<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 Section 240.14a-11(c) or Section 240.14a-12
Superior Financial Corporation
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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:
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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):
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(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>
TO OUR STOCKHOLDERS:
The annual meeting of the stockholders of Superior Financial Corp. will be
held at 10:00 a.m., Wednesday, May 12, 1999, at 5000 Rogers Avenue Fort Smith,
Arkansas.
Enclosed is the notice of the meeting, a proxy statement, a proxy card and
Superior's Annual Report on Form 10-K. We hope that you will study the
enclosed material carefully and attend the meeting in person.
Whether you plan to attend the meeting or not, please sign and date the
enclosed proxy card and return it in the accompanying envelope as promptly as
possible. The proxy may be revoked by your vote in person at the meeting, by
your execution and submission of a later dated proxy, or by your giving
written notice of revocation to the Secretary of Superior Financial Corp. at
any time prior to the voting thereof. Thank you for your support.
Sincerely,
/s/ C. Stanley Bailey
-------------------------------------
C. Stanley Bailey
Chairman of the Board and Chief
Executive Officer
April 12, 1999
<PAGE>
NOTICE
of the
ANNUAL MEETING OF STOCKHOLDERS
of
Superior Financial Corp.
To Be Held May 12, 1999
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of Superior
Financial Corp. ("Superior"), a Delaware corporation, will be held at 5000
Rogers Avenue, Fort Smith Arkansas, on Wednesday, May 12, 1999, at 10:00 a.m.,
central time, for the following purposes:
1. To elect the nominees named in the Proxy Statement as directors to serve
for a term of one year.
2. To approve the adoption of the 1998 Long Term Incentive Plan (the
"Incentive Plan").
3. To ratify the selection of Ernst & Young LLP as Superior's independent
auditors.
4. To transact such other business as may properly come before the meeting
or any adjournments thereof, but which is not now anticipated.
These matters are discussed in detail in the accompanying proxy statement.
Only stockholders of record at the close of business on March 31, 1999, will
be entitled to notice of, and to vote at, the meeting. A complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order
and showing the address of each stockholder and the number of shares
registered in the name of each stockholder, shall be open for examination by
any stockholder at Superior's principal office at 5000 Rogers Avenue, Fort
Smith, Arkansas, during ordinary business hours for any purpose germane to the
meeting. Such list will be open for a period of at least ten days prior to the
meeting.
All stockholders of Superior are cordially invited to attend the meeting in
person. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE SIGN
AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ACCOMPANYING ENVELOPE AS
PROMPTLY AS POSSIBLE. THE PROXY MAY BE REVOKED BY YOUR VOTE IN PERSON AT THE
MEETING, BY YOUR EXECUTION AND SUBMISSION OF A LATER DATED PROXY, OR BY YOUR
GIVING WRITTEN NOTICE OF REVOCATION TO THE SECRETARY OF SUPERIOR AT ANY TIME
PRIOR TO THE VOTING THEREOF.
By Order of the Board of Directors
/s/ C. Stanley Bailey
--------------------------------------
C. Stanley Bailey
Chairman of the Board and Chief
Executive Officer
April 12, 1999
<PAGE>
Superior Financial Corp.
5000 Rogers Avenue
Fort Smith, Arkansas 72917
Telephone: (501) 484-4305
PROXY STATEMENT
FOR 1999 ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement and the accompanying proxy are furnished on or about
April 12, 1999, by Superior Financial Corp. ("Superior") to the holders of
record of common stock, par value $0.01, of Superior (the "Common Stock") in
connection with the annual meeting of Superior's stockholders and any
adjournments thereof (the "Annual Meeting") to be held on Wednesday, May 12,
1999, at 5000 Rogers Avenue, Fort Smith, Arkansas. The matters to be
considered and acted upon, including the election of directors, approval of
the 1998 Long Term Incentive Plan (the "Incentive Plan") and the ratification
of Ernst & Young LLP as Superior's independent auditors are described herein.
The Board of Directors of Superior (the "Board") recommends the election of
the five director-nominees named in this Proxy Statement for a term of one
year, approval of the Incentive Plan and ratification of Ernst & Young LLP as
Superior's independent auditors.
The enclosed proxy is solicited on behalf of the Board and is revocable at
any time prior to the voting of such proxy by giving written notice of
revocation to the Secretary of Superior, or by executing and submitting a
later dated proxy, or by voting in person at the Annual Meeting. Mere
attendance at the Annual Meeting without submitting a later dated proxy will
not be sufficient to revoke a previously submitted proxy. All properly
executed proxies delivered pursuant to this solicitation will be voted at the
Annual Meeting and in accordance with instructions, if any. If no instructions
are given, the proxies will be voted FOR election of the director-nominees
named herein, FOR approval of the Incentive Plan, FOR ratification of Ernst &
Young LLP as Superior's independent auditors and in accordance with the
instructions of management as to any other matters that may come before the
Annual Meeting.
Superior will pay the cost of soliciting proxies. In addition to the use of
the mails, proxies may be solicited by personal interview, telephone or
electronic communication. Banks, brokers, nominees or fiduciaries will be
required to forward the soliciting material to the principals and to obtain
authorization of the execution of proxies. Superior may, upon request,
reimburse banks, brokers and other institutions, nominees and fiduciaries for
their expenses in forwarding proxy material to the principals.
Stockholders Eligible to Vote
This Proxy Statement is furnished to the holders of Common Stock who were
holders of record as of the close of business on March 31, 1999. Only those
holders are eligible to vote at the Annual Meeting.
Votes will be tabulated and counted by one or more inspectors of election
appointed by the Chairman of the Board. Proxies marked as abstentions and
shares held in street name which have been designated by brokers on proxy
cards as not voted will not be counted as votes cast. Such proxies will be
counted for purposes of determining a quorum at the Annual Meeting. A quorum
consists of a majority of the shares of Common Stock outstanding.
1
<PAGE>
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
Principal Stockholders
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of March 31, 1999 by each person of record
believed by Superior to own beneficially 5% or more of the Common Stock.
<TABLE>
<CAPTION>
Number Percentage
of Beneficially
Name Shares Owned
---- ------- ------------
<S> <C> <C>
Bosworth & Co...................................... 550,000 5.46
Keefe, Bruyette & Woods, Inc. ..................... 552,083 5.48
Morgan Stanley & Co................................ 550,000 5.46
Oz Master Fund, Ltd................................ 600,000 5.95
Steven N. Stein(1)................................. 577,600(1) 5.73
Alexander D. Warm(1)............................... 537,100(1) 5.33
Wellington Management Company...................... 550,000 5.46
Whiting & Co....................................... 550,000 5.46
</TABLE>
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(1) John M. Stein, a director of Superior, and Steven N. Stein, a principal
shareholder of Superior, are directors, executive Officers and principal
stockholders of Financial Stocks, Inc. Alexander D. Warm, who is the
beneficial owner of 537,100 shares of Common Stock, and Stanley L.
Viagran, who owns 30,000 shares of Common Stock are the remaining
directors and shareholders of Financial Stocks, Inc., which is a general
partner and investment manager of certain investment funds, including
Vine Street Exchange Fund, L. P., which owns 312,500 shares of Common
Stock. John M Stein and Steven N. Stein are brothers. Alexander D. Warm
and Stuart E. Warm, who owns 20,000 shares of Common Stock, are brothers.
Steven N. Stein and John M. Stein each disclaim any ownership of Common
Stock held by the other. Alexander D. Warm and Stuart E. Warm each
disclaim any ownership of Common Stock held by the other.
2
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of March 31, 1999 by each director and each
executive officer, and all directors and executive officers as a group.
<TABLE>
<CAPTION>
Number Percentage
of Beneficially
Name Shares Owned
---- ------- ------------
<S> <C> <C>
C. Stanley Bailey.................................. 299,166(1) 2.88
Rick D. Gardner.................................... 1,385(2) *
Boyd W. Hendrickson................................ -- *
C. Marvin Scott.................................... 97,500(2) 1.00
John M. Stein...................................... 160,800(3) 1.60
David E. Stubblefield.............................. 10,000 *
Officers and Directors as a Group.................. 568,851 5.43
</TABLE>
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* Represents less than 1%
(1) Includes 195,000 shares of Common Stock subject to stock options, 49,398
shares held jointly by Mr. Bailey and his wife Virginia H. Bailey and
10,316 shares held in Mrs. Bailey's IRA.
(2) Represents shares of Common Stock subject to stock options.
(3) John M. Stein, a director of Superior, and Steven N. Stein, a principal
shareholder of Superior, are directors, executive officers and principal
shareholders of Financial Stocks, Inc. Alexander D. Warm, who is the
beneficial owner of 537,100 shares of Common Stock, and Stanley L.
Viagran, who owns 30,000 shares of the Common Stock, are the remaining
directors and shareholders of Financial Stocks, Inc. Financial Stocks,
Inc. is a general partner and investment manager of certain investments
funds, including Vine Street Exchange Fund, L.P., which owns 312,500
shares of Common Stock. Steven N. Stein and John M. Stein are brothers.
Alexander D. Warm and Stuart E. Warm, who owns 20,000 shares of Common
Stock, are brothers. Steven N. Stein and John M. Stein each disclaim any
ownership of Common Stock held by the other. Alexander D. Warm and Stuart
E. Warm each disclaim any ownership of Common Stock held by the other.
3
<PAGE>
ELECTION OF DIRECTORS
The Board recommends that the stockholders elect the five persons named
below to hold office for the term of one year, or until their successors are
elected and qualified. Superior's Restated Certificate of Incorporation
provides that the number of directors which shall constitute the entire Board
shall be fixed from time to time by resolutions adopted by the Board, but
shall not be less than three persons.
If, prior to the voting at the Annual Meeting, any person proposed for
election as a director is unavailable to serve or for good cause cannot serve,
the shares represented by all valid proxies may be voted for the election of
such substitute as the members of the Board may recommend. Superior's
management knows of no reason why any person would be unavailable or unable to
serve as a director.
Assuming a quorum is present at the Annual Meeting, a plurality of the votes
cast will be sufficient to elect the directors. On the proxy card, voting for
directors is Proposal 1.
The bylaws of Superior contain certain limitations on stockholder
nominations of candidates for election as directors. See "Bylaw Provisions
Regarding Conduct of Stockholders' Meetings."
The following table provides certain biographical information about each
nominee to be proposed on behalf of the Board. Unless otherwise indicated,
each person has been engaged in the principal occupation shown for the last
five years. Executive officers serve at the discretion of the Board.
DIRECTORS TO BE NOMINATED ON BEHALF OF THE BOARD FOR A TERM OF ONE YEAR
<TABLE>
<CAPTION>
Position and Office Held with Present and Principal
Name, Age and Year Superior and Superior Federal Occupation for the Last
Became Director Bank, F.S.B. Five Years
------------------ ---------------------------- ------------------------
<C> <C> <S>
C. Stanley Bailey*..... Chairman of the Board, Chief Chief Financial Officer
49, 1998 Executive Officer of both and Executive Vice
Superior and Superior President of Hancock
Federal Bank, F.S.B. Holding Company and
Hancock Bank, Gulfport,
Mississippi, 1995-1998,
Vice Chairman of the
Board of Director,
AmSouth Bancorporation
and AmSouth Bank,
Birmingham, Alabama
1971-1994
C. Marvin Scott*....... President and Director, of Chief Retail Officer and
49, 1998 both Superior and Superior Senior Vice President,
Federal Bank, F.S.B. Hancock Holding Company
and Hancock Bank,
Gulfport Mississippi,
1996-1998; Executive
Vice President--
Consumer Banking,
AmSouth Bank
Birmingham, Alabama
1988-1996.
Boyd W. Hendrickson.... Director of Superior and President and Chief
54, 1998 Superior Federal Bank, Operating Officer of
F.S.B. Beverly Enterprises,
Inc. Fort Smith,
Arkansas
John M. Stein.......... Director of Superior and President, Financial
32, 1998 Superior Federal Bank, Stocks, Inc.,
F.S.B. Cincinnati, Ohio; Vice
President; Bankers
Trust Company, New
York, New York, 1993-
1995.
David E. Stubblefield.. Director of Superior and President and Chief
62, 1998 Superior Federal Bank, Executive Officer ABF
F.S.B. since 1994 Freight System, Inc.
</TABLE>
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* Indicates that the director/nominee is also an executive officer.
The Board of Directors has established audit and compensation committees.
The Audit Committee currently consists of Messrs. Stubblefield and
Hendrickson, neither of whom is an employee of Superior. The
4
<PAGE>
Audit Committee reviews the general scope of the audit conducted by Superior's
independent auditors, the fees charged for their work and matters relating to
Superior's internal control systems. In performing its functions, the Audit
Committee meets separately with representatives of Superior's independent
auditors, with Superior's internal auditors and with representatives of senior
management.
The Compensation Committee currently consists of Messrs. Stein, Stubblefield
and Hendrickson, none of whom is an employee of Superior. The Compensation
Committee administers Superior stock option plans and grants options and other
awards to company employees under such plans. In addition, the Compensation
Committee is responsible for establishing of policies dealing with various
compensation and employee benefit matters of Superior.
Superior has no nominating committee.
During 1998, the Board met six times. All directors attended 75% or more of
these meetings, plus meetings of committees of the Board on which they served.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Superior
directors, certain officers and 10% stockholders to file reports of ownership
and changes in ownership with the Securities and Exchange Commission (the
"SEC"). Such officers, directors and 10% stockholders are required by SEC
regulations to furnish Superior with copies of all Section 16(a) reports they
file, initial reports on Form 3 and 5 which are filed with the SEC annually.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no reports on Form
5 were required for those persons, Superior believes that during 1998 all
filings applicable to its officers, directors and 10% stockholders were made
timely.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The Compensation Committee Currently consists of Messrs. Stein, Stubblefield
and Hendrickson, none of whom is an employee of Superior. Before the formation
of the Compensation Committee, and in connection with the acquisition, Messrs.
Bailey and Scott negotiated their respective employment agreements with the
lead Investor and the Placement Agent, each of whom is a principal
shareholder. See "--Employment Agreements."
OTHER TRANSACTIONS--LOANS
Certain directors, officers and principal shareholders of Superior and their
affiliated interests were customers of and had transactions with Superior
Federal Bank, F.S.B. (the "Bank") in the ordinary course of business;
additional transactions may be expected to take place in the ordinary course
of business. Included in such transactions were outstanding loans and
commitments from the Bank, all of which were made in the ordinary course of
business on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons and did not involve more than normal risk of collectability or
present other unfavorable features.
DIRECTOR COMPENSATION
Directors of Superior and the Bank receive fees of $500 for each Board
meeting of each entity attended. Members of committees of Superior and the
Bank receive fees of $200 for each committee meeting attended. Superior paid
no directors fees in 1997. All of the directors of Superior also serve as
directors of the Bank. Fees paid to directors of Superior for their services
as directors of the Bank or as directors of Superior totaled $14,150 in 1998.
5
<PAGE>
EXECUTIVE COMPENSATION
And Other Information
The following table provides certain summary information concerning
compensation paid or accrued by Superior to or on behalf of Superior's
Chairman of the Board and Chief Executive Officer and the two most highly
compensated executive officers of Superior. No information is given for 1996
or 1997 because Superior was not organized until 1997, and no executive
compensation was paid until 1998.
<TABLE>
<CAPTION>
Long Term
ANNUAL COMPENSATION COMPENSATION AWARDS
---------------------- ---------------------
SECURITIES
RESTRICTED UNDERLYING
NAME AND SALARY BONUS STOCK OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR ($) ($) AWARDS ($) (#) COMPENSATION
------------------ ---- ------- ------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
C. Stanley Bailey....... 1998 225,000 56,250 -- 487,500(2) *
Chairman and CEO
C. Marvin Scott......... 1998 150,000 37,500 -- 243,750(2) *
President
Rick D. Gardner......... 1998 125,000(1) 5,889(1) -- 5,540 *
Chief Financial Officer
</TABLE>
- --------
* Does not include amounts attributable to miscellaneous benefits received by
the named officers. The costs of providing such benefits to the named
officers for the year ended 1998 are not anticipated to exceed the lesser
of $50,000 or 10% of the total annual salary and bonus reported.
(1) Mr. Gardner joined Superior on September 21, 1998. The salary given here
represents his annualized base salary. The bonus represents amounts
actually paid in relation to 1998 employment.
(2) Represents options granted to Messrs. Bailey, Scott and Gardner on
December 22, 1997, January 9, 1998 and September 21, 1998, respectively.
The exercise price $10.00 per share with respect to options held by Mr.
Bailey and Mr. Scott and is $10.83 with respect to options held by Mr.
Gardner.
STOCK OPTION PLANS
Superior adopted the Incentive Plan on June 17, 1998. The Incentive Plan is
an omnibus plan administered by the Compensation Committee to provide equity-
based incentive compensation for Superior's key employees. It provides for
issuance of incentive stock options, qualified under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and non-qualified
stock options. The Incentive Plan also provides for issuance of stock
appreciation rights, whether in tandem with options or separately, and awards
of restricted shares subject to time-based restrictions and/or performance
goals. The Incentive Plan will be submitted to the stockholders for
ratification at the Annual Meeting. See "Approval of Incentive Plan."
The Incentive Plan imposes a limit on the total number of shares that may be
issued during the ten-year term of the Incentive Plan equal to 10% of the
number of shares outstanding as of December 31, 1998. It imposes a limit on
the number of awards that may be granted to all employees in any one calendar
year equal to 1% of the number of shares outstanding on December 31, 1998. On
that date there were 10,080,503 shares of Common Stock outstanding. Finally,
the Incentive Plan limits the number of restricted stock awards that may be
granted each year, which are time-based restricted only (i.e., without regard
to any performance goals), to a number of shares equal to .33% (one-third of
one percent) of the number of shares outstanding on December 31, 1998.
Each award is non-transferrable during the life of the employee, except as
permitted by the Compensation Committee to the employee's family or a trust
for the employee's family. The awards do not create a right to employment.
Upon a change in control of Superior any vesting schedules and performance
goals are deemed satisfied.
6
<PAGE>
As discussed further below, options were granted to Mr. Bailey and Mr. Scott
pursuant to their Founder's Agreements and Employment Agreements,
respectively. Those options were issued before adoption of the Incentive Plan
by Superior's Board and, therefore, are non-qualified stock options. They have
not been issued pursuant to the Incentive Plan.
Options
The following table shows certain information respecting exercised and
unexercised options for Common Stock held by Superior executive officers at
December 31, 1998. Certain options have been granted pursuant to a performance
based vesting schedule which only permits the holder to exercise a portion of
his or her options upon accomplishing pre-defined levels of stock price
performance.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, DECEMBER 31,
1998 1998(2)
--------------- --------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
ON EXERCISE (#) REALIZED ($)(1) UNEXERCISABLE UNEXERCISABLE
--------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
C. Stanley Bailey....... -- -- 195,000/292,500 $19,500/29,250
C. Marvin Scott......... -- -- 97,500/146,250 $ 9,750/14,625
Rick D. Gardner......... -- -- 1,385/4,155 --
</TABLE>
- --------
(1) Value realized is the difference between the fair market value of the
securities underlying the options and the exercise price on the date of
exercise. No options had been exercised as of December 31, 1998.
(2) Value is calculated by subtracting the exercise price from the market
value of underlying securities at December 31, 1998. Because there was no
market for the Common Stock as of December 31, 1998, the Common Stock's
book value of $10.10 as of that date has been used to represent the
Common Stock's fair market value.
The following table shows certain information respecting grants of options
respecting Common Stock to certain executive officers of Superior during 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL
INDIVIDUAL GRANTS RATES OF STOCK PRICE APPRECIATION FOR OPTION TERM
------------------------------- -------------------------------------------------
PERCENT OF
TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO EXERCISE MARKET
UNDERLYING EMPLOYEES OR BASE PRICE
OPTIONS IN FISCAL PRICE ON DATE EXPIRATION 0%
NAME GRANTED (#) YEAR ($/SH) OF GRANT DATE ($) 5% ($) 10% ($)
- ---- ----------- ---------- -------- ---------- -------------- --- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
C. Marvin Scott......... 243,750 89.1 $10.00 $10.00 (1) January, 2008 0 1,344,000 3,310,000
Rick D. Gardner......... 5,540 2.0 $10.83 10.10 (2) November, 2008 0 27,000 72,000
</TABLE>
- --------
(1) Because there was no market for the Common Stock on such date, the maximum
price that was paid for the Common Stock in the Private Placement on April
1, 1998 has been used to represent the market price for the purposes of
this table.
(2) Because there was no market for the Common Stock on such date, the Common
Stock's book value as of December 31, 1998 has been used to represent the
market price for the purposes of this table.
7
<PAGE>
EMPLOYMENT AGREEMENTS
Superior and Mr. Bailey have entered into an employment agreement which
provides, among other things, that Mr. Bailey serve as the Chairman of the
Board of Directors and Chief Executive Officer of Superior and the Bank for an
initial term of employment of three years at an initial base annual salary of
$225,000 and an initial targeted annual bonus of $75,000 based upon the
achievement of certain performance goals. Mr. Bailey is also entitled to
receive options to acquire 487,500 shares of Common Stock, or 5% of the shares
of Common Stock issued and outstanding. The exercise price of such options is
$ 10.00 per share.
Superior and Mr. Scott have entered into an agreement which provides, among
other things, that Mr. Scott serve as the President of Superior and the Bank
for an initial base annual salary of $150,000 and an entitled to receive
options to acquire 243,750 shares of Common Stock, 2.5% of the shares of
Common Stock issued and outstanding. The exercise price of such options is
$10.00 per share.
Mr. Gardner has entered into an agreement dated September 21, 1998 to serve
as Superior's and the Bank's Chief Financial Officer. He is entitled to
receive compensation $125,000 annual base salary and bonuses of up to 50% of
base salary, with a targeted payout of 30%, if the Bank achieves certain
performance goals. He received stock options covering 5,540 shares of Common
Stock, subject to certain vesting requirements. The exercise price of the
options is $10.83.
Superior has agreed with each of Mr. Bailey, Mr. Scott and Mr. Gardner to
pay certain severance benefits upon a change of control of Superior. A change
of control is defined for this purpose as the occurrence of a transaction the
result of which is that more than 25% of the outstanding shares of Common
Stock (or a successor or parent) are acquired by any person, entity or group
acting in concert, which before the transaction, owned less than 25% of the
outstanding shares of the Common Stock. In the event of a change of control,
Mr. Bailey will be entitled to receive, subject to Section 280(g) of the
Internal Revenue Code of 1986, as amended, an amount equal to three times his
total compensation for the preceding 12 months. Each of Mr. Scott and Mr.
Gardner will be entitled to receive, respectively, an amount equal 2.99 times
his total compensation for the preceding 12 months.
BENEFIT PLAN
Superior has established a contributory profit sharing plan pursuant to
Section 401(k) of the Code covering substantially all employees (the "Plan").
Superior is the Plan administrator and investment advisor, and Capital
Guardian serves as the Plan's trustee. Each year Superior determines, at its
discretion, the amount of matching contributions not to exceed 6% of the
employee's annual compensation vesting ratably over a four year period. Total
Plan expenses charged to Superior's operations for 1998 were $203,863.
INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
Mr. Bailey, Mr. Scott and Mr. Gardner have entered into employment
agreements with Superior. These agreements provide, among other things, that
each of them is entitled to receive options to acquire shares of Common Stock
pursuant to a vesting schedule determined by the occurrence of certain events.
See "--Employment Agreements."
COMPENSATION COMMITTEE REPORT
The Compensation Committee consists of Boyd W. Henderson, John M. Stein and
David E. Stubblefield, none of whom is an employee of Superior or the Bank.
The committee reviews and determines cash compensation of executive officers
of Superior.
COMPENSATION PRINCIPLES
The committee determines executive compensation in accordance with five
principles: (1) Superior's financial performance measured against attainment
of Superior's business goals and the performance of peer-
8
<PAGE>
group institutions; (2) the competitiveness of executive compensation with
Superior's peers; (3) the encouragement of stock ownership of management; (4)
the individual performance of each executive officer; and (5) recommendations
by the Chief Executive Officer regarding all executive officers other than
himself. No disproportionate weight is assigned to any individual principle.
1998 COMPENSATION
Compensation in 1998 for executive officers, including the Chief Executive
Officer, was negotiated in connection with their initial employment by
Superior. The terms of such compensation are set forth in employment
agreements. See "--Employment Agreements."
STOCK AWARDS
Certain stock awards to Mr. Bailey, Mr. Scott and Mr. Gardner are governed
by the terms of their employment agreements. See "--Employment Agreements."
This foregoing report is submitted by the compensation committee.
COMMITTEE:
JOHN M. STEIN
BOYD W. HENDERSON
DAVID E. STUBBLEFIELD
PERFORMANCE GRAPH
Because there was no public market for the Common Stock until February 1999,
the performance graph normally required by Item 402(1) of Regulation S-K has
been omitted.
APPROVAL OF INCENTIVE PLAN
THE INCENTIVE PLAN
The following is a brief description of the Incentive Plan, a complete copy
of which is attached to this Proxy Statement as Appendix A.
The Incentive Plan imposes a limit on the total number of shares that may be
issued during the 10-year term of the Incentive Plan equal to 10% of the
number of shares outstanding as of December 31, 1998. It imposes a limit on
the number of Awards that may be granted to all employees in any one calendar
year equal to 1% of the number of shares outstanding on December 31, 1998.
Finally, the Incentive Plan limits the number of restricted stock awards that
may be granted each year, which are time-based restricted only (i.e., without
regard to any performance goals), to a number of shares equal to 0.33% (one-
third of 1%) of the number of shares outstanding on December 31, 1998. On
December 31, 1998, there were 10,080,503 shares of Common Stock outstanding.
Each Award is non-transferrable during the life of the employee, except as
permitted by the Compensation Committee in certain cases to the employee's
family or a trust for the employee's family. The Awards do not create a right
to employment. Upon a change of control of Superior, any vesting schedules and
performance goals are deemed satisfied, performance shares may be paid in
cash, and employees may elect during a limited period of time to receive cash
upon exercise of a cash option or an incentive stock option.
Awards of options, SARs and restricted stock and performance shares are
subject to such vesting schedules and other restrictions as the Compensation
Committee may determine at the time of grant. It is expected, however, that
all awards will be subject either to a time-based vesting schedule or a
performance-based vesting
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schedule. The exercise price of all stock options, whether incentive stock
options or non-qualified stock options, will be not less than the fair market
value of Superior's common stock on the date of the grant. Similarly, all
stock appreciation rights will be based on the fair market value of Superior's
common stock on the date of grant. Incentive stock options and stock
appreciation rights shall have a term not to exceed ten years.
Each Award under the incentive plan to an employee will be evidenced by a
written award agreement, executed by Superior and the employee.
The Board retains the right to terminate the Incentive Plan and may amend or
modify the plan, but not in a manner that would adversely effect outstanding
awards.
CERTAIN TAX CONSEQUENCES
The following is a brief summary of the federal income tax consequences to
the holder of an incentive stock option ("ISO"), a non-qualified stock option
("NSO"), stock appreciation rights ("SARs"), and restricted shares. The
summary may not address all tax consequences that may be relevant to a
particular employee. This summary is not intended to be exhaustive and does
not describe state and local tax consequences. Employees are strongly urged to
consult their tax advisors concerning the particular federal, state, local or
foreign tax consequences to them of the transactions described below.
Options granted as ISOs are intended to qualify under Section 422 of the
Code. An employee generally will not recognize income upon the grant or
exercise of an ISO. If shares issued to an employee pursuant to the exercise
of an ISO are not disposed of in a disqualifying disposition within two years
after the date of grant or within one year after the exercise of the option,
then upon the sale of the shares any amount realized in excess of the exercise
price generally will be taxed to the employee as capital gain, and any loss
will be a capital loss. If shares acquired upon the exercise of an ISO are
disposed of prior to the expiration of either holding period described above,
the employee generally will recognize ordinary income in the year of
disposition in an amount
equal to any excess of the fair market value of the shares at the time of
exercise (or, if less, the amount realized on the disposition of the shares)
over the exercise price. Any further gain (or loss) realized by the employee
generally will be taxed as capital gain (or loss). In addition, if an employee
is subject to federal "alternative minimum tax," the exercise of an ISO will
be treated essentially the same as a NSO for purposes of the alternative
minimum tax.
An employee will not recognize income at the time a NSO is granted. At the
time of exercise, the employee will recognize ordinary income in an amount
equal to the difference between the exercise price and the fair market value
of the shares on the date of exercise. Upon a later sale of those shares, any
appreciation (or depreciation) in the value of the shares after the date of
exercise generally will be treated as capital gain (or loss).
In general, a recipient of a SAR will not recognize income at the time a SAR
is granted. At the time of exercise, however, the recipient will recognize
ordinary income in an amount equal to the difference between the fair market
value of the number of shares on which the SAR is based at the date of grant
and the fair market value of the shares on the date of exercise.
A recipient of restricted stock, whether subject to a time-based vesting
schedule or a performance-based vesting schedule, generally will not recognize
income at the time the restricted stock is granted. The recipient generally
will recognize ordinary income in an amount equal to the excess of the fair
market value of the shares over the amount paid for the shares, if any. The
recipient will recognize the income on the date that the restricted shares
become vested provided that the stock is not transferrable before such time.
Section 16(b) of the Securities Exchange Act of 1934 generally will defer for
six months the recognition of income for persons subject to such Section
16(b). Any gain (or loss) realized by the holder of the restricted stock
pursuant to a subsequent disposition of the shares generally will be taxed as
capital gain (or loss). Alternatively, the recipient of the restricted stock
or performance shares may elect to recognize as ordinary income on the date of
the transfer of
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the shares the difference between the fair market value of the shares on that
date and the amount paid for such shares, if any. If such election is made,
any further appreciation (or depreciation) in the value of the shares after
the date of transfer generally will be treated as capital gain (or loss).
To the extent that an employee recognizes ordinary income in the
circumstances described above, Superior or the subsidiary for which the
employee performs services, will be entitled to a corresponding tax deduction,
provided that, among other things, the income meets the test of
reasonableness, is an ordinary and necessary business expense, is not an
"excess parachute payment" within the meaning of Section 280G of the Code and
is not disallowed by the $1.0 million limitation on certain executive
compensation under Section 162(m) of the Code.
VOTE REQUIRED
Approval of the Incentive Plan ( Proposal 2 on the proxy card ) requires the
affirmative vote of a majority of the outstanding shares of Common Stock.
Abstentions and broker non-votes, therefore, will have the same effect as a
vote against approval. THE BOARD RECOMMENDS A VOTE FOR THE APPROVAL OF THE
INCENTIVE PLAN.
RATIFICATION OF INDEPENDENT AUDITOR
In March 1998, management of the Superior recommended that Ernst & Young LLP
serve as Superior's independent auditors and replace Deloitte & Touche LLP as
the Bank's independent auditors. The Board of Directors approved retaining
Ernst & Young LLP in March 1998. No report by Deloitte & Touche LLP on
Superior's financial statements for either of 1996 or 1997 contained an
adverse opinion, disclaimer of opinion, modification or qualification. During
the last two fiscal years there were no disagreements between Superior and
Deloitte & Touche LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure.
Superior has selected the firm of Ernst & Young LLP to act as its and the
Bank's independent auditors for 1999. It is expected that representatives of
this firm will be present at the Annual Meeting and will have an opportunity
to make a statement to and to answer questions from stockholders.
Ratification of the selection of Ernst & Young LLP (Proposal 3 on the proxy
card) requires the affirmative vote of a majority of the shares of Common
Stock present in person or represented by proxy at the Annual Meeting. The
Board recommends a vote for the ratification of Ernst & Young LLP.
BYLAW PROVISIONS REGARDING CONDUCT OF STOCKHOLDERS' MEETINGS
Superior's bylaws contain two provisions relating to the conduct of
stockholders' meetings. The first provision requires that certain procedures
be followed by a stockholder of record who wishes to present business at the
annual meeting of stockholders, including the nomination of candidates for
election as directors. In order to nominate persons for election as a director
or to present other business at a meeting, a stockholder must provide written
notice thereof to the secretary of Superior not less than 60 days nor more
than 90 days prior to the first anniversary of the preceding year's annual
meeting, provided that, if the date of the annual meeting is advanced by more
than 30 days or delayed by more than 60 days from such anniversary date,
notice by the stockholder to be timely must be delivered not earlier than the
90th day prior to such annual meeting or the 20th day following the day on
which public announcement of the date of such meeting is first made.
As it relates to director nominations, the written notice must state all
information as to each nominee required to be disclosed in solicitations of
proxies for election of directors under SEC regulations, including the written
consent of each such nominee. As for any other business that the stockholder
proposes to bring before the meeting, the written notice must contain a brief
description of the business, the reasons for conducting the
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business at the meeting and any material interest in such business of such
stockholder. The notice must also contain the name and address of such
stockholder and the class and number of shares of Superior owned beneficially
and of record, as well as the same information for each beneficial owner who
may be nominated for election as a director.
The Board is not required to nominate a person designated by a stockholder
or to take up such other business as may be contained in a written notice from
a stockholder; however, compliance with this procedure would permit a
stockholder to nominate the individual at the stockholders meeting, and any
stockholder may vote shares in person or by proxy for any individual such
stockholder desires. The procedures relating to nominating directors and
presenting other business at a stockholders meeting may only be used by a
stockholder who is a stockholder of record at the time of the giving of the
notice by the stockholder to the secretary of Superior. The procedures do not
prohibit or apply to stockholder proposals under SEC rule 14a-8 as described
at "Proposals of Stockholders."
The second provision of Superior's bylaws relates to the conduct of the
business at a stockholder meeting. Under that provision, the Board has the
authority to adopt rules for the conduct of meetings, and, unless inconsistent
with any such rules, the Chairman of the meeting may prescribe such rules,
regulations and procedures as, in his judgment, are appropriate for the proper
conduct of the meeting.
PROPOSALS OF STOCKHOLDERS
Subject to certain rules of the SEC, proposals by stockholders intended to
be presented at Superior's, 2000 annual meeting of stockholders must be
received at Superior's principal executive offices not less than 120 calendar
days in advance of April 12, 2000 (December 13, 1999) for inclusion in the
proxy or information statement relating to the 2000 annual meeting.
OTHER MATTERS
Superior does not know of any matters to be presented for action at the
meeting other than those listed in the notice of the meeting and referred to
herein.
Superior has furnished without charge to its stockholders, herewith, a copy
of its annual report on Form 10-K, including Superior financial statements and
schedules, required to be filed with the SEC for the year ended December 31,
1998.
PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD, AND RETURN IT IN THE
ACCOMPANYING ENVELOPE AS PROMPTLY AS POSSIBLE.
YOU MAY REVOKE THE PROXY BY GIVING WRITTEN NOTICE OF REVOCATION TO THE
SECRETARY OF SUPERIOR AT ANY TIME PRIOR TO THE VOTING THEREOF, BY EXECUTING
AND SUBMITTING A LATER DATED PROXY, OR BY ATTENDING THE MEETING AND VOTING IN
PERSON.
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APPENDIX A
SUPERIOR FINANCIAL CORP.
1998 LONG-TERM INCENTIVE PLAN
1. PURPOSE
The purpose of the Superior Financial Corp. 1998 Long-Term Incentive Plan is
to provide incentives and rewards for Employees of the Company and its
Subsidiaries (i) to support the execution of the Company's business and human
resource strategies and the achievement of its goals, (ii) to associate the
interests of Employees with those of the Company's shareholders, (iii) provide
Employees with an equity ownership in the Company commensurate with Company
performance, as reflected in increased shareholder value, (iv) maintain
competitive compensation levels, and (v) provide an incentive to Employees for
continuous employment with the Company. The Plan permits the grant of non-
qualified stock options, incentive stock options, stock appreciation rights,
and restricted and performance shares.
2. DEFINITIONS
"Award" includes, without limitation, stock options (including incentive
stock options under Section 422 of the Code), restricted and performance
shares, and stock appreciation rights all on a stand alone, combination, or
tandem basis, as described in or granted under this Plan.
"Award Agreement" means a written agreement entered into between the Company
and a Participant setting forth the terms and conditions of an Award made to
such Participant under this Plan, in the form prescribed by the Committee.
"Board" means the Board of Directors of the Company.
"Change of Control" shall have them meaning specified in Section 11(b).
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means the Committee appointed by the Board, each member of which
shall be a "disinterested person" within the meaning of Rule 16b-3 under the
Exchange Act and shall be an "outside director" within the meaning of Section
162(m) of the Code. The Committee shall be composed of no fewer than the
minimum number of disinterested persons as may be required by Rule 16b-3.
"Common Stock" means the common stock of the Company.
"Company" means Superior Financial Corp., a thrift holding company under the
Homeowners' Loan Act, organized in Delaware and headquartered in Fort Smith,
Arkansas.
"Employee" means an employee of the Company or a Subsidiary.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means the closing price of the Common Stock as reported
on the national stock exchange on which the Company's shares are actively
traded on the relevant valuation date or, if there were no Common Stock
transactions on the valuation date, on the next preceding date on which there
were Common Stock transactions. If the Common Stock is not listed on such, or
similar exchange, "Fair Market Value" means the last price at which shares
were issued by the Company or traded in a private transaction.
"Incentive Stock Option Plan" means all terms and provisions of this "Plan"
applicable to incentive stock options under Section 422 of the Code.
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"Participant" means an Employee who has been granted an Award under this
Plan.
"Performance Goals" means, with respect to any Performance Period,
performance goals based on any of the following criteria and established by
the Committee prior to the beginning of such Performance Period, or
performance goals based on any of the following criteria and established by
the Committee after the beginning of such Performance Period, that meet the
requirements to be considered pre-established performance goals under Section
162(m) of the Code: earnings or earnings growth; earnings per share; return on
equity, assets or investment; revenues; expenses; stock price; market share;
charge-offs; or reductions in non-performing assets. Such Performance Goals
may be particular to an Employee or the division, department, branch, line of
business, Subsidiary or other unit in which the Employee works, or may be
based on the performance of the Company generally.
"Performance Period" means the period of time designated by the Committee
applicable to a Performance Share during which the Performance Goals shall be
measured.
"Performance Share" shall have the meaning specified in Section 6(c).
"Plan" means this Superior Financial Corp. 1998 Long-Term Incentive Plan.
"Plan Year" means a twelve-month period beginning with January 1 of each
year.
"Reporting Person" means an officer or director of the Company subject to
the reporting requirements of Section 16 of the Exchange Act.
"Stock Appreciation Rights" or "SARs" shall have the meaning specified in
Section 6(d).
"Subsidiary" means any corporation or other entity in which the Company has
or obtains, directly or indirectly, a proprietary interest of more than 50% by
reason of stock ownership or otherwise.
3. ELIGIBILITY
Employees eligible for participation in the Plan shall be selected by the
Committee from the executive officers and other key employees of the Company
who occupy responsible managerial or professional positions and who have the
capability of making a substantial contribution to the success of the Company.
In making the selection and in determining the form and amount of Awards, the
Committee shall consider any factors deemed relevant, including the Employee's
functions, responsibilities, value of services to the Company, past and
potential contributions to the Company's profitability and growth.
4. PLAN ADMINISTRATION
(a) This Plan shall be administered by the Committee. The Committee shall
have the authority, in its sole discretion from time to time to:
(i) designate the Employees or classes of Employees eligible to
participate in the Plan;
(ii) subject to the limitations contained herein, grant Awards in such
form and amount as the Committee shall determine;
(iii) impose such limitations, restrictions and conditions upon any such
Award as the Committee shall deem appropriate, including vesting
schedules, price, and performance standards (including Performance
Goals);
(iv) determine payment alternatives such as cash, stock, or other means
of payment consistent with the purpose of this Plan;
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(v) determine such other terms and conditions as the Committee shall
deem appropriate; and
(vi) interpret the Plan, adopt, amend and rescind rules and regulations
relating to the Plan, and make all other determinations and take all
other actions necessary or advisable for the implementation and
administration of the Plan.
(b) Except as otherwise required by this Plan, the Committee shall have
authority in its sole discretion to interpret and construe the
provisions of this Plan and the Award Agreements and make
determinations pursuant to any Plan provision or Award Agreement which
shall be final and binding on all persons.
(c) The Committee may designate persons other than its members to carry out
its responsibilities under such conditions or limitations as it may
set, other than its authority with regard to Awards granted to
Reporting Persons.
5. STOCK SUBJECT TO THE PROVISIONS OF THIS PLAN
(a) The stock subject to the provisions of this Plan shall either be shares
of authorized but unissued Common Stock, shares of Common Stock held as
treasury stock or previously issued shares of Common Stock reacquired
by the Company, including shares purchased on the open market. Subject
to adjustment in accordance with the provisions of Section 9, and
subject to Section 5(d), (i) the total number of shares of Common Stock
that may be issued pursuant to Awards under the Plan (including,
without limitation, Awards of Options, SARs, and restricted and
Performance Shares) shall not exceed ten percent (10%) of the
outstanding Common Stock as reported in the Company's Annual Report on
Form 10-K for the fiscal year ending December 31, 1998, (ii) the total
number of shares of Common Stock available for grants of Awards
(including, without limitation, Awards of Options, SARs, and restricted
and Performance Shares) in any Plan Year shall not exceed one percent
(1%) of the outstanding Common Stock as reported in the Company's
Annual Report on Form 10-K for the fiscal year ending December 31,
1998, and (iii) the total number of shares of Common Stock available
for grants of restricted stock in any Plan Year that vest solely upon
passage of time (for example, without regard to Performance Goals),
shall not exceed one-third of one percent of the outstanding Common
Stock as reported in the Company's Annual Report on Form 10-K for the
fiscal year ending December 31, 1998.
(b) Subject to adjustment in accordance with Section 9 and subject to
Section 5(a) the total number of shares of Common Stock available for
grants of Awards (including without limitation, Awards of Options,
SARs, and restricted and Performance Shares) in any Plan Year to any
Participant shall not exceed one percent (1%) of the outstanding Common
Stock as reported on the Company's Form 10-K for the fiscal year ending
December 31, 1998.
(c) For purposes of calculating the total number of shares of Common Stock
available for grants of Awards, the grant of a performance or
restricted share Award shall be deemed to be equal to the maximum
number of shares of Common Stock which may be issued under the Award.
(d) There shall be carried forward and be available for Awards under this
Plan in each succeeding Plan Year, in addition to shares of Common
Stock available for grant under paragraph (a) of this Section 5, all of
the following: (i) any unused portion of the limit set forth in
paragraph (a) of this Section 5 for preceding Plan Years; and (ii)
shares of Common Stock represented by Awards which have been cancelled,
forfeited, surrendered, terminated or expire unexercised during
preceding Plan Years.
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6. EMPLOYEE AWARDS UNDER THIS PLAN
As the Committee may determine, the following types of Employee Awards may
be granted under this Plan to Employees on a stand alone, combination, or
tandem basis:
(a) Stock Option. A right to purchase for cash or shares a specified number
of shares of Common Stock at a fixed exercise price during a specified
time, all as the Committee may determine; provided that the exercise
price of any option shall not be less than 100% of the Fair Market
Value of the Common Stock on the date of grant of the Award.
(b) Incentive Stock Option. An award in the form of a stock option which
shall comply with the requirements of Section 422 of the Code or any
successor Section as it may be amended from time to time.
(c) Restricted and Performance Shares. A transfer of shares of Common Stock
to a Participant, subject to such restrictions or other incidents of
ownership, or subject to specified Performance Goals for such periods
of time as the Committee may determine.
(d) Stock Appreciation Rights.
(i) Subject to the terms and conditions of the Plan, Stock Appreciation
Rights ("SARs") may be granted to Participants at any time and from
time to time as shall be determined by the Committee. The Committee
may grant Freestanding SARs, Tandem SARs, or any combination of
these forms of SARs.
(ii) A "Freestanding SAR" means a SAR that is granted independently of
any other Award. A "Tandem SAR" means a SAR that is granted in
connection with a related Award, particularly a stock option,
including an incentive stock option, the exercise of which shall
require forfeiture of the right to purchase a share of Common Stock
under the related option (and when a share is purchased under the
option, a Tandem SAR shall similarly be cancelled).
(iii) The Committee shall have complete discretion in determining the
number of SARs granted to each Participant (subject to Article 5
herein) and, consistent with the provisions of the Plan, in
determining the terms and conditions pertaining to such SARs.
(iv) The grant price of a Freestanding SAR shall equal the Fair Market
Value of a share of Common Stock on the date of grant of the SAR.
The grant price of Tandem SARs shall equal the exercise price of
the related option.
(vi) Exercise of Tandem SARs. Tandem SARs may be exercised for all or
part of the shares of Common Stock subject to the related option
upon the surrender of the right to exercise the equivalent portion
of the related option. A Tandem SAR may be exercised only with
respect to the shares of Common Stock for which its related option
is then exercisable.
(viii) Exercise of Freestanding SARs. Freestanding SARs may be exercised
upon whatever terms and conditions the Committee, in its sole
discretion, imposes upon them.
(ix) SAR Agreement. Each SAR grant shall be evidenced by an Award
Agreement that shall specify the grant price, the term of the SAR,
and such other provisions as the Committee shall determine.
(x) Term of SARs. The term of an SAR granted under the Plan shall be
determined by the Committee, in its sole discretion; provided,
however that such term shall not exceed ten (10) years.
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(xi) Payment of SAR Amount. Upon exercise of a SAR, a Participant shall
be entitled to receive payment from the Company in an amount
determined by multiplying:
(A) The difference between the Fair Market Value of a share of
Common Stock on the date of exercise over the grant price; by
(B) The number of shares of Common Stock with respect to which the
SAR is exercised.
At the discretion of the Committee, the payment upon SAR exercise may be in
cash, in shares of Common Stock of equivalent value, or in some combination
thereof.
(xi) Section 16 Requirements. Notwithstanding any other provision of the
Plan, the Committee may impose such conditions on exercise of a SAR
(including, without limitation, the right of the Committee to limit
the time of exercise to specified periods) as may be required to
satisfy the requirements of Section 16 of the Exchange Act.
7. OTHER TERMS AND CONDITIONS
(a) Assignability. With respect to Incentive Stock Options only, except to
the extent, if any, as may be permitted by the Code and rules
promulgated under Section 16 of the Exchange Act, (i) no Incentive
Stock Option shall be assignable or transferable except by will or by
the laws of descent and distribution or pursuant to a domestic
relations order, and (ii) during the lifetime of a Participant, the
Incentive Stock Option shall be exercisable only by such Participant or
such Participant's guardian, legal representative, or assignee pursuant
to a domestic relations order.
With respect to other Awards, unless the Committee shall permit (on such
terms and conditions as it shall establish) an Award to be transferred to a
member of the Participant's immediate family or to a trust or similar vehicle
for the benefit of such immediate family members (collectively, the "Permitted
Transferees"), (i) no Award shall be assignable or transferable except by
will, by the laws of descent and distribution or pursuant to a domestic
relations order, and (ii) during the lifetime of a Participant, the Award
shall be exercisable only by such Participant or such Participant's guardian,
legal representative or assignee pursuant to a domestic relations order or, if
applicable, the Permitted Transferees.
(b) Death of Participant. Upon the death of a Participant, any rights to
the extent exercisable on the date of death may be exercised by the
Participant's estate, or by a person who acquires the right to exercise
the Award by bequest or inheritance or by reason of the death of the
Participant, provided that such exercise occurs within both the
remaining effective term of the Award and one year after the
Participant's death.
(c) Retirement or Disability. Upon termination of the Participant's
employment by reason of retirement or permanent disability (in each
case as determined by the Committee), the Participant may, within
thirty-six months from the date of termination, exercise any Award to
the extent such Award otherwise is exercisable during such thirty-six
months, pursuant to the terms of this Plan and the Award Agreement.
(d) Termination for Other Reasons. Except as provided in Section 7(b) and
(c), or except as otherwise determined by the Committee, all Awards
shall terminate three (3) months after the termination of the
Participant's employment.
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(e) Exercise of Option by Transferee. Upon the transfer of (i) an Incentive
Stock Option to a beneficiary of devisee, or (ii) an option other than
an Incentive Stock Option to any transferee pursuant to a transfer
approved by the Committee, such transferee shall have the balance of
the original exercise period within which to exercise the transferred
option.
(f) Award Agreement. Each Award under this Plan shall be evidenced by an
Award Agreement executed by the Company and the holder of the Award,
stating the number of shares of Common Stock subject to the Award in
such form as the Committee may from time to time determine. Each Award
shall be effective upon the decision of the Committee to grant the
Award, which shall be deemed the date of grant of the Award.
(g) Rights As A Shareholder. Except as otherwise provided herein or in any
Award Agreement, a Participant shall have no right as a shareholder
with respect to shares of Common Stock covered by an Award until the
date the Participant or his guardian or legal representative is the
holder of record of such shares.
(h) No Obligation to Exercise. The grant of an Award shall impose no
obligation upon the Participant to exercise the Award.
(i) Payments by Participants. The Committee may determine that Awards for
which a payment is due from a Participant may be payable: (i) in U.S.
dollars by personal check, bank draft or money order payable to the
order of the Company, by money transfers or direct account debits; (ii)
through the delivery or deemed delivery based on attestation to the
ownership of shares of Common Stock with a Fair Market Value equal to
the total payment due from the Participant; (iii) by a combination of
the methods described in (i) and (ii) above; or (iv) by such other
methods as the Committee may deem appropriate.
(j) Tax Withholding. The Company shall have the right to withhold from any
payments made under this Plan, or to collect as a condition of payment,
any taxes required by law to be withheld. At any time when a
Participant is required to pay to the Company an amount required to be
withheld under applicable income tax laws in connection with a
distribution of shares of Common Stock pursuant to this Plan, the
Participant may satisfy this obligation in whole or in part by electing
to have the Company withhold from such distribution shares of Common
Stock having a value equal to the amount required to be withheld. The
value of the shares of Common Stock to be withheld shall be based on
the Fair Market Value of the Common Stock on the date that the amount
of tax to be withheld shall be determined (the "Tax Date"). Any such
election is subject to the following restrictions: (i) the election
must be made on or prior to the Tax Date; (ii) the election must be
irrevocable; and (iii) the election must be subject to the disapproval
of the Committee. To the extent required to comply with rules
promulgated under Section 16 of the Exchange Act, elections by
Reporting Persons are subject to the following additional restrictions:
(i) no election shall be effective for a Tax Date which occurs within
six months of the grant of the award; and (ii) the election must be
made either (A) six months or more prior to the Tax Date or (B) during
a period beginning on the third business day following the date of
release for publication of the Company's quarterly or annual summary
statements of sales and earnings and ending on the twelfth business day
following such date.
(k) Restrictions On Sales and Exercise. With respect to Reporting Persons,
and if required to comply with rules promulgated under Section 16 of
the Exchange Act (i) no Award providing for exercise, a vesting period,
a restriction period or the attainment of performance standards shall
permit unrestricted ownership of shares of Common Stock by the
Participant for at least six months from the date of grant, and (ii)
shares of Common Stock acquired pursuant to this Plan (other than
shares of Common Stock acquired as a result of the granting of a
"derivative security") may not be sold or otherwise disposed of for at
least six months after acquisition.
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(l) Requirements of Law. The granting of Awards and the issuance of shares
of Common Stock upon the exercise of Awards shall be subject to all
applicable requirements imposed by federal and state securities and
other laws, rules and regulations and by any regulatory agencies having
jurisdiction, and by any stock exchanges upon which the Common Stock
may be listed. As a condition precedent to the issue of shares of
Common Stock pursuant to the grant or exercise of an Award, the Company
may require the Participant to take any reasonable action to meet such
requirements.
8. AMENDMENTS
(a) Except as otherwise provided in this Plan, the Board may at any time
terminate and, from time to time, may amend or modify this Plan. Any
such action of the Board may be taken without the approval of the
Company's shareholders, but only to the extent that such shareholder
approval is not required by applicable law or regulation, including
specifically Rule 16b-3 under the Exchange Act and the Code.
(b) No amendment, modification or termination of this Plan shall in any
manner adversely affect any Awards theretofore granted to a Participant
under this Plan without the consent of such Participant.
9. RECAPITALIZATION
The aggregate number of shares of Common Stock as to which Awards may be
granted to Participants, the number of shares thereof covered by each
outstanding Award, and the price per share thereof in each such Award, shall
all be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, stock dividend,
combination or exchange for other securities, reclassification,
reorganization, redesignation, merger, consolidation, recapitalization or
other such change. Any such adjustment may provide for the elimination of
fractional shares.
10. NO RIGHT TO EMPLOYMENT
No person shall have any claim or right to be granted an Award, and the
grant of an Award shall not be construed as giving a Participant the right to
be retained in the employ of the Company or a Subsidiary. Nothing in this Plan
shall interfere with or limit in any way the right of the Company or any
Subsidiary to terminate any Participant's employment at any time, nor confer
upon any Participant any right to continue in the employ of the Company or any
Subsidiary. Moreover, the Committee's determinations under the Plan (including
without limitation, determinations of the persons to receive Awards, the form,
amount and timing of such Awards, the terms and provisions of such Awards and
the Award Agreements evidencing same) need not be uniform and may be made by
it selectively among Employees who receive, or are eligible to receive, Awards
under the Plan, whether or not such persons are similarly situated.
11. CHANGE OF CONTROL
(a) Notwithstanding anything contained in this Plan or any Award Agreement
to the contrary, in the event of a Change of Control, as defined below,
the following shall occur with respect to any and all Awards
outstanding as of such Change of Control:
(i) automatic maximization of performance standards, lapse of all
restrictions and acceleration of any time periods relating to the
exercise, realization or vesting of such Awards so that such Awards
may be immediately exercised, realized or vested in full on or
before the relevant date fixed in the Award Agreement;
(ii) Performance Shares may be paid, in the Committee's discretion,
entirely in cash;
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<PAGE>
(iii) upon exercise of a stock option or an incentive stock option
(collectively, an "Option") during the 60-day period from and after
the date of Change of Control, the Participant exercising the
Option may in lieu of the receipt of Common Stock upon the exercise
of the Option, elect by written notice to the Company to receive an
amount in cash equal to the excess of the aggregate Value (as
defined below) of the shares of Common Stock covered by the Option
or portion thereof surrendered determined on the date the Option is
exercised, over the aggregate exercise price of the Option (such
excess is referred to herein as the "Aggregate Spread"); provided,
however, as to any person who is a Reporting Person, and
notwithstanding any other provision of this Plan, that if the end
of such 60-day period is within six months of the date of grant of
an Option held by such Reporting Person, such Option shall be
cancelled in exchange for a cash payment to the Participant equal
to the Aggregate Spread on the day which is six months and one day
after the date of grant of such Option. As used in this
subparagraph 11(a)(iii) the term "Value" means the higher of (i)
the highest Fair Market Value during the 60-day period from and
after the date of a Change of Control, and (ii) if the Change of
Control is the result of a transaction or series of transactions
described in subparagraphs (i) or (iii) of Paragraph 11(b) (the
definition of Change of Control), the highest price per share of
the Common Stock paid in such transaction or series of transactions
(which in the case of subparagraph 11(b) (i) shall be the highest
price per share of the Common Stock as reflected in a Schedule 13D
filed by the person having made the acquisition);
(iv) following a Change of Control, if a Participant's employment
terminates for any reason other than retirement under a retirement
plan of the Company or death, any Options held by such Participant
may be exercised by such Participant until the earlier of three
months after the termination of employment or the expiration date
of such Options; and
(v) all Awards shall become non-cancelable.
(b) A "Change of Control" of the Company shall be deemed to have occurred upon
the happening of any of the following events:
(i) the acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Exchange Act) of beneficial ownership of 25% or more of
either the then outstanding shares of Common Stock of the Company
or the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the
election of directors; provided, however, that neither of the
following shall constitute a Change of Control: (A) any acquisition
by the Company or any of its Subsidiaries, or any employee benefit
plan (or related trust) of the Company or its Subsidiaries, or (B)
any acquisition by any corporation if, following such acquisition,
more than 50% of the then outstanding voting shares of stock of
such corporation are owned, directly or indirectly, by all or
substantially all of the persons who were the owners of the Common
Stock of the Company immediately prior to such acquisition:
(ii) individuals who, as of the effective date, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least
a majority of the Board, provided that any individual becoming a
director subsequent to such date whose election, or nomination for
election by the Company's shareholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member
of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office is in connection with
an actual or threatened election contest relating to the election
of the directors of the Company (as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act);
or
(iii) approval by the shareholders of the Company of a reorganization,
merger or consolidation of the Company, in each case, with respect
to which the individuals and entities who were the
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<PAGE>
respective beneficial owners of the Common Stock and voting
securities of the Company immediately prior to such reorganization,
merger or consolidation do not, following such reorganization, merger
or consolidation, beneficially own, directly or indirectly, more than
50% of, respectively, the then outstanding shares of Common Stock and
the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such reorganization, merger
or consolidation.
(iv) approval by the shareholders of the Company of a (i) complete
liquidation or dissolution of the Company, or (ii) the sale or other
disposition of all or substantially all of the assets of the Company,
other than to a corporation, with respect to which following such
sale or other disposition more than 50% of, respectively, the then
outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all
or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the outstanding Common Stock of
the Company and the outstanding voting securities of the Company
immediately prior to such sale or other disposition in substantially
the same proportions as their ownership, immediately prior to such
sale or other disposition, of the outstanding Common Stock of the
Company and outstanding securities of the Company, as the case may
be.
(c) Notwithstanding anything contained in this Plan or any Award Agreement
to the contrary, the provisions of this Article 11 may not be
terminated, amended, or modified on or after the date of a Change of
Control to effect adversely any Award theretofore granted under the Plan
without the prior written consent of the Participant with respect to
said Participant's outstanding Awards.
12. GOVERNING LAW
To the extent that federal laws do not otherwise control, this Plan shall be
construed in accordance with and governed by the law of the State of Arkansas.
13. INDEMNIFICATION
Each person who is or shall have been a member of the Committee or of the
Board shall be indemnified and held harmless by the Company against and from
any loss, cost, liability or expense that may be imposed upon or reasonably
incurred by him in connection with or resulting from any claim, action, suit
or proceeding to which he may be a party or in which he may be involved by
reason of any action taken or failure to act under this Plan and against and
from any and all amounts paid by him in settlement thereof, with the Company's
approval, or paid by him in satisfaction of any judgment in any such action,
suit or proceeding against him, provided he shall give the Company an
opportunity, at its own expense, to handle and defend the same before he
undertakes to handle and defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification
to which such persons may be entitled under the Company's Articles of
Incorporation or Code or Regulation, as a matter of law, or otherwise, or any
power that the Company may have to indemnify them or hold them harmless.
14. SAVINGS CLAUSE
This Plan is intended to comply in all aspects with applicable law and
regulation, including, with respect to Incentive Stock Options, Section 422 of
the Code, and with respect to those Employees who are Reporting Persons, Rule
16b-3 under the Exchange Act. In case any one or more of the provisions of
this Plan shall be held invalid, illegal or unenforceable in any respect under
applicable law and regulation (including Rule 16b-3), the validity, legality
and enforceability of the remaining provisions shall not in any way be
affected or impaired
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<PAGE>
thereby and the invalid, illegal or unenforceable provision shall be deemed
null and void; however, to the extent permissible by laws, any provision which
could be deemed null and void shall first be construed, interpreted or revised
retroactively to permit this Plan to be construed in compliance with all
applicable laws (including Section 422 of the Code and Rule 16b-3) so as to
foster the intent of this Plan. Notwithstanding anything in this Plan to the
contrary, the Committee, in its sole and absolute discretion, may bifurcate
this Plan so as to restrict, limit or condition the use of any provision of
this Plan to Participants who are Reporting Persons without so restricting,
limiting or conditioning this Plan with respect to other Participants.
15. EFFECTIVE DATE AND TERM
The effective date of this Plan is the date of approval by the Company's
Board of Directors, which date is , 1998. Awards may be granted on or
after the effective date, subject in the case of the Incentive Stock Option
Plan, only, to its approval by the Company's shareholders within twelve (12)
months thereafter. This Plan shall remain in effect until the tenth
anniversary of its effective date.
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<PAGE>
SOLICITED BY THE BOARD OF DIRECTORS
PROXY
Common Stock
Superior Financial Corp.
ANNUAL MEETING OF STOCKHOLDERS
MAY 12, 1999
The undersigned hereby appoints C. Stanley Bailey and C. Marvin Scott and
either of them, or such other persons as the Board of Directors of Superior
Financial Corp. ("Superior"), may designate, proxies for the undersigned, with
full power of substitution, to represent the undersigned and to vote all of the
shares of common stock, par value $0.01, of Superior (the "Common Stock") which
the undersigned would be entitled to vote at the annual meeting of stockholders
to be held on May 12, 1999 and at any and all adjournments thereof.
1. Election of Directors:
NOMINEES FOR A TERM EXPIRING IN 2000: C. Stanley Bailey, C. Marvin Scott,
Boyd W. Hendrickson, John M. Stein and David E. Stubblefield
[_] FOR ALL NOMINEES [_] WITHHOLD
listed except AUTHORITY to
as marked to the vote for all
contrary nominees
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL, STRIKE A LINE
THROUGH THE NOMINEE'S NAME IN THE ABOVE LIST.
2. Approval of 1998 Long Term Incentive Plan:
[_] FOR approval of the [_] AGAINST [_] ABSTAIN
Incentive Plan approval of the
Incentive Plan
(continued on back)
<PAGE>
3. Ratification of Ernst & Young LLP as Superior's independent auditors:
[_] FOR ratification [_] AGAINST [_] ABSTAIN
ratification
4. In their discretion, to vote on such other matters as may properly come
before the meeting, but which are not now anticipated, to vote for the election
of any person as a director should any person named in the proxy statement to
be elected be unavailable or unable to serve or for good cause cannot serve,
and to vote upon matters incident to the conduct of the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE VOTED
AS DIRECTED HEREIN. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE
PERSONS NAMED IN PROPOSAL 1, FOR APPROVAL OF THE INCENTIVE PLAN, FOR
RATIFICATION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS AND IN ACCORDANCE
WITH THE DISCRETION OF THE PROXY HOLDERS RESPECTING ITEM 4.
Please sign and date this proxy.
Dated: ________________, 1999
Phone No.
__________________________
(Signature of Stockholder)
(Signature of
Stockholder, if more
than one) Please sign
exactly as your name
appears on the
envelope in which this
material was mailed.
Agents, executors,
administrators,
guardians, and
trustees must give
full title as such.
Corporations should be
signed by their
President or
authorized officer.
