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(e)(2))
x Definitive Proxy Statement
_ Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
South Dakota State Medical Holding Company, Incorporated
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
x No fee required.
_ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
_ Fee paid previously with preliminary materials.
_ Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
May 1, 1997
SOUTH DAKOTA STATE MEDICAL
HOLDING COMPANY, INCORPORATED
1323 South Minnesota Avenue
Sioux Falls, South Dakota 57105
MAY 8, 1997
TO ALL CLASS A PREFERRED STOCKHOLDERS:
Enclosed is the Notice of Annual Meeting of Stockholders, Proxy Statement,
ballot and proxy to: elect three directors of South Dakota State Medical
Holding Company, Incorporated ("DAKOTACARE" or the "Company") for a three-
year term expiring at the Annual Meeting of Stockholders to be held in 2000.
Also enclosed is the Company's 1996 Annual Report to Shareholders, the Ballot
and Proxy for voting and the interim anaudited consolidated financial
statements for the quarter ended March 31, 1997.
The Ballot and Proxy must be received at the DAKOTACARE OFFICE and must be
postmarked by June 1, 1997.
If you have any questions, please call Kirk Zimmer at DAKOTACARE at
(605) 334-4000.
Sincerely,
By: /s/ Robert D. Johnson
Robert D. Johnson
Chief Executive Officer
SOUTH DAKOTA STATE MEDICAL
HOLDING COMPANY, INCORPORATED
1323 South Minnesota Avenue
Sioux Falls, South Dakota 57105
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
June 5, 1997
TO THE CLASS A AND B PREFERRED STOCKHOLDERS OF SOUTH DAKOTA STATE MEDICAL
HOLDING COMPANY, INCORPORATED:
Notice is hereby given that the Annual Meeting of Stockholders of South
Dakota State Medical Holding Company, Incorporated ("DAKOTACARE" or the
"Company") will be held on Thursday, June 5, 1997, at the Ramkota Inn,
Sioux Falls, South Dakota, at 9:15 a.m., Sioux Falls, South Dakota time, for
the following purposes:
1. To elect three directors of the Company for a three-year term expiring at
the Annual Meeting of Stockholders to be held in 2000.
2. To consider such other business as may properly come before the
stockholders for vote at the Annual Meeting.
Only the stockholders of record of the Company's Class A Voting
Preferred Stock and Class B Voting Preferred Stock at the close of business
on April 20, 1997, will be entitled to receive notice of and to vote at the
meeting or any adjournment thereof.
A form of Ballot and Proxy and Proxy Statement containing more detailed
information with respect to the matters to be considered at the Annual
Meeting accompany this notice.
NOTE: The Ballot and Proxy must be received at the DAKOTACARE office
and must be postmarked by June 1, 1997 (the "Deadline").
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. WHETHER OR NOT YOU PLAN
TO BE PERSONALLY PRESENT AT THE MEETING, PLEASE COMPLETE, DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IF YOU LATER
DESIRE TO REVOKE YOUR PROXY, YOU MAY DO SO AT ANY TIME BEFORE IT IS EXERCISED.
BY ORDER OF THE BOARD OF DIRECTORS,
By: /s/ Guy E. Tam, M.D.
Guy E. Tam, M.D.
Secretary
May 8, 1997
SOUTH DAKOTA STATE MEDICAL
HOLDING COMPANY, INCORPORATED
1323 South Minnesota Avenue
Sioux Falls, South Dakota 57105
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
JUNE 5, 1997
This Proxy Statement is furnished in connection with the solicitation of
the enclosed proxy by the Board of Directors of South Dakota State Medical
Holding Company, Incorporated (the "Company" or "DAKOTACARE") for use at a
Annual Meeting of Stockholders (the "Annual Meeting") to be held on Thursday,
June 5, 1997, at 9:15 a.m., Sioux Falls, South Dakota time, at the Ramkota Inn,
Sioux Falls, South Dakota, and at any adjournment or postponement thereof.
At the Annual Meeting, the Company's Class A and B stockholders will be
asked to consider and vote upon the following proposals described in the
enclosed Notice of Annual Meeting:
1. To elect three directors of the Company for a three-year term expiring at
the Annual Meeting of Stockholders to be held in 2000.
2. To consider such other business as may properly come before the stock-
holders for vote at the Annual Meeting.
This Proxy Statement and the form of ballot and proxy enclosed are being
mailed to stockholders commencing on or about May 8, 1997. NOTE: The Ballot
and Proxy must be received at the DAKOTACARE office and must be postmarked by
June 1, 1997 (the "Deadline").
VOTING AND PROXY INFORMATION
Shares of the Company's Class A Preferred Stock and Class B Preferred Stock
represented by ballots and proxies in the form solicited will be voted in the
manner directed by a stockholder. If no direction is made by a stockholder, the
proxy will be voted for the election of the three nominees named in this Proxy
Statement, and in the discretion of the proxy holders, for any other matters
that properly come before the stockholders for vote at the Annual Meeting.
A stockholder may revoke his or her Ballot and Proxy at any time before the
Deadline by delivering to the Secretary of the Company a written notice of
termination of the proxy's authority or by filing with the Secretary of the
Company another timely Ballot and Proxy bearing a later date.
Votes are cast by ballot and proxy for the Annual Meeting and will be
tabulated by the inspectors of election appointed by the Company for the
meeting, and the number of stockholders voting by proxy will determine whether
or not a quorum is present. The inspectors of election will treat abstentions
as shares that are present and entitled to vote for purposes of determining the
presence of a quorum for all matters. Shares abstaining with respect to any
matter will be treated as unvoted.
Only the holders of the Company's Class A Preferred Stock and Class B
Preferred Stock whose names appear of record on the Company's books at the close
of business on April 20, 1997 (the "Record Date"), will be entitled to vote at
the Annual Meeting. At the close of business on the Record Date, a total of
1,040 shares of Class A Preferred Stock, 1,300 shares of Class B Preferred
Stock, and 1,505,760 shares of Class C Common Stock were outstanding. The
holders of a majority of the Class A Preferred Stock and Class B Preferred Stock
issued and outstanding and entitled to vote at the Annual Meeting, represented
by proxy, will constitute a quorum for the transaction of business. If a quorum
is not present, the Annual Meeting may be adjourned from time to time until a
quorum is present. The affirmative vote of the holders of a majority of the
shares of Class A Preferred Stock and Class B Preferred Stock (voting as one
class), represented at the Annual Meeting in person or by proxy, is necessary
for the election of directors and the approval of all other matters proposed to
the stockholders at the Annual Meeting. Each holder of the Company's Class A
Preferred Stock and Class B Preferred Stock, is entitled to one vote for each
share held. There is a right to cumulate voting for the election of directors.
The Company anticipates that the officers and directors of the Company will
vote their shares of Class A Preferred Stock in favor of each of the proposals
described in the Notice of Annual Meeting of Stockholders. The South Dakota
State Medical Association is the only holder of Class B Preferred Stock. It is
anticipated that the South Dakota State Medical Association will vote all of its
Class B Preferred Stock in favor of each of the proposals described in the
Notice of Annual Meeting of Stockholders.
Expenses in connection with the solicitation of proxies will be paid by the
Company. Proxies are being solicited primarily by mail, but, in addition,
officers and regular employees of the Company who will receive no extra
compensation for their services may solicit proxies by telephone or telecopier.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and is required to file
periodic reports, proxy statements and other information with the Securities and
Exchange Commission (the "SEC") relating to its business, financial statements
and other matters. Such reports, proxy statements and other information may be
inspected and copied at the public reference facilities maintained by the SEC
at Room 1024, 450 Fifth Street Northwest, Washington, D.C. 20549, and at the
SEC's regional offices located at Seven World Trade Center, Suite 1300,
New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials can also be obtained at prescribed
rates from the public reference section of the SEC at 450 Fifth Street
Northwest, Washington D.C. 20549. In addition, the Commission maintains a web
site (address http://www.sec.gov) on the Internet that contains reports, proxy
statements and other information for companies like the Company which file
electronically.
ELECTION OF DIRECTORS
Nominees and Voting
Pursuant to the Company's Bylaws, the Board of Directors consists of nine
directors who are elected for three-year terms expiring at each successive
Annual Meeting of Stockholders. Currently, no director may serve more than
three consecutive terms. The terms of Dr. James Jackson, Dr. K. Gene Koob, and
Dr. Frank D. Messner expire at the 1997 Annual Meeting of Stockholders; the
terms of Dr. Robert L. Ferrell, Dr. Ben J. Henderson, and Dr. Douglas M. Holum
expire at the 1998 Annual Meeting of Stockholders; and the terms of Dr. Guy E.
Tam, Mr. Patrick Beckman and Mr. Jeffrey Rodman expire at the 1999 Annual
Meeting of Stockholders. The Bylaws currently require that eight of the
directors be holders of Class A Voting Preferred Stock of the Company and two of
the directors be consumers. The Articles of Incorporation restrict ownership
of Class A Voting Preferred Stock to medical or osteopathic physicians who have
executed Participating Physician Agreements with the Company. To assure equal
eligibility and opportunity throughout the state of South Dakota and avoid
domination of the Board of Directors by any geographic area or areas, the number
of physician directors from any one District Medical Society of the South Dakota
State Medical Association can not exceed two. The consumer directors may be
from any geographic location which is served by South Dakota State Medical
Holding Company and their residence does not affect the geographic restriction
for physician directors. The two consumer directors are currently Mr. Patrick
Beckman and Mr. Jeffrey Rodman. The officers of the Company are appointed by
the Board of Directors and hold office until their successors are chosen and
qualified.
The persons named in the accompanying proxy will vote for the election of
the three nominees described herein, unless authority to vote is withheld. The
Board of Directors has been informed that each of the three nominees is willing
to serve as a director; however, if any nominee should decline or become unable
to serve as a director for any reason, the proxy may be voted for such other
person as the proxies shall, in their discretion, determine.
Nominee Information
The following table sets forth certain information as of April 30, 1997,
concerning the three nominees for election as directors of the Company:
Name Age Position with Company
---- --- ---------------------
James A. Engelbrecht, M.D. 50 None
K. Gene Koob, M.D. 54 Director
Frank D. Messner, M.D. 54 Director
Dr. Engelbrecht is the President of the South Dakota State Medical
Association and has been engaged in the practice of consultative Rheumatology
and internal medicine at the clinic of Drs. Engelbrecht and Weaver in Rapid
City, South Dakota, since 1984.
Dr. Koob became a director of the Company in June 1994. He is a member
of the South Dakota State Medical Association and has been engaged as a
neurologist at Neurology Associates in Sioux Falls, South Dakota, since 1974.
Dr. Messner became a director of the Company in June 1994. He is a member
of the South Dakota State Medical Association and has been engaged as a
radiologist at Yankton Radiology in Yankton, South Dakota, since 1974.
Existing Board of Directors
The following table sets forth certain information of the existing Board
of Directors, excluding those nominated above, as of April 30, 1997.
Name Age Position
---- --- --------
Robert L. Ferrell, M.D. 57 President and Director
Guy Tam, M.D. 58 Secretary/Treasurer and Director
James Jackson, M.D. 54 Director
Ben J. Henderson, D.O. 54 Director
Douglas M. Holum, M.D. 37 Director
Mr. Patrick Beckman 53 Director
Mr. Jeffrey Rodman 41 Director
Dr. Ferrell has been a director since inception and became President in
May 1990. Dr. Ferrell is a past President of the South Dakota State Medical
Association and has been in practice as an otology, laryngology, rhinology
specialist in Rapid City, South Dakota, since 1973.
Dr. Tam became a director of the Company in May 1990, and became Secretary
in September 1990. Dr. Tam is a member of the South Dakota State Medical
Association and has been engaged in practice as a family practitioner at Central
Plains Clinic in Sioux Falls, South Dakota, since 1968.
Dr. Jackson became a director of the Company in June 1988. He is a member
of the South Dakota Medical Association and has been engaged in the practice of
cardiology at The Heart Doctors in Rapid City, South Dakota, since 1979.
Dr. Henderson became a director of the Company in June 1995. He is a
member of the South Dakota State Medical Association and has been engaged in
practice as an internist at Mobridge Medical Clinic in Mobridge, South Dakota,
since 1975.
Dr. Holum became a director of the Company in June 1995. He is a member
of the South Dakota State Medical Association and has been engaged in practice
as a family practitioner at Mitchell Clinic in Mitchell, South Dakota, since
1992. From 1991 to June 1992, Dr. Holum practiced at Central Minnesota Group
Health Plan (a staff-model HMO) in St. Cloud, Minnesota.
Mr. Beckman became a director of the Company in June 1991. Mr. Beckman has
been engaged in the real estate business in Sioux Falls, South Dakota, since
1969. Mr. Beckman was a principal in Beckman-Zea Realty, Inc., from 1979 to
1992. Since then he is the sole owner of Beckman Realty and Development
Corporation.
Mr. Rodman became a director of the Company in June 1996. Mr. Rodman is
the Executive Vice President of the South Dakota Bankers Association, a position
he has held since 1989. Mr. Rodman has also served as Chairman of South Dakota
Banker's Insurance Services, Inc., since 1993.
Director Compensation
Each Director receives $250 per Board meeting attended and is reimbursed
for costs associated with the attendance of such meetings. The Company
currently has no stock options or other equity-based compensation for its
directors, officers or other employees.
Committees and Meetings of the Board of Directors
The Board of Directors of the Company has an Executive Committee consisting
of Robert Ferrell, M.D., Chairman and Guy Tam, M.D., an Audit Committee
consisting of Guy Tam, M.D., Chairman, K. Gene Koob, M.D., and Frank Messner,
M.D., and a Nominating Committee.
The Board of Directors held 5 meetings during 1996. All incumbent directors
attended at least 75% of the meetings of the Board and committees of which they
were members.
The Executive Committee held no meetings during 1996, and the Audit
Committee met once during 1996.
The Nominating Committee consists of the President-Elect of the South
Dakota State Medical Association, one Class A stockholder, and one Director
(K. Gene Koob, M.D.). The Nominating Committee met once in 1997 to make the
current year nominations.
Compensation Committee Report
The Board of Directors currently performs the functions of a compensation
committee. Robert D. Johnson participates in the deliberation of all officer's
compensation except for his own.
General Compensation Philosophy
During 1996, the Company adopted an executive compensation philosophy
under which total compensation was based on pay practices in the Company's
geographical region and a person's experience and responsibilities to the
Company. Currently, the executive compensation program does not include long-
term incentive or equity compensation. Total compensation for 1996 was based on
the median pay practices of comparably sized companies in DAKOTACARE's
geographic region, the individual's years of experienced, and level of
responsibility.
CEO Compensation
Robert D. Johnson does not have an employment contract, but the Company has
established a deferred compensation agreement with him. A provision has been
made for the future compensation which is payable upon the completion of the
earlier of 25 years or any earlier retirement age specified by the Board of
Directors by resolution. Mr. Johnson generally devotes a portion of his time to
the Company and to the South Dakota State Medical Association. He received
separate compensation from the South Dakota State Medical Association during
1996, which totaled $110,934, including retirement plan contribution. Mr.
Johnson's salary for 1996 for the Company was based on a cost of living
adjustment from his 1995 salary and a subjective review by the Board of
Directors of his 1996 performance.
Compensation Committee Interlocks and Insider Participation
The Board of Directors currently performs the functions of a compensation
committee. Robert D. Johnson participates in the deliberation of all officer's
compensation except for his own. There are no compensation committee interlocks
with other companies and none of the nonemployee directors has been an officer,
employee, or insider of the Company or its subsidiaries.
EXECUTIVE COMPENSATION
Name and Principal All Other
Position Year Salary $ Compensation(1)
-------- ---- -------- ---------------
Robert D. Johnson 1996 $58,632 $12,373
Chief Executive Officer 1995 $41,330 $13,968
1994 $31,625 $6,440
Russell H. Harris, M.D. (2) 1996 $48,937 $9,469
Vice President, Medical Affairs 1995 $101,029 $11,431
1994 $95,662 $10,935
(1) Consists of retirement plan contribution and premiums paid on the deferred
compensation plan. (2) Dr. Harris passed away in June 1996.
No other officer received total annual salary and bonus in excess of
$100,000 during 1996, 1995 or 1994.
Robert D. Johnson received salaries and retirement contributions totaling
$110,934, $110,628, $107,253, from the South Dakota State Medical Association
for the years ended 1996, 1995, and 1994, respectively.
The Company intends to enter into indemnification agreements with each
executive officer and director. The Company has employment agreements with its
executive officers and maintains key person insurance of $250,000 on Robert D.
Johnson and $188,700 on Kirk J. Zimmer.
PERFORMANCE GRAPH
No graph is presented because there has been no established market or
exchange for the trading of the Class C Voting Common Stock or Class A Preferred
Stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leases office space from the Association. In January 1996 the
Company signed a one year lease, which expired December 31, 1996, which
required minimum annual rental payments of $158,400. A one year lease was
entered into with the Association in January 1997 which requires minimum annual
rental payments of $168,120. Total rental payments for office space to the
Association were $158,400, $144,650, and $119,000, for the years ended December
31, 1996, 1995, and 1994, respectively. Commencing in 1995, employees of the
Foundation provided management services for the Company. Total management fees
paid to the Foundation for the years ended December 31, 1996 and 1995, were
$138,000 and $46,000, respectively. The Company provides group health insurance
coverage for employees of the Association and the Foundation. Total premium
income from the affiliates was $85,186, $128,191, $129,535, in the years ended
December 31, 1996, 1995, and 1994, respectively.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of March 31, 1997,
regarding the beneficial ownership of securities of the Company by (i) each
person or group who is known by the Company to be the beneficial owner of more
than 5% of the outstanding voting securities, (ii) all directors of the
Company, (iii) each individual named in the Summary Compensation Table, and
(iv) all directors and executive officers of the Company as a group. The
Company believes that the beneficial owners of the securities listed below,
based on information furnished by such owners, have sole voting and investment
power (or shares such powers with his or her spouse), subject to the terms of
the terms of the respective classes of securities of the Company and the
information contained in the notes to the table.
Amount & Nature
Title Name and Address of of Beneficial Percent
of Class Beneficial Owner Ownership of Class
-------- ---------------- --------- --------
Class B Preferred South Dakota State 1,300 100%
Medical Association(l)
1323 South Minnesota Avenue
Sioux Falls, SD 57105
Class C Common Lloyd Solberg, M.D. 133,360 8.86%
P.O. Box 5054
Sioux Falls, SD 57117-5054
Class A Preferred Robert L. Ferrell, M.D. 1 .10%
Class C Common 31,840 2.11%
Class A Preferred Guy E. Tam, M.D. 1 .10%
Class C Common 4,360 .29%
Class A Preferred James Jackson, M.D. 1 .10%
Class C Common 3,570 .24%
Class C Common Patrick Beckman -- --
Class A Preferred Frank D. Messner, M.D. 1 .10%
Class C Common 8,800 .58%
Class A Preferred K. Gene Koob, M.D. 1 .10%
Class A Preferred Ben J. Henderson, D.O. 1 .10%
Class C Common 560 .04%
Class A Preferred Douglas M. Holum, M.D. 1 .10%
Class C Common Jeffrey J. Rodman -- --
Class C Common Robert D. Johnson(2) 14,560 .97%
1323 South Minnesota Avenue
Sioux Falls, SD 57105
Class A Preferred All Directors and Executive 7 .67%
Officers as a Group
Class C Common (18 people) 92,410 6.14%
(1) The South Dakota State Medical Association is an affiliated company.
(2) Robert D. Johnson is the Chief Executive Officer of the South Dakota
State Medical Association.
COMPLIANCE WITH SECTION 16 (a) OF
THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires executive
officers and directors, and persons who beneficially own more than ten percent
(10%) of the Company's Common Stock to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission
("SEC"), and furnish copies of those reports to the Company. Based solely on
a review of the copies of such reports furnished to the Company, and written
representations from the executive officers and directors, the Company believes
that during 1996 all filing requirements were complied with.
OTHER MATTERS
The Board of Directors of the Company knows of no matters which may come
before the Annual Meeting other than those referred to above. However, if any
procedural or other matters should properly come before the Annual Meeting
calling for a vote of the stockholders, it is the intention of the persons named
in the enclosed proxy to vote such proxy in accordance with their best judgment.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
McGladrey & Pullen served as the Company's independent certified public
accountants for 1996 and are serving in that capacity for 1997. It is not
expected that representatives of McGladrey & Pullen will attend the Annual
Meeting of Stockholders or have the opportunity to make a statement or respond
to questions.
STOCKHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
Any proposal by a stockholder to be presented at the 1998 Annual Meeting
must be received at the Company's principal executive offices, 1323 South
Minnesota Avenue, Sioux Falls, South Dakota 57105, addressed to Guy E. Tam,
M.D., the Secretary of the Company, not later than January 31, 1998.
BY ORDER OF THE BOARD OF DIRECTORS,
By: /s/ Guy E. Tam, M.D.
Guy E. Tam, M.D.
Secretary
Dated: April 30, 1997
