SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement |_| Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
DynCorp
(Name of Registrant as Specified In Its Charter)
None
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing Fee (Check the appropriate box):
|X| No fee required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price of other underlying value of
transaction computed pursuant to Exchange Act Rule
0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
|_| Fee previously paid with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
This proxy form is solicited on behalf of the Board of Directors of DynCorp.
DynCorp
2000 Edmund Halley Drive
Reston, VA 20191
The undersigned hereby appoints Dan R. Bannister, Paul V. Lombardi, and
Herbert S. Winokur, Jr., and each of them, as proxies, with full power of
substitution, and hereby authorizes each of them to present the shares of Common
Stock of DynCorp, held of record by or beneficially on behalf of the undersigned
as of May 26, 2000 at the Annual Meeting of Stockholders of DynCorp to be held
on Tuesday, July 18, 2000 at 10:00 a.m., eastern daylight time, at the offices
of DynCorp, 11710 Plaza America Drive, Reston, Virginia 20190, and at any
adjournment thereof, and to vote such shares as directed below with respect to
the matters set forth and upon any other matter which may properly come before
the meeting or any adjournment thereof.
Election of directors
|_| FOR election of the following nominees:
Russell E. Dougherty as a Class II director for a one-year term
T. Eugene Blanchard as a Class III director for a three-year term
Paul V. Lombardi as a Class III director for a three-year term
Dudley C. Mecum II as a Class III director for a three-year term
|_| AGAINST election of all four nominees
|_| WITHHOLD AUTHORITY (to withhold authority to vote for an
individual nominee, write that nominee's name below):
(date) (signature)
(joint owner's signature, if any)
PROXY STATEMENT
- --------------------------------------------------------------------------------
NOTICE OF MEETING
- --------------------------------------------------------------------------------
NOTICE OF 2000 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, 11710 Plaza America
Drive, Reston, Virginia 20190, at 10:00 a.m., eastern daylight time, Tuesday,
July 18, 2000, 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 T. Eugene Blanchard, Paul V. Lombardi, and Dudley C.
Mecum II to serve as Class III directors for three-year terms; and
2. To act on such other business as is properly before the meeting.
Your Board of Directors recommends a vote "FOR" election of the nominees.
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, Thursday, July 13,
2000, 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 1999 Annual Report are being distributed on or about
June 12, 2000.
By Order of the Board of Directors,
/s/ H. M. Hougen
H. Montgomery Hougen
Vice President & Corporate Secretary
June 12, 2000
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 am I voting on?....................................................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?.........................................13
How does our stock performance compare with others?.....................14
Who are the largest stockholders of the Company?........................14
How much stock do directors and officers own?...........................15
What about the Company's independent public accountants?................16
Have there been any business transactions between any director or
officer and the Company during the past year?..........................16
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 1999 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.
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 shares in
a Company stock account will receive a proxy statement and voting card,
together with an envelope addressed to the SARP's ballot-counting agent.
================================================================================
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, 1999. 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 by the ESOP
trustees to determine the proportion of votes "for" or "against" each nominee.
Then the ESOP trustees will vote all the shares in the ESOP, including those
allocated to the accounts of other participants who have not given any
instructions 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 Company stock account, except that the
voting card reflects all the shares held in your SARP Company stock 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?
Shares purchased through the payroll deduction Employee Stock Purchase Plan are
issued directly in the participants' names, and they 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 all the nominees for the Board of Directors, you may
check the box marked "FOR". If you want to vote against all the 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 do not mark any selections, your voting card will be voted for the
election of all the directors.
================================================================================
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 26, 2000
(the "record date"), there were 10,413,708 shares outstanding, and each share
carries one vote. Therefore, 3,471,124 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 7,451,045 shares, the presence of the ESOP
trustee will constitute a quorum.
================================================================================
Is my vote confidential?
ESOP and SARP votes are confidential; the ballot-counting agency merely advises
the trustees of 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 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. Please send in each card.
================================================================================
<PAGE>
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 7,451,045 62.1%
SARP Trust 831,805 6.9%
DynCorp directors and officers (1) (2) 2,086,669 17.4%
Other current or former DynCorp employee 926,167 7.7%
Outside investors 694,146 5.8%
-------
Total 11,989,831
1. Does not include approximately 53,916 shares held in the ESOP and
SARP Trusts on behalf of directors and officers.
2. See table on pages 15-16 for more information.
================================================================================
Who pays for this proxy solicitation?
The cost of printing and mailing the Annual Report and this proxy statement,
plus the cost of tabulating proxy cards and ESOP and SARP voting instruction
cards, will be paid by the Company.
================================================================================
How do I receive an Annual Report?
The ESOP and SARP are sending Annual Reports to 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) 261-5029, send a request by facsimile to (703)
261-5078, or send a message 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 am I voting on?
The sole item on the ballot is the election of the following nominees for
director.
The nominee for election as a Class II director for a one-year term is:
Russell E. Dougherty Director since 1989
General Dougherty, age 79, was an attorney with the law firm of McGuire, Woods,
Battle & Boothe until his retirement in 1999. 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 to 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 as Class III directors for a three-year term are:
T. Eugene Blanchard Director since 1988
Mr. Blanchard, age 69, served as Senior Vice President and Chief Financial
Officer from 1979 to 1997, when he retired as an active employee of the Company.
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.
<PAGE>
Paul V. Lombardi Director since 1994
Mr. Lombardi, age 58, has served as President and Chief Executive Officer since
1997. He served as Chief Operating Officer from 1995 to 1997; as Executive Vice
President from 1994 to 1997; as Vice President from 1992 to 1994; as President
of the Federal Sector from 1994 to 1995; and as President of the Government
Services Group from 1992 to 1994. He was Senior Vice President and Group General
Manager, Planning Research Corporation from 1990 to 1992. He is a director of
Avid Medical Systems, Inc.
Dudley C. Mecum II Director since 1988
Mr. Mecum, age 65, is a Managing Director of Capricorn Holdings LLC (private
investment company). He was a partner, G. L. Ohrstrom & Co. (investment firm)
from 1989 to 1997. He served as Group Vice President and Director, Combustion
Engineering, Inc. from 1985 to 1988, and previously as Vice Chairman, Peat,
Marwick & Mitchell. He is a director of CCC Information Services Group, Inc.;
Citigroup Inc.; Lyondell, Inc.; and Suburban Propane Partners LLP.
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 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. Your Board of Directors recommends a vote FOR
these nominees. If a record holder does not send in a voting card or marks
"withhold" on a voting card, that will have the same effect as voting against
the nominee. 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 69, Chairman of the Board, has served in that capacity since
1997. He served as President of the Company from 1984 to 1997 and as Chief
Executive Officer from 1985 to 1997. He retired as an active employee of the
Company in 1999. He is a director of ITC Learning Corporation. His current term
as a director expires in 2001.
Paul G. Kaminski Director since 1997
Dr. Kaminski, age 57, also served as a director of the Company from 1988 to
1994. He is President and Chief Executive Officer of Technovation, Inc.
(innovation consulting) and a Senior Partner in Global Technology Partners
(investment banking). He served in the United States Department of Defense as
Under Secretary of Defense for Acquisition and Technology from 1994 to 1997. He
was Chairman and Chief Executive Officer of Technology Strategies & Alliances
(strategic partnership consulting) from 1993 to 1994. He is a director of Anteon
Corporation; Condor Systems, Inc.; DeCrane Aircraft Holdings, Inc.; Eagle Picher
Technologies, LLC; and General Dynamics Corporation and a Member of the Board of
Visitors of the Software Engineering Institute. His current term as a director
expires in 2001.
David L. Reichardt Director since 1988
Mr. Reichardt, age 57, 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 to 1986 and as Vice President and
General Counsel of DynCorp from 1977 to 1984. His current term as a director
expires in 2001.
H. Brian Thompson Director since 1999
Mr. Thompson, age 61, 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 to 1998 and Vice Chairman
of Qwest Communications International Inc. from June to December 1998. From 1981
to 1990, he was Executive Vice President, MCI Communications Corporation. He is
a director of Bell Canada International Inc. and Williams Communications Group,
Inc. and a member of the management committee of Paging Brazil Holding Company,
LLC. His current term as a director expires in 2002.
<PAGE>
Herbert S. Winokur, Jr. Director since 1988
Mr. Winokur, age 56, served as Chairman of the Board from 1988 to 1997. He is
Chairman and Chief Executive Officer of Capricorn Holdings, Inc. (private
investment company) and Managing General Partner of three Capricorn Investors
limited partnerships concentrating on investments in restructure situations. He
was formerly Senior Executive Vice President and Director, Penn Central
Corporation. He is a director of Azurix Corp.; CCC Information Services Group,
Inc.; ENRON Corporation; Mrs. Fields Holdings, Inc.; and The WMF Group, Ltd. His
current term as a director expires in 2002.
================================================================================
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 54, Vice President, Technical Services, has served
in that capacity since 1996 and as President of DynCorp Technical Services, Inc.
and President of the Technical Services business unit since January 1999. He
served as President of the Aerospace Technology business unit from 1996 through
1998. He was Vice President, Systems Support Services, Lockheed Martin Services,
Inc. from 1992 to 1996 and Vice President, Business Development, GE Government
Services, General Electric Company from 1989 to 1992.
* John J. Fitzgerald, age 46, Vice President and Controller, has served in that
capacity since 1997. He was Vice President and Controller, PRC, Inc. from 1992
to 1997; Chief Financial Officer and Treasurer of American Safety Razor Company
from 1990 to 1992; Vice President and Controller of American Bank Stationery
Company from 1988 to 1990; and Chief Financial Officer and Treasurer of
Physician's Pharmaceutical Services, Inc. from 1986 to 1988.
* Patrick C. FitzPatrick, age 61, Senior Vice President and Chief Financial
Officer, has served in that capacity since 1997. He also served as Treasurer
during 1997. He was Chief Financial Officer, American Mobile Satellite
Corporation from 1996 to 1997; Senior Vice President and Chief Financial Officer
of PRC, Inc. from 1992 to 1996; and President and Chief Operating Officer,
Oxford Real Estate Management Services from 1990 to 1992.
Paul T. Graham, age 33, Vice President and Treasurer, has served in that
capacity since 1997. He was Finance Manager of the Company from 1992 to 1994,
Assistant Treasurer from 1994 to 1997, and Director of Finance from 1995 to
1997.
H. Montgomery Hougen, age 65, Vice President and Secretary and Deputy General
Counsel, has served as Vice President since 1994 and as Corporate Secretary and
Deputy General Counsel since 1984.
* Roxane P. Kerr, age 52, Senior Vice President, Human Resources and
Administration, has served in that capacity since 1998. She was Director of
Human Resources, North America, LucasVerity Plc from 1993 to 1998 and a private
human resources consultant from 1992 to 1993.
* Marshall S. Mandell, age 57, Senior Vice President, Corporate Development, has
served in that capacity since 1998. He served as Vice President, Business
Development from 1994 to 1998. He also served as Acting President of the
Information and Engineering Technology strategic business unit from 1997 to
1998. He served as Vice President, Business Development, Applied Sciences Group
from 1992 to 1994. He was Senior Vice President, Eastern Computers, Inc. from
1991 to 1992 and President of the Systems Engineering Group, Ogden/Evaluation
Research Corporation from 1984 to 1991.
* James P. McCoy, age 56, President of DynCorp Information Systems LLC, has
served in that capacity and as President of the Information Systems business
unit since December 1999. He served as Executive Vice President of the
Information & Enterprise Technology business unit from 1998 to December 1999. He
was Senior Vice President of the Professional Technical Services business unit
of GRC International, Inc. from 1995 to 1997.
Ruth Morrel, age 45, Vice President, Law and Compliance, has served in that
capacity since 1994. She served as Group General Counsel from 1984 to 1994.
Charlene A. Wheeless, age 36, Vice President, Corporate Communications, has
served in that capacity since February 2000. She served as Director, Corporate
Communications from 1996 to 2000 and as Manager, Corporate Communications from
1992 to 1995. She was Director, Employee Communications for PRC, Inc. from 1995
to 1996.
<PAGE>
Robert G. Wilson, age 59, 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.
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> <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. Thompson Member Member
Mr. Winokur Member Chairman Chairman Chairman
No. of meetings in 1999: 5 3 3 2 3 1
Each director attended all meetings of the Board of Directors and the various
committees on which he served.
</TABLE>
================================================================================
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 1999
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 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.
================================================================================
<PAGE>
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. FitzPatrick, Senior
Vice President and Chief Financial Officer; Mr. Mandell, Senior Vice President,
Corporate Development; Mr. Reichardt, Senior Vice President and General Counsel;
and Mr. Alleger, President of the Technical Services business unit.
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 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. In addition, 20% of the annual bonus
is normally paid in the form of shares of stock, valued at then-current market
value.
By the Compensation Committee:
Herbert S. Winokur, Chairman
Russell E. Dougherty
Paul G. Kaminski
================================================================================
Are directors paid for their duties?
Mr. Bannister receives an annual fee of $144,000 to serve as Chairman of the
Board and member of various Board committees and to provide other services to
the Company. Other non-employee directors of the Company receive an annual
retainer fee of $20,000 as directors and $2,750 for each committee on which they
serve. The chairmen of the Business Ethics and Compliance, Compensation, and
Executive Committees receive an additional annual fee of $2,000, and the
chairman of the Audit Committee receives an additional annual fee of $3,000. The
Company also pays non-employee directors a meeting fee of $1,000 for attendance
at each Board meeting and $500 for attendance at committee meetings. Directors
are reimbursed for expenses incurred in connection with attendance at meetings
and participation in other Company activities.
<PAGE>
================================================================================
Do directors receive other forms of compensation?
Directors may also received stock options. In 1999, 5,000 stock options, having
an exercise price equal to the then-current market value, were awarded to Mr.
Thompson, pursuant to the Company's 1995 Stock Option Plan. Non-employee
directors do not participate in other current benefit plans of the Company.
Because directors of the Company can incur personal liability for activities in
connection with Company business, the Company purchases insurance to cover
claims against its directors and officers and to cover losses incurred in the
Company's indemnification of directors and officers as required or permitted by
law. The directors and officers covered are the directors and officers of the
Company and its subsidiaries. There is no allocation or segregation of the
premium for specific subsidiaries or individual directors and officers.
What is the compensation of the named executive officers?
<TABLE>
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
<CAPTION>
Long-Term
Compensation
Annual compensation Awards
Name and Year Salary Bonus Other Securities All other
principal ($) ($)(1) annual underlying compensation
position compen- options/SARs ($) (2)
sation($) (#)
(a) (b) (c) (d) (e) (g) (i)
<S> <C> <C> <C> <C> <C> <C>
Paul V. Lombardi 1999 370,400 78,000 -- 70,000 11,893
President & Chief 1998 342,104 185,300 -- -- 14,283
Executive Officer 1997 332,789 160,000 177 -- 8,307
- --------------------------------------------------------------------------------
Patrick C. FitzPatrick 1999 272,170 43,300 -- 30,000 14,793
Senior Vice President & 1998 248,947 129,800 -- -- 10,896
Chief Financial Officer 1997 241,933 90,000 -- 100,000 11,060
- --------------------------------------------------------------------------------
Marshall S. Mandell 1999 224,446 36,200 -- 30,000 9,144
Senior Vice President, 1998 212,724 87,300 -- 40,000 10,854
Business Development 1997 204,248 73,300 364 -- 10,155
- --------------------------------------------------------------------------------
David L. Reichardt 1999 272,170 43,300 -- 30,000 14,144
Senior Vice President & 1998 248,947 204,800 -- -- 16,706
General Counsel 1997 245,082 90,000 244 -- 11,738
- --------------------------------------------------------------------------------
Robert B. Alleger, Jr. 1999 227,077 103,500 -- 35,000 12,960
President, Technical 1998 191,585 88,200 -- 20,000 12,788
Services business unit 1997 184,777 81,000 141 -- 9,252
- --------------------------------------------------------------------------------
<FN>
(1) Column (d) reflects bonuses earned and expensed during year, whether
paid during or after such year. Twenty percent of executive incentive
plan bonuses is normally paid in the form of shares of Common Stock,
valued at then-current market value.
(2) Column (i) includes respective individual's pro rata share of the
Company's contribution to the Employee Stock Ownership Plan ("ESOP"),
Company-matching contributions to the Savings and Retirement Plan
("SARP") and the imputed income, according to IRS tax tables, for
Company-paid premiums for supplemental executive retirement plan life
and term life insurance. These amounts are:
ESOP contributions SARP contributions Insurance Premiums
($) ($) ($)
Name 1999 1998 1997 1999 1998 1997 1999 1998 1997
Mr. Lombardi 4,273 4,435 4,356 2,886 3,000 2,850 4,735 6,848 1,101
Mr. FitzPatrick 4,273 4,435 4,356 2,500 2,338 1,267 8,020 4,122 5,437
Mr. Mandell 4,273 4,435 4,356 2,143 2,143 2,361 2,728 4,277 3,438
Mr. Reichardt 4,273 4,435 4,356 3,125 3,125 1,269 6,746 9,146 6,112
Mr. Alleger 4,273 4,435 4,356 4,570 2,106 -- 3,937 6,247 4,896
</FN>
</TABLE>
<PAGE>
<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 70,000 15.2% $24.50 7/15/09 2,793,735 4,448,710
Mr. FitzPatrick 30,000 6.5% $24.50 7/15/09 1,197,315 1,906,590
Mr. Mandell 30,000 6.5% $24.50 7/15/09 1,197,315 1,906,590
Mr. Reichardt 30,000 6.5% $24.50 7/15/09 1,197,315 1,906,590
Mr. Alleger 35,000 7.6% $24.50 7/15/09 1,396,868 2,224,355
</TABLE>
<TABLE>
<CAPTION>
Aggregated Options/SAR Exercises in Last Fiscal Year and
FY-End Option/SAR Values
Number of securities Value of unexercised
underlying unexercised in-the-money options/ SARs
options/SARs at fiscal at fiscal year-end ($)
year-end (#)
Name Shares acquired Value Exercisable/ Exercisable/
on exercise (#) realized ($) Unexercisable Unexercisable
(a) (b) (c) (d) (e)
<S> <C> <C> <C> <C> <C> <C>
Mr. Lombardi -- -- 86,000 114,000 599,200 284,800
Mr. FitzPatrick -- -- 40,000 90,000 160,000 240,000
Mr. Mandell -- -- 38,000 74,500 204,000 123,500
Mr. Reichardt -- -- 65,000 65,000 442,000 223,000
Mr. Alleger -- -- 21,800 61,200 100,280 78,520
</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 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 the
named executive officers, (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, 2000,
but are subject to annual automatic renewal unless terminated by the Board of
<PAGE>
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 3 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 250 shares or more on
the Company's Internal Stock Market in the course of meeting ETOP targets, the
Company pays 15% of the purchase price and pays the purchaser an additional 7
1/2% of the purchase price to reimburse him or her for current income taxes on
the company-paid portion; this 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 non-union employees of the Company
and its incorporated subsidiaries. The Company makes periodic 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, up to a maximum allowable compensation of
$160,000 in the case of the named executive officers. Current contribution
levels are approximately 2.8% 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 a maximum amount of
$10,500 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 1999, 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.
<PAGE>
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 normally 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 15% 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. Options are
granted at the then-current market value. Options granted to the named
executive officers in 1999 will vest at the earlier of eight years of
service or age 65; provided that vesting will accelerate during the first
four years if the Company's cumulative total business return equals or
exceeds projected returns for the period.
================================================================================
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, 1994, using the valuation
price established by the Board of Directors for purposes of a former
Stockholders Agreement and for the Internal Stock Market, with a similar $100
theoretical investment in each of the NASDAQ composite index and a composite of
22 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.
DynCorp 5-Year Performance Graph
DynCorp NASDAQ Government
Technical
Services
(GTS)Index
12/31/1994 100 100 100
12/31/1995 125.632 139.92 131.13
12/31/1996 160.202 171.69 160.21
12/31/1997 168.634 208.83 189.34
12/31/1998 198.145 291.6 253.13
12/31/1999 191.821 541.16 281.17
<PAGE>
Who are the largest stockholders of the Company?
As of May 26, 2000, 10,413,708 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 26, 2000, concerning the largest stockholdings,
including the only beneficial owners of five percent or more of the outstanding
shares of the Company's common stock.
Name and address of Amount & nature of Percent of
beneficial owner ownership shares
DynCorp Employee Stock Ownership Plan Trust 7,451,045 71.6%
c/o DynCorp Direct
11710 Plaza America Drive
Reston, Virginia 20190
DynCorp Savings and Retirement Plan Trust 831,805 8.0%
c/o DynCorp Direct
11710 Plaza America Drive
Reston, Virginia 20190
(1) The Trusts hold these shares for the accounts of approximately 31,236
participants, in the case of the ESOP, and approximately 5,457
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 26, 2000, 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>
<CAPTION>
Amount & nature of ownership
Name and title of beneficial owner Outstanding Obtainable Total Percent of
shares shares (1) shares (2)
<S> <C> <C> <C> <C>
R. B. Alleger, Jr. 2,239 28,400 30,639 Direct } *
President, Technical Services 4,598 4,598 Indirect
business unit
D. R. Bannister 263,289 132,000 395,289 Direct }3.7%
Chairman of the Board & Director 48,290 48,290 Indirect
T. E. Blanchard 38,426 64,900 103,326 Direct }1.3%
Director 51,828(3) 51,828 Indirect
R. E. Dougherty 4,276 0 4,276 Direct *
Director
P. C. FitzPatrick 875 50,000 50,875 Direct } *
Senior Vice President & Chief 4,504 4,504 Indirect
Financial Officer
P. G. Kaminski 0 7,500 7,500 Direct *
Director
P. V. Lombardi 25,613 104,000 129,613 Direct }1.1%
President, Chief Executive Officer 8,144 8,144 Indirect
& Director
M. S. Mandell 5,600 54,000 59,600 Direct } *
Senior Vice President, 3,624 3,624 Indirect
Corporate Development
D. C. Mecum II 2,825 2,500 5,325 Direct *
Director
D. L. Reichardt 23,738 80,000 103,738 Direct } *
Senior Vice President, General 6,672 6,672 Indirect
Counsel & Director
<PAGE>
H. Brian Thompson 0 0 0 - *
Director
H. S. Winokur, Jr. 25,639 0 25,639 Direct }3.6%
Director 409,773 409,773 Indirect
All directors and officers 433,502 578,800 1,012,302 Direct }13.1%
562,288 562,288 Indirect
</TABLE>
(1) Shares which could be obtained as a result of exercise of all
in-the-money 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.
================================================================================
What about the Company's independent public accountants?
The Board of Directors has made no decision regarding independent public
accountants for the year 2000, as of the date of this mailing.
================================================================================
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 1999 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, 11710 Plaza America Drive,
Reston, Virginia 20190-6039 of that desire. The proposal must be received at the
Company's offices no later than February 19, 2001. 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.
