SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
Proxy Statement Pursuant To Section 14(a)
Of The Securities Exchange Act Of 1934
|X| Filed by the Registrant
|_| Filed by a Party other than the Registrant
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, Use of the Commission Only (as permitted by Rule 14a-6(e)
(2))Proxy Statement
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
SOS STAFFING SERVICES, INC.
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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:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
PROXY
SOS STAFFING SERVICES, INC.
1415 SOUTH MAIN STREET
SALT LAKE CITY, UT 84115
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Richard D. Reinhold, Howard W. Scott, Jr. and
John K. Morrison, and each of them, as proxies, with full power of substitution,
and hereby authorizes them to represent and vote, as designated below, all
shares of Common Stock, $.01 par value, of SOS Staffing Services, Inc., a Utah
corporation (the "Company"), held of record by the undersigned on March 31, 1997
at the Annual Meeting of Shareholders (the "Annual Meeting") to be held at the
Doubletree Hotel, Seminar Theater Room, 255 South West Temple, Salt Lake City,
Utah 84101, on May 14, 1997, at 1:30 p.m., Mountain Daylight Time, or at any
adjournment or postponement thereof, upon the matters set forth below, all in
accordance with and as more fully described in the accompanying Notice of Annual
Meeting and Proxy Statement, receipt of which is hereby acknowledged.
1. ELECTION OF DIRECTORS, each to serve a term of three years expiring at
the annual meeting of shareholders of the Company to be held in 2000
and until their respective successors shall be duly elected and shall
qualify.
[ ] FOR all nominees listed below (except as marked to the contrary
below).
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below.
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below.)
R. THAYNE ROBSON HOWARD W. SCOTT, JR. RICHARD J. TRIPP
- - - - - - - - - - - - - - - - - - - - (fold here) - - - -- - - - - - - - - - - - -
2. PROPOSAL TO AMEND THE COMPANY'S 1995 STOCK INCENTIVE PLAN (the
"Incentive Plan") to increase the number of shares available for
issuance upon the exercise of options granted under the Incentive Plan
to 800,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO RATIFY THE APPOINTMENT OF Arthur Andersen, LLP as the
Independent Auditor of the Company for the fiscal year ending December
28, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF THE DIRECTOR NOMINEES NAMED ABOVE, FOR THE AMENDMENT
TO THE INCENTIVE PLAN, AND FOR THE RATIFICATION OF THE APPOINTMENT OF ARTHUR
ANDERSEN, LLP AS THE INDEPENDENT AUDITOR OF THE COMPANY. Please complete, sign
and date this proxy where indicated and return it promptly in the accompanying
prepaid envelope.
DATED: / , 1997.
Signature: Signature if held jointly:
------------------------- ------------------
Title (if applicable): Title (if applicable):
------------- ----------------------
(Please sign above exactly as the shares are issued. 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.)
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 14, 1997
SOS STAFFING SERVICES, INC.
[GRAPHIC OMITTED]
To the Shareholders of
SOS STAFFING SERVICES, INC.:
The Annual Meeting of the Shareholders of SOS Staffing Services, Inc. (the
"Company") will be held at the Doubltree Hotel, Seminar Theater Room, 255 South
West Temple, Salt Lake City, Ut 84101 on Wednesday, May 14, 1997, at 1:30 p.m.,
Mountain Daylight Time (the "Annual Meeting"). The purpose of the Annual Meeting
is to consider and vote upon the following matters, as mor fully described in
the accompanying Proxy Statement:
(i) To elect three directors of the Company, each to serve until the 2000
annual meeting of shareholders and until their respective successors
have been duly elected and qualifies;
(ii) To authorize an amendment to the Company's 1995 Stock Incentive Plan
(the "Incentive Plan") to increase the aggregate number of shares
available for issuance upon the exercise of options granted under the
Incentive Plan to 800,000 shares; and
(iii) To ratify the appointment of Arthur Andersen, LLP as independent
auditors of the Company for the fiscal year ending December 28, 1997;
(iv) To transact such other business that may properly come before the
Annual Meeting or at any adjournment of postponement thereof.
The Board of Directors has fixed the close of business on March 31, 1997 as
the record date for the determination of shareholders entitled to receive notice
of and to vote at the Annual Meeting and at any adjournment or postponement
thereof.
BY ORDER OF THE BOARD OF DIRECTORS
JOHN K. MORRISON
Secretary and General Counsel
April 3, 1997
IMPORTANT
Whether or not you expect to attend the Annual Meeting in person, to assure
that your shares will be represented, please date, complete, sign and mail the
enclosed proxy without delay in the enclosed postage paid envelope. Your proxy
will not be used if you are present at the Annual Meeting and desire to vote
your shares personally.
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
SOS Staffing Services, Inc.
1415 South Main Street
Salt Lake City, UT 84115
PROXY STATEMENT
Annual Meeting of Shareholders
May 14, 1997
SOLICITATION OF PROXIES
This Proxy Statement is being furnished to the shareholders of SOS Staffing
Services, Inc., a Utah corporation (the "Company"), in connection with the
solicitation by the Board of Directors of the Company of proxies from holders of
outstanding shares of the Company's Common Stock, $0.01 par value (the "Common
Stock"), for use at the Annual Meeting of Shareholders of the Company to be held
on Wednesday, May 14, 1997, at 1:30 p.m., Mountain Daylight Time, and at any
adjournment or postponement thereof (the "Annual Meeting"). This Proxy
Statement, the Notice of Annual Meeting of Shareholders and the accompanying
form of proxy are first being mailed to shareholders of the Company on or about
April 3, 1997.
The Company will bear all costs and expenses relating to the solicitation of
proxies, including the costs of preparing, printing and mailing to shareholders
this Proxy Statement and accompanying materials. In addition to the solicitation
of proxies by use of the mail, the directors, officers and employees of the
Company, without receiving additional compensation therefor, may solicit proxies
personally or by telephone or facsimile. Arrangements will be made with
brokerage firms and other custodians, nominees and fiduciaries for the
forwarding of solicitation materials to the beneficial owners of the shares of
Common Stock held by such persons, and the Company will reimburse such brokerage
firms, custodians, nominees and fiduciaries for reasonable out-of-pocket
expenses incurred by them in connection therewith.
VOTING
The Board of Directors has fixed the close of business on Monday, March 31, 1997
as the record date for the determination of shareholders entitled to notice of
and to vote at the Annual Meeting (the "Record Date"). As of the Record Date,
there were issued and outstanding 9,037,820 shares of Common Stock. The holders
of record of the shares of Common Stock on the Record Date entitled to be voted
at the Annual Meeting are entitled to cast one vote per share on each matter
submitted to a vote at the Annual Meeting.
<PAGE>
Proxies
Shares of Common Stock which are entitled to be voted at the Annual
Meeting and which are represented by properly executed proxies will be voted in
accordance with the instructions indicated on such proxies. If no instructions
are indicated, such shares will be voted FOR the election of each of the three
director nominees; FOR the authorization to amend the Company's 1995 Stock
Incentive Plan (the "Incentive Plan") to increase the aggregate number of shares
available for issuance upon the exercise of options granted under the Incentive
Plan to 800,000 shares; FOR the ratification of the appointment of Arthur
Andersen, LLP to be the Company's independent auditor for the fiscal year ending
December 28, 1997; and, in the discretion of the proxy holder, as to any other
matters which may properly come before the Annual Meeting. A shareholder who has
executed and returned a proxy may revoke it at any time prior to its exercise at
the Annual Meeting by executing and returning a proxy bearing a later date, by
filing with the Secretary of the Company, at the address set forth above, by a
written notice of revocation bearing a later date than the proxy being revoked,
or by voting the Common Stock covered thereby in person at the Annual Meeting.
Vote Required
A majority of the votes entitled to be cast at the Annual Meeting is
required for a quorum at the Annual Meeting. Abstentions and broker non-votes
will be counted as "represented" for the purpose of determining the presence or
absence of a quorum. Under Utah law, once a quorum is established, shareholder
approval with respect to a particular proposal is generally obtained when the
votes cast in favor of the proposal exceed the votes cast against the proposal.
Accordingly, abstentions and broker non-votes will not have the effect of being
considered as votes cast against any matter considered at the Annual Meeting. In
the election of directors, the three nominees receiving the highest number of
votes will be elected. For approval of the amendment to the Incentive Plan, the
votes cast in favor of the proposal must exceed the votes cast against the
proposal. For the approval of the proposed ratification of the selection of
Arthur Andersen, LLP to be the Company's independent auditor for the 1997 fiscal
year, the votes cast in favor of the proposal must exceed the votes cast against
the proposal. Holders of shares of Common Stock are entitled to one vote at the
Annual Meeting for each share of Common Stock held of record at the Record Date.
ELECTION OF DIRECTORS
At the Annual Meeting, three directors of the Company are to be elected
to serve three-year terms expiring at the annual meeting of shareholders to be
held in 2000 and until their successors shall be duly elected and qualified. If
any of the nominees should be unavailable to serve, which is not now
anticipated, the proxies solicited hereby will be voted for such other persons
as shall be designated by the present Board of Directors. The three nominees
receiving the highest number of votes at the Annual Meeting will be elected.
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<PAGE>
In addition to the directors to be elected at the Annual Meeting, the
directors named below will continue to serve their respective terms of office as
indicated: Richard D. Reinhold and JoAnn W. Wagner are currently serving terms
which expire at the annual meeting of the Company's shareholders to be held in
1998. Randolph K. Rolf and Stanley R. de Waal are currently serving terms which
expire at the annual meeting of the Company's shareholders to be held in 1999.
Brief statements setting forth certain biographical information concerning each
of the nominees and continuing directors appear below.
Nominees for Election as Directors
Certain information with respect to each nominee is set forth below.
R. Thayne Robson, 67, has been a director of the Company since June
1995. Mr. Robson currently serves as Director of the Utah Bureau of Economic and
Business Research, Professor of Management and Research and Professor of
Economics for the University of Utah and has done so since 1978. He also
currently serves as director for ARUP Alliance, Inc., a medical test laboratory
based in Salt Lake City, Utah, a director for Western Mortgage, a Utah
corporation engaged in mortgage banking and correspondence, and as trustee for
Aquila Rocky Mountain Equity Fund and Tax-Free Fund for Utah, mutual funds
managed by Aquila Management Corporation, a New York corporation. Mr. Robson has
been and continues to be involved in numerous civic and community endeavors,
including serving as a member of the Utah Governor's Economic Coordinating
Committee since 1982, trustee of the Salt Lake Convention and Visitors' Bureau
since 1984, a special advisor and member of the Executive Committee of the
Economic Development Corporation of Utah since 1985, ex-officio director of the
Salt Lake Downtown Alliance since 1991, and director of the Community Board of
Salt Lake Valley/IHC Hospitals since 1992, and trustee of Crossroads Research
Institute, a Utah non-profit research institute, since 1986.
Howard W. Scott, Jr., 62, joined the Company in February 1994 as Vice
President and was appointed as President and Chief Operating Officer in April
1995. Mr. Scott has more than 30 years of experience in the temporary services
industry. He served as President of Dunhill Personnel System, Inc. from 1991 to
1994, and as President of CDI Temporary Services, a subsidiary of CDI Corp.,
from 1978 to 1991. Mr. Scott also served two terms as the President of the
National Association of Temporary and Staffing Services ("NATSS") from 1971 to
1973 and, in October of 1993, was awarded its highest honor, the NATSS
Leadership Hall of Fame Award. Mr. Scott obtained a B.S. Degree in Journalism
from Northwestern University in 1957.
Richard J. Tripp, 48, has served as Senior Vice Presiden of
Administration of the Company since April 1995 and as a director of the Company
since 1991. From 1991 to April 1995, Mr. Tripp served as Vice President of
Administration of the Company. From 1973 until 1991, Mr. Tripp held a variety of
positions with the Company in customer service, and as an office and area
manager. Mr. Tripp obtained a B.S. Degree in Psychology from Brigham Young
3
<PAGE>
University in 1973. Mr. Tripp also served two terms as President of the Utah
Association of Temporary Services from 1987 to 1989.
Directors Whose Terms of Office Continue
Certain information with respect to continuing directors is set forth
below.
Richard D. Reinhold, 58, has been Chairman of the Board and Chief
Executive Officer since founding the Company in 1973. He also served as
President from 1973 to April 1995. Prior to founding the Company, Mr. Reinhold
worked for several national temporary service firms, including Greyhound
Temporary Services, for which Mr. Reinhold served as Vice President from 1971 to
1973. Mr. Reinhold also served as President of NATSS from 1989 to 1990, and as
President of the Utah Association of Temporary Services in 1982 and 1985. Mr.
Reinhold obtained a B.S. Degree in Marketing from the University of Kansas in
1960.
Stanley R. de Waal, 62, was elected a director of the Company in May
1995. Mr. de Waal is currently President and a director of DeWaal Keeler & Co.,
P.C. a Utah professional corporation of certified public accountants, of which
Mr. de Waal was a founder in 1975. Mr. de Waal has been a licensed certified
public accountant since 1967. Mr. de Waal also currently serves as a member of
the Board of Directors of the Hansen Planetarium, a non-profit organization.
Randolph K. Rolf, 55, has been a director of the Company since June
1995. Mr. Rolf is currently the Chairman of the Board, President and Chief
Executive Officer of Unitog Company ("Unitog"), a public company based in Kansas
City, Missouri, which manufactures, sells and rents industrial uniforms. He has
served as Chairman of the Board of Unitog since May 1991 and as President and
Chief Executive Officer since May 1988.
JoAnn W. Wagner, 57, has been a director and consultant of the Company
since July 1, 1995. Since July 1995, Ms. Wagner has been an independent
consultant to the temporary staffing industry. From January 1994 through July 1,
1995, Ms. Wagner was not employed in the temporary staffing business pursuant to
the terms of a non-competition agreement between Ms. Wagner and Interim
Services, Inc. ("Interim Services"). From January 1991 until January 1994, Ms.
Wagner served as the Vice President of Market Development for Interim Services.
From November 1987 until January 1991, Ms. Wagner served as the President and a
director of Interim Systems Corporation, a publicly traded corporation engaged
in the temporary staffing business, which was acquired by H&R Block, Inc. in
1991. Ms. Wagner served as President of NATSS from 1991 to 1992.
Committees, Meetings and Reports
The Board of Directors has standing Audit and Compensation Committees.
The members of the Audit Committee are Stanley R. de Waal (Chairperson), R.
4
<PAGE>
Thayne Robson and JoAnn W. Wagner. The members of the Compensation Committee are
JoAnn W. Wagner (Chairperson), R. Thayne Robson and Randolph K. Rolf.
The Audit Committee met four times during the 1996 fiscal year. The
functions of the Audit Committee are: (i) to review and approve the selection
of, and all services performed by, the Company's independent auditor; (ii) to
review the Company's internal controls; and (iii) to review and report to the
Board of Directors with respect to the scope of audit procedures, accounting
practices and internal accounting and financial controls of the Company.
The Compensation Committee met three times during the 1996 fiscal year.
The Compensation Committee has oversight responsibility for all executive
compensation and benefit programs of the Company. The Compensation Committee
reviews and approves all executive compensation and benefit plans, including the
Company's Incentive Plan.
During the fiscal year ended December 29, 1996, there were five
meetings held by the Board of Directors. No director attended fewer than 75% of
the total number of meetings of the Board of Directors and of the committees on
which he or she served.
Director Compensation
Each non-employee member of the Board of Directors is paid a fee of
$1,000 for each board meeting attended. No separate compensation is paid for
attendance at committee meetings. All directors are also reimbursed for expenses
in connection with attendance at board and committee meetings.
The Company entered into a one-year consulting agreement with JoAnn
Wagner, commencing July 1, 1995. Pursuant to the agreement, Ms. Wagner has
assisted and advised the Company with respect to identifying and evaluating
potential acquisitions for the Company and negotiating the terms of such
acquisitions. Ms. Wagner's compensation under the agreement was $3,500 per
month, which included the $1,000 per board meeting fee otherwise payable to Ms.
Wagner as a director of the Company. At the conclusion of the initial one-year
term of the agreement, the Company and Ms. Wagner agreed to extend the
agreement, on the same terms and conditions, provided that the agreement may be
terminated by either party upon 30 days written notice.
Directors of the Company are also eligible to participate in the
Incentive Plan. Pursuant to the terms of the Incentive Plan, the Company issued
5,000 incentive stock options to each non-employee director on the effective
date of the Company's initial public offering and to JoAnn W. Wagner, who became
a director subsequent to the Company's initial public offering. The options,
which become exercisable in five equal installments beginning on the date of
grant (e.g., 20% became exercisable on the date of grant, an additional 20%
become exercisable on the each of the next four anniversaries of the date of
grant, etc.), are exercisable at a price equal to the fair market value of a
5
<PAGE>
share of Common Stock on the date of grant. Pursuant to the Incentive Plan, on
the date of each annual meeting of the Company's shareholders the Company will
issue to each non-employee director 1,000 incentive stock options. Accordingly,
on May 16, 1996, the date of the Company's 1996 annual meeting of shareholders,
the Company issued to each non-employee director 1,000 incentive stock options
under the Incentive Plan. The options were fully exercisable upon the date of
grant at an exercise price equal to the fair market value of a share of Common
Stock on the Date of Grant. Additionally, each non-employee director was issued
5,000 incentive stock options on September 16, 1996. The options, which become
exercisable in five equal installments beginning on the date of grant, are
exercisable at a price equal to the fair market value of a share of Common Stock
on the date of grant.
EXECUTIVE OFFICERS
In addition to Messrs. Reinhold, Scott and Tripp, certain information
is furnished with respect to the following executive officers of the Company:
Gary B. Crook, 44, joined the Company in May 1995 as Chief Financial
Officer, Vice President and Treasurer. From October 1993 to December 1994, Mr.
Crook served as a consultant to the General Manager and acting Chief Financial
Officer of Al Azizia - Panda United, Inc., a corporation located in Riyadh,
Saudi Arabia, engaged in the business of grocery retail and distribution. From
June 1991 to September 1993, Mr. Crook was the Vice President and Controller for
Food-4-Less Supermarkets, Inc. in La Habra, California. From September 1986 to
June 1991, Mr. Crook served as a Vice President of Administration and Controller
of Alpha Beta Company, a subsidiary of American Stores Company, also in La
Habra, California. Mr. Crook obtained a B.S. degree in Business Economics and an
M.B.A. degree from the University of Utah.
W. B. Collings, 57, currently serves the Company as Controller, a
position he has held since joining the Company in May 1993, and was appointed
Assistant Secretary in April 1995. From March 1991 to May 1993, Mr. Collings was
self-employed as an accountant. From October 1978 until March 1991, Mr. Collings
served as the Chief Financial Officer of Information Now, Inc., a Utah
corporation engaged in developing, installing and supporting computer software.
Mr. Collings obtained a B.S. degree in Business Administration from Brigham
Young University in 1961, and thereafter completed two additional years of
graduate study in accounting.
John K. Morrison, 34, was appointed the Secretary of the Company in
April 1995. He was employed as General Counsel in January 1995. Prior to joining
the Company in January 1995, Mr. Morrison was employed as an attorney for the
Anti-Discrimination Division of the Utah Industrial Commission from July 1993
through December 1994. From October 1991 to July 1993, Mr. Morrison was engaged
in the private practice of law in Salt Lake City, Utah. Mr. Morrison obtained
his Juris Doctorate degree in 1991 from the University of Utah. He obtained a
B.A. in Political Science and a B.S. in Economics from the University of Utah in
1987.
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EXECUTIVE COMPENSATION
The compensation of Richard D. Reinhold, the Company's Chief Executive
Officer, and the other executive officers of the Company whose total cash
compensation for the fiscal year ended December 29, 1996 exceeded $100,000 is
shown on the following pages in three tables and discussed in a report from the
Compensation Committee of the Board of Directors.
<TABLE>
Summary Compensation Table
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
Fiscal Salary(1) Bonus(2) Other Annual Options All Other
Name and Position Year Compensation Compensation(3)
----------------- ---- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard D. Reinhold 1996 $195,000 $45,825 -- -- $49,098
Chairman of the 1995 185,090 -- -- -- 47,556
Board and Chief 1994 195,000 -- $786,840(4) -- 48,396
Executive Officer
Howard W. Scott, Jr. 1996 190,000 44,650 -- 15,000 --
President and Chief 1995 178,350 19,000 -- 25,000 --
Operating Officer 1994 138,462 10,000 -- -- 500
Richard J. Tripp 1996 150,000 17,625 -- 10,000 2,215
Senior Vice 1995 150,000 17,500 -- 20,000 46,576
President of 1994 150,000 20,634 -- -- (5)
Administration 115,401 (5)
Gary B. Crook 1996 100,000 18,500 -- 15,000 --
Chief Financial 1995 46,000 10,000 -- 10,000 --
Officer, Vice 1994 -- -- -- --
President and
Treasurer
</TABLE>
(1) Messrs. Reinhold, Scott and Tripp entered into employment agreements
effective January 1, 1995 with annualized salaries of $195,000, $190,000 and
$150,000 per year respectively.
(2) Includes performance bonuses of $19,000, $7,500, and $10,000 paid in
February 1996 to Howard W. Scott, Jr., Richard J. Tripp, and Gary B. Crook,
respectively, based on the Company's performance during the 1995 fiscal year.
Also includes performance bonuses of $45,825, $44,650, $17,625 and $18,500 paid
in February 1997 to Richard D. Reinhold, Howard W. Scott, Jr., Richard J. Tripp,
and Gary B. Crook, respectively, based on the Company's performance during the
1996 fiscal year.
(3) Represents matching contributions made by the Company pursuant to the
Company's 401(k) plan and premiums paid by the Company pursuant to the Company's
split-dollar life insurance plan, as follows: Richard D. Reinhold, 401(k)
contributions of $840 for the 1994 fiscal year and insurance premiums of
$49,098, $47,556 and $48,396 for the 1996, 1995 and 1994 fiscal years,
respectively; Howard W. Scott, Jr., 401(k) contributions of $500 for the 1994
fiscal year; and Richard J. Tripp, 401(k) contribution of $931 for the 1994
fiscal year and insurance premiums of $2,215 for the 1996 fiscal year and $3,993
for each of the 1995 and 1994 fiscal years.
(4) Represents amounts distributed to Mr. Reinhold pursuant to the Company's
status as a Subchapter S Corporation.
(5) Includes compensation in the amount of $43,583 deferred from earlier years
at Mr. Tripp's request that was paid in the 1995 fiscal year and $110,477
distributed to Mr. Tripp in the 1994 fiscal year in settlement and termination
of a change of control and severance agreement between Mr. Tripp and the
Company.
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Option Grants in Last Fiscal Year
The following table sets forth the grants of options made by the
Company during the fiscal year ended December 29, 1996 to executive officers
named in the Summary Compensation Table. As of December 29, 1996, the Company
had not granted any stock appreciation rights. All options granted are incentive
stock options granted under the Incentive Plan.
<TABLE>
<CAPTION>
Percent of Potential Realizable Value at
Total Options Assumed Annual Rates of Stock
Granted to Exercise Price Appreciation for Option
Options Employees in or Base Expiration Term (in dollars)
Name Granted Fiscal Year Price Date 5% 10%
- - ----------------------- ------- ----------- ----- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Howard W. Scott, Jr. 15,000 11.3% $9.50 07/30/06 $89,617 $227,108
Richard J. Tripp 10,000 7.6% $9.50 07/30/06 $59,745 $151,406
Gary B. Crook 15,000 11.3% $9.50 07/30/06 $89,617 $227,108
</TABLE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth the number of unexercised options to
acquire shares of Common Stock held on December 29, 1996 and the aggregate value
of such options held by the executive officers named in the Summary Compensation
Table. The named individuals did not exercise options to acquire shares of
Common Stock during the fiscal year ended December 29, 1996. As of December 29,
1996, the Company had not granted any options to acquire shares of Common Stock
to Mr. Richard D. Reinhold, the Chief Executive Officer of the Company, nor had
the Company granted any stock appreciation rights to Mr. Reinhold or any of the
executive officers named below.
<TABLE>
<CAPTION>
Number of Value of Unexercised
Unexercised Options In-the Money Options at
at December 31, 1995 at December 27, 1996 (1)
------------------------------------ ----------------------------------
Name Exercisable Unexercisable Excercisable Unexercisable
<S> <C> <C> <C> <C>
Howard W. Scott, Jr. 12,000 28,000 $33,000 $62,000
Richard J. Tripp 9,200 20,800 $26,200 $48,800
Gary B. Crook 6,600 18,400 $14,100 $28,400
</TABLE>
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(1) Reflects the difference between the exercise price of the unexercised
options and the market value of shares of the Common Stock on December 27, 1996
(last day of business in fiscal 1996). The last transaction of the Common Stock
on December 27, 1996, as reported by NASDAQ, was $10.00 per share.
Employment Agreements
The Company has entered into employment agreements with Messrs.
Reinhold, Scott and Tripp, the terms of which commenced on January 1, 1995 and
will expire on the third anniversary thereof. Pursuant to such agreements, the
Company has agreed to employ Messrs. Reinhold, Scott and Tripp for the term of
their respective agreements in their current positions and duties, which may be
modified, however, at the discretion of the Board of Directors. The minimum
annual salaries for Messrs. Reinhold, Scott and Tripp under the agreements are:
$195,000, $190,000 and $150,000, respectively. The agreements terminate upon the
death or disability of the officer or termination of the officer's employment
for cause. The agreements also contain covenants of the officers that, during
the term of their employment and continuing for two years after the termination
of their employment for any reason, with or without cause, they will not compete
with the Company nor disclose or make use of confidential information of the
Company. The officers are also subject to the confidentiality and limited
non-solicitation agreements executed by the Company's regular employees.
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Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that incorporate by reference, in
whole or in part, subsequent filings including, without limitation, this Proxy
Statement, the following Report of the Compensation Committee and the
Performance Graph set forth on page 14 hereof shall not be incorporated by
reference in any such filings.
COMPENSATION COMMITTEE REPORT
General. The Company's executive compensation program is administered
by the Compensation Committee of the Board of Directors of the Company (the
"Committee"), which is responsible for establishing the policies and amounts of
compensation for the Company's executive officers. The Committee, composed of
three independent directors, Randolph K. Rolf, R. Thayne Robson and JoAnn W.
Wagner, has oversight responsibility for executive compensation and executive
benefit programs of the Company, including the Incentive Plan.
The Committee has responsibility for all compensation matters for the
Company's Chief Executive Officer, President, Senior Vice President and Chief
Financial Officer (the "Key Executives"). The amount of cash compensation for
executive officers other than the Key Executives is determined by the Key
Executives subject to the approval of the Committee. The Committee determines
the amount of non-cash compensation under the Incentive Plan, as well as any
cash bonuses paid to the Key Executives.
In determining the amount and composition of executive compensation for
the Key Executives and administering the Incentive Plan, the Committee is guided
by the following fundamental objectives:
i. Attracting and retaining outstanding executive officers;
ii. Facilitating the acquisition by Key Executives of options to acquire
shares of Common Stock and;
iii. Ensuring that a substantial portion of Key Executives' compensation is
variable and is tied to quantifiable short-term and long-term measures
of the Company's performance.
The Committee's application of these principles is discussed in greater
detail below.
Key Executive Compensation. Since the formation of the Committee in
1995, Key Executive compensation has consisted of annual salaries established
pursuant to employment agreements executed by the Company and certain Key
Executives (as described on Page 9, Employment Agreement. CFO's salary has been
set by the Committee, but there is no written agreement.), and additional
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compensation in the form of cash bonuses and stock options as the Committee, in
its discretion, awards to the Key Executives. Pursuant to employment agreements
entered into between the Company and the Key Executives, the annual salaries of
the Key Executives have been fixed contractually at amounts that were deemed
competitive for executives with comparable ability and experience, taking into
account existing salaries and employment agreements with respect to executives
and companies comparable in size and complexity to the Company. Fiscal year-end
cash performance bonuses were awarded to the Key Executives in 1997 for 1996
performance, reflecting the Committee's conclusion that the Key Executives
played an integral role in the Company's achievement of record sales and
earnings in 1996.
CEO Compensation. Richard D. Reinhold is the Chairman of the Board and
Chief Executive Officer of the Company. Mr. Reinhold's compensation is
determined pursuant to the principles described above and by the terms of his
employment agreement. Following its review of the Company's performance during
the 1996 fiscal year, the Committee concluded that Mr. Reinhold's performance in
1996 merited payment of a performance bonus. The Committee believes that Mr.
Reinhold's compensation fairly and accurately compensates Mr. Reinhold for his
vision and leadership in developing and pursuing new markets for Company
services, overseeing the successful acquisition and integration of several
staffing service companies and leading the Company.
Cash Bonus Awards. In February 1996, the Compensation Committee adopted
a Long-Term Bonus Plan for the Key Executives of the Company (the "Bonus Plan").
In addition, W. B. Collings, the Company's Assistant Secretary and Controller,
and John K. Morrison, the Company's Secretary and General Counsel, are eligible
to participate in the Bonus Plan. The Plan is separated into two distinct
bonuses. The short-term portion of the bonus is based on the percentage increase
of earnings per share on an annual basis. Under the 1996 Plan, the Chief
Executive Officer, Chief Operating Officer and Chief Financial Officer are
entitled to a maximum bonus of 20% (10% for the Senior Vice President and other
executive officers) of their salary. The percentage paid is based on a formula
implemented by the Compensation Committee. The Company must achieve an annual
increase of at least 20% in earnings per share before the short-term portion of
the Bonus Plan bonus is paid.
The second portion of the 1996 bonus plan is based on the long-term
performance of the Company. Key Executives are eligible to receive an annual
cash bonus based on a three-year moving average of internal growth. The Chief
Executive Officer, Chief Operating Officer and Chief Financial Officer are
eligible to receive an annual cash bonus of up to 20% (10% for the Senior Vice
Present and other executive officers) of their annual base salaries based upon
the Company's achievement of long-term internal growth objectives established by
the Committee. The minimum annual internal growth rate upon which the long-term
portion of the Bonus Plan will be paid is 15%. No bonus will be paid under the
long-term Bonus Plan until the conclusion of the Company's 1998 fiscal year.
If the Company fails to meet the minimum objectives described above,
the Key Executives and other participants in the Bonus Plan will be ineligible
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to receive bonus payments based upon the portion of the Bonus Plan for which the
minimum objective was not met. The Committee's goal in establishing the Bonus
Plan is to tie Key Executive performance bonuses to the Company's achievement of
its goals of earnings per share and internal growth. The use of a three-year
average to assess the Company's internal growth is designed to create incentive
for Key Executives to stay with the Company on a long-term basis and to make
decisions that benefit the long-term financial condition of the Company.
In November 1996, the Compensation Committee amended the terms of the
Bonus Plan with respect to some of the Key Executives of the Company. The
Amendment to the Bonus Plan will be effective for the 1997 fiscal year. The
Compensation Committee amended the Bonus Plan by increasing the percent of base
salary for the bonus. The maximum amount that the Chief Executive Officer and
Chief Operating Officer are eligible to receive was raised from 20% to 30% of
their annual base salaries, for both the earning per share portion and the
internal growth portion of the Plan. The bonus amount for the Chief Financial
Officer was not changed. The bonus amount for the Senior Vice President and
other executive officers was raised from 10% to 15% of their annual base
salaries for both portions of the Plan.
In February 1997, the Compensation Committee awarded to each of the Key
Executives and other executive officers participating in the Bonus Plan a
discretionary one-time bonus payment in an amount equal to one-half of the
difference between the amount payable to such officers under the Bonus Plan
prior to the November 1996 amendment and the amount payable to such officers
after giving effect to the amendment. The Committee also set criteria to pay the
remainder of the difference between the pre-amendment and post-amendment
calculations based on the Company's performance during the first half of the
1997 fiscal year.
Incentive Plan. The Company believes it is essential for all executive
officers of the Company to receive stock options under the Incentive Plan,
thereby aligning the long-term interests of the Company's executive officers
with those of the Company's shareholders. The Company adopted the Incentive Plan
in 1995, charging the Committee with responsibility for its administration. In
1996, the Committee granted options representing 40,000 shares of Common Stock
to Key Executives. Other executive officers were granted options to acquire
4,500 shares. These options vest over a five-year period and expire ten years
from the grant date. If an executive officer's employment terminates prior to
the applicable vesting date, the officer generally forfeits all options that
have not yet vested. The Committee believes that the grant of these options to
executive officers is highly desirable, because it motivates these officers to
continue their employment with the Company and creates strong incentives to
maximize the growth and profitability of the Company. As of December 29, 1996,
executive officers (including the Key Executives) held options to purchase an
aggregate of 107,000 shares of Common Stock granted pursuant to the Incentive
Plan since its inception in 1995.
Other Compensation Plans. The Company has a number of other broad-based
employee benefit plans in which the executive officers of the Company
participate on the same terms as other Company employees meeting the eligibility
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requirements, subject to any legal limitations on the amounts that may be
contributed to or benefits payable under the plans. These include:
i. The Company's cafeteria plan administered pursuant to Section 125 of
the Internal Revenue Code of 1996, as amended (the "Code");
ii. The Company's 401(k) plan, pursuant to which the Company makes
discretionary matching contributions. The Key Executives and the other
highly compensated executive officers of the Company are not entitled
to matching contributions from the Company.
iii. Effective January 1, 1997, the Company adopted a non-qualified deferred
compensation plan for Key Executives, other executive officers and
other key employees of the Company. Historically, highly compensated
employees have not been able to effectively participate in the
Company's 401(k) plan. The Company adopted the plan to enable its key
employees to have an effective alternative for retirement savings. The
Company may at its discretion make matching contributions to the plan.
Executive Compensation Philosophy. The Committee believes the Company's
executive compensation program has enabled the Company to attract, motivate and
retain senior management by providing competitive total compensation opportunity
based on performance. Competitive base salaries that reflect each individual's
level of responsibility and annual variable performance-based cash incentive
awards are important elements of the Company's cash compensation philosophy. The
Committee also believes the grant of options under the Incentive Plan not only
aligns interests of the executive officers with shareholders but creates a
competitive advantage for the Company as well. The Committee believes the
Company's executive compensation program strikes an appropriate balance between
short- and long-term performance objectives.
Respectfully submitted,
JoAnn W. Wagner, Chairperson
R. Thayne Robson
Randolph K. Rolf
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PERFORMANCE GRAPH
The following graph shows a comparison of cumulative shareholder return
for the Common Stock for the period beginning June 30, 1995 (the date of the
Company's initial public offering) and ending December 31, 1996, as well as the
cumulative total return for the NASDAQ Composite Index and a Peer Group Index
for the same period.
The Peer Group Index is a staffing services composite index comprised
of fourteen publicly traded staffing companies and published by the Staffing
Industry Report, an industry trade publication. In the Company's proxy materials
distributed in connection with the Company's 1996 Annual Meeting, the Company
presented a peer group index reflecting the cumulative shareholder return of
five other publicly traded staffing services companies, namely Career Horizons,
Inc.; Interim Services, Inc.; Norrell, Inc.; Personnel Management, Inc.; and
Labor Ready, Inc. During 1996, Career Horizons, Inc., one of the staffing
services companies whose shareholder return was reflected in the Company's 1995
peer group index, merged with AccuStaff, Inc. As a result of that business
combination, the Company concluded that a peer group index drawn from the four
remaining companies might provide an insufficient basis for comparison of the
Company's performance. Accordingly, the Company has elected to present the peer
group index prepared by the Staffing Industry Report, which the Company believes
will serve as a better basis for comparison in the future.
The performance graph assumes that $100 was invested at the market
close on June 30, 1995 and that dividends, if any, were reinvested for all
companies, including those on the NASDAQ Composite index and the Peer Group
Index.
The stock price performance shown on this graph is not indicative of future
price performance of the Common Stock.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
Total Return Analysis 6/30/95 9/30/95 12/29/95 3/29/96 6/28/96 9/30/96 12/31/96
- - ----------------------------------------------------------------------------------------------------------------
- - --------------------------- ----------- ----------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
SOS Staffing Services $ 100 $ 122.22 $ 138.84 $164.66 $ 177.68 $ 166.58 $ 155.49
- - --------------------------- ----------- ----------- ----------- ----------- ----------- ------------ -----------
- - --------------------------- ----------- ----------- ----------- ----------- ----------- ------------ -----------
Staffing Industry $ 100 $ 114.16 $ 114.67 $ 206.41 $ 237.37 $ 235.31 $ 214.13
- - --------------------------- ----------- ----------- ----------- ----------- ----------- ------------ -----------
- - --------------------------- ----------- ----------- ----------- ----------- ----------- ------------ -----------
Nasdaq Composite (US) $ 100 $ 111.60 $ 112.50 $ 117.78 $ 126.73 $ 131.17 $ 137.99
- - --------------------------- ----------- ----------- ----------- ----------- ----------- ------------ -----------
</TABLE>
14
<PAGE>
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth information as of December 29, 1996 with
respect to the beneficial ownership of shares of the Common Stock by each person
known by the Company to be the beneficial owner of more than 5% of the Common
Stock, by each director, by each executive officer named in the Summary
Compensation Table and by all directors and officers as a group. Unless noted
otherwise, each person named below has sole voting and investment power with
respect to the shares indicated. The percentages set forth below have been
computed without taking into account treasury shares held by the Company and are
based on 8,706,020 shares of Common Stock outstanding as of December 29, 1996:
Beneficial Ownership as of December 29, 1996
Number of Shares Percentage of Class
Richard D. Reinhold 3,835,500 (1) 44.1%
1415 South Main Street
Salt Lake City, UT 84115
Sandra E. Reinhold 3,835,500 (1) 44.1%
1415 South Main Street
Salt Lake City, UT 84115
Richard J. Tripp 13,243.21 (2) *
Howard W. Scott, Jr. 12,600 (2) *
Randolph K. Rolf 9,000 (2)(3) *
Gary B. Crook 8,899.18 (2) *
Stanley R. de Waal 5,000 (2)(4) *
JoAnn W. Wagner 4,500 (2) *
R. Thayne Robson 4,000 (2) *
All officers and
directors as a group (ten persons) 3,896,540 (2) 44.8%
* Less than one percent of outstanding shares
(1) Of the shares reflected as beneficially owned by Richard D. Reinhold and
Sandra E. Reinhold, 1,875,250 shares are held of record by Richard D. Reinhold,
1,880,250 shares are held of record by Sandra E. Reinhold and 80,000 shares are
held of record by Reinhold Limited, a family limited partnership of which
Richard D. Reinhold and Sandra E. Reinhold are general partners.
(2) The amounts indicated include shares subject to options currently
exercisable held by the following persons in the following amounts, Richard J.
Tripp, 9,200 shares; Howard W. Scott, Jr., 12,000 shares; Randolph K. Rolf,
4,000 shares; Gary B. Crook, 6,600 shares; Stanley R. de Waal, 4,000 shares;
15
<PAGE>
JoAnn W. Wagner, 4,000 shares; R. Thayne Robson, 3,000 shares; and all officers
and directors as a group, 46,400 shares. The amounts also include shares of
Company stock held in the Company's 401(k) plan by the following persons in the
following amounts: Richard J. Tripp, 43.21 shares and Gary B. Crook, 2,299.18
shares. The shares are fractional amounts held based on the market price of the
Company's stock on December 31, 1996.
(3) The share amounts indicated for Randolph K. Rolf include 5,000 shares owned
of record by the Randolph K. Rolf Trust.
(4) The share amounts indicated for Stanley R. de Waal include 1,000 shares
owned of record by Mr. de Waal's wife.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company currently leases its corporate office building from Reed F.
Reinhold, Rand F. Reinhold, Rena R. Qualls and Robb F. Reinhold, the adult
children of Richard D. and Sandra E. Reinhold, pursuant to a lease agreement
which expires in March 2005 with a ten year renewal option in favor of the
Company. The lease, which was amended as of January 1995 to include additional
space, provides for future minimum annual lease payments amounting to
approximately $77,000. The Company paid approximately $76,800 to Reed F.
Reinhold, Rand F. Reinhold, Rena R. Qualls and Robb F. Reinhold in rental
payments under the lease during the fiscal year ended December 29, 1996. The
Company believes that the terms of the lease are at least as favorable as the
terms that could have been obtained from an unaffiliated third party in a
similar transaction.
The Company has entered into a franchise agreement effective as of
January 1995 with TSI of Utah, Inc. ("TSI"), a company owned by Reed F.
Reinhold, a son of Richard D. and Sandra E. Reinhold, which provides industrial
temporary staffing services. Pursuant to the agreement, TSI has acquired the
right to operate a temporary service business in a designated market area under
the name "TSI Temporary Services" and to utilize the Company's methods,
procedures, standards and specifications in operation of such business. In
consideration of such rights, TSI pays to the Company a portion of the gross
margin derived from the operation of such business. Under the agreement, the
Company funds a payroll bank account from which TSI pays the wages of temporary
employees. TSI invoices its clients directly for all services performed, and the
clients are instructed to remit payment therefor directly to the Company. As of
December 29, 1996, the Company had receivables due from TSI of approximately
$462,370, which were secured by outstanding receivables of TSI of approximately
$472,000. During fiscal year 1996, the Company recorded service fee revenues of
approximately $126,000 relating to the agreement. The Company has a right of
first refusal with respect to any transfer by TSI of an ownership interest in
TSI and an option to purchase TSI's assets upon termination or expiration of the
franchise agreement for any reason. The Company believes that the terms of the
franchise agreement are at least as favorable as the terms that could have been
obtained from an unaffiliated third party in a similar transaction.
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<PAGE>
Effective January 1, 1996, the Company entered into a contract with the
Rand Group, Inc. ("Rand Group"), a company incorporated and owned by Rand F.
Reinhold, a son of Richard D. and Sandra E. Reinhold, to sell the Travel Plus
division of the Company to the Rand Group. The Travel Plus division of the
Company had been operating at a loss. The assets sold consisted primarily of
sales material, customer information and existing goodwill. The purchase price
of the sale was $20,000 in incentive travel to be used by the Company in its
1996 sales contest. The Company will also receive travel discounts of five
percent on future travel in connection with its travel program for staff and
temporary employees. The agreement also included a sublease of a certain portion
of the premises on a month to month basis with rent of $500 per month, which was
terminated in 1996. The Company believes that the terms of this transaction were
at least as favorable as the terms that could have been obtained from an
unaffiliated third party in a similar transaction.
On or about January 1, 1989, the Company entered into a change of
control and severance agreement (the "Tripp Agreement") with Richard J. Tripp.
In March 1995, the Company and Mr. Tripp amended the Tripp Agreement which
settled all claims of Mr. Tripp and the Company with respect to the Tripp
Agreement, subject to the Company's payment of the following amounts. In March
1995, Mr. Tripp was paid the sum of $110,477 as a distribution of the vested
portion of the Tripp Agreement. A remaining balance of $63,735 will continue to
vest at a rate of ten percent per year for ten years. Unpaid amounts payable
pursuant to the termination of the Tripp Agreement will, upon vesting, be
payable upon the earlier of Mr. Tripp's termination of employment, achieving age
59 or retirement.
RATIFICATION OF AMENDMENT TO
THE INCENTIVE PLAN
The Board of Directors has recommended that the shareholders of the
Company approve an Amendment to the Incentive Plan to increase the maximum
number of shares available for issuance under the Incentive Plan from the
existing level of 400,000 shares to 800,00 shares.
The following description of the Incentive Plan does not purport to be
complete and is qualified in its entirety by reference to the full text of the
Incentive Plan.
Since the inception of the Incentive Plan the Company has granted
options to purchase 305,200 shares of Common Stock. Of these grants, 7,040
options have been forfeited, leaving options to purchase 298,160 shares
currently outstanding. The total number of shares of Common Stock currently
available for issuance upon the exercise of options granted under the Incentive
Plan is 101,840 shares. Of the options granted, options for 107,000 shares of
Common Stock have been granted to executive officers of the Company. Options to
purchase 44,000 shares have been granted to outside directors of the Company.
Options for an additional 67,000 shares of Common Stock, or 22% of the shares
subject to options granted, have been used to retain key management and key
employees of certain acquisitions of the Company. The remainder of the options
granted have been to key employees of the Company.
17
<PAGE>
The Company believes that the ability to grant options to purchase
shares of the Common Stock is desirable to retain key executive officers, key
employees, and is a very effective tool in negotiating the retention of key
management and employees in certain acquisitions. Though the Company has no
specific intent to grant any specific number of options at this time, the total
number of shares of Common Stock subject to options available for grant is
101,840 shares. Based on the Company's historical use of options under the
Incentive Plan, the Board of Directors feels it is desirable at this time to
authorize additional shares to be available for option grants.
The Board of Directors recommends that the shareholders of the Company vote FOR
the proposal to approve the Amendment to the Incentive Plan.
Description of the Incentive Plan
Purpose. The purpose of the Incentive Plan is to promote the long-term
success of the Company and the creation of incremental shareholder value by (a)
encouraging directors and key employees of the Company and its subsidiaries to
focus on critical long-range objectives, (b) encouraging the attraction and
retention of key employees and directors with exceptional qualifications, and
(c) linking the interests of key employees and directors of the Company directly
to shareholder interests through increased stock ownership.
Administration. The Incentive Plan is administered by the Compensation
Committee of the Board of Directors (the "Committee"). Except as contemplated
under the Formula Plan described below, the Committee will select the directors
and key employees who are to receive awards under the Incentive Plan, determine
the amount, vesting requirements and other conditions of such awards, interpret
the Incentive Plan, execute agreements setting forth the terms of such awards
(each, a "Stock Award Agreement") and make all other decisions relating to the
operation of the Incentive Plan.
Duration of the Incentive Plan. The Incentive Plan became effective on
May 4, 1995 and will remain in effect until terminated by the Board of
Directors, except that no Incentive Option (as defined below) may be granted
under the Incentive Plan after May 3, 2005. Notwithstanding the termination of
the Incentive Plan, the Incentive Plan will continue in effect after such
termination for purposes of the administration of any award granted at the
effective date of the termination of the Incentive Plan.
Shares Subject to the Incentive Plan. The Incentive Plan provides for
the issuance of Incentive Stock Options (the "Incentive Options"), as that term
is defined in Section 422 of the Code, non-qualified stock options which are not
governed by the provisions of Section 422 of the Code ("Non-qualified Options")
for shares of Common Stock (the Incentive Options and the Non-qualified Options
may be referred to collectively as the "Options"), certain corresponding stock
appreciation rights ("SARs"), restricted shares of Common Stock ("Restricted
Shares") and Stock Units (as defined below) or any combination thereof (the
18
<PAGE>
various awards are referred to collectively as the "Awards"). The aggregate
number of Options, Restricted Shares and Stock Units that may be awarded under
the Incentive Plan is currently 400,000, and the maximum number of Options,
Restricted Shares and Stock Units that may be awarded to a single participant in
any calendar year is 50,000. If any Options, Restricted Shares or Stock Units
are forfeited or if any Option terminates for any reason before being exercised,
such Options, Restricted Shares or Stock Units will again become available for
Awards under the Plan. However, if any Options are surrendered because
corresponding SARs are exercised, such Options will not become available again
for Awards under the Incentive Plan. Any shares of Common Stock issued pursuant
to the Incentive Plan may be authorized but unissued shares or treasury shares.
Shares of Common Stock to be issued upon the exercise of Awards granted pursuant
to the Incentive Plan have been registered with the Securities and Exchange
Commission (the "Commission") under a Registration Statement on Form S-8, on
file with the Commission. On March 3, 1997, the closing price of the Common
Stock, as reported on the Nasdaq National Market, was 12.125.
In the event of a subdivision of the outstanding shares of Common
Stock, a declaration of a dividend payable in shares of Common Stock, a
declaration of a dividend payable in a form other than shares of Common Stock in
an amount that has a material effect on the price of the shares of Common Stock,
a combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise) into a lesser number of shares of Common Stock, a
recapitalization or similar occurrence (the occurrence of each of which may be
referred to as a "Capital Change"), the Committee will make appropriate
adjustments in the number of Options, Restricted Shares and Stock Units
available for future Awards under the Incentive Plan.
Eligibility. Awards may be granted only to directors of the Company and
employees of the Company and its subsidiaries that the Committee, in its
discretion, determines to be key employees (the "Key Employees"). Directors who
are not employees of the Company, including members of the Committee, are
eligible to participate in the Incentive Plan through the Formula Plan described
below.
Options. The Committee, in its discretion, may grant both Incentive
Options and Non-qualified Options from time to time. The Committee has complete
authority, subject to the terms of the Incentive Plan, to determine the persons
to whom and the time or times at which grants of Options will be made. The
Incentive Plan provides that the exercise price of Options, restrictions upon
the exercise of Options and restrictions on the transferability of shares issued
upon the exercise of Options, will be determined by the Committee in its sole
discretion, except that (i) the exercise price of any Incentive Option will not
be less than the fair market value of a share of Common Stock as of the date of
the grant, and (ii) in the case of an Incentive Option granted to any individual
who, at the time that the Incentive Option is granted, owns more than ten
percent of the total combined voting power of all classes of stock of the
Company or any of its subsidiaries (a "Restricted Shareholder"), the exercise
price of such Incentive Option will not be less than 110% of the fair market
value, determined pursuant to the Incentive Plan, of a share of Common Stock as
of the date on which the Option is granted. The Committee, in its sole
discretion, will determine the time or times when each Option vests and becomes
exercisable. The term of an Incentive Option, however, may not be more than ten
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<PAGE>
years from the date of grant and the term of any Incentive Option granted to a
Restricted Shareholder may not be more than five years from the date of grant.
During the lifetime of the employee receiving the Option (the "Optionee"), the
Option will be exercisable only by the Optionee and will not be assignable or
transferable. Each Option will become exercisable in such installments, at such
time or times, and is subject to such conditions, as the Committee, in its
discretion, may determine at or before the time the Option is granted. The
Committee may provide for the accelerated exercisability of an Option in the
event of the death, disability or retirement of the Optionee. Unless otherwise
provided by the Committee, all Options will terminate one year after the
termination of the employment (in the case of a Key Employee) or service (in the
case of a director) of an Optionee, unless the Optionee's employment or service
was terminated for cause, as defined in the Incentive Plan, in which event the
Options will immediately terminate upon the termination of such Optionee's
employment.
Payment. The exercise price of Options granted under the Incentive Plan
will be payable at the time of exercise in cash or, in the discretion of the
Committee, in shares of Common Stock or other forms approved by the Committee.
In the case of an Incentive Option, payment will be made only pursuant to the
express provisions with regard to exercise that the Committee determines to
include in the applicable Stock Award Agreement. Any payment method approved by
the Committee must be consistent with applicable law, regulations and rules as
well as the terms and conditions of the Incentive Plan.
Stock Appreciation Rights. In connection with the grant of any Option,
the Committee, in its discretion, may also grant an SAR, which will relate to a
specific Option granted to the Optionee. Such SAR will entitle the Optionee to
surrender to the Company, unexercised, all or any part of that portion of the
Option which then is exercisable and to receive from the Company an amount equal
to the difference between the aggregate exercise price of the shares of Common
Stock subject to the Option and the fair market value, as determined under the
Incentive Plan, of such shares on the date of such exercise. Payment by the
Company of any amount owing pursuant to the exercise of an SAR may be made in
shares of Common Stock, cash, or any combination of cash and shares, as
determined in the discretion of the Committee. The determination of the
Committee to include an SAR in an Incentive Option may be made only at the time
of the grant of the Incentive Option. The Committee may include an SAR in a
Non-qualified Option at the time of the grant, and any time thereafter until six
months before the expiration of the Non-qualified Option.
An SAR may be exercised only to the extent the Option to which it is
applicable is exercisable and may not be exercised unless both the SAR and the
related Option have been outstanding for more than six months. If, on the date
an Option expires, the exercise price of the Option is less than the fair market
value of the shares of Common Stock on such date, then any SARs included in such
Option will automatically be deemed to be exercised as of such date with respect
to any portion of such Option that has not been exercised or surrendered.
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Restricted Shares. The Committee may grant shares of Common Stock,
which are subject to vesting conditions as an Award under the Incentive Plan
(the "Restricted Shares"). The award of Restricted Shares may be made at any
time and for any year of the Incentive Plan. The Restricted Shares will become
vested, in full or in installments, upon satisfaction of the conditions
specified in the Stock Award Agreement. The Committee will select the vesting
conditions, which may be based upon the recipient's service and/or performance,
the Company's performance, or such other criteria as the Committee may adopt.
The Stock Award Agreement may also provide for accelerated vesting in the event
of the recipient's death, disability or retirement. A recipient of Restricted
Shares, as a condition to the grant of such Restricted Shares, may be required
to pay the Company, in cash, an amount equal to the par value of the Restricted
Shares. The holders of Restricted Shares will have the same voting, dividend and
other rights as the Company's other shareholders.
Stock Units. A Stock Unit is an unfunded and unsecured bookkeeping
entry representing the equivalent of one share of Common Stock which is subject
to certain vesting conditions (a "Stock Unit"). Holders of Stock Units have no
voting rights or other rights of a shareholder, but are entitled to receive
"Dividend Equivalents" in an amount equal to the amount of cash dividends paid
on the number of shares of Common Stock represented by the Stock Units while the
Stock Units are outstanding. Stock Units and corresponding Dividend Equivalents
will be settled at a time determined by the Committee and may be paid, in the
discretion of the Committee, in the form of cash, shares of Common Stock or a
combination thereof.
Stock Units may be awarded in combination with Restricted Shares or
Non-qualified Options, and the Committee may provide that the Stock Units will
be forfeited in the event that the related Non-qualified Options are exercised.
No cash consideration will be required for an award of a Stock Unit. The
Committee may grant Stock Units at anytime during the term of the Incentive
Plan. The Committee will, in its sole discretion, select the vesting conditions
for each award of a Stock Unit. The vesting conditions may be based upon the
recipient's service or performance, the Company's performance, or such other
criteria that the Committee may adopt.
Formula Awards. Directors of the Company who are not employees of the
Company ("Non-Employee Directors") are eligible to participate in the Incentive
Plan based upon a formula that determines the amount, terms and timing of Awards
using objective criteria (the "Formula Plan"). The Formula Plan provides for the
grant of 5,000 Non-qualified Options to each Non-Employee Director serving on
the effective date of the Company's initial public offering and to each
Non-Employee Director becoming a director thereafter (each such grant, an
"Initial Grant"). In addition, 1,000 Non-qualified Options will be granted
automatically each year on the date of the Company's annual meeting of
shareholders (each, an "Annual Grant") to each individual who is elected to
serve or continues to serve as a Non-Employee Director following such Annual
Meeting (except any Non-Employee Director receiving an Initial Grant in
connection with such Annual Meeting).
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Non-qualified Options which are part of an Initial Grant vest and
become exercisable in five equal installments beginning on the date of grant
(e.g., 20% become exercisable on the date of grant, an additional 20% become
exercisable on the first anniversary of the date of grant, etc.). Non-qualified
Options which are part of an Annual Grant will be fully vested and exercisable
on the date of grant and will not be subject to the vesting schedule described
above. The exercise price of shares of Common Stock subject to Formula Awards
will be equal to the fair market value of such shares on the date the Formula
Award is granted.
Formula Awards expire five years from the date of grant and may be
terminated earlier as follows: (i) if a Non-Employee Director's service
terminates for any reason other than Cause, the Non-Employee Director may for a
period of one year after such termination exercise his or her Formula Awards to
the extent that such Formula Awards or portion thereof were vested and
exercisable as of the date the Non-Employee Director's service terminated, after
which the unexercised portion of any Formula Award will automatically terminate
in full, and (ii) if a Non-Employee Director's service terminates for Cause, the
unexercised portion of any Formula Awards granted to the Non-Employee Director
shall immediately terminate in full and no rights or Option thereunder may be
exercised. Neither the Formula Plan, nor the granting of a Formula Award, nor
any other action taken pursuant to the Formula Plan will constitute or be
evidence of any agreement or understanding that a Non-Employee Director has a
right to continue as a director for any period of time or at any particular rate
of compensation.
Amendments to Incentive Plan. The Board of Directors may, at any time
and for any reason, amend or terminate the Incentive Plan. Any amendment to the
Incentive Plan, however, will be subject to the approval of the Company's
shareholders to the extent required by applicable laws, regulations or rules. No
amendment, suspension or termination of the Incentive Plan will affect an Award
granted on or at the effective date of such amendment.
General Provisions. Neither the Incentive Plan nor the grant of any
Award thereunder will be deemed to give any individual the right to remain
employed by the Company. The Incentive Plan will not inhibit the Company's
ability to terminate or modify the terms of the employment of any employee at
anytime, with or without cause. Participants in the Incentive Plan will have no
rights with respect to dividends, voting or any other privileges accorded to the
Company's shareholders at the issuance of stock certificates for shares of
Common Stock. Recipients of Options under the Incentive Plan will have no
obligation to exercise such Options. Participants in the Incentive Plan will not
have any right or interest under the Plan in any Option or shares of Common
Stock prior to the grant of an Option, Restricted Share or Stock Unit to such
participant.
Federal Income Tax Consequences
The following tax discussion is a brief summary of federal income tax
law applicable to the Incentive Plan. The discussion is intended solely for
general information and omits certain information which does not apply generally
to all participants in the Incentive Plan.
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Initial Grant of Options and Stock Appreciation Rights. A recipient of
Options, whether Non-qualified Options or Incentive Options, or SARs incurs no
income tax liability, and the Company obtains no deduction, from the grant of
Options or SARs.
Incentive Options. The holder of an Incentive Option will not be
subject to federal income tax upon the exercise of the Incentive Option, and the
Company will not be entitled to a tax deduction by reason of such exercise,
provided that the holder is still employed by the Company (or terminated
employment no longer than three months before the exercise date). Additional
exceptions to this exercise timing requirement apply upon the death or
disability of the Optionee. A sale of the shares of Common Stock received upon
the exercise of an Incentive Option which occurs both more than one year after
the exercise of the Incentive Option and more than two years after the grant of
the Incentive Option will result in the realization of long-term capital gain or
loss to the Optionee in the amount of the difference between the amount realized
on the sale and the exercise price for such shares. Generally, upon a sale or
disposition of the shares prior to the foregoing holding requirements (referred
to as a "disqualifying disposition"), the Optionee will recognize ordinary
compensation income, and the Company will receive a corresponding deduction,
equal to the lesser of (i) the excess of the fair market value of the shares on
the date of transfer to the Optionee over the exercise price, or (ii) the excess
of the amount realized on the disposition over the exercise price.
Proposed Amendment
Currently, the Incentive Plan provides that the aggregate number of
Options, Restrictive Shares, Stock Units and SARs that may be awarded under the
Incentive Plan shall not exceed 400,000. As of March 1, 1997, the committee had
granted Options relating to an aggregate of 305,200 shares of Common Stock, but
had not granted any Restricted Shares, Stock Units or SARs. Of the Options
granted, Options to purchase 7,040 shares of Common Stock had been forfeited,
leaving 101,840 Options, Restricted Shares, Stock Units and SARs available to be
awarded under the Incentive Plan. Following a review of the Awards made under
the Incentive Plan to date and the Awards which the Board of Directors believes
should be granted in order to achieve the Incentive Plan's stated purposes, the
Board of Directors has determined that the number of Options, Restricted Shares,
Stock Units and SARs currently permitted under the Incentive Plan is
insufficient to achieve the purposes of the Incentive Plan. Based upon that
determination, the Board of Directors has adopted, and is submitting to the
shareholders of the Company for their approval at the Annual Meeting, the
amendment described below, which provides for an increase in the aggregate
number of Options, Restricted Shares, Stock Units and SARs that may be granted
under the Plan from 400,000 to 800,000 Options, Restricted Shares, Stock Units
and SARs. The Board of Directors believes that the best interest of the Company
will be served by increasing the number of Awards available to be granted under
the Plan.
Approval of the purposed amendment to increase the number of shares of
Common Stock available for issuance under the Incentive Plan (the "Amendment")
requires that the number of votes cast in favor of the Amendment of the Annual
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Meeting exceed the number of votes cast in opposition to the Amendment. Approval
of the Amendment will not result directly in the grant of any Awards to the
executive officers, directors or employees of the Company. Approval will,
however, increase the number of Options, Restricted Shares, Stock Units and SARs
that may be granted to the directors of the Company and the Key Employees. If
the Amendment is not approved by the shareholders of the Company, the Incentive
Plan will continue in effect as amended on September 16, 1996.
Certain Interests of Directors
In considering the recommendation of the Board of Directors with
respect to the Amendment, shareholders should be aware that the members of the
Board of Directors may have conflicts of interest in connection with such
proposal. As discussed above, all current directors of the Company are eligible
to participate in the Incentive Plan.
The Board of Directors recognizes that adoption of the proposed
amendment to the Incentive Plan may benefit individual directors of the Company
and their successors, but it believes that approval of the Amendment will
strengthen the Company's ability to continue to attract, motivate and retain
qualified employees, officers and directors. Furthermore, the Board of Directors
believes that approval of the Amendment will advance the interests of the
Company and its shareholders by encouraging the Company's directors and the Key
Employees to make significant contributions to the long-term success of the
Company. The Board of Directors believes that the amendment is in the best
interest of the Company and its shareholders, and therefore, unanimously
recommends a vote FOR the proposal to approve the Amendment. In considering the
foregoing recommendation of the Board of Directors, shareholders of the Company
should be aware that the current members of the Board of Directors owned, in the
aggregate, approximately 44.6% of the shares of the Common Stock outstanding as
of December 29, 1996. See "Principal Holders of Voting Securities."
RATIFICATION OF SELECTION OF AUDITOR
The Audit Committee of the Board of Directors has recommended, and the
Board of Directors has selected, the firm of Arthur Andersen, LLP, independent
certified public accountants, to audit the financial statements of the Company
for the fiscal year ending December 28, 1997, subject to ratification by the
shareholders of the Company. Arthur Andersen, LLP has acted as independent
auditor for the Company since 1995. The Board of Directors anticipates that one
or more representatives of Arthur Andersen, LLP will be present at the Annual
Meeting and will have an opportunity to make a statement if they so desire and
will be available to respond to appropriate questions.
The Board of Directors recommends that shareholders vote FOR
ratification of the appointment of Arthur Andersen, LLP as the Company's
independent auditor.
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OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of
no other matters to be presented for action at the Annual Meeting. If, however,
any further business should properly come before the Annual Meeting, the persons
named as proxies in the accompanying form will vote on such business in
accordance with their best judgment.
PROPOSALS OF SHAREHOLDERS
Proposals which shareholders intend to present at the Annual Meeting of
Shareholders of the Company to be held in the 1998 calendar year must be
received by John K. Morrison, Secretary and General Counsel of the Company, at
the Company's executive offices (1415 South Main Street, Salt Lake City, Utah,
84115) no later than December 5, 1997.
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ADDITIONAL INFORMATION
The Company will provide, without charge to any person from whom a
proxy is solicited by the Board of Directors, upon written request of such
person, a copy of the Company's 1996 Annual Report on Form 10-K, including the
financial statements and schedules thereto (as well as exhibits thereto, if
specifically requested), required to be filed with the Securities and Exchange
Commission. Written requests for such information should be directed to:
SOS Staffing Services, Inc.
Investor Relations Department
1415 South Main Street
Salt Lake City, UT 84115
