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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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, for use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to 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)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 13, 1998
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 DoubleTree Hotel, 255 South West Temple,
Salt Lake City, UT 84101 on Wednesday, May 13, 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 more fully described in the
accompanying Proxy Statement:
(i) To elect three directors of the Company, each to serve until
the 2001 annual meeting of shareholders and until their
respective successors have been duly elected and qualified;
(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
1,800,000 shares; and
(iii) To ratify the appointment of Arthur Andersen LLP as
independent auditors of the Company for the fiscal year ending
January 3, 1999;
(iv) To transact such other business that may properly come before
the Annual Meeting or at any adjournment or postponement
thereof.
The Board of Directors has fixed the close of business on March 23,
1998 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
March 30, 1998
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>
SOS Staffing Services, Inc.
1415 South Main Street
Salt Lake City, UT 84115
------------------------
PROXY STATEMENT
------------------------
Annual Meeting of Shareholders
May 13, 1998
--------------------------------
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 13, 1998, 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 March 30, 1998.
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 mails, 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
23, 1998 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 12,665,462 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 1,800,000 shares; FOR the ratification of the appointment of Arthur
Andersen LLP to serve as the Company's independent auditors for the fiscal year
ending January 3, 1999; 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, 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 1998 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 2001 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.
2
<PAGE>
On October 30, 1997, the Board of Directors voted to increase the
number of directors from seven to nine. In order to fill the vacancies created
by the increase in the number of directors, the Board of Directors appointed
Samuel C. Freitag and Annette Strauss to serve as directors of the Company until
the annual meeting of shareholders of the Company in 1998 and 1999,
respectively. On February 27, 1998, Richard D. Reinhold, the Company's founder,
resigned from his capacities as Chairman of the Board and as a director of the
Company. Upon Mr. Reinhold's resignation the Board of Directors voted to
designate Mr. Reinhold as Chairman Emeritus of the Company, an honorary title.
Also on February 27, 1998, the Board of Directors voted to appoint JoAnn W.
Wagner to serve as Chairman of the Board and to appoint Peter Sollenne,
President and Chief Operating Officer of the Company, as a director to fill the
vacancy created by Mr. Reinhold's resignation.
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. Randolph K. Rolf, Stanley R. deWaal and Annette Strauss are currently
serving terms which expire at the annual meeting of the Company's shareholders
to be held in 1999. R. Thayne Robson, Howard W. Scott, Jr. and Richard J. Tripp
are currently serving terms which expire at the annual meeting of the Company's
shareholders to be held in 2000. 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.
JoAnn W. Wagner, 58, has been Chairman of the Board of Directors of the
Company since February 27, 1998, and has served as Executive Vice President of
Corporate Development since September 1997. From August 1997 until her
appointment as Chairman, Ms. Wagner served as Vice-Chairman of the Board. Ms.
Wagner has been a director of the Company since July 1995. From July 1995
through August 1997, Ms. Wagner was an independent consultant to the temporary
staffing industry, including the Company. From January 1994 through July 1995,
Ms. Wagner was engaged as an independent consultant to 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 the National Association of Temporary and Staffing
Services ("NATSS") from 1991 to 1992.
Peter R. Sollenne, 49, has been a director of the Company since
February 27, 1998, when he was appointed by the Board of Directors to fill the
vacancy created by Richard D. Reinhold's resignation as a director. Mr. Sollenne
joined the Company on August 4, 1997 as President and Chief Operating Officer.
3
<PAGE>
Prior to joining the Company, Mr. Sollenne was employed from July 1995 until
August 1997 by Personnel Group of America, Inc., initially as President of ABAR
Staffing Services and then as President of the Commercial Staffing Division.
From January 1995 until June 1995, Mr. Sollenne was self employed as a
management and business consultant. From April 1989 to December 1994, he was
employed by USL Capital, a division of Ford Financial Services, as Senior Vice
President of Sales, Marketing and Customer Service. Mr. Sollenne obtained a B.S.
degree in Accounting/Business Administration from Boston College.
Samuel C. Freitag, 40, has been a director of the Company since October
30, 1997, when the Board of Directors was expanded from seven to nine directors.
Mr. Freitag is currently the Senior Managing Director of George K. Baum Merchant
Banc, L.L.C. , a position he has held since early 1997. From 1993 until early
1997, Mr. Freitag was Vice Chairman, Director of Investment Banking, and a
member of the Management Committee of George K. Baum & Company. From 1986 until
1993, Mr. Freitag was employed by George K. Baum & Company as a Vice President
in the Corporate Finance Department. From 1979 to 1986, Mr. Freitag was employed
by Continental Illinois Corporation. Mr. Freitag has extensive experience in
public offerings of equity; mergers, acquisitions and divestures; private
placements of debt and equity; leveraged buyouts; and providing strategic
advisory services. Mr. Freitag received a B.A. degree with majors in Economics
and Business Administration from Coe College where he was named a George Baker
Scholar. Mr. Freitag also has an M.B.A. from the University of Iowa.
Directors Whose Terms of Office Continue
Certain information with respect to continuing directors is set forth
below.
Stanley R. deWaal, 63, was elected a director of the Company in May
1995. Mr. deWaal is currently President and a director of DeWaal, Keeler & Co.,
a Utah professional corporation of certified public accountants, of which Mr.
deWaal was a founder in 1975. Mr. deWaal has been a licensed certified public
accountant since 1967. Mr. deWaal also currently serves as a member of the Board
of Directors of the Hansen Planetarium, a non-profit organization.
R. Thayne Robson, 68, 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 a director of ARUP Alliance, Inc., medical test laboratory
based in Salt Lake City, Utah, a director of Western Mortgage, a Utah
corporation engaged in mortgage banking and correspondence, and as, a trustee of
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
4
<PAGE>
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.
Randolph K. Rolf, 56, 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.
Howard W. Scott, Jr., 63, joined the Company in February 1994 as Vice
President and was appointed as President and Chief Operating Officer in April
1995, a position, he held until August 1997. In August 1997, Mr. Scott was
appointed as Chief Executive Officer of the Company. Mr. Scott has been a
director of the Company since June 1995. Mr. Scott has more than 35 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 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.
Annette Strauss, 74, has been a director of the Company since October
30, 1997, when the Board of Directors was expanded from seven to nine directors.
Mrs. Strauss was the Mayor of Dallas, Texas from 1987 through 1991. She was an
elected member of the Dallas City Counsel from 1983 until her election as Mayor.
While on the City Counsel, Mrs. Strauss also served as Deputy Mayor Pro Tem and
Mayor Pro Tem. Since her service as Mayor, Mrs. Strauss has been extensively
involved in community, charitable, civic and philanthropic activities as a
director, officer or trustee of numerous boards and committees. Mrs. Strauss
holds a B.A. in Sociology from the University of Texas at Austin. Mrs. Strauss
also obtained a M.A. degree in Sociology and Psychology from Columbia University
Richard J. Tripp, 49, has served as Senior Vice President of the
Company's Pacific Division since December 1997 and as a director of the Company
since 1991. From April 1995 to December 1997 Mr. Tripp served as Senior Vice
President of Administration of the Company. 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 University in 1973. Mr. TrippI also served two terms as
President of the Utah Association of Temporary Services from 1987 to 1989.
5
<PAGE>
Committees, Meetings and Reports
The Board of Directors has standing Audit and Compensation Committees.
The members of the Audit Committee are Stanley R. deWaal (Chairperson), R.
Thayne Robson and Samuel C. Freitag. The members of the Compensation Committee
are Randolph K. Rolf (Chairperson), R. Thayne Robson and Annette Strauss. JoAnn
W. Wagner served on both committees until August 4, 1997, when she became an
employee of the company.
The Audit Committee met three times during the 1997 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 1997 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
Incentive Plan.
During the fiscal year ended December 28, 1997, 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 W.
Wagner, commencing July 1, 1995. Pursuant to the agreement, Ms. Wagner 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. The consulting agreement with Ms. Wagner was cancelled
effective August 4, 1997 by mutual consent when Ms. Wagner became an employee of
the Company.
Directors of the Company are also eligible to participate in the
Incentive Plan. Pursuant to the terms of the Incentive Plan, the Company issued
6
<PAGE>
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. Samuel C.
Freitag and Annette Strauss were also issued 5,000 incentive stock option on the
date they were elected as directors. 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 and 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 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 15, 1997, the date of the
Company's 1997 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.
EXECUTIVE OFFICERS
In addition to Ms. Wagner and Messrs. Scott, Sollenne and Tripp,
certain information is furnished with respect to the following executive
officers of the Company:
Gary B. Crook, 45, joined the Company in May 1995 as Chief Financial
Officer, Vice President and Treasurer. On February 27, 1998, he was appointed
Executive Vice President. 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, 58, currently serves the Company as Vice President,
Controller and Assistant Secretary. He was appointed as Vice President on
February 27, 1998. He joined the Company as the Controller 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, 35, 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
7
<PAGE>
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.
KEY EMPLOYEES
Certain information relating to certain non-executive officers and key
employees of the Company is as follows:
Mary Bailey, 40, joined the Company in March 1995, serving most
recently as Vice President of Operations since November 1997. From March 1995 to
January 1996, Ms. Bailey served as Branch Manager and from January 1996 to
December 1996 was the District Manger for Central Utah. From December 1996 to
November 1997, Ms. Bailey was the Southern Utah Area Manager. Prior to working
at the Company, Ms. Bailey was the Personnel Manager and Director for Nature's
Herbs, Inc., an herbal manufacturing company, for seven years. Ms. Bailey served
two consecutive terms from 1996 to 1997 on the Board of Directors for the Human
Resource Association. She has also been a member of the National Organization
for Human Resource Society from 1991 to present.
Michael A. Jones, 50, was appointed Vice President of the Company's
Plains States Division in December 1997. Mr. Jones joined the Company as a
result of the acquisition of Century Personnel, Inc. ("Century") and M. A. Jones
Enterprises, Inc. ("MAJE") in October 1997. Mr. Jones founded Century, a
commercial staffing company, and MAJE, an executive search and placement firm,
in August 1991 and owned and managed both companies until their acquisition by
the Company. From April 1986 until September 1991, Mr. Jones was Sr. Vice
President of Human Resources and New Concepts for Rent-A-Center, a retail
company providing household durable goods rental services. From August 1981
until March 1986, Mr. Jones served as Sr. Vice President of Human Resources for
Howard Johnston Company, a foodservice and restaurant provider. Mr. Jones
obtained a Bachelor of Science degree from the University of Illinois and an
M.B.A. from John F. Kennedy University.
Richard Liner, 43, Vice President, Information Technology Staffing, has
served as Vice President-Staffing of Wolfe & Associates, Inc. ("Wolfe") since
August 1997. He was vice president of the western region of Ajilon Services,
Inc. ("Ajilon"), a comprehensive IT services company, from 1990 until 1997. He
was Vice President of U.S. Business Development for Ajilon before joining Wolfe.
Mr. Liner received a Bachelor of Science degree in Math/Computer Science from
Union College.
Robert J. Otoupalik, 50, Vice President, Information Technology
Consulting, has served as Vice President of the Business Communications Division
of Wolfe since 1985. Mr. Otoupalik now coordinates the consulting services
8
<PAGE>
offered by the Company's IT staffing companies. Mr. Otoupalik received a
Bachelor of Science degree in Industrial Management from Purdue University.
Tony Rodda, 62, has served as Vice President of Technical Services
since December 1997. Mr. Rodda has been responsible for the Technical Division
of the Company since his employment with the Company in 1982. Prior to joining
the Company, Mr. Rodda had 11 years of engineering and technical staffing
experience. Mr. Rodda received a B.S. in Aerospace Engineering from Hughes
Aerospace College.
John E. Schaffer, 31, has served as Vice President, Systems Integration
and Outsourcing for Wolfe since October 1997 and is responsible for the
coordination of the Systems Integration and IT outsourcing services offered by
the Company. Mr. Schaffer was the owner and president of JesCo Technical
Services, Inc. from 1992 until it was acquired by the Company in October 1997.
Mr. Schaffer received a B.S. degree in Business Economics from Williamette
University.
John F. Waugh, 46, joined the Company in 1991 and has served as Vice
President of Administrative Professional Services, a newly formed consulting
division specializing in needs assessment and program development for worker's
compensation, drug testing, benefits systems, and ergonomic job analysis, since
November 1997. Mr. Waugh served as the Company's Worker's Compensation Claims
Manager from 1991 to 1996 and assumed responsibility for management of all of
the Company's insurance programs in 1996 as Director of Risk and Insurance.
Prior to working for SOS, Mr. Waugh was operations manager for a staffing
company and a home health agency for 14 years. Mr. Waugh holds several
professional certifications, including Certified Personnel Consultant awarded by
the National Association of Personnel Consultants.
Steven L. Whitworth, 34, has been with the Company since September
1990, serving most recently as Vice President of the Company's Mountain
States/Central Commercial Division since January 1998. From 1995 to 1997, Mr.
Whitworth served as Utah Regional Manager and from 1992 to 1995, he was Salt
Lake Area Manager. From 1990 to 1992, Mr. Whitworth held various positions in
the Company in sales and marketing. Prior to 1990, Mr. Whitworth worked in sales
and marketing for the hospitality and transportation industry.
Curtis L. Wolfe, 55, President, Information Technology, has served as
President of Wolfe since 1973. Mr. Wolfe was an owner of Wolfe until it was
acquired by the Company in November 1996. Mr. Wolfe's responsibilities include
integrating the Company's various IT acquisitions and coordinating the delivery
of IT staffing, consulting and outsourcing services. Mr. Wolfe is a graduate of
the United States Air Force Academy.
EXECUTIVE COMPENSATION
The compensation of Richard D. Reinhold and Howard W. Scott, Jr., the
Company's Chief Executive Officers during the fiscal year ended December 28,
9
<PAGE>
1997, the other executive officers of the Company whose total cash compensation
for the fiscal year ended December 28, 1997 exceeded $100,000 and the two most
highly compensated non-executive officers of the Company for the fiscal year
ended December 28, 1997 (collectively, the "Named Officers") is shown on the
following pages in three tables and discussed in a report from the Compensation
Committee of the Board of Directors.
Summary Compensation Table
The following table sets forth, for the three most recent fiscal years
of the Company, the compensation paid to the Named Officers.
<TABLE>
<CAPTION>
Long Term
---------
Annual Compensation Compensation
------------------- ------------
Awards
------
Fiscal Salary(1) Bonus(2) Other Annual All Other
------ --------- -------- ------------ ---------
Name and Position Year Compensation Options Compensation(3)
----------------- ---- ------------ ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard D. Reinhold (4) 1997 $232,000 -- -- -- $47,556
Chairman of the 1996 195,000 $45,825 -- -- 49,098
Board and Chief 1995 185,090 -- -- -- 47,556
Executive Officer
Howard W. Scott, Jr. (5) 1997 207,111 104,300 -- 10,000 --
Chief Executive 1996 190,000 44,650 -- 15,000 --
Officer 1995 178,350 19,000 -- 25,000 500
Richard J. Tripp 1997 150,000 37,878 -- -- 3,488
Senior Vice President 1996 150,000 17,625 -- 10,000 2,215
1995 150,000 17,500 -- 20,000 46,576(6)
JoAnn W. Wagner (7) 1997 53,848 26,924 $24,500(8) 19,000 --
Chairman of the 1996 -- -- 42,000(8) 6,000 --
Board and Executive 1995 -- -- 21,000(8) 5,000 --
Vice President
Gary B. Crook 1997 119,610 36,301 -- -- --
Vice President, 1996 100,000 18,500 -- 15,000 --
Treasurer 1995 46,000 10,000 -- 10,000 --
and Chief Financial --
Officer
Robert J. Otoupalik 1997 200,000 -- -- -- --
Vice President 1996 25,000(9) -- -- 10,000 --
Information 1995 -- -- -- -- --
Technology Consulting
Curtis L. Wolfe 1997 200,000 -- -- -- --
President, Information 1996 25,000(9) -- -- 10,000 --
Technology 1995 -- -- -- -- --
</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. Mr. Reinhold's employment agreement was amended
effective January 1, 1997 to increase his salary to $232,000. Mr. Scott's
employment agreement was amended effective August 4, 1997 to increase his salary
to $220,000. Ms. Wagner entered into an employment agreement effective August 4,
1997 with an annualized salary of $140,000. Ms. Wagner's salary was based on
working two-thirds full time. On February 27, 1998 her salary was adjusted to
$210,000 to reflect full time employment with the Company.
(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.
10
<PAGE>
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. Includes performance bonuses of $104,300, $37,878, $ 26,924
and $36,301 paid in February 1998 to Howard W. Scott, Jr., Richard J. Tripp,
JoAnn W. Wagner and Gary B. Crook, respectively, based on the Company's
performance during the 1997 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, insurance
premiums of $47,566, $49,098 and $47,556 for 1997, 1996 and 1995, respectively;
and Richard J. Tripp, insurance premiums of $3,488, $2,215 and $3,993 for 1997,
1996 and 1995, respectively.
(4) Mr. Reinhold served as Chief Executive Officer of the Company until August
4, 1997. Mr. Reinhold continued as an employee of the Company in the position of
Chairman of the Board until his retirement on February 27, 1998.
(5) Mr. Scott was appointed Chief Executive Officer of the Company on August 4,
1997. Prior to such appointment, Mr. Scott was the Company's President and Chief
Operating Officer.
(6) 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.
(7) Ms. Wagner was employed by the Company and appointed Vice Chairman and
Executive Vice President of Corporate Development on August 4, 1997. She was
appointed Chairman of the Board on February 27, 1998. Prior to her employment
with the Company, Ms. Wagner served as an independent director and consultant to
the Company commencing in July 1995.
(8) Fees paid to Ms. Wagner as a consultant.
(9) Messrs. Otoupalik and Wolfe were employed by the Company in November 1996 as
a result of the Company's acquisition of Wolfe & Associates, Inc. Compensation
amounts set forth for Messrs. Otoupalik and Wolfe during fiscal 1996 reflect
compensation paid after the effective date of the acquisition.
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 28, 1997 to the Named Officers. As
of December 28, 1997, the Company had not granted any stock appreciation rights.
All options granted are incentive stock options granted under the Incentive
Plan.
<TABLE>
<CAPTION>
Potential Realizable Value at
Percent of Assumed Annual Rates of Stock
Total Options Price Appreciation for Option
Granted to Exercise Term (in dollars)
Options Employees in or Base Expiration ------------------------------
Name Granted Fiscal Year Price Date 5% 10%
- ----------------------- ------- ----------- ----- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Howard W. Scott, Jr. 10,000 3.8% $16.50 08/04/07 $103,768 $262,968
JoAnn W. Wagner 1,000(1) .4 $12.25 05/14/02 $ 3,384 $ 7,479
18,000 6.9 $16.50 08/04/07 $186,782 $473,342
</TABLE>
(1) Formula award options granted in connection with the Company's 1997 Annual
Meeting of Shareholders prior to Ms. Wagner's employment with the Company.
11
<PAGE>
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 28, 1997 and the aggregate value
of such options held by the Named Officers. The Named Officers did not exercise
options to acquire shares of Common Stock during the fiscal year ended December
28, 1997. As of December 28, 1997, the Company had not granted any stock
appreciation rights to any of the Named Officers.
<TABLE>
<CAPTION>
Number of Value of Unexercised
Unexercised Options In-the Money Options at
at December 28, 1997 at December 28, 1997 (1)
------------------------------ -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- -------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Howard W. Scott, Jr. 20,400 29,600 $221,350 $264,900
Richard J. Tripp 14,000 16,000 165,950 182,800
JoAnn W. Wagner 10,600 19,400 76,575 87,300
Gary B. Crook 10,600 14,400 117,625 153,000
Robert J. Otoupalik 3,600 6,400 25,200 44,800
Curtis L. Wolfe 3,600 6,400 25,200 44,800
</TABLE>
(1) Reflects the difference between the exercise price of the unexercised
options and the market value of shares of the Common Stock on December 28, 1997.
The last transaction of the Common Stock on December 26, 1997, the last trading
date of the Company's fiscal year, as reported by NASDAQ, was $19.125 per share.
Employment Agreements
The Company entered into employment agreements with Messrs. Reinhold,
Scott and Tripp, the terms of which commenced on January 1, 1995 and which
expired on the third anniversary thereof. The employment agreements between the
Company and Messrs. Scott and Tripp have been amended to extend their terms for
periods of one additional year. Each agreement is renewable for successive
one-year periods upon the mutual consent of the parties. In January 1998, Mr.
Reinhold's agreement was amended to reflect his resignation as a full-time
employee of the Company, to terminate the Company's obligation to pay salary and
bonuses to Mr. Reinhold and to provide that the Company would continue to pay
certain medical and life insurance premiums and to pay for Mr. Reinhold's
attendance at industry conferences and other activities to promote the good will
of the Company until he reaches age 65. Effective August 4, 1997, the Company
also entered into employment agreements with Ms. Wagner and Mr. Sollenne. Such
agreements are for periods of one year and can be extended for additional
one-year periods upon the mutual consent of the applicable parties. Pursuant to
such agreements, the Company has agreed to employ Messrs. Scott, Sollenne and
Tripp and Ms. Wagner for the term of their respective agreements in their
12
<PAGE>
current positions and duties, which may be modified, however, at the discretion
of the Board of Directors. The minimum annual salaries for Messrs. Scott,
Sollenne and Tripp and Ms. Wagner under the agreements are: $220,000, $200,000,
$150,000 and $210,000, 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 a specified period 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.
In connection with the acquisition of Wolfe, the Company entered into
employment agreements with Messrs. Otoupalik and Wolfe. Each agreement is for a
term of two years from the date of acquisition of Wolfe and provides for a
minimum annual salary of $200,000. The agreements also contain covenants of
Wolfe and Otoupalik that, during the term of their employment and continuing for
a specified period 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.
13
<PAGE>
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 18 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 Annette
Strauss, 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 Chairman of the Board and Executive Vice President, Chief Executive
Officer, President and Chief Operating Officer, Senior Vice President and
Executive 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, as described above, executed by the Company
and the Key Executives, and additional 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 1998 for 1997 performance, reflecting the
14
<PAGE>
Committee's conclusion that the Key Executives played an integral role in the
Company's achievement of record sales and earnings in 1997.
CEO Compensation. Richard D. Reinhold was the Chairman of the Board
until February 27, 1998 and was the Chief Executive Officer until August 4,
1997. Mr. Reinhold's compensation during the year ended December 28, 1997 was
determined pursuant to the principles described above and by the terms of his
employment agreement. The Committee believes that Mr. Reinhold's compensation
reflected the significant contributions rendered by Mr. Reinhold to the Company
during the year. Mr. Reinhold declined the bonus he was awarded by the Committee
under the Company's bonus plan for the year.
Howard W. Scott, Jr. has been the Company's Chief Executive Officer
since August 4, 1997. Mr. Scott'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 1997 fiscal year,
the Committee concluded that Mr. Scott's performance in 1997 merited payment of
a performance bonus. The bonus was based on the formula described below. The
Committee believes that Mr. Scott's compensation fairly and accurately
compensates Mr. Scott for his vision and leadership in developing and pursuing
new markets for Company services, overseeing the successful operation of the
Company and its acquisitions and leading the Company.
Cash Bonus Awards. In November 1996, the 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 Vice President, Controller and Assistant
Secretary, 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 Bonus Plan, the
Chief Executive Officer and President and Chief Operating Officer were eligible
to receive a maximum bonus equal to 30% (20% for the Executive Vice President
and Chief Financial Officer and 15% for the Senior Vice President and other
executive officers) of their salary. The percentage paid is based on a formula
implemented by the Committee. The Company must achieve an increase of at least
20% in earnings per share before any bonus is paid.
The second portion of the Bonus Plan is based on the long-term
performance of the Company. Key Executives are each eligible to receive an
annual cash bonus based on a three-year moving average of internal growth. The
Chief Executive Officer and President and Chief Operating Officer are eligible
to receive an annual cash bonus of up to 30% (20% for the Executive Vice
President and Chief Financial Officer and 15% for the Senior Vice President
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 internal growth average upon which the bonus will be paid
is 15%. This portion of the bonus was paid in February 1998 and amounts paid to
the Named Officers thereunder are reflected in the Summary Compensation Table
set forth on page 10 of this Proxy Statement.
15
<PAGE>
The Company's failure to meet the minimum objectives described above would
disqualify either portion of the Bonus Plan. 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 an 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 February 1998, the Committee voted to distribute
all amounts payable under this portion of the Bonus Plan based on the Company's
internal growth rate for 1996 and 1997.
In November 1997, the 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 commencing with the year ending January 3, 1999. The Committee
amended the Bonus Plan by increasing the percent of base salary for the bonus.
The maximum amount that the Chairman of the Board and Executive Vice President,
Chief Executive Officer, President and Chief Operating Officer and, Executive
Vice President and Chief Financial Officer will be eligible to receive was
raised to 50% of their annual base salaries, for both the earning per share and
the internal growth portion of the Bonus Plan. The internal growth rate will now
be based on the internal growth rate of the Company for the fiscal year. The
maximum bonus amount payable to other executive officers was raised to 25% of
their annual base salaries for both portions of the Bonus Plan.
The November 1997 amendment to the Bonus Plan also modified the participation of
Richard J. Tripp, Senior Vice President, in the Bonus Plan. Mr. Tripp
participated in the Bonus Plan for periods prior to the year ended December 28,
1997; but, effective December 29, 1997, Mr. Tripp will participate in a
operational bonus based on the performance of one of the Company's divisions for
which he now has management responsibility and will not participate in the Bonus
Plan.
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
1997, the Committee granted options representing 69,000 shares of Common Stock
to Key Executives. 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 31, 1997,
executive officers (including the Key Executives) held options to purchase an
aggregate of 187,000 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
16
<PAGE>
participate on the same terms as other Company employees meeting the eligibility
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. Certain Key Executives and other
employees who are determined to be highly compensated for purposes of
the Code are not entitled to participate in the Company's 401(k) plan.
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 deferred compensation
plan to enable its Key Executives and other key employees to have an
effective alternative for retirement savings. The Company may at its
discretion make matching contributions to the plan. In February 1998,
the Company matched one-third of the contributions made by eligible
employees during 1997. The Company's match was capped at $1,000 per
participant.
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,
Randolph K. Rolf, Chairman
R. Thayne Robson
Annette Strauss
17
<PAGE>
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative shareholder return
for the Common Stock for the period beginning June 28, 1995 (the date of the
Company's initial public offering) and ending December 28, 1997, 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.
The performance graph assumes that $100 was invested at the market
close on June 28, 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>
6/30/95 9/30/95 12/29/95 3/29/96 6/28/96 9/30/96 12/31/96 3/30/97 6/29/97 9/28/97 12/28/97
------- ------- -------- ------- ------- ------- -------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SOS Staffing Services $100 $122.22 $138.89 $164.81 $177.78 $166.67 $155.56 $166.67 $225.93 $274.07 $283.33
Peer Group Index $100 $114.16 $114.67 $206.32 $238.01 $235.93 $214.39 $165.20 $203.17 $212.82 $208.30
Nasdaq Composite Index $100 $111.66 $112.58 $117.86 $126.80 $131.29 $138.15 $133.70 $153.89 $180.01 $161.73
</TABLE>
18
<PAGE>
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth information as of March 23, 1998 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 Named Officer and by all directors and officers
as a group. Unless noted otherwise, the Company believes 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 12,665,462 shares of Common
Stock outstanding as of March 23, 1998:
<TABLE>
<CAPTION>
Beneficial Ownership as of March 23, 1998
-----------------------------------------
Number of Shares Percentage of Class
---------------- -------------------
<S> <C> <C>
Richard D. Reinhold 2,811,000 (1) 22.2%
c/o Church of Jesus Christ of Latter-Day Saints
Singapore Mission
253 Bukit Timah Rd.; 4th Floor
Singapore 259690
Sandra E. Reinhold 2,811,000 (1) 22.2%
c/o Church of Jesus Christ of Latter-Day Saints
Singapore Mission
253 Bukit Timah Rd.; 4th Floor
Singapore 259690
Franklin Advisers, Inc. 803,000 (2) 6.3%
777 Mariners Island Blvd.
San Mateo, CA 94404
Howard W. Scott, Jr. 22,335 (3) *
Richard J. Tripp 18,640 (3) *
JoAnn W. Wagner 14,550 (3) *
Gary B. Crook 13,733 (3) *
Randolph K. Rolf 13,400 (3)(4) *
Samuel C. Freitag 11,000 (3)(5) *
Stanley R. deWaal 8,900 (3)(6) *
R. Thayne Robson 8,400 (3) *
Curtis L. Wolfe 4,400 (3) *
Robert J. Otoupalik 4,100 (3) *
Annette Strauss 2,400 (3) *
All officers and 133,533 (3) 1.0%
directors as a group (fourteen persons)
</TABLE>
- --------------------
* Less than one percent of outstanding shares
19
<PAGE>
(1) Of the shares reflected as beneficially owned by Richard D. Reinhold and
Sandra E. Reinhold, 1,363,000 shares are held of record by Richard D. Reinhold,
1,368,000 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) Based upon information provided to the Company, the Company believes
Franklin Advisers, Inc. is a subsidiary of Franklin Resources, Inc. of which
Charles B. Johnson and Rupert H. Johnson, Jr. each own in excess of ten percent
of the capital stock.
(3) The amounts indicated include shares subject to options currently
exercisable held by the following persons in the following amounts, Howard W.
Scott, 21,400 shares; Richard J. Tripp, 14,500 shares; JoAnn W. Wagner, 12,600
shares; Gary B. Crook, 11,600 shares; Randolph K. Rolf, 8,400 shares; Samuel C.
Freitag, 2,400 shares; Stanley R. deWaal, 8,400 shares; R. Thayne Robson, 7,400
shares; Curtis L. Wolfe, 4,400 shares; Robert J. Otoupalik, 4,100 shares;
Annette Strauss, 2,400 shares; and all officers and directors as a group,
100,520 shares. The amounts also include shares of Common Stock held in the
Company's 401(k) plan by the following persons in the following amounts: Richard
J. Tripp, approximately 139 shares and Gary B. Crook, approximately 2,133
shares. The number of shares held, in the Company's 401(k) plan is based on the
market price of the Common Stock on December 31, 1997 (the last date for which
401(k) plan information is available).
(4) The share amounts indicated for Randolph K. Rolf include 5,000 shares owned
of record by the Randolph K. Rolf Trust.
(5) The share amounts indicated for Samuel C. Freitag include 300 shares held as
custodian for his minor children.
(6) The share amounts indicated for Stanley R. deWaal include 500 shares owned
of record by Mr. deWaal's spouse.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December 1997, the Company purchased certain assets and
substantially all of the business of TSI of Utah, Inc. ("TSI"), a company that
provides industrial temporary staffing services and was owned by an adult son of
Richard D. and Sandra E. Reinhold, for approximately $1,285,000, of which
$600,000 was paid in cash and the remaining $685,000 will be paid under the
terms of a promissory note. Pursuant to the asset purchase agreement, the
Company's franchise agreement with TSI was terminated. The Company had entered
into a franchise agreement effective as of January 1995 with TSI. Pursuant to
the franchise agreement, TSI had 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,
20
<PAGE>
TSI paid to the Company a portion of the gross margin derived from the operation
of such business. Under the agreement, the Company funded a payroll bank account
from which TSI paid the wages of temporary employees. TSI invoiced its clients
directly for all services performed and the clients were 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. As of the date of
closing of the asset purchase agreement, the Company had receivables due from
TSI of $631,000.The Company believes that the terms of the asset purchase
agreement and the franchise agreement were at least as favorable as the terms
that could have been obtained from an unaffiliated third party in a similar
transaction.
The Company currently leases its corporate office building from 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 $97,000. The Company paid approximately $86,000, $77,000 and
$65,000 as lease payments for fiscal years 1997, 1996 and 1995, respectively.
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.
As of December 29, 1996, the Company had a note receivable due from
Curtis L. Wolfe, President of Wolfe in the amount of approximately $91,100.
During 1997, this note, along with all accrued interest, was repaid to the
Company. The note was unsecured, accrued interest at ten percent per annum and
was due on demand.
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 (the "Amendment") to increase
the number of shares of Common Stock available for issuance under the Incentive
Plan by 1,000,000 shares. The number of shares available under the Incentive
Plan was increased from 400,000 shares to 800,000 shares at the Annual Meeting
of Shareholders in 1997. The proposed Amendment would increase the number of
shares under the plan to 1,800,000 shares.
Since the inception of the Incentive Plan, the Company has granted
options to purchase 795,000 shares of Common Stock. Of these grants, 29,812
options have been forfeited and options for 30,462 shares have been exercised.
The total number of shares currently available for grant under the Incentive
Plan is 34,812 shares. Of the 795,000 options granted, 203,000 options have been
granted to executive officers of the Company. Options to purchase 93,000 shares
have been granted to non-employee directors of the Company. An additional
353,500 options, or 44.5% of the options granted, have been granted for the
purpose of retaining key management and employees of certain companies acquired
21
<PAGE>
by the Company. The remainder of the options granted (145,500 options) have been
to key employees of the Company.
The Company believes that the ability to grant options to purchase
shares of Common Stock is desirable to retain key executive officers and key
employees, and is a very effective tool in negotiating the retention of key
management and employees in certain acquisitions. The total number of options
currently available for grant is limited to 34,812 options. If the Amendment is
adopted, the Company intends to issue 48,000 options to certain key employees of
the Company, including certain Named Officers. Based on the Company's historical
use of options under the Incentive Plan and the Company's intention to pursue
its growth strategy, including the acquisition of additional staffing
businesses, the Company feels it is desirable at this time to authorize
additional shares to be available for future option grants.
The Board of Directors recommends that the shareholders of the Company
vote FOR the Amendment.
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 currently administered by a 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, and non-qualified stock options, which
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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 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 800,000, 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. Currently, 400,000 shares of Common Stock to
be issued upon the exercise of Awards 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 23, 1998, the closing sale price
of the Common Stock, as reported by The Nasdaq Stock Market, was $26.00.
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
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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
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
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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.
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 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, commencing with the Annual Meeting, 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
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Director following such Annual Meeting (except any Non-Employee Director
receiving an Initial Grant in connection with such Annual Meeting).
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 rights 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.
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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.
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.
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 January 3, 1999, 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, unanimously 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 1999 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 November 25, 1998.
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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 1997 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:
Investor Relations Department
SOS Staffing Services, Inc.
1415 South Main Street
Salt Lake City, UT 84115
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