<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended December 31, 1996 or
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period
from ____________________ to _______________________.
Commission file number: 0-23940
ALTERNATIVE RESOURCES CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 38-279106
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Tri-State International, Suite 300
Lincolnshire, Illinois 60069
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 317-1000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
-----------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. / /
The registrant estimates that the aggregate market value of the registrant's
Common Stock held by non-affiliates on March 7, 1997 (based upon an estimate
that 88.4% of the shares are so owned by non-affiliates and upon the average
of the closing bid and asked prices for the Common Stock on the Nasdaq
National Market) on that date was approximately $224,800,000. Determination
of stock ownership by non-affiliates was made solely for the purpose of
responding to this requirements and registrant is not bound by this
determination for any other purpose.
As of March 7, 1997, 15,653,267 shares of the registrant's Common Stock were
outstanding.
The following documents are incorporated into this Form 10-K by reference:
Certain portions of the Annual Report to Stockholders for fiscal year
ended December 31, 1996 (Part II).
Certain portions of the Proxy Statement for Annual Meeting of Stockholders
to be held on April 29, 1997 (Part III).
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PART I
ITEM 1. BUSINESS
OVERVIEW
Alternative Resources Corporation-Registered Trademark- ("ARC" or the
"Company"), through its subsidiaries, is a provider of technical services,
including component outsourcing and project based resources for staffing
solutions in information technology ("IT") operations. The Company's clients
consist principally of Fortune 1000 companies and other organizations with
sizable and complex IS operations. The Company serves its clients through a
network of 51 branch offices (as of December 31, 1996) located in the United
States and Canada. The Company has experienced substantial growth in revenue
and earnings driven primarily by industry trends toward component outsourcing
of IS operations, increased penetration of the Company's existing clients and
markets, expansion into new markets and the introduction of new services.
The Company was formed in March 1988 and began providing technical
staffing solutions in April 1988. The Company has expanded its office
network during each year of operation, opening three offices in 1988, four
offices in 1989, six offices in 1990, two offices in 1991, five offices in
1992, five offices in 1993, nine offices in 1994, eight offices in 1995 and
nine offices in 1996. The Company intends to open six to eight new offices
in 1997.
ARC SERVICES
The Company has developed an expertise in, and focuses exclusively on,
providing technical staffing solutions for the specialized requirements of IS
operations. Through a combination of managed services, project management
and technical staffing resources, the Company provides clients with the
flexibility, management skills, and technical knowledge to address rapidly
changing needs within an information technology environment that is evolving
more quickly than the client's planning horizon. ARC Technical Employees
perform a broad range of tasks, including:
- Upgrades and conversions - Moves, adds and changes of desktop hardware
- Network analysis - Traditional mainframe operations (tape, print,
and console and network control)
- Data center relocations - Peak load assistance
- Interim staffing during - Rounding out production schedules
technology migrations
- End user support and - Management and delivery of complete IT
service functions such as help desk, data center and
desktop support
ARC STAFFING SOLUTIONS
The Company provides technical staffing services under four
alternatives: Tactical Resources-SM-, Strategic Resources-SM-,
Smartsourcing-Registered Trademark- and Smartsourcing+-SM-. The staffing
alternative chosen by clients depends on the nature and length of the
project, the degree of day-to-day management responsibility clients wish to
delegate and the flexibility desired. All staffing services are provided at
the clients' facilities and all Technical Employees work under client
supervision, except under the Company's Smartsourcing and Smartsourcing+
alternatives. The Company believes its staffing solutions permit clients to
meet their IS operations staffing requirements more effectively and
economically.
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TACTICAL RESOURCES. Under Tactical Resources, the Company provides
Technical Employees for projects ranging in duration from one day to well
over a year. Tactical Resources provide clients with maximum flexibility in
meeting staffing requirements as clients may terminate projects at any time.
Clients pay only for the actual time the Technical Employee works. Clients
generally may engage Technical Employees at any time and on any day, without
paying a shift, weekend or holiday premium.
STRATEGIC RESOURCES. Strategic Resources differ from Tactical Resources
in that the Company provides the Technical Employee with a more comprehensive
benefits package at no additional cost to the client. The Company believes
that Strategic Resources offer clients greater assurance that a project will
be completed by the same Technical Employee. Clients typically select this
alternative for projects that are expected to extend at least one year or
that require continuity of the technical staff. Under Strategic Resources,
clients commit to use a Technical Employee for a minimum of 32 hours per week
during the term of the project. A client may terminate a Strategic Resources
project at any time with notice to the Company. The Company believes this
alternative, because of the benefits offered, enhances the likelihood of
Technical Employee retention.
SMARTSOURCING. Under Smartsourcing, the Company manages, supervises and
schedules the staffing requirements of all or part of a client's IS
operations department or function. However, as opposed to total outsourcing,
the strategic direction and control of the department or function is retained
by the client. For example, under one of the Company's Smartsourcing
projects, the Company provides, manages and supervises ARC Technical
Employees who operate a client's entire data center tape operations.
Smartsourcing relieves the client of the burdensome responsibilities of
employment and termination, performance evaluations, benefits administration,
scheduling and retraining. Smartsourcing is generally structured to provide
clients with an economical mix of both Tactical Resources and Strategic
Resources. Under Smartsourcing, the Company may commit to achieving certain
service levels established by a client and may be subject to penalties if
such service levels are not achieved.
SMARTSOURCING+. The Company's Smartsourcing+ goes one step further than
a Smartsourcing arrangement by offering highly experienced, on-site
management to oversee service level agreements, production requirements,
project management, process enhancements and management reporting. The site
manager reports to the client, but also receives direction from the
operational delivery team.
All four of the Company's staffing alternatives are supported by the
Company's National Client Support Services ("NCSS"), which provides both
clients and Technical Employees with assistance and direction in case of
emergencies and other unanticipated events. NCSS is available to clients at
no additional cost after normal business hours on weekdays and 24 hours a day
on weekends.
Historically, staffing services have been billed on an hourly basis.
The majority of the traditional staffing business is invoiced in this manner.
Under Smartsourcing-Registered Trademark- and Smartsourcing+-SM- arrangements,
where ARC may take over an entire or component part of a client's IT
operations, the Company may utilize other invoicing arrangements as an
alternative to the more traditional hourly billing. Such arrangements may
include fixed price arrangements or per unit billing. An example of a per
unit billing arrangement would be a price per call on a help desk operation.
CHANGES IN 1997. In 1997, the Company intends to modify the
eligibility criteria for and certain provisions of the benefit plans that it
provides to Technical Employees. In the past, the type of benefits package
that was provided was determined by whether the Technical Employee was
involved in a project that was long-term or short term in nature. Employees
on long-term projects received a more comprehensive benefits package which
included medical coverage and paid time off benefits. Employees on
short-term projects did not receive medical and paid time off benefits but
instead received a year-end cash bonus based on hours worked.
<PAGE>
Management has determined that the level of benefits provided to Technical
Employees will be based upon the number of hours worked rather than the
length of the individual project that the employee may be working on.
Management believes that this will improve overall employee retention and
allow for more flexibility in filling projects. In conjunction with this
change, the year-end cash bonus will be eliminated.
ADDITIONAL ARC SERVICES
To strengthen ARC's ability to provide comprehensive solutions to its
clients, the Company recently formed several strategic alliances with other
leading technology service providers whose capabilities those provided by ARC
technical employees. These alliances have expanded the bandwidth of services
offered by ARC. These complementary services include:
- complete management of IT staff
- offsite outsourcing services
- call center and corporate computer services
- telecommunications network integration
Management believes that these alliances will play an important part in
the Company's strategy to provide more comprehensive solutions to IT issues
that its clients face. In most cases, these services will be combined with
the Company's core staffing services.
ARC APPROACH
The Company has developed a customized approach to the project
assignment process that it believes results in a high degree of client and
technical employee satisfaction, repeat business from clients and a high
level of technical employee retention. The Company believes a superior
project assignment entails developing a comprehensive understanding of
clients' needs, matching clients' needs with requisite skills on a timely
basis, and monitoring performance throughout the project. However, the
Company believes that the professional and interpersonal skills required to
interact with clients and interpret and communicate their needs differ
greatly from those required to manage the recruitment and project assignment
of technical employees. Under the ARC approach, project responsibilities are
shared between account managers and resource managers. Account managers
focus principally on building and fostering relationships with clients,
understanding the client's organization and assessing the client's needs, and
proposing tailored staffing solutions. Resource managers focus principally
on recruiting and establishing relationships with technical personnel,
assessing their technical and interpersonal skills, selecting appropriate
technical personnel for a project, and monitoring and motivating technical
employees on a project. This separation of responsibilities allows account
managers and resource managers to meet the needs of their respective
constituencies while working together to enhance the prospects of a superior
project assignment.
Each branch office typically has two or three account managers. Each
account manager typically focuses on 25 to 40 targeted organizations with
substantial IT operations. The Company also employs national account
managers who establish and manage national service arrangements with certain
major clients and maintain those relationships at the corporate office level.
Account managers and national account managers work together to serve the
local and national needs of such clients.
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Each branch office typically has two or three resource managers. A
resource manager typically manages an aggregate of 20 to 30 technical
employees assigned to various projects.
The Company operates within a decentralized management structure that
gives branch general managers significant discretion over the operations and
performance of their branch office. The Company believes that its management
structure provides a motivating environment for its staff, creates a
responsive and committed management team, and improves productivity. In
addition, the Company invests significant resources in ongoing training of
its branch office staff to promote consistent execution of the Company's
strategy.
Branch general managers are responsible for the overall performance of
their respective branch office and may oversee client support sites. Branch
general managers also assist account managers in developing and maintaining
client relationships and assist resource managers in interviewing and
evaluating technical personnel. Branch general managers generally have
significant direct selling experience with a Fortune 500 company, at least
three years of experience in sales management, and strong interpersonal
skills. Each branch general manager reports to an executive director.
Executive directors are primarily responsible for insuring consistent
implementation of the ARC consultative sales approach and project assignment
process, as well as other elements of the Company's business strategy,
throughout the office network. Executive directors also train, develop and
evaluate branch general managers and assist in selecting, establishing and
overseeing new branch offices and client support sites.
In 1995, the Company initiated a pilot program to market and sell its
services to mid-to large-size clients outside the Company's traditional
Fortune 1000 client profile. Based on the successful results of the pilot
program, in 1996 the company embarked upon a "Middle Market" program which
entailed adding a Middle Market Account Manager to each branch in the
Company's existing office network. As of December 31, 1996, the program was
implemented in 30 of the Company's 51 branches with the rollout expected to
be completed in mid-1997. Beginning in 1997, the Middle Markets program will
be renamed as the General Business program.
The Company provides sales and delivery support for its
Smartsourcing-Registered Trademark- and Smartsourcing+-SM- offerings through a
centralized Smartsourcing-Registered Trademark- Solutions staff located at
its headquarters in Lincolnshire, Illinois. This staff of specialists
supports ARC's account managers in presenting Smartsourcing-Registered
Trademark- Solutions to clients. The staff also provides management
oversight and technical support to Smartsourcing-Registered Trademark-
project teams.
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TECHNICAL PERSONNEL
The Company currently maintains databases in its branch offices
containing more than 40,000 individuals who have a wide range of technical
skills, including the following:
MAINFRAME AND MID-RANGE COMPUTER OPERATIONS
- Mainframe Computer Operator - Production Scheduler
- Master Console Operator - Documentation Specialist
- Peripheral Equipment Operator - Project Manager
- Shift Supervisor - Trainer
- Operations Analyst
DESKTOP AND WORKSTATION COMPUTING AND CLIENT SERVER SUPPORT
- PC Bench Technician - Documentation Specialist
- PC Field Technician - Project Manager
- Shift Supervisor - Trainer
- PC Specialist
VOICE AND DATA COMMUNICATIONS
- Telecommunications Technician - Local Area Network Administrator
- Telecommunications Administrator - Local Area Network Manager
- Telecommunications Analyst - Local Area Network Systems
- Documentation Specialist Engineer
- Shift Supervisor - Project Manager
- Local Area Network Technician - Trainer
HELP DESK SUPPORT
- Mainframe Help Desk Specialist - Telecommunications Help Desk
- PC Help Desk Specialist Specialist
To recruit qualified technical personnel, the Company places newspaper
advertisements, maintains a presence at local technical college(s) and
obtains referrals from its technical employees and clients. In addition, the
Company recruits technical personnel through its web site (www.ALRC.com).
Prospective technical employees are required to complete an extensive
questionnaire regarding skill levels, experience, education and availability,
and to provide references. Resource managers regularly update each branch
office database to reflect changes in technical personnel skill levels and
availability. While on a project for the Company, technical personnel become
ARC technical employees.
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OPERATIONS
The Company operates through a network of 51 offices (including client
support sites) located in the United States and Canada. In addition to the
Company's principal executive offices in Lincolnshire, Illinois, as of
December 31, 1996, the Company had offices located in the following
metropolitan areas:
<TABLE>
<CAPTION>
YEAR YEAR
LOCATION OPENED LOCATION OPENED
- -------- ------ -------- ------
<S> <C> <C> <C>
Detroit, Michigan 1988 St. Louis, Missouri 1994
Minneapolis, Minnesota 1988 Toronto, Ontario 1994
Dallas, Texas 1988 Stamford, Connecticut 1994
Sacramento, California 1994
Boston, Massachusetts 1989 New York, New York 1994
Chicago, Illinois 1989 Rosemont, Illinois 1994
Cleveland, Ohio 1989 Edison, New Jersey 1994
Washington, D.C. 1989 Charlotte, North Carolina 1994
Plano, Texas 1994
San Francisco, California 1990
Fort Worth, Texas 1990 Boca Raton, Florida 1995
Atlanta, Georgia 1990 Colorado Springs, Colorado 1995
Houston, Texas 1990 Rochester, New York* 1995
Los Angeles, California 1990 Raleigh-Durham, North Carolina 1995
Anaheim, California 1990 Milwaukee, Wisconsin 1995
Woodland Hills, California 1995
Cincinnati, Ohio 1991 Allentown, Pennsylvania 1995
San Jose, California 1991 Long Island, New York 1995
Philadelphia, Pennsylvania 1992 Richmond, Virginia* 1996
Harrisburg, Pennsylvania* 1992 Portland, Oregon 1996
Orlando, Florida 1992 Kansas City, Kansas 1996
Baltimore, Maryland 1992 Pittsburgh, Pennsylvania 1996
Saddlebrook, New Jersey 1992 San Diego, California 1996
Boulder, Colorado* 1996
Denver, Colorado 1993 Boise, Idaho 1996
Phoenix, Arizona 1993 Hartford, Connecticut 1996
Tampa, Florida 1993 Southbury, Connecticut* 1996
Miami, Florida 1993
Seattle, Washington 1993
</TABLE>
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* Client Support Site
The Company expects to open six to eight additional offices in 1997 in
new and existing geographic markets. In selecting markets for new branch
offices, the Company considers many factors, including the presence of
organizations with substantial IT operations, the availability of internal
management resources, opportunities to expand geographically with existing
clients and overall demographics.
From time to time, the Company opens client support sites in response to
specific client needs. Client support sites are similar to branch offices
but are staffed only by a resource manager and have no selling function. Many
client support sites evolve into full branches as other client opportunities
arise within the local market. The Company may establish additional client
support sites in markets where it does not have an established presence,
especially as national account relationships expand.
<PAGE>
CLIENTS
The Company's clients are typically organizations with sizable and
complex IT operations. The IT requirements of these organizations often
provide opportunities for major projects that extend for multiple years or
generate additional projects. During 1996, the Company provided technical
staffing solutions to computer services companies, systems integrators,
telecommunications companies, banking and financial services entities,
manufacturers, distributors, health care providers and utilities. The
Company's computer services and systems integrator clients often subcontract
ARC's staffing services to their own customers. In 1996, the Company's
largest clients, IBM and Electronic Data Systems Corporation, accounted for
approximately 13% and 11% of the Company's total revenues, respectively.
COMPETITION
The technical staffing industry is highly competitive and fragmented and
has low barriers to entry. The Company competes for potential clients with
providers of outsourcing services, systems integrators, computer systems
consultants, other providers of technical staffing services and, to a lesser
extent, temporary personnel agencies. The Company competes for technical
personnel with private and public companies, other providers of technical
staffing services, systems integrators, providers of outsourcing services,
computer systems consultants, clients and temporary personnel agencies.
The Company believes that the principal competitive factors in obtaining
and retaining clients are accurate assessment of clients' requirements,
timely assignment of technical employees with appropriate skills and the
price of services. The Company is dependent upon its ability to continue to
attract and retain technical personnel who possess the technical skills and
experience necessary to meet the staffing requirements of its clients. The
principal competitive factors in attracting qualified technical personnel are
schedule flexibility, the availability of training, benefits and compensation
as well as the availability, quality and variety of projects. The Company
believes that many of the technical personnel included in its branch office
databases may also be pursuing other employment opportunities. Therefore,
the Company believes that responsiveness to the needs of technical personnel
is an important factor in the Company's ability to fill projects.
SEASONALITY
The Company's quarterly results are affected by such factors as
employment taxes and the timing, number and costs associated with new branch
office openings. In general, the first two quarters of the year carry a
significant portion of payroll tax expense. As employees reach annual payroll
limits, usually in the third and fourth quarters, the Company's payroll tax
expense is reduced. The timing of branch office openings is dependent upon
such factors as the availability of resources for recruiting and training
branch staff, as well as how quickly office space can be identified and the
lease negotiated.
EMPLOYEES
At December 31, 1996, the Company employed 477 staff employees and
approximately 3,100 technical employees. During 1996, the Company employed
more than 8,200 technical employees.
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are as follows:
NAME AGE POSITION
---- --- ---------
Larry I. Kane 56 Chairman of the Board and Chief Executive
Officer
Richard Williams 51 President and Chief Operating Officer
Robert V. Carlson 40 Executive Vice President
Bradley K. Lamers 39 Vice President and Chief Financial Officer,
Secretary and Treasurer
Silvia U. Masini 42 Vice President
Mr. Kane founded the company in March 1988 and has served as its Chief
Executive Officer and a Director since the Company's inception. Mr. Kane was
named Chairman of the Board of the Company in May 1995. Mr. Kane also served
as the President of the Company from the Company's inception to February
1997. Mr. Kane was Region Director for Brandon Systems Corporation, a
provider of technical staffing services from August 1985 through November
1987. Mr. Kane previously held various sales management and marketing
positions with General Electric Company and Automated Data Processing, Inc.
Mr. Richard Williams joined the Company as Director, President and Chief
Operating Officer in February 1997. From 1995 through 1996, Mr. Williams was
co-founder and Chairman and Chief Executive Officer of Intellisource, Inc.,
an outsourcing services firm. From 1990 to 1995, Mr. Williams was a senior
vice president of Dun & Bradstreet Corporation, where he was responsible for
corporate strategy and marketing, as well as chief of technology.
Previously, Mr. Williams was vice president of U.S. marketing for Unisys and
a general manager of General Electric's Consumer Electronics Division.
Mr. Robert V. Carlson has been Executive Vice President responsible for
the Company's field operations since November 1996. Mr. Carlson joined the
Company in April 1991 as a Branch General Manager, became an Executive
Director in December 1993, and was named Vice President in July 1995. Prior
to joining the Company, Mr. Carlson held various positions with General
Electric and Automated Data Processing, Inc.
Mr. Bradley K. Lamers joined the Company in March 1995 as Director of
Finance and Controller. He was promoted to Vice President in July 1995 and
to Chief Financial Officer, Corporate Secretary and Treasurer in October
1995. From November 1988 to March 1995, Mr. Lamers served as a division
controller for Rogers Foods, Inc., a wholly-owned subsidiary of Universal
Foods Corporation.
Ms. Silvia U. Masini joined the Company in March 1990 as Manager - Human
Resources. She was promoted to Director of Human Resources in September 1992
and to Vice President, overseeing the Company's human resources function
which includes employee recruitment, development and training programs, in
October 1993.
<PAGE>
ITEM 2. PROPERTIES
The Company's principal executive office is currently located in
approximately 27,000 square feet of office space in Lincolnshire, Illinois,
pursuant to a lease agreement that expires October 31, 2006. The Company
leases office space for all of its branch offices and client support sites.
Branch offices occupy between 1,200 and 4,700 square feet. The lease terms
for branch offices are typically five years.
ITEM 3. LEGAL PROCEEDINGS
In the normal course of business, the Company is a party to various
legal proceedings. The Company does not expect that any currently pending
proceedings will have a material adverse effect on its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The information required by this Item is included in registrant's Annual
Report to Stockholders for the fiscal year ended December 31, 1996, under the
caption "Stockholder Information", which information is set forth in Exhibit
13 to this Form 10-K and is hereby incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this Item is included in registrant's Annual
Report to Stockholders for the fiscal year ended December 31, 1996, under the
caption "Five Year Summary of Selected Financial Data," which information is
set forth in Exhibit 13 to this Form 10-K and is hereby incorporated herein
by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The information required by this Item is included in registrant's Annual
Report to Stockholders for the fiscal year ended December 31, 1996, under the
caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations," which information is set forth in Exhibit 13 to this
Form 10-K and is hereby incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is included in registrant's Annual
Report to Stockholders for the fiscal year ended December 31, 1996, under the
captions "Consolidated Balance Sheets," "Consolidated Statements of
Operations," "Consolidated Statements of Changes in Stockholders' Equity,"
"Consolidated Statements of Cash Flows," "Notes to Consolidated Financial
Statements" and "Independent Auditors' Report," which information is set
forth in Exhibit 13 to this Form 10-K and is hereby incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
a. Directors of the Company
The information required by this Item is set forth in registrant's
Proxy Statement for the Annual Meeting of Stockholders to be
held on April 29, 1997, at pages 3 through 5 under the caption
"Election of Directors", which information is hereby
incorporated herein by reference.
b. Executive Officers of the Company
Reference is made to "Executive Officers of the Registrant" in Part I.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is set forth in registrant's Proxy
Statement for the Annual Meeting of Stockholders to be held on April 29,
1997, at pages 6 through 8 under the caption "Executive Compensation," at
page 10 under the caption "Board of Directors", and at page 10 under the
caption "Compensation Committee Interlocks and Insider Participation," which
information is hereby incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this Item is set forth in registrant's Proxy
Statement for the Annual Meeting of Stockholders to be held on April 29,
1997, at page 2 under the caption "Securities Beneficially Owned by Principal
Stockholders and Management," which information is hereby incorporated herein
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) (1) FINANCIAL STATEMENTS
The following financial statements of Alternative Resources
Corporation, included in the registrant's Annual Report to
Stockholders for the fiscal year ended December 31, 1996 are
included in Part II, Item 8:
(i) Consolidated Balance Sheets - as of December 31, 1996
and 1995;
(ii) Consolidated Statements of Operations - years ended
December 31, 1996, 1995,and 1994;
(iii) Consolidated Statements of Changes in Stockholders' Equity -
years ended December 31, 1996, 1995, and 1994;
(iv) Consolidated Statements of Cash Flows - years ended
December 31, 1996, 1995,and 1994;
(v) Notes to Consolidated Financial Statements; and
(vi) Independent Auditors' Report from KPMG Peat Marwick LLP.
(2) FINANCIAL STATEMENT SCHEDULES
(i) Independent Auditors' Report from KPMG Peat Marwick LLP.
(ii) Schedule II - valuation and qualifying accounts.
(3) EXHIBITS
3.1 Amended and Restated Certificate of Incorporation. Incorporated
herein by reference to exhibit 3 to the Company's form 10-Q for the
period ended June 30, 1996 (File No. 0-23940)
3.2 Amended and Restated By-Laws
Exhibit 10.1 through 10.10 are management contracts or compensatory plans or
arrangements
10.1 Amended and Restated Stock Option Plan. Incorporated herein by
reference to exhibit 10 to the Company's form 10-Q for the period ended
June 30, 1996. (File No. 0-23940)
10.2 Senior Management Agreement between Alternative Resources Corporation
and Larry I. Kane dated as of March 8 1988, as amended December 2,
1988 and March 9, 1990. Incorporated herein by reference to exhibit
10.3 to the Company's Registration Statement on Form S-1, as amended,
Registration No. 33-76584.
10.3 Third Amendment to Senior Management Agreement between Alternative
Resources Corporation and Larry I. Kane dated as of April 20, 1994.
Incorporated herein by reference to exhibit 10.4 to the Company's
Registration Form S-1, as amended, Registration No. 33-76584.
10.4 Executive Employment Agreement between Alternative Resources
Corporation and Silvia U. Masini dated April 18, 1994. Incorporated
herein by reference to exhibit 10.7 to the Company's form 10-K for
the period ended December 31, 1994. (File No. 0-23940)
<PAGE>
10.5 Executive Employment Agreement between Alternative Resources
Corporation and Robert V. Carlson dated July 21, 1995. Incorporated
herein by reference to exhibit 10.8 to the Company's form 10-K for the
period ended December 31, 1995. (File No. 0-23940)
10.6 Executive Employment Agreement between Alternative Resources
Corporation and Bradley K. Lamers dated July 21, 1995. Incorporated
herein by reference to exhibit 10.9 to the Company's form 10-K for
the period ended December 31, 1995. (File No. 0-23940)
10.7 Senior Management Agreement dated September 30, 1991 between
Alternative Resources Corporation and Bruce R. Smith, as amended.
Incorporated herein by reference to exhibit 10.10 to the Company's
Registration Statement on Form S-1, as amended, Registration
No. 33-76584.
10.8 Form of Indemnity Agreement between Alternative Resources Corporation
and its directors and officers. Incorporated herein by reference to
exhibit 10.11 to the Company's Registration Form S-1, as amended,
Registration No. 33-76584.
10.9 Alternative Resources Corporation Employee Stock Purchase Plan.
Incorporated herein by reference to the exhibit 10.12 to the Company's
Registration Statement on Form S-8, Registration No. 33-88918.
10.10 Senior Management Agreement made as of September 30, 1991 between
Alternative Resources Corporation and Silvia U. Masini. Incorporated
herein by reference to the exhibit 10.15 to the Company's Annual
Report on form 10-K for the year ended December 31, 1994.
(File No. 0-23940).
13 Certain portions of the 1996 Annual Report to Stockholders
21 Subsidiaries of Alternative Resources Corporation
23 Consent of KPMG Peat Marwick LLP
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
There were no reports on Form 8-K filed for the three months ended
December 31, 1996.
(c) EXHIBITS
The exhibits filed as part of this Annual Report on Form 10-K are as
specified in Item 14(a)(3) herein.
(d) FINANCIAL STATEMENT SCHEDULES
The financial statement schedule filed as part of this Annual Report
on Form 10-K is as specified in item 14(a)(2) herein.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on March 28, 1997.
ALTERNATIVE RESOURCES CORPORATION
By /s/ Larry I. Kane
--------------------
Larry I. Kane, Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 28, 1997:
Signature Title
--------- ------
/s/ Larry I. Kane Chairman of the Board and Chief
- -------------------------
Larry I. Kane Executive Officer (Principle Executive Officer)
/s/ Richard Williams President, Chief Operating Officer and Director
- -------------------------
Richard Williams
Executive Vice President and Director
- -------------------------
Robert V. Carlson
/s/ Bradley K. Lamers Vice President, Chief Financial
- -------------------------
Bradley K. Lamers Officer, Secretary and Treasurer (Principal
Financial Officer and Principal Accounting
Officer)
/s/ Michael E. Harris Director
- -------------------------
Michael E. Harris
/s/ Bruce R. Smith Director
- -------------------------
Bruce R. Smith
/s/ Raymond R. Hipp Director
- -------------------------
Raymond R. Hipp
Director
- -------------------------
JoAnne Brandes
/s/ Don Rully Director
- -------------------------
Don Rully
<PAGE>
ALTERNATIVE RESOURCES CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
Additions
-------------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Accounts Deductions Period
- ----------- ---------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
1996
Allowance for doubtful
accounts $579 $278 -- $329 $528
1995
Allowance for doubtful
accounts 176 420 -- 17 579
1994
Allowance for doubtful
accounts 95 124 -- 42 176
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Alternative Resources Corporation
Under date of January 21, 1997, we reported on the consolidated balance
sheets of Alternative Resources Corporation and subsidiaries as of December
31, 1996 and 1995, and the related consolidated statements of operations,
changes in stockholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1996, as contained in the 1996 annual
report to stockholders. These consolidated financial statements and our
report thereon are incorporated by reference in the annual report on Form
10-K for the year ended December 31, 1996. In connection with our audits to
the aforementioned consolidated financial statements, we also audited the
related consolidated financial statement schedule. The consolidated financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on the consolidated financial
statement schedule based on our audits.
In our opinion, such consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly in all material respects the information set
forth therein.
KPMG PEAT MARWICK LLP
Chicago, Illinois
January 21, 1997
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
- ------- ----------- --------
3.2 Amended and Restated By-Laws
13 Certain portions of 1996 Annual Report to Stockholders
21 Subsidiaries of Alternative Resources Corporation
23 Consent of KPMG Peat Marwick LLP
27 Financial Data Schedule
<PAGE>
AMENDED AND RESTATED BY-LAWS
OF
ALTERNATIVE RESOURCES CORPORATION
(A DELAWARE CORPORATION)
EFFECTIVE NOVEMBER 21, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1 - CERTIFICATE OF INCORPORATION
Section 1.1. Contents. . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Certificate in Effect . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 - MEETINGS OF STOCKHOLDERS
Section 2.1. Place . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.2. Annual Meeting. . . . . . . . . . . . . . . . . . . . . . 1
Section 2.3. Special Meetings. . . . . . . . . . . . . . . . . . . . . 1
Section 2.4. Notice of Meetings. . . . . . . . . . . . . . . . . . . . 2
Section 2.5. Affidavit of Notice . . . . . . . . . . . . . . . . . . . 2
Section 2.6. Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.7. Voting Requirements . . . . . . . . . . . . . . . . . . . 2
Section 2.8. Proxies and Voting. . . . . . . . . . . . . . . . . . . . 2
Section 2.9. Director Nominations. . . . . . . . . . . . . . . . . . . 3
Section 2.10. New Business . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.11. Action Without Meeting . . . . . . . . . . . . . . . . . 4
Section 2.12. Stockholder List . . . . . . . . . . . . . . . . . . . . 4
Section 2.13. Record Date. . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 3 - DIRECTORS
Section 3.1. Duties. . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.2. Number; Election and Term of Office . . . . . . . . . . . 5
Section 3.3. Compensation. . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.4. Reliance on Books . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 4 - MEETINGS OF THE BOARD OF DIRECTORS
Section 4.1. Place . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4.2. Annual Meeting. . . . . . . . . . . . . . . . . . . . . . 6
Section 4.3. Regular Meetings. . . . . . . . . . . . . . . . . . . . . 6
Section 4.4. Special Meetings. . . . . . . . . . . . . . . . . . . . . 6
Section 4.5. Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4.6. Action Without Meeting. . . . . . . . . . . . . . . . . . 7
Section 4.7. Telephone Meetings. . . . . . . . . . . . . . . . . . . . 7
Section 4.8. Interested Directors. . . . . . . . . . . . . . . . . . . 7
-i-
<PAGE>
ARTICLE 5 - COMMITTEES OF DIRECTORS
Section 5.1. Designation . . . . . . . . . . . . . . . . . . . . . . . 8
Section 5.2. Records of Meetings . . . . . . . . . . . . . . . . . . . 9
ARTICLE 6 - NOTICES
Section 6.1. Method of Giving Notice . . . . . . . . . . . . . . . . . 9
Section 6.2. Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 7 - OFFICERS
Section 7.1. In General. . . . . . . . . . . . . . . . . . . . . . . . 9
Section 7.2. Election of Chairman of the Board, President, Secretary
and Treasurer . . . . . . . . . . . . . . . . . . . . . . 10
Section 7.3. Election of Other Officers. . . . . . . . . . . . . . . . 10
Section 7.4. Salaries. . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 7.5. Term of Office. . . . . . . . . . . . . . . . . . . . . . 10
Section 7.6. Duties of Chairman of the Board . . . . . . . . . . . . . 10
Section 7.7. Duties of President . . . . . . . . . . . . . . . . . . . 10
Section 7.8. Duties of Vice President. . . . . . . . . . . . . . . . . 10
Section 7.9. Duties of Secretary . . . . . . . . . . . . . . . . . . . 10
Section 7.10. Duties of Assistant Secretary. . . . . . . . . . . . . . 11
Section 7.11. Duties of Treasurer. . . . . . . . . . . . . . . . . . . 11
Section 7.12. Duties of Assistant Treasurer. . . . . . . . . . . . . . 11
ARTICLE 8 - RESIGNATIONS, REMOVALS AND VACANCIES
Section 8.1. Directors . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 8.2. Officers. . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 9 - CERTIFICATE OF STOCK
Section 9.1. Issuance of Stock . . . . . . . . . . . . . . . . . . . . 13
Section 9.2. Right to Certificate; Form. . . . . . . . . . . . . . . . 13
Section 9.3. Facsimile Signature . . . . . . . . . . . . . . . . . . . 13
Section 9.4. Lost Certificates . . . . . . . . . . . . . . . . . . . . 14
Section 9.5. Transfer of Stock . . . . . . . . . . . . . . . . . . . . 14
Section 9.6. Registered Stockholders . . . . . . . . . . . . . . . . . 14
ARTICLE 10 - INDEMNIFICATION
Section 10.1. Third Party Actions. . . . . . . . . . . . . . . . . . . 14
Section 10.2. Derivative Actions . . . . . . . . . . . . . . . . . . . 15
Section 10.3. Expenses . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 10.4. Authorization. . . . . . . . . . . . . . . . . . . . . . 15
Section 10.5. Advance Payment of Expenses. . . . . . . . . . . . . . . 15
Section 10.6. Non-Exclusiveness. . . . . . . . . . . . . . . . . . . . 16
Section 10.7. Insurance. . . . . . . . . . . . . . . . . . . . . . . . 16
Section 10.8. Constituent Corporations . . . . . . . . . . . . . . . . 16
Section 10.9. Additional Indemnification . . . . . . . . . . . . . . . 16
-ii-
<PAGE>
ARTICLE 11 - DIVIDENDS AND RESERVES
Section 11.1. Dividends. . . . . . . . . . . . . . . . . . . . . . . . 17
Section 11.2. Reserves . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 12 - EXECUTION OF PAPERS
ARTICLE 13 - FISCAL YEAR
ARTICLE 14 - DEPOSITORIES
ARTICLE 15 - SEAL
ARTICLE 16 - OFFICES
Section 16.1. Registered Office. . . . . . . . . . . . . . . . . . . . 18
Section 16.2. Principal Office . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 17 - AMENDMENTS
-iii-
<PAGE>
ALTERNATIVE RESOURCES CORPORATION
AMENDED AND RESTATED BY-LAWS
ARTICLE 1
CERTIFICATE OF INCORPORATION
SECTION 1.1. CONTENTS. These By-laws, the powers of the
corporation and of its Directors and stockholders, and all matters concerning
the conduct and regulation of the business of the corporation shall be
subject to such provisions in regard thereto, if any, as are set forth in
said Certificate of Incorporation. The Certificate of Incorporation is
hereby made a part of these By-laws.
SECTION 1.2. CERTIFICATE IN EFFECT. All references in these
By-laws to the Certificate of Incorporation shall be construed to mean the
Certificate of Incorporation of the corporation as from time to time amended
and restated, including (unless the context shall otherwise require) all
certificates and any agreement of consolidation or merger filed pursuant to
the Delaware General Corporation Law, as amended.
ARTICLE 2
MEETINGS OF STOCKHOLDERS
SECTION 2.1. PLACE. All meetings of the stockholders may be held
at such place either within or without the State of Delaware as shall be
designated from time to time by the Board of Directors, the Chairman of the
Board or the President and stated in the notice of the meeting or in any duly
executed waiver of notice thereof.
SECTION 2.2. ANNUAL MEETING. The annual meeting of the
stockholders, commencing in 1995, shall be held each year within 180 days
after the close of the immediately preceding fiscal year of the corporation,
at such date and time as shall be designated from time to time by the Board
of Directors, and stated in the notice or waiver of notice of the meeting.
SECTION 2.3. SPECIAL MEETINGS. Special meetings of the
stockholders, for any purpose or purposes, unless otherwise prescribed by the
General Corporation Law of the State of Delaware, the Certificate of
Incorporation or these By-laws, may only be called by the President, the
Chairman of the Board or a majority of the Board of Directors then in office.
Such request shall state the purpose or purposes of the proposed meeting.
<PAGE>
SECTION 2.4. NOTICE OF MEETINGS. A written notice of all meetings
of stockholders stating the place, date and hour of the meeting and, in the
case of a special meeting, the purpose or purposes for which the special
meeting is called, shall be given to each stockholder entitled to vote at
such meeting. Except as otherwise provided by law, such notice shall be given
not less than ten nor more than sixty (60) days before the date of the
meeting. If mailed, notice is given when deposited in the United States
mail, postage prepaid, directed to the stockholder at his address as it
appears on the records of the corporation. Business transacted at any
special meeting of stockholders shall be limited to the purposes stated in
the notice.
SECTION 2.5. AFFIDAVIT OF NOTICE. An affidavit of the Secretary
or an Assistant Secretary or the transfer agent of the corporation that
notice of a stockholders meeting has been given shall, in the absence of
fraud, be prima facie evidence of the facts stated herein.
SECTION 2.6. QUORUM. The holders of a majority of the stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise provided by
statute or by the Certificate of Incorporation or by these By-laws. If,
however, such quorum shall not be present or represented by proxy at any
meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, the Chairman of the Board or the
President, shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, except as hereinafter
provided, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the original meeting. If the
adjournment is for more than thirty (30) days, or if after the adjournment a
new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
SECTION 2.7. VOTING REQUIREMENTS. When a quorum is present at any
meeting, the vote of the holders of a majority of the stock having voting
power present in person or represented by proxy shall decide any question
brought before such meeting, unless the question is one upon which by express
provision of any applicable statute, the Certificate of Incorporation or
these By-laws, a different vote is required, in which case such express
provision shall govern and control the decision of such question.
SECTION 2.8. PROXIES AND VOTING. Unless otherwise provided by the
General Corporation Law of the State of Delaware, the Certificate of
Incorporation or these By-laws, each stockholder shall at every meeting of
the stockholders be entitled to one vote in person or by proxy for each share
of the capital stock having voting power held by such stockholder, but no
proxy shall be voted on after three years from its date, unless the proxy
provides for a longer period. Persons holding stock in a fiduciary capacity
shall be entitled to vote the shares so held, and persons whose stock is
pledged shall be entitled to vote the pledged shares, unless in the transfer
by the pledgor on the books of the corporation he shall have expressly
empowered the pledgee to vote said shares, in which case only the pledgee, or
his proxy, may represent and vote such shares. Shares of the capital stock
of the corporation owned by the corporation shall not be voted, directly or
indirectly.
-2-
<PAGE>
If shares or other securities having voting power stand of record
in the names of two or more persons, whether fiduciaries, members of a
partnership, joint tenants, tenants in common, tenants by the entirety or
otherwise, or if two or more persons have the same fiduciary relationship
respecting the same shares, unless the Secretary of the corporation is given
written notice to the contrary and is furnished with a copy of the instrument
or order appointing them or creating the relationship wherein it is so
provided, their acts with respect to voting shall have the following effect;
(a) If only one votes, his act binds all;
(b) If more than one vote, the act of the majority so voting
binds all;
(c) If more than one vote, but the vote is evenly split on any
particular matter, each faction may vote the securities in question
proportionally, or any person voting the shares, or a beneficiary, if
any, may apply to the Court of Chancery or such other court as may
have jurisdiction to appoint an additional person to act with the
persons so voting the shares, which shall then be voted as determined
by a majority of such persons and the person appointed by the Court.
If the instrument so filed shows that any such tenancy is held in
unequal interests, a majority or even split for the purpose of this
subsection shall be a majority or even split in interest.
SECTION 2.9. DIRECTOR NOMINATIONS. Nominations for the election
of Directors may be made by the Board of Directors or by any stockholder
entitled to vote for the election of Directors. Nominations by stockholders
shall be made in writing and delivered or mailed by first class United States
mail, postage prepaid, to the Secretary of the corporation not less than
sixty (60) nor more than ninety (90) days prior to the date of the annual
meeting or if the corporation mails its notice and proxy to the stockholders
less than sixty (60) days prior to the annual meeting, within ten (10) days
after the notice and proxy is mailed. Each stockholder nomination shall set
forth (i) the name, age, business address and, if known, residence address of
each nominee proposed in such nomination, (ii) the principal occupation or
employment of each such nominee, and (iii) the number of shares of capital
stock of the corporation which are beneficially owned by each nominee; and in
addition, evidence of the nominee's willingness to serve as a Director shall
also be provided. Upon delivery, such nominations shall be posted in a
conspicuous place in the principal office and other offices, if any, of the
corporation. Ballots bearing the names of all persons nominated by the
stockholders shall be provided for use at the annual meeting.
The chairman of the meeting of stockholders at which any election
of Directors is to occur may, if the facts warrant, determine and declare to
the meeting that a nomination was not made in accordance with the foregoing
procedure, and if he should so determine, he shall so declare to the meeting
and the defective nomination shall be disregarded.
-3-
<PAGE>
SECTION 2.10. NEW BUSINESS. Any new business to be taken up at
any meeting of the stockholders shall be stated in writing and delivered or
mailed by first class United States mail, postage prepaid, to the Secretary
of the corporation not less than sixty (60) nor more than ninety (90) days
before the date of the annual meeting, or if the corporation mails its notice
and proxy to the stockholders less than sixty (60) days prior to the annual
meeting, within ten (10) days after the notice and proxy is mailed (the "New
Business Due Date"), and all business so stated, proposed, and delivered or
mailed shall be considered at the annual meeting; but no other proposal shall
be acted upon at the annual meeting. This provision shall not prevent the
consideration and approval or disapproval at the annual meeting of reports of
officers, Directors, and committees; but in connection with such reports, no
new business shall be acted upon at such annual meeting unless stated and
filed as herein provided. If the chairman of the annual meeting determines
that business was not properly brought before the annual meeting in
accordance with the foregoing procedures, the chairman shall declare to the
meeting that the business was not properly brought before the meeting and
such business shall not be transacted.
SECTION 2.11. ACTION WITHOUT MEETING. No action required or
permitted to be taken at any annual or special meeting of stockholders of the
corporation may be taken by written consent without a meeting of such
stockholders.
SECTION 2.12. STOCKHOLDER LIST. The officer who has charge of the
stock ledger of the corporation shall prepare and make, at least ten (10)
days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior
to the meeting either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting, or, if not
so specified, at the place where the meeting is to be held. The list shall
also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
The original or duplicate stock ledger shall be the only evidence as to who
are the stockholders entitled to examine such list, the stock ledger or the
books of the corporation, or to vote in person or by proxy at any meeting of
stockholders.
SECTION 2.13. RECORD DATE. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights or entitled to
exercise any rights in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the Board of Directors may
fix, in advance, a record date, which shall not be more than sixty (60) nor
less than ten (10) days before the date of such meeting, nor more than sixty
(60) days prior to any other action. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
-4-
<PAGE>
If no record date is fixed by the Board of Directors:
(a) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held.
(b) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
ARTICLE 3
DIRECTORS
SECTION 3.1. DUTIES. The business and affairs of the corporation
shall be managed by or under the direction of its Board of Directors which
may exercise all such powers of the corporation and do all such lawful acts
and things as are not by the General Corporation Law of the State of
Delaware, nor by the Certificate of Incorporation nor by these By-laws
directed or required to be exercised or done by the stockholders.
SECTION 3.2. NUMBER; ELECTION AND TERM OF OFFICE. The number of
Directors which shall constitute the whole Board of the corporation shall be
as determined from time to time exclusively by the Board of Directors and set
forth in a resolution of the Board of Directors. The Board of Directors
shall be divided into three classes as nearly equal in number as possible.
Subject to any limitation which may be contained within the Certificate of
Incorporation, the number of the Board of Directors may be increased at any
time by vote of a majority of the Directors then in office. The members of
each class shall be elected for a term of three years and each Director
elected shall hold office until his successor is elected and qualified or
until his earlier resignation or removal. One class shall be elected
annually beginning in 1995 and the terms of the Class I, Class II and Class
III Directors shall expire upon the election and qualification of successor
Directors at the annual meetings of stockholders held in 1995, 1996 and 1997,
respectively. Directors need not be stockholders.
SECTION 3.3. COMPENSATION. Unless otherwise restricted by the
Certificate of Incorporation or these By-laws, the Board of Directors shall
have the authority to fix the compensation of Directors. The Directors may
be paid their expenses, if any, of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated salary as Directors. No such payment shall
preclude any Director from serving the corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees
may be allowed like compensation for attending committee meetings.
-5-
<PAGE>
SECTION 3.4. RELIANCE ON BOOKS. A member of the Board of
Directors or a member of any committee designated by the Board of Directors
shall, in the performance of his duties, be fully protected in relying in
good faith upon the books of account or reports made to the corporation by
any of its officers, or by an independent certified public accountant, or by
an appraiser selected with reasonable care by the Board of Directors or by
any committee, or in relying in good faith upon other records of the
corporation.
ARTICLE 4
MEETINGS OF THE BOARD OF DIRECTORS
SECTION 4.1. PLACE. The Board of Directors of the corporation may
hold meetings, both regular and special, at such place or places within or
without the State of Delaware as the Board of Directors may from time to time
determine, or as may be specified or fixed in the respective notices or
waivers of notice of such meeting.
SECTION 4.2. ANNUAL MEETING. The annual meeting of the Board of
Directors shall be held immediately following the annual meeting of
stockholders each year or any special meeting held in lieu thereof, or at
such other time as the Board of Directors may from time to time determine or
as may be specified or fixed in the notices or waivers of notice of such
meeting.
SECTION 4.3. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held without notice at such time and at such place as shall
from time to time be determined by the Board.
SECTION 4.4. SPECIAL MEETINGS. Special meetings of the Board may
be called by the Chairman of the Board or the President on two (2) days'
notice to each Director either personally, by mail, by telegram or by
facsimile. Special meetings shall be called by the Chairman of the Board,
the President or the Secretary in like manner and on like notice on the
written request of any two Directors unless the Board consists of only one
Director, in which case special meetings shall be called by the Chairman of
the Board, the President or the Secretary in like manner and on like notice
on the written request of the sole Director.
SECTION 4.5. QUORUM. At all meetings of the Board, a majority of
the Directors then in office shall constitute a quorum for the transaction of
business and the act of a majority of the Directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the Certificate of
Incorporation or by these By-laws. Common or interested Directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors. If a quorum shall not be present at any meeting of the Board of
Directors, the Directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
-6-
<PAGE>
SECTION 4.6. ACTION WITHOUT MEETINg. Unless otherwise restricted
by the Certificate of Incorporation or these By-laws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all members of the Board
or committee, as the case may be, consent thereto in writing, and the writing
or writings are filed with the minutes of proceedings of the Board or
committee.
SECTION 4.7. TELEPHONE MEETINGS. Unless otherwise restricted by
the Certificate of Incorporation or these By-laws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
SECTION 4.8. INTERESTED DIRECTORS.
(a) No contract or transaction between a corporation and one or
more of its Directors or officers, or between a corporation and any other
corporation, partnership, association, or other organization in which one or
more of its Directors or officers are Directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or
solely because the Director or officer is present at or participates in the
meeting of the Board or committee which authorizes the contract or
transaction, or solely because his or their votes are counted for such
purpose, if:
(i) the material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the Board
of Directors or the committee, and the Board or committee in good
faith authorizes the contract or transaction by the affirmative vote
of a majority of the disinterested Directors, even though the
disinterested Directors be less than a quorum; or
(ii) the material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction
is specifically approved in good faith by vote of the stockholders; or
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(iii) the contract or transaction is fair as to the corporation
as of the time it is authorized, approved or ratified by the Board of
Directors, a committee or the stockholders.
(b) Common or interested Directors may be counted in determining
the presence of a quorum at a meeting of the Board of Directors or of a
committee which authorizes the contract or transaction.
ARTICLE 5
COMMITTEES OF DIRECTORS
SECTION 5.1. DESIGNATION.
(a) The Board of Directors may by resolution passed by a majority
of the whole Board, designate one or more committees, each committee to
consist of one or more of the Directors of the corporation. The Board may
designate one or more Directors as alternate members of any committee, who
may replace any absent or disqualified member at any meeting of the committee.
(b) In the absence or disqualification of a member of a committee,
the member or members thereof present at any meeting and not disqualified
from voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member.
(c) Any such committee, to the extent provided in the resolution
of the Board of Directors designating the committee, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation, and may authorize
the seal of the corporation to be affixed to all papers which may require it;
but no such committee shall have the power or authority in reference to
amending the Certificate of Incorporation, (except that a committee may, to
the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the Board of Directors, fix the
designations and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
corporation or the conversion into, or the exchange of such shares for,
shares of any other class or the classes or any other series of the same or
any other class or classes of stock of the corporation or fix the number of
shares of any series of stock or authorize the increase or decrease of the
shares of any series), adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, recommending to
the stockholders a dissolution of the corporation or a revocation of a
dissolution, or amending the By-laws of the corporation; and,
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unless the resolution, these By-laws or the Certificate of Incorporation
expressly so provide, no such committee shall have the power or authority to
declare a dividend, to authorize the issuance of stock or to adopt a
certificate of ownership and merger. Such committee or committees shall have
such name or names as may be determined from time to time by resolution
adopted by the Board of Directors.
SECTION 5.2. RECORDS OF MEETINGS. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Directors
when required.
ARTICLE 6
NOTICES
SECTION 6.1. METHOD OF GIVING NOTICE. Whenever, under any
provision of the General Corporation Law of the State of Delaware or of the
Certificate of Incorporation or of these By-laws, notice is required to be
given to any Director or stockholder, such notice shall be given in writing
by the Secretary or the person or persons calling the meeting by leaving such
notice with such Director or stockholder at his residence or usual place of
business or by mailing it addressed to such Director or stockholder, at his
address as it appears on the records of the corporation, with postage thereon
prepaid, and such notice shall be deemed to be given at the time when the
same shall be personally delivered or deposited in the United States mail.
Notice to Directors may also be given by telegram or facsimile.
SECTION 6.2. WAIVER. Whenever any notice is required to be given
under any provision of the General Corporation Law of the State of Delaware
or of the Certificate of Incorporation or of these By-laws, a waiver thereof
in writing, signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of
notice of such meeting, except when the person attends the meeting for the
express purpose of objecting at the beginning of the meeting to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, Directors or members of a
committee of Directors need be specified in any written waiver of notice.
ARTICLE 7
OFFICERS
SECTION 7.1. IN GENERAL. The officers of the corporation shall be
chosen by the Board of Directors and shall include a Chairman of the Board, a
President, a Secretary and a Treasurer. The Board of Directors may also
choose one or more Vice Presidents, Assistant Secretaries and Assistant
Treasurers. Any number of offices may be held by the same person, unless the
Certificate of Incorporation or these By-laws otherwise provide.
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SECTION 7.2. ELECTION OF CHAIRMAN OF THE BOARD, PRESIDENT,
SECRETARY AND TREASURER. The Board of Directors at its first meeting after
each annual meeting of stockholders shall choose a Chairman of the Board, a
President, a Secretary and a Treasurer. In addition, the Board shall
designate the Chairman or the President as the Chief Executive Officer of the
Corporation, who shall have executive authority to see that all orders and
resolutions of the Board of Directors are carried into effect, and, subject
to the control vested in the Board of Directors by statute, by the
Certificate of Incorporation or by these By-Laws, shall administer and be
responsible for the overall management of the business and affairs of the
Corporation.
SECTION 7.3. ELECTION OF OTHER OFFICERS. The Board of Directors
may appoint such other officers and agents as it shall deem appropriate who
shall hold their offices for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time by the Board.
SECTION 7.4. SALARIES. The salaries of all officers and agents of
the corporation may be fixed by the Board of Directors.
SECTION 7.5. TERM OF OFFICE. The officers of the corporation
shall hold office until their successors are elected and qualified or until
their earlier resignation or removal. Any officer elected or appointed by
the Board of Directors may be removed at any time in the manner specified in
Section 8.2.
SECTION 7.6. DUTIES OF CHAIRMAN OF THE BOARD. The Chairman of the
Board shall preside at all meetings of the stockholders and of the Board of
Directors, shall advise and counsel with the President shall assume such
other duties as from time to time may be assigned to him by the Board of
Directors.
SECTION 7.7. DUTIES OF PRESIDENT. The President shall perform all
duties incident to the office of the President and such other duties as may
from time to time be assigned by the Board of Directors or the Chairman of
the Board. In the absence or disability of the Chairman of the Board, he
shall perform the duties of the Chairman of the Board.
SECTION 7.8. DUTIES OF VICE PRESIDENT. In the absence of the
Chairman of the Board, the President or in the event of their inability or
refusal to act, the Vice President (or in the event there be more than one
Vice President, the Vice Presidents in the order designated by the Directors,
or in the absence of any designation, then in the order of their election)
shall perform the duties of the President, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the President. The
Vice President shall perform such other duties and have such other powers as
the Board of Directors, the Chairman of the Board or the President may from
time to time prescribe.
SECTION 7.9. DUTIES OF SECRETARY. The Secretary shall attend all
meetings of the Board of Directors and all meetings of the stockholders and
record all the proceedings of the meetings of the corporation and of the
Board of Directors in a book to be kept for that purpose and shall perform
like duties for the standing committees when required. He shall give, or
cause to be given, notice of all meetings of the stockholders and special
meetings of the Board of Directors, except as otherwise provided in these
By-laws, and shall perform such
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other duties as may be prescribed by the Board of Directors, the Chairman of
the Board or the President, under whose supervision he shall be. He shall
have charge of the stock ledger (which may, however, be kept by any transfer
agent or agents of the corporation under his direction) and of the corporate
seal of the corporation.
SECTION 7.10. DUTIES OF ASSISTANT SECRETARY. The Assistant
Secretary, or if there be more than one, the Assistant Secretaries in the
order determined by the Board of Directors (or if there be no such
determination, then in the order of their election) shall, in the absence of
the Secretary or in the event of his inability or refusal to act, perform the
duties and exercise the powers of the Secretary and shall perform such other
duties and have such other powers as the Board of Directors or the Chairman
of the Board may from time to time prescribe.
SECTION 7.11. DUTIES OF TREASURER. The Treasurer shall have the
custody of the corporate funds and securities and shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
corporation and shall deposit all moneys and other valuable effects in the
name and to the credit of the corporation in such depositories as may be
designated by the Board of Directors. The Treasurer shall disburse or
supervise the disbursement of the funds of the corporation as may be ordered
by the Board of Directors, taking proper vouchers for such disbursements, and
shall render to the Board of Directors, at its regular meetings, or when the
Board of Directors so requires, an account of all of his transactions as
Treasurer and of the financial condition of the corporation. If required by
the Board of Directors, he shall give the corporation a bond in such sum and
with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of this office and for
the restoration to the corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control
belonging to the corporation.
SECTION 7.12. DUTIES OF ASSISTANT TREASURER. The Assistant
Treasurer, or if there shall be more than one, the Assistant Treasurers in
the order determined by the Board of Directors (or if there be no such
determination, then in the order of their election), shall, in the absence of
the Treasurer or in the event of his inability or refusal to act, perform the
duties and exercise the powers of the Treasurer and shall perform such other
duties and have such other powers as the Board of Directors or the Chairman
of the Board may from time to time prescribe.
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ARTICLE 8
RESIGNATIONS, REMOVALS AND VACANCIES
SECTION 8.1. DIRECTORS.
(a) RESIGNATIONS. Any Director may resign at any time by giving
written notice to the Board of Directors, the Chairman of the Board, the
President or the Secretary. Such resignation shall take effect at the time
specified therein; and unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
(b) REMOVALS. Subject to any provisions of the Certificate of
Incorporation, the holders of stock entitled to vote for the election of
Directors may, at any meeting called for that purpose, by the affirmative
vote of not less than two-thirds (66 2/3%) of the shares of such stock
outstanding and entitled to vote thereat, remove any Director or the entire
Board of Directors, but only for cause.
Whenever the holders of any class or series are entitled to elect
one or more Directors by the Certificate of Incorporation, this subsection
shall apply, in respect to the removal of a Director or Directors so elected,
to the vote of the holders of the outstanding shares of that class or series
and not to the vote of the outstanding shares as a whole.
(c) VACANCIES. Vacancies occurring in the office of Director and
newly created Directorships resulting from any increase in the authorized
number of Directors shall be filled by a majority of the Directors then in
office, though less than a quorum, and the Directors so chosen shall hold
office, subject to the By-laws, until the next election of the class for
which such Directors shall have been chosen, and until their successors are
duly elected and qualified or until their earlier resignation or removal.
Whenever the holders of any class or classes of stock or series thereof are
entitled to elect one or more Directors by the Certificate of Incorporation,
vacancies and newly created Directorships of such class or classes or series
may be filled by a majority of the Directors elected by such class or classes
or series thereof then in office, or by a sole remaining Director so elected.
If there are no Directors in office, then an election of Directors
may be held in the manner provided by statute.
Unless otherwise provided in the Certificate of Incorporation or
these By-laws, when one or more Directors shall resign from the Board,
effective at a future date, a majority of the Directors then in office,
including those who have so resigned, shall have power to fill such vacancy
or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each Director so chosen shall hold
office as provided in this section in the filling of other vacancies.
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SECTION 8.2. OFFICERS. Any officer may resign at any time by
giving written notice to the Board of Directors, the Chairman of the Board,
the President or the Secretary. Such resignation shall take effect at the
time specified therein; and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
The Board of Directors may, at any meeting called for that purpose, by vote
of a majority of their entire number, remove from office any officer of the
corporation or any member of a committee, with or without cause. Any vacancy
occurring in the office of Chairman of the Board, President, Secretary or
Treasurer shall be filled by the Board of Directors and the officers so
chosen shall hold office subject to the By-laws for the unexpired term in
respect of which the vacancy occurred and until their successors shall be
elected and qualify or until their earlier resignation or removal.
ARTICLE 9
CERTIFICATE OF STOCK
SECTION 9.1. ISSUANCE OF STOCK. The Directors may, at any time
and from time to time, if all of the shares of capital stock which the
corporation is authorized by its Certificate of Incorporation to issue have
not been issued, subscribed for, or otherwise committed to be issued, issue
or take subscriptions for additional shares of its capital stock up to the
amount authorized in its Certificate of Incorporation. Such stock shall be
issued and the consideration paid therefor in the manner prescribed by law.
Shares of stock with par value may be issued for such consideration, having a
value not less than par value thereof.
SECTION 9.2. RIGHT TO CERTIFICATE; FORM. Every holder of stock in
the corporation shall be entitled to have a certificate, signed by, or in the
name of the corporation by, the Chairman of the Board, the President or a
Vice President and the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary of the corporation, certifying the number of shares
owned by him in the corporation; provided that the Directors may provide by
one or more resolutions that some or all of any or all classes or series of
the corporation's stock shall be uncertificated shares. Certificates may be
issued for partly paid shares and in such case upon the face or back of the
certificates issued to represent any such partly paid shares, the total
amount of the consideration to be paid therefor, and the amount paid thereon,
shall be specified.
SECTION 9.3. FACSIMILE SIGNATURE. Any of or all the signatures on
the certificate may be facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the corporation with
the same effect as if he were such officer, transfer agent or registrar at
the date of issue.
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<PAGE>
SECTION 9.4. LOST CERTIFICATES. The Board of Directors may direct
a new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost, stolen or destroyed.
When authorizing such issue of a new certificate or certificates, the Board
of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to advertise the
same in such manner as it shall require and/or to give the corporation a bond
in such sum as it may direct as indemnity against any claim that may be made
against the corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
SECTION 9.5. TRANSFER OF STOCK. Upon surrender to the corporation
or the transfer agent of the corporation of a certificate for shares duly
endorsed or accompanied by proper evidence of succession, assignation or
authority to transfer, it shall be the duty of the corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
SECTION 9.6. REGISTERED STOCKHOLDERS. The corporation shall be
entitled to recognize the exclusive right of a person registered on its books
as the owner of shares to receive dividends, and to vote as such owner, and
to hold liable for calls and assessments a person registered on its books as
the owner of shares, and shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except
as otherwise provided by the General Corporation Law of the State of
Delaware.
ARTICLE 10
INDEMNIFICATION
SECTION 10.1. THIRD PARTY ACTIONS. The corporation shall
indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an
action by or in the right of the corporation) by reason of the fact that he
is or was a Director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a Director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him
in connection with such action, suit or proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon
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plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
SECTION 10.2. DERIVATIVE ACTIONS. The corporation shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he
is or was a Director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a Director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation and
except that no indemnification shall be made in respect of any claim, issue
or matter as to which such person shall have been adjudged to be liable to
the corporation unless and only to the extent that the Court of Chancery or
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses which the Court of Chancery or such other
court shall deem proper.
SECTION 10.3. EXPENSES. To the extent that a Director, officer,
employee or agent of the corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
Sections 10.1 and 10.2, or in defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith.
SECTION 10.4. AUTHORIZATION. Any indemnification under Sections
10.1 and 10.2 (unless ordered by a court) shall be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the Director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth
in Sections 10.1 and 10.2. Such determination shall be made by (a) the Board
of Directors by a majority vote of a quorum consisting of Directors who were
not parties to such action, suit or proceeding, or (b) if such a quorum is
not obtainable, or, even if obtainable, a quorum of disinterested Directors
so directs, by independent legal counsel in a written opinion, or (c) by the
stockholders.
SECTION 10.5. ADVANCE PAYMENT OF EXPENSES. Expenses (including
attorneys' fees) incurred by an officer or Director in defending any civil,
criminal, administrative or investigative action, suit or proceeding may be
paid by the corporation in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of such
officer or Director to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the corporation as authorized in
this Article 10. Such expenses (including attorneys' fees) incurred by other
employees and agents may be so paid upon such terms and conditions, if any,
as the Board of Directors deems appropriate.
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SECTION 10.6. NON-EXCLUSIVENESS. The indemnification and
advancement of expenses provided by this Article 10 shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any By-Law, agreement, vote of
stockholders or disinterested Directors or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such
office.
The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article 10 shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
Director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
SECTION 10.7. INSURANCE. The corporation shall have power to
purchase and maintain insurance on behalf of any person who is or was a
Director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a Director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under the provisions of this Article 10.
For purposes of this Article 10, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan;
and references to "serving at the request of the corporation" shall include
any quotes service as a Director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such Director,
officer, employee or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to
in this section.
SECTION 10.8. CONSTITUENT CORPORATIONS. The corporation shall
have power to indemnify any person who is or was a Director, officer,
employee or agent of a constituent corporation absorbed in a consolidation or
merger with this corporation or is or was serving at the request of such
constituent corporation as a Director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, in the
same manner as hereinabove provided if such constituent corporation's
separate existence had continued, would have had power and authority to
indemnify its Directors, officers, and employees or agents.
SECTION 10.9. ADDITIONAL INDEMNIFICATION. In addition to the
foregoing provisions of this Article 10, the corporation shall have the
power, to the full extent provided by law, to indemnify any person for any
act or
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omission of such person against all loss, cost, damage and expense (including
attorneys' fees) if such person is determined (in the manner prescribed in
Section 10.4 hereof) to have acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interest of the
corporation.
ARTICLE 11
DIVIDENDS AND RESERVES
SECTION 11.1. DIVIDENDS. The Board of Directors of the
corporation, subject to any restrictions contained in the Certificate of
Incorporation and other lawful commitments of the corporation, may declare
and pay dividends upon the shares of its capital stock either out of the
surplus of the corporation, as defined in and computed in accordance with the
General Corporation Law of the State of Delaware, or in case there shall be
no such surplus, out of the net profits of the corporation for the fiscal
year in which the dividend is declared and/or the preceding fiscal year. If
the capital of the corporation, computed in accordance with the General
Corporation Law of the State of Delaware, shall have been diminished by
depreciation in the value of its property, or by losses, or otherwise, to an
amount less than the aggregate amount of the capital represented by the
issued and outstanding stock of all classes having a preference upon the
distribution of assets, the Board of Directors of the corporation shall not
declare and pay out of such net profits any dividends upon any shares of any
classes of its capital stock until the deficiency in the amount of capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets shall have been repaired.
SECTION 11.2. RESERVES. The Board of Directors of the corporation
may set apart, out of any of the funds of the corporation available for
dividends, a reserve or reserves for any proper purpose and may abolish any
such reserve.
ARTICLE 12
EXECUTION OF PAPERS
Except as otherwise provided in these By-laws or as the Board of
Directors may generally or in particular cases otherwise determine, all
deeds, leases, transfers, contracts, bonds, notes, checks, drafts and other
instruments authorized to be executed on behalf of the corporation shall be
executed by any officer, agent or agents as may be authorized by the Board of
Directors from time to time.
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ARTICLE 13
FISCAL YEAR
The fiscal year of the corporation shall end on the 31st day of
December of each year.
ARTICLE 14
DEPOSITORIES
The Board of Directors or an officer designated by the Board shall
appoint banks, trust companies, or other depositories in which shall be
deposited from time to time the money or securities of the corporation.
ARTICLE 15
SEAL
The Corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the word "Delaware." The seal
may be used by causing it or a facsimile thereof to be impressed or affixed
or reproduced or otherwise.
ARTICLE 16
OFFICES
SECTION 16.1. REGISTERED OFFICE. The registered office in the
State of Delaware shall be located at 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of the corporation's registered
agent at such address shall be The Corporation Trust Corporation.
SECTION 16.2. PRINCIPAL OFFICE. The corporation may also have
offices within and without the State of Delaware as the Board of Directors
may from time to time determine or the business of the corporation may
require.
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ARTICLE 17
AMENDMENTS
These By-laws may be amended or repealed by the vote of a majority
of the directors present at any meeting at which a quorum is present or by
the vote of the holders of two-thirds of the total outstanding voting stock
of the corporation, present in person or represented by proxy, at any meeting
of stockholders at which a quorum is present.
<PAGE>
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA) 1996 1995 1994 1993 1992
- --------------------------------------------------- ------- ------- -------- ------- -------
Revenue $196,728 $154,173 $94,478 $53,061 $27,948
Cost of services 124,268 97,401 58,062 32,047 16,320
- --------------------------------------------------------------------------------------------------------
Gross profit 72,460 56,772 36,416 21,014 11,628
Selling, general and administrative expenses 51,538 39,847 26,335 15,471 9,680
- --------------------------------------------------------------------------------------------------------
Income from operations 20,922 16,925 10,081 5,543 1,948
Other/income (expense), net 1,107 713 303 (80) (62)
- --------------------------------------------------------------------------------------------------------
Income before income taxes & extraordinary item 22,029 17,638 10,384 5,463 1,886
Income taxes 8,811 7,280 4,194 2,237 765
- --------------------------------------------------------------------------------------------------------
Income before extraordinary item 13,218 10,358 6,190 3,226 1,121
Extraordinary item-utilization of net operating
loss carryforward -- -- -- -- 480
- --------------------------------------------------------------------------------------------------------
Net income $13,218 $10,358 $ 6,190 $ 3,226 $ 1,601
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Net earnings per share $0.83 $0.65 $0.41 $0.24 $0.11
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Weighted average common and common
equivalent shares outstanding 15,990 15,992 14,958 13,620 13,352
- --------------------------------------------------------------------------------------------------------
SELECTED OPERATING DATA:
Number of branch offices open at period end 51 42 34 25 20
BALANCE SHEET DATA:
Working capital $51,812 $33,994 $19,207 $ 3,215 $ 1,862
Total assets 64,403 47,811 26,581 9,011 4,440
Redeemable Preferred Stock -- -- -- -- 2,239
Stockholders' equity (deficit) 55,667 38,461 19,972 3,601 (181)
- --------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Alternative Resources Corporation-Registered Trademark- (ARC) has experienced
substantial growth in revenue and earnings driven by industry trends toward
component outsourcing of Information Services operations, increased
penetration of existing clients, expansion into new markets, increased
productivity of existing branch offices, the opening of new branch offices
and the introduction of new services. Essentially all of ARC's revenue is
generated from technical resource services that offer the benefits of
outsourcing while allowing Information Services operations managers to retain
strategic control over their operations. ARC provides its clients with a
variety of service offerings to meet their needs. On shorter term projects,
clients have maximum flexibility to start and stop projects at any time. On
longer term projects, where employee continuity is required, ARC provides a
comprehensive benefits package to the technical employee without increasing
the client's hourly bill rate. Historically, while the gross margins on
longer term projects have been lower than those on shorter term projects
because of the cost of providing additional benefits, longer term projects
carry lower administrative costs because of the long term commitments made by
the client.
The Company's Smartsourcing-Registered Trademark- Solutions are becoming a
more significant part of ARC's business. Under a Smartsourcing-Registered
Trademark-arrangement, wherein ARC may take over an entire or component part
of a client's IT operations, the Company may provide for flexibility in
invoicing arrangements other than more traditional hourly billing. Such
arrangements may include fixed price or per unit billing, as well as
commitments by ARC to meet specific service levels. Management believes that
Smartsourcing-Registered Trademark-revenue is an important measure of
clients' confidence and willingness to engage ARC to provide more
comprehensive IT staffing solutions.
One of the primary factors impacting ARC's gross margin is the volume of
business with its major clients. ARC offers its largest clients volume
discounts from list prices in order to encourage increased and continued
usage of ARC's services. ARC believes these discounts have contributed
significantly to its revenue growth.
During 1996, ARC continued to invest in initiatives to drive future growth.
As such, selling, general and administrative expenses as a percentage of
revenue increased primarily due to start up costs associated with the Middle
Market and Smartsourcing-Registered Trademark- Solutions initiatives.
RESULTS OF OPERATIONS
The following table sets forth the percentage of revenue represented by
certain line items of ARC's consolidated statements of operations for the
periods indicated:
YEAR ENDED DECEMBER 31, 1996 1995 1994
- -------------------------------------------------------------
REVENUE 100.0% 100.0% 100.0%
COST OF SERVICES 63.2 63.2 61.4
- -------------------------------------------------------------
GROSS PROFIT 36.8 36.8 38.6
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 26.2 25.8 27.9
- -------------------------------------------------------------
INCOME FROM OPERATIONS 10.6 11.0 10.7
OTHER INCOME, NET 0.6 0.4 0.3
- -------------------------------------------------------------
INCOME BEFORE INCOME TAXES 11.2 11.4 11.0
INCOME TAXES 4.5 4.7 4.4
- -------------------------------------------------------------
NET INCOME 6.7% 6.7% 6.6%
- -------------------------------------------------------------
- -------------------------------------------------------------
FISCAL 1996 COMPARED TO FISCAL 1995
REVENUE. Revenue increased by 27.6% from $154.2 million in 1995 to $196.7
million in 1996, primarily as a result of an increase in the hours of service
provided
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS CONTINUED
to clients from 4.8 million in 1995 to 5.7 million in 1996, and, to a lesser
extent, an increase in the average revenue per project hour. The increase in
hours of service was primarily due to increased productivity of existing
branch offices. Branch offices opened prior to the beginning of 1995
contributed 86.9% of ARC's revenue growth from 1995 to 1996. The increase in
average revenue per project hour reflects demand for technical employees with
higher skills and an increase in prices.
GROSS PROFIT. Gross profit increased by 27.6% from $56.8 million in 1995 to
$72.5 million in 1996, primarily as a result of an increase in hours of
service provided to clients. Gross margin remained unchanged at 36.8% for
1995 and 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased from $39.8 million in 1995 to $51.5 million
in 1996, primarily due to increased commissions, bonuses and staffing
expenses associated with revenue and profitability growth, start up expenses
associated with the new Middle Market initiative, investment in the
infrastructure for sales and delivery of our Smartsourcing-Registered
Trademark- and Smartsourcing+sm services, and an increased number of branch
offices and their related operating costs. Selling, general and
administrative expenses increased as a percentage of revenue from 25.8% in
1995 to 26.2% in 1996, primarily due to the costs associated with the Middle
Market and Smartsourcing-Registered Trademark- initiatives.
INCOME FROM OPERATIONS. Income from operations increased from $16.9 million
in 1995 to $20.9 million in 1996, and decreased as a percentage of total
revenue from 11.0% to 10.6%.
PROVISION FOR INCOME TAXES. The provision for income taxes increased from
$7.3 million, or an effective tax rate of 41.3%, in 1995 to $8.8 million, or
an effective tax rate of 40.0%, in 1996. The decrease in the effective tax
rate in 1996 is the result of a tax planning initiative implemented at the
beginning of the year.
NET INCOME. Net income increased from $10.4 million in 1995 to $13.2 million
in 1996, and remained unchanged as a percentage of total revenue at 6.7%.
FISCAL 1995 COMPARED TO FISCAL 1994
REVENUE. Revenue increased by 63.2% from $94.5 million in 1994 to $154.2
million in 1995, primarily as a result of an increase in the hours of service
provided to clients from 3.3 million in 1994 to 4.8 million in 1995, and, to
a lesser extent, an increase in the average revenue per project hour. The
increase in hours of service was primarily from increased productivity of
existing branch offices. Branch offices opened prior to the beginning of 1994
contributed 85.1% of ARC's revenue growth from 1994 to 1995. The increase in
average revenue per project hour reflects demand for technical employees with
higher skills.
GROSS PROFIT. Gross profit increased by 55.9% from $36.4 million in 1994 to
$56.8 million in 1995, primarily as a result of an increase in hours of
service provided to clients. Gross margin decreased from 38.6% in 1994 to
36.8% in 1995, principally from increased volume discounts and the higher
benefits costs of services associated with an increase in longer term
projects.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased from $26.3 million in 1994 to $39.8 million
in 1995, primarily due to increased commissions, bonuses and staffing
expenses associated with revenue and profitability growth, an increased
number of branch offices and client support sites and related operating
costs, and increased expenses associated with the growth of the management
team and related support
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS CONTINUED
at the corporate headquarters. Selling, general and administrative expenses
decreased as a percentage of revenue from 27.9% in 1994 to 25.8% in 1995,
reflecting greater operating efficiencies and economies of scale gained from
a larger revenue base.
INCOME FROM OPERATIONS. Income from operations increased from $10.1 million
in 1994 to $16.9 million in 1995, and increased as a percentage of total
revenue from 10.7% to 11.0%.
PROVISION FOR INCOME TAXES. The provision for income taxes increased from
$4.2 million, or an effective tax rate of 40.4%, in 1994 to $7.3 million, or
an effective tax rate of 41.3%, in 1995.
NET INCOME. Net income increased from $6.2 million in 1994 to $10.4 million
in 1995, and increased as a percentage of total revenue from 6.6% to 6.7%.
LIQUIDITY AND CAPITAL RESOURCES
Prior to its initial public offering, ARC financed its operations through
private placements of equity securities, a bank line of credit and cash
generated from operations. On May 9, 1994, ARC received $10.6 million of net
proceeds from the sale of Common Stock in its initial public offering, of
which $888,000 was used to repay all of its then outstanding debt. Net cash
flow from operations was $1.1 million, $4.1 million and $3.8 million in 1994,
1995 and 1996, respectively. Positive cash flows in 1994, 1995 and 1996
resulted from significant increases in earnings for those periods, partially
offset in all three periods by increases in accounts receivable resulting
from higher revenues. In addition, in 1996, cash flow from operations was
reduced by a decrease in payroll and related expenses, as these liabilities
were paid prior to the fiscal year end.
Working capital increased from $19.2 million at December 31, 1994 to $34.0
million at December 31, 1995 and $51.8 million at December 31, 1996. On June
21, 1995, ARC received $7.2 million of net proceeds from the sale of 314,850
shares of its Common Stock pursuant to an over-allotment option granted by
ARC in connection with a secondary public offering of shares by certain
selling stockholders of ARC.
ARC believes its cash balances and funds from operations will be sufficient
to fund continued expansion of its office network and to meet all of its
anticipated cash requirements for at least the next 12 months.
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS YEAR ENDED DECEMBER 31, 1996 1995
- ------------------------------------------------------------------------------------------
(IN THOUSANDS EXCEPT NUMBER OF SHARES AND PER SHARE DATA)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,310 $ 1,903
Short-term investments 20,868 15,077
Trade accounts receivable, net of allowance
for doubtful accounts of $528 in 1996 and $579 in 1995 33,207 24,621
Prepaid expenses 455 518
Other receivables 2,403 664
Deferred income taxes 960 309
- ------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 60,203 43,092
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT:
Office equipment 3,103 2,140
Furniture and fixtures 1,427 889
Software 420 363
Leasehold improvements 307 95
- ------------------------------------------------------------------------------------------
5,257 3,487
Less accumulated depreciation and amortization 2,377 1,433
- ------------------------------------------------------------------------------------------
NET PROPERTY AND EQUIPMENT 2,880 2,054
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
OTHER ASSETS:
Long-term investments 1,026 2,460
Deposits and other assets 294 205
- ------------------------------------------------------------------------------------------
TOTAL OTHER ASSETS 1,320 2,665
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
TOTAL ASSETS $ 64,403 $ 47,811
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------
(in thousands except number of shares and per share data)
CURRENT LIABILITIES:
Accounts payable $ 324 $ 437
Payroll and related expenses 5,969 6,082
Accrued expenses 1,632 2,161
Income taxes payable 466 418
- ------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 8,391 9,098
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Deferred rent payable 345 252
- ------------------------------------------------------------------------------------------
TOTAL LIABILITIES 8,736 9,350
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Preferred Stock ($.01 par value; 1,000,000 shares authorized;
none issued and outstanding) -- --
Common Stock ($.01 par value; 50,000,000 and 20,000,000
shares authorized, 15,651,391 and 15,347,027 shares
issued and outstanding in 1996 and 1995, respectively) 157 153
Additional paid-in capital 23,003 19,052
Unrealized loss on available-for-sale securities (28) --
Cumulative translation adjustment 43 (18)
Retained earnings 32,492 19,274
- ------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 55,667 38,461
- ------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 64,403 $ 47,811
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenue $ 196,728 $ 154,173 $ 94,478
Cost of services 124,268 97,401 58,062
- --------------------------------------------------------------------------------------
Gross profit 72,460 56,772 36,416
Selling, general and administrative expenses 51,538 39,847 26,335
- --------------------------------------------------------------------------------------
Income from operations 20,922 16,925 10,081
Other income, net 1,107 713 303
- --------------------------------------------------------------------------------------
Income before income taxes 22,029 17,638 10,384
Income taxes 8,811 7,280 4,194
- --------------------------------------------------------------------------------------
NET INCOME $ 13,218 $ 10,358 $ 6,190
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
PER SHARE AMOUNTS:
Primary $ 0.83 $ 0.65 $ 0.51
Fully diluted $ 0.83 $ 0.65 $ 0.41
- --------------------------------------------------------------------------------------
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING:
Primary 15,985 15,861 12,037
Fully diluted 15,990 15,992 14,958
- --------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NOTES UNREALIZED
RECEIVABLE LOSS ON CUMULATIVE TOTAL
ADDITIONAL FROM SALE AVAILABLE- FOREIGN STOCK-
PREFERRED STOCK COMMON STOCK PAID-IN OF COMMON RETAINED FOR-SALE EXCHANGE HOLDERS
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCK EARNINGS SECURITIES GAIN/LOSS EQUITY
- ----------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31, 1993 6 $ 630 4,114 $ 41 $ 283 $(96) $ 2,743 $ -- $ -- $ 3,601
Conversion of Class B
Convertible
Preferred
Stock to
Common Stock (6) (630) 8,820 89 541 -- -- -- -- --
Issuance of
Common Stock -- -- 1,717 17 10,617 -- -- -- 10,634
Repurchase of
Common Stock -- -- (4) -- (1) 1 -- -- -- --
Exercise of
stock options -- -- 134 1 68 -- -- -- -- 169
Note repayment -- -- -- -- -- 95 -- -- -- 95
Dividend accretion -- -- -- -- -- -- (17) -- -- (17)
Accrual of stock
registration
rights -- -- -- -- (700) -- -- -- -- (700)
Net income -- -- -- -- -- -- 6,190 -- -- 6,190
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT
DECEMBER 31, 1994 -- -- 14,781 148 10,908 -- 8,916 -- -- 19,972
Issuance of
Common Stock -- -- 315 3 7,207 -- -- -- -- 7,210
Exercise of
stock options -- -- 251 2 811 -- -- -- -- 813
Repurchase of
Common Stock -- -- (24) -- (738) -- -- -- -- (738)
Issuance of Common
Stock under
employee stock
purchase plan -- -- 24 -- 589 -- -- -- -- 589
Translation
adjustment -- -- -- -- -- -- -- -- (18) (18)
Expiration of
stock
registration
rights -- -- -- -- 275 -- -- -- -- 275
Net income -- -- -- -- -- -- 10,358 -- -- 10,358
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT
DECEMBER 31, 1995 -- -- 15,347 153 19,052 -- 19,274 -- (18) 38,461
Exercise of
stock options -- -- 304 4 2,909 -- -- -- -- 2,913
Repurchase of
Common Stock -- -- (55) -- (1,500) -- -- -- -- (1,500)
Issuance of
Common Stock
under employee
stock purchase
plan -- -- 55 -- 1,305 -- -- -- -- 1,305
Translation adjustment -- -- -- -- -- -- -- -- 61 61
Unrealized loss on
available-for-
sale securities -- -- -- -- -- -- -- (28) -- (28)
Tax benefit
recognized
on stock options
exercised -- -- -- -- 1,237 -- -- -- -- 1,237
Net income -- -- -- -- -- -- 13,218 -- -- 13,218
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT
DECEMBER 31, 1996 -- $ -- 15,651 $157 $23,003 $ -- $32,492 $(28) $ 43 $55,667
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31, 1996 1995 1994
- -------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 13,218 $ 10,358 $ 6,190
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 946 748 311
Deferred income tax benefit (651) (326) (186)
Allowance for doubtful accounts (51) 403 81
Change in assets and liabilities:
Trade accounts receivable (8,535) (9,824) (7,787)
Prepaid expenses 63 (90) (167)
Other receivables (502) (355) (258)
Deposits and other assets (30) (49) (16)
Accounts payable (113) (36) 120
Payroll and related expenses (113) 2,565 1,554
Accrued expenses (529) 270 1,244
Income taxes payable 48 369 (64)
Deferred rent payable 93 65 72
- -------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,844 4,098 1,094
=======================================================================================================
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (1,770) (1,551) (1,083)
Purchases of available-for-sale securities (24,152) -- --
Redemptions of available-for-sale securities 4,620 -- --
Purchases of held-to-maturity securities -- (19,533) (17,440)
Redemptions of held-to-maturity securities 15,147 12,503 6,933
- -------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (6,155) (8,581) (11,590)
=======================================================================================================
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of Common Stock -- 7,210 10,634
Payments received on stock options exercised 2,913 813 169
Dividends paid on Preferred Stock -- -- (17)
Payments received on Common Stock notes -- -- 95
Repurchase of Common Stock (1,500) (738) --
Issuance of Common Stock under employee stock purchase plan 1,305 589 --
Accrued stock registration rights -- (200) (225)
Net short-term repayments -- -- (2,014)
Cash overdraft (repayments) -- (1,288) 1,288
- -------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,718 6,386 9,930
=======================================================================================================
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 407 1,903 (566)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 1,903 -- 566
- -------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR $ 2,310 $ 1,903 $ --
=======================================================================================================
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $ -- $ -- $ 32
Cash paid for income taxes 9,753 7,275 4,446
=======================================================================================================
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
Tax benefit on stock options exercised $ 1,237 $ -- $ --
Accrual (expiration) of stock registration rights -- (275) 475
=======================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND NATURE OF THE BUSINESS. Alternative Resources Corporation
(the "Company") was incorporated in Delaware on March 8, 1988. The Company
provides comprehensive information technology services that allow clients to
stay focused on mission-critical activities of their business. Customized
solutions vary based on the nature and length of client projects, the degree
of day-to-day management responsibility clients wish to delegate, and the
flexibility desired. The Company focuses on five information technology
environments including: 1) help desk, 2) desktop and workstation computing
(PC/LAN), 3) client/server support, 4) voice and data communications
(LANs/WANs), and 5) mainframe and midrange computer operations.
PRINCIPLES OF CONSOLIDATION. The operations of the Company are conducted
through a parent holding company and two operating subsidiaries. The
accompanying consolidated financial statements include the financial position
and results of operations of the Company and its subsidiaries with all
intercompany transactions eliminated in their entirety.
USE OF ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
CASH EQUIVALENTS. Cash equivalents include all deposits in banks and highly
liquid investments with original maturities of three months or less.
INVESTMENT SECURITIES. The Company classifies its investment securities
purchased before December 31, 1995 as held-to-maturity and records such
securities at amortized cost. Held-to-maturity securities are those
securities which the Company has the ability and intent to hold until
maturity. Investment securities purchased after December 31, 1995 are
classified as available-for-sale and are recorded at fair market value, with
unrealized holding gains or losses, if any, recorded as a separate component
of stockholders' equity. The Company does not invest in trading securities.
Realized gains and losses from the sale of available-for-sale securities are
determined on a specific identification basis. Interest income is recognized
when earned.
PROPERTY AND EQUIPMENT. Property and equipment are recorded at cost and
depreciated using the straight-line method over the estimated useful lives of
the respective assets ranging from three to five years. Leasehold
improvements are amortized using the straight-line method over the life of
the related leases, generally three to five years.
TRANSLATION OF FOREIGN CURRENCIES. Assets and liabilities of the Company's
Canadian branch are translated at the rate of exchange in effect on the
balance sheet date; income and expenses are translated at the weighted
average rates of exchange prevailing during the year. The related translation
adjustments are reflected as a cumulative translation adjustment in
stockholders' equity. Foreign currency realized and unrealized gains and
losses for the years presented were not material.
REVENUE RECOGNITION. Revenues are recognized, net of volume discounts, as
services are performed.
INCOME TAXES. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
STOCK COMPENSATION PLANS. Prior to January 1, 1996, the Company accounted for
its stock-based compensation plans in accordance with the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," ("APB 25") and related interpretations. Under APB 25, no
compensation cost has been recognized for its stock option plan and its
employee stock purchase plan. On January 1, 1996, the Company adopted
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," ("Statement 123") which permits entities to
recognize as expense over the vesting period the fair value of all
stock-based awards on the date of grant. Alternatively, Statement 123 also
allows entities to continue to apply the provisions of APB 25 and provide pro
forma net income and pro forma earnings per share disclosures for its
stock-based compensation plans in 1995 and future years as if the
fair-value-based method defined in Statement 123 had been applied. The
Company has elected to continue to apply the provisions of APB 25 and provide
the pro forma disclosure provisions of Statement 123.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FAIR VALUE OF FINANCIAL INSTRUMENTS. The carrying amounts of the Company's
financial instruments approximate their fair values due to the short maturity
of these instruments.
COMPUTATION OF EARNINGS PER SHARE. The primary earnings per common and common
equivalent share amounts for the years ended December 31, 1996, 1995 and 1994
have been computed using the weighted average number of common and dilutive
common equivalent shares outstanding for each year. Net income used in the
calculation of primary earnings per share for the year ended December 31,
1994 was reduced by the accretion of dividends on Class B Convertible
Preferred Stock, 8%, $0.10 par value per share (the "Class B Convertible
Preferred Stock"). Dilutive common equivalent shares consist of the shares
issuable upon exercise of stock options (using the treasury stock method).
The fully diluted earnings per share amounts have been computed using the
higher average market price during 1996 and the higher ending market price in
1995 and 1994, in applying the treasury stock method for stock options.
Dilutive common equivalent shares consist of the shares issuable upon
conversion of the Class B Convertible Preferred Stock (as if converted to
Common Stock on the original date of issuance) and the exercise of stock
options (using the treasury stock method).
Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No.
83, Common Stock and options for Common Stock granted by the Company during
the 12 months immediately preceding the date of the Company's initial public
offering (using the treasury stock method and the mid-point of the proposed
public offering price per share) have been included in the calculation of
common and common equivalent shares in 1994 as if they were outstanding for
all periods presented.
RECLASSIFICATION. Certain 1995 and 1994 balances have been reclassified to
conform with the 1996 presentation.
(2) INVESTMENTS
The aggregate fair value, gross unrealized holding gains, gross unrealized
holding losses and amortized cost of investments by security type and class
of security as of December 31, 1996 were (in thousands):
<TABLE>
<CAPTION>
GROSS
UNREALIZED
HOLDING
-------------------
AGGREGATE AMORTIZED
FAIR VALUE GAINS (LOSSES) COST
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE:
US TREASURY AND FEDERAL
AGENCY DEBT SECURITIES $7,275 $ 31 $ (14) $ 7,258
STATE AND MUNICIPAL
DEBT SECURITIES 7,299 4 (29) 7,324
CORPORATE DEBT
SECURITIES 4,880 3 (23) 4,900
- --------------------------------------------------------------------------------
TOTAL AVAILABLE-FOR-SALE 19,454 38 (66) 19,482
- --------------------------------------------------------------------------------
HELD-TO-MATURITY:
US TREASURY AND FEDERAL
AGENCY DEBT SECURITIES 760 6 -- 754
STATE AND MUNICIPAL
DEBT SECURITIES 1,680 1 (7) 1,686
- --------------------------------------------------------------------------------
TOTAL HELD-TO-MATURITY 2,440 7 (7) 2,440
================================================================================
TOTAL INVESTMENTS $21,894 $ 45 $ (73) $21,922
================================================================================
</TABLE>
Held-to-maturity securities at December 31, 1995 consisted of $17.5 million
of debt securities with an estimated fair market value that approximated cost.
The aggregate fair value and amortized cost of investments by contractual
maturity as of December 31, 1996 were (in thousands):
AGGREGATE AMORTIZED
FAIR VALUE COST
- ---------------------------------------------------------------------
AVAILABLE-FOR-SALE:
MATURITY WITHIN 1 YEAR $18,428 $18,456
MATURITY AFTER 1 YEAR WITHIN 5 YEARS 1,026 1,026
- ---------------------------------------------------------------------
TOTAL 19,454 19,482
- ---------------------------------------------------------------------
HELD-TO-MATURITY:
MATURITY WITHIN 1 YEAR 2,440 2,440
- ---------------------------------------------------------------------
TOTAL INVESTMENTS $21,894 $21,922
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
Proceeds from sales of available-for-sale securities during 1996 were
$628,000. Realized gains and losses from these sales were not material in
1996. The net unrealized loss during 1996 recorded as a separate component of
stockholders' equity was $28,000.
(3) REDEEMABLE PREFERRED STOCK
During 1994, the holders of the Class B Convertible Preferred Stock converted
their shares into 8,820,000 shares of Common Stock. Dividends of $17,000 were
accreted and paid to the holders of Class B Convertible Preferred Stock for the
year ended December 31, 1994.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
(4) STOCKHOLDERS' EQUITY
On May 2, 1994, the Company filed an amended and restated Certificate of
Incorporation effecting a seven-for-one split of the Company's Common Stock.
All common share and per share amounts have been adjusted retroactively to
give effect to the stock split. Additionally, the amended and restated
Certificate of Incorporation effected an increase in the number of authorized
shares of Common Stock to 20,000,000 and authorized 1,000,000 shares of
Preferred Stock.
In May 1994, the Company issued 1,716,500 shares of Common Stock in
connection with an initial public offering of the Company's Common Stock.
In 1994, the Company accrued $700,000 as an estimate of the costs to be
incurred for registration rights granted to Wind Point Partners II, L.P. with
a corresponding reduction in additional paid-in-capital. Approximately
$200,000 and $225,000 were utilized for registration rights exercised in 1995
and 1994, respectively, and additional paid-in-capital was increased by
$275,000 as the remaining registration rights expired.
On May 22, 1995, the Company's Board of Directors approved a two-for-one
split of the Company's Common Stock. All common share and per share amounts
have been adjusted retroactively to give effect to the stock split.
In June 1995, the Company issued 314,850 shares of Common Stock in connection
with a secondary public offering of the Company's Common Stock.
In April 1996, the Company amended the Certificate of Incorporation to
increase the number of authorized shares of Common Stock to 50,000,000.
(5) LEASES
The Company leases its office facilities under noncancelable operating
leases. Rental expense for operating leases during 1996, 1995 and 1994 was
$2,257,000, $1,608,000 and $1,091,000, respectively.
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) as of December 31,
1996 are (in thousands):
YEAR ENDING DECEMBER 31, AMOUNT
- ----------------------------------------
1997 $ 2,592
- ----------------------------------------
1998 2,413
- ----------------------------------------
1999 2,099
- ----------------------------------------
2000 1,698
- ----------------------------------------
2001 1,076
- ----------------------------------------
THEREAFTER 2,608
- ----------------------------------------
TOTAL $12,486
- ----------------------------------------
- ----------------------------------------
(6) OTHER INCOME (EXPENSE), NET
Other income (expense), net for the years ended December 31, 1996, 1995 and
1994, is comprised of the following (in thousands):
1996 1995 1994
- ---------------------------------------------------
INTEREST INCOME $1,107 $713 $329
INTEREST EXPENSE -- -- (25)
- ---------------------------------------------------
$1,107 $713 $304
===================================================
(7) INCOME TAXES
Income tax expense (benefit) is summarized as follows for the years ended
December 31, 1996, 1995 and 1994 (in thousands):
1996 1995 1994
- ----------------------------------------------------
CURRENT:
FEDERAL $8,312 $6,230 $3,584
STATE 1,150 1,376 796
- ----------------------------------------------------
TOTAL CURRENT 9,462 7,606 4,380
- ----------------------------------------------------
DEFERRED:
FEDERAL (576) (279) (161)
STATE (75) (47) (25)
- ----------------------------------------------------
TOTAL DEFERRED (651) (326) (186)
- ----------------------------------------------------
$8,811 $7,280 $4,194
====================================================
The reasons for the difference between the effective tax rates and the
corporate Federal income tax rate for the years ended December 31, 1996, 1995
and 1994, are as follows:
PERCENTAGE OF EARNINGS
BEFORE INCOME TAXES 1996 1995 1994
- -------------------------------------------------------------------------
FEDERAL INCOME TAX RATE 35.0% 35.0% 35.0%
ITEMS AFFECTING FEDERAL INCOME TAX RATE:
STATE INCOME TAX, NET OF
FEDERAL TAX BENEFIT 4.1 5.1 4.9
OTHER 0.9 1.2 0.5
- -------------------------------------------------------------------------
EFFECTIVE INCOME TAX RATE 40.0% 41.3% 40.4%
=========================================================================
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1996 and 1995, are as follows (in thousands):
1996 1995
- ------------------------------------------------------------------
DEFERRED TAX ASSETS:
PROPERTY AND EQUIPMENT - DEPRECIATION $71 $ --
ACCOUNTS RECEIVABLE VALUATION ALLOWANCE 271 238
DEFERRED RENT PAYABLE 138 103
ACCRUED LIABILITIES 519 266
- ------------------------------------------------------------------
GROSS DEFERRED TAX ASSETS 999 607
- ------------------------------------------------------------------
DEFERRED TAX LIABILITIES:
PROPERTY AND EQUIPMENT - DEPRECIATION -- (45)
CASH TO ACCRUAL ADJUSTMENT -- (139)
OTHER (39) (114)
- ------------------------------------------------------------------
GROSS DEFERRED TAX LIABILITIES (39) (298)
- ------------------------------------------------------------------
NET DEFERRED TAX ASSET $960 $309
==================================================================
No valuation allowance for deferred tax assets has been recorded as the
Company believes it is more likely than not the deferred tax assets will be
realized in the future.
(8) EMPLOYEE SAVINGS PLAN
The Company maintains a defined contribution benefit plan ("the Plan"). The
Plan covers each employee who has completed 1,000 hours of service in a
12-month period commencing with the start of employment. Contributions to the
Plan are based on percentages of employee salaries plus a matching
contribution by the Company in an amount to be determined at the Company's
discretion. Vesting in the Company's contributions is based on length of
service over a five-year period. Contributions by the Company on behalf of
all employees approximated $131,000, $77,000 and $35,000 during 1996, 1995
and 1994, respectively.
(9) STOCK OPTIONS
During 1994, the Company amended and restated the stock option plan adopted
in 1992. Under the amended and restated Incentive Stock Option Plan ("Option
Plan"), officers and key employees may be granted non-qualified stock
options, incentive stock options, performance units, and stock appreciation
rights. The Option Plan also provides for automatic annual grants to each
non-affiliate director of non-qualified stock options to purchase up to 5,000
shares of Common Stock. The purchase price per share for such options will be
equal to the fair market value of a share of Common Stock on the date of
grant. Any such options will be exercisable one year after the date of grant
and will terminate upon the earlier of 90 days following the date on which
such director ceases to serve on the Board or 10 years after the date of
grant.
The exercise price of incentive stock options granted under the Option Plan
must be equal to at least 100% of the fair market value of the stock subject
to the option on the date of grant. The incentive stock options granted by
the Company may not be exercised during the first six months from the date
granted and thereafter generally become exercisable at a rate of 2.38% of the
total shares subject to the option on and after the first day of each
calendar month thereafter. The maximum term of a stock option under the
Option Plan is 10 years.
In the event employment is terminated for any reason other than gross and
willful misconduct, death, or disability, vested options are exercisable
within 30 days after such termination of employment. Termination due to gross
and willful misconduct terminates the option as of the date of the
misconduct. Upon death or disablement, vested options are exercisable within
six months after the date of death or disablement by the executors,
administrators, or applicable guardian of the optionee.
The fair value of each option is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1996 and 1995, respectively: risk-free
interest rates of 6.0 percent and 6.2 percent; expected lives of 4 years and
4 years; expected volatility of 32 percent and 40 percent; and no dividends
are expected to be paid.
The following net income and earnings per share data reflect the pro forma
effect of the stock-based compensation cost for the Company's stock option
plan and employee stock purchase plan in accordance with Statement 123 (in
thousands, except per share data):
1996 1995
- ----------------------------------------------------------
NET INCOME
AS REPORTED $13,218 $10,358
PRO FORMA $11,337 $10,059
PRIMARY EARNINGS
PER SHARE
AS REPORTED $0.83 $ 0.65
PRO FORMA $0.73 $ 0.67
FULLY DILUTED
EARNINGS PER SHARE
AS REPORTED $0.83 $ 0.65
PRO FORMA $0.71 $ 0.63
- ----------------------------------------------------------
Pro forma net income and earnings per share data reflect
only options granted in 1996 and 1995.
<PAGE>
NOTES TO FINANCIAL CONSOLIDATED STATEMENTS CONTINUED
Stock option transactions for the years ended December 31, 1994, 1995 and
1996 are summarized as follows (in thousands, except price data):
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
- ----------------------------------------------------------
BALANCE, DECEMBER 31, 1993 1,056 $ 1.80
OPTIONS GRANTED 748 13.46
OPTIONS CANCELED (275) 3.58
OPTIONS EXERCISED (134) 1.25
- ----------------------------------------------------------
BALANCE AT DECEMBER 31, 1994 1,395 7.75
==========================================================
OPTIONS GRANTED 1,401 27.83
OPTIONS CANCELED (305) 11.41
OPTIONS EXERCISED (251) 3.24
- ----------------------------------------------------------
BALANCE AT DECEMBER 31, 1995 2,240 20.04
=========================================================
OPTIONS GRANTED 1,092 22.62
OPTIONS CANCELED (406) 21.60
OPTIONS EXERCISED (304) 9.58
- ---------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 2,622 $22.08
=========================================================
For the years ended December 31, 1996, 1995 and 1994 there were 472,108,
126,588 and 86,282 options exercisable, respectively. As of December 31,
1996, no stock options were available for future grants. The weighted-average
grant-date fair values of options granted during 1996 and 1995 were $8.88 and
$9.42 per share, respectively.
The following table summarizes information about the stock options
outstanding as of December 31, 1996 (options in thousands):
OPTIONS OPTIONS
OUTSTANDING EXERCISABLE
----------------------------------- -----------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- -----------------------------------------------------------------------------
$ 1-15 539 7.5 years $10 208 $ 9
- -----------------------------------------------------------------------------
17 644 10.0 17 0 17
- -----------------------------------------------------------------------------
19-26 432 8.4 23 126 23
- -----------------------------------------------------------------------------
28-30 579 9.2 29 58 29
- -----------------------------------------------------------------------------
31-38 428 9.0 33 80 33
- -----------------------------------------------------------------------------
$ 1-38 2,622 8.9 $22 472 $19
- -----------------------------------------------------------------------------
(10) EMPLOYEE STOCK PURCHASE PLAN
In 1995, the Stockholders of the Company approved the Alternative Resources
Corporation Employee Stock Purchase Plan (the "Stock Purchase Plan"). An
aggregate of 300,000 shares of the Company's Common Stock (subject to
adjustment for any dividend, stock split or other relevant changes in the
Company's capitalization) may be sold pursuant to the Stock Purchase Plan.
The Stock Purchase Plan covers each employee who has completed 1,000 hours of
service during the last 12 calendar months preceding the enrollment date. The
Stock Purchase Plan enables employees to purchase the Company's Common Stock
at 85% of the market price. Employees may purchase the Company's Common Stock
through the Stock Purchase Plan only by payroll deduction. Payroll deductions
may not exceed 20% of the employee's gross pay or $21,250 in any one year.
During 1996 and 1995, all Stock Purchase Plan shares were purchased on the
open market. In 1996 and 1995, the Company's matching portion to the Stock
Purchase Plan amounted to $195,000 and $149,000, respectively. As required
under Statement 123, these amounts have been reflected in the pro forma net
income and earnings per share data (see Note 9).
(11) CONCENTRATION OF CREDIT RISK
The Company provides services to clients including systems integrators,
telecommunications companies, banking and financial services entities,
manufacturers, distributors, health care providers and utilities throughout
the United States. In 1996, 1995 and 1994, the largest client accounted for
approximately 13%, 11% and 6%, and the second largest client accounted for
approximately 11%, 15% and 12% of the Company's total revenues, respectively.
(12) LEGAL PROCEEDINGS
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position, results of operations or liquidity.
<PAGE>
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND STOCKHOLDERS
ALTERNATIVE RESOURCES CORPORATION
We have audited the accompanying consolidated balance sheets of Alternative
Resources Corporation and subsidiaries (the Company) as of December 31, 1996
and 1995, and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1996. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Alternative Resources Corporation and subsidiaries as of December 31, 1996
and 1995, and the results of their operations and their cash flows for each
of the years in the three-year period ended December 31, 1996 in conformity
with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Chicago, Illinois
January 21, 1997
<PAGE>
STOCKHOLDER INFORMATION
Alternative Resources Corporation completed its initial public offering on
May 2, 1994, at a split-adjusted price per share of $7.00. ARC's common stock
is traded on the Nasdaq National Market under the symbol "ALRC." No cash
dividends have been paid on the Common Stock since the initial trading. As of
December 31, 1996, ARC had 174 stockholders of record (including brokerage
firms and other nominees) and 15,651,391 outstanding shares of common stock.
The table shows the reported high and low sale prices of the common stock for
the periods indicated during the years ended December 31, 1995 and 1996 (all
price data has been restated to reflect a two-for-one stock split effective
May 22, 1995):
1996 1995
------------------- -------------------
HIGH LOW HIGH LOW
- ----------------------------------------------------------------------
FIRST QUARTER $33-1/4 $24 $20-1/8 $14-3/4
- ----------------------------------------------------------------------
SECOND QUARTER 44-1/2 30-1/2 27-1/2 18
- ----------------------------------------------------------------------
THIRD QUARTER 37-1/2 20-1/2 34 25-1/2
- ----------------------------------------------------------------------
FOURTH QUARTER 30-3/4 13-1/2 33-1/4 26-3/4
- ----------------------------------------------------------------------
<PAGE>
ALTERNATIVE RESOURCES CORPORATION
SUBSIDIARIES
STATE OF
NAME INCORPORATION
---- -------------
ARC Service, Inc. Delaware
ARC Advantage, Inc. Delaware
<PAGE>
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Alternative Resources Corporation:
We consent to incorporation by reference in the registration statements
(Nos. 33-88918, 33-85078 and 333-12693) on Forms S-8 of Alternative Resources
Corporation of our reports dated January 21, 1997, relating to the
consolidated balance sheets of Alternative Resources Corporation and
subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of operations, changes in stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1996, and the
related consolidated financial statement schedule, which reports are
incorporated by reference in the December 31, 1996 annual report on Form 10-K
of Alternative Resources Corporation.
KPMG PEAT MARWICK LLP
Chicago, Illinois
March 28, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS FOUND IN THE COMPANY'S FORM 10-K FOR THE
TWELVE MONTH PERIOD ENDED DECEMBER 31, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,310
<SECURITIES> 20,868
<RECEIVABLES> 33,207
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 60,203
<PP&E> 5,257
<DEPRECIATION> 2,377
<TOTAL-ASSETS> 64,403
<CURRENT-LIABILITIES> 8,391
<BONDS> 0
0
0
<COMMON> 157
<OTHER-SE> 55,510
<TOTAL-LIABILITY-AND-EQUITY> 64,403
<SALES> 0
<TOTAL-REVENUES> 196,728
<CGS> 0
<TOTAL-COSTS> 124,268
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 22,029
<INCOME-TAX> 8,811
<INCOME-CONTINUING> 13,218
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,218
<EPS-PRIMARY> 0.83
<EPS-DILUTED> 0.83
</TABLE>
