<PAGE> 1
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/X/ Preliminary proxy statement
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
THE REYNOLDS & REYNOLDS COMPANY
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
THE REYNOLDS & REYNOLDS COMPANY
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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:
(4) Proposed maximum aggregate value of transaction:
/ / 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:
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<PAGE> 2
THE REYNOLDS AND REYNOLDS COMPANY
115 SOUTH LUDLOW STREET
DAYTON, OHIO 45402
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 9, 1995
To the Shareholders of
THE REYNOLDS AND REYNOLDS COMPANY
The Annual Meeting of the Shareholders ("Meeting") of The Reynolds and
Reynolds Company, an Ohio corporation, will be held in the Frederick C. Smith
Auditorium located in the David H. Ponitz Sinclair Center, Building 12, on the
Sinclair Community College campus, 444 West Third Street, Dayton, Ohio 45402,
on Thursday, February 9, 1995, at 11:00 a.m., Eastern Standard Time.
The items of business are:
1. A proposal to elect three (3) Directors;
2. A proposal to amend and restate the Amended Articles of Incorporation
to increase the number of authorized Class A Common Shares;
3. A proposal to adopt the Stock Option Plan -- 1995 for key employees
and nonemployee directors of the Company; and
4. A proposal to appoint Deloitte & Touche as independent auditors for the
Company; and
such other matters as may properly be brought before the Meeting or any
adjournment(s) thereof.
Shareholders of record at the close of business on December 16, 1994 are
entitled to vote at the Meeting or any adjournment(s) thereof.
Your attention is called to the accompanying Proxy Card and Proxy Statement.
A copy of the Company's Annual Report for its fiscal year ended September
30, 1994, is enclosed. It is not deemed to be part of the official Proxy
soliciting material. If any Shareholder fails to receive a copy of the Annual
Report, one may be obtained by writing to the Secretary of the Company.
BY ORDER OF THE BOARD OF DIRECTORS
Adam M. Lutynski, Secretary
Dayton, Ohio
January 5, 1995
***************************************************************************
* *
* ALL SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. *
* WHETHER OR NOT YOU EXPECT TO ATTEND, PLEASE DATE AND SIGN THE *
* ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE POSTAGE PREPAID *
* ENVELOPE PROVIDED. *
* *
***************************************************************************
<PAGE> 3
<TABLE>
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
OF
THE REYNOLDS AND REYNOLDS COMPANY
115 South Ludlow Street
Dayton, Ohio 45402
TO BE HELD FEBRUARY 9, 1995
<CAPTION>
THIS PROXY STATEMENT IS ARRANGED IN THE FOLLOWING ORDER:
PAGE
----
<S> <C>
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
DESCRIPTION OF CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
VOTING SECURITIES OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . 4
ELECTION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (PROPOSAL I) 5
BOARD COMMITTEES, MEETINGS, COMPENSATION AND INDEMNIFICATION OF DIRECTORS . . . . . . . . . . . . 7
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SUMMARY COMPENSATION TABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
OPTION/SAR GRANTS IN LAST FISCAL YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE . . . . . . . 12
LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR . . . . . . . . . . . . . . . . . . . . 12
PENSION PLAN TABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
EMPLOYMENT AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
PERFORMANCE GRAPH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION . . . 17
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
INCREASE IN AUTHORIZED CLASS A COMMON SHARES . . . . . . . . . . . . . . . . . . . . . . . (PROPOSAL II) 20
ADOPTION OF THE STOCK OPTION PLAN -- 1995 . . . . . . . . . . . . . . . . . . . . . . . . (PROPOSAL III) 21
APPOINTMENT OF INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . (PROPOSAL IV) 26
SHAREHOLDER PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
EXHIBIT A - AMENDED ARTICLES OF INCORPORATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A1
EXHIBIT B - STOCK OPTION PLAN -- 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B1
</TABLE>
2
<PAGE> 4
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation
of proxies by The Reynolds and Reynolds Company ("Company") for its Annual
Meeting of Shareholders ("Meeting"), February 9, 1995. This solicitation is
being made by mail. The Company may use its officers and other employees to
solicit proxies from Shareholders, personally or by telephone, facsimile or
letter. The costs of this solicitation will be borne by the Company. If the
Company requests nominees and brokers to solicit their principals and customers
for their proxies, the Company will reimburse such nominees and brokers for
their reasonable out-of-pocket expenses.
All shares represented by valid proxies received from this
solicitation, and not revoked, will be voted at the Meeting. If Shareholder
directions appear on the Proxy Card, such shares will be voted according to
those directions. Unless contrary directions are given, all shares will be
voted in favor of the proposals and for the nominees for Director described in
the accompanying Notice of Meeting and this Proxy Statement and, in the
discretion of the Appointed Proxies, upon such other matters as may properly
come before the Meeting. Any proxy may be revoked by the Shareholder at any
time before the vote, by giving written notice to the Company at its address
provided on page 1 of this Proxy Statement or at the Meeting before any vote is
taken.
Under Section 1701.55 of the Ohio Revised Code, a Shareholder may
exercise cumulative voting rights in the election of Directors by giving
written notice of that desire to the President, a Vice President or the
Secretary of the Company not fewer than 48 hours before the scheduled start of
the Meeting. If an announcement of the giving of such notice is made at the
start of the Meeting by the Chairman or Secretary, or by or on behalf of the
Shareholder giving such notice, each Shareholder shall have the right to
cumulate his or her votes in voting for Directors. In voting cumulatively, a
Shareholder may give one candidate that number of votes determined by
multiplying the number of his or her shares by the number of Directors to be
elected or may distribute that number of votes among two or more candidates as
he or she sees fit. If cumulative voting is elected and no further
instructions are given, the Appointed Proxies shall, at their discretion,
distribute the votes they cast among the nominees.
The Board of Directors has fixed the close of business on December 16,
1994, as the Record Date for the determination of the Shareholders entitled to
receive notice of, and to vote at, the Meeting or at any adjournment(s) thereof
despite any subsequent transfers of shares. The stock transfer books of the
Company will not be closed.
DESCRIPTION OF CAPITAL STOCK
The Company has two classes of authorized capital shares outstanding:
Class A Common Shares with a par value of $.625 ("Class A Shares") and Class B
Common Shares with a par value of $.03125 ("Class B Shares"). There are
60,000,000 Class A Shares authorized, of which 41,452,637 were issued and
outstanding on December 1, 1994, and 30,000,000 Class B Shares authorized, of
which 10,000,000 were issued and outstanding on that date. In addition, the
Company has authorized 60,000,000 Preferred Shares ("Preferred Shares") with no
par value. As of December 1, 1994 no Preferred Shares were issued and
outstanding.
Each holder of Class A Shares and Class B Shares is entitled to one
vote per share held of record. All shares vote as a single class except that,
as required by Ohio law, Shareholders vote separately by classes in the case of
certain proposed amendments to the Amended Articles of Incorporation (the
"Articles") and certain other specified transactions. Proposal II will not
require separate voting by class.
3
<PAGE> 5
All properly cast votes, in person or by proxy, by Shareholders of
record at the close of business on December 16, 1994 will be counted for
purposes of the proposals to be voted on at the Meeting. Abstentions and
broker non-votes will not be counted, and therefore will have no impact in the
context of the plurality vote for Directors or the vote for proposal III or for
auditors. Because the vote to amend the Amended Articles of Incorporation
requires a specific percentage of issued and outstanding shares, such
abstentions and broker non-votes will consequently be the equivalent of "no"
votes in that context.
No dividend may be declared or paid on either class unless a dividend
shall be simultaneously declared and paid on both classes. Any dividend
declared and paid on Class A Shares shall be in a per share amount of 20 times
the dividend simultaneously declared and paid on the Class B Shares. In the
event of the liquidation of the Company, any distribution made with respect to
the Class A Shares shall be in a per share amount of 20 times the distribution
made with respect to each Class B Share. Neither class of shares has any
preemptive rights.
Each Class B Share may at any time, at the option of the holder
thereof, be converted into 1/20th of a Class A Share. Class B Shares
surrendered for conversion are cancelled and may not be reissued. All
outstanding Class B Shares are subject to an agreement under which they may
not, unless previously converted into Class A Shares, be transferred to anyone
except the wife, children and grandchildren (including any trust of which they
are the beneficiaries) of Richard H. Grant, Jr., Chairman of the Company's
Steering Committee.
<TABLE>
VOTING SECURITIES OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
<CAPTION>
=====================================================================================================================
CLASS A CLASS B TOTAL VOTING
SHARES % SHARES % SHARES %
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Number of shares outstanding on
December 1, 1994, except as noted
below were: 41,452,637(1) 100.0 10,000,000 100.0 51,452,637(1) 100.0
The following are the only persons
known by the Company to own
beneficially more than 5% of either
class of voting security on December
1, 1994:
RICHARD H. GRANT, III 81,476(2) 0.2 10,000,000 100.0 10,081,476(2) 19.6
Director and Private Investor
800 Germantown Street
Dayton, Ohio 45407
FMR CORP. 2,681,900(3) 6.5 2,681,900(3) 5.2
82 Devonshire Street
Boston, Massachusetts 02109
IDS FINANCIAL CORPORATION 2,521,000(4) 6.1 2,521,000(4) 4.9
IDS Tower 10
Minneapolis, Minnesota 55440
On December 1, 1994, the shares
beneficially owned by all executive
officers and Directors as a group (13
persons) were: 1,734,053(5) 4.2 10,000,000 100.0 11,734,053(5) 22.7
=====================================================================================================================
<FN>
(1) Does not include 4,774,451 Class A Shares held in treasury.
(Footnotes continued on following page)
</TABLE>
4
<PAGE> 6
(2) Richard H. Grant, III has sole voting and sole investment power with
regard to 38,776 Class A Shares held in his own name. The total
includes 42,700 Class A Shares as to which Mr. Grant holds options
exercisable within 60 days. The amount excludes 5,540 Class A Shares
held by Mrs. Grant as to which Mr. Grant disclaims beneficial
ownership. This amount does not include 500,000 Class A Shares into
which his 10,000,000 Class B Shares are convertible at a 20-to-1
ratio.
(3) As of December 1, 1994, FMR Corp. has sole dispositive power for
2,611,300 shares held by two affiliates: Fidelity Management and
Research Company and Fidelity Management Trust Company. It also has
sole voting power for 7,700 of those shares. Another affiliate,
Fidelity International Limited, has sole voting and dispositive power
for 70,600 shares.
(4) As of December 5, 1994, IDS Financial Corporation (IDS) and its
affiliates share dispositive power over 2,521,000 shares, and IDS and
an affiliate share voting power for 691,000 shares.
(5) Includes 219,967 Class A Shares as to which such persons may exercise
options within the next 60 days.
PROPOSAL I
ELECTION OF DIRECTORS
The Board of Directors of the Company proposes that three Directors be
elected for a three-year term expiring in 1998.
There are currently eleven Directors; three whose terms expire in
1995, four whose terms expire in 1996, and four whose terms expire in 1997.
The Board has recommended and nominated JOSEPH N. BAUSMAN, RICHARD H. GRANT,
JR. AND WILLIAM H. SEALL.
The enclosed Proxy will be voted FOR electing the three nominees
unless a specification is made to withhold such vote. Since the number of
Directors has previously been fixed at eleven, the election of three Directors
for new terms shall, in accordance with the Company's Consolidated Code of
Regulations, be decided by plurality vote.
If any nominee shall cease to be a candidate for election for any
reason, the Proxy will be voted for a substitute nominee designated by the
Board of Directors and for the other nominees. The Board of Directors
currently has no reason to believe that any nominee will not remain a candidate
for election as a Director or will be unwilling to serve as a Director if
elected.
Following is certain information about each nominee-incumbent and
those Directors whose terms of office will continue after the Meeting.
5
<PAGE> 7
<TABLE>
<CAPTION>
NOMINEES FOR TERMS EXPIRING IN 1998
SERVED AS
PRINCIPAL OCCUPATION AND FIVE YEAR DIRECTOR
NAME AGE EMPLOYMENT HISTORY SINCE CLASS A(1) CLASS B(1)
- - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Joseph N. Bausman 51 President, Computer Systems 1989 87,777(2) ___
Division.
Richard H. Grant, 81 Chairman of the Steering Committee. 1939 1,061,202(3) ___
Jr.
William H. Seall 51 Partner, Dinsmore & Shohl law firm 1977 800(4) ___
since January 1993; prior thereto
President and Chief Operating
Officer of Brunner Companies,
diversified holdings.
</TABLE>
<TABLE>
DIRECTORS WHOSE TERMS EXPIRE IN 1997
<CAPTION>
SERVED AS
PRINCIPAL OCCUPATION AND FIVE YEAR DIRECTOR
NAME AGE EMPLOYMENT HISTORY SINCE CLASS A(1) CLASS B(1)
- - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dale L. Medford 44 Vice President, Corporate Finance 1991 100,144(5) ___
and Chief Financial Officer.
Robert C. Nevin 54 President, Business Forms 1985 106,444(6) ___
Division.
Gayle B. Price, Jr. 64 Chairman and Chief Executive 1976 4,800 ___
Officer, Price Brothers Company,
manufacturer of concrete
construction materials.
Kenneth W. Thiele 78 Private Investor. 1975 4,000 ___
</TABLE>
<TABLE>
DIRECTORS WHOSE TERMS EXPIRE IN 1996
<CAPTION>
SERVED AS
PRINCIPAL OCCUPATION AND FIVE YEAR DIRECTOR
NAME AGE EMPLOYMENT HISTORY SINCE CLASS A(1) CLASS B(1)
- - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dr. David E. Fry 51 President and Chief Executive 1987 400 ___
Officer, Northwood University.
Richard H. Grant, 55 Private Investor since October 1, 1960 81,476(7) 10,000,000
III 1994 when he retired after thirty-six
years of service with the Company,
most recently as Senior Vice
President, International, Computer
Systems Division.
David R. Holmes 54 Chairman of the Board, President and 1987 263,535(8) ___
Chief Executive Officer since August
1990; President and Chief Executive
Officer since January 1989.
Martin D. Walker 62 Chairman and Chief Executive Officer 1991 4,000 ___
of M. A. Hanna Company, an
international specialty chemicals
company.(9)
(Footnotes on following page)
</TABLE>
6
<PAGE> 8
(1) Shares owned beneficially on December 1, 1994.
All shares are held with sole voting and sole investment power unless
otherwise indicated. The individual holdings of each Director equal
less than 1% of the issued and outstanding Class A or Class B Shares,
except for Richard H. Grant, Jr. and Richard H. Grant, III whose
holdings are specifically described in Footnotes 3 and 7 below and, in
the case of Richard H. Grant, III, the table under VOTING SECURITIES
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT on page 4.
Richard H. Grant, III is the son of Richard H. Grant, Jr., and they
may be deemed to be "control persons" with respect to the Company;
however, each disclaims any beneficial ownership of the Class A Shares
or Class B Shares held by the other.
(2) Mr. Bausman has sole voting and sole investment power with regard to
56,121 Class A Shares held in his own name. The total includes 31,656
Class A Shares as to which Mr. Bausman holds options exercisable
within 60 days.
(3) Richard H. Grant, Jr. has sole voting and sole investment power with
regard to 4,076 Class A Shares held in his own name. He also has sole
voting and sole investment power with regard to 1,057,126 Class A
Shares held in a trust for his benefit. This amount excludes 25,176
Class A Shares held by Mrs. Grant as to which Mr. Grant disclaims
beneficial ownership.
(4) Mr. Seall has shared voting and shared investment power with regard to
800 Class A Shares held jointly with his spouse.
(5) Mr. Medford has sole voting and sole investment power with regard to
40,366 shares held in his own name, and shared voting and shared
investment power with regard to 19,800 shares held jointly with his
spouse. The total includes 39,978 Class A Shares as to which Mr.
Medford holds options exercisable within 60 days.
(6) Mr. Nevin has sole voting and sole investment power with regard to
49,860 Class A Shares held in his own name, 2,050 Class A Shares in
the name of his daughter, and 2,050 Class A Shares held in the name of
his son. The total includes 52,484 Class A Shares as to which Mr.
Nevin holds options exercisable within 60 days.
(7) See Note 2 to the table under VOTING SECURITIES OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT on page 5.
(8) Mr. Holmes has sole voting and sole investment power with regard to
246,716 Class A Shares. The total includes 5,000 Class A Shares as to
which Mr. Holmes holds options exercisable within 60 days. The total
also includes 4,773 Class A Shares, 3,523 Class A Shares and 3,523
Class A Shares held in the names of his three sons. This amount
excludes 2,000 Class A Shares held by Mrs. Holmes as to which Mr.
Holmes disclaims beneficial ownership.
(9) Mr. Walker also serves as a director of Textron, Inc., Comerica Inc.
and Mariner Group, Inc.
BOARD COMMITTEES, MEETINGS, COMPENSATION
AND INDEMNIFICATION OF DIRECTORS
The Board of Directors has established an Audit Committee, a
Compensation Committee, an Investment Committee and a Finance Committee.
The Audit Committee (Messrs. Price (Chairman), Fry, Seall and Walker)
meets with the Company's independent public accountants, internal auditors,
Chief Executive Officer and financial
7
<PAGE> 9
management executives. This Committee also reviews the scope and results of
audits, as well as recommendations made by the Company's independent
accountants, auditors and executives with respect to internal and external
accounting controls and specific accounting and financial reporting issues.
During the last fiscal year, this Committee met four times.
The Compensation Committee (Messrs. Fry (Chairman), Price, Seall and
Walker) formulates and oversees the Company's various upper management
incentive compensation programs, reviews for budget purposes, specific
recommendations on general compensation levels for upper management,
establishes compensation for key executive officers and supervises the
Company's stock option plans. During the last fiscal year, this Committee met
three times.
The Investment Committee (Messrs. Grant, Jr. (Chairman), Holmes,
Medford and Thiele) makes investment decisions for the Company's retirement
plans trust fund. During the last fiscal year, this Committee met eight times.
The Finance Committee (Messrs. Grant, Jr. (Chairman), Holmes and
Medford) oversees contributions to the Company's retirement plans trust fund,
reviews Company debt limits and cash position and recommends stock repurchases
and public stock offerings. During the last fiscal year, this Committee met
once.
The Company does not have a standing nominating committee or other
similar committee.
During the fiscal year ended September 30, 1994, the Board of
Directors met four times. During the fiscal year, all Directors attended 75%
or more of the aggregate number of meetings of the Board of Directors and
meetings of committees of which they were members.
Nonemployee Directors receive an annual fee of $22,500 plus $1,000
for each Board of Directors Meeting attended. Nonemployee Directors who serve
on a committee receive an additional $500 for each committee meeting attended.
Committee Chairmen receive an additional $1,500 per year. No Director who is
an employee of the Company receives any compensation for services as a Director
or committee member.
The Company has entered into agreements (the "Indemnification
Agreements") with each Director of the Company providing for contractual
protection of certain rights of indemnification from the Company.
The Indemnification Agreements provide for indemnification of
Directors to the fullest extent permitted by law. They cover any and all fees,
expenses, judgments, fines, penalties and amounts paid in settlement incurred
in connection with the fact that such Director is or was a Director, officer,
employee, agent or fiduciary of the Company or is or was serving at the request
of the Company as the Company's representative with respect to another entity.
Indemnification would not be available, however, if it is determined that such
indemnification is not permitted under applicable law and such determination is
not successfully challenged before a court. A Director would also not be
entitled to indemnification in connection with a proceeding initiated by such
Director prior to a Change in Control (as defined in the Indemnification
Agreements) unless such proceeding was authorized or consented to by the
Company's Board of Directors.
The Indemnification Agreements provide for the prompt advancement of
all expenses incurred in connection with any proceeding and obligate the
Director to reimburse the Company for all amounts so advanced if it is
subsequently determined, as provided in the Indemnification Agreements, that
the Director
8
<PAGE> 10
is not entitled to indemnification.
If it is determined that the Director would not be permitted to be
indemnified under applicable law (and, therefore, is not entitled to
indemnification under the Indemnification Agreements), the Indemnification
Agreements provide that the Director may disagree with such determination and
seek a judicial resolution of that right to indemnification. The
Indemnification Agreements provide that, subject to applicable law, the
Director challenging such determination is entitled to indemnification for, and
advancement of, all fees and expenses incurred in any proceeding seeking a
determination of eligibility for indemnification under the Indemnification
Agreements, the Company's Amended Articles of Incorporation, the Company's Code
of Regulations or any Director's liability insurance policy.
***************************************************************************
* *
* THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTING JOSEPH N. *
* BAUSMAN, RICHARD H. GRANT, JR. AND WILLIAM H. SEALL EACH FOR A TERM *
* OF THREE (3) YEARS. *
* *
***************************************************************************
EXECUTIVE COMPENSATION
The following tables and narrative text discuss the compensation paid
to the Company's Chief Executive Officer and the Company's four other most
highly compensated executive officers during the fiscal year ended September
30, 1994 and the two prior fiscal years.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- --------------------
OPTIONS LTIP ALL OTHER
NAME AND SALARY BONUS AWARDS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) (#) ($) ($)(1)
- - ------------------ ---- --------- --------- ----------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
DAVID R. HOLMES
Chairman of the Board, 1994 439,250 351,400 312,160 409,229 24,394
President and Chief 1993 423,375 329,428 60,000 276,588 22,393
Executive Officer 1992 404,625 250,862 85,600 173,180 19,737
JOSEPH N. BAUSMAN 1994 269,750 215,800 172,520 201,050 16,914
President, Computer 1993 260,250 205,350 20,000 136,015 15,102
Systems Division 1992 249,000 176,788 32,800 85,258 13,548
ROBERT C. NEVIN 1994 269,750 194,980 172,520 201,050 28,401
President, Business 1993 260,250 179,396 20,000 136,015 22,699
Forms Division 1992 249,000 143,284 32,800 85,258 20,093
DALE L. MEDFORD
Vice President 1994 205,250 153,938 114,120 133,856 11,915
Corporate Finance and 1993 198,000 144,164 12,400 90,547 9,580
Chief Financial Officer 1992 189,000 107,727 20,400 56,625 9,210
ADAM M. LUTYNSKI 1994 162,250 121,688 76,720 90,697 9,344
General Counsel 1993 154,750 112,674 9,200 60,659 7,080
and Secretary 1992 145,500 82,933 15,600 37,365 7,097
(Footnotes on following page)
</TABLE>
9
<PAGE> 11
(1) The 1994 amounts disclosed in this column include:
<TABLE>
<CAPTION>
Above Market
Defined Imputed Interest Interest on Total
Contribution on Split Dollar Deferred Other
Name Plans Life Insurance(1) Compensation(2) Compensation
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
David R. Holmes 2,598 13,787 8,009 24,394
Joseph N. Bausman 3,090 8,925 4,899 16,914
Robert C. Nevin 2,931 11,624 13,846 28,401
Dale L. Medford 3,496 4,993 3,426 11,915
Adam M. Lutynski 3,022 6,322 -- 9,344
<FN>
(1) The life insurance component is provided on a split dollar
basis with each participant paying the term equivalent premium
and the Company paying the remainder of the premium. At
termination of the policy, all premium payments made by the
Company are reimbursed. Interest was imputed on the amount
receivable from the participant at the Company's short-term
investment rate.
(2) The named executives (except Lutynski) entered into Deferred
Compensation Agreements with the Company whereby income was
deferred for four years in order to provide individual
retirement benefits at age 65 of up to $100,000 per year for a
fixed term of 15 years. The deferrals were completed as of
September 30, 1989. Benefits payable are reduced for early
retirement and lump sum distributions are available at the
participant's discretion. The amounts presented represent the
above market interest earned on the funds deferred and were
calculated assuming a 15 year payment stream at age 65.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
</TABLE>
10
<PAGE> 12
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS(1)
---------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF STOCK PRICE
% OF TOTAL APPRECIATION FOR
OPTIONS GRANTED OPTION TERM
NUMBER OF TO EMPLOYEES IN EXERCISE OR ----------------------
OPTIONS FISCAL YEAR BASE PRICE EXPIRATION
NAME GRANTED (%) ($/SHARE) DATE 5%($) 10%($)
- - ---- ---------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
David R. Holmes 32,160(2) 1.1755 20.000(2) 10/01/03 404,505 1,025,095
40,000(3) 1.4621 22.050(3) 10/01/03 421,116 1,192,994
40,000(3) 1.4621 23.155(3) 10/01/03 376,916 1,148,794
40,000(3) 1.4621 24.315(3) 10/01/03 330,516 1,102,394
40,000(3) 1.4621 25.530(3) 10/01/03 281,916 1,053,794
40,000(3) 1.4621 26.805(3) 10/01/03 230,916 1,002,794
40,000(3) 1.4621 28.145(3) 10/01/03 177,316 949,194
40,000(3) 1.4621 29.550(3) 10/01/03 121,116 892,994
Joseph N. Bausman 14,880(2) .5439 20.000(2) 10/01/03 187,159 474,298
22,520(3) .8232 22.050(3) 10/01/03 237,088 671,656
22,520(3) .8232 23.155(3) 10/01/03 212,204 646,771
22,520(3) .8232 24.315(3) 10/01/03 186,080 620,648
22,520(3) .8232 25.530(3) 10/01/03 158,719 593,286
22,520(3) .8232 26.805(3) 10/01/03 130,006 564,573
22,520(3) .8232 28.145(3) 10/01/03 99,829 534,396
22,520(3) .8232 29.550(3) 10/01/03 68,188 502,756
Robert C. Nevin 14,880(2) .5439 20.000(2) 10/01/03 187,159 474,298
22,520(3) .8232 22.050(3) 10/01/03 237,088 671,656
22,520(3) .8232 23.155(3) 10/01/03 212,204 646,771
22,520(3) .8232 24.315(3) 10/01/03 186,080 620,648
22,520(3) .8232 25.530(3) 10/01/03 158,719 593,286
22,520(3) .8232 26.805(3) 10/01/03 130,006 564,573
22,520(3) .8232 28.145(3) 10/01/03 99,829 534,396
22,520(3) .8232 29.550(3) 10/01/03 68,188 502,756
Dale L. Medford 9,120(2) .3333 20.000(2) 10/01/03 114,710 290,699
15,000(3) .5483 22.050(3) 10/01/03 157,918 447,373
15,000(3) .5483 23.155(3) 10/01/03 141,343 430,798
15,000(3) .5483 24.315(3) 10/01/03 123,943 413,398
15,000(3) .5483 25.530(3) 10/01/03 105,718 395,173
15,000(3) .5483 26.805(3) 10/01/03 86,593 376,048
15,000(3) .5483 28.145(3) 10/01/03 66,494 355,948
15,000(3) .5483 29.550(3) 10/01/03 45,418 334,873
Adam M. Lutynski 6,720(2) .2456 20.000(2) 10/01/03 84,523 214,199
10,000(3) .3655 22.050(3) 10/01/03 105,279 298,248
10,000(3) .3655 23.155(3) 10/01/03 94,229 287,198
10,000(3) .3655 24.315(3) 10/01/03 82,629 275,598
10,000(3) .3655 25.530(3) 10/01/03 70,479 263,448
10,000(3) .3655 26.805(3) 10/01/03 57,729 250,698
10,000(3) .3655 28.145(3) 10/01/03 44,329 237,298
10,000(3) .3655 29.550(3) 10/01/03 30,279 223,248
<FN>
(1) No Stock Appreciation Rights (SARs) were awarded in the 1994 fiscal year.
(2) Grants were made on October 1, 1993 with the exercise price equal to the fair market value ($20.00) on that date. Options
vest 25% annually beginning October 1, 1994.
(3) Seven Vision 2000 grants were made on October 1, 1993 with all exercise prices in excess of the fair market value on that
date. Vision 2000 options vest 100% October 1, 1998. (See Vision 2000 Stock Option Grant on page 19.)
</TABLE>
11
<PAGE> 13
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED FY-END FY-END
ON REALIZED EXERCISABLE/ EXERCISABLE/
EXERCISE VALUE UNEXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) ($)
---- --------- --------- ------------------- -----------------------
<S> <C> <C> <C> <C>
David R. Holmes 52,220 609,725 6,616 / 312,160 93,038 / 380,000
Joseph N. Bausman 46,132 877,936 27,936 / 172,520 471,026 / 197,810
Robert C. Nevin 40,988 707,426 54,524 / 172,520 921,977 / 197,810
Dale L. Medford 16,502 288,087 37,698 / 114,120 645,410 / 127,800
Adam M. Lutynski -- -- 9,336 / 76,720 131,895 / 88,400
</TABLE>
<TABLE>
LONG-TERM INCENTIVE PLAN -- AWARDS
IN LAST FISCAL YEAR
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE-BASED PLANS
-----------------------------------------
PERFORMANCE OR
OTHER OTHER PERIOD THRESHOLD TARGET MAXIMUM
NAME RIGHTS UNTIL PAYOUT ($) ($) ($)
---- ------ -------------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
David R. Holmes (1) (1) 0 219,625 439,250
Joseph N. Bausman (1) (1) 0 107,900 215,800
Robert C. Nevin (1) (1) 0 107,900 215,800
Dale L. Medford (1) (1) 0 71,838 143,675
Adam M. Lutynski (1) (1) 0 48,675 97,350
<FN>
(1) Participants in the Intermediate Plan, which is considered a long-term
incentive plan, are determined strictly by grade level within the
Company. No formal awards are made and there are no vested rights.
Annual amounts are paid to participants with the amount of the award
dependent upon the Company's three year average return on equity. The
periods considered in the calculation are the most recent fiscal year
and the preceding two years. The Threshold and Maximum measurements
are the same as those used to determine annual bonuses. The potential
annual payout amounts reported here were calculated using fiscal year
1994 salaries. The payout for fiscal year 1994 is included in the
LTIP Payout column of the Summary Compensation Table.
</TABLE>
12
<PAGE> 14
<TABLE>
PENSION PLAN TABLE (1)
<CAPTION>
YEARS OF SERVICE (2)
------------------------------------------------------------------------------
REMUNERATION 10 15 20 25 30
------------ ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 300,000 $ 45,000 $ 67,500 $ 90,000 $112,500 $135,000
400,000 60,000 90,000 120,000 150,000 180,000
500,000 75,000 112,500 150,000 187,500 225,000
600,000 90,000 135,000 180,000 225,000 270,000
700,000 105,000 157,500 210,000 262,500 315,000
800,000 120,000 180,000 240,000 300,000 360,000
900,000 135,000 202,500 270,000 337,500 405,000
1,000,000 150,000 225,000 300,000 375,000 450,000
1,100,000 165,000 247,500 330,000 412,500 495,000
1,200,000 180,000 270,000 360,000 450,000 540,000
1,300,000 195,000 292,500 390,000 487,500 585,000
1,400,000 210,000 315,000 420,000 525,000 630,000
1,500,000 225,000 337,500 450,000 562,500 675,000
<FN>
(1) This table sets forth the annual retirement benefits payable under the
Company's qualified pension plan and the Supplemental Retirement Plan
(non-qualified) upon retirement at age 65 based on an employee's final
average annual compensation. Compensation as defined in the Plans
includes Salary, Bonus and Long-Term Incentive Plan payments. The
qualified pension benefits are reduced by 1.67% of monthly primary
Social Security benefits multiplied by years of credited service up to
a maximum of 30 years. The Supplemental Plan provides benefits to
participants who would lose benefits because of legislative limits
imposed on qualified plans or because of their participation in the
Company's Non-Qualified Deferred Compensation Plan. Additional
benefits provided under the Supplemental Plan for participants with
employment contracts are not included in the table but are discussed
below with employment contracts. Participation in the Supplemental
Plan requires approval by the Board. Optional payment forms of
actuarial equivalence are also available.
(2) Respective years of service as of September 30, 1994, for the persons
named in the Summary Compensation Table are: Mr. Holmes, 9; Mr.
Bausman, 29; Mr. Nevin, 8; Mr. Medford, 20; and Mr. Lutynski, 12.
In addition to the plans discussed above, the Company also provides
compensation or death benefits generally payable over 10 years,
beginning at the earlier of retirement or death of the employee. The
compensation benefit is equal to either 100%, 150% or 200% of the
current year's total cash compensation depending upon the respective
officer's grade level. The Company generally insures against its
obligations through the purchase of life insurance policies on the
lives of such officers.
</TABLE>
EMPLOYMENT AGREEMENTS
Mr. Holmes has entered into an Employment Agreement with the Company
under which he has agreed to remain employed by the Company as its President
and Chief Executive Officer until September 30, 1995 at an annual base salary
of $340,000 with increases as established from time to time by the Board of
Directors, but which may not be reduced below $340,000 without his consent or
resolution by arbitration. If Mr. Holmes elects early retirement upon reaching
age 55, his annual retirement benefits (including those to which he may be
entitled under the pension plan) shall be equal to 61% of his final average
annual compensation. After age 55 his annual retirement benefits shall
increase by one percent (1%) of final average compensation for each additional
twelve month period of service after age 55, but prior to reaching age 65.
13
<PAGE> 15
Mr. Nevin and Mr. Bausman have also entered into Employment Agreements
with the Company. Mr. Nevin's was renewed effective September 30, 1992 and,
during fiscal 1994, Mr. Bausman's was extended for one year pending completion
of a new contract. Messrs. Nevin and Bausman have agreed to remain employed by
the Company until September 30, 1997, and May 31, 1995, respectively, at an
annual base salary of $252,000 and $212,000, respectively, with such increases
as are established from time to time by the Board of Directors, but which may
not be reduced below those annual salaries without their respective consent or
resolution by arbitration. Upon retirement after attaining age 65, Messrs.
Nevin and Bausman shall be entitled to receive retirement benefits (including
benefits to which they may be entitled under the pension plan) equal to 65% of
final average annual compensation. If they elect early retirement after
reaching age 55, but prior to reaching age 58, their respective annual
retirement benefits (including benefits to which they may be entitled under the
pension plan) shall equal 55% of final average annual compensation (reduced by
1/15 for each year of service, as defined in the Company's pension plan, less
than 15). If they elect early retirement after reaching age 58 their
respective annual retirement benefits shall equal 55% of final average annual
compensation plus 1% for each additional twelve-month period of service after
age 58, but prior to reaching age 65, with no reduction if their respective
years of service are fewer than 15.
The Employment Agreements of Messrs. Holmes, Nevin and Bausman also
provide for certain disability and death benefits, including retirement
benefits as described above upon permanent disability. In the event of death,
the Employment Agreements also provide for continued medical coverage of the
employee's spouse for a period expiring at the earlier of her death or 42
months after the employee's death. During the period of each Employment
Agreement and for a period of two years after the termination thereof, or the
cessation of payments thereunder (whichever is later), each of them shall not
compete directly or indirectly with the Company.
The foregoing Agreements also generally provide that if the employee is
discharged by the Company prior to the expiration date of the Agreements other
than for cause (as defined in the Agreements), or if the Company fails to renew
the Agreements other than for cause, the employee shall be entitled to receive
(i) payments in an amount equal to the employee's Annual Compensation Value (as
defined in the Agreements), reduced by 70% of compensation from subsequent
employment (a) for a period expiring two years from the date of termination of
employment with respect to discharge prior to the expiration date of the
Agreements, or (b) for a period of one year from the expiration date of the
Agreements in the case of non-renewal; (ii) credit for certain amounts of
additional service under the Supplemental Plan; (iii) continuing coverage under
Company-sponsored medical benefits programs for a period expiring on the
earlier of the employee's securing other employment or two years from the date
of termination of employment; (iv) reimbursement of up to $20,000 in
out-placement fees; and (v) required payments under the employee's Deferred
Compensation Agreement.
These Employment Agreements also contain provisions which may require
the Company to fund an escrow immediately in the event of a "change in control"
(as defined in such Agreements) of the Company. Funding is required upon the
occurrence of any "escrow funding event," as defined in such Agreements. The
Company estimates that if Messrs. Holmes, Nevin and Bausman had been terminated
on September 30, 1994 following a change in control of the Company, the total
severance payments by the Company to the officers under their Agreements would
have been $6,711,931.
These Employment Agreements also provide that: (i) the employee will be
entitled to receive the escrowed amount upon a Change in Control Termination
that occurs within twenty-four months of a change in control; (ii) the employee
will receive an additional twenty-four months of service credit under the
Supplemental Plan following a Change in Control Termination; (iii) the
payments to be made upon a Change in Control Termination include a payment
equal to three times the employee's annual salary in
14
<PAGE> 16
effect at the date of termination or immediately prior to the change in control
(whichever is higher) and his average bonus with respect to the three fiscal
years preceding the year in which his termination of employment occurs; (iv) if
the total amount of any payments payable to the employee upon the termination
of the employee's employment or upon a change in control (whether or not
pursuant to the severance provisions) would be subject to an excise tax as
"parachute payments" pursuant to Sections 280G and 4999 of the Internal Revenue
Code of 1986, the amount of the severance payments under the severance
provisions will be reduced to avoid such excise tax, but only if the net effect
of such reduction is to increase the net after tax income to the executive; and
(v) the amount paid into escrow shall be the amount described in clause (iii)
as may be limited pursuant to clause (iv) and for periodic adjustment of such
amount. The Employment Agreements of Messrs. Holmes and Nevin further provide
that (i) if the employee voluntarily terminates employment or is discharged by
the Company other than for "cause" (as defined therein) prior to attainment of
age 55, he will be entitled to receive, commencing at age 55, a portion of his
annual retirement benefits prorated to reflect his service with the Company;
and (ii) upon a Change in Control Termination prior to the date he attains age
55, the employee will be entitled to receive, commencing at age 55, retirement
benefits equal to 61% and 55% of his final average compensation, respectively.
Mr. Bausman's Employment Agreement further provides that (i) if he voluntarily
terminates his employment or is discharged by the Company prior to his
attainment of age 55, he will be entitled to receive under the Supplemental
Plan a portion of his age 55 benefit prorated to reflect his service with the
Company after November 9, 1987 in excess of his vested Pension Plan benefit and
the Officer's Life Insurance and Compensation Program benefits; and (ii) upon a
Change in Control Termination prior to the date he attains age 55, he will be
entitled to receive, commencing at age 55, retirement benefits equal to 55% of
his Final Average Compensation.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
15
<PAGE> 17
<TABLE>
PERFORMANCE GRAPH
FISCAL YEARS 1990 THROUGH 1994
Comparison of Five Year Cumulative Total Return Among The Reynolds and Reynolds Company,
S&P 500 Index and a Composite of Two Indices
<CAPTION>
1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
Reynolds 100 52 108 188 342 443
S&P 500 100 91 119 132 149 155
Composite Index 100 70 93 95 118 140
<FN>
The graph compares the cumulative total shareholder return on a $100
investment in the Company's Class A common shares for the last five fiscal
years with the cumulative total return on $100 invested in each of (i) the S&P
500 Index and (ii) a composite of two indices. The composite index is
comprised of the S&P Computer Software and Services Index and a
self-constructed business forms index and is adjusted each year to reflect the
percent of the Company's business segments' revenues represented by each index.
The Bridge Printing Index (used in last year's proxy) ceased publication. The
Company selected the following business forms companies for its
self-constructed replacement index: American Business Products, Inc., Duplex
Products, Inc., Ennis Business Forms, Inc., Moore, Ltd., New England Business
Services, Inc., Standard Register Company and Wallace Computer Services, Inc.
The graph assumes all investments were made at market value on September 30,
1989 and the reinvestment of all dividends.
</TABLE>
16
<PAGE> 18
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
Committee
---------
The Compensation Committee of the Board of Directors consists entirely
of nonemployee, independent Directors. The Committee reviews, recommends and
approves changes to the Company's compensation policies and programs applicable
to the Company's officers and senior personnel.
Deductibility of Executive Compensation
---------------------------------------
The Committee has been advised with respect to Internal Revenue Code
Section 162(m) ("New Tax Law") and related transitional rules concerning the
non-deductibility of annual compensation in excess of $1 million if paid to any
of the individuals listed in the Summary Compensation Table.
Under the transitional rules, the Committee has been further advised
that the New Tax Law did not apply to the Company during fiscal year 1994
(ended September 30, 1994).
When the provisions of the New Tax Law do apply in fiscal year 1995
(beginning October 1, 1994), it is the Committee's current intention that
executive compensation be deductible for purposes of federal income tax. To
achieve that goal, the Committee will study all available alternatives under
the New Tax Law and will present its decisions in this Report next year.
Compensation Policy and Objectives
----------------------------------
Our primary goal as members of the Compensation Committee is to assure
that the compensation provided to executives is linked to the Company's
business strategies and objectives, thereby aligning the financial interests of
senior management with those of the shareholders. Beyond that, our priorities
are to assure that the executive compensation programs enable the Company to
attract, retain and motivate the high caliber executives required for the
success of the business. These objectives are achieved through a variety of
compensation programs, summarized below, which support both the current and
long-term performance of the business.
Base Salary
- - -----------
Base salaries for executive officers are determined by evaluating the
responsibilities of the position and comparing it with other executive
positions in the marketplace. From time to time the Company's compensation
consultant surveys senior executive salaries from a representative sampling
(approximately 20) of companies in the computer services and business forms
industries. The Company's pay grade levels are then set at approximately the
competitive mid-range. Each of the executive officers is assigned a pay grade
based on that competitive marketplace data. Individual salaries may then vary
somewhat below or above the mid-range, based upon the individual's performance
and contribution to Company success, tenure on the job and internal equity.
Annual salary adjustments are determined by individual performance within an
officer salary increase budget approved by the Committee. Base salary levels
for executive officers increased an average of 3.7% effective January 1, 1994.
17
<PAGE> 19
Annual Incentives
- - -----------------
Officers have an opportunity to earn annual bonuses ("Annual Plan")
based on performance against financial targets established by the Committee.
Since 1987, the Company has used corporate return on equity as its primary
measure of corporate performance. At the divisional level, other measures of
performance for the annual bonus include sales, operating income and return on
net assets. In addition, the Committee approves adjustments to the bonus
formula as may be necessary from time to time to insure against unmerited
windfalls or penalties due to accounting changes or other non-operating
factors. Over time, the Company has found that linking executive pay
principally to corporate return on equity directly ties the executive's
interests and rewards to those of the shareholder. Under the current structure
of the Annual Plan, no bonus is paid until a threshold corporate return on
equity of 8% is achieved; maximum payout requires a 20% return on equity. The
annual bonus payout can range between 0% of annual salary to 60% of annual
salary. For fiscal 1994, because the Company achieved a return on equity of
23.8%, the annual bonus payout for the executive officers ranged between 52.3%
to 60.0% of annual salary.
Another annual incentive plan is the Personal Performance Bonus. This
plan is designed to reward all officers for the achievement of financial and
non-financial goals which are agreed upon by the officer and the officer's
superior. In the case of Mr. Holmes, his annual goals are agreed upon by this
Committee in consultation with Mr. Holmes. Examples of financial goals have
been return on equity, sales, return on net assets or operating income.
Examples of non-financial goals have been market share growth, total quality
measures, customer satisfaction and the strengthening of a key organizational
process. With the exception of Mr. Holmes whose personal performance bonus is
determined by the Compensation Committee during its year-end review, all other
executive officers have their personal performance bonus determined by the
respective individual to whom they report during individual year-end
evaluations. Depending on an individual's performance against goals, this
bonus can range between 0% to 20% of annual salary. For fiscal 1994 this
personal performance bonus for the named executive officers ranged from 15% to
20% of annual salary.
Long-Term Incentives
- - --------------------
Stock Options
-------------
To further align the interests of shareholders and management, the
Company grants incentive stock options annually to approximately 250 employees.
The number of shares awarded is driven by a pay grade level formula which is
established and reviewed from time to time by the Compensation Committee. The
Committee assigns a percentage to each pay grade level. That percentage is
multiplied by the salary mid-point for that grade level and the result is
divided by the fair market value of the Company's stock on October 1. For all
officers during fiscal year 1994, the percentage of annual salary used in
determining stock option grants ranged from 40% to 125%. The exercise price
is the fair market value of the stock on the date of the grant. The options,
which have a ten year life, are not exercisable during the first year after
the grant. Thereafter, on each of the first four anniversaries of the grant,
twenty-five percent of the options become exercisable.
Such stock options provide incentive for the creation of shareholder
value, since the full benefit of the compensation package cannot be realized
unless an appreciation in the price of the Company's common shares occurs over
a specified number of years.
18
<PAGE> 20
Stock Ownership Guidelines
--------------------------
During fiscal year 1994, the Compensation Committee established
suggested stock ownership guidelines for all officers of the Company. These
guidelines specify an appropriate level of ownership of Company stock as a
multiple of the officer's annual base salary. These multiples range from a
high of 4.25 times annual salary (in the case of Mr. Holmes) to a low of 1.5
times annual salary. The Committee thought it appropriate to permit the
officers to achieve these ownership guidelines over a ten year period in
increments of 10% per year. To encourage the officers to make steady progress
toward meeting the guidelines, the Committee determined that if an officer owns
a quantity of shares sufficient to meet the ownership guidelines for that year
the officer would be granted options on 20% more shares in addition to the
officer's standard stock option grant for that year. If, for example, the
standard stock option grant for that year were one hundred shares, the officer
would receive options on twenty additional shares of stock for having met the
guidelines for that year. As of September 1, 1994 stock ownership among the
forty-eight officers stood at approximately 750,000 shares. The Committee
believes that these guidelines will have the positive effect of further
aligning the interests of the officer group with those of all shareholders.
Vision 2000 Stock Option Grant
------------------------------
At the beginning of fiscal year 1994, Mr. Holmes presented to the Board
a long-term growth plan - Vision 2000 - for the balance of the decade.
Vision 2000 is a strategic plan to produce a company with significantly
increased revenues, profits and shareholder value. To assist in the
achievement of Vision 2000, the Committee made special, one-time grants of
premium-priced, non-qualified stock options to all officers. On the date of
these grants, October 1, 1993, the fair market value of the Company's stock was
$20.00 per share. The exercise prices of the Vision 2000 grants range from a
low of $22.05 to a high of $29.55 per share. (Both the fair market value and
the exercise prices reflect the March 1994 stock split). Options are fully
vested on October 1, 1998 and are exercisable at any time between October 1,
1998 and October 1, 2003. Depending on the officer's grade level, the option
grants (adjusted for the March 1994 stock split) ranged from a high of 280,000
shares (for Mr Holmes) to a low of 22,820 shares. These option grants will
provide rewards only if the price of the Company's stock achieves superior
performance levels for the balance of the decade.
Intermediate Incentive Compensation
-----------------------------------
Certain senior officers, including the five named executive officers,
also participate in an Intermediate Incentive Compensation Plan. This plan,
which is paid annually, is based on a three-year average return on equity, and
is designed to focus and reward senior management on producing consistent
longer-term financial results. For fiscal 1994 the payout from this plan for
the named executive officers ranged from 55.9% to 93.2% of annual salary.
CEO Compensation
- - ----------------
Mr. Holmes has served as Chairman, President and Chief Executive
Officer since August 1990, and President and Chief Executive Officer since
January 1989. The Performance Graph on page 16 illustrates the Company's
accomplishments during this period. In fiscal 1994 the Company achieved record
revenues and earnings and achieved a 23.8% return on equity. Shareholders
realized a 25% increase in share value during the year. Mr. Holmes' 1994
compensation of $1,224,273 (as shown in the Summary Compensation Table on page
9) included a market priced base salary of $439,250. He also participates in
the Annual, Intermediate and Personal Performance Bonus programs described
above and is subject to their standards, formulas and evaluation procedures.
The Committee awarded a personal
19
<PAGE> 21
performance bonus of $87,850 to Mr. Holmes following its year-end evaluation.
On October 1, 1993, in addition to the Vision 2000 option grant (described
above), the Committee awarded Mr. Holmes an annual stock option grant for
32,160 Class A Shares which was based on the formula (explained above)
applicable to his position.
Summary
- - -------
The Committee believes that a high caliber, motivated management team
is critical to sustained business success.
As in prior years, in 1994 a significant portion (approximately 64%) of
the total compensation potential for the named executive officers was "at risk"
and payable based on individual and corporate performance-based variables that
will motivate and focus management on those issues that drive the success of
the Company. The Committee intends to continue its performance-based pay
policy which links executive rewards to shareholder returns.
THE COMPENSATION COMMITTEE
Dr. David E. Fry, Chairman William H. Seall
Gayle B. Price, Jr. Martin D. Walker
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The law firm of Dinsmore & Shohl provided certain professional
services for the Company during fiscal year 1994. Mr. Seall, a Director of the
Company, is a member of that firm.
No Executive Officer or Director is or has been indebted to the
Company during the last fiscal year in excess of $60,000.
PROPOSAL II
INCREASE IN AUTHORIZED CLASS A COMMON SHARES
The Board of Directors proposes that the Articles of Incorporation be
amended and restated to increase the number of authorized Class A Shares from
60,000,000 to 120,000,000, an increase of 60,000,000. No request is being made
to increase the number of authorized Class B Shares.
Background
- - ----------
On February 17, 1994 the Board of Directors declared a two-for-one
stock split which was paid to shareholders on March 15, 1994. Payment of that
split required more than 23,000,000 Class A Shares and significantly reduced
the number of those authorized shares available for general corporate purposes.
As of December 1, 1994, there were 41,452,637 Class A Shares issued
and outstanding. An additional 4,446,633 Class A Shares were reserved for
issuance on the exercise of outstanding stock options and the conversion of the
outstanding Class B Shares. As a result, there now remain only 14,100,730
Class A Shares available for future issuance for general corporate purposes.
20
<PAGE> 22
Result of Approval
- - ------------------
Approval of this proposal to increase by 60,000,000 the number of
authorized Class A Shares will mean that 74,100,730 Class A Shares will be
available for future issuance by the Board in the exercise of its sound
discretion for general corporate purposes. Those purposes include, by way of
example, stock splits or stock dividends, possible future acquisitions, the
Stock Option Plan - 1995 (if approved by the shareholders) or, if deemed
advisable, issuances and sales in order to raise additional corporate funds.
The Company has no present plans for any such issuances to raise additional
funds.
The Board of Directors recommends 60,000,000 as the amount of the
increase in the number of authorized Class A Shares to assist the Company's
long-range planning and to avoid the necessity of returning to the shareholders
each year or on a fairly regular basis for authorizations of additional shares.
Except for an approximate $150,000 filing fee payable to the Ohio
Secretary of State in connection with the increased number of authorized Class
A Shares, the Company will incur no substantial expenses or costs related to
this increase in its authorized Class A Shares. The Board of Directors does
not intend to infringe upon or detract from the usual prerogatives of the
Company's shareholders with respect to shareholder approval of future issuances
of the additional shares, as set forth below.
Except for the shares which will be reserved under the terms of the
Stock Option Plan - 1995, there are no present plans, understandings or
agreements with respect to the issuance of any additional Class A Shares for
which authorization is being sought. However, the Company from time to time
conducts preliminary investigations and discussions which might lead to the
issuance of Class A Shares for the acquisition of other businesses. Management
does not intend to seek any further shareholder approval prior to the issuance
of any additional shares in future transactions unless such approval is
required by law, by the Company's Amended Articles of Incorporation or
Consolidated Code of Regulations, or by the rules of any stock exchange upon
which the stock of the Company may be listed. A possible dilution in the
equity ownership of the present shareholders may result if and when the
additional shares are issued. The holders of Class A Shares have no preemptive
rights.
The proposed Amended Articles of Incorporation, which the shareholders
are being requested to adopt at the Meeting, appear in their entirety as
Exhibit A to the Proxy Statement. The affirmative vote of the holders of at
least two-thirds of the total number of outstanding Class A Shares and Class B
Shares, voting as one class, will be necessary for the approval of this
proposal.
***************************************************************************
* *
* THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR AMENDING AND RESTATING *
* THE AMENDED ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF *
* AUTHORIZED CLASS A COMMON SHARES. *
* *
***************************************************************************
PROPOSAL III
ADOPTION OF STOCK OPTION PLAN -- 1995
During its entire thirty-three year history as a public corporation, the
Company has used stock options to motivate and compensate its officers and
other key employees. It believes that the present stock option plan is
achieving its objectives of attracting competent employees, retaining
outstanding executives and increasing share ownership by such executives.
Because the Company's present stock option plan was
21
<PAGE> 23
not available to nonemployee Directors, the Board of Directors on November
15, 1994, adopted, subject to approval by the shareholders, The Reynolds and
Reynolds Company Stock Option Plan -- 1995 (the "Plan"), which makes each
Director of the Company who is not an employee of the Company ("Nonemployee
Director") eligible to receive stock options. The portion of the Plan
applicable to employees is, in all material respects, almost identical to the
Company's present stock option plan. Other than the timing and amount of
options granted, which are not discretionary, the terms of the portion of the
Plan applicable to Nonemployee Directors are the same as those applicable to
employees. If the Plan is approved by the shareholders, no additional grants
will be made under the present stock option plan.
Under the Plan, officers and key employees (generally, those at or above the
director level) of the Company or any subsidiary are eligible to receive a
grant of stock options for Class A Shares of the Company ("Employee Options")
and Nonemployee Directors of the Company are eligible to receive a grant of
stock options for Class A Shares ("Nonemployee Director Options"). A summary
of the Plan follows and is qualified in its entirety by reference to the copy
of the Plan attached to this Proxy Statement as Exhibit B.
Eligibility
- - -----------
Any key employee of the Company or any subsidiary ranking at or above
director level (presently 266 individuals) and such other employees, regardless
of title or designation, as shall in the determination of the Board be
responsible in the future for the duties presently being discharged by
employees at or above the director level, shall be eligible to receive grants
of Employee Options under the Plan. An eligible employee is not rendered
ineligible by reason of service on the Board of Directors of the Company. Any
Nonemployee Director of the Company shall be eligible to receive grants of
Nonemployee Director Options under the Plan. At present, six Nonemployee
Directors will be eligible to receive Nonemployee Director Options.
Principal Features of the Plan
- - ------------------------------
The Employee Options Committee shall grant Employee Options. It shall have
the authority and discretion to determine the number of Class A Shares covered
by an individual Employee Option and the exercise price for those shares.
However: (i) no one may receive Employee Options under the Plan covering more
than 15% of the total number of Class A Shares authorized for issuance under
the Plan, and (ii) the exercise price may not be less than the par value of the
shares on the date of the grant. The exercise price of Employee Options
designated as incentive stock options ("ISO") must be not less than the Fair
Market Value of a Class A Share on the date of grant. In its discretion, the
Employee Options Committee may refrain from granting any Employee Options in a
particular year or may grant Employee Options to some, but not all, eligible
employees in a particular year. It is anticipated that Employee Option grants
will take place annually. The term of each Employee Option exercise period is
subject to the discretion of the Employee Options Committee, but shall not
exceed ten years.
In determining which of the eligible employees shall be granted Employee
Options in a particular year, the number of Class A Shares to be covered by
each Employee Option, the exercise price for the Employee Options granted and
the term and exercise period for the Employee Options granted, the Employee
Options Committee, consistent with the express provisions of the Plan, may take
into account the nature of the services rendered by the respective eligible
employees, their present and potential contributions and value to the Company's
success and such other factors as the Employee Options Committee in its
discretion shall deem relevant. A majority of the Employee Options Committee
shall have the authority to make binding decisions.
22
<PAGE> 24
On October 1 of each Plan year there shall be an automatic grant of
Nonemployee Director Options to each Nonemployee Director to purchase that
number of Class A Shares which represent a Fair Market Value of $40,000. This
dollar figure shall be adjusted annually beginning October 1, 1996 to reflect
the year to year change in the Consumer Price Index. On each of the first four
anniversaries of a grant, 25% of each Nonemployee Director Option grant shall
vest in the recipient. The exercise period shall be ten years from the date of
the grant.
The number of Class A Shares that may be the subject of Employee Options and
Nonemployee Director Options granted under the Plan is determined by a formula
which has two parts: i) an initial reservation; and ii) annual reservations
during the ten year life of the Plan. The initial reservation is one million
Class A Shares. The annual reservations shall be the lesser of two percent
(2%) of the total issued and outstanding Class A Shares as of October 1 of each
full or partial fiscal year during which the Plan is in effect beginning with
October 1, 1995 or two percent (2%) of the total issued and outstanding Class A
Shares as of October 1, 1994, which equals 834,151 shares. Class A Shares
subject to the Plan may, at the discretion of the Board of Directors, be either
authorized and unissued Class A Shares or Class A Shares acquired or to be
acquired by and belonging to the Company as treasury shares. If an Employee
Option or a Nonemployee Director Option is surrendered, forfeited or expires
without being fully exercised, the unexercised Class A Shares are available for
offering under future Employee Options or Nonemployee Director Options granted.
Option Rights
- - -------------
Except for death or retirement, an employee must exercise an Employee Option
while employed by the Company or within sixty (60) days of employment
termination (other than a termination for cause). Nonemployee Directors may
exercise Nonemployee Director Options while no longer serving on the Board,
unless terminated for cause. In the case of death while employed or while
serving as a Nonemployee Director, an optionee's estate or personal
representative may exercise the respective Employee Option or Nonemployee
Director Option within one year following the optionee's death or the remainder
of the exercise period, whichever is less. In the case of employee retirement,
the optionee may exercise Employee Options at any time before the expiration of
the respective exercise period. The grant of an Employee Option or a
Nonemployee Director Option does not confer any rights of a shareholder. Such
rights (including the right to vote the Class A Shares and to receive
dividends) come only after a stock certificate is issued following the exercise
of an Employee Option or a Nonemployee Director Option.
Administration
- - --------------
The Employee Options will be administered by the Employee Options Committee
composed of at least three Nonemployee Directors. The Employee Options
Committee is responsible for construing, interpreting and implementing the
provisions of the portion of the Plan applicable to employees and making awards
of Employee Options thereunder. The Nonemployee Director Options will be
administered by the Nonemployee Director Options Committee composed of all
Directors who are employees of the Company. The Nonemployee Director Options
Committee is responsible for the interpretation and implementation of the
portion of the Plan applicable to Nonemployee Directors.
Federal Income Tax Consequences
- - -------------------------------
The following are the Federal income tax consequences generally arising with
respect to options granted under the Plan. The grant of an option will create
no tax consequences for an optionee or the Company. The optionee will have no
taxable income upon exercising an ISO (except that the alternative
23
<PAGE> 25
minimum tax may apply) while the optionee is an employee of the Company or
within three months after retirement (one year in the case of a disabled
employee). After such time period, ISOs are treated as non-qualified options.
The Company will receive no deduction when an ISO is exercised. Nonemployee
Director Options will be treated as non-qualified options. Upon exercising a
non-qualified option, the optionee must recognize ordinary income equal to the
difference between the exercise price and the Fair Market Value of the stock on
the date of exercise. The Company will be entitled to a deduction for the same
amount. The treatment to an optionee of a disposition of Class A Shares
acquired through the exercise of an option depends on how long the Class A
Shares have been held and on whether such Class A Shares were acquired by
exercising an ISO or by exercising a non-qualified option. Generally, there
will be no tax consequence to the Company in connection with a disposition of
Class A Shares acquired under an option except that the Company may be entitled
to a deduction in the case of a disposition of Class A Shares acquired under an
ISO before the applicable ISO holding periods have been satisfied. Different
tax rules apply with respect to participants who are subject to Section 16 of
the Securities Exchange Act of 1934, as amended.
General
- - -------
The closing price of the Company's Class A Shares on the New York Stock
Exchange on December 1, 1994, was $22.875 per share.
No option shall be transferable by an optionee except, upon death, by will or
the laws of descent and distribution. Options shall be exercisable during the
optionee's lifetime only by the optionee or by his guardian or legal
representative.
The maximum number of Class A Shares that may be granted under the Plan, the
number of Class A Shares covered by outstanding Employee Options and
Nonemployee Director Options granted thereunder and the prices per share
applicable thereto, are subject to adjustment in the event of stock dividends,
stock splits, combinations of Class A Shares, recapitalizations, mergers,
consolidations, spin-offs, reorganizations and similar events.
On the occurrence of a Change in Control (defined in Exhibit B, pages B1 and
B2) all outstanding options become immediately and fully exercisable.
If the Company is the subject of a merger, acquisition or other
reorganization in which the Company is not to be the surviving entity, the
Company shall, in its discretion exercisable by a 75% affirmative vote of its
Board of Directors, have the right to cancel, immediately prior to the
effective date of the transaction, all outstanding Employee Options and
Nonemployee Director Options issued under the Plan by giving written notice to
each optionee or his personal representative of its intention to do so and by
permitting the purchase during the thirty (30) day period next preceding such
effective date of the proposed transaction of all Class A Shares subject to
such outstanding options.
The Plan may be amended from time to time by the Board of Directors, but
without further approval of the shareholders no such amendment shall (i)
increase the maximum number of Class A Shares that may be granted under the
Plan, (ii) change the class of employees eligible to receive grants, (iii)
decrease the minimum price at which Class A Shares may be optioned or permit
options to be exercisable more than ten years after date of grant, (iv) make a
member of the Employee Options Committee eligible to receive or hold Employee
Options under this Plan while serving on the Employee Options Committee, or (v)
without the consent of the optionee, alter or affect outstanding Employee
Options or Nonemployee Director Options to the detriment of the optionee.
24
<PAGE> 26
New Plan Benefits
- - -----------------
The grant of Employee Options under the Plan is within the discretion of the
Employee Options Committee. For this reason, the options to be granted to
officers and key employees under the Plan are not determinable.
The grant of Nonemployee Director Options under the Plan are not
discretionary. The number of shares to be granted to Nonemployee Directors in
the future under the Plan is unknown, as the amount will be determined on the
basis of the Fair Market Value of Class A Shares on the date of grant.
The following table sets forth the grant of options to be received under the
Plan by (i) the named executives officers, (ii) all current executive officers
as a group, (iii) all current Directors who are not executive officers as a
group, and (iv) all employees, including all officers who are not executive
officers, as a group.
STOCK OPTION PLAN -- 1995
Name and Position Dollar Value Number of Shares
----------------- ------------ ----------------
David R. Holmes 0
Joseph N. Bausman 0
Robert C. Nevin 0
Dale L. Medford 0
Adam M. Lutynski 0
All current executive officers
as a group (7 persons) 0
All current Directors who are not
executive officers as a group
(6 persons) $40,000 0
All employees, including officers
who are not executive officers,
as a group 0
The affirmative vote of the holders of a majority of the total number of
outstanding Class A Shares and Class B Shares, voting as one class, will be
necessary for the approval of the Plan.
***************************************************************************
* *
* THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ADOPTING THE *
* STOCK OPTION PLAN -- 1995. *
* *
***************************************************************************
25
<PAGE> 27
PROPOSAL IV
APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee of the Board of Directors recommends that Deloitte
& Touche LLP be appointed as independent auditors of the Company for one year.
Deloitte & Touche was formed in 1989 upon the combination of Deloitte Haskins &
Sells and Touche Ross & Company. Representatives of Deloitte & Touche are
expected to be present at the Annual Meeting and will have the opportunity to
make statements if they so desire and will be available to respond to
appropriate questions.
***************************************************************************
* *
* THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPOINTMENT OF *
* DELOITTE & TOUCHE AS INDEPENDENT AUDITORS FOR THE COMPANY. *
* *
***************************************************************************
SHAREHOLDER PROPOSALS
Proposals of Shareholders intended to be presented at the 1996 Annual
Meeting of Shareholders must be received by the Company by September 5, 1995,
for inclusion in the Company's Proxy Statement and Proxy relating to the 1996
Annual Meeting of Shareholders.
Shareholder nominations of persons to be elected to the Board of
Directors at the February 8, 1996 Annual Meeting must be delivered to or mailed
and received at the principal executive offices of the Company no earlier than
November 10, 1995 and no later than December 10, 1995.
OTHER MATTERS
Management does not intend to present to the Meeting any matters other
than those described above. It does not know of anything that will be presented
by other parties. However, if any other matters shall properly come before the
Meeting, the Appointed Proxies intend to vote on such matters according to
their discretion and best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
Adam M. Lutynski, Secretary
Dayton, Ohio
January 5, 1995
26
<PAGE> 28
EXHIBIT A
AMENDED ARTICLES OF INCORPORATION
of
THE REYNOLDS AND REYNOLDS COMPANY
Restatement Effective February 9, 1995
FIRST: The name of the corporation is THE REYNOLDS AND REYNOLDS COMPANY.
SECOND: The place in the State of Ohio where its principal office is
located is the City of Dayton, Montgomery County.
THIRD: The purposes for which it is formed are:
a. To manufacture and distribute standard and custom business
forms and systems and computer equipment, systems and accessories,
and provide electronic data processing services;
b. To act as statutory agent for any domestic or foreign
corporation as permitted by Sections 1701.07, 1702.06 and 1703.041,
of the Ohio Revised Code, and amendments thereto; and
c. To engage in any lawful act or activity for which
corporations may be formed under Sections 1701.01 to 1701.98,
inclusive, of the Ohio Revised Code and amendments thereto.
Nothing herein shall be deemed to limit or exclude in any manner
any capacity, power, right, privilege or authority granted to, or
inhering within, this corporation by virtue of the common law and
the General Corporation Law of Ohio, as the same may be amended
from time to time.
FOURTH: SECTION 1. Authorized Capital Stock.
The total number of shares of capital stock that the corporation is
authorized to issue is 210,000,000, divided into three classes as
follows:
(i) 120,000,000 Class A Common Shares, $.625, (hereafter referred
to as "Class A Common Shares");
(ii) 30,000,000 Class B Common Shares, $.03125, (hereafter
referred to as "Class B Common Shares" and referred to collectively
with the Class A Common Shares as "Common Shares"); and
(iii) 60,000,000 Preferred Shares, no par value (hereafter
referred to as "Preferred Shares").
SECTION 2. Terms and Provisions of Preferred Shares.
A-1
<PAGE> 29
a. GENERAL. The Preferred Shares may be issued in one or more
series. Except as set forth in Articles FOURTH and FIFTH of these
Amended Articles of Incorporation or as permitted by Section 1701
of the Revised Code of the State of Ohio, as amended from time to
time (the "Ohio Code"), the express terms of Preferred Shares of
different series of any particular class shall be identical. The
division of the Preferred Shares into one or more series and the
designations, preferences and relative, participating, optional or
other special rights and privileges of, and qualifications and
restrictions on, the rights of holders of Preferred Shares of each
series shall be such as stated and expressed in these Amended
Articles of Incorporation and, to the extent not stated and
expressed herein and subject to the Ohio Code, shall be such as may
be fixed by the Board of Directors (authority to do so being hereby
expressly granted) and stated and expressed in a resolution or
resolutions adopted by the Board of Directors and an amendment to
these Amended Articles of Incorporation adopted by the Board of
Directors providing for the issuance of Preferred Shares of such
series. Such resolution or resolutions and amendment shall fix (i)
the designation and authorized number of Preferred Shares for each
series; (ii) the dividend or distribution rates for such series;
(iii) the dates of payment of dividends or distributions and the
dates, if any, from which dividends are cumulative; (iv) the
liquidation prices for such series; (v) the redemption rights and
prices for such series, if any; (vi) the sinking fund requirements
for such series, if any; (vii) conversion rights for such series,
if any; PROVIDED that in no event shall the Preferred Shares be
convertible into Common Shares; and (viii) restrictions on the
issuance of shares of any class or series, if any. Such resolution
or resolutions and amendment may also fix (authority to do so being
hereby expressly granted to the Board of Directors) any and all
other relative, participating, voting, optional or other special
rights and privileges of, and qualifications or restrictions on,
the rights of holders of Preferred Shares or any series thereof to
the extent permitted by the Ohio Code.
b. DIVIDEND PREFERENCE. The holders of Preferred Shares of each
series, in preference to the dividend rights on the Common Shares
and any other stock of the corporation ranking junior to the
Preferred Shares with respect to dividends or distributions, shall
be entitled to receive out of any funds legally available therefor
and when and as declared by the Board of Directors dividends or
distributions at the rates fixed for such series by the amendments
to these Amended Articles of Incorporation adopted by the Board of
Directors providing for the issuance of such series, and no more,
payable on the dates fixed for such series in such amendments.
Such dividends shall be cumulative, in the case of Preferred Shares
of a particular series entitled to cumulative dividends, from and
after the dates fixed for such series by the amendments to these
Amended Articles of Incorporation adopted by the Board of Directors
providing for the issuance of such series.
No dividend for any dividend period shall be paid upon or
declared and set apart for any Preferred Shares of any series for
any dividend period unless, as to each series of Preferred Shares
entitled to cumulative dividends, dividends for all past dividend
periods on all such series shall have been paid or shall have been
declared and a sum sufficient for the payment thereof set apart.
No dividend in respect of past dividend periods shall be paid
upon or declared and set apart for payment on any Preferred Shares
of any series entitled to cumulative
A-2
<PAGE> 30
dividends unless there shall be or have been declared and set
apart for payment on all outstanding Preferred Shares of all series
entitled to cumulative dividends, dividends for past dividend
periods ratably in accordance with the amounts which would be
payable on the shares of the series entitled to cumulative
dividends if all dividends due for all past dividend periods were
declared and paid in full.
So long as any Preferred Shares of any series remain
outstanding, the corporation shall not declare or pay any dividends
or make any distributions, in each case, whether in cash,
securities or otherwise, on the Common Shares or any other stock
ranking junior to the Preferred Shares with respect to dividends or
distributions (other than dividends or distributions payable in
Common Shares or other stock ranking junior to the Preferred Shares
with respect to dividends or distributions and with respect to the
liquidation, dissolution or winding up of the corporation), nor
shall any Common Shares or shares of such junior stock be redeemed,
purchased, retired or otherwise acquired, unless and until all
dividends or distributions on the Preferred Shares of all series
for all past dividend periods shall have been paid or made in full,
or declared and a sum sufficient for payment of such dividends or
distributions set apart, and the full dividend thereon or
distribution with respect thereto shall have been declared and paid
or made for the current dividend period.
c. LIQUIDATION PREFERENCE. In the event of any liquidation,
dissolution or winding up of the corporation, voluntary or
otherwise, then, before any distribution or payment shall be made
to the holders of Common Shares or any class of stock of the
corporation ranking junior to the Preferred Shares in respect to
the liquidation, dissolution or winding up of the corporation, the
holders of the Preferred Shares of all series shall be entitled to
be paid in full the respective amounts fixed by the amendments to
these Amended Articles of Incorporation adopted by the Board of
Directors providing for the issuance of such series for payment for
such series in the event of liquidation, dissolution or winding up
of the corporation. After such payment shall have been made in
full to the holders of Preferred Shares of all series, the
remaining assets of the corporation shall be distributed among the
holders of Common Shares and other shares of any other class of
stock of the corporation ranking junior to the Preferred Shares in
respect of the liquidation, dissolution or winding up of the
corporation according to their respective rights. In the event
that the assets of the corporation available for distribution to
the holders of Preferred Shares of all series shall not be
sufficient to make the payment required herein to be made in full,
such assets shall be distributed to the holders of the Preferred
Shares of all series pro rata in proportion to the amounts fixed
for payment for such shares in the event of the liquidation,
dissolution or winding up of the corporation.
d. STATUS OF REACQUIRED SHARES. Except as otherwise provided in
any amendments to the Amended Articles of Incorporation by the
Board of Directors providing for the issuance of any particular
series of Preferred Shares, Preferred Shares that are redeemed,
repurchased or otherwise acquired by the corporation shall assume
the status of authorized but unissued Preferred Shares and may
thereafter, subject to the provisions of this Article FOURTH, the
Ohio Code and any restrictions contained in the amendments to these
Amended Articles of Incorporation by the Board of Directors
providing for the issuance of any particular series of Preferred
Shares, be reissued in the same manner as other authorized but
unissued Preferred Shares.
A-3
<PAGE> 31
Section 3. Terms and Provisions of Common Shares.
The express terms and provisions of the Common Shares are as
follows:
a. When and as declared by the Board of Directors out of the
funds of the corporation available for such purpose and subject to
prior rights and preferences of the Preferred Shares set forth in
Section 2.b. of this Article FOURTH, the holders of the Class A
Common Shares and Class B Common Shares shall be entitled to
receive dividends; PROVIDED that no dividend shall be declared or
paid on either class of Common Shares unless a dividend shall be
simultaneously declared and paid on both classes, and the dividend
on each Class A Common Share in every instance shall be in an
amount twenty (20) times that declared and paid on each Class B
Common Share.
b. In the event of the dissolution, liquidation or winding up of
the corporation, voluntary or otherwise, after the debts and
liabilities have been paid and payment in full of all amounts
required to be paid to the holders of Preferred Shares of all
series pursuant to Section 2.c. of this Article FOURTH, the
remaining assets shall be distributed to the holders of the Common
Shares in units -- 20 units to be assigned for each Class A Common
Share and one unit for each Class B Common Share outstanding.
c. Any holder of Class B Common Shares may, at his option, at
any time convert any or all of such Class B Common Shares into
Class A Common Shares of the corporation at the rate of one (1)
Class A Common Share for each twenty (20) Class B Common Shares.
On presentation and surrender to the corporation of a certificate
or certificates for Class B Common Shares so to be converted, as
aforesaid, duly endorsed in blank for transfer, the holder of such
Class B Common Shares shall be entitled to receive in exchange
therefor a certificate or certificates for fully paid and
non-assessable Class A Common Shares at the rate aforesaid. Class
B Common Shares shall be deemed to have been converted and the
person converting the same to have become the holder of record of
Class A Common Shares for the purpose of receiving dividends and
for all other purposes whatever as of the date when the certificate
or certificates for such Class B Common Shares are surrendered to
the corporation, as aforesaid. The corporation shall reserve and
keep available, out of its authorized and unissued Class A Common
Shares solely for the purpose of effecting the conversion of the
Class B Common Shares, such number of Class A Common Shares as
shall, from time to time, be sufficient to effect the conversion of
all Class B Common Shares then outstanding. Class B Common Shares
surrendered upon conversion shall be cancelled and shall not be
reissued.
SECTION 4. Terms and Provisions of Series A Participating
Preferred Shares.
a. DESIGNATION AND AMOUNT. There shall be established a series
of Preferred Shares which shall be designated as the "Series A
Participating Preferred Shares" and the number of shares
constituting such series shall be 2,000,000.
b. DIVIDENDS AND DISTRIBUTIONS.
(1) Subject to the provisions for adjustment set forth
in this Section 4.b. of this Article FOURTH, the holders of Series
A Participating Preferred Shares shall be
A-4
<PAGE> 32
entitled to receive, when and if declared by the Board of Directors out of
funds legally available for the purpose, dividends on each Series A
Participating Preferred Share equal to 1,000 (as adjusted from time to time as
provided in subparagraph (2) of this Section 4.b. of this Article FOURTH, the
"Class A Multiple") times the aggregate amount of dividends or distributions
declared (whether or not paid) from time to time per Class A Common Share
(other than to the extent that such dividends and distributions are payable in
Class A Common Shares); PROVIDED that, in the event the dividends and
distributions declared on each Series A Participating Preferred Share
outstanding during the period (a "Dividend Period") between any Dividend
Payment Date (as defined below) and the next subsequent Dividend Payment Date
(or, in the case of the first Dividend Period, the period between the date of
issuance of the first Series A Participating Preferred Share or any fraction
thereof and the next subsequent Dividend Payment Date), do not in the aggregate
equal at least $10 per Series A Participating Preferred Share, then each Series
A Participating Preferred Share shall be entitled to receive, when and if
declared by the Board of Directors out of funds legally available for the
purpose, dividends ("Minimum Dividends") on each Series A Participating
Preferred Share equal to the difference between $10 and the amount of any
dividends or distributions declared on the Series A Participating Preferred
Shares during such Dividend Period. Minimum Dividends shall be payable in cash
on the Dividend Payment Date ending the applicable Dividend Period. "Dividend
Payment Dates" shall mean the dates determined by the Board of Directors which
dates shall be no later than the last day of January, April, June and September
in each year.
(2) In the event the corporation shall at any time or from time to time
after May 6, 1991 (the "Rights Declaration Date") (a) declare any dividend or
distribution on the Class A Common Shares payable in Class A Common Shares, (b)
subdivide the outstanding Class A Common Shares, or (c) combine the outstanding
Class A Common Shares into a smaller number of shares, then in each such case
the Class A Multiple shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of Class A Common Shares outstanding
immediately after such event and the denominator of which is the number of
Class A Common Shares outstanding immediately prior to such event.
(3) The corporation shall declare a dividend or distribution on the Series
A Participating Preferred Shares as set forth in subparagraph (1) of this
Section 4.b. of this Article FOURTH prior to or simultaneously with a
declaration of any dividend or distribution on the Class A Common Shares (other
than a dividend or distribution payable in Class A Common Shares) or, in the
case of dividends payable on a Dividend Payment Date, prior to such Dividend
Payment Date.
(4) Dividends shall begin to accrue and be cumulative on each outstanding
Series A Participating Preferred Share from the date of issuance thereof.
Accrued and accumulated but unpaid dividends shall not bear interest.
Dividends paid on the Series A Participating Preferred Shares in an amount less
than the total amount of such dividends at the time accrued, accumulated and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix
a record date for the determination of holders of Series A Participating
Preferred Shares entitled to receive payment of a dividend or distribution
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<PAGE> 33
declared thereon, which record date shall be no more than 60 days
prior to the date fixed for the payment thereof.
c. VOTING RIGHTS. Subject to the Ohio Code and any amendments
to these Amended Articles of Incorporation by the Board of
Directors providing for the issuance of any series of Preferred
Shares (other than the Series A Participating Preferred Shares),
the holders of the Class A Common Shares, Class B Common Shares and
Preferred Shares of all series (including, without limitation, the
Series A Participating Preferred Shares) shall be entitled to one
vote per share and shall vote together as a single class for all
corporate purposes.
d. LIQUIDATION, DISSOLUTION OR WINDING UP. In the event of any
liquidation, dissolution or winding up of the corporation,
voluntary or otherwise, then, before any distribution or payment
shall be made to the holders of Common Shares or any class of stock
of the corporation ranking junior to the Series A Participating
Preferred Shares in respect of the liquidation, dissolution or
winding up of the corporation, first (1) the holders of the Series
A Participating Preferred Shares shall be entitled to be paid an
amount in dollars equal to (a) the Class A Multiple per share, plus
(b) any accrued, accumulated and unpaid dividends and distribution
thereon, whether or not declared, to the date of such payment and
then (2) the holders of the Series A Participating Preferred Shares
shall be entitled to be paid in full an amount per share equal to
the Remaining Assets (as defined below) multiplied by a fraction
(a) the numerator of which is 20,000 and (b) the denominator of
which is the sum of (i) the number of issued and outstanding Series
A Participating Preferred Shares multiplied by 20,000, (ii) the
number of issued and outstanding Class A Common Shares multiplied
by 20 and (iii) the number of issued and outstanding Class B Common
Shares.
"Remaining Assets" shall mean the amount of assets legally
available for payment to shareholders of the corporation upon
liquidation, dissolution or winding up of the corporation,
voluntary or otherwise, minus any payments to holders of Preferred
Shares upon liquidation, dissolution or winding up of the
Corporation, voluntarily or otherwise to be made pursuant to clause
(1) of the first sentence of this Section 4.d. of this Article
FOURTH or pursuant to any amendments to these Amended Articles of
Incorporation made by the Board of Directors providing for the
issuance of any other series of Preferred Shares.
e. CONSOLIDATION, MERGER, ETC. In case the corporation shall
enter into any consolidation, merger, combination or other
transaction in which the Class A Common Shares are exchanged for or
converted into other shares or securities, cash or any other
property, then in any such case each Series A Participating
Preferred Share shall at the same time be similarly exchanged for
or converted into an amount per share equal to the Class A Multiple
times the aggregate amount of shares, securities, cash or any other
property (payable in kind), as the case may be, into which or for
which each Class A Common Share is exchanged or changed; PROVIDED
that, the Series A Participating Preferred Shares shall not be
exchanged for or converted into Common Shares and in lieu thereof
the holders of the Series A Preferred Shares will receive cash or
other consideration in the form and amount determined by the Board
of Directors to be equivalent to the per share amount referred to
immediately preceding this provision.
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<PAGE> 34
f. NO REDEMPTION. The Series A Participating Preferred Shares
shall not be redeemable.
g. FRACTIONAL SHARES. Series A Participating Preferred Shares
may be issued in fractions of a share which shall entitle the
holder, in proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in
distributions and have the benefit of all other rights or holders
of Series A Participating Preferred Shares.
FIFTH: Subject to the Ohio Code and any amendments to these Articles of
Incorporation by the Board of Directors providing for the issuance
of any series of Preferred Shares, the holders of the Class A
Common Shares, Class B Common Shares and Preferred Shares of all
series shall be entitled to one vote per share and shall vote
together as a single class for all corporate purposes.
SIXTH: When authorized by the affirmative vote of the Board of Directors,
without the action or approval of the shareholders of this
corporation, unless such action or approval is required under the
General Corporation Law of Ohio, as the same may be amended from
time to time, this corporation may purchase, or contract to
purchase, at any time from time to time, shares of any class issued
by this corporation, voting trust certificates for shares, bonds,
debentures, notes, script, warrants, obligations, evidences of
indebtedness or any other securities of this corporation, if and
when any holder of such securities desires to sell the same, for
such prices and upon and subject to such terms and conditions as
the Board of Directors may determine, provided that no such
purchase shall be made, pursuant to any such contract or otherwise,
if after such purchase the assets of this corporation would be less
than its liabilities plus stated capital or if it is insolvent as
defined in the General Corporation Law of Ohio, as the same may be
amended from time to time, or if there is reasonable ground to
believe that by such purchase it would be rendered insolvent.
SEVENTH: No holder of shares of any class of this corporation shall, as such
holder, have any preemptive rights in, or preemptive rights to
subscribe for or purchase, any shares of the corporation, or any
bonds, debentures or other securities convertible into any shares
of the corporation.
EIGHTH: No contract or transaction shall be void or voidable with respect
to the corporation for the reason that it is between the
corporation and one or more of its directors or officers, or
between the corporation and any other person in which one or more
of its directors or officers are directors, trustees, or officers,
or have a financial or personal interest, or for the reason that
one or more interested directors or officers participate in or vote
at the meeting of the directors or a committee thereof which
authorizes such contract or transaction, if in any such case (a)
the material facts as to his or their relationship or interest and
as to the contract or transaction are disclosed or are known to the
directors or the committee and the directors or committee, in good
faith reasonably justified by such facts, authorize the contract or
transaction by the affirmative vote of a majority of the
disinterested directors, even though the disinterested directors
constitute less than a quorum; or (b) the material facts as to his
or their relationship or interest and as to the contract or
transaction are disclosed or are known to the shareholders entitled
to vote
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<PAGE> 35
thereon and the contract or transaction is specifically approved
at a meeting of the shareholders held for such purpose by the
affirmative vote of the holders of shares entitling them to
exercise a majority of the voting power of the corporation held by
persons not interested in the contract or transaction; or (c) the
contract or transaction is fair as to the corporation as of the
time it is authorized or approved by the directors, a committee
thereof, or the shareholders. Common or interested directors may
be counted in determining the presence of a quorum at a meeting of
the directors, or of a committee thereof which authorizes the
contract or transactions.
NINTH: As more specifically set forth in the Consolidated Code of
Regulations of the corporation, the corporation may provide to any
director, officer, other employee or agent of the corporation or
any person who serves at the request of the corporation as a
director, trustee, other employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, the maximum
indemnification permitted under Section 1701.13(E) of the Ohio
Revised Code, including amendments thereto, or any comparable
provisions of any future Ohio statute.
TENTH: The number of directors of the Corporation shall be not fewer than
nine (9) nor more than twelve (12), with the exact whole number of
directors and the number of directors in each class determined
either (i) by the affirmative vote of the holders of record of at
least 75% of the voting power of outstanding shares of the
Corporation at a meeting of shareholders called for that purpose
and for the purpose of electing directors or (ii) from time to time
by the affirmative vote of a majority of the directors. No
reduction shall have the effect of removing any director prior to
the expiration of his term of office. Election of Directors need
not be by ballot unless the Consolidated Code of Regulations so
provides. The Directors shall be classified with respect to their
terms of office by dividing them into three classes, each
consisting as nearly as possible of one-third of the whole number
of the Board of Directors. A Director's term of office shall be
three years, except that, in order to provide for the rotation of
members of the Board of Directors, initially and whenever
necessary, a Director may be elected for a shorter term. At each
Annual Meeting of Shareholders, the successors to the class of
Directors whose terms expire at the time of such Annual Meeting
shall be elected to hold office for a term of three years and until
their successors are duly elected and have qualified, so that the
term of office of one class of Directors shall expire in each year.
A Director may be removed from office as a Director at any time,
but only for cause, by the affirmative vote of shareholders of
record holding a majority of the outstanding voting securities of
the corporation entitled to vote in the election of Directors at a
meeting of the shareholders called for that purpose; provided that
no Director shall be removed in case the votes of a sufficient
number of shares are cast against his removal which, if
cumulatively voted at an election of all the Directors, would be
sufficient to elect at least one Director.
ELEVENTH: SECTION 1. Notwithstanding any other provisions of these Amended
Articles of Incorporation and except as set forth in Section 2 of
this Article Eleventh, if any of the following transactions are
proposed to be entered into with a five percent beneficial owner
(as defined in Section 4 hereof), the affirmative vote or consent
of the holders of not less than seventy-five percent (75%) of the
outstanding shares of this corporation entitled to
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<PAGE> 36
vote in elections of directors, voting for purposes of this
Article as one class (unless separate class voting by the shares is
otherwise required by the laws of the State of Ohio), shall be
required:
a. to adopt any agreement for, or to approve, the merger or
consolidation of the corporation or any subsidiary (as defined in
Section 4 hereof) with or into a five percent beneficial owner;
b. to authorize any sale, lease, transfer, exchange, mortgage,
pledge, or other disposition to a five percent beneficial owner of
all or substantially all of the assets of the corporation or any
subsidiary; or
c. to authorize the issuance or transfer by the Corporation or
any subsidiary of any voting securities of the corporation or any
subsidiary in exchange or payment for the securities or assets of a
five percent beneficial owner, if such authorization is otherwise
required by law or by any agreement between the corporation and any
national securities exchange or by any other agreement to which the
corporation or any subsidiary is a party.
If the other party to any of the foregoing transactions is not, and
has not been, such a five percent beneficial owner, the provisions
of this Section 1 shall not apply, and the provisions of the
corporation's Consolidated Code of Regulations and the provisions
of Ohio law shall apply.
SECTION 2. The provisions of Section 1 of this Article Eleventh
shall not apply, and the provisions of the corporation's
Consolidated Code of Regulations and of Ohio law shall apply to (i)
any transaction described therein if the Board of Directors by
resolution shall have approved an agreement with such five percent
beneficial owner setting forth the principal terms of such
transaction and such transaction is substantially consistent
therewith, provided that a majority of those members of the Board
of Directors voting in favor of the resolution approving the
agreement were duly elected and acting members of the Board of
Directors prior to the time such five percent beneficial owner
became the beneficial owner of five percent or more of the
outstanding shares of the corporation entitled to vote in elections
of directors or (ii) any transaction described therein if such five
percent beneficial owner is a majority-controlled subsidiary of the
corporation.
SECTION 3. The affirmative vote or consent of the holders of not
less than seventy-five percent (75%) of the outstanding shares of
the corporation entitled to vote in elections of directors, voting
for purposes of this Article as one class (unless separate class
voting by the shares is otherwise required by the laws of the State
of Ohio), shall be required for the adoption of any plan for the
dissolution of the corporation if the Board of Directors shall not
have, by resolution, recommended to the shareholders the adoption
of such plan for dissolution of the corporation. If the Board of
Directors shall have so recommended to the shareholders such plan
for dissolution of the corporation, the provisions of the
corporation's Consolidated Code of Regulations and the provisions
of Ohio law shall apply; provided that a majority of those members
of the Board of Directors voting in favor of the dissolution plan
were duly elected and acting members of the Board of Directors
prior to the time such five percent beneficial owner became the
beneficial owner of five percent or more of the outstanding shares
of stock of the corporation
A-9
<PAGE> 37
entitled to vote in the election of directors.
SECTION 4. As used in this Article,
a. any specified person shall be deemed to be the "beneficial
owner" of shares of stock of the corporation (i) which such
specified person or any of its affiliates or associates (as such
terms are hereinafter defined) owns, directly or indirectly,
whether of record or not, (ii) which such specified person or any
of its affiliates or associates has the right to acquire pursuant
to any agreement, or upon exercise of conversion rights, warrants
or options, or otherwise, (iii) which are beneficially owned,
directly or indirectly (including shares deemed owned through
application of clauses (i) and (ii) above) by any other person with
which such specified person or any of its affiliates or associates
has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of stock of the
corporation, or (iv) which such specified person or any of its
affiliates or associates has the right to acquire by reason of
tenders of shares submitted to them by other shareholders of the
corporation in connection with or pursuant to a tender offer made
by such specified person or any of its affiliates or associates;
b. a "subsidiary" is any corporation at least 50 percent of the
voting securities of which are owned, directly or indirectly, by
this corporation;
c. a "person" is any individual, corporation, partnership or
other entity;
d. an "affiliate" of a specified person is any person that
directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with, the
specified person; and
e. an "associate" of a specified person is (i) any person of
which such specified person is an officer or partner or is,
directly or indirectly, the beneficial owner of ten percent or more
of any class of equity securities, (ii) any trust or other estate
in which such specified person has a substantial beneficial
interest or as to which such specified person serves as trustee or
in a similar fiduciary capacity, or (iii) any relative or spouse of
such specified person, or any relative of such spouse, who has the
same home as such specified person or who is a director or officer
of such specified person or any corporation which controls or is
controlled by such specified person;
f. "five percent beneficial owner" is any person who is, or at
any time within the preceding twelve months has been, the
beneficial owner of five percent (5%) or more of the outstanding
shares of the corporation entitled to vote in elections of
directors, such determination to be made as of the record date of
shareholders entitled to receive notice of, and to vote on or
consent to, any of the transactions set forth above in Sections 1
and 3 of this Article Eleventh.
SECTION 5. For purposes of determining whether a person is a five
percent beneficial owner, the outstanding shares of the corporation
shall include shares deemed owned through application of clauses
(i), (ii), (iii) and (iv) of Subsection 4(a) above but shall not
include any other shares which may be issuable pursuant to any
agreement or upon exercise of conversion rights, warrants or
options.
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<PAGE> 38
SECTION 6. The Board of Directors shall have the power and duty to
determine, for purposes of this Article, on the basis of
information known to such Board,
a. whether any party to a transaction referred to in Section 1
of this Article is a five percent beneficial owner; and
b. whether a proposed transaction is subject to the provisions
of Section 1, 2 or 3 of this Article.
Any such determination shall be conclusive and binding for all
purposes of this Article.
TWELFTH: Notwithstanding any other provisions of these Amended Articles of
Incorporation and any provisions of the Consolidated Code of
Regulations of the corporation, no amendment to these Amended
Articles of Incorporation shall amend, modify, or repeal any or all
of the provisions of Articles Tenth, Eleventh and Twelfth, unless
so adopted by the affirmative vote or consent of the holders of not
less than seventy-five percent (75%) of the outstanding shares of
the corporation entitled to vote in elections of Directors,
considered for purposes of this Article as a class (unless separate
class voting by the shares is otherwise required by the laws of the
State of Ohio); provided, however, that in the event the Board of
Directors of the corporation shall, by resolution adopted by a
majority of the Directors then in office, recommend to the
shareholders the adoption of any such amendment, the shareholders
of record holding two-thirds of the outstanding shares of the
corporation entitled to vote in elections of Directors may amend,
modify, or repeal any or all of such provisions.
THIR-
TEENTH: These Amended Articles of Incorporation supersede the existing
Amended Articles of Incorporation.
A-11
<PAGE> 39
EXHIBIT B
THE REYNOLDS AND REYNOLDS COMPANY
STOCK OPTION PLAN -- 1995
SECTION 1. PURPOSES.
The Reynolds and Reynolds Company 1995 Stock Option Plan is intended to promote
the growth and general prosperity of The Reynolds and Reynolds Company and its
Subsidiaries, as defined in Section 2 below, by providing key employees
responsible for the policies and operations of the Company and nonemployee
directors with an additional incentive to contribute to its success by
assisting the Company in attracting and retaining the best available personnel
for positions of substantial responsibility and by increasing the identity of
interests of key employees and nonemployee directors with those of the
shareholders of the Company. It is intended that these purposes be effected
through the granting of Options, as defined in Section 2 below.
SECTION 2. DEFINITIONS.
(A) "ADMINISTRATOR" means the Employee Options Committee with respect to
Employee Options and the Nonemployee Director Options Committee with
respect to Nonemployee Director Options.
(B) "AFFILIATE" means a person controlling, controlled by, or under common
control with the Company.
(C) "BOARD" means the Board of Directors of the Company.
(D) "CHANGE IN CONTROL" shall mean the occurrence of any of the following:
(i) Any "person," as such term is used in Sections 13 (d) and
14 (d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (other than Richard H. Grant, Jr., his
children or his grandchildren, the Company, any trustee or
other fiduciary holding securities under an employee
benefit plan of the Company or any company owned, directly
or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of
stock of the Company), who is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of
the Company's then outstanding securities;
(ii) during any period of two consecutive years (not including
any period prior to the execution of this Plan),
individuals who at the beginning of such period constitute
the Board, and any new director (other than a director
designated by a person who has entered into an agreement
with the Company to effect a transaction described in
clause (i), (iii) or (iv) of this Section) whose election
by the Company's shareholders was approved by a vote of at
least two-thirds (2/3) of the directors at the beginning of
the period or whose election or nomination for election was
previously so approved cease for any reason to constitute
at least a majority thereof;
(iii) the shareholders of the Company approve a merger of
consolidation of the Company
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<PAGE> 40
with any other Company, other than (1) a merger or consolidation which
would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation or (2) a merger or
consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no "person" (as hereinabove defined)
acquires more than 50% of the combined voting power of the Company's
then outstanding securities; or
(iv) the shareholders of the Company approve a plan of
liquidation, dissolution or winding up of the Company or an
agreement for the sale or disposition by the Company of all
or substantially all of the Company's assets.
(E) "CODE" means the Internal Revenue Code of 1986, as amended.
(F) "COMPANY" means The Reynolds and Reynolds Company.
(G) "DATE OF GRANT" means the date upon which the Administrator determines
to grant an Option or such later date as may be determined by the
Administrator at the time such grant is authorized, subject to
satisfaction of any conditions the Administrator may place on the
effectiveness of the grant.
(H) "DIRECTOR" means a member of the Board.
(I) "EMPLOYEE OPTION" means an Option other than Nonemployee Director
Option.
(J) "EMPLOYEE OPTIONS COMMITTEE" means the Employee Options Committee
referred to in Section 4(a).
(K) "FAIR MARKET VALUE OF A SHARE" means the mean between the highest and
lowest reported selling prices on a national securities exchange of
the Shares as reported in the appropriate composite listing for said
exchange on the date the value of a Share is to be determined under
this Plan or, if no such sales occurred on that date, then on the next
preceding date on which a sale was made. In the event the Shares of
the Company are traded in the over-the-counter market, Fair Market
Value of a Share means the mean between the "high" and "low"
quotations in the over-the-counter market on the date the value of a
Share is to be determined, as reported by the National Association of
Securities Dealers through NASDAQ or, if no quotations are available
on such date, then on the next preceding date on which such quotations
are available.
(L) "HE" and "HIS" also mean "She" and "Hers."
(M) "INCENTIVE STOCK OPTION" means any Employee Option granted hereunder,
the terms of which, at the time of grant, comply with the provisions
of section 422 of the Code.
(N) "NONEMPLOYEE DIRECTOR" means each Director of the Company who is not
an employee of the Company or any Subsidiary.
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<PAGE> 41
(O) "NONEMPLOYEE DIRECTOR OPTION" means an Option granted to a Nonemployee
Director.
(P) "NONEMPLOYEE DIRECTOR OPTIONS COMMITTEE" means the Nonemployee
Director Options Committee referred to in Section 4(b).
(Q) "NON-QUALIFIED STOCK OPTION" means any Option granted hereunder, the
terms of which, at the time of grant, do not comply with the
provisions of section 422 of the Code.
(R) "OPTION" means the right to purchase a specified number of Shares of
the Company in accordance with the terms of this Plan and shall
include both Employee Options and Nonemployee Director Options.
(S) "OPTION PRICE" means the purchase price per Share specified in an
Option granted under the Plan, which price shall be established in
accordance with Sections 4 and 7 and may vary from one Option to
another; provided, however, that in no event may said price be less
than the par value of the Shares, if any; and provided further, that
in no event may said price of any Incentive Stock Option granted
hereunder or a Nonemployee Director Option be less than the Fair
Market Value of a Share on the Date of Grant.
(T) "PLAN" means The Reynolds and Reynolds Company 1995 Stock Option Plan.
(U) "SHARE" or "SHARES" means the Class A Common Shares of the Company.
(V) "SUBSIDIARY" means any company in which more than 50% of the voting
stock is owned or controlled, directly or indirectly, by the Company.
(W) "TERMINATION FOR CAUSE" means a termination of an optionee's
employment or service on the Board (by removal or failure of the Board
to nominate the optionee) whenever occasioned by (i) the willful and
continued failure by the optionee to substantially perform the
optionee's duties with the Company (other than any such failure
resulting from the optionee's incapacity due to physical or mental
illness ) after a written demand for substantial performance is
delivered to the optionee by the Board, which demand specifically
identifies the manner in which the Board believes the optionee has not
substantially performed the optionee's duties, or (ii) the willful
engaging by the optionee in conduct which is demonstrably and
materially injurious to the Company or its Subsidiaries, monetarily or
otherwise. For purposes of this definition, no act, or failure to
act, on the optionee's part shall be deemed "willful" unless done, or
omitted to be done, by the optionee not in good faith and without
reasonable belief that the optionee's act, or failure to act, was in
the best interest of the Company.
SECTION 3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the adjustments required under the provisions of Section 11
hereof, the total number of Shares which may be issued upon the
exercise of all Options granted under the Plan shall not exceed the
sum of:
(i) 1,000,000 Shares; plus
(ii) annual amounts equal to the lesser of (1) two percent (2%)
of the total issued and
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<PAGE> 42
outstanding Shares of the Company as of October 1 of
each full or partial Company fiscal year during which the
Plan is in effect beginning with the Company's fiscal year
commencing October 1, 1995; or (2) such amount calculated
as of October 1, 1994 (two percent (2%) of 41,707,576
Shares or 834,151 Shares).
(b) To the extent that the actual number of Shares issued upon the
exercise of Options granted under the Plan in any such year is less
than the maximum amount allowed hereunder, such excess number of
Shares may be issued upon the exercise of Options granted under the
Plan in subsequent years.
(c) Shares subject to the Plan may be, at the discretion of the Board,
either authorized and unissued Shares or Shares acquired by and
belonging to the Company as treasury shares.
(d) If all or any part of an Option ceases to be exercisable for any
reason, the Shares which are subject to the unexercisable portion of
the Option shall again become available for grant under the Plan.
SECTION 4. ADMINISTRATION OF THE PLAN.
(A) EMPLOYEE OPTIONS.
(i) The Board shall appoint an Employee Options Committee
consisting of not fewer than three members of the Board to
administer the Plan with respect to Employee Options. From
time to time, the Board may increase the size of the
Employee Options Committee and appoint additional members
thereof, remove members (with or without cause), and
appoint new members in substitution therefor and fill
vacancies, however caused. No person shall serve as a
member of the Employee Options Committee if such person is
then or was, at any time within one year prior thereto,
eligible to receive an Employee Option grant under the Plan
or under any other plan of the Company or its Affiliates
under the terms of which participants are, or were,
eligible to receive stock, stock options, or stock
appreciation rights of the Company or any of its
Affiliates.
(ii) Subject to the express terms and conditions of the Plan,
the Employee Options Committee shall have the authority to
(i) grant Employee Options and determine the Option Price
for Shares covered by each Employee Option, the employees
to whom Employee Options are granted, the time or times at
which Employee Options are granted, and the number of
Shares covered by each Employee Option; (ii) construe,
interpret, and implement the Plan and any agreements
executed in connection with the Plan with respect to
Employee Options; (iii) prescribe, amend, and rescind rules
and regulations relating to the Plan with respect to
Employee Options; (iv) make all determinations necessary or
advisable in administering the Plan with respect to
Employee Options; (v) correct any defect, supply any
omission and reconcile any inconsistency in the Plan with
respect to Employee Options; and (vi) determine whether an
Incentive Stock Option, a Non-Qualified Stock Option or a
combination of the two shall be granted as an Employee
Option. In exercising its authority under (i) above, the
Employee Options Committee, consistent with the express
provisions of the Plan, may take into account the nature of
the services rendered by the respective eligible
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employees, their present and potential contributions
and value to the Company's success and such other factors
as the Employee Options Committee in its discretion shall
deem relevant. Any action to be taken by a majority of the
Employee Options Committee shall be the action of the
Employee Options Committee.
(iii) The determination of the Employee Options Committee with
respect to any matter relating to the Plan with respect to
any Employee Option shall be conclusive. No member of the
Employee Options Committee shall be liable for any action
or determination made in good faith with respect to the
Plan or any grant thereunder.
(iv) With respect to the grant of any Employee Option, the
Employee Options Committee may establish terms and
conditions governing its exercise which are more
restrictive than the terms and conditions contained in the
Plan.
(B) NONEMPLOYEE DIRECTOR OPTIONS. The members of the Board who are
employees shall constitute the Nonemployee Director Options Committee
and shall be responsible for the administration of the Plan with
respect to Nonemployee Director Options. With respect to Nonemployee
Director Options, the Nonemployee Director Options Committee by
majority thereof is authorized to interpret the Plan, to prescribe,
amend, and rescind rules and regulations relating to the Plan, to
provide for conditions and assurances deemed necessary or advisable to
protect the interests of the Company, and to make all other
determinations necessary or advisable for the administration of the
Nonemployee Director Options, but only to the extent not contrary to
the express provisions of the Plan. Determinations, interpretations,
or other actions made or taken by the Nonemployee Director Options
Committee with respect to Nonemployee Director Options, in good faith
pursuant to the provisions of the Plan shall be final, binding, and
conclusive for all purposes and upon all persons whomsoever.
SECTION 5. ELIGIBILITY AND TIMING OF GRANTS.
(A) EMPLOYEE OPTIONS.
(i) Employee options, including without limitation, Incentive
Stock Options may be granted by the Employee Options
Committee to any key employees of the Company, or any
Subsidiary, holding positions at or above the director
level and such other key employees, regardless of title or
designation, as shall, in the determination of the Employee
Options Committee, be responsible in the future for the
duties presently being discharged by employees at or above
the director level. The Employee Options Committee may
condition an Employee Option grant upon the execution of an
option agreement containing such provisions as the Employee
Options Committee determines to be advisable. An otherwise
eligible employee shall not be rendered ineligible by
reason of service as a member of the Board. If the
Employee Options Committee deems it appropriate to do so,
it may determine to (i) grant Employee Options to some, but
not to all, eligible employees in a particular year, or
(ii) refrain from granting any Employee Options at all in a
particular year. An employee who has been granted an
Employee Option under this Plan or under any other prior or
current stock option plan of the Company may, if he is
otherwise eligible, be granted additional Employee Options
under this Plan.
B-5
<PAGE> 44
(ii) Unless otherwise determined by the Employee Options
Committee, Employee Options shall be granted annually
during the term of the Plan.
(B) NONEMPLOYEE DIRECTOR OPTIONS. Each Nonemployee Director who is a
Nonemployee Director on October 1 of each year during the term of the
Plan shall be automatically granted Nonemployee Director Options.
SECTION 6. TERM OF OPTION AND NUMBER OF SHARES COVERED BY INDIVIDUAL
OPTIONS.
(A) EMPLOYEE OPTIONS.
(i) The term of each Employee Option shall not exceed ten (10)
years from the Date of Grant of the Employee Option. The
Employee Options Committee shall promptly cause such
grantee of an Employee Option to be notified of the grant
and the details thereof.
(ii) The number of Shares covered by an Employee Option shall be
determined by the Employee Options Committee in its
discretion; provided, however, that no employee may be
granted Employee Options under this Plan covering more than
fifteen percent (15%) of the total number of Shares
reserved under Section 3; and provided further, that no
Incentive Stock Option may be granted to any employee then
possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the
Company unless such Incentive Stock Option sets forth a per
share exercise price of one hundred ten percent (110%) of
the Fair Market Value of a Share on the Date of Grant. The
aggregate Fair Market Value, determined as of the Date of
Grant, of the Shares with respect to which Employee Options
constituting Incentive Stock Options granted under the Plan
or under any other incentive stock option plan of the
Company are first exercisable by an employee during any
calendar year shall not exceed one hundred thousand dollars
($100,000).
(B) NONEMPLOYEE DIRECTOR OPTIONS.
(i) The term of each Nonemployee Director Option shall be ten
(10) years from the date of its grant.
(ii) On October 1, or the first business day in October, of each
year during the term of this Plan, each Nonemployee
Director shall automatically be granted Nonemployee
Director Options to purchase Shares with an aggregate Fair
Market Value of $40,000, rounded to the nearest whole
Share. The $40,000 standard shall be adjusted each October
1, commencing October 1, 1996, for annual increases in the
Consumer Price Index. The index used in calculating any
increase shall be the U.S. Consumer Price Index, all urban
Consumers, all items (or equivalent successor index),
published by the Bureau of Labor Statistics of the U.S.
Department of Labor. Notwithstanding the foregoing, if on
any date on which Nonemployee Director Options are to be
granted there is not a sufficient number of Shares
remaining authorized for grant under this Plan to enable
each Nonemployee Director to be granted a Nonemployee
Director Option to purchase the full number of Shares to
which he or she would normally be entitled, Nonemployee
Director Options covering the available Shares shall be
prorated among the
B-6
<PAGE> 45
Nonemployee Directors.
SECTION 7. OPTION PRICE AND PAYMENT THEREOF.
(A) IN GENERAL.
(i) The Option Price shall be payable to the Company either (1)
in United States dollars in cash (including check, bank
draft or money order), or (2) at the discretion of the
applicable committee determined at the Date of Grant, by
delivering either Shares already owned by the optionee or a
combination of Shares and cash. The Shares delivered to
the Company shall be valued at their Fair Market Value.
(ii) The proceeds of the sale of the Shares subject to Options
hereunder are to be added to the general funds of the
Company and used for its general corporate purposes.
(B) EMPLOYEE OPTIONS. Each Employee Option shall state the number of
Shares to which it pertains and the Option Price applicable thereto.
The Option Price for each Employee Option shall be determined by the
Employee Options Committee in its discretion at the time of grant;
provided, however, that the Option Price of any Employee Option which
is an Incentive Stock Option shall be not less than the Fair Market
Value of the Shares subject to such Incentive Stock Option on the Date
of Grant.
(C) NONEMPLOYEE DIRECTOR OPTIONS. Each Nonemployee Director Option shall
state the number of Shares to which it pertains and the Option Price
applicable thereto. The Option Price for each Nonemployee Director
Option shall be equal to the Fair Market Value of the Shares subject
to such Nonemployee Director Option on the Date of Grant.
SECTION 8. EXERCISE OF OPTION.
(A) EMPLOYEE OPTIONS.
(i) Employee Options granted hereunder shall be exercisable at
such times and under such conditions as shall be
permissible under the terms of the Plan and of the Employee
Option.
(ii) The following restrictions shall apply to the exercise of
Employee Options:
(1) Each Employee Option shall be exercisable in whole
or in part at any time or from time to time within
the exercise period established by the Employee
Options Committee for that Employee Option, but in
no event shall said Employee Option be exercisable
after the expiration of ten (10) years from the
Date of Grant of said Employee Option.
(2) Except as provided in Subsections 8(a)(ii)(3), (4)
and (5), an Employee Option may be exercised only
if the optionee has been continuously employed by
the Company since the Date of Grant of the Employee
Option. If an optionee's employment is terminated
by the Company pursuant to a Termination for
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<PAGE> 46
Cause, all Employee Options theretofore granted
to such optionee shall, to the extent not
previously exercised, terminate immediately.
Whether an authorized leave of absence shall
constitute a termination of employment shall be
determined by the Employee Options Committee.
(3) If an optionee dies while employed by Company, the
Employee Options of such deceased optionee may,
subject to the ten-year limitation in Section 6, be
exercised within one (1) year from the date of the
optionee's death, to the extent the optionee was
entitled to exercise the Employee Options on that
date, by the person or persons (including the
optionee's estate) to whom his rights under such
Employee Options passed by will or by the laws of
descent and distribution.
(4) If an optionee retires from active employment with
the Company, the Employee Options of such retired
optionee may, with the consent of the Employee
Options Committee, subject to the ten-year
limitation in Section 6, be exercised by the
retired optionee as fully as if he had remained
continuously employed by the Company.
(5) If an optionee's employment is terminated by either
the Company or the optionee (other than a
Termination for Cause), the Employee Options of
such optionee, may, subject to the ten-year
limitation in Section 6, be exercised by the
optionee within sixty (60) days of such termination
of employment, to the extent the optionee was
entitled to exercise the Employee Options on that
date, as fully as if he had remained continuously
employed by the Company.
(B) NONEMPLOYEE DIRECTOR OPTIONS.
(i) A Nonemployee Director Option shall be exercisable with
respect to twenty-five percent (25%) of the Shares subject
to the Nonemployee Director Option on and after the first
anniversary of the Date of Grant of such Nonemployee
Director Option subject to the restrictions contained in
Subsection 8(b)(ii). On and after each subsequent
anniversary date of the Date of Grant, an additional
twenty-five percent (25%) of the original Shares subject to
the Nonemployee Director Option shall be exercisable
subject to the restrictions contained in Subsection
8(b)(ii).
(ii) The following restrictions shall apply to the exercise of
Nonemployee Director Options:
(1) Except as provided in subsection 8(b)(ii)(2), each
Nonemployee Director Option shall be exercisable,
in whole or in part, at any time or from time to
time, regardless of whether the optionee continues
to serve on the Board, with respect to Shares
subject to the Options which are exercisable under
subsection 8(b)(i), but in no event shall said
Nonemployee Director Option be exercisable after
the expiration of ten (10) years from the Date of
Grant of said Nonemployee Director Option.
(2) If an optionee's service on the Board is terminated
pursuant to a Termination for Cause, all
Nonemployee Director Options of such an optionee
theretofore
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<PAGE> 47
granted to such optionee shall, to the extent not
previously exercised, terminate immediately.
(C) GENERAL PROVISIONS.
(i) An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in
accordance with the terms of the Option by the person
entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has
been received by the Company. Notwithstanding the exercise
of an Option, until the issuance of stock certificates, no
rights of a shareholder, including the right to vote or
receive dividends, shall exist with respect to Shares
subject to the Option. Except as provided in Section 11,
no adjustment will be made for dividend or other rights for
which a record date occurs prior to the date stock
certificates are issued, with respect to Options exercised
under the Plan.
(ii) No fraction of a Share may be purchased by an optionee upon
exercise of an Option; and, to the extent that the use of
fractional or percentage computations would otherwise give
rise to the right of the optionee to purchase a fraction of
a Share, the total Shares subject to exercise shall be
adjusted to the nearest whole number with any half Share
balance being adjusted to one whole Share.
(iii) Upon the occurrence of a Change in Control, all Options
outstanding on the date of such Change in Control, shall
become immediately and fully exercisable.
SECTION 9. AUTHORITY TO AMEND OPTIONS.
(a) Except as otherwise specifically provided hereunder, the Administrator
shall have discretion to determine the terms upon which any Option,
with respect to which it acts as Administrator, is exercisable, and
shall include such terms as it deems advisable to subject the exercise
of such Option to exemption from the application of Section 16(b) of
the Securities Exchange Act of 1934. To assure such exemption,
Options outstanding and option agreements evidencing such Options may
be amended, if necessary, by the applicable Administrator.
(b) The Employee Options Committee, in granting Incentive Stock Options,
shall have discretion to determine the terms upon which said Options
are exercisable subject to the applicable provisions of the Plan, and
to include in those terms such provisions as it deems advisable to
permit treatment of such Options as "incentive stock options" under
Section 422 of the Code.
SECTION 10. NONTRANSFERABILITY.
Options may not be sold, pledged, assigned, hypothecated or transferred other
than by will or the laws of descent and distribution and may be exercised only
by an optionee during his lifetime, or by his legal guardian or legal
representative.
SECTION 11. ADJUSTMENT UPON CHANGES IN SHARES OR CAPITALIZATION.
In the event of any change in the Shares subject to the Plan or to any Option
granted hereunder by reason of a merger, consolidation, reorganization,
recapitalization, stock dividend, stock split-up, combination or
B-9
<PAGE> 48
exchange of shares or other change in the corporate structure (provided that
the Company remains as the surviving entity upon the completion of any of the
foregoing transactions), the aggregate number of Shares as to which Options may
be granted under the Plan, the number and class of Shares subject to each
outstanding Option and the Option Price per Share shall be adjusted
accordingly. The Administrator shall be responsible for making the necessary
changes with respect to such Options.
SECTION 12. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The Plan and all Options granted pursuant to it are subject to all
laws and regulations of any governmental authority which may be
applicable thereto; and, notwithstanding any provisions of this Plan
or the Options granted, the holder of an Option shall not be entitled
to exercise such Option nor shall the Company be obligated to issue
any Shares under the Plan to the Option holder if such exercise or
issuance shall constitute a violation by the optionee or the Company
of any provision of any such law or regulation.
(b) The Company, in its discretion, may postpone the issuance and delivery
of Shares upon the exercise of an Option until completion of any stock
exchange listing or registration or other qualification of such Shares
under any state or federal law, rule, or regulation as the Company may
consider appropriate and may require any person exercising an Option
to make such representations and furnish such information as it
considers appropriate in connection with the issuance of the Shares in
compliance with applicable law. Under such circumstances, the Company
shall proceed with reasonable promptness to complete any such listing,
registration or other qualification.
(c) Shares issued and delivered upon exercise of an Option shall be
subject to such restrictions on trading, including appropriate
legending of certificates to that effect as the Company, in its
discretion, shall determine necessary to satisfy applicable legal
requirements and obligations.
(d) Each optionee to whom an Option is awarded or Shares are issued shall,
at the time the Option is granted or the Shares are issued, as a
condition to such award or issuance, (i) represent, in form
satisfactory to counsel for the Company, that acquisition of the
Shares pursuant to the Option, shall be for investment purposes only;
(ii) agree, in form satisfactory to counsel for the Company, that he
will not sell, pledge, hypothecate or otherwise distribute such Shares
or any interest therein unless a registration statement covering such
Shares is in effect under the Securities Act of 1933, as now or
hereafter amended, or unless counsel for the Company has rendered to
the Company an opinion that such sale, pledge, hypothecation or other
distribution may be carried out without registration of such Shares
under said Act; and (iii) agree, in form satisfactory to counsel for
the Company, that an appropriate legend may be placed on the stock
certificate or certificates evidencing ownership of Shares acquired
hereunder, which legend shall reflect the restrictions on disposition
contained herein; provided, however, that the foregoing condition and
the representation and agreements called for thereby with respect to
the Shares shall be inoperative and shall expire in the event that
either (A) the Shares are registered under the Securities Act of 1933,
as now or hereafter amended or (B) in the opinion of counsel for the
Company, such condition, representation, and agreements are not
necessary under said Act or any rule or regulation promulgated
pursuant thereto.
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<PAGE> 49
SECTION 13. RESERVATION OF SHARES.
The Company, during the term of this Plan, will at all times, consistent with
Section 3, reserve and keep available such number of Shares as, in the judgment
of the Board, shall be sufficient to satisfy the requirements of the Plan.
SECTION 14. TERM OF PLAN.
This Plan shall expire on February 9, 2005 unless sooner terminated under
Section 15.
SECTION 15. AMENDMENT AND TERMINATION OF PLAN.
(a) The Board may, from time to time, amend the Plan or any provision
thereof in such respects as the Board may deem advisable except that,
without the consent of the shareholders of the Company:
(1) the maximum number of Shares subject to the Plan cannot be
increased except in accordance with Section 11;
(2) the class of employees eligible for the grant of an
Employee Option cannot be changed;
(3) the minimum price at which Shares may be optioned cannot be
decreased and no Option can be granted that is exercisable
more than ten (10) years after the date of grant; and
(4) no person can while a member of the Employee Options
Committee be eligible to receive or hold an Employee Option
under this Plan.
Except as specifically permitted by the terms of the Plan or an option
agreement, no amendment shall cause an Option previously granted to
any optionee to be altered or affected to his detriment without his
consent.
Notwithstanding the foregoing, the plan provision regarding
Nonemployee Director Options shall not be amended more than once every
six (6) months, other than to comply with changes in the Internal
Revenue Code, the Employee Retirement Income Security Act, or the
rules thereunder.
(b) The Board may, at any time, terminate the Plan.
(c) Any amendment (except as expressly provided in Section 9) or
termination of the Plan shall not adversely affect any Option
previously granted and such Option shall remain in full force and
effect as if the Plan had not been amended or terminated.
SECTION 16. DISCRETIONARY CANCELLATION IN CASE OF MERGER, ACQUISITION
OR OTHER REORGANIZATION.
Anything to the contrary notwithstanding, if the Company is the subject of a
merger, acquisition or other reorganization in which the Company is not the
surviving entity, the Company shall, at its option exercisable by the
affirmative vote of seventy-five percent (75%) of the members of the Board duly
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<PAGE> 50
elected and serving immediately prior to the proposed transaction, have the
right to cancel, immediately prior to the effective date of such merger,
acquisition or reorganization, all outstanding Options issued under this Plan
by giving written notice to each optionee or his personal representative of its
intention to do so and by permitting the purchase during the thirty day period
next preceding such effective date of all Shares subject to such outstanding
Options.
SECTION 17. DISCLAIMER OF LIABILITY.
Inability of the Company to obtain from any regulatory body the authority
deemed by the Company's counsel to be necessary to the lawful grant of Options
or issuance of any Shares thereunder shall relieve the Company and the
Administrator of any liability relating to the failure to grant such Options or
issue such Shares.
SECTION 18. CLAIM TO OPTION, OWNERSHIP OR EMPLOYMENT RIGHTS.
Neither the grantee nor other holder of an Option, nor his legal
representatives, legatees or distributees, shall have any rights as a
shareholder of the Company with respect to any Shares covered by such Option
until the date of the issuance of a stock certificate or certificates
representing such Shares. Nothing contained in the Plan or in any Employee
Option shall confer upon any employee any right with respect to continuance of
employment by the Company or any Subsidiary or interfere in any way with the
right of the Company or any Subsidiary to terminate his employment at any time.
The granting of any Nonemployee Director Option shall not impose upon the
Company, the Board of Directors or any other Directors any obligation to
nominate any optionee for election as a Director and the right of the
shareholders of the Company to remove any person as a Director shall not be
diminished or affected by reason of the fact that a Nonemployee Director Option
has been granted to such person.
SECTION 19. TAX WITHHOLDING.
In connection with the grant and exercise of Options, the optionee or other
holder of an Option may be required to pay to the Company or a Subsidiary, as
appropriate, the amount of any taxes which the Company or Subsidiary is
required by law to withhold with respect to such transactions.
SECTION 20. INDEMNIFICATION.
Each person who is or shall have been a member of a committee serving as
Administrator or of the Board shall be indemnified and held harmless by the
Company against and from any loss, cost, liability or expense that may be
imposed upon or reasonably incurred by him in connection with or resulting from
any claim, action, suit or proceeding to which he may be a party or in which he
may be involved by reason of any action taken or failure to act under the Plan
and against and from any and all amounts paid by him in settlement thereof,
with the Company's approval, or paid by him in satisfaction of judgment in any
such action, suit or proceeding against him; provided he shall give the Company
an opportunity, at its own expense, to handle and defend the same before he
undertakes to handle and defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification
to which such person may be entitled under the Company's Articles of
Incorporation or Code of Regulations, as a matter of law, or otherwise, or any
power that the Company may have to indemnify him or hold him harmless.
B-12
<PAGE> 51
SECTION 21. NOTICES.
Each notice relating to this Plan shall be in writing and delivered in person
or by certified mail to the proper address. Each notice shall be deemed to
have been given on the date it is received. Each notice to the Administrator
shall be addressed as follows:
The Reynolds and Reynolds Company
Post Office Box 2608
Dayton, Ohio 45401
Attention: Administrator - 1995 Stock Option Plan
Each notice to an optionee or other holder of an Option shall be addressed to
the optionee or such other holder, as the case may be, at the optionee's
address set forth in the Option or in the Company's current records. Anyone
to whom a notice may be given under this Plan may designate, by writing filed
with the Administrator, a new address.
SECTION 22. BENEFITS OF THE PLAN.
This Plan shall inure to the benefit of and be binding upon each successor of
the Company. All rights and obligations imposed upon an optionee shall be
binding upon the optionee's heirs, legal representatives and successors.
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<TABLE>
THE REYNOLDS AND REYNOLDS COMPANY
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS, FEBRUARY 9, 1995
The undersigned hereby appoints David R. Holmes and Adam M. Lutynski, or either of them ("Appointed Proxies"), with power
of substitution to each, to vote all shares of the undersigned at the Annual Meeting of Shareholders ("Meeting") of The Reynolds
and Reynolds Company to be held on Thursday, February 9, 1995 at 11:00 a.m. EST, or at any adjournment(s) thereof, as follows:
<S> <C>
I. ELECTION OF DIRECTORS
[ ] FOR electing Joseph N. Bausman, Richard H. Grant, Jr., and William H. Seall [ ] WITHHOLD AUTHORITY to vote for Joseph N.
each for a term of three (3) years (except as marked to the contrary below). Bausman, Richard H. Grant, Jr. and William H.
Seall.
(Instruction: To withhold authority to vote for any individual nominee, write that nominee's name in the space provided below.)
----------------------------------------------------------------------------------------------------------------------------------
II. Proposal to increase the number of authorized Class A Common Shares [ ] FOR [ ] AGAINST [ ] ABSTAIN
III. Proposal to adopt the Stock Option Plan -- 1995 [ ] FOR [ ] AGAINST [ ] ABSTAIN
IV. Proposal to appoint Deloitte & Touche LLP as independent auditors [ ] FOR [ ] AGAINST [ ] ABSTAIN
If any other business is brought before the Meeting or any adjournment(s) thereof, this Proxy will be voted in the discretion of
the Appointed Proxies.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTING EACH OF THE DIRECTORS AND FOR PROPOSALS II, III AND IV
THIS PROXY, SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS, WILL BE VOTED AS DIRECTED. IF NO DIRECTION TO THE CONTRARY IS INDICATED,
IT WILL BE VOTED FOR THE ELECTION OF THE NAMED NOMINEES AS DIRECTORS, FOR THE INCREASE IN THE NUMBER OF AUTHORIZED CLASS A COMMON
SHARES, FOR THE STOCK OPTION PLAN -- 1995 AND FOR DELOITTE & TOUCHE. IF CUMULATIVE VOTING IS ELECTED AND NO FURTHER INSTRUCTIONS
ARE GIVEN, VOTES CAST PURSUANT TO THIS PROXY WILL BE DISTRIBUTED AMONG THE ABOVE NOMINEES AT THE DISCRETION OF THE APPOINTED
PROXIES.
The undersigned ratifies all that the Appointed Proxies, or their substitutes, may lawfully do by virtue hereof, and
revokes any proxies previously given to vote at the Meeting or adjournment(s).
Dated: ______________________________________________
_____________________________________________________
(Signature)
_____________________________________________________
(Signature)
Please sign exactly as name(s) appear to the left.
When signing in fiduciary or representative capacity,
please add your full title. If shares are registered
in more than one name, all holders must sign. If
signature is for a corporation, the handwritten signature
and title of an authorized officer are required, together
with the full corporate name.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE
</TABLE>
