UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
SUPERIOR FINANCIAL CORP
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
Superior Financial Corp.
16101 LaGrande Drive
Suite 103
Little Rock, Arkansas 72223
Telephone: (501) 324-7282
To Our Shareholders:
The annual meeting of the shareholders of Superior Financial Corp.
("Superior") will be held at 2:00 p.m., central daylight time, Wednesday,
May 16, 2001, at 5000 Rogers Avenue, Fort Smith, Arkansas.
Enclosed is the notice of the meeting, a proxy statement, a proxy card,
Superior's Annual Report to its Shareholders and Superior's Annual Report on
Form 10-K. We hope you will study the enclosed material carefully and attend
the meeting in person.
Whether you plan to attend the meeting or not, please sign and date the
enclosed proxy card and return it in the accompanying envelope as promptly as
possible. Please indicate in the space provided on the proxy card whether or
not you plan to attend the meeting in person. The proxy may be revoked by your
vote in person at the meeting, by your execution and submission of a later
dated proxy, or by your giving written notice of revocation to the Secretary of
Superior Financial Corp. at any time prior to the voting thereof. Thank you for
your support.
Sincerely,
/s/ C. Stanley Bailey
C. Stanley Bailey
Chairman of the Board and
Chief Executive Officer
April 13, 2001
Superior Financial Corp.
16101 LaGrande Drive
Suite 103
Little Rock, Arkansas 72223
Telephone: (501) 324-7282
NOTICE
of the
ANNUAL MEETING OF SHAREHOLDERS
of
SUPERIOR FINANCIAL CORP.
To Be Held May 16, 2001
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of Superior
Financial Corp. ("Superior"), a Delaware corporation, will be held at 5000
Rogers Avenue, Fort Smith, Arkansas, on Wednesday, May 16, 2001, at 2:00 p.m.,
central daylight time, for the following purposes:
1. To elect the nominees named in the Proxy Statement as directors to serve
for a term of one year.
2. To ratify the accounting firm of Ernst & Young LLP as Superior's
independent auditors.
3. To transact such other business as may properly come before the meeting
or any adjournments thereof, but which is not now anticipated.
These matters are discussed in detail in the accompanying proxy statement.
Only shareholders of record at the close of business on March 30, 2001, will be
entitled to notice of, and to vote at, the meeting. A complete list of the
shareholders entitled to vote at the meeting, arranged in alphabetical order
and showing the address of each shareholder and the number of shares registered
in the name of each shareholder, shall be open for examination by any
shareholder at Superior's office at 5000 Rogers Avenue, Fort Smith, Arkansas,
during ordinary business hours for any purpose germane to the meeting. Such
list will be open for a period of at least ten days prior to the meeting.
All shareholders of Superior are cordially invited to attend the meeting in
person. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE SIGN
AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ACCOMPANYING ENVELOPE AS
PROMPTLY AS POSSIBLE. THE PROXY MAY BE REVOKED BY YOUR VOTE IN PERSON AT THE
MEETING, BY YOUR EXECUTION AND SUBMISSION OF A LATER DATED PROXY, OR BY YOUR
GIVING WRITTEN NOTICE OF REVOCATION TO THE SECRETARY OF SUPERIOR AT ANY TIME
PRIOR TO THE VOTING THEREOF.
By Order of the Board of Directors
/s/ C. Stanley Bailey
C. Stanley Bailey
Chairman of the Board
and Chief Executive Officer
April 13, 2001
Superior Financial Corp.
16101 LaGrande Drive
Suite 103
Little Rock, Arkansas 72223
Telephone: (501) 324-7282
PROXY STATEMENT
FOR 2001 ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement and the accompanying proxy are furnished on or about
April 13, 2001, by Superior Financial Corp. ("Superior") to the holders of
record of common stock, par value $0.01, of Superior (the "Common Stock") in
connection with the annual meeting of Superior's shareholders and any
adjournments thereof (the "Annual Meeting") to be held on Wednesday, May 16,
2001, at 5000 Rogers Avenue, Fort Smith, Arkansas. The matters to be considered
and acted upon, including the election of directors, and ratification of Ernst
& Young LLP as Superior's independent auditors, are discussed herein.
The Board of Directors of Superior (the "Board") recommends the election of
the nine director-nominees named in this Proxy Statement for a term of one
year.
The enclosed proxy is solicited on behalf of the Board and is revocable at
any time prior to the voting of such proxy by giving written notice of
revocation to the Secretary of Superior, or by executing and submitting a later
dated proxy, or by voting in person at the Annual Meeting. Mere attendance at
the Annual Meeting without submitting a later dated proxy will not be
sufficient to revoke a previously submitted proxy. All properly executed
proxies delivered pursuant to this solicitation will be voted at the Annual
Meeting and in accordance with instructions, if any. If no instructions are
given, the proxies will be voted FOR election of the director-nominees named
herein, FOR ratification of Ernst & Young LLP as Superior's independent
auditors and in accordance with the instructions of management as to any other
matters that may come before the Annual Meeting.
Superior will pay the cost of soliciting proxies. In addition to the use of
the mails, proxies may be solicited by personal interview, telephone or
electronic communication. Banks, brokers, nominees or fiduciaries will be
required to forward the soliciting material to the principals and to obtain
authorization of the execution of proxies. Superior may, upon request,
reimburse banks, brokers and other institutions, nominees and fiduciaries for
their expenses in forwarding proxy material to the principals. Superior has
retained the firm of Georgeson & Co. to solicit street-name holders and will
pay such firm a fee of $6,500 plus out of pocket expenses.
Shareholders Eligible to Vote
This Proxy Statement is furnished to the holders of Common Stock who were
holders of record as of the close of business on March 30, 2001. Only those
holders are eligible to vote at the Annual Meeting. As of March 30, 2001 there
were outstanding 9,050,921 shares of Common Stock. Each share of Common Stock
is entitled to one vote.
Votes will be tabulated and counted by one or more inspectors of election
appointed by the Chairman of the Board. Proxies marked as abstentions and
shares held in street name which have been designated by brokers on proxy cards
as not voted will not be counted as votes cast. Such proxies will be counted
for purposes of determining a quorum at the Annual Meeting. A quorum consists
of a majority of the shares of Common Stock outstanding.
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
Principal Shareholders
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of March 30, 2001 by each person of record
believed by Superior to own beneficially 5% or more of the Common Stock.
Number Percentage
of Beneficially
Name and Address Shares Owned
---------------- ------- ------------
Franklin Mutual Advisers, LLC ............................ 737,000 8.14%
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
Steven N. Stein(1)........................................ 577,600 6.38
441 Vine Street, Suite 507
Cincinnati, Ohio 45202
Keefe, Bruyette & Woods, Inc.............................. 575,473 6.36
Two World Trade Center, 89th Floor
New York, New York 10048
C. Stanley Bailey(2)...................................... 591,666 6.20
16101 LaGrande Drive, Ste 103
Little Rock, Arkansas 72223
Financial Stocks, Inc(1).................................. 547,500 6.05
441 Vine Street, Suite 507
Cincinnati, Ohio 45202
Alexander D. Warm(1)...................................... 537,100 5.93
2335 Florence Avenue
Cincinnati, Ohio 45206
FleetBoston Financial Corporation......................... 478,300 5.28
100 Federal Street
Boston, Massachusetts 02110
Oz Management, L.L.C. .................................... 477,500 5.28
9 West 57th Street, 39th Floor
New York, New York 10019
- --------
(1) John M. Stein, a director of Superior, and Steven N. Stein, a principal
shareholder of Superior, are directors, executive officers and principal
shareholders of Financial Stocks, Inc. Alexander D. Warm, who is the
beneficial owner of 224,600 shares of Common Stock and trustee of a trust
which owns 312,500 shares of Common Stock, and Stanley L. Vigran, who owns
30,000 shares of Common Stock, are the remaining directors and shareholders
of Financial Stocks, Inc., which is a general partner and investment
manager of certain investment funds, including Vine Street Exchange Fund,
L. P., which owns 312,500 shares of Common Stock, and Financial Stocks
Private Equity Fund 1998 L.P., which owns 235,000 shares of Common Stock.
John M Stein and Steven N. Stein are brothers. Steven N. Stein and John M.
Stein each disclaim any ownership of Common Stock held by the other.
(2) Includes 487,500 shares of Common Stock subject to stock options, 46,248
shares held jointly by Mr. Bailey and his wife Virginia H. Bailey, 10,316
shares held in Mr. Bailey's IRA and 3,150 shares held in the Mary Brittan
Bailey Trust.
2
SECURITY OWNERSHIP OF MANAGEMENT AND DIRECTORS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of March 30, 2001 by each director and each
executive officer, and all directors and executive officers as a group.
Percentage
Number of Beneficially
Name Shares Owned
---- --------- ------------
C. Stanley Bailey..................................... 591,666(1) 6.20%
Brian A. Gahr......................................... 300 *
Rick D. Gardner....................................... 6,385(2) *
Howard B. McMahon..................................... 3,000 *
C. Marvin Scott....................................... 244,250(3) 2.62%
Ben F. Scroggin....................................... 2,000 *
John M. Stein......................................... 160,800(4) 1.78%
John E. Steuri........................................ 10,000 *
David E. Stubblefield................................. 12,000(5) *
Officers and Directors as a Group..................... 1,030,401 11.38%
- --------
* Represents less than 1%
(1) Includes 487,500 shares of Common Stock subject to stock options, 46,248
shares held jointly by Mr. Bailey and his wife Virginia H. Bailey, 10,316
shares held in Mrs. Bailey's IRA and 3,150 shares held in the Mary Brittan
Bailey Trust.
(2) Includes 1,385 shares of Common Stock subject to stock options.
(3) Includes 243,750 shares of Common Stock subject to stock options.
(4) John M. Stein, a director of Superior, and Steven N. Stein, a principal
shareholder of Superior, are directors, executive officers and principal
shareholders of Financial Stocks, Inc. Alexander D. Warm, who is the
beneficial owner of 224,600 shares of Common Stock and trustee of a trust
which owns 312,500 shares of Common Stock, and Stanley L. Vigran, who owns
30,000 shares of the Common Stock, are the remaining directors and
shareholders of Financial Stocks, Inc. Financial Stocks, Inc. is a general
partner and investment manager of certain investments funds, including Vine
Street Exchange Fund, L.P., which owns 312,500 shares of Common Stock, and
Financial Stocks Private Equity Fund 1998 L.P., which owns 235,000 share of
Common Stock. Steven N. Stein and John M. Stein are brothers. Steven N.
Stein and John M. Stein each disclaim any ownership of Common Stock held by
the other.
(5) Includes 10,000 shares held in an irrevocable trust, of which Mr.
Stubblefield is a co-trustee.
ELECTION OF DIRECTORS
The Board recommends that the shareholders elect the nine persons named
below to hold office for the term of one year, or until their successors are
elected and qualified. Superior's Restated Certificate of Incorporation
provides that the number of directors which shall constitute the entire Board
shall be fixed from time to time by resolutions adopted by the Board, but shall
not be less than three persons.
If, prior to the voting at the Annual Meeting, any person proposed for
election as a director is unavailable to serve or for good cause cannot serve,
the shares represented by all valid proxies may be voted for the election of
such substitute as the members of the Board may recommend. Superior's
management knows of no reason why any person would be unavailable or unable to
serve as a director.
Assuming a quorum is present at the Annual Meeting, a plurality of the votes
cast will be sufficient to elect the directors. On the proxy card, voting for
directors is Proposal 1.
The bylaws of Superior contain certain limitations on shareholder
nominations of candidates for election as directors. See "Bylaw Provisions
Regarding Conduct of Shareholders' Meetings."
3
The following table provides certain biographical information about each
nominee to be proposed on behalf of the Board. Unless otherwise indicated, each
person has been engaged in the principal occupation shown for the last five
years. Executive officers serve at the discretion of the Board.
DIRECTORS TO BE NOMINATED ON BEHALF OF THE BOARD FOR A TERM OF ONE YEAR
Position and Office Held with Present and Principal
Name, Age and Year Superior and Superior Federal Occupation for the
Became Director Bank, F.S.B. Last Five Years
------------------- ---------------------------- ----------------------------
C. Stanley Bailey* Chairman of the Board, Chief Chief Financial Officer and
52, 1998 Executive Officer of both Executive Vice President of
Superior Hancock Holding Company and
and Superior Federal Bank, Hancock Bank, Gulfport,
F.S.B. Mississippi,
1995-1998; Vice Chairman of
the Board of Directors,
AmSouth Bancorporation and
AmSouth Bank, Birmingham,
Alabama
1971-1994
C. Marvin Scott* President, Chief Operating Chief Retail Officer and
51, 1998 Officer and Director of both Senior Vice President,
Superior and Superior Hancock Holding Company and
Federal Bank, F.S.B. Hancock Bank, Gulfport
Mississippi, 1996-1998;
Executive Vice President--
Consumer Banking, AmSouth
Bank Birmingham, Alabama
1988-1996
Rick D. Gardner* Chief Financial Officer and Chief Financial Officer and
41, 2001 Director of both Superior subsequently Chief Executive
and Superior Federal Bank, Officer of First Commercial
F.S.B. Mortgage Company, Little
Rock, Arkansas, 1996-1998;
Chief Financial Officer,
Metmor Financial, Kansas
City, Missouri, 1990-1995
Brian A. Gahr Director of Superior and Division Vice President of
46, 1999 Superior Federal Bank, Whirlpool Corp. since 1995,
F.S.B. Fort Smith, Arkansas
Howard B. McMahon Director of Superior; Independent Contractor, Fort
62, 1999 director of Superior Federal Smith, Arkansas, 2000-
Bank, F.S.B. since 1995 Present; prior to 2000,
Owner of SSI, Inc., a
general contractor in Fort
Smith, Arkansas
Ben F. Scroggin, Director of Superior; Retired banker, Little Rock,
Jr. 80, 2000 director of Superior Federal Arkansas
Bank, F.S.B. since 1964
John M. Stein Director of Superior and President, Financial Stocks,
34, 1998 Superior Federal Bank, Inc., Cincinnati, Ohio, 1995
F.S.B. to present; Vice President,
Bankers Trust Company, New
York, New York, 1993-1995
John E. Steuri Director of Superior and Private Investments, 2000-
61, 1999 Superior Federal Bank, Present; Chairman of Advance
F.S.B. Thermal Technologies, Inc.,
1996-2000; Chairman,
President & CEO of ALLTEL
Information Systems from
1988 to 1996, Little Rock,
Arkansas
David E. Director of Superior; President and Chief
Stubblefield director of Executive Officer of ABF
63, 1998 Superior Federal Bank, Freight Systems, Inc., Fort
F.S.B. Smith, Arkansas
since 1994
- --------
* Indicates that the director/nominee is also an executive officer.
4
The Board has established audit, compensation and loan and investment
committees. The Audit Committee currently consists of Messrs. Gahr, McMahon,
Scroggin and Stein, none of whom is an employee of Superior. The Audit
Committee reviews the general scope of the audit conducted by Superior's
independent auditors, the fees charged for their work and matters relating to
Superior's internal control systems. In performing its functions, the Audit
Committee meets separately with representatives of Superior's independent
auditors, with Superior's internal auditors and with representatives of senior
management. The Audit Committee met five times in 2000.
The Compensation Committee currently consists of Messrs. Stein, Steuri and
Stubblefield, none of whom is an employee of Superior. The Compensation
Committee administers Superior stock option plans and grants options and other
awards to company employees under such plans. In addition, the Compensation
Committee is responsible for establishing policies dealing with various
compensation and employee benefit matters of Superior. The Compensation
Committee met three times in 2000.
The Loan and Investment Committee presently consists of Messrs.
Stubblefield, Gahr, McMahon, Scroggin and Steuri. The Loan and Investment
Committee oversees loan and investment policies and activities and reviews and
approves loan relationships of $2,000,000 and greater. The Loan and Investment
Committee met nineteen times in 2000.
Superior has no nominating committee.
During 2000, the Board met 12 times. All directors attended 75% or more of
these meetings, plus meetings of committees of the Board on which they served.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Superior
directors, certain officers and 10% shareholders to file reports of ownership
and changes in ownership with the Securities and Exchange Commission (the
"SEC"). Such officers, directors and 10% shareholders are required by SEC
regulations to furnish Superior with copies of all Section 16(a) reports they
file, including initial reports on Form 3 and annual reports on Form 5.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no reports on Form
5 were required for those persons, Superior believes that during 2000 all
filings applicable to its officers, directors and 10% shareholders were made
timely.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The Compensation Committee currently consists of Messrs. Stein, Steuri and
Stubblefield, none of whom is an employee of Superior. Before the formation of
the Compensation Committee, and in connection with the acquisition of Superior
Federal Bank, F.S.B. (the "Bank"), Messrs. Bailey and Scott negotiated their
respective employment agreements with Financial Stocks, Inc. and Keefe,
Bruyette & Woods, Inc., who acted as the lead investor and the placement agent,
respectively, and were instrumental in raising the capital necessary for such
acquisition and for payment of the costs associated with such acquisition and
each of whom is a principal shareholder. See "--Employment Agreements."
Other Transactions--Loans
Certain directors, officers and principal shareholders of Superior and their
affiliated interests were customers of and had transactions with the Bank in
the ordinary course of business; additional transactions may be expected to
take place in the ordinary course of business. Included in such transactions
were outstanding
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loans and commitments from the Bank, all of which were made in the ordinary
course of business on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions
with other persons and did not involve more than normal risk of collectability
or present other unfavorable features.
Director Compensation
Directors of Superior and the Bank currently receive fees of $1,000 for each
Board meeting of each entity attended. Members of committees of Superior and
the Bank receive fees of $250 for each committee meeting attended. All of the
directors of Superior also serve as directors of the Bank. Fees paid to
directors of Superior for their services as directors of the Bank or as
directors of Superior totaled $127,450 in 2000.
EXECUTIVE COMPENSATION
AND OTHER INFORMATION
The following table provides certain summary information concerning
compensation paid or accrued by Superior to or on behalf of Superior's Chairman
of the Board and Chief Executive Officer and the only other two executive
officers of Superior who were paid or otherwise compensated in excess of
$100,000 in 2000.
Annual Long Term
Compensation Compensation Awards
-------------------- ---------------------
Restricted Securities
Name and Principal Salary Bonus Stock Underlying All Other
Position Year ($) ($) Awards ($) Options (#) Compensation
- ------------------ ---- -------- -------- ---------- ---------- ------------
C. Stanley Bailey....... 2000 $300,000 $150,000 32,000 *
Chairman and CEO 1999 250,000 125,000 -- 31,250 *
1998 225,000 56,250 -- 487,500(2) *
C. Marvin Scott......... 2000 220,000 110,000 21,250 *
President and Chief 1999 170,000 85,000 -- 20,732 $102,000(3)
Operating Officer 1998 150,000 37,500 -- 243,750(2) *
Rick D. Gardner......... 2000 140,000 70,000 7,000 *
Chief Financial Officer 1999 125,000 35,938 -- 6,830 *
1998 125,000(1) 5,889(1) -- 5,540(2) *
- --------
* Does not include amounts attributable to miscellaneous benefits received by
the named officers. The costs of providing such benefits to the named
officers for the years ended 2000, 1999 and 1998 did not exceed the lesser
of $50,000 or 10% of the total annual salary and bonus reported.
(1) Mr. Gardner joined Superior on September 21, 1998. The salary given for
each of 2000, 1999 and 1998 represents annualized base salary. The 2000,
1999 and 1998 bonuses represent amounts actually paid in relation to 2000,
1999 and 1998 employment, respectively.
(2) Represents options granted to Messrs. Bailey, Scott and Gardner on December
22, 1997, January 9, 1998 and September 21, 1998, respectively. The
exercise price is $10.00 per share with respect to options held by Mr.
Bailey and Mr. Scott and is $10.83 with respect to options held by Mr.
Gardner.
(3) Represents a reimbursement paid to Mr. Scott for relocation expenses and
income taxes incurred by the reimbursement.
Stock Option Plans
Superior adopted the Superior Financial Corp. 1998 Long Term Incentive Plan
(the "LTIP") on June 17, 1998. It was ratified by the shareholders at the 1999
Annual Meeting. The LTIP is an omnibus plan administered by the Compensation
Committee to provide equity-based incentive compensation for Superior's
6
key employees. It provides for issuance of incentive stock options, qualified
under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), and non-qualified stock options. The LTIP also provides for issuance
of stock appreciation rights, whether in tandem with options or separately, and
awards of restricted shares subject to time-based restrictions and/or
performance goals.
The LTIP imposes a limit on the total number of shares that may be issued
during the ten-year term of the LTIP equal to 10% of the number of shares
outstanding as of December 31, 1998. It imposes a limit on the number of awards
that may be granted to all employees in any one calendar year equal to 1% of
the number of shares outstanding on December 31, 1998. On that date there were
10,080,503 shares of Common Stock outstanding. However, any unused portion of
the annual shares limit shall be carried forward and available to be awarded in
future years. Finally, the LTIP limits the number of restricted stock awards
that may be granted each year, which are time-based restricted only (i.e.,
without regard to any performance goals), to a number of shares equal to .33%
(one-third of one percent) of the number of shares outstanding on December 31,
1998.
Each award is non-transferrable during the life of the employee, except as
permitted by the Compensation Committee to the employee's family or a trust for
the employee's family. The awards do not create a right to employment. Upon a
change in control of Superior any vesting schedules and performance goals are
deemed satisfied.
As discussed further below, options were granted to Mr. Bailey and Mr. Scott
pursuant to their Founder's Agreements and Employment Agreements, respectively.
Those options were issued before adoption of the LTIP by Superior's Board and,
therefore, are non-qualified stock options. Those options were not issued
pursuant to the LTIP.
Options
The following table shows certain information respecting exercised and
unexercised options for Common Stock held by Superior executive officers at
December 31, 2000. Certain options have been granted pursuant to a performance
based vesting schedule which only permits the holder to exercise a portion of
his or her options upon accomplishing pre-defined levels of stock price
performance.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options At Options At
December 31, December 31,
2000 2000(2)
-------------- ---------------
Shares
Acquired On Value Exercisable/ Exercisable/
Name Exercise(#) Realized($)(1) Unexercisable Unexercisable
- ---- ----------- -------------- -------------- ---------------
C. Stanley Bailey.... -- -- 487,500/63,250 $456,788/47,547
C. Marvin Scott...... -- -- 243,750/41,982 228,394/31,562
Rick D. Gardner...... -- -- 1,385/17,985 148/10,842
- --------
(1) Value realized is the difference between the fair market value of the
securities underlying the options and the exercise price on the date of
exercise.
(2) Value is calculated by subtracting the exercise price from the market value
of underlying securities at December 31, 2000. The market value for the
Common Stock as of December 31, 2000 was $10.937.
7
The following table shows certain information regarding grants of options
respecting Common Stock to certain executive officers of Superior during 2000.
Option Grants in Last Fiscal Year
Individual
Grants
----------
Potential
Realizable
Value at Assumed
Percent of Annual Rates of
Total Stock
Number of Options Price
Securities Granted to Exercise Market Appreciation for
Underlying Employees or Base Price Option Term
Options in Fiscal Price On Date Expiration -----------------
Name Granted (#) Year ($/Sh) of Grant Date 5%($) 10%($)
- ---- ----------- ---------- -------- -------- ---------- -------- --------
C. Stanley Bailey....... 32,000 28.2% $10.00 $10.00 April 2010 $496,000 $755,000
C. Marvin Scott......... 21,250 18.7 10.00 10.00 April 2010 330,000 501,000
Rick D. Gardner......... 7,000 6.2 10.00 10.00 April 2010 109,000 165,000
Employment Agreements
Mr. Bailey has an employment agreement with Superior which provides, among
other things, that Mr. Bailey serve as the Chairman of the Board of Directors
and Chief Executive Officer of Superior and the Bank for an initial term of
employment of three years. Pursuant to the agreement, Mr. Bailey has been
granted options to acquire 487,500 shares of Common Stock. The exercise price
of such options is $10.00 per share.
Mr. Scott has an agreement with Superior which provides, among other things,
that Mr. Scott serve as the President of Superior and the Bank. Pursuant to the
agreement Mr. Scott has been granted options to acquire 243,750 shares of
Common Stock. The exercise price of such options is $10.00 per share.
Mr. Gardner has an agreement with Superior dated September 21, 1998 to serve
as Superior's and the Bank's Chief Financial Officer. He is entitled to receive
an annual base salary and bonuses of up to 50% of base salary, with a targeted
payout of 30%, if the Bank achieves certain performance goals. Pursuant to the
agreement, he has been granted options to acquire 5,540 shares of Common Stock,
subject to certain vesting requirements. The exercise price of the options is
$10.83.
Superior has agreed with each of Mr. Bailey, Mr. Scott and Mr. Gardner to
pay certain severance benefits upon a change of control of Superior. A change
of control is defined for this purpose as the occurrence of a transaction the
result of which is that more than 25% of the outstanding shares of Common Stock
(or a successor or parent) are acquired by any person, entity or group acting
in concert, which before the transaction, owned less than 25% of the
outstanding shares of the Common Stock. In the event of a change of control,
Mr. Bailey will be entitled to receive, subject to Section 280(g) of the Code,
an amount equal to three times his total compensation for the preceding 12
months. Each of Mr. Scott and Mr. Gardner will be entitled to receive,
respectively, an amount equal to 2.99 times of his total compensation for the
preceding 12 months.
Benefit Plans
Superior has established a contributory profit sharing plan pursuant to
Section 401(k) of the Code covering substantially all employees (the "Plan").
Superior is the Plan administrator and investment advisor, and Capital Guardian
serves as the Plan's trustee. Each year Superior determines, at its discretion,
the amount of matching contributions not to exceed 6% of the employee's annual
compensation vesting ratably over a four year period. Total Plan expenses
charged to Superior's operations for 2000 were $332,534.
Interests of Management and Others in Certain Transactions
Mr. Bailey, Mr. Scott and Mr. Gardner have entered into employment
agreements with Superior. These agreements provide, among other things, that
each of them is entitled to receive options to acquire shares of Common Stock
pursuant to a vesting schedule determined by the occurrence of certain events.
See "--Employment Agreements."
8
COMPENSATION COMMITTEE REPORT
The Compensation Committee consists of John M. Stein, John E. Steuri and
David E. Stubblefield, none of whom is an employee of Superior or the Bank. The
committee reviews and determines cash compensation of executive officers of
Superior.
Compensation Principles
The committee determines executive compensation in accordance with five
principles: (1) Superior's financial performance measured against attainment of
Superior's business goals and the performance of peer-group institutions; (2)
the competitiveness of executive compensation with Superior's peers; (3) the
encouragement of stock ownership of management; (4) the individual performance
of each executive officer; and (5) recommendations by the Chief Executive
Officer regarding all executive officers other than himself. No
disproportionate weight is assigned to any individual principle.
2000 Compensation
Compensation in 2000 for executive officers, including the Chief Executive
Officer, was negotiated in connection with their initial employment by
Superior. The terms of such compensation are set forth in employment
agreements. See "--Employment Agreements."
Stock Awards
Certain stock awards to Mr. Bailey, Mr. Scott and Mr. Gardner are governed
by the terms of their employment agreements. See "--Employment Agreements."
This foregoing report is submitted by the Compensation Committee.
Committee:
John M. Stein
John E. Steuri
David E. Stubblefield
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Performance Graph
[PERFORMANCE GRAPH]
2/08/99 3/31/99 6/30/99 9/30/99 12/31/99 3/31/00 6/30/00 9/30/00 12/31/00
SUPERIOR FINANCIAL CORP. 100.00 85.56 97.78 106.67 98.89 84.44 90.55 100.00 97.22
NASDAQ BANK INDEX 100.00 100.63 108.00 98.29 100.85 91.11 88.63 105.46 115.08
NASDAQ MARKET INDEX U.S. COS. 100.00 102.08 111.64 114.22 165.78 190.38 165.53 152.31 101.97
Neither the foregoing graph nor the Compensation Committee Report is to be
deemed to be incorporated by reference into any past or subsequent filings by
Superior under the Securities Act of 1933 or the Securities Exchange Act of
1934.
10
AUDIT COMMITTEE REPORT
The Audit Committee currently consists of Messrs. Gahr, McMahon, Scroggin
and Stein, none of whom is an employee of Superior. The members of the Audit
Committee satisfy the independence and experience requirements of the National
Association of Securities Dealers. The Audit Committee has adopted a charter,
which is attached to this Proxy Statement as Appendix A. The Audit Committee
reviews its charter for adequacy on an annual basis. In accordance with its
charter, the Audit Committee met four times in 2000. The Audit Committee has
reviewed Superior's audited financial statements with management to determine
whether such statements were consistent with Superior's audit policy and
whether Superior's internal controls were adequate for the preparation of the
financial statements.
The Audit Committee has reviewed and discussed with management Superior's
audited financial statements as of and for the fiscal year ended December 31,
2000. The Committee also has discussed with the independent auditors for
Superior the matters required to be discussed by Statement on Auditing
Standards No. 61, Communication with Audit Committees, as amended. The
Committee has received the written disclosures and the letter from the
independent auditors for Superior required by Independence Standards Board
Standard No. 1, Independence Discussions with Audit Committees, as amended, and
has discussed with the independent auditors that firm's independence from
management and Superior. In addition, the Audit Committee considered the
compatibility of nonaudit services with the auditor's independence.
Based on the review and discussions referred to in the above paragraph, the
Committee recommends to the Board that the year-end audited financial
statements be included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000 for filing with the Securities and Exchange
Commission.
One of the Audit Committee's responsibilities is to recommend to the Board
an independent auditor. The Audit Committee has recommended Ernst & Young LLP
as Superior's independent auditor for 2001 (See "Ratification of Independent
Auditor").
In making its recommendation for 2001, the Audit Committee considered the
fees paid to Ernst & Young LLP in relation to the services they provided and
the compatibility of any non-audit services that Ernst & Young LLP provided to
Superior with their status as its independent auditor. See "Ratification of
Independent Auditor--Audit Fees" for more information regarding fees paid to
Ernst & Young LLP during 2000.
The foregoing report is submitted by the Audit Committee.
Committee:
Brian A. Gahr
Howard B. McMahon
Ben F. Scroggin
John M. Stein
RATIFICATION OF INDEPENDENT AUDITORS
Selection
Management of Superior has recommended that Ernst & Young LLP be retained as
Superior's independent auditors for both it and the Bank. The Board approved
retaining Ernst & Young LLP.
Superior has selected the firm of Ernst & Young LLP to act as its and the
Bank's independent auditors for 2001. It is expected that representatives of
this firm will be present at the Annual Meeting and have an opportunity to make
a statement to, and to answer questions from, shareholders.
Ratification of the selection of Ernst & Young LLP (Proposal 2 on the proxy
card) requires the affirmative vote of a majority of the shares of Common Stock
present in person or represented by proxy at the Annual Meeting. The Board
recommends a vote for the ratification of Ernst & Young LLP.
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Audit Fees
Audit related fees for the year ended December 31, 2000 totaled $121,717
(Annual Audit: $111,217; Audit Related Services: $10,500).
Financial Information Systems Design and Implementation Fees
For the year ending December 31, 2000, Ernst & Young LLP was not engaged to
and did not provide any of the professional services described in Paragraph
(c)(4)(ii) of Rule 2-01 of Regulation S-X.
All Other Fees
For the year ended December 31, 2000, Ernst & Young LLP billed $35,434 to
Superior for services other than those described above.
Compatibility of Fees
Superior's Audit Committee has considered the provision of non-audit
services by Ernst & Young LLP and the fees paid to Ernst & Young LLP for such
services, and believes that the provision of such services and their fees are
compatible with maintaining Ernst & Young LLP's independence (See "Audit
Committee Report").
BYLAW PROVISIONS REGARDING CONDUCT OF SHAREHOLDERS' MEETINGS
Superior's bylaws contain two provisions relating to the conduct of
shareholders' meetings. The first provision requires that certain procedures be
followed by a shareholder of record who wishes to present business at the
annual meeting of shareholders, including the nomination of candidates for
election as directors. In order to nominate persons for election as a director
or to present other business at a meeting, a shareholder must provide written
notice thereof to the Secretary of Superior not less than 60 days nor more than
90 days prior to the first anniversary of the preceding year's annual meeting,
provided that, if the date of the annual meeting is advanced by more than 30
days or delayed by more than 60 days from such anniversary date, notice by the
shareholder to be timely must be delivered not earlier than the 90th day prior
to such annual meeting or the 20th day following the day on which public
announcement of the date of such meeting is first made.
As it relates to director nominations, the written notice must state all
information as to each nominee required to be disclosed in solicitations of
proxies for election of directors under SEC regulations, including the written
consent of each such nominee. As for any other business that the shareholder
proposes to bring before the meeting, the written notice must contain a brief
description of the business, the reasons for conducting the business at the
meeting and any material interest in such business of such shareholder. The
notice must also contain the name and address of such shareholder and the class
and number of shares of Superior owned beneficially and of record, as well as
the same information for each beneficial owner who may be nominated for
election as a director. The Board is not required to nominate a person
designated by a shareholder or to take up such other business as may be
contained in a written notice from a shareholder; however, compliance with this
procedure would permit a shareholder to nominate the individual at the
shareholders meeting, and any shareholder may vote shares in person or by proxy
for any individual such shareholder desires. The procedures relating to
nominating directors and presenting other business at a shareholders' meeting
may only be used by a shareholder who is a shareholder of record at the time of
the giving of the notice by the shareholder to the secretary of Superior. The
procedures do not prohibit or apply to shareholder proposals under SEC rule
14a-8 as described at "Proposals of Shareholders."
The second provision of Superior's bylaws relates to the conduct of the
business at a shareholder meeting. Under that provision, the Board has the
authority to adopt rules for the conduct of meetings, and, unless inconsistent
with any such rules, the Chairman of the meeting may prescribe such rules,
regulations and procedures as, in his judgment, are appropriate for the proper
conduct of the meeting.
12
PROPOSALS OF SHAREHOLDERS
Subject to certain rules of the SEC, proposals by shareholders intended to
be presented at Superior's 2002 annual meeting of shareholders must be received
at Superior's principal executive offices not less than 120 calendar days in
advance of April 13, 2002 (December 14, 2001) for inclusion in the proxy or
information statement relating to the 2002 annual meeting.
OTHER MATTERS
Superior does not know of any matters to be presented for action at the
meeting other than those listed in the notice of the meeting and referred to
herein.
Superior has furnished without charge to its shareholders, herewith, a copy
of its annual report on Form 10-K, including Superior financial statements but
excluding financial statement schedules and exhibits, required to be filed with
the SEC for the year ended December 31, 2000. A copy of the financial statement
schedules and exhibits may be obtained upon written request to Rick D. Gardner,
16101 LaGrande Drive, Suite 103, Little Rock, Arkansas 72223.
PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD, AND RETURN IT IN THE
ACCOMPANYING ENVELOPE AS PROMPTLY AS POSSIBLE.
YOU MAY REVOKE THE PROXY BY GIVING WRITTEN NOTICE OF REVOCATION TO THE
SECRETARY OF SUPERIOR AT ANY TIME PRIOR TO THE VOTING THEREOF, BY EXECUTING AND
SUBMITTING A LATER DATED PROXY, OR BY ATTENDING THE MEETING AND VOTING IN
PERSON.
13
APPENDIX A
AUDIT COMMITTEE CHARTER
RESOLVED, the Audit Committee shall operate in accordance with these
resolutions, which shall be the Audit Committee's charter, and shall conduct
itself with the utmost regard for ensuring that the Company conforms to all
applicable generally accepted accounting principles, and when in doubt as to
what those principles may be, the Audit Committee shall confer with the
Company's then current and duly appointed independent auditors (sometimes
referred to herein as "outside auditors") and shall be entitled to rely upon
their advice and direction;
FURTHER RESOLVED, the Audit Committee of the Board shall be comprised
exclusively of independent Board members who each at time of appointment to the
Audit Committee and continuing throughout service on that committee shall have
no relationship to the Company that may interfere with the exercise of
independence from the management of the Company and the Company itself, with
the term "independence" hereby defined to mean (a) no employment by the Company
or any affiliate of the Company currently or within five years preceding
appointment, (b) no receipt of compensation from the Company or any affiliate
of the Company other than for services as a Board member or in connection with
a Company benefit available to Board members, (c) no family relationship with
any person who currently or has been an executive officer of the company during
the five years preceding appointment of the Audit Committee member, (d) no
status as a partner in, controlling stock of, or a stockholder of any for-
profit business organization receiving or paying more than five percent (5%) of
the Company's consolidated gross revenues annually from or to the Company and
any affiliate of the Company, and (e) no status as an executive officer of a
business or other organization at which an executive officer of the Company
serves on that organization's compensation committee;
FURTHER RESOLVED, the Audit Committee shall at all times have at least three
members, each of whom shall have, or acquire reasonably after appointment to
the Audit Committee, the ability to understand fundamental financial statements
(including balance sheets, income statements, and cash flow statements) and at
least one of whom shall have accounting or related financial management
expertise;
FURTHER RESOLVED, the independent auditors appointed by the Board are
ultimately accountable to the Board and the Audit Committee, as representatives
of the stockholders of the Company, and the Board has the sole authority and
responsibility to select, evaluate, and if necessary and appropriate, replace
the outside auditors from time to time;
FURTHER RESOLVED, the Audit Committee shall obtain from the outside auditors
a formal written statement on an annual basis in which the auditor delineates
all relationships between the auditor and the Company or affiliates (including
executive officers) of the Company and the Audit Committee shall actively
engage in a dialogue with the auditor with respect to any disclosed
relationships or services, and if the Audit Committee determines that any
relationship or service as disclosed may impact the objectivity and
independence of the outside auditors, the Audit Committee shall take or cause
the outside auditors to take such action as to ensure the independence of the
outside auditors;
FURTHER RESOLVED, the Company's auditors shall meet with and discuss with
the Audit Committee the Company's accounting principles as applied in its
financial reporting, and in its discussions the outside auditors shall disclose
its judgments about the quality of the Company's accounting principles, which
discussion shall include such issues as the clarity of the Company's financial
disclosures and degree of aggressiveness or conservatism of the Company's
accounting principles and underlying estimates and other significant decisions
made by management of the Company in preparing financial disclosure, and to
ensure open and frank discussions the Audit Committee shall, at an appropriate
time in each of its meetings with the outside auditors, dismiss any officers,
other Board members, and other Company affiliates from the meeting and reserve
sufficient time for such meetings;
A-1
FURTHER RESOLVED, the Audit Committee or its Chairman shall meet, in person
or by telephone, on a quarterly basis with the outside auditors for purposes of
reviewing the then current SEC Form 10-Q or 10-K prior to its filing with the
Securities and Exchange Commission;
FURTHER RESOLVED, the Audit Committee shall have the authority both to
retain special legal, accounting, or other consultants to advise the Committee
and to request that any officer or employee of the Company or Company's outside
counsel or independent auditor attend a meeting of the Committee or meet with
any members of, or consultants to, the Committee;
FURTHER RESOLVED, the Audit Committee shall meet with representatives of
both the Internal Audit and Loan Review functions on a quarterly basis, to
review the activities of those functions for the most recent quarter and to
obtain the information necessary to form an evaluation of the Company's
internal control structure;
FURTHER RESOLVED, Internal Audit shall provide to the Audit Committee for
approval an Audit Program within the first quarter of each calendar year, which
will detail the activities scheduled on the basis of both risk assessment and
regulatory and/or legal requirements for the remainder of that calendar year,
and the progress in accomplishing such program which will be reviewed on an
annual basis; and
FURTHER RESOLVED, the Audit Committee's duties and responsibilities are
limited to those set forth previously in this Charter, and specifically do not
include the following duties which are deemed to be the responsibility of
management, internal audit, and/or the independent auditor: (a) planning or
conducting audits, (b) determining that the Company's financial statements are
complete and accurate and in accordance with generally accepted accounting
principles, (c) conducting investigations, (d) resolving disagreements, if any,
between management and the independent auditor, and (e) assuring compliance
with laws and regulations.
A-2
SOLICITED BY THE BOARD OF DIRECTORS
PROXY
Common Stock
Superior Financial Corp
Annual Meeting of Shareholders
May 16, 2001
The undersigned hereby appoints C. Stanley Bailey and C. Marvin Scott and
either of them, or such other persons as the Board of Directors of Superior
Financial Corp. ("Superior") may designate, proxies for the undersigned, with
full power of substitution, to represent the undersigned and to vote all of the
shares of common stock, par value $0.01, of Superior (the "Common Stock") which
the undersigned would be entitled to vote at the annual meeting of shareholders
to be held on May 16, 2001 and at any and all adjournments thereof. The
proxies, in their discretion, are further authorized to vote (i) for the
election of a person to the Board of Directors if any nominee named herein
becomes unable to serve or for good cause will not serve, and (ii) on any other
matter that may properly come before the meeting, including matters incident to
the conduct of the meeting.
1. Election of Directors:
NOMINEES FOR A TERM EXPIRING IN 2002: C. Stanley Bailey, Brian A. Gahr, Rick
D. Gardner, Howard B. McMahon, C. Marvin Scott, Ben F. Scroggin, John M. Stein,
John E. Steuri and David E. Stubblefield
[_] FOR all nominees listed except as marked to the
contrary [_] WITHHOLD AUTHORITY to vote for all nominees
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL, STRIKE A LINE
THROUGH THE NOMINEE'S NAME IN THE ABOVE LIST.
2. Ratification of Ernst & Young LLP as Superior's independent auditors.
[_] FOR ratification [_] AGAINST
ratification [_] ABSTAIN
(Continued On Reverse Side)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE VOTED
AS DIRECTED HEREIN. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE
PERSONS NAMED IN PROPOSAL 1, AND FOR RATIFICATION OF ERNST & YOUNG LLP AS
INDEPENDENT AUDITORS.
Please sign and date this proxy.
I will [_] will not [_] attend the meeting.
DATED: _______________________, 2001
Phone No.:
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(Signature of Shareholder)
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(Signature of Shareholder, if more
than one)
Please sign exactly as your name
appears on the envelope in which
this material was mailed. Agents,
executors, administrators,
guardians, and trustees must give
full title as such. Proxies of
corporations should be signed by
their President or authorized
officer.