<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Superior Consultant Holdings
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(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
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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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<PAGE> 2
SUPERIOR CONSULTANT HOLDINGS CORPORATION
4000 TOWN CENTER, SUITE 1100
SOUTHFIELD, MICHIGAN 48075
April 9, 1999
Dear Stockholder:
It is my pleasure to invite you to attend the 1999 Annual Meeting of
Stockholders of Superior Consultant Holdings Corporation. The meeting will be
held at 4:00 p.m. local time on Thursday, May 6, 1999, at the Reno Hilton Hotel,
2500 East 2nd Street, Reno, Nevada, 89595.
The accompanying Notice of Annual Meeting of Stockholders and Proxy
Statement describes the items of business which will be discussed during the
meeting. It is important that you vote your shares whether or not you expect to
attend the meeting. To be sure your vote is counted, we urge you to carefully
review the Proxy Statement and to vote your choices. PLEASE SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE AS SOON AS POSSIBLE.
If you attend the meeting and wish to vote in person, the ballot that you submit
at the meeting will take the place of your proxy.
I look forward to seeing you at the meeting. On behalf of the management
and directors of Superior Consultant Holdings Corporation, I want to thank you
for your continued support and confidence in the Company.
Sincerely,
RICHARD D. HELPPIE, JR.
Richard D. Helppie, Jr.
Chairman of the Board and Chief
Executive Officer
<PAGE> 3
SUPERIOR CONSULTANT HOLDINGS CORPORATION
4000 TOWN CENTER, SUITE 1100
SOUTHFIELD, MICHIGAN 48075
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 6, 1999
To the Stockholders of Superior Consultant Holdings Corporation:
The Annual Meeting of Stockholders of Superior Consultant Holdings
Corporation, a Delaware corporation (the "Company"), will be held at the Reno
Hilton Hotel, 2500 East 2nd Street, Reno, Nevada, 89595 on Thursday, May 6,
1999, at 4:00 p.m. local time for the following purposes, as more fully
described in the accompanying Proxy Statement:
1. To elect three directors to the Board of Directors of the Company, each
to serve for a term of three years;
2. To amend the Company's Long-Term Incentive Plan to increase the
aggregate number of shares that may be issued under the Plan from
2,400,000 Shares to 4,000,000 Shares and to approve the Long-Term
Incentive Plan for purposes of Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Plan Amendment"); and
3. To consider and act upon such other business as may properly come before
the meeting or any adjournment thereof.
Stockholders of record of the Company's common stock, par value $0.01 per
share, at the close of business on March 25, 1999, the record date fixed by the
Board of Directors, are entitled to notice of, and to vote at, the meeting, as
more fully described in the Proxy Statement. For ten days prior to the meeting,
a list of stockholders entitled to vote at the meeting with the address of and
number of shares held by each will be kept on file (i) at the offices of the
Company at 4000 Town Center, Suite 1100, Southfield, Michigan 48075, (ii) at the
offices of the Company's transfer agent, Harris Trust and Savings Bank, located
at 311 W. Monroe Street, Chicago, Illinois 60606 and (iii) at the meeting place
at the Reno Hilton Hotel, 2500 East 2nd Street, Reno, Nevada, 89595 and will be
subject to inspection by any stockholder at any time during usual business
hours. The list will also be available for inspection by any stockholder during
the meeting.
Stockholders who cannot attend are urged to sign, date and otherwise
complete the enclosed proxy card and return it promptly in the envelope
provided. Any stockholder giving a proxy has the right to revoke it at any time
before it is voted.
The annual report of the Company for the fiscal year ended December 31,
1998 is being mailed to all stockholders of record and accompanies this Proxy
Statement.
For the Board of Directors,
SUSAN M. SYNOR
Secretary
-------------------------
Southfield, Michigan
April 9, 1999
YOUR VOTE IS IMPORTANT.
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY CARD PROMPTLY,
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING
<PAGE> 4
SUPERIOR CONSULTANT HOLDINGS CORPORATION
4000 TOWN CENTER, SUITE 1100
SOUTHFIELD, MICHIGAN 48075
------------------------------
PROXY STATEMENT
------------------------------
The following information is provided in connection with the solicitation
of proxies for the 1999 Annual Meeting of Stockholders of Superior Consultant
Holdings Corporation, a Delaware corporation (the "COMPANY"(1)), to be held on
May 6, 1999, and any adjournments thereof (the "ANNUAL MEETING"), for the
purposes stated in the Notice of Annual Meeting of Stockholders preceding this
Proxy Statement.
VOTING OF SHARES
This Proxy Statement and the accompanying proxy card are being mailed to
stockholders, beginning on or about April 9, 1999, in connection with the
solicitation of proxies on behalf of the Board of Directors of the Company (the
"BOARD") for the Annual Meeting.
Each share of the Company's common stock, par value $0.01 per share (the
"COMMON STOCK"), represented at the Annual Meeting is entitled to one vote on
each matter properly brought before the Annual Meeting. Please specify your
choices by marking the appropriate boxes on the enclosed proxy card and signing
it. Directors are elected by a plurality of the votes cast by the shares
entitled to vote at a meeting at which a quorum is present. A plurality means
that the nominees with the largest number of votes are elected as directors up
to the maximum number of directors to be chosen at the meeting. To amend the
Long-Term Incentive Plan, a majority of the shares of the Company's outstanding
Common Stock entitled to vote at a meeting at which a quorum is present must be
voted in favor of the Plan Amendment. Any other matters that may be submitted at
the meeting shall be determined by a majority of the votes cast. Shares
represented by proxies that are marked "withhold authority" with respect to the
election of one or more nominees for election as directors or as to the Plan
Amendment, and proxies which are marked to deny discretionary authority on other
matters will not be counted in determining whether the requisite affirmative
vote was obtained in such matters. If no directions are given and the signed
card is returned, the persons named in the proxy card will vote the shares for
the election of all listed nominees, in favor of the Plan Amendment and at their
discretion on any other matter that may properly come before the meeting in
accordance with their best judgment. If a broker or other nominee holding shares
for a beneficial owner does not vote on a proposal (broker non-votes), the
shares will not be counted in determining the number of votes cast. Stockholders
voting by proxy may revoke that proxy at any time before it is voted at the
meeting by delivering to the Company a proxy bearing a later date, by written
revocation or by attending in person and casting a ballot.
YOUR VOTE IS IMPORTANT. PLEASE RETURN YOUR MARKED AND SIGNED PROXY CARD
PROMPTLY SO YOUR SHARES CAN BE REPRESENTED, EVEN IF YOU PLAN TO ATTEND THE
MEETING IN PERSON.
Proxies are solicited to give all stockholders of record on March 25, 1999
(the "RECORD DATE") an opportunity to vote on matters to be presented at the
Annual Meeting. Shares can be voted at the meeting only if the stockholder is
present or represented by proxy. As of the Record Date, 10,358,259 shares of
Common Stock were issued and outstanding.
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1Unless the context otherwise indicates, all references to the "Company" include
the Company's two principal operating subsidiaries, Superior Consultant
Company, Inc. ("Superior") and Enterprise Consulting Group, Inc.
("Enterprise").
<PAGE> 5
MEETINGS OF THE BOARD OF DIRECTORS,
BOARD COMMITTEES AND COMMITTEE COMPOSITION
GENERAL
The business affairs of the Company are managed under the direction of the
Board. Members of the Board are kept informed through various reports and
documents sent to them on a regular basis, through operating and financial
reports routinely presented at Board and committee meetings by the Chief
Executive Officer, Chief Financial Officer and other officers, and through other
means.
During 1998, the Board held three regularly scheduled meetings, four
special telephonic meetings and acted by unanimous written consent on eight
additional occasions.
Biographical information on the director nominees and the directors serving
unexpired terms is set forth herein under the caption "Item No. 1 -- Election of
Directors."
COMMITTEES
In October 1996 the Board formed the standing Audit Committee and the
Compensation Committee to assist the Board in carrying out its duties. In
February 1998 the Board formed the Nominating Committee to assist the Board in
carrying out its duties.
The NOMINATING COMMITTEE currently has three members, two of whom are
independent, non-employee directors. Members of the committee are Richard P.
Saslow, Reginald M. Ballantyne III and John L. Silverman, its Chairperson.
The AUDIT COMMITTEE currently has three members, two of whom are
independent, non-employee directors. Members of the committee are Mr. Saslow,
Bernard J. Lachner and Douglas S. Peters, its Chairperson. The Audit Committee
considers the adequacy of the internal controls of the Company and the
objectivity and integrity of financial reporting and meets with the independent
certified public accountants and appropriate Company financial personnel about
these matters. This Committee met five times during 1998.
The COMPENSATION COMMITTEE has four members, three of whom are independent,
non-employee directors. Members of the committee are Mr. Lachner, Mr. Silverman,
Kenneth S. George and Richard D. Helppie, Jr., who is the Chairman and Chief
Executive Officer of the Company. This committee monitors and makes
recommendations to the Board with respect to compensation programs for directors
and officers, administers compensation plans for executive officers, and
provides oversight with respect to compensation and employee benefit plans. Its
Report on Executive Compensation is set forth herein under the caption
"Compensation Committee Report on Executive Compensation." The committee has
constituted a subcommittee, consisting of the three independent, non-employee
directors (the "EXECUTIVE OPTION SUBCOMMITTEE," with responsibility for
determining the nature, timing and amount of awards and grants under the
Company's Long-Term Incentive Plan (the "Incentive Plan") to those employees
subject to the requirements of Section 16(b) under the Securities Exchange Act.
The Compensation Committee met two times during 1998.
COMPENSATION OF DIRECTORS
Pursuant to the terms of the formula program of the Long-Term Incentive
Plan, each director of the Company who is not otherwise employed by the Company
automatically will be granted an option to purchase 5,000 shares of Common Stock
upon the first day of the next fiscal quarter after the quarter in which the
director joined the Board and again on the first day of that same quarter in
each subsequent fiscal year of his or her appointment to the Board of Directors
during his or her term, for so long as he/she remains a director. The options
will have an exercise price equal to the fair market value of the Common Stock
as of the grant date. Of the options to purchase 5,000 shares of Common Stock,
options to purchase 3,000 shares will be fully vested on the date of the grant.
The remaining option to purchase 2,000 shares will become fully vested on the
first anniversary of the date of the grant, provided that the director/grantee
shall have attended all regularly scheduled meetings of the Board and shall have
participated in not less than 80% of all Board conference calls scheduled on
notice of not less than 48 hours.
Directors are also reimbursed for travel expenses incurred in connection
with attending board and committee meetings.
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ITEM NO. 1 -- ELECTION OF DIRECTORS
Pursuant to the Company's Certificate of Incorporation the number of
directors shall be not less than three (3) nor more than fifteen (15), with the
actual number being set from time to time by the Board. The Board has determined
that the number of directors of the Company shall currently be set at nine. The
three employee directors on the Board are the Company's Chief Executive Officer,
Vice President/General Counsel and Executive Vice President/Vice Chairman. The
Board is divided into three classes with staggered, three-year terms so that the
term of one class expires at each annual meeting of stockholders. Directors are
elected by a plurality of the votes cast.
The following nominees have been selected and approved by the Board for
submission to the stockholders: Richard D. Helppie, Jr., Richard P. Saslow and
C. Everett Koop, each to serve a three-year term expiring at the 2002 Annual
Meeting. Except as otherwise specified in the proxy, proxies will be voted for
election of these nominees.
If a nominee becomes unable or unwilling to serve, proxies will be voted
for election of such person as shall be designated by the Board; however,
management knows of no reason why any nominee should be unable or unwilling to
serve. All of the nominees have consented to be named as nominees and to serve
as directors if elected.
A brief listing of each nominee and each director serving an unexpired term
follows.
NOMINEES FOR ELECTION AT THIS
MEETING TO TERMS EXPIRING IN 2002:
THE BOARD RECOMMENDS A VOTE "FOR" THESE NOMINEES
Richard D. Helppie, Jr. (age 43) has served as Superior's President and
Chief Executive Officer since he founded Superior in May 1984. Mr. Helppie also
founded Unitive, which was the predecessor company to Enterprise and which is
now a wholly owned subsidiary of Superior Consultant Holdings Corporation. Mr.
Helppie currently serves as Enterprise's Chairman, President 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 24 years of experience in
the healthcare and information systems industries.
Richard P. Saslow (age 52) has served as a Director of the Company since
August 1996. Mr. Saslow practiced business law and commercial litigation with
the firm of Butzel Long, PC from January 1991 to January 1997. Prior to that
period, Mr. Saslow practiced law with the firm of Butzel, Keidan, Simon, Meyers
& Graham from 1974 to 1990. Mr. Saslow joined the Company in January 1997 and
has served since that time as Vice President and General Counsel.
C. Everett Koop (age 82) has served as a Director of the Company since May
1998. Since 1992, Dr. Koop has served as the McInerney Professor of Surgery at
the Dartmouth Medical School and as Senior Scholar at the C. Everett Koop
Institute at Dartmouth. Dr. Koop is also a frequent lecturer on healthcare
topics. An internationally respected pediatric surgeon, Dr. Koop was
Surgeon-in-Chief of the Children's Hospital of Philadelphia from 1948 to 1981
and Editor-in-Chief of the Journal of Pediatric Surgery from 1964 to 1976. Dr.
Koop was Surgeon General of the United States from 1981 to 1989. He was also
appointed Director of the Office of International Health in May 1982. Dr. Koop
is also the recipient of numerous honors and awards, including 35 honorary
doctorates. Dr. Koop is currently the Chairman of the Board for drkoop.com,
Inc., an Internet solutions and services company.
DIRECTORS WHOSE TERMS CONTINUE UNTIL 2000:
Douglas S. Peters (age 55) 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 its 1995 merger with Main Line Health, Inc.
Previous to that, Mr. Peters served in the same capacity for Main Line Health,
Inc. Mr. Peters was a Senior Vice President with Blue Cross Blue Shield of
Illinois and prior to that was the
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President and CEO of Henry Ford Health System. Mr. Peters has 32 years of
healthcare industry experience. Mr. Peters is also a director of the
Philadelphia Contributionship. Mr. Peters is a Fellow of the American College of
Healthcare Executives ("ACHE").
Bernard J. Lachner (age 71) 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
of ACHE, and is a past member of its Board of Governors. He has also served as
the Chairman of American Hospital Association ("AHA"). Mr. Lachner is also a
member of the Healthcare Hall of Fame.
Charles O. Bracken (age 49) has served as a Director of the Company since
January 1, 1999. Mr. Bracken currently serves as Vice Chairman and Executive
Vice President of the Company. Mr. Bracken joined Superior in March 1987 and has
from that time served as Executive Vice President of Superior. Mr. Bracken has
more than 28 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 information software firm, preceded by 10
years of related experience in healthcare information systems management,
including positions as Chief Information Officer for single and multi-hospital
corporations.
DIRECTORS WHOSE TERMS CONTINUE UNTIL 2001:
Reginald M. Ballantyne III (age 55) has served as a Director of the Company
since August 1996. Mr. Ballantyne was initially appointed to Superior's Advisory
Council in 1995. He has held the position of President of PMH Health Resources,
Inc. since 1984. Prior to that, Mr. Ballantyne served as President of Phoenix
Memorial Hospital. Mr. Ballantyne was elected Chairman of the AHA in 1997 and
served as Speaker of the AHA House of Delegates in 1998. He is a Fellow of ACHE
and a recipient of the ACHE Gold Medal Award for Management Excellence. Mr.
Ballantyne also served as a member of the national Board of Commissioners for
the Joint Commission on Accreditation of Healthcare Organizations and as
Chairman of the AHA Committee of Commissioners.
Kenneth S. George (age 50) has served as a Director of the Company since
November 1997. Mr. George is currently a General Partner for Riverside
Acquisition, L.L.C. From 1994 to 1995, Mr. George served as Chairman and Chief
Executive Officer for AmeriStat, Inc. which was sold in October, 1995 to Med
Trans., a subsidiary of Laidlaw. From 1988 through its sale to Healthtrust, Inc.
in 1994, Mr. George was Chairman and CEO of Epic Healthcare Group. Mr. George is
the founding Director of the Texas Lyceum Association and served as a member on
the Board of Managers for the Dallas County Hospital District. Mr. George also
currently serves as a State Representative in the Texas House of
Representatives.
John L. Silverman (age 57), has served as a Director of the Company since
October 1997. Mr. Silverman is currently an independent consultant to the
healthcare industry. From 1995 through 1997, he served as Chief Executive
Officer of AsiaCare, Inc., a southeast Asian healthcare investment company. From
1990 to August, 1997, he was the Vice President and Chief Financial Officer of
Chi Systems, Inc., a healthcare consulting company. Mr. Silverman is currently a
director of Integrated Health Services, Inc., MHM Services, Inc. and Chi
Laboratory Systems, Inc.
ITEM NO. 2 -- AMENDMENT TO LONG TERM INCENTIVE PLAN
PROPOSAL
The Board of Directors of the Company has adopted, subject to stockholder
approval, the Second Amendment to the Superior Consultant Holdings Corporation
Long-Term Incentive Plan (the "INCENTIVE PLAN"). In the event that stockholder
approval is received, the Incentive Plan would be amended as set forth in
Appendix A.
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DISCUSSION OF AMENDMENT
The purpose for amending the Incentive Plan is to increase the number of
shares available for grant thereunder. In addition, the Board of Directors is
seeking the approval of the Incentive Plan by the stockholders to ensure
compliance with Section 162(m) of the Internal Revenue Code of 1986, as amended
("CODE").
The Company's successful growth and development depends in a large part on
the Company's ability to recruit and retain highly skilled consulting
professionals. The market for consultants skilled in areas critical to the
Company's clients is extremely tight. Many of the Company's competitors have
greater financial resources than the Company and are able to bring those
resources to bear in competition for hiring consulting personnel. The Company
believes that its ability to issue equity options as incentive compensation
greatly increases the Company's ability to recruit, motivate and retain skilled
consultants in this extremely competitive environment.
Under the Incentive Plan, a total of 2,400,000 shares of common stock
currently have been made available for issuance. As of March 31, 1999, a total
of 82,648 shares have been issued pursuant to the options granted under the
Incentive Plan and options to acquire another 1,847,480 shares are currently
outstanding. In addition, the Company has committed to grant options to acquire
another 150,000 shares. Thus, as of March 31, 1999, only 319,872 shares remain
eligible for future grant. Because of the Company's decision to make the
Incentive Plan available to greater numbers of employees, the issuance of
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 of
Directors believes that the Company needs to have a significant quantity of
available shares for future grants. Accordingly, the Board has adopted an
amendment to increase to 4,000,000 the aggregate number of shares available for
issuance under the Incentive Plan.
As of March 31, 1999 the market value of the 1,600,000 additional shares to
be made available for issuance under the Incentive Plan was $54,600,000. Cash
payments received by the Company under the Incentive Plan will be used for
general corporate purposes.
The stockholders are also being asked to approve the Incentive Plan, and
its amendments thereto, in order to ensure that the Incentive Plan continues to
meet the statutory requirements of Code Section 162(m). In general, Section
162(m) of the Code disallows a publicly-held corporation a deduction for federal
income tax purposes for compensation in excess of $1 million per year paid to
its chief executive officer and the four other officers whose compensation is
disclosed in its annual proxy statement, subject to certain exceptions. Under
Section 162(m), compensation that qualifies as "performance based compensation"
is not subject to the $1 million limitation. One of the conditions required to
qualify compensation paid pursuant to grants and awards under the Incentive Plan
as "performance-based compensation" is stockholder approval of the Incentive
Plan. However, for companies that become publicly-held in connection with an
initial public offering, the $1 million deduction limitation (and the
stockholder approval request) will not apply during a transitional period to
income recognized pursuant to a compensation plan that existed during the period
in which the corporation was not publicly held. Because the Incentive Plan had
been approved by the Company's stockholders before the initial public offering,
grants and awards under the Incentive Plan have fallen under this special
transitional rule for obtaining stockholder approval. Under the transitional
rule, the Incentive Plan has to be resubmitted for stockholder approval on or
before the Company's 2000 annual meeting (or, if earlier, upon the issuance of
all common stock available under the initial term of the Incentive Plan). The
stockholders are now being asked to approve the Incentive Plan, and the
amendments thereto, to ensure that it will continue to qualify under the
statutory requirements of Section 162(m).
DESCRIPTION OF THE PLAN
General
The purpose of the Incentive Plan, which was originally adopted by the
Board of Directors of the Company and approved by the stockholders in October,
1996, is to assist the Company in attracting and
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retaining key employees, and also independent contractors, non-employee
directors 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 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.
ADMINISTRATION OF THE INCENTIVE PLAN
The Incentive Plan is administered by a committee of the Board of Directors
consisting of four Board members (the "Committee"). The Committee (except as
described below) 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. The determination of the Committee with
respect to any matter under the Plan to be acted upon by the Committee is final
and binding.
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 Committee has delegated to the
Executive Option Subcommittee full responsibility and authority with respect to
Awards to executive officers.
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 benefits 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.
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 under a Company retirement plan or termination 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
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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 portions 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. 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.
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 of
Directors. SARs will
7
<PAGE> 11
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.
Under the provisions of the Incentive Plan, all members of the Board of
Directors who are not employees of the Company will receive an Option to
purchase 5,000 shares upon the first day of the next fiscal quarter after the
quarter in which the director joined the Board. Each continuing non-employee
member of the Board of Directors will receive an additional Award of an Option
to purchase 5,000 shares upon each anniversary of the date of the first grant.
3,000 shares of each Option issued to a non-employee member of the Board of
Directors will become exercisable immediately upon grant. The remaining option
to purchase 2,000 shares 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.
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 Section 162(m). A Performance or Cash Award will be
subject to cancellation or forfeiture upon the terms set forth above.
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 Company's 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 and at the same time, provided
the Company includes and reports such amounts on a timely filed Form W-2 or Form
1099-MISC (or similar such IRS form filing). Upon a disposition of shares
acquired upon exercise of a Non-Qualified Option, any amount received in excess
of the fair 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 typically 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, the Participant will
thereafter recognize long-term 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.
8
<PAGE> 12
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.
Vote Required: Directors' Recommendation
The Second Amendment to the Incentive Plan becomes effective on its
approval by the Company's stockholders. Approval of the Second Amendment to the
Incentive Plan, and approval of the Incentive Plan for Code Section 162(m)
purposes, requires the affirmative vote of the holders of a majority of the
Shares of common stock outstanding as of the Record Date and present in person
or by proxy at the May 6, 1999 annual meeting. THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR APPROVAL OF THE SECOND AMENDMENT TO THE INCENTIVE PLAN AND APPROVAL
OF THE INCENTIVE PLAN FOR CODE SECTION 162(M) PURPOSES. THE PROXIES SOLICITED BY
AND ON BEHALF OF THE BOARD OF DIRECTORS WILL BE VOTED FOR APPROVAL OF THE SECOND
AMENDMENT TO THE INCENTIVE PLAN AND APPROVAL OF THE INCENTIVE PLAN FOR CODE
SECTION 162(M) PURPOSES, UNLESS A CONTRARY CHOICE IS SPECIFIED IN THE PROXY.
OTHER MATTERS TO COME BEFORE MEETING
If any matter not described herein should properly come before the meeting,
the persons named in the proxy card will vote the shares in accordance with
their best judgment. At the time this Proxy Statement went to press, the Company
knew of no other matters which might be presented for stockholder action at the
Annual Meeting.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
RESPONSIBILITIES AND COMPOSITION OF THE COMMITTEE
The Compensation Committee of the Company's Board of Directors (the
"Committee") is responsible for (i) establishing compensation programs for the
executive officers of the Company designed to attract, motivate and retain key
executives responsible for the Company's success; (ii) administering and
maintaining such programs in a manner that will benefit the long-term interests
of the Company and its stockholders; and (iii) determining the compensation of
the Company's Chief Executive Officer. The Committee is composed of four
directors. Three of these directors have never served as employees of the
Company. The fourth member of the Committee is the Company's Chief Executive
Officer.
This report describes the philosophy that underlies the cash and
equity-based components of the Company's executive compensation program. It also
describes the details of each element of the program, as well as the rationale
for compensation paid to the Company's Chief Executive Officer and its executive
officers in general.
COMPENSATION PHILOSOPHY AND OBJECTIVES
The Committee believes that the Company's executive officer compensation
should be determined according to a competitive framework and based on overall
financial results, individual contributions and teamwork that help build value
for the Company's stockholders. Within this overall philosophy, the Committee
bases the compensation program on the following principles:
COMPENSATION OF EXECUTIVE OFFICERS GENERALLY
The Company's executive compensation program is designed to link executive
pay to Company performance and to provide an incentive to executives to manage
the Company with a principal view to enhancing stockholder value.
9
<PAGE> 13
Generally, the Company's executive compensation program makes a significant
portion of each executive's cash compensation contingent upon growth and
improvement in the Company's results of operations, with the potential to earn
exceptional rewards for exceptional performance. More specifically, the program
is designed to provide compensation for meeting and exceeding internal goals and
to provide incentives to increase the market value of the Company's Common
Stock. The program is also designed to attract and retain talented executives
who are essential to the Company's long-term success within a highly competitive
industry that demands unique talents, skills and capabilities.
Compensation criteria are evaluated annually to ensure they are appropriate
and consistent with the business objectives which are important in meeting the
Company's earnings per share, operating profits and revenue goals and in
enhancing stockholder value. The Company's executive compensation policies and
programs are intended to: (i) provide rewards contingent upon Company and
individual performance; (ii) link executive compensation to sustainable
increases in and the preservation of stockholder value; (iii) promote teamwork
among executives and other Company employees; (iv) retain a strong management
team; and (v) encourage personal and professional development and growth.
BASE SALARY. The Committee reviews the compensation of each of its
executive officers not less than annually. The Committee's review takes into
consideration both the Company's performance with respect to earnings per share,
operating profits and revenue, and also the duties and performance of each
executive. In making salary recommendations or decisions, the Committee
exercises its discretion and judgment based on the foregoing criteria, without
applying a specific formula to determine the weight of each factor considered.
The Committee also considers equity and fairness when comparing base salaries of
executives.
INCENTIVE BONUSES. In 1998, the Board revised and continued its
compensation program based on certain financial performance criteria, including
revenue growth, profitability and performance of target goals. Each of the
Company's Named Executive Officers (as defined below) was covered under the 1998
compensation program. Named Executive Officers have annual and other periodic
bonus opportunities equal to between $110,000 and $160,000. The bonus paid to
Messrs. Helppie, Bracken and Tashiro, if any, is discretionary up to the dollar
levels in their respective bonus plans.
LONG-TERM INCENTIVE COMPENSATION PLAN
The Committee believes that the granting of stock options and other forms
of equity compensation is an important method of rewarding and motivating
management by aligning management's interests with those of the Company's
stockholders on a long-term basis. In addition, the Committee recognizes that
the Company conducts its business in an increasingly competitive industry and
that, in order for the Company to remain highly competitive and at the same time
pursue a high-growth strategy, it must employ the best and most talented
executives and managers who possess demonstrated skills and experience. The
Company believes that stock options and other forms of equity compensation have
given and continue to give the Company a significant advantage in attracting and
retaining such employees. The Committee believes the Incentive Plan is an
important feature of the Company's executive compensation package. Under the
Incentive Plan, the Committee's stock option subcommittee may grant options and
other forms of equity compensation to executive officers who are expected to
contribute materially to the Company's future success. In determining the size
of stock option and other equity grants, the subcommittee focuses primarily on
the Company's performance and the perceived role of each executive in
accomplishing such performance objectives, as well as the satisfaction of
individual performance objectives.
The Committee intends to continue using stock options and other forms of
equity compensation as the primary long-term incentive for the Company's
executive officers. Because they generally provide rewards to executives only to
the extent the Company's stock price increases after the options or other equity
awards are granted the Committee feels that stock options and other equity
awards granted under the Incentive Plan are an appropriate means to provide
executives with incentives that closely align their interests with those of
stockholders and thereby encourage them to promote the ongoing success of the
Company. The Committee also feels that the Incentive Plan should be amended as
proposed in Item 2 to ensure that an adequate supply of shares is available in
the future.
10
<PAGE> 14
In February 1999, the Board authorized the creation of the Non-Statutory
Stock Option Plan (the "Non-Statutory Plan") and reserved 1,000,000 shares of
Common Stock for issuance under the Non-Statutory Plan. Under the Non-Statutory
Plan, the Company may grant stock options in connection with acquisitions by the
Company and other special circumstances. The Non-Statutory Plan has
substantially the same form, terms and substance as the Company's Incentive
Plan, except that grants issued under the Non-Statutory Plan will not qualify as
"incentive stock options" for tax purposes, and directors and executive officers
of the Company are not eligible to receive grants under the Non-Statutory Plan.
The Board authorized the Non-Statutory Plan in order to meet any expedient
incentive compensation needs which might arise in the interim pending approval
of the Plan Amendment.
POLICY ON DEDUCTIBILITY OF COMPENSATION
It is the responsibility of the Committee to address the provisions of
Section 162(m) of the Internal Revenue Code which, except in the case of
"performance-based compensation" and certain other types of compensation, limit
to $1,000,000 the amount of the Company's federal income tax deduction for
compensation paid to the Chief Executive Officer and the other four most highly
paid executive officers. Because the reliance period with respect to the
Company's Incentive Plan is expiring shortly, the stockholders are being asked
to approve the Incentive Plan, along with certain amendments thereto, to ensure
that compensation related to options granted under the Incentive Plan is not
otherwise subject to the deduction limitations under Section 162(m) of the Code.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Chief Executive Officer's salary, bonus and long-term awards follow the
policies set forth above. For the 1998 fiscal year, Mr. Helppie's base salary
was $325,000. Mr. Helppie earned a bonus in the amount of $20,000 in 1998. He
also received $4,000 in profit sharing under the Company's 401(k) Plan. Mr.
Helppie received incentive stock options to purchase 15,000 shares of Common
Stock in 1998 at an exercise price equal to 110% of the fair market value on the
date of the grant, and non-statutory stock options to purchase 10,000 shares of
Common Stock at an exercise price equal to the fair market value on the date of
the grant. The options granted will vest at a rate of 20% per year.
The foregoing report has been approved by all of the members of the
Committee.(1)
THE COMPENSATION COMMITTEE
John L. Silverman, Chairperson
Richard D. Helppie, Jr.
Bernard J. Lachner
Kenneth S. George
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Richard D. Helppie, Jr. is the Company's Chief Executive Officer, and has
been a member of the Compensation Committee since August 1996. The Company did
not have a Compensation Committee prior to August 1996. Prior to August 1996,
Mr. Helppie, who then served as both a director and Chief Executive Officer, had
responsibility for all decisions with respect to executive officer compensation.
- ---------------
1Pursuant to Item 402(a)(9) of Regulation S-K promulgated by the Securities and
Exchange Commission (the "SEC"), neither the "Compensation Committee Report on
Executive Compensation" nor the material under the caption "Stockholder Return
Performance Graph" shall be deemed to be filed with the SEC for purposes of the
Securities Exchange Act, as amended (the "Exchange Act"), nor shall such report
or such material be deemed to be incorporated by reference in any past or
future filing by the Company under the Exchange Act or the Securities Act of
1933, as amended (the "Securities Act").
11
<PAGE> 15
STOCKHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the percentage change in the
cumulative total stockholder return on the Company's Common Stock against the
Nasdaq Market Index and a Company-selected peer group of providers of consulting
and/or information services (the "Peer Group"). The graph assumes that $100 was
invested on October 10, 1996 at a price of $16.00 per share, in each of the
Company's Common Stock, the Nasdaq Market Index and the Peer Group, and that all
dividends were reinvested.
PERFORMANCE GRAPH FOR SUPERIOR CONSULTANT HOLDINGS CORPORATION
Prepared by Media General Financial Services
Produced on March 31, 1999 including data to 12/31/98
LINE GRAPH
<TABLE>
<CAPTION>
SUPERIOR PEER GROUP INDEX
CONSULTANT NASDAQ MARKET ----------------
HOLDINGS CORP. INDEX
-------------- -------------
<S> <C> <C> <C>
10/10/96 100.00 100.00 100.00
12/31/96 154.69 104.71 116.55
12/31/97 187.50 128.08 158.38
12/31/98 271.88 180.64 272.72
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
10/10/96 12/31/96 12/31/97 12/31/98
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Superior Consultant Holdings Corporation $100.00 $154.69 $187.50 $271.88
- -----------------------------------------------------------------------------------------------------------------------
NASDAQ Market Index $100.00 104.71 128.08 180.64
- -----------------------------------------------------------------------------------------------------------------------
Peer Group $100.00 116.55 158.38 272.72
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTES:
(a) Peer Group return is weighted by market capitalization.
(b) The Peer Group is comprised of the common stock of the following companies:
Cambridge Technology Partners, Inc.; Cerner Corporation; Computer Sciences
Corporation; DAOU Systems, Inc.; First Consulting Group Inc.; International
Business Machines; Mastech Corporation; The Metzler Group, Inc.; Renaissance
Worldwide Corporation; Sapient Corporation; Shared Medical Systems
Corporation; and Whittman-Hart, Inc.
(c) Claremont Technology Group, HBO & Company, and Renaissance Solutions, Inc.
no longer appear in the Peer Group because they were the subject of business
combinations in 1998. DAOU Systems, Inc. and First Consulting Group Inc.
have been added since the Company's 1998 Proxy Statement. Each closed an
initial public offering during or near the beginning of 1998.
12
<PAGE> 16
MANAGEMENT COMPENSATION
GENERAL
The following table sets forth all compensation awarded or earned by the
Company's Chief Executive Officer and the three other most highly paid executive
officers during the last three fiscal years (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION(1) ------------
-------------------------------------- SECURITIES
FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS(#) COMPENSATION(3)
- --------------------------- ------ ------ ----- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard D. Helppie, Jr.... 1998 $325,000 $ 20,000 $ 0 25,000 $5,735
Chief Executive Officer 1997 325,000 0 0 0 8,911
and Chairman of the 1996 436,196 2,558,779 0 0 7,926
Company
Charles O. Bracken........ 1998 310,000 30,000 0 25,000 $5,692
Executive Vice President 1997 290,000 0 0 0 8,911
and Vice Chairman of the 1996 317,136 527,061 0 0 7,926
Company
Robert R. Tashiro......... 1998 290,000 30,000 0 25,000 $5,648
President of the Company 1997 220,000 0 0 0 8,729
and Chief Operating 1996 204,493 364,745 0 5,000 7,926
Officer of Superior
James T. House............ 1998 150,000 51,183 0 25,000 $5,323
Vice President, Chief 1997 110,000 75,455 0 7,272 8,263
Financial Officer, 1996 95,000 120,413 13,556(2) 20,000 7,664
Treasurer and Assistant
Secretary of the Company
</TABLE>
- ---------------
(1) Effective January 5, 1998, the Company entered into agreements with Messrs.
Helppie, Bracken, Tashiro and House which provided them with aggregate
annual compensation of $1,560,000, comprised of base salary and bonus
compensation based on achievement of certain pre-determined performance
criteria. These agreements are similar to agreements which the Company
entered into with these three executives in October 1996 in connection with
the Company's initial public offering. These previous agreements did not
apply to amounts paid to these executives prior to the initial public
offering.
(2) Consists of gain on exercise of stock options.
(3) Represents amounts paid by the Company during fiscal 1998 for (i) long-term
and short-term disability insurance premiums as follows: Messrs. Helppie,
Bracken and Tashiro -- $1,022 each and Mr. House -- $999; (ii) life
insurance premiums for which the Company is not the beneficiary as follows:
Mr. Helppie -- $713, Mr. Bracken -- $670, Mr. Tashiro -- $626 and Mr. House
-- $324; and (iii) profit sharing contributions made by the Company as
follows: Messrs. Helppie, Bracken, Tashiro and House -- $4,000 each.
13
<PAGE> 17
EXECUTIVE OPTION GRANTS
The following table contains information concerning the stock option grants
made to each of the Named Executive Officers in 1998.
OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES PERCENT OF TOTAL EXERCISE PRICE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED TO PRICE OPTION TERM(1)
OPTIONS EMPLOYEES IN PER EXPIRATION ----------------------
NAME GRANTED FISCAL 1998 SHARE(2) DATE 5% 10%
---- ---------- ------------------ -------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Richard D. Helppie,
Jr. .................... 15,000 2.4% $33.00 01/01/03 $ 79,350 $ 229,800
Richard D. Helppie,
Jr. .................... 10,000 1.6% 30.00 01/01/08 188,700 478,100
Charles O. Bracken........ 25,000 4.0% 30.00 01/01/08 471,750 1,195,250
Robert R. Tashiro......... 25,000 4.0% 30.00 01/01/08 471,750 1,195,250
James T. House............ 25,000 4.0% 30.00 01/01/08 471,750 1,195,250
</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 (in all cases
except Mr. Helppie's incentive stock option grants exercisable at $33.00 per
share, which have a life of five 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% annually compounded
increase in the Company's stock price from the date of grant to the end of
the option term would result in stock prices of $48.87 and $77.81 per share,
respectively, in the case of the ten year options (or $38.29 and $48.32,
respectively, in the case of Mr. Helppie's five year option).
(2) The options become exercisable at a rate of 20% per year, on the anniversary
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 1998, as well as the value of
unexercised options held by such persons on December 31, 1998. The values for
in-the-money options (which represent the positive spread between the exercise
price of any existing stock options and $43.50 per share, the closing price of
the Common Stock as reported by the Nasdaq National Market on December 31, 1998)
also are included.
AGGREGATE OPTION EXERCISES IN FISCAL 1998
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED DECEMBER 31, 1998 DECEMBER 31, 1998
UPON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard D. Helppie, Jr....... 0 $0 0 25,000 $ 0 $292,500
Charles O. Bracken........... 0 0 0 25,000 0 337,500
Robert R. Tashiro............ 0 0 2,000 28,000 55,000 420,000
James T. House............... 0 0 9,454 42,818 247,263 776,587
</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.
14
<PAGE> 18
EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS
Richard D. Helppie, Jr.'s 1998 compensation agreement provides for an
annual salary of $325,000 and an annual bonus of an amount not more than
$150,000. Mr. Helppie's compensation shall be subject to review of the
Compensation Committee of the Board.
Charles O. Bracken's 1998 employment agreement provides for his employment
as Executive Vice President of the Company at an annual base salary of $310,000
and annual bonus of up to $160,000 per year. Under the employment agreement, Mr.
Bracken is subject to noncompetition, nonsolicitation and nondisclosure
covenants.
Robert R. Tashiro's 1998 employment agreement provides for his employment
as Senior Vice President and Chief Operating Officer of the Company at an annual
base salary of $290,000 and an annual bonus of up to $110,000 per year. Under
the employment agreement, Mr. Tashiro is subject to noncompetition,
nonsolicitation and nondisclosure covenants.
James T. House's 1998 employment agreement provides for his employment as a
Vice President and Chief Financial Officer of the Company at an annual base
salary of approximately $150,000. Mr. House also participated in the Company's
Vice President Bonus Plan pursuant to which he was eligible to receive a base
bonus of $65,000 (which base bonus was 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.
The 1998 employment or compensation agreements with each Named Executive
Officer provide salary continuation benefits in the event that the executive
officer's employment is terminated by the Company for any reason other than
gross misconduct, embezzlement or attempted embezzlement of money or property of
the Company or a subsidiary or an affiliate, the executive officer's
perpetration or attempted perpetration of fraud on the Company or a subsidiary
or an affiliate, or the executive officer's participation in a fraud or
attempted fraud on the Company. Upon such termination, the officer shall receive
his base salary for a period of one year (two years in the case of Mr. Helppie)
from the date of termination and his bonus, if any, earned up through and
including the date of termination. In addition, any stock options granted up to
the date of termination vest immediately upon termination, but no new stock
options will be granted after the date of termination.
The 1998 employment or compensation agreements with each Named Executive
Officer also provide salary continuation benefits in the event that the
executive officer's employment is terminated due to a Change in Control (as
defined below) of the Company. Upon such termination, the executive officer will
receive an amount equal to two times the full annual base salary in effect for
the year of termination plus two times the full year's bonus opportunity in
effect for the year of termination. In addition, stock options granted up to the
date of termination vest immediately upon termination; however, no new stock
options will be granted after the date of termination. A Change in Control is
defined to include the acquisition by any person or group of 50% or more of the
Company's then-outstanding voting securities, the approval by the stockholders
of a merger, consolidation, recapitalization or reorganization of the Company
that would result in a transfer of more than 25% of the total voting securities,
and the approval by the stockholders of a liquidation of the Company or sale of
more than 50% of the Company's assets.
15
<PAGE> 19
CERTAIN RELATIONSHIPS AND RELATED 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, 2015. At the option of the Company, the entire outstanding
indebtedness under the note may be accelerated in the event that Mr. Bracken's
employment with the Company is terminated. The largest amount of indebtedness
outstanding under such note during fiscal 1998 was $453,000 and as of December
31, 1998 was $439,000.
In April 1995, Superior loaned to Mr. Tashiro $250,000, evidenced by a term
promissory note, bearing interest of 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, 2015. At
the option of the Company, the entire outstanding indebtedness under the note
may be accelerated in the event that Mr. Tashiro's employment with the Company
is terminated. The largest amount of indebtedness outstanding under such note
was $226,000 during fiscal 1998 and as of December 31, 1998 was $219,000.
In 1996 the Company entered into a tax indemnification agreement with the S
corporation 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 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.
In 1998, the Company chartered aircraft from Clearwater Aviation, Inc., of
which Mr. Helppie is sole stockholder. Payments under this arrangement totaled
approximately $36,000 in 1996, $224,000 in 1997, and $622,000 in 1998. This
arrangement was approved by a majority of all of the independent and
disinterested members of the Board of Directors.
Mr. Saslow, a Director, was a shareholder in the law firm of Butzel Long,
PC, Detroit, Michigan. Butzel Long and Mr. Saslow's prior firm Butzel, Keidan,
Simon, Myers & Graham, have been outside general counsel to Superior since 1985
and Enterprise since 1993. Mr. Saslow joined the Company as a vice president and
general counsel in January 1997.
Mr. Peters, a Director, is the President of Jefferson Health System, a
non-profit organization which, from time to time, is a client of the Company.
Mr. Ballantyne serves as president of PMH Health Resources, the parent
company of PMH Health Services Network, a client of the Company. PMH Health
Services Network purchased workflow re-design services from Chi Systems, Inc.,
which was acquired by the Company in 1997. PMH Health Services Network paid
Superior Consultant Company, Inc. a total of $200,000 for the workflow re-design
project which was completed in 1998. There are no other projects currently
pending between PMH Health Services Network and the Company.
In 1998, the Company recognized revenue of approximately $1.5 million from
drkoop.com, Inc. Dr. Koop, the Chairman of drkoop.com, Inc., is a Director of
the Company, and Mr. Helppie serves on the Board of Directors of drkoop.com,
Inc. In addition, the Company has an equity investment in drkoop.com, Inc., for
which it paid approximately $6.0 million.
16
<PAGE> 20
STOCK OWNERSHIP OF DIRECTORS,
EXECUTIVE OFFICERS AND PRINCIPAL HOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of March 25, 1999 by: (i) each person known by the
Company to own beneficially more than five percent (5%) of the outstanding
shares of Common Stock; (ii) each of the Company's directors and nominees for
directors; (iii) each of the Named Executive Officers; and (iv) all directors
and named executive Officers of the Company as a group. (Each person named below
has an address in care of the Company's principal executive offices.) 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>
SHARES BENEFICIALLY OWNED(1)
-----------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT
------------------------ ------ -------
<S> <C> <C>
Richard D. Helppie, Jr.(2)(3)............................... 3,180,124 30.7
GEOCAPITAL, LLC(4).......................................... 1,107,425 10.7
AMVESCAP PLC(5)............................................. 678,100 6.5
Charles O. Bracken(3)....................................... 321,378 3.1
Robert R. Tashiro(3)........................................ 156,610 1.5
John L. Silverman(3)........................................ 23,519 *
James T. House(3)........................................... 23,403 *
Reginald M. Ballantyne III(3)............................... 11,000 *
Bernard Lachner(3).......................................... 11,000 *
Richard P. Saslow(3)........................................ 14,200 *
Douglas S. Peters(3)........................................ 11,700 *
Kenneth S. George(3)........................................ 8,000 *
C. Everett Koop(3).......................................... 3,000 *
All Directors, Executive Officers and 5% stockholders as a
group..................................................... 5,549,459 53.1
</TABLE>
- ---------------
* less than 1%
(1) Applicable percentage of ownership as of March 25, 1999 is based upon
10,358,259 shares of Common Stock outstanding, and 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) 2,585,124 shares are held by The Richard D. Helppie, Jr. Trust, of which Mr.
Helppie is the sole trustee, and 590,000 shares are held by The Richard D.
Helppie, Jr. Ten Year Grantor Retained Annuity Trust, of which Mr. Helppie
is the sole trustee.
(3) Includes shares issuable upon exercise of options currently exercisable or
exercisable within 60 days from the date hereof as follows: Mr. Helppie
5,000 shares; Mr. Bracken 5,000 shares; Mr. Tashiro 7,000 shares; Mr. House
15,908 shares; Mr. Ballantyne 11,000 shares; Mr. Lachner 11,000 shares; Mr.
Peters 11,000 shares; Mr. Saslow 13,200 shares; Mr. Silverman 8,000 shares;
Mr. George 8,000 shares; and Dr. Koop 3,000 shares.
(4) According to Report on SEC's Schedule 13G, as of February 10, 1999
GEOCAPITAL, LLC has sole dispositive power over all shares listed.
(5) According to Report on SEC's Schedules 13G, as of February 11, 1999 AMVESCAP
PLC shares voting and dispositive power of all shares listed with AVZ, Inc.,
AIM Management Group Inc., AMVESCAP Group Services, Inc., INVESCO, Inc.,
INVESCO North American Holdings, Inc., INVESCO Capital Management, Inc.,
INVESCO Funds Group, Inc., INVESCO Management & Research, Inc., INVESCO
Realty Advisors and Inc., INVESCO (NY) Asset Management, Inc.
17
<PAGE> 21
SECTION 16(a) BENEFICIAL OWNER REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act requires the Company's
directors and executive officers, and any persons who own more than ten percent
(10%) of the Company's Common Stock, to file with the SEC initial reports of
ownership and reports of changes in ownership of Common Stock. Such persons are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the year ended December 31, 1998, all such Section
16(a) filing requirements were complied with, except for the following: (i) a
Form 5 was to be filed by Richard D. Helppie, Jr., Richard P. Saslow, Reginald
M. Ballantyne, Kenneth S. George, C. Everett Koop, Bernard J. Lachner, Douglas
S. Peters, and John L. Silverman by February 15, 1999. Such forms are expected
to be filed before April 15, 1999; (ii) a Form 4 was to be filed by John L.
Silverman by January 10, 1999. Such form is expected to be filed before April
15, 1999; and (iii) a Form 3 was to be filed by C. Everett Koop by May 23, 1998.
Such form is expected to be filed before April 15, 1999.
STOCKHOLDER PROPOSALS FOR THE 2000 PROXY STATEMENT
Any stockholder satisfying the SEC requirements and wishing to submit a
proposal to be included in the Proxy Statement for the 2000 Annual Meeting of
Stockholders should submit the proposal in writing to: Secretary, Superior
Consultant Holdings Corporation, 4000 Town Center, Suite 1100, Southfield,
Michigan 48075. The Company must receive a proposal by December 14, 1999 in
order to consider it for inclusion in the Proxy Statement for the 2000 Annual
Meeting of Stockholders.
VOTING PROCEDURES
Abstentions and broker non-votes are counted for purposes of determining
the presence or absence of a quorum for the transaction of business at the
Meeting. With regard to the election of directors, votes may be cast in favor or
withheld. Votes that are withheld and broker non-votes will be excluded entirely
from the vote and will have no effect on the outcome.
INDEPENDENT PUBLIC ACCOUNTANTS
Grant Thornton LLP, the Company's independent public accountants, has
audited the Company's financial statements for the fiscal year ended December
31, 1998. The Company expects representatives of Grant Thornton LLP to be
present at the Meeting and to be available to respond to appropriate questions
from stockholders. The Grant Thornton LLP representatives will be given an
opportunity to make a statement if they desire.
OTHER INFORMATION
A copy of the Annual Report on Form 10-K as filed with the SEC for the year
ended December 31, 1998 (excluding exhibits) will be furnished, without charge,
by writing to Susan Synor, Investor Relations, Superior Consultant Holdings
Corporation, 4000 Town Center, Suite 1100, Southfield, Michigan 48075.
18
<PAGE> 22
SOLICITATION OF PROXIES
All expenses incident to the solicitation of proxies by the Company will be
paid by the Company. Solicitation may be made personally, or by telephone,
telegraph or mail, by one or more employees of the Company, without additional
compensation. The Company will reimburse brokerage houses and other custodians,
nominees and fiduciaries for reasonable out-of-pocket expenses incurred in
forwarding copies of solicitation material to beneficial owners of Common Stock
held of record by such persons.
The above Notice of Annual Meeting and Proxy Statement are sent by order of
the Company's Board of Directors.
SUSAN M. SYNOR
Secretary
Southfield, Michigan
April 9, 1999
19
<PAGE> 23
APPENDIX A
SECOND AMENDMENT TO THE
SUPERIOR CONSULTANT HOLDINGS CORPORATION
LONG-TERM INCENTIVE PLAN
The Superior Consultant Holdings Corporation Long-Term Incentive Plan shall
be amended, effective May 6, 1999, as follows:
Article III ("SHARES SUBJECT TO THE PLAN") shall be amended to read as
follows:
The aggregate number of Shares as to which Awards may be granted from
time to time shall be four million (4,000,000) Shares (subject to
adjustments for stock splits, stock dividends, and other adjustments
described in Article XVII hereof).
In accordance with Code Section 162(m), the aggregate number of Shares
to which Awards may be granted in any one calendar year to any one Key
Employee shall not exceed six hundred thousand (600,000) Shares (subject to
adjustment for stock splits, stock dividends, and other adjustments
described in Article XVII hereof).
From time to time, the Committee and appropriate officers of the
Company shall take whatever actions are necessary to file required
documents with governmental authorities and stock exchanges so as to make
Shares available for issuance pursuant to the Plan. Shares subject to
Awards that are forfeited, terminated, expired unexercised, canceled by
agreement of the Company and the Participant, settled in cash in lieu of
Common Stock, or in such manner that all or some of the Shares covered by
such Awards are not issued to a Participant, or are exchanged for Awards
that do not involve Common Stock, shall immediately become available for
Awards. Awards payable in cash shall not reduce the number of shares
available for Awards under the Plan.
Except as otherwise set forth herein, the aggregate number of Shares
as to which Awards may be granted shall be subject to change only by means
of an amendment of the Plan duly adopted by the Company and approved by the
stockholders of the Company within one year before or after the date of
adoption of the Amendment.
This Second Amendment is adopted effective the 6th day of May, 1999.
SUPERIOR CONSULTANT HOLDINGS
CORPORATION
20
<PAGE> 24
SUPERIOR CONSULTANT HOLDINGS CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1. ELECTION OF CLASS III DIRECTORS, for For Withhold For All 2. To amend the Company's Long-Term For Against Abstain
a term expiring at the Annual Meeting of All All Except Incentive Plan to increase the / / / / / /
Stockholders in 2002 (mark one of the aggregate number of shares of
ovals). common stock that may be issued
Nominees: Richard D. Helppie, Jr. / / / / / / under the Plan from 2,400,000
Richard P. Saslow and shares to 4,000,000 shares
C. Everett Koop and to approve the Long-Term
(INSTRUCTION: To withhold authority Incentive Plan for purposes of
to vote for any individual nominee, Section 162(m) of the Internal
write that nominee's name in the Revenue Code of 1986, as amended.
space below.)
3. In their discretion, the Proxies
- --------------------- are authorized to vote upon such
other business as may properly
come before the meeting, or any
adjournment thereof.
Dated: ________________, 1999
Signature(s) ___________________________________________
________________________________________________________
Please sign exactly as name appears at left. When shares
are held by joint tenants, both should sign. When signing
as attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please
sign in full corporate name by President or other
authorized officer. If as a partnership, please sign in
full partnership name by authorized person.
</TABLE>
/\FOLD AND DETACH HERE/\
YOUR VOTE IS IMPORTANT!
PLEASE MARK, DATE, SIGN AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
<PAGE> 25
PROXY PROXY
SUPERIOR CONSULTANT HOLDINGS CORPORATION
4000 TOWN CENTER, SUITE 1100
SOUTHFIELD, MICHIGAN 48075
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Richard D. Helppie, Jr. and Richard P.
Saslow, and each of them, as Proxies with the power to appoint their
substitutes, and hereby authorizes each of them to represent and to vote, as
designated below, all the shares of common stock, par value $0.01 per share, of
Superior Consultant Holdings Corporation (the "Company") held of record by the
undersigned on March 25, 1999, at the Annual Meeting of Stockholders when
convened on Thursday, May 6, 1999, or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO SELECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1 AND 2.
PLEASE MARK, DATE, SIGN AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
IF YOU HAVE ANY QUESTIONS, PLEASE CONTACT THE COMPANY AT 1-248-386-8300.
(Continued and to be signed on reverse side)
