<PAGE>
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):
/X/ No Fee Required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:
__________________________________________________________________________
/ / 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.
(1) Amount previously paid:
_________________________________________________________________________
(2) Form, Schedule or registration statement no.:
_________________________________________________________________________
(3) Filing party:
_________________________________________________________________________
(4) Date Filed:
_________________________________________________________________________
<PAGE>
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 9, 1997
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 9, 1997, 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 change the composition of the
Plan's Administrative Committee to conform with recent changes to the
rules governing compensatory stock plans under the Securities Exchange
Act of 1934 and, except for certain limited matters, to permit the
Board of Directors to amend the Plan without shareholder approval
(designated as Proposal 2 in the accompanying Proxy Statement).
3. To consider and vote on an amendment to the Nichols Research
Corporation Non-Employee Officer and Director Stock Option Plan to
change the composition of the Plan's Administrative Committee to
conform with recent changes to the rules governing compensatory stock
plans under the Securities Exchange Act of 1934 and, except for
certain limited matters, to permit the Board of Directors to amend the
Plan without shareholder approval (designated as Proposal 3 in the
accompanying Proxy Statement).
4. To consider and vote on an amendment to the Nichols Research
Corporation 1988 Employees' Stock Purchase Plan to change the
composition of the Plan's Administrative Committee to conform with
recent changes to the rules governing compensatory stock plans under
the Securities Exchange Act of 1934 and, except for certain limited
matters, to permit the Board of Directors to amend the Plan without
shareholder approval (designated as Proposal 4 in the accompanying
Proxy Statement).
5. To consider and vote on an amendment to the Nichols Research
Corporation 1989 Incentive Stock Option Plan to change the composition
of the Plan's Administrative Committee to conform with recent changes
to the rules governing compensatory stock plans under the Securities
Exchange Act of 1934 and, except for certain limited matters, to
permit the Board of Directors to amend the Plan without shareholder
approval (designated as Proposal 5 in the accompanying Proxy
Statement).
<PAGE>
6. 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 6 in the accompanying Proxy
Statement).
7. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The close of business on November 29, 1996, 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, 1996, is enclosed.
By order of the Board of Directors,
Patsy L. Hattox
Secretary
Huntsville, Alabama
December 6, 1996
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>
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 9, 1997, and at any and all adjournments thereof (the "Meeting").
The form of proxy permits specification, approval, disapproval or
abstention, as to each of the six proposals. Proposals 1 through 6 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 through 6.
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 6, 1996, 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, 1996, 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 through 6
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. 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 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 through 6.
<PAGE>
COMMON STOCK OUTSTANDING AND PRINCIPAL SHAREHOLDERS
As of November 1, 1996, there were outstanding 11,564,637 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, 1996, 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, James C. Moule, Michael W. Solley and James M. Coward, 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.
PERCENT OF TOTAL
NUMBER OF SHARES COMMON STOCK
NAMES(1) BENEFICIALLY OWNED OUTSTANDING (2)
- -------- ------------------ ----------------
The Brinson Company (Brinson Partners 903,454 7.8%
& Brinson Trust)
Palisade Capital Management, L.L.C. 856,909 7.4%
Account Management Corporation 652,800 5.6%
David L. Babson and Co., Inc. 586,650 5.1%
DIRECTORS AND NOMINEES
- ----------------------
Chris H. Horgen 475,000(3) 4.1%
Michael J. Mruz 158,250(4) 1.4%
Roy J. Nichols 454,698(5) 3.9%
Patsy L. Hattox 65,331(6) *
Phil E. DePoy 3,750(7) *
Roger P. Heinisch 21,501(8) *
William E. Odom 9,003(9) *
James R. Thompson, Jr. 6,000(10) *
John R. Wynn 17,002(11) *
Thomas L. Patterson 105,799 *
Robert W. Hager 4,500(12) *
NAMED EXECUTIVE OFFICERS WHO ARE NOT
DIRECTORS OR NOMINEES
- -------------------------------------
James C. Moule 51,629(13) *
Michael W. Solley 6,937(14) *
James M. Coward 37,377(15) *
ALL DIRECTORS AND EXECUTIVE 1,431,254(16) 12.4%
OFFICERS AS A GROUP (16 PERSONS)
- ---------------
* Less than 1%
(1) The addresses for all persons listed above are in care of the Company
with the following exceptions: The Brinson Company, 209 South LaSalle
Street, Suite 20, Chicago, IL 60604-1295; Palisade Capital
Management, L.L.C., One Bridge Plaza, Suite 695, Fort Lee, NJ 07024;
Account Management Corporation, 2 Newberry Street, Boston, MA 02116;
David L. Babson and Co., Inc., One Memorial Drive, Cambridge, MA
02142-1300; Roy J. Nichols, 2430 Covemont Drive, Huntsville, AL 35801;
Phil E. DePoy, 195 North Harbor Drive, Apt. 4601, Chicago, IL 60601;
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; and Robert
W. Hager, E-51 Sunset Beach Lane, Belfair, WA 98528.
(2) Shares issuable under options exercisable within 60 days are
considered outstanding for the purpose of calculating the percentage
of Common Stock owned by each executive officer, director and 5%
shareholder who have options exercisable within 60 days, but such
shares are not to be considered outstanding with respect to any other
executive officer, director, or 5% shareholder.
(3) Includes 35,000 shares which are subject to immediately exercisable
options, 1,549 shares held by an adult child who is a member of the
Mr. Horgen's household, and 99,000 shares held directly by Mr.
Horgen's spouse.
(4) Includes 41,250 shares which are subject to immediately exercisable
options held by Mr. Mruz and 12,000 shares held in a revocable trust,
of which both Mr. Mruz and his spouse are trustees.
(5) Represents 366,363 shares held in a revocable trust for Mr. Nichols
and his spouse, of which both are trustees, and 88,335 shares held in
the Roy J. Nichols and Susan B. Nichols Charitable Remainder Unitrust,
of which Mr. Nichols is the sole trustee.
(6) Includes 4,023 shares which are subject to immediately exercisable
options held by Ms. Hattox.
(7) Includes 3,000 shares which are subject to immediately exercisable
options held by Dr. DePoy.
(8) Includes 7,503 shares which are subject to immediately exercisable
options held by Dr. Heinisch.
(9) Includes 7,503 shares which are subject to immediately exercisable
options held by General Odom.
(10) Represents 6,000 shares which are subject to immediately exercisable
options held by Mr. Thompson.
(11) Includes 6,000 shares which are subject to immediately exercisable
options held by Mr. Wynn.
(12) Represents 3,000 shares which are subject to immediately exercisable
options held by Mr. Hager and 1,500 shares which are held in joint
tenancy with spouse.
(13) Includes 3,026 shares which are subject to immediately exercisable
options held by Mr. Moule.
(14) Includes 5,010 shares which are subject to immediately exercisable
options held by Mr. Solley.
(15) Includes 4,524 shares which are subject to immediately exercisable
options held by Mr. Coward.
(16) Includes 127,860 shares which are subject to stock options exercisable
within 60 days, 99,300 shares owned by the spouses of two officers,
378,363 shares held in trusts by two officers and their spouses,
88,335 shares held in trust by an officer who is sole trustee, 1,500
shares held in joint tenancy with spouse, 1,549 shares held by an
adult child who is a member of an officer's household, and 600 shares
held by an officer as custodian for a minor child.
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. 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.
Although the Company has established the number of directors at eleven
(11), proxies may not be voted for more than ten (10) persons. It is the
intention of the persons named in the proxy to vote the proxies for the
election of the nominees listed below, nine 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:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION SINCE
- ---- ---- -------- --------
<S> <C> <C> <C>
Chris H. Horgen 50 Chief Executive Officer and Chairman 1976
Michael J. Mruz 51 President, Chief Operating Officer and Director 1994
Roy J. Nichols 58 Senior Vice President and Vice Chairman 1976
Patsy L. Hattox 47 Chief Administrative Officer, Corporate Vice 1980
President, Secretary, and Director
Roger P. Heinisch 58 Director 1984
John R. Wynn 52 Director 1985
William E. Odom 64 Director 1991
James R. Thompson, Jr. 60 Director 1992
Phil E. DePoy 61 Director 1994
Thomas L. Patterson 54 Director Nominee and President of Nichols SELECT -
Business Unit
</TABLE>
<PAGE>
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 in August 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. ("BDM"), 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 communications systems. Mr. Mruz holds a
bachelors degree in Mathematics from Villanova University, and a masters
degree in Systems Analysis from the Air Force Institute of Technology.
Dr. Heinisch has been Vice President, Engineering with Alliant
Techsystems, Inc., a defense contractor, since 1991. 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 bachelors and masters 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.
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, since 1988. 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 bachelors degree in
Engineering from the United States Military Academy. He also holds masters
and doctorate degrees in Political Science from Columbia University.
Mr. Thompson has been Executive Vice President of Orbital Sciences
Corporation, a space technology company, since 1991. 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 bachelors degree in Aeronautical Engineering from
Georgia Institute of Technology and a masters degree in Mechanical
Engineering from the University of Florida.
Dr. DePoy has served as President of the National Opinion Research
Center ("NORC"), a non-profit corporation engaged in survey research for
the public interest and affiliated with the University of Chicago, since
1992. From 1985 to 1992, Dr. DePoy served as Distinguished Senior Fellow
and President and Chief Executive Officer (CEO) of the Center for Naval
Analyses (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 became CNA's President and CEO in 1995. Dr.
DePoy received his bachelors degree in Chemical Engineering from Purdue
University, his masters degree in Nuclear Engineering from Massachusetts
Institute of Technology, and his doctorate degree in Chemical Engineering
from Stanford University.
Mr. Patterson joined the Company in July 1996 as President of Nichols
SELECT. Mr. Patterson has also been President of TXEN, Inc., an
information technology company for managed care organizations, since he
founded it in 1989. The Company owns a 19.9% interest in TXEN, Inc. From
1980 to 1989, he was President of SEAKO, Inc., an information technology
company for practice management and managed care systems. Prior to
founding SEAKO, Inc., in 1980, he worked as an engineer for the U.S. Navy
Department, and in sales and marketing for Electronic Associates, Inc.,
Hewlett Packard, and Modular Computer Systems, Inc. Mr. Patterson holds a
bachelors degree in Mechanical Engineering and a masters degree in
Engineering Mechanics from the University of Alabama.
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 and Spacehab, Inc. Dr. Heinisch
serves as a director of Non-Volatile Electronics, Inc.
BOARD COMMITTEES AND ATTENDANCE
During the fiscal year ended August 31, 1996, Mr. Wynn, Dr. Heinisch,
General Odom, Mr. Thompson and Mr. Hager served 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, 1996, the Audit Committee held one (1)
meeting, and all committee members were present. During the fiscal year
ended August 31, 1996, Dr. Heinisch, Mr. Wynn and General Odom served 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 the President and Chief Operating Officer.
During the fiscal year ended August 31, 1996, the Executive Officer
Compensation Committee held one (1) meeting, and all committee members were
present. During the fiscal year ended August 31, 1996, Messrs. Mruz and
Nichols served 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, 1996, the Stock Option Committee held no meetings, but took
action by unanimous written consent on seventeen (17) occasions. During
the fiscal year ended August 31, 1996, Messrs. Horgen, Mruz, Nichols and
Wynn served as members of the Executive Committee of the Board of
Directors. The Executive Committee takes action on behalf of the Board of
Directors when it is inconvenient or impossible for the entire Board of
Directors to meet. During the fiscal year August 31, 1996, the Executive
Committee held four (4) meetings, and all committee members were present.
The Company does not have a Nominating Committee.
During the fiscal year ended August 31, 1996, the Board of Directors
held four (4) meetings, and all directors were present at such meetings
with the exception of Mr. Hager who was not present at one meeting. The
Board of Directors also adopted action by unanimous written consent of all
directors on ten (10) occasions during the fiscal year ended August 31,
1996.
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, 1996 (the "Named Executive
Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
--------------------------
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER RESTRICTED SHARES OF STOCK
ANNUAL STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS OPTIONS AWARDED COMPENSATION
- ------------------ ---- ------ ----- ------------ ---------- --------------- ------------
(1) (2) (3)
Chris H. Horgen, Chairman 1996 $227,300 $115,000 - N/A 105,000 $13,673
and Chief Executive Officer 1995 217,053 90,000 - N/A N/A 15,534
1994 224,254 55,000 - N/A N/A 20,592
Michael J. Mruz(4), 1996 221,069 115,000 $44,105(5) N/A N/A 13,144
President, Chief Operating 1995 210,740 98,000 88,375(6) (7) - 14,960
Officer and Director 1994 - - - N/A 150,000 -
Michael W. Solley, 1996 125,695 90,000 - N/A 18,000 13,382
President, Nichols 1995 110,045 28,750 - N/A 15,003 13,080
InfoFed Business Unit 1994 100,569 16,000 - N/A 5,251 10,415
James C. Moule, 1996 158,946 60,000 - N/A 9,000 14,246
President, Nichols 1995 136,723 30,500 - N/A 9,000 15,184
Federal Business Unit 1994 132,764 20,000 - N/A 1,503 13,762
James M. Coward, 1996 127,471 55,000 - N/A 12,000 13,950
Corporate Vice 1995 123,897 24,000 - N/A 3,000 14,583
President, Marketing 1994 118,984 9,000 - N/A 1,503 11,544
</TABLE>
__________________
(1) Includes the following amounts deferred by the Named Executive
Officers under the Company's 401(k) Profit Sharing Plan:
<PAGE>
FISCAL YEAR ENDED AUGUST 31
---------------------------
Name 1994 1995 1996
- ---- ---- ---- ----
Chris H. Horgen $8,141 $11,079 $10,583
Michael J. Mruz N/A 10,524 9,500
Michael W. Solley 2,331 2,773 4,341
James C. Moule 3,055 6,608 8,758
James M. Coward 5,119 5,857 7,301
Also includes the following amounts deferred by the Named Executive
Officers under the Company's Cafeteria Plan:
FISCAL YEAR ENDED AUGUST 31
---------------------------
NAME 1994 1995 1996
- ---- ---- ---- ----
Chris H. Horgen - $ 1,776 $ 1,164
Michael J. Mruz - 1,187 1,018
Michael W. Solley - 445 1,237
James C. Moule - 1,803 1,458
James M. Coward - 2,516 2,227
(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, 1994, 1995 and 1996 for the benefit
of the Named Executive Officers:
RETIREMENT PLAN
CONTRIBUTION/ TERM LIFE
NAME YEAR FORFEITURE ALLOCATIONS PREMIUMS
- ---- ---- ---------------------- ---------
Chris H. Horgen 1996 $13,673 $ -
1995 15,534 -
1994 19,766 826
Michael J. Mruz 1996 13,144 -
1995 14,960 -
1994 N/A -
Michael W. Solley 1996 13,382 -
1995 13,080 -
1994 9,743 672
James C. Moule 1996 14,246 -
1995 15,184 -
1994 12,936 826
<PAGE>
James M. Coward 1996 13,950 -
1995 14,583 -
1994 10,750 794
(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) Moving expenses associated with Mr. Mruz's relocation to Huntsville,
Alabama.
(6) 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 full family COBRA health
insurance premiums.
(7) On August 31, 1996, Mr. Mruz held the 105,000 shares (the 70,000
shares after the adjustment for the Company's most recent 3-for-2
stock split) of restricted Common Stock he acquired in the transaction
described in footnote (6) above. On that date, the fair market value
of those shares was $2,257,500.00, or $21.50 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. Mruz 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:
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL YEAR ENDED AUGUST 31, 1996
--------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- --------------------------------------------------------------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PERCENT OF
TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO EXERCISE
UNDERLYING EMPLOYEES PRICE OPTION
OPTIONS IN FISCAL PER EXPIRATION
NAME TYPE OF OPTION GRANTED YEAR SHARE DATE 5% 10%
- ------ ------------ -------- ---------- -------- ---------- -------- --------
Chris H. Horgen Non-Statutory(1) 105,000 * $12.00 8/31/00 $348,600 $769,650
James C. Moule Incentive(2) 9,000 * $21.50 8/31/01 53,460 118,170
Michael W. Solley Incentive(2) 18,000 * $15.50 3/1/01 77,040 170,280
James M. Coward Incentive(2) 12,000 * $15.50 3/1/01 51,360 113,520
</TABLE>
- ------------------
*Less than 1%
(1) The Non-Statutory Stock Option was granted on September 1, 1995. The
Non-Statutory Stock Option is exercisable in one-third (1/3) annual
increments commencing one year from the date of grant, provided
certain annual revenue and profit growth performance goals in the
Company's commercial/health care business areas are achieved.
(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 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, 1996, 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:
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED FISCAL YEAR OPTION EXERCISES AND STOCK OPTION VALUES AT AUGUST 31, 1996
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS AT FISCAL YEAR END OPTIONS AT FISCAL YEAR END(2)
-------------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C>
NUMBER OF SHARES
ACQUIRED ON VALUE
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ---------------- -------- ----------- ------------- ----------- -------------
(1)
Chris H. Horgen N/A N/A 35,000 70,000 $332,500 $ 665,000
Michael J. Mruz N/A N/A 41,250 108,750 611,738 1,612,763
James C. Moule N/A N/A 5,526 20,015 76,151 108,421
Michael W. Solley 4,511 $30,510 4,260 39,766 56,657 374,364
James M. Coward N/A N/A 5,773 17,515 76,401 131,666
</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
$21.50 per share closing market price of the Common Stock on August
31, 1996, as quoted on the Nasdaq National Market.
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 $10,000, $1,200 for
special meeting attendance, and reimbursement for out-of-pocket expenses
incurred in connection with attendance at meetings.
In addition to the annual director's fee and the special meeting
attendance fee, non-employee directors of the Company may receive option
grants each year 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 109,999 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, 1996, Dr. DePoy, Mr. Hager,
Dr. Heinisch, General Odom, Mr. Thompson, and Mr. Wynn were each granted an
option to purchase 1,500 shares of Common Stock at an average per share
exercise price of $14.92.
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 45,000 shares of Common Stock and Non-
Statutory stock options to purchase 105,000 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. On that
date, the fair market value of the shares purchased was $11.50 per share.
The shares purchased 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. Mruz 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, 1996, the Stock Option Committee
awarded a total of 297,084 stock options, 144,000 of which were awarded to
executive officers and 9,000 of which were awarded to six non-employee
directors.
During the year ended August 31, 1996, 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.
In establishing the compensation of Mr. Horgen and Mr. Mruz for the
fiscal year that began September 1, 1995, 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. Mruz and Mr. Nichols who serve as members of the Stock Option
Committee. During the fiscal year ended August 31, 1996, the Stock Option
Committee awarded a total of 297,084 stock options, of which 144,000 shares
were awarded to the executive officers. 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.
EXECUTIVE OFFICER STOCK
COMPENSATION COMMITTEE OPTION COMMITTEE
- ---------------------- ----------------
Roger P. Heinisch Michael J. Mruz Chris H. Horgen, CEO
John R. Wynn Roy J. Nichols Michael J. Mruz, President/COO
William E. Odom
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. American Management Systems, BDM
International, Inc., BTG, Inc., Computer Management Sciences, Inc., and
Keane, Inc., which replaced COMARCO, Inc., Geodynamics Corporation,
Intermetrics, Inc., SofTech, Inc., and Stanford Telecommunications, Inc.,
were chosen as peer group members on the basis of their information
technology businesses.
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, 1996. The companies included in the peer group for the year
ended August 31, 1996, and shown in the first graph are:
American Management Systems
BDM International, Inc.
BTG, Inc.
CACI International, Inc.
Computer Horizons Corporation
Computer Management Sciences, Inc.
GRC International, Inc.
Keane, Inc.
Logicon, Inc.
Titan Corporation
The companies included in the peer group for the year ended August 31,
1995, and shown in the second 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
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,
1991, in the Company's Common Stock, in the Standard & Poor's 500 Stock
Index companies, and in the peer group.
<TABLE>
<CAPTION>
COMPARATIVE OF FIVE-YEAR TOTAL RETURNS*
NICHOLS RESEARCH CORPORATION, S&P 500, 1996 PEER GROUP
(PERFORMANCE RESULTS THROUGH 8/31/96)
<S> <C> <C> <C>
MEASUREMENT PERIOD
(FISCAL YEAR ENDED AUGUST 31) NRES S&P 500 INDEX PEER GROUP
- ----------------------------- ---- ------------- ----------
Measurement Pt - 8/31/91 $100.00 $100.00 $100.00
1992 $138.37 $107.95 $109.34
1993 $116.28 $124.30 $143.23
1994 $111.63 $131.08 $211.64
1995 $172.09 $159.34 $327.25
1996 $300.00 $189.23 $475.26
</TABLE>
*Source: Frank Russell Company.
<TABLE>
<CAPTION>
COMPARATIVE OF FIVE-YEAR TOTAL RETURNS*
NICHOLS RESEARCH CORPORATION, S&P 500, 1995 PEER GROUP
(PERFORMANCE RESULTS THROUGH 8/31/96)
<S> <C> <C> <C>
MEASUREMENT PERIOD
(FISCAL YEAR ENDED AUGUST 31) NRES S&P 500 INDEX OLD PEER GROUP
- ----------------------------- ---- ------------- --------------
Measurement Pt - 8/31/91 $100.00 $100.00 $100.00
1992 $138.37 $107.95 $ 89.96
1993 $116.28 $124.30 $142.43
1994 $111.63 $131.08 $199.24
1995 $172.09 $159.34 $333.36
1996 $300.00 $189.23 $411.16
</TABLE>
*Source: Frank Russell Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-----------------------------------------------
The Company leases (pursuant to a lease which expires December 31, 2000)
17,850 square feet of office facilities in Huntsville, Alabama, at an annual
rental of $133,875, or $7.50 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 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 1996, 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.
The Company owns a 19.9% interest in TXEN, Inc., an information systems
and services company in the managed healthcare industry. The Company has an
option to purchase the remaining 80.1% of TXEN, Inc. beginning in July 1997 at
a formula price based on the net income of TXEN, Inc. Chris H. Horgen, Chief
Executive Officer of the Company owns a 4.5% interest in TXEN, Inc. which he
acquired on February 15, 1993, and would be beneficially impacted by the
exercise of the Company's option. Thomas L. Patterson, President of Nichols
SELECT and a nominee for the Company's Board of Directors, is the President and
a director of TXEN, Inc., and owns a 47% interest in TXEN, Inc. Mr. Patterson
would also be beneficially impacted by the exercise of the Company's option.
In fiscal 1996, the Company performed software design and development services
and other technical services for TXEN, Inc., for which it was paid $100,150.
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 1996 by the Company to the
firm did not exceed 5% of the gross revenues of the firm for such year.
SECTION 16(A) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive 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.
Executive 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, 1996, all Section 16(a) filing requirements applicable to its
executive officers, directors and greater than ten percent beneficial owners
were complied with.
<PAGE>
PROPOSAL 2
AMENDMENT TO NICHOLS RESEARCH CORPORATION
1991 STOCK OPTION PLAN
Description of Proposed Amendment
- ---------------------------------
On November 14, 1996, the Board of Directors adopted an amendment (the
"Amendment") to the Nichols Research Corporation 1991 Stock Option Plan (the
"1991 Plan") to change the composition of the 1991 Plan's Administrative
Committee to conform with recent changes to the rules governing compensatory
stock plans under Section 16 of the Securities Exchange Act of 1934 (the "1934
Act") and, except for certain limited matters, to permit the Board of Directors
to amend the 1991 Plan without shareholder approval. A copy of the Amendment
to the 1991 Plan is attached to this Proxy Statement as Exhibit "A."
Prior to November 1, the rules under Section 16 of the 1934 Act provided
that compensatory stock plans could only be administered by a committee of
directors who had not been granted options under the plan while serving on the
committee or during the one year period before serving on the committee. This
requirement had the effect of prohibiting a director from receiving a stock
option grant under the 1991 Plan while serving on the Administrative Committee
or within one year before serving on the Administrative Committee. These same
rules also required shareholder approval of certain amendments to compensatory
stock plans. The rules governing compensatory stock plans under Section 16 of
the 1934 Act were recently amended by the Securities and Exchange Commission to
(i) require the Board of Directors or a committee of two or more non-employee
directors who do not have a material financial relationship with the company or
any of its subsidiaries to serve as the committee responsible for administering
compensatory stock plans, (ii) permit persons serving on the compensatory stock
plan's administrative committee to receive options under the plan, and (iii)
allow adoption or amendment of compensatory stock plans without shareholder
approval.
The Amendment adopted by the Company's Board of Directors provides that
the 1991 Plan will be administered by a committee composed of either the entire
Board of Directors or a committee of two or more non-employee directors who do
not have a material financial relationship with the Company or any of its
subsidiaries. The Amendment also provides that persons serving on the 1991
Plan's Administrative Committee may receive option grants under the 1991 Plan.
The Amendment also permits the Board of Directors to amend the 1991 Plan
without shareholder approval, except with respect to (i) a change in the number
of shares for which options may be granted under the 1991 Plan either in the
aggregate or to any individual employee, (ii) a change in the provisions
relating to the determination of employees to whom options shall be granted,
(iii) removal of the administration of the 1991 Plan from the Administrative
Committee, or (iv) a decrease in the price at which Incentive Options may be
granted. If adopted by the shareholders, the Amendment will take effect
retroactively on November 1, 1996.
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
2,175,000 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 November 1, 1996, was $22.92 per share.
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 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.
The Board of Directors may, insofar as permitted by law, from time to
time, with respect to any shares at the time not subject to options, suspend or
discontinue the 1991 Plan or revise or amend it in any respect whatsoever.
Without approval of the shareholders, however, no such revision or amendment
shall change the number of shares subject to the 1991 Plan, change the
designation of the class of employees eligible to receive options, decrease the
price at which Incentive Options may be granted, remove the administration of
the 1991 Plan from the Committee, or render any member of the Committee
eligible to receive an option under the 1991 Plan while serving thereon.
To be entitled to the tax advantages associated with Incentive Options, an
option recipient must (i) 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 (ii) 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, provided the Company withholds on the amount treated as
ordinary income.
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
AMENDMENT TO NICHOLS RESEARCH CORPORATION
NON-EMPLOYEE OFFICER AND DIRECTOR STOCK OPTION PLAN
Description of Proposed Amendment
- ---------------------------------
On November 14, 1996, the Board of Directors adopted an amendment (the
"Amendment") to the Nichols Research Corporation Non-Employee Officer and
Director Stock Option Plan (the "Non-Employee Plan") to change the composition
of the Non-Employee Plan's Administrative Committee to conform with recent
changes to the rules governing compensatory stock plans under Section 16 of the
Securities Exchange Act of 1934 (the "1934 Act") and, except for certain
limited matters, to permit the Board of Directors to amend the Non-Employee
Plan without shareholder approval. A copy of the Amendment to the Non-Employee
Plan is attached to this Proxy Statement as Exhibit "B."
Prior to November 1, the rules under Section 16 of the 1934 Act provided
that compensatory stock plans could only be administered by a committee of
directors who had not been granted options under the plan while serving on the
committee or during the one year period before serving on the committee. This
requirement had the effect of prohibiting a director from receiving a stock
option grant under the Non-Employee Plan while serving on the Administrative
Committee or within one year before serving on the Administrative Committee.
These same rules also required shareholder approval of certain amendments to
compensatory stock plans. The rules governing compensatory stock plans under
Section 16 of the 1934 Act were recently amended by the Securities and Exchange
Commission to (i) require the Board of Directors or a committee of two or more
non-employee directors who do not have a material financial relationship with
the company or any of its subsidiaries to serve as the committee responsible
for administering compensatory stock plans, (ii) permit persons serving on the
compensatory stock plan's administrative committee to receive options under the
plan, and (iii) allow adoption or amendment of compensatory stock plans without
shareholder approval.
The Amendment adopted by the Company's Board of Directors provides that
the Non-Employee Plan will be administered by a committee composed of either
the entire Board of Directors or a committee of two or more non-employee
directors who do not have a material financial relationship with the Company or
any of its subsidiaries. The Amendment also provides that persons serving on
the Non-Employee Plan's Administrative Committee may receive option grants
under the Non-Employee Plan. The Amendment also permits the Board of Directors
to amend the Non-Employee Plan without shareholder approval, except with
respect to (i) an increase in the number of shares which may be subject to the
Non-Employee Plan, (ii) removal of the administration of the Non-Employee Plan
from the Administrative Committee, or (iii) a decrease in the price at which
options may be granted. If adopted by the shareholders, the Amendment will take
effect retroactively on November 1, 1996.
The Board of Directors recommends a vote FOR Proposal 3.
Current Plan Features
- ---------------------
The Non-Employee Plan is administered by the Stock Option Committee of the
Board of Directors (the "Committee"). No one who is eligible to receive
options under the Non-Employee Plan participates in the administration of the
Non-Employee Plan. The closing sale price of the Common Stock on November 1,
1996, was $22.92 per share.
The Non-Employee Plan covers 109,999 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.
The Committee, insofar as permitted by law, shall have the right from time
to time, with respect to any shares at the time not subject to options, to
suspend or discontinue the Non-Employee Plan or revise or amend it in any
respect whatsoever except that, without approval of the shareholders of the
Company, no such revision or amendment shall (a) increase the maximum number of
shares which may be subject to the Non-Employee Plan, (b) increase the maximum
number of shares which may be optioned to any one non-employee officer or
director, (c) materially increase the benefits accruing to option holders under
the Non-Employee Plan, (d) decrease the price at which options may be granted,
(e) remove the administration of the Non-Employee Plan from the Committee, (f)
render any member of the Committee eligible to receive an option under the Non-
Employee Plan while serving thereon, or (g) permit the granting of options
under the Non-Employee Plan after October 24, 2003.
An optionee will not recognize income on the grant of options under the
Non-Employee Plan, but will generally recognize ordinary income upon the
exercise of an option under the Non-Employee Plan. The amount of income
recognized upon the exercise of an option will be measured by the excess, if
any, of the fair market value of the shares at the time of exercise over the
exercise price. Optionees, however, unless they elect to recognize income at
the time of receipt of shares on the exercise of an option, will not recognize
ordinary income until such time as a sale of such shares at a profit could no
longer subject the optionee to suit under Section 16(b) of the Securities
Exchange Act of 1934. In either case, the amount of income is measured with
respect to the fair market value of the stock at the time the income is
recognized. If ordinary income is recognized by the optionee, the Company will
be entitled to a deduction in the amount of ordinary income so recognized.
Plan Benefits to be Received
- ----------------------------
The amount of options received or to be received under the Non-Employee
Plan by Company directors who are not executive officers of the Company and by
the nominees for election as a director of the Company cannot be determined
because the granting of options under the Non-Employee Plan are solely in the
discretion of the Stock Option Committee.
PROPOSAL 4
AMENDMENT TO NICHOLS RESEARCH CORPORATION
1988 EMPLOYEES' STOCK PURCHASE PLAN
Description of Proposed Amendment
- ---------------------------------
On November 14, 1996, the Board of Directors adopted an amendment (the
"Amendment") to the Nichols Research Corporation 1988 Employees' Stock Purchase
Plan (the "Stock Purchase Plan") to change the composition of the Stock
Purchase Plan's Administrative Committee to conform with recent changes to the
rules governing compensatory stock plans under Section 16 of the Securities
Exchange Act of 1934 (the "1934 Act") and, except for certain limited matters,
to permit the Board of Directors to amend the Stock Purchase Plan without
shareholder approval. A copy of the Amendment to the Stock Purchase Plan is
attached to this Proxy Statement as Exhibit "C."
Prior to November 1, the rules under Section 16 of the 1934 Act provided
that compensatory stock plans could only be administered by a committee of
directors who had not been granted options under the plan while serving on the
committee or during the one year period before serving on the committee. This
requirement had the effect of prohibiting a director from receiving a stock
option grant under the Stock Purchase Plan while serving on the Administrative
Committee or within one year before serving on the Administrative Committee.
These same rules also required shareholder approval of certain amendments to
compensatory stock plans. The rules governing compensatory stock plans under
Section 16 of the 1934 Act were recently amended by the Securities and Exchange
Commission to (i) require the Board of Directors or a committee of two or more
non-employee directors who do not have a material financial relationship with
the company or any of its subsidiaries to serve as the committee responsible
for administering compensatory stock plans, (ii) permit persons serving on the
compensatory stock plan's administrative committee to receive options under the
plan, and (iii) allow adoption or amendment of compensatory stock plans without
shareholder approval.
The Amendment adopted by the Company's Board of Directors provides that
the Stock Purchase Plan will be administered by a committee composed of either
the entire Board of Directors or a committee of two or more non-employee
directors who do not have a material financial relationship with the Company or
any of its subsidiaries. The Amendment also provides that persons serving on
the Stock Purchase Plan's Administrative Committee may receive option grants
under the Stock Purchase Plan. The Amendment also permits the Board of
Directors to amend the Stock Purchase Plan without shareholder approval, except
with respect to (i) an increase in the number of shares available for purchase
under the Stock Purchase Plan, or (ii) removal of the administration of the
Stock Purchase Plan from the Administrative Committee. If adopted by the
shareholders, the Amendment will take effect retroactively on November 1, 1996.
The Board of Directors recommends a vote FOR Proposal 4.
Current Plan Features
- ---------------------
The Stock Purchase Plan is designed to qualify as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code. The Stock
Purchase Plan is administered by the Stock Option Committee of the Board of
Directors (the "Committee"). No one who is eligible to receive an option under
the Stock Purchase Plan may participate in the administration of the Stock
Purchase Plan.
The Stock Purchase Plan covers 769,999 shares of the Company's Common
Stock. All regular, full-time employees of the Company and such subsidiaries
as are designated by the Board are eligible for an option under the Stock
Purchase Plan. On each March 1, June 1, September 1, and December 1, each
eligible employee is granted a nontransferable option to purchase Common Stock
on the last day of the option period. Option periods are three month periods
beginning on March 1, June 1, September 1, and December 1, and ending on the
next May 31, August 31, November 30, or February 28, respectively. Options
expire at the end of each option period. An employee may exercise the option
granted to him only by authorizing payroll deductions. As of the last day of
the option period, the amount of payroll deductions during such option period
are used to purchase whole shares of Common Stock under the employee's option.
The price for Common Stock purchased under each option is 85% of its fair
market value on the last day of the option period. The market value of the
Company's Common Stock was $15.50 at November 30, 1995; $15.50 at February 29,
1996; $21.50 at May 31, 1996; and $21.50 at August 31, 1996.
The grant of options to an employee and his right to purchase shares are
subject to certain limitations in the Stock Purchase Plan. An employee may not
be granted an option if the employee would own (as determined under the
Internal Revenue Code) 5% or more of the voting power or value of all classes
of stock of the Company or any of its subsidiaries immediately after the option
is granted, or if options under the Stock Purchase Plan or other plans
qualified under the same provision of the Internal Revenue Code would result
during any calendar year in the purchase of shares having an aggregate fair
market value of more than $25,000. Further, an employee may not purchase in an
option period more than the number of shares equal to 10% of his annual basic
rate of compensation divided by 85% of the fair market value of the Common
Stock, both determined on the last day of the option period.
The Board of Directors may amend the Stock Purchase Plan at any time in
such manner and to such extent as it deems appropriate; provided, that no such
amendment shall, without approval of the shareholders, increase the number of
shares of stock available for purchase under the Stock Purchase Plan.
The grant or exercise of an option under the Stock Purchase Plan will not
have a tax impact on the employee or the Company. If the employee disposes of
the Common Stock acquired upon the exercise of the option after at least two
years from the date of grant and one year from the date of exercise, then the
employee must treat as ordinary income the amount by which the lesser of (1)
the fair market value of the Common Stock at the time of disposition, or (2)
the fair market value of the Common Stock at the date of grant exceeds the
exercise price. Any gain above this amount of ordinary income will be treated
as long-term capital gain. If an employee holds Common Stock at the time of
the employee's death, the holding period requirements are automatically deemed
to have been satisfied and ordinary income must be realized by the employee in
the amount by which the lesser of (1) the fair market value of the Common Stock
at the time of death, or (2) the fair market value of the Common Stock at the
date of grant exceeds the exercise price. The Company will not be allowed a
deduction if the holding period requirements are satisfied.
If an employee disposes of Common Stock before expiration of two years
from the date of grant and one year from the date of exercise, then the
employee must treat as ordinary income the excess of the fair market value of
the Common Stock on the date of exercise of the option over the exercise price.
Any additional gain will be treated as long-term or short-term capital gain,
depending upon whether the Common Stock was held for more than one year after
the date of exercise. The Company will be allowed a deduction equal to the
amount of ordinary income recognized by the employee.
Plan Benefits to be Received
- ----------------------------
The benefits or amounts that will be received by or allocated to the Named
Executive Officers, all other current executive officers, and all other
employees who are not executive officers under the Stock Purchase Plan are not
determinable because the purchase price for the Common Stock under the Stock
Purchase Plan is based upon the fair market value of the Common Stock in future
periods, which cannot be determined at this time.
PROPOSAL 5
AMENDMENT TO NICHOLS RESEARCH CORPORATION
1989 INCENTIVE STOCK OPTION PLAN
Description of Proposed Amendment
- ---------------------------------
On November 14, 1996, the Board of Directors adopted an amendment (the
"Amendment") to the Nichols Research Corporation 1989 Incentive Stock Option
Plan (the "1989 Plan") to change the composition of the 1989 Plan's
Administrative Committee to conform with recent changes to the rules governing
compensatory stock plans under Section 16 of the Securities Exchange Act of
1934 (the "1934 Act") and, except for certain limited matters, to permit the
Board of Directors to amend the 1989 Plan without shareholder approval. A copy
of the Amendment to the 1989 Plan is attached to this Proxy Statement as
Exhibit "D."
Prior to November 1, the rules under Section 16 of the 1934 Act provided
that compensatory stock plans could only be administered by a committee of
directors who had not been granted options under the plan while serving on the
committee or during the one year period before serving on the committee. This
requirement had the effect of prohibiting a director from receiving a stock
option grant under the 1989 Plan while serving on the Administrative Committee
or within one year before serving on the Administrative Committee. These same
rules also required shareholder approval of certain amendments to compensatory
stock plans. The rules governing compensatory stock plans under Section 16 of
the 1934 Act were recently amended by the Securities and Exchange Commission to
(i) require the Board of Directors or a committee of two or more non-employee
directors who do not have a material financial relationship with the company or
any of its subsidiaries to serve as the committee responsible for administering
compensatory stock plans, (ii) permit persons serving on the compensatory stock
plan's administrative committee to receive options under the plan, and (iii)
allow adoption or amendment of compensatory stock plans without shareholder
approval.
The Amendment adopted by the Company's Board of Directors provides that
the 1989 Plan will be administered by a committee composed of either the entire
Board of Directors or a committee of two or more non-employee directors who do
not have a material financial relationship with the Company or any of its
subsidiaries. The Amendment also provides that persons serving on the 1989
Plan's Administrative Committee may receive option grants under the 1989 Plan.
The Amendment also permits the Board of Directors to amend the 1989 Plan
without shareholder approval, except with respect to (i) a change in the number
of shares for which options may be granted under the 1989 Plan either in the
aggregate or to any individual employee, (ii) a change in the provisions
relating to the determination of employees to whom options shall be granted,
(iii) removal of the administration of the 1989 Plan from the Administrative
Committee, or (iv) a decrease in the price at which options may be granted. If
adopted by the shareholders, the Amendment will take effect retroactively on
November 1, 1996.
The Board of Directors recommends a vote FOR Proposal 5.
Current Plan Features
- ---------------------
The 1989 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 1989 Plan, although executive officers and
employee-directors of the Company who are not Committee members may receive
options under the 1989 Plan.
The 1989 Plan permits the Committee to grant incentive stock options as
defined by Section 422 of the Internal Revenue Code of 1986, as amended
("Code"). The Committee may not amend or adjust an option in any manner that
causes the 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 1989 Plan, the Committee may, in its discretion, commit up to 799,999
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 November 1, 1996, was $22.92 per share.
Options may be granted pursuant to the 1989 Plan from January 1, 1990,
through December 31, 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 option may be
granted to an employee who, immediately after such 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 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 option, and such option by its terms is not exercisable
after the expiration of five (5) years from the date such option is granted.
A recipient of an option will be required to pay for shares received
pursuant to the exercise of an option not less than 100% of the Fair Market
Value (as defined below) of such shares on the date the option is granted.
Subject to the restrictions imposed by the 1989 Plan, the price of shares
obtainable pursuant to the exercise of 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 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 option which, together with other applicable
prior option grants, exceeds such maximum, the option will be null and void to
the extent of such excess.
No 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 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 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. 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 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. 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.
The Board of Directors may at any time and from time to time modify and
amend the 1989 Plan in any respect; provided, however, that no such amendment
shall without the approval of the shareholders (a) increase the maximum number
of shares for which options may be granted under the 1989 Plan either in the
aggregate or to any individual employee; or (b) reduce the minimum option
prices which may be established under the 1989 Plan; or (c) extend the period
or periods during which options may be granted or exercised; or (d) change the
provisions relating to the determination of employees to whom options shall be
granted and the number of shares to be covered by such options; or (e) change
the provisions relating to adjustments to be made upon changes in
capitalization; or (f) change the method for the selection of the Committee; or
(g) remove the administration of the 1989 Plan from the Committee; or (h)
render any member of the Committee eligible to receive an option under the 1989
Plan while serving thereon. The termination or any modification or amendment
of the 1989 Plan shall not, without the consent of an employee, affect an
employee's rights under an option theretofore granted to him.
To be entitled to the tax advantages associated with the options, an
option recipient must (i) not dispose of the stock within two years after the
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 (ii) 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 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 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.
Plan Benefits to be Received
- ----------------------------
The amount of options received or to be received under the 1989 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 1989 Plan are made in the sole discretion of the Stock
Option Committee.
PROPOSAL 6
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, 1997, 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 6.
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 1997 Proxy
Materials no later than August 8, 1997.
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 6, 1996
<PAGE>
EXHIBIT "A"
AMENDMENT FOUR
TO THE
NICHOLS RESEARCH CORPORATION
1991 STOCK OPTION PLAN
Pursuant to Section 8 of the Nichols Research Corporation 1991 Stock
Option Plan (the "Plan"), Nichols Research Corporation (the "Company"),
hereby amends the Plan as follows:
1. Subject to approval by the shareholders of the Company, effective
November 1, 1996, the first five sentences of Section 2 of the Plan are
hereby deleted in their entirety and the following new sentences are
substituted in their place:
The Plan shall be administered by a committee (the "Committee")
composed of the entire Board of Directors or a committee of the Board of
Directors that is composed solely of two or more Non-Employee Directors.
For this purpose, the term "Non-Employee Director" shall mean a person
who is a member of the Company's Board of Directors who (a) is not
currently an officer or employee of the Company or any parent or subsid-
iary of the Company, (b) does not directly or indirectly receive compen-
sation for serving as a consultant or in any other non-director capacity
from the Company or any parent or subsidiary of the Company that
exceeds the dollar amount for which disclosure would be required pur-
suant to Item 404(a) of Regulation S-K promulgated under the Securities
Act of 1933 and the Securities Exchange Act of 1934 ("Regulation S-K"),
(c) does not possess an interest in any other transaction with the
Company or any parent or subsidiary of the Company for which disclosure
would be required pursuant to Item 404(a) of Regulation S-K, and (d) is
not engaged in a business relationship with the Company or any parent or
subsidiary of the Company which would be disclosable under Item 404(b) of
Regulation S-K. In the event the Committee is a committee composed of
two or more Non-Employee Directors, the Board of Directors may from time
to time remove members from, add members to, and fill vacancies, on the
Committee. A member of the Committee shall be eligible to participate in
the Plan and receive options under the Plan.
2. Subject to approval by the shareholders of the Company, effective
November 1, 1996, the third sentence of Section 3 of the Plan is hereby
deleted.
3. Subject to approval by the shareholders of the Company, effective
November 1, 1996, Section 8 of the Plan is hereby deleted and the following
new Section 8 is substituted in its place:
The Board of Directors, insofar as permitted by law, shall have
the right from time to time with respect to any shares at the time not
subject to options, to suspend or discontinue the Plan or revise or
amend it in any respect whatsoever, except that without approval of
the shareholders of the Company, no such revision or amendment shall: (a)
change the number of shares for which options may be granted under the
Plan either in the aggregate or to any individual employee, (b) change
the provisions relating to the determination of employees to whom options
shall be granted, (c) remove the administration of the Plan from the Com-
mittee, or (d) decrease the price at which Incentive Options may be
granted.
<PAGE>
Except as amended above, the Plan shall remain in full force and effect
according to its terms and provisions.
Done this the 14th day of November, 1996.
NICHOLS RESEARCH CORPORATION
By: Chris H. Horgen
-------------------------------
Its Chief Executive Office
<PAGE>
EXHIBIT "B"
AMENDMENT THREE
TO THE
NICHOLS RESEARCH CORPORATION
NON-EMPLOYEE OFFICER AND DIRECTOR STOCK OPTION PLAN
Pursuant to Section 8 of the Nichols Research Corporation Non-Employee
Officer and Director Stock Option Plan (the "Plan"), Nichols Research
Corporation (the "Company"), hereby amends the Plan as follows:
1. Subject to approval by the shareholders of the Company, effective
November 1, 1996, the first paragraph of Section 3 of the Plan is hereby
deleted in its entirety and the following new paragraph is substituted in
its place:
The Plan shall be administered by a committee (the "Committee")
composed of the entire Board of Directors or a committee of the Board
of Directors that is composed solely of two or more Non-Employee
Directors. For this purpose, the term "Non-Employee Director" shall
mean a person who is a member of the Company's Board of Directors who
(a) is not currently an officer or employee of the Company or any
parent or subsidiary of the Company, (b) does not directly or
indirectly receive compensation for serving as a consultant or in any
other non-director capacity from the Company or any parent or
subsidiary of the Company that exceeds the dollar amount for which
disclosure would be required pursuant to Item 404(a) of Regulation S-K
promulgated under the Securities Act of 1933 and the Securities
Exchange Act of 1934 ("Regulation S-K"), (c) does not possess an
interest in any other transaction with the Company or any parent or
subsidiary of the Company for which disclosure would be required
pursuant to Item 404(a) of Regulation S-K, and (d) is not engaged in a
business relationship with the Company or any parent or subsidiary of
the Company which would be disclosable under Item 404(b) of Regulation
S-K. In the event the Committee is a committee composed of two or
more Non-Employee Directors, the Board of Directors may from time to
time remove members from, add members to, and fill vacancies, on the
Committee. A member of the Committee shall be eligible to participate
in the Plan and receive options under the Plan.
2. Subject to approval by the shareholders of the Company, effective
November 1, 1996, the fourth sentence of Section 4 of the Plan is hereby
deleted in its entirety.
3. Subject to approval by the shareholders of the Company, effective
November 1, 1996, Section 8 of the Plan is hereby deleted in its entirety
and the following new Section 8 is substituted in its place:
8. AMENDMENT OF THE PLAN.
The Board of Directors, insofar as permitted by law, shall
have the right from time to time with respect to any shares at
the time not subject to options, to suspend or discontinue the
Plan or revise or amend it in any respect whatsoever, except that
without approval of the shareholders of the Company, no such
revision or amendment shall: (a) increase the maximum number of
shares which may be subject to the Plan, (b) decrease the price
<PAGE>
at which options may be granted, or (c) remove the administration
of the Plan from the Committee.
Except as amended above, the Plan shall remain in full force and
effect according to its terms and provisions.
Done this the 14th day of November, 1996.
NICHOLS RESEARCH CORPORATION
By: Chris H. Horgen
--------------------------------
Its Chief Executive Officer
<PAGE>
EXHIBIT "C"
AMENDMENT NUMBER SIX TO THE
NICHOLS RESEARCH CORPORATION
1988 EMPLOYEES' STOCK PURCHASE PLAN
Pursuant to Section 7.1 of the Nichols Research Corporation 1988
Employees' Stock Purchase Plan (the "Plan"), Nichols Research Corporation
(the "Company"), hereby amends the Plan as follows:
1. Subject to approval by the shareholders of the Company, effective
November 1, 1996, Section 7.1 of the Plan is hereby deleted in its entirety
and the following new Section 7.1 is substituted in its place:
7.1 AMENDMENT. The Board of Directors, insofar as permitted by
law, shall have the right from time to time with respect to any shares
at the time not subject to options, to suspend or discontinue the Plan
or revise or amend it in any respect whatsoever, except that without
approval of the shareholders of the Company, no such revision or
amendment shall: (a) increase (except as provided in Section 4.7) the
number of shares of stock available for purchase under the Plan, or
(b) remove the administration of the Plan from the Committee.
2. Subject to approval by the shareholders of the Company, effective
November 1, 1996, the first two sentences of ARTICLE VIII of the Plan are
hereby deleted in their entirety and the following sentences are
substituted in their place:
The Plan shall be administered by a committee (the "Committee")
composed of the entire Board of Directors or a committee of the Board
of Directors that is composed solely of two or more Non-Employee
Directors. For this purpose, the term "Non-Employee Director" shall
mean a person who is a member of the Company's Board of Directors who
(a) is not currently an officer or employee of the Company or any
parent or subsidiary of the Company, (b) does not directly or
indirectly receive compensation for serving as a consultant or in any
other non-director capacity from the Company or any parent or
subsidiary of the Company that exceeds the dollar amount for which
disclosure would be required pursuant to Item 404(a) of Regulation S-K
promulgated under the Securities Act of 1933 and the Securities
Exchange Act of 1934 ("Regulation S-K"), (c) does not possess an
interest in any other transaction with the Company or any parent or
subsidiary of the Company for which disclosure would be required
pursuant to Item 404(a) of Regulation S-K, and (d) is not engaged in a
business relationship with the Company or any parent or subsidiary of
the Company which would be disclosable under Item 404(b) of Regulation
S-K. In the event the Committee is a committee composed of two or
more Non-Employee Directors, the Board of Directors may from time to
time remove members from, add members to, and fill vacancies, on the
Committee. A member of the Committee shall be eligible to participate
in the Plan and receive options under the Plan.
<PAGE>
Except as amended above, the Plan shall remain in full force and
effect according to its terms and provisions.
Done this the 14th day of November, 1996.
NICHOLS RESEARCH CORPORATION
By: Chris H. Horgen
------------------------------
Chris H. Horgen
<PAGE>
EXHIBIT "D"
AMENDMENT NUMBER TWO TO THE
NICHOLS RESEARCH CORPORATION
1989 INCENTIVE STOCK OPTION PLAN
Pursuant to Section 13 of the Nichols Research Corporation 1989
Incentive Stock Option Plan (the "Plan"), Nichols Research Corporation (the
"Company"), hereby amends the Plan as follows:
1. Subject to approval by the shareholders of the Company, effective
November 1, 1996, the first, third and last sentences of the first
paragraph of Section 2 of the Plan are hereby deleted in their entirety and
the following sentences are added at the beginning of the first paragraph
of Section 2:
The Plan shall be administered by a committee (the "Committee")
composed of the entire Board of Directors or a committee of the Board
of Directors that is composed solely of two or more Non-Employee
Directors. For this purpose, the term "Non-Employee Director" shall
mean a person who is a member of the Company's Board of Directors who
(a) is not currently an officer or employee of the Company or any
parent or subsidiary of the Company, (b) does not directly or
indirectly receive compensation for serving as a consultant or in any
other non-director capacity from the Company or any parent or
subsidiary of the Company that exceeds the dollar amount for which
disclosure would be required pursuant to Item 404(a) of Regulation S-K
promulgated under the Securities Act of 1933 and the Securities
Exchange Act of 1934 ("Regulation S-K"), (c) does not possess an
interest in any other transaction with the Company or any parent or
subsidiary of the Company for which disclosure would be required
pursuant to Item 404(a) of Regulation S-K, and (d) is not engaged in a
business relationship with the Company or any parent or subsidiary of
the Company which would be disclosable under Item 404(b) of Regulation
S-K. In the event the Committee is a committee composed of two or
more Non-Employee Directors, the Board of Directors may from time to
time remove members from, add members to, and fill vacancies, on the
Committee. A member of the Committee shall be eligible to participate
in the Plan and receive options under the Plan.
2. Subject to approval by the shareholders of the Company, effective
November 1, 1996, the third sentence of Section 3(a) of the Plan is hereby
deleted in its entirety.
3. Subject to approval by the shareholders of the Company, effective
November 1, 1996, the first sentence of Section 13 of the Plan is hereby
deleted in its entirety and the following new sentence is substituted in
its place:
The Board of Directors, insofar as permitted by law, shall have
the right from time to time with respect to any shares at the time not
subject to options, to suspend or discontinue the Plan or revise or
amend it in any respect whatsoever, except that without approval of
the shareholders of the Company, no such revision or amendment shall:
(a) increase (except in accordance with Section 6) the maximum number
of shares for which options may be granted under the Plan either in
the aggregate or to any individual employee, (b) change the provisions
relating to the determination of employees to whom options shall be
granted, (c) remove the administration of the Plan from the Committee,
or (d) decrease the price at which options may be granted.
Except as amended above, the Plan shall remain in full force and
effect according to its terms and provisions.
Done this the 14th day of November, 1996.
NICHOLS RESEARCH CORPORATION
By: Chris H. Horgen
----------------------------------
Its Chief Executive Officer
<PAGE>
NICHOLS RESEARCH CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
January 9, 1997
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 9, 1997, or any adjournment(s) thereof. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR PROPOSALS 1 THROUGH 6.
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)
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 THROUGH 6.
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 Thomas L. Patterson
(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
change the composition of the Plan's Administrative Committee to
conform with recent changes to the rules governing compensatory
stock plans under the Securities Exchange Act of 1934 and, except
for certain limited matters, to permit the Board of Directors to
amend the Plan without shareholder approval.
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
3. Approval of Amendment to the Company's Non-Employee Officer and
Director Stock Option Plan to change the composition of the Plan's
Administrative Committee to conform with recent changes to the
rules governing compensatory stock plans under the Securities
Exchange Act of 1934 and, except for certain limited matters, to
permit the Board of Directors to amend the Plan without shareholder
approval.
/ / FOR / / AGAINST / / ABSTAIN
4. Approval of Amendment to the Company's 1988 Employees' Stock
Purchase Plan to change the composition of the Plan's
Administrative Committee to conform with recent changes to the
rules governing compensatory stock plans under the Securities
Exchange Act of 1934 and, except for certain limited matters, to
permit the Board of Directors to amend the Plan without shareholder
approval.
/ / FOR / / AGAINST / / ABSTAIN
5. Approval of Amendment to the Company's 1989 Incentive Stock Option
Plan to change the composition of the Plan's Administrative
Committee to conform with recent changes to the rules governing
compensatory stock plans under the Securities Exchange Act of 1934
and, except for certain limited matters, to permit the Board of
Directors to amend the Plan without shareholder approval.
/ / FOR / / AGAINST / / ABSTAIN
6. Ratification of Ernst & Young LLP as the independent public
accountants of the Company.
/ / FOR / / AGAINST / / ABSTAIN
7. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting.
Please sign exactly as name appears 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:______________________________, 1996
____________________________________________
(Signature)
____________________________________________
(Signature if held jointly)
PLEASE SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
