<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
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(3)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CLARK/BARDES HOLDINGS, INC.
(Name of Registrant As Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required. [ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
$___________
(4) Proposed maximum aggregate value of transaction: $___________
(5) Total fee paid: $___________
[ ] Fee paid previously with preliminary materials: $____________
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a) (2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
CLARK/BARDES HOLDINGS, INC.
102 SOUTH WYNSTONE PARK DRIVE, SUITE 200
NORTH BARRINGTON, ILLINOIS 60010
NOTICE OF THE 2000 ANNUAL MEETING OF THE STOCKHOLDERS
TO BE HELD APRIL 18, 2000
To our stockholders:
We cordially invite you to attend the 2000 annual meeting of our
stockholders at the Crowne Plaza, Northstar Hotel, 618 Second Avenue South,
Minneapolis, Minnesota, on April 18, 2000, at 9:00 a.m. local time, for the
following purposes:
(1) To elect two Class II directors to serve until the 2003 annual meeting
of our stockholders, and until the respective successor of each is duly
elected and qualified;
(2) To ratify the appointment of Ernst & Young LLP by your board of
directors as the independent accountants of our financial statements
for the year ended December 31, 2000;
(3) To adopt an Amended and Restated 1998 Non-Employee Director Stock
Option Plan; and
(4) To transact such other business as may properly come before the annual
meeting.
Any action may be taken on these matters at the annual meeting on the date
specified above or on any later date if the annual meeting is adjourned or
postponed.
Your board of directors has established the close of business on March 13,
2000 as the record date for determining the stockholders entitled to notice of
and to vote at the annual meeting or any adjournment thereof. For purposes
pertaining to the annual meeting, you may examine the list of stockholders as of
the record date at our offices in North Barrington, Illinois, during regular
business hours on any business day before the annual meeting or any adjournment
thereof.
We have included, along with this notice, a proxy statement and our 1999
Form 10-K, which describes certain of our activities during 1999 and contains
our financial statements for the year ended December 31, 1999. The Form 10-K
does not form any part of the material for solicitation of proxies.
WE URGE YOU, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, TO SIGN,
DATE AND MAIL THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED. IF YOU HAVE
SUBMITTED A PROXY AND THEN ATTEND THE ANNUAL MEETING IN PERSON, YOU MAY REVOKE
THE PROXY AND VOTE IN PERSON ON ALL MATTERS SUBMITTED AT THE ANNUAL MEETING.
By Order of the Board of Directors,
W.T. Wamberg
President, Chief Executive Officer and
Chairman of the Board
March 30, 2000
North Barrington, Illinois
<PAGE> 3
CLARK/BARDES HOLDINGS, INC.
102 SOUTH WYNSTONE PARK DRIVE, SUITE 200
NORTH BARRINGTON, ILLINOIS 60010
PROXY STATEMENT
2000 ANNUAL MEETING OF THE STOCKHOLDERS
TO BE HELD APRIL 18, 2000
INTRODUCTION
Your board of directors hereby solicits your proxy on behalf of
Clark/Bardes Holdings, Inc. for use at the 2000 annual meeting of our
stockholders and any continuation of the meeting pursuant to any adjournment
thereof. The annual meeting will be held at the Crowne Plaza, Northstar Hotel,
618 Second Avenue South, Minneapolis, Minnesota, on April 18, 2000, at 9:00 a.m.
local time.
Our principal executive office is located at 102 South Wynstone Park Drive,
Suite 200, North Barrington, Illinois 60010. Our telephone number is (847)
304-5800. We will mail this proxy statement and the accompanying proxy card on
or about March 30, 2000. The date of this proxy statement is March 30, 2000.
PURPOSES OF THE ANNUAL MEETING
At the annual meeting, the holders of record of shares of our common stock,
$.01 par value per share, on March 13, 2000 will vote upon the following
matters:
(1) The proposal to elect two Class II directors to serve until the 2003
annual meeting of our stockholders and until the respective successor
of each is duly elected and qualified ("Proposal One");
(2) The ratification of the appointment of Ernst & Young LLP by your board
of directors as the independent accountants of our financial statements
for the year ended December 31, 2000 ("Proposal Two");
(3) To adopt the Amended and Restated 1998 Non-Employee Director Stock
Option Plan ("Proposal Three"); and
(4) The transaction of such other business as may properly come before the
annual meeting.
Your board of directors recommends that you vote "FOR" each of Proposal
One, Proposal Two and Proposal Three.
RECORD DATE AND VOTING
RECORD DATE AND STOCKHOLDERS LIST
Your board of directors has established the close of business on March 13,
2000 as the record date for determining the stockholders entitled to notice of
and to vote at the annual meeting. On this record date, we had 9,769,826 shares
of our common stock outstanding. We did not have any other shares of capital
stock outstanding on the record date.
A list of stockholders entitled to vote at the annual meeting, which will
be arranged in alphabetical order and which will show each stockholder's address
and the number of shares registered in his or her name, will be open to any
stockholder to examine for any purpose related to the annual meeting. You may
examine this list during ordinary business hours commencing March 30, 2000, and
continuing through the date of the annual meeting at our principal office, at
102 South Wynstone Park Drive, Suite 200, North Barrington, Illinois 60010.
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QUORUM, REQUIRED VOTE AND VOTING RIGHTS
Quorum. The presence, in person or by proxy, of stockholders holding a
majority of the outstanding shares of our common stock on the record date will
constitute a quorum at the annual meeting. Shares that are represented at the
annual meeting but abstain from voting on any or all matters and shares that are
"broker non-votes" will be counted in determining whether a quorum is present at
the annual meeting. A "broker non-vote" occurs when a broker or nominee votes on
some matters on the proxy card but not on others because he does not have the
authority to do so. The election inspectors appointed for the annual meeting
will determine the number of shares of our common stock present at the meeting,
determine the validity of proxies and ballots, determine whether or not a quorum
is present, and count all votes and ballots. Unless a quorum is present at the
annual meeting, no action may be taken at the meeting except an adjournment
until a later time.
Required Vote. With respect to Proposal One, a plurality of all the votes
cast by stockholders, in person or by proxy, will elect each nominee for
director. A majority of the votes cast, in person or by proxy, is required for
Proposal Two and Proposal Three. Abstentions are not counted as a vote cast, and
will not affect the outcome of Proposal One, Proposal Two or Proposal Three.
Broker non-votes will be treated as not present and not entitled to vote with
respect to any proposals. Therefore, broker non-votes will have no effect on the
outcome of any proposal.
Voting Rights. With respect to each proposal, you will be entitled to one
vote per share of common stock held as of the record date.
PROXIES
Thomas M. Pyra and Keith L. Staudt, the persons named as proxies on the
proxy card accompanying this proxy statement, were selected by your board of
directors to serve as proxies. Messrs. Pyra and Staudt are officers of
Clark/Bardes Holdings. Each executed and returned proxy card will be voted
according to the directions indicated on that proxy card. If no direction is
indicated, the proxy will be voted according to your board of directors'
recommendations, which are contained in this proxy statement.
Your board of directors does not intend to present, and has no information
that others will present, any business at the annual meeting that requires a
vote on any other matter. If any other matter requiring a vote properly comes
before the annual meeting, the proxyholders will vote the proxies that they hold
in accordance with their best judgment, including voting them to adjourn the
annual meeting to another time if a quorum is not present at the annual meeting
or if they believe that an adjournment is in our best interests.
If you give a proxy, you may revoke it at any time before the shares of
common stock it represents are voted. This revocation is effective upon receipt,
at any time before the annual meeting is called to order, by our corporate
secretary of either (i) an instrument revoking the proxy or (ii) a duly executed
proxy bearing a later date than the preceding proxy. Additionally, you may
change or revoke a previously executed proxy by voting in person at the annual
meeting.
PROXY SOLICITATION COSTS
We will bear the cost to solicit proxies. We may solicit proxies from you
and other persons in person or by mail, facsimile transmission, telephone,
personal interview, or any other means. We will also reimburse banks, brokers,
custodians, fiduciaries, nominees, securities dealers, trust companies, and
other persons for the reasonable expenses that they incur when forwarding this
proxy statement and the accompanying materials to the beneficial owners of
shares of our common stock. Our directors and officers also may solicit proxies
from you and other persons by any of the means described above. We will not pay
these directors and officers any extra compensation for participating in this
solicitation.
OUR BUSINESS
We are a nationally recognized firm that provides a variety of compensation
and benefit services to U.S. corporations, banks and healthcare organizations.
Clark/Bardes Holdings, Inc. wholly owns Clark/ Bardes, Inc. which is the
successor corporation to Clark/Bardes, Inc., a Texas corporation, formed in
1967.
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<PAGE> 5
Clark/Bardes Holdings and Clark/Bardes were formed in June 1998 in contemplation
of our initial public offering, which was completed on August 19, 1998.
We have three operating divisions. Each of these divisions is focused on
the evaluation, design, implementation and administration of innovative
compensation and benefit programs that help each of their clients attract and
retain executives, key employees and other professionals. Our Clark/Bardes
division markets to large U.S. corporations and banks with over $5 billion in
assets. Additionally, our Bank Compensation Strategies division markets to
community banks, which typically have less than $1 billion in assets. Finally,
our HealthCare Compensation Strategies division markets predominantly to large
and medium sized healthcare organizations including the following:
not-for-profit and for-profit healthcare systems; independent hospitals; managed
care organizations; academic medical centers and teaching hospitals; major group
medical practices; and hospital associations.
PROPOSAL ONE
ELECTION OF DIRECTORS
GENERAL
Your board of directors is divided, as nearly equal in number as possible,
into three classes, denominated Class I, Class II and Class III. Your board of
directors currently consists of seven directors. Some of these directors also
serve as directors of our subsidiary, Clark/Bardes, Inc. Your board of directors
has nominated two Class II directors, Lawrence H. Hendrickson and L. William
Seidman, to continue to serve as Class II directors for a three year term until
the annual meeting of stockholders to be held in 2003 and until the respective
successor of each is duly elected and qualified. The four directors whose terms
of office expire in 2001 and 2002 will continue to serve after the annual
meeting until such time as their respective terms of office expire and until
their respective successors are duly elected and qualified. See "-- Other
Directors" below. Your board of directors recommends that the stockholders vote
"FOR" the election of the nominees named in this proxy statement to continue to
serve as directors of Clark/Bardes. See "-- Nominees for Election as Class II
Directors" below.
NOMINEES FOR ELECTION AS CLASS II DIRECTORS
Your board of directors has nominated the following persons to serve as
Class II directors until the 2003 annual meeting of our stockholders and until
the respective successor of each duly elected and qualified:
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR CLASS
- ---- --- -------- --------------
<S> <C> <C> <C>
Lawrence H. Hendrickson......... 60 Vice Chairman of the Board of Class II
Directors and Director
L. William Seidman.............. 78 Director Class II
</TABLE>
Lawrence H. Hendrickson has served as the Vice Chairman of the Board of
Directors and director of Clark/Bardes Holdings since June 1998, and became the
Vice Chairman of the Board of Directors and a director of Clark/Bardes in July
1998. Mr. Hendrickson's current term as a director of Clark/Bardes Holdings
expires at the 2000 annual meeting of our stockholders. From September 1997
until July 1998, Mr. Hendrickson served as the Vice Chairman of the Board of
Directors and a director of our predecessor company. Mr. Hendrickson founded
Bank Compensation Strategies, Inc. in May 1982 and since that time and through
the date of the acquisition of Bank Compensation Strategies served as its Chief
Executive Officer. Prior to founding Bank Compensation Strategies, Mr.
Hendrickson was President of L.H. Hendrickson & Co., Inc. providing investment
and insurance solutions to small businesses and affluent individuals since 1960.
Mr. Hendrickson is a graduate of the University of Minnesota with a Bachelor of
Arts degree in business.
L. William Seidman has served as a director of Clark/Bardes Holdings and a
member of the compensation committee of our Board of Directors since June 1998
and became a director of Clark/Bardes in
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<PAGE> 6
July 1998. Mr. Seidman's current term as a director of Clark/Bardes Holdings
expires at the 2000 annual meeting of our stockholders. From September 1997
until July 1998, Mr. Seidman served as a member of our predecessor company's
advisory board. Mr. Seidman is the chief commentator on NBC cable network's CNBC
and publisher of Bank Director magazine. From 1985 to 1991, Mr. Seidman served
as the chairman of the Federal Deposit Insurance Corporation under Presidents
Reagan and Bush. He became the chairman of the Resolution Trust Corporation in
1989 and served in that capacity until 1991. Earlier, Mr. Seidman had served as
President Reagan's co-chair of the White House Conference on Productivity,
President Ford's Assistant of Economic Affairs and a member of the Arizona
Governor's Commission on Interstate Banking. The former dean of Arizona State's
College of Business, Mr. Seidman holds an A.B. from Dartmouth (Phi Beta Kappa),
an LL.B. from Harvard Law School and an M.B.A. (with honors) from the University
of Michigan.
OTHER DIRECTORS
The following persons will continue to serve as directors of Clark/Bardes
Holdings after the annual meeting until such time as their respective terms of
office expire and until their respective successors are duly elected and
qualified.
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR CLASS
- ---- --- -------- --------------
<S> <C> <C> <C>
W.T. Wamberg.................... 47 Chairman of the Board of Class III
Directors, President, Chief
Executive Officer, and
Director
Melvin G. Todd.................. 44 Executive Vice President and Class I
Director
George D. Dalton................ 72 Director Class I
Steven F. Piaker................ 37 Director Class I
Randolph A. Pohlman............. 56 Director Class III
</TABLE>
W.T. Wamberg has served as the Chairman of the Board of Directors and a
director of Clark/Bardes Holdings since June 1998, and became the Chairman of
the Board of Directors and a director of Clark/Bardes in July 1998. Mr. Wamberg
became President of Clark/Bardes Holdings in September 1999. In connection with
our acquisition of The Wamberg Organization, as of September 1999, he also
became Chief Executive Officer of Clark/Bardes Holdings. Mr. Wamberg's term as a
director of Clark/Bardes Holdings expires at the 2001 annual meeting of our
stockholders. Mr. Wamberg served as a director of our predecessor company since
1988 and served as the Chairman of the Board of our predecessor company from
September 1996 until July 1998. Mr. Wamberg, who has been a producer for us
since 1976, was President and Chief Executive Officer of The Wamberg
Organization, Inc., an independently operated sales office that marketed our
products, until we acquired it as of September 1999. Mr. Wamberg graduated from
Baldwin-Wallace College with a Bachelor of Arts degree in finance. Mr. Wamberg
was formerly President of the Association for Advanced Life Underwriting.
Melvin G. Todd has served as a director of Clark/Bardes Holdings since June
1998 and his current term as a director of Clark/Bardes Holdings expires at the
2002 annual meeting of our stockholders. Mr. Todd also served as a director of
our predecessor company from January 1993 to July 1998. Mr. Todd served as
President of Clark/Bardes Holdings from June 1998 until September 1999 and has
served as Chief Executive Officer and President of Clark/Bardes, Inc. since July
1998. He also served as Chief Executive Officer of Clark/Bardes Holdings between
June 1998 and September 1999. Mr. Todd became an Executive Vice President of
Clark/Bardes Holdings in September 1999. Prior to joining our predecessor
company, Mr. Todd served as a Vice President with The Great-West Life Assurance
Company. Mr. Todd graduated with honors from the University of Manitoba with a
Bachelor of Commerce degree. Mr. Todd is also an active member of the American
Academy of Actuaries and a Fellow of the Society of Actuaries.
George D. Dalton has served as a director of Clark/Bardes Holdings and
Clark/Bardes and a member of the compensation committee of our Board of
Directors since October 1998, and his current term as a director
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<PAGE> 7
of Clark/Bardes Holdings expires at the 2002 annual meeting of our stockholders.
Since July 1984, Mr. Dalton has served as the Chairman of the Board and Chief
Executive Officer of Fiserv Inc., a public company engaged in data processing
outsourcing. Since 1995, Mr. Dalton has served as a director and a member of the
compensation and audit committees of APAC Teleservices, Inc., a public
telemarketing company. Mr. Dalton has served as a director and member of the
compensation committee of ARI Network Services, Inc., a public company engaged
in computer networking services.
Steven F. Piaker has served as a director of Clark/Bardes Holdings and
Clark/Bardes since June 1999, and his current term as a director of Clark/Bardes
Holdings expires at the 2002 annual meeting of our stockholders. Mr. Piaker
acquired his board seat in connection with our private placement of common stock
to Conning Insurance Capital Limited Partnership V, L.P. Mr. Piaker is Senior
Vice President of Conning & Company and has been a partner at Conning since
August 1994. Mr. Piaker also works on private equity investment opportunities,
and has provided corporate finance advisory services to Conning's clients. Mr.
Piaker also sits on the boards of Answer Financial, Inc., Intek Information,
Inc., MedSpan, Inc., Sterling Collisions Centers, Inc. and TeleBanc Financial
Corporation. Prior to joining Conning, Mr. Piaker was a Senior Vice President of
Conseco where he was involved in forming Conseco Capital Partners II, L.P. and
completing a number of private equity investments. Prior to that, Mr. Piaker was
a Vice President in GE Capital's Corporate Finance Group, focusing on leveraged
investments and acquisitions in the insurance and financial services industries.
A Chartered Financial Analyst, Mr. Piaker is a graduate of the University of
Rochester and holds an M.B.A. from Duke University's Fuqua School of Business.
Randolph A. Pohlman has served as a director of Clark/Bardes Holdings and a
member of the compensation committee of our Board of Directors since June 1998
and became a director of Clark/Bardes in July 1998. Mr. Pohlman's term as a
director of Clark/Bardes Holdings expires at the 2001 annual meeting of our
stockholders. Since February 1996 until July 1998, Mr. Pohlman served as a
member of our predecessor company's advisory board. Since July 1995, Mr. Pohlman
has served as the Dean of the School of Business and Entrepreneurship at Nova
Southeastern University in Fort Lauderdale, Florida. From April 1990 to July
1995, Mr. Pohlman served as Director of Human Resources World Wide for Koch
Industries. Mr. Pohlman graduated from Kansas State University with Bachelor of
Science and Master of Science degrees in Business Administration and, in
addition, earned a Ph.D. in finance and organizational behavior from Oklahoma
State University.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
Meeting of the Board of Directors. Our business is under the general
management of our board of directors. There are presently seven directors,
including four independent directors. Your board of directors held four
regularly scheduled and eight special meetings during 1999, and each of the
directors attended at least seventy-five percent of these meetings.
Committees. Your board of directors has established an audit committee of
independent directors, which consists of Messrs. Dalton, Pohlman, Piaker and
Seidman. The audit committee reviews the scope and approach of our annual audit,
our annual financial statements and the auditors' report thereon and the
auditors' comments relative to the adequacy of our system of internal controls
and accounting systems. The audit committee also recommends to the board of
directors the appointment of independent public accountants for the following
year.
Your board of directors has established a compensation committee of
independent directors, which consists of Messrs. Dalton, Pohlman, Piaker and
Seidman. The compensation committee reviews management compensation levels and
provides recommendations to your board of directors regarding salaries and other
compensation for our executive officers, including bonuses and incentive plans,
and administers our 1998 stock option plan.
Your board of directors has established an executive committee, which
consists of Messrs. Wamberg, Hendrickson and Todd. The executive committee has
the power and authority of the board of directors to manage our affairs between
meetings. The executive committee also regularly reviews significant corporate
matters and recommends action as appropriate to the board of directors.
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Your board of directors has no standing nominating committee, and the
entire board of directors acts in this capacity.
OUR DIRECTORS AND EXECUTIVE OFFICERS
EXECUTIVE OFFICERS
Set forth below is a table identifying our executive officers who are not
identified herein as a director or nominee for director. Many of our executive
officers also hold similar offices with our subsidiary, Clark/ Bardes, Inc.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Richard C. Chapman................... 45 Executive Vice President
Donald C. Wegmiller.................. 61 Executive Vice President
Thomas M. Pyra....................... 47 Chief Financial Officer and Chief
Operations Officer
</TABLE>
Richard C. Chapman became an Executive Vice President of Clark/Bardes
Holdings in July 1998. Since September 1997, Mr. Chapman has also served as the
President and Chief Executive Officer of our Bank Compensation Strategies
division. Prior to joining our predecessor company, Mr. Chapman was a producer
for Bank Compensation Strategies since 1985 and served as President of Bank
Compensation Strategies since January 1994. Prior to joining Bank Compensation
Strategies, Mr. Chapman was an officer with First Bank System, a regional bank
holding company in Minneapolis, Minnesota. Mr. Chapman graduated cum laude from
Augustana College in Sioux Falls, S.D., with a double major in mathematics and
business administration.
Donald C. Wegmiller became an Executive Vice President of Clark/Bardes
Holdings upon our acquisition of Management Compensation Group/HealthCare in
April 1999. He is also President and Chief Executive Officer of our HealthCare
Compensation Strategies division. Prior to joining Management Compensation
Group/HealthCare, he served as Vice Chairman and President of HealthSpan Health
Systems Corporation. Mr. Wegmiller continues to hold policy positions in state
and national health care associations. He has served on the boards of fourteen
publicly held corporations over the past 20 years, and currently serves on the
board of Medical Graphics; LecTec Corporation; JLJ Medical Devices
International, LLC, Minnesota Point, and as Chairman of Possis Medical, Inc.
From 1986 to 1988, Mr. Wegmiller served as an officer of the American Hospital
Association, and he served as the organization's Chairman in 1987. Mr. Wegmiller
received a Bachelor degree magna cum laude from the University of Minnesota,
Duluth and a Master of Hospital Administration Degree from the University of
Minnesota, Minneapolis. He also teaches health care administration at the
University of Minnesota, Duke University and Arizona State University.
Thomas M. Pyra became Chief Financial Officer of Clark/Bardes Holdings and
Clark/Bardes in July 1998 and Chief Operations Officer in October 1999. Mr. Pyra
served as the Chief Financial Officer for our predecessor company during July of
1998. Prior to joining our predecessor company, Mr. Pyra served as Vice
President and Chief Financial Officer of Geodesic Systems, L.L.C. from April
1997. Mr. Pyra served as Chief Financial Officer for Recompute Corporation from
October 1995 until January 1997 and served as Vice President and Controller of
Intercraft Company from October 1992 until June 1995. Mr. Pyra received a
Bachelor of Science degree in finance and an MBA from DePaul University.
TERMS OF OFFICE
Your board of directors elects our officers. Each of the officers holds
office until his successor is duly elected and qualified or until their earlier
death, disqualification, retirement, resignation or removal from office.
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<PAGE> 9
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, requires our
directors and officers, and persons who own more than 10% of our common stock,
to file with the SEC initial reports of common stock ownership and reports of
changes in such ownership. A reporting person must file a Form 3 -- Initial
Statement of Beneficial Ownership of Securities within 10 days after such person
becomes a reporting person. A reporting person must file a Form 4 -- Statement
of Changes of Beneficial Ownership of Securities within 10 days after any month
in which such person's beneficial ownership of securities changes, except for
certain changes exempt from the reporting requirements of Form 4. Such exempt
changes include stock options granted under a plan qualifying pursuant to Rule
16b-3 under the Exchange Act. A reporting person must file a Form 5 -- Annual
Statement of Beneficial Ownership of Securities within 45 days after the end of
our fiscal year to report any changes in ownership during the year not reported
on a Form 4, including changes exempt from the reporting requirements of Form 4.
The SEC's rules require our reporting persons to furnish us with copies of
all Section 16(a) reports that they file. Based solely upon a review of the
copies of such reports furnished to us and written representations that no other
reports were required with respect to the year ended December 31, 1999, we
believe that the reporting persons have complied with all applicable Section
16(a) filing requirements for 1999 on a timely basis, except for a Form 4 due in
February 1999 with respect to each of Messrs. Chapman and Meyer covering one
transaction each and for a Form 4 due in August 1999 with respect to Messrs.
Todd, Pyra and Staudt covering one transaction each.
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<PAGE> 10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the annual and long-term compensation earned
during the last three fiscal years with respect to our Chief Executive Officer,
our four most highly compensated executive officers in 1999 other than the Chief
Executive Officer, and two additional highly compensated employees for services
rendered during the referenced year.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-----------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
NAME AND ------------------------------ STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) AWARDS($) OPTIONS(#) COMPENSATION($)
- ------------------ ---- --------- ----------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
W.T. Wamberg........................... 1999 $ 87,872 $100,540 $ -- -- $ --
President, Chairman of the Board,
Chief 1998 -- -- -- -- --
Executive Officer and Director 1997 -- -- -- -- --
Melvin G. Todd......................... 1999 $250,008 $290,009 $ -- -- --
Executive Vice President and Director 1998 251,278 616,607 216,972 30,523 --
1997 250,886 225,007 -- 70,833 --
Richard C. Chapman..................... 1999 $253,212 $195,000 $ -- 10,000 $ --
Executive Vice President 1998 256,276 212,000 -- 65,000 --
1997 84,191 75,000 -- -- --
Donald C. Wegmiller.................... 1999 $257,700 $251,354 $ -- 185,000 $57,759
Executive Vice President 1998 -- -- -- -- --
1997 -- -- -- -- --
Thomas M. Pyra......................... 1999 $219,468 $220,000 $ -- 50,000 $83,208
Chief Financial Officer and Chief 1998 100,000 28,333 -- 50,000 --
Operations Officer 1997 -- -- -- -- --
Robert Grant........................... 1999 $ 83,208 $435,971 $ -- 26,700 $54,549
Sales Executive 1998 -- -- -- -- --
1997 -- -- -- -- --
Robert Erra............................ 1999 $ 93,600 $274,171 $ -- 16,700 $ --
Sales Executive 1998 -- -- -- -- --
1997 -- -- -- -- --
</TABLE>
- ---------------
(1) Bonuses represent incentive compensation, whether under employment
agreements entered into with the named executive officers, or otherwise. See
"Management -- Employment Agreements." Bonuses reflect amounts earned by the
named executive officers during the referenced year, even though paid
subsequent to such year.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning the options
granted to the named executive officers during 1999. The options were granted
pursuant to our 1998 stock option plan. No stock appreciation
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<PAGE> 11
rights were granted during 1999. For additional information on and certain terms
of options, see "-- 1998 Stock Option Plan."
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM($)(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------------
NAME GRANTED FISCAL YEAR(1) ($/SH) DATE 5% 10%
- ---- ---------- -------------- -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
W.T. Wamberg.............. -- 0.0% $ -- -- $ -- $ --
Melvin G. Todd............ -- 0.0% $ -- -- -- --
Richard C. Chapman........ 10,000 1.7% $18.13 2/28/07 255,107 353,299
Donald C. Wegmiller(3).... 185,000 31.6% $16.63 4/4/09 4,329,014 5,995,273
Thomas M. Pyra............ 50,000 8.5% $14.75 2/28/07 1,037,736 1,437,166
Robert Grant(3)........... 26,700 4.6% $16.63 4/4/09 624,782 865,264
Robert Erra(3)............ 16,700 2.9% $16.63 4/4/09 390,781 541,195
</TABLE>
- ---------------
(1) Options to purchase a total of 554,887 shares of our common stock at an
exercise price of $14.25 to $18.13 per share were granted in 1999.
(2) In accordance with the rules of the SEC, the amounts shown on this table
represent hypothetical gains that could be achieved for the respective
options if exercised at the end of the option term. These gains are based on
the assumed rates of stock appreciation of 5.0% and 10.0% compounded
annually from the date the respective options were granted to their
expiration date and do not reflect our estimates or projections of future
common stock prices. The gains shown are net of the option exercise price,
but do not include deductions for taxes or other expenses associated with
the exercise. Actual gains, if any, on stock option exercises will depend on
the future performance of our common stock, the option holder's continued
employment through the option period, and the date on which the options are
exercised.
(3) In connection with our acquisition of MCG/Healthcare, Messrs. Wegmiller,
Grant and Erra, along with certain other executives of MCG/Healthcare, were
granted performance options that will vest at the rate of 20% per year
beginning December 31, 1999. These options are subject to forfeiture
conditions if certain performance objectives are not met over the five year
vesting period.
OPTION EXERCISES IN LAST FISCAL YEAR
The following table sets forth certain information concerning all
unexercised options held by the named executive officers as of December 31,
1999. For additional information on and certain terms of such options, see "--
1998 Stock Option Plan." No options were exercised during 1999.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
YEAR-END(#) FISCAL YEAR-END(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
W.T. Wamberg...................... -- -- -- --
Melvin G. Todd.................... 101,356 -- 732,288 --
Richard C. Chapman................ 16,250 58,750 87,344 262,031
Donald C. Wegmiller............... 37,000 148,000 -- --
Thomas M. Pyra.................... 50,000 50,000 179,165 89,585
Robert Grant...................... 5,340 21,360 -- --
Robert Erra....................... 3,340 13,360 -- --
</TABLE>
- ---------------
(1) Value for "in-the-money" options represents the positive spread between the
respective exercise prices of outstanding options and the closing price of
$14.375 on December 31, 1999.
9
<PAGE> 12
COMPENSATION OF DIRECTORS
The members of your board of directors who are also employees receive no
additional compensation for their services as a director. In 1999, we reimbursed
Mr. Wamberg and Mr. Hendrickson $100,000 and $219,000, respectively, for
expenses incurred on our behalf.
Non-employee directors, other than Mr. Pohlman, are paid an annual stipend
of $15,000, and all non-employee directors are reimbursed all reasonable
expenses incurred by them related to their services as non-employee directors.
In addition, non-employee directors, other than Mr. Pohlman, are eligible to
participate in the 1998 non-employee director stock option plan.
EMPLOYEE BENEFIT AND RETIREMENT PLANS
We maintain a defined contribution plan for our employees that is qualified
under Section 401(k) of the Internal Revenue Code of 1986. We match 50.0% of the
first 6.0% of salary that an eligible participant contributes to this 401(k)
Plan.
EXECUFLEX BENEFIT PLAN
A new executive benefit program we adopted in 1999 is the Execuflex
executive benefit plan. Initiated by our HealthCare Compensation Strategies
division, this plan is a customized approach that combines both motivational and
executive retention attributes using tax deferred and, in some cases, tax free
benefits.
After presenting this plan to our board of directors, it was approved for
certain of our senior executives. Under this plan, each executive is provided
with an annual allowance of $15,000, which may be allocated among a menu of
options to meet the individual needs of the executive and his or her family. The
program consists of:
- Individual long-term disability that provides for a replacement of a
portion of income lost due to a disability. It is non-cancelable for all
full-time executives and provides lifetime coverage that adjusts for
salary and is not subject to Social Security offsets. The benefit is
taxable to the executive and the benefit period declines annually from
age 61.
- Group long-term care for the executive, the executive's spouse or
dependent parents providing nursing care or home care when the covered
individual requires it as defined by the policy. The benefit coverage is
for six years and may be increased or extended for a lifetime at the
executive's option. All or a portion of the benefits are tax-free.
- Family supplemental survivor options in which we assist the executive in
the purchase of variable universal life coverage that can be split
between the executive, his or her spouse or jointly. We pay the premium
for ten years while the executive retains the policy. At retirement or
after fifteen years we recover our premiums from the cash value of the
policy which continues with the executive.
- A capital accumulation features in which the funds not invested in the
other three options are credited to the executive's account vesting
ratably over the plan year. Earnings are credited to the account based on
a choice of options and are subject to Social Security and Medicare
withholding. Income taxes are payable on distribution. This company
liability is match-funded through the use of a specially designed
corporate owned life insurance product.
1998 STOCK OPTION PLAN
A total of 2,000,000 shares of our common stock has been reserved for
issuance under our 1998 stock option plan. The 1998 stock option plan was
initially adopted by our predecessor company in March 1997 and we assumed,
amended and restated it in July 1998. The 1998 stock option plan is administered
by your board of directors or the compensation committee, who have full
authority to determine the individuals to whom, and the time at which, the
options may be granted and the number of shares covered by each option. Both
nonqualified stock options and incentive stock options (as defined in the
Internal Revenue Code) may be granted under the 1998 stock option plan. The
option price per share is determined by the compensation
10
<PAGE> 13
committee but may not be less than fair market value for incentive stock
options. Options may be granted to our officers, employees (including officers
who are also directors), non-employee directors or licensed insurance producers.
Incentive stock options are not transferable or assignable by an optionee other
than by will or the laws of descent and distribution. Nonqualified stock options
may be transferred to certain permitted transferees to the extent permitted in
the applicable nonqualified stock option agreement granting any such
nonqualified stock options.
As of March 13, 2000, 1,224,732 options had been granted under the 1998
stock option plan, of which 1,250 were exercised in 1999 and 1,204,732 of which
remained outstanding. A total of 794,018 shares of our common stock remain
available for grant as of March 13, 2000.
1998 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
Our non-employee director plan is discussed in detail under "Proposal
Three -- Approval of the Adoption of the Amended and Restated 1998 Non-Employee
Director Stock Option Plan."
EMPLOYEE STOCK PURCHASE PLAN
In July 1998, your board of directors adopted a stock purchase plan, under
which a total of 200,000 shares of our common stock have been reserved for
issuance. A committee of directors appointed by your board of directors
administers the stock purchase plan. Any employee who has been our employee for
90 days is eligible to participate in offerings under the stock purchase plan.
The stock purchase plan consists of eight semi-annual offerings of our
common stock beginning on each January 1 and July 1 in each of the years 1999,
2000, 2001 and 2002, and terminating on June 30 and December 31 of each year.
The maximum number of shares issued in these years will be 50,000 in 1999, and
50,000 plus the number of unissued shares from prior offerings for each of 2000,
2001 and 2002.
On the commencement date of each offering under the stock purchase plan, a
participating employee will be deemed to have been granted an option to purchase
a maximum number of shares of common stock equal to: (i) the percentage of the
employee's base pay that the employee has elected to be withheld (not to exceed
10.0%), (ii) multiplied by the employee's base pay during the period of the
offering and (iii) divided by the lower of 85.0% of the closing market price of
our common stock on the applicable offering commencement date or 85.0% of the
closing market price of our common stock on the offering termination date.
Options held by a participant may be exercised by that participant.
No employee may be granted options pursuant to the stock purchase plan if,
as a result of a grant, an employee would (i) own stock or hold options to
purchase stock possessing 5.0% or more of the total combined voting power or
value of all classes of our stock or (ii) have rights to purchase stock under
all our employee stock purchase plans that accrue at a rate in excess of $25,000
in fair market value for any calendar year.
Unless a participant gives written notice to us, his or her option for the
purchase of our common stock with payroll deductions made during an offering
will be deemed to have been exercised automatically on the offering termination
date applicable to such offering, for the purchase of the number of full shares
of common stock that the accumulated payroll deductions at that time will
purchase at the applicable option price. A participant may withdraw payroll
deductions credited to his account under the stock purchase plan at any time.
KEY EXECUTIVE LIFE INSURANCE
We maintain and are the sole beneficiary of key man life insurance policies
on the lives of Messrs. Wamberg, Wegmiller, Todd and Chapman in the amounts of
$23.0 million, $8.5 million, $1.0 million and $4.0 million, respectively.
11
<PAGE> 14
EMPLOYMENT AGREEMENTS
Effective as of July 1, 1998, we entered into employment agreements with
Mr. Todd and Mr. Pyra. The term of both employment agreements is for a period of
three years ending on June 30, 2001. Mr. Todd's and Mr. Pyra's employment
agreements provide for annual base salaries of $250,000 and $200,000,
respectively. In addition to their annual base salary, Mr. Todd is entitled to
receive a bonus each year of up to 100% of his annual base salary based upon our
performance, and Mr. Pyra is entitled to receive a bonus each year of up to 75%
of his annual base salary based upon net income and incremental five-year net
income. On August 19, 1999, Mr. Pyra was granted an option, which terminates on
February 28, 2007, to purchase 50,000 shares of common stock at an exercise
price of $9.00 per share under our 1998 stock option plan. Mr. Todd's employment
agreement provides that if there is a "change of control" of Clark/Bardes
Holdings, Mr. Todd will be paid, for the term of his employment plus two years
thereafter, his annual "cash compensation" (which is based upon Mr. Todd's
average cash compensation for the two years prior to such change of control),
plus an annual amount equal to 50% of such average annual cash compensation. The
total amount, however, cannot exceed the amount that would cause such payment to
be deemed a "parachute payment" under Section 280G of the Internal Revenue Code.
If, following a change of control, Mr. Todd voluntarily terminates employment
for other than good cause (as defined in the employment agreement), his annual
cash compensation and bonus, payable upon such change of control will be payable
for only one year. Both Mr. Todd and Mr. Pyra are subject to non-competition,
non-solicitation and confidentiality provisions. If either Mr. Todd or Mr. Pyra
are terminated for cause including any willful breach of the non-competition,
non-solicitation or confidentiality provisions of their employment agreements,
all payments to the officer will end. If Mr. Todd or Mr. Pyra is terminated
without cause, the officer will be entitled to severance compensation equal to
his annual base salary for a period equal to the greater of 90 days or the
remaining term of his employment agreement. From time to time, your board of
directors may increase the bonuses and compensation paid under these agreements.
We entered into an employment agreement, effective April 5, 1999, with
Donald C. Wegmiller. Subject to renewal, the agreement ends on December 31,
2003. It calls for an annual base salary of $335,000, as well as additional
commissions and a bonus each year equal to 3% of certain revenues generated by
our Healthcare Compensation Strategies division. Mr. Wegmiller is subject to
non-competition, non-solicitation and confidentiality provisions. On the
effective date of this agreement, Mr. Wegmiller was granted an option to
purchase 185,000 shares of our common stock which vests and becomes exercisable
in five annual installments beginning December 30, 1999. If, following a change
of control, Mr. Wegmiller voluntarily terminates employment, his stock options
granted under the agreement will become 100% vested and he can elect to receive
either 12 months salary and other compensation or no compensation and a waiver
of the agreement's restrictive covenants. If Mr. Wegmiller is terminated without
cause, then his stock options will become 100% vested and he will receive 12
months salary and other compensation.
As part of our acquisition of The Wamberg Organization, we entered into an
employment agreement, effective as of September 1, 1999, with W.T. Wamberg. The
agreement is for a term of five years, and provides for a base salary of
$260,000 and bonuses of up to 140% of base salary, in the discretion of our
board of directors' compensation committee. The agreement contains provisions
concerning non-competition, non-solicitation and confidentiality. During the
term of the employment agreement, Mr. Wamberg is to be employed as our chief
executive officer, and Mr. Wamberg has agreed to devote substantially all of his
business time and attention to this task. If Mr. Wamberg's duties or position
differs materially from that of the chief executive officer, upon termination
without cause, or upon a change of control, Mr. Wamberg may terminate his
employment and elect to receive either 12 months salary plus accrued and unpaid
benefits or no severance compensation and a waiver of the non-competition and
non-solicitation covenants. Mr. Wamberg may also voluntarily terminate the
agreement upon 30 days notice without any further obligation.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1999, the compensation committee of your board of directors
consisted of Messrs. Dalton, Pohlman, Piaker and Seidman, all of whom are
independent directors. Our officers who are not directors do not participate in
deliberations of the compensation committee or the board of directors regarding
executive compensation.
12
<PAGE> 15
JOINT REPORT OF THE COMPENSATION COMMITTEE AND
THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
GENERAL
The compensation committee is responsible for establishing the compensation
of Clark/Bardes Holdings' directors, officers and other managerial personnel,
including salaries, bonuses, termination agreements and other executive officer
benefits. The compensation committee is comprised of Messrs. Dalton, Pohlman,
Piaker and Seidman, each of whom is an independent director and none of whom is
currently or was formerly one of our officers or employees.
Although the board of directors delegated certain responsibilities as
described above to the compensation committee, in determining compensation for
directors, officers and other managerial personnel for 1999, the board of
directors as a whole acted directly with respect to certain compensation
decisions. The board of directors is comprised of Messrs. Wamberg, Hendrickson,
Todd, Pohlman, Dalton, Piaker and Seidman. Mr. Todd abstained from all
compensation decisions with respect to himself for his services as chief
executive officer prior to September 1, 1999, and Mr. Wamberg similarly
abstained from all compensation decisions with respect to himself for his
service as chief executive officer.
1999 COMPENSATION
Base Salary. The base salaries of executive officers are established in
consideration of the competitive market for executives of comparable levels at
companies at a comparable stage of development. We have entered into employment
agreements with Messrs. Chapman, Miller, Pyra, Todd, Wegmiller and Wamberg, the
terms of which are described above under "Executive Compensation -- Employment
Agreements." The board of directors believed these contracts to be necessary to
ensure the retention of experienced management. The board of directors believes
the annual compensation provided to each of the executive officers, whether
pursuant to an employment agreement or otherwise, is commensurate with the
responsibilities, experience and individual performance of such executive
officers.
Bonuses. The board of directors granted bonuses in 1999 based on our
performance and the contribution of the particular executive officer to whom
such bonus was paid taking into account such executive officer's contribution to
the significant developments taking place in Clark/Bardes Holdings in 1999
including our acquisition strategy. The employment agreements of Messrs. Miller,
Pyra, Todd, Wamberg and Wegmiller also tie the amount of bonuses to be paid to
such executive officers to certain measures of our performance. See "Executive
Compensation -- Employee Agreements." The board of directors believes that the
bonuses paid to executive officers in 1999, whether pursuant to employment
agreement or otherwise, is commensurate with our performance and such executive
officer's contribution to such performance.
Stock Options. The purpose of the 1998 stock option plan is to encourage
and enable participants under the plan to acquire and retain a proprietary
interest in us by ownership of our stock. The board of directors has directed
the grant of stock options pursuant to the 1998 stock option plan in order to
align the interests of its executive officers with our interests those of our
stockholders. In addition to our performance, the board of directors considered
the significant developments taking place in 1999 including our acquisition
strategy. The board of directors believes the stock options granted to executive
officers in 1999, whether pursuant to employment agreement or otherwise, is
commensurate with the executive officer's responsibilities, experience and
individual performance of such executive officer.
1999 COMPENSATION OF CHIEF EXECUTIVE OFFICER
Melvin Todd held the position of Chief Executive Officer and President
until September 1999 when W.T. Wamberg succeeded him in these positions. In
determining the appropriate compensation for Mr. Todd, the board of directors is
guided by our performance, competitive practices, and the board of director's
policy, as discussed above, of determining compensation with reference to the
compensation paid to similarly situated executives of comparable companies. In
addition to our performance, the board of directors considered the significant
developments taking place in 1999 including our acquisition strategy.
Appropriate adjustments in
13
<PAGE> 16
the compensation of the Chief Executive Officer is considered concurrently with
similar adjustments made for our other executive officers. The following
outlines the annual base salary of, and bonus paid to Mr. Todd during 1999:
<TABLE>
<CAPTION>
NUMBER OF
ANNUAL STOCK OPTIONS
NAME BASE SALARY BONUS PAID GRANTED
- ---- ----------- ---------- -------------
<S> <C> <C> <C>
Melvin G. Todd.................................... $250,000 $290,009 --
Executive Vice President and Director
</TABLE>
In determining the appropriate compensation for Mr. Wamberg, as with Mr. Todd,
the board of directors considers our performance, competitive practices,
significant developments (including our acquisition strategy) and its policy of
determining compensation with reference to the compensation paid to similarly
situated executives of comparable companies. The board of directors believes the
annual base salary paid to both Mr. Todd and Mr. Wamberg in 1999 is commensurate
with their respective responsibilities, experience, individual performance, and
the bonus paid to each is commensurate with our performance and their respective
contributions to such performance.
<TABLE>
<CAPTION>
NUMBER OF
ANNUAL STOCK OPTIONS
NAME BASE SALARY BONUS PAID GRANTED
- ---- ----------- ---------- -------------
<S> <C> <C> <C>
W.T. Wamberg...................................... $260,000 $100,541 --
Chairman of the Board, Chief Executive Officer,
President and Director
</TABLE>
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
The compensation committee expects all compensation paid to executive
officers to be tax deductible to Clark/Bardes Holdings. Section 162(m) provides
that compensation in excess of $1,000,000 paid to the chief executive officer of
Clark/Bardes Holdings and the four highest compensated officers of Clark/Bardes
Holdings (other than the chief executive officer) cannot be deducted by
Clark/Bardes Holdings for federal income tax purposes unless, in general, such
compensation is performance based, is established by a committee of outside
directors, is objectively determined and the plan or agreement providing for
such performance-based compensation is approved by stockholders. In the future,
however, the compensation committee may determine to adopt a compensation
program that does not satisfy the conditions of Section 162(m) if, in its
judgment after considering the additional costs of not satisfying Section
162(m), such program is appropriate.
This report has been furnished by the members of the compensation committee
and by the board of directors.
<TABLE>
<S> <C>
COMPENSATION COMMITTEE BOARD OF DIRECTORS
Randolph A. Pohlman W.T. Wamberg
L. William Seidman Lawrence H. Hendrickson
George D. Dalton Melvin G. Todd
Steven Piaker Randolph A. Pohlman
L. William Seidman
George D. Dalton
Steven Piaker
</TABLE>
14
<PAGE> 17
PERFORMANCE GRAPH
The following performance graph sets forth the cumulative total stockholder
return for our common stock, the Russell 2000 Index and the Nasdaq Insurance
Index for the period indicated. The performance graph assumes $100 invested in
our common stock at its closing price on August 18, 1998, the date on which our
common stock commenced trading on the Nasdaq National Market, and in each of the
Russell 2000 Index and the Nasdaq Insurance Index on the same date. The
performance graph also assumes the reinvestment of all dividends, if any. The
dates on the performance graph represent the last trading day of each month
indicated. The performance graph is not necessarily indicative of future
investment performance.
[Performance Graph]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
8/18/98 8/98 9/98 10/98 11/98 12/98 1/99 2/99 3/99 4/99 5/99 6/99 7/99
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Clark/Bardes 100 89 92 108 192 182 185 183 184 141 191 205 204
Russell 2000 100 100 105 110 115 122 124 114 115 125 127 133 129
Nasdaq Insurance 100 87 90 98 105 109 107 109 124 138 143 144 138
<CAPTION>
- --------------------- ---------------------------------------
8/99 9/99 10/99 11/99 12/99
- --------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C>
Clark/Bardes 185 223 149 134 155
Russell 2000 132 124 125 132 146
Nasdaq Insurance 124 124 124 119 115
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of our common stock as of March 13, 2000, by:
(1) each person who is known by our company to own beneficially more than
5% of our common stock;
(2) each director;
(3) each of the named executive officers; and
(4) all directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the SEC.
In computing percentage ownership of each person, shares of common stock subject
to options held by that person that are currently
15
<PAGE> 18
exercisable or exercisable within 60 days of March 13, 2000, are deemed to be
beneficially owned. These shares, however, are not deemed outstanding for the
purposes of computing the percentage ownership of each other person. We have
separated the number of shares held into two categories:
- "Number of Shares Actually Issued," which includes beneficial ownership
of our common stock but excludes stock options; and
- "Number of Shares Issuable Pursuant to Stock Options," which includes
only the shares of common stock subject to options that are currently
exercisable or exercisable within 60 days of March 13, 2000.
Except as indicated in this table and pursuant to applicable community
property laws, each stockholder named in the table has sole voting and
investment power with respect to the shares set forth opposite such
stockholder's name. Percentage of ownership is based on 9,769,826 shares of our
common stock outstanding on March 13, 2000.
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF SHARES PERCENTAGE OF
SHARES ISSUABLE SHARES
ACTUALLY PURSUANT TO BENEFICIALLY
NAME OF BENEFICIAL OWNER ISSUED STOCK OPTIONS OWNED
- ------------------------ --------- ------------- -------------
<S> <C> <C> <C>
General American Life Insurance Company(1)...... 555,600 -- 5.7%
700 Market Street
St. Louis, Missouri 63101
Phoenix Home Life Insurance Company(2).......... 555,600 -- 5.7%
One American Row
Hartford, Connecticut 06115...................
Conning Insurance Capital Limited Partnership 1,000,000 -- 10.2%
V(3)..........................................
Cityplace II
185 Asylum Street
Hartford, Connecticut 06103...................
W.T. Wamberg.................................... 1,903,082 -- 19.5%
Lawrence H. Hendrickson......................... 415,508 -- 4.3%
Melvin G. Todd.................................. 76,835 101,356 1.8%
Richard C. Chapman.............................. 289,158 18,750 3.2%
Donald C. Wegmiller............................. 117,652 -- 1.2%
Thomas M. Pyra.................................. 5,005 66,667 *
L. William Seidman.............................. 5,000 13,000 *
Randolph A. Pohlman............................. 2,000 63,883 *
George D. Dalton................................ 5,000 12,206 *
Steven F. Piaker................................ -- 13,444 *
--------- ------- -----
All directors and executive officers as a 2,819,240 289,306 31.8%
group.........................................
10 individuals)
</TABLE>
- ---------------
* Less than 1%
(1) Based solely upon information contained in Schedule 13G/A, filed with the
SEC on June 16, 1999. General American is a subsidiary of General American
Mutual Holding Co. and GenAmerica Corporation, each of which also claim
beneficial ownership of the stock. Based solely upon publicly available
information, Metropolitan Life Insurance Company has acquired beneficial
ownership of the stock of certain of these companies.
(2) Based solely upon information contained in Schedule 13G/A, filed with the
SEC on July 22, 1999.
(3) Based solely upon information contained in Schedule 13G/A, filed with the
SEC on June 16, 1999. Conning Insurance Capital is a subsidiary of General
American Mutual Holding Co.; GenAmerica Corporation; General American Life
Insurance; Conning Corp.; Conning, Inc.; Conning & Company; and Conning
Investment Partners V, LLC; each of which also claim beneficial ownership of
the stock. Based solely upon publicly available information, Metropolitan
Life Insurance Company has acquired beneficial ownership of the stock of
certain of these companies.
16
<PAGE> 19
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PRINCIPAL OFFICE AGREEMENT WITH W.T. WAMBERG
We and Mr. Wamberg were the parties to a principal office agreement, dated
July 29, 1993, pursuant to which The Wamberg Organization, whose sole
shareholder was W.T. Wamberg, marketed on our behalf life insurance and
administrative and consulting services, and we furnished to The Wamberg
Organization marketing materials and concepts, program design ideas, selected
life insurance products, specimen plan documents and administrative services.
Commissions and fees payable to The Wamberg Organization were net of any of our
administrative costs as determined by our board of directors. Under the terms of
the principal office agreement, we paid The Wamberg Organization $7,792,000 in
1997, $8,068,000 in 1998 and $8,071,000 in 1999, for commissions and fees
earned. The terms and conditions of Mr. Wamberg's principal office agreement
were similar in all material respects to the terms and conditions of such
agreements with other producers. This agreement was terminated with the purchase
of the assets of The Wamberg Organization on September 1, 1999.
PURCHASE OF RENEWAL REVENUE FROM W.T. WAMBERG AND THE WAMBERG ORGANIZATION
On January 4, 1999, we purchased the right to receive approximately 27.5%
of the commission and fee revenue, prior to deduction of servicing costs,
related to renewal revenue of the inforce policies on June 30, 1998, due under
the principal office agreement with W.T. Wamberg and The Wamberg Organization,
for a cash payment of $7.5 million. This transaction allows us to receive
approximately $14.2 million over a ten year period. As a result of this
acquisition we reduced our commission and fee expense that would have otherwise
been due to W.T. Wamberg and The Wamberg Organization.
ACQUISITION OF THE WAMBERG ORGANIZATION
On September 1, 1999, our subsidiary, Clark/Bardes, Inc., entered into and
consummated an asset and stock purchase agreement to acquire substantially all
the assets and assume liabilities of The Wamberg Organization. We acquired
certain operating assets, all of the remaining renewal commission not already
acquired and some liabilities, principally accounts payable and employee
benefits, of The Wamberg Organization. In addition, we acquired all of the
outstanding common stock of Wamberg Financial Corporation, which owned an
airplane and related debt of approximately $3.8 million. The assets acquired
under the purchase agreement include cash; receivables; equipment; intangible
assets; intellectual property; customer and supplier lists; insurance; and all
rights under existing contracts, leases, agreements and permits.
The Wamberg Organization had historically generated our largest volume of
revenue. In light of the relationship between The Wamberg Organization, Wamberg
Financial Corporation, W.T. Wamberg and us, our board appointed a special
committee of the board of directors comprised of independent, non-employee
directors to review the terms of this transaction. The special committee
retained an investment bank to issue a fairness opinion with respect to this
acquisition. After analyzing the matter and considering all relevant issues, the
special committee recommended that our board approve the transaction.
The initial cost of the acquisition was approximately $18.0 million and
provided for:
- cash payment to The Wamberg Organization of $12.4 million;
- a cash payment to W.T. Wamberg of $50,000 for his shares of Wamberg
Financial Corporation;
- the direct payment of $1.5 million for outstanding loans of The Wamberg
Organization;
- the assumption of approximately $4.3 million of liabilities including a
$3.8 million note payable for the purchase of a corporate aircraft; and
- expenses of approximately $173,000.
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<PAGE> 20
In addition to the transactions at closing, the purchase agreement provides for
payment to The Wamberg Organization of $11.9 million through December 31, 2002,
which may be reduced if we do not achieve revenue objectives set forth in the
purchase agreement.
PRIVATE PLACEMENT WITH CONNING
On June 7, 1999, we completed a private placement of 1,000,000 shares of
our common stock at $17 per share to Conning Insurance Capital Limited
Partnership V, L.P. Conning Insurance Capital is a limited partnership managed
by a subsidiary of Conning Corporation. As part of the private placement, we
granted Conning Insurance Capital registration rights which it may use to have
its shares of our common stock registered along with any shares we may be
registering with the SEC. In addition, we granted Conning Insurance Capital the
right to make two demands for registration after December 31, 2002.
We also agreed to appoint one representative of Conning Insurance Capital
to our board of directors. Conning Insurance Capital designated Steven F.
Piaker, senior vice president of Conning & Company, to be that representative.
Conning & Company has provided investment banking services for us in the past,
and it acted as a managing underwriter of our initial public offering. We
further agreed that, when Mr. Piaker's term expires, we would use our best
efforts to elect a Conning Insurance Capital representative to our board of
directors. Of the proceeds, $12 million was used to pay down a portion of our
outstanding balance of our credit facility in July 1999 and $5 million was used
in the acquisition of The Wamberg Organization.
ANCILLARY BUSINESS ARRANGEMENTS
Because of various federal and state licensing restrictions, we market
products registered with the SEC and our insurance-financed employee benefit
programs in the states of Ohio, Pennsylvania and Texas through a registered
broker-dealer, Clark/Bardes Securities, Inc., with which we have a networking
agreement, and insurance agencies, for which we provide almost all services
through administration and services agreements. Each of the following insurance
agencies -- Clark/Bardes Agency of Ohio, Inc., Clark/Bardes, Inc. of
Pennsylvania and Clark/Bardes of Texas, Inc. -- provide the entity through which
our producers sell certain products and conduct business in such states. In
exchange, each of the insurance agencies is a party to an administration and
services agreement under which each insurance agency pays us to furnish
facilities, services, personnel and assistance, including the following:
- performing all bookkeeping and accounting functions;
- establishing and maintaining all records required by law and by generally
accepted accounting principles;
- furnishing all stationery, forms, and supplies;
- providing all necessary clerical and professional staff to perform the
above activities;
- providing all computer hardware and software capabilities and facilities;
- providing office space, furniture, fixtures, equipment and supplies;
- assisting in the preparation of reports required by governmental
regulatory and supervisory authorities; and
- billing and collection of all premiums.
The charges and fees pursuant to the administration and services agreements
are equal to the costs we incur in providing the services, personnel and
property, plus an additional amount equal to a certain percentage of such cost.
Each insurance agency is solely responsible for its own activities as an
insurance producer and for its relationship with the producers or employees in
the course and scope of their activities performed on behalf of such agency.
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<PAGE> 21
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Your board of directors, upon the recommendation of the audit committee,
has appointed Ernst & Young LLP, independent certified public accountants, as
independent accountants of our financial statements for 2000. Ernst & Young LLP
has acted as accountants for us since June 2, 1997.
Your board of directors has determined to afford you the opportunity to
express your opinions on the matter of accountants, and, accordingly, is
submitting to you at the annual meeting a proposal to ratify the appointment of
Ernst & Young LLP. If a majority of the shares voted at the annual meeting, in
person or by proxy, are not voted in favor of the ratification of the
appointment of Ernst & Young LLP, your board of directors will interpret this as
an instruction to seek other accountants. YOUR BOARD OF DIRECTORS RECOMMENDS
THAT YOU VOTE "FOR" THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS
INDEPENDENT ACCOUNTANTS OF CLARK/BARDES' FINANCIAL STATEMENTS FOR THE YEAR ENDED
DECEMBER 31, 2000.
Representatives of Ernst & Young LLP are expected to be present at the
annual meeting to respond to appropriate questions.
PROPOSAL THREE
APPROVAL OF THE ADOPTION OF THE
AMENDED AND RESTATED 1998 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
A total of 100,000 shares of our common stock has been reserved for
issuance under our non-employee director plan. The non-employee director plan is
administered by either your board of directors or the compensation committee.
Only nonqualified options may be granted under the non-employee director plan.
All of our non-employee directors, other than Mr. Pohlman, may participate in
the non-employee director plan. The non-employee director plan provides for the
automatic grant of stock options to purchase 10,000 shares of our common stock
to each newly elected non-employee director on the first day of the month
following the election of such director. The appointment stock options vest and
become exercisable over three years in increments of 277 shares on the first day
of every month beginning in the month immediately after the stock options were
granted. The non-employee director plan also provides for the automatic grant of
stock options to purchase 4,000 shares of our common stock to continuing
non-employee directors on the first day of the month immediately following our
annual stockholder meetings. The annual grants of stock options to continuing
non-employee directors vest and become exercisable in increments of 1,000 shares
for each regularly scheduled quarterly meeting of the board of directors that
the non-employee director attends in person. The exercise price for stock
options granted under the non- employee director plan is the fair market value
of our common stock on the date of grant.
As of March 13, 2000, 33,110 options had been granted under the
non-employee director plan, and a total of 66,890 shares of our common stock
remain available for grant.
Your board of directors adopted the original plan in September 1998 and
adopted the amended and restated non-employee director plan in January 2000. On
December 1, 1998, we filed with the Commission a registration statement on Form
S-8 registering the shares of common stock underlying the options offered under
this plan.
The plan, as amended and restated, differs from the plan as originally
adopted in that it will have the effect of doubling the number of options
granted to some non-employee directors for their attendance at board meetings.
The extra options will only be available to those non-employee directors who
have stood for reelection at least once. If the amended and restated plan is
adopted, only Mr. Seidman, if reelected at our 2000 annual meeting, would be
eligible for the increased options in the coming year. In later years, other
non-employee directors, aside from Mr. Pohlman, would, upon reelection, also be
eligible.
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<PAGE> 22
The following table provides information concerning options granted under
the non-employee director plan:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
NAME AS OF MARCH 13, 2000
- ---- --------------------
<S> <C>
L. William Seidman................................. 4,000
George D. Dalton................................... 15,666
Steven Piaker...................................... 13,444
Randolph A. Pohlman................................ (1)
Current Non-Employee Directors as a Group (4
persons)......................................... 33,110
</TABLE>
- ---------------
(1) Mr. Pohlman is, by the terms of the plan, not eligible to participate.
A copy of the plan, as amended and restated, is attached for your reference
as Exhibit A to this proxy statement. YOUR BOARD OF DIRECTORS RECOMMENDS THAT
YOU VOTE "FOR" THE ADOPTION OF THE AMENDED AND RESTATED 1998 NON-EMPLOYEE
DIRECTOR STOCK OPTION PLAN.
STOCKHOLDER PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING
Your board of directors will provide for the presentation of your proposals
at the 2001 annual meeting of stockholders, provided that such proposals are
submitted by eligible stockholders who have complied with the relevant
regulations of the SEC regarding stockholder proposals, and our bylaws, a copy
of which is available upon written request from Mr. Staudt, our general counsel
and corporate secretary. To be considered for inclusion in our proxy statement
for the 2001 annual meeting, stockholder proposals must be received at our
principal executive office no later than December 15, 2000.
INCORPORATION BY REFERENCE
With respect to any future filings with the SEC into which this proxy
statement is incorporated by reference, Exhibit A hereto and the material under
the headings "Joint Report of the Compensation Committee and the Board of
Directors on Executive Compensation" and "Performance Graph" shall not be
incorporated into such future filings.
FORWARD-LOOKING STATEMENTS
This proxy statement may contain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. When used in this proxy statement, words such
as "anticipate," "believe," "estimate," "expect," "intend," "predict,"
"project," and similar expressions, as they relate to us or our management,
identify forward-looking statements. Such forward-looking statements are based
on the beliefs of our management as well as assumptions made by and information
currently available to us. These forward-looking statements are subject to
certain risks, uncertainties and assumptions, including risks, uncertainties and
assumptions including but not limited to difficulties associated with changes in
tax legislation, dependence on key producers and key personnel, our dependence
on persistency of existing business, credit risk related to renewal revenue,
acquisition risks, risks related to significant intangible assets, competitive
factors and pricing pressures, dependence on certain insurance companies,
changes in legal and regulatory requirements and general economic conditions.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those anticipated, expected or projected. Such forward-looking statements
reflect our current views with respect to future events and are subject to these
and other risks, uncertainties and assumptions, relating to our operations,
results of operations, growth strategy and liquidity. All subsequent written and
oral forward-looking statements attributable to us or individuals acting on our
behalf are expressly qualified in their entirety by this paragraph.
20
<PAGE> 23
FORM 10-K
Accompanying this proxy statement is a copy of our Form 10-K for the year
ended December 31, 1999. The Form 10-K does not form any part of the materials
for the solicitation of proxies. We will mail additional copies of our annual
report on Form 10-K for the year ended December 31, 1999 to each stockholder or
beneficial owner of shares of our common stock without charge upon such person's
written request to James Radosevich at our executive offices at 102 South
Wynstone Park Drive, Suite 200, North Barrington, Illinois 60010.
By Order of the Board of Directors
W.T. Wamberg
President, Chief Executive Officer
and Chairman of the Board
North Barrington, Illinois
March 30, 2000
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<PAGE> 24
EXHIBIT A
CLARK/BARDES HOLDINGS, INC.
AMENDED AND RESTATED
1998 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
SECTION 1. Purpose. The purpose of the Clark/Bardes Holdings, Inc. 1998
Director Stock Option Plan (the "Plan") is to promote the interests of
Clark/Bardes Holdings, Inc., a Delaware corporation (the "Company"), and the
interests of the Company's stockholders by providing an opportunity to
non-employee directors of the Company (other than Randolph A. Pohlman who has
already been granted option to purchase Common Stock in a Non-Qualified Stock
Option Agreement, dated as of December 30, 1997 and effective April 2, 1997) to
purchase Common Stock of the Company. By encouraging such stock ownership, the
Company seeks to attract, retain and motivate such non-employee directors and to
encourage them to devote their best efforts to the business and financial
success of the Company. Under the Plan, the Committee shall automatically grant
"non-qualified stock options" to non-employee directors of the Company under the
terms and conditions described below.
SECTION 2. Definitions. For purposes of the Plan, the following terms used
herein shall have the following meanings, unless a different meaning is clearly
required by the context.
2.1 "Board of Directors" shall mean the Board of Directors of the Company.
2.2 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.3 "Committee" shall mean the committee of the Board of Directors referred
to in Section 5 hereof.
2.4 "Common Stock" shall mean the Common Stock, $.01 par value, of the
Company.
2.5 "Incumbent Director" shall mean, beginning January 2000, a Non-Employee
Director who has stood for reelection to the Board of Directors at least once or
is standing for election to a successive term to the Board of Directors.
2.6 "Non-Employee Director" shall mean any director of the Company on the
date of an award hereunder who is not an employee or officer of the Company or
an employee or officer of any Parent or Subsidiary of the Company and who has no
other ongoing relationship with the Company, any Parent or Subsidiary, other
than as a director, excluding, however, Randolph A. Pohlman.
2.7 "Non-Qualified Options" or "Options" shall mean options granted to a
Participant pursuant to the Plan that are intended to be, and qualify as,
"nonqualified stock options" as described in Treasury Regulation Section 1.83-7
or any successor regulation thereto and that shall not constitute nor be treated
as an incentive stock options (as defined in Section 422(b) of the Code).
2.8 "Participant" shall mean any Non-Employee Director, other than Randolph
A. Pohlman, to whom any Non-Qualified Options are granted under the Plan.
2.9 "Parent of the Company" shall have the meaning set forth in Section
424(e) of the Code.
2.10 "Subsidiary of the Company" shall have the meaning set forth in
Section 424(f) of the Code.
SECTION 3. Option Grants. Subject to the share limitations of Section 4.1
hereof, each Non-Employee Director, other than Randolph A. Pohlman, shall
automatically receive grants of Non-Qualified Options to purchase Common Stock
as follows:
(a) George Dalton, a Non-Employee Director, shall be granted
Non-Qualified Options to purchase 1,666 shares of Common Stock on the first
day of the month immediately following the date of adoption of the Plan;
(b) thereafter, each Non-Employee Director (including the grantees
named in Section 3(a)) who is elected (or appointed to fill a vacancy) as a
director of the Company after the adoption of Plan by the Company shall be
granted Non-Qualified Options to purchase 10,000 shares of Common Stock on
the
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<PAGE> 25
first day of the month immediately following each date on which such
Non-Employee Director is elected or reelected (or appointed) as a director
of the Company for a three year term; and
(c) each Non-Employee Director who has previously been granted
Non-Qualified Options under the Plan shall be granted additional
Non-Qualified Options to purchase 4,000 shares of Common Stock, or in the
case of an Incumbent Director, 8,000 shares of Common Stock, on the first
day of the month immediately following each annual meeting of shareholders
of the Company if such Non-Employee Director or Incumbent Director, as the
case may be, continues to serve as a Director on such date of grant.
The Non-Qualified Options granted pursuant to this Section 3(a) and 3(b) shall
be hereinafter referred to as Appointment Non-Qualified Options, and
Non-Qualified Options granted pursuant to this Section 3(c) shall hereinafter be
referred to as Attendance Non-Qualified Options. In the event a Non-Employee
Director is elected, reelected or appointed for a term less than three years,
the 10,000 shares set forth in Section 3(b) shall be reduced as to such director
by multiplying it by a Fraction, the denominator of which is 36 and the
numerator of which is the number of whole months in the term (or remaining term)
to which the director is elected or appointed.
SECTION 4. Common Stock Subject to the Plan.
4.1 Number of Shares. The total number of shares of Common Stock for which
Non-Qualified Options may be granted under the Plan shall not exceed in the
aggregate 100,000 shares of Common Stock (subject to adjustment as provided in
section 6 hereof). If on any date upon which Non-Qualified Options are to be
granted hereunder, the number of shares of Common Stock remaining available for
issuance under the Plan is insufficient for the grant of the total number of
Non-Qualified Options to all Non-Employee Directors otherwise entitled thereto
pursuant to Section 3 above, then each Non-Employee Director shall receive Non-
Qualified Options to purchase a proportionate number of the available number of
shares remaining (rounded down to the greatest number of whole shares of Common
Stock available).
4.2 Reissuance. The shares of Common Stock that may be subject to
Non-Qualified Options granted under the Plan may be either authorized and
unissued shares or shares reacquired at any time and now or hereafter held as
treasury stock as the Board of Directors may determine. In the event that any
outstanding Non-Qualified Options expire or are terminated for any reason, the
shares allocable to such Non-Qualified Options may again be subject to
Non-Qualified Options granted under the Plan.
SECTION 5. Administration of the Plan
5.1 Administration. The Plan shall be administered by the entire Board of
Directors or by a committee of the Board of Directors (the "Committee")
established by the Board of Directors. Any Committee shall be appointed from
time to time by, and shall serve at the pleasure of, the Board of Directors. To
the extent that the Plan is administered by the entire Board of Directors, the
term "Committee" shall be deemed to refer to the Board of Directors.
5.2 Grant of Non-Qualified Options. Upon each grant of Non-Qualified
Options hereunder, the Committee, on behalf of the Company, shall enter into,
execute, and deliver to the Participant a stock option agreement ("Non-Qualified
Stock Option Agreement") relating to such Non-Qualified Options, which agreement
shall contain the following terms and conditions, together with such other terms
and conditions which are determined by the Committee and are not inconsistent
with any of the following terms and conditions or with any other provision of
the Plan:
(a) Expiration. Appointment Non-Qualified Options shall expire on the
earlier of (i) the tenth anniversary of the date of grant thereof, or (ii)
the date the Participant ceases to be a director of the Company other than
by reason of death or disability. In the event the Participant ceases to be
a director of the Company by reason of death or disability, Appointment
Non-Qualified Options shall expire on the earlier of (i) the tenth
anniversary of the date of grant or (ii) one year from the date of such
death or disability.
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<PAGE> 26
Attendance Non-Qualified Options shall expire on the earlier of (i)
the third anniversary of the date of grant thereof, or (ii) the date the
Participant ceases to be a director of the Company other than by reason of
death or disability. In the event the Participant ceases to be a director
of the Company by reason of death or disability, Attendance Non-Qualified
Options shall expire on the earlier of (i) the third anniversary of the
date of grant or (ii) one year from the date of such death or disability.
(b) Exercise Price. The exercise price for the options described at
Section 3(a) hereof shall be the greater of (i) $9.00 per share or (ii) the
fair market value on the date of grant of such Non-Qualified Options. The
exercise price of all other Non-Qualified Options granted under the Plan
shall be equal to the fair market value on the date of grant of such
Non-Qualified Options. For purposes of the Plan, the fair market value per
share of Common Stock as of any day shall be deemed to be the average of
the daily closing prices per share of Common Stock for the 30 consecutive
trading days that such shares were traded ending on the 15th day before
such date (or any shorter period that the Common Stock has traded with
respect to any Non-Qualified Options granted prior to 45 days of trading of
the Common Stock). The closing price for each day shall be the reported
closing price on the principal national securities exchange on which the
shares of Common Stock are listed or admitted to trading, or, if the shares
of Common Stock are not listed or admitted to trading on any national
securities exchange, on the National Association of Securities Dealers
Automated Quotation National Market (the "Nasdaq National Market"), or, if
the shares of Common Stock are not quoted on the Nasdaq National Market,
the average of the highest reported bid and the lowest reported asked
prices as furnished by the National Association of Securities Dealers, Inc.
(the "NASD") through NASDAQ, or, if not so reported through NASDAQ as
reported through the National Quotation Bureau, Incorporated ("NQBI") or a
similar organization if NASDAQ or NQBI is no longer reporting such
information. If the Common Stock is not reported or quoted by any such
organization on any of the 30 consecutive days ending on the 15th day
before the date of grant, the fair market value of the shares of Common
Stock subject to Non-Qualified Options on the date the Options are granted
shall be the fair market value thereof determined in good faith by the
Board of Directors. The fair market value of Shares of Common Stock subject
to Options shall be determined without regard to any restriction other than
a restriction which, by its terms, will never lapse.
(c) Vesting. The Appointment Non-Qualified Options described at
Section 3(a) hereof shall vest and become exercisable in increments of 277
shares on the first day of every month, beginning with the month
immediately after the date such options were granted if Dalton continues to
serve as a Non-Employee Director on the first day of the month, and any
such options remaining that are not vested and not exercisable on the date
that Dalton's term for which elected expires and a successor has been
elected and qualified shall vest and become exercisable on such date. The
remaining Appointment Non-Qualified Options described at Section 3(b) shall
vest and become exercisable by a Non-Employee Director in increments of 277
shares on the first day of every month beginning in the month immediately
after the date the Appointment Non-Qualified Options were granted pursuant
to Section 3(b) hereof if such Non-Employee Director continues to serve as
a Non-Employee Director on such first day of the month, and any such
options remaining that are not vested and not exercisable on the date that
such Non-Employee Director's term for which elected expires and a successor
has been elected and qualified shall vest and become exercisable on such
date.
The Attendance Non-Qualified Options shall vest and become exercisable
by a Non-Employee Director in increments of 1,000 shares, or in the case of
an Incumbent Director, 2,000 shares, for each regularly scheduled quarterly
meeting of the Board of Directors which such Non-Employee Director or
Incumbent Director, as the case may be, attends in person.
(d) Transferability of Options. Subject to the prior consent of the
Committee, Options granted hereunder may be transferred by the Participant
thereof to one or more permitted transferees; provided that (i) there may
be no consideration for such transfer, (ii) the Participant (or such
Participant's estate or representative) shall remain obligated to satisfy
all employment tax and other withholding tax obligations associated with
the exercise of the Options, (iii) the Participant shall notify the Company
in writing that such transfer has occurred, the identity and address of the
permitted transferee and the
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<PAGE> 27
relationship of the permitted transferee to the Participant and (iv) such
transfer shall be effected pursuant to transfer documents approved from
time to time by the Committee. To the extent an Option transferred pursuant
to this Section 5.2(d) is not fully exercisable as of the date of transfer
thereof, the Participant shall specify in the transfer document whether and
to what extent the transferred Options (if less than all of the options
subject to the applicable Non-Qualified Stock Option Agreement) are
exercisable, subject to the limitations on exercisability contained in the
applicable Non-Qualified Stock Option Agreement. Furthermore, to the extent
the Participant transfers Options that are not exercisable as of the date
of transfer and such Options are less than all of the Options subject to
the applicable Non-Qualified Stock Option Agreement, the Participant shall
specify in the transfer documents, subject to the limitations on
exercisability contained in the applicable Non-Qualified Stock Option
Agreement, when the transferred Options become exercisable as Options under
the applicable Non-Qualified Stock Option Agreement generally become
exercisable subsequent to such transfer. Any permitted transferee may not
further assign or transfer the transferred Option otherwise than by will or
the laws of the descent and distribution. Following any permitted transfer,
any such Options shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer; provided that
for purposes of Sections 5.2(e) and 8 hereof the term "Participant" shall
be deemed to refer also to each permitted transferee. The events of
termination of relationship in Section 5.2(a) hereof shall continue to be
applied with respect to the Participant, following which the Options shall
be exercisable by the transferee only to the extent, and for the periods
specified in Section 5.2(a). The term "permitted transferees" shall mean
one or more of the following: (i) any member of the Participant's immediate
family; (ii) a trust established for the exclusive benefit of one or more
members of such immediate family; or (iii) a partnership in which such
immediate family members are the only partners. The term "immediate family"
is defined for such purpose as spouses, children, stepchildren and
grandchildren, including relationships arising from adoption.
(e) Payment of Option Price. Shares of Common Stock purchased upon
exercise of Options shall at the time of purchase be paid for in full. The
Company shall satisfy its employment tax and other tax withholding
obligations by requiring the Participant (or such Participant's permitted
transferee, estate or representative) to pay the amount of employment tax
and withholding tax, if any, that must be paid under federal, state and
local law due to the exercise of the Option. To the extent that the right
to purchase shares has accrued hereunder, Options may be exercised from
time to time by written notice to the Company stating the full number of
shares with respect to which the Option is being exercised and the time of
delivery thereof, which shall be at least fifteen days after the giving of
such notice unless an earlier date shall have been mutually agreed upon by
the Participant (or other person entitled to exercise the Option) and the
Company, accompanied by payment to the Company of the purchase price in
full and the amount of employment tax and withholding tax due, if any, upon
the exercise of the Option. Such payment shall be effected (i) by certified
or official bank check, (ii) if so permitted by the Company, by the
delivery of a number of shares of Common Stock (plus cash if necessary)
having a fair market value equal to the amount of such purchase price and
employment or withholding tax, or (iii) by delivery of the equivalent
thereof acceptable to the Company. The Company will, as soon as reasonably
possible notify the Participant (or such Participant's representative) of
the amount of employment tax and other withholding tax that must be paid
under federal, state and local law due to the exercise of the Option. At
the time of delivery, the Company shall, without transfer or issue tax to
the Participant (or other person entitled to exercise the Option), deliver
to the Participant (or to such other person) at the principal office of the
Company, or such other place as shall be mutually agreed upon, a
certificate or certificates for the shares of Common Stock, provided,
however, that the time of delivery may be postponed by the Company for such
period as may be required for it with reasonable diligence to comply with
any requirements of law.
(f) Conditions to Issuance of Shares. The obligation of the Company to
issue shares of Capital Stock under the Plan shall be subject to (i) the
effectiveness of a Registration Statement on Form S-8 under the Securities
Act of 1933, as amended, with respect to such shares, and (ii) the
condition that the shares shall have been listed (or authorized for listing
upon official notice of issuance) upon (x) each
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<PAGE> 28
stock exchange, if any, on which the Common Stock may then be listed or (y)
if the common stock is not listed on any such exchange, the Nasdaq National
Market.
5.3 Interpretation. The Committee shall be authorized to interpret the
Plan and may, from time to time, adopt such rules and regulations, not
inconsistent with the provisions of the Plan, as it may deem advisable to carry
out the purposes of the Plan.
5.4 Finality. The interpretation and construction by the Committee of any
provisions of the Plan, any Options granted hereunder or any agreement
evidencing any such Options shall be final and conclusive upon all parties.
5.5 Voting. Subject to Sections 3 and 5.2 hereof, members of the Committee
may vote on any matter affecting the administration of the Plan or the granting
of Options under the Plan.
5.6 Expenses and Liabilities. All expenses and liabilities incurred by the
Committee in the administration of the Plan shall be borne by the Company. The
Committee may employ attorneys, consultants, accountants or other persons in
connection with the administration of the Plan. The Company, and its officers
and directors, shall be entitled to rely upon the advice, opinions or valuations
of any such persons.
5.7 Indemnification. Neither the members of the Board of Directors nor any
member of the Committee shall be liable for any act, omission, or determination
taken or made in good faith with respect to the Plan or any Options granted
under it, and members of the Board of Directors and the Committee shall be
entitled to indemnification and reimbursement by the Company in respect of any
claim, loss, damage, or expense (including attorneys' fees, the costs of
settling any suit, provided such settlement is approved by independent legal
counsel selected by the Company, and amounts paid in satisfaction of a judgment,
except a judgment based on a finding of bad faith) arising therefrom to the full
extent permitted by law.
SECTION 6. Adjustments. In the event that, after the adoption of the Plan
by the Board of Directors, the outstanding shares of the Company's Common Stock
shall be changed into or exchanged for a different number or kind of shares of
stock or other securities of the Company or of another corporation through
reorganization, merger or consolidation, recapitalization, reclassification,
stock split, split-up, combination or exchange of shares or increased because of
any dividends paid in Common Stock, the Board of Directors shall appropriately
adjust (i) the number of shares of Common Stock (and the exercise price per
share) subject to any unexercised Options (to the nearest possible full share);
and (ii) the number of shares of Common Stock for which Options may be granted
under the Plan, as set forth in Section 4.1 hereof, and such adjustments shall
be effective and binding for all purposes of the Plan.
SECTION 7. Effect of the Plan on Participant's Relationship with the
Company. Neither the Plan nor any Options granted hereunder to a Participant
shall be construed as conferring upon such Participant any right to continue to
serve as a director of (or otherwise provide services to) the Company or limit
in any respect the right of the Company to terminate such Participant's
relationship with the Company at any time. No person or entity shall be entitled
to vote, receive dividends, or be deemed for any purpose the holder of any
Shares until the Options granted with respect to such Shares shall have been
exercised in accordance with the provisions of the Plan.
SECTION 8. Amendment of the Plan. The Board of Directors may amend the Plan
from time to time as it deems desirable; provided, however, that, (1) no such
amendment shall deprive any Participant of any Options theretofore granted under
the Plan, without the consent of such Participant, or of any of his or her
rights thereunder or with respect thereto; and (2) without the approval of the
holders of a majority of the stock of the Company present, or represented, and
entitled to vote thereon at a meeting, the Board of Directors may not amend the
Plan (i) to increase (except for increases due to adjustments in accordance with
Section 6 hereof) the aggregate number of shares of Common Stock for which
Options may be granted hereunder, or (ii) to make any other change requiring
stockholder approval under any applicable rule, regulation, or procedure of any
national securities exchange or securities association upon which any securities
of the Company are listed (or any listing agreement with any such securities
exchange or securities association).
A-5
<PAGE> 29
SECTION 9. Termination of the Plan. The Board of Directors may terminate
the Plan at any time. Unless the Plan shall theretofore have been terminated by
the Board of Directors, the Plan shall terminate on December 31, 2008. No
Options may be granted hereunder after termination of the Plan. The termination
of the Plan shall not alter or impair any rights or obligations under any
Options theretofore granted under the Plan.
SECTION 10. Effective Date of the Plan. The Plan is effective on September
22, 1998, which was the date of its original adoption by the Board of Directors
of the Company.
SECTION 11. Legal Restrictions. Nothing herein, in any agreement entered
into hereunder, or in any Options granted hereunder, shall require the Company
to sell or issue any Common Stock pursuant to an Option if such sale or issuance
would, in the opinion of counsel for the Company, constitute a violation of the
Securities Act of 1933, as amended, or any similar or superseding statute or
statutes, or any other applicable federal or state statute, rule, or regulation,
as then in effect. At the time of any grant or exercise of any Options, or sale
or issuance of common Stock pursuant thereto, the Company may, as a condition
precedent to the sale or issuance of such Common Stock, require from the holder
of the Options (or in the event of his death, his legal representatives,
legatees, or distributees) such written representations, if any, concerning his
(or the transferee's) intentions with regard to the retention or disposition of
the Common Stock being acquired pursuant to such Options, and such written
covenants and agreements, if any, as to the manner of disposal of such Common
Stock as, in the opinion of counsel to the Company, may be necessary to ensure
that any disposition by such holder (or in the event of his death, his legal
representatives, legatees, or distributees) will not involve a violation of the
Securities Act of 1933, as amended, or any similar or superseding statute or
statutes, or any other applicable federal or state statute, rule, or regulation,
as then in effect. Certificates for Common Stock, when issued, shall have
appropriate legends, or statements of other applicable restrictions, endorsed
thereon, and may or may not be immediately transferable.
SECTION 12. Governing Law. All questions arising with respect to the
provisions of the Plan or any agreement entered into hereunder or any Option
shall be determined by application of the laws of the State of Delaware except
to the extent Delaware law is preempted by federal law.
A-6
<PAGE> 30
Attn: Steve Myers
- -------------------------------------------------------------------------------
CLARK/BARDES HOLDINGS, INC.
102 SOUTH WYNSTONE PARK DRIVE, SUITE 200
NORTH BARRINGTON, ILLINOIS 60010
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
FOR THE ANNUAL MEETING ON APRIL 18, 2000
The undersigned hereby constitutes and appoints Keith L. Staudt, Vice
President, General Counsel and Secretary, and Thomas M. Pyra, Chief Financial
Officer, and Chief Operations Officer or any of them acting in the absence of
the other, his or her true and lawful agents and proxies, with full power of
substitution, and hereby authorizes them to represent the undersigned and to
vote for the undersigned as designated on the reverse side, at the annual
meeting of stockholders to be held at the Crowne Plaza, Northstar Hotel, 618
Second Avenue South, Minneapolis, Minnesota, on April 18, 2000, at 9:00 a.m.
local time, and at any adjournments thereof, on all matters coming before said
meeting.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
and Proxy Statement, both dated March 30, 2000 and hereby revokes any proxy or
proxies heretofore given to vote of said meeting or any adjournment thereof.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICE BY MARKING THE APPROPRIATE BOXES
ON THE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXYHOLDERS CANNOT
VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD. ACTION TAKEN PURSUANT TO
THIS PROXY CARD WILL BE EFFECTIVE AS TO ALL SHARES THAT YOU OWN.
This proxy when properly executed
will be voted in the manner directed
herein. If no direction is made, this CLARK/BARDES HOLDINGS, INC.
proxy will be voted FOR items 1 and 2 P.O. BOX 11269
and 3. This proxy will be voted, in the NEW YORK, N.Y. 10203-0269
discretion of proxyholders, upon such
other business as may properly come
before the Annual Meeting or any
adjournment thereof.
(Continued and to be dated and signed on the reverse side.)
<PAGE> 31
DETACH PROXY CARD HERE
o o
------------
------------
<TABLE>
<CAPTION>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING:
<S> <C> <C> <C>
1. Election of two Class II directors to serve FOR all nominees [ ] WITHHOLD AUTHORITY to vote [ ] *EXCEPTIONS [ ]
until the 2003 annual meeting of listed below for all nominees listed below
Clark/Bardes' stockholders, and until the
respective successor of each is duly elected
and qualified:
Nominees: Lawrence H. Hendrickson, L. William Seidman
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN
THE SPACE PROVIDED BELOW.)
*Exceptions
----------------------------------------------------------------------------------------------------------------------
2. Ratification of the appointment of Ernst & Young LLP by
Clark/Bardes' board of directors as the independent
accountants of Clark/Bardes' financial statements for
the year ended December 31, 2000: FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Adoption of an Amended and Restated 1998 Non-Employee
Director Stock Option Plan: FOR [ ] AGAINST [ ] ABSTAIN [ ]
CHANGE OF ADDRESS
OR COMMENTS MARK HERE [ ]
NOTE: Please sign each sign. When signing guardian,
please give exactly as name appears as attorney,
executor, full title as such.
Dated: , 2000
---------------------------------------
Name
---------------------------------------------
(please print)
---------------------------------------------
SIGNATURE(S)
Votes must be indicated [X]
(x) in Black or Blue ink.
</TABLE>
(PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE PREPAID
ENVELOPE.)
PLEASE DETACH HERE
YOU MUST DETACH THIS PORTION OF THE PROXY CARD
o BEFORE RETURNING IT IN THE ENCLOSED ENVELOPE o
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