<PAGE>
<PAGE>1
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 statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
/ / Confidential, for use of Commission only (as permitted by Rule
14a-6(e)(2))
NICHOLS RESEARCH CORPORATION
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than registrant)
Payment of filing fee (Check the appropriate box):
/ /$125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ /$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 transaction applies:
______________________________________________________________________
(3)Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:
______________________________________________________________________
(4)Proposed maximum aggregate value of transaction:
______________________________________________________________________
(5) Total fee paid:
______________________________________________________________________
/X/Fee paid previously with preliminary materials.
/ /Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
<PAGE>
<PAGE>2
(1) Amount previously paid:
______________________________________________________________________
(2) Form, Schedule or registration statement no.:
______________________________________________________________________
(3) Filing party:
______________________________________________________________________
(4) Date Filed:
______________________________________________________________________
<PAGE>
<PAGE>3
NICHOLS RESEARCH CORPORATION
4040 Memorial Parkway, South
Post Office Box 400002
Huntsville, Alabama 35815-1502
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
January 11, 1996
TO THE SHAREHOLDERS OF NICHOLS RESEARCH CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Nichols Research Corporation (the "Company") will be held in the Company
Auditorium, Corporate Headquarters, 4040 Memorial Parkway, South,
Huntsville, Alabama, on January 11, 1996, at 5:00 p.m. local time for the
following purposes:
1. To elect ten (10) Directors to the Board of Directors to
serve for the ensuing year and until their successors are duly elected and
qualified (designated as Proposal 1 in the accompanying Proxy Statement).
2. To consider and vote on an amendment to the Nichols Research
Corporation 1991 Stock Option Plan to increase the number of shares of
Common Stock for issuance thereunder by 500,000 to 1,450,000 shares
(designated as Proposal 2 in the accompanying Proxy Statement).
3. To consider and vote on an amendment to the Company's
Certificate of Incorporation to increase the authorized shares of common
stock to 20,000,000 shares from 10,000,000 shares (designated as Proposal 3
in the accompanying Proxy Statement).
4. To ratify the appointment by the Board of Directors of Ernst
& Young LLP as the Company's independent public accountants for the current
year (designated as Proposal 4 in the accompanying Proxy Statement).
5. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The close of business on November 29, 1995, has been fixed as the
record date for determination of shareholders entitled to notice of and to
vote at the meeting.
A copy of the Annual Report to Shareholders for the fiscal year ended
August 31, 1995, is enclosed.
By order of the Board of Directors,
Patsy L. Hattox
Secretary
Huntsville, Alabama
December 8, 1995
<PAGE>
<PAGE>4
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE MARK, SIGN, AND
DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
IF YOU LATER ATTEND THE MEETING AND WISH TO VOTE IN PERSON, YOU MAY
WITHDRAW YOUR PROXY AND SO VOTE AT THAT TIME. NO POSTAGE IS NEEDED IF
MAILED IN THE UNITED STATES.
<PAGE>
<PAGE>5
NICHOLS RESEARCH CORPORATION
4040 Memorial Parkway, South
Post Office Box 400002
Huntsville, Alabama 35815-1502
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Nichols Research Corporation (the
"Company"), to be voted at the Annual Meeting of Shareholders to be held on
January 11, 1996, and at any and all adjournments thereof (the "Meeting").
The form of proxy permits specification, approval, disapproval or
abstention, as to each of the four proposals. Proposals 1, 2, 3 and 4 will
be presented at the Meeting by management. If the enclosed form of proxy
is properly executed, returned and not revoked, it will be voted in
accordance with the directions, if any, made by the shareholder or, if
directions are not made, will be voted in favor of Proposals 1, 2, 3 and 4.
The cost of solicitation of proxies will be borne by the Company.
Proxies may be solicited by directors, officers, or regular employees of
the Company in person or by telephone, facsimile, or mail. The Company may
reimburse brokerage firms and others for their expenses in forwarding
solicitation material regarding the Meeting to beneficial owners. On or
about December 8, 1995, the Company will commence mailing this Proxy
Statement, the enclosed form of proxy, and attached Notice to holders of
its common stock.
Shareholders who sign proxies have the right to revoke them at any
time before they are voted by filing with the Secretary of the Company
either an instrument revoking the proxy or a duly executed proxy bearing a
later date, or by attending the Meeting and voting in person.
The close of business on November 29, 1995, has been fixed as the
record date for the determination of shareholders entitled to notice of and
to vote at the Meeting.
GENERAL
A majority of the shareholders entitled to vote must be present in
person, or be represented by proxy, to constitute a quorum and act upon the
proposed business. Failure of a quorum to be represented at the Meeting
will necessitate an adjournment and will subject the Company to additional
expense.
Election of each director and approval of Proposals 2 and 4 discussed
in this Proxy Statement require the affirmative vote of the holders of a
majority of the outstanding shares present and entitled to vote at the
Meeting. Proposal 3 discussed in this Proxy Statement requires the
affirmative vote of the holders of a majority of the outstanding shares
entitled to vote for approval. The Company's Certificate of Incorporation
and Bylaws do not contain any provisions concerning the treatment of
abstentions and broker non-votes. Delaware law treats abstentions as votes
<PAGE>
<PAGE>6
which are not cast in favor of a proposal or nominee. Delaware law does
not address the treatment of broker non-votes; however, the Company will
treat broker non-votes as present for purposes of calculating the quorum
but as absent for purposes of calculating votes cast for or against a
proposal or nominee. The Board of Directors recommends that you vote FOR
each nominated director and FOR Proposals 2, 3 and 4.
COMMON STOCK OUTSTANDING AND PRINCIPAL SHAREHOLDERS
As of November 1, 1995, there were outstanding 6,343,569 shares of the
Company's common stock, $.01 par value per share (the "Common Stock").
Holders of Common Stock are entitled to one vote per share on all matters
to be voted upon by shareholders.
The following table sets forth information as of November 1, 1995, as
to (a) the only persons who were known by the Company to own beneficially
more than 5% of the outstanding Common Stock of the Company; (b) the shares
of such Common Stock beneficially owned by the directors and nominees of
the Company; (c) the shares of such Common Stock beneficially owned by
Chris H. Horgen, the Company's Chief Executive Officer, and by Michael J.
Mruz, John D. Jones, James C. Moule, and Jerry T. Bosley, the four most
highly compensated executive officers of the Company (collectively, the
"Named Executive Officers"); and (d) the shares of such Common Stock
beneficially owned by all executive officers and directors of the Company
as a group. Unless otherwise indicated, each shareholder named has sole
voting and dispositive power with respect to his shares.
<TABLE>
<CAPTION>
NUMBER
OF SHARES PERCENTAGE OF TOTAL
BENEFICIALLY COMMON STOCK
NAMES(1) OWNED OUTSTANDING (2)
- -------- ------------ -------------------
<S> <C> <C>
David L. Babson and Co., Inc. 694,600 10.9%
Brinson Partners, Inc. 602,303 9.5%
Account Management, Inc. 387,200 6.1%
DIRECTORS AND NOMINEES
- ----------------------
Chris H. Horgen 293,334(3) 4.6%
Michael J. Mruz 92,500(4) 1.5%
Roy J. Nichols 334,721(5) 5.3%
Patsy L. Hattox 42,547(6) *
Phil E. DePoy 1,500(7) *
Robert W. Hager 2,000(8) *
Roger P. Heinisch 13,334(9) *
William E. Odom 5,002(10) *
James R. Thompson, Jr. 3,000(11) *
John R. Wynn 10,601(12) *
NAMED EXECUTIVE OFFICERS WHO ARE NOT
- ------------------------------------
DIRECTORS OR NOMINEES
- -------------------------------------
John D. Jones 42,507(13) *
James C. Moule 39,863(14) *
Jerry T. Bosley 13,825(15) *
<PAGE>
<PAGE>7
ALL DIRECTORS AND EXECUTIVE
- ---------------------------- 1,149,390(16) 18.1%
OFFICERS AS A GROUP (26 PERSONS)
- --------------------------------
</TABLE>
- -------------------
* Less than 1%
(1)The addresses for all persons listed above are in care of the Company
with the following exceptions: Roger P. Heinisch, 23620 Olinda Trail,
Scandia, MN 55073; William E. Odom, 3627 Everette Street, N.W., Washington,
DC 20008; James R. Thompson, Jr., 416 Randolph Avenue, Huntsville, AL
35802; Phil E. DePoy, 1700 East 56th Street, Apt. 3809, Chicago, IL 60637;
and Robert W. Hager, E-51 Sunset Beach Lane, Belfair, WA 98528.
(2)Shares issuable under immediately exercisable options are considered
outstanding for the purpose of calculating the percentage of Common Stock
owned by officers, directors and 5% shareholders who have immediately
exercisable options, but such shares are not to be considered outstanding with
respect to officers, directors, and 5% shareholders who do not have any
such options.
(3)Includes 1,033 shares held by an adult child who is a member of the
officer's household, and 66,000 shares held directly by Mr. Horgen's
spouse.
(4)Includes 17,500 shares which are subject to immediately exercisable
options held by Mr. Mruz and 5,000 shares held in a revocable trust, of
which both Mr. Mruz and his spouse are trustees.
(5)All shares are held in a revocable trust for Mr. Nichols and his spouse
of which both are trustees.
(6)Includes 3,175 shares which are subject to immediately exercisable
options held by Ms. Hattox.
(7)Includes 1,000 shares which are subject to immediately exercisable
options held by Dr. DePoy.
(8)Includes 1,000 shares which are subject to immediately exercisable
options held by Mr. Hager, and 1,000 shares which are held in joint tenancy
with spouse.
(9)Includes 4,002 shares which are subject to immediately exercisable
options held by Dr. Heinisch.
(10)Includes 4,002 shares which are subject to immediately exercisable
options held by General Odom.
(11)Comprised of 3,000 shares which are subject to immediately exercisable
stock options held by Mr. Thompson.
(12)Includes 5,335 shares which are subject to immediately exercisable
options held by Mr. Wynn, and 266 shares held by Mr. Wynn's spouse for the
benefit of minor children.
<PAGE>
<PAGE>8
(13)Includes 6,009 shares which are subject to immediately exercisable
options held by Dr. Jones, 1,700 shares held by an officer as custodian for a
minor child, and 1,700 shares held by an adult child who is a member of Dr.
Jones' household.
(14)Includes 3,010 shares which are subject to immediately exercisable
options held by Mr. Moule and 200 shares which are held directly by the
officer's spouse.
(15)Includes 6,007 shares which are subject to immediately exercisable
options held by Mr. Bosley.
(16)Includes 80,609 shares which are subject to immediately exercisable
stock options, 66,200 shares owned by the spouses of two officers, 339,721
shares held in revocable trusts by two officers and their spouses, 1,333
shares owned by a corporation of which an officer is a 50% owner, 22,909
shares held in joint tenancy with spouses, 1,700 shares held by an officer as
custodian for a minor child, 266 shares held by the spouse of an officer for
the benefit of minor children, and 2,743 shares held by adult children who are
members of two officers' households.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors has fixed the number of members of the Board of
Directors at eleven (11) by resolution pursuant to authority granted in the
Bylaws of the Company. The Board of Directors proposes that the ten (10)
nominees listed below be elected as directors, to serve until the next
Annual Meeting of Shareholders and until their successors are duly elected
and qualified. Although the Company has established the number of
directors at eleven, proxies may not be voted for more than ten persons.
It is the desire of the Board of Directors that the Board have the option
of selecting one director to serve on the Board prior to the election of
directors at the next Annual Meeting of Shareholders. It is the intention
of the persons named in the proxy to vote the proxies for the election of
the nominees listed below, all of whom are presently directors of the
Company. If any nominee should become unavailable to serve as a director
for any reason (which is not anticipated), the persons named as proxies
reserve full discretion to vote for such other person or persons as may be
nominated.
The names of the nominees for directors, together with certain
information regarding them, are as follows:
<PAGE>
<PAGE>9
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION SINCE
- ---- ---- -------- --------
<S> <C> <C> <C>
Chris H. Horgen 49 Chief Executive Officer and Chairman 1976
Michael J. Mruz 50 President, Chief Operating Officer and Director 1994
Roy J. Nichols 57 Senior Vice Pesident, Chief Technical Officer, and Vice Chairman 1976
Patsy L. Hattox 46 Chief Administrative Officer, Corporate Vice President, Secretary, and 1980
Director
Roger P. Heinisch 57 Director 1984
John R. Wynn 51 Director 1985
William E. Odom 63 Director 1991
James R. Thompson, Jr. 59 Director 1992
Phil E. DePoy 60 Director 1994
Robert W. Hager 67 Director 1994
</TABLE>
Chris H. Horgen, Roy J. Nichols, and Patsy L. Hattox are employed by
the Company in the positions set forth above, and have been employed by the
Company for more than five years.
Michael J. Mruz became President of the Company on August 16, 1994,
and its Chief Operating Officer and a director on September 1, 1994. From
1989 to 1994, Mr. Mruz served as Executive Vice President, Chief Financial
and Administrative Officer, and a member of the Board of Directors of BDM
International, Inc., a defense contractor. While at BDM, Mr. Mruz held the
positions of Corporate Vice President from 1988 to 1989, Vice
President/General Manager of BDM's Huntsville Technology Center from 1983
to 1988, Vice President, Systems Design and Analysis from 1979 to 1983, and
various management and technical positions from 1974 to 1979. Mr. Mruz
served in the U.S. Air Force from 1968 through 1974 in research and
development assignments involving state-of-the-art communications systems.
Mr. Mruz holds a bachelor's degree in Mathematics from Villanova
University, and a master's degree in Systems Analysis from the Air Force
Institute of Technology.
Dr. Heinisch is employed by Alliant Techsystems, Inc., a defense
contractor, as Vice President, Engineering Information Systems and
Technology. He was employed by Honeywell, Inc., a defense contractor, from
1968 to 1990. While at Honeywell, Dr. Heinisch held the positions of Vice
President of Manufacturing and Materials Operations of the Defense Systems
Group from 1989 to 1990, Vice President and Deputy, Science and Technology
from 1988 to 1989, Vice President of Flight Systems Operations from 1985 to
1988, and Vice President for Honeywell's System and Research Center from
1982 to 1985. Dr. Heinisch holds bachelor's and master's degrees in
Nuclear Engineering from Marquette University and a doctorate degree in
Engineering from Purdue University.
Mr. Wynn is a practicing attorney in Huntsville, Alabama, and has been
a member of the law firm of Lanier Ford Shaver & Payne P.C., and its
predecessors since 1970. The firm has served as general counsel to the
Company since 1983.
<PAGE>
<PAGE>10
Lt. Gen. (Ret.) Odom is Director of National Security Studies for
Hudson Institute, a nonprofit organization which analyzes, evaluates, and
formulates foreign, military, and domestic policy. He also serves as an
adjunct professor at Yale University. In 1988, General Odom retired from
the Army after 34 years of service. At the time of his retirement, General
Odom was Director of the National Security Agency and Chief, Central
Security Service, at Fort George Meade, Maryland. As Director of the
National Security Agency from 1985 to 1988, General Odom was responsible
for the agency's work in signal intelligence and communications security,
and was the principal signal intelligence advisor to the Secretary of
Defense, the Director of Central Intelligence, and the Joint Chiefs of
Staff. General Odom received a bachelor's degree in Engineering from the
United States Military Academy. He also holds master's and doctorate
degrees in Political Science from Columbia University.
Mr. Thompson is employed by Orbital Sciences Corporation, a space
technology company, as Executive Vice President. From 1989 to 1991, he
served as Deputy Administrator for the National Aeronautics and Space
Administration (NASA). From 1986 to 1989, he served as the Director of
NASA's Marshall Space Flight Center. From 1983 to 1986, he was the Deputy
Director for Technical Operations for Princeton Applied Physics Laboratory.
Mr. Thompson holds a bachelor's degree in Aeronautical Engineering from
Georgia Institute of Technology and a master's degree in Mechanical
Engineering from the University of Florida.
Dr. DePoy has served as President of the National Opinion Research
Center (NORC) since 1992. NORC is a non-profit corporation engaged in
survey research for the public interest and is affiliated with the
University of Chicago. From 1985 to 1992, Dr. DePoy served as
distinguished Senior Fellow and President and Chief Executive Officer (CEO)
of the Center for Naval Analysis (CNA) located in Alexandria, Virginia.
CNA's research efforts include operations analysis, systems analysis, and
systems engineering efforts for the Navy and other government agencies. He
served in a variety of capacities at CNA from 1959 through 1991,
beginning as an analyst and field representative. He served as Director of
CNA's Systems Evaluation Group before being promoted to Vice President in
1974. He became Executive Vice President and Director of Research in 1984,
before assuming the responsibilities as CNA's President and CEO in 1985.
Dr. DePoy received his bachelor's degree in Chemical Engineering from
Purdue University, his master's degree in Nuclear Engineering from
Massachusetts Institute of Technology, and his doctorate degree in Chemical
Engineering from Stanford University.
Mr. Hager retired from The Boeing Company in March 1993, where he had
been Vice President-General Manager of the Missiles and Space Division
since 1991. He was responsible for all missile and space programs within
Boeing. In May 1989, Mr. Hager became Vice President-General Manager of
Boeing's Huntsville Division. From 1984 to 1989, he served as Vice
President, Space Station Freedom. He was Vice President of Engineering for
Boeing Aerospace before his Space Station position. He is a Trustee of the
University's Space Research Association. Mr. Hager received his master's
degree in Civil Engineering from the University of Washington.
Mr. Horgen serves as a director of SouthTrust Bank of Alabama, N.A.
Mr. Nichols serves as a director of Adtran, Inc. Mr. Thompson serves as a
director of Orbital Sciences Corporation. Dr. Heinisch serves as a
director of Nonvolatile Electronics, Inc.
<PAGE>
<PAGE>11
BOARD COMMITTEES AND ATTENDANCE
Mr. Wynn, Dr. Heinisch, General Odom, Mr. Thompson and Mr. Hager serve
as members of the Audit Committee of the Board of Directors. The Audit
Committee reviews the services provided by the Company's independent
accountants. During the fiscal year ended August 31, 1995, the Audit
Committee held two (2) meetings, and all committee members were present.
Dr. Heinisch, Mr. Wynn and General Odom serve as members of the Executive
Officer Compensation Committee of the Board of Directors. The Executive
Officer Compensation Committee recommends to the Company's Board of
Directors the salary and cash bonus for the Company's Chief Executive
Officer and President/Chief Operating Officer. During the fiscal year
ended August 31, 1995, the Executive Officer Compensation Committee held
one (1) meeting, and all committee members were present. Messrs. Horgen
and Nichols serve as members of the Stock Option Committee of the Board of
Directors. The Stock Option Committee administers the Company's 1989
Incentive Stock Option Plan, the Company's 1988 Employees' Stock Purchase
Plan, the Company's 1991 Stock Option Plan and the Company's Non-Employee
Officer and Director Stock Option Plan. During the fiscal year ended
August 31, 1995, the Stock Option Committee held no meetings, but took
action by unanimous written consent on eleven (11) occasions. On August
24, 1995, the Board established an Executive Committee and elected Chris H.
Horgen, Michael J. Mruz, Roy J. Nichols, and John R. Wynn to that
committee. The Executive Committee held no meetings in the fiscal year
ended August 31, 1995. The Company does not have a Nominating Committee.
During the fiscal year ended August 31, 1995, the Board of Directors
held four (4) meetings, and all directors were present at such meetings
with the exception of William E. Odom who was not present at one meeting
and Roger P. Heinisch who was not present at one meeting. The Board of
Directors also adopted action by unanimous written consent of all directors
on eleven (11) occasions during the fiscal year ended August 31, 1995.
EXECUTIVE COMPENSATION
COMPENSATION SUMMARY
- ---------------------
The following table summarizes for the last three completed fiscal
years the compensation of the Chief Executive Officer and the four most
highly compensated executive officers of the Company whose salary and bonus
exceeded $100,000 for the year ended August 31, 1995 (the "Named Executive
Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
--------------------------
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------- ------------------------------
OTHER RESTRICTED SHARES OF STOCK
NAME AND ANNUAL STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS OPTIONS AWARDED COMPENSATION
- ------------------ ---- ------ ----- ------------ ---------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Chris H. Horgen, Chairman 1995 $217,053 $90,000 - N/A N/A $15,534
and Chief Executive Officer 1994 224,254 55,000 - N/A N/A 20,592
1993 187,226 70,000 - N/A N/A 22,593
<PAGE>
<PAGE>12
Michael J. Mruz(4) 1995 210,740 98,000 $88,375(5) (6) - 14,960
President, Chief Operating 1994 - - - N/A 100,000 -
Officer and Director
John D. Jones, Corporate 1995 132,829 30,500 - N/A - 15,137
Vice President 1994 129,459 10,000 - N/A - 12,648
1993 118,973 31,000 - N/A 5,025 16,445
James C. Moule, Corporate 1995 136,723 30,500 - N/A 6,000 15,184
Vice President 1994 132,764 20,000 - N/A 1,002 13,762
1993 123,997 20,400 - N/A 2,025 15,846
Jerry T. Bosley, Corporate 1995 122,803 31,500 - N/A 4,000 15,019
Vice President 1994 121,767 21,000 - N/A 3,000 12,858
1993 107,070 22,000 - N/A 6,021 14,120
</TABLE>
__________________
(1)Includes the following amounts deferred by the Named Executive Officers
under the Company's 401(k) Profit Sharing Plan:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED AUGUST 31
---------------------------
<S> <C> <C> <C>
Name 1993 1994 1995
- ---- ---- ---- ----
Chris H. Horgen $8,412 $8,141 $11,079
Michael J. Mruz N/A N/A 10,524
John D. Jones 6,607 7,831 11,349
James C. Moule 2,888 3,055 6,608
Jerry T. Bosley 5,163 5,711 10,796
</TABLE>
Also includes the following amounts deferred by the Named Executive
Officers under the Company's Cafeteria Plan:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED AUGUST 31
---------------------------
<S> <C> <C> <C>
NAME 1993 1994 1995
- ---- ---- ---- ----
Chris H. Horgen - - $1,776
Michael J. Mruz - - 1,187
John D. Jones - - 1,781
James C. Moule - - 1,803
Jerry T. Bosley - - 64
</TABLE>
<PAGE>
<PAGE>13
(2)"Other Annual Compensation" for each of the named executives does not
include the value of certain perquisites or other personal benefits, if
any, furnished by the Company to the Named Executive Officers (or for which
it reimburses the Named Executive Officers), unless the value of such
benefits in total exceeds the lesser of $50,000 or 10% of the total annual
salary and bonus reported in the above table for any Named Executive
Officer.
(3)"All Other Compensation" consists of the following Company contributions
(matching and profit sharing) to the Company's 401(k) Profit Sharing
Retirement Plan, forfeiture allocations under that retirement plan and term
life insurance premiums paid by the Company in fiscal years ended August
31, 1993 and 1994 for the benefit of the Named Executive Officers:
<TABLE>
<CAPTION>
RETIREMENT PLAN TERM
CONTRIBUTION/ LIFE
NAME YEAR FORFEITURE ALLOCATIONS PREMIUMS
- ---- ---- ---------------------- --------
<S> <C> <C> <C>
Chris H. Horgen 1995 $15,534 $ -
1994 19,766 826
1993 21,588 1,005
Michael J. Mruz 1995 14,960 -
1994 N/A -
John D. Jones 1995 15,137 -
1994 11,762 886
1993 15,440 1,005
James C. Moule 1995 15,184 -
1994 12,936 826
1993 14,841 1,005
Jerry T. Bosley 1995 15,019 -
1994 12,054 804
1993 13,196 924
</TABLE>
(4)On August 16, 1994, Mr. Mruz commenced employment with the Company as
President. Mr. Mruz became the Company's Chief Operating Officer and a
director on September 1, 1994.
(5)Pursuant to his employment with the Company, on September 1, 1994, the
Company granted Mr. Mruz an option to purchase 70,000 shares of restricted
Common Stock for 90% of the fair market value of the Common Stock as
reported on NASDAQ on the date of purchase. On September 1, 1994, Mr. Mruz
exercised that option. On that date, the fair market value of the shares
purchased was $11.50 per share. Therefore, $80,500 of the amount reported
in the table is the dollar value of the difference between the $724,500
price paid by Mr. Mruz for the 70,000 shares of restricted Common Stock and
the $805,000 fair market value of those shares on the purchase date. Also
included in the table is $7,875 paid by the Company for nine months of nine
months of full family COBRA health insurance premiums.
<PAGE>
<PAGE>14
(6)On August 31, 1995, Mr. Mruz held the 70,000 shares of restricted Common
Stock he acquired in the transaction desribed in footnote (5) above. On
that date, the fair market value of those shares was $1,295,000, or $18.50
per share, as reported on NASDAQ.
STOCK OPTION GRANTS, EXERCISES AND FISCAL YEAR END VALUES
- ---------------------------------------------------------
The Company from time to time awards stock options to executive
officers and other key employees pursuant to two stock option plans
approved by the shareholders of the Company. Messrs. Horgen and Nichols
are not eligible to receive options under either of the Company's stock
option plans because they are members of the Stock Option Committee which
administers those two plans.
The following table summarizes certain information concerning stock
options granted during the last fiscal year to those Named Executive
Officers who are eligible to receive options under the Company's two stock
option plans:
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- ------------------------------------------------------------------------------------------------------- -------------------
PERCENT OF
TOTAL
NUMBER OF OPTIONS GRANT
SECURITIES EMPLOYEES EXERCISE DATE OPTION
UNDERLYING IN FISCAL PRICE PER MARKET EXPIRATION
NAME TYPE OF OPTION OPTIONS GRANTED YEAR SHARE PRICE DATE 5% 10%
- ---- -------------- --------------- ---------- -------- ------ --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael J. Mruz Restricted(1) 70,000 * $10.35 $11.50 8/31/1996 N/A N/A
James C. Moule Incentive(2) 6,000 * $18.50 $18.50 8/31/2000 $30,660 $67,740
Jerry T. Bosley Incentive(2) 4,000 * $18.50 $18.50 8/31/2000 $20,440 $45,160
</TABLE>
- ------------------
*Less than 1%
(1)Pursuant to his employment with the Company, on September 1, 1994, the
Company granted Mr. Mruz an option to purchase 70,000 shares of restricted
Common Stock for 90% of the fair market value of the Common Stock as
reported on NASDAQ on the date of purchase. On September 1, 1994, Mr. Mruz
exercised that option. On that date, the fair market value of the shares
purchased was $11.50 per share.
(2)The aggregate Fair Market Value (determined at the time the option is
granted) of the Common Stock with respect to which Incentive Options are
exercisable for the first time by an option recipient during any calendar
year (under all such plans of the Company and its subsidiaries) may not
exceed $100,000. If any single employee should be granted an Incentive
<PAGE>
<PAGE>15
Option which, together with other applicable prior Incentive Option grants,
exceeds such maximum, the Incentive Option will be treated as a
Non-Statutory Option to the extent of such excess.
No Incentive Option is exercisable, either in whole or in part, prior to
twenty-four (24) months from the date it is granted. Up to one-third of
the total shares granted under the Incentive Option may be purchased in
each of the following installment periods, each beginning from the date the
option is granted: (1) after twenty-four months; (2) after thirty-six
months; and (3) after forty-eight months. Incentive Option recipients may
accumulate installments not yet exercised, which may be exercised, in whole
or in part, in any subsequent period but not later than five years from the
date the option is granted.
The following table sets forth certain information concerning
exercises of options during the last fiscal year by the Named Executive
Officers and the values as of August 31, 1995, of the unexercised stock
options held by the Named Executive Officers who are eligible to receive
options under the Company's two stock option plans:
<TABLE>
<CAPTION>
AGGREGATED FISCAL YEAR OPTION EXERCISES AND STOCK OPTION VALUES AT AUGUST 31, 1995
----------------------------------------------------------------------------------
Number of Shares Underlying Value of Unexercised In-
Unexercised Options at the-Money Options at
Fiscal Year End Fiscal Year End (2)
--------------------------- ------------------------
NUMBER OF SHARES
ACQUIRED ON VALUE
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ---------------- -------- ----------- ------------- ----------- -------------
(1)
<S> <C> <C> <C> <C> <C> <C>
Michael J. Mruz 70,000 $80,500 17,500 82,500 $148,750 $701,250
John D. Jones 2,666 16,396 6,009 2,016 36,537 8,588
James C. Moule 2,666 34,471 3,010 8,018 21,306 11,230
Jerry T. Bosley N/A N/A 6,007 10,014 38,282 34,954
</TABLE>
- ----------------------
(1)Values realized are calculated by subtracting the exercise price from
the closing market price of the Common Stock as of the exercise date(s).
(2)Values are calculated by subtracting the exercise price from the $18.50
per share closing market price of the Common Stock on August 31, 1995, as
quoted on the NASDAQ National Market System.
COMPENSATION OF DIRECTORS
- -------------------------
Directors of the Company, other than those who also serve as officers
of the Company, receive an annual director's fee of $8,400 and
reimbursement for out-of-pocket expenses incurred in connection with
attendance at meetings. No fee is paid for attendance at committee
meetings.
<PAGE>
<PAGE>16
In addition to the annual director's fee, non-employee directors of
the Company are eligible to receive option grants under the Company's
Non-Employee Officer and Director Stock Option Plan (the "Non-Employee
Plan"). The Company adopted and the shareholders approved the Non-Employee
Plan effective August 29, 1988. The Non-Employee Plan is administered by
the Stock Option Committee of the Board of Directors. No one who is
eligible to receive options under the Non-Employee Plan participates in the
administration of the Non-Employee Plan.
The Non-Employee Plan covers 73,333 shares of the Company's Common
Stock. Officers and directors who are neither contractual nor common law
employees of the Company or any of its subsidiaries are eligible to
participate in the Non-Employee Plan. The Committee determines the
non-employee officers and directors of the Company who are granted options
and the number of shares subject to each such option. Options may be
granted to purchase shares at 100% of the fair market value of the shares
on the date of grant. No non-employee officer or director may be granted
options to purchase in excess of 35% of the total number of shares
authorized for grant under the Non-Employee Plan. The options are
exercisable immediately after the date of grant and expire five years after
the date of grant. Options are nontransferable and may be exercised only
while the optionee is serving as a non-employee officer or director of the
Company or during various limited periods after death, retirement, or other
termination of service. The Non-Employee Plan terminates on October 24,
2003; however, options outstanding at the date of expiration of the
Non-Employee Plan may be exercised within the period provided in such
options.
During the fiscal year ended August 31, 1995, Dr. DePoy, Mr. Hager,
Dr. Heinisch, General Odom, Mr. Thompson, and Mr. Wynn were each granted an
option to purchase 1,000 shares of Common Stock at an average per share
exercise price of $12.25.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
- ---------------------------------------------------------------------------
On June 6, 1994, the Company entered into an Employment Agreement (the
"Agreement") with Michael J. Mruz, President and Chief Operating Officer of
the Company. The Agreement provides for the employment of Mr. Mruz as the
President of the Company for a period of two years, commencing August 16,
1994, unless the Agreement is terminated before the end of that term.
After the initial 2-year term, the Agreement automatically renews on a
year-to-year basis. The Agreement provides that Mr. Mruz will be paid an
annual salary of $210,000, subject to increases as authorized by the
Company. He may be awarded discretionary performance bonuses. Pursuant to
the Agreement, on the date of his employment the Company granted Mr. Mruz
incentive stock options to purchase 30,000 shares of Common Stock and non-
statutory stock options to purchase 70,000 shares of Common Stock, both
options having exercise prices equal to the fair market value of the Common
Stock on the date of grant. These options were granted under the 1991
Stock Option Plan and are subject to all the terms of that Plan. Also,
pursuant to the Agreement, on September 1, 1994, the Company granted Mr.
Mruz an option to purchase up to 70,000 shares of Common Stock for 90% of
the fair market value of the Common Stock on the date the option is
exercised. On September 1, 1994, Mr. Mruz exercised that option. See
footnote (5) to the Summary Compensation Table above. The shares purchased
<PAGE>
<PAGE>17
by Mr. Mruz on exercise of this option are restricted and may not be sold
by Mr. Mruz without compliance with applicable securities laws and a right
of first refusal in favor of the Company which commences two years after
the date on which the stock was purchased. The employment of Mr. Mruz will
terminate upon his death or disability, upon 60 days' prior written notice
by either party, or for good cause. If Mr. Mruz is terminated by the
Company on 60 days' prior written notice within five years of his
employment date, he will be paid, as additional compensation, six months'
salary from the date of termination.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN
COMPENSATION DECISIONS
- --------------------------------------------------------------
The compensation of Mr. Horgen and Mr. Mruz is determined by the
Executive Officer Compensation Committee of the Company's Board of
Directors. During the last fiscal year, Dr. Heinisch, Mr. Wynn and General
Odom served on the Executive Officer Compensation Committee. Mr. Wynn, a
director of the Company, is a member-shareholder in the Huntsville,
Alabama, law firm of Lanier Ford Shaver & Payne P.C., which serves as
general counsel to the Company. Responsibility for determination of the
compensation of all other executive officers was delegated to Mr. Horgen
and Mr. Mruz by the Board.
The Stock Option Committee, which administers the Company's two stock
option plans and the Non-Employee Officer and Director Stock Option Plan
(the "Stock Option Committee"), is appointed by the Board of Directors and
currently consists of Messrs. Horgen and Nichols. The Stock Option
Committee may award both incentive stock options and non-statutory stock
options to executive officers, non-employee directors, and other key
employees. During the fiscal year ended August 31, 1995, the Stock Option
Committee awarded a total of 310,349 stock options, 77,505 of which were
awarded to executive officers and 6,000 of which were awarded to six non-
employee directors.
During the year ended August 31, 1995, none of the executive officers
of the Company served as a director or member of the compensation committee
(or board committee performing equivalent functions) of another entity, one
of whose executive officers served as a director of the Company or as a
member of the Company's Executive Officer Compensation Committee.
EXECUTIVE OFFICER COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
- -------------------------------------------------------------------------
Compensation of the executive officers consists principally of a
regular monthly salary, an annual bonus and stock options. The regular
monthly salary for the executive officers is generally established at the
beginning of each fiscal year. Each executive officer may be eligible for
a bonus award at the end of each fiscal year.
The compensation of Mr. Horgen and Mr. Mruz is determined by the
Executive Officer Compensation Committee (the "Compensation Committee").
Responsibility for determination of the compensation of other executive
officers was delegated to Mr. Horgen and Mr. Mruz by the Board.
<PAGE>
<PAGE>18
In establishing the compensation of Mr. Horgen and Mr. Mruz for the
fiscal year that began September 1, 1994, the Compensation Committee
considered, among other matters, the regular monthly salary and bonuses
paid to Mr. Horgen and Mr. Mruz during the previous fiscal year, the rate
of inflation, raises given to other employees of the Company, performance
evaluations, the total compensation paid other employees of the Company,
the compensation ranges for other executive officers of eight comparable
companies, and the financial performance of the Company. Although the
above factors were considered by the Compensation Committee, there was no
quantitative weight assigned to any of the factors considered and the
decision regarding regular monthly salary and bonus compensation was
subjective.
The factors considered by Mr. Horgen and Mr. Mruz in determining the
compensation of other executive officers include the executive's overall
contribution to the Company, his or her level of experience, comparable
salaries within the industry, salaries paid other executives of the
Company, evaluations of the executive and the Company's performance. No
quantitative weight is assigned to the various factors considered by Mr.
Horgen and Mr. Mruz, and the decision regarding regular monthly salary and
bonus compensation is subjective.
The Stock Option Committee of the Board may award both incentive stock
options and non-statutory stock options to the executive officers, other
than Mr. Horgen and Mr. Nichols who serve as members of the Stock Option
Committee. During the fiscal year ended August 31, 1995, the Stock Option
Committee awarded a total of 310,349 stock options, of which 77,505 shares
were awarded to the executive officers. In addition, Mr. Mruz was granted
a restricted stock option on September 1, 1994 for 70,000 shares pursuant
to his employment agreement. The Stock Option Committee, in awarding stock
options, considers primarily the executive's contribution to the success of
the Company. This is a subjective determination.
<TABLE>
<CAPTION>
EXECUTIVE OFFICER COMPENSATION
COMMITTEE STOCK OPTION COMMITTEE
- ------------------------------ ----------------------
<S> <C> <C>
Roger P. Heinisch Chris H. Horgen Chris H. Horgen, CEO
John R. Wynn Roy J. Nichols Michael J. Mruz, President/COO
William E. Odom
</TABLE>
PERFORMANCE GRAPH
- -----------------
The composition of the peer group of companies was changed from the
immediately preceding year to reflect the success of the Company's efforts to
diversify its business into the information technology area. The peer group
in the immediately preceding year consisted of companies whose business was
primarily technical services under contracts and subcontracts with the
Department of Defense. CACI International, Inc., and Computer Horizons
Corporation, which replaced Dynamics Research Corporation, and Analysis &
Technology, Inc., were chosen as peer group members on the basis of their
information technology business.
<PAGE>
<PAGE>19
The following graphs set forth a comparison of the yearly percentage
change in the cumulative total shareholder return on the Company's Common
Stock against the cumulative total return of the Standard & Poor's 500
Stock Index and a group of peer companies for the five year period ended
August 31, 1995.
The companies included in the peer group for the year ended August 31,
1995, and shown in the first graph are:
CACI International, Inc.
COMARCO, Inc.
Computer Horizons Corporation
GRC International, Inc.
Geodynamics Corporation
Intermetrics, Inc.
Logicon, Inc.
SofTech, Inc.
Stanford Telecommunications, Inc.
Titan Corporation
The Companies included in the peer group for the year ended August 31,
1994, and shown in the second graph are:
Analysis & Technology, Inc.
COMARCO, Inc.
Dynamics Research Corporation
GRC International, Inc.
Geodynamics Corporation
Intermetrics, Inc.
Logicon, Inc.
SofTech, Inc.
Stanford Telecommunications, Inc.
Titan Corporation
Total shareholder return was determined by adding (a) the cumulative
amount of dividends for a given year, assuming dividend reinvestment, and
(b) the difference between the share price at the beginning and at the end
of the year, the sum of which was then divided by the share price at the
beginning of such year. The graphs assume $100 was invested on August 31, 1990
in the Company's Common Stock, in the Standard & Poor's 500 Stock Index
companies, and in the peer group.
<PAGE>
<PAGE>20
<TABLE>
<CAPTION>
COMPARATIVE FIVE-YEAR TOTAL RETURNS*
NICHOLS RESEARCH CORPORATION, S&P 500, PEER GROUP
(PERFORMANCE RESULTS THROUGH 8/31/95)
Measurement Period S&P 500
(Fiscal Year Ended August 31) NRES Index Peer Group
- ----------------------------- ------- ------- ----------
<S> <C> <C> <C>
Measurement Pt - 8/31/90 $100.00 $100.00 $100.00
1991 173.74 126.91 151.87
1992 240.40 137.00 136.62
1993 202.02 157.76 216.31
1994 193.94 166.35 302.58
1995 298.99 202.22 506.27
</TABLE>
*Source: Frank Russell Company.
<TABLE>
<CAPTION>
COMPARATIVE FIVE-YEAR TOTAL RETURNS*
NICHOLS RESEARCH CORPORATION, S&P 500, OLD PEER GROUP
(PERFORMANCE RESULTS THROUGH 8/31/95)
Measurement Period S&P 500 Old
(Fiscal Year Ended August 31) NRES Index Peer Group
- ----------------------------- ------- ------- ----------
<S> <C> <C> <C>
Measurement Pt - 8/31/90 $100.00 $100.00 $100.00
1991 173.74 126.91 160.89
1992 240.40 137.00 140.93
1993 202.02 157.76 231.66
1994 193.94 166.35 291.74
1995 298.99 202.22 463.50
</TABLE>
*Source: Frank Russell Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leases (pursuant to a lease which expires August 31, 1996)
10,191 square feet of office facilities in Huntsville, Alabama, at an
annual rental of $81,528, or $8.00 per square foot, from High Tech
Properties, a general partnership in which Roy J. Nichols and Chris H.
Horgen each own a one-sixth interest. The Company leases (pursuant to a
lease which expires August 31, 2000) another 40,000 square feet of office
space in Huntsville, Alabama, at an annual rental of $420,000, or $10.50
per square foot, from Parkway Properties I, a general partnership in which
Roy J. Nichols and Chris H. Horgen each own a one-fourth interest. In
addition, the Company leases (pursuant to a lease which expires on February
28, 1997) another 40,899 square feet of office space in Huntsville,
Alabama, at an annual rental of $429,440, or $10.50 per square foot, from
<PAGE>
<PAGE>21
Parkway Properties II, a general partnership in which Roy J. Nichols and
Chris H. Horgen each own a one-fifth interest. In the opinion of the
disinterested members of the Board of Directors, the rental payments under
the leases are on terms no less favorable to the Company than those
available from unrelated third parties. Additionally, the Board of
Directors has adopted a resolution providing that the Company will not
enter into leases or other transactions with officers, directors, principal
shareholders or their affiliates unless the transactions have been approved
by a majority of disinterested directors and are on terms no less favorable
to the Company than those which could be obtained from unaffiliated
parties. In fiscal year 1995, total lease payments to High Tech Properties
were $132,930, total lease payments to Parkway Properties I were $440,000,
and total lease payments to Parkway Properties II were $429,440.
On December 16, 1994, the Company purchased all of the preferred stock
of TXEN, Inc., an Alabama corporation, for $1,500,000. The preferred stock
is convertible to 19.9% of the common stock of TXEN, Inc. The purchase
price was determined by negotiations between the parties and approved by
the Company's Board of Dirctors. Chris H. Horgen owns 4.9% of the common
stock of TXEN, Inc. The Company also acquired an option from all of the
stockholders, including Chris H. Horgen, to purchase all of the capital
stock of TXEN, Inc., exercisable in 1998 at a formula price based on the
net income of TXEN, Inc.
John R. Wynn, who is a director of the Company, is a member-
shareholder in the Huntsville, Alabama law firm of Lanier Ford Shaver &
Payne P.C., general counsel to the Company. Fees paid in fiscal year 1995
by the Company to the firm did not exceed 5% of the gross revenues of the
firm for such year.
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent
of a registered class of the Company's equity securities, to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission (SEC) and the National Association of Securities Dealers, Inc.
Officers, directors and greater than ten percent shareholders are required
by SEC regulation to furnish the Company with copies of all Section 16(a)
forms they file.
Based solely on review of the copies of such forms and any amendments
thereto furnished to the Company, or written representations that no Forms
5 were required, the Company believes that during the one year period ended
August 31, 1995, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent beneficial owners were
complied with, with the exception of two individuals who each filed one
late report: Michael J. Mruz, President, whose report covered one
transaction, and John D. Jones, Corporate Vice President, whose report
covered one transaction. Additionally, in fiscal 1995, Chris H. Horgen
filed two Forms 4 disclosing four transactions that took place in fiscal
1994 and for which two Forms 4 should have been filed, but were not filed,
in fiscal 1994.
<PAGE>
<PAGE>22
PROPOSAL 2
AMENDMENT TO NICHOLS RESEARCH CORPORATION
1991 STOCK OPTION PLAN
DESCRIPTION OF PROPOSED AMENDMENT
- ---------------------------------
On August 24, 1995, the Board of Directors adopted the following
Amendment to the Nichols Research Corporation 1991 Stock Option Plan (the
"1991 Plan") to increase the number of shares which may be issued upon
exercise of options under the 1991 Plan to 1,450,000 shares from 950,000
shares of the Company's Common Stock:
Effective upon approval by the shareholders of the Company, the second
sentence of Section 4 of the Plan is amended to increase by 500,000 shares
the aggregate number of shares which may be issued pursuant to option
exercises under the Plan, to 1,450,000 shares of Capital Stock.
The 1991 Plan provides that options may not be issued under the 1991
Plan after November 12, 2000. As of August 31, 1995, unexercised options
for 660,771 shares of Common Stock were outstanding. The Amendment to the
1991 Plan was adopted in order to ensure that sufficient shares of Common
Stock would be available for the granting of options under the 1991 Plan
prior to its expiration on November 12, 2000. The amendment will be
effective upon approval of the shareholders.
The Board of Directors recommends a vote FOR Proposal 2.
CURRENT PLAN FEATURES
- ---------------------
The 1991 Plan is administered by the Stock Option Committee of the
Board of Directors (the "Committee"). No member of the Committee is
eligible to receive an option under the 1991 Plan, although executive
officers and employee-directors of the Company who are not Committee
members may receive options under the 1991 Plan.
The 1991 Plan permits the Committee to grant both incentive stock
options ("Incentive Options"), as defined by Section 422 of the Internal
Revenue Code of 1986, as amended ("Code"), and options which do not qualify
as Incentive Options ("Non-Statutory Options"). The Committee may not
amend or adjust an Incentive Option in any manner that causes the Incentive
Option to fail to continue to qualify as an Incentive Option.
The stock subject to options are shares of the Company's authorized
but unissued or reacquired one cent ($.01) par value common stock ("Common
Stock"). Under the 1991 Plan, the Committee may, in its discretion, commit
up to 950,000 shares of the Company's Common Stock (subject to adjustment
in the event of stock dividends, stock splits, and stock consolidations of
the Common Stock, or any other increase or decrease in the number of shares
effected without receipt of consideration by the Company) to options. The
closing sale price of the Common Stock on August 31, 1995, was $18.50 per
share.
<PAGE>
<PAGE>23
Options may be granted pursuant to the 1991 Plan from November 13,
1991, through November 12, 2000, to key employees (including officers) of
the Company and its subsidiaries. The Committee has the discretion to
designate option recipients, and the number of options to be granted to
each. No Incentive Option may be granted to an employee who, immediately
after such Incentive Option is granted, owns or has rights to stock
possessing more than 10% of the total combined voting power of all classes
of stock of the Company, unless such Incentive Option is granted at a price
which is at least 110% of the Fair Market Value (as defined below) of the
stock subject to the Incentive Option, and such Incentive Option by its
terms is not exercisable after the expiration of five (5) years from the
date such Incentive Option is granted.
A recipient of an Incentive Option will be required to pay for shares
received pursuant to the exercise of an Incentive Option not less than 100%
of the Fair Market Value (as defined below) of such shares on the date the
Incentive Option is granted. A recipient of a Non-Statutory Option will be
required to pay for shares received pursuant to the exercise of a
Non-Statutory Option not less than the par value of the shares (not less
than $.01 per share). Subject to the restrictions imposed by the 1991
Plan, the price of shares obtainable pursuant to the exercise of both
Incentive Options and Non-Statutory Options will be established by the
Committee in its sole discretion.
The fair market value of optioned shares is the closing sale price of
the Common Stock as reported on the National Association of Securities
Dealers Inc., Automated Quotations National Market System, or the mean
between the highest and lowest per share sales price should the stock be
listed on an exchange, on a given day, or if such stock is not traded on
that day, then on the next preceding day on which such stock was traded
("Fair Market Value"). The aggregate Fair Market Value (determined at the
time the option is granted) of the Common Stock with respect to which
Incentive Options are exercisable for the first time by an option recipient
during any calendar year (under all such plans of the Company and its
subsidiaries) may not exceed $100,000. If any single employee should be
granted an Incentive Option which, together with other applicable prior
Incentive Option grants, exceeds such maximum, the Incentive Option will be
treated as a Non-Statutory Option to the extent of such excess.
No Non-Statutory Option is exercisable either in whole or in part
prior to the earlier of (a) the date specified in the Non-Statutory Option,
or (b) six (6) months from the date the Non-Statutory Option is granted.
During the option recipient's lifetime, the Non-Statutory Option shall be
exercisable only by the option recipient or the option recipient's guardian
or legal representative if one has been appointed, and shall not be
assignable or transferable other than by will or the laws of descent and
distribution. No Non-Statutory Option is exercisable after the earlier of
(1) the date specified in the Non-Statutory Option, or (2) the expiration
of ten (10) years from the date the Non-Statutory Option is granted.
No Incentive Option is exercisable, either in whole or in part, prior
to twenty-four (24) months from the date it is granted, and in no event is
an Incentive Option exercisable after the expiration of five (5) years from
the date it is granted. Up to one-third of the total shares granted under
the Incentive Option may be purchased in each of the following installment
periods, each beginning from the date the option is granted: (1) after
<PAGE>
<PAGE>24
twenty-four months; (2) after thirty-six months; and (3) after forty-eight
months. Incentive Option recipients may accumulate installments not yet
exercised, which may be exercised, in whole or in part, in any subsequent
period but not later than five years from the date the option is granted.
An Incentive Option is exercisable only by the option recipient and may not
be assigned or transferred by the option recipient other than by will or
the laws of descent and distribution.
The option recipient may pay the option price in cash. The option
recipient must pay for shares received pursuant to an option exercise on or
before the date of such exercise or, if the option recipient delivers to
the Company a notice of exercise and an irrevocable subscription agreement
which obligates the option recipient to take delivery of the shares within
one year of the exercise date, on or before the date the option recipient
takes delivery of the shares. The proceeds from all payments pursuant to
the exercise of options will be used for general corporate purposes. The
Company and its subsidiaries will receive no cash or other payment upon the
granting of options pursuant to the Plan.
To be entitled to the tax advantages associated with Incentive
Options, an option recipient must (1) not dispose of the stock within two
years after the Incentive Option is granted and hold the stock itself for
at least one year after such shares have been transferred to him following
the consummation of his purchase, and (2) remain in the continuous employ
of the Company, its subsidiaries, or both at all times from the date of the
grant to the date three months prior to the date the Incentive Option is
exercised. Under such circumstances, for federal income tax purposes, no
income to the employee, and no deduction to the Company, will result from
either the issuance or exercise of the Incentive Option, except that the
difference between the exercise price and the Fair Market Value of the
stock on the date of exercise constitutes a tax preference to the employee
for purposes of the alternative minimum tax. When the stock is sold or
exchanged, the amount by which the value of the stock at the time of its
disposition exceeds the option price will, if such treatment is available
under the Code, be treated as long-term capital gain. If, however, the
stock is disposed of prior to the expiration of the required holding
periods, the employee must treat the gain realized on the disposition as
ordinary income, to the extent of the lesser of (a) the Fair Market Value
of the option stock on the date of exercise minus the option price, or (b)
the amount realized on disposition of the stock minus the option price.
Amounts treated as ordinary income by the employee are deductible by the
Company. Under current law, net long-term capital gain on sales or
exchanges will be taxed to the employee in the same manner as ordinary
income, subject to a maximum 28% tax rate.
The taxation of Non-Statutory Options is primarily governed by Section
83 of the Code and the Treasury Regulations issued thereunder. No income
to the employee and no deduction to the Company will result from the
issuance of a Non-Statutory Option. Upon exercise of the Non-Statutory
Option, the difference between the Fair Market Value of the stock and the
exercise price is taxable as ordinary income. If the stock is subsequently
sold, the basis for calculating gain or loss will be the price paid for the
stock upon exercise plus the amount, if any, of taxable income realized
upon exercise of the option. If the stock is sold after having been held
for more than one (1) year after the exercise of the option, the amount
realized will be subject to long-term capital gain or loss treatment. The
Company is entitled to a tax deduction equal to the amount of ordinary
income realized upon exercise of the Non-Statutory Option.
<PAGE>
<PAGE>25
PLAN BENEFITS TO BE RECEIVED
- ----------------------------
The amount of options received or to be received under the 1991 Plan
by the Named Executive Officers, all other current executive officers, and
all other employees who are not executive officers cannot be determined
because option grants under the 1991 Plan are made in the sole discretion
of the Stock Option Committee.
PROPOSAL 3
INCREASE IN AUTHORIZED SHARES OF COMMON STOCK
On August 24, 1995, the Board of Directors unanimously approved and
recommended that the shareholders consider and approve an amendment to
Article IV of the Company's Certificate of Incorporation (the
"Certificate") that would increase the number of authorized shares of the
Company's Common Stock to 20,000,000 shares from 10,000,000 shares. The
Board of Directors believes that it is in the best interests of the Company
and its shareholders to amend the Certificate to give effect to the
proposed amendment.
The proposed amendment to Article IV of the Certificate of
Incorporation is set forth below:
Capital
------
The aggregate number of shares which the corporation is authorized to issue
is 20,000,000 shares of $.01 par value voting common stock all of the same
class and none preferred.
As of November 1, 1995, there were 6,343,569 shares of Common Stock
issued and outstanding. As of such date, 184,377 shares of Common Stock
were held in treasury. Options covering approximately 919,409 shares of
Common Stock have previously been granted but have not been exercised, and
516,731 additional shares of Common Stock have been reserved for future
purchases under the Company's stock purchase plan and for future option
grants under the Company's stock option plans. This leaves a balance of
2,035,914 authorized shares of Common Stock available for future use as of
November 1, 1995.
The Board of Directors considers the proposed increase in the number
of authorized shares of Common Stock desirable in order to give the Board
the flexibility to issue Common Stock in connection with, among other
things, stock dividends and splits, acquisitions of other companies, stock
offerings and other financings, employee benefits, and for other general
corporate purposes without the expense and delay incidental to obtaining
shareholder approval of an amendment to the Certificate of Incorporation
increasing the number of authorized shares at the time of such action,
except as may be required for a particular issuance by applicable law. The
Company has no present plans, arrangements, or understandings to issue
additional shares of Common Stock as a result of a stock split,
acquisition, offering, or otherwise.
The Board of Directors recommends a vote FOR Proposal 3.
<PAGE>
<PAGE>26
PROPOSAL 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company has appointed Ernst & Young LLP,
as the Company's independent public accountants to audit the financial
statements of the Company for the current fiscal year ending August 31, 1996,
and to perform other appropriate accounting services. Such appointment will be
presented to the shareholders for ratification at the Meeting. If the
shareholders do not ratify the appointment, the selection of another firm
will be considered by the Board. A representative of Ernst & Young LLP, is
expected to be present at the Meeting to respond to questions from
shareholders and will be given the opportunity to make a statement if he so
desires.
The Board of Directors recommends a vote FOR Proposal 4.
DATE FOR RECEIPT OF SHAREHOLDERS' PROPOSALS
Proposals of shareholders intended to be presented at the next Annual
Meeting must be received by the Company for inclusion in its 1996 Proxy
Materials no later than August 10, 1996.
OTHER
Management does not know of any other matters to be presented at the
Meeting for action by shareholders. However, if any other matters are
properly brought before the Meeting or any adjournment thereof, votes will
be cast pursuant to the proxies in accordance with the best judgment of the
proxy holders with respect to such matter.
UPON WRITTEN REQUEST OF ANY SHAREHOLDER TO PATSY L. HATTOX, SECRETARY,
NICHOLS RESEARCH CORPORATION, P.O. BOX 400002, HUNTSVILLE, ALABAMA
35815-1502, THE COMPANY WILL PROVIDE WITHOUT CHARGE A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION.
By order of the Board of Directors,
Patsy L. Hattox
Secretary
DATED: December 8, 1995
<PAGE>
<PAGE>27
NICHOLS RESEARCH CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
January 11, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE NICHOLS RESEARCH CORPORATION BOARD
OF DIRECTORS.
The undersigned hereby appoints Chris H. Horgen and Patsy L. Hattox,
or either of them, as Proxies, each with the power to appoint his or her
substitute, and hereby authorizes them to represent and to vote, as
directed on the reverse side, all the shares of Common Stock of Nichols
Research Corporation which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Shareholders to be held on
January 11, 1996, or any adjournment(s) thereof. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3 AND 4.
In their discretion, the Proxies are authorized to vote upon other
business as may properly come before the meeting or any adjournment(s)
thereof. If any named nominee above is not able to serve, the Proxies may
vote for such other person or persons nominated in accordance with their
best judgment.
(Continued, and to be marked, dated and signed, on the other side)
<PAGE>
<PAGE>28
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1, 2, 3 and 4.
1.ELECTION OF DIRECTORS
/ /FOR all nominees listed to the right (except as marked to the contrary)
/ /WITHHOLD AUTHORITY to vote for all nominees listed to the right.
NOMINEES: Chris H. Horgen, Michael J. Mruz, Roy J. Nichols, Patsy L.
Hattox, Roger P. Heinisch, John R. Wynn, William E. Odom, James R.
Thompson, Jr., Phil E. DePoy, and Robert W. Hager
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
___________________________________________________
2.Approval of Amendment to the Company's 1991 Stock Option Plan to
increase the number of shares of Common Stock for issuance thereunder by
500,000 to 1,450,000 shares.
/ /FOR / / AGAINST / / ABSTAIN
3.Approval of Amendment to the Company's Certificate of Incorporation to
increase the authorized shares of Common Stock from 10,000,000 to
20,000,000 shares.
/ /FOR / / AGAINST / / ABSTAIN
4.Ratification of Ernst & Young LLP as the independent public
accountants of the Company.
/ /FOR / / AGAINST / / ABSTAIN
5.In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting.
<PAGE>
<PAGE>29
Please sign exactly as name appears hereon. When shares
are held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee, or guardian, please give full title as
such. If a corporation, please sign in full corporate name by President or
other authorized officer. If a partnership, please sign in partnership
name by authorized person.
Dated:______________________________, 1995
________________________________________________
(Signature)
________________________________________________
(Signature if held jointly)
PLEASE SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
