SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
LABOR READY, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
LABOR READY, INC.
- --------------------------------------------------------------------------------
(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:
-----------------------------------------------------------------------
[LOGO]
Tacoma, Washington
June 28, 1999
Dear Shareholders:
It is a pleasure to invite you to your Company's 1999 Annual Meeting of
Shareholders, to be held at the Best Western Executive Inn, 5700 Pacific Highway
East, Fife, Washington, on Wednesday, August 4, 1999, at 10:00 a.m. (Pacific
Daylight Time).
The matters to be acted upon are described in the accompanying Notice of
Annual Meeting and Proxy Statement.
The Company has continued to expand dramatically in the last year with 683
dispatch offices now open. I hope that those shareholders who find the time and
place convenient will attend the meeting. We will report on Labor Ready's
operations and respond to any questions you may have.
YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND, IT IS
IMPORTANT THAT YOUR SHARES BE REPRESENTED. PLEASE SIGN, DATE, AND MAIL THE
ENCLOSED PROXY CARD AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE PREPAID ENVELOPE
IN ORDER TO ENSURE THAT YOUR VOTE IS COUNTED. IF YOU ATTEND THE MEETING, YOU
WILL, OF COURSE, HAVE THE RIGHT TO VOTE YOUR SHARES IN PERSON.
Very truly yours,
[SIG]
Glenn A. Welstad
Chairman of the Board,
Chief Executive Officer and
President
LABOR READY, INC.
1016 SOUTH 28(TH) STREET
TACOMA, WASHINGTON 98409
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
WEDNESDAY, AUGUST 4, 1999
---------------------
To the Shareholders:
The annual meeting of the Shareholders of Labor Ready, Inc., a Washington
corporation, will be held at the Best Western Executive Inn, 5700 Pacific
Highway East, Fife, Washington, on Wednesday, August 4, 1999, at 10:00 a.m.
(Pacific Daylight Time) for the following purposes:
1. to elect the directors to serve until the next Annual Meeting of
Shareholders, and until their respective successors are elected and
qualified;
2. to vote on a proposed amendment to Labor Ready, Inc.'s Articles of
Incorporation to limit the personal liability of the Company's directors
to the maximum extent allowed by Washington law;
3. to ratify the selection of Arthur Andersen LLP as Labor Ready Inc.'s
independent public auditors for the fiscal year ending December 31, 1999;
and
4. to transact such other business as may properly come before the meeting
or any adjournment thereof.
Only shareholders of record at the close of business on June 24, 1999, will
be entitled to notice of, and to vote at, the annual meeting and any
adjournments thereof.
By Order of the Board of Directors
[SIG]
Ronald L. Junck,
SECRETARY
Tacoma, Washington
June 28, 1999
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO DATE AND
SIGN THE ENCLOSED PROXY CARD AND RETURN IT AS PROMPTLY AS POSSIBLE IN THE
ENCLOSED STAMPED AND ADDRESSED ENVELOPE IN ORDER THAT THE PRESENCE OF A QUORUM
MAY BE ASSURED. THE GIVING OF SUCH PROXY DOES NOT AFFECT YOUR RIGHT TO REVOKE IT
LATER OR VOTE YOUR SHARES IN PERSON IN THE EVENT THAT YOU SHOULD ATTEND THE
MEETING.
LABOR READY, INC.
1016 SOUTH 28(TH) STREET
TACOMA, WASHINGTON 98409
------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
WEDNESDAY, AUGUST 4, 1999
------------------------
We sent you this proxy statement because the Board of Directors of Labor
Ready, Inc., a Washington corporation is soliciting your proxy to vote your
shares at the 1999 Annual Meeting of Shareholders of the Company. The annual
meeting will be held at 10:00 a.m. (Pacific time) on Wednesday, August 4, 1999,
at the Best Western Executive Inn, 5700 Pacific Highway East, Fife, Washington,
and at any adjournment thereof. This proxy statement contains information that
we are required to provide to you under the rules of the Securities and Exchange
Commission and that is designed to assist you in voting your shares. We are
sending this proxy statement to the holders of common and preferred stock of the
Company.
REVOCATION OF PROXIES. If you execute a proxy, you will retain the right to
revoke it at any time before it is voted. You may revoke or change your proxy
before it is voted by: (i) sending a written revocation to the Corporate
Secretary of the Company at 1016 South 28(th) Street, Tacoma, Washington 98409;
(ii) submitting a proxy with a later date; (iii) delivering a written request in
person to return the executed proxy; or (iv) attending the annual meeting and
voting at the annual meeting. Your right to revoke your proxy is not limited by
or subject to compliance with a specified formal procedure, but you should give
written notice to the Secretary of the Company at or before the annual meeting
so that the number of shares represented by proxy can be recomputed.
VOTING OF PROXIES. If you properly execute and return the enclosed proxy
card, the individuals named on the proxy card (your proxies) will vote your
shares in the manner you indicate. We urge you to specify your choices by
marking the appropriate box on the enclosed proxy card; if you sign and return
the proxy card without indicating your instructions, your shares will be voted
FOR THE ELECTION OF DIRECTORS NOMINATED BY THE BOARD OF DIRECTORS AND FOR
PROPOSALS 2 AND 3, and with respect to any other business that may come before
the meeting, as recommended by the Board of Directors. You may vote for,
against, or abstain from voting on, any matter that may properly come before the
meeting.
QUORUM. A quorum is necessary to hold a valid meeting. If shareholders
entitled to cast at least a majority of all the votes entitled to be cast at the
annual meeting are present in person or by proxy, a quorum will exist. Shares
represented by proxies containing an abstention as to any matter will be treated
as shares that are present and entitled to vote for purposes of determining a
quorum. Similarly, shares held by brokers or nominees for the accounts of others
as to which voting instructions have not been given ("Broker Non-Votes") will be
treated as shares that are present and entitled to vote for purposes of
determining a quorum.
EFFECT OF ABSTENTIONS AND BROKER NON-VOTES. Election of directors and
approval of the amendment to the Company's Articles require the affirmative vote
of the shares represented at the annual meeting. Abstentions and Broker
Non-Votes will have no effect in the election of directors. Abstentions and
Broker Non-Votes will have the effect of a "no" vote as to the proposed
amendment to the Company's Articles of Incorporation.
RECORD DATE. Shareholders of record at the close of business on June 24,
1999 are entitled to vote at the annual meeting. On June 15, 1999, the Company
had 42,898,434 shares of common stock outstanding, and there were 6,485,696
shares of preferred stock outstanding. The number of shares outstanding reflects
a 3 for 2 stock split effective on June 24, 1999 (effected as a dividend of one
share of common stock or
preferred stock for every two shares of common stock or preferred stock held),
and payable on July 12, 1999. Each share of common stock entitles the holder
thereof to one vote and each share of preferred stock entitles the holder
thereof to one vote.
DISCRETIONARY AUTHORITY. If any nominee for director is unable to serve or
for good cause will not serve, or if any matters not specified in this proxy
statement come before the meeting, eligible shares will be voted as specified by
the named proxies pursuant to discretionary authority granted in the proxy. At
the time this proxy statement was printed, we were not aware of any other
matters to be voted on.
SOLICITATION OF PROXIES. Proxies may be solicited by officers, directors
and regular supervisory and executive employees of the Company, none of whom
will receive any additional compensation for their services.
MAILING AND FORWARDING OF PROXY MATERIALS. On June 30, 1999, we first began
mailing this proxy statement and the enclosed proxy card to shareholders. We
will arrange with brokerage firms and other custodians, nominees and fiduciaries
to forward proxy solicitation material to certain beneficial owners of the
common stock and will reimburse such brokerage firms, custodians, nominees and
fiduciaries for reasonable out-of-pocket expenses that they incur as a result of
forwarding the proxy materials.
EXECUTIVE OFFICES. The principal executive office of the Company is 1016
South 28(th) Street, Tacoma, Washington 98409. The phone number for the Company
is (253) 383-9101.
PROPOSAL 1. ELECTION OF DIRECTORS
The Company's directors are elected each year at the annual meeting of
shareholders to serve until they resign or are removed, or are otherwise
disqualified to serve, or until their successors are elected and qualified. The
Company's Board of Directors currently consists of five directors. The Board of
Directors has unanimously nominated the following persons for election as
directors, all of whom are currently directors. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR EACH OF THE NOMINEES. The nominees are as follows:
GLENN A. WELSTAD, age 55, has served as the Company's Chairman of the Board
of Directors, Chief Executive Officer and President since February 1988. Prior
to joining the Company, Mr. Welstad was an officer of Body Toning, Inc., W.I.T.
Enterprises, and Money Mailer from February 1987 to March 1989. In 1969 Mr.
Welstad founded Northwest Management Corporation, a holding company for
restaurant operations. Over the course of 15 years, Mr. Welstad expanded the
operations to twenty-two locations in five states, which included eight Hardee's
Hamburger Restaurants as well as pizza and Mexican restaurants. In March 1984,
Mr. Welstad sold his ownership interest in Northwest Management Corporation.
ROBERT J. SULLIVAN, age 69, has served as a director of the Company since
November 1994. Prior to joining the Company he served as a financial consultant
of the Company from July 1993 to June 1994. Mr. Sullivan served as Chief
Financial Officer of Unifast Industries, Inc. from June 1990 to November 1991,
and General Manager of Reserve Supply Company of Long Island from July 1992 to
December 1993. Additionally, Mr. Sullivan has an extensive career of over 33
years in financial management, as both a CPA and audit manager with Price
Waterhouse & Co. and as a member of executive management with companies listed
on NYSE and AMEX such as American Express Company, Bush Universal, Inc.,
Cablevision Systems, Inc. and Micron Products, Inc.
THOMAS E. MCCHESNEY, age 52 has served as a director of the Company since
July 1995. In September 1996, Mr. McChesney became associated with Blackwell
Donaldson and Company, as director of investment banking. Mr. McChesney is also
a director of Firstlink Communications, Inc. and Nations Express, Inc.
Previously, Mr. McChesney was an officer and director of Paulson Investment Co.
and Paulson Capital Corporation from March 1977 to June 1995.
2
RONALD L. JUNCK, age 51, has served as a Director and Secretary of the
Company since November 1995. In February 1998, Mr. Junck joined the Company as
Executive Vice President and General Counsel. From 1974 until 1998, Mr. Junck
practiced law in Phoenix, Arizona, specializing in business law and commercial
transactions and serving as the Company's outside counsel. As an attorney, he
has extensive trial experience in a variety of commercial cases and has lectured
widely at a number of colleges and universities. Mr. Junck is an employee of the
Company, a member of its board of directors, and is also a shareholder in a law
firm that received approximately $429,000 in payment for legal services
performed for the Company in 1998.
RICHARD W. GASTEN, age 61, has served as a Director of the Company since
August 1996. Mr. Gasten has also served as a Director of Labour Ready Temporary
Services, Ltd., the Company's Canadian subsidiary and as a consultant to the
Company since September 1995. In June 1997, Mr. Gasten was appointed to the
position of Vice President and Secretary of the Canadian subsidiary. With this
appointment, the consulting agreement with Mr. Gasten terminated. Mr. Gasten has
over 25 years experience as a member of executive management with various
Canadian financial institutions.
INDEMNIFICATION OF DIRECTORS
The Washington Business Corporation Act (the "Washington Business Act")
provides that a company may indemnify its directors and officers as to certain
liabilities. The Company's Articles of Incorporation and Bylaws provide for the
indemnification of its directors and officers to the fullest extent permitted by
law. The effect of such provisions is to indemnify the directors and officers of
the Company against all costs, expenses and liabilities incurred by them in
connection with any action, suit or proceeding in which they are involved by
reason of their affiliation with the Company, to the fullest extent permitted by
law.
MEETINGS AND COMMITTEES OF THE BOARD
COMPENSATION COMMITTEE. In early 1997, the Board of Directors appointed a
Compensation Committee to review and recommend executive compensation. The
Compensation Committee, which currently consists of Messrs. McChesney, who
chairs the committee, and Sullivan, met four times during fiscal year 1998.
AUDIT COMMITTEE. In early 1997, the Board of Directors appointed an Audit
Committee currently consisting of Messrs. Sullivan, who chairs the committee,
and McChesney to consider the adequacy of the internal controls and the
objectivity of financial reporting. The Audit Committee recommends to the Board
the appointment of the independent public accountants, subject to ratification
by the shareholders at the annual meeting. The Audit Committee met three times
during fiscal year 1998.
3
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of each class of equity securities of the Company as of June 15, 1999
for (i) each person known to the Company to own beneficially 5% or more of any
such class as of June 15, 1999, (ii) each director of the Company, (iii) each
executive officer of the Company named in the Summary Compensation Table and
(iv) all officers and directors of the Company as a group. Except as otherwise
noted, the named beneficial owner has sole voting and investment power.
AMOUNT AND
NATURE OF
BENEFICIAL
OWNERSHIP
NAME & ADDRESS (NUMBER OF PERCENT OF
OF BENEFICIAL OWNER TITLE OF CLASS SHARES)(1) CLASS
- --------------------------------------------------- ------------------ ----------- -----------
Glenn A. Welstad(1)(2)............................. Common Stock 4,927,718 11.43%
Preferred Stock 4,814,739 74.2%
Ralph E. Peterson(1)............................... Common Stock 156,543 *
Joseph P. Sambataro, Jr.(1)........................ Common Stock 142,875 *
Dennis Diamond(1).................................. Common Stock 1,520 *
Thomas E. Gilbert.................................. Common Stock 5,063 *
Ronald L. Junck(1)................................. Common Stock 378,096 *
Richard W. Gasten(1)............................... Common Stock 23,625 *
Thomas E. McChesney(1)............................. Common Stock 142,466 *
Robert J. Sullivan(1).............................. Common Stock 88,603 *
All Officers and Directors as Group Common Stock 5,869,007 13.6%
(12 Individuals)(1)................................ Preferred Stock 4,814,739 74.2%
- ------------------------
* Less than 1%.
(1) Beneficial ownership is calculated in accordance with Rule 13d-3(d)(1) of
the Securities Exchange Act of 1934, as amended and includes shares of
common stock issuable upon exercise of options, warrants, and other
securities convertible into or exchangeable for common stock currently
exercisable or exercisable within 60 days of June 15, 1999. The share
numbers above reflect a 3 for 2 stock split effective June 24, 1999 and
payable on July 12, 1999.
(2) The business address of Mr. Welstad is 1016 S. 28(th) Street, Tacoma,
Washington, 98409.
4
PROPOSAL 2. AMENDMENT OF ARTICLES OF INCORPORATION
The Board of Directors has proposed an amendment to its articles of
incorporation that would limit the personal monetary liability of directors for
their actions as a director to the maximum extent permitted by Washington law.
The text of the amendment to the Company's articles of incorporation is attached
as Exhibit A.
Washington law provides that, if authorized by a company's articles of
incorporation, a director will not be personally liable to the corporation or
its shareholders for monetary damages for conduct as a director. A director will
be liable for (a) intentional misconduct by the director or a knowing violation
of law by the director; (b) dividends and distributions that are paid in
violation of Washington law; and (c) transactions in which the director
personally receives a benefit in money, property or services to which the
director is not legally entitled.
The Washington legislature adopted the statute in 1989 in response to
concerns that certain events had resulted in a significant increase in the risk
of liability encountered by directors and that companies were experiencing
significant difficulties in retaining outside directors and attracting qualified
candidates as directors. The composition of the Company's board of directors,
including its two independent directors, has changed little since the Company
became listed on the Nasdaq Stock Market in 1996 and its subsequent listing on
the New York Stock Exchange in 1998. The Company is engaged in identifying and
recruiting prospective candidates for its board of directors. The board of
directors believes the Company must raise the standard of protection for
directors up to the level authorized by Washington law in order to attract
highly qualified, independent directors.
The Company has adopted some provisions to provide directors with
protection. For example, the Company is authorized by its articles of
incorporation to indemnify each director consistent with Washington law.
Similarly, the Company has provided a limitation of monetary liability for
directors in its bylaws and has obtained officers and directors liability
insurance. While those provisions provide directors with a significant degree of
protection, given the dramatic changes in the Company's operations and business
activities in recent years (e.g., during the past five years the number of
dispatch offices has increased from 51 to 683, while revenues have increased
from $39 million to $607 million), the board of directors believes that the
Company should provide its directors with the maximum protection authorized by
Washington law.
Since the amendment would, if adopted, limit the liability of the current
directors, the current directors may be deemed to have a "conflicting interest"
under Washington law. AS A RESULT, THE BOARD OF DIRECTORS ARE NOT MAKING A
RECOMMENDATION TO THE COMPANY'S SHAREHOLDERS WITH RESPECT TO THE APPROVAL OR
DISAPPROVAL OF PROPOSAL 2.
5
PROPOSAL 3. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
On September 22, 1997, the Company engaged Arthur Andersen, LLP ("Arthur
Andersen") as principal accountants for the year ending December 31, 1997.
Arthur Andersen replaced BDO Seidman LLP ("BDO") as of the date reported above.
The change in the Company's independent auditor was the result of a mutually
agreeable decision between the Company and BDO to discontinue their
relationship, which resulted in BDO submitting a resignation letter to the
Company, which the Company received on September 18, 1997. The Company solicited
a formal proposal from Arthur Andersen due to Arthur Andersen's excellent
reputation and expertise in the temporary employment industry, numbering among
its clients some of the largest companies in the industry. The Company's Audit
Committee approved the engagement of Arthur Andersen on September 22, 1997.
During the two most recent fiscal years there have been no disagreements
with BDO on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure nor any reportable events.
Arthur Andersen's report on the consolidated financial statements for the past
two years contained no adverse opinion or disclaimer of opinion and was not
qualified or modified as to uncertainty, audit scope or accounting principles.
Upon the recommendation of the Audit Committee, the Board of Directors has
appointed Arthur Andersen to serve as the independent auditors of the Company
for the calendar year ending December 31, 1999. Representatives of Arthur
Andersen will be present at the annual meeting to make a statement if they
desire to do so and respond to appropriate questions by shareholders. The
affirmative vote of a majority of the shares represented at the meeting is
required for the ratification of the Board's selection of Arthur Andersen as the
Company's independent auditors for the calendar year ending December 31, 1999.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE SELECTION
OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS OF THE COMPANY.
EXECUTIVE OFFICERS
The names, ages and positions of the non-director executive officers of the
Company are listed below along with their business experience during the past
five years. No family relationships exist among any of the directors or
executive officers of the Company, except that Todd A. Welstad is the son of
Glenn A. Welstad.
JOSEPH P. SAMBATARO, JR., age 49, has served as Executive Vice President,
Treasurer, Chief Financial Officer and Assistant Secretary of the Company since
August 1997. Prior to joining the Company, he served as the Managing Partner of
the Seattle office of BDO Seidman, LLP, an accounting and consulting firm from
1990 to 1997. In 1985 Mr. Sambataro was co-founder, and served as Director and
Officer of Ecova Corporation, an on-site toxic waste remediation company until
1989. From 1972 until 1985 Mr. Sambataro was a Partner with KPMG Peat Marwick in
the New York, Miami and Seattle offices. Mr. Sambataro obtained a degree in
accounting from Fordham University in 1972 and is a member of the American
Institute of Certified Public Accountants.
DENNIS DIAMOND, age 38, has served as Chief Operating Officer since June
1998. Since joining the Company in 1993, Mr. Diamond has served in a variety of
positions of increasing responsibility, most recently, as Executive Vice
President of Operations since March 1998 and Vice President of Operations for
the Western Division since October 1997. Mr. Diamond started with Labor Ready in
1993 as a dispatch office general manager and has served as a District Manager
and Area Director in various locations with the Company. Mr. Diamond received
his Masters of Business Administration from Kansas State University in 1991 and
his Bachelor's Degree in Political Science from Clemson University in 1982.
6
TODD A. WELSTAD, age 29, has served as Chief Information Officer of the
Company since August 1997. Mr. Welstad joined the Company in January 1994 as the
manager of the Tacoma dispatch office and in August 1994 was promoted to Systems
Analyst in the MIS Department. From October 1994 until August 1997, Mr. Welstad
served as Director of the MIS Department. From February 1989 to December 1994,
Mr. Welstad was employed as a Technical Supervisor at Micro-Rel, a division of
Medtronics.
STEVE COOPER, age 37, has served as Corporate Controller of the Company
since April 1999. Prior to joining the Company, Mr. Cooper's most recent
position was with the international consulting and accounting firm of Arthur
Andersen as a Senior Manager in Business Process Consulting from 1998 to 1999.
From 1993 to 1998, Mr. Cooper worked for Albertson's as the Director of
Corporate Internal Controls. He was a Senior Manager with Deloitte & Touche from
1985-1993. Mr. Cooper received a degree in accounting from Idaho State
University in 1985 and is a member of the American Institute of Certified Public
Accountants.
THOMAS GILBERT, age 43, has served as Regional Vice President of Operations
for the Western Region since July 1998. Mr. Gilbert joined the Company in
January 1996 as a District Manager. In July 1996 he was promoted to Area
Director of Operations for the Company's Central Area. Prior to joining the
Company, Mr. Gilbert was Division Operations Manager for Taco John's
International, Inc., an operator and franchisor of Mexican quick service
restaurants based in Cheyenne, Wyoming, from 1991 to 1995.
JAMES SCHLICHER, age 40, has served as Regional Vice President since March
1998. Since joining the Company in 1995, Mr. Schlicher has held a variety of
positions including District Manager and Area Director of Operations. Prior to
joining the Company, he served as Vice President of Operations for Monterey
Pasta Company from 1994 to 1995, Regional Manager for NPCI from 1985 to 1994,
and Market Manager for Pizza Hut from 1977 to 1985. Mr. Schlicher obtained a
degree in General Business with a minor in psychology from Liberty University of
Virginia in 1989.
BRYAN WEMPEN, age 29, has served as Regional Vice President since May 1999.
Since joining the Company in 1994, Mr. Wempen has served in a variety of
positions including Branch Manager, District Manager, Senior District
Manager--Northern California, and most recently Area Director of Operations for
the Southeast area since March 1998. Prior to joining the Company, Mr. Wempen
was Sales Manager for Ayers Company Inc., a Midwest gaming company based in
Kearney, Nebraska from 1992 to 1994. Mr. Wempen received a degree in Business
Management from the University of Nebraska in 1992.
7
EXECUTIVE COMPENSATION
The number of shares in the next three tables reflects a 3 for 2 stock split
effective June 24, 1999, and payable on July 12, 1999. The following table sets
forth the compensation earned by the Chief Executive Officer and the next four
most highly compensated executive officers of the Company for the last completed
fiscal year.
SUMMARY COMPENSATION TABLE(1)
LONG-TERM
COMPENSATION
AWARDS
------------- ALL OTHER
ANNUAL COMPENSATION SECURITIES COMPENSATION
UNDERLYING -------------------
-------------------- OPTIONS/ MATCHING 401(K)
NAME AND POSITION YEAR SALARY($) SARS(#) CONTRIBUTIONS
- ---------------------------------------------------------- --------- --------- ------------- -------------------
Glenn A. Welstad.......................................... 1998 497,380 45,000 $ 2,500
Chairman of the Board, Chief 1997 452,958 -- $ 2,375
Executive Officer and President 1996 401,486 --
Ralph E. Peterson(2)...................................... 1998 240,000 45,000 --
Executive Vice President--Corporate 1997 265,026 1,688 --
And Business Development 1996 154,772 759,375 --
Dennis D. Diamond......................................... 1998 198,692 45,000 $ 2,484
Chief Operating Officer 1997 172,917 119,813 $ 2,195
1996 170,233 --
Joseph P. Sambataro, Jr................................... 1998 192,692 45,000 $ 1,731
Executive Vice President Chief Financial 1997 53,328 405,000 --
Officer, Treasurer and Assistant Secretary
Thomas E. Gilbert......................................... 1998 168,000 9,554 $ 2,500
Vice President--Western Region 1997 153,577 35,438 $ 1,487
1996 86,263 20,250 --
- ------------------------
(1) None of the named executives received compensation reportable under the
Restricted Stock Awards or Long-Term Incentive Plan Payouts columns.
(2) Effective December 31, 1998, Mr. Peterson resigned as Executive Vice
President Corporate and Business Development and effective March 12, 1999,
he resigned as Director.
8
OPTION GRANTS DURING 1998 FISCAL YEAR
The following table provides information related to options granted to the
executive officers named in the Summary Compensation Table during 1998. The
exercise price reflects a 3 for 2 stock split effective June 24, 1999, and
payable on July 12, 1999.
POTENTIAL REALIZABLE
OPTION/SAR GRANTS IN LAST FISCAL YEAR VALUE AT ASSUMED
---------------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM (1)
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION ----------------------
NAME GRANTED(2) FISCAL YEAR ($/SH)(3) DATE 5% 10%
- ------------------------------------ ------------- ----------------- ----------- ----------- ---------- ----------
Glenn Welstad....................... 45,000 2% 12.05 2/27/03 149,910 331,110
Chairman of the Board, Chief
Executive Officer and President
Ralph E. Peterson................... 45,000 2% 12.05 2/27/03 149,910 331,110
Executive Vice President--
Corporate and Business Development
Dennis D. Diamond................... 45,000 2% 12.05 2/27/03 149,910 331,110
Chief Operating Officer
Joseph P. Sambataro, Jr............. 45,000 2% 12.05 2/27/03 149,910 331,110
Executive Vice President, Chief
Financial Officer, Treasurer and
Assistant Secretary
Thomas E. Gilbert................... 9,554 .3% 12.05 2/27/03 31,826 70,295
Vice President--Western Region
- ------------------------
(1) The potential realizable value portion of the table illustrates value that
might be realized upon exercise of the options immediately prior to the
expiration of their term, assuming the specified compounded rates of
appreciation on the Company's common stock over the term of the options.
These numbers do not take into account certain provisions of the options
providing for cancellation of the option following termination of
employment.
(2) Options to acquire shares of common stock. The options vest 25% annually
over the next four years.
(3) The option exercise price may be paid in shares of common stock owned by the
executive officer, in cash, or in any other form of valid consideration or a
combination of any of the foregoing, as determined by the Compensation
Committee in its discretion.
9
OPTION EXERCISES DURING 1998 AND YEAR END OPTION VALUES
The following table provides information related to options exercised by the
named executive officers during 1998 and the number and value of options held at
year-end. The Company does not have any outstanding stock appreciation rights
("SARs").
AGGREGATE OPTION/SAR EXERCISES IN 1998
AND YEAR-END OPTION/SAR VALUE
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
DECEMBER 31, 1998(#) DECEMBER 31, 1998($)(1)
SHARES ACQUIRED VALUE -------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------- --------------- ------------- ----------- ------------- ------------ -------------
Glenn Welstad..................... -- -- -- 45,000 -- $ 48,135
Chairman of the Board, Chief
Executive Officer and President
Ralph E. Peterson................. 76,253 $ 1,980,236 228,794 350,015 $ 2,096,569 $ 3,007,170
Executive Vice President
Corporate and Business
Development
Dennis D. Diamond................. -- -- 52,059 128,448 $ 490,651 $ 714,963
Chief Operating Officer
Joseph P. Sambataro, Jr........... -- $ 1,000,552 112,500 247,500 $ 1,059,938 $ 1,956,023
Executive Vice President Chief
Financial Officer Treasurer and
Assistant Secretary
Thomas E. Gilbert................. 13,922 -- -- 37,820 -- $ 276,508
Vice President--Western Region
- ------------------------
(1) The closing price for the Company's common stock as reported by the New York
Stock Exchange on December 31, 1998, as adjusted for the 3 for 2 stock split
effective June 24, 1999, was $13.13.
COMPENSATION OF DIRECTORS
Each nonemployee director receives an annual retainer of $20,000, $1,000 for
attending each regular or special Board of Directors meeting, and $500 for
attending each assigned committee meeting. The Board of Directors met four times
in fiscal year 1998. The 1998 Stock Option and Incentive Plan provides for the
annual grant to directors of the Company of a nonqualified option for 2,000
shares on the first business day of each January, vesting after 6 months of
service as a director, and exercisable at the fair market value of the Company's
common stock. In addition, the Board of Directors may grant a nonqualified
option to a director upon his or her initial election or appointment to the
Board of Directors.
10
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION(*)
The Company's executive compensation is determined by a compensation
committee comprised of two members of the Board of Directors, Messrs. McChesney
and Sullivan. The philosophy of the Company's executive compensation program is
that compensation of executive officers should be directly and materially linked
both to the operating performance of the Company and to the interests of
Shareholders.
Annual cash compensation, together with stock options, is designed to
attract and retain qualified executives and to ensure that such executives have
a continuing stake in the long term success of the Company. Beginning in 1998,
the Compensation Committee developed more formal policies with respect to
executive compensation through the use of a consulting firm. In 1998, the Board
of Directors approved guidelines for annual grants of stock options to
management and administrative personnel. Under the plan as approved, each of the
executive officers of the Company receives a grant of 20,000 options per year,
subject to annual approval by the Compensation Committee.
With respect to compensation for the Company's CEO, base salary for 1998 and
prior years has been set by a contract that expired December 31, 1998. The
Company and Mr. Welstad have executed a new five-year contract as described
below. With respect to both base salary and incentive compensation, the
Compensation Committee believes that there is substantial basis for increasing
the CEO's compensation. The Company's common stock price has, as illustrated by
the Performance Graph below, increased dramatically in the past four and a half
years (more than 1,400%), many times the Company's peer group and the Nasdaq
Composite. In addition, revenue growth during the last year and last five years
increased 81% and 1,458%, respectively, while earnings have increased in the
same periods 184% and 2,224%, respectively.
The Compensation Committee believes that, as the Company's single largest
shareholder, the CEO's interests are already aligned with the interests of all
shareholders. However, based on the Company's outstanding performance for the
last year and the prior five years, the Committee believes that there is a
significant basis for increasing the CEO's compensation. The Committee would
view favorably increasing the CEO's cash compensation through salary adjustments
or bonuses or granting additional stock-based compensation, or both. Instead,
the CEO has requested, and the Committee has approved, (1) entering into a split
dollar insurance policy with a trust for his estate planning purposes; and (2) a
small increase in his salary.
With respect to other executive officers, the Compensation Committee sets
salary based on recommendations of the CEO, unless the officer's salary is
established by written contract. With respect to officers that have recently
joined the Company, the recommendations are based on the CEO's negotiations with
the officer as necessary to attract such persons to become officers of the
Company. With respect to other officers, especially the CEO's son, the
Compensation Committee reviews the salaries for officers with comparable duties
at the median of companies of comparable revenue size in the Pacific Northwest.
These companies are selected informally without the use of a compensation
consultant. Annual salary increases are typically modest, except to reflect
changes in responsibilities.
Members of the Compensation Committee
Thomas E. McChesney, Chair
Robert J. Sullivan
- ------------------------
* The report of the Compensation Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under either the Securities Act of 1933, as amended,
or the Securities Exchange Act of 1934, as amended (together, the "Acts"),
except to the extent that the Company specifically incorporates such report by
reference; and further, such report shall not otherwise be deemed filed under
the Acts.
11
EMPLOYMENT AGREEMENTS:
On June 8, 1999, the Company entered into an employment agreement with Glenn
Welstad, the Company's Chairman and Chief Executive Officer, which provides for
annual compensation of $500,000, payable not less frequently than monthly. In
addition, the employment agreement provides that the Board of Directors may
increase Mr. Welstad's compensation and award him such bonuses as the Board sees
fit, based on Mr. Welstad's performance, and the overall performance of the
Company. The term of Mr. Welstad's employment agreement runs through December
31, 2003. The agreement also provides that Mr. Welstad will receive
reimbursement for reasonable out-of-pocket expenses that he incurs in connection
with his services for the Company, and the Company will pay a portion of the
premiums due on a life insurance policy on the life of Mr. Welstad and his
spouse. Mr. Welstad is also entitled to all benefits offered generally to
employees of the Company.
In March 1997, the Company entered into an employment agreement with Ralph
E. Peterson, the Company's former Executive Vice President--Corporate and
Business Development, which provided for annual compensation of $20,000 per
month at inception of the agreement, subject to annual increases on the
anniversary date of the agreement at the discretion of the Board of Directors.
In addition, the employment agreement provided for a bonus, as determined by the
compensation committee, based on Mr. Peterson's performance, and the overall
performance of the Company. The agreement provided Mr. Peterson with options to
purchase 506,250 of the Company's common stock at its fair market value at date
of grant of $3.97. 101,250 of the options vested on the date of grant and the
balance in equal annual amounts to 2000. Effective December 31, 1998, in
connection with his retirement from full time employment, Mr. Peterson and the
Company agreed to terminate his employment agreement and Mr. Peterson resigned
his duties as Executive Vice President Corporate and Business Development.
Effective March 12, 1999, Mr. Peterson resigned as Director. The Company has
entered into a new employment agreement with Mr. Peterson through April 30, 2002
which provides for a salary of $2,000 per month and continuation of the vesting
schedule for options which had been previously granted. Mr. Peterson will
continue to assist the company with business development and other special
projects as directed by its President and CEO.
In August 1997, the Company entered into an employment agreement with Joseph
P. Sambataro, Jr., the Company's Executive Vice President, Chief Financial
Officer, Treasurer and Assistant Secretary, which provides for annual
compensation of $13,500 per month, subject to annual increases on the
anniversary date of the agreement at the discretion of the Board of Directors.
In addition, the employment agreement provides for a bonus, as determined by the
compensation committee, based on Mr. Sambataro's performance, and the overall
performance of the Company. The agreement provides Mr. Sambataro with options to
purchase 405,000 shares of the Company's common stock at its fair market value
at date of grant of $3.70. 101,250 of the options vest on the date of grant and
50,625 options vest semi-annually to 2000. The agreement expires in 2001 unless
extended by mutual agreement between Mr. Sambataro and the Board of Directors or
is terminated pursuant to its terms.
12
PERFORMANCE GRAPH
The following graph depicts the Company's stock price performance from April
11, 1994 (the date on which quotations for the common stock first appeared on
the OTC Bulletin Board) through December 31, 1998, relative to the performance
of the Nasdaq Stock Market (U.S. Companies), and a peer group of companies in
the temporary labor industry. All indices shown in the graph have been reset to
a base of 100 as of April 11, 1994, and assume an investment of $100 on that
date and the reinvestment of dividends, if any, paid since that date. The lines
represent calendar year end index levels; if the Company's calendar year ended
on a Sunday, the preceding trading day was used.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
TOTAL RETURN TO STOCKHOLDERS
(ASSUMES $100 INVESTMENT ON 4/11/94)
Labor Ready, Inc. Peer Group Dow Jones Composite
4/11/94 $100 $100 $100
12/30/94 228 119 100
12/29/95 600 133 136
12/31/96 759 150 166
12/31/97 1,624 167 217
12/31/98 2,492 147 243
TOTAL RETURN ANALYSIS 4/11/94 12/30/94 12/29/95 12/31/96 12/31/97 12/31/98
- ------------------------------ ----------- ----------- ----------- ----------- ----------- -----------
Labor Ready, Inc.............. $ 100 $ 228 $ 600 $ 759 $ 1,624 $ 2,492
Peer Group*................... $ 100 $ 119 $ 133 $ 150 $ 167 $ 147
Dow Jones Composite........... $ 100 $ 100 $ 136 $ 166 $ 217 $ 243
- ------------------------
* PEER GROUP INCLUDES KELLY SERVICES, INC., MANPOWER, INC., NORRELL
CORPORATION, OLSTEN CORPORATION, AND REMEDYTEMP, INC.
SOURCE: CARL THOMPSON ASSOCIATES WWW.CTAONLINE.COM (800) 959-9677. DATA FROM
BLOOMBERG FINANCIAL MARKETS
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the directors
and executive officers, and persons who own beneficially more than ten percent
of the common stock of the Company, to file reports of ownership and changes in
ownership, with the Securities and Exchange Commission. Copies of all reports
are required to be furnished to the Company pursuant to Section 16(a). Based on
the reports received by the Company, and on written representations from the
reporting persons, the Company believes that the directors, officers, and
greater than ten percent beneficial owners, complied with all applicable
reporting requirements during the year ended December 31, 1998, except that a
Form 4 was not filed timely with respect to Ralph E. Peterson's exercise on
November 5, 1998 of an option to acquire 50,253 shares of the Company's common
stock. This event was reported on a Form 5 dated February 12, 1999.
13
PROPOSALS OF SHAREHOLDERS
The rules of the Securities and Exchange Commission provide that the
deadline for submitting a shareholder proposal to be presented at the Company's
next Annual Meeting of Shareholders and included in the Company's proxy
statement relating to such meeting is not less than 120 calendar days before the
date of the Company's proxy statement released to shareholders in connection
with the previous year's annual meeting. Accordingly, a shareholder proposal to
be presented at the Company's 2000 Annual Meeting of Shareholders and included
in the Company's proxy statement relating to such meeting must be received by
the Company at its executive offices at 1016 South 28(th) Street, Tacoma,
Washington 98409, no later than March 1, 2000. Please send the proposal to the
attention of the Company's Corporate Secretary.
OTHER BUSINESS
We do not intend to bring any other business before the meeting, and so far
as we know, no matters are to be brought before the meeting except as specified
in the notice of the meeting. However, as to any other business which may
properly come before the meeting, it is intended that proxies, in the form
enclosed, will be voted in respect thereof, in accordance with the judgment of
the persons voting such proxies.
FORM 10-K REPORT AVAILABLE
A copy of the Company's annual report on Form 10-K, as filed with the
Securities and Exchange Commission, will be furnished without charge to
shareholders upon request to Chief Financial Officer, Labor Ready, Inc., 1016
South 28(th) Street, Tacoma, Washington 98409; telephone: (253) 383-9101.
LABOR READY, INC.
By Order of the Board of Directors
[SIG]
Ronald L. Junck
SECRETARY
Tacoma, Washington
June 28, 1999
14
EXHIBIT A
LIMITATION OF DIRECTOR LIABILITY
A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for conduct as a director,
except for:
(a) Acts or omissions involving intentional misconduct by the director or a
knowing violation of law by the director;
(b) Conduct violating RCW 23B.08.310 (which involves certain distributions
by the corporation);
(c) Any transaction from which the director will personally receive a
benefit in money, property, or services to which the director is not
legally entitled.
If the Washington Business Corporation Act is amended to authorize corporate
action further eliminating or limiting the personal liability of directors, then
the liability of a director of the corporation shall be eliminated or limited to
the fullest extent permitted by the Washington Business Corporation Act, as so
amended. Any repeal or modification of the foregoing paragraph by the
shareholders of the corporation shall not adversely affect any right or
protection of a director of the corporation with respect to any acts or
omissions of such director occurring prior to such repeal or modification.
15
[FRONT]
PROXY
FOR ANNUAL MEETING OF THE SHAREHOLDERS
LABOR READY, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Glenn A. Welstad and Ronald L. Junck
(collectively, the "Proxies"), and each of them, with full power of
substitution, as proxies to vote the shares which the undersigned is entitled to
vote at the annual meeting of the Company to be held at 10:00 a.m. (Pacific
Daylight Time) on Wednesday, August 4, 1999, at the Best Western Executive Inn,
5700 Pacific Highway East, Fife, Washington, and at any adjournment thereof.
1. FOR Election of directors: / / Glenn A. Welstad, Robert J. Sullivan, Thomas E.
McChesney, Ronald L. Junck, and Richard W. Gasten
WITHHOLD AUTHORITY to vote for the following directors (write in name):
---------------------------------------------------------------------------------------
2. Proposal to amend the Company's Articles of Incorporation to limit the liability of
directors to the maximum extent permitted by Washington law.
/ / FOR / / AGAINST / / ABSTAIN
3. Proposal to ratify the selection of Arthur Andersen LLP as the Company's independent
auditors for the calendar year ending December 31, 1999.
/ / FOR / / AGAINST / / ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such other business as may
properly come before the meeting.
[REVERSE]
This proxy when properly signed will be voted and will be voted in the
manner directed herein by the undersigned shareholder. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL DIRECTORS AND FOR PROPOSALS 2
AND 3.
____________________________
Signature
____________________________
Signature, if held jointly
____________________________
Print Name(s)
Dated: _______________, 1999
IMPORTANT--PLEASE SIGN AND RETURN PROMPTLY. 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 an authorized person.