<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 4, 1996
REGISTRATION STATEMENT NO. 333-10213
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
SUPERIOR CONSULTANT HOLDINGS CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
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<S> <C> <C>
DELAWARE 8742 38-3306717
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification No.)
incorporation or
organization)
</TABLE>
4000 TOWN CENTER, SUITE 1100
SOUTHFIELD, MICHIGAN 48075
(810) 386-8300
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
RICHARD D. HELPPIE, JR.
CHIEF EXECUTIVE OFFICER
SUPERIOR CONSULTANT HOLDINGS CORPORATION
4000 TOWN CENTER, SUITE 1100
SOUTHFIELD, MICHIGAN 48075
(810) 386-8300
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
------------------------------
Copies to:
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WILLIAM N. WEAVER, JR. SCOTT N. GIERKE
SACHNOFF & WEAVER, LTD. MCDERMOTT, WILL & EMERY
30 S. WACKER DRIVE, 29TH FLOOR 227 W. MONROE ST.
CHICAGO, ILLINOIS 60606 CHICAGO, ILLINOIS 60606
TELEPHONE NO. (312) 207-6401 TELEPHONE NO. (312) 372-2000
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / _____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / _____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation, or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
SUBJECT TO COMPLETION, DATED OCTOBER 4, 1996
PROSPECTUS
2,150,000 SHARES
SUPERIOR CONSULTANT
HOLDINGS CORPORATION
[SUPERIOR LOGO] COMMON STOCK
All of the 2,150,000 shares of Common Stock offered hereby are being sold
by Superior Consultant Holdings Corporation (the "Company"). Prior to this
offering, there has been no public market for the Common Stock of the Company.
It is currently estimated that the initial public offering price will be between
$13.00 and $15.00 per share. See "Underwriting" for information relating to the
determination of the initial public offering price. The Common Stock has been
approved for listing on The Nasdaq National Market under the symbol "SUPC."
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share............................. $ $ $
Total(3).............................. $ $ $
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</TABLE>
(1) The Company and, in the event the over-allotment option is exercised,
certain stockholders of the Company (the "Selling Stockholders"), have
agreed to indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting expenses of the offering payable by the Company estimated
at $600,000.
(3) The Company and the Selling Stockholders have granted to the Underwriters a
30-day option to purchase up to an additional 322,500 shares of Common Stock
solely to cover over-allotments, if any. If all such shares are purchased,
the total Price to Public, Underwriting Discount, and Proceeds to Company
will be $ , $ and $ , respectively, and the proceeds to
the Selling Stockholders will be $ . The Company will not receive any
of the proceeds from the sale of shares of Common Stock by the Selling
Stockholders pursuant to the Underwriters' over-allotment option, if
exercised. See "Underwriting" and "Principal and Selling Stockholders."
The shares of Common Stock are offered by the several Underwriters when, as
and if delivered to and accepted by them and subject to their right to reject
orders in whole or in part. It is expected that delivery of the certificates for
the shares of Common Stock will be made on or about , 1996.
WILLIAM BLAIR & COMPANY
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
JEFFERIES & COMPANY, INC.
THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE> 3
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), a Registration Statement on Form S-1 under the Securities Act of
1933 with respect to the Common Stock offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto, certain parts of which have been omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to the Company and the Common Stock, reference is made to the
Registration Statement and to the exhibits and schedules filed as part of the
Registration Statement. Statements contained in this Prospectus concerning the
contents of any contract or any other document referred to are not necessarily
complete; reference is made in each instance to the copy of such contract or
document filed as an exhibit to the Registration Statement. Each such statement
is qualified in all respects by such reference to such exhibit. Copies of the
Registration Statement and the exhibits and schedules thereto may be inspected
without charge at the public reference facilities maintained by the Securities
and Exchange Commission in Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the regional offices of the Commission located at Seven World
Trade Center, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and copies of all or any part
thereto may be obtained from such office upon payment of prescribed fees. The
Registration Statement, including the exhibits and schedules thereto, is also
available on the Commission's Web site at http://www.sec.gov.
------------------------------
This Prospectus contains certain forward-looking statements that involve
substantial risks and uncertainties. When used in this Prospectus, the words
"anticipate," "believe," "estimate," "intend" and "expect" and similar
expressions are intended to identify such forward-looking statements. The
Company's actual results, performance or achievements could differ materially
from the results expressed in or implied by these forward-looking statements.
Factors that could cause or contribute to such differences include those
discussed in "Risk Factors."
------------------------------
The Company intends to furnish its stockholders with annual reports
containing audited financial statements examined by its independent auditors and
quarterly reports containing interim unaudited financial information for the
first three quarters of each year.
------------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET, OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the consolidated financial statements and related notes thereto
appearing elsewhere in this Prospectus. Unless indicated otherwise, all
information contained in this Prospectus: (i) assumes that the Underwriters'
over-allotment option is not exercised; and (ii) gives retroactive effect to two
separate merger transactions to be effected prior to the closing of this
offering, pursuant to which, among other things, Superior Consultant Company,
Inc. ("Superior") and UNITIVE Corporation ("Unitive") will become wholly-owned
operating subsidiaries of the Company (collectively, the "Corporate
Reorganization"). Unless the context otherwise indicates, all references to the
"Company" include Superior and Unitive.
THE COMPANY
The Company is a national healthcare consulting firm that provides a wide
range of information technology ("IT") consulting and strategic and operations
management consulting services to a broad cross-section of healthcare industry
participants and healthcare information system vendors. The Company uses its
in-depth institutional knowledge and nationally deployed group of experienced
consultants to help clients plan and execute business strategies. The Company's
comprehensive continuum of solutions range from strategic planning and
operations management consulting, to information systems planning,
implementation and integration, to interim management and outsourcing.
The Company's services integrate many diverse facets and constituencies of
the healthcare industry. Through its strategic consulting, the Company brings
together the healthcare and business relationships required to establish and
maintain efficient and collaborative Integrated Delivery Networks ("IDNs").
Through its operations management consulting, the Company links the needs and
optimizes the contributions of clinical, information and management personnel.
Through its IT implementation and integration consulting, the Company forges a
value-added link between healthcare information systems vendors and their
customers by maximizing the potential of existing technology and providing a
bridge to emerging technologies. The Company's broad expertise in numerous
healthcare information systems and technologies and its independent status
enable the Company to recommend and implement customized solutions that are
unbiased to specific organizations, hardware or software vendors.
The Company believes several competitive factors distinguish it from other
participants in the healthcare consulting market, including: (i) an extensive
healthcare focus giving the Company an in-depth knowledge of the healthcare
industry and a detailed understanding of each client's particular business
environment and market dynamics; (ii) proprietary information and communication
systems which are used by the Company's consultants on a daily basis to access
product and industry knowledge, facilitate seamless geographic communication and
effectively manage and complete engagements; (iii) recognized expertise
resulting from the Company's experienced healthcare consultants, who have an
average of over 16 years of healthcare and IT experience, and a structured
framework for continuous skills enhancement; (iv) an ability to recruit and
retain highly experienced personnel; (v) an extensive knowledge of the products
and technologies of major healthcare information system vendors; and (vi)
long-term client relationships that often create opportunities for additional
engagements.
The Company has served over 600 clients across a broad cross-section of the
healthcare industry. From January 1, 1995 through June 30, 1996, the Company
worked for over 280 healthcare clients on over 850 engagements. The Company
believes that its long-term relationships, in-depth knowledge of its client's
needs and its broad range of services provide it with significant advantages
over its competitors in marketing additional services and winning new
engagements. In each of the last three completed fiscal years, the Company's
revenues from clients served in the prior year were at least 70% of total
revenues. The Company's goal is to be the preferred, if not sole, provider of a
broad range of solutions for each of its healthcare clients.
The healthcare industry continues to undergo rapid, profound change as
healthcare providers face external and internal pressures to meet the
competitive demands of the marketplace, comply with increasing government
regulations and cope with the advent of managed care. As industry consolidation
and the
3
<PAGE> 5
formation of IDNs create larger and increasingly far-reaching healthcare
organizations, providers must place greater focus on information management and
business process solutions to control costs, demonstrate quality, measure
performance and increase efficiency. Those pressures have driven the healthcare
industry's substantial spending on IT, which was estimated by International Data
Corporation to have been approximately $8.5 billion in 1994. Healthcare IT has
grown increasingly complex, costly and burdensome due to the challenges of
deploying new technology, implementing new enterprise wide information systems,
maintaining older systems and meeting staffing requirements in a market with an
insufficient pool of qualified IT professionals. In addition, the changing
business environment has also produced an evolving range of strategic and
operational options for healthcare entities, many of which are unfamiliar to an
industry that has historically operated under a non-aligned, third-party payor
environment. As a result, the Company believes that healthcare organizations
will continue to turn to outside consultants for a wide range of IT, strategic
and operational solutions. For example, according to DataQuest, expenditures by
healthcare industry participants on IT professional services have grown at a
compound annual rate of approximately 16.5% from an estimated $2.5 billion in
1994 to an estimated $3.3 billion in 1996.
The Company's growth strategy is focused on: (i) continuing to leverage its
existing client base; (ii) expanding its client base and intensifying its
geographic presence; (iii) enhancing and adding new service areas including
outsourcing; and (iv) pursuing strategic acquisitions and alliances. By
successfully achieving these goals, the Company believes it can further enhance
its leadership position in the healthcare consulting industry. Another facet of
the Company's growth strategy focuses on Unitive, a subsidiary that assists
clients in various industries in developing, designing, implementing and
maintaining groupware and intranet and internet information systems and
solutions, principally using Lotus Notes. The Company intends to capitalize on
opportunities to cross-market Unitive's groupware development and management
services to its healthcare clients while continuing to expand Unitive's business
across a broad range of industries.
THE OFFERING
Shares Offered by the Company........... 2,150,000
Shares Outstanding Immediately After the
Offering................................ 6,986,112 (1)
Use of Proceeds......................... Repayment of short-term bank
indebtedness and general corporate
purposes, including working capital
and possible acquisitions of
related businesses. See "Use of
Proceeds."
Nasdaq National Market Symbol........... SUPC
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(1) Excludes (i) 270,000 shares of Common Stock reserved for issuance pursuant
to stock options to be granted under the Company's Long-Term Incentive Plan
as of the consummation of this offering at an exercise price per share
equal to the initial public offering price; and (ii) 630,000 additional
shares of Common Stock reserved for future issuance under the Company's
Long-Term Incentive Plan. Assumes the issuance of 58,127 shares of Common
Stock upon the exercise of currently outstanding options in connection with
the Corporate Reorganization. See "Management -- Employee Benefit Plans --
Long-Term Incentive Plan" and Note 11 of Notes to Consolidated Financial
Statements.
4
<PAGE> 6
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AND SELECTED OPERATING DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
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PRO PRO
FORMA FORMA
1991 1992 1993 1994 1995 1995(1) 1995 1996 1996(1)
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STATEMENT OF OPERATIONS DATA:
Revenues.............................. $13,289 $14,316 $15,559 $19,234 $25,906 $25,906 $11,921 $16,547 $16,547
Cost of services...................... 6,468 6,822 6,802 8,505 12,008 12,008 5,552 8,197 8,197
Selling, general and administrative
expenses............................ 4,914 5,712 6,200 8,223 10,045 10,045 4,672 6,250 6,250
Executive compensation expense(2)..... 1,760 3,480 1,931 2,445 3,730 1,060 1,766 2,600 530
------- ------- ------- ------- ------- ------- ------- ------- -------
Earnings (loss) from operations....... 147 (1,698) 626 61 123 2,793 (69) (500) 1,570
Interest and other expense (income)... (23) (34) 22 (28) (58) (58 ) (21) (6) (6 )
------- ------- ------- ------- ------- ------- ------- ------- -------
Earnings (loss) before income taxes... 170 (1,664) 604 89 181 2,851 (48) (494) 1,576
Income taxes.......................... -- -- -- -- 165 1,215 100 13 625
------- ------- ------- ------- ------- ------- ------- ------- -------
Net earnings (loss)................... $ 170 $(1,664) $ 604 $ 89 $ 16 $1,636 $ (148) $ (507) $ 951
======= ======= ======= ======= ======= ======= ======= ======= =======
Pro forma net earnings per share...... $ 0.36 $ 0.20
======= =======
Shares used in computing pro forma net
earnings per share.................. 4,607 4,822
SELECTED OPERATING DATA:
Number of consultants, at period
end................................. 101 102 114 143 194 169 234
Number of clients billed.............. 118 105 131 186 243 140 242
Number of new projects................ 209 280 365 429 540 257 380
</TABLE>
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JUNE 30, 1996
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ACTUAL AS ADJUSTED(3)
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<S> <C> <C>
BALANCE SHEET DATA:
Working capital.................................................................................... $ 804 $ 28,395
Total assets....................................................................................... 9,131 34,420
Total debt......................................................................................... 753 73
Total stockholders' equity......................................................................... 1,355 28,696
</TABLE>
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(1) The pro forma statement of operations information has been computed for each
pro forma period by adjusting the Company's net earnings, as reported for
such period, to (i) eliminate executive compensation expense for such period
in excess of the amount of executive compensation (including the full amount
of potential bonus) that would have been paid had the executive compensation
agreements, which will become effective as of the closing date of this
offering, been effective throughout such period; and (ii) record income
taxes, assuming an effective tax rate of 42.6% for the year ended December
31, 1995 and 39.6% for the six months ended June 30, 1996, which would have
been recorded had Superior been a C Corporation during such periods. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Management -- Executive Compensation" and "S Corporation
Termination."
(2) Executive compensation expense includes salary and bonuses for Richard D.
Helppie, Jr., Charles O. Bracken and Robert R. Tashiro. The Company has
entered into agreements with these three officers which will be effective
upon the closing of this offering through December 31, 1997 and which will
provide them with annual compensation in the aggregate amount of $910,000,
comprised of base salary and bonus compensation based on achievement of
certain pre-determined performance criteria. These limitations will not
apply to amounts paid to these three officers on or prior to the closing of
this Offering. See "Management -- Executive Compensation."
(3) As adjusted to give effect to (i) the sale of 2,150,000 shares of Common
Stock by the Company at an assumed initial public offering price of $14.00
per share and the application of the estimated net proceeds therefrom; (ii)
the recognition of an estimated $250,000 of deferred income taxes upon the
termination of Superior's S Corporation election; and (iii) receipt of the
proceeds from the issuance of 58,127 shares of Common Stock immediately
prior to this offering upon the exercise of currently outstanding options at
a weighted average exercise price of $3.40 per share. See "S Corporation
Termination," "Use of Proceeds" and Note 7 to Notes to Consolidated
Financial Statements.
* * *
The Company was incorporated in Delaware on August 14, 1996. Superior and
Unitive were founded in 1984 and 1993, respectively. The principal office of the
Company is located at 4000 Town Center, Suite 1100, Southfield, Michigan 48075;
its telephone number is (810) 386-8300.
5
<PAGE> 7
RISK FACTORS
In addition to the other information set forth in this Prospectus,
investors should consider carefully the following factors in connection with an
investment in the shares of Common Stock offered hereby.
NEED TO ATTRACT, RETAIN AND MANAGE PROFESSIONAL STAFF
The Company's business involves the delivery of professional services and
is labor-intensive. The Company's success depends in large part upon its ability
to attract, develop, motivate and retain highly skilled consultants. There is
significant competition for employees with the skills required to perform the
services offered by the Company from other consulting firms, healthcare
providers and other healthcare industry participants, health information systems
vendors, clients, systems integrators and many other enterprises. There can be
no assurance that the Company will be able to attract and retain a sufficient
number of highly skilled employees in the future or that it will continue to be
successful in training, retaining and motivating employees. The loss of a
significant number of consultants and/or the Company's inability to hire a
sufficient number of qualified consultants could have a material adverse effect
on the Company's business, operating results and financial condition including
its ability to secure, service and complete client engagements.
CLIENT CONCENTRATION
The Company derives a significant portion of its revenue from a relatively
limited number of clients. For example, during 1995 and the six months ended
June 30, 1996 the Company's five largest clients accounted for approximately
37.6% and 34.2%, respectively, of the Company's revenues. Four of the top five
clients in 1995 were also among the Company's five largest clients during the
six months ended June 30, 1996. Other than Detroit Medical Center, which
accounted for 13.3% and 10.4% of the Company's revenues in 1995 and the six
months ended June 30, 1996, respectively, no other client accounted for 10% or
more of the Company's revenues during these periods. Clients engage the Company
on an assignment-by-assignment basis, and a client can generally terminate an
assignment at any time without penalty. In addition, the level of the Company's
consulting services required by any individual client can diminish over the life
of its relationship with the Company, and there can be no assurance that the
Company will be successful in establishing relationships with new clients as
this occurs. Moreover, there can be no assurance that the Company's existing
clients will continue to engage the Company for additional projects or do so at
the same revenue levels. The loss of any significant client could have a
material adverse effect on the Company's business, financial condition and
results of operations.
VENDOR SYSTEMS CONCENTRATION
There are numerous healthcare information systems solutions available to
the healthcare industry. Vendors of these products come into and out of favor
depending on a variety of factors. Although the Company's consultants have
expertise with the information systems developed by numerous healthcare
information system vendors, historically the Company has experienced periodic
revenue concentration from client projects involving the products of an evolving
group of vendors. At present, the Company believes that its current
concentration of revenue derived from the planning, management, process design
and implementation involving the products of two current leading healthcare
information systems vendors, Shared Medical Systems Corporation (SMS) and HBO &
Company (HBOC), generally reflects the current favor of the healthcare industry
participants served by the Company to these vendors. In 1995 and the six months
ended June 30, 1996, client projects involving the products of these two
vendors, together, represented approximately 41.3% and 43.9%, of the Company's
revenues. Should either of these vendors (or any vendors with whose products the
Company has substantial involvement) lose favor in the healthcare industry, it
would require the Company to refocus its efforts on alternative information
systems products of other vendors. The loss of a major portion of the Company's
business with respect to any one of these vendors could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
6
<PAGE> 8
VARIABILITY OF QUARTERLY OPERATING RESULTS
Variations in the Company's revenue and operating results may occur as a
result of a number of factors, such as the number and significance of active
client engagements during a quarter, delays incurred in connection with a
project, employee hiring and consultant utilization. The timing of revenues is
difficult to forecast because the Company's sales cycle can be relatively long
and may depend on factors such as the size and scope of assignments, budgetary
cycles and pressures and general economic conditions. In addition, a substantial
percentage of the Company's expenses, particularly personnel and rent, are
relatively fixed in advance of any particular quarter. As a result, a variation
in the size or number of client assignments or the timing of the initiation or
the completion of client assignments can cause significant variations in
operating results from quarter to quarter. Seasonal factors, such as vacation
days and total business days in a quarter, and the business practices of clients
such as deferring commitments on new projects until after the end of the
calendar or the client's fiscal year, could require the Company to maintain
under-utilized employees and could therefore have a material adverse effect on
the Company's business, financial condition and results of operations. In
addition, the Company's annual employees' meetings can result in lower
consultant utilization in the quarter in which the meeting occurs. Given the
possibility of such fluctuations, the Company believes that comparisons of its
results of operations for preceding quarters are not necessarily meaningful and
that such results for one quarter should not be relied upon as an indication of
future performance. Based on the preceding factors, it is possible that the
Company may experience a shortfall in revenue or earnings from expected levels
or otherwise fail to meet expectations of securities analysts or the market in
general, which could have a material adverse effect on the market price of the
Company's Common Stock. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Quarterly Results."
HEALTHCARE INDUSTRY CONCENTRATION
All of the revenues of the Company's wholly owned healthcare consulting
subsidiary, Superior, in 1995 and in the six months ended June 30, 1996, were
derived from clients involved in the healthcare industry. These revenues
represented 93.4% and 93.3%, respectively, of the total revenues generated by
the Company on a consolidated basis for the same periods. As a result of the
Company's focus on healthcare consulting, the Company's business, financial
condition and results of operations are influenced by conditions affecting this
industry, including changing political, economic and regulatory influences that
may affect the procurement practices and operation of healthcare providers. Many
federal and state legislators have announced that they intend to propose
programs to reform the United States healthcare system at both the federal and
state level. These programs could result in lower reimbursement rates and
otherwise change the environment in which providers operate. In addition, large
private purchasers of healthcare services are placing increasing cost pressure
on providers. Healthcare providers may react to these cost pressures and other
uncertainties by curtailing or deferring investments, including investments in
the Company's services. Moreover, many healthcare providers are consolidating to
create larger healthcare delivery organizations and are forming affiliations for
purchasing products and services. These consolidations and affiliations reduce
the number of potential customers for the Company's services, and the increased
bargaining power of these organizations could lead to reductions in the amounts
paid for the Company's services. In addition, this consolidation is likely to
result in the acquisition of certain of the Company's clients, and such clients
may scale back or terminate their relationship with the Company following their
acquisition. The impact of these developments in the healthcare industry is
difficult to predict and could have a material adverse effect on the Company's
business, financial condition and results of operations.
DEPENDENCE ON SENIOR MANAGEMENT
The success of the Company is highly dependent upon the efforts, abilities
and business generation capabilities of its senior management team, including
its three most senior executive officers: Richard D. Helppie, Jr., President and
Chief Executive Officer of the Company, Charles O. Bracken, Executive Vice
President of Superior, and Robert R. Tashiro, Senior Vice President and Chief
Operating Officer of Superior. Although client relationships are managed at many
levels of the Company, the loss of the services of any of these key executives
for any reason could have a material adverse effect upon the Company's business,
7
<PAGE> 9
financial condition and results of operations, including its ability to secure
engagements. Moreover, certain client and industry relationships and areas of
expertise are dependent on the efforts, abilities and business generation
capabilities of other members of the Company's management team. The loss of the
services of any of these management team members could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Management."
PROJECT RISKS
Many of the Company's engagements involve projects which are critical to
the operations of its clients' business and which provide benefits that may be
difficult to quantify. The Company's failure to meet a client's expectations in
the performance of its services could damage the Company's reputation and
adversely affect its ability to attract new business. In addition, the Company
could incur substantial costs and expend significant resources correcting errors
in its work, and could possibly become liable for damages caused by such errors.
The Company is establishing a program to provide healthcare IT outsourcing which
includes interim management, personnel acquisition and facilities management,
and/or the transfer of a client's information system assets -- hardware/software
and human resources -- from an internal business function to an outsourced
service. To implement its outsourcing program, the Company may be required to
make substantial investments in capital assets and personnel for certain
outsourcing contracts. The Company has minimal experience to date as an
outsourcing provider, and there can be no assurance that the Company will be
able to assess accurately the investment required and negotiate and perform in a
profitable manner any of its outsourcing contracts it may be awarded. A small
percentage of the Company's projects are billed on a fixed-fee basis, which is
distinguishable from the Company's general method of billing on a time and
materials basis. The Company could in the future increase the number and size of
projects billed on a fixed-fee basis, particularly if the Company is successful
in its strategy to provide healthcare IT outsourcing services. The Company's
failure to estimate accurately the resources and related expenses required for a
fixed-fee project or its failure to complete its contractual obligations in a
manner consistent with the project plan upon which its fixed-fee contract was
based could have a material adverse effect on the Company's business, financial
condition and results of operations.
COMPETITION
The market for the Company's services is highly fragmented and highly
competitive and is subject to rapid change. The Company believes that it
currently competes principally with systems integration firms, national
consulting firms, including the consulting divisions of the "Big Six" accounting
firms, information system vendors, service groups of computer equipment
companies, facilities management companies, general management consulting firms
and regional and specialty consulting firms. Many of the Company's competitors
have significantly greater financial, technical and marketing resources than the
Company, generate greater revenues and have greater name recognition than the
Company. Moreover, those competitors that sell or license their own software may
in the future attempt to limit or eliminate the use of third party consultants,
such as the Company, to implement and/or customize such software. In addition,
vendors whose systems may enjoy wide market acceptance and large market share
could enter into exclusive or restrictive agreements with other consulting firms
which could eliminate or substantially reduce the Company's implementation work
for those systems. There are relatively low barriers to entry into the Company's
markets, and the Company has faced and expects to continue to face additional
competition from new entrants into the healthcare consulting industry. In
addition, combinations and consolidations in the consulting industry will give
rise to larger competitors, whose relative strengths are impossible to predict.
The Company also competes with its clients' internal resources, particularly
where these resources represent a fixed cost to the client. This internal client
competition may heighten as consolidation of healthcare providers creates
organizations large enough to support more sophisticated internal information
management capabilities. There can be no assurance that the Company will be able
to compete effectively with current and future competitors or that competitive
pressures faced by the Company will not cause the Company's revenue or operating
margins to decline or otherwise materially adversely affect its business,
financial condition and results of operations.
8
<PAGE> 10
MANAGEMENT OF GROWTH
The Company's operational and geographic growth has placed significant
demands on the Company's management, administrative, operational and financial
resources, and the Company's ability to manage its growth will require the
Company to continue to implement and improve its operational, financial and
management information systems and to continue to expand, motivate and
effectively manage an evolving and expanding workforce. In addition, the
Company's success will depend in large part on its ability to maintain high
levels of consultant utilization, maintain billing rates, maintain quality and
accurately set and meet schedules. The Company's rent will increase by
approximately $10,000 per month and the Company will incur certain one-time
costs and capital expenditures aggregating approximately $550,000 associated
with the Company's move in the third quarter of 1996 to larger headquarters to
accommodate its growth. If the Company is unable to manage effectively any of
these variables, the quality of the Company's services, its ability to retain
key personnel and its results of operation could be materially and adversely
affected. No assurance can be given that the Company will continue to experience
growth or that the Company will be successful in managing its growth, if any.
POSSIBLE ACQUISITION RISKS
The Company intends to expand its geographic presence, industry expertise
and technical scope through strategic acquisitions and alliances with companies
that provide additional and complementary products, services or skills or have
strategic client relationships. Although the Company has considered possible
acquisitions in the past, the Company has never acquired another company other
than the transactions pursuant to the Corporate Reorganization and currently has
no commitments or agreements with respect to any such acquisition or alliance.
There can be no assurance that the Company will be able to identify suitable
acquisition candidates or that, if identified, the Company will be able to
acquire such companies on suitable terms. Moreover, other companies are
competing for acquisition candidates, which could result in an increase in the
price of acquisition targets and a decrease in the number of attractive
companies available for acquisition. Acquisitions may also involve a number of
special risks, including: (i) adverse effects on the Company's reported
operating results including increased goodwill amortization and interest
expense; (ii) diversion of management attention; (iii) risks associated with
unanticipated problems, liabilities or contingencies; (iv) difficulties related
to the integration and management of the acquired business; (v) the risk of
entering markets in which the Company has limited or no direct expertise; and
(vi) the potential loss of key employees of the acquired companies. In addition,
acquisitions may involve the expenditure of significant funds. There can be no
assurance that any acquisition will result in long-term benefits to the Company
or that management will be able to manage effectively the resulting business.
The occurrence of some or all of the events described in these risks could have
a material adverse effect on the Company's business, financial condition and
results of operations.
LIMITED PROTECTION OF PROPRIETARY SYSTEMS AND PROCEDURES
The Company's success is in part dependent upon its proprietary internal
information and communication systems, databases, tools, and the methods and
procedures that it has developed specifically to serve its clients. In addition,
Unitive has and will continue to develop proprietary groupware tools and
applications. The Company has no patents; consequently, it relies on a
combination of nondisclosure and other contractual arrangements and copyright,
trademark and trade secret laws to protect its proprietary systems, information
and procedures. There can be no assurance that the steps taken by the Company to
protect its proprietary rights will be adequate to prevent misappropriation of
such rights or that the Company will be able to detect unauthorized use and take
appropriate steps to enforce its proprietary rights. The Company believes that
its systems and procedures and other proprietary rights do not infringe upon the
proprietary rights of third parties. There can be no assurance, however, that
third parties will not assert infringement claims against the Company in the
future or that any such claims will not require the Company to enter into
materially adverse license arrangements or result in protracted and costly
litigation, regardless of the merits of such claims.
9
<PAGE> 11
CONTROL BY PRINCIPAL STOCKHOLDER
After completion of this offering, the Company's principal stockholder and
Chief Executive Officer, Richard D. Helppie, Jr., will beneficially own
approximately 57.9% (55.5% if the Underwriters' over-allotment option is
exercised in full) of the Company's outstanding shares of Common Stock. As a
result, Mr. Helppie will continue to be able to control the outcome of matters
requiring a stockholder vote, including the election of directors and the
approval of significant corporate matters, thereby controlling the affairs and
management of the Company. Such control could adversely affect the market price
of the Common Stock or delay or prevent a change in control of the Company.
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price of the Common Stock will
be determined by negotiations among management of the Company and the
representatives of the Underwriters, and may not be indicative of future market
prices. See "Underwriting" for factors to be considered in determining the
initial public offering price per share. Although the Company has received
approval for the Common Stock to be quoted on the Nasdaq National Market, there
can be no assurance that an active trading market will develop or be sustained
subsequent to this offering. In addition, broad market trading and valuation
fluctuations have adversely affected the valuation of healthcare focused and
technology-based service companies and may adversely affect the market price of
the Company's Common Stock. The Common Stock may be subject to wide fluctuations
in price in response to variations in quarterly operating results and other
factors, including the evolving business prospects of the Company's clients,
suppliers and competitors, changes in the financial estimates by securities
analysts, possible acquisitions, general economic or market conditions and other
factors. There can be no assurance that the market price of the Common Stock
will not decline below the initial public offering price.
DILUTION
The initial public offering price per share of Common Stock is
substantially higher than the net tangible book value per share of the Common
Stock. Purchasers of shares of Common Stock in this offering (assuming an
initial public offering price of $14.00 per share) will experience immediate and
substantial dilution of $9.89 in the pro forma net tangible book value per share
of Common Stock. See "Dilution."
SIGNIFICANT UNALLOCATED NET PROCEEDS
The principal purposes of this offering are to obtain additional capital,
create a public market for the Company's Common Stock, facilitate future access
for the Company to public equity markets and enhance the Company's ability to
use its Common Stock as consideration for potential acquisitions and as a means
of attracting and retaining key employees. A substantial majority of the net
proceeds of this offering has not been designated for any specific purpose.
Therefore, the Board of Directors of the Company will have broad discretion with
respect to the use of the net proceeds of this offering. See "Use of Proceeds."
CERTAIN ANTITAKEOVER EFFECTS
The Company's Amended and Restated Certificate of Incorporation and By-Laws
and the Delaware General Corporation Law include provisions that may be deemed
to have antitakeover effects and may delay, defer or prevent a takeover attempt
that stockholders might consider in their best interests. These include a board
of directors which is divided into three classes, each of which is elected for
staggered, three-year terms, By-Law provisions under which only the Chairman of
the Board, a majority of the Board of Directors or stockholders owning at least
50% of the Company's capital stock may call meetings of stockholders and which
require certain advance notice procedures for nominating candidates for election
to the Board of Directors. The Board of Directors of the Company is empowered to
issue up to 1,000,000 shares of preferred stock and to determine the price,
rights, preferences and privileges of such shares, without any further
stockholder action. The existence of this "blank-check" preferred stock could
render more difficult or discourage an attempt to obtain control of the Company
by means of a tender offer, merger, proxy contest or otherwise. In addition,
this
10
<PAGE> 12
"blank check" preferred stock, and an issuance thereof may have an adverse
effect on the market price of the Company's Common Stock. Furthermore, the
Company is subject to the antitakeover provisions of Section 203 of the Delaware
General Corporation Law that prohibit the Company from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person first becomes an "interested
stockholder," unless the business combination is approved in a prescribed
manner. The application of Section 203 and certain other provisions of the
Certificate of Incorporation to be effective upon the closing of this offering
could also have the effect of delaying or preventing a change of control of the
Company, which could adversely affect the market price of the Company's Common
Stock. See "Management -- Executive Officers and Directors" and "Description of
Capital Stock -- Antitakeover Effects of Provisions of the Certificate of
Incorporation, By-Laws and Delaware Law."
BENEFITS OF OFFERING TO EXISTING STOCKHOLDERS
The Company's existing stockholders will receive substantial proceeds from
this offering and certain other benefits in connection with the offering. If the
Underwriters' over-allotment option is exercised in full, certain of the
Company's existing Stockholders will receive aggregate net proceeds of
$2,055,102 (based on an assumed offering price of $14 per share) from the sale
of 157,842 Shares held by them. Approximately $3.4 million in accrued
compensation will be paid to certain of the existing stockholders out of the
proceeds of the offering. In addition, the offering will establish a public
market for the Common Stock and provide significantly increased liquidity to the
existing stockholders for the shares of Common Stock they will own after the
offering. See "Use of Proceeds" and "Principal and Selling Stockholders."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of Common Stock in the public
market following this offering could adversely affect the market price for the
Company's Common Stock. The number of shares of Common Stock available for sale
in the public market is limited by restrictions under the Securities Act and
lock-up agreements entered into by the Company, the Company's officers and
directors and all holders of Common Stock. Under those restrictions, subject to
certain specified exceptions, the Company and such persons have agreed not to
sell or otherwise dispose of any of their shares for a period of 180 days after
the date of this Prospectus without the prior written consent of William Blair &
Company, L.L.C. However, William Blair & Company, L.L.C. may, in its sole
discretion and at any time without notice, release all or any portion of the
securities subject to such lock-up agreements. As a result of these
restrictions, only the 2,150,000 shares of Common Stock offered hereby will be
eligible for sale on the date of this Prospectus; an additional 25,000 shares
will be eligible for sale 90 days after the date of the Prospectus and an
additional, 4,483,217 shares will be eligible for sale 180 days after the date
of this Prospectus, in accordance with Rules 701 and/or 144 under the Securities
Act. The Company also intends, after the effective date of this offering, to
register on a registration statement on Form S-8 approximately 900,000 shares of
Common Stock reserved for issuance under the Company's Long-Term Incentive Plan.
See "Shares Eligible for Future Sale."
11
<PAGE> 13
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,150,000 shares of
Common Stock offered hereby are estimated to be approximately $27.4 million
(approximately $29.5 million if the over-allotment option is exercised in full),
assuming an initial public offering price of $14.00 per share and after
deducting the underwriting discount and estimated offering expenses. The
principal purposes of this offering are to obtain additional capital, facilitate
future access for the Company to public equity markets and enhance the Company's
ability to use its Common Stock as consideration for potential acquisitions and
as a means of attracting and retaining key employees. The Company intends to use
a portion of the net proceeds of the offering to repay all amounts outstanding
under the Company's revolving bank lines of credit, which bear interest at an
annual rate equal to the prime rate of interest plus 0.5% (8.75% as of June 30,
1996). As of June 30, 1996, approximately $680,000 was outstanding under the
lines of credit. The Company anticipates borrowing additional amounts under the
lines of credit subsequent to June 30, 1996 to fund the payment of accrued
compensation to certain of the Company's executive officers for the period
through the date of the Corporate Reorganization. Approximately $3.4 million of
the net proceeds of this Offering will be used to pay accrued executive
compensation (or to repay outstanding borrowings incurred to pay executive
compensation) to the following three senior executive officers: Richard D.
Helppie, Jr. (approximately $2.6 million), Charles O. Bracken (approximately
$500,000) and Robert R. Tashiro (approximately $300,000). The Company expects to
add the remaining net proceeds from this offering to its general funds. Such
funds will be available for general corporate purposes, including working
capital. A portion of the proceeds may also be used to acquire or invest in
complementary businesses; however, there are no commitments or agreements with
respect to any such transactions at the present time. Pending use of the net
proceeds for the above purposes, the Company intends to invest such funds in
short-term, interest-bearing, investment-grade obligations.
S CORPORATION TERMINATION
Since January 1, 1987, Superior has been treated as a Subchapter S
Corporation for federal income tax purposes under Subchapter S of the Internal
Revenue Code of 1986, as amended (the "Code"), and for certain state income tax
purposes. As a result, substantially all of the income of Superior has been
taxed directly to its stockholders rather than to Superior. In addition, prior
to January 1, 1995 Unitive was taxed as a Subchapter S corporation and
thereafter as a Subchapter C Corporation. Following the closing of this
offering, the Company, Superior and Unitive will be subject to corporate income
taxation on a consolidated basis as Subchapter C corporations.
In connection with the termination of Superior's S Corporation status, the
Company will record deferred income taxes of approximately $250,000 in
accordance with Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes." This income tax expense will be in addition to income tax
expense otherwise incurred in such quarter and will be incurred upon termination
of the Company's S Corporation status, estimated to occur in October 1996. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 7 to Notes to Consolidated Financial Statements.
DIVIDEND POLICY
The Company has not paid cash dividends on its Common Stock. The Company
currently anticipates that all of its earnings will be retained for development
of the Company's business and does not anticipate paying any cash dividends in
the foreseeable future. Future cash dividends, if any, will be at the discretion
of the Company's Board of Directors and will depend upon, among other things,
the Company's future operations and earnings, capital requirements and surplus,
general financial condition, contractual restrictions and such other factors as
the Board of Directors may deem relevant.
12
<PAGE> 14
CAPITALIZATION
The following table sets forth the total short term debt and capitalization
of the Company as of June 30, 1996, and as adjusted to reflect (i) the receipt
of proceeds from the issuance of 58,127 shares of Common Stock issued
immediately prior to this offering upon exercise of currently outstanding
options at a weighted average exercise price of $3.40 per share; (ii) the
recognition of an estimated $250,000 of deferred income taxes upon the
termination of Superior's S Corporation election; and (iii) the sale of
2,150,000 shares of Common Stock by the Company at an assumed initial public
offering price of $14.00 per share and the application of the estimated net
proceeds therefrom. See "Use of Proceeds." The following table should be read in
conjunction with the Consolidated Financial Statements and Notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
---------------------
ACTUAL AS ADJUSTED
------ -----------
(IN THOUSANDS)
<S> <C> <C>
Lines of credit (1)....................................................... $ 680 $ --
Note payable to stockholder............................................... 73 73
------ ---------
Total short term debt........................................... $ 753 $ 73
====== =========
Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000 shares authorized; no shares
issued or outstanding................................................ $ -- $ --
Common stock, $.01 par value; 30,000,000 shares authorized; 4,777,985
issued and outstanding; 6,986,112 issued and outstanding as adjusted
(2).................................................................. 48 70
Additional paid-in capital.............................................. 1,036 28,605
Retained earnings....................................................... 999 749
Stockholders' notes receivable.......................................... (728) (728)
------ ---------
Total stockholders' equity........................................... 1,355 28,696
------ ---------
Total capitalization............................................ $1,355 $28,696
====== =========
</TABLE>
- -------------------------
(1) Does not include approximately $3.4 million expected to be drawn on the
Company's lines of credit subsequent to June 30, 1996, the proceeds of
which will be used primarily to fund the payment of certain accrued
executive bonus compensation. The Company intends to repay the lines of
credit balances out of the net proceeds of this offering. See "Management
-- Executive Compensation."
(2) Excludes (i) 270,000 shares of Common Stock reserved for issuance pursuant
to stock options to be granted as of the consummation of this offering at
an exercise price per share equal to the initial public offering price; and
(ii) 630,000 additional shares of Common Stock reserved for future issuance
under the Company's Long-Term Incentive Plan. See "Management -- Employee
Benefit Plans -- Long-Term Incentive Plan" and Note 12 of Notes to
Consolidated Financial Statements.
13
<PAGE> 15
DILUTION
The net tangible book value of the Company at June 30, 1996, was
approximately $1.4 million or $0.28 per share. Without taking into account any
changes in net tangible book value after June 30, 1996, other than to give
effect to pro forma adjustments for (i) the issuance of 58,127 shares of Common
Stock to be issued immediately prior to this offering upon exercise of currently
outstanding options at a weighted average exercise price of $3.40 per share;
(ii) the sale by the Company of 2,150,000 shares of its Common Stock offered
hereby at an assumed initial public offering price of $14.00 per share and the
application of the net proceeds therefrom (after deducting the underwriting
discount and estimated offering expenses); and (iii) the recognition of an
estimated $250,000 of deferred income taxes upon the termination of Superior's S
Corporation election, the pro forma net tangible adjusted book value of the
Company at June 30, 1996 would have been $28.7 million, or $4.11 per share. This
amount represents an immediate increase in net tangible book value of $3.83 per
share to existing stockholders of the Company and an immediate dilution in net
tangible book value per share of $9.89 per share to purchasers of Common Stock
in this offering. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share...................... $14.00
Net tangible book value per share before the offering.............. $0.28
Increase attributable to new investors............................. 3.83
-----
Pro forma net tangible book value per share after the offering....... 4.11
------
Dilution per share to new investors(1)............................... $ 9.89
======
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1996,
the differences between existing stockholders and new investors with respect to
the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price paid per share (assuming an initial
public offering price of $14.00 per share and before deducting the underwriting
discount and estimated offering expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE
NUMBER PERCENT AMOUNT PERCENT PRICE PER SHARE
--------- ------- ----------- ------- ---------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)................ 4,836,112 69.2% $ 1,281,654 4.1% $ 0.27
New investors(1)........................ 2,150,000 30.8 30,100,000 95.9 14.00
--------- ----- ----------- -----
Total.............................. 6,986,112 100.0% $31,381,654 100.0%
========= ===== =========== =====
</TABLE>
- -------------------------
(1) If the Underwriter's over-allotment option is exercised in full, sales by
the Selling Stockholders in this offering will reduce the number of shares
held by existing stockholders to 4,678,270, or 65.4%, and will increase the
number of shares to be purchased by the investors to 2,472,500, or 34.6%.
See "Principal and Selling Stockholders."
14
<PAGE> 16
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The selected consolidated statements of operations and balance sheet data
as of, and for, the years ended December 31, 1993, 1994 and 1995 are derived
from, and are qualified by reference to, the consolidated financial statements
of the Company audited by Grant Thornton LLP, independent certified public
accountants, appearing elsewhere in this Prospectus. The selected consolidated
statement of operations and balance sheet data as of, and for, the years ended
December 31, 1991 and 1992 are derived from unaudited financial statements of
the Company not included herein. The consolidated statement of operations and
balance sheet data as of, and for, the six month periods ended June 30, 1995 and
1996 are unaudited but have been derived from the Company's internal
consolidated financial statements, which in the opinion of management of the
Company, have been prepared on the same basis as the audited financial
statements and reflect all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of the financial position and
results of operations of the Company. The selected consolidated financial and
operating data presented below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
with the Consolidated Financial Statements and the Notes thereto and other
financial information appearing elsewhere in this Prospectus. The results of
operations for the period ended June 30, 1996 are not necessarily indicative of
results for the full fiscal year.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------------- ----------------------------
PRO PRO
FORMA FORMA
1991 1992 1993 1994 1995 1995(1) 1995 1996 1996(1)
------- ------- ------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................... $13,289 $14,316 $15,559 $19,234 $25,906 $25,906 $11,921 $16,547 $16,547
Cost of services................... 6,468 6,822 6,802 8,505 12,008 12,008 5,552 8,197 8,197
Selling, general and administrative
expenses......................... 4,914 5,712 6,200 8,223 10,045 10,045 4,672 6,250 6,250
Executive compensation
expense(2)....................... 1,760 3,480 1,931 2,445 3,730 1,060 1,766 2,600 530
------- ------- ------- ------- ------- ------- ------- ------- -------
Earnings (loss) from operations.... 147 (1,698) 626 61 123 2,793 (69) (500) 1,570
Interest and other expense
(income)......................... (23) (34) 22 (28) (58) (58) (21) (6) (6)
------- ------- ------- ------- ------- ------- ------- ------- -------
Earnings (loss) before income
taxes............................ 170 (1,664) 604 89 181 2,851 (48) (494) 1,576
Income taxes....................... -- -- -- -- 165 1,215 100 13 625
------- ------- ------- ------- ------- ------- ------- ------- -------
Net earnings (loss)................ $ 170 $(1,664) $ 604 $ 89 $ 16 $ 1,636 $ (148) $ (507) $ 951
======= ======= ======= ======= ======= ======= ======= ======= =======
Pro forma net earnings per share... $ 0.36 $ 0.20
======= =======
Shares used in computing pro forma
net earnings per share........... 4,607 4,822
SELECTED OPERATING DATA:
Number of consultants, at period
end.............................. 101 102 114 143 194 169 234
Number of clients billed........... 118 105 131 186 243 140 242
Number of new projects............. 209 280 365 429 540 257 380
<CAPTION>
DECEMBER 31, JUNE 30,
----------------------------------------------- -----------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.................... $ 1,935 $ 344 $ 918 $ 955 $ 1,457 $ 1,000 $ 804
Total assets....................... 4,572 3,293 4,061 5,072 7,405 5,848 9,131
Total debt......................... 455 355 345 5 206 5 753
Total stockholders' equity......... 2,496 832 1,496 1,585 1,861 1,662 1,355
</TABLE>
- -------------------------
(1) The pro forma statement of operations information has been computed for each
pro forma period by adjusting the Company's net earnings, as reported for
such period, to (i) eliminate executive compensation expense for such period
in excess of the amount of executive compensation (including the full amount
of potential bonus) that would have been paid had the executive compensation
agreements, which will become effective as of the closing date of this
offering, been effective throughout such period; and (ii) record income
taxes, assuming an effective tax rate of 42.6% for the year ended December
31, 1995 and 39.6% for the six months ended June 30, 1996 which would have
been recorded had Superior been a C Corporation during such periods. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Management -- Executive Compensation" and "S Corporation
Termination."
(2) Executive compensation expense includes salary and bonuses for Richard D.
Helppie, Jr., Charles O. Bracken and Robert R. Tashiro. The Company has
entered into agreements with these three officers which will be effective
upon the closing of this offering through December 31, 1997 and which will
provide them with annual compensation in the aggregate amount of $910,000,
comprised of base salary and bonus compensation based on achievement of
certain pre-determined performance criteria. These limitations will not
apply to amounts paid to these three officers on or prior to the closing of
this Offering. See "Management -- Executive Compensation."
15
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company conducts business through its two operating subsidiaries,
Superior and Unitive. Superior is a leading healthcare consulting firm that
provides a wide range of information technology consulting and strategic and
operations management consulting services to a broad cross-section of healthcare
industry participants and healthcare information system vendors. Unitive assists
numerous clients in various industries in developing, designing, implementing
and maintaining groupware and intranet and internet information systems and
solutions, principally using Lotus Notes. During the year ended December 31,
1995, Superior and Unitive generated 93.2% and 6.8% of consolidated revenues,
respectively. In connection with the Offering, the Company will enter into two
separate merger transactions pursuant to which Superior and Unitive will become
wholly-owned subsidiaries of the Company. These transactions will be accounted
for in a manner similar to a pooling of interest.
The Company derives substantially all of its revenues from fees for
professional services, the substantial majority of which are billed at
contracted hourly rates. The Company establishes standard billing guidelines
based on the type and level of service offered. Actual billing rates are
established on a project by project basis and may vary from the standard
guidelines. Billings are typically made on a bi-weekly basis to monitor client
satisfaction and manage outstanding accounts receivable balances. Revenue on
time and materials contracts is recognized as the services are provided. A small
percentage of the Company's projects are billed on a fixed-fee basis, which is
distinguishable from the Company's general method of billing on a time and
materials basis. The Company recognizes revenue on fixed-fee projects using the
percentage of completion basis. The Company could in the future increase the
number and size of projects billed on a fixed-fee basis. Increased use of
fixed-fee contracts could subject the Company to increased risks, including cost
overruns. Additionally, if the Company is successful in its strategy to provide
healthcare IT outsourcing services, there can be no assurance that the Company
will be able to achieve profit margins on outsourcing contracts it may be
awarded which are consistent with its historical levels of profitability or
which justify the Company's investments in such contracts.
The Company's historical revenue growth is attributable to various factors,
including an increase in the number of projects for existing and new clients,
and expanded geographic presence. The number of clients billed per year has
risen to 243 in 1995 from 131 in 1993. The number of clients billed during the
six months ended June 30, 1996 was 242, as compared to 140 during the six months
ended June 30, 1995. In addition, the Company seeks to increase revenues by
expanding its range of specialty services. In each of the last three completed
fiscal years, the Company's revenues from clients served in the prior year were
at least 70% of total revenues. The Company has performed projects for clients
located in over 40 states, and the Company manages its client development
efforts through several strategic services groups, each having specific
geographic responsibility and focus.
The Company's most significant expense is cost of services, which consists
primarily of consultant salaries and benefits. In recent years, consultant
compensation expense has grown faster than consultant billing rates, resulting
in an increase in the Company's cost of services as a percentage of revenues.
The Company addressed this issue by adding an additional variable portion of
compensation payable upon the achievement of measurable performance goals.
The Company's cost of services as a percentage of revenues is also impacted
by its consultant utilization. The Company manages utilization by monitoring
project requirements and timetables. The number of consultants assigned to a
project will vary according to the size, complexity, duration and demands of the
project. Project terminations, completions and scheduling delays may result in
periods when consultants are not fully utilized. An unanticipated termination of
a significant project could cause the Company to experience lower consultant
utilization, resulting in a higher than expected number of unassigned
consultants. In addition, the establishment of new practice areas and the hiring
of consultants in peak hiring periods have resulted in periods of lower
consultant utilization (and resulting downward pressure on margins) until
project volume increases in these new areas. In the future, the establishment of
new practice areas, as well as further
16
<PAGE> 18
geographic expansion, could from time to time adversely affect utilization.
Variations in consultant utilization would result in quarterly variability of
the Company's cost of services as a percentage of revenues. The Company's
consultants are generally employed on a full-time basis, and therefore the
Company will in the short run incur substantially all of its employee-related
costs even during periods of low utilization.
Selling, general and administrative expenses include the costs of
recruiting, continuing education, marketing, facilities, equipment depreciation,
administration, including compensation and benefits. Selling, general and
administrative expense as a percentage of total revenues has decreased as the
Company leverages its infrastructure expense across its growing revenue base.
The Company will incur increased rent and certain one-time costs associated with
the Company's move in the third quarter of 1996 to larger headquarters to
accommodate its growth.
Historically, executive compensation expense consisted of salaries, formula
bonuses and discretionary bonuses paid to the majority stockholder and two other
key executives. The Company's historical levels of executive compensation were
related primarily to the Company's status as a Subchapter S Corporation and
period to period increases in executive compensation expense were related
primarily to the Company's period to period earnings growth. The Company has
entered into agreements with these individuals, to be effective upon the
consummation of this offering through December 31, 1997, which provide maximum
annual compensation in an aggregate amount of $910,000 for these three key
executives, comprised of base salary, and bonus amounts to be awarded based on
the attainment of certain financial performance criteria. The foregoing
compensation arrangements for these three officers will not apply to amounts
paid on or prior to the closing of this Offering. The total compensation to
these three individuals under these agreements in 1995 would have been
approximately $1.1 million.
The pro forma statement of operations data reflects an adjustment for
executive officer compensation for the year ended December 31, 1995 and for the
six months ended June 30, 1996 to eliminate the amount by which key executive
compensation paid in such periods was in excess of the estimated compensation
that would have been paid under the newly adopted executive compensation
agreements, as if such agreements were in place throughout such periods. The
estimated amount payable under the new agreements was calculated by assuming the
payment to the executive officers of their base salaries plus 100% of their
potential bonus for the applicable period.
Since January 1, 1987, Superior has been treated as a Subchapter S
corporation for federal income tax purposes under Subchapter S of the Code and
for certain state income tax purposes. As a result, substantially all of the
income of Superior has been taxed directly to its stockholders rather than to
Superior. In addition, prior to January 1, 1995 Unitive was taxed as a
Subchapter S corporation and thereafter as a Subchapter C corporation. Following
the closing of this offering, the Company, Superior and Unitive will be subject
to corporate income taxation on a consolidated basis as Subchapter C
corporations.
The pro forma statement of operations data also reflects an adjustment to
federal income taxes for the year ended December 31, 1995 and for the six months
ended June 30, 1996, assuming Superior has been operating as a C Corporation
during such periods, and reflects an effective tax rate of 42.6% and 39.6%,
respectively, after giving effect to the executive officer compensation expense
adjustments.
In connection with the termination of Superior's S Corporation status, the
Company will record deferred income taxes of approximately $250,000 in
accordance with Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes." This income tax expense will be in addition to income tax
expense otherwise incurred in such quarter and will be incurred upon termination
of the Company's S Corporation status, estimated to occur in October 1996.
17
<PAGE> 19
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
statement of operations data and selected pro forma data expressed as a
percentage of revenues. The trends illustrated in the following table may not
necessarily be indicative of future results.
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES
-----------------------------------------------------------
SIX MONTHS ENDED JUNE
YEAR ENDED DECEMBER 31, 30,
-------------------------------- -----------------------
PRO PRO
FORMA FORMA
1993 1994 1995 1995 1995 1996 1996
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of services........................ 43.7 44.2 46.3 46.3 46.6 49.5 49.5
Selling, general and administrative
expenses.............................. 39.9 42.8 38.8 38.8 39.2 37.8 37.8
Executive compensation expense.......... 12.4 12.7 14.4 4.1 14.8 15.7 3.2
----- ----- ----- ----- ----- ----- -----
Earnings (loss) from operations......... 4.0 0.3 0.5 10.8 (0.6) (3.0) 9.5
Interest expense........................ 0.1 -- -- -- 0.1 0.1 0.1
Other (income) expense.................. -- (0.2) (0.2) (0.2) (0.3) (0.1) (0.1)
----- ----- ----- ----- ----- ----- -----
Earnings (loss) before income taxes..... 3.9% 0.5% 0.7% 11.0 (0.4)% (3.0)% 9.5
===== ===== ===== ===== =====
Pro forma income taxes.................. 4.7 3.8
----- -----
Pro forma net earnings.................. 6.3% 5.7%
===== =====
</TABLE>
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
Revenues. Revenues increased by $4.6 million, or 38.8%, to $16.5 million
for the six months ended June 30, 1996, as compared to $11.9 million for the six
months ended June 30, 1995. The revenue growth was due primarily to an increased
number of new projects to 380 in the six months ended June 30, 1996 from 257 in
the six months ended June 30, 1995. The number of consultants increased by
approximately 38.5%, to 234 at June 30, 1996 from 169 at June 30, 1995.
Cost of services. Cost of services increased by $2.6 million, or 47.6%, to
$8.2 million for the six months ended June 30, 1996, as compared to $5.6 million
for the six months ended June 30, 1995. The increase was due to the additional
number of consultants, as well as increases in their compensation levels. Cost
of services as a percentage of revenues increased to 49.5% for the six months
ended June 30, 1996, as compared to 46.6% for the six months ended June 30,
1995. This increase was due to an increase in compensation levels, only
partially offset by a modest increase in average billing rates. In addition, the
Company initiated two new national practice areas, which required both more
highly-compensated individuals and produced lower consultant utilization during
start-up.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased by $1.6 million, or 33.8% to $6.3 million for
the six months ended June 30, 1996, as compared to $4.7 million for the six
months ended June 30, 1995. This increase was due primarily to the increase in
incentive and other compensation as well as higher recruiting and training
expenses consistent with the Company's growth and enhanced marketing efforts to
achieve higher revenues. Selling, general and administrative expenses as a
percentage of revenues decreased to 37.8% for the six months ended June 30,
1996, as compared to 39.2% for the six months ended June 30, 1995. This decrease
was due to increased operating efficiencies resulting from higher revenue
levels.
Executive compensation expense. Executive compensation expense increased by
$834,000 to $2.6 million for the six months ended June 30, 1996, as compared to
$1.8 million for the six months ended June 30, 1995.
18
<PAGE> 20
1995 COMPARED TO 1994
Revenues. Revenues increased by $6.7 million, or 34.7% to $25.9 million for
the year ended December 31, 1995, as compared to $19.2 million for the year
ended December 31, 1994. The revenue growth was attributable primarily to an
increase in the number of new projects, to 540 in 1995 from 429 in 1994. The
number of consultants increased approximately 35.7%, to 194 at December 31, 1995
from 143 at December 31, 1994. During 1995, in order to provide better client
service, the Company refocused its service organization into National Practice
Areas and refocused its marketing efforts into strategic service groups having
specific geographic areas of responsibility.
Cost of services. Cost of services increased by $3.5 million, or 41.2%, to
$12.0 million for the year ended December 31, 1995, as compared to $8.5 million
for the year ended December 31, 1994. The increase was primarily due to the
additional number of consultants required to staff the larger revenue base, as
well as increases in their compensation levels. Cost of services as a percentage
of revenues increased to 46.3% for the year ended December 31, 1995, as compared
to 44.2% for the year ended December 31, 1994. This increase was due to an
increase in compensation levels, with average billing rates remaining relatively
constant. In addition, the Company's organizational shift to National Practice
Areas initially required both more highly-compensated individuals and produced a
lower consultant utilization.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased by $1.8 million, or 22.2%, to $10.0 million
for the year ended December 31, 1995, as compared to $8.2 million for the year
ended December 31, 1994. This increase was due primarily to the increase in
incentive and other compensation, as well as higher recruiting and training
expenses consistent with the Company's growth and refocused marketing efforts to
achieve higher revenue levels. Selling, general and administrative expenses as a
percentage of revenues decreased to 38.8% for the year ended December 31, 1995,
as compared to 42.8% for the year ended December 31, 1994. This decrease was due
to increased efficiencies resulting from higher revenue levels. Included in
selling, general and administrative expenses is bad debt expense, which
increased by $221,000 to $230,000 for the year ended December 31, 1995, as
compared to $9,000 for the year ended December 31, 1994, due primarily to the
recognition of potential collection problems with two specific minor clients, as
well as an increase in reserves for non-client specific collection risk.
Executive compensation expense. Executive compensation expense increased by
$1.3 million to $3.7 million for the year ended December 31, 1995, as compared
to $2.4 million for the year ended December 31, 1994, due to increased formula
and discretionary bonuses.
1994 COMPARED TO 1993
Revenues. Revenues increased by $3.7 million, or 23.6%, to $19.2 million
for the year ended December 31, 1994, as compared to $15.6 million for the year
ended December 31, 1993. The revenue growth was attributable primarily to an
increase in the number of new projects, to 429 in 1994 from 365 in 1993. The
number of consultants increased approximately 25.4% to 143 at December 31, 1994
from 114 at December 31, 1993.
Cost of services. Cost of services increased by $1.7 million, or 25.0%, to
$8.5 million for the year ended December 31, 1994, as compared to $6.8 million
for the year ended December 31, 1993. The increase was due to the additional
number of consultants, as well as increases in consultant compensation levels.
Cost of services as a percentage of revenues increased slightly to 44.2% for the
year ended December 31, 1994, as compared to 43.7% for the year ended December
31, 1993.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased by $2.0 million, or 32.6% to $8.2 million for
the year ended December 31, 1994, as compared to $6.2 million for the year ended
December 31, 1993. Selling, general and administrative expenses as a percentage
of revenues increased to 42.8% for the year ended December 31, 1994, as compared
to 39.9% for the year ended December 31, 1993. This increase was due primarily
to the increase in incentive and other compensation, as well as higher
recruiting and training expenses consistent with the Company's growth and
enhanced marketing efforts to achieve higher revenue levels.
19
<PAGE> 21
Executive compensation expense. Executive compensation expense increased by
$514,000 to $2.4 million for the year ended December 31, 1994, as compared to
$1.9 million for the year ended December 31, 1993.
QUARTERLY RESULTS
The following table sets forth certain unaudited quarterly operating
information for each of the last eight quarters. The historical data have been
prepared on the same basis as the audited consolidated financial statements
contained elsewhere in this Prospectus and includes all normal recurring
adjustments necessary for the fair presentation of the information for the
periods presented, when read in conjunction with the Company's Consolidated
Financial Statements and related Notes thereto. Results for any previous fiscal
quarter are not necessarily indicative of results for the full year or for any
future quarter.
<TABLE>
<CAPTION>
QUARTERS ENDED
---------------------------------------------------------------------------------------
SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1994 1994 1995 1995 1995 1995 1996 1996
--------- -------- -------- -------- --------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues............................. $ 4,780 $4,990 $5,816 $6,105 $ 6,961 $7,024 $8,162 $8,385
Cost of services..................... 2,140 2,202 2,725 2,827 3,088 3,368 3,924 4,273
Selling, general and administrative
expenses........................... 2,099 2,269 2,282 2,390 2,768 2,605 3,078 3,172
Executive compensation
expense............................ 535 510 875 891 976 988 1,436 1,164
------- ------- ------- ------- ------- ------- ------- -------
Earnings (loss) from operations...... 6 9 (66) (3) 129 63 (276) (224)
Interest and other expense
(income)........................... 4 (57) (5) (16) -- (37) (1) (5)
------- ------- ------- ------- ------- ------- ------- -------
Earnings (loss) before income
taxes.............................. $ 2 $ 66 $ (61) $ 13 $ 129 $ 100 $ (275) $ (219)
======= ======= ======= ======= ======= ======= ======= =======
Pro forma earnings before income
taxes(1)........................... $ 549 $ 640 $ 840 $ 822 $ 896 $ 680
Pro forma net earnings(1)............ 330 308 505 493 540 411
Pro forma net earnings per
share(1)........................... 0.08 0.07 0.11 0.10 0.11 0.09
Shares used in calculating pro forma
net earnings per share............. 4,102 4,678 4,822 4,822 4,822 4,822
</TABLE>
- -------------------------
(1) The pro forma statement of operations data reflects an adjustment for
executive officer compensation for the year ended December 31, 1995 and for
the six months ended June 30, 1996 to eliminate the excess of key executive
compensation paid in such periods over the estimated compensation that would
have been paid under the recently executed executive compensation agreements
(to be effective upon the closing of this offering), as if these agreements
were in place throughout such periods. See "-- Overview". The estimated
amount payable under the new agreements was calculated by assuming the
payment to the executive officers of their annual base salaries plus 100% of
their potential bonus. The pro forma statement of operations data also
reflects an adjustment to federal income taxes for the year ended December
31, 1995 and for the six months ended June 30, 1996, after giving effect to
executive officer compensation expense adjustments.
Revenues and operating results fluctuate from quarter to quarter due to
several factors, such as the number and significance of client engagements
commenced and completed during a quarter, delays incurred in connection with a
project, consultant hiring, and utilization. The timing of revenues varies from
quarter to quarter because the Company's sales cycle can be relatively long and
may depend on factors such as the size and scope of assignments, the general
ability of clients to terminate engagements without penalty, and general
economic conditions. In addition, the timing of the establishment of new
practice areas, geographic expansion and the hiring of key individuals can also
have an effect on consultant utilization. Seasonal factors such as vacation
days, total business days in a quarter or the business practices of clients,
such as deferred commitments on new projects until after the end of the calendar
or the client's fiscal year, can cause the Company to experience lower
consultant utilization. Because a significant percentage of the Company's
expenses are relatively fixed, a variation in the number or size of client
assignments or the timing of the initiation or the completion of client
assignments can cause significant variations in operating results from quarter
to quarter. In addition, the Company's annual employees' meeting can result in
lower consultant utilization in the quarter in which the meeting occurs.
20
<PAGE> 22
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital needs have been to fund the growth in working
capital required to support its growth in revenues. The Company's primary source
of liquidity has been cash flow from operations. The Company believes that funds
generated from operations, together with the net proceeds from this offering and
available credit under its bank credit facilities, will be sufficient to finance
its working capital and capital expenditure requirements for at least the next
twelve months.
At June 30, 1996, the Company had cash and cash equivalents of $115,000 and
working capital of $804,000. Working capital at June 30, 1996 represents a
decrease of $653,000 from December 31, 1995 resulting from an increase in
bonuses payable, offset by an increase in net accounts receivable. A portion of
the bonuses payable represents S Corporation taxable income earned through June
30, 1996 by Superior. Working capital at December 31, 1995 was $1.5 million, an
increase of $502,000 from December 31, 1994. This increase was primarily due to
the growth in accounts receivable, partially offset by a growth in operating
liabilities.
The Company has two collateralized line of credit facilities at Comerica
Bank N.A. totaling $3.0 million. The credit facilities bear interest at 0.5%
over prime. As of June 30, 1996, the Company had $680,000 outstanding on these
lines, with an interest rate of 8.75% at June 30, 1996. The Company anticipates
borrowing on the lines of credit to fund the bonuses payable representing S
Corporation taxable income earned through the termination of the S Corporation
election, and will repay such borrowings through proceeds from the offering.
Net cash used in operating activities for the six months ended June 30,
1996 was $409,000, compared with cash provided by operations of $108,000 for the
six months ended June 30, 1995. The increase in cash used is primarily due to
the decrease in deferred revenue. Increased accounts receivable from increased
revenue volume was substantially offset by increases in operating liabilities,
each of which was attributable to higher business levels.
Net cash provided by operating activities for the years ended December 31,
1995 and 1994 was relatively constant at $811,000 and $823,000, respectively.
While accounts receivable grew from increased revenue volume in each year, such
increases were partially offset by non-cash operating expenses, in addition to
increases in operating liabilities.
Net cash used in investing activities during all periods consist
principally of computer equipment acquisitions. The Company estimates that it
will incur approximately $1.0 million in capital expenditures in 1996 of which
approximately $500,000 is anticipated to be incurred in connection with the
relocation of its headquarters which occurred in September 1996. The Company
does not have any other material commitments for capital expenditures for the
remainder of 1996 or 1997.
Net cash provided by financing activities of $548,000 for the six months
ended June 30, 1996 was principally the result of borrowings on the lines of
credit to fund equipment purchases. Net cash provided by financing activities
for the year ended December 31, 1995 of $236,000 was principally the result of a
loan from the majority stockholder for working capital purposes. Net cash used
in financing activities of $340,000 for the year ended December 31, 1994 was the
result of net repayments on the lines of credit, funded by results of
operations.
21
<PAGE> 23
BUSINESS
The Company is a national healthcare consulting firm that provides a wide
range of information technology ("IT") consulting and strategic and operations
management consulting services to a broad cross section of healthcare industry
participants and healthcare information system vendors. The Company uses its
in-depth institutional knowledge and nationally deployed group of experienced
consultants to help clients plan and execute business strategies. The Company's
comprehensive continuum of solutions range from strategic planning and
operations management consulting, to information systems planning,
implementation and integration, to interim management and outsourcing. The
Company's wholly-owned subsidiary, Unitive, assists clients in various
industries in developing, designing, implementing and maintaining groupware and
intranet and internet information systems and solutions, principally using Lotus
Notes.
The Company has served over 600 clients across a broad cross-section of the
healthcare industry. From January 1, 1995 through June 30, 1996, the Company
worked for over 280 healthcare clients on over 850 engagements. The Company
believes that its long-term relationships, in-depth knowledge of its client's
needs and its broad range of services provide it with significant advantages
over its competitors in marketing additional services and winning new
engagements. In each of the last three completed fiscal years, the Company's
revenues from clients served in the prior year were at least 70% of total
revenues. The Company's goal is to be the preferred, if not sole, provider of a
broad range of solutions for each of its healthcare clients.
INDUSTRY BACKGROUND
General
The United States healthcare industry is undergoing rapid, profound change.
In recent years, healthcare expenditures have increased at approximately twice
the rate of inflation and are expected to exceed $1 trillion in 1996, according
to a joint HCIA/Deloitte & Touche publication on the healthcare industry. The
Company believes that the consolidation of healthcare systems and the aging of
the U.S. population should result in continued dramatic change in the healthcare
industry. Healthcare providers today face external and internal pressures to
meet the competitive demands of the marketplace, comply with increasing
government regulations and cope with the advent of managed care. These
challenges, combined with increased demands on capital resources, are forcing
healthcare providers to seek new ways to structure and manage their
organizations and deliver services. In the past, the financial risk of
healthcare delivery was absorbed principally by third-party payors, and
providers did not focus on cost containment. Now, through managed care
arrangements and provider capitation (under which providers are paid an annual
fixed fee per individual to deliver all healthcare services required by that
individual), the economic risk of healthcare delivery is shifting from payors to
providers. In order to manage this risk, providers must enhance their
understanding of treatment costs, variability of costs and cost control and must
restructure their processes and organizations to enhance efficiency and
accountability. Providers must achieve each of these objectives, while at the
same time continuing to demonstrate increasing quality and consistency in
healthcare delivery.
The shifting of risk from payor to provider has also encouraged and
accelerated consolidation among healthcare providers. In order to achieve
economies of scale, operating efficiencies, and enhanced contracting
capabilities, healthcare organizations such as hospitals, primary care and
multi-specialty physician groups, laboratories, pharmacies, home health services
and nursing homes are integrating horizontally and vertically to create
Integrated Delivery Networks (IDNs). The goal of IDNs is to deliver
comprehensive healthcare in a cost effective manner and accordingly, their
success is dependent on effectively managing and delivering information to the
caregivers. As industry consolidation and IDN formations create larger and
increasingly far-reaching healthcare organizations, and as the demand for
information services is increasingly required to cross multiple points of care,
IDNs must place greater focus on information management and business process
solutions to control costs, demonstrate quality, measure performance, and
increase efficiency.
22
<PAGE> 24
Information Technology
The increased demand for tools to collect, analyze and interpret clinical,
operational and financial information rapidly, flexibly and in a technological
framework that supports today's diverse healthcare environment is intensifying
the reliance of the healthcare industry on IT solutions. As a result, the
healthcare industry is rapidly increasing its spending for IT. Expenditures by
healthcare industry participants for hardware, software, staff, consulting and
other outside IT related services increased an estimated 15.6%, from $7.4
billion in 1993 to $8.5 billion in 1994 according to International Data
Corporation. Healthcare IT spending is being driven not only by the heightened
need for better management information systems, but also continued
price-performance improvements in hardware and software, the ability to develop
increasingly user-friendly software applications and the emergence of better
application development tools.
According to DataQuest, expenditures by healthcare industry participants on
IT professional services have grown at a compound annual rate of approximately
16.5% from an estimated $2.5 billion in 1994 to an estimated $3.3 billion for
1996. The healthcare IT environment has grown increasingly complex, costly and
burdensome as a result of the challenges of deploying new technology,
maintaining older systems and meeting staffing requirements in a market with an
insufficient pool of qualified IT professionals. At the same time, external
economic factors have forced organizations to focus on core competencies and
trim work forces. The Company believes that healthcare participants will
continue to turn to outside consultants, external management of internal
information systems and full outsourcing as a means of coping with the financial
and technical demands of information systems management. The Company believes
this dynamic is also occurring across other industries as organizations look to
external management and outsourcing of their information systems in order to
remain focused on their core business.
Consulting
The changing business environment has also produced an evolving range of
strategic and operating options for healthcare entities, many of which are
unfamiliar to an industry that had long operated under a non-aligned, third
party payor environment. In response, healthcare participants are formulating
and implementing new strategies and tactics, including redesigning business
processes and workflows, acquiring better technology and adopting or remodeling
customer service and marketing programs. The Company believes that healthcare
participants will continue to turn to outside consultants to assist in this
process for several reasons: the pace of change is eclipsing their own internal
resources and capacity to identify, evaluate and implement the full range of
options; consultants enable them to develop better solutions in shorter time
frames; and purchasing consulting expertise can be more cost effective. By
employing outside expertise, healthcare providers can often improve their
ability to compete by more rapidly deploying new processes.
The healthcare consulting industry is highly fragmented and consists
primarily of: (i) larger systems integration firms, including the consulting
divisions of the "Big Six" accounting firms, which offer healthcare as one of
their specialty areas; (ii) healthcare information system vendors that focus on
services relating to the software solutions they offer; (iii) healthcare
consulting firms many of whom focus on selected specialty areas, such as
strategic planning or vendor-specific implementation; and (iv) other large
general management consulting firms that do not specialize in healthcare
consulting and/or offer systems implementation. Increasingly, the competitive
advantage in healthcare consulting will be gained by those consulting firms
which (i) are able to marshal the necessary expertise and resources to offer
comprehensive skill sets to clients; (ii) have the strength and consistency of
advice along the entire service continuum (from strategy to selection to
implementation); and (iii) offer the flexibility to meet the challenges of the
rapidly changing healthcare and IT industries.
23
<PAGE> 25
THE SUPERIOR SOLUTION
The Company uses its in-depth institutional knowledge of healthcare
delivery systems and nationally deployed group of experienced consultants to
help clients plan and execute business strategies. The Company offers its
clients a continuum of solutions, ranging from strategic planning and operations
management consulting, to information system planning, implementation and
integration, to interim management and outsourcing. The Company adheres to a
central philosophy of structuring a project team for each client and engagement
that understands the complexities of the healthcare environment for that
particular client and can concurrently address the management and technical
ramifications of change and improvement. In structuring an engagement the
Company does not impose any preordained program on its clients. Rather,
utilizing the professional judgment derived from their years of experience, the
Company's consultants work in concert with each client to develop
custom-tailored solutions. As each client relationship evolves, the Company's
professionals add their experiences to the Company's proprietary databases to
accumulate a detailed and intimate understanding of each client and its specific
needs. The Company's nationally deployed professionals are aided by instant
access, via its proprietary information and communication system (the virtual
electronic hallway), to its knowledge and client resource databases and to
collaboration with colleagues. This unified-team approach helps to ensure high
quality, consistent and geographically seamless client service.
The Company's services integrate many diverse facets and constituencies of
the healthcare industry. Through its strategic consulting, the Company brings
together the healthcare and business relationships required to establish and
maintain efficient and collaborative healthcare delivery networks. Through its
operations management consulting, the Company links the needs and optimizes the
contributions of clinical, information and management personnel. Through its
value-added information systems implementation and integration consulting, the
Company forges a link between healthcare information systems vendors and their
customers by helping each group maximize the potential of existing technology.
The Company also provides a bridge between existing and emerging technologies by
supplying vendors with needed knowledge to develop innovations focused on the
changing needs of the marketplace and by assisting healthcare industry
participants to assess the relative merits and risks of selecting and
implementing new technologies. The Company also helps its clients take advantage
of the opportunities presented by budding technologies such as the internet and
intranet, local and wide area communication networks, telemedicine and document
imaging solutions.
To ensure that its clients receive the optimal strategic, operational
and/or IT solution for their business needs, the Company implements solutions
that are unbiased to specific organizations, hardware or software vendors. The
Company offers an objective assessment of the advantages and disadvantages of
each particular strategic, operational and/or IT solution, including packaged
software applications, platforms and operating systems. Through its unbiased
solutions, the Company can take a flexible approach to its clients' business
problems and provide them with the best solution.
24
<PAGE> 26
BUSINESS STRENGTHS
The Company believes that the following factors have been of principal
importance in its ability to distinguish itself from its competitors and to
achieve its present position as a leading provider of consulting services to the
healthcare industry.
Extensive Healthcare Focus. The Company believes its focus on management
and IT consulting for the healthcare industry allows it to offer a comprehensive
set of services and solutions anchored by in-depth knowledge of the healthcare
industry and a detailed understanding of each client's particular business
environment and market dynamics. This enables the Company, in contrast to many
of its competitors, to be a single source provider of a full array of healthcare
consulting services while maintaining the advanced skill sets offered by its 13
specialty practice groups. In response to the rapidly changing nature of the
healthcare and IT industry, the Company regularly evaluates emerging trends and
innovations in these industries in an effort to enhance and expand its services
and practice groups.
Proprietary Information and Communication System ("The Electronic
Hallway"). The Company has made substantial investments in proprietary
information and communications systems which the Company's consultants use on a
daily basis to successfully and efficiently complete engagements. These
proprietary systems, which were developed and are maintained by Unitive, provide
the Company's nationally deployed consultants with real-time access to product
and industry information, client resource databases, and each consultant's
skills inventory and near term schedules. The Company's communications and
information systems create a virtual "electronic hallway" in which consultants
can collaborate by means of daily, individual and group communication across the
breadth of the Company's national network of expertise. The Company's system
also includes access to a proprietary IT diagnostic and planning system, as well
as to consultant time-management, billing, financial tracking and client
resource databases.
Recognized Expertise. The Company believes that its healthcare
specialization, strong industry presence, history of successful engagements and
the expertise of its healthcare consultants, who average over 16 years of
healthcare and IT experience, distinguish the Company from its competitors. The
Company's staff consists of experienced consultants specializing in one or more
areas of healthcare and/or information technology. The Company's recruiting
policy focuses exclusively on attracting and retaining highly experienced
professionals, many of whom come from senior levels of management within the
healthcare industry. Many of the Company's consultants are recognized experts in
their fields and publish and lecture frequently, keeping the Company's name at
the forefront of emerging issues in healthcare consulting.
Superior Culture, Recruiting and Training. The Company believes its unique
culture is central to its ability to successfully recruit and retain new
personnel to the Company team. The Company has built a unique corporate culture
based upon geographically seamless communication (fostered by its electronic
hallway) and a motivational and interactive work environment that features
extensive professional development opportunities and productivity incentives.
Expertise With Major Healthcare Information Systems. The Company has
substantial expertise with the information systems developed by numerous
healthcare information system vendors, including the products developed by such
leaders in the field as SMS, HBOC and Cerner Corporation. The Company's
experience with these products has enabled it to attain significant revenues
from a variety of projects such as planning, selection, management, process
design and implementation of these products. The Company's widespread knowledge
of multiple healthcare information systems allows it to select and implement the
best available solution for each client and adapt its service offerings as
healthcare information technology evolves.
25
<PAGE> 27
GROWTH STRATEGY
The Company's goal is to be the preferred or single source provider of a
wide range of healthcare consulting and information management services,
including outsourcing. The Company's strategy to achieve this goal includes the
following elements:
Leverage Existing Client Base. The Company has served over 600 clients
across a broad cross-section of the healthcare industry. From January 1, 1995
through June 30, 1996, the Company worked for over 280 healthcare clients on
over 850 engagements. The Company believes that its long-term relationships and
in-depth knowledge of its client's needs provide it with significant advantages
over its competitors in marketing additional services and winning new
engagements. In each of the last three completed fiscal years, the Company's
revenues from clients served in the prior year were at least 70% of total
revenues. The Company believes its long term client relationships and ability to
address clients' needs with a multidisciplinary, unified team approach provides
the opportunity to continue as the preferred provider of a broad range of
solutions for existing clients.
Expand Client Base and Intensify Geographic Presence. By emphasizing the
provision of high quality, comprehensive healthcare consulting services, the
Company has consistently expanded its base of clients. From January 1995 through
June 1996, the Company added approximately 145 new healthcare industry clients
and performed approximately 300 healthcare consulting engagements for such
clients. The Company intends to continue to leverage its IT capabilities and
expertise to expand the number of engagements it performs. The Company believes
that the integration of its consultant team through the electronic hallway
allows for further geographic expansion while minimizing additional office
overhead. The Company maintains formal branch offices in five U.S. cities and
has served clients located in over 40 states. The Company plans to intensify its
local presence in targeted markets which it believes offer the best prospects
for growth.
Enhance and Add Practice Areas; Pursue Outsourcing Opportunities. The
Company regularly evaluates emerging trends and innovations in the healthcare
and IT industry and their potential impact on and acceptance by healthcare
participants. Based on these evaluations, the Company augments its existing
practice areas and adds new services to enhance its ability to support clients'
evolving needs. In 1996, the Company added network design and installation and
outsourcing to its established National Practice Areas. The Company intends to
expand its engagements in healthcare information systems management by offering
a flexible program of services ranging from interim management to personnel
acquisition and facilities management to total outsourcing.
Pursue Strategic Acquisitions and Alliances. The Company believes that
significant acquisition opportunities exist due to the highly fragmented nature
of the healthcare consulting industry. The Company intends to expand its
geographic presence, industry expertise and technical scope through strategic
acquisitions and alliances with companies that provide additional and/or
complementary products, services or skills or have strategic client
relationships. The Company believes that its information and communication
system will help assimilate the personnel and technology of companies it may
acquire.
Expand Unitive. The Company intends to increase Unitive's business and
market presence through a combination of entry into new geographic markets,
selective acquisitions and provision of outsourcing services to organizations
that are presently underserved. In addition, Unitive intends to leverage its
existing client relationships to expand consulting and service opportunities to
the business partners, vendors and healthcare industry participants of existing
clients for workgroup, client/server and internet/intranet solutions and
training.
26
<PAGE> 28
SERVICES
The Company offers its clients a comprehensive continuum of healthcare
consulting services, from helping the client define its vision, to strategic
planning, selection of appropriate solutions, implementation and on-going
management. The Company offers custom-tailored solutions at the appropriate
points of this continuum based on an assessment of the client's needs. The
Company offers services in the following three broadly defined categories:
Information Technology Consulting. The Company provides high quality
services in developing long term IT strategy through selection of technology and
products, systems implementation, integration and management, and contract
negotiation. Although the vast majority of the Company's consultants have a wide
variety of skills, the majority have concentrated capabilities in the IT area.
Strategic Planning and Management Consulting. The Company's management
consulting services include such focus areas as strategic planning, analysis of
current industry and competitive conditions, formation of physician-hospital
alliances, mergers and affiliations, multi-specialty group practice formation,
IDN formation, financial advice and establishment of managed care organizations.
Operations Consulting. The Company provides business process redesign and
operations improvement as methods to help clients eliminate organizational
redundancy, reduce cost and implement changes in the areas of patient care,
administrative services, quality management, finance, physician support and
nursing. The Company can provide executive and staff education, interim
management and operational assistance and offers a comprehensive program for
information systems outsourcing.
In order to offer its clients a depth of proficiency and experience the
Company organizes its services by its 13 National Practice Areas which work
together synergistically to serve its clients, many of whom have consulting
needs in multiple areas. The National Practice Areas operate in conjunction with
the Company's client relationship executives who coordinate how the Company's
specialty areas can work together to achieve optimum productivity and cost
effectiveness. The Company has developed methodologies for delivering these
skills in a consistent, coordinated manner, either as a full project team, a
joint client-consultant or joint vendor-consultant project team, selected
expertise or as part of a seminar or workshop.
27
<PAGE> 29
Set forth below is a list of the healthcare consulting services and skills
offered by the Company:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
CATEGORY DESCRIPTION OF SERVICES
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION SYSTEMS
CONSULTING
- Strategic information system planning, budgeting, development
and implementation
- Systems and departmental audits and assessments
- Interim management and facilities management
- Outsourcing
- Executive Planning Systems (EPS)
- Executive and technical education and end user training
- Legacy system maximization
- Unbiased product selection and vendor negotiation
- Applications testing and quality assurance
- System implementation and integration, including products of
SMS, Cerner, HBOC and others
- Network and client-server planning and design
- Imaging system feasibility studies, design and implementation
- --------------------------------------------------------------------------------------------------
STRATEGIC AND
OPERATIONS MANAGEMENT
CONSULTING
- Strategic and tactical planning
- Collaboration strategies, mergers, acquisitions and
affiliations
- Executive and departmental interim management
- Operational and executive assessment
- Re-engineering and business process improvement and redesign
- Project management
- State and local comparative data analysis/benchmarking
- Decision Support and Executive Information Systems (DSS/EIS)
- Computerized patient record (CPR) planning and implementation
- Productivity and quality improvement
- Payor and customer surveys and profiles
- Market and competitive landscape research and analysis
- --------------------------------------------------------------------------------------------------
INTEGRATED DELIVERY
NETWORK (IDN)
CONSULTING
- IDN planning and development
- Managed care seminars and retreats
- Managed care organization development--physician partnerships,
PHOs and MSOs
- Network formation planning
- Market analysis and business planning
- Managed care contracting strategies
- Insurance company partner selection
- Community health information network planning and development
- Capitation and risk contracting
- Case management/utilization management
- Managed care systems assessment, evaluation and implementation
- Medicare and Medicaid risk contracting
- Purchasing and Materials Management
- System Implementation
- --------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE> 30
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
CATEGORY DESCRIPTION OF SERVICES
- --------------------------------------------------------------------------------------------------
<S> <C>
HEALTH INFORMATION
MANAGEMENT CONSULTING - Medical Records Department review/utilization review
- Health information network planning and development
- Clinical data repositories/longitudinal patient records
- Interim management
- Coding and grouping
- --------------------------------------------------------------------------------------------------
FINANCIAL CONSULTING
- Revenue enhancement
- Business Office review
- Revenue cycle management/cash acceleration
- Interim management
- System implementation support
- Accounts management, including admissions, billing and
collections
- Reimbursement analysis/charge capture analysis
- Diagnostic review
- Capital and financial planning
- --------------------------------------------------------------------------------------------------
CLINICAL CONSULTING
- Patient care and nursing care system design
- Clinical systems implementation
- Patient-focused care planning
- Clinical workflow analysis and reengineering
- Information systems selection and implementation
- Interim management
- Clinical benchmarking
- Quality measurement and outcomes management
- Clinical protocol and pathway development
- Laboratory operation/information management consulting services
- JCAHO compliance
- --------------------------------------------------------------------------------------------------
AMBULATORY PRACTICE
MANAGEMENT CONSULTING
- Operations assessment and re-engineering
- Systems selection and implementation
- Practice revenue analysis
- Facilities management
- --------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE> 31
CLIENT SOLUTIONS
Examples of the Company's engagements, which are representative of the
nature of its services and client relationships, are set forth below:
Comprehensive Systems and Operational Integration. An East Coast IDN has
engaged the Company to assist with more than 143 specific projects over the past
five years. In 1991, the Company assisted with an HBOC installation and the
Company was subsequently engaged to provide consulting on a range of systems and
operational issues affecting the IDN. These included operational review and
redesign of information services, emergency services and oncology departments;
implementation and provision of technical support for MediPac, 3M, FileNet, and
SMS INVISION, SIGNATURE and SoftMed systems; assistance with system selections,
contract review; and cost/benefit analysis for imaging technology, clinical
information systems, and managed care information systems. The Company also
participated in financial consulting engagements for the IDN and assisted with
consolidated business office planning, use of advanced technology, interim
management, policy and procedure development, patient accounting system
training, and diagnosis related grouping costing and revenue enhancement.
Strategic Planning and Implementation. A Midwestern community hospital
engaged the Company to develop a multi-year process to re-engineer hospital
functions including information systems, medical staff and management
operations. The Company evaluated current systems, conducted interviews of the
hospital's key management, implemented a total quality management program and
facilitated a five-year hospital-wide business and information systems strategic
plan. The Company also conceived, designed and implemented an affiliation plan
for the hospital in order to define business opportunities and objectives and
reporting requirements, and to expand the hospital's market area. As a result of
the joint efforts of the hospital and the Company, the hospital entered into an
affiliation with a major healthcare network; reorganized its senior management
structure with assistance from an interim chief operating officer, interim chief
information officer, interim vice president of nursing, and interim finance
department manager supplied by the Company; completed reengineering of existing
systems; and expanded information systems applications for clinical and
physician networking capabilities. The Company spearheaded the reengineering of
the patient care model, redefining nurse management, clinician roles,
responsibilities and interactions with information systems functions. This
process included labor relations, organizational transition and on-going quality
assurance and education. The Company also assisted with operational projects to
reengineer the hospital's medical records, finance, patient accounting and other
departments.
Long-Term Engagement. Since it first engaged the Company 11 years ago, a
West Coast university-based healthcare system has enlisted the Company for a
wide range of services. The Company provided long range systems planning,
selection and implementation of a healthcare information system, including
project management for approximately 35 system customizations. The Company
managed the design and implementation of an interface between the disparate
information systems of two affiliated facilities, and facilitated the
integration of those information systems into other systems within the
University's healthcare system. In connection with this implementation, the
Company also assisted with training services. In addition, the Company helped to
implement the university's operational improvement program and to develop a
long-term strategy to enhance administrative and clinical information access
throughout the university and to reduce costs in targeted departments while
improving medical service delivery. The Company's consultant team was later
engaged to conduct operational analyses in the medical records, patient
financial services and patient admission services departments. The Company is
currently analyzing the business process for ancillary departments in order to
assist with the implementation of a new physician order entry system.
Complex Strategic, Operational and Clinical Projects. A large Midwestern
IDN engaged the Company to assist in providing strategic and operational
guidance. The Company was first engaged to provide technical assistance and then
to help with several projects related to the integration of the IDN's healthcare
system, including selection of a managed care systems service bureau and
planning and initiating the operations of a large, multi-specialty ambulatory
care facility. The Company further assisted the client in the implementation of
various information systems that will be linked to an existing, state-wide
community health information network; provided an information base of integrated
delivery system models for the IDN's physician
30
<PAGE> 32
organization and its compensation arrangements; and identified prospective
purchasers of the IDN's benefit plan. The Company also worked with the IDN's
laboratory facility to write and revise policies and procedures and to help
implement operational changes and advised the laboratory facility on meeting
compliance standards for the College of American Pathologists and Joint
Commission on the Accreditation of Healthcare Organizations, and obtaining Food
& Drug Administration and Health Care Financing Administration accreditation.
INFORMATION SYSTEM EXPERIENCE
In order to provide its clients with a comprehensive source for healthcare
IT services and capabilities, the Company seeks to maintain a consultant base
that is experienced with a wide mix of established and emerging information
systems and technologies. The experience of the Company's consultants is derived
from a combination of work for Company clients as well as experience gained
prior to joining the Company. The Company's consultants have evaluation,
implementation, operational or other experience with one or more healthcare
information systems or technologies offered by the following companies:
<TABLE>
<S><C>
3Com
3M Healthcare Information
Systems
ADAC Laboratories
Advanced Institutional
Management Software, Inc.
Advanced Medical Systems
ALLTEL Information Services
-- Healthcare Division
American Express Information
Services Company
AMISYS Managed Care Systems,
Inc.
Antrim Corporation
APACHE Medical Systems, Inc.
Atwork Corporation
Bay Networks, Inc.
Borland International, Inc.
Cabletron Systems
Century Analysis, Inc.
Cerner Corporation
Cisco Systems, Inc.
CITATION Computer Systems,
Inc.
CliniComp International
Compaq Computer Corporation
The Compucare Company
Continental Healthcare
Systems
CSC Healthcare Systems
Cycare Systems, Inc.
Data General Corporation
DataCare, Inc.
Dictaphone Corporation
Digital Equipment Corp.
DKD/The MedStat Group, Inc.
Dun & Bradstreet Software
Dynamic Healthcare
Technologies, Inc.
EDA/SQL
EMTEK Healthcare Systems,
Inc.
Enterprise Systems, Inc.
EPIC Systems Corporation
FileNet Corporation
First Coast Systems, Inc.
First Data Corporation/Health
Sciences Group
Global Software, Inc.
HBO & Company
HCm, Inc.
Health Data Sciences Corp.
Healthcare Communications,
Inc.
Hewlett-Packard Company
Hospital Computer Systems,
Inc.
IBM
IDX Systems Corporation
IMNET Systems, Inc.
Informix Software, Inc.
Intelus, A SunGard Company
Keane, Inc. Healthcare
Services Division
Kronos
Kurzweil Applied
Intelligence, Inc.
Lanier Worldwide, Inc.
LanVision, Inc.
Lotus Development Corporation
Management Systems
Associates, Inc.
McCormack & Dodge
Medic Computer Systems, Inc.
Medicus Systems Corp.
MediQual Systems, Inc.
Meditech
Microsoft Corporation
Netscape Communications
Corporation
NetView
Novell Incorporated
Occupational Health Software
Systems
Oracle Corporation
PeopleSoft, Inc.
PHAMIS Incorporated
Resource Information
Management Systems
Santa Cruz Operation
Incorporated
Serving Software, Inc.
Shared Medical Systems
SMART Corporation
Soft Computer Consultants
SoftMed Systems, Inc.
Software Technologies Corp.
Source Data Systems
Sun Microsystems, Inc.
Sunquest Information Systems,
Inc.
Sybase, Inc.
Synoptics
Telxon Corporation
Transition Systems, Inc.
UB Networks
Unisys Corporation
Value Health Institutional
Pharmacy Systems
Ventech Systems, Inc.
Wang Laboratories, Inc.
X10sion
</TABLE>
31
<PAGE> 33
UNITIVE
Unitive provides IT consulting services, primarily Lotus Notes groupware
applications and tool development and workgroup system management, to companies
in numerous industries that seek solutions to intra-and inter-company workgroup
information and communications problems. Unitive assists clients in planning and
implementing large-scale groupware deployments, establishing protocols
(including security conventions, user interfaces, naming conventions and coding
efficiency protocols), developing methodologies for rapid applications, defining
administrative procedures, training and establishing intranet and internet
solutions. In addition, Unitive offers its "Quickstart" databases which are a
set of 14 production-ready Lotus Notes applications that were developed by
Unitive for immediate use or to be used as a starting point for custom
application development. Unitive also offers applications outsourcing, whereby
Unitive will run client applications on servers located at Unitive's own
facilities. Unitive's successful work with Lotus Notes groupware solutions
places it in the top tier of Lotus-designated Business Partners leveraging
product sales and number of certified professionals, qualifying Unitive for
designation as a Premium Lotus Business Partner in 1995 and in 1996. In 1995 and
the six months ended June 30, 1996 Unitive accounted for 6.8% of the Company's
revenues.
Client Solution. The Chrysler SCORE project, Unitive's largest external
engagement to date, involves unique opportunities for Unitive but is also
representative of Unitive's service capabilities. Unitive is engaged by Chrysler
Corporation to assist with a Lotus Notes workgroup implementation of the
Chrysler SCORE (Supplier Cost Reduction Effort) initiative. Under the SCORE
system, each Chrysler supplier is required to submit cost reduction proposals
and each is ranked by the number of "SCORE Points" gained through successful
cost-reduction activities. In addition, Unitive is assisting in the link-up of
the approximately 2,500 suppliers to the SCORE System via Lotus Notes. The
Company believes that Unitive's role in this large program gives it a distinct
advantage and opportunity to provide IT consulting, management and outsourcing
to the present and future suppliers in this Chrysler program.
SUPERIOR EMPLOYEES
The Company believes that one of its key strengths lies in its ability to
attract, develop, motivate and retain a talented, creative and highly skilled
work force of senior-level professionals who are specialists in one or more
areas of healthcare and/or information technology. The Company's healthcare
consultants are highly experienced, with an average of over 16 years of
healthcare and IT experience. Many of the these consultants have established
their credentials as healthcare executives and senior management of healthcare
entities, business office managers, medical records administrators, nurse
administrators, nurses, hospital admissions directors, and information
management and information systems technical personnel. As of August 2, 1996,
the Company employed over 280 employees, of whom over 235 were consultants.
The Company believes it has a unique corporate culture built upon open
communication across geographic regions and practice areas (fostered by the
Company's proprietary information and communications system) and a motivational
and interactive work environment that features extensive professional
development opportunities and productivity incentives.
Through the establishment of its Superior Institute, the Company has
developed a comprehensive training and ongoing education program, currently
offering 18 courses to guide its professionals through a progression of skill
enhancement programs. As part of this effort, the Company provides training
curricula in new trends in healthcare, information technology and business
management. An integral part of the on-going education process at the Company
takes place through its proprietary information and communications system. This
allows the Company's consultants to continue to upgrade their skills while
remaining deployed in the field. In addition, the Company has developed an
employee orientation program that features a sophisticated presentation to
provide new employees with a comprehensive understanding of the Company's
structure and approach to healthcare consulting. The Company also maintains a
formal and active network of former employees; these alumni provide expertise on
projects, introduce the Company to new client leads, and, in several cases, have
returned to the Company from experiences elsewhere in the healthcare industry.
32
<PAGE> 34
SALES AND MARKETING
The Company's business development efforts are based upon a highly
organized, company-wide, consistent approach. All personnel are trained and
reinforced in the Company's marketing methods and philosophy, and are encouraged
to identify, develop and pursue client service opportunities. The Company's
marketing efforts are directed by senior management, practice area leaders and
strategic service group leaders, who focus on client development strategies,
geographic market penetration and cross-selling new and existing clients.
Business development is an integral part of the formal responsibilities at all
levels of the Company's management, including its National Practice Area
leaders, and the Company sets business development goals on both a departmental
and individual basis.
The Company's business development efforts focus primarily on identifying
key decision makers in the healthcare industry, determining the value to be
provided to each potential client and then managing the sales process to
completion through a sophisticated client resource database, developed and
maintained by Unitive. Each potential client lead is entered into the database,
and that profile is updated for subsequent developments and information
throughout the entire life of the Company's relationship with the potential
client, as well as after a client retains the Company for services. At any given
time, numerous Company professionals are active in the development of business
from either a new or existing client, and the client resource database enables
all Company personnel to access up-to-date information on the Company's efforts
with respect to a client or client prospect, identifies other Company contacts
with that client, and highlights the particular needs expressed by the client to
date.
In addition, the Company relies upon its reputation in the marketplace, the
personal contacts and networking of the Company's professionals, direct industry
marketing programs, trade shows, and the industry presence maintained by Company
professionals to enhance its business development efforts. The Company's
marketing efforts are enhanced by its presence within the healthcare industry by
virtue of its employees' speaking engagements and publications on topics
affecting healthcare. Since January 1, 1995 the Company's healthcare consultants
have published over 40 articles on current and emerging topics in healthcare
information and management and have participated in over 40 external speaking
engagements and presentations to industry associations and client audiences.
The Company operates its healthcare consulting business through a
combination of its national presence, regional relationships and its 13 National
Practice Areas. Each National Practice Area offers a selected variety of the
Company's healthcare consulting services and often two or more of these areas
work synergistically to provide solutions to clients. Each area is managed by a
National Practice Area leader who has profit and loss responsibility for the
specific area and is responsible for its growth. As the Company adds to its
services through internal growth and acquisition, it will evaluate adding new
practice areas or augmenting the services of its existing National Practice
Areas. The Company actively markets the subject-matter expertise of its National
Practice Areas through the focus of its Strategic Services Groups. Each
Strategic Services Group is responsible for developing and enhancing knowledge
of local regulation and market factors, as well as developing and nurturing
knowledge of and relationships with specific client organizations. The Company
then combines the expertise of its National Practice Areas to form solutions
that are responsive to local conditions and of value to specific clients.
The Company provides a compensation system designed to foster an active
focus at all levels within the organization on growth and business development
from a company-wide perspective. Group leaders and other middle management earn
incentive compensation on a monthly basis and on an annual basis based on group
performance goals. Senior management earns incentive-based compensation based on
company-wide performance goals.
COMPETITION
The market for the Company's services is highly fragmented, highly
competitive and is subject to rapid change. The Company believes that it
currently competes principally with systems integration firms, national
33
<PAGE> 35
consulting firms, including the consulting divisions of the "Big Six" accounting
firms, information system vendors, service groups of computer equipment
companies, facilities management companies, general management consulting firms
and regional and specialty consulting firms. Many of the Company's competitors
have significantly greater financial, technical and marketing resources than the
Company, generate greater revenues and have greater name recognition than the
Company. Moreover, those competitors that sell or license their own software may
in the future attempt to limit or eliminate the use of third party consultants,
such as the Company, to implement and/or customize such software. In addition,
vendors whose systems may enjoy wide market acceptance and large market share
could enter into exclusive or restrictive agreements with other consulting firms
which could eliminate or substantially reduce the Company's implementation work
for those systems. There are relatively low barriers to entry into the Company's
markets, and the Company has faced and expects to continue to face additional
competition from new entrants into its markets. In addition, combinations and
consolidations in the consulting industry will give rise to larger competitors,
whose relative strengths are impossible to predict. The Company also competes
with its clients' internal resources, particularly where these resources
represent a fixed cost to the client. This internal client competition may
heighten as consolidation of healthcare providers creates organizations large
enough to support internal information management capabilities. See "Risk
Factors -- Competition."
The Company believes that the principal competitive factors in its market
include reputation, industry expertise, project management expertise, price,
quality of service, responsiveness and speed of implementation and delivery.
There can be no assurance that the Company will be able to compete effectively
on pricing or other requirements with current and future competitors or that
competitive pressures faced by the Company will not cause the Company's revenue
or operating margins to decline or otherwise materially adversely affect its
business, financial condition and results of operations.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
The Company's success is in part dependent upon its proprietary internal
information and communications systems, databases, tools and the methods and
procedures that it has developed specifically to serve its clients. In addition,
Unitive has and will continue to develop proprietary groupware tools and
applications. The Company has no patents; consequently, it relies on a
combination of non-disclosure and other contractual arrangements and copyright,
trademark and trade secret laws to protect its proprietary systems, information,
and procedures. There can be no assurance that the steps taken by the Company to
protect its proprietary rights will be adequate to prevent misappropriation of
such rights or that the Company will be able to detect unauthorized use and take
appropriate steps to enforce its proprietary rights. The Company believes that
its systems and procedures and other proprietary rights do not infringe upon the
proprietary rights of third parties. There can be no assurance, however, that
third parties will not assert infringement claims against the Company in the
future or that any such claims will not require the Company to enter into
materially adverse license arrangements or result in protracted and costly
litigation, regardless of the merits of such claims. See "Risk Factors --
Limited Protection of Proprietary Systems and Procedures."
FACILITIES
The Company's headquarters is located in approximately 35,000 square feet
of leased office space in Southfield, Michigan. Superior also leases an
aggregate of approximately 8,000 square feet of additional office space in
Clearwater, Florida; Atlanta, Georgia; Dallas, Texas; and Walnut Creek,
California. The Company believes that its facilities are adequate for its
current needs and that additional facilities can be leased to meet future needs.
LEGAL PROCEEDINGS
The Company is not subject to any pending material litigation.
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<PAGE> 36
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors and their respective ages as of August
31, 1996 and positions are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ----------------------------------- --- ---------------------------------------------------
<S> <C> <C>
Richard D. Helppie, Jr.(1)......... 40 President, Chief Executive Officer and Chairman of
the Company
Charles O. Bracken................. 47 Executive Vice President of Superior
Robert R. Tashiro.................. 40 Senior Vice President and Chief Operating Officer
of Superior
James T. House..................... 35 Vice President-Finance, Treasurer and Secretary of
the Company
Kenneth T. Boone................... 40 President and Chief Operating Officer of Unitive
Reginald M. Ballantyne III......... 52 Director
Bernard J. Lachner(1)(2)........... 68 Director
Douglas S. Peters.................. 52 Director
Richard P. Saslow(2)............... 49 Director
Donald W. Simborg, M.D.(1)......... 55 Director
</TABLE>
- -------------------------
(1) Member of the Compensation Committee of the Board of Directors
(2) Member of the Audit Committee of the Board of Directors
Richard D. Helppie, Jr. has served as Superior's President and Chief
Executive Officer since he founded Superior in May 1984. Mr. Helppie also
founded Unitive Corporation and currently serves as Unitive's Chairman and Chief
Executive Officer. Mr. Helppie also serves as Chairman and Chief Executive
Officer, and is a Director, of the Company. Mr. Helppie has more than 20 years
of experience in the healthcare and information systems industries.
Charles O. Bracken joined Superior in March 1987 as Executive Vice
President. Mr. Bracken has more than 25 years of experience in the healthcare
and information systems industries. Prior to joining Superior, Mr. Bracken spent
three years as vice president of marketing of a healthcare software firm,
preceded by 10 years of related experience, most recently as chief information
officer of a multi-hospital corporation. Mr. Bracken has also served as a board
member for the Center for Health Information Management.
Robert R. Tashiro joined Superior in 1985 as a Systems Consultant. He was
appointed Vice President in 1990, Senior Vice President in 1992 and Chief
Operating Officer in June 1996. Mr. Tashiro has more than 17 years of experience
in the information systems industry and more than 11 years of experience in the
healthcare industry. Prior to joining the Company, Mr. Tashiro served as an
Information Systems Department project manager at Kettering Medical Center.
Prior to that, Mr. Tashiro worked for EDS.
James T. House joined Superior in 1988 as its Controller. Since that time,
he has held various positions with the Company and is currently the
Vice-President--Finance of Superior and the Chairman of Unitive's finance
committee.
Kenneth T. Boone joined Unitive and Superior in March 1993 as Chief
Information Officer. He served in this role for both companies until 1995 when
he became President and Chief Operating Officer of Unitive. From July 1992 to
March 1993, Mr. Boone served as President of Boone Engineering Services, Inc.
From January 1987 to July 1992, Mr. Boone was employed by Lotus Development
Corporation, and served as District Sales Manager during the last two years of
his tenure.
Reginald M. Ballantyne III has served as a Director of the Company since
August 1996. Mr. Ballantyne has served on Superior's advisory council since
1995. He has served as the President of PMH Health Resources, Inc. since 1984.
Prior to that, Mr. Ballantyne served as President of Phoenix Memorial Hospital.
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<PAGE> 37
Mr. Ballantyne is the current Chairman-elect of the American Hospital
Association ("AHA") and will be the Chairman for the 1997 term. He is also a
fellow of the American College of Healthcare Executives ("ACHE"). Mr. Ballantyne
has served as a member of the national Board of Commissioners for Joint
Commission on the Accreditation of Healthcare Organizations.
Bernard J. Lachner has served as a Director of the Company since August
1996. Mr. Lachner has served as the chairman of Superior's advisory council
since 1993. From July 1972 until his retirement in November 1992, Mr. Lachner
served as the Chief Executive Officer of Evanston Hospital Corporation. Other
directorships include subsidiaries of Allstate Insurance and St. Joseph Health
System. Mr. Lachner founded Ohio State University's graduate program in Health
Services Administration and served as its first director. He is a fellow in
ACHE, and is a past member of its Board of Governors. He has also served as the
Chairman of AHA.
Douglas S. Peters has served as a Director of the Company since August
1996. Mr. Peters has served as the President and Chief Executive Officer of
Jefferson Health System since the 1995 merger with Main Line Health System.
Previous to that, Mr. Peters served in the same capacity for Main Line. Mr.
Peters is also a director with the Philadelphia Contributionship and serves on
the Advisory Board of First Union Bank. Mr. Peters is a fellow with ACHE.
Richard P. Saslow has served as a Director of the Company since August
1996. Mr. Saslow has been practicing business law and commercial litigation with
the firm of Butzel Long, PC since January 1991. Prior to that period, Mr. Saslow
practiced law with the firm of Butzel, Keidan, Simon, Myers & Graham from 1974
to 1990.
Donald W. Simborg, M.D. has served as a Director of the Company since
August 1996. Mr. Simborg has been the Chief Executive Officer of KnowMed
Systems, a software company, since October 1995. In 1994, Dr. Simborg served as
a Vice President of Medicus Systems. From 1990 to 1993, he served as Chief
Executive Officer for Bell Atlantic Healthcare.
Executive officers of the Company are elected by, and serve at the
discretion of, the Board of Directors. Each executive officer is a full-time
employee of the Company, Superior and/or Unitive, as specified above next to
their respective names. The Board of Directors currently consists of six
members. The Board of Directors is divided into three classes, each of whose
members serve for a staggered three-year term. The Board is comprised of two
Class I Directors (Messrs. Lachner and Peters), two Class II Directors (Dr.
Simborg and Mr. Ballantyne) and two Class III Directors (Messrs. Helppie and
Saslow). At each annual meeting of stockholders the appropriate number of
directors will be elected for a three-year term to succeed the directors of the
same class whose terms are then expiring. The terms of the Class I Directors,
Class II Directors and Class III Directors will expire upon the election and
qualification of successor directors at the annual meetings of stockholders held
in calendar years 1997, 1998 and 1999, respectively. There are no family
relationships between any director or executive officer of the Company.
BOARD COMMITTEES
The Board of Directors has established an Audit Committee and a
Compensation Committee. The Audit Committee will be responsible for reviewing
with management the financial controls, accounting and audit and reporting
activities of the Company. The Committee will review the qualifications of the
Company's independent auditors, make recommendations to the Board of Directors
regarding the selection of independent auditors, review the scope, fees and
results of any audit and review non-audit services and related fees provided by
the independent auditors. The Compensation Committee will be responsible for the
administration of all salary and incentive compensation plans for the officers
and key employees of the Company, including bonuses. The Committee will also
administer the Company's Long-Term Incentive Plan.
DIRECTOR COMPENSATION
Directors who are not officers or employees of the Company are paid a fee
of $1,000 for each board meeting attended in person and are reimbursed for
travel expenses incurred in connection with attending board
36
<PAGE> 38
and committee meetings. In addition, under the Long-Term Incentive Plan,
Directors who are not employees of the Company will receive options to purchase
3,000 shares of Common Stock on the effective date of the registration statement
of which this Prospectus forms a part or, if later, upon joining the Board of
Directors. Thereafter, each non-employee director will receive an annual grant
of an option to purchase 3,000 shares of Common Stock. The options will have an
exercise price equal to the fair market value of the Common Stock on the date of
grant, and will be fully vested on the date of grant. See "-- Employee Benefit
Plans -- Long-Term Incentive Plan." The Company does not currently provide
additional compensation for committee participation or special assignments of
the Board of Directors.
COMPENSATION COMMITTEE INTERLOCK AND INSIDER PARTICIPATION
The Compensation Committee was not in existence prior to August 1996.
Accordingly, Richard D. Helppie, Jr. had sole responsibility for any and all
decisions with respect to executive officer compensation.
ADVISORY COUNCIL
Superior established its Advisory Council (the "Advisory Council") in 1993.
The Advisory Council is a non-governing body currently comprised of five leaders
in the healthcare industry who meet periodically to advise Superior on emerging
issues and trends in the healthcare field, as well as both strategic planning
and potential specialization areas for Superior. Advisory Council members are
paid a fee of $1,000 per meeting and $1,500 per calendar year and are reimbursed
for travel, lodging and meal expenses incurred in connection with attendance at
Advisory Council sessions. Superior intends to continue the Advisory Council
following this offering and to maintain its current compensation allowance for
its members. Messrs. Ballantyne, Lachner and Peters are currently members of the
Advisory Council.
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<PAGE> 39
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the annual
and long-term compensation paid by the Company for services rendered during the
fiscal year ended December 31, 1995 for the Company's Chief Executive Officer
and the Company's four other executive officers (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
--------------------------------------
NAME AND OTHER ANNUAL ALL OTHER
PRINCIPAL POSITION SALARY BONUS COMPENSATION(2) COMPENSATION(3)
- ---------------------------------------------- -------- ---------- --------------- ---------------
<S> <C> <C> <C> <C>
Richard D. Helppie, Jr., President, Chief
Executive Officer and Chairman of the
Company..................................... $477,000 $1,948,448 $ -- $ 9,709
Charles O. Bracken, Executive Vice President
of Superior................................. 318,000 378,419 150,000 9,709
Robert R. Tashiro, Senior Vice President and
Chief Operating Officer of Superior......... 176,000 207,162 75,000 9,709
James T. House, Vice President - Finance,
Treasurer and Secretary of the Company...... 80,000 62,145 -- 7,198
Kenneth T. Boone, President and Chief
Operating Officer of Unitive................ 90,000 63,500 -- 7,975
</TABLE>
- -------------------------
(1) The Company has entered into agreements, effective as of the closing of this
offering through the end of fiscal 1997, with the current three most highly
compensated executive officers, Messrs. Helppie, Bracken and Tashiro, which
provide these three executives with annual base compensation in the
aggregate of $835,000 and annual bonus compensation of up to $75,000 per
person, based on the achievement of certain pre-determined performance
criteria. These agreements do not apply to amounts paid to these three
officers on or prior to the closing of this Offering.
(2) Other annual compensation for Messrs. Bracken and Tashiro represents the
difference between the dollar value paid by such persons for shares of
Common Stock in 1995 and the fair market value of the shares at the time of
sale.
(3) Consists of profit sharing contributions made by the Company on behalf of
the Named Executive Officers.
The following table sets forth certain information with respect to the
value of options held at December 31, 1995 by the Named Executive Officers who
held options during 1995. The Named Executive Officers did not exercise any
options to purchase Common Stock during 1995. However, all of these options will
be exercised prior to the offering.
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT YEAR END(#) AT YEAR END($)(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Richard D. Helppie, Jr............................. -- -- -- --
Charles O. Bracken................................. -- -- -- --
Robert R. Tashiro..................................
James T. House..................................... 1,066 -- $11,428 --
Kenneth J. Boone................................... -- -- -- --
</TABLE>
- -------------------------
(1) Calculated based on the assumed initial public offering price of $14.00 per
share less the exercise price payable for such shares.
38
<PAGE> 40
EMPLOYMENT RELATED AGREEMENTS
In connection with the offering, Richard D. Helppie, Jr. will enter into an
agreement to limit his aggregate annual compensation to $400,000, consisting of
a combination of base salary and bonus, through the end of fiscal 1997. This
agreement will become effective upon the closing of this Offering and will not
apply to amounts paid to him on or prior to such date.
In connection with the offering, Charles O. Bracken's existing employment
agreement will be amended to provide for an annual base salary of $290,000 and
annual bonus of up to $75,000 per year through the end of fiscal 1997. This
agreement will become effective upon the closing of this Offering and will not
apply to amounts paid to him on or prior to such date. Superior's existing
agreement with Mr. Bracken provides for his employment as an Executive Vice
President of Superior at an annual base salary of approximately $325,000. Mr.
Bracken also participates in Superior's 1996 Executive Vice President Bonus Plan
pursuant to which he is eligible to receive monthly and annual base bonuses of
$5,000 and $233,000, respectively (which base bonuses are subject to increase or
decrease based on the performance of Superior as measured by revenue, profit and
certain other criteria as set forth in the respective plans). Under the
employment agreement, Mr. Bracken is subject to noncompetition, nonsolicitation
and nondisclosure covenants.
In connection with the offering, Robert R. Tashiro's employment agreement
will be amended to provide for an annual base salary of $220,000 and an annual
bonus of up to $75,000 per year through the end of fiscal 1997. This agreement
will become effective upon the closing of this Offering and will not apply to
amounts paid to him on or prior to such date. Superior's existing agreement with
Mr. Tashiro provides for his employment as Senior Vice President of Superior at
an annual base salary of approximately $200,000. Mr. Tashiro also participates
in Superior's 1996 Senior Vice President Bonus Plan pursuant to which he is
eligible to receive monthly and annual base bonuses of $3,000 and $175,000,
respectively (which base bonuses are subject to increase or decrease based on
the performance of Superior as measured by revenue, profit and certain other
criteria as set forth in the respective plans). Under the employment agreement,
Mr. Tashiro is subject to noncompetition, nonsolicitation and nondisclosure
covenants.
Superior has an agreement with James T. House that provides for his
employment as a Vice President of Superior at an annual base salary of
approximately $95,000. Mr. House also participates in Superior's 1996 Vice
President Bonus Plan pursuant to which he is eligible to receive monthly and
annual base bonuses of $3,000 and $70,000, respectively (which base bonuses are
subject to increase or decrease based on the performance of Superior as measured
by revenue, profit and certain other criteria as set forth in the respective
plans). Under the employment agreement, Mr. House is subject to noncompetition,
nonsolicitation and nondisclosure covenants.
Unitive has an agreement with Kenneth T. Boone that provides for his
employment as the President and Chief Operating Officer of Unitive at an annual
base salary of approximately $125,000. Mr. Boone is also entitled to
discretionary bonus compensation based on the attainment of certain objective
performance criteria. Under the employment agreement, Mr. Boone is subject to
noncompetition, nonsolicitation and nondisclosure covenants.
EMPLOYEE BENEFIT PLANS
Long-Term Incentive Plan
The Board of Directors has adopted The 1996 Long-Term Incentive Plan (the
"Long-Term Incentive Plan"). The Long-Term Incentive Plan is designed to enhance
the long-term profitability and stockholder value of the Company by offering
Common Stock, Common Stock-based and other performance incentives to those
individuals who are key to the growth and success of the Company, to attract and
retain experienced executives and to align executives' economic incentives with
the Company's stockholders.
The Long-Term Incentive Plan is administered by the Compensation Committee,
which, except for the formula program (the "formula program") noted below for
non-employee directors, has exclusive authority to grant awards under the
Long-Term Incentive Plan and to make all interpretations and determinations
affecting the Long-Term Incentive Plan. The Compensation Committee has the
discretion to determine the individuals to whom Awards (as defined below) are
granted, the amount of such Award, any applicable vesting schedule and other
terms of any Award.
39
<PAGE> 41
Participation in the Long-Term Incentive Plan is limited to employees,
consultants, advisors and independent contractors of the Company and its
subsidiaries who are selected from time to time by the Compensation Committee.
In addition, non-employee directors automatically participate in the formula
program. Awards under the Long-Term Incentive Plan may be in the form of stock
options (including both incentive stock options that meet the requirements of
Section 422 of the Internal Revenue Code and nonqualified stock options), stock
awards, restricted stock grants, stock appreciation rights ("SARs") and
performance awards (collectively, "Awards"). Any Award issued under the
Long-Term Incentive Plan that is forfeited, expired, cancelled or terminated
prior to exercise will again become available for grant under the Long-Term
Incentive Plan.
The Long-Term Incentive Plan also includes the directors formula program.
The formula program provides for the automatic grant of vested options to
purchase shares of Common Stock to non-employee directors of the Company. See
"Management -- Director Compensation."
The maximum number of shares of Common Stock which may be issued and sold
under the Long-Term Incentive Plan is 900,000 shares. The Company expects to
grant options to purchase approximately 270,000 shares of Common Stock in
connection with this offering at an exercise price per share equal to the
initial public offering price. Other than the director formula option plans, the
initial options will vest 20% per year on the first through fifth anniversaries
of the date of grant. A total of 110,000 such shares will be granted to the
Named Executive Officers as follows: Helppie: 30,000; Bracken: 30,000; Tashiro:
30,000; and House: 20,000. In the event of any stock dividend, stock split,
recapitalization, merger, other change in the capitalization of the Company or
similar corporate transaction or event affecting the Common Stock, the
Compensation Committee may make appropriate adjustments to the Awards. The
Company may also accelerate the timing of the exercise of any Awards or cancel
any Award and provide instead for the payment to the participant in cash of the
economic value of the Award at the time of cancellation.
401(k) Savings Plan
The Company maintains the Superior Consultant Company, Inc. 401(k) Profit
Sharing Plan, a defined contribution retirement plan with a cash or deferred
arrangement as described in Section 401(k) of the Internal Revenue Code (the
"401(k) Plan"). The 401(k) Plan is intended to be qualified under Section 401(a)
of the Internal Revenue Code. All employees of the Company, Superior and Unitive
who have completed one year of service and have attained age 21 are eligible to
participate in the 401(k) Plan on the first day of the month coinciding with or
following the date on which they satisfy the eligibility criteria. The 401(k)
Plan provides that each participant may make elective contributions of from 1%
to 15% of his or her compensation, subject to statutory limits. The Company may
make a discretionary contribution, to the Plan. Under the terms of the 401(k)
Plan, allocation of the discretionary contribution is integrated with Social
Security, in accordance with applicable nondiscrimination rules under the
Internal Revenue Code.
40
<PAGE> 42
CERTAIN TRANSACTIONS
In April, 1995, Superior loaned Mr. Bracken $500,000, evidenced by a term
promissory note, bearing interest at 7.71% per annum. The note provides for
equal annual payments of principal and interest of $50,000, payable on December
31 of each year beginning December 31, 1995 with the entire unpaid principal
balance due on December 31, 2014. Mr. Bracken used the proceeds of such loan to
purchase shares of Common Stock, and the note is secured by a pledge of such
shares under a pledge agreement dated April 20, 1995. In connection with the
Offering, and in exchange for the release of the shares from the lien of the
pledge agreement, the pledge agreement and the note are being amended to provide
for personal recourse to Mr. Bracken on the note and for acceleration, at the
option of the Company, of the entire outstanding indebtedness under the Note in
the event that Mr. Bracken's employment with the Company is terminated. The
largest amount of indebtedness outstanding under such note during fiscal 1995
was $500,000 and as of September 1, 1996 was $477,000.
In April, 1995, Superior loaned to Mr. Tashiro $250,000, evidenced by a
term promissory note, bearing interest at 7.71% per annum. The note provides for
equal annual payments of $25,000, payable on December 31 of each year beginning
December 31, 1995 with the entire principal balance due on December 31, 2012.
Mr. Tashiro used the proceeds of such loan to purchase shares of Common Stock
and the note is secured by a pledge of such shares under a pledge agreement
dated April 20, 1995. In connection with the Offering, and in exchange for the
release of the shares from the lien of the pledge agreement, the pledge
agreement and the note are being amended to provide for personal recourse to Mr.
Tashiro on the note and for acceleration, at the option of the Company, of the
entire outstanding indebtedness under the Note in the event that Mr. Tashiro's
employment with the Company is terminated. The largest amount of indebtedness
outstanding under such note was $250,000 during fiscal 1995 and as of September
1, 1996 was $238,000.
In September, 1995, The Richard D. Helppie, Jr. Trust, of which Mr. Helppie
is Trustee, loaned Unitive $200,000, evidenced by a term promissory note bearing
interest at 8.75% per year. The outstanding principal balance of $73,000 is
expected to be repaid by Unitive on or before the consummation of the offering.
In connection with this offering the Company will enter into a tax
indemnification agreement with the current shareholders of Superior which
provides for, among other things, the indemnification of each such shareholder
for any losses or liabilities with respect to any additional taxes (including
interest, penalties and legal fees) and the repayment to the Company of any
amounts received as refunds, resulting from the Superior's operations during the
period in which it was an S corporation. Management believes that the Company's
maximum exposure pursuant to this agreement is not material.
The Company anticipates that in the future it will charter aircraft from
Clearwater Aviation, Inc., of which Mr. Helppie is sole stockholder. Payments
under this arrangement, which will be at or below market rates, are anticipated
to be between $150,000 and $250,000 in fiscal 1997. This arrangement is subject
to approval by a majority of the independent and disinterested members of the
Board of Directors.
Mr. Saslow, a Director, is a shareholder in the law firm of Butzel Long,
PC, Detroit, Michigan. Butzel Long (and its predecessor firms) has been general
counsel to Superior since 1985 and Unitive since 1993.
All future transactions between the Company and any of its officers,
directors and principal stockholders or their affiliates will be approved by a
majority of the Board of Directors, including a majority of the independent and
disinterested directors.
41
<PAGE> 43
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of July 31, 1996, and as adjusted to reflect the
sale of the shares offered hereby for: (i) each person known by the Company to
own beneficially more than 5% of the outstanding shares of Common Stock; (ii)
each of the Company's directors; (iii) each of the Named Executive Officers; and
(iv) all directors and executive officers of the Company as a group. Unless
otherwise indicated in the footnotes to the table set forth below, each person
or entity named below has an address in care of the Company's principal
executive offices. The Company believes that each person or entity named below
has sole voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by such holder, subject to community property laws
where applicable.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING(1) AFTER OFFERING(1)(2)
-------------------- --------------------
NUMBER OF NUMBER OF
NAME SHARES PERCENT SHARES PERCENT
- -------------------------------------------------------- --------- ------- --------- -------
<S> <C> <C> <C> <C>
Richard D. Helppie, Jr.(3).............................. 4,042,001 83.6% 4,042,001 57.9%
Charles O. Bracken...................................... 439,223 9.1% 439,223 6.3%
Robert R. Tashiro....................................... 219,610 4.5% 219,610 3.1%
James T. House(4)....................................... 7,495 * 7,495 *
Kenneth T. Boone........................................ 38,576 * 38,576 *
Reginald M. Ballantyne III(5)........................... * * 3,000 *
Bernard J. Lachner(5)................................... * * 3,000 *
Douglas S. Peters(5).................................... * * 3,000 *
Richard P. Saslow(5).................................... * * 3,000 *
Donald W. Simborg, M.D.(5).............................. * * 3,000 *
All executive officers and directors as a group (10
persons)(4)........................................... 4,746,905 98.2% 4,761,905 68.2%
</TABLE>
- -------------------------
* Less than 1%.
(1) Applicable percentage of ownership as of July 31, 1996 is based upon
4,836,112 shares of Common Stock outstanding. Applicable percentage
ownership after this offering is based upon 6,986,112 shares of Common Stock
outstanding. Beneficial ownership is determined in accordance with the rules
of the Securities and Exchange Commission, and includes voting and
investment power with respect to the shares shown as beneficially owned.
Shares of Common Stock subject to options currently exercisable or
exercisable on or before September 29, 1996 are deemed outstanding for
computing the percentage ownership of the person holding such options, but
are not deemed outstanding for computing the percentage ownership of any
other person.
(2) Assumes no exercise of the Underwriters' over-allotment option to purchase
up to an aggregate of 157,842 shares of Common Stock from the following
Selling Stockholders: The Richard D. Helppie, Jr. Trust (75,000 shares),
Charles O. Bracken (50,000 shares), Robert R. Tashiro (25,000 shares),
Lawrence H. Cater (6,465 shares) and Gary L. Hammon (1,377 shares). If the
Underwriters' over-allotment option is exercised in full, upon completion of
this offering Mr. Helppie, Mr. Bracken, Mr. Tashiro, Mr. Cater and Mr.
Hammon would beneficially own 3,967,001 shares (55.5%), 389,223 shares
(5.4%), 194,610 shares (2.7%), 6,365 shares (less than 1%) and 1,289 shares
(less than 1%), respectively.
(3) All shares are held by The Richard D. Helppie, Jr. Trust, of which Mr.
Helppie is the sole trustee.
(4) Includes 1,066 shares of Common Stock to be issued upon exercise of
outstanding options in connection with this Offering.
(5) Includes 3,000 shares issuable upon exercise of options exercisable within
60 days from the date of this Prospectus.
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<PAGE> 44
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company consists of 30,000,000 shares
of Common Stock, par value $0.01 per share, and 1,000,000 shares of Preferred
Stock, par value $0.01 per share (the "Preferred Stock"). Upon completion of
this offering, the Company will have outstanding 6,986,112 shares of Common
Stock and no shares of Preferred Stock. As of July 31, 1996, there were eight
record holders of Common Stock.
COMMON STOCK
The holders of Common Stock are entitled to one vote per share for the
election of directors and all other matters submitted for stockholder vote,
except matters submitted to the vote of another class or series of shares.
Holders of Common Stock are not entitled to cumulative voting rights. Therefore,
the holders of a majority of the shares voting for the election of directors can
elect all of the directors if they choose to do so. The holders of Common Stock
are entitled to dividends in such amounts and at such times, if any, as may be
declared by the Board of Directors out of funds legally available therefor. The
Company has not paid any dividends on its Common Stock and does not anticipate
paying any cash dividends on such stock in the foreseeable future. See "Dividend
Policy." Upon liquidation, dissolution or winding up of the Company, the holders
of Common Stock are entitled to share ratably in all net assets available for
distribution to stockholders after payments to creditors. The Common Stock is
not redeemable and has no preemptive or conversion rights.
The rights of the holders of Common Stock are subject to the rights of the
holders of any Preferred Stock which may, in the future, be issued. All
outstanding shares of Common Stock are, and the shares of Common Stock to be
sold by the Company in this offering when issued will be, duly authorized,
validly issued, fully paid and nonassessable.
PREFERRED STOCK
The Company's Certificate of Incorporation authorizes 1,000,000 shares of
Preferred Stock. The Board of Directors has the authority to issue the Preferred
Stock in one or more series and to fix the price, rights, preferences,
privileges and restrictions thereof, including dividend rights, dividend rates,
conversion rights, voting rights, liquidation preferences and the number of
shares constituting any series or the designation of such series, without
further vote or action by the stockholders. The issuance of Preferred Stock may
have the effect of delaying, deferring or preventing a change in control of the
Company without further action by the stockholders and may adversely affect the
voting and other rights of the holders of Common Stock. The issuance of
Preferred Stock with voting and conversion rights may adversely affect the
voting power of the holders of Common Stock, including the loss of voting
control to others. The Company has no current plans to issue any shares of
Preferred Stock.
ANTITAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BY-LAWS
AND DELAWARE LAW
Certificate of Incorporation and By-Laws. The Amended and Restated
Certificate of Incorporation (the "Certificate of Incorporation") provides that
the Board of Directors will be divided into three classes of directors, each
class constituting approximately one-third of the total number of directors and
with the classes serving staggered three-year terms. The By-Laws provide that
only the Chairman of the Board, a majority of the Board of Directors or the
stockholders owning at least 50% of the Company's capital stock may call
meetings of stockholders and require certain advance notice procedures for
nominating candidates for election to the Board of Directors. These provisions
of the Certificate of Incorporation and By-Laws could discourage potential
acquisition proposals and could delay or prevent a change in control of the
Company. These provisions are intended to enhance the likelihood of continuity
and stability in the composition of the Board of Directors and in the policies
formulated by the Board of Directors and to discourage certain types of
transactions that may involve an actual or threatened change of control of the
Company. These provisions are designed to reduce the vulnerability of the
Company to an unsolicited acquisition proposal. The provisions also
43
<PAGE> 45
are intended to discourage certain tactics that may be used in proxy fights.
However, such provisions could have the effect of discouraging others from
making tender offers for the Company's shares and, as a consequence, they also
may inhibit fluctuations in the market price of the Company's shares that could
result from actual or rumored takeover attempts. Such provisions also may have
the effect of preventing changes in the management of the Company. See "Risk
Factors -- Certain Antitakeover Effects."
Delaware Takeover Statute. Following the Offering, the Company will be
subject to Section 203 of the Delaware General Corporation Law ("Section 203"),
which, subject to certain exceptions, prohibits a publicly held Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that such stockholder
became an interested stockholder, unless: (i) prior to such date, the board of
directors of the corporation approved either the business combination or the
transaction that resulted in the stockholder becoming an interested stockholder;
(ii) upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number of
shares outstanding those shares owned (a) by persons who are directors and also
officers and (b) by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
Long-Term Incentive Plan will be tendered in a tender or exchange offer; or
(iii) on or subsequent to such date, the business combination is approved by the
board of directors and authorized at an annual or special meeting of the
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock that is not owned by the interested
stockholder.
Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii) any
sale, transfer, pledge or other disposition of 10% or more of the assets of the
corporation involving the interested stockholder; (iii) subject to certain
exceptions, any transaction that results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder; (iv)
any transaction involving the corporation that has the effect of increasing the
proportionate share of the stock of any class or series of the corporation
beneficially owned by the interested stockholder; or (v) the receipt by the
interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation. In
general, Section 203 defines an interested stockholder as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Limitation of Liability. As permitted by the Delaware General Corporation
Law, the Company's Certificate provides that directors of the Company shall not
be personally liable for monetary damages to the Company for certain breaches of
their fiduciary duty as directors, unless they violated their duty of loyalty to
the Company or its stockholders, acted in bad faith, knowingly or intentionally
violated the law, authorized illegal dividends or redemptions, or derived an
improper personal benefit from their action as directors. This provision would
have no effect on the availability of equitable remedies or nonmonetary relief,
such as an injunction or rescission for breach of the duty of care. In addition,
the provision applies only to claims against a director arising out of his or
her role as a director and not in any other capacity (such as an officer or
employee of the Company). Further, liability of a director for violations of the
federal securities laws will not be limited by this provision. Directors will,
however, no longer be liable for monetary damages arising from decisions
involving violations of the duty of care which could be deemed grossly
negligent.
Indemnification. The Certificate provides that directors and officers of
the Company shall be indemnified by the Company to the fullest extent authorized
by Delaware law, as it now exists or may in the future be amended, against all
expenses and liabilities reasonably incurred in connection with service for or
on behalf of the Company. The Certificate also authorizes the Company to enter
into one or more agreements with any person which provide for indemnification
greater or different from that provided in the Certificate. The Company has
entered into indemnification agreements with all current members of the Board of
Directors and executive officers. The Company believes that these provisions and
agreements are desirable to attract and retain qualified directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act
44
<PAGE> 46
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Harris Trust and
Savings Bank, Chicago, Illinois.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for the Common Stock of
the Company. Sales of substantial amounts of Common Stock in the public market,
or the perception that such sales could occur, could adversely affect market
prices prevailing from time to time. Furthermore, since certain contractual and
legal restrictions on resale described below restrict the ability of the Company
and current stockholders of the Company from selling shares of Common Stock,
sales of substantial amounts of Common Stock of the Company in the public market
after the restrictions lapse could adversely affect the prevailing market price
and the ability of the Company to raise equity capital in the future.
Upon completion of this offering, the Company will have outstanding an
aggregate of 6,986,112 shares of Common Stock. Of these outstanding shares of
Common Stock, the 2,150,000 shares of Common Stock sold in this offering will be
freely tradable without restriction or further registration under the Securities
Act, unless purchased by "affiliates" of the Company as that term is defined in
Rule 144 under the Securities Act. The remaining 4,836,112 shares of Common
Stock held by existing stockholders are "restricted securities" as that term is
defined in Rule 144 under the Securities Act ("Restricted Shares"). Restricted
Shares may be sold in the public market only if registered or if they qualify
for an exemption from registration under Rules 144 or 701 promulgated under the
Securities Act, which are summarized below. Sales of the Restricted Shares in
the public market, or the availability of such shares for sale, could adversely
affect the market price of the Common Stock.
The Company, all executive officers and directors and all existing holders
of Common Stock have entered into contractual "lock-up" agreements providing
that, except for (i) granting of options under the Long-Term Incentive Plan;
(ii) the issuance of warrants and options in connection with client agreements
and business affiliations and ventures; and (iii) the sale of up to an aggregate
of 25,000 shares (in the event such shares are not sold pursuant to the
Underwriters' over-allotment option) by certain stockholders to fund the tax
impact and the exercise price related to options which will be exercised
immediately prior to the offering, neither the Company nor any of such persons
will offer, sell, contract to sell or grant any option to purchase or otherwise
dispose of any shares of Common Stock or securities convertible into or
exchangeable for shares of Common Stock for a period of 180 days after the date
of this prospectus without the prior written consent of William Blair & Company,
L.L.C. William Blair & Company, L.L.C., in its discretion, may waive the
foregoing restrictions in whole or in part, with or without a public
announcement of such action. As a result of these contractual restrictions,
notwithstanding possible earlier eligibility for sale under the provisions of
Rules 144 and/or 701, the shares subject to lock-up agreements will not be
salable until 180 days after the date of this Prospectus (or earlier with the
consent of William Blair & Company, L.L.C.).
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, a person (or persons whose shares are aggregated)
who has beneficially owned Restricted Shares for at least two years (including
the holding period of any prior owner other than an affiliate of the Company)
would be entitled to sell within any three-month period a number of shares that
does not exceed the greater of: (i) one percent of the number of shares of
Common Stock then outstanding (which will equal approximately 69,860 shares
immediately after this offering); or (ii) the average weekly trading volume of
the Common Stock during the four calendar weeks preceding the filing of a Form
144 with respect to such sale. Sales under Rule 144 are also subject to certain
manner of sales provisions and notice requirements and to the availability of
current public information about the Company. Under Rule 144(k), a person who is
not deemed to have
45
<PAGE> 47
been an affiliate of the Company at any time during the 90 days preceding a
sale, and who has beneficially owned the shares proposed to be sold for at least
three years (including the holding period of any prior owner other than an
affiliate), is entitled to sell such shares without complying with the manner of
sale, public information, volume limitation or notice provisions of Rule 144.
Any employee, officer or director of or consultant to the Company who
purchased his or her shares pursuant to a written compensatory plan or contract
may be entitled to rely on the resale provisions of Rule 701. Rule 701 permits
affiliates to sell their Rule 701 shares under Rule 144 without complying with
the holding period requirements of Rule 144. Rule 701 further provides that
non-affiliates may sell such shares in reliance on Rule 144 without having to
comply with the public information, volume limitation or notice provisions of
Rule 144. In both cases, a holder of Rule 701 shares is required to wait until
90 days after the date of this Prospectus before selling such shares.
The Company intends to file a registration statement on Form S-8 under the
Securities Act to register an aggregate of 900,000 shares of Common Stock
reserved for issuance under the Company's Long-Term Incentive Plan. See
"Management -- Employee Benefit Plans -- Long-Term Incentive Plan." Accordingly,
shares registered under such registration statement will, subject to Rule 144
volume limitations applicable to affiliates, be available for sale in the open
market, unless such shares are subject to vesting restrictions with the Company
or the lock-up agreements described above. In conjunction with the closing of
this offering, the Company will grant options to purchase 255,000 shares under
the Long-Term Incentive Plan to certain key employees and options to purchase
15,000 shares under the directors formula program of the Long-Term Incentive
Program.
46
<PAGE> 48
UNDERWRITING
The several underwriters named below (the "Underwriters"), for whom William
Blair & Company, L.L.C., Donaldson, Lufkin & Jenrette Securities Corporation and
Jefferies & Company, Inc., are acting as Representatives ("the
Representatives"), have severally agreed, subject to the terms and conditions
set forth in the Underwriting Agreement between the Company and the Underwriters
(the "Underwriting Agreement"), to purchase from the Company, and the Company
has agreed to sell to each of the Underwriters, the number of shares of Common
Stock (excluding the over-allotment shares) set forth below opposite their
respective names at the initial public offering price per share less the
underwriting discount set forth on the cover of this Prospectus.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------------------------------------------------------------- ---------
<S> <C>
William Blair & Company, L.L.C. ...................................
Donaldson, Lufkin & Jenrette Securities Corporation................
Jefferies & Company, Inc. .........................................
---------
Total......................................................... 2,150,000
=========
</TABLE>
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters have agreed to purchase all of the Common Stock offered hereby if
any is purchased (excluding shares covered by the over-allotment option granted
to the Underwriters therein). In the event of a default by any Underwriter, the
Underwriting Agreement provides that, in certain circumstances, purchase
commitments of the non-defaulting Underwriters may be increased or the
Underwriting Agreement may be terminated.
The Representatives have advised the Company that the Underwriters propose
initially to offer the Common Stock to the public at the public offering price
set forth on the cover page of this Prospectus and to certain dealers at such
price less a concession of not more than $ per share. Additionally, the
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $ per share to certain other dealers. After the initial public
offering, the offering price and other selling terms may be changed by the
Representatives.
The Company and the Selling Stockholders have granted to the Underwriters
an option, exercisable on one occasion only within 30 days after the date of
this Prospectus, to purchase up to an aggregate of 322,500 shares of Common
Stock at the same price per share to be paid by the Underwriters for the other
shares offered hereby. If the Underwriters purchase any such additional shares
pursuant to this option, each Underwriter will be committed to purchase such
additional shares in approximately the same proportion as set forth in the table
above. The Underwriters may exercise the option only for the purpose of covering
over-allotments, if any, made in connection with the distribution of the Common
Stock offered hereby. See "Principal and Selling Stockholders."
The Company, the Company's directors and executive officers and all other
current stockholders have agreed, subject to the exceptions described above
under "Shares Eligible for Future Sale," not to sell, contract to sell or
otherwise dispose of any Common Stock or any securities convertible into or
exchangeable for shares of Common Stock or any interest therein for a period of
180 days after the effective date of the Registration Statement of which this
Prospectus is a part without the prior written consent of William Blair &
Company, L.L.C., except for the Common Stock offered hereby. William Blair &
Company, L.L.C., in its discretion, may waive the foregoing restrictions in
whole or in part, with or without a public announcement of such action. See
"Shares Eligible For Future Sale."
47
<PAGE> 49
Prior to this Offering, there has been no public market for the shares of
Common Stock. The initial public offering price for the Common Stock will be
determined by negotiations between the Company and the Representatives. Among
the factors to be considered in such negotiations are prevailing market and
economic conditions, revenues and earnings of the Company in recent periods,
estimates of the Company's business potential and prospects, the present state
of the Company's business operations, an assessment of the Company's management
and the market valuation of companies in related businesses which the
Representatives believe to be comparable to the Company, among other factors.
The Common Stock has been approved for listing on The Nasdaq National Market
under the symbol "SUPC." However, there can be no assurance that an active or
orderly trading market will develop for the Common Stock or that the Common
Stock will trade in the public market subsequent to this offering at or above
the initial public offering price.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters and their controlling persons against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments the
Underwriters may be required to make in respect thereof.
The Representatives have informed the Company that the Underwriters will
not confirm, without customer authorization, sales to their customer accounts as
to which they have discretionary authority.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Sachnoff & Weaver, Ltd., Chicago, Illinois. Certain
legal matters in connection with the offering will be passed upon for the
Underwriters by McDermott, Will & Emery, Chicago, Illinois.
EXPERTS
The Consolidated Financial Statements of the Company as of December 31,
1994 and 1995, and for each of the three years in the period ended December 31,
1995, appearing in this Prospectus and in the Registration Statement, have been
audited by Grant Thornton LLP, independent certified public accountants, as
stated in their report appearing elsewhere herein, and are included in reliance
upon such report of such firm given upon their authority as experts in
accounting and auditing.
48
<PAGE> 50
SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Certified Public Accountants.................................... F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996
(unaudited)......................................................................... F-3
Consolidated Statements of Operations for the years ended December 31, 1993, 1994 and
1995 and for the six months ended June 30, 1995 and 1996 (unaudited)................ F-4
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1993,
1994 and 1995 and for the six months ended June 30, 1996 (unaudited)................ F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994 and
1995 and for the six months ended June 30, 1995 and 1996 (unaudited)................ F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE> 51
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Superior Consultant Holdings Corporation
We have audited the accompanying consolidated balance sheets of Superior
Consultant Holdings Corporation (a Delaware corporation) and Subsidiaries as of
December 31, 1994 and 1995, and the related statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Superior Consultant Holdings Corporation and Subsidiaries as of December 31,
1994 and 1995, and the results of their consolidated operations and their
consolidated cash flows for each of the three years in the period ended December
31, 1995, in conformity with generally accepted accounting principles.
GRANT THORNTON LLP
Detroit, Michigan
July 26, 1996
The foregoing report of independent certified public accountants is in the form
which will be signed upon consummation of the transaction described in Note 1 to
the financial statements.
GRANT THORNTON LLP
Detroit, Michigan
July 26, 1996
F-2
<PAGE> 52
SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- JUNE 30,
1994 1995 1996
------ ------ -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents...................................... $ 215 $ 455 $ 115
Accounts receivable (net of allowance for doubtful accounts of
$49,000 as of December 31, 1994; $279,000 as of December 31,
1995; and $208,000 as of June 30, 1996)..................... 4,112 5,811 7,551
Prepaid expenses and other current assets...................... 115 154 205
------ ------ ------
Total current assets...................................... 4,442 6,420 7,871
Property and equipment, net...................................... 630 985 1,260
------ ------ ------
Total Assets.............................................. $5,072 $7,405 $ 9,131
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Lines of credit................................................ $ -- $ 50 $ 680
Accounts payable............................................... 821 1,118 1,046
Accrued liabilities
Payroll and withholding taxes............................... 1,162 1,736 1,214
Commissions................................................. 419 502 461
Profit sharing.............................................. 235 482 762
Bonuses..................................................... 149 281 2,689
Deferred revenue................................................. 696 638 112
Note payable to stockholder...................................... 5 156 73
Income tax payable............................................... -- -- 30
------ ------ ------
Total current liabilities................................. 3,487 4,963 7,067
Deferred income taxes............................................ -- 133 116
Deferred bonuses................................................. -- 448 593
Commitments (Note 8)............................................. -- -- --
Stockholders' equity
Preferred stock; authorized, 1,000,000 shares of $.01 par
value; no shares issued or outstanding...................... -- -- --
Common stock; authorized, 30,000,000 shares of $.01 par value;
issued and outstanding, 4,058,243 in 1994, 4,777,985 in 1995
and 1996.................................................... 41 48 48
Additional paid-in capital..................................... 54 1,036 1,036
Retained earnings.............................................. 1,490 1,506 999
Stockholders' notes receivable................................. -- (729) (728)
------ ------ ------
Total stockholders' equity................................ 1,585 1,861 1,355
------ ------ ------
Total Liabilities and Stockholders' Equity................ $5,072 $7,405 $ 9,131
====== ====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE> 53
SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- -------------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues................................... $15,559 $19,234 $25,906 $11,921 $16,547
Costs and expenses
Cost of services......................... 6,802 8,505 12,008 5,552 8,197
Selling, general and administrative
expenses.............................. 6,200 8,223 10,045 4,672 6,250
Executive compensation expense........... 1,931 2,445 3,730 1,766 2,600
------- ------- ------- ------- -------
Total costs and expenses............ 14,933 19,173 25,783 11,990 17,047
------- ------- ------- ------- -------
Earnings (loss) from operations..... 626 61 123 (69) (500)
Interest expense........................... 18 16 16 9 22
Other (income) expense..................... 4 (44) (74) (30) (28)
------- ------- ------- ------- -------
Earnings (loss) before income
taxes............................ 604 89 181 (48) (494)
Income taxes............................... -- -- 165 100 13
------- ------- ------- ------- -------
Net earnings (loss)................. $ 604 $ 89 $ 16 $ (148) $ (507)
======= ======= ======= ======= =======
Pro forma earnings data (unaudited)
Earnings (loss) before income taxes,
as reported........................... $ 181 $ (494)
Adjustment for executive compensation
expense............................... 2,670 2,070
------- -------
Pro forma earnings before income taxes... 2,851 1,576
Pro forma income tax expense............. 1,215 625
------- -------
Pro forma net earnings................... $ 1,636 $ 951
======= =======
Pro forma net earnings per share......... $ 0.36 $ 0.20
======= =======
Pro forma weighted average number of
common and common equivalent shares
outstanding........................... 4,607 4,822
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 54
SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL STOCKHOLDERS'
---------------- PAID-IN RETAINED NOTES
SHARES AMOUNT CAPITAL EARNINGS RECEIVABLE TOTAL
------ ------ ---------- -------- ------------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993............. 3,733 $ 35 $ -- $ 797 $ -- $ 832
Issuance of common stock............... 325 6 54 -- -- 60
Net earnings........................... -- -- -- 604 -- 604
------ ------ -------- ------- --------- ------
Balance at December 31, 1993........... 4,058 41 54 1,401 -- 1,496
Net earnings........................... -- -- -- 89 -- 89
------ ------ -------- ------- --------- ------
Balance at December 31, 1994........... 4,058 41 54 1,490 -- 1,585
Net earnings........................... -- -- -- 16 -- 16
Issuance of common stock............... 720 7 982 -- (764) 225
Payment on stockholders' notes
receivable........................... -- -- -- -- 35 35
------ ------ -------- ------- --------- ------
Balance at December 31, 1995........... 4,778 48 1,036 1,506 (729) 1,861
Net loss (unaudited)................... -- -- -- (507) -- (507)
Payment on stockholders' notes
receivable (unaudited)............... -- -- -- -- 1 1
------ ------ -------- ------- --------- ------
Balance at June 30, 1996 (unaudited)... 4,778 $ 48 $1,036 $ 999 $(728) $1,355
===== ====== ======= ====== ========= ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 55
SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------------------- ---------------
1993 1994 1995 1995 1996
----- ----- ------- ----- -------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net earnings (loss)................................. $ 604 $ 89 $ 16 $(148) $ (507)
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities
Depreciation..................................... 237 287 405 139 204
Non-cash compensation............................ -- -- 225 225 --
Bad debt expense (recoveries).................... (10) 9 230 97 59
Loss on sale of assets........................... 32 15 47 -- --
Deferred income taxes............................ -- -- 133 80 (17)
Changes in operating assets and liabilities:
Accounts receivable............................ (739) (825) (1,929) (871) (1,799)
Prepaid expenses and other current assets...... 53 (14) (39) (34) (51)
Accounts payable............................... 70 234 297 (178) (72)
Accrued liabilities............................ 351 484 1,484 957 2,270
Deferred revenue............................... (308) 544 (58) (159) (526)
Income taxes payable........................... -- -- -- -- 30
----- ----- ------- ----- -------
Net cash provided by (used in) operating
activities................................ 290 823 811 108 (409)
Cash flows from investing activities:
Purchases of property and equipment................. (357) (353) (807) (250) (479)
----- ----- ------- ----- -------
Net cash (used in) investing activities..... (357) (353) (807) (250) (479)
Cash flows from financing activities:
(Repayment of) proceeds from lines of credit, net... (15) (340) 50 -- 630
Proceeds from notes payable to stockholder.......... 5 -- 200 -- --
Repayment of note payable to stockholder............ -- -- (49) -- (83)
Proceeds from issuance of common stock.............. 60 -- -- -- --
Principal payments on stockholders' notes
receivable....................................... -- -- 35 -- 1
----- ----- ------- ----- -------
Net cash provided by (used in) financing
activities................................ 50 (340) 236 -- 548
----- ----- ------- ----- -------
Net (decrease) increase in cash....................... (17) 130 240 (142) (340)
Cash and cash equivalents, beginning of period........ 102 85 215 215 455
----- ----- ------- ----- -------
Cash and cash equivalents, end of period.............. $ 85 $ 215 $ 455 $ 73 $ 115
===== ===== ======= ===== =======
Supplemental disclosure of cash flow information:
Interest............................................ $ 18 $ 16 $ 16 $ 9 $ 12
Income taxes........................................ -- -- 40 20 12
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE> 56
SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 (UNAUDITED)
(TABULAR AMOUNTS ARE IN THOUSANDS)
1. SUMMARY OF ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Superior Consultant Holdings Corporation, a newly-formed holding company, and
its subsidiaries, Superior Consultant Company, Inc. ("Superior") and Unitive
Corporation ("Unitive"), collectively referred to as the "Company". Superior is
a leading healthcare consulting firm that provides a wide range of information
technology consulting and strategic and operations management consulting
services to a broad cross-section of healthcare industry participants and
healthcare information system vendors. Unitive assists clients to develop,
design, implement and maintain groupware and intranet and internet information
systems and solutions, principally using Lotus Notes. The Company operates in
one business segment.
Historically, both Superior and Unitive were majority-owned by an
individual. In connection with a proposed public offering of common stock, the
companies intend to enter into and consummate a corporate reorganization,
whereby Superior and Unitive will become wholly-owned operating subsidiaries of
Superior Consultant Holdings Corporation. Superior Consultant Holdings
Corporation was incorporated in Delaware on August 14, 1996. Superior Consultant
Holdings Corporation's articles of incorporation authorize the issuance of up to
30 million shares of $.01 par value common stock plus up to 1 million shares of
$.01 par value preferred stock. Immediately preceding the reorganization, 54,500
shares of common stock will be issued upon exercise of currently outstanding
options, and the 4,172,147 and 71,250 shares of Superior's and Unitive's then
outstanding common stock, respectively, will be exchanged for 4,450,353 and
385,759 shares, respectively, of common stock in Superior Consultant Holdings
Corporation. This transaction will be accounted for as a reorganization of
entities under common control and accounted for in a manner similar to a pooling
of interests. The accompanying consolidated financial statements and footnotes
and all share amounts included therein, give effect to the reorganization.
Interim Financial Data
The consolidated financial statements and related notes thereto as of June
30, 1996 and for the six months ended June 30, 1995 and 1996 are unaudited. The
information reflects all adjustments, consisting only of normal recurring
entries, that, in the opinion of management, are necessary to present fairly the
financial position, results of operations and cash flows of the Company for the
periods indicated. Results of operations for the interim periods are not
necessarily indicative of the results of operations for the full fiscal year.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost. The Company uses accelerated
methods for depreciation based on useful lives ranging from 3 to 10 years.
Expenditures for major renewals and improvements that extend the useful life of
property and equipment are capitalized. Expenditures for maintenance and repairs
are charged to expense as incurred.
F-7
<PAGE> 57
SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 (UNAUDITED)
(TABULAR AMOUNTS ARE IN THOUSANDS)
1. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
Income Taxes
Superior is currently taxed under Subchapter S of the Internal Revenue
Code. In addition, through December 31, 1994, Unitive had also elected to be
taxed under Subchapter S. As a result of the elections, federal income taxes are
payable personally by the current stockholders. Accordingly, the 1993 and 1994
consolidated statements of operations do not include a provision for federal
income taxes, and the 1995 and 1996 statements of operations include a provision
for federal income taxes only for Unitive.
The Subchapter S election of Superior will be terminated prior to the
closing of the proposed initial public offering of common stock. Accordingly, a
pro forma provision for income taxes is presented as if the Company was taxed as
a C Corporation for the year ended December 31, 1995 and six months ended June
30, 1996.
Taxes on earnings, including pro forma calculations and the impact of
deferred income taxes as a result of termination of the Subchapter S election,
are accounted for under the liability method pursuant to Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes."
Deferred Bonus
Of the non-current deferred bonuses, approximately $448,000 are payable no
later than March 1999, and approximately $145,000 are payable no later than
March 2000, subject to and contingent upon employees' continued employment on
those dates.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from these estimates.
Fair Value of Financial Instruments
Management believes the fair value of financial instruments approximates
their carrying amounts. The carrying value of the cash and cash equivalents
approximates their estimated fair values based upon quoted market prices.
Management believes the fair value of notes payable and stockholders' notes
receivable approximate their carrying values based on current rates for
instruments with similar characteristics.
Revenue Recognition
The Company recognizes professional revenues as services are performed for
projects billed on a time and materials basis. On fixed-fee projects, the
Company recognizes revenue using the percentage of completion basis. Deferred
revenue represents collections made in advance of services being performed.
New Accounting Pronouncements
Statement of Financial Accounting Standards No. 121 ("SFAS 121"),
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," issued in March 1995, requires that
F-8
<PAGE> 58
SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 (UNAUDITED)
(TABULAR AMOUNTS ARE IN THOUSANDS)
1. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
long-lived assets and certain identifiable intangibles that are used in
operations be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of assets might not be
recoverable. Adoption of this Statement is required for fiscal years beginning
after December 15, 1995. The Company does not expect the effect of SFAS 121 to
be material.
Statement of Financial Accounting Standards No. 123 ("SFAS 123"),
"Accounting for Stock-Based Compensation," issued in October 1995, establishes
accounting and reporting standards for stock-based compensation plans. Adoption
of this Statement is required for fiscal years beginning after December 15,
1995. As permitted under the provisions of this Statement, the Company has
elected to continue the use of APB Opinion No. 25 to measure compensation costs
for employee stock-based compensation. For stock-based compensation that may be
issued to non-employees, the Company does not expect the effect of SFAS 123 to
be material.
2. ALLOWANCE FOR DOUBTFUL ACCOUNTS
A summary of activity in connection with the allowance for doubtful
accounts follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Allowance for doubtful accounts at beginning of year............... $ 50 $40 $ 49
Charged (credited) to bad debt expense............................. (10) 9 230
---- --- ----
Allowance for doubtful accounts at end of year..................... $ 40 $49 $279
==== === ====
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30,
1994 1995 1996
------------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Office equipment..................................... $ 244 $ 338 $ 351
Computer equipment................................... 837 1,275 1,737
Office machines...................................... 346 499 504
------ ------- -------
1,427 2,112..... 2,592
Less: accumulated depreciation.................. (797) (1,127) (1,332)
------ ------- -------
Property and equipment -- net........................ $ 630 $ 985 $ 1,260
====== ======= =======
</TABLE>
4. LINES OF CREDIT
Superior has a line of credit with a bank which allows borrowings up to
$2.5 million, due on demand, with no scheduled maturity date. Borrowings bear
interest at 0.5% above the bank's prime rate (effective rate of 9.0% at December
31, 1995) and are collateralized by Superior's accounts receivable. At December
31, 1994 and 1995, there were no amounts outstanding on this line. At June 30,
1996, $425,000 was outstanding on this line.
F-9
<PAGE> 59
SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 (UNAUDITED)
(TABULAR AMOUNTS ARE IN THOUSANDS)
4. LINES OF CREDIT (CONTINUED)
Unitive has a line of credit with a bank which allows the Company to borrow
up to $500,000, due on demand, with no scheduled maturity date. Borrowings bear
interest at 0.5% above the bank's prime rate (effective rate of 9.0% at December
31, 1995) and are collateralized by all assets of Unitive. At December 31, 1995
and June 30, 1996, $50,000 and $255,000 were outstanding, respectively.
5. ACCRUED BONUSES
Accrued bonuses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30,
1994 1995 1996
------------ ------------ --------
<S> <C> <C> <C>
Performance bonuses
Payable to stockholders............................ $ -- $403 $ 766
Payable to all other employees..................... 149 326 894
1996 estimated S Corporation earnings to be paid as
bonuses to stockholders............................ -- -- 1,622
---- ---- ------
$149 $729 $3,282
==== ==== ======
</TABLE>
As of the closing of the offering, the Company will have paid to the
existing stockholders, as bonuses, all estimated S Corporation earnings that
will be includable in the taxable income of the existing stockholders, as well
as their portion of performance bonuses.
6. STOCKHOLDERS' EQUITY
Stock Transfer Restriction Agreements
Superior, Unitive and its minority stockholders have entered into Stock
Transfer Restriction Agreements. The agreements restrict the ability of minority
stockholders to transfer their shares of stock and outlines circumstances under
which shares may be repurchased by the companies or their majority stockholder.
The price at which shares are to be repurchased is defined by a formula in the
agreements. Such agreements will terminate upon the reorganization described in
Note 1.
Stock Option Plan
In June 1987, Superior adopted the 1987 Key Employees' Stock Option Plan
(the Stock Plan) under which incentive and non-statutory stock options to
acquire shares of Superior's common stock may be granted to officers and other
employees. The Stock Plan is administered by the Board of Directors and permits
the issuance of options for up to 1,600,025 shares of common stock. Effective
January 1, 1993, the exercise price shall be the estimated fair market value per
share as determined by the Board of Directors at the time the option is granted.
Options are exercisable not sooner than the date of and immediately prior to (1)
any sale of all or substantially all of Superior's stock or assets or a merger
into an acquiring entity or (2) the initial public offering of common stock, if
any, and terminate if not exercised upon the occurrence of these events. As of
December 31, 1995, Superior had granted 58,127 options to key management and
members of the Board of
F-10
<PAGE> 60
SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 (UNAUDITED)
(TABULAR AMOUNTS ARE IN THOUSANDS)
6. STOCKHOLDERS' EQUITY (CONTINUED)
Directors. Of these options, none were exercised as of December 31, 1995. The
following table summarizes the changes in the number of common shares under
stock options granted pursuant to the Stock Plan.
<TABLE>
<CAPTION>
RANGE OF
EXERCISE
SHARES PRICES
------ --------------
<S> <C> <C>
Number of options outstanding at January 1, 1993...................... 640 $0.21 to $4.12
Granted during the year............................................... 119 2.81
Canceled during the year.............................................. (43) 0.39 to 4.12
-----
---
Number of options at December 31, 1993................................ 716 0.21 to 4.12
Canceled during the year.............................................. (2) 2.81
-----
---
Number of options outstanding at December 31, 1994.................... 714 0.21 to 4.12
Canceled during the year.............................................. (656) 0.21 to 3.79
-----
---
Number of options outstanding at December 31, 1995 and
June 30, 1996 (unaudited)........................................... 58 0.39 to 4.12
========
</TABLE>
Supplemental Net Earnings and Net Earnings Per Share
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 30, 1996
----------------- ----------------
<S> <C> <C>
Supplemental net earnings..................... $ 1,647 $ 968
====== ======
Supplemental net earnings per share........... $ 0.35 $ 0.20
====== ======
Weighted average number of common and common
equivalent shares outstanding............... 4,656 4,871
====== ======
</TABLE>
Supplemental net earnings represents pro forma net earnings adjusted for
the elimination of interest expense associated with the repayment of
approximately $680,000 in debt under lines of credit in conjunction with the
Company's initial public offering.
Supplemental net earnings per share has been computed by dividing
supplemental net earnings by the weighted average number of common and common
equivalent shares outstanding during the period used in the pro forma net
earnings per share and the assumed issuance of 48,571 shares of common stock by
the Company which would be necessary to generate gross proceeds sufficient to
repay the $680,000 in debt outstanding at June 30, 1996 in conjunction with the
Company's initial public offering.
F-11
<PAGE> 61
SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 (UNAUDITED)
(TABULAR AMOUNTS ARE IN THOUSANDS)
7. INCOME TAXES
The historical income tax provision (for Unitive) consists of the
following:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1995 JUNE 30, 1996
----------------- -------------
<S> <C> <C>
Historical federal income taxes
Currently payable............................... $ 32 $ 30
Deferred........................................ 133 (17)
---- ----
$ 165 $ 13
==== ====
</TABLE>
Deferred income taxes are due to the difference between use of the cash
basis for tax reporting through December 31, 1995 and the accrual basis used for
financial reporting.
A reconciliation of the provision for income taxes follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, SIX MONTHS ENDED JUNE 30,
----------------- --------------------------
1995 1996
1995 PRO FORMA 1995 1996 PRO FORMA
---- --------- ---- ----- ---------
<S> <C> <C> <C> <C> <C>
Expected expense at the statutory
rate............................... $ 62 $ 969 $(17) $(168) $ 536
Effect of Superior's S Corporation
election........................... 83 -- 103 170 --
Permanent differences; expenses
recognized for book, not tax....... 20 119 14 11 25
State income taxes................... -- 127 -- -- 64
---- ------ ---- --- ----
Total income taxes.............. $165 $ 1,215 $100 $ 13 $ 625
==== ====== ==== === ====
</TABLE>
Prior to the closing of the initial public offering, Superior will
terminate its Subchapter S election and become a C Corporation. The C
Corporation will assume the tax basis of the assets and liabilities of the
terminated S Corporation. In connection with Superior's termination of its S
Corporation status, the Company will record deferred income taxes of
approximately $250,000 in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes."
The composition of the $250,000 is as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Compensation expense................................................ $565
Allowance for bad debts............................................. 79
Deferred Revenue.................................................... 68
----
712
Deferred tax liability:
Change from cash to accrual basis of tax accounting for Superior
effective January 1, 1996........................................ 962
----
Net deferred tax liability............................................ $250
====
</TABLE>
F-12
<PAGE> 62
SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 (UNAUDITED)
(TABULAR AMOUNTS ARE IN THOUSANDS)
8. PROFIT-SHARING PLAN
The Company has a profit-sharing plan (the Plan) which qualifies under
Section 401(k) of the Internal Revenue Code. Eligible employees may contribute
up to the maximum allowable under tax regulations. Company contributions are
fully discretionary. Profit sharing expense was $235,000, $235,000, $450,000,
$137,000, and $280,000 for the years ended December 31, 1993, 1994, 1995 and six
months ended June 30, 1995 and 1996, respectively. The $450,000 accrued as of
December 31, 1995 was paid subsequent to June 30, 1996.
9. COMMITMENTS
The Company leases its office facilities, certain equipment and vehicles
under lease agreements classified as operating leases. Future minimum lease
payments under such noncancelable operating leases are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31:
--------------------------------------------------------------
<S> <C>
1996.......................................................... $ 281
1997.......................................................... 475
1998.......................................................... 436
1999.......................................................... 398
2000.......................................................... 346
Thereafter.................................................... 922
----
Total future minimum lease payments........................... $2,858
====
</TABLE>
Rent expense amounted to $273,000, $298,000, $356,000, $138,000, and
$161,000 for the years ended December 31, 1993, 1994, 1995 and the six months
ended June 30, 1995 and 1996, respectively, and has been included in selling,
general and administrative expenses in the accompanying statements of
operations.
10. RELATED PARTY TRANSACTIONS
The Company has an unsecured note payable to the trust of the majority
stockholder which matures in August 1996, and bears interest at 8.75% per annum.
This note is subordinated to the lines of credit (Note 4). Interest expense on
this note was approximately $4,000 for the year ended December 31, 1995 and
approximately $9,600 for the six months ended June 30, 1996.
During 1995, Superior issued 658,833 shares of its common stock to two
stockholders in exchange for two promissory notes totaling $750,000, and the
cancellation of outstanding stock options. The notes bear interest at 7.7% per
annum and require annual payments totaling $75,000. Interest income on these
notes totaled approximately $40,000 for the year ended December 31, 1995 and
$7,000 and $17,500 for the six months ended June 30, 1995 and 1996,
respectively. The Company has recorded compensation expense and a related
increase to additional paid-in capital of $225,000 for the year ended December
31, 1995 representing the difference between the estimated market value of the
common stock at the date of issuance and its selling price. The estimated market
value of the common stock was based on the amount of a bona fide offer from an
unrelated third party to purchase Superior near the date of the issuance of such
shares.
F-13
<PAGE> 63
SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 (UNAUDITED)
(TABULAR AMOUNTS ARE IN THOUSANDS)
11. MAJOR CUSTOMERS
During the years ended December 31, 1993, 1995 and for the six months ended
June 30, 1995 and 1996, the Company derived approximately 12%, 13%, 14%, and
10%, respectively, of its revenues from a single customer (not the same customer
every period). During the year ended December 31, 1994, the Company derived
approximately 39% of its revenues from three customers, with each customer
providing over 10% of revenues. As of December 31, 1994, 1995 and June 30, 1996,
accounts receivable from a single customer comprised 11%, 15% and 14% of total
assets, respectively. The loss of a major customer or the uncollectibility of
related accounts receivable could have a material adverse impact on the
Company's financial condition and results of operations.
12. SUBSEQUENT EVENT
Conditioned upon the effectiveness of the reorganization Superior intends
to terminate its 1987 Stock Option Plan and the Company intends to adopt its
Long-Term Incentive Plan. Pursuant to the Long-Term Incentive Plan, a maximum of
900,000 shares of common stock will be initially authorized for the granting of
incentive, nonstatutory or formula options. The options will have exercise
prices based upon the then current market value of the common stock.
13. PRO FORMA ADJUSTMENTS TO FINANCIAL STATEMENTS (UNAUDITED)
The following pro forma adjustments have been made to the historical
results of operations to make the presentations more comparable in relation to
future periods.
(a) For the year ended December 31, 1995 and six months ended June 30,
1996, elimination of executive compensation expense (including bonuses) in
excess of the amount that would have been paid had the compensation limiting
agreements, which will become effective as of the closing date of the public
offering, for the majority stockholder and two other executive officers, been
effective throughout such periods.
(b) Computation of federal income taxes assuming effective tax rates of
42.6% and 39.6% for the year ended December 31, 1995 and six months ended June
30, 1996, respectively, which would have been recorded had Superior been a C
Corporation and after eliminating the executive compensation expense in (a).
Pro forma net earnings per share for the year ended December 31, 1995 and
six months ended June 30, 1996 is based on 4,607,055 and 4,821,991 shares of
common stock outstanding, respectively, after giving effect to the transactions
discussed in Note 1.
F-14
<PAGE> 64
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SHARES OF COMMON STOCK BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH
THE PERSON MAKING THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANYTIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
----------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary...................... 3
Risk Factors............................ 6
Use of Proceeds......................... 12
S Corporation Termination............... 12
Dividend Policy......................... 12
Capitalization.......................... 13
Dilution................................ 14
Selected Consolidated Financial and
Operating Data........................ 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 16
Business................................ 22
Management.............................. 35
Certain Transactions.................... 41
Principal and Selling Stockholders...... 42
Description of Capital Stock............ 43
Shares Eligible for Future Sale......... 45
Underwriting............................ 47
Legal Matters........................... 48
Experts................................. 48
Index to Consolidated Financial
Statements............................ F-1
</TABLE>
----------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2,150,000 SHARES
SUPERIOR LOGO
SUPERIOR CONSULTANT
HOLDINGS CORPORATION
COMMON STOCK
------------------
PROSPECTUS
, 1996
------------------
WILLIAM BLAIR & COMPANY
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
JEFFERIES & COMPANY, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 65
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of the Common Stock being registered hereby. All the amounts shown
are estimated, except the SEC registration fee, the NASD filing fee and the
Nasdaq National Market listing fee.
<TABLE>
<S> <C>
SEC registration fee............................................... $ 12,789
NASD filing fee.................................................... 4,209
Nasdaq National Market listing fee................................. 19,487
Blue Sky filing fees and expenses.................................. 10,000
Printing expenses.................................................. 125,000
Legal fees and expenses............................................ 175,000
Auditors' accounting fees and expenses............................. 125,000
Transfer Agent and Registrar fees and expenses..................... 30,000
Miscellaneous expenses............................................. 98,515
--------
Total......................................................... $600,000
========
</TABLE>
- -------------------------
* To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is a Delaware corporation, subject to the applicable
indemnification provisions of the General Corporation Law of the State of
Delaware (the "DGCL"). Section 145 of the DGCL empowers a Delaware corporation
to indemnify, subject to the standards therein prescribed, any person in
connection with any action, suit or proceeding brought or threatened because
such person is or was a director, officer, employee or agent of the corporation
or was serving as such with respect to another corporation or other entity at
the request of such corporation.
In accordance with Section 102(b)(7) of the DGCL, Article XIII of the
Company's Amended and Restated Certificate of Incorporation provides that "no
director of the Corporation shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
notwithstanding any provision of law imposing such liability except for
liability: (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL, as the same exists or hereafter may be amended, or (iv)
for any transaction from which the director derived an improper personal
benefit. If the DGCL is amended to authorize the further elimination or
limitation of liability of directors, then the liability of a director of the
Corporation, in addition to the limitation on personal liability provided
herein, shall be limited to the fullest extent permitted by an amended DGCL. Any
repeal or modification of this Article XIII by the stockholders of the
Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
at the time of such repeal or modification."
The Company's Certificate of Incorporation and By-Laws contain provisions
that require the Company to indemnify its directors and officers to the fullest
extent permitted by Delaware law.
The Company has entered into indemnification agreements with each of its
executive officers and directors in which the Company agrees to indemnify and
hold harmless the officer or director to the fullest extent permitted by
applicable law against any and all attorneys' fees and all other expense, cost,
liability and loss (including a mandatory obligation by the Company to advance
reimbursement of legal fees and expenses) paid or incurred by such officer or
director or on his or her behalf in connection with any threatened, pending
II-1
<PAGE> 66
or completed action, suit or proceeding, or any inquiry or investigation not
initiated by the officer or director that he or she believes in good faith might
lead to a proceeding, inquiry or investigation (a "Proceeding"), relating to the
fact that the officer or director is or was a director, officer, employee or
agent of the Company, or is or was serving at the request of the Company as a
director, officer, employee, trustee, agent or fiduciary of another corporation,
partnership, joint venture, employee benefit plan, trust or other enterprise, or
by reason of any action or inaction by the officer or director in such capacity.
However, the Company's obligation to indemnify the officer or director is
subject to a determination by: (i) the Company's Board of Directors, by vote of
the majority of disinterested directors, or such person or body appointed by the
Board of Directors who is a disinterested party; (ii) under certain
circumstances, independent legal counsel appointed by the Board of Directors in
a written opinion; or (iii) a court of competent jurisdiction in a final,
nonappealable adjudication, that the officer or director acted in good faith and
in a manner he or she reasonably believed to be in or not opposed to the best
interests of the Company and, with respect to any criminal Proceeding, the
officer or director acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the Company, and with
respect to any criminal Proceeding, the officer or director had no reasonable
cause to believe that his or her conduct was unlawful.
The Underwriting Agreement (Exhibit 1.1 hereto) provides for
indemnification by the underwriters of the Company and its directors and
executive officers in the offering of the Common Stock registered hereby, and
each person, if any, who controls the Company, for certain liabilities,
including liabilities arising under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following information relates to securities of the Company issued or
sold within the past three (3) years.
1. On April 20, 1995, Superior issued and sold an aggregate of 617,637
shares of its Common Stock to two of its employees for aggregate
consideration of $750,000 ($225,000 of which constituted compensation).
2. On April 20, 1995, Unitive issued and sold an aggregate of 11,250
shares of Common Stock to certain employees and directors of the Company
for aggregate consideration of $14,062.50.
3. Prior to the consummation of the Offering, the Registrant will
acquire all of the outstanding shares of the Superior and Unitive by way of
two reverse triangular mergers, pursuant to which approximately 1.07 shares
of Common Stock of the Registrant will be issued for each share of Common
Stock of Superior and approximately 5.41 shares of Common Stock of the
Registrant will be issued for each share of Common Stock of Unitive.
No underwriters were engaged in connection with the foregoing sales of
securities. Such sales were made in reliance upon the exemption from
registration set forth in Section 4(2) of the Securities Act for transactions
not involving a public offering.
II-2
<PAGE> 67
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
1.1 Form of Underwriting Agreement
2.1 Merger Agreement -- Superior
2.2 Merger Agreement -- Unitive
3.1 Form of Amended and Restated Certificate of Incorporation of the Company*
3.2 Form of By-Laws of the Company*
4.1 Specimen Common Stock certificate
5.1 Opinion of Sachnoff & Weaver, Ltd.
10.1 Form of Indemnification Agreement between the Company and each of its directors and
officers*
10.2 Form of Long-Term Incentive Compensation Plan*
10.3 Lease dated March 21, 1996 between PMTC Limited Partnership and Superior.*
10.4 Form of Tax Indemnification Agreement*
10.5 Employment Agreement dated December 11, 1995, between Superior Consultant Company,
Inc. and Charles O. Bracken, and related 1996 Executive Vice President Bonus Plan*
10.6 Employment Agreement dated December 8, 1995, between Superior Consultant Company,
Inc. and Robert R. Tashiro, and related 1996 Vice President Bonus Plan*
10.7 Employment Agreement dated December 27, 1995, between Superior Consultant Company,
Inc. and James T. House, and related 1996 Vice President Bonus Plan*
10.8 Employment Agreement dated July 26, 1996, between Unitive Corporation and Kenneth
Boone*
10.9 Form of Amendment to Employment Agreement between Superior Consultant Company, Inc.
and Robert R. Tashiro
10.10 Form of Amendment to Employment Agreement between Superior Consultant Company, Inc.
and Charles O. Bracken
10.11 Form of Compensation Agreement between Superior Consultant Holdings Corporation and
Richard D. Helppie, Jr.
10.12 Promissory Note dated April 20, 1995, executed by Charles O. Bracken in favor of
Superior Consultant Company, Inc.*
10.13 Pledge Agreement dated April 20, 1995, between Charles O. Bracken and Superior
Consultant Company, Inc.*
10.14 Promissory Note dated April 20, 1995, executed by Robert R. Tashiro in favor of
Superior Consultant Company, Inc.*
10.15 Pledge Agreement dated April 20, 1995 between Superior Consultant Company, Inc. and
Robert R. Tashiro*
21.1 Subsidiaries of Superior Consultant Holdings Corporation*
23.1 Consent of Grant Thornton LLP
23.2 Consent of Sachnoff & Weaver, Ltd. (to be included in Exhibit 5.1)
24.1 Power of Attorney*
27.1 Financial Data Schedule*
</TABLE>
- -------------------------
* Previously filed.
II-3
<PAGE> 68
(b) Financial Statement Schedule(s).
None.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions or otherwise, the Company has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. If a
claim for indemnification against such liability (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The Company hereby undertakes that:
(1) The undersigned will provide the underwriters at the closing
specified in the underwriting agreement certificates in such denominations
and registered in such names as required by the underwriters to permit
prompt delivery to each purchaser.
(2) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it is declared effective.
(3) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 69
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Amendment No. 2 to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Southfield,
State of Michigan, on October 4, 1996.
SUPERIOR CONSULTANT, INC.
By: /s/ RICHARD D. HELPPIE, JR.
----------------------------------
Richard D. Helppie, Jr.
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 2 to Registration Statement has been signed by the following
persons in the capacities indicated on the 4th day of October, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ RICHARD D. HELPPIE, JR. President, Chief Executive Officer
- --------------------------------------------- (Principal Executive Officer) and Director
Richard D. Helppie, Jr.
/s/ JAMES T. HOUSE (Principal Financial and Accounting
- --------------------------------------------- Officer)
James T. House
* Director
- ---------------------------------------------
Reginald M. Ballantyne III
* Director
- ---------------------------------------------
Bernard J. Lachner
* Director
- ---------------------------------------------
Douglas S. Peters
* Director
- ---------------------------------------------
Richard P. Saslow
* Director
- ---------------------------------------------
Donald W. Simborg, M.D.
*By /s/ RICHARD D. HELPPIE, JR.
- ---------------------------------------------
Richard D. Helppie, Jr.
/s/ JAMES T. HOUSE
- ---------------------------------------------
James T. House
Attorneys-in-Fact
</TABLE>
II-5
<PAGE> 70
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
- ------- ----------- ------------
<S> <C>
1.1 Form of Underwriting Agreement
2.1 Merger Agreement -- Superior
2.2 Merger Agreement -- Unitive
3.1 Form of Amended and Restated Certificate of Incorporation of the Company*
3.2 Form of By-Laws of the Company*
4.1 Specimen Common Stock certificate
5.1 Opinion of Sachnoff & Weaver, Ltd.
10.1 Form of Indemnification Agreement between the Company and each of its
directors and officers*
10.2 Form of Long-Term Incentive Compensation Plan*
10.3 Lease dated March 21, 1996 between PMTC Limited Partnership and Superior*
10.4 Form of Tax Indemnification Agreement*
10.5 Employment Agreement dated December 11, 1995, between Superior Consultant
Company, Inc. and Charles O. Bracken, and related 1996 Executive Vice
President Bonus Plan*
10.6 Employment Agreement dated December 8, 1995, between Superior Consultant
Company, Inc. and Robert R. Tashiro, and related 1996 Vice President Bonus
Plan*
10.7 Employment Agreement dated December 27, 1995, between Superior Consultant
Company, Inc. and James T. House, and related 1996 Vice President Bonus
Plan*
10.8 Employment Agreement dated July 26, 1996, between Unitive Corporation and
Kenneth Boone*
10.9 Form of Amendment to Employment Agreement between Superior Consultant
Company, Inc. and Robert R. Tashiro
10.10 Form of Amendment to Employment Agreement between Superior Consultant
Company, Inc. and Charles O. Bracken
10.11 Form of Compensation Agreement between Superior Consultant Holdings
Corporation and Richard D. Helppie, Jr.
10.12 Promissory Note dated April 20, 1995, executed by Charles O. Bracken in
favor of Superior Consultant Company, Inc.*
10.13 Pledge Agreement dated April 20, 1995, between Charles O. Bracken and
Superior Consultant Company, Inc.*
10.14 Promissory Note dated April 20, 1995, executed by Robert R. Tashiro in
favor of Superior Consultant Company, Inc.*
10.15 Pledge Agreement dated April 20, 1995 between Superior Consultant Company,
Inc. and Robert R. Tashiro*
21.1 Subsidiaries of Superior Consultant Holdings Corporation*
23.1 Consent of Grant Thornton LLP
23.2 Consent of Sachnoff & Weaver, Ltd. (to be included in Exhibit 5.1)
24.1 Power of Attorney*
27.1 Financial Data Schedule*
</TABLE>
- -------------------------
* Previously filed.
<PAGE> 1
EXHIBIT 1.1
SUPERIOR CONSULTANT HOLDINGS CORPORATION
2,150,000 Shares Common Stock(1)
Underwriting Agreement
October __, 1996
William Blair & Company, L.L.C.
Donaldson, Lufkin & Jenrette Securities Corporation
Jefferies & Company, Inc.
As Representatives of the Several
Underwriters Named in Schedule A
c/o William Blair & Company, L.L.C.
222 West Adams Street
Chicago, Illinois 60606
Ladies and Gentlemen:
Section 1. Introductory. Superior Consultant Holdings Corporation
("Company") a Delaware corporation, has an authorized capital stock consisting
of 1,000,000 shares of Preferred Stock, $0.01 par value, of which no shares are
outstanding on the date hereof and 30,000,000 shares, $0.01 par value, of
Common Stock ("Common Stock"), of which 4,836,112 shares are outstanding on the
date hereof. The Company proposes to issue and sell 2,150,000 shares of its
authorized but unissued Common Stock (the "Firm Shares") to the several
underwriters named in Schedule A as it may be amended by the Pricing Agreement
hereinafter defined ("Underwriters"), who are acting severally and not jointly.
In addition, the Company and certain stockholders of the Company (collectively
referred to as the "Selling Stockholders" and named in Schedule B) propose to
grant to the Underwriters an option to purchase up to 322,500 additional shares
of Common Stock ("Option Shares") as provided in Section 5 hereof. The Firm
Shares and, to the extent such option is exercised, the Option Shares, are
hereinafter collectively referred to as the "Shares."
You have advised the Company and the Selling Stockholders that the
Underwriters propose to make a public offering of their respective portions of
the Shares as soon as you deem advisable after the registration statement
hereinafter referred to becomes effective, if it
________________________
(1)Plus an option to acquire up to 322,500 additional shares to cover
overallotments.
<PAGE> 2
has not yet become effective, and the Pricing Agreement hereinafter defined has
been executed and delivered.
Prior to the purchase and public offering of the Shares by the several
Underwriters, the Company, the Selling Stockholders and the Representatives
identified above, acting on behalf of the several Underwriters, shall enter
into an agreement substantially in the form of Exhibit A hereto ("Pricing
Agreement"). The Pricing Agreement may take the form of an exchange of any
standard form of written telecommunication between the Company, the Selling
Stockholders and the Representatives and shall specify such applicable
information as is indicated in Exhibit A hereto. The offering of the Shares
will be governed by this Agreement, as supplemented by the Pricing Agreement.
From and after the date of the execution and delivery of the Pricing Agreement,
this Agreement shall be deemed to incorporate the Pricing Agreement.
The Company and each of the Selling Stockholders hereby confirm their
agreements with the Underwriters as follows:
Section 2. Representations and Warranties of the Company. The
Company represents and warrants to the several Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-10213)
and a related preliminary prospectus with respect to the Shares have
been prepared and filed with the Securities and Exchange Commission
("Commission") by the Company in conformity with the requirements of
the Securities Act of 1933, as amended, and the rules and regulations
of the Commission thereunder (collectively, the "1933 Act;" unless
indicated to the contrary, all references herein to specific rules are
rules promulgated under the 1933 Act); and the Company has so prepared
and has filed such amendments thereto, if any, and such amended
preliminary prospectuses as may have been required to the date hereof
and will file such additional amendments thereto and such amended
prospectuses as may hereafter be required. If the Company has elected
not to rely upon Rule 430A, the Company has prepared and will promptly
file an amendment to the registration statement and an amended
prospectus. If the Company has elected to rely upon Rule 430A, it
will prepare and file a prospectus pursuant to Rule 424(b) that
discloses the information previously omitted from the prospectus in
reliance upon Rule 430A. There have been or will promptly be
delivered to you three signed copies of such registration statement
and amendments, three copies of each exhibit filed therewith, and
conformed copies of such registration statement and amendments (but
without exhibits) and of the related preliminary prospectus or
prospectuses and final forms of prospectus for each of the
Underwriters.
Such registration statement (as amended, if
applicable) at the time it becomes effective and the prospectus
constituting a part thereof (including the
-2-
<PAGE> 3
information, if any, deemed to be part thereof pursuant to Rule
430A(b) and/or Rule 434), as from time to time amended or
supplemented, are hereinafter referred to as the "Registration
Statement," and the "Prospectus," respectively, except that if any
revised prospectus shall be provided to the Underwriters by the
Company for use in connection with the offering of the Shares which
differs from the Prospectus on file at the Commission at the time the
Registration Statement became or becomes effective (whether or not
such revised prospectus is required to be filed by the Company
pursuant to Rule 424(b)), the term Prospectus shall refer to such
revised prospectus from and after the time it was provided to the
Underwriters for such use. If the Company elects to rely on Rule 434
of the 1933 Act, all references to "Prospectus" shall be deemed to
include, without limitation, the form of prospectus and the term
sheet, taken together, provided to the Underwriters by the Company in
accordance with Rule 434 of the 1933 Act ("Rule 434 Prospectus"). Any
registration statement (including any amendment or supplement thereto
or information which is deemed part thereof) filed by the Company
under Rule 462(b) ("Rule 462(b) Registration Statement") shall be
deemed to be part of the "Registration Statement" as defined herein,
and any prospectus (including any amendment or supplement thereto or
information which is deemed part thereof) included in such
registration statement shall be deemed to be part of the "Prospectus",
as defined herein, as appropriate. The Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission
thereunder are hereinafter collectively referred to as the "Exchange
Act."
(b) The Commission has not issued any order preventing or
suspending the use of any preliminary prospectus, and each preliminary
prospectus has conformed in all material respects with the
requirements of the 1933 Act and, as of its date, has not included any
untrue statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and when the
Registration Statement became or becomes effective, and at all times
subsequent thereto, up to the First Closing Date or the Second Closing
Date hereinafter defined, as the case may be, the Registration
Statement, including the information deemed to be part of the
Registration Statement at the time of effectiveness pursuant to Rule
430A(b), if applicable, and the Prospectus and any amendments or
supplements thereto, contained or will contain all statements that are
required to be stated therein in accordance with the 1933 Act and in
all material respects conformed or will in all material respects
conform to the requirements of the 1933 Act, and neither the
Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, included or will include any untrue statement of a
material fact or omitted or will omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that the Company makes no
representation or warranty as to information contained in or omitted
from any preliminary prospectus, the Registration Statement, the
Prospectus or any such amendment or supplement in
-3-
<PAGE> 4
reliance upon and in conformity with written information furnished to
the Company by or on behalf of any Underwriter through the
Representatives specifically for use in the preparation thereof.
(c) The Company and its subsidiaries have been duly
incorporated and are validly existing as corporations in good standing
under the laws of their respective places of incorporation, with
corporate power and authority to own their properties and conduct
their business as described in the Prospectus; the Company and each of
its subsidiaries are duly qualified to do business as foreign
corporations under the corporation law of, and are in good standing as
such in, each jurisdiction in which they own or lease substantial
properties, have an office, or in which substantial business is
conducted and such qualification is required except in any such case
where the failure to so qualify or be in good standing would not have
a material adverse effect upon the Company and its subsidiaries taken
as a whole; and no proceeding of which the Company has knowledge has
been instituted in any such jurisdiction, revoking, limiting or
curtailing, or seeking to revoke, limit or curtail, such power and
authority or qualification.
(d) Except as disclosed in the Registration Statement, the
Company owns directly or indirectly 100 percent of the issued and
outstanding capital stock of each of its subsidiaries, free and clear
of any claims, liens, encumbrances, security interests or rights of
first refusal and all of such capital stock has been duly authorized
and validly issued and is fully paid and nonassessable. There are no
outstanding options, preemptive rights, subscriptions, warrants,
calls, rights of first refusal or other agreements with respect to the
capital stock of either subsidiary.
(e) The issued and outstanding shares of capital stock of the
Company as set forth in the Prospectus have been duly authorized and
validly issued, are fully paid and nonassessable, and conform to the
description thereof contained in the Prospectus.
(f) The Shares to be sold by the Company have been duly
authorized and when issued, delivered and paid for pursuant to this
Agreement, will be validly issued, fully paid and nonassessable, and
will conform to the description thereof contained in the Prospectus.
(g) The making and performance by the Company of this
Agreement and the Pricing Agreement have been duly authorized by all
necessary corporate action and will not violate any provision of the
Company's charter or bylaws and will not result in the breach, or be
in contravention, of any provision of any agreement, franchise,
license, indenture, mortgage, deed of trust, or other instrument to
which the Company or any subsidiary is a party or by which the
Company, any subsidiary or the property of any of them may be bound or
affected, or any order, rule or regulation applicable to
-4-
<PAGE> 5
the Company or any subsidiary of any court or regulatory body,
administrative agency or other governmental body having jurisdiction
over the Company or any subsidiary or any of their respective
properties, or any order of any court or governmental agency or
authority entered in any proceeding to which the Company or any
subsidiary was or is now a party or by which it is bound. No consent,
approval, authorization or other order of any court, regulatory body,
administrative agency or other governmental body is required for the
execution and delivery of this Agreement or the Pricing Agreement or
the consummation of the transactions contemplated herein or therein,
except for compliance with the 1933 Act, the Exchange Act and blue sky
laws applicable to the public offering of the Shares by the several
Underwriters and clearance of such offering with the National
Association of Securities Dealers, Inc. ("NASD"). This Agreement has
been duly executed and delivered by the Company.
(h) The accountants who have expressed their opinions with
respect to certain of the financial statements and schedules included
in the Registration Statement are independent accountants as required
by the 1933 Act.
(i) The consolidated financial statements and schedules of
the Company included in the Registration Statement present fairly the
consolidated financial position of the Company as of the respective
dates of such financial statements, and the consolidated results of
operations and cash flows of the Company for the respective periods
covered thereby, all in conformity with generally accepted accounting
principles consistently applied throughout the periods involved except
as disclosed in the Prospectus and the supporting schedules included
in the Registration Statement present fairly the information required
to be stated therein. The financial information set forth in the
Prospectus under "Selected Consolidated Financial and Operating Data"
and "Summary Consolidated Financial and Operating Data" presents
fairly on the basis stated in the Prospectus, the information set
forth therein.
The pro forma information included in the Prospectus
(i) presents fairly the information shown therein, (ii) has been
prepared in all material respects in accordance with generally
accepted accounting principles, (iii) has been prepared in accordance
with the Commission's rules and guidelines with respect to pro forma
information, (iv) has been properly compiled on the pro forma basis
described therein, and, (v) in the opinion of the Company, the
assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate under the circumstances.
(j) Neither the Company nor any subsidiary is in violation of
its charter or in default under any consent decree, or in default with
respect to any provision of any lease, loan agreement, franchise,
license, permit or other contract obligation to which it is a party
that would or could be expected to have a material adverse effect upon
the
-5-
<PAGE> 6
condition (financial or otherwise) or results of operations of the
Company and its subsidiaries taken as a whole; and there does not
exist any state of facts which constitutes an event of default as
defined in such documents or which, with notice or lapse of time or
both, would constitute such an event of default, in each case, except
for defaults which neither singly nor in the aggregate are material to
the Company and its subsidiaries taken as a whole.
(k) There are no material legal or governmental proceedings
pending, or to the Company's knowledge, threatened to which the
Company or any subsidiary is or may be a party or of which material
property owned or leased by the Company or any subsidiary is or may be
the subject, or related to environmental or discrimination matters
which are not disclosed in the Prospectus, or which question the
validity of this Agreement or the Pricing Agreement or any action
taken or to be taken pursuant hereto or thereto.
(l) There are no holders of securities of the Company having
rights to registration thereof, preemptive rights or rights of first
refusal to purchase Common Stock.
(m) The Company and each of its subsidiaries have good and
marketable title to all the properties and assets reflected as owned
in the financial statements hereinabove described (or elsewhere in the
Prospectus), subject to no lien, mortgage, pledge, charge or
encumbrance of any kind except those, if any, reflected in such
financial statements (or elsewhere in the Prospectus) or which are not
material to the Company and its subsidiaries taken as a whole. The
Company and each of its subsidiaries hold their respective leased
properties which are material to the Company and its subsidiaries
taken as a whole under valid and binding leases.
(n) The Company has not taken and will not take, directly or
indirectly, any action designed to or which has constituted or which
might reasonably be expected to cause or result, under the Exchange
Act or otherwise, in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the
Shares.
(o) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, and
except as contemplated by the Prospectus, the Company and its
subsidiaries, taken as a whole, have not incurred any material
liabilities or obligations, direct or contingent, nor entered into any
material transactions not in the ordinary course of business and there
has not been any material adverse change in their condition (financial
or otherwise) or results of operations nor any material change in
their capital stock, short-term debt or long-term debt.
-6-
<PAGE> 7
(p) The Company agrees not to sell, contract to sell or
otherwise dispose of any Common Stock or securities convertible into
Common Stock for a period of 180 days after this Agreement becomes
effective without the prior written consent of William Blair &
Company,L.L.C.; provided, however, that the Company may (i) grant
options under its Long-Term Incentive Plan, and (ii) issue warrants
and options in connection with client agreements and business
affiliations and ventures. The Company has obtained similar
agreements from each of its officers, directors and stockholders
(except with respect to (i) the sale of up to an aggregate of 25,000
shares, in the event such shares are not sold as Option Shares, to
fund the tax impact and exercise price related to options exercised
prior to the offering (ii) bona fide gifts of shares of Common Stock
provided that the donee or donees agree in writing to be bound by the
restrictions described above, and (iii) if such person is an
individual, dispositions to members of his or her immediate family or
to a trust the beneficiaries of which are exclusively such person
and/or a member or members of his or her immediate family provided
that each transferee agrees in writing to be bound by the restrictions
described above).
(q) There is no material document of a character required to
be described in the Registration Statement or the Prospectus or to be
filed as an exhibit to the Registration Statement which is not
described or filed as required.
(r) The Company together with its subsidiaries owns and
possesses all right, title and interest in and to, or has duly
licensed from third parties, all patents, patent rights, trade
secrets, inventions, know-how, trademarks, trade names, copyrights,
service marks and other proprietary rights ("Trade Rights") material
to the business of the Company and each of its subsidiaries taken as a
whole. Neither the Company nor any of its subsidiaries has received
any notice of infringement, misappropriation or conflict from any
third party as to such material Trade Rights which has not been
resolved or disposed of and neither the Company nor any of its
subsidiaries has infringed, misappropriated or otherwise conflicted
with material Trade Rights of any third parties, which infringement,
misappropriation or conflict would have a material adverse effect upon
the condition (financial or otherwise) or results of operations of the
Company and its subsidiaries taken as a whole.
(s) The conduct of the business of the Company and each of
its subsidiaries is in compliance in all respects with applicable
federal, state, local and foreign laws and regulations, except where
the failure to be in compliance would not have a material adverse
effect upon the condition (financial or otherwise) or results of
operations of the Company and its subsidiaries taken as a whole.
(t) All offers and sales of the Company's capital stock prior
to the date hereof were at all relevant times exempt from the
registration requirements of the 1933 Act
-7-
<PAGE> 8
and were duly registered with or the subject of an available exemption
from the registration requirements of the applicable state securities
or blue sky laws.
(u) The Company has filed all necessary federal and state
income and franchise tax returns and has paid all taxes shown as due
thereon, and there is no tax deficiency that has been, or to the
knowledge of the Company might be, asserted against the Company or any
of its properties or assets that would or could be expected to have a
material adverse affect upon the condition (financial or otherwise) or
results of operations of the Company and its subsidiaries taken as a
whole.
(v) The Company has filed a registration statement pursuant
to Section 12(g) of the Exchange Act to register the Common Stock
thereunder, has filed an application to list the Shares on the Nasdaq
National Market, and has received notification that the listing has
been approved, subject to notice of issuance or sale of the Shares, as
the case may be.
(w) The Company is not, and does not intend to conduct its
business in a manner in which it would become, an "investment company"
as defined in Section 3(a) of the Investment Company Act of 1940, as
amended ("Investment Company Act").
(x) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida,
Chapter 92-198, An Act Relating to Disclosure of Doing Business with
Cuba, and the Company further agrees that if it commences engaging in
business with the government of Cuba or with any person or affiliate
located in Cuba after the date the Registration Statement becomes or
has become effective with the Commission or with the Florida
Department of Banking and Finance (the "Department"), whichever date
is later, or if the information reported in the Prospectus, if any,
concerning the Company's business with Cuba or with any person or
affiliate located in Cuba changes in any material way, the Company
will provide the Department notice of such business or change, as
appropriate, in a form acceptable to the Department.
(y) Each of Superior Consultant Company, Inc. and UNITIVE
Corporation (collectively, the "operating companies") and the Company
had the requisite corporate power and authority to carry out the
corporate reorganization described under the caption "Prospectus
Summary" in the Prospectus (such transaction being referred to herein
as the "Merger"), and each of the Company and the operating companies
and the stockholders of each of them have taken all action required by
law, their respective charter and bylaws or otherwise to approve the
Merger.
(z) The consummation of the Merger did not or will not
contravene any provision of applicable law or the respective charter
or bylaws of the Company, or
-8-
<PAGE> 9
either of the operating companies (except to the extent the Company
has obtained the requisite consent) any provision of any material
agreement or other material instrument binding upon the Company or
either of the operating companies or any order, writ, injunction or
decree of any jurisdiction, court or governmental body, and no
consent, approval, authorization or order of any court or governmental
agency or body is or was required in connection with the Merger,
except such as have been obtained. The Merger will be duly and
validly consummated and will be effective prior to the First Closing
Date.
(aa) Superior and its stockholders have made a valid election
pursuant to Section 1362(a) of the Internal Revenue Code of 1986, as
amended (the "Code") to be an "S corporation" within the meaning of
Section 1361(a)(1) of the Code for all taxable periods beginning after
January 1, 1987 and no event has occurred during such period that
would result in a termination of such election; Superior has no
material federal corporate income tax liability for the period from
January 1, 1987 to the termination of the election to be an S
corporation which termination will occur on the day after this
Agreement is executed. Unitive and its stockholders made a valid
election pursuant to Section 1362(a) of the Code to be an "S
corporation" within the meaning of Section 1361(a)(1) of the Code for
all taxable periods beginning after _______________ and ending January
1, 1995 and no event has occurred during such period that would result
in a termination of such election; Unitive has no material federal
corporate income tax liability for the period from ______________ to
January 1, 1995.
Section 3. Representations, Warranties and Covenants of the Selling
Stockholders.
(a) Each Selling Stockholder severally and not jointly
represents and warrants (with respect to himself or herself alone) to,
and agrees with, the Company and the Underwriters that:
(i) Such Selling Stockholder has, and on the First Closing
Date or the Second Closing Date (as hereinafter defined), as the case
may be, will have, valid marketable title to the Shares proposed to be
sold by such Selling Stockholder hereunder on such date and full
right, power and authority to enter into this Agreement and the
Pricing Agreement and to sell, assign, transfer and deliver such
Shares hereunder, free and clear of all voting trust arrangements,
liens, encumbrances, equities, claims and community property rights;
and upon delivery of and payment for such Shares hereunder, the
Underwriters will acquire valid marketable title thereto, free and
clear of all voting trust arrangements, liens, encumbrances, equities,
claims and community property rights.
-9-
<PAGE> 10
(ii) Such Selling Stockholder has not taken and will not
take, directly or indirectly, any action designed to or which might be
reasonably expected to cause or result, under the Exchange Act or
otherwise, in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the
Shares.
(iii) Such Selling Stockholder has executed and delivered a
Power of Attorney ("Power of Attorney") among the Selling Stockholder,
____________, ________________, and ______________ (the "Agents"),
naming the Agents as such Selling Stockholder's attorneys-in-fact
(and, by the execution by any Agent of this Agreement, such Agent
hereby represents and warrants that he has been duly appointed as
attorney-in-fact by the Selling Stockholders pursuant to the Power of
Attorney) for the purpose of entering into and carrying out this
Agreement and the Pricing Agreement, and the Power of Attorney has
been duly executed by, and is a valid and binding agreement of, such
Selling Stockholder and a copy thereof has been delivered to you.
(iv) Such Selling Stockholder further represents, warrants
and agrees that such Selling Stockholder has deposited in custody,
under a Custody Agreement ("Custody Agreement") with
_____________________________, as custodian ("Custodian"),
certificates in negotiable form for the Shares to be sold hereunder by
such Selling Stockholder, for the purpose of further delivery pursuant
to this Agreement. Such Selling Stockholder agrees that the Shares to
be sold by such Selling Stockholder on deposit with the Custodian are
subject to the interests of the Company, the Underwriters and the
other Selling Stockholders, that the arrangements made for such
custody, and the appointment of the Agents pursuant to the Power of
Attorney, are to that extent irrevocable, and that the obligations of
such Selling Stockholder hereunder and under the Power of Attorney and
the Custody Agreement shall not be terminated except as provided in
this Agreement, the Power of Attorney or the Custody Agreement by any
act of such Selling Stockholder, by operation of law, whether, in the
case of an individual Selling Stockholder, by the death or incapacity
of such Selling Stockholder or, in the case of a trust or estate, by
the death of the trustee or trustees or the executor or executors or
the termination of such trust or estate, or, in the case of a
partnership or corporation, by the dissolution, winding-up or other
event affecting the legal life of such entity, or by the occurrence of
any other event. If any individual Selling Stockholder, trustee or
executor should die or become incapacitated, or any such trust,
estate, partnership or corporation should be terminated, or if any
other event should occur before the delivery of the Shares hereunder,
the documents evidencing Shares then on deposit with the Custodian
shall be delivered by the Custodian in accordance with the terms and
conditions of this Agreement as if such death, incapacity, termination
or other event had not occurred, regardless of whether or not the
Custodian shall have received notice thereof. Each Agent has been
authorized by such Selling Stockholder to execute and deliver this
Agreement and the Pricing
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<PAGE> 11
Agreement and the Custodian has been authorized to receive and
acknowledge receipt of the proceeds of sale of the Shares to be sold
by such Selling Stockholder against delivery thereof and otherwise act
on behalf of such Selling Stockholder. The Custody Agreement has been
duly executed by, and is a valid and binding obligation of, such
Selling Stockholder and a copy thereof has been delivered to you.
(v) Each preliminary prospectus, insofar as it relates to
such Selling Stockholder as of its date, has conformed in all material
respects with the requirements of the 1933 Act and, as of its date,
has not included any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
and the Registration Statement at the time of effectiveness, and at
all times subsequent thereto, up to the First Closing Date or the
Second Closing Date hereinafter defined, as the case may be, (1) such
parts of the Registration Statement and the Prospectus and any
amendments or supplements thereto as relate to such Selling
Stockholder, and the Registration Statement and the Prospectus and any
amendments or supplements thereto, to the knowledge of such Selling
Stockholder in all other respects, contained or will contain all
statements that are required to be stated therein in accordance with
the 1933 Act and in all material respects conformed or will in all
material respects conform to the requirements of the 1933 Act, and (2)
neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, as it relates to such Selling
Stockholder, and, to the knowledge of such Selling Stockholder in all
other respects, included or will include any untrue statement of a
material fact or omitted or will omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading; provided that neither clause (1) nor (2) shall
have any effect if information has been given by such Selling
Stockholder to the Company and the Representatives in writing which
would eliminate or remedy any such untrue statement or omission.
(vi) Such Selling Stockholder agrees with the Company and the
Underwriters not to sell, contract to sell or otherwise dispose of any
Common Stock for a period of 180 days after this Agreement becomes
effective without the prior written consent of William Blair &
Company, L.L.C.; provided, however, that each Selling Stockholder may
(i) make bona fide gifts of shares of Common Stock provided that the
donee or donees agree in writing to be bound by the restrictions
described above, and (ii) if the Selling Stockholder is an individual,
make dispositions to members of his or her immediate family or to a
trust the beneficiaries of which are exclusively such person and/or a
member or members of his or her immediate family provided that each
transferee agrees in writing to be bound by the restrictions described
above, and (iii) together with all other persons who are exercising
options in connection with, or immediately prior to, the offering may,
with the prior consent of the Company, sell up to an aggregate of
25,000 shares of Common Stock (provided, that each Selling
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<PAGE> 12
Stockholder may only sell a number of shares of Common Stock which
will generate net proceeds which are sufficient to pay the exercise
price of such Selling Stockholder's options and the income tax payable
by such Selling Stockholder as a result of the exercise of such
options).
(b) Each of Richard D. Helppie, Jr., Charles O. Bracken and
Robert R. Tashiro severally represents and warrants to, and agrees with, the
Underwriters to the same effect as the representations and warranties of the
Company set forth in Section 2 of this Agreement.
(c) In order to document the Underwriters' compliance with
the reporting and withholding provisions of the Internal Revenue Code of 1986,
as amended, with respect to the transactions herein contemplated, each of the
Selling Stockholders agrees to deliver to you prior to or on the Second Closing
Date, as hereinafter defined, a properly completed and executed United States
Treasury Department Form W-8 or W-9 (or other applicable form of statement
specified by Treasury Department regulations in lieu thereof).
Section 4. Representations and Warranties of the Underwriters. The
Representatives, on behalf of the several Underwriters, represent and warrant
to the Company and the Selling Stockholders that the information set forth (a)
on the cover page of the Prospectus with respect to price, underwriting
discount and terms of the offering, (b) in the last paragraph of page 2
concerning stabilization and over-allotment by the Underwriters, and (c) under
"Underwriting" in the Prospectus was furnished to the Company by and on behalf
of the Underwriters for use in connection with the preparation of the
Registration Statement and does not include any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
Section 5. Purchase, Sale and Delivery of Shares. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to sell to the
Underwriters named in Schedule A hereto, and the Underwriters agree, severally
and not jointly, to purchase 2,150,000 Firm Shares from the Company at the
price per share set forth in the Pricing Agreement. The obligation of each
Underwriter to the Company shall be to purchase from the Company that number of
full shares which is set forth opposite the name of such Underwriter in
Schedule A hereto. The initial public offering price and the purchase price
shall be set forth in the Pricing Agreement.
At 9:00 A.M., Chicago Time, on the fourth business day, if permitted
under Rule 15c6-1 under the Exchange Act, (or the third business day if
required under Rule 15c6-1 under the Exchange Act or unless postponed in
accordance with the provisions of Section 12) following the date the
Registration Statement becomes effective (or, if the Company has elected to
rely upon Rule 430A, the fourth business day, if permitted under Rule 15c6-1
under the Exchange Act, (or the third business day if required under Rule
15c6-1 under the
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<PAGE> 13
Exchange Act) after execution of the Pricing Agreement), or such other time not
later than ten business days after such date as shall be agreed upon by the
Representatives and the Company, the Company will deliver to you through the
facilities of The Depository Trust Company for the accounts of the several
Underwriters, certificates representing the Firm Shares against payment of the
purchase price therefor by delivery of federal or other immediately available
funds, by wire transfer or otherwise, to the Company. Such time of delivery
and payment is herein referred to as the "First Closing Date." The certificates
for the Firm Shares so to be delivered will be in such denominations and
registered in such names as you request by notice to the Company prior to 10:00
A.M., Chicago Time, on the second business day preceding the First Closing
Date, and will be made available at the Company's expense for checking and
packaging by the Representatives at 10:00 A.M., Chicago Time, on the business
day preceding the First Closing Date. Payment for the Firm Shares so to be
delivered shall be made at the time and in the manner described above at the
offices of counsel for the Underwriters.
In addition, on the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company and the Selling Stockholders hereby grant an option to the
several Underwriters to purchase, severally and not jointly, up to an aggregate
of 322,500 Option Shares, at the same purchase price per share to be paid for
the Firm Shares, for use solely in covering any overallotments made by the
Underwriters in the sale and distribution of the Firm Shares. The option
granted hereunder may be exercised at any time (but not more than once) within
30 days after the date of the initial public offering upon notice by you to the
Company and the Agents setting forth the aggregate number of Option Shares as
to which the Underwriters are exercising the option, the names and
denominations in which the certificates for such shares are to be registered
and the time and place at which such certificates will be delivered. Such time
of delivery (which may not be earlier than the First Closing Date), being
herein referred to as the "Second Closing Date," shall be determined by you,
but if at any time other than the First Closing Date, shall not be earlier than
three nor later than 10 full business days after delivery of such notice of
exercise. The number of Option Shares to be purchased from the Company and
each such Selling Stockholder are set forth in Schedule B hereto. If less than
all Option Shares are purchased such Shares shall be purchased (a) first, from
the Selling Stockholders (pro rata in proportion to the number of Shares set
forth opposite the name of such Selling Stockholder on Schedule B), and (b)
second, from the Company. The number of Option Shares to be purchased by each
Underwriter shall be determined by multiplying the number of Option Shares to
be sold by the Company and the Selling Stockholders pursuant to such notice of
exercise by a fraction, the numerator of which is the number of Firm Shares to
be purchased by such Underwriter as set forth opposite its name in Schedule A
and the denominator of which is the total number of Firm Shares (subject to
such adjustments to eliminate any fractional share purchases as you in your
absolute discretion may make). Certificates for the Option Shares will be made
available at the Company's expense for checking and packaging at 10:00 A.M.,
Chicago Time, on the business day preceding the
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<PAGE> 14
Second Closing Date. The manner of payment for and delivery of the Option
Shares shall be the same as for the Firm Shares as specified in the preceding
paragraph.
You have advised the Company and the Selling Stockholders that each
Underwriter has authorized you to accept delivery of its Shares, to make
payment and to receipt therefor. You, individually and not as the
Representatives of the Underwriters, may make payment for any Shares to be
purchased by any Underwriter whose funds shall not have been received by you by
the First Closing Date or the Second Closing Date, as the case may be, for the
account of such Underwriter, but any such payment shall not relieve such
Underwriter from any obligation hereunder.
Section 6. Covenants of the Company. The Company covenants and
agrees that:
(a) The Company will advise you promptly of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the institution of any proceedings for
that purpose, or of any notification of the suspension of
qualification of the Shares for sale in any jurisdiction or the
initiation or threatening of any proceedings for that purpose, and
will also advise you and the Selling Stockholders promptly of any
request of the Commission for amendment or supplement of the
Registration Statement, of any preliminary prospectus or of the
Prospectus, or for additional information.
(b) The Company will give you notice of its intention to file
or prepare any amendment to the Registration Statement (including any
post-effective amendment) or any Rule 462(b) Registration Statement or
any amendment or supplement to the Prospectus (including any revised
prospectus which the Company proposes for use by the Underwriters in
connection with the offering of the Shares which differs from the
prospectus on file at the Commission at the time the Registration
Statement became or becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) and any
term sheet as contemplated by Rule 434) and will furnish you and the
Selling Stockholders with copies of any such amendment or supplement a
reasonable amount of time prior to such proposed filing or use, as the
case may be, and will not file any such amendment or supplement or use
any such prospectus to which you or counsel for the Underwriters shall
reasonably object.
(c) If the Company elects to rely on Rule 434 of the 1933
Act, the Company will prepare a term sheet that complies with the
requirements of Rule 434. If the Company elects not to rely on Rule
434, the Company will provide the Underwriters with copies of the form
of prospectus, in such numbers as the Underwriters may reasonably
request, and file with the Commission such prospectus in accordance
with Rule 424(b) of the 1933 Act within the time period prescribed by
such rule. If the Company elects to rely on Rule 434, the Company
will provide the Underwriters with
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<PAGE> 15
copies of the form of Rule 434 Prospectus, in such numbers as the
Underwriters may reasonably request, by the close of business in New
York on the business day immediately succeeding the date of the
Pricing Agreement.
(d) If at any time when a prospectus relating to the Shares
is required to be delivered under the 1933 Act any event occurs as a
result of which the Prospectus, including any amendments or
supplements, would include an untrue statement of a material fact, or
omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus, including any
amendments or supplements thereto and including any revised prospectus
which the Company proposes for use by the Underwriters in connection
with the offering of the Shares which differs from the prospectus on
file with the Commission at the time of effectiveness of the
Registration Statement, whether or not such revised prospectus is
required to be filed pursuant to Rule 424(b) to comply with the 1933
Act, the Company promptly will advise you thereof and will promptly
prepare and file with the Commission an amendment or supplement which
will correct such statement or omission or an amendment which will
effect such compliance; and, in case any Underwriter is required to
deliver a prospectus nine months or more after the effective date of
the Registration Statement, the Company upon request, but at the
expense of such Underwriter, will prepare promptly such prospectus or
prospectuses as may be necessary to permit compliance with the
requirements of Section 10(a)(3) of the 1933 Act.
(e) Neither the Company nor any of its subsidiaries will,
prior to the earlier of the Second Closing Date or termination or
expiration of the related option, incur any liability or obligation,
direct or contingent, or enter into any material transaction, other
than in the ordinary course of business, except as contemplated by the
Prospectus.
(f) Neither the Company nor any of its subsidiaries will
acquire any capital stock of the Company prior to the earlier of the
Second Closing Date or termination or expiration of the related option
nor will the Company declare or pay any dividend or make any other
distribution upon the Common Stock payable to stockholders of record
on a date prior to the earlier of the Second Closing Date or
termination or expiration of the related option, except in either case
as contemplated by the Prospectus.
(g) Not later than ______________, 1997 the Company will make
generally available to its security holders an earnings statement
(which need not be audited) covering a period of at least 12 months
beginning after the effective date of the Registration Statement,
which will satisfy the provisions of the last paragraph of Section
11(a) of the 1933 Act.
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<PAGE> 16
(h) During such period as a prospectus is required by law to
be delivered in connection with offers and sales of the Shares by an
Underwriter or dealer, the Company will furnish to you at its expense,
subject to the provisions of subsection (d) hereof, copies of the
Registration Statement, the Prospectus, each preliminary prospectus
and all amendments and supplements to any such documents in each case
as soon as available and in such quantities as you may reasonably
request, for the purposes contemplated by the 1933 Act.
(i) The Company will cooperate with the Underwriters in
qualifying or registering the Shares for sale under the blue sky laws
of such jurisdictions as you designate, and will continue such
qualifications in effect so long as reasonably required for the
distribution of the Shares. The Company shall not be required to
qualify as a foreign corporation or to file a general consent to
service of process in any such jurisdiction where it is not currently
qualified or where it would be subject to taxation as a foreign
corporation.
(j) During the period of five years hereafter, the Company
will furnish you and each of the other Underwriters (upon their
request) with a copy (i) as soon as practicable after the filing
thereof, of each report filed by the Company with the Commission, any
securities exchange or the NASD; (ii) as soon as practicable after the
release thereof, of each material press release in respect of the
Company; and (iii) as soon as available, of each report of the Company
mailed to stockholders.
(k) The Company will use the net proceeds received by it from
the sale of the Shares being sold by it in the manner specified in the
Prospectus.
(l) If, at the time of effectiveness of the Registration
Statement, any information shall have been omitted therefrom in
reliance upon Rule 430A and/or Rule 434, then immediately following
the execution of the Pricing Agreement, the Company will prepare, and
file or transmit for filing with the Commission in accordance with
such Rule 430A, Rule 424(b) and/or Rule 434, copies of an amended
Prospectus, or, if required by such Rule 430A and/or Rule 434, a
post-effective amendment to the Registration Statement (including an
amended Prospectus), containing all information so omitted. If
required, the Company will prepare and file, or transmit for filing, a
Rule 462(b) Registration Statement not later than the date of the
execution of the Pricing Agreement. If a Rule 462(b) Registration
Statement is filed, the Company shall make payment of, or arrange for
payment of, the additional registration fee owing to the Commission
required by Rule 111.
(m) The Company will comply with all registration, filing and
reporting requirements of the Exchange Act and the Nasdaq National
Market and will file with the Commission in a timely manner all
reports on Form SR required by Rule 463 and
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<PAGE> 17
will furnish you copies of any such reports as soon as practicable
after the filing thereof.
(n) Superior Consultant Company, Inc. has elected or will
elect pursuant to Section 1362(e)(3) of the Code and Treas. Reg.
Section 1.1362-3(b)(1) to allocate its S termination year income on
the basis of its normal accounting method to the S short year (within
the meaning of Section 1362(e)(1)(A)) ending on the close of business
on the date this Agreement is executed and to the C short year (within
the meaning of Section 1362(e)(1)(B)) commencing on the day after this
Agreement is executed.
Section 7. Payment of Expenses. Whether or not the transactions
contemplated hereunder are consummated or this Agreement becomes effective as
to all of its provisions or is terminated, the Company agrees to pay (i) all
costs, fees and expenses (other than legal fees and disbursements of counsel
for the Underwriters and the expenses incurred by the Underwriters) incurred in
connection with the performance of the Company's and the Selling Stockholders'
obligations hereunder, including without limiting the generality of the
foregoing, all fees and expenses of legal counsel for the Company and the
Selling Stockholders' and of the Company's independent accountants, all costs
and expenses incurred in connection with the preparation, printing, filing and
distribution of the Registration Statement, each preliminary prospectus and the
Prospectus (including all exhibits and financial statements) and all amendments
and supplements provided for herein, this Agreement, the Pricing Agreement and
the Blue Sky Memorandum, (ii) all costs, fees and expenses (including legal
fees not to exceed $10,000 and disbursements of counsel for the Underwriters)
incurred by the Underwriters in connection with qualifying or registering all
or any part of the Shares for offer and sale under blue sky laws, including the
preparation of a blue sky memorandum relating to the Shares, and all costs,
fees and expenses (including legal fees and disbursements of counsel for the
Underwriters) incurred by the Underwriters in connection with the clearance of
such offering with the NASD; and (iii) all fees and expenses of the Company's
transfer agent, printing of the certificates for the Shares and all transfer
taxes, if any, with respect to the sale and delivery of the Shares to the
several Underwriters.
The provisions of this Section shall not affect any agreement which
the Company and the Selling Stockholders may make for the allocation or sharing
of such expenses and costs.
Section 8. Conditions of the Obligations of the Underwriters. The
obligations of the several Underwriters to purchase and pay for the Firm Shares
on the First Closing Date and the Option Shares on the Second Closing Date
shall be subject to the accuracy of the representations and warranties on the
part of the Company and the Selling Stockholders herein set forth as of the
date hereof and as of the First Closing Date or the Second Closing Date, as the
case may be, to the accuracy of the statements of officers of the Company made
pursuant to the provisions hereof, to the performance by the Company and the
Selling Stockholders of their respective obligations hereunder, and to the
following additional conditions:
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<PAGE> 18
(a) The Registration Statement shall have become effective
either prior to the execution of this Agreement or not later than 1:00
P.M., Chicago Time, on the first full business day after the date of
this Agreement, or such later time as shall have been consented to by
you but in no event later than 1:00 P.M., Chicago Time, on the third
full business day following the date hereof; and prior to the First
Closing Date or the Second Closing Date, as the case may be, no stop
order suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that purpose shall have been
instituted or shall be pending or, to the knowledge of the Company,
the Selling Stockholders or you, shall be contemplated by the
Commission. If the Company has elected to rely upon Rule 430A and/or
Rule 434, the information concerning the initial public offering price
of the Shares and price-related information shall have been
transmitted to the Commission for filing pursuant to Rule 424(b)
within the prescribed period and the Company will provide evidence
satisfactory to the Representatives of such timely filing (or a
post-effective amendment providing such information shall have been
filed and declared effective in accordance with the requirements of
Rules 430A and 424(b)). If a Rule 462(b) Registration Statement is
required, such Registration Statement shall have been transmitted to
the Commission for filing and become effective within the prescribed
time period and, prior to the First Closing Date, the Company shall
have provided evidence of such filing and effectiveness in accordance
with Rule 462(b).
(b) The legality and sufficiency of the authorization,
issuance and sale or transfer and sale of the Shares hereunder, the
validity and form of the certificates representing the Shares, the
execution and delivery of this Agreement and the Pricing Agreement,
and all corporate proceedings and other legal matters incident
thereto, and the form of the Registration Statement and the Prospectus
(except financial statements) shall have been approved by counsel for
the Underwriters exercising reasonable judgment.
(c) You shall not have advised the Company that the
Registration Statement or the Prospectus or any amendment or
supplement thereto, contains an untrue statement of fact, which, in
the opinion of counsel for the Underwriters, is material or omits to
state a fact which, in the opinion of such counsel, is material and is
required to be stated therein or necessary to make the statements
therein not misleading.
(d) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred any change, or any
development involving a prospective change, in or affecting
particularly the business or properties of the Company or its
subsidiaries taken as a whole, whether or not arising in the ordinary
course of business, which, in the judgment of the Representatives,
makes it impractical or inadvisable to proceed with the public
offering or purchase of the Shares as contemplated hereby.
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<PAGE> 19
(e) The Corporate Reorganization (as contemplated by the
Prospectus) shall have been duly and validly completed.
(f) Messrs. Helppie, Tashiro and Bracken shall have executed
the agreements limiting their compensation which are described in the
Prospectus and such agreements shall be in full force and effect.
(g) There shall have been furnished to you, as
Representatives of the Underwriters, on the First Closing Date or the
Second Closing Date, as the case may be, except as otherwise expressly
provided below:
(i) An opinion of Sachnoff & Weaver, Ltd., counsel
for the Company and for the Selling Stockholders, addressed to
the Underwriters and dated the First Closing Date or the
Second Closing Date, as the case may be, to the effect that:
(1) the Company has been duly incorporated
and is validly existing as a corporation in good
standing under the laws of the State of Delaware with
corporate power and authority to own its properties
and conduct its business as described in the
Prospectus; and, to their knowledge, the Company has
been duly qualified to do business as a foreign
corporation under the corporation law of, and is in
good standing as such in, every jurisdiction where
the ownership or leasing of property, or the conduct
of its business requires such qualification except
where the failure so to qualify would not have a
material adverse effect upon the condition (financial
or otherwise) or results of operations of the Company
and its subsidiaries taken as a whole;
(2) an opinion to the same general effect as
clause (1) of this subparagraph (i) with respect to
each subsidiary of the Company;
(3) all of the issued and outstanding
capital stock of each subsidiary of the Company has
been duly authorized, validly issued and is fully
paid and nonassessable, and the Company owns directly
or indirectly 100 percent of the outstanding capital
stock of each subsidiary, and to the best knowledge
of such counsel, such stock is owned free and clear
of any claims, liens, encumbrances or security
interests and there are no outstanding rights,
preemptive rights, subscriptions, warrants, calls,
options, rights of first refusal or other agreements
of any kind with respect to the capital stock of
either subsidiary of the Company;
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<PAGE> 20
(4) the authorized capital stock of the
Company, of which there is outstanding the amount set
forth in the Registration Statement and Prospectus
(except for subsequent issuances, if any, pursuant to
stock options or other rights referred to in the
Prospectus), conforms as to legal matters in all
material respects to the description thereof in the
Registration Statement and Prospectus;
(5) the issued and outstanding capital stock
of the Company has been duly authorized and validly
issued and is fully paid and nonassessable and was
not issued in violation of any preemptive or similar
rights arising by operation of law, under the charter
or by-laws of the Company or, to the knowledge of
such counsel, under any agreement to which the
Company or any of its subsidiaries is a party;
(6) the certificates for the Shares to be
delivered hereunder are in due and proper form, and
when duly countersigned by the Company's transfer
agent and delivered to you or upon your order against
payment of the agreed consideration therefor in
accordance with the provisions of this Agreement and
the Pricing Agreement, the Shares represented thereby
will be duly authorized and validly issued, fully
paid and nonassessable and conform to the description
thereof in the Prospectus; the Shares to be sold
hereunder have been duly and validly authorized and
qualified for inclusion on the Nasdaq National
Market;
(7) the Registration Statement has become
effective under the 1933 Act, and, to the best
knowledge of such counsel, no stop order suspending
the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have
been instituted or are pending or contemplated under
the 1933 Act, and the Registration Statement
(including the information deemed to be part of the
Registration Statement at the time of effectiveness
pursuant to Rule 430A(b) and/or Rule 434, if
applicable), the Prospectus and each amendment or
supplement thereto (except for the financial
statements and other statistical or financial data
included therein as to which such counsel need
express no opinion) comply as to form in all material
respects with the requirements of the 1933 Act; such
counsel have no reason to believe that either the
Registration Statement (including the information
deemed to be part of the Registration Statement at
the time of effectiveness pursuant to Rule 430A(b)
and/or Rule 434, if applicable) or the Prospectus, or
the Registration Statement or the Prospectus as
amended or supplemented (except as aforesaid), as of
their respective effective or issue dates, contained
any untrue statement of a
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<PAGE> 21
material fact or omitted to state a material fact
required to be stated therein or necessary to make
the statements therein not misleading or that the
Prospectus as amended or supplemented, if applicable,
as of the First Closing Date or the Second Closing
Date, as the case may be, contained any untrue
statement of a material fact or omitted to state any
material fact necessary to make the statements
therein not misleading in light of the circumstances
under which they were made; the statements in the
Registration Statement and the Prospectus summarizing
statutes, rules and regulations are accurate and
fairly and correctly present the information required
to be presented by the 1933 Act or the rules and
regulations thereunder, in all material respects and
such counsel does not know of any statutes, rules and
regulations required to be described or referred to
in the Registration Statement or the Prospectus that
are not described or referred to therein as required;
and such counsel does not know of any legal or
governmental proceedings pending or threatened
required to be described in the Prospectus which are
not described as required, nor of any contracts or
documents of a character required to be described in
the Registration Statement or Prospectus or to be
filed as exhibits to the Registration Statement which
are not described or filed, as required;
(8) the statements under the captions
"Management - Employee Benefit Plans," "Management -
Employment Related Agreements," "S-Corporation
Termination," "Certain Transactions," "Description of
Capital Stock" and "Shares Eligible for Future Sale"
in the Prospectus, insofar as such statements
constitute a summary of documents referred to therein
or matters of law, are accurate summaries and fairly
and correctly present, in all material respects, the
information called for with respect to such documents
and matters;
(9) this Agreement and the Pricing Agreement
and the performance of the Company's obligations
hereunder have been duly authorized by all necessary
corporate action and this Agreement and the Pricing
Agreement have been duly executed and delivered by
and on behalf of the Company, and are legal, valid
and binding agreements of the Company, except as
enforceability of the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights and by
the exercise of judicial discretion in accordance
with general principles applicable to equitable and
similar remedies and except as to those provisions
relating to indemnities and contribution for
liabilities arising under the 1933 Act as to which no
opinion need be expressed; and no approval,
authorization or consent of
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<PAGE> 22
any public board, agency, or instrumentality of the
United States or of any state or other jurisdiction
is necessary in connection with the issue or sale of
the Shares by the Company pursuant to this Agreement
(other than under the 1933 Act, applicable blue sky
laws and the rules of the NASD) or the consummation
by the Company of any other transactions contemplated
hereby;
(10) the execution and performance of this
Agreement will not contravene any of the provisions
of, or result in a default under, any agreement,
franchise, license, indenture, mortgage, deed of
trust, or other instrument known to such counsel, of
the Company or any of its subsidiaries or by which
the property of any of them is bound and which
contravention or default would be material to the
Company and its subsidiaries taken as a whole; or
violate any of the provisions of the charter or
bylaws of the Company or any of its subsidiaries or,
so far as is known to such counsel, violate any
statute, order, rule or regulation of any regulatory
or governmental body having jurisdiction over the
Company or any of its subsidiaries;
(11) to such counsel's knowledge, all offers
and sales of the Company's and the operating
companies' capital stock prior to the date hereof
were at all relevant times exempt from the
registration requirements of the 1933 Act and were
duly registered or the subject of an available
exemption from the registration requirements of the
applicable state securities or blue sky laws;
(12) with respect to each Selling
Stockholder, this Agreement, the Pricing Agreement,
the Power of Attorney and Custody Agreement have been
duly authorized, executed and delivered by or on
behalf of each such Selling Stockholder; the Agents
and the Custodian for each such Selling Stockholder
have been duly and validly authorized to carry out
all transactions contemplated herein on behalf of
each such Selling Stockholder; and the performance of
this Agreement, the Pricing Agreement, the Power of
Attorney and the Custody Agreement and the
consummation of the transactions herein and therein
contemplated by such Selling Stockholders will not
result in a breach or violation of any of the terms
and provisions of, or constitute a default under, any
statute, any indenture, mortgage, deed of trust, note
agreement or other agreement or instrument known to
such counsel to which any of such Selling
Stockholders is a party or by which any are bound or
to which any of the property of such Selling
Stockholders is subject, or any order, rule or
regulation known to such counsel of any court or
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governmental agency or body having jurisdiction over
any of such Selling Stockholders or any of their
properties; and no consent, approval, authorization
or order of any court or governmental agency or body
is required for the consummation of the transactions
contemplated by this Agreement, the Pricing
Agreement, the Power of Attorney and the Custody
Agreement in connection with the sale of Shares to be
sold by such Selling Stockholders hereunder, except
such as have been obtained under the 1933 Act and
such as may be required under applicable blue sky
laws in connection with the purchase and distribution
of such Shares by the Underwriters and the clearance
of such offering with the NASD;
(13) each Selling Stockholder has full
right, power and authority to enter into this
Agreement, the Pricing Agreement, the Power of
Attorney and the Custody Agreement and to sell,
transfer and deliver the Shares to be sold on the
First Closing Date or the Second Closing Date, as the
case may be, by such Selling Stockholder hereunder
and good and marketable title to such Shares so sold,
free and clear of all voting trust arrangements,
liens, encumbrances, equities, claims and community
property rights whatsoever, has been transferred to
the Underwriters (who counsel may assume to be bona
fide purchasers) who have purchased such Shares
hereunder;
(14) this Agreement, the Pricing Agreement,
the Power of Attorney and the Custody Agreement are
legal, valid and binding agreements of each Selling
Stockholder except as enforceability of the same may
be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors'
rights and by the exercise of judicial discretion in
accordance with general principles applicable to
equitable and similar remedies and except with
respect to those provisions relating to indemnities
and contribution for liabilities arising under the
1933 Act, as to which no opinion need be expressed;
(15) the Company is not an "investment
company" or a person "controlled by" an "investment
company" within the meaning of the Investment Company
Act;
(16) to the knowledge of such counsel except
as disclosed in the Prospectus, no person has the
right, contractual or otherwise, to cause the Company
to issue, or register pursuant to the 1933 Act, any
shares of capital stock of the Company, upon the
issue and sale of the Shares to be sold by the
Company to the Underwriters pursuant to this
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<PAGE> 24
Agreement, nor does any person have preemptive
rights, rights of first refusal, or other rights to
purchase any capital stock of the Company;
(17) each of the Company and the
operating companies had the requisite corporate power
and authority to carry out the Corporate
Reorganization, and each of the Company and the
operating companies and the stockholders of each of
them have taken all action required by law, their
respective charter and bylaws or otherwise to approve
the Corporate Reorganization, as the case may be; and
(18) the consummation of the Corporate
Reorganization did not contravene any provision of
applicable law or the respective charter or bylaws of
the Company or any of the operating companies or,
except to the extent the Company has obtained the
requisite consent, any provision of any material
agreement or other material instrument binding upon
the Company or any of the operating companies or any
order, writ, injunction or decree of any
jurisdiction, court or governmental body, and no
consent, approval, authorization or order of any
court or governmental agency or body is or was
required in connection with the Corporate
Reorganization, except such as have been obtained.
In rendering such opinion, such counsel may
state that insofar as their opinion under clause (7) above
relates to the accuracy and completeness of the Prospectus and
Registration Statement, it is based upon a general review with
the Company's representatives and independent accountants of
the information contained therein, without independent
verification by such counsel of the accuracy or completeness
of such information. Such counsel may also rely upon the
opinions of other competent counsel and, as to factual
matters, on certificates of the Selling Stockholders and of
officers of the Company and of state officials, in which case
their opinion is to state that they are so doing and copies of
said opinions or certificates are to be attached to the
opinion unless said opinions or certificates (or, in the case
of certificates, the information therein) have been furnished
to the Representatives in other form.
(ii) Such opinion or opinions of McDermott, Will &
Emery, counsel for the Underwriters, dated the First Closing
Date or the Second Closing Date, as the case may be, with
respect to the incorporation of the Company, the validity of
the Shares to be sold by the Company, the Registration
Statement and the Prospectus and other related matters as you
may reasonably require, and the Company shall have furnished
to such counsel such documents and
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<PAGE> 25
shall have exhibited to them such papers and records as they
request for the purpose of enabling them to pass upon such
matters.
(iii) A certificate of the chief executive officer
and the principal financial officer of the Company, dated the
First Closing Date or the Second Closing Date, as the case may
be, to the effect that:
(1) the representations and warranties of
the Company set forth in Section 2 of this Agreement
are true and correct as of the date of this Agreement
and as of the First Closing Date or the Second
Closing Date, as the case may be, and the Company has
complied with all the agreements and satisfied all
the conditions on its part to be performed or
satisfied at or prior to such Closing Date; and
(2) the Commission has not issued an order
preventing or suspending the use of the Prospectus or
any preliminary prospectus filed as a part of the
Registration Statement or any amendment thereto; no
stop order suspending the effectiveness of the
Registration Statement has been issued; and to the
best knowledge of the respective signers, no
proceedings for that purpose have been instituted or
are pending or contemplated under the 1933 Act.
The delivery of the certificate provided for
in this subparagraph shall be and constitute a representation
and warranty of the Company as to the facts required in the
immediately foregoing clauses (1) and (2) of this subparagraph
to be set forth in said certificate.
(iv) A certificate of each Selling Stockholder dated
the First Closing Date or the Second Closing Date, as the case
may be, to the effect that the representations and warranties
of such Selling Stockholder set forth in Section 3 of this
Agreement are true and correct as of such date and the Selling
Stockholder has complied with all the agreements and satisfied
all the conditions on the part of such Selling Stockholder to
be performed or satisfied at or prior to such date.
(v) At the time the Pricing Agreement is executed
and also on the First Closing Date or the Second Closing Date,
as the case may be, there shall be delivered to you a letter
addressed to you, as Representatives of the Underwriters, from
Grant Thornton L.L.C., independent accountants, the first one
to be dated the date of the Pricing Agreement, the second one
to be dated the First Closing Date and the third one (in the
event of a second closing) to be dated the Second Closing
Date, to the effect set forth in Schedule C. There
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<PAGE> 26
shall not have been any change or decrease specified in the
letters referred to in this subparagraph which makes it
impractical or inadvisable in the judgment of the
Representatives to proceed with the public offering or
purchase of the Shares as contemplated hereby.
(vi) Such further certificates and documents as you
may reasonably request.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are satisfactory to you and
to McDermott, Will & Emery, counsel for the Underwriters, which approval shall
not be unreasonably withheld. The Company shall furnish you with such manually
signed or conformed copies of such opinions, certificates, letters and
documents as you request.
If any condition to the Underwriters' obligations hereunder to be
satisfied prior to or at the First Closing Date is not so satisfied, this
Agreement at your election will terminate upon notification to the Company and
the Selling Stockholders without liability on the part of any Underwriter or
the Company or any Selling Stockholder, except for the expenses to be paid or
reimbursed by the Company pursuant to Sections 7 and 9 hereof and except to the
extent provided in Section 11 hereof.
Section 9. Reimbursement of Underwriters' Expenses. If the sale to
the Underwriters of the Shares on the First Closing Date is not consummated
because any condition of the Underwriters' obligations hereunder is not
satisfied or because of any refusal, inability or failure on the part of the
Company or the Selling Stockholders to perform any agreement herein or to
comply with any provision hereof, unless such failure to satisfy such condition
or to comply with any provision hereof is due to the default or omission of any
Underwriter, the Company agrees to reimburse you and the other Underwriters
upon demand for all out-of-pocket expenses (including reasonable fees and
disbursements of counsel) that shall have been reasonably incurred by you and
them in connection with the proposed purchase and the sale of the Shares. Any
such termination shall be without liability of any party to any other party
except that the provisions of this Section, Section 7 and Section 11 shall at
all times be effective and shall apply.
Section 10. Effectiveness of Registration Statement. You, the
Company and the Selling Stockholders will use your, its and their best efforts
to cause the Registration Statement to become effective, if it has not yet
become effective, and to prevent the issuance of any stop order suspending the
effectiveness of the Registration Statement and, if such stop order be issued,
to obtain as soon as possible the lifting thereof.
Section 11. Indemnification. (a) The Company and each Selling
Stockholder, jointly and severally, agree to indemnify and hold harmless each
Underwriter and each person, if
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<PAGE> 27
any, who controls any Underwriter within the meaning of the 1933 Act or the
Exchange Act against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter or such controlling person may become
subject under the 1933 Act, the Exchange Act or other federal or state
statutory law or regulation, at common law or otherwise (including in
settlement of any litigation if such settlement is effected with the written
consent of the Company and/or such Selling Stockholders, as the case may be),
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement,
including the information deemed to be part of the Registration Statement at
the time of effectiveness pursuant to Rule 430A and/or Rule 434, if applicable,
any preliminary prospectus, the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; and will reimburse each Underwriter
and each such controlling person for any legal or other expenses reasonably
incurred by such Underwriter or such controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that neither the Company nor any Selling Stockholder will be
liable in any such case to the extent that (i) any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration Statement,
any preliminary prospectus, the Prospectus or any amendment or supplement
thereto in reliance upon and in conformity with written information furnished
to the Company by or on behalf of any Underwriter through the Representatives,
specifically for use therein; or (ii) if such statement or omission was
contained or made in any preliminary prospectus and corrected in the Prospectus
and (1) any such loss, claim, damage or liability suffered or incurred by any
Underwriter (or any person who controls any Underwriter) resulted from an
action, claim or suit by any person who purchased Shares which are the subject
thereof from such Underwriter in the offering and (2) such Underwriter failed
to deliver or provide a copy of the Prospectus to such person at or prior to
the confirmation of the sale of such Shares in any case where such delivery is
required by the 1933 Act. In addition to their other obligations under this
Section 11(a), the Company and the Selling Stockholders agree that, as an
interim measure during the pendency of any claim, action, investigation,
inquiry or other proceeding arising out of or based upon any statement or
omission, or any alleged statement or omission, described in this Section
11(a), they will reimburse the Underwriters on a monthly basis for all
reasonable legal and other expenses incurred in connection with investigating
or defending any such claim, action, investigation, inquiry or other
proceeding, notwithstanding the absence of a judicial determination as to the
propriety and enforceability of the Company's and the Selling Stockholders'
obligation to reimburse the Underwriters for such expenses and the possibility
that such payments might later be held to have been improper by a court of
competent jurisdiction. This indemnity agreement will be in addition to any
liability which the Company and the Selling Stockholders may otherwise have.
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Without limiting the full extent of the Company's agreement to
indemnify each Underwriter, as herein provided,
(i) each Selling Stockholder other than Messrs. Helppie, Tashiro and
Bracken shall be liable under the indemnity agreements contained in paragraph
(a) of this Section only for losses, claims, damages or liabilities arising out
of or based upon untrue or alleged untrue statements or omissions or alleged
omissions made in the Registration Statement, any preliminary prospectus, the
prospectus, or any amendment or supplement thereto that relate to such Selling
Stockholder,
(ii) each Selling Stockholder other than Messrs. Helppie, Tashiro and
Bracken shall be liable under the indemnity agreements contained in paragraph
(a) of this Section and for breaches of any representations and warranties
contained in this Agreement only for an amount not exceeding the proceeds
received by such Selling Stockholder from the sale of Shares hereunder, and
(iii) Messrs. Helppie, Tashiro and Bracken, shall each be liable under
the indemnity agreements contained in paragraph (a) of this Section and for
breaches of any representations and warranties contained in this Agreement for
an amount not exceeding the sum of (I) the proceeds received by such Selling
Stockholder from the sale of Shares hereunder, plus (II) the portion of the
proceeds of the Offering used to pay accrued compensation to such Selling
Stockholder or used to repay indebtedness of the Company which was incurred to
pay accrued compensation to such Selling Stockholder.
(b) Each Underwriter will severally indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the
Registration Statement, and each Selling Stockholder and each person, if any,
who controls the Company within the meaning of the 1933 Act or the Exchange
Act, against any losses, claims, damages or liabilities to which the Company,
or any such director, officer, Selling Stockholder or controlling person may
become subject under the 1933 Act, the Exchange Act or other federal or state
statutory law or regulation, at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of such Underwriter), insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue or alleged untrue statement of any material fact contained in the
Registration Statement, any preliminary prospectus, the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in the
Registration Statement, any preliminary prospectus, the Prospectus, or any
amendment or supplement thereto in reliance upon and in conformity with Section
4 of this Agreement or any other written information furnished to the Company
by such Underwriter through the
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Representatives specifically for use in the preparation thereof; and will
reimburse any legal or other expenses reasonably incurred by the Company, or
any such director, officer, Selling Stockholder or controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or action. In addition to their other obligations under this Section
11(b), the Underwriters agree that, as an interim measure during the pendency
of any claim, action, investigation, inquiry or other proceeding arising out of
or based upon any statement or omission, or any alleged statement or omission,
described in this Section 11(b), they will reimburse the Company and the
Selling Stockholders on a monthly basis for all reasonable legal and other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
Underwriters' obligation to reimburse the Company and the Selling Stockholders
for such expenses and the possibility that such payments might later be held to
have been improper by a court of competent jurisdiction. This indemnity
agreement will be in addition to any liability which such Underwriter may
otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under this
Section, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party except to the extent that
the indemnifying party was prejudiced by such failure to notify. In case any
such action is brought against any indemnified party, and it notifies an
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with
all other indemnifying parties similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party; provided,
however, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that there may be legal defenses available to it and/or
other indemnified parties which are different from or additional to those
available to the indemnifying party, or the indemnified and indemnifying
parties may have conflicting interests which would make it inappropriate for
the same counsel to represent both of them, the indemnified party or parties
shall have the right to select separate counsel to assume such legal defense
and otherwise to participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of its election so to assume the defense of
such action and approval by the indemnified party of counsel, the indemnifying
party will not be liable to such indemnified party under this Section for any
legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof unless (i) the indemnified party shall have
employed such counsel in connection with the assumption of legal defense in
accordance with the proviso to the next preceding sentence (it being
understood, however, that the indemnifying party shall not be liable for the
expenses of more than one separate counsel, approved by the Representatives in
the case of paragraph (a),
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<PAGE> 30
representing all indemnified parties not having different or additional
defenses or potential conflicting interest among themselves who are parties to
such action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability arising out
of such proceeding.
(d) If the indemnification provided for in this Section is
unavailable to an indemnified party under paragraphs (a) or (b) hereof in
respect of any losses, claims, damages or liabilities referred to therein, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages or liabilities (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, the Selling Stockholders and the Underwriters from the offering of the
Shares or (ii) if the allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of the Company, the Selling Stockholders and the Underwriters in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations. The
respective relative benefits received by the Company, the Selling Stockholders
and the Underwriters shall be deemed to be in the same proportion in the case
of the Company and the Selling Stockholders, as the total price paid to the
Company and the Selling Stockholders for the Shares by the Underwriters (net of
underwriting discount but before deducting expenses), and in the case of the
Underwriters as the underwriting discount received by them bears to the total
of such amounts paid to the Company and the Selling Stockholders and received
by the Underwriters as underwriting discount in each case as contemplated by
the Prospectus. The relative fault of the Company and the Selling Stockholders
and the Underwriters shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Company or by the Selling Stockholders or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party as a
result of the losses, claims, damages and liabilities referred to above shall
be deemed to include any legal or other fees or expenses reasonably incurred by
such party in connection with investigating or defending any action or claim.
The Company, the Selling Stockholders and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section
were determined by pro rata
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allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section are several in proportion to their respective
underwriting commitments and not joint.
(e) The provisions of this Section shall survive any termination of
this Agreement.
Section 12. Default of Underwriters. It shall be a condition to the
agreement and obligation of the Company and the Selling Stockholders to sell
and deliver the Shares hereunder, and of each Underwriter to purchase the
Shares hereunder, that, except as hereinafter in this paragraph provided, each
of the Underwriters shall purchase and pay for all Shares agreed to be
purchased by such Underwriter hereunder upon tender to the Representatives of
all such Shares in accordance with the terms hereof. If any Underwriter or
Underwriters default in their obligations to purchase Shares hereunder on the
First Closing Date and the aggregate number of Shares which such defaulting
Underwriter or Underwriters agreed but failed to purchase does not exceed 10
percent of the total number of Shares which the Underwriters are obligated to
purchase on the First Closing Date, the Representatives may make arrangements
satisfactory to the Company and the Selling Stockholders for the purchase of
such Shares by other persons, including any of the Underwriters, but if no such
arrangements are made by such date the nondefaulting Underwriters shall be
obligated severally, in proportion to their respective commitments hereunder,
to purchase the Shares which such defaulting Underwriters agreed but failed to
purchase on such date. If any Underwriter or Underwriters so default and the
aggregate number of Shares with respect to which such default or defaults occur
is more than the above percentage and arrangements satisfactory to the
Representatives and the Company and the Selling Stockholders for the purchase
of such Shares by other persons are not made within 36 hours after such
default, this Agreement will terminate without liability on the part of any
nondefaulting Underwriter or the Company or the Selling Stockholders, except
for the expenses to be paid by the Company pursuant to Section 7 hereof and
except to the extent provided in Section 11 hereof.
In the event that Shares to which a default relates are to be
purchased by the nondefaulting Underwriters or by another party or parties, the
Representatives or the Company shall have the right to postpone the First
Closing Date for not more than seven business days in order that the necessary
changes in the Registration Statement, Prospectus and any other documents, as
well as any other arrangements, may be effected. As used in this Agreement,
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<PAGE> 32
the term "Underwriter" includes any person substituted for an Underwriter under
this Section. Nothing herein will relieve a defaulting Underwriter from
liability for its default.
Section 13. Effective Date. This Agreement shall become effective
immediately as to Sections 7, 9, 11 and 14 and as to all other provisions at
10:00 A.M., Chicago Time, on the day following the date upon which the Pricing
Agreement is executed and delivered, unless such a day is a Saturday, Sunday or
holiday (and in that event this Agreement shall become effective at such hour
on the business day next succeeding such Saturday, Sunday or holiday); but this
Agreement shall nevertheless become effective at such earlier time after the
Pricing Agreement is executed and delivered as you may determine on and by
notice to the Company and the Selling Stockholders or by release of any Shares
for sale to the public. For the purposes of this Section, the Shares shall be
deemed to have been so released upon the release for publication of any
newspaper advertisement relating to the Shares or upon the release by you of
telegrams (i) advising Underwriters that the Shares are released for public
offering, or (ii) offering the Shares for sale to securities dealers, whichever
may occur first.
Section 14. Termination. Without limiting the right to terminate
this Agreement pursuant to any other provision hereof:
(a) This Agreement may be terminated by the Company by notice
to you and the Selling Stockholders or by you by notice to the Company
and the Selling Stockholders at any time prior to the time this
Agreement shall become effective as to all its provisions, and any
such termination shall be without liability on the part of the Company
or the Selling Stockholders to any Underwriter (except for the
expenses to be paid or reimbursed pursuant to Section 7 hereof and
except to the extent provided in Section 11 hereof) or of any
Underwriter to the Company or the Selling Stockholders.
(b) This Agreement may also be terminated by you prior to the
First Closing Date, and the option referred to in Section 5, if
exercised, may be cancelled at any time prior to the Second Closing
Date, if (i) trading in securities on the New York Stock Exchange or
the Nasdaq National Market shall have been suspended or minimum prices
shall have been established on such exchange, or (ii) a banking
moratorium shall have been declared by Illinois, New York, or United
States authorities, or (iii) there shall have been any change in
financial markets or in political, economic or financial conditions
which, in the opinion of the Representatives, either renders it
impracticable or inadvisable to proceed with the offering and sale of
the Shares on the terms set forth in the Prospectus or materially and
adversely affects the market for the Shares, or (iv) there shall have
been an outbreak of major armed hostilities between the United States
and any foreign power which in the opinion of the Representatives
makes it impractical or inadvisable to offer or sell the Shares. Any
termination pursuant to this paragraph (b) shall be without liability
on the part of
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<PAGE> 33
any Underwriter to the Company or the Selling Stockholders or on the
part of the Company to any Underwriter or the Selling Stockholders
(except for expenses to be paid or reimbursed pursuant to Section 7
hereof and except to the extent provided in Section 11 hereof).
Section 15. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers, of the Selling Stockholders and of
the several Underwriters set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation made by or on
behalf of any Underwriter or the Company or any of its or their partners,
principals, members, officers or directors or any controlling person, or the
Selling Stockholders as the case may be, and will survive delivery of and
payment for the Shares sold hereunder.
Section 16. Notices. All communications hereunder will be in writing
and, if sent to the Underwriters will be mailed, delivered or telegraphed and
confirmed to you c/o William Blair & Company, L.L.C., 222 West Adams Street,
Chicago, Illinois 60606, with a copy to Scott N. Gierke, McDermott, Will &
Emery, 227 West Monroe, Chicago, Illinois 60606; if sent to the Company will be
mailed, delivered or telegraphed and confirmed to the Company at its corporate
headquarters with a copy to William Weaver, Sachnoff & Weaver Ltd., 30 S.
Wacker Drive, Chicago, Illinois 60606; and if sent to the Selling Stockholders
will be mailed, delivered or telegraphed and confirmed to the Agents and the
Custodian at such address as they have previously furnished to the Company and
the Representatives, with a copy to ________________________________.
Section 17. Successors. This Agreement and the Pricing Agreement
will inure to the benefit of and be binding upon the parties hereto and their
respective successors, personal representatives and assigns, and to the benefit
of the officers and directors and controlling persons referred to in Section
11, and no other person will have any right or obligation hereunder. The term
"successors" shall not include any purchaser of the Shares as such from any of
the Underwriters merely by reason of such purchase.
Section 18. Representation of Underwriters. You will act as
Representatives for the several Underwriters in connection with this financing,
and any action under or in respect of this Agreement taken by you will be
binding upon all the Underwriters.
Section 19. Partial Unenforceability. If any section, paragraph or
provision of this Agreement is for any reason determined to be invalid or
unenforceable, such determination shall not affect the validity or
enforceability of any other section, paragraph or provision hereof.
-33-
<PAGE> 34
Section 20. Applicable Law. This Agreement and the Pricing Agreement
shall be governed by and construed in accordance with the laws of the State of
Illinois.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company, the Selling
Stockholders and the several Underwriters including you, all in accordance with
its terms.
Very truly yours,
SUPERIOR CONSULTANT HOLDINGS
CORPORATION
By
________________________________________
Chief Executive Officer
[Selling Stockholders]
By
________________________________________
Agent and Attorney-in-Fact
The foregoing Agreement is hereby
confirmed and accepted as of
the date first above written.
William Blair & Company, L.L.C.
Donaldson, Lufkin & Jenrette Securities Corporation
Jefferies & Company, Inc.
Acting as Representatives of the
several Underwriters named in
Schedule A.
William Blair & Company, L.L.C.
By__________________________________
Principal
-34-
<PAGE> 35
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Firm Shares
Underwriter to be Purchased
----------- ---------------
<S> <C>
William Blair & Company, L.L.C.
Donaldson, Lufkin & Jenrette Securities Corporation
Jefferies & Company, Inc.
------------------------
TOTAL 2,150,000
========================
</TABLE>
<PAGE> 36
SCHEDULE B
<TABLE>
<CAPTION>
Number of Number of
Firm Shares Option Shares
to be Sold to be Sold
---------- ----------
<S> <C> <C>
Company 2,150,000 164,658
Selling Stockholders:
The Richard D. Helppie, Jr. Trust 0 75,000
Charles O. Bracken 0 50,000
Robert R. Tashiro 0 25,000
Lawrence H. Carter 0 6,465
Gary L. Hammon 0 1,377
------------------------ ------------------------
TOTAL 2,150,000 322,500
======================== ========================
</TABLE>
<PAGE> 37
SCHEDULE C
Comfort Letter of Grant Thornton LLC
(1) They are independent public accountants with respect to the
Company and its subsidiaries within the meaning of the 1933 Act.
(2) In their opinion the consolidated financial statements and
schedules of the Company and its subsidiaries included in the Registration
Statement and the consolidated financial statements of the Company from which
the information presented under the captions "Selected Consolidated Financial
and Operating Data" and "Selected Financial and Operating Data" has been
derived which are stated therein to have been examined by them comply as to
form in all material respects with the applicable accounting requirements of
the 1933 Act.
(3) On the basis of specified procedures (but not an examination in
accordance with generally accepted auditing standards), including inquiries of
certain officers of the Company and its subsidiaries responsible for financial
and accounting matters as to transactions and events subsequent to
___________________, 19___, a reading of minutes of meetings of the
stockholders and directors of the Company and its subsidiaries since
_________________, 19___, a reading of the latest available interim unaudited
consolidated financial statements of the Company and its subsidiaries (with an
indication of the date thereof) and other procedures as specified in such
letter, nothing came to their attention which caused them to believe that (i)
the unaudited consolidated financial statements of the Company and its
subsidiaries included in the Registration Statement do not comply as to form in
all material respects with the applicable accounting requirements of the 1933
Act or that such unaudited financial statements are not fairly presented in
accordance with generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial statements included
in the Registration Statement, and (ii) at a specified date not more than five
days prior to the date thereof in the case of the first letter and not more
than two business days prior to the date thereof in the case of the second and
third letters, there was any change in the capital stock or long-term debt or
short-term debt (other than normal payments) of the Company and its
subsidiaries on a consolidated basis or any decrease in consolidated net
current assets or consolidated stockholders' equity as compared with amounts
shown on the latest unaudited balance sheet of the Company included in the
Registration Statement or for the period from the date of such balance sheet to
a date not more than five days prior to the date thereof in the case of the
first letter and not more than two business days prior to the date thereof in
the case of the second and third letters, there were any decreases, as compared
with the corresponding period of the prior year, in consolidated net sales,
consolidated income before income taxes or in the total or per share amounts of
consolidated net income except, in all instances, for changes or decreases
which the Prospectus discloses have occurred or may occur or which are set
forth in such letter.
C-1
<PAGE> 38
(4) On the basis of reading the unaudited pro forma financial
statement data included in the Registration Statement and the Prospectus,
carrying out specified procedures, inquiries of certain officials of the
Company who have responsibility for financial and accounting matters, and
proving the arithmetic accuracy of the application of the pro forma adjustments
to the historical amounts in the pro forma financial statement data, nothing
came to their attention which caused them to believe that the pro forma
financial statement data does not comply in form in all material respects with
the applicable accounting requirements of Rule 11-02 of Regulation S-X of or
that the pro forma adjustments have not been properly applied to the historical
amounts in the compilation of such statements.
(5) They have carried out specified procedures, which have been
agreed to by the Representatives, with respect to certain information in the
Prospectus specified by the Representatives (including the unaudited annual
financial statements contained in the Prospectus), and on the basis of such
procedures, they have found such information to be in agreement with the
general accounting records of the Company and its subsidiaries.
C-2
<PAGE> 39
Exhibit A
SUPERIOR CONSULTANT HOLDINGS CORPORATION
2,150,000 Shares Common Stock(2)
PRICING AGREEMENT
October __, 1996
William Blair & Company, L.L.C.
Donaldson, Lufkin & Jenrette Securities Corporation
Jefferies & Company, Inc.
As Representatives of the Several
Underwriters
c/o William Blair & Company, L.L.C.
222 West Adams Street
Chicago, Illinois 60606
Ladies and Gentlemen:
Reference is made to the Underwriting Agreement dated October __, 1996
(the "Underwriting Agreement") relating to the sale by the Company and the
Selling Stockholders and the purchase by the several Underwriters for whom
William Blair & Company, L.L.C., Donaldson, Lufkin & Jenrette Securities
Corporation and Jefferies & Company, Inc. are acting as representatives (the
"Representatives"), of the above Shares. All terms herein shall have the
definitions contained in the Underwriting Agreement except as otherwise defined
herein.
Pursuant to Section 5 of the Underwriting Agreement, the Company and
each of the Selling Stockholders agree with the Representatives as follows:
1. The initial public offering price per share for the Shares shall
be $__________.
2. The purchase price per share for the Shares to be paid by the
several Underwriters shall be $_____________, being an amount equal to the
initial public offering price set forth above less $____________ per share.
Schedule A is amended as follows:
____________________
(2)Plus an option to acquire up to 322,500 additional shares to cover
overallotments
A-1
<PAGE> 40
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company, the Selling
Stockholders and the several Underwriters, including you, all in accordance
with its terms.
Very truly yours,
SUPERIOR CONSULTANT HOLDINGS
CORPORATION
By
________________________________________
Chief Executive Officer
[Selling Stockholders]
By
________________________________________
Agent and Attorney-in-Fact
The foregoing Agreement is hereby
confirmed and accepted as of
the date first above written.
William Blair & Company, L.L.C.
Donaldson, Lufkin & Jenrette Securities Corporation
Jefferies & Company, Inc.
Acting as Representatives of the
several Underwriters named in
Schedule A.
William Blair & Company, L.L.C.
By__________________________________
Principal
A-2
<PAGE> 1
EXHIBIT 2.1
MERGER AGREEMENT
AMONG
SUPERIOR CONSULTANT COMPANY, INC.,
AND
SUPERIOR ACQUISITION, INC.
AND
SUPERIOR CONSULTANT HOLDINGS CORPORATION
__________________, 1996
This Agreement is entered into as of _____________, 1996, by and among
SUPERIOR CONSULTATNT HOLDINGS CORPORATION, a Delaware corporation ("ACQUIROR"),
SUPERIOR ACQUISITION, INC. a Michigan corporation and a wholly-owned Subsidiary
of the Acquiror ("TRANSITORY SUBSIDIARY"), and SUPERIOR CONSULTANT COMPANY,
INC., a Michigan corporation ("TARGET".) Acquiror, Transitory Subsidiary,
and Target are referred to collectively herein as the "PARTIES".
This Agreement contemplates a transaction in which the Acquiror will
acquire all of the outstanding capital stock of Target through a reverse
subsidiary merger of Transitory Subsidiary with and into Target. The
Shareholders of Target will receive captail stock of Acquiror in exchange for
their captail stock in Target. Immediately after the mergers, the Target
Shareholders shall be the sole shareholders of Acquiror. It is intended that
the merger qualify as a tax-free reorganization pursuant to Code Sections
368(a)(1)(A) and 368(a)(2)(E).
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
<PAGE> 2
1. Definitions.
"ACQUIROR" has the meaning set forth in the preface above.
"CERTIFICATE OF MERGER" has the meaning set forth in Section 2(c) below.
"CLOSING" has the meaning set forth in Section 2(b) below.
"CLOSING DATE" has the meaning set forth in Section 2(b) below.
"MICHIGAN BUSINESS CORPORATION ACT" means the Michigan Business
Corporation Act, as amended.
"MERGER" has the meaning set forth in Section 2(a)(i) below.
"MERGER EFFECTIVE TIME" has the meaning set forth in Section 2(d)(i)
below.
"PARTY" has the meaning set forth in the preface above.
"PERSON" means an individual, a partnership, a limited liability company,
a corporation, an association, a joint stock company, a trust, a joint venture,
an unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"SUBSIDIARY" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"TARGET" has the meaning set forth in the preface above.
"TARGET SHARE" means any share of the Common Stock, $__ par value per
share, of Target.
"TARGET SHAREHOLDER" means any Person who or which holds any Target
Shares.
"TRANSITORY SUBSIDIARY" has the meaning set forth in the preface above.
2. Basic Transaction.
(a) The Merger. On and subject to the terms and conditions of this
Agreement, Transitory Subsidiary will merge with and into Target
("MERGER") at the Merger Effective Time. Target shall be the corporation
surviving the Merger.
(b) The Closing. The closing of the transactions contemplated by
this Agreement (the "CLOSING") shall take place at the offices of
Acquiror in
2
<PAGE> 3
Southfield, Michigan, commencing at 9:00 a.m. local time on such date as the
Parties may mutually determine (the "CLOSING DATE").
(c) Actions at the Closing. At the Closing Target and Transitory
Subsidiary will file with the Secretary of State of the State of Michigan a
Certificate of Merger in the form attached hereto as Exhibit A.
(d) Effect of Merger.
(i) General. The Merger shall become effective at the time
Certificate of Merger is filed with the Secretary of State of the State
of Michigan (the "MERGER EFFECTIVE TIME"). The Merger shall have the
effect set forth in the Michigan Business Corporation Act. The surviving
corporation of the Merger may, at any time after the Merger Effective
Time, take any action (including executing and delivering any document)
in the name and on behalf of either Target on Transitory Subsidiary in
order to carry out and effectuate the transactions contemplated by this
Agreement.
(ii) Conversion of Shares. At and as of the Merger
Effective Time, each Target Share shall be converted into the right to
receive 1.06668376 Acquiror Shares. After the Effective Time, no Target
Share shall be deemed to be outstanding or to have any rights other
than those set forth above in this Section 2(d)(ii) and in 2(d)(vii).
(iii) Conversion of Capital Stock of the Transitory
Subsidiary. At and as of the Merger Effective Time, each share of
Common Stock, no par value, of Transitory Subsidiary shall be converted
into one share of Common Stock, $.01 par value per share, of the
surviving corporation.
(iv) Articles of Incorporation. The Articles of
Incorporation of Target in effect at and as of the Merger Effective
Time will remain in effect as the Articles of Incorporation of the
surviving corporation of Merger without any modification or amendment
in Merger.
(v) Bylaws. The Bylaws of Target in effect at and as of
the Merger Effective Time will remain the Bylaws of the surviving
corporation of Merger without any modification or amendment in Merger.
(vi) Directors and Officers. The directors and officers of
Target in office at and as of the Merger Effective Time will remain the
directors and officers of the surviving corporation of Merger
(retaining their respective positions and terms of office).
3
<PAGE> 4
(vii) Exchange of Certificates. At the Closing, each Target
Shareholder shall surrender to Acquiror for exchange a certificate
or certificates, duly endorsed in blank or accompanied by duly
executed stock powers, representing all of the Target Shares held
by the Target Shareholder. In exchange therefor, Acquiror shall
issue to the Target Shareholder a certificate or certificates
representing the shares of Acquiror Shares to be issued pursuant
to Section 2(d)(ii). Surrendered certificates shall forthwith be
canceled. Acquiror shall not be obligated to deliver the Acquiror
Shares to which the Target Shareholder is entitled as a result of
Merger until such holder surrenders his certificate or
certificates representing shares of Target Shares for exchange as
provided in this Section 2(d)(vii). Until so surrendered and
exchanged, each such certificate shall represent solely the right
to receive the certificate representing Acquiror Shares to be
issued pursuant to Section 2(d)(ii) into which the shares it
theretofore represented shall have been converted pursuant to
Section 2(d)(ii), and Acquiror shall not be required to issue the
Acquiror Shares to which the Target Shareholder otherwise would be
entitled; provided that procedures allowing for payment against
lost or destroyed certificates upon receipt of customary and
appropriate certifications and indemnities shall be provided.
(viii) Rights of the Target Shareholders. From and after the
Merger Effective Time, the Target Shareholders shall have no
rights with respect to his shares of Target Shares other than the
right to surrender the certificate or certificates representing
such shares for exchange pursuant to Section 2(d)(vii)
3. Termination of Agreement. This Agreement shall terminate if the
Certificate of Merger is not filed on or before December 31, 1996.
4. Miscellaneous.
(a) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns; provided, however, that the provisions in
Section 2 above concerning payment of the merger consideration are intended for
the benefit of Target.
(b) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
(c) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and
4
<PAGE> 5
permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior
written approval of the other Parties.
(d) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(e) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF MICHIGAN WITHOUT GIVING
EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE
OF MICHIGAN OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE
LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF MICHIGAN.
(g) Amendments and Waivers. The Parties may mutually amend any provision
of this Agreement at any time prior to the Effective Time with the prior
authorization of their respective boards of directors; provided, however, that
any amendment effected subsequent to shareholder approval will be subject to
the restrictions contained in the Michigan Business Corporation Act. No
amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by all of the Parties. No waiver by any Party of
any default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
(h) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(i) Construction. Any reference to any federal, state, local, or foreign
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context otherwise requires. The word
"including" shall mean including without limitation.
(j) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
*****
5
<PAGE> 6
IN WITNESS WHEREOF, the Parties hereto have executed this Merger Agreement
as of the date first above written.
SUPERIOR CONSULTANT HOLDINGS SUPERIOR ACQUISITION, INC., a Michigan
CORPORATION, a Delaware corporation corporation
By:________________________________ By:________________________________
Its:________________________________ Its:________________________________
SUPERIOR CONSULTANT COMPANY, INC., a
Michigan corporation
By:________________________________
Its:________________________________
6
<PAGE> 1
EXHIBIT 2.2
MERGER AGREEMENT
AMONG
UNITIVE CORP.
AND
UNITIVE ACQUISITION, INC.
AND
SUPERIOR CONSULTANT HOLDINGS CORPORATION
______________ __ , 1996
This Agreement is entered into as of ______________ ___, 1996, by and
among SUPERIOR CONSULTANT HOLDINGS CORPORATION, a Delaware corporation
("ACQUIROR"), UNITIVE ACQUISITION, INC. a Michigan corporation and a wholly-
owned Subsidiary of the Acquiror ("TRANSITORY SUBSIDIARY"), and UNITIVE
CORP., a Michigan corporation ("TARGET".) Acquiror, Transitory Subsidiary,
Transitory Subsidiary, and Target are referred to collectively herein as the
"PARTIES".
This Agreement contemplates a transaction in which the Acquiror will
acquire all of the outstanding capital stock of Target through a reverse
subsidiary merger of Transitory Subsidiary with and into Target. The
Shareholders of Target will receive capital stock of Acquiror in exchange for
their capital stock in Target. It is intended that the merger qualify as a
tax-free reorganization pursuant to Code Sections 368(a)(1)(A) and 368(a)(2)(E).
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Definitions.
"ACQUIROR" has the meaning set forth in the preface above.
<PAGE> 2
"CERTIFICATE OF MERGER" has the meaning set forth in Section 2(c) below.
"CLOSING" has the meaning set forth in Section 2(b) below.
"CLOSING DATE" has the meaning set forth in Section 2(b) below.
"MICHIGAN BUSINESS CORPORATION ACT" means the Michigan Business
Corporation Act, as amended.
"MERGER" has the meaning set forth in Section 2(a)(i) below.
"MERGER EFFECTIVE TIME" has the meaning set forth in Section 2(d)(i)
below.
"PARTY" has the meaning set forth in the preface above.
"PERSON" means an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
"SUBSIDIARY" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"TARGET" has the meaning set forth in the preface above.
"TARGET SHARE" means any share of the Common Stock, no par value per
share, of Target.
"TARGET SHAREHOLDER" means any Person who or which holds any Target
Shares.
"TRANSITORY SUBSIDIARY" has the meaning set forth in the preface above.
2. Basic Transaction.
(a) The Merger. On and subject to the terms and conditions
of this Agreement, Transitory Subsidiary will merge with and into Target
("MERGER") at the Merger Effective Time. Target shall be the corporation
surviving the Merger.
(b) The Closing. The closing of the transactions
contemplated by this Agreement (the "CLOSING") shall take place at the
offices of Acquiror in Southfield, Michigan, commencing at 9:00 a.m.
local time on the second business day subsequent to the execution of a
definitive underwriting agreement with respect to an initial public
offering of shares of the Acquiror (the "Underwriting
2
<PAGE> 3
Agreement") or such other date as the Parties may mutually determine
(the "CLOSING DATE").
(c) Actions at the Closing. At the Closing, Target and
Transitory Subsidiary will file with the Secretary of State of the State
of Michigan a Certificate of Merger in the form attached hereto as
Exhibit A.
(d) Effect of Merger.
(i) General. The Merger shall become effective at the
time Certificate of Merger is filed with the Secretary of State
of the State of Michigan (the "MERGER EFFECTIVE TIME"). The
Merger shall have the effect set forth in the Michigan Business
Corporation Act. The surviving corporation of the Merger may,
at any time after the Merger Effective Time, take any action
(including executing and delivering any document) in the name
and on behalf of either Target or Transitory Subsidiary in order
to carry out and effectuate the transactions contemplated by
this Agreement.
(ii) Conversion of Shares. At and as of the Merger
Effective Time, each Target Share shall be converted into the
right to receive 5.41417544 Acquiror Shares. After the Effective
Time, no Target Share shall be deemed to be outstanding or to
have any rights other than those set forth above in this Section
2(d)(ii) and in 2(d)(vii).
(iii) Conversion of Capital Stock of the Transitory
Subsidiary. At and as of the Merger Effective Time, each share
of Common Stock, no par value, of Transitory Subsidiary shall be
converted into one share of Common Stock, no par value per
share, of the surviving corporation.
(iv) Articles of Incorporation. The Articles of
Incorporation of Target Subsidiary in effect at and as of
the Merger Effective Time will remain in effect as the Articles
of Incorporation of the surviving corporation of Merger without
any modification or amendment in Merger except that the name of
the surviving corporation shall be changed to "Unitive
Corporation."
(v) Bylaws. The Bylaws of Target in effect at and as of
the Merger Effective Time will remain the Bylaws of the
surviving corporation of Merger without any modification or
amendment in Merger.
(vi) Directors and Officers. The directors and officers
of Target in office at and as of the Merger Effective Time will
remain the directors and officers of the surviving corporation
of Merger (retaining their respective positions and terms of
office).
3
<PAGE> 4
(vii) Exchange of Certificates. At the Closing, each
Target Shareholder shall surrender to Acquiror for exchange a
certificate or certificates, duly endorsed in blank or
accompanied by duly executed stock powers, representing all of
the Target Shares held by the Target Shareholder. In exchange
therefor, Acquiror shall issue to the Target Shareholder a
certificate or certificates representing the shares of Acquiror
Shares to be issued pursuant to Section 2(d)(ii). Surrendered
certificates shall forthwith be canceled. Acquiror shall not be
obligated to deliver the Acquiror Shares to which the Target
Shareholder is entitled as a result of Merger until such holder
surrenders his certificate or certificates representing shares
of Target Shares for exchange as provided in this Section
2(d)(vii). Until so surrendered and exchanged, each such
certificate shall represent solely the right to receive the
certificate representing Acquiror Shares to be issued pursuant
to Section 2(d)(ii) into which the shares it theretofore
represented shall have been converted pursuant to Section
2(d)(ii), and Acquiror shall not be required to issue the
Acquiror Shares to which the Target Shareholder otherwise would
be entitled; provided that procedures allowing for payment
against lost or destroyed certificates upon receipt of customary
and appropriate certifications and indemnities shall be
provided.
(viii) Rights of the Target Shareholders. From and
after the Merger Effective Time, the Target Shareholders shall
have no rights with respect to his shares of Target Shares other
than the right to surrender the certificate or certificates
representing such shares for exchange pursuant to Section
2(d)(vii)
3. Termination of Agreement. This Agreement shall terminate if the
Underwriting Agreement is not executed on or before December 31, 1996.
4. Miscellaneous.
(a) No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person other than the Parties and their
respective successors and permitted assigns; provided, however, that the
provisions in Section 2 above concerning delivery of the merger consideration
are intended for the benefit of Target's shareholders.
(b) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
(c) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and
4
<PAGE> 5
permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Parties.
(d) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(e) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF MICHIGAN WITHOUT GIVING
EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE
OF MICHIGAN OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE
LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF MICHIGAN.
(g) Amendments and Waivers. The Parties may mutually amend any
provision of this Agreement at any time prior to the Effective Time with the
prior authorization of their respective boards of directors; provided, however,
that any amendment effected subsequent to shareholder approval will be subject
to the restrictions contained in the Michigan Business Corporation Act. No
amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by all of the Parties. No waiver by any Party of
any default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(h) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(i) Construction. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. The
word "including" shall mean including without limitation.
(j) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
*****
5
<PAGE> 6
IN WITNESS WHEREOF, the Parties hereto have executed this Merger
Agreement as of the date first above written.
SUPERIOR CONSULTANT HOLDINGS UNITIVE ACQUISITION, INC., a
CORPORATION, a Delaware corporation Michigan corporation
By:________________________________ By:________________________________
Its:_______________________________ Its:_______________________________
UNITIVE CORP., a
Michigan corporation
By:________________________________
Its:_______________________________
6
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<S><C>
EXHIBIT 4.1
NUMBER [PHOTO] SHARES
SUPERIOR CONSULTANT HOLDINGS CORPORATION
INCORPORATED UNDER THE LAWS OF SEE REVERSE FOR CERTAIN DEFINITIONS
THE STATE OF DELAWARE
THIS CERTIFICATE IS TRANSFERABLE IN CUSIP 868146 10 1
CHICAGO, ILLINOIS AND NEW YORK, NEW YORK
This Certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE $0.01 PER SHARE, OF
SUPERIOR CONSULTANT HOLDINGS CORPORATION
transferable on the books of the Corporation in person or by duly authorized Attorney upon surrender of this Certificate properly
endorsed. CERTIFICATE OF STOCK
This Certificate is not valid unless countersigned and registered by the Transfer Agent Registrar. By
Witness the facsimile seal and the signatures of its duly authorized officers.
Dated Countersigned and
[SEAL] Registered:
HARRIS Trust and
Savings BANK
Susan M. Synor Richard D. Helppie (CHICAGO)
ASSISTANT SECRETARY PRESIDENT TRANSFER AGENT AND
REGISTRAR
AUTHORIZED
SIGNATURE
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<S><C>
SUPERIOR CONSULTANT HOLDINGS CORPORATION
If the Corporation is authorized to issue different classes of shares or different series within a class, the Corporation
will furnish to any shareholder upon request and without charge a full statement of the designations, relative rights, preferences,
and limitations applicable to shares of each class authorized to be issued, and, if the Corporation is authorized to issue any
preferred or special class in series, the variations in the relative rights, preferences, and limitations between the shares of each
such series so far as the same have been fixed and determined and the authority of the Board of Directors to fix and determine the
relative rights, preferences, and limitations for future series.
- ------------------------------------------------------------------------------------------------------------------------------------
The following abbreviations, when used in the inscription on the face of this Certificate, shall be construed as though
they were written out in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT. __________________Custodian _____________________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with under Uniform Gifts to Minors
right of survivorship and Act _____________________________________
not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
For Value received, _____________________________________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
| |
|____________________________________|______________________________________________________________________
____________________________________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF ASSIGNEE)
____________________________________________________________________________________________________________
____________________________________________________________________________________________________________
____________________________________________________________________________________________________________
_____________________________________________________________________________________________________ Shares
of Common Stock represented by the within Certificate and do hereby irrevocably constitute and appoint _____
________________________________________________________________________________________________ Attorney to
transfer the said Shares on the books of the within-named Corporation with full power of substitution in the
premises.
Dated _______________________________________
X ____________________________________________________________________
X ____________________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED: ____________________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION, (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
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<PAGE> 1
EXHIBIT 5.1
[SACHNOFF & WEAVER, LTD. LETTERHEAD]
October 4, 1996
Superior Consultant Holdings Corporation
4000 Town Center
Suite 1100
Southfield, MI 48075
Dear Ladies and Gentlemen:
We have acted as counsel to Superior Consultant Holdings Corporation, a
Delaware corporation (the "Company"), in connection with the Registration
Statement on Form S-1 (the "Registration Statement"), filed by the Company
under the Securities Act of 1933, as amended, with the Securities and Exchange
Commission (the "Commission"), relating to the sale of up to 2,472,500 shares
(the "Shares") of the Company's Common Stock, par value $0.01 per share. We
have examined the Registration Statement and the form of the Underwriting
Agreement filed with the Commission as an exhibit to the Registration Statement
(the "Underwriting Agreement"). In addition, we have reviewed such other
documents and records of corporate proceedings, and have made such further
investigations, as we have deemed necessary to enable us to express the opinion
hereinafter set forth.
We hereby advise you that in our opinion the Shares have been duly
authorized by the Company and, upon payment and delivery in accordance with the
Underwriting Agreement, will be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the Registration Statement. In giving this consent, we do not
hereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act of 1933 or the rules and regulations of
the Securities and Exchange Commission.
Very truly yours,
/s/ Sachnoff & Weaver, Ltd.
SACHNOFF & WEAVER, LTD.
JAS/WED
<PAGE> 1
EXHIBIT 10.9
SUPERIOR CONSULTANT COMPANY, INC.
Amendment to Employment Agreement
and 1996 Vice President Bonus Plan
The Employment Agreement dated January 1, 1996, as amended (the "EMPLOYMENT
AGREEMENT") between Robert R. Tashiro, (the "EMPLOYEE") and Superior
Consultant Company, Inc., a Michigan Corporation ("SUPERIOR"), is hereby
amended as follows:
1. Notwithstanding any provision of the Employment agreement, the 1996
Vice President Bonus Plan between Superior and Employee, and any
subsequent amendments, supplements or successor plans or agreements
thereto to the contrary, during the period beginning on the closing of
the registered initial public offering of common stock ("IPO") by
Superior's affiliate, Superior Consultant Holdings Corporation
("SUPERIOR HOLDINGS") and ending on December 31, 1997 (the
"COMPENSATION LIMITATION PERIOD"), the total salary and bonus payable
to Employee by Superior, Superior Holdings and their affiliates shall
be limited as follows:
a) Employee's bi-weekly salary at all times during the
Compensation Limitation Period shall be limited to $8,461.54.
b) During calendar 1997, the aggregate annual, monthly and other
bonus compensation payable to Employee shall not exceed
$75,000.
c) During the portion of the Compensation Limitation Period
occurring within calendar 1996 (the "1996 PERIOD"), the
aggregate monthly annual and other bonus compensation payable
to Employee shall not exceed the product of (i) $75,000
multiplied by (ii) a fraction, the numerator of which shall be
the number of days in the 1996 Period and the denominator of
which shall be 365.
d) The aggregate bonus amounts set forth above may be allocated
between Employee's annual Base Bonus and monthly Base Bonus
amounts by Superior in its discretion.
2. This amendment becomes effective upon the closing of the IPO of
Superior Holdings. All of the provisions of the Employment Agreement
and 1996 Vice President Bonus Plan shall remain in full force and
effect, unamended hereby, unless and until the IPO closing occurs.
3. Except as amended herein, all terms and provisions of the Employment
Agreement and 1996 Vice President Bonus Plan remain in full force and
effect.
SIGNATURES:
Acknowledged and accepted for Superior Consultant Company, Inc.
_____________________________ __________________________ _______________
NAME TITLE DATE
I hereby acknowledge that I have voluntarily entered into this Amendment to
Employment Agreement and 1996 Vice President Bonus Plan after having a full and
adequate opportunity to review its provisions.
Acknowledged and accepted
_____________________________ __________________________ _______________
NAME TITLE DATE
<PAGE> 1
EXHIBIT 10.10
SUPERIOR CONSULTANT COMPANY, INC.
Amendment to Employment Agreement and 1996 Executive Vice
President Bonus Plan
The Employment Agreement dated ________________, as amended (the "EMPLOYMENT
AGREEMENT") between Charles O. Bracken, (the "EMPLOYEE") and Superior
Consultant Company, Inc., a Michigan Corporation ("SUPERIOR"), is hereby
amended as follows:
1. Notwithstanding any provision of the Employment agreement, the 1996
Vice President Bonus Plan between Superior and Employee, and any
subsequent amendments, supplements or successor plans or agreements
thereto to the contrary, during the period beginning on the closing of
the registered initial public offering of common stock ("IPO") by
Superior's affiliate, Superior Consultant Holdings Corporation
("SUPERIOR HOLDINGS") and ending on December 31, 1997 (the
"COMPENSATION LIMITATION PERIOD"), the total salary and bonus payable
to Employee by Superior, Superior Holdings and their affiliates shall
be limited as follows:
a) Employee's bi-weekly salary at all times during the
Compensation Limitation Period shall be limited to $11,153.85.
b) During calendar 1997, the aggregate annual, monthly and other
bonus compensation payable to Employee shall not exceed
$75,000.
c) During the portion of the Compensation Limitation Period
occurring within calendar 1996 (the "1996 PERIOD"), the
aggregate monthly annual and other bonus compensation payable
to Employee shall not exceed the product of (i) $75,000
multiplied by (ii) a fraction, the numerator of which shall be
the number of days in the 1996 Period and the denominator of
which shall be 365.
d) The aggregate bonus amounts set forth above may be allocated
between Employee's annual Base Bonus and monthly Base Bonus
amounts by Superior in its discretion.
2. This amendment becomes effective upon the closing of the IPO of
Superior Holdings. All of the provisions of the Employment Agreement
and the 1996 Executive Vice President Bonus Plan shall remain in full
force and effect, unamended hereby, unless and until the IPO closing
occurs.
3. Except as amended herein, all terms and provisions of the Employment
Agreement and the 1996 Executive Vice President Bonus Plan remain in
full force and effect.
SIGNATURES:
Acknowledged and accepted for Superior Consultant Company, Inc.
_____________________________ __________________________ _______________
NAME TITLE DATE
I hereby acknowledge that I have voluntarily entered into this Amendment to
Employment Agreement and 1996 Executive Vice President Bonus Plan after having
a full and adequate opportunity to review its provisions.
Acknowledged and accepted
_____________________________ __________________________ _______________
NAME TITLE DATE
<PAGE> 1
EXHIBIT 10.11
SUPERIOR CONSULTANT HOLDINGS CORPORATION
Compensation Agreement
The Compensation Agreement is made as of October 1, between Richard D.
Helppie, Jr., (the "EMPLOYEE") and Superior Consultant Holdings Corporation, a
Delaware Corporation ("SUPERIOR").
The parties agree as follows:
1. Notwithstanding any provision of any bonus or compensation plan or
agreement between Superior or any of its subsidiaries and employee
to the contrary, during the period beginning on the closing of the
registered initial public offering of common stock ("IPO") by Superior
and ending on December 31, 1997 (the "COMPENSATION LIMITATION PERIOD"),
the total salary and bonus payable to Employee by Superior and its
subsidiaries and affiliates shall be limited as follows:
a) During calendar 1997, the aggregate salary and bonus
compensation payable to Employee shall not exceed $400,000.
b) During the portion of the Compensation Limitation Period
occurring within calendar 1996 (the "1996 PERIOD"), the
aggregate salary and bonus compensation payable
to Employee shall not exceed the product of (i) $400,000
multiplied by (ii) a fraction, the numerator of which shall be
the number of days in the 1996 Period and the denominator of
which shall be 365.
c) The aggregate compensation amounts specified above may be
allocated between base salary and bonus in such amounts and
according to such criteria, as the Company in its discretion
shall determine.
3. This agreement becomes effective only upon the closing of the IPO of
Superior.
SIGNATURES:
Acknowledged and accepted for Superior Consultant Holdings Corporation.
_____________________________ __________________________ _______________
NAME TITLE DATE
I hereby acknowledge that I have voluntarily entered into this Compensation
Agreement after having a full and adequate opportunity to review its provisions.
Acknowledged and accepted
_____________________________ __________________________ _______________
NAME TITLE DATE
<PAGE> 1
EXHIBIT 23.1
ACCOUNTANTS' CONSENT
We have issued our report dated July 26, 1996, accompanying the
consolidated financial statements of Superior Consultant Holdings Corporation
and Subsidiaries contained in the Registration Statement and Prospectus, which
will be signed upon consummation of the transaction described in Note 1 to the
consolidated financial statements. We consent to the use of the aforementioned
reports in the Registration Statement and Prospectus, and to the use of our name
as it appears under the captions "Selected Consolidated Financial and Operating
Data" and "Experts".
/s/ GRANT THORNTON LLP
Detroit, Michigan
October 4, 1996
