<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.15a-12
STAFFMARK, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with written 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
STAFFMARK, INC.
302 EAST MILLSAP ROAD
FAYETTEVILLE, ARKANSAS 72703
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 8, 1998
To the Stockholders:
Notice is hereby given that the annual meeting of stockholders (the
"Annual Meeting") of StaffMark, Inc. ("StaffMark" or the "Company") will be
held at the Northwest Arkansas Convention Center, 1500 South 48th, Springdale,
Arkansas on the 8th day of May, 1998, at 10:00 a.m., Central Standard Time, for
the following purposes:
1. To elect ten directors to serve terms scheduled to end in
conjunction with the next annual meeting of stockholders or
until their successors are elected and qualify;
2. To consider and act upon a proposal of the Board of Directors
of the Company to approve and adopt the amendment to the
Company's Certificate of Incorporation, as amended, to
increase the number of authorized shares of common stock from
26,000,000 to 200,000,000 and the number of authorized shares
of preferred stock from 1,000,000 to 10,000,000;
3. To ratify and approve the Company's Amended and Restated 1996
Stock Option Plan;
4. To ratify and approve an amendment to the Company's Employee
Stock Purchase Plan; and
5. To transact such other business as may properly come before
the meeting or any adjournments thereof.
All stockholders are cordially invited to attend the Annual Meeting,
however, only stockholders of record as of the close of business on March 16,
1998 are entitled to receive notice of and to vote at the Annual Meeting.
The Company's Proxy Statement and Annual Report are submitted
herewith.
By Order of the Board of Directors
TERRY C. BELLORA
Secretary
Fayetteville, Arkansas
March 23, 1998
YOUR VOTE IS IMPORTANT WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE
ANNUAL MEETING, YOU ARE URGED TO FILL IN, DATE AND SIGN THE ENCLOSED
PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE. IF
YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE YOUR SHARES OF
COMMON STOCK PERSONALLY EVEN IF YOU HAVE PREVIOUSLY
SUBMITTED A PROXY.
<PAGE> 3
STAFFMARK, INC.
302 EAST MILLSAP ROAD
FAYETTEVILLE, ARKANSAS 72703
PROXY STATEMENT FOR ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD MAY 8, 1998
SOLICITATION AND REVOCABILITY OF PROXIES
The accompanying Proxy is solicited by and on behalf of the Board of
Directors of StaffMark, Inc., a Delaware corporation (the "Company" or
"StaffMark") for use only at the annual meeting of stockholders (the "Annual
Meeting") of StaffMark to be held at the Northwest Arkansas Convention Center,
1500 South 48th, Springdale, Arkansas on the 8th day of May, 1998, at 10:00
a.m., Central Standard Time, and at any adjournments thereof. The approximate
date on which this Proxy Statement and accompanying Proxy will first be given
or sent to stockholders is March 23, 1998.
Each Proxy executed and returned by a stockholder may be revoked at
any time thereafter, by written notice to that effect to the attention of the
Company's Secretary, before the Annual Meeting, or to the Company's Secretary
or the Inspectors of Election at the Annual Meeting, or by a duly executed
Proxy bearing a later date.
Proxies in the accompanying form will be voted in accordance with the
specifications made and, where no specifications are given, such Proxies will
be voted:
FOR the election as directors of the nominees named herein;
FOR the approval and adoption of an amendment to the Company's
Certificate of Incorporation, as amended;
FOR the ratification and approval of the Company's Amended and
Restated 1996 Stock Option Plan; and
FOR the ratification and approval of an amendment to the
Company's Employee Stock Purchase Plan.
In the discretion of the Proxy holders, the Proxies will also be voted
FOR or AGAINST such other matters as may properly come before the Annual
Meeting. Management of the Company is not aware of any other matters to be
presented for action at the Annual Meeting.
The cost of preparing, assembling and mailing the Notice of Annual
Meeting of Stockholders, Proxy Statement and form of Proxy and the cost of
soliciting Proxies will be paid by the Company. Proxies may be solicited in
person or by telephone by officers, directors and regular supervisory and
executive employees of the Company, none of whom will receive any additional
compensation for their services. The Company will pay brokers or other persons
holding stock in their names or the names of their nominees for the reasonable
expenses of forwarding soliciting material to their principals.
2
<PAGE> 4
OUTSTANDING STOCK AND VOTING RIGHTS
At the Annual Meeting, each stockholder will be entitled to one vote
for each share of common stock, $.01 par value ("Common Stock"), owned of
record at the close of business on March 16, 1998. The outstanding Common
Stock of the Company as of the record date totaled _______________ shares.
Votes may be cast in person or by Proxy. The stock transfer books of the
Company will not be closed.
The enclosed form of Proxy provides a method for stockholders to
withhold authority to vote for any one or more of the director nominees while
still granting authority to the Proxy to vote for the remaining nominees. The
names of all nominees are listed on the Proxy card. If you wish to grant the
Proxy authority to vote for all nominees, check the box marked "FOR." If you
wish to withhold authority to vote for all nominees, check the box marked
"WITHHOLD AUTHORITY." If you wish your shares to be voted for some nominees
and not for one or more of the others, indicate the name(s) of the nominee(s)
for whom you are withholding the authority to vote by writing the name(s) of
such nominee(s) in the space provided on the form of Proxy.
The presence at the Annual Meeting, in person or by proxy, of the
holders of a majority of the shares of the Common Stock entitled to vote at the
Meeting will constitute a quorum. Shares of Common Stock represented by Proxies
containing abstentions or indicating broker non-votes will be considered as
present at the Annual Meeting for the purpose of determining the presence of a
quorum. Votes cast by proxy or in person will be tabulated by the inspectors of
election appointed by the Board of Directors of the Company for the Annual
Meeting. Under Delaware law and the Company's Certificate of Incorporation, as
amended, if a quorum is present at the Annual Meeting: (a) Proposal 1--the ten
nominees for election as directors who receive the greatest number of votes cast
for the election of directors at the Annual Meeting (i.e., a plurality) by the
shares of Common Stock present in person or by Proxy at the Annual Meeting and
entitled to vote thereon shall be elected as directors; and (b) Proposals 2-4
and any other matter properly submitted to a vote of the stockholders at the
Annual Meeting--the affirmative vote of a majority of the shares of Common Stock
cast at the Annual Meeting by the holders of the shares entitled to vote thereon
is required to approve such Proposals to be considered at the Annual Meeting.
Abstentions and votes withheld in the absence of instructions from street name
holders (broker non-votes) are included in the determination of those shares
present and voting as to "routine" matters like Proposal 1 and may be voted in
the discretion of brokers with respect to such "routine" matters. Abstentions
are also counted in voting as to "non-routine" matters like Proposals 2-4 and
thus, have the effect of a negative vote on such "non-routine" matters. Broker
non-votes are not counted in voting as to "non-routine" matters like Proposals
2-4.
DIRECTOR NOMINEES AND NAMED EXECUTIVE OFFICERS
The following sets forth information concerning each of the nominees
for election to the Board of Directors, including his or her name, age,
principal occupation or employment during at least the past five years and the
period during which such person has served as a director of the Company.
Except as otherwise noted, all nominees have served on the Board of Directors
of StaffMark since October 1996.
Nominees for Election to the Board of Directors
<TABLE>
<CAPTION>
Name Age Experience
---- --- ----------
<S> <C> <C>
Jerry T. Brewer 57 Co-founded StaffMark in March 1996 and has served since then as its
Chairman of the Board. Mr. Brewer also co-founded Brewer Personnel
Services, Inc. ("Brewer"), currently a wholly-owned subsidiary of the
Company, in July 1988, and currently serves as its Chairman of the Board.
From July 1988 to April 1995, Mr. Brewer served as President and Chief
Executive Officer of Brewer.
Clete T. Brewer 32 Co-founded StaffMark in March 1996 and has served since then as its
President and Chief Executive Officer and a director. Mr. Brewer also
co-founded Brewer in July 1988, and has served since April 1995 as
President, Chief Executive Officer and a director of Brewer. From July
1988 to April 1995, Mr. Brewer served as Vice President of Brewer. Mr
Brewer is the son of Jerry T. Brewer.
W. David Bartholomew 41 Executive Vice President - Eastern Operations since October 1996. Mr.
Bartholomew served as Secretary/Treasurer and principal of HRA, Inc.
("HRA"), one of the StaffMark founding companies, from August 1993
through October 1996. From 1991 through August 1993, Mr. Bartholomew was
President of Cobble Personnel of Nashville.
</TABLE>
3
<PAGE> 5
<TABLE>
<CAPTION>
Name Age Experience
---- --- ----------
<S> <C> <C>
Steven E. Schulte 35 Executive Vice President - Administration since October 1996. Mr.
Schulte was employed by Prostaff Personnel Services, Inc. ("Prostaff"),
one of the StaffMark founding companies from August 1987 through October
1996.
John H. Maxwell, Jr. 54 Executive Vice President - Medical Services since October 1996. Mr.
Maxwell served as the Chief Executive Officer of Maxwell Staffing, Inc.,
one of the StaffMark founding companies from 1973 through October 1996.
Mr. Maxwell is a Certified Personnel Consultant and a Certified
International Personnel Consultant.
Janice Blethen 54 Executive Vice President - Clinical Trials Support Services since October
1996. Ms. Blethen has served as Chief Executive Officer of Blethen
Temporaries, Inc., one of the StaffMark founding companies, from its
inception in 1975 through October 1996. Ms. Blethen is a Certified
Personnel Consultant.
William T. Gregory 55 Vice President and General Manager - Carolina Region since October 1996.
Mr. Gregory served as President of First Choice Staffing, Inc., one of
the StaffMark founding companies, from 1985 through October 1996. Mr.
Gregory is a Certified Personnel Consultant.
William J. Lynch 55 Since March 1996, Mr. Lynch has served as a Managing Director of Capstone
Partners, LLC, a special situations venture capital firm. From October
1989 to March 1996, Mr. Lynch was a partner of the law firm of Morgan,
Lewis & Bockius LLP. Mr. Lynch also serves as a director of Coach USA,
Inc., a publicly traded motorcoach services company.
R. Clayton McWhorter 64 In 1996, Mr. McWhorter founded Clayton Associates, LLC, a venture capital
company. Mr. McWhorter is a member of the Board of Directors of
Columbia/HCA Healthcare Corporation, a public company ("Columbia/HCA"),
and served as its Chairman of the Board from April 1995 to May 1996. Mr.
McWhorter served as Chairman, President and Chief Executive Officer of
Healthtrust, Inc. from 1987 to April 1995 and served as President and
Chief Executive Officer of Hospital Corporation of America from 1985 to
April 1987 (both of which are now a part of Columbia/HCA). In addition,
Mr. McWhorter is a director of Suntrust Bank - Nashville (a subsidiary
of a public company) and is a director for Corrections Corporation of
America, a publicly traded company.
Charles A. Sanders, M.D. 66 Dr. Sanders is retired from Glaxo, Inc. where he served as Chief
Executive Officer from 1989 through 1994 and Chairman from 1992 through
1995. Dr. Sanders currently serves as Chairman of The Commonwealth Fund
and Project HOPE and serves on the Board of Trustees of The University of
North Carolina at Chapel Hill. Dr. Sanders is a director of Kenole
International. Dr. Sanders is also a director of Pharmacopica, Inc.,
Scios, Inc., Vertex Pharmaceuticals Incorporated, Magainin Pharmaceuticals,
Inc. and Trimeris, Inc., which are all publicly traded companies.
</TABLE>
The following sets forth information concerning executive officers of
the Company identified under "Executive Compensation" who are not presently
members, or nominated herein to become members, of the Board of Directors.
4
<PAGE> 6
Other Named Executive Officers
<TABLE>
<CAPTION>
Name Age Experience
---- --- ----------
<S> <C> <C>
Terry C. Bellora 51 Chief Financial Officer and Secretary of StaffMark since August 1996.
Prior to joining StaffMark, Mr. Bellora served as Chief Financial Officer
of Pace Industries, Inc. ("Pace") from 1986 to August 1996. Mr. Bellora
served as director of Pace from 1988 to 1993 and as an advisory director
of Pace from 1993 to 1996. Mr. Bellora is a Certified Public Accountant
and was previously an audit partner at Gaddy & Co., Certified Public
Accountants.
Ted Feldman 44 Chief Operating Officer of the Company since October 1996. Mr. Feldman
founded HRA in 1991 and since its inception has served as its President
and Chief Executive Officer. From 1979 until 1992, Mr. Feldman served as
President of Nashville Trunk & Bag Co. Mr. Feldman is also an
independent trustee of CCA Prison Realty Trust, a publicly traded real
estate investment trust.
Donald A. Marr, Jr. 33 Executive Vice President - Western Operations since October 1996. Mr.
Marr oversees the Company's Commercial and Professional divisions in that
region. He has been employed by Brewer since 1990 and has served as
Brewer's Vice President of Operations since 1994.
</TABLE>
ELECTION OF DIRECTORS (PROPOSAL 1)
The Company has nominated for reelection to the Board of Directors ten
candidates who currently comprise all of the members of the Company's Board of
Directors. For more information concerning these director nominees, see
"Director Nominees and Named Executive Officers; Nominees for Election to the
Board of Directors" Unless otherwise designated, the enclosed Proxy will be
voted FOR the election of the foregoing nominees as directors. The Board of
Directors does not contemplate that any of these nominees will be unable to
stand for election, but should any nominee unexpectedly become unavailable for
election, the persons named as Proxies shall have the authority to vote for the
election of any other nominee proposed by the Board of Directors. In the event
of any director's death, disqualification or inability to serve, the resulting
vacancy in the Board of Directors will be filled by a vote of the Board of
Directors. THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
ELECTION OF THE NOMINEES DESCRIBED HEREIN AS DIRECTORS OF THE COMPANY.
BOARD ORGANIZATION AND COMMITTEES
Regular meetings of the Board of Directors are held approximately four
times a year, with special meetings conducted as needed. During 1997, the
Board of Directors held four regular meetings, one annual meeting and nine
special meetings. Each director attended at least 75% of the aggregate of: (i)
all regular, annual and special meetings of the Board of Directors; and (ii)
all meetings of the Board Committees on which he or she served during 1997.
The Board of Directors has established committees to perform certain
of its functions, including the Audit Committee, the Compensation Committee and
the Acquisition Committee. The functions of each of these
5
<PAGE> 7
committees, and its members, are set forth below. The Board of Directors does
not have a nominating committee since nominating functions are performed by the
Board of Directors as a group.
The Audit Committee reviews the internal controls of the Company,
reviews the objectivity of its financial reporting and meets with appropriate
Company financial personnel and the Company's independent certified public
accountants in connection with these reviews. The Audit Committee also
recommends to the Board the appointment of independent certified public
accountants to serve as auditors for the following year. The Audit Committee
met twice during 1997. The Audit Committee currently consists of Dr. Sanders,
Mr. Lynch, and Mr. Jerry Brewer.
The Compensation Committee advises and makes recommendations to the
Board with respect to salaries and bonuses to be paid to executive officers and
other employees of the Company. The Compensation Committee also administers
the Company's 1996 Stock Option Plan. It also recommends to the Board of
Directors adoption of any compensation plans in which officers and directors of
the Company are eligible to participate. The Compensation Committee met twice
during 1997. The Compensation Committee currently consists of Mr. Lynch and
Mr. McWhorter.
The Acquisition Committee reviews and monitors the strategic direction
of the Company's acquisition program and, within guidelines established by the
full Board of Directors, has authority to approve offers and the form of
consideration to be offered for the acquisition of other businesses. The
Acquisition Committee currently consists of: Mr. Jerry Brewer; Mr. Clete
Brewer; Mr. Steve Schulte, Executive Vice President - Administration; Mr. Ted
Feldman; Mr. Terry C. Bellora; and Mr. Robert H. Janes III, Executive Vice
President - Mergers and Acquisitions. The Acquisition Committee held ___
meetings during 1997.
6
<PAGE> 8
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 2, 1998, information
regarding the beneficial ownership of the Common Stock of the Company by: (i)
each person known to beneficially own more than 5% of the outstanding shares of
Common Stock; (ii) each of the Company's directors; (iii) each Named Executive
Officer, as defined below; and (iv) all executive officers and directors as a
group. Unless otherwise indicated in the footnotes following the table, all
persons listed have an address in care of the Company's principal executive
offices referenced herein and have sole voting and investment power with
respect to their shares.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
-------------------------
NAME NUMBER PERCENT
---- --------- -------
<S> <C> <C>
Jerry T. Brewer(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 596,323 3.09%
Clete T. Brewer(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,002,084 5.20
Terry C. Bellora(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,200 *
Ted Feldman(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 318,611 1.65
Donald A. Marr, Jr.(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,667 *
David Bartholomew(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259,437 1.35
Steven E. Schulte(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 445,258 2.31
John H. Maxwell, Jr.(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . 677,392 3.52
Janice Blethen(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 444,810 2.31
William T. Gregory(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . 435,850 2.26
William J. Lynch(12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,972 *
Clayton McWhorter(13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,332 *
Charles A. Sanders, M.D.(14) . . . . . . . . . . . . . . . . . . . . . . . . 17,332 *
All directors and executive officers as a group (17 persons) . . . . 4,717,417 24.28
</TABLE>
- ----------
*Less than 1%.
(1) The percentages shown with respect to any identified individual or
group are calculated by dividing (i) the sum of (a) the number of
shares of Common Stock actually owned as of March 2, 1998 plus (b) the
number of shares of Common Stock that may be acquired through the
exercise of options or other rights on or before April 30, 1998
("Currently Exercisable Options"), by (ii) the sum of 19,271,421
shares of Common Stock outstanding on March 2, 1998 plus the amount
referenced in clause (i)(b).
(2) Includes 175,000 shares held by Mr. Brewer's spouse, as to which Mr.
Brewer disclaims beneficial ownership.
(3) Includes 750 shares held by Mr. Brewer's spouse, as to which Mr.
Brewer disclaims beneficial ownership, and 5,000 shares subject to
Currently Exercisable Options.
(4) Includes 100,000 shares subject to Currently Exercisable Options, and
200 shares held by a trust of which Mr. Bellora is the trustee.
(5) Includes 1,000 shares held by Mr. Feldman's spouse, as to which Mr.
Feldman disclaims beneficial ownership, and 15,000 shares subject to
Currently Exercisable Options.
(6) Includes 11,667 shares subject to Currently Exercisable Options.
(7) Includes 246,937 shares are held by Bartfund I Limited Partnership, of
which Mr. Bartholomew is the general partner, and 12,500 shares
subject to Currently Exercisable Options.
(8) Includes 437,025 shares held by the Steven E. Schulte Revocable Trust
for which Mr. Schulte is trustee, and 3,333 shares subject to
Currently Exercisable Options.
(9) Includes 346,620 shares held by the John H. Maxwell, Jr. Revocable
Living Trust, of which Mr. Maxwell is the trustee, and 330,772 shares
beneficially owned by Mr. Maxwell's spouse, as to which Mr. Maxwell
disclaims beneficial ownership. John H. Maxwell, Jr. is the spouse of
Mary Sue Maxwell.
(10) Includes 71,905 shares held by Blethen Family Investments Limited
Partnership, the general partner of which is a corporation controlled
by Ms. Blethen and 3,333 shares subject to Currently Exercisable
Options.
(11) Includes 2,500 shares owned by Mr. Gregory's spouse, as to which Mr.
Gregory disclaims beneficial ownership.
(12) Includes 3,033 shares held by a trust for which Mr. Lynch is trustee
and 7,332 shares subject to Currently Exercisable Options.
(13) Includes 7,332 shares subject to Currently Exercisable Options.
(14) Includes 7,332 shares subject to Currently Exercisable Options.
7
<PAGE> 9
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid or accrued by the
Company for services rendered during the years indicated to the Company's Chief
Executive Officer and to the Company's four most highly compensated executive
officers whose total salary and bonus exceeded $100,000 during the year ended
December 31, 1997 (the "Named Executive Officers"). The Company did not grant
any stock appreciation rights or make any long-term incentive plan payouts
during the periods shown.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
----------------------------------- ------------
Securities
Underlying Other Annual
Name and Principal Position Year Salary ($)(1) Bonus($) Options Compensation
--------------------------- ---- ------------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Clete T. Brewer, President, 1997 $150,000 $ 41,051 65,000 $ 16,737(2)
Chief Executive Officer and Director ....... 1996 40,869 N/A 10,000 2,487
Terry C. Bellora, Chief Financial Officer 1997 150,000 31,051 102,500 7,200(2)
and Secretary .............................. 1996 41,538 N/A 160,000 2,824
Ted Feldman, Chief Operating Officer ........ 1997 145,000 30,051 70,000 6,000(2)
1996 39,769 N/A 10,000 1,025
W. David Bartholomew, Executive Vice 1997 125,000 25,051 57,500 6,000(2)
President - Eastern Operations; Director ... 1996 34,615 N/A 10,000 1,025
Donald A. Marr, Jr., Executive Vice 1997 125,000 20,051 35,000 26,524(3)
President - Western Operations ............. 1996 31,259 N/A 15,000 1,500
</TABLE>
- ----------------
(1) Salary for 1996 reflects partial year compensation for the period from
the completion of the Company's initial public offering, October 2,
1996, through December 31, 1996.
(2) Consists of automobile allowances and, as to Mr. Brewer, the
distribution of the cash surrender value of a key man life insurance
policy in the amount of $10,737.
(3) Includes the net book value ($11,988) of a Company automobile that was
given to Mr. Marr during 1997, automobile allowances, and the
distribution of the cash surrender value of a key man life insurance
policy in the amount of $8,536.
8
<PAGE> 10
The following table sets forth information concerning each grant of
stock options to the Name Executive Officers during the year ended December 31,
1997.
Option Grants in Fiscal 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------------------
Number of Percentage of
Securities Total
Underlying Options Granted Exercise or Grant Date
Options to Employees in Base Price Expiration Present
Name Granted Fiscal 1997 ($/Share)(1) Date Value ($)(2)
- ---- ---------- --------------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
Clete T. Brewer .......... 15,000 1.64% $12.875 3/03/07 97,729
50,000 5.46 27.00 8/22/07 683,150
Terry C. Bellora ......... 27,500 3.00 12.875 3/03/07 179,168
75,000 8.19 27.00 8/22/07 1,029,725
Ted Feldman .............. 45,000 4.91 12.875 3/03/07 293,184
25,000 2.73 27.00 8/22/07 341,575
W. David Bartholomew ..... 37,500 4.09 12.875 3/03/07 244,320
20,000 2.18 27.00 8/22/07 273,260
Donald A. Marr, Jr. ...... 35,000 1.09 12.875 3/03/07 228,032
15,000 1.64 27.00 8/22/07 204,945
</TABLE>
- ----------------
(1) All options were granted at the market value on the date of grant
based on the last sale price of the Company's Common Stock on the date
of grant.
(2) The grant date present value was based on the Black-Scholes Option
Valuation Model, a widely-recognized method of valuing options. The
following underlying assumptions were used to derive the present value
of these options: expected volatility of the Company's Common Stock
of 51%, based upon the actual weekly volatility of the Company's stock
during 1997; a risk-free rate of return of 5.25%, based on the yield
of five-year U.S. Treasury notes as of the grant date; and exercise
of the option five years after the grant date. The actual value, if
any, the Named Executive Officers may realize upon exercise will
depend on the excess of the stock price over the exercise price on the
actual date the option is exercised; consequently, there is no
assurance the value realized by the Named Executive Officers will be
at or near the value estimated by the Black-Scholes Option Valuation
Model.
The following table sets forth information concerning the value of
unexercised options as of December 31, 1997, by the Named Executive Officers.
None of the Named Executive Officers exercised options during the year ended
December 31, 1997.
Stock Option Exercises and Year End Values
<TABLE>
<CAPTION>
Value of
Number Of Securities Underlying In-the-
Unexercised Options held at Money Options at
December 31, 1997 December 31, 1997(1)
------------------------------- -----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Clete T. Brewer . . . . . . -0- 75,000 -0- $ 708,750
Terry C. Bellora . . . . . . 100,000 162,500 $1,587,500 2,415,000
Ted Feldman . . . . . . . . . -0- 80,000 -0- 1,155,625
W. David Bartholomew . . . . -0- 67,500 -0- 991,875
Donald A. Marr, Jr. . . . . . -0- 60,000 -0- 921,875
</TABLE>
- ----------
(1) Options are "in-the-money" if the closing market price of the
Company's Common Stock exceeds the exercise price of the options. The
value of the unexercised options represents the difference between the
closing market price of the Company's Common Stock on December 31,
1997, $31.625, and the exercise price of such options.
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DIRECTOR COMPENSATION
Directors who are employees of the Company do not receive additional
compensation for serving as directors. Each director who is not an employee of
the Company receives a fee of $2,000 for attendance at each regular Board of
Directors meeting and $500 for each committee meeting (unless held on the same
day as a Board of Directors meeting). Under the Company's Amended and Restated
Option Plan, each non-employee director automatically receives nonqualified
stock options to purchase 10,000 shares of Common Stock upon such person's
initial election as a director. Non-employee directors also receive annual
grants of non-qualified stock options to purchase 2,000 shares of Common Stock
following re-election at each Annual Meeting of Stockholders. All of such
options have or will have an exercise price equal to the fair market value of
the Common Stock on the date of grant, are exercisable in three equal
installments on each of the first through third anniversaries of the date of
grant and will expire five years from the date of grant. All directors of the
Company are reimbursed for out-of-pocket expenses incurred in attending
meetings of the Board of Directors or committees thereof and for other expenses
incurred in their capacity as directors.
EMPLOYMENT AGREEMENTS
Clete Brewer, Ted Feldman, David Bartholomew and Donald Marr entered
into employment agreements with the Company, or a subsidiary thereof,
commencing on the date of the closing of the Company's initial public offering
on October 2, 1996 (the "IPO"). Pursuant to such employment agreements, each
such officer is eligible for additional year-end bonus compensation to be
determined pursuant to an incentive bonus plan established by the Company. See
"Report of the Compensation Committee; 1997 Compensation." Each employment
agreement is for a term of five years, and unless terminated or not renewed by
the Company or the employee, the term will continue thereafter on a
year-to-year basis on the same terms and conditions existing at the time of
renewal.
Each of the employment agreements for Messrs. Brewer, Feldman,
Bartholomew and Marr provides that, in the event of a termination of employment
by the Company, except for specific instances of "cause" as defined in the
employment agreement, such employee shall be entitled to receive from the
Company such employee's then current salary for a period no longer than five
years after the IPO. Each employment agreement contains a covenant not to
compete with the Company for a period of two years immediately following the
termination of his employment.
Mr. Bellora entered into a five-year employment agreement with the
Company in October 1996 providing for an annual base salary, a bonus to be
determined annually pursuant to an incentive bonus plan established by the
Company and options to purchase 150,000 shares of Common Stock at the IPO
price, which options are scheduled to become exercisable over a period of five
years and terminate in October 2006. In the event of termination without
cause, the agreement obligates the Company to pay Mr. Bellora an amount equal
to his salary for a two-year period (the "Payout"). In the event of a change
in control of the Company, Mr. Bellora may elect to terminate his employment
and receive an amount equal to the Payout. Mr. Bellora's employment agreement
contains a covenant not to compete with the Company for the two-year period
immediately following termination of employment, except in the case of a
termination by the Company without cause in the absence of a change in control,
in which case the non-compete covenant extends for a one-year period following
termination of employment. In the event of a change in control without 15 days
notice, such non-competition provisions would not apply.
REPORT OF THE COMPENSATION COMMITTEE
The following report of the Compensation Committee of the Board of
Directors of StaffMark shall not be deemed incorporated by reference by any
general statement incorporating this Proxy statement by reference into any
filing under the Securities Act of 1933, as amended (the "Securities Act"), or
under the Securities Exchange Act of
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<PAGE> 12
1934, as amended (the "Exchange Act"), and shall not be deemed filed under
either of the Securities Act or the Exchange Act except to the extent that
StaffMark specifically incorporates this information by reference.
OVERVIEW
The key components of executive officer compensation are salary, bonus
and stock option awards. Each of the Company's Named Executive Officers is a
party to a five-year employment agreement (collectively the "Executive
Employment Agreements") that was negotiated at arms-length at the time of the
IPO. The Compensation Committee believes that the base salary levels provided
for in the Executive Employment Agreements are below the base salary levels
paid to executives holding comparable positions with other publicly held
staffing and service companies.
The members of the Compensation Committee hold primary responsibility
for determining executive officer compensation levels, subject to the terms of
the Executive Employment Agreements. The Compensation Committee is composed
entirely of independent outside directors of StaffMark, none of whom are or
have been officers or employees of StaffMark. The Compensation Committee has
adopted a compensation philosophy that is intended to align compensation with
StaffMark's overall business strategy. The philosophy guiding the executive
compensation program is designed to link executive compensation and stockholder
value. The goals of the program are:
o To compensate executive employees in a manner that aligns the
employee's interests with the interests of the stockholders;
o To encourage continuation of StaffMark's entrepreneurial
spirit;
o To reward executives for successful long-term strategic
management;
o To recognize outstanding performance; and
o To attract and retain highly qualified and motivated
executives.
The strategy established by the Compensation Committee with respect to
executive compensation includes maintaining base salaries for executives at a
level somewhat below the industry average, while providing bonuses and stock
options which, when combined with base salary amounts, give StaffMark's
executives the potential to earn in excess of competitive industry compensation
if subjective and objective performance goals for StaffMark are achieved. The
Compensation Committee intends to continue to grant to StaffMark's executives
and other key employees stock options at the current market value, which
options have no monetary value to the executives unless and until the market
price of StaffMark's Common Stock increases above the exercise price. The mix
of base salary, bonuses and stock option awards reflects the Compensation
Committee's intention to link executive compensation to StaffMark's operational
performance and the price of its Common Stock. The Compensation Committee
anticipates that future option grants will be based on a subjective analysis of
various performance criteria, primarily earnings per share and operating
profits, but will not directly be tied to any one factor. Future bonus
payments will be in accordance with the Bonus Plan described herein. The
Compensation Committee intends to continue to examine ways to more closely link
its annual bonus and long-term incentive plans to StaffMark's stock
performance, with the objective of creating plans that strengthen the
relationship between stockholder value and executive compensation.
1997 COMPENSATION
During fiscal 1997, the Compensation Committee developed a new plan
with respect to the cash bonus portion of the compensation payable to executive
officers of the Company (the "Bonus Plan"). Under the Bonus Plan, the
Compensation Committee is charged with responsibility for the establishment of
specific annual "performance targets" for each executive officer who
participates in the Bonus Plan. The performance targets may be based on one or
more of the following business criteria: net income, return on equity, return
on assets or earnings per share (in each case as defined in the Bonus Plan), or
on any combination thereof, and must be established while
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<PAGE> 13
the performance relative to the target remains substantially uncertain within
the meaning of Section 162(m) of the Code. Concurrently with the selection of
the performance targets, the Committee must establish an objective formula or
standard for calculating the maximum bonus payable to each participating
executive officer. Under the Bonus Plan, the maximum bonus per fiscal year may
not in any event exceed 100% of an executive officer's base salary for such
fiscal year. In addition to this overall maximum, the Committee has sole
discretion to determine whether any or all of the maximum permissible bonus
will actually be paid, or whether payment or vesting of any bonus will be
deferred. The Compensation Committee is also authorized to exercise its
"negative discretion" by establishing additional conditions and terms of
payment of bonuses, including the achievement of other financial, strategic or
individual goals, which may be objective or subjective, as it deems
appropriate. The Board of Directors believes that the Bonus Plan is consistent
with the Company's existing policies that closely relate executive compensation
to the Company's performance. The Bonus Plan also serves the Company's
interests by granting the Compensation Committee discretion both in selecting
the criteria by which performance is to be measured and in determining the
actual amount of each eligible executive's bonus within the maximum limits
imposed pursuant to the Bonus Plan. All bonuses under the Bonus Plan are to be
paid in cash or cash equivalents.
The Compensation Committee established the performance targets for
fiscal 1997 based upon earnings per share. The Committee believes that this
specific target constitutes confidential business information the disclosure of
which could adversely affect the Company. All of the Named Executive Officers
were eligible to participate in the Bonus Plan in 1997.
Compensation paid during 1997 to Clete T. Brewer, StaffMark's
President and Chief Executive Officer, was comprised of $150,000 in base
salary, a $41,000 bonus pursuant to the Bonus Plan and the award of 65,000
stock options. In March 1997 and August 1997, the Compensation Committee
granted Mr. Brewer options to acquire 15,000 shares and 50,000 shares,
respectively, of the Company's Common Stock at the fair market value of the
Common Stock on the dates of grant. All of such options have been granted to
Mr. Brewer in recognition of his continued service and efforts towards the
growth and success of the Company. Total cash compensation for StaffMark's
other executive officers during 1997 was paid in accordance with each such
officer's Executive Employment Agreement and cash bonuses were paid in
accordance with the Bonus Plan. Stock option grants were awarded based upon
such individuals' contributed service and efforts toward the growth and success
of the Company and were approved by the Compensation Committee. This report is
submitted by the members of the Compensation Committee.
STAFFMARK, INC.
COMPENSATION COMMITTEE
William J. Lynch
R. Clayton McWhorter
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PERFORMANCE GRAPH
The following chart compares the cumulative total stockholder return
on the Company's Common Stock with the cumulative total return on the S&P 500
Index and the common stock of eight companies in the temporary staffing
industry, for the period beginning September 27, 1996, (the date that trading
of Common Stock first began on the Nasdaq National Market), and ending December
31, 1997 (the last trading date in the Company's 1997 fiscal year) assuming a
$100 investment in each and assuming the reinvestment of dividends. Although
the Company's initial offering price was $12.00, the closing price of $14.00 on
the first day of trading was used as the beginning price of the Common Stock.
The Company paid no dividends during the period. Companies in the self
selected peer group are as follows: AccuStaff Incorporated; COREstaff, Inc.;
Norrell Corporation; Personnel Management, Inc.; Personnel Group of America;
RemedyTemp, Inc.; SOS Staffing Services, Inc.; and Western Staff Services, Inc.
COMPARISON OF CUMULATIVE TOTAL RETURN
["TOTAL RETURN TO STOCKHOLDERS" GRAPH TO FOLLOW]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TOTAL RETURN ANALYSIS
9/27/96 12/31/96 12/31/97
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
STAFFMARK, INC. $100 $89 $225
- --------------------------------------------------------------------------------
Peer Group $100 $87 $95
- --------------------------------------------------------------------------------
Nasdaq Composite (US) $100 $105 $128
- --------------------------------------------------------------------------------
</TABLE>
Source: Carl Thompson Associates
www.ctaonline.com
(303) 494-5472.
Data from Bloomberg Financial
Markets
CERTAIN TRANSACTIONS
In connection with the acquisition of Brewer, the Company assumed a
lease by Brewer of property in Fayetteville, Arkansas that is owned by Brewer
Investments, an Arkansas limited partnership whose partners are Jerry T.
Brewer and Kay Brewer, Clete Brewer's parents. The property is now the
Company's headquarters. The total lease payments to Brewer Investments in 1997
approximated $225,000, and the lease extends for five years. StaffMark is
responsible for all real estate taxes, insurance, utilities and maintenance.
In connection with the acquisition of Prostaff, the Company assumed
leases by Prostaff of property in Little Rock, Arkansas used by Prostaff in its
operations that are owned by an Arkansas limited liability company, one of
whose members is Steven E. Schulte. Rent for 1997 approximated $127,200, and
StaffMark is responsible for all real estate taxes, insurance, utilities and
maintenance. The Company also leases its Tulsa, Oklahoma offices from John H.
Maxwell, Jr. and Mary Sue Maxwell. The total lease payments to the Maxwells in
1997 approximated $100,000.
The Company believes that the foregoing rent payments for leased
facilities with related parties are on terms that are as favorable to the
Company as those that could be obtained from unaffiliated third parties.
In October 1996, StaffMark advanced Donald A. Marr, Jr. the principal
amount of $80,000 due on October 2, 1999 pursuant to a promissory note that
accrues interest at six percent per annum.
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<PAGE> 15
ADOPTION OF AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION, AS AMENDED, TO INCREASE THE COMPANY'S AUTHORIZED
COMMON STOCK AND PREFERRED STOCK (PROPOSAL 2)
The Company is currently authorized to issue 26,000,000 shares of
Common Stock and 1,000,000 shares of preferred stock. At the Annual Meeting,
a vote will be taken on a proposal to adopt an amendment to the Company's
Certificate of Incorporation, as amended, to increase the number of authorized
shares of Common Stock from 26,000,000 to 200,000,000 and to increase the
number of authorized shares of preferred stock from 1,000,000 to 10,000,000.
If the stockholders approve the amendment, the first paragraph of Article Four
of the Company's Certificate of Incorporation, as amended, will read as
follows:
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is two hundred and ten
million (210,000,000) shares, divided into two classes of which ten
million (10,000,000) shares, par value $.01 per share, shall be
designated Preferred Stock (the "Preferred Stock"), and two hundred
million (200,000,000) shares, par value $.01 per share, shall be
designated as Common Stock (the "Common Stock").
The Board of Directors has proposed the increase in the number of
authorized shares of Common Stock and Preferred Stock to assure that an
adequate supply of shares of Common Stock and Preferred Stock are available for
general corporate purposes, including, future acquisitions, raising additional
capital, and stock dividends and splits. The Board of Directors believes that
an increase in the total number of shares of Common Stock and Preferred Stock
authorized will better enable the Company to meet its future needs and give it
greater flexibility to respond quickly to advantageous business situations.
Although it did not form a basis for the Board's decision to recommend
the amendment, the existence of additional authorized shares of Common Stock
could, under certain circumstances, have an anti-takeover effect. For example,
in the event of a hostile attempt to take over control of the Company, the
Company could, in an attempt to discourage or make more difficult a hostile
takeover attempt, issue shares of Common Stock or Preferred Stock, thereby
diluting the voting power of outstanding shares and increasing the potential
cost to acquire control of the Company. The amendment, therefore, may have the
effect of discouraging unsolicited takeover attempts. In such a case,
stockholders might be deprived of benefits that could result from such an
attempt, such as realization of a premium over the market price of their shares
in a tender offer or the temporary increase in market price that could result
from such an attempt. The Company is not aware of any existing or planned
attempt to acquire the Company by means of an unsolicited merger, tender offer,
solicitation of proxies in opposition to management or otherwise, or to change
the Company's management. The Board of Directors has not presented this
amendment with the intent that it be used as a type of anti-takeover device.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE
AND ADOPT THE AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION, AS
AMENDED, TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK AND
PREFERRED STOCK.
APPROVAL AND RATIFICATION OF THE AMENDED AND RESTATED
1996 STOCK OPTION PLAN (PROPOSAL 3)
At the Annual Meeting, stockholders will be asked to ratify and
approve the Company's Amended and Restated 1996 Stock Option Plan (the "Option
Plan"), which was originally adopted in June 1996 and amended by the Board of
Directors in March 1998. The Option Plan, as amended, is being submitted to
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<PAGE> 16
stockholders in order to satisfy the shareholder approval requirements of
Section 162(m) ("Section 162(m)") of the Internal Revenue Code of 1986, as
amended (the "Code").
DESCRIPTION OF AMENDED AND RESTATED 1996 STOCK OPTION PLAN
The purpose of the Option Plan is to provide directors, officers, key
employees and consultants with additional incentives by increasing their
ownership interests in the Company. Directors, officers and other key
employees of the Company and its subsidiaries are eligible to participate in
the Option Plan. In addition, awards may be granted to consultants providing
valuable services to the Company. As of December 31, 1997, the Company and its
affiliates employed ____ individuals and retained ____ consultants who were
eligible to participate in the Option Plan. Awards under the Option Plan are
granted by the Compensation Committee of the Board of Directors and may include
incentive stock options ("ISOs") and/or non-qualified stock options ("NQSOs").
The Compensation Committee of the Board of Directors administers the
Option Plan. The Compensation Committee generally has discretion to determine
the terms of an option grant, including the number of option shares, option
price, term, vesting schedule, the post-termination exercise period, and
whether the grant will be an ISO or NQSO. Notwithstanding this discretion: (i)
the number of shares subject to options granted to any individual in any
calendar year may not exceed 500,000 shares; (ii) the option price per share of
Common Stock may not be less than 100% of the fair market value of such share
at the time of grant, or 110% of the fair market value of such shares if the
option is intended to be an ISO and is granted to a stockholder owning more
than 10% of the combined voting power of all classes of the stock of the
Company or a parent or subsidiary on the date of the grant of the option (a
"10% stockholder"); and (iii) the term of any option may not exceed 10 years,
or five years if the option is intended to be an ISO and is granted to a 10%
stockholder. In addition, unless otherwise specified by the Compensation
Committee, all outstanding options vest upon a "change in control" of the
Company (as defined by the Option Plan), and all options will terminate three
months following any termination of employment.
The Option Plan also provides for automatic option grants to directors
who are not otherwise employed by the Company or its subsidiaries. Upon
commencement of service (or upon agreeing to serve in the case of the initial
non-employee directors), a non-employee director will receive an NQSO to
purchase 10,000 shares of Common Stock, and thereafter a non-employee director
will receive annual options to purchase 2,000 shares of Common Stock. The
annual options are granted following re-election to the Board of Directors.
Options granted to non-employee directors become exercisable in three equal
installments on each of the date of grant and the first and second
anniversaries of the date of grant. Non-employee director options have a term
of five years from the date of grant and an exercise price equal to the fair
market value of Common Stock on the date of grant. The closing price of the
Common Stock reported on the Nasdaq National Market for March 2, 1998 was $____
per share.
The maximum number of shares of Common Stock that may be subject to
outstanding options, determined immediately after the grant of any option, is
the greater of 1,500,000 or 12% of the aggregate number of shares of the
Company's Common Stock outstanding; provided, however, that options to purchase
no more than 1,500,000 shares of Common Stock may be granted as ISOs as of the
preceding January 1, less, in each case, the number of shares subject to
previously outstanding awards under the Option Plan. Shares of Common Stock
which are attributable to awards which have expired, terminated or been
canceled or forfeited during any calendar year are available for issuance or
use in connection with future awards during such calendar year.
The Option Plan will remain in effect until terminated by the Board of
Directors. No ISO may be granted more than 10 years after the adoption of the
Option Plan by the Board or approval of the Plan by the stockholders, whichever
is earlier. The Option Plan may be amended by the Board of Directors without
the consent of the stockholders of the Company, except that any amendment,
although effective when made, will be subject to stockholder approval within
one year after approval by the Board of Directors if required by any federal or
state law or regulation or by the rules of any stock exchange or automated
quotation system on which the Common Stock may then be listed or quoted.
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<PAGE> 17
The Board of Directors recently amended the Option Plan by adding a
provision which permits officers, with the prior approval of the Compensation
Committee (or its designee), to transfer their stock options to members of
their immediate families, either directly or through trusts or similar
vehicles.
OPTION PLAN INTENDED TO COMPLY WITH SECTION 162(M) OF THE CODE.
Section 162(m) of the Code disallows a public company's deductions for
employee remuneration exceeding $1,000,000 per year for its Chief Executive
Officer and other four most highly compensated officers, but contains an
exception for "performance-based compensation" that meets certain requirements.
In order for the Option Plan to meet these requirements, the material terms of
the Option Plan must be approved by the Company's stockholders, as set forth
herein. The Option Plan is intended to qualify grants of stock options made
under the Option Plan as "performance-based compensation" pursuant to section
162(m) of the Code. The Option Plan limits the number of shares subject to
options granted to any individual in any calendar year to no more than 500,000
shares. The Option Plan is being submitted to stockholders in order to satisfy
the stockholder approval requirements of Section 162(m) of the Code.
TAX TREATMENT
Non-Qualified Stock Options. There are no federal income tax
consequences to an individual or to the Company upon the grant of an NQSO under
the Option Plan. Upon the exercise of an NQSO, an individual will recognize
ordinary compensation income in an amount equal to the excess of the fair
market value of the shares at the time of exercise over the exercise price of
the NQSO, and the Company generally will be entitled to a corresponding federal
income tax deduction. Upon the sale of shares acquired by the exercise of an
NQSO, an individual will have a capital gain or loss (long-term or short-term
depending upon the length of time the shares were held) in an amount equal to
the difference between the amount realized upon the sale and the individual's
adjusted tax basis in the shares (the exercise price plus the amount of
ordinary income recognized by the individual at the time of exercise of the
NQSO).
Incentive Stock Options. An employee will not recognize federal
taxable income, upon either the grant or exercise of the ISO. However, for
purposes of the alternative minimum tax imposed under the Code, in the year in
which an ISO is exercised, the amount by which the fair market value of the
shares acquired upon exercise exceeds the exercise price will be treated as an
item of adjustment and included in the computation of the recipient's
alternative minimum taxable income. An employee who disposes of the shares
acquired upon exercise of an ISO after two years from the date the ISO was
granted and after one year from the date such shares were transferred to him or
her upon exercise of the ISO will recognize capital gain or loss (long-term or
short-term capital gain, depending upon the length of time the employee held
his or her shares prior to the disposition) in the amount of the difference
between the amount realized on the sale and the exercise price, and the Company
will not be entitled to any tax deduction by reason of the grant or exercise of
the ISO. As a general rule, if an employee disposes of the shares acquired
upon exercise of an ISO before satisfying both holding period requirements (a
"disqualifying disposition"), his or her gain recognized on such a disposition
will be taxed as ordinary income to the extent of the difference between the
fair market value of such shares on the date of exercise and the exercise
price, and the Company will be entitled to a deduction in that amount. The
gain, if any, in excess of the amount recognized as ordinary income on such a
disqualifying disposition will be long-term or short-term capital gain,
depending upon the length of time the Grantee held his or her shares prior to
the disposition.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
APPROVAL AND RATIFICATION OF THE AMENDED AND RESTATED 1996 STOCK OPTION PLAN.
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<PAGE> 18
APPROVAL OF AN AMENDMENT TO THE STAFFMARK, INC.
EMPLOYEE STOCK PURCHASE PLAN (PROPOSAL 4)
On May 2, 1997, the Company's stockholders approved the Company's
Employee Stock Purchase Plan (the "Purchase Plan"), pursuant to which eligible
employees may purchase shares of Common Stock. The purpose of the Purchase Plan
is to provide employees with an opportunity to purchase, and increase their
ownership of, Common Stock. The Company has reserved 300,000 shares of Common
Stock for issuance under the Purchase Plan. As of December 31, 1997, the
Company and its affiliates employed ____ individuals who were eligible to
participate in the Purchase Plan.
On March 12, 1998 the Board of Directors amended and restated the
Purchase Plan, effective July 1, 1997, subject to stockholder approval, to
expand existing eligibility requirements, as described in greater detail below.
The Purchase Plan amendment will not be effective unless or until shareholder
approval is obtained.
As originally approved, the Purchase Plan permitted a regular employee
of the Company to participate, on a voluntary basis, if: (i) the employee's
customary employment was greater than 20 hours per week and five months per
calendar year; and (ii) the employee completed one year of continuous service
with the Company. The Purchase Plan, as amended, will allow employees (whether
regular full-time, or part-time or temporary) of the Company to participate in
the Purchase Plan on a voluntary basis without the foregoing requirements;
provided that an employee who owns five percent or more of the total combined
voting power or value of all classes of stock of the Company will not be
eligible to participate in the Purchase Plan. The committee administering the
Purchase Plan (the "Committee") may designate certain "subsidiary corporations"
of the Company, as that term is defined in section 424 of the Code, as
participating entities in the Purchase Plan; provided, however, foreign
subsidiaries may not be designated as participating entities in the Purchase
Plan. The amended Purchase Plan also permits the Board of Directors to amend
the plan without stockholder approval unless such approval is required by
Section 423 the Code.
MATERIAL FEATURES OF THE PURCHASE PLAN
Eligible employees participate in the Purchase Plan by exercising
options to purchase Common Stock. Options shall be granted for each purchase
period to eligible employees who elect to participate in the Purchase Plan.
Each calendar quarter will be a purchase period unless otherwise established by
the Committee. Common Stock will be purchased through a participant's payroll
deductions at a stated dollar amount not less than $10 per pay period (or $20
if the pay period is every month), as determined by the participant. However,
no employee will be permitted to purchase shares of Common Stock under the
Purchase Plan having an aggregate fair market value of more than $25,000 for
each calendar year. Common Stock may be purchased under the Purchase Plan at a
price equal to 85% of the lower of fair market value of the Common Stock on the
first or last trading day of each purchase period. The fair market value of the
Common Stock will be determined by reference to the Common Stock price on the
Nasdaq National Market on each relevant date. The closing price of the Common
Stock reported on the Nasdaq National Market for March 2, 1998 was $_____ per
share.
Each eligible employee who elects to participate in the Purchase Plan
will, without any action on his or her part, be automatically deemed to have
exercised his or her option on the last day of each purchase period if he or
she is then employed, unless the employee notifies the Committee of his or her
desire not to make such purchase. To the extent that the amount withheld
through payroll deductions throughout the purchase period is sufficient to
purchase, at the option price, one or more whole shares of Common Stock, such
shares shall be purchased for the participant and delivered by the Company as
determined by the Committee. An option granted under the Purchase Plan shall
not be transferable by an employee other than by will or by the laws of descent
and distribution and is exercisable during his or her lifetime only by the
employee.
Shares of Common Stock purchased under the Purchase Plan may not be
sold or withdrawn from the participant's account prior to one year following
the date on which such shares were purchased. All funds received or
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held by the Company under the Purchase Plan are general assets of the Company,
free of any trust or other restriction, and may be used for any corporate
purpose. No interest on such funds will be credited to or paid to any
participant under the Purchase Plan.
An employee may voluntarily suspend his or her payroll deductions at
any time, but will not be permitted to resume the payroll deductions again
until the next January 1 or July 1 following the date the Company is notified
to resume payroll deductions. An employee may change the rate of his or her
payroll deductions on any January 1 or July 1. If an employee terminates his
or her employment with the Company, his or her participation in the Purchase
Plan will be automatically terminated as of the date of termination of
employment, and the shares held in his or her stockholder account will either
be sold as directed by the participant or distributed to the participant, in
which case the Common Stock purchased through the Purchase Plan as of the date
of termination will be distributed to the participant together with cash equal
to the sum of the fair market value of any fractional shares owned by the
participant and amounts withheld through payroll deductions that had not been
applied to purchase Common Stock under the Purchase Plan.
TAX TREATMENT
The Purchase Plan is intended to qualify as an employee stock purchase
plan within the meaning of Section 423 of the Code. Under the Code as
currently in effect, an employee will not be deemed to have recognized income,
nor will the Company be entitled to a deduction, upon the participant's
acquisition of Common Stock pursuant to the Purchase Plan. An employee who
acquires shares under the Purchase Plan will recognize income when he or she
sells or otherwise disposes of such shares.
If an employee sells shares acquired under the Purchase Plan more than
two years after the date on which the option to purchase the shares was granted
and more than one year after the purchase of the shares (the "statutory holding
period"), a portion of the participant's gain will be ordinary income and a
portion will be capital gain. The participant will be taxed at ordinary income
tax rates on the excess of the value of the shares when the option was granted
over the purchase price, or, if less, the entire gain on the sale. The
participant will have additional capital gain or loss equal to the difference,
if any, between the proceeds of the sale and the participant's basis in the
shares (the purchase price plus any ordinary income realized). The capital
gain rate will depend on how long the stock is held by the participant. The
Company will not be entitled to any tax deduction with respect to a sale by an
employee after the statutory holding period.
If an employee sells shares before the expiration of the statutory
holding period, the participant generally will be taxed at ordinary income tax
rates to the extent that the value of the shares when the shares were purchased
exceeded the purchase price. The Company will be entitled to a corresponding
deduction. The participant will have additional capital gain or loss on the
difference between the proceeds of the sale and the participant's basis in the
shares (the purchase price plus any ordinary income realized). The capital
gain rate will depend on how long the stock is held by the participant.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
APPROVAL AND RATIFICATION OF THE AMENDMENT TO THE PURCHASE PLAN.
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires StaffMark's officers and
directors, and persons who own more than 10% of a registered class of
StaffMark's equity securities, to file initial reports of ownership and reports
of
18
<PAGE> 20
changes in ownership with the Securities and Exchange Commission (the "SEC")
and the Nasdaq National Market. Such persons are required by SEC regulation to
furnish StaffMark with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of other such forms received
by it with respect to 1997, or written representations from certain reporting
persons, StaffMark believes that all other filing requirements applicable to
its executive officers, directors and persons who own more than 10% of a
registered class of StaffMark's equity securities have been complied with,
except for the purchase of 5,000 shares of the Company's Common Stock by
Charles A. Sanders, M.D. in March 1997, which was reported on Form 5 in
February 1998.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Arthur Andersen LLP as the
Company's independent public accountants and auditors, a position that firm has
held since the IPO. Representatives of Arthur Andersen LLP are expected to be
present at the Annual Meeting with the opportunity to make a statement if they
desire to do so and to respond to appropriate questions.
SUBMISSION OF STOCKHOLDER PROPOSALS
Any stockholder proposal to be presented at the 1999 Annual Meeting
should be directed to Terry C. Bellora, Secretary of the Company, 302 East
Millsap Road, Fayetteville, Arkansas 72703, and must be received by the Company
on or before November 30, 1998. Any such proposal must comply with the
requirements of Rule 14a-8 under the Securities Exchange Act of 1934.
ADDITIONAL INFORMATION AVAILABLE
The Company's Annual Report to stockholders accompanies this Proxy
Statement. The Company filed its Annual Report on Form 10-K for the year ended
December 31, 1997 with the Securities and Exchange Commission on March ___,
1998. A copy of the Form 10-K, including any financial statements and
schedules and a list describing any exhibits not contained therein, may be
obtained without charge by any stockholder. Written requests for copies of the
report should be directed to Terry C. Bellora, Secretary, StaffMark, Inc., 302
East Millsap Road, Fayetteville, Arkansas 72703.
OTHER MATTERS
The Board of Directors does not intend to present and does not have
any reason to believe that others will present any items of business at the
Annual Meeting other than as stated in the Notice of Annual Meeting of
Stockholders. If, however, other matters are properly brought before the
meeting, it is the intention of the persons named in the accompanying Proxy to
vote the shares represented thereby in accordance with their best judgment, and
discretionary authority to do so is included in the Proxy.
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING ARE URGED TO SIGN, DATE
AND RETURN PROMPTLY THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED, WHICH REQUIRES
NO ADDITIONAL POSTAGE IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors
Terry C. Bellora
Secretary
Fayetteville, Arkansas
March 23, 1998
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<PAGE> 21
APPENDIX A
STAFFMARK, INC.
302 EAST MILLSAP ROAD
FAYETTEVILLE, ARKANSAS 72703
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
KNOW ALL MEN BY THESE PRESENTS that I, the undersigned stockholder of
StaffMark, Inc., a Delaware corporation, do hereby nominate, constitute, and
appoint Jerry T. Brewer, Clete T. Brewer, and Gordon Y. Allison, or any one or
more of them, my true and lawful attorney(s) with full power of substitution
for me and in my name, place and stead, to vote all of the Common Stock, par
value $.01 per share, of the Company, standing in my name on its books on March
16, 1998, at the Annual Meeting of its Stockholders to be held on May 8, 1998
at the Northwest Arkansas Convention Center, 1500 South 48th, Springdale,
Arkansas, at 10:00 a.m., local time, or at any adjournment thereof.
1. Election of the following nominees as directors: Jerry T. Brewer,
Clete T. Brewer, W. David Bartholomew, Steven E. Schulte, John H.
Maxwell, Jr., Janice Blethen, William T. Gregory, William J. Lynch, R.
Clayton McWhorter, and Charles A. Sanders, M.D.
For all nominees listed WITHHOLD AUTHORITY to vote for
(except as marked to the all nominees voted
contrary)
(INSTRUCTION: To withhold authority to vote for any individual
nominees(s), write that nominee's name(s) on the space provided below.
---------------------------------------------------
2. To approve and adopt an amendment to the Company's Certificate of
Incorporation, as amended, to increase the number of authorized shares
of common stock from 26,000,000 to 200,000,000 and increase the number
of authorized shares of preferred stock from 1,000,000 to 10,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To ratify and approve the Company's Amended and Restated 1996 Stock
Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To ratify and approve an amendment to the Employee Stock Purchase
Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
ALL SHARES WILL BE VOTED AS DIRECTED HEREIN AND, UNLESS OTHERWISE
DIRECTED, WILL BE VOTED "FOR" PROPOSAL 1 (ALL NOMINEES), "FOR " PROPOSAL 2,
"FOR" PROPOSAL 3,
A-1
<PAGE> 22
"FOR" PROPOSAL 4 AND IN ACCORDANCE WITH THE DISCRETION OF THE PERSON VOTING THE
PROXY WITH RESPECT TO ANY OTHER BUSINESS PROPERLY BROUGHT BEFORE THE MEETING.
This Proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder. Please sign exactly as your
name appears hereon. When shares are held by joint tenants, both should sign.
When signing as attorney, 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. Make sure that the name on your stock
certificate(s) is exactly as you indicate below.
_______________________________________
Signature
_______________________________________
Signature if jointly held
_______________________________________
DATE: _________________________________
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED SELF-ADDRESSED POSTAGE PREPAID ENVELOPE
A-2
