SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant /_/
Check the appropriate box:
/X/ Preliminary Proxy Statement
/_/ Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
/_/ Definitive Proxy Statement
/_/ Definitive Additional Materials
/_/ Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
J.C. Nichols Company
- ------------------------------------------------------------------------
(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:
------------------------------------------------------------------------
1
<PAGE>
J.C. NICHOLS COMPANY
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 28, 1997
You are invited, as a shareholder of J.C. Nichols Company (the "Company"),
to be present either in person or by proxy at the 1997 Annual Meeting of
Shareholders, which will be held in the Grand Ballroom of the Crowne Plaza
Hotel, 4445 Main Street, Kansas City, Missouri on Wednesday, May 28, 1997,
beginning at 10:00 a.m., or any adjournment or adjournments thereof, for the
following purposes:
1. To elect three (3) Directors to the Company's Board of Directors to
serve terms of three years;
2. To approve amendments to and a restatement of the Articles of
Incorporation of the Company;
3. To approve the selection of KPMG Peat Marwick LLP as auditors for the
Company for the 1997 fiscal year; and
4. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed April 25, 1997 as the record date for
determination of the shareholders entitled to notice of and to vote at the
meeting or any adjournment thereof.
The Board of Directors of the Company encourages you to complete, sign,
date, and return to the Company in the enclosed, postage paid envelope the
enclosed proxy card, regardless of whether you intend to be present at this
meeting. You may revoke your proxy at any time before it is exercised, and your
proxy will be deemed revoked if you attend and vote in person.
BY ORDER OF THE BOARD OF DIRECTORS
--------------------------------
Price A. Sloan
Secretary
310 Ward Parkway
Kansas City, Missouri 64112
______________, 1997
2
<PAGE>
PROXY STATEMENT
J.C. NICHOLS COMPANY
310 WARD PARKWAY, KANSAS CITY, MO 64112
RELATING TO ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 28, 1997
I. GENERAL INFORMATION
This proxy statement is being furnished to shareholders on or about
________________, 1997 as part of the solicitation by the Board of Directors of
the J.C. Nichols Company (the "Company") of proxies for use at the annual
meeting of its shareholders to be held at the Crowne Plaza Hotel, 4445 Main
Street, Kansas City, Missouri on Wednesday, May 28, 1997, at 10:00 a.m. and at
any adjournments thereof, for the purpose of voting on the matters set forth in
the accompanying Notice of Annual Meeting of Shareholders. If the enclosed proxy
is executed and returned to the Company, it nevertheless may be revoked by
written notification to the Secretary of the Company at any time before the
proxy is exercised. A shareholder may also revoke the enclosed proxy by
attending the shareholders meeting and voting in person. Unless the enclosed
proxy is revoked, it will be voted as directed.
Shareholders of record as of the close of business on April 25, 1997 are
entitled to vote on matters to come before the meeting. At the close of business
on that date, 3,849,358 shares of Common Stock of the Company were issued,
outstanding, and entitled to vote. Except for the election of Directors,
shareholders of the Company are entitled to one vote for each share of Common
Stock held. When electing Directors at this meeting, shareholders will have the
opportunity to cast votes using cumulative voting. Cumulative voting permits a
shareholder to cast the number of votes in an election that is equal to the
number of shares owned by the shareholder multiplied by the number of directors
to be elected. All votes of a shareholder may either be cast for
one nominee or distributed among multiple nominees. The three candidates in the
election receiving the highest number of votes shall be elected. Accordingly,
the Board of Directors is soliciting discretionary authority to cumulate proxies
in the election in such a manner as to ensure the election of the maximum number
of nominees described in this Proxy Statement.
The Company will bear the cost of this solicitation of proxies. The Company
may reimburse brokers and other persons holding stock in their names or in the
names of their nominees for their expenses in sending proxy material to
principals. In addition to soliciting proxies by mail, proxies may be solicited
personally, or by telephone or electronic media by regular employees of the
Company.
II. PROPOSALS
A. ELECTION OF DIRECTORS
The Articles of Incorporation of the Company provide that the Board of
Directors shall have nine members. The Company's Bylaws provide for the
classification of Directors into three classes of equal size. At this year's
meeting of the shareholders, three directors, constituting one class, are to be
elected for three year terms.
3
<PAGE>
Barrett Brady, Kay N. Callison, and William V. Morgan have been nominated
for election as directors at the annual meeting of the shareholders. Mr. Brady
and Ms. Callison were elected as directors of the Company at the annual meeting
of the shareholders in 1995 to serve until this year and are nominated for
re-election. Mr. Morgan has been nominated to fill the seat recently left
vacant by John Simon's resignation from the Board.
Unless otherwise instructed, proxies received in response to this
solicitation will be voted in favor of the election of the persons nominated by
the Board of Directors and all proxies shall be voted in such a manner as to
ensure the election of the maximum number of nominees described below. While it
is not expected that any of the nominees will be unable to accept office, if for
any reason one or more are unable to do so, the proxies will be voted for
substitute nominees selected by the Board of Directors of the Company. The three
nominees for election as directors who receive the greatest number of votes cast
for election of directors at the meeting, a quorum being present, shall be
elected directors of the Company. Abstentions, broker non-votes and instructions
on the accompanying proxy card to withhold authority to vote for all of the
nominees will result in the respective nominees receiving fewer votes. Set forth
below is a brief description of the individuals nominated for election at the
annual meeting of the shareholders and, for your information, a brief
description of those directors whose terms will expire at a later date.
1. Nominees for Election - Term Expiring 2000
Barrett Brady - Age 50. Mr. Brady is the President and Chief Executive
Officer of the Company and has been acting in those
capacities since September of 1995. Mr. Brady has
served as a director of the Company since December 1995.
For more than five years prior to becoming President and
Chief Executive Officer of the Company, Mr. Brady served
as President of Dunn Industries, Inc., an investment
holding company in the primary business of regional
commercial and industrial general contracting. Mr. Brady
is also a director of North American Savings Bank. Mr.
Brady is the brother-in-law of Mr. John Fox, Vice
President of Special Projects for the Company.
Kay N. Callison - Age 53. Ms. Callison has served as a director of the
Company since 1982. For more than five years, Ms.
Callison has been active in charitable activities in the
Kansas City Metropolitan area.
William V. Morgan - Age 54. Mr. Morgan has been the President of Morgan
Associates, Inc., an investment and pipeline management
company, since February 1987, and Cortez Holdings
Corporation, a related pipeline investment company, since
October 1992. Mr. Morgan has served as a director of
Midland Loan Services and Kinder Morgan, L.P. since 1994
and Vice Chairman of Cortez Pipeline Company since
February 1987. He has held legal and management
positions in the energy industry since 1975, including
the presidencies of three major interstate natural gas
companies: Florida Gas Transmission Company, Transwestern
Pipeline Company and Northern Natural Gas Company.
4
<PAGE>
- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS THAT MR. BRADY, MS.CALLISON AND MR.
MORGAN BE ELECTED TO THE BOARD OF DIRECTORS TO SERVE THREE YEAR TERMS.
- -------------------------------------------------------------------------------
2. Other Directors Not Now Standing For Election
The following is a listing of members of the Board of Directors who are
continuing in office and are not now standing for election. These directors are
shown for your information.
a. Other Directors - Term Expiring 1999
William K. Hoskins - Age 62. For more than five years Mr. Hoskins has
served as Vice President, General Counsel, and
Secretary to a major pharmaceutical company now named
Hoechst Marion Roussel, Inc. and which was formerly
known both as Marion Merrell Dow, Inc. and Marion
Laboratories, Inc. In 1997, Mr. Hoskins was appointed
special counsel to Hoechst Marion Roussel, the parent
company of Hoechst Marion Roussel, Inc. Mr. Hoskins
is currently the Chairman of the Board of Directors
of the Company and has served in that capacity since
May 1996.
Mark C. Demetree - Age 40. Since February 1993, Mr. Demetree has been the
President of North American Salt Company, a company
that is the second largest producer of salt in the
United States and Canada and is a unit of Harris
Chemical Group, Inc. From 1989 through January 1993,
Mr. Demetree was a Senior Vice President
of D.G. Harris & Associates, Inc. From 1991 through
February 1993, Mr. Demetree was also President of the
Trona Railway Company. Mr. Demetree is also a member
of the Board of Directors of Advanced Radio Telecom
Corp., NAMSCO, Inc. and Sifto Canada, Inc. and is a
member of the Board of Governors of the Chamber of
Maritime Commerce for the Great Lakes and St. Lawrence
Seaway.
John A. Ovel - Age 50. Mr. Ovel has served as a director of the
Company since May 1996. For more than five years Mr.
Ovel has served as Regional President of Boatmen's Trust
Company, trustee of the J.C. Nichols Company Employee
Stock Ownership Trust (the "Trust"). As trustee,
Boatmen's Trust Company is record owner of the shares
beneficially owned by the Trust.
b. Other Directors - Term Expiring 1998
Clarence L. Roeder - Age 63. Mr. Roeder has served as a director of the
Company since 1974. For more than five years prior to
July 1995, Mr. Roeder was Secretary of the Company.
For more than five years prior to January 1993,
Mr. Roeder was Vice President and General Counsel of
the Company. Mr. Roeder is also a member of the Board
of Directors of Mercantile Bank of Kansas and Mercantile
Bank of Kansas City.
5
<PAGE>
Thomas J. Turner, III - Age 52. Mr. Turner has served as a director of the
Company since December 1995. For more than five
years, Mr. Turner has served as President of Charter
American Mortgage Company, a business that operates
as a correspondent, and originates and services
commercial loans, for institutional mortgage lenders.
Mr. Turner is an advisory director of Boatmen's Bank.
3. Information Concerning the Board of Directors, Management and Certain
Security Owners
a. Executive Officers
The following are the executive officers of the Company, all of whom serve
at the will of the Board of Directors.
Barrett Brady - Information relating to Mr. Brady is set forth above.
G. Reid Teaney - Age 50. Mr. Teaney is Senior Vice President of the
Company and has served in that capacity since July
1996. For more than five years prior to becoming
Senior Vice President of the Company, Mr. Teaney
served as Senior Vice President and Executive Managing
Officer of the Kansas City office of CB
Commercial Group, a commercial real estate marketing,
sales, leasing, and brokerage company. From January
1988 through March 1996, Mr. Teaney served as a
director of Columbia Trust Company.
Edward A. de Avila - Age 42. Mr. de Avila is Senior Vice President of
Development of the Company and has been acting in
that capacity since August 1996. From November 1993
to July 1996, Mr. de Avila was Managing Director of
Centertainment, Inc., an indirect wholly-owned
subsidiary of AMC Entertainment, Inc., one of the
largest motion picture exhibitors in the United
States. Centertainment, Inc. pursued the development
of entertainment based retail centers with AMC
Multiscreen Theaters as major anchors. From March
1988 through May 1993, Mr. de Avila was Vice
President, Director of Retail for Reston Town Center
Associates, a major developer of retail space in
Reston, Virginia.
John H. Fox - Age 52. Mr. Fox is a Vice President of the Company
with primary responsibility for special projects and
has been acting in that capacity for more than five
years. Mr. Fox is the brother-in-law of Mr. Brady.
Brian G. Shanahan - Age 58. Mr. Shanahan is a Vice
President of the Company with primary
responsibility for apartment
leasing and related operations and has been
acting in that capacity for more than five years.
Michael T. Shields- Age 57. Mr. Shields is a Vice President of the
Company with primary responsibility for retail and
industrial leasing and related operations and has
been acting in that capacity for more than five years.
Donnell J. Dixon - Age 54. Mr. Dixon is a Vice President of the
Company with primary responsibility for office
leasing and related operations and has been acting
in that capacity for more than five years.
6
<PAGE>
William E. Bell - Age 62. Mr. Bell is the Vice President of
Administration for the Company and has been acting in
that capacity for more than five years.
Mark A. Peterson - Age 33. Mr. Peterson is the Vice
President, Treasurer and Chief Financial Officer of
the Company and has been acting in that capacity since
June 1995. For more than five years prior to that
time, Mr. Peterson acted in levels of increasing
responsibility, concluding as senior audit manager,
for Donnelly Meiners Jordan Kline, P.C., a
certified public accounting firm that has
provided services to the Company.
Price A. Sloan - Age 34. Mr. Sloan is the Secretary and General
Counsel of the Company and has been acting in
that capacity since March 1996. For more than five
years prior to that time, Mr. Sloan was an attorney
with Blackwell Sanders Matheny Weary & Lombardi
L.C., the law firm that has acted and continues
to act as legal counsel to the Company.
b. Security Ownership of Certain Beneficial Owners, Directors and
Management
Table A describes the security ownership of certain beneficial owners,
while Table B describes the security ownership by management and directors as of
April 16, 1997.
TABLE A - Beneficial ownership of those owning more than five percent of the
outstanding shares of the Company(a)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name of Amount and Nature of Percentage of
Beneficial Owner Address of Beneficial Owner Beneficial Ownership Outstanding Shares
- --------------------------------------------------------------------------------------------------------
Cede & Co. Cede & Co.
P.O. Box 20
Bowling Green Stat
New York, NY 10274 1,272,124(b) 33.0%
- --------------------------------------------------------------------------------------------------------
Boatmen's Trust Boatmen's Trust Company
Company Attn: Diane Summers
P.O. Box 41903
Kansas City, MO 64183 896,187(c) 23.3%
- -------------------------------------------------------------------------------------------------------
The Miller Nichols Miller Nichols, Jeannette
Living Trust Nichols and Clarence Roeder,
Trustees
400 West 49th Terrace
Alameda Towers
Kansas City, MO 64112 567,095(d) 14.7%
- -------------------------------------------------------------------------------------------------------
Kay N. Callison Kay N. Callison
55 Lemans Court
Shawnee Mission, KS 66208 277,440(e) 7.2%
- --------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
(a) All information obtained from the shareholder register of the Company and
Officer and Director Questionnaires as of April 16, 1997.
(b) All of these shares are owned of record by Cede & Co. for other persons,
none of whom, to the knowledge of the
Company, own beneficially 5% or more of the outstanding shares.
(c) Of the 896,187 shares held by Boatmen's Trust Company, 769,647
of those shares are in the record name of CNOM & Co. and are owned by the
Company's ESOT. The remainder are in the record name of Boatmen's Trust
Company as Trustee or agent for others. Although NationsBank Corporation
recently acquired Boatmen's Bancshares, Inc. (the parent of Boatmen's Trust
Company), Boatmen's Trust Company is still the Trustee of the Company's
ESOT. Boatmen's Bancshares, Inc., CNOM & Co., and NationsBank Corporation
disclaim beneficial ownership of all such shares.
(d) Shares reflected include shares beneficially owned by the Miller Nichols
Living Trust. Miller Nichols and Clarence Roeder, Chairman Emeritus and
Director of the Company, respectively, and Ms. Jeanette Nichols are
trustees of the Miller Nichols Living Trust, none of whom have sole voting
or investment powers.
(e) Ms. Callison is a director of the Company. Of the shares reported by Ms.
Callison, 114,040 shares are held individually by Ms. Callison and she has
sole voting and investment power over such shares. Additionally, 37,640
shares are held in trusts for which Ms. Callison's spouse has sole voting
and dispositive power. Ms. Callison is the trustee and has sole
investment and voting power for two trusts for the benefit of her children,
Mark Callison and Elizabeth Callison. Such trusts hold 103,280 shares.
Ms. Callison is co-trustee with Ann Nichols and UMB Bank, N.A. of Kansas
City of the Nancy Nichols Lopez Trust, which owns 7,680 shares.
Ms. Callison, Ms. Nichols and UMB Bank share investment and voting power
over such shares. Ms. Callison is the co-trustee with Commerce Bank of
the Miller Nichols Trust, which owns 14,800 shares for the benefit of
Ms. Ann Nichols. Ms. Callison and Commerce Bank share investment and
voting power over such shares.
TABLE B - Management Ownership(a)
<TABLE>
<CAPTION>
<S> <C> <C>
Name, Title Amount and Nature of Percentage of
Beneficial Ownership Outstanding Shares
- -----------------------------------------------------------------------------------------
Barrett Brady, Director,
President and Chief Executive
Officer 110,000(b) 2.9%
Price A. Sloan, General Counsel
and Secretary 1,550(c) less than .1%
Mark A. Peterson, Vice President,
Treasurer and Chief Financial
Officer 300 less than 1%
G. Reid Teaney,
Senior Vice President 600(d) less than .1%
William E. Bell, Vice President 100 less than .1%
John A. Ovel, Director 896,187(e) 23.3%
Clarence Roeder, Director 567,095(f) 14.7%
Kay N. Callison, Director 277,440(g) 7.2%
William K. Hoskins, Director 2,240 less than .1%
Thomas J. Turner, III, Director 1,500 less than .1%
Beneficial Ownership of Directors
and Executive Officers as a Group 1,857,012(h) 48.1%
</TABLE>
8
<PAGE>
(a) All information obtained from the shareholder register of the Company and
Officer and Director Questionnaires of the Company as of April 16, 1997.
(b) Of the 110,000 shares reported by Mr. Brady, 2,400 shares are held
individually by Mr. Brady's spouse. Mr. Brady disclaims beneficial
ownership of such shares. Additionally, shares reflected as beneficially
owned by Mr. Brady include 8,000 shares held by the Fred Brady Trust dated
December 5, 1985. Mr. Brady is a Trustee of such trust and has sole voting
and investment power over such shares. An additional 64,000 shares reported
by Mr. Brady are attributable to an unexercised but vested stock option
from the Company that can be exercised at any time prior to December 31,
2010 and an additional 16,000 shares reported by Mr. Brady are attributable
to an unexercised but vested stock option from the Company that can be
exercised at any time prior to May 30, 2006.
(c) Of the 1,550 shares of reported by Mr. Sloan, 750 are held individually by
Mr. Sloan and 300 are held individually by Mr. Sloan's spouse.
Additionally, 500 shares are held in a life insurance trust for the
benefit of Mr. Sloan's spouse. Mr. Sloan does not have voting or
investment power over such shares held by such trust and disclaims
beneficial ownership of such shares.
(d) Of the 600 shares reported by Mr. Teaney, 300 are held individually by
Mr. Teaney's spouse.
(e) John A. Ovel is the Regional President of Boatmen's Trust Company.
Although NationsBank Corporation recently acquired Boatmen's Bancshares,
Inc. (the parent of Boatmen's Trust Company), Boatmen's Trust Company is
still the Trustee of the Company's ESOT, which owns 769,647 shares. The
remaining shares reported are held by Boatmen's Trust Company as Trustee or
agent for other parties. Mr. Ovel, Boatmen's Bancshares, Inc., CNOM & Co.
(the nominee of Boatmen's Trust Company), and NationsBank disclaim all
beneficial ownership of such shares.
(f) All 567,095 shares reported by Mr. Roeder are held by the Miller
Nichols Living Trust. Mr. Roeder, Ms. Jeannette
Nichols and Mr. Miller Nichols, Chairman Emeritus, are co-trustees of the
Miller Nichols Living Trust. Mr. Roeder
does not have sole voting or investment powers for such shares.
Mr. Roeder disclaims all beneficial ownership of such shares.
(g) Ms. Callison is a director of the Company. Of the shares reported by
Ms. Callison, 114,040 shares are held individually by Ms. Callison and she
has sole voting and investment power over such shares. Additionally,
37,640 shares are held in trusts for which Ms. Callison's spouse has sole
voting and investment power. Ms. Callison is the trustee and has sole
investment and voting power for two trusts for the benefit of her children,
Mark Callison and Elizabeth Callison. Such trusts hold 103,280 shares.
Ms. Callison is co-trustee with Ann Nichols and UMB Bank, N.A. of Kansas
City of the Nancy Nichols Lopez Trust, which owns 7,680 shares.
Ms. Callison, Ms. Nichols and UMB Bank share investment and voting power
over such shares. Ms. Callison is the co-trustee with Commerce Bank of
the Miller Nichols Trust, which owns 14,800 shares for the benefit of
Ms. Ann Nichols. Ms. Callison and Commerce Bank share investment and
voting power over such shares.
(h) See individual ownership footnotes above for voting and investment powers
and disclaimers of beneficial ownership and general disclosures.
c. Information Concerning the Board of Directors Meetings and Committees
The Board of Directors met thirteen times during 1996. Each current
director attended in person or by telephone at least 75% of the total number of
Board and committee meetings held while he or she served as a director or
member of the committee.
Certain members of the Board of Directors serve on one or more of the
Executive, Audit, Nominating, and Compensation Committees of the Board. The
Executive Committee is currently composed of Mr. Brady, Chairman, Mr. Hoskins,
Mr. Demetree, Ms. Callison, and Mr. Turner. This committee has been delegated
substantial authority and meets as necessary between meetings of the full Board
of Directors. The Executive Committee held four meetings during 1996.
The Audit Committee is composed of Mr. Roeder. Mr. Quinn, a former
director, was chairman of the Audit Committee during 1996. This committee
reviews reports and other financial information generated by internal and
independent accountants of the Company and strategic financial programs. It
also recommends the independent auditor for Board approval. The Audit
Committee met five times during 1996.
9
<PAGE>
The Compensation Committee is composed of Mr. Turner, Chairman and Mr.
Demetree. This committee reviews the performance of the executive officers of
the Company and recommends changes in officer compensation and company benefits.
The Compensation Committee met four times during 1996.
The Nominating Committee is currently composed of Mr. Hoskins, Chairman,
Mr. Brady and Ms. Callison. This committee is responsible for proposing director
nominees, and the results of its efforts are set forth in this Proxy Statement.
The Nominating Committee met two times in 1996. The Nominating Committee will
consider shareholder nominees timely submitted to the Board of
Directors.
d. Outside Director Compensation
Directors attending, whether by telephone or in person, any regular or
special meeting of the Board of Directors of the Company are paid $1,000 per
meeting. Directors who are members of committees of the Board of Directors
attending, whether by telephone or in person, any regular or special meeting of
a committee of the Board of Directors are paid $500 per meeting. Directors who
are also employees of the Company are not paid directors' fees. Directors'
and committee member fees were increased in early 1996 from $400 per meeting.
e. Executive Officer Compensation
The following table sets forth the compensation of certain executive
officers of the Company for the last three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Long Term
Annual Compensation Compensation
------------------------------ -----------------
Securities
Other Annual Underlying All Other
Name and Salary Bonus Compensation Options/SARS Compensation
Principal Position Year ($) ($) ($) ($) ($)
- ------------------------------------------------------------------------------------------------------------
Barrett Brady, CEO 1996 225,000 144,000(a) 9,857(b) 224,000(c)
1995 110,000 N/A N/A N/A
Jack Frost, CEO 1995 61,025 N/A N/A N/A $6,975(d)
Lynn L. McCarthy, 1995 87,667(f) 50,000 1,080(g) N/A 5,388(h)
CEO(e) 1994 253,900(i) 10,000 1,508(g) N/A 9,122(j)
Mark A. Peterson, 1996 100,000 25,000 4,800(k) N/A N/A
CFO
Edward A. de Avila, 1996 78,205 20,000 2,850(l) N/A N/A
Senior Vice President
G. Reid Teaney, 1996 74,666 40,000(m) 3,300(n) N/A N/A
Senior Vice President
</TABLE>
(a) The amount reflects bonus earned in 1996 but paid in 1997.
(b) The amount reported reflects the value of personal automobile use paid to
Mr. Brady by the Company and the cost of a country club membership provided
to Mr. Brady by the Company.
(c) See, (i) Options/SAR Grants in Last Fiscal Year and (ii) Aggregated
Options/SAR Exercises in Last Fiscal Year and FY-end option/SAR Values, in
the tables below.
(d) The amount reported includes $6,975 paid to Mr. Frost as director fees.
(e) The amounts reflected for Mr. McCarthy in 1995 do not attempt to adjust for
the value of cash and property received by Mr. McCarthy pursuant to the
Settlement Agreement that resolved the significant shareholder litigation
that occurred in 1995.
(f) The amount reported includes $6,533 deferred by Mr. McCarthy and $4,333
contributed by the Company under the Company's 401(k) savings plan.
(g) The amount reflects the value of the personal use of a Company-owned
automobile attributable to Mr. McCarthy.
(h) The amount reported includes $1,050 paid to Mr. McCarthy as director fees
and $4,338 paid as premiums under
supplemental split dollar life insurance policies for Mr. McCarthy.
(i) The amount reported includes $62,304 deferred at the election of Mr.
McCarthy as deferred compensation, $9,065 deferred by Mr. McCarthy and
$5,663 contributed by the Company under the Company's 401(k) savings plan
and $10,933 contributed by the Company for Mr. McCarthy to the J. C.
Nichols Company Employee Stock Ownership Plan.
(j) The amount reported includes $2,575 paid to Mr. McCarthy as director fees
and $6,547 paid as premiums under supplemental split dollar life insurance
policies for Mr. McCarthy.
(k) The amount reported reflects automobile allowance paid to Mr. Peterson.
(l) The amount reported reflects automobile allowance paid to Mr. de Avila.
(m) The amount reported reflects bonus earned in 1996 but paid in 1997.
(n) The amount reported reflects automobile allowance paid to Mr. Teaney.
<TABLE>
<CAPTION>
Option/SAR Grants in Lat Fiscal Year
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term(a)
------------------------------------ --------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Number of Percent of Total
Securities Options Granted Exercise of
Underlying to Employees in Base Price Expiration
Name Options Granted Fiscal Year ($/Shr) Date 0%($) 5%($) 10%($)
- ------------------------------------------------------------------------------------------------------------
Barrett Brady, 64,000 28.6 $0.0125 12/31/2010 1,239,200 2,018,526 3,214,165
CEO 160,000 71.4 $19.375 5/30/2006 -0- 1,949,573 4,490,601
(a) Assumes $19.375 per share market value at date of grant.
</TABLE>
10
<PAGE>
Aggregated Option/SAR Exercises in Last
Fiscal Year and FY-End Option/SAR Values
Value of Unexercised
Number of Underlying In-the-Money
Unexercised Options at Options/SARS at
Fiscal Year-End(#) Fiscal Year-End(a)($)
----------------------- --------------------
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Received Unexercisable Unexercisable
- -------------------------------------------------------------------------------
Barrett Brady, CEO .. -0- -0- 32,000/32,000 959,600/959,600
-0- -0- 16,000/144,000 170,000/1,530,000
(a) Assumes $19.375 per share market value at date of grant.
f. Employment Agreements
The Company has an employment agreement with its President and Chief
Executive Officer, Mr. Barrett Brady. The principal terms of Mr. Brady's
employment agreement provide that for a period of five years ending on December
31, 2000, Mr. Brady shall receive a base salary of $225,000 per year subject to
annual review and adjustment at the discretion of the Company's Board of
Directors. Additionally, Mr. Brady shall be entitled to an annual incentive
discretionary bonus based upon achieving goals to be set annually, with an
opportunity to earn up to 80% of his base salary as annual incentive
discretionary bonus. Moreover, Mr. Brady shall be entitled to fixed supplemental
retirement benefits of $78,000 per year payable for 15 years commencing upon the
earlier of his disability or reaching the age of 60. Such supplemental
retirement benefits vest at a rate of 40% on January 1, 1996, 20% on December
31, 1996, and 10% annually on December 31st for the years 1997, 1998, 1999 and
2000. Mr. Brady has been granted a stock option of 64,000 shares, or their
equivalent, of common stock at a price of $.0125 per share, which option vested
50% on January 1, 1996 and the remaining 50% vested on January 1, 1997. Mr.
Brady has also been granted an option to purchase 160,000 shares of common stock
of the Company, or their equivalent, at a price of $19.375 per share. Such
options vest at a rate of 10% on December 31, 1996, 15% on December 31, 1997,
and 25% annually on December 31st for the years 1998, 1999 and 2000. Mr. Brady
shall be subject to a confidentiality and non-competition agreement during the
term of the agreement and for a period of one year after termination.
Mr. Brady's employment agreement provides for termination by the Company
for cause, by voluntary resignation of Mr. Brady, or by the Company without
cause. The agreement also provides Mr. Brady the right to terminate the
agreement upon a change in control of the Company, which is defined as the
acquisition by any entity or affiliated group of 35% or more of the combined
voting power of the outstanding securities of the Company. Upon termination of
the agreement by either party as a result of a change of control or by the
Company without cause, Mr. Brady shall be entitled to certain rights, including,
but not limited to, immediate vesting of all stock options and the right to
receive his salary and normal employee benefits for the longer of twenty-four
months or the remainder of the agreement's term.
The Company has an employment agreement with its Senior Vice President of
Development, Mr. Edward A. de Avila. The principal terms of Mr. de Avila's
employment agreement provide that for a period of three years ending on August
12, 1999, Mr. de Avila shall receive a base salary of $200,000 per year subject
to annual review and increase at the discretion of the Company's Board of
Directors.
11
<PAGE>
Additionally, Mr. de Avila shall be entitled to an annual incentive
discretionary bonus, with an opportunity to receive up to 40% of his base salary
as annual incentive discretionary bonus. Mr. de Avila's employment agreement
provides for termination by the Company for cause, by voluntary resignation of
Mr. de Avila, or by the Company without cause. Upon termination of the Agreement
by the Company without cause, Mr. de Avila shall be entitled to certain rights,
including, but not limited to, the right to receive his annual salary and normal
employee benefits from the date of termination until August 12, 1999.
The Company has an employment agreement with its Senior Vice President, Mr.
G. Reid Teaney. The principal terms of Mr. Teaney's employment agreement provide
that for a period of three years ending on July 14, 1999, Mr. Teaney shall
receive a base salary of $160,000 per year subject to annual review and increase
at the discretion of the Company's Board of Directors. Additionally, Mr. Teaney
shall be entitled to an annual incentive discretionary bonus with an opportunity
to receive up to 60% of his base salary as annual incentive discretionary bonus.
Mr. Teaney's employment agreement provides for termination by the Company for
cause, by voluntary resignation of Mr. Teaney, or by the Company without cause.
Upon termination of the Agreement by the Company without cause, Mr. Teaney shall
be entitled to certain rights, including, but not limited to, the right to
receive his annual salary and normal employee benefits from the date of
termination until July 14, 1999.
The Company has an employment agreement with its Chief Financial Officer,
Mr. Mark A. Peterson. The principal terms of Mr. Peterson's employment agreement
provide that for a period of three years ending on December 31, 1998, Mr.
Peterson shall receive a base salary of $100,000 per year subject to annual
review and increase at the discretion of the Company's Board of Directors.
Additionally, Mr. Peterson shall be entitled to an annual incentive
discretionary bonus set by the Company's Board of Directors. Mr. Peterson's
employment agreement provides for termination by the Company for cause, by
voluntary resignation of Mr. Peterson, or by the Company without cause. Upon
termination of the Agreement by the Company without cause, Mr. Peterson shall be
entitled to certain rights, including, but not limited to, the right to receive
his annual salary and normal employee benefits for a period of not less than
twelve months following the date of termination.
The Company has an employment agreement with its General Counsel and
Secretary, Mr. Price A. Sloan. The principal terms of Mr. Sloan's employment
agreement provide that for a period of three years ending on March 19, 1999, Mr.
Sloan shall receive a base salary of $100,000 per year subject to annual review
and increase at the discretion of the Company's Board of Directors.
Additionally, Mr. Sloan shall be entitled to an annual incentive discretionary
bonus set by the Company's Board of Directors. Mr. Sloan's employment agreement
provides for termination by the Company for cause, by voluntary resignation of
Mr. Sloan, or by the Company without cause. Upon termination of the Agreement by
the Company without cause, Mr. Sloan shall be entitled to certain rights,
including, but not limited to, the right to receive his annual salary and normal
employee benefits for a period of not less than twelve months following the date
of termination.
g. Stock Option Plan.
The Board of Directors of the Company on March 28, 1996 adopted the 1996
Stock Option Plan ("Plan") that allowed the granting of stock options to
eligible plan participants. The shareholders of the Company approved the Plan at
their 1996 Annual Meeting on May 29, 1996. An amendment and restatement of the
plan was approved subsequently by the Board of Directors to reflect recent
changes in the federal securities regulations relevant to the Plan. The Plan
authorizes the Board to issue up to 480,000 shares of the Company's common
stock. If an option granted under the Plan expires or is canceled without
12
<PAGE>
having been exercised or vested, the shares subject to the unvested and canceled
options will be available thereunder for subsequent grants of options. The
type, amount, and conditions of any options granted under the Plan are
determined by the Compensation Committee, or such other committee as the
Board of Directors determines.
h. Compensation Committee Report on Executive Compensation
Compensation Philosophy: The Company's executive compensation program is
designed to provide fair compensation to executives based on their performance
and contribution to the Company and to provide incentives that attract and
retain key executives, instill a long-term commitment to the Company, and
develop pride and a sense of Company ownership, all in a manner consistent with
shareholder interests. Given these objectives, the executive officers'
compensation package includes primarily two elements: (1) base salary, which is
reviewed annually; and (2) incentive compensation consisting of stock options
and bonuses.
Annual adjustments to the base salaries of the Company's executives are
based on the Company's performance during the preceding fiscal year and upon a
subjective evaluation of each executive's individual contribution to that
performance. In evaluating overall Company performance, the primary focus is on
the Company's financial performance for the year. Additionally, certain
intangible criteria, including whether the Company achieved strategic goals
and conducted its operations in accordance with the standards of business
expected of the Company by its shareholders and the community in which it
operates, may also be considered.
Stock options are likely to be granted annually in future as additional
compensation in an effort to link each executive's future compensation
to the long-term financial success of the Company, as measured by stock
performance. The total number of options awarded each executive will be
based on an evaluation of the performance of each executive under
consideration without regard to the number of options held by or previously
granted to each executive.
Compensation of the Chief Executive Officer: For the fiscal year ended
December 31, 1996, Barrett Brady, the Company's Chief Executive Officer,
received a bonus of $144,000. Mr. Brady's bonus was based on a subjective
valuation which considered, in part, the Company's financial
performance for the fiscal year (i.e., $27.9 million in net income following two
years of losses; and a 33% increase in revenues) as well as the implementation
of business strategies established by the Board.
This report has been issued over the names of each member of the
Compensation Committee, Thomas J. Turner, III, Chairman and Mark C. Demetree.
i. Certain Relationships and Related Transactions
Mr. Thomas J. Turner, III is a Director of the Company and is president and
principal shareholder of Charter American Mortgage Company, a business that
prepares and presents mortgage loan applications to institutional mortgage
lenders. Charter American Mortgage Company has from time to time been asked to
provide services to the Company, and the Company has obtained loans as a result
of loan applications taken by Charter American Mortgage Company. Such loans were
obtained by the Company at rates competitive with the rates charged by other
mortgage lenders. Charter American Mortgage Company has
13
<PAGE>
earned approximately $146,000 in the last year in loan origination fees on
mortgage financing obtained by the Company as a result of services
provided by Charter American Mortgage Company.
The Company loaned to the ESOT approximately $2.0 million to permit the
ESOT to meet its 1996 obligations. That loan was unsecured and non-interest
bearing. The loan has been repaid in full.
Mr. John A. Ovel is a Director of the Company and is Regional President of
Boatmen's Trust Company, the current trustee of the ESOT. CNOM & Co., the
nominee of Boatmen's Trust Company, is record owner of the shares beneficially
owned by the ESOT. Boatmen's Trust Company receives a fee for serving as trustee
of the ESOT. The fee currently is determined by the number of shares held by the
ESOT, the amount of cash held by the ESOT, the appraised value of the shares
held by the ESOT, and the level of service requested by the ESOT. In 1996, that
fee was approximately $102,000 and Boatmen's Trust Company expects such fees to
be approximately $120,000 during 1997.
Mr. Clarence L. Roeder and Ms. Kay N. Callison are Directors of the
Company. Mr. Roeder and Mr. Miller Nichols, father of Ms. Callison, are each a
director of Westport Today, Inc. In addition, Mr. Roeder is a vice president
of that entity. Westport Today, Inc. entered into a Supplemental Settlement
Agreement with the Company in September 1995 pursuant to which Westport Today,
Inc. agreed to retire outstanding indebtedness of approximately $3,250,000 to
the Company. Such indebtedness has been paid in full.
On January 29, 1997 the Company purchased all outstanding shares of the
Company owned beneficially and of record by AHI Metnall L.P. ("AHI").
Additionally, Mr. John Simon and Mr. James W. Quinn, who are affiliated with
AHI, resigned as directors of the Company.
The Company paid consideration of $27.25 per share, or a total of
$25,856,980 for the 948,880 shares of the Company's common stock owned by AHI.
At the closing, the Company delivered to AHI $12,809,880 in cash (plus eight
percent (8%) interest per annum from January 15, 1997 to January 29, 1997 in an
amount totaling $39,307). The Company also executed a promissory note in the
amount of $12,989,600 (which reflects a $57,500 reduction for certain expenses),
bearing interest at a rate of eight percent (8%) per annum with interest
accruing commencing on January 15, 1997 ("Note"). The Note is secured by the
pledge of a mortgage receivable and real property.
The purchase price for the stock held by AHI was based on a negotiated
price within the range of trades in the fourth quarter of 1996, which trades
were between $27.00 and $31.06 per share. The transaction was negotiated on
behalf of the Company over a number of months by management of the Company, with
input from the Board of Directors of the Company. The transaction was
unanimously approved by the Board of Directors of the Company without the
participation of Mr. Simon or Mr. Quinn. The purchase by the Company of the
stock held by AHI decreased the number of outstanding shares of common stock of
the Company from 4,852,400 to 3,903,520 shares. The number of outstanding shares
of common stock was further reduced to 3,849,358 in January 1997 when the ESOT
transferred 54,162 shares to the Company in repayment of a loan from the
Company.
j. Performance of the Company's Common Stock
During 1996, the Company did not have a class of stock registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Shares of the
Company's common stock have been traded in the over-the-counter market very
infrequently through inter-broker bulletin boards trading under the
14
<PAGE>
symbol "NCJC.BB." The high and low sales prices for the Company's common stock
during the fourth quarter of 1996 were $31.06 and $27.00.
B. PROPOSAL TO AMEND AND RESTATE THE ARTICLES OF INCORPORATION
1. General
The Board of Directors has approved, and recommends that the shareholders
adopt, the Amended and Restated Articles of Incorporation of the
Company in the form attached as Appendix "A" hereto (the "Restated Articles").
The Restated Articles incorporate into a single document the various amendments
made to the Company's 1972 Articles of Incorporation (the "Old Articles"),
and delete certain provisions of the Old Articles that have been made
unnecessary or ineffective by subsequent events, including subsequent revisions
to Missouri law. Additionally, the Restated Articles include a number of
amendments that have certain anti-takeover effects (the "Amendments").
Under Missouri law, adoption of the Restated Articles requires the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock of the Company entitled to vote at the meeting. Abstentions, broker
non-votes and the failure of any shareholder to vote will have the same effect
as votes against the proposal. All of the Amendments are permitted by law and
are consistent with the rules of the NASDAQ Stock Market, Inc. on which the
Company has made application to have the shares of the Common Stock listed. If
shareholders approve the Restated Articles, the Company will cause the Restated
Articles to be filed with the Secretary of State of the State of Missouri as
soon as practicable after such approval is final.
2. Anti-Takeover Amendments
The Amendments are designed to promote conditions of continuity and
stability in the Company's management and policies. Although the Amendments have
certain anti-takeover effects, they are not in response to any active effort
to accumulate the Company's Common Stock or to obtain control of the
Company. However, the Board of Directors has observed an increase in
corporate takeover activity in recent years and the use of certain
takeover tactics, including proxy fights, hostile takeover attempts, and partial
tender offers, that have become relatively common in corporate takeover
practice. The Board believes that these tactics can place undue pressure on
boards of directors and shareholders to act hastily and on incomplete
information, and therefore can be highly disruptive to a company and can result
in unfair differences in treatment of some shareholders who act immediately in
response to announcement of takeover activity and those who choose to act later,
if at all.
The over-all effect of the proposals would be to render more difficult the
accomplishment of a merger or the assumption of control by a principal
shareholder without approval of the Board of Directors and to make more
difficult the rapid removal of management. The Board of Directors does not
presently intend to propose that other anti-takeover measures be included in the
Restated Articles in future proxy solicitations. The Amendments are discussed
below.
a. The Removal of a Director for Cause Only
The Amendments would provide that an individual director may be removed
from office by shareholders only for cause and only upon approval of
shareholders holding 66 2/3% or more of the shares of Common Stock entitled
to vote. The Articles of Incorporation currently allow the shareholders to
remove individual
15
<PAGE>
directors with or without cause unless the votes cast against removal would be
sufficient to elect such director at an election of the class of directors of
which he is a part.
Advantages of Allowing Removal Only for Cause. The primary purpose of this
Amendment is to preclude the removal of any director or directors by a takeover
bidder or otherwise, unless removal is warranted for reasons other than the
desire to obtain control of the Board. For a takeover bidder to obtain effective
control of the Company, it presently would need to control at least a majority
of the Board votes. One popular method for a takeover bidder to obtain control
is to acquire a majority of the outstanding shares of a company through a tender
offer or open market purchases and to use that voting power to remove the
existing directors and replace them with persons chosen by the takeover bidder.
Requiring cause in order to remove a director would defeat this strategy,
thereby encouraging potential takeover bidders to obtain the cooperation of the
existing Board before attempting a takeover. The Board believes that if a
purchaser acquired a significant or controlling interest in the Common Stock,
the purchaser's ability to remove the entire Board would severely
curtail the Company's ability to rapidly negotiate effectively with the
purchaser. The threat of removal would deprive the Board of the time and
information necessary to evaluate any takeover proposal, to study alternative
proposals, and to help ensure that the best price would be obtained in any
transaction involving the Company.
Disadvantages to Provision Concerning Removal of Directors. The Amendment
will make the removal of any director more difficult, even if such removal is
believed by the shareholders to be in their best interests, and will eliminate
the shareholders' ability to remove a director at will. Since the Amendment will
make the removal of directors more difficult, it will increase the directors'
security in their positions and, since the Board has the power to retain and
discharge management, could perpetuate incumbent management. The removal of a
director for cause could be costly and time-consuming. The proposed Amendment
would render more difficult, and may discourage, an attempt to acquire control
of the Company without the approval of the Company's management.
b. Opt-In to Missouri Control Share Acquisition Statute
The Missouri General and Business Corporation Law ("MGBCL") contains a
"Control Share Acquisition Statute" governing "Acquiring Persons"
who, after any acquisition of shares of a publicly traded corporation, have
20% or more of the voting power of such corporation.
The statute prohibits an Acquiring Person from voting its shares
unless certain disclosure requirements are met and the retention or
restoration of voting rights is approved by both (i) a majority of the
outstanding voting stock, and (ii) a majority of the outstanding voting
stock after exclusion of Interested Shares. "Interested Shares" are defined as
shares owned by the Acquiring Person, by directors who are also employees,
and by officers of the corporation.
A number of acquisitions of shares are deemed not to constitute Control
Share Acquisitions, including good faith gifts, transfers pursuant to wills,
purchases pursuant to an issuance by the corporation, mergers involving the
corporation that satisfy the other requirements of the MGBCL, transactions with
a person who owned a majority of the voting power of the corporation within the
prior year, or purchases from a person who has previously satisfied the
provisions of the Control Share Acquisition Statute so long
16
<PAGE>
as the transaction does not result in the purchasing party having voting power
after the purchase in a percentage range beyond the range for which the
selling party previously satisfied the provisions of the statute. Additionally,
a corporation may exempt itself from application of the statute by inserting
a provision in its articles of incorporation or bylaws expressly electing not
to be covered by the statute. The Old Articles cause the Company to "opt-out"
of the Control Share Acquisition Statute. The Amendments cause the Company to
"opt-in" to the Control Share Acquisition Statute.
Advantage of the Missouri Statute. In recent years a number of companies
have become the targets of takeover attempts. Frequently, these takeovers
have been accomplished in two steps; first, another corporation publicly offers
to buy a substantial block of the target corporation's stock
shareholders and then after having acquired such a block, gains working control
of the board of directors of the target corporation; and second, using its
control of the target corporation's board of directors, the other corporation
seeks a merger or some other business combination with the target corporation
resulting in the remaining shareholders of the target corporation
surrendering their stock for the consideration that is offered to them by the
terms of the transaction. Your Board of Directors is concerned about the
possibility of take-over attempts that often require management and
shareholders of the target company to make hurried decisions about the merits
of proposed transactions that may not be the result of arms-length bargaining
between the two corporations and over which management and shareholders may,
in substance, have no control. In addition, the mergers or other transactions
so effected may be related more to the immediate financial or other private
objectives of the acquiring group than to the interests of the target
corporation. Thus, the target corporation's shareholders can be forced to
choose between enduring a substantial change in the business objectives and
methods of their corporation, or liquidating their holdings of the corporation's
stock, possibly at a disadvantageous price and with adverse tax consequences.
The Board believes that if any future takeover of the Company is involved, the
shareholders are more likely to benefit in the long range if there are
provisions inducing a prospective acquiror to negotiate with management on an
arm's length basis. Your management believes that it is fully equipped to
evaluate the Company and its future potential with a view to achieving the
maximum long term benefits for its shareholders.
Disadvantages of the Missouri Statute. The proposed Amendments would allow
the holder of a large block of less than a majority of the shares of
the Company to prevent a merger or other business combination. The proposed
amendments may make tender offers, proxy contests or other direct appeals to
shareholders of the Company as the first step in a take-over attempt less
effective. This may discourage tender offers or business combinations that some
shareholders might find desirable. Generally, tender offers are made at a
premium above the current market price, and to the extent that such tender
offers are discouraged, the Company's shareholders would be denied the
opportunity of selling at a higher price. The proposed amendments will make a
take-over of the Company opposed by management more unlikely, even if
shareholders might view it as being in their interest. This proposal may also
impact management tenure by discouraging a tender offer hostile to management.
c. Authorization to Issue a Class of Preferred Stock
The Amendments authorize the issuance of up to 40,000,000 shares of
preferred stock with such designations, preferences, conversion rights,
cumulative, relative, participating, optional or other rights, including voting
rights, qualifications, limitations or restrictions thereof as are determined by
the Board of Directors. Thus, if the Amendments are approved, the Board of
Directors would be entitled to authorize the creation and issuance of up to
40,000,000 shares of preferred stock in one or more series with such limitations
and restrictions as may be determined in the Board's sole discretion, without
further authorization by the Company's shareholders. Shareholders will not have
preemptive rights to subscribe for shares of preferred stock.
17
<PAGE>
The Board of Directors could issue shares from a series of preferred stock
that make more difficult or discourage an attempt to obtain control of the
Company by means of a merger, tender offer, proxy contest or other means. The
issuance of shares of preferred stock could be used to create voting or other
impediments or to discourage persons seeking to gain control of the Company, for
example, by the sale of preferred stock to purchasers favorable to the Board of
Directors. In addition, the Board of Directors could authorize holders of a
series of preferred stock to vote either separately as a class or with the
holders of Common Stock, on any merger, sale or exchange of assets by the
Company or any other extraordinary corporate transaction. The issuance of new
shares could also be used to dilute the stock ownership of a person or entity
seeking to obtain control of the Company.
The shares of preferred stock could also be issued in connection with a
shareholders' rights plan, and the Board of Directors will consider adopting
such a plan if the proposed amendment is approved by the shareholders. Typically
under such a plan, shareholders of the Company would be issued rights to
purchase preferred stock at a specified price. Such preferred stock would have
such rights and preferences as may ultimately be determined by the Board. Such
rights would typically not be exercisable until the earlier to occur of (i) the
date of a public announcement that a person or group of affiliated or associated
persons (an "Purchaser") acquired, or obtained the right to acquire,
beneficial ownership of a stated percentage or more of the outstanding shares of
the Common Stock or (ii) ten days following the commencement or announcement of
an intention to make a tender offer or exchange offer that would result in a
person or group beneficially owning a stated percentage or more of such
outstanding shares of Common Stock (the earlier of such dates being called the
"Distribution Date"). Until the Distribution Date, the rights would normally be
transferred only with the Company's Common Stock. The rights are usually
redeemable in certain instances and would expire at a date and time specified by
the Board, unless earlier redeemed by the Company. Also under such a plan,
following a merger or other business combination transaction involving the
Company or the sale of a stated percentage or more of its assets or earning
power, each holder of a right, other than rights that are owned by a Purchaser
Person (which are generally thereafter void), typically can thereafter receive
upon the exercise of the right that number of shares of publicly traded common
stock of a Purchaser that at the time of such transaction would have a
market value of some multiple of the exercise price of the rights.
Advantages of Preferred Stock. The Board of Directors believes that the
authorization of the preferred stock is in the best interests of the Company and
its shareholders and believes it is advisable to authorize such shares and
have them available for possible future transactions, such as a
shareholders' rights plan, financings, strategic alliances, corporate mergers,
acquisitions, possible funding of new programs or businesses and other
uses not presently determinable and as may be deemed to be feasible and in the
best interests of the Company. In addition, the Board of Directors believes that
it is desirable that the Company have the flexibility to issue shares of
preferred stock without further shareholder action, except as otherwise provided
by law.
Disadvantages of Preferred Stock. It is not possible to determine the
actual effects of the preferred stock on the rights of the shareholders of the
Company until the Board of Directors determines the rights of the holders of a
series of the preferred stock. However, such effects might include (i)
restrictions on the payment of dividends to holders of the Common Stock; (ii)
dilution of voting power to the extent that the holders of shares of preferred
stock are given voting rights; (iii) dilution of the equity interests and voting
power if the preferred stock is convertible into Common Stock; and (iv)
restrictions upon any distribution of assets to the holders of the Common Stock
upon liquidation or dissolution and until the satisfaction of any liquidation
preference granted to the holders of preferred stock. The existence of the
authorized shares could have the effect of discouraging unsolicited takeover
attempts.
18
<PAGE>
d. Super-Majority Vote to Amend or Repeal Certain Provisions of the
Restated Articles and Bylaws
The Amendments add a new Article Eleven, requireing that in order for
shareholders to amend, repeal or adopt any provision inconsistent with
Articles Six, Seven, Nine, Ten or Eleven of the Restated Articles or make,
amend, alter or repeal bylaws of the Company designated by the Board of
Directors, the affirmative vote of at least 66 2/3% of the outstanding
shares of Common Stock of the Company shall be required. Under the MGBCL,
amendments to the articles of incorporation of a corporation require the
approval of the holders of a majority of the outstanding stock entitled to
vote thereon, but the law also permits a corporation to include provisions
in its articles of incorporation requiring a greater vote than the vote
otherwise required by law for any corporate action.
Purpose of Super-Majority Vote Requirement. The requirement of an increased
shareholder vote is designed to prevent a person holding or controlling a
majority, but less than 66 2/3%, of the shares of the Company from avoiding
the requirements of the Amendments and anti-takeover provisions in the
Company's Bylaws by simply repealing them.
Existing Anti-Takeover Defenses in Bylaws. Paragraph 12 of the Bylaws of
the Company provides that the Board shall be divided into three equal classes
of directors. Such a classified board makes it more time-consuming to change
majority control of the Board without its consent, and thus reduces the
vulnerability of the Company to an unsolicited takeover proposal that does
not contemplate the acquisition of all of the Company's
outstanding shares, or to an unsolicited proposal for the restructuring or
sale of all or part of the Company.
Anticipated Anti-Takeover Defenses in Bylaws. The Board of Directors is
presently contemplating amendments to the Company's Bylaws that may have anti-
takeover effects. Those provisions (i) impose advance notice requirements for
shareholder proposals to be presented at a meeting of shareholders, , (ii)
require that shareholders nominating individuals to serve on the Board provide
information comparable to that which would be required of the Company under
applicable federal securities laws, (iii) limit the ability of shareholders to
call a special meeting, and (iv) elinimate the ability of shareholders to fill
vacancies on the Board of Directors. These Bylaw provisions could enable the
Company to delay undesirable shareholder actions to<PAGE>
give the Company necessary
time and information to adequately respond.
Anti-Takeover provision in MGBCL. The MGBCL contains a business combination
statute that protects Missouri corporations from unsolicited takeovers by
prohibiting certain transactions. The statute restricts certain "Business
Combinations" between a corporation and an "Interested Shareholder" and its
"Affiliates" and "Associates" (as defined therein). A "Business Combination"
includes a merger or consolidation, certain sales, leases, exchanges, mortgages,
transfers, pledges and similar dispositions of corporate assets or stock and any
reclassifications, recapitalizations or reorganizations that increase the
proportionate voting power of the Interested Shareholder. An "Interested
Shareholder" includes any person or entity that beneficially owns or controls
20% or more of the outstanding voting shares of the corporation. Pursuant to the
business combination statute, a Missouri corporation may at no time
engage in a Business Combination with an Interested Shareholder other than (i) a
Business Combination approved by the board of directors prior to the date on
which the Interested Shareholder acquired such status; (ii) a Business
Combination approved by the holders of a majority of the outstanding voting
stock not beneficially owned by the Interested Shareholder or its Affiliates
or Associates at a meeting called no earlier than five years after the date
on which the Interested Shareholder acquired such status; or (iii) a
Business Combination that satisfies certain detailed fairness and
procedural requirements.
The MGBCL exempts from its business combination provisions corporations
that adopt provisions in their articles of incorporation electing not to be
covered by the statute. The Amendments do not opt out of the business
combination statute.
19
<PAGE>
3. Other Amendments
In addition to the Amendments set forth above, the Restated Articles delete
or modify a number of other provisions that have been made unnecessary or
ineffective by subsequent events, including subsequent revisions to Missouri
law, or include. Each such include other changes deemed appropriate by the Board
of Directors amendment is described below.
a. Increase the number of authorized shares of Common Stock
The Amendments increase the number of authorized shares of common stock of
the Company from 10,000,000 to 40,000,000. The Board of Directors believes that
the increase in the number of authorized shares will provide greater flexibility
for the Company to declare stock dividends or stock splits, use stock for any
future acquisitions, raise equity capital, or to use the additional shares
for other general corporate purposes.
b. Elimination of Discussion of Company History
The Old Articles contain a discussion of the manner in which the Company
was formed. This discussion is unnecessary and is being deleted.
c. Simplifying the Description of the Company's Purposes
At present, the MGBCL provides that a corporation may state in its articles
of incorporation that it may engage in any activity within the purposes for
which corporations may be organized under the MGBCL, without the need to list
specific activities. Thus, the lengthy description of specific activities in
which the Company may engage that appears in the Old Articles is unnecessary and
is being deleted in favor of the "general purpose" clause provided by the MGBCL.
d. Deleting Certain Provisions Providing that All Corporate Powers May be
Exercised by the Board of Directors and Specifying Certain Powers
The Old Articles provide that, except as otherwise provided by statute,
the articles of incorporation or the bylaws, all corporate powers may be
exercised by the Board of Directors. As this section merely restates Missouri
law, it is unnecessary and is being deleted.
e. Miscellaneous Changes
In addition, certain miscellaneous changes, such as the elimination of
shareholders' ability to act by written consent, the elimination of the
discussion of the validity of contracts in which a director may have a
personal interest and the renumbering of certain subsections and cross-
references, are made in the Restated Articles.
20
<PAGE>
- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
FOREGOING PROPOSAL
- -------------------------------------------------------------------------------
C. APPROVAL OF SELECTION OF AUDITORS
The Audit Committee and the Board unanimously recommend voting to approve
the selection of KPMG Peat Marwick LLP, as auditors for the Company and its
wholly-owned subsidiaries for the 1997 fiscal year. This firm has served as
auditors for the Company since May 1995. A representative of KPMG Peat Marwick
LLP will be present at the annual meeting of shareholders and will have an
opportunity to make a statement and be available to answer appropriate questions
asked by the shareholders.
Ratification of the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for the year 1997 will require the affirmative vote of a
majority of the shares of common stock represented in person or by proxy and
entitled to vote at the annual meeting. Abstentions and broker non-votes will
have the same effect as votes against the proposal. In the event shareholders do
not ratify the appointment of KPMG Peat Marwick LLP, the appointment will be
reconsidered by the Audit Committee and the Board of Directors.
- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
FOREGOING PROPOSAL
- -------------------------------------------------------------------------------
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Exchange Act, the Company's directors and
executive officers and shareholders holding more than ten percent of the
outstanding stock of the Company are required to report their initial ownership
of stock and any subsequent change in such ownership to the Securities and
Exchange Commission and the Company. Specific time deadlines for the
Section 16(a) filing requirements have been established by the Securities
and Exchange Commission. Because the Company was not subject to the
provisions of the Exchange Act during 1996, no reports were required to be
filed by its directors, executive directors and ten percent holders.
III. OTHER MATTERS
The Board of Directors does not intend to present any matter, and is not
aware of any individual's intention to present any matter, for action at this
meeting other than those described above. However, if any other matters properly
come before the meeting, it is the intention of persons named in the
accompanying proxy to vote the proxy in accordance with their best judgment on
such matters.
IV. PROPOSALS OF SECURITY HOLDERS
Proposals of security holders intended to be presented at the next annual
meeting must be received by the Company no later than November ____, 1997, in
order to be considered for inclusion in the proxy statement relating to that
meeting.
21
<PAGE>
V. THE ANNUAL REPORT TO THE SHAREHOLDERS
The Annual Report of the Company for the year ended December 31, 1996 is
included with this Proxy Statement. The Report contains the Company's 1996
consolidated financial statements audited by KPMG Peat Marwick LLP, independent
public accountants.
Whether or not you expect to be present at the 1997 Annual Meeting, you are
requested to complete, date, sign, and return the enclosed proxy card. Your
prompt response will be much appreciated.
BY ORDER OF THE BOARD OF DIRECTORS
Price A. Sloan
Secretary
______________, 1997
22
<PAGE>
- -------------------------------------------------------------------------------
PROXY PROXY
J.C. NICHOLS COMPANY
This Proxy is Solicited on Behalf of the Board of Directors.
The undersigned hereby appoints Barrett Brady and William K. Hoskins, or
either of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated below, all the
shares of Common Stock of J.C. Nichols Company the undersigned is entitled to
vote at the Annual Meeting of Stockholders to be held on April 30, 1997, or any
adjournment or postponement thereof. This proxy revokes all prior proxies given
by the undersigned.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED PREPAID ENVELOPE.
(Continued and to be signed on the reverse side)
- -------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
J.C. NICHOLS COMPANY
PLEASE MARK VOTE IN BOX IN THE FOLLOWING MANNER USING DARK INK ONLY.
The Board of Directors recommends a vote FOR election of the following nominees:
<S> <C>
1. ELECTION OF DIRECTORS --
FOR all listed Nominees AUTHORITY WITHHELD for all listed Nominees
Nominees: Barrett Brady /_/ /_/
Kay N. Callison FOR all listed Nominees, except vote(s) withheld for the following Nominee(s):
William V. Morgan /_/ ____________________________________________________________________________
________ SHARES VOTED FOR Nominee(s): (Please print name of Nominee(s))
/_/
The Board of Directors recommends a vote FOR the following proposals:
2. Approval of Amendments to and a Restatement of the FOR AGAINST WITHHOLD
Company's Articles of Incorporation /_/ /_/ /_/
3. Ratification of the selection of KPMG Peat Marwick FOR AGAINST WITHHOLD
LLP as the Company's accountants /_/ /_/ /_/
4. In their discretion, the Proxies are authorized to vote
upon such other business as may properly come before
the meeting and all matters incident to the conduct of This proxy, when appropriately executed, will be voted in the
the meeting manner directed herein by the undersigned stockholder. If
no direction is made, this proxy will be voted in such a
manner as to ensure election of the maximum number of
directors from the nominees listed in the proxy statement,
FOR the amendments to and restatement of the Articles of
Incorporation and FOR the selection of KPMG Peat
Marwick LLP as the Company's accountants.
Dated: , 1997
Signature(s)
Please sign exactly as name appears at left.
When shares are held by joint tenants, both should
sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If
corporation, please sign in full corporate name by President
or other authorized officer. If a partnership, please sign
in partnership name by an authorized person.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Appendix A
PROPOSED
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
J.C. NICHOLS COMPANY
ARTICLE ONE
The name of the corporation is J.C. Nichols Company (the "Corporation").
ARTICLE TWO
The address of the Corporation's registered office in the State of Missouri
is 2300 Main, Suite 1100, Kansas City, Missouri 64108. The name of its
registered agent at such address is BSMWL, Inc.
ARTICLE THREE
The corporation is formed for the following purposes:
1. To engage in the business of general real estate development,
construction, sales, ownership, management and leasing; namely to manage,
buy, lease, rent or otherwise acquire, own, hold, use, divide, partition, plat,
subdivide, develop, improve, operate, sell, lease, exchange, mortgage or
otherwise dispose of or deal in and turn to account as principal, agent,
broker or otherwise, real estate, leaseholds and any and all of the
interests or estates therein or pertinent thereto.
2. To engage in any lawful business or activity for which corporations
may be organized under The General and Business Corporation Law of Missouri
("Act").
ARTICLE FOUR
1. Authorized Shares. The Corporation has authority to issue eighty million
(80,000,000) shares of capital stock, consisting of forty million (40,000,000)
shares of Common Stock, par value $.01 per share (the "Common Stock"), and forty
million (40,000,000) shares of Preferred Stock, par value $.01 per share (the
"Preferred Stock").
All of the authorized shares of the Corporation may be issued, from time to
time, without action by the shareholders, for such consideration as may be
fixed, from time to time, by the Board of Directors, or by any duly authorized
committee thereof, and shares so issued, the full consideration for which has
been paid or delivered, will be deemed fully paid and non-assessable stock. The
holders of such shares shall not be liable for any further payment thereon.
No holder of any shares of the Corporation shall be entitled as such, as a
matter of right, to purchase or subscribe for any shares of stock of the
Corporation of any class, whether now or hereafter authorized or whether issued
for cash, property or services or as a dividend or otherwise, or to purchase or
subscribe for any obligations, bonds, notes,
<PAGE>
debentures, other securities or stock convertible into shares of stock of the
Corporation or carrying or evidencing any right to purchase shares of stock of
any class.
2. Common Stock
a. The holders of Common Stock shall be entitled to one vote per share
on all matters to be voted on by the shareholders of the Corporation, but in the
election of directors cumulative voting shall prevail. Accordingly, in the
election of directors each shareholder shall have the right to cast as many
votes in the aggregate as shall equal the number of voting shares so held by
him, multiplied by the number of directors to be elected at such election, and
he may cast the whole number of such votes for one candidate or distribute them
among two or more candidates. Directors shall not be elected in any other
manner, unless such cumulative voting be unanimously waived by all shareholders
present at such meeting.
b. To the extent permitted under the Act and subject to the provisions
of the Preferred Stock, as and when dividends on the Common Stock are declared
by the Board of Directors or paid thereon, whether in cash, property or
securities of the Corporation, all holders of Common Stock shall be entitled to
participate in such dividends ratably on a per share basis.
c. Subject to the provisions of the Preferred Stock, the holders of
Common Stock shall be entitled to participate ratably on a per share basis in
all distributions to the holders of Common Stock in any liquidation, dissolution
or winding up of the Corporation.
d. The Corporation shall keep at its principal office (or such other
place as the Corporation reasonably designates) a register for the registration
of shares of Common Stock whether in certificate or book-entry form. Upon the
surrender of any certificate representing shares of any class of Common Stock at
such place, the Corporation shall, at the request of the registered holder of
such certificate, execute and deliver a new certificate or certificates in
exchange therefor representing in the aggregate the number of shares of such
class represented by the surrendered certificate, and the Corporation forthwith
shall cancel such surrendered certificate. Each such new certificate will be
registered in such name as is requested and will represent such number of
shares of such class as is substantially identical in form to the surrendered
certificate. The issuance of new certificates shall be made without charge to
the holders of the surrendered certificates of any issuance tax in respect
thereof or other cost incurred by the Corporation in connection with such
issuance.
e. Upon receipt of evidence reasonably satisfactory to the Corporation
(an affidavit of the registered holder will be satisfactory) of the ownership
and the loss, theft, destruction or mutilation of any certificate evidencing one
or more shares of any class of Common Stock, and in the case of any such loss,
theft or destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other
institutional investor its own agreement will be satisfactory), or in the case
of any such mutilation upon surrender of such certificate, the Corporation shall
execute and deliver in lieu of such certificate a new certificate of like kind
representing the number of shares of such class represented by such lost,
stolen, destroyed or mutilated certificate and dated the date of such lost,
stolen, destroyed or mutilated certificate.
3. Preferred Stock
a. Shares of Preferred Stock may be issued in one or more series at
such time or times and for such consideration as the Board of Directors may
determine. Each such series shall be given a distinguishing designation.
<PAGE>
All shares of any one series shall have preferences, limitations and relative
rights identical with those of other shares of the same series and except
to the extent otherwise provided in the description of such series, with
those of other shares of Preferred Stock.
b. The authority of the Board of Directors with respect to each
series shall include, but not be limited to, determination of the following:
i. The distinguishing designation and number of shares
constituting that series, which number may (except where otherwise
provided by the Board of Directors in creating such series) be
increased or decreased from time to time by action of the Board of
Directors;
ii. The dividend rate, if any, on the shares of that series,
whether dividends shall be cumulative, and, if so, from which date
or dates, and the relative rights of priority, if any, of payment
of dividends on shares of that series over shares of any other
series or over the Common Stock;
iii. The voting rights, if any, which shares of that series
shall have, and the terms of such voting rights;
iv. Whether the shares of that series shall be convertible
into or exchangeable for cash, shares of stock of any other class
or any other series, indebtedness, or other property or rights,
including securities of another corporation, and, if so, the terms
and conditions of such exchange or conversion, including the rate
or rates of conversion, and whether such rate shall be a
designated amount or an amount determined in accordance with a
designated formula or by reference to extrinsic data or events,
the date or dates upon or after which they shall be convertible or
exchangeable, the duration for which they shall be convertible or
exchangeable, the event or events upon or after which they shall
be convertible or exchangeable, and whether they shall be
convertible or exchangeable at the option of the Corporation, the
shareholder or another person, and the method (if any) of
adjusting the rate of conversion or exchange in the event of a
stock split, stock dividend, combination of shares or similar
event;
v. Whether or not the shares of that series shall be
redeemable and, if so, the terms and conditions of such
redemption, including the date or dates upon or after which the
shares of that series shall be redeemable, whether they shall be
redeemable at the option of the Corporation, the shareholder or
another person, the amount per share payable in the event of
redemption (which amount may vary under different conditions and
at different redemption dates), whether such amount shall be a
designated amount or an amount determined in accordance with a
designated formula or by reference
<PAGE>
to extrinsic data or events, and whether such amount shall be paid
in cash, indebtedness, securities or other property or rights,
including securities of any other corporation;
vi. Whether that series shall have a retirement or sinking
fund for the purchase or redemption of shares of that series, and
if so, the terms and amount payable into such fund;
vii. The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of
the Corporation, and the relative rights of priority, if any, of
payment of shares of that series over shares of any other series
or over the Common Stock;
viii. Whether the issuance of any additional shares of such
series, or of any shares of any other series, shall be subject to
restrictions as to issuance, or as to the powers, preferences or
rights of any such other series; and
ix. Any other preferences, powers, privileges, and relative,
participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, of the shares
of that series, as the Board of Directors may deem advisable and
as shall not be inconsistent with these Articles of Incorporation
or the Act.
ARTICLE FIVE
The Corporation is to have perpetual existence.
ARTICLE SIX
The authority to make, amend, alter or repeal the bylaws of the Corporation
is hereby expressly and solely granted to and vested in the Board of Directors
of the Corporation, subject always to the power of the shareholders to make,
amend, alter or repeal the bylaws of the Corporation, by the affirmative vote
of the holders of a majority of the shares of the then outstanding voting
stock of the Corporation, voting together as a single class. The Board of
Directors is hereby vested with the authority to designate in the bylaws
certain sections of the bylaws that can only be amended either by: (i)
affirmative of 66 2/3% of the entire Board of Directors, or (ii) the
affirmative vote of the holders of 66 2/3% of the shares of the then outstanding
voting stock of the Corporation, voting together as a single class.
ARTICLE SEVEN
Meetings of shareholders may be held within or without the State of
Missouri, as the bylaws of the Corporation may provide. The books of the
Corporation may be kept outside the State of Missouri at such place or places as
may be designated from time to time by the Board of Directors or in the bylaws
of the Corporation. Election of directors need not be by written ballot unless
the bylaws of the Corporation so provide.
<PAGE>
Any action required or permitted to be taken by the shareholders of the
Corporation must be effected at a duly called annual or special meeting of
shareholders of the Corporation and may not be effected by any consent in
writing by such shareholders.
Except as otherwise required by the Act and subject to the right of holders
of any Preferred Stock, special meetings of the shareholders may only be called
by: (i) the Board of Directors pursuant to a resolution duly adopted by a
majority of the entire Board of Directors; or (ii) a shareholder or shareholders
holding 20% or more of the shares of the then outstanding voting stock of the
Corporation. Special meetings of the shareholders may not be
called by any other person or persons.
ARTICLE EIGHT
Except as otherwise specifically provided in the Act, or the Articles of
Incorporation or bylaws of the Corporation, as from time to time amended, all
powers of management, direction and control of the Corporation shall be, and
hereby are, vested in the Board of Directors.
The Corporation may agree to the terms and conditions upon which any
director or officer accepts his office or position and in its bylaws or by
contract may agree to indemnify and protect, to the maximum extent permitted by
the Act, each and all of such persons and any person who, at the request of the
Corporation, served as a director or officer of another corporation in which
this Corporation owned stock against all costs and expenses reasonably incurred
by any or all of them, and all liability imposed or threatened to be imposed
upon any or all of them, by reason of or arising out of their or any of them
being or having been a director or officer of this Corporation or of such other
corporation; but any such bylaw or contractual provision shall not be exclusive
of any other right or rights of any such director or officer to be indemnified
and protected against such costs and liabilities that he may otherwise possess.
ARTICLE NINE
The Corporation expressly elects to be governed by Section 351.407 of the
Act or any subsequent amendments thereof, or substitutes therefor, or
supplements thereto.
ARTICLE TEN
1. The number of directors constituting the Board of Directors shall be
nine initially, and thereafter, the number of directors constituting the
entire Board of Directors shall be fixed by, or in the manner provided in
the bylaws of the Corporation but shall be not less than seven nor more than
twelve. Subject to the rights of the holders of any Preferred Stock then
outstanding, the specific number of directors within such minimum and maximum
shall be authorized from time to time by an amendment of the bylaws of the
Corporation duly adopted by a two-thirds vote of the entire Board of Directors.
The Corporation shall notify the Secretary of State of any change in the number
of directors as required by the Act.
<PAGE>
2. The Board of Directors shall be classified such that there will be three
classes of directors, with the term of each class expiring in different years
and the number of directors in each class as nearly equal in number as possible.
Each director shall be placed in one of three classes, and the initial term of
office of each director shall expire at the annual shareholders' meeting taking
place in the year set forth opposite such director's name (or, if later, upon
the election and qualification of such director's successor), as follows:
Name Class Term Expires
Barrett Brady A 2000
Kay N. Callison A 2000
William V. Morgan A 2000
Clarence L. Roeder B 1998
Thomas J. Turner, III B 1998
[Vacant Seat] B 1998
Mark C. Demetree C 1999
William K. Hoskins C 1999
John A. Ovel C 1999
At each annual shareholders' meeting following such initial classification
and election, the number of directors equal to the number of directors in
the class whose term expires at the time of such meeting shall be elected for a
full three-year term to succeed those whose terms expire.
3. Subject to the rights of the holders of any Preferred Stock then
outstanding, any vacancies in the Board of Directors for any reason, including
by reason of any increase in the number of directors, shall, if occurring prior
to the expiration of the term of office of the class in which such vacancy
occurs, be filled only by the Board of Directors, acting by the affirmative vote
of two-thirds of the remaining directors.
4. Subject to the rights of the holders of any Preferred Stock then
outstanding: (i) any director, or the entire Board of Directors, may be removed
from office at any time, but only for Cause (as defined below), by the
affirmative vote of the holders of record of outstanding shares representing at
least 66 2/3% of the voting power of all the shares of capital stock of the
Corporation then entitled to vote generally in the election of directors, voting
together as a single class, and (ii) to the extent permitted by law, any
director may be removed from office at any time, but only for Cause, by the
affirmative vote of two-thirds of the entire Board of Directors. As used in
these Articles of Incorporation, the term "Cause" means (i) conviction of the
director for a felony; (ii) declaration by order
<PAGE>
of a court that the director is of unsound mind; or (iii) gross abuse of trust
that is proven by clear and convincing evidence to have been committed in bad
faith.
ARTICLE ELEVEN
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in these Articles of Incorporation in the manner now or
hereafter prescribed herein and by the Act, and all rights conferred upon
shareholders herein are granted subject to this reservation. Notwithstanding
the foregoing or any other provisions of these Articles of Incorporation or
the bylaws of the Corporation, the affirmative vote of the holders of at least
66 2/3% of the voting power of the shares of the then outstanding voting
stock of the Corporation, voting together as a single class, shall be required
to amend or repeal, or adopt any provisions inconsistent with, ARTICLES SIX,
SEVEN, NINE, TEN, or this ARTICLE ELEVEN of these Articles of Incorporation.
<PAGE>
