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, for use of the Commission Only (as permitted by Rule
14a"6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a"11(c) orss.240.14a"12
SOS STAFFING SERVICES, INC.
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(Name of Registrant as Specified in its Charter)
---------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a"6(i)(1) and
0"11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0"11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0"11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 17, 2000
SOS STAFFING SERVICES, INC.
(SOS LOGO OMITTED)
To the Shareholders of SOS STAFFING SERVICES, INC.:
The Annual Meeting of Shareholders of SOS Staffing Services, Inc. (the
"Company") will be held at the Wyndham Hotel, 215 West South Temple, Salt Lake
City, Utah, 84101 on Wednesday, May 17, 2000, 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 2003 annual meeting of shareholders and until their
respective successors have been duly elected and qualified;
(ii) To ratify the appointment of Arthur Andersen LLP as
independent auditors of the Company for the fiscal year ending
December 31, 2000; and
(iii) 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 27,
2000 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
/s/John K. Morrison
-------------------
JOHN K. MORRISON
Vice President, General Counsel and Secretary
April 10, 2000
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>
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 JoAnn W. Wagner 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 27, 2000 at the Annual Meeting of the
Shareholders (the "Annual Meeting") to be held at the Wyndham Hotel, 215 West
South Temple, Salt Lake City, Utah 84101, on May 17, 2000, 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 of Shareholders 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 2003
and until their respective successors shall be duly elected and shall
qualify.
FOR all nominees listed below WITHHOLD AUTHORITY to vote for
(except as marked to the all nominees listed below.
contrary 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 THOMAS K. SANSOM RICHARD J. TRIPP
2. PROPOSAL TO RATIFY THE APPOINTMENT OF Arthur Andersen LLP as the
Independent Auditor of the Company for the fiscal year ending December
31, 2000.
FOR AGAINST ABSTAIN
3. 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 DIRECTOR NOMINEES NAMED ABOVE, 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: / , 2000.
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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>
SOS Staffing Services, Inc.
1415 South Main Street
Salt Lake City, UT 84115
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PROXY STATEMENT
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Annual Meeting of Shareholders
May 17, 2000
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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 17, 2000, at 1:30 p.m., Mountain Daylight
Time, at the Wyndham Hotel, 215 West South Temple, Salt Lake City, Utah, or 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 10, 2000.
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
27, 2000 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 12,691,398 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.
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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 ratification of the appointment of Arthur Andersen
LLP to serve as the Company's independent auditors for the fiscal year ending
December 31, 2000; 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 the approval of the proposed ratification of the
selection of Arthur Andersen LLP to be the Company's independent auditor for the
2000 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 2003 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 Board of Directors. The three nominees receiving
the highest number of votes at the Annual Meeting will be elected.
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On February 7, 2000, Michael A. Jones resigned as a director of the
Company. On February 8, 2000, the Board of Directors appointed Thomas K. Sansom
as a director to serve the remainder of Mr. Jones' term which expires at the
time of the Annual Meeting.
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. Samuel C. Freitag and JoAnn W. Wagner are currently serving terms
which expire at the time of the annual meeting of the shareholders to be held in
the 2001 calendar year. Stanley R. deWaal and Randolph K. Rolf are currently
serving terms which expire at the time of the annual meeting of shareholders to
be held in the 2002 calendar year. 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, 70, 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 and 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., a 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
Economic Development Corporation of Utah since 1985, ex-officio director of the
Salt Lake Downtown Alliance since 1991, 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.
Thomas K. Sansom, 61, has served as director of the Company since his
appointment on February 8, 2000. In December 1999, Mr. Sansom was first employed
by the Company as Senior Vice President of the Company and President of its
Commercial Division. From 1995 through 1998, Mr. Sansom was Senior Vice
President of the Commercial Division for Accustaff Incorporated. From 1993
through 1995 Mr. Sansom was President and Chief Operating Officer of Nesco
Service Company. During 1992 Mr. Sansom was self employed. He served as Vice
President of Operations at Interim Systems from 1988 through 1991. Mr. Sansom's
career in the staffing industry began in 1965 as an account executive and he has
held a variety of positions working his way up the ranks with Kelly Services,
Olsten Corp., and Interim. Mr. Sansom served on the board of directors of the
American Staffing Association ("ASA"), formerly the National Association of
Temporary Staffing Services ("NATSS"). Mr. Sansom holds a B.A. in Business
Administration from Alma College, Alma Michigan. Mr. Sansom has been and
continues to be involved in numerous civic and community endeavors including
Habitat for Humanity and The Children's Society.
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Richard J. Tripp, 51, has served as Senior Vice President of the
Company since August 1998 and as a director of the Company since 1991. From
December 1997 to August 1998, Mr. Tripp served as Senior Vice President of the
Company's Pacific Division. 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. 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.
Stanley R. deWaal, 65, was elected a director of the Company in May
1995. Mr. deWaal is currently Vice President of Century Business Services, a
business service firm in Salt Lake City, Utah. Mr. deWaal was President and a
director of DeWaal, Keeler & Co., a Utah professional corporation of certified
public accountants, from 1975, when Mr. deWaal co-founded the firm, until
November 1999, when the firm was purchased by Century Business Services. 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.
Samuel C. Freitag, 42, has been a director of the Company since October
30, 1997. 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
divestitures; 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.
Randolph K. Rolf, 58, has been a director of the Company since June
1995. Until his retirement in March 1999, Mr. Rolf served as Chairman of the
Board, President and Chief Executive Officer of Unitog Company ("Unitog"), a
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public company based in Kansas City, Missouri which manufactured, sold and
rented industrial uniforms. (Unitog was acquired by Cintas Corporation in March
1999.) Mr. Rolf served as Chairman of the Board of Unitog from May 1991 and as
President and Chief Executive Officer from May 1988 until March 1999.
JoAnn W. Wagner, 60, has been Chief Executive Officer of the Company
since October 1998. Ms. Wagner has served as Chairman of the Board of Directors
of the Company since February 1998. Additionally, Ms. Wagner was appointed
President of the Company in March 1999. From September 1997 until her
appointment as Chief Executive Officer, Ms. Wagner served as Executive Vice
President of Corporate Development. 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 ASA, formerly 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. deWaal (Chairperson), R.
Thayne Robson and Samuel C. Freitag. The members of the Compensation Committee
are Randolph K. Rolf (Chairperson), R. Thayne Robson and Samuel C. Freitag.
The Audit Committee met four times during the 1999 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 auditors; (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. Each
member of the Audit Committee is independent from management of the Company.
Since July 1998, the Audit Committee's functions have been governed by a charter
adopted by the Company's board of directors. The Audit Committee charter is
currently under review to ensure that it conforms with the recently-developed
regulations of the Securities and Exchange Commission and Nasdaq(R).
The Compensation Committee met four times during the 1999 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. Each member
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of the Compensation Committee is independent from management. The Compensation
Committee's functions are governed by a charter adopted by the Company's board
of directors.
During the 1999 fiscal year, there were seven 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
During 1999, each non-employee member of the Board of Directors was
paid a fee of $3,000 for each board meeting attended. Additionally each
non-employee member was paid a fee of $500 for each committee meeting attended.
All directors are reimbursed for expenses in connection with attendance at board
and committee meetings. Prior to 1999, each non-employee member of the Board of
Directors was paid a fee of $1,000 for each board meeting attended. There was no
fee paid for attendance at a committee meeting.
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 could have been 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.
Howard W. Scott resigned as an employee and director of the Company
effective March 25, 1999. In connection therewith and in accordance with certain
provisions of the employment agreement in effect at such resignation, the
Company agreed to continue to pay Mr. Scott his annualized salary of $220,000
until the Annual Meeting.
Directors of the Company are also eligible to participate in the
Company's May 1995 Incentive Stock Option Plan (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. JoAnn W. Wagner and Samuel C. Freitag, who became
directors subsequent to the Company's initial public offering, were also issued
5,000 incentive stock options 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 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
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will issue to each non-employee director an additional 1,000 incentive stock
options. Accordingly, on May 19, 1999, the date of the Company's 1999 annual
meeting of shareholders, the Company issued to each non-employee director 1,000
incentive stock options under the Incentive Plan. The options issued in
connection with the 1999 annual meeting of shareholders 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, the Company issued
2,500 options on December 20, 1999 to each non-employee director. Such 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 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.
EXECUTIVE OFFICERS
In addition to Ms. Wagner and Messrs. Sansom and Tripp, certain
information is furnished with respect to the following executive officers of the
Company:
W. B. Collings, 60, currently serves the Company as Vice President,
Treasurer and Assistant Secretary. Mr. Collings was appointed Treasurer in April
1998. Mr. Collings was appointed as Vice President on February 27, 1998 and
Assistant Secretary in April 1995. He joined the Company as the Controller in
May 1993, a position he held until April 1998. 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.
Dennis N. Emery, 49, was appointed as Senior Vice President of Finance
and Controller of the Company in December 1999. Mr. Emery joined the Company in
April 1998 as Vice President and Controller. From October 1988 until he joined
the Company, Mr. Emery was employed as the Controller of Mountaineer Gas Company
in Charleston, West Virginia. Prior to his employment with Mountaineer Gas
Company, Mr. Emery was employed by Arthur Andersen LLP as Controller of its
Washington D.C. office. Mr. Emery holds a B.S. Degree in Accounting from the
University of Utah.
John K. Morrison, 37, was appointed as Vice President of the Company on
March 25, 1999. Mr. Morrison has served as Corporate Secretary of the Company
since April 1995. Mr. Morrison 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
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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 Doctor 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.
John E. Schaffer, 37, was appointed as Senior Vice President of the
Company on March 25, 1999. On March 25, 1999, he was also appointed as President
of the Company's information technology subsidiary, Inteliant Corporation
("Inteliant"). From October 1997 through March 1999, Mr. Schaffer served as Vice
President, Systems Integration and Outsourcing, of the Company's information
technology operations and was responsible for the coordination of the systems
integration and information technology 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. Prior to
1992, Mr. Schaffer was employed in the software development industry in IT
operations, release management and customer support management. Mr. Schaffer
received a B.S. degree in Business Economics from Williamette University.
Brad L. Stewart, 42, joined the Company in December 1999 as Executive
Vice President and Chief Financial Officer. From October 1998 until December
1999, Mr. Stewart was the acting Chief Financial Officer of The Murdock Group
("Murdock"), an employment agency business in Salt Lake City, Utah. While at
Murdock, he assisted in the formation of an affiliated company, myjobsearch.com,
a Web-based job search company. From 1995 through 1998, Mr. Stewart served as
chief operating officer of Marker International, Inc. ("Marker"), Salt Lake
City, Utah, a manufacturer of ski and snowboard equipment, and outerwear, where
he was responsible for eleven subsidiaries located in Germany, Japan,
Switzerland, Canada, and the United States. From 1991 through 1995, Mr. Stewart
was Marker's Chief Financial Officer. Prior to working for Marker, Mr. Stewart
was employed for more than seven years by Arthur Andersen, LLP as a manager in
its Phoenix, Arizona and Atlanta, Georgia offices. Mr. Stewart has a B.S. in
Accounting from Brigham Young University. Mr. Stewart is a Certified Public
Accountant and a member of the American Institute of Certified Public
Accountants and the Arizona Society of Certified Public Accountants.
EXECUTIVE COMPENSATION
The compensation of JoAnn W. Wagner, the Company's Chief Executive
Officer during the 1999 fiscal year, the other executive officers of the Company
whose total cash compensation for the 1999 fiscal year exceeded $100,000 and
certain former executive officers or key employees of the Company (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.
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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
Compensation
Annual Compensation Awards
------------------- ------
Other
Fiscal Annual All Other
Name and Position Year Salary Bonus Compensation Options Compensation
----------------- ---- ------ ----- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
JoAnn W. Wagner (1) 1999 $279,141 $ -- $ -- 50,000 $ 1,980
Chairman of the 1998 204,708 -- -- 50,000 576
Board, Chief Executive 1997 53,848 26,924 24,500 19,000 --
Officer and President
John E. Schaffer (2) 1999 230,000 -- -- 40,000 238
Senior Vice President 1998 200,000 -- -- 20,000 --
President Inteliant 1997 50,000 -- -- 10,000 --
Richard J. Tripp (3) 1999 157,608 -- -- 7,500 4,139
Senior Vice President 1998 150,000 31,868 -- 10,000 3,720
1997 150,000 37,878 -- -- 3,488
Dennis N. Emery (4) 1999 93,434 20,000 -- 20,000 10,090
Senior Vice President 1998 69,934 -- -- 12,500 141
Controller 1997 -- -- -- -- --
Gary B. Crook (5) 1999 174,500 -- -- -- 224
Executive Vice 1998 163,942 -- -- 30,000 338
President, 1997 119,610 36,301 -- -- --
Chief Financial Officer
Michael A. Jones (6) 1999 218,536 -- -- 52,250 282
Executive Vice 1998 125,000 -- -- 5,000 252
President 1997 20,833 -- -- 10,000 --
President Commercial
Division
</TABLE>
-----------------------------
(1) Ms. Wagner was appointed Chief Executive Officer of the Company on October
29, 1998. Bonus amount reflects bonus paid to Ms. Wagner in February 1998 for
the 1997 fiscal year. Amounts listed under "Other Annual Compensation" reflect
amounts paid to Ms. Wagner for consulting services rendered prior to her
employment by the Company. Amounts listed under "All Other Compensation" reflect
life insurance premiums paid by the Company for insurance in excess of $50,000.
(2) Mr. Schaffer was employed by the Company in October 1997 in connection with
the Company's acquisition of JesCo Technical Services, Inc. Compensation amounts
for fiscal 1997 reflect compensation paid after the effective date of the
acquisition. Amounts listed under "All Other Compensation" reflect life
insurance premiums paid by the Company for insurance in excess of $50,000.
(3) Bonus amounts reflect bonus payments of $31,868 and $37,878 paid to Mr.
Tripp in February 1999 and February 1998 for the 1998 and 1997 fiscal years,
respectively. Amounts listed under "All Other Compensation" include life
insurance premiums paid by the Company for insurance in excess of $50,000 and
other insurance premiums made in each year listed.
(4) Mr. Emery was employed by the Company in April 1998. Compensation amounts
for 1998 reflect compensation paid after Mr. Emery's date of hire. The Bonus
amount reflects a bonus payment of $20,000 paid to Mr. Emery in March 2000 for
the 1999 fiscal year. Amounts listed under "All Other Compensation" reflect life
insurance premiums paid by the Company in each year listed, as well as $10,000
paid in fiscal 1999 related to Mr. Emery's relocation upon accepting employment
with the Company.
(5) Mr. Crook's compensation reflects a performance bonus of $36,301 paid in
February 1998 for fiscal year 1997. The amount listed under "All Other
Compensation" reflects life insurance premiums paid by the Company for insurance
in excess of $50,000. Mr. Crook resigned as an officer of the Company effective
December 17, 1999 and as an employee of the Company effective January 31, 2000.
9
<PAGE>
(6) Mr. Jones was employed by the Company in October 1997 in connection with the
Company's acquisition of the Century Group. Compensation amounts for the 1997
fiscal year represent compensation paid after the effective date of the
acquisition. The amount listed under "All Other Compensation" reflects life
insurance premiums paid by the Company for insurance in excess of $50,000.
Effective July 31, 1999, Mr. Jones resigned as an officer and employee of the
Company. He resigned as a director of the Company effective February 7, 2000.
Option Grants in Last Fiscal Year
The following table sets forth the grants of options made by the
Company during the 1999 fiscal year to the Named Officers. As of January 2,
2000, the Company had not granted any stock appreciation rights. All options
granted, except as noted, 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 Price Appreciation for Option
Options Employees in Exercise or Expiration Term (in Dollars)
Name Granted Fiscal Year Base Price Date 5% 10%
---- ------- ----------- ---------- ---------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
JoAnn W. Wagner 20,000 4.4% $7.125 01/04/09 $89,700 $227,100
30,000 6.7 4.375 12/20/09 82,650 209,250
John E. Schaffer 40,000 8.9 8.000 03/25/09 201,200 510,000
Richard J. Tripp 7,500 1.7 4.375 12/20/09 20,663 97,313
Dennis N. Emery 20,000 4.4 4.375 12/20/09 55,100 139,500
Michael A. Jones(1) 40,000 8.9 8.250 02/17/09 207,600 526,000
10,000 2.2 8.000 03/25/09 50,300 127,500
2,500 0.6 4.375 12/20/04 603 1,338
</TABLE>
- --------------------------
(1) The option grants to Michael A. Jones of 40,000 options and 10,000 options
were incentive stock options. All of these options have been forfeited, the
unvested portion forfeited at the time of his resignation as an employee, the
balance forfeited 90 days thereafter. The option grant of 2,500 shares were
non-qualified options. 2,000 of these options have been forfeited. The balance
remain exercisable for a period of one year following Mr. Jones' resignation as
a director, to wit: until February 8, 2001.
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 January 2, 2000 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 1999 fiscal year. As of
January 2, 2000, the Company had not granted any stock appreciation rights to
any of the Named Officers.
10
<PAGE>
<TABLE>
<CAPTION>
Number of Value of Unexercised
Unexercised Options In-the Money Options at
at January 2, 2000 at January 2, 2000 (1)
--------------------------- ---------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
JoAnn W. Wagner 53,160 76,840 $.00 $.00
John E. Schaffer 26,800 43,200 .00 .00
Richard J. Tripp 29,100 18,400 .00 .00
Dennis N. Emery 8,500 24,000 .00 .00
Gary B. Crook 29,400 25,600 .00 .00
Michael A. Jones 500 2,000 .00 .00
</TABLE>
- ---------------------
(1) Reflects the difference between the exercise price of the unexercised
options and the market value of shares of Common Stock on January 2, 2000. The
last transaction of the Common Stock on December 31, 1999, the last trading date
of the Company's fiscal year, as reported by Nasdaq(R), was $4.375 per share.
Employment Agreements
The Company entered into an employment agreement with Ms. Wagner on
August 4, 1997 with an annualized salary of $140,000. Ms. Wagner's salary was
based on working two-thirds time. On February 27, 1998, Ms. Wagner's annual
salary was adjusted to $220,000 to reflect full-time employment with the Company
and an increase in compensation. Effective April 1, 1999, Ms. Wagner's
employment agreement was amended to increase her annual salary to $300,000.
Effective April 1, 2000, Ms. Wagner's annual salary was increased to $350,000.
The term of Ms. Wagner's agreement expires on December 31, 2003. The term is
automatically renewable for successive one-year terms unless six months advance
notice is given by either Ms. Wagner or the Company of an intent not to renew.
The agreement provides that Ms. Wagner may be terminated for cause without any
severance or other payments except for the salary and compensation earned
through the date of such termination. If Ms. Wagner is terminated without cause
then the Agreement provides that she will be paid two years of annual salary. If
Wagner is terminated due to a change in control, she will be paid an amount
equal to the greater of two years of annual salary or the remainder of the term,
but in no event more than an amount which would trigger the Golden Parachute
Provisions of Internal Revenue Code Section 280G(d).
In connection with the Company's acquisition of JesCo Technical
Services, Inc. on October 1, 1997, Mr. Schaffer became employed pursuant to a
written employment agreement with Inteliant with an annualized salary of
$200,000. The compensation amounts reported for Mr. Schaffer in the Summary
Compensation Table set forth above for fiscal year 1997 represent compensation
paid after the effective date of the acquisition. In connection with Mr.
Schaffer's appointment as President of Inteliant, his employment agreement was
amended effective April 1, 1999 to increase his annualized salary to $240,000.
Effective January 1, 2000, the employment agreement was amended to provide that
the term will expire on December 31, 2001. The employment agreement provides for
11
<PAGE>
the payment of one year's salary in the event of a change in control which
results in the termination of Mr. Schaffer's employment with Inteliant. The
Agreement also provides that if Mr. Schaffer is terminated without cause prior
to the end of the term that he would be paid for the remainder of the term, but
in no event more than one year's salary or less than six months' salary. Mr.
Schaffer will also be granted 398,000 options for Inteliant Corporation stock
under the Inteliant Option Plan (See Compensation Committee Report, beginning on
page 14). The Company and Mr. Schaffer's have preliminarily agreed to cancel all
options held by Mr. Schaffer under the Incentive Plan.
The Company entered into an employment agreement with Mr. Tripp, the
term of which commenced on January 1, 1995 and expired on the third anniversary
thereof. The employment agreement between the Company and Mr. Tripp was amended
to extend the term for periods of one additional year. The agreement is
renewable for successive one-year periods upon the mutual consent of the
parties. Effective April 1, 2000, the minimum annual salary payable to Mr. Tripp
is $168,000. Effective December 20, 1999, Mr. Tripp's employment agreement was
amended to provide that he would be paid one year's salary in the event of a
change in control.
The Company does not have an employment agreement for a definite term
with Mr. Emery. Mr. Emery's current annual salary is $140,000. In the event he
is terminated due to a change in control, he will be paid one year's salary.
In connection with the Company's acquisition of the Century Group on
October 27, 1997, Mr. Jones became employed pursuant to a written employment
agreement with an annualized salary of $125,000. The compensation amounts
reported for Mr. Jones in the Summary Compensation Table set forth above for
fiscal year 1997 represent compensation paid after the effective date of the
acquisition. In connection with Mr. Jones' appointment as President of the
Company's commercial division, his employment agreement was amended to provide
an annualized salary of $225,000 and other compensation of approximately
$25,000. The term of the agreement was to terminate at the end of the 1999
fiscal year, unless the parties agreed to an extension prior to November 1,
1999. Mr. Jones resigned as an officer and employee of the Company effective
July 3, 1999. In connection therewith, the Company agreed to pay Jones his
annual salary through the end of the original term, to wit: through December 31,
1999.
Messrs. Sansom and Stewart were employed pursuant to employment
agreements executed in December 1999. Each agreement is for a term expiring on
December 31, 2000. Each agreement automatically renews for successive one-year
periods unless either the employee or the Company gives three months prior
notice of his or its intent not to renew. The agreements provide for the payment
of a minimum annual salary of $200,000 and $180,000 for Messrs. Sansom and
Stewart, respectively. The agreements provide for certain severance payments in
the event the employee is terminated without cause or if the Company determines
not to renew the agreement for an additional term. The agreements also provide
for the payment of one year's annual salary in the event of a change in control.
The employment agreements described above terminate upon the death or
disability of the officer or employee or termination of the employment of the
officer or employee for cause. The agreements also contain covenants of the
officers or employees that, during the term of their employment and continuing
12
<PAGE>
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 and employees
are also subject to the confidentiality and limited non-solicitation agreements
executed by the Company's regular employees.
The Company has entered agreements to pay one year's salary to other
executive officers, who are otherwise employed on an at-will basis, if there is
a change in control.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act of 1934 requires the Company's
executive officers and directors to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission (the
"SEC"). Executive officers and directors are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on a review of the copies of such forms furnished to the Company and
written representations from the Company's executive officers and directors, the
Company believes that one individual was late in filing a total of three reports
required by Section 16(a). The late filings consisted of Forms 4 filed by
Randolph K. Rolf, a director of the Company, for the months of September,
October and November 1999.
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 19 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 (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 Samuel C. Freitag, 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, President and Chief Executive Officer and the other
executive officers of the Company (the "Key Executives"). 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 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 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. The Committee through the Company has engaged third
party compensation experts to provide competitive salary and other compensation
data. Except for Mr. Emery and another Key Executive, fiscal year-end cash
performance bonuses were not awarded to the Key Executives in 2000 for 1999
performance because the Company did not meet the criteria established by the
Committee for bonus payments.
14
<PAGE>
CEO Compensation. JoAnn W. Wagner has served as the Chief Executive
Officer since October 29, 1998. Ms. Wagner has served as Chairman of the Board
since February 27, 1998 and was previously Vice Chairman and Executive Vice
President. Ms. Wagner's compensation is determined pursuant to the principles
described above and by the terms of her employment agreement. The Committee
believes Ms. Wagner's compensation fairly and accurately recognizes her vision
and leadership in integrating the Company's acquisitions, overseeing the
transition of leadership of the Company and implementing the Company's business
strategy.
Cash Bonus Awards. Since November 1996, the Committee has had in effect
bonus plans based on the percentage increase of earnings per share on an annual
basis and the internal growth over an annual or longer period. The Committee has
reviewed the plans annually to determine whether the plans remain appropriate in
terms of the bonus targets as a percentage of salary for each Key Executive, the
targeted performance and the percentage weight given to each target.
In February 1999, the Committee adopted the 1999 bonus plan (the "1999
Plan") to be effective for the 1999 fiscal year. The 1999 Plan provided that the
Chief Executive Officer would be paid an amount equal to 50% of her salary if
all of the targets established by the Committee were achieved. If the targets
were exceeded, the Chief Executive Officer could have received up to 100% of her
salary as a bonus based on the Company's performance. The other Key Executives
were also subject to the 1999 Plan, but with varying target and cap percentages
of salary. The Committee established three targets related to internal sales
growth exclusive of acquisitions, operating income growth and earnings per share
growth.
Key Executives with direct operational responsibility, i.e. Thomas K.
Sansom (not eligible for the 1999 Plan) John E. Schaffer and Richard J. Tripp
(the "Operational Key Executives") were subject to a modified version of the
1999 Plan based, on the performance of the operating units for which they had
responsibility.
The Company did not achieve the minimum objectives necessary to pay any
bonus to the Key Executives and Operational Key Executives under the 1999 Plan.
The Committee determined, however, to pay a discretionary bonus to Mr. Emery
based on his exceptional individual performance in 1999, primarily with
Inteliant. One other Key Executive was paid a bonus based on meeting certain
criteria defined by management and which was approved by the Committee.
In March 2000, the Committee adopted the 2000 bonus plan (the "2000
Plan"). The 2000 Plan maintains many of the key concepts of the 1999 Plan, but
reflects the determination of the Committee to adjust the operation of the
Company's bonus plan in order to achieve the fundamental objectives established
by the Committee. The 2000 Plan has a specific individual performance component.
The operating income component has been removed for the Key Executives, but
15
<PAGE>
still exists for the Operational Key Executive. The 2000 Plan provides that the
Chief Executive Officer will be paid an amount equal to 60% of her salary if all
of the targets established by the Committee are achieved. If the targets are
exceeded, the Chief Executive Officer could receive up to 110% of her salary as
a bonus based on the Company's and her individual performance. The other Key
Executives are also subject to the 2000 Plan, but with varying targets and
percentages of salary caps.
The 2000 Plan provides that 20% of the individual Key Executive's
target bonus can be paid to the Key Executive based on his or her individual
performance. While the Committee has the authority to issue discretionary
bonuses based on individual performance, it determined to specifically set a
target based on the Company's annual review of each Key Executive's performance.
This is to provide incentive to Key Executives to excel, even if the other
targets become unattainable. The 2000 Plan further provides that 20% and 60% of
the target bonus will be paid if the internal growth and earnings per share
growth targets are met, respectively. The Operational Key Executive's plan
differs in that internal growth is based only on the Operational Key Executive's
business unit, and operating income is used in lieu of earnings per share. Each
operating unit has a different target based on the expectations of such unit.
The 2000 Plan target for the Key Executives will be achieved if the Operational
Key Executives achieve the targets set for their individual units.
The purpose of the 2000 Plan is to create realistic measurable
performance targets. The Committee intends to set new performance targets each
fiscal year, but to leave the basic formula in place.
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
1999, the Committee granted options representing 265,000 shares of Common Stock
to Key Executives (the amount represents option grants to persons who currently
are Key Executives or were Key Executives at the time of the grant). 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 January 2, 2000, Key Executives held
options to purchase an aggregate of 410,000 shares of Common Stock granted
pursuant to the Incentive Plan since its inception in 1995 (the amount
represents options held by persons who currently are Key Executives or were Key
Executives as of January 2, 2000).
16
<PAGE>
Inteliant Plan. In an effort to remain competitive and to attract and
retain the information technology employees needed to achieve the Inteliant
business plan, the Company, as sole shareholder, approved the adoption of the
Inteliant Corporation 2000 Stock Option Plan (the "Inteliant Option Plan"), for
the benefit of Inteliant's employees, officers and directors. The Plan,
administered by Inteliant's board of directors, allows for the grant of options
to purchase a maximum of 10,000,000 shares of Inteliant common stock (the
Company owns all 30,000,000 shares of Inteliant common stock that are issued and
outstanding). The number of options to be granted, the vesting schedule of such
grants and other conditions of each grant are established by Inteliant's board
of directors. The grants will be issued at the fair market value as determined
in good faith by the Inteliant board of directors. The Company and Inteliant's
board of directors have engaged an independent third party valuation firm to
determine the fair market value of Inteliant for purposes of the Inteliant
Option Plan.
The Committee has approved the issuance of 398,000 Inteliant options to
Mr. Schaffer. The Company and Mr. Schaffer have preliminarily agreed to cancel
the Company options held by Mr. Schaffer under the Incentive Plan. Other Key
Executives could be eligible for grants under the Inteliant Option Plan, but
none have been approved for grant.
Other Compensation Plans. The Company has a number of other broad-based
employee benefit plans in which the Key Executives 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. Key Executives and other
employees employed by the Company who are determined to be highly
compensated for purposes of the Code are not entitled to participate in
the Company's 401(k) plan. Effective January 1, 2000, the highly
compensated employees of Inteliant, including Key Executives employed
by Inteliant, became able to participate in the 401(k) plan. The
Company has received a favorable determination from the IRS treating
Inteliant as a separate line of business for 401(k) discrimination
testing purposes. In March 2000, the Company matched one-third of the
contributions made by eligible employees during 1999. The Company's
match was capped at $2,000 per participant.
iii. The Company's 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 maintains 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 March 2000, the Company matched one-third
of the contributions made by eligible employees during 1999. The
Company's match was capped at $2,000 per participant.
17
<PAGE>
iv. The Company's non-qualified employee stock purchase plan. The plan
permits after-tax payroll deductions to purchase shares of Common
Stock. The Company pays the administrative costs and commissions
related to the plan. Each employee has a separate brokerage account
which holds the shares.
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,
/s/Randolph K. Rolf, Chairman
-----------------------------
Randolph K. Rolf
Chairman
/s/R. Thayne Robson
-------------------
Thayne Robson
/s/Samuel C. Freitag
--------------------
Samual C. Freitag
18
<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 January 2, 2000, 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 14 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.
(GRAPH OMITTED)
<TABLE>
<CAPTION>
6/28/95 6/95 9/95 12/95 3/96 6/96 9/96 12/96 3/97 6/97 9/97 12/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COMPANY 100 98 120 136 162 175 164 153 162 225 269 275
PEER GROUP 100 99 114 122 144 175 176 166 172 228 273 262
NASDAQ STOCK 100 101 114 115 120 130 135 142 134 158 185 173
MARKET (U.S.)
3/98 6/98 9/98 12/98 3/99 6/99 9/99 1/2/00
COMPANY 385 255 213 105 111 76 85 64
PEER GROUP 327 326 238 262 214 226 216 280
NASDAQ STOCK 203 209 188 245 274 300 307 453
</TABLE>
19
<PAGE>
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth information as of March 27, 2000 with
respect to the beneficial ownership of shares of 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 12,691,398 shares of Common
Stock outstanding as of March 27, 2000:
Beneficial Ownership as of March 27, 2000
-----------------------------------------
Percentage
Number of Shares of Class
---------------- --------
Sandra E. Reinhold 2,782,200(1) 21.92%
P.O. Box 730
Midway, UT 84049
Richard D. Reinhold 2,782,200(1) 21.92%
P.O. Box 730
Midway, UT 84049
Reed F. Reinhold 2,788,200(2) 21.97%
1696 E. Torrey Pines Circle
Draper, UT 84020
Neuberger Berman, LLC 1,217,239(3) 9.59%
605 Third Avenue
New York, NY 10158-3698
Lord, Abbet & Co. 1,076,947 8.49%
767 Fifth Avenue
New York, NY 10153-0203
Brinson Partners, Inc. (4) 997,953 7.86%
209 South LaSalle
Chicago, IL 60604-1295
Fleet Boston Corporation 726,860(5) 5.73%
One Federal Street
Boston, MA 02110
Dimensional Fund Advisors Inc. 713,600(6) 5.62%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
JoAnn W. Wagner 83,310(7) *
Richard J. Tripp 33,204(7)(8) *
John E. Schaffer 27,876(7)(8) *
Randolph K. Rolf 27,275(7)(9) *
Samuel C. Freitag 23,300(7)(10) *
Stanley R. deWaal 19,700(7) *
R. Thayne Robson 19,700(7) *
Dennis N. Emery 8,500(7) *
All officers and directors 289,471(7)(8) 2.28%
as a group (12 persons)
- ----------
* Less than one percent of outstanding shares
20
<PAGE>
(1) Of the shares reflected as beneficially owned by Sandra E. Reinhold and
Richard D. Reinhold, 1,353,600 shares are held of record by Sandra E. Reinhold,
1,348,600 shares are held of record by Richard D. 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) Of the shares reflected as beneficially owned by Reed F. Reinhold, 6,000
shares are held of record by Reed F. Reinhold. Pursuant to a power of attorney
dated March 6, 1998, Reed F. Reinhold shares voting power with Richard D.
Reinhold and Sandra E. Reinhold to vote each of the shares described in note (1)
above.
(3) Based on the information provided to the Company, of the shares reflected as
beneficially owned by Neuberger Berman, LLC, 789,400 shares are beneficially
owned by Neuberger Berman Genesis Portfolio and the balance are beneficially
owned by various funds of which Neuberger Berman, LLC is a sub-advisor.
Neuberger Berman Management Inc. is also deemed to be a beneficial owner of the
shares listed.
(4) Based upon information provided to the Company, the Company believes that
Brinson Partners, Inc. is an indirect wholly-owned subsidiary of UBS AG, Zurich,
Switzerland.
(5) Based on information provided to the Company, the Company believes that
Fleet Boston Corporation has sole voting power of 500,860 of the shares
reflected as beneficially owned. It has sole dispositive power over all 726,860
shares reflected.
(6) Based on information provided to the Company, the Company believes that
Dimensional Fund Advisors, Inc. possesses voting or investment power of the
shares reflected in its role as an investment advisor or manager.
(7) The share amounts indicated include shares subject to options currently
exercisable held by the following persons in the following amounts: JoAnn W.
Wagner, 63,160 shares; Richard J. Tripp, 29,100 shares; John E. Schaffer, 26,800
shares; Randolph K. Rolf, 19,700 shares; Samuel C. Freitag, 11,700 shares;
Stanley R. deWaal, 19,700 shares; R. Thayne Robson, 18,700 shares; Dennis N.
Emery, 8,500 shares; and all officers and directors as a group, 243,280 shares.
(8) The share amounts indicated 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 104 shares; John E. Schaffer, approximately 576 shares;
and all officers and directors as a group 916 shares. The number of shares held
in the Company's 401(k) plan is based on plan information available on December
31, 1999, the last statement date of the plan.
21
<PAGE>
(9) The share amounts indicated for Randolph K. Rolf include 7,575 shares owned
of record by the Randolph K. Rolf Trust.
(10)The share amounts indicated for Samuel C. Freitag include 300 shares held as
custodian for his minor children.
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 incorporated by Reed F.
Reinhold, an adult son of Richard D. and Sandra E. Reinhold, principal
shareholders of the Company, for approximately $1,285,000; of which $600,000 was
paid in cash with the remaining $685,000 in a note payable. At the time of the
acquisition, the Company had receivables due from TSI in the amount of
approximately $625,000, which were set-off against the note payable. The balance
of the note was paid during fiscal 1998. 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 the operation of such business. In consideration of such
rights, 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. Under the franchise
agreement, the Company recorded service fee revenues of approximately $133,000
and $126,000 for fiscal years 1997 and 1996, respectively. 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 $103,000. The Company paid approximately $103,000, $87,000 and
$86,000 as lease payments for fiscal years 1999, 1998 and 1997, 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.
During 1999, certain companies owned by two of the adult children of
Richard D. and Sandra E. Reinhold, including Reed F. Reinhold, leased employees
from ServCom Staff Management, Inc. ("ServCom"), a wholly-owned subsidiary of
the Company. During 1999 ServCom generated revenues totaling approximately
$437,000 related to leasing employees to the companies owned by these adult
children. There were no outstanding receivables at the end of 1999 related to
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these agreements.. During 1998, ServCom generated revenues totaling
approximately $270,500 related to leasing employees to the companies owned by
these adult children. Outstanding receivables at the end of fiscal 1998 related
to these agreements totaled approximately $38,000. The Company believes that the
terms of this relationship are similar to those that would be given to an
unaffiliated third party in a similar agreement.
During 1999 the Company contributed approximately $297,000 in cash and
other assets to a joint venture with a former employee whereby the Company
acquired 49% of the newly-formed venture, Bency & Associates, LLC. The carrying
value of the venture at January 2, 2000 was approximately $264,000. The joint
venture is being accounted for using the equity method of accounting. As part of
the agreement, the Company agreed to provide a credit facility of $500,000
terminating December 31, 2000. The agreement provides for interest at a bank's
prime rate less 1% (7.5% at January 2, 2000) on the first $100,000 for the first
six months, with the rate increasing to a bank's prime rate (8.5% at January 2,
2000) for any amount over $100,000 or after six months. At January 2, 2000,
borrowings under this credit facility were approximately $225,000. Interest
income during fiscal 1999 was approximately $2,000.
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 31, 2000, 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.
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 desire to have included in the Company's
proxy materials relating to the annual meeting of shareholders to be held in the
2001 calendar year must be received by John K. Morrison, Vice President, General
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Counsel and Secretary of the Company, at the Company's executive offices (1415
South Main Street, Salt Lake City, Utah, 84115) no later than December 6, 2000
in order to be considered for possible inclusion in such proxy materials.
Pursuant to rules adopted by the Securities and Exchange Commission, if
a shareholder intends to propose any matter for a vote at the annual meeting of
shareholders to be held in the 2001 calendar year, but fails to notify the
Company of such intention prior to February 20, 2001, then a proxy solicited by
the Board of Directors may be voted on such matter in the discretion of the
proxy holder, without discussion of the matter in the proxy statement soliciting
such proxy and without such matter appearing as a separate item on the proxy
card.
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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 1999 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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