REYNOLDS, SMITH AND HILLS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 24, 1997
To the Shareholders of
Reynolds, Smith and Hills, Inc.
The Annual Meeting of shareholders of Reynolds, Smith and Hills, Inc.
will be held at the offices of the Company at 4651 Salisbury Road, Suite 400,
Jacksonville, Florida, 32256 on Thursday, July 24, 1997 at 9:00 a.m., local
time, for the following purposes:
1. To elect six Directors to serve until next year's Annual
Meeting of Shareholders;
2. To ratify the appointment of Deloitte & Touche LLP as
independent auditors of the Company for the 1998 fiscal year;
3. To consider approval of the Company's Amended and Restated
1991 Incentive Stock Option Plan and the reservation of 50,000
additional shares of the Company's Common Stock for issuance
of options under such plan;
4. To consider approval of the Company's Amended and Restated
1991 Nonqualified Stock Option Plan and the reduction of
50,000 shares of the Company's Common Stock reserved for
issuance of options under such plan;
5. To consider approval of the Company's Amended and Restated
1991 Employee Stock Bonus Plan; and
6. To transact such other business as may properly come before
the meeting.
Shareholders of record at the close of business on June 20, 1997 will
be entitled to vote at the meeting.
By Order of the Board of Directors
David K. Robertson
Secretary
Jacksonville, Florida
June 20, 1997
Whether or not you plan to attend the meeting, please execute and promptly
return the enclosed proxy in the envelope provided.
<PAGE>
REYNOLDS, SMITH AND HILLS, INC.
4651 Salisbury Road
Jacksonville, Florida 32256
PROXY STATEMENT
This proxy statement and the accompanying form of proxy are being
furnished to shareholders in connection with the solicitation of proxies by the
Board of Directors of Reynolds, Smith and Hills, Inc. for use at its Annual
Meeting of Shareholders to be held on Thursday, July 24, 1997. It is proposed
that this proxy statement and accompanying form of proxy will be sent to the
Company's shareholders on or about June 20, 1997.
The shares represented by your proxy will be voted in accordance with
your directions if the proxy is properly signed and returned to us before the
meeting. Your proxy may be revoked by written request that is received by the
Secretary of the Company before the meeting. If you are attending the Annual
Meeting, you may revoke your proxy at the meeting by voting in person.
The cost of soliciting proxies will be paid by the Company and is
expected to be nominal. Officers and other employees of the Company may solicit
proxies personally or by telephone in certain instances in an effort to have a
larger representation at the meeting.
Shareholders of record at the close of business on June 20, 1997, will
be entitled to vote. On that date there were 454,864 outstanding shares of
Common Stock. Each share is entitled to one vote. Shares of Common Stock
allocated to the account of a participant in the Company's 401(k) Plan will be
voted by the trustee in accordance with the participant's voting instructions.
Allocated shares of Common Stock for which no voting instructions are received
will be voted by the trustee in accordance with the 401(k) Plan in its
discretion.
Proxies solicited hereby will be voted FOR each of the following
proposals unless a vote against a proposal or abstention is specifically
indicated.
I. ELECTION OF DIRECTORS
Directors are elected to serve until the Annual Meeting of Shareholders
in 1998. The Board of Directors has no reason to expect that any of the
following nominees will be unable to stand for election, but in the event a
vacancy among the original nominees occurs prior to the Annual Meeting, the
proxies will be voted for a substitute nominee or nominees named by the Board of
Directors and for the remaining nominees.
The By-Laws of the Company provide that the Board of Directors shall be
comprised of at least one and not more than 15 persons, as determined by the
Board of Directors. The Board has fixed the current number of directors at six.
1
<PAGE>
The six nominees who receive the greatest number of votes cast for the
election of directors at the meeting shall become directors at the conclusion of
the tabulation of votes.
Certain information concerning each nominee for director of the
Company, including their principal occupations for the past five or more years,
is set forth below:
Leerie T. Jenkins, Jr. Principal positions are Chairman of the Board
and Chief Executive Officer of the Company, which he has held since June 1990.
Mr. Jenkins has been employed with the Company and predecessor companies for
over 25 years. He holds a Masters and Bachelors degree in landscape architecture
from the University of Michigan and University of Georgia, respectively. Age 48.
David K. Robertson. Principal positions are Executive Vice President,
which he has held since January 1995, Secretary, Treasurer, Chief Financial
Officer and Director of the Company, which he has held since June 1990. Prior to
January 1995 Mr. Robertson was Senior Vice President. Mr. Robertson has been
employed with the Company and predecessor companies for over 15 years. He
graduated from Florida State University with a degree in Business. Age 45.
Darold F. Cole. Principal positions are Senior Vice President and
Director of the Company, which he has held since June 1990. Mr. Cole has been
employed with the Company and predecessor companies for over 28 years. He
graduated from Kansas State University with a degree in electrical engineering.
Age 55.
J. Ronald Ratliff. Principal positions are Senior Vice President and
Director of the Company, which he has held since June 1990. Mr. Ratliff has been
employed with the Company and predecessor companies for over 19 years. He holds
a Masters and Bachelors degree from the University of South Florida. Age 48.
David E. Thomas, Jr. Director of the Company since February 1992. His
principal occupation is Managing Director and Head of Mergers and Acquisitions
of Raymond James and Associates, Inc. Mr. Thomas joined Raymond James in 1987.
He graduated from Emory University with an M.B.A. and J.D. degree. He also holds
a Bachelors degree in Business Administration from the University of Richmond.
Age 40.
Alexander P. Zechella. Director of the Company since February 1992. He
retired in 1985 after having served from 1984 as President, Chief Executive
Officer, Chief Operating Officer, and Director of The Charter Company. Prior to
joining The Charter Company in 1980, Mr. Zechella served in many capacities with
Westinghouse Corporation and retired as Northeast Region Vice President in 1980.
Mr. Zechella currently serves on the Board of Directors of Enviroq Corporation,
a professional firm located in Jacksonville, Florida. He holds a Masters and
Bachelors degree in civil engineering from Rensselaer Polytechnic Institute. Age
76.
The Board of Directors recommends a vote FOR the nominees
set forth above.
2
<PAGE>
Security Ownership of Certain Beneficial Owners
The following table sets forth, as of June 20, 1997, certain
information with respect to beneficial ownership of the Company's Common Stock
by (i) each director, (ii) each named executive officer and (iii) any person
beneficially owning more than 5%.
Number of Shares Percentage of
Name Beneficially Owned* Outstanding Shares
---- ------------------- ------------------
Leerie T. Jenkins, Jr (1) 65,117 14.3%
David K. Robertson (1) 27,076 5.9%
Charles W. Gregg (1) 9,770 2.1%
Darold F. Cole (2) 26,942 5.9%
J. Ronald Ratliff (1) 32,105 7.0%
Joseph J. Hartnett (2) 28,051 6.2%
Henry C. Luke, Jr (3) 27,672 6.1%
David E. Thomas, Jr (4) -- --
Alexander P. Zechella (5) -- --
Executive officers,
directors and beneficial
owners as a Group
(9 persons) 216,733 46.8%
* Includes shares which may be purchased upon exercise of options which are
exercisable as of June 20, 1997 or become exercisable within 60 days thereafter,
for the following individuals; Mr. Jenkins - 1,649; Mr. Robertson - 1,500; Mr.
Gregg -2,000; Mr. Cole - 1,500; Mr. Ratliff - 1,500; All executive officers,
directors and beneficial owners as a group - 8,149.
* Participants in the Company's 401(k) plan may elect to have their contribution
as well as the Company's matching contribution invested in the Company's common
stock. The participant has both voting and dispositive control of such shares
which are held for the benefit of such participant by INVESCO Retirement Plan
Services, Inc., as trustee. The number of shares shown includes shares held in
the 401(k) plan as follows: Mr. Jenkins - 11,779; Mr. Robertson - 5,831; Mr.
Gregg - 1,055; Mr. Cole - 8,129; Mr. Luke - 3,002; Mr. Ratliff - 7,926; Mr.
Hartnett - 3,982; All executive officers, directors and beneficial owners as a
group - 41,704.
(1) 4651 Salisbury Road, Suite 400, Jacksonville, FL 32256
(2) 2235 N. Courtenay Pkwy, Suite C, Merritt Island, FL 32953
(3) 345 Greencastle Drive, Jacksonville, FL 32225
(4) 880 Carillon Parkway, St. Petersburg, FL 33716
(5) 13000 Sawgrass Village, Ponte Vedra Beach, FL 32082
3
<PAGE>
Meetings of the Board of Directors and Committees
The Board of Directors had five meetings during fiscal year 1997. All
of the Directors attended at least 75% of the meetings of the Board of Directors
and the Committees of the Board of which they were members.
The Board of Directors has delegated certain functions to the following
standing committees of the Board:
The Compensation Committee is responsible for setting and administering
executive officers' salaries and the annual bonus and long term incentive plans
that govern the compensation paid to all senior managers of the Company. The
Compensation Committee is composed of Messrs. Thomas and Zechella and held three
meetings during fiscal year 1997.
The Audit Committee's functions are to recommend for appointment by the
Board of Directors a firm of independent certified public accountants to act as
auditors for the Company and to meet with the auditors to review the scope,
preparation and results of the company's audits, the Company's internal
accounting and financial controls and to consider such other matters relating to
the financial reporting process and safeguarding of the Company's assets as it
may consider appropriate. The Audit Committee is composed of Messrs. Zechella
and Cole and held two meetings during fiscal year 1997.
The Benefits Committee's functions are to review and make findings,
reports and recommendations to the Board of Directors regarding matters relative
to benefits plans, packages and/or programs for the Company's officers and
employees. The Benefits Committee held one meeting during fiscal year 1997 and
is composed of Messrs. Ratliff, Robertson and Cole.
The Nominating Committee's functions are to review and make
recommendations to the Board of Directors regarding the composition of the Board
of Directors of the Company. The Nominating Committee normally expects to be
able to identify from its own resources the names of qualified nominees, but it
will accept from stockholders recommendations of individuals to be considered as
nominees. Any such recommendations should be submitted in writing to the
Company, Attention: Corporate Secretary, no later than February 20, 1998. The
Nominating Committee held one meeting during fiscal year 1997 and is composed of
Messrs. Jenkins and Zechella.
Directors Compensation
Outside directors receive a $5,000 annual fee for their service on the
Board and reimbursement of expenses. Officers of the Company do not receive any
additional compensation for serving as members of the Board or any of its
committees.
4
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) filing requirements applicable to its Executive Officers,
Directors and persons who beneficially own more than 10% of the Company's
registered equity securities were complied with, except for the following.
Charles W. Gregg, Executive Vice President and Chief Operating Officer of the
Company, filed one delinquent Form 4 regarding five transactions. J. Ronald
Ratliff, Senior Vice President and Director of the Company, filed one delinquent
Form 4 regarding three transactions.
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table sets forth, for the Company's last three fiscal
years the compensation paid to the Chief Executive Officer and the four other
most highly compensated executive officers of the Company (the "named executive
officers") who earned more than $100,000 in the current fiscal year in all
capacities in which they serve.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
------------
ANNUAL
COMPENSATION AWARDS PAYOUTS
------------ ------ -------
NAME SECURITIES
AND UNDERLYING LTIP ALL OTHER
PRINCIPAL SALARY BONUS OPTIONS/ PAY- COMPEN-
POSITION YEAR ($) ($) SARS (#) OUTS ($) SATION (1) ($)
--------- ---- ------- ------ --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Leerie T. Jenkins, Jr. Chairman 1997 164,000 15,000 -- -- 2,761
of the Board and CEO 1996 145,000 5,000 550 -- 2,468
1995 138,000 10,000 550 -- 2,264
David K. Robertson, Executive 1997 121,000 12,000 -- -- 3,217
Vice President, Secretary, 1996 108,000 14,000 500 -- 3,730
Treasurer, CFO and Director 1995 98,000 8,000 500 -- 3,486
Charles W. Gregg, Executive 1997 120,000 12,000 -- -- 1,800
Vice President and COO 1996 108,000 8,000 2,000 -- 1,630
1995 98,000 5,000 500 -- 1,464
Darold F. Cole, Senior Vice 1997 98,000 12,000 -- -- 3,217
President and Director 1996 97,000 13,000 500 -- 2,969
1995 94,000 9,000 500 -- 2,469
J. Ronald Ratliff, Senior Vice 1997 111,000 12,000 -- -- 2,708
President and Director 1996 106,000 9,000 500 -- 3,429
1995 103,000 8,000 500 -- 3,144
</TABLE>
(1) For 1997 includes a) the Company's matching contribution to the 401(k)
Plan which is applicable to all Plan participants (Mr. Jenkins $1,625;
Mr. Robertson $1,800; Mr. Gregg $1,800; Mr. Cole $1,388; Mr. Ratliff
$1,650) and b) premiums paid for supplemental term life insurance
policies in which the beneficiary is named by the individual (Mr.
Jenkins $1,136; Mr. Robertson $1,417; Mr. Gregg $0; Mr. Cole $1,829;
Mr. Ratliff $1,058).
5
<PAGE>
Stock Options
There were no grants of stock options to the named executive oficer
during the last fiscal year.
Option Exercises and Fiscal Year-End Values
There were no options exercised by the named executive officers during
the last fiscal year. The following table sets forth information with respect to
the unexercised options held by the named executive officers as of the end of
the fiscal year.
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION/SAR VALUES
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FISCAL AT FISCAL
SHARES VALUE YEAR END (#) YEAR END ($)
ACQUIRED ON REALIZED EXERCISABLE\ EXERCISABLE\
NAME EXERCISE (#) ($) UNEXERCISABlE UNEXERCISABLE
- - ---------------------- ----------- -------- ------------ ------------
Leerie T. Jenkins, Jr. - - 1,649/551 -/-
David K. Robertson - - 1,500/500 400/325
Charles W. Gregg - - 2,000/1,500 650/825
Darold F. Cole - - 1,500/500 400/325
J. Ronald Ratliff - - 1,500/500 400/325
6
<PAGE>
Performance Graph
The graph below is a comparison of the Company's cumulative stockholder
returns on an indexed basis with the S&P 500 stock index and an industry peer
group over the period from April 1, 1992 to March 31, 1997.
COMPARISON FROM APRIL 1, 1992
TO MARCH 31, 1997 OF CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, S&P 500 INDEX AND PEER GROUP
- - --------------------------------------------------------------------------------
3/92 3/93 3/94 3/95 3/96 3/97
- - --------------------------------------------------------------------------------
RS&H $100 $225 $201 $207 $216 $225
- - --------------------------------------------------------------------------------
S&P 500 $100 $112 $110 $124 $160 $188
- - --------------------------------------------------------------------------------
FY '97 PEER $100 $ 92 $ 85 $ 63 $ 82 $ 77
- - --------------------------------------------------------------------------------
FY '96 PEER $100 $101 $ 96 $ 81 $ 93 N/A
- - --------------------------------------------------------------------------------
* Assumes a reinvestment of dividends and a $100 initial investment on
April 1, 1992 in the Company, S&P 500 Index, and the Peer Group.
* For the year ended March 31, 1997 the members of the peer group are
Michael Baker Corp., Dames & Moore, Inc., Jacobs Engineering Group,
Inc. and STV Group, Inc. ("FY '97 Peer"). The "FY '96 Peer" group
includes Michael Baker, Corp. and Greiner Engineering, Inc. as of March
31, 1996 and includes Michael Baker, Corp., Greiner Engineering, Inc.
and CRSS, Inc. as of March 31, 1995, 1994, 1993 and 1992. The Company
adopted a new peer group in fiscal 1997 as a result of mergers and
acquisitions among members of the prior peer group.
* The Company's stock is not presently traded on any public stock
exchange or other public market. In constructing the performance graph,
the Company used the appraised value of the stock determined for
purposes of setting the price at which the Company's stock will be sold
to and traded within the Company's 401(k) plan. In June of each year,
the appraised value of the stock for each year is determined by an
independent valuation firm based on the previous year's financial
statements. All purchases and trades within the Company's 401(k) plan
after receipt of a new appraisal are made at a price equal to the
appraised value of the stock set forth in the new appraisal.
ACCORDINGLY, THE VALUE SHOWN ON THE PERFORMANCE GRAPH FOR MARCH 1997
WAS DETERMINED IN JUNE OF 1996 BASED UPON THE FINANCIAL STATEMENTS OF
THE COMPANY FOR THE FISCAL YEAR ENDED MARCH 31, 1996. The appraisal
value does not necessarily represent the price at which a shareholder
could sell shares of the Company's stock.
7
<PAGE>
Compensation Committee Report
The Compensation Committee is composed of two independent non-employee
directors. The committee is responsible for setting and administering executive
officer salaries and the annual bonus and long-term incentive plans that govern
the compensation paid to all managers of the Company. The following report
represents the actions of the committee regarding compensation paid to the
executive officers during fiscal year 1997.
The Company's compensation programs are designed to link executives'
compensation to the performance of the Company and provide competitive
compensation for executives. The compensation plan consists of annual incentive
awards and equity-based incentives. Annual incentive awards are granted based on
corporate financial performance and individual performance. Equity- based
compensation is used to build shareholder value and motivate executive behavior
over the long-term. These types of compensation aid in attracting and retaining
the executive talent needed to ensure the continued success of the Company.
The compensation plan for the executives of the Company is comprised of
two elements: 1) an annual component, i.e. base salary and annual bonus and 2) a
long-term component, i.e., stock options. The policies regarding each of these
elements, as well as the basis for determining the compensation of the Chairman
of the Board and CEO, Mr. Jenkins, are described below.
1) Annual Component: Base Salary and Annual Bonus
Base salaries for executive officers are determined by evaluating the
responsibilities of the position and comparing it to other executive officer
positions in the local marketplace and similar positions in competitive
engineering firms of the same size. These salaries are reviewed annually and are
adjusted based on the Company's performance and the individual's contribution to
that performance.
The Key Employee Performance Bonus Program links compensation to the
performance of the Company. A percentage of pre-tax profits is allocated to the
bonus fund. There are no minimum or maximum award amounts for an individual
participant, but the total of all participants' awards is generally limited to
the fund amount. Bonuses may be distributed in either cash or stock or some
combination of both.
2) Long-Term Component: Stock Options
To align shareholders' and executive officers' interest, the long-term
compensation plan uses stock option grants whose value is related to the value
of Company common shares. Grants of stock options are made under the 1991
Incentive Stock Option Plan and 1991 Nonqualified Stock Option Plan; the plans
which were approved by the shareholders.
8
<PAGE>
The committee determines the number of shares subject to grant,
exercise, price, duration and other terms and conditions of each grant. Stock
options are exercisable up to ten years from the grant date. Such stock options
provide incentive for the creation of shareholder value over the long-term since
the full benefit of the compensation package cannot be realized unless
appreciation in the price of Company common shares occurs over a specified
number of years.
The details regarding specific provisions of annual and long-term
compensation components described above apply to all senior managers of the
Company including the named officers.
CEO Compensation
During fiscal year 1997, the Company's most highly compensated officer
was Leerie T. Jenkins, Jr., Chairman of the Board and CEO. Mr. Jenkins'
performance was reviewed by the committee as it related to the annual and
long-term component of his compensation.
Both the annual and long-term components are based in part on the
Company's financial performances, realizing business development goals and
overall company growth for the fiscal years involved. Base pay for Mr. Jenkins
increased approximately 17% during fiscal year 1997. Mr. Jenkins also received a
$15,000 cash bonus.
The committee has concluded that Mr. Jenkins' performance warrants the
compensation for fiscal year 1997 as reflected in the Summary Compensation
Table.
The Compensation Committee
David E. Thomas Jr., Chairman
Alexander P. Zechella
9
<PAGE>
II. RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Deloitte & Touche LLP as the
Company's independent auditors for the fiscal year ending March 31, 1998,
subject to ratification by the shareholders. Deloitte & Touche LLP has audited
the Company's books for many years. Representatives of Deloitte & Touche LLP are
expected to be present at the Annual Meeting with the opportunity to make a
statement if they so desire and to respond to appropriate questions from
shareholders.
The Board recommends a vote FOR ratification of the selection of Deloitte &
Touche LLP.
III. APPROVAL OF THE REYNOLDS, SMITH AND HILLS, INC.
AMENDED AND RESTATED 1991 INCENTIVE STOCK OPTION PLAN
On May 20, 1997, the Board of Directors of the Company amended the
Reynolds, Smith and Hills, Inc. 1991 Incentive Stock Option Plan (the "ISO
Plan"). The amendments will principally (i) increase the number of shares
authorized and issuable pursuant to the plan; (ii) allow the Board to delegate
administration of the plan to a committee; (iii) add a provision that terminates
an option in the event the optionee's employment is terminated for cause; (iv)
add a provision that allows cashless exercises; (v) require shareholder approval
when such approval is required to preserve the incentive stock option status of
options granted pursuant to the plan; and (vi) add an indemnification provision.
Under the ISO Plan, the Company has the authority to grant employees of
the Company or its subsidiaries incentive stock options ("ISOs") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"). In order for the Company to issue ISOs, shareholder approval of the
plan and certain material amendments is required under both the Code and the ISO
Plan. Accordingly, at the Annual Meeting, the ISO Plan, as amended, is being
submitted to the shareholders for their approval so that the Company may issue
such ISOs.
Increase in the Number of Shares Issuable Under the ISO Plan
The Board of Directors has amended Section 2(a) of the ISO Plan to
increase the number of shares issuable under the ISO Plan from 50,000 to
100,000. As of May 30, 1997, options to purchase 43,700 shares of Common Stock
were outstanding under the ISO Plan at a weighted average exercise price of $11
per share. The Board of Directors believes that it is in the best interest of
the Company to enable employees of the Company and its subsidiaries to acquire a
proprietary interest in the Company and to encourage those persons upon whose
judgment, initiative and efforts the Company largely depends for the successful
conduct of its business.
10
<PAGE>
Termination of Option when Optionee is Terminated for Cause
The ISO Plan currently treats an optionee whose employment is
terminated for cause the same as an optionee whose employment is terminated
without cause. In either case, the option may be exercised within three months
after the date of termination. The Board of Directors has amended Section 4(d)
of the ISO Plan to shorten the period during which an optionee who has been
terminated for cause may exercise an option. An option granted pursuant to the
ISO Plan, as amended, held by a person terminated for cause will terminate
immediately, except that the Board of Directors may extend the exercise period
of such option for a period of up to 30 days. The Board of Directors believes
that it is in the best interest of the Company to limit the proprietary interest
in the Company of persons who are terminated for cause.
Cashless Exercise Feature
The Board of Directors has amended Section 4(e) of the ISO Plan to
allow option exercises in a variety of forms, including cash payment and
cashless exercise through a broker, through delivery of a promissory note,
through the surrender of shares already held by the optionee or with shares
withheld from the shares otherwise deliverable to the optionee upon exercise of
the option, or any combination of the foregoing. The Board of Directors believes
that it is in the best interest of the Company and its stockholders to amend the
ISO Plan to provide the Board of Directors (and any committee administering the
ISO Plan) with greater flexibility in the manner in which they may allow those
employees upon whose judgment, initiative and efforts the Company largely
depends for the successful conduct of its business to acquire a proprietary
interest in the Company.
Indemnification Provision
The Board of Directors amended the ISO Plan to add a new Section 7
which adds an indemnification provision that protects members of the Board of
Directors who administer the ISO Plan. The Board of Directors believes that it
is in the best interest of the Company to encourage members of the Board of
Directors to serve on any committee appointed to administer the plan.
Section 16 Changes
Effective August 1996, the Securities and Exchange Commission (the
"Commission") amended its rules under Section 16 of the Securities Exchange Act
of 1934 to relax a number of the regulatory requirements which previously
applied to stock option plans. The ISO Plan, as amended, provides the Board of
Directors with the added flexibility that is permitted under the Commission's
new rules and makes certain other technical changes which are permitted under
the amended rules.
The Board of Directors has amended Sections 3 and 6 of the ISO Plan to
eliminate the requirement that the plan be administered by a committee
consisting solely of two or more disinterested directors, as defined by Rule
16b-3, and to require shareholder approval of plan amendments only when required
to preserve the incentive stock option status of options granted pursuant to the
ISO Plan.
11
<PAGE>
The Board of Directors believes that it is in the best interest of the
Company and its stockholders to amend the ISO Plan to provide the Board of
Directors (and any committee administering the plan) with greater flexibility in
the manner in which they may allow those employees upon whose judgment,
initiative and efforts the Company largely depends for the successful conduct of
its business to acquire a proprietary interest in the Company.
Summary of the Amended and Restated Reynolds, Smith and Hills, Inc. 1991
Incentive Stock Option Plan
The following summary outlined below is qualified in its entirety by
reference to the full text of the Amended and Restated Reynolds, Smith and
Hills, Inc. 1991 Incentive Stock Option Plan. A copy of such plan is available
upon request from the Company.
Purpose of the ISO Plan. The purpose of the ISO Plan is to enable the
Company to attract and retain persons of ability as employees and motivate such
employees to exert their best efforts on behalf of the Company and its
subsidiaries through the grant of options to purchase Common Stock of the
Company. The ISO Plan provides for the grant to employees of the Company and its
subsidiaries of incentive stock options to purchase shares of the Common Stock
of the Company.
Major Provisions of the ISO Plan. The major provisions of the ISO Plan
are as follows:
Eligibility: The persons who are eligible to receive awards pursuant to
the ISO Plan are employees of the Company or its subsidiaries.
Administration: The Board of Directors administers the ISO Plan, but it
is authorized to delegate to a committee of its members or to any officer of the
Company any or all of its authority under the plan. The Board has the authority
under the ISO Plan to determine and designate those employees of the Company and
any of its subsidiaries to whom options are to be granted and to determine the
number of shares, the exercise price, vesting schedule and other terms of the
option. References in this discussion of the ISO Plan to the Board of Directors
shall be deemed to include any committee or person whom the Board of Directors
designates to administer the ISO Plan.
Option Price: The Board of Directors has the authority to determine the
exercise price per share of the options granted pursuant to the ISO Plan
provided that the price will be equal to the Fair Market Value (as defined in
the ISO Plan) of a share of Common Stock on the date of grant. Payment for
shares of Common Stock purchased upon exercise of an option shall be made in
cash or by optionee's personal check, certified check or bank draft or, in the
Committee's discretion determined at the time of the grant: (i) in shares of
Common Stock owned by the optionee or with shares of Common Stock withheld from
the shares otherwise deliverable to the optionee upon exercise of such option;
(ii) by delivery of an irrevocable direction to a securities broker to sell
shares of Common Stock and deliver all or a portion of the proceeds to the
Company in payment for the Common Stock; (iii) by delivery of the optionee's
promissory note; or (iv) in any combination of the foregoing.
12
<PAGE>
Nontransferability: No option granted under the ISO Plan may be
transferred or assigned. In addition, during the lifetime of the optionee,
options awarded under the ISO Plan may be exercised only by such person or by
such person's guardian or legal representative.
Amendment or Termination of the ISO Plan: The Board of Directors may
terminate and in any respect amend or modify the ISO Plan, except that
shareholder approval is required whenever necessary to preserve the ISO
treatment of options granted pursuant to the ISO Plan.
Tax Treatment of Incentive Stock Options
Under the Code, an employee generally recognizes no regular taxable
income as the result of the grant or exercise of an ISO. However, an amount
equal to the difference between the Fair Market Value of the stock on the date
of exercise and the exercise price will be treated as an item of adjustment in
the year of exercise for purposes of the alternative minimum tax.
The Company will not be allowed a deduction for federal income tax
purposes in connection with the grant or exercise of an ISO, regardless of the
applicability of the alternative minimum tax to the optionee. The Company will
be entitled to a deduction, however, to the extent that ordinary income is
recognized by the optionee upon a disqualifying disposition (see below).
Upon a sale or exchange of the shares at least two years after the
grant of an ISO and one year after exercise of the option, gain or loss will be
recognized by the optionee equal to the difference between the sale price and
the exercise price. Such gain or loss will be characterized for federal income
tax purposes as long-term capital gain or loss. The Company is not entitled to
any deduction under these circumstances.
If any optionee disposes of shares acquired upon issuance of an ISO
prior to completion of either of the above holding periods, the optionee will
have made a "disqualifying disposition" of the shares. In such event, the
optionee will recognize ordinary income at the time of disposition equal to the
difference between the exercise price and the lower of the Fair Market Value of
the stock at the date of the option exercise or the sale price of the stock. The
Company generally will be entitled to a deduction in the same amount as the
ordinary income recognized by the optionee on a disqualifying disposition.
The optionee also will recognize capital gain on such disqualifying
disposition in an amount equal to the difference between (i) the amount realized
by the optionee upon such disqualifying disposition of the stock and (ii) the
exercise price, increased by the total amount of ordinary income, if any,
recognized by the optionee upon such disqualifying disposition (as described in
the second sentence of the preceding paragraph). Any such capital gain resulting
from a disqualifying disposition of shares acquired upon exercise of an ISO will
be long-term capital gain if the shares with respect to which such gain or loss
is realized have been held for more than twelve months.
13
<PAGE>
IV. APPROVAL OF THE REYNOLDS, SMITH AND HILLS, INC.
AMENDED AND RESTATED 1991 NONQUALIFIED STOCK OPTION PLAN
On May 20, 1997, the Board of Directors of the Company amended the
Reynolds, Smith and Hills, Inc. 1991 Nonqualified Stock Option Plan (the "NSO
Plan"). The amendments will principally (i) reduce the number of shares
authorized and issuable pursuant to the plan; (ii) allow the Board to delegate
administration of the plan to a committee; (iii) add a provision that terminates
an option in the event the optionee's employment is terminated for cause; (iv)
add a provision that allows cashless exercises; (v) allow the Board of Directors
to amend the plan; and (vi) add an indemnification provision.
Reduce the Number of Shares Issuable Under the NSO Plan
The Board of Directors has amended Section 2 of the NSO Plan to reduce
the number of shares issuable under the NSO Plan from 100,000 to 50,000. As of
May 30, 1997, no options to purchase shares of Common Stock were outstanding
under the NSO Plan. The Board of Directors believes that it is in the best
interest of the shareholders of the Company to reduce the number of shares
issuable under the NSO Plan by the amount that it proposes to increase the
number of shares issuable under the ISO Plan.
Termination of Option when Optionee is Terminated for Cause
The NSO Plan currently treats an optionee whose employment is
terminated for cause the same as an optionee whose employment is terminated
without cause. In either case, the option may be exercised within three months
after the date of termination. The Board of Directors has amended Section 4(d)
of the NSO Plan to shorten the period during which an optionee who has been
terminated for cause may exercise an option. An option granted pursuant to the
NSO Plan, as amended, held by a person terminated for cause will terminate
immediately, except that the Board of Directors may extend the exercise period
of such option for a period of up to 30 days. The Board of Directors believes
that it is in the best interest of the Company to limit the proprietary interest
in the Company of persons who are terminated for cause.
Cashless Exercise Feature
The Board of Directors has amended Section 4(e) of the NSO Plan to
allow option exercises in a variety of forms, including cash payment and
cashless exercise through a broker, through delivery of a promissory note,
through the surrender of shares already held by the optionee or with shares
withheld from the shares otherwise deliverable to the optionee upon exercise of
the option, or any combination of the foregoing. The Board of Directors believes
that it is in the best interest of the Company and its stockholders to amend the
NSO Plan to provide the Board of Directors (and any committee administering the
NSO Plan) with greater flexibility in the manner in which they may allow those
employees upon whose judgment, initiative and efforts the Company largely
depends for the successful conduct of its business to acquire a proprietary
interest in the Company.
Indemnification Provision
The Board of Directors amended the NSO Plan to add a new Section 7
which adds an indemnification provision that protects members of the Board of
Directors who administer the NSO Plan. The Board of Directors believes that it
is in the best interest of the Company to encourage members of the Board of
Directors to serve on any committee appointed to administer the plan.
14
<PAGE>
Section 16 Changes
The Board of Directors has amended Sections 3 and 6 of the NSO Plan to
eliminate (i) the requirement that the plan be administered by a committee
consisting solely of two or more disinterested directors, as defined by Rule
16b-3, and (ii) the requirement that plan amendments be approved by the
shareholders.
The Board of Directors believes that it is in the best interest of the
Company and its stockholders to amend the NSO Plan to provide the Board of
Directors (and any committee administering the plan) with greater flexibility in
the manner in which they may allow those employees upon whose judgment,
initiative and efforts the Company largely depends for the successful conduct of
its business to acquire a proprietary interest in the Company.
Summary of the Amended and Restated Reynolds, Smith and Hills, Inc. 1991
Nonqualified Stock Option Plan
The following summary outlined below is qualified in its entirety by
reference to the full text of the Amended and Restated Reynolds, Smith and
Hills, Inc. 1991 Nonqualified Stock Option Plan. A copy of such plan is
available upon request from the Company.
Purpose of the NSO Plan. The purpose of the NSO Plan is to enable the
Company to attract and retain persons of ability as employees and motivate such
employees to exert their best efforts on behalf of the Company and its
subsidiaries through the grant of options to purchase Common Stock of the
Company.
Major Provisions of the NSO Plan. The major provisions of the NSO Plan
are as follows:
Eligibility: The persons who are eligible to receive awards pursuant to
the NSO Plan are employees of the Company or its subsidiaries.
Administration: The Board of Directors administers the NSO Plan, but it
is authorized to delegate to a committee of its members or to any officer of the
Company any or all of its authority under the plan. The Board has the authority
under the NSO Plan to determine and designate those employees of the Company and
any of its subsidiaries to whom options are to be granted and to determine the
number of shares, the exercise price, vesting schedule and other terms of the
option. References in this discussion of the NSO Plan to the Board of Directors
shall be deemed to include any committee or person whom the Board of Directors
designates to administer the NSO Plan.
Option Price: The Board of Directors has the authority to determine the
exercise price per share of the options granted pursuant to the NSO Plan.
Payment for shares of Common Stock purchased upon exercise of an option shall be
made in cash or by optionee's personal check, certified check or bank draft or,
in the Committee's discretion determined at the time of the grant: (i) in shares
of Common Stock owned by the optionee or with shares of Common Stock withheld
from the shares otherwise deliverable to the optionee upon exercise of such
option; (ii) by delivery of an irrevocable direction to a securities broker to
sell shares of Common Stock and deliver all or a portion of the proceeds to the
Company in payment for the Common Stock; (iii) by delivery of the optionee's
promissory note; or (iv) in any combination of the foregoing.
15
<PAGE>
Nontransferability: No option granted under the NSO Plan may be
transferred or assigned. In addition, during the lifetime of the optionee,
options awarded under the NSO Plan may be exercised only by such person or by
such person's guardian or legal representative.
Amendment or Termination of the NSO Plan: The Board of Directors may
terminate and in any respect amend or modify the NSO Plan.
Tax Treatment of Nonqualified Stock Options
An optionee generally recognizes no taxable income as the result of the
grant of any nonqualified stock option ("NQSO"), assuming that the option does
not have a readily ascertainable fair market value at the time it is granted
(which is usually the case with plans of this type). Upon exercise of an NQSO,
an optionee will normally recognize ordinary compensation income for federal tax
purposes equal to the excess, if any, of the then Fair Market Value of the
shares over the exercise price. Optionees who are employees will be subject to
withholding with respect to income recognized upon exercise of an NQSO.
The Company will generally be entitled to a tax deduction to the extent
and in the year that ordinary income is recognized by the exercising optionee.
Upon a sale of shares acquired pursuant to the exercise of an NQSO, any
difference between the sale price and the Fair Market Value of the shares on the
date of exercise will be treated as capital gain or loss, and will qualify for
long-term capital gain or loss treatment if the shares have been held for more
than twelve months.
V. APPROVAL OF THE REYNOLDS, SMITH AND HILLS, INC.
AMENDED AND RESTATED 1991 EMPLOYEE STOCK BONUS PLAN
On May 20, 1997, the Board of Directors of the Company amended the
Reynolds, Smith and Hills, Inc. 1991 Employee Stock Bonus Plan (the "Bonus
Plan"). The amendments will principally (i) allow the Board to delegate
administration of the Bonus Plan to a committee; (ii) allow the Board of
Directors to amend the Bonus Plan; and (iii) add an indemnification provision.
Section 16 Changes
The Board of Directors has amended Sections 3 and 11 of the Bonus Plan
to eliminate (i) the requirement that the plan be administered by a committee
consisting solely of two or more disinterested directors, as defined by Rule
16b-3, and (ii) the requirement that plan amendments be approved by the
shareholders.
The Board of Directors believes that it is in the best interest of the
Company and its stockholders to amend the Bonus Plan to provide the Board of
Directors (and any committee administering the plan) with greater flexibility in
the manner in which they may allow those employees upon whose judgment,
initiative and efforts the Company largely depends for the successful conduct of
its business to acquire a proprietary interest in the Company.
16
<PAGE>
Indemnification Provision
The Board of Directors amended the Bonus Plan to add a new Section 12
which adds an indemnification provision that protects members of the Board of
Directors who administer the Bonus Plan. The Board of Directors believes that it
is in the best interest of the Company to encourage members of the Board of
Directors to serve on any committee appointed to administer the plan.
Summary of the Amended and Restated Reynolds, Smith and Hills, Inc. 1991
Employee Stock Bonus Plan
The following summary outlined below is qualified in its entirety by
reference to the full text of the Amended and Restated Reynolds, Smith and
Hills, Inc. 1991 Employee Stock Bonus Plan. A copy of such plan is available
upon request from the Company.
Purpose of the Bonus Plan. The purpose of the Bonus Plan is to enable
the Company to reward outstanding service and to attract and retain persons of
ability as employees of the Company and its subsidiaries. The number of shares
of Common Stock of the Company issuable under the Bonus Plan is 50,000, and
11,000 shares of Common Stock had been awarded pursuant to the Bonus Plan as of
May 30, 1997.
Major Provisions of the Bonus Plan. The major provisions of the Bonus
Plan are as follows:
Eligibility: The persons who are eligible to receive awards pursuant to
the Bonus Plan are employees of the Company or its subsidiaries.
Administration: The Board of Directors administers the Bonus Plan, but
it is authorized to delegate to a committee of its members or to any officer of
the Company any or all of its authority under the plan. The Board has the
authority under the Bonus Plan to determine and designate those employees of the
Company and any of its subsidiaries to whom shares are to be granted and to
determine the number of shares, vesting schedule and other terms of the grant.
References in this discussion of the Bonus Plan to the Board of Directors shall
be deemed to include any committee or person whom the Board of Directors
designates to administer the Bonus Plan.
Nontransferability: The right to receive stock under the Bonus Plan may
not be transferred or assigned.
Amendment or Termination of the Bonus Plan: The Board of Directors may
terminate and in any respect amend or modify the Bonus Plan.
VI. OTHER BUSINESS
The Company does not know of any business to be presented at the
meeting other than as set forth above. However, if any other business comes
before the meeting, it is intended that the holders of proxies solicited hereby
will vote in accordance with their best judgement.
17
<PAGE>
Shareholder Proposals for Next Annual Meeting
Any shareholder proposal intended to be presented at the 1998 Annual
Meeting of Shareholders should be sent to the Company, Attention: Corporate
Secretary, and must be received no later than February 20, 1998.
Annual Report on Form 10-K
On or about June 20, 1997, the Company's 1997 Annual Report on Form
10-K for the fiscal year ended March 31, 1997 was mailed to all shareholders of
record through the close of business on June 20, 1997.
*****************************************
18
<PAGE>
REYNOLDS, SMITH AND HILLS, INC.
P R O X Y
This Proxy Solicited on Behalf of the Board of Directors
Annual Meeting of Shareholders to be held Thursday, July 24, 1997
The undersigned hereby appoints Leerie T. Jenkins, Jr. and David K. Robertson,
jointly and severally, proxies, with full power of substitution and with
discretionary authority, to represent and to vote, in accordance with the
instructions set forth below, all shares of Common Stock of Reynolds, Smith and
Hills, Inc. held of record by the undersigned on June 20, 1997 at the annual
meeting of shareholders to be held on Thursday, July 24, 1997 or any adjournment
thereof.
1. Election of Directors.
________ For all nominees listed below (except as marked to
the contrary below).
________ Withhold authority to vote for all nominees listed
---
below.
Instruction: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below.
L. Jenkins; D. Robertson; D. Cole;
R. Ratliff; D. Thomas; A. Zechella
2. Proposal to ratify the appointment of Deloitte & Touche LLP as
independent public accountants of the Company for the fiscal year
ending March 31, 1998.
_____________For _____________Against _____________Abstain
3. Proposal to ratify amendments to the Company's Amended and Restated
1991 Incentive Stock Option Plan and the reservation of 50,000
additional shares of the Company's Common Stock for issuance of options
under such plan.
_____________For _____________Against _____________Abstain
4. Proposal to ratify amendments to the Company's Amended and Restated
1991 Nonqualified Stock Option Plan and the reduction of 50,000 shares
of the Company's Common Stock reserved for issuance of options under
such plan.
_____________For _____________Against _____________Abstain
1
<PAGE>
5. Proposal to ratify amendments to the Company's Amended and Restated
1991 Employee Stock Bonus Plan.
_____________For _____________Against _____________Abstain
6. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign.
Signature______________________________________Date_______________
Signature______________________________________Date_______________
When signing as Attorney, Administrator, Guardian or Trustee please give full
title as such. If a corporation, please sign in full corporate name by president
or other authorized officer. If a partnership name, please sign by authorized
person.
This proxy when executed will be voted in the manner directed herein by the
shareholders. If no direction is made, this proxy will be voted FOR all
proposals.
2
<PAGE>
