR-END OPTION VALUES
The following table sets forth information with respect to each of the
named executive officers concerning each exercise of stock options during the
fiscal year and the number and value of unexercised options held as of December
31, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
SHARES VALUE YEAR-END(#) FISCAL YEAR-END($)(2)
ACQUIRED REALIZED --------------------------- ---------------------------
NAME ON EXERCISE ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard B. DeWolfe.......... 0 0 256,250 68,750 236,000 37,500
Paul J. Harrington.......... 0 0 48,750 41,250 41,625 47,700
Patricia A. Griffin......... 200 500 10,250 14,750 17,665 15,075
James A. Marcotte........... 0 0 1,500 12,000 0 6,075
</TABLE>
- ---------------
(1) Value represents the difference between the closing price of the Common
Stock on the date of exercise and the exercise price, multiplied by the
number of shares acquired on exercise.
(2) Represents the fair market value of the Company's Common Stock on December
31, 1997 ($6.25 per share based on the closing price on the American Stock
Exchange) minus the exercise price per share, of the in-the-money options,
multiplied by the number of shares subject to each option.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Effective May 21, 1992, Mr. DeWolfe entered into an employment contract
with the Company which is generally terminable with 90 days prior written
notice. Pursuant to the terms of this contract, Mr. DeWolfe serves as President
and Chief Executive Officer of the Company at a salary to be determined annually
by the Board. In addition, the contract includes provisions providing Mr.
DeWolfe with severance payments at the rate of his then current salary for two
years following the termination of his employment without cause and restricting
Mr. DeWolfe's right to compete with the Company for one year following the
termination of his employment for any reason. The Company owns a $5 million "key
man" life insurance policy on Mr. DeWolfe.
Effective May 21, 1992, Mr. Harrington entered into an employment contract
with the Company which is generally terminable with 90 days prior written
notice. Pursuant to the terms of this contract, Mr. Harrington serves as
Executive Vice President of the Company at a salary to be determined annually by
the Board of Directors. In addition, the contract includes provisions providing
Mr. Harrington with severance payments at the rate of his then current salary
for one year following the termination of his employment without cause and
restricting Mr. Harrington's right to compete with the Company for one year
following the termination of his employment for any reason.
Effective May 21, 1992, Ms. Griffin entered into an employment contract
with the Company which is generally terminable with 90 days prior written
notice. Pursuant to the terms of this contract, Ms. Griffin serves as Senior
Vice President of the Company at a salary to be determined annually by the Board
of Directors. In addition, the contract includes provisions providing Ms.
Griffin with severance payments at the rate of her then current salary for one
year following the termination of her employment without cause and restricting
Ms. Griffin's right to compete with the Company for one year following the
termination of her employment for any reason.
8
<PAGE> 11
Effective June 27, 1996, Mr. Marcotte entered into an employment contract
with the Company which is generally terminable with 90 days prior written
notice. Pursuant to the terms of this contract, Mr. Marcotte serves as Senior
Vice President and Chief Financial Officer of the Company at a salary to be
determined annually by the Board of Directors. In addition, the contract
includes provisions providing Mr. Marcotte with severance payments at the rate
of his then current salary for one year following the termination of his
employment without cause and restricting Mr. Marcotte's right to solicit
employees or associates of the Company for two years following the termination
of his employment for any reason.
ADDITIONAL INFORMATION WITH RESPECT TO COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION ON COMPENSATION DECISIONS
During fiscal year 1997, Richard B. DeWolfe, the Company's Chairman and
Chief Executive Officer, made recommendations to the Compensation Committee of
the Board of Directors regarding executive officer compensation.
During fiscal year 1997, the Company paid consulting fees to Mr. Allen in
the aggregate amount of $62,000 relating to investor relations and mergers and
acquisitions.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is designed to attract, retain
and reward executives who are responsible for leading the company in achieving
its business objectives. This report is submitted by the Board of Directors and
addresses the compensation policies for fiscal 1997 as they affected Mr.
DeWolfe, in his capacity as Chief Executive Officer of the Company, and the
other executive officers of the Company.
Compensation Philosophy
The Company's executive compensation philosophy is based on the belief that
competitive compensation is essential to attract, motivate and retain highly
qualified and industrious employees. The Company's policy is to provide total
compensation that is competitive for comparable work and comparable corporate
performance. The compensation program is also designed to link the interests of
the Company's executives to the interests of the Company's shareholders.
At present, the executive compensation program is comprised of salary, cash
incentive opportunities, long-term incentive opportunities in the form of stock
options, and benefits typically offered to executives by major corporations. As
an executive's level of responsibility increases, the greater the mix of
compensation shifts to incentive-based compensation and compensation based on
increases in the value of the Common Stock through stock-based awards.
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation over $1 million paid to its chief
executive officer and its four other most highly compensated executive officers
(the "named executive officers"). Qualifying performance-based compensation is
not subject to the deduction limit if certain requirements are met. It is not
anticipated that any of the named executive officers will receive compensation
for 1997, or for future years that can now be predicted, which would not be
deductible for tax purposes.
Compensation Elements
Base Salary
Salary ranges are assigned to each position based on a comparison of
DeWolfe positions with similar positions in companies of similar size in the
Company's industry, with range midpoints established at the
9
<PAGE> 12
average of the marketplace. Actual salaries within the appropriate range depend
upon individual performance, experience and internal equity and are reviewed and
may be adjusted annually by the Company. Increases in the base salaries paid to
executive officers in 1997 were made in the discretion of the Board of Directors
based on the foregoing criteria.
Incentive Compensation
Cash bonuses paid to executive officers are determined by the Board of
Directors based on subjective criteria and on the financial performance of the
Company and are paid at various times during the year. The bonuses paid to
executive officers in 1997 were based on both performance in 1996, as well as on
year-to-date performance in 1997.
Stock Options
Under the Company's 1992 Stock Option Plan for executive officers and other
employees (the "1992 Plan"), which was discontinued in February, 1998 in
connection with the adoption of the Company's 1998 Stock Option Plan, the Stock
Option Committee of the Board of Directors was authorized to grant options with
terms of up to ten years. The options generally became exercisable with respect
to 25% of the shares covered thereby on the first anniversary of the date of
grant and with respect to an additional 25% on each of the next three
anniversary dates thereafter. In granting the stock options to executives, the
Stock Option Committee of the Board of Directors took into account the practices
of other companies of comparable size as well as the executive's level of
responsibility and individual and corporate performance during the prior year.
In 1997, the Stock Option Committee granted to Messrs. Harrington and Marcotte
and to Ms. Griffin options to purchase an aggregate of 37,500 shares.
Compensation to the Chief Executive Officer
The compensation of Richard B. DeWolfe, Chairman of the Board and Chief
Executive Officer, takes into account the fact that Mr. DeWolfe is the founder
and has been the principal executive officer of the Company since its inception.
Mr. DeWolfe is responsible, to a greater degree than principal executive
officers of many companies of similar size, for the success of the Company and
the resulting value of its stock price. Accordingly, a substantial portion of
his total compensation package consists of bonus compensation and stock options.
Mr. DeWolfe's salary for 1997 was based upon a number of 1996 factors, including
revenue growth, expansion, and pre-tax earnings. These factors were given
approximately equal weight in the consideration of Mr. DeWolfe's 1997
compensation. Revenue grew by 15% in 1996. The Company completed no acquisitions
during 1996 as it concentrated on its restructuring plan and growing its core
business units. Pre-tax income in 1996 was fifteen times as high as the 1995
amount. As a result, the Company increased Mr. DeWolfe's base salary in 1997 by
6.5% and awarded Mr. DeWolfe a year end bonus of $73,750. In addition, the Stock
Option Committee granted to Mr. DeWolfe options to acquire 50,000 shares.
A. Clinton Allen
Paul R. Del Rossi
R. Robert Popeo
COMPENSATION OF DIRECTORS
The Company's outside (non-employee) directors each receive cash
compensation in the amount of $24,000 annually (provided that they attend a
minimum of 4 meetings) in consideration for serving on the Board of Directors.
In addition, Mr. Allen receives compensation at a rate of $6,000 per month in
exchange for consulting services rendered to the Company relating to investor
relations and mergers and acquisitions. In
10
<PAGE> 13
addition, each of the Company's non-employee directors participated in the
Company's 1992 Non-Employee Director Stock Option Plan (the "1992 Director
Plan") until its discontinuance in connection with the adoption of the Company's
1998 Stock Option Plan.
Under the 1992 Director Plan, each outside director automatically received
a grant of an option for 12,000 shares upon the adoption of the Plan. Each such
option was for a term of ten years and became exercisable over a period of
twenty-four months from the date of grant in equal monthly installments on a
cumulative basis. On the first business day of calendar year 1993 through 1998,
each person then serving as an outside director received an additional automatic
grant of an option to acquire 5,000 shares, each of which was also for a term of
ten years, but was immediately exercisable in full on the date of grant.
Options under the 1992 Director Plan are not transferable by the optionee
otherwise than by will or the laws of descent and distribution and terminate if
the optionee ceases to serve as a member of the Company's Board of Directors. In
the event of the optionee's death or permanent disability, the option becomes
exercisable in full and the optionee or his heirs, legatees or legal
representatives may exercise the option during the following three years or the
remainder of the option term, whichever period is shorter.
Options to acquire an aggregate of 15,000 shares at an exercise price of
$5.25 per share were granted in 1997 under the 1992 Director Plan, including
options to acquire 5,000 shares, which were granted to Mr. Allen, options to
acquire 5,000 shares, which were granted to Mr. Popeo, and options to acquire
5,000 shares, which were granted to Mr. Del Rossi.
Under the 1998 Stock Option Plan, the full Board of Directors may grant
options to directors in such amount as the Board of Directors may determine in
its discretion. Each such option shall be for a term not to exceed ten years and
at an exercise price which shall not be less than the fair market value of a
share of the Company's stock on the date of grant.
11
<PAGE> 14
THE DEWOLFE COMPANIES, INC.
STOCK PRICE PERFORMANCE GRAPH(1)
[CHART IS C/R/C]
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
DeWolfe $100.00 $120.57 $146.29 $164.29 $150.00 $178.57
AMEX Market Value Index(2) $100.00 $119.52 $108.63 $137.32 $146.10 $177.20
S&P Retail Stores Composite(3) $100.00 $ 93.51 $ 84.33 $ 93.02 $108.26 $154.93
AMEX Financial Sub Index(4) $100.00 $107.46 $ 97.35 $127.19 $151.41 N/A
</TABLE>
- ---------------
(1) The above graph assumes a $100 investment on December 31, 1992, through the
five-year period ended December 31, 1997 in the Company's Common Stock, the
AMEX Market Value Index, and the S&P Retail Stores Composite. Also included
is a graph showing the 4-year performance of the AMEX Financial Sub Index
(see below). The prices for the AMEX Market Value Index, the S&P Retail
Stores Composite and the AMEX Financial Sub Index assume the reinvestment of
dividends. The DeWolfe Companies, Inc. did not declare or pay any dividends
during the operative period.
(2) The AMEX Market Value Index includes companies whose shares are traded on
the American Stock Exchange.
(3) The S&P Retail Stores Composite is a capitalization weighted index of all of
the stocks in the Standard & Poors 500 that are involved in the industrial
sectors of the retail industry. The Company decided to change to a retail
index rather than a financial services index because its primary line of
business is residential real estate sales and marketing.
(4) The AMEX Financial Sub Index, which was reported in prior years' proxy
statements of the Company, and was comprised of companies which were in the
financial services industry and whose shares were traded on the American
Stock Exchange, is no longer published by the American Stock Exchange.
12
<PAGE> 15
PRINCIPAL STOCKHOLDERS AND STOCKHOLDING OF MANAGEMENT
The following shows as of March 18, 1998 the number of shares of the
Company's Common Stock owned by each director and nominee for director, each
named executive officer, all executive officers and directors as a group, and by
each person known by the Company to own more than 5% of the Company's
outstanding Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENTAGE
BENEFICIAL OWNED
NAME (1) OWNERSHIP (2) (2)
-------- ------------- ----------
<S> <C> <C>
Richard B. DeWolfe.......................................... 2,033,692(3) 57.8
The DeWolfe Companies, Inc.
80 Hayden Avenue
Lexington, Massachusetts 02173
Robert N. Sibcy............................................. 300,111(4) 9.3
8044 Montgomery Road
Cincinnati, Ohio 45236
A. Clinton Allen............................................ 249,330(5) 7.2
A.C. Allen & Company, Inc.
1280 Massachusetts Avenue
Cambridge, Massachusetts 02138
R. Robert Popeo............................................. 47,000(6) 1.4
Paul R. Del Rossi........................................... 47,000(6) 1.4
Patricia A. Griffin......................................... 101,027(6) 3.1
Paul J. Harrington.......................................... 69,071(6) 2.1
James A. Marcotte........................................... 3,376(6) *
All executive officers and directors
as a group (8 persons).................................... 2,550,497(7) 65.1
</TABLE>
- ---------------
* Denotes ownership of less than 1%.
(1) Except as specified otherwise, each person has sole voting and dispositive
power with respect to the indicated shares of Common Stock.
(2) Pursuant to the rules of the Securities and Exchange Commission, shares of
Common Stock which an individual or group has a right to acquire within 60
days pursuant to the exercise of options or warrants are deemed to be
outstanding for the purpose of computing the number of shares owned by, and
percentage ownership of, such individual or group, but are not deemed
outstanding for the purpose of computing the percentage ownership of any
other person shown in the table.
(3) Includes 108,855 shares of Common Stock held by Mr. DeWolfe's spouse and
options to acquire 12,375 shares of Common Stock beneficially owned by his
spouse, beneficial ownership of which shares is disclaimed by Mr. DeWolfe.
Includes 299,875 shares of Common Stock which Mr. DeWolfe has a right to
acquire within 60 days pursuant to the exercise of options.
(4) Includes 185,095 shares of Common Stock owned by Mr. Sibcy's spouse.
(5) Includes (i) 5,380 shares of Common Stock owned by Mr. Allen's spouse
beneficial ownership of which shares is disclaimed by Mr. Allen; (ii)
117,000 shares of Common Stock which Mr. Allen has a right to acquire within
60 days pursuant to the exercise of options; and (iii) 100,000 shares of
common stock which Mr. Allen has a right to acquire within 60 days pursuant
to the exercise of warrants.
13
<PAGE> 16
(6) Includes the following number of shares of Common Stock which the individual
has a right to acquire within 60 days pursuant to the exercise of options:
Messrs. Popeo and Del Rossi: 47,000 shares each; Ms. Griffin: 16,000 shares;
Mr. Harrington: 65,000 shares; and Mr. Marcotte: 3,375 shares.
(7) Includes 695,250 shares of Common Stock which executive officers and
directors have a right to acquire within 60 days pursuant to the exercise of
options and warrants. Includes shares and options held by the spouses of
certain executive officers, or directors, beneficial ownership of which is
disclaimed by the applicable officer or director.
APPROVAL OF THE 1998 STOCK OPTION PLAN
On February 10, 1998, the Company adopted, subject to shareholder approval,
the 1998 Stock Option Plan (the "1998 Plan"). Up to 400,000 shares of Common
Stock (subject to adjustment in the event of stock splits, stock dividends and
other similar events) may be issued pursuant to options granted under the 1998
Plan. The 1998 Plan is intended to benefit the Company and its subsidiaries
through offering certain present and future key employees, directors and
consultants (including sales associates) a favorable opportunity to become
holders of stock in the Company over a period of years, thereby giving them a
permanent stake in the growth and prosperity of the Company and encouraging the
continuance of their services with the Company and/or its subsidiaries. A copy
of the 1998 Plan is included with this proxy statement as Exhibit A.
The 1998 Plan is intended to replace the Company's 1992 Stock Option Plan
(the "1992 Plan") which does not have a sufficient number of shares available to
make stock option grants in 1998, and the Company's 1992 Non-Employee Director
Stock Option Plan (the "1992 Director Plan"). If the 1998 Plan is approved by
the stockholders, no additional options will be granted under the 1992 Plan or
the 1992 Director Plan.
ADMINISTRATION
The 1998 Plan is administered by the Stock Option Committee of the Board of
Directors, and, with respect to options to be granted to members of such
Committee, by the full Board of Directors. Option grants under the 1998 Plan may
be made to employees and consultants (including sales associates) of the Company
or any subsidiary, and to members of the Company's Board of Directors, whether
or not they are employees. Options granted under the 1998 Plan are designated as
either "non-qualified stock options" or "incentive stock options" under the
Internal Revenue Code of 1986. Each option is for a term of not more than ten
years from the date of grant, and becomes exercisable in such installments as
may be determined by the Stock Option Committee. The maximum number of options
that may be granted in a single fiscal year to an individual is 100,000.
The Stock Option Committee will have the discretion to specify the extent
to which options expire in the event of voluntary or involuntary termination of
employment or in the event of violation of any duty not to compete or not to
disclose confidential Company information. The Stock Option Committee also will
have the discretion to make stock options transferable (for example, to family
members). Under the 1998 Plan, upon a change of control of the Company, options
shall become immediately exercisable, and shall remain exercisable throughout
their entire term.
The exercise price of stock options granted under the 1998 Plan is
determined by the Stock Option Committee, but it may not be less than the fair
market value of the stock on the date the option is granted, which is defined as
the average of the high and low sales prices of the Company's common stock on
the American Stock Exchange on the trading day immediately preceding the date
the option is granted, unless the Stock Option Committee otherwise determines.
An incentive stock option granted to a person who owns more than 10% of the
Company's outstanding stock must have an exercise price of not less than 110% of
fair market
14
<PAGE> 17
value. The full exercise price must be paid at the time of exercise either in
cash, by tendering previously acquired shares, or by a combination of the above.
The Stock Option Committee may also allow cashless exercises. In connection with
the exercise of options, the Stock Option Committee may make loans to optionees
in its discretion, subject to certain terms and conditions not inconsistent with
the 1998 Plan. Such loans shall bear interest rates, as determined by the Stock
Option Committee, which may be below then current market rates or may be made
without interest. No such loan may exceed the fair market value of the shares
covered by the options, or portion thereof, exercised by the optionee. No loan
shall have an initial term exceeding two years, but such loans may be renewable
at the discretion of the Stock Option Committee. Such loans shall be secured by
a pledge of shares of the optionee having a fair market value of at least equal
to 150% of the principal amount of the loan.
Options granted under the 1998 Plan shall expire at such time as the Stock
Option Committee shall determine, but not later than the tenth anniversary of
the date of grant unless otherwise designated by the Stock Option Committee at
the time of the grant. Options granted under the 1998 Plan shall be exercisable
at such times and be subject to such restrictions and conditions as the Stock
Option Committee shall approve, which need not be the same for each grant or for
each participant. The Stock Option Committee may impose such restrictions on
shares acquired upon the exercise of an option as it deems advisable.
The Board of Directors of the Company may amend or terminate the 1998 Plan
in whole or in part at any time, subject to any requirement of stockholder
approval imposed by any applicable law, rule or regulation. No amendment,
modification or termination of the 1998 Plan shall adversely affect in any
material way any option previously granted under the plan, without the written
consent of the holder of the option.
FEDERAL INCOME TAX CONSEQUENCES
The grant of an option will have no immediate tax consequences to the
optionee or the Company. The exercise of a non-qualified stock option will
require an optionee to include in income, as compensation, the amount by which
the fair market value of the acquired shares on the exercise date exceeds the
option price. Upon a subsequent sale or taxable exchange of shares acquired upon
exercise of a non-qualified stock option, an optionee will recognize long- or
short-term capital gain or loss equal to the difference between the amount
realized on the sale and the tax basis of such shares. The Company will be
entitled (provided applicable withholding requirements are met) to a deduction
at the same time and in the same amount as the optionee is in receipt of income
in connection with the exercise of a non-qualified stock option.
If the optionee exercises an incentive stock option and does not dispose of
the acquired shares within two years after the date of grant of the option or
within one year after the date of the transfer of such shares to him (a
"disqualifying disposition"), the optionee will realize no compensation income
and any gain or loss that the optionee realizes on a subsequent disposition of
such shares will be treated as long-term capital gain or loss. For purposes of
computing the alternative minimum tax, however, the option generally will be
treated as if it were a non-qualified stock option. If an optionee makes a
disqualifying disposition, the optionee will be required to include in income,
as compensation, the lesser of (i) the difference between the option price and
the fair market value of the acquired shares on the exercise date or (ii) the
amount of gain realized on such disposition. In addition, depending on the
amount received as a result of such disposition, the optionee may realize
long-term or short-term capital gain or loss. The Company will be entitled to a
deduction at the same time and in the same amount as the optionee is in receipt
of compensation income as a result of a disqualifying disposition. If there is
no disqualifying disposition, no deduction will be available to the Company.
OPTIONS GRANTED UNDER THE 1998 PLAN
On February 10, 1998, an aggregate of 277,900 options were granted under
the 1998 Plan to employees, directors and consultants (including sales
associates) of the Company, including options to acquire 100,000
15
<PAGE> 18
shares granted to Mr. DeWolfe, options to acquire 50,000 shares granted to Mr.
Allen, options to acquire 30,000 shares granted to Mr. Harrington, options to
acquire 25,000 shares granted to Mr. Marcotte, options to acquire 10,000 shares
granted to Ms. Griffin, options to acquire 5,000 shares granted to Mr. Popeo,
and options to acquire 5,000 shares granted to Mr. Del Rossi. Executive officers
as a group were granted an aggregate of 166,000 of such options. Non-employee
directors as a group were granted an aggregate of 60,000 of such options. The
exercise price of 31,500 of the options granted to Mr. DeWolfe was $6.63 per
share, representing 110% of the fair market value of a share of the Company's
stock on the date of grant. The exercise price of the balance of 68,500 options
granted to Mr. DeWolfe and of all of the other options granted on such date was
$6.03 per share, representing 100% of the fair market value of a share of the
Company's stock on the date of grant. The options granted to Messrs. Allen, Del
Rossi and Popeo have a term of 10 years and were vested in full on the date of
grant. All of the other options granted have a term of 5 years and vest with
respect to 25% of the shares covered thereby on each anniversary date of the
date of grant. As of March 18, 1998 options to purchase 277,900 shares under the
Plan were outstanding and 122,100 shares were reserved and available for
additional grants under the Plan. The closing price of the Company's Common
Stock on the American Stock Exchange on March 18, 1998 was $6.25 per share.
The affirmative vote of the holders of a majority of the shares of Common
Stock present in person or represented by proxy and entitled to vote at the
Annual Meeting is necessary to approve the Plan. If stockholders do not approve
the amendment, all options granted by the Company under the Plan on February 10,
1998 will be canceled and void.
THE BOARD OF DIRECTORS BELIEVES THAT THE APPROVAL OF THE PLAN WILL CONTINUE
TO PROMOTE THE LONG-TERM FINANCIAL SUCCESS OF THE COMPANY BY AFFORDING AN
ADDITIONAL OPPORTUNITY TO ALIGN THE INTERESTS OF EMPLOYEES, DIRECTORS AND
CONSULTANTS (INCLUDING SALES ASSOCIATES) WITH THOSE OF STOCKHOLDERS.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR APPROVAL OF THE 1998
STOCK OPTION PLAN.
INDEPENDENT AUDITORS
The Board of Directors has selected as auditors of the Company for the year
ended December 31, 1998 the firm of Ernst & Young LLP and recommends
ratification of such selection by the shareholders. A member of the firm of
Ernst & Young LLP is expected to be present at the Annual Meeting of
Stockholders and will be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the next Annual
Meeting of Stockholders must comply with Rule 14a-8 of the Securities and
Exchange Commission issued under the Securities Exchange Act of 1934, and must
be received at the principal executive offices of the Company not later than
December 4, 1998.
OTHER MATTERS
The Board of Directors knows of no other matters which may come before the
Meeting. However, if any matter not now known is presented at the Meeting, it is
the intention of the persons named in the accompanying form of proxy to vote
said proxy in accordance with their judgment on such matter.
16
<PAGE> 19
The Company will bear the cost of solicitation of proxies. Solicitations of
proxies by mail may be followed by telephone or other personal solicitation of
certain stockholders by officers or other employees of the Company.
By order of the Board of Directors,
PAUL J. HARRINGTON,
Clerk
April 2, 1998
17
<PAGE> 20
EXHIBIT A
THE DEWOLFE COMPANIES, INC.
1998 STOCK OPTION PLAN
ARTICLE 1.
Establishment, Objectives, and Duration
1.1 Establishment of the Plan. THE DEWOLFE COMPANIES, INC., a
Massachusetts corporation (hereinafter referred to as the "Company"), hereby
establishes an incentive compensation plan to be known as The DeWolfe Companies,
Inc. 1998 Stock Option Plan (hereinafter referred to as the "Plan"), as set
forth in this document.
Subject to the provisions of Article 12 hereof, the Plan shall become
effective as of February 10, 1998 (the "Effective Date") and shall remain in
effect as provided in Section 1.4 hereof.
1.2 Prior Plans Superseded. The Plan is intended to and hereby does
replace and supersede the Company's 1992 Stock Option Plan, as amended (the
"1992 Plan"), and the Company's 1992 Non-Employee Director Stock Option Plan, as
amended (the "Director Plan"), and as of the Effective Date, the 1992 Plan is
hereby terminated in accordance with the provisions of Section 13 of the 1992
Plan and the 1992 Director Plan is hereby discontinued in accordance with the
provisions of Section 10 of the Director Plan, provided, however, that all
outstanding options under the 1992 Plan and the 1992 Director Plan shall remain
in full force and effect in accordance with the 1992 Plan and the 1992 Director
Plan, as the case may be, as in effect immediately prior to the Effective Date.
1.3 Purpose of the Plan. The purpose of this Plan is to benefit the
Company and its subsidiaries by enabling the Company to offer to certain present
and future Employees, Directors, and consultants (including sales associates)
stock based incentives in the Company, thereby giving them a stake in the growth
and prosperity of the Company and encouraging the continuance of their services
with the Company or subsidiaries.
1.4 Duration of the Plan. The Plan shall commence on the Effective Date
and shall remain in effect, subject to the right of the Board of Directors to
amend or terminate the Plan at any time pursuant to Article 9 hereof, until all
Shares subject to it shall have been purchased or acquired according to the
Plan's provisions.
ARTICLE 2.
Definitions
Whenever used in the Plan, the following terms shall have the meanings set
forth below, and when the meaning is intended, the initial letter of the word
shall be capitalized:
"Beneficial Owner" or "Beneficial Ownership" shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act.
"Board" or "Board of Directors" means the Board of Directors of the
Company.
A-1
<PAGE> 21
"Change of Control" of the Company shall mean:
(a) The Company is merged or consolidated or reorganized into or with
another corporation or other legal person (an "Acquiror") and as a result
of such merger, consolidation or reorganization less than 75% of the
outstanding voting securities or other capital interests of the surviving,
resulting or acquiring corporation or other legal person are owned in the
aggregate by the stockholders of the Company, directly or indirectly,
immediately prior to such merger, consolidation or reorganization, other
than by the Acquiror or any corporation or other legal person controlling,
controlled by or under common control with the Acquiror;
(b) The Company sells all or substantially all of its business and/or
assets to an Acquiror, of which less than 75% of the outstanding voting
securities or other capital interests are owned in the aggregate by the
stockholders of the Company, directly or indirectly, immediately prior to
such sale, other than by any corporation or other legal person controlling,
controlled by or under common control with the Acquiror; or
(c) During any period of two consecutive years, individuals who at the
beginning of any such period constitute the 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 stockholders, of
each new director of the Company was approved by a vote of at least
two-thirds of such directors of the Company then still in office who were
directors of the Company at the beginning of any such period.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor legislation thereto.
"Committee" means the Committee as specified in Article 3 herein appointed
by the Board to administer the Plan with respect to grants of Options.
"Common Stock" means the common stock of the Company.
"Company" means The DeWolfe Companies, Inc. a Massachusetts corporation, as
well as any successor to such entity as provided in Article 11 herein.
"Director" means any individual who is a member of the Board of Directors
of the Company.
"Disability" shall have the meaning ascribed to such term in the
Participant's governing long-term disability plan. If no long term disability
plan is in place with respect to a Participant, then with respect to that
Participant, Disability shall mean: for the first 24 months of disability, that
the Participant is unable to perform his or her job; thereafter, that the
Participant is unable to perform any and every duty of any gainful occupation
for which the Participant is reasonably suited by training, education or
experience.
"Effective Date" shall have the meaning ascribed to such term in Section
1.1 hereof.
"Employee" means any employee of the Company or any Subsidiary.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor act thereto.
"Fair Market Value" shall (i) for purposes of setting any Option Price,
unless otherwise required by any applicable provision of the Code or any
regulations issued thereunder, or unless the Committee otherwise determines,
mean as of the date of grant of the Option, the average of the high and low
sales prices of the Common Stock on the American Stock Exchange (as reported in
The Wall Street Journal) on the trading date immediately preceding such date of
grant; and (ii) for purposes of the valuation of any Shares delivered in payment
of the Option Price upon the exercise of an Option, for purposes of the
valuation of any Shares
A-2
<PAGE> 22
withheld to pay taxes due in connection with the exercise of an Option, mean the
average of the high and low sales prices of the Common Stock on the American
Stock Exchange (as reported in The Wall Street Journal) on the date of exercise
(or if the date of exercise is not a trading day, on the trading day next
preceding the date of exercise).
"Incentive Stock Option" or "ISO" means an option to purchase Shares
granted under Article 6 herein and which is designated as an Incentive Stock
Option and which is intended to meet the requirements of Code Section 422.
"Insider" shall mean an individual who is, on the relevant date, an
officer, director or more than ten percent (10%) beneficial owner of any class
of the Company's equity securities that is registered pursuant to Section 12 of
the Exchange Act, all as defined under Section 16 of the Exchange Act and the
regulations promulgated thereunder.
"Named Executive Officer" means a Participant who is one of the group of
covered employees as defined in the regulations promulgated under Code Section
162(m), or any successor statute.
"Nonqualified Stock Option" or "NQSO" means an option to purchase Shares
granted under Article 6 herein and which is not intended to meet the
requirements of Code Section 422.
"Option" means an Incentive Stock Option or a Nonqualified Stock Option, as
described in Article 6 herein.
"Option Agreement" means a writing provided by the Company to each
Participant setting forth the terms and provisions applicable to Options granted
under this Plan. The Participant's acceptance of the terms of the Option
Agreement shall be evidenced by the continued rendering by the Participant of
services on behalf of the Company or its subsidiaries without written objection
before any exercise of the Option. If the Participant objects in writing, the
grant of the Option shall be revoked.
"Option Price" means the price at which a Share may be purchased by a
Participant pursuant to an Option.
"Participant" means an Employee, a Director or a consultant (including a
sales associate) who has outstanding an Option granted under the Plan.
"Performance-Based Exception" means the exception for performance-based
compensation from the tax deductibility limitations of Code Section 162(m).
"Retirement" means the Participant's termination of employment with the
Company or its Subsidiaries on or after the date on which the Participant
becomes eligible to receive normal or early retirement benefits under The
DeWolfe Companies, Inc. 401(k) Retirement Plan, or such successor plan as may be
implemented in the future. If the Participant is not a participant in the 401(k)
Retirement Plan, then retirement may occur on or after the date the Participant
has achieved the minimum age or combination of age and service with the Company
and its Subsidiaries that would be required to receive an immediate annuity from
the 401(k) Retirement Plan if he or she were a participant. Notwithstanding the
foregoing, the Committee may, in its sole discretion, determine that a
Participant has met the criteria for a Retirement termination from the Company.
"Shares" means shares of Common Stock of the Company.
"Subsidiary" means any corporation, partnership, joint venture, affiliate,
or other entity in which the Company is the direct or indirect beneficial owner
of not less than 20% of all issued and outstanding equity interests.
A-3
<PAGE> 23
ARTICLE 3.
Administration
3.1 The Committee. The Plan shall be administered by the Stock Option
Committee of the Board, or by any other Committee appointed by the Board. If and
to the extent that no Committee exists that has the authority to administer the
Plan, the functions of the Committee shall be exercised by the full Board.
Notwithstanding the foregoing, no option shall be granted to any member of the
Committee unless such grant is approved by the unanimous vote of the Board
(which may be by written consent), and with respect to any such Options to be
granted to a member of the Committee, any reference to the Committee in this
Plan shall instead refer to the full Board.
3.2 Authority of the Committee. Except as limited by law or by the
Certificate of Incorporation or Bylaws of the Company, and subject to the
provisions herein, the Committee shall have full power to select Employees,
Directors and consultants (including sales associates) who shall participate in
the Plan; determine the sizes and types of Options; determine the terms and
conditions of Options in a manner consistent with the Plan; construe and
interpret the Plan and any agreement or instrument entered into under the Plan;
establish, amend, or waive rules and regulations for the Plan's administration;
and (subject to the provisions of Article 9 herein) amend the terms and
conditions of any outstanding Option to the extent such terms and conditions are
within the discretion of the Committee as provided in the Plan. Further, the
Committee shall make all other determinations which may be necessary or
advisable for the administration of the Plan. As permitted by law, the Committee
may delegate the authority granted to it herein.
3.3 Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders and
resolutions of the Board shall be final, conclusive and binding on all persons,
including the Company, its stockholders, Employees, consultants (including sales
associates) Participants, and their estates and beneficiaries.
ARTICLE 4.
Shares Subject to the Plan and Maximum Number of Shares Subject to Options
4.1 Shares Available for Options. The aggregate number of Shares which
may be issued or used for reference purposes under this Plan or with respect to
which Options may be granted shall not exceed 400,000 Shares (subject to
adjustment as provided in Section 4.3), which may be either authorized and
unissued Shares or Shares held in or acquired for the treasury of the Company.
Upon:
(a) a cancellation, termination, expiration, forfeiture, or lapse for
any reason of any Option; or
(b) payment of an Option Price and/or payment of any taxes arising
upon exercise of an Option with previously acquired Shares or by
withholding Shares which otherwise would be acquired on exercise,
then the number of Shares underlying any such Option which were not issued as a
result of any of the foregoing actions shall again be available for the purposes
of Options thereafter granted under the Plan.
4.2 Individual Participant Limitations. Unless and until the Committee
determines that an Option to a Named Executive Officer shall not be designed to
comply with the Performance-Based Exception, and subject to adjustment as
provided in Section 4.3 herein, the maximum aggregate number of Options that may
be granted in any one fiscal year to a Participant shall be 100,000.
4.3 Adjustments in Authorized Shares. In the event of any change in
corporate capitalization, such as a stock split, or a corporate transaction,
such as any merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company, any reorganization (whether or
not such reorganization
A-4
<PAGE> 24
comes within the definition of such term in Code Section 368) or any partial or
complete liquidation of the Company, such adjustment shall be made in the number
and class of Shares available for Options, the number and class of and/or price
of Shares subject to outstanding Options granted under the Plan and the number
of Shares set forth in Sections 4.1 and 4.2, as may be determined to be
appropriate and equitable by the Committee, in its sole discretion, to prevent
dilution or enlargement of rights; provided, however, that the number subject to
any Option shall always be a whole number.
ARTICLE 5.
Eligibility and Participation
5.1 Eligibility. Persons eligible to participate in this Plan include all
officers and other employees of the Company and its Subsidiaries, Directors and
consultants (including sales associates) of the Company and its Subsidiaries, as
determined by the Committee.
5.2 Actual Participation. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees, Directors
and consultants (including sales associates), those to whom Options shall be
granted and shall determine the terms, conditions and amount of each Option.
ARTICLE 6.
Granting of Stock Options
6.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to one or more Participants in such number, and upon such
terms, and at any time and from time to time as shall be determined by the
Committee. The Committee may grant Nonqualified Stock Options or Incentive Stock
Options. The Committee shall have complete discretion in determining the number
of Options granted to each Participant (subject to Article 4 herein).
6.2 Option Agreement. Each Option grant shall be evidenced by an Option
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions as the
Committee shall determine. The Option Agreement with respect to the Option also
shall specify whether the Option is intended to be an ISO within the meaning of
Code Section 422, or an NQSO whose grant is intended not to fall under the
provisions of Code Section 422.
6.3 Option Price. The Committee shall designate the Option Price for each
grant of an Option under this Plan which Option Price shall be at least equal to
one hundred percent (100%) of the Fair Market Value of a Share on the date the
Option is granted, and which Option Price may not be subsequently changed by the
Committee except pursuant to Section 4.3 hereof or to the extent provided in the
Option Agreement.
6.4 Duration of Options. Each Option granted to a Participant shall
expire at such time as the Committee shall determine at the time of grant;
provided, however, that unless otherwise designated by the Committee at the time
of grant, no Option shall be exercisable later than the tenth (10th) anniversary
date of its grant.
6.5 Exercise of Options. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for
each grant or for each Participant.
6.6 Payment. Options granted under this Article 6 shall be exercised by
the delivery of a written notice of exercise to the Company, setting forth the
number of Shares with respect to which the Option is to
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be exercised, accompanied by full payment for the Shares. The Option Price upon
exercise of any Option shall be payable to the Company in full either:
(a) in cash or its equivalent,
(b) by tendering previously acquired Shares having an aggregate Fair
Market Value at the time of exercise equal to the total Option Price, or
(c) by a combination of (a) and (b).
The Committee also may allow cashless exercises as permitted under Federal
Reserve Board's Regulation T, subject to applicable securities law restrictions,
or by any other means which the Committee determines to be consistent with the
Plan's purpose and applicable law. As soon as practicable after receipt of a
written notification of exercise and full payment, the Company shall deliver to
the Participant, in the Participant's name, Share certificates in an appropriate
amount based upon the number of Shares purchased under the Option(s).
In connection with the exercise of options granted under the Plan, the
Company may make loans to the Participants as the Committee, in its discretion,
may determine. Such loans shall be subject to the following terms and conditions
and such other terms and conditions as the Committee shall determine not
inconsistent with the Plan. Such loans shall bear interest at such rates as the
Committee shall determine from time to time, which rates may be below then
current market rates or may be made without interest. In no event may any such
loan exceed the Fair Market Value, at the date of exercise, of the shares
covered by the Option, or portion thereof, exercised by the Optionee. No loan
shall have an initial term exceeding two years, but any such loan may be
renewable at the discretion of the Committee. When a loan shall have been made,
Shares having a fair market value at least equal to 150 percent of the principal
amount of the loan shall be pledged by the Participant to the Company as
security for payment of the unpaid balance of the loan.
6.7 Restrictions on Share Transferability. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Article 6 as it may deem advisable, including, without
limitation, restrictions under applicable federal securities laws, under the
requirements of any stock exchange or market upon which such Shares are then
listed and/or traded, and under any blue sky or state securities laws applicable
to such Shares.
6.8 Termination of Employment, Director Relationship or Consulting
Arrangement. Each Option Agreement shall set forth the extent to which the
Participant shall have the right to exercise the Option following termination of
the Participant's employment, service on the Board of Directors, or consulting
arrangement with the Company and/or its Subsidiaries. Such provisions shall be
determined in the sole discretion of the Committee, shall be included in the
Option Agreement entered into with each Participant, need not be uniform among
all Options issued pursuant to the Plan, and may reflect distinctions based on
the reasons for termination of employment, director relationship or consulting
agreement, including, but not limited to, termination of employment for cause or
good reason, or reasons relating to the breach or threatened breach of
restrictive covenants. Subject to Article 8, in the event that a Participant's
Option Agreement does not set forth such termination provisions, the following
termination provisions shall apply:
(a) In the event a Participant's employment, director relationship or
consulting arrangement with the Company and/or its Subsidiaries is
terminated for any reason other than death, Disability or Retirement, all
Options held by the Participant shall expire and all rights to purchase
Shares thereunder shall terminate immediately; provided, however, that
notwithstanding the foregoing, all Options to which the Participant has a
vested right immediately prior to such termination shall be exercisable for
the lesser of (i) 30 days following the date of termination or (ii) the
expiration date of the Option.
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<PAGE> 26
(b) In the event a Participant's employment, director relationship or
consulting arrangement with the Company and/or its Subsidiaries is
terminated due to death or Disability, all Options shall immediately become
fully vested on the date of termination.
(c) Subject to Article 8, in the event of termination of the
Participant's employment, director relationship or consulting arrangement,
due to death or Disability, all Options in which the Participant has a
vested right upon termination shall be exercisable for a period of one (1)
year following such termination, or until the expiration date of the
Option, whichever is later.
(d) Subject to Article 8, in the event of termination of the
Participant's employment director relationship or consulting arrangement
due to Retirement, all Options in which the Participant has a vested right
upon termination shall be exercisable until the date which is (i) three
years following the date of termination or (ii) the expiration date of the
Option, whichever is earlier.
6.9 Nontransferability of Options.
(a) Incentive Stock Options. No ISO granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, all ISOs granted to a Participant under the Plan
shall be exercisable during his or her lifetime only by such Participant.
(b) Nonqualified Stock Options. Except as otherwise provided in a
Participant's Option Agreement, no NQSO granted under this Article 6 may be
sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, except as otherwise provided in a Participant's
Option Agreement, all NQSOs granted to a Participant under this Article 6
shall be exercisable during his or her lifetime only by such Participant.
ARTICLE 7.
Rights of Employees, Directors and Consultants
7.1 Employment or Consulting Arrangement. Nothing in the Plan shall
interfere with or limit in any way the right of the Company to terminate any
Participant's employment or consulting arrangement at any time, nor confer upon
any Participant any right to continue in the employ of or consulting arrangement
with the Company or any Subsidiary, nor interfere with or limit in any way the
right of the Board to remove any Participant who is a Director from service on
the Board at any time in accordance with the provisions of the Company's By-laws
and applicable law.
For purposes of this Plan, temporary absence from employment because of
illness, vacation, approved leaves of absence, and transfers of employment among
the Company and its Subsidiaries, shall not be considered to terminate
employment or to interrupt continuous employment. Temporary cessation of the
provision of consulting services because of illness, vacation or any other
reason approved in advance by the Company shall not be considered a termination
of the consulting arrangement or an interruption of the continuity thereof.
Conversion of a Participant's employment relationship to a consulting
arrangement or from a consulting arrangement to an employment relationship shall
not result in termination of previously granted Options.
7.2 Participation. No Employee, Director or consultant shall have the
right to be selected to receive an Option under this Plan, or, having been so
selected, to be selected to receive a future Option.
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<PAGE> 27
ARTICLE 8.
Change of Control
Upon the occurrence of a Change of Control, unless otherwise specifically
prohibited under applicable laws, or by the rules and regulations of any
governing governmental agencies or national securities exchanges, any and all
Options granted hereunder shall become immediately exercisable, and shall remain
exercisable throughout their entire term.
ARTICLE 9.
Amendment, Modification, and Termination
9.1 Amendment, Modification, and Termination. The Board may at any time
and from time to time, alter, amend, suspend or terminate the Plan in whole or
in part, subject to any requirement of stockholder approval imposed by
applicable law, rule or regulation.
9.2 Options Previously Granted. No termination, amendment, or
modification of the Plan shall adversely affect in any material way any Option
previously granted under the Plan, without the written consent of the
Participant holding such Option.
ARTICLE 10.
Withholding
10.1 Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy federal, state, and local taxes, domestic or foreign,
required by law or regulation to be withheld with respect to any taxable event
arising as a result of the Plan.
10.2 Share Withholding. With respect to withholding required upon the
exercise of Options, Participants may elect, subject to the approval of the
Committee, to satisfy the withholding requirement, in whole or in part, by
having the Company withhold Shares having a Fair Market Value on the date the
tax is to be determined equal to the minimum statutory total tax which would be
imposed on the transaction. All such elections shall be irrevocable, made in
writing, signed by the Participant, and shall be subject to any restrictions or
limitations that the Committee, in its sole discretion, deems appropriate.
ARTICLE 11.
Successors
All obligations of the Company under the Plan with respect to Options
granted hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect merger,
consolidation, purchase of all or substantially all of the business and/or
assets of the Company or otherwise.
ARTICLE 12.
Shareholder Ratification
This Plan was adopted by the Board of Directors on February 10, 1998,
subject to the ratification by the stockholders of the Company. If the Plan is
ratified by the affirmative vote of the holders of a majority of the
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<PAGE> 28
outstanding shares of Common Stock of the Company voting in person or by proxy
at the 1998 Annual Stockholders' Meeting, it shall be deemed to have become
effective on the Effective Date of February 10, 1998. Options may be granted
under the Plan prior to ratification of the Plan by the stockholders of the
Company and, in each such case, the date of grant shall be determined without
reference to the date of ratification of the Plan by stockholders of the
Company; provided, however that if the Plan is not ratified by stockholders, all
options granted hereunder shall be canceled and void.
ARTICLE 13.
Legal Construction
13.1 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
13.2 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
13.3 Requirements of Law. The granting of Options and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
13.4 Securities Law Compliance. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the Exchange Act. To the extent any provision of
the Plan or action by the Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the Committee.
13.5 Governing Law. To the extent not preempted by federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and governed
by the laws of the Commonwealth of Massachusetts.
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<PAGE> 29
1137-PS-98
<PAGE> 30
THE DEWOLFE COMPANIES, INC.
PROXY FOR 1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 12, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
The undersigned, revoking previous proxies relating to these shares, hereby
acknowledges receipt of the Notice of Annual Meeting of Stockholders and
Proxy Statement dated April 2, 1998 in connection with the Annual Meeting
to be held on May 12, 1998 at 10:00 a.m. at the Newton Marriott, in Newton,
Massachusetts, and hereby appoints Richard B. DeWolfe and Paul J.
Harrington, and each of them (with full power to act alone), the attorneys
and proxies of the undersigned, with power of substitution to each, to vote
all shares of the Common stock of the DeWolfe Companies, Inc. registered in
the name provided herein which the undersigned is entitled to vote at the
1998 Annual Meeting of Stockholders, and at any adjournment or adjournments
thereof, with all the powers the undersigned would have if personally
present. Without limiting the general authorization hereby given, said
proxies are, and each of them is, instructed to vote or act as follows on
the proposals set forth in said Proxy Statement and on such other matters
as may properly come before the meeting.
SEE REVERSE SIDE. If you wish to vote in accordance with the Board of Directors'
recommendations, just sign on the reverse side. You need not mark any boxes.
SEE REVERSE SIDE
<PAGE> 31
/X/ Please mark votes as
in this example.
This proxy, when properly executed, will be voted in the manner directed herein.
If no direction is made, this Proxy will be voted FOR all of the Board of
Directors' nominees, FOR Proposal 2, and FOR Proposal 3.
The Board of Directors recommends a vote FOR Proposals 1, 2 and 3.
1. To fix the size of the Board at four and to elect the nominees named in the
Proxy Statement.
Nominees: Richard B. DeWolfe, A. Clinton Allen,
Paul R. Del Rossi and R. Robert Popeo
/ / For / / withheld
/ / _______________________________________
For all nominees except as noted above
2. To approve the Company's 1998 Stock Option Plan.
/ / For / / Against / / Abstain
3. To ratify the Company's Selection of Ernst & Young LLP as the Company's
Independent Auditors.
/ / For / / Against / / Abstain
MARK HERE / / MARK HERE / /
FOR ADDRESS IF YOU PLAN
CHANGE AND TO ATTEND
NOTE AT LEFT THE MEETING
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
Signature:______________________________ Date:____________________________
Signature:______________________________ Date:____________________________
