-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IjvqIXyAwB9K0zYUwpifvyC33rDpuwgBL2bO+QJTYhyW3MF7STBrPSlaZ4oR2Hlc CtfmbMP3DZDDYwI08pL02w== 0000806388-97-000031.txt : 19970716 0000806388-97-000031.hdr.sgml : 19970716 ACCESSION NUMBER: 0000806388-97-000031 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970531 FILED AS OF DATE: 19970715 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NICHOLS RESEARCH CORP /AL/ CENTRAL INDEX KEY: 0000806388 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING SERVICES [8711] IRS NUMBER: 630713665 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15295 FILM NUMBER: 97640747 BUSINESS ADDRESS: STREET 1: 4040 MEMORIAL PKWY SOUTH CITY: HUNTSVILLE STATE: AL ZIP: 35802 BUSINESS PHONE: 2058831140 10-Q 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 _____________________ FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended May 31, 1997 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Transition Period From _____________ To _____________ _____________________ Nichols Research Corporation Commission File Number 0-15295 (Exact name of registrant as specified in its charter) _____________________ DELAWARE 63-0713665 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification no.) 4040 Memorial Parkway, South Huntsville, Alabama 35802-1326 (205) 883-1140 (Address, including zip code, of principal offices) _____________________ NO CHANGE (Former name, address and fiscal year if changed since last report) _____________________ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO __ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. COMMON STOCK, $.01 PAR VALUE 11,746,885 SHARES OUTSTANDING ON May 31, 1997 _____________________ ================================================================================ FORM 10-Q NICHOLS RESEARCH CORPORATION QUARTERLY REPORT FOR THE PERIOD ENDED MAY 31, 1997 INDEX Part I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Statements of Income for the Three Months and Nine Months Ended May 31, 1997 and May 31, 1996 (Unaudited) Condensed Consolidated Balance Sheets as of May 31, 1997 and August 31, 1996 (Unaudited) Condensed Consolidated Statements of Changes in Stockholders' Equity for the Nine Months Ended May 31, 1997 and May 31, 1996 (Unaudited) Condensed Consolidated Statements of Cash Flows for the Nine Months Ended May 31, 1997 and May 31, 1996 (Unaudited) Notes to Condensed Consolidated Financial Statements (Unaudited) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Part II. OTHER INFORMATION Item 1. Legal Proceedings Item 6. Exhibits and Reports on Form 8-K Signatures PART I - FINANCIAL INFORMATION Item 1 - Financial Statements NICHOLS RESEARCH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) For the Three Months Ended For the Nine Months Ended -------------------------- ------------------------- May 31, May 31, May 31, May 31, 1997 1996 1997 1996 ---------------------------------------------------- (amounts in thousands except share data) Revenues................ $94,032 $55,169 $268,853 $153,202 Costs and expenses: Direct and allocable costs.................. 83,052 46,713 237,571 129,735 General and administrative expenses............... 6,366 4,899 17,894 13,879 --------------------------------------- Total costs and expenses............ 89,418 51,612 255,465 143,614 --------------------------------------- Operating profit.......... 4,614 13,388 9,588 3,557 Other income (expense): Interest expense......... (69) (99) (405) (226) Other income, principally 277 262 760 749 interest................ Equity in earnings of unconsolidated affiliates.............. 140 - 420 - Minority interest in consolidated subsidiaries............ 34 - (196) - ---------------------------------------- Income before income taxes................... 4,996 3,720 13,967 10,111 Income taxes............. 1,814 1,344 5,070 3,670 ---------------------------------------- Net income............... $ 3,182 $ 2,376 $ 8,897 $ 6,441 ======================================== Earnings per share......... $ .26 $ .23 $ .73 $ .64 ======================================== Weighted average number of common and common equivalent shares..................... 12,209,607 10,289,793 12,246,427 10,112,291 ============================================= NOTE: The Company has not declared or paid dividends in any of the periods presented. All references to the number of shares and per share amounts have been restated to reflect the effect of a three-for-two stock split effective October 21, 1996. NICHOLS RESEARCH CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) May 31, August 31, 1997 1996 ------------------------- ASSETS (amounts in thousands) Current assets: Cash and temporary cash investments.................... $ 17,082 $ 21,419 Accounts receivable............. 127,790 90,232 Deferred income taxes........... 1,519 1,519 Other........................... 4,373 2,384 ------------------------- Total current assets.......... 150,764 115,554 Long-term investments............. 4,249 4,483 Property and equipment: Computers and related equipment.. 19,250 17,182 Furniture, equipment and improvements.................... 8,089 6,915 Equipment - contracts............ 5,771 5,771 -------------------------- 33,110 29,868 Less accumulated depreciation.... 17,641 14,721 -------------------------- Net property and equipment..... 15,469 15,147 Goodwill (net of accumulated amortization...................... 19,947 21,004 Investment in affiliates........... 9,315 4,099 Other assets....................... 2,349 1,677 -------------------------- Total assets....................... $ 202,093 $ 161,964 ========================== NOTE: All references to the number of shares and per share amounts have been restated to reflect the effect of three-for-two stock split effective October 21, 1996. NICHOLS RESERACH CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) CONTINUED May 31, August 31, 1997 1996 -------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY (amounts in thousands) Current liabilities: Accounts payable...................... $ 56,204 $ 31,032 Accrued compensation and benefits..... 12,227 9,037 Income taxes payable.................. 38 238 Current maturities of long-term debt.. 761 764 Other................................. 2,237 1,808 -------------------------------- Total current liabilities........... 71,467 42,879 Deferred income taxes................... 1,340 1,340 Long-term debt: Industrial development bonds.......... 1,557 1,777 Long-term notes....................... 2,601 3,007 -------------------------------- Total long-term debt................ 4,158 4,784 Minority interest in consolidated subsidiaries........................... 281 - Stockholders' equity: Common stock, par value $.01 per share Authorized - 20,000,000 shares Issued - 11,915,385 and 11,651,018 shares, respectively................ 119 117 Additional paid-in capital............ 62,058 59,071 Retained earnings..................... 63,958 55,061 Less cost of treasury stock - 168,500 shares....................... (1,288) (1,288) -------------------------------- Total stockholders' equity....... 124,847 112,961 -------------------------------- Total liabilities and stockholders' equity................................. $ 202,093 $ 161,964 ================================ NOTE: All references to the number of shares and per share amounts have been restated to reflect the effect of a three-for-two stock split effective October 21, 1996. NICHOLS RESEARCH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
Additional Total Common Stock Paid-In Retained Treasury Stockholders' Shares Amount Capital Earnings Stock Equity ---------------------------------------------------------------------- (amounts in thousands except share data) For the Nine Months Ended May 31, 1997 Balance, August 31, 1996 11,651,018 $ 117 $ 59,071 $ 55,061 $ (1,288) $ 112,961 Exercise of stock options 205,615 2 1,854 - - 1,856 Employee stock purchases 58,752 - 1,133 - - 1,133 Net income - - - 8,897 - 8,897 ----------------------------------------------------------------------- Balance, May 31, 1997 11,915,385 $ 119 $ 62,058 $ 63,958 $ (1,288) $ 124,847 ======================================================================= For the Nine Months Ended May 31, 1996 Balance, August 31, 1995 9,658,841 $ 97 $ 24,225 $ 45,669 $ (2,143) $ 67,848 Exercise of stock options 233,945 1 1,529 - - 1,530 Employee stock purchases 46,888 1 690 - - 691 Re-issue 108,066 shares of treasury stock - - 1,523 - 855 2,378 Net income - - - 6,441 - 6,441 ---------------------------------------------------------------------- Balance, May 31, 1996 9,939,674 $ 99 $ 27,967 $ 52,110 $ (1,288) $ 78,888 ====================================================================== NOTE: All references to the number of shares and per share amounts have been restated to reflect the effect of a three-for-two stock split effective October 21, 1996. NICHOLS RESEARCH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Nine Months Ended ------------------------- May 31, May 31, 1997 1996 ------------------------- (amounts in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income................................. $ 8,897 $ 6,441 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization............ 4,346 3,070 Equity in earnings of unconsolidated affiliates............................... (420) - Minority interest........................ 281 - Changes in assets and liabilities net of effects of acquisitions: Accounts receivable...................... (37,758) (6,959) Other assets............................. (2,797) (677) Accounts payable......................... 25,172 (4,917) Accrued compensation and benefits........ 3,190 1,658 Income taxes payable..................... (200) (865) Other current liabilities................ 429 1,687 -------------------------- Total adjustments...................... (7,757) (7,003) -------------------------- Net cash provided (used) by operating activities................................ 1,140 (562) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment......... (3,242) (3,113) Purchase of long-term investment........... (75) - Payments for acquisitions, net of cash acquired................................... - (14,763) Payments for investment in affiliates....... (4,796) (1,546) Proceeds from sale of long-term investments. 275 - -------------------------- Net cash used by investing activities....... (7,838) (19,422) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock...... 2,989 2,221 Proceeds from borrowings on line of credit.. 15,000 14,500 Payments of line of credit borrowings....... (15,000) - Payments of long-term debt.................. (628) (869) -------------------------- Net cash provided by financing activities... 2,36 115,852 -------------------------- Net decrease in cash........................ (4,337) (4,132) Cash and temporary cash investments at beginning of period........................ 21,419 17,196 -------------------------- Cash and temporary cash investments at end of period.................................. $ 17,082 $ 13,064 ========================== NICHOLS RESEARCH CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (CONTINUED) NON-CASH TRANSACTIONS: Adjustment to purchase price allocation..... $ 200 $ - Issuance of treasury stock as consideration in acquisition............... - 2,378 See accompanying notes. NICHOLS RESEARCH CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) May 31, 1997 Note 1 - Basis of Presentation --------------------- The condensed consolidated financial statements (and all other information in this report) have not been examined by independent auditors, but in the opinion of the Company, all adjustments, consisting of the normal recurring accruals necessary for a fair presentation of the results for the period, have been made. The condensed consolidated financial statements include the accounts of Nichols Research Corporation and its majority-owned subsidiaries and joint ventures. All significant intercompany balances and transactions have been eliminated in consolidation. The CompanyOs earnings in unconsolidated affiliates and joint ventures are accounted for using the equity method. Note 2 - Stock Split ----------- On October 9, 1996 the Board of Directors declared a three-for- two stock split which was paid to shareholders of record on October 21, 1996. The split was effected on November 4, 1996 by a stock dividend of one share for every two shares of common stock outstanding, with cash paid in lieu of fractional shares based on the stock value on record date. All references to the number of shares and per share amounts have been restated to reflect the effect of the split for all periods presented. Note 3 - New Pronouncements ------------------ The Company adopted Financial Accounting Standards Board Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of, on September 1, 1996. The Company has reviewed long-lived assets and identifiable intangible assets used in operation of the business and concluded the assets are not impaired. If events or changes occur to indicate that an impairment does exist, an assessment of the need for an impairment write-down will be performed. Note 4 - Investment in Affiliate ----------------------- In February 1997, the Company acquired approximately 35 percent of the outstanding capital stock of Intertech Management Group, Inc. (Intertech) for approximately $4,025,000. In May 1997, the Company purchased an additional 5% interest in Intertech for approximately $525,000. Intertech provides software and data processing services to the telecommunications industry. NICHOLS RESEARCH CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) Note 5 - Reclassification ---------------- Certain prior period amounts have been reclassified to conform with the current period's presentation. Note 6 - Subsequent Event ---------------- On June 24, 1997 the Company extended its existing line of credit to September 30, 1997. NICHOLS RESEARCH CORPORATION Item 2 - Management's Discussion and Analysis of Financial Condition Results of Operations - --------------------- The Company is a provider of technical and information technology (IT) services, including information processing, systems development and systems integration. The Company provides these services to a wide range of clients, including the DOD, other federal agencies, state and local governments, healthcare and insurance organizations, and commercial enterprises. The Company's business strategy consists of three key elements: (i) maintain the Company's leadership in technology; (ii) apply the Company's technology to create solutions for new clients; and (iii) make strategic acquisitions and form alliances to expand the business of the Company and gain industry knowledge. The Company's business and financial performance are subject to risks and uncertainties, including those discussed below. The Company is organized in four strategic business units, reflecting the particular market focus of each line of business. Nichols Federal provides technical services primarily to U.S. government defense agencies. Nichols InfoFed provides information and technology services to a variety of governmental agencies. Nichols InfoTec provides information and technology services to various commercial clients, other than healthcare or insurance industry clients. Nichols SELECT provides information services to clients in the healthcare and insurance industries. For the nine months ended May 31, 1997, the percentage of total revenues attributable to the four business units were approximately 56% for Nichols Federal, 34% for Nichols InfoFed, 7% for Nichols InfoTec, 3% for Nichols SELECT. Expansion through acquisitions is an important component of the Company's overall business strategy. The Company has completed eight strategic acquisitions and alliances since September 1, 1994. The Company's continued ability to grow by acquisitions is dependent upon, and may be limited by, the availability of compatible acquisition candidates at reasonable prices, the Company's ability to fund or finance acquisitions on acceptable terms, and the Company's ability to maintain or enhance the profitability of any acquired business. NICHOLS RESEARCH CORPORATION RESULTS OF OPERATIONS (CONTINUED) As part of the Company's business strategy to enter new markets, the Company intends to pursue large systems integration contracts in both the government and commercial markets, although competition for such contracts is intense and many of the Company's competitors have greater resources than the Company. While such contracts are working capital intensive, requiring large equipment and software purchases to be funded by the Company before payment from the customer, the Company believes such contracts offer attractive revenue growth and margin expansion opportunities for the CompanyOs range of technical expertise and capabilities. The Company's revenues and earnings may fluctuate from quarter to quarter based on such factors as the number, size and scope of projects in which the Company is engaged, the contractual terms and degree of completion of such projects, expenditures required by the Company in connection with such projects, any delays incurred in connection with such projects, employee utilization rates, the adequacy of provisions for losses, the accuracy of estimates of resources required to complete ongoing projects, and general economic conditions. Under certain contracts, the Company is required to purchase, integrate and deliver to the customer large computer processing systems and other equipment. Revenues are accrued as costs to deliver these systems are incurred, and as a result, quarterly revenues will be impacted by fluctuations related to significant system integration contracts which occur on a periodic basis depending on contract terms and modifications. The Company's services are provided primarily through three types of contracts: fixed-price, time-and-materials and cost- reimbursement contracts. Fixed-price contracts require the Company to perform services under a contract at a stipulated price. Time-and-materials contracts reimburse the Company for the number of labor hours expended at an established hourly rate negotiated in the contract, plus the cost of materials incurred. Under cost-reimbursement contracts, the Company is reimbursed for all actual costs incurred in performing the contract to the extent that such costs are within the contract funding levels and allowable under the terms of the contract, plus a fee or profit. NICHOLS RESEARCH CORPORATION RESULTS OF OPERATIONS (CONTINUED) The Company had a backlog of approximately $1.2 billion, including options of $684.4 million, at May 31, 1997. The Company had a backlog of $950.4 million, including options of $431.2 million, at May 31, 1996. Backlog represents the amount of revenues expected to be realized from awarded contracts. Therefore, the amount in backlog is typically less than the face amount of the contract. The amount includes estimates based on the Company's experience with similar awards and customers and estimates of revenues that would be recognized from the performance of options, under existing contracts, that may be exercised by the customer. These estimates are reviewed periodically and are adjusted based on the latest available information. Historically, these adjustments have not been significant. Because contracts in backlog are typically multi- year contracts, an increase in backlog may not translate into proportional revenue growth in any future period. The table below presents contract award and backlog data for the periods indicated: Nine Months Ended May 31, May 31, 1997 1996 ----------------------- (amounts in thousands) Contract award amount............ $ 444,309 $ 449,495 Backlog (with options)........... $1,201,087 $ 950,376 Backlog (without options)........ $ 516,681 $ 519,143 The following tables set forth, for the periods indicated, the percentage which certain items in the consolidated statements of income bear to consolidated revenues, and the percentage change of such items for the periods indicated: NICHOLS RESEARCH CORPORATION
For the Three Months Ended For the Nine Months Ended May 31, 1997 Compared May 31, 1997 Compared to the Three Months Ended to the Nine Months Ended May 31, 1996 May 31, 1996 Amount of Percentage Amount of Percentage Change Change Change Change ----------------------------------------------------------- (amounts in thousands) Revenues........................ $ 38.9 70.4% $ 115.6 75.5% Cost and expenses: Direct and allocable costs.... 36.3 77.8 107.8 83.1 General and administrative expenses..................... 1.5 29.9 4.0 28.9 ------- -------- Total cost and expenses.... 37.8 73.3 111.8 77.9 Operating profit................ 1.1 29.7 3.8 39.6 Other income (expense), net..... .2 134.4 .1 10.7 ------- -------- Income before income taxes...... 1.3 34.3 3.9 38.1 Income taxes.................... 0.5 35.0 1.4 38.1 ------- -------- Net Income...................... 0.8 33.9 2.5 38.1 ======= ========
For the Three Months Ended For the Nine Months Ended May 31, May 31, May 31, May 31, 1997 1996 1997 1996 ---------------------------------------------------------- Revenues....................... 100.0% 100.0% 100.0% 100.0% Cost and expenses: Direct and allocable contract costs....................... 88.3 84.7 88.3 84.7 General and administrative expenses.................... 6.8 8.9 6.7 9.0 ----------------------------------------------------------- Total cost and expenses... 95.1 93.6 95.0 93.7 Operating profit............... 4.9 6.4 5.0 6.3 Other income (expense)......... .4 .3 .2 .3 ------------------------------------------------------------ Income before income taxes..... 5.3 6.7 5.2 6.6 Income taxes................... 1.9 2.4 1.9 2.4 ------------------------------------------------------------ Net income..................... 3.4% 4.3% 3.3% 4.2% ============================================================ COMPARISON OF OPERATING RESULTS FOR FISCAL THIRD QUARTER 1997 WITH FISCAL THIRD QUARTER 1996. REVENUES. Revenues increased $38.9 million (70.4%) for the three months and $115.6 million (75.5%) for the nine months ended May 31, 1997 as compared to the three months and nine months ended May 31, 1996. Fiscal year to date revenues increased as a result of revenue from the HPCM contracts and the acquisition of AME completed in May 1996, but decreased as a result of the completion of the initial FedEx contract in first quarter 1996. OPERATING PROFIT. Operating profit increased $1.1 million (29.7%) for the three months and $3.8 million (39.6%) for the nine months ended May 31, 1997. Costs and expenses were 95.1% of revenues for the three months and 95.0% for the nine months ended May 31, 1997 as compared to 93.6% for the three months and 93.7% for the nine months ended May 31, 1996. The increase in direct and allocable costs as a percentage of revenues was primarily the result of hardware and software acquired for the HPCM integration contracts. Included in direct and allocable costs are costs associated with the completion of two significant government contracts which resulted in a decrease in operating profit of approximately 0.5% for the period ended May 31, 1997. The increase of $4.0 million in general and administrative expenses for the nine month period is primarily from increases in amortization of goodwill as well as general and administrative expenses of AME acquired in 1996. OTHER INCOME. Other income consists primarily of interest income. Substantially all available cash is invested in interest-bearing accounts or fixed income instruments. INTEREST EXPENSE. Interest expense increased $0.2 million for the nine months ended May 31, 1997 as a result of short term borrowings during the second quarter. At May 31, 1997 there were no outstanding borrowings under the line of credit. EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES. Equity in earnings of unconsolidated affiliates primarily represents the Company's share of earnings from TXEN, Inc. The increase is due to increased revenues and improved profitability of TXEN. MINORITY INTEREST. Minority interest primarily represents the minority partnerOs share of earnings of Holland Technology Group and Holland Software Solutions, joint ventures. The increase is a result of the increased profitability of these ventures which began in fiscal 1996. INCOME TAXES. Income taxes as a percentage of income before taxes was 36.3% for the nine months ended May 31, 1997 and May 31, 1996. NET INCOME. Net income increased $0.8 million (33.9%) for the three months and $2.5 million (38.1%) for the nine months ended May 31, 1997 as compared to the three months and nine months ended May 31, 1996. The increase is the result of the reasons discussed above. Liquidity and Capital Resources - ------------------------------- Historically, the Company's positive cash flow from operations and available credit facilities have provided adequate liquidity and working capital to fully fund the CompanyOs operational needs and support the acquisition activities. Working capital was $79.3 million and $41.8 million at May 31, 1997 and May 31, 1996, respectively. Operating activities provided cash of $1.1 million for the nine months ended May 31, 1997 and used cash of $0.6 million for the nine months ended May 31, 1996. The Company realized proceeds from the sale of Common Stock of $3.0 million and $2.2 million for nine months ended May 31, 1997 and May 31, 1996. The Company has a bank line of credit of $73.5 million which expires in September 1997, unless renewed. The credit agreement provides for interest at London Interbank Offered Rate plus 1.25% and a commitment fee on the unused portion of the line of credit. Outstanding borrowings are secured primarily by accounts receivable. As of May 31, 1997 there were no outstanding borrowings under the line of credit. Purchases of property and equipment were $3.2 million for the nine months ended May 31, 1997 and $3.1 million for the nine months ended May 31, 1996. On February 5, 1997, the Company acquired approximately 35% of the outstanding capital stock of Intertech Management Group, Inc. (Intertech), for approximately $4,025,000. In May 1997, the Company purchased an additional 5% interest in Intertech for approximately $525,000. Intertech provides software and data processing services to the telecommunications industry. In fiscal 1996, the Company was awarded the HPCM Contracts for information system development and computer system integration activities, which will require the Company to acquire substantial amounts of computer hardware as part of these integrated systems. The Company continues to actively pursue other contracts that could require the integration of significant computer equipment components. The timing of payments to suppliers and payments from customers under the Company's system integration contracts could cause cash flows from operations to fluctuate from period to period. Nichols has an option to purchase the remaining 80.1% of TXEN, Inc. in August 1997. The Company believes that its existing capital resources, together with available borrowing capacity, will be sufficient to fund operating needs, finance acquisitions of property and equipment for information technology programs and computer system integration activities, and make strategic acquisitions, if appropriate. Effects of Inflation - -------------------- Substantially all contracts awarded to the Company have been based on proposals which reflect estimated cost increases due to inflation. Historically, inflation has not had a significant impact on the Company. PART II - OTHER INFORMATION Item 1 - Legal Proceedings On May 31, 1996, the Company purchased all of the capital stock of Advanced Marine Enterprises, Inc. (AME) pursuant to an agreement which provides indemnification of the Company by the sellers against all damages arising out of litigation pending against AME. One of the pending cases was PRC, Inc. v. AME, et al., instituted on January 2, 1996, in the Circuit Court of Arlington County, Virginia, Chancery No. 96.1, wherein PRC, Inc. alleged that, among other matters, AME and certain of its employees conspired to illegally acquire the PRC Engineering Department, including its employees, customers, property and proprietary information. The trial of this non-jury action commenced May 28, 1996, and concluded on June 19, 1996. On June 18, 1997, the trial court entered a final decree against the defendants in the aggregate amount of $5,514,795 which includes interest at 9% per annum from June 19, 1996, attorney fees and cost. On July 9, 1997, AME filed a Notice of Appeal to the Virginia Supreme Court. In addition to the sellers' contractual indemnity, an escrow account funded by the sellers in the amount of approximately $5.8 million exists to secure the sellers' indemnity obligation to the Company which the Company believes will be adequate to cover the potential liability associated with this litigation. Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits. Exhibit No. Description ----------- ----------- 27 Financial Data Schedule (b)The Company has not filed any reports on Form 8-K for the nine months ended May 31, 1997. NICHOLS RESEARCH CORPORATION SIGNATURES MANAGEMENT REPRESENTATION The accompanying unaudited Consolidated Balance Sheets at May 31, 1997, and August 31, 1996 as well as the Consolidated Statements of Income, Consolidated Statements of Changes in Stockholders' Equity and Consolidated Statements of Cash Flows for the nine months ended May 31, 1997 and 1996, have been prepared in accordance with instructions to Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring accruals, considered necessary for a fair presentation have been included. Date: July 15, 1997 By: Allen E. Dillard ---------------- ----------------------- Vice President and Chief Financial Officer (Principal Finance and Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NICHOLS RESEARCH CORPORATION Date: July 15, 1997 By: Allen E. Dillard ---------------- ------------------------ Vice President and Chief Financial Officer (Principal Finance and Accounting Officer)
EX-27 2
5 1000 US 9-MOS AUG-31-1997 MAY-31-1997 1 17,082 0 127,790 0 0 150,764 33,110 17,641 202,093 71,467 4,158 0 0 119 124,728 202,093 268,853 268,853 237,571 237,571 0 0 405 13,967 5,070 8,897 0 0 0 8,897 .73 .73
EX-3.2 3 BYLAWS OF NICHOLS RESEARCH CORPORATION BY LAWS OF NICHOLS RESEARCH CORPORATION I N D E X ARTICLE ONE - OFFICES Section 1.1 Registered Office 1 Section 1.2 Principal Business Office 1 ARTICLE TWO - SHAREHOLDERS MEETINGS Section 2.1 Annual Meeting 1 Section 2.2 Special Meetings 1 Section 2.3 Place 2 Section 2.4 Notice 2 Section 2.5 Quorum 2 Section 2.6 Proxies; Required Vote 3 Section 2.7 Presiding Officer and Secretary 3 Section 2.8 Shareholder List 3 Section 2.9 Action in Lieu of Meeting 4 ARTICLE THREE - DIRECTORS Section 3.1 Management 4 Section 3.2 Number of Directors; Quorum 4 Section 3.3 Vacancies 5 Section 3.4 Election of Directors 5 Section 3.5 Removal 5 Section 3.6 Resignation 5 Section 3.7 Compensation 6 Section 3.8 Co-Chairmen 6 ARTICLE FOUR - COMMITTEES Section 4.1 Executive Committee 6 Section 4.2 Other Committees 8 Section 4.3 Removal 9 ARTICLE FIVE- MEETINGS OF THE BOARD OF DIRECTORS Section 5.1 Time and Place 9 Section 5.2 Regular Meetings 9 Section 5.3 Special Meetings; Notice 9 Section 5.4 Waiver of Notice 10 Section 5.5 Quorum 10 Section 5.6 Action in Lieu of Meeting 11 Section 5.7 Interested Directors and Officers 11 ARTICLE SIX - OFFICERS, AGENTS AND EMPLOYEES Section 6.1 General Provisions 12 Section 6.2 Powers and Duties of the Chief Executive Officer and the President 13 Section 6.3 Powers and Duties of Executive Vice Presidents, Senior Vice Presidents and Vice Presidents 14 Section 6.4 Powers and Duties of the Secretary 15 Section 6.5 Powers and Duties of the Treasurer 15 Section 6.6 Appointment, Powers and Duties of Assistant Secretaries 16 Section 6.7 Appointment, Powers and Duties of Assistant Treasurers 16 Section 6.8 Delegation of Duties 16 ARTICLE SEVEN - CAPITAL STOCK Section 7.1 Certificates 17 Section 7.2 Shareholder List 18 Section 7.3 Transfer of Shares 19 Section 7.4 Record Dates 19 Section 7.5 Registered Owner 19 Section 7.6 Transfer Agent and Registrars 20 Section 7.7 Lost Certificates 20 Section 7.8 Fractional Shares or Scrip 20 ARTICLE EIGHT - BOOKS AND RECORDS; SEAL; ANNUAL STATEMENTS Section 8.1 Inspection of Books and Records 21 Section 8.2 Seal 22 Section 8.3 Annual Statements 22 ARTICLE NINE - INDEMNIFICATION Section 9.1 Third Party Claims 23 Section 9.2 Corporate Claims 24 Section 9.3 Indemnification of Expenses Where Successful 25 Section 9.4 Authorization of Indemnification 25 Section 9.5 Advancement of Expenses 25 Section 9.6 Nonexclusive Method of Indemnification 26 Section 9.7 Insurance 26 Section 9.8 Notification to Shareholders of Indemnification 27 ARTICLE TEN - NOTICES, WAIVERS OF NOTICE Section 10.1 Notices 27 Section 10.2 Waivers of Notice 27 ARTICLE ELEVEN - EMERGENCY POWERS Section 11.1 By-Laws 28 Section 11.2 Lines of Succession 28 Section 11.3 Head Office 28 Section 11.4 Period of Effectiveness 29 Section 11.5 Notices 29 Section 11.6 Officers as Directors Pro Tempore 29 Section 11.7 Liability of Officers, Directors and Agents 29 ARTICLE TWELVE - CONTRACTS; CHECKS Section 12.1 Contracts 30 Section 12.2 Checks 30 ARTICLE THIRTEEN - DIVIDENDS AND DISTRIBUTIONS 30 ARTICLE FOURTEEN - AMENDMENTS 31 BY-LAWS OF NICHOLS RESEARCH CORPORATION ARTICLE ONE OFFICES 1.1 Registered Office. The corporation shall at all times maintain a registered office in the State of Delaware and a registered agent at that address but may have other offices located within or outside the State of Delaware as the Board of Directors may determine. 1.2 Principal Business Office. The corporation shall maintain its principal place of business in Madison County, Alabama, and may have other places of business within or without the State of Alabama as the Board of Directors may determine. ARTICLE TWO SHAREHOLDERS MEETINGS 2.1 Annual Meeting. The annual meeting of shareholders of the corporation shall be held within 180 days after the end of each fiscal year of the corporation. The annual meeting shall be held at such time and place as the Directors shall determine from time to time and as shall be specified in the notice of the meeting. 2.2 Special Meetings. Special meetings of the shareholders may be called at any time by the Chief Executive Officer, President, or a majority of the board of directors. Special meetings shall be held at such a time and place and on such date as shall be specified in the notice of the meeting. 2.3 Place. Annual or special meetings of shareholders may be held within or without the State of Delaware as may be specified in the notice of meeting. 2.4 Notice. Notice of annual or special shareholders meetings stating place, day and hour of the meeting shall be given in writing not less than ten nor more than sixty days before the date of the meeting, either mailed to the last known address of or personally given to each shareholder. Notice of any special meeting of shareholders shall state the purpose or purposes for which the meeting is called. The notice of any meeting at which amendments to or restatements of the certificate of incorporation, merger or consolidation of the corporation, or the disposition of corporate assets requiring shareholder approval are to be considered shall state such purpose, be given at least twenty days before such meeting and further comply with all requirements of law. Notice of a meeting may be waived by an instrument in writing executed before or after the meeting. The waiver need not specify the purpose of the meeting or the business transacted, unless one of the purposes of the meeting concerns a plan of merger or consolidation, in which event the waiver shall comply with the further requirements of law concerning such waiver. Attendance at such meeting in person or by proxy shall constitute a waiver of notice thereof. 2.5 Quorum. At all meetings of shareholders a majority of the outstanding shares of stock shall constitute a quorum for the transaction of business, and no resolution or business shall be transacted without the favorable vote of the holders of a majority of the shares represented at the meeting and entitled to vote. A lesser number may adjourn from day to day, and shall announce the time and place to which the meeting is adjourned. 2.6 Proxies; Required Vote. At every meeting of the shareholders, including meetings of shareholders for the election of Directors, any shareholder having the right to vote shall be entitled to vote in person or by proxy, but no proxy shall be voted after eleven months from its date, unless said proxy provides for a longer period. Each shareholder shall have one vote for each share of stock having voting power, registered in his name on the books of the corporation. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the shareholders, except as otherwise provided by law, by the certificate of incorporation or by these by-laws. 2.7 Presiding Officer and Secretary. At every meeting of shareholders, a Co-Chairman of the Board, or in the absence of a Co-Chairman or if there be none, the Chief Executive Officer, or in his absence the President, or in his absence a Vice President or, if none be present, the appointee of the presiding officer of the meeting, shall preside. The Secretary, or in his absence an Assistant Secretary, or if none be present, the appointee of the Presiding officer of the meeting, shall act as secretary of the meeting. 2.8 Shareholder List. The officer or agent having charge of the stock transfer books of the corporation shall produce for the inspection of any shareholder a complete alphabetical list of shareholders entitled to vote showing the address and share holdings of each shareholder. Such a list shall be kept on file in the principal office of the corporation for at least ten days prior to all meetings of shareholders and shall be subject to inspection by any shareholder making written request therefor at any time during usual business hours; such list shall also be available for inspection by any shareholder at, and continuously during, every meeting of the shareholders. 2.9 Action in Lieu of Meeting. Any action to be taken at a meeting of the shareholders of the corporation, or any action that may be taken at a meeting of the shareholders, may be taken without a meeting if a consent in writing setting forth the action so taken shall be signed by all of the shareholders entitled to vote with respect to the subject matter thereof and any further requirements of law pertaining to such consents have been complied with. ARTICLE THREE DIRECTORS 3.1 Management. Subject to these by-laws, the certificate of incorporation and any lawful agreement among the shareholders, the full and entire management of the affairs and business of the corporation shall be vested in the Board of Directors, which shall have and may exercise all of the powers that may be exercised or performed by the corporation. 3.2 Number of Directors; Quorum. The Board of Directors shall consist of not less than five (5) and not more than nine (9) members, the precise number to be fixed by resolution of the Board of Directors from time to time. A majority of said Directors shall constitute a quorum for the transaction of business. All resolutions adopted and all business transacted by the Board of Directors shall require the affirmative vote of a majority of the Directors present at a meeting at which a quorum is present. 3.3 Vacancies. The Directors may fill the place of any Director which may become vacant prior to the expiration of his term by a vote of the majority of remaining Directors though the remaining Directors may be less than a quorum of the Board of Directors; such appointment by the Directors shall continue until the expiration of the term of the Director whose place has become vacant. Any vacancy which occurs by reason of any increase in the number of Directors shall be filled by election at an annual meeting or special meeting of shareholders called for such a purpose. 3.4 Election of Directors. Directors shall be elected annually, at the annual meeting of shareholders and shall serve until the next annual meeting of shareholders and until their successors have been elected and qualified. 3.5 Removal. A Director may be removed from office, with or without cause, upon the majority vote of the shareholders entitled to vote at an election of Directors, at a meeting with respect to which notice of such purpose is given. The shareholders, upon the majority vote of the shareholders, may then forthwith proceed to elect a successor for the unexpired term of the Director who was removed from office. 3.6 Resignation. Any Director may resign at any time either orally at any meeting of the Board of Directors or by so advising to a Co-Chairman of the Board, if any, or the Chief Executive Officer or President or by giving written notice to the corporation. A Director who resigns may postpone the effectiveness of his resignation to a future date or upon the occurrence of a future event specified in a written tender of resignation. If no time of effectiveness is specified therein, a resignation shall be effective upon tender. A vacancy shall be deemed to exist at the time a resignation is tendered, and the Board of Directors or the shareholders may, then or thereafter, elect a successor to take office when the resignation by its terms becomes effective. 3.7 Compensation. Directors may be allowed such compensation for attendance at regular or special meetings of the Board of Directors and of any special or standing committees thereof as may be determined from time to time by resolution of the Board of Directors. 3.8 Co-Chairmen. The Board of Directors shall elect from its members two persons who shall serve as Co-Chairmen of the Board of Directors. In the absence of an agreement to the contrary, each Co-Chairman of the Board of Directors shall preside at every other meeting of the shareholders and every other meeting of the directors. If the Co-Chairman who is to preside at a meeting of the shareholders or directors is absent, the other Co- Chairman shall preside at such meeting. ARTICLE FOUR COMMITTEES 4.1 Executive Committee. (a) The Board of Directors may by resolution adopted by a majority of the entire Board designate an Executive Committee of the Board of Directors consisting of two or more Directors. Each member of the Executive Committee shall hold office until the first meeting of the Board of Directors after the annual meeting of shareholders next following his election and until his successor is elected and qualified, or until his death, resignation or removal, or until he shall cease to be a Director. (b) During the intervals between the meetings of the Board of Directors, the Executive Committee may exercise all the authority of the Board of Directors; provided, however, that the Executive Committee shall not have the power to amend or repeal any resolution of the Board of Directors that by its terms shall not be subject to amendment or repeal by the Executive Committee, and the Executive Committee shall not have the authority of the Board of Directors in reference to (1) amending the certificate of incorporation or by-laws of the corporation; (2) adopting a plan of merger or consolidation; (3) the sale, lease, mortgage, exchange or other disposition of all or substantially all the property and assets of the corporation otherwise than in the usual and regular course of its business; (4) a voluntary dissolution of the corporation or a revocation of any such voluntary dissolution; (5) filling a vacancy in the Board of Directors; (6) declaring a dividend or distribution from surplus; or (7) issuing capital stock. (c) The Executive Committee shall meet from time to time on call of a Co-Chairman of the Board, the Chief Executive Officer or the President or of any two or more members of the Executive Committee. Meetings of the Executive Committee may be held at such place or places, within or without the State of Delaware as the Executive Committee shall determine or as may be specified or fixed in the respective notices or waivers of such meetings. The Executive Committee may fix its own rules of procedures, including provision for notice of its meetings. It shall keep a record of its proceedings and shall report these proceedings to the Board of Directors at the meeting thereof held next after they have been taken, and all such proceedings shall be subject to revision or alteration by the Board of Directors except to the extent that action shall have been taken pursuant to or in reliance upon such proceedings prior to any such revision or alteration. (d) The Executive Committee shall act by majority vote of its members; provided, that contracts or transactions of and by the corporation in which officers or Directors of the corporation are interested shall require the affirmative vote of a majority of the disinterested members of the Executive Committee, at a meeting of the Executive Committee at which the material facts as to the interest and as to the contract or transaction are disclosed or known to the members of the Executive Committee prior to the vote. (e) Members of the Executive Committee may participate in committee proceedings by means of conference telephone or similar communications equipment by means of which all persons participating in the proceedings can hear each other, and such participation shall constitute presence in person at such proceedings. (f) The Board of Directors, by resolution adopted in accordance with paragraph (a) of this section, may designate one or more Directors as alternate members of the Executive Committee who may act in the place and stead of any absent member or members at any meeting of said committee. 4.2 Other Committees. The Board of Directors, by resolution adopted by a majority of the entire Board, may designate one or more additional committees, each committee to consist of two or more of the Directors of the corporation, which shall have such name or names and shall have and may exercise such powers of the Board of Directors, except the powers denied to the Executive Committee, as may be determined from time to time by the Board of Directors. Such committees shall provide for its own rules of procedure, subject to the same restrictions thereon as provided above for the Executive Committee. 4.3 Removal. The Board of Directors shall have power at any time to remove any member of any committee, with or without cause, and to fill vacancies in and to dissolve any such committee. ARTICLE FIVE MEETINGS OF THE BOARD OF DIRECTORS 5.1 Time and Place. Meetings of the Board of Directors may be held at any place either within or without the State of Alabama. Each newly elected Board of Directors shall meet immediately following the close of the annual meeting of shareholders and at the place thereof, or such newly elected Board of Directors may hold such meeting at such place and time as shall be fixed by the consent in writing of all the Directors. In any such case no notice of such meeting to the newly elected Directors shall be necessary in order legally to constitute the meeting, provided a quorum be present. 5.2 Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such time and place, within or without the State of Delaware, as shall be determined by the Board of Directors from time to time. 5.3 Special Meetings; Notice. Special meetings of the Board of Directors may be called by a Co-Chairman of the Board, the Chief Executive Officer, or the President on not less than two days' written notice by mail, telegram or cablegram, or by personal delivery to each Director and shall be called by a Co-Chairman of the Board, the Chief Executive Officer, the President or the Secretary in like manner and on like notice on the written request of any two or more Directors. Any such special meeting shall be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of meeting. No notice of any meeting of the Board of Directors need state the purposes thereof. 5.4 Waiver of Notice. Notice of any meeting may be waived by an instrument in writing executed before or after the meeting. Attendance in person at any such meeting shall constitute a waiver of notice thereof except where a Director attends a meeting for the express purpose of objecting because the meeting is not lawfully called or convened. 5.5 Quorum. At all meetings of the Board of Directors, the presence of one-third of the Directors, but not less than two Directors, shall be necessary and sufficient to constitute a quorum for the transaction of business. Directors may participate in any meeting by means of conference telephone or similar communications equipment by which all persons participating in the meeting can hear each other, and participation in a meeting by means of such communications equipment shall constitute the presence in person at such meeting. The act of a majority of the Directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by- law, the certificate of incorporation or these by-laws. In the absence of a quorum a majority of the Directors present at any meeting may adjourn the meeting from time to time until a quorum is present. Notice of any adjourned meeting need only be given by announcement at the meeting at which the adjournment is taken. 5.6 Action in Lieu of Meeting. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if a written consent thereto is signed by all members of the Board of Directors or of such committee, as the case may be, and such written consent is filed with the minutes of the proceedings of the Board of Directors and any further requirements of law pertaining to such consents have been complied with. 5.7 Interested Directors and Officers. An interested Director or officer is one who is a party to a contract or transaction with the corporation or who is an officer or Director of, or has a financial interest in, another corporation, partnership or association which is a party to a contract or transaction with the corporation. Contracts and transactions between the corporation and one or more interested Directors or officers shall not be void or voidable solely because of such relationship or interest or because such a Director is present at a meeting of the Board of Directors or a committee thereof which authorizes, approves or ratifies such contract or transaction, if either: (1) the contract or transaction is approved in good faith by the Board of Directors or appropriate committee by the affirmative votes or consent of a majority of disinterested Directors at a meeting of the Board or committee at which the material facts as to the interested person or persons and the contract or transaction are disclosed or known to the Board or committee prior to the vote; or (2) the contract or transaction is approved in good faith by the shareholders after the material facts as to the interested person or persons and the contract or transaction have been disclosed to them; or (3) the contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified by the Board of Directors or the appropriate committee, or the shareholders. Interested Directors may not be counted in determining the presence of a quorum at a meeting of the Board or committee which authorizes the contract or transaction. ARTICLE SIX OFFICERS, AGENTS AND EMPLOYEES 6.1 General Provisions. The officers of the corporation shall be a Chief Executive Officer, a President, a Secretary, and a Treasurer, one or more Executive Vice Presidents, Senior Vice Presidents and Vice Presidents, one or more Assistant Secretaries, and one or more Assistant Treasurers. The officers shall be elected by the Board of Directors at the first meeting of the Board of Directors after the annual meeting of the shareholders in each year or shall be appointed as provided in these by- laws. The executive officers of the corporation shall consist of the Chief Executive Officer, the President, all Executive Vice Presidents, all Senior Vice Presidents, the Secretary and the Treasurer. The board of Directors may elect other officers, agents and employees, who shall have such authority and perform such duties as may be prescribed by the Board of Directors. All officers shall hold office until the meeting of the Board of Directors following the next annual meeting of the shareholders after their election or appointment and until their successors shall have been elected or appointed and shall have qualified. Any two or more offices may be held by the same person. Any officer, agent or employee of the corporation may be removed by the Board of Directors whenever in its judgment the best interests of the corporation will be served thereby. Such removal shall be without prejudice to such person's contract rights, if any, but the election or appointment of any person as an officer, agent or employee of the corporation shall not of itself create contract rights. The compensation of officers, agents, and employees elected by the Board of Directors shall be fixed by the Board of Directors, but this power may be delegated to any officer, agent or employee as to persons under his direction or control. The Board of Directors may require any officer, agent or employee to give security for the faithful performance of his duties. 6.2 Powers and Duties of the Chief Executive Officer and the President. The powers and duties of the Chief Executive Officer and the President, subject to the supervision and control of the Board of Directors, shall be those usually appertaining to their respective offices and whatever other powers and duties are prescribed by these by-laws or by the Board of Directors. (a) The Chief Executive Officer of the corporation shall be the highest executive officer of the corporation and shall have overall responsibility for the management of the business of the corporation, including responsibility for execution of all orders and resolutions adopted by the Board of Directors, execution of authorized conveyances, contracts and other documents in the name of the corporation, except where the signing and execution thereof may be delegated by the Board of Directors or these by-laws to another officer or agent of the corporation. (b) The President shall be the second highest executive officer of the corporation and shall report to the Chief Executive Officer of the corporation. The President shall have such responsibilities for the management of the business of the corporation as may be assigned to him by the Chief Executive Officer or the Board of Directors. The President, in the absence of the Chief Executive Officer, shall have the authority to execute on behalf of the corporation conveyances, contracts and other documents. 6.3 Powers and Duties of Executive Vice Presidents, Senior Vice Presidents and Vice Presidents. Each Executive Vice President, Senior Vice President and Vice President shall have such powers and perform such duties as the Board of Directors, the Chief Executive Officer or the President may prescribe and shall perform such other duties as may be prescribed by these by-laws. In the absence or inability to act of the Chief Executive Officer or President, unless the Board of Directors shall otherwise provide, the Executive Vice President who has served in that capacity for the longest time and who shall be present and able to act, shall perform all duties and may exercise any of the powers of the Chief Executive Officer. The performance of any such duty by an Executive Vice President, Senior Vice President or Vice President shall be conclusive evidence of his power to act. Without limiting the generality of the foregoing, an Executive Vice President appointed by the Board of Directors shall be designated as the Executive Vice President for a major operation or division of the corporation and as such shall have responsibility and authority to conduct the business of such operation or division. Each Executive Vice President shall report to the Chief Executive Officer and the President and shall have such other duties as may be assigned to him by the Board of Directors. Each Executive Vice President shall have the authority to execute on behalf of the corporation all conveyances, contracts and other documents which pertain to the operation or division of the corporation for which he has responsibility. 6.4 Powers and Duties of the Secretary. The Secretary shall have charge of the minutes of all proceedings of the shareholders and of the Board of Directors and shall keep the minutes of all their meetings at which he is present. Except as otherwise provided by these by-laws he shall attend to the giving of all notices to shareholders and Directors. He shall have charge of the seal of the corporation, shall attend to its use on all documents the execution of which on behalf of the corporation under its seal is duly authorized and shall attest the same by his signature whenever required. He shall have charge of the record of shareholders of the corporation, of all written requests by shareholders that notices be mailed to them at an address other than their addresses on the record of shareholders, and of such other books and papers as the Board of Directors may direct. Subject to the control of the Board of Directors, he shall have all such powers and duties as generally are incident to the position of Secretary or as may be assigned to him by the Chief Executive Officer, President or the Board. 6.5 Powers and Duties of the Treasurer. The Treasurer shall have charge of all funds and securities of the corporation, shall endorse the same for deposit or collection when necessary and deposit the same to the credit of the corporation in such banks or depositaries as the Board of Directors may authorize. He may endorse all commercial documents requiring endorsements for or on behalf of the corporation and may sign all receipts and all commercial documents requiring endorsements for or on behalf of the corporation and may sign all receipts and vouchers for payments made to the corporation. He shall have all such powers and duties as generally are incident to the position of Treasurer or as may be assigned to him by the Chief Executive Officer, President or by the Board of Directors. 6.6 Appointment, Powers and Duties of Assistant Secretaries. Assistant Secretaries may be appointed by the Chief Executive Officer, President or elected by the Board of Directors. In the absence or inability of the Secretary to act, any Assistant Secretary may perform all the duties and exercise all the powers of the Secretary. The performance of any such duty shall be conclusive evidence of his power to act. An Assistant Secretary shall also perform such other duties as the Secretary or the Board of Directors may assign to him. 6.7 Appointment, Powers and Duties of Assistant Treasurers. Assistant Treasurers may be appointed by the Chief Executive Officer, President or elected by the Board of Directors. In the absence or inability of the Treasurer to act, an Assistant Treasurer may perform all the duties and exercise all the powers of the Treasurer. The performance of any such duty shall be conclusive evidence of his power to act. An Assistant Treasurer shall also perform such other duties as the Treasurer or the Board of Directors may assign to him. 6.8 Delegation of Duties. In case of the absence of any officer of the corporation, or for any other reason that the Board of Directors may deem sufficient, the Board of Directors (or in the case of Assistant Secretaries or Assistant Treasurers only, the Chief Executive Officer or President) may confer for the time being the powers and duties, or any of them of such officer upon any other officer (provided that the powers and duties of the Chief Executive Officer or President may not be conferred upon the Secretary, and vice versa), or elect or appoint any new officer to fill a vacancy created by death, resignation, retirement or termination of any officer. In such latter event such new officer shall serve until the next annual election of officers. ARTICLE SEVEN CAPITAL STOCK 7.1 Certificates. The interest of each shareholder shall be evidenced by a certificate or certificates representing shares of the corporation which shall be in such form as the Board of Directors may from time to time adopt and shall be numbered and shall be entered in the books of the corporation as they are issued. Each certificate representing shares shall set forth upon the face thereof the following: (a) the name of this corporation; (b) that the corporation is organized under the laws of the State of Delaware; (c) the name or names of the person or persons to whom the certificate is issued; (d) the number and class of shares, and the designation of the series, if any, which the certificate represents; (e) the par value of each share represented by such certificate, or a statement that the shares are without par value; and (f) if any shares represented by the certificate are non-voting shares, a statement or notation to that effect; and if the shares represented by the certificate are subordinate to shares of any other class or series with respect to dividends or amounts payable on liquidation, shall further set forth on either the face or back of the certificate a clear and concise statement to that effect. Each certificate shall be signed by the Chief Executive Officer, President or any Executive or Senior dice President and the Secretary or an Assistant Secretary and may be sealed with the seal of the corporation or a facsimile thereof. If a certificate is countersigned by a transfer agent or registered by a registrar, other than the corporation itself or an employee of the corporation, the signature of any such officer of the corporation may be a facsimile. In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates shall cease to be such officer or officers of the corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the corporation, such certificate or certificates may nevertheless be delivered as though the person or persons who signed such certificate or certificates or whose facsimile signatures shall have been used thereon had not ceased to be such officer or officers. 7.2 Shareholder List. The corporation shall keep or cause to be kept a record of the shareholders of the corporation which readily shows, in alphabetical order or by alphabetical index, and by classes or series of stock, if any, the names of the shareholders entitled to vote, with the address of and the number of shares held by each. Said record shall be presented and kept open for ten days prior to and during all meetings of the shareholders in accordance with the provisions of Section 2.8 of these by-laws. 7.3 Transfer of Shares. Transfers of stock shall be made on the books of the corporation only by the person named in the certificate, or by power of attorney lawfully constituted in writing, and upon surrender of the certificate thereof, or in the case of a certificate alleged to have been lost, stolen or destroyed, upon compliance with the provisions of Section 7.7 of these by-laws. 7.4 Record Dates. (a) For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors may provide that the stock transfer books shall be closed for a stated period but not to exceed sixty days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least ten days immediately preceding such meeting. (b) In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date to be not more than sixty days and, in case of a meeting of shareholders, not less than ten days, prior to the date on which the particular action requiring such determination of shareholders is to be taken. 7.5 Registered Owner. The corporation shall be entitled to treat the holder of record of any share of stock of the corporation as the person entitled to vote such share, to receive any dividend or other distribution with respect to such share, and for all other purposes and accordingly shall not be bound to recognize any equitable or other claim or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law. 7.6 Transfer Agent and Registrars. The Board of Directors may appoint one or more transfer agents and one or more registrars and may require each stock certificate to bear the signature or signatures of a transfer agent or a registrar or both. 7.7 Lost Certificates. Any person claiming a certificate of stock to be lost, stolen or destroyed shall make an affidavit or affirmation of the fact in such manner as the Board of Directors may require and shall, if the Directors so require, give the corporation a bond of indemnity in form and amount and with one or more sureties satisfactory to the Board of Directors, whereupon an appropriate new certificate may be issued in lieu of the certificate alleged to have been lost, stolen or destroyed. 7.8 Fractional Shares or Scrip. The corporation may, when and if authorized so to do by its Board of Directors, issue certificates for fractional shares or scrip in order to effect share transfers, share distributions or reclassifications, mergers, consolidations or reorganizations. Holders of fractional shares shall be entitled, in proportion to their fractional holdings, to exercise voting rights, receive dividends and participate in any of the assets of the corporation in the event of liquidation. Holders of scrip shall not, unless expressly authorized by the Board of Directors, be entitled to exercise any rights of a shareholder of the corporation, including voting rights, dividend rights or the right to participate in any assets of the corporation in the event of liquidation. In lieu of issuing fractional shares or scrip, the corporation may pay in cash the fair value of fractional interest as determined by the Board of Directors; and the Board of Directors may adopt resolutions regarding rights with respect to fractional shares or scrip as it may deem appropriate, including without limitation the right for persons entitled to receive fractional shares to sell such fractional shares or purchase such additional fractional shares as may be needed to acquire one full share, or sell such fractional shares or scrip for the account of such persons. ARTICLE EIGHT BOOKS AND RECORDS; SEAL; ANNUAL STATEMENTS 8.1 Inspection of Books and Records. Any shareholder of record, including a holder of record of voting trust certificates, upon written demand under oath stating the purpose thereof, shall have the right to examine in person or by agent or attorney, at any reasonable time or times, for any proper purpose, the books and records of account, minutes and record of shareholders and to make copies thereof or extracts therefrom. Such demand shall be sent to the attention of the Secretary of the corporation at its principal place of business. If the demand is made by an agent or attorney, such demand shall be accompanied by a power of attorney or other authorization to act on behalf of the shareholder. If the Secretary or a majority of the Board of Directors or members of the Executive Committee of the corporation find the request proper, the Secretary shall notify the shareholder within a reasonable time after receipt of said request of the time, which shall in no event be more than thirty days after such notification, and place at which the inspection may be conducted. If said request is found by the Secretary, the Board of Directors or the Executive Committee not to be proper, the Secretary shall so notify the requesting shareholder within a reasonable time after receipt of the request. The Secretary shall specify in said notice the basis for the rejection of the shareholder's request. The Secretary, the Board of Directors and the Executive Committee shall at all times be entitled to rely in good faith on the corporate records in making any determination hereunder. 8.2 Seal. The corporate seal shall be in such form as the Board of Directors may from time to time determine. In the event it is inconvenient to use such a seal at any time, the signature of the corporation followed by the word "Seal" enclosed in parentheses or scroll shall be deemed the seal of the corporation. 8.3 Annual Statements. Not later than 180 days after the close of each fiscal year, and in any case prior to the next annual meeting of shareholders, the corporation shall prepare and mail to each shareholder and holder of voting trust certificates: (a) A balance sheet showing in reasonable detail the financial condition of the corporation as of the close of its fiscal year, and (b) A statement of income (expenses and retained earnings) showing the results of its operations during its fiscal year; and (c) A report of the Chief Executive Officer, officer in charge of financial records or a certified public accountant stating whether, in his opinion, the financial statements present fairly the financial position of the corporation and the results of its operations in accordance with generally accepted accounting principles and, if not, describing the basis for their preparation of the data in accordance with accounting procedures generally used in the industry in which the corporation conducts its business. ARTICLE NINE INDEMNIFICATION 9.1 Third Party Claims. Under the circumstances prescribed in Sections 9.3 and 9.4, the corporation shall indemnify and hold harmless any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, including appeals, (other than an action by or in the right of the corporation) by reason of the fact that he is or was a Director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a Director, officer, partner, employee, or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amount paid in settlement actually and reasonably incurred by him in connection with such claim, action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any claim, action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. 9.2 Corporate Claims . Under the circumstances prescribed in Sections 9.3 and 9.4, the corporation shall indemnify and hold harmless any person who was or is a party or is threatened to be made a party to any threatened, pending or completed claim, action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact he is or was a Director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a Director, officer, partner, employee or agent, of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation; except that no indemnification shall be made in respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation, unless and only to the extent that the Chancery Court or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Chancery Court or such other court shall deem proper. 9.3 Indemnification of Expenses Where Successful. To the extent that a Director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 9.1 and 9.2, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. 9.4 Authorization of Indemnification. Except as provided in Section 9.3 and except as may be ordered by a court, any indemnification under Sections 9.1 and 9.2 shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Sections 9.1 and 9.2. Such a determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of Directors who were not parties to or have been wholly successful on the merits or otherwise with respect to such action, suit or proceeding, or (2) if such a quorum is not obtainable or, even if obtainable, a quorum of disinterested Directors so directs, by independent legal counsel in a written opinion, or (3) by the affirmative vote of a majority of the shares entitled to vote thereon. 9.5 Advancement of Expenses. Expenses (including attorneys' fees) incurred in defending a civil or criminal action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors in the specific case upon receipt of an undertaking by or on behalf of the Director, officer, employee or agent to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized in this Article Nine. 9.6 Nonexclusive Method of Indemnification. The indemnification and advancement of expenses provided by this Article Nine shall not be deemed exclusive of any other rights, in respect of indemnification or otherwise, to which those seeking indemnification or advancement of expenses may be entitled under any agreement, by-law or resolution approved by the affirmative vote of the holders of a majority of the shares entitled to vote thereon taken at a meeting the notice of which specified that such by- law or resolution would be placed before the shareholders, both as to action by a Director, officer, employee or agent in his official capacity and as to action in another capacity while holding such office or position, and shall continue as to a person who has ceased to be a Director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. 9.7 Insurance. The corporation may purchase and maintain insurance on behalf of any person who is or was a Director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a Director, officer, partner, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article Nine. 9.8 Notification to Shareholders of Indemnification. If any expenses or other amounts are paid by way of indemnification, otherwise than by court order or action by the shareholders or by an insurance carrier pursuant to insurance maintained by the corporation, the corporation shall, not later than the next annual meeting of shareholders unless such meeting is held within three months from the date of such payment, and, in any event, within I5 months from the date of such payment, send by first class mail to its shareholders of record at the time entitled to vote for the election of Directors a statement specifying the persons paid, the amounts paid, and the nature and status at the time of such payment of the litigation or threatened litigation. ARTICLE TEN NOTICES; WAIVERS OF NOTICE 10.1 Notices. Except as otherwise specifically provided in these by- laws, whenever under the provisions of these by-laws notice is required to be given to any shareholder, Director or officer, it shall not be construed to mean personal notice, but such notice may be given by personal notice or by cable or telegraph, or by mail by depositing the same in the post office or letter box in a postpaid sealed wrapper, addressed to such shareholder, officer or Director at such address as appears on the books of the corporation, and such notice shall be deemed to be given at the time when the same shall be thus sent or mailed. 10.2 Waivers of Notice. Except as otherwise provided in these by-laws, when any notice whatever is required to be given by law, by the certificate of incorporation or by these by-laws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. In the case of a shareholder, such waiver of notice may be signed by the shareholder's attorney or proxy duly appointed in writing. ARTICLE ELEVEN EMERGENCY POWERS 11.1 By-Laws. The Board of Directors may adopt emergency by-laws, subject to repeal or change by action of the shareholders, which shall, notwithstanding any provision of law, the certificate of incorporation or these by-laws, be operative during any emergency in the conduct of the business of the corporation resulting from an attack on the United States or on a locality in which the corporation conducts its business or customarily holds meetings of its Board of Directors or its shareholders, or during any nuclear or atomic disaster, or during the existence of any catastrophe, or other similar emergency condition, as a result of which a quorum of the Board of Directors or a standing committee thereof cannot readily be convened for action. The emergency by-laws may make any provision that may be practical and necessary for the circumstances of the emergency. 11.2 Lines of Succession. The Board of Directors, either before or during any such emergency, may provide, and from time to time modify, lines of succession in the event that during such an emergency any or all officers or agents of the corporation shall for any reason be rendered incapable of discharging their duties. 11.3 Head Office. The Board of Directors, either before or during any such emergency, may effective in the emergency, change the head office or designate several alternative head offices or regional offices, or authorize the officers to do so. 11.4 Period of Effectiveness. To the extent not inconsistent with any emergency by-laws so adopted, these by-laws shall remain in effect during any such emergency and upon its termination the emergency by-laws shall cease to be operative. 11.5 Notices. Unless otherwise provided in emergency by-laws, notice of any meeting of the Board of Directors during any such emergency may be given only to such of the Directors as it may be feasible to reach at the time, and by such means as may be feasible at the time, including publication, radio or television. 11.6 Officers as Directors Pro Tempore. To the extent required to constitute a quorum at any meeting of the Board of Directors during any such emergency, the officers of the corporation who are present shall, unless otherwise provided in emergency by-laws, be deemed, in order of rank and within the same rank in order of seniority, Directors for such meeting, provided, that the emergency by-laws may declare that the Director or Directors in attendance at a meeting shall constitute a quorum. 11.7 Liability of Officers, Directors and Agents. No officer, Director, agent or employee acting in accordance with any emergency by-laws shall be liable except for willful misconduct. No officer, Director, agent or employee shall be liable for any action taken by him in good faith in such an emergency in furtherance of the ordinary business affairs of the corporation even though not authorized by the by-laws then in effect. ARTICLE TWELVE CONTRACTS; CHECKS 12.1 Contracts. The Board of Directors may authorize any officer, employee or agent to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances. 12.2 Checks. Checks, notes, drafts, acceptances, bills of exchange and other orders or obligations for the payment of money shall be signed by such officer or officers or person or persons as the Board of Directors by resolution shall from time to time designate. ARTICLE THIRTEEN DIVIDENDS AND DISTRIBUTIONS The Board of Directors may declare dividends on its outstanding shares out of either (I) the surplus of the corporation, as defined in and computed in accordance with Sections 154 and 244 of the General Corporation Law of Delaware, or (2] in case there shall be no such surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Dividends may be declared and paid in cash, property, or treasury shares of the corporation or may be paid in authorized but unissued shares of the corporation. If a dividend is paid in authorized but unissued shares of the corporation, the Board of Directors shall, by resolution, direct that there be designated as capital in respect of such shares an amount which is not less than the aggregate par value of par value shares being declared as a dividend and, in the case of shares without par value being declared as a dividend, such amount shall be determined by the Board of Directors. No such designation as capital shall be necessary if shares are being distributed by the corporation pursuant to a split-up or division of its stock rather than as payment of a dividend declared payable in stock of the corporation. ARTICLE FOURTEEN AMENDMENTS The by-laws of the corporation may be altered or amended and new by-laws may be adopted by the shareholders at any annual or special meeting of the shareholders or by the Board of Directors at any regular or special meeting of the Board of Directors; provided, however, that, if such action is to be taken at a meeting of the shareholders, notice of the general nature of the proposed change in the by-laws shall be given in the notice of meeting. The shareholders may provide by resolution that any by-law provision repealed, amended, adopted, or altered by them may not be repealed, amended, adopted, or altered by the Board of Directors. Action by the shareholders with respect to by-laws shall be taken by an affirmative vote of a majority of all shares entitled to elect Directors, and action by the Board of Directors with respect to by-laws shall be taken by an affirmative vote of a majority of all Directors then holding office. FIRST AMENDMENT TO THE BYLAWS OF NICHOLS RESEARCH CORPORATION Pursuant to Article Fourteen of the Bylaws of Nichols Research Corporation (the "Bylaws"), the Bylaws of Nichols Research Corporation (the "Company") are hereby amended effective November 15, 1990, as follows: 1. The first sentence of Section 2.7 of the Bylaws is hereby deleted in its entirety and the following new sentence is substituted in its place: At every meeting of shareholders, the Chairman of the Board, or in the absence of the Chairman or if there is none, the Vice Chairman of the Board or if there is none, the Chief Executive Officer, or in his absence the President, or in his absence a Vice President or, if none be present, the appointee of the presiding officer of the meeting, shall preside. 2. The first sentence of Section 3.6 of the Bylaws is hereby deleted in its entirety and the following new sentence is substituted in its place: Any Director may resign at any time either orally at any meeting of the Board of Directors or by so advising the Chairman of the Board, if any, the Vice Chairman of the Board, if any, the Chief Executive Officer or the President or by giving written notice to the corporation. 3. Section 3.8 of the Bylaws is hereby deleted in its entirety and the following new Section is substituted in its place: 3.8 CHAIRMAN OF THE BOARD; VICE CHAIRMAN OF THE BOARD. The Board of Directors may elect from its members a Chairman of the Board of Directors. In the absence of an agreement to the contrary, the Chairman of the Board of Directors shall preside at every meeting of the shareholders and at every meeting of the Directors. The Board of Directors may elect from its members a Vice Chairman of the Board of Directors. The Vice Chairman of the Board shall serve in the absence of the Chairman of the Board. 4. The first sentence of Section 4.1(c) of the Bylaws is hereby deleted in its entirety and the following new sentence is substituted in its place: The Executive Committee shall meet from time to time on the call of the Chairman of the Board, the Vice Chairman of the Board, the Chief Executive Officer, or the President or of any two or more members of the Executive Committee. 5. The first sentence of Section 5.3 of the Bylaws is hereby deleted in its entirety and the following new sentence is substituted in its place: Special meetings of the Board of Directors may be called by the Chairman of the Board, the Vice Chairman of the Board, the Chief Executive Officer, or the President on not less than two days' written notice by mail, telegram or cablegram, or by personal delivery to each Director and shall be called by the Chairman of the Board, the Vice Chairman of the Board, the Chief Executive Officer, the President or the Secretary in a like manner and on like notice on the written request of any two or more Directors. In all other respects the Bylaws shall remain in full force and effect according to their terms and provisions. IN WITNESS WHEREOF, the undersigned hereby certifies that the foregoing First Amendment to the Bylaws of Nichols Research Corporation was duly adopted by the Board of Directors on November 15, 1990. /s/ Patsy L. Hattox ------------------------------------------- Secretary SECOND AMENDMENT TO THE BYLAWS OF NICHOLS RESEARCH CORPORATION Pursuant to Article Fourteen of the Bylaws of Nichols Research Corporation (the "Bylaws"), the Bylaws of Nichols Research Corporation (the "Company") are hereby amended effective September 15, 1993, as follows: The first sentence of Section 3.2 is hereby deleted in its entirety and the following new sentence is substituted in its place: The Board of Directors shall consist of not less than five (5) and not more than eleven (11) members, the precise number to be fixed by resolution of the Board of Directors from time to time. In all other respects the Bylaws shall remain in full force and effect according to their terms and provisions. IN WITNESS WHEREOF, the undersigned hereby certifies that the foregoing Second Amendment to the Bylaws of Nichols Research Corporation was duly adopted by the Board of Directors on September 15, 1993. /s/ Patsy L. Hattox ------------------------------------------- Secretary THIRD AMENDMENT TO THE BYLAWS OF NICHOLS RESEARCH CORPORATION Pursuant to Article Fourteen of the Bylaws of Nichols Research Corporation (the "Bylaws"), the Bylaws of Nichols Research Corporation (the "Company") are hereby amended effective August 24, 1995, as follows: 1. The following new Section 3.9 is hereby added to the Bylaws: 3.9 MANDATORY RETIREMENT. Upon the attainment of age 70, a director shall retire from the Board of Directors and shall thereafter cease to be qualified to serve as a director of the corporation. A vacancy shall be deemed to exist at the time a director attains the age of 70, and the Board of Directors or the shareholders may, then or thereafter, elect a successor to take office upon such retirement and until the term of the retired director would have ended, but for said retirement. In all other respects, the Bylaws shall remain in full force and affect according to their terms and provisions. IN WITNESS WHEREOF, the undersigned hereby certifies that the foregoing Third Amendment to the Bylaws of Nichols Research Corporation was duly adopted by the Board of Directors on August 24, 1995. /s/ Patsy L. Hattox ------------------------------------------- Secretary FOURTH AMENDMENT TO THE BY-LAWS OF NICHOLS RESEARCH CORPORATION Pursuant to Article Fourteen of the By-laws of Nichols Research Corporation (the "By-laws") of Nichols Research Corporation (the "Company") are hereby amended effective January 11, 1996, as follows. The first sentence of Section 3.2 is hereby deleted in its entirety and the following new sentence is substituted in its place: The Board of Directors shall consist of not less than five (5) and not more than twelve (12) members, the precise number to be fixed by resolution of the Board of Directors from time to time. In all other respects, the By-laws shall remain in full force and effect according to their terms and provisions. IN WITNESS WHEREOF, the undersigned hereby certifies that the foregoing Fourth Amendment to the By-laws of Nichols Research Corporation was duly adopted by the Board of Directors on January 11, 1996. /s/ Patsy L. Hattox ---------------------- Secretary FIFTH AMENDMENT TO THE BYLAWS OF NICHOLS RESEARCH CORPORATION Pursuant to Article Fourteen of the Bylaws of Nichols Research Corporation, the Bylaws of Nichols Research Corporation are hereby amended effective May 15, 1997, as follows: Sections 6.1, 6.2 and 6.3 of Article Six of the Bylaws are hereby deleted in their entirety and the following new Sections 6.1, 6.2 and 6.3 of Article Six are substituted in their place: ARTICLE SIX OFFICERS, AGENTS AND EMPLOYEES 6.1 General Provisions. The officers of the corporation shall be the Chairman of the Board of Directors (the "Chairman"), if a full-time employee of the corporation, a Chief Executive Officer, a President, a Secretary, and a Treasurer, one or more Executive Vice Presidents, Senior Vice Presidents and Vice Presidents, one or more Assistant Secretaries, and one or more Assistant Treasurers. The officers shall be elected by the Board of Directors at the first meeting of the Board of Directors after the annual meeting of the shareholders in each year or shall be appointed as provided in these by-laws. The executive officers of the corporation shall consist of the Chairman (if a full-time employee of the corporation), Chief Executive Officer, President, all Executive Vice Presidents, all Senior Vice Presidents, Secretary and Treasurer. The Board of Directors may elect other officers, agents and employees, who shall have such authority and perform such duties as may be prescribed by the Board of Directors. All officers shall hold office until the meeting of the Board of Directors following the next annual meeting of the shareholders after their election or appointment and until their successors shall have been elected or appointed and shall have qualified. Any two or more offices may be held by the same person. Any officer, agent or employee of the corporation may be removed by the Board of Directors whenever in its judgment the best interests of the corporation will be served thereby. Such removal shall be without prejudice to such person's contract rights, if any, but the election or appointment of any person as an officer, agent or employee of the corporation shall not of itself create contract rights. The compensation of officers, agents, and employees elected by the Board of Directors shall be fixed by the Board of Directors, but this power may be delegated to any officer, agent or employee as to persons under his direction or control. The Board of Directors may require any officer, agent or employee to give security for the faithful performance of his duties. 6.2 Powers and Duties of the Chairman, Chief Executive Officer and President. The powers and duties of the Chairman, Chief Executive Officer and President, subject to the supervision and control of the Board of Directors, shall be those usually appertaining to their respective offices and whatever other powers and duties are prescribed by these by-laws or by the Board of Directors. (a) The Chairman, if a full-time employee of the corporation, shall be the highest executive officer of the corporation and shall have responsibility for the management of the business of the corporation, including responsibility for overall corporate leadership, direction and strategy, and execution of all orders and resolutions adopted by the Board of Directors. The Chairman shall have authority on behalf of the corporation to execute conveyances, contracts and other documents. (b) If the Chairman is a full-time employee of the corporation, the Chief Executive Officer of the corporation shall be the second highest executive officer of the corporation and shall report to the Chairman. If the Chairman is not a full-time employee of the corporation, the Chief Executive officer of the corporation shall be the highest executive officer of the corporation. The Chief Executive Officer shall have responsibility for the day-to-day management and operation of the corporation, including responsibility for execution of all orders and resolutions adopted by the Board of Directors. The Chief Executive Officer shall have authority on behalf of the corporation to execute conveyances, contracts and other documents. (c) If the Chairman is a full-time employee of the corporation, the President shall be the third highest executive officer of the corporation. If the Chairman is not a full-time employee of the corporation, the President shall be the second highest executive officer of the corporation. The President shall report to the Chief Executive Officer of the corporation. The President shall have such responsibilities for the management of the business of the corporation as may be assigned to him by the Chief Executive Officer or the Board of Directors. The President shall have the authority to execute on behalf of the corporation conveyances, contracts and other documents. 6.3 Powers and Duties of Executive Vice Presidents, Senior Vice Presidents and Vice Presidents. Each Executive Vice President, Senior Vice President and Vice President shall have such powers and perform such duties as the Board of Directors, the Chairman (if a full-time employee of the corporation), Chief Executive Officer or the President may prescribe and shall perform such other duties as may be prescribed by these by-laws. In the absence or inability to act of the Chief Executive Officer or President, unless the Board of Directors shall otherwise provide, the Executive Vice President who has served in that capacity for the longest time and who shall be present and able to act, shall perform all duties and may exercise any of the powers of the Chief Executive Officer. The performance of any such duty by an Executive Vice President, Senior Vice President or Vice President shall be conclusive evidence of his power to act, without limiting the generality of the foregoing, an Executive Vice President appointed by the Board of Directors shall be designated as the Executive Vice President for a major operation or division of the corporation and as such shall have responsibility and authority to conduct the business of such operation or division. Each Executive Vice President shall report to the Chief Executive Officer and the President and shall have such other duties as may be assigned to him by the Board of Directors. Each Executive Vice President shall have the authority to execute on behalf of the corporation all conveyances, contracts and other documents which pertain to the operation or division of the corporation for which he has responsibility. In all other respects the Bylaws shall remain in full force and effect according to their terms and provisions. IN WITNESS WHEREOF, the undersigned hereby certifies that the foregoing Fifth Amendment to the Bylaws of Nichols Research Corporation was duly adopted by the Board of Directors on May 15, 1997. /s/ Patsy L. Hattox ----------------------- Secretary EX-10 4 SECOND AMENDMENT TO CREDIT AGREEMENT THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Second Amendment") is made and entered into effective as of the 24th day of June, 1997, by and between NICHOLS RESEARCH CORPORATION, a Delaware corporation ("Borrower"), SOUTHTRUST BANK, NATIONAL ASSOCIATION, a national banking association f/k/a SouthTrust Bank of Alabama, National Association ("SouthTrust"), REGIONS BANK, an Alabama state banking corporation f/kla First Alabama Bank ("Regions"), and CORESTATES BANK, N.A., a national banking association ("Corestates")(SouthTrust, Regions, and Corestates being collectively referred to herein as the "Banks"). RECITALS: A. Borrower and Banks are parties to that certain Credit Agreement dated August 16, 1995, as amended by that certain First Amendment to Credit Agreement dated March 31, 1997 (as amended, the "Credit Agreement") pursuant to which Banks have made a $73,500,000 line of credit loan to the Bon-ower. Capitalized terms used herein shall have the meanings ascribed to such terms in the Credit Agreement. B. Borrower has requested that the Commitment Termination Date be extended to September 30, 1997, and as a condition to such extension, Banks have required the execution of this Second Amendment. AGREEMENT NOW, THEREFORE, in consideration of the foregoing recitals, and other good and valuable consideration, the receipt and aufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Article I of the Credit Agreement is hereby amended by deleting the definition of "Commitment Termination Date" in its entirety and by inserting in lieu thereof the following definition: "Commitment Termination Date" means the first to occur of (1) September 30, 1997, or such later date as Borrower and Banks may agree upon in writing pursuant to Section 2.11 hereof, it being agreed that Banks shall have no obligation to extend the Commitment Termination Date, or (2) the date that Banks, by reason of an Event of Default, suspend the making of further Advances. 2. No right of Banks with respect to the Credit Agreement or any of the other Loan Documents are or will be in any manner released, destroyed, diminished, or other`Nise adversely aff~cted by this Second Amendment. 3. Except as hereby expressly mod)fied and amended, the Credit Agreement shall remain in full force and effect, and the Credit Agreement, as amended, is hereby rat)fied and affirmed in all respects. Borrower confirms that it has no defenses or setoffs with respect to its obligations pursuant to the Credit Agreement as amended hereby. 4. Borrower represents and warrants to Banks that all representations and warranties contained in the Credit Agreement are true and correct as of the date hereof, and no Event of Default or Potential Default has occurred or exists. 5. All references to the Credit Agreement in any of the other Loan Documents shall be deemed to refer, from and afiter the date hereof, to the Credit Agreement as amended hereby. 6. This Second Amendment shall inure to the benefit of and be binding upon the parties hereto, and their respective successors and assignors. 7. This Second Amendment may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute one and the same instrument. 8. TO THE EXTENT PERMITTED BY APPLICABLE LAW, BORROWER HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY ON ANY CLAIM, COUNTERCLAIM, SETOFF, DEMAND, ACTION OR CAUSE OF ACTION (I) ARISING OUT OF OR IN ANY WAY PERTAINING OR RELATING TO THIS SECOND AMENDMENT, THE CREDIT AGREEMENT, OR THE OTHER LOAN DOCUMENTS, OR (II) IN ANY WAY CONNECTED WITH OR PERTAINING OR RELATED TO OR INCIDENTAL TO ANY DEALINGS OF THE PARTIES HERETO WITH RESPECT TO THE FOREGOING OR IN CONNECTION WITH THE TRANSACTIONS RELATED THERETO OR CONTEMPLATED THEREBY OR THE EXERCISE OF ANY PARTY'S RIGHTS AND REMEDIES THEREUNDER, IN ALL OF THE FOREGOING CASES WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. BORROWER AGREES THAT BANKS MAY FILE A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED AGREEMENT OF BORROWER IRREVOCABLY TO WAIVE ITS RIGHT TO TRIAL BY JURY, AND THAT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY DISPUTE OR CONTROVERSY WHATSOEVER BETWEEN BORROWER AND BANKS SHALL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY. IN WITNESS WHEREOF, the parties have caused this Second Amendment to be properly executed and delivered by their duly authorized officers to be effective as of the day and year first above written. NICHOLS RESEARCH CORPORATION, a Delaware corporation By: /s/ Allen E. Dillard ------------------------- Its: Chief Financial Officer SOUTHTRUST BANK, NATIONAL ASSOCIATION, a national banking association By: /s/ Kevin Horton -------------------------- Its: Assistant Vice President REGIONS BANK, an Alabama state banking corporation f/k/a First Alabama Bank By: /s/ Kenneth D. Watson --------------------------- Its: Vice President CORESTATES BANK, N.A., a national banking association By: /s/ Karen Leaf --------------------------- Its: Vice President STATE OF ALABAMA ) COUNTY OF Madison ) I, the undersigned, a Notary Public in and for said County, in said State, hereby certify that Allen E. Dillard , whose name as Chief Financial Officer of Nichols Research Corporation, a Delaware corporation, is signed to the foregoing instrument, and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, _he, as such officer, executed the same voluntarily and with full authority for and as the act of said corporation. Given under my hand and official seal this the 24th day of June, 1997. /s/ Sharon B. Ivey ---------------- Notary Public My Commission Expires: My Commission Expires: 3-3-99 STATE OF ALABAMA ) COUNTY OF Jefferson) I, the undersigned, a Notary Public in and for said County, in said State, hereby certify that Kevin Horton, whose name as Assistant Vice President of SouthTrust Bank, National Association, a national banking association f/k/a SouthTrust Bank of Alabama, National Association, is signed to the foregoing instrument, and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, he, as such officer, executed the same voluntarily and with full authority for and as the act of said association. Given under my hand and official seal this the 1 day of July, 1997. /s/ Melanie Sowell --------------------- Notary Public My Commission Expires: My Commission Expires February 19,2001 STATE OF ALABAMA ) COUNTY OF Madison ) I, the undersigned, a Notary Public in and for said County, in said State, hereby certify that Kenneth D. Watson, whose name as Vice President of Regions Bank, an Alabama state banking corporation f/k/a First Alabama Bank, is signed to the foregoing instrument, and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, _he, as such office, executed the same voluntary and with full authority for and as the act of said corporation. Given under my hand and official seal this the 27th day of June, 1997. /s/ Betty Morring ------------------ Notary Public My Commission Expires: My Commission Expires 10-20-99 STATE OF PENNSYLVANIA ) COUNTY OF Philadelphia) I, the undersigned, a Notary Public in and for said County, in said State, hereby certify that Karen Leaf, whose name as Vice President of Corestates Bank, N.A., a national banking association, is signed to the foregoing instrument, and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, _he, as such officer, executed the same voluntarily and with full authority for and as the act of said association. Given under my hand and official seal this the 26th day of June, 1997. /s/ Sharon A. Kelly ------------------ Notary Public My Commission Expires: Nov. 15, 1999 - -------------- EX-11 5 NICHOLS RESEARCH CORPORATION EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
For the Three Months Ended For the Nine Months Ended May 31, May 31, May 31, May 31, 1997 1996 1997 1996 Weighted average common shares outstanding............ 11,698,417 9,628,085 11,623,020 9,561,450 Net common shares issuable on exercise of certain stock options (1)............ 511,190 661,708 623,407 550,841 ----------------------------------------------------------- Average common and common equivalent shares outstanding..... 12,209,607 10,289,793 12,246,427 10,112,291 =========================================================== Net income.............. $ 3,182,000 $ 2,376,000 $ 8,897,000 $ 6,441,000 =========================================================== Per share amount........ $ .26 $ .23 $ .73 $ .64 ===========================================================
(1) Net common shares issuable on exercise of common stock options is calculated based upon the treasury stock method using the average market price. -----END PRIVACY-ENHANCED MESSAGE-----