<PAGE> 1
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:
<TABLE>
<S> <C>
/ / 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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
SCB COMPUTER TECHNOLOGY, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[LOGO]
SCB COMPUTER TECHNOLOGY, INC.
1365 WEST BRIERBROOK ROAD
MEMPHIS, TENNESSEE 38138
(901) 754-6577
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 6, 1996
The Annual Meeting of Shareholders of SCB Computer Technology, Inc.
(the "Company") will be held at 10:00 a.m., local time, on Friday, September 6,
1996 at the Crescent Club, 6075 Poplar Avenue, Ninth Floor, Memphis, Tennessee
for the following purposes:
1. To elect five directors to hold office for a term of one year
and until their successors are duly elected and qualified;
2. To ratify the appointment of Ernst & Young LLP as the
independent accountants of the Company; and
3. 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 July 22, 1996
are entitled to notice of and to vote at the Annual Meeting. Your attention is
directed to the Proxy Statement accompanying this notice for a complete
statement regarding matters to be acted upon at the Annual Meeting.
By order of the Board of Directors,
/s/ Gordon L. Bateman
-----------------------------------
GORDON L. BATEMAN
Secretary
Memphis, Tennessee
August 7, 1996
We urge you to attend the Annual Meeting. Whether or not you plan to
attend, please complete, date, and sign the enclosed proxy card and
return it in the enclosed postage-paid envelope. A proxy may be revoked
by a shareholder at any time prior to its use as specified in the
accompanying Proxy Statement.
<PAGE> 3
SCB COMPUTER TECHNOLOGY, INC.
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
The accompanying proxy is solicited by the Board of Directors of SCB
Computer Technology, Inc. (the "Company") for use at the Annual Meeting of
Shareholders to be held at the Crescent Club, 6075 Poplar Avenue, Ninth Floor,
Memphis, Tennessee on Friday, September 6, 1996, at 10:00 a.m., local time, and
any adjournment thereof, for the purposes set forth in the Notice of Annual
Meeting of Shareholders. The approximate date on which this Proxy Statement and
the enclosed proxy are first being sent to shareholders is August 7, 1996.
Only holders of the Company's common stock, $.01 par value (the
"Common Stock"), at the close of business on July 22, 1996 are entitled to vote
at the Annual Meeting. On such date, the Company had 7,015,583 shares of the
Common Stock issued and outstanding. Holders of the Common Stock will be
entitled to one vote for each share of Common Stock so held, which may be given
in person or by proxy duly authorized in writing.
Shares represented by valid proxies will be voted in accordance with
instructions contained therein, or, in the absence of such instructions, in
accordance with the Board of Directors' recommendations. Any shareholder of the
Company has the unconditional right to revoke a proxy at any time prior to the
voting thereof by any action inconsistent with the proxy, including notifying
the Secretary of the Company in writing, executing a subsequent proxy, or
personally appearing at the Annual Meeting and casting a contrary vote. No such
revocation will be effective, however, unless and until notice of such
revocation has been received by the Company at or prior to the Annual Meeting.
The Board of Directors knows of no other matters to be brought to a
vote at the Annual Meeting. If any other matter properly does come before the
Annual Meeting, however, the persons appointed in the proxy or their
substitutes will vote in accordance with their best judgment on such matters.
The cost of solicitation of proxies will be borne by the Company,
including expenses in connection with preparing, assembling, and mailing this
Proxy Statement. Such solicitation will be made by mail, and also may be made
by the Company's executive officers or employees personally or by telephone or
telecopy. Upon request, the Company will reimburse brokers, dealers, banks, and
trustees, or their nominees, for reasonable expenses incurred by them in
forwarding solicitation material to beneficial owners of the Common Stock.
PROPOSAL ONE: ELECTION OF DIRECTORS
Under the Company's Amended and Restated Charter, each of the members
of the Board of Directors is elected at the annual meeting of shareholders and
holds office until the next annual meeting of shareholders and until the
incumbent director's successor is duly elected and qualified, subject, however,
to prior death, resignation, retirement, disqualification, or removal from
office. The nominees for election are elected by a plurality of the votes cast
by holders of the shares of Common Stock entitled to vote at the Annual
Meeting. Shareholders have no right to vote cumulatively for directors.
Unless contrary instructions are received, shares of voting securities
of the Company represented by duly executed proxies will be voted in favor of
the election of the nominees named herein. If for any reason a nominee is
unable to serve as a director, it is intended that the proxies solicited hereby
will be voted for such substitute nominee as the Board of Directors of the
Company may propose. The Board of Directors has no reason to expect that the
nominees will be unable to serve and at this time does not have any substitute
nominees under consideration.
1
<PAGE> 4
The following persons are the Board of Directors' nominees for
election to serve as directors. The nominees are presently directors of the
Company. Certain information relating to the nominees is set forth in the
following table.
<TABLE>
<CAPTION>
NAME OF DIRECTOR BACKGROUND INFORMATION
---------------- ----------------------
<S> <C>
T. Scott Cobb Mr. Cobb, 58, is a founder of the Company and has served
as Chairman of the Board since the Company's
incorporation in 1984. From 1984 until June 1996, Mr.
Cobb also served as President of the Company. Mr. Cobb
was a partner in Seltmann, Cobb & Bryant, the Company's
predecessor, from its formation in 1976 until 1984.
Prior to founding the Company, Mr. Cobb was associated
with Touche Ross & Company, a predecessor to the
accounting firm of Deloitte & Touche LLP, and also held
several engineering positions, including chief computer
engineer for the 1969 lunar landing, during his 12 years
of service at Grumman Aircraft Engineering Corporation,
a predecessor to Grumman Corporation. Mr. Cobb is the
father of Jeffrey S. Cobb, Executive Vice President of
Operations of the Company.
Ben C. Bryant, Jr. Mr. Bryant, 49, is a founder of the Company and has
served as Chief Executive Officer, Treasurer, and Vice
Chairman of the Board of the Company since 1984. Mr.
Bryant has also served as President of the Company since
June 1996. Mr. Bryant was a partner in Seltmann, Cobb &
Bryant, the Company's predecessor, from its formation in
1976. From 1974 to 1976, Mr. Bryant was associated with
Touche Ross & Company. Prior to 1974, Mr. Bryant served
in a variety of positions, including manager of business
systems development, with McDonnell Douglas Corporation.
Steve N. White Mr. White, 48, has served as Executive Vice President-
Development since June 1996 and as a Director since
December 1995. Mr. White has also served in varying
capacities for the Company for more than 15 years,
including as Chief Operating Officer from 1990 to June
1996. Prior to joining the Company, Mr. White served as
senior auditor with Touche Ross & Company.
James E. Harwood Mr. Harwood, 60, has served as a Director of the Company
since January 1996. Mr. Harwood has served as president
of Sterling Equities, Inc., an investment services firm,
since 1990. From 1980 to 1990, Mr. Harwood held several
executive positions with Schering-Plough Corporation, a
pharmaceutical and health care products company. Mr.
Harwood also serves as a director for Morgan Keegan,
Inc., a regional securities firm; Leader Financial
Corporation, a savings bank holding company; and
Washington Life Insurance Co.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
NAME OF DIRECTOR BACKGROUND INFORMATION
---------------- ----------------------
<S> <C>
Joseph W. McLeary Mr. McLeary, 57, has served as a Director of the Company
since January 1996. Mr. McLeary is chairman of the board
and chief executive officer of Midland Financial Group,
Inc., a publicly-held automobile insurance company, and
has served in these capacities since 1987. Mr. McLeary
also serves as a director of Equity Inns, Inc., a real
estate investment trust specializing in hotel
properties.
</TABLE>
The Board of Directors has established a policy of holding meetings on
a regular quarterly basis and on other occasions when required by special
circumstances. Certain directors also devote their time and attention to the
Board's principal standing committees. The committees and their primary
functions are as follows:
Audit Committee -- This committee (the "Audit Committee")
makes recommendations to the Board of Directors with respect to the
Company's financial statements and the appointment of independent
accountants, reviews significant audit and accounting policies and
practices, meets with the Company's independent accountants
concerning, among other things, the scope of audits and reports, and
reviews the performance of the overall accounting and financial
controls of the Company. The Audit Committee is comprised of Messrs.
Harwood, McLeary, and White.
Compensation Committee -- This committee (the "Compensation
Committee") has the responsibility for reviewing and approving the
salaries, bonuses, and other compensation and benefits of executive
officers, advising management regarding benefits and other terms and
conditions of compensation, and administering the Company's 1995 Stock
Incentive Plan (the "Stock Incentive Plan"). The Compensation
Committee is comprised of Messrs. Harwood and McLeary.
The Board of Directors held three meetings during the fiscal year
ended April 30, 1996. The Compensation Committee, which was established
immediately prior to the Company's initial public offering in February 1996,
held one meeting during the fiscal year ended April 30, 1996. The Audit
Committee, also established in February 1996, held no meetings during the
fiscal year ended April 30, 1996. Each of the incumbent directors attended at
least 75% of the meetings of the Board of Directors and the respective
committees of which they were members during the fiscal year ended April 30,
1996.
The Board of Directors does not have a nominating committee.
Nominations for election to the Board of Directors may be made by the Board of
Directors, a nominating committee appointed by the Board of Directors, or by
any shareholder entitled to vote for the election of directors. Nominations
made by shareholders must be made by written notice (setting forth the
information required by the Company's Amended and Restated Bylaws) received by
the Secretary of the Company at least 120 days in advance of an annual meeting
or within 10 days of the date on which notice of a special meeting for the
election of directors is first given to shareholders.
3
<PAGE> 6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the
beneficial ownership of shares of the Common Stock as of the date hereof by (i)
each current director of the Company (including the nominees); (ii) each of the
executive officers named in the Summary Compensation Table on page 5 hereof
(the "Named Executive Officers"); (iii) each shareholder of the Company known
to management of the Company to own beneficially more than 5% of the
outstanding shares of the Common Stock; and (iv) all directors and executive
officers of the Company as a group. Unless otherwise indicated, the Company
believes that the beneficial owner set forth in the table has sole voting and
investment power.
<TABLE>
<CAPTION>
Amount and
Name of Nature of Beneficial Percent
Beneficial Owner Ownership(1) of Class
---------------- ------------ --------
<S> <C> <C>
SCB Computer Technology, Inc.
ESOP and Trust (2)(3) 779,078 11.1%
T. Scott Cobb (2) 1,632,908 (4)(5) 23.3%
Ben C. Bryant, Jr. (2) 1,752,515 (5)(6) 25.0%
Steve N. White 145,112 (7) 2.1%
Gary Ellis 48,821 (8) *
Gordon L. Bateman 66,670 (9) 1.0%
James E. Harwood 2,000 *
Joseph W. McLeary 2,000 *
All directors and executive
officers as a group (9 persons) 3,725,411 53.0%
</TABLE>
________________________
* Indicates ownership of less than one percent of the outstanding Common
Stock.
(1) Pursuant to the rules of the Securities and Exchange Commission, shares of
Common Stock that a beneficial owner has the right to acquire within 60
days of the date hereof are considered to be beneficially owned by such
person and are deemed to be outstanding for the purpose of computing the
percentage ownership of such person but are not deemed outstanding for the
purpose of computing the percentage ownership of any other person.
(2) Address: 1365 West Brierbrook Road, Memphis, Tennessee 38138.
(3) Approximately 265 employees of the Company participate in the ESOP. T.
Scott Cobb and Ben C. Bryant, Jr. are the trustees of the ESOP.
(4) Includes 94,341 shares allocated to Mr. Cobb by the ESOP and 374,526 shares
owned by Mr. Cobb's wife and minor daughter. Does not include 252,342
shares beneficially owned by Mr. Cobb's children who are 18 years of age or
older.
(5) Does not include shares held by the ESOP that are not allocated to the
accounts of Messrs. Cobb or Bryant. See Notes (4) and (6). Messrs. Cobb
and Bryant, as trustees, have no voting or investment power with respect to
shares held by the ESOP.
(6) Includes 94,341 shares allocated to Mr. Bryant by the ESOP and 318,254
shares beneficially owned by Mr. Bryant's wife. Does not include 119,688
shares beneficially owned by Mr. Bryant's children who are 18 years of age
or older.
(7) Includes 52,675 shares allocated to Mr. White by the ESOP.
(8) Includes 37,568 shares allocated to Mr. Ellis by the ESOP.
(9) Includes 23,951 shares allocated to Mr. Bateman by the ESOP.
4
<PAGE> 7
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid or accrued
by the Company on behalf of the Chief Executive Officer and the other four most
highly compensated executive officers who received an annual salary and bonus
in excess of $100,000 (together with the Chief Executive Officer, the "Named
Executive Officers") for the fiscal year ended April 30, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------- ---------------------
SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY ($)(1) BONUS ($) OPTIONS/SARS (#)
--------------------------- ----------- ------------- --------- ---------------------
<S> <C> <C> <C> <C>
T. Scott Cobb 1996(2) 1,182,420 700,000 --
Chairman 1995 1,425,925 659,075 --
Ben C. Bryant, Jr. 1996(2) 1,182,420 700,000 --
Vice Chairman, 1995 1,425,925 659,075 --
President, Chief
Executive Officer, and
Treasurer
Steve N. White 1996 285,417 661,362(3) --
Executive Vice President 1995 227,646 -- --
- Development
Gary Ellis 1996 170,000 109,717(3) 10,100
Senior Vice President 1995 146,820 20,000 --
Gordon L. Bateman 1996 151,250 176,612(3) 10,100
Chief Financial Officer, 1995 143,200 -- --
Executive Vice
President, and Secretary
</TABLE>
(1) Includes amounts deferred by the employee under the Company's 401(k)
plan.
(2) In February 1996, each of Messrs. Cobb and Bryant entered into
employment agreements with the Company. Each employment agreement is
for a term expiring on April 30, 1999. The employment agreements
initially provided for an annual base salary of $600,000, increasing
10% on each of May 1, 1997 and 1998. Effective as of July 1, 1996,
each of the employment agreements was amended to reduce the annual
base salary to $300,000. The agreements also provide for bonuses of
$100,000 or $200,000 per year to each of Messrs. Cobb and Bryant in
the event the Company exceeds 110% or 125%, respectively, of pre-tax
earnings targets established by the Board of Directors at the
beginning of each fiscal year. The employment agreements can be
terminated at any time for "cause," as defined in each employment
agreement. Each agreement will also terminate if the employee becomes
disabled or otherwise unable to perform his assigned duties for a
period of 90 consecutive days. In the event the employee is terminated
by the Company without cause or because of a disability, the Company
must continue to pay the employee's salary for the balance of the term
of the agreement. The employment agreements also contain a
noncompetition covenant for a period of one year following a
termination of employment by the employee for any reason or by the
Company for cause.
(3) Represents the value of shares of Common Stock ($9.75 per share)
granted to the Named Executive Officer on October 31, 1995.
5
<PAGE> 8
The following table summarizes certain information regarding stock
options issued to the Named Executive Officers during the fiscal year ended
April 30, 1996. No stock appreciation rights ("SARs") have been granted by the
Company.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM (2)
--------------------------------------------------------------- --------------------------
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS GRANTED EXERCISE
UNDERLYING OPTIONS TO EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED (#)(1) FISCAL 1996 ($/SHARE) DATE 5%($) 10%($)
------------------ ------------------ ---------------- --------- ---------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
T. Scott Cobb -- -- -- -- -- --
Ben C. Bryant, Jr. -- -- -- -- -- --
Steve N. White -- -- -- -- -- --
Gary Ellis 10,100 5.1% $15.50 2/14/06 98,475 249,470
Gordon L. Bateman 10,100 5.1% $15.50 2/14/06 98,475 249,470
</TABLE>
____________
(1) All options were granted pursuant to the Stock Incentive Plan and vest
in one-quarter increments annually beginning February 14, 1997.
(2) Potential realizable value is calculated from a base stock price of
$15.50, the exercise prices of the options granted.
The following table summarizes certain information with respect to
stock options issued to the Named Executive Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL 1996 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-
UNEXERCISED OPTIONS HELD AT MONEY OPTIONS HELD AT
APRIL 30, 1996 APRIL 30, 1996(1)
(#) ($)
----------------------------- ----------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE (#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------ --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
T. Scott Cobb -- -- -- -- -- --
Ben C. Bryant, Jr. -- -- -- -- -- --
Steve N. White -- -- -- -- -- --
Gary Ellis -- -- -- 10,100 -- 111,100
Gordon L. Bateman -- -- -- 10,100 -- 111,100
</TABLE>
____________
(1) Reflects the market value of the underlying securities at $26.50 per
share, the closing price on The Nasdaq Stock Market's National Market
(the "Nasdaq National Market") on April 30, 1996, less the exercise
price ($15.50 per share).
6
<PAGE> 9
DIRECTOR COMPENSATION
Directors who are employees of the Company do not receive additional
compensation for serving as directors of the Company. Directors who are not
employed by the Company (the "Outside Directors") are entitled to a fee of
$3,000 for each board or committee meeting attended. All directors are entitled
to reimbursement for their actual out-of-pocket expenses incurred in connection
with attending meetings.
The Stock Incentive Plan provides for automatic grants of up to an
aggregate of 50,000 non-qualified stock options to Outside Directors. Options
to purchase 5,000 shares of Common Stock were granted to those persons serving
as Outside Directors as of the consummation of the initial public offering
(Messrs. Harwood and McLeary) at an exercise price of $15.50 per share, the
initial public offering price. Options to purchase 5,000 shares of Common Stock
will be automatically granted to additional Outside Directors upon their
initial election to the Board of Directors. Options to purchase 2,500 shares of
Common Stock will also be automatically granted to each Outside Director upon
his or her reelection to the Board of Directors beginning with the 1997 Annual
Meeting of Shareholders, if such director has served as such for at least
eleven months as of the date of such reelection. An option granted to an
Outside Director will enable the optionee to purchase shares of Common Stock at
the fair market value of the Common Stock on the date of grant. Outside
Directors' options first become exercisable one year from the date of grant and
have a term of ten years from the date of grant. The exercise price may be paid
in cash, shares of Common Stock, or a combination thereof.
1995 STOCK INCENTIVE PLAN
The Stock Incentive Plan was approved by the Board of Directors of the
Company in December 1995 and by the shareholders in January 1996. Under the
Stock Incentive Plan, the Compensation Committee has the authority to grant to
key employees and consultants of the Company the following types of awards: (1)
stock options; (2) stock appreciation rights; (3) restricted stock; and/or (4)
other stock-based awards. Pursuant to the Stock Incentive Plan, 600,000 shares
of Common Stock have been reserved for award. Any shares as to which an option
or other award expires, lapses unexpired, or is forfeited, terminated, or
canceled may become subject to a new option or other award. The Stock Incentive
Plan will terminate on, and no award may be granted later than, the tenth
anniversary of the date of adoption of the Stock Incentive Plan, but the
exercise date of awards granted prior to such tenth anniversary may extend
beyond that date.
Incentive stock options ("ISOs") and non-qualified stock options
("NSOs") may be granted for such number of shares as the Compensation Committee
may determine and may be granted alone, in conjunction with, or in tandem with
other awards under the Stock Incentive Plan or cash awards outside the Stock
Incentive Plan. A stock option will be exercisable at such times and subject to
such terms and conditions as the Compensation Committee determines. In the case
of an ISO, the term will be no more than ten years after the date of grant
(five years in the case of ISOs for certain 10% shareholders), and the option
price will not be less than 100% (110% in the case of certain 10% shareholders)
of the fair market value of the Common Stock as of the date of grant. The
option price for any non-qualified stock option will not be less than 50% of
the fair market value as of the date of grant. Stock options and stock
appreciation rights granted under the Stock Incentive Plan may not be assigned
or transferred other than by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order.
Stock appreciation rights may be granted under the Stock Incentive
Plan in conjunction with all or part of a stock option and will be exercisable
only when the underlying stock option is exercisable. Once a stock appreciation
right has been exercised, the related portion of the stock option underlying
the stock appreciation right terminates. Upon the exercise of a stock
appreciation right, the Compensation Committee will pay to the employee or
consultant in cash, Common Stock or a combination thereof (the method of
payment to be at the discretion of the Committee), an amount equal to the
excess of the fair market value of the Common Stock on the exercise date over
the option price, multiplied by the number of stock appreciation rights being
exercised.
7
<PAGE> 10
Restricted stock awards may be granted alone, in addition to, or in
tandem with, other awards under the Stock Incentive Plan. The provisions
attendant to a grant of restricted stock may vary from participant to
participant. In making an award of restricted stock, the Compensation Committee
will determine the periods during which the restricted stock is subject to
forfeiture and may provide such other awards designed to guarantee a minimum of
value for such stock. During the restriction period, the employee or consultant
may not sell, transfer, pledge, or assign the restricted stock but will be
entitled to vote the restricted stock and to receive, at the election of the
Compensation Committee, cash or deferred dividends.
The Compensation Committee also may grant other types of awards such
as performance shares, convertible preferred stock, convertible debentures or
other exchangeable securities that are valued, as a whole or in part, by
reference to or otherwise based on the Common Stock. These awards may be
granted alone, in addition to, or in tandem with, stock options, stock
appreciation rights, restricted stock, or cash awards outside of the Stock
Incentive Plan. Awards will be made upon such terms and conditions as the
Compensation Committee may determine.
If there is a change in control or a potential change in control of
the Company (as defined in the Stock Incentive Plan), stock appreciation rights
and limited stock appreciation rights outstanding for at least six months, and
any stock options which are not then exercisable, in the discretion of the
Board, may become fully exercisable and vested. Notwithstanding the foregoing,
stock appreciation rights held by a person subject to Section 16(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), will be
automatically exercised if the change in control or potential change in control
is not within the control of such person for purposes of Rule 16b-3(e)(3) of
the Exchange Act. Also, in the discretion of the Board, the restrictions and
deferral limitations applicable to restricted stock and other stock-based
awards may lapse and such shares and awards will be deemed fully vested. Stock
options, stock appreciation rights, limited stock appreciation rights,
restricted stock, and other stock-based awards, will, unless otherwise
determined by the Compensation Committee in its sole discretion, be cashed out
on the basis of the change in control price (as defined in the Stock Incentive
Plan and as described below). The change in control price will be the highest
price per share paid in any transaction reported on the Nasdaq National Market
or paid or offered to be paid in any bona fide transaction relating to a change
in control or potential change in control at any time during the immediately
preceding 60-day period. The Compensation Committee has the discretion to
determine the change in control price, based on the parameters described in the
preceding sentence.
Because awards under the Stock Incentive Plan are at the discretion of
the Compensation Committee, the benefits that will be awarded under the Stock
Incentive Plan in the future are not currently determinable. The following
table shows as to (i) each of the Named Executive Officers, (i) all executive
officers as a group, (iii) all current directors who are not executive officers
as a group, (iv) each nominee for election as a director, and (v) all other
employees as a group, the aggregate number of shares of Common Stock subject to
options granted under the Stock Incentive Plan and the average per share option
exercise price. As of July 22, 1996, the market value of a share of Common
Stock based on the closing price for such stock on the Nasdaq National Market
was $17.00.
8
<PAGE> 11
STOCK INCENTIVE PLAN BENEFITS
<TABLE>
<CAPTION>
AVERAGE
EXERCISE PRICE
NAME OPTIONS (#) PER SHARE($)
---- ----------- ------------
<S> <C> <C>
T. Scott Cobb -- --
Ben C. Bryant, Jr. -- --
Steve N. White -- --
Gary Ellis 10,100 15.50
Gordon L. Bateman 10,100 15.50
James E. Harwood 5,000 15.50
Joseph W. McLeary 5,000 15.50
Executive officers as a group 50,400 15.50
Outside Directors as a group 10,000 15.50
All other employees as a group 149,000 15.50
</TABLE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Neither the grant nor the exercise of an ISO will result in taxable
income to the employee. The tax treatment on the sale of the Common Stock
acquired upon exercise of an ISO depends on whether the holding period
requirement is satisfied. The holding period requirement is met if the
disposition by the employee occurs (i) at least two years after the date of
grant of the option, (ii) at least one year after the date the shares were
transferred to the employee, and (iii) while the employee remains employed by
the Company or not more than three months after his or her termination of
employment (or not more than one year in the case of a disabled employee). In
the case of a deceased employee, the ISO may be exercised by the deceased
employee's legal representative provided the deceased employee had satisfied
the holding period requirement at the time of his or her death. The Stock
Incentive Plan limits the right of the legal representative of any deceased
employee to exercise an option to one year following death. If the holding
period is satisfied, the excess of the amount realized upon sale of the Common
Stock over the price paid for these shares will be treated as a long-term
capital gain. If the employee disposes of the Common Stock before the holding
period is met (a "disqualifying disposition"), the excess of the fair market
value of the shares on the date of exercise or, if less, the fair market value
on the date of disposition, over the exercise price will be taxable as ordinary
income to the employee at the time of disposition, and the Company will be
entitled to a corresponding deduction. The balance of the gain, if any, will be
a capital gain for the employee. Any capital gain realized by the employee will
be long-term capital gain if the employee's holding period for the Common Stock
at the time of disposition is more than one year; otherwise it will be
short-term.
Although the exercise of an ISO will not result in taxable income to
the employee, the excess of the fair market value of the shares on the date of
exercise over the exercise price will be included in the employee's
"alternative minimum taxable income" under Section 56 of the Internal Revenue
Code of 1986, as amended (the "Code"). This inclusion might subject the
employee to, or increase his or her liability for, the alternative minimum tax
under Section 55 of the Code.
There will be no federal income tax consequences to the Company or to
the grantee upon the grant of an NSO under the Stock Incentive Plan. However,
the grantee, except as noted below, upon exercise of the NSO will realize
ordinary income for federal income tax purposes in an amount equal to the
excess of the fair market value of the shares purchased over the exercise
price. The Company will generally be entitled to a tax deduction at such time
and in the same amount that the employee realizes ordinary income. If the
Common Stock so acquired is later sold or exchanged, the difference between the
sales price and the fair market value of such stock on the date of exercise of
the option is generally taxable as long-term or short-term capital gain or loss
depending upon whether the Common Stock has been held for more than one year
after such date.
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<PAGE> 12
A grantee who pays the exercise price upon exercise of an ISO or NSO,
in whole or in part, by delivering shares of the Company's stock already owned
by him or her will realize no gain or loss for federal income tax purposes on
the shares surrendered, but otherwise will be taxed according to the rules
described above. Shares acquired upon exercise which are equal in number to the
shares surrendered will have a basis equal to the basis of the shares
surrendered, and (except as noted below with respect to disqualifying
dispositions) the holding period of such shares will include the holding period
of the shares surrendered. In the case of an NSO, the basis of additional
shares received upon exercise of the NSO will be equal to the fair market value
of such shares on the date of exercise, and the holding period for such
additional shares will commence on the date the option is exercised. In the
case of an ISO, the basis of the additional shares received will be zero, and
the holding period for such shares will commence on the date of the exchange.
If any of the shares received upon exercise of the ISO are disposed of within
two years of the date of grant of the ISO or within one year after exercise,
the shares with the lowest basis (i.e., zero basis) will be deemed to be
disposed of first, and such disposition will be a disqualifying disposition
giving rise to ordinary income as previously discussed above.
The Company has the right to deduct from other compensation paid to
the employee an amount sufficient to satisfy any federal, state, and local
withholding tax requirements prior to the delivery of any certificate for such
shares.
The Stock Incentive Plan is not intended to be a "qualified plan"
under Section 401(a) of the Code.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company established a Compensation Committee immediately prior to
the Company's initial public offering in February 1996. Prior to the offering,
all directors, including Messrs. Cobb, Bryant, and White, each an executive
officer of the Company, participated in deliberations concerning executive
officer compensation. Except as set forth in the preceding sentence, no
executive officer of the Company served during fiscal year 1996 as a member of
a compensation committee or as a director of any entity of which any of the
Company's directors serves as an executive officer.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Prior to the initial public offering in February 1996, the Board of
Directors established a Compensation Committee composed of Messrs. Harwood and
McLeary. Neither of these persons has at any time been an officer or employee
of the Company. Prior to the establishment of the Compensation Committee, the
Board of Directors had no compensation committee or other committee performing
similar functions. Accordingly, decisions with respect to compensation of the
Named Executive Officers for the fiscal year ended April 30, 1996 were made by
the Board of Directors.
Currently, Messrs. Cobb and Bryant are compensated in accordance with
the terms of employment agreements approved by the Board of Directors and
entered into upon the consummation of the initial public offering. The
remainder of the executive officers are compensated pursuant to an executive
compensation program established by the Board of Directors. The overall
objectives of the Company's executive compensation program are to:
- attract and retain the highest quality talent to lead the
Company;
- reward key executives based on corporate and individual
performance; and
- provide incentives designed to maximize shareholder value.
The philosophy upon which these objectives are based is to provide
incentives to the Company's officers to enhance the profitability of the
Company and to align closely the financial interests of the Company's officers
with those of its shareholders. In order to implement this philosophy, the
Compensation Committee is currently reviewing the individual elements of
executive compensation, including salaries, incentive compensation awards, and
stock option
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<PAGE> 13
awards. The Compensation Committee has not engaged an independent compensation
consulting firm to assist the Compensation Committee in further developing the
Company's compensation program but may do so during the fiscal year ended April
30, 1997.
Section 162(m) of the Code generally disallows a corporate deduction
for compensation over $1,000,000 paid to the Company's Chief Executive Officer
and any of the four other most highly compensated officers. The $1,000,000
limitation applies to all types of compensation, including restricted stock
awards and amounts realized on the exercise of stock options and SARs, unless
the awards and plan under which they are made qualify as "performance based"
under the terms of the Code and related regulations. Under the regulations,
executive compensation pursuant to the Company's Stock Incentive Plan should
qualify as "performance based" compensation and therefore be excluded from the
$1,000,000 limit. Other forms of compensation provided by the Company,
however, are not excluded from such limit. The Company currently anticipates
that compensation of its executive officers will be deductible under Section
162(m) because executive officer compensation is presently below the limit and
because the Company intends to continue to utilize performance based
compensation in future periods.
JAMES E. HARWOOD
JOSEPH W. MCLEARY
PERFORMANCE GRAPH
The following graph compares the cumulative returns of $100 invested
on February 15, 1996 (the date of the Company's initial public offering) in (a)
the Common Stock, (b) the CRSP Index for the Nasdaq Stock Market-U.S.
Corporations and (c) the CRSP Index for Nasdaq Computer and Data Processing
Stocks, assuming reinvestment of all dividends.
[GRAPH]
<TABLE>
<CAPTION>
2/15/96 4/30/96
------- -------
<S> <C> <C>
SCB Computer Technology, Inc. $100.00 $162.00
NASDAQ Stock Market (US Corp) $100.00 $110.00
NASDAQ Computer & Data Processing Stocks $100.00 $113.00
</TABLE>
11
<PAGE> 14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Brothers Leasing. During the fiscal year ended April 30, 1996, the
Company purchased and leased computers and other equipment from Brothers Rental
and Leasing ("Brothers Leasing"), which is owned by Kenneth Cobb who is a son
of T. Scott Cobb, Chairman of the Company. Payments by the Company to Brothers
Leasing during fiscal 1996 aggregated $116,939, consisting of $39,444 paid in
connection with the leasing of certain equipment and a payment of $77,495 for
the purchase of the equipment under lease at its fair market value. The
Company's relationship with Brothers Leasing has been terminated.
Duck Hill Ranch. Prior to October 31, 1995, the Company loaned money
from time to time to Duck Hill Ranch Incorporated ("Duck Hill"), a subchapter S
corporation under the Code, the outstanding capital stock of which is owned
equally by T. Scott Cobb, Chairman, and Ben C. Bryant, Jr., Chief Executive
Officer, Vice Chairman of the Board, and President. The loans bore interest at
rates above the applicable federal rate under the Code, and were repaid each
year. During the fiscal year ended April 30, 1996, the highest amount of
indebtedness outstanding to the Company from Duck Hill (and the average
interest rates charged by the Company during such period) was $231,000 (8.00%).
At April 30, 1996, no amounts were outstanding on loans by the Company to Duck
Hill.
Officer Loans. During the fiscal year ended April 30, 1996, the
highest amount of indebtedness outstanding to the Company from Mr. Cobb (and
the average interest rates charged by the Company during such period) was
$73,500 (8.00%). At April 30, 1996, no amounts of indebtedness of Mr. Cobb to
the Company were outstanding.
PROPOSAL TWO: RATIFICATION OF APPOINTMENT OF ACCOUNTANTS
Upon recommendation of the Audit Committee, the Board of Directors has
appointed Ernst & Young LLP, independent public accountants, to audit the
accounts of the Company for the fiscal year ending April 30, 1997 and
recommends that shareholders vote to ratify such selection. A representative of
Ernst & Young LLP is expected to be present at the Annual Meeting, will have an
opportunity to make a statement if he or she so desires, and is expected to be
available to respond to appropriate questions. THE BOARD OF DIRECTORS
RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" PROPOSAL TWO.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors, and persons who beneficially own more than ten percent
of the Common Stock, to file reports of ownership and changes in ownership with
the Securities and Exchange Commission. The executive officers, directors, and
greater than ten percent shareholders are required by federal securities
regulations to furnish the Company with copies of all Section 16(a) reports
filed. Based solely on the Company's review of the copies of such reports and
written representations from certain reporting persons furnished to the
Company, the Company believes that its officers, directors, and greater than
ten percent shareholders were in compliance with all applicable filing
requirements.
DEADLINE FOR SUBMISSION TO SHAREHOLDERS
OF PROPOSALS TO BE PRESENTED AT THE
1997 ANNUAL MEETING OF SHAREHOLDERS
Any proposal intended to be presented for action at the 1997 Annual
Meeting of Shareholders by any shareholder of the Company must be received by
the Secretary of the Company not later than April 10, 1997 in order for such
proposal to be considered for inclusion in the Company's Proxy Statement and
proxy relating to its 1997 Annual Meeting of Shareholders. Nothing in this
paragraph shall be deemed to require the Company to include any
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<PAGE> 15
shareholder proposal which does not meet all the requirements for such
inclusion established by the Securities and Exchange Commission.
METHOD OF COUNTING VOTES
Unless a contrary choice is indicated, all duly executed proxies will
be voted in accordance with the instructions set forth on the back side of the
proxy card. Abstentions and "non-votes" will be counted as present for the
purposes of determining a quorum. A "non-vote" occurs when a nominee holding
shares for a beneficial owner votes on one proposal but does not vote on
another non-routine proposal because the nominee does not have discretionary
voting power and has not received instructions from the beneficial owner.
Assuming the presence of a quorum, abstentions and "non-votes" will have no
effect on the proposals to be submitted to the shareholders at the Annual
Meeting.
MISCELLANEOUS
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED APRIL 30, 1996 MAY BE OBTAINED, WITHOUT CHARGE, BY ANY SHAREHOLDER TO
WHOM THIS PROXY STATEMENT IS SENT, UPON WRITTEN REQUEST TO GORDON L. BATEMAN,
SECRETARY, SCB COMPUTER TECHNOLOGY, INC., 1365 WEST BRIERBROOK ROAD, MEMPHIS,
TENNESSEE 38138. COPIES OF EXHIBITS FILED WITH THE FORM 10-K ALSO WILL BE
AVAILABLE UPON WRITTEN REQUEST ON PAYMENT OF CHARGES APPROXIMATING THE
COMPANY'S COST.
Date: August 7, 1996
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<PAGE> 16
APPENDIX A
SCB COMPUTER TECHNOLOGY, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FRIDAY, SEPTEMBER 6, 1996.
The undersigned hereby appoints T. Scott Cobb and Ben C. Bryant, Jr., and either
of them, as proxies, with full power of substitution, to vote all shares of the
undersigned as shown on the reverse side of this proxy at the Annual Meeting of
Shareholders of SCB Computer Technology, Inc. to be held at the Crescent Club,
Ninth Floor, 6075 Poplar Avenue, Memphis, Tennessee, on Friday, September 6,
1996 at 10:00 a.m., local time, and any adjournments thereof.
PROPOSAL 1: ELECTION OF DIRECTORS:
/ / FOR all of the following nominees (except as indicated to the contrary
below):
T. Scott Cobb Steve N. White Joseph W. McLeary
Ben C. Bryant, Jr. James E. Harwood
/ / WITHHOLD AUTHORITY (ABSTAIN) to vote for the following nominees (please
print name or names):
- --------------------------------------------------------------------------------
/ / WITHHOLD AUTHORITY (ABSTAIN) to vote for all nominees
PROPOSAL 2: RATIFICATION OF APPOINTMENT OF ACCOUNTANTS:
/ / FOR the appointment of Ernst & Young LLP
/ / AGAINST the appointment of Ernst & Young LLP
/ / WITHHOLD AUTHORITY (ABSTAIN)
IMPORTANT: PLEASE DATE AND SIGN THIS PROXY ON THE REVERSE SIDE.
Your shares will be voted in accordance with your instructions. If no choice is
specified, shares will be voted FOR the nominees in the election of directors
and FOR the ratification of the selection of the accountants.
Date: , 1996. PLEASE SIGN HERE AND RETURN
----------- PROMPTLY
----------------------------------
----------------------------------
Please sign exactly as your name
appears at left. If shares are
registered in the names of two or
more persons, each should sign.
Executors, administrators,
trustees, guardians and attorneys
should show their full titles. If a
corporation is shareholder, the
corporate officer should sign in
full corporate name and title, such
as President or other officer. If a
partnership or limited liability
company is shareholder, please sign
in such organization's name by an
authorized person.
- --------------------------------------------------------------------------------
If you have changed your address, please PRINT your new address on this line.
