<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Data Research Associates, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class 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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee 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> 2
[DATA RESEARCH ASSOCIATES, INC. LOGO]
DATA RESEARCH ASSOCIATES, INC.
January 5, 1999
Dear Shareholder:
You are cordially invited to attend the 1999 Annual Meeting of
Shareholders of Data Research Associates, Inc. to be held at The Ritz-Carlton
Hotel, 100 Carondelet Plaza, St. Louis, Missouri, on Wednesday, February 10,
1999, at 4:00 p.m. CST.
Details of the business to be conducted at the Annual Meeting are given
in the attached Notice of Annual Meeting and Proxy Statement.
Whether or not you plan to attend, please complete, sign, date and
return the enclosed proxy card in the envelope provided at your earliest
convenience. If you choose to attend the meeting, you may, of course, revoke
your proxy and personally cast your vote.
We look forward to seeing you at the Annual Meeting.
Michael J. Mellinger
Michael J. Mellinger
President and Chief Executive Officer
<PAGE> 3
DATA RESEARCH ASSOCIATES, INC.
1276 North Warson Road
St. Louis, Missouri 63132
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
St. Louis, Missouri
January 5, 1999
The Annual Meeting of Shareholders of Data Research Associates, Inc.,
will be held on Wednesday, February 10, 1999, at 4:00 p.m. CST at The
Ritz-Carlton Hotel, 100 Carondelet Plaza, St. Louis, Missouri 63105, for the
purposes of:
1. Electing one Class C director, to serve for three years;
2. Transacting such other business as may properly come before the
meeting.
Shareholders of record at the close of business on December 16, 1998,
will be entitled to vote at said meeting. A list of all shareholders entitled to
vote at the Annual Meeting, arranged in alphabetical order and showing the
address of and number of shares held by each shareholder, will be open at the
principal office of Data Research Associates, Inc. at 1276 North Warson Road,
St. Louis, Missouri 63132, during usual business hours, to the examination of
any shareholder for any purpose germane to the Annual Meeting for 10 days prior
to the date thereof.
A copy of the Annual Report for fiscal 1998 accompanies this notice.
By Order of the Board of Directors
POLLY C. MELLINGER
Secretary
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, PLEASE MARK,
SIGN, DATE AND RETURN THE ACCOMPANYING PROXY PROMPTLY. A RETURN ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
<PAGE> 4
DATA RESEARCH ASSOCIATES, INC.
1276 North Warson Road
St. Louis, Missouri 63132
PROXY STATEMENT
SOLICITATION OF PROXIES
The enclosed proxy is solicited by the Board of Directors of Data
Research Associates, Inc. (the "Company"), for use at the Annual Meeting of the
Company's shareholders to be held at The Ritz-Carlton Hotel, 100 Carondelet
Plaza, St. Louis, Missouri 63105, on Wednesday, February 10, 1999, at 4:00 p.m.
CST and at any adjournments thereof. Whether or not you expect to attend the
meeting in person, please return your executed proxy in the enclosed envelope
and the shares represented thereby will be voted in accordance with your wishes.
The first mailing of proxies to shareholders will occur on or about January 5,
1999.
REVOCABILITY OF PROXY
If, after sending in your proxy, you decide to vote in person or desire
to revoke your proxy for any other reason, you may do so by notifying the
Secretary of the Company in writing of such revocation at any time prior to the
voting of the proxy.
RECORD DATE
Shareholders of record at the close of business on December 16, 1998,
will be entitled to vote at the Annual Meeting.
ACTION TO BE TAKEN UNDER PROXY
Unless otherwise directed by the giver of the proxy, the persons named
in the enclosed form of proxy, to-wit, Michael J. Mellinger and Katharine W.
Biggs, or the one of them who acts, will vote:
(1) FOR the election of Howard L. Wood named herein as nominee for
Class C director of the Company to hold office until the annual meeting of the
Company's shareholders in 2002 and until his successor has been duly elected and
qualified;
(2) according to their judgment on the transaction of such other
business as may properly come before the meeting or any adjournments thereof.
<PAGE> 5
Should the nominee named herein for election as a director become
unavailable for any reason, it is intended that the persons named in the proxy
will vote for the election of such other person in his stead as may be
designated by the Board of Directors. The Board of Directors is not aware of any
reason that might cause the nominee to be unavailable.
VOTING SECURITIES, VOTING RIGHTS
AND PRINCIPAL SECURITY HOLDERS
On December 16, 1998, there were 5,370,370 shares of Common Stock, of
the par value of $.01 per share ("Common Stock"), outstanding, which constitute
all of the outstanding shares of the Company. Each share is entitled to one vote
on all matters to come before the Annual Meeting, including the election of a
director.
A majority of the outstanding shares entitled to vote, represented in
person or by proxy, will constitute a quorum at the meeting. The affirmative
vote of a majority of the shares represented at the Annual Meeting and entitled
to vote on the subject matter is required to elect the director and to act on
any other matter properly brought before the Annual Meeting. Shares represented
by proxies that are marked "withhold authority" with respect to the election of
the person to serve on the Board of Directors are deemed to be represented at
the meeting as to such matter and will be considered in determining whether the
requisite number of affirmative votes are cast on such matter. Accordingly, such
proxies will have the same effect as a vote against the nominee as to whom such
direction applies. With regard to any other matters, abstentions (including
proxies which deny discretionary authority on any matters properly brought
before the meeting) will be counted as shares present and entitled to vote and
will have the same effect as a vote against any such other matters. Shares held
in "street name" by brokers but not voted by such brokers, for any reason, on a
particular matter (so-called "broker non-votes") will not be deemed present or
represented at the Annual Meeting for purpose of such matter and, therefore,
will have no effect even if such shares have been properly voted by such broker,
in person or by proxy, on one or more other matters brought before the Annual
Meeting.
As of December 16, 1998, the following persons were known to the
Company who may, individually or as a group, be deemed to be the beneficial
owners, respectively, of more than 5% of the Common Stock, each of which persons
has sole voting and investment power over such Common Stock, except as set forth
in the footnotes hereto:
-2-
<PAGE> 6
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNERSHIP OF CLASS
- ---------------- ----------------------- --------
<S> <C> <C>
Michael J. Mellinger, 1,866,947(1) 34.8%
Chairman of the
Board, President and
Chief Executive Officer
of the Company
1276 North Warson Road
St. Louis, Missouri 63132
F. Gilbert Bickel III, 797,450(2) 14.9%
a Director
1630 S. Lindbergh Blvd.
St. Louis, Missouri 63131
Schwartz Investment Counsel, Inc. 413,700(3) 7.7%
3707 West Maple Road
Bloomfield Hills, Michigan 48301
</TABLE>
- --------------------
(1) Includes 36,150 shares held by Polly C. Mellinger, wife of Mr.
Mellinger, as to which shares Mr. Mellinger disclaims beneficial
ownership, and currently exercisable options to acquire 9,000 shares of
Common Stock.
(2) Includes 75,000 shares held by Martha Bickel, wife of Mr. Bickel, as to
which shares Mr. Bickel disclaims beneficial ownership, and currently
exercisable options to acquire 9,000 shares of Common Stock.
(3) Information derived from Nasdaq Online.
-3-
<PAGE> 7
SECURITY OWNERSHIP OF MANAGEMENT
On December 16, 1998, the following represented beneficial ownership of
Common Stock by the nominee for election as Class C director, each of the other
current directors of the Company, each of the executive officers named in the
Summary Compensation Table (see "Executive Compensation" below) and all current
directors and executive officers of the Company as a group (each director and
officer having sole voting and investment power over the shares listed opposite
his or her name except as set forth in the footnotes hereto):
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
- ------------------------ ------------------------ --------
<S> <C> <C>
F. Gilbert Bickel III 797,450(1) 14.9%
Carole Cotton 18,300(2) *
Donald P. Gallop 21,458(3) *
Michael J. Mellinger 1,866,947(4) 34.8%
Howard L. Wood 21,458(2) *
Katharine W. Biggs 19,020(5) *
Joseph M. Bonwich 9,131(6) *
All Current Directors
and Executive Officers as a
Group (7 individuals) 2,753,764(7) 51.3%
</TABLE>
- ----------------
*Represents less than 1% of the class.
(1) See Note (2) to the table under "Voting Securities, Voting Rights and
Principal Security Holders."
(2) Includes currently exercisable options to acquire 9,000 shares of
Common Stock.
-4-
<PAGE> 8
(3) Includes 9,000 shares held in the name of Gallop, Johnson & Neuman,
L.C., the law firm of which Mr. Gallop is Chairman, and currently
exercisable options to acquire 9,000 shares of Common Stock.
(4) See Note (1) to the table under "Voting Securities, Voting Rights and
Principal Security Holders."
(5) Includes currently exercisable options to acquire 3,875 shares of
Common Stock.
(6) Includes the equivalent of 710 shares held in the Company's 401(k)
Plan,and currently exercisable options to acquire 4,750 shares of
Common Stock.
(7) Includes currently exercisable options to acquire 53,625 shares of
Common Stock.
-5-
<PAGE> 9
PROPOSAL 1 - ELECTION OF A CLASS C DIRECTOR
INFORMATION ABOUT THE NOMINEE AND DIRECTORS
CONTINUING IN OFFICE
The Company's Amended and Restated By-laws currently provide for three
classes of directors, each class serving for a three-year term expiring one year
after expiration of the term of the preceding class, so that the term of one
class will expire each year. The terms of the current Class A and Class B
directors expire in 2001 and 2000, respectively. The Board of Directors has
nominated Howard L. Wood, who is the current Class C director, for a term
expiring at the annual shareholders meeting in 2002. The following table lists
the principal occupation of the nominee and the present directors continuing in
office for at least the last five years, his or her present positions and
offices with the Company, the year in which he or she first was elected or
appointed a director (each serving continuously since first elected or
appointed), his or her age and his or her directorships in any company with a
class of securities registered pursuant to Sections 12 or 15(d) of the
Securities Exchange Act of 1934 or in any company registered as an investment
company under the Investment Company Act of 1940.
<TABLE>
<CAPTION>
Service as
Name Age Principal Occupation Director Since
---- --- -------------------- ---------------
CLASS C NOMINEE--
<S> <C> <C>
Howard L. Wood 59 Co-founder of Charter Communications Group 1992
and Vice-Chairman of Charter
Communications, Inc., a multiple
system cable television operator
which was formed in January 1993
for the purpose of acquiring and
managing cable television
properties.
CLASS A DIRECTORS--
F. Gilbert Bickel III 54 Vice President since April 1988 of Merrill 1979
Lynch, Pierce, Fenner & Smith, Incorporated,
a full-service brokerage firm. Director of
Summit Marketing Group, Inc.
Michael J. Mellinger 49 Chairman of the Board since April 1992 1975
and President and Chief Executive
Officer of the Company since 1975;
Treasurer of the Company from April
1992 to February 1995.
</TABLE>
-6-
<PAGE> 10
<TABLE>
CLASS B DIRECTORS--
<S> <C> <C>
Carole Cotton(1) 52 President, since November 1990, of CCA 1992
Consulting, Inc., a management consulting
and research firm which focuses exclusively
on the information technology market in
education. Such firm also publishes annual
syndicated studies and produces national
conferences on both the K-12 and higher
education markets. Ms. Cotton also provided
consulting services to the Company with such
firm's predecessors since 1986.
Donald P. Gallop(1) 66 Attorney-at-law and Chairman of the law 1992
firm of Gallop, Johnson & Neuman, L.C. for
more than the last five years; Director of Falcon
Products, Inc.
</TABLE>
- --------------
(1) See "Compensation Committee Interlocks and Insider Participation" for
further information.
-7-
<PAGE> 11
INFORMATION CONCERNING BOARD OF DIRECTORS
During fiscal 1998, four meetings of the Board of Directors were held.
During such fiscal year, each director attended 75% or more of the aggregate of
(i) the total number of meetings of the Board of Directors held during the
period for which he or she has been a director and (ii) the total number of
meetings held by all committees of the Board of Directors on which he or she
served during the period for which he or she served.
The Board of Directors of the Company has a standing Audit Committee
consisting of Ms. Cotton and Messrs. Bickel, Gallop and Wood, and a standing
Compensation Committee consisting of Ms. Cotton and Mr. Gallop. The purpose of
the Audit Committee is to review the results and scope of the audit and services
provided by the Company's independent public accountants. The purpose of the
Compensation Committee is to act on behalf of the Board of Directors with
respect to the compensation of directors and executive officers. The
Compensation Committee also administers the Company's stock option and other
benefit plans. During fiscal 1998, two Audit Committee meetings and one
Compensation Committee meeting were held.
The Company has no standing nominating committee or other committee
performing a similar function.
DIRECTOR FEES
The Company pays an annual fee of $10,000 to directors who are not
employees of the Company. In addition, the Company pays non-employee directors
$1,000 for each Board of Directors meeting attended in person, $500 for each
telephonic Board meeting attended and $500 for each committee meeting attended.
The Company also reimburses directors for out-of-pocket expenses incurred in
connection with their attendance at Board and committee meetings. Directors'
fees of $61,000 were paid during fiscal 1998. Additionally, non-employee
directors participate in the Company's Director Stock Option Plan. Historically,
such non-employee directors have each received annually options to acquire 3,000
shares of the Company's Common Stock, exercisable in accordance with the terms
of the Company's Director Stock Option Plan.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
During fiscal year 1998, the Company paid $36,000 to CCA Consulting,
Inc., which provided the Company with two studies of the information technology
market in K-12 and higher
-8-
<PAGE> 12
education. Carole Cotton, a director of the Company, is the President of CCA
Consulting, Inc., which is expected to provide consulting services to the
Company in the future.
Donald P. Gallop, a director of the Company, is Chairman of the law
firm of Gallop, Johnson & Neuman, L.C. which provided legal services to the
Company during the fiscal year ended September 30, 1998, and is expected to
provide legal services to the Company in the future.
EXECUTIVE COMPENSATION
The following information is given for the fiscal years ended September
30, 1998, 1997 and 1996, concerning annual and long-term compensation for
services rendered to the Company and its subsidiaries by the Company's Chief
Executive Officer and up to the four most highly compensated executive officers
of the Company whose total salary and bonuses exceeded $100,000 (the "named
executive officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
-------------------
ANNUAL COMPENSATION AWARDS
-----------------------------------------------------------------
OTHER ANNUAL SECURITIES ALL OTHER
BONUS COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) ($) (1) ($) (2) OPTIONS/SARS(#)(3) ($) (2)(4)
- --------------------------- ----- ---------- ------- ------------ ------------------ ------------
<S> <C> <C> <C> <C> <C> <C>
MICHAEL J. MELLINGER 1998 408,000 -0- -- 3,000 1,500
CHAIRMAN OF THE BOARD, 1997 400,000 -0- -- 3,000 1,500
PRESIDENT, AND CHIEF 1996 277,956 255,230 -- 3,000 1,500
EXECUTIVE OFFICER
KATHARINE W. BIGGS 1998 122,440 -0- -- 10,000 2,040
VICE PRESIDENT, 1997 120,000 -0- -- 2,000 1,710
CHIEF FINANCIAL 1996 105,000 31,649 -- 1,875 1,680
OFFICER AND TREASURER
JOSEPH M. BONWICH 1998 107,100 5,000 -- 10,000 2,661
VICE PRESIDENT 1997 105,000 10,000 -- 2,000 2,040
1996 90,000 25,825 -- 750 2,040
</TABLE>
(1) Executive officers of the Company, other than Mr. Mellinger, are
entitled to receive bonuses annually at the discretion of the Board of
Directors of the Company. Amounts are earned and accrued during the
fiscal years indicated, and are paid subsequent to the end of each
fiscal year. Mr. Mellinger received bonuses equivalent to 0%, 0%, and
3.5% of the Company's income before income tax for the years ended
September 30, 1998, 1997 and 1996. See "Employment Agreement" below
regarding Mr. Mellinger's employment agreement with respect to his
future bonuses, if any.
(2) The named executive officers received certain perquisites during fiscal
1998, none of which in the aggregate exceeded the lesser of $50,000 or
10% of such officer's total salary and bonus for such fiscal year.
-9-
<PAGE> 13
(3) The number of shares has been adjusted to reflect the stock dividend
paid on August 19, 1996.
(4) Includes matching Company contributions to the Company's 401(k) Profit
Sharing Plan of $1,500 each for Mr. Mellinger, Ms. Biggs and Mr.
Bonwich and matching Company contributions to the Company's Stock
Purchase Plan of $540 for Ms. Biggs and $1,161 for Mr. Bonwich.
-10-
<PAGE> 14
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR(1)
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
INDIVIDUAL GRANTS PRICE
APPRECIATION FOR OPTION TERM(5)
-----------------------------------------------------------------------------------------
NUMBER OF
SECURITIES
UNDERLYING % OF TOTAL
OPTIONS/ OPTIONS/SARS
SARS GRANTED TO EXERCISE OR
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION 0% 5% 10%
NAME # FISCAL YEAR ($/SH) (4) DATE ($) ($) ($)
---- --------- ------------ ---------- --- ----- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Michael J. Mellinger 3,000(2) 3.0% 12.625 11/13/01 -0- 8,163 17,578
Katharine W. Biggs 10,000(3) 11.0% 12.625 11/13/02 -0- 34,881 77,077
Joseph M. Bonwich 10,000(3) 11.0% 12.625 11/13/02 -0- 34,881 77,077
</TABLE>
- ------------------------------------
(1) This table and the table on page 12 have been adjusted for the 1996
stock dividend.
(2) The option listed was granted on November 13, 1997, to Mr. Mellinger in
his capacity as director of the Company under the Company's Director
Stock Option Plan and became fully exercisable six months after the date
of grant.
(3) The option listed was granted on November 13, 1997, to each vice
president under the Company's 1992 Stock Option Plan and becomes
exercisable in thirds beginning the next January 1 after the second
anniversary of the grant and continuing each successive January 1.
(4) Exercise or base price is equal to the closing sales price as reported
on the Nasdaq Stock Market (NASDAQ National Market System) on the date
of grant.
(5) The dollar amounts under these columns result from calculations at 0%
and at the 5% and 10% rates set by the Securities and Exchange
Commission and, therefore, are not intended to forecast possible future
appreciation, if any, of the price of the Company's Common Stock.
-11-
<PAGE> 15
AGGREGATED OPTION/SAR EXERCISE IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES AT FY-END (#) AT FY-END ($)
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
---- --------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Mellinger -0- -0- 12,000/0 41,760/0
Katharine W. Biggs 1,500 18,750 1,875/12,000 8,756/14,500
Joseph M. Bonwich -0- -0- 2,750/12,000 18,503/14,500
</TABLE>
EMPLOYMENT AGREEMENT
The Company is a party to an employment agreement with Mr. Mellinger,
which agreement expires September 30, 2002 (the "Employment Agreement"), with an
automatic five-year renewal, unless terminated by Mr. Mellinger or the Company
upon the occurrence of certain events. Pursuant to the Employment Agreement, Mr.
Mellinger has agreed to serve as the President and Chief Executive Officer of
the Company in exchange for annual base compensation of $400,000 (the "Base
Compensation"), as may be increased each fiscal year by the Board of Directors
and payable no less frequently than monthly. For fiscal 1997 and thereafter, Mr.
Mellinger's bonus, if any, shall be determined in accordance with the terms of a
formula (the "Bonus Formula") to be determined for each fiscal year by the
Compensation Committee. For the fiscal year ending September 30, 1998, the bonus
will be in the amount of 5% of the increase in Employer's income before income
taxes and bonuses for such fiscal year compared to the prior fiscal year,
determined by the Company's independent auditors in accordance with generally
accepted accounting principles, consistently applied, and payable within ninety
(90) days of the end of such fiscal year. The Employment Agreement provides that
Mr. Mellinger is entitled to an additional bonus of (i) 150% of the Base
Compensation in the event Mr. Mellinger's employment with the Company is
terminated for reasons other than for cause, permanent disability or death or
there occurs a significant reduction in the position, duties or responsibilities
of Mr. Mellinger (collectively, "Termination") within one year following a
"Change in Control" (as defined in the Employment Agreement), (ii) 100% of Base
Compensation if Termination occurs within the second year following a Change in
Control, and (iii) 50% of Base Compensation if Termination occurs within the
third year following a Change in Control.
-12-
<PAGE> 16
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors (the "Committee") is
composed of two outside directors and is responsible for developing and
approving the Company's compensation program for the Chief Executive Officer and
the other executive officers of the Company. The Committee also administers the
Data Research Associates, Inc. 1992 Stock Option Plan ("the 1992 Plan"). The
overall objectives of the Company's executive compensation program are to
provide total compensation that will attract and retain highly qualified
executives and to link executive compensation to corporate performance.
The Company's executive compensation policies include the following:
-Compensation levels should be competitive with other software and
technology companies of comparable size;
-Compensation should be directly related to the Company's achievement
of both short and long-term corporate performance goals and to the
individual executive's contribution to achieving those goals;
-Ownership of the Company's Common Stock provides a link between
executives and shareholders by creating incentives for the executives
to achieve the long-term goal of creating shareholder value.
.
The Committee feels that it can best reach its objectives through a
compensation package that includes three elements: (1) base salary; (2) annual
cash bonuses; and (3) long-term incentives in the form of stock options. The
Chief Executive Officer, Michael J. Mellinger, makes recommendations to the
Committee on all elements of the compensation package for the executive officers
other than himself.
BASE SALARIES
In order to attract and retain executives, the Company strives to offer
competitive salaries and employee benefits, including its Employee Stock
Purchase Plan, 401(k) Profit Sharing Plan, health care plans and other employee
benefit programs. The Committee sets base salary levels for executives based on
the responsibilities of the position held and the experience of the individual,
and by reference to a self-selected group of software and technology companies
of comparable size and to the Company's competitors, when such information is
available.
-13-
<PAGE> 17
Base salaries are adjusted annually based on the Social Security
Administration's cost-of-living adjustment (COLA) calculation. Base salaries are
also reviewed annually with regard to the Company's performance for the year and
the responsibilities of the individual executive.
Under the terms of the Employment Agreement, Mr. Mellinger's base salary for
the fiscal year ended September 30, 1997, was set at $400,000. The Employment
Agreement provides that the Committee may raise Mr. Mellinger's base salary
after considering his individual performance, the total compensation paid to the
chief executive officers of similar companies of comparable size to the
Company's and such other factors as deemed relevant by the Board of Directors of
the Company.
In determining Mr. Mellinger's base salary for fiscal 1998, the Committee
took into consideration that although fiscal 1997 marked the eleventh
consecutive year of increased earnings for the Company, revenues decreased from
the previous year and earnings per share were the same as fiscal 1996. Thus, the
Company fell short of its goal of annual growth in revenues, earnings and
earnings per share. The Committee recognized that during fiscal 1997 the Company
released DRA Web2, a retrieval device that incorporates the object-oriented
technology of the Company's new Taos product line, but experienced some
slowdowns in other areas of product development due primarily to staff changes
throughout the year. Based upon these factors, Mr. Mellinger's base salary for
fiscal 1998 was set at $408,000, an increase of 2% over fiscal 1997.
ANNUAL BONUSES
For fiscal 1998, the Committee determined bonuses for the Company's
executives (excluding the Chief Executive Officer) based on formulas determined
at the beginning of fiscal 1998 which provided for each officer to receive a
bonus linked to an increase in corporate earnings and, for certain executives,
to his area of responsibility. Total bonuses paid to these officers equaled less
than one-tenth of 1% of the Company's income before income taxes.
In determining whether or not to pay Mr. Mellinger a bonus, the Committee
relied on a formula established at the beginning of fiscal 1998 which tied any
bonus for the year to an increase in corporate earnings over fiscal 1997. Since
corporate earnings in fiscal 1998 decreased from earnings in fiscal 1997, the
Committee did not award a bonus to Mr.
Mellinger for fiscal 1998.
STOCK OPTIONS
Since its initial public offering in 1992, the Board of Directors of the
Company has realized the importance of providing executives and other key
employees incentives to maximize the Company's financial performance and align
their interests with those of the Company's shareholders. Through the 1992 Plan
the Company has encouraged its executives to acquire and hold the Company's
Common Stock. Executive officers, along with all of the Company's other
-14-
<PAGE> 18
employees, also are eligible to participate in the Data Research Associates,
Inc. Stock Purchase Plan, an ongoing stock acquisition program under which an
employee may defer a portion of his or her salary to acquire shares of Common
Stock. The Company matches a portion of the employee's deferral.
In fiscal 1998 the Committee granted options under the 1992 Plan to each of the
executive officers (excluding the Chief Executive Officer). In determining how
many options should be granted to each officer, the Committee considered the
entire compensation package of each officer and the recommendation of Mr.
Mellinger.
Respectfully submitted,
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
OF DATA RESEARCH ASSOCIATES, INC.
CAROLE COTTON
DONALD P. GALLOP
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<PAGE> 19
PERFORMANCE GRAPH
Set forth below is a line graph comparing the annual percentage change
in the cumulative total shareholder return on the Company's Common Stock against
the cumulative total returns of the Center for Research in Security Prices
("CRSP") Index for the Nasdaq Stock Market (U.S. Companies) and the CRSP Index
for Nasdaq Computer and Data Processing Stocks.
[LINE GRAPH]
<TABLE>
<CAPTION>
LEGEND
<S> <C> <C> <C> <C> <C> <C> <C>
Symbol CRSP Total Returns Index for: 09/30/93 09/30/94 09/29/95 09/30/96 09/30/97 09/30/98
- ------ ----------------------------- -------- -------- -------- -------- -------- --------
_____ [] Data Research Associates, Inc. 100.0 68.5 107.4 150.0 161.5 156.7
..--.* Nasdaq Stock Market (US Companies) 100.0 100.8 139.3 165.2 226.8 231.8
- -----. Nasdaq Computer and Data Processing Stocks 100.0 111.1 177.9 220.6 298.6 389.9
SIC 7370-7379 US & Foreign
NOTES:
A. The lines represent monthly index levels derived from compounded daily returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 09/30/93.
</TABLE>
-16-
<PAGE> 20
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Pursuant to an equipment lease which expired on April 15, 1996, the
Company leased its office phone equipment from Davandy Management, Inc.
("Davandy"). Upon expiration of the lease the Company did not exercise its
option to purchase the equipment at fair market value but has continued to lease
the equipment on a month-to-month basis at a monthly rate of $1,640. During
fiscal 1998, Davandy received $19,680 in payments from the Company for the use
of such equipment. Michael J. Mellinger, the Company's President and Chief
Executive Officer, is the president and sole shareholder of Davandy.
Management of the Company believes that the terms and conditions of the
above-described transactions and those described under the heading "Compensation
Committee Interlocks and Insider Participation" were no less favorable to the
Company than those which would have been available to the Company in comparable
transactions with unaffiliated persons.
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's executive officers and directors, and persons who own
more than 10% 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. Such individuals are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file. There are no known
failures to file any forms required under Section 16(a). Based on review of the
copies of such forms furnished to the Company, the Company believes that such
persons complied with all Section 16(a) filing requirements applicable to them
with respect to transactions during fiscal 1998.
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<PAGE> 21
RELATIONSHIP WITH INDEPENDENT AUDITORS
The firm of Ernst & Young LLP served as the Company's independent
auditors for the fiscal year ended September 30, 1998, and for a number of years
prior thereto, and the Board of Directors has selected this firm to serve as
independent auditors for the fiscal year ending September 30, 1998.
Representatives of Ernst & Young are expected to attend the Annual Meeting and
will have the opportunity to make statements and respond to appropriate
questions from shareholders.
ANNUAL REPORT
The Annual Report of the Company for fiscal 1998 accompanies this
notice.
FUTURE PROPOSALS OF SECURITY HOLDERS
All proposals of security holders intended to be presented at the 2000
annual meeting of shareholders must be received by the Company not later than
September 7, 1999, for inclusion in the Company's 2000 Proxy Statement and form
of proxy relating to such meeting.
Pursuant to the Company's bylaws, in order to be considered at the 2000
annual meeting of shareholders, a shareholder proposal must be received by the
Company not later than the sixtieth day prior to such annual meeting, which date
will be December 17, 1999.
OTHER BUSINESS
The Board of Directors knows of no business to be brought before the
Annual Meeting other than as set forth above. If other matters properly come
before the meeting, it is the intention of the persons named in the solicited
proxy to vote the proxy on such matters in accordance with their judgment.
MISCELLANEOUS
The Company will pay the cost of soliciting proxies in the accompanying
form. In addition to solicitation by use of the mails, certain officers and
regular employees of the Company may solicit the return of proxies by telephone,
telegram or personal interview and may request brokerage houses and custodians,
nominees and fiduciaries to forward soliciting material to their principals and
will agree to reimburse them for their reasonable out-of-pocket expenses.
Shareholders are urged to mark, sign, date and send in their proxies
without delay.
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<PAGE> 22
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR FISCAL 1998 FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION (INCLUDING RELATED FINANCIAL
STATEMENT SCHEDULES) IS AVAILABLE TO SHAREHOLDERS WITHOUT CHARGE, UPON WRITTEN
REQUEST TO THE SECRETARY, DATA RESEARCH ASSOCIATES, INC., 1276 NORTH WARSON
ROAD, ST. LOUIS, MISSOURI 63132.
By Order of the Board of Directors
POLLY C. MELLINGER
Secretary
St. Louis, Missouri
January 5, 1999
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<PAGE> 23
DATA RESEARCH ASSOCIATES, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR
THE 1999 ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby apppoint(s) Michael J. Mellinger and Katharine W. Biggs,
and each of them, with full power to act alone, the true and lawful
attorneys-in-fact and proxies of the undersigned, with full power of
substitution, and hereby authorize(s) them and each of them, to represent the
undersigned and to vote all shares of common stock that the undersigned is
entitled to vote at the Annual Meeting of Shareholders of Data Research
Associates, Inc. to be held on Wednesday, February 10, 1999, commencing at 4:00
p.m. at The Ritz-Carlton Hotel, 100 Carondelet Plaza, St. Louis, Missouri 63105
and at any and all adjournments thereof, according to the number of votes which
the undersigned would possess if personally present, on the following proposals
and any other matters coming before said meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF THE CLASS C DIRECTOR UNDER PROPOSAL 1 AND IN THE
DISCRETION OF THE PROXY WITH RESPECT TO SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE
(Continued and to be signed on reverse side)
<PAGE> 24
DATA RESEARCH ASSOCIATES, INC.
PLEASE VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [ ]
Directors recommend a vote FOR
1. Election of Class C Director: For Withhold 2. In his discretion with
Nominee: Howard L. Wood [ ] [ ] respect to such other
business as may
properly come before
the meeting or any
adjournment thereof.
The undersigned hereby acknowledges
receipt of copies of the Notice of Annual
Meeting of Shareholders and Proxy
Statement, each dated January 5, 1999 and
the Annual Report of the Company for
fiscal 1998.
DATED:_____________________________, 1999
Signature(s):____________________________
_________________________________________
Please sign name(s) exactly as it appears
on this proxy. In the case of joint
holders, all should sign. Executors,
administrators, trustees and
attorneys-in-fact should so indicate when
signing. If executed by a corporation,
this proxy should be signed by a duly
authorized officer. If executed by a
partnership, this proxy should be signed
by an authorized partner.
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT!
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
