<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Personnel Group of America
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
PGA Logo
6302 FAIRVIEW ROAD, SUITE 201
CHARLOTTE, NORTH CAROLINA 28210
April 14, 1999
Dear Shareholder:
You are cordially invited to attend the 1999 Annual Meeting of Shareholders
to be held at The Park Hotel, 2200 Rexford Road, Charlotte, North Carolina, on
Thursday, May 20, 1999, at 9:30 a.m., local time.
The Notice of Annual Meeting of Shareholders and Proxy Statement are
attached hereto. Also enclosed herewith is a copy of the Company's 1998 Annual
Report to Shareholders. The matters to be acted upon by our shareholders are set
forth in the Notice of Annual Meeting and discussed in the Proxy Statement.
We would appreciate your signing, dating and returning the enclosed proxy
card in the envelope provided at your earliest convenience. If you choose to
attend the 1999 Annual Meeting, you may revoke your proxy and personally cast
your votes.
We look forward to seeing you at the Annual Meeting.
Sincerely yours,
/s/ EDWARD P. DRUDGE, JR.
Edward P. Drudge, Jr.
Chairman and Chief Executive Officer
<PAGE> 3
PERSONNEL GROUP OF AMERICA, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 20, 1999
------------------
TO THE SHAREHOLDERS
OF PERSONNEL GROUP OF AMERICA, INC.
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Shareholders of
Personnel Group of America, Inc., a Delaware corporation (the "Company"), will
be held at 9:30 a.m., local time, on May 20, 1999, at The Park Hotel, 2200
Rexford Road, Charlotte, North Carolina, for the following purposes:
(1) The election of two members to the Company's Board of Directors to
serve until the Annual Meeting of Shareholders in 2002 or until their
successors are duly elected and qualified;
(2) The approval of the Company's Amended and Restated Management
Incentive Compensation Plan;
(3) The approval of the continuation of the Company's 1995 Equity
Participation Plan;
(4) The ratification of the selection of PricewaterhouseCoopers LLP as
the Company's independent public accountants for 1999; and
(5) The transaction of such other business as may properly come before
the Annual Meeting and any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on March 26, 1999,
as the record date for determining those shareholders entitled to notice of, and
to vote at, the Annual Meeting and any adjournments or postponements thereof. A
list of those shareholders may be examined at the principal executive office of
the Company, 6302 Fairview Road, Suite 201, Charlotte, North Carolina, during
the 10-day period preceding the Meeting.
Whether or not you expect to be present, please sign, date and return the
enclosed proxy card in the enclosed pre-addressed envelope as promptly as
possible. No postage is required if mailed in the United States.
By Order of the Board of Directors,
/s/ EDWARD P. DRUDGE, JR.
Edward P. Drudge, Jr.
Chairman and Chief Executive Officer
Charlotte, North Carolina
April 14, 1999
ALL SHAREHOLDERS ARE INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. THOSE
SHAREHOLDERS WHO ARE UNABLE TO ATTEND ARE URGED TO EXECUTE AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. SHAREHOLDERS WHO EXECUTE A PROXY
CARD MAY NEVERTHELESS ATTEND THE ANNUAL MEETING, REVOKE THEIR PROXY AND VOTE
THEIR SHARES IN PERSON.
<PAGE> 4
1999 ANNUAL MEETING OF SHAREHOLDERS
OF PERSONNEL GROUP OF AMERICA, INC.
-------------------------
PROXY STATEMENT
-------------------------
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Personnel Group of America, Inc., a Delaware
corporation ("PGA" or the "Company"), of proxies from the holders of the
Company's Common Stock, par value $.01 per share (the "Common Stock"), for use
at the 1999 Annual Meeting of Shareholders of the Company to be held at The Park
Hotel, 2200 Rexford Road, Charlotte, North Carolina, at 9:30 a.m., local time,
on May 20, 1999, or at any adjournments or postponements thereof (the "Annual
Meeting"), pursuant to the enclosed Notice of Annual Meeting of Shareholders.
The approximate date that this Proxy Statement and the enclosed form of proxy
are first being sent or given to holders of Common Stock is April 14, 1999. The
Company's principal executive offices are located at 6302 Fairview Road, Suite
201, Charlotte, North Carolina 28210, and its telephone number is (704)
442-5100.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of the Company's Board of
Directors. The giving of a proxy does not preclude the right to vote in person
should any shareholder giving the proxy so desire. Shareholders have a right to
revoke their proxy at any time prior to the exercise thereof, either in person
at the Annual Meeting or by filing with the Company's Secretary at Company
headquarters a written revocation or duly executed proxy bearing a later date.
The cost of preparing, assembling and mailing this Proxy Statement, the
Notice of Annual Meeting of Shareholders and the enclosed proxy will be borne by
the Company. In addition to the use of mail, employees of the Company may
solicit proxies personally and by telephone. The Company's employees will
receive no compensation for soliciting proxies other than their regular
salaries. The Company may request banks, brokers and other custodians, nominees
and fiduciaries to forward copies of the proxy material to their principals and
to request authority for the execution of proxies. The Company has retained
Corporate Communications, Inc., of Nashville, Tennessee, to aid in the proxy
solicitation at an estimated cost of $5,000.
Except as otherwise noted herein, all share and per share information
relating to the Company's Common Stock contained in this Proxy Statement has
been adjusted to reflect the two-for-one stock split of the Common Stock
effected as a stock dividend on March 30, 1998.
PURPOSES OF THE MEETING
At the Annual Meeting, the Company's shareholders will consider and vote
upon the following matters:
(1) The election of two members to the Company's Board of Directors to
serve until the Annual Meeting of Shareholders in 2002 or until their
successors are duly elected and qualified;
(2) The approval of the Company's Amended and Restated Management
Incentive Compensation Plan;
(3) The approval of the continuation of the Company's 1995 Equity
Participation Plan;
(4) The ratification of the selection of PricewaterhouseCoopers LLP as
the Company's independent public accountants for 1999; and
(5) The transaction of such other business as may properly come before
the Annual Meeting and any adjournments or postponements thereof.
Unless contrary instructions are indicated on the enclosed proxy, all
shares represented by valid proxies received pursuant to this solicitation (and
which have not been revoked in accordance with the procedures set
<PAGE> 5
forth above) will be voted (a) in favor of the election of the two nominees for
directors named below, (b) in favor of the proposal to approve the Company's
Amended and Restated Management Incentive Compensation Plan, (c) in favor of the
proposal to approve the continuation of the Company's 1995 Equity Participation
Plan and (d) in favor of the proposal to ratify PricewaterhouseCoopers LLP as
the Company's independent public accountants. In the event a shareholder
specifies a different choice by means of the enclosed proxy, his or her shares
will be voted in accordance with the specification so made.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board of Directors has set the close of business on March 26, 1999, as
the record date (the "Record Date") for determining shareholders of the Company
entitled to notice of and to vote at the Annual Meeting. As of the Record Date,
there were 30,037,666 shares of Common Stock issued and outstanding, all of
which are entitled to one vote on all matters to be acted upon at the Annual
Meeting. Neither the Company's Certificate of Incorporation nor Bylaws provide
for cumulative voting rights.
The representation in person or by proxy of a majority of the issued and
outstanding shares of Common Stock entitled to vote will constitute a quorum at
the Annual Meeting. Abstentions and shares held by brokers with respect to which
voting authority is withheld by beneficial owners ("broker non-votes") will be
counted for the purpose of determining the presence or absence of a quorum.
Directors of the Company are elected by a plurality vote, and votes may either
be cast in favor of nominees or withheld. Withheld votes will be excluded
entirely from the vote and will have no effect on the outcome of the election.
Approval of the remaining proposals requires the affirmative vote of the holders
of a majority of the shares of Common Stock present in person or represented by
proxy and entitled to vote. On any such proposal, an abstention will have the
same effect as a negative vote but, because shares held by brokers will not be
considered entitled to vote on matters as to which beneficial owners withhold
voting authority, a broker non-vote will have no effect on the vote.
2
<PAGE> 6
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 26, 1999 (except where
otherwise noted), the number and percentage of outstanding shares beneficially
owned by each person known by the Company to own beneficially more than 5% of
the Company's Common Stock, by each director and nominee for director of the
Company, by each person named below in the Summary Compensation Table and by all
directors, executive and other corporate officers and Division Presidents of the
Company as a group. Except as otherwise indicated, each shareholder named has
sole voting and investment power with respect to such shareholder's shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF SHARES PERCENT OF COMMON
NAME AND ADDRESS* OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) STOCK OUTSTANDING
- - ------------------------------------- --------------------- -----------------
<S> <C> <C>
J. & W. Seligman & Co. Incorporated.................... 4,171,700(2) 13.9%
100 Park Avenue
New York, New York 10017
Dresdner RCM Global Investors LLC...................... 3,281,000(2) 10.9%
Four Embarcadero Center, Suite 3000
San Francisco, California 94111-4189
Citigroup, Inc......................................... 1,765,786(2) 5.9%
425 Park Avenue
New York, New York 10043
Edward P. Drudge, Jr................................... 830,582(3) 2.7%
James C. Hunt.......................................... 107,274(4) **
Ken R. Bramlett, Jr.................................... 62,549(5) **
Kevin P. Egan.......................................... 55,174(6) **
James V. Napier........................................ 45,000(6) **
J. Roger King.......................................... 45,000(6) **
William J. Simione, Jr................................. 35,000(6) **
Michael H. Barker...................................... 29,692 **
William T. McCarthy.................................... -- **
All directors, executive and other corporate officers
and Division Presidents as a group (10 persons)...... 1,209,690 3.9%
</TABLE>
- - ---------------
* Addresses are furnished only for beneficial owners of 5% of the Common Stock
** Less than one percent
(1) Includes the following shares subject to stock options exercisable within 60
days after March 26, 1999: Mr. Drudge -- 774,379; Mr. Hunt -- 100,526; Mr.
Bramlett -- 52,674; Mr. Egan -- 28,000; Mr. Napier -- 28,000; Mr.
King -- 28,000; Mr. Simione -- 28,000; Mr. Barker -- 14,346; and directors,
executive and other corporate officers and Division Presidents as a
group -- 1,055,325.
(2) The amount and nature of the shares beneficially owned are as of December
31, 1998, and are based on the most recent Schedule 13G of each reporting
person, or amendment thereto, on file with the Company. Of the total shares
reported, J. & W. Seligman & Co. reported shared voting power with respect
to 3,628,400 of its shares and shared dispositive power with respect to all
of its shares; Dresdner RCM Global Investors reported sole voting power with
respect to only 2,251,100 of its shares and Citigroup reported shared voting
and shared dispositive power with respect to all of its shares.
(3) Includes 8,700 shares held in the name of Mr. Drudge's spouse.
(4) Includes 1,120 shares held in the names of Mr. Hunt's spouse and children.
(5) Includes 500 shares held in the name of Mr. Bramlett's spouse.
(6) Includes 5,000 restricted shares granted in July 1997 that vest 33 1/3% on
each of the first, second and third anniversaries of the grant date. See
"Election of Directors -- Director Compensation."
3
<PAGE> 7
PROPOSAL 1.
ELECTION OF DIRECTORS
NOMINEES
The Company's Certificate of Incorporation and Bylaws provide for seven
directors who are divided into three classes. Directors serve for three-year
terms or until their successors are duly elected and qualified. Mr. Hunt and Mr.
Bramlett were appointed as Class I directors in 1997 to fill vacancies on the
Board and to serve as directors until this Annual Meeting of Shareholders.
Messrs. Egan and King were re-elected as Class II directors at the Annual
Meeting of Shareholders in 1997, and will serve in Class II for a term expiring
at the Annual Meeting of Shareholders in 2000, or until their successors have
been duly elected and qualified. Messrs. Drudge, Napier and Simione were
re-elected as Class III directors at the Annual Meeting of Shareholders in 1998,
and will serve in Class III for a term expiring at the Annual Meeting of
Shareholders in 2001, or until their successors have been duly elected and
qualified. Messrs. Hunt and Bramlett are the sole nominees standing for election
at this Annual Meeting and, if elected, will serve in Class I for a term
expiring at the Annual Meeting of Shareholders in 2002, or until their
successors have been duly elected and qualified.
The Board of Directors makes nominations for director candidates as
permitted by the Company's Bylaws. The Company's Bylaws prescribe the procedure
a shareholder must follow to make nominations for director candidates, as
described below under "Proposals for 2000 Annual Meeting of Shareholders." The
Board of Directors has no reason to believe that any board nominees will refuse
to act or be unable to accept election. In the event that a nominee for a
directorship is unable to accept election or if any unforeseen contingencies
should arise, however, it is intended that proxies will be voted for such other
person or persons as may be designated by the Board of Directors, unless it is
directed by a proxy to do otherwise.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF MESSRS.
HUNT AND BRAMLETT FOR RE-ELECTION AS CLASS I DIRECTORS.
4
<PAGE> 8
OFFICERS AND DIRECTORS
The following table sets forth information as to the Company's current
executive officers, directors and selected other corporate and divisional
officers:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Edward P. Drudge, Jr....................... 60 Chairman of the Board and Chief Executive
Officer
James C. Hunt.............................. 42 Senior Vice President, Chief Financial
Officer, Treasurer and Director
Ken R. Bramlett, Jr........................ 39 Senior Vice President, General Counsel,
Secretary and Director
Donald Kierson............................. 49 Chief Information Officer
Michael H. Barker.......................... 44 President -- Commercial Staffing Division
William T. McCarthy........................ 44 President -- Information Technology
Division
Ann S. Fleming............................. 56 Senior Vice President -- Central
Operations, Commercial Staffing Division
Jeffrey B. Walker.......................... 39 Vice President -- Atlantic Operations,
Commercial Staffing Division
Cynthia Carlson............................ 51 Vice President -- Candidate Sourcing,
Information Technology Division
Kevin P. Egan (1)(2)....................... 55 Director
J. Roger King (1)(2)....................... 58 Director
James V. Napier(1)(3)...................... 62 Director
William J. Simione, Jr.(2)(3).............. 57 Director
</TABLE>
- - ---------------
(1) Member of the Compensation Committee of the Board of Directors.
(2) Member of the Governance Committee of the Board of Directors.
(3) Member of the Audit Committee of the Board of Directors.
Edward P. Drudge, Jr.: Mr. Drudge has served as the Chairman of the Board
and Chief Executive Officer of the Company since the formation of the Company in
July 1995. Prior to that time, Mr. Drudge was President of the Personnel Group
of America Division of Adia, S.A. a Swiss corporation ("Adia"), and Senior Vice
President of Adia Services, Inc., a California corporation and wholly owned
subsidiary of Adia ("Adia California"), having joined Adia in April 1989 to
start the Personnel Group of America Division. Prior to joining Adia, Mr. Drudge
held senior management positions with Manpower Inc., a provider of personnel
services, for 16 years, and prior to that, sales and marketing positions with
Procter & Gamble.
James C. Hunt: Mr. Hunt joined the Company as a Senior Vice President in
January 1997, and has served as Chief Financial Officer and Treasurer and as a
director of the Company since March 1997. Prior to joining the Company, Mr. Hunt
spent 18 years with Arthur Andersen LLP, a worldwide accounting and consulting
firm, the last six years as a partner.
Ken R. Bramlett, Jr.: Mr. Bramlett has served as Senior Vice President,
General Counsel and Secretary of the Company since October 1996, and as a
director of the Company since August 1997. Prior to joining the Company, Mr.
Bramlett spent 12 years with Robinson, Bradshaw & Hinson, P.A., a Charlotte,
North Carolina law firm, the last six years as a partner. Mr. Bramlett also
serves on the board of directors of World Acceptance Corporation, a small loan
consumer finance company headquartered in Greenville, South Carolina.
Donald Kierson: Mr. Kierson has served as Chief Information Officer of the
Company since January 1999. From 1988 until December 1998, Mr. Kierson served in
various sales and administrative capacities for Richmond-based information
technology services provider Broughton Systems, the last year as President.
Broughton Systems was acquired by the Company in July 1996.
5
<PAGE> 9
Michael H. Barker: Mr. Barker has served as President of the Commercial
Staffing Division of the Company since January 1998. Prior to joining the
Company, Mr. Barker served as the Chief Operations Officer for the Computer
Group Division of IKON Technology Services, a diversified technology company,
for three years. Prior to that, Mr. Barker served as a regional Vice President
for Control Data, Inc., a systems integration company, for three years.
William T. McCarthy: Mr. McCarthy has served as President of the
Information Technology Division of the Company since September 1998. Prior to
joining the Company, Mr. McCarthy served as Vice President of Intelli-Sourcing
for Syntel, Inc., a national information technology services firm, from December
1997 to September 1998, and prior to that, spent seven years as Associate
Partner/Managing Director with Andersen Consulting, a worldwide consulting firm.
Ann S. Fleming: Ms. Fleming has served as Senior Vice President -- Central
Operations of the Commercial Staffing Division since October 1996 and as
President of FirstWord Staffing Services since September 1991. Prior to joining
the Company, Ms. Fleming spent nine years in the temporary help business with
Manpower, Inc. and Volt Information Services.
Jeffrey B. Walker: Mr. Walker has served as Vice President -- Atlantic
Operations of the Commercial Staffing Division since joining the Company in
August 1998. Prior to joining the Company, Mr. Walker served as Director of
Corporate Accounts at Olsten Corporation for three years. Prior to that, Mr.
Walker served as a Manager of Strategic Planning and Training for L.M. Berry
Company, a BellSouth Corporation subsidiary, for 13 years.
Cynthia Carlson: Ms. Carlson has served as Vice President -- Candidate
Outsourcing in the Information Technology Division since joining the Company in
January 1999. From January 1998 to December 1998, Ms. Carlson served as
Education Division Leader for IKON Technology Services, a diversified technology
company. From 1983 to 1997, she served as President of Carlson Compute, a
technology training company that was sold to IKON Technology Services in 1997.
Kevin P. Egan: Mr. Egan has served as a director of the Company since
September 1995. Since October 1995, Mr. Egan has been President of Tamarack
Holdings, an investment company. From 1983 to September 1995, Mr. Egan served as
President and Chief Operating Officer of PrimeNet DataSystems, St. Paul,
Minnesota, a provider of database and integrated marketing services. Prior to
forming PrimeNet in 1983, Mr. Egan was senior vice president of Manpower Inc.
from 1975 to 1983. Mr. Egan also previously held marketing and management
positions with the Graphic Services Division of 3M Company and Transamerica
Computer Co., London, England.
J. Roger King: Mr. King has served as a director of the Company since
September 1995. Mr. King retired on February 1, 1998, after a 28-year career
with PepsiCo, Inc. and its affiliates. Mr. King joined the Frito-Lay Division of
PepsiCo in 1969 and served in various personnel and employee relations positions
for PepsiCo, including Senior Vice President of Personnel of PepsiCo, from 1984
to 1995. Mr. King served as Senior Vice President of Human Resources of
Frito-Lay from June 1995 until his retirement.
James V. Napier: Mr. Napier has served as a director of the Company since
September 1995. Since November 1992, Mr. Napier has been the Chairman of
Scientific-Atlanta, Inc., a telecommunications company. Between 1988 and 1992,
Mr. Napier served as Chairman and Chief Executive Officer of The Commercial
Telephone Group, a telecommunications engineering and design company, and
between 1985 and 1986, served as Chief Executive Officer and President of HBO &
Company, Inc., a health care information services company. In addition to
serving on the boards of directors of the Company and Scientific-Atlanta, Mr.
Napier is a director of Engelhard Corporation, Vulcan Materials Company, HBO &
Company, Inc., Intelligent Systems Corporation and Westinghouse Air Brake
Company.
William J. Simione, Jr.: Mr. Simione has served as a director of the
Company since September 1995. Since October 1996, Mr. Simione has served as Vice
Chairman of the Board of Directors and Executive Vice President of Simione
Central Holdings, Inc., which provides consulting services and information
systems to the home health care industry. He is a member of the Prospective
Payment Task Force, a Regulatory Affairs
6
<PAGE> 10
Subcommittee for the National Association for Home Care, and is one of the
Subcommittee's National Reimbursement Consultants.
During fiscal 1998, the Board of Directors held four regularly scheduled
meetings and took certain actions by unanimous written consent. All incumbent
directors had perfect attendance at (a) all meetings of the Board of Directors
held during 1998 (except that Mr. Simione was unable to attend the December
board meeting) and (b) all meetings of Board committees held during 1998 to the
extent such directors served on such committees.
Messrs. Napier and Simione served as members of the Audit Committee of the
Board of Directors (the "Audit Committee") during 1998. The Audit Committee
meets with appropriate financial and legal personnel and independent public
accountants of the Company and reviews the internal controls of the Company and
the objectivity of its financial reporting. This Committee makes recommendations
to the Board of Directors with respect to the appointment of the independent
public accountants to serve as auditors in examining the corporate accounts of
the Company. The Company's independent public accountants periodically meet
privately with the Audit Committee and have access to the Audit Committee at any
time. The Audit Committee met twice during 1998.
Messrs. Egan, King and Napier served as members of the Compensation
Committee of the Board of Directors (the "Compensation Committee") during 1998.
The Compensation Committee reviews proposals regarding the establishment or
change of benefit plans, salaries and compensation of the executive officers and
other employees of the Company, advises management and makes recommendations to
the Board of Directors with respect thereto, and administers the Company's 1995
Equity Participation Plan and the Company's Management Incentive Compensation
Plan. The Compensation Committee met three times during 1998 and took a number
of actions by written consent.
Messrs. Egan, King and Simione served as members of the Governance
Committee of the Board of Directors (the "Governance Committee") during 1998.
The Governance Committee provides general oversight of the governance of the
Board of Directors, makes recommendations concerning Board size, make-up,
structure and compensation and from time to time recommends nominees for the
Board and its committees. The Governance Committee met once during 1998.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and executive officers, and persons who
beneficially own, within the meaning of Rule 16a-1 under the Exchange Act, more
than 10% of a registered class of the Company's equity securities, to file with
the Securities and Exchange Commission initial reports of ownership and reports
of changes in ownership of Common Stock and other equity securities of the
Company. Executive officers, directors and greater than 10% beneficial owners
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file. To the Company's knowledge and based solely on a
review of the copies of such reports furnished to the Company during the fiscal
year ended January 3, 1999, all Section 16(a) filing requirements applicable to
its executive officers and directors and any greater than 10% beneficial owners
were complied with.
DIRECTOR COMPENSATION
Each non-employee director currently receives an annual retainer of
$10,000, and each such director who chairs a committee also receives an annual
retainer of $1,000. In addition, non-employee directors receive meeting fees of
$1,000 per board meeting attended and $500 per committee meeting attended, plus
reimbursement of expenses. The Company has implemented a deferred compensation
plan (the "Deferred Fee Plan") for the non-employee directors under which
participating directors may defer any or all of their retainer and meeting fees
for specified time periods. The Deferred Fee Plan is non-qualified for tax
purposes. Deferred fees under the Deferred Fee Plan earn interest at the prime
rate or, at each participating director's option, a return based on the
Company's stock price performance over time. Each non-employee director,
7
<PAGE> 11
except for Mr. King, has elected to defer 100% of the retainer and meeting fees
to which he otherwise would be entitled in 1999 under the Deferred Fee Plan.
Each non-employee director also receives, upon joining the Board, an
initial option grant to purchase 12,500 shares of Common Stock, an additional
option grant to purchase 6,250 shares of Common Stock in each of the succeeding
two years, and an annual option grant to purchase 3,000 shares of Common Stock
in each year thereafter that such director remains on the Board. All of such
options are granted under the Company's 1995 Equity Participation Plan, which
requires that the exercise price for options granted under the plan equal the
fair market value of the Common Stock on the date of grant. In July 1997, each
non-employee director also received a special grant of 5,000 restricted shares
of Common Stock. These shares vest in equal installments of 33 1/3% on each of
the first, second and third anniversaries of the grant date.
EXECUTIVE COMPENSATION
The following table sets forth compensation information for fiscal 1998,
1997 and 1996 for those persons who were, at January 3, 1999, the Chief
Executive Officer, the Company's other executive officers and the Company's
Division Presidents:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
-------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION OPTIONS(#)(1) COMPENSATION
- - --------------------------- -------- -------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Edward P. Drudge, Jr........ 1998 $373,750 $485,825 $ -- 117,114(2) $24,903(3)
Chairman and Chief 1997 347,942 439,671 178,916(4) 22,415(5)
Executive Officer 1996 307,500 -- 543,634(6) 19,559(7)
James C. Hunt............... 1998 $257,100 $198,343 $55,279(8) 68,142(2)(9) $ --
Senior Vice President,
Chief 1997(10) 234,200 185,890 -- 164,680(4) 50,000(5)
Financial Officer and
Treasurer
Ken R. Bramlett, Jr......... 1998 $198,722 $148,964 $ -- 41,296(9) $ --
Senior Vice President, 1997 177,623 57,750 40,810(4) 50,000(5)
General Counsel and 1996(11) 43,807 -- 50,364(6) --
Secretary
Michael H. Barker........... 1998(12) $200,694 $ 67,503 $48,746(13) 60,346(2) $ 7,462(3)
President -- Commercial
Staffing Division
William T. McCarthy......... 1998(14) $ 80,919 $ 37,500 $ -- 78,617 $ 2,352(3)
President -- Information
Technology Division
</TABLE>
- - ---------------
(1) Except as set forth below, 1996 option grants shown for each of the named
officers generally vested 20% on the grant dates of such options, with an
additional 20% vesting on each successive anniversary of the grant date, and
1997 and 1998 option grants generally vest 25% on each of the first four
anniversaries of the grant dates.
(2) Includes 17,114 options, 6,846 options and 6,846 options granted to Mr.
Drudge, Mr. Hunt and Mr. Barker, respectively, on December 31, 1998, in lieu
of a portion of their 1998 bonuses. See "Compensation Committee Report on
Executive Compensation." These options had an exercise price of $17.53 and
were vested 100% on the date of grant.
(footnotes continued)
8
<PAGE> 12
(3) Represents 1998 allocations to the Company's non-qualified profit-sharing
plan for the named officers and $500 in employee matching contributions to
Mr. Drudge's individual retirement account.
(4) Includes 78,916 options, 4,680 options and 10,810 options granted to Mr.
Drudge, Mr. Hunt and Mr. Bramlett, respectively, on December 31, 1997, in
lieu of a portion of their 1997 bonuses. See "Compensation Committee Report
on Executive Compensation." These options had an exercise price of $16.03
and were vested 100% on the date of grant.
(5) Represents 1997 allocations to the Company's non-qualified profit-sharing
plan for the named officers and $500 in employee matching contributions to
Mr. Drudge's individual retirement account.
(6) Includes 103,634 options and 10,364 options granted to Mr. Drudge and Mr.
Bramlett, respectively, on January 2, 1997, in lieu of their 1996 bonuses.
These options had an exercise price of $11.59 and were vested 100% on the
date of grant.
(7) Includes $19,059 in non-qualified profit-sharing allocations for 1996 and
$500 in employer matching contributions to Mr. Drudge's individual
retirement account.
(8) Represents reimbursement of country club initiation fees, including
gross-up to cover income taxes associated therewith.
(9) Includes 11,296 options granted to each of Mr. Hunt and Mr. Bramlett on
February 17, 1999, in lieu of a 1998 allocation for the named officers
under the Company's non-qualified profit-sharing plan. These options were
granted at an exercise price of $13.28 and vest 25% on each of the first
four anniversaries of the grant date.
(10) Mr. Hunt joined the Company in January 1997.
(11) Mr. Bramlett joined the Company in October 1996.
(12) Mr. Barker joined the Company in January 1998.
(13) Represents reimbursement of moving expenses, including gross-up to cover
income taxes associated therewith.
(14) Mr. McCarthy joined the Company in September 1998.
Option Grants Table. The following table sets forth certain information
concerning grants of stock options to the named officers during fiscal 1998:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% OF TOTAL
INDIVIDUAL GRANTS OPTIONS GRANTED EXERCISE GRANT DATE
NUMBER OF SECURITIES UNDERLYING TO EMPLOYEES OR BASE PRICE EXPIRATION PRESENT VALUE
NAME OPTIONS GRANTED (#)(1) IN FISCAL YEAR ($/SH) DATE ($)(5)(6)
- - ---- ------------------------------- --------------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Edward P. Drudge,
Jr................. 100,000(2) 9.5% $12.25 09/28/08 $530,000
17,114(3) 1.6 17.53 12/31/08 124,761
James C. Hunt........ 50,000(2) 4.7 12.25 09/28/08 265,000
6,846(3) * 17.53 12/31/08 49,907
Ken R. Bramlett,
Jr................. 30,000(2) 2.8 12.25 09/28/08 159,000
Michael H. Barker.... 30,000(4) 2.8 16.63 01/19/08 219,000
23,500(2) 2.2 12.25 09/28/08 124,550
6,846(3) * 17.53 12/31/08 49,907
William T. McCarthy.. 78,617(2) 7.4 12.72 09/18/08 433,180
</TABLE>
- - ---------------
* Less than 1%
(1) Amounts shown exclude 11,296 options granted to each of Mr. Hunt and Mr.
Bramlett on February 17, 1999, in lieu of a 1998 allocation for the named
officers under the Company's non-qualified profit-sharing plan. These
options were granted at an exercise price of $13.28 and vest 25% on each of
the first four anniversaries of the grant date.
(footnotes continued)
9
<PAGE> 13
(2) These options are currently 100% unvested, and will vest 25% per year on
each anniversary date of grant through 2002.
(3) These options were granted on December 31, 1998, to the named officers, in
lieu of a portion of their 1998 bonuses, and were vested 100% on the date of
grant.
(4) These options are currently 25% vested, and will continue vesting 25% per
year on each anniversary date of grant through 2002.
(5) Calculated in accordance with the Binomial Model for estimating the value of
stock options, which estimates the present value of an option based upon
assumptions as to future variables such as interest rate and stock price
volatility. The Binomial calculations assumed an expected volatility of
40.0%, an interest rate of between 4.25% and 5.63%, depending on the grant
date and no dividends. The actual value, if any, realized on the exercise of
an option will depend on the excess of the fair market value of the stock
over the exercise price on the date the option is exercised, and may be
substantially different from the value estimated by the Binomial Model.
(6) As of March 26, 1999, the closing sales price for the Common Stock on the
New York Stock Exchange was $6.38. Based upon such price, the current value
of each of these options is zero.
Option Year-End Value Table. The following table sets forth certain
information concerning unexercised options held as of the end of fiscal 1998:
FISCAL YEAR-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS AT FY-END (#) OPTIONS AT FY-END ($)(1)(2)
---------------------------------- ----------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Edward P. Drudge, Jr.......... 774,379 422,429 $5,071,933 $2,207,160
James C. Hunt................. 100,526 121,000 506,445 602,835
Ken R. Bramlett, Jr........... 52,674 68,500 228,829 269,563
Michael H. Barker............. 6,846 53,500 35,942 53,295
William T. McCarthy........... -- 78,617 -- 375,884
</TABLE>
- - ---------------
(1) The fair market value of the Common Stock used for these computations was
$17.50, which was the last sales price for the Common Stock on the New York
Stock Exchange on December 31, 1998.
(2) As of March 26, 1999, the closing sales price of the Common Stock was $6.38.
Based upon such price, none of the options shown is currently in-the-money.
EMPLOYMENT AGREEMENTS
Edward P. Drudge, Jr. is employed pursuant to the terms of an employment
agreement, dated as of September 29, 1995, and amended as of March 1, 1998,
which provides for his employment as Chief Executive Officer of the Company
until September 30, 2001, subject to automatic renewal for successive one-year
periods unless either the Company or Mr. Drudge has given notice of non-renewal
six months prior to expiration. The employment agreement currently provides for
(i) an annual base salary of $385,000 (subject to annual adjustment as
determined by the Compensation Committee) and (ii) the right to earn bonuses
under the Company's Management Incentive Compensation Plan. If Mr. Drudge's
employment agreement is terminated by the Company other than for cause or by Mr.
Drudge upon a change in terms and conditions of employment or following a change
in control of the Company, the Company must pay Mr. Drudge severance equal to 24
months' salary and any unpaid bonus to which he would otherwise have been
entitled, and all unvested options to purchase Common Stock then held by Mr.
Drudge become immediately exercisable. The employment agreement contains a
provision prohibiting Mr. Drudge from competing with the Company or soliciting
employees and customers of the Company for a period of two years from the date
Mr. Drudge's employment with the Company ceases.
James C. Hunt is employed pursuant to the terms of an employment agreement,
dated as of January 2, 1997, which provides for his employment as Senior Vice
President, Chief Financial Officer and Treasurer of
10
<PAGE> 14
the Company until December 31, 1999, subject to automatic renewal for successive
one-year periods unless either the Company or Mr. Hunt has given notice of
non-renewal six months prior to expiration. The employment agreement currently
provides for (i) an annual base salary of $265,000 (subject to annual adjustment
as determined by the Compensation Committee) and (ii) the right to earn bonuses
under the Company's Management Incentive Compensation Plan. If Mr. Hunt's
employment agreement is terminated by the Company other than for cause or by Mr.
Hunt upon a change in terms and conditions of employment or following a change
in control of the Company, the Company must pay Mr. Hunt severance equal to 24
months' salary and any unpaid bonus to which he would otherwise have been
entitled, and all unvested options to purchase Common Stock then held by Mr.
Hunt become immediately exercisable. The employment agreement contains a
provision prohibiting Mr. Hunt from competing with the Company or soliciting
employees and customers of the Company for a period of two years from the date
Mr. Hunt's employment with the Company ceases.
Ken R. Bramlett, Jr. is employed pursuant to the terms of an employment
agreement, dated as of October 7, 1996, which provides for his employment as
Senior Vice President of the Company until September 30, 1999, subject to
automatic renewal for successive one-year periods unless either the Company or
Mr. Bramlett has given notice of non-renewal six months prior to expiration. The
employment agreement currently provides for (i) an annual base salary of
$200,000 (subject to annual adjustment as determined by the Compensation
Committee) and (ii) the right to earn bonuses under the Company's Management
Incentive Compensation Plan. If Mr. Bramlett's employment agreement is
terminated by the Company other than for cause or by Mr. Bramlett upon a change
in terms and conditions of employment or following a change in control of the
Company, the Company must pay Mr. Bramlett severance equal to 12 months' salary
and any unpaid bonus to which he would otherwise have been entitled, and all
unvested options to purchase Common Stock then held by Mr. Bramlett become
immediately exercisable. The employment agreement contains a provision
prohibiting Mr. Bramlett from competing with the Company or soliciting employees
and customers of the Company for a period of two years from the date Mr.
Bramlett's employment with the Company ceases.
Michael H. Barker is employed pursuant to the terms of an employment
agreement, dated as of January 19, 1998, which provides for his employment as
President of the Commercial Staffing Division of the Company until January 18,
2000, subject to automatic renewal for successive one-year periods unless either
the Company or Mr. Barker has given notice of non-renewal six months prior to
expiration. The employment agreement currently provides for (i) an annual base
salary of $214,000 (subject to annual adjustment as determined by the
Compensation Committee) and (ii) the right to earn bonuses under the Company's
Management Incentive Compensation Plan. If Mr. Barker's employment agreement is
terminated by the Company other than for cause or by Mr. Barker upon a change in
terms and conditions of employment or following a change in control of the
Company, the Company must pay Mr. Barker severance equal to 12 months' salary
and any unpaid bonus to which he would otherwise have been entitled, and all
unvested options to purchase Common Stock then held by Mr. Barker become
immediately exercisable. The employment agreement contains a provision
prohibiting Mr. Barker from competing with the Company or soliciting employees
and customers of the Company for a period of two years from the date Mr.
Barker's employment with the Company ceases.
William T. McCarthy is employed pursuant to the terms of an employment
agreement, dated as of September 18, 1998, which provides for his employment as
President of the Information Technology Division of the Company until September
28, 1999, subject to automatic renewal for successive one-year periods unless
either the Company or Mr. McCarthy has given notice of non-renewal six months
prior to expiration. The employment agreement currently provides for (i) an
annual base salary of $300,000 (subject to annual adjustment as determined by
the Compensation Committee) and (ii) the right to earn bonuses under the
Company's Management Incentive Compensation Plan. If Mr. McCarthy's employment
agreement is terminated by the Company other than for cause or by Mr. McCarthy
upon a change in terms and conditions of employment or following a change in
control of the Company, the Company must pay Mr. McCarthy severance equal to 12
months' salary and any unpaid bonus to which he would otherwise have been
entitled, and all unvested options to purchase Common Stock then held by Mr.
McCarthy become immediately exercisable. The employment agreement contains a
provision prohibiting Mr. McCarthy from competing with
11
<PAGE> 15
the Company for a period of one year from the date Mr. McCarthy's employment
with the Company ceases. Additionally, Mr. McCarthy is prohibited from
soliciting employees and customers of the Company for a period of two years from
the date Mr. McCarthy's employment with the Company ceases.
Donald Kierson is employed pursuant to the terms of an employment
agreement, dated as of January 4, 1999, which provides for his employment as
Chief Information Officer of the Company until January 3, 2000, subject to
automatic renewal for successive one-year periods unless either the Company or
Mr. Kierson has given notice of non-renewal six months prior to expiration. The
employment agreement currently provides for (i) an annual base salary of
$155,000 (subject to annual adjustment as determined by the Compensation
Committee) and (ii) the right to earn bonuses under the Company's Management
Incentive Compensation Plan. If Mr. Kierson's employment agreement is terminated
by the Company other than for cause or by Mr. Kierson upon a change in terms and
conditions of employment or following a change in control of the Company, the
Company must pay Mr. Kierson severance equal to 12 months' salary and any unpaid
bonus to which he would otherwise have been entitled, and all unvested options
to purchase Common Stock then held by Mr. Kierson become immediately
exercisable. The employment agreement contains a provision prohibiting Mr.
Kierson from competing with the Company or soliciting employees and customers of
the Company for a period of two years from the date Mr. Kierson's employment
with the Company ceases.
12
<PAGE> 16
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL
It is the Compensation Committee's responsibility to review and recommend
to the Board for approval the compensation of the Company's senior officers. The
goals of the Company's compensation program for senior officers are to base
compensation on the attainment of performance objectives, to establish
compensation levels that will enable the Company to attract and retain talented
individuals and to motivate them to achieve the Company's business objectives,
including increasing shareholder value. To achieve these goals, the Company has
established a compensation program consisting of three principal components. The
components are base salary, incentive bonus awards and discretionary bonuses in
the form of equity-based compensation consisting primarily of qualified (or
incentive) and non-qualified stock options. The Company strives to structure its
compensation program to enable it to attract, retain and reward qualified senior
management whose contributions are critical to the Company's long-term success.
BASE SALARY
The Company considers the sustained performance of its senior officers in
establishing base salaries. Among the factors considered are length of service
with the Company, individual performance, scope of responsibilities and
successful management of administrative or financial functions or operating
subsidiaries or divisions. The assessment of management performance focuses on
both qualitative (leadership and management qualities) and quantitative (growth
of revenues, operating earnings and earning per share, as well as the
containment of expenses) factors.
The Chief Executive Officer evaluates the overall performance of the other
senior officers, including those officers named in the Summary Compensation
Table. Financial and business goals and objectives are discussed with key
executives and periodic meetings of key executives are held to discuss business
strategies, financial and business performance, budgeting matters and strategic
planning matters. An executive's overall evaluation is a combination of a
qualitative review by fellow executives and the Chief Executive Officer and a
review of the extent to which pre-established business and financial objectives
have been obtained.
Base salaries for fiscal 1998 for all officers named in the Summary
Compensation Table were determined in accordance with the terms of employment
agreements in effect with such executives, as adjusted annually by the
Compensation Committee based on the factors mentioned above. The recommendation
for a particular base salary adjustment was determined primarily by the Chief
Executive Officer, based on the above factors, with no specified weight being
given to any particular performance factor, business or financial objective. The
recommendations were presented to the Compensation Committee, together with
industry data on executive compensation at comparable companies. For fiscal
1998, financial goals established for determining adjustments to base salary
were met or exceeded in most cases and, in such cases, appropriate adjustments
to base salary were made.
INCENTIVE BONUS AWARDS
Early in each fiscal year, the Compensation Committee establishes a range
of incentive bonus compensation that may be earned as part of each senior
officer's annual compensation. For fiscal 1998, incentive bonus compensation for
Mr. Drudge, Mr. Hunt and Mr. Bramlett was based on the Company's achievement of
pre-established annual earnings per share goals. The Committee believes that the
use of earnings per share targets in determining incentive bonus compensation
for these individuals is an appropriate way to directly align the interests of
the Company's executive officers and shareholders. Incentive bonus compensation
in fiscal 1998 for Mr. Barker and Mr. McCarthy, the Company's Division
Presidents, was based on the achievement of pre-established annual financial
goals relating to increases in the earnings growth before interest and taxes,
relative to budget and prior year, of their respective divisions. The financial
goals established for fiscal 1998 for the payment of incentive compensation to
all of the named officers were met or exceeded in most cases, and bonuses were
authorized where appropriate.
13
<PAGE> 17
In 1997, the Compensation Committee implemented a program designed to
encourage designated senior officers of the Company to take a portion of their
annual incentive bonuses in the form of stock options. Under this program, each
designated officer may elect, prior to the end of each fiscal year, to receive a
set percentage (up to 50%) of his bonus for that year in the form of stock
options granted under the Company's 1995 Equity Participation Plan, the number
of options being granted in each case to be determined by a formula set by the
Committee. The Compensation Committee established this program for two main
reasons (in addition to the other factors considered below in the granting of
stock options generally). First, distributing stock options to selected senior
officers in lieu of cash bonuses enables the Company to conserve cash for
investment. Second, paying bonuses in stock options is consistent with one of
the Compensation Committee's stated goals of increasing the equity portion of
senior officer compensation and Company equity holdings by the senior officers
generally.
For fiscal 1998, the Committee granted 17,114 options, 6,846 options and
6,846 options to Mr. Drudge, Mr. Hunt and Mr. Barker, respectively, in lieu of
portions of their 1998 cash bonuses. These options were granted at an exercise
price of $17.53 and vested 100% on the date of grant.
DISCRETIONARY BONUS AWARDS/EQUITY BASED COMPENSATION
One of the Compensation Committee's stated goals as discussed above is to
increase the equity portion of senior officers compensation generally.
Accordingly, the Company also rewards its senior officers with discretionary
compensation awards, generally in the form of incentive stock options and
non-qualified stock options granted under the Company's 1995 Equity
Participation Plan. Through the granting of stock options, the Company seeks to
align the interests of key employees more closely with those of the Company's
shareholders by motivating and rewarding actions that lead to long-term value
creation for shareholders. In addition, the Company recognizes that stock
options are a necessary part of a competitive compensation program, which, as
discussed above, is designed to attract and retain qualified executives.
Historically, options granted to senior officers (other than options granted in
lieu of cash bonuses) have vested over a four-year period in order to encourage
executives and other key employees to remain in the employ of the Company and to
foster a long-term perspective.
In fiscal 1998, the Company used incentive stock options to achieve the
competitive compensation levels it determined to be necessary for the executive
officers named in the Summary Compensation Table. In addition, the Company
granted incentive options in fiscal 1998 to all full-time employees that had
been with the Company for at least one year prior to the date of grant,
consisting of approximately 970 individuals. Most options granted vest over a
four-year period and, accordingly, are a form of long-term compensation.
All options are granted by the Compensation Committee, acting as the stock
option committee under the Company's 1995 Equity Participation Plan. In
determining the employees to whom options would be awarded and the size of the
option awards, the Committee received a recommended list of key employees that
was compiled primarily by the Chief Executive Officer, the Division Presidents
and the operating company presidents with a view toward a fair and equitable
distribution of options among the employee pool.
CHIEF EXECUTIVE OFFICER'S COMPENSATION
The compensation of Edward P. Drudge, Jr., the Company's Chief Executive
Officer, is determined pursuant to the terms of his employment agreement with
the Company, as adjusted annually by the Compensation Committee based on the
factors described above. See "Executive Compensation -- Employment Agreements."
In fiscal 1998, Mr. Drudge's employment agreement provided for a base annual
salary, adjusted based on 1997 performance, and an incentive bonus based on 1998
earnings per share growth during the year. Earnings per share from continuing
operations rose to $0.96 during 1998, up 35% over 1997 and up 2.1% over the
consensus Wall Street estimates for the 1998 Company's earnings per share at the
beginning of the year. Because these financial results met or exceeded the
financial goals established for determining the payment of incentive
compensation, Mr. Drudge was paid $485,825 as a cash bonus. Mr. Drudge was also
granted 17,114 stock options under the 1995 Equity Participation Plan on
December 31, 1998.
14
<PAGE> 18
Also in 1998, the Compensation Committee granted 100,000 stock options to
Mr. Drudge on September 28, 1998. The 1998 award was made by the Compensation
Committee on the basis of the factors set forth above under the heading
"Discretionary Bonus Awards/Equity Based Compensation."
SECTION 162(M) OF THE INTERNAL REVENUE CODE
It is the Company's policy generally to design the Company's compensation
programs to comply with Section 162(m) of the Code, so that total compensation
paid to any employee will not exceed $1.0 million in any one year, except for
compensation payments in excess of $1.0 million that which qualify as
"performance-based." The Company intends to comply with other requirements of
the performance-based compensation exclusion under Section 162(m), including
option pricing requirements and requirements governing the administration of the
1995 Equity Participation Plan and the Management Incentive Compensation Plan,
so that the deductibility of compensation paid to top executives thereunder is
not expected to be disallowed.
Compensation Committee:
Kevin P. Egan
J. Roger King
James V. Napier
15
<PAGE> 19
CORPORATE PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Company's
Common Stock from the effective date of the Company's initial public offering,
September 25, 1995, through the end of the Company's most recent fiscal year,
with the cumulative total return of the S&P 400 Index, and a peer group index
selected by the Company (the "Peer Group Index"), consisting of nine public
companies that specialize in providing personnel staffing services in the United
States. All cumulative returns assume the investment of $100 in each of the
Company's Common Stock, the S&P 400 Index and the Peer Group Index on September
25, 1995, and assume the reinvestment of dividends.
<TABLE>
<CAPTION>
Personnel
Measurement Period Group of Peer
(Fiscal Year Covered) America, Inc. S&P 400 Group
<S> <C> <C> <C>
9/25/95 100 100 100
12/95 104 104 108
12/96 172 124 141
12/97 236 164 177
12/98 250 187 155
</TABLE>
- - ---------------
* The Peer Group Index consists of the following companies: Interim Services,
Inc., Modis Incorporated (formerly AccuStaff), Barrett Business Services,
Inc., Robert Half International, Inc., Kelly Services, Inc., Manpower, Inc.,
Norrell Corporation, Metamor Worldwide, Inc. and Staffmark Corporation.
16
<PAGE> 20
PROPOSAL 2.
APPROVAL OF AMENDED AND RESTATED MANAGEMENT
INCENTIVE COMPENSATION PLAN
GENERAL
On March 25, 1999, the Compensation Committee amended and restated the
Company's Management Incentive Compensation Plan, which provides for annual
bonuses to eligible employees based on the achievement of pre-established
Company performance goals. The shareholders are being asked to approve the
Amended and Restated Management Incentive Compensation Plan (the "Incentive
Plan") in order to comply with Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"). Section 162(m) generally disallows a tax
deduction to a public company for compensation over $1 million paid to the
Company's chief executive officer or four other most highly compensated
officers. Qualifying "performance-based" compensation is not subject to the
deduction limit if, among other things, it is awarded pursuant to a plan
properly disclosed to, and approved by, the shareholders. Up until the Annual
Meeting, the Company has relied on a transition rule that temporarily exempts
from the Section 162(m) limitations awards under a plan approved by shareholders
before the Company went public. Further awards of qualifying compensation under
the Incentive Plan are contingent on shareholder approval. Approval of the
Incentive Plan requires the affirmative vote of a majority of the outstanding
shares present or represented by proxy and entitled to vote at the Annual
Meeting.
SUMMARY OF THE INCENTIVE PLAN
The following summary of the Incentive Plan is qualified in its entirety by
the text of the Incentive Plan, a copy of which is attached hereto as Exhibit A.
The Plan is intended to motivate all Company employees toward higher
achievement, to align their goals with those of the Company and its shareholders
and to attract and retain highly qualified employees. All employees of the
Company are eligible to participate. Participants will be selected annually by
the committee that administers the plan (the "Plan Committee"). The Compensation
Committee currently acts as the Plan Committee. Participants must be selected
within the first 90 days of the fiscal year or such longer period as may then be
permitted by Section 162(m) (the "Selection Period"). The Plan Committee may
consider any and all relevant factors in selecting participants, including the
individual's functions, responsibilities, value of services provided and past
and potential contributions to the Company's profitability and sound growth.
Participants may receive a bonus under the Incentive Plan based on the
attainment of Company performance objectives established during the Selection
Period by the Plan Committee and related to one or more of the following Company
business criteria: pre-tax income, operating income, cash flow, earnings per
share, return on equity, return on invested capital or assets, cost reductions
and savings, return on revenues, collections of accounts receivable or
productivity. The Plan Committee will establish a bonus matrix during the
Selection Period that determines the level of each participant's award based on
the degree to which the performance goals are achieved.
Participants have the right under the Incentive Plan to elect to receive up
to 50% of their annual bonus award entitlement in fully vested stock options
rather than cash. Such elections must be made no later than the last business
day of the fiscal year to which the award relates and may specify any
percentage, up to 50% of the bonus award, that the participant wishes to receive
in stock options. The Plan Committee will calculate the amount of any option
election awards by performing a Black-Scholes option pricing or using a similar
valuation method.
The options will be issued at an exercise price equal to 100% of fair
market value on the date of grant, which is the last business day of the fiscal
year for which the bonus is otherwise payable. The cash portion of all awards
will be payable on or before March 1 of the year following the year in which the
bonus is earned. Payment of any bonus is contingent on the employee's continued
employment through the last day of the
17
<PAGE> 21
bonus performance period, but the Plan Committee has the discretion to make
exceptions to this requirement in the case or retirement, death or disability.
No bonuses may be paid to a person who is a "covered employee" within the
meaning of Section 162(m) (a "Section 162(m) Employee") until the Plan Committee
certifies in writing that the performance standards have been met. The Plan
Committee has discretion to reduce, but not to increase, the bonus payable to a
Section 162(m) Employee. The Incentive Plan imposes additional administrative
requirements on the Plan Committee designed to comply with Section 162(m), but
the Plan Committee has discretion whether to apply such requirements to
employees other than Section 162(m) Employees.
The maximum bonus award that is payable to any participant for any annual
bonus period may not exceed the lesser of 250% of the participant's base salary
for the bonus period or $1,250,000. The original limitations established in 1995
when the Incentive Plan was initially adopted were 100% of base salary or
$500,000. The Compensation Committee and the Board of Directors believe that
this increase in the maximum individual award is necessary and appropriate to
reflect both the Company's growth since its initial public offering and the
growth in potential bonus compensation levels of the Company's executive
officers, particularly Edward P. Drudge, Jr.
The Company reserves the right to amend or terminate the Incentive Plan at
any time in its sole discretion, and amendments will require shareholder
approval only to the extent required by applicable laws, regulations or stock
exchange requirements.
All stock options elected in lieu of cash bonuses may be incentive stock
options ("ISOs") or non-qualified stock options under the Code ("NQSOs").
Certain federal income tax consequences with respect to ISOs and NQSOs are
described below under "Approval of Continuation of 1995 Equity Participation
Plan - Federal Income Tax Consequences."
SCOPE OF AMENDMENTS
In addition to certain administrative changes, including those directed at
complying with Section 162(m), the amendments to the Incentive Plan are designed
primarily to (i) provide that all employees of the Company are eligible to
participate, (ii) add the provisions and mechanics described above relating to
participants' ability to receive up to 50% of their bonus award in stock options
in lieu of cash and (iii) increase the maximum bonus award payable to any
individual under the Incentive Plan, as described above.
18
<PAGE> 22
PLAN BENEFITS TABLE
The following table sets forth certain information concerning awards during
the fiscal year ended January 3, 1999, under the Incentive Plan and the
Company's 1995 Equity Participation Plan (which, as described under the
following proposal, is also being submitted for shareholder approval in order to
comply with Section 162(m)), to (i) each officer of the Company named in the
Summary Compensation Table, (ii) all current executive and other corporate
officers and Division Presidents as a group and (iii) all employees as a group,
other than current executive and other corporate officers and Division
Presidents.
PLAN BENEFITS
UNDER THE MANAGEMENT INCENTIVE COMPENSATION PLAN
AND 1995 EQUITY PARTICIPATION PLAN
<TABLE>
<CAPTION>
1995 EQUITY
INCENTIVE PLAN PARTICIPATION PLAN
--------------------------------- ----------------------
SECURITIES SECURITIES
UNDERLYING DOLLAR UNDERLYING
DOLLAR VALUE(1) OPTIONS(2) VALUE (1) OPTIONS(3)
------------------ ---------- --------- ----------
CASH BONUS OPTIONS
---------- -------
<S> <C> <C> <C> <C> <C>
Edward P. Drudge, Jr.......................... $485,825 $0 17,114 $0 100,000
Chairman and Chief Executive Officer
James C. Hunt................................. $198,343 $0 6,846 $0 50,000
Senior Vice President, Chief Financial
Officer and
Treasurer
Ken R. Bramlett, Jr........................... $148,964 -- -- $0 30,000
Senior Vice President, General Counsel and
Secretary
Michael H. Barker............................. $ 67,503 $0 6,846 $0 53,500(4)
President -- Commercial Staffing Division
William T. McCarthy........................... $ 37,500 -- -- $0 78,617
President -- Information Technology Division
All executive and other corporate officers and
Division Presidents as a group (6
persons).................................... $938,135 $0 30,806 $0 312,117
All employees as a group, other than executive
and other corporate officers and Division
Presidents (974 persons).................... $ 0 $0 0 $0 838,493
</TABLE>
- - ---------------
(1) Dollar value of all option grants is currently zero, based on the difference
between exercise prices of such stock options and $6.38, the closing price
of the Company's Common Stock on March 26, 1999.
(2) All options shown, which have been elected by the participant in lieu of
cash bonus, were 100% vested on the date of grant.
(3) Except as otherwise set forth in footnote 4 below, all these options are
currently unvested, and will vest 25% on each anniversary date of grant
through 2002.
(4) Of these options, 30,000 are currently 25% vested, and will continue vesting
25% per year on each anniversary date of grant through 2002.
The proposed text of the Incentive Plan is set forth in its entirety as
Exhibit A attached hereto.
FOR THE REASONS SET FORTH ABOVE, THE BOARD UNANIMOUSLY RECOMMENDS A VOTE
FOR THE APPROVAL OF THE INCENTIVE PLAN.
19
<PAGE> 23
PROPOSAL 3.
APPROVAL OF CONTINUATION OF 1995 EQUITY
PARTICIPATION PLAN
GENERAL
The shareholders are being asked to approve the continuation of the
Company's 1995 Equity Participation Plan (the "1995 Plan") in order to comply
with Section 162(m) of the Code. Section 162(m) of the Code generally disallows
a tax deduction to a public company for compensation over $1 million paid to its
chief executive officer or four other most highly compensated officers.
Qualifying "performance-based" compensation is not subject to the deduction
limit if, among other things, it is awarded pursuant to a plan properly
disclosed to and approved by, the shareholders. In particular, stock options,
the only type of award made to date under the 1995 Plan, will satisfy the
performance-based exception if the awards are made by a qualifying compensation
committee, the plan sets the maximum number of shares that can be granted to any
particular employee within a specified period and the compensation is based
solely on an increase in the stock price after the grant date (i.e. the option
exercise price is equal to or greater than the fair market value of the stock
subject to the award on the grant date). Up until the Annual Meeting, the
Company has relied on a transition rule that temporarily exempts from the
Section 162(m) limits awards under a plan that was approved by the shareholders
before the Company went public. Further awards of qualifying compensation under
the 1995 Plan are contingent on shareholder approval. Approval of the
continuation of the 1995 Plan requires the affirmative vote of a majority of the
outstanding shares present or represented by proxy and entitled to vote at the
Annual Meeting.
SUMMARY OF THE 1995 PLAN
The following summary of the 1995 Plan is qualified in its entirety by the
text of the 1995 Plan, a copy of which may be obtained, without charge, by
written request to the Company, 6302 Fairview Road, Suite 201, Charlotte, North
Carolina 28210, Attention: Corporate Secretary.
The 1995 Plan, which authorizes the grant of stock options, restricted
stock and other equity based awards, was adopted and approved by the Company's
shareholder prior to the Company's initial public offering in September 1995 to
attract and retain officers, key employees, consultants and directors. In 1995,
an aggregate of 1,200,000 shares of Common Stock were reserved for issuance
under the 1995 Plan. In 1997, the Company's public shareholders approved an
amendment to increase the number of shares reserved for issuance under the 1995
Plan to 15% of the Company's issued and outstanding Common Stock from time to
time. Based on the number of shares of Common Stock outstanding at March 26,
1999, an aggregate of 4,505,650 shares are reserved for issuance under the 1995
Plan, and options with respect to 3,075,018 of such reserved shares are issued
and outstanding. The maximum number of shares that may be subject to options or
stock appreciation rights ("SARs") granted under the 1995 Plan to any individual
in any calendar year may not exceed 200,000.
The Compensation Committee generally administers the 1995 Plan and
determines the persons to whom awards will be granted. Approximately 1,200
officers, employees, non-employee directors and consultants are eligible to
participate in the 1995 Plan. Options, SARs, restricted stock and other awards
under the 1995 Plan may be granted to such individuals as determined by the
Compensation Committee; provided, however, that the Board, acting as a majority,
generally administers the 1995 Plan with respect to options granted to outside
directors.
The terms of each award generally will be set forth in a separate agreement
with the participant. In addition, non-employee directors (including the
directors who administer the plan) are eligible to receive non-discretionary
grants of non-qualified stock options ("NQSOs") under the 1995 Plan pursuant to
the formula as described above under "Election of Directors -- Director
Compensation." NQSOs may be granted to an employee or consultant for any term
specified by the Compensation Committee and will provide for the right to
purchase Common Stock at a specified price which, except with respect to NQSOs
intended to qualify as
20
<PAGE> 24
performance-based compensation under Section 162(m), may be less than fair
market value on the date of grant (but not less than par value), and may become
exercisable (in the discretion of the Compensation Committee) in one or more
installments after the grant date. Of the NQSOs granted to non-employee
directors, 100% are fully vested and exercisable upon grant, and the term of
each such option shall be 10 years, subject to expiration 90 days after the
director ceases to serve as a director, except upon the director's retirement in
accordance with any Company retirement policy applicable to directors. Incentive
stock options may be granted only to employees and, if granted, will be designed
to comply with the provisions of the Code and will be subject to restrictions
contained in the Code, including a required exercise price equal to at least
100% of fair market value of Common Stock on the grant date and a 10-year
restriction on their term, but may be subsequently modified to disqualify them
from treatment as an incentive stock option. SARs may be granted to employees
and consultants and may be granted in connection and simultaneously with the
grant of an option, with respect to a previously granted option or independent
of an option. Participants may receive dividend equivalents representing the
value of the dividends per share paid by the Company, calculated with reference
to the number of shares covered by the stock options, SARs or performance awards
held by the participant. Performance awards may be granted by the Compensation
Committee to employees and consultants and may include bonus or "phantom" stock
awards that provide for payments based upon increases in the price of the
Company's Common Stock over a predetermined period. Restricted stock may be sold
to employees and consultants at various prices (but not below par value) and
made subject to such restrictions as may be determined by the Compensation
Committee. Deferred stock may be awarded to employees and consultants, typically
without payment of consideration, but subject to vesting conditions based on
continued employment or on performance criteria established by the Compensation
Committee. Whereas purchasers of restricted stock will have voting rights and
will receive dividends prior to the time when the restrictions lapse, recipients
of deferred stock generally will have no voting or dividend rights prior to the
time when vesting conditions are satisfied. Stock awards, including the number
of shares or units awarded, shall be determined by the Compensation Committee
and may be based upon the fair market value, book value, net profits or other
measure of the value of Common Stock or other specific performance criteria.
The exercise or purchase price for all options, SARs, restricted stock and
other rights to acquire Common Stock, together with any applicable tax required
to be withheld, may be paid in cash or at the discretion of the Compensation
Committee (or the Board, in the case of NQSOs granted to non-employee
directors), in shares of Common Stock owned by the optionee (or issuable upon
exercise of the option) or in other lawful consideration, including services
rendered.
The dates on which options or other awards under the 1995 Plan first become
exercisable and on which they expire will be set forth in individual stock
options or other agreements setting forth the terms of the awards. Such
agreements generally will provide that options and other awards expire within 90
days after the termination of the optionee's status as an employee or
consultant, although the Committee may provide that such options continue to be
exercisable following a termination without cause, or following a change in
control of the Company, or because of the grantee's retirement, death,
disability or otherwise. Similarly, restricted stock granted under the 1995 Plan
which has not vested generally will be subject to repurchase by the Company in
the event of the grantee's termination of employment or consultancy, although
the Committee may make exceptions, based on the reason for termination or on
other factors, in the terms of an individual restricted stock agreement.
No restricted stock, deferred stock, option, SAR or other right to acquire
Common Stock granted under the 1995 Plan may be assigned or transferred by the
grantee, except by will or the laws of intestate succession, although such
shares or the shares underlying such rights may be transferred if all applicable
restrictions have lapsed. During the lifetime of the holder of any option or
right, the option or right may be exercised only by the holder.
The shares subject to stock options, SARs or other awards which have
terminated or lapsed unexercised or which have been canceled upon grant of a new
option, SAR or other award, and shares which are withheld by the Company upon
the exercise of stock options or other awards in payment of the exercise price
thereof, will continue to be available for issuance under the 1995 Plan.
21
<PAGE> 25
The Compensation Committee has the right to accelerate, in whole or in
part, from time to time, conditionally or unconditionally, the right to exercise
any option or other award granted under the 1995 Plan other than NQSOs granted
to non-employee directors.
All amendments of the 1995 Plan to increase the number of shares as to
which options, SARs, restricted stock and other awards may be granted (except
for adjustments resulting from stock splits and the like) require the approval
of the Company's shareholders. The 1995 Plan generally may be amended, modified,
suspended or terminated by the Compensation Committee, unless such action would
otherwise require shareholder approval as a matter of applicable law, regulation
or rule. Amendments of the 1995 Plan will not, without the consent of the
participant, affect such person's rights under an award previously granted,
unless the award itself otherwise expressly so provides. The 1995 Plan
terminates 10 years from the date it was initially adopted by the Company's
Board of Directors.
FEDERAL INCOME TAX CONSEQUENCES
Certain tax consequences of the 1995 Plan under current federal law are
summarized in the following discussion, which deals with the general tax
principles applicable to the 1995 Plan and is intended for general information
only. Alternative minimum tax and state and local income taxes are not
discussed, and may vary depending on individual circumstances and from locality
to locality.
For federal income tax purposes, the recipient of NQSOs granted under the
1995 Plan will not have taxable income upon the grant of the option, nor will
the Company then be entitled to any deduction. Generally, upon exercise of NQSOs
the optionee will realize ordinary income, and the Company will be entitled to a
deduction, in an amount equal to the difference between the option exercise
price and the fair market value of the stock at the date of exercise. An
optionee's basis for the stock for purposes of determining his gain or loss on
his subsequent disposition of the shares generally will be the fair market value
of the stock on the date of exercise of the NQSO. There is no taxable income to
an employee when an incentive stock option ("ISO") is granted to him or when
that option is exercised; however, the amount by which the fair market value of
the shares at the time of exercise exceeds the option price will be an "item of
tax preference" for the optionee. Gain realized by an optionee upon sale of
stock issued on exercise of an ISO is taxable at capital gains rates, and no tax
deduction is available to the Company, unless the optionee disposes of the
shares within two years after the date of grant of the option or within one year
of the date the shares were transferred to the optionee. In such event the
difference between the option exercise price and the fair market value of the
shares on the date of the option's exercise will be taxed at ordinary income
rates, and the Company will be entitled to a deduction to the extent the
employee must recognize ordinary income. An ISO exercised more than three months
after an optionee's retirement from employment, other than by reason of death or
disability, will be taxed as an NQSO, with the optionee deemed to have received
income upon such exercise taxable at ordinary income rates. The Company will be
entitled to a tax deduction equal to the ordinary income, if any, realized by
the optionee. No taxable income is realized upon the receipt of an SAR, but upon
exercise of the SAR the fair market value of the shares (or cash in lieu of
shares) received must be treated as compensation taxable as ordinary income to
the recipient in the year of such exercise. The Company will be entitled to a
deduction for compensation paid in the same amount which the recipient realized
as ordinary income. An employee or consultant to whom restricted or deferred
stock is issued will not have taxable income upon issuance and the Company will
not then be entitled to a deduction, unless, in the case of restricted stock, an
election is made under Section 83(b) of the Code. However, when restrictions on
shares of restricted stock lapse, such that the shares are no longer subject to
repurchase by the Company, the employee will realize ordinary income and the
Company will be entitled to a deduction in an amount equal to the fair market
value of the shares at the date such restrictions lapse, less the purchase price
therefor. Similarly, when deferred stock vests and is issued to the employee or
consultant, the employee or consultant will realize ordinary income and the
Company will be entitled to a deduction in an amount equal to the fair market
value of the shares at the date of issuance. If an election is made under
Section 83(b) with respect to restricted stock, the employee will realize
ordinary income at the date of issuance equal to the difference between the fair
market value of the shares at that date less the purchase price therefor and the
Company will be entitled to a deduction in the same amount. The Code does not
permit a Section 83(b) election to be made with respect
22
<PAGE> 26
to deferred stock.
Certain information concerning grants under the 1995 Plan during the
Company's last fiscal year is disclosed above under "Approval of the Amended and
Restated Management Incentive Compensation Plan - Plan Benefits Table."
FOR THE REASONS SET FORTH ABOVE, THE BOARD UNANIMOUSLY RECOMMENDS A VOTE
FOR THE APPROVAL OF THE CONTINUATION OF THE 1995 PLAN.
23
<PAGE> 27
PROPOSAL 4.
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, on the recommendation of the Company's Audit
Committee, has selected PricewaterhouseCoopers LLP ("PricewaterhouseCoopers") as
the Company's independent public accountants for the year ending January 2,
2000. One or more representatives of PricewaterhouseCoopers will be present at
the Annual Meeting, will have the opportunity to make a statement if they desire
to do so and are expected to be available to respond to appropriate questions
from shareholders. The Company has been advised by PricewaterhouseCoopers that
the firm did not have any direct financial interest or any material interest in
the Company and its subsidiaries during the Company's most recent fiscal year.
Approval of the proposal to ratify the selection of PricewaterhouseCoopers
requires the affirmative vote of a majority of the outstanding shares of Common
Stock present in person or represented by proxy at the Annual Meeting and
entitled to vote. Should the shareholders vote negatively, the Board of
Directors will consider a change in independent public accountants for the next
fiscal year.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL TO
RATIFY THE SELECTION OF PRICEWATERHOUSECOOPERS AS THE COMPANY'S INDEPENDENT
PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING JANUARY 2, 1999.
The Company previously disclosed the following information in a Current
Report on Form 8-K filed March 21, 1997 (the "Report"):
As a result of hiring a new Chief Financial Officer, Mr. James C. Hunt, who
has a family relationship with a partner in the Greensboro, North Carolina
office of Arthur Andersen LLP ("Arthur Andersen"), which had served as the
Company's independent public accountants since 1995, the Company received a
letter from Arthur Andersen dated March 17, 1997, indicating that it would
decline to stand for reappointment as the Company's independent public
accountants for fiscal year 1997.
The reports of Arthur Andersen on the Company's financial statements for
the fiscal years ended December 31, 1995, and December 29, 1996, contained no
adverse opinion or disclaimer of opinion, nor were they qualified or modified as
to uncertainty, audit scope or accounting principles.
In connection with the audits of the Company's financial statements for
each of the fiscal years ended December 31, 1995, and December 28, 1996, and in
the subsequent interim period, there were no disagreements with Arthur Andersen
on matters of accounting principles or practices, financial statement disclosure
or auditing scope or procedures which, if not resolved to the satisfaction of
Arthur Andersen, would have caused Arthur Andersen to make reference to such
matter in its report.
The Company furnished Arthur Andersen with a copy of the foregoing
disclosure and in response thereto, Arthur Andersen furnished the Company with a
letter dated March 21, 1997, addressed to the Securities and Exchange
Commission, indicating no disagreement with the foregoing statements.
The Report also stated that the Company's Board of Directors, upon the
recommendation of the Audit Committee, engaged Pricewaterhouse LLP as of March
17, 1997, as the Company's independent public accountants for its fiscal year
ending December 28, 1997.
PROPOSALS FOR 2000 ANNUAL MEETING OF SHAREHOLDERS
Shareholders who intend to present proposals for consideration at next
year's annual meeting are advised that any such proposal must be received by the
Secretary of the Company by no later than the close of business on December 16,
1999, if such proposal is to be considered for inclusion in the proxy statement
and proxy appointment form relating to that meeting. Only persons who have held
beneficially or of record at least $2,000 in market value, or 1% of the
outstanding Common Stock, for at least one year on the date the proposal is
submitted and who continue in such capacity through the meeting date are
eligible to submit proposals to be considered for inclusion in the Company's
proxy statement. In addition, the Company's bylaws prescribe
24
<PAGE> 28
procedures a shareholder must follow to make nominations for director candidates
or propose any other business to be considered at an annual meeting. Shareholder
nominations for director candidates or other proper shareholder business will be
considered at an annual meeting or a special meeting of shareholders if the
shareholder (who must be, at the time of delivery of notice, a shareholder of
record) delivers to the Secretary of the Company a timely notice setting forth
the information specified in Section 14 of Article II of the Company's Bylaws.
In the case of an annual meeting, such notice shall be considered timely if
delivered not earlier than the close of business on the 90th day, nor later than
the close of business on the 60th day, prior to the first anniversary of the
preceding year's annual meeting. If, however, the annual meeting date is more
than 30 days before or 60 days after the anniversary date of the preceding
year's annual meeting, the notice will be considered timely if delivered not
earlier than the close of business on the 90th day prior to such meeting nor
later than the close of business on the later of (i) the 60th day prior to such
meeting or (ii) the 10th day following the day on which the public announcement
of the date of such meeting is first made by the Company. In the case of a
special meeting, such notice shall be considered timely if delivered not earlier
than the close of business on the 90th day prior to such meeting nor later than
the close of business on the later of (i) the 60th day prior to such meeting or
(ii) the 10th day following the day on which public announcement is first made
of the special meeting date and the nominees proposed by the Board of Directors.
Any shareholder desiring a copy of the Company's Bylaws will be furnished one
without charge upon written request to the Secretary.
OTHER BUSINESS
The Board knows of no other business to be brought before the Annual
Meeting. If, however, any other business should properly come before the Annual
Meeting, the persons named in the accompanying proxy will vote proxies as in
their discretion they may deem appropriate, unless they are directed by a proxy
to do otherwise.
25
<PAGE> 29
EXHIBIT A
PERSONNEL GROUP OF AMERICA, INC.
AMENDED AND RESTATED
MANAGEMENT INCENTIVE COMPENSATION PLAN
1. PURPOSE AND DESIGN
This Management Incentive Compensation Plan (the "Plan") is intended to
provide an incentive for superior work and to motivate all employees of
Personnel Group of America, Inc. ("PGA," and together with its subsidiaries,
"the Company") and its subsidiaries toward even higher achievement and business
results, to tie their goals and interests to those of the Company and its
stockholders and to enable the Company to attract and retain highly qualified
employees. The Plan is designed to ensure that the bonuses paid hereunder to
Section 162(m) Employees (as defined below) are deductible without limit under
Section 162(m) of the Internal Revenue Code of 1986, as amended, and the
regulations and interpretations promulgated thereunder (the "Code").
2. ELIGIBLE EMPLOYEES
The Plan Committee (as defined below) shall determine and designate, from
time to time, from among all employees of the Company (the "Eligible Employees")
those persons who may receive bonuses under the Plan, and thereby become
participants in the Plan ("Participants"). Certain of such Participants who are
or may be "covered employees" as defined in Section 162(m)(3) of the Code may be
designated as "Section 162(m) Employees," and those Participants who are not
Section 162(m) Employees shall hereinafter be referred to as "Non-Section 162(m)
Employees." In making these selections, the Plan Committee shall consider any
and all factors it deems relevant, including the individual's functions,
responsibilities, value of services to the Company and past and potential
contributions to the Company's profitability and sound growth.
3. THE PLAN COMMITTEE
The "Plan Committee" shall consist of one or more persons who are appointed
by the Board of Directors of PGA to administer all or portions of the Plan. The
Plan Committee shall have the sole discretion and authority to administer and
interpret the Plan.
4. BONUSES
(a) An Eligible Employee may receive a bonus payment hereunder based upon
the attainment of performance objectives established by the Plan Committee and
related to one or more of the following corporate business criteria: pre-tax
income, operating income, cash flow, earnings per share, return on equity,
return on invested capital or assets, cost reductions and savings, return on
revenues, collections of accounts receivable or productivity. Within the first
90 days of each fiscal year (or, if longer, within the maximum period allowed
under Section 162(m) of the Code), the Plan Committee shall select the
Participants for such fiscal year. Designation of an Eligible Employee as a
Participant for a fiscal year shall not, however, in any manner entitle such
Participant to receive a bonus award under the Plan for such fiscal year. The
entitlement of any Participant to payment of a bonus award for such fiscal year
shall be decided solely in accordance with the provisions of this Plan. All of
the bonus awards issued under the Plan to Section 162(m) Employees are intended
to qualify as "performance-based compensation" under Section 162(m) of the Code.
(b) Within the first 90 days of each fiscal year (or, if longer, within the
maximum period allowed under Section 162(m) of the Code), the Plan Committee
shall calculate each Participant's base salary for the fiscal year then
beginning. The base salary for any fiscal year shall be the Participant's base
salary as of the first day of such fiscal year. Once the base salary is
determined for any fiscal year, the base salary will not change for that fiscal
year.
A-1
<PAGE> 30
(c) Within the first 90 days of each fiscal year (or, if longer, within the
maximum period allowed under Section 162(m) of the Code), the Plan Committee
shall establish in writing for such fiscal year:
(i) the specific performance goals for such fiscal year for each
Participant, and
(ii) a bonus matrix detailing the bonus award for each Participant in
this Plan if the performance goals for such individual are attained. The
amount of a Participant's bonus award for any fiscal year will be
calculated from the bonus formula for such fiscal year, which bonus formula
shall be the product of the Participant's base salary and the percentage
derived from the bonus matrix.
(d) The form of bonus awards shall be determined as follows:
(i) Each Participant in the Plan shall have the right to elect to
receive up to fifty (50%) percent of the Participant's bonus award for a
fiscal year in fully vested stock options in lieu of cash. Such election
must be made by notice to the Company given by no later than the last
business day of the fiscal year to which such award relates. Such notice
shall set forth the percentage of the Participant's bonus award the
Participant elects to receive in fully vested stock options, and such
notice shall be binding on the Participant and irrevocable after the date
given. Bonus awards elected by a Participant to be paid in stock options
shall be paid as follows. The percentage specified in the notice referred
to above shall be converted into a number of fully vested stock options
using the Black-Scholes option pricing method or a derivative thereof as
calculated by the Plan Committee, with each calculation being done as of
the last business day of the fiscal year for which such bonus award is
otherwise payable. The Company will issue that number of fully vested stock
options to the Participant. All stock options issued hereunder will be
granted under the Company's 1995 Equity Participation Plan, and will be
granted thereunder as of the last business day of the fiscal year for which
such bonus award is otherwise payable.
(ii) The portion of a Participant's bonus award not paid in stock
options pursuant to clause (i) above shall be paid in cash on or prior to
March 1 in the year succeeding the fiscal year for which such bonus award
is payable.
(e) No bonuses shall be paid to Section 162(m) Employees under the Plan
unless and until the Plan Committee makes a certification in writing with
respect to the attainment of the objective performance standards as required by
Code Section 162(m). Although the Plan Committee may in its sole discretion
reduce the bonus payable to a Section 162(m) Employee, the Plan Committee shall
have no discretion to increase the amount of a Section 162(m) Employee's bonus.
(f) The Plan Committee shall have the discretion to apply or not apply the
foregoing provisions to bonuses payable to Non-Section 162(m) Employees.
(g) The payment of a bonus to a Participant with respect to a bonus period
shall be conditioned upon the Participant's employment by the Company on the
last day of the performance period; provided, however, that the Plan Committee
may make exceptions to this requirement, in its sole discretion, in the case of
a Participant's retirement, death or disability.
(h) Notwithstanding any provision contained in this Plan to the contrary,
the maximum bonus award payable to any Participant for any bonus period shall be
equal to the lesser of 250% of the Participant's base salary with respect to
such bonus period or $1,250,000.
5. AMENDMENT AND TERMINATION
PGA reserves the right to amend or terminate this Plan at any time in its
sole discretion. Any amendments to the Plan shall require stockholder approval
only to the extent required by applicable laws, regulations or stock exchange
requirements.
A-2
<PAGE> 31
APPENDIX A
REVOCABLE PROXY
PERSONNEL GROUP OF AMERICA, INC.
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 20, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Edward P. Drudge, Jr., James C. Hunt and Ken
R. Bramlett, Jr. as Proxies, each with the power to appoint his substitute, and
hereby authorizes each of them to represent and to vote, as designated below,
all the shares of common stock of Personnel Group of America, Inc. (the
"Company") held of record by the undersigned on March 26, 1999, at the annual
meeting of shareholders to be held on May 20, 1999 or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH DIRECTOR NOMINEE NAMED HEREIN
AND EACH PROPOSAL, AND THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE DIRECTOR
NOMINEES NAMED HEREIN AND FOR EACH PROPOSAL UNLESS THE SHAREHOLDER DIRECTS
OTHERWISE, IN WHICH CASE IT WILL BE VOTED AS DIRECTED.
1. ELECTION OF TWO DIRECTORS
<TABLE>
<S> <C>
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote for
all nominees listed below.
</TABLE>
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
James C. Hunt; Ken R. Bramlett, Jr.
2. Proposal to approve the Amended and Restated Management Incentive
Compensation Plan
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Proposal to approve the continuation of the 1995 Equity Participation Plan
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Proposals Continued On Reverse Side
Please sign and date on the reverse side and return in the enclosed
postage-prepaid envelope.
4. Proposal to ratify the selection of PricewaterhouseCoopers LLP as the
Company's independent public accountants
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
The undersigned acknowledges receipt of the Notice of Annual Meeting and
Proxy Statement dated April 14, 1999, and revokes all proxies heretofore given
by the undersigned.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED POSTAGE-PREPAID ENVELOPE.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
Partnership please sign in partnership name by authorized person.
Dated: , 1999
-----------------------
------------------------------
Signature
------------------------------
Signature if held jointly
<PAGE> 32
APPENDIX B
THE 1995 EQUITY PARTICIPATION PLAN
OF
PERSONNEL GROUP OF AMERICA, INC.
Personnel Group of America, Inc., a Delaware corporation, has adopted
The 1995 Equity Participation Plan of Personnel Group of America, Inc. (the
"Plan"), effective September 21, 1995, for the benefit of its eligible
employees, consultants and directors. The Plan consists of two plans, one for
the benefit of key Employees (as such term is defined below) and consultants
and one for the benefit of Independent Directors (as such term is defined
below).
The purposes of this Plan are as follows:
(1) To provide an additional incentive for directors, key Employees
and consultants to further the growth, development and financial success of the
Company by personally benefiting through the ownership of Company stock and/or
rights which recognize such growth, development and financial success.
(2) To enable the Company to obtain and retain the services of
directors, key Employees and consultants considered essential to the long range
success of the Company by offering them an opportunity to own stock in the
Company and/or rights which will reflect the growth, development and financial
success of the Company.
ARTICLE I
DEFINITIONS
1.1 General. Wherever the following terms are used in this Plan they
shall have the meaning specified below, unless the context clearly indicates
otherwise.
1.2 Award Limit. "Award Limit" shall mean two hundred thousand
(200,000) shares of Common Stock.
1.3 Board. "Board" shall mean the Board of Directors of the Company.
1.4 Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.5 Committee. "Committee" shall mean the Compensation Committee of
the Board, or a subcommittee of the Board, appointed as provided in Section
9.1.
1.6 Common Stock. "Common Stock" shall mean the common stock of the
Company, par value $.01 per share, and any equity security of the Company
issued or authorized to be issued in the future, but excluding, any warrants,
options or other rights to
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purchase Common Stock. Debt securities of the Company convertible into Common
Stock shall be deemed equity securities of the Company.
1.7 Company. "Company" shall mean Personnel Group of America, Inc., a
Delaware corporation.
1.8 Deferred Stock. "Deferred Stock" shall mean Common Stock awarded
under Article VII of this Plan.
1.9 Director. "Director" shall mean a member of the Board.
1.10 Dividend Equivalent. "Dividend Equivalent" shall mean a right to
receive the equivalent value (in cash or Common Stock) of dividends paid on
Common Stock, awarded under Article VII of this Plan.
1.11 Employee. "Employee" shall mean any officer or other employee (as
defined in accordance with Section 3401(c) of the Code) of the Company, or of
any corporation which is a Subsidiary.
1.12 Exchange Act. "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
1.13 Fair Market Value. "Fair Market Value" of a share of Common Stock
as of a given date shall be (i) the mean between the highest and lowest selling
price of a share of Common Stock on the principal exchange on which shares of
Common Stock are then trading, if any, on such date, or if shares were not
traded on such date, then on the closest preceding date on which a trade
occurred, or (ii) if Common Stock is not traded on an exchange, the mean
between the closing representative bid and asked prices for the Common Stock on
such date as reported by NASDAQ or, if NASDAQ is not then in existence, by its
successor quotation system; or (iii) if Common Stock is not publicly traded,
the Fair Market Value of a share of Common Stock as established by the
Committee (or the Board, in the case of Options granted to Independent
Directors) acting in good faith.
1.14 Grantee. "Grantee" shall mean an Employee or consultant granted a
Performance Award, Dividend Equivalent, Stock Payment or Stock Appreciation
Right, or an award of Deferred Stock, under this Plan.
1.15 Incentive Stock Option. "Incentive Stock Option" shall mean an
option which conforms to the applicable provisions of Section 422 of the Code
and which is designated as an Incentive Stock Option by the Committee.
1.16 Independent Director. "Independent Director" shall mean a member
of the Board who is not an Employee of the Company.
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1.17 Non-Qualified Stock Option. "Non-Qualified Stock Option" shall
mean an Option which is not designated as an Incentive Stock Option by the
Committee.
1.18 Option. "Option" shall mean a stock option granted under Article
III of this Plan. An Option granted under this Plan shall, as determined by the
Committee, be either a Non-Qualified Stock Option or an Incentive Stock Option;
provided, however, that Options granted to Independent Directors and
consultants shall be Non-Qualified Stock Options.
1.19 Optionee. "Optionee" shall mean an Employee, consultant or
Independent Director granted an Option under this Plan.
1.20 Performance Award. "Performance Award" shall mean a cash bonus,
stock bonus or other performance or incentive award that is paid in cash,
Common Stock or a combination of both, awarded under Article VII of this Plan.
1.21 Plan. "Plan" shall mean The 1995 Equity Participation Plan of
Personnel Group of America, Inc.
1.22 Restricted Stock. "Restricted Stock" shall mean Common Stock
awarded under Article VI of this Plan.
1.23 Restricted Stockholder. "Restricted Stockholder" shall mean an
Employee or consultant granted an award of Restricted Stock under Article VI of
this Plan.
1.24 Rule 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3 under
the Exchange Act, as such Rule may be amended from time to time.
1.25 Stock Appreciation Right. "Stock Appreciation Right" shall mean a
stock appreciation right granted under Article VIII of this Plan.
1.26 Stock Payment. "Stock Payment" shall mean (i) a payment in the
form of shares of Common Stock, or (ii) an option or other right to purchase
shares of Common Stock, as part of a deferred compensation arrangement, made in
lieu of all or any portion of the compensation, including without limitation,
salary, bonuses and commissions, that would otherwise become payable to a key
Employee or consultant in cash, awarded under Article VII of this Plan.
1.27 Subsidiary. "Subsidiary" shall mean any corporation in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain then owns
stock possessing 50 percent or more of the
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total combined voting power of all classes of stock in one of the other
corporations in such chain.
1.28 Termination of Consultancy. "Termination of Consultancy" shall
mean the time when the engagement of Optionee, Grantee or Restricted
Stockholder as a Consultant to the Company or a Subsidiary is terminated for
any reason, with or without cause, including without limitation, resignation,
discharge, death or retirement; but excluding terminations where there is a
simultaneous commencement of employment with the Company or any Subsidiary. The
Committee, in its absolute discretion, shall determine the effect of all
matters and questions relating to Termination of Consultancy, including, but
not by way of limitation, the question of whether a Termination of Consultancy
resulted from a discharge for good cause, and all questions of whether
particular leaves of absence constitute Terminations of Employment.
Notwithstanding any other provision of this Plan, the Company or any Subsidiary
has an absolute and unrestricted right to terminate a consultant's service at
any time for any reason whatsoever, with or without cause, except to the extent
expressly provided otherwise in writing.
1.29 Termination of Directorship. "Termination of Directorship" shall
mean the time when an Optionee who is an Independent Director ceases to be a
Director for any reason, including, but not by way of limitation, a termination
by resignation, failure to be elected, death or retirement. The Board, in its
sole and absolute discretion, shall determine the effect of all matters and
questions relating to Termination of Directorship.
1.30 Termination of Employment. "Termination of Employment" shall mean
the time when the employee-employer relationship between the Optionee, Grantee
or Restricted Stockholder and the Company or any Subsidiary is terminated for
any reason, including, but not by way of limitation, a termination by
resignation, discharge, death, disability or retirement; but excluding (i)
terminations where there is a simultaneous reemployment, continuing employment
of an Optionee, Grantee or Restricted Stockholder by the Company or any
Subsidiary, (ii) at the discretion of the Committee, terminations which result
in a temporary severance of the employee-employer relationship, and (iii) at
the discretion of the Committee, terminations which are followed by the
simultaneous establishment of a consulting relationship by the Company or a
Subsidiary with the former employee. The Committee, in its absolute discretion,
shall determine the effect of all matters and questions relating to Termination
of Employment, including, but not by way of limitation, the question of whether
a Termination of Employment resulted from a discharge for good cause, and all
questions of whether particular leaves of absence constitute Terminations of
Employment; provided, however, that, with respect to Incentive Stock Options, a
leave of
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<PAGE> 36
absence, change in status from an employee to an independent contractor or
other change in the employee-employer relationship shall constitute a
Termination of Employment if, and to the extent that, such leave of absence,
change in status or other change interrupts employment for the purposes of
Section 422(a)(2) of the Code and the then applicable regulations and revenue
rulings under said Section. Notwithstanding any other provision of this Plan,
the Company or any Subsidiary has an absolute and unrestricted right to
terminate an Employee's employment at any time for any reason whatsoever, with
or without cause, except to the extent expressly provided otherwise in writing.
ARTICLE II
SHARES SUBJECT TO PLAN
2.1 Shares Subject to Plan.
(a) The shares of stock subject to Options, awards of Restricted
Stock, Performance Awards, Dividend Equivalents, awards of Deferred Stock,
Stock Payments or Stock Appreciation Rights shall be Common Stock, initially
shares of the Company's Common Stock, par value $.01 per share. The aggregate
number of such shares which may be issued upon exercise of such options or
rights upon any such awards under the Plan shall not exceed 15% of the then
issued and outstanding Common Stock of the Company, and the number of shares
reserved for issuance under the Plan shall automatically be adjusted from time
to time to an amount equal to 15% of the Common Stock then issued and
outstanding. The shares of Common Stock issuable upon exercise of such options
or rights or upon any such awards may be either previously authorized but
unissued shares or treasury shares.
(b) The maximum number of shares which may be subject to Options or
Stock Appreciation Rights granted under the Plan to any individual in any
calendar year shall not exceed the Award Limit. To the extent required by
Section 162(m) of the Code, shares subject to Options which are cancelled
continue to be counted against the Award Limit and if, after grant of an
Option, the price of shares subject to such Option is reduced, the transaction
is treated as a cancellation of the Option and a grant of a new Option and both
the Option deemed to be cancelled and the Option deemed to be granted are
counted against the Award Limit. Furthermore, to the extent required by Section
162(m) of the Code, if, after grant of a Stock Appreciation Right, the base
amount on which stock appreciation is calculated is reduced to reflect a
reduction in the Fair Market Value of the Company's Common Stock, the
transaction is treated as a cancellation of the Stock Appreciation Right and a
grant of a new Stock Appreciation Right and both the Stock Appreciation Right
deemed to be cancelled and the Stock Appreciation Reheat deemed to be granted
are counted against the Award Limit.
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2.2 Unexercised Options and Other Rights. If any Option, or other
right to acquire shares of Common Stock under any other award under this Plan,
expires or is cancelled without having been fully exercised, the number of
shares subject to such Option or other right but as to which such Option or
other right was not exercised prior to its expiration or cancellation may again
be optioned, granted or awarded hereunder, subject to the limitations of
Section 2.1. Shares of Common Stock which are withheld by the Company upon the
exercise of any Option or other award under this Plan in payment of the
exercise price thereof may again be optioned, granted or awarded hereunder,
subject to the limitations of Section 2.1.
ARTICLE III
GRANTING OF OPTIONS
3.1 Eligibility. Subject to the Award Limit, any Employee or
consultant selected by the Committee pursuant to Section 3.4(a)(i) shall be
eligible to be granted an Option. Each Independent Director of the Company
shall be eligible to be granted Options at the times and in the manner set
forth in Section 3.4(d).
3.2 Disqualification for Stock Ownership. No person may be granted an
Incentive Stock Option under this Plan if such person, at the time the
Incentive Stock Option is granted, owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or any then existing Subsidiary unless such Incentive Stock Option conforms to
the applicable provisions of Section 422 of the Code.
3.3 Qualification of Incentive Stock Options. No Incentive Stock
Option shall be granted unless such Option, when granted, qualifies as an
"incentive stock option" under Section 422 of the Code. No Incentive Stock
Option shall be granted to any person who is not an Employee.
3.4 Granting of Options.
(a) The Committee shall from time to time, in its absolute discretion,
and subject to the applicable limitations of this Plan:
(i) Determine which Employees are key Employees and select
from among the key Employees or consultants (including Employees or
consultants who have previously received Options or other awards under
this Plan) such of them as in its opinion should be granted Options;
(ii) Subject to the Award Limit, determine the number of
shares to be subject to such Options granted to the selected key
Employees or consultants;
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(iii) Determine whether such Options are to be Incentive
Stock Options or Non-Qualified Stock Options and whether such Options
are to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code; and
(iv) Determine the terms and conditions of such Options,
consistent with this Plan; provided, however, that the terms and
conditions of Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall
include, but not be limited to, such terms and conditions as may be
necessary to meet the applicable provisions of Section 162(m) of the
Code.
(b) Upon the selection of a key Employee or consultant to be granted
an Option, the Committee shall instruct the Secretary of the Company to issue
the Option and may impose such conditions on the grant of the Option as it
deems appropriate. Without limiting the generality of the preceding sentence,
the Committee may, in its discretion and on such terms as it deems appropriate,
require as a condition on the grant of an Option to an Employee or consultant
that the Employee or consultant surrender for cancellation some or all of the
unexercised Options, awards of Restricted Stock or Deferred Stock, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments or
other rights which have been previously granted to him under this Plan or
otherwise. An Option, the grant of which is conditioned upon such surrender,
may have an option price lower (or higher) than the exercise price of such
surrendered Option or other award, may cover the same (or a lesser or greater)
number of shares as such surrendered Option or other award, may contain such
other terms as the Committee deems appropriate, and shall be exercisable in
accordance with its terms, without regard to the number of shares, price,
exercise period or any other term or condition of such surrendered Option or
other award.
(c) Any Incentive Stock Option granted under this Plan may be modified
by the Committee to disqualify such option from treatment as an "incentive
stock option" under Section 422 of the Code.
(d) During the term of the Plan, each person who is an Independent
Director as of the date of the consummation of the initial public offering of
Common Stock automatically shall be granted (i) an option to purchase six
thousand two hundred fifty (6,250) shares of Common Stock (subject to
adjustment as provided in Section 10.3) on the date of such initial public
offering, (ii) an option to purchase three thousand one hundred twenty-five
(3,125) shares of Common Stock (subject to adjustment as provided in Section
10.3) on the date of each of the first and second annual meetings of
stockholders after such initial public offering at which the Independent
Director is reelected to the Board, and
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(iii) an option to purchase one thousand five hundred (1,500) shares of Common
Stock (subject to adjustment as provided in Section 10.3) on the date of each
annual meeting of stockholders after the second annual meeting after such
initial public offering at which the Independent Director is reelected to the
Board. During the term of the Plan after the consummation of the initial public
offering of Common Stock, a person who is initially elected to the Board and is
then an Independent Director automatically shall be granted (i) an option to
purchase six thousand two hundred fifty (6,250) shares of Common Stock (subject
to adjustment as provided in Section 10.3) on the date of such initial
election, (ii) an option to purchase three thousand one hundred twenty-five
(3,125) shares of Common Stock (subject to adjustment as provided in Section
10.3) on the date of each of the first and second annual meetings of
stockholders after such initial election at which the Independent Director is
reelected to the Board, and (iii) an option to purchase one thousand five
hundred (1,500) shares of Common Stock (subject to adjustment as provided in
Section 10.3) on the date of each annual meeting of stockholders after the
second annual meeting after such initial election at which the Independent
Director is reelected to the Board. Members of the Board who are employees of
the Company who subsequently retire from the Company and remain on the Board
will not receive an initial Option grant pursuant to clause (i) of the
preceding sentence, but to the extent that they are otherwise eligible, will
receive, after retirement from the Company, Options as described in the clauses
(ii) and (iii) of the preceding sentence. All the foregoing Option grants
authorized by this Section 3.4(d) are subject to stockholder approval of the
Plan.
ARTICLE IV
TERMS OF OPTIONS
4.1 Option Agreement. Each Option shall be evidenced by a written
Stock Option Agreement, which shall be executed by the Optionee and an
authorized officer of the Company and which shall contain such terms and
conditions as the Committee (or the Board, in the case of Options granted to
Independent Directors) shall determine, consistent with this Plan. Stock Option
Agreements evidencing Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall contain
such terms and conditions as may be necessary to meet the applicable provisions
of Section 162(m) of the Code. Stock Option Agreements evidencing Incentive
Stock Options shall contain such terms and conditions as may be necessary to
meet the applicable provisions of Section 422 of the Code.
4.2 Option Price. The price per share of the shares subject to each
Option shall be set by the Committee; provided, however, that (i) such price
shall be no less than the par value of a share of Common Stock, (ii) in the
case of Options intended to
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qualify as performance-based compensation as described in Section 162(m)(4)(C)
of the Code, such price shall be no less than 100% of the Fair Market Value of
a share of Common Stock on the date the Option is granted, (iii) in the case of
Options granted to Independent Directors, such price shall be equal to 100% of
the Fair Market Value of a share of Common Stock on the date the Option is
granted, except with respect to the Options granted to Independent Directors
pursuant to Section 3.4(d) upon the consummation of the initial public offering
of Common Stock, in which case such price shall be equal to the public offering
price, and (iv) in the case of Incentive Stock Options such price shall not be
less than the greater of: (a) 100% of the Fair Market Value of a share of
Common Stock on the date the Option is granted, or (b) 110% of the fair market
value of a share of Common Stock on the date such Option is granted in the case
of an individual then owning (within the meaning of Section 424(d) of the Code)
more than 10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary.
4.3 Option Term. The term of an Option (other than an Option granted
to an Independent Director) shall be set by the Committee in its discretion;
provided, however, that, in the case of Incentive Stock Options, the term shall
not be more than ten (10) years from the date the Incentive Stock Option is
granted, or five (5) years from such date if the Incentive Stock Option is
granted to an individual then owning (within the meaning of Section 424(d) of
the Code) more than 10% of the total combined voting power of all classes of
stock of the Company or any Subsidiary. The term of an Option granted to an
Independent Director shall be ten (10) years from the date the Option is
granted, provided, however, that the Option shall expire ninety (90) days after
the Independent Director ceases to serve as a Director, except upon the
Independent Director's retirement in accordance with the Company's retirement
policy applicable to Directors. Subject to the foregoing provisions and except
as limited by requirements of Section 422 of the Code and regulations and
rulings thereunder applicable to Incentive Stock Options, the Committee may
extend the term of any outstanding Option in connection with any Termination of
Employment or Termination of Consultancy of the Optionee, or amend any other
term or condition of such Option relating to such a termination.
4.4 Option Vesting.
(a) The period during which the right to exercise an Option in whole
or in part vests in the Optionee shall be set by the Committee and the
Committee may determine that an Option may not be exercised in whole or in part
for a specified period after it is granted; provided, however, that no Option
granted to a person subject to Section 16 of the Exchange Act shall be
exercisable until at least six months have elapsed from (but excluding) the
date on which the Option was granted. At any time
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after grant of an Option, the Committee may, in its sole discretion and subject
to whatever terms and conditions it selects, accelerate the period during which
an Option vests. Notwithstanding the foregoing, all Options granted to
Independent Directors shall be exercisable immediately on the date of grant,
without variation.
(b) No portion of an Option which is unexercisable at Termination of
Employment, Termination of Directorship or Termination of a Consultancy, as
applicable, shall thereafter become exercisable, except as may be otherwise
provided by the Committee with respect to Options granted to Employees or
consultants, either in the Stock Option Agreement or in a resolution adopted
following the grant of the Option.
(c) To the extent that the aggregate Fair Market Value of stock with
respect to which "incentive stock options" (within the meaning of Section 422
of the Code, but without regard to Section 422(d) of the Code) are exercisable
for the first time by an Optionee during any calendar year (under the Plan and
all other incentive stock option plans of the Company and any Subsidiary)
exceeds $100,000, such Options shall be treated as Non-Qualified Options to the
extent required by Section 422 of the Code. The rule set forth in the preceding
sentence shall be applied by taking Options into account in the order in which
they were granted. For purposes of this Section 4.4(c), the Fair Market Value
of stock shall be determined as of the time the Option with respect to such
stock is granted.
4.5 Consideration. In consideration of the granting of an Option, the
Optionee shall agree, in the written Stock Option Agreement, to remain in the
employ of (or to consult for or to serve as an Independent Director of, as
applicable) the Company or any Subsidiary for a period of at least one year
after the Option is granted (or until the next annual meeting of stockholders
of the Company, in the case of an Independent Director). Nothing in this Plan
or in any Stock Option Agreement hereunder shall confer upon any Optionee any
right to continue in the employ of, or as a consultant for, the Company or any
Subsidiary, or as a director of the Company, or shall interfere with or
restrict in any way the rights of the Company and any Subsidiary, which are
hereby expressly reserved, to discharge any Optionee at any time for any reason
whatsoever, with or without good cause.
ARTICLE V
EXERCISE OF OPTIONS
5.1 Partial Exercise. An exercisable Option may be exercised in whole
or in part. However, an Option shall not be exercisable with respect to
fractional shares and the Committee (or the Board, in the case of Options
granted to Independent Directors)
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may require that, by the terms of the Option, a partial exercise be with
respect to a minimum number of shares.
5.2 Manner of Exercise. All or a portion of an exercisable Option
shall be deemed exercised upon delivery of all of the following to the
Secretary of the Company or his office:
(a) A written notice complying with the applicable rules established
by the Committee or the Board stating that the Option, or a portion thereof, is
exercised. The notice shall be signed by the Optionee or other person then
entitled to exercise the Option or such portion;
(b) Such representations and documents as the Committee or the Board,
in its absolute discretion, deems necessary or advisable to effect compliance
with all applicable provisions of the Securities Act of 1933, as amended, and
any other federal or state securities laws or regulations. The Committee or
Board may, in its absolute discretion, also take whatever additional actions it
deems appropriate to effect such compliance including, without limitation,
placing legends on share certificates and issuing stop-transfer notices to
agents and registrars;
(c) In the event that the Option shall be exercised pursuant to
Section 10.1 by any person or persons other than the Optionee, appropriate
proof of the right of such person or persons to exercise the Option; and
(d) Full cash payment to the Secretary of the Company for the shares
with respect to which the Option, or portion thereof, is exercised. However, at
the discretion of the Committee (or the Board, in the case of Options granted
to Independent Directors), the terms of the Option may (i) allow a delay in
payment up to thirty (30) days from the date the Option, or portion thereof, is
exercised; (ii) allow payment, in whole or in part, through the delivery of
shares of Common Stock owned by the Optionee, duly endorsed for transfer to the
Company with a Fair Market Value on the date of delivery equal to the aggregate
exercise price of the Option or exercised portion thereof; (iii) subject to the
timing requirements of Section 5.3, allow payment, in whole or in part, through
the surrender of shares of Common Stock then issuable upon exercise of the
Option having a Fair Market Value on the date of Option exercise equal to the
aggregate exercise price of the Option or exercised portion thereof; (iv) allow
payment, in whole or in part, through the delivery of property of any kind
which constitutes good and valuable consideration; (v) allow payment, in whole
or in part, through the delivery of a full recourse promissory note bearing
interest (at no less than such rate as shall then preclude the imputation of
interest under the Code) and payable upon such terms as may be prescribed by
the Committee or the Board, or (vi) allow payment through any combination of
the consideration provided in
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the foregoing subparagraphs (ii), (iii), (iv) and (v). In the case of a
promissory note, the Committee or the Board may also prescribe the form of such
note and the security to be given for such note. The Option may not be
exercised, however, by delivery of a promissory note or by a loan from the
Company when or where such loan or other extension of credit is prohibited by
law.
5.3 Certain Timing Requirements. At the discretion of the Committee
(or Board, in the case of Options granted to Independent Directors), shares of
Common Stock issuable to the Optionee upon exercise of the Option may be used
to satisfy the Option exercise price or the tax withholding consequences of
such exercise, in the case of persons subject to Section 16 of the Exchange
Act, only (i) during the period beginning on the third business day following
the date of release of the quarterly or annual summary statement of sales and
earnings of the Company and ending on the twelfth business day following such
date or (ii) pursuant to an irrevocable written election by the Optionee to use
shares of Common Stock issuable to the Optionee upon exercise of the Option to
pay all or part of the Option price or the withholding taxes made at least six
months prior to the payment of such Option price or withholding taxes.
5.4 Conditions to Issuance of Stock Certificates. The Company shall
not be required to issue or deliver any certificate or certificates for shares
of stock purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on
which such class of stock is then listed;
(b) The completion of any registration or other qualification of such
shares under any state or federal law, or under the rulings or regulations of
the Securities and Exchange Commission or any other governmental regulatory
body which the Committee or Board shall, in its absolute discretion, deem
necessary or advisable;
(c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee or Board shall, in its absolute
discretion, determine to be necessary or advisable;
(d) The lapse of such reasonable period of time following the exercise
of the Option as the Committee or Board may establish from time to time for
reasons of administrative convenience; and
(e) The receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax.
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5.5 Rights as Stockholders. The holders of Options shall not be, nor
have any of the rights or privileges of, stockholders of the Company in respect
of any shares purchasable upon the exercise of any part of an Option unless and
until certificates representing such shares have been issued by the Company to
such holders.
5.6 Ownership and Transfer Restrictions. The Committee (or Board, in
the case of Options granted to Independent Directors), in its absolute
discretion, may impose such restrictions on the ownership and transferability
of the shares purchasable upon the exercise of an Option as it deems
appropriate. Any such restriction shall be set forth in the respective Stock
Option Agreement and may be referred to on the certificates evidencing such
shares. The Committee may require the Employee to give the Company prompt
notice of any disposition of shares of Common Stock acquired by exercise of an
Incentive Stock Option within (i) two years from the date of granting such
Option to such Employee or (ii) one year after the transfer of such shares to
such Employee. The Committee may direct that the certificates evidencing shares
acquired by exercise of an Option refer to such requirement to give prompt
notice of disposition.
ARTICLE VI
AWARD OF RESTRICTED STOCK
6.1 Award of Restricted Stock.
(a) The Committee shall from time to time, in its absolute discretion:
(i) Select from among the key Employees or consultants
(including Employees or consultants who have previously received other
awards under this Plan) such of them as in its opinion should be
awarded Restricted Stock; and
(ii) Determine the purchase price, if any, and other terms
and conditions applicable to such Restricted Stock, consistent with
this Plan.
(b) The Committee shall establish the purchase price, if any, and form
of payment for Restricted Stock; provided, however, that such purchase price
shall be no less than the par value of the Common Stock to be purchased. In all
cases, legal consideration shall be required for each issuance of Restricted
Stock.
(c) Upon the selection of a key Employee or consultant to be awarded
Restricted Stock, the Committee shall instruct the Secretary of the Company to
issue such Restricted Stock and may impose such conditions on the issuance of
such Restricted Stock as it deems appropriate.
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6.2 Restricted Stock Agreement. Restricted Stock shall be issued only
pursuant to a written Restricted Stock Agreement, which shall be executed by
the selected key Employee or consultant and an authorized officer of the
Company and which shall contain such terms and conditions as the Committee
shall determine, consistent with this Plan.
6.3 Consideration. As consideration for the issuance of Restricted
Stock, in addition to payment of any purchase price, the Restricted Stockholder
shall agree, in the written Restricted Stock Agreement, to remain in the employ
of, or to consult for, the Company or any Subsidiary for a period of at least
one year after the Restricted Stock is issued. Nothing in this Plan or in any
Restricted Stock Agreement hereunder shall confer on any Restricted Stockholder
any right to continue in the employ of, or as a consultant for, the Company or
any Subsidiary or shall interfere with or restrict in any way the rights of the
Company and any Subsidiary, which are hereby expressly reserved, to discharge
any Restricted Stockholder at any time for any reason whatsoever, with or
without good cause.
6.4 Rights as Stockholders. Upon delivery of the shares of Restricted
Stock to the escrow holder pursuant to Section 6.7, the Restricted Stockholder
shall have, unless otherwise provided by the Committee, all the rights of a
stockholder with respect to said shares, subject to the restrictions in his
Restricted Stock Agreement, including the right to receive all dividends and
other distributions paid or made with respect to the shares; provided, however,
that in the discretion of the Committee, any extraordinary distributions with
respect to the Common Stock shall be subject to the restrictions set forth in
Section 6.5.
6.5 Restriction. All shares of Restricted Stock issued under this Plan
(including any shares received by holders thereof with respect to shares of
Restricted Stock as a result of stock dividends, stock splits or any other form
of recapitalization) shall, in the terms of each individual Restricted Stock
Agreement, be subject to such restrictions as the Committee shall provide,
which restrictions may include, without limitation, restrictions concerning
voting rights and transferability and restrictions based on duration of
employment with the Company, Company performance and individual performance;
provided, however, that no share of Restricted Stock granted to a person
subject to Section 16 of the Exchange Act shall be sold, assigned or otherwise
transferred until at least six months have elapsed from (but excluding) the
date on which the Restricted Stock was issued, and provided, further, that by a
resolution adopted after the Restricted Stock is issued, the Committee may, on
such terms and conditions as it may determine to be appropriate, remove any or
all of the restrictions imposed by the terms of the Restricted Stock Agreement.
Restricted Stock may not be sold or encumbered until all restrictions are
terminated or expire. Unless provided otherwise by the Committee, if no
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consideration was paid by the Restricted Stockholder upon issuance, a
Restricted Stockholder's rights in unvested Restricted Stock shall lapse upon
Termination of Employment or, if applicable, upon the termination of his
consulting relationship with the Company.
6.6 Repurchase of Restricted Stock. The Committee shall provide in the
terms of each individual Restricted Stock Agreement that the Company shall have
the right to repurchase from the Restricted Stockholder the Restricted Stock
then subject to restrictions under the Restricted Stock Agreement immediately
upon a Termination of Employment or, if applicable, upon a termination of any
consulting relationship between the Restricted Stockholder and the Company, at
a cash price per share equal to the price paid by the Restricted Stockholder
for such Restricted Stock; provided, however, that provision may be made that
no such right of repurchase shall exist in the event of a Termination of
Employment or Termination of Consultancy without cause, or following a change
in control of the Company or because of the Restricted Stockholder's
retirement, death or disability, or otherwise.
6.7 Escrow. The Secretary of the Company or such other escrow holder
as the Committee may appoint shall retain physical custody of each certificate
representing Restricted Stock until all of the restrictions imposed under the
Restricted Stock Agreement with respect to the shares evidenced by such
certificate expire or shall have been removed.
6.8 Legend. In order to enforce the restrictions imposed upon shares
of Restricted Stock hereunder, the Committee shall cause a legend or legends to
be placed on certificates representing all shares of Restricted Stock that are
still subject to restrictions under Restricted Stock Agreements, which legend
or legends shall make appropriate reference to the conditions imposed thereby.
ARTICLE VII
PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS,
DEFERRED STOCK, STOCK PAYMENTS
7.1 Performance Awards. Any key Employee or consultant selected by the
Committee may be granted one or more Performance Awards. The value of such
Performance Awards may be linked to the market value, book value, net profits
or other measure of the value of Common Stock or other specific performance
criteria determined appropriate by the Committee, in each case on a specified
date or dates or over any period or periods determined by the Committee, or may
be based upon the appreciation in the market value, book value, net profits or
other measure of the value of a specified number of shares of Common Stock over
a fixed period or periods determined by the Committee. In making such
determinations, the Committee shall consider (among such other factors as it
deems relevant in light of
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the specific type of award) the contributions, responsibilities and other
compensation of the particular key Employee or consultant.
7.2 Dividend Equivalents. Any key Employee or consultant selected by
the Committee may be granted Dividend Equivalents based on the dividends
declared on Common Stock, to be credited as of dividend payment dates, during
the period between the date an Option, Stock Appreciation Right, Deferred Stock
or Performance Award is granted, and the date such Option, Stock Appreciation
Right, Deferred Stock or Performance Award is exercised, vests or expires, as
determined by the Committee. Such Dividend Equivalents shall be converted to
cash or additional shares of Common Stock by such formula and at such time and
subject to such limitations as may be determined by the Committee.
7.3 Stock Payments. Any key Employee or consultant selected by the
Committee may receive Stock Payments in the manner determined from time to time
by the Committee. The number of shares shall be determined by the Committee and
may be based upon the Fair Market Value, book value, net profits or other
measure of the value of Common Stock or other specific performance criteria
determined appropriate by the Committee on the date such Stock Payment is made
or on any date thereafter.
7.4 Deferred Stock. Any key Employee or consultant selected by the
Committee may be granted an award of Deferred Stock in the manner determined
from time to time by the Committee. The number of shares of Deferred Stock
shall be determined by the Committee and may be linked to the market value,
book value, net profits or other measure of the value of Common Stock or other
specific performance criteria determined appropriate by the Committee, in each
case on a specified date or dates or over any period or periods determined by
the Committee. Common Stock underlying a Deferred Stock award will not be
issued until the Deferred Stock award has vested, pursuant to a vesting
schedule or performance criteria set by the Committee. Unless otherwise
provided by the Committee, a Grantee of Deferred Stock shall have no rights as
a Company stockholder with respect to such Deferred Stock until such time as
the award has vested and the Common Stock underlying, the award has been
issued.
7.5 Performance Award Agreement, Dividend Equivalent Agreement,
Deferred Stock Agreement, Stock Payment Agreement. Each Performance Award,
Dividend Equivalent, award of Deferred Stock and/or Stock Payment shall be
evidenced by a written agreement, which shall be executed by the Grantee and an
authorized Officer of the Company and which shall contain such terms and
conditions as the Committee shall determine, consistent with this Plan.
7.6 Term. The term of a Performance Award, Dividend Equivalent, award
of Deferred Stock and/or Stock Payment shall be set by the Committee in its
discretion.
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7.7 Exercise Upon Termination of Employment. A Performance Award,
Dividend Equivalent, award of Deferred Stock and/or Stock Payment is
exercisable only while the Grantee is an Employee or consultant; provided that
the Committee may determine that the Performance Award, Dividend Equivalent,
award of Deferred Stock and/or Stock Payment may be exercised subsequent to
Termination of Employment or Termination of Consultancy without cause, or
following a change in control of the Company, or because of the Grantee's
retirement, death or disability, or otherwise.
7.8 Payment on Exercise. Payment of the amount determined under
Section 7.1 or 7.2 above shall be in cash, in Common Stock or a combination of
both, as determined by the Committee. To the extent any payment under this
Article VII is effected in Common Stock, it shall be made subject to
satisfaction of all provisions of Section 5.4.
7.9 Consideration. In consideration of the granting of a Performance
Award, Dividend Equivalent, award of Deferred Stock and/or Stock Payment, the
Grantee shall agree, in a written agreement, to remain in the employ of, or to
consult for, the Company or any Subsidiary for a period of at least one year
after such Performance Award, Dividend Equivalent, award of Deferred Stock
and/or Stock Payment is granted. Nothing in this Plan or in any agreement
hereunder shall confer on any Grantee any right to continue in the employ of,
or as a consultant for, the Company or any Subsidiary or shall interfere with
or restrict in any way the rights of the Company and any Subsidiary, which are
hereby expressly reserved, to discharge any Grantee at any time for any reason
whatsoever, with or without good cause.
ARTICLE VIII
STOCK APPRECIATION RIGHTS
8.1 Grant of Stock Appreciation Rights. Subject to the Award Limit, a
Stock Appreciation Right may be granted to any key Employee or consultant
selected by the Committee. A Stock Appreciation Right may be granted (i) in
connection and simultaneously with the grant of an Option, (ii) with respect to
a previously granted Option, or (iii) independent of an Option. A Stock
Appreciation Right shall be subject to such terms and conditions not
inconsistent with this Plan as the Committee shall impose, and shall be
evidenced by a written Stock Appreciation Right Agreement, which shall be
executed by the Grantee and an authorized officer of the Company. The
Committee, in its discretion, may determine whether a Stock Appreciation Right
is to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code and Stock Appreciation Right Agreements evidencing
Stock Appreciation Rights intended to so qualify shall contain such terms and
conditions as may be necessary to meet the applicable provisions of Section
162(m) of the Code. Without
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limiting the generality of the foregoing, the Committee may, in its discretion
and on such terms as it deems appropriate, require as a condition of the grant
of a Stock Appreciation Right to an Employee or consultant that the Employee or
consultant surrender for cancellation some or all of the unexercised Options,
awards of Restricted Stock or Deferred Stock, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents or Stock Payments, or other rights
which have been previously granted to him under this Plan or otherwise. A Stock
Appreciation Right, the grant of which is conditioned upon such surrender, may
have an exercise price lower (or higher) than the exercise price of the
surrendered Option or other award, may cover the same (or a lesser or greater)
number of shares as such surrendered Option or other award, may contain such
other terms as the Committee deems appropriate, and shall be exercisable in
accordance with its terms, without regard to the number of shares, price,
exercise period or any other term or condition of such surrendered Option or
other award.
8.2 Coupled Stock Appreciation Rights.
(a) A Coupled Stock Appreciation Right ("CSAR") shall be related to a
particular Option and shall be exercisable only when and to the extent the
related Option is exercisable.
(b) A CSAR may be granted to the Grantee for no more than the number
of shares subject to the simultaneously or previously granted Option to which
it is coupled.
(c) A CSAR shall entitle the Grantee (or other person entitled to
exercise the Option pursuant to this Plan) to surrender to the Company
unexercised a portion of the Option to which the CSAR relates (to the extent
then exercisable pursuant to its terms) and to receive from the Company in
exchange therefor an amount determined by multiplying the difference obtained
by subtracting the Option exercise price from the Fair Market Value of a share
of Common Stock on the date of exercise of the CSAR by the number of shares of
Common Stock with respect to which the CSAR shall have been exercised, subject
to any limitations the Committee may impose.
8.3 Independent Stock Appreciation Rights.
(a) An Independent Stock Appreciation Right ("ISAR") shall be
unrelated to any Option and shall have a term set by the Committee. An ISAR
shall be exercisable in such installments as the Committee may determine. An
ISAR shall cover such number of shares of Common Stock as the Committee may
determine; provided, however, that no ISAR granted to a person subject to
Section 16 of the Exchange Act shall be exercisable until at least six months
have elapsed from (but excluding) the date on which the Option was granted. The
exercise price per share of Common Stock subject to each ISAR shall be set by
the Committee. An ISAR is exercisable
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only while the Grantee is an Employee or consultant; provided that the
Committee may determine that the ISAR may be exercised subsequent to
Termination of Employment or Termination of Consultancy without cause, or
following a change in control of the Company, or because of the Grantee's
retirement, death or disability, or otherwise.
(b) An ISAR shall entitle the Grantee (or other person entitled to
exercise the ISAR pursuant to this Plan) to exercise all or a specified portion
of the ISAR (to the extent then exercisable pursuant to its terms) and to
receive from the Company an amount determined by multiplying the difference
obtained by subtracting the exercise price per share of the ISAR from the Fair
Market Value of a share of Common Stock on the date of exercise of the ISAR by
the number of shares of Common Stock with respect to which the ISAR shall have
been exercised, subject to any limitations the Committee may impose.
8.4 Payment and Limitations on Exercise.
(a) Payment of the amount determined under Section 8.2(c) and 8.3(b)
above shall be in cash, in Common Stock (based on its Fair Market Value as of
the date the Stock Appreciation Right is exercised) or a combination of both,
as determined by the Committee. To the extent such payment is effected in
Common Stock it shall be made subject to satisfaction of all provisions of
Section 5.4 hereinabove pertaining to Options.
(b) Grantees of Stock Appreciation Rights who are subject to Section
16 of the Exchange Act may, in the discretion of the Board or Committee, be
required to comply with any timing, or other restrictions under Rule 16b-3
applicable to the settlement or exercise of a Stock Appreciation Right.
8.5 Consideration. In consideration of the granting of a Stock
Appreciation Right, the Grantee shall agree, in the written Stock Appreciation
Right Agreement, to remain in the employ of, or to consult for, the Company or
any Subsidiary for a period of at least one year after the Stock Appreciation
Right is granted. Nothing in this Plan or in any Stock Appreciation Right
Agreement hereunder shall confer on any Grantee any right to continue in the
employ of, or as a consultant for, the Company or any Subsidiary or shall
interfere with or restrict in any way the rights of the Company and any
Subsidiary, which are hereby expressly reserved, to discharge any Grantee at
any time for any reason whatsoever, with or without good cause.
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ARTICLE IX
ADMINISTRATION
9.1 Compensation Committee. The Compensation Committee (or a
subcommittee of the Board assuming the functions of the Committee under this
Plan) shall consist of two or more Independent Directors appointed by and
holding office at the pleasure of the Board, each of whom is both a
"disinterested person" as defined by Rule 16b-3 and an "outside director" for
purposes of Section 162(m) of the Code. Appointment of Committee members shall
be effective upon acceptance of appointment. Committee members may resign at
any time by delivering written notice to the Board. Vacancies in the Committee
may be filled by the Board.
9.2 Duties and Powers of Committee. It shall be the duty of the
Committee to conduct the general administration of this Plan in accordance with
its provisions. The Committee shall have the power to interpret this Plan and
the agreements pursuant to which Options, awards of Restricted Stock or
Deferred Stock, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments are granted or awarded, and to adopt such rules
for the administration, interpretation, and application of this Plan as are
consistent therewith and to interpret, amend or revoke any such rules.
Notwithstanding the foregoing, the full Board, acting by a majority of its
members in office, shall conduct the general administration of the Plan with
respect to Options granted to Independent Directors. Any such grant or award
under this Plan need not be the same with respect to each Optionee, Grantee or
Restricted Stockholder. Any such interpretations and rules with respect to
Incentive Stock Options shall be consistent with the provisions of Section 422
of the Code. In its absolute discretion, the Board may at any time and from
time to time exercise any and all rights and duties of the Committee under this
Plan except with respect to matters which under Rule 16b-3 or Section 162(m) of
the Code, or any regulations or rules issued thereunder, are required to be
determined in the sole discretion of the Committee.
9.3 Majority Rule. The Committee shall act by a majority of its
members in attendance at a meeting at which a quorum is present or by a
memorandum or other written instrument signed by all members of the Committee.
9.4 Compensation; Professional Assistance; Good Faith Actions. Members
of the Committee shall receive such compensation for their services as members
as may be determined by the Board. All expenses and liabilities which members
of the Committee incur in connection with the administration of this Plan shall
be borne by the Company. The Committee may, with the approval of the Board,
employ attorneys, consultants, accountants, appraisers, brokers, or other
persons. The Committee, the Company and the Company's officers and Directors
shall be entitled to rely upon the advice,
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opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee in good faith shall be
final and binding upon all Optionees, Grantees, Restricted Stockholders, the
Company and all other interested persons. No members of the Committee or Board
shall be personally liable for any action, determination or interpretation made
in good faith with respect to this Plan, Options, awards of Restricted Stock or
Deferred Stock, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments, and all members of the Committee shall be fully
protected by the Company in respect of any such action, determination or
interpretation.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Not Transferable. Options, Restricted Stock awards, Deferred
Stock awards, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments under this Plan may not be sold, pledged,
assigned, or transferred in any manner other than by will or the laws of
descent and distribution, unless and until such rights or awards have been
exercised, or the shares underlying such rights or awards have been issued, and
all restrictions applicable to such shares have lapsed. No Option, Restricted
Stock award, Deferred Stock award, Performance Award, Stock Appreciation Right,
Dividend Equivalent or Stock Payment or interest or right therein shall be
liable for the debts, contracts or engagements of the Optionee, Grantee or
Restricted Stockholder or his successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect.
During the lifetime of the Optionee or Grantee, only he may exercise
an Option or other right or award (or any portion thereof) granted to him under
the Plan. After the death of the Optionee or Grantee, any exercisable portion
of an Option or other right or award may, prior to the time when such portion
becomes unexercisable under the Plan or the applicable Stock Option Agreement
or other agreement, be exercised by his personal representative or by any
person empowered to do so under the deceased Optionee's or Grantee's will or
under the then applicable laws of descent and distribution.
10.2 Amendment, Suspension or Termination of this Plan. This Plan may
be wholly or partially amended or otherwise modified, suspended or terminated
at any time or from time to time by the Committee. However, without approval of
the Company's stockholders given within twelve months before or after the
action by the
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Committee, no action of the Committee may, except as provided in Section 10.3,
increase the limits imposed in Section 2.1 on the maximum number of shares
which may be issued under this Plan or modify the Award Limit, and no action of
the Committee may be taken that would otherwise require stockholder approval as
a matter of applicable law, regulation or rule. Notwithstanding the foregoing,
the provisions of this Plan relating to formula Option grants to Independent
Directors, including the amount, price and timing thereof, shall not be amended
more than once in any six-month period other than to comport with changes in
the Code, the Employee Retirement Income Security Act, or the respective rules
thereunder, No amendment, suspension or termination of this Plan shall, without
the consent of the holder of Options, Restricted Stock awards, Deferred Stock
awards, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or
Stock Payments, alter or impair any rights or obligations under any Options,
Restricted Stock awards, Deferred Stock awards, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents or Stock Payments theretofore granted
or awarded, unless the award itself otherwise expressly so provides. No
Options, Restricted Stock, Deferred Stock, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents or Stock Payments may be granted or
awarded during any period of suspension or after termination of this Plan, and
in no event may any Incentive Stock Option be granted under this Plan after the
first to occur of the following events:
(a) The expiration of ten years from the date the Plan is adopted by
the Board; or
(b) The expiration of ten years from the date the Plan is approved by
the Company's stockholders under Section 10.5.
10.3 Changes in Common Stock or Assets of the Company. In the event
that the outstanding shares of Common Stock are hereafter changed into or
exchanged for cash or a different number or kind of shares or other securities
of the Company, or of another corporation, by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock splitup, stock
dividend, or combination of shares, appropriate adjustments shall be made by
the Committee in the number and kind of shares for which Options, Restricted
Stock awards, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents, Deferred Stock awards or Stock Payments may be granted, including
adjustments of the limitations in Section 2.1 on the maximum number and kind of
shares which may be issued and of the Award limit described in Section 1.2, and
appropriate adjustments shall be made by the Board in the number and kind of
shares for the purchase of which Options are granted to Independent Directors
under Section 3.4(d).
In the event of such a change or exchange, subject to the other
provisions of this Plan, the Committee (or the Board, in the case of Options
granted to Independent Directors) shall also make
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an appropriate and equitable adjustment in the number and kind of shares as to
which all outstanding Options, Performance Awards, Stock Appreciation Rights,
Dividend Equivalents or Stock Payments, or portions thereof then unexercised,
shall be exercisable and in the number and kind of shares of outstanding
Restricted Stock or Deferred Stock. Such adjustment shall be made with the
intent that after the change or exchange of shares, each Optionee's and each
Grantee's and each Restricted Stockholder's proportionate interest shall be
maintained as before the occurrence of such event. Such adjustment in an
outstanding Option, Performance Award, Stock Appreciation Right, Dividend
Equivalent or Stock Payment may include a necessary or appropriate
corresponding adjustment in Option, Performance Award, Stock Appreciation
Right, Dividend Equivalent or Stock Payment exercise price, but shall be made
without change in the total price applicable to the Option, Performance Award,
Stock Appreciation Right, Dividend Equivalent or Stock Payment, or the
unexercised portion thereof (except for any change in the aggregate price
resulting from rounding-off of share quantities or prices).
Where an adjustment of the type described above is made to an
Incentive Stock Option under this Section, the adjustment will be made in a
manner which will not be considered a "modification" under the provisions of
subsection 424(h)(3) of the Code.
In the event of a "spin-off" or other substantial distribution of
assets of the Company which has a material diminutive effect upon the Fair
Market Value of the Company's Common Stock, the Committee (or the Board, in the
case of Options granted to Independent Directors) shall make an appropriate and
equitable adjustment to the Option, Performance Award, Stock Appreciation
Right, Dividend Equivalent or Stock Payment exercise price to reflect such
diminution.
10.4 Merger of the Company. In the event of the merger or
consolidation of the Company with or into another corporation, the exchange of
all or substantially all of the assets of the Company for the securities of
another corporation, the acquisition by another corporation or person of all or
substantially all of the Company's assets or 80% or more of the Company's then
outstanding voting stock, or the liquidation or dissolution of the Company:
(a) At the discretion of the Committee (or the Board, in the case of
Options granted to Independent Directors), the terms of an Option, Performance
Award, Stock Appreciation Right, Dividend Equivalent or Stock Payment may
provide that it cannot be exercised after such event.
(b) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee (or the Board, in the case of Options granted to
Independent Directors) may provide either by
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the terms of such Option, Performance Award, Stock Appreciation Right, Dividend
Equivalent or Stock Payment or by a resolution adopted prior to the occurrence
of such event that, for a specified period of time prior to such event, such
Option, Performance Award, Stock Appreciation Right, Dividend Equivalent or
Stock Payment shall be exercisable as to all shares covered thereby,
notwithstanding anything to the contrary in this Plan or in the provisions of
such Option, Performance Award, Stock Appreciation Right, Dividend Equivalent
or Stock Payment.
(c) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee (or the Board, in the case of Options granted to
Independent Directors) may provide either by the terms of such Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent or Stock
Payment or by a resolution adopted prior to the occurrence of such event that
upon such event, such Option, Performance Award, Stock Appreciation Right,
Dividend Equivalent or Stock Payment shall be assumed by the successor
corporation, or a parent or subsidiary thereof, or shall be substituted for by
similar options, rights or awards covering the stock of the successor
corporation, or a parent or subsidiary thereof, with appropriate adjustments as
to the number and kind of shares and prices.
(d) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee may provide either by the terms of a Restricted
Stock award or Deferred Stock award or by a resolution adopted prior to the
occurrence of such event that, for a specified period of time prior to such
event, the restrictions imposed under a Restricted Stock Agreement or a
Deferred Stock Agreement upon some or all shares of Restricted Stock or
Deferred Stock may be terminated, and, in the case of Restricted Stock, some or
all shares of such Restricted Stock may cease to be subject to repurchase under
Section 6.6 after such event.
(e) None of the foregoing discretionary terms of this Section 10.4
shall be permitted with respect to Options granted under Section 3.4(d) to
Independent Directors to the extent that such discretion would be inconsistent
with the requirements of Rule 16b-3.
10.5 Approval of Plan by Stockholders. This Plan will be submitted for
the approval of the Company's stockholders within twelve months after the date
of the Board's initial adoption of this Plan. Options, Performance Awards,
Stock Appreciation Rights, Dividend Equivalents or Stock Payments may be
granted and Restricted Stock or Deferred Stock may be awarded prior to such
Stockholder approval, provided that such Options, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents or Stock Payments shall not be
exercisable and such Restricted Stock or Deferred Stock shall not vest prior to
the time when this Plan is approved by the stockholders, and provided further
that if such
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approval has not been obtained at the end of said twelve-month period, all
Options, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or
Stock Payments previously granted and all Restricted Stock or Deferred Stock
previously awarded under this Plan shall thereupon be cancelled and become null
and void.
10.6 Tax Withholding. The Company shall be entitled to require payment
in cash or deduction from other compensation payable to each Optionee, Grantee
or Restricted Stockholder of any sums required by federal, state or local tax
law to be withheld with respect to the issuance, vesting or exercise of any
Option, Restricted Stock, Deferred Stock, Performance Award, Stock Appreciation
Right, Dividend Equivalent or Stock Payment. Subject to the timing requirements
of Section 5.3, the Committee (or the Board, in the case of Options granted to
Independent Directors) may in its discretion and in satisfaction of the
foregoing requirement allow such Optionee, Grantee or Restricted Stockholder to
elect to have the Company withhold shares of Common Stock (or allow the return
of shares of Common Stock) having a Fair Market Value equal to the sums
required to be withheld.
10.7 Loans. The Committee may, in its discretion, extend one or more
loans to key Employees in connection with the exercise or receipt of an Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent or Stock
Payment granted under this Plan, or the issuance of Restricted Stock or
Deferred Stock awarded under this Plan. The terms and conditions of any such
loan shall be set by the Committee.
10.8 Limitations Applicable to Section 16 Persons and
Performance-Based Compensation. Notwithstanding any other provision of this
Plan, any Option, Performance Award, Stock Appreciation Right, Dividend
Equivalent or Stock Payment granted, or Restricted Stock or Deferred Stock
awarded, to a key Employee or Director who is then subject to Section 16 of the
Exchange Act, shall be subject to any additional limitations set forth in any
applicable exemptive rule under Section 16 of the Exchange Act (including any
amendment to Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule, and this Plan shall be deemed amended to
the extent necessary to conform to such limitations. Furthermore,
notwithstanding any other provision of this Plan, any Option or Stock
Appreciation Right intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code shall be subject to any
additional limitations set forth in Section 162(m) of the Code (including any
amendment to Section 162(m) of the Code) or any regulations or rulings issued
thereunder that are requirements for qualification as performance-based
compensation as described in Section 162(m)(4)(C) of the Code, and this Plan
shall be deemed amended to the extent necessary to conform to such
requirements.
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10.9 Effect of Plan Upon Options and Compensation Plans. The adoption
of this Plan shall not affect any other compensation or incentive plans in
effect for the Company or any Subsidiary. Nothing in this Plan shall be
construed to limit the right of the Company (i) to establish any other forms of
incentives or compensation for Employees, Directors or consultants of the
Company or any Subsidiary or (ii) to grant or assume options or other rights
otherwise than under this Plan in connection with any proper corporate purpose
including but not by way of limitation, the grant or assumption of options in
connection with the acquisition by purchase, lease, merger, consolidation or
otherwise, of the business, stock or assets of any corporation, partnership,
firm or association.
10.10 Compliance with Laws. This Plan, the granting and vesting of
Options, Restricted Stock awards, Deferred Stock awards, Performance Awards,
Stock Appreciation Rights, Dividend Equivalents or Stock Payments under this
Plan and the issuance and delivery of shares of Common Stock and the payment of
money under this Plan or under Options, Performance Awards, Stock Appreciation
Rights, Dividend Equivalents or Stock Payments granted or Restricted Stock or
Deferred Stock awarded hereunder are subject to compliance with all applicable
federal and state laws, rules and regulations (including but not limited to
state and federal securities law and federal margin requirements) and to such
approvals by any listing, regulatory or governmental authority as may, in the
opinion of counsel for the Company, be necessary or advisable in connection
therewith. Any securities delivered under this Plan shall be subject to such
restrictions, and the person acquiring such securities shall, if requested by
the Company, provide such assurances and representations to the Company as the
Company may deem necessary or desirable to assure compliance with all
applicable legal requirements. To the extent permitted by applicable law, the
Plan, Options, Restricted Stock awards, Deferred Stock awards, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments
granted or awarded hereunder shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.
10.11 Titles. Titles are provided herein for convenience only and are
not to serve as a basis for interpretation or construction of this Plan.
10.12 Governing Law. This Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
Delaware without regard to conflicts of laws thereof.
* * *
26
<PAGE> 58
I hereby certify that the foregoing Plan was duly adopted by the Board
of Directors of Personnel Group of America, Inc. on September 21, 1995.
Executed on this 9th day of November, 1995.
/s/ Rosemary Payne-Harris
---------------------------------
Secretary
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