<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] 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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 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 15, 1998
The Annual Meeting of Shareholders of SCB Computer Technology, Inc.
(the "Company") will be held at 10:00 a.m., local time, on Tuesday, September
15, 1998 at the Company's Emerging Technology Center, 3239 Players Club Parkway,
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 consider and act upon a proposal to amend the Company's
Amended and Restated Charter to increase the number of
authorized shares of Common Stock from 50,000,000 to
100,000,000;
3. To consider and act upon a proposal to approve an amendment to
the Company's 1997 Stock Incentive Plan to increase the number
of shares of Common Stock available for issuance thereunder to
3,000,000;
4. To ratify the appointment of Ernst & Young LLP as the
independent accountants of the Company; and
5. 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, 1998
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,
GORDON L. BATEMAN
Secretary
Memphis, Tennessee
August __, 1998
- --------------------------------------------------------------------------------
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
TO BE HELD SEPTEMBER 15, 1998
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 (the "Annual Meeting") to be held at the Company's Emerging
Technology Center, 3239 Players Club Parkway, Memphis, Tennessee on Tuesday,
September 15, 1998, 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 __, 1998.
Only holders of the Company's common stock, par value $.01 per share
(the "Common Stock"), at the close of business on July 22, 1998 (the "Record
Date") are entitled to vote at the Annual Meeting. On the Record Date, the
Company had _____ 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
held of record on the Record Date, which may be given in person or by proxy duly
authorized in writing. Cumulative voting is not permitted.
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 matters other than those set forth
in the accompanying Notice of Annual Meeting of Shareholders 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
facsimile transmission. 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.
<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 NOMINEE BACKGROUND INFORMATION
- ---------------------------- -----------------------------------------------------------
<S> <C>
T. Scott Cobb Mr. Cobb, 61, 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 at
Grumman Aircraft Engineering Corporation, a predecessor
to Northrop 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, 51, is a founder of the Company and has served
as Chief Executive Officer 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, 51, has served as Executive Vice President-
Development of the Company since June 1996 and as a
Director of the Company since December 1995. Mr. White
has also served in varying capacities for the Company for
more than 19 years, including as Chief Operating Officer
from 1990 to June 1996. Prior to joining the Company, Mr.
White was a senior auditor with Touche Ross & Company.
James E. Harwood Mr. Harwood, 62, has served as a Director of the Company
since February 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 Memphis, Tennessee based securities firm; Union Planters
Corporation, a bank holding company; and Washington Life
Insurance Co.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
NAME OF NOMINEE BACKGROUND INFORMATION
- ---------------------------- -----------------------------------------------------------
<S> <C>
Joseph W. McLeary Mr. McLeary, 59, has served as a Director of the Company
since January 1996. Since May 1997, Mr. McLeary has
served as chairman of the board of Executive Financial
Services, Inc., a financial consulting company. Mr.
McLeary served as chairman of the board and chief
executive officer of Midland Financial Group, Inc., a
publicly held automobile insurance company, from 1987
until March 1997. 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 "1995 Stock Plan") and 1997 Stock Incentive Plan
(the "1997 Stock Plan"). The Compensation Committee is comprised of
Messrs. Harwood and McLeary.
The Board of Directors held seven meetings during the fiscal year ended
April 30, 1998. The Compensation Committee held one meeting during the fiscal
year ended April 30, 1998. The Audit Committee held one meeting during the
fiscal year ended April 30, 1998. 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,
1998.
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 the anniversary date of the proxy
statement for the previous year's 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
Named Executive Officers in the Summary Compensation Table on page 5 thereof;
(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. 2,332,527(2) 9.5%
ESOP and Trust
1365 West Brierbrook Road,
Memphis, Tennessee 38138
Ben C. Bryant, Jr. 5,203,748(3)(4) 21.1%
1365 West Brierbrook Road,
Memphis, Tennessee 38138
T. Scott Cobb 4,733,206(4)(5) 19.2%
1365 West Brierbrook Road,
Memphis, Tennessee 38138
Steve N. White 435,352(6) 1.8%
Gary E. McCarter 52,150(7) *
Gordon L. Bateman 215,158(8) *
James E. Harwood 26,000(9) *
Joseph W. McLeary 26,000(9) *
All directors and executive
officers as a group (8 persons) 10,922,852(10) 44.3%
</TABLE>
- ----------
* Indicates ownership of less than one percent of the outstanding Common
Stock.
(1) Pursuant to the rules of the Securities and Exchange Commission (the
"SEC"), 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) Approximately 240 employees of the Company participate in the ESOP. Ben
C. Bryant, Jr. and T. Scott Cobb are the trustees of the ESOP.
(3) Includes 283,022 shares allocated to Mr. Bryant by the ESOP and 946,564
shares beneficially owned by Mr. Bryant's wife. Does not include shares
beneficially owned by Mr. Bryant's children who are 18 years of age or
older.
(4) Does not include shares held by the ESOP that are not allocated to the
accounts of Messrs. Bryant or Cobb. See Notes (4) and (6). Messrs.
Bryant and Cobb, as trustees, have no voting or investment power with
respect to shares held by the ESOP.
(5) Includes 283,022 shares allocated to Mr. Cobb by the ESOP and 1,078,666
shares owned by Mr. Cobb's wife and minor daughter. Does not include
shares beneficially owned by Mr. Cobb's children who are 18 years of
age or older.
(6) Includes 158,042 shares allocated to Mr. White by the ESOP and 30,000
shares issuable upon the exercise of options.
(7) Includes 52,150 shares issuable upon the exercise of options.
(8) Includes 71,852 shares allocated to Mr. Bateman by the ESOP, 20,000
shares beneficially owned by Mr. Bateman's wife and 45,150 shares
issuable upon the exercise of options.
(9) Includes 20,000 shares issuable upon the exercise of options.
(10) Includes 212,450 shares issuable upon the exercise of options.
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 $100,000 (together with the Chief Executive Officer, the
"Named Executive Officers") for the fiscal year ended April 30, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
---------------
ANNUAL COMPENSATION SECURITIES ALL
FISCAL -------------------------- UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) OPTIONS/SARS(#) COMPENSATION($)
--------------------------- ---- ------------ -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Ben C. Bryant, Jr. (2) 1998 300,000 -- -- 7,608(5)
Vice Chairman, President, Chief 1997 350,000 -- -- 5,358(6)
Executive Officer, and Treasurer 1996 1,182,420 700,000 -- 5,358(6)
T. Scott Cobb (2) 1998 300,000 -- -- 10,608(5)
Chairman 1997 350,000 -- -- 8,358(6)
1996 1,182,420 700,000 -- 8,358(6)
Steve N. White 1998 160,000 -- -- 5,946(5)
Executive Vice President - 1997 175,000 -- 60,000 4,746(6)
Development 1996 285,417 661,362(4) -- 4,746(6)
Gary E. McCarter (3) 1998 140,000 -- -- 1,389(5)
Chief Financial Officer 1997 100,642 -- 302(6)
302(6)
Gordon L. Bateman 1998 140,000 -- -- 5,303(5)
Chief Administrative Officer and 1997 134,667 -- 60,000 4,253(6)
Secretary 1996 151,250 176,612(4) 30,300 4,253(6)
</TABLE>
- ----------
(1) Includes amounts deferred by the employee under the Company's 401(k)
plan.
(2) In February 1996, each of Messrs. Bryant and Cobb 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. Bryant and Cobb 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. No bonus was paid to either of Messrs. Bryant and Cobb for
the fiscal year ended April 30, 1998. 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) Mr. McCarter was employed by the Company as Senior Vice President of
Finance and Administration in November 1996 and became Chief Financial
Officer in August 1997.
(4) Represents the value of shares of Common Stock ($3.25 per share)
granted to the Named Executive Officer on October 31, 1995.
(5) Includes contributions by the Company to each Named Executive Officer's
401(k) Plan account as follows: Mr. Bryant--$2,250; Mr. Cobb--$2,250;
Mr. White--$1,200; Mr. McCarter--$1,087; and Mr. Bateman--$1,050. Also
includes premiums paid by the Company for life insurance provided for
the benefit of the Named Executive Officers as follows: Mr.
Bryant--$5,358; Mr. Cobb--$8,358; Mr. White--$4,746; Mr.
McCarter--$302; and Mr. Bateman--$4,253.
(6) Includes premiums paid by the Company for life insurance provided for
the benefit of the Named Executive Officers as follows: Mr.
Bryant--$5,358; Mr. Cobb--$8,358; Mr. White--$4,746; Mr.
McCarter--$302; and Mr. Bateman--$4,253.
5
<PAGE> 8
There were no stock options issued to any of the Named Executive
Officers during the fiscal year ended April 30, 1998.
The following table summarizes certain information with respect to
stock options issued to the Named Executive Officers prior to the fiscal year
ended April 30, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL 1998 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED ON VALUE UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
NAME EXERCISE (#) REALIZED ($) AT APRIL 30, 1998 (#) APRIL 30, 1998 (1) ($)
- ------------------- ------------ ------------ ------------------------------ -----------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ben C. Bryant, Jr. -- -- -- -- -- --
T. Scott Cobb -- -- -- -- -- --
Steve N. White -- -- 30,000 30,000 195,000 195,000
Gary E. McCarter 8,000 26,000 52,150 60,150 291,406 149,406
Gordon L. Bateman -- -- 45,150 45,150 298,626 298,626
</TABLE>
- ----------
(1) Reflects the market value of the underlying securities at $12.00 per share,
the closing price on The Nasdaq Stock Market's National Market (the "Nasdaq
National Market") on April 30, 1998, less the exercise price.
The Company has never awarded stock appreciation rights to any employee,
has no long-term incentive plan, as that term is defined in the regulations of
the SEC, and has no defined benefit or actuarial plans covering any employees of
the Company.
DIRECTOR COMPENSATION
Directors who are employees of the Company do not receive additional
compensation for serving as directors of the Company. For the fiscal year ended
April 30, 1998, directors who were not employed by the Company, namely Messrs.
Harwood and McLeary (the "Outside Directors") were entitled to an annual fee of
$20,000, payable quarterly, plus a fee of $500 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.
Under the 1997 Stock Plan, non-qualified stock options to purchase
10,000 shares of Common Stock will be automatically granted to Outside Directors
upon their initial election to the Board of Directors and options to purchase
5,000 shares of Common Stock will also be automatically granted to each Outside
Director upon his or her reelection to the Board of Directors. On April 2, 1998,
in recognition for services rendered in excess of what was originally
anticipated, the Board awarded each of Messrs. Harwood and McLeary a special
bonus of an additional option to purchase 5,000 shares of Common Stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No executive officer of the Company served during fiscal year 1998 as a
member of a compensation committee or as a director of any entity of which any
of the Company's directors served as an executive officer.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's Compensation Committee is composed of Messrs. Harwood and
McLeary. Neither of these persons has at any time been an officer or employee of
the Company.
Currently, Mr. Bryant, who is the Company's Chief Executive Officer,
and Mr. Cobb are compensated in accordance with the terms of employment
agreements approved by the Board of Directors and entered into upon the
consummation of the Company's initial public offering in February 1996. In July
1996, the Compensation Committee, at the request of Messrs. Bryant and Cobb
agreed to amend each of the employment agreements to reduce the annual base
salary from $600,000 to $300,000. The agreements also provide for bonuses of
$100,000 or $200,000 per year to each of Messrs. Bryant and Cobb in the event
that 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. No
bonuses were paid to
6
<PAGE> 9
Messrs. Bryant or Cobb for the fiscal year ended April 30, 1998. To date, the
Compensation Committee has not awarded any equity-based compensation to either
of Messrs. Bryant and Cobb, in part because of their significant existing equity
ownership positions. See "--Security Ownership of Certain Beneficial Owners and
Management."
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 fiscal 1997, the Compensation Committee engaged Executive Financial
Services, Inc., an independent compensation consulting firm ("EFS"), to assist
the Compensation Committee in further developing the Company's compensation
program. EFS detailed for the Compensation Committee the Company's practices
relative to some of the companies included in the CRSP Index for Nasdaq Computer
and Data Processing Stocks, which is presented on the performance graph on Page
9, and additional companies in the information technology business with
respect to which the Company believes it competes for executive talent. The
compensation levels for fiscal 1998 were established by the Compensation
Committee based on, among other things, EFS's analysis.
Annual salaries for fiscal 1998 for senior management were somewhat
below median competitive levels because the Compensation Committee determined to
rely to a greater degree on annual and long-term incentive compensation to
motivate management performance. In that regard, the Compensation Committee
established an incentive compensation plan whereby members of senior management
and selected employees may be awarded annual and long-term incentive bonuses
based upon the attainment by the Company of earnings goals established by the
Compensation Committee at the beginning of the fiscal year. One-half of any
bonus award would be automatically subject to the terms of a Deferred
Compensation Plan. The remaining one-half of the bonus award would be paid to
the recipient, who would have the option to defer such award pursuant to the
terms of the Deferred Compensation Plan. The portion of a recipient's bonus
which is automatically subject to the terms of the Deferred Compensation Plan
would vest over five years and would be placed into an account that fluctuates
with the price of the Company's Common Stock, thereby tying the value of a
participant's award to the performance of the Company and aligning the interests
of the participants more closely with those of the Company's shareholders. The
remaining one-half of the bonus award vests immediately and may be deferred, at
the recipient's option, and invested in a phantom stock account or in one of
several investment options established by the Committee administering the
Deferred Compensation Plan. Because of the Company's failure to meet the
earnings goals established by the Compensation Committee, no awards were made to
the executive officers under the incentive compensation plan during the fiscal
year ended April 30, 1998.
The Compensation Committee is currently assessing executive officers'
salaries and incentive compensation earnings targets for fiscal 1999. Although
no earnings goals have been established, the Compensation Committee anticipates
that such goals will be set on a basis consistent with those for fiscal 1998.
Section 162(m) of the Internal Revenue Code of 1986, as amended (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 stock appreciation rights, 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, stock options
awarded pursuant to the Company's 1995 Stock Plan and 1997 Stock 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,
may not be excluded from such limit. The Company currently anticipates that
compensation of its executive officers will be deductible under Section 162(m)
7
<PAGE> 10
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
8
<PAGE> 11
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.
<TABLE>
<CAPTION>
2/15/96 4/30/96 4/30/97 4/30/98
------- ------- ------- -------
<S> <C> <C> <C> <C>
SCB Computer Technology, Inc. $100 $162 $107 $220
NASDAQ $100 $110 $116 $174
NASDAQ Computer & Data Processing $100 $113 $125 $195
</TABLE>
9
<PAGE> 12
PROPOSAL TWO: AMENDMENT TO CHARTER TO INCREASE AUTHORIZED SHARES OF COMMON STOCK
On May 19, 1998, the Board of Directors unanimously approved and
directed that the shareholders consider an amendment to Section 7 of the
Company's Amended and Restated Charter (the "Charter"). The amendment to Section
7 would increase the number of authorized shares of Common Stock from 50,000,000
to 100,000,000. If this proposal is approved by the shareholders at the Annual
Meeting, the amendment to Section 7 will become effective upon the filing of
Articles of Amendment with the Secretary of State of Tennessee, which filing is
expected to take place shortly after the Annual Meeting. The Board of Directors
believes that it is in the best interests of the Company and all of its
shareholders to amend the Charter.
Except as set forth below, the relative rights of the holders of Common
Stock under the Charter would remain unchanged. The first paragraph of Section 7
of the Charter, as amended by the proposed amendment, is set forth below. The
remainder of Section 7 will remain unchanged.
"7. The corporation is authorized to issue two classes of stock in the
following number of shares: (i) 100,000,000 shares of common stock, par
value $.01 per share (the "Common Stock"), and (ii) 1,000,000 shares of
preferred stock, no par value (the "Preferred Stock")."
As of July 22, 1998, there were _____ shares of Common Stock issued and
outstanding, _____ shares subject to options awarded under the 1995 Stock Plan,
_____ shares subject to options awarded under the 1997 Stock Plan, and an
additional _____ shares reserved under the 1995 and 1997 Stock Plans for future
awards. Since April 30, 1998, the Company has issued 2,124,304 shares of Common
Stock in connection with acquisitions. Furthermore, the Board of Directors has
declared two stock splits: in September 1997, a three-for-two stock split
effected in the form of a 50% stock dividend; and in April 1998, a two-for-one
stock split effected in the form of a 100% stock dividend.
The Board of Directors considers the proposed increase in the number of
authorized shares of Common Stock desirable because it would give the Company
the necessary flexibility to issue Common Stock in connection with additional
stock dividends and splits, acquisitions, equity financings, employee
compensation and benefit plans, and for other general corporate purposes. The
Company currently has no definitive understanding, arrangement, or agreement
with respect to the issuance of additional shares of Common Stock in connection
with an acquisition or otherwise.
Future issuances of Common Stock would be at the discretion of the
Board of Directors without the expense and delay incidental to obtaining
shareholder approval, except as may be required by applicable law or by the
rules of any stock exchange or market on which the Company's securities may then
be listed or authorized for quotation. For example, the Nasdaq National Market,
on which the Common Stock is authorized for quotation, currently requires
shareholder approval as a prerequisite to listing shares in several instances,
including in connection with acquisitions where the present or potential
issuance of shares could result in an increase in the number of shares of Common
Stock outstanding by 20% or more.
Holders of Common Stock have no preemptive rights to subscribe to any
additional securities of any class that the Company may issue. The amendment to
the Charter is not being proposed in response to any effort known by management
to acquire control of the Company.
The amendment to the Charter will be approved if the votes cast in
favor of the proposal exceed the votes cast against it. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE BY THE HOLDERS OF COMMON STOCK "FOR" PROPOSAL TWO.
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PROPOSAL THREE: AMENDMENT TO THE 1997 STOCK PLAN
INTRODUCTION
The 1997 Stock Plan was originally adopted by the Company's
shareholders in September 1997. The 1997 Stock Plan initially authorized 600,000
shares of Common Stock for issuance, which number of shares was subsequently
increased to 1,200,000 as a result of a two-for-one stock split effected in the
form of a stock dividend paid on April 27, 1998. The Board of Directors has
reviewed the Company's stock-based incentive compensation arrangements and
concluded that the 1997 Stock Plan does not currently authorize a sufficient
number of shares to provide flexibility with respect to stock-based compensation
or to establish appropriate long-term incentives to achieve the Company's
objectives. In particular, the Board has determined that, in light of the
intense competition for skilled IT consultants and programmers, the opportunity
for equity-based compensation provides the Company with a recruiting and
retention advantage over some of its competitors. As of April 1998, the Company
had awarded options to over 620 employees.
As of July 22, 1998, options to purchase an aggregate of _________
shares were outstanding under the 1997 Stock Plan and options to purchase an
aggregate of ___________ shares have been exercised. Accordingly, _______ shares
of Common Stock were available for issuance under the 1997 Stock Plan. In order
to provide the Company with greater flexibility to adapt to changing economic
and competitive conditions, and to employment goals and expansion plans through
stock-based compensation strategies that will attract and retain those employees
who are important to the long-term success of the Company, the Board of
Directors has proposed the adoption of an amendment to the 1997 Stock Plan to
increase the number of shares of Common Stock authorized for issuance under the
1997 Stock Plan.
SUMMARY OF THE PROPOSED AMENDMENT
If approved by the shareholders, the amendment will increase the number
of shares of Common Stock which may be issued upon the exercise of options under
the 1997 Stock Plan by 1,800,000 shares or less than ____ percent of the
_________ shares of Common Stock outstanding on July 22, 1998. These shares, in
addition to the _______ shares currently authorized and available for issuance
under the 1997 Stock Plan, will provide an aggregate of _____shares available
for future issuance. If approved by the shareholders, the amendment will become
effective as of September 15, 1998, the date of the Annual Meeting.
SUMMARY OF THE MATERIAL PROVISIONS OF THE 1997 STOCK PLAN, AS AMENDED
Under the 1997 Stock Plan, the Compensation Committee has the authority
to grant to employees and consultants of the Company, and the Board of Directors
has the authority to grant to Outside Directors (currently there are two Outside
Directors), the following types of awards: (1) stock options; (2) stock
appreciation rights; (3) restricted stock; and/or (4) other stock-based awards.
The Compensation Committee has the power to delegate authority to the Company's
Chief Executive Officer or to a committee composed of officers of the Company to
grant, on behalf of the Compensation Committee, non-qualified stock options,
subject to such guidelines as the Compensation Committee may determine from time
to time. Pursuant to the 1997 Stock Plan, as amended, __________ shares of
Common Stock have been reserved and, upon shareholder approval, will be
available for issuance, which may include authorized and unissued shares or
treasury shares.
The maximum number of shares of Common Stock for which awards may be
made under the 1997 Stock Plan to any officer of the Company or other person
whose compensation may be subject to the limitations on deductibility under
Section 162 (m) of the Code is 200,000 during any single year. As of the date
hereof, no awards have been made under the 1997 Stock Plan. 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
1997 Stock Plan will terminate on, and no award may be granted later than, the
tenth anniversary of the date of adoption of the 1997 Stock Plan, but the
exercise date of awards granted prior to such tenth anniversary may extend
beyond that date.
The 1997 Stock Plan also provides for automatic grants of non-qualified
stock options to Outside Directors. Options to purchase 10,000 shares of Common
Stock will be automatically granted to Outside Directors upon their initial
election to the Board of Directors. Options to purchase 5,000 shares will also
be automatically granted to each Outside Director upon his or her reelection to
the Board of Directors at the annual shareholders' meeting if such director has
served as such for the past eleven months as of the date of the meeting. Such
options will vest with respect to all shares on the first anniversary of the
date of grant, if such Outside Director is still serving as a director on such
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<PAGE> 14
date. All options automatically 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 will not be able to
transfer or assign their options without the prior written consent of the Board
of Directors other than (i) transfers by the optionee to a member of his or her
immediate family or a trust for the benefit of the optionee or a member of his
or her immediate family, or (ii) transfers by will or by the laws of descent and
distribution. Options automatically granted to Outside Directors will 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. For periods beginning on
the date of the 1997 annual meeting of shareholders, the 1997 Stock Plan
provisions regarding automatic option grants to Outside Directors will supersede
and replace similar automatic grant provisions of the 1995 Stock Plan.
Incentive stock options ("ISOs") and non-qualified stock options 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 1997 Stock Plan or cash awards outside the 1997 Stock Plan. A stock
option will be exercisable at such times and subject to such terms and
conditions as the Compensation Committee will determine. In the case of an ISO,
however, the term will be no more than ten years after the date of grant (five
years in the case of ISO's for certain 10% shareholders). The option price for
an ISO 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 and for any
non-qualified stock option will not be less than 50% of the fair market value as
of the date of grant. ISOs granted under the 1997 Stock Plan may not be
transferred or assigned other than by will or by the laws of descent and
distribution. Non-qualified stock options and stock appreciation rights may not
be transferred or assigned without the prior written consent of the Compensation
Committee other than (i) transfers by the optionee to a member of his or her
immediate family or a trust for the benefit of the optionee or a member of his
or her immediate family, or (ii) transfers by will or by the laws of descent and
distribution.
Stock appreciation rights ("SARs") may be granted under the 1997 Stock
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 SAR has been
exercised, the related portion of the stock option underlying the SAR will
terminate. Upon the exercise of a SAR, the Company 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 Compensation 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 SARs being exercised.
Restricted stock awards may be granted alone, in addition to, or in
tandem with, other awards under the 1997 Stock Plan or cash awards made outside
the 1997 Stock 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 value for such stock. The Compensation Committee
may also impose such other conditions and restrictions on the shares of
restricted stock as it deems appropriate, including the satisfaction of one or
more of the following performance criteria: (i) pre-tax income or after-tax
income; (ii) operating cash flow; (iii) operating profit; (iv) return on equity,
assets, capital, or investment; (v) earnings or book value per share; (vi) sales
or revenues; (vii) operating expenses; (viii) Common Stock price appreciation;
and (ix) implementation, management, or completion of critical projects or
processes (the "Performance Goals"). The Performance Goals may include a
threshold level of performance below which no payment will be made (or will
occur), and a maximum level of performance above which no additional payment
will be made (or at which full vesting will occur). Each of the Performance
Goals will be determined, to the extent applicable, in accordance with generally
accepted accounting principles and will be subject to certification by the
Compensation Committee; provided, that the Compensation Committee will have the
authority to make equitable adjustments to the Performance Goals in recognition
of unusual or non-recurring events affecting the Company. The Compensation
Committee may provide that such restrictions will lapse with respect to
specified percentages of the awarded shares of restricted stock on successive
future dates. 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
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
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<PAGE> 15
options, SARs, restricted stock, or cash awards outside of the 1997 Stock 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 of control of the
Company, SARs, and any stock options which are not then exercisable, will become
fully exercisable and vested and 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. For purposes of the 1997 Stock
Plan, a change of control is defined generally to include (i) any person or
entity, other than the Company or a wholly-owned subsidiary of the Company,
becoming the beneficial owner of the Company's securities having 35% or more of
the combined voting power of the then outstanding securities that may be cast
for the election of directors; (ii) in connection with a cash tender, exchange
offer, merger or other business combination, sale of assets or contested
election, less than a majority of the combined voting power of the then
outstanding securities of the Company entitled to vote generally in the election
of directors being held in the aggregate by the holders of the Company's
securities entitled to vote generally in the election of directors of the
Company immediately prior to such transaction; and (iii) during any period of
two consecutive years, individuals who at the beginning of any such period
constitute the Board of Directors ceasing to constitute at least a majority
thereof, unless the election of each director first elected during such period
was approved by a vote of at least two-thirds of the directors of the Company
then still in office who were directors of the Company at the beginning of any
such period. Stock options, SARs, 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 1997 Stock 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, as determined by the
Compensation Committee.
The Board of Directors may amend, alter, or discontinue the 1997 Stock
Plan, provided that no amendment may be made which would impair the rights of an
optionee or participant under an award made under the 1997 Stock Plan without
the participant's consent. No award may be granted pursuant to the 1997 Stock
Plan on or after the tenth anniversary of the effective date of the plan, but
awards granted prior to such tenth anniversary may be extended beyond that date.
Because awards under the 1997 Stock Plan are at the discretion of the
Compensation Committee, the benefits that will be awarded under the 1997 Stock
Plan to persons other than Outside Directors are not currently determinable. As
of April 30, 1998, the market value of a share of Common Stock based on the
closing price for such stock on the Nasdaq National Market was $12.00.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the federal income tax aspects of
awards made under the 1997 Stock Plan based upon the federal income tax laws in
effect on the date hereof. This summary is not intended to be exhaustive and
does not describe state or local tax consequences.
Incentive Stock Options. No taxable income is realized by the
participant upon the grant or exercise of an ISO. If Common Stock is issued to a
participant pursuant to the exercise of an ISO, and if no disqualifying
disposition of the shares is made by the participant within two years of the
date of grant or within one year after the transfer of the shares to the
participant, then: (a) upon the sale of the shares, any amount realized in
excess of the option price will be taxed to the participant as a mid-term or
long-term capital gain, and any loss sustained will be a capital loss, and (b)
no deduction will be allowed to the Company for federal income tax purposes. The
exercise of an ISO will give rise to an item of tax preference that may result
in an alternative minimum tax liability for the participant unless the
participant makes a disqualifying disposition of the shares received upon
exercise.
If Common Stock acquired upon the exercise of an ISO is disposed of
prior to the expiration of the holding periods described above, then generally:
(a) the participant will realize ordinary income in the year of disposition in
an amount equal to the excess, if any, of the fair market value of the shares at
exercise (or, if less, the amount realized on the disposition of the shares)
over the option price paid for such shares, and (b) the Company will be entitled
to deduct any such recognized amount. Any further gain or loss realized by the
participant will be taxed as short-term, mid-term, or long-term capital gain or
loss, as the case may be, and will not result in any deduction by the Company.
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<PAGE> 16
Subject to certain exceptions for disability or death, if an ISO is
exercised more than three months following the termination of the participant's
employment, the option will generally be taxed as a non-qualified stock option.
Non-Qualified Stock Options. Except as noted below, with respect to
non-qualified stock options: (a) no income is realized by the participant at the
time the option is granted; (b) generally upon exercise of the option, the
participant realizes ordinary income in an amount equal to the difference
between the option price paid for the shares and the fair market value of the
shares on the date of exercise and the Company will be entitled to a tax
deduction in the same amount; and (c) at disposition, any appreciation (or
depreciation) after date of exercise is treated either as short-term, mid-term,
or long-term capital gain or loss, depending upon the length of time that the
participant has held the shares. See "Restricted Stock" for tax rules applicable
where the spread value of an option is settled in an award of restricted stock.
Stock Appreciation Rights. No income will be realized by a participant
in connection with the grant of an SAR. When the SAR is exercised, the
participant will generally be required to include as taxable ordinary income in
the year of exercise, an amount equal to the amount of cash and the fair market
value of any shares received. The Company will be entitled to a deduction at the
time and in the amount included in the participant's income by reason of the
exercise. If the participant receives Common Stock upon exercise of an SAR, the
post-exercise appreciation or depreciation will be treated in the same manner
discussed above under "Non-Qualified Stock Options."
Restricted Stock. A participant receiving restricted stock generally
will recognize ordinary income in the amount of the fair market value of the
restricted stock at the time the stock is no longer subject to forfeiture, less
the consideration paid for the stock. However, a participant may elect, under
Section 83(b) of the Code within 30 days of the grant of the stock, to recognize
taxable ordinary income on the date of grant equal to the excess of the fair
market value of the shares of restricted stock (determined without regard to the
restrictions) over the purchase price of the restricted stock. Thereafter, if
the shares are forfeited, the participant will be entitled to a deduction,
refund, or loss, for tax purposes only, in an amount equal to the purchase price
of the forfeited shares regardless of whether he made a Section 83(b) election.
With respect to the sale of shares after the forfeiture period has expired, the
holding period to determine whether the participant has long-term, mid-term or
short-term capital gain or loss generally begins when the restriction period
expires and the tax basis for such shares will generally be based on the fair
market value of such shares on such date. However, if the participant makes an
election under Section 83(b), the holding period will commence on the date of
grant, the tax basis will be equal to the fair market value of shares on such
date (determined without regard to restrictions), and the Company generally will
be entitled to a deduction equal to the amount that is taxable as ordinary
income to the participant in the year that such income is taxable.
Dividends and Dividend Equivalents. Dividends paid on restricted stock
generally will be treated as compensation that is taxable as ordinary income to
the participant, and will be deductible by the Company. If, however, the
participant makes a Section 83(b) election, the dividends will be taxable as
ordinary income to the participant but will not be deductible by the Company.
Other Stock-Based Awards. The federal income tax treatment of other
stock-based awards will depend on the nature of any such award and the
restrictions applicable to such award. Such an award may, depending on the
conditions applicable to the award, be taxable as an option, an award of
restricted stock, or in a manner not described herein.
The 1997 Stock Plan is not intended to be a "qualified plan" under
Section 401(a) of the Code.
The proposed amendment to the 1997 Stock Plan will be approved and
adopted if the votes cast in favor of the proposed amendment to the 1997 Stock
Plan exceed the votes cast against it. Abstentions and broker non-votes will not
be considered in the vote. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
PROPOSAL THREE.
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<PAGE> 17
PROPOSAL FOUR: 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, 1999 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 FOUR.
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
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 SEC. 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, with the exception of James E. Harwood and Joseph W. McLeary,
directors of the Company, who each failed to file timely one report reflecting
two exempt transactions. Such reports have been subsequently filed.
DEADLINE FOR SUBMISSION TO SHAREHOLDERS
OF PROPOSALS TO BE PRESENTED AT THE
1999 ANNUAL MEETING OF SHAREHOLDERS
Any proposal intended to be presented for action at the 1999 annual
meeting of shareholders by any shareholder of the Company must be received by
the Secretary of the Company not later than April __, 1999 in order for such
proposal to be considered for inclusion in the Company's Proxy Statement and
proxy relating to its 1999 annual meeting of shareholders. Nothing in this
paragraph shall be deemed to require the Company to include any shareholder
proposal which does not meet all the requirements for such inclusion established
by the SEC.
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, 1998 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 __, 1998
<PAGE> 18
APPENDIX A
SCB COMPUTER TECHNOLOGY, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON TUESDAY, SEPTEMBER 15, 1998.
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 Company's
Emerging Technology Center, 3239 Players Club Parkway, Memphis, Tennessee, on
Tuesday, September 15, 1998 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: AMENDMENT TO CHARTER TO INCREASE AUTHORIZED SHARES
OF COMMON STOCK:
[ ] FOR the amendment to Charter to increase authorized shares of Common
Stock
[ ] AGAINST the amendment to Charter to increase authorized shares of Common
Stock
[ ] ABSTAIN
<PAGE> 19
PROPOSAL 3: AMENDMENT TO THE 1997 STOCK INCENTIVE PLAN:
[ ] FOR amendment to the 1997 Stock Incentive Plan
[ ] AGAINST amendment to the 1997 Stock Incentive Plan
[ ] ABSTAIN
PROPOSAL 4: RATIFICATION OF APPOINTMENT OF ACCOUNTANTS:
[ ] FOR the appointment of Ernst & Young LLP
[ ] AGAINST the appointment of Ernst & Young LLP
[ ] 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;
FOR THE AMENDMENT TO CHARTER TO INCREASE AUTHORIZED SHARES OF COMMON STOCK; FOR
THE AMENDMENT TO THE 1997 STOCK INCENTIVE PLAN; AND FOR THE RATIFICATION OF THE
SELECTION OF THE ACCOUNTANTS.
Date: , 1998
-----------------------
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.
