<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
THE REYNOLDS AND REYNOLDS COMPANY
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
[LOGO]
THE REYNOLDS AND REYNOLDS COMPANY
115 SOUTH LUDLOW STREET
DAYTON, OHIO 45402
January 6, 1998
Dear Fellow Shareholder:
You are cordially invited to attend our Annual Meeting of Shareholders to
be held on Thursday, February 12, 1998 at 11:00 a.m., Eastern Standard Time, 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. Directions to the meeting appear on the back page
of this booklet.
The notice of meeting and proxy statement following this letter describe the
business to be transacted. During the meeting we will also report on the current
activities of the Company and give you an opportunity to ask questions. We
encourage you to participate in the meeting and to allow time to visit our
demonstration and display area either before or after the meeting. The demo and
display area, which is also in the David H. Ponitz Sinclair Center will be open
from 10:00 a.m. until 12:30 p.m.
Whether or not you plan to attend the Meeting, we urge you to sign and date the
enclosed proxy card and return it as soon as possible so that your shares will
be represented. The vote of every shareholder is important.
We look forward to welcoming you at the meeting.
Sincerely,
David R. Holmes
Chairman, President and
Chief Executive Officer
<PAGE> 3
THE REYNOLDS AND REYNOLDS COMPANY
115 SOUTH LUDLOW STREET, DAYTON, OHIO 45402
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 12, 1998
To All Shareholders:
The Annual Meeting of 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 12, 1998, at 11:00 a.m., Eastern Standard Time, for the
following purposes:
1. To elect five (5) Directors;
2. To appoint Deloitte & Touche LLP as independent auditors for
the company; and
3. To transact such other business as may properly be brought
before the Meeting or any adjournment(s) thereof.
Shareholders of record at the close of business on December 19, 1997,
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, 1997, 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 6, 1998
================================================================================
YOUR VOTE IS IMPORTANT. Whether or not you plan to attend the meeting,
please sign and return the proxy in the enclosed postage prepaid
envelope so your shares can be voted.
================================================================================
1
<PAGE> 4
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
THE REYNOLDS AND REYNOLDS COMPANY
115 South Ludlow Street, Dayton, Ohio 45402
TO BE HELD FEBRUARY 12, 1998
THIS PROXY STATEMENT IS ARRANGED IN THE FOLLOWING ORDER:
<TABLE>
<CAPTION>
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...........................................................................................8
Summary Compensation Table..............................................................................9
--------------------------
Option/SAR Grants in Last Fiscal Year ................................................................ 10
-------------------------------------
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Value ..................... 10
--------------------------------------------------------------------------------
Long-Term Incentive Plan -- Awards in Last Fiscal Year ................................................11
------------------------------------------------------
Pension Plan Table ................................................................................... 11
------------------
Employment Agreements ................................................................................ 12
---------------------
Performance Graph .................................................................................... 14
-----------------
Report of the Compensation Committee of the Board of Directors on Executive Compensation ............. 14
----------------------------------------------------------------------------------------
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS .................................................................17
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE ........................................................17
APPOINTMENT OF INDEPENDENT AUDITORS .............................................................(PROPOSAL II) 17
SHAREHOLDER PROPOSALS ..........................................................................................18
OTHER MATTERS ..................................................................................................18
</TABLE>
2
<PAGE> 5
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 12, 1998. This solicitation is
being made by mail. The company has retained Georgeson & Company Inc. to assist
in its proxy solicitation. Georgeson's fee will be $8,000 plus out-of-pocket
expenses incurred on the company's behalf. The company may also 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 nominees for Director and independent auditors as 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 19,
1997 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 no par value ("Class A Shares") and Class B Common
Shares with no par value ("Class B Shares"). There are 240,000,000 Class A
Shares authorized, of which 78,637,414 were issued and outstanding on December
1, 1997, and 40,000,000 Class B Shares authorized, of which 20,000,000 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, 1997, no Preferred Shares were issued and outstanding. Class A
Shares are listed on the New York Stock Exchange. There is no public market for
Class B Shares.
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 and certain
other specified transactions.
3
<PAGE> 6
All properly cast votes, in person or by proxy, by shareholders of
record at the close of business on December 19, 1997 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 on the
plurality vote for Directors or the vote for the appointment of the independent
auditors.
No dividend may be declared or paid on either class of shares 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 canceled 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.
VOTING SECURITIES OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
<CAPTION>
==================================================================================================================
CLASS A CLASS B TOTAL VOTING
SHARES % SHARES % SHARES %
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Number of shares outstanding on
December 1, 1997, except as noted
below were: 78,637,414(1) 100.0 20,000,000 100.0 98,637,414(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, 1997:
Richard H. Grant, III 115,535(2) .12 20,000,000 100.0 20,115,535(2) 20.4
---------------------
Director and Private Investor
800 Germantown Street
Dayton, Ohio 45407
On December 1, 1997, the shares
beneficially owned by all
executive officers and Directors
as a group (16 persons) were: 2,595,430(3) 2.9 20,000,000 100.0 22,595,430(3) 22.6
==================================================================================================================
<FN>
(1) Does not include 13,650,309 Class A Shares held in treasury.
(2) Richard H. Grant, III has sole voting and sole investment power with
regard to 94,428 Class A Shares held in his own name. The total
includes 21,107 Class A Shares as to which Mr. Grant holds options
exercisable within 60 days. The amount excludes 12,776 Class A Shares
held by Mrs. Grant as to which Mr. Grant disclaims beneficial
ownership. This amount does not include 1,000,000 Class A Shares into
which his 20,000,000 Class B Shares are convertible at a 20-to-1 ratio.
(3) Includes 307,139 Class A Shares as to which such persons may exercise
options within the next 60 days.
</TABLE>
4
<PAGE> 7
PROPOSAL I
ELECTION OF DIRECTORS
The Board of Directors of the company has fixed the number of Directors
to constitute the full Board at twelve and proposes that four Directors be
elected for a three-year term expiring in 2001 and one Director be elected for a
two-year term expiring in 2000.
The Board has recommended and nominated RICHARD H. GRANT, JR., ALLAN Z.
LOREN, PHILIP A. ODEEN AND DONALD K. PETERSON each for a three-year term and
JAMES L. ARTHUR for a two-year term.
Messrs. Odeen and Peterson are nominated to fill the positions of
Robert C. Nevin, President of the company's Automotive Division, and Joseph N.
Bausman, the company's former Chief Strategy Officer, whose terms expire at the
annual meeting. Mr. Arthur will fill a position created by the retirement of
Director Kenneth W. Thiele, private investor, whose term would have expired in
2000.
The enclosed Proxy will be voted FOR electing the five nominees unless
a specification is made to withhold such vote. Since the number of Directors has
been fixed at twelve, the election of five 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 the new nominees, each
nominee-incumbent and those Directors whose terms of office will continue after
the Meeting.
NOMINEES FOR TERMS EXPIRING IN 2001
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION AND FIVE YEAR EMPLOYMENT HISTORY SINCE CLASS A(1)
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Richard H. Grant, Jr. 84 Chairman of the Steering Committee. 1939 1,010,816(2)
Allan Z. Loren 59 Executive Vice President and Chief Information 1996 389(4)
Officer, American Express Company, a
diversified worldwide travel, financial and
network services company, since May 1994;
prior thereto, President and CEO, Galileo
International, a global computer reservation
system company owned by 11 airlines.(3)
Philip A. Odeen 62 President and Chief Executive Officer, BDM --- 2,000(5)
International, Inc., a multinational information
technology company, since 1992.
Donald K. Peterson 48 Executive Vice President and Chief Financial Officer, --- 0
Lucent Tehnologies, one of the world's leading
designers, developers and manufacturers of
telecommunications systems, software and products,
since February 1996; prior thereto, Vice President and
Chief Financial Officer, AT&T Communications Services
Group from September 1995 to February 1996; President,
Nortel Communications Systems from 1992 to 1994; and
Executive Vice President Sales of Northern Telecom,
Inc.
</TABLE>
(Table continued on following page)
5
<PAGE> 8
NOMINEE FOR TERM EXPIRING IN 2000
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION AND FIVE YEAR EMPLOYMENT HISTORY SINCE CLASS A(1)
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
James A. Arthur 62 Consultant to Hewlett-Packard Company since his --- 0
retirement in May 1996; prior thereto, Senior Vice
President and General Manager - Customer Support,
Hewlett-Packard Company, which designs, manufactures
and services equipment and systems for measurement,
computation and communications.
</TABLE>
DIRECTORS WHOSE TERMS EXPIRE IN 2000
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION AND FIVE YEAR EMPLOYMENT HISTORY SINCE CLASS A(1)
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cleve L. Killingsworth, 45 President and Chief Executive Officer, Health Alliance 1997 0
Jr. Plan, Michigan's largest managed care plan, since
January 1998; prior thereto, President,
Central East Division, Kaiser Permanente, from
March 1996 to January 1998; President of Ohio
Region, Kaiser Permanente, from August 1994 to
March 1996; and Senior Vice President of
health care operation for Blue Cross and Blue
Shield of Rochester from January 1986 to
August 1994.
Dale L. Medford 47 Vice President, Corporate Finance and Chief Financial 1991 139,269(6)
Officer.
Gayle B. Price, Jr. 67 Chairman, President and Chief Executive Officer, Price 1976 13,147(7)
Brothers Company, manufacturer of concrete
construction materials.
</TABLE>
DIRECTORS WHOSE TERMS EXPIRE IN 1999
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION AND FIVE YEAR EMPLOYMENT HISTORY SINCE CLASS A(1)
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dr. David E. Fry 54 President and Chief Executive Officer, Northwood 1987 2,347(8)
University, a private graduate and undergraduate
university.
Richard H. Grant, III 58 Private Investor since October 1994; prior thereto, 1960 115,535(9)
Senior Vice President, International, Computer Systems
Division, The Reynolds and Reynolds Company.
David R. Holmes 57 Chairman of the Board, President and Chief Executive 1987
Officer.(10) 606,086(11)
Martin D. Walker 65 Principal, MORWAL Investments, a private venture 1991 9,547(13)
capital investment group, since July, 1997; prior
thereto, Chairman and Chief Executive Officer, M. A.
Hanna Company, an international specialty chemicals
company.(12)
</TABLE>
(1) Shares owned beneficially on December 1, 1997.
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 2 and 9 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.
(Footnotes continued on following page)
6
<PAGE> 9
(2) Richard H. Grant, Jr. has sole voting and sole investment power with
regard to 1,916 Class A Shares held in his own name. He also has sole
voting and sole investment power with regard to 1,008,900 Class A
Shares held in a trust for his benefit. The 1,010,816 shares exclude
41,032 Class A Shares held by Mrs. Grant as to which Mr. Grant
disclaims beneficial ownership.
(3) Mr. Loren also serves as a director of United States Cellular
Corporation.
(4) Mr. Loren's shares represent Class A Shares as to which he holds
options exercisable within 60 days.
(5) Mr. Odeen has sole voting and sole investment power with regard to the
2,000 Class A Shares held in his own name.
(6) Mr. Medford has sole voting and sole investment power with regard to
89,059 shares held in his own name, and shared voting and shared
investment power with regard to 12,800 shares held jointly with his
spouse. The 139,269 shares include 37,410 Class A Shares as to which
Mr. Medford holds options exercisable within 60 days.
(7) Mr. Price has sole voting and sole investment power with regard to
12,179 Class A Shares held in his own name. The 13,147 shares include
968 Class A Shares as to which Mr. Price holds options exercisable
within 60 days.
(8) Dr. Fry has sole voting and sole investment power with regard to 800
Class A Shares held in his own name. The 2,347 shares include 1,547
Class A Shares as to which Dr. Fry holds options exercisable within 60
days.
(9) See Note 2 to the table under VOTING SECURITIES OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT on page 4.
(10) Mr. Holmes also serves as a director of The Dayton Power & Light
Company and NCR Corporation.
(11) Mr. Holmes has sole voting and sole investment power with regard to
527,742 Class A Shares. The 606,086 shares include 12,496 Class A
Shares, 9,944 Class A Shares and 9,944 Class A Shares held in the names
of his three sons and 45,960 Class A Shares as to which Mr. Holmes
holds options exercisable within 60 days. This amount (606,086)
excludes 10,278 Class A Shares held by Mrs. Holmes as to which Mr.
Holmes disclaims beneficial ownership.
(12) Mr. Walker also serves as a director of Comerica Incorporated, The
Goodyear Tire & Rubber Company, M. A. Hanna Company, Lexmark
International Group, Inc., Textron Inc. and The Timken Company.
(13) Mr. Walker has sole voting and sole investment power with regard to
8,000 Class A Shares held in his own name. The 9,547 shares include
1,547 Class A Shares as to which Mr. Walker holds options exercisable
within 60 days.
BOARD COMMITTEES, MEETINGS, COMPENSATION
AND INDEMNIFICATION OF DIRECTORS
The Board of Directors has established four Committees: Audit,
Compensation, Investment and Finance.
The Audit Committee (Messrs. Fry (Chairman), Killingsworth, Loren,
Price and Walker) meets with the company's independent public accountants,
internal auditors, Chief Executive Officer and financial management executives
to review the scope and results of audits, as well as recommendations made by
those persons 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. Walker (Chairman), Fry,
Loren and Price) 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 four times.
7
<PAGE> 10
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 four 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, 1997, the Board of Directors
met six times and all Directors with the exception of Mr. Loren and Mr. Price
attended 75% or more of the aggregate number of meetings of the Board and
committees of which they were members. Mr. Loren attended 57% and Mr. Price
attended 71% of the aggregate number of meetings each was eligible to attend.
Non-employee Directors receive an annual fee of $22,500 plus $1,000 for
each Board of Directors Meeting attended and, on October 1 of each year, options
to purchase that number of Class A Shares which represent a fair market value of
$40,000 (adjusted annually for increases in the consumer price index).
Non-employee 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 Indemnification Agreements with each Director which
indemnifies the Director to the fullest extent permitted by law. They cover any
and all fees, expenses, judgments, fines, penalties and settlement amounts paid
in any matter relating to the Director's role as a Director, officer, employee,
agent or fiduciary of the company or when serving as the company's
representative with respect to another entity. A Director would not be entitled
to indemnification in connection with a proceeding initiated by that 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 subject to the
Director's obligation to repay (at the company's request) those advances if it
is determined later that the Director is not entitled to indemnification.
If a) it is determined that a Director is not entitled to
indemnification under applicable law; and b) the Director challenges that
determination in court, the Indemnification Agreements provide that, subject to
applicable law, the challenging Director is entitled to indemnification for, and
advancement of, all fees and expenses incurred in any such proceeding.
================================================================================
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTING RICHARD H. GRANT,
JR., ALLAN Z. LOREN, PHILIP A. ODEEN AND DONALD K. PETERSON EACH FOR A
TERM OF THREE (3) YEARS, AND JAMES A. ARTHUR FOR A TERM OF TWO (2)
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,
1997, and the two prior fiscal years.
8
<PAGE> 11
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------- ------------------------------
NAME AND OPTION LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) AWARDS (#) PAYOUTS ($) COMPENSATION($)(1)
------------------------ ------- ----------- ----------- ------------- ------------ -------------------
<S> <C> <C> <C> <C> <C> <C>
David R. Holmes 1997 480,575 277,784 226,640 480,575 43,436
- ---------------
Chairman of the Board, 1996 466,575 487,095 439,600 466,575 38,232
President and Chief 1995 452,975 362,380 53,280 452,975 34,460
Executive Officer
Robert C. Nevin 1997 295,056 194,674 22,360 236,045 40,716
- ---------------
President, Automotive 1996 286,463 302,985 18,480 229,170 36,977
Division 1995 278,120 221,757 24,720 222,496 32,950
Joseph N. Bausman 1997 295,056 162,969 12,360 236,045 28,160
- -----------------
Chief Strategy 1996 286,463 258,298 18,480 229,170 25,777
Officer 1995 278,120 214,152 24,720 222,496 23,080
Rodney A. Hedeen 1997 233,600 148,663 5,520 173,493 11,078
- ----------------
President, Business
Systems Division
H. John Proud 1997 243,750 66,766 9,720 195,000 11,698
- -------------
President, Healthcare 1996 221,250 131,667 13,920 177,000 11,380
Systems Division 1995 194,815 146,113 11,040 141,908 10,508
</TABLE>
(1) The 1997 amounts disclosed in this column include:
<TABLE>
<CAPTION>
ABOVE MARKET
DEFINED IMPUTED INTEREST INTEREST ON TOTAL
CONTRIBUTION ON SPLIT DOLLAR DEFERRED OTHER
NAME PLANS ($) LIFE INSURANCE ($)(1) COMPENSATION($)(2) COMPENSATION($)
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
David R. Holmes 2,684 26,608 14,144 43,436
Robert C. Nevin 2,684 20,923 17,109 40,716
Joseph N. Bausman 2,684 16,947 8,529 28,160
Rodney A. Hedeen 2,689 8,389 0 11,078
H. John Proud 2,684 9,014 0 11,698
</TABLE>
(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.
(Footnotes continued on following page)
9
<PAGE> 12
(2) The named executives (except Mr. Proud and Mr. Hedeen) 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 $100,000 per
year for a fixed term of 15 years. The deferrals were
completed as of September 30, 1989. Benefits payable are
reduced for early retirement and lump sum distributions are
available at the participant's discretion. The amounts
presented represent the above market interest earned on the
funds deferred and were calculated assuming a 15 year payment
stream at age 65.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
--------------------------------------------------------------
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED ANNUAL
OPTIONS RATES OF STOCK PRICE
GRANTED TO APPRECIATION FOR
NUMBER OF EMPLOYEES IN EXERCISE OPTION TERM
OPTIONS FISCAL YEAR OR EXPIRATION
GRANTED(2) (%) BASE PRICE DATE -------------------------
NAME ($/SHARE)(2) 5%($) 10%($)
------------------ ------------- --------------- ------------ ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
David R. Holmes 226,640 13.2346 26.5000 10/01/06 3,777,115 9,571,953
Robert C. Nevin 12,360 .7218 26.5000 10/01/06 205,988 522,014
10,000 .5839 27.1875 02/03/07 170,981 433,299
Joseph N. Bausman 12,360 .7218 26.5000 10/01/06 205,988 522,014
Rodney A. Hedeen 5,520 .3223 26.5000 10/01/06 91,995 233,133
H. John Proud 9,720 .5676 26.5000 10/01/06 161,991 410,516
</TABLE>
(1) No Stock Appreciation Rights (SARs) were awarded in the 1997 fiscal
year.
(2) Grants, other than Mr. Nevin's grant of 10,000 shares, were made on
October 1, 1996, with the exercise price equal to the fair market value
($26.50) on that date. Options vest 25% annually beginning October 1,
1997, except for 200,000 of Mr. Holmes' options which vest 100% on
October 1, 2001. Mr. Nevin's 10,000 shares were granted effective
February 3, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED FY-END FY-END
ON REALIZED EXERCISABLE/ EXERCISABLE/
EXERCISE VALUE UNEXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) ($)
--------------------- ----------- ---------- ------------------- ---------------------
<S> <C> <C> <C> <C>
David R. Holmes 39,300 526,181 0/1,259,060 0/5,624,801
Robert C. Nevin 16,864 314,008 25,116/371,300 208,995/2,489,158
Joseph N. Bausman 31,860 437,620 0/361,300 0/2,489,158
Rodney A. Hedeen 0 0 36,040/160,520 417,438/1,106,018
H. John Proud 0 0 19,200/169,040 154,714/1,118,168
</TABLE>
10
<PAGE> 13
LONG-TERM INCENTIVE PLAN -- AWARDS
IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE-BASED PLANS
PERFORMANCE OR ---------------------------------------------
OTHER OTHER PERIOD THRESHOLD TARGET MAXIMUM
NAME RIGHTS UNTIL PAYOUT ($) ($) ($)
-------------------------- --------- ------------------ ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
David R. Holmes (1) (1) 0 240,288 480,575
Robert C. Nevin (1) (1) 0 118,022 236,045
Joseph N. Bausman (1) (1) 0 118,022 236,045
Rodney A. Hedeen (1) (1) 0 93,440 186,880
H. John Proud (1) (1) 0 97,500 195,000
</TABLE>
(1) Participants in the Intermediate Plan (including Mr. Holmes who
participates in his own substantially similar 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 potential annual payout
amounts reported here were calculated using fiscal year 1997 salaries.
The payout for fiscal year 1997 is included in the LTIP Payout column
of the Summary Compensation Table. Additional information on the
Intermediate Plan appears on page 16.
PENSION PLAN TABLE (1)
<TABLE>
<CAPTION>
YEARS OF SERVICE (2)
------------------------------------------------------------------------------
REMUNERATION 10 15 20 25 30
------------------ --------- ---------- --------- --------- ---------
<S> <C> <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
1,600,000 240,000 360,000 480,000 600,000 720,000
1,700,000 255,000 382,500 510,000 637,500 765,000
1,800,000 270,000 405,000 540,000 675,000 810,000
</TABLE>
(1) This table sets forth the annual retirement benefits payable under the
company's qualified pension plan and the non-qualified Supplemental
Retirement Plan ("Supplemental Plan") 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 agreements are not included in the table
but are discussed below with employment agreements. Participation in
the Supplemental Plan requires approval by the Board. Optional payment
forms of actuarial equivalence are also available.
(Footnotes continued on following page)
11
<PAGE> 14
(2) Respective years of service for purposes of the qualified plan as of
September 30, 1997, for the persons named in the Summary Compensation
Table are: Mr. Holmes, 12; Mr. Nevin, 11; Mr. Bausman, 32; Mr. Hedeen,
11; and Mr. Proud, 26.
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 officer. 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.
EMPLOYMENT AGREEMENTS
Effective October 1, 1995, Mr. Holmes entered into an amended and
restated agreement by which he agrees to remain employed by the company as its
Chairman, President and Chief Executive Officer until October 3, 2000, at an
annual base salary of $436,300 which may not be reduced without his consent or
resolution by arbitration. This base salary may be increased from time to time
consistent with the recommendations of the Compensation Committee and as
approved by the Board of Directors. The retirement benefit at age 59 is 65% of
final average annual compensation. The age 55 early retirement benefit is 61% of
final average annual compensation which thereafter increases by an additional 1%
of final average annual compensation for each additional twelve month period of
employment, including retirement after age 59.
Mr. Holmes' agreement also provided for special grants of non-qualified
stock options on October 1, 1995 and October 1, 1996, of 400,000 shares and
200,000 shares, respectively. Both grants were at fair market value on the date
of the grant. These grants are in addition to the customary annual awards made
under the company's stock option plan in which Mr. Holmes is a participant.
Messrs. Nevin, Proud and Hedeen have Employment Agreements by which
they each agree to remain employed by the company until, respectively, September
30, 2001, September 1, 1999, and February 1, 2001 at respective annual base
salaries of $297,220, $210,000 and $250,000 which may not be reduced without the
individual's consent or resolution by arbitration. These base salaries may be
increased from time to time consistent with the recommendations of the
Compensation Committee and as approved by the Board of Directors.
Mr. Nevin's retirement benefits are 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 he retires after reaching age 55 and
before reaching age 58. If he elects early retirement after reaching age 58, his
respective annual retirement benefits shall be 55% of final average annual
compensation plus 1% for each additional twelve-month period of service after
age 58, but before reaching age 65, with no reduction if his years of service
are fewer than 15. Mr. Proud's and Mr. Hedeen's retirement benefits are those
provided under the company-sponsored qualified and non-qualified programs in
which they participate.
The Employment Agreements of Messrs. Holmes and Nevin also provide for
certain disability and death benefits, including retirement benefits as
described above in case of permanent disability. The Agreements also provide for
continued medical coverage of the surviving spouses for a period which ends at
the earlier of the spouse's death or 42 months after the employee's death. Mr.
Proud's and Mr. Hedeen's coverage in the case of death or disability is that
provided under the company-sponsored programs in which they participate. During
the terms of the Agreements and for two years after the respective terminations
of them, or the cessation of payments made under them (whichever is later), each
of Messrs. Holmes, Nevin, Proud and Hedeen shall not compete directly or
indirectly with the company. However, if Mr. Proud's or Mr. Hedeen's Agreement
is not renewed, the non-competition restriction applicable to them shall
continue for only one year.
All four Agreements generally provide that if the employee is
discharged by the company before the expiration date 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
equal to the employee's Annual Compensation Value (as defined in the
Agreements), reduced by 70% of compensation from subsequent employment
(reduction does not apply to Mr. Proud or Mr. Hedeen) (a) for two years (for Mr.
Nevin, the lesser of two years or the number of months then remaining in the
term of his Agreement) from the date of termination of employment with respect
to discharge before the expiration of the Agreements, or (b) for one year from
12
<PAGE> 15
the expiration of the Agreements in the case of non-renewal (non-renewal
benefit does not apply to Mr. Nevin); (ii) credit for certain amounts of
additional service under the Supplemental Plan (iii) continuing coverage under
company-sponsored medical benefits programs ending at the earlier of employee's
securing other employment or two years from termination; (iv) reimbursement of
up to $20,000 in out-placement fees; and (v) required payments under the
employee's (except for Mr. Proud and Mr. Hedeen) 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, Proud and Hedeen had been
terminated on December 1, 1997, following a change in control of the company,
the total severance payments by the company to the officers under their
Agreements would have been $9,335,979. If such termination were to occur, the
non-competition restrictions in the respective Employment Agreements are void
and non-binding.
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 24 months of a change in control; (ii) the employee will
receive an additional 24 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 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 calendar 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.
On September 30, 1997, Joseph N. Bausman, former Chief Strategy
Officer, elected to retire early and receive the benefits afforded him under his
Amended and Restated Employment Agreement of May 31, 1995. These benefits
include certain continuing payments, deferred compensation benefits and
retirement benefits. In accordance with his Agreement, Mr. Bausman remains
subject to noncompetition provisions so long as payments are being made to him
under his Agreement.
Balance of Page Intentionally Left Blank
13
<PAGE> 16
PERFORMANCE GRAPH
FISCAL YEARS 1993 THROUGH 1997
Comparison of Five Year Cumulative Total Return Among The Reynolds and Reynolds
Company, S&P 500 Index and a Composite of Two Indices
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
9/92 9/93 9/94 9/95 9/96 9/97
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Reynolds 100 182 236 327 503 379
S&P 500 100 113 117 152 183 257
Peer Group 100 121 140 195 242 344
</TABLE>
- --------------------------------------------------------------------------------
The graph compares the cumulative total shareholder return on a $100 investment
in the company's Class A 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 company selected the following
business forms companies for its self-constructed index: American Business
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,
1992, and the reinvestment of all dividends.
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.
Compensation Policy and Objectives
----------------------------------
Our primary goal as members of the Compensation Committee is unchanged
from last year: 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.
14
<PAGE> 17
Base Salary
- -----------
Base salaries for executive officers are determined by evaluating the
responsibilities of the position and comparing them 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% effective January 1, 1997. This
paragraph applies to all executives except those whose employment agreements may
contain terms which vary from these provisions. See EMPLOYMENT AGREEMENTS, pages
12 and 13.
Annual Incentives
- -----------------
The company's Chief Executive Officer ("CEO"), participates in a
separate, shareholder-approved, performance-based, incentive plan ("CEO Plan")
the terms of which are substantially similar to the annual and intermediate
compensation plans for the other officers. The purpose of this CEO Plan is to
qualify all CEO compensation in excess of $1 million for deductibility under the
applicable provisions of the Internal Revenue Code.
Officers may 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 ("ROE") as its primary measure of corporate
performance. During fiscal 1996, the Committee introduced growth in sales and
growth in earnings as additional measures for determining annual bonuses.
Although the combinations vary by division, overall, ROE is weighted more
heavily (75%) than the growth components (25%) in determining annual bonuses.
Also, the ROE which must be achieved before any bonus is paid was raised as was
the maximum bonus achievable. 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. The company
believes that linking executive pay principally to corporate ROE directly ties
the executive's interests and rewards to those of the shareholders. Under the
structure of the Annual Plan in effect for fiscal 1997, no bonus is paid until a
threshold corporate ROE of 10% or a 5% growth in sales or earnings is achieved;
maximum payout requires a combination of a 28% ROE and 15% growth in sales and
earnings. The annual bonus payout can range between 0% of annual salary to 90%
of annual salary. During fiscal 1997, the company achieved a 16.1% ROE, a 26%
growth in overall sales but a decrease in earnings (all of which varied by
division). As a result, the annual bonus payout for the named executive officers
(including Mr. Holmes under his substantially similar but separate plan) was
down compared to fiscal 1996 and averaged 37% 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
ROE, sales, return on net assets and 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 and the three division presidents, whose personal
performance bonuses are 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 1997 this personal performance bonus for the named executive officers
ranged from 15% to 20% of annual salary.
15
<PAGE> 18
Long-Term Incentives
- --------------------
Stock Options
-------------
To further align the interests of shareholders and management, the
company grants incentive stock options annually to approximately 330 officer and
director-level 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 1997, the percentage of annual
salary used in determining stock option grants ranged from 35% to 125%. The
exercise price is the fair market value of the stock on the date of the grant.
The options have a ten year life and 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.
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, 1997, stock ownership among the sixty-five
officers stood at approximately 1,682,000 shares representing a market value of
approximately $33.6 million. 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.
Intermediate Incentive Compensation
-----------------------------------
Certain senior officers, including all named executive officers (except
Mr. Holmes), 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 for producing
consistent longer-term financial results. For fiscal 1997 the payout from the
CEO Plan (for Mr. Holmes) and from the Intermediate Incentive Compensation Plan
for the other named executive officers ranged from 74% to 100% 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 14 illustrates the growth in
shareholder value during much of this period. Even with the disappointing
performance of its stock during fiscal 1997, the company still finished more
than 10% ahead of the peer group and 47.5% ahead of the S&P 500 for the five
year period. Although earnings (after restructuring and other special charges)
were down compared to fiscal 1996, the company posted record revenues and
achieved a 16.1% ROE during fiscal 1997. Mr. Holmes' 1997 compensation of
$1,282,370 (as shown in the Summary Compensation Table on page 9) included a
market-priced base salary of $480,575. Under the CEO Plan he is eligible for
annual and intermediate incentive compensation the performance standards of
which are substantially similar to those in the annual and intermediate
compensation plans for other named executive officers. The restructuring and
other special charges taken during fiscal 1997 had an adverse impact on the
company's earnings. As a consequence, Mr. Holmes' annual bonus
16
<PAGE> 19
dropped by more than 53% from $393,780 in fiscal 1996 to $181,669 in fiscal
1997. The Committee awarded a personal performance bonus of $96,115 to Mr.
Holmes following its year-end evaluation. On October 1, 1996, the Committee
awarded Mr. Holmes an annual stock option grant for 26,640 Class A Shares which
was based on the formula (explained above) applicable to his position. In
addition, Mr. Holmes received a grant of 200,000 non-qualified stock options
according to the terms of his Employment Agreement described on pages 12 and 13.
Summary
- -------
The Committee believes that a high caliber, motivated management team
is critical to sustained business success.
As in prior years, in 1997 a significant portion (approximately 66%) 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
Allan Z. Loren
Gayle B. Price, Jr.
Martin D. Walker, Chairman
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
No Executive Officer or Director is or has been indebted to the company
during the last fiscal year in excess of $60,000.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Richard H. Grant, Jr.'s, Form 5, reporting an exempt bona-fide gift
made in April, 1997, was inadvertently filed late.
PROPOSAL II
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.
Representatives of Deloitte & Touche LLP 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 LLP AS INDEPENDENT AUDITORS FOR THE COMPANY.
================================================================================
17
<PAGE> 20
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the 1999 Annual
Meeting of Shareholders must be received by the company by September 13, 1998,
for inclusion in the company's Proxy Statement and Proxy relating to the 1999
Annual Meeting of Shareholders.
Shareholder nominations of persons to be elected to the Board of
Directors at the February 11, 1999 Annual Meeting must be delivered to or mailed
and received at the principal executive offices of the company no earlier than
November 11, 1998, and no later than December 11, 1998.
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 6, 1998
18
<PAGE> 21
THE REYNOLDS AND REYNOLDS COMPANY
ANNUAL MEETING
Frederick C. Smith Auditorium
David H. Ponitz Sinclair Center/Building 12
Sinclair Community College Campus
444 West Third Street
Dayton, Ohio 45402
FEBRUARY 12, 1998
11:00 A.M. EASTERN STANDARD TIME
(Demonstration & Display Area
open from 10:00 a.m. to 12:30 p.m.)
DIRECTIONS TO SINCLAIR CENTER:
From I-75 - Northbound or Southbound:
Take the Third Street exit and travel east on Third Street to Perry Street.
Turn right on Perry Street and travel south one block to Fourth Street.
Turn right on Fourth Street.
The entrance to the underground parking garage in the
Sinclair Center will be on your right.
After entering garage, stay to the right (northeast) and
look for Sinclair Center North Entrance sign.
Go through double doors to elevator or stairs.
Take elevator or stairs to the first floor of Sinclair Center/Building 12.
(PARKING PASSES WILL BE PROVIDED AT THE MEETING.)
19
<PAGE> 22
THE REYNOLDS AND REYNOLDS COMPANY
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS, FEBRUARY 12, 1998
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 12, 1998 at 11:00 a.m. EST, or at any adjournment(s) thereof, as
follows:
<TABLE>
I. ELECTION OF DIRECTORS
<S> <C> <C> <C>
[ ] FOR electing Richard H. Grant, Jr., Allan Z. Loren, [ ] WITHHOLD AUTHORITY to vote for
Philip A. Odeen and Donald K. Peterson each for a three-year Richard H. Grant, Jr., Allan Z. Loren,
term and James L. Arthur for a two-year term. Philip A. Odeen, Donald K. Peterson and
James L. Arthur.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominee's name in the space provided below.)
---------------------------------------------------------------------------------------------------------------------------------
II. Proposal to appoint Deloitte & Touche LLP as independent auditors [ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
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
NOMINEES AND FOR PROPOSAL II
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 AND FOR THE APPOINTMENT OF DELOITTE
& TOUCHE LLP AS AUDITORS FOR THE COMPANY. 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