<PAGE>
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
[_] Preliminary Information Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14C-5(D)(2))
[x] Definitive Information Statement
Superior Consultant Holdings Corporation
- --------------------------------------------------------------------------------
(Name of Registrant As Specified In Charter)
Payment of Filing Fee (Check the appropriate box):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14c-5(g).
[x[ No fee required.
[_] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
--------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
SUPERIOR CONSULTANT HOLDINGS CORPORATION
4000 TOWN CENTER, SUITE 1100
SOUTHFIELD, MICHIGAN 48075
----------------
INFORMATION STATEMENT
----------------
GENERAL INFORMATION
GENERAL
This Information Statement (the "Information Statement") is furnished to the
holders of Common Stock, $0.01 par value per share (the "Common Stock"), of
Superior Consultant Holdings Corporation, a Delaware corporation (the
"Company"), in connection with certain actions taken by a Written Consent of
Stockholders in Lieu of Special Meeting dated October 27, 1997 (the "Written
Consent").
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
This Information Statement is being provided pursuant to the requirements of
Rule 14c-2 promulgated under Section 14 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), to inform holders of Common Stock
entitled to vote or give an authorization or consent in regard to the actions
authorized by the Written Consent, of the actions having been taken by the
Written Consent.
By executing and delivering the Written Consent to the Company, stockholders
holding no less than a majority of the outstanding shares of the Company's
Common Stock (the "Majority Stockholders") authorized the action taken by the
Board of Directors of the Company (the "Board") on October 22, 1997 to amend
the Superior Consultant Holding Corporation Long-Term Incentive Plan (the
"Incentive Plan") to increase the aggregate number of shares as to which
awards may be granted under the plan from 900,000 to 2,400,000 and to amend
the terms and conditions of the Formula Options (as defined under the
Incentive Plan) to be granted to directors of the Company under the Incentive
Plan. This amendment to the Incentive Plan will not become effective until
December 1, 1997.
RECORD DATE
On October 22, 1997 (the "Record Date"), there were 8,206,464 shares of
Common Stock outstanding and entitled to vote upon the matter approved by the
Written Consent. On the Record Date, the Majority Stockholders executed a
Written Consent with respect to 4,372,944 shares of Common Stock owned by such
stockholders, which shares constituted approximately 53.3% of the Company's
outstanding Common Stock. Only stockholders of record of the Company at the
close of business on the Record Date are entitled to receive this Information
Statement. The Written Consent was executed October 27, 1997 and delivered by
the Majority Stockholders to the Company's principal executive offices at 4000
Town Center, Suite 1100, Southfield, Michigan 48075.
VOTING SECURITIES AND PRINCIPAL HOLDERS:
As of the Record Date, there were 8,206,464 outstanding shares of Common
Stock, each entitled to one vote on the matters authorized pursuant to the
Written Consent. Holders of Common Stock and entitled to vote were calculated,
as of the Record Date, to determine the number of shares constituting a
majority of the outstanding shares of Common Stock required to approve the
Written Consent.
<PAGE>
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of the Record Date by: (i) each person known by
the Company to own beneficially more than 5% of the outstanding shares of
Common Stock; (ii) each director of the Company; (iii) each executive officer
named in the Summary Compensation Table below; and (iv) all directors and
executive officers of the Company as a group in each case, as of the Record
Date. (Each person named below has an address in care of the Company's
principal executive offices.) Except as set forth in the footnotes to the
table, the Company believes that each person 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
SHARE(1)
-----------------
NUMBER OF
NAME OF BENEFICIAL OWNER SHARES PERCENT
------------------------ --------- -------
<S> <C> <C>
Richard D. Helppie, Jr.(2).............................. 3,927,001 47.9%
Charles O. Bracken...................................... 389,223 4.7
Robert R. Tashiro(3).................................... 195,610 2.4
James T. House(3)....................................... 16,500 *
Kenneth T. Boone........................................ 38,576 *
Reginald M. Ballantyne III(3)........................... 6,000 *
Bernard Lachner(3)...................................... 6,000 *
Douglas S. Peters(3).................................... 6,000 *
Richard P. Saslow(3).................................... 6,000 *
John L. Silverman(3).................................... 53,519 *
All Directors and Executive Officers as a group
(9 persons)(2),(3)..................................... 4,644,429 56.6
</TABLE>
- --------
* Less than 1%.
(1) Applicable percentage of ownership as of the Record Date is based upon
8,206,464 shares of Common Stock outstanding. Applicable percentage in
each case is determined by assuming the exercise of options that are held
by such persons (but not those held by any other person) which are
exercisable within 60 days of the date hereof. 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.
(2) 3,788,111 shares are held by The Richard D. Helppie, Jr. Trust, of which
Mr. Helppie is the sole trustee, 97,223 shares of Common Stock are held by
The Superior Consultant Charitable Foundation, of which Mr. Helppie is
president and a director, and 41,667 shares of Common Stock are held by
The Helppie Family Charitable Foundation, of which Mr. Helppie is
president and a director. Mr. Helppie is deemed to be a beneficial owner
of the Trust and the two foundations. The address for Mr. Helppie, the
Trust and the two foundations is in care of the Company's principal
executive offices.
(3) Includes shares issuable upon exercise of options exercisable within 60
days from the date hereof. Mr. Tashiro 1,000 shares; Mr. House 4,000
shares; Mr. Ballantyne 6,000 shares; Mr. Lachner 6,000 shares; Mr. Peters
6,000 shares; Mr. Saslow 6,000 shares; and Mr. Silverman 3,000 shares.
2
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth all compensation awarded or earned by the
Company's President and Chief Executive Officer and the four other most highly
paid executive officers during the last two fiscal years (the "Named Executive
Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1) LONG TERM COMPENSATION(4)
--------------------------------------- ---------------------------
SECURITIES
NAME AND PRINCIPAL FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION OPTIONS (#) COMPENSATION(4)
------------------ ------ -------- ---------- ------------ ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard D. Helppie, Jr.. 1996 $436,196 $2,558,779 $ -- -- $7,926
President, Chief 1995 477,000 1,948,448 -- -- 9,709
Executive Officer and
Chairman of the Company
Charles O. Bracken...... 1996 317,136 527,061 -- -- 7,926
Executive Vice 1995 318,000 378,419 150,000(2) -- 9,709
President of Superior
Robert R. Tashiro....... 1996 204,493 364,745 -- 5,000 7,926
Senior Vice President 1995 176,000 207,162 75,000(2) -- 9,709
and Chief Operating
Officer of Superior
James T. House.......... 1996 95,000 120,413 13,556(3) 20,000 7,664
Vice President, Chief 1995 80,000 62,145 -- -- 7,198
Financial Officer and
Treasurer of the
Company
Kenneth T. Boone........ 1996 125,000 13,464 -- -- 7,332
President and Chief 1995 90,000 63,500 -- -- 7,975
Operating Officer of
Enterprise (5)
</TABLE>
- --------
(1) The Company has entered into agreements, effective as of October 16, 1996
through December 31, 1997, with Messrs. Helppie, Bracken and Tashiro,
which provide these three executives with aggregate annual compensation of
approximately $1.1 million, comprised of base salary and bonus
compensation based on achievement of certain pre-determined performance
criteria.
(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 the sale.
(3) Consists of gain on exercise of stock options.
(4) Represents amounts paid by the Company during fiscal 1996 for (i) long-
term and short-term disability insurance premiums as follows: Messrs.
Helppie, Bracken, Tashiro and Boone $450 each, and Mr. House $348, (ii)
life insurance premiums for which the Company is not the beneficiary as
follows: Messrs. Helppie, Bracken and Tashiro $422 each, Mr. House $262
and Mr. Boone $450, and (iii) profit sharing contributions made by the
Company as follows: Messrs. Helppie, Bracken, Tashiro and House $7,054
each and Mr. Boone $6,432.
(5) Mr. Boone served in this position with one of the Company's two wholly-
owned operating subsidiaries, Enterprise Consulting Group, Inc., in fiscal
1995 and fiscal 1996.
3
<PAGE>
EXECUTIVE OPTION GRANTS
The following table contains information concerning the stock option grants
made to each of the Named Executive Officers in 1996.
OPTION GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES OF STOCK
PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(1)
------------------------------------------------------------ -----------------
SHARES % OF TOTAL OPTIONS EXERCISE
UNDERLYING GRANTED TO EMPLOYEES PRICE EXPIRATION
NAME OPTIONS GRANTED IN FISCAL 1996 PER SHARE(2) DATE 5% 10%
---- --------------- -------------------- ------------ ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Richard D. Helppie, Jr.. -- -- $ -- -- $ -- $ --
Charles O. Bracken...... -- -- -- -- -- --
Robert R. Tashiro....... 5,000 2.2% 16.00 10/10/06 50,300 127,500
James T. House.......... 20,000 8.9% 16.00 10/10/06 201,200 510,000
Kenneth T. Boone........ -- -- -- -- -- --
</TABLE>
- --------
(1) In accordance with SEC rules, these columns show gains that might exist for
the option over the life of the option, a period of ten years. This
valuation is hypothetical; if the stock price does not increase above the
exercise price, compensation to the Named Executive Officers will be zero.
A 5% or 10% annual compounded increase in the Company's stock price from
the date of grant to the end of 10-year option term would result in stock
prices of $26.06 and $41.50 per share, respectively. The potential
realizable value does not represent the Company's prediction of its stock
price performance. There can be no assurance that the actual stock price
appreciation over the ten-year option will be at the assumed 5% or 10%
levels or at any other defined level.
(2) The options become exercisable at a rate of 20% per year, on the
anniversary date of the grant, over a five-year period.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information concerning stock options exercised
by the Named Executive Officers during 1996, as well as the value of
unexercised options held by such persons at December 31, 1996. The values of
in-the-money options (which represent the positive spread between the exercise
price of any existing stock options and $24 3/4 per share, the closing price of
the Common Stock as reported by the Nasdaq National Market on December 31,
1996) also are included.
AGGREGATE OPTION EXERCISES IN FISCAL 1996
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
SHARES
ACQUIRED NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-THE-
UPON VALUE UNDERLYING UNEXERCISED MONEY OPTIONS AT
EXERCISE REALIZED(1) OPTIONS AT DECEMBER 31, 1996 DECEMBER 31, 1996
-------- ----------- -------------------------------- --------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------- --------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Richard D. Helppie, Jr.. -- $ -- -- -- -- $ --
Charles O. Bracken...... -- -- -- -- -- --
Robert R. Tashiro....... -- -- -- 5,000 -- 43,750
James T. House.......... 1,066 13,556 -- 20,000 -- 175,000
Kenneth T. Boone........ -- -- -- -- -- --
</TABLE>
- --------
(1) Calculated as the difference between the fair market value of the Company's
Common Stock at the time of the option exercise and the exercise price.
4
<PAGE>
EMPLOYMENT RELATED AGREEMENTS
Richard D. Helppie, Jr.'s employment agreement limits his aggregate annual
compensation to $400,000, consisting of a combination of base salary and
bonus, through the end of fiscal 1997. This agreement became effective October
16, 1996.
Charles O. Bracken's employment agreement provides for an annual base salary
of $290,000 and an performance-based bonus of up to $75,000 per year through
the end of fiscal 1997. Under the employment agreement, Mr. Bracken is subject
to noncompetition, nonsolicitation and nondisclosure covenants.
Robert R. Tashiro's employment agreement provides for an annual base salary
of $220,000 and an annual performance-based bonus of up to $75,000 per year
through the end of fiscal 1997. Under the employment agreement, Mr. Tashiro is
subject to noncompetition, nonsolicitation and nondisclosure covenants.
James T. House's employment agreement provides for his employment as a Vice
President and Chief Financial Officer of the Company at an annual base salary
of approximately $110,000. Mr. House also participates in the Company's 1997
Vice President Bonus Plan pursuant to which he is eligible to receive
quarterly and annual base bonuses of $10,000 and $25,000, respectively (which
base bonuses are subject to increase or decrease based on performance 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.
COMPENSATION PLANS
The Board has adopted the First Amendment to the Incentive Plan. Pursuant to
the Written Consent, the increase in the number of shares under the Incentive
Plan and the changes to the terms and conditions of the Formula Options to be
granted under the plan to each non-employee director on the Board has been
approved and will become effective December 1, 1997. The amendment to the
Incentive Plan is set forth in Annex A.
DISCUSSION OF AMENDMENT
The main purposes for amending the Incentive Plan are to (i) increase the
number of shares available for grant thereunder and (ii) amend the terms and
conditions of the Formula Options to be granted under the plan to each non-
employee director on the Board.
Under the Incentive Plan, a total of 900,000 shares of Common Stock
currently have been made available for issuance. Because of the Company's
decision to make the Incentive Plan available to greater numbers of employees,
the need to issue options in connection with acquisitions, and the Company's
anticipated needs for flexibility in compensating its key employees in the
future and otherwise as needed to sustain future growth in the Company's
operations, the Board has adopted an amendment to increase to 2,400,000 the
aggregate number of shares of Common Stock available for issuance under the
Incentive Plan. As of the Record Date, the market value of the 1,500,000
additional shares of Common Stock to be available for issuance under the
Incentive Plan was $53,812,500. Cash payments received by the Company under
the Incentive Plan will be used for general corporate purposes. No more than
600,000 shares may be granted under the Incentive Plan in any one calendar
year to any one employee.
Prior to the adoption of the amendment to the Incentive Plan, each director
who was not an officer or employee of the Company was automatically granted a
Formula Option to purchase 3,000 shares of Common Stock, regardless of the
number of Board meetings such director attended. The Formula Option was
immediately exercisable upon grant. Under the amendment, each director who is
not an officer or employee of the Company will be granted automatically an
option to purchase 5,000 shares of Common Stock upon his or her initial
election and qualification as a non-employee Board member; and, thereafter,
will be granted automatically an option to purchase 5,000 shares of Common
Stock upon each anniversary of such non-employee Board member's election,
provided such person remains an incumbent non-employee Board member on such
anniversary date.
5
<PAGE>
Of the 5,000 shares of Common Stock subject to each option, 3,000 shares
will be fully exercisable upon grant. The remaining option to purchase 2,000
shares of Common Stock will become fully exercisable on the first anniversary
of the date of grant, provided that the Board member attends all regularly
scheduled meetings of the Board and participates in not less than eighty
percent (80%) of all Board conference calls scheduled on notice of not less
than forty-eight hours. Failure to satisfy such Board attendance and
participation criteria will result in the lapse of the option to purchase the
remaining 2,000 shares of Common Stock as of the first anniversary of the date
of grant.
DESCRIPTION OF THE PLAN
General
The purpose of the Incentive Plan, which was originally adopted by the Board
and approved by the stockholders of the Company in October, 1996, is to assist
the Company in attracting and retaining key employees, and also non-employee
directors, independent contractors and consultants, and to give such persons a
greater proprietary interest in, and closer identity with, the Company and its
financial success. The Incentive Plan authorizes the Company to make grants
("Awards") of Incentive Stock Options (within the meaning of Section 422 of
the Internal Revenue Code, as amended (the "Code")), Non-Qualified (or non-
statutory) Stock Options (the Incentive and Non-Qualified Stock Options issued
under the Incentive Plan are referred to collectively as "Options"),
Restricted Stock, Stock Appreciation Rights ("SARs"), Performance Awards and
Cash Awards.
The Incentive Plan is administered by a committee of the Board consisting of
two or more Board members (the "Committee"). The Committee has complete
discretion to determine which employees and non-employees will be recipients
of Awards under the Incentive Plan (the "Participants") and to establish the
terms, conditions and limitations of each Award (subject to the terms of the
Incentive Plan and the applicable provisions of the Code), including the type
and amount of the Award, the number of shares of Common Stock to be subject to
Options or Restricted Stock, or the amount of cash to be included in the
Award, the exercise price of any Options and the date or dates upon which the
Options become exercisable or upon which any restrictions applicable to any
Common Stock included in the Award lapse. The Committee also has full power to
construe and interpret the Plan and the Awards granted under the Plan, and to
establish rules and regulations necessary or advisable for its administration.
Currently, the Committee consists of three Board members, of whom two
independent, non-employee-directors have been delegated the responsibility to
make Awards to those employees subject to the requirements of Section 16(b) of
the Exchange Act.
Awards under the Incentive Plan may be granted only to key employees and key
non-employees (non-employee directors, consultants or independent contractors)
of the Company and its subsidiaries. The Committee will determine whether a
particular employee or non-employee qualifies as a "Key Employee" or "Key Non-
Employee." Awards may be granted to a prospective employee, conditioned upon
such person becoming an employee.
The Board may amend the Plan in any respect, except that the following
changes may not be made without stockholder approval: (i) the maximum number
of shares available for Awards may not be increased except upon stock splits
and dividends, combinations and similar events, (ii) the requirements as to
eligibility may not be materially modified, (iii) the benefit to participants
may not be materially increased, (iv) the period during which Incentive
Options may be granted or exercised may not be extended, and (v) the class of
employees eligible to receive Incentive Options may not be modified.
Terms and Conditions of Awards under the Incentive Plan
Awards under the Incentive Plan may consist of any combination of one or
more Incentive or Non-Qualified Options, Restricted Stock, SARs, Performance
Awards or Cash Awards, on a stand alone, combination or tandem basis. The
Committee may specify that Awards other than Options will be paid in cash,
shares of common stock, or a combination of cash and common stock.
6
<PAGE>
The Committee is permitted to cancel any unexpired, unpaid, unexercised or
deferred Awards at any time if a Participant (a) provides services for a
competitor, (b) discloses confidential Company information, or (c) fails to
disclose and convey to the Company any invention or idea developed by the
Participant during employment by the Company and relating to the business of
the Company. Unless otherwise described below for Options, or as may be
provided in the Award, all unexpired, unpaid, unexercised or deferred Awards
will be canceled immediately if a Participant ceases his or her employment
with the Company and its subsidiaries, except for (a) retirement under a
Company retirement plan, (b) retirement in the best interest of the Company
(as determined by the Company's chief executive or other designated senior
officer), or (c) termination of the Participant's employment upon his or her
death or disability. Upon retirement (i) under a Company retirement plan or
(ii) in the best interests of the Company, the Committee may permit Awards to
continue, and may accelerate exercisability and vesting. Upon the death or
disability of a Participant, his or her estate or beneficiaries (or the
Participant in the case of disability) may exercise or receive benefits under
the Award until the original expiration date as provided in the Award (or
within one year in the case of Options) and the Committee may in its
discretion accelerate the vesting or terminate the restrictions to which the
Award is subject.
Upon any change in the nature or number of outstanding shares of Common
Stock due to stock split, stock dividend, merger, reorganization or similar
event, adjustments will be made to the numbers of shares and the applicable
exercise and base prices under outstanding Awards to prevent dilution or
enlargement of the Awards previously granted.
Both Incentive and Non-Qualified Options may be granted pursuant to the
Incentive Plan. Incentive Options must have an exercise price per share equal
to at least the fair market value of a share at the time the Award is granted.
As required by the Code, if an Incentive Option is granted to any Participant
who owns more than ten percent of the voting power of the Company (a
"Significant Stockholder"), then the exercise price per share to such
Participant will be not less than one hundred ten percent (110%) of fair
market value on the date of grant. Fair market value equals the closing sales
price of the common stock on the date of grant. The exercise price for Non-
Qualified Options will be determined by the Committee in its sole discretion
on the date of grant, and, except as may be determined to be appropriate by
the Committee pursuant to Section 162(m) of the Code, may be less than fair
market value. The maximum term of all Incentive Options granted under the
Incentive Plan is ten years. (Incentive Options granted to a Significant
Stockholder have a maximum term of five years.) The term of Non-Qualified
Options may be set by the Committee in its discretion. No Options may be
granted more than ten years from the date the Incentive Plan was adopted.
Except as otherwise determined by the Committee, all Options are non-
transferable and may be exercised during a Participant's lifetime only by the
Participant.
At the time an Option is awarded, the Committee will specify the date or
dates upon which the Option, or portion of the Option, becomes exercisable.
The permissible manner of payment for the purchase price upon exercise of the
Option (such as cash, check, the transfer of previously owned, fully paid
shares, or through a "cashless" exercise) will be set by the Committee in the
particular Award agreement or by general rules.
A Participant who ceases to be an employee or "Key Non-Employee" of the
Company or its subsidiaries for any reason other than death, disability or
termination "for cause" will be permitted to exercise any Option, to the
extent it was exercisable on the date of such cessation, but only within three
months of such cessation, to the extent to which it was exercisable upon
termination of employment. A Participant who is terminated for "cause," as
defined in the Incentive Plan, will immediately lose all rights to exercise
any Options. If a Participant dies, his or her estate or personal
representative may exercise the Option, to the extent it was exercisable on
the date of death. If a Participant becomes permanently disabled, he or she
may exercise an Option to the extent it was exercisable at the time of the
onset of the disability or, if the Option vests periodically, to the extent it
would have been exercisable as of the next vesting date. In the case of either
death or disability, the Option must be exercised within twelve (12) months
after the date of death or onset of disability, and prior to the original
expiration date of the Option.
7
<PAGE>
The Committee may award shares of Common Stock (or grant an Award
denominated in units of Common Stock) on a restricted basis. The terms of a
Restricted Stock Award, including the consideration, if any, to be paid by the
Participant to acquire the stock and the restrictions placed upon such shares
and the time or times or event or events upon which such restrictions will
lapse, will be determined by the Committee at the time the Award is made and
will be described in the Award agreement. After the Restricted Stock is
awarded, the Participant will be a stockholder with respect to such stock, and
will have rights to vote and receive dividends with respect to such stock.
Shares of Restricted Stock may not be transferred, assigned or pledged prior
to the lapse of the applicable restrictions. The Committee, in its discretion,
may accelerate the date on which the restrictions lapse.
The Committee may award SARs either alone, in tandem or in combination with
an Option or other Award. An SAR will permit the Participant to receive, upon
exercise, cash or shares of Common Stock equal in value to the excess of the
fair market value of a share of Common Stock as of the exercise date over the
base price set by the Committee at the time the SAR is granted, multiplied by
the number of shares of Common Stock then being exercised under the SAR. The
base price will be at least the fair market value of a share of common stock
on the date of grant, unless a lower base price is approved by the Board. SARs
will become exercisable upon the date or dates, or the occurrence of the
events, set by the Committee at the time of grant. An SAR may only be
exercised by the Participant or, if applicable, by the Participant's personal
representative.
The Committee may award Performance Awards or Cash Awards under the
Incentive Plan, subject to restrictions and conditions and other terms as
determined by the Committee at the time of the Award. The Committee may use
business criteria and other measures of performance it deems appropriate in
establishing any conditions, and may exercise its discretion to increase or
decrease the amounts payable under any Awards, subject to performance
conditions, except as otherwise may be limited in the case of a Performance
Award intended to qualify under Code (S)162(m). A Performance or Cash Award
will be subject to cancellation or forfeiture upon the terms set forth above.
Under the provisions of the Incentive Plan, all members of the Board who are
not employees of the Company will receive an Option to purchase 5,000 shares
of Common Stock upon his or her initial election and qualification as a non-
employee Board member. Each continuing non-employee member of the Board will
receive an additional Award of an Option to purchase 5,000 shares of Common
Stock upon each anniversary of such non-employee member's election to the
Board. 3,000 shares of Common Stock of each Option issued to a non-employee
member of the Board will become exercisable immediately upon grant. The option
to purchase the remaining 2,000 shares of Common Stock will be exercisable on
the first anniversary of the date of grant, provided the Board member attended
all regularly scheduled meetings of the Board and participated in 80% or more
of all conference calls scheduled by the Board on 48 hours or more notice.
Failure to satisfy such criteria shall result in the lapse of the Option to
purchase the remaining 2,000 shares of Common Stock. The description of the
Formula Options in this paragraph reflects the terms of the Incentive Plan, as
amended. The "Discussion of Amendment" above discusses how the Incentive Plan,
as amended, differs from the Incentive Plan prior to such amendment.
New Plan Benefits
The table below reports the number of shares of Common Stock which may be
purchased upon exercise of Options which the Company intends to grant under
the amendment to the Incentive Plan.
NEW PLAN BENEFITS
SUPERIOR CONSULTANT HOLDINGS CORPORATION LONG-TERM INCENTIVE PLAN
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING
NAME AND POSITION OPTION GRANTED
- ----------------- ---------------------------
<S> <C>
Executive Group..................................... 0
Non-Executive Director Group........................ 15,000
Non-Executive Officer Employee Group................ 8,000
</TABLE>
8
<PAGE>
In addition, the Committee has indicated that it intends to authorize the
Awards of Options to executive officers of the Corporation for up to 25,000
shares of Common Stock in the 1998 calendar year, though the allocation and
price for such Awards has not yet been determined. The Committee may grant
additional Awards to such executive officers and other plan participants for
the 1998 calendar year and thereafter.
Federal Income Tax Effects
Under the Code, as presently in effect, the grant of an Option or SAR or the
award of Restricted Stock under the Incentive Plan will not generate federal
income to a Participant or a deduction to the Company.
Upon exercise of a Non-Qualified Option or an SAR, the Participant will
normally be deemed to have received ordinary income in an amount equal to the
difference between the exercise price for the Option and the fair market value
of the Common Stock on the exercise date or, in the case of an SAR, equal to
the amount of payment received from the Company (less any exercise price, if
applicable). The Company will be entitled to a tax deduction in the same
amount as is recognized by the Participant at the same time, provided the
Company includes and reports such amounts on a timely filed Form W-2 or Form
1099-MISC. Upon a disposition of shares acquired upon exercise of a Non-
Qualified Option, any amount received in excess of the market value of the
shares at the time of exercise of the Option generally will be treated as
long-term or short-term capital gain, depending on the holding period of the
shares. The Company will not be entitled to any tax deduction upon such
subsequent disposition.
In the case of Incentive Options, the Participant generally recognizes no
ordinary income on the date of grant or exercise. If the Participant holds the
stock acquired through exercise of an Incentive Option for one year from the
date of exercise and two years from the date of grant of the Option, the
Participant will thereafter recognize a capital gain or loss upon a subsequent
sale of the stock, based on the difference between the Incentive Option's
exercise price and the sale price. If the stock is sold before the requisite
holding period, the Participant will recognize ordinary income based upon the
difference between the exercise price and the lesser of the sales price or the
fair market value upon the date of exercise. The Company generally will be
allowed a business expense deduction only if, and to the extent, the
Participant recognizes ordinary income.
For Awards of Restricted Stock, the fair market value of the stock is not
taxable to the Participant as ordinary income until the year the Participant's
interest is freely transferable or no longer subject to a substantial risk of
forfeiture. Section 83 of the Code, however, permits a Participant to elect to
have the fair market value of the stock taxed as ordinary income in the year
the Award is received. Dividends on Restricted Stock are treated as ordinary
income at the time paid. The Company generally will be entitled to a deduction
equal to the amount of ordinary income recognized by the Participant.
Upon the grant of a Performance or Cash Award, the Participant will
recognize ordinary income equal to the amount of the award, which amount will
be includable in the Participant's taxable income in the year such cash award
is paid. The Company will be entitled to a deduction in the same year equal to
the amount of the Award.
Susan M. Synor
Secretary
Southfield, Michigan
November 6, 1997
9
<PAGE>
APPENDIX A
TEXT OF AMENDMENT TO THE INCENTIVE PLAN
FIRST AMENDMENT TO THE SUPERIOR CONSULTANT HOLDINGS CORPORATION LONG-TERM
INCENTIVE PLAN.
The Superior Consultant Holdings Corporation Long-Term Incentive Plan (the
"Plan") is hereby amended, effective December 1, 1997, as follows:
1. The aggregate number of Shares as to which Awards may be granted
pursuant to Article III of the Plan shall be increased from 900,000 to
2,400,000.
2. Article VIII ("Formula Options") of the Plan, shall be amended to read
as follows:
A. Each Non-Employee Board Member shall be granted automatically a
Formula Option to purchase five thousand (5,000) Shares upon his or her
initial election and qualification as a Non-Employee Board Member; and,
thereafter, shall be granted automatically a Formula Option to purchase
five thousand (5,000) Shares upon each anniversary of such Non-Employee
Board Member's election, provided such person remains an incumbent Non-
Employee Board Member on such anniversary date.
B. The purchase price of the Shares subject to the Formula Option
shall be equal to one hundred percent (100%) of the Fair Market Value
as of the date of grant.
C. Of the five thousand (5,000) Shares subject to each Formula Option
granted to a Non-Employee Board Member, three thousand (3,000) Shares
shall be fully exercisable upon grant in accordance with the terms of
this Plan. The remaining option to purchase two thousand (2,000) Shares
will become fully exercisable on the first anniversary of the date of
grant, provided that the Non-Employee Board Member shall have attended
all regularly scheduled meetings of the Board and shall have
participated in not less than eighty percent (80%) of all Board
conference calls scheduled on notice of not less than forty-eight (48)
hours. Failure to satisfy such Board attendance and participation
criteria shall result in the lapse of the option to purchase the
remaining two thousand (2,000) Shares as of the first anniversary of
the date of grant. If a Non-Employee Board Member shall cease to be a
director of the Company because of death or disability, all Shares for
which Formula Options have been granted and which have not otherwise
lapsed hereunder, shall be exercisable in accordance with Paragraphs G
and H of Article VII. If a Non-Employee Board Member ceases to be a
director of the Company for any reason other than death or disability,
his or her right to exercise the Formula Option, and the timing of such
exercise, shall be governed by the applicable provisions of Paragraph F
of Article VII.
D. Formula Options shall be evidenced by an Award Agreement which
shall conform to the requirements of the Plan, and may contain such
other provisions not inconsistent therewith, as the Committee shall
deem advisable. The provisions of Article VII governing Nonstatutory
Options, and the exercise and issuance thereof, shall apply to Formula
Options to the extent such provisions are not inconsistent with this
Article VIII.
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