SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED
BY RULE 14A-6(E)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-12
ALTERNATIVE RESOURCES CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(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)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
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/ / Fee paid previously with preliminary materials.
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the offsetting fee was paid previously. Identify the previous
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ALTERNATIVE RESOURCES CORPORATION
600 HART ROAD
SUITE 300
BARRINGTON, ILLINOIS 60010
(847) 381-6701
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 14, 2001
------------------------
To the Stockholders of
ALTERNATIVE RESOURCES CORPORATION:
The Annual Meeting of Stockholders of Alternative Resources Corporation, a
Delaware corporation (the "Company"), will be held at the Company's corporate
headquarters at 600 Hart Road, Suite 300, Barrington, IL 60010 on Thursday,
June 14, 2001, at 10:00 A.M. Central Daylight Time for the following purposes:
1. To elect two Class I directors.
2. To approve an amendment to the Company's Certificate of Incorporation to
effect a reverse stock split of the Company's issued and outstanding
Common Stock, as more fully described in the accompanying proxy
statement.
3. To consider and transact such other business as may properly come before
the Annual Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on April 23, 2001, as
the record date for determining the stockholders entitled to notice of and to
vote at the Annual Meeting.
By Order of the Board of Directors
/s/ STEVEN PURCELL
Steven Purcell
SENIOR VICE PRESIDENT, CHIEF FINANCIAL
OFFICER, SECRETARY AND TREASURER
May 11, 2001
All stockholders are urged to attend the meeting in person or by proxy. Whether
or not you plan to attend the meeting, please complete, sign and date the
enclosed proxy card and return it promptly in the enclosed envelope provided,
which requires no postage for mailing in the United States. A prompt response is
helpful, and your cooperation will be appreciated. Your proxy can be withdrawn
at any time before it is voted.
ALTERNATIVE RESOURCES CORPORATION
600 HART ROAD
SUITE 300
BARRINGTON, ILLINOIS 60010
------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 14, 2001
------------------------
This Proxy Statement is being mailed to stockholders on or about May 11,
2001 and is furnished in connection with the solicitation by the Board of
Directors of Alternative Resources Corporation, (the "Company"), of proxies for
the Annual Meeting of Stockholders to be held on June 14, 2001, for the purpose
of considering and acting upon the matters specified in the Notice of Annual
Meeting of Stockholders accompanying this Proxy Statement. If the form of Proxy
that accompanies this Proxy Statement is executed and returned, it will be
voted. A Proxy may be revoked at any time prior to its voting by written notice
to the Secretary of the Company.
A majority of the outstanding shares of Common Stock of the Company ("Common
Stock") entitled to vote at this meeting and represented in person or by proxy
will constitute a quorum. The affirmative vote of the holders of a plurality of
the shares of Common Stock entitled to vote and represented in person or by
proxy at this meeting is required to elect directors. The affirmative vote of
the holders of a majority of the outstanding shares of the Company's Common
Stock is required to approve the amendment to the Company's Certification of
Incorporation to effect a reverse stock split. Shares represented by proxies
which are marked "abstain" or to deny discretionary authority on any matter will
be treated as shares present and entitled to vote and will have the same affect
as votes against any such matters. Broker "non-votes" will also have the same
affect as votes against the proposal to approve the amendment to the Company's
Certificate of Incorporation. Broker "non-votes" and the shares as to which
stockholders abstain are included for purposes of determining whether a quorum
of shares is present at a meeting. A broker "non-vote" occurs when a nominee
holding shares for a beneficial owner does not vote a particular proposal
because the nominee does not have discretionary voting power with respect to
that item and has not received instructions from the beneficial owner.
Expenses incurred in the solicitation of proxies will be borne by the
Company. Officers of the Company may make additional solicitations in person or
by telephone.
The Company's Form 10-K Annual Report for the year ended December 31, 2000
accompanies this Proxy Statement. If you did not receive a copy of the report,
you may obtain one by writing to the Secretary of the Company.
As of March 23, 2001, the Company had outstanding 17,390,594 shares of
Common Stock, and such shares are the only shares entitled to vote at the Annual
Meeting. Each share is entitled to one vote on each matter to be voted upon at
the Annual Meeting.
SECURITIES BENEFICIALLY OWNED BY
PRINCIPAL STOCKHOLDERS AND MANAGEMENT
Set forth in the following table are the beneficial holdings (and the
percentages of outstanding shares represented by such beneficial holdings) as of
March 23, 2001, except as otherwise noted, of (i) each person (including any
"group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934
(the "Exchange Act")) known by the Company to own beneficially more than 5% of
its outstanding Common Stock, (ii) directors and nominees for directorships,
(iii) each Named Executive Officer (as defined under "Executive Compensation"
below), and (iv) all directors and executive officers as a group. Except as
otherwise indicated, the Company believes that the beneficial owners of the
Common Stock listed below, based on information provided by such owners, have
sole investment and voting power with respect to such shares, subject to
community property laws where applicable. Under Rule 13d-3 of the Exchange Act,
persons who have the power to vote or dispose of Common Stock of the Company,
either alone or jointly with others, are deemed to be beneficial owners of such
Common Stock.
NUMBER OF SHARES PERCENT OF
NAME BENEFICIALLY OWNED CLASS
- ---- ------------------ ----------
Larry I. Kane(1) ........................................... 1,577,280 9.07%
2654 Kingston Drive
Northbrook, IL 60062
Raymond R. Hipp............................................. 422,300 2.43%
Steven Purcell.............................................. 302,500 1.74%
Victor J. Fricas............................................ 300,000 1.73%
David Nolan................................................. 299,850 1.72%
Sharon A. McKinney.......................................... 50,000 *
Bruce R. Smith(2)........................................... 99,770 *
Syd N. Heaton(2)............................................ 115,000 *
Jo Anne Brandes(2).......................................... 33,000 *
A. Donald Rully(2).......................................... 45,600 *
Charles W. Sweet(2)......................................... 1,500 *
George B. Cobbe(2).......................................... 15,000 *
All directors and executive officers as a group
(11 persons)(2)........................................... 1,684,520 9.69%
- ------------------------
* Less than 1%.
(1) Based upon a Schedule 13G dated February 14, 1997, as filed with the
Securities and Exchange Commission.
(2) Includes 33,000 shares (Ms. Brandes), 15,000 shares (Mr. Cobbe), 15,000
shares (Mr. Heaton), 15,000 shares (Mr. Rully), 35,012 shares (Mr. Smith),
and 113,012 shares (all directors and executive officers as a group) that
are subject to presently exercisable options or options exercisable within
60 days of March 23, 2001.
2
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Amended and Restated Certificate of Incorporation of the Company
provides that the Board of Directors of the Company shall be divided into three
classes, as nearly equal in number as possible, with one class being elected
each year for a three-year term. At the Annual Meeting of Stockholders, two
Class I directors are to be elected to serve until 2004. Five directors will
continue to serve in accordance with their prior election or appointment.
It is intended that the proxies (except proxies marked to the contrary) will
be voted for the nominees listed below. It is expected that the nominees will
serve, but if any nominee declines or is unable to serve for any unforeseen
cause, the proxies will be voted to fill any vacancy so arising in accordance
with the discretionary authority of the persons named in the proxies.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE CLASS I NOMINEES.
NOMINEE AND CONTINUING DIRECTORS
The following table sets forth certain information with respect to the
nominees and the continuing directors:
NAME AND AGE DIRECTOR SINCE: PRINCIPAL OCCUPATION AND OTHER INFORMATION
- ------------ ------------------- ----------------------------------------------------
CLASS I NOMINEES FOR ELECTION WITH TERMS EXPIRING IN 2004
Jo Anne Brandes (47) August 1994 Ms. Brandes has been Senior Vice President, General
Counsel and Secretary for S.C. Johnson Commercial
Markets, Inc., a worldwide commercial products and
solutions company, since October 1997. Ms. Brandes
was Vice President, General Counsel--Worldwide
Professional for S.C. Johnson & Son, Inc., from
October 1996 to October 1997, and was Vice
President--Corporate Communications Worldwide for
S.C. Johnson & Son, Inc. from October 1994 to
October 1996. From May 1992 through September 1994
she was Director--Corporate Communications Worldwide
for S.C. Johnson & Son, Inc. Ms. Brandes currently
serves on the Boards of Directors of Bright Horizons
Family Solutions and Johnson Family Funds, Inc. and
is a regent of the University of Wisconsin System.
A. Donald Rully (62) March 1998 Mr. Rully was employed by IBM Corporation from 1965
to 1998, most recently as Vice President and General
Manager of Technology Solutions with IBM/Global
Services. Since Mr. Rully's retirement in
April 1998, he has been engaged in the consulting
business.
CLASS II DIRECTORS WITH TERMS EXPIRING IN 2002
Syd N. Heaton (61) March 1998 Mr. Heaton was Chairman and Chief Executive Officer
of Advantis, a networking technology company formed
by IBM Corporation and Sears, Roebuck and Co., from
1992 through his retirement in 1997. Previously he
held a variety of management positions with IBM.
3
NAME AND AGE DIRECTOR SINCE: PRINCIPAL OCCUPATION AND OTHER INFORMATION
- ------------ ------------------- ----------------------------------------------------
Steven Purcell (50) May 1999 Mr. Purcell joined the Company in August 1998 as
Senior Vice President, Chief Financial Officer,
Secretary and Treasurer. He was elected to the Board
of Directors in May 1999. Prior to joining the
Company he was Chief Financial Officer for American
Business Information, a provider of business and
consumer data and data processing services. From
1991 to 1996 he served as Vice President--Finance,
Chief Financial Officer and Treasurer, of Micro
Warehouse, a direct marketer of hardware, software
and accessories.
Bruce R. Smith (59) April 1991 Mr. Smith currently is a Principal with Nextera /
Sibson Consulting Group. Previously, Mr. Smith was a
founder and President and Chief Executive Officer of
Integration Alliance Corporation, a commercial
systems, technology marketing and distribution
company, from August 1994 through March 1998, at
which time the company was sold to General Electric
Capital Corporation. Mr. Smith was President and
Chief Executive Officer of Client Systems, Inc.,
f/k/a Systems/DRC, Inc., a distributor of computer
software and hardware systems, from November 1993
through July 1994. From February 1991 through
October 1993, Mr. Smith was Vice President-
Marketing and Sales of Distribution Resources
Company, a computer software developer and hardware
systems provider. From March 1986 through
January 1991, Mr. Smith was Vice President/Division
General Manager of Businessland, Inc., a computer
and network systems distributor. Mr. Smith
previously held various general management, sales
and training positions with Xerox Corporation and
Exxon Corporation. Mr. Smith also serves on the
Boards of Directors of Jefferson Wells International
and The Bombay Company.
CLASS III DIRECTORS WITH TERMS EXPIRING IN 2003
Raymond R. Hipp (58) August 1994 Mr. Hipp has been Chairman of the Board, President
and Chief Executive Officer of the Company since
July 1998. Previously he was Chief Executive
Officer of ITI Marketing Services, a provider of
telemarketing services, from August 1996 until
May 1998 when the company was sold. He was a
self-employed management consultant from
September 1994 to August 1996. Mr. Hipp was
President of Comdisco Disaster Recovery Services, a
provider of business continuity services for the
information technology industry, from 1980 through
August 1994. Mr. Hipp previously held executive and
management positions with International Business
Machines Corporation. He currently serves on the
Board of Directors of Gardner Denver Inc.
4
NAME AND AGE DIRECTOR SINCE: PRINCIPAL OCCUPATION AND OTHER INFORMATION
- ------------ ------------------- ----------------------------------------------------
Charles W. Sweet (57) February 6, 2001 Mr. Sweet is Chairman of A.T. Kearney Executive
Search. He has over 29 years of executive search
experience. Prior to assuming the leadership role as
Chairman, Mr. Sweet spent 14 years as President of
the division, with management responsibility for
A.T. Kearney Executive Search offices in North
America, Europe, Asia and South America. He has
completed more than 250 search assignments in a wide
variety of industries, covering virtually every
functional area with an emphasis on strategically
critical general management assignments and boards
of directors. Mr. Sweet serves on the board of
directors of GreatBanc, and Calypaso Systems, Inc.
He is an elected trustee and head of the finance
committee of the Village of Barrington Hills,
Illinois and is on the board of advisors for Ridge
Capital Fund and a trustee for the University of
Richmond. Mr. Sweet has a B.A. degree from Hamilton
College and an M.B.A. degree from the University of
Chicago.
BOARD OF DIRECTORS
The Board of Directors held four meetings during 2000. All directors
attended at least 75 percent of the aggregate number of such meetings and of
meetings of Board committees on which they served in 2000.
The Board of Directors has an Audit Committee composed of Syd N. Heaton,
Bruce R. Smith and A. Donald Rully, each of whom is independent as such term is
defined in the National Association of Securities Dealers' listing standards.
The Audit Committee had four meetings in 2000. The functions of the Audit
Committee are described under "Report of the Audit Committee."
The Board of Directors has a Compensation Committee, composed of Joanne
Brandes, Syd N. Heaton and Bruce R. Smith. In addition, the full Board of
Directors addressed various compensation-related matters during the year. The
Compensation Committee met one time during 2000. The functions of the
Compensation Committee include determining executive officers' salaries and
bonuses and administering and determining awards under the Company's Incentive
Stock Option Plan, the Employee Stock Purchase Plan and certain other employee
benefit plans.
Directors who are not employees or officers of the Company receive $2,000
for each Board meeting attended and $1,000 for each committee meeting attended
and also receive on the date of each annual meeting (and on the date of initial
election to the Board if other than at an annual meeting) a non-qualified stock
option to purchase 5,000 shares of Common Stock under the Incentive Stock Option
Plan. In addition, all directors are reimbursed for certain expenses in
connection with attendance at Board and committee meetings.
5
EXECUTIVE COMPENSATION
The following table sets forth information with respect to all compensation
paid or earned for services rendered to the Company by the Company's chief
executive officer and each of the four other executive officers of the Company
as of December 31, 2000 (together, the "Named Executive Officers"), for the
years indicated.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION AWARDS
-----------------------
RESTRICTED SECURITIES
ANNUAL COMPENSATION STOCK UNDERLYING ALL OTHER
--------------------------------- AWARD(S) OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($)(1)(2) (#)(2) ($)(3)
- --------------------------- -------- ---------- --------- ---------- ---------- ------------
Raymond R. Hipp .................. 2000 $360,000 $ -- $93,600 -- $ 8,545
Chairman of the Board 1999 300,000 -- -- 75,000 115,058
President and Chief 1998 121,154 250,000 -- 300,000 63,995
Executive Officer
Steven Purcell ................... 2000 $300,000 $ -- $62,400 -- $ 4,318
Senior Vice President 1999 250,000 35,000 -- 40,000 92,958
Chief Financial Officer, 1998 100,962 150,000 -- 200,000 174
Secretary and Treasurer
David Nolan(4) ................... 2000 $250,000 $ -- $62,400 25,000 $ 7,094
President of Field Operations 1999 123,000 $ -- -- 200,000 6,247
Victor J. Fricas(5) .............. 2000 $175,000 $ -- $46,800 5,000 $ 4,057
Chief Information Officer
Sharon A. McKinney(6) ............ 2000 $180,000 $ 24,000 $15,600 -- $ 4,031
Senior Vice President, Human 1999 148,308 -- -- 40,000 64,751
Resources
- ------------------------
(1) As of December 31, 2000, the number of shares and the value (based upon
closing price of the Company's Common Stock on December 31, 2000), of the
restricted stock held by each of the Executive Officers was as follows:
Mr. Hipp (300,000 shares / $103,200), Mr. Purcell (200,000
shares / $68,800), Mr. Nolan (200,000 shares, / $68,800), Mr. Fricas
(150,000 shares / $51,600), and Ms. McKinney (50,000 shares / $17,200).
(2) On November 1, 2000, all of the options held by the Named Executive Officers
(965,000 in the aggregate), including any of the options granted in 2000,
were cancelled. In exchange, each of the Named Executive Officers received
the number of restricted shares of Common Stock specified in footnote
(1) above, as owned at December 31, 2000.
(3) Includes term life insurance premiums paid by the Company for coverage in
excess of standard coverage provided to all employees and medical, dental
and long-term disability benefits, respectively, as follows:
Mr. Hipp--$1,415 and $5,882; Mr. Purcell--$37 and $3,653; Mr. Nolan--$366
and $5,882; Mr. Fricas--$417 and $3,640 and Ms. McKinney--$13 and $1,258.
Ms. McKinney also received $1,258 of 401(K) benefits.
(4) Mr. Nolan joined the Company as an executive officer effective July 1, 1999.
(5) Mr. Fricas became an executive officer effective November 1, 2000.
(6) Ms. McKinney became an executive officer effective January 22, 1999.
6
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding stock options granted
to the Named Executive Officers during 2000. On November 1, 2000, all of these
options as well as all other options held by the Named Executives were
cancelled, and, in exchange, each Named Executive received a number of shares of
restricted common stock. As a result, none of the Named Executive Officers held
any stock options as of December 31, 2000, nor did any of them exercise any
options in 2000 prior to cancellation.
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------------ VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL EXERCISE PRICE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED OR BASE OPTION TERM(4)
OPTIONS GRANTED TO EMPLOYEES PRICE EXPIRATION -----------------------
NAME (#)(1) IN FISCAL YEAR(2) ($/SH)(3) DATE 5% ($) 10% ($)
- ---- --------------- ----------------- --------- ---------- ---------- ----------
Raymond R. Hipp.......... 0 0% $ 0 $ 0 $ 0
Steven Purcell........... 0 0% $ 0 $ 0 $ 0
David Nolan.............. 25,000 4.4% $4.219 2/1/2010 $66,275 $168,025
Victor J. Fricas......... 5,000 0.9% $3.063 3/27/2010 $ 9,635 $ 24,385
Sharon A. McKinney....... 0 0% $ 0 $ 0 $ 0
- ------------------------
(1) Options are not exercisable during the first six months from the date the
options are originally granted, which is ten years prior to the specified
expiration date. Thereafter, options become exercisable at the rate of 2.38
percent of the total share subject to the option on and after the first day
of each month. The term of the option is ten years from the original date of
grant. As noted above, these options were cancelled on November 1, 2000.
(2) Based on 568,000 total options granted to employees, including the Named
Executive Officers, in 2000.
(3) The exercise price was equal to the fair market value of the Common Stock on
the date of grant.
(4) The potential realizable value was calculated based on the term of the
option at its time of grant (ten years). It was calculated by assuming the
stock price on the date of grant would appreciate at the indicated annual
rate compounded annually for the entire term of the option and that the
option would be exercised and sold on the last day of its term for the
appreciated stock price.
EMPLOYMENT AGREEMENTS
Mr. Hipp is employed as Chairman of the Board, President and Chief Executive
Officer under an employment agreement dated July 23, 1998 which extends through
December 31, 2001, subject to an automatic one-year extension as of such date
and as of each December 31 thereafter, unless 90 days notice of intent not to
extend is given by Mr. Hipp or the Company Under the agreement, Mr. Hipp
received $250,000 upon execution of the agreement, and is entitled to a base
salary of not less than $300,000 per year. The agreement also provides that
Mr. Hipp was eligible for an incentive compensation award for calendar year
2000. The Board of Directors approved an incentive compensation award for 2000
of up to approximately $300,000 based upon attainment by the Company of certain
revenue and earnings per share targets specified in the agreement. Because such
targets were not met, no incentive compensation award was paid to Mr. Hipp for
calendar year 2000. In addition, in the event the Company terminates Mr. Hipp
without cause, Mr. Hipp will be entitled to an amount equal to two years base
salary plus a prorated portion of any applicable annual incentive award for the
year in which termination occurs.
7
Mr. Purcell is employed as the Senior Vice President and Chief Financial
Officer under an employment agreement dated August 1, 1998, which extends
through December 31, 2001, subject to automatic one-year extensions as of such
date and as of each December 31, thereafter, unless 90 days notice of intent not
to extend is given by Mr. Purcell or the Company. Under the agreement,
Mr. Purcell received $150,000 upon execution of the agreement, and is entitled
to a base salary of not less than $250,000 per year. The agreement also provides
that Mr. Purcell was eligible for an incentive compensation award for calendar
year 2000. The Board of Directors approved an incentive compensation award for
2000 of up to approximately $175,000 based upon attainment by the Company of
certain revenue and earnings per share targets specified in the agreement.
Because such targets were not met, no incentive compensation award with respect
to such revenue and earnings targets was paid to Mr. Purcell for calendar year
2000. In addition, in the event the Company terminates Mr. Purcell without
cause, Mr. Purcell will be entitled to an amount equal to two years base salary
plus a prorated portion of any applicable annual incentive award for the year in
which the termination occurs.
Mr. Nolan is employed as the President of Field Operations under an
employment agreement dated July 1, 1999, which extends through December 31,
1999, subject to automatic one-year extensions as of such date and as of each
December 31, thereafter, unless 90 days notice of intent not to extend is given
by Mr. Nolan or the Company. Under the agreement, Mr. Nolan is entitled to a
base salary of $250,000 per year. The agreement also provides that Mr. Nolan was
eligible for an incentive compensation award for calendar year 2000 of up to
approximately $150,000 based upon attainment by the Company of certain revenue
and earnings per share targets specified in the agreement. Because such targets
were not met, no incentive compensation award with respect to such revenue and
earnings targets was paid to Mr. Nolan for calendar year 2000. In addition, in
the event the Company terminates Mr. Nolan without cause, Mr. Nolan will be
entitled to an amount equal to two years base salary plus a prorated portion of
any applicable annual incentive award for the year in which the termination
occurs.
Mr. Fricas is employed as the Chief Information Officer under an employment
agreement dated August 15, 2000, which extends through December 31, 2000,
subject to automatic one year extensions as of such date and as of each
December 31, thereafter, unless 90 days notice of intent not to extend is given
by Mr. Fricas or the Company. Under the agreement, Mr. Fricas is entitled to a
base salary of $175,000 per year. The agreement also provides that Mr. Fricas is
eligible for an incentive compensation award for calendar year 2000 and 2001. In
addition, in the event the Company terminates Mr. Fricas without cause,
Mr. Fricas will be entitled to an amount equal to one year base salary plus a
prorated portion of any applicable annual incentive award for the year in which
the termination occurs.
Ms. McKinney is employed as the Senior Vice President, Human Resources under
an employment agreement dated August 15, 2000, which extends through December
31, 2000, subject to automatic one-year extensions as of such date and as of
each December 31, thereafter, unless 90 days notice of intent not to extend is
given by Ms. McKinney or the Company. Under the agreement, Ms. McKinney is
entitled to a base salary of $180,000 per year. The agreement also provides that
Ms. McKinney is eligible for an incentive compensation award for calendar year
2000 and 2001. Ms. McKinney received a bonus of $24,000 for fiscal year 2000. In
addition, in the event the Company terminates Ms. McKinney without cause,
Ms. McKinney will be entitled to an amount equal to one year base salary plus a
prorated portion of any applicable annual incentive award for the year in which
the termination occurs.
8
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW OF EXECUTIVE COMPENSATION POLICIES
The Compensation Committee of the Board of Directors determines the salaries
and bonuses of executive officers and other key employees of the Company and
administers the Company's Incentive Stock Option Plan. In setting the
compensation levels of the Company's executive officers and in administering the
Stock Option Plan, the Compensation Committee has established the following
principles:
1) Provide competitive compensation levels and use equity ownership through
the Incentive Stock Option Plan to attract and retain highly qualified
individuals.
2) Set competitive base compensation levels and utilize significant
performance-based incentive compensation to achieve total compensation
targets.
3) Establish performance goals which are aggressive and are aligned with an
objective of increasing stockholder value at a greater rate than the rate
achieved by the upper quartile of the Russell 2000 Index.
4) Use discretionary cash awards as appropriate to recognize outstanding
individual contribution or overall Company performance that far exceeds
annual goals.
5) Allocate stock options and /or restricted stock grants broadly across
the organization so that all executive officers and key employees have a
stockholder perspective.
The overall compensation of the executive officers consists of the
compensation components set forth below. The Compensation Committee believes
that in 2000 the executive officers of the Company were compensated at levels
comparable to other information services or staffing companies.
TOTAL COMPENSATION--2000
BASE SALARIES.
Base Salaries of the Named Executive Officers were paid as specified in the
Summary Compensation Tables above. The Compensation Committee believes that the
base salary levels of the executive officers are comparable to their peers
within the information services and staffing industries.
TARGET BONUS PLAN.
Under the Company's 2000 Target Bonus Plan, the Compensation Committee
established certain corporate revenue and profit goals, specific revenue and
profit goals for certain business units, and executive specific goals. For 2000,
no bonuses attributable to the revenue and profit elements of the plan were paid
to the executive officers. A bonus was paid to one of the executive officers in
connection with the attainment of executive-specific goals.
OPTION GRANTS AND RESTRICTED STOCK.
Executive officers and other key employees of the Company are eligible to
participate in the Incentive Stock Option Plan. The purpose of the Stock Option
Plan is to provide incentive to management and key employees to maximize
stockholder value by providing them with opportunities to acquire shares of the
Company's Common Stock. Options and/or shares of restricted stock are granted to
executive officers and key employees who the Compensation Committee, in its sole
discretion, determines to be responsible for the future growth and profitability
of the Company. The Compensation Committee determines the employees to whom
options and/or restricted stock will be granted and establishes the number of
shares covered by each grant and the exercise price and vesting
9
period for each grant. The Committee typically grants stock options with
four-year vesting periods for each grant, creating strong incentives for
recipients of stock option grants to remain with the Company.
The stock options granted by the Compensation Committee have an exercise
price equal to the fair market value of the Company's Common Stock on the date
of grant, thus rewarding the recipient only if the Company's Common Stock price
appreciates above the price on the date of grant.
During 2000 the Compensation Committee considered it necessary to provide a
retention incentive to certain key members of management. To accomplish this,
the Committee, with the approval of the Board of Directors, issued 1,240,000
shares of Restricted Common Stock, including 900,000 to the Named Executive
Officers. The restrictions required the executives to remain employed at the
Company over various periods until July 2002. The Named Executive Officers were
required to return all options outstanding to the Company. In total, 965,000
options were cancelled as part of this program.
COMPENSATION OF CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER.
Mr. Hipp was elected Chairman of the Board, President and Chief Executive
Officer effective August 1, 1998. During 2000, he was paid a salary of $360,000.
Under the terms of the employment agreement, Mr. Hipp was eligible for an
incentive compensation award in 2000. The Board of Directors approved an
incentive compensation award for 2000 of up to $300,000 based upon the
attainment by the Company of certain revenue and earnings targets. Because such
targets were not met, no incentive compensation award was paid under the
employment agreement. On November 1, 2000, all of the 400,000 options held by
Mr. Hipp were cancelled and replaced by an award of 300,000 shares of Restricted
Common Stock as discussed in the previous paragraph.
DEDUCTIBILITY OF COMPENSATION IN EXCESS OF $1 MILLION PER YEAR.
Internal Revenue Code section 162(m), in general, precludes a public
corporation from claiming a tax deduction for compensation in excess of $1
million in any taxable year for any executive officer named in the summary
compensation table in such corporation's proxy statement. Certain performance-
based compensation is exempt from this tax deduction limitation. The
Compensation Committee's policy is to structure executive compensation in order
to maximize the amount of the Company's tax deduction. However, the Compensation
Committee reserves the right to deviate from that policy to the extent it is
deemed necessary to serve the best interests of the Company.
Respectfully Submitted By:
The Compensation Committee
Jo Anne Brandes
Syd N. Heaton
Bruce R. Smith
10
PROPOSAL NO. 2
APPROVAL OF A REVERSE STOCK SPLIT
The Board of Directors of the Company has unanimously approved a proposal to
amend the Company's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") to effect a reverse stock split of the Company's
outstanding Common Stock on the terms described below (the "Reverse Stock
Split"). The Board of Directors has declared the amendment to the Certificate of
Incorporation to be advisable and has recommended that the amendment be
presented to the stockholders of the Company for approval.
Except for adjustments that may result from the treatment of fractional
shares as described below, each stockholder will hold the same percentage of
Common Stock outstanding immediately following the Reverse Stock Split as such
stockholder held immediately prior to the Reverse Stock Split. If approved by
the stockholders of the Company as provided below, the Reverse Stock Split will
be effected by an amendment to the Certificate of Incorporation in substantially
the form attached to this Proxy Statement as Appendix B (the "Reverse Stock
Split Amendment") and will become effective upon the filing of the Reverse Stock
Split Amendment with the Secretary of State of Delaware (the "Effective Date").
The following discussion is qualified in its entirety by the full text of the
Reverse Stock Split Amendment, which is hereby incorporated by reference herein.
On the Effective Date, the Reverse Stock Split will result in the automatic
conversion of between three and five shares (as determined by the Board of
Directors in the manner described below) of issued and outstanding Common Stock
into one share of Common Stock. The Board believes that stockholder approval of
an exchange ratio range, as opposed to approval of a specified exchange ratio,
in which the Reverse Stock Split may be effected provides the Board with maximum
flexibility to achieve the purposes of the Reverse Stock Split. Fractional
shares of Common Stock will not be issued as a result of the Reverse Stock
Split, but instead, the Company will pay each holder of a fractional interest an
amount in cash equal to the value of such fractional interest on the Effective
Date.
If the Reverse Stock Split proposal is approved by the stockholders, the
Reverse Stock Split will be effected only upon a determination by the Board that
the Reverse Stock Split is in the best interest of the Company and its
stockholders at that time. Notwithstanding approval of the Reverse Stock Split
proposal by the stockholders of the Company, the Board may, in its sole
discretion, determine not to effect the Reverse Stock Split or to delay such
action based on the then-current trading price of the Common Stock or certain
other factors described herein. See "--Affect of the Reverse Stock Split
Proposal." On April 16, 2001, the last reported sale price of the Common stock
on the Nasdaq Stock Market, Inc. National Market (the "Nasdaq National Market")
was $0.71 per share.
Dissenting stockholders have no appraisal rights under Delaware law, the
Company's Certificate of Incorporation or the Company's Amended and Restated
By-laws in connection with the approval of the Reverse Stock Split
Amendment and the consummation of the Reverse Stock Split.
REASONS FOR THE REVERSE STOCK SPILT
The primary purpose of the Reverse Stock Split is to combine the outstanding
shares of Common Stock so that the Common Stock outstanding after giving affect
to the Reverse Stock Split trades at a significantly higher price per share than
the Common Stock outstanding before giving affect to the Reverse Stock Split.
The Company believes that this higher trading price will aid the Company in
remaining eligible for listing on the Nasdaq National Market.
The Company's Common Stock must maintain a minimum bid price of $1.00 per
share in order to remain eligible for continued listing on the Nasdaq National
Market. On October 31, 2000, the staff (the "Staff") of the Nasdaq Stock Market,
Inc. ("Nasdaq") notified the Company that the bid price for its Common Stock had
been below $1.00 per share for a period of thirty consecutive trading days. The
11
Staff advised the Company that it would be given a period of ninety days within
which to comply with the minimum bid price requirement in order to maintain it's
listing on the Nasdaq National Market. The Company was unable to meet this
requirement during the ninety-day period.
On March 8, 2001, in accordance with Nasdaq procedures, representatives of
the Company participated in an oral hearing before a Nasdaq Listing
Qualifications Panel in order to request a temporary exemption from the minimum
bid price requirement for continued listing on the Nasdaq National Market. In
this hearing, the Staff recommended that the Company implement a reverse stock
split in order to satisfy the $1.00 minimum bid price requirement. On March 12,
2001, the Company advised the Staff that the Company would submit to its
stockholders for their approval a proposal to amend the Company's Certificate of
Incorporation to effect a reverse stock split of its Common Stock.
On March 26, 2001, the Staff advised the Company that the Company would be
permitted to maintain the listing of its Common Stock on the Nasdaq National
Market only if (i) the Company is able to evidence a closing bid price of at
least $1.00 per share no later than June 15, 2001 and (ii) the Company is able
to evidence a closing bid price of at least $1.00 per share for a minimum of ten
consecutive trading days immediately thereafter. The Company believes, but
cannot assure, that the Reverse Stock Split will enable the Common Stock to
trade above the $1.00 minimum bid price established by the Nasdaq listing
requirements for continued listing on the Nasdaq National Market (the "Nasdaq
National Market Listing Requirements") and to satisfy the minimum bid price
requirement for at least ten consecutive trading days thereafter.
The Company believes that maintaining the listing of its Common Stock on the
Nasdaq National Market is in the best interest of the Company and its
stockholders. Inclusion in the Nasdaq National Market increases liquidity and
may potentially minimize the spread between the "bid" and "asked" prices quoted
by market makers. Further, a Nasdaq National Market listing may enhance the
Company's access to capital and increase the Company's flexibility in responding
to anticipated capital requirements. The Company believes that prospective
investors will view an investment in the Company more favorably if its shares
qualify for listing on the Nasdaq National Market.
The Company also believes that the current per share price level of the
Common Stock has reduced the effective marketability of the Company's shares of
Common Stock because of the reluctance of many leading brokerage firms to
recommend low-priced stock to their clients. Certain investors view low-priced
stock as speculative and unattractive, although certain other investors may be
attracted to low-priced stock because of the greater trading volatility
sometimes associated with such securities. In addition, a variety of brokerage
house policies and practices tend to discourage individual brokers within those
firms dealing in low-priced stock. Such policies and practices pertain to the
payment of brokers' commissions and to time-consuming procedures that function
to make the handling of low-priced stocks unattractive to brokers from an
economic standpoint.
In addition, because brokerage commissions on low-priced stock generally
represent a higher percentage of the stock price than commissions on
higher-priced stock, the current share price of the Common Stock can result in
individual stockholders paying transaction costs (commissions, markups or
markdowns) that represent a higher percentage of their total share value than
would be the case if the share price were substantially higher. This factor also
may limit the willingness of institutions to purchase the Common Stock at its
current low share price.
In addition, if the Common Stock is not listed on the Nasdaq National Market
and the trading price of the Common Stock were to remain below $1.00 per share,
trading in the Common Stock would also be subject to the requirements of certain
rules promulgated under the Securities Exchange Act of 1934 which require
additional disclosures by broker-dealers in connection with any trades involving
a stock defined as a "penny stock" (generally, a non-Nasdaq equity security that
has a market price of less than $5.00 per share, subject to certain exceptions).
In such event, the additional burdens imposed
12
upon broker-dealers to effect transactions in the Common Stock could further
limit the market liquidity of the Common Stock and the ability of investors to
trade the Common Stock.
As discussed below, in the event that the Common Stock is delisted from the
Nasdaq National Market, sales of the Common Stock would likely be conducted only
in the over-the-counter market or potentially in regional exchanges. This may
have a negative impact on the liquidity and price of the Common Stock and
investors may find it more difficult to purchase or dispose of, or to obtain
accurate quotations as to the market value of, the Common Stock.
For all the above reasons, the Company believes that the Reverse Stock Split
is in the best interests of the Company and its stockholders. There can be no
assurance, however, that the Reverse Stock Split will have the desired
consequences. Specifically, there can be no assurance that, after the Reverse
Stock Split, the market price of the Common Stock will not decrease to its
pre-split levels or that the market capitalization of the Common Stock after the
proposed Reverse Stock Split will be equal to the market capitalization before
the proposed Reverse Stock Split.
AFFECT OF THE REVERSE STOCK SPLIT PROPOSAL
Although the Company expects to file the Reverse Stock Split Amendment with
the Delaware Secretary of State's office promptly following approval of the
Reverse Stock Split proposal at the Annual Meeting, the actual timing of such
filing will be determined by the Board of Directors based upon its evaluation as
to when such action is most advantageous to the Company and its stockholders.
Further, notwithstanding approval of the Reverse Stock Split proposal by the
stockholders of the Company, the Board of Directors may elect not to file the
Reverse Stock Split Amendment.
In the event that the Board of Directors determines to effect the Reverse
Stock Split, the Board will set the exchange ratio for the Reverse Stock Split
based upon, among other things, the following factors: (i) the Nasdaq Listing
Requirements, (ii) the then-current trading price of the Common Stock, and (iii)
the advice of the Company's advisors. In determining the proper exchange ratio,
the Board of Directors will consider the stock price at the time of the Reverse
Stock Split to achieve a trading price over $1.00 and still allow for other
market uncertainties.
After the Effective Date of the Reverse Stock Split, each stockholder will
own a reduced number of shares of Common Stock but will hold the same percentage
of the outstanding shares (subject to adjustments for fractional interests
resulting from the Reverse Stock Split) as such stockholder held prior to the
Effective Date. The number of shares of Common Stock that may be purchased upon
the exercise of outstanding options, warrants, and other securities convertible
into, or exercisable or exchangeable for, shares of Common Stock, and the per
share exercise or conversion prices thereof, will be adjusted appropriately with
respect to the Reverse Stock Split in accordance with their terms as of the
Effective Date.
The Reverse Stock Split may also result in some stockholders owning "odd
lots" of less than 100 shares of Common Stock received as a result of the
Reverse Stock Split. Brokerage commissions and other costs of transactions in
odd lots may be higher, particularly on a per share basis, than the cost of
transactions in even multiples of 100 shares.
Following the Reverse Stock Split, the number of shares of Common Stock
outstanding will be reduced and the par value of the Common Stock will be
increased (from $.01 per share to between $0.03 and $0.05 per share, in
proportion to the reverse split exchange ratio determined by the Board of
Directors). As a consequence, the aggregate par value of the outstanding Common
Stock will not change. The Reverse Stock Split will not affect the Company's
total stockholders' equity. All share and per share information will be
retroactively adjusted following the Effective Date to reflect the Reverse Stock
Split for all periods presented in future filings.
13
Based on the 17,390,594 shares of Common Stock outstanding as of March 23,
2001, the following table reflects the approximate percentage reduction in the
outstanding shares of Common Stock and the approximate number of shares of
Common Stock that would be outstanding as a result of the Reverse Stock Split,
based on the exchange ratio range included in the Reverse Stock Split proposal:
SPLIT EXCHANGE RATIO PERCENTAGE REDUCTION RESULTING SHARES OUTSTANDING
- -------------------- -------------------- ----------------------------
1 for 3 66% 5,796,865
1 for 4 75% 4,347,649
1 for 5 80% 3,478,119
The Reverse Stock Split will affect all stockholders equally and will not
affect any stockholder's proportionate equity interest in the Company (except
with respect to adjustments for fractional interests). None of the rights
currently accruing to holders of the Common Stock, options or warrants to
purchase Common stock, or securities convertible into Common Stock will be
affected by the Reverse Stock Split. Following the Reverse Stock Split, each
share of the Common Stock resulting from the Reverse Stock Split will entitle
the holder thereof to one vote per share and will otherwise be identical to the
outstanding Common Stock immediately prior to the Effective Date.
EXCHANGE OF STOCK CERTIFICATES; NO FRACTIONAL SHARES
The combination and reclassification of shares of Common Stock pursuant to
the Reverse Stock Split will occur automatically on the Effective Date without
any action on the part of stockholders of the Company and without regard to the
date on which certificates evidencing shares of Common Stock prior to the
Reverse Stock Split are physically surrendered for new certificates. As of the
Effective Date, every three to five shares of issued and outstanding Common
Stock will be converted and reclassified into one share of post-split Common
Stock. For example, a holder of 100 shares immediately prior to the Effective
Date would hold between 33 and 20 shares after the Effective Date. Fractional
shares of Common Stock will not be issued as a result of the Reverse Stock
Split, but instead, the Company will pay each holder of a fractional interest an
amount in cash equal to the value of such fractional interest on the Effective
Date.
As soon as practicable after the Effective Date, transmittal forms will be
mailed to each holder of record of shares of Common Stock, to be used in
forwarding such holder's stock certificates for surrender and exchange for
certificates evidencing the number of shares of Common Stock such stockholder is
entitled to receive as a consequence of the Reverse Stock Split. The transmittal
forms will be accompanied by instructions specifying other details of the
exchange. Upon receipt of such transmittal form, each stockholder should
surrender the certificates evidencing shares of Common Stock prior to the
Reverse Stock Split in accordance with the applicable instructions. Each holder
who surrenders certificates will receive new certificates evidencing the whole
number of shares of Common Stock that such stockholder holds as a result of the
Reverse Stock Split. Stockholders will not be required to pay any transfer fee
or other fee in connection with the exchange of certificates.
STOCKHOLDERS SHOULD NOT SUBMIT THEIR STOCK CERTIFICATES FOR EXCHANGE UNTIL
THEY RECEIVE A TRANSMITTAL FORM FROM THE COMPANY.
As of the Effective Date, each certificate representing shares of Common
Stock outstanding prior to the Effective Date will be deemed canceled and, for
all corporate purposes, will be deemed only to evidence the right to receive the
number of shares of Common Stock into which the shares of Common Stock evidenced
by such certificate have been converted as a result of the Reverse Stock Split.
OTHER NASDAQ REQUIREMENTS
In addition to the $1.00 minimum bid price per share requirement described
above, the continued listing of the Common Stock on the Nasdaq National Market
is subject to the maintenance of the other
14
quantitative and qualitative requirements set forth in the Nasdaq National
Market Listing Requirements. Although the Company believes that it will meet
each of these requirements as of the first full trading day after the Effective
Date, there can be no assurance that such will be the case or that other factors
will not cause the Company to fail to meet such requirements.
The Company believes that the Reverse Stock Split represents the Company's
best opportunity to remain listed on Nasdaq.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the material federal income tax consequences of
the Reverse Stock Split is based upon the Internal Revenue Code of 1986, as
amended, Treasury regulations thereunder, judicial decisions and current
administrative rulings and practices, all as in effect on the date hereof and
all of which could be repealed, overruled or modified at any time, possibly with
retroactive effect. No ruling from the Internal Revenue Service (the "IRS") with
respect to the matters discussed herein has been requested and there is no
assurance that the IRS would agree with the conclusions set forth in this
discussion.
This discussion may not address certain federal income tax consequences that
may be relevant to particular stockholders in light of their personal
circumstances or to certain types of stockholders (such as dealers in
securities, insurance companies, foreign individuals and entities, financial
institutions and tax-exempt entities) that may be subject to special treatment
under the federal income tax laws. This discussion also does not address any tax
consequences under state, local or foreign laws.
STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISERS AS TO THE PARTICULAR
TAX CONSEQUENCES TO THEM OF THE REVERSE STOCK SPLIT.
Except as discussed below, no gain or loss should be recognized by a
stockholder who receives only Common Stock in connection with the transactions
contemplated by the Reverse Stock Split. The aggregate tax basis of the shares
of Common Stock held by a stockholder following the Reverse Stock Split will
equal the stockholder's aggregate basis in the Common Stock held immediately
prior to the Reverse Stock Split and generally will be allocated among the
shares of Common Stock held following the Reverse Stock Split on a pro-rata
basis. Stockholders who have used the specific identification method to identify
their basis in shares of Common Stock combined in the Reverse Stock Split should
consult their own tax advisors to determine their basis in the shares of Common
Stock received in exchange therefore in the Reverse Stock Split. Shares of
Common Stock received should have the same holding period as the Common Stock
surrendered. The receipt of a cash payment in lieu of a fractional interest will
result in recognition of gain or loss for federal income tax purposes.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE REVERSE
STOCK SPLIT PROPOSAL.
15
PERFORMANCE GRAPH
The following graph sets forth a comparison of the Company's cumulative
total stockholder return on its Common Stock for the period beginning
December 31, 1995, and ending December 31, 2000 against the cumulative total
return of the Russell 2000 Index, Peer Group A, Peer Group B and Peer Group C
for the same period. Peer Group A consists of publicly-traded companies in the
staffing industry and includes the following companies: Kelly Services, Inc.,
Manpower, Inc., On Assignment, Inc., and Robert Half International, Inc. Peer
Group B consists of publicly-traded companies in the computer services industry
and includes the following companies: Cambridge Technology Partners, Inc.,
Computer Horizons Corporation, Computer Sciences Corporation, Hewlett-Packard
Company, International Business Machines Corporation and Keane, Inc. Peer Group
C consists of publicly-traded companies in both the staffing and computer
services industries and includes the following companies: Computer Horizon
Corporation, Computer Task Group, Inc., Renaissance Worldwide, Inc., Modis
Professional Services, Inc., Keane, Inc., Spherion Corporation, Cambridge
Technology Partners, Inc., Personnel Group of America, Inc., RCM Technologies,
Inc., Metro Information Services, Inc., Analysts International Corporation, CDI
Corporation and Comforce Corporation. The Company has chosen this third peer
group after reviewing both peer groups A and B and concluded that they are no
longer representative peer groups. The Company intends to use Peer Group C for
future peer group comparisons and to discontinue use of Peer Group A and B. The
total stockholder return for each company in Peer Group A, B and C has been
weighted according to its stock market capitalization. This graph and table
shown below assumes an investment of $100 on December 31, 1995 in each of the
Company's Common Stock, the Russell 2000 Index, Peer Group A, Peer Group B, and
Peer Group C and assumes reinvestment of dividends, if any. The stock price
performance shown below is not necessarily indicative of future stock price
performance.
DECEMBER 31, 2000
---------------------------------------------------------------
1995 1996 1997 1998 1999 2000
-------- -------- -------- -------- -------- --------
Alternative Resources Corporation..... $100.00 $ 57.44 $ 76.24 $ 35.12 $ 18.18 $ 1.14
Russell 2000 Index.................... $100.00 $116.49 $142.55 $138.92 $168.45 $163.36
Peer Group A.......................... $100.00 $124.38 $168.14 $163.48 $148.69 $205.74
Peer Group B.......................... $100.00 $145.94 $194.61 $289.87 $382.73 $265.94
Peer Group C.......................... $100.00 $156.29 $231.21 $160.47 $139.87 $ 39.42
16
AUDIT COMMITTEE REPORT
The responsibilities of the Audit Committee, which are set forth in the
Audit Committee Charter adopted by the Board of Directors (a copy of which is
attached to this proxy statement as Appendix A), include providing oversight to
the Company's financial reporting process through periodic meetings with the
Company's independent auditors, internal auditors and management to review
accounting, auditing, internal controls and financial reporting matters. The
management of the Company is responsible for the preparation and integrity of
the financial reporting information and related systems of internal controls.
The Audit Committee, in carrying out its role, relies on the Company's senior
management, including senior financial management, and its independent auditors.
We have reviewed and discussed with senior management the Company's audited
financial statements for the year ended December 31, 2000. Management has
confirmed to us that such financial statements (i) have been prepared with
integrity and objectivity and are the responsibility of management and,
(ii) have been prepared in conformity with generally accepted accounting
principles.
We have discussed with KPMG LLP, our independent auditors, the matters
required to be discussed by SAS 61 (Communications with Audit Committee). SAS 61
requires our independent auditors to provide us with additional information
regarding the scope and results of their audit of the Company's financial
statements, including with respect to (i) their responsibility under generally
accepted auditing standards, (ii) significant accounting policies, (iii)
management judgments and estimates, (iv) any significant audit adjustments,
(v) any disagreements with management, and (vi) any difficulties encountered in
performing the audit.
We have received from KPMG LLP a letter providing the disclosures required
by Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees) with respect to any relationships between KPMG LLP and the
Company that in their professional judgment may reasonably be thought to bear on
independence. KPMG LLP has discussed its independence with us, and has confirmed
in such letter that, in its professional judgment, it is independent of the
Company within the meaning of the federal securities laws. The Audit Committee
has considered whether the non-audit services rendered by KPMG LLP are
compatible with maintaining their independence.
Based on the review and discussions described above with respect to the
Company's audited financial statements, we have recommended to the Board of
Directors that such financial statements be included in the Company's Form 10-K
Annual Report for the year ended December 31, 2000.
As specified in the Audit Committee Charter, it is not the duty of the Audit
Committee to plan or conduct audits or to determine that the Company's financial
statements are complete and accurate and in accordance with generally accepted
accounting principles. That is the responsibility of management and the
Company's independent auditors. In giving our recommendation to the Board of
Directors, we have relied on (i) management's representation that such financial
statements have been prepared with integrity and objectivity and in conformity
with generally accepted accounting principals, and (ii) the report of the
Company's independent auditors with respect to such financial statements.
Respectfully Submitted By:
The Audit Committee
Syd N. Heaton
Bruce R. Smith
A. Donald Rully
17
INDEPENDENT ACCOUNTANTS
The Company's Board of Directors, upon the recommendation of the Company's
Audit Committee, has appointed the firm of KPMG LLP as independent accountants
to audit the books, records and accounts of the Company for 2001.
It is expected that representatives of KPMG LLP will be present at the
annual meeting with the opportunity to respond to appropriate questions and to
make a statement if they desire to do so.
AUDIT FEES--The Company was billed a total of approximately $189,000 by
KPMG LLP, the Company's independent auditors, for professional services rendered
for the audit of the Company's annual financial statements for the fiscal year
ended December 31, 2000 and the reviews of interim financial statements included
in the Company's Quarterly Reports on Form 10-Q filed during 2000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES--The Company
did not engage KPMG LLP for financial information systems design and
implementation services during the fiscal year ended December 31, 2000.
ALL OTHER FEES--The Company was billed a total of $169,000 for all other
services rendered by KPMG LLP during the fiscal year ended December 31, 2000
that are not set forth above.
PROPOSALS OF SECURITY HOLDERS
A stockholder proposal to be presented at the 2002 Annual Meeting must be
received at the Company's corporate headquarters, 600 Hart Road, Suite 300,
Barrington, Illinois 60010 by no later than December 31, 2001 for evaluation as
to inclusion in the Proxy Statement in connection with such Meeting.
In order for a stockholder to nominate a candidate for director, under the
Company's Bylaws, timely notice of the nomination must be given in writing to
the Secretary of the Company. To be timely, any such notice must be delivered or
mailed by first class United States mail, postage prepaid, to the Secretary at
the principal executive offices of the Company not less than sixty (60) days nor
more than ninety (90) days prior to the date of the annual meeting of
stockholders or, if the Company mails its notice and proxy to the stockholders
less than sixty (60) days prior to the annual meeting, within ten (10) days
after the notice and proxy is mailed. Such notice must describe various matters
regarding the nominee and the stockholder giving the notice, including such
information as name, address, occupation and shares held.
In order for a stockholder to bring other business before a stockholders
meeting, timely notice must be given to the Secretary of the Company within the
time limits described above. Such notice must include various matters regarding
the stockholder giving the notice and a description of the proposed business.
These requirements are separate from and in addition to the requirements a
stockholder must meet to have a proposal included in the Company's proxy
statement.
18
OTHER MATTERS TO COME BEFORE THE MEETING
The Board of Directors of the Company knows of no other business, which may
come before the Annual Meeting. However, if any other matters are properly
presented to the Meeting, the persons named in the proxies will vote upon them
in accordance with their best judgment.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN THE PROXY AND
RETURN IT IN THE ENCLOSED STAMPED ENVELOPE.
By Order of the Board of Directors
/s/ STEVEN PURCELL
Steven Purcell
SENIOR VICE PRESIDENT, CHIEF FINANCIAL
OFFICER, SECRETARY AND TREASURER
Barrington, Illinois
Date: May 7, 2001
19
APPENDIXES
APPENDIX A
AUDIT COMMITTEE CHARTER
PURPOSE
The Audit Committee is appointed by the Board of Directors for the primary
purposes of:
Assisting the Board of Directors in fulfilling its oversight
responsibilities as they relate to the Company's accounting policies and
internal controls, financial reporting practices and legal and regulatory
compliance, and
Maintaining, through regularly scheduled meetings, a line of
communication between the Board of Directors and the Company's financial
management, internal auditors and independent accountants.
AUTHORITY
The Audit Committee is a standing committee of the Board and shall have
unrestricted access to personnel and documents of the Corporation and its
operating subsidiaries and Auditors, and will be provided with the resources
necessary to carry out its responsibilities.
STRUCTURE, RESOURCES AND PROCESS
1) The Committee shall be composed of a minimum of three (3) directors who
shall be non-management directors of the Corporation, each of whom shall
meet the independence requirements of the Nasdaq Stock Market, Inc. Each
member of the Audit Committee shall have the ability to understand
fundamental financial statements. In addition, at least one member of the
Audit Committee shall have past employment experience in finance or
accounting, professional certification in accounting, or any other
comparable experience or background which results in the individual's
financial sophistication, including being or having been a chief executive
officer, chief financial officer or other senior officer with financial
oversight responsibilities.
2) The Chairman of the Board/CEO shall serve as an ex-officio member of the
Committee, and the Secretary of the Board shall serve as secretary of the
Committee.
3) The Board or, in the event of its failure to do so, the members of the
Committee, shall appoint a chairman (the "Chairman") from amongst their
number; the Chairman may serve any number of consecutive terms. If the
Chairman of the Committee is not present at any meeting of the Committee,
the Chairman of the meeting shall be chosen by the Committee from among the
members present.
4) Members shall be appointed for a term of one year, or reappointed for
further periods, at the meeting of the Board immediately following each
annual meeting of the shareholders of the Corporation. Each member of the
Committee shall continue to be a member thereof until a successor is
appointed, unless the member shall resign or be removed by the Board or
shall otherwise case to be a director of the Corporation.
5) Where a vacancy occurs at any time in the membership of the Committee, it
shall be filled by the Board.
MEETINGS AND MINUTES
1) The Chairman shall, in consultation with management, establish the agenda
and ensure notice of the time and place and related materials respecting
every meeting shall be given in writing or
A-1
facsimile communication to each member of the Committee at least forty-eight
(48) hours prior to the time listed for such meeting.
2) The Committee shall meet at least four times per year and may call special
meetings as required.
3) A quorum for meetings shall be a majority of the members, present in person
or by telephone or other telecommunication device that permit all persons
participating in the meeting to speak and hear each other.
4) The Auditors shall have the right to meet with the Committee at their own
request and the Committee has the right to meet with the Auditor, with
management not present, to discuss pertinent matters.
5) The Committee shall at all times have the right to determine who shall and
shall not be present at any part of the meeting of the Committee.
6) Resolutions of the Committee shall be carried by the majority of the votes
of the members of the Committee present at the meeting. The Chairman
presiding at any meeting of the Committee shall have a casting vote in case
of deadlock.
7) The minutes of the Committee meetings shall accurately record the decisions
reached and shall be distributed to Committee members and the other
Directors of the Corporation with copies to the Chief Financial Officer,
Treasurer, and external Auditor.
8) The committee shall report regularly to the Board of Directors and bring its
recommendations to the full Board for their approval.
SCOPE AND RESPONSIBILITIES
6) FINANCIAL INFORMATION
The Committee shall:
a) Review the annual and quarterly financial statements, reports to
shareholders and related press releases as well as any other formal
financial reports to be issued by the Corporation, prior to publication,
and recommend their approval to the Board of Directors of the
Corporation.
b) Discuss with the independent accountants the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the
conduct of the audit.
c) Review quarterly financial information and other public disclosure
documents.
d) In relation to items a) and b) the Committee shall consider:
i) any change in accounting policy and the reasons therefore.
ii) the degree and conformity with the accounting policies generally
followed in the industry.
iii) any sensitive reporting or accounting practices.
iv) any proposed adjustments not implemented and the reasons for
non-implementation.
v) any unusual transaction.
vi) the possible affects of any proposed changes in legislation.
vii) any alternative methods of disclosure.
viii) appropriate accounting for legal or other contingencies.
ix) any matters referred to the Committee from Board of Directors of the
Corporation
x) any other relevant matters.
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7) AUDITORS
The Company's independent accountants are ultimately accountable to the
Board of Directors and the Audit Committee, which have the ultimate
authority and responsibility to select, evaluate and, where appropriate,
replace the independent accountants. In connection with its oversight of the
external audit coverage, the Audit Committee will:
a) Review the annual audit plan and results of the annual audit, including:
i) the Auditor' engagement letter
ii) audit fees
iii) the scope of the audit, including materiality, areas of risk to be
reviewed by the Auditors, required reports, timetable and deadlines
iv) the Auditors' management letter together with the management's
response
v) the form of the audit report
vi) the post-audit management letter together with management's response
b) Assess the performance of the Auditor
c) Recommend the Auditor for appointment by the Board
d) Obtain confirmation and assurance as to the independent accountants
independence, including ensuring that they submit on a periodic basis
(not less than annually) to the Audit Committee a formal written
statement delineating all relationships between the independent
accountants and the Company. The Audit Committee is responsible for
actively engaging in a dialogue with the independent accountants with
respect to any disclosed relationships or services that may impact the
objectivity and independence of the independent accountants and for
recommending that the Board of Directors take appropriate action in
response to the independent accounts' report to satisfy itself of their
independence.
e) Review with the Auditor, in the absence of management, the extent and
quality of the Company's accounting and information technology resources
f) Review corporation insider trading policy, continuous disclosure policy,
and corporate guidelines for maintaining confidentiality in conjunction
with the Governance, Ethics, and Regulatory Committee.
g) Meet privately with the Auditors to discuss, in the absence of
management, management's cooperation in the audit process and the
sufficiency and quality of management responsible for financial statement
preparation, account, and related matters.
h) Recommend any other related audit engagements.
8) ACCOUNTING SYSTEMS AND INTERNAL CONTROLS
The Committee shall:
a) Obtain reasonable assurance from discussions with and/or reports from
management and the Auditors that the Corporation's accounting systems and
internal controls are reliable and operating effectively, with particular
reference to dependence on complex computer systems.
b) Review weaknesses, if any identified by the Auditors in the
Corporation's accounting systems and internal controls, and discuss any
such concerns with the management.
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c) Call for such further investigations as are necessary to assure itself
of the effectiveness of the systems of control within the Corporation.
d) Ensure adequate internal resources are committed to the Company's
financial reporting and controls.
9) STATUTORY
The Committee shall:
a) Review all reportable events, including disagreements and unresolved
issues that may arise when there is a change of Auditor.
10) OTHER
The Committee shall:
a) Consider any other relevant matters as considered appropriate or
necessary from time to time.
b) Investigate any incidents of potential fraud or illegal acts.
c) Review annually and report to the Board on the adequacy of the
Committee's terms of reference.
d) Prepare the report of the Audit Committee required by the rules of the
Securities and Exchange Commission to be included in the proxy statement
for each annual meeting.
e) Review and reassess annually the adequacy of this Audit Committee
Charter and recommend any proposed changes to the Board of Directors.
EXTERNAL ADVISORS
If, in order to properly discharge its functions, duties and responsibilities,
it is necessary, in the opinion of the Committee, that the Committee obtains the
advise and counsel of external advisors other than auditors, the Chairman shall,
at the request of the Committee, seek approval of the Board to engage the
necessary advisors.
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the Company's financial statements are complete and accurate
and are in accordance with generally accepted accounting principles. This is the
responsibility of management and the independent accountants. Nor is it the duty
of the Audit Committee to conduct investigations, to resolve disagreements, if
any, between management and the independent accountants or to assure compliance
with laws and regulations and the Company's corporate policies.
Adopted by the Committee on May 8, 2000 and approved by the Board on May 9,
2000.
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APPENDIX B
CERTIFICATE OF AMENDMENT
TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ALTERNATIVE RESOURCES CORPORATION
The undersigned, the Chief Executive Officer of Alternative Resources
Corporation, a Delaware corporation (the "Corporation"), does hereby certify as
follows:
1. The name of the Corporation is Alternative Resources Corporation.
2. Article FOURTH of the Corporation's Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation") is hereby amended as follows:
By adding as a second sentence to the first paragraph of Article FOURTH, the
following:
Simultaneously with the effective date of this Certificate of
Amendment (the "Effective Date"), all issued and outstanding shares of Common
Stock ("Existing Common Stock") shall be and hereby are automatically combined
and reclassified as follows: each shares of Existing Common Stock shall be
combined and reclassified (the "Reverse Split") as one share of issued and
outstanding Common Stock ("New Common Stock"), provided that there shall be no
fractional shares of New Common Stock. In the case of any holder of fewer than
shares of Existing Common Stock or any number of shares of Existing Common
Stock which, when divided by , does not result in a whole number (a
"Fractional Share Holder"), the fractional share interest of New Common Stock
held by such Fractional Share Holder as a result of the Reverse Split shall be
cancelled and such Fractional Share Holder shall be entitled to receive an
amount in cash equal to the value, based on the market price, of such fractional
share interest on the Effective Date.
The Corporation shall, through its transfer agent, provide certificates
representing New Common Stock to holders of Existing Common Stock in exchange
for certificates representing Existing Common Stock. From and after the
Effective Date, certificates representing shares of Existing Common Stock are
hereby canceled and shall represent only the right of the holders thereof to
receive New Common Stock.
From and after the Effective Date, the term "New Common Stock" as used in
this Article FOURTH shall mean Common Stock as provided in the Certificate of
Incorporation.
3. The foregoing amendment was duly approved and adopted in accordance with
the provisions of Section 242 of the General Corporation Law of the State of
Delaware and the By-Laws of the Corporation at a meeting of the Board of
Directors of the Corporation on , 2001, at which a quorum was present and
acting throughout. The Board of Directors previously declared the advisability
of the amendment and directed that the amendment be submitted to the
stockholders of the Corporation for approval.
1. At the Annual Meeting of the Stockholders of the Corporation held on
June 14, 2001, a majority of the shares of the outstanding Common Stock
entitled to vote thereon were voted in favor of the amendment in accordance
with Section 242 of the General Corporation Law of the State of Delaware.
5. This amendment shall be effective on the date this Certificate of
Amendment is filed and accepted by the Secretary of State of the State of
Delaware.
The undersigned, being the Chief Executive Officer of the Corporation, for
purposes of amending its Certificate of Incorporation pursuant to the General
Corporation Law of the State of Delaware,
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acknowledges that it is his act and deed and that the facts stated herein are
true, and has signed this instrument on June , 2001.
ALTERNATIVE RESOURCES CORPORATION
By:
------------------------------------------
Raymond R. Hipp
CHIEF EXECUTIVE OFFICER
ATTEST:
- ------------------------------------------
Steven Purcell
SENIOR VICE PRESIDENT, CHIEF FINANCIAL
OFFICER, SECRETARY AND TREASURER
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ALTERNATIVE RESOURCES CORPORATION
600 HART ROAD, SUITE 300, BARRINGTON, ILLINOIS 60010
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS -- JUNE 14, 2001
The undersigned hereby appoints Raymond R. Hipp and Steve Purcell, or either
of them, with full power of substitution, to represent and to vote the stock
of the undersigned at the Annual Meeting of Stockholders of Alternative
Resources Corporation, to be held at the Company's corporate headquarters at
600 Hart Road, Suite 300, Barrington, Illinois 60010, on Thursday, June 14,
2001 at 10 A.M., Central Daylight Time, or at any adjournment thereof as
follow:
THE PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THE PROXY WILL BE VOTED
FOR ALL DIRECTORS SPECIFIED ON THE REVERSE HEREOF.
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
Please indicate any change in address. (Continued and to be signed on reverse
side.)
FOLD AND DETACH HERE
ALTERNATIVE RESOURCES CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY /X/
Withheld For All
For Authority Except As
All For All Marked
1. Election of two Class I Directors / / / / / /
(terms to expire in 2004)
Nominees: Jo Anne Brandes A. Donald Rully
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME ABOVE.
2. To approve an amendment to the Company's
Certificate of Incorporation to effect a For Against Abstain
reverse stock split of the Company's / / / / / /
issued and outstanding Common Stock, as
more fully described in the accompanying
proxy statement.
3. Each of the persons named as proxies
herein is authorized, in such person's
direction, to vote upon such other
matters as may properly come before
the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ALL NOMINEES LISTED IN
PROPOSAL 1 AND FOR PROPOSAL 2.
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW. / /
This Proxy must be signed exactly as your name appears hereon. When shares
are held by joint tenants, both should sign. Attorney's, executors,
administrators, trustees and guardians should indicate their capacities. If
the signer is a corporation, please print full corporate name and indicate
capacity of duly authorized officer executing on behalf of the corporation.
If the signer is a partnership or limited liability company, name and
indicate capacity of duly authorized person executing on behalf of the
partnership or limited liability company.
Signature(s) ________________________________________
________________________________________
Dated: _____________________________________________, 2001
FOLD AND DETACH HERE