23
SCHEDULE 14A
(Rule 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant X
Filed by a party other than the registrant
Check the appropriate box:
Preliminary proxy
X Definitive proxy statement
Definitive additional materials
Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Dynamics Research Corporation
(Name of Registrant as Specified in Its Charter)
Dynamics Research Corporation
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
X $125 per Exchange Act Rule 0-11(c) (1) (ii), 14a-6(i) (1), or 14a-
6(i)(2).
$500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
Fee computed on table below per Exchange Act Rules 14a-6(i) (4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to
Exchange Act Rule 0-111:
(4) Proposed maximum aggregate value of transaction:
Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid previously.
Identify
the previous filing by registration statement number, or the form or
schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
_______________
1Set forth the amount on which the filing fee is calculated and state how
it was determine.
DYNAMICS RESEARCH CORPORATION
60 Frontage Road
Andover, Massachusetts 01810
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held April 25, 1995
To the Stockholders:
The Annual Meeting of the stockholders of Dynamics Research
Corporation will be held at 3:30 p.m. on Tuesday, April 25, 1995 on the
33rd Floor of The State Street Bank and Trust Building, 225 Franklin
Street, Boston, Massachusetts, for the following purposes:
1. To fix the number of directors for the ensuing year and to elect
the Class II Directors,
2. To approve the 1995 Stock Option Plan for Non-Employee Directors,
3. To consider and act upon such other matters as may properly come
before the
meeting.
Only stockholders of record at the close of business on March 10, 1995
will be entitled to receive notice of and to vote at the meeting.
By order of the Board of Directors,
John R. D. McClintock,
Clerk
March 21, 1995
__________________
IMPORTANT
All shareholders are urged to complete and mail the enclosed proxy promptly
whether or not you plan to attend the meeting in person. The enclosed
envelope requires no postage if mailed in the U.S.A. or Canada.
Shareholders attending the meeting may revoke their proxies and personally
vote on all matters which are considered. It is important that your shares
be voted.
DYNAMICS RESEARCH CORPORATION
60 Frontage Road
Andover, Massachusetts 01810
_________________
PROXY STATEMENT
______________
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 25, 1995
________________
GENERAL
The accompanying proxy is solicited by the Board of Directors of
Dynamics Research Corporation (the "Company") to be voted at the 1995
Annual Meeting of Stockholders.
Proxies in the accompanying form will be voted as specified by the
stockholders. If no specification is made, the proxy will be voted for the
election of directors and for approval of the 1995 Stock Option Plan for
Non-Employee Directors unless authority to vote has been withheld. A proxy
may only be revoked by written revocation received by the Clerk of the
Company prior to the exercise thereof.
Stockholders of record at the close of business on March 10, 1995 are
entitled to notice of, and to vote at the Annual Meeting. There were
5,625,448 shares of Common Stock, $.10 Par Value outstanding as of that
date, each entitled to one vote.
This proxy statement and enclosed proxy are being mailed to
stockholders on or about the date of the Notice of Annual Meeting.
The cost of solicitation of proxies will be borne by the Company.
Employees of the Company may also solicit proxies by mail, telephone or
personal interview.
ELECTION OF DIRECTORS
Term of Office
Under Massachusetts law, the Board of Directors of the Company is
classified into three classes, as nearly equal in number as possible, with
the term of office of one class expiring each year. The enclosed proxy
will be voted to elect the persons named below, unless otherwise
instructed, as Class II directors for a term of three years expiring at the
1998 Annual Meeting of Stockholders or until their respective successors
are elected and qualified. If either nominee should become unavailable,
proxies will be voted for a substitute nominee designated by management, or
to fix the number of directors at a lesser number, unless instructions are
given to the contrary. The current Board has no reason to expect that
either nominee will be unavailable.
Year First Elected
Name Age Principal Occupation A Director
Nominees for Election as Class II Directors
Terms Expiring in l998
Francis J. Aguilar 62 Professor of Business Administration 1987
Harvard University Graduate School of
Business Administration
John S. Anderegg, Jr. 71 Chairman of the Company 1955
Continuing Class I Directors - Terms Expiring in 1997
General James P. Mullins Executive Consultant 1991
(USAF, ret.) 66
Thomas J. Troup 71 Vice Chairman and Director of 1962-1971
Burr-Brown Corporation since 1980
(Manufacturer of Electronic Components)
Continuing Class III Directorship - Term Expiring in 1996
Albert Rand 68 President and Chief Executive 1984
Officer of the Company
The principal occupation of each of the above nominees and continuing
directors has been that set forth above throughout the past five years.
Dr. Aguilar is also a Director of Bowater, Inc. and Burr-Brown
Corporation. Mr. Anderegg is a Trustee of Ivy and MacKenzie Funds and a
Director of Burr-Brown Corporation.
Board Meetings and Committees
The Board of Directors held four meetings during 1994.
The Audit Committee consisting of Dr. Aguilar, Mr. Troup and General
Mullins reviews with the independent auditors the financial statements and
reports issued by the Company, reviews the Company's internal accounting
procedures, controls and programs and makes recommendations to the Board of
Directors on the engagement of the independent auditors. During 1994, the
Audit Committee held two meetings.
The Compensation Committee, consisting of Dr. Aguilar and General
Mullins, administers the 1993 Equity Incentive Plan, including granting of
options and other awards under that plan, reviews the compensation policies
of the Company and approves the compensation of the officers. During 1994,
the Compensation Committee held two meetings.
The Company does not have a standing nominating committee.
PRINCIPAL STOCKHOLDERS
Common Stock Ownership of Certain Beneficial Owners and Management
As of March 10, 1995, the following table shows the beneficial
ownership of Common Stock of the Company by all persons or groups known by
the Company to be the beneficial owners of more that 5% of its outstanding
stock, based on filings with the Securities and Exchange Commission, all
directors, the executive officers listed in the Summary Compensation Table
and all directors and executive officers as a group:
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class
John S. Anderegg, Jr..............................................
724,099(1) 12.87
c/o Dynamics Research Corporation
60 Frontage Road
Andover, MA 01810
Albert Rand...........................................................
308,770(2) 5.49
c/o Dynamics Research Corporation
60 Frontage Road
Andover, MA 01810
Francis J. Aguilar....................................................
17,667(3) *
James P. Mullins.....................................................
2,000 *
Thomas J. Troup....................................................
1,537(4) *
John L. Wilkinson...................................................
10,280(5) *
Douglas R. Potter...................................................
22,100(6) *
DFA Investment Dimensions Group, Inc................. 372,312(7) 6.62
c/o Dimensional Fund Advisors, Inc.
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
All directors and executive officers as a group (7 persons) 1,086,453(8)
19.31
________
*Less than 1% of the outstanding shares of Common Stock.
All shares are held directly except as indicated.
(1) Includes 44,168 shares held by Mr. Anderegg as
custodian for his children, 64,321 shares held in the estate of
Mrs. Anderegg, of which Mr. Anderegg is executor, and 17,172 shares owned
by one of Mr. Anderegg's children who resides with him, as to all of which
he disclaims beneficial ownership.
(2) Includes 189,980 shares which Mr. Rand has the
right to acquire on exercise of stock options that are currently
exercisable or will be exercisable within 60 days of March 10, 1995.
(3) Includes 8,833 shares held in a pension plan of
which Dr. Aguilar has sole voting and investment powers.
(4) Includes 986 shares held in a trust of which Mr. Troup is trustee.
(5) Includes options to purchase 3,993 shares which are currently
exercisable or will be exercisable within 60 days of March 10,
1995.
(6) Includes options to purchase 3,667 shares which are currently
exercisable or will be exercisable within 60 days of March 10,
1995.
(7) Dimensional Fund Advisors has the power to dispose
of these shares and shares the power to vote 78,195 of
these shares. All shares are held in portfolios of DFA Investment
Dimensions Group Inc., or the DFA Group Trust, for both of
which Dimensional Fund Advisors Inc. serves as investment manager.
(8) Includes options to purchase 197,640 shares which are exercisable
within 60 days of
March 10, 1995.
COMPENSATION AND RELATED MATTERS
Compensation of Directors
Directors who are not employees of the Company receive an annual fee of
$20,000 for
serving as directors. No additional compensation is paid to those
directors who serve on a committee of the Board of Directors.
The Company has a Deferred Compensation Plan under which non-employee
directors may elect to defer their directors fees. Amounts deferred for
each participant are credited to a separate account, and interest at the
lowest rate at which the Company borrowed money during each quarter or, if
there was no such borrowing, at the prime rate, is credited to such account
quarterly. The balance in a participant's account is payable in a lump sum
or in installments when the participant ceases to be a director. Mr. Troup
and Dr. Aguilar deferred their 1994 director fees. Interest accrued for
1994 on the cumulative fees for each director was $4,349.
Executive Compensation
<TABLE>
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation paid to the President
and Chief Executive Officer and each of the Company's other highly
compensated executive officers (the "named executives") during or with
respect to 1994, 1993, and 1992.
<CAPTION>
Annual Long Term
Compensation Compensation
Name and Other Shares All Other
Principal Annual UnderlyingCompensation
Position YearSalary ($)Bonus ($)Compensation ($)Options (#) ($)
(1)
<S> <C> <C> <C> <C> <C> <C>
Albert Rand 1994235,000 2,250 2,249
President &1993235,000 2,249
C.E.O. 1992225,00015,000(2) 26,620 2,182
John S. Anderegg, Jr.1994195,000 2,250
Chairman 1993195,000 2,249
1992195,000 2,182
John L. Wilkinson 1994126,000 1,890
V. P. of Human1993126,000 1,871
Resources 1992120,500 1,874
Douglas R. Potter 1994 135,000 1,480
V.P.of Finance & 1993 22,500(3)
11,000
C.F.O.
</TABLE>
(1) Consists of employer's match for the 401K plan.
(2) Paid in 1993 for performance in 1992.
(3) Mr. Potter commenced employment with DRC on November 1, 1993.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table summarizes options exercised during 1994 and
presents the value of unexercised options held by the named executives at
fiscal year-end.
Number of Value of
Shares UnderlyingUnexercised
Unexercised In-the-Money
Options at Options at
Options Exercised in 1994 12/31/94(#)12/31/94($)(1)
Shares Acquired Value Exercisable/(E)Exercisable/(E)
Name on Exercise (#)Realized ($)Unexercisable(U)Unexercisable(U)
Albert Rand 31,018 $34,337181,107 E $0 E
8,873 U
John L. Wilkinson -- -- 3,993E $0 E
Douglas R. Potter -- -- 3,667E $0 E
7,333U $0 U
(1) Based on market value at 12/31/94 of $2.75 per share less respective
exercise prices.
Report of the Compensation Committee of the Board of Directors
The Compensation Committee of the Board of Directors administers the
Company's executive compensation program. The committee is composed of
Dr. Aguilar and General Mullins, both of whom are independent non-employee
directors and who have no "interlocking" relationships as defined by the
Securities and Exchange Commission. The Committee meets formally and
consults informally during the year. The Committee is responsible for
recommending to the Board of Directors the compensation of all the officers
of the Company and for reviewing the design and effectiveness of executive
compensation policies. All awards of stock options and restricted stock to
the Company's employees are made by the Committee.
Compensation Philosophy and Objectives
The Company's executive compensation program consists of base salary,
annual cash bonus incentives and long-term incentives in the form of stock
options. Its objectives are four-fold:
Provide base compensation that enables the Company to attract and
retain key executives.
Provide executive officers with total direct remuneration which is
competitive
with similarly sized companies for comparable performance.
Reward executives for outstanding achievements which clearly
benefit the Company.
Align the interest of the Company's executives with the long-term
interests
of shareholders.
The executive compensation program provides an overall level of
compensation opportunity which the Compensation Committee believes is
competitive with other companies of comparable size and complexity. Actual
compensation will vary with annual and long-term Company performance, as
well as individual performance and longevity, and hence may be greater or
less than actual compensation at other companies. The Committee uses its
discretion to establish executive compensation at levels which in its
judgment are warranted by external or internal factors as well as an
executive's individual circumstances. In arriving at what it considers
appropriate levels and components of compensation, the Compensation
Committee utilizes industry compensation data provided by nationally
recognized compensation information sources.
Executive Compensation Program Components
The particular elements of the compensation program are discussed more
fully below:
Base Salary. The Committee maintains base salary levels for executives
that, based on its analysis of pertinent compensation data, are competitive
with other companies of comparable size and complexity.
Base salaries of executives are determined by the potential impact of
the individual on the Company and its performance, salaries paid by other
companies for comparable positions, individual performance against goals
and the overall performance of the Company.
Cash Bonuses. The Compensation Committee may approve discretionary
cash bonuses as a means of rewarding executives (and other employees) for
significant Company and individual performance. These cash awards are not
based on a specific formula; rather, they are intended to be compensation
in recognition of outstanding accomplishments that result in clearly
quantitative or qualitative benefit to the Company.
Long-Term Incentives. Long-term incentives are provided in the form of
stock options. The Committee and the Board of Directors believe that
management's ownership of a significant equity interest in the Company
aligns the long-term interests of management and shareholders and is an
important incentive and contributing factor toward building shareholder
value. Stock options, therefore, are granted at the market value of the
common stock on date of grant. The value received by the executive from a
stock option granted depends on increases in the market price of the
Company's common stock during the term of the option. Consequently, the
value of the compensation is proportionate to increases in shareholder
value. Grants of stock options are made by the Compensation Committee in
its discretion based both upon the executive's actual
contribution to the Company's current performance and his expected
contribution toward meeting the Company's long-term financial/strategic
goals.
CEO Compensation
Mr. Rand's salary increase from 1992 to 1993 reflects the Committee's
judgment on the Company's financial performance in 1992 and progress in
attaining strategic objectives and Mr. Rand's personal contributions. In
accordance with the above compensation philosophy, the Committee did not
increase Mr. Rand's base salary for fiscal 1994.
The Compensation Committee
of the Board of Directors:
Francis J. Aguilar
James P. Mullins
Performance Comparison
The following table illustrates the return that would have been realized
(assuming reinvestment of dividends) by an investor who invested $100 on
December 29, 1989 in each of (i) the Company's common stock, (ii) the
NASDAQ Stock Market - Composite U.S. Index and (iii) a Peer Group of
companies as listed below:
Dynamics Research Corporation NASDAQ Composite
Peer Group
1989 100 100 100
1990 80 85 112
1991 83 136 151
1992 87 159 183
1993 97 181 193
1994 64 177 220
Companies in Self- Determined Peer Group:
Analysis & Technology Inc. CACI International Inc.
Comarco Inc. Geodynamics Corp.
Intermetrics Inc. Nichols Research Corp.
Perceptronics Inc.
Severance Agreements
The Company has severance agreements with Messrs. Anderegg and Rand.
Under these agreements, the Company agrees to pay severance benefits to
each such executive if his employment is terminated for any reason other
than for cause (as defined in the agreements) or if the executive
terminates his employment as a result of a specified justification, within
two years following a change of control of the Company. A change in
control includes the acquisition of 20% or more of the combined voting
power of the Company's then-outstanding securities, other changes in
control of a kind required to be reported by certain regulatory
authorities, and certain changes in membership of the Board of Directors.
Under the agreements, the executive is entitled to a severance payment
equal to 299 % of his average annual base salary and bonus for the two
calendar years immediately prior to a change in control. In addition, the
executive is entitled to certain other benefits, including the acceleration
of the exercisability of outstanding stock options, continued participation
for up to three years in life, accident, medical, health and other similar
plans and programs in which the executive participated prior to the change
in control, and the payment by the Company of any legal fees and expenses
incurred as a result of such termination of employment. At the option of
the executive, the payments or benefits payable under the agreement may be
decreased to the extent necessary to avoid any excise taxes payable as a
result of the severance benefits. Such severance payments would not be
reduced for compensation received by the executive from any new employment.
Under these agreements, based on the current compensation as of March 10,
1995, change of control cash severance payments would be approximately
$583,050 and $702,650 for Messrs. Anderegg and Rand, respectively.
Indemnification Agreements
The Company has indemnification agreements with each of its directors.
Each indemnification agreement entitles the director to be indemnified by
the Company for any liabilities and expenses incurred in connection with
the defense or disposition of any legal claim or action brought or
threatened against him or her by reason of (i) being or having been a
director of the Company or (ii) serving or having served at the Company's
request as a director of another organization or in any capacity with
respect to an employee benefit plan. The indemnification agreement also
requires the Company to advance payment for any expenses incurred by a
director in connection with such an action. However, a director will not
receive indemnification under the agreement if he or she is found not to
have acted in good faith in the reasonable belief that his or her actions
were in the best interest of the Company. The indemnification provided
under the indemnification agreement is required whether or not an action is
brought asserting that the director seeking indemnification acted
unlawfully or acted to create an improper personal benefit, unless the
director is actually found not to have acted in good faith in the
reasonable belief that his or her actions were in the best interests of the
Company. The rights under the indemnification agreement are in addition to
any rights of indemnification the director may have under the Company's
Articles of Incorporation or By-laws or otherwise and are not subject to
any limitations which may be contained in the Company's Articles of
Incorporation or By-laws.
Pension Plan
The following table sets forth the annual benefits payable as a life
annuity which would be payable under the Company's noncontributory defined
benefit Pension Plan at normal retirement at age 65 to participants having
the years of service and average annual earnings as indicated in the table,
assuming all such participants attained age 65 in 1994:
ESTIMATED ANNUAL BENEFIT FOR YEAR 1994
Average Estimated Annual Benefit
Annual For Indicated Years of Service
Earnings 15 20 25 30 or more
$100,000 $17,601 $23,468 $29,335 $35,202
$125,000 $22,601 $30,135 $37,668 $45,202
$150,000* $27,601 $36,801 $46,001 $55,202
Frozen Benefit - Accrued through 12/31/93*
$175,000 $32,601 $43,468 $54,334 $65,201
$200,000 $37,601 $50,134 $62,668 $75,201
$225,000 $42,600 $56,801 $71,001 $85,201
$235,840 $44,768 $59,691 $74,614 $89,537
*Maximum Plan Compensation for 1994 is $150,000.
Employee's are entitled to the greater of: benefit accrued through
12/31/93 (calculated on prior years wage caps) or benefit based on the new
$150K wage cap.
As of March 10, 1995, Messrs. Anderegg, Rand, Wilkinson and Potter had
38, 35, 13 and 1 year of service, respectively, for purposes of the Pension
Plan.
All employees of the Company, who complete a year of service, including
the individuals
named in the compensation table above, are eligible to earn benefits under
the Pension Plan. Upon retirement the benefits under the Pension Plan vary
depending upon the participant's age at retirement, years of service with
the Company and average annual earnings for the five consecutive highest
years of service in the ten years prior to termination. The amount of
annual retirement benefits is determined by a formula which applies years
of service to a basic defined benefit, which, in the case of a participant
with at least 30 years of service, is .6833% of the average of the 5
highest consecutive years of compensation in the last 10 years worked plus
.65% of such average annual earnings which exceed Social Security Covered
Compensation, but not less than (a) $60 multiplied by his or her years of
service or (b) the benefit which had accrued as of December 31, 1987 under
the Company's prior retirement program. Compensation reflects the amounts
shown under salary in the Summary Compensation Table. The Pension Plan
limits the compensation taken into account for purposes of determining the
benefit under the Pension Plan to the maximum permissible under the
Internal Revenue Code, which for 1994 was $150,000. Social Security
Covered Compensation means the dollar amount which represents the average
of the maximum wages subject to Social Security tax for each year of the
participant's working career. The benefits under the Pension Plan are
payable in various annuity forms and are subject to maximum limits in
certain circumstances.
Savings & Investment (40lk) Plan
The Company also maintains a cash or deferred plan under which employees
with at least three months of service may reduce their compensation and
have such amounts ("elective deferrals") contributed to the plan on their
behalf. The Company contributes to the plan an amount equal to 25% of the
employee's elective deferrals which do not exceed 6% of the employee's
compensation. The elective deferrals are invested in one or more
collective investment funds at the participant's direction, and are paid to
the employee in a lump sum when employment terminates. The Company's
contributions are invested in guaranteed investment contracts and are paid
to the employee in a lump sum at date of termination, subject to forfeiture
of any non-vested portion if termination occurs within the first five years
of employment.
Equity Incentives
The 1993 Equity Incentive Plan (1993 Plan) provides for the award of
either incentive or non-qualified stock options, stock appreciation rights,
restricted and unrestricted stock awards and deferred stock awards. As of
March 10, 1995, 440,000 shares of the Company's common stock were reserved
for issuance under the 1993 Plan, options to purchase 88,000 shares were
outstanding and 352,000 shares were available for future grants. The
option price shall not be less than the fair market value at the time of
grant and the term of the option may not exceed ten years. The employees
of the Company eligible to participate in the 1993 Plan and the awards
granted to participants in the Plan are determined by the Compensation
Committee. Options to purchase 338,895 shares also remain outstanding
under the Company's 1983 Stock Option Plan (1983 Plan) which terminated in
1993.
APPROVAL OF 1995 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
The Company's 1995 Stock Option Plan for Non-Employee Directors (the
"Directors Option Plan") was adopted by the Board of Directors of the
Company on March 17, 1995. The Directors Option Plan is designed to
advance the Company's interest by enhancing its ability to attract and
retain non-employee directors who are in a position to make significant
contributions to the success of the Company and to align the interest of
those directors more closely with stockholders. Stockholders are being
requested to approve the Directors Option Plan at the Annual Meeting. The
following summary is qualified in its entirety by the full text of the
Directors Option Plan that appears as Exhibit A to this Proxy Statement.
Pursuant to the Directors Option Plan, beginning on the date of the
Annual Meeting, each director who is not an employee of the Company who is
serving as a director following the Annual Meeting will initially be
granted an option to purchase 5,000 shares of Common Stock. If any new non-
employee directors are subsequently elected, they will also receive an
option to purchase 5,000 shares. On the date of each annual meeting after
the initial grant, each eligible director who is reelected or continuing
will be granted an option to acquire an additional 1,000 shares of Common
Stock. Dr. Aguilar, General Mullins and Mr. Troup are currently the only
eligible directors and, assuming they continue as directors at the Annual
Meeting, each will be awarded an option for 5,000 shares of Common Stock.
The exercise price of options under the Directors Option Plan will be
100% of the fair market value of the Common Stock on the date of grant.
The exercise price may be paid in cash, by tendering shares of Common
Stock, by having the Company hold back from the shares transferred upon
exercise stock having a fair market value equal to the exercise price, by
delivering an undertaking by a broker to deliver promptly sufficient funds
to pay the exercise price, or by any combination of the foregoing. Each
option will be non-transferable except upon death, will expire 10 years
after the date of grant and will become exercisable to the extent of one-
third of the shares covered thereby on each of the first, second and third
anniversaries of the date of grant. If a director dies, or otherwise
ceases to be a director, prior to the date the option becomes exercisable,
all options not then exercisable will immediately terminate. Any
exercisable options will remain exercisable for a period of one year
following death or three months following other termination of the
individual's status as a director, but in no event beyond the tenth
anniversary of the date of grant. Upon a merger in which the Company is
not the surviving corporation or that results in the acquisition of all of
the Company's stock by a single person or entity or by a group of persons
or a sale of all or substantially all of the Company's assets, or a
dissolution or liquidation of the Company, all options not at the time
exercisable will become immediately exercisable 20 days prior to the date
of the stockholders meeting to vote upon any such merger, consolidation
sale, dissolution, or liquidation as set forth in the related proxy
statement, or if there shall be no such meeting, 20 days prior to the
effective date of any such transaction and will terminate upon the
consummation of the transaction. In the event such a transaction is to be
accounted for as a pooling of interests, the Company shall provide for the
surviving or acquiring corporation or an affiliate thereof to grant each
holder of an option hereunder outstanding at the time of the transaction a
replacement option on substantially equivalent terms. A total of 100,000
shares of Common Stock has been reserved for issuance under the Directors
Option Plan, subject to adjustment for stock splits and similar events.
For federal income tax purposes, options under the Directors Option
Plan are treated as nonstatutory options. In general, the optionee has no
taxable income at the time of grant of a nonstatutory option but realizes
income in connection with exercise of the option in an amount equal to the
excess (at time of exercise) of the fair market value of the shares
acquired upon exercise over the exercise price, and a corresponding
deduction is available to the Company. Upon a subsequent sale or exchange
of the shares, appreciation or depreciation after the date of exercise is
treated as capital gain or loss to the optionee, and the Company is not
entitled to a corresponding deduction.
Under the so-called "golden parachute" provisions of the Internal
Revenue Code, the vesting or accelerated exercisability of awards in
connection with a change in control of the Company may be required to be
valued and taken into account in determining whether participants have
received compensatory payments, contingent on the change in control, in
excess of certain limits. If these limits are exceeded, a substantial
portion of amounts payable to the participant, including income recognized
by reason of the grant, vesting or exercise of awards under the Incentive
Plan, may be subject to an additional 20% federal tax and may be
nondeductible to the Company.
This summary does not purport to be complete or to cover federal
employment tax or other federal tax consequences that may be associated
with the plans, nor does it cover state, local or non-U.S. taxes.
Recommendation of the Board of Directors: "FOR" this Proposal
The Board of Directors believes that the adoption of the Directors
Option Plan
will promote the interests of the Company and the stockholders and help the
Company to attract and retain qualified non-employee directors.
Accordingly, the Board of Directors has approved the adoption of the
Directors Option Plan and recommends that the stockholders vote "FOR" the
proposal to adopt the Directors Option Plan. Proxies solicited by the
Board of Directors will be so voted unless stockholders specify otherwise.
To approve the Directors Option Plan, the vote of holders of a majority
of the shares present or represented and entitled to vote on the proposal
at the meeting is required.
QUORUM, REQUIRED VOTES, AND METHOD OF TABULATION
Consistent with state law and under the Company's by-laws, a majority of
the shares entitled to be cast on a particular matter, present in person or
represented by proxy, constitutes a quorum as to such matter. Votes cast
by proxy or in person at the Annual Meeting will be counted by persons
appointed by the Company to act as election inspectors for the meeting.
The nominees for election as Class II directors at the Annual Meeting who
receive the greatest number of votes properly cast for the election of
directors will be elected directors. A majority of the votes properly cast
on the matter is necessary to approve the action proposed in Item 2 of the
accompanying Notice of Annual Meeting.
An abstention will have the effect of a vote against the 1995 Stock
Option Plan for Non-Employee Directors proposal, while a broker non-vote
(i.e., shares held by brokers or nominees as to which (i) instructions have
not been received from the beneficial owners and (ii) the broker or nominee
does not have the discretionary authority to vote on a particular matter)
will have no effect on the outcome.
The election inspectors will count the total number of votes cast "for"
approval of Items 1 and 2 for purposes of determining whether sufficient
affirmative votes have been cast. The election inspectors will count
shares represented by proxies that withhold authority to vote for a nominee
for election as a director or that reflect abstentions and "broker non-
votes" (i.e., shares held by brokers or nominees as to which (i)
instructions have not been received from the beneficial owners and (ii) the
broker or nominee does not have the discretionary authority to vote on a
particular matter) only as shares that are present and entitled to vote on
the matter for purposes of determining a quorum, but neither abstentions
nor broker non-votes have any effect on the outcome on voting on the
matter.
AUDIT MATTERS
Upon the recommendation of the Audit Committee, the Board of Directors
has selected Arthur Andersen & Co., certified public accountants, as
auditors for the Company for the fiscal year ending December 30, 1995.
Arthur Andersen & Co. has served as the Company's independent auditors
since 1957. A representative of Arthur Andersen & Co. is expected to be
present at the Annual Meeting with the opportunity to make a statement if
he or she desires to do so and to respond to appropriate questions.
OTHER INFORMATION
Stockholder Proposals for Fiscal 1995 Annual Meeting
Proposals of stockholders submitted for consideration at the next annual
meeting of stockholders must be received by the Company no later than
November 15, 1995 in order to be considered for inclusion in the Company's
proxy materials for that meeting.
Other Business
The Board of Directors does not know of any business which will be
presented to the Annual Meeting other than that referred to in the
accompanying notice. If other business properly comes before the Annual
Meeting, it is intended that the proxies will be voted in the judgment of
the persons voting the proxies unless specific instructions to the contrary
are given.
By the Order of the Board of Directors
John R. D. McClintock
Clerk
Andover, Massachusetts
March 21, 1995
EXHIBIT A
DYNAMICS RESEARCH CORPORATION
1995 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE
The purpose of this 1995 Stock Option Plan for Non-Employee Directors
(the "Plan") is to advance the interests of Dynamics Research Corporation
(the "Company") by enhancing the ability of the Company to attract and
retain non-employee directors who are in a position to make significant
contributions to the success of the Company and to align the interest of
those directors more closely with the stockholders.
2. ADMINISTRATION
The Plan shall be administered by a committee (the "Committee") of the
Board of Directors (the "Board") of the Company designated by the Board for
that purpose. Unless and until a Committee is appointed the Plan shall be
administered by the entire Board, the references in the Plan to the
"Committee " shall be deemed references to the Board. The Committee shall
have authority, not inconsistent with the express provisions of the Plan,
(a) to grant options in accordance with the Plan to such directors as are
eligible to receive options; (b) to prescribe the form or forms of
instruments evidencing options and any other instruments required under the
Plan and to change such forms from time to time; (c) to adopt, amend and
rescind rules and regulations for the administration of the Plan; and (d)
to interpret the Plan and to decide any questions and settle all
controversies and disputes that may arise in connection with the Plan.
Such determinations of the Committee shall be conclusive and shall bind all
parties.
3. EFFECTIVE DATE AND TERM OF PLAN
Plan shall become effective on the date on which the Plan is approved
by the Board of Directors of the Company, subject to approval by the
shareholders of the Company. No option shall be granted under the Plan
after the completion of ten years from the date on which the Plan was
adopted by the Board, but options previously granted may extend beyond that
date.
4. SHARES SUBJECT TO THE PLAN
(a) Number of Shares. Subject to adjustment as provided in Section
4(c), the aggregate number of shares of the Company's common stock (the
"Stock") that may be delivered upon the exercise of options granted under
the Plan shall be 100,000. If any option granted under the Plan terminates
without having been exercised in full, the number of shares of Stock as to
which such option was not exercised shall be available for future grants
within the limits set forth in this Section 4(a).
(b) Shares to be Delivered. Shares delivered under the Plan shall be
authorized but unissued Stock or, if the Board so decides in its sole
discretion, previously issued Stock acquired by the Company and held in
treasury. No fractional shares of Stock shall be delivered under the Plan.
(c) Changes in Stock. In the event of a stock dividend, stock split
or combination of shares, recapitalization or other change in the Company's
capital stock, after the effective date of the Plan, the number and kind of
shares of stock or securities of the Company subject to options then
outstanding or subsequently granted under the Plan, the maximum number of
shares or securities that may be delivered under the Plan, the exercise
price, and other relevant provisions shall be appropriately adjusted by the
Committee, whose determination shall be binding on all persons.
5. ELIGIBILITY FOR OPTIONS
Directors eligible to receive options under the Plan ("Eligible
Directors") shall be those directors who are not employees of the Company
or of any subsidiary of the Company.
6. TERMS AND CONDITIONS OF OPTIONS
(a) Number of Options. On the date of the first annual meeting of
stockholders following the adoption of this Plan each Eligible Director who
is elected, re-elected or continuing as a director on such date shall be
awarded on such date an option covering 5,000 shares of Stock; thereafter,
at each annual meeting or meeting of the board of directors at which a new
Eligible Director is elected to the Board or following the election by the
Board of a new Eligible Director to the Board, he or she shall be awarded
an option covering 5,000 shares of Stock; and at each annual meeting
subsequent to the annual meeting at which the initial grant was made to an
Eligible Director and at which he or she is reelected or is continuing as a
director, he or she shall be awarded an additional option covering 1,000
shares of Stock.
(b) Exercise Price. The exercise price of each option shall be 100%
of the fair market value per share of the Stock on the date the option is
granted. In no event, however, shall the option price be less, in the case
of an original issue of authorized stock, than par value per share. For
purposes of this paragraph, (A) the fair market value of a share of Stock
on any date shall be the Closing Price on such day or, if there was no
Closing Price on such day, the latest day prior thereto on which there was
a Closing Price; and (B) the "Closing Price" of the Stock on any business
day will be the last sale price as reported on the principal market on
which the Stock is traded or, if no last sale is reported, then the mean
between the highest bid and lowest asked prices on that day.
(c) Duration of Options. The latest date on which an option may be
exercised (the "Final Exercise Date") shall be the date which is ten years
from the date the option was granted.
(d) Exercise of Options.
(1) Each option shall become exercisable to the extent of one-third
of the shares covered thereby on each of the first, second and third
anniversaries of the date of grant.
(2) Any exercise of an option shall be in writing, signed by the
proper person and delivered or mailed to the Company, accompanied by (i)
any documentation required by the Committee and (ii) payment in full for
the number of shares for which the option is exercised.
(3) The Committee shall have the right to require that the individual
exercising the option remit to the Company an amount sufficient to
satisfy any federal, state, or local withholding tax requirements (or make
other arrangements satisfactory to the employer with regard to such taxes)
prior to the delivery or any Stock pursuant to the exercise of the option.
If permitted by the committee the individual exercising the option may
elect, at such time and in such manner as the Committee may prescribe, to
have the Company hold back from the transfer Stock having a value
calculated to satisfy such withholding obligation. In the case of an
individual subject to Section 16(b) of the Exchange Act, no such election
shall be effective unless made in compliance with the applicable
requirements of Rule 16b-3 or any successor Rule under the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
(4) If an option is exercised by the executor or administrator of a
deceased director, or by the person or persons to whom the option has been
transferred by the director's will or the applicable laws of descent and
distribution, the Company shall be under no obligation to deliver Stock
pursuant to such exercise until the Company is satisfied as to the
authority of the person or persons exercising the option.
(e) Payment for and Delivery of Stock. Stock purchased under the
Plan shall be paid for as follows: (i) in cash or by check (acceptable to
the Company in accordance with guidelines established for this purpose),
bank draft or money order payable to the order of the Company; (ii) through
the delivery of shares of Stock (which, in the case of shares of Stock
acquired from the Company, have been outstanding for at least six months)
having a fair market value on the last business day preceding the date of
exercise equal to the purchase price; (iii) by having the Company hold back
from the shares transferred upon exercise Stock having a fair market value
on the last business day preceding the date of exercise equal to the
exercise price; (iv) by delivery of an unconditional and irrevocable
undertaking by a broker to deliver promptly to the Company sufficient
funds to pay the purchase price; or (v) by any combination of the
permissible forms of payment; provided, that if the Stock delivered upon
exercise of the option is an original issue of authorized Stock, at least
so much of the exercise price as represents the par value of such Stock
shall be paid other than with a personal check or promissory note of the
option holder.
An option holder shall not have the rights of a shareholder with
regard to awards under the Plan except as to Stock actually received by him
or her under the Plan.
The Company shall not be obligated to deliver any shares of Stock (a)
until, in the opinion of the Company's counsel, all applicable federal and
state laws and regulations have been complied with, and (b) if the
outstanding Stock is at the time listed on any stock exchange, until the
shares to be delivered have been listed or authorized to be listed on such
exchange upon official notice of issuance, and (c) until all other legal
matters in connection with the issuance and delivery of such shares have
been approved by the Company's counsel. If the sale of Stock has not been
registered under the Securities Act of 1933, as amended, the Company may
require, as a condition to exercise of the option, such representations or
agreements as counsel for the Company may consider appropriate to avoid
violation of such Act and may require that the certificates evidencing such
Stock bear an appropriate legend restricting transfer.
(f) Nontransferability of Options. No option may be transferred
other than by will or by the laws of descent and distribution, and during a
director's lifetime an option may be exercised only by him or her.
(g) Death. Upon the death of any Eligible Director granted options
under this Plan, all options not then exercisable shall terminate. All
options held by the director that are exercisable immediately prior to
death may be exercised by his or her executor or administrator, or by the
person or persons to whom the option is transferred by will or the
applicable laws of descent and distribution, at any time within one year
after the director's death (subject, however, to the limitations of Section
6(c) regarding the maximum exercise period for such option). After
completion of that one-year period, such options shall terminate to the
extent not previously exercised.
(h) Other Termination of Status of Director. If a director's service
with the Company terminates for any reason other than death, all options
held by the director that are not then exercisable shall terminate.
Options that are exercisable on the date or termination shall continue to
be exercisable for a period of three months (subject to Section 6(c)).
After completion of that three-month period such options shall terminate to
the extent not previously exercised, expired or terminated.
(i) Mergers, etc. In the event of a consolidation or merger in which
the Company is not the surviving corporation or which results in the
acquisition of substantially all the Company's outstanding Stock by a
single person or entity or by a group of persons and/or entities acting in
concert, or in the event of a sale or transfer of substantially all of the
Company's assets or a dissolution or liquidation of the Company, all
options hereunder will terminate; provided, that 20 days prior to the
scheduled date of the stockholders meeting to vote upon any such merger,
consolidation sale, dissolution, or liquidation as set forth in the related
proxy statement, or if there shall be no such meeting, 20 days prior to the
effective date of any such transaction, all options outstanding hereunder
that are not otherwise exercisable shall become immediately exercisable,
and provided, further that in the event such a transaction is to be
accounted for as a pooling of interests, the Company shall provide for the
surviving or acquiring corporation or an affiliate thereof to grant each
holder of an option hereunder outstanding at the time of the transaction
replacement options on substantially equivalent terms.
7. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT,
TERMINATION AND EFFECTIVENESS
Neither adoption of the Plan nor the grant of options to a director
shall affect the Company's right to grant to such director options that are
not subject to the Plan, to issue to such directors Stock as a bonus or
otherwise, or to adopt other plans or arrangements under which Stock may be
issued to directors.
The Committee may at any time terminate the Plan as to any further
grants of options. The Committee may at any time or times, but in no event
(except to comply with the provisions of the Internal Revenue Code, the
Employee Retirement Income Security Act or the rules thereunder) more than
once in any six-month period, amend the Plan for any purpose which may at
the time by permitted by law; provided, that except to the extent expressly
required or permitted by the Plan, no such amendment will, without the
approval of the stockholders of the Company, effectuate a change for which
stockholder approval is required in order for the Plan to continue to
qualify under Rule 16b-3 promulgated under Section 16 of the Exchange Act.
PROXY
DYNAMICS RESEARCH CORPORATION
Annual Meeting of Stockholders-April 25, 1995
The undersigned hereby appoints John S. Anderegg, Jr., Douglas R. Potter and
Albert Rand, with power of substitution to each, and hereby authorizes them
to represent and to vote as designated below, at the Annual Meeting of
Stockholders of Dynamics Research Corporation (the "Company") on April 25,
1995 at 3:30 P.M. Boston time, and at any adjournments thereof, all of the
shares of the Company which the undersigned would be entitled to vote if
personally present.
The Board of Directors recommends a vote FOR:
1. Fixing the number of Directors and Election of Class II Directors
FOR nominees listed below, except as indicated. WITHHOLD AUTHORITY to vote
for nominees listed below.
Dr. Francis J. Aguilar
John S. Anderegg, Jr. ABSTAIN
(INSTRUCTIONS:to withhold authority to vote for any individual, write his
name on the line below.)
____________________________________________________________________________
_________
2. To approve the 1995 Stock Option Plan for Non-Employee Directors.
FOR AGAINST ABSTAIN
Account NumberNo. of Shares Proxy No.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. EVERY PROPERLY SIGNED PROXY
WILL BE VOTED AS DIRECTED. UNLESS OTHERWISE DIRECTED, PROXIES WILL BE
VOTED FOR ITEM 1 AND ITEM 2. IN THEIR DISCRETION, THE PROXIES ARE
AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING.
Dated................................., 1995
............................................................
Signature
............................................................
Signature
Please mark, date and sign as your name appears
hereon
and return in the enclosed envelope. If signing
as an
attorney, executor, administrator, trustee,
guardian or
other representative capacity, please give your
full title
as such.
