[TYPE] DEF 14A
[DOCUMENT-COUNT] 1
[SROS] NONE
[FILER]
[CIK] 0000030770
[CCC] gyvwwp5$
[/FILER]
[PERIOD] 07/07/99
PROXY STATEMENT
NOTICE OF MEETING
DynCorp
AMENDED NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of DynCorp, a Delaware corporation, will be
held at the principal executive offices of the Company, 2000 Edmund Halley
Drive, Reston, Virginia 20191, at 10:00 a.m., eastern daylight time, Wednesday,
July 28, 1999, to consider and take action on the following:
1. Election of Russell E. Dougherty to serve as a Class II director for a
one-year term and H. Brian Thompson and Herbert S. Winokur, Jr. to serve as
Class II directors for three-year terms;
2. Ratification of Arthur Andersen LLP as independent public accountants
for 1999; and
3. To act on such other business as is properly before the meeting.
Your Board of Directors recommends a vote "FOR" election of the nominees and
"FOR" ratification of the independent public accountants.
Please mail your voting card in the envelope furnished with the voting card. It
must reach the addressee no later than the close of business, Monday, July 26,
1999, in order for the votes or instructions to be counted.
The voting instructions discussed in this proxy statement are being solicited on
behalf of the Board of Directors of the Company. The proxy statement, voting
cards, and the Company's 1998 Annual Report are being distributed on or about
July 8, 1999.
By Order of the Board of Directors,
H. Montgomery Hougen
Vice President & Corporate Secretary
July 8, 1999
Important: To ensure that your vote is counted at the Annual Meeting, you
are urged to sign and return the enclosed voting card today.
<PAGE>
PROXY STATEMENT
TABLE OF CONTENTS
Question Page
What is a voting card?.......................................................1
What is a proxy statement?...................................................1
Who will receive this proxy statement?.......................................1
Who can vote?................................................................1
How can I vote shares in my ESOP or SARP account?............................1
What happens if I do not vote my ESOP or SARP shares?........................2
What about my ESPP shares?...................................................2
How do I vote?...............................................................2
How do I mark the voting card?...............................................2
Who will count the vote?.....................................................2
How many votes are necessary to adopt a proposal?............................2
Is my vote confidential?.....................................................3
What does it mean if I get more than one voting card?........................3
Who owns the Company's common stock?........................ ...............3
Who pays for this proxy solicitation?........................................3
How do I receive an Annual Report?...........................................3
Can I revoke or change my voting card?........................ ..............4
What directors am I voting on?...............................................4
What are independent public accountants?.....................................4
What is the purpose of my vote?..............................................5
Who are the other directors?.................................................5
Who are the other executive officers of the Company?.........................6
Does the Board of Directors have any standing committees?....................7
Who determines executive compensation amounts?................. .............8
What is the relationship between the members of the Compensation
Committee and the Company?..................................................8
What reports must the Compensation Committee make about compensation?........8
Are directors paid for their duties?.........................................9
Do directors receive other forms of compensation?............................9
What is the compensation of the named executive officers?...................10
Are there any employment contracts between the named executive officers
and the Company?...........................................................12
What is the Board's policy about stock ownership by executives?.............12
How do employees acquire stock?.............................................12
How does our stock performance compare with others?.........................13
Who are the largest stockholders of the Company?............................14
How much stock do directors and officers own?...............................15
Have there been any business transactions between any director or officer
and the Company during the past year?.......................................15
Can I suggest an item for inclusion on next year's proxy statement?.........16
<PAGE>
PROXY STATEMENT
QUESTIONS AND ANSWERS
What is a voting card?
A voting card is like a written ballot. It is sometimes called a "proxy" card.
When you instruct someone to vote your shares in a certain manner, the
designated person then acts as your agent or "proxy" in casting your vote or
giving your voting instructions.
What is a proxy statement?
This is a proxy statement. When the Company offers you the opportunity to vote
as a stockholder or to give voting instructions, it must also give you certain
information about the Company and the election. For example, the securities laws
require that we furnish you with specific information about stock ownership and
executive compensation. Much of that information is in this proxy statement. The
balance of the financial and other information that we are required to give you
can be found in the Company's 1998 Annual Report, Form 10-K.
Who will receive this proxy statement?
o Persons who own stock in their own names ("record holders") will receive a
proxy statement and one or more voting cards, together with an envelope
addressed to the Corporate Secretary. Record holders include current and
former employees who bought stock in their own names, outside investors,
and the ESOP and SARP trusts, which hold stock on behalf of participants in
the plans. For record holders known to the Company to be participants in
the ESOP, we will send your proxy statement with your ESOP materials.
o Participants in the Employee Stock Ownership Plan ("ESOP") will receive a
proxy statement and voting card, together with an envelope addressed to the
ESOP's ballot-counting agent.
o Participants in the Savings and Retirement Plan ("SARP") who hold a Company
stock account will receive a voting card, together with an envelope
addressed to the SARP's ballot-counting agent. We will send your proxy
statement with your ESOP materials.
Who can vote?
All record holders can vote directly when they send in their voting cards. The
ESOP Trust and SARP Trust own shares directly and will vote those shares in
accordance with voting instructions received from their participants.
How can I vote shares in my ESOP or SARP account?
The ESOP voting card shows the number of shares allocated to your ESOP account
as of December 31, 1998. The plan document designates participants as "named
fiduciaries", which allows participants to give voting instructions for their
shares. Your voting instructions, together with the instructions of all other
participants who mail in their voting cards, will be counted on behalf of the
ESOP Trustees to determine the proportion of votes "for" or "against" each
nominee and the independent public accountants. Then the ESOP Trustees will vote
all the shares in the ESOP, including those allocated to the accounts of other
participants and those not yet allocated to individual accounts, in the same
proportions "for" or "against" the respective matter, unless following the
participant instructions would at the time be contrary to the laws governing
such trusts, in which case the Trustees will vote the shares in accordance with
the law.
The same process applies to your SARP voting card, except that the voting card
reflects all the shares held in your SARP account as of the record date.
What happens if I do not vote my ESOP or SARP shares?
The plan documents provide that all shares are to be voted proportionately in
the same ratio as votes are cast in actual voting instructions received. If you
do not give voting instructions for shares in your account, the other
participants who do give instructions will actually instruct the trustees how to
vote them for you. On the other hand, if you do vote your shares, your vote will
determine the voting of other shares as well, including a proportionate share of
unallocated shares and the allocated shares which other participants do not
vote.
What about my ESPP shares?
Participants in the payroll deduction Employee Stock Purchase Plan have their
shares issued directly in their own names and are record holders. They vote
those shares directly by sending in voting cards.
How do I vote?
Mark, sign, and date the enclosed voting card, and return it immediately in the
enclosed envelope. If this is a joint account, both owners should sign the card.
You should send all the voting cards in the envelope that came with the voting
card. It is important to match the voting card with the correct envelope,
because the voting instructions are counted by different parties.
How do I mark the voting card?
If you want to vote for the nominees for the Board of Directors, you may check
the box marked "FOR". If you want to vote against all nominees, check the box
marked "AGAINST" . If you want to vote against an individual nominee, write that
person's name on the line below the words "WITHHOLD AUTHORITY". The words
"withhold authority" really mean "against".
If you want to vote for ratification of Arthur Andersen LLP as independent
public accountants, check the box marked "FOR". If you want to vote against
ratification, check the box marked "AGAINST". If you do not want to vote on the
matter, check the box marked "ABSTAIN".
If you do not mark any selections, your voting card will be voted for the
election of the directors and for ratification of the independent public
accountants.
Who will count the vote?
The Corporate Secretary counts the votes of record holders. The ESOP Trust and
SARP Trust have hired ChaseMellon Shareholder Services, L.L.C. to count ESOP and
SARP voting cards. The Trusts will vote the shares at the Annual Meeting.
How many votes are necessary to adopt a proposal?
Each share that is held by a record holder is equal to one vote. On May 24, 1999
(the "record date"), there were 10,035,164 shares outstanding, and each share
carries one vote. Therefore, 3,345,055 shares will make up a quorum for the
meeting. When a quorum is present, the meeting can carry on business. A majority
of the total shares then represented at the meeting is necessary to pass an
action. Because the ESOP Trust holds 7,311,131 shares, the mere presence of the
ESOP Trustee voting those shares will constitute a quorum.
Is my vote confidential?
ESOP and SARP votes are confidential; the ballot-counting agency merely tells
the Trustee the total number of shares voted for or against a matter. The
Corporate Secretary will count votes cast by record holders, and those votes are
not confidential.
What does it mean if I get more than one voting card?
You will get an ESOP voting card for your ESOP shares. If you hold stock in the
SARP Company stock account, you will also get a SARP voting card for those
shares. If you are also a record holder, you will receive a voting card for
shares held directly in your name. Some record holders may receive more than one
record holder voting card, because they hold shares in more than one account,
such as through a joint account or trust account.
Who owns the Company's common stock?
If all outstanding options to buy shares were exercised and all shares currently
deferred under the former Restricted Stock Plan were issued, this is
approximately what our ownership would be:
Owners No. of shares Percentage
ESOP Trust 7,311,131 63.9%
SARP Trust 620,290 5.4%
DynCorp directors and officers (1)(2) 2,008,260 17.6%
Other current or former DynCorp
employees 859,747 7.5%
Outside investors 634,043 5.6%
Total 11,433,471
1. Does not include approximately 58,404 shares held in the ESOP
and SARP Trusts on behalf of directors and officers.
2. See table on page 15 for more information.
Who pays for this proxy solicitation?
The cost of printing and mailing the Annual Report and this proxy statement to
ESOP participants plus the cost of tabulating ESOP voting cards will be paid by
the ESOP trust. The costs relating to SARP participants will be paid by the SARP
trust. The Company will pay remaining costs.
How do I receive an Annual Report?
The ESOP is sending Annual Reports to ESOP participants with these proxy
statements. Nearly all our record holders are also ESOP participants. For record
holders who are not known to be ESOP participants, the Company is sending an
Annual Report directly with this proxy statement. If you have not received an
Annual Report through one of these methods, you may call the Corporate
Secretary's office at (703) 264-9112, send a request by facsimile to (703)
264-9147, or send a message to him on internal e-mail (Hougen, Monty) or on the
internet ([email protected]).
Can I revoke or change my voting card?
If record holders want to change their vote, they can revoke their voting
instructions by: (1) sending a written statement to the Corporate Secretary
prior to the Annual Meeting; (2) submitting a properly signed replacement voting
card with a later date to the Corporate Secretary; or (3) voting in person at
the Annual Meeting. ESOP and SARP participants cannot change their voting
instructions.
What directors am I voting on?
The first item on the ballot is the election of the following nominees for
director.
The nominee for election for a one-year term is:
Russell E. Dougherty Director since 1989 General Dougherty, age 78, was an
attorney with the law firm of McGuire, Woods, Battle & Boothe until his
retirement in 1998. He is a retired General, United States Air Force, who served
as Commander-in-Chief, Strategic Air Command and Chief of Staff, Allied Command,
Europe. From 1980 until 1986, he served as Executive Director of the Air Force
Association and Publisher of Air Force Magazine. He was formerly a member of the
Defense Science Board; trustee of the Institute for Defense Analysis; and
trustee of The Aerospace Corp.
The nominees for election for a three-year term are:
H. Brian Thompson
Mr. Thompson, age 60, has served as Chairman and Chief
Executive Officer of Global TeleSystems Group, Inc. since March, 1999. He was
Chairman and Chief Executive Officer of LCI International Inc. from 1991 until
1998 and Vice Chairman of Qwest Communications International Inc. from June
until December, 1998. From 1981 to 1990, he was Executive Vice President, MCI
Communications Corporation. He is a director of Bell Canada International Inc.,
PageNet do Brazil, and Golden Books Family Entertainment Inc. He is a member of
the Listed Company Advisory Committee to the New York Stock Exchange Board of
Directors. He has not served previously as a director of DynCorp.
Herbert S. Winokur, Jr. Director since 1988
Mr. Winokur, age 55, served as Chairman of the Board from 1988 until 1997.
He is President, Capricorn Holdings, Inc. (an investment company), and the
Managing Partner of Capricorn Investors, L.P. and Capricorn Investors II, L.P.
He was formerly Senior Executive Vice President; Member, Office of the
President; and Director, Penn Central Corporation. He is a director of ENRON
Corp.; NAC Re Corp.; Mrs. Fields' Holdings, Inc.; The WMF Group, Ltd.; CCC
Information Services Group Inc.; and Azurix Corp.
The nominees have consented to serve for their respective terms. If a nominee is
unable to stand for election, the Board of Directors may, by resolution, provide
for a lesser number of directors or designate a substitute. In the latter case,
shares represented by proxies may be voted for a substitute director.
What are independent public accountants?
Independent public accountants audit the Company's financial statements each
year, to assure that the information contained in the Annual Report is presented
in accordance with generally accepted accounting principles. Representatives of
the independent public accountants meet regularly with the Audit Committee of
the Board of Directors, and the Audit Committee reviews their reports and
findings. Arthur Andersen LLP is one of the largest such firms in the world, and
it has provided this service to the Company for nearly 50 years. The Board of
Directors has selected the firm to provide audit services to the Company again
in 1999, on the advice of its Audit Committee, and recommends that you ratify
that selection. Representatives of the independent public accountants are not
expected to attend the Annual Meeting.
What is the purpose of my vote?
An affirmative vote of a majority of the shares represented at the meeting is
necessary to elect a director, and an affirmative vote for the independent
public accountants helps assure the Board that it is making suitable choice of
accountants on behalf of the stockholders. Your Board of Directors recommends a
vote FOR these nominees and FOR ratification. If a record holder does not send
in a voting card or marks "withhold" or "abstain" on a voting card, that will
have the same effect as voting against the matter. However, the ESOP Trust will
vote all the shares held by the ESOP Trust, and the SARP Trust will vote all the
shares held in the SARP Trust, proportionately in the same ratio as votes are
cast in actual voting instructions received.
Who are the other directors? The other current directors are:
Dan R. Bannister Director since 1985 Mr. Bannister, age 68, is Chairman of the
Board. He served as President of the Company from 1984 until 1997 and as Chief
Executive Officer from 1985 until 1997. In 1997, he was elected Chairman of the
Board. He retired as an active employee of the Company in April, 1999. He is a
director of ITC Learning Corporation. His current term as a director expires in
2001.
T. Eugene Blanchard Director since 1988 Mr. Blanchard, age 68, served as Senior
Vice President and Chief Financial Officer of the Company from 1979 until 1997,
when he retired as an active employee. He is the Chairman of the Company's
Employee Stock Ownership Plan Committee and a trustee of the Employee Stock
Ownership Plan Trust. He is a director of Landmark Systems Corporation. His
current term as a director expires in 2000.
Paul V. Lombardi Director since 1994 Mr. Lombardi, age 57, has served as
President and Chief Executive Officer since 1997. He served as Chief Operating
Officer from 1995 until 1997; as Executive Vice President from 1994 until 1997;
as Vice President from 1992 until 1994; as President of Federal Sector from 1994
until 1995; and as President of Government Services Group from 1992 until 1994.
He was Senior Vice President and Group General Manager, Planning Research
Corporation from 1990 until 1992. He is a director of Avid Medical Systems, Inc.
His current term as a director expires in 2000.
Paul G. Kaminski Director since 1997 Dr. Kaminski, age 56, also served as a
director of the Company from 1988 until 1994. He is President and Chief
Executive Officer of Technovation, Inc. (consulting and investment banking) and
a Senior Partner in Global Technology Partners (merchant banking). He served in
the United States Department of Defense as Under Secretary of Defense for
Acquisition and Technology from 1994 until 1997. He was Chairman and Chief
Executive Officer of Technology Strategies & Alliances (strategic partnership
consulting) from 1993 until 1994. He is a director of Anteon Corporation; Condor
Systems, Inc.; General Dynamics Corporation; DeCrane Aircraft Holdings, Inc.;
Eagle Picher Technologies, LLC; and other, privately held companies. His current
term as a director expires in 2001.
Dudley C. Mecum II Director since 1988 Mr. Mecum, age 64, is a Managing Director
of Capricorn Holdings LLC (private investment company). He was a partner, G. L.
Ohrstrom & Co., an investment firm, from 1989 until 1997. He served as Vice
Chairman, Peat Marwick Mitchell & Co. From 1965 to 1985, except for the period
from 1971 to 1973, when he served as Assistant Secretary of the Army
(Installations & Logistics). He is a director of Citigroup Inc.; Travelers
Property Casualty Corp.; Lyondell Chemical Company; VICORP Restaurants, Inc.;
Metris Companies Inc.; CCC Information Services Group Inc.; and Suburban Propane
Partners LLP. His current term as a director expires in 2000.
David L. Reichardt Director since 1988 Mr. Reichardt, age 56, has served as
Senior Vice President and General Counsel of the Company since 1986. He served
as President of Dynalectric Company, a former subsidiary of the Company, from
1984 until 1986 and as Vice President and General Counsel of DynCorp from 1977
until 1984. His current term as a director expires in 2001.
Who are the other executive officers of the Company?
In addition to the above-named directors who also hold offices, the Company's
executive officers are:
* Robert B. Alleger, Jr., age 53, Vice President, Aerospace Technology, has
served in that capacity and as President of the Technical Services, formerly
Aerospace Technology, business unit since 1996. He was Vice President, Systems
Support Services, Lockheed Martin Services, Inc. from 1992 until 1996 and Vice
President, Business Development, GE Government Services, General Electric
Company from 1989 until 1992.
* John J. Fitzgerald, age 45, Vice President and Controller, has served in that
capacity since 1997. He was Vice President and Controller, PRC, Inc. from 1992
until 1997; Chief Financial Officer and Treasurer of American Safety Razor
Company from 1990 until 1992; Vice President and Controller of American Bank
Stationery Company from 1988 until 1990; and Chief Financial Officer and
Treasurer of Physician's Pharmaceutical Services, Inc. from 1986 until 1988.
* Patrick C. FitzPatrick, age 59, Senior Vice President and Chief Financial
Officer, has served as Senior Vice President and Chief Financial Officer since
1997. He was Chief Financial Officer, American Mobile Satellite Corporation from
1996 until 1997; Senior Vice President and Chief Financial Officer of PRC Inc.
from 1992 until 1996; and President and Chief Operating Officer of Oxford Real
Estate Management Services from 1990 until 1992.
Paul T. Graham, age 32, Vice President and Treasurer, has served in that
capacity since 1997. He was Finance Manager of the Company from 1992 until 1994,
Assistant Treasurer from 1994 until 1997, and Director of Finance from 1995
until 1997.
* Gary P. Hobbs, age 51, President of DynCorp Information & Enterprise
Technology, Inc., has served as President of the Information & Enterprise
Technology business unit since August, 1998. He was President, Northrop Grumman
Technical Services, Northrop Grumman Corporation from 1995 until 1998, and
President, Applied Technology Division, Computer Sciences Corporation from 1993
until 1995.
H. Montgomery Hougen, age 64, Vice President and Secretary and Deputy General
Counsel, has served as a Vice President since 1994 and as Corporate Secretary
and Deputy General Counsel since 1984.
* Roxane P. Kerr, age 51, Senior Vice President, Human Resources and
Administration, has served in that capacity since March, 1998. She was Vice
President, Human Resources, North America, LucasVerity Plc from 1993 until 1998,
and a private human resources consultant from 1992 until 1993.
* Marshall S. Mandell, age 56, Senior Vice President, Corporate Development, has
served in that capacity since November, 1998. He served as Vice President,
Business Development from 1994 until 1998 and as Acting President of the
Information and Engineering Technology business unit from 1997 until 1998. He
served as Vice President, Business Development, Applied Science Group from 1992
until 1994. He was Senior Vice President, Eastern Computers, Inc. from 1991
until 1992, and President, Systems Engineering Group, Ogden/Evaluation Research
Corporation from 1984 until 1991.
Ruth Morrel, age 44, Vice President, Law and Compliance, has served in that
capacity since 1994. She served as Group General Counsel from 1984 until 1994.
Henry H. Philcox, age 58, Vice President and Chief Information Officer, has
served in that capacity since 1995. He was Chief Information Officer of the
Internal Revenue Service from 1990 until 1995.
Robert G. Wilson, age 58, Vice President and General Auditor, has served in that
capacity since 1985.
* The persons designated by an asterisk, as well as the officers who are
also directors, have been designated as "officers" for purposes of Rule
16a-1, issued under Section 16 of the Securities Exchange Act of 1934.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Securities Exchange Act requires certain officers and directors to file
periodic reports of purchases and sales of the Company's stock to the Securities
and Exchange Commission. The Company believes that all required persons filed
all required reports under Section 16 of the Act in a timely manner.
Does the Board of Directors have any standing committees?
The Board of Directors has established several standing committees of directors.
The description of those committees and their memberships are:
o Audit Committee: Provides oversight and review of the Company's accounting
and financial functions and its financial reporting process.
o Business Ethics and Compliance Committee: Oversees the implementation and
maintenance of, and assures corporate compliance with, a comprehensive
business ethics and legal compliance program.
o Compensation Committee: Reviews, approves, and revises the Company's
compensation policies, practices, and plans, including the appropriateness
of salary, incentive compensation, stock option, and other benefit matters.
o Executive Committee: Acts for the Board of Directors between meetings.
o Nominating Committee: Provides the Board of Directors with recommendations
concerning the qualifications of potential candidates for membership on the
Board. The Committee may, but is not obligated to, consider written
suggestions of potential candidates submitted by stockholders.
Recommendations should be directed to the Chairman of the Board at the
Company's address.
<TABLE>
<CAPTION>
Membership roster:
Name Board of Directors Audit Business Ethics Compensation Executive Nominating
<S> <C> <C> <C> <C> <C>
Mr. Bannister Chairman Member Member
Mr. Blanchard Member Member Member
Gen. Dougherty Member Member Member
Dr. Kaminski Member Chairman Member Member
Mr. Lombardi Member Member
Mr. Mecum Member Chairman Member
Mr. Reichardt Member
Mr. Winokur Member Chairman Chairman Chairman
No. of meetings in 1998: 4 5 4 4 8 0
</TABLE>
Each director attended all meetings of the Board of Directors and the various
committees on which he served.
Who determines executive compensation amounts?
The Compensation Committee of the Board of Directors sets policies and
rates for executive compensation. The members of the Compensation Committee
during 1998 were: Mr. Winokur, Chairman of the Committee; General Dougherty; and
Dr. Kaminski.
What is the relationship between the members of the Compensation Committee and
the Company?
None of the members of the Compensation Committee are, or were, current or
former employees of or have a business or other relationship with the Company.
No executive officer of the Company serves on the board of directors or
compensation committee of any entity (other than subsidiaries of the Company)
whose directors or executive officers served on the Board of Directors or
Compensation Committee of the Company.
What reports must the Compensation Committee make about compensation?
The following comments and several tables in this proxy statement pertain
to certain "named executive officers". For this proxy statement, that term
applies to Mr. Lombardi, President and Chief Executive Officer; Mr. Bannister,
Chairman of the Board; Mr. Reichardt, Senior Vice President and General Counsel;
Mr. FitzPatrick, Senior Vice President and Chief Financial Officer; and Mr.
Mandell, Senior Vice President, Corporate Development.
What is our compensation philosophy?
Our compensation programs have been carefully designed to motivate our
management team to create and maximize stockholder value. The linking of
executive compensation with the returns realized by our stockholders has proven
to be instrumental to our continued growth and performance. Our Compensation
Committee consists of three independent non-employee directors who have the
primary responsibility to administer executive compensation programs, policies
and practices. DynCorp's executive compensation program consists of three
elements: base pay, an annual incentive program, and a long-term incentive
compensation program. The mix of short- and long-term incentives is continually
reviewed to assure the proper linkage between executive rewards and stockholder
returns.
How do we determine base pay?
The base pay of our executives is determined by individual performance and
comparisons to executive compensation in the service, information technology,
and general industry businesses.
How are annual bonuses determined?
The purpose of annual bonuses is to motivate and reward key executives for their
achievement of pre-established, measurable objectives that have significant and
direct impact on the overall success of the company and its business. At the
beginning of the year, company and unit financial objectives, individual
objectives, and target incentive award levels are established and confirmed in
writing for each participant. At the conclusion of the year, the achievement of
the specified financial objectives and individual objectives are scored and
weighted for each participant according to established formulae to determine the
actual bonus amount to be awarded.
How is compensation used to focus management on long-term value creation?
Stock options are granted by the Company to aid in the retention of key
employees and to align the interests of management employees with those of the
stockholders. Stock options have value for management employees only if the
price of the Company's stock increases above the fair market value on the grant
date and the employee remains in the Company's employ for the period required
for the stock option to be exercisable, thus providing an incentive to remain in
the Company's employ. Additionally, stock options directly link a portion of the
management employee's compensation to the interests of stockholders by providing
an incentive to maximize stockholder value.
By the Compensation Committee:
Herbert S. Winokur, Chairman
Russell E. Dougherty
Paul G. Kaminski
Are directors paid for their duties?
Directors who are also employees of the Company do not receive any additional
compensation for their services as directors.
Directors who are not employees of the Company receive an annual retainer of
$20,000 and an attendance fee of $1,000 for each meeting they attend. Members of
the Audit, Business Ethics and Compliance, Compensation, and Executive
Committees receive an annual retainer of $2,750 for serving on the committees
and an attendance fee of $500 for each committee meeting they attend. The
chairman of each committee other than the Audit Committee receives an additional
annual retainer of $2,000, and the chairman of the Audit Committee receives an
additional annual retainer of $3,000. In 1998, non-employee directors received
an aggregate amount of $153,450 in retainers and fees, as a group. They are also
reimbursed for related travel expenses.
Do directors receive other forms of compensation?
Directors have also received stock options under the Company's 1995 Stock Option
Plan, discussed below. The Board awarded 5,000 stock options to each of Mr.
Blanchard, General Dougherty, Dr. Kaminski, and Mr. Mecum in 1998, at an
exercise price of $20.00 per share. Non-employee directors do not participate in
other current benefit plans of the Company.
Because directors of the Company can incur personal liability for activities in
connection with Company business, the Company purchases insurance to cover
claims against its directors and officers and to cover losses incurred in the
Company's indemnification of directors and officers as required or permitted by
law. The directors and officers covered are the directors and officers of the
Company and its subsidiaries. There is no allocation or segregation of the
premium for specific subsidiaries or individual directors and officers.
What is the compensation of the named executive officers?
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Compensation
Annual compensation Awards
Name and principal position Year Salary ($) Bonus Other Securities All other
($) (1) annual underlying compensation
compen-sation options/SARs (#) ($) (2)
(a) (c) ($) (g)
(b) (d) (e) (i)
<PAGE>
<S> <C> <C> <C> <C> <C> <C>
Paul V. Lombardi 1998 342,104 185,300 -- -- 14,283
President & Chief 1997 332,789 160,000 177 -- 8,307
Executive Officer 1996 279,614 148,000 -- 90,000 10,742
Dan R. Bannister 1998 233,025 25,000 -- -- 259,927
Chairman of the Board 1997 275,481 25,000 174 -- 14,215
1996 326,105 235,000 -- 100,000 17,012
David L. Reichardt 1998 248,947 204,800 -- -- 16,706
Senior Vice President & 1997 245,082 90,000 244 -- 11,738
General Counsel 1996 219,464 99,000 -- 75,000 9,179
Patrick C. FitzPatrick 1998 248,947 129,800 -- -- 10,896
Senior Vice President & 1997 241,933 90,000 -- 100,000 11,060
Chief Financial Officer 1996 -- -- -- -- --
Marshall S. Mandell 1998 212,724 97,300 -- 40,000 10,854
Vice President, Business 1997 204,248 73,300 364 -- 10,155
Development 1996 179,246 80,000 -- 30,000 8,798
<FN>
(1) Column (d) reflects bonuses earned and expensed during year, whether
paid during or after such year. Since 1996, 20% of executive bonuses
have been paid in shares of Common Stock, valued at then-current market
value.
(2) Column (i) includes special, one-time payments to Mr. Bannister and
each named executive officer's allocated share of Company's
contribution to the ESOP and SARP and Company-paid portion of
group-term and split-dollar life insurance premiums, computed according
to Internal Revenue Service tables. These amounts are:
</FN>
</TABLE>
<TABLE>
<CAPTION>
ESOP contributions ($) SARP contributions ($) Insurance Premiums ($)
Name 1998 1997 1996 1998 1997 1996 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mr. Lombardi 4,435 4,356 4,691 3,000 2,850 900 6,848 1,101 5,151
Mr. Bannister -- -- 4,691 2,709 3,800 1,250 7,682 10,415 11,072
Mr. Reichardt 4,435 4,356 4,691 3,125 1,269 913 9,146 6,112 3,575
Mr. FitzPatrick 4,435 4,356 -- 2,338 1,267 -- 4,122 5,437 --
Mr. Mandell 4,435 4,356 4,691 2,143 2,361 1,306 4,277 3,438 2,801
</TABLE>
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants Potential realizable
value at assumed
annual rates of stock
price appreciation for
option term
Name Number of Percent of total Exercise or Expiration 5% ($) 10% ($)
securities options/ SARs base price date
underlying granted to ($/Share)
options/SARs employees in
granted (#) fiscal year
(a) (b) (c) (d) (e) (f) (g)
<S> <C> <C> <C> <C> <C> <C>
Mr. Lombardi 0 n/a n/a n/a n/a n/a
Mr. Bannister 0 n/a n/a n/a n/a n/a
Mr. Reichardt 0 n/a n/a n/a n/a n/a
Mr. FitzPatrick 0 n/a n/a n/a n/a n/a
Mr. Mandell 40,000 7.8 20.00 3/16/08 377,400 956,100
</TABLE>
<TABLE>
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<PAGE>
<CAPTION>
Number of securities Value of unexercised
underlying unexercised in-the-money options/ SARs
options/SARs at fiscal at fiscal year-end ($)
year-end (#)
Name Shares acquired Value Exercisable/ Exercisable/
on exercise(#) realized ($) Unexercisable Unexercisable
(b)
(a) (c) (d) (e)
<S> <C> <C> <C> <C> <C> <C>
Mr. Lombardi -- -- 60,000 70,000 212,400 216,600
Mr. Bannister -- -- 79,000 86,000 298,900 282,600
Mr. Reichardt -- -- 45,000 55,000 151,500 163,500
Mr. FitzPatrick -- -- 20,000 80,000 10,000 40,000
Mr. Mandell -- -- 19,500 63,000 68,250 75,500
</TABLE>
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Company has established a Supplemental Executive Retirement Plan for certain
senior executives, including the five named executive officers, whereby the
individuals (or their beneficiaries) receive payments having an aggregate amount
equal to 150% of the sum of their final annual salary rate plus their final
target annual bonus, paid over the ten-year period following their normal
retirement, disability retirement, and, in some cases, early retirement. Upon
their death following such retirement, the individuals' beneficiaries also
receive an additional aggregate lump-sum payment equal to one-half of the
foregoing amount. In the event of their death prior to retirement, the
individuals' beneficiaries receive, in lieu of the foregoing payments, an
aggregate lump-sum payment equal to 100% of the sum of their final annual salary
rate plus their final target annual bonus. The Company funds some of such
payments through split-dollar life insurance policies.
Are there any employment contracts between the named executive officers and the
Company?
Except for the change-in-control severance agreements described below, the
Company's executives serve at the pleasure of the Board of Directors.
The Company has entered into change-in-control severance agreements with Messrs.
FitzPatrick, Lombardi, Mandell, and Reichardt, (the "Severance Agreements").
Each Severance Agreement provides that certain benefits, including a lump-sum
payment, will be triggered if the executive is terminated following a change in
control of the Company, unless termination occurs under specific circumstances
set forth in the Severance Agreements. A change in control would occur if the
Company were to be substantially acquired by a new owner or if a majority of the
Board of Directors were replaced. The Severance Agreements currently expire on
December 31, 1999, but are subject to annual automatic renewal unless terminated
by the Board of Directors. The amount of such lump-sum payment would be 2.99
times the sum of the executive's annual salary and average incentive
compensation for the three prior years. Other benefits include payment of
incentive compensation not yet paid for the prior year and a pro rata portion of
incentive compensation awards for the current year, as well as immediate vesting
of all unvested stock options. Each Severance Agreement also provides a
reduction if the payment exceeds the amount the Company is entitled to deduct on
its federal income tax return. The Severance Agreements also provide that the
Company will reimburse the individual for legal fees and expenses incurred by
the executive in enforcing his rights under the Severance Agreements.
What is the Board's policy about stock ownership by executives?
In 1995, the Board of Directors established the DynCorp Equity Target Ownership
Policy ("ETOP"). The ETOP applies to all employees in bands 1 through 4 of the
Executive/Senior Management Compensation Program, including the named executive
officers. The ETOP implements the Compensation Committee's belief that
significant stock ownership by management employees will provide an incentive
for those managers to improve stockholder value over the long term. This will
benefit the managers as well as all stockholders. The ETOP establishes goals of
stock ownership based on individual levels of compensation. It provides that the
aggregate value of shares owned directly by the individuals or held on their
behalf in various plans, like the ESOP and SARP, be at least as great as the
following multiples of their base annual salary:
Base salary rate of: required value of holdings:
Chief Executive Officer 4.0 times base salary
$300,000 or more 3.0 times base salary
$200,000 to $299,999 2.5 times base salary
less than $200,000 1.5 times base salary
If an executive subject to the ETOP purchases a block of 1,000 shares or more on
the Company's Internal Stock Market in the course of meeting ETOP targets, the
purchaser receives a special bonus payment equal to 7 1/2% of the purchase
price, which is intended to have an after-tax effect similar to a purchase of
the shares through the Employee Stock Purchase Plan mentioned below.
How do employees acquire stock?
The Company has provided several additional ways for its employees, including
the named executive officers and other employees subject to the ETOP, to acquire
stock.
o The Employee Stock Ownership Plan ("ESOP") is the Company's principal
retirement program for substantially all its non-union employees. The
Company makes regular contributions to the ESOP Trust each year. The ESOP
Trust uses these contributions to buy shares of the Company's stock. Shares
purchased during the year are allocated, as of the end of the year, to the
accounts of all participants based on annual compensation. Current
contribution levels are approximately 3% of compensation. Vesting in the
shares occurs over the first four years of employment.
o The Savings and Retirement Plan ("SARP") is a tax-deferred (401(k))
retirement plan open to substantially all employees. Participants may
defer receipt of a portion of their compensation, limited to the
maximum amount of $10,000 per year in the case of the named executive
officers. The Company contributes such amounts to the Trust on their
behalf. The investment options for participants include a Company
stock fund, as well as 13 T. Rowe Price investment funds. The Company
matches investments in the Company stock fund. For the first 1% of an
employee's pay so invested, the Company contributes an equal amount.
For the next 4% of pay so invested, the Company contributes one-fourth
of such amount. In 1998, the Trust acquired shares for such
investments and the Company-match portion by purchase on the Company's
Internal Stock Market. The salary deferral portion is always vested.
Vesting in the Company-match portion occurs on the earlier of
termination of employment because of normal retirement, death, or
disability or completion of one year of employment.
o The Executive Incentive Plan ("EIP") is the bonus compensation plan for
corporate officers and other key executives, including the named executive
officers. Each participant's performance for the year is measured against
certain individual criteria and the Company's performance for the year.
Following such measurement, the Compensation Committee determines the
amount of bonuses payable to the participants. Twenty percent of these EIP
payments, net of taxes, is made in shares of stock, valued at the
then-current market price.
o The Employee Stock Purchase Plan ("ESPP") is a tax-qualified employee stock
purchase plan. All employees can participate in the ESPP. They may
contribute a portion of their salary, at rates not to exceed $450 per week,
on an after-tax basis. The contributions are used to purchase stock on
their behalf in the Company's Internal Stock Market. The Company
contributes an amount equal to 5% of each individual's deferrals to
purchase additional shares on their behalf. The purchaser must hold
ESPP-purchased shares for at least one year.
o The 1995 Stock Option Plan is a non-qualified (for income tax
purposes) stock option plan. Key managers, including the named
executive officers, may receive stock options from time to time. A
stock option permits them to purchase a certain number of shares over
a period of seven years, at the market price in effect at the time of
the grant. Options vest in equal increments over the next five years
(the next four years for options granted after March 5, 1998), if the
participant remains an employee for the full vesting period. When a
portion of the option vests, the participant may exercise the option
by payment of the exercise price. The difference between the exercise
price and the market value of the shares at time of exercise is
taxable as salary-type income. If the participant leaves the Company
because of normal retirement, death, or disability, all the options
vest immediately. Vested options may be exercised over a six- or
twelve-month period following such termination. If employment is
terminated for other reasons, options are normally forfeited.
o The 1999 Long-Term Incentive Stock Plan is a performance-based stock and
cash incentive plan, under which the Compensation Committee may grant stock
options, stock appreciation rights, restricted stock, and other stock-based
grants and awards, as determined by the Compensation Committee.
How does our stock performance compare with others?
The following chart shows a comparison of the theoretical returns on an
investment of $100 in Company stock on December 31, 1993, using the valuation
price established by the Board of Directors for purposes of a former
Stockholders Agreement and the Internal Stock Market, with a similar $100
theoretical investment in each of the NASDAQ composite index and a composite of
20 other Government technical services companies on the same date. The chart
shows the comparable value in dollars of each such investment, as of the end of
each of the following five years.
Who are the largest stockholders of the Company?
As of May 24, 1999, 10,032,164 shares of common stock, which is the only class
of voting securities of the Company, were outstanding. The following table
presents information as of May 24, 1999, concerning the largest stockholdings,
including the only beneficial owners of five percent or more of the outstanding
shares of the Company's common stock.
<PAGE>
Name and address of Amount & nature of Percent of
beneficial owner ownership shares
DynCorp Employee Stock Ownership Plan Trust 7,311,131 72.9%
c/o DynCorp Direct
2000 Edmund Halley Dr.
Reston, VA 20191-3436
DynCorp Savings and Retirement Plan Trust 620,290 6.2%
c/o DynCorp Direct
2000 Edmund Halley Dr.
Reston, VA 20191-3436
(1) The Trusts hold these shares for the accounts of approximately 33,200
participants, in the case of the ESOP, and approximately 3,558
participants, in the case of the SARP. The Trustees vote the shares in
accordance with instructions received from participants.
(2) The Company provides administration for, and periodically contributes
funds to, the Plans
How much stock do directors and officers own?
The following table presents information as of May 24, 1999, concerning the
beneficial ownership of the Company's common stock by nominees, directors, and
named executive officers and all directors and officers as a group. Shares
include those held on behalf of the individuals in the ESOP and SARP.
<TABLE>
Amount & nature of ownership
<CAPTION>
Name and title of beneficial owner Outstanding Obtainable Total Percent of
shares shares (1) shares (2)
<S> <C> <C> <C> <C> <C>
D. R. Bannister 259,756 164,711 424,467 Direct }3.8%
Chairman of the Board & Director 9,615 9,615 Indirect
T. E. Blanchard 50,384 46,800 97,184 Direct }1.3%
Director 52,631 (3) 52,631 Indirect
R. E. Dougherty 4,000 0 4,000 Direct *
Director
P. C. FitzPatrick 2,272 30,000 32,272 Direct } *
Senior Vice President & Chief 3,859 3,859 Indirect
Financial Officer
P. G. Kaminski 0 1,000 1,000 Direct *
Director
P. V. Lombardi 24,679 78,000 102,679 Direct } *
President, Chief Executive Officer & 7,276 7,276 Indirect
Director
M. S. Mandell 5,277 35,500 40,777 Direct } *
Senior Vice President, Corporate 2,981 2,981 Indirect
Development
D. C. Mecum II 2,825 0 2,825 Direct *
Director
D. L. Reichardt 38,738 60,000 98,738 Direct } *
Senior Vice President, General 7,628 7,628 Indirect
Counsel & Director
H. Brian Thompson 0 0 0 - *
Nominee
H. S. Winokur, Jr. 35,639 0 35,639 Direct }3.9%
Director 409,773 409,773 Indirect
All directors and officers as a group 483,824 484,436 968,260 Direct }13.1%
524,430 524,430 Indirect
<FN>
(1) Shares which could be obtained as a result of exercise of all options
vested now or due to vest in the next 60 days and expiration of
restricted stock deferral periods due to expire within the next 60
days.
(2) Percentages include aggregate direct and indirect shares. An asterisk
indicates that beneficial ownership is less than one percent of the
class.
(3) Mr. Blanchard disclaims beneficial ownership of 40,000 shares owned by
his spouse.
</FN>
</TABLE>
Have there been any business transactions between any director or officer and
the Company during the past year?
Mr. Blanchard serves as Chairman of the Administrative Committee for the
Company's Employee Stock Ownership Plan and as a Trustee of the Employee Stock
Ownership Plan Trust. He is compensated at an hourly fee rate and is reimbursed
for expenses. Total fees paid in 1998 were $55,650.
Can I suggest an item for inclusion on next year's proxy statement?
An eligible stockholder who wants to have a qualified proposal considered for
inclusion in the proxy statement for the 2000 Annual Meeting of Stockholders
must notify the Corporate Secretary of the Company, 2000 Edmund Halley Drive,
Reston, Virginia 20191 of that desire. The proposal must be received at the
Company's offices no later than March 17, 2000. In order to be eligible to
submit a proposal, the stockholder must have been a registered or beneficial
owner of at least one percent of the Company's common stock or stock with a
market value of $1,000 for at least one year prior to submitting the proposal,
and the stockholder must continue to own such stock through the date on which
the meeting is held.
